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 JULY 3, 2004

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
$23,542,540,000 at December 26, 2003 (based on the closing sales price on the
New York Stock Exchange Composite Tape on December 26, 2003, as reported by The
Wall Street Journal (Southwest Edition)). At August 28, 2004, the registrant had
issued and outstanding an aggregate of 639,345,528 shares of its common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the company's 2004 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 related products primarily to the foodservice
or "food-prepared-away-from-home" industry. Founded in 1969, SYSCO provides its
products and services to approximately 400,000 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 $29 billion in
annual sales, both through internal expansion of existing operations and through
acquisitions. Through the end of fiscal 2004, SYSCO had acquired 121 companies
or divisions of companies.

In May 2004, SYSCO acquired International Food Group, Inc., a distributor
of foodservice products to quick-service restaurants in various international
markets. In April 2004, SYSCO acquired Overton Distributors, Inc., a full-line
fresh fruit and vegetable foodservice distributor, headquartered in Nashville,
Tennessee with operations in Tennessee and North Carolina. In September 2003,
SYSCO acquired certain assets of Luzo Foodservice Corporation, located in
Bedford, Massachusetts. In September 2003, SYSCO acquired certain assets of the
Stockton, California foodservice operations from Smart & Final, Inc.

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
cuisine foodservice market located in St. Paul, Minnesota and Kansas City,
Missouri. In October 2002, SYSCO acquired the net assets of Pronamic 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.

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 related products to the foodservice or
"food-prepared-away-from-home" industry. Under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures 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

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companies distribute a full line of food products and a wide variety of non-food
products to chain restaurant customer locations. "Other" financial information
is attributable to the company's other segments, including the company's
specialty produce, custom-cut meat, Asian cuisine foodservice 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, other meat, seafood and
poultry products. Our specialty Asian cuisine foodservice companies distribute a
full line of food products and a wide variety of non-food products to
restaurants serving Asian cuisine. Our lodging industry products company
distributes personal care guest amenities, equipment, housekeeping supplies,
room accessories and textiles to the lodging industry. The company's Canadian
operations are not significant for geographical disclosure purposes.

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 and national hamburger, sandwich,
pizza, chicken, steak and other 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 foods, fresh meats, imported specialties and fresh
produce. The company also supplies a wide variety of non-food items, including
paper products such as disposable napkins, plates and cups; tableware such as
china and silverware; restaurant and kitchen equipment and 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 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 13,500 sales and marketing representatives and support
staff 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 and assistance in inventory
control, as well as access to various third party services designed to add value
to our customers' businesses.

No single customer accounted for as much as 10% of SYSCO's total sales for
its fiscal year ended July 3, 2004. Approximately 3% of traditional foodservice
sales during fiscal 2004 resulted from a process of competitive bidding.

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 July 3, 2004. Although this customer represents
approximately 43% 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.

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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 accounts for more than 10% 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, involves 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. Expected to be operational in the third quarter of fiscal 2005, the
center will receive and distribute food and related products to SYSCO's
operating companies in the Northeast.

The Baugh Supply Chain Cooperative, through its staff of 470 persons,
administers a consolidated product procurement program designed to develop,
obtain and ensure consistent quality food and non-food 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 700 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 2004, 2003
and 2002, approximately $530,086,000, $435,637,000 and

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$416,393,000, respectively, were invested in facility expansions, fleet
additions and other capital asset enhancements. The company estimates its
capital expenditures in fiscal 2005 should be in the range of $475,000,000 to
$500,000,000. During the three years ended July 3, 2004, 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
2005 capital expenditures from the same sources.

EMPLOYEES

As of July 3, 2004, SYSCO and its operating companies had approximately
47,800 full-time employees, approximately 19% of whom were represented by
unions, primarily the International Brotherhood of Teamsters. Contract
negotiations are handled locally. Collective bargaining agreements covering
approximately 21% of the company's union employees expire during fiscal 2005.
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 14%
as of July 3, 2004, SYSCO believes, based upon industry trade data, that its
sales to the North American "food-prepared-away-from-home" industry were the
highest of any foodservice distributor during fiscal 2004. 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 non-food 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.

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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 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 July 3, 2004, SYSCO and its operating companies operated 166
facilities throughout the United States and Canada, of which 150 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 July 3, 2004.

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

SYSCO owns approximately 415,513,000 cubic feet of its distribution
facilities and self-serve centers (or 79.2% of the total cubic feet), and the
remainder is occupied under leases expiring at various dates from fiscal 2005 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 $18,676,000 at July 3, 2004. Such mortgage
indebtedness and industrial revenue bond financing arrangements mature at
various dates to fiscal 2026.

The company owns its approximately 188,000 square foot headquarters office
complex in Houston, Texas and leases approximately 208,000 square feet of
additional office space in Houston, Texas.

Facilities in Rocky Hills, Connecticut; Halfmoon, New York; Jessup,
Maryland; Harahan, Louisiana; Poway, California; and Kansas City, Missouri
(which in the aggregate accounted for approximately 6.7% of fiscal 2004 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 Post Falls, Idaho and Chicago, Illinois. In
addition, the company's first regional distribution center is under construction
in Front Royal, Virginia.

As of July 3, 2004, SYSCO's fleet of approximately 8,560 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 86% 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

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

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 August 28, 2004
was 15,293.

In March 2004, 35,520 Dividend Access Shares, 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.

In June 2004, 28,401 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.

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 June 2004, 78,744 shares were issued to a former shareholder of Strano
Foodservice ("Strano") upon the conversion of Dividend Access Shares issued in
connection with SYSCO's acquisition of Strano in July 1996. 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.

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SYSCO made the following share repurchases during the fourth quarter of
fiscal 2004:

ISSUER PURCHASES OF EQUITY SECURITIES

In the above table, the total number of shares purchased includes shares
purchased as part of the publicly announced share repurchase program as well as
shares tendered by individuals in connection with stock option exercises.

On July 31, 2002, the company announced that the Board of Directors
approved the repurchase of 20,000,000 shares, which was completed during the
third quarter of fiscal 2004. On September 12, 2003, the company announced that
the Board of Directors approved the repurchase of an additional 20,000,000
shares.

In July 2004, the Board of Directors authorized the company to enter into
agreements from time to time for the repurchase during company announced
"blackout periods" of such securities in compliance with Rule 10b5-1 promulgated
under the Exchange Act. The company has not yet entered into such an agreement.

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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 2003. As a
result, the amortization of goodwill and intangibles with indefinite lives
was discontinued.

(2) The per share data for fiscal 2001 and fiscal 2000 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

HIGHLIGHTS

Sales increased 12.2% in fiscal 2004 over fiscal 2003. Fiscal 2004 included
53 weeks which represented an additional week over the 52 weeks in fiscal 2003.
This additional week represented an estimated 2.2% of the sales increase in
fiscal 2004. Gross margins as a percent of sales for fiscal 2004 decreased from
the prior year due to the impact of product cost increases and changes in
customer mix, segment mix and product mix. Operating expenses as a percent of
sales for fiscal 2004 decreased from the prior year due to operating
efficiencies and operating costs increasing at lower rates than the sales price
increases driven by product cost increases. Operating expenses were negatively
impacted by increased net pension costs and expenses incurred in connection with
the National Supply Chain project and were favorably impacted by gains recorded
related to the cash surrender value of life insurance assets. Primarily as a
result of these factors, net earnings increased 16.6% in fiscal 2004 over fiscal
2003. The earnings increases in fiscal 2004 over fiscal 2003 also include the
impact of the additional week in fiscal 2004.

The impact on our customers of a prolonged period of rising product costs,
internally estimated at 6.3% for the fiscal year and 8.0% for the fourth quarter
of fiscal 2004, has contributed to a softer foodservice market. Management
believes that the softness in the foodservice market together with general
economic conditions contributed to a slowing of sales growth for the company in
the latter half of the fourth quarter of fiscal 2004 which is continuing in the
first quarter of fiscal 2005. The company has renewed its focus on expense
controls in fiscal 2005, including managing labor costs and productivity and
ongoing benchmarking and sharing of best practices at the operating companies.

OVERVIEW

SYSCO distributes food and related products to the foodservice industry,
including restaurants, healthcare and educational facilities, lodging
establishments and other foodservice customers. SYSCO's operations are located
throughout the United States and Canada and include broadline companies,
specialty produce companies, custom-cut meat operations, Asian cuisine
foodservice, hotel supply operations, SYGMA, the company's chain restaurant
distribution subsidiary, and a company that distributes to internationally
located chain restaurants.

The company estimates that it serves more than 14% of an approximately $207
billion annual foodservice market that includes the North American foodservice,
non-food and hotel amenity, furniture and textile markets. The foodservice, or
food-prepared-away-from-home, market represents approximately one-half of the
total food purchases made at the consumer level. This share has grown from about
37% in 1972, since food purchases in the foodservice industry have grown more
rapidly than food purchases in the retail grocery industry over most of that
time period. Factors influencing this trend, and therefore SYSCO's growth,
include increases in dual-worker and single-parent families; busier lifestyles;
the general aging of the population; growing affluence; and the increasing
demand for the variety, convenience and entertainment afforded by the
proliferation of restaurants and other foodservice operations. Industry
statisticians and demographers expect most of these general trends to continue,
although they may not continue at the same pace.

