SYY 10-K & 10-Q changes, risk factors and insider trading

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 periodically experience shortages of qualified labor in certain geographies, particularly in the area of warehouse workers and drivers. Such shortages may result in increased costs from certain temporary wage actions, such as hiring, referral, and retention bonus programs. Unsuccessful recruiting and retention efforts as a result of such shortages for a prolonged period of time could have a material adverse effect on our financial condition and results of operations.

•Unfavorable geopolitical, economic and market conditions and developments, including changes in global trade policies and tariffs, can depress demand (including as to mix of products and services), sales and/or gross margins in a given market, and impact consumer confidence and foot traffic to restaurants.

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) or military conflicts in the Middle East) 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 itstheir obligations, whether due to itstheir insolvency or otherwise, which could result in financial losses.

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,events have negatively impacted our operations in the past. 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, recent U.S. tariffs imposed or threatened to be imposed on other countries, anycould have retaliatory actions taken by such countries and general political uncertainty surrounding trade relations and policiespolicies. While we have not experienced significant negative impacts to date, these could have a negative impact on our business, results of operations and financial condition as well as consumer confidence and spending.

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.

The effects of climate change may create financial and operational risks to our business, both directly and indirectly. There is an increased focus around the world by regulatory and legislative bodies at all levels towards policies relating to climate change and the impact of global warming, including the regulation of greenhouse gas (GHG) emissions, energy usage and sustainability efforts. Increased compliance costs and expenses due to the impacts of climate change on our business, as well as additional legal or regulatory requirements regarding climate change or designed to reduce or mitigate the effects of carbon dioxide and other GHG emissions on the environment, may cause disruptions in, or an increase in the costs associated with, the running of our business, particularly with regard to our distribution and supply chain operations. Moreover, compliance with any such legal or regulatory requirements may require that we implement changes to our business operations and strategy, which would require us to devote substantial time and attention to these matters and cause us to incur additional costs. The effects of climate change, and legal or regulatory initiatives to address climate change, could have a long-term adverse impact on our business, results of operations and financial condition. Such adverse impacts may be incurred directly through damage to our own property or equipment or indirectly if such impacts adversely affect our suppliers. In addition, from time to time we establish and publicly announce goals and commitments related to sustainability matters, including those related to reducing our impact on the environment. Our current sustainability goals include to reduce our Scope 1 & 2 emissions by 27.5% by 2030 and to continue to encourage suppliers to reduce Scope 3 emissions (focusing on purchased goods and services and upstream transportation suppliers). Our ability to meet these and other related goals depends in part on significant technological advancements with respect to the development and availability of reliable, affordable and sustainable alternative solutions, including electric and other alternative fuel vehicles as well as alternative energy sources, which may not be developed or be available to us in the timeframe needed to achieve these goals. In addition, we may determine that it is in our best interests to revise our current goals based on economic or regulatory factors, business strategy or other factors. If we change or do not meet our publicly stated goals, then we may experience a negative reaction from the media, stockholders, activists and other interested stakeholders, and any perception that we have failed to act responsibly regarding climate change, whether or not valid, could result in adverse publicity and negatively affect our business and reputation. While we remain committed to being responsive to climate change and reducing our greenhouse gas footprint, there can be no assurance that our goals and strategic plans to achieve those goals will be successful, that the costs related to climate transition will not be higher than expected, that the necessary technological advancements will occur in the timeframe we expect, or at all, or that proposed regulation or deregulation related to climate change will not have a negative competitive impact, any one of which could have a material adverse effect on our business, financial condition and results of operations.

In addition, methodologies for reporting climate-related information may change and previously reported information may be adjusted to reflect new reporting protocols or regulations, improvements in the availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations and other changes in circumstances. Our processes and controls for reporting climate-related information across our operations are evolving along with multiple disparate standards for identifying, measuring and reporting sustainability metrics, including disclosures that may be required by the SEC, European and other regulators, such as the Corporate Sustainability Reporting Directive (CSRD) in the European Union and the California Climate Accountability Package, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or our ability to achieve such goals in the future.

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.

Changes in consumer eating habits (such as a decline in consuming food away from home, a decline in portion sizes, the impact of advancements in pharmaceutical therapies 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 consumer spending, 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.

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. See Note 4, “Acquisitions,” in the Notes to the Consolidated Financial Statements in Item 8 for more information on our pending acquisition of Jetro Restaurant Depot. 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.

•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%. On January 20, 2025, President Trump issued executive orders that the OECD Global Tax Deal has no force and effect in the U.S., and to investigate foreign countries’ compliance with tax treaties and to prepare a list of options for protective measures the U.S. should adopt in response. Our analysis is ongoing as the OECD continues to release additional guidance, countries enact legislation, and the potential U.S. response.response develops. To the extent additional legislative changes take place in the countries in which we operate, it is possible that these changes may yield an adverse impact on our effective tax rate, financial results.results and cash flows.

