Edgar Filing: SYSCO CORP

Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

Form 10-Q

(Mark One)

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

For the quarterly period ended October 1, 2016

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-6544

________________

Sysco Corporation

(Exact name of registrant as specified in its charter)



Delaware	74-1648137
(State or other jurisdiction of	(IRS employer
incorporation or organization)	identification number)
1390 Enclave Parkway	77077-2099
Houston, Texas	(Zip Code)
(Address of principal executive offices)

Registrant’s Telephone Number, Including Area Code:

(281) 584-1390

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer ☑	Accelerated Filer ☐
Non-accelerated Filer ☐ (Do not check if a smaller reporting company)	Smaller Reporting Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

546,931,309 shares of common stock were outstanding as of October 21, 2016.

TABLE OF CONTENTS



		Page No.
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40

Signatures		41

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)



	Oct. 1, 2016			Jul. 2, 2016			Sep. 26, 2015
	(unaudited)						(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	759,898		$	3,919,300		$	388,256
Accounts and notes receivable, less allowances of $41,246, $37,880, and $46,470	4,191,460			3,380,971			3,531,105
Inventories	3,025,811			2,639,174			2,841,361
Deferred income taxes	—			—			85,416
Prepaid expenses and other current assets	158,301			114,454			93,015
Prepaid income taxes	—			—			88,807
Total current assets	8,135,470			10,053,899			7,027,960
Plant and equipment at cost, less depreciation	4,418,524			3,880,442			3,961,299
Other long-term assets
Goodwill	3,815,674			2,121,661			1,981,390
Intangibles, less amortization	1,203,888			207,461			168,541
Deferred income taxes	198,867			207,320			—
Other assets	252,387			251,021			232,361
Total other long-term assets	5,470,816			2,787,463			2,382,292
Total assets	$	18,024,810		$	16,721,804		$	13,371,551

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable	$	6,834		$	89,563		$	51,806
Accounts payable	3,716,517			2,935,982			2,887,863
Accrued expenses	1,381,300			1,289,312			999,337
Accrued income taxes	252,681			110,690			—
Current maturities of long-term debt	9,218			8,909			31,810
Total current liabilities	5,366,550			4,434,456			3,970,816
Long-term liabilities
Long-term debt	7,843,517			7,336,930			3,004,618
Deferred income taxes	218,414			26,942			160,688
Other long-term liabilities	1,498,680			1,368,482			885,501
Total long-term liabilities	9,560,611			8,732,354			4,050,807
Commitments and contingencies
Noncontrolling interest	76,863			75,386			44,243
Shareholders' equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none	—			—			—
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares	765,175			765,175			765,175
Paid-in capital	1,313,245			1,281,140			1,231,506
Retained earnings	9,159,866			9,006,138			8,816,245
Accumulated other comprehensive loss	(1,434,940		)	(1,358,118		)	(1,007,539		)
Treasury stock at cost, 216,182,601, 205,577,484 and 169,052,528 shares	(6,782,560		)	(6,214,727		)	(4,499,702		)
Total shareholders' equity	3,020,786			3,479,608			5,305,685
Total liabilities and shareholders' equity	$	18,024,810		$	16,721,804		$	13,371,551

Note: The July 2, 2016 balance sheet has been derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)

(In thousands, except for share and per share data)



	13-Week Period Ended
	Oct. 1, 2016			Sep. 26, 2015
Sales	$	13,968,654		$	12,562,611
Cost of sales	11,276,735			10,324,616
Gross profit	2,691,919			2,237,995
Operating expenses	2,125,086			1,744,521
Operating income	566,833			493,474
Interest expense	73,623			126,907
Other expense (income), net	(7,216		)	(15,240		)
Earnings before income taxes	500,426			381,807
Income taxes	176,539			137,387
Net earnings	$	323,887		$	244,420

Net earnings:
Basic earnings per share	$	0.58		$	0.41
Diluted earnings per share	0.58			0.41

Average shares outstanding	555,437,764			596,698,935
Diluted shares outstanding	560,954,068			600,789,913

Dividends declared per common share	$	0.31		$	0.30

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)



	13-Week Period Ended
	Oct. 1, 2016			Sep. 26, 2015
Net earnings	$	323,887		$	244,420
Other comprehensive income (loss):
Foreign currency translation adjustment	(89,553		)	(87,229		)
Items presented net of tax:
Gains and losses on cash flow hedges	1,770			1,676
Change in fair value of cash flow hedges	(319		)	(3,778		)
Amortization of prior service cost	1,752			1,715
Amortization of actuarial loss, net	8,790			3,275
Prior service cost arising in current year	738			—
Total other comprehensive income (loss)	(76,822		)	(84,341		)
Comprehensive income	$	247,065		$	160,079

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED CASH FLOWS (Unaudited)

(In thousands)



