SYSCO CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 28, 2003

OR

[ ] 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

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act: NONE

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 [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) [X]

The aggregate market value of the voting stock of the registrant held by
stockholders who were not affiliates (as defined by regulations of the
Securities and Exchange Commission) of the registrant was approximately
$19,101,745,000 at December 27, 2002 (based on the closing sales price on the
New York Stock Exchange Composite Tape on December 27, 2002, as reported by The
Wall Street Journal (Southwest Edition)). At September 9, 2003, the registrant
had issued and outstanding an aggregate of 648,520,955 shares of its common
stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the proxy statement to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by
this Form 10-K are incorporated by reference into Part III.
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TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

OVERVIEW

Sysco Corporation, acting through its subsidiaries and divisions
(collectively referred to as "SYSCO" or the "company"), is the largest North
American distributor of food and food related products to the foodservice or
"food-prepared-away-from-home" industry. Founded in 1969, SYSCO provides its
products and services to approximately 420,000 customers, including restaurants,
healthcare and educational facilities, lodging establishments and other
foodservice customers.

SYSCO, which was formed when the stockholders of nine companies exchanged
their stock for SYSCO common stock, commenced operations in March 1970. Since
its formation, the company has grown from $115 million to over $26 billion in
annual sales both through internal expansion of existing operations and
acquisitions of formerly independent companies. Through the end of fiscal 2003,
SYSCO had acquired seventy-three companies or divisions of companies.

In August 2003, SYSCO signed a definitive agreement to acquire certain
assets of the Stockton, California foodservice operations from Smart & Final,
Inc. The transaction was completed in September 2003.

In May 2003, SYSCO acquired the paper and chemical products distributor
Reed Distributors, Inc. located in Lewiston, Maine. In April 2003, SYSCO
acquired the specialty meat-cutting division of the Colorado Boxed Beef Company
and its affiliated broadline foodservice operation, J&B Foodservice located in
Auburndale, Florida. In December 2002, SYSCO acquired certain assets of the
Denver operations of Marriott Distribution Services, Inc., a wholly owned
subsidiary of Marriott International, Inc. In November 2002, SYSCO acquired
Asian Foods, Inc., a specialty distributor of products and services to the Asian
foodservice market located in St. Paul, Minnesota and Kansas City, Missouri. In
October 2002, SYSCO acquired the net assets of Pronamics, the quick-service
distribution division of priszm brandz. In October 2002, SYSCO acquired Abbott
Foods, Inc., an independently owned broadline foodservice distributor located in
Columbus, Ohio.

In March 2002, SYSCO acquired substantially all of the assets and certain
liabilities of the SERCA Foodservice operations of Sobeys, Inc. headquartered in
Toronto, Ontario with operations across Canada. In September 2001, SYSCO
acquired Franklin Supply Company, a supplier of housekeeping and other operating
supplies to the lodging industry headquartered in Louisburg, North Carolina. In
July 2001, the company acquired Fulton Provision Co., a specialty meat company
based in Portland, Oregon.

In May 2001, the company acquired HRI Supply, Inc. a broadline foodservice
distributor located in Kelowna, British Columbia. In March 2001, SYSCO acquired
Guest Supply, Inc. through an exchange offer followed by a merger. Guest Supply
is a specialty distributor to the lodging industry headquartered in Monmouth
Junction, New Jersey. In January 2001, SYSCO acquired certain operations of the
Freedman Companies, a specialty meat supplier based in Houston, Texas. In
December 2000, SYSCO acquired North Douglas Distributors, Ltd., a broadline
foodservice distributor operating on Vancouver Island, British Columbia and the
Albert M. Briggs Company, a specialty meat distributor in Washington, D.C.

SYSCO is organized under the laws of Delaware. The address and telephone
number of the company's executive offices are 1390 Enclave Parkway, Houston,
Texas 77077-2099, (281) 584-1390. This annual report on Form 10-K, as well as
all other reports filed or furnished by SYSCO pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, are available free of charge on SYSCO's
website at www.sysco.com as soon as reasonably practicable after they are
electronically filed with or furnished to the Securities and Exchange
Commission.

OPERATING SEGMENTS

SYSCO provides food and other products to the foodservice or
"food-prepared-away-from-home" industry. Under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclo-

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sures about Segments of an Enterprise and Related Information," the company has
aggregated its operating companies into a number of segments, of which only
Broadline and SYGMA are reportable segments as defined in SFAS No. 131.
Broadline operating companies distribute a full line of food products and a wide
variety of non-food products to both our traditional and chain restaurant
customers. SYGMA operating companies distribute a full line of food products and
a wide variety of non-food products to some of our chain restaurant customer
locations. "Other" financial information is attributable to the company's other
segments, including the company's specialty produce, meat and lodging industry
products segments. The company's specialty produce companies distribute fresh
produce and, on a limited basis, other foodservice products. Specialty meat
companies distribute custom-cut fresh steaks, and other meat, seafood and
poultry products. Our lodging industry products company distributes personal
care guest amenities, housekeeping supplies, room accessories and textiles to
the lodging industry.

CUSTOMERS AND PRODUCTS

The foodservice industry consists of two major customer
types -- "traditional" and "chain restaurant." Traditional foodservice customers
include restaurants, hospitals, schools, hotels and industrial caterers. SYSCO's
chain restaurant customers include regional pizza and national hamburger,
chicken and steak chain operations.

Services to the company's traditional foodservice and chain restaurant
customers are supported by similar physical facilities, vehicles, materials
handling equipment and techniques, and administrative and operating staffs.

Products distributed by the company include a full line of frozen foods,
such as meats, fully prepared entrees, fruits, vegetables and desserts, and a
full line of canned and dry goods, fresh meats, imported specialties and fresh
produce. The company also supplies a wide variety of nonfood items, including
paper products such as disposable napkins, plates and cups; tableware such as
china and silverware; restaurant and kitchen equipment and supplies; medical and
surgical supplies; and cleaning supplies. SYSCO's operating companies distribute
both nationally-branded merchandise and products packaged under SYSCO's private
brands.

The company believes that prompt and accurate delivery of orders, close
contact with customers and the ability to provide a full array of products and
services to assist customers in their foodservice operations are of primary
importance in the marketing and distribution of products to the traditional
customers. SYSCO's operating companies offer daily delivery to certain customer
locations and have the capability of delivering special orders on short notice.
Through the more than 13,150 sales and marketing representatives of SYSCO and
its operating companies, SYSCO stays informed of the needs of its customers and
acquaints them with new products and services. SYSCO's operating companies also
provide ancillary services relating to foodservice distribution such as
providing customers with product usage reports and other data, menu-planning
advice, food safety training, contract services for installing kitchen
equipment, installation and service of beverage dispensing machines and
assistance in inventory control, as well as access to various third party
services designed to add value to our customers' businesses.

No single foodservice customer accounted for as much as 10% of SYSCO's
sales for its fiscal year ended June 28, 2003. Approximately 4% of traditional
foodservice sales during fiscal 2003 resulted from a process of competitive
bidding. There are no material long-term contracts with any traditional
foodservice customer that may not be cancelled by either party at its option.

SYSCO's sales to chain restaurant customers consist of a variety of food
products necessitated by the increasingly broad menus of chain restaurants. The
company believes that consistent product quality and timely and accurate service
are important factors in the selection of a chain restaurant supplier. One chain
restaurant customer (Wendy's International, Inc.) accounted for 5% of SYSCO's
sales for its fiscal year ended June 28, 2003. Although this customer represents
approximately 45% of the SYGMA segment sales, the company does not believe that
the loss of this customer would have a material adverse effect on SYSCO as a
whole. There are no material long-term contracts with any chain restaurant
customer that may not be cancelled by either party at its option.

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Based upon available information, the company estimates that sales by type
of customer during the past three fiscal years were as follows:

SOURCES OF SUPPLY

SYSCO estimates that it purchases from thousands of independent sources,
none of which individually account for more than 5% of the company's purchases.
These sources of supply consist generally of large corporations selling brand
name and private label merchandise and independent private label processors and
packers. Generally, purchasing is carried out through centrally developed
purchasing programs and direct purchasing programs established by the company's
various operating companies. The company continually develops relationships with
suppliers but has no material long-term purchase commitments with any supplier.

In the second quarter of fiscal 2002, SYSCO began restructuring its supply
chain. This National Supply Chain initiative, which reorganizes SYSCO's supply
chain, involved the creation of the Baugh Supply Chain Cooperative that handles
product procurement and the construction of regional distribution centers which
will aggregate inventory demand to optimize the supply chain activities for
certain products from all SYSCO operating companies in the region. This National
Supply Chain initiative is expected to create a more efficient and effective
supply chain infrastructure for SYSCO, its suppliers and its customers.

The use of regional distribution centers is expected to result in lower
costs of inventory, transportation, product handling and transaction processing
in addition to lowering working capital and future facility expansion needs at
the operating companies. Construction is underway on the first regional
distribution center, the Northeast Redistribution Center located in Front Royal,
Virginia. When complete, the center will receive and distribute food and
food-related products to SYSCO's operating companies in the Northeast.

The Baugh Supply Chain Cooperative, through its staff of 450 persons,
administers a consolidated product procurement program designed to develop,
obtain and assure consistent quality food and nonfood products. The program
covers the purchasing and marketing of SYSCO Brand merchandise, as well as
private label and national brand merchandise, encompassing substantially all
product lines. The operating companies are all members of the cooperative and
can choose to purchase product through the cooperative or directly from
suppliers.

CORPORATE HEADQUARTERS' SERVICES

SYSCO's corporate staff, consisting of approximately 600 persons, makes
available a number of services to the company's operating companies. These
persons possess experience and expertise in, among other areas, accounting and
finance, cash management, information technology, employee benefits, engineering
and insurance. The corporate office also makes available legal, marketing and
tax compliance services as well as warehousing and distribution services, which
provide assistance in space utilization, energy conservation, fleet management
and work flow.

CAPITAL IMPROVEMENTS

To maximize productivity and customer service, the company continues to
construct and modernize its distribution facilities. During fiscal 2003, 2002
and 2001, approximately $436,000,000, $416,000,000 and $341,000,000,
respectively, were invested in facility expansions, fleet additions and other
capital asset

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enhancements. The company estimates its capital expenditures in fiscal 2004
should be in the range of $490,000,000 to $510,000,000. During the three years
ended June 28, 2003, capital expenditures were financed primarily by internally
generated funds, the company's commercial paper program and bank borrowings. The
company expects to finance its fiscal 2004 capital expenditures from the same
sources.

EMPLOYEES

As of June 28, 2003, SYSCO and its operating companies had approximately
47,400 full-time employees, approximately 20% of whom were represented by
unions, primarily the International Brotherhood of Teamsters. Contract
negotiations are handled locally. Collective bargaining agreements covering
approximately 11% of the company's union employees expire during fiscal 2004.
SYSCO considers its labor relations to be satisfactory.

COMPETITION

The business of SYSCO is competitive with numerous companies engaged in
foodservice distribution. While competition is encountered primarily from local
and regional distributors, a few companies compete with SYSCO on a national
basis. The company believes that, although price and customer contact are
important considerations, the principal competitive factor in the foodservice
industry is the ability to deliver a wide range of quality products and related
services on a timely and dependable basis. Although SYSCO's share of the
foodservice industry market in the United States and Canada was an estimated 13%
as of June 28, 2003, SYSCO believes, based upon industry trade data, that its
sales to the North American "food-prepared-away-from-home" industry were the
largest of any foodservice distributor during fiscal 2003. While adequate
industry statistics are not available, the company believes that in most
instances its local operations are among the leading distributors of food and
related nonfood products to foodservice customers in their respective trading
areas.

GOVERNMENT REGULATION

As a marketer and distributor of food products, SYSCO is subject to the
Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by
the U.S. Food and Drug Administration ("FDA"). The FDA regulates manufacturing
and holding requirements for foods through its current good manufacturing
practice regulations, specifies the standards of identity for certain foods and
prescribes the format and content of certain information required to appear on
food product labels. For certain product lines, SYSCO is also subject to the
Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable
Agricultural Commodities Act and regulations promulgated thereunder by the U.S.
Department of Agriculture ("USDA"). The USDA imposes standards for product
quality and sanitation including the inspection and labeling of meat and poultry
products and the grading and commercial acceptance of produce shipments from the
company's suppliers. The company and its products are also subject to state and
local regulation through such measures as the licensing of its facilities,
enforcement by state and local health agencies of state and local standards for
the company's products and regulation of the company's trade practices in
connection with the sale of its products. SYSCO's facilities are generally
inspected at least annually by state and/or federal authorities. These
facilities are also subject to inspections and regulations issued pursuant to
the Occupational Safety and Health Act by the U.S. Department of Labor, which
require the company to comply with certain manufacturing, health and safety
standards to protect its employees from accidents and to establish hazard
communication programs to transmit information on the hazards of certain
chemicals present in products distributed by the company.

The company is also subject to regulation by numerous federal, state and
local regulatory agencies, including but not limited to the U.S. Department of
Labor, which sets employment practice standards for workers, and the U.S.
Department of Transportation, which regulates transportation of perishable and
hazardous materials and waste, and similar state and local agencies.

The company's distribution facilities have tanks for the storage of diesel
fuel and other petroleum products which are subject to laws regulating such
storage tanks. Other federal, state and local provisions

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relating to the protection of the environment or the discharge of materials do
not materially impact the company's use or operation of its facilities.

Compliance with these laws has not had and is not anticipated to have a
material effect on the capital expenditures, earnings or competitive position of
SYSCO.

GENERAL

SYSCO has numerous trademarks which are of significant importance to the
company. The loss of the SYSCO(R) trademark would have a material adverse effect
on SYSCO's results of operations.

SYSCO is not engaged in material research and development activities
relating to the development of new products or the improvement of existing
products.

Sales of the company do not generally fluctuate on a seasonal basis;
therefore, the business of the company is not deemed to be seasonal.

As of June 28, 2003, SYSCO and its operating companies operated 162
facilities throughout the United States and Canada, of which 145 were principal
distribution facilities.