Our fiscal 20252026 results were driven byreflected sales growth of 3.2%3.9% as compared to fiscal 2024. This growth was2025, driven by inflation and volume growth, partiallyincluding contributions from recent acquisitions. Sales increased across our U.S. Foodservice Operations, International Foodservice Operations, and SYGMA segments. Gross profit increased 2.5%4.5% as compared to fiscal 2024,2025, primarily attributabledue to effectiveour managementstrategic ofsourcing productefforts costand inflation.higher volumes from local customers. Operating income decreasedincreased 3.6%0.2% as compared to fiscal 2024,2025, primarily due to agross noncashprofit goodwillgains, impairmentpartially chargeoffset inby ourincreased Guestsales Worldwideheadcount business.investments, Adjustedincreased restructuring and transformational project costs, higher incentive compensation, and higher acquisition and due diligence costs. We consider restructuring and transformational project costs and acquisition and due diligence costs to be “Certain Item” expenses (as defined below). Excluding Certain Item expenses, adjusted operating income increased 1.2%2.6% as compared to fiscal 2024.2025. See below for a comparison of our fiscal 20252026 results to our fiscal 20242025 results, both including and excluding Certain Items (as defined below).

◦decreasedincreased 3.6%,0.2%, or $114$7 million, to $3.1 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 EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions.

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.

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 Capital Resources” for discussions of GAAP metrics, including net cash provided by operating activities and our reconciliation of this non-GAAP financial measure.

During fiscal 2025,2026, Sysco wasexperienced impactedthe byeffects of negative year-over-year restaurant foot traffic to restaurants. Foot traffic trends improved in the fourth quarter of fiscal 2025.trends. We expect restaurant foot traffic and the broader macroeconomic environment in fiscal 20262027 to beremain similargenerally toconsistent foot traffic trends in the fourth quarter ofwith fiscal 2025.2026 Weconditions. Despite these near-term trends, we continue to believe the food-away-from-home sector is a healthy long-term growth market, and Sysco is diversified and well positioned as a market leader in food service.

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 our sales and gross profit performance in fiscal 20252026 was product cost inflation, as we experienced 2.5%3.0% inflation at the total enterprise level. U.S. Foodservice experienced a 0.5%1.4% improvement in total case volume and a 1.4%1.7% decreaseincrease in local case volume as compared to fiscal 2024.2025. This volume reflects our broadline and specialty businesses, except for our specialty meats business, which measures its volume in pounds.businesses. We experienced growth in local case volume in our International Foodservice segment of approximately 4.0%4.3% in fiscal 2025,2026, as compared to fiscal 2024.2025.

We experienced inflation at a rate of 3.5%2.8% and 2.5%3.0% in the fourth quarter and for fiscal 2025,2026, respectively, at the total enterprise level, primarily driven by inflation in the dairy,meat, poultry,seafood, and meatfresh produce categories. We have been successful in managing inflation, resulting in an increase in gross profit dollars. Gross margin decreasedincreased 1310 basis points in fiscal 20252026 as compared to fiscal 2024,2025, primarily as a result of our strategic sourcing efforts and a shift in our customer mix driven by nationallocal salescase volumesgrowth outpacing localnational salescase volumes and a decrease in Sysco brand penetration rates.growth. Gross margin increaseddecreased 1917 basis points in the fourth quarter of fiscal 20252026 as compared to the fourth quarter of fiscal 2024,2025, primarily asdue ato resultthe lapping of disciplinedfavorable benefits from strategic sourcing efforts.initiatives in the fourth quarter of fiscal 2025 and the increased cost of fuel across the business.

We expect to grow our revenue and earnings in fiscal 2026.2027. We expect the rate of inflation for fiscal 20262027 to be approximately 2%,1.5% whichto is consistent with recent trends experienced in fiscal 2025.2.0%. We also expect volume growth in fiscal 20262027, including local case volume growth, as a result of improvedcontinued productivity gains with sales consultantprofessionals retention,based increasedon salesimproving consultant tenure, and from contributions from potential mergers and acquisitions.tenure. In total, we expect these factors to result in net sales growth across the enterprise of 3%6% to 5%7% in fiscal 2026.2027.

Total operating expenses increased 4.2%5.6% during fiscal 2025,2026, as compared to fiscal 2024,2025, driven by business and sales headcount investments, costincreased inflation,restructuring asand welltransformational asproject acosts, noncash impairment charge on our Guest Worldwide business. These increases were partially offset by lowerhigher incentive compensationcompensation, asand ourhigher acquisition and due diligence costs. Adjusted operating results were lower than our target payout criteria. Our Global Support Center expenses experiencedincreased a5.1% decrease of 5.7% induring fiscal 20252026, as compared to fiscal 2024, primarily2025, as a result of progresshigher onsales ourheadcount existinginvestments costand savingsincentive program.compensation.