	13-Week Period Ended
	Oct. 1, 2016			Sep. 26, 2015
Cash flows from operating activities:
Net earnings	$	323,887		$	244,420
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense	25,127			11,636
Depreciation and amortization	211,685			135,961
Amortization of debt issuance and other debt-related costs	6,560			6,161
Loss on extinguishment of debt	—			86,460
Deferred income taxes	11,374			124,631
Provision for losses on receivables	(440		)	1,546
Other non-cash items	(6,829		)	(4,511		)
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
(Increase) in receivables	(136,097		)	(211,035		)
(Increase) in inventories	(149,759		)	(162,867		)
(Increase) decrease in prepaid expenses and other current assets	(12,657		)	165
Increase in accounts payable	110,914			23,580
(Decrease) in accrued expenses	(259,698		)	(470,409		)
Increase in accrued income taxes	145,601			5,833
(Increase) in other assets	(17,066		)	(10,354		)
Increase (decrease) in other long-term liabilities	1,340			(38,419		)
Excess tax benefits from share-based compensation arrangements	(5,268		)	(4,280		)
Net cash provided by (used for) operating activities	248,674			(261,482		)
Cash flows from investing activities:
Additions to plant and equipment	(142,255		)	(121,243		)
Proceeds from sales of plant and equipment	4,261			1,506
Acquisition of businesses, net of cash acquired	(2,910,461		)	(83,598		)
Decrease in restricted cash	—			168,274
Net cash used for investing activities	(3,048,455		)	(35,061		)
Cash flows from financing activities:
Bank and commercial paper borrowings (repayments), net	442,777			717,600
Other debt borrowings	1,201			4,148
Other debt repayments	(94,935		)	(3,659		)
Redemption of senior notes	—			(5,050,000		)
Debt issuance costs	(2,846		)	—
Cash received from termination of interest rate swap agreements	—			14,496
Proceeds from stock option exercises	32,307			54,768
Treasury stock purchases	(600,139		)	—
Dividends paid	(173,292		)	(179,037		)
Excess tax benefits from share-based compensation arrangements	5,268			4,280
Net cash used for financing activities	(389,659		)	(4,437,404		)
Effect of exchange rates on cash and cash equivalents	30,038			(7,841		)
Net decrease in cash and cash equivalents	(3,159,402		)	(4,741,788		)
Cash and cash equivalents at beginning of period	3,919,300			5,130,044
Cash and cash equivalents at end of period	$	759,898		$	388,256
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	118,426		$	93,976
Income taxes	24,406			13,298

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

1. BASIS OF PRESENTATION

The consolidated financial statements have been prepared by the company, without audit, with the exception of the July 2, 2016 consolidated balance sheet, which was derived from the audited consolidated financial statements included in the company's fiscal 2016 Annual Report on Form 10-K. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income 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.

On July 5, 2016, Sysco consummated its acquisition of Cucina Lux Investments Limited (a private company limited by shares organized under the laws of England and Wales), a holding company of the Brakes Group. This is further described in Note 4, "Acquisitions". This acquisition, combined with a change in how the chief operating decision maker assesses performance and allocates resources, resulted in a change in the company's segment reporting. This is further described in Note 13, "Business Segment Information".

Deferred taxes within the consolidated balance sheet for October 1, 2016, have been classified as long-term due to the adoption of an accounting pronouncement related to simplification in the presentation of deferred taxes. See Note 2, "Changes in Accounting" for additional information on these changes.

These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the company's fiscal 2016 Annual Report on Form 10-K. Certain footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.

The interim financial information herein has been reviewed by Ernst & Young LLP, independent registered public accounting firm, in accordance with established professional standards and procedures for such a review. A Review Report of Independent Registered Public Accounting Firm has been issued by Ernst & Young LLP and is included as Exhibit 15.1 to this Form 10-Q.

2. CHANGES IN ACCOUNTING

Simplification of Balance Sheet Classification of Deferred Taxes

In November 2015, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, as part of its simplification initiative, which is the FASB's effort to reduce the cost and complexity of certain aspects of U.S. GAAP. This guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as non-current on the balance sheet. The guidance does not change the existing requirement that only permits offsetting of deferred tax assets and deferred tax liabilities within a jurisdiction. The company early adopted this standard in the second quarter of fiscal 2016 on a prospective basis, as permitted by the ASU.

3. NEW ACCOUNTING STANDARDS

Guidance in Presentation of Cash Flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The eight specific issues are (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Businesses Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6) Distributions Received from Equity Method Invitees; (7) Beneficial Interests in Securitization Transactions; and (8) Separately Identifiable Cash and Application of the Predominance Principle. The guidance is effective for interim and annual periods beginning after December 15, 2017, which is fiscal 2019 for Sysco, with early adoption permitted. The company is currently reviewing the provisions of the new standard.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In addition, Topic 842 expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, which is fiscal 2020 for Sysco, with early adoption permitted. The company is currently reviewing the provisions of the new standard.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The collective guidance is effective for interim and annual periods beginning after December 15, 2017, which is fiscal 2019 for Sysco, and could be early adopted in fiscal 2018. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The company has not selected a transition method and is currently evaluating the impact of the pending adoption of this ASU on its ongoing financial reporting.

4. ACQUISITIONS

During the first 13 weeks of fiscal 2017, the company paid cash of $2.9 billion for acquisitions, net of cash acquired. Certain current year and prior year 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 October 1, 2016, aggregate contingent consideration outstanding was $20.7 million, of which $6.7 million was recorded as earnout liabilities.

Brakes Group

On July 5, 2016, Sysco consummated its acquisition of Cucina Lux Investments Limited (a private company limited by shares organized under the laws of England and Wales), a holding company of the Brakes Group, pursuant to an agreement for the sale and purchase of securities in the capital of the Brakes Group, dated as of February 19, 2016 (the Purchase Agreement), by and among Sysco, entities affiliated with Bain Capital Investors, LLC, and members of management of the Brakes Group (the Acquisition). Following the closing of the Acquisition, the Brakes Group became a wholly-owned subsidiary of Sysco.

The Brakes Group is a leading European foodservice business by revenue, supplying fresh, refrigerated and frozen food products, as well as non-food products and supplies, to more than 50,000 foodservice customers ranging from large customers, including leisure, pub, restaurant, hotel and contract catering groups, to smaller customers, including independent restaurants, hotels, fast food outlets, schools and hospitals. Brakes Group businesses include: Brakes, Brakes Catering Equipment, Brake France, Country Choice, Davigel, Fresh Direct, Freshfayre, M&J Seafood, Menigo Foodservice, Pauley's, Wild Harvest and Woodward Foodservice. The Brakes Group has leading market positions in the U.K., France, and Sweden, in addition to a presence in Ireland, Belgium, Spain and Luxembourg. The principal reasons for the Acquisition was the ability to expand Sysco's footprint and infrastructure in Europe and profitably grow Sysco's business. These contributed to a purchase price that resulted in recognition of goodwill.

