Sysco Annual Report 2005

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FY2005 Annual Report · Sysco

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OU R ST ORY CO NT INUES TO UNFOLD

SYSCO CORPORATION

1390 Enclave Parkway
Houston, Texas 77077-2099
Phone (281) 584-1390

www.sysco.com

SYSCO-AR-05

S Y S C O C O R P O R A T I O N

FINANCIAL HIGHLIGHTS

(dollars in thousands, except for share data)

July 2, 2005

Fiscal Year Ended

July 3, 2004
(53 Weeks)

June 28, 2003

2005-04

2004-03

Percent Change

Sales

$ 30,281,914

$ 29,335,403

$ 26,140,337

12%

Earnings before income taxes

Net earnings

Diluted earnings per share

Dividends declared per share

Shareholders’ equity per share

1,525,436

961,457

1.47

0.58

4.39

1,475,144

907,214

1,260,387

778,288

1.37

0.50

4.03

1.18

0.42

3.41

Capital expenditures

390,203

530,086

435,637

Return on average shareholders’ equity

35%

39%

36%

Diluted average shares outstanding

653,157,117

661,919,234

661,535,382

Number of shares repurchased

16,790,200

16,454,300

16,500,000

Number of employees

Number of shareholders of record

47,500

15,083

47,800

15,337

47,400

15,533

(26)

(4)

(1)

(2)

—

(1)

GENERAL INFORMATION

CORPORATE OFFICES
SYSCO Corporation
1390 Enclave Parkway
Houston, Texas 77077-2099
(281) 584-1390
Internet: http://www.sysco.com

ANNUAL SHAREHOLDERS’
MEETING
The Houstonian Hotel
111 North Post Oak Lane
Houston, Texas 77024
November 11, 2005 at 10:00 a.m.

INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
Houston, Texas

COUNSEL
Arnall Golden Gregory LLP
Atlanta, Georgia

SHAREHOLDER INFORMATION
For information or assistance
regarding individual stock records,
the Dividend Reinvestment Plan
with Optional Cash Purchase
Feature, dividend or tax informa-
tion, replacement of stock certifi-
cates and transfer instructions,
please contact the following:

TRANSFER AGENT
AND REGISTRAR
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
1-800-730-4001
Internet:
http://www.equiserve.com

INVESTOR CONTACT
Financial analysts and other
investment professionals should
direct inquiries to:

Mr. John M. Palizza
Assistant Treasurer
(281) 584-1308

Ms. Toni R. Spigelmyer
Director
Investor/Media Relations
(281) 584-1458

COMMON STOCK AND DIVIDEND INFORMATION
SYSCO’s common stock is traded on the New York Stock Exchange under the symbol
“SYY.” The company has consistently paid quarterly cash dividends on its common stock
and has increased the dividend 36 times in its 35 years as a public company. The current
quarterly cash dividend is $0.15 per share.

DIVIDEND REINVESTMENT PLAN WITH OPTIONAL CASH PURCHASE FEATURE
SYSCO’s Dividend Reinvestment Plan allows shareholders of record to reinvest
quarterly cash dividends in SYSCO shares automatically, with no service charge or
brokerage commissions.

The Plan also permits registered shareholders to invest additional money to purchase
shares. In addition, certificates may be deposited directly into a Plan account for safe-
keeping and may be sold directly through the Plan for a modest fee.

Shareholders desiring information about the Dividend Reinvestment Plan with Optional
Cash Purchase Feature may obtain a brochure and enrollment form by
contacting the Transfer Agent, EquiServe Trust Company, N.A. at 1-800-730-4001.

FORM 10-K AND FINANCIAL INFORMATION
A copy of the fiscal 2005 Annual Report on Form 10-K filed with the Securities and
Exchange Commission, as well as copies of financial reports and other company
literature, can be found on our web site at http://www.sysco.com, or may be obtained
without charge upon written request to the Investor Relations Department, SYSCO
Corporation, at the corporate offices, or by calling 1-800-337-9726.

FORWARD-LOOKING STATEMENTS
Certain statements made herein are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. They include statements about anticipated
sales volumes, industry growth and increased market share, SYSCO’s long-term growth
objectives with respect to sales, earnings, return on equity, long-term debt and
capitalization, anticipated capital expenditures, ability to meet future cash requirements
and remain profitable, implementation and benefits of redistribution centers, and imple-
mentation, timing and anticipated benefits of fold-outs and acquisitions.

These statements are based on management’s current expectations and estimates;
actual results may differ materially. Decisions to pursue fold-outs and acquisitions or
to construct redistribution facilities and expenditures for such could vary depending
upon construction schedules and the timing of other purchases, such as fleet and equip-
ment, while redistribution facility, fold-out and acquisition timing and results could be
impacted by competitive conditions, labor issues and other matters including the risk
that the supply chain initiative will not achieve the desired benefits and efficiencies. The
ability to pursue acquisitions also depends upon the availability and suitability of poten-
tial candidates and management’s allocation of capital. Industry growth may be affected
by general economic conditions. SYSCO’s decisions regarding capital expenditures and
its ability to achieve anticipated sales volumes and its long-term growth objectives,
increase market share, meet future cash requirements and remain profitable could be
affected by competitive price pressures, relatively low profit margins, availability of
supplies, leverage and debt risks, severe weather, work stoppages, success or failure of
consolidated buying plan initiatives, successful integration of acquired companies and
fold-outs, conditions in the economy and the industry, including the impact of increased
fuel costs, and internal factors such as the ability to control expenses.

For a discussion of additional risks and uncertainties that could cause actual results to
differ from those contained in the forward-looking statements, see the Company’s Annual
Report on Form 10-K for the fiscal year ended July 2, 2005, which is included herewith.

Certifications: The most recent certifications by the Company's chief executive officer and chief financial officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to the Company's Form 10-K. The Company has also filed
with the New York Stock Exchange the most recent Annual CEO Certification, without qualification, as required by Section
303A.12(a) of the New York Stock Exchange Listed Company Manual.

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SYSCO is the largest marketer and distributor of
foodservice products in North America. Our 161
locations serve all major and many second-tier
markets in the United States and Canada, as well
as certain international locations of U.S.-based
chain restaurants. Our culture has always been
customer-centric and our more than 47,500
associates are committed to our mission of
helping our 390,000 customers succeed in their
quest to create exciting and enjoyable dining
experiences for their patrons.

The following pages are but a snapshot detailing
our story as it continues to unfold through our
newest undertaking – reorganizing our supply
chain. By improving collaboration with each link
of the chain, we can streamline the process and
ultimately reduce costs for customers, suppliers
and SYSCO.

To Our Shareholders:

The majority of this annual report is devoted to our efforts to redesign our supply chain,

so in this letter I would like to discuss the many other important initiatives we are under-

taking to drive SYSCO forward in 2006 and beyond.

The year just ended was a difficult one for SYSCO.
Sales for the year were $30.3 billion, 3.2 percent above sales in 2004. Fiscal year 2004

contained 53 weeks, so on a comparable basis, 2005 sales were 5.3 percent higher than

adjusted 2004 sales of $28.8 billion. (See reconciliation under “Results of Operations –

Sales” in our Form 10-K for fiscal 2005.) This is below our stated goal of high single-digit

to low double-digit sales growth. Sales during the year were negatively affected by

Richard J. Schnieders

higher than normal product cost inflation and higher fuel costs. Inflation hurts sales

because restaurant customers have to pay more in order to purchase the same number

of meals, while higher fuel costs take disposable income out of consumers’ pockets.

It is a testament to the dedication of our associ-
ates that net earnings grew to $961.5 million, 6.0
percent higher than last year’s net income, while diluted earnings per share rose to $1.47,

up 7.3 percent from last year’s $1.37. Our ability to drive costs down during the year was

a key component of our ability to grow earnings and earnings per share at a higher rate

than our sales growth.

Throughout fiscal 2005 we worked diligently on
positioning SYSCO for future growth and we have
several programs in place which will help produce profitable, sustain-
able sales growth. Our Business Review program is a systematic method of consulting

with our very best customers to strengthen and solidify our existing customer relation-

ships. A typical business review involves extensive preparation and a meeting of several

hours with the customer to review ways that we can contribute to their success. This

involves everything from menu analysis to food product testing to access to our value-

added iCare services. The results from these business reviews in 2005 were gratifying,

and we plan to conduct approximately 40,000 reviews in 2006.

Coupled with our Business Review program, we
continued to make progress in our Business
Development program. Our operating companies have developed dedi-
cated teams who are charged with going out into the market and in a systematic way,

calling on restaurants and other food service venues that are not SYSCO customers.

Their job is to convince these non-SYSCO customers that they should buy from SYSCO.

I should add that we remain committed to grow-
ing the bedrock of our sales effort, our Marketing
Associates. We have the largest, and we believe, the best sales force in the
industry and we will continue to add to it to extend our lead. Our overall plan is to grow all

of our customer contact personnel – our Marketing Associates, Business Review Managers

and Business Development Managers, by at least 6 percent this year.

Richard J. Schnieders “The Supply Chain
Initiative is the largest strategic undertaking in the
history of SYSCO, and we are convinced that our
customers, suppliers and ultimately our sharehold-
ers will benefit from the distribution efficiencies and
competitive advantages that it will generate.”

Chairman, Chief Executive Officer and President

We were deeply saddened for those
whose lives and property were ravaged by Hurricane
Katrina. Thankfully, almost all of our New Orleans
associates are accounted for and many have been
employed by other operating companies. No facilities
were flooded or had significant structural damage
and our New Orleans company was back in limited
operation by mid-September. Our Houston, Dallas
and Central Alabama operations have been shipping
to areas normally served by New Orleans. Through
our long-standing partnership with the American
Red Cross, we have been supplying food for the relief
efforts. All those affected are in our hearts and on
our minds as they go about rebuilding their lives.

In addition to investing in people for growth, we
will also be investing in assets for future growth.
During 2005 we spent $390.2 million on capital expenditures and we will increase that

pace somewhat in 2006, with capital spending planned at the $425 million – $450 million

range. Spending will be primarily in three areas: 1) for buildings – new and more efficient

warehouses; 2) for fleet – both replacement and expansion of our truck fleet; and 3) for

systems – to help us operate more efficiently and effectively.