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ITEM 2. PROPERTIES

The table below shows the number of distribution facilities and self-serve
centers occupied by SYSCO in each state or province and the aggregate cubic
footage devoted to cold and dry storage as of June 28, 2003.

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* Segments served include Broadline (BL), SYGMA (S) and Other (O).

SYSCO owns approximately 386,000,000 cubic feet of its distribution
facilities and self-serve centers (or 77.4% of the total cubic feet), and the
remainder is occupied under leases expiring at various dates from fiscal 2004 to
fiscal 2023, exclusive of renewal options. Certain of the facilities owned by
the company are either subject to mortgage indebtedness or industrial revenue
bond financing arrangements totaling $24,096,000 at June 28, 2003. Such mortgage
indebtedness and industrial revenue bond financing arrangements mature at
various dates to 2026.

The company owns its approximately 188,000 square foot headquarters office
complex in Houston, Texas and leases approximately 201,000 square feet of
additional office space in Houston, Texas.

Facilities in Rocky Hills, Connecticut; Halfmoon, New York; Miami, Florida;
Little Rock, Arkansas; Palmetto, Florida; Cleveland, Ohio; San Antonio, Texas;
and Billings, Montana (which in the aggregate accounted for approximately 9.8%
of fiscal 2003 sales) are operating near capacity and the company is currently
constructing expansions or replacements for these distribution facilities. New
distribution facilities are also under construction in Fargo, North Dakota and
Ventura County, California. In addition, the company's first regional
distribution center is under construction in Front Royal, Virginia.

As of June 28, 2003, SYSCO's fleet of approximately 8,570 delivery vehicles
consisted of tractor and trailer combinations, vans and panel trucks, most of
which are either wholly or partially refrigerated for the transportation of
frozen or perishable foods. The company owns approximately 87% of these vehicles
and leases the remainder.

ITEM 3. LEGAL PROCEEDINGS

SYSCO is engaged in various legal proceedings which have arisen but have
not been fully adjudicated. These proceedings, in the opinion of management,
will not have a material adverse effect upon the consolidated financial position
or results of operations of the company when ultimately concluded.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The following are the executive officers of SYSCO, each of whom serves at
the discretion of the Board and holds the office opposite his or her name below
until the meeting of the Board of Directors immediately preceding the next
Annual Meeting of Stockholders or until his or her successor has been elected or
qualified. Executive officers who also serve as directors, serve as directors
until expiration of their terms or until their successors have been elected and
qualified. Each officer listed below has been employed by the company for at
least the past five years.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The principal market for SYSCO's Common Stock (SYY) is the New York Stock
Exchange. The table below sets forth the high and low sales prices per share for
SYSCO's Common Stock as reported on the New York Stock Exchange Composite Tape
and the cash dividends declared for the periods indicated.

The number of record owners of SYSCO's Common Stock as of September 9, 2003
was 15,442.

In August 2002, a total of 24,868 shares of Common Stock were issued to
three retired employees pursuant to the company's Management Incentive Plan
which was approved by shareholders on November 3, 2000. In each case, the shares
had been elected to be received in lieu of a portion of the individual's cash
bonus earned during fiscal 2002 and prior to retirement. The shares were issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended, in a
transaction that did not involve any public offering.

In October 2001 and September 2002, a total of 64,450 and 128,902 shares,
respectively, were released to the former shareholders of Buckhead Beef Company
("Buckhead") pursuant to the terms of an escrow agreement executed in connection
with SYSCO's acquisition of Buckhead in August 1999.

In October 2001, a total of 64,024 shares were released to the former
shareholders of Newport Meat Company ("Newport") pursuant to the terms of an
escrow agreement executed in connection with SYSCO's acquisition of Newport in
July 1999.

In October 2001 and October 2002, a total of 47,060 and 47,056 shares,
respectively, were released to the former shareholders of Malcolm Meats Company
("Malcolm") pursuant to the terms of an escrow agreement executed in connection
with SYSCO's acquisition of Malcolm in November 1999.

In October 2002, a total of 26,034 Dividend Access Shares, convertible on a
one-for-one basis into SYSCO shares, were released to the former owners of HRI
Supply, Ltd. ("HRI") pursuant to the terms of an escrow agreement executed in
connection with SYSCO's acquisition of HRI in May 2001.

In March 2003, a total of 537,777 shares were released to the former
shareholders of FreshPoint Holdings, Inc. ("FreshPoint") pursuant to the terms
of an escrow agreement executed in connection with SYSCO's acquisition of
FreshPoint in March 2000.

In April 2002 and February 2003, a total of 35,520 and 35,520 Dividend
Access Shares, respectively, convertible on a one-for-one basis into SYSCO
shares, were released to the former shareholders of North Douglas Distributors
("North Douglas") pursuant to the terms of an escrow agreement executed in
connection with SYSCO's acquisition of North Douglas in December 2000.

All of the above issuances were made pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.

In July 2001, a total of 111,997 shares were issued to the former
shareholders of North Douglas upon the conversion of Dividend Access Shares
issued in connection with SYSCO's acquisition of North Douglas in

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December 2000. In June 2001, a total of 58,000 shares were issued to the former
shareholders of HRI upon the conversion of Dividend Access Shares issued in
connection with SYSCO's acquisition of HRI in May 2001. The foregoing shares
were issued pursuant to the exemption from registration contained in Section
3(a)(9) of the Securities Act of 1933, as amended.

ITEM 6. SELECTED FINANCIAL DATA

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(1) SYSCO adopted the provisions of SFAS No. 142, "Accounting for Goodwill and
Other Intangible Assets," effective at the beginning of fiscal year 2003. As
a result, the amortization of goodwill was discontinued.

(2) The per share data for fiscal 2001 and prior years reflect the 2-for-1 stock
split of December 15, 2000.

(3) In fiscal 2000, SYSCO recorded a one-time, after-tax, non-cash charge of
$8,041 to comply with the required adoption of AICPA SOP 98-5, "Reporting on
the Costs of Start-up Activities."

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

SYSCO provides marketing and distribution services to foodservice customers
throughout the United States and Canada. The company intends to continue to
expand its market share through profitable sales growth, foldouts and
acquisitions. The company also strives to increase the effectiveness of its
marketing associates, its consolidated buying programs and the productivity of
its warehousing and distribution activities. These objectives require continuing
investment. SYSCO's resources include cash provided by operations and access to
capital from financial markets.

SYSCO's operations historically have produced significant cash flow. Cash
generated from operations is first allocated to working capital requirements;
investments in facilities, fleet and other equipment required to meet customers'
needs; cash dividends; and acquisitions compatible with the company's overall
growth strategy. Any remaining cash generated from operations may, at the
discretion of management, be applied toward a portion of the cost of the share
repurchase program, while the remainder of the cost may be financed with
additional long-term debt. SYSCO's share repurchase program is used primarily to
offset shares issued under various employee benefit and compensation plans, for
acquisitions and to reduce shares outstanding, which may have the net effect of
increasing earnings per share. Management targets a long-term debt to total
capitalization ratio between 35% and 40%. The ratio may exceed the target range
from time to time due to borrowings incurred in order to fund acquisitions and
internal growth opportunities and due to fluctuations in the timing and amount
of share repurchases. The ratio also may fall below the target range due to
strong cash flow from operations and fluctuations in the timing and amount of
share repurchases. This ratio was 36.2% and 35.6% at June 28, 2003 and June 29,
2002, respectively.

The company generated net cash from operations of $1,372,840,000 in fiscal
2003, $1,084,980,000 in fiscal 2002, and $955,224,000 in fiscal 2001. The
overall increases in operating results contributed to the annual increases in
cash flows from operations. In addition, several factors also contributed to the
increase in cash flow from operations. During the second quarter of fiscal 2002,
the company began reorganizing its supply chain to maximize consolidated
efficiencies and increase the effectiveness of the merchandising and procurement
functions performed for the benefit of customers. The new structure results in
the deferral of certain federal and state income tax payments and is reflected
in the increase in net deferred taxes. Tax payments made during the year of
$28,747,000 were $211,045,000 less than tax payments made in the prior year.
This decrease is primarily due to the deferrals discussed above as well as the
impact of other temporary differences and the timing and amount of tax payments.
The company estimates the cash flow savings from this deferral in fiscal 2003 to
be approximately $410,000,000 as compared to approximately $267,000,000 in
fiscal 2002. The company expects the positive cash flow impact of deferrals in
fiscal 2004 and beyond to be less than fiscal 2003 levels, as it will begin
making payments related to these deferrals in fiscal 2004. The company expects
the net cash flow impact of deferrals in fiscal 2004 and beyond to be
incrementally positive when compared to what would have been paid on an annual
basis without the deferral due to the company's belief that its volume through
the new structure will continue to grow. In addition, a federal tax payment of
$75,000,000 normally due in the fourth quarter of 2001 was deferred until the
first quarter of 2002 as allowed by the Internal Revenue Service, due to the
Texas tropical storm Allison disaster, and is reflected in the decrease of
accrued income taxes in fiscal 2002.

Cash flow from operations for fiscal 2003 was positively impacted by
increases in accounts payable balances offset by increases in accounts
receivable and inventory balances and decreases in accrued expenses and other
liabilities. Increased sales volumes over the comparable periods contributed to
the increase in accounts receivable balances. SYSCO has also experienced sales
increases with national contract customers that have outpaced the sales
increases from marketing associate-served customers. National contract
customers' payment terms are traditionally longer than the SYSCO average. In
addition, SYSCO had approximately $37,000,000 in receivables past due at
year-end from a U.S. military contractor that have since been paid. The
increased sales volumes also contributed to the increase in inventory balances.
The increase in accounts payable balances was partially due to the increased
inventory balances and was significantly aided by an increase in accounts
payable days outstanding over the comparable period. A contributor to the
decrease in

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accrued expenses and other liabilities was the increase in pension contributions
from $83,136,000 in fiscal 2002 to $164,565,000 in fiscal 2003.

Cash used for investing activities was $681,825,000 in fiscal 2003,
$662,300,000 in fiscal 2002, and $338,751,000 in fiscal 2001. Expenditures for
facilities, fleet and other equipment were $435,637,000 in fiscal 2003,
$416,393,000 in fiscal 2002, and $341,138,000 in fiscal 2001. The increase in
fiscal 2003 over fiscal 2002 was primarily due to the construction of fold-out
facilities in Las Vegas, Nevada and Ventura, California, replacement facilities
in Cleveland, Ohio; Dallas, Texas; and Miami, Florida and the Northeast
Redistribution Center in Front Royal, Virginia (first phase of the National
Supply Chain initiative). The increase in fiscal 2002 over fiscal 2001 was
primarily due to the construction of fold-out facilities located in Sacramento,
California; Columbia, South Carolina; and Las Vegas, Nevada. Fiscal 2002
expenditures also included costs incurred on the construction or expansion of
facilities in Dallas, Texas; Norman, Oklahoma; Baraboo, Wisconsin; and Jersey
City, New Jersey. Total expenditures in fiscal 2004 are expected to increase to
the range of $490,000,000 to $510,000,000 due to the continuation of the
fold-out program; facility, fleet and other equipment replacements and
expansions; the company's supply chain initiatives; and investments in
technology. Expenditures for acquisitions of businesses were $209,010,000 in
fiscal 2003, $234,618,000 in fiscal 2002, and $10,363,000 in fiscal 2001.

The National Supply Chain project is expected to create a more efficient
and effective supply chain infrastructure for SYSCO, its suppliers and its
customers. The project entails the implementation of regional distribution
centers, which will aggregate inventory demand to optimize the supply chain
activities for certain products from all SYSCO operating companies in the
region. The project is expected to achieve lower costs of inventory,
transportation, product handling and transaction processing in addition to
lowering working capital and future facility expansion needs at the operating
companies. The Northeast Redistribution Center is expected to be operational in
the summer of 2004. The center will receive and distribute food and food-related
products to SYSCO operating companies in the Northeast, creating benefits for
customers and suppliers, as well as for SYSCO.

In November 2000, the company filed with the Securities and Exchange
Commission a shelf registration statement covering 30,000,000 shares of common
stock to be offered from time to time in connection with acquisitions. As of
June 28, 2003, 29,477,835 shares remained available for issuance under this
registration statement.

Cash used for financing activities was $550,528,000 in fiscal 2003,
$359,984,000 in fiscal 2002, and $639,858,000 in fiscal 2001. In September 2001,
the Board authorized the repurchase of an additional 16,000,000 shares, which
was completed during fiscal 2003. In July 2002, the Board authorized the
repurchase of an additional 20,000,000 shares. Under this authorization,
9,063,200 shares remained available for purchase at June 28, 2003. In September
2003, the Board authorized the repurchase of an additional 20,000,000 shares.
The number of shares acquired and their cost during the past three fiscal years
was 16,500,000 shares for $478,471,000 in fiscal 2003, 18,000,000 shares for
$473,558,000 in fiscal 2002, and 16,000,000 shares for $428,196,000 in fiscal
2001.

Dividends paid were $261,854,000 in fiscal 2003, $213,275,000 in fiscal
2002, and $173,701,000 in fiscal 2001. SYSCO began paying the current quarterly
dividend rate of $0.11 per share in January 2003, an increase from the $0.09 per
share that became effective in January 2002. In May 2003, SYSCO declared its
regular quarterly dividend for the first quarter of fiscal 2004 of $0.11 per
share, which was paid in July 2003. In September 2003, SYSCO also declared its
regular quarterly dividend for the second quarter of fiscal 2004 of $0.11 per
share, payable in October 2003.

In April 2002, SYSCO issued $200,000,000 principal amount of 4.75% notes
due July 30, 2005 under a shelf registration statement filed in June 1998. These
notes, which were priced at 99.8% of par, are unsecured and are not subject to
any sinking fund requirement. They include a redemption provision which allows
SYSCO to retire the notes at any time prior to maturity at the greater of par
plus accrued interest or an amount designed to insure that the note holders are
not penalized by early redemption. Proceeds from the notes were used to pay down
borrowings under the company's commercial paper program. As of August 29,

12

2003, there was $425,000,000 in principal amount outstanding under the
previously filed registration statement, leaving $75,000,000 available for
issuance.