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

Total consideration has been determined to be as follows (in thousands):



Cash consideration paid, net of cash acquired	$	626,442
Payment for Brakes outstanding financial debt	2,284,100
Total consideration paid, net of cash acquired	$	2,910,542

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



	Preliminary Purchase Price Allocation
Accounts receivable	$	720,053
Inventory	248,031
Plant and equipment	540,928
Other assets	9,842
Goodwill and other intangibles ⁽¹⁾	2,860,179
Total assets	4,379,033
Accounts payable	(736,881		)
Accrued expenses	(240,436		)
Deferred tax liabilities	(213,614		)
Other liabilities	(277,560		)
Total consideration, net of cash acquired	$	2,910,542

⁽¹⁾

The excess purchase price of $1.7 billion was assigned to goodwill, none of which is deductible for income tax purposes. This goodwill has been assigned to the International Foodservice Operations reportable segment. Intangible assets added include customer relationships of $917.6 million with a weighted average life of 12 years and trademarks and trade names of $140.6 million that are indefinite lives assets. Amortization expense is being recognized on a straight line basis and for the first quarter of fiscal 2017 was $19.1 million.

The quarter ended October 1, 2016 includes the results of operations of the Brakes Group for the period from July 5, 2016 to October 1, 2016. The consolidated statement of operations for the quarter ended October 1, 2016 includes $1.3 billion of sales and $18.9 million of net earnings attributable to the Brakes Group. Sysco incurred debt in order to fund the Acquisition; however, the interest expense on that debt is not reflected within the earnings from operations attributable to the Brakes Group.

Unaudited Pro forma Results

The following table presents the company’s pro forma consolidated sales, earnings before income taxes, and net earnings for the quarter ended September 26, 2015. The unaudited pro forma results include the historical statements of operations information of the company and of Brakes Group, giving effect to the Acquisition and related financing as if they had occurred at the beginning of the period presented (in thousands, except per share data).



	13-Week Period Ended
	Sep. 26, 2015

Sales	$	13,992,188
Income before Taxes	$	369,579
Net Earnings	$	236,091

Net earnings:
Basic earnings per common share	$	0.40
Diluted earnings per common share	$	0.39

The pro forma results, prepared in accordance with U.S. GAAP, include the following pro forma adjustments related to the Acquisition.


(i)	Additional amortization expense related to the fair value of intangible assets acquired.


(ii)	Additional depreciation expense related to the fair value of property and equipment acquired.


(iii)	The elimination of interest expense assuming the long-term debt paid off on behalf of the Brakes Group as of the Acquisition date had been retired as of June 28, 2015.


(iv)	The addition of interest expense incurred by Sysco due to the Acquisition of the Brakes Group.


(v)	The elimination of interest income from related party debt instruments issued to the Brakes Group prior to the Acquisition.


(vi)	The elimination of Brakes' minority interests, as the majority of the interests were repurchased before the Acquisition.

The unaudited pro forma results do not include any sales or cost reductions that may be achieved through the business combination, or the impact of non-recurring items directly related to the business combination or the nature and amount of any material, nonrecurring pro forma adjustments.

The unaudited pro forma results are not necessarily indicative of the operating results that would have occurred if the Acquisition had been completed as of the date for which the pro forma financial information is presented. In addition, the unaudited pro forma results do not purport to project the future consolidated operating results of the combined companies.

5. FAIR VALUE MEASUREMENTS

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


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


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


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

Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include 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. Restricted cash consists of investments in high-quality money market funds. Any derivative instruments described below are discussed further in Note 6, "Derivative Financial Instruments"

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


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


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


•	The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates. These are included as Level 2 measurements in the tables below.


•	The foreign currency swap agreements are valued using a swap valuation model that utilizes an income approach applying observable market inputs including interest rates, LIBOR swap rates for U.S. dollars, pound sterling and Euro currencies, and credit default swap rates. These are included as Level 2 measurements in the tables below.


•	Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. These are included as Level 2 measurements in the tables below.


•	Fuel hedges are valued based on observable market transactions of forward commodity prices. These are included as Level 2 measurements in the tables below.

•

Contingent consideration in the form of earnout agreements relating to acquisitions is determined utilizing a discounted cash flow approach using various probability-weighted scenarios. The significant unobservable inputs used in calculating the fair value of the contingent consideration includes financial performance scenarios, the probability of achieving those scenarios and the discount rate. These are included in contingent consideration liabilities as Level 3 measurements in the table below. For additional information, see Note 4, "Acquisitions".

