Sysco Financial Model

• Total assets: Approximately $22 billion to $24 billion.
• Key asset categories: Accounts Receivable, Inventory, Property, Plant & Equipment (PP&E), and Goodwill.
• Goodwill & intangibles: Approximately 25% to 30% of total assets, reflecting a long history of bolt-on acquisitions.
• Working capital profile:
• Days Sales Outstanding (DSO): 20 to 25 days (restaurants and institutions pay relatively quickly).
• Days Inventory Outstanding (DIO): 25 to 30 days (perishable goods require rapid inventory turns).
• Days Payable Outstanding (DPO): 35 to 40 days.
• Net working capital as % of revenue: Near zero or slightly negative.
• Is working capital positive or negative? Sysco operates with very tight, often negative working capital, meaning it funds growth efficiently by collecting from customers before paying suppliers.
• PP&E: Consists of distribution facilities, refrigerated warehouses, and a massive fleet of delivery trucks. Useful lives range from 3 to 10 years for vehicles and up to 40 years for buildings.
• Right-of-use assets / operating leases: Material, representing leased distribution centres and some fleet vehicles, typically around $1.0 billion to $1.5 billion.

• Capex as % of revenue: 1.0% to 1.2% (approximately $700 million to $800 million annually).
• Maintenance capex vs. growth capex: Roughly 70% maintenance (fleet replacement, facility upkeep) and 30% growth (facility expansion, automation, routing software).
• Major capex programmes underway or planned: Investments in warehouse automation, electric vehicle fleet testing, and supply chain technology.
• Capitalised software / development costs: Minimal compared to physical infrastructure.
• M&A pattern: Serial bolt-on acquirer, purchasing regional broadline distributors and specialty food purveyors (e.g., Italian imports, custom meat cutters).
• Typical acquisition multiple paid: 8x to 10x EV/EBITDA.

• Total debt: Approximately $10 billion to $12 billion.
• Debt/EBITDA ratio: Target is 2.5x to 2.7x (FY24 reported at 2.7x).
• Credit rating: Investment grade (typically BBB+ / Baa1).
• Key debt instruments: Senior unsecured notes and a commercial paper programme for working capital needs.
• Maturity profile: Well-laddered with average maturities exceeding 5 years.
• Interest rate profile: Predominantly fixed-rate bonds, with floating exposure limited to commercial paper.
• Covenants: Standard investment-grade covenants; no restrictive financial maintenance covenants on the bonds.
• Share repurchase programme: Highly active; repurchased approximately $1.2 billion in FY24 and $1.3 billion in FY25.
• Dividend policy: Long-standing dividend payer with a payout ratio of roughly 40% to 50% of net income, yielding around 2.5%.

• Operating cash flow conversion: Consistently strong, typically 1.5x to 2.0x of Net Income (generating $2.5 billion to $3.0 billion annually).
• Free cash flow margin: 2.0% to 3.0% of revenue.
• Major non-cash items: Depreciation, amortisation, and occasional goodwill impairments (e.g., Guest Worldwide impairment in FY25).
• Working capital cash flow impact: Generally a source of cash or neutral due to the negative working capital dynamic.
• Capex intensity: Low relative to revenue (1%), but high in absolute dollar terms.
• Cash tax rate vs. GAAP effective tax rate: Cash taxes closely mirror the GAAP effective rate of approximately 23% to 24%.

1. Assumptions: Contains all hardcoded drivers for case volume growth, product cost inflation, segment margins, working capital days, and capital allocation targets.
2. Revenue & Gross Profit: Builds revenue and gross profit line-by-line for U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other.
3. Operating Expenses: Details warehouse costs, delivery costs (including fuel), selling expenses, and G&A.
4. Income Statement: Consolidated view linking revenue, COGS, Opex, D&A, Interest, and Taxes to calculate Net Income and EPS.
5. Balance Sheet: Projects Assets (Receivables, Inventory, PP&E, Goodwill) and Liabilities (Payables, Debt, Equity) using working capital days and capex schedules.
6. Cash Flow Statement: Reconciles Net Income to Operating, Investing, and Financing cash flows, calculating Free Cash Flow.
7. Debt & Interest Schedule: Tracks senior notes, commercial paper balances, interest expense, and debt paydowns.
8. Valuation (DCF): Calculates Unlevered Free Cash Flow, applies WACC, and derives an implied share price using a terminal growth rate.

