Sysco Corp. (NYSE:SYY)

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

Sysco Corp., effective income tax rate (EITR) reconciliation

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
U.S. statutory federal income tax rate	21.00%	21.00%	21.00%	21.00%	21.00%	21.00%
State and local income taxes, net of any applicable federal income tax benefit	3.90%	2.63%	2.41%	2.67%	5.69%	3.35%
Foreign income taxes	-1.00%	-1.08%	-1.88%	-9.99%	-2.46%	-1.42%
Uncertain tax positions	0.10%	0.06%	0.83%	-0.38%	-1.44%	-0.31%
Tax benefit of equity-based compensation	0.10%	-0.11%	-0.16%	-1.07%	-9.77%	-2.07%
Nondeductible impairment charges	0.00%	0.00%	0.00%	0.00%	17.65%	0.00%
Impact of U.S. Tax Reform	0.00%	0.00%	0.00%	0.00%	0.00%	-4.64%
Other	-0.30%	0.05%	0.01%	-1.88%	-4.12%	0.62%
Effective income tax rate	23.80%	22.55%	22.21%	10.35%	26.55%	16.53%

The effective income tax rate (EITR) exhibited significant volatility between 2019 and 2024, fluctuating from a low of 10.35% in 2021 to a peak of 26.55% in 2020. While the U.S. statutory federal income tax rate remained constant at 21.00% throughout the entire period, the actual tax burden was heavily influenced by non-recurring charges and varying tax credits.

Drivers of Peak and Trough Volatility: The peak EITR of 26.55% in 2020 was primarily driven by a substantial 17.65% increase resulting from nondeductible impairment charges. In contrast, the period low of 10.35% in 2021 was largely the result of a significant negative adjustment of 9.99% stemming from foreign income taxes, which offset the statutory rate.
Normalization and Recent Trends: Following the instability of 2020 and 2021, the EITR entered a period of stabilization and gradual increase. The rate moved from 22.21% in 2022 to 22.55% in 2023, and further to 23.80% in 2024. This trend indicates a convergence toward a steady state that resides slightly above the federal statutory rate.
Impact of Equity-Based Compensation and Tax Reform: The tax benefit from equity-based compensation provided a meaningful reduction in the EITR during the early part of the period, most notably in 2020 with a 9.77% reduction. However, this benefit diminished significantly over time, becoming negligible by 2024. Similarly, a one-time reduction of 4.64% due to U.S. Tax Reform was observed only in 2019.
Consistent Tax Components: State and local income taxes have consistently functioned as an upward adjustment to the EITR, generally ranging between 2.41% and 5.69%. Conversely, foreign income taxes have consistently acted as a downward pressure on the EITR across all six years, although the scale of this benefit has decreased since the 2021 spike.

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

Sysco Corp., components of deferred tax assets and liabilities

US$ in millions

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
Net operating tax loss carryforwards	534)	537)	483)	613)	380)	274)
Operating lease liabilities	237)	171)	162)	181)	—)	—)
Interest carryforwards	228)	205)	170)	—)	—)	—)
Pension	121)	101)	72)	111)	185)	158)
Receivables	52)	51)	43)	54)	100)	17)
Inventory	30)	27)	24)	18)	17)	12)
Deferred compensation	28)	26)	28)	29)	32)	30)
Share-based compensation	27)	24)	30)	26)	21)	39)
Other	67)	61)	89)	115)	45)	51)
Deferred tax assets before valuation allowances	1,324)	1,202)	1,101)	1,148)	779)	581)
Valuation allowances	(278)	(267)	(232)	(227)	(138)	(128)
Deferred tax assets	1,046)	935)	869)	922)	641)	453)
Goodwill and intangible assets	(374)	(364)	(379)	(352)	(330)	(359)
Excess tax depreciation and basis differences of assets	(285)	(238)	(151)	(148)	(170)	(163)
Operating lease assets	(231)	(172)	(161)	(181)	—)	—)
Foreign currency remeasurement losses and currency hedge	(20)	(16)	—)	—)	—)	—)
Other	(36)	(28)	(51)	(35)	(34)	(23)
Deferred tax liabilities	(946)	(817)	(741)	(716)	(534)	(545)
Net deferred tax assets (liabilities)	100)	118)	127)	205)	108)	(91)

