Sysco(US:SYY)2024-08-27 22:06Part I Item 1. Business Sysco, the largest global food distributor, achieved record $78.8 billion sales in fiscal 2024, serving 730,000 locations across three primary segments - Sysco is the largest global food distributor, serving approximately 730,000 customer locations and achieving a record $78.8 billion in annual sales in fiscal 202467 - The company's operations are structured into three main reportable segments: U.S. Foodservice Operations, International Foodservice Operations, and SYGMA, with a fourth 'Other' category for smaller operations910 Sales by Principal Product Category (FY2022-FY2024) | Principal product categories | 2024 (%) | 2023 (%) | 2022 (%) | | :--- | :--- | :--- | :--- | | Canned and dry products | 19% | 19% | 17% | | Fresh and frozen meats | 18% | 18% | 19% | | Frozen fruits, vegetables, bakery and other | 15% | 15% | 14% | | Dairy products | 10% | 11% | 10% | | Poultry | 10% | 10% | 11% | | Fresh produce | 9% | 9% | 8% | | Paper and disposables | 7% | 7% | 7% | | Seafood | 4% | 4% | 5% | | Beverage products | 4% | 3% | 3% | | Equipment and smallwares | 2% | 1% | 1% | | Other | 2% | 3% | 5% | Sales by Customer Type (FY2022-FY2024) | Type of Customer | 2024 (%) | 2023 (%) | 2022 (%) | | :--- | :--- | :--- | :--- | | Restaurants | 62% | 62% | 63% | | Education, government | 7% | 8% | 8% | | Healthcare | 7% | 7% | 8% | | Travel and leisure | 6% | 8% | 7% | | Other | 18% | 15% | 14% | - As of June 29, 2024, Sysco employed approximately 76,000 people, an increase from 72,000 in the prior year. About 15% of the workforce is represented by unions24 - The company estimates its market share at approximately 17% of the $360 billion U.S. foodservice market for calendar year 202330 Item 1A. Risk Factors Sysco faces key risks from low industry margins, inflation, labor shortages, supply chain issues, cybersecurity, and high indebtedness - The foodservice distribution industry is characterized by low profit margins and is highly sensitive to product cost inflation and deflation, which can adversely affect results of operations4849 - A shortage of qualified labor, particularly warehouse workers and drivers, could increase costs and decrease the ability to serve customers effectively. Increases in labor costs, such as minimum wage hikes, also pose a risk to profitability5051 - The company relies heavily on technology and is vulnerable to cybersecurity incidents. A past event in March 2023 resulted in the extraction of company data, though it did not impact operational systems103104 - As of June 29, 2024, the company had approximately $12.0 billion in total indebtedness, which could limit financial flexibility and increase vulnerability to adverse economic conditions115 - Sysco contributes to several underfunded multiemployer pension plans and estimates its potential withdrawal liability could be as much as $141 million as of August 16, 2024118120 Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None128 Item 1C. Cybersecurity Sysco's cybersecurity strategy, overseen by the Board's Technology Committee and CISO, includes prevention and detection, with no material threats identified in fiscal 2024 - Cybersecurity oversight is managed by the Board's Technology Committee, with direct supervision from the CISO, CIO, CEO, CFO, and General Counsel130131132 - The company's cybersecurity program includes employee training, threat intelligence monitoring, third-party risk management, and partnerships with government and commercial experts135 - During the fiscal year ended June 29, 2024, Sysco has not identified any risks from cybersecurity threats that have materially affected or are reasonably anticipated to materially affect the company137 Item 2. Properties As of June 29, 2024, Sysco operated 340 global distribution facilities totaling 56.6 million square feet, owning 70.8% of the space and 90% of its 18,000 vehicle fleet Distribution Facilities by Location (as of June 29, 2024) | Location | Number of Facilities | Square Feet (thousands) | | :--- | :--- | :--- | | United States and its territories | 204 | 44,226 | | France | 42 | 3,015 | | United Kingdom | 42 | 2,435 | | Canada | 28 | 4,250 | | Other International | 24 | 2,680 | | Totals | 340 | 56,605 | - The company owns approximately 40.1 million