General economic conditions and consumer confidence can have an effect on
the frequency and amount spent by consumers for food prepared away from home and
therefore on SYSCO. However, we have consistently grown at a faster rate than
the overall industry and have grown our market share in this fragmented
industry.

The company intends to continue to expand its market share and grow
earnings through strategies which include:

- Profitable sales growth: In addition to expansion through foldouts (new
operating companies created in established markets previously served by
other SYSCO operating companies) and a disciplined acquisition program,
refining the use of customer purchasing potential and profitability data
in targeting new customers, deepening relationships with existing
customers, tailoring products and

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services and allocating associated resources by customer, and managing
the profitability of, or exiting, low profit or unprofitable customers.

- Brand management: Leveraging brand strength to grow sales and
profitability while ensuring strict quality control processes and
providing greater value to customers.

- Productivity: Deploying the latest technology and leveraging best
business practices to improve operating efficiencies and leverage
expenses to sales growth.

- Sales force effectiveness: Targeted recruiting, training and compensation
of marketing associates. Expanding the business development and business
review functions to further strengthen our marketing associate-customer
relationships.

- Supply chain optimization: Creating a more efficient and effective supply
chain infrastructure through the National Supply Chain project.

The company's National Supply Chain project is intended to optimize the
supply chain activities for certain products from SYSCO's operating companies in
each respective region and as a result, reduce inventory and operating costs,
working capital requirements and future facility expansion needs at SYSCO's
operating companies while providing greater value to our suppliers and
customers. The company expects to build from five to ten regional distribution
centers over a period of ten years. The first regional distribution center in
the Northeast is expected to be operational during the third quarter of fiscal
2005.

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RESULTS OF OPERATIONS

The following table sets forth the components of the Results of Operations
expressed as a percentage of sales for the periods indicated:

The following table sets forth the change in the components of the Results
of Operations expressed as a percentage increase or decrease over the prior
year:

Sales

Sales increased 12.2% in fiscal 2004 and 11.9% in fiscal 2003 over the
prior years. The additional week contributed approximately 2.2% to the overall
sales growth rate for fiscal 2004. Because the fourth quarter of fiscal 2004
contained an additional week as compared to fiscal 2003, sales growth for fiscal
2004 is not directly comparable to the prior year. In order to provide a more
comparable picture of sales growth during fiscal 2004, management believes that
it is appropriate to adjust the sales figures for fiscal 2004 by the estimated
impact of the additional week. As a result, sales for fiscal 2004 presented in
the table below are adjusted by one-fourteenth of total sales for the fourth
quarter. Failure to make these adjustments might cause investors to

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overstate the amount of actual sales growth due to the additional week of sales
included in fiscal 2004. Set forth below is a reconciliation of actual sales
growth to adjusted sales growth for the periods presented:

Acquisitions contributed 0.9% to the overall sales growth rate for fiscal 2004
and 5.2% for fiscal 2003. Estimated product cost increases, an internal measure
of inflation, were 6.3% during fiscal 2004 as compared to a flat rate during
fiscal 2003. SYSCO generally expects to pass product cost increases to its
customers; however, the actual amount of inflation reflected as sales price
increases is difficult to quantify. Management believes that SYSCO's restaurant
operator customers have experienced softness in their rate of sales growth as
cost and price increases impact customer spending. Product cost increases in the
fourth quarter of fiscal 2004 reached 8.0%. Management believes that the
softness in the foodservice market together with general economic conditions
contributed to a slowing of SYSCO's sales growth in the latter half of the
fourth quarter of fiscal 2004 which is continuing in the first quarter of fiscal
2005.

Industry sources estimate the total foodservice market experienced a real
sales decline of approximately 0.7% in calendar year 2003 and real sales growth
of 0.5% in calendar year 2002.

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:

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Cost of Sales

Cost of sales as a percentage of sales was 80.7% in fiscal 2004, 80.3% in
fiscal 2003 and 80.2% in fiscal 2002. Management believes that cost of sales as
a percentage of sales in fiscal 2004 was impacted by several factors, including
product cost increases and changes in customer mix, segment mix and product mix;
however, the specific impact of each factor is difficult to quantify. Product
cost increases in substantially all product categories also had the impact of
reducing gross margins as a percentage of sales, as gross profit dollars are
earned on a higher sales dollar base. Dairy and meat products, which are
especially affected by product cost increases since they are often sold on a
cost-per-pound plus a fee basis rather than a percentage markup, experienced the
highest rates of inflation. The result was a higher sales price but a lower
gross margin as a percentage of sales even as gross margin dollars were
maintained or even increased. Multi-unit customer sales in the Broadline
segment, which traditionally yield lower gross margins and lower expenses than
marketing associate-served customer sales, grew faster than sales to marketing
associate-served customer sales. Sales at the SYGMA and the Other segments,
which traditionally have lower margins than the Broadline segment, grew faster
than sales at the Broadline segment. In the area of product mix, meat sales
continued to grow as a percentage of overall sales and also experienced a high
rate of cost increases. Meat products typically generate higher prices and
higher gross margin dollars per case than the average of other products, but
lower gross margins as a percentage of sales. Therefore, increased sales of
these products had the effect of decreasing overall gross margins as a
percentage of sales even as gross margin dollars were maintained or increased.

The increase in cost of sales as a percentage of sales in fiscal 2003 was
primarily a result of two factors. First, multi-unit sales growth was greater
than marketing associate-served sales growth. Second, fresh-cut meat sales grew
as a percentage of overall sales.

In fiscal 2002, cost of sales was influenced by SYSCO's overall customer
and product mix, economies realized in purchasing and increased sales of SYSCO
Brand products.

Operating Expenses

Operating expenses include the costs of warehousing and delivering products
as well as selling, administrative and occupancy expenses. These expenses as a
percent of sales were 14.1% for fiscal 2004, 14.7% for fiscal 2003 and 14.9% for
fiscal 2002. Changes in the percentage relationship of operating expenses to
sales result from an interplay of several factors, including improved
efficiencies, customer mix, and product cost increases.

The decrease in expenses as a percentage of sales in fiscal 2004 as
compared to fiscal 2003 was attributable to several factors including improved
operating efficiencies as demonstrated by improving trends in key expense
metrics tracked at the broadline operating companies, including pieces sold per
delivery, product line items sold per delivery, pieces per trip and pieces per
error. Increases in product costs and the resulting increased average sales
price per item also favorably impacted expenses as a percentage of sales as
operating costs increased at a lower rate. Operating expenses were negatively
impacted by increases in net pension costs of $39,944,000 and by increases in
expenses related to the National Supply Chain project of $5,584,000 over fiscal
2003. Management estimates that the company will incur an additional $40,000,000
to $50,000,000 in expenses related to the National Supply Chain project in
fiscal 2005 over what was incurred in fiscal 2004, including depreciation of the
first redistribution center.

Operating expenses were also favorably impacted by the recognition of
income in fiscal 2004 of $19,124,000 to adjust the carrying value of life
insurance assets to their cash surrender value. The gains in fiscal 2004 were
recognized in the first 39 weeks with a modest loss of $97,000 in the fourth
quarter of fiscal 2004. This contrasted with fiscal 2003 where a gain of
$13,000,000 was recognized in the fourth quarter reversing the majority of prior
losses recognized in the first 39 weeks and resulting in a net loss of $156,000
for the fiscal year.

The company has renewed its focus on expense controls in fiscal 2005,
including managing labor costs and productivity and ongoing benchmarking and
sharing of best practices at the operating companies.

15

The decrease in expenses as a percentage of sales in fiscal 2003 as
compared to fiscal 2002 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 project of $5,996,000 over fiscal 2002.

Operating expenses in fiscal 2002 were negatively impacted by increases in
marketing associate-served sales, for which higher expenses are incurred to
serve these customers.

Interest Expense

Interest expense decreased 3.3% in fiscal 2004 and increased 14.8% in
fiscal 2003 over the prior years. The decrease in interest expense in fiscal
2004 was primarily due to lower borrowing rates offsetting moderately higher
borrowing levels. The lower average borrowing rates of the company in fiscal
2004 were due to lower short-term market interest rates and the use of interest
rate swaps which converted the fixed rates of interest on a portion of SYSCO's
long term debt to lower variable rates of interest. The increase in interest
expense in fiscal 2003 was primarily due to increased borrowings, partially
offset by decreases in interest rate levels.

Other, Net

Other, net was income of $12,365,000 in fiscal 2004, $8,347,000 in fiscal
2003 and $2,805,000 in fiscal 2002. 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 increased 17.0% in fiscal 2004 and 14.5% in
fiscal 2003 over the prior years. The increases were due to the factors
discussed above. The additional week also contributed to the earnings growth in
fiscal 2004.

Provision for Income Taxes

The effective tax rate was 38.50% in fiscal 2004 and 38.25% in fiscal 2003
and 2002.

Net Earnings

Fiscal 2004 represents the twenty-eighth consecutive year of increased
earnings before the cumulative effect of accounting changes. Net earnings
increased 16.6% in fiscal 2004 and 14.5% in fiscal 2003 over the prior periods.
The increases were due to the factors discussed above.

Return on Average Shareholders' Equity

The return on average shareholders' equity was approximately 39% in fiscal
2004, 36% in fiscal 2003 and 31% in fiscal 2002. The increase in net earnings
and share repurchases in fiscal 2004, reduced by the reversal of a portion of
minimum pension liability, contributed to the increase in fiscal 2004. Since its
inception, SYSCO has averaged approximately 19% return on average shareholders'
equity.