The following tables present the company’s assets and liabilities measured at fair value on a recurring basis as of October 1, 2016, July 2, 2016 and September 26, 2015:



	Assets and Liabilities Measured at Fair Value as of Oct. 1, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	9,176	$	43,270	$	—	$	52,446
Other assets
Interest rate swap agreements	—		18,935		—		18,935
Foreign currency swaps	—		3,979		—		3,979
Foreign currency forwards	—		873		—		873
Total assets at fair value	$	9,176	$	67,057	$	—	$	76,233

Liabilities:
Contingent consideration	$	—	$	—	$	6,659	$	6,659
Other long-term liabilities
Cross-currency swaps	—		3,184		—		3,184
Foreign currency swaps	—		10,695		—		10,695
Fuel hedges	—		618		—		618
Total liabilities at fair value	$	—	$	14,497	$	6,659	$	21,156



	Assets and Liabilities Measured at Fair Value as of Jul. 2, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	634,230	$	43,270	$	—	$	677,500
Other assets
Interest rate swap agreements	—		36,805		—		36,805
Total assets at fair value	$	634,230	$	80,075	$	—	$	714,305

Liabilities:
Contingent consideration	$	—	$	—	$	16,439	$	16,439
Total liabilities at fair value	$	—	$	—	$	16,439	$	16,439



	Assets and Liabilities Measured at Fair Value as of Sep. 26, 2015
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	102,508	$	62,131	$	—	$	164,639
Other assets
Interest rate swap agreement	—		8,219		—		8,219
Total assets at fair value	$	102,508	$	70,350	$	—	$	172,858

Liabilities:
Contingent consideration	$	—	$	—	$	28,722	$	28,722
Total liabilities at fair value	$	—	$	—	$	28,722	$	28,722

The significant unobservable inputs used in the fair value measurements of our Level 3 contingent consideration liabilities related to earnout agreements were as follows:



	13-Week Period Ended
	Oct. 1, 2016		Sep. 26, 2015
Unobservable Inputs:	(Weighted Average)
Probability of achieving payout targets	92.1	%	93.2	%
Discount Rate	8.3	%	11.5	%

A decrease in probabilities of achieving the targets or an increase in the discount rates would result in a lower fair value measurement. The fair value of contingent consideration for earnout agreements is reassessed quarterly, including an analysis of the significant inputs used in the valuation, as well as the accretion of the present value discount. Changes are reflected within Operating expense in the consolidated results of operations.

The following table provides the changes in fair value of the contingent consideration for earnout liabilities for the periods presented (in thousands):



	13-Week Period Ended
	Oct. 1, 2016			Sep. 26, 2015
Balance at the beginning of year	$	16,439		$	28,644
Contingent consideration liabilities recorded for business acquisitions	(142		)	(125		)
Payments	(9,537		)	(75		)
Currency translation	(101		)	278
Balance as of the end of the quarter	$	6,659		$	28,722

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 issue or on the current rates offered to the company for debt of the same remaining maturities and is considered a Level 2 measurement. The fair value of total debt approximated $8.4 billion, $7.9 billion and $3.1 billion as of October 1, 2016, July 2, 2016 and September 26, 2015, respectively. The carrying value of total debt was $7.8 billion, $7.4 billion and $2.9 billion as of October 1, 2016, July 2, 2016 and September 26, 2015, respectively.

6. DERIVATIVE FINANCIAL INSTRUMENTS

Sysco uses derivative financial instruments to enact hedging strategies for risk mitigation purposes; however, the company does not use derivative financial instruments for trading or speculative purposes.

Hedging 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. Details of outstanding swap agreements as of October 1, 2016 are below:



Maturity Date of Swap	Notional Value (in millions)		Fixed Coupon Rate on Hedged Debt		Floating Interest Rate on Swap	Floating Rate Reset Terms
February 12, 2018	$	500	5.25	%	Six-month LIBOR	Every six months in arrears
April 1, 2019	$	500	1.90	%	Three-month LIBOR	Every three months in advance
October 1, 2020	$	750	2.60	%	Three-month LIBOR	Every three months in advance
July 15, 2021	$	500	2.50	%	Three-month LIBOR	Every three months in advance

Hedging of foreign currency risk

In the first quarter of fiscal 2017, Sysco entered into cross-currency swap contracts to hedge the foreign currency transaction risk of certain pound sterling-denominated intercompany loans with a total notional value of £234.2 million. Gains and losses from these swaps offset the changes in value of interest and principal payments as a result of changes in foreign exchange rates, which are recorded in other expense (income), net in the consolidated results of operations. The company recognizes the difference between the U.S. dollar interest payments received from the swap counterparty and the U.S. dollar equivalent of the pound sterling interest payments made to the swap counterparty in other expense (income), net on the consolidated results of operations. This difference varies over time and is driven by a number of market factors, including relevant interest rate differentials and foreign exchange rates. These swaps have been designated as cash flow hedges and mature in July 2021, at the same time as the related loans. There are no credit-risk-related contingent features associated with these swaps.

The company also entered into cross currency swap contracts to hedge the foreign currency exposure of our net investment in certain foreign operations. The effective portion of the derivative gain or loss is recorded in accumulated other comprehensive income and will be subsequently reclassified to earnings when the hedged net investment is either sold or substantially liquidated. Sysco also designated its Euro-denominated debt of €500 million issued in June 2016 as a net-investment hedge. 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.

Sysco's operations in the United Kingdom and Sweden have inventory purchases denominated in currencies other than their functional currency such as Euro, U.S. dollar, Polish zloty and Danish krone. These inventory purchases give rise to foreign currency exposure between the functional currency of these entities 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. These swap contracts are recorded at fair value on the balance sheet and within accumulated other comprehensive income. The amount of ineffectiveness, if any, is recorded in earnings. Amounts in accumulated other comprehensive income are reclassified into earnings in the same period during which the hedged forecasted transactions affect earnings, which is the period in which the company recognizes the sales associated with the specified foreign currency-denominated inventory purchases.

Hedging of fuel price risk

As a result of the Acquisition, Sysco acquired the Brakes Group fuel commodity swaps used to hedge against the risk of the change in the price of diesel on anticipated future purchases. These swaps have maturity dates extending into June 2017 and have been designated as cash flow hedges. These swap contracts are recorded at fair value on the balance sheet and within accumulated other comprehensive income. The amount of ineffectiveness, if any, is recorded in earnings. Amounts in accumulated other comprehensive income are reclassified into earnings in the same period during which the hedged forecasted transactions occur, which is when the fuel is expected to be procured.

