Sysco Annual Report 2023

Plain-text annual report

2023 ANNUAL REPORT LETTER FROM the CEO the CEO Kevin Hourican President and Chief Executive Oﬃcer Fellow Stockholders, Being the leader in the foodservice industry means we understand the important role food plays in bringing people together and creating connections. That understanding inspired our company purpose: Connecting the world to share food and care for one another, which helped form our strategy, called our Recipe For Growth. Over the past three years, we have advanced our Recipe For Growth strategy, enabling Sysco to improve our product oﬀerings and increase our customer service levels. The results have been clear - we have industry-leading proﬁt margins and have increased our share of the total market. Our strategy has enabled us to better serve our customers, big and small, and that reality has resulted in accelerating our sales performance versus the industry. Being a growth company and delivering industry-leading EBIT margin rates helped Sysco generate record levels of sales and proﬁts in ﬁscal 2023. Sysco is a resilient and diversiﬁed company. Size and scale matter in this industry, and we are further leveraging our scale advantages through our Recipe For Growth strategy. The best companies in the world are growth companies, and we expect that Sysco will continue to grow proﬁtably for decades to come. We are playing the long game at Sysco, and we are playing to win. We are investing in our people, investing in our products, investing in our services, and investing in our technology. All of this is done with one purpose in mind: to diﬀerentiate Sysco from who we compete against and provide our customers with improved levels of service. We are disciplined in ensuring our investments deliver a strong ROIC, and we are conﬁdent that our business results will reward our shareholders over time. Strong Financial Performance Amid Dynamic Environment1 Throughout the past ﬁscal year, we have proven our ability to build on our strong historical ﬁnancial performance with record-breaking results. In ﬁscal 2023, we grew annual sales by 11.2%, to more than $76.3 billion and saw the highest full year adjusted operating income on record. The performance of both our U.S. and International teams advanced total company sales growth by $7.7 billion for the year, or $8.6 billion on a constant currency basis. That sales growth is the equivalent of creating a net new Fortune 500 company. I am very proud of the work our colleagues have done to increase proﬁtable revenues and drive operational eﬃciency. Our strong top and bottom-line results enabled Sysco to return $1.5 billion to our shareholders through both dividends and share repurchases. The strong free cash ﬂow and disciplined ﬁnancial management enabled Sysco to end the year at 2.5x net debt to adjusted EBITDA, achieving the low end of our target ratio. Winning through our Recipe for Growth Strategy Our strategy focuses on ﬁve pillars: Digital, Products and Solutions, Supply Chain, Customer Teams, and Future Horizons. These ﬁve elements operate as a growth wheel, each of them building on the next. Together they enable Sysco to better serve our customers. Examples of our progress include: (cid:122) Digital: We have progressed our digital tools by enhancing and personalizing customer oﬀers, improving search and order entry, adding the Spanish language, and increasing customer conversion rates. (cid:122) Products & Solutions: We have improved our product assortment, with notable enhancements in our Italian and Specialty products, and enrolled over 12,000 customers in our Perks! loyalty program. 1 This paragraph contains non-GAAP financial measures. See pages 28 through 33 in the attached Form 10-K and Annex A for a reconciliation of these non-GAAP measures to the corresponding GAAP results and an explanation of the adjustments that we have made in order to calculate these measures. (cid:122) Supply Chain: We have improved the eﬃciency and reliability of our supply chain. It is fueled by reﬁned colleague training and performance management. Our Driver Training academy, now live nationwide, has been a key to this progress. (cid:122) Customer Teams: Our Sysco Your Way selling program is now in over 400 neighborhoods, across ﬁve countries. The program has delivered double- digit sales and proﬁt growth in converted neighborhoods. We have increased our number of selling specialists to expertly represent our expanding assortment. (cid:122) Future Horizons: We reduced structural costs at Sysco, through a series of eﬃciency improvement levers, helping drive positive operating expense leverage. Additionally, we completed select acquisitions to complement Sysco’s capabilities in our Italian and Produce businesses. Elevating our Value and the Industry Through Sustainability Sysco has taken a leading role in driving the future of sustainability for our industry. Earlier this year, we announced our new sustainability platform, “One Planet. One Table.” Our platform unites our eﬀorts in caring for people, sourcing products responsibly, and protecting the planet. In April, we broke ground on a ﬁrst-of-its-kind Electric Vehicle (“EV”) Hub in Riverside, CA. This facility will be fully equipped to power EV trucks, tractors, and trailers through onsite solar energy. To contribute to our Global Good Goal, Sysco colleagues spent nearly 24,000 hours volunteering in their communities this past year. Additionally, Sysco donated millions of meals to feed the communities where we operate, and for the second year in a row, donated $1 million to Feeding America. Sysco remains deeply committed to creating a workplace where everyone feels welcomed and respected. In short, everyone is welcome at our table. Our objective is to ensure that our colleague population matches our customer population and the communities we serve. We know that by better representing our communities, we will be more eﬀective in serving our customers. For the second year in a row, Environmental, Social, and Governance and diversity, equity, and inclusion metrics are included in our compensation program to ensure we continue to meet our commitments. Sysco is Well-Positioned for Long-Term, Profitable Growth Our record results this ﬁscal year would not have been accomplished without the enthusiasm and dedication of Sysco’s 72,000+ talented colleagues. They are the lifeblood of the organization and the backbone of our industry. I am inspired by the actions of our team on a daily basis. From braving 100F+ degree summer days, delivering thousands of cases to our customers, to solving problems for our customers when they face adversity, Sysco’s sales and delivery teams go the extra mile to ensure our customers are successful. I am proud and humbled to lead this incredible group and company. My job is to help ensure our colleagues are positioned to properly serve our customers by providing them with industry-leading tools, resources, and processes. Sysco has the people, tools, and strategies to continue our positive momentum. We believe that FY24 will be a bright one for Sysco, further advancing our market share gains, delivering compelling top-line growth, and expanding our proﬁtability. You have the commitment of our leadership team, board of directors, and our colleagues to work harder than anyone in the industry to deliver outstanding shareholder value and continue to earn your trust and investment. Sincerely, Kevin Hourican President & CEO UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934 For the ﬁscal year ended July 1, 2023 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-6544 Sysco Corporation (Exact name of registrant as speciﬁed in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 1390 Enclave Parkway Houston, Texas (Address of principal executive oﬃces) 741648137 (I.R.S. Employer Identiﬁcation No.) 77077-2099 (Zip Code) 281 5841390 Registrant’s Telephone Number, Including Area Code: Title of each class Common Stock, $1.00 Par Value SECURITIES REGISTERED PURSUANT TO SECTION 12b OF THE ACT: Trading symbols SYY Name of each exchange on which registered New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12g OF THE ACT: NONE Indicate by checkmark YES NO • if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities Act. • if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the Act. • 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. • 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). • 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 deﬁnition of “large accelerated ﬁler,” “accelerated ﬁler,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Accelerated ﬁler Large Accelerated ﬁler Non-accelerated ﬁler • 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 • whether the registrant has ﬁled a report on and attestation to its management’s assessment of the eﬀectiveness of its internal control over ﬁnancial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting ﬁrm that prepared or issued its audit report. • If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the ﬁnancial statements of Smaller reporting company Emerging growth company the registrant included in the ﬁling reﬂect the correction of an error to previously issued ﬁnancial statements. • whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). • whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Exchange Act). The aggregate market value of the voting stock of the registrant held by stockholders who were not aﬃliates (as deﬁned by regulations of the Securities and Exchange Commission) of the registrant was approximately $38,720,179,124 as of January 1, 2023 (based on the closing sales price on the New York Stock Exchange Composite Tape on December 30, 2022, as reported by The Wall Street Journal (Southwest Edition)). As of August 8, 2023, the registrant had issued and outstanding an aggregate of 504,925,847 shares of its common stock. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the company’s 2023 Proxy Statement to be ﬁled with the Securities and Exchange Commission no later than 120 days after the end of the ﬁscal year covered by this Form 10-K are incorporated by reference into Part III. PART III ITEM 10. Directors, Executive Oﬃcers and Corporate Governance ITEM 11. Executive Compensation ITEM 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder Matters ITEM 13. Certain Relationships and Related Transactions, and Director Independence ITEM 14. Principal Accountant Fees and Services PART IV ITEM 15. Exhibit and Financial Statement Schedules ITEM 16. Form 10-K Summary SIGNATURES RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES 87 87 87 87 87 87 88 88 93 94 A1 Table of Contents PART I ITEM 1. Business ITEM 1A. Risk Factors ITEM 1B. Unresolved Staﬀ Comments ITEM 2. Properties ITEM 3. Legal Proceedings ITEM 4. Mine Safety Disclosures PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ITEM 6. [Reserved] ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk ITEM 8. Financial Statements and Supplementary Data ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ITEM 9A. Controls and Procedures ITEM 9B. Other Information ITEM 9C. Disclosure Reporting Regarding Foreign Jurisdictions that Prevent Inspections 3 3 8 17 17 18 18 19 19 20 20 42 44 85 85 85 86 2 SYSCO CORPORATION // 2023 Form 10-K PART I Item 1. Business Unless this Form 10-K indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or the “company” as used in this Form 10-K refer to Sysco Corporation together with its consolidated subsidiaries and divisions. Overview Sysco Corporation, acting through its subsidiaries and divisions, is the largest global distributor of food and related products primarily to the foodservice or food-away-from-home industry. Our purpose is “Connecting the World to Share Food and Care for One Another.” We provided products and related services to approximately 725,000 customer locations, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers during ﬁscal 2023. Founded in 1969, Sysco commenced operations as a public company in March 1970 when the stockholders of nine companies exchanged their stock for Sysco common stock. Since our formation, we have grown from $115 million to our all-time high of $76.3 billion in annual sales in ﬁscal 2023, both through internal expansion of existing operations and acquisitions. Sysco’s ﬁscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year ended July 1, 2023 for ﬁscal 2023, a 52-week year ended July 2, 2022 for ﬁscal 2022 and a 53-week year ended July 3, 2021 for ﬁscal 2021. We will have a 52-week year ending June 29, 2024 for ﬁscal 2024. Sysco Corporation is organized under the laws of Delaware. The address and telephone number of our executive offices are 1390 Enclave Parkway, Houston, Texas 77077-2099, (281) 584-1390. This annual report on Form 10-K, as well as all other reports filed or furnished by Sysco pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are available free of charge on Sysco’s website at www.sysco.com as soon as reasonably practicable after they are electronically ﬁled with or furnished to the Securities and Exchange Commission (SEC). Reporting Segments Sysco distributes food and related products to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Our primary operations are in North America and Europe. Under the accounting provisions related to disclosures about segments of an enterprise, we have combined certain operations into three reportable segments. “Other” ﬁnancial information is attributable to our other operations that do not meet the quantitative disclosure thresholds. (cid:122) International Foodservice Operations – includes operations outside of the United States (U.S.), 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 our export operations that distribute to international customers. Our European operations primarily consist of operations in the United Kingdom (U.K.), France, Ireland and Sweden; (cid:122) U.S. Foodservice Operations – primarily includes (a) our U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, produce, specialty Italian, specialty imports and a wide variety of non-food products and (b) our U.S. Specialty operations, which include our FreshPoint fresh produce distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, our Asian specialty distribution company and a number of other small specialty businesses that are not material to the operations of Sysco; (cid:122) SYGMA – our U.S. customized distribution operations serving quick- service chain restaurant customer locations; and (cid:122) Other – primarily our hotel supply operations, Guest Worldwide. Foodservice operating sites distribute a full line of food products and a wide variety of non-food products to both independent and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served. SYGMA operating sites distribute a full line of food products and a wide variety of non-food products to certain chain restaurant customer locations. Selected ﬁnancial data for each of our reportable segments, as well as ﬁnancial information concerning geographic areas, can be found in Note 21, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 8. SYSCO CORPORATION // 2023 Form 10-K 3 PART I Item 1. Business Customers and Products Sysco’s customers in the foodservice industry include restaurants, hospitals and skilled nursing facilities, schools and colleges, hotels and motels, industrial caterers and other similar venues where foodservice products are served. The products we distribute include: We also supply a wide variety of non-food items, including: (cid:122) frozen foods, such as meats, seafood, fully prepared entrées, fruits, (cid:122) paper products such as disposable napkins, plates and cups; vegetables and desserts; (cid:122) canned and dry foods; (cid:122) fresh meats and seafood; (cid:122) dairy products; (cid:122) beverage products; (cid:122) imported specialties; and (cid:122) fresh produce. (cid:122) tableware such as glassware and silverware; (cid:122) cookware such as pots, pans and utensils; (cid:122) restaurant and kitchen equipment and supplies; and (cid:122) cleaning supplies. A comparison of the sales mix in the principal product categories during the last three years is presented below: Principal product categories 2023 2022 2021 16% Canned and dry products 19 Fresh and frozen meats 15 Frozen fruits, vegetables, bakery and other 10 Dairy products 11 Poultry 8 Fresh produce 8 Paper and disposables 5 Seafood 3 Beverage products Other(1) 5 TOTALS 100% (1) Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment, other janitorial products, medical supplies and smallwares. 19% 18 15 11 10 9 7 4 3 4 100% 17% 19 14 10 11 8 7 5 3 6 100% Our distribution centers, which we refer to as operating sites, distribute branded merchandise, as well as products packaged under our private brands. Products packaged under our private brands have been manufactured for Sysco according to specifications that have been developed by our quality assurance team. In addition, our quality assurance team certiﬁes the manufacturing and processing plants where these products are packaged, enforces our quality control standards and identiﬁes supply sources that satisfy our requirements. We believe that prompt and accurate delivery of orders, competitive pricing, customer service and the ability to provide a full array of products and services to assist customers in their foodservice operations are of primary importance in the marketing and distribution of foodservice products to our customers. Our operating sites oﬀer daily delivery to certain customer locations and have the capability of delivering special orders on short notice. Through the sales and marketing representatives and support staﬀ, we stay informed of the needs of our customers and acquaint them with new products and services. We also provide ancillary services relating to foodservice distribution, such as providing customers with product usage reports and other data, menu-planning advice, food safety training and assistance in inventory control. Additionally, we provide access to various third-party services designed to add value to our customers’ businesses. No single customer accounted for 10% or more of Sysco’s total sales for the ﬁscal year ended July 1, 2023. We estimate that our sales by type of customer during the past three ﬁscal years were as follows: Type of Customer 2023 2022 2021 Restaurants(1) 66% 6 Education, government 5 Travel and leisure 9 Healthcare Other(2) 14 TOTALS 100% (1) Restaurants returned to a pre-pandemic percentage of total sales in fiscal year 2023. For comparability purposes, in both fiscal years 2020 and 2019, restaurants constituted 63% 8 7 8 14 100% 62% 8 8 7 15 100% 62% of total sales. (2) Other includes cafeterias that are not stand-alone restaurants, bakeries, caterers, churches, civic and fraternal organizations, vending distributors, other distributors and international exports, as well as retail food sales and logistics services. None of these types of customers, as a group, exceeded 5% of total sales in any of the years for which information is presented. 4 SYSCO CORPORATION // 2023 Form 10-K We estimate that sales to our customers in the food service management (FSM) sector, which include large customers that service cafeterias in institutions such as universities, hospitals, and sporting venues, accounted for 7% of sales in ﬁscal 2023, as compared to 6% of sales in ﬁscal 2022. These sales are reﬂected within the respective customer types listed in the table above, depending on the type of customer the FSM operator serves. PART I Item 1. Business Sources of Supply We purchase from thousands of suppliers, both domestic and international, none of which individually accounted for more than 10% of our purchases for ﬁscal 2023. These suppliers consist generally of large corporations selling brand name and private label merchandise, as well as independent regional brand and private label processors and packers. We also provide specialty and seasonal products from small to mid-sized producers to meet a growing demand for locally sourced products. Our locally sourced products, including produce, meats, cheese and other products, help diﬀerentiate our customers’ oﬀerings, satisfy demands for new products, and support local communities. Merchandise is generally purchased through both centrally developed programs, domestically and internationally, and direct programs established by our various operating sites. Working Capital Practices Our growth is funded through a combination of cash on hand, cash ﬂow from operations, commercial paper issuances and long-term borrowings. See the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” regarding our liquidity, ﬁnancial position and sources and uses of funds. We extend credit terms to some of our customers based on our assessment of each customer’s creditworthiness. We monitor each customer’s account and will suspend shipments if necessary. Global Support Center Our Global Support Center (GSC) provides numerous centralized services to our operating sites and performs support activities for employees, suppliers and customers. GSC team members possess experience and expertise in, among other areas, customer and vendor contract administration, accounting and ﬁnance, treasury, legal, information technology, payroll and employee beneﬁts, risk management and insurance, sales and marketing, Capital Improvements During fiscal 2023, 2022 and 2021, $793.3 million, $632.8 million and $470.7 million, respectively, were invested in facilities, technology, equipment, delivery ﬂeet and other capital asset enhancements. From time to time, we dispose of assets in the normal course of business and we consider proceeds from these asset sales to be an offset to capital expenditures. During ﬁscal 2023, 2022 and 2021, capital expenditures, net of proceeds from sales of assets, were $751.2 million, $608.7 million and $411.5 million, respectively. Capital expenditures, net of proceeds from sales Human Capital Resources We believe engaged and empowered colleagues are key to business success. Attracting, developing and retaining the best talent globally drives the company’s long-term value. Our diverse colleagues and inclusive culture create an environment where colleagues can develop their skills and contribute to our success. As of July 1, 2023, we employed approximately 72,000 employees, including 50,000 U.S. employees and 22,000 employees outside the U.S., as compared to approximately 71,000 employees as of July 2, 2022. Also, approximately 99% of our U.S.-based We administer a consolidated product procurement program designed to develop, obtain and ensure consistent quality food and non-food products. The program covers the purchasing and marketing of branded merchandise, as well as products from several national brand suppliers, encompassing substantially all product lines. Some of our products are purchased internationally within global procurement centers to build strategic relationships with international suppliers and to optimize our supply chain network. We also focus on increasing proﬁtability by lowering operating costs and aggregate inventory levels. This reduces future facility expansion needs at our operating sites, while providing greater value to our suppliers and customers. A majority of our sales orders are ﬁlled within 24 hours of customer order placement. We generally maintain inventory on hand to meet customer demand. The level of inventory on hand will vary by product depending on shelf-life, supplier order fulﬁllment lead times and customer demand. We also purchase additional volumes of certain products based on supply or pricing opportunities. We take advantage of suppliers’ cash discounts where appropriate. Otherwise, we pay our suppliers according to our payment terms. merchandising, inbound logistics, human resources, strategy and tax compliance services. The GSC also makes available supply chain expertise in warehousing, distribution, and omni-channel strategic services, which provide assistance in operational best practices, including space utilization, energy conservation, ﬂeet management and workﬂow. of assets, as a percentage of sales during ﬁscal 2023, 2022 and 2021 were 1.0%, 0.9% and 0.8%, respectively. During the three years ended July 1, 2023, capital expenditures were ﬁnanced primarily by internally generated funds along with bank and other borrowings. We expect our capital expenditures, net of proceeds from sales of assets, to continue to approximate 1% of sales in ﬁscal 2024, and we expect to ﬁnance these capital expenditures from cash ﬂows from operations and bank and other borrowings. colleagues are classiﬁed as full-time, deﬁned as employees who work 30 or more hours per week. Approximately 15% of our employees were represented by unions, primarily the International Brotherhood of Teamsters and unions in France and Sweden. Approximately 8% of our union U.S. employees and 20% of our union international employees are covered by collective bargaining agreements that are subject to renegotiation in ﬁscal 2024. SYSCO CORPORATION // 2023 Form 10-K 5 PART I Item 1. Business Talent Acquisition and Talent Management Maintaining a pipeline of talent is critical to our ongoing success and is essential to our succession planning eﬀorts and to growing leaders throughout the organization. Our leadership is responsible for attracting and retaining top talent by facilitating an environment where employees feel supported and encouraged in their professional and personal development. Specifically, we promote employee development by cultivating a high-impact learning culture for our colleagues through a variety of enterprise development programs and learning resources, including goal-setting and career development processes. We commit to investing in our employees through on the job training and coaching. Additionally, through our Sysco Speaks program, we conduct annual, confidential engagement surveys of our global workforce that are administered and analyzed by an independent third party. Total Rewards We are committed to equal pay for equal work, regardless of gender, race, ethnicity or other personal characteristics. To deliver on that commitment, we benchmark and set pay ranges based on market data and consider various factors, such as an employee’s role and experience, job location and individual performance. We also regularly review our compensation practices to promote fair and equitable pay. In ﬁscal 2023, our hourly colleagues received an average hourly wage of $24.15, and 100% of colleagues in our U.S. distribution facilities received pay above state minimum wage thresholds. Also, some of our full-time colleagues receive paid vacation and sick time beneﬁts, short-term and long-term incentives, retirement plans, training and development, access to career opportunities, paid pregnancy and adoption leave beneﬁts, short-term and long-term disability benefits, health and welfare benefits, and recognition, as well as other programs like employee discounts. Diversity, Equity and Inclusion Our Diversity, Equity and Inclusion (DEI) team develops global strategic initiatives that are implemented to ensure that the needs specific to each region are addressed. Our vision is to build a diverse, equitable and inclusive work environment that reﬂects the customers and communities we serve. We use our Global DEI Advisory Council to monitor and enhance our three-year DEI Roadmap and Real Talk Dialogues which provide leaders and colleagues safe forums to have open, honest, two-way and completely voluntary conversations. Our Colleague Resource Groups (CRGs) are voluntary, colleague-led groups organized to foster a diverse, inclusive workplace at Sysco. They are a critical element of our engagement and DEI eﬀorts at both our headquarters and at operating sites. As of July 1, 2023, our U.S. employee population possessed the gender, ethnic and racial attributes identiﬁed below: United States Employee Population(1) Individual Contributors Management Senior Management Oﬃcers TOTAL SYSCO (1) Information is based on self-reported identification. Male Female White 81% 74 74 72 80 19% 26 26 28 20 42% 63 79 66 45 Hispanic or Latino Black or African American Asian American Indian or Alaskan Native Native Hawaiian or Other Pacific Islander Two or more races Not Available 26% 16 6 5 25 23% 12 6 14 21 4% 5 6 5 4 1% 1 — 1 1 1% 1 — — 1 2% 2 2 3 2 1% — 1 6 1 Competition A large number of companies are engaged in the distribution of food and non-food products to the foodservice industry. Our customers may choose to purchase products directly from wholesale or retail outlets, including club, cash and carry and grocery stores, online retailers, or negotiate prices directly with our suppliers. We compete with local and regional distributors and some organizations that operate on a multi-region basis. In addition, these local, regional and multi-regional distributors can create purchasing cooperatives and marketing groups to enhance their competitive abilities by expanding their product mix, improving purchasing power and extending their geographic capabilities. Our customers are accustomed to purchasing from multiple suppliers and channels concurrently. Customers can choose from many broadline foodservice distributors; specialty distributors that focus on speciﬁc categories such as produce, meat or seafood; other wholesale channels; club stores; cash and carry stores; grocery stores; and numerous online retailers. Since switching costs are very low, customers can make supplier and channel changes very quickly. We believe that the principal competitive factors in the foodservice industry are eﬀective customer contacts, the ability to deliver a wide range of quality products and related services on a timely and dependable basis, and competitive prices. There are few barriers to market entry. 6 SYSCO CORPORATION // 2023 Form 10-K We estimate we serve more than 17% of the approximately $350 billion annual foodservice market in the U.S., as estimated by Technomic, Inc., for calendar year 2022. Technomic projects the market size to increase to approximately $370 billion by the end of calendar 2023. We also serve certain international geographies that vary in size and amount of market share. We believe, based upon industry trade data, our sales to the U.S. and Canada food-away-from-home industry were the highest of any foodservice distributor during ﬁscal 2023. While comprehensive industry statistics are not available, we believe that, in most instances, our operations in the U.S. and Canada are among the leading distributors of food and related non-food products to foodservice customers in those trade areas. We believe our competitive advantages include our sales consultants; our diversiﬁed product base, which includes quality-assured Sysco brand products; our service reliability; the ancillary services we provide to our customers, such as business reviews and menu analysis; and our multi-regional presence in North America and Europe. These advantages combined with a large geographical footprint of multi-temperature warehouses, mitigates some of the impact of regional economic declines that may occur over time. Government Regulation Our company is required to comply, and it is our policy to comply, with all applicable laws and regulations in the numerous countries throughout the world in which we do business. In the U.S., as a marketer and distributor of food products, we are subject to the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the U.S. Food and Drug Administration (FDA). The FDA regulates food safety and quality through various statutory and regulatory mandates, including manufacturing and holding requirements for foods through good manufacturing practice regulations, hazard analysis and critical control point (HACCP) requirements for certain foods, and the food and color additive approval process. The agency also speciﬁes the standards of identity for certain foods; prescribes the format and content of information required to appear on food product labels; regulates food contact packaging and materials; and maintains a Reportable Food Registry for the industry to report when there is a reasonable probability that an article of food will cause serious adverse health consequences. For certain product lines, we are also subject to the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable Agricultural Commodities Act, the Packers and Stockyard Act and regulations promulgated by the U.S. Department of Agriculture (USDA) to interpret and implement these statutory provisions. The USDA imposes standards for product safety, quality and sanitation through the federal meat and poultry inspection program. The USDA reviews and approves the labeling of these products and establishes standards for the grading and commercial acceptance of produce shipments from our suppliers. We are also subject to the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, which imposes certain registration and record keeping requirements on facilities that manufacture, process, pack or hold food for human or animal consumption. The Food Safety Modernization Act (FSMA) has signiﬁcantly expanded our food safety requirements. The FDA has ﬁnalized regulations implementing the FSMA, recognizing that ensuring the safety of the food supply is a shared responsibility among many diﬀerent points in the global supply chain. The FSMA rules are designed to identify specific actions that must be taken at each of these points to prevent contamination. We have established and continue to maintain comprehensive, prevention- based controls across the food supply chain that are both veriﬁed and validated, as required by FDA regulations implementing FSMA. The FSMA further imposes requirements for food products imported into the U.S. and provides the FDA with mandatory recall authority. We and our products are also subject to state and local regulation through such measures as the licensing of our facilities; enforcement by state and local health agencies of state and local standards for our products; and regulation of our trade practices in connection with the sale of our products. Our facilities are subject to regulations issued pursuant to the U.S. Occupational Safety and Health Act by the U.S. Department of Labor. These regulations require us to comply with certain manufacturing, health and safety standards to protect our employees from accidents and to establish hazard communication programs to transmit information on the hazards of certain chemicals present in products we distribute. We are also subject to the National Labor Relations Act, which governs the process for collective bargaining between employers and employees and protects the rights of both employers and employees in the workplace. PART I Item 1. Business Our processing and distribution facilities must be registered with the FDA biennially and are subject to periodic government agency inspections by the FDA and USDA. Our facilities are generally inspected at least annually by federal and/or state authorities. We also must comply with Federal Trade Commission standards with respect to any claims made about our food products in advertising and marketing materials. Our customers include several departments of the federal government, including the Department of Defense and Department of Veterans Affairs facilities, as well as certain state and local entities. These customer relationships subject us to additional regulations applicable to government contractors. We are also subject to regulation by numerous federal, state and local regulatory agencies, including, but not limited to, the U.S. Department of Labor, which sets employment practice standards for workers. We are also subject to regulations by the U.S. Department of Transportation, as well as its agencies, the Surface Transportation Board, the Federal Highway Administration, the Federal Motor Carrier Safety Administration, and the National Highway Traﬃc Safety Administration, which collectively regulate our trucking operations through the regulation of operations, safety, insurance and hazardous materials. We must comply with the safety and ﬁtness regulations promulgated by the Federal Motor Carrier Safety Administration, including those relating to drug and alcohol testing and hours-of service. Such matters as weight and dimension of equipment also fall under federal and state regulations. We are subject to regulations of the Federal Aviation Administration covering items transported by air. In addition, we are subject to the federal False Claims Act, and similar state statutes, which prohibit knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the government and the knowing and improper retention of overpayments. The U.S. Foreign Corrupt Practices Act (FCPA) prohibits bribery of public oﬃcials to obtain or retain business in foreign jurisdictions. The FCPA also requires us to keep accurate books and records and to maintain internal accounting controls to detect and prevent bribery and to ensure that transactions are properly authorized and recorded. We have implemented and continue to develop an anti-corruption compliance program applicable to our global operations intended to detect and prevent bribery and to comply with these and other anti-corruption laws in countries where we operate. Our business is subject to competition laws in the various jurisdictions where we operate, including the Sherman Antitrust Act and related federal and state antitrust laws in the U.S. These laws and regulations generally prohibit competitors from ﬁxing prices, boycotting competitors, or engaging in other conduct that unreasonably restrains competition. In many jurisdictions, compliance with these competition laws is of special importance to us. Our operations may come under special scrutiny by competition law authorities due to our competitive position in those jurisdictions. Outside the U.S., our business is subject to numerous similar statutes, regulations, and other regulatory requirements. For example, we are subject to legal and regulatory requirements of the European Union (EU), as well as those of EU countries, where we conduct business (including Ireland, France and Sweden). Those requirements relate to, among other things, competition, product composition, packaging, labeling, SYSCO CORPORATION // 2023 Form 10-K 7 PART I Item 1A. Risk Factors advertisement (including nutrition and health claims) and the safety of food products, as well as the health, safety and working conditions of employees. We are subject to privacy laws in the EU, including the General Data Protection Regulation (GDPR), which requires companies to meet certain requirements regarding the handling of personal data. In addition, our business is subject to the U.K. Modern Slavery Act 2015, which requires certain companies that operate in the U.K. to prepare a report describing steps that they have taken to ensure that slavery and human traﬃcking is not taking place in their supply chain or business. Our business is also subject to the U.K. Bribery Act 2010, an anti-corruption law that criminalizes the failure by a company to prevent persons associated with that company from oﬀering or paying bribes to government oﬃcials or non-government persons in order to obtain or retain business or a business advantage for the company, as well as restricting the offer, payment or receipt of bribes to or from governmental officials and non-governmental persons. All of our company’s facilities and other operations in the U.S. and elsewhere around the world are subject to various environmental protection statutes and regulations, including those in the U.S., the U.K. and the EU, relating to: (1) the use of water resources and the discharge of wastewater; (2) the discharge of pollutants into the air, including vehicle emissions; (3) proper handling, treatment and disposing of solid and hazardous wastes; and (4) protecting against and appropriately investigating and remediating spills and releases. Further, most of our distribution facilities have ammonia-based refrigeration systems and tanks for the storage of diesel fuel and other petroleum products which are subject to laws regulating such systems and storage tanks (including the investigation and remediation of soil and groundwater contamination associated with the use of underground storage tanks). See “Item 1A. Risk Factors - Business and Operational Risks - We may incur signiﬁcant costs to comply with environmental laws and regulations, and we may be subject to substantial ﬁnes, penalties, or third-party claims for non-compliance.” General We have numerous trademarks that are of significant importance, including the SYSCO® and Brakes® trademarks, in addition to our privately branded product trademarks that include these trademarks. These trademarks and the private brands on which they are used are widely recognized within the foodservice industry. Both our U.S. and European trademarks are eﬀective for a ten-year period, and we generally renew our trademarks before their expiration dates unless a particular trademark is no longer in use. We believe the loss of the SYSCO® trademark would have a material adverse eﬀect on our results of operations. We do not have any material patents or licenses. Item 1A. Risk Factors We are not engaged in material research and development activities relating to the development of new products or the improvement of existing products. Our sales do not generally ﬂuctuate signiﬁcantly on a seasonal basis; therefore, our business is not deemed to be seasonal. As of July 1, 2023, we operated 334 distribution facilities throughout North America and Europe. The following discussion of “risk factors” identifies the most significant factors that may adversely aﬀect our business, results of operations, ﬁnancial position and future ﬁnancial performance. This information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes contained in this report. The following discussion of risks is not all inclusive, but is designed to highlight what we believe are the most signiﬁcant factors to consider when evaluating our business. These factors could cause our future results to diﬀer from our expectations expressed in the forward-looking statements identiﬁed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and from other historical trends. Industry and General Economic Risks Our industry is characterized by low margins, and periods of significant or prolonged inflation or deflation affect our product costs and may negatively impact our profitability and results of operations. The foodservice distribution industry is characterized by relatively high inventory turnover with relatively low proﬁt margins. Volatile food costs have a direct impact on our industry. We experienced an elevated inﬂation rate of approximately 6.1% in our total company operations during ﬁscal 2023, primarily in the dairy, frozen and canned and dry categories. In periods of signiﬁcant product cost inﬂation, if we are unable to pass on all or a portion of such product cost increases to our customers in a timely manner, our results of operations would be adversely aﬀected. In addition, periods of rapidly increasing inﬂation may adversely aﬀect our results of operations due to the impact of such inﬂation on discretionary spending by consumers and our limited ability to increase prices in the current, highly competitive environment. Conversely, our results of operations may be adversely aﬀected by periods of product cost disinﬂation and deﬂation, because we make a signiﬁcant portion of our sales at prices that are based on the cost of products we sell plus a percentage margin, mark-up or fee per case. As a result, our results of operations may be adversely aﬀected during periods of product cost disinﬂation and deﬂation, even though our gross proﬁt percentage may remain relatively constant. 