16

SEGMENT RESULTS

The following table sets forth the change in the selected financial data of
each of the company's reportable segments expressed as a percentage increase
over the prior year and should be read in conjunction with Business Segment
Information in the Notes to Consolidated Financial Statements:

The following table sets forth sales and earnings before taxes of each of
the company's reportable segments expressed as a percentage of the respective
consolidated total and should be read in conjunction with Business Segment
Information in the Notes to Consolidated Financial Statements:

Broadline Segment

Broadline segment sales increased 10.4% in fiscal 2004 and 12.1% in fiscal
2003 over the prior years. Acquisitions contributed 0.2% to the overall sales
growth rate for fiscal 2004 and 5.6% in fiscal 2003. The fiscal 2004 sales
growth was due to increased sales to marketing associate-served customers and
multi-unit customers, including increased sales of SYSCO Brand products, and
price increases resulting from higher product costs. The additional week also
contributed to the sales growth in fiscal 2004. The fiscal 2003 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 in
both years was obtained through 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 were 80.9% in fiscal 2004, 82.2% in fiscal 2003
and 82.1% in fiscal 2002. The decrease in fiscal 2004 was due primarily to
strong sales growth in the custom-cut meat, SYGMA and lodging industry product
segments outpacing the broadline sales growth, as well as the acquisition of the
Asian cuisine foodservice operations during fiscal 2003. The increase in fiscal
2003 was due primarily to the acquisition of a Canadian broadline foodservice
operation.

Marketing associate-served sales as a percentage of broadline sales in the
U.S. decreased to 54.3% in fiscal 2004 as compared to 54.6% in fiscal 2003. The
decrease in fiscal 2004 was due to the rate of sales increase to multi-unit
customers exceeding the rate of sales increase to marketing associate-served
customers. The growth in sales to multi-unit customers was fueled by increased
sales to existing locations and the addition of new locations. SYSCO Brand sales
as a percentage of broadline sales in the U.S. increased to 49.1% for fiscal
2004 as compared to 48.7% in fiscal 2003.

Earnings before income taxes for the Broadline segment increased 14.4% in
fiscal 2004 and 12.8% in fiscal 2003 over the prior years. The increase in
earnings before income taxes for fiscal year 2004 was primarily due to increased
sales and reduced expenses as a percentage of sales, which more than offset
reduced margins as a

17

percentage of sales. Reduced expenses as a percentage of sales is attributable
to several factors including improved operating efficiencies. The decrease in
margins and expenses as a percentage of sales was also impacted by increases in
product costs and the resulting increase in the average sales price per item.
The additional week also contributed to the earnings growth in fiscal 2004. The
increases in earnings before income taxes for fiscal years 2003 and 2002 were
primarily due to increases in sales and lower expenses as a percentage of sales.

SYGMA Segment

SYGMA segment sales increased 21.7% in fiscal 2004 and 9.2% in fiscal 2003
over the prior years. Acquisitions contributed 1.9% to the overall sales growth
rate for fiscal 2004 and 2.8% in fiscal 2003. The fiscal 2004 sales growth was
due primarily to sales to new customers, sales growth in SYGMA's existing
customer base related to new locations added by those customers, as well as
increases in sales to existing locations, price increases resulting from higher
product costs and sales from acquisitions. The additional week also contributed
to the sales growth in fiscal 2004. 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. SYGMA segment sales as a percentage of total
SYSCO sales were 12.1% in fiscal 2004, 11.2% in fiscal 2003 and 11.4% in fiscal
2002.

Earnings before income taxes for the SYGMA segment increased 7.2% in fiscal
2004 and 3.4% in fiscal 2003 over the prior years. The increase in fiscal 2004
was primarily due to the increased sales offset by increased expenses incurred
related to implementation of new systems, severance payments related to certain
personnel changes, costs related to worker's compensation insurance claims and
pension costs. The additional week also contributed to the earnings growth in
fiscal 2004. The increase in fiscal 2003 was primarily due to increased sales.

During fiscal 2004 and continuing in the first quarter of fiscal 2005,
SYGMA is discontinuing servicing a portion of its largest customer's locations
due to that customer's geographic supply chain realignment. SYGMA expects to
offset these lost sales by obtaining sales from additional locations from this
customer and obtaining new business from other customers. In many cases, this
new business will be served out of different SYGMA locations than those that
served the business that was discontinued. As a result, during fiscal 2004,
SYGMA incurred additional expenses including severance payments and equipment
moving costs as it transitioned its operations to serve these new customers.
SYGMA expects to incur similar expenses during the first and second quarter of
fiscal 2005 as it continues to transition to serve these new customers. Any net
lost sales and the related additional expenses are not expected to be material
to SYSCO overall, and we expect SYGMA to continue to be a profitable segment.

Other Segments

Other segment sales increased 19.0% in fiscal 2004 and 17.3% in fiscal 2003
over the prior years. Acquisitions contributed 6.2% to the overall sales growth
rate for fiscal 2004 and 4.9% in fiscal 2003. The increase in fiscal 2004 was
primarily attributable to increased sales to the existing customer base, sales
to new customers, price increases resulting from higher product costs and sales
from acquisitions. The additional week also contributed to the sales growth in
fiscal 2004. 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. Other segment sales as a percentage of total
SYSCO sales were 8.1% in fiscal 2004, 7.7% in fiscal 2003 and 7.3% in fiscal
2002.

Earnings before income taxes for the Other segment increased 55.4% in
fiscal 2004 and 4.8% in fiscal 2003 over the prior years. The increase in fiscal
2004 was primarily due to increases in sales, acquisitions and reduced expenses
as a percentage of sales, which more than offset reduced gross margins as a
percentage of sales. The additional week also contributed to the earnings growth
in fiscal 2004. The increase in fiscal 2003 was due primarily to acquisitions,
increased earnings from increased gross margins and operating efficiencies at
our 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.

18

LIQUIDITY AND CAPITAL RESOURCES

SYSCO provides marketing and distribution services to foodservice customers
primarily 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, to reduce shares outstanding, which may have the net effect of
increasing earnings per share, and to aid in managing the ratio of long-term
debt to total capitalization. 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 32.4% and 36.2% at July 3, 2004 and June 28,
2003, respectively. The reversal of a portion of the minimum pension liability
adjustments in other comprehensive income contributed to the decrease in the
ratio at July 3, 2004.

The company generated net cash from operations of $1,189,522,000 in fiscal
2004, $1,372,840,000 in fiscal 2003, and $1,084,980,000 in fiscal 2002. Several
factors contributed to the decrease in cash flow from operations in fiscal 2004.
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 structure results in the deferral of certain federal
and state income tax payments, as supply chain distributions are not included in
taxable income until distributed in periods subsequent to when they are
recognized in book income. Fiscal 2004 is the first period that supply chain
distributions were included in taxable income since the company began deferring
these items for tax purposes in fiscal 2002. As a result of the impact of these
items and other temporary differences, including the utilization of U.S. federal
net operating loss carryforwards, excess tax depreciation and pension
contributions, taxes paid during fiscal 2004 increased to $344,414,000 as
compared to $28,747,000 in fiscal 2003. The company expects the net cash flow
impact of deferrals in fiscal 2005 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.

Cash flow from operations for fiscal 2004 was negatively impacted by
increases in accounts receivable and inventory balances, partially offset by
increases in accounts payable balances and increases in accrued expenses and
other liabilities. Increased sales volumes over the prior periods partially
contributed to the increase in accounts receivable balances. SYSCO has also
experienced sales increases with multi-unit customers that have outpaced the
sales increases from marketing associate-served customers. Multi-unit customers'
payment terms are traditionally longer than the SYSCO average. Inventory levels
also increased over prior year levels, partially due to the increased sales
volumes. In addition, inventory levels at the end of fiscal 2004, measured as a
function of average days sales outstanding, exceeded the levels at the end of
fiscal 2003, which in turn were lower than those at the end of fiscal 2002. This
relative increase in inventory levels negatively impacted cash flow from
operations for fiscal 2004. The increase in accounts payable balances was
partially due to the increased inventory balances but was also negatively
impacted by decreases in accounts payable days outstanding over the prior
periods. A significant reason for the decrease in accrued expenses and other
long-term liabilities in fiscal 2003 was the increase in pension contributions
from $83,136,000 in fiscal 2002 to $164,565,000 in fiscal 2003. Pension
contributions in fiscal 2004 were $165,512,000. The company anticipates pension
contributions in fiscal 2005 will be approximately $86,294,000.

19

Cash used for investing activities was $683,811,000 in fiscal 2004,
$681,825,000 in fiscal 2003, and $662,300,000 in fiscal 2002. Expenditures for
facilities, fleet and other equipment were $530,086,000 in fiscal 2004,
$435,637,000 in fiscal 2003, and $416,393,000 in fiscal 2002. Fiscal 2004
capital expenditures included the construction of fold-out facilities in Oxnard,
California and Fargo, North Dakota, replacement or significant expansion of
facilities in Billings, Montana; Cleveland, Ohio; Jacksonville, Florida; Miami,
Florida; and San Antonio, Texas, and continued expenditures related to the
National Supply Chain project. The capital expenditures in fiscal 2003 included
the construction of fold-out facilities in Las Vegas, Nevada and Oxnard,
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 project). Fiscal 2002 expenditures included
construction of fold-out facilities located in Sacramento, California; Columbia,
South Carolina; and Las Vegas, Nevada, as well as 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
2005 are expected to decrease slightly to the range of $475,000,000 to
$500,000,000 due to completion of several major replacements and fold-outs in
fiscal 2004. Fiscal 2005 expenditures will include the continuation of the
fold-out program; facility, fleet and other equipment replacements and
expansions; the company's National Supply Chain project; and investments in
technology. Cash expenditures for acquisitions of businesses were $79,247,000 in
fiscal 2004, $209,010,000 in fiscal 2003 and $234,618,000 in fiscal 2002.