One of the key concepts in our geographic expan-
sion has been building fold out facilities. These are
new operating companies that are opened on the geographic edge of an existing market

which allows us to get closer to our customers. During 2005 we announced that we were

targeting doing three fold-outs per year, up from our average of one and one-half per year.

SALES
in millions of dollars

26,140

23,351

21,784

19,303

29,335

30,282

NET EARNINGS
in thousands of dollars

907,214

778,288

679,787

596,909

961,457

This year we have announced plans to open fold outs near Raleigh, North Carolina and

445,588

in the Gulf Coast region of Alabama as well as replacing and relocating a smaller facility

in central Illinois. We will continue to identify appropriate locations to fill in our markets

and get closer to our customers.

We continue to seek appropriate acquisitions,
both in our broadline and our specialty areas. During
2005 we added one broadline distributor, two produce distributors and four specialty

meat distributors. These fine companies helped us broaden our reach throughout much

of the United States and parts of Canada.

At the end of the fiscal year, Tom Lankford,
SYSCO’s president and chief operating officer,
retired after a distinguished 43-year career. He had served in many roles since his

company was acquired by SYSCO in 1981. His passion for our business and his leadership

of our company left an enduring mark that will be long remembered.

Restaurants are truly representative of the entre-
preneurial spirit, fostering the belief that creative, hard-working individuals
can truly control their own destiny and live their own dreams. Our job is to support that

entrepreneurial spirit, nurture it and cherish it. Only by helping our customers succeed

will SYSCO be successful over the long term.

Richard J. Schnieders
Chairman, Chief Executive Officer and President
October 3, 2005

DILUTED EPS
in dollars

1.47

1.37

1.18

1.01

0.88

0.67

RETURN ON AVERAGE
TOTAL CAPITAL

25%

23%

21%

17%

RETURN ON AVERAGE
SHAREHOLDERS' EQUITY
39%

36%

31%

29%

35%

Our Story Continues to Unfold...

SYSCO is uniquely positioned to refine and implement
supply chain management capabilities that can drive
efficiencies and benefits along the chain. Fiscal 2005 was
pivotal in this transformation process. Operations were
launched at the first of seven to nine redistribution centers
(RDCs) that will be located strategically throughout the
United States to serve SYSCO’s broadline companies. The
Northeast RDC in Front Royal, Virginia, was completed on
time and on budget, and is producing better-than-anticipated
results. A site in Florida has been selected for the second
RDC that will serve all five Florida broadline companies.
The initial cost for the first RDC included not only the facility
cost, but also the development costs for all the business
processes that will be used in all subsequent RDCs. The
following foldout pages contain a brief summary of the
Supply Chain Initiative and the benefits we anticipate from
this ambitious endeavor.

In February 2005, the first RDC order was shipped to the Norton (Boston), Massachusetts
operating company. By the second week of September, according to plan, all 14 Northeast
Region operating companies had transitioned to the Northeast RDC. Approximately 200
of the 3,800 suppliers serving the Northeast operating companies have contracted to
participate in supplying the RDC more than 25,000 items from 400-plus supply points.

THE FIRST RDC

A sophisticated computer
model identifies RDC
locations that optimize
inbound and outbound
freight costs, have access
to roadways and
railways, and offer an
available workforce.

The Northeast RDC serves
the 14 operating companies
that supply customers in
Connecticut, Delaware, Maine,
Maryland, Massachusetts,
New Hampshire, New Jersey,
New York, Pennsylvania,
Rhode Island, Vermont,
Virginia and part of
West Virginia.

Potential Future RDC Locations
Future RDC Location
Broadline Operating Companies

The National Supply Chain Initiative

THE CUSTOMER

Building enduring relationships with establishments that prepare food away from
home is the first step in helping our customers succeed. Our supply chain initiative
represents a collaborative approach among all parties to better serve customers’ needs.
By aggregating customer demand and ultimately sharing it with suppliers, SYSCO will
be able to reduce costs and move products more effectively and efficiently from the
farmers, manufacturers and processors to the dining-away-from-home public.

[ CUSTOMER ]

SYSCO

By investing in its supply chain infrastructure and increasing the visibility of information
from customers to suppliers, SYSCO can 1) lower total supply chain costs; 2) develop better
forecasting, fulfillment and replenishment processes; 3) use resources more effectively;
4) manage transportation from a high-level regional and national view versus an individual
operating company level; and 5) collaborate effectively with suppliers and customers.

[ SYSCO ]

In typical SYSCO operating companies not served by an RDC, customers’ orders are
processed through each operating company independently to suppliers who receive
multiple orders at varying times. Using the RDC, orders from the various SYSCO companies
instead are aggregated into one order through the RDC, simplifying the process, creating
predictable, reliable order patterns and improving product availability and freshness.

Traditional supply chain inefficiencies may include partial truckload deliveries, inconsistent
pallet configurations and supplier lead times of up to six weeks. Redistribution gives SYSCO
control of these processes so that RDC orders arrive at broadline companies in full truckloads
within 24 hours, reconfigured specifically for each company and ready for immediate storage.
This reduces labor costs, inventory levels and dock-to-slot “touch points.” With optimum
truckloads, the RDC-served companies are receiving 30% fewer delivery trucks, and reduced
handling has dropped most unloading times to just 20 minutes from two or more hours.

THE SUPPLIER

In the pre-RDC environment, separate orders from individual SYSCO operating companies
require suppliers to plan well in advance and maintain adequate safety stock to fulfill SYSCO’s
customer product needs at any given time. These individual orders require multiple invoices
and payments. Operating within the RDC parameters requires functional changes for potential
RDC suppliers, who are evaluated to verify their RDC-readiness on a transactional, operational
and e-commerce level.

RDC suppliers ultimately will have significantly better customer demand information, allowing
them to plan production times and shift schedules more efficiently and maintain less safety
stock. In addition, one order processed through the RDC reduces the paperwork and labor
required for multiple invoices and payments and reduces the number of shipping destination
points from numerous locations to just one.

[ SUPPLIER ]

CONSUMER SATISFACTION

Ultimately, the goal throughout the supply chain is the same – to tempt diners’
taste buds, satisfy their senses and leave pleasurable experiences lingering in their
memories. Consumers have a great variety of choices in deciding where to spend their
food dollars. Foodservice operators are continually challenged to create innovative
menus that attract patrons again and again.

[ CONSUMER ]

Consumers voice their preferences by frequenting establishments that offer menu
variety, safe, wholesome and fresh foods, great taste and customer-oriented service.
Through the RDC, a chef in Pittsburgh or Boston will be able to select menu items from
potentially twice as many product choices than may have been available pre-RDC,
making it easier to demonstrate his/her artistry in creating signature dishes. And with
shorter product lead times, fresh is even fresher!

The National Supply Chain Initiative

THE CUSTOMER

[ CUSTOMER ]

SYSCO

[ SYSCO ]

THE SUPPLIER

[ SUPPLIER ]

CONSUMER SATISFACTION

[ CONSUMER ]

“My customers want it all – great taste, fresh products, a fun dining experience. I have
to make it happen, even with thousands of demands on my time. I know I can count
on SYSCO. With the RDC, costs for everyone ultimately should come down and I’ll
have even more products to choose from, with customers coming back for more!”

One of 390,000 SYSCO customers

Customers
SYSCO’s mission of “Helping Our Customers Succeed” is embodied in every action and every
transaction, for our success invariably is tied to that of our customers.

Industry sources estimate there are more than 900,000 customer purchasing points

in North America, of which approximately 390,000 are SYSCO customers. To provide

those customers the quality and variety of products to make their daily menus inter-

esting and pleasing to those they serve, we offer more than 350,000 products across

North America. The typical SYSCO broadline operating company, however, may carry

10,000 to 15,000 items, since consumer tastes and preferences differ from company to

company and region to region. Catfish may be a particular favorite of consumers in the

South, but absent from the menu in another region. Likewise, some diners may prefer

beef barbeque, while others might choose pork.

Suppose a chef in Connecticut wants a particular item that is not carried by the SYSCO

operating company in Connecticut. There may be numerous chefs in the Boston area

who use the product and it is available to them through the Boston company. Pre-RDC,

it may not have been feasible for the Connecticut operation to handle the item, but the

MORE OF FER INGS – MOR E M ENU VA R IE TY

“The RDC is the ultimate win-win for our customers
and SYSCO. We can bring more offerings to market,
helping our customers be a step ahead of ever-changing
dining trends and adding more variety and vitality
to their menus.”

customer will now have access to that product and many more through the RDC, whose

items in inventory will reflect that of the region it serves and not just one particular

operating company.

Product demand forecasting is one of the functions critical to the success of the entire

redistribution process. Operating companies place orders through the Demand Planning

and Replenishment System (DPR), which evaluates various economic variables that

impact replenishment decisions. It synchronizes the forecasting, planning and ordering

functions with the RDC, resulting in shorter product lead times, which translates into

fresher products. In addition, it has the ability to create seasonal profiles to pinpoint

year-over-year sales trends, to determine the most economic ordering frequency for

a particular vendor, and to optimize purchasing through forward buys, while tracking

inventory related to such buys.

Using the same system, the Supply Chain Inventory Management Department (SCIM)

at the corporate office analyzes and aggregates product forecasts from each of the

operating companies served by the RDC to place orders. These and other programs are

invaluable to the entire supply chain cost reduction process.

Kent Humphries “The RDC concept works! We are seeing benefits in our receiving
labor, forklift labor and loading costs. In the past, a truckload received into our
warehouse that may have taken up to two hours to unload now takes as little as
20 minutes and often is touched only once, not three or four times.”

President and CEO, Sysco Food Services of Baltimore, LLC

Benefits to SYSCO
With an optimized supply chain, SYSCO should be able to increase service levels and
satisfaction by moving products more efficiently.

The entire ordering, receiving and storage process is much more efficient for the RDC-

served companies. Orders are consolidated in the Demand Planning and Replenishment

System (DPR) and passed to the Warehouse Management System (WMS) at the RDC,

which streamlines and simplifies the complete process.