Concurrent with the issuance of these notes, SYSCO entered into an interest
rate swap agreement with a notional amount of $200,000,000 whereby SYSCO
received a fixed rate equal to 4.75% per annum and paid a benchmark interest
rate of six-month LIBOR in arrears less 84.5 basis points. In June 2003, SYSCO
terminated this swap agreement and received approximately $15,359,000
representing the fair value of the swap agreement at the time of termination. A
corresponding amount is reflected as an increase in the carrying value of the
related debt to reflect its fair value at termination. This increase in the
carrying value of the debt is being amortized as a reduction of interest expense
over the remaining term of the debt.

In May 2002, SYSCO International, Co., a wholly-owned subsidiary of SYSCO,
issued 6.10% notes totaling $200,000,000 due June 1, 2012 in a private offering.
These notes, which were priced at 99.7% of par, were fully and unconditionally
guaranteed by Sysco Corporation, were not subject to any sinking fund
requirement, included registration rights for the note holders, and included a
redemption provision which allowed SYSCO International, Co. to retire the notes
at any time prior to maturity at the greater of par plus accrued interest or an
amount designed to insure that the note holders were not penalized by the early
redemption. In December 2002, SYSCO International, Co. completed a registered
exchange offer for these notes. In the exchange offer, all of the outstanding
$200,000,000 notes were exchanged for new notes which are identical in all
respects to the outstanding notes except that the new notes are registered under
the Securities Act of 1933. The new notes are fully and unconditionally
guaranteed by Sysco Corporation. The proceeds from these notes were utilized to
repay commercial paper borrowings issued by SYSCO International, Co. to fund the
acquisition of a Canadian broadline foodservice business.

SYSCO has uncommitted bank lines of credit, which provided for unsecured
borrowings for working capital of up to $95,000,000 at June 28, 2003 and up to
$125,000,000 at June 29, 2002. There were no borrowings outstanding under these
lines of credit as of June 28, 2003 or August 29, 2003.

SYSCO has a commercial paper program in the United States which was
supported by a bank credit facility in the amount of $450,000,000 as of June 28,
2003 maturing in fiscal 2008. SYSCO also has a commercial paper program in
Canada which is supported by a bank credit facility in the amount of
$100,000,000 in Canadian dollars maturing in fiscal 2004. During fiscal 2003,
2002 and 2001, commercial paper and short-term bank borrowings ranged from
approximately $55,813,000 to $495,703,000, $51,472,000 to $538,362,000, and
$157,631,000 to $411,790,000, respectively. Commercial paper borrowings were
$151,748,000 as of June 28, 2003 and $92,755,000 as of August 29, 2003. The
company intends to settle outstanding commercial paper borrowings when they come
due by issuing additional debt or retiring them utilizing cash generated from
operations.

Total debt at June 28, 2003 was $1,372,236,000, of which approximately 88%
was at fixed rates averaging 5.7% and the remainder was at floating rates
averaging 2.5%. SYSCO continues to have borrowing capacity available and
alternative financing arrangements are evaluated as appropriate.

In summary, SYSCO believes that through continual monitoring and management
of assets together with the availability of additional capital in the financial
markets, it will meet its cash requirements while maintaining proper liquidity
for normal operating purposes.

13

CONTRACTUAL OBLIGATIONS

The following table sets forth certain information concerning SYSCO's
obligations to make future payments under contracts, such as debt and lease
agreements:

Included in other long-term liabilities of $289,998,000 as of June 28, 2003
are Sysco's obligations related to pension and deferred compensation plans.

SALES

Sales increased 11.9% in fiscal 2003, 7.2% in fiscal 2002 and 12.8% in
fiscal 2001. The annual sales increases were attributable to a variety of
factors, including the progress of SYSCO's Customers Are Really Everything to
SYSCO (C.A.R.E.S.) customer relationship initiatives, a persistent focus on
increasing sales to marketing associate-served customers, the continuing
recognition by customers of the quality and value of SYSCO Brand products, the
overall growth in the foodservice industry and acquisitions. Real sales growth,
calculated as total sales growth less non-comparable acquisitions and adjusted
for internally estimated product cost inflation or deflation, was approximately
6.7% in fiscal 2003. Acquisitions represented 5.2% of sales increases for fiscal
2003 and there was no inflation or deflation. Product costs trended upward
during the last half of the fiscal year, reversing the deflationary pressures
experienced during the first half of the year, resulting in a flat rate for the
entire year. Real sales growth is a non-GAAP financial measure as defined by the
Securities and Exchange Commission. Management believes it is a useful indicator
of the company's organic growth without regard to acquisitions and inflation.

After adjusting for acquisitions and inflation, real sales growth was
approximately 2.7% in 2002. Acquisitions represented 3.4% of sales increases for
fiscal 2002 and inflation was 1.1%. After adjusting for acquisitions and
inflation, real sales growth was approximately 5.8% in fiscal 2001. Acquisitions
represented 4.5% of total sales in fiscal 2001 and inflation was approximately
2.5%. The lower sales growth in 2002 was attributable to the overall softness in
the economy and comparisons to sales increases in fiscal 2001.

Industry sources estimate the total foodservice market experienced a real
sales decline of approximately 0.3% in calendar year 2002 and zero real sales
growth in calendar year 2001.

SYSCO's sales for fiscal 2001 through 2003 were as follows:

14

A comparison of the sales mix in the principal product categories during
the last three years is presented below:

A comparison of sales by type of customer during the last three years is
presented below:

COST OF SALES

Cost of sales increased approximately 12.1% in fiscal 2003, 6.9% in fiscal
2002 and 11.9% in fiscal 2001. In fiscal 2003, the increase in cost of sales
resulted in gross margins as a percent of sales decreasing 0.08 percentage
points compared to the prior year. This decrease was primarily attributable to
two factors. First, multi-unit sales growth of 13.3% was greater than marketing
associate-served sales growth of 10.5%. Multi-unit sales tend to have lower
gross margins (coupled with lower expenses) than marketing associate-served
sales. Secondly, fresh-cut meat sales grew as a percentage of overall sales. As
these are higher price and lower gross margin percentage products, this had the
effect of decreasing overall gross margins as a percent of sales even as gross
margin dollars increased. In 2002 and 2001, the rate of increase in cost of
sales was less than the rate of sales increase leading to improved gross
margins. The rate of increase in gross margins is influenced by SYSCO's overall
customer and product mix, economies realized in purchasing and higher sales of
SYSCO Brand products.

OPERATING EXPENSES

Operating expenses include the costs of warehousing and delivering products
as well as selling and administrative expenses. These expenses as a percent of
sales were 14.7% for fiscal 2003 and 14.8% for fiscal 2002 and 2001. Changes in
the percentage relationship of operating expenses to sales result from an
interplay of several factors, including customer mix. Inflationary increases in
operating costs generally have been offset through improved productivity.

15

The decrease in expenses in fiscal 2003 was primarily attributable to
improved operating efficiencies as demonstrated by improving trends in key
expense metrics including pieces sold per delivery and product line items sold
per delivery. These operating expense improvements were partially offset by
increases in net pension costs of $22,952,000 and by increases in expenses
incurred in connection with the National Supply Chain initiative of $5,996,000.

Operating expenses in fiscal 2002 were negatively impacted by increased
costs realized during the initial operating periods of fold-outs in Sacramento,
California; Columbia, South Carolina; and Las Vegas, Nevada. In addition, the
increase in marketing associate-served sales is accompanied by higher expenses
to serve these customers.

INTEREST EXPENSE

Interest expense for fiscal 2003 increased $9,337,000, or approximately
14.8% over fiscal 2002, which had decreased $8,879,000, or approximately 12.4%
below fiscal 2001. The increase in interest expense in fiscal 2003 was primarily
due to increased borrowings, partially offset by decreases in interest rate
levels. The decrease in interest expense in fiscal 2002 was primarily due to
decreases in interest rates for short-term and commercial paper borrowings.
Interest capitalized during construction periods for the past three years was
$5,244,000 in fiscal 2003, $3,746,000 in fiscal 2002 and $2,995,000 in fiscal
2001.

OTHER, NET

Other, net was income of $8,347,000 in fiscal 2003, an increase of
$5,542,000 from the income of $2,805,000 in fiscal 2002. Fiscal 2002's income of
$2,805,000 increased $2,906,000 from the $101,000 expense in fiscal 2001.
Changes between the years result from fluctuations in miscellaneous activities,
primarily gains and losses on the sale of surplus facilities.

EARNINGS BEFORE INCOME TAXES

Earnings before income taxes in fiscal 2003 rose $159,517,000, or
approximately 14.5% above fiscal 2002 which had increased $134,215,000, or
approximately 13.9%, over fiscal 2001. Additional sales and realization of
operating efficiencies contributed to the increases.

PROVISION FOR INCOME TAXES

The effective tax rate was 38.25% in fiscal 2003, 2002 and 2001. SYSCO
anticipates an effective tax rate of 38.50% in fiscal 2004. The increase is
attributable to the increasing effective rates of state income taxes.

NET EARNINGS

Fiscal 2003 represents the twenty-seventh consecutive year of increased net
earnings. Net earnings rose $98,501,000 or approximately 14.5% above fiscal
2002, which had increased $82,878,000 or approximately 13.9% over fiscal 2001.
The increases were caused by additional sales, operating efficiencies and other
factors discussed above.

RETURN ON AVERAGE SHAREHOLDERS' EQUITY

The return on average shareholders' equity was approximately 36% in fiscal
2003 and 31% in fiscal 2002 and fiscal 2001. Since its inception, SYSCO has
averaged in excess of an 18% return on average shareholders' equity before the
cumulative effect of accounting changes.

BROADLINE SEGMENT

Broadline segment sales increased by 12.1% in fiscal 2003 as compared to
fiscal 2002 and by 5.8% in fiscal 2002 as compared to fiscal 2001. The fiscal
2003 and 2002 sales growth was due primarily to increased sales to marketing
associate-served and multi-unit customers, including increased sales of SYSCO
Brand products, as well as the acquisition of a Canadian broadline foodservice
operation. The sales growth was obtained through

16

increased sales to the existing customer base as well as the acquisition of new
customers. Broadline segment sales as a percentage of total SYSCO sales
increased to 82.2% in fiscal 2003 from 82.1% in fiscal 2002 which decreased from
83.1% in fiscal 2001. The increase in fiscal 2003 was due primarily to the
acquisition of a Canadian broadline foodservice operation. The decrease in
fiscal 2002 was due primarily to acquisitions of specialty meat, lodging
industry product and produce companies in the Other segments and greater
percentage growth of specialty meat, lodging industry companies and SYGMA
segment as a percentage of overall SYSCO sales.

Earnings before income taxes for the Broadline segment increased by 12.8%
in fiscal 2003 as compared to fiscal 2002 and by 12.4% in fiscal 2002 as
compared to fiscal 2001. The increases in earnings before income taxes for
fiscal 2003 and fiscal 2002 were driven by improved operating efficiencies as
well as increased sales to multi-unit and marketing associate-served customers
and increases in sales of SYSCO Brand products.

SYGMA SEGMENT

SYGMA segment sales increased by 9.2% in fiscal 2003 as compared to fiscal
2002 and 10.6% in fiscal 2002 as compared to fiscal 2001. The fiscal 2003 sales
growth was primarily due to sales growth in SYGMA's existing customer base as
well as the acquisition of two quickservice operations. Sales growth in fiscal
2002 was due primarily to sales growth in SYGMA's existing customer base. SYGMA
segment sales as a percentage of total SYSCO sales decreased to 11.2% in fiscal
2003 from 11.4% in fiscal 2002 which increased from 11.1% in fiscal 2001. The
decrease in fiscal 2003 was due to the sales growth in the Broadline and Other
segments.

Earnings before income taxes for the SYGMA segment increased by 3.4% in
fiscal 2003 as compared to fiscal 2002 and 41.2% in fiscal 2002 as compared to
fiscal 2001. The increase in fiscal 2003 was primarily due to increased sales.
The increase in fiscal 2002 was due to operating efficiencies and improved labor
productivity realized during the fiscal year.

OTHER SEGMENTS

Other segment sales increased by 17.3% in fiscal 2003 as compared to fiscal
2002 and 23.9% in fiscal 2002 as compared to fiscal 2001. Other segment sales as
a percentage of total SYSCO sales increased to 7.7% in fiscal 2003 from 7.3% in
fiscal 2002 which increased from 6.3% in fiscal 2001. The increase in fiscal
2003 was primarily attributable to sales growth in our custom meat-cutting
operations as well as the timing of acquisitions made during the year. The
increase in fiscal 2002 was due primarily to the timing of acquisitions made
during the year.

Earnings before income taxes for the Other segment increased by 4.8% in
fiscal 2003 as compared to fiscal 2002 and 15.5% in fiscal 2002 as compared to
fiscal 2001. The increase in fiscal 2003 was due primarily to the acquisition of
a specialty distributor of products to the Asian foodservice market, increased
earnings from increased gross margins and operating efficiencies at the
company's specialty produce operations, and increased earnings from increased
sales and gross margins at the company's specialty lodging industry products
operations. These were offset by expenses incurred on a start-up operation
supplying the health care industry and decreased earnings at the company's
specialty meat-cutting operations. This decrease was primarily attributable to
decreased gross margins as meat costs increased in a highly inflationary period.
Gross margin percentages on products priced on a mark-up per pound basis are
difficult to maintain during inflationary periods. The increase in fiscal 2002
was due primarily to the timing of acquisitions made during the periods
presented but was offset by a decrease due to the downturn in demand in travel
and resort destination cities which are serviced by certain of the specialty
companies.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, sales and
expenses in the accompanying financial statements. Significant accounting
polices employed by SYSCO are presented in the notes to the financial
statements.

17

Critical accounting policies are those that are most important to the
portrayal of the company's financial condition and results of operations. These
policies require management's most subjective or complex judgments, often
employing the use of estimates about the effect of matters that are inherently
uncertain. Senior management has reviewed with the Audit Committee of the Board
of Directors the development and selection of the critical accounting estimates
and this related disclosure. SYSCO's most critical accounting policies pertain
to the allowance for doubtful accounts receivable, self-insurance programs,
pension plans and accounting for business combinations.