The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of October 1, 2016, July 2, 2016 and September 26, 2015 are as follows:



		Derivative Fair Value
	Balance Sheet location	Oct. 1, 2016		Sep. 26, 2015		Jul. 2, 2016
		(In thousands)
Fair value hedges:
Interest rate swap agreements	Other assets	$	18,935	$	8,219	$	36,805

Cash Flow Hedges:
Foreign currency forwards	Other assets	$	873	$	—	$	—
Fuel hedges	Other long-term liabilities	618		—		—
Cross currency swaps	Other long-term liabilities	3,184		—		—

Net Investment Hedges:
Foreign currency swaps	Other assets	$	3,979	$	—	$	—
Foreign currency swaps	Other long-term liabilities	10,695		—		—

The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 13-week periods ended October 1, 2016 and September 26, 2015 presented on a pretax basis are as follows:



	Location of (Gain) or Loss Recognized	Amount of (Gain) or Loss Recognized
		13-Week Period Ended
		Oct. 1, 2016			Sep. 26, 2015
		(In thousands)
Fair Value Hedge Relationships:
Interest rate swap agreements	Interest expense	$	(3,400	)	$	(1,997	)

Amounts related to cash flow hedge relationships were not material. For fair value hedges of interest rate risk, hedge ineffectiveness represents the difference between the changes in the fair value of the derivative instruments and the changes in fair value of the fixed rate debt attributable to changes in the benchmark interest rate. For cash flow hedges, hedge ineffectiveness is the lesser of the change in the fair value of the derivative compared to the change in the hedged transaction. Hedge ineffectiveness is recorded directly in earnings within interest expense for interest rate swaps, other income and expense, net for hedging of the foreign exchange risk on intercompany loans, cost of sales for foreign exchange risk on inventory purchases and operating expense for fuel hedging. All amounts were immaterial for the first quarter of fiscal 2017 and 2016. None of the instruments contain credit-risk-related contingent features.

7. DEBT

Sysco has a commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $1.5 billion. As of October 1, 2016, there was $442.8 million in outstanding commercial paper classified as long-term debt due to the underlying long-term revolving credit facility. This facility, in the amount of $1.5 billion, expired on December 29, 2018, but was subject to extension. During the first 13 weeks of 2017, aggregate outstanding commercial paper and short-term bank borrowings ranged from zero to approximately $694.3 million.

On November 2, 2016, the company's existing long-term revolving credit facility was terminated and a new facility in the amount of $2.0 billion was established. The new facility expires on November 2, 2021, but is subject to extension.

8. EARNINGS PER SHARE

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



	13-Week Period Ended
	Oct. 1, 2016		Sep. 26, 2015
	(In thousands, except for share and per share data)
Numerator:
Net earnings	$	323,887	$	244,420
Denominator:
Weighted-average basic shares outstanding	555,437,764		596,698,935
Dilutive effect of share-based awards	5,516,304		4,090,978
Weighted-average diluted shares outstanding	560,954,068		600,789,913
Basic earnings per share	$	0.58	$	0.41
Diluted earnings per share	$	0.58	$	0.41

The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 2,056,000 and 4,500,000 for the first quarter of fiscal 2017 and fiscal 2016, respectively.

9. OTHER COMPREHENSIVE INCOME

Comprehensive income is net earnings plus certain other items that are recorded directly to shareholders’ equity, such as foreign currency translation adjustment, amounts related to cash flow hedging arrangements and certain amounts related to pension and other postretirement plans. Comprehensive income was $247.1 million and $160.1 million for the first quarter of fiscal 2017 and fiscal 2016, respectively.

A summary of the components of other comprehensive income (loss) and the related tax effects for each of the periods presented is as follows:



		13-Week Period Ended Oct. 1, 2016
	Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount			Tax		Net of Tax Amount
		(In thousands)
Pension and other postretirement benefit plans:
Reclassification adjustments:
Amortization of prior service cost	Operating expenses	$	2,844		$	1,092	$	1,752
Amortization of actuarial loss (gain), net	Operating expenses	12,721			3,931		8,790
Prior service cost arising in current year	Operating expenses	738			—		738
Total reclassification adjustments		16,303			5,023		11,280
Foreign currency translation:
Other comprehensive income before reclassification adjustments:
Foreign currency translation adjustment	N/A	(89,553		)	—		(89,553		)
Interest rate swaps:
Reclassification adjustments:
Gains and losses on cash flow hedges	Interest expense	2,873			1,103		1,770
Change in fair value of cash flow hedge	N/A	(319		)	—		(319		)
Total other comprehensive (loss) income		$	(70,696	)	$	6,126	$	(76,822	)



		13-Week Period Ended Sep. 26, 2015
	Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount			Tax			Net of Tax Amount
		(In thousands)
Pension and other postretirement benefit plans:
Reclassification adjustments:
Amortization of prior service cost	Operating expenses	$	2,784		$	1,069		$	1,715
Amortization of actuarial loss (gain), net	Operating expenses	5,317			2,042			3,275
Total reclassification adjustments		8,101			3,111			4,990
Foreign currency translation:
Other comprehensive income before reclassification adjustments:
Foreign currency translation adjustment	N/A	(87,229		)	—			(87,229		)
Interest rate swaps:
Reclassification adjustments:
Gains and losses on cash flow hedges	Interest expense	2,720			1,044			1,676
Change in fair value of cash flow hedges	N/A	(6,134		)	(2,356		)	(3,778		)
Total other comprehensive (loss) income		$	(82,542	)	$	1,799		$	(84,341	)