8 SYSCO CORPORATION // 2023 Form 10-K A shortage of qualified labor and increases in labor costs could adversely affect our business and materially reduce earnings. The future success of our operations, including the achievement of our strategic objectives, depends on our ability, and the ability of certain third parties on which we rely, to identify, recruit, develop and retain diverse, qualiﬁed and talented individuals. As a result, a shortage of qualiﬁed labor could adversely aﬀect our business, decrease our ability to eﬀectively serve our customers, and achieve our strategic objectives. We are experiencing a shortage of qualiﬁed labor in certain geographies, particularly in the area of warehouse workers and drivers. Such shortages frequently result in increased costs from certain temporary wage actions, such as hiring, referral, and retention bonus programs. See the discussion under “Human Capital Resources” in Item 1, “Business” for additional information regarding our talent acquisition and talent management eﬀorts in the context of these labor shortages. Unsuccessful recruiting and retention eﬀorts as a result of such continuing shortages for a prolonged period of time could have a material adverse eﬀect on our ﬁnancial condition and results of operations. Labor shortages also likely lead to higher wages for employees and higher costs to purchase the services of third parties. Increases in labor costs, such as increases in minimum wage requirements, wage inﬂation and/or increased overtime, reduce our proﬁtability and that of our customers. Increases in such labor costs for a prolonged period of time could have a material adverse eﬀect on our ﬁnancial condition and results of operations. Further, potential changes in labor legislation and case law could result in current non-union portions of our workforce, including warehouse and delivery personnel, being subjected to greater organized labor influence. If additional portions of our workforce became subject to collective bargaining agreements, this could result in increased costs of doing business as we would become subject to mandatory, binding arbitration or labor scheduling, costs and standards, which may reduce our operating ﬂexibility. Global health developments and economic uncertainty resulting from the COVID-19 pandemic or other future public health crises may continue to adversely affect our business, financial condition and results of operations. Public health crises, pandemics and epidemics could adversely aﬀect our business, ﬁnancial condition and results of operations. For example, the coronavirus (COVID-19) pandemic adversely impacted our business, results of operations and ﬁnancial condition directly and disrupted the operations of our business partners, suppliers and customers. While our operations have generally stabilized since the peak of the COVID-19 pandemic, we cannot predict with certainty the extent to which our operations may be impacted in the future by any continuing eﬀects of COVID-19 on us or on our business partners, suppliers and customers. Fear of COVID-19 or similar 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, our customers and our suppliers were present and operated, imposed PART I Item 1A. Risk Factors 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 required or strongly urged various venues where foodservice products were served, including restaurants, schools, hotels and cruise liners, to reduce or discontinue operations, which adversely affected demand in the foodservice industry, including demand for our products and services. Mutations of the virus have arisen, and may arise in the future, some of which could prove to be particularly aggressive variants, causing some governmental authorities to reintroduce certain restrictions in the future, which could adversely aﬀect demand in the foodservice industry. The future outbreak of a public health crisis (including the reemergence of COVID-19) that adversely aﬀects our business, results of operations and ﬁnancial condition, could also have the eﬀect of heightening many of the other risks described in this 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. Unfavorable macroeconomic conditions, as well as unfavorable conditions in particular local markets, may adversely affect our results of operations and financial condition. Our results of operations are susceptible to regional, national and international economic trends and uncertainties. Economic conditions can aﬀect us in the following ways: (cid:122) Unfavorable conditions can depress sales and/or gross margins in a given market. (cid:122) Food cost and fuel cost inflation can lead to reductions in the frequency of dining out and the amount spent by consumers for food-away-from-home purchases, reducing demand for our products. (cid:122) Heightened uncertainty in the financial markets negatively affects consumer conﬁdence and discretionary spending. (cid:122) The inability to consistently access credit markets could impair our ability to market and distribute food products, support our operations and meet our customers’ needs. (cid:122) Liquidity and the inability of our customers and suppliers to consistently access credit markets to obtain cash to support their operations can cause temporary interruptions in our ability to collect funds from our customers and obtain the products and supplies that we need in the quantities and at the prices that we request. (cid:122) Foreign exchange rate fluctuations can adversely impact our competitiveness and/or ﬁnancial results. The countries in which we operate have experienced and are experiencing, from time to time, deteriorating economic conditions and heightened uncertainty in ﬁnancial markets, which have adversely impacted business and consumer conﬁdence and spending and depressed capital investment and economic activity in the aﬀected regions. Such conditions and high levels of uncertainty make it diﬃcult to predict when, or if, a recession may occur. In fact, some commentators have suggested that the U.S. is already in a recession. A prolonged economic downturn or recession in the U.S. or global economies, and the impact on gross domestic product growth, corporate earnings, consumer conﬁdence, employment rates, income levels and/or personal wealth, could have a material adverse eﬀect on our results of operations and ﬁnancial condition. SYSCO CORPORATION // 2023 Form 10-K 9 PART I Item 1A. Risk Factors We may not be able to fully compensate for increases in fuel costs, and fuel hedging arrangements intended to contain fuel costs could result in above market fuel costs, any of which could adversely affect our results of operations. The cost of fuel aﬀects the prices we pay for products, as well as the costs we incur to deliver products to our customers. We require signiﬁcant quantities of fuel for our delivery vehicles and are exposed to the risk associated with ﬂuctuations in the market price for fuel. The price and supply of fuel can ﬂuctuate signiﬁcantly based on international, political and economic circumstances (such as the invasion of Ukraine by the Russian Federation (Russia)) as well as other factors outside our control, such as actions by the Organization of the Petroleum Exporting Countries (OPEC) and other oil and gas producers, regional production patterns, weather conditions and environmental concerns. Although we have been able to pass along a portion of increased fuel costs to our customers in the past through, among other things, our fuel surcharge program, we may not be able to do so in the future. If fuel costs continue to increase in the future, we may experience diﬃculties in passing all or a portion of these costs along to our customers, which may adversely aﬀect our results of operations. We routinely enter into fuel hedging arrangements, including fuel derivatives, to hedge our exposure to volatile fuel prices. Nevertheless, our fuel hedging transactions may not be eﬀective in protecting us from changes in fuel prices. If fuel prices were to decrease signiﬁcantly, these hedging arrangements would result in our paying higher-than-market costs for a portion of our diesel fuel. In addition, our future use of fuel derivatives would expose us to the risk that any of our counterparties fails to perform its obligations, whether due to its insolvency or otherwise, which could result in ﬁnancial losses. Economic and political instability and changes in laws and regulations 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. Local or regional geopolitical events, such as Brexit and, civil unrest in France in 2023 related to socioeconomic issues, have negatively impacted our operations. Similar future trade or labor disruptions or disputes could have a negative impact on our operations in the EU and other parts of the world. In addition, military conﬂicts, such as the invasion of Ukraine by Russia, can negatively impact global demand. In response to such conﬂicts, various governments can and have recently imposed export controls on certain products and ﬁnancial and economic sanctions on certain industry sectors and parties, which actions can have a negative impact on our operations. Although our business has not been materially impacted to date by the ongoing invasion of Ukraine by Russia, it is impossible to predict the extent to which our operations, or those of our suppliers and customers, will be impacted in the short and long term, or the ways in which the conﬂict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are diﬃcult to predict, but could be substantial. Further escalation of geopolitical tensions related to the military conﬂict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, lower consumer demand and changes to foreign exchange rates and ﬁnancial markets. Any or all of these factors could disrupt our business directly and could disrupt the business of our customers, which could have an adverse eﬀect on our business and results of operations. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K. Competition and the impact of GPOs may reduce our margins and make it difficult for us to maintain our market share, growth rate and profitability. The foodservice distribution industry is fragmented and highly competitive, with local, regional and multi-regional distributors and specialty competitors. Local and regional companies often align themselves with other smaller distributors through purchasing cooperatives and marketing groups, with the goal of enhancing their geographic reach, private label oﬀerings, overall purchasing power, cost eﬃciencies and ability to meet customer distribution requirements. These suppliers may also rely on local presence as a source of competitive advantage, and they may have lower costs and other competitive advantages due to geographic proximity. Furthermore, barriers to entry by new competitors, or geographic or product line expansion by existing competitors, are low. Additionally, increased competition from non-traditional sources (such as club stores and commercial wholesale outlets with lower cost structures), online direct food wholesalers and cash and carry operations have served to further increase pressure on the industry’s proﬁt margins. Continued margin pressure within the industry may have a material adverse eﬀect on our results of operations. Moreover, some of our customers purchase their products from us through group purchasing organizations (GPOs) in an eﬀort to lower the prices paid by these customers on their foodservice orders. GPOs have a relatively larger presence in the healthcare, lodging and foodservice management customer segments. If these GPOs are able to add a signiﬁcant number of our customers as members, our business, ﬁnancial condition and results of operations may be adversely aﬀected. Finally, demand for food-away-from-home products is volatile and price sensitive, imposing limits on our customers’ ability to absorb cost increases. New and increasing competitive sources may result in increased focus on pricing and on limiting price increases or may require increased discounting or other concessions. Such competition or other industry pressures may result in margin erosion and/or make it diﬃcult for us to attract and retain customers. If we are unable to eﬀectively diﬀerentiate ourselves from our competitors, our results of operations could be adversely impacted. In addition, even if we are able to eﬀectively diﬀerentiate ourselves, we may only be able to do so through increased expenditures or decreased prices, which could also adversely impact our results of operations. 10 SYSCO CORPORATION // 2023 Form 10-K Business and Operational Risks Conditions beyond our control can interrupt our supplies, increase our product costs and impair our ability to deliver products and services to our customers, any of which could adversely affect our business, results of operations and financial condition. We obtain substantially all of our foodservice and related products from third-party suppliers. Although our purchasing volume can provide beneﬁts when dealing with suppliers, suppliers may not be able to provide the foodservice products and supplies that we need due to conditions outside of their control. We are also subject to delays caused by interruptions in production and increases in product costs based on conditions outside of our control. These conditions include shortages of qualiﬁed labor for our suppliers, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, short-term weather conditions or more prolonged climate change, crop and other agricultural conditions, water shortages, transportation interruptions (such as shortages of ocean cargo containers), unavailability of fuel or increases in fuel costs, product recalls, competitive demands, civil insurrection or social unrest, terrorist attacks or international hostilities (such as the invasion of Ukraine by Russia) and natural disasters, epidemics, pandemics (such as the COVID-19 pandemic) or other human or animal disease outbreaks or other catastrophic events (including, but not limited to, foodborne illnesses). Many of these conditions outside of our control could also impair our ability to provide our products and services to our customers or increase the cost of doing so. While our operations have generally stabilized since the peak of the COVID-19 pandemic, we cannot predict with certainty the extent that our operations may continue to be impacted by any continuing eﬀects of COVID-19 on us or on our business partners, suppliers and customers. Customer demand is currently outpacing available supply in certain categories. Certain suppliers are struggling to meet demand for our orders and may also be aﬀected by higher costs to source or produce and transport products, which impairs our ability to deliver products and services to our customers. Prolonged future supply shortages could have an adverse eﬀect on our ﬁnancial condition and results of operations. Further, increased frequency or duration of extreme weather conditions, which may be from climate change, could also impair production capabilities, disrupt our supply chain or adversely aﬀect demand for our products. At any time, input costs could increase for a prolonged period for a large portion of the products that we sell. Additionally, we procure products from suppliers outside of the U.S., and we are subject to the risks associated with political or ﬁnancial instability, military conﬂict, trade restrictions, tariﬀs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, including health and safety restrictions related to epidemics and pandemics (such as the COVID-19 pandemic), any or all of which could delay our receipt of products or increase our input costs. In addition, as a foodservice distributor, it is necessary for us to maintain an inventory of products. Declines in product pricing levels between the time we purchase a product from our suppliers and the time we sell the product to our customers could reduce our margin on that inventory, adversely aﬀecting our results of operations. PART I Item 1A. Risk Factors Adverse publicity about us or lack of confidence in our products could negatively impact our reputation and reduce earnings. Maintaining a good reputation and public conﬁdence in the safety of the products we distribute is critical to our business. Our brand names, trademarks, logos and reputation are powerful sales and marketing tools, and we devote significant resources to promoting and protecting them. Anything that damages our reputation or public conﬁdence in our products, whether or not justiﬁed, could tarnish our reputation and diminish the value of our brand, which could adversely aﬀect our results of operations, and require additional resources to rebuild our reputation and restore the value of our brand. Reports, whether true or not, of foodborne illnesses or injuries caused by food tampering could also severely injure our reputation or reduce public conﬁdence in our products. If patrons of our restaurant customers were to become ill from foodborne illnesses, our customers could be forced to temporarily close restaurant locations, which would have an adverse eﬀect on our sales and proﬁtability. In addition, adverse publicity about regulatory or legal action against us could damage our reputation and image, undermine our customers’ confidence in us and reduce short-term or long-term demand for our products and services, even if the regulatory or legal action is unfounded or not material to our operations. Any of these developments or circumstances could adversely aﬀect our results of operations. Our relationships with long-term customers may be materially diminished or terminated, which could adversely affect our business, financial condition and results of operations. We have long-standing relationships and agreements with a number of our customers. Some of our customer agreements are terminable upon written notice by either us or the customer, which provides some customers with the opportunity to renegotiate their contracts with us on less favorable terms or to award more business to our competitors. Market competition, customer requirements, customer ﬁnancial condition and customer consolidation through mergers or acquisitions also could adversely aﬀect our ability to continue or expand these relationships. We may not be able to retain or renew existing agreements, maintain relationships with any of our customers on acceptable terms, or at all, or collect amounts that insolvent customers might owe us. The loss of one or more of our major customers could adversely aﬀect our business, ﬁnancial condition, and results of operations. Our anticipated change to the mix of locally managed customers versus multi-unit customers could reduce our gross and operating margins. Gross margin from our multi-unit customers, which includes primarily national and regional casual dining and quick service restaurant chains, is generally lower than that of our locally managed customers because we typically sell higher volumes of products to multi-unit customers and provide a relatively lower level of value-added services than we do to locally managed customers. If sales to our locally managed customers do not grow at the same (or a greater) rate as sales to our multi-unit customers, our operating margins could decline. For example, the COVID-19 pandemic generally negatively aﬀected multi-unit customers less than locally managed customers. SYSCO CORPORATION // 2023 Form 10-K 11 PART I Item 1A. Risk Factors If our sales to multi-unit customers were to continue to increase at a faster pace of growth than sales to our locally managed customers, we will become more dependent on multi-unit customers, as they begin to represent a greater proportion of our total sales. Therefore, a future loss of sales to the larger of these multi-unit customers could have a material negative impact on our results of operations and financial condition. Additionally, as a result of our greater dependence on these customers, these customers could pressure us to lower our prices and/or oﬀer expanded or additional services at the same prices. In that event, if we were unable to achieve additional cost savings to offset these price reductions and/or cost increases, our results of operations could be materially adversely aﬀected. We may be unable to change our cost structure and pricing practices rapidly enough to successfully compete in such an environment. Changes in consumer eating habits could materially and adversely affect our business, financial condition, and results of operations. Changes in consumer eating habits (such as a decline in consuming food away from home, a decline in portion sizes, or a shift in preferences toward restaurants that are not our customers) could reduce demand for our products. Consumer eating habits could be aﬀected by a number of factors, including changes in attitudes regarding diet and health (including shifting preferences for sustainable, organic and locally grown products, as well as alternative proteins) or new information regarding the health eﬀects of consuming certain foods. Changing consumer eating habits also occur due to generational shifts. Millennials, the largest demographic group in terms of spend, seek new and diﬀerent, as well as more ethnic, menu options and menu innovation. If consumer eating habits change signiﬁcantly, we may be required to modify or discontinue sales of certain items in our product portfolio, and we may experience higher costs and/or supply shortages associated with our eﬀorts to accommodate those changes as our suppliers adapt to new eating preferences. Changing consumer eating habits may reduce the frequency with which consumers purchase meals outside of the home. Additionally, changes in consumer eating habits may result in the enactment or amendment of laws and regulations that impact the ingredients and nutritional content of our food products, or laws and regulations requiring us to disclose the nutritional content of our food products. Compliance with these laws and regulations, as well as others regarding the ingredients and nutritional content of our food products, may be costly and time-consuming. We may not be able to eﬀectively respond to changes in consumer health perceptions or resulting new laws or regulations or to adapt our menu oﬀerings to trends in eating habits. In addition, in response to the COVID-19 pandemic and the related economic downturn, many consumers preferred to eat at home rather than consume food away from home. If these preferences return and consumers choose to avoid gathering in public places in large groups, the demand for our products and services could be adversely aﬀected. Moreover, if governmental restrictions were to resume, it is unclear how quickly customers will return to their prior eating habits, which may be a function of continued concerns over safety or depressed consumer sentiment due to adverse economic conditions, including job losses. 12 SYSCO CORPORATION // 2023 Form 10-K Expanding into new markets and complementary lines of business presents unique challenges and may not be successful, and failure to successfully expand may adversely affect the implementation of our business strategy. An element of our strategy includes further expansion of operations into new markets and the establishment of new procurement organizations. Our ability to successfully operate in these new markets may be adversely aﬀected by political, economic and social conditions beyond our control, public health crises, epidemics and pandemics (such as the COVID-19 pandemic), local laws and customs, and legal and regulatory constraints, including compliance with applicable anti-corruption and currency laws and regulations, of the countries or regions in which we currently operate or intend to operate in the future. Risks inherent in such expansion also include, among others, the costs and diﬃculties of identifying and gaining access to local suppliers, suﬀering possible adverse tax consequences from changes in tax laws or the unfavorable resolution of tax assessments or audits, maintaining product quality and greater diﬃculty in enforcing intellectual property rights. Our business strategy also includes the possibility of expansion into businesses that are closely related or complementary to, but not currently part of, our core foodservice distribution business. Our ability to successfully operate in these complementary business markets may be adversely aﬀected by legal and regulatory constraints, including compliance with regulatory programs to which we become subject. Risks inherent in branching out into such complementary markets also include the costs and diﬃculties of managing operations outside of our core business, which may require additional skills and competencies, as well as diﬃculties in identifying and gaining access to suppliers or customers in new markets. Changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results. As a multinational corporation, we are subject to income taxes, as well as non-income-based taxes, in both the U.S. and various foreign jurisdictions. Signiﬁcant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. Changes in tax laws or tax rulings may have a signiﬁcant adverse impact on our eﬀective tax rate. For example: (cid:122) The U.S. and many countries where we do business are actively considering or have recently enacted changes in relevant tax, accounting and other laws, regulations and interpretations, including changes to tax laws applicable to corporate multinationals. (cid:122) On August 16, 2022, the U.S. Congress passed the Inﬂation Reduction Act of 2022 (Inﬂation Reduction Act), which, among other provisions, creates a new corporate alternative minimum tax (CAMT) of at least 15% for certain large corporations that have at least an average of $1 billion in adjusted ﬁnancial statement income over a consecutive three-year period eﬀective after December 31, 2022. The Inﬂation Reduction Act also includes a 1% excise tax on certain stock repurchases beginning in 2023. We do not expect to meet the CAMT threshold in the near term. (cid:122) On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Proﬁt Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy. Pillar One expands a country’s authority to tax proﬁts from companies that make sales into their country but do not have a physical location in the country. Pillar Two includes an agreement on international tax reform, including rules to ensure that large corporations pay a minimum rate of corporate income tax. On December 20, 2021, the OECD released Pillar Two Model Rules deﬁning the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD continues to release additional guidance on the two-pillar framework, with widespread implementation anticipated by 2024. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by individual countries. Further, in the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination could change if tax laws or tax rulings were to be modiﬁed. We are also subject to non-income-based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in both the U.S. and various foreign jurisdictions. Although we believe that our income and non-income-based tax estimates are appropriate, there is no assurance that the ﬁnal determination of tax audits or tax disputes will not be diﬀerent from what is reﬂected in our historical income tax provisions and accruals. Given the unpredictability of possible further changes to the U.S. or foreign tax laws and regulations and their potential interdependency, it is very diﬃcult to predict the cumulative eﬀect of such tax laws and regulations on our results of operations and cash ﬂow, but such laws and regulations (and changes thereto) could adversely impact our ﬁnancial results. Additionally, we are subject to regular review and audit by both domestic and foreign tax authorities as well as to the prospective and retrospective eﬀects of changing tax regulations and legislation. Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially diﬀer from the tax amounts recorded in our Consolidated Financial Statements and may materially aﬀect our income tax provision, net income, or cash flows in the period or periods for which such determination and settlement occurs. If our products are alleged to have caused injury or illness, or to have failed to comply with governmental regulations, we may need to recall or withdraw our products and may experience product liability claims. We, like any other foodservice distributor, may be subject to product recalls, including voluntary recalls or withdrawals, if the products we distribute are alleged to have caused injury or illness, to have been mislabeled, misbranded, or adulterated or to otherwise have violated applicable governmental regulations. We may also choose to voluntarily recall or withdraw products that we determine do not satisfy our quality standards, in order to protect our brand and reputation. Any future product recall or withdrawal that results in substantial and unexpected expenditures, destruction of product inventory, damage to our reputation and/or lost sales due to the unavailability of the product for a period of time could materially adversely aﬀect our results of operations and ﬁnancial condition. We also face the risk of exposure to product liability claims if the use of products sold by Sysco is alleged to have caused injury or illness. We cannot be sure that consumption of our products will not cause a health- related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Further, even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely aﬀect our reputation with existing and potential customers and our corporate and brand image. Umbrella liability insurance that we maintain for product liability claims may not continue to be available at a reasonable cost or, if available, may not be adequate to cover all of our liabilities. We generally PART I Item 1A. Risk Factors seek contractual indemniﬁcation and insurance coverage from parties supplying our products, but this indemniﬁcation or insurance coverage is limited, as a practical matter, to the creditworthiness of the indemnifying party and the insured limits of any insurance provided by suppliers. If we do not have adequate insurance or contractual indemniﬁcation available, product liability relating to defective products could materially adversely aﬀect our results of operations and ﬁnancial condition. If we fail to comply with requirements imposed by applicable law or other governmental regulations, we could become subject to lawsuits, investigations and other liabilities and restrictions on our operations that could materially adversely affect our business. We are subject to various federal, state, provincial, regional and local laws, rules and regulations in the countries in which we operate with respect to many aspects of our business, such as food safety and sanitation, ethical business practices, transportation, minimum wage, overtime, wage payment, wage and hour and employment discrimination, immigration, human health and safety. Due to the services we provide in connection with governmentally funded entitlement programs, we are also subject to additional laws and regulations. For a detailed discussion of the laws and regulations to which our business is subject, please refer to “Business – Government Regulation” in Part I, Item 1 of this Annual Report on Form 10-K. From time to time, both federal and state governmental agencies conduct audits of various aspects of our operations, as part of investigations of providers of services under governmental contracts, or otherwise. We also receive requests for information from governmental agencies in connection with these audits. While we attempt to comply with all applicable laws and regulations, we may not be in full compliance with all applicable laws and regulations or interpretations of these laws and regulations at all times; moreover, we may not be able to comply with all future laws, regulations or interpretations of these laws and regulations. If we fail to comply with applicable laws and regulations or encounter disagreements with respect to our contracts subject to governmental regulations, including those referred to above, we may be subject to investigations, criminal sanctions or civil remedies, including fines, injunctions, prohibitions on exporting, or seizures or debarments from contracting with such government. The cost of compliance or the consequences of non-compliance, including debarments, could have an adverse eﬀect on our results of operations. In addition, governmental units may make changes in the regulatory frameworks within which we operate that may require us to incur substantial increases in costs in order to comply with such laws and regulations. We may incur significant costs to comply with environmental laws and regulations, and we may be subject to substantial fines, penalties or third-party claims for non-compliance. Our operations are subject to various federal, state, provincial, regional and local laws, rules and regulations in the various countries in which we operate relating to the protection of the environment, including those governing: (cid:122) the discharge of pollutants into the air, soil, and water; (cid:122) the management and disposal of solid and hazardous materials and wastes; SYSCO CORPORATION // 2023 Form 10-K 13 PART I Item 1A. Risk Factors (cid:122) employee exposure to hazards in the workplace; and (cid:122) the investigation and remediation of contamination resulting from releases of petroleum products and other regulated materials. In the course of our operations, we: operate, maintain and fuel ﬂeet vehicles; store fuel in on-site above and underground storage tanks; operate refrigeration systems; and use and dispose of hazardous substances and food wastes. We could incur substantial costs, including ﬁnes or penalties and third-party claims for property damage or personal injury, as a result of any violations of environmental or workplace safety laws and regulations or releases of regulated materials into the environment. In addition, we could incur substantial investigation, remediation or other costs related to environmental conditions at our currently or formerly owned or operated properties. For example, most of our distribution facilities have ammonia-based refrigeration systems and tanks for the storage of diesel fuel and other petroleum products, which are subject to laws regulating such systems and storage tanks (including the investigation and remediation of soil and groundwater contamination associated with the use of underground storage tanks). Certain of these laws and regulations in the EU may impose liability for costs of investigation or remediation of contamination (which could be material), regardless of fault or the legality of the original disposal, even if such contamination was present prior to the commencement of our operations at the site and was not caused by our activities. In addition, many of our facilities have propane and battery-powered forklifts. Proposed or recently enacted legal requirements, such as those requiring the phase-out of certain ozone-depleting substances, and proposals for the regulation of greenhouse gas emissions, may require us to upgrade or replace equipment, or may increase our transportation or other operating costs. If we are unable to finance and integrate acquired businesses effectively, our earnings per share could be materially adversely affected. Historically, a portion of our growth has come through acquisitions. If we are unable to integrate acquired businesses successfully or realize anticipated economic, operational and other beneﬁts and synergies in a timely manner, our results of operations may be materially adversely affected. For example, we are experiencing ongoing operational challenges related to our eﬀorts to integrate two businesses in France, adversely aﬀecting our ability to drive growth in sales. Integration of an acquired business may be more diﬃcult when we acquire a business in a market in which we have limited expertise, or with a culture diﬀerent from Sysco’s. A significant expansion of our business and operations, in terms of geography or magnitude, could strain our administrative and operational resources. Significant acquisitions may also require the issuance of material additional amounts of debt or equity, which could materially alter our debt-to-equity ratio, increase our interest expense and decrease earnings per share, and make it difficult for us to obtain favorable ﬁnancing for other acquisitions or capital investments. In addition, our failure to implement eﬀective internal control over ﬁnancial reporting and disclosure controls and procedures with respect to a signiﬁcant acquired business could result in material weaknesses and/or a failure to ﬁle our periodic reports with the Securities and Exchange Commission on a timely basis. 14 SYSCO CORPORATION // 2023 Form 10-K We rely on technology in our business, and any cybersecurity incident, other technology disruption or delay in implementing new technology could negatively affect our business and our relationships with customers. We use technology in substantially all aspects of our business operations, and our ability to serve customers most eﬀectively depends on the reliability of our technology systems. We use software and other technology systems, among other things, to generate and select orders, to load and route trucks, to make purchases, to manage our warehouses and to monitor and manage our business on a day-to-day basis. We also use mobile devices, social networking and other online platforms to connect with our employees, suppliers, business partners and customers. Further, our business involves the storage and transmission of numerous classes of sensitive and/or conﬁdential information and intellectual property, including customers’ and suppliers’ personal information, private information about employees and ﬁnancial and strategic information about us and our business partners. This sensitive and/or conﬁdential information and intellectual property are stored on information technology systems controlled by us, as well as systems controlled by third parties, such as our service providers. These technology systems and the operation thereof are vulnerable to disruption from circumstances beyond our control, including ﬁre, natural disasters, power outages, systems failures, security breaches, espionage, cyber-attacks, viruses, theft and inadvertent release of information. We and our third-party providers experience cybersecurity incidents of varying degrees from time-to-time, including ransomware and phishing attacks, as well as distributed denial of service attacks and the theft of data. Cyber threats are constantly evolving, are becoming more sophisticated and are being made by groups and individuals with a wide range of expertise and motives, and this increases the diﬃculty of detecting and successfully defending against them. For example, as disclosed in our Quarterly Report on Form 10-Q for our third quarter of ﬁscal 2023, in March 2023, Sysco became aware of a cybersecurity event perpetrated by a threat actor believed to have begun in January 2023. Immediately upon detection, Sysco initiated an investigation, with the assistance of cybersecurity and forensics professionals, determining that the threat actor had extracted certain company data, including data relating to operation of the business, customers, employees and personal data. This data extraction did not impact Sysco’s operational systems and related business functions, and its service to customers continued uninterrupted. Sysco also notiﬁed federal law enforcement and provided other required notiﬁcations. To date, these cybersecurity incidents have not had a material impact on our ﬁnancial condition, results of operations or liquidity. However, there is no assurance that there will not be a material adverse eﬀect in the future, especially if the amount of insurance coverage we maintain is not suﬃcient to cover claims or liabilities relating to an incident. Potential consequences of a future material cybersecurity incident include: business disruption; disruption to systems; theft, destruction, loss, corruption, misappropriation or unauthorized release of sensitive and/ or conﬁdential information or intellectual property (including personal information in violation of one or more privacy laws); loss of revenue; reputational and brand damage; and potential liability, including litigation or other legal actions against us or the imposition by governmental authorities of penalties, fines, fees or liabilities, which, in turn, could cause us to incur signiﬁcantly increased cybersecurity protection and remediation costs and the loss of customers. In addition, if our suppliers or customers experience such a breach or unauthorized disclosure or system failure, their businesses could be disrupted or otherwise negatively aﬀected. This may result in a disruption in our supply chain or reduced customer orders, which would adversely aﬀect our business operations. We have also outsourced several information technology support services and administrative functions to third-party service providers, including cloud-based service providers, and may outsource other functions in the future to achieve cost savings and eﬃciencies. If these service providers do not perform eﬀectively due to breach or system failure, we may not be able to achieve the expected beneﬁts and our business may be disrupted. The COVID-19 pandemic has resulted in many of our employees, contractors and other corporate partners working remotely, increasing reliance on information technology systems that are outside our direct control. These systems are potentially vulnerable to cyber-based attacks and security breaches. In addition, cyber criminals are increasing their attacks on individual employees with business email compromise scams designed to trick victims into transferring sensitive data or funds, or steal credentials that compromise information systems. The actions and controls we have implemented and are implementing to date, or which we seek to cause or have caused third-party providers to implement, may be insuﬃcient to protect our systems, information or other intellectual property. Further, we anticipate continuing to devote signiﬁcant resources to maintaining and upgrading our security measures generally, including those we employ to protect personal information against these cybersecurity threats. Further, as we pursue our strategy to grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, we are also expanding and improving our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. Failure to adequately assess and identify cybersecurity risks associated with acquisitions and new initiatives could increase our vulnerability to such risks. Our eﬀorts to prevent security breaches and cybersecurity incidents, and to implement eﬀective disaster recovery plans, may not be entirely eﬀective to insulate us from technology disruption or protect us from adverse eﬀects on our results of operations. Additionally, information technology systems continue to evolve and, in order to remain competitive, we must implement new technologies in a timely and eﬃcient manner. For example, we may incorporate emerging artiﬁcial intelligence (AI) solutions into our platform, offerings, services and features, and these applications may become important in our operations over time. Our failure to implement timely and/or successfully new technologies, including AI, may adversely aﬀect our competitiveness and, consequently, our results of operations. Our failure to comply with data privacy regulations could adversely affect our business. There are new and emerging data privacy laws, as well as frequent updates and changes to existing data privacy laws, in most jurisdictions in which we operate. Given the complexity of these laws and the often- onerous requirements they place on businesses regarding the collection, storage, handling, use, disclosure, transfer, and security of personal data, it is important for us to understand their impact and respond accordingly. Failure to comply with data privacy laws can result in substantial ﬁnes or penalties, legal liability and / or reputational damage. In the UK and Europe, the General Data Protection Regulation (the GDPR), which came into eﬀect in 2018, places stringent requirements on companies when handling personal data. There continues to be a growing trend of other countries adopting similar laws. Additionally, there continues to be signiﬁcant uncertainty with respect to the California Consumer Privacy Act of 2018 (the CCPA), which went into eﬀect on January 1, 2020, and imposes additional obligations on companies regarding the handling of personal information and provides certain individual privacy rights to persons whose information is collected. Both the GDPR and the CCPA are continuously evolving and developing PART I Item 1A. Risk Factors and may be interpreted and applied differently from jurisdiction to jurisdiction and may create inconsistent or conﬂicting requirements. For example, the California Privacy Rights Act (the CPRA), which was approved by California voters as a ballot initiative in November 2020, modiﬁes the CCPA signiﬁcantly, further enhancing and extending an individual’s rights over their personal data and the obligations placed on companies that handle this data. The resulting new regulations became effective on January 1, 2023. Most notably, employee and business data were brought into scope, which raises the compliance requirements for us signiﬁcantly, in terms of internal controls, processes and governance requirements. Furthermore, since 2020, several other U.S. states have enacted (and additional U.S. states are considering enacting) stringent consumer privacy laws, which may impose varying standards and requirements on our data collection, use and processing activities. Continued state by state introduction of privacy laws can be expected to lead to signiﬁcantly greater complexity in our compliance requirements globally, which could result in complaints from data subjects and/or action from regulators. If we do not provide suﬃcient resources to ensure we are able to respond, adapt and implement the necessary requirements to respond to the various forthcoming changes, which could include federal data privacy requirements in the US, while continuing to maintain our compliance with global data privacy laws, this could adversely impact our reputation and we could face exposure to ﬁnes levied by regulators, which could have a signiﬁcant ﬁnancial impact on our business. Our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position. As described in Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8, as of July 1, 2023, we had approximately $10.4 billion of total indebtedness, which primarily includes our outstanding senior notes. Additionally, we have the ability to borrow under our revolving credit facility, which supports our U.S. commercial paper program. Our level of indebtedness could have important consequences for us, including: (cid:122) limiting our ability to obtain additional ﬁnancing, if needed, for working capital, capital expenditures, acquisitions, debt service requirements or other purposes; (cid:122) increasing our vulnerability to adverse economic, industry or competitive developments; (cid:122) limiting our ﬂexibility in planning for, or reacting to, changes in our business and our industry; and (cid:122) placing us at a competitive disadvantage compared to our competitors that have less debt. Our indebtedness may increase from time to time for various reasons, including fluctuations in operating results, working capital needs, capital expenditures, potential acquisitions, joint ventures and/or share repurchase programs. Our level of indebtedness and the ultimate cost of such indebtedness could have a negative impact on our liquidity, cost of future debt ﬁnancing and ﬁnancial results, and our credit ratings may be adversely aﬀected as a result of the incurrence of additional indebtedness. 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. In the future, our cash ﬂow and capital resources may not be suﬃcient for payments of interest on and principal of our debt, and any alternative ﬁnancing measures available may not be successful and may not permit us to meet our scheduled debt service obligations. SYSCO CORPORATION // 2023 Form 10-K 15 PART I Item 1A. Risk Factors We may be required to pay material amounts under multiemployer defined benefit pension plans, which could adversely affect our financial condition, results of operations and cash flows. We contribute to several multiemployer deﬁned beneﬁt pension plans based on obligations arising under collective bargaining agreements covering union-represented employees. In fiscal 2023, our total contributions to these plans were approximately $52.6 million. The costs of providing beneﬁts through such plans have increased in recent years. The amount of any increase or decrease in our required contributions to these multiemployer plans will depend upon many factors, including collective bargaining negotiations, actions taken by trustees who manage the plans, government regulations, changes in the funded status of these plans and the potential payment of a withdrawal liability if we, for any reason, cease to have an ongoing obligation to contribute to a given plan. Based upon the information available to us from the administrators of these plans, none of these plans have assets suﬃcient to fully pay their liabilities, and therefore all such plans have unfunded vested beneﬁts. Increases in the unfunded liabilities of these plans may result in increased future contribution obligations imposed on us and on other participating employers. Under federal law, signiﬁcant underfunding experienced by a given plan generally results in increased contribution obligations in the form of surcharges and supplemental contribution obligations. Our risk of such increased payments may be greater if any of the participating employers in these underfunded plans withdraws from a given plan due to insolvency and is not able to contribute an amount suﬃcient to fund the unfunded liabilities associated with its participants in the plan. We could also be treated as partially withdrawing from participation in one of these plans if the number of our employees participating in a given plan is reduced to a certain percentage over a certain period of time, or if we cease to have an obligation to contribute under one or more, but fewer than all, of the collective bargaining agreements that require us to make contributions to a particular plan. Such reductions in the number of employees participating in these plans could occur as a result of changes in our business operations, such as facility closures or consolidations. We estimate our share of the aggregate withdrawal liability on the multiemployer plans in which we participate could have been as much as $142.6 million as of August 18, 2023. This estimate is based on the information available from plan administrators, which had valuation dates between February 1, 2020 and December 31, 2022. As the valuation dates for all of the plans was between February 1, 2020 and December 31, 2022, the company’s estimate reﬂects the condition of the ﬁnancial markets as of this date range. Due to the lack of current information, management believes Sysco’s current share of the withdrawal liability could materially diﬀer from this estimate. A signiﬁcant increase to funding requirements could adversely aﬀect our ﬁnancial condition, results of operations and cash ﬂows. Organization and Common Stock Risks Our funding requirements for our company- sponsored qualified pension plan may increase should financial markets experience future declines, which could adversely affect our financial condition, results of operations and cash flows. We had a pension obligation of $2.6 billion, as compared to assets totaling $2.6 billion, as of July 1, 2023, both of which have sensitivity to ﬁnancial market factors that could impact our funding requirements. See Note 14, “Company- Sponsored Employee Beneﬁt Plans” in the Notes to Consolidated Financial Statements in Item 8 for a discussion of the funded status of the U.S. Retirement Plan. At the end of ﬁscal 2012, we decided to freeze future beneﬁt accruals under our company-sponsored qualiﬁed pension plan (the U.S. Retirement Plan) as of December 31, 2012 for all U.S.