At companies not served by the RDC, many orders arrive in less-than-full truckloads

(LTL) and must be reconfigured upon receipt. Often, they are stored in higher overhead

safety-stock slots and must be handled again when they are lowered to eye-level for

selection. At the RDC, most orders are stacked, wrapped and labeled on full pallets that

are configured to be sent directly to operating company picking slots, eliminating sev-

eral “touch points.” At the RDC-served broadline companies, about twice as many items

now go immediately to picking slots, saving significant time in the put-away process.

Also, less safety stock is needed at the operating companies because products may be

accessed from the RDC in one day, when previously more than 10 business days’ lead

time to the vendor was sometimes necessary. Another benefit of smaller inventories is

the ability to delay construction and expansion of operating company facilities, since

less space is required at the operating company level.

By consolidating all inbound RDC load planning and execution, SYSCO will be able

to create better loads and leverage its freight buying power more effectively. Using

contracted carriers to provide this transportation allows for fewer carriers and tighter

relationships, resulting in lower rates and greater availability of capacity during peak

periods. Also critical was the selection of a dedicated carrier to deliver products from

the RDC to SYSCO operating companies. By managing and maintaining both inbound

and outbound control, SYSCO can better manage costs and have complete visibility of

shipments along the entire supply route.

Accurate product forecasting is another crucial factor. The effects of new customers,

special events, holidays, economic variables and other factors that impact decisions

in forecasting customer demand must be considered. SYSCO’s DPR system interfaces

with the SYSCO Uniform System (SUS) and generates forecasts to allow more accurate

planning and ordering, not only for the regional operating companies, but also for the

RDC and suppliers.

MORE PR OD UCT S – L ES S INV E NT ORY

Demand Planning and Replenishment (DPR) has been
successful in reducing inventories at operating companies
that have implemented it and adopted new business
processes. Additional companies will implement DPR
well in advance of the RDC roll-out, which could
further reduce inventories in FY 2006.

“SYSCO has devoted a lot of time, energy and resources to create a viable means of
reducing costs throughout the supply chain. Just the fact that ultimately we should
have much more accurate demand information from SYSCO’s customers gives us
a great advantage, allowing us to use our resources much more effectively.”

One of thousands of SYSCO suppliers

Benefits to Suppliers
SYSCO’s supply chain strategy evolved from the need to move from a fragmented view of the supply
chain, where today each member – operating company, supplier, customer – optimizes performance
independently, to an end-to-end view, where optimization occurs across the entire chain.

An advanced, world-class supply chain will increase value to suppliers through a num-

ber of improved practices. For example, order management process efficiencies should

significantly decrease purchase order volume through order consolidation and reduce

inventory safety stock requirements. Freight management changes should reduce or

eliminate forward warehousing costs and associated inventory and operational costs,

optimize loading times at supplier locations and allow transfer of product ownership

earlier in the purchase transaction. Billing improvements for a supplier would include

consistent pricing and terms, and fewer payment points, reducing the number of

receivables from SYSCO, as well as reduced work associated with accounts payable

and product and shipping discrepancies.

Educating, preparing and assisting suppliers in recognizing the benefits, sharing the

vision, and embracing the RDC as the catalyst to accomplish the desired objectives

is critical. Through its Supplier Adoption Process, SYSCO identifies suppliers capable

RECONFIGURED PALLETS – IMPROVED HANDLING

Product receiving at the operating companies is stream-
lined by a system at the RDC that is significantly
improving material handling. The system, known as the
Value Added Services cells (VAS) Palletizer/Depalletizer,
automatically breaks down supplier-configured full
pallets and separates the cartons to be rearranged, or
re-palletized, to fit operating company warehouse slots.

of working with the RDCs on a transactional, operational and e-commerce level and

pinpoints their plants and distribution networks to determine savings opportunities.

Suppliers then participate in intense workshops to discuss in depth and agree on

tangible supply chain savings and how they will be allocated.

SYSCO has hired talented resources and supply chain experts and is implementing the

state-of-the-art tools necessary to achieve efficiencies and savings as quickly as pos-

sible. Analysis and modeling experts identify optimal locations for RDCs, determine the

lowest cost product flow paths from suppliers, and produce business cases for return

on investments. The Inventory Management Team develops and manages inventory

forecasting methods, prepares demand plans and ensures superior customer service

levels. Transportation analysts optimize transportation usage within and across regions,

build private and dedicated fleets, and secure transportation capacity to meet customer

requirements. The Metrics Team designs, implements and monitors supply chain mea-

sures while tracking financial performance against business case objectives.

Through better collaboration between SYSCO and its suppliers, such relationships

should be strengthened. Ultimately, suppliers should have access to significantly better

customer demand information, allowing them to more efficiently forecast product

needs and more effectively plan and schedule production and replenishment.

Consumer Satisfaction
One of the delights of our consumer-oriented society is the multitude of food choices that
abound to tempt our senses and satisfy our yearnings for not only tried and true familiar
foods, but also those that conjure visions of faraway places and diverse cultures.

It is exactly that diversity that spawns

families with working parents and may be more apt to embrace an

unique, imaginative menus that entice

eating-away-from-home lifestyle.

us to embrace different tastes and enjoy

more varied selections. Foodservice opera-

tors – whether they own or manage a restau-

rant, a health care facility, a retirement home, a

school or college foodservice area, a business location,

cruise ship or a myriad of other food-away-from-home venues –

are challenged daily to respond to changing trends and shifting

preferences of their customers.

All of these trends and preferences reflect the abundance of

products available in our foodservice world. When SYSCO was

formed in 1969, just 10,000 products were carried in inventory.

Today, there are more than 350,000 system-wide, and an individual

operating company may store 10,000 to 15,000 items. With the

reorganization of the supply chain, SYSCO companies served by

an RDC will have access to more products than previously, since

the RDCs will house product preferences for an entire region, some

Consumers’ tastes have become more adventurous, and many are

of which previously may have been available from only one or two

increasingly interested in nutritional factors that impact health.

operating companies.

Dietary concerns like low carbohydrates, low fat, whole grains,

fiber, calorie count, trans fats and beneficial Omega-3 fatty acids

are influencing menu choices, although the most significant factor

continues to be simply that food must taste good.

SYSCO continues to design and develop innovative products that

offer our customers greater value and ensure strict standards for

quality and food safety to help our customers meet consumers’

needs and desires. Our quality assurance team of 180 professionals

Generational differences, more than ever before, also impact

is involved in nearly every aspect of bringing to market more than

the food choices of mature consumers, Baby Boomers and the

45,500 SYSCO Brand products as they journey from farm to plate –

Generation X and Generation Y groups. Generation Y, those born

certifying the manufacturing and processing plants, enforcing

between 1981 and 1990, are a more ethnically diverse population

SYSCO’s rigorous quality control measures and identifying supply

and tend to have a greater interest not only in ethnic foods, but

sources that can satisfy our requirements, those of our customers

also organic foods and healthy choices. Many also grew up in

and, ultimately, the end consumer.

American Red Cross Mobile Kitchen
During a disaster, we all trust and derive comfort from the name and logo of the American
Red Cross. The next time disaster strikes, you may see the familiar, bright red cross teamed
with SYSCO, the most trusted symbol in foodservice distribution.

That’s because our 12 Southwest Region broadline companies (Austin, Dallas, Denver,

Houston, Kansas City, New Mexico, New Orleans, Oklahoma, Pegler, San Antonio,

St. Louis and Watson), along with generous SYSCO suppliers, donated a truck equipped

as a self-contained mobile kitchen that can turn out several thousand hot, home-style

meals daily for victims of disaster.

The 1992-model refrigerated trailer was scheduled to be sold, but gained a new persona

when the refrigeration unit, bulkheads, ramp and other items were removed and the

trailer began its makeover from distribution vehicle to mobile kitchen that will be perma-

nently housed in Houston, but can be sent to disasters anywhere in the nation.

The 28-foot trailer kitchen boasts a generator and self-contained water supply and

wastewater disposal tanks. It can operate 24/7 for an unlimited time if it can tie into

community water and electrical systems, or function as a stand-alone unit for 24 hours if

an affected community is totally without resources.

The mobile kitchen is a prototype for an entirely new concept in feeding disaster victims.

Equipped with four large convection ovens and two huge tilt skillets, it is designed to

take advantage of new boil-in-the-bag or ready-to-bake packaging, so no actual food

preparation is required in the kitchen. The food is delivered heated and transported to

Red Cross emergency response vehicles that serve meals at the feeding locations. This

saves time, mess and waste, and allows the kitchen to operate with a team of three

volunteers. The product specifications call for higher quality, more well-balanced, hot

meals and the menus may be regionalized.

The kitchen made its official debut during Hurricane Dennis in July, 2005 and was dis-

patched to Lake Charles, Louisiana during the Hurricane Katrina relief efforts to serve hot

meals to those displaced by the storm.

SYSCO has long been a partner with the American Red Cross during disasters and our

corporation donated financial aid to the organization’s relief fund as well as products

after hurricanes struck Florida last year and Hurricane Katrina recently ravaged portions

of the Gulf Coast. Forty-three other SYSCO companies are converting and donating two

additional specially-equipped kitchens for use in their regions. The recent tragedy under-

scores the importance of this project. We are proud to be associated with the Red Cross

team in feeding those affected by disasters.

H ELP ING H ANDS – H OT MEA L S

The 28-foot trailer refurbished as a mobile kitchen,
and donated to the American Red Cross by SYSCO’s
Southwest Region, served nearly 9,000 meals per day
during Hurricane Katrina relief efforts during August
and September, 2005. The kitchen can serve high
quality, well-balanced hot meals 24/7 with water and
electricity available, or 24 hours as a self-contained unit.