Allowance for Doubtful Accounts Receivable

SYSCO evaluates the collectibility of accounts receivable and determines
the appropriate reserve for doubtful accounts based on a combination of factors.
In circumstances where the company is aware of a specific customer's inability
to meet its financial obligation, a specific allowance for doubtful accounts is
recorded to reduce the receivable to the net amount reasonably expected to be
collected. In addition, allowances are recorded for all other receivables based
on analysis of historical trends of write-offs and recoveries. The company
utilizes specific criteria to determine uncollectible receivables to be written
off including bankruptcy, accounts referred to outside parties for collection
and accounts past due over specified periods. If the financial condition of
SYSCO's customers were to deteriorate, additional allowances may be required.

Self-Insurance Program

SYSCO maintains a self-insurance program covering portions of workers'
compensation, group medical, general liability and vehicle liability costs. The
amounts in excess of the self-insured levels are fully insured. Liabilities
associated with these risks are estimated in part by considering historical
claims experience, demographic factors, severity factors and other actuarial
assumptions. Projections of future loss expenses are inherently uncertain
because of the random nature of insurance claims occurrences and could be
significantly affected if future occurrences and claims differ from these
assumptions and historical trends. In an attempt to mitigate the risks of
workers' compensation, vehicle and general liability claims, safety procedures
and awareness programs have been implemented.

Pension Plans

SYSCO maintains defined benefit and defined contribution retirement plans
for its employees. The company also contributes to various multi-employer plans
under collective bargaining agreements. The defined benefit pension plans pay
benefits to employees at retirement using formulas based on a participant's
years of service and compensation. SYSCO also maintains a non-qualified,
unfunded Supplementary Executive Retirement Plan (SERP) for key employees. In
order to meet its obligations under the SERP, the company maintains life
insurance policies on the lives of participants. SYSCO is the sole owner and
beneficiary of such policies, which are excluded from plan assets in arriving at
prepaid (accrued) benefit cost. Cash surrender values of such policies were
$74,730,000 at June 28, 2003 and $71,418,000 at June 29, 2002.

SYSCO accounts for its defined benefit pension plans in accordance with
Statement of Financial Accounting Standards (SFAS) No. 87, "Employers'
Accounting for Pensions," as amended by SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits -- an amendment of FASB
Statements No. 87, 88, and 106." These statements require that the amounts
recognized in the financial statements be determined on an actuarial basis.
Three of the more critical assumptions in the actuarial calculations are the
discount rate for determining the current value of plan benefits, the assumption
for the rate of increase in future compensation levels and the expected rate of
return on plan assets.

For guidance in determining the discount rate, SYSCO refers to rates of
return on high-quality fixed-income investments, including, among other items,
Moody's long-term AA corporate bond yields. The discount rate utilized by SYSCO
was 6.00% and 7.25% as of June 28, 2003 and June 29, 2002, respectively. The
discount rate assumption is reviewed annually and revised as deemed appropriate,
as it was at June 28,

18

2003, when the discount rate was reduced to 6.00% from 7.25% and at June 29,
2002 when the discount rate was reduced to 7.25% from 7.50%.

The discount rate assumption utilized impacts the recorded amount of
pension expense. The 0.25% decrease in the discount rate used at June 29, 2002
increased SYSCO's net pension expense for fiscal 2003 by approximately
$5,500,000. The decrease in the discount rate of 1.25% at June 28, 2003 will
increase SYSCO's pension expense for fiscal 2004 by approximately $35,300,000.

SYSCO looks to actual plan experience in determining the rates of increase
in compensation levels. SYSCO used a plan specific age-related set of rates
(equivalent to a single rate of 5.89%), as of June 28, 2003 and June 29, 2002.

The expected long-term rate of return on plan assets was 9.00% and 9.50% as
of June 28, 2003 and June 29, 2002, respectively. The expectations of future
returns are derived from a mathematical asset model that incorporates
assumptions as to the various asset class returns, reflecting a combination of
rigorous historical performance analysis and the forward-looking views of the
financial markets regarding the yield on long-term bonds and the historical
returns of the major stock markets. Although not determinative of future
returns, the effective annual rate of return on plan assets, developed using
geometric/compound averaging, was 12.1%, 7.5%, 2.7% and a negative 14.3% over
the twenty-year, ten-year, five-year and one-year periods ended December 31,
2002, respectively. In addition, in nine of the last fifteen years, the actual
return on plan assets has exceeded 9.50%. The rate of return assumption is
reviewed annually and revised as deemed appropriate as it was at June 28, 2003
when the expected return was reduced to 9.00% from 9.50% and at June 29, 2002
when the expected return was reduced to 9.50% from 10.50%.

The expected return on plan assets impacts the recorded amount of pension
expense. The 1% decrease in the assumed rate of return increased SYSCO's net
pension expense for fiscal 2003 by approximately $4,900,000. The decrease in the
expected return of 0.50% at June 28, 2003 will increase SYSCO's net pension
expense for fiscal 2004 by approximately $3,400,000.

Amortization of unrecognized net asset losses increased pension expense for
fiscal year 2003 by approximately $5,800,000 and is expected to further increase
pension expense for fiscal year 2004 by approximately $4,200,000.

Changes in assumptions regarding the discount rate together with actual
returns on plan assets below the expected return assumptions resulted in the
company being required to reflect a cumulative adjustment to other comprehensive
income with respect to minimum pension liability of $185,118,000, net of tax, as
of June 28, 2003 and $65,435,000, net of tax, as of June 29, 2002. Minimum
pension liability adjustments are non-cash adjustments that are reflected as an
increase in the pension liability and an offsetting charge to shareholders'
equity, net of tax, through comprehensive loss rather than net income.

The company's prepaid pension cost prior to the recognition of the
additional minimum pension liability was $91,340,000 and $1,063,000 at June 28,
2003 and June 29, 2002, respectively. Included in arriving at accrued benefit
cost as of June 28, 2003 and June 29, 2002, respectively, are $493,829,000 and
$236,852,000 in deferred net actuarial losses resulting from the variance of
actual experience from that projected by actuarial assumptions. A portion of
this unrecognized loss is amortized and recognized in accordance with SFAS No.
87 in pension expense over time.

The company recognized net pension costs of $74,288,000, net of an expected
asset return of $44,061,000, and $51,336,000, net of an expected asset return of
$42,039,000, for fiscal years 2003 and 2002, respectively. Changes in the
assumptions together with the normal growth of the plan and the impact of losses
from prior periods, increased net pension cost $22,952,000 in fiscal 2003 and is
expected to increase fiscal 2004 by $39,900,000.

The company's cash contributions to its pension plans were $164,565,000 and
$83,136,000 in fiscal years 2003 and 2002, respectively. For the past several
years no contributions have been required to be made to the qualified pension
trust, as determined by government regulations; however, SYSCO has chosen to
voluntarily

19

make contributions. In fiscal 2004, contributions to the qualified pension trust
will also not be required as determined by government regulations.

Accounting for Business Combinations

Goodwill and intangible assets represent the excess of consideration over
the fair value of tangible net assets acquired. Certain assumptions and
estimates are employed in determining the fair value of assets acquired,
including goodwill and other intangible assets, as well as determining the
allocation of goodwill to the appropriate reporting unit. In addition, SYSCO
assesses the recoverability of these intangibles by determining whether the fair
values of the applicable reporting units exceed their carrying values. The
evaluation of fair value requires the use of projections, estimates and
assumptions as to the future performance of the operations in performing a
discounted cash flow analysis as well as assumptions regarding sales and
earnings multiples that would be applied in comparable acquisitions in the
industry. Actual results could differ from these assumptions and projections
resulting in the company revising its assumptions and, if required, recognizing
an impairment loss.

NEW ACCOUNTING STANDARDS

SYSCO adopted the provisions of SFAS No. 142, "Accounting for Goodwill and
Other Intangible Assets," effective at the beginning of fiscal 2003. As a
result, the amortization of goodwill was discontinued. Management completed its
assessment of the impact that the adoption of SFAS No. 142 had on the company's
consolidated financial statements and determined that there was no impairment to
the carrying value of goodwill. Had goodwill amortization been discontinued for
all the fiscal years reported, SYSCO's pro forma net earnings and diluted
earnings per share were $778,288,000 and $1.18 in fiscal 2003, $694,320,000 and
$1.03 in fiscal 2002 and $608,998,000 and $0.90 in fiscal 2001.

SYSCO adopted the provisions of SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," effective in fiscal 2003. The
adoption of SFAS No. 144 has not had a material effect on the company's
consolidated financial statements.

SYSCO has adopted the provisions of Financial Accounting Standards Board
(FASB) Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." This interpretation requires certain guarantees to be recorded at fair
value and also requires a guarantor to make certain disclosures regarding
guarantees. This interpretation's initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements became effective
for SYSCO's financial statements for the third quarter of fiscal 2003. The
adoption of this interpretation did not have a material impact on SYSCO's
consolidated financial statements or disclosures.

SYSCO adopted the disclosure provisions of SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure," in the third quarter of
fiscal 2003. SFAS No. 148 provides alternative methods of transition to SFAS No.
123, "Accounting for Stock-Based Compensation," fair value method of accounting
for stock-based employee compensation if a company elects to adopt these
provisions. SFAS No. 148 also specifies required disclosures of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.

SYSCO has adopted the provisions of the Emerging Issues Task Force (EITF)
Issue No. 02-16, "Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor." The provisions of EITF No. 02-16 are
effective for fiscal periods beginning after December 15, 2002 with certain
provisions effective for arrangements entered into after November 21, 2002.
SYSCO's historical accounting policies are consistent with the provisions of
EITF No. 02-16 and thus SYSCO chose to adopt this accounting policy during the
third quarter of fiscal 2003. EITF No. 02-16 provides guidance as to the
recognition and classification of monies received from vendors. The adoption of
this consensus did not have an impact on SYSCO's consolidated financial
statements.

20

SYSCO adopted the provisions of the EITF Issue 02-17, "Recognition of
Customer Relationship Intangible Assets Acquired in a Business Combination,"
effective October 2002. EITF No. 02-17 addresses the intangible asset
recognition criteria of SFAS No. 141, "Business Combinations," and provides that
an intangible asset related to customer relationship intangibles may exist even
though the relationship is not evidenced by a contract. The adoption of this
consensus did not have a material impact on SYSCO's consolidated financial
statements.

In November 2002, the EITF reached a consensus on Issue No. 00-21,
"Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses how to
account for revenue arrangements with multiple deliverables and provides
guidance relating to when such arrangements should be divided into components
for revenue recognition purposes. The consensus will be effective for agreements
entered into in fiscal 2004 with early adoption permitted. The adoption of this
consensus will not have a material impact on SYSCO's consolidated financial
statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51." This interpretation introduces a new consolidation model, the
variable interests model, which determines control (and consolidation) based on
potential variability in gains and losses of the entity being evaluated for
consolidation. The interpretation's consolidation provisions apply immediately
to variable interests in variable interest entities (VIE's) created after
January 31, 2003 and apply in the first fiscal year or interim period beginning
after June 15, 2003 to VIE's acquired before February 1, 2003. The adoption of
this interpretation will not have a material impact on SYSCO's consolidated
financial statements.

RISK FACTORS

Low Margin Business; Economic Sensitivity

The foodservice distribution industry is characterized by relatively high
inventory turnover with relatively low profit margins. SYSCO makes a significant
portion of its sales at prices that are based on the cost of products it sells
plus a percentage markup. As a result, SYSCO's profit levels may be negatively
impacted during periods of product cost deflation, even though SYSCO's gross
profit percentage may remain relatively constant. Product cost inflation could
also have a negative impact on profit margins if SYSCO is unable to raise prices
to its customers at the same rate its costs increase. The foodservice industry
is sensitive to national and regional economic conditions. SYSCO's operating
results are also sensitive to, and may be adversely affected by, other factors,
including difficulties with the collectability of accounts receivable, inventory
control, competitive price pressures, severe weather conditions and unexpected
increases in fuel or other transportation-related costs. Although these factors
have not had a material adverse impact on SYSCO's past operations, there can be
no assurance that one or more of these factors will not adversely affect future
operating results.

Leverage and Debt Service

Because historically a substantial part of SYSCO's growth has been the
result of acquisitions and capital expansion, SYSCO's continued growth depends,
in large part, on its ability to continue this expansion. As a result, its
inability to finance acquisitions and capital expenditures through borrowed
funds could restrict its ability to expand. Moreover, any default under the
documents governing the indebtedness of SYSCO could have a significant adverse
effect on the market value of SYSCO's common stock. Further, SYSCO's leveraged
position may also increase its vulnerability to competitive pressures.

Product Liability Claims

SYSCO, like any other seller of food, faces the risk of exposure to product
liability claims in the event that the use of products sold by the company
causes injury or illness. With respect to product liability claims, SYSCO
believes it has sufficient primary or excess umbrella liability insurance.
However, this insurance may not continue to be available at a reasonable cost,
or, if available, may not be adequate to cover all of SYSCO's liabilities. SYSCO
generally seeks contractual indemnification and insurance coverage from parties
supplying

21

its products, but this indemnification or insurance coverage is limited, as a
practical matter, to the creditworthiness of the indemnifying party and the
insured limits of any insurance provided by suppliers. If SYSCO does not have
adequate insurance or contractual indemnification available, product liability
relating to defective products could materially reduce SYSCO's net earnings and
earnings per share.

Interruption of Supplies

SYSCO obtains substantially all of its foodservice products from third
party suppliers. For the most part, SYSCO does not have long-term contracts with
its suppliers committing them to provide products to SYSCO. Although SYSCO's
purchasing volume can provide leverage when dealing with suppliers, suppliers
may not provide the foodservice products and supplies needed by SYSCO in the
quantities requested. Because SYSCO does not control the actual production of
the products it sells, it is also subject to delays caused by interruption in
production based on conditions outside its control. These conditions include job
actions or strikes by employees of suppliers, weather, crop conditions,
transportation interruptions, and natural disasters or other catastrophic
events. SYSCO's inability to obtain adequate supplies of its foodservice
products as a result of any of the foregoing factors or otherwise, could mean
that SYSCO could not fulfill its obligations to customers, and customers may
turn to other distributors.