-based salaried and non-union hourly employees. Eﬀective January 1, 2013, these employees were eligible for additional contributions under an enhanced, deﬁned contribution plan. The amount of our annual contribution to the U.S. Retirement Plan is dependent upon, among other things, the returns on the U.S. Retirement Plan’s assets and discount rates used to calculate the plan’s liability. In ﬁscal 2018, we made voluntary contributions of $380 million to the U.S. Retirement Plan, allowing us to set an investment strategy that more closely aligns the duration of the U.S. Retirement Plan’s assets with the duration of its liabilities. As a result, our U.S. Retirement Plan holds a greater amount of investments in ﬁxed income securities, but also holds equity securities. Fluctuations in asset values can cause the amount of our anticipated future contributions to the plan to increase. The projected liability of the U.S. Retirement Plan will be impacted by the ﬂuctuations of interest rates on high quality bonds in the public markets as these are inputs in determining our minimum funding requirements. Failure to successfully renegotiate union contracts could result in work stoppages, which could have a material adverse effect on our business, financial condition and results of operations. As of July 1, 2023, we had approximately 72,000 employees, approximately 15% of whom were represented by unions, primarily the International Brotherhood of Teamsters and unions in France and Sweden. Approximately 15% of our union employees are covered by collective bargaining agreements that are subject to renegotiation in ﬁscal 2024. Failure to eﬀectively renegotiate these contracts could result in work stoppages. We believe our operating sites have good relationships with their unions, but a work stoppage due to failure of multiple operating subsidiaries to renegotiate union contracts could have a material adverse eﬀect on our business, ﬁnancial condition and results of operations. Our authorized preferred stock provides anti-takeover benefits that may not be viewed as beneficial to stockholders. Under our Restated Certiﬁcate of Incorporation, our Board of Directors is authorized to issue up to 1,500,000 shares of preferred stock without stockholder approval. Issuance of these shares could make it more diﬃcult for anyone to acquire Sysco without approval of our Board of Directors, depending on the rights and preferences of the stock issued. In addition, if anyone attempts to acquire Sysco without approval of our Board of Directors, the existence of this undesignated preferred stock could allow our Board of Directors to adopt a shareholder rights plan without obtaining stockholder approval, which could result in substantial dilution to a potential acquirer. As a result, hostile takeover attempts that might result in an acquisition of Sysco, which could otherwise have been ﬁnancially beneﬁcial to our stockholders, could be deterred. 16 SYSCO CORPORATION // 2023 Form 10-K PART I Item 2. Properties Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of ﬁduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certiﬁcate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal aﬀairs doctrine, except for any action (A) as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than such court, or (C) for which such court does not have subject matter jurisdiction. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it ﬁnds favorable for disputes with us or our directors, oﬃcers or other employees, which may discourage such lawsuits against us and our directors, oﬃcers and other employees. Alternatively, if a court were to ﬁnd this provision in our amended and restated bylaws to be inapplicable or unenforceable in any action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely aﬀect our business, ﬁnancial condition and results of operations. Item 1B. Unresolved Staff Comments None. Item 2. Properties The table below shows the number of distribution facilities occupied by Sysco in each country and the aggregate square footage devoted to cold and dry storage as of July 1, 2023. Location Bahamas Belgium Canada Costa Rica France Ireland and Northern Ireland Mexico Panama Sweden United Kingdom United States and its territories(2) TOTALS3 (1) Segments served include U.S. Foodservice (U), International Foodservice (I), SYGMA (S), and Other (O). (2) California, Florida, Texas, and Illinois account for 24, 16, 14, and 11 respectively, of the facilities located in the U.S. (3) Using a comparable definition based on facility size, fiscal 2022 included 333 facilities. Number of Facilities Square Feet (in thousands) Segment Served(1) 1 1 28 1 41 8 6 1 7 48 192 334 192 200 4,220 188 3,004 656 288 44 948 2,644 41,583 53,967 I I I, O I I I I I I I U, I, S, O We own approximately 40,100,000 square feet of our distribution facilities (or 74.4% of the total square feet), and the remainder is occupied under leases expiring at various dates from ﬁscal 2024 to ﬁscal 2049, exclusive of renewal options. We are currently constructing expansions or build-outs for various distribution facilities in the United States and Northern Ireland. The various operating sites undergoing signiﬁcant construction, in the aggregate, contributed approximately 6% of ﬁscal 2023 sales. Within our Latin American operations, we operate 17 cash and carry facilities and 5 warehouse and storage facilities in Costa Rica and 5 cash and carry facilities and 1 warehouse and storage facility in Panama. We own our approximately 634,000 square foot headquarters office complex in Houston, Texas. As of July 1, 2023, our ﬂeet of approximately 17,000 delivery vehicles consisted of tractor and trailer combinations, vans and panel trucks, most of which are either wholly or partially refrigerated for the transportation of frozen or perishable foods. We own approximately 89% of these vehicles and lease the remainder. SYSCO CORPORATION // 2023 Form 10-K 17 PART I Item 3. Legal Proceedings Item 3. Legal Proceedings 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. 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 either (i) involve the potential for monetary sanctions that Sysco’s management reasonably believes will exceed a specified threshold or (ii) are material to its business or financial condition. Pursuant to this item, Sysco has chosen a reporting threshold for such proceedings of $1 million. Applying this threshold, there are no environmental matters to disclose for this period, nor does the company expect a material adverse eﬀect on its business or ﬁnancial condition. Item 4. Mine Safety Disclosures Not applicable. 18 SYSCO CORPORATION // 2023 Form 10-K PART II – FINANCIAL INFORMATION Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market for Sysco’s common stock (SYY) is the New York Stock Exchange. The number of record owners of Sysco’s common stock as of August 8, 2023 was 7,365. We currently expect that comparable quarterly cash dividends will continue to be paid in the future; however, future declarations of dividends and the establishment of future record and payment dates are subject to the ﬁnal determination of our Board of Directors. We made the following share repurchases during the fourth quarter of ﬁscal 2023: ISSUER PURCHASES OF EQUITY SECURITIES Period Month #1 April 2 – April 29 Month #2 April 30 – May 27 Month #3 May 28 – July 1 TOTALS (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (a) Total Number of Shares Purchased(1) (b) Average Price Paid per Share 77,017 $ 77.24 77,017 566,283 73.46 566,283 1,035,491 1,678,791 $ 72.16 72.83 1,035,491 1,678,791 — — — — (1) The total number of shares repurchased includes no shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3. (2) See the discussion in Item 7, “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 program. In 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, which will remain available until fully utilized. We repurchased 6,231,071 shares for $500.1 million during ﬁscal 2023. As of July 1, 2023, we had a remaining authorization of approximately $4.0 billion. We purchased 552,463 additional shares under our authorization through August 8, 2023. Stock Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “ﬁled” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future ﬁling under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Sysco speciﬁcally incorporates such information by reference into such ﬁling. The graph assumes that the value of the investment in our Common Stock, the S&P 500 Index, and the S&P 500 Food/Staple Retail Index was $100 on the last trading day of ﬁscal 2018, and that all dividends were reinvested. Performance data for Sysco, the S&P 500 Index and the S&P 500 Food/Staple Retail Index is provided as of the last trading day of each of our last ﬁve ﬁscal years. The following stock performance graph compares the performance of Sysco’s Common Stock to the S&P 500 Index and to the S&P 500 Food/ Staple Retail Index for Sysco’s last ﬁve ﬁscal years. SYSCO CORPORATION // 2023 Form 10-K 19 PART II – FINANCIAL INFORMATION Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN ASSUMES INITIAL INVESTMENT OF $100 l e u a V x e d n I 200 175 150 125 100 75 6/30/2018 6/29/2019 6/27/2020 7/3/2021 7/2/2022 7/1/2023 Period Ending Sysco Corporation S&P 500 S&P 500 Food/Staple Retail Index Sysco Corporation S&P 500 S&P 500 Food/Staple Retail Index Item 6. [Reserved] 6/30/2018 6/29/2019 6/27/2020 7/3/2021 7/2/2022 7/1/2023 $100 100 100 $106 110 118 $80 115 125 $122 169 162 $140 151 170 $123 179 184 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of Sysco’s ﬁnancial condition, results of operations and liquidity and capital resources for the ﬁscal years ended July 1, 2023 and July 2, 2022 should be read as a supplement to our Consolidated Financial Statements and the accompanying notes contained in Item 8 of this report, and in conjunction with the “Forward-looking Statements” section set forth in Part II and the “Risk Factors” section set forth in Item 1A of Part I. All discussion of changes in our results of operations from ﬁscal 2022 to ﬁscal 2021 has been omitted from this Form 10-K, but may be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended July 2, 2022, ﬁled with the Securities and Exchange Commission on August 26, 2022. Overview Sysco distributes food and related products to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Our primary operations are in North America and Europe. Under the accounting provisions related to disclosures about segments of an enterprise, we have combined certain operations into three reportable segments. “Other” ﬁnancial information is attributable to our other operations that do not meet the quantitative disclosure thresholds. (cid:122) U.S. Foodservice Operations – primarily includes (a) our U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, produce, specialty Italian, specialty imports and a wide variety of non-food products and (b) our U.S. Specialty operations, which include our FreshPoint fresh produce distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, our Asian specialty distribution company and a number of other small specialty businesses that are not material to the operations of Sysco; (cid:122) International Foodservice Operations – includes operations outside of the United States (U.S.), 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 our export operations that distribute to international customers. Our European operations primarily consist of operations in the United Kingdom (U.K.), France, Ireland and Sweden; 20 SYSCO CORPORATION // 2023 Form 10-K PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (cid:122) SYGMA – our U.S. customized distribution operations serving quick- service chain restaurant customer locations; and (cid:122) Other – primarily our hotel supply operations, Guest Worldwide. We estimate that we serve about 17% of an approximately $350 billion annual foodservice market in the U.S. based on industry data obtained from Technomic, Inc. (Technomic) as of the end of calendar year 2022. Technomic projects the market size to increase to approximately $370 billion by the end of calendar year 2023. From time to time, Technomic may revise the methodology used to calculate the size of the foodservice market and, as a result, our percentage can change not only from our sales results, but also from such revisions. We also serve certain international geographies that vary in size and amount of market share. According to industry sources, the foodservice, or food-away-from-home, market represents approximately 53% of the total dollars spent on food purchases made at the consumer level in the U.S. as of the end of calendar year 2022. Highlights Our ﬁscal 2023 results were strong, reﬂecting growth in volumes and market share. Our market share gains in the U.S. segments continued to accelerate through the ﬁscal year. This demonstrates the favorable impact of our Recipe for Growth strategy on our business, now in its third year. This strategy is helping us advance our capabilities in supply chain and sales. As a result, Sysco achieved an all-time record for annual sales and operating income. We made significant improvements in operating expense leverage, resulting in improved productivity that drove proﬁtable growth. See below for a comparison of our ﬁscal 2023 results to our ﬁscal 2022 results, both including and excluding Certain Items (as deﬁned below). Below is a comparison of results from ﬁscal 2023 to ﬁscal 2022: (cid:122) Sales: (cid:122) increased 11.2%, or $7.7 billion, to $76.3 billion; (cid:122) Operating income: (cid:122) increased 29.5%, or $692.0 million, to $3.0 billion; (cid:122) adjusted operating income increased 21.7%, or $572.0 million, to $3.2 billion; (cid:122) Net earnings: (cid:122) increased 30.3%, or $411.4 million, to $1.8 billion; (cid:122) adjusted net earnings increased 22.2%, or $371.2 million, to $2.0 billion; (cid:122) Basic earnings per share: (cid:122) increased 31.2%, or $0.83, to $3.49 from the comparable prior year amount of $2.66 per share; (cid:122) Diluted earnings per share: (cid:122) increased 31.4%, or $0.83, to $3.47 from the comparable prior year amount of $2.64 per share; (cid:122) adjusted diluted earnings per share were $4.01 in ﬁscal 2023, a $0.76 increase from the comparable prior year amount of $3.25 per share. (cid:122) EBITDA: (cid:122) increased 14.1%, or $444.4 million, to $3.6 billion; and (cid:122) adjusted EBITDA increased 15.6%, or $519.2 million, to $3.8 billion. The discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash ﬂow, any non-GAAP ﬁnancial measures will be denoted as adjusted measures to remove the impact of restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation initiatives and (3) severance charges; acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions; and the reduction of bad debt expense previously recognized in ﬁscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Our results for ﬁscal 2023 were also impacted by adjustments to a product return allowance pertaining to COVID-related personal protection equipment inventory, a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred deﬁned beneﬁt plan obligations to an insurer, and a litigation ﬁnancing agreement. Our results for ﬁscal 2022 were also impacted by a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory, losses on the extinguishment of long-term debt and an increase in reserves for uncertain tax positions. The ﬁscal 2023 and ﬁscal 2022 items discussed above are collectively referred to as “Certain Items.” The results of our operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our 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. Management believes that adjusting its operating expenses, operating income, interest expense, other (income) expense, net earnings and diluted earnings per share to remove these Certain Items, provides an important perspective with respect to our underlying business trends and results. Additionally, it provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations, (2) facilitates comparisons on a year-over-year basis and (3) 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. The company uses these non-GAAP measures when evaluating its ﬁnancial results as well as for internal planning and forecasting purposes. These ﬁnancial measures should not be used as a substitute for GAAP measures in assessing the company’s results of operations for periods presented. An analysis of any non-GAAP ﬁnancial measure should be used in conjunction with results presented in accordance with GAAP. Any metric within this section referred to as “adjusted” will reﬂect the applicable impact of Certain Items. More information on the rationale for the use of these measures and reconciliations to GAAP numbers can be found under “Non-GAAP Reconciliations.” SYSCO CORPORATION // 2023 Form 10-K 21 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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. We believe the following are our most signiﬁcant performance metrics in our current business environment: (cid:122) Adjusted operating income growth (non-GAAP); (cid:122) Adjusted diluted earnings per share growth (non-GAAP); (cid:122) Adjusted EBITDA (non-GAAP); (cid:122) Case volume growth by customer type for U.S. Foodservice operations; (cid:122) Sysco brand penetration for U.S. Broadline operations; (cid:122) Free cash ﬂow (non-GAAP); and (cid:122) Adjusted return on invested capital (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. Key Financial Definitions (cid:122) Sales – Sales is equal to gross sales subtracted by, (1) sales returns and (2) sales incentives that we oﬀer to certain customers, such as upfront monies and discounts. Our sales are driven by changes in case volumes, product inﬂation that is reﬂected in the pricing of our products and mix of products sold. (cid:122) Gross proﬁt – Gross proﬁt is equal to our net sales subtracted by our cost of goods sold. Cost of goods sold primarily includes inventory costs (net of supplier consideration) and inbound freight. Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes. Adjusted Operating Income and Adjusted Diluted Earnings per Share Growth Adjusted operating income represents our consolidated operating income, adjusted for the impact of Certain Items that we do not consider representative of our underlying performance. Adjusted diluted earnings per share represents our consolidated diluted earnings per share, adjusted for the impact of Certain Items that we do not consider representative of our underlying performance. Sysco’s management considers growth in these metrics to be useful measures of operating efficiency and proﬁtability as they facilitate comparison of performance on a consistent basis from period to period by providing a measurement of recurring factors and trends aﬀecting our business. Adjusted EBITDA EBITDA represents net earnings plus: (1) interest expense, (2) income tax expense and benefit, (3) depreciation and (4) amortization. The net earnings component of our EBITDA calculation is impacted by Certain Items that we do not consider representative of our underlying performance. As a result, in the non-GAAP reconciliations below for each period presented, adjusted EBITDA is computed as EBITDA plus the impact of Certain Items, excluding Certain Items related to interest expense, income taxes, depreciation and amortization. Sysco’s management considers growth in this metric to be a measure of overall financial 22 SYSCO CORPORATION // 2023 Form 10-K performance that provides useful information to management and investors about the proﬁtability of the business. It facilitates comparison of performance on a consistent basis from period to period by providing a measurement of recurring factors and trends aﬀecting our business. Additionally, it is a commonly used component metric used to inform on capital structure decisions. Case Volume Growth by Customer Type for U.S. Foodservice Operations Case volume represents the volume of product sold to customers during a period of time and improvements in this metric are a primary driver of Sysco’s top line performance. We deﬁne a case, speciﬁcally for our U.S. Foodservice operations, as the lowest level of packaged products that are sold from our warehouses, with one case potentially containing several pieces of a product packaged in bulk. Case size does not generally vary by location or from period to period due to the design of our warehouses. Case volume growth is calculated by dividing the change in the volume of cases sold year-over-year by the volume of cases sold in the prior year. Sysco management considers case volume growth within its U.S. Foodservice operations to be a measure that provides useful information to management and investors in evaluating sales performance and as an indicator of gross margin performance. Management monitors case volume growth by customer type, with bifurcation between local customers and national customers, as this provides a measure of gross profit performance due to the pricing strategies attached to each customer type. Local customers are primarily street customers, such as independent restaurants that do not have long-term contracts, or locally managed customers, such as local chain restaurants, while national customers are the multi-unit customers requiring national coverage from a customer-centric view and are managed centrally from our Global Shared Center. Sysco management seeks to drive higher case volume growth to local customers, which allows more favorable pricing terms for our U.S. Foodservice operations and generates higher gross margins as a result. National customers beneﬁt from purchasing power as they are able to negotiate pricing agreements across multiple businesses reducing our gross profit potential, but reducing our overall cost per case, as national customers have bigger drop sizes. While overall case volume growth reﬂects a key component of sales growth, local customer case growth provides additional context around gross proﬁt performance. Sysco Brand Penetration for U.S. Broadline Operations Sysco management considers Sysco brand penetration to be a measure that provides useful information to management and investors in evaluating the gross proﬁt performance of the company’s U.S. Broadline operations. Sysco oﬀers an assortment of Sysco-branded products which are diﬀerentiated from privately branded products. These Sysco Branded products enable us to achieve higher gross margin by administering and leveraging a consolidated product procurement program for quality food and non-food products. Due to cost eﬃciencies, Sysco-branded products generate a higher gross margin than sales from other privately branded products. We deﬁne Sysco brand penetration as the percentage of Sysco- branded case volume sold to U.S. Broadline customers over all cases sold to U.S. Broadline customers. It is calculated by dividing Sysco-branded case volume sold to U.S. Broadline customers by total cases sold to U.S. Broadline customers. This performance indicator, also measured at the PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations customer type level, including local and national customers, is driven by growth in the distribution of Sysco branded products to more customers and more geographies, as well as increasing Sysco branded oﬀerings through innovation and the launch of new products. Capital Resources” for discussions of GAAP metrics, including net cash provided by operating activities and our reconciliation of this non-GAAP ﬁnancial measure. Free Cash Flow Free cash ﬂow represents net cash provided from operating activities, subtracted by purchases of plant and equipment, added to proceeds from sales of plant and equipment. Sysco management considers free cash ﬂow to be a non-GAAP liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases and sales of buildings, ﬂeet, equipment and technology, which may potentially be used to pay for, among other things, strategic uses of cash, including dividend payments, share repurchases and acquisitions. However, free cash flow may not be available for discretionary expenditures as it may be necessary that we use it to make mandatory debt service or other payments. Free cash ﬂow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See “Liquidity and Adjusted Return on Invested Capital Although adjusted return on invested capital (ROIC) is considered a non-GAAP ﬁnancial measure, Sysco management considers adjusted ROIC to be a measure that provides useful information to management and investors in evaluating the efficiency and effectiveness of the company’s long-term capital investments and it has been reintroduced as a component of long-term incentive compensation for ﬁscal 2024. We calculate adjusted ROIC as adjusted net earnings divided by the sum of: (1) stockholders’ equity, computed as the average of adjusted stockholders’ equity at the beginning of the year and at the end of each ﬁscal quarter during the year; and (2) long-term debt, computed as the average of the long-term debt at the beginning of the year and at the end of each ﬁscal quarter during the year. Trends in ROIC can ﬂuctuate over time as management balances long-term strategic initiatives with possible short-term impacts. Trends Economic and Industry Trends Sysco continues to outperform the foodservice market due to the success of the Recipe for Growth strategy. The food-away-from-home sector is a healthy long-term market. Sysco is diversiﬁed and well positioned as a market leader in food service. We expect the foodservice market to grow at a lower rate in ﬁscal 2024 as compared to ﬁscal 2023. We expect the rate of inﬂation for ﬁscal 2024 to be below historical trends. We expect deﬂation within our U.S. Broadline operations for the ﬁrst half of ﬁscal 2024, followed by minimal inﬂation in the second half of ﬁscal 2024. Our International Foodservice operations are expected to remain inﬂationary during ﬁscal 2024 given the unique marketplace conditions present in those operations. At the total enterprise level, inﬂation is expected to be slightly positive for ﬁscal 2024. Sales and Gross Profit Trends Our sales and gross profit performance are influenced by multiple factors including price, volume, inﬂation, customer mix and product mix. The most signiﬁcant factor aﬀecting performance in ﬁscal 2023 was volume growth, as we experienced a 5.2% improvement in U.S. Foodservice case volume and a 3.3% improvement in local case volume within our U.S. segment in each instance as compared to ﬁscal 2022. This volume reﬂects our broadline and specialty businesses, except for our specialty meats business, which measures its volume in pounds. This growth enabled us to gain market share during ﬁscal 2023 and contributed to Sysco achieving an all-time record for annual sales. Product cost inflation has also been a driver of our sales and gross profit performance. We experienced inflation at a rate of 2.1% and 6.1% in the fourth quarter and fiscal 2023, respectively, at the total enterprise level, primarily driven by inﬂation in the dairy, frozen, and canned and dry categories. The rate of inﬂation, as compared to the prior year, declined at an accelerated rate during the fourth quarter. We have been successful in managing inﬂation, resulting in an increase in gross proﬁt dollars. Gross margin increased 51 basis points in the fourth quarter and increased 33 basis points for ﬁscal 2023, as compared to the corresponding prior year periods, primarily driven by higher volumes, the eﬀective management of inﬂation and progress with our partnership growth management initiatives. Given our expectation for slower market growth and inﬂation as noted previously, we expect sales growth to increase in the mid-single digits in ﬁscal 2024 as compared to ﬁscal 2023, as we reach approximately $80 billion in annual sales. Operating Expense Trends Total operating expenses increased 9.4% during ﬁscal 2023, as compared to ﬁscal 2022, driven by increased volumes, cost inﬂation, continued operational cost pressures from the operating environment and our planned investments to drive our transformation initiatives under our Recipe for Growth strategy. We continued to improve our supply chain eﬃciency, while investing in associate retention and best-in-class training, primarily for transportation and warehouse colleagues. These eﬃciency eﬀorts are expected to continue to improve in ﬁscal 2024. Our Sysco Driver Academy and industry leading training programs are contributing to improved retention and productivity, and we expect to see this trend improve as the percentage of drivers and warehouse colleagues trained from within Sysco continues to grow. We believe the advancements we are making in our physical capabilities, and the investments we are making in improved training, will provide higher service levels to our customers and strengthen Sysco’s ability to proﬁtably win market share. SYSCO CORPORATION // 2023 Form 10-K 23 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Non-Routine Gains and Losses In ﬁscal 2023, we completed two transactions that created non-routine gains and losses, both of which were treated as Certain Items. First, the Sysco Corporation Retirement Plan (the Plan) executed a commitment agreement to purchase a nonparticipating single premium group annuity contract that transferred $695.0 million of the Plan’s defined benefit pension obligations related to certain pension beneﬁts. As a result of this transaction, we recognized a one-time, non-cash pre-tax pension settlement charge of $315.4 million in the second quarter of ﬁscal 2023. Second, Sysco had been pursuing claims against a variety of vendors from which the company purchased products. To mitigate the risk of incurring signiﬁcant legal fees on these claims without any ultimate gain, in calendar 2019 and 2020, we entered into agreements with a third party whereby the company secured a minimum amount of cash proceeds from the third party in exchange for assigning to the third party the rights to a portion of the future litigation proceeds. At the time of receipt of these cash proceeds, the amounts were deferred in “Other long-term liabilities.” In June 2023, an agreement was reached in which the company assigned all its remaining claims against these vendors to the third party. As a result, Sysco is no longer obligated to pursue litigation against these vendors; therefore, previous deferred proceeds were recognized within “Other expense (income), net.” In total, this agreement resulted in $122.0 million being recognized in “Other expense (income), net” in June 2023. We do not expect similar transactions to these in ﬁscal 2024. Strategy Our purpose is “Connecting the World to Share Food and Care for One Another.” Purpose driven companies are believed to perform better, and we believe our purpose will assist us to grow substantially faster than the foodservice distribution industry and deliver proﬁtable growth through our “Recipe for Growth” transformation. This growth transformation is supported by strategic pillars that we believe will continue to enable us to better serve our customers, including: (cid:122) Digital – We have and will continue to enrich the customer experience through personalized digital tools that reduce friction in the purchase experience and introduce innovation to our customers. We continue to invest in our personalization engine and upgraded our digital shopping platform with more than 100 new feature enhancements, including Spanish language capability, implemented in ﬁscal 2023. We successfully leveraged our centralized pricing tool in the U.S. in ﬁscal 2023 that gave us the ability to be right on price at the region, customer, and item level even during periods of rapid inﬂation, dis-inﬂation, and even deﬂation. (cid:122) Products and Solutions – We are providing customer-focused marketing and merchandising solutions that inspire increased sales of our broad assortment of fair priced products and services. We continue to improve our merchandising strategies globally to secure the best possible cost for our customers and in ﬁscal 2023, we stood up a Sysco Brand team to accelerate progress within our owned-brands. 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. Our eﬀective tax rate for ﬁscal 2023 was 22.55% and is expected to increase to approximately 24.50% in ﬁscal 2024 due to geographic mix, strong international growth and increases in state tax rates. Mergers and Acquisitions We continue to focus on mergers and acquisitions as a part of our growth strategy. We plan to reinforce our existing businesses, while cultivating new channels, new segments and new capabilities. In the ﬁrst and second quarters of fiscal 2023, we acquired a total of three small U.S.-based independent Italian food distributors as part of our plan to meaningfully scale our growing Italian platform. The results of these acquisitions were not material to the consolidated results of the company for ﬁscal 2023. In August 2023, we acquired BIX Produce, a leading produce specialty distributor based in Minnesota. This acquisition is expected to provide a strategic opportunity for specialty produce operations to expand its geographic footprint in an area of the country where it does not currently have operations. (cid:122) Supply Chain – We are eﬃciently and consistently serving customers with the products they need, when and how they need them, through a ﬂexible delivery framework. We are developing a more nimble, accessible and productive supply chain that is better positioned to support our customers. In ﬁscal 2023, our work on deploying strengthened engineered labor standards allowed us to consistently improve supply chain eﬃciency quarter over quarter. We also completed the roll out of our Driver Academy nationally. Our strategic initiatives to enable omni-channel inventory fulﬁllment are being piloted. (cid:122) Customer Teams – Our greatest strength is our people, people who are passionate about food and food service. Our diverse team delivers expertise and diﬀerentiated services designed to help our customers grow their businesses. We intend to improve the eﬀectiveness of our sales organization by leveraging data to increase the yield of the sales process. In ﬁscal 2023, we meaningfully advanced our Total Team Selling model that brings together our Broadline and Specialty businesses in shared geography to best meet the needs of our customers. (cid:122) Future Horizons – We are committed to responsible growth. We will cultivate new channels, new segments, and new capabilities while being stewards of our company and our planet for the long-term. We will fund our journey through cost-out and eﬃciency improvements. In August 2023, we acquired BIX Produce – a leading produce specialty distributor based in Minnesota that allows us to expand our geographic footprint and continue to add new capabilities, including fresh cut produce, grab-and-go sandwiches, and value-added products. 24 SYSCO CORPORATION // 2023 Form 10-K 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: PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Sales Cost of sales Gross proﬁt Operating expenses Operating income Interest expense Other (income) expense, net Earnings before income taxes Income taxes NET EARNINGS 2023 100.0% 81.7 18.3 14.3 4.0 0.7 0.3 3.0 0.7 2.3% 2022 100.0% 82.0 18.0 14.6 3.4 0.9 — 2.5 0.5 2.0% 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: Sales Cost of sales Gross proﬁt Operating expenses Operating income Interest expense Other (income) expense, net(1) Earnings before income taxes Income taxes NET EARNINGS Basic earnings per share Diluted earnings per share Average shares outstanding Diluted shares outstanding (1) Other (income) expense, net was expense of $226.4 million in fiscal 2023 and income of $23.9 million in fiscal 2022. Segment Results The following represents our results by reportable segments: 2023 11.2% 10.8 13.3 9.4 29.5 (15.5) (1,046.8) 30.8 32.8 30.3% 31.2% 31.4 (0.6) (0.8) (In thousands) Sales Sales increase Percentage of total Operating income (loss) Operating income increase Percentage of total segments Operating income as a percentage of sales Year Ended Jul. 1, 2023 U.S. Foodservice Operations International Foodservice Operations SYGMA Other Global Support Center Consolidated Totals $ 53,682,894 $ 13,559,610 $ 7,843,111 $ 1,239,060 $ — $ 76,324,675 10.6% 70.3% 15.0% 17.8% $ 3,586,576 $ 313,449 $ 12.8% 89.4% 6.7% 213.3% 7.8% 2.3% 8.2% 10.3% 56,526 NM 1.4% 0.7% $ 14.5% 1.6% 56,877 227.0% 1.4% 4.6% 11.2% 100.0% $ (974,879) $ 3,038,549 29.5% 100.0% 4.0% SYSCO CORPORATION // 2023 Form 10-K 25 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (In thousands) U.S. Foodservice Operations International Foodservice Operations Year Ended Jul. 2, 2022 SYGMA Other Global Support Center Consolidated Totals Sales Percentage of total Operating income (loss) Percentage of total segments Operating income (loss) as a percentage of sales $ 48,520,562 $ 11,787,449 $ 7,245,824 $ 1,082,311 $ — $ 68,636,146 70.7% 17.2% $ 3,180,705 $ 100,033 $ 96.5% 6.6% 3.1% 0.8% 10.6% (3,124) (0.1)% —% 1.5% 100.0% $ 17,392 $ (948,506) $ 2,346,500 0.5% 1.6% 100.0% 3.4% In ﬁscal 2023, U.S. Foodservice Operations and International Foodservice Operations represented approximately 70.3% and 17.8%, respectively, of Sysco’s overall sales, compared to 70.7% and 17.2%, respectively, in ﬁscal 2022. In ﬁscal 2023 and ﬁscal 2022, U.S. Foodservice Operations represented approximately 89.4% and 96.5%, respectively, of the total segment operating income. This illustrates that these segments represent a substantial majority of our total segment results when compared to other reportable segments. See Note 21, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 8. Cost of sales primarily includes our product costs, net of vendor consideration, and includes in-bound freight. Operating expenses include the costs of facilities, product handling, delivery, selling and general and administrative activities. Fuel surcharges are reﬂected within sales and gross proﬁt; fuel costs are reﬂected within operating expenses. Along with sales, operating income is the most relevant measure for evaluating segment performance and allocating resources, as operating income includes cost of goods sold in addition to the costs to warehouse and deliver goods, which are signiﬁcant and relevant costs when evaluating a distribution business. Results of U.S. Foodservice Operations In fiscal 2023, the U.S. Foodservice Operations operating results represented approximately 70.3% of Sysco’s overall sales and 89.4% of the aggregated operating income of Sysco’s reporting segments. Several factors contributed to these higher operating results as compared to the other operating segments. We invested substantial amounts in assets, operating methods, technology and management expertise in this segment. The breadth of its sales force, geographic reach of its distribution area and its purchasing power enable this segment to generate its relatively stronger results of 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 prior year: (Dollars in thousands) Sales Gross proﬁt Operating expenses OPERATING INCOME Gross proﬁt Adjusted operating expenses (Non-GAAP)(1) ADJUSTED OPERATING INCOME NONGAAP1 (1) See “Non-GAAP Reconciliations” below. 2023 2022 Change in Dollars % Change $ 53,682,894 10,359,003 6,772,427 $ 3,586,576 $ 10,359,003 6,729,738 $ 3,629,265 $ 48,520,562 9,196,133 6,015,428 $ 3,180,705 $ 9,196,133 5,998,824 $ 3,197,309 $ $ $ $ 5,162,332 1,162,870 756,999 405,871 1,162,870 730,914 431,956 10.6% 12.6 12.6 12.8% 12.6% 12.2 13.5% Sales The following table sets forth the percentage and dollar value increase or decrease in sales over the prior year in order to demonstrate the cause and magnitude of change. (Dollars in millions) Cause of change Increase (Decrease) 2023 Percentage Dollars Case volume(1) Inﬂation Other(2) TOTAL CHANGE IN SALES (1) Case volumes increased 5.2% compared to fiscal 2022. This volume increase resulted in a 4.5% increase in the dollar value of sales compared to fiscal 2022. (2) Case volume reflects our broadline and specialty businesses, with the exception of our specialty meats business, which measures its volume in pounds. Any impact in volumes 2,175.3 2,716.7 270.3 $ 5,162.3 4.5% 5.6 0.5 10.6% $ from our specialty meats operations is included within “Other.” 26 SYSCO CORPORATION // 2023 Form 10-K PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The sales growth in our U.S. Foodservice Operations was fueled by three factors: inﬂation, market growth, and strong market share gains. Case volumes from our U.S. Foodservice Operations increased 5.2%, as compared to ﬁscal 2022. This included a 3.3% increase in local customer case volume as compared to ﬁscal 2022. Operating Income The increase in operating income for ﬁscal 2023, as compared to ﬁscal 2022, was driven by gross proﬁt dollar growth and partially oﬀset by an increase in operating expenses. Gross proﬁt dollar growth was driven primarily by higher volumes as well as continued progress with eﬀective management of product cost inﬂation and our strategic sourcing initiatives. The estimated change in product costs, an internal measure of inﬂation or deﬂation, increased in ﬁscal 2023. For ﬁscal 2023, this change in product costs was primarily driven by inﬂation in the dairy, frozen, and canned and dry categories. Sysco brand penetration for U.S. Broadline improved by 36 basis points to 37.0% for fiscal 2023, as compared to fiscal 2022. Specific to local customers, Sysco brand penetration for U.S. Broadline improved by 118 basis points to 46.8% for ﬁscal 2023, as compared to ﬁscal 2022. Gross margin, which is gross proﬁt as a percentage of sales, was 19.3% in ﬁscal 2023. This was an increase of 35 basis points compared to gross margin of 19.0% in fiscal 2022 due to the effective management of inﬂation, along with speciﬁc eﬀorts to optimize our gross proﬁt dollars. The increase in operating expenses for ﬁscal 2023, as compared to ﬁscal 2022, was primarily driven by increased volumes, operational pressures from the operating environment, cost inflation and our planned investments to drive our transformation initiatives. We also experienced an increase in operating expenses due to investments for our Recipe for Growth strategy in ﬁscal 2023. Results of International Foodservice Operations In ﬁscal 2023, the International Foodservice Operations operating results represented approximately 17.8% of Sysco’s overall sales. 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 prior year: (Dollars in thousands) Sales Gross proﬁt Operating expenses OPERATING INCOME Gross proﬁt Adjusted operating expenses (Non-GAAP)(1) ADJUSTED OPERATING INCOME NONGAAP1 Comparable sales using a constant currency basis (Non-GAAP)(1) Comparable gross proﬁt using a constant currency basis (Non-GAAP)(1) Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)(1) COMPARABLE OPERATING INCOME ADJUSTED FOR CERTAIN ITEMS USING A CONSTANT CURRENCY BASIS NONGAAP1 (1) See “Non-GAAP Reconciliations” below. 2023 2022 Change in Dollars % Change $ $ $ 13,559,610 $ 2,640,860 2,327,411 313,449 $ 2,640,860 $ 2,243,137 $ 397,723 $ $ 14,451,906 $ 2,823,663 11,787,449 2,377,093 2,277,060 100,033 2,377,093 2,148,551 228,542 11,787,449 2,377,093 $ $ $ 1,772,161 263,767 50,351 213,416 263,767 94,586 $ 169,181 $ 2,664,457 446,570 15.0% 11.1 2.2 213.3% 11.1% 4.4 74.0% 22.6% 18.8 2,409,493 2,148,551 260,942 12.1 $ 414,170 $ 228,542 $ 185,628 81.2% Sales The following table sets forth the percentage and dollar value increase or decrease in sales over the comparable prior year period in order to demonstrate the cause and magnitude of change. (Dollars in millions) Cause of change Increase (Decrease) 2023 Percentage Dollars 1,680.7 Inﬂation (892.3) Foreign currency Other(1) 983.8 $ 1,772.2 TOTAL CHANGE IN SALES (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 14.3% (7.6) 8.3 15.0% $ that differ from country to country and cannot be aggregated on a consistent comparable basis. SYSCO CORPORATION // 2023 Form 10-K 27 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Sales in fiscal 2023 were higher primarily due to inflation, along with an increase in volume, some of which was attributable to our Recipe for Growth initiatives. Partially oﬀsetting these increases was the negative impact of foreign currency translation. Other income and expense Other income decreased $250.4 million for ﬁscal 2023, as compared to ﬁscal 2022, primarily due to a pension settlement charge partially oﬀset by a gain on a litigation ﬁnancing agreement. Operating Income The $213.4 million increase in operating income for fiscal 2023, as compared to ﬁscal 2022, was primarily a result of the continuing increase in sales volumes along with speciﬁc eﬀorts to optimize our gross proﬁt while managing our operating expenses. The increase in gross proﬁt dollars in ﬁscal 2023, as compared to ﬁscal 2022, was attributable to the increase in sales volume and the management of inﬂation along with speciﬁc eﬀorts to optimize our gross proﬁt dollars. The increase in operating expenses for ﬁscal 2023, as compared to ﬁscal 2022, was primarily due to increased volume and inﬂation. Results of SYGMA and Other Segment For SYGMA, sales were 8.2% higher in ﬁscal 2023, as compared to ﬁscal 2022, primarily from inﬂation and fee increases to customers. Operating income increased by $59.7 million in ﬁscal 2023, as compared to ﬁscal 2022, primarily due to fee increases to customers. For the operations that are grouped within our Other segment, operating income increased $39.5 million in ﬁscal 2023, as compared to ﬁscal 2022, primarily due to the recovery of our hospitality business, Guest Worldwide. Volume for 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 the corporate oﬃce and Sysco’s shared service operations. These expenses increased $101.2 million in ﬁscal 2023, or 11.6% as compared to ﬁscal 2022, primarily due to increases in self-insurance costs, technology expense and employee-related expenses, partially oﬀset by reduced acquisition- related costs. Included in Global Support Center expenses are Certain Items that totaled $44.9 million in ﬁscal 2023, as compared to $146.8 million in ﬁscal 2022. Certain Items impacting ﬁscal 2023 were primarily expenses associated with our business technology transformation initiatives. In fiscal 2022, Certain Items that impacted the year were primarily expenses associated with our business technology transformation initiatives and acquisitions, as well as a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory. Interest Expense Interest expense decreased $96.9 million for ﬁscal 2023, as compared to ﬁscal 2022, primarily due to a $115.6 million charge taken for debt extinguished in ﬁscal 2022. Net Earnings Net earnings increased 30.3% in ﬁscal 2023, as compared to ﬁscal 2022, due primarily to the items noted previously for operating income and interest expense, as well as items impacting our income taxes that are discussed in Note 19, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 8. Adjusted net earnings, excluding Certain Items, increased 22.2% in ﬁscal 2023, primarily due to an increase in sales volume. Earnings Per Share Basic earnings per share in ﬁscal 2023 were $3.49, a 31.2% increase from the comparable prior year period amount of $2.66 per share. Diluted earnings per share in fiscal 2023 were $3.47, a 31.4% increase from the comparable prior year period amount of $2.64 per share. Adjusted diluted earnings per share, excluding Certain Items (which is a non-GAAP ﬁnancial measure for which a reconciliation is provided in “Non-GAAP Reconciliations” on the subsequent page), in ﬁscal 2023 were $4.01, a 23.4% increase from the comparable prior year period amount of $3.25 per share. These results were primarily attributable to the factors discussed previously related to net earnings in ﬁscal 2023. Non-GAAP Reconciliations The discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash ﬂow, any non-GAAP ﬁnancial measures will be denoted as adjusted measures to remove the impact of restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation initiatives and (3) severance charges; acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions; and the reduction of bad debt expense previously recognized in ﬁscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Our results for ﬁscal 2023 were also impacted by adjustments to a product return allowance pertaining to COVID-related personal protection equipment inventory, a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred deﬁned beneﬁt plan obligations to an insurer, and a litigation ﬁnancing agreement. Our results for ﬁscal 2022 were also impacted by a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory, losses on the extinguishment of long-term debt and an increase in reserves for uncertain tax positions. 