The following tables provide a summary of the changes in accumulated other comprehensive (loss) income for the periods presented:



	13-Week Period Ended Oct. 1, 2016
	Pension and Other Postretirement Benefit Plans, net of tax			Foreign Currency Translation			Interest Rate Swaps, net of tax			Total
	(In thousands)
Balance as of Jul. 2, 2016	$	(1,104,484	)	$	(136,813	)	$	(116,821	)	$	(1,358,118	)
Equity adjustment from foreign currency translation	—			(89,553		)	—			(89,553		)
Other comprehensive income before reclassification adjustments	—			—			—			—
Gains and losses on cash flow hedges	—			—			1,770			1,770
Change in fair value of cash flow hedges	—			—			(319		)	(319		)
Prior service cost arising in current year	738			—			—			738
Amortization of unrecognized prior service cost	1,752			—			—			1,752
Amortization of unrecognized net actuarial losses	8,790			—			—			8,790
Balance as of Oct. 1, 2016	$	(1,093,204	)	$	(226,366	)	$	(115,370	)	$	(1,434,940	)



	13-Week Period Ended Sep. 26, 2015
	Pension and Other Postretirement Benefit Plans, net of tax			Foreign Currency Translation			Interest Rate Swaps, net of tax			Total
	(In thousands)
Balance as of Jun. 27, 2015	$	(705,311	)	$	(97,733	)	$	(120,153	)	$	(923,197	)
Other comprehensive income before reclassification adjustments	—			(87,229		)	—			(87,229		)
Gains and losses on cash flow hedges	—			—			1,676			1,676
Change in fair value of cash flow hedges	—			—			(3,778		)	(3,778		)
Amortization of unrecognized prior service cost	1,715			—			—			1,715
Amortization of unrecognized net actuarial losses	3,274			—			—			3,274
Balance as of Sep. 26, 2015	$	(700,322	)	$	(184,962	)	$	(122,255	)	$	(1,007,539	)

10. SHARE-BASED COMPENSATION

Sysco provides compensation benefits to employees and non-employee directors under several share-based payment arrangements including various employee stock incentive plans, the Employee Stock Purchase Plan (ESPP), and various non-employee director plans.

Stock Incentive Plans

In the first quarter of fiscal 2017, options to purchase 4,923,481 shares were granted to employees. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per option granted during the first quarter of fiscal 2017 was $6.04.

In the first quarter of fiscal 2017, 802,854 performance share units (PSUs) were granted to employees. Based on the jurisdiction in which the employee resides, some of these PSUs were granted with forfeitable dividend equivalents. The fair value of each PSU award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For PSUs granted without dividend equivalents, the fair value was reduced by the present value of expected dividends during the vesting period. The weighted average grant-date fair value per performance share unit granted during the first quarter of fiscal 2017 was $52.19. The PSUs will convert into shares of Sysco common stock at the end of the performance period based on financial performance targets consisting of Sysco's earnings per share compound annual growth rate and adjusted return on invested capital. In the first quarter of fiscal 2017, expense was recognized assuming on-target performance will be achieved.

Employee Stock Purchase Plan

Plan participants purchased 264,900 shares of common stock under the Sysco ESPP during the first quarter of fiscal 2017.

The weighted average fair value per share of employee stock purchase rights issued pursuant to the Employee Stock Purchase Plan was $7.61 during the first quarter of fiscal 2017. The fair value of the stock purchase rights is estimated as the difference between the stock price and the employee purchase price.

All Share-Based Payment Arrangements

The total share-based compensation cost that has been recognized in results of operations was $25.1 million and $11.6 million for the first quarter of fiscal 2017 and fiscal 2016, respectively.

As of October 1, 2016, there was $113.4 million of total unrecognized compensation cost related to share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of 2.51 years.

11. INCOME TAXES

Uncertain Tax Positions

As of October 1, 2016, the gross amount of unrecognized tax benefit and related accrued interest was $23.5 million and $14.4 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months, either because Sysco prevails on positions challenged upon audit or because the company agrees to the disallowance. Items that may cause changes to unrecognized tax benefits primarily include the consideration of various filing requirements in numerous states and the allocation of income and expense between tax jurisdictions. At this time, an estimate of the range of the reasonably possible change cannot be made.

Effective Tax Rate

Sysco’s effective tax rate is reflective of the jurisdictions where the company has operations. The effective tax rates for the first quarter of fiscal 2017 and fiscal 2016 were 35.28% and 35.98%, respectively. Indefinitely reinvested earnings taxed at foreign statutory rates less than our domestic tax rate have the impact of reducing the effective tax rate in both periods. The Acquisition contributed to a lower effective tax rate in the first quarter of fiscal 2017, as the Brakes Group's operations are taxed at a lower rate than Sysco's historical U.S. operations. In the first quarter of fiscal 2017, Sysco experienced a reduction in the effective tax rate due to tax credits and lower tax rates from new tax laws in the United Kingdom. These were largely offset by one-time tax expenses related to the Acquisition primarily from non-deductible transaction costs.

Other

The determination of the company’s provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects a combination of income earned and taxed in the various U.S. federal and state, as well as foreign, jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

12. 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. 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. However, the final results of legal proceedings cannot be predicted with certainty and, if the company failed to prevail in one or more of these legal matters, and the associated realized losses were to exceed the company’s current estimates of the range of potential losses, the company’s consolidated financial position or results of operations could be materially adversely affected in future periods.

13. BUSINESS SEGMENT INFORMATION

The Acquisition, combined with a change in how the chief operating decision maker assesses performance and allocates resources, resulted in a change in Sysco's segment reporting. Sysco has aggregated certain of its operating companies into three reportable segments. "Other" financial information is attributable to the company's other operating segments that have not been aggregated into one of the three reporting segments.