SUMMARY OF OPERATIONS AND RELATED INFORMATION

(Dollars in thousands except for per share data)

2005

2004

2003

2002

2001

Results of Operations
Sales
Costs and expense
Cost of sales
Operating expenses
Interest expense

Other, net

Total costs and expenses
Earnings before income taxes

Income taxes

Earnings before cumulative effect of

accounting change

Cumulative effect of accounting change
Net earnings
Effective income tax rate
Per Common Share Data (1)
Diluted earnings per share:

Earnings before accounting change
Cumulative effect of accounting change
Net earnings
Dividends declared
Shareholders’ equity
Diluted average shares outstanding
Performance Measurements
Pretax return on sales
Return on average shareholders’ equity
Return on average total capital
(equity plus long-term debt)

Financial Position
Current ratio
Working capital
Other assets
Plant and equipment (net)
Total assets

Long-term debt
Shareholders’ equity
Other Data
Dividends declared
Capital expenditures
Number of employees
Shareholder Data
Closing price of common share at year end (1)
Price/earnings ratio at year end - diluted (1)
Market price per common share-high/low (1)
Number of shareholders of record at year end

$ 30,281,914

$ 29,335,403

$ 26,140,337

$ 23,350,504

$ 21,784,497

24,498,200
4,194,184
75,000
(10,906)
28,756,478
1,525,436
563,979

23,661,514
4,141,230
69,880
(12,365)
27,860,259
1,475,144
567,930

20,979,556
3,836,507
72,234
(8,347)
24,879,950
1,260,387
482,099

18,722,163
3,467,379
62,897
(2,805)
22,249,634
1,100,870
421,083

17,513,138
3,232,827
71,776
101
20,817,842
966,655
369,746

961,457
—
961,457

36.97%

907,214
—
907,214

778,288
—
778,288

679,787
—
679,787

596,909
—
596,909

38.50%

38.25%

1.47
—
1.47
0.58
4.39
653,157,117

1.37
—
1.37
0.50
4.03
661,919,234

1.18
—
1.18
0.42
3.41
661,535,382

1.01
—
1.01
0.34
3.26
673,445,783

0.88
—
0.88
0.27
3.16
677,949,351

5.04%
35%

23%

5.03%
39%

4.82%
36%

4.71%
31%

4.44%
31%

25%

23%

21%

1.16
544,216
1,997,815
2,268,301
8,267,902
956,177
2,758,839

368,792
390,203
47,500

36.25
25
38-29
15,083

1.23
724,777
1,829,412
2,166,809
7,847,632
1,231,493
2,564,506

321,353
530,086
47,800

34.80
25
41-29
15,337

1.34
928,405
1,384,327
1,922,660
6,936,521
1,249,467
2,197,531

1.52
$ 1,082,925
1,138,682
1,697,782
5,989,753
1,176,307
2,132,519

273,852
435,637
47,400

29.55
25
33-21
15,533

225,530
416,393
46,800

27.22
27
30-22
15,510

1.37
772,770
960,475
1,516,778
5,352,987
961,421
2,100,535

180,702
341,138
43,000

27.15
31
30-19
15,493

(1) The data presented reflects the 2-for-1 stock splits of December 15, 2000 and March 20, 1998.

2000

1999

1998

1997

1996

1995

1-Year
Growth
Rates
2005

5-Year

20-Year

10-Year
Compound Compound Compound
Growth
Rates
2001-2005 1996-2005 1986-2005

Growth
Rates

$ 19,303,268

$ 17,422,815

$ 15,327,536

$ 14,454,589

$ 13,395,130

$ 12,118,047

10%

13%

15,649,551
2,843,755
70,832
1,522
18,565,660
737,608
283,979

14,207,860
2,547,266
72,839
963
16,828,928
593,887
231,616

12,499,636
2,236,932
58,422
53
14,795,043
532,493
207,672

11,835,959
2,076,335
46,502
(162)
13,958,634
495,955
193,422

10,983,796
1,917,376
41,019
(1,004)
12,941,187
453,943
177,038

9,927,448
1,736,625
38,579
(2,223)
11,700,429
417,618
165,794

453,629
(8,041)
445,588

362,271
—
362,271

324,821
(28,053)
296,768

302,533
—
302,533

276,905
—
276,905

38.50%

39.00%

251,824
—
251,824
39.70%

0.68
(0.01)
0.67
0.23
2.60
669,555,856

0.54
—
0.54
0.20
2.11
673,593,338

0.47
(0.04)
0.43
0.17
1.98
686,880,362

0.43
—
0.43
0.15
1.99
712,167,188

0.37
—
0.37
0.13
2.01
739,430,592

0.34
—
0.34
0.11
1.89
749,525,192

3.82%
29%

3.41%
27%

3.47%
22%

3.43%
21%

3.39%
20%

17%

16%

14%

15%

14%

3.45%
19%

14%

1.47
840,608
747,463
1,340,226
4,730,145
1,023,642
1,721,584

152,427
266,413
40,400

21.07
31
22-13
15,207

1.66
948,252
460,146
1,227,669
4,081,205
997,717
1,394,221

129,516
286,687
35,100

15.38
28
16-10
15,485

1.61
825,727
449,068
1,151,054
3,780,189
867,017
1,326,639

115,218
259,353
33,400

12.75
30
14-9
16,142

1.72
821,955
413,762
1,058,432
3,433,823
685,620
1,374,612

101,980
210,868
32,000

9.25
22
10-7
17,890

1.81
855,887
412,436
990,642
3,319,943
581,734
1,451,224

91,044
235,891
30,600

8.57
23
9-7
19,160

1.88
836,603
411,712
896,079
3,097,161
541,556
1,383,472

76,791
201,577
28,100

7.38
22
8-6
21,112

7
16
9

17
20
11

16
18
9

20
25
15

DIRECTORS
Colin G. Campbell (69) 2,3*,5
Elected: 1989
Chairman, President and
Chief Executive Officer,
Colonial Williamsburg Foundation
John M. Cassaday (53) 1,6
Elected: 2004
President and Chief Executive Officer
Corus Entertainment, Inc.
Judith B. Craven, M.D., M.P.H. (59) 3,6
Elected: 1996
Retired President,
United Way of the Texas Gulf Coast
Jonathan Golden (68) 5,6
Elected: 1984
Partner,
Arnall Golden Gregory LLP
Joseph A. Hafner, Jr. (60) 1,5,6*
Elected: 2003
Chairman,
Riviana Foods, Inc.
Richard G. Merrill (74) 1,2*,5
Elected: 1983
Retired Executive Vice President,
The Prudential Insurance Company
of America
Richard J. Schnieders (57) 4*,5*,6
Elected: 1997
Chairman, Chief Executive Officer
and President
SYSCO Corporation
Phyllis S. Sewell (74) 2,3
Elected: 1991
Retired Senior Vice President,
Federated Department Stores, Inc.
John K. Stubblefield, Jr. (59) 4
Elected: 2003
Executive Vice President,
Finance and Chief Financial Officer,
SYSCO Corporation
Richard G. Tilghman (65) 1*, 2,5
Elected: 2002
Retired Chairman,
SunTrust Bank Mid-Atlantic
And Retired Vice Chairman,
SunTrust Banks
Jackie M. Ward (67) 2,3
Elected: 2001
Retired Founder, Chairman,
CEO and President,
Computer Generation Incorporated

RETIRED DIRECTORS
John W. Anderson
Retired Vice President,
Southwestern Bell Communications, Inc.

John F. Baugh
Founder and Retired Senior Chairman,
SYSCO Corporation

Charles H. Cotros
Retired Chairman and CEO,
SYSCO Corporation

Frank A. Godchaux III
Retired Chairman,
Riviana Foods, Inc.

Jabie S. Hardin
Retired Chairman,
Hardin’s-Sysco Food Services, LLC

Herbert Irving
Retired Vice Chairman of the Board,
SYSCO Corporation

Fritz C. Knoebel
Retired Chairman,
Nobel/Sysco Food Services Company

Thomas E. Lankford
Retired President and COO,
SYSCO Corporation

Bill M. Lindig
Retired Chairman and CEO,
SYSCO Corporation

E. James Lowrey
Retired Executive Vice President
Finance & Administration,
SYSCO Corporation

Donald H. Pegler, Jr.
Retired Chairman,
Pegler-Sysco Food Services Company

Frank H. Richardson
Retired President and
Chief Executive Officer,
Shell Oil Company

James A. Schlindwein
Retired Executive Vice President
Merchandising Services,
SYSCO Corporation

Arthur J. Swenka
Retired Senior Vice President,
Foodservice Operations,
SYSCO Corporation

Thomas B. Walker, Jr.
Retired Limited Partner,
The Goldman Sachs Group, Inc.

John F. Woodhouse
Retired Chairman and CEO,
SYSCO Corporation

DIRECTORS’ COUNCIL
The Directors’ Council was established in
1981 and is comprised of eight operating
company presidents who oversee some
of SYSCO’s most successful operations.
The members meet twice yearly and offer
guidance and insight to assist the Board of
Directors in formulating SYSCO’s manage-
ment strategies and policies.

Christopher S. DeWitt, President,
Nobel/Sysco Food Services Company
(Term Expires 2005)

Timothy K. Hussman, President,
Sysco Newport Meat Company
(Term Expires 2006)

Walter R. Rudisiler, President,
Sysco Food Services of Jacksonville, Inc.
(Term Expires 2006)

Thomas H. Russell, Vice President,
SYSCO; Chairman and Chief Executive
Officer, The SYGMA Network, Inc.