Labor Relations

As of June 28, 2003, approximately 9,500 employees at 49 operating
companies were members of 58 different local unions associated with the
International Brotherhood of Teamsters and other labor organizations. In fiscal
2004, 10 agreements covering approximately 1,070 employees will expire. Failure
of the operating companies to effectively renegotiate these contracts could
result in work stoppages. Although SYSCO's operating subsidiaries have not
experienced any significant labor disputes or work stoppages to date, and SYSCO
believes they have satisfactory relationships with their unions, a work stoppage
due to failure of one or more operating subsidiaries to renegotiate a union
contract, or otherwise, could have a material adverse effect on SYSCO.

Integration of Acquired Companies

If SYSCO is unable to integrate acquired businesses successfully and
realize anticipated economic, operational and other benefits in a timely manner,
its profitability may decrease. Integration of an acquired business may be more
difficult when SYSCO acquires a business in a market in which it has limited or
no expertise, or with a corporate culture different from SYSCO's. If SYSCO is
unable to integrate acquired businesses successfully, it may incur substantial
costs and delays in increasing its customer base. In addition, the failure to
integrate acquisitions successfully may divert management's attention from
SYSCO's existing business and may damage SYSCO's relationships with its key
customers and suppliers.

Charter and Stockholder Rights Plan

Under its Restated Certificate of Incorporation, SYSCO's Board of Directors
is authorized to issue up to 1.5 million shares of preferred stock without
stockholder approval. Issuance of these shares could make it more difficult for
anyone to acquire SYSCO without approval of the Board of Directors, depending on
the rights and preferences of the stock issued. In addition, if anyone attempts
to acquire SYSCO without approval of the Board of Directors of SYSCO, the
stockholders of SYSCO have the right to purchase preferred stock of SYSCO
pursuant to its Stockholder Rights Plan, which could result in substantial
dilution to a potential acquiror. The existence of either of these provisions
could deter hostile takeover attempts that might result in an acquisition of
SYSCO that could otherwise have been financially beneficial to SYSCO's
stockholders.

FORWARD-LOOKING STATEMENTS

Certain statements made herein that look forward in time or express
management's expectations or beliefs with respect to the occurrence of future
events are forward-looking statements under the Private Securities Litigation
Reform Act of 1995. They include statements about SYSCO's ability to increase
its

22

market share and sales, long-term debt to capitalization target ratios,
anticipated capital expenditures, timing and expected benefits of the National
Supply Chain initiative and related regional distribution centers, and SYSCO's
ability to meet future cash requirements and remain profitable.

These statements are based on management's current expectations and
estimates; actual results may differ materially due in part to the risk factors
discussed above. In addition, SYSCO's ability to increase its market share and
sales, meet future cash requirements and remain profitable could be affected by
conditions in the economy and the industry and internal factors such as the
ability to control expenses. The ability to meet long-term debt to
capitalization target ratios may also be affected by share repurchases, cash
flow, acquisitions and internal growth.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

SYSCO does not utilize financial instruments for trading purposes. SYSCO's
use of debt directly exposes the company to interest rate risk. Floating rate
debt, where the interest rate fluctuates periodically, exposes the company to
short-term changes in market interest rates. Fixed rate debt, where the interest
rate is fixed over the life of the instrument, exposes the company to changes in
market interest rates reflected in the fair value of the debt and to the risk
that the company may need to refinance maturing debt with new debt at a higher
rate.

SYSCO manages its debt portfolio to achieve an overall desired position of
fixed and floating rates and may employ interest rate swaps as a tool to achieve
that goal. The major risks from interest rate derivatives include changes in the
interest rates affecting the fair value of such instruments, potential increases
in interest expense due to market increases in floating interest rates and the
creditworthiness of the counterparties in such transactions. At June 28, 2003,
the company had no interest rate swap agreements outstanding. At June 28, 2003
the company had outstanding $151,748,000 of commercial paper at variable rates
of interest with maturities through October 2, 2003. The company's long-term
debt obligations of $1,249,467,000 were primarily at fixed rates of interest.

The following table presents principal cash flows and related
weighted-average interest rates by expected maturity dates. All amounts are
stated in U.S. dollar equivalents.

The company does not believe that its operations in Canada exposes it to
significant foreign exchange risk.

23

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SYSCO CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

All other schedules are omitted because they are not applicable or the
information is set forth in the consolidated financial statements or notes
thereto.

24

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors
Sysco Corporation

We have audited the accompanying consolidated balance sheets of Sysco
Corporation (a Delaware corporation) and subsidiaries as of June 28, 2003 and
June 29, 2002, and the related statements of consolidated results of operations,
shareholders' equity and cash flows for each of the three years in the period
ended June 28, 2003. Our audits also included the financial statement schedule
at Item 15(a), No. 2. These financial statements and schedule are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Sysco Corporation and subsidiaries as of June 28, 2003 and June 29, 2002, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended June 28, 2003 in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As discussed in the Notes to the Consolidated Financial Statements,
effective June 30, 2002, Sysco Corporation adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets".

ERNST & YOUNG LLP

Houston, Texas
August 11, 2003

25

SYSCO

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements

26

SYSCO

CONSOLIDATED RESULTS OF OPERATIONS

See Notes to Consolidated Financial Statements

27

SYSCO

CONSOLIDATED SHAREHOLDERS' EQUITY

See Notes to Consolidated Financial Statements

28

SYSCO

CONSOLIDATED CASH FLOWS

See Notes to Consolidated Financial Statements

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF ACCOUNTING POLICIES

BUSINESS AND CONSOLIDATION

Sysco Corporation (SYSCO) is engaged in the marketing and distribution of a
wide range of food and related products to the foodservice or
"food-prepared-away-from-home" industry. These services are performed for
approximately 420,000 customers from 145 distribution facilities located
throughout the United States and Canada.

The accompanying financial statements include the accounts of SYSCO and its
subsidiaries. All significant intercompany transactions and account balances
have been eliminated. Certain amounts in the prior years have been reclassified
to conform to the fiscal 2003 presentation, including restricted cash previously
classified as cash and cash equivalents and other long-term liabilities related
to pension and deferred compensation plans previously classified as accrued
expenses.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the reported amounts of assets, liabilities, sales and expenses. Actual results
could differ from the estimates used.

ACCOUNTS RECEIVABLE

Accounts receivable consist primarily of trade receivables from customers
and receivables from suppliers for marketing or incentive programs. SYSCO
evaluates the collectibility of accounts receivable and determines the
appropriate reserve for doubtful accounts based on a combination of factors. In
circumstances where the company is aware of a specific customer's inability to
meet its financial obligation to SYSCO, a specific allowance for doubtful
accounts is recorded to reduce the receivable to the net amount reasonably
expected to be collected. In addition, allowances are recorded for all other
receivables based on an analysis of historical trends of write-offs and
recoveries. The company utilizes specific criteria to determine uncollectible
receivables to be written off including bankruptcy, accounts referred to outside
parties for collection and accounts past due over specified periods. The
allowance for doubtful accounts receivable was $35,005,000 as of June 28, 2003
and $30,338,000 as of June 29, 2002. Customer accounts written off, net of
recoveries, were $24,771,000 or 0.09% of sales, $26,068,000 or 0.11% of sales,
and $23,045,000 or 0.11% of sales for fiscal 2003, 2002 and 2001, respectively.

INVENTORIES

Inventories consisting primarily of finished goods include food and related
products held for resale and are valued at the lower of cost (first-in,
first-out method) or market. Elements of costs include the purchase price of the
product and freight charges to deliver the product to the company's warehouses
and are net of certain cash or non-cash consideration received from vendors (see
"Vendor Consideration").

PLANT AND EQUIPMENT

Capital additions, improvements and major renewals are classified as plant
and equipment and are carried at cost. Depreciation is recorded using the
straight-line method, which reduces the book value of each asset in equal
amounts over its estimated useful life. Maintenance, repairs and minor renewals
are charged to earnings when they are incurred. Upon the disposition of an
asset, its accumulated depreciation is deducted from the original cost, and any
gain or loss is reflected in current earnings.

Applicable interest charges incurred during the construction of new
facilities are capitalized as one of the elements of cost and are amortized over
the assets' estimated useful lives. Interest capitalized during construction
periods for the past three years was $5,244,000 in 2003, $3,746,000 in 2002 and
$2,995,000 in 2001.

30

A summary of plant and equipment, including the related accumulated
depreciation, appears below:

GOODWILL AND INTANGIBLES

Goodwill and intangibles represent the excess of cost over the fair value
of tangible net assets acquired. Intangibles with definite lives are amortized
over their useful lives. Goodwill and intangibles with indefinite lives are not
amortized. The recoverability of goodwill and intangibles is assessed annually
or more frequently, as needed, by determining whether the fair values of the
applicable reporting units exceed their carrying values. The company updates its
analysis of the recoverability of goodwill and intangibles when events or
changes have occurred that would suggest an impairment of carrying value.
Accumulated amortization of goodwill and intangibles was $141,731,000 and
$139,977,000 as of June 28, 2003 and June 29, 2002, respectively.

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of all Canadian subsidiaries are translated at
current exchange rates. Related translation adjustments are recorded as a
component of other accumulated comprehensive income.

REVENUE RECOGNITION

The company recognizes revenue from the sale of a product when it is
considered to be realized or realizable and earned. The company determines these
requirements to be met at the point at which the product is delivered to the
customer. The company grants certain customers sales incentives such as rebates
or discounts and treats these as a reduction of sales at the time the sale is
recognized.

VENDOR CONSIDERATION

SYSCO recognizes consideration received from vendors when the services
performed in connection with the monies received are completed. There are
several types of cash consideration received from vendors. In many instances,
the vendor consideration is in the form of a specified amount per case or per
pound. In these instances, SYSCO will recognize the vendor consideration as a
reduction of cost of sales when the product is sold. In the situations where the
vendor consideration is not related directly to specific product purchases,
SYSCO will recognize these as a reduction of cost of sales when the earnings
process is complete, the related service is performed and the amounts realized.
In certain of these latter instances, the vendor consideration represents a
reimbursement of a specific incremental identifiable cost incurred by SYSCO in
selling the vendor's product. In these cases, SYSCO classifies the consideration
as a reduction of those costs with any excess funds classified as a reduction of
cost of sales and recognizes these in the period where the costs are incurred
and related services performed.

INSURANCE PROGRAM

SYSCO maintains a self-insurance program covering portions of workers'
compensation, group medical, general and vehicle liability costs. The amounts in
excess of the self-insured levels are fully insured. Liabilities

31

associated with these risks are estimated in part by considering historical
claims experience, demographic factors, severity factors and other actuarial
assumptions.

STOCK-BASED COMPENSATION

SYSCO accounts for its stock compensation plans under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations under which no compensation cost has been recognized.

Options issued before September 2001 may vest over a five-year period
beginning on the date of grant if certain operating performance measures are
attained, or will vest fully nine and one-half years from the date of grant to
the extent not previously vested. Options issued in September 2001 and after
generally vest ratably over a specified five-year period.

The following table provides comparative pro forma net earnings and
earnings per share had compensation cost for these plans been determined using
the fair value method of Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," for all periods presented:

The weighted average fair value of options granted was $6.88 and $8.81
during fiscal 2003 and 2002, respectively. The fair value was estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in fiscal 2003 and 2002,
respectively: dividend yield of 1.45% and 1.26%; expected volatility of 25% and
22%; risk-free interest rates of 2.7% and 4.8%; and expected lives of five years
and eight years.

The weighted average fair value of employee stock purchase rights issued
pursuant to the Employees' Stock Purchase Plan was $4.14 and $3.96 during fiscal
2003 and 2002, respectively. The fair value of the stock purchase rights was
calculated as the difference between the stock price at date of issuance and the
employee purchase price.

The pro forma presentation includes options granted after 1995. The pro
forma effects for fiscal 2003, 2002, and 2001 are not necessarily indicative of
the pro forma effects in future years.

32

SHIPPING AND HANDLING COSTS

Shipping and handling costs include costs associated with the selection of
products and delivery to customers. Included in operating expenses are shipping
and handling costs of approximately $1,505,360,000 in fiscal 2003,
$1,328,428,000 in fiscal 2002, and $1,297,944,000 in fiscal 2001.

INCOME TAXES

SYSCO follows the liability method of accounting for income taxes as
required by the provisions of SFAS No. 109, "Accounting for Income Taxes."

CASH FLOW INFORMATION

For cash flow purposes, cash includes cash equivalents such as time
deposits, certificates of deposit, short-term investments and all highly liquid
instruments with original maturities of three months or less.

ACQUISITIONS

During fiscal 2003, SYSCO or one of its subsidiaries acquired for cash a
broadline foodservice operation, two quickservice operations, a custom
meat-cutting operation, a specialty distributor of products to the Asian
foodservice market and a distributor of paper and chemical products. During
fiscal 2002, SYSCO acquired for cash and/or stock a custom meat-cutting
operation, a company that supplies products to the lodging industry and
substantially all of the assets and certain liabilities of a Canadian broadline
foodservice operation. During fiscal 2001, SYSCO acquired for cash and/or stock
two custom meat-cutting operations, two broadline foodservice companies and one
company that supplies products to the lodging industry.

During fiscal 2003, in the aggregate, the company paid cash of $209,010,000
and issued 951,127 shares for acquisitions during fiscal 2003 and for contingent
consideration and restructuring costs related to operations acquired in previous
fiscal years.

Acquisitions of businesses are accounted for using the purchase method of
accounting and the financial statements include the results of the acquired
operations from the respective dates they joined SYSCO. The acquisitions were
immaterial, individually and in the aggregate, to the consolidated financial
statements.

