01—Abstract
Summary
Summary of the 10-K filed August 25, 2023. Cited figures are marked; the original filing is the authoritative source.
Sysco Corporation (SYY) reported a record fiscal 2023 (52 weeks ended July 1, 2023), with sales rising 11.2%, or $7.7 billion, to $76.3 billiona, and operating income increasing 29.5%, or $692.0 million, to $3.0 billion.
Net earnings increased 30.3%, or $411.4 million, to $1.8 billionb, and diluted earnings per share were $3.47, up from $2.64. On an adjusted basis (excluding Certain Items), adjusted diluted earnings per share were $4.01, a $0.76 increase from $3.25. Management attributed growth primarily to volume: U.S. Foodservice case volume rose 5.2%, and local case volume rose 3.3%, while product cost inflation was 6.1% for the fiscal year.
The results included a $315.4 millionc non-cash pension settlement charge and $122.0 million of income from a litigation financing agreement. Cash flow strengthened, with cash flows from operations of $2.9 billion (compared with $1.8 billion in fiscal 2022) and free cash flow of $2.1 billion (compared with $1.2 billion). Sysco repaid $549.3 million of 1.25% senior notes at maturity and paid $996.0 million in dividends ($1.96 per share).
It repurchased 6,231,071 shares for $500.1 milliond and had approximately $4.0 billion remaining under its repurchase authorization. Total debt was $10.4 billion at July 1, 2023, nearly all at fixed rates, and the company reported approximately $3.7 billion in cash and available liquidity.
Management expects fiscal 2024 sales growth in the mid-single digits, reaching approximately $80 billion in annual sales, with slightly positive enterprise inflation, capital expenditures of about 1% of sales, and an effective tax rate of approximately 24.50%. The filing also discloses a cybersecurity event first detected in March 2023, which has not had a material impact to date, and a 2023 acquisition of BIX Produce.
02—Key points
Key Highlights
- Record fiscal 2023 sales of $76.3 billion, up 11.2%, and operating income of $3.0 billion, up 29.5%.
- Diluted EPS of $3.47 (up 31.4%); adjusted diluted EPS excluding Certain Items of $4.01, up $0.76 from $3.25.
- Growth driven by volume: U.S. Foodservice case volume up 5.2% and local case volume up 3.3%; product cost inflation of 6.1% for the year.
- Free cash flow of $2.1 billion versus $1.2 billion in fiscal 2022, with operating cash flow of $2.9 billion.
- Shareholder returns included $996.0 million in dividends ($1.96 per share) and $500.1 million in share repurchases, with about $4.0 billion remaining under authorization.
- Non-recurring items included a $315.4 million pension settlement charge and $122.0 million of litigation financing income.
- Fiscal 2024 outlook calls for mid-single-digit sales growth, approximately $80 billion in sales, and an effective tax rate near 24.50%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Sysco kept $0.02.
- Revenue$76.33B100.0%
- Cost of revenue−$62.37B81.7%
- Gross profit$13.96B18.3%
- Operating costs−$10.92B14.3%
- Operating income$3.04B4.0%
- Interest, other & tax−$1.27B1.7%
- Net income$1.77B2.3%
Where FY2023 revenue went
$76.33B- Cost of revenue: $62.37B, 82% of revenue
- Operating costs: $10.92B, 14% of revenue
- Net income: $1.77B, 2.3% of revenue
- Interest, other & tax: $1.27B, 1.7% of revenue
Kept 2.3% as net incomeNet income $1.77B · 2.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed August 25, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $76.33B$68.64B | +11.2% |
| Cost of Revenue | $62.37B$56.32B | +10.8% |
| Gross Profit | $13.96B$12.32B | +13.3% |
| Operating Expenses | $10.92B$9.97B | +9.4% |
| Operating Income | $3.04B$2.35B | +29.5% |
| Net Income | $1.77B$1.36B | +30.2% |
| EPS (Basic) | $3.49$2.66 | +31.2% |
| EPS (Diluted) | $3.47$2.64 | +31.4% |
| Shares Outstanding (Basic) | 507.36M510.63M | −0.6% |
| Shares Outstanding (Diluted) | 509.72M514.01M | −0.8% |
05—Questions
Frequently Asked Questions
How did Sysco's profitability change in fiscal 2023?
Operating income rose 29.5%, or $692.0 million, to $3.0 billion, and net earnings rose 30.3%, or $411.4 million, to $1.8 billion. Operating margin was 3.98% versus 3.42% in fiscal 2022. Adjusted operating income, excluding Certain Items, increased 21.7% to $3.2 billion.
What drove sales growth?
Sales increased 11.2% to $76.3 billion. U.S. Foodservice case volume rose 5.2%, and inflation contributed to growth. In International Foodservice, sales rose 15.0%, driven mainly by inflation, partly offset by a negative foreign currency impact of 7.6%.
What are the main risks highlighted in the filing?
Key risks include low industry margins amid product cost inflation or deflation, labor shortages and rising labor costs, fuel price volatility, competition and group purchasing organizations, cybersecurity incidents (including a March 2023 event that has not had a material impact to date), and total debt of $10.4 billion. The filing also notes potential material multiemployer pension withdrawal liability, estimated at as much as $142.6 million.
What is Sysco's capital allocation and liquidity position?
Capital expenditures, net of asset sales, were $751.2 million, about 1.0% of sales. Sysco paid $996.0 million in dividends, repurchased $500.1 million of stock, and repaid $549.3 million of senior notes. As of July 1, 2023, it had about $3.7 billion in cash and available liquidity, no revolver borrowings, and credit ratings of Baa1 (Moody's), BBB (S&P) and BBB (Fitch).
What does management expect for fiscal 2024?
Management expects sales growth in the mid-single digits, reaching approximately $80 billion. It expects inflation to be slightly positive at the enterprise level, with deflation in U.S. Broadline for the first half of the year. Capital expenditures are expected to be about 1% of sales, and the effective tax rate is expected to increase to approximately 24.50%.
06—Continue