Scott A. Sonnemaker, President,
Sysco Food Services of Portland, Inc.
(Term Expires 2006)

Charles W. Staes, President,
Sysco Food Services – Chicago, Inc.
(Term Expires 2005)

Vaughn S. Thompson, President,
Sysco Food Services of Calgary
(Term Expires 2006)

Paul A. Winterhalder, President,
Sysco Food Services of Sacramento, Inc.
(Term Expires 2005)

OFFICERS
Larry J. Accardi
Executive Vice President, Contract Sales;
President, Specialty Distribution Companies

K. Susan Billiot
Assistant Vice President, Human Resources

Cameron L. Blakely
Vice President,
eBusiness and Baugh Supply Chain
Cooperative Supplier Services

Jack D. Carlson
Vice President, Real Estate
and Construction

Kenneth J. Carrig
Executive Vice President and Chief
Administrative Officer

Shannon E. Connell
Vice President, Customer Insights
and Market Development

Robert G. Culak
Vice President, Financial Reporting
and Compliance

Gary W. Cullen
Vice President, Distribution Services

Robert J. Davis
Senior Vice President, Contract Sales

Twila M. Day
Vice President, Information Technology

William B. Day
Vice President,
Supply Chain Management

Kirk G. Drummond
Senior Vice President and
Chief Information Officer

G. Mitchell Elmer
Vice President, Controller and Chief
Accounting Officer

Albert L. Gaylor
Vice President, Industry Relations
and Diversity

Jonathan R. Gottfried
Assistant Vice President,
Merchandising, Grocery

James C. Graham
Senior Vice President, Foodservice
Operations (Southwest Region)

Michael W. Green
Senior Vice President,
Foodservice Operations
(Midwest Region)

William Holden
Senior Vice President,
Foodservice Operations
(Northeast Region)

Robert E. Howell
Assistant Vice President,
Category Operations

Aaron I. Katz
Assistant Vice President, Legal

Alan W. Kelso
Assistant Vice President,
Safety and Labor Relations

Jeff A. Kimmich
Assistant Vice President, Merchandising,
Center of the Plate

Thomas P. Kurz
Assistant Vice President, Deputy General
Counsel and Assistant Secretary

James E. Lankford
Senior Vice President,
Foodservice Operations
(Western Region)

Andrew L. Malcolm
Vice President, SYSCO Corporation;
Chairman, SYSCO’s Specialty
Meat Companies

Amanda J. Mesler
Vice President, Organization Development
and Strategy

Mark Mignogna
Assistant Vice President, Quality Assurance

Mary Beth Moehring
Vice President,
Learning and Organizational Capability

Jesse E. Morris
Assistant Controller

Gregory W. Neely
Assistant Controller

Michael C. Nichols
Vice President, General Counsel
and Corporate Secretary

Masao Nishi
Assistant Vice President,
Supply Chain Management

Kathy Oates
Assistant Treasurer

John M. Palizza
Assistant Treasurer

Larry G. Pulliam
Executive Vice President,
Merchandising Services

Thomas P. Randt
Assistant Vice President,
Employee Relations

Dale K. Robertson
Vice President, Multi-Unit Sales -
Customer Development

Barry Robinson
Assistant Vice President, Healthcare Sales
and Marketing

Thomas H. Russell, Vice President,
SYSCO; Chairman and Chief Executive
Officer, The SYGMA Network, Inc.

Diane Day Sanders
Senior Vice President of Finance
and Treasurer

Richard J. Schnieders
Chairman, Chief Executive Officer
and President

Christopher J. Shepardson
Assistant Vice President, Merchandising,
Foodservice Supplies

David B. Smallwood
Vice President, Multi-Unit Sales

Stephen F. Smith
Senior Vice President,
Foodservice Operations
(Southeast Region)

Bruce L. Soltis
Senior Vice President, Canadian
Foodservice Operations

Kenneth F. Spitler
Executive Vice President;
President, North American
Foodservice Operations

John K. Stubblefield, Jr.
Executive Vice President, Finance
and Chief Financial Officer

Brian M. Sturgeon
Vice President, SYSCO; President and
Chief Operating Officer, FreshPoint, Inc.

Robert C. Thurber
Vice President, Merchandising Services

David L. Valentine
Assistant Controller

Thomas G. Wason
Vice President, Produce/Frozen
Fruits and Vegetables

Craig G. Watson
Vice President, Quality Assurance
and Agricultural Sustainability

Mark Wisnoski
Assistant Vice President,
Employee Benefits

BOARD COMMITTEES
1 Audit 2 Compensation and Stock Option 3 Corporate Governance and Nominating
4 Employee Benefits 5 Executive 6 Finance * Denotes Committee Chairman

Printed on recycled paper containing
recovered, post-consumer waste paper.

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 2, 2005
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
(State or other jurisdiction of
incorporation or organization)
1390 Enclave Parkway
Houston, Texas
(Address of principal executive offices)

74-1648137
(IRS employer
identification number)
77077-2099
(Zip Code)

Registrant’s Telephone Number, Including Area Code: (281) 584-1390

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

Title of Each Class

Common Stock, $1.00 par value
Preferred Stock Purchase Rights

Name of each exchange on
which registered

New York Stock Exchange
New York Stock Exchange

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]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [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 $24,238,453,000 at December 31, 2004
(based on the closing sales price on the New York Stock Exchange Composite Tape on December 31, 2004, as reported by The Wall Street
Journal (Southwest Edition)). At August 27, 2005, the registrant had issued and outstanding an aggregate of 626,984,757 shares of its
common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the company’s 2005 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.

TABLE OF CONTENTS

PART I
Page No.
Business ...................................................................................................................................1
Properties ..................................................................................................................................5
Legal Proceedings .....................................................................................................................6
Submission of Matters to a Vote of Security Holders .............................................................6

PART II
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities .................................................................6
Selected Financial Data ............................................................................................................8
Management’s Discussion and Analysis of Financial Condition
and Results of Operations ........................................................................................................8
Quantitative and Qualitative Disclosures about Market Risk ...............................................22
Financial Statements and Supplementary Data ....................................................................25
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .........................................................................................................58
Controls and Procedures .........................................................................................................58
Other Information ....................................................................................................................58

PART III
Directors and Executive Officers of the Registrant ................................................................58
Executive Compensation .........................................................................................................58
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters ...................................................................58
Certain Relationships and Related Transactions ...................................................................58
Principal Accountant Fees and Services ................................................................................58

Item 1.
Item 2.
Item 3.
Item 4.

Item 5.

Item 6.
Item 7.

Item 7A.
Item 8.
Item 9.

Item 9A.
Item 9B.

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

PART IV
Exhibits and Financial Statement Schedules .........................................................................59

Item 15.

Signatures ...............................................................................................................................62

PART I

Item 1. Business

Overview

Sysco Corporation, acting through its subsidiaries and divisions (collectively referred to as “SYSCO” or the “company”), is the larg-
est 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 390,000 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 $30 billion in annual sales, both through
internal expansion of existing operations and through acquisitions. Through the end of fiscal 2005, SYSCO had acquired 130 companies
or divisions of companies.

In May 2005, SYSCO acquired Facciola Meat Company, a specialty meat and seafood distributor located in Fremont, California.
In May 2005, SYSCO acquired Royalty Foods, Inc., a specialty meat distributor located in Orlando, Florida. In January 2005, SYSCO
acquired Piranha Produce, a full-line fresh fruit and vegetable distributor, headquartered in Modesto, California. In December 2004,
SYSCO acquired Robert’s Foods, a broadline foodservice distributor located in Springfield, Illinois. In November 2004, SYSCO acquired
Honeyman’s Ltd. and JJ Derma’s Meats, custom-cut meat distributors located in Toronto, Ontario, Canada. In October 2004, SYSCO
acquired Nashville Tomato, a regional tomato packager and distributor headquartered in Nashville, Tennessee.

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 food-
service 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.

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 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. 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. Selected financial data for each of the company’s reportable segments as well as financial information concerning
geographic areas can be found in Business Segment Information in the Notes to Consolidated Financial Statements in Item 8.

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, material 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, 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;
cookware such as pots, pans and utensils; 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 distribu-
tion 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 13,200 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 custom-
ers 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 10% or more of SYSCO’s total sales for its fiscal year ended July 2, 2005.

SYSCO’s sales to chain restaurant customers consist of a variety of food products. 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 cus-
tomer (Wendy’s International, Inc.) accounted for 5% of SYSCO’s sales for its fiscal year ended July 2, 2005. Although this customer
represents approximately 39% 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.

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

as follows:

Type of Customer

2005

2004

Restaurants ............................................................................................................................................. 64%
Hospitals and nursing homes ................................................................................................................. 10
5
Schools and colleges ..............................................................................................................................
Hotels and motels ..................................................................................................................................
6
Other ....................................................................................................................................................... 15

64%
10
5
6
15

2003

63%
10
6
6
15

Totals .............................................................................................................................................. 100%

100%

Sources of Supply

SYSCO purchases from thousands of suppliers, none of which individually accounts for more than 10% of the company’s purchases.
These suppliers consist generally of large corporations selling brand name and private label merchandise and independent regional brand
and 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 project, which reor-
ganizes SYSCO’s supply chain, involved the creation of the Baugh Supply Chain Cooperative that handles product procurement, and also
involves the construction and operation of regional distribution centers which will aggregate inventory demand to optimize the supply
chain activities for certain products for all SYSCO operating companies in the region. The company’s National Supply Chain project is
intended to increase profitability by lowering aggregate inventory levels, operating costs, 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 seven to nine
regional distribution centers over the next seven years. The first of these centers, the Northeast Redistribution Center located in Front
Royal, Virginia, opened during the third quarter of fiscal 2005. As of August 2005, it was supplying products to 12 of the 14 broadline
operating companies in the Northeast Region and is expected to be shipping products to the remaining two operating companies in the

Northeast Region by October 2005. The company expects to begin construction of its second regional redistribution facility, to be located
in Alachua, Florida, in fiscal 2006. The third regional redistribution center is planned to be located in the Midwest Region.

The Baugh Supply Chain Cooperative 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 products from a number of national brand suppliers, encompassing substantially all product lines. The operating companies
can choose to purchase product from the suppliers participating in the cooperative’s programs or from other suppliers, but SYSCO Brand
products are only available through the cooperative’s programs.

Working Capital Practices

SYSCO’s growth is funded through a combination of cash flow from operations, commercial paper issuances and long-term borrow-
ings. See the discussion in Liquidity and Capital Resources in Management’s Discussion and Analysis in Item 7 regarding the company’s
liquidity, financial position and sources and uses of funds.

Credit terms extended by SYSCO to its customers can vary from cash on delivery to 30 days or more based on SYSCO’s assessment

of the customers’ credit risk. SYSCO monitors the customers’ accounts and will suspend shipments to customers if necessary.

A majority of SYSCO’s sales are filled within 24 hours of when the customers’ orders are placed. SYSCO will maintain inventory on
hand to be able to meet customer demand. The level of inventory on hand will vary by product depending on product shelf-life, supplier
order fulfillment lead times and customer demand. SYSCO also makes purchases of product based on supply or pricing opportunities.

SYSCO takes advantage of suppliers’ cash discounts where appropriate and otherwise generally receives payment terms from its

suppliers. Payment terms received from suppliers range from weekly to 30 days or more.