28 SYSCO CORPORATION // 2023 Form 10-K The results of our operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our results on a constant currency basis. Constant currency operating results are calculated by translating current-period local currency operating results with the currency exchange rates used to translate the ﬁnancial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period. Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items and presenting its results on a constant currency basis, provides an important perspective with respect to our underlying business trends and results. It provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations and (2) facilitates comparisons on a year-over-year basis. PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Sysco has a history of growth through acquisitions and excludes from its non-GAAP financial measures the impact of acquisition-related intangible amortization, acquisition costs and due-diligence costs for those acquisitions. We believe this approach signiﬁcantly enhances the comparability of Sysco’s results for ﬁscal 2023 and ﬁscal 2022. Set forth on the following page is a reconciliation of sales, operating expenses, operating income, other (income) expense, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not be equal to the total presented when added due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding. SYSCO CORPORATION // 2023 Form 10-K 29 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (In thousands, except for share and per share data) Sales (GAAP) Impact of currency ﬂuctuations(1) Comparable sales using a constant currency basis (Non-GAAP) Cost of sales (GAAP) Impact of inventory valuation adjustment(2) Cost of sales adjusted for Certain Items (Non-GAAP) Gross profit (GAAP) Impact of inventory valuation adjustment(2) Gross proﬁt adjusted for Certain Items (Non-GAAP) Impact of currency ﬂuctuations(1) Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP) Gross margin (GAAP) Impact of inventory valuation adjustment(2) Gross margin adjusted for Certain Items (Non-GAAP) Impact of currency ﬂuctuations(1) Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP) Operating expenses (GAAP) Impact of restructuring and transformational project costs(3) Impact of acquisition-related costs(4) Impact of bad debt reserve adjustments(5) Operating expenses adjusted for Certain Items (Non-GAAP) Impact of currency ﬂuctuations(1) Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) Operating expense as a percentage of sales (GAAP) Impact of certain item adjustments Adjusted operating expense as a percentage of sales (Non-GAAP) Operating income (GAAP) Impact of inventory valuation adjustment(2) Impact of restructuring and transformational project costs(3) Impact of acquisition-related costs(4) Impact of bad debt reserve adjustments(5) Operating income adjusted for Certain Items (Non-GAAP) Impact of currency ﬂuctuations(1) Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) Operating margin (GAAP) Operating margin adjusted for Certain Items (Non-GAAP) Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP) Interest expense (GAAP) Impact of loss on extinguishment of debt Interest expense adjusted for Certain Items (Non-GAAP) Other expense (income) (GAAP) Impact of other non-routine gains and losses(6) Other expense (income) adjusted for Certain Items (Non-GAAP) Net earnings (GAAP) Impact of inventory valuation adjustment(2) Impact of restructuring and transformational project costs(3) Impact of acquisition-related costs(4) Impact of bad debt reserve adjustments(5) Impact of loss on extinguishment of debt 30 SYSCO CORPORATION // 2023 Form 10-K $ $ $ $ $ 2023 2022 76,324,675 910,290 77,234,965 62,369,678 2,571 62,372,249 13,954,997 (2,571) 13,952,426 188,796 $ 68,636,146 — $ 68,636,146 $ 56,315,622 (73,224) $ 56,242,398 $ 12,320,524 73,224 12,393,748 — $ $ $ $ $ Change in Dollars 7,688,529 910,290 8,598,819 6,054,056 75,795 6,129,851 1,634,473 (75,795) 1,558,678 188,796 $ 14,141,222 $ 12,393,748 $ 1,747,474 18.28% — 18.28 0.03 17.95% 0.11 18.06 — $ 18.31% 18.06% $ 10,916,448 (62,965) (115,889) 4,425 10,742,019 182,873 $ 9,974,024 (107,475) (139,173) 27,999 9,755,375 — 942,424 44,510 23,284 (23,574) 986,644 182,873 $ 10,924,892 $ 9,755,375 $ 1,169,517 $ 14.30% (0.23) 14.07% $ 3,038,549 (2,571) 62,965 115,889 (4,425) 3,210,407 5,923 14.53% (0.32) 14.21% $ 2,346,500 73,224 107,475 139,173 (27,999) 2,638,373 — 692,049 (75,795) (44,510) (23,284) 23,574 572,034 5,923 $ 3,216,330 $ 2,638,373 $ 577,957 $ $ $ $ $ 3.98% 4.21% 4.16% $ $ $ $ $ 526,752 — 526,752 226,442 (194,459) 31,983 1,770,124 (2,571) 62,965 115,889 (4,425) — 3.42% 3.84% 3.83% $ 623,643 (115,603 $ 508,040 (23,916) $ — (23,916) $ $ 1,358,768 73,224 107,475 139,173 (27,999) 115,603 (96,891) 115,603 18,712 250,358 (194,459) 55,899 411,356 (75,795) (44,510) (23,284) 23,574 (115,603) %/bps Change 11.2% 1.3 12.5% 10.8% 0.1 10.9% 13.3% (0.7) 12.6 1.5 14.1% 33 bps -11 bps 22 bps 3 bps 25 bps 9.4% 41.4 16.7 (84.2) 10.1 1.9 12.0% -23 bps 9 bps -14 bps 29.5% NM (41.4) (16.7) 84.2 21.7 0.2 21.9% 56 bps 37 bps 33 bps (15.5)% NM 3.7% NM NM NM 30.3% NM (41.4) (16.7) 84.2 NM (In thousands, except for share and per share data) Impact of other non-routine gains and losses(6) Tax impact of inventory valuation adjustment(7) Tax impact of restructuring and transformational project costs(7) Tax impact of acquisition-related costs(7) Tax impact of bad debt reserves adjustments(7) Tax impact of loss on extinguishment of debt(7) Tax impact of other non-routine gains and losses(7) Impact of adjustments to uncertain tax positions Net earnings adjusted for Certain Items (Non-GAAP) Diluted earnings per share (GAAP) Impact of inventory valuation adjustment(2) Impact of restructuring and transformational project costs(3) Impact of acquisition-related costs(4) Impact of bad debt reserve adjustments(5) Impact of loss on extinguishment of debt Impact of other non-routine gains and losses(6) Tax impact of inventory valuation adjustment(7) Tax impact of restructuring and transformational project costs(7) Tax impact of acquisition-related costs(7) Tax impact of bad debt reserves adjustments(7) Tax impact of loss on extinguishment of debt(7) Tax impact of other non-routine gains and losses(7) Impact of adjustments to uncertain tax positions Diluted earnings per share adjusted for Certain Items (Non-GAAP)(8) Diluted shares outstanding PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2023 194,459 647 (15,847) (29,166) 1,114 — (48,941) — 2,044,248 3.47 (0.01) 0.12 0.23 (0.01) — 0.38 — (0.03) (0.06) — — (0.10) — 4.01 509,719,756 $ $ $ 2022 — (18,902) (27,743) (35,926) 7,228 (29,841) — 12,000 1,673,060 2.64 0.14 0.21 0.27 (0.05) 0.22 — (0.04) (0.05) (0.07) 0.01 (0.06) — 0.02 3.25 514,005,827 $ $ $ $ $ $ Change in Dollars 194,459 19,549 11,896 6,760 (6,114) 29,841 (48,941) (12,000) 371,188 0.83 (0.15) (0.09) (0.04) 0.04 (0.22) 0.38 0.04 0.02 0.01 (0.01) 0.06 (0.10) (0.02) 0.76 %/bps Change NM NM 42.9 18.8 (84.6) NM NM NM 22.2% 31.4% NM (42.9) (14.8) 80.0 NM NM NM 40.0 14.3 NM NM NM NM 23.4% (1) Represents a constant currency adjustment which eliminates the impact of foreign currency fluctuations on the current year results. (2) Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory. Fiscal 2022 represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory. (3) Fiscal 2023 includes $20 million related to restructuring and severance charges and $43 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2022 includes $59 million related to restructuring and severance charges and $49 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. (4) Fiscal 2023 includes $105 million of intangible amortization expense and $10 million in acquisition and due diligence costs. Fiscal 2022 includes $106 million of intangible amortization expense and $33 million in acquisition and due diligence costs. (5) Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. (6) Fiscal 2023 primarily includes a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer and $122 million in income from a litigation financing agreement. (7) 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 (8) the Certain Item was incurred. 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. SYSCO CORPORATION // 2023 Form 10-K 31 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Set forth below is a reconciliation by segment of actual operating expenses and operating income to adjusted results for these measures for the periods presented (dollars in thousands): 2023 2022 Change in Dollars %/bps Change U.S. FOODSERVICE OPERATIONS Sales (GAAP) Gross profit (GAAP) Gross margin (GAAP) Operating expenses (GAAP) Impact of restructuring and transformational project costs Impact of acquisition-related costs(1) Impact of bad debt reserve adjustments(2) Operating expenses adjusted for Certain Items (Non-GAAP) Operating income (GAAP) Impact of restructuring and transformational project costs Impact of acquisition-related costs(1) Impact of bad debt reserve adjustments(2) Operating income adjusted for Certain Items (Non-GAAP) INTERNATIONAL FOODSERVICE OPERATIONS Sales (GAAP) Impact of currency ﬂuctuations(3) Comparable sales using a constant currency basis (Non-GAAP) Gross profit (GAAP) Impact of currency ﬂuctuations(3) Comparable gross profit using a constant currency basis (Non-GAAP) Gross margin (GAAP) Impact of currency ﬂuctuations(3) Comparable gross margin using a constant currency basis (Non-GAAP) Operating expenses (GAAP) Impact of restructuring and transformational project costs(4) Impact of acquisition-related costs(5) Impact of bad debt reserve adjustments(2) Operating expenses adjusted for Certain Items (Non-GAAP) Impact of currency ﬂuctuations(3) Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) Operating income (GAAP) Impact of restructuring and transformational project costs(4) Impact of acquisition-related costs(5) Impact of bad debt reserve adjustments(2) Operating income adjusted for Certain Items (Non-GAAP) Impact of currency ﬂuctuations(3) Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) SYGMA Sales (GAAP) Gross profit (GAAP) Gross margin (GAAP) Operating expenses (GAAP) Operating income (loss) (GAAP) OTHER Sales (GAAP) Gross profit (GAAP) Gross margin (GAAP) Operating expenses (GAAP) Impact of bad debt reserve adjustments(2) 32 SYSCO CORPORATION // 2023 Form 10-K $ 53,682,894 $ 48,520,562 $ 5,162,332 10,359,003 9,196,133 1,162,870 19.30% 18.95% $ 6,772,427 (817) (46,042) 4,170 $ 6,729,738 $ 3,586,576 817 46,042 (4,170) $ 3,629,265 $ 6,015,428 (1,162) (36,207) 20,765 $ 5,998,824 $ 3,180,705 1,162 36,207 (20,765) $ 3,197,309 $ $ $ $ 756,999 345 (9,835) (16,595) 730,914 405,871 (345) 9,835 16,595 431,956 $ 13,559,610 892,296 $ 14,451,906 $ 2,640,860 182,803 $ 2,823,663 $ 11,787,449 — $ 11,787,449 $ 2,377,093 — $ 2,377,093 $ 1,772,161 892,296 $ 2,664,457 263,767 $ 182,803 446,570 $ 19.48% 0.06 19.54% 20.17% — 20.17% $ 2,327,411 (19,018) (65,511) 255 2,243,137 166,356 $ 2,277,060 (57,683) (78,062) 7,236 2,148,551 — $ 2,409,493 313,449 $ 19,018 65,511 (255) 397,723 16,447 $ 2,148,551 100,033 $ 57,683 78,062 (7,236) 228,542 — $ 414,170 $ 228,542 $ 7,843,111 631,135 $ 7,245,824 576,280 8.05% 7.95% $ 574,609 56,526 $ 579,404 (3,124) $ 1,239,060 326,315 $ 1,082,311 248,125 26.34% 22.93% $ 269,438 — $ 230,733 (2) $ $ $ $ $ $ $ $ 10.6% 12.6% 35 bps 12.6% 29.7 (27.2) (79.9) 12.2% 12.8% (29.7) 27.2 79.9 13.5% 15.0% 7.6 22.6% 11.1% 7.7 18.8% -69 bps 6 bps -63 bps 2.2% 67.0 16.1 (96.5) 4.4 7.7 12.1% NM (67.0) (16.1) 96.5 74.0 7.2 50,351 38,665 12,551 (6,981) 94,586 166,356 260,942 213,416 (38,665) (12,551) 6,981 169,181 16,447 185,628 81.2% 597,287 54,855 (4,795) 59,650 156,749 78,190 38,705 2 8.2% 9.5% 10 bps (0.8)% NM 14.5% 31.5% 341 bps 16.8% NM Operating expenses adjusted for Certain Items (Non-GAAP) Operating income (GAAP) Impact of bad debt reserve adjustments(2) Operating income adjusted for Certain Items (Non-GAAP) GLOBAL SUPPORT CENTER Gross loss (GAAP) Impact of inventory valuation adjustment(6) Gross loss adjusted for Certain Items (Non-GAAP) Operating expenses (GAAP) Impact of restructuring and transformational project costs(7) Impact of acquisition-related costs(8) Operating expenses adjusted for Certain Items (Non-GAAP) Operating loss (GAAP) Impact of inventory valuation adjustment(6) Impact of restructuring and transformational project costs(7) Impact of acquisition-related costs(8) Operating loss adjusted for Certain Items (Non-GAAP) PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2023 269,438 56,877 — 56,877 $ $ $ 2022 230,731 17,392 2 17,394 $ $ $ (2,316) $ (2,571) (4,887) $ $ 972,563 (43,130) (4,336) 925,097 $ (974,879) $ (2,571) 43,130 4,336 (929,984) $ (77,107) $ 73,224 (3,883) $ $ 871,399 (48,630) (24,904) 797,865 $ (948,506) $ 73,224 48,630 24,904 (801,748) $ $ $ $ $ $ $ $ $ $ Change in Dollars 38,707 39,485 (2) 39,483 74,791 (75,795) (1,004) 101,164 5,500 20,568 127,232 (26,373) (75,795) (5,500) (20,568) (128,236) %/bps Change 16.8% NM NM NM 97.0% NM (25.9)% 11.6% 11.3 82.6 15.9% (2.8)% NM (11.3) (82.6) (16.0)% (1) Fiscal 2023 and fiscal 2022 include intangible amortization expense and acquisition costs. (2) Fiscal 2023 and fiscal 2022 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) (5) Represents intangible amortization expense. (6) Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory. Fiscal 2022 represents a write-down of Includes restructuring and severance costs, primarily in Europe. COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory. Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy. (7) (8) 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 “Key Performance Indicators” for further discussion regarding this non-GAAP ﬁnancial measure. Set forth below is a reconciliation of actual net earnings (loss) to EBITDA and to adjusted EBITDA results for the periods presented (dollars in thousands): NET EARNINGS (GAAP) Interest (GAAP) Income taxes (GAAP) Depreciation and amortization (GAAP) EBITDA (Non-GAAP) Certain Item adjustments: Impact of inventory valuation adjustment(1) Impact of restructuring and transformational project costs(2) Impact of acquisition-related costs(3) Impact of bad debt reserve adjustments(4) Impact of other non-routine gains and losses(5) EBITDA ADJUSTED FOR CERTAIN ITEMS (NON-GAAP)(6) 2023 $ 1,770,124 2022 $ 1,358,768 526,752 515,231 775,604 $ 3,587,711 623,643 388,005 772,881 $ 3,143,297 $ (2,571) $ 61,009 10,393 (4,425) 194,459 $ 3,846,576 73,224 106,091 32,738 (27,999) — $ 3,327,351 Change in Dollars 411,356 (96,891) 127,226 2,723 444,414 $ $ $ (75,795) (45,082) (22,345) 23,574 194,459 $ 519,225 % Change 30.3% (15.5) 32.8 0.4 14.1% NM (42.5) (68.3) 84.2 NM 15.6% (1) Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory. Fiscal 2022 represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory. (2) Fiscal 2023 and fiscal 2022 include charges related to restructuring and severance, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy and exclude charges related to accelerated depreciation. (3) Fiscal 2023 and fiscal 2022 include acquisition and due diligence costs. (4) Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. (5) Fiscal 2023 primarily includes a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that (6) transferred defined benefit plan obligations to an insurer and $122 million in income from a litigation financing agreement. In arriving at adjusted EBITDA, Sysco does not exclude interest income of $24 million and $7 million or non-cash stock compensation expense of $95 million and $122 million for fiscal 2023 and fiscal 2022, respectively. NM represents that the percentage change is not meaningful. SYSCO CORPORATION // 2023 Form 10-K 33 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Highlights Below are comparisons of the cash ﬂows from ﬁscal 2023 to ﬁscal 2022: (cid:122) Cash ﬂows from operations were $2.9 billion in ﬁscal 2023, compared to $1.8 billion in ﬁscal 2022; (cid:122) Net capital expenditures totaled $751.2 million in ﬁscal 2023, compared to $608.7 million in ﬁscal 2022; (cid:122) Free cash ﬂow was $2.1 billion in ﬁscal 2023, compared to $1.2 billion in ﬁscal 2022 (see “Cash Flows – Free Cash Flow – Non-GAAP Reconciliation” below for an explanation of this non-GAAP ﬁnancial measure); (cid:122) Cash used for acquisition of businesses was $37.4 million in ﬁscal 2023, compared to $1.3 billion in ﬁscal 2022; (cid:122) Dividends paid were $996.0 million in fiscal 2023, compared to $958.9 million in ﬁscal 2022; (cid:122) Cash paid for treasury stock repurchases was $500.1 million in ﬁscal 2023, compared to $499.8 million in ﬁscal 2022; (cid:122) We repaid senior notes in the amount of $549.3 million in ﬁscal 2023; and (cid:122) There were no commercial paper amounts outstanding as of the end of ﬁscal 2023 and ﬁscal 2022. As of July 1, 2023, there were no borrowings outstanding under our long-term revolving credit facility and the company had approximately $3.7 billion in cash and available liquidity. As of August 8, 2023, the company had approximately $3.1 billion in cash and available liquidity. Sources and Uses of Cash Sysco generates cash in the U.S. and internationally. Sysco’s strategic objectives include continuous investment in our business; these investments are funded primarily by cash from operations and, to a lesser extent, external borrowings. Traditionally, our operations have produced signiﬁcant cash ﬂow and, due to our strong ﬁnancial position, we believe that we will continue to be able to eﬀectively access capital markets, as needed. Cash generated from operations is generally allocated to: (cid:122) working capital-investments; (cid:122) capital investments in facilities, systems, ﬂeet, other equipment and technology; (cid:122) acquisitions consistent with our growth strategy; (cid:122) debt repayments; (cid:122) cash dividends; and (cid:122) share repurchases. Any remaining cash generated from operations may be 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 macro-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 34 SYSCO CORPORATION // 2023 Form 10-K with vendors, have been suﬃcient to limit a signiﬁcant unfavorable impact on our cash ﬂows from operations. We believe these mechanisms will continue to mitigate any unfavorable impact on our cash ﬂows from operations arising from macro-economic trends and conditions. We extend credit terms to some of our customers based on our assessment of each customer’s creditworthiness. We monitor each customer’s account and will suspend shipments if necessary. In the ordinary course of business, customers periodically negotiate extended payment terms on trade accounts receivable. The company may utilize purchase arrangements with third-party ﬁnancial institutions to transfer portions of our trade accounts receivable balance on a non-recourse basis in order to extend terms for the customer without negatively impacting our cash ﬂow. The arrangements meet the requirements for the receivables transferred to be accounted for as sales. See Note 1, “Summary of Accounting Policies,” in the Notes to Consolidated Financial Statements in Item 8 for additional information. As of July 1, 2023, we had $745.2 million in cash and cash equivalents, approximately 83% of which was held by our international subsidiaries and generated from our earnings of international operations. If these earnings were transferred among countries or repatriated to the U.S., such amounts may be subject to withholding and additional foreign tax obligations. Additionally, Sysco Corporation has provided intercompany loans to certain of its international subsidiaries. When interest and principal payments are made, some of this cash will move 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 July 1, 2023, the Captive held $120.7 million of ﬁxed income marketable securities and $220.8 million of restricted cash and restricted cash equivalents in a restricted investment portfolio in order to meet solvency requirements. We purchased $16.2 million in marketable securities in ﬁscal 2023 and received $11.6 million in proceeds from the sale of marketable securities in the period. Cash Requirements The Company’s cash requirements within the next twelve months include accounts payable and accrued liabilities, current maturities of long-term debt, other current liabilities, purchase commitments and other obligations. We expect the cash required to meet these obligations to be primarily generated through a combination of cash from operations and access to capital from ﬁnancial markets. Our long-term cash requirements under our various contractual obligations and commitments include: (cid:122) Debt Obligations and Interest Payments – See Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8 for further detail of our debt and the timing of expected future principal and interest payments. (cid:122) Operating and Finance Leases – See Note 13, “Leases,” in the Notes to Consolidated Financial Statements in Item 8 for further detail of our obligations and the timing of expected future payments. (cid:122) Deferred Compensation – The estimate of the timing of future payments under the Executive Deferred Compensation Plan and Management Savings Plan involves the use of certain assumptions, including retirement ages and payout periods. See Note 14, “Company- Sponsored Employee Benefit Plans,” in the Notes to Consolidated Financial Statements in Item 8 for further detail of our obligations and the timing of expected future payments. (cid:122) Purchase and Other Obligations – Purchase obligations include agreements for purchases of product in the normal course of business for which all signiﬁcant terms have been conﬁrmed, including minimum quantities resulting from our category management process. Such amounts are based on estimates. Purchase obligations also include amounts committed with various third-party service providers to provide information technology services for periods up to ﬁscal 2029. See discussion under Note 20, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8. Purchase obligations exclude full requirements electricity contracts where no stated minimum purchase volume is required. (cid:122) Other Liabilities – These include other long-term liabilities reﬂected in our consolidated balance sheets as of July 1, 2023, including obligations associated with certain employee beneﬁt programs, unrecognized tax beneﬁts and various long-term liabilities which have some inherent uncertainty in the timing of these payments. (cid:122) Contingent Consideration – Certain acquisitions involve contingent consideration typically payable only if certain operating results are attained or certain outstanding contingencies are resolved. See Note 4, “Acquisitions,” in the Notes to Consolidated Financial Statements in Item 8 for aggregate contingent consideration amounts outstanding as of July 1, 2023. We believe the following sources will be suﬃcient to meet our anticipated cash requirements for at least the next twelve months while maintaining suﬃcient liquidity for normal operating purposes: (cid:122) our cash ﬂows from operations; (cid:122) the availability of additional capital under our existing commercial paper programs, supported by our revolving credit facility; and (cid:122) our ability to access capital from ﬁnancial markets, including issuances of debt securities, either privately or under our shelf registration statement ﬁled with the SEC. PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Due to our strong ﬁnancial position, we believe that we will continue to be able to eﬀectively access the commercial paper market and long-term capital markets if necessary. Cash Flows Operating Activities We generated $2.9 billion in cash ﬂows from operations in ﬁscal 2023, compared to cash ﬂows from operations of $1.8 billion in ﬁscal 2022. In ﬁscal 2023, these amounts included year-over-year favorable comparisons on working capital of $772.1 million due to a favorable comparison on accounts receivable and inventory of $700.5 million and $686.4 million, respectively, partially oﬀset by an unfavorable comparison on accounts payable of $614.8 million. Accrued expenses also had an unfavorable comparison of $401.1 million, primarily from accrued payroll. Income taxes positively impacted cash ﬂows from operations by $149.8 million, as estimated payments made were lower than in fiscal 2022 due to overpayments in the prior year. Investing Activities Fiscal 2023 and Fiscal 2022 capital expenditures included: (cid:122) buildings and building improvements; (cid:122) ﬂeet replacements; (cid:122) investments in technology; and (cid:122) warehouse equipment. The Company had net cash used by plant and equipment purchases and sales of $751.2 million and ﬁnanced $311.2 million of non-cash capital expenditures for the year ended July 1, 2023. The following table sets forth the company’s total plant and equipment additions: (In thousands) Net cash capital expenditures Plant and equipment acquired through ﬁnancing programs Assets obtained in exchange for ﬁnance lease obligations TOTAL NET PLANT AND EQUIPMENT ADDITIONS Our capital expenditures in ﬁscal 2023 were $160.5 million higher than in ﬁscal 2022, as we made investments to advance our Recipe for Growth strategy. Consistent with ﬁscal 2023, we expect our capital expenditures in ﬁscal 2024 to be approximately 1.0% of sales. During fiscal 2023, we paid $37.4 million, net of cash acquired, for acquisitions. During ﬁscal 2022, we paid $1.3 billion, net of cash acquired, for acquisitions. These payments decreased in ﬁscal 2023 compared to ﬁscal 2022 due to the smaller size of acquisitions during the year. 2023 751,178 $ $ 197,096 114,098 $ 1,062,372 $ 2022 608,658 — 191,523 800,181 Free Cash Flow Our free cash ﬂow for ﬁscal 2023 increased by $933.8 million, to $2.1 billion, as compared to ﬁscal 2022, principally as a result of an increase in cash flows from operations, offset by a year-over-year increase in capital expenditures. SYSCO CORPORATION // 2023 Form 10-K 35 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Non-GAAP Reconciliation Free cash ﬂow should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP ﬁnancial measure should be used in conjunction with results presented in accordance with GAAP. See “Key (In thousands) NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP) Additions to plant and equipment Proceeds from sales of plant and equipment FREE CASH FLOW NONGAAP Financing Activities Equity Transactions Proceeds from exercises of share-based compensation awards were $79.2 million and $128.2 million in ﬁscal 2023 and ﬁscal 2022, respectively. 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 traditionally 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 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 which will remain available until fully utilized. We repurchased 6,231,071 shares for $500.1 million during ﬁscal 2023. As of July 1, 2023, we had a remaining authorization of approximately $4.0 billion. We expect to complete approximately $750 million in shares repurchases in ﬁscal 2024. Depending on the volume of acquisitions completed in fiscal 2024, we could increase share repurchases above this amount. We repurchased 552,463 additional shares for $41.3 million under our authorization through August 8, 2023. We have made dividend payments to our shareholders in each ﬁscal year since our company’s inception. Dividends paid in ﬁscal 2023 were $996.0 million, or $1.96 per share, as compared to $958.9 million, or $1.88 per share, in ﬁscal 2022. In April 2023, we declared our regular quarterly dividend for the fourth quarter of ﬁscal 2023 of $0.50 per share, a $0.01 per share increase from the prior quarter, which was paid in July 2023. In August 2021, we ﬁled a universal shelf registration statement with the SEC under which we, as a well-known seasoned issuer, have the ability to issue and sell an indeterminate amount of various types of debt and equity securities. The speciﬁc terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements. In November 2000, we ﬁled with the SEC a shelf registration statement covering 30,000,000 shares of common stock to be oﬀered from time to time in connection with acquisitions. As of August 8, 2023, 29,477,835 shares remained available for issuance under this registration statement. Performance Indicators” for further discussion regarding this non-GAAP ﬁnancial measure. In the table that follows, free cash ﬂow for each period presented is reconciled to net cash provided by operating activities. 2023 $ 2,867,602 2022 $ 1,791,286 Change in Dollars $ 1,076,316 (793,325) 42,147 $ 2,116,424 (632,802) 24,144 $ 1,182,628 $ (160,523) 18,003 933,796 % Change 60.1% (25.4) 74.6 79.0% Debt Activity and Borrowing Availability Our debt activity, including issuances and repayments, and our borrowing availability is described in Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8. Our outstanding borrowings at July 1, 2023, and repayment activity since the end of ﬁscal 2023 are disclosed within those notes. Updated amounts at August 8, 2023, include: (cid:122) No outstanding borrowings from the long-term revolving credit facility supporting our U.S. commercial paper program; and (cid:122) $339.0 million outstanding borrowings under our U.S. commercial paper program. Our aggregate commercial paper issuances and short-term bank borrowings had weighted average interest rates of 4.10% for ﬁscal 2023 and 1.35% for ﬁscal 2022. 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. As of August 8, 2023, Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa1 and a ratings outlook of “stable.” Standard & Poor’s has assigned us an unsecured debt credit rating of BBB and a ratings outlook of “stable.” Fitch Ratings Inc. has assigned us an unsecured debt credit rating of BBB and a ratings outlook of “stable.” 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 August 8, 2023, the company had approximately $3.1 billion in cash and available liquidity. Our long-term revolving credit facility includes aggregate commitments of the lenders thereunder of $3.0 billion with an option to increase such commitments to $4.0 billion. The facility includes a covenant, among others, requiring Sysco to maintain a ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0 over four consecutive ﬁscal quarters. The revolving credit facility expires on April 29, 2027. As of July 1, 2023, Sysco was in compliance with all of its debt covenants and the company expects to remain in compliance through the next twelve months. Sysco’s commercial paper dealer agreement includes an issuance allowance for an aggregate amount not to exceed $3.0 billion. Any outstanding amounts are classiﬁed within long-term debt, as the program is supported by the long-term revolving credit facility. 36 SYSCO CORPORATION // 2023 Form 10-K 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, entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation. A list of the current guarantors is included in Exhibit 22 to this Form 10-K. All subsequent issuances of senior notes and debentures in the U.S. and borrowings under the company’s $3.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries, as discussed in Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8. As of July 1, 2023, Sysco had a total of $9.5 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. The assets of Sysco Corporation consist principally of the stock of its subsidiaries. Therefore, the rights of Sysco Corporation and the rights of its creditors to participate in the assets of any subsidiary upon liquidation, recapitalization or otherwise will be subject to the prior claims of that subsidiary’s creditors, except to the extent that claims of Sysco Corporation itself and/or the claims of those creditors themselves may be recognized as creditor claims of the subsidiary. Furthermore, the ability of Sysco Corporation to service its indebtedness and other obligations is dependent upon the earnings and cash ﬂow of its subsidiaries and the distribution or other payment to it of such earnings or cash ﬂow. If any of Sysco Corporation’s subsidiaries becomes insolvent, the direct creditors (In thousands) Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet ASSETS Receivables due from non-obligor subsidiaries Current assets Total current assets Notes receivable from non-obligor subsidiaries Other noncurrent assets Total noncurrent assets LIABILITIES Payables due to non-obligor subsidiaries Other current liabilities Total current liabilities Notes payable to non-obligor subsidiaries Long-term debt Other noncurrent liabilities Total noncurrent liabilities PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of that subsidiary will have a prior claim on its assets. Sysco Corporation’s rights and the rights of its creditors, including the rights of a holder of senior notes as an owner of debt securities, will be subject to that prior claim unless Sysco Corporation or such noteholder, if such noteholder’s debt securities are guaranteed by such subsidiary, also is a direct creditor of that subsidiary. The guarantee of any subsidiary guarantor with respect to a series of senior notes or debentures may be released under certain customary circumstances. If we exercise our defeasance option with respect to the senior notes or debentures of any series, then any subsidiary guarantor effectively will be released with respect to that series. Further, each subsidiary guarantee will remain in full force and eﬀect until the earliest to occur of the date, if any, on which (1) the applicable subsidiary guarantor shall consolidate with or merge into Sysco Corporation or any successor of Sysco Corporation or (2) Sysco Corporation or any successor of Sysco Corporation consolidates with or merges into the applicable subsidiary guarantor. Basis of Preparation of the Summarized Financial Information The summarized financial information of Sysco Corporation (issuer), and certain wholly owned U.S. Broadline subsidiaries (guarantors) (together, 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 table includes summarized ﬁnancial information of the obligor group for the periods presented. Jul. 1, 2023 321,476 5,149,509 5,470,985 108,380 4,254,145 4,362,525 71,175 2,305,435 2,376,610 240,874 9,793,541 1,121,884 11,156,299 $ $ $ $ $ $ $ $ SYSCO CORPORATION // 2023 Form 10-K 37 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (In thousands) Combined Parent and Guarantor Subsidiaries Summarized Results of Operations Sales Gross proﬁt Operating income Interest expense from non-obligor subsidiaries Net earnings Off-Balance Sheet Arrangements We have no oﬀ-balance sheet arrangements. $ 2023 47,919,810 8,722,554 2,621,532 16,754 1,390,966 Critical Accounting Policies and Estimates The preparation of ﬁnancial statements in conformity with GAAP requires us to make estimates and assumptions that aﬀect the reported amounts of assets, liabilities, sales and expenses in the accompanying ﬁnancial statements. Significant accounting policies employed by Sysco are presented in the notes to the ﬁnancial statements. utilizing either a qualitative or quantitative assessment; however, if a qualitative assessment is performed and we determine that the fair value of a reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, a quantitative test is performed. 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 the goodwill and intangible assets, income taxes, company-sponsored pension plans and inventory valuation. Goodwill and Intangible Assets We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100% of the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. We use multiple valuation methods to determine the fair value of assets acquired and liabilities assumed. For intangible assets, we generally use the income method which uses a forecast of the expected future net cash ﬂows associated with each asset. These cash ﬂows are then adjusted to present value by applying an appropriate discount rate that reﬂects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or other methods include the amount and timing of projected future cash ﬂows and the discount rate selected to measure the risks inherent in the future cash ﬂows. Determining the useful life of an intangible asset also requires judgment, as diﬀerent types of intangible assets will have diﬀerent useful lives. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. More information on our acquisitions can be found in Note 4, “Acquisitions,” in the Notes to Consolidated Financial Statements in Item 8. Annually in our ﬁscal fourth quarter, we assess the recoverability of goodwill and indeﬁnite-lived intangibles by determining whether the fair values exceed the carrying values of these assets. Impairment reviews, outside our annual review time frame, are performed if events or circumstances occur that include changes in macroeconomic conditions, industry and market considerations, cost factors, overall ﬁnancial performance, other relevant entity-speciﬁc events, speciﬁc events aﬀecting the reporting unit or sustained decrease in share price. Our testing may be performed When using a quantitative test, we arrive at our estimates of fair value using a combination of discounted cash ﬂow and earnings or revenue multiple models. The results from each of these models are then weighted and combined into a single estimate of fair value for each reporting unit. We use a higher weighting for our discounted cash ﬂow valuation compared to the earnings multiple models because the forecasted operating results that serve as a basis for the analysis incorporate management’s outlook and anticipated changes for the businesses consistent with a market participant. The primary assumptions used in these various models include estimated earnings multiples of comparable acquisitions in the industry, including control premiums, earnings or revenue multiples on acquisitions completed by Sysco in the past, future cash ﬂow estimates of the reporting units which are dependent on internal forecasts and projected growth rates, and weighted average cost of capital, along with working capital and capital expenditure requirements. When possible, we use observable market inputs in our models to arrive at the fair values of our reporting units. Certain reporting units have a greater proportion of goodwill recorded to estimated fair value as compared to the U.S. Broadline, Canada Broadline or SYGMA reporting units. This is primarily due to these businesses having been more recently acquired, and as a result there has been less history of organic growth than in the U.S. Broadline, Canadian Broadline and SYGMA reporting units. As such, these reporting units have a greater risk of future impairment if their operations were to suﬀer a signiﬁcant downturn. In the annual ﬁscal 2023 assessment, we concluded that all reporting units have a fair value that exceeded book value by at least 30%, with one exception. Impairment charges would have been applicable for this reporting unit if our estimate of fair value was decreased by approximately 6%, with goodwill of $119.0 million in the aggregate as of July 1, 2023. The company estimated the fair value of these reporting units using a combination of discounted cash ﬂow and earnings or revenue multiple models. For the purposes of the discounted cash ﬂow models, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk adjusted rate. The fair value conclusions as of July 1, 2023 for the reporting units are highly sensitive to changes in the assumptions used in the income approach which include forecasted revenues, perpetual growth rates, and long-term discount rates, among others, all of which require signiﬁcant judgments by management. Fair value of the reporting unit is: therefore, determined 38 SYSCO CORPORATION // 2023 Form 10-K using signiﬁcant unobservable inputs, or level 3 in the fair value hierarchy. The company has used recent historical performance, current forecasted ﬁnancial information, and broad-based industry and economic statistics as a basis to estimate the key assumptions utilized in the discounted cash ﬂow model. These key assumptions are inherently uncertain and require a high degree of estimation and judgment and are subject to change based on future changes, industry and global economic and geo-political conditions, and the timing and success of the implementation of current strategic initiatives. Income Taxes The determination of our provision for income taxes requires signiﬁcant judgment, the use of estimates and the interpretation and application of complex tax laws. Our provision for income taxes primarily reﬂects a combination of income earned and taxed in the various U.S. federal and state as well as foreign jurisdictions. Tax law changes, increases or decreases in book versus tax basis diﬀerences, accruals or adjustments of accruals for unrecognized tax beneﬁts or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all aﬀect the overall eﬀective tax rate. Certain of our operations have carryforward attributes, such as operating losses. If these operations do not produce suﬃcient income, it could lead to the recognition of valuation allowances against certain deferred tax assets in the future if losses occur or growth is insuﬃcient beyond our current expectations. This would negatively impact our income tax expense, net earnings, and balance sheet. Our liability for unrecognized tax beneﬁts contains uncertainties because management is required to make assumptions and to apply judgment in estimating the exposures associated with our various ﬁling positions. We believe that the judgments and estimates discussed herein are reasonable; however, actual results could diﬀer, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which a liability has been established, or pay amounts in excess of recorded liabilities, our eﬀective income tax rate in a given ﬁnancial statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an increase in our eﬀective income tax rate in the period of resolution. A favorable tax settlement may be recognized as a reduction in our eﬀective income tax rate in the period of resolution. During the third quarter of ﬁscal 2023, Sysco received a Statutory Notice of Deﬁciency from the Internal Revenue Service, mainly related to foreign tax credits generated in ﬁscal 2018 from repatriated earnings primarily from our Canadian operations. On April 18, 2023, during the company’s fourth ﬁscal quarter, the company ﬁled suit in the U.S. Tax Court challenging the validity of certain tax regulations related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The lawsuit seeks to have the court invalidate these regulations, which would aﬃrm the company’s position regarding its foreign tax credits. Sysco previously recorded a beneﬁt of $131.0 million attributable to its interpretation of the TCJA and the Internal Revenue Code. If the company is ultimately unsuccessful in defending its position, it may be required to reverse all, or some portion, of the beneﬁt previously recorded. Company-Sponsored Pension Plans Amounts related to deﬁned beneﬁt plans recognized in the ﬁnancial statements are determined on an actuarial basis. Two of the more critical assumptions in the actuarial calculations are the discount rate for determining the current value of plan beneﬁts and the expected rate of return on plan assets. Our U.S. Retirement Plan is largely frozen and is only open to a small number of employees. Our Supplemental Executive Retirement Plan (SERP) is frozen and is not open to any employees. None PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of these plans have a signiﬁcant sensitivity to changes in discount rates speciﬁc to our results of operations, but such changes could impact our balance sheet due to a change in our funded status. Due to the low level of active employees in our retirement plans, our assumption for the rate of increase in future compensation is not a critical assumption. The expected long-term rate of return on plan assets of the U.S. Retirement Plan was 4.50% for the period of July 2022 to October 2022. Due to the settlement that occurred, as discussed in Note 14, “Company-Sponsored Employee Beneﬁt Plans” in the Notes to Consolidated Financial Statements in Item 8, the rate changed to 6.00% from November 2022 to June 2023. The expected long-term rate of return on plan assets was 4.50% for ﬁscal 2022. The expectations of future returns are derived from a mathematical asset model that incorporates assumptions as to the various asset class returns reflecting a combination of historical performance analysis, the forward-looking views of the ﬁnancial markets regarding the yield on bonds, historical returns of the major stock markets, and returns on alternative investments. The rate of return assumption is reviewed annually and revised as deemed appropriate. The expected return on plan assets impacts the recorded amount of net pension costs. The expected long-term rate of return on plan assets of the U.S. Retirement Plan is 5.50% for ﬁscal 2024. A 25 basis point increase (decrease) in the assumed rate of return in the Plan for ﬁscal 2024 would decrease (increase) Sysco’s net company-sponsored pension costs for ﬁscal 2024 by approximately $6.0 million. Pension accounting standards require the recognition of the funded status of our deﬁned beneﬁt plans in the Statement of Financial Position, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The amount reﬂected in accumulated other comprehensive loss related to the recognition of the funded status of our deﬁned beneﬁt plans as of July 1, 2023 was a charge, net of tax, of $839.5 million. The amount reﬂected in accumulated other comprehensive loss related to the recognition of the funded status of our deﬁned beneﬁt plans as of July 2, 2022 was a charge, net of tax, of $1.0 billion. The decrease compared to July 2, 2022 is due to a portion of the accumulated other comprehensive loss being recognized in our consolidated results of operations as a result of the purchase of a nonparticipating single premium group annuity contract that transferred a portion of the U.S. Retirement Plan’s pension obligations related to certain pension beneﬁts over to an insurer. Inventory Valuation Inventories consisting primarily of ﬁnished goods include food and related products and lodging products held for sale. Inventories are valued at the lower of cost (ﬁrst-in, ﬁrst-out method) and net realizable value. Inventory balances are adjusted for slow-moving, excess, and obsolete inventories. Inventory valuation reserves require certain management estimates and judgments which may signiﬁcantly aﬀect the ending inventory valuation. We estimate our reserves based on the consideration of a variety of factors, including but not limited to, current economic conditions and business trends, seasonal demand, future merchandising strategies and the age of our products. We have not made any material changes in the methodology used to establish our inventory valuation or the related reserves. We believe that we have suﬃcient current and historical knowledge to record reasonable estimates, and the risk of inventory obsolescence is largely mitigated because of the speed with which our inventory typically turns. However, these assumptions are inherently uncertain and require estimation and judgment and are subject to change. During ﬁscal year 2023, the change in our inventory valuation reserve was not material to our results of operations or balance sheet. SYSCO CORPORATION // 2023 Form 10-K 39 PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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: (cid:122) our expectations of an improving market over the course of ﬁscal 2024; (cid:122) our expectations regarding the ability of our supply chain and facilities to remain in place and operational; (cid:122) our plans regarding our transformation initiatives and the expected eﬀects from such initiatives, including the Sysco Driver Academy; (cid:122) statements regarding uncollectible accounts, including that if collections continue to improve, additional reductions in bad debt expense could occur; (cid:122) our expectations that our Recipe for Growth strategy will allow us to better serve our customers and differentiate Sysco from our competition; (cid:122) our expectations regarding our ﬁscal 2024 sales and our rate of sales growth in ﬁscal 2024 and the three years of our long-range plan; (cid:122) our expectations regarding the impact of inflation on sales, gross margin rates and gross proﬁt dollars; (cid:122) our expectations regarding gross margins in ﬁscal 2024; (cid:122) our plans regarding cost savings, including our target for cost savings through ﬁscal 2024 and the impact of costs savings on the company; (cid:122) our belief that our purpose will allow us to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our Recipe for Growth transformation, and statements regarding our plans with respect to our strategic pillars that support this growth transformation; (cid:122) our expectations regarding the use and investment of remaining cash generated from operations; (cid:122) 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 and recover from the crisis; (cid:122) our expectations regarding the calculation of adjusted return on invested capital, adjusted operating income, adjusted net earnings and adjusted diluted earnings per share; (cid:122) our expectations regarding the impact of future Certain Items on our projected future non-GAAP and GAAP results; (cid:122) our expectations regarding our eﬀective tax rate in ﬁscal 2024; (cid:122) the suﬃciency of our mechanisms for managing working capital and competitive pressures, and our beliefs regarding the impact of these mechanisms; (cid:122) our ability to meet future cash requirements, including the ability to access financial markets effectively, including issuances of debt securities, and maintain suﬃcient liquidity; (cid:122) our expectations regarding the payment of dividends, and the growth of our dividend, in the future; (cid:122) our expectations regarding future activity under our share repurchase program; (cid:122) future compliance with the covenants under our revolving credit facility; (cid:122) our ability to eﬀectively access the commercial paper market and long- term capital markets; (cid:122) our intention to repay our long-term debt with cash on hand, cash ﬂow from operations, issuances of commercial paper, issuances of senior notes, or a combination thereof. 