The purchase price of the acquired entities was allocated to the net assets
acquired and liabilities assumed based on the estimated fair value at the dates
of acquisition, with any excess of cost over the fair value of net assets
acquired (including intangibles) recognized as goodwill. The balances included
in the Consolidated Balance Sheets related to the fiscal 2003 acquisitions are
based upon preliminary information and are subject to change when final asset
and liability valuations are obtained. Material changes to the preliminary
allocations are not anticipated by management.

During the third quarter of fiscal 2003, SYSCO recorded $16,300,000 as
additional cost of the acquisition of a Canadian broadline foodservice operation
and as accrued expenses. These costs relate to plans to exit activities of the
acquired operations and primarily consist of termination of leases on facilities
and equipment and the involuntary termination of employees.

Certain acquisitions involve contingent consideration typically payable
only in the event that certain operating results are attained or certain
outstanding contingencies are resolved. Aggregate contingent consideration
amounts outstanding as of June 28, 2003 included approximately 3,503,000 shares
and $31,111,000 in cash, which, if distributed, could result in the recording of
up to $100,548,000 in additional goodwill. Such amounts typically are to be paid
out over periods of up to five years from the date of acquisition.

In August 2003, SYSCO signed a definitive agreement to acquire certain
assets of the Stockton, California foodservice operations from Smart & Final,
Inc. The transaction was completed in September 2003.

33

DERIVATIVE FINANCIAL INSTRUMENTS

SYSCO manages its debt portfolio by targeting an overall desired position
of fixed and floating rates and may employ interest rate swaps from time to time
to achieve this goal. The company does not use derivative financial instruments
for trading or speculative purposes.

In March 2002, SYSCO entered into an interest rate swap agreement with a
notional amount of $200,000,000 related to the $200,000,000 aggregate principal
amount of 4.75% notes due July 30, 2005. The objective of such transaction was
to protect the debt against changes in fair value due to changes in the
benchmark interest rate, which was designated as six-month LIBOR in arrears less
84.5 basis points. Under the interest rate swap agreement, SYSCO received a
fixed rate equal to 4.75% per annum and paid the benchmark interest rate. SYSCO
designated its interest rate swap agreement as a fair value hedge of the
underlying debt. Interest expense on the debt was adjusted to include payments
made or received under the hedge agreement. In June 2003, SYSCO terminated this
swap agreement and received approximately $15,359,000 representing the fair
value of the swap agreement at the time of termination. A corresponding amount
is reflected as an increase in the carrying value of the related debt to reflect
its fair value at termination. This increase in the carrying value of the debt
is being amortized as a reduction of interest expense over the remaining term of
the debt.

NEW ACCOUNTING STANDARDS

SYSCO adopted the provisions of SFAS No. 142, "Accounting for Goodwill and
Other Intangible Assets," effective at the beginning of fiscal 2003. As a
result, the amortization of goodwill was discontinued. Management completed its
assessment of the impact that the adoption of SFAS No. 142 had on the company's
consolidated financial statements and determined that there was no impairment to
the carrying value of goodwill.

The following table provides comparative net earnings and earnings per
share had the non-amortization provision been in effect for all periods
presented:

SYSCO adopted the provisions of SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," effective in fiscal 2003. The
adoption of SFAS No. 144 has not had a material effect on the company's
consolidated financial statements.

SYSCO has adopted the provisions of Financial Accounting Standards Board
(FASB) Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." This interpretation requires certain guarantees to be recorded at fair

34

value and also requires a guarantor to make certain disclosures regarding
guarantees. This interpretation's initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements became effective
for SYSCO's financial statements for the third quarter of fiscal 2003. The
adoption of this interpretation did not have a material impact on SYSCO's
consolidated financial statements or disclosures.

SYSCO adopted the disclosure provisions of SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure," in the third quarter of
fiscal 2003. SFAS No. 148 provides alternative methods of transition to SFAS No.
123, "Accounting for Stock-Based Compensation," fair value method of accounting
for stock-based employee compensation if a company elects to adopt these
provisions. SFAS No. 148 also specifies required disclosures of an entity's
accounting policy with respect to stock-based employee compensation on reported
net earnings and earnings per share in annual and interim financial statements.

SYSCO has adopted the provisions of the Emerging Issues Task Force (EITF)
Issue No. 02-16, "Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor." The provisions of EITF No. 02-16 are
effective for fiscal periods beginning after December 15, 2002 with certain
provisions effective for arrangements entered into after November 21, 2002. EITF
No. 02-16 provides guidance as to the recognition and classification of monies
received from vendors. SYSCO's historical accounting policies are consistent
with the provisions of EITF No. 02-16 and thus SYSCO chose to adopt this
accounting policy during the third quarter of fiscal 2003. The adoption of this
consensus did not have an impact on SYSCO's consolidated financial statements.

SYSCO adopted the provisions of the EITF Issue 02-17, "Recognition of
Customer Relationship Intangible Assets Acquired in a Business Combination,"
effective October 2002. EITF No. 02-17 addresses the intangible asset
recognition criteria of SFAS No. 141, "Business Combinations," and provides that
an intangible asset related to customer relationship intangibles may exist even
though the relationship is not evidenced by a contract. The adoption of this
consensus did not have a material impact on SYSCO's consolidated financial
statements.

In November 2002, the EITF reached a consensus on Issue No. 00-21,
"Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses how to
account for revenue arrangements with multiple deliverables and provides
guidance relating to when such arrangements should be divided into components
for revenue recognition purposes. The consensus will be effective for agreements
entered into in fiscal 2004 with early adoption permitted. The adoption of this
consensus will not have a material impact on SYSCO's consolidated financial
statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51." This interpretation introduces a new consolidation model, the
variable interests model, which determines control (and consolidation) based on
potential variability in gains and losses of the entity being evaluated for
consolidation. The interpretation's consolidation provisions apply immediately
to variable interests in variable interest entities (VIE's) created after
January 31, 2003 and apply in the first fiscal year or interim period beginning
after June 15, 2003 to VIE's acquired before February 1, 2003. The adoption of
this interpretation will not have a material impact on SYSCO's consolidated
financial statements.

35

ADDITIONAL FINANCIAL INFORMATION

INCOME TAXES

The income tax provisions consist of the following:

Included in the income taxes charged to earnings are net deferred tax
provisions of $481,330,000, $263,492,000, and $6,199,000 in fiscal 2003, 2002
and 2001, respectively. The deferred tax provisions result from the effects of
net changes during the year in deferred tax assets and liabilities arising from
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

United States income taxes have not been provided on undistributed earnings
of Canadian subsidiaries. The company intends to permanently reinvest the
unremitted earnings of its Canadian subsidiaries in those businesses outside of
the United States and, therefore, has not provided for deferred income taxes on
such unremitted foreign earnings.

Significant components of SYSCO's deferred tax assets and liabilities are
as follows:

The increase in net deferred tax liability balances from June 29, 2002 to
June 28, 2003 was primarily due to the deferral of federal and state income tax
payments resulting from the company's reorganization of its supply chain. The
increase in total deferred tax liability balances related to this item was
approximately $464,377,000 for the year ended June 28, 2003. A portion of the
deferral related to this item was classified as a current deferred tax liability
as of June 28, 2003 due to the timing of when the related income tax payments
will become payable.

The company has had taxable earnings during each year of its 34-year
existence except for fiscal 2003. In fiscal 2003, the company had a net
operating tax loss primarily as a result of the deferral of the supply chain
distributions. These deferrals will reverse in fiscal 2004. The company knows of
no reason that it will not have

36

taxable earnings in future years. Consequently, SYSCO believes that it is more
likely than not that the entire benefit of existing differences will be realized
and therefore no valuation allowance has been established for deferred tax
assets.

Reconciliations of the statutory federal income tax rate to the effective
income tax rates are as follows:

RESTRICTED CASH

SYSCO is required by its insurers to collateralize the self-insured portion
of its workers' compensation and liability claims. Previously, the collateral
requirements were met by issuing letters of credit. These letters of credit were
replaced with funds deposited in an insurance trust. In addition, in certain
acquisitions, SYSCO has placed funds into escrow to be disbursed to certain
sellers in the event that certain operating results are attained or certain
contingencies are resolved. The increase in restricted cash from June 29, 2002
to June 28, 2003 was due to the timing of depositing funds to replace letters of
credit as they expired and to the depositing of funds into escrow relating to
recent acquisitions.

SHAREHOLDERS' EQUITY

Basic earnings per share have been computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during those
respective years. Diluted earnings per share have been computed by dividing net
earnings by the weighted average number of shares of common stock outstanding
during those respective years adjusted for the dilutive effect of stock options
outstanding using the treasury stock method.

A reconciliation of the numerators and the denominators of the basic and
diluted per share computations for the periods presented follows:

The number of options which were not included in the diluted earnings per
share calculation because the effect would have been antidilutive was
approximately 13,620,000, 365,000 and zero for fiscal 2003, 2002 and 2001,
respectively.

Comprehensive income is net earnings plus certain other items that are
recorded directly to shareholders' equity. The amounts recorded to other
comprehensive loss with respect to minimum pension liability were $119,683,000,
net of tax of $74,136,000, for the year ended June 28, 2003, $59,811,000, net of
tax of $37,049,000, for the year ended June 29, 2002 and $5,624,000, net of tax
of $3,484,000, for the year ended June 30, 2001. The amount recorded to other
comprehensive loss related to foreign currency translation

37

adjustment was a gain of $32,737,000 for the year ended June 28, 2003.
Comprehensive income was $691,342,000, $619,976,000 and $591,285,000 for the
fiscal years ended June 28, 2003, June 29, 2002 and June 30, 2001, respectively.

DEBT

SYSCO has uncommitted bank lines of credit, which provided for unsecured
borrowings for working capital of up to $95,000,000 at June 28, 2003 and up to
$125,000,000 at June 29, 2002. There were no borrowings outstanding under these
lines of credit as of June 28, 2003 or June 29, 2002.

SYSCO's debt consists of the following:

The principal payments required to be made on debt during the next five
years are shown below:

SYSCO has a revolving loan agreement in the amount of $450,000,000 as of
June 28, 2003 maturing in fiscal 2008 which supports the company's United States
commercial paper program. It is the company's intent to continue to refinance
this facility on a long-term basis. As a result, the commercial paper borrowings
supported by this agreement have been classified as long-term debt. United
States commercial paper borrowings outstanding at June 28, 2003 were
$49,926,000.

SYSCO also has a revolving loan agreement in the amount of $100,000,000 in
Canadian dollars (CAD) maturing in fiscal 2004 which supports the company's
Canadian commercial paper program. The Canadian commercial paper borrowings
outstanding at June 28, 2003 were CAD $137,078,000 ($101,822,000 in U.S.
dollars).

In June 1995, SYSCO issued 6.5% senior notes totaling $150,000,000 due June
12, 2005, under a $500,000,000 shelf registration filed with the Securities and
Exchange Commission. These notes, which were priced at 99.4% of par, are
unsecured, not redeemable prior to maturity and are not subject to any sinking
fund requirement. In May 1996, SYSCO issued 7.0% senior notes totaling
$200,000,000 due May 1, 2006, under

38

this shelf registration. These notes, which were priced at par, are unsecured,
not redeemable prior to maturity and are not subject to any sinking fund
requirement. In April 1997, in two separate offerings, SYSCO drew down the
remaining $150,000,000 of the $500,000,000 shelf registration. SYSCO issued
7.16% debentures totaling $50,000,000 due April 15, 2027. These debentures were
priced at par, are unsecured, are not subject to any sinking fund requirement
and are redeemable at the option of the holder on April 15, 2007, but otherwise
are not redeemable prior to maturity. At that time, SYSCO issued 7.25% senior
notes totaling $100,000,000 due April 15, 2007. These notes were priced at
99.611% of par and are unsecured, not redeemable prior to maturity and not
subject to any sinking fund requirement.

In June 1998, SYSCO filed with the Securities and Exchange Commission
another $500,000,000 shelf registration of debt securities. In July 1998, SYSCO
issued 6.5% debentures totaling $225,000,000 under the shelf registration, due
on August 1, 2028. These debentures were priced at 99.685% of par, are
unsecured, are not subject to any sinking fund requirement and include a
redemption provision which allows SYSCO to retire the debentures at any time
prior to maturity at the greater of par plus accrued interest or an amount
designed to ensure that the debenture holders are not penalized by the early
redemption. Proceeds from the debentures were used to retire commercial paper
borrowings.

In April 2002, SYSCO issued 4.75% notes totaling $200,000,000 under this
shelf registration, due on July 30, 2005. These notes, which were priced at
99.8% of par, are unsecured, are not subject to any sinking fund requirement and
include a redemption provision which allows SYSCO to retire the notes at any
time prior to maturity at the greater of par plus accrued interest or an amount
designed to ensure that the note holders are not penalized by the early
redemption. Proceeds from the notes were utilized to retire commercial paper
borrowings. Concurrent with the issuance of these notes, SYSCO entered into an
interest rate swap agreement with a notional amount of $200,000,000 whereby
SYSCO received a fixed rate equal to 4.75% per annum and paid a benchmark
interest rate of six-month LIBOR in arrears less 84.5 basis points. In June
2003, SYSCO terminated this swap agreement and received approximately
$15,359,000 representing the fair value of the swap agreement at the time of
termination. A corresponding amount is reflected as an increase in the carrying
value of the related debt to reflect its fair value at termination. This
increase in the carrying value of the debt is being amortized as a reduction of
interest expense over the remaining term of the debt.

In May 2002, SYSCO International, Co., a wholly-owned subsidiary of SYSCO,
issued 6.10% notes totaling $200,000,000 due June 1, 2012 in a private offering.
These notes, which were priced at 99.7% of par, were fully and unconditionally
guaranteed by Sysco Corporation, were not subject to any sinking fund
requirement, included registration rights for the note holders, and included a
redemption provision which allowed SYSCO International, Co. to retire the notes
at any time prior to maturity at the greater of par plus accrued interest or an
amount designed to ensure that the note holders were not penalized by the early
redemption. In December 2002, SYSCO International, Co. completed a registered
exchange offer for these notes. In the exchange offer, all of the outstanding
$200,000,000 notes were exchanged for new notes which are identical in all
respects to the outstanding notes except that the new notes are registered under
the Securities Act of 1933. The new notes are fully and unconditionally
guaranteed by Sysco Corporation. The proceeds from these notes were utilized to
repay commercial paper issued by SYSCO International, Co. to fund the
acquisition of a Canadian broadline foodservice business.