Corporate Headquarters’ Services

SYSCO’s corporate staff makes available a number of services to the company’s operating companies. Members of the corporate
staff 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, payroll, human resources and
tax compliance services as well as warehousing and distribution services, which provide assistance in space utilization, energy conserva-
tion, 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 2005, 2004 and 2003, approximately $390,203,000, $530,086,000 and $435,637,000, respectively, were invested in facility expan-
sions, fleet additions and other capital asset enhancements. The company estimates its capital expenditures in fiscal 2006 should be in
the range of $425,000,000 to $450,000,000. During the three years ended July 2, 2005, capital expenditures were financed primarily by
internally generated funds, the company’s commercial paper program and bank and other borrowings. The company expects to finance
its fiscal 2006 capital expenditures from the same sources.

Employees

As of July 2, 2005, SYSCO and its operating companies had approximately 47,500 full-time employees, approximately 18% of whom
were represented by unions, primarily the International Brotherhood of Teamsters. Contract negotiations are handled locally. Collective
bargaining agreements covering approximately 27% of the company’s union employees expire during fiscal 2006. SYSCO considers its
labor relations to be satisfactory. During the fourth quarter of fiscal 2005, the number of customer contact associates increased by almost
2% as compared to the number at the end of the third quarter of fiscal 2005. The company intends to continue to increase the number
of customer contact associates in fiscal 2006.

Competition

The business of SYSCO is competitive with numerous companies engaged in foodservice distribution. Foodservice operators may
also choose to purchase products directly from retail outlets. While competition is encountered primarily from local and regional dis-
tributors, a few companies compete with SYSCO on a national basis. The company believes that the principal competitive factors in the
foodservice industry are effective customer contacts, the ability to deliver a wide range of quality products and related services on a
timely and dependable basis and a competitive price. The company estimates that it serves about 14% of an approximately $210 billion
annual market that includes the North American foodservice and hotel amenity, furniture and textile markets. 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 food-
service distributor during fiscal 2005. 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 U.S. Federal Food, Drug and Cosmetic Act and regulations
promulgated thereunder by the U.S. Food and Drug Administration (“FDA”) and the Canadian Food and Drugs Act and the regulations
thereunder.

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, the Packers and Stockyard 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 label-
ing of meat and poultry products and the grading and commercial acceptance of produce shipments from the company’s suppliers. SYSCO
is also subject to the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, which imposes certain registration
and record keeping requirements on facilities that manufacture, process, pack or hold food for human or animal consumption.

In Canada, the Canadian Food Inspection Agency administers and enforces the food safety and nutritional quality standards
established by Health Canada under the Canadian Food and Drugs Act and under other related federal legislation, including the Canada
Agricultural Products Act, the Meat Inspection Act, the Fish Inspection Act and the Consumer Packaging and Labeling Act (as it relates
to food). These laws regulate the processing, storing, grading, packaging, marking, transporting and inspection of certain SYSCO product
lines as well as the packaging, labeling, sale, importation and advertising of pre-packaged and certain other products.

The company and its products are also subject to state, provincial and local regulation through such measures as the licensing of its
facilities, enforcement by state, provincial and local health agencies of state, provincial 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 subject to inspections
and regulations issued pursuant to the U.S. Occupational Safety and Health Act by the U.S. Department of Labor, together with similar
occupational health and safety laws in each Canadian province, 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 also is subject to regulation by numerous U.S. and Canadian federal, state, provincial and local regulatory agencies,
including, but not limited to, the U.S. Department of Labor and each Canadian provincial ministry of labour, which set employment
practice standards for workers, and the U.S. Department of Transportation and the Canadian Transportation Agency, which regulate
transportation of perishable and hazardous materials and waste, and similar state, provincial and local agencies.

Most of the company’s distribution facilities have ammonia-based refrigeration systems and tanks for the storage of diesel fuel and
other petroleum products which are subject to laws regulating such systems and storage tanks. Other U.S. and Canadian federal, state,
provincial 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® 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 improve-

ment of existing products.

Sales of the company do not generally fluctuate significantly on a seasonal basis; therefore, the business of the company is not

deemed to be seasonal.

As of July 2, 2005, SYSCO and its operating companies operated 170 facilities throughout the United States and Canada, of which

160 were principal distribution facilities.

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 2, 2005.

Location

Number of
Facilities
and Centers

Cold Storage
(Thousands
Cubic Feet)

Dry Storage
Thousands
(Cubic Feet)

Segments
Served*

Alabama ...............................................................................................................
Alaska ..................................................................................................................
Arizona .................................................................................................................
Arkansas ..............................................................................................................
California ..............................................................................................................
Colorado ...............................................................................................................
Connecticut ..........................................................................................................
District of Columbia .............................................................................................
Florida ..................................................................................................................
Georgia .................................................................................................................
Hawaii ..................................................................................................................
Idaho ....................................................................................................................
Illinois ...................................................................................................................
Indiana .................................................................................................................
Iowa ....................................................................................................................
Kansas ..................................................................................................................
Kentucky ...............................................................................................................
Louisiana ..............................................................................................................
Maine ...................................................................................................................
Maryland ..............................................................................................................
Massachusetts ....................................................................................................
Michigan ..............................................................................................................
Minnesota ............................................................................................................
Mississippi ...........................................................................................................
Missouri ...............................................................................................................
Montana ...............................................................................................................
Nebraska ..............................................................................................................
Nevada .................................................................................................................
New Jersey ..........................................................................................................
New Mexico ........................................................................................................
New York .............................................................................................................
North Carolina .....................................................................................................
North Dakota .......................................................................................................
Ohio ....................................................................................................................
Oklahoma .............................................................................................................
Oregon ..................................................................................................................
Pennsylvania ........................................................................................................
South Carolina .....................................................................................................
South Dakota .......................................................................................................
Tennessee ............................................................................................................
Texas ....................................................................................................................
Utah ....................................................................................................................
Virginia .................................................................................................................
Washington ..........................................................................................................
Wisconsin ............................................................................................................
Alberta, Canada ...................................................................................................
British Columbia, Canada ....................................................................................
Manitoba, Canada ...............................................................................................
New Brunswick, Canada .....................................................................................
Newfoundland, Canada .......................................................................................
Nova Scotia, Canada ...........................................................................................
Ontario, Canada ...................................................................................................
Quebec, Canada ...................................................................................................
Saskatchewan, Canada .......................................................................................

2
1
1
1
18
5
1
1
13
6
1
2
5
2
1
1
1
1
1
5
2
4
2
1
2
1
1
2
4
1
5
6
1
9
2
3
4
1
1
3
13
1
3
1
3
2
8
1
2
2
1
7
1
1

2,886
1,067
2,901
2,477
25,840
7,495
4,244
335
23,013
5,654
—
2,023
4,311
3,905
1,535
4,003
2,330
3,265
1,507
8,826
5,605
5,501
4,676
2,125
2,375
3,288
1,712
2,749
3,085
2,182
7,433
5,440
525
9,041
3,057
3,980
6,780
2,271
2
6,470
19,572
3,600
13,162
4,647
7,128
4,090
3,896
1,135
1,172
744
735
7,949
716
1,271

2,393
645
3,190
2,940
34,650
10,870
3,990
30
24,209
14,937
258
2,366
10,065
1,822
2,082
3,894
2,648
2,994
2,121
8,896
7,798
9,569
4,308
2,690
2,682
2,538
2,108
4,474
10,753
2,093
10,436
11,478
584
13,933
4,028
3,791
8,286
2,362
123
9,277
23,643
3,690
10,091
3,044
5,902
3,982
4,649
860
1,031
669
704
8,919
1,209
750

Total ............................................................................................................

170

255,731

317,454

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

BL
BL
BL
BL
BL, S, O
BL, S, O
BL
O
BL, S, O
BL, S, O
O
BL
BL, S, O
BL, O
BL
BL
BL
BL
BL
BL, O
BL, S
BL, S, O
BL, O
BL
BL, O
BL
BL
BL, O
BL, O
BL
BL
BL, S, O
BL
BL, S, O
BL, S
BL, S, O
BL, S
BL
BL
BL, O
BL, S, O
BL
BL
BL
BL
BL
BL, O
BL
BL
BL
BL
BL, S, O
BL
BL

SYSCO owns approximately 460,967,000 cubic feet of its distribution facilities and self-serve centers (or 80.4% of the total cubic
feet), and the remainder is occupied under leases expiring at various dates from fiscal 2006 to fiscal 2040, exclusive of renewal options.
Certain of the facilities owned by the company are either subject to mortgage indebtedness or industrial revenue bond financing arrange-
ments totaling $19,510,000 at July 2, 2005. Such mortgage indebtedness and industrial revenue bond financing arrangements mature at
various dates through 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. The company began the expansion of its headquarters office complex
in fiscal 2006.

Facilities in Denver, Colorado; Lincoln, Illinois; St. Louis, Missouri; and Las Vegas, Nevada (which in the aggregate accounted for
approximately 2.5% of fiscal 2005 sales) are operating near capacity and the company is currently constructing expansions or replace-
ments for these distribution facilities. New distribution facilities also are under construction in Geneva County, Alabama; Lancaster,
California; and Raleigh, North Carolina. The company expects to begin construction of its second regional redistribution facility, to be
located in Alachua, Florida, in fiscal 2006.

As of July 2, 2005, SYSCO’s fleet of approximately 8,550 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.

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.

Fiscal 2004:

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Fiscal 2005:

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Common Stock
Prices

High

Low

Dividends
Declared
Per Share

$ 34.24
37.57
41.27
39.73

$ 36.00
38.43
37.83
38.04

$ 28.54
31.45
35.33
34.75

$ 29.48
29.71
32.57
34.23

$ 0.11
0.13
0.13
0.13

$ 0.13
0.15
0.15
0.15

The number of record owners of SYSCO’s Common Stock as of August 27, 2005 was 14,980.

In January 2004, a total of 65,123 dividend access shares, convertible on a one-for-one basis into SYSCO shares, were released to
the former owners of North Douglas Distributors pursuant to the terms of an escrow agreement executed in connection with SYSCO’s
acquisition of North Douglas in December 2000.

In July 2004, a total of 322,256 shares of common stock were released to the former shareholders of Buckhead Beef Company

pursuant to the terms of an escrow agreement executed in connection with SYSCO’s acquisition of Buckhead in August 1999.

In September 2004, a total of 256,096 shares of common stock were released to the former shareholders of Newport Meat Company

pursuant to the terms of an escrow agreement executed in connection with SYSCO’s acquisition of Newport in July 1999.