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 third quarter of fiscal 2005. 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. Fiscal 2004
capital expenditures related to the National Supply Chain project were
$107,822,000, bringing the total amount of capital expenditures on the project
since inception to $152,254,000.

Cash used for financing activities was $641,851,000 in fiscal 2004,
$550,528,000 in fiscal 2003, and $359,984,000 in fiscal 2002. In July 2002, the
Board authorized the repurchase of an additional 20,000,000 shares, which was
completed during fiscal 2004. 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 16,454,300 shares for
$608,506,000 in fiscal 2004, 16,500,000 shares for $478,471,000 in fiscal 2003,
and 18,000,000 shares for $473,558,000 in fiscal 2002. An additional 670,000
shares have been purchased at a cost of $22,770,000 through August 20, 2004,
resulting in 11,938,900 shares remaining available for repurchase as authorized
by the Board as of that date.

Dividends paid were $309,540,000 in fiscal 2004, $261,854,000 in fiscal
2003, and $213,275,000 in fiscal 2002. SYSCO began paying the current quarterly
dividend rate of $0.13 per share in January 2004, an increase from the $0.11 per
share that became effective in January 2003. In May 2004, SYSCO declared its
regular quarterly dividend for the first quarter of fiscal 2005 of $0.13 per
share, which was paid in July 2004. In September 2004, SYSCO also declared its
regular quarterly dividend for the second quarter of fiscal 2005 of $0.13 per
share, payable in October 2004.

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
August 20, 2004, 29,447,835 shares remained available for issuance under this
registration statement.

In June 1998, the company filed with the Securities and Exchange Commission
a shelf registration statement covering $500,000,000 in debt securities. As of
August 20, 2004, there was $425,000,000 in principal amount outstanding under
the registration statement, leaving $75,000,000 available for issuance.

20

In March 2004, SYSCO issued 4.60% notes totaling $200,000,000 due March 15,
2014 in a private offering. Proceeds from the notes were utilized to retire
commercial paper borrowings. The fixed rate of interest on these notes was
effectively converted to variable rates of interest through the interest rate
swap agreements entered into in April and May of 2004.

SYSCO has uncommitted bank lines of credit, which provided for unsecured
borrowings for working capital of up to $95,000,000, of which none was
outstanding as of July 3, 2004 and $17,000,000 was outstanding as of August 20,
2004.

SYSCO has a commercial paper program in the United States which is
supported by a bank credit facility in the amount of $450,000,000, 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 CAD $100,000,000, maturing
in fiscal 2005. During fiscal 2004, 2003 and 2002, aggregate commercial paper
and short-term bank borrowings ranged from approximately $73,102,000 to
$478,114,000, $55,813,000 to $495,703,000, and $51,472,000 to $538,362,000,
respectively. Commercial paper borrowings were $73,834,000 as of July 3, 2004
and $48,503,000 as of August 20, 2004. 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 July 3, 2004 was $1,468,160,000, of which approximately 60%
was at fixed rates averaging 5.2% and the remainder was at floating rates
averaging 4.0%, as adjusted for the effect of the interest rate swaps
outstanding as of July 3, 2004. SYSCO continues to have borrowing capacity
available and alternative financing arrangements are evaluated as appropriate.

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 July 3, 2004 and June 28, 2003, letters of credit outstanding
were $11,001,000 and $14,610,000, respectively.

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.

CONTRACTUAL OBLIGATIONS

The following table sets forth certain information concerning SYSCO's
obligations and commitments to make contractual future payments:

The estimate of the timing of future payments under the Executive Deferred
Compensation Plan involves the use of certain assumptions, including retirement
ages and payout periods. For purposes of this table, purchase obligations
include agreements for purchases of product in the normal course of business,
for which all significant terms have been confirmed. Such amounts included in
the table above are based on estimates.

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

21

consideration amounts outstanding as of July 3, 2004 included approximately
1,273,000 shares of SYSCO's common stock and $61,614,000 in cash. These amounts
are not included in the table above.

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
policies employed by SYSCO are presented in the notes to the financial
statements.

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

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 by third party
insurers. 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. SYSCO maintains a qualified retirement
plan (Retirement Plan) for its employees which pays benefits to employees at
retirement, using formulas based on a participant's years of service and
compensation. SYSCO also maintains a non-qualified, unfunded Supplemental
Executive Retirement Plan (SERP) which provides additional retirement benefits
to certain 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 $87,104,000 at July 3, 2004 and $74,730,000 at June 28, 2003.

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

22

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 6.25% and 6.00% as of July 3, 2004 and June 28, 2003, respectively. The
discount rate assumption is reviewed annually and revised as deemed appropriate,
as it was at July 3, 2004, when the discount rate was increased to 6.25% from
6.00% and at June 28, 2003 when the discount rate was reduced to 6.00% from
7.25%.

The discount rate assumption utilized impacts the recorded amount of net
pension costs. The 1.25% decrease in the discount rate used at June 28, 2003
increased SYSCO's net pension costs for fiscal 2004 by approximately
$37,000,000. The increase in the discount rate of 0.25% at July 3, 2004 will
decrease SYSCO's net pension costs for fiscal 2005 by approximately $9,500,000.

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%) for the Retirement Plan, as of July 3,
2004 and June 28, 2003. The SERP assumes annual salary increases of 10% through
fiscal 2007 and 7% thereafter as of July 3, 2004 and annual salary increases of
8% through fiscal 2005 and 7% thereafter as of June 28, 2003.

The expected long-term rate of return on plan assets of the Retirement Plan
was 9.00% and 9.50% as of July 3, 2004 and June 28, 2003, 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 approximately 10.6%, 8.5%, 3.6% and
21.9% over the 20-year, 10-year, 5-year and 1-year periods ended December 31,
2003, respectively. In addition, in nine of the last fifteen years, the actual
return on plan assets has exceeded 9.00%. The rate of return assumption is
reviewed annually and revised as deemed appropriate, as it was for fiscal 2004
when the expected return was reduced to 9.00% from 9.50%.

The expected return on plan assets impacts the recorded amount of net
pension costs. The 0.50% decrease in the assumed rate of return in fiscal 2004
increased SYSCO's net pension costs for fiscal 2004 by approximately $3,400,000.
A 1.0% increase (decrease) in the assumed rate of return for fiscal 2005 would
decrease (increase) SYSCO's net pension costs for fiscal 2005 by approximately
$9,200,000.

Minimum pension liability adjustments are recorded so that the recorded
pension liability is at least equal to the accumulated benefit obligation.
Minimum pension liability adjustments are non-cash adjustments that are
reflected as an increase (or decrease) in the pension liability and an
offsetting charge to shareholders' equity, net of tax, through comprehensive
income (or loss).

During fiscal 2004, a minimum pension liability adjustment of $266,075,000
was recorded as a debit to the company's net pension balance as of July 3, 2004.
Of this adjustment, $267,535,000 was recorded to reverse all minimum pension
liability adjustments recorded in prior years related to the Retirement Plan. At
July 3, 2004, the fair value of plan assets of the Retirement Plan exceeded the
accumulated benefit obligation, eliminating the need for a minimum pension
liability adjustment. The change in the company's funded position related to the
Retirement Plan was due primarily to the better than expected return on plan
assets in fiscal 2004 of approximately $111,127,000 as compared to an expected
return of approximately $61,148,000, voluntary contribution to the qualified
pension trust in fiscal 2004 of $160,000,000 and the increase in the discount
rate at July 3, 2004 to 6.25%. At July 3, 2004, the accumulated benefit
obligation of the SERP continued to exceed the fair value of plan assets and
required an additional minimum pension liability adjustment of $1,460,000 during
fiscal 2004 to increase the accrued pension cost related to the SERP.

23

During fiscal 2003, a minimum pension liability adjustment of $193,819,000
was recorded as a credit to the company's net pension balance as of June 28,
2003. This adjustment was due to the company's accumulated benefit obligations
exceeding the fair value of plan assets for both the Retirement Plan and the
SERP and was due to lower than expected returns on plan assets and the decrease
in the discount rate at June 28, 2003 to 6.00%.

Amounts reflected in accumulated other comprehensive income (loss) related
to minimum pension liability, net of tax, were ($20,733,000) as of July 3, 2004,
and ($185,118,000) as of June 28, 2003.

The company's prepaid pension cost prior to the recognition of the
additional minimum pension liability was $142,620,000 and $91,340,000 at July 3,
2004 and June 28, 2003, respectively. Included in arriving at accrued benefit
cost as of July 3, 2004 and June 28, 2003, respectively, are $454,468,000 and
$493,829,000 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 net pension costs over time.