SYSCO's Industrial Revenue Bonds have varying structures. Final maturities
range from one to 23 years and certain of the bonds provide SYSCO the right to
redeem (or call) the bonds at various dates. These call provisions generally
provide the bondholder a premium in the early call years, declining to par value
as the bonds approach maturity.

Total debt at June 28, 2003 was $1,372,236,000, of which approximately 88%
was at fixed rates averaging 5.7% with an average life of 10 years, and the
remainder was at floating rates averaging 2.5%. Certain loan agreements contain
typical debt covenants to protect noteholders, including provisions to maintain
the company's indebtedness to capitalization ratio (as defined in the agreement)
below a specified level. SYSCO was in compliance with all debt covenants at June
28, 2003.

The fair value of SYSCO's total long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the company for debt of the same remaining
39

maturities. The fair value of total long-term debt approximated $1,510,453,000
at June 28, 2003 and $1,241,246,000 at June 29, 2002.

As part of normal business activities, SYSCO issues letters of credit
through major banking institutions as required by certain vendor and insurance
agreements. As of June 28, 2003 and June 29, 2002, letters of credit outstanding
were $14,610,000 and $15,619,000, respectively.

LEASES

Although SYSCO normally purchases assets, it has obligations under capital
and operating leases for certain distribution facilities, vehicles and
computers. Total rental expense under operating leases was $83,597,000,
$64,130,000, and $59,833,000 in fiscal 2003, 2002 and 2001, respectively.
Contingent rentals, subleases and assets and obligations under capital leases
are not significant.

Aggregate minimum lease payments under existing non-capitalized long-term
leases are as follows:

STOCK-BASED COMPENSATION PLANS

Employee Incentive Stock Option Plan

The Employee Incentive Stock Option Plan adopted in fiscal 1982 provided
for the issuance of options to purchase SYSCO common stock to officers and key
personnel of the company and its subsidiaries at the market price at the date of
grant, as adjusted for stock splits. No further grants will be made under this
plan which expired in November 1991 and was replaced by the 1991 Stock Option
Plan.

The following summary presents information with regard to options under
this plan:

All activity under this plan concluded in fiscal 2002.

1991 Stock Option Plan

The 1991 Stock Option Plan (1991 Plan) was adopted in fiscal 1992 and
originally reserved 12,000,000 shares of SYSCO common stock for options to
directors, officers and key personnel of the company and its subsidiaries at the
market price at the date of grant. The 1991 Plan provided for the issuance of
options qualified as incentive stock options under the Internal Revenue Code of
1986, options which are not

40

so qualified and stock appreciation rights. During fiscal 1996, the shareholders
approved an amendment to the 1991 Plan for an additional 32,000,000 shares to be
made available for future grants of options. No stock appreciation rights were
issued under this plan. No further grants will be made under this plan, which
expired in November 2000 and was replaced by the 2000 Stock Incentive Plan.

The following summary presents information with regard to options under the
1991 Plan:

The following table summarizes information about options outstanding under
the 1991 Plan as of June 28, 2003:

2000 Stock Incentive Plan

The 2000 Stock Incentive Plan (2000 Plan) was adopted in fiscal 2001 and
provides for option grants and other stock-based awards to directors, officers
and other employees of the company and its subsidiaries at the market price at
the date of grant. The 2000 Plan reserves 40,000,000 shares of SYSCO common
stock, plus any shares of common stock which were available for grants under the
1991 Plan but which were not utilized prior to its expiration (approximately
8,504,000 shares) and any shares issued under the 1991 Plan that are forfeited,
expire or are cancelled (approximately 4,445,000 shares as of June 28, 2003) and
up to 10,000,000 shares of common stock which have been reacquired by the
company in the open market or in private transactions after November 3, 2000.
The 2000 Plan provides for the issuance of options qualified as incentive stock
options under the Internal Revenue Code of 1986, options which are not so
qualified, stock appreciation rights and other stock-based awards. To date, the
company has issued stock options but no stock appreciation rights under the 2000
Plan.

41

The following summary presents information with regard to options under the
2000 Plan:

The following table summarizes information about options outstanding under
the 2000 Plan as of June 28, 2003:

On a combined basis, the total number of options granted under the 1991
Plan and 2000 Plan were 13,650,211, 30,514,910 and 5,824,910 in fiscal years
2003, 2002 and 2001, respectively. The number of options granted in fiscal 2002
was significantly higher than the number of options granted in fiscal 2003, 2001
and in prior years. Part of this increase was due to a new program instituted in
fiscal 2002 that provides for stock options to be granted to all non-executive
employees who meet certain tenure requirements. During the first year of the
program, 16,265,000 options were granted to approximately 8,800 employees. In
addition, the number of options granted overall was increased in connection with
certain compensation adjustments resulting in 1,239,000 options being granted to
17 executive officers and 13,010,910 options being granted to approximately
2,300 other key employees. During fiscal 2003, 2,311,000 options were granted to
approximately 2,300 non-executive employees based on tenure, 942,000 options
were granted to 17 executive officers and 10,397,211 options were granted to
approximately 2,000 other key employees.

1993 and 1996 Guest Supply Stock Incentive Plans

Prior to March 2001, Guest Supply, Inc. maintained the 1993 Stock Option
Plan and the 1996 Long-Term Incentive Plan (Guest Supply Plans). In connection
with SYSCO's acquisition of Guest Supply in March 2001, all outstanding options
exercisable to purchase Guest Supply common stock were converted into options to
purchase shares of SYSCO common stock. The number of shares underlying such
options, as well as the exercise price, were adjusted pursuant to the terms of
the Merger Agreement and Plan of Reorganization dated January 22, 2001. These
options are fully vested and expire in 10 years from the original grant date. No
new options will be issued under any of the Guest Supply Plans.

42

The following summary presents information with regard to options under the
Guest Supply Plans:

The following table summarizes information about options outstanding under
the Guest Supply Plans as of June 28, 2003:

Non-Employee Directors Stock Option Plan

The Non-Employee Directors Stock Option Plan adopted in fiscal 1996
permitted the issuance of up to 800,000 shares of common stock to non-employee
directors. As of June 28, 2003, options for 304,000 shares have been granted
under this plan, 32,000 shares have been cancelled, 96,000 shares have been
exercised and 176,000 shares are available for exercise. No further grants will
be made under this plan, which was replaced by the Non-Employee Directors Stock
Plan.

Non-Employee Directors Stock Plan

The Non-Employee Directors Stock Plan adopted in fiscal 1999 permits the
issuance of up to 800,000 shares of common stock to non-employee directors.
Under this plan, non-employee directors receive a one time retainer stock award
of 4,000 shares when first elected as a non-employee director and may receive an
annual grant of options to purchase shares of common stock if certain earnings
goals are met. As of June 28, 2003, options for 368,000 shares have been granted
to under this plan, 50,664 shares have been exercised and 170,124 shares are
available for exercise.

Employees' Stock Purchase Plan

SYSCO has an Employees' Stock Purchase Plan which permits employees (other
than directors) to invest by means of periodic payroll deductions in SYSCO
common stock at 85% of the closing price on the last business day of each
calendar quarter. During fiscal 2003, 1,886,090 shares of SYSCO common stock
were purchased by the participants as compared to 1,784,529 purchased in fiscal
2002 and 1,630,208 purchased in fiscal 2001. The total number of shares which
may be sold pursuant to the plan may not exceed 68,000,000 shares, of which
10,067,901 remained available at June 28, 2003.

43

EMPLOYEE BENEFIT PLANS

SYSCO has defined benefit and defined contribution retirement plans for its
employees. Also, the company contributes to various multi-employer plans under
collective bargaining agreements and provides certain health care benefits to
eligible retirees and their dependents.

The defined contribution 401(k) plan provides that under certain
circumstances the company may make matching contributions of up to 50% of the
first 6% of a participant's compensation. SYSCO's contributions to this plan
were $24,102,000 in 2003, $23,421,000 in 2002, and $9,561,000 in 2001. The
defined benefit pension plans pay benefits to employees at retirement using
formulas based on a participant's years of service and compensation.

SYSCO also has a Management Incentive Plan that compensates key management
personnel for specific performance achievements. The awards earned under this
plan were $62,486,000 in 2003, $51,981,000 in 2002, and $52,540,000 in 2001 and
were paid in the following fiscal year in both cash and stock. In addition to
receiving benefits upon retirement under the company's defined benefit plan,
participants in the Management Incentive Plan will receive benefits under a
Supplemental Executive Retirement Plan (SERP). This plan is a nonqualified,
unfunded supplementary retirement plan. In order to meet its obligations under
the SERP, SYSCO maintains life insurance policies on the lives of the
participants with carrying values of $74,730,000 at June 28, 2003 and
$71,418,000 at June 29, 2002. These policies are not included as plan assets nor
in the funded status amounts in the table below. SYSCO is the sole owner and
beneficiary of such policies. Projected benefit obligations and accumulated
benefit obligations for the SERP were $209,416,000 and $128,071,000,
respectively, as of June 28, 2003 and $145,884,000 and $92,220,000,
respectively, as of June 29, 2002.

44

The funded status of the defined benefit plans is as follows (including the
SERP benefit obligations but excluding the cash surrender values of life
insurance policies from plan assets):

Additional information related to SYSCO's defined benefit plans is as
follows:

Changes in assumptions regarding the discount rate together with actual
returns on plan assets below the expected return assumptions resulted in the
company being required to reflect a cumulative adjustment to other comprehensive
income with respect to minimum pension liability of $185,118,000, net of tax, as
of June 28, 2003 and $65,435,000, net of tax, as of June 29, 2002. Minimum
pension liability adjustments are

45

non-cash adjustments that are reflected as an increase in the pension liability
and an offsetting charge to shareholders' equity, net of tax, through
comprehensive loss rather than net income.

As a result of changes in the assumptions together with the normal growth
of the plan and the impact of losses from prior periods, net pension cost
increased $22,952,000 in fiscal 2003 and is expected to increase $39,900,000 in
fiscal 2004.

The company's cash contributions to its pension plans were $164,565,000 and
$83,136,000 in fiscal years 2003 and 2002, respectively. For the past several
years no contributions have been required to be made to the qualified pension
trust, as determined by government regulations; however, SYSCO has chosen to
voluntarily make contributions. In fiscal 2004, contributions to the qualified
pension trust will also not be required as determined by government regulations.

The assumptions as of fiscal year-end were:

A healthcare cost trend rate is not used in the calculations because SYSCO
subsidizes the cost of postretirement medical coverage by a fixed dollar amount
with the retiree responsible for the cost of coverage in excess of the subsidy,
including all future cost increases.

The components of net pension costs are as follows:

The components of other postretirement benefit costs are as follows:

Multi-employer pension costs were $27,808,000, $27,511,000, and $26,246,000
in fiscal 2003, 2002 and 2001, respectively.

46

CONTINGENCIES

SYSCO is engaged in various legal proceedings which have arisen but have
not been fully adjudicated. These proceedings, in the opinion of management,
will not have a material adverse effect upon the consolidated financial position
or results of operations of the company when ultimately concluded.

SUPPLEMENTAL GUARANTOR INFORMATION

SYSCO International, Co. is an unlimited liability company organized under
the laws of the Province of Nova Scotia, Canada and is a wholly-owned subsidiary
of SYSCO. In May 2002, SYSCO International, Co. issued, in a private offering,
$200,000,000 of 6.10% notes due in 2012 (See "Debt"). In December 2002, these
notes were exchanged for substantially identical notes in an exchange offer
registered under the Securities Act of 1933. These notes are fully and
unconditionally guaranteed by SYSCO. SYSCO International, Co. is a holding
company with no significant sources of income or assets, other than its equity
interests in its subsidiaries and interest income from loans made to its
subsidiaries. The proceeds from the issuance of the 6.10% notes were used to
repay commercial paper issued to fund the fiscal 2002 acquisition of a Canadian
broadline foodservice operation.

The following condensed consolidating financial statements present
separately the financial position, results of operations and cash flows of the
parent guarantor (SYSCO), the subsidiary issuer (SYSCO International), all other
non-guarantor subsidiaries of SYSCO (Other Non-Guarantor Subsidiaries) on a
combined basis and eliminating entries. The financial information for SYSCO
includes corporate activities as well as certain operating companies which were
operated as divisions of SYSCO prior to fiscal 2003. Beginning with the third
quarter of fiscal 2003, these divisions have been operated as subsidiaries and
their results from that point in time are included in the Other Non-Guarantor
Subsidiaries column. The accompanying financial information includes the
balances and results of SYSCO International, Co. from the date of its inception
in February 2002.

50

BUSINESS SEGMENT INFORMATION

The company has aggregated its operating companies into a number of
segments, of which only Broadline and SYGMA are reportable segments as defined
in SFAS No. 131. 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. SYGMA operating companies distribute a full line of food
products and a wide variety of non-food products to certain chain restaurant
customer locations. "Other" financial information is attributable to the
company's other segments, including the company's specialty produce, meat and
lodging industry products segments. The company's Canadian operations are not
significant for geographical disclosure purposes.

The accounting policies for the segments are the same as those disclosed by
SYSCO. Intersegment sales represent specialty produce and meat company products
distributed by the Broadline and SYGMA operating companies. The segment results
include allocation of centrally incurred costs for shared services that
eliminate upon consolidation. Centrally incurred costs are allocated based upon
the relative level of service used by each operating company.