•	U.S. Foodservice Operations - primarily includes U.S. broadline operations, custom-cut meat companies, FreshPoint (our specialty produce companies) and European Imports (a specialty import company);


•	International Foodservice Operations - includes broadline operations in Canada and Europe, including the Brakes Group, Bahamas, Mexico, Costa Rica and Panama, as well as a company that distributes to international customers;


•	SYGMA - our chain restaurant distribution subsidiary; and


•	Other - primarily our hotel supply operations and our Sysco Ventures platform, which includes our suite of technology solutions that help support the business needs of our customers.

Broadline operating companies distribute a full line of food products and a wide variety of non-food products to both traditional and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served. SYGMA operating companies distribute a full line of food products and a wide variety of non-food products to certain chain restaurant customer locations.

The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Management evaluates the performance of each of our operating segments based on its respective operating income results. Corporate expenses generally include all expenses of the corporate office and Sysco’s shared services center. These also include all share-based compensation costs. While a segment’s operating income may be impacted in the short-term by increases or decreases in gross profits, expenses, or a combination thereof, over the long-term each business segment is expected to increase its operating income at a greater rate than sales growth. This is consistent with our long-term goal of leveraging earnings growth at a greater rate than sales growth.

The following tables set forth certain financial information for Sysco’s business segments. Prior year amounts have been reclassified to conform to the current year presentation and include the impact of a change in allocation between corporate and these segments that is not material but is consistent with management's assessment of segment performance in fiscal 2017.



	13-Week Period Ended
	Oct. 1, 2016			Sep. 26, 2015
Sales:	(In thousands)
U.S. Foodservice Operations	$	9,481,115		$	9,407,923
International Foodservice Operations	2,728,360			1,390,259
SYGMA	1,504,692			1,445,904
Other	254,487			318,525
Total	$	13,968,654		$	12,562,611

	13-Week Period Ended
	Oct. 1, 2016			Sep. 26, 2015
Operating income:	(In thousands)
U.S. Foodservice Operations	$	745,231		$	686,669
International Foodservice Operations	79,435			51,920
SYGMA	4,908			5,123
Other	8,001			10,770
Total segments	837,575			754,482
Corporate expenses	(270,742		)	(261,008		)
Total operating income	566,833			493,474
Interest expense	73,623			126,907
Other expense (income), net	(7,216		)	(15,240		)
Earnings before income taxes	$	500,426		$	381,807



	Oct. 1, 2016		July 2, 2016		Sep. 26, 2015
Assets:	(In thousands)
U.S. Foodservice Operations	$	6,988,148	$	6,870,159	$	7,263,246
International Foodservice Operations	6,410,354		2,030,917		1,812,094
SYGMA	583,106		541,796		508,403
Other	433,895		469,830		429,226
Total segments	14,415,503		9,912,702		10,012,969
Corporate	3,609,307		6,809,102		3,358,582
Total	$	18,024,810	$	16,721,804	$	13,371,551

14. SUPPLEMENTAL GUARANTOR INFORMATION - SUBSIDIARY GUARANTEES

On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation. Borrowings under the company’s revolving credit facility supporting the company’s U.S. and Canadian commercial paper programs are also covered under these guarantees. As of October 1, 2016, Sysco had a total of $7.8 billion in senior notes, debentures and commercial paper outstanding that was covered by these guarantees.

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

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



	Condensed Consolidating Balance Sheet
	Oct. 1, 2016
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries		Eliminations			Consolidated Totals
	(In thousands)
Current assets	$	227,329		$	4,043,517		$	3,864,624	$	—		$	8,135,470
Investment in subsidiaries	7,324,607			260,252			758,353		(8,343,212		)	—
Plant and equipment, net	394,254			1,566,905			2,457,365		—			4,418,524
Other assets	199,918			566,954			4,703,944		—			5,470,816
Total assets	$	8,146,108		$	6,437,628		$	11,784,286	$	(8,343,212	)	$	18,024,810
Current liabilities	$	433,751		$	2,138,099		$	2,794,700	$	—		$	5,366,550
Intercompany payables (receivables)	(4,182,835		)	(474,685		)	4,657,520		—			—
Long-term debt	7,607,826			61,663			174,028		—			7,843,517
Other liabilities	1,032,296			156,272			528,526		—			1,717,094
Noncontrolling interest	—			—			76,863		—			76,863
Shareholders’ equity	3,255,070			4,556,279			3,552,649		(8,343,212		)	3,020,786
Total liabilities and shareholders’ equity	$	8,146,108		$	6,437,628		$	11,784,286	$	(8,343,212	)	$	18,024,810



	Condensed Consolidating Balance Sheet
	July 2, 2016
	Sysco			Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)
Current assets	$	3,440,206		$	3,813,524	$	2,800,169		$	—		$	10,053,899
Investment in subsidiaries	6,484,258			224,138		(306,219		)	(6,402,177		)	—
Plant and equipment, net	429,890			1,587,702		1,862,850			—			3,880,442
Other assets	213,186			642,525		1,931,752			—			2,787,463
Total assets	$	10,567,540		$	6,267,889	$	6,288,552		$	(6,402,177	)	$	16,721,804
Current liabilities	$	621,925		$	111,728	$	3,700,803		$	—		$	4,434,456
Intercompany payables (receivables)	(1,348,425		)	2,097,508		(749,083		)	—			—
Long-term debt	7,145,955			62,387		128,588			—			7,336,930
Other liabilities	878,834			248,493		268,097			—			1,395,424
Noncontrolling interest	—			—		75,386			—			75,386
Shareholders’ equity	3,269,251			3,747,773		2,864,761			(6,402,177		)	3,479,608
Total liabilities and shareholders’ equity	$	10,567,540		$	6,267,889	$	6,288,552		$	(6,402,177	)	$	16,721,804