The company's net deferred tax position underwent a significant transition over the six-year period, shifting from a net liability of 91 million dollars in 2019 to a net asset of 100 million dollars by 2024. While total deferred tax assets and liabilities both grew in absolute terms, the growth in assets initially outpaced liabilities, leading to a peak net asset position of 205 million dollars in 2021 before stabilizing.

Growth and Composition of Deferred Tax Assets: Gross deferred tax assets before valuation allowances more than doubled, increasing from 581 million dollars in 2019 to 1,324 million dollars in 2024. This growth was primarily driven by net operating tax loss carryforwards, which rose from 274 million dollars in 2019 to 534 million dollars in 2024, despite a peak of 613 million dollars in 2021. Additionally, new components emerged in later years, specifically operating lease liabilities, which reached 237 million dollars by 2024, and interest carryforwards, which grew from 170 million dollars in 2022 to 228 million dollars in 2024.
Valuation Allowance Trends: A consistent increase in valuation allowances is observed, rising from 128 million dollars in 2019 to 278 million dollars in 2024. The growth of these allowances indicates a more conservative assessment of the realizability of the gross deferred tax assets over time, effectively offsetting a portion of the asset growth.
Expansion of Deferred Tax Liabilities: Deferred tax liabilities increased from 545 million dollars in 2019 to 946 million dollars in 2024. The primary drivers of this increase include excess tax depreciation and basis differences of assets, which grew from 163 million dollars to 285 million dollars. Operating lease assets also became a significant contributor starting in 2021, reaching 231 million dollars by 2024. Liabilities related to goodwill and intangible assets remained a substantial and relatively stable component, fluctuating between 330 million and 379 million dollars throughout the period.
Net Deferred Tax Trajectory: The net deferred tax position moved from a liability state to an asset state in 2020. After reaching its maximum asset value in 2021, the net position saw a gradual decline from 205 million dollars in 2021 to 100 million dollars in 2024. This downward trend in the net asset position in recent years is attributable to the acceleration of deferred tax liabilities, particularly through increased tax depreciation and lease-related adjustments, outpacing the growth of net deferred tax assets.

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

Sysco Corp., deferred tax assets and liabilities, classification

US$ in millions

		Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
	Deferred tax assets	445)	420)	378)	353)	194)	81)
	Deferred tax liabilities	345)	303)	250)	147)	87)	172)

An analysis of the deferred tax accounts reveals a period of sustained growth in both assets and liabilities, characterized by a significant structural shift in the net tax position between 2019 and 2024.

Deferred Tax Assets Trend: Deferred tax assets exhibited a consistent and significant upward trajectory throughout the observed period, increasing from 81 million USD in 2019 to 445 million USD by June 29, 2024. This steady growth suggests a continuous accumulation of temporary differences that will result in deductible amounts in future years.
Deferred Tax Liabilities Trend: Deferred tax liabilities experienced a period of volatility, characterized by an initial decline from 172 million USD in 2019 to 87 million USD in 2020. Following this trough, a consistent increase was observed over the subsequent four years, with the balance rising to 345 million USD by 2024, indicating an increase in future taxable obligations.
Net Deferred Tax Position: A transition occurred in the net deferred tax position, moving from a net liability of 91 million USD in 2019 to a net asset position from 2020 onward. This net asset position peaked in 2021 at 206 million USD and subsequently contracted to 100 million USD by 2024, as the growth in deferred tax liabilities began to accelerate relative to the growth in deferred tax assets.