In the second quarter of fiscalOctober 2025, we acquired CampbellsFairfax Prime Meat,Meadow, a leading specialty meat businesssupplier based in Scotland.the ByUnited combiningKingdom. theThis acquisition follows our acquisition of Campbells Prime Meat productlast offeringfiscal withyear and positions our broadlineteam business,in thisthe acquisitionUnited provides a strategic opportunityKingdom to enableachieve totaladditional teamgrowth sellingby inleveraging thisadditional region.specialty meat capabilities geographically. This company’s results are included within International Foodservice Operations and were not material to our results in fiscal 2025.2026.

The sales growth in our U.S. Foodservice Operations in fiscal 2026 was driven by higher inflation inand fiscalcase 2025.volume growth. Case volumes from our U.S. Foodservice Operations increased 0.5%,1.4%, as compared to fiscal 2024.2025. This included a 1.4%1.7% decreaseincrease in local customer case volume as compared to fiscal 2024.2025 and a 1.3% increase in national customer case volume as compared to fiscal 2025.

The decreaseincrease in operating income for fiscal 2025,2026, as compared to fiscal 2024,2025, was driven by increases in operating expenses, partially offset by gross profit dollar growth and case volume growth.growth, partially offset by increases in operating expenses.

Gross profit dollar growth in fiscal 20252026 was driven primarily by disciplinedbenefits from strategic sourcing efforts and case volume growthgrowth, including contributions from recent acquisitions.acquisitions and stronger performance from local customers. The estimated change in product costs, an internal measure of inflation or deflation, increased in fiscal 2025.2026. For fiscal 2025,2026, this change in product costs was primarily driven by inflation in the dairymeat, seafood, and poultryfresh produce categories. Sysco brand penetration for U.S. Broadline decreased by 8159 basis points to 35.8%35.4% for fiscal 2025,2026, as compared to fiscal 2024.2025. Specific to local customers, Sysco brand penetration for U.S. Broadline decreased by 8145 basis points to 46.2%45.8% for fiscal 2025,2026, as compared to fiscal 2024.2025.

Gross margin, which is gross profit as a percentage of sales, was 19.1%19.11% in fiscal 2026, compared to 19.09% in fiscal 2025. ThisThe was a decrease of 262 basis pointspoint comparedincrease to gross margin of 19.4% in fiscal 2024,was primarily due to a favorable shift in our customer mixmix, driven by national sales volumes outpacing local sales volume andgrowth aoutpacing decreasenational insales Syscovolume brand penetration rates.growth.

The increase in operating expenses for fiscal 2025,2026, as compared to fiscal 2024,2025, was primarily driven by cost inflation and increases in colleague-related costs, depreciationwhich expense,is inclusive of investments in sales headcount and bad debt, partially offset by lower incentive compensation and gains from sale leaseback transactions.compensation.

Sales increased 2.4%7.6% in fiscal 20252026 as compared to fiscal 2024,2025, primarily due to higher inflationinflation, the impact of foreign currency translation, and local case growth. Excluding the impact of the Mexico joint venture, which was divested during the second quarter of fiscal 2025, sales increased 4.8%9.1% in fiscal 20252026 as compared to fiscal 2024.2025.

The $62$26 million increase in operating income for fiscal 2025,2026, as compared to fiscal 2024,2025, was primarily due to growth in local case volumes,volumes successas a result of expanded supply chain capacity, increased availability of Sysco branded merchandise, and increased sales headcount. This was partially offset by increases in ouroperating strategic sourcing program, and positive contributions from our recent mergers and acquisitions efforts.expenses.

The increase in gross profit dollars in fiscal 2025,2026, as compared to fiscal 2024,2025, was primarily attributable to increases in local case volumes.volumes, including contributions from recent acquisitions. Local case volumes increased approximately 4.0%4.3% in fiscal 2025,2026, as compared to fiscal 2024.2025.

The increase in operating expenses for fiscal 2025,2026, as compared to fiscal 2024,2025, was primarily due to increases in colleague-related costscosts, supply chain transformation costs, and depreciationsales expense.headcount investments.

Our SYGMA segment sales wereincreased 8.3% higher2.5% in fiscal 2025,2026, as compared to fiscal 2024, primarily driven by the growth of new customers.2025. Operating income increased by $9$13 million in fiscal 2025,2026, as compared to fiscal 2024,2025. primarilyThese dueincreases towere driven by continued improvements in the growthefficiency and performance of new customers and productivity improvements. We expect SYGMA’s salessupply growthchain rates to moderate in fiscal 2026 as we reach the one-year anniversary mark of fiscal 2025’s substantial customer additions.operations.