1. U.S. Foodservice Revenue = Prior Year U.S. Foodservice Revenue x (1 + U.S. Case Volume Growth + Product Cost Inflation)
2. International Foodservice Revenue = Prior Year International Revenue x (1 + International Volume Growth) x (1 + FX Impact)
3. SYGMA Revenue = Prior Year SYGMA Revenue x (1 + SYGMA Volume Growth)
4. Consolidated COGS = Consolidated Revenue - (Sum of Segment Gross Profits)
5. Segment Gross Profit = Segment Revenue x Segment Gross Margin %
6. Operating Expenses = Prior Year Operating Expenses x (1 + Total Case Volume Growth + Wage/Fuel Inflation)
7. Accounts Receivable = (Consolidated Revenue / 365) x DSO
8. Inventory = (Consolidated COGS / 365) x DIO
9. Accounts Payable = (Consolidated COGS / 365) x DPO
10. Depreciation Expense = Beginning PP&E x Blended Depreciation Rate
11. Interest Expense = Average Total Debt x Weighted Average Interest Rate
12. Free Cash Flow = Cash Flow from Operations - Capital Expenditures

The Assumptions sheet dictates the growth and margin profiles on the Revenue & Gross Profit and Operating Expenses sheets. These operational sheets feed directly into the Income Statement. Net Income from the Income Statement flows to the top of the Cash Flow Statement. The Cash Flow Statement calculates changes in working capital (driven by the Balance Sheet) and capital expenditures, which in turn update the PP&E line on the Balance Sheet. The financing section of the Cash Flow Statement links to the Debt & Interest Schedule, which calculates interest expense. This interest expense flows back to the Income Statement, creating a circular reference that must be managed via an iterative calculation or a circuit breaker toggle.

• Revenue, Gross Profit, and Asset balances are entered and displayed as positive numbers.
• Expenses (COGS, Opex, Interest, Taxes) are entered as positive numbers in their respective build schedules but subtracted in the Income Statement totals.
• Liability and Equity balances are positive.
• On the Cash Flow Statement, cash inflows are positive, and cash outflows (e.g., Capital Expenditures, Dividends, Share Repurchases) are negative.

• Failing to model inflation pass-through correctly; Sysco passes food costs to customers, meaning revenue rises during inflationary periods, but gross margin percentages mathematically compress even if gross profit dollars increase.
• Ignoring the structural margin differences between segments; SYGMA operates at a significantly lower gross margin than U.S. Foodservice, so mix shifts will distort consolidated margins.
• Overcomplicating working capital; Sysco's cash conversion cycle is extremely tight, and minor errors in DSO or DPO assumptions will cause massive, unrealistic swings in Operating Cash Flow.
• Miscalculating the impact of a 53-week fiscal year, which occurs periodically and artificially inflates year-over-year growth rates by approximately 2%.
• Underestimating the impact of fuel costs; while Sysco uses fuel surcharges, rapid spikes in diesel prices can temporarily compress operating margins before pricing catches up.
• Failing to account for constant-currency adjustments in the International segment, as FX swings can alter reported revenue by 1% to 3% annually.
• Excluding the impact of share repurchases on EPS; Sysco aggressively buys back stock, meaning EPS grows faster than Net Income.
• Misaligning capex and D&A; as an asset-heavy business, D&A is a massive non-cash add-back, and capex must be modelled accurately to prevent the net PP&E balance from deteriorating.

• Consolidated Gross Margin should remain strictly within the 18.0% to 19.0% band based on historical performance.
• Operating Margin should be between 4.0% and 4.5%; flag if it drops below 3.5% or exceeds 5.0%.
• Net Debt to Adjusted EBITDA must remain between 2.5x and 3.0x, aligning with management's stated target and rating agency requirements.
• Capital Expenditures as a percentage of revenue should consistently run between 1.0% and 1.2%.
• Operating Cash Flow to Net Income conversion should be greater than 1.2x, reflecting the heavy D&A add-back.
• The Balance Sheet must balance perfectly in every projected period (Total Assets = Total Liabilities + Shareholders' Equity).
• Dividend payout ratio should remain between 40% and 50% of Net Income.
• Effective tax rate should be stable at approximately 23% to 24%.

• Filings: SEC EDGAR database for Sysco's 10-K, 10-Q, and 8-K filings; Sysco Investor Relations website for earnings presentations and supplemental data.
• Key Peers: US Foods Holding Corp. (USFD), Performance Food Group Company (PFGC), and Gordon Food Service (private).
• Industry Data: National Restaurant Association (NRA) Restaurant Performance Index, USDA food cost inflation reports.
• Consensus Estimates: FactSet or Bloomberg for forward-looking analyst estimates on case volume growth and gross margins.

• Sysco Corporation Form 10-K for the fiscal year ended June 29, 2024.
• Sysco Corporation Form 10-K for the fiscal year ended June 28, 2025.
• Sysco FY24 and FY25 Quarterly Earnings Releases (Q1-Q4).
• Sysco Investor Relations Presentations and Supplemental Financial Information.