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Sysco Corp., Financial Data: Reported vs. Adjusted

Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

Sysco Corp., adjustments to financial statements

US$ in millions

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
Adjustment to Total Assets
Total assets (as reported)	24,917)	22,821)	22,086)	21,414)	22,628)	17,967)
Less: Noncurrent deferred tax assets, net	445)	420)	378)	353)	194)	81)
Total assets (adjusted)	24,472)	22,401)	21,708)	21,061)	22,434)	17,886)
Adjustment to Total Liabilities
Total liabilities (as reported)	23,026)	20,779)	20,671)	19,826)	21,435)	15,428)
Less: Noncurrent deferred tax liabilities, net	345)	303)	250)	147)	87)	172)
Total liabilities (adjusted)	22,681)	20,476)	20,421)	19,679)	21,349)	15,256)
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported)	1,860)	2,009)	1,382)	1,553)	1,159)	2,503)
Less: Net deferred tax assets (liabilities)	100)	118)	127)	205)	108)	(91)
Shareholders’ equity (adjusted)	1,760)	1,891)	1,255)	1,347)	1,051)	2,594)
Adjustment to Net Earnings
Net earnings (as reported)	1,955)	1,770)	1,359)	524)	215)	1,674)
Add: Deferred income tax expense (benefit)	26)	(16)	(64)	(158)	(191)	(127)
Net earnings (adjusted)	1,981)	1,754)	1,294)	366)	24)	1,548)

An analysis of the financial position from 2019 to 2024 reveals a consistent upward trend in both reported and adjusted total assets and liabilities, with significant volatility in equity and net earnings. The removal of deferred taxes consistently reduces the valuation of both total assets and total liabilities across the observed period.

Asset and Liability Adjustments: A widening gap is observed between reported and adjusted figures for both assets and liabilities. For total assets, the adjustment increased from 81 million in 2019 to 445 million in 2024. Similarly, the adjustment for total liabilities grew from 172 million in 2019 to 345 million in 2024. This indicates that the impact of deferred tax components on the balance sheet has intensified over time.
Shareholders' Equity Trends: Reported shareholders' equity experienced a significant decline from 2,503 million in 2019 to 1,860 million in 2024. The removal of deferred taxes shifted the equity position; while adjusted equity was higher than reported equity in 2019, it remained lower than reported equity from 2020 through 2024. The most pronounced divergence occurred in 2021, where reported equity exceeded adjusted equity by 206 million.
Net Earnings Volatility: Net earnings exhibited a sharp contraction in 2020, with reported earnings falling to 215 million and adjusted earnings dropping further to 24 million. A strong recovery trend followed, with adjusted net earnings rising to 1,981 million by 2024. The relationship between reported and adjusted earnings is inconsistent; in 2019 and 2021, reported earnings were higher, whereas in 2020 and 2024, adjusted earnings were higher, suggesting fluctuating tax-related adjustments to the bottom line.
Balance Sheet Leverage Impact: The removal of deferred taxes reduces both sides of the balance sheet, but the magnitude of reduction in assets has grown more rapidly than the reduction in liabilities. By 2024, the asset adjustment of 445 million exceeded the liability adjustment of 345 million, contributing to a lower adjusted equity figure compared to the reported amount.

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Sysco Corp., Financial Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

Sysco Corp., adjusted financial ratios

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
Net Profit Margin
Reported net profit margin	2.48%	2.32%	1.98%	1.02%	0.41%	2.79%
Adjusted net profit margin	2.51%	2.30%	1.89%	0.71%	0.05%	2.57%
Total Asset Turnover
Reported total asset turnover	3.16	3.34	3.11	2.40	2.34	3.35
Adjusted total asset turnover	3.22	3.41	3.16	2.44	2.36	3.36
Financial Leverage
Reported financial leverage	13.40	11.36	15.98	13.79	19.53	7.18
Adjusted financial leverage	13.90	11.85	17.30	15.63	21.34	6.89
Return on Equity (ROE)
Reported ROE	105.11%	88.13%	98.30%	33.76%	18.60%	66.90%
Adjusted ROE	112.56%	92.74%	103.15%	27.19%	2.30%	59.66%
Return on Assets (ROA)
Reported ROA	7.85%	7.76%	6.15%	2.45%	0.95%	9.32%
Adjusted ROA	8.09%	7.83%	5.96%	1.74%	0.11%	8.65%