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 and those within Part I, Item 1A of this document: (cid:122) the risk that if sales from our locally managed customers do not grow at the same rate as sales from multi-unit customers, our gross margins may decline; (cid:122) periods of significant or prolonged inflation or deflation and their impact on our product costs and proﬁtability generally; (cid:122) 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; (cid:122) the risk that our eﬀorts to modify truck routing, including our small truck initiative, in order to reduce outbound transportation costs may be unsuccessful; (cid:122) 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; (cid:122) risks related to unfavorable conditions in the Americas and Europe and (cid:122) the expected long-term rate of return on plan assets of the U.S. the impact on our results of operations and ﬁnancial condition; Retirement Plan; (cid:122) the suﬃciency of our available liquidity to sustain our operations for multiple years; (cid:122) estimates regarding the outcome of legal proceedings; (cid:122) the impact of seasonal trends on our free cash ﬂow; (cid:122) estimates regarding our capital expenditures and the sources of ﬁnancing for our capital expenditures; (cid:122) our expectations regarding the impact of potential acquisitions and sales of assets on our liquidity, borrowing capacity, leverage ratios and capital availability; (cid:122) our expectations regarding real sales growth in the U.S. foodservice market and trends in produce markets; (cid:122) the risks related to our efforts to implement our transformation initiatives and meet our other 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; (cid:122) the impact of unexpected future changes to our business initiatives based on management’s subjective evaluation of our overall business needs; (cid:122) the risk that the actual costs of any business initiatives may be greater or less than currently expected; (cid:122) the risk that competition in our industry and the impact of GPOs may adversely impact our margins and our ability to retain customers and make it diﬃcult for us to maintain our market share, growth rate and proﬁtability; 40 SYSCO CORPORATION // 2023 Form 10-K PART II – FINANCIAL INFORMATION Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (cid:122) the risk that our relationships with long-term customers may be (cid:122) the risk that divestiture of one or more of our businesses may not materially diminished or terminated; provide the anticipated eﬀects on our operations; (cid:122) the risk that changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations; (cid:122) 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; (cid:122) the impact and eﬀects of public health crises, pandemics and epidemics, such as the recent outbreak of COVID-19, and the adverse impact thereof on our business, ﬁnancial condition and results of operations; (cid:122) the risk that changes in applicable tax laws or regulations and the resolution of tax disputes could negatively aﬀect our ﬁnancial results; (cid:122) 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; (cid:122) the risk of interruption of supplies and increase in product costs as a result of conditions beyond our control; (cid:122) the potential impact on our reputation and earnings of adverse publicity or lack of conﬁdence in our products; (cid:122) risks related to unfavorable changes to the mix of locally managed customers versus corporate-managed customers; (cid:122) the risk that we may not realize anticipated beneﬁts from our operating cost reduction eﬀorts; (cid:122) diﬃculties in successfully expanding into international markets and complimentary lines of business; (cid:122) the potential impact of product liability claims; (cid:122) the risk that we fail to comply with requirements imposed by applicable law or government regulations; (cid:122) risks related to our ability to eﬀectively ﬁnance and integrate acquired businesses; (cid:122) 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; (cid:122) our level of indebtedness and the terms of our indebtedness could adversely aﬀect our business and liquidity position; (cid:122) 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; (cid:122) 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; (cid:122) due to our reliance on technology, any technology disruption or delay in implementing new technology could have a material negative impact on our business; (cid:122) the risk of negative impacts to our business and our relationships with customers from a cybersecurity incident and/or other technology disruptions; (cid:122) the risk that changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely aﬀect interest expense related to outstanding debt; (cid:122) the potential requirement to pay material amounts under our multiemployer deﬁned beneﬁt pension plans; (cid:122) our funding requirements for our company-sponsored qualified pension plan may increase should ﬁnancial markets experience future declines; (cid:122) labor issues, including the renegotiation of union contracts and shortage of qualiﬁed labor; (cid:122) 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; (cid:122) the risk that the anti-takeover beneﬁts provided by our preferred stock may not be viewed as beneﬁcial to stockholders; and (cid:122) the risk that the exclusive forum provisions in our amended and restated bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, oﬃcers or employees. SYSCO CORPORATION // 2023 Form 10-K 41 PART II – FINANCIAL INFORMATION Item 7A. Quantitative and Qualitative Disclosures about Market Risk Item 7A. 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. Interest Rate Risk We do not utilize ﬁnancial instruments for trading purposes. Our use of debt directly exposes us to interest rate risk. Floating rate debt, where the interest rate ﬂuctuates periodically, exposes us to short-term changes in market interest rates. Fixed rate debt, where the interest rate is ﬁxed over the life of the instrument, exposes us to changes in market interest rates reﬂected in the fair value of the debt and to the risk that we may need to reﬁnance maturing debt with new debt at higher rates. We manage our debt portfolio to achieve an overall desired position of ﬁxed and ﬂoating rates and may employ interest rate swaps as a tool to achieve that position. The major risks from interest rate derivatives include changes in the interest rates aﬀecting the fair value of such instruments, potential increases in interest expense due to market increases in ﬂoating interest rates and the creditworthiness of the counterparties in such transactions. At July 1, 2023, there were no commercial paper issuances outstanding under our U.S. commercial paper program. Total debt as of July 1, 2023 was $10.4 billion, of which approximately 100% was at ﬁxed rates of interest. At July 2, 2022, there were no commercial paper issuances outstanding under our U.S. commercial paper program. Total debt as of July 2, 2022 was $10.6 billion, of which approximately 95% was at ﬁxed rates of interest, including the impact of our interest rate swap agreements. The following tables present our interest rate position as of July 1, 2023. All amounts are stated in U.S. dollar equivalents. Interest Rate Position as of July 1, 2023 Principal Amount by Expected Maturity Average Interest Rate (Dollars in thousands) U.S. Dollar Denominated: Fixed Rate Debt Average Interest Rate Canadian Dollar Denominated: Fixed Rate Debt Average Interest Rate 2024 2025 2026 2027 2028 Thereafter Total Fair Value $ — $ —% — $ 750,000 —% 3.75% $ 1,043,176 $ 750,000 $ 7,038,879 $ 9,582,055 $ 8,942,071 3.46% 3.25% 4.82% 4.47% $ — $ 377,815 $ —% 3.65% — $ —% — $ —% — $ —% — $ —% 377,815 $ 365,385 3.65% Foreign Currency Exchange Rate Risk The majority of our foreign subsidiaries use their local currency as their functional currency. To the extent that business transactions are not denominated in a foreign subsidiary’s functional currency, we are exposed to foreign currency exchange rate risk. We will also incur gains and losses within our shareholders’ equity due to the translation of our ﬁnancial statements from foreign currencies into U.S. dollars. Our largest currency exposures are with Canadian dollars, British pound sterling and Euro currencies. Our income statement trends may be impacted by the translation of the income statements of our foreign subsidiaries into U.S. dollars. The exchange rates used to translate our foreign sales into U.S. dollars negatively aﬀected sales by 1.3% in ﬁscal 2023 when compared to ﬁscal 2022. The exchange rate used to translate our foreign sales into U.S. dollars negatively aﬀected sales by 0.3% in ﬁscal 2022 when compared to ﬁscal 2021. The impact to our operating income, net earnings and earnings per share was not material in ﬁscal 2023 or ﬁscal 2022. A 10% unfavorable change in the ﬁscal 2023 weighted year-to-date exchange rate and the resulting impact on our ﬁnancial statements would have negatively aﬀected ﬁscal 2023 sales by 1.7% and would not have materially aﬀected our operating income, net earnings and earnings per share. Our investments and loans to foreign operations create additional foreign currency exposure and from time to time, we enter into agreements to hedge foreign currency exchange rate risks and mitigate impact to our consolidated results of operations. In the fourth quarter of ﬁscal 2023, we extinguished €500 million of Euro notes issued in June 2016 as a hedge of a portion of our net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations. Changes in the value of these items resulting from ﬂuctuations in the underlying exchange rates to U.S. Dollar exchange rates were recorded as foreign currency translation adjustments within Accumulated other comprehensive income (loss). Additionally, we periodically enter into agreements to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt instruments, which are designated as fair value hedges. Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components. Unrealized gains or losses on components excluded from hedge eﬀectiveness are recorded as a component of Accumulated other comprehensive income and recognized into earnings over the life of the hedged instrument. 42 SYSCO CORPORATION // 2023 Form 10-K 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 0.6% of sales during ﬁscal 2023 and 0.5% of sales in ﬁscal 2022 and ﬁscal 2021. PART II – FINANCIAL INFORMATION Item 7A. Quantitative and Qualitative Disclosures about Market Risk 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 July 1, 2023, we had diesel fuel swaps with a total notional amount of approximately 71 million gallons through September 2025. These swaps are expected to lock in the price of approximately 80% of our bulk fuel purchases for ﬁscal 2024, or 70% of our total projected fuel purchase needs for ﬁscal 2024. Our remaining fuel purchase needs will occur at market rates unless contracted for a ﬁxed price or hedged at a later date. Using current, published quarterly market price projections for diesel and estimates of fuel consumption, a 10% unfavorable change in diesel prices from the market price would result in a potential increase of approximately $6.1 million in our fuel costs on our non-contracted volumes. Investment Risk Our U.S. Retirement Plan holds various investments, including public and private equity, ﬁxed income securities and real estate funds. The amount of our annual contribution to the plan is dependent upon, among other things, the return on the plan’s assets and discount rates used to calculate the plan’s liability. Fluctuations in asset values can cause the amount of our anticipated future contributions to the plan to increase and can result in a reduction to shareholders’ equity on our balance sheet as of ﬁscal year-end, which is when this plan’s funded status is measured. Also, the projected liability of the plan will be impacted by the ﬂuctuations of interest rates on high quality bonds in the public markets. To the extent the ﬁnancial markets experience declines, our anticipated future contributions and funded status will be aﬀected for future years. A 10% unfavorable change in the value of the investments held by our company-sponsored retirement plans at the plans’ ﬁscal year end (December 31, 2022) would not have a material impact on our anticipated future contributions for ﬁscal 2024; however, such an unfavorable change would increase our pension expense for ﬁscal 2024 by $23.4 million and would reduce our shareholders’ equity on our balance sheet as of July 1, 2023 by $264.1 million. SYSCO CORPORATION // 2023 Form 10-K 43 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Item 8. Financial Statements and Supplementary Data SYSCO CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements: Report of Management on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (PCAOB ID: 42) Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements (PCAOB ID: 42) Consolidated Balance Sheets 44 45 46 47 Consolidated Results of Operations Consolidated Statements of Comprehensive Income Changes in Consolidated Shareholders’ Equity Consolidated Cash Flows Notes to Consolidated Financial Statements 48 48 49 51 52 All schedules are omitted because they are not applicable or the information is set forth in the consolidated ﬁnancial statements or notes thereto. Report of Management on Internal Control Over Financial Reporting The management of Sysco Corporation (Sysco) is responsible for establishing and maintaining adequate internal control over ﬁnancial reporting for the company. Sysco’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of published ﬁnancial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be eﬀective can provide only reasonable assurance with respect to ﬁnancial statement preparation and presentation. Sysco’s management assessed the eﬀectiveness of Sysco’s internal control over ﬁnancial reporting as of July 1, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on this assessment, management concluded that, as of July 1, 2023, Sysco’s internal control over ﬁnancial reporting was eﬀective based on those criteria. Ernst & Young LLP, the independent registered public accounting ﬁrm that audited the company’s consolidated ﬁnancial statements included in this report, has issued an audit report on the eﬀectiveness of Sysco’s internal control over ﬁnancial reporting as of July 1, 2023. 44 SYSCO CORPORATION // 2023 Form 10-K Report of Independent Registered Public Accounting Firm PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data To the Shareholders and the Board of Directors of Sysco Corporation Opinion on Internal Control over Financial Reporting We have audited Sysco Corporation and its Consolidated Subsidiaries’ internal control over ﬁnancial reporting as of July 1, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Sysco Corporation and its Consolidated Subsidiaries (the Company) maintained, in all material respects, eﬀective internal control over ﬁnancial reporting as of July 1, 2023, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2023 consolidated ﬁnancial statements of the Company and our report dated August 24, 2023, expressed an unqualiﬁed opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining eﬀective internal control over ﬁnancial reporting and for its assessment of the eﬀectiveness of internal control over ﬁnancial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over ﬁnancial reporting based on our audit. We are a public accounting ﬁrm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over ﬁnancial reporting was maintained in all material respects. Houston, Texas August 24, 2023 Our audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating eﬀectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of ﬁnancial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material eﬀect on the ﬁnancial statements. Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of eﬀectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. SYSCO CORPORATION // 2023 Form 10-K 45 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Sysco Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Sysco Corporation and its Consolidated Subsidiaries (the Company) as of July 1, 2023 and July 2, 2022, the related consolidated results of operations, statements of comprehensive income, changes in shareholders’ equity and cash ﬂows for each of the three years in the period ended July 1, 2023 and the related notes (collectively referred to as the “consolidated ﬁnancial statements”). In our opinion, the consolidated ﬁnancial statements present fairly, in all material respects, the ﬁnancial position of the Company at July 1, 2023 and July 2, 2022, and the results of its operations and its cash ﬂows for each of the three years in the period ended July 1, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over ﬁnancial reporting as of July 1, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated August 24, 2023 expressed an unqualiﬁed opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s ﬁnancial statements based on our audits. We are a public accounting ﬁrm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Valuation of Goodwill We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ﬁnancial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the ﬁnancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the ﬁnancial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated ﬁnancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates. Description of the Matter At July 1, 2023, the Company’s goodwill was $4.6 billion. As discussed in Note 1 of the consolidated ﬁnancial statements, goodwill is tested by the Company’s management for impairment at least annually unless there are indications of impairment at other points throughout the ﬁscal year. Auditing management’s impairment tests for goodwill is complex and highly judgmental due to the signiﬁcant estimation required to determine the fair value of the reporting units. In particular, the fair value estimates of two reporting units were more sensitive to changes in signiﬁcant assumptions including changes in projected cash ﬂows and weighted average cost of capital. These assumptions are sensitive to and aﬀected by expected future market or economic conditions and company- speciﬁc qualitative factors. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating eﬀectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s review of the signiﬁcant assumptions described above. We also tested controls over management’s review of the data used in their valuation models. To test the estimated fair value of the two reporting units, we performed audit procedures that included, among others, assessing methodologies and testing the signiﬁcant assumptions discussed above and the underlying data used by the Company in its analysis. We compared projected cash ﬂows to the Company’s historical cash ﬂows and other available industry information. We involved our valuation specialists to assist in reviewing the valuation methodology and testing the weighted average cost of capital. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of signiﬁcant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. We have served as the Company’s auditor since 2002. Houston, Texas August 24, 2023 46 SYSCO CORPORATION // 2023 Form 10-K Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands, except for share data) ASSETS Current assets Cash and cash equivalents Accounts receivable, less allowances of $45,599 and $70,790 Inventories Prepaid expenses and other current assets Income tax receivable Total current assets Plant and equipment at cost, less accumulated depreciation Other long-term assets Goodwill Intangibles, less amortization Deferred income taxes Operating lease right-of-use assets, net Other assets Total other long-term assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable Accrued expenses Accrued income taxes Current operating lease liabilities Current maturities of long-term debt Total current liabilities Long-term liabilities Long-term debt Deferred income taxes Long-term operating lease liabilities Other long-term liabilities Total long-term liabilities Noncontrolling interest 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 Paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock at cost, 260,062,834 and 256,531,543 shares Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY See Notes to Consolidated Financial Statements PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Jul. 1, 2023 Jul. 2, 2022 $ 745,201 5,091,970 4,480,812 284,566 5,815 10,608,364 4,915,049 4,645,754 859,530 420,450 731,766 640,232 7,297,732 $ 22,821,145 $ 6,025,757 2,251,181 101,894 99,051 62,550 8,540,433 10,347,997 302,904 656,269 931,708 12,238,878 33,212 $ 867,086 4,838,912 4,437,498 303,789 35,934 10,483,219 4,456,420 4,542,315 952,683 377,604 723,297 550,150 7,146,049 $ 22,085,688 $ 5,752,958 2,270,753 40,042 105,690 580,611 8,750,054 10,066,931 250,171 636,417 967,907 11,921,426 31,948 — 765,175 1,814,681 11,310,664 (1,252,590) (10,629,308) 2,008,622 $ 22,821,145 — 765,175 1,766,305 10,539,722 (1,482,054) (10,206,888) 1,382,260 $ 22,085,688 SYSCO CORPORATION // 2023 Form 10-K 47 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED RESULTS OF OPERATIONS (In thousands, except for share and per share data) Sales Cost of sales Gross proﬁt Operating expenses Operating income Interest expense Other expense (income), net(1) Earnings before income taxes Income taxes NET EARNINGS Net earnings: Basic earnings per share Diluted earnings per share Average shares outstanding Diluted shares outstanding $ Jul. 1, 2023 76,324,675 62,369,678 13,954,997 10,916,448 3,038,549 526,752 226,442 2,285,355 515,231 $ 1,770,124 Year Ended Jul. 2, 2022 $ 68,636,146 56,315,622 12,320,524 9,974,024 2,346,500 623,643 (23,916) 1,746,773 388,005 $ 1,358,768 Jul. 3, 2021 $ 51,297,843 41,941,094 9,356,749 7,909,561 1,447,188 880,137 (17,677) 584,728 60,519 524,209 $ $ 3.49 3.47 507,362,913 509,719,756 $ 2.66 2.64 510,630,645 514,005,827 $ 1.03 1.02 510,696,398 513,555,088 (1) Sysco’s second quarter of fiscal 2023 included a charge for $315.4 million in other expense related to pension settlement charges. See Note 14, “Company-Sponsored Employee Benefit Plans.” Sysco’s fourth quarter of fiscal 2023 included $122.0 million in other income related to a legacy litigation financing agreement. See Note 20, “Commitments and Contingencies.” Gains and losses related to the disposition of fixed assets have been recognized within operating expenses. Prior year amounts have been reclassified to conform to this presentation. See Notes to Consolidated Financial Statements CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended Jul. 1, 2023 1,770,124 $ Jul. 2, 2022 1,358,768 $ Jul. 3, 2021 524,209 $ 127,227 (461,425) 362,292 8,665 (20,918) (55,334) (149) 296 23,706 236,591 (88,799) (1,821) 229,464 $ 1,999,588 8,624 53,930 24,312 — 296 59,118 — (8,758) (9,387) (333,290) $ 1,025,478 8,812 (24,155) 14,125 — 548 46,695 — 156,480 (2,680) 562,117 $ 1,086,326 (In thousands) Net earnings Other comprehensive income (loss): Foreign currency translation adjustment Items presented net of tax: Amortization of cash ﬂow hedges Change in net investment hedges Change in cash ﬂow hedges Changes in excluded components of fair value hedge Amortization of prior service cost Amortization of actuarial loss Pension settlement charge Net actuarial (loss) gain arising in current year Change in marketable securities Total other comprehensive income (loss) COMPREHENSIVE INCOME See Notes to Consolidated Financial Statements 48 SYSCO CORPORATION // 2023 Form 10-K Sysco Corporation and its Consolidated Subsidiaries CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands, except for share data) Balance as of June 27, 2020 Net earnings Foreign currency translation adjustment Amortization of cash ﬂow hedges, net of tax Change in cash ﬂow hedges, net of tax Change in net investment hedge, net of tax Reclassiﬁcation of pension and other postretirement beneﬁt plans amounts to net earnings, net of tax Pension funded status adjustment, net of tax Change in marketable securities, net of tax Adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), net of tax Dividends declared ($1.82 per common share) Share-based compensation awards BALANCE AS OF JULY 3, 2021 Net earnings Foreign currency translation adjustment Amortization of cash ﬂow hedges, net of tax Change in cash ﬂow hedges, net of tax Change in net investment hedges, net of tax Reclassiﬁcation of pension and other postretirement beneﬁt plans amounts to net earnings, net of tax Pension funded status adjustment, net of tax Change in marketable securities, net of tax Dividends declared ($1.90 per common share) Treasury stock purchases Increase in ownership interest in subsidiaries Share-based compensation awards BALANCE AS OF JULY 1, 2022 Common Stock Paid-in Capital Amount 765,174,900 $ 765,175 $ 1,506,901 Shares Accumulated Other Comprehensive Loss $ (1,710,881) Retained Earnings $ 10,563,008 524,209 Treasury Stock Shares 256,915,825 $ Amounts Totals (9,965,590) $ 1,158,613 524,209 362,292 8,812 14,125 (24,155) 47,243 156,480 (2,680) 362,292 8,812 14,125 (24,155) 47,243 156,480 (2,680) (2,068) (933,443) 243,468 $(1,148,764) 253,342,595 $ (9,835,216) $ 1,552,896 1,358,768 (3,573,230) 130,374 (2,068) (933,443) 765,174,900 $ 765,175 $1,619,995 $10,151,706 1,358,768 113,094 (461,425) (461,425) 8,624 24,312 53,930 59,414 (8,758) (9,387) (970,752) 6,698,991 (499,839) 8,624 24,312 53,930 59,414 (8,758) (9,387) (970,752) (499,839) 765,174,900 $ 765,175 $1,766,305 $10,539,722 (304) 146,614 (304) 274,781 $(1,482,054) 256,531,543 $ (10,206,888) $ 1,382,260 (3,510,043) 128,167 SYSCO CORPORATION // 2023 Form 10-K 49 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands, except for share data) BALANCE AS OF JULY 1, 2022 Net earnings Foreign currency translation adjustment Amortization of cash ﬂow hedges, net of tax Change in cash ﬂow hedges, net of tax Change in net investment hedges, net of tax Changes in excluded components of fair value hedge, net of tax Reclassiﬁcation of pension and other postretirement beneﬁt plans amounts to net earnings, net of tax Pension settlement charge, net of tax Net actuarial loss arising in current year, net of tax Change in marketable securities, net of tax Dividends declared ($1.97 per common share) Treasury stock purchases Increase in ownership interest in subsidiaries Share-based compensation awards BALANCE AS OF JULY 1, 2023 Common Stock Shares Retained Earnings 765,174,900 $ 765,175 $1,766,305 $10,539,722 1,770,124 Paid-in Capital Amount Accumulated Other Comprehensive Loss Treasury Stock Totals $(1,482,054) 256,531,543 $ (10,206,888) $ 1,382,260 1,770,124 Amounts Shares 127,227 8,665 (55,334) (20,918) (149) 24,002 236,591 (88,799) (1,821) (999,182) 6,231,071 (500,093) 127,227 8,665 (55,334) (20,918) (149) 24,002 236,591 (88,799) (1,821) (999,182) (500,093) 765,174,900 $ 765,175 $1,814,681 $11,310,664 (2,077) 50,453 (2,077) 128,126 $ (1,252,590) 260,062,834 $ (10,629,308) $ 2,008,622 (2,699,780) 77,673 See Notes to Consolidated Financial Statements 50 SYSCO CORPORATION // 2023 Form 10-K Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS (In thousands) Cash ﬂows from operating activities: Net earnings Adjustments to reconcile net earnings to cash provided by operating activities: Pension settlement charge Share-based compensation expense Depreciation and amortization Operating lease asset amortization Amortization of debt issuance and other debt-related costs Deferred income taxes Provision for losses (gains) on receivables Loss on extinguishment of debt Loss on sale of business Other non-cash items Additional changes in certain assets and liabilities, net of eﬀect of businesses acquired: Increase in receivables Increase in inventories Decrease (increase) in prepaid expenses and other current assets Increase in accounts payable Increase in accrued expenses Decrease in operating lease liabilities Increase (decrease) in accrued income taxes Decrease (increase) in other assets (Decrease) increase in other long-term liabilities Net cash provided by operating activities Cash ﬂows from investing activities: Additions to plant and equipment Proceeds from sales of plant and equipment Acquisition of businesses, net of cash acquired Purchase of marketable securities Proceeds from sales of marketable securities Other investing activities Net cash used for investing activities Cash ﬂows from ﬁnancing activities: Bank and commercial paper borrowings, net Other debt borrowings including senior notes Other debt repayments including senior notes Redemption premiums and repayments for senior notes Cash received from termination of interest rate swap agreements Proceeds from stock option exercises Stock repurchases Dividends paid Other ﬁnancing activities Net cash used for ﬁnancing activities Eﬀect of exchange rates on cash, cash equivalents and restricted cash Net increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at beginning of period CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD Supplemental disclosures of cash ﬂow information: Cash paid during the period for: Interest Income taxes, net of refunds See Notes to Consolidated Financial Statements PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Year Ended Jul. 1, 2023 Jul. 2, 2022 Jul. 3, 2021 $ 1,770,124 $ 1,358,768 $ 524,209 315,354 95,660 775,604 113,073 20,007 (16,434) 35,655 — — (6,907) (270,639) (22,219) 2,147 195,607 22,368 (133,754) 91,971 5,565 (125,580) 2,867,602 (793,325) 42,147 (37,384) (16,191) 11,641 8,499 (784,613) — 122,315 772,881 108,052 22,305 (64,454) (15,494) 115,603 — (12,692) (971,170) (708,610) 4,805 810,451 423,429 (125,741) (9,775) (1,082) (38,305) 1,791,286 (632,802) 24,144 (1,281,137) (19,318) 16,648 14,259 (1,878,206) — 95,815 737,916 113,906 26,115 (157,864) (152,740) 293,897 22,737 (16,502) (662,345) (551,405) (32,577) 1,459,222 167,181 (142,351) 118,953 18,822 40,853 1,903,842 (470,676) 59,147 — (53,148) 35,979 — (428,698) — 248,977 (829,828) — — 79,171 (500,093) (995,985) (58,218) (2,055,976) 7,643 34,656 931,376 $ 966,032 — 1,248,207 (494,585) (1,395,668) 23,127 128,167 (499,825) (958,937) (37,384) (1,986,898) (31,906) (2,105,724) 3,037,100 $ 931,376 (826,182) 1,484 (2,003,135) (999,996) — 130,374 — (917,564) (13,209) (4,628,228) 94,614 (3,058,470) 6,095,570 $3,037,100 $ 510,730 444,399 $ 498,349 450,148 $ 877,512 103,547 SYSCO CORPORATION // 2023 Form 10-K 51 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Sysco Corporation and its Consolidated Subsidiaries Notes to Consolidated Financial Statements Unless this Form 10-K indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or the “company” as used in this Form 10-K refer to Sysco Corporation together with its consolidated subsidiaries and divisions. 1. Summary of Accounting Policies Business and Consolidation Sysco Corporation, acting through its subsidiaries and divisions (Sysco or the company), is engaged in the marketing and distribution of a wide range of food and related products primarily to the foodservice or food-away-from-home industry. These services are performed for approximately 725,000 customers from 334 distribution facilities located throughout North America and Europe. Sysco’s ﬁscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year ended July 1, 2023 for ﬁscal 2023, a 52-week year ended July 2, 2022 for ﬁscal 2022, and a 53-week year ended July 3, 2021 for ﬁscal 2021. The company will have a 52-week year ending June 29, 2024 for ﬁscal 2024. The accompanying ﬁnancial statements include the accounts of Sysco and its consolidated subsidiaries. All signiﬁcant intercompany transactions and account balances have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that aﬀect the reported amounts of assets, liabilities, sales and expenses. Actual results could diﬀer from the estimates used. Cash and Cash Equivalents Cash includes cash equivalents such as cash deposits, time deposits, certiﬁcates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less, which are recorded at fair value. Accounts Receivable, Less Allowances Accounts receivable consist primarily of trade receivables from customers and receivables from suppliers for marketing or incentive programs. Sysco determines the past due status of trade receivables based on contractual terms with each customer and evaluates the collectability of accounts receivable to determine an appropriate allowance for credit losses on trade receivables. To calculate an allowance for credit losses, 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. Allowances are recorded for all other receivables based on an analysis of historical trends of write-oﬀs and recoveries. The company utilizes arrangements to sell portions of its trade accounts receivable to third-party ﬁnancial institutions on a non-recourse basis. The arrangements meet the requirements for the receivables transferred to be accounted for as sales and are accounted for as a reduction in trade receivables. Proceeds from the sales are reported net of negotiated discount and are recorded as a reduction to accounts receivable outstanding in the company’s consolidated balance sheets and as cash ﬂows from operating activities in the company’s consolidated statements of cash ﬂows. Accounts receivable sold, without recourse, under these arrangements were $4.2 billion and $3.6 billion for the ﬁscal years ended July 1, 2023 and July 2, 2022, respectively. In certain instances, Sysco has continuing involvement subsequent to the transfer, limited to providing certain servicing and collection actions on behalf of the purchasers of the designated trade receivables. The outstanding aggregate principal amount of receivables that has been derecognized and remain outstanding was $86.4 million and $51.0 million at July 1, 2023 and July 2, 2022, respectively. Sysco continues to service the receivables post-transfer on a non-recourse basis with no participating interest. Inventories Inventories consisting primarily of ﬁnished goods include food and related products and lodging products held for resale. Inventories are valued at the lower of cost (ﬁrst-in, ﬁrst-out method) and net realizable value. Elements of costs include the purchase price of the product and freight charges to deliver the product to the company’s warehouses and are net of certain cash received from vendors (see Vendor Consideration). Inventory balances are adjusted for slow-moving, excess, and obsolete inventories. Inventory valuation reserves are estimated based on the consideration of a variety of factors, including but not limited to, current economic conditions and business trends, seasonal demand, future merchandising strategies and the age of our products. Plant and Equipment Capital additions, improvements and major replacements are classiﬁed as plant and equipment and are carried at cost. Depreciation is recorded using the straight-line method, which reduces the book value of each asset in equal amounts over its estimated useful life. Depreciation is included within operating expenses in the consolidated results of operations. Maintenance, repairs and minor replacements are charged to earnings when they are incurred. Upon the disposition of an asset, its accumulated depreciation is deducted from the original cost, and any gain or loss is reﬂected in current earnings. Long-Lived Assets Management reviews long-lived assets, including ﬁnite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash ﬂows expected to be generated by the related assets are estimated over the asset’s useful life on an undiscounted basis. For assets held for use, Sysco groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. 52 SYSCO CORPORATION // 2023 Form 10-K Goodwill and Indeﬁnite-Lived Intangibles Goodwill represents the excess of cost over the fair value of net assets acquired. Goodwill and intangibles with indeﬁnite lives are not amortized. Goodwill is assigned to the reporting units that are expected to beneﬁt from the synergies of a business combination. The recoverability of goodwill and indeﬁnite-lived intangibles is assessed annually, or more frequently as needed when events or changes have occurred that would suggest an impairment of carrying value, by determining whether the fair values of the applicable reporting units exceed their carrying values. This annual testing may be performed utilizing either a qualitative or quantitative assessment; however, if a qualitative assessment is performed and it is determined that the fair value of a reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, a quantitative test is performed. For ﬁscal 2023, the company utilized a qualitative assessment for certain reporting units. For the remaining reporting units, Sysco performed a quantitative test using a combination of the income and market approaches. The evaluation of fair value requires a discounted cash ﬂow analysis using projections, estimates and assumptions as to the future performance of the operations in addition to assumptions regarding sales and earnings multiples that would be applied in comparable acquisitions. In the annual ﬁscal 2023 assessment, all reporting units were concluded to have a fair value that exceeded book value by at least 30%, with the exception of one reporting unit whose fair value exceeded book value by approximately 6%. This reporting unit has goodwill of $119.0 million. Derivative Financial Instruments All derivatives are recognized as assets or liabilities within the consolidated balance sheets at fair value at their gross values. Gains or losses on derivative financial instruments designated as fair value hedges are recognized immediately in the consolidated results of operations, along with the oﬀsetting gain or loss related to the underlying hedged item. Gains or losses on derivative ﬁnancial instruments designated as cash ﬂow hedges are recorded as a separate component of shareholders’ equity from inception of the hedges and are reclassiﬁed to the consolidated results of operations in conjunction with the recognition of the underlying hedged item. For net investment hedges, the remeasurement gain or loss is recorded in accumulated other comprehensive income and will be subsequently reclassiﬁed to net earnings when the hedged net investment is either sold or substantially liquidated. Investments in Corporate-Owned Life Insurance Investments in Corporate-Owned Life Insurance (COLI) policies are recorded at their cash surrender values as of each balance sheet date. Changes in the cash surrender value during the period are recorded as a gain or loss within operating expenses. Sysco has the ability and intent to hold certain of its COLI policies to maturity; therefore, the company does not record deferred tax balances related to cash surrender value gains or losses for these policies. The company invests in COLI policies relating to its executive deferred compensation plan and Supplemental Executive Retirement Plan (SERP). The total amounts related to the company’s investments in COLI policies included in other assets in the consolidated balance sheets were $160.4 million and $162.3 million at July 1, 2023 and July 2, 2022, respectively. PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Treasury Stock The company records treasury stock purchases at cost. Shares removed from treasury are valued at cost using the average cost method. Foreign Currency Translation The assets and liabilities of all foreign subsidiaries are translated at current exchange rates. Related translation adjustments are recorded as a component of Accumulated Other Comprehensive Income (loss) (AOCI). Revenue Recognition The company, in accordance with Accounting Standards Codiﬁcation (ASC) Topic 606, recognizes revenues when the performance obligation is satisﬁed. This is the point at which control of the promised goods or services are transferred to our customers. Revenues are recorded in an amount that reﬂects the consideration Sysco expects to be entitled to receive in exchange for those goods or services. For the majority of Sysco’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered, as that is generally when legal title, physical possession and risks and rewards of goods/services transfers to the customer. The timing of satisfaction of the performance obligation is not subject to signiﬁcant judgment. Sales tax collected from customers is not included in revenue, but rather recorded as a liability due to the respective taxing authorities. Shipping and handling costs include costs associated with the selection of products and delivery to customers and are included within operating expenses. Product Sales Revenues Sysco generates revenue primarily from the distribution and sale of food and related products to its customers. Substantially all revenue is recognized at the point in time in which the product is delivered to the customer. The company grants certain customers sales incentives, such as rebates or discounts, which are accounted for as variable consideration. The variable consideration is based on amounts known at the time the performance obligation is satisfied and, therefore, requires minimal judgment. The disclosure of disaggregated revenues is presented in Note 3, “Revenue.” Contract Balances After completion of Sysco’s performance obligations, the company has an unconditional right to consideration as outlined in its contracts with customers. We extend credit terms to some of our customers based on our assessment of each customer’s creditworthiness. Customer receivables are included in accounts receivable, less allowances in the consolidated balance sheet, were $4.7 billion and $4.6 billion as of July 1, 2023 and July 2, 2022, respectively. Sysco has certain customer contracts in which upfront monies are paid to its customers. These payments have become industry practice and are not related to ﬁnancing of the customer’s business. They are not associated with any distinct good or service to be received from the customer and therefore, are treated as a reduction of transaction prices. All upfront payments are capitalized in other assets and amortized over the life of the contract or the expected life of the relationship with the customer on a straight-line basis. As of July 1, 2023, Sysco’s contract assets were not signiﬁcant. Sysco has no signiﬁcant commissions paid that are directly attributable to obtaining a particular contract. SYSCO CORPORATION // 2023 Form 10-K 53 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Vendor Consideration Sysco recognizes consideration received from vendors as a reduction to cost of sales when the services performed in connection with the monies received are completed and when the related product has been sold by Sysco. In many instances, the vendor consideration is in the form of a speciﬁed amount per case or per pound. In these instances, Sysco will recognize the vendor consideration as a reduction of cost of sales when the product is sold. Shipping and Handling Costs Shipping and handling costs include costs associated with the selection of products and delivery to customers. Included in operating expenses are shipping and handling costs of approximately $4.0 billion, $3.9 billion and $3.1 billion in ﬁscal 2023, 2022 and 2021, respectively. Insurance Program Sysco maintains a self-insurance program covering portions of workers’ compensation, general and vehicle liability and property insurance costs. The amounts in excess of the self-insured levels are fully insured by third party insurers. Sysco has a wholly owned captive insurance subsidiary (the Captive) with the primary purpose to enhance Sysco’s risk ﬁnancing strategies by providing Sysco the opportunity to negotiate insurance premiums in the non-retail insurance market. The Captive must maintain a suﬃcient level of cash to fund future reserve payments and secure the insurer’s obligations for workers’ compensation, general liability and auto liability programs. The Captive holds restricted assets in order to meet solvency requirements, including a restricted investment portfolio of marketable ﬁxed income securities, which have been classiﬁed and accounted for as available-for-sale, and cash and restricted cash equivalents held in a cash deposit account. Further, Sysco has letters of credit available to collateralize the remaining liabilities not covered by restricted cash, restricted cash equivalents and marketable securities. The company also maintains a fully self-insured group medical program. Liabilities associated with these risks are estimated in part by considering historical claims experience, medical cost trends, demographic factors, severity factors and other actuarial assumptions. Share-Based Compensation Sysco recognizes expense for its share-based compensation based on the fair value of the awards that are granted. The fair value of performance share unit awards is determined based on the target number of shares of common stock and the company’s stock price on the date of grant and subsequently adjusted based on actual and forecasted performance compared to planned targets. The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model. Option pricing methods require the input of subjective assumptions, including the expected stock price volatility. The fair value of restricted stock and restricted stock unit awards are based on the company’s stock price on the date of grant. Measured compensation cost is recognized ratably over the vesting period of the related share-based compensation award. During the vesting period, Sysco reduces share-based compensation expense for estimated forfeitures based on an analysis of historical trends reviewed annually. Sysco’s estimate of forfeitures is applied at the grant level. The estimate of forfeitures is adjusted to the amount to actual forfeitures at the end of each vesting period. 54 SYSCO CORPORATION // 2023 Form 10-K Income Taxes Sysco recognizes deferred tax assets and liabilities based on the estimated future tax consequences attributable to diﬀerences between the ﬁnancial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured pursuant to tax laws using rates expected to apply to taxable income in the years in which those temporary diﬀerences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. The additional United States (U.S.) federal tax burden as a result of the global intangible low taxed income regime is accounted for as a periodic cost. 