For the operations that are grouped within our Other segment, sales were 7.3%0.5% lower in fiscal 2025,2026, as compared to fiscal 2024.2025. Operating income decreasedincreased $113$103 million in fiscal 2025,2026, as compared to fiscal 2024.2025. The operations of this group mainly consist of our hospitality business, Guest Worldwide. InThe fiscalimprovement 2025,in operating income is due to a noncash goodwill impairment charge of $92 million that was recorded in fiscal 2025 within operating expenses for a portion of the goodwill attributable to our Guest Worldwide reporting unit. This impairment charge is considered a Certain Item (defined above). We dodid not expecthave a similar impairment charge in fiscal 2026 and as a result, are expecting improved operating results within our Other segment in fiscal 2026.

Our Global Support Center generally includes all expenses of the corporate office and Sysco’s shared service operations. These expenses decreasedincreased $56$127 million in fiscal 2025,2026, or 5.7%13.7% as compared to fiscal 2024,2025, primarily due to decreasesincreases in colleague-related costs, includingwhich loweris inclusive of incentive compensation.compensation, and acquisition and due diligence costs, partially offset by decreases in insurance costs.

Included in Global Support Center expenses are Certain Items that totaled $162 million in fiscal 2026, as compared to $79 million in fiscal 2025, as compared to $81 million in fiscal 2024.2025. Certain Items impacting fiscal 20252026 were primarily expenses associated with severances, our business technology transformation initiatives,initiatives and expensesacquisition associatedand withdue acquisitions.diligence costs. In fiscal 2024,2025, Certain Items that impacted the year were primarily expenses associated with severances, our business technology transformation initiatives, and expenses associated with acquisitions.

Interest expense increased $28$82 million for fiscal 2025,2026, as compared to fiscal 2024,2025, primarily due to interest on new senior notes issued.issued, as well as amortization expense associated with debt issuance costs on a bridge loan facility, which is treated as a Certain Item. We expect to incur $700approximately $770 million in interest expense in fiscal 2026.2027, which includes the amortization of debt issuance costs associated with the bridge loan facility related to the planned acquisition of JRD. Interest expense on an adjusted basis is expected to be approximately $675 million in fiscal 2027.

Net earnings decreased 6.5%3.9% in fiscal 2025,2026, as compared to fiscal 2024,2025, due primarily to the items noted previously for operating income andincome, interest expense, and other expense (income), net 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 0.8% in fiscal 2025, primarily due to an increase in sales volume as a result of recent acquisitions and disciplined strategic sourcing efforts.

Basic earnings per share in fiscal 20252026 were $3.74,$3.67, a 4.1%1.9% decrease from the fiscal 20242025 amount of $3.90$3.74 per share. Diluted earnings per share in fiscal 20252026 were $3.73,$3.66, a 4.1%1.9% decrease from the fiscal 20242025 amount of $3.89$3.73 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 2026 were $4.61, a 3.4% increase from the fiscal 2025 amount of $4.46 per share. These results were primarily attributable to the factors discussed previously related to net earnings in fiscal 2026.

•Cash used for acquisition of businesses was $189 million in fiscal 2026, compared to $40 million in fiscal 2025, compared to $1.2 billion in fiscal 20242025;

•Cash paid for treasury stock repurchases was $200 million in fiscal 2026, compared to $1.3 billion in fiscal 2025, compared to $1.2 billion in fiscal 20242025;

•We issued senior notes totaling $1.25 billion in fiscal 2025,2026, and totaling $1.0 billion in fiscal 20242025; and

•TheThere were no commercial paper amount outstanding as of the end of fiscal 2025 was $205 million.2026. There were $200$205 million in commercial paper amounts outstanding as of the end of fiscal 2024.2025.

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. See Note 4, “Acquisitions,” in the Notes to the Consolidated Financial Statements in Item 8 for more information on our pending acquisition of Jetro Restaurant Depot.

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-economicmacroeconomic 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 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 balancereceivables on a non-recourse basis in order to extend terms for theour customercustomers without negatively impacting our cash flow. TheThese 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.

ComparisonsOur of results from the secondthird quarter of fiscal 2026 results included sales growth of 4.7% as compared to the secondthird quarter of fiscal 2025 are presented below:2025,

◦adjusted operating income increaseddecreased 3.1%,0.6%, or $24$5 million, to $807$768 million;

◦adjusted net earnings increaseddecreased 3.9%,3.6%, or $18$17 million, to $476$452 million;

◦adjusted diluted earnings per share increaseddecreased 6.5%,2.1%, or $0.06,$0.02, to $0.99$0.94 per share;

◦adjusted EBITDA increased 3.3%,0.1%, or $32$1 million, to $1.0$970 billion.million.

◦decreased 3.3%,7.0%, or $30$91 million, to $866$1.2 millionbillion;

The fiscal 2026 and fiscal 2025 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.