	Condensed Consolidating Balance Sheet
	Sep. 26, 2015
	Sysco		Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries		Eliminations			Consolidated Totals
	(In thousands)
Current assets	$	237,758	$	4,252,595		$	2,537,607	$	—		$	7,027,960
Investment in subsidiaries	9,473,425		—			—		(9,473,425		)	—
Plant and equipment, net	512,397		1,662,227			1,786,675		—			3,961,299
Other assets	203,535		525,372			1,653,385		—			2,382,292
Total assets	$	10,427,115	$	6,440,194		$	5,977,667	$	(9,473,425	)	$	13,371,551
Current liabilities	$	478,158	$	1,105,347		$	2,387,311	$	—		$	3,970,816
Intercompany payables (receivables)	1,041,230		(1,670,713		)	629,483		—			—
Long-term debt	2,884,581		9,337			110,700		—			3,004,618
Other liabilities	715,169		271,194			59,826		—			1,046,189
Noncontrolling interest	—		—			44,243		—			44,243
Shareholders’ equity	5,307,977		6,725,029			2,746,104		(9,473,425		)	5,305,685
Total liabilities and shareholders’ equity	$	10,427,115	$	6,440,194		$	5,977,667	$	(9,473,425	)	$	13,371,551



	Condensed Consolidating Statement of Comprehensive Income
	For the 13-Week Period Ended Oct. 1, 2016
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)
Sales	$	—		$	8,532,859		$	5,880,712		$	(444,917	)	$	13,968,654
Cost of sales	—			6,874,182			4,847,470			(444,917		)	11,276,735
Gross profit	—			1,658,677			1,033,242			—			2,691,919
Operating expenses	217,903			957,964			949,219			—			2,125,086
Operating income (loss)	(217,903		)	700,713			84,023			—			566,833
Interest expense (income)	68,889			(25,034		)	29,768			—			73,623
Other expense (income), net	(14,891		)	(224		)	7,899			—			(7,216		)
Earnings (losses) before income taxes	(271,901		)	725,971			46,356			—			500,426
Income tax (benefit) provision	(95,921		)	256,107			16,353			—			176,539
Equity in earnings of subsidiaries	499,868			—			—			(499,868		)	—
Net earnings	323,888			469,864			30,003			(499,868		)	323,887
Other comprehensive income (loss)	(76,822		)	—			(214,625		)	214,625			(76,822		)
Comprehensive income	$	247,066		$	469,864		$	(184,622	)	$	(285,243	)	$	247,065



	Condensed Consolidating Statement of Comprehensive Income
	For the 13-Week Period Ended Sep. 26, 2015
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)
Sales	$	—		$	8,524,550		$	4,426,998		$	(388,937	)	$	12,562,611
Cost of sales	—			6,912,169			3,801,384			(388,937		)	10,324,616
Gross profit	—			1,612,381			625,614			—			2,237,995
Operating expenses	199,375			956,915			588,231			—			1,744,521
Operating income (loss)	(199,375		)	655,466			37,383			—			493,474
Interest expense (income)	146,097			(39,983		)	20,793			—			126,907
Other expense (income), net	(5,077		)	(477		)	(9,686		)	—			(15,240		)
Earnings (losses) before income taxes	(340,395		)	695,926			26,276			—			381,807
Income tax (benefit) provision	(122,484		)	250,417			9,454			—			137,387
Equity in earnings of subsidiaries	462,331			—			—			(462,331		)	—
Net earnings	244,420			445,509			16,822			(462,331		)	244,420
Other comprehensive income (loss)	(84,341		)	—			(183,185		)	183,185			(84,341		)
Comprehensive income	$	160,079		$	445,509		$	(166,363	)	$	(279,146	)	$	160,079



	Condensed Consolidating Cash Flows
	For the 13-Week Period Ended Oct. 1, 2016
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Consolidated Totals
	(In thousands)
Cash flows provided by (used for):
Operating activities	$	(163,444	)	$	2,236,758		$	(1,824,640	)	$	248,674
Investing activities	(22,729		)	(19,426		)	(3,006,300		)	(3,048,455		)
Financing activities	(225,668		)	(7,492		)	(156,499		)	(389,659		)
Effect of exchange rates on cash	—			—			30,038			30,038
Intercompany activity	(2,833,759		)	(2,206,407		)	5,040,166			—
Net increase (decrease) in cash and cash equivalents	(3,245,600		)	3,433			82,765			(3,159,402		)
Cash and cash equivalents at the beginning of period	3,376,412			34,072			508,816			3,919,300
Cash and cash equivalents at the end of period	$	130,812		$	37,505		$	591,581		$	759,898



	Condensed Consolidating Cash Flows
	For the 13-Week Period Ended Sep. 26, 2015
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Consolidated Totals
	(In thousands)
Cash flows provided by (used for):
Operating activities	$	(525,626	)	$	(317,193	)	$	581,337		$	(261,482	)
Investing activities	138,186			(13,083		)	(160,164		)	(35,061		)
Financing activities	(4,445,507		)	(800		)	8,903			(4,437,404		)
Effect of exchange rates on cash	—			—			(7,841		)	(7,841		)
Intercompany activity	59,403			329,064			(388,467		)	—
Net increase (decrease) in cash and cash equivalents	(4,773,544		)	(2,012		)	33,768			(4,741,788		)
Cash and cash equivalents at the beginning of period	4,851,074			26,377			252,593			5,130,044
Cash and cash equivalents at the end of period	$	77,530		$	24,365		$	286,361		$