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 primarily reﬂects a combination of income earned and taxed in the various U.S. federal and state, as well as various foreign jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all aﬀect the overall eﬀective tax rate. Acquisitions Acquisitions of businesses are accounted for using the acquisition method of accounting. The ﬁnancial statements include the results of the acquired operations from the respective dates of acquisition. The purchase price of the acquired entities is preliminarily allocated to the net assets acquired and liabilities assumed based on the estimated fair value at the dates of acquisition. Any excess of cost over the fair value of net assets acquired, including intangibles, is recognized as goodwill. During the measurement period, up to twelve months from the date of acquisition, subsequent changes may be made to adjust the preliminary amounts recognized at the acquisition date to their subsequently determined acquisition-date fair values. Basis of Presentation The ﬁnancial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income, changes in consolidated shareholders’ equity and consolidated cash ﬂows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, except as otherwise disclosed, necessary to present fairly the ﬁnancial position, results of operations, comprehensive income and cash ﬂows for all periods presented have been made. Sysco has interests in various jointly owned foodservice operations in Mexico and Panama for which it consolidates the results of the operations. The ﬁnancial position, results of operations and cash ﬂows for these companies have been included in Sysco’s consolidated ﬁnancial statements. The value of the noncontrolling interest in each entity is considered redeemable due to certain features of the investment agreement and has been presented as mezzanine equity, which is outside of permanent equity, in the consolidated balance sheets. The income attributable to the noncontrolling interest is located within Other expense (income), net, in the consolidated results of operations because this amount is not material. The non-cash add back for the change in the value of the noncontrolling interest is located within Other non-cash items on the consolidated cash ﬂows. PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Supplemental Cash Flow Information Within the Consolidated Statement of Cash Flows, certain items have been grouped as other ﬁnancing activities. These primarily include cash paid for shares withheld to cover taxes from share-based compensation and debt issuance costs. The following table sets forth the company’s reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statement of Cash Flows that sum to the total of the same such amounts shown in the consolidated balance sheets: (In thousands) Cash and cash equivalents Restricted cash(1) TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH SHOWN IN THE CONSOLIDATED STATEMENT OF CASH FLOWS Jul. 1, 2023 $ 745,201 220,831 Jul. 2, 2022 867,086 $ 64,290 Jul. 3, 2021 $ 3,007,123 29,977 $ 966,032 $ 931,376 $3,037,100 (1) Restricted cash primarily represents cash and cash equivalents of the Captive which is 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. The following table sets forth the company's non-cash investing and financing activities: (In thousands) Non-cash investing and ﬁnancing activities: Plant and equipment acquired through ﬁnancing programs Assets obtained in exchange for ﬁnance lease obligations Jul. 1, 2023 Jul. 2, 2022 Jul. 3, 2021 $ 197,096 114,098 $ — $ 191,523 — 8,687 2. New Accounting Standards Government Assistance In November 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-10, “Government Assistance (Topic 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 the new standard, business entities will need to provide information about the nature of the transaction, including signiﬁcant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction. The new guidance is eﬀective for all entities for annual reporting periods beginning after December 15, 2021; however, early adoption is permitted. The guidance may be applied either prospectively to all in-scope transactions that are reﬂected in the ﬁnancial statements at the date of initial application and to new transactions that are entered into after the date of initial application, or retrospectively. Sysco completed its assessment of the disclosures required under ASC 832 and adopted the standard in ﬁscal 2023 on a prospective basis. The implementation of the accounting standard did not have a material impact on the company’s ﬁnancial statements and related disclosures. Liabilities – Supplier Financing Programs In September 2022, the FASB issued Accounting Standards Update (ASU) 2022-04, Liabilities—Supplier Finance Programs, Subtopic 405-50, that requires entities to disclose in the annual ﬁnancial statements the key terms of supplier finance programs they use in connection with the purchase of goods and services, along with information about their obligations under these programs, including a roll forward of those obligations. Additionally, the guidance requires disclosure of the outstanding amount of the obligations as of the end of each interim period. The guidance does not aﬀect the recognition, measurement, or ﬁnancial statement presentation of supplier ﬁnance program obligations. The guidance is eﬀective for ﬁscal years and interim periods within those ﬁscal years beginning after December 15, 2022, which is the ﬁrst quarter of ﬁscal 2024 for Sysco, except for the roll forward requirement, which is eﬀective annually for ﬁscal years beginning after December 15, 2023, which is ﬁscal year 2025 for Sysco. Early adoption is permitted. The guidance requires retrospective application to all periods in which a balance sheet is presented, except for the roll forward requirement, which will be applied prospectively. The company is currently reviewing the provisions of the new standard. SYSCO CORPORATION // 2023 Form 10-K 55 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data 3. Revenue Disaggregation of Sales The following tables present our sales disaggregated by reportable segment and sales mix for the company’s principal product categories for the periods presented: (In thousands) Principal Product Categories Canned and dry products Fresh and frozen meats Frozen fruits, vegetables, bakery and other Dairy products Poultry Fresh produce Paper and disposables Seafood Beverage products Other(1) TOTAL SALES Year Ended Jul. 1, 2023 US Foodservice Operations International Foodservice Operations SYGMA Other Total $ 10,441,202 9,772,806 7,661,858 6,022,085 5,500,970 5,366,527 3,999,166 2,380,099 1,307,956 1,230,225 $53,682,894 $ $ 2,948,620 $ 1,857,117 2,395,698 1,536,936 1,153,687 1,042,450 551,117 464,787 584,685 1,024,513 1,884 — 149 — — — 59,374 — 91,875 1,085,778 $13,559,610 $ 7,843,111 $1,239,060 960,196 1,860,205 1,306,747 650,432 1,097,016 272,279 832,750 178,085 573,486 111,915 $ 14,351,902 13,490,128 11,364,452 8,209,453 7,751,673 6,681,256 5,442,407 3,022,971 2,558,002 3,452,431 $76,324,675 (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. (In thousands) Principal Product Categories Fresh and frozen meats Canned and dry products Frozen fruits, vegetables, bakery and other Poultry Dairy products Fresh produce Paper and disposables Seafood Beverage products Other(1) TOTAL SALES Year Ended Jul. 2, 2022 US Foodservice Operations International Foodservice Operations SYGMA Other Total $ 9,640,877 8,810,968 6,355,698 5,718,662 4,919,936 4,538,732 3,730,642 2,599,281 1,073,033 1,132,733 $48,520,562 $ 1,661,884 $ 1,966,644 733,832 1,154,571 976,863 582,749 260,580 777,890 156,430 528,883 107,382 $11,787,449 $ 7,245,824 2,406,899 2,138,534 994,648 1,257,021 911,617 492,700 458,939 473,923 991,284 $ 9 10,577 — — — — 83,989 — 82,957 904,779 $1,082,311 $ 13,269,414 11,962,276 9,648,803 7,690,173 6,759,706 5,710,929 5,085,221 3,214,650 2,158,796 3,136,178 $68,636,146 (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. (In thousands) Principal Product Categories Fresh and frozen meats Canned and dry products Frozen fruits, vegetables, bakery and other Poultry Dairy products Paper and disposables Fresh produce Seafood Beverage products Other(1) TOTAL SALES Year Ended Jul. 3, 2021 US Foodservice Operations International Foodservice Operations SYGMA Other Total $ 7,002,257 6,354,670 4,771,288 3,901,642 3,561,080 3,072,552 3,077,074 2,140,684 795,192 1,048,404 $35,724,843 $ $ 1,147,809 $ 1,782,229 166,870 1,126,020 919,578 600,903 772,330 284,092 129,406 609,687 107,486 — $ 9,932,295 8,147,229 116 7,515,335 — 5,549,804 — 5,057,313 — 4,285,789 49,291 3,998,542 — 2,581,800 — 1,766,808 51,395 2,462,928 622,959 $51,297,843 $ 8,350,638 $ 6,498,601 $ 723,761 1,625,573 1,618,027 728,584 895,330 391,616 637,376 311,710 310,534 684,079 (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. 56 SYSCO CORPORATION // 2023 Form 10-K PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include cash deposits, time deposits, certiﬁcates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less. The following is a description of the valuation methodologies used for assets and liabilities measured at fair value: (cid:122) Cash deposits included in cash equivalents are valued at amortized cost which approximates fair value. These are included within cash equivalents as a Level 1 measurement in the tables below. (cid:122) Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 2 measurement in the tables below. (cid:122) 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. (cid:122) 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. (cid:122) Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. (cid:122) Cross-currency swaps are valued using a swap valuation model that utilizes an income approach applying observable markets inputs, including LIBOR swap rates for United States dollars and Mexican pesos. (cid:122) Fuel swap contracts are valued based on observable market transactions of forward commodity prices. The fair value of the company’s marketable securities are all measured using inputs that are considered a Level 2 measurement, as they rely on quoted prices in markets that are not actively traded 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 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 10, “Derivative Financial Instruments.” 4. Acquisitions During ﬁscal 2023, the company paid cash of $37.4 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 July 1, 2023, aggregate contingent consideration outstanding was $57.6 million, of which $55.1 million was recorded as earnout liabilities. All earnout liabilities are measured using unobservable inputs (primarily forecasted future revenue streams for the acquisition) that are considered a Level 3 fair value measurement. Greco and Sons 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. Greco imports and distributes a full line of food and non-food products and manufactures specialty meat products. The acquisition also included Bellissimo Foods Company which distributes a broad selection of Italian and Mediterranean ingredients, including a proprietary branded line of products that are sold exclusively through the Bellissimo Foods Company distribution network, serving independent pizza and Italian restaurants. The purpose of the acquisition was to strengthen Sysco’s business within the Italian foodservice sector. During the first quarter of fiscal 2023, the company completed the determination of fair value of the assets acquired and liabilities assumed for the Greco acquisition. The company recorded certain measurement period adjustments during each quarter of ﬁscal 2022 and the ﬁrst quarter of ﬁscal 2023, none of which were individually or in aggregate material to the company’s ﬁnancial statements. Fair Value Measurements 5. 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: (cid:122) Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets; (cid:122) 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 (cid:122) 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 CORPORATION // 2023 Form 10-K 57 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data The following tables present the company’s assets measured at fair value on a recurring basis as of July 1, 2023 and July 2, 2022: (In thousands) Assets: Cash equivalents Cash and cash equivalents Other assets(1) TOTAL ASSETS AT FAIR VALUE (1) Represents restricted cash balance recorded within other assets in the consolidated balance sheet. (In thousands) Assets: Cash equivalents Cash and cash equivalents Other assets(1) TOTAL ASSETS AT FAIR VALUE Assets and Liabilities Measured at Fair Value as of Jul. 1, 2023 Level 1 Level 2 Level 3 Total $ 308,952 $ 10,021 — $529,783 $ 10,021 220,831 $ — $ 318,973 220,831 $ — $539,804 — Assets and Liabilities Measured at Fair Value as of Jul. 2, 2022 Level 1 Level 2 Level 3 Total $ 625,281 $ 10,007 — $689,571 $ 10,007 64,290 $ — $ 635,288 64,290 $ — $699,578 — (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 $9.8 billion and $10.5 billion as of July 1, 2023 and July 2, 2022, respectively. The carrying value of total debt was $10.4 billion and $10.6 billion as of July 1, 2023 and July 2, 2022, respectively. 6. Marketable Securities Sysco invests a portion of the assets held by our 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. Sysco estimates 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 losses on marketable securities are recorded in Accumulated other comprehensive loss. The following table presents the company’s available-for-sale marketable securities as of July 1, 2023 and July 2, 2022: (In thousands) Fixed income securities: Corporate bonds Government bonds TOTAL MARKETABLE SECURITIES (In thousands) Fixed income securities: Corporate bonds Government bonds TOTAL MARKETABLE SECURITIES 58 SYSCO CORPORATION // 2023 Form 10-K Amortized Cost Basis Gross Unrealized Gains $ 99,501 29,777 $ 129,278 $ $ 96 — 96 Amortized Cost Basis Gross Unrealized Gains $ 96,167 30,070 $ 126,237 $ $ 8 — 8 Jul. 1, 2023 Gross Unrealized Losses Fair Value Short-Term Marketable Securities Long-Term Marketable Securities $ (6,777) $ (1,913) 92,820 27,864 $ (8,690) $ 120,684 $ 12,767 — $ 12,767 $ 80,053 27,864 $ 107,917 Jul. 2, 2022 Gross Unrealized Losses Fair Value Short-Term Marketable Securities Long-Term Marketable Securities $ (5,995) $ (302) 90,180 29,768 $ (6,297) $ 119,948 $ 5,983 — $ 5,983 $ 84,197 29,768 $ 113,965 As of July 1, 2023, the balance of available-for-sale securities by contractual maturity is shown in the following table on a ﬁscal year basis. 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. PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands) Due in one year or less Due after one year through ﬁve years Due after ﬁve years through ten years TOTAL Jul. 1, 2023 $ 12,767 63,457 44,460 $120,684 There were no signiﬁcant realized gains or losses in marketable securities during ﬁscal 2023, 2022, and 2021. 7. Allowance for Credit Losses on Trade Receivables Sysco determines the past due status of trade receivables based on contractual terms with each customer and evaluates the collectability of accounts receivable to determine an appropriate allowance for credit losses on trade receivables. To calculate an allowance for credit losses, 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. A summary of the activity in the allowance for credit losses on trade receivables appears below: (In thousands) Balance at beginning of period Adjustments to costs and expenses Customer accounts written oﬀ, net of recoveries Other adjustments BALANCE AT END OF PERIOD $ 2023 70,790 35,655 (61,964) 1,118 $ 45,599 2022 $ 117,695 (15,494) (23,823) (7,588) $ 70,790 2021 $ 334,810 (152,740) (45,230) (19,145) $ 117,695 In ﬁscal 2020, the company experienced an increase in past due trade receivables and recognized additional bad debt charges because of closures among customers stemming from the onset of the COVID-19 pandemic. In ﬁscal 2021 and 2022, conditions improved and the company’s results reﬂect a beneﬁt on the reduction of its allowance for these receivable balances, as the company made progress on obtaining payments from its customers. Plant and Equipment 8. A summary of plant and equipment, including the related accumulated depreciation, appears below: (In thousands) Plant and equipment at cost: Land Buildings and improvements Fleet and equipment Computer hardware and software Total plant and equipment at cost Accumulated depreciation TOTAL PLANT AND EQUIPMENT, NET Jul. 1, 2023 Jul. 2, 2022 Estimated Useful Lives $ 493,051 5,768,715 4,215,364 1,587,229 12,064,359 (7,149,310) $ 489,556 5,335,446 3,886,923 1,499,514 11,211,439 (6,755,019) $ 4,915,049 $ 4,456,420 10-30 years 3-10 years 3-5 years Depreciation expense, including amortization of capital leases, was $649.8 million in 2023, $640.7 million in 2022 and $635.0 million in 2021. SYSCO CORPORATION // 2023 Form 10-K 59 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data 9. Goodwill and Other Intangibles The changes in the carrying amount of goodwill by reportable segment for the years presented are as follows: (In thousands) Carrying amount as of July 3, 2021 Goodwill acquired during year Currency translation/other CARRYING AMOUNT AS OF JULY 2, 2022 Goodwill acquired during year Currency translation/other CARRYING AMOUNT AS OF JULY 1, 2023 U.S. Foodservice Operations $ 1,353,604 851,899 6,012 $ 2,211,515 38,827 (2,941) International Foodservice Operations $ 2,369,773 9,227 (268,797) $ 2,110,203 — 67,587 Other Total SYGMA $ 32,607 — — $ 188,155 — (165) $ 32,607 $187,990 — (34) — — $ 3,944,139 861,126 (262,950) $ 4,542,315 38,827 64,612 $ 2,247,401 $ 2,177,790 $ 32,607 $187,956 $ 4,645,754 Amortizable intangible assets acquired during ﬁscal 2023 were $15.2 million, with a weighted-average amortization period of 6.2 years. Amortizable intangible assets acquired during ﬁscal 2023 by category were customer relationships and non-compete arrangements of $10.1 million and $5.1 million, respectively, with a weighted-average amortization period of 7.0 years and 4.6 years, respectively. Fully amortized intangible assets have been removed in the period fully amortized in the table below which presents the company’s amortizable intangible assets in total by category as follows: (In thousands) Customer relationships Non-compete agreements Trademarks TOTAL AMORTIZABLE INTANGIBLE ASSETS Jul. 1, 2023 Jul. 2, 2022 Gross Carrying Amount $ 1,284,045 26,010 146,986 $1,457,041 Accumulated Amortization Net Gross Carrying Amount $ (684,815) (14,966) (26,037) $ 599,230 11,044 120,949 $ 1,280,809 22,147 148,151 Accumulated Amortization Net $ (594,691) $ 686,118 11,204 130,976 (10,943) (17,175) $ (725,818) $ 731,223 $ 1,451,107 $ (622,809) $ 828,298 The table below presents the company’s indeﬁnite-lived intangible assets by category as follows: (In thousands) Trademarks Licenses TOTAL INDEFINITELIVED INTANGIBLE ASSETS Jul. 1, 2023 Jul. 2, 2022 $ 127,341 966 $ 123,419 966 $128,307 $124,385 Amortization expense for 2023, 2022 and 2021 was $126.3 million, $132.9 million and $103.5 million, respectively. The estimated future amortization expense for the next ﬁve ﬁscal years on intangible assets outstanding as of July 1, 2023 is shown below: (In thousands) 2024 2025 2026 2027 2028 Amount $ 126,173 117,551 74,241 66,383 63,116 10. Derivative Financial Instruments Sysco uses derivative ﬁnancial instruments to enact hedging strategies for risk mitigation purposes; however, the company does not use derivative financial instruments for trading or speculative purposes. Hedging strategies are used to manage interest rate risk, foreign currency risk and fuel price risk. Hedging of interest rate risk Sysco manages its debt portfolio with interest rate swaps from time to time to achieve an overall desired position of ﬁxed and ﬂoating rates. Hedging of foreign currency risk 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. 60 SYSCO CORPORATION // 2023 Form 10-K PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Additionally, Sysco has a cross-currency swap designated as a fair value hedge for the purpose of hedging foreign currency risk associated with changes in spot rates on foreign denominated debt instruments. Sysco has elected to exclude the change in fair value of the forward points from the assessment of hedge eﬀectiveness. Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components. Unrealized gains or losses on components excluded from hedge eﬀectiveness are recorded as a component of accumulated other comprehensive income and recognized into earnings over the life of the hedged instrument. Except for the excluded components, changes in the fair value of the derivative instrument designated as a fair value hedge are oﬀset against changes in fair value of the hedged assets or liabilities through earnings. The company had used euro-bond denominated debt to hedge the foreign currency exposure of our net investment in certain foreign operations; however, this debt instrument matured in June 2023. 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 July 1, 2023 are presented below: Maturity Date of the Hedging Instrument Currency / Unit of Measure Hedging of foreign currency risk Various (July 2023 to August 2023) Various (July 2023 to October 2023) May 2024 Hedging of fuel risk Swedish Krona British Pound Sterling Mexican Peso Various (July 2023 to September 2025) Gallons Notional Value (In millions) 140 15 439 71 The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of July 1, 2023 and July 2, 2022 are as follows: (In thousands) Fair Value Hedges: Cross currency swap Interest rate swaps Cash Flow Hedges: Fuel swaps Foreign currency forwards Fuel swaps Fuel swaps Foreign currency forwards Fuel swaps Balance Sheet location Other current liabilities Other current liabilities Other current assets Other current assets Other assets Other current liabilities Other current liabilities Other long-term liabilities Derivative Fair Value Jul. 1, 2023 Jul. 2, 2022 $ 1,262 — $ — 2,820 $ 102 624 40 17,932 404 5,637 $ 47,170 633 — — — 209 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: (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 Gain or (loss) on fair value hedging relationships: Interest rate swaps: Hedged items Derivatives designated as hedging instruments Cross currency swap: Hedged items Derivatives designated as hedging instruments Jul. 1, 2023 Jul. 2, 2022 $ 753,194 $ 623,643 $ (10,410) (4,489) $ 1,063 (1,063) $ $ 30,268 (56,543)   SYSCO CORPORATION // 2023 Form 10-K 61 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data The (gains) losses on the fair value hedging relationships associated with the hedged items as disclosed in the table above are comprised of the following components for each of the periods presented: (In thousands) Interest expense Increase (decrease) in fair value of debt HEDGED ITEMS Jul. 1, 2023 (7,590) $ 1,757 $ (9,347) $ Jul. 2, 2022 (15,769) $ (46,037) 30,268 The location and eﬀect of cash ﬂow and net investment hedge accounting on the consolidated statements of comprehensive income for the ﬁscal years ended July 1, 2023 and July 2, 2022, presented on a pretax basis, are as follows: (In thousands) Derivatives in cash ﬂow hedging relationships: Fuel swaps Foreign currency contracts TOTAL Derivatives in net investment hedging relationships: Foreign denominated debt Derivatives in fair value hedging relationships: Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives 2023 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 $ (70,842) (428) $ (71,270) $ (27,902) Operating expense Cost of sales / Other income N/A $ $ $ $ 29,028 — 29,028 — — Change in excluded component of fair value hedge $ (199) Other expense (income) (In thousands) Derivatives in cash ﬂow hedging relationships: Fuel swaps Foreign currency contracts TOTAL Derivatives in net investment hedging relationships: Foreign denominated debt 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 $ 30,514 621 $ 31,135 $ 71,906 Operating expense Cost of sales / Other income N/A $ $ $ 51,941 — 51,941 — The carrying amount of hedged liabilities in the consolidated balance sheet as of July 1, 2023 is zero. The location and carrying amount of hedged liabilities in the consolidated balance sheet as of July 2, 2022 are as follows: (In thousands) Balance sheet location: Current maturities of long-term debt Jul. 2, 2022 Carrying Amount of Hedged Assets (Liabilities) Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities) $ (568,601) $ 2,820 62 SYSCO CORPORATION // 2023 Form 10-K 11. Self-Insured Liabilities Sysco maintains a self-insurance program covering portions of workers’ compensation, general and vehicle liability and property insurance costs. The amounts in excess of the self-insured levels are fully insured by third party insurers. The company also maintains a fully self-insured group medical program. A summary of the activity in self-insured liabilities appears below: PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands) Balance at beginning of period Charged to costs and expenses Payments BALANCE AT END OF PERIOD 2023 $ 397,375 707,362 (619,331) $ 485,406 2022 $ 359,120 552,019 (513,764) $ 397,375 2021 $ 329,648 494,328 (464,856) $ 359,120 The long-term portion of the self-insured liability balance was $314.5 million and $253.8 million as of July 1, 2023, and July 2, 2022, respectively. 12. Debt And Other Financing Arrangements $ $ (In thousands) Senior notes, interest at 1.25%, maturing in ﬁscal 2023(1)(2) Senior notes, interest at 3.65%, maturing in ﬁscal 2025(1) Senior notes, interest at 3.75%, maturing in ﬁscal 2026(1)(2) Senior notes, interest at 3.30%, maturing in ﬁscal 2027(1)(2) Debentures, interest at 7.16%, maturing in ﬁscal 2027(2)(3) Senior notes, interest at 3.25%, maturing in ﬁscal 2028(1)(2) Debentures, interest at 6.50%, maturing in fiscal 2029(2) Senior notes, interest at 2.40%, maturing in ﬁscal 2030(1)(2) Senior notes, interest at 5.95%, maturing in ﬁscal 2030(1)(2) Senior notes, interest at 2.45%, maturing in ﬁscal 2032(1)(2) Senior notes, interest at 5.375%, maturing in ﬁscal 2036(1)(2) Senior notes, interest at 6.625%, maturing in ﬁscal 2039(1)(2) Senior notes, interest at 6.60%, maturing in ﬁscal 2040(1)(2) Senior notes, interest at 4.85%, maturing in ﬁscal 2046(1)(2) Senior notes, interest at 4.50%, maturing in ﬁscal 2046(1)(2) Senior notes, interest at 4.45%, maturing in ﬁscal 2048(1)(2) Senior notes, interest at 3.30%, maturing in ﬁscal 2050(1)(2) Senior notes, interest at 6.60%, maturing in ﬁscal 2050(1)(2) Senior notes, interest at 3.15%, maturing in ﬁscal 2052(1)(2) Plant and equipment ﬁnancing programs, ﬁnance leases, notes payable, and other debt, interest averaging 4.49% and maturing at various dates to ﬁscal 2052 as of July 1, 2023, and 3.52% and maturing at various dates to ﬁscal 247,860 2052 as of July 2, 2022 10,647,542 Total debt (580,611) Less current maturities of long-term debt $ 10,066,931 NET LONGTERM DEBT (1) Represents senior notes that are unsecured, are not subject to any sinking fund requirement and include a redemption provision that allows Sysco to retire the debentures and notes at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture and note holders are not penalized by the early redemption. Jul. 2, 2022 517,790 385,768 748,595 995,864 43,174 745,617 154,957 496,184 992,617 445,316 382,446 199,280 349,757 496,334 494,602 492,966 494,681 1,176,653 787,081 Jul. 1, 2023 — 377,107 749,025 996,840 43,174 746,431 155,032 496,650 993,434 445,769 382,572 199,472 349,957 496,491 494,740 493,126 494,811 1,176,902 787,367 531,647 10,410,547 (62,550) $ 10,347,997 (2) Represents senior notes, debentures and borrowings under the company’s long-term revolving credit facility that are guaranteed by certain wholly owned U.S. Broadline subsidiaries of Sysco Corporation as discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” (3) This debenture is not subject to any sinking fund requirement and is no longer redeemable prior to maturity. SYSCO CORPORATION // 2023 Form 10-K 63 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data As of July 1, 2023, the principal and interest payments required to be made during the next ﬁve ﬁscal years on Sysco’s senior notes and debentures are shown below: (In thousands) 2024 2025 2026 2027 2028 (1) Interest(1) $ 441,841 441,841 414,011 383,449 351,670 Includes payments on floating rate debt based on rates as of July 1, 2023, assuming amount remains unchanged until maturity, and payments on fixed rate debt based on maturity dates. Principal — 377,815 750,000 1,043,176 750,000 $ Sysco has a long-term revolving credit facility that includes aggregate commitments of the lenders thereunder of $3.0 billion, with an option to increase such commitments to $4.0 billion. The facility includes a covenant requiring Sysco to maintain a ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0 over four consecutive ﬁscal quarters. The facility expires on April 29, 2027. As of July 1, 2023, there were no borrowings outstanding under this facility. recognizes a ﬁnance or operating lease liability and right-of-use (ROU) asset in the consolidated balance sheets if a lease exists. Lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. If the borrowing rate implicit in the lease is not readily determinable, Sysco uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Sysco has a U.S commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $3.0 billion. Any outstanding amounts are classiﬁed within long-term debt, as the program is supported by the long-term revolving credit facility. As of July 1, 2023, there were no commercial paper issuances outstanding under this program. In June 2023, Sysco repaid 1.25% senior notes totaling $549.3 million at maturity using cash ﬂow from operations. As of July 1, 2023 and July 2, 2022, letters of credit outstanding were $268.4 million and $202.9 million, respectively. 13. Leases Sysco leases certain of its distribution and warehouse facilities, oﬃce facilities, fleet vehicles, and office and warehouse equipment. The company determines if an arrangement is a lease at inception and The lease term is deﬁned as the noncancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the company will exercise one of these options. Leases with an initial term of twelve months or less are not recorded in Sysco’s consolidated balance sheets, and the company recognizes expense for these leases on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or a rate, such as insurance and property taxes, are excluded from the measurement of the lease liability and are recognized as variable lease cost when the obligation for that payment is incurred. For leases in which the lease and non-lease components have been combined, the variable lease expense includes expenses such as common area maintenance, utilities, and repairs and maintenance. Sysco’s leases do not contain signiﬁcant residual value guarantees and do not impose signiﬁcant restrictions or covenants. The following table presents the location of the ﬁnance lease ROU assets and lease liabilities in the company’s consolidated balance Sheets at July 1, 2023 and July 2, 2022: (In thousands) Finance lease right-of-use assets Current ﬁnance lease liabilities Long-term ﬁnance lease liabilities Consolidated Balance Sheet Location Plant and equipment at cost, less accumulated depreciation Current maturities of long-term debt Long-term debt Jul. 1, 2023 285,192 $ 37,929 259,887 Jul. 2, 2022 $ 222,372 39,121 187,225 The following table presents lease costs for each of the presented periods ended July 1, 2023 and July 2, 2022: (In thousands) Operating lease cost Financing lease cost: Amortization of right-of-use assets Interest on lease obligations Variable lease cost Short-term lease cost NET LEASE COST Consolidated Results of Operations Location Operating expenses Operating expenses Interest expense Operating expenses Operating expenses Jul. 1, 2023 $ 139,428 Jul. 2, 2022 $ 126,743 49,890 10,914 73,524 54,618 $ 328,374 41,606 6,506 44,734 31,659 $ 251,248 64 SYSCO CORPORATION // 2023 Form 10-K Future minimum lease obligations under existing noncancelable operating and ﬁnance lease agreements by ﬁscal year as of July 1, 2023 are as follows: PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands) 2024 2025 2026 2027 2028 Thereafter Total undiscounted lease obligations Less imputed interest PRESENT VALUE OF LEASE OBLIGATIONS Operating Leases $ 124,221 115,526 104,559 101,040 77,816 403,012 926,174 (170,854) $ 755,320 $ Finance Leases 48,814 42,181 34,574 28,377 20,072 233,973 407,991 (110,175) $ 297,816 The Company has entered into operating lease agreements that have not yet commenced as of July 1, 2023 with legally binding minimum lease payments of $288.5 million. The leases are expected to commence during the next two ﬁscal years. Other information related to lease agreements was as follows: (Dollars in thousands) Cash Paid For Amounts Included In Measurement of Liabilities: Operating cash ﬂows for operating leases Operating cash ﬂows for ﬁnancing leases Financing cash ﬂows for ﬁnancing leases Supplemental Non-cash Information on Lease Liabilities: Assets obtained in exchange for operating lease obligations Assets obtained in exchange for ﬁnance lease obligations Operating lease asset adjustments, including renewals and remeasurements Operating lease liability adjustments, including renewals and remeasurements Lease Term and Discount Rate: Weighted-average remaining lease term (years): Operating leases Financing leases Weighted-average discount rate: Operating leases Financing leases Jul. 1, 2023 Jul. 2, 2022 $ $ $ $ 133,754 10,914 44,422 105,289 114,098 13,271 17,173 125,741 6,506 40,238 156,505 191,523 22,087 13,045 10.36 years 14.94 years 11.04 years 14.65 years 3.31% 4.06% 2.85% 3.17% Company-Sponsored Employee Benefit Plans 14. Sysco has company-sponsored deﬁned beneﬁt and deﬁned contribution retirement plans for its employees. Also, the company provides certain health care beneﬁts to eligible retirees and their dependents. Deﬁned Contribution Plans The company operates a defined contribution 401(k) Plan as a Safe Harbor Plan, which is a plan that treats all employees’ benefits equally within the plan, under Sections 401(k) and 401(m) of the Internal Revenue Code with respect to non-union employees and those union employees whose unions adopted the Safe Harbor Plan provisions. The company will make a non-elective contribution each pay period equal to 3% of a participant’s compensation. Additionally, the company will make matching contributions of 50% of a participant’s pretax contribution on the ﬁrst 6% of the participant’s compensation contributed by the participant. Certain employees are also eligible for a transition contribution, and the company may also make discretionary contributions. For union employees who are members of unions that did not adopt the Safe Harbor Plan provisions, the plan provides that under certain circumstances the company may make matching contributions of up to 50% of the ﬁrst 6% of a participant’s compensation. The company also has a non-qualiﬁed, unfunded Management Savings Plan (MSP) available to key management personnel who are participants in the Management Incentive Plan (MIP). Participants may defer up to 50% of their annual salary and up to 90% of their annual bonus. The company will make a non-elective contribution each pay period equal to 3% of a participant’s compensation. Additionally, the company will make matching contributions of 50% of a participant’s pretax contribution on the ﬁrst 6% of the participant’s eligible compensation that is deferred. Certain employees are also eligible for a transition contribution, and the company may also make discretionary contributions. All company contributions to the MSP are limited by the amounts contributed by the company to the participant’s 401(k) account. The company had deferred compensation obligations of $105.6 million as of July 1, 2023 and $101.3 million as of July 2, 2022 under the unfunded MSP and the company’s executive deferred compensation plan, which is frozen to all participants of the plan. More than half of the July 1, 2023 obligations are due to be paid beyond ﬁscal 2026. Sysco’s expense related to its deﬁned contribution plans was $176.3 million in ﬁscal 2023, $145.5 million in ﬁscal 2022, and $145.8 million in ﬁscal 2021. SYSCO CORPORATION // 2023 Form 10-K 65 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Deﬁned Beneﬁt Plans Sysco maintains various qualified pension plans that pay benefits to participating employees at retirement, using formulas based on a participant’s years of service and compensation. The U.S. pension plan (U.S. Retirement Plan) is frozen for all U.S.-based salaried and non-union hourly employees, as these employees are eligible for benefits under the company’s deﬁned contribution 401(k) plan. Various deﬁned beneﬁt pension plans cover certain employees, primarily in the U.K., France and Sweden; however, the U.K. pension plan (U.K. Retirement Plan) is frozen to new plan participants and future accrual of beneﬁts. The funding policy for each plan complies with the requirements of relevant governmental laws and regulations. In addition to receiving beneﬁts upon retirement under the company’s U.S. Retirement Plan, certain key management personnel, who were participants in the MIP, are entitled to receive beneﬁts under the Supplemental Executive Retirement Plan (SERP). This plan is a nonqualiﬁed, unfunded supplementary retirement plan and was amended to freeze benefits and stop future accruals eﬀective June 29, 2013, to all participants. The company also provides certain health care beneﬁts to eligible retirees and their dependents. These health care beneﬁts represent Sysco’s unfunded other post-retirement medical plans. The plan had beneﬁt obligations of $7.3 million as of July 1, 2023 and $8.1 million as of July 2, 2022. On October 25, 2022, the U.S. Retirement Plan executed an agreement with Massachusetts Mutual Life Insurance Company (the Insurer). Under this agreement, the Plan purchased a nonparticipating single premium group annuity contract using Plan assets that transferred to the Insurer $695.0 million of the Plan’s deﬁned beneﬁt pension obligations related to certain pension beneﬁts. The contract covers approximately 10,000 Sysco participants and beneficiaries (the Transferred Participants) in the U.S. Retirement Plan. Under the group annuity contract, the Insurer made an unconditional and irrevocable commitment to pay the pension beneﬁts of each Transferred Participant that were due on or after January 1, 2023. The transaction resulted in no changes to the amount of beneﬁts payable to the Transferred Participants. As a result of the transaction, Sysco recognized a one-time, non-cash pre-tax pension settlement charge of $315.4 million in the second quarter of ﬁscal 2023 primarily related to the accelerated recognition of actuarial losses included within accumulated other comprehensive loss in the statement of changes in consolidated shareholders’ equity. The transaction also required the company to remeasure the beneﬁt obligations and plan assets of the U.S. Retirement Plan. The remeasurement reﬂected the use of an updated discount rate and an expected rate of return on plan assets as of October 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date. The remeasurement of the benefit obligations and plan assets of the U.S. Retirement Plan that took place on October 31, 2022 reflected an updated discount rate and an updated expected rate of return on plan assets. The discount rate used to determine beneﬁt obligations as of the remeasurement date was 6.07%, as compared to the discount rate of 4.91% that was used to determine beneﬁt obligations as of July 2, 2022. The expected rate of return used to determine net company-sponsored beneﬁt costs for the remainder of ﬁscal 2023 was updated to 6.00% as of the remeasurement date, as compared to the expected rate of return of 4.50% that was calculated as of July 2, 2022 to determine net company-sponsored beneﬁt costs for ﬁscal 2023. 66 SYSCO CORPORATION // 2023 Form 10-K PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Funded Status Accumulated pension assets measured against the obligation for pension beneﬁts represents the funded status of a given plan. The funded status of Sysco’s company-sponsored deﬁned beneﬁt plans is presented in the table below. The caption “U.S. Pension Beneﬁts” in the tables below includes both the U.S. Retirement Plan and the SERP. As Sysco’s ﬁscal 2023 year end is July 1, 2023, the company utilized a practical expedient permitting Sysco to measure its deﬁned beneﬁt plan assets and obligations as of the month end closest to the ﬁscal year end, and has used June 30, 2023 as the measurement date of the plan assets and obligations disclosed herein. (In thousands) U.S. Pension Benefits(1) Jul. 1, 2023 Jul. 2, 2022 International Pension Benefits Jul. 2, 2022 Jul. 1, 2023 Change in beneﬁt obligation: Beneﬁt obligation at beginning of year Service cost Interest cost Amendments Curtailments Actuarial gain, net Beneﬁt payments Settlements Beneﬁt obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Employer contribution Beneﬁt payments Settlements Fair value of plan assets at end of year FUNDED STATUS AT END OF YEAR (1) The U.S. Retirement Plan had a funded status of $10.1 million and $94.9 million as of July 1, 2023 and July 2, 2022, respectively. $ 3,920,672 8,109 170,149 2,884 — (300,256) (127,182) (694,998) 2,979,378 3,633,167 (198,874) 29,155 (127,182) (694,998) 2,641,268 $ (338,110) $ 5,000,998 13,490 152,401 — — (1,081,865) (164,352) — 3,920,672 4,654,763 (888,805) 31,561 (164,352) — 3,633,167 $ (287,505) $ 288,523 2,182 10,184 — (841) (11,512) (13,008) 9,930 285,458 241,884 (72,671) 21,058 (13,008) 7,695 184,958 $ (100,500) $ $ 434,451 3,101 7,456 — (1,291) (93,717) (13,882) (47,595) 288,523 319,616 (48,710) 21,220 (13,882) (36,360) 241,884 (46,639) As of July 1, 2023 and July 2, 2022, the SERP had beneﬁt obligations of $348.3 million and $382.4 million, respectively. In order to meet a portion of its obligations under the SERP, Sysco has a rabbi trust that invests in Corporate-Owned Life Insurance policies on the lives of participants and interests in corporate-owned real estate assets. These assets are not included as plan assets or in the funded status amounts in the tables above and below. The life insurance policies on the lives of the participants had carrying values of $91.2 million as of July 1, 2023 and $92.6 million as of July 2, 2022. Sysco is the sole owner and beneﬁciary of such policies. The amounts recognized on Sysco’s consolidated balance sheets related to its company-sponsored deﬁned beneﬁt plans are as follows: (In thousands) Noncurrent assets (Other assets) Current accrued beneﬁt liability (Accrued expenses) Noncurrent accrued beneﬁt liability (Other long-term liabilities) NET AMOUNT RECOGNIZED U.S. Pension Benefits International Pension Benefits Jul. 1, 2023 Jul. 2, 2022 Jul. 1, 2023 Jul. 2, 2022 $ 10,143 (32,138) (316,115) $ (338,110) $ 94,934 (31,969) (350,470) $ (287,505) $ — (1,460) (99,040) $ (100,500) $ $ 5,116 (1,399) (50,356) (46,639) Accumulated other comprehensive loss (income) as of July 1, 2023 consists of the following amounts that had not, as of that date, been recognized in net beneﬁt cost: (In thousands) Prior service cost Actuarial losses TOTAL U.S. Pension Benefits International Pension Benefits $ 2,545 1,115,019 $ 1,117,564 $ $ 1,258 56,692 57,950 Total $ 3,803 1,171,711 $ 1,175,514 Accumulated other comprehensive loss (income) as of July 2, 2022 consists of the following amounts that had not, as of that date, been recognized in net beneﬁt cost: (In thousands) Prior service cost Actuarial losses (gains) TOTAL U.S. Pension Benefits International Pension Benefits Total $ 54 1,417,073 $ 1,417,127 $ $ 1,103 (18,768) (17,665) $ 1,157 1,398,305 $ 1,399,462 SYSCO CORPORATION // 2023 Form 10-K 67 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Information for plans with accumulated beneﬁt obligation/aggregate beneﬁt obligation in excess of fair value of plan assets is as follows: (In thousands) U.S. Pension Benefits(1) Jul. 1, 2023 Jul. 2, 2022 International Pension Benefits(2) Jul. 1, 2023 Jul. 2, 2022 Accumulated beneﬁt obligation/aggregate beneﬁt obligation Fair value of plan assets at end of year (1) (2) U.K. Retirement Plan fair value of plan assets exceeded the accumulated benefit obligation/aggregate benefit obligation as of July 2, 2022. Information under Pension Benefits as of July 1, 2023 and July 2, 2022 includes both the U.S. Retirement Plan and the SERP. $ 382,334 — 348,165 — $ $ 280,429 184,958 $ 46,895 263 Components of Net Benefit Costs and Other Comprehensive Income The components of net company-sponsored pension costs for each ﬁscal year are as follows: (In thousands) Service cost Interest cost Expected return on plan assets Amortization of prior service cost (credit) Amortization of actuarial loss (gain) Curtailment gain Settlement loss recognized NET PENSION COSTS BENEFITS 2023 2022 2021 U.S. Pension Benefits International Pension Benefits U.S. Pension Benefits International Pension Benefits U.S. Pension Benefits International Pension Benefits $ $ 8,109 170,149 (147,827) 393 33,044 — 315,455 379,323 $ $ 2,182 10,184 (10,830) (35) (410) (911) — 180 $ $ 13,490 152,401 (206,320) 393 34,961 — — (5,075 $ $ 3,101 7,456 (9,770) (43) 92 (1,003) — (167) $ $ 16,472 145,299 (206,406) 729 42,288 — — (1,618) $ $ 3,288 6,810 (7,426) (61) 250 (1,230) — 1,631 The components of net company-sponsored pension costs other than the service cost component are reported in Other expense (income), net within the consolidated results of operations. Other changes in plan assets and beneﬁt obligations recognized in other comprehensive income (loss) related to company-sponsored pension plans for each ﬁscal year are as follows: (In thousands) 2023 2022 2021 U.S. Pension Benefits International Pension Benefits U.S. Pension Benefits International Pension Benefits U.S. Pension Benefits International Pension Benefits Amortization of prior service cost (credit) Amortization of actuarial loss (gain) Prior service credit arising in current year Eﬀect of exchange rates on amounts in AOCI Actuarial gain (loss) arising in current year NET PENSION INCOME COST $ $ 393 348,498 (2,884) — (46,444) 299,563 $ $ (105) (410) — (3,111) (71,989) (75,615) $ $ 393 34,961 — — (13,259) 22,095 $ $ (129) 92 — (752) 35,610 34,821 $ $ 729 42,288 — — 192,041 235,058 $ $ (131) 250 — (3,254) 16,493 13,358 Amounts included in accumulated other comprehensive loss (income) as of July 1, 2023 that are expected to be recognized as components of net company-sponsored beneﬁt cost during ﬁscal 2024 are: (In thousands) Amortization of prior service cost (credit) Amortization of actuarial losses (gains) TOTAL U.S. Pension Benefits International Pension Benefits $ $ 393 27,931 28,324 $ $ (36) 1,241 1,205 $ $ Total 357 29,172 29,529 Employer Contributions The company made cash contributions to its company-sponsored pension plans of $50.2 million and $52.8 million in fiscal years 2023 and 2022, respectively. There were no contributions made to the U.S. Retirement Plan in ﬁscal 2023, as there were no required contributions to meet ERISA minimum funding requirements in ﬁscal 2023. There are no required contributions to the U.S. Retirement Plan to meet ERISA minimum funding requirements in fiscal 2024. The company’s contributions to the SERP plan are made in the amounts needed to fund current year beneﬁt payments. The estimated aggregate ﬁscal 2024 contribution to fund beneﬁt payments for the SERP plan is $32.1 million. The estimated ﬁscal 2024 contributions to fund beneﬁt payments for the international retirement plans are $21.3 million. 68 SYSCO CORPORATION // 2023 Form 10-K Estimated Future Benefit Payments Estimated future benefit payments for vested participants, based on actuarial assumptions, are as follows: (In thousands) 2024 2025 2026 2027 2028 Subsequent ﬁve years U.S. Pension Benefits International Pension Benefits $ 133,180 143,809 154,771 165,229 175,161 988,657 $ 13,156 14,404 14,553 15,336 15,651 83,670 Assumptions Weighted-average assumptions used to determine beneﬁt obligations as of year-end were: Jul. 1, 2023 Jul. 2, 2022 Discount rate — U.S. Retirement Plan Discount rate — SERP Discount rate — U.K. Retirement Plan Rate of compensation increase — U.S. Retirement Plan 5.62% 5.65 5.20 3.00 4.91% 4.84 3.65 3.00 As beneﬁt accruals under the SERP and U.K. Retirement Plan are frozen, future pay is not projected in the determination of the beneﬁt obligation as of July 1, 2023 or July 2, 2022. We i g h t e d - a v e r a g e a s s u m p t i o n s u s e d t o d e t e r m i n e n e t company-sponsored pension costs for each ﬁscal year were: 2023 6.07% 4.84 3.65 2022 3.12% 2.91 1.90 2021 2.94% 2.91 1.60 Discount rate — U.S. Retirement Plan(1) Discount rate — SERP Discount rate — U.K. Retirement Plan Expec ted rate of retur n — U.S. Retirement Plan(2) Expec ted rate of retur n — U.K . Retirement Plan Rate of compensation increase — U.S. Retirement Plan (1) The discount rate of the U.S. Retirement Plan was 4.91% for the period of July 2022 to October 2022. Due to the settlement that occurred, the rate changed to 6.07% from November 2022 to June 2023. 