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 2005, 169,155 shares were issued to the former shareholders of North Douglas Distributors upon the conversion of dividend

access shares issued in connection with SYSCO’s acquisition of North Douglas in December 2000.

In June 2005, 160,867 shares were issued to the former shareholders of HRI Supply, Ltd. upon the conversion of dividend access

shares issued in connection with SYSCO’s acquisition of HRI in May 2001.

The foregoing shares were issued pursuant to the exemption from registration contained in Section 3(a)(9) of the Securities Act of 1933,

as amended.

SYSCO made the following share repurchases during the fourth quarter of fiscal 2005:

ISSUER PURCHASES OF EQUITY SECURITIES

Period

(a) Total Number

(b) Average Price
of Shares Purchased (1) Paid Per Share

(d) Maximum Number
of Shares That May Yet
be Purchased Under
the Plans or Programs

Month #1
April 3 — April 30 ...................................................
Month #2
May 1 — May 28 ....................................................
Month #3
May 29 — July 2 ....................................................
Total ..........................................................................

1,822,824

$ 35.61

1,800,000

20,712,700

1,951,486

36.11

1,914,000

18,798,700

3,000,816
6,775,126

37.04
$ 36.39

2,980,000
6,694,000

15,818,700
15,818,700

(1) The total number of shares purchased includes 22,824, 37,486 and 20,816 shares tendered by individuals in connection with stock option exercises in Month #1, Month
#2 and Month #3, respectively.

On September 12, 2003, the company announced that the Board of Directors approved the repurchase of 20,000,000 shares. On
February 18, 2005, the company announced that the Board of Directors approved the repurchase of an additional 20,000,000 shares over
a 12- to 18-month period. Pursuant to these repurchase programs, shares may be acquired in the open market or in privately negotiated
transactions at the company’s discretion, subject to market conditions and other factors. In July 2004, the Board of Directors authorized
the company to enter into agreements from time to time to extend its ongoing repurchase program to include repurchases during company
announced “blackout periods” of such securities in compliance with Rule 10b5-1 promulgated under the Exchange Act.

On November 23, 2004, the company entered into a stock purchase plan with Bank of America Securities LLC to purchase up to
10 million shares of SYSCO common stock as authorized under the September 2003 repurchase program pursuant to Rules 10b5-1 and
10b-18 under the Exchange Act. A total of 10 million shares were purchased during the period between November 29, 2004 and May 6,
2005, including during company “blackout” periods. By its terms, the agreement terminated on May 6, 2005.

On May 27, 2005, the company entered into a stock purchase plan with Bank of New York to purchase up to 10 million shares
of SYSCO common stock as authorized under the February 2005 repurchase program pursuant to Rules 10b5-1 and 10b-18 under the
Exchange Act. A total of 6,975,000 shares were purchased between June 1, 2005 and August 16, 2005, including during company “black-
out” periods. By its terms, the agreement terminated on August 16, 2005.

As of August 27, 2005, no shares remained available for repurchase under the September 2003 repurchase program, and there were

10,443,700 shares remaining available for repurchase under the February 2005 repurchase program.

966,655
369,746
596,909

0.90
0.88

0.27

Item 6. Selected Financial Data

(In thousands except for share data)

2005

Sales ................................................... $ 30,281,914
Earnings before income

taxes ................................................
Income taxes .......................................
Net earnings ....................................... $

1,525,436
563,979
961,457

Fiscal Year

2004
(53 weeks)

2003(1)

2002

2001(2)

$ 29,335,403

$ 26,140,337

$ 23,350,504

$ 21,784,497

1,475,144
567,930
907,214

1,260,387
482,099
778,288

1,100,870
421,083
679,787

Net earnings:
Basic earnings per share ................ $
Diluted earnings per share .............

Dividends declared per share ............

1.51
1.47

0.58

1.41
1.37

0.50

1.20
1.18

0.42

1.03
1.01

0.34

Total assets .........................................

8,267,902

7,847,632

6,936,521

5,989,753

5,352,987

Capital expenditures ...........................

390,203

530,086

435,637

416,393

341,138

Current maturities of

long-term debt ................................ $

410,933
956,177
Long-term debt ...................................
1,367,110
Total long-term debt ...........................
2,758,839
Shareholders’ equity ...........................
Total capitalization ............................. $ 4,125,949
Ratio of long-term debt to
capitalization ..................................

33.1%

$
162,833
1,231,493
1,394,326
2,564,506
$ 3,958,832

$
20,947
1,249,467
1,270,414
2,197,531
$ 3,467,945

$
13,754
1,176,307
1,190,061
2,132,519
$ 3,322,580

23,267
961,421
984,688
2,100,535
$ 3,085,223

35.2%

36.6%

35.8%

31.9%

(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 amortiza-
tion of goodwill and intangibles with indefinite lives was discontinued.

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

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Highlights

Sales increased 3.2% in fiscal 2005 over fiscal 2004. Fiscal 2005 included 52 weeks, as compared to fiscal 2004 which included an
additional 53rd week. After adjusting for the additional week in fiscal 2004, sales increased 5.3% in fiscal 2005 over fiscal 2004 adjusted
sales (See the reconciliation of fiscal 2004 actual sales to fiscal 2004 adjusted sales in “Sales” under “Results of Operations”). Gross
margins as a percent of sales for fiscal 2005 decreased from the prior year due to the impact of product cost increases and changes in
customer mix and segment mix. Operating expenses as a percent of sales for fiscal 2005 decreased from the prior year due to operating
efficiencies, operating costs increasing at lower rates than sales price increases, reduced performance-based management incentive
compensation and decreased net pension costs, which overcame increased fuel costs and increased expenses incurred on the National
Supply Chain project. The income tax provision in fiscal 2005 includes a tax benefit of $8.5 million primarily related to the reversal of
valuation allowances previously recorded on certain state net operating loss carryforwards and a tax benefit of $11 million related to
the reversal of a tax contingency accrual. The comparison of fiscal 2005’s net earnings to fiscal 2004 was also negatively impacted
by the additional 53rd week in fiscal 2004. Primarily as a result of these factors, net earnings for fiscal 2005 increased 6.0% over the
prior year.

Management believes that prolonged periods of rising product costs, together with general economic conditions, including the
impact of increased fuel costs on consumer spending, contributed to a softness in the foodservice market and thus a slowing of
SYSCO’s sales growth beginning in the latter half of the fourth quarter of fiscal 2004 and continuing into the first half of fiscal 2005.
After adjusting for the additional week in last year’s fourth quarter, sales growth remained relatively stable over the course of fiscal
2005. Management believes that the declining rate of product cost increases over the course of fiscal 2005 has lessened the overall

gross margin pressures experienced during the year and has contributed to the underlying unit growth experienced in the latter half of
fiscal 2005. Additionally, management believes that the maturation of the company’s business review process has contributed to unit
sales growth.

The company continues to focus on customer account penetration and expense controls, including managing personnel expenses,

improving productivity and ongoing benchmarking and sharing of best practices at the operating companies.

Overview

SYSCO distributes food and related products to 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 operations, hotel supply operations, and SYGMA,
the company’s chain restaurant distribution subsidiary.

The company estimates that it serves about 14% of an approximately $210 billion annual market that includes the North American
foodservice and hotel amenity, furniture and textile markets. According to industry sources, the foodservice, or food-prepared-away-from-
home, market represents approximately one-half of the total dollars spent on food purchases made at the consumer level. This share
grew from about 37% in 1972 to its current level in 1998.

General economic conditions and consumer confidence can affect the frequency and amount spent by consumers for food-prepared-
away-from-home and in turn can impact SYSCO’s sales. SYSCO historically has grown at a faster rate than the overall industry and has
grown its market share in this fragmented industry.

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

(cid:127) Sales growth: The company plans to grow sales by gaining an increased share of products purchased by existing customers,
development of new customers, the use of foldouts (new operating companies created in established markets previously served
by other SYSCO operating companies) and a disciplined acquisition program. The company uses market information to estimate
the potential sales and profitability of new and existing customers. Marketing resources, SYSCO Brand products and value-
added services provided by SYSCO can be custom-tailored to the purchasing needs of customers. Additionally, the investment of
resources in any particular account can be made in proportion to the account’s potential profitability.

(cid:127) Brand management: SYSCO Brand products are manufactured by suppliers to meet SYSCO’s product specifications using strict
quality assurance standards. SYSCO believes that SYSCO Brand products generally provide higher profitability than national
brand products to SYSCO. SYSCO believes that SYSCO Brand products also provide a greater value to SYSCO’s customers and
differentiate SYSCO from its customers.

(cid:127) Productivity gains: The company’s investment in warehousing and transportation technology and the implementation of best

business practices allows SYSCO to leverage operating expenses relative to sales growth.

(cid:127) Sales force effectiveness: The company invests in the development and expansion of its customer contact resources by hiring
additional customer contact personnel through targeted recruiting, hiring and promotion practices, effective use of training
programs and improved compensation systems. Expanded business review and business development functions allow the sales
force to strength customer relationships and increase sales.

(cid:127) Supply chain management: The company’s National Supply Chain project and related organization is being developed to reduce
total supply chain costs, operating costs and working capital requirements of the company. The company’s National Supply Chain
project is intended to optimize the supply chain activities for products for SYSCO’s operating companies in each respective region
and as a result, increase profitability and lower 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 seven to nine regional distribution centers in the United States over the next seven years. The first of these
centers, the Northeast Redistribution Center located in Front Royal, Virginia, opened during the third quarter of fiscal 2005. As of
August 2005, it was supplying products to 12 of the 14 broadline operating companies in the Northeast Region and is expected to
be shipping products to the remaining two operating companies in the Northeast Region by October 2005. The company expects
to begin construction of its second regional redistribution facility, to be located in Alachua, Florida, in fiscal 2006.

The expenses related to the National Supply Chain project in the first quarter of fiscal 2006 are expected to be approximately
equal to expenses in the fourth quarter of fiscal 2005 or about $15 million. During the first half of fiscal 2006, the ramp-up phase of the
Northeast Redistribution Center will be completed. It is anticipated that the majority of benefits that will be realized in fiscal 2006 from
the Northeast Redistribution Center will be realized during the second half of fiscal 2006 as this is when the Northeast Redistribution
Center is expected to be operating at full volume.