An analysis of the financial ratios from 2019 to 2024 reveals a significant volatility event centered around 2020, followed by a consistent recovery in profitability and efficiency metrics. The removal of deferred taxes provides a more nuanced view of the company's operational performance and capital structure, particularly during periods of financial stress.

Profitability and Margin Trends: The net profit margin experienced a sharp contraction in 2020, with the adjusted margin dropping to 0.05% compared to 2.57% in 2019. Since that trough, a steady upward trajectory has been observed, with the adjusted net profit margin reaching 2.51% by June 2024. Return on Assets (ROA) mirrors this pattern, declining from an adjusted 8.65% in 2019 to 0.11% in 2020, before recovering to 8.09% by 2024. The narrow gap between reported and adjusted figures in recent years suggests a diminishing impact of deferred tax adjustments on bottom-line margins.
Asset Utilization and Efficiency: Total asset turnover remained relatively stable, although a temporary dip occurred in 2020 and 2021. The adjusted turnover ratio declined from 3.36 in 2019 to a low of 2.36 in 2020, before recovering to 3.22 by 2024. The consistency between reported and adjusted turnover ratios indicates that deferred tax adjustments have a negligible impact on the company's ability to generate revenue from its asset base.
Capital Structure and Leverage: Financial leverage exhibited a substantial spike in 2020, with the adjusted ratio rising to 21.34 from 6.89 in 2019. This indicates a significant increase in the proportion of debt or other liabilities relative to equity during that period. While leverage has since moderated, it remains elevated compared to 2019 levels, settling at an adjusted ratio of 13.90 in 2024. The adjusted leverage figures are consistently higher than the reported figures, suggesting that the removal of deferred taxes reveals a more leveraged capital position.
Returns on Equity: Return on Equity (ROE) demonstrated extreme volatility. The most notable divergence occurs in 2020, where the reported ROE of 18.60% was drastically reduced to an adjusted ROE of 2.30%, highlighting a heavy reliance on deferred tax accounting to bolster reported equity returns during that fiscal year. Following 2021, ROE grew aggressively, exceeding 100% in both reported and adjusted terms by 2024. This surge is driven by the combination of recovering profit margins and the maintenance of high financial leverage.

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
As Reported
Selected Financial Data (US$ in millions)
Net earnings	1,955)	1,770)	1,359)	524)	215)	1,674)
Sales	78,844)	76,325)	68,636)	51,298)	52,893)	60,114)
Profitability Ratio
Net profit margin¹	2.48%	2.32%	1.98%	1.02%	0.41%	2.79%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings	1,981)	1,754)	1,294)	366)	24)	1,548)
Sales	78,844)	76,325)	68,636)	51,298)	52,893)	60,114)
Profitability Ratio
Adjusted net profit margin²	2.51%	2.30%	1.89%	0.71%	0.05%	2.57%

2024 Calculations

¹ Net profit margin = 100 × Net earnings ÷ Sales
= 100 × 1,955 ÷ 78,844 = 2.48%

² Adjusted net profit margin = 100 × Adjusted net earnings ÷ Sales
= 100 × 1,981 ÷ 78,844 = 2.51%

A significant volatility pattern is observed in net earnings and profit margins between 2019 and 2024, characterized by a sharp contraction in 2020 followed by a consistent, multi-year recovery trend.