The company recognized net pension costs of $114,232,000, net of an
expected asset return of $61,148,000, $74,288,000, net of an expected asset
return of $46,462,000, and $51,336,000, net of an expected asset return of
$43,053,000 for fiscal years 2004, 2003 and 2002, respectively. Changes in the
assumptions together with the normal growth of the plan and the impact of
actuarial losses from prior periods, increased net pension costs $39,944,000 in
fiscal 2004 and is expected to decrease net pension costs in fiscal 2005 by
approximately $7,374,000.

The company made cash contributions to its pension plans of $165,512,000
and $164,565,000 in fiscal years 2004 and 2003, respectively, including
voluntary contributions to the Retirement Plan of $160,000,000 in each of fiscal
2004 and fiscal 2003. In fiscal 2005, as in the previous years, contributions to
the Retirement Plan will not be required to meet ERISA minimum funding
requirements but the company anticipates that it will make voluntary
contributions of approximately $80,000,000. The estimated fiscal 2005
contributions to fund benefit payments for the SERP and other post-retirement
plans are $6,294,000 and $362,000, respectively.

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 Emerging Issues Task Force (EITF) Issue No.
00-21, "Revenue Arrangements with Multiple Deliverables," effective at the
beginning of fiscal 2004. EITF 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 adoption of this consensus did not have a material impact on
SYSCO's consolidated financial statements.

SYSCO adopted the provisions of FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51," effective at the beginning of fiscal 2004. 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

24

evaluated for consolidation. The adoption of this interpretation did not have a
material impact on SYSCO's consolidated financial statements.

SYSCO adopted the provisions of SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,"
effective at the beginning of fiscal 2004. SFAS No. 150 establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. The adoption of this statement
did not have a material effect on SYSCO's consolidated financial statements.

SYSCO adopted the disclosure provisions of SFAS No. 132 (revised 2003),
"Employers' Disclosures about Pensions and Other Postretirement Benefits," in
the third quarter of fiscal 2004. The standard requires that companies provide
additional financial statement disclosures for defined benefit plans in annual
and interim financial statements, which are found under the discussion of
"Employee Benefit Plans" in the Notes to Consolidated Financial Statements.

In March 2004, the FASB issued an Exposure Draft, "Share-Based Payment, an
Amendment of Statements No. 123 and 95." The proposed change in accounting would
replace existing requirements under SFAS No. 123, "Accounting for Stock-Based
Compensation" and APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the proposal, all forms of share-based payments to employees,
including employee stock options, would be expensed, recognizing the cost in the
income statement. The expense of each award would generally be measured at fair
value at the grant date. As proposed, SYSCO would have to adopt the new
statement beginning in Fiscal 2006. The adoption of this proposed standard is
expected to have a material impact on SYSCO's consolidated financial statements,
as the company currently accounts for its stock compensation plans using the
intrinsic value method provided by APB No. 25 and thus has not recorded any
compensation expense with respect to stock option grants to date.

RISK FACTORS

Low Margin Business; Inflation and 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. Prolonged periods of product
cost inflation may also have a negative impact on the company's profit margins
and earnings to the extent such product cost increases are not passed on to
customers due to resistance to higher prices. The foodservice industry is
sensitive to national and regional economic conditions. Inflation, fuel costs
and other factors affecting consumer confidence and the frequency and amount
spent by consumers for food prepared away from home may negatively impact
SYSCO's sales and operating results. SYSCO's operating results are also
sensitive to, and may be adversely affected by, other factors, including
difficulties with the collectability of accounts receivable, 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.

25

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 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 and related 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 and related 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 July 3, 2004, approximately 9,100 employees at 51 operating companies
were members of 59 different local unions associated with the International
Brotherhood of Teamsters and other labor organizations. In fiscal 2005, 12
agreements covering approximately 1,900 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

26

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 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 July 3, 2004, the company had outstanding $73,834,000 of commercial
paper at variable rates of interest with maturities through October 7, 2004. The
company's total long-term debt obligations of $1,394,326,000 were primarily at
fixed rates of interest. In addition, the company has entered into interest rate
swap agreements totaling $500,000,000 in notional amount whereby the company
receives interest payments at fixed rates of interest and pays interest at
variable rates. The following tables present the company's interest rate
position as of July 3, 2004. All amounts are stated in U.S. dollar equivalents.

27

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

Rate A -- six-month LIBOR averaged over a six month period

Rate B -- six-month LIBOR in arrears

28

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 total long-term debt obligations of $1,270,414,000 were primarily at
fixed rates of interest. At June 28, 2003, the company had no interest rate swap
agreements outstanding. The following table presents the company's interest rate
position as of June 28, 2003. All amounts are stated in U.S. dollar equivalents.

The company does not believe that its foreign operations expose it to
significant foreign exchange risk, since the exposure is limited primarily to
Canada which historically has had stable exchange rates, and for which the
amounts are not material on an overall basis to SYSCO.

29

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.

30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 July 3, 2004 and
June 28, 2003, and the related statements of consolidated results of operations,
shareholders' equity and cash flows for each of the three years in the period
ended July 3, 2004. 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 the standards of the Public
Company Accounting Oversight Board (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 July 3, 2004 and June 28, 2003, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended July 3, 2004 in conformity with U.S. generally
accepted accounting principles. 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.

ERNST & YOUNG LLP

Houston, Texas
August 16, 2004

31

SYSCO

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements

32

SYSCO

CONSOLIDATED RESULTS OF OPERATIONS

See Notes to Consolidated Financial Statements

33

SYSCO

CONSOLIDATED SHAREHOLDERS' EQUITY

See Notes to Consolidated Financial Statements

34

SYSCO

CONSOLIDATED CASH FLOWS

See Notes to Consolidated Financial Statements

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF ACCOUNTING POLICIES

BUSINESS AND CONSOLIDATION

Sysco Corporation (SYSCO or the company) is engaged in the marketing and
distribution of a wide range of food and related products primarily to the
foodservice or "food-prepared-away-from-home" industry. These services are
performed for approximately 400,000 customers from 150 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 2004 presentation.

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 $34,175,000 as of July 3, 2004
and $35,005,000 as of June 28, 2003. Customer accounts written off, net of
recoveries, were $28,485,000 or 0.10% of sales, $24,771,000 or 0.09% of sales,
and $26,068,000 or 0.11% of sales for fiscal 2004, 2003 and 2002, 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 replacements 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
replacements 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 and development of software for internal use are capitalized as one
of the elements of cost and are amortized over the assets' estimated useful
lives. Interest capitalized for the past three years was $7,495,000 in 2004,
$5,244,000 in 2003 and $3,746,000 in 2002.

36

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

Depreciation expense for the past three years was $273,030,000 in 2004,
$263,480,000 in 2003 and $243,498,000 in 2002.

LONG-LIVED ASSETS

Management reviews long-lived assets for indicators of impairment whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Cash flows expected to be generated by the related assets are
estimated over the asset's useful life based on updated projections. If the
evaluation indicates that the carrying amount of the asset may not be
recoverable, the potential impairment is measured based on a projected
discounted cash flow model.

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 is assigned to the reporting units that are
expected to benefit from the synergies of the combination. The recoverability of
goodwill and intangibles is assessed annually, or more frequently as needed when
events or changes have occurred that would suggest an impairment of carrying
value, 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.

Goodwill and intangibles allocated by reportable segment are as follows:

The above amounts are presented net of accumulated amortization of
$145,975,000 and $141,731,000 as of July 3, 2004 and June 28, 2003,
respectively.

In accordance with Statement of Financial Accounting Standards (SFAS) No.
142, "Accounting for Goodwill and Other Intangible Assets," adopted in fiscal
2003, goodwill and intangibles with indefinite lives

37

are not amortized. The following table provides comparative net earnings and
earnings per share had the non-amortization provision of SFAS No. 142 been in
effect for all periods presented:

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

38

STOCK-BASED COMPENSATION

SYSCO accounts for its stock compensation plans using the intrinsic value
method provided by Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations under which no
compensation cost has been recognized for stock option grants.

Options issued before September 2001 generally 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 SFAS No. 123, "Accounting for Stock-Based
Compensation," for all periods presented:

The weighted average fair value of options granted was $6.74, $6.88 and
$8.81 per share during fiscal 2004, 2003 and 2002, respectively. The fair value
on the date of grant was estimated using the Black-Scholes option pricing model
with the following weighted average assumptions for each fiscal year:

The weighted average fair value of employee stock purchase rights issued
pursuant to the Employees' Stock Purchase Plan was $5.17, $4.14 and $3.96 per
share during fiscal 2004, 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 only options granted after 1995. The
pro forma effects for fiscal 2004, 2003 and 2002 are not necessarily indicative
of the pro forma effects in future years.

39

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 $1,624,552,000 in fiscal 2004,
$1,505,360,000 in fiscal 2003, and $1,328,428,000 in fiscal 2002.

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 2004, SYSCO or one of its subsidiaries acquired for cash
certain assets of two broadline foodservice operations, a specialty produce
distributor, and one quickservice operation. 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 cuisine 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 2004, in the aggregate, the company paid cash of $79,247,000
and issued 2,007,089 shares with a value of $41,993,000 for acquisitions during
fiscal 2004 and for contingent consideration related to operations acquired in
previous fiscal years. In addition, escrowed funds related to certain
acquisitions in the amount of $4,810,000 were released to sellers during fiscal
2004.

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 is 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 recent 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.

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 July 3, 2004 included approximately 1,273,000 shares
and $61,614,000 in cash, which, if distributed, could result in the recording of
up to $88,465,000 in additional goodwill. Such amounts typically are to be paid
out over periods of up to five years from the date of acquisition.