51

The following table sets forth the financial information for SYSCO's
business segments:

52

The sales mix for the principal product categories during the three years
ended June 28, 2003 is as follows:

53

QUARTERLY RESULTS (UNAUDITED)

Financial information for each quarter in the years ended June 28, 2003 and
June 29, 2002 is set forth below:

54

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

As of June 28, 2003, an evaluation was performed under the supervision and
with the participation of the company's management, including the CEO and CFO,
of the effectiveness of the design and operation of the company's disclosure
controls and procedures. Based on that evaluation, the company's management,
including the CEO and CFO, concluded that the company's disclosure controls and
procedures were effective as of June 28, 2003 in providing reasonable assurances
that material information required to be disclosed is included on a timely basis
in the reports it files with the Securities and Exchange Commission.

PART III

Except as otherwise indicated, the information required by Items 10, 11,
12, 13 and 14 will be included in the company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 no
later than 120 days after the end of the fiscal year covered by this Form 10-K
and such portions of said proxy statement are hereby incorporated by reference
thereto.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning Executive Officers is included in Part I (Item 4A)
of this Form 10-K (page 8).

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed, or incorporated by reference, as
part of this Form 10-K:

1. All financial statements. See index to Consolidated Financial
Statements on page 24 of this Form 10-K.

2. Financial Statement Schedule. See page S-1 of this Form 10-K.

3. Exhibits.

3(a) -- Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3(a) to Form 10-K for the year ended
June 28, 1997 (File No. 1-6544).
3(b) -- Amended and Restated Bylaws of Sysco Corporation dated
February 8, 2002, incorporated by reference to Exhibit 3(b)
to Form 10-Q for the quarter ended December 29, 2001 (File
No. 1-6544).
3(c) -- Form of Amended Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock,
incorporated by reference to Exhibit 3(c) to Form 10-K for
the year ended June 29, 1996 (File No. 1-6544).
3(d) -- Certificate of Amendment of Certificate of Incorporation
increasing authorized shares, incorporated by reference to
Exhibit 3(d) to Form 10-Q for the quarter ended January 1,
2000 (File No. 1-6544).

55

4(a) -- Sixth Amendment and Restatement of Competitive Advance and
Revolving Credit Facility Agreement dated May 31, 1996,
incorporated by reference to Exhibit 4(a) to Form 10-K in
the year ended June 27, 1996 (File No. 1-6544).
4(b) -- Agreement and Seventh Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of June 27,
1997, incorporated by reference to Exhibit 4(a) to Form 10-K
for the year ended June 28, 1997 (File No. 1-6544).
4(c) -- Agreement and Eighth Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of June 22,
1998, incorporated by reference to Exhibit 4(c) to Form 10-K
for the year ended July 3, 1999 (File No. 1-6544).
4(d) -- Senior Debt Indenture, dated as of June 15, 1995, between
Sysco Corporation and First Union National Bank of North
Carolina, Trustee, incorporated by reference to Exhibit 4(a)
to Registration Statement on Form S-3 filed June 6, 1995
(File No. 33-60023).
4(e) -- First Supplemental Indenture, dated June 27, 1995, between
Sysco Corporation and First Union National Bank of North
Carolina, Trustee as amended, incorporated by reference to
Exhibit 4(e) to Form 10-K for the year ended June 29, 1996
(File No. 1-6544).
4(f) -- Second Supplemental Indenture, dated as of May 1, 1996,
between Sysco Corporation and First Union National Bank of
North Carolina, Trustee as amended, incorporated by
reference to Exhibit 4(f) to Form 10-K for the year ended
June 29, 1996 (File No. 1-6544).
4(g) -- Third Supplemental Indenture, dated as of April 25, 1997,
between Sysco Corporation and First Union National Bank of
North Carolina, Trustee, incorporated by reference to
Exhibit 4(g) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
4(h) -- Fourth Supplemental Indenture, dated as of April 25, 1997,
between Sysco Corporation and First Union National Bank of
North Carolina, Trustee, incorporated by reference to
Exhibit 4(h) to Form 10-K for the year ended June 28,1997
(File No. 1-6544).
4(i) -- Fifth Supplemental Indenture, dated as of July 27, 1998
between Sysco Corporation and First Union National Bank,
Trustee, incorporated by reference to Exhibit 4(h) to Form
10-K for the year ended June 27, 1998 (File No. 1-6544).
4(j) -- Agreement and Ninth Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of December 1,
1999, incorporated by reference to Exhibit 4(j) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
4(k) -- Sixth Supplemental Indenture dated April 5, 2002 between
Sysco Corporation and Wachovia Bank, National Association,
incorporated by reference to Exhibit 4.1 to Form 8-K dated
April 5, 2002.
4(l) -- Indenture dated May 23, 2002 between Sysco International,
Co., Sysco Corporation and Wachovia Bank, National
Association, incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-4 filed August 21, 2002
(File No. 333-98489).
4(m) -- Credit Agreement dated September 13, 2002 by and among SYSCO
Corporation, JPMorgan Chase Bank, individually and as
Administrative Agent, the Co-Syndication Agents named
therein and the other financial institutions party thereto,
incorporated by reference to Exhibit 4(i) to Form 10-Q for
the quarter ended September 28, 2002 filed on May 13, 2003
(File No. 1-6544).
10(a)+ -- Amended and Restated Sysco Corporation Executive Deferred
Compensation Plan, incorporated by reference to Exhibit
10(a) to Form 10-K for the year ended July 1, 1995 (File No.
1-6544).
10(b)+ -- Fifth Amended and Restated Sysco Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(b) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
10(c)+ -- Sysco Corporation Employee Incentive Stock Option Plan,
incorporated by reference to Exhibit 10(c) to Form 10-K for
the year ended July 3, 1999 (File No. 1-6544).
10(d)+ -- Sysco Corporation 1995 Management Incentive Plan,
incorporated by reference to Exhibit 10(e) to Form 10-K for
the year ended July 1, 1995 (File No. 1-6544).
10(e)+ -- Sysco Corporation 1991 Stock Option Plan, incorporated by
reference to Exhibit 10(e) to Form 10-K for the year ended
July 3, 1999 (File No. 1-6544).

56

10(f)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan dated
effective September 4, 1997, incorporated by reference to
Exhibit 10(f) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
10(g)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan dated
effective November 5, 1998, incorporated by reference to
Exhibit 10(g) to Form 10-K for the year ended July 3, 1999
(File No. 1-6544).
10(h)+ -- Sysco Corporation Amended and Restated Non-Employee
Directors Stock Option Plan, incorporated by reference to
Exhibit 10(g) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
10(i)+ -- Amendment to the Amended and Restated Non-Employee Directors
Stock Option Plan dated effective November 5, 1998,
incorporated by reference to Exhibit 10(i) to Form 10-K for
the year ended July 3, 1999 (File No. 1-6544).
10(j)+ -- Sysco Corporation Non-Employee Directors Stock Plan,
incorporated by reference to Appendix A of the 1998 Proxy
Statement (File No. 1-6544).
10(k) -- Amended and Restated Shareholder Rights Agreement,
incorporated by reference to Registration Statement on Form
8-A/A, filed May 29, 1996 (File No. 1-6544).
10(l) -- Amendment to the Amended and Restated Shareholder Rights
Agreement dated as of May 20, 1996, incorporated by
reference to Exhibit 1 to Registration Statement on Form
8-A/A, filed July 16, 1999 (File No. 1-6544).
10(m)+ -- Sysco Corporation Split Dollar Life Insurance Plan,
incorporated by reference to Exhibit 10(m) to Form 10-Q for
the quarter ended January 1, 2000 (File No. 1-6544).
10(n)+ -- Executive Compensation Adjustment Agreement -- Bill M.
Lindig, incorporated by reference to Exhibit 10(n) to Form
10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(o)+ -- Executive Compensation Adjustment Agreement -- Charles H.
Cotros, incorporated by reference to Exhibit 10(o) to Form
10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(p)+ -- First Amendment to Fifth Amended and Restated Sysco
Corporation Supplemental Executive Retirement Plan dated
effective June 29, 1997, incorporated by reference to
Exhibit 10(p) to Form 10-Q for the quarter ended January 1,
2000 (File No. 1-6544).
10(q)+ -- First Amendment to Amended and Restated Sysco Corporation
Executive Deferred Compensation Plan dated effective June
29, 1997, incorporated by reference to Exhibit 10(q) to Form
10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(r)+ -- First Amendment to Sysco Corporation 1995 Management
Incentive Plan dated effective June 29, 1997, incorporated
by reference to Exhibit 10(r) to Form 10-Q for the quarter
ended January 1, 2000 (File No. 1-6544).
10(s)+ -- 2000 Management Incentive Plan, incorporated by reference to
Appendix A to Proxy Statement filed September 25, 2000 (File
No. 1-6544).
10(t)+ -- 2000 Stock Incentive Plan, incorporated by reference to
Appendix B to Proxy Statement filed on September 25, 2000
(File No. 1-6544).
10(u)+ -- Amended and Restated Non-Employee Directors Stock Plan,
incorporated by reference to Appendix B to Proxy Statement
filed on September 24, 2001 (File No. 1-6544).
10(v)+ -- Second Amendment dated as of May 10, 2000, to the Fifth
Amended and Restated SYSCO Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(a) to Form 10-Q for the quarter ended September
30, 2000 filed on November 13, 2000 (File No. 1-6544).
10(w)+ -- Second Amendment dated as of May 10, 2000, to Amended and
Restated SYSCO Corporation Executive Deferred Compensation
Plan, incorporated by reference to Exhibit 10(b) to Form
10-Q for the quarter ended September 30, 2000 filed on
November 13, 2000 (File No. 1-6544).

57

10(x)+ -- First Amendment dated as of May 10, 2000 to Amended and
Restated SYSCO Corporation Board of Directors Deferred
Compensation Plan, incorporated by reference to Exhibit
10(c) to Form 10-Q for the quarter ended September 30, 2000
filed on November 13, 2000 (File No. 1-6544).
10(y)+ -- First Amendment, dated September 1, 2000, to the Executive
Compensation Adjustment Agreement between Sysco and Charles
H. Cotros, incorporated by reference to Exhibit 10(d) to
Form 10-Q for the quarter ended September 30, 2000 filed on
November 13, 2000 (File No. 1-6544).
10(z)+ -- Equity Deferral Plan dated April 1, 2002, incorporated by
reference to Exhibit 10(z) to Form 10-K for the year ended
June 29, 2002 filed on September 25, 2002 (File No. 1-6544).
10(aa)+ -- Second Amended and Restated Board of Directors Deferred
Compensation Plan dated April 1, 2002, incorporated by
reference to Exhibit 10(aa) to Form 10-K for the year ended
June 29, 2002 filed on September 25, 2002 (File No. 1-6544).
10(bb)+ -- First Amendment to Second Amended and Restated Board of
Directors Deferred Compensation Plan dated July 12, 2002,
incorporated by reference to Exhibit 10(bb) to Form 10-K for
the year ended June 29, 2002 filed on September 25, 2002
(File No. 1-6544).
10(cc)+ -- Second Amended and Restated Executive Deferred Compensation
Plan dated April 1, 2002, incorporated by reference to
Exhibit 10(cc) to Form 10-K for the year ended June 29, 2002
filed on September 25, 2002 (File No. 1-6544).
10(dd)+ -- First Amendment to Second Amended and Restated Executive
Deferred Compensation Plan dated July 12, 2002, incorporated
by reference to Exhibit 10(dd) to Form 10-K for the year
ended June 29, 2002 filed on September 25, 2002 (File No.
1-6544).
10(ee)+ -- Third Amendment to Fifth Amended and Restated Supplemental
Executive Retirement Plan dated July 12, 2002, incorporated
by reference to Exhibit 10(dd) to Form 10-K for the year
ended June 29, 2002 filed on September 25, 2002 (File No.
1-6544).
10(ff)+ -- Retiree Equity Deferral Plan Effective November 22, 2002,
incorporated by reference to Exhibit 10(a) to Form 10-Q for
the quarter ended December 28, 2002 filed on February 10,
2003 (File No. 1-6544).
21# -- Subsidiaries of the Registrant.
23# -- Independent Public Accountants' Consent.
31(a)# -- CEO Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31(b)# -- CFO Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32(a)# -- CEO Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32(b)# -- CFO Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

- ---------------

+ Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of
Regulation S-K

# Filed Herewith

(b) The following reports on Form 8-K were filed during the fourth quarter
of fiscal 2003:

On April 28, 2003, the company filed a Form 8-K announcing the results
of its third quarter ended March 29, 2003.

58

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Sysco Corporation has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, on this 24th
day of September, 2003.

SYSCO CORPORATION

By /s/ RICHARD J. SCHNIEDERS
------------------------------------
Richard J. Schnieders
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated and on the date indicated above.

PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS:

/s/ RICHARD J. SCHNIEDERS Chairman of the Board and Chief Executive
- -------------------------------------------- Officer
Richard J. Schnieders

/s/ JOHN K. STUBBLEFIELD, JR. Executive Vice President, Finance and
- -------------------------------------------- Administration
John K. Stubblefield, Jr.

DIRECTORS:

/s/ COLIN G. CAMPBELL /s/ RICHARD J. SCHNIEDERS
- -------------------------------------------- --------------------------------------------
Colin G. Campbell Richard J. Schnieders

/s/ JUDITH B. CRAVEN /s/ PHYLLIS S. SEWELL
- -------------------------------------------- --------------------------------------------
Judith B. Craven Phyllis S. Sewell

/s/ JONATHAN GOLDEN /s/ JOHN K. STUBBLEFIELD, JR.
- -------------------------------------------- --------------------------------------------
Jonathan Golden John K. Stubblefield, Jr.

/s/ THOMAS E. LANKFORD /s/ RICHARD G. TILGHMAN
- -------------------------------------------- --------------------------------------------
Thomas E. Lankford Richard G. Tilghman

/s/ RICHARD G. MERRILL /s/ JACKIE M. WARD
- -------------------------------------------- --------------------------------------------
Richard G. Merrill Jackie M. Ward

/s/ FRANK H. RICHARDSON
- --------------------------------------------
Frank H. Richardson

59

SYSCO CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

- ---------------

(1) Allowance accounts resulting from acquisitions and other adjustments.

(2) Customer accounts written off, net of recoveries.

S-1

INDEX TO EXHIBITS

- ---------------

+ Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of
Regulation S-K

# Filed Herewith