Net Earnings Performance: Reported net earnings experienced a steep decline from 1,674 million US$ in 2019 to 215 million US$ in 2020. A steady recovery followed, with earnings increasing sequentially each year to reach 1,955 million US$ by June 29, 2024. Adjusted net earnings followed a similar, though more exaggerated, trajectory, dropping to a low of 24 million US$ in 2020 before climbing to 1,981 million US$ in 2024, ultimately surpassing 2019 levels.
Net Profit Margin Trends: The reported net profit margin fell from 2.79% in 2019 to 0.41% in 2020, subsequently recovering to 2.48% by 2024. The adjusted net profit margin exhibited more severe compression, reaching a nadir of 0.05% in 2020. However, the adjusted margin recovered to 2.51% by 2024, effectively returning to the baseline established in 2019, which was 2.57%.
Analysis of Reported versus Adjusted Metrics: A notable divergence occurred in 2020, where reported net earnings and margins remained higher than their adjusted counterparts, suggesting that non-recurring items provided a buffer to the reported results during the period of maximum contraction. By 2024, this relationship inverted, with adjusted net earnings exceeding reported earnings, indicating that specific non-recurring expenses may have weighed on the reported bottom line.

The overall financial trajectory indicates a restoration of profitability. The convergence of the 2024 adjusted net profit margin with 2019 levels, combined with an increase in absolute adjusted net earnings, suggests that operational scale has expanded while maintaining historical margin efficiency.

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
As Reported
Selected Financial Data (US$ in millions)
Sales	78,844)	76,325)	68,636)	51,298)	52,893)	60,114)
Total assets	24,917)	22,821)	22,086)	21,414)	22,628)	17,967)
Activity Ratio
Total asset turnover¹	3.16	3.34	3.11	2.40	2.34	3.35
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Sales	78,844)	76,325)	68,636)	51,298)	52,893)	60,114)
Adjusted total assets	24,472)	22,401)	21,708)	21,061)	22,434)	17,886)
Activity Ratio
Adjusted total asset turnover²	3.22	3.41	3.16	2.44	2.36	3.36

2024 Calculations

¹ Total asset turnover = Sales ÷ Total assets
= 78,844 ÷ 24,917 = 3.16

² Adjusted total asset turnover = Sales ÷ Adjusted total assets
= 78,844 ÷ 24,472 = 3.22

An analysis of asset utilization from 2019 to 2024 reveals a period of substantial asset base expansion accompanied by significant fluctuations in operational efficiency. Total assets experienced a sharp increase in 2020, followed by a period of relative stability and subsequent growth leading into 2024.

Asset Base Expansion: Reported total assets increased from US$ 17,967 million in June 2019 to US$ 24,917 million in June 2024. The most significant growth occurred between 2019 and 2020, during which reported assets rose by approximately 25.8%. Adjusted total assets mirrored this trend, growing from US$ 17,886 million to US$ 24,472 million over the same period.
Adjusted Total Asset Turnover Volatility: The adjusted total asset turnover ratio experienced a notable decline and subsequent recovery. From a high of 3.36 in 2019, the ratio dropped to 2.36 in 2020 and remained low at 2.44 in 2021. A strong upward trend followed, with the ratio climbing to 3.16 in 2022 and peaking at 3.41 in 2023, before settling at 3.22 in 2024.
Analysis of Reported versus Adjusted Metrics: A consistent positive variance is observed when comparing adjusted turnover to reported turnover. The adjusted total asset turnover remained higher than the reported ratio in every year of the analysis. This discrepancy is driven by the adjusted total asset figures being consistently lower than the reported total assets, which mathematically enhances the resulting turnover ratio and suggests a more optimized view of asset efficiency after specific adjustments.