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 with $200,000,000
aggregate notional amount as a fair value hedge against 4.75% notes due July
2005. The swap effectively converted the fixed interest rate on the notes into a
floating rate of six-month LIBOR in arrears less 84.5 basis points, which was
designated as
40

the respective benchmark interest rate on each of the interest payment dates
until maturity of the respective notes. In June 2003, SYSCO terminated this
agreement and received approximately $15,359,000, which represented the fair
value of the swap agreement at the time of termination.

In October 2003, SYSCO entered into $500,000,000 aggregate notional amount
of interest rate swaps as a fair value hedge against the 7.00% Senior Notes due
May 2006, 7.25% Senior Notes due April 2007 and 6.10% Senior Notes due June
2012. The swaps effectively converted the fixed interest rate on each of the
three series of notes into a floating rate of six-month LIBOR averaged over a
six month period plus 461, 430 and 171 basis points, respectively, which were
designated as the respective benchmark interest rates on each of the interest
payment dates until maturity of the respective notes.

In March 2004, SYSCO terminated the $200,000,000 aggregate notional amount
swap which was a fair value hedge against the 6.10% Senior Notes due June 2012
and received approximately $1,305,000 which represented the fair value of the
swap agreement at the time of termination.

In April 2004 and May 2004, SYSCO entered into two interest rate swaps each
with $100,000,000 aggregate notional amount as fair value hedges against the
4.60% Senior Notes due March 2014. The swaps effectively convert the fixed rate
on these notes into floating rates of six-month LIBOR in arrears less 52 and 72
basis points, respectively, which were designated as the respective benchmark
interest rates on each of the interest payment dates until maturity of the
notes.

The terms of the swap agreements and the hedged items are such that the
hedges are considered perfectly effective against changes in the fair value of
the debt due to changes in the benchmark interest rates over their terms. As a
result, the shortcut method provided by SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," is applied and there is no need to
periodically reassess the effectiveness of the hedges during the terms of the
swaps. Interest expense on the debt is adjusted to include payments made or
received under the hedge agreements. The fair value of the swaps is carried as
an asset or a liability on the Consolidated Balance Sheet and the carrying value
of the hedged debt is adjusted accordingly. The fair values of SYSCO's interest
rate swaps are the estimated amounts the company would receive or pay to
terminate the agreements as of the reporting dates. As of July 3, 2004, the fair
value of the outstanding swaps was a loss of $5,430,000, which is reflected in
Other Long-term Liabilities on the Consolidated Balance Sheet, and the carrying
amount of the related debt has been decreased by the same amount. There were no
outstanding swaps as of June 28, 2003.

The amount received upon termination of a swap 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 amortized as a
reduction of interest expense over the remaining term of the debt.

NEW ACCOUNTING STANDARDS

SYSCO adopted the provisions of Emerging Issues Task Force (EITF) Issue No.
00-21, "Revenue Arrangements with Multiple Deliverables," effective at the
beginning of fiscal 2004. EITF 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 adoption of this consensus did not have a material impact on
SYSCO's consolidated financial statements.

SYSCO adopted the provisions of FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51," effective at the beginning of fiscal 2004. 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 adoption of this
interpretation did not have a material impact on SYSCO's consolidated financial
statements.

SYSCO adopted the provisions of SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,"
effective at the beginning of fiscal 2004. SFAS No. 150 establishes standards
for how an issuer classifies and measures certain financial instruments with
characteris-

41

tics of both liabilities and equity. The adoption of this statement did not have
a material effect on SYSCO's consolidated financial statements.

SYSCO adopted the disclosure provisions of SFAS No. 132 (revised 2003),
"Employers' Disclosures about Pensions and Other Postretirement Benefits," in
the third quarter of fiscal 2004. The standard requires that companies provide
additional financial statement disclosures for defined benefit plans in annual
and interim financial statements, which are found under the discussion of
"Employee Benefit Plans."

In March 2004, the FASB issued an Exposure Draft, "Share-Based Payment, an
Amendment of Statements No. 123 and 95." The proposed change in accounting would
replace existing requirements under SFAS No. 123, "Accounting for Stock-Based
Compensation" and APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the proposal, all forms of share-based payments to employees,
including employee stock options, would be expensed, recognizing the cost in the
income statement. The expense of each award would generally be measured at fair
value at the grant date. As proposed, SYSCO would have to adopt the new
statement beginning in fiscal 2006. The adoption of this proposed standard is
expected to have a material impact on SYSCO's consolidated financial statements,
as the company currently accounts for its stock compensation plans using the
intrinsic value method provided by APB No. 25 and thus has not recorded any
compensation expense with respect to stock option grants to date.

ADDITIONAL FINANCIAL INFORMATION

INCOME TAXES

The income tax provisions for each fiscal year consist of the following:

Included in the income taxes charged to earnings are net deferred tax
provisions of $608,152,000, $481,330,000, and $263,492,000 in fiscal 2004, 2003
and 2002, 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. In
addition to the deferred tax provision, changes in the deferred tax liability
balances from June 28, 2003 to July 3, 2004 were also impacted by minimum
pension liability adjustments (see "Employee Benefit Plans") and the
reclassification of deferred supply chain distributions from current deferred
tax liabilities to accrued income taxes based on the timing of when payments
related to these items become payable.

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.

42

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

Deferred supply chain distributions are classified as current or deferred
tax liabilities based on when the related income tax payments will become
payable. Fiscal 2004 was the first fiscal year that these supply chain
distributions were recognized in taxable income since the company began
deferring these items for tax purposes as a result of the reorganization of its
supply chain in fiscal year 2001. As a result of the impact of these items and
other temporary differences, including the utilization of U.S. federal net
operating loss carryforwards, excess tax depreciation and pension contributions,
taxes paid during fiscal 2004 increased to $344,414,000 as compared to
$28,747,000 in fiscal 2003.

In fiscal 2003, the company had a U.S. federal net operating tax loss
primarily as a result of the deferral of the supply chain distributions. This
net operating loss carryforward was fully utilized in fiscal 2004. In addition,
the company had state and Canadian net operating losses at July 3, 2004 and June
28, 2003, respectively. The net operating losses outstanding at July 3, 2004
expire in fiscal years 2005 through 2020. A valuation allowance of $68,501,000
and $50,158,000 was recorded as of July 3, 2004 and June 28, 2003, respectively,
as management believes that it is more likely than not that the benefits of
these state and Canadian tax loss carryforwards will not be realized through
future taxable income.

Reconciliations of the statutory federal income tax rate to the effective
income tax rates for each fiscal year are as follows:

The determination of the company's overall effective tax rate requires the
use of estimates. The effective tax rate is a combination of income earned and
taxed in the various U.S. federal and state, as well as Canadian

43

federal and provincial jurisdictions. Jurisdictional tax law changes,
increases/decreases in permanent differences between book and tax items, tax
credits and the company's change in earnings from these taxing jurisdictions all
affect the overall effective tax rate.

RESTRICTED CASH

SYSCO is required by its insurers to collateralize the self-insured portion
of its workers' compensation and liability claims. SYSCO has chosen to satisfy
these collateral requirements by depositing funds in insurance trusts. In
addition, in certain acquisitions, SYSCO has placed funds into escrow to be
disbursed to certain sellers in the event that specified operating results are
attained or contingencies resolved.

A summary of restricted cash balances appears below:

The increase in restricted cash from June 28, 2003 to July 3, 2004 was
primarily due to the deposit of $90,000,000 in insurance trusts due to a change
in underwriting requirements adopted by an insurer regarding the percentage of
overall risks required to be collateralized and to meet the collateral
requirements of a new insurer. Escrowed funds related to certain acquisitions in
the amount of $4,810,000 were released to sellers during fiscal 2004.

SHAREHOLDERS' EQUITY

On November 7, 2003, SYSCO's shareholders approved an amendment to SYSCO's
restated Certificate of Incorporation to increase the number of shares of common
stock that SYSCO will have the authority to issue to two billion shares, an
increase from the previous authorization of one billion shares.

Basic earnings per share have been computed by dividing net earnings by the
weighted average number of shares of common stock outstanding for each
respective year. 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 anti-dilutive was
approximately zero, 13,620,000 and 365,000 for fiscal 2004, 2003 and 2002,
respectively.

44

Dividends declared were $321,353,000, $273,852,000 and $225,530,000 in
fiscal 2004, 2003 and 2002, respectively. Included in dividends declared for
each year were dividends declared but not yet paid at year end of approximately
$83,000,000, $71,000,000 and $59,000,000, in fiscal 2004, 2003 and 2002,
respectively.

In May 1986, the Board of Directors adopted a Warrant Dividend Plan
designed to protect against those unsolicited attempts to acquire control of
SYSCO that the Board believes are not in the best interests of the shareholders.
In May 1996, the Board of Directors adopted an Amended and Restated Rights
Agreement (the Plan) to replace the Warrant Dividend Plan and, among other
things, extend the expiration of the Plan through May 2006. The Board adopted
further amendments in May 1999. The Plan provides for an initial dividend
distribution (which took place in 1996) and subsequent issuances of Preferred
Stock Purchase Rights (Rights) concurrently with future common share issuances
such that, prior to any adjustments, each outstanding share of SYSCO common
stock would be associated with one Right. After adjustments for common stock
splits, there is now one quarter of a Right associated with each common share.