square feet, or 70.8% of its total distribution facility space138 - The company's fleet comprises approximately 18,000 delivery vehicles, with about 90% being owned and the remainder leased141 Item 3. Legal Proceedings Sysco is not party to any pending legal proceedings or environmental matters expected to materially affect its financial condition or operations - The company does not believe any pending legal proceedings will have a material adverse effect on its financial condition, results of operations, or cash flows142 Item 4. Mine Safety Disclosures This item is not applicable to the company - None144 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Sysco's common stock trades on the NYSE; the company repurchased $1.2 billion in shares during fiscal 2024, with $2.8 billion remaining authorized Issuer Purchases of Equity Securities (Q4 FY2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | March 31 - April 27 | 1,983,915 | $77.12 | | April 28 - May 25 | 2,251,129 | $75.52 | | May 26 - June 29 | 3,005,111 | $72.50 | | Totals | 7,240,155 | $74.70 | - For the full fiscal year 2024, Sysco repurchased 16,128,932 shares for $1.2 billion147 - As of June 29, 2024, approximately $2.8 billion remained available for repurchase under the company's $5 billion share repurchase program approved in May 2021147146 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Sysco's fiscal 2024 sales grew 3.3% to $78.8 billion, with operating income up 5.4%, driven by strategic initiatives and projected 4-5% sales growth in fiscal 2025 Fiscal 2024 Financial Highlights vs. Fiscal 2023 | Metric | Fiscal 2024 | Change vs. FY2023 | | :--- | :--- | :--- | | Sales | $78.8 billion | +3.3% | | Operating Income | $3.2 billion | +5.4% | | Adjusted Operating Income | $3.5 billion | +8.4% | | Net Earnings | $2.0 billion | +10.5% | | Adjusted Net Earnings | $2.2 billion | +6.0% | | Diluted EPS | $3.89 | +12.1% | | Adjusted Diluted EPS | $4.31 | +7.5% | - The company's 'Recipe for Growth' strategy is focused on five pillars: Digital, Products and Solutions, Supply Chain, Customer Teams, and Future Horizons179180181 - For fiscal 2025, the company projects net sales growth of 4% to 5%, driven by low single-digit volume growth and an inflation rate of approximately 2%173 Results of Operations Fiscal 2024 consolidated sales increased 3.3% to $78.8 billion, with gross profit up 4.7% and operating income rising 5.4% Consolidated Results of Operations (% Change FY2024 vs FY2023) | Metric | % Change | | :--- | :--- | | Sales | 3.3% | | Gross profit | 4.7% | | Operating expenses | 4.5% | | Operating income | 5.4% | | Net earnings | 10.5% | | Diluted earnings per share | 12.1% | Segment Sales (in millions) | Segment | FY 2024 (in millions) | FY 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | U.S. Foodservice Operations | $55,339 | $53,683 | 3.1% | | International Foodservice Operations | $14,561 | $13,560 | 7.4% | | SYGMA | $7,768 | $7,843 | (1.0)% | | Other | $1,176 | $1,239 | (5.1)% | | Consolidated Total | $78,844 | $76,325 | 3.3% | Segment Operating Income (in millions) | Segment | FY 2024 (in millions) | FY 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | U.S. Foodservice Operations | $3,673 | $3,587 | 2.4% | | International Foodservice Operations | $375 | $314 | 19.4% | | SYGMA | $72 | $56 | 28.6% | | Other | $40 | $57 | (29.8)% | | Total Segments | $4,160 | $4,014 | 3.6% | Liquidity and Capital Resources Sysco generated $3.0 billion in operating cash flow and $2.2 billion in free cash flow in fiscal 2024, with $3.5 billion in liquidity and $12.0 billion in total debt Key Cash Flow and Liquidity Metrics (FY2024 vs FY2023) | Metric (in billions) | Fiscal 2024 | Fiscal 2023 | | :--- | :--- | :--- | | Cash Flow from Operations | $3.0 | $2.9 | | Free Cash Flow (Non-GAAP) | $2.2 | $2.1 | | Cash for Acquisitions | $1.2 | $0.037 | | Dividends Paid | $1.0 | $1.0 | | Share Repurchases | $1.2 | $0.5 | - As of June 29, 2024, the company had $696 million in cash and cash equivalents and approximately $3.5 billion in total available liquidity226222 - The company expects capital expenditures in fiscal 2025 to be approximately 1.0% of sales, consistent with fiscal 2024235 Item 7A. Quantitative and Qualitative Disclosures about Market Risk Sysco manages market risks including