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
As Reported
Selected Financial Data (US$ in millions)
Total assets	24,917)	22,821)	22,086)	21,414)	22,628)	17,967)
Shareholders’ equity	1,860)	2,009)	1,382)	1,553)	1,159)	2,503)
Solvency Ratio
Financial leverage¹	13.40	11.36	15.98	13.79	19.53	7.18
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	24,472)	22,401)	21,708)	21,061)	22,434)	17,886)
Adjusted shareholders’ equity	1,760)	1,891)	1,255)	1,347)	1,051)	2,594)
Solvency Ratio
Adjusted financial leverage²	13.90	11.85	17.30	15.63	21.34	6.89

2024 Calculations

¹ Financial leverage = Total assets ÷ Shareholders’ equity
= 24,917 ÷ 1,860 = 13.40

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= 24,472 ÷ 1,760 = 13.90

An analysis of the financial structure from 2019 to 2024 reveals significant volatility in leverage and equity levels, coinciding with a general expansion of the asset base.

Asset Trajectory: Adjusted total assets grew from US$ 17,886 million in 2019 to US$ 24,472 million by 2024. A sharp increase was recorded between 2019 and 2020, followed by a brief contraction in 2021 and a consistent upward trend through 2024.
Equity Volatility: Adjusted shareholders' equity experienced a substantial decline from US$ 2,594 million in 2019 to US$ 1,051 million in 2020. While a gradual recovery occurred, peaking at US$ 1,891 million in 2023, equity levels remained below 2019 benchmarks, ending the period at US$ 1,760 million in 2024.
Financial Leverage Analysis: Adjusted financial leverage exhibited a dramatic spike in 2020, rising from 6.89 in 2019 to a peak of 21.34. This indicates a period of significant capital restructuring or a sharp decrease in the equity-to-asset ratio. Following this peak, the ratio trended downward, though it remained elevated compared to 2019 levels, ending at 13.90 in 2024.
Reported versus Adjusted Comparison: A consistent divergence is observable between reported and adjusted financial leverage from 2020 through 2024, with adjusted leverage figures remaining systematically higher than reported figures. This suggests that the adjustments applied to total assets and shareholders' equity have a compounding effect that increases the calculated leverage ratio across the majority of the observed timeframe.

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
As Reported
Selected Financial Data (US$ in millions)
Net earnings	1,955)	1,770)	1,359)	524)	215)	1,674)
Shareholders’ equity	1,860)	2,009)	1,382)	1,553)	1,159)	2,503)
Profitability Ratio
ROE¹	105.11%	88.13%	98.30%	33.76%	18.60%	66.90%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings	1,981)	1,754)	1,294)	366)	24)	1,548)
Adjusted shareholders’ equity	1,760)	1,891)	1,255)	1,347)	1,051)	2,594)
Profitability Ratio
Adjusted ROE²	112.56%	92.74%	103.15%	27.19%	2.30%	59.66%

2024 Calculations

¹ ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × 1,955 ÷ 1,860 = 105.11%

² Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted shareholders’ equity
= 100 × 1,981 ÷ 1,760 = 112.56%

The financial trajectory between 2019 and 2024 is characterized by a severe contraction in 2020 followed by a robust recovery in earnings and a significant expansion in return metrics.

Net Earnings Trends: A substantial decline in profitability occurred in 2020, with reported net earnings falling from 1,674 million USD in 2019 to 215 million USD. Adjusted net earnings experienced a more acute drop, descending to 24 million USD in 2020. From 2021 onward, a consistent upward trend is observed, with adjusted net earnings recovering to 366 million USD in 2021 and peaking at 1,981 million USD by June 2024.
Shareholders' Equity Movements: A sharp reduction in equity was noted between 2019 and 2020, where adjusted shareholders' equity decreased from 2,594 million USD to 1,051 million USD. Although equity levels partially recovered, reaching 1,891 million USD in 2023, the base remained lower than 2019 levels, ending at 1,760 million USD in 2024. This reduction in the equity denominator contributed significantly to the subsequent increase in return percentages.
Adjusted Return on Equity (ROE) Analysis: The Adjusted ROE exhibited extreme volatility, collapsing from 59.66% in 2019 to 2.30% in 2020. A rapid acceleration followed, with the ratio climbing to 27.19% in 2021 and surging to 103.15% in 2022. The metric remained elevated through 2024, reaching 112.56%, indicating that net income growth far outstripped the growth of adjusted shareholders' equity during the recovery phase.
Divergence Between Reported and Adjusted Metrics: Significant variances between reported and adjusted figures are most evident in 2020, where reported net earnings were nearly ten times higher than adjusted net earnings. In the later years of the period, these figures converged. The Adjusted ROE shifted from being lower than the Reported ROE in 2019 and 2021 to being higher in 2022 and 2024, reflecting the impact of adjustments on both the earnings and equity components of the ratio.