The Rights will not be exercisable until a public announcement is made that
a party has acquired 10% or more of SYSCO's common stock or a party makes a
tender offer for 10% or more of its common stock, without Board approval (each a
Trigger Event). Currently, following occurrence of a Trigger Event, each whole
Right would, upon exercise, entitle its holder to purchase one two-thousandth of
a share of Series A Junior Participating Preferred Stock (Preferred) at an
exercise price of $175. The terms are subject to adjustment upon certain future
events. In addition to the foregoing, subject to limited exceptions, if a public
announcement is made that a party has acquired 10% or more of SYSCO's common
stock, a Rightholder may, for a limited time, purchase $350 worth of Preferred
for a purchase price of $175. In the event of a merger or other business
combination transaction not approved by the Board, each Right effectively
entitles the holder to purchase $350 worth of stock of the surviving company for
a purchase price of $175.

The Rights may be redeemed by SYSCO at a price of $0.01 per Right at any
time before a party acquires 10% of SYSCO's common stock. Unless sooner redeemed
or exercised, the Rights will expire at close of business May 31, 2006. As a
result of the Rights distribution, 450,000 of the 1,500,000 authorized preferred
shares have been reserved for issuance as Series A Junior Participating
Preferred Stock.

OTHER COMPREHENSIVE INCOME

Comprehensive income is net earnings plus certain other items that are
recorded directly to shareholders' equity.

The following table provides a summary of the changes in accumulated other
comprehensive income (loss) for the years presented:

45

The following table provides a summary of the components of other
comprehensive income for the years presented:

DEBT

SYSCO has uncommitted bank lines of credit, which provided for unsecured
borrowings for working capital of up to $95,000,000. There were no borrowings
outstanding under these lines of credit as of July 3, 2004 or June 28, 2003.

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,
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. The United States
commercial paper borrowings outstanding at July 3, 2004 and June 28, 2003 were
zero and $49,926,000, respectively.

46

SYSCO also has a revolving loan agreement in the amount of $100,000,000 in
Canadian dollars (CAD), maturing in fiscal 2005, which supports the company's
Canadian commercial paper program. The Canadian commercial paper borrowings
outstanding at July 3, 2004 and June 28, 2003 were CAD $97,768,000 ($73,834,000
in U.S. dollars) and CAD $137,078,000 ($101,822,000 in U.S. dollars),
respectively.

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 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. SYSCO also 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 the
1998 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.

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.

In March 2004, SYSCO issued 4.60% notes totaling $200,000,000 due March 15,
2014 in a private offering. These notes, which were priced at 99.943% 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.

SYSCO's Industrial Revenue Bonds have varying structures. Final maturities
range from one to 22 years and certain of the bonds provide SYSCO the right to
redeem (or call) the bonds at various dates. These call

47

provisions generally provide the bondholder a premium in the early call years,
declining to par value as the bonds approach maturity.

Total debt at July 3, 2004 was $1,468,160,000, of which approximately 60%
was at fixed rates averaging 5.2% with an average life of 8 years, and the
remainder was at floating rates averaging 4.0%, as adjusted for the effect of
the interest rate swaps outstanding at July 3, 2004. Certain loan agreements
contain typical debt covenants to protect noteholders, including provisions to
maintain the company's long-term debt to total capital ratio below a specified
level. SYSCO was in compliance with all debt covenants at July 3, 2004.

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 maturities. The fair value
of total long-term debt approximated $1,459,969,000 at July 3, 2004 and
$1,408,631,000 at June 28, 2003, respectively.

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 July 3, 2004 and June 28, 2003, letters of credit outstanding
were $11,001,000 and $14,610,000, 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 $86,842,000,
$83,597,000, and $64,130,000 in fiscal 2004, 2003 and 2002, 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.

48

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 so qualified and stock appreciation rights. Vesting
requirements for awards under this plan vary by individual grant and include a
combination of both time-based and performance-based vesting. The contractual
life of all options granted under this plan is 10 years. 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 July 3, 2004:

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 4,565,000 shares as of July 3, 2004) 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

49

incentive stock options under the Internal Revenue Code of 1986, options which
are not so qualified, stock appreciation rights and other stock-based awards.
Vesting requirements for awards under this plan vary by individual grant and
include a combination of both time-based and performance-based vesting. The
contractual life of all options granted under this plan through July 3, 2004 is
10 years. To date, the company has issued stock options but no stock
appreciation rights under the 2000 Plan. As of July 3, 2004, there were
9,388,820 remaining shares authorized and available for grant. In September
2004, approximately 8,632,750 options were granted to employees.

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 July 3, 2004:

The total number of options granted under the 2000 Plan was 13,344,746,
13,650,211 and 30,514,910 in fiscal years 2004, 2003 and 2002, respectively.
During fiscal 2004, 2,482,000 options were granted to approximately 2,400
non-executive employees based on tenure, 821,000 options were granted to 17
executive officers and 10,041,746 options were granted to approximately 2,000
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. During fiscal 2002, 16,265,000 options
were granted to approximately 8,800 non-executive employees based on tenure,
1,239,000 options were granted to 17 executive officers and 13,010,910 were
granted to approximately 2,300 other key employees. The number of options
granted in fiscal 2002 was significantly higher than the number of options
granted in fiscal 2003 and fiscal 2004. 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.

50

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 10 years from the original grant date. No
new options will be issued under any of the Guest Supply Plans.

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 July 3, 2004:

Non-Employee Directors Stock Option Plan and Non-Employee Directors Stock 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. No further grants will be made under this plan, which was replaced by
the 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 may receive an annual grant of options
to purchase shares of common stock if certain earnings goals are met. Vesting
requirements for awards under these plans vary by individual grant and include a
combination of both time-based and performance-based vesting. The contractual
life of all options granted under these plans through July 3, 2004 is 10 years.

As of July 3, 2004, options for a total of 744,000 shares have been granted
under these plans, of which 166,664 have been exercised, 32,000 have been
cancelled and 418,936 are available for exercise. As of July 3, 2004, there were
231,734 remaining shares authorized and available for grant under the
Non-Employee Directors Stock Plan. In September 2004, 72,000 options were
granted to non-employee directors.

51

The following table summarizes information about options outstanding under
both of the Non-Employee Director Plans as of July 3, 2004:

In addition to the options summarized in the tables above, one-time
retainer awards of restricted stock were granted to new non-employee directors
in the amount of 4,000 shares with a fair value at date of grant of $34.12 per
share in fiscal 2004, 4,000 shares with a fair value at date of grant of $31.47
per share in fiscal 2003 and 4,000 shares with a fair value at date of grant of
$24.82 per share in fiscal 2002.

Non-employee directors may also elect to receive up to 50% of their annual
directors' fees in SYSCO common stock. As a result of such elections, a total of
11,640, 12,496 and 13,950 shares with a weighted-average grant date fair value
of $30.82, $28.73 and $26.55 per share were issued in fiscal 2004, 2003 and
2002, respectively.

In total, 128,266 shares of restricted stock have been issued to
non-employee directors under the Non-Employee Directors Stock Plan.

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 2004, 1,620,535 shares of SYSCO common stock
were purchased by the participants as compared to 1,886,090 shares purchased in
fiscal 2003 and 1,784,529 shares purchased in fiscal 2002. The total number of
shares which may be sold pursuant to the plan may not exceed 68,000,000 shares,
of which 8,447,356 remained available at July 3, 2004. In July 2004, 417,059
shares were purchased by participants.

Management Incentive Compensation

SYSCO has a Management Incentive Plan that compensates key management
personnel for specific performance achievements. The bonuses earned and expensed
under this plan were $77,494,000 in fiscal 2004, $62,486,000 in fiscal 2003 and
$51,981,000 in fiscal 2002 and were paid in the following fiscal year in both
cash and stock at the election of each participant. A total of 940,843 shares,
861,156 shares and 851,087 shares at a fair value of $29.55, $27.22 and $27.15
were issued pursuant to this plan in fiscal 2004, 2003 and 2002, respectively,
for bonuses earned in the preceding fiscal years. As of July 3, 2004, there were
5,347,274 remaining shares that may be issued under the Management Incentive
Plan. In August 2004, 1,001,624 shares were issued in payment for the bonuses
earned in fiscal 2004 elected to be received in stock. Participants in the
Management Incentive Plan also have the option to defer portions of their salary
and bonuses pursuant to the Executive Deferred Compensation Plan.

52

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.

SYSCO maintains a qualified retirement plan (Retirement Plan) that pays
benefits to employees at retirement, using formulas based on a participant's
years of service and compensation.

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 $27,390,000 in 2004, $24,102,000 in 2003, and $23,421,000 in 2002.

In addition to receiving benefits upon retirement under the company's
defined benefit plan, participants in the Management Incentive Plan (see
"Management Incentive Compensation" under "Stock Based Compensation Plans") 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 $87,104,000 at July 3, 2004
and $74,730,000 at June 28, 2003. These policies are not included as plan assets
or 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 $269,815,000 and $153,652,000,
respectively, as of July 3, 2004 and $209,416,000 and $128,071,000,
respectively, as of June 28, 2003.