3.30 2.56 2.56 2.55 4.65 3.00 4.50 6.00 4.75 (2) The expected long-term rate of return on plan assets of the U.S. Retirement Plan was 4.50% for the period of July 2022 to October 2022. Due to the settlement that occurred, the rate changed to 6.00% from November 2022 to June 2023. For guidance in determining the discount rate for U.S. deﬁned beneﬁt plans, Sysco calculates the implied rate of return on a hypothetical portfolio of high-quality ﬁxed-income investments for which the timing and amount of cash outﬂows approximates the estimated payouts of the company-sponsored pension plans. Sysco uses an annualized corporate bond yield curve to estimate the rate at which pension beneﬁts could eﬀectively be settled to estimate a discount rate for the U.K. Retirement Plan. The discount rate assumption is updated annually and revised as deemed appropriate. The discount rates to be used for PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data the calculation of ﬁscal 2024 net company-sponsored beneﬁt costs for the U.S. Retirement Plan and U.K. Retirement Plan are 5.62% and 5.20%, respectively. The discount rate to be used for the calculation of ﬁscal 2024 net company-sponsored beneﬁt costs for the SERP is 5.65%. The expected long-term rate of return on plan assets assumption for the retirement plans are net return on assets assumption, representing gross return on assets less asset management expenses. Speciﬁc to the U.S. Retirement Plan, administrative expenses are also excluded from the gross return on assets. The expected return for the U.S. Retirement Plan is derived from a mathematical asset model that incorporates assumptions as to the various asset class returns, reﬂecting a combination of rigorous historical performance analysis and the forward-looking views of the ﬁnancial markets regarding the yield on bonds, the historical returns of the major stock markets and returns on alternative investments. The expected return for the U.K. Retirement Plan is derived from a long-term swap yield time horizon adjusted for the expected return based on the plan’s current asset allocation and historical results. The rate of return assumption is reviewed annually and revised as deemed appropriate. The expected long-term rates of return to be used in the calculation of ﬁscal 2024 net company-sponsored beneﬁt costs for the U.S. Retirement Plan and U.K. Retirement Plan are 5.50% and 6.65%, respectively. Plan Assets Investment Strategy The company’s overall strategic investment objectives for the U.S. Retirement Plan are to preserve capital for future beneﬁt payments and to balance risk and return commensurate with ongoing changes in the valuation of plan liabilities using an investment strategy that closely aligns the duration of the U.S. Retirement Plan’s assets with the duration of its liabilities. In order to accomplish these objectives, the company oversees the U.S. Retirement Plan’s investment objectives and policy design, decides proper plan asset class strategies and structures, monitors the performance of plan investment managers and investment funds and determines the proper investment allocation of pension plan contributions. The strategy results in an asset portfolio that more closely matches the behavior of the liability, thereby reducing the volatility of the U.S. Retirement Plan’s funded status. This structure ensures the U.S. Retirement Plan’s investments are diversiﬁed within each asset class, in addition to being diversiﬁed across asset classes with the intent to build asset class portfolios that are structured without strategic bias for or against any subcategories within each asset class. The company has also created a set of investment guidelines for the U.S. Retirement Plan’s investment managers to specify prohibited transactions, including borrowing of money except for real estate, private equity or hedge fund portfolios where leverage is a key component of the investment strategy and permitted in the investments’ governing documents, the purchase of securities on margin unless fully collateralized by cash or cash equivalents or short sales, pledging, mortgaging or hypothecating of any securities, except for loans of securities that are fully collateralized, market timing transactions and the direct purchase of the securities of Sysco or the investment manager. The purchase or sale of derivatives for speculation or leverage is also prohibited; however, investment managers are allowed to use derivative securities so long as they do not increase the risk proﬁle or leverage of the manager’s portfolio. Such derivative securities have been used to prevent funded status changes due to interest rate changes. SYSCO CORPORATION // 2023 Form 10-K 69 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data The U.S. Retirement Plan’s target and actual investment allocation as of July 1, 2023 is as follows: Growth assets Liability hedging assets U.S. Retirement Plan Target Asset Allocation Actual Asset Allocation 30% 70 29% 71 100% Sysco’s U.S. Retirement Plan investment strategy is implemented through a combination of balanced and specialized investment managers, passive investment funds and actively managed investment funds. Growth assets include, but are not limited to, equities, alternatives, real estate, and growth fixed income intended to generate returns in excess of the liability growth rate. The liability hedging assets will be comprised primarily of ﬁxed income investments, including interest rate and credit derivatives, intended to reduce funded status volatility due to changes in interest rates and credit spreads, while generating returns consistent with the projected liability growth rate. The U.S. Retirement Plan’s portfolio includes investment funds which are selected based on each fund’s stated investment strategy to align with Sysco’s overall target mix of investments. Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered appropriate. The day-to-day management of the assets of the U.K. Retirement Plan has been delegated by the plan trustee to a ﬁduciary manager who decides the composition of the asset portfolio in line with the objectives of the plan’s trustee and within speciﬁc investment guidelines agreed upon with the trustee. The primary objective for the U.K. Retirement Plan is to provide suﬃcient assets to pay beneﬁts as they fall due. The current objective for the U.K. Retirement Plan is to achieve a return on plan assets of 2.1% in excess of the return on the liability benchmark over a rolling ﬁve-year period. The liability benchmark is the portfolio of gilts, which are bonds issued by the British government, that best matches the liability proﬁle of the U.K. Retirement Plan. The investment objective includes a risk statement that targets a level of investment tracking error versus the liability benchmark to be below 10% per year. The actual tracking error targeted may ﬂuctuate over time as the composition of the portfolio changes and the levels of risk in markets change. The U.K. Retirement Plan’s Trustee and its Fiduciary Manager seek to achieve the Plan’s investment objectives by investing in a suitably diversiﬁed mix of assets. The U.K. Retirement Plan’s target investment allocation and actual investment allocation for ﬁscal 2023 is as follows: Growth portfolio Matching portfolio U.K. Retirement Plan Target Asset Allocation Actual Asset Allocation 50% 50 49% 51 100% The U.K. Retirement Plan’s investment strategy is implemented primarily through a common contractual investment fund managed by the solvency manager. The pooled investment fund consists of investment types including (1) equity investments covering a range of geographies and including private equity investments, (2) credit investments including global investment grade and high yield bonds, loans and other debt and derivative securities, (3) property investments including global direct or indirect real estate holdings, and (4) macro-oriented funds that seek to generate return by going long and short in a variety of markets and operate strategies which focus on markets rather than individual 70 SYSCO CORPORATION // 2023 Form 10-K stocks and often use derivatives rather than physical assets. Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered appropriate. As discussed above, the retirement plans’ investments in equities, debt instruments and alternative investments provide a range of returns and also expose the plan to investment risk. However, the investment policies put in place by the trustee and solvency manager ensure diversiﬁcation of plan assets across issuers, industries and countries. Fair Value of Plan Assets 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). See Note 5, “Fair Value Measurements,” for a description of the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The following is a description of the valuation methodologies used for assets and liabilities held by Sysco’s retirement plans measured at fair value. Cash and cash equivalents: Valued at amortized cost, which approximates fair value due to the short-term maturities of these investments. Cash and cash equivalents is included as a Level 1 and Level 2 measurement in the table below. Equity securities: Valued at the closing price reported on the exchange market. Equity securities valued at the closing price reported on the exchange market are classiﬁed as a Level 1 measurement in the table below. If a stock is not listed on a public exchange, such as an American Depository Receipt or some preferred stocks, the stock is valued using an evaluated bid price based on a compilation of observable market information. Equity securities not listed on a public exchange are classiﬁed as a Level 2 measurement in the table below. Fixed income securities: Valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active market. All ﬁxed income securities are included as a Level 2 measurement in the table below. Investment funds: Represents collective trust and funds holding debt, equity, hedge funds, private equity funds, exchange-traded real estate securities, and common contractual funds which are valued at the net asset value (NAV) provided by the manager of each fund. The NAV is based on the fair value of the underlying securities within the fund. Non-exchange traded real estate funds are valued based on the proportionate interest held by the U.S. Retirement Plan, which is based on the valuations of the underlying real estate investments held by each fund. Each real estate investment is valued on the basis of a discounted cash ﬂow approach. Inputs used include future rental receipts, expenses and residual values from a market participant view of the highest and best use of the real estate as rental property. The private equity funds are valued based on the proportionate interest held by the U.S. Retirement Plan, which is based on the valuations of the underlying private equity investments held by each fund. The hedge funds are valued based on the hedge funds’ proportionate share of the net assets of the underlying private investment fund as determined by the underlying private investment fund’s general partner. Indirectly held investments are valued utilizing the latest ﬁnancial reports supplied by the fund’s portfolio investments. Directly held investments are valued initially based on transaction price and are adjusted utilizing available market data and investment-speciﬁc factors, such as estimates of liquidation value, prices of recent transactions in the same or similar issuer, current operating performance and future expectations of the particular investment, changes in market outlook and the ﬁnancing environment. PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Derivatives: Valuation method varies by type of derivative security. (cid:122) Credit default and interest rate swaps: Valued using evaluated bid prices based on a compilation of observable market information. Inputs used for credit default swaps include spread curves and trade data about the credit quality of the counterparty. Inputs used for interest rate swaps include benchmark yields, swap curves, cash ﬂow analysis, and interdealer broker rates. Credit default and interest rate swaps are included as a Level 2 measurement in the table below. (cid:122) Foreign currency contracts: Valued using a standardized interpolation model that utilizes the quoted prices for standard-length forward foreign currency contracts and adjusts to the remaining term outstanding on the contract being valued. Foreign currency contracts are included as a Level 2 measurement in the table below. (cid:122) Futures and option contracts: Valued at the closing price reported on the exchange market for exchange-traded futures and options. Over- the-counter options are valued using pricing models that are based on observable market information. Exchange-traded futures and options are included as a Level 1 measurement in the table below; over-the- counter options are included as a Level 2 measurement. The following table presents the fair value of the U.S. Retirement Plan’s assets by major asset category as of July 1, 2023: Assets Measured at Fair Value as of Jul. 1, 2023 Measured at NAV(6) Level 3 Level 2 79,702 $ $ — $ — $ — — — — — — — — — — 213,565 164,611 191,332 105,542 66,517 Level 1 12,515 $ 17,496 60 — — — Total 92,217 231,061 164,671 191,332 105,542 66,517 (In thousands) Cash and cash equivalents Growth assets: U.S. equity(1) International equity(1) Hedge fund of funds(2) Real estate funds(3) Private equity funds(4) Liability hedging assets: Corporate bonds U.S. government and agency securities Other(5) 1,386,297 396,791 6,840 $ 2,641,268 Includes direct investments in equity securities and within investment funds for which fair value is measured at NAV. There are no unfunded commitments as of July 1, 2023. The remaining investments may be redeemed once per day with advanced written notice and subject to applicable limits. 1,340,451 199,780 6,840 $ 1,626,773 TOTAL INVESTMENTS AT FAIR VALUE (1) 45,846 197,011 — 984,424 — — — 30,071 — — — — $ $ $ (2) There were no unfunded commitments as of July 1, 2023, and there were no redemption restrictions as of July 1, 2023. The investment may be redeemed once per quarter. (3) For investments in the funds listed in this category, total unfunded commitment as of July 1, 2023 was $2.0 million. Less than 1% of the investments cannot be redeemed. The estimate of the liquidation period for these funds varies from 2023 to 2026. The remaining investments may be redeemed quarterly with advanced written notice and subject to applicable limits. (4) Total unfunded commitments in the funds listed in this category as of July 1, 2023 were $14.6 million. The investments cannot be redeemed, but the fund will make distributions (5) (6) through liquidation. The estimate of the liquidation period varies for each fund from 2023 to 2031. Includes foreign government and state and municipal debt securities. Includes certain investments that are measured at fair value using the NAV practical expedient that have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. The following table presents the fair value of the U.K. Retirement Plan’s assets by major asset category as of July 1, 2023: (In thousands) Investment funds: Assets Measured at Fair Value as of Jul. 1, 2023 Level 1 Level 2 Level 3 Measured at NAV(2) Total Common contractual fund(1) 183,944 183,944 TOTAL INVESTMENTS AT FAIR VALUE (1) There were $5.3 million of unfunded commitments as of July 1, 2023. As of July 1, 2023 there are no monetary redemption restrictions, however timing restrictions ranged 183,944 183,944 — $ — $ — $ — $ — $ — $ $ $ $ $ (2) from daily to quarterly. Includes certain investments that are measured at fair value using the NAV practical expedient that have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. SYSCO CORPORATION // 2023 Form 10-K 71 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data The following table presents the fair value of the U.S. Retirement Plan’s assets by major asset category as of July 2, 2022: (In thousands) Cash and cash equivalents Growth assets: U.S. equity(1) International equity(1) Hedge fund of funds(2) Real estate funds(3) Private equity funds(4) Liability hedging assets: Corporate bonds U.S. government and agency securities Other(5) Assets Measured at Fair Value as of Jul. 2, 2022 Measured at NAV(6) Level 3 $ — $ — $ Level 1 88,962 $ $ Level 2 30,365 20,894 166 — — — 25,508 — — — — — — — — — 257,711 241,209 276,844 116,638 87,140 Total 119,327 304,113 241,375 276,844 116,638 87,140 1,864,042 610,427 13,261 $ 3,633,167 Includes direct investments in equity securities and within investment funds for which fair value is measured at NAV. There are no unfunded commitments as of July 2, 2022. The remaining investments may be redeemed once per day with advanced written notice and subject to applicable limits. 71,151 — 265,094 — — — — $ 1,315,787 1,792,891 345,333 13,261 $ 2,207,358 TOTAL INVESTMENTS AT FAIR VALUE (1) — — — 110,022 $ $ (2) There were no unfunded commitments as of July 2, 2022, and there were no redemption restrictions as of July 2, 2022. The investment may be redeemed once per quarter. (3) For investments in the funds listed in this category, total unfunded commitment as of July 2, 2022 was $2.0 million. Less than 1% of the investments cannot be redeemed. The estimate of the liquidation period for these funds varies from 2022 to 2026. The remaining investments may be redeemed quarterly with advanced written notice and subject to applicable limits. (4) Total unfunded commitment as of July 2, 2022 was $15.9 million. The investments cannot be redeemed, but the fund will make distributions through liquidation. The estimate (5) (6) of the liquidation period varies for each fund from 2022 to 2031. Includes foreign government and state and municipal debt securities. Includes certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. The following table presents the fair value of the U.K. Retirement Plan’s assets by major asset category as of July 2, 2022: (In thousands) Liability hedging assets: Cash and cash equivalents Corporate bonds U.K. government securities International government securities Derivative assets (liabilities), net(1) Investment funds: Common contractual fund(2) Assets Measured at Fair Value as of Jul. 2, 2022 Level 1 Level 2 Level 3 Measured at NAV(3) $ $ 5,451 — — — — $ 38,537 25,544 75,125 10,214 (22,947) — $ — — — — — $ — — — — Total 43,988 25,544 75,125 10,214 (22,947) $ Includes interest rate swaps and zero coupon swaps. The fair value of asset positions totaled $8.0 million; the fair value of liability positions totaled $30.9 million. TOTAL INVESTMENTS AT FAIR VALUE (1) (2) There were $11.2 million of unfunded commitments as of July 2, 2022, and there were no redemption restrictions as of July 2, 2022. The investment may be redeemed twice $ $ $ — 5,451 — 126,473 — — $ 109,831 109,831 109,831 241,755 (3) per month. Includes certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. 72 SYSCO CORPORATION // 2023 Form 10-K 15. Multiemployer Employee Benefit Plans Deﬁned Beneﬁt Pension Plans Sysco currently participates in several different multiemployer defined benefit pension plans in the United States (U.S.) based on obligations arising under collective bargaining agreements covering union-represented employees. Expenses related to these plans are recognized at the time we make contributions to the plans. Sysco does not directly manage these multiemployer plans; pursuant to federal law, these plans are managed by boards of trustees, half of whom are appointed by the unions and the other half appointed by employers contributing to the plan. Some of Sysco’s current employees in the U.S. are participants in such multiemployer plans as of July 1, 2023. The risks of participating in these multiemployer plans are diﬀerent from single-employer plans in the following respects: (cid:122) Assets contributed to the multiemployer plan by one employer may be used to provide beneﬁts to employees of other participating employers. (cid:122) If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. (cid:122) If Sysco chooses to stop participating in some of its multiemployer plans in the U.S., Sysco may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Based upon the information available from plan administrators, management believes that all of these multiemployer plans are, to diﬀerent degrees, underfunded. In addition, pension-related legislation in the U.S. requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding. As a result, Sysco expects its future contributions to these plans to increase. In addition, if a multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deﬁciency for those employers contributing to the fund. However, under current law, this excise tax is unlikely to apply since multiemployer pension plans experiencing accumulated funding deﬁciencies are considered “critical” or “critical and declining,” and the excise tax does not apply to pension plans in critical or critical and declining status. Under current law regarding multiemployer deﬁned beneﬁt plans, a plan’s termination, Sysco’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan would require Sysco to make withdrawal liability payments to the plan for Sysco’s allocated share of the multiemployer plan’s unfunded vested beneﬁt liabilities. Plan Contributions Sysco’s contributions to multiemployer deﬁned beneﬁt pension plans were as follows for each ﬁscal year: (In thousands) Individually signiﬁcant plans All other plans TOTAL CONTRIBUTIONS 2023 $ 40,943 11,672 $ 52,615 2022 $ 35,103 10,386 $ 45,489 2021 $ 29,143 13,750 $ 42,893 Individually Significant Plans The following information relates to multiemployer deﬁned beneﬁt pension plans that Sysco has determined to be individually signiﬁcant to the company. As noted below, the company has determined only one plan – the Western Conference of Teamsters Pension Plan – as currently being individually signiﬁcant to the company. To determine individually significant plans, the company evaluated several factors, including Sysco’s signiﬁcance to the plan in terms of employees and contributions, the funded status of the plan and the size of the company’s potential withdrawal liability if it were to voluntarily withdraw from the plan. The following table provides information about the funded status of individually signiﬁcant plans: (cid:122) The “EIN-PN” column provides the Employer Identiﬁcation Number (EIN) and the three-digit plan number (PN). (cid:122) The “Pension Protection Act Zone Status” columns provide the two most recent Pension Protection Act zone statuses available from each plan. The zone status is based on information that the company received from the plan’s administrators and is certiﬁed by each plan’s actuary, together with information included in the annual return/reports ﬁled by each plan with the U.S. Department of Labor. Among other factors, plans in the red zone are generally less than 65% funded, plans in the orange zone are both less than 80% funded and have an accumulated funding deﬁciency or are expected to have a deﬁciency in any of the next six plan years, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The Multiemployer Protection Act of 2014 created a new zone called “critical and declining.” Plans are generally considered “critical and declining” if they are projected to become insolvent within 15 years. (cid:122) The “FIP/RP Status” column indicates whether a ﬁnancial improvement plan (FIP) for yellow/orange zone plans or a rehabilitation plan (RP) for red zone plans is pending or implemented in the current year or was put in place in a prior year. A status of “Pending” indicates a FIP/RP has been approved but actual period covered by the FIP/RP has not begun. A status of “Implemented” means the period covered by the FIP/RP began in the current year or is ongoing. (cid:122) The “Surcharge Imposed” column indicates whether a surcharge or supplemental contribution was paid during the most recent annual period presented for the company’s contributions to each plan in the yellow, orange or red zone. If the company’s current collective bargaining agreement (CBA) with a plan satisﬁes the requirements of a pending but not yet implemented FIP or RP, then the payment of surcharges or supplemental contributions is not required and “No” will be reﬂected in this column. If the company’s current CBA with a plan does not yet satisfy the requirements of a pending but not yet implemented FIP or RP, then the payment of surcharges or supplemental contributions is required and “Yes” will be reﬂected in this column. SYSCO CORPORATION // 2023 Form 10-K 73 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Pension Protection Act Zone Status Pension Fund EIN-PN As of 12/31/22 As of 12/31/21 FIP/RP Status Western Conference of Teamsters Pension Plan 91-6145047-001 Green Green N/A Surcharge Imposed N/A Expiration Date(s) of CBA(s) 7/2/2023 to 11/30/2027(1) (1) Sysco is party to 24 CBAs that require contributions to the Western Conference of Teamsters Pension Trust. Each agreement covers anywhere from less than 1% to 20% of the total contributions Sysco is required to pay the fund. The following table provides information about the company’s contributions to individually signiﬁcant plans: (cid:122) The “Sysco Contributions” columns provide contribution amounts based on Sysco’s ﬁscal years, which may not coincide with the plans’ ﬁscal years. (cid:122) The “Sysco 5% of Total Plan Contributions” columns indicate whether Sysco was listed on Schedule R of the plan’s most recently ﬁled Form 5500s as providing more than ﬁve percent of the total contributions to the plan, and the plan year-end is noted. Pension Fund (In thousands) Western Conference of Teamsters Pension Plan Sysco Contributions Sysco 5% of Total Plan Contributions 2023 2022 2021 $ 40,943 $ 35,103 $ 29,143 2022 No 2021 No For the plan noted in the table above, minimum contributions outside of the agreed upon contractual rate are not required. 16. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: (In thousands, except for share and per share data) Numerator: Net earnings Denominator: Weighted-average basic shares outstanding Dilutive eﬀect of share-based awards Weighted-average diluted shares outstanding Basic earnings per share DILUTED EARNINGS PER SHARE 2023 2022 2021 $ 1,770,124 $ 1,358,768 $ 524,209 507,362,913 2,356,843 509,719,756 3.49 3.47 $ $ 510,630,645 3,375,182 514,005,827 2.66 2.64 $ $ 510,696,398 2,858,690 513,555,088 1.03 1.02 $ $ 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 2,373,000, 1,538,000 and 3,807,000 for ﬁscal 2023, 2022 and 2021, respectively. Dividends declared were $999.2 million, $970.8 million and $933.4 million in ﬁscal 2023, 2022 and 2021, respectively. Included in dividends declared for each year were dividends declared but not yet paid at year-end of approximately $252.6 million, $249.2 million and $240.6 million in ﬁscal 2023, 2022 and 2021, respectively. 17. 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 $2.0 billion, $1.0 billion and $1.1 billion for ﬁscal 2023, 2022 and 2021, respectively. 74 SYSCO CORPORATION // 2023 Form 10-K A summary of the components of other comprehensive income (loss) and the related tax eﬀects for each of the periods presented is as follows: PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands) Pension and other postretirement benefit plans: Other comprehensive income before reclassiﬁcation adjustments: Net actuarial loss, arising in the current year Settlements Total other comprehensive income before reclassiﬁcation adjustments Reclassiﬁcation adjustments: Amortization of prior service cost Amortization of actuarial loss, net Total reclassiﬁcation adjustments Foreign currency translation: Foreign currency translation adjustment Marketable securities: Change in marketable securities(1) Hedging instruments: Other comprehensive income (loss) before reclassiﬁcation adjustments: Change in excluded component of fair value hedge Change in cash ﬂow hedges Change in net investment hedges Total other comprehensive income (loss) before reclassiﬁcation adjustments Reclassiﬁcation adjustments: Amortization of cash ﬂow hedges TOTAL OTHER COMPREHENSIVE INCOME Location of Expense (Income) Recognized in Net Earnings 2023 Before Tax Amount Tax Net of Tax Amount Other expense, net $ Other expense, net (120,820) $ 315,455 194,635 $ (32,021) 78,864 46,843 (88,799) 236,591 147,792 Other expense, net Other expense, net 396 31,601 31,997 100 7,895 7,995 296 23,706 24,002 N/A N/A 127,227 — 127,227 (2,306) (485) (1,821) Other expense, net Operating expenses(2) N/A (199) (71,270) (27,902) (99,371) (50) (15,936) (6,984) (22,970) (149) (55,334) (20,918) (76,401) Interest expense 11,553 263,735 $ $ 2,888 34,271 8,665 229,464 $ (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 fiscal 2023. (2) Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges. (In thousands) Pension and other postretirement benefit plans: Other comprehensive income before reclassiﬁcation adjustments: Net actuarial gain, arising in the current year Reclassiﬁcation adjustments: Amortization of prior service cost Amortization of actuarial loss, net Total reclassiﬁcation adjustments Foreign currency translation: Foreign currency translation adjustment Marketable securities: Change in marketable securities(1) Hedging instruments: Other comprehensive income (loss) before reclassiﬁcation adjustments: Change in cash ﬂow hedges Change in net investment hedges Total other comprehensive income before reclassiﬁcation adjustments Reclassiﬁcation adjustments: Amortization of cash ﬂow hedges TOTAL OTHER COMPREHENSIVE INCOME Location of Expense (Income) Recognized in Net Earnings 2022 Before Tax Amount Tax Net of Tax Amount $ (11,243) $ (2,485) $ (8,758) Other expense, net Other expense, net 396 74,713 75,109 100 15,595 15,695 296 59,118 59,414 N/A N/A (461,425) — (461,425) (11,880) (2,493) (9,387) Operating expenses(2) N/A 31,135 71,906 103,041 6,823 17,976 24,799 24,312 53,930 78,242 Interest expense 11,501 (294,897) $ $ 2,877 38,393 8,624 $ (333,290) (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 fiscal 2022. (2) Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges. SYSCO CORPORATION // 2023 Form 10-K 75 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands) Pension and other postretirement benefit plans: Other comprehensive income before reclassiﬁcation adjustments: Net actuarial gain (loss), arising in the current year Reclassiﬁcation adjustments: Amortization of prior service cost Amortization of actuarial loss, net Total reclassiﬁcation adjustments Foreign currency translation: Foreign currency translation adjustment Marketable securities: Change in marketable securities(1) Hedging instruments: Other comprehensive income (loss) before reclassiﬁcation adjustments: Change in cash ﬂow hedges Change in net investment hedges Total other comprehensive income before reclassiﬁcation adjustments Reclassiﬁcation adjustments: Amortization of cash ﬂow hedges TOTAL OTHER COMPREHENSIVE LOSS Location of Expense (Income) Recognized in Net Earnings 2021 Before Tax Amount Tax Net of Tax Amount $ 208,640 $ 52,160 $ 156,480 Other expense, net Other expense, net 732 61,042 61,774 184 14,347 14,531 548 46,695 47,243 N/A N/A 362,292 — 362,292 (3,392) (712) (2,680) Operating expenses(2) N/A 19,066 (32,206) (13,140) 4,941 (8,051) (3,110) 14,125 (24,155) (10,030) Interest expense 11,751 627,925 $ $ 2,939 65,808 8,812 562,117 $ (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 fiscal 2021. (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 the periods presented: Pension and Other Postretirement Benefit Plans, net of tax (1,265,714) $ $ Foreign Currency Translation (402,384) $ Hedging, net of tax (49,878) Marketable Securities 7,095 $ Total (1,710,881) $ 156,480 362,292 (10,030) — 508,742 47,243 — — — 8,812 — (1,061,991) (40,092) (51,096) — (2,680) 4,415 56,055 (2,680) (1,148,764) (8,758) (461,425) 78,242 — (391,941) 59,414 — (1,011,335) — — (501,517) 8,624 — 35,770 — (9,387) (4,972) 68,038 (9,387) (1,482,054) 147,792 127,227 76,401  198,618 24,002 — — — $ (839,541) $ (374,290) $ 8,665 — (31,966) $ 32,667  (1,821) (1,821) (6,793) $ (1,252,590) (In thousands) Balance as of Jun. 27, 2020 Other comprehensive income before reclassiﬁcation adjustments Amounts reclassiﬁed from accumulated other comprehensive loss Change in marketable securities Balance as of Jul. 3, 2021 Other comprehensive income before reclassiﬁcation adjustments Amounts reclassiﬁed from accumulated other comprehensive loss Change in marketable securities Balance as of Jul. 2, 2022 Other comprehensive income before reclassiﬁcation adjustments Amounts reclassiﬁed from accumulated other comprehensive loss Change in marketable securities BALANCE AS OF JUL. 1, 2023 76 SYSCO CORPORATION // 2023 Form 10-K 18. 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 November 2018, Sysco’s Omnibus Incentive Plan (2018 Plan) was adopted and reserved up to 51,500,000 shares of Sysco common stock for share-based awards to employees, non-employee directors and key advisors. Of the 51,500,000 authorized shares, the full 51,500,000 shares may be issued as options or stock appreciation rights and up to 17,500,000 shares may be issued as restricted stock, restricted stock units or other types of stock-based awards. To date, Sysco has issued options, restricted stock units and performance share units under the 2018 Plan. Vesting requirements for awards under the 2018 Plan vary by individual grant and may include either time-based vesting or time-based vesting subject to acceleration based on performance criteria for ﬁscal periods of at least one year. The contractual life of all options granted under the 2018 Plan are and will be no greater than ten years. As of July 1, 2023, there were 39,928,758 remaining shares authorized and available for grant in total under the 2018 Plan, of which the full 39,928,758 shares may be issued as options or stock appreciation rights, or as a combination of up to 12,114,046 shares that may be issued as restricted stock, restricted stock units or other types of stock-based awards, with the remainder available for issuance as options or stock appreciation rights. Sysco has also granted employee options under several previous employee stock option plans for which previously granted options remain outstanding as of July 1, 2023. No new options will be issued under any of the prior plans. Future grants to employees will be made through the 2018 Plan or subsequently adopted plans. Awards under these plans are subject to time-based vesting with vesting periods that vary by individual grant. The contractual life of all options granted under these plans is ten years. Sysco’s policy is to utilize treasury stock for issuing shares upon share option exercise or share unit conversion. PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Performance Share Units During ﬁscal 2023 and 2022, 460,672 and 475,883 performance share units (PSUs), respectively, 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 performance share unit granted during ﬁscal 2023 and 2022 was $84.87 and $76.75, respectively. The PSUs will convert into shares of Sysco common stock at the end of the performance period based on actual performance targets achieved as well as the market-based return of Sysco’s common stock relative to that of the S&P 500 index companies. Stock Options Sysco’s option awards are subject to graded vesting over a requisite service period with compensation cost recognized on a straight-line basis through the requisite service period over the duration of the award. In addition, certain of Sysco’s options provide that the options continue to vest as if the optionee continued as an employee or director if the optionee meets certain age and years of service thresholds upon retirement. In these cases, Sysco will recognize compensation cost for such awards over the period from the grant date to the date the employee or director ﬁrst becomes eligible to retire with the options continuing to vest after retirement. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. Expected dividend yield is estimated based on the historical pattern of dividends and the average stock price for the year preceding the option grant. Expected volatility is based on historical volatility of Sysco’s stock, implied volatilities from traded options on Sysco’s stock, and other factors. The risk-free rate for the expected term of the option is based on the United States Treasury yield curve in eﬀect at the time of grant. Sysco utilizes historical data to estimate option exercise and employee termination behavior in determining the expected life of awards for valuation purposes. The weighted average assumptions discussed above are noted in the table below for relevant periods as follows: Dividend yield Expected volatility Risk-free interest rate Expected Life 2023 2.4% 32.6% 3.0% 2022 2.5% 30.1% 1.0% 2021 2.7% 32.1% 0.5% 6.6 years 6.6 years 7.0 years SYSCO CORPORATION // 2023 Form 10-K 77 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data The following summary presents information regarding outstanding options as of July 1, 2023 and changes during the ﬁscal year then ended with regard to options under all stock incentive plans: Outstanding as of July 2, 2022 Granted Exercised Forfeited Expired Outstanding as of July 1, 2023 Expected to vest as of July 1, 2023 Exercisable as of July 1, 2023 Shares Under Option Weighted Average Exercise Price Per Share 9,634,493 954,249 570,578 267,981 — 9,750,183 2,036,563 7,644,880 $ $ $ $ 62.74 84.97 54.80 75.03 — 65.05 75.56 62.10 Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) 5.71 8.32 4.99 $ $ $ 104,397 8,142 96,209 The total number of employee options granted was 954,249, 1,224,150 and 1,975,413 in ﬁscal years 2023, 2022 and 2021, respectively. During ﬁscal 2023, 384,212 options were granted to 13 executive oﬃcers and 570,037 options were granted to 167 other key employees. During ﬁscal 2022, 499,554 options were granted to 11 executive oﬃcers and 724,596 options were granted to 145 other key employees. During ﬁscal 2021, 706,229 options were granted to 13 executive oﬃcers and 1,269,184 were granted to 117 other key employees. The weighted average grant date fair value of options granted in fiscal 2023, 2022 and 2021 was $24.46, $17.39 and $13.72, respectively. The total intrinsic value of options exercised during fiscal 2023, 2022 and 2021 was $1.2 million, $5.1 million and $6.7 million, respectively. Restricted Stock Units During fiscal 2023, 2022 and 2021, 917,560, 758,934 and 975,886 restricted stock units, respectively, were granted to employees. The majority of which will vest ratably over a three-year period. Some of these restricted stock units were granted with dividend equivalents. The fair value of each restricted stock unit award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For restricted stock unit awards granted without dividend equivalents, the fair value was reduced by the present value of expected dividends as of the grant date during the vesting period. The weighted average grant date fair value per share of restricted stock units granted during ﬁscal 2023, 2022 and 2021 was $75.66, $80.31 and $66.55, respectively. The total fair value of restricted stock units vested during ﬁscal 2023, 2022 and 2021 was $44.0 million, $41.6 million and $34.8 million, respectively. The total intrinsic value of restricted stock units vested during ﬁscal 2023, 2022 and 2021 was $46.8 million, $52.6 million and $42.6 million, respectively. Non-Employee Director Awards During ﬁscal 2023, 2022 and 2021, 22,055, 22,293 and 28,419 restricted equity awards, respectively, were granted to non-employee directors (NEDs), which will vest over a one-year period. NEDs may elect to receive these awards in restricted stock shares that will vest at the end of the award stated vesting period or as deferred units that convert into shares of Sysco common stock on a date subsequent to the award stated vesting date selected by the NED. The fair value of the restricted awards is based on the company’s stock price as of the date of grant. The weighted average grant date fair value of the shares granted during ﬁscal 2023, 2022 and 2021 was $84.10, $74.93 and $71.99, respectively. The total fair value of restricted stock shares vested and deferred units distributed during ﬁscal 2023, 2022 and 2021 was $1.9 million, $1.7 million and $2.0 million, respectively. Restricted stock shares are valued on their vesting date. Vested deferred units are valued on their subsequent conversion and distribution date. NEDs may elect to receive up to 100% of their annual directors’ fees in Sysco common stock on either an annual or deferred basis. As a result of such elections, a total of 6,974, 6,002 and 5,887 shares with a weighted- average grant date fair value of $78.82, $78.35 and $57.19 per share were issued in ﬁscal 2023, 2022 and 2021, respectively, in the form of fully vested common stock or deferred units. The total fair value of common stock issued as a result of election shares and deferred units distributed during ﬁscal 2023, 2022 and 2021 was $0.5 million, $0.5 million and $0.3 million, respectively. Common stock shares are valued on their vesting date. Vested deferred units are valued on their subsequent conversion and distribution date. As of July 1, 2023, there were 108,822 fully vested deferred units outstanding that will convert into shares of Sysco common stock upon dates selected by the respective NED. 78 SYSCO CORPORATION // 2023 Form 10-K Summary of Equity Instruments Other Than Stock Options The following summary presents information regarding outstanding non-vested awards as of July 1, 2023 and changes during the ﬁscal year then ended with regard to these awards under the stock incentive plans. Award types represented include restricted stock units granted to employees, restricted awards granted to non-employee directors and PSUs. PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Non-vested as of July 2, 2022 Granted Vested Forfeited NONVESTED AS OF JULY 1, 2023 2015 Employee Stock Purchase Plan The Sysco ESPP permits employees to invest in Sysco common stock by means of periodic payroll deductions at a discount of 15% from the closing price on the last business day of each calendar quarter. The total number of shares that may be sold pursuant to the ESPP may not exceed 79,000,000 shares, of which 2,219,109 remained available as of July 1, 2023. During fiscal 2023, 1,032,545 shares of Sysco common stock were purchased by the participants, as compared to 868,439 shares purchased in ﬁscal 2022 and 1,029,113 shares purchased in ﬁscal 2021. The weighted average fair value of employee stock purchase rights issued pursuant to the ESPP was $11.15, $12.10 and $4.84 per share during ﬁscal 2023, 2022 and 2021, respectively. The fair value of the stock purchase rights was calculated as the diﬀerence between the stock price at date of issuance and the employee purchase price. Weighted Average Grant Date Fair Value Per Share $ $ 69.10 79.26 59.59 74.25 82.05 Shares 3,065,295 1,514,501 (1,863,721) (262,171) 2,453,904 All Share-Based Payment Arrangements The total share-based compensation cost included in operating expenses in the consolidated results of operations was $95.7 million, $122.3 million and $95.8 million for fiscal 2023, 2022 and 2021, respectively. The company’s expense related to its PSUs decreased, as the performance metrics are trending below target for awards not yet paid. The total income tax beneﬁt for share-based compensation arrangements was $16.1 million, $19.1 million and $17.8 million for ﬁscal 2023, 2022 and 2021, respectively. As of July 1, 2023, there was $127.4 million of total unrecognized share-based compensation cost, which is expected to be recognized over a weighted-average period of 1.9 years. Cash received from option exercises and ESPP participation was $79.2 million, $128.2 million and $130.4 million during fiscal 2023, 2022 and 2021, respectively. The actual tax beneﬁt realized for the tax deductions from option exercises totaled $1.9 million, $12.9 million and $11.0 million during ﬁscal 2023, 2022 and 2021, respectively. 19. Income Taxes Income Tax Provisions For ﬁnancial reporting purposes, earnings (loss) before income taxes consists of the following: (In thousands) U.S. Foreign TOTAL The income tax provision for each ﬁscal year consists of the following: (In thousands) U.S. federal income taxes State and local income taxes Foreign income taxes TOTAL 2023 1,941,581 343,774 2,285,355 2023 388,534 78,805 47,892 515,231 $ $ $ $ The current and deferred components of the income tax provisions for each ﬁscal year are as follows: (In thousands) Current Deferred TOTAL 2023 531,665 (16,434) 515,231 $ $ 2022 1,642,376 104,397 1,746,773 2022 353,825 45,502 (11,322) 388,005 $ $ $ $ 2021 858,179 (273,451) 584,728 2021 158,762 17,808 (116,051) 60,519 2022 452,459 (64,454) 388,005 $ $ 2021 218,383 (157,864) 60,519 $ $ $ $ $ $ The deferred tax provisions result from the eﬀects of net changes during the year in deferred tax assets and liabilities arising from temporary diﬀerences between the carrying amounts of assets and liabilities for ﬁnancial reporting purposes and the amounts used for income tax purposes. SYSCO CORPORATION // 2023 Form 10-K 79 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Eﬀective Tax Rates Reconciliations of the statutory federal income tax rate to the eﬀective income tax rates for each ﬁscal year are as follows: U.S. statutory federal income tax rate State and local income taxes, net of any applicable federal income tax beneﬁt Foreign income taxes Uncertain tax positions Tax beneﬁt of equity-based compensation Other EFFECTIVE INCOME TAX RATE 2023 21.00% 2.63 (1.08) 0.06 (0.11) 0.05 22.55% 2022 21.00% 2.41 (1.88) 0.83 (0.16) 0.01 22.21% 2021 21.00% 2.67 (9.99) (0.38) (1.07) (1.88) 10.35% The eﬀective tax rate of 22.55% for ﬁscal 2023 was impacted by (1) state income tax expense of $60.1 million and (2) earnings from our foreign operations which are taxed at rates diﬀerent than our domestic tax rate, as well as credits, local permanent diﬀerences and other minimum taxes, which resulted in a net increase in the eﬀective tax rate. The eﬀective tax rate of 22.21% for ﬁscal 2022 was impacted by (1) state income tax expense of $42.2 million and (2) earnings from our foreign operations which are taxed at rates diﬀerent than our domestic tax rate, as well as credits, local permanent diﬀerences and other minimum taxes. Deferred Tax Assets and Liabilities Signiﬁcant components of Sysco’s deferred tax assets and liabilities are as follows: (In thousands) Deferred tax assets: Net operating tax loss carryforwards Interest carryforwards Operating lease liabilities Pension Receivables Inventory Deferred compensation Share-based compensation Other Deferred tax assets before valuation allowances Valuation allowances Total deferred tax assets Deferred tax liabilities: Goodwill and intangible assets Excess tax depreciation and basis diﬀerences of assets Operating lease assets Foreign currency remeasurement losses and currency hedge Other Total deferred tax liabilities TOTAL NET DEFERRED TAX ASSETS The company’s deferred tax asset for net operating loss carryforwards as of July 1, 2023 and July 2, 2022 consisted of state and foreign net operating tax loss carryforwards. The state net operating loss carryforwards outstanding as of July 1, 2023 expire in ﬁscal years 2024 through 2043, with some losses having unlimited carryforward periods. The foreign net operating loss carryforward periods vary by jurisdiction, from 5 years to unlimited. The company assesses the recoverability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The company considers 80 SYSCO CORPORATION // 2023 Form 10-K Jul. 1, 2023 Jul. 2, 2022 $ $ 536,582 204,880 170,982 101,359 50,831 26,540 26,441 24,080 60,689 1,202,384 (267,388) 934,996 363,534 237,998 171,812 16,264 27,842 817,450 117,546 $ $ 483,165 169,642 161,684 71,722 43,108 24,394 27,984 30,395 97,249 1,109,343 (240,591) 868,752 379,018 150,578 161,163 — 50,560 741,319 127,433 all available evidence (both positive and negative) in determining whether a valuation allowance is required. As a result of the company’s analysis, it was concluded that, as of July 1, 2023, a valuation allowance of $267.4 million should be established against the portion of the deferred tax asset attributable to capital losses, certain state interest, and foreign and U.S. state losses. The company will continue to monitor facts and circumstances in the reassessment of the likelihood that net operating loss carryforwards will be realized. Uncertain Tax Positions A reconciliation of the beginning and ending amount of gross unrecognized tax beneﬁts, excluding interest and penalties, is as follows: PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data (In thousands) Unrecognized tax beneﬁts at beginning of year Additions for tax positions related to prior years UNRECOGNIZED TAX BENEFITS AT END OF YEAR As of July 1, 2023, the gross amount of liability for accrued interest and penalties related to unrecognized tax beneﬁts was $7.8 million. As of July 2, 2022, the gross amount of liability for accrued interest and penalties related to unrecognized tax beneﬁts was $6.2 million. The expense recorded for interest and penalties related to unrecognized tax beneﬁts was not material in any year presented. 