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Based on: 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27), 10-K (reporting date: 2019-06-29).

	Jun 29, 2024	Jul 1, 2023	Jul 2, 2022	Jul 3, 2021	Jun 27, 2020	Jun 29, 2019
As Reported
Selected Financial Data (US$ in millions)
Net earnings	1,955)	1,770)	1,359)	524)	215)	1,674)
Total assets	24,917)	22,821)	22,086)	21,414)	22,628)	17,967)
Profitability Ratio
ROA¹	7.85%	7.76%	6.15%	2.45%	0.95%	9.32%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings	1,981)	1,754)	1,294)	366)	24)	1,548)
Adjusted total assets	24,472)	22,401)	21,708)	21,061)	22,434)	17,886)
Profitability Ratio
Adjusted ROA²	8.09%	7.83%	5.96%	1.74%	0.11%	8.65%

2024 Calculations

¹ ROA = 100 × Net earnings ÷ Total assets
= 100 × 1,955 ÷ 24,917 = 7.85%

² Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × 1,981 ÷ 24,472 = 8.09%

The financial performance from 2019 to 2024 is characterized by a severe contraction in profitability during the 2020 fiscal year, followed by a consistent multi-year recovery. While the asset base expanded steadily over the period, the return on assets experienced extreme volatility, reflecting a significant misalignment between asset growth and earnings generation during the initial downturn before stabilizing in the subsequent years.

Net Earnings Performance: Adjusted net earnings experienced a precipitous decline from US$ 1,548 million in 2019 to US$ 24 million in 2020. This represented a near-total erosion of adjusted profitability. However, a strong recovery trend followed, with adjusted earnings rising to US$ 366 million in 2021, US$ 1,294 million in 2022, and eventually peaking at US$ 1,981 million in 2024. By the end of the period, adjusted net earnings exceeded 2019 levels, indicating a successful rebound in operational profitability.
Asset Base Expansion: Total assets showed a general upward trajectory, increasing from an adjusted value of US$ 17,886 million in 2019 to US$ 24,472 million in 2024. A notable spike occurred in 2020, where adjusted assets rose to US$ 22,434 million despite the collapse in earnings, suggesting an increase in liquidity or asset accumulation during the crisis period. Following a slight correction in 2021, the asset base continued to grow moderately through 2024.
Return on Assets (ROA) Analysis: The Adjusted ROA mirrors the volatility of the net earnings, dropping from 8.65% in 2019 to a negligible 0.11% in 2020. This indicates that the company's ability to generate profit from its assets was almost entirely compromised during that year. The recovery was gradual but consistent, with Adjusted ROA climbing to 1.74% in 2021, 5.96% in 2022, and 7.83% in 2023. By 2024, the Adjusted ROA reached 8.09%, approaching the pre-crisis efficiency level of 2019.
Comparison of Reported and Adjusted Metrics: A divergence between reported and adjusted figures is most prominent in 2020, where reported net earnings were US$ 215 million compared to adjusted net earnings of only US$ 24 million. This suggests that non-recurring items or specific accounting adjustments significantly impacted the reported bottom line. By 2024, the gap closed, with adjusted net earnings (US$ 1,981 million) slightly exceeding reported net earnings (US$ 1,955 million), indicating a high degree of alignment between statutory reporting and adjusted operational performance.

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