The company made cash contributions to its pension plans of $165,512,000
and $164,565,000 in fiscal years 2004 and 2003, respectively, including
$160,000,000 in voluntary contributions to the Retirement Plan in both fiscal
2004 and 2003. In fiscal 2005, as in previous years, contributions to the
Retirement Plan will not be required to meet ERISA minimum funding requirements,
yet the company anticipates it will make voluntary contributions of
approximately $80,000,000. The company's contributions to the SERP and other
post-retirement plans are made in the amounts needed to fund current year
benefit payments. The estimated fiscal 2005 contributions to fund benefit
payments for the SERP and other post-retirement plans are $6,294,000 and
$362,000, respectively.

Estimated future benefit payments are as follows:

53

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

54

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

Minimum pension liability adjustments result when the accumulated benefit
obligation exceeds the fair value of plan assets and are recorded so that the
recorded pension liability is at a minimum equal to the accumulated benefit
obligation. Minimum pension liability adjustments are non-cash adjustments that
are reflected as an increase (or decrease) in the pension liability and an
offsetting charge to shareholders' equity, net of tax, through comprehensive
income (or loss) rather than net income.

Amounts reflected in accumulated other comprehensive income (loss) related
to minimum pension liability, net of tax, were ($20,733,000) as of July 3, 2004,
and ($185,118,000) as of June 28, 2003.

As a result of changes in assumptions together with the normal growth of
the plan, the impact of losses from prior periods and the amount and timing of
contributions, net pension costs increased $39,944,000 in fiscal 2004 and is
expected to decrease in fiscal 2005 by approximately $7,374,000. The components
of net pension costs for each fiscal year are as follows:

55

The components of other postretirement benefit costs for each fiscal year
are as follows:

Multi-employer pension costs were $29,479,000, $27,808,000, and $27,511,000
in fiscal 2004, 2003 and 2002, respectively.

Weighted-average assumptions used to determine benefit obligations at
year-end were:

For determining the benefit obligations at year-end, the SERP calculations
assume annual salary increases of 10% through fiscal 2007 and 7% thereafter as
of July 3, 2004 and annual salary increases of 8% through fiscal 2005 and 7%
thereafter as of June 28, 2003.

Weighted-average assumptions used to determine net pension costs and other
postretirement benefit costs for each fiscal year were:

For determining net pension costs for each fiscal year, the SERP calculations
assume annual salary increases of 8% through fiscal 2005 and 7% thereafter for
fiscal 2004, 2003 and 2002.

The measurement date for the pension and other postretirement benefit plans
is June 30.

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.

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 6.25% and 6.00% as of July 3, 2004 and June 28, 2003, respectively. The
discount rate assumption is reviewed annually and revised as deemed appropriate.

The expected long-term rate of return on plan assets is 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.
The rate of return assumption is reviewed annually and revised as deemed
appropriate.

56

SYSCO's investment objectives target a mix of investments that can
potentially achieve an above-average rate of return. SYSCO has determined that
this strategy is appropriate due to the relatively low ratio of retirees as a
percentage of participants, low average years of participant service and low
average age of participants and is willing to accept the above-average level of
short-term risk and variability in returns to attempt to achieve a higher level
of long-term returns. As a result, the company's strategy targets a mix of
investments which include 70% stocks (including a mix of large capitalization
U.S. stocks, small to mid-capitalization U.S. stocks and international stocks)
and 30% fixed income investments and cash equivalents.

The percentage of the fair value of plan assets by asset category is as
follows:

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.

57

60

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, custom-cut
meat, Asian cuisine foodservice 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.

61

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

62

The sales mix for the principal product categories for each fiscal year is
as follows:

63

QUARTERLY RESULTS (UNAUDITED)

Financial information for each quarter in the years ended July 3, 2004 and
June 28, 2003 is set forth below:

64

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

As of July 3, 2004, 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 July 3, 2004 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.
Furthermore, the company's management noted that no changes occurred during the
fourth quarter of fiscal 2004 that materially affected, or would be reasonably
likely to materially affect, the company's internal controls over financial
reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is included in our proxy statement
for the 2004 Annual Meeting of Stockholders under the following captions, and is
incorporated herein by reference thereto: "Election of Directors," "Executive
Officers," "Section 16(a) Beneficial Ownership Reporting Compliance," "Report of
the Audit Committee" and "Corporate Governance."

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is included in our proxy statement
for the 2004 Annual Meeting of Stockholders under the following captions, and is
incorporated herein by reference thereto: "Director Compensation" and "Executive
Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this item is included in our proxy statement
for the 2004 Annual Meeting of Stockholders under the following captions, and is
incorporated herein by reference thereto: "Stock Ownership" and "Equity
Compensation Plan Information."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is included in our proxy statement
for the 2004 Annual Meeting of Stockholders under the following caption, and is
incorporated herein by reference thereto: "Certain Relationships."

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is included in our proxy statement
for the 2004 Annual Meeting of Stockholders under the following caption, and is
incorporated herein by reference thereto: "Fees Paid to Independent Public
Accountants."

65

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 30 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).
3(e) -- Certificate of Amendment to Restated Certificate of
Incorporation increasing authorized shares, incorporated by
reference to Exhibit 3(e) to Form 10-Q for the quarter ended
December 27, 2003 (File No. 1-6544).
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).

66

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).
4(n) -- Seventh Supplemental Indenture, including form of Note,
dated March 5, 2004 between SYSCO Corporation, as Issuer,
and Wachovia Bank, National Association (formerly First
Union National Bank of North Carolina), as Trustee,
incorporated by reference to Exhibit 4(j) to Form 10-Q for
the quarter ended March 27, 2004 (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).
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).

67

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).
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).

68

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).
10(gg)+# -- Second Amendment to Second Amended and Restated Executive
Deferred Compensation Agreement effective July 9, 2004.
10(hh)+# -- Fourth Amendment to Fifth Amended and Restated Supplemental
Executive Retirement Plan effective July 9, 2004.
10(ii)+# -- Executive Severance Agreement dated July 6, 2004 between
SYSCO Corporation and Richard J. Schnieders.
10(jj)+# -- Form of Executive Severance Agreement between SYSCO
Corporation and each of Thomas E. Lankford (dated July 12,
2004), John K. Stubblefield, Jr. (dated July 6, 2004),
Kenneth F. Spitler (dated July 14, 2004) and Larry J.
Accardi (dated August 18, 2004).
10(kk)+# -- Form of First Amendment dated September 3, 2004 to Executive
Severance Agreement between SYSCO Corporation and each of
Richard J. Schnieders, Thomas E. Lankford, John K.
Stubblefield, Jr., Kenneth F. Spitler and Larry J. Accardi.
10(ll)+ -- 2004 Long-Term Incentive Cash Plan dated September 3, 2004,
incorporated by reference to Exhibit 10(a) to Form 8-K filed
on September 10, 2004 (File No. 1-6544).
10(mm)+ -- Form of Performance Unit Grant Agreement issued to executive
officers effective September 3, 2004 under the Long-Term
Incentive Cash Plan, incorporated by reference to Exhibit
10(b) to Form 8-K filed on September 10, 2004 (File No.
1-6544).
10(nn)+ -- Form of Stock Option Grant Agreement issued to executive
officers on September 2, 2004 under the 2000 Stock Incentive
Plan, incorporated by reference to Exhibit 10(a) to Form 8-K
filed on September 9, 2004 (File No. 1-6544).
10(oo)+ -- Form of Stock Option Grant Agreement issued to non-employee
directors on September 3, 2004 under the Non-Employee
Directors Stock Plan, incorporated by reference to Exhibit
10(b) to Form 8-K filed on September 9, 2004 (File No.
1-6544).
10(pp)+# -- Form of Stock Option Grant Agreement issued to executive
officers on August 31, 1995 under the 1991 Stock Option
Plan.
10(qq)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 5, 1996 under the 1991 Stock Option
Plan.
10(rr)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 4, 1997 under the 1991 Stock Option
Plan.
10(ss)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 3, 1998 under the 1991 Stock Option
Plan.
10(tt)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 2, 1999 under the 1991 Stock Option
Plan.
10(uu)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 7, 2000 under the 1991 Stock Option
Plan.
10(vv)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 11, 2001 under the 2000 Stock
Incentive Plan.
10(ww)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 11, 2001 under the 2000 Stock
Incentive Plan.
10(xx)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 12, 2002 under the 2000 Stock
Incentive Plan.
10(yy)+# -- Form of Stock Option Grant Agreement issued to executive
officers on September 11, 2003 under the 2000 Stock
Incentive Plan.
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.

69

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

70

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 16th
day of September, 2004.

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 (principal executive officer)
Richard J. Schnieders

/s/ JOHN K. STUBBLEFIELD, JR. Executive Vice President, Finance and
------------------------------------------------------ Administration
John K. Stubblefield, Jr. (principal financial and accounting officer)

DIRECTORS:

/s/ COLIN G. CAMPBELL /s/ FRANK H. RICHARDSON
------------------------------------------------------ ---------------------------------------------
Colin G. Campbell Frank H. Richardson

/s/ JUDITH B. CRAVEN /s/ RICHARD J. SCHNIEDERS
------------------------------------------------------ ---------------------------------------------
Judith B. Craven Richard J. Schnieders

/s/ JONATHAN GOLDEN /s/ PHYLLIS S. SEWELL
------------------------------------------------------ ---------------------------------------------
Jonathan Golden Phyllis S. Sewell

/s/ JOSEPH A. HAFNER, JR. /s/ JOHN K. STUBBLEFIELD, JR.
------------------------------------------------------ ---------------------------------------------
Joseph A. Hafner, Jr. 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

71

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