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. During the third quarter of ﬁscal 2023, Sysco received a Statutory Notice of Deficiency from the Internal Revenue Service, mainly related to foreign tax credits generated in ﬁscal 2018 from repatriated earnings primarily from our Canadian operations. In the fourth quarter (April 18th) of ﬁscal 2023, the company ﬁled suit in the U.S. Tax Court challenging the validity of certain tax regulations related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The lawsuit seeks to have the court invalidate these regulations, which would aﬃrm the company’s position regarding its foreign tax credits. Sysco has previously recorded a benefit of $131.0 million attributable to its interpretation of the TCJA and the Internal Revenue Code. If the company is ultimately unsuccessful in defending its position, it may be required to reverse all, or some portion, of the beneﬁt previously recorded. If Sysco were to recognize all unrecognized tax beneﬁts recorded as of July 1, 2023, approximately $32.3 million of the $32.4 million reserve would reduce the effective tax rate. If Sysco were to recognize all unrecognized tax beneﬁts recorded as of July 2, 2022, approximately $32.3 million of the $32.4 million reserve would reduce the eﬀective tax rate. It is reasonably possible that the amount of the unrecognized tax beneﬁts with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months either because Sysco’s positions are sustained on audit or because the company agrees to their disallowance. Items that may cause changes to unrecognized tax beneﬁts primarily include the consideration of various ﬁling requirements in various jurisdictions and the allocation of income and expense between tax jurisdictions. In addition, the amount of unrecognized tax beneﬁts recognized within the next twelve months may decrease due to the expiration of the statute of limitations for certain years in various jurisdictions; however, it is possible that a jurisdiction may open an audit on one of these years prior to the statute of limitations expiring. Sysco anticipates an immaterial decrease to the reserve within twelve months as a result of lapse of statutes. Sysco’s federal tax returns for 2019 and subsequent tax years have statutes of limitations that remain open for audit. As of July 1, 2023, Sysco’s tax returns in the majority of the state and local and material foreign jurisdictions are no longer subject to audit for the years before 2016. 2023 32,400 — 32,400 $ $ 2022 20,400 12,000 32,400 $ $ Other Sysco intends to indeﬁnitely reinvest income of its foreign operations except for income from a Singapore entity, and, as a result, no material accruals have been made with respect to the tax eﬀects of unremitted earnings from these reinvested foreign earnings, including impacts of outside basis diﬀerences and withholding taxes. The Singapore income for which we are not claiming permanent reinvestment only relates to income for fiscal year 2023 and forward. The Company has not recorded any withholding tax liability on the current year undistributed Singapore earnings, as the distribution of this income to the U.S. would not result in any income or withholding tax liability. As a result of the U.S. Tax Cuts and Jobs Act, unremitted earnings prior to the eﬀective date of the act have been subject to U.S. income tax. Any residual tax eﬀects, including foreign withholding taxes, are immaterial to the ﬁnancial statements. The Inflation Reduction Act of 2022 (Inflation Reduction Act) was enacted on August 16, 2022. The Inﬂation Reduction Act imposes a new 15% corporate alternative minimum tax (CAMT ) on “applicable corporations” for taxable years beginning after December 31, 2022. The CAMT is imposed to the extent the alternative minimum tax exceeds a corporation’s regular tax liability. A corporation that pays alternative minimum tax is eligible for a credit against income tax in future years. Sysco does not currently expect that the implementation of the new standard will have a material eﬀect on its ﬁnancial statements. On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Proﬁt Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy. Pillar One expands a country’s authority to tax proﬁts from companies that make sales into their country but do not have a physical location in the country. Pillar Two includes an agreement on international tax reform, including rules to ensure that large corporations pay a minimum rate of corporate income tax. On December 20, 2021, the OECD released Pillar Two Model Rules deﬁning the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD continues to release additional guidance on the two-pillar framework, with widespread implementation anticipated by 2024. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by individual countries, including the United Kingdom, where the rules will be eﬀective January 1, 2024. 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. SYSCO CORPORATION // 2023 Form 10-K 81 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data 20. Commitments And Contingencies Legal Proceedings Sysco is engaged in various legal proceedings that have arisen but have not been fully adjudicated. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible to probable. When probable and reasonably estimable, the losses have been accrued. Although the ﬁnal results of legal proceedings cannot be predicted with certainty, based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse eﬀect upon the consolidated ﬁnancial position or results of operations of the company. The company has been pursuing claims against a variety of vendors from which the company purchased products. To mitigate the risk of incurring signiﬁcant legal fees on these claims without any ultimate gain, in calendar 2019 and 2020, the company entered into agreements with a third party whereby the company secured a minimum amount of cash proceeds from the third party in exchange for assigning to the third party the rights to a portion of the future litigation proceeds. At the time of receipt of these cash proceeds, the amounts were deferred in “Other long-term liabilities.” In June 2023, an agreement was reached in which the company assigned all its remaining claims against these vendors to the third party. As a result, Sysco is no longer obligated to pursue litigation against these vendors and therefore previous deferred proceeds were recognized within “Other expense (income), net.” In total, this agreement resulted in $122.0 million being recognized in “Other expense (income), net” in June 2023. Other Commitments Sysco has committed to aggregate product purchases for resale in order to beneﬁt from a centralized approach to purchasing. A majority of these agreements expire within one year; however, certain agreements have terms through ﬁscal 2028. These agreements commit the company to a minimum volume at various pricing terms, including ﬁxed pricing, variable pricing or a combination thereof. Minimum amounts committed to as of July 1, 2023 totaled approximately $15.0 billion. Minimum amounts committed to by year are as follows: (In thousands) 2024 2025 2026 2027 2028 $ Amount 9,966,259 4,009,588 669,195 348,919 29,834 Sysco has contracts with various third-party service providers to receive information technology services. The services have been committed for periods up to ﬁscal 2029 and may be extended. As of July 1, 2023, the total remaining cost of the services over that period is expected to be approximately $273.0 million. A portion of this committed amount may be reduced by Sysco utilizing less than estimated resources and can be increased by Sysco utilizing more than estimated resources. Certain agreements allow adjustments for inflation. Sysco may also cancel a portion or all of the services provided subject to termination fees that decrease over time. If Sysco were to terminate all of the services in ﬁscal 2024, the estimated termination fees incurred in ﬁscal 2024 would be approximately $25.8 million. 21. Business Segment Information The company has combined certain of its operations in three reportable segments. “Other” ﬁnancial information is attributable to the company’s other operating segments that do not meet the quantitative disclosure thresholds. (cid:122) U.S. Foodservice Operations – primarily includes (a) our U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, produce, specialty Italian, specialty imports and a wide variety of non-food products and (b) our U.S. Specialty operations, which include our FreshPoint fresh produce distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, our Asian specialty distribution company and a number of other small specialty businesses that are not material to the operations of Sysco; (cid:122) International Foodservice Operations – includes operations outside of the United States (U.S.), 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 our export operations that distribute to international customers. Our European operations primarily consist of operations in the United Kingdom (U.K.), France, Ireland and Sweden; (cid:122) SYGMA – our U.S. customized distribution operations serving quick- service chain restaurant customer locations; and (cid:122) Other – primarily our hotel supply operations, Guest Worldwide. The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated ﬁnancial statements. Our Global Support Center expenses generally include all expenses of the corporate oﬃce and Sysco’s shared service operations. These also include all U.S. share-based compensation costs. 82 SYSCO CORPORATION // 2023 Form 10-K The following tables set forth certain ﬁnancial information for Sysco’s business segments. (In thousands) Sales: U.S. Foodservice Operations International Foodservice Operations SYGMA Other TOTAL Operating income (loss): U.S. Foodservice Operations International Foodservice Operations SYGMA Other Total segments Global Support Center Total operating income Interest expense Other expense (income), net EARNINGS BEFORE INCOME TAXES Depreciation and amortization: U.S. Foodservice Operations International Foodservice Operations SYGMA Other Total segments Global Support Center TOTAL Capital Expenditures: U.S. Foodservice Operations International Foodservice Operations SYGMA Other Total segments Global Support Center TOTAL Assets: U.S. Foodservice Operations International Foodservice Operations SYGMA Other Total segments Global Support Center TOTAL PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Fiscal Year 2023 2022 2021 $ 53,682,894 13,559,610 7,843,111 1,239,060 $ 76,324,675 $ 48,520,562 11,787,449 7,245,824 1,082,311 $ 68,636,146 $ 35,724,843 8,350,638 6,498,601 723,761 $ 51,297,843 $ 3,586,576 313,449 56,526 56,877 4,013,428 (974,879) 3,038,549 526,752 226,442 $ 2,285,355 $ 3,180,705 100,033 (3,124) 17,392 3,295,006 (948,506) 2,346,500 623,643 (23,916) $ 1,746,773 $ $ $ $ 436,824 218,244 31,617 8,554 695,239 80,365 775,604 389,046 192,579 30,976 23,465 636,066 157,259 793,325 $ $ $ $ 406,880 240,030 31,276 9,293 687,479 85,402 772,881 262,071 155,493 35,186 4,487 457,237 175,565 632,802 $ $ $ $ $ $ 2,468,127 (240,416) 52,620 (428) 2,279,903 (832,715) 1,447,188 880,137 (17,677) 584,728 366,808 238,457 32,774 9,961 648,000 89,916 737,916 163,303 152,017 33,185 16,924 365,429 105,247 470,676 $ 11,398,284 7,432,533 839,711 644,319 20,314,847 2,506,298 $ 22,821,145 $ 9,540,902 6,595,897 835,316 554,894 17,527,009 4,558,679 $ 22,085,688 $ 7,632,481 6,784,006 760,388 455,236 15,632,111 5,781,428 $ 21,413,539 SYSCO CORPORATION // 2023 Form 10-K 83 PART II – FINANCIAL INFORMATION Item 8. Financial Statements and Supplementary Data Information concerning geographic areas is as follows: (In thousands) Sales: United States Canada United Kingdom France Other TOTAL Plant and equipment at cost, less accumulated depreciation: United States Canada France United Kingdom Other TOTAL Operating lease right-of-use assets, net: United States United Kingdom France Sweden Canada Other TOTAL Fiscal Year 2023 2022 2021 $ 62,403,563 5,827,806 3,340,281 1,591,125 3,161,900 $ 76,324,675 $ 3,720,729 334,728 300,258 298,244 261,090 $ 4,915,049 $ 56,511,006 5,093,961 2,859,063 1,412,716 2,759,400 $ 68,636,146 $ 3,346,356 337,295 304,115 248,990 219,664 $ 4,456,420 $ 42,610,406 3,906,722 1,706,851 1,097,868 1,975,996 $ 51,297,843 $ 3,148,279 355,864 323,461 275,385 223,074 $ 4,326,063 $ $ 338,078 197,134 64,818 36,701 28,500 66,535 731,766 $ $ 316,933 192,802 78,215 38,213 39,034 58,100 723,297 $ $ 197,617 229,853 137,069 47,428 37,228 59,968 709,163 The sales mix for the principal product categories by segment is disclosed in Note 3, “Revenue.” 22. Quarterly Results (Unaudited) Financial information for each quarter in the fiscal year ended July 1, 2023 is set forth below. (In thousands except for per share data) October 1 December 31(1) April 1 July 1(2) Fiscal Year Fiscal 2023 Quarter Ended Sales Cost of sales Gross proﬁt Operating expenses Operating income Interest expense Other expense (income), net Earnings before income taxes Income tax expense NET EARNINGS Per share: Basic net earnings(3) Diluted net earnings(3) Dividends declared $ 19,126,830 15,637,975 3,488,855 2,754,522 734,333 124,150 15,281 594,902 129,334 465,568 $ $ $ 18,593,953 $ 18,875,676 15,444,316 3,431,360 2,737,183 694,177 134,931 5,209 554,037 124,433 429,604 $ 15,244,337 3,349,616 2,708,974 640,642 132,042 330,124 178,476 37,260 141,216 $ $ 19,728,216 16,043,050 3,685,166 2,715,769 969,397 135,629 (124,172) 957,940 224,204 733,736 $ 76,324,675 62,369,678 13,954,997 10,916,448 3,038,549 526,752 226,442 2,285,355 515,231 $ 1,770,124 $ $ 0.92 0.91 0.49 0.28 $ 0.28 0.49 $ 0.85 0.84 0.49 $ 1.45 1.44 0.50 3.49 3.47 1.97 (1) Sysco’s second quarter of fiscal 2023 included a charge for $315.4 million in other expense related to pension settlement charges. See Note 14, “Company-Sponsored Employee Benefit Plans.” (2) Sysco’s fourth quarter of fiscal 2023 included $122.0 million in other income related to a legacy litigation financing agreement. See Note 20, “Commitments and Contingencies.” (3) Quarterly basic and diluted earnings per share amounts may not add up to the full fiscal year total presented due to rounding. Basic and diluted earnings per share are calculated by dividing net earnings by basic and diluted shares outstanding, respectively. 84 SYSCO CORPORATION // 2023 Form 10-K Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART II – FINANCIAL INFORMATION Item 9B. Other Information None. Item 9A. 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 July 1, 2023. The term “disclosure controls and procedures,” as deﬁned in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it ﬁles or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods speciﬁed in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it ﬁles or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal ﬁnancial oﬃcers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-beneﬁt relationship of possible controls and procedures. Sysco’s disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of July 1, 2023, 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. Management’s report on internal control over financial reporting is included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. 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 ) under the Exchange Act) that occurred during the fourth quarter ended July 1, 2023, that have materially aﬀected, or are reasonably likely to materially aﬀect, our internal control over ﬁnancial reporting. Item 9B. Other Information Insider Trading Arrangements and Policies The table below shows the outstanding plans or other arrangements (each, a (Plan)) providing for the purchase and/or sale of Sysco securities by Sysco’s directors and Section 16 oﬃcers, including those Plans adopted or terminated during the quarter ended July 1, 2023: Name Title Action Date Rule 10b5-1(1) Non-Rule 10b5-1(2) Trading Arrangement Kevin Hourican President and Chief Executive Oﬃcer Adopt May 4, 2023 Greg Bertrand Neil Russell Scott Stone Executive Vice President, US Foodservice Operations Senior Vice President, Corporate Aﬀairs and Chief Administrative Oﬃcer Vice President, Financial Reporting and Interim Chief Accounting Oﬃcer Adopt Feb. 15, 2023 Adopt Feb. 14, 2023 Adopt Feb. 6, 2023 x x x x Number of Securities Converted 75,019 shares to be sold Expiration Date(4) Mar. 1, 2024 92,145 shares to be sold(3) Dec. 31, 2024 1,056 shares to be sold 1,000 shares to be acquired and held upon the exercise of vested stock options Dec. 29, 2023 21,884 shares to be sold Mar. 7, 2024 Intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c). (1) (2) Non-Rule Rule 10b5-1 trading arrangement as defined in Item 408 of Regulation S-K. (3) The shares reported for Mr. Bertrand include 3,444 shares directly held by Mr. Bertrand’s children and covered under three separate trading plans with identical adoption and expiration dates. (4) Each Plan terminates on the earlier of: (i) the expiration date listed in the table above; (ii) the first date on which all trades set forth in the Plan have been executed; or (iii) such date the Plan is otherwise terminated according to its terms. SYSCO CORPORATION // 2023 Form 10-K 85 PART II – FINANCIAL INFORMATION Item 9C. Disclosure Reporting Regarding Foreign Jurisdictions that Prevent Inspections Item 9C. Disclosure Reporting Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 86 SYSCO CORPORATION // 2023 Form 10-K PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item will be included in our proxy statement for the 2023 Annual Meeting of Stockholders under the following captions, and is incorporated herein by reference thereto: “Corporate Governance,” “Executive Oﬃcers,” “Delinquent Section 16(a) Reports,” “Report of the Audit Committee” and “Board of Directors Matters.” Item 11. Executive Compensation The information required by this item will be included in our proxy statement for the 2023 Annual Meeting of Stockholders under the following captions, and is incorporated herein by reference thereto: “Compensation Discussion and Analysis,” “Report of the Compensation and Leadership Development Committee,” “Director Compensation” and “Executive Compensation.” Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be included in our proxy statement for the 2023 Annual Meeting of Stockholders under the following captions, and is incorporated herein by reference thereto: “Stock Ownership” and “Equity Compensation Plan Information.” Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be included in our proxy statement for the 2023 Annual Meeting of Stockholders under the following caption, and is incorporated herein by reference thereto: “Corporate Governance – Certain Relationships and Related Person Transactions” and “Corporate Governance – Director Independence.” Item 14. Principal Accountant Fees and Services The information required by this item will be included in our proxy statement for the 2023 Annual Meeting of Stockholders under the following caption, and is incorporated herein by reference thereto: “Fees Paid to Independent Registered Public Accounting Firm.” SYSCO CORPORATION // 2023 Form 10-K 87 PART IV Item 15. Exhibit and Financial Statement Schedules (a) The following documents are ﬁled, or incorporated by reference, as part of this Form 10-K: 1. All ﬁnancial statements. See Index to Consolidated Financial Statements of this Form 10-K. 2. All ﬁnancial statement schedules are omitted because they are not applicable or the information is set forth in the consolidated ﬁnancial statements or notes thereto within Item 8. Financial Statements and Supplementary Data. 3. Exhibits. The exhibits listed on the Exhibit Index below are ﬁled or furnished as part of this Annual Report on Form 10-K. 88 SYSCO CORPORATION // 2023 Form 10-K PART IV Exhibit Index Exhibit Index Exhibits. 3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9# 10.1 10.2 10.3 10.4 10.5 10.6 — Restated Certiﬁcate of Incorporation, incorporated by reference to Exhibit 3(a) to the Form 10-K for the year ended June 28, 1997 (File No. 1-6544). — Certiﬁcate of Amendment to Restated Certiﬁcate of Incorporation increasing authorized shares, incorporated by reference to Exhibit 3(e) to the Form 10-Q for the quarter ended December 27, 2003 (File No. 1-6544). — Form of Amended Certiﬁcate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(c) to the Form 10-K for the year ended June 29, 1996 (File No. 1-6544). — Amended and Restated Bylaws of Sysco Corporation dated June 21, 2023, incorporated by reference to Exhibit 3.1 to the Form 8-K ﬁled on June 23, 2023 (File No. 1-6544). — Senior Debt Indenture, dated as of June 15, 1995, between Sysco Corporation and First Union National Bank of North Carolina, Trustee, incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-3 ﬁled June 6, 1995 (File No. 33-60023). — Form of Guarantee of Indebtedness of Sysco Corporation under Exhibits 4.1 through 4.6 as executed by Sysco’s U.S. Broadline subsidiaries, incorporated by reference to Exhibit 4.1 to the Form 8-K ﬁled on January 20, 2011 (File No. 1-6544). — Thirteenth Supplemental Indenture, including form of Initial Guarantee, dated February 17, 2012 between Sysco Corporation, as Issuer, the Trustee and the Initial Guarantors, incorporated by reference to Exhibit 4(o) to Registration Statement on Form S-3 ﬁled on February 17, 2012 (File No. 1-6544). — Agreement of Resignation, Appointment and Acceptance, dated February 13, 2007, by and among Sysco Corporation and Sysco International Co., a wholly owned subsidiary of Sysco Corporation, U.S. Bank National Association and The Bank of New York Trust Company, N.A., incorporated by reference to Exhibit 4(h) to Registration Statement on Form S-3 ﬁled on February 6, 2008 (File No. 333-149086). — Fortieth Supplemental Indenture dated as of December 13, 2021 among Sysco Corporation, the guarantors named therein and Trustee. — Forty-First Supplemental Indenture dated as of December 14, 2021 among Sysco Corporation, the guarantors named therein and Trustee. — 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 December 14, 2021 (File No. 1-6544). — 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). — Description of Sysco Corporation Securities. — Credit Agreement dated as of April 29 2022, among Sysco Corporation, Sysco Canada, Inc., Sysco EU II S.à r.l., Bank of America N.A. as administrative agent, and certain lenders and guarantors party thereto, incorporated by reference to Exhibit 10.1 to the Form 8-K ﬁled on May 2, 2022 (File No. 1-6544). — Issuing and Paying Agent Agreement, dated as of October 31, 2014, between Sysco Corporation and U.S. Bank National Association, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended December 27, 2014 ﬁled on February 3, 2015 (File No. 1-6544). — Amended and Restated Commercial Paper Dealer Agreement, dated as of October 31, 2014, between Sysco Corporation, as issuer, and JPMorgan Morgan Securities LLC, as Dealer, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended December 27, 2014 ﬁled on February 3, 2015(File No. 1-6544). — Commercial Paper Dealer Agreement, dated as of October 31, 2014, between Sysco Corporation, as issuer, and Goldman, Sachs & Co, as Dealer, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended December 27, 2014 ﬁled on February 3, 2015(File No. 1-6544). — Commercial Paper Dealer Agreement, dated as of January 18, 2017, between Sysco Corporation, as issuer, and Wells Fargo Securities, LLC, as Dealer, incorporated by reference to Exhibit 10.5 to the Form 10-K for the year ended July 1, 2017 ﬁled on August 30, 2017 (File No. 1-6544). — Commercial Paper Dealer Agreement, dated as of February 3, 2017, between Sysco Corporation, as issuer, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer, incorporated by reference to Exhibit 10.6 to the Form 10-K for the year ended July 1, 2017 ﬁled on August 30, 2017 (File No. 1-6544). SYSCO CORPORATION // 2023 Form 10-K 89 PART IV Exhibit Index 10.7 10.8 10.9 10.10 — Form of Amended and Restated Commercial Paper Dealer Agreement, dated as of September 2, 2022, by and between Sysco Corporation, as Issuer, and the applicable Dealer party thereto, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended October 1, 2022 ﬁled on November 2, 2022 (File No. 1-6544). — Amended and Restated Issuing and Paying Agent Agreement, dated as of September 2, 2022, by and between U.S. Bank Trust Company, National Association, as Issuing and Paying Agent, and Sysco Corporation, as Issuer, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended October 1, 2022 ﬁled on November 2, 2022 (File No. 1-6544). — Issuing and Paying Agency Agreement dated April 30, 2020 between Brake Bros. Limited, as Issuer, and Deutsche Bank AG, London Branch, as Issuing and Paying Agent, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended March 28, 2020 ﬁled on May 6, 2020 (File No. 1-6544). — Dealer Agreement dated April 30, 2020 between Brake Bros. Limited, as Issuer, and Barclays Bank PLC, as Arranger, and Barclays Bank PLC, as Dealer, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended March 28, 2020 ﬁled on May 6, 2020 (File No. 1-6544). 10.11 — Demand Facility Agreement, dated as of June 30, 2011, between SFS Canada I, LP and The Toronto-Dominion Bank, incorporated by reference to Exhibit 10.7 to the Form 10-K for the year ended July 2, 2011 ﬁled on August 30, 2011 (File No. 1-6544). 10.12 — Guaranty Agreement, dated as of June 30, 2011, between Sysco Corporation and The Toronto-Dominion Bank, incorporated by reference to Exhibit 10.8 to the Form 10-K for the year ended July 2, 2011 ﬁled on August 30, 2011 (File No. 1-6544). 10.13† — Sixth Amended and Restated Sysco Corporation Executive Deferred Compensation Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended October 2, 2010 ﬁled on November 9, 2010 (File No. 1-6544). 10.14† — First Amendment to the Sixth Amended and Restated Sysco Corporation Executive Deferred Compensation Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended March 31, 2012 ﬁled on May 8, 2012 (File No. 1-6544). 10.15† — Seventh Amended and Restated Sysco Corporation Executive Deferred Compensation Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended December 29, 2012 ﬁled on February 4, 2013 (File No. 1-6544). 10.16† — Amended and Restated Sysco Corporation Executive Deferred Compensation Plan, eﬀective June 29, 2013, incorporated by reference to Exhibit 10.11 to the Form 10-K for the year ended June 29, 2013 ﬁled on August 27, 2013 (File No. 1-6544). 10.17† — 2015-1 Amendment to the Amended and Restated Sysco Corporation Executive Deferred Compensation Plan, incorporated by reference to Exhibit 10.16 to the Form 10-K for the year ended June 27, 2015 ﬁled on August 25, 2015 (File No. 1-6544). 10.18† — Tenth Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10.4 to the Form 10-Q for the quarter ended October 2, 2010 ﬁled on November 9, 2010 (File No. 1-6544). 10.19† — First Amendment to Tenth Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10.15 to the Form 10-K for the year ended July 2, 2011 ﬁled on August 30, 2011 (File No. 1-6544). 10.20† — Second Amendment to Tenth Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended March 31, 2012 ﬁled on May 8, 2012 (File No. 1-6544). 10.21† — Eleventh Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended December 29, 2012 ﬁled on February 4, 2013 (File No. 1-6544). 10.22† — Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan, including the Amended and Restated Sysco Corporation MIP Retirement Program, attached as Appendix I, eﬀective as of June 29, 2013, incorporated by reference to Exhibit 10.16 to the Form 10-K for the year ended June 29, 2013 ﬁled on August 27, 2013 (File No. 1-6544). 10.23† — First Amendment to the Amended and Restated Sysco Corporation Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended March 29, 2014 ﬁled on May 6, 2014 (File No. 1-6544). 10.24† — Amended and Restated Sysco Corporation MIP Retirement Program, eﬀective as of June 29, 2013, incorporated by reference to Exhibit 10.17 to the Form 10-K for the year ended June 29, 2013 ﬁled on August 27, 2013 (File No. 1-6544). 10.25† — First Amendment to the Amended and Restated Sysco Corporation MIP Retirement Program, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended March 29, 2014 ﬁled on May 6, 2014 (File No. 1-6544). 10.26† — Sysco Corporation Management Savings Plan, incorporated by reference to Exhibit 10.4 to the Form 10-Q for the quarter ended December 29, 2012 ﬁled on February 4, 2013 (File No. 1-6544). 10.27† — Amended and Restated Sysco Corporation Management Savings Plan, eﬀective as of June 29, 2013, incorporated by reference to Exhibit 10.19 to the Form 10-K for the year ended June 29, 2013 ﬁled on August 27, 2013 (File No. 1-6544). 10.28† — First Amendment to the Amended and Restated Sysco Corporation Management Savings Plan, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended March 29, 2014 ﬁled on May 6, 2014 (File No. 1-6544). 90 SYSCO CORPORATION // 2023 Form 10-K PART IV Exhibit Index 10.29† — 2016-1 Amendment to the Amended and Restated Sysco Corporation Management Savings Plan, adopted eﬀective November 15, 2016, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended December 31, 2016 ﬁled on February 7, 2017 (File No. 1-6544). 10.30† — Amendment 2018-1 to the Sysco Corporation Management Savings Plan, adopted eﬀective January 1, 2018, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended December 30, 2017 ﬁled on February 6, 2018 (File No. 1-6544). 10.31† — Amendment 2018-2 to the Sysco Corporation Management Savings Plan, adopted eﬀective May 25, 2018, incorporated by reference to Exhibit 10.27 to the Form 10-K for the year ended June 30, 2018 ﬁled on August 27, 2018(File No. 1-6544). 10.32† — Sysco Corporation 2013 Long-Term Incentive Plan, incorporated by reference to Exhibit 99.1 to the Form S-8 ﬁled on November 15, 2013 (File No. 1-6544). 10.33† — Amendment 2017-1 to the Sysco Corporation 2013 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.30 to the Form 10-K for the year ended July 1, 2017 ﬁled on August 30, 2017 (File No. 1-6544). 10.34† 10.35† 10.36† 10.37† 10.38† — Form of Stock Option Grant Agreement issued to executive oﬃcers under the Sysco Corporation 2013 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended December 28, 2013 ﬁled on February 4, 2014 (File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2016) for executive oﬃcers under the Sysco Corporation 2013 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended December 26, 2015 ﬁled on February 2, 2016 (File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2017) for executive oﬃcers under the Sysco Corporation 2013 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended October 1, 2016 filed on November 8, 2016 (File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2018) for executive oﬃcers under the Sysco Corporation 2013 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended September 30, 2017 ﬁled on November 9, 2017 (File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2019) for executive oﬃcers under the Sysco Corporation 2013 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended September 29, 2018 ﬁled on November 6, 2018 (File No. 1-6544). 10.39† — Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Annex II to the Sysco Corporation Proxy Statement ﬁled October 5, 2018 (File No. 1-6544). 10.40† 10.41† 10.42† 10.43† 10.44† 10.45† 10.46† 10.47† — Sysco Corporation Annual Incentive Program (AIP) For Corporate AIP Bonus-Eligible Positions (Fiscal Year 2023) adopted eﬀective July 29, 2022, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended October 1, 2022 ﬁled on November 2, 2022 (File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2020) for executive oﬃcers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.41 to the Form 10-K for the ﬁscal year ended June 29, 2019 ﬁled on August 26, 2019(File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2021) for executive oﬃcers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended September 26, 2020 ﬁled on November 4, 2020 (File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2022) for executive oﬃcers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.4 to the Form 10-Q for the quarter ended October 2, 2021 ﬁled on November 9, 2021 (File No. 1-6544). — Form of Stock Option Grant Agreement (Fiscal Year 2023) for executive oﬃcers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.4 to the Form 10-Q for the quarter ended October 1, 2022 ﬁled on November 2, 2022 (File No. 1-6544). — Form of Performance Share Unit Grant Agreement (Fiscal Year 2022) for executive oﬃcers under the Sysco Corporation 2018 Omnibus Incentive Plan , incorporated by reference to Exhibit 10.6 to the Form 10-Q for the quarter ended October 2, 2021 ﬁled on November 9, 2021 (File No. 1-6544). — Form of Performance Share Unit Grant Agreement (Fiscal Year 2023) for executive oﬃcers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.6 to the Form 10-Q for the quarter ended October 1, 2022 ﬁled on November 2, 2022 (File No. 1-6544). — Performance Share Unit Grant Agreement – Retention Award for Greg Bertrand dated August 19, 2021, pursuant to the Sysco 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.9 to the Form 10-Q for the quarter ended October 2, 2021 ﬁled on November 9, 2021 (File No. 1-6544). SYSCO CORPORATION // 2023 Form 10-K 91 PART IV Exhibit Index 10.48† 10.49† 10.50† — Form of Restricted Stock Unit Grant Agreement (Fiscal Year 2021) for executive oﬃcers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended September 26, 2020 ﬁled on November 4, 2020 (File No. 1-6544). — Form of Restricted Stock Unit Grant Agreement (Fiscal Year 2022) for executive officers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.5 to the Form 10-Q for the quarter ended October 2, 2021 ﬁled on November 9, 2021 (File No. 1-6544). — Form of Restricted Stock Unit Grant Agreement (Fiscal Year 2023) for executive officers under the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.5 to the Form 10-Q for the quarter ended October 1, 2022 ﬁled on November 2, 2022 (File No. 1-6544). 10.51† — Form of Sysco Protective Covenants Agreement, incorporated by reference to Exhibit 10.2 to the Form 8-K ﬁled on July 17, 2020 (File No. 1-6544). 10.52† 10.53† — Form of Restricted Stock Award Agreement for Directors (2022) pursuant to the Sysco Corporation 2018 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended December 31, 2022 ﬁled on February 1, 2023 (File No. 1-6544). — Form of Restricted Stock Award Agreement for Directors (2022) 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), incorporated by reference to Exhibit 10.4 to the Form 10-Q for the quarter ended December 31, 2022 ﬁled on February 1, 2023 (File No. 1-6544). 10.54† — Description of Sysco Corporation’s Executive Relocation Expense Reimbursement Policy, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended January 1, 2011 ﬁled on February 8, 2011 (File No. 1-6544). 10.55† — Sysco Corporation Non-Employee Directors Stock Election Policy, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended March 30, 2019 ﬁled on May 7, 2019 (File No. 1-6544). 10.56† — 2009 Non-Employee Directors Stock Plan, incorporated by reference to Annex A to the Sysco Corporation Proxy Statement ﬁled October 8, 2009 (File No. 1-6544). 10.57† — Form of Restricted Stock Grant Agreement under the 2009 Non-Employee Directors Stock Plan for those individuals who elected to defer receipt of shares under the 2009 Board of Directors Stock Deferral Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended April 2, 2011 ﬁled on May 10, 2011(File No. 1-6544). 10.58† — Second Amended and Restated Sysco Corporation 2005 Board of Directors Deferred Compensation Plan, incorporated by reference to Exhibit 10.59 to the Form 10-K for the year ended June 28, 2008 ﬁled on August 26, 2008 (File No. 1-6544). 10.59† — First Amendment to the Second Amended and Restated Sysco Corporation 2005 Board of Directors Deferred Compensation Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended March 31, 2012 ﬁled on May 8, 2012 (File No. 1-6544). 10.60† — 2009 Board of Directors Stock Deferral Plan, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended December 26, 2009 ﬁled on February 2, 2010 (File No. 1-6544). 10.61† — Description of Compensation Arrangements with Non-Employee Directors, incorporated by reference to Exhibit 10.5 to the Form 10-Q for the quarter ended December 31, 2022 ﬁled on February 1, 2023 (File No. 1-6544). 10.62† — Form of Indemniﬁcation Agreement with Non-Employee Directors, incorporated by reference to Exhibit 10.61 to the Form 10-K for the year ended July 28, 2008 ﬁled on August 26, 2008 (File No. 1-6544). 10.63† — Form of Severance Letter Agreement for Executive Vice Presidents, incorporated by reference to Exhibit 10.1 to the Form 8-K ﬁled on July 17, 2020 (File No. 1-6544). 10.64† — Form of Severance Letter Agreement for Senior Vice Presidents, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended December 31, 2022 ﬁled on February 1, 2023 (File No. 1-6544). 10.65† — Letter Agreement, dated as of January 10, 2020, by and between Kevin P. Hourican and Sysco Corporation, incorporated by reference to Exhibit 10.1 to the Form 8-K ﬁled on January 16, 2020 (File No. 1-6544). 10.66† — Letter Agreement, dated as of February 28, 2020, by and between Cathy Marie Robinson and Sysco Corporation, incorporated by reference to Exhibit 10.7 to the Form 10-Q for the quarter ended September 26, 2020 ﬁled on November 4, 2020 (File No. 1-6544). 10.67† — Letter Agreement, dated as of November 12, 2020, by and between Aaron E. Alt and Sysco Corporation, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended December 26, 2020 ﬁled on February 3, 2021 (File No. 1-6544). 10.68† — Letter Agreement, dated as of November 23, 2020, by and between Thomas R. Peck, Jr. and Sysco Corporation, incorporated by reference to Exhibit 10.12 to the Form 10-Q for the quarter ended October 2, 2021 ﬁled on November 9, 2021 (File No. 1-6544). 92 SYSCO CORPORATION // 2023 Form 10-K 10.69† — Letter Agreement, dated as of February 28, 2023, by and between Kenny Cheung and Sysco Corporation, incorporated by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended April 1, 2023 ﬁled on May 2, 2023 (File No. 1-6544). 10.70† — Letter Agreement, dated as of March 25, 2023, by and between Neil Russell and Sysco Corporation, incorporated by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended April 1, 2023 ﬁled on May 2, 2023 (File No. 1-6544). PART IV Item 16. Form 10-K Summary 21.1# 22.1# 23.1# 31.1# 31.2# 32.1# 32.2# — Subsidiaries of the Registrant. — Subsidiary Guarantors and Issuers of Guaranteed Securities. — Consent of Independent Registered Public Accounting Firm. — CEO Certiﬁcation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. — CFO Certiﬁcation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. — CEO Certiﬁcation Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. — 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 601(b)(10)(iii)(A) of Regulation S-K # Filed Herewith Note: Debt instruments of Sysco Corporation and its subsidiaries deﬁning the rights of long-term debt holders in principal amounts not exceeding 10% of Sysco Corporation’s consolidated assets have been omitted and will be provided to the Securities and Exchange Commission upon request. Item 16. Form 10-K Summary None. SYSCO CORPORATION // 2023 Form 10-K 93 PART IV Signatures SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Sysco Corporation has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on this 24th day of August 2023. SYSCO CORPORATION By: /s/ KEVIN P. HOURICAN Kevin P. Hourican President and Chief Executive Oﬃcer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Sysco Corporation in the capacities indicated and on the date indicated above. PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS: /s/ KEVIN P. HOURICAN Kevin P. Hourican /s/ KENNY K. CHEUNG Kenny K. Cheung President and Chief Executive Oﬃcer (principal executive oﬃcer) Executive Vice President and Chief Financial Oﬃcer (principal ﬁnancial oﬃcer) /s/ SCOTT B. STONE Vice President of Financial Reporting and Interim Chief Accounting Oﬃcer (principal accounting oﬃcer) Scott B. Stone DIRECTORS: /s/ DANIEL J. BRUTTO Daniel J. Brutto /s/ ALI DIBADJ Ali Dibadj /s/ LARRY C. GLASSCOCK Larry C. Glasscock /s/ JILL M. GOLDER Jill M. Golder /s/ BRADLEY M. HALVERSON Bradley M. Halverson /s/ JOHN M. HINSHAW John M. Hinshaw /s/ KEVIN P. HOURICAN Kevin P. Hourican /s/ HANS-JOACHIM KOERBER Hans-Joachim Koerber /s/ ALISON KENNEY PAUL Alison Kenney Paul /s/ EDWARD D. SHIRLEY Edward D. Shirley /s/ SHEILA G. TALTON Sheila G. Talton 94 SYSCO CORPORATION // 2023 Form 10-K Reconciliation of GAAP Measures to Non-GAAP Measures We calculate the net debt to adjusted EBITDA leverage ratio as (i) total debt, computed as the sum of notes payable, current maturities of long-term debt and long-term debt, less (ii) cash and cash equivalents, and divided by (iii) adjusted EBITDA over the trailing twelve months, computed as EBITDA plus the impact of Certain Items, excluding Certain Items related to interest expense, income taxes, depreciation and amortization. Sysco considers the net debt to adjusted EBITDA leverage ratio to be a measure that provides useful information to management and investors in evaluating the company’s ability to pay oﬀ debt and supports the company’s credit rating. An analysis of any non-GAAP ﬁnancial measure should be used in conjunction with results presented in accordance with GAAP. ANNEX A Dollars in thousands Current maturities of long-term debt Long-term debt Total debt Cash and cash equivalents Net debt Adjusted EBITDA Debt/Adjusted EBITDA ratio Net Debt/Adjusted EBITDA ratio 52-Week Period Ended Jul. 1, 2023 62,550 10,347,997 10,410,547 (745,201) 9,665,346 3,846,576 2.7 2.5 $ $ $ SYSCO CORPORATION // 2023 Form 10-K A1 Stockholder Information Corporate Offices Sysco Corporation 1390 Enclave Parkway Houston, TX 77077-2099 281.584.1390 www.sysco.com Annual Stockholders’ Meeting The 2023 Annual Meeting of Stockholders will be a virtual-only meeting (no physical location). The meeting will be held on Friday, November 17, 2023 at 10 a.m. Central time. To access the meeting, you will need your 16-digit control number found on your proxy card. Log in at virtualshareholdermeeting. com/SYY2023. Independent Accountants Ernst & Young LLP Houston, TX Transfer Agent & Registrar Broadridge Corporate Issuer Solutions, Inc. P.O. Box 1342 Brentwood, NY 11717 1.888.CALLSYY (1.888.225.5799) www.shareholder.broadridge.com/syy Investor Contact Kevin Kim Vice President, Investor Relations 281.584.1219 Common Stock and Dividend Information Sysco’s common stock is traded on the New York Stock Exchange under the symbol “SYY.” The company has paid quarterly cash dividends on its common stock since its founding as a public company in 1970 and has increased the dividend 54 times in that period. The current quarterly cash dividend is $0.50 per share. Dividend Reinvestment Plan with Optional Cash Purchase Feature Sysco’s Dividend Reinvestment Plan provides a convenient way for shareholders of record to reinvest quarterly cash dividends in Sysco shares automatically, with no service charge or brokerage commissions. The Plan also permits registered shareholders to invest additional money to purchase shares. In addition, certificates may be deposited directly into a Plan account for safekeeping and may be sold directly through the Plan for a modest fee. Shareholders desiring information about the Dividend Reinvestment Plan with Optional Cash Purchase Feature may obtain a brochure and enrollment form by contacting the Transfer Agent & Registrar, Broadridge Corporate Issuer Solutions, Inc. at 1.888.225.5799. 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. These statements are based on management’s current expectations and estimates. 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,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2023, as filed with the Securities and Exchange Commission, and the Company’s subsequent filings with the SEC. Sysco does not undertake to update its forward-looking statements, except as required by applicable law. Form 10-K and Financial Information A copy of the fiscal 2023 Annual Report on Form 10-K, including the financial statements and financial statement schedules, as well as copies of other financial reports and company literature, may be obtained without charge upon written request to the Investor Relations Department, Sysco Corporation, at the corporate offices listed above, or by calling 281.584.2615. This information, which is included in this Annual Report, also may be found on our website at www.sysco.com in the Investors section. Officers & Directors Directors Daniel J. Brutto Former President, UPS International and Senior Vice President, United Parcel Service, Inc. John M. Hinshaw GMD Chief Operating Officer, HSBC Group Management Services, Ltd. Ali Dibadj Chief Executive Officer, Janus Henderson Group, plc. Kevin P. Hourican President and Chief Executive Officer, Sysco Corporation Larry C. Glasscock Former Chairman of the Board of Directors, CEO and President of WellPoint, Inc. Jill M. Golder Former Senior Vice President and Chief Financial Officer, Cracker Barrell Old Country Store, Inc. Bradley M. Halverson Former Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar Inc. Hans-Joachim Koerber Former Chairman and CEO of METRO Group (Germany) Alison Kenney Paul Managing Director, Global Alliances, Google, Inc. Edward D. Shirley Chairman of the Board, Sysco Corporation Sheila G. Talton President and Chief Executive Officer of Gray Matter Analytics Executive Officers Greg D. Bertrand Executive Vice President and Global Chief Operating Officer Eve M. McFadden Senior Vice President, Legal, General Counsel and Corporate Secretary Kenny K. Cheung Executive Vice President and Chief Financial Officer Joel T. Grade Executive Vice President, Corporate Development Victoria L. Gutierrez Senior Vice President, Chief Merchandising Officer Kevin P. Hourican President and Chief Executive Officer J. Chris Jasper Senior Vice President and President, U.S. Broadline Foodservice Operations Gregory S. Keller Senior Vice President, National Accounts, Sysco and SYGMA Thomas R. Peck, Jr. Executive Vice President and Chief Information and Digital Officer Ronald L. Phillips Executive Vice President and Chief Human Resources Officer Daniel T. Purefoy Senior Vice President, Chief Supply Chain Officer Neil A. Russell Senior Vice President, Corporate Affairs and Chief Administrative Officer Scott B. Stone Vice President, Financial Reporting and Interim Chief Accounting Officer 1390 Enclave Parkway Houston, TX 77077-2099 281.584.1390 www.sysco.com For more information please visit: www.investors.sysco.com

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