interest rate, foreign currency, and fuel price, with 98% of its $12.0 billion debt at fixed rates and 70% of fiscal 2025 fuel needs hedged - Total debt was $12.0 billion as of June 29, 2024, with approximately 98% at fixed rates of interest, mitigating exposure to short-term interest rate fluctuations279 - The company's largest foreign currency exposures are to the Canadian dollar, British pound sterling, and Euro283 - Sysco uses diesel fuel swap contracts to manage fuel price risk and expects to lock in the price for approximately 70% of its total projected fuel purchase needs for fiscal 2025287 Item 8. Financial Statements and Supplementary Data This section presents Sysco's audited consolidated financial statements for fiscal years 2022-2024, including balance sheets, income statements, cash flows, and detailed notes Consolidated Financial Statements As of June 29, 2024, Sysco reported $24.9 billion in total assets, $1.9 billion in equity, $78.8 billion in sales, and $3.0 billion in operating cash flow Consolidated Results of Operations (in millions, except per share data) | | FY 2024 (in millions) | FY 2023 (in millions) | FY 2022 (in millions) | | :--- | :--- | :--- | :--- | | Sales | $78,844 | $76,325 | $68,636 | | Gross Profit | $14,608 | $13,955 | $12,320 | | Operating Income | $3,202 | $3,039 | $2,346 | | Net Earnings | $1,955 | $1,770 | $1,359 | | Diluted EPS | $3.89 | $3.47 | $2.64 | Consolidated Balance Sheet Data (in millions) | | Jun 29, 2024 (in millions) | Jul 1, 2023 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $11,043 | $10,608 | | Total Assets | $24,917 | $22,821 | | Total Current Liabilities | $9,241 | $8,540 | | Total Long-term Debt | $11,513 | $10,348 | | Total Shareholders' Equity | $1,860 | $2,009 | Consolidated Cash Flow Data (in millions) | | FY 2024 (in millions) | FY 2023 (in millions) | FY 2022 (in millions) | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $2,989 | $2,868 | $1,791 | | Net Cash for Investing Activities | $(1,962) | $(785) | $(1,878) | | Net Cash for Financing Activities | $(1,038) | $(2,056) | $(1,987) | Notes to Consolidated Financial Statements The notes detail accounting policies, acquisitions, $12.0 billion in debt, pension status, and segment performance, with U.S. Foodservice contributing 70.2% of fiscal 2024 sales - In fiscal 2024, Sysco paid $1.2 billion for several acquisitions, including the $965 million cash purchase of Edward Don & Company, a distributor of foodservice equipment and supplies368369 - As of June 29, 2024, total debt was $12.0 billion, consisting primarily of senior notes and debentures with maturities ranging from fiscal 2025 to 2052404406 - The company's U.S. defined benefit pension plan was underfunded by $395 million as of June 29, 2024, while its international plans were underfunded by $137 million428 Segment Financial Data (FY 2024, in millions) | Segment | Sales (in millions) | Operating Income (in millions) | Assets (in millions) | | :--- | :--- | :--- | :--- | | U.S. Foodservice | $55,339 | $3,673 | $12,505 | | International Foodservice | $14,561 | $375 | $7,545 | | SYGMA | $7,768 | $72 | $923 | | Other | $1,176 | $40 | $616 | Item 9A. Controls and Procedures Management concluded disclosure controls were effective as of June 29, 2024, with no material changes to internal control over financial reporting in Q4 - The CEO and CFO concluded that as of June 29, 2024, the company's disclosure controls and procedures were effective at the reasonable assurance level544 - There were no changes in internal control over financial reporting during the fourth quarter of fiscal 2024 that materially affected, or are reasonably likely to materially affect, internal controls547 Part III Items 10-14 Information for Items 10-14 is incorporated by reference from the company's 2024 definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2024 Proxy Statement550552553 Part IV Item 15. Exhibit and Financial Statement Schedules This section provides an index of all financial statements and exhibits filed with the Form 10-K, including governance and debt documents - This section contains the index of all financial statements and exhibits filed with the Form 10-K553554 Item 16. Form 10-K Summary The company indicates that no Form 10-K summary is provided - None561