Hurricane Katrina

Hurricane Katrina principally impacted our operating companies in Jackson, Mississippi and New Orleans, Louisiana as well as
causing many of our customers in the New Orleans and Mississippi Gulf Coast area to be closed. The impacted operations in Jackson
have recovered and service to customers has been restored. SYSCO’s facility in New Orleans sustained only minor damage from the storm
but remained closed after the storm due to conditions in New Orleans. The facility has recently resumed partial operations, however, most
of the orders received from customers of the New Orleans facility that are open for business have been temporarily rerouted to other
nearby SYSCO facilities for fulfillment and delivery until the New Orleans facility has been restored to full capacity. We are still accessing
the impact of Hurricane Katrina on our operations in the areas affected by the storm; however, we do not expect this occurence to have
a material adverse effect on SYSCO’S financial position or fiscal 2006’s operating results as a whole.

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:

2005

2004

2003

Sales .................................................................................................................................................... 100.0%
Costs and Expenses
Cost of sales .................................................................................................................................... 80.9
Operating expenses ......................................................................................................................... 13.9
0.2
Interest expense ..............................................................................................................................
0.0
Other, net .........................................................................................................................................
Total costs and expenses .................................................................................................................... 95.0
5.0
Earnings before income taxes .............................................................................................................
1.8
Income taxes ........................................................................................................................................
3.2%
Net earnings ........................................................................................................................................

100.0%

80.7
14.1
0.2
0.0
95.0
5.0
1.9
3.1%

80.3
14.7
0.2
0.0
95.2
4.8
1.8
3.0%

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 ...........................................................................................................................................................................
Costs and Expenses
Cost of sales ...........................................................................................................................................................
Operating expenses ................................................................................................................................................
Interest expense .....................................................................................................................................................
Other, net ................................................................................................................................................................
Total costs and expenses ...........................................................................................................................................
Earnings before income taxes ....................................................................................................................................
Income taxes ...............................................................................................................................................................
Net earnings ...............................................................................................................................................................

2005

3.2%

3.5
1.3
7.3
(11.8)
3.2
3.4
(0.7)
6.0%

Basic earnings per share ............................................................................................................................................
Diluted earnings per share .........................................................................................................................................

7.1%
7.3

Average shares outstanding ......................................................................................................................................
Diluted shares outstanding ........................................................................................................................................

(1.0)
(1.3)

2004

12.2%

12.8
7.9
(3.3)
48.1
12.0
17.0
17.8
16.6%

17.5%
16.1

(1.2)
0.1

Sales

Sales for fiscal 2005 were 3.2% greater than fiscal 2004, or 5.3% greater after adjusting for the additional week in fiscal 2004. Sales
for fiscal 2004 were 12.2% greater than fiscal 2003, or 10.0% greater after adjusting for the additional week in fiscal 2004. Because the
fourth quarter of fiscal 2004 contained an additional week as compared to fiscal 2005 and fiscal 2003, sales growth for fiscal years 2005,
2004 and 2003 are not directly comparable. In order to provide a more comparable picture of sales growth, 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. Set forth below is a reconciliation of
actual sales growth to adjusted sales growth for the periods presented:

2005
(52 Weeks)

2004
(53 Weeks)

2003
(52 Weeks)

Sales for the fiscal year .............................................................

$ 30,281,914,000

$ 29,335,403,000

$ 26,140,337,000

Estimated sales for the additional week ...................................
Adjusted sales ............................................................................
Actual percentage increase .......................................................

Adjusted percentage increase ...................................................

—
$ 30,281,914,000

581,358,000
$ 28,754,045,000

—
$ 26,140,337,000

3.2%

5.3%

12.2%

10.0%

11.9%

Acquisitions contributed 0.8% to the overall sales growth rate for fiscal 2005 and 0.9% for fiscal 2004. 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. Estimated product cost increases were 3.5% during fiscal 2005 as compared to 6.3% during fiscal 2004.

Management believes that prolonged periods of rising product costs together with general economic conditions, including the impact
of increased fuel costs on consumer spending, contributed to the softness in the foodservice market and thus a slowing of SYSCO’s sales
growth beginning in the latter half of the fourth quarter of fiscal 2004 and continuing into the first half of fiscal 2005. After adjusting for
the additional week in last year’s fourth quarter, sales growth remained relatively stable over the course of fiscal 2005. Management
believes that the declining rate of product cost increases over the course of fiscal 2005 has lessened the overall gross margin pressures
experienced during the year and has contributed to the underlying unit growth in the latter half of fiscal 2005. Additionally, management
believes that the maturation of the company’s business review process has contributed to unit sales growth.

The company also continues its focus on profitable sales growth. One part of this strategy involves being more selective with respect
to which customers we serve, including improving the profitability of, or ultimately exiting, unprofitable customers and refining the use
of customer purchasing potential and profitability data in targeting new customers. The company continues to see reductions in sales to
unprofitable customers over the comparable prior year periods. In addition, the number of customer contact personnel increased almost
2% in the fourth quarter of fiscal 2005 as compared to the number at the end of the third quarter of fiscal 2005. The company intends to
continue to increase the number of customer contact associates in fiscal 2006.

Industry sources estimate the total foodservice market experienced real sales growth of approximately 2.4% in calendar year 2004

and real sales decline of approximately 0.1% in calendar year 2003.

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

Fresh and frozen meats ........................................................................................................................
Canned and dry products ......................................................................................................................
Frozen fruits, vegetables, bakery and other ........................................................................................
Poultry ...................................................................................................................................................
Dairy products .......................................................................................................................................
Fresh produce .......................................................................................................................................
Paper and disposables .........................................................................................................................
Seafood .................................................................................................................................................
Beverage products ................................................................................................................................
Equipment and smallwares ..................................................................................................................
Janitorial products ................................................................................................................................
Medical supplies ..................................................................................................................................

2005

19%
18
14
11
9
8
8
5
3
2
2
1

100%

2004

19%
18
14
11
9
8
8
5
3
2
2
1
100%

2003

18%
19
14
10
9
8
8
6
3
2
2
1
100%

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

Restaurants ...........................................................................................................................................
Hospitals and nursing homes ...............................................................................................................
Schools and colleges ............................................................................................................................
Hotels and motels ................................................................................................................................
All other ................................................................................................................................................

2005

64%
10
5
6
15
100%

2004

64%
10
5
6
15
100%

2003

63%
10
6
6
15
100%

Gross Margins

Gross margins as a percentage of sales declined in fiscal 2005 when compared to the prior year. Management believes that this
gross margin decline was caused by several factors, including product cost increases, changes in segment mix, customer mix and pricing
pressure. Product cost increases in most of the product categories had the impact of reducing gross margins as a percentage of sales, as
gross profit dollars are earned on a higher sales dollar base. The decline in gross margins as a percent of sales slowed during the course
of fiscal 2005 due in part to a lessening of the rate of product cost increases during the fiscal year.

Gross margins as a percentage of sales declined in fiscal 2004 when compared to the prior year. Management believes that gross
margins as a percentage of sales in fiscal 2004 were impacted by several factors, including product cost increases, changes in customer
mix, segment mix and product mix and pricing pressure.

Operating Expenses

Operating expenses include the costs of warehousing and delivering products as well as selling, administrative and occupancy
expenses. 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 which result in increases in sales prices.

The decrease in operating expenses as a percentage of sales in fiscal 2005 as compared to fiscal 2004 was aided by improved
operating efficiencies. For example, the Broadline segment continues to demonstrate improving trends in key expense metrics, including
miles driven per trip, pieces per stop 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 increased costs to deliver product to customers due to increased fuel costs of
approximately $31,000,000 in fiscal 2005 over the prior year. Operating expenses related to the National Supply Chain project were
$46,450,000 in fiscal 2005, as compared to $29,333,000 in fiscal 2004. Also included in operating expenses was the recognition of a gain
of $13,803,000 in fiscal 2005 to adjust the carrying value of life insurance assets to their cash surrender value, as compared to a gain
of $19,124,000 in fiscal 2004. Operating expenses were favorably impacted by a reduction of management performance based incentive
bonuses of $26,989,000 and a decrease in net pension cost of $7,374,000 in fiscal 2005 as compared to fiscal 2004.

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 prod-
uct 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. Also included in operating expenses
was the recognition of a gain of $19,124,000 in fiscal 2004 to adjust the carrying value of life insurance assets to their cash surrender
value, as compared to a loss of $156,000 in fiscal 2003.

In order to partially manage the volatility and uncertainty of fuel costs, SYSCO from time to time will enter into forward purchase
commitments for a portion of SYSCO’s projected monthly diesel fuel requirements. Forward diesel fuel purchase commitments outstand-
ing as of July 2, 2005 were not material.

Interest Expense

The increase in interest expense in fiscal 2005 was due to increased borrowing interest rates. The increase in the company’s overall
borrowing interest rates was primarily due to an increase in the percentage of the company’s debt with fixed interest rates in fiscal 2005
as compared to fiscal 2004. In fiscal 2004, the company’s debt portfolio included a larger percentage of floating rate debt in the form of

either commercial paper issuances or fixed rate debt converted to floating through interest rate swap agreements. In addition, market
interest rates have increased during fiscal 2005.

The decrease in interest expense in fiscal 2004 was primarily due to lower borrowing interest 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.

Other, Net

Changes between the years result from fluctuations in miscellaneous activities, primarily gains and losses on the sale of surplus

facilities.

Income Taxes

The effective tax rate was 36.97% in fiscal 2005, 38.50% in fiscal 2004 and 38.25% in fiscal 2003. The income tax provision in fiscal
2005 includes a tax benefit of $8,500,000 primarily related to the reversal of valuation allowances previously recorded on certain state
net operating loss carryforwards and a tax benefit of $11,000,000 related to the reversal of a tax contingency accrual.

Net Earnings

Fiscal 2005 represents the twenty-ninth consecutive year of increased earnings before the cumulative effect of accounting changes.
The increases were due to the factors discussed above. In addition, the comparison of fiscal 2005’s net earnings to fiscal 2004 was
negatively impacted by the additional 53rd week in fiscal 2004.

Earnings Per Share

The increases in earnings per share were the result of factors discussed above, as well as a net reduction of shares outstanding

due primarily to share repurchases.

Return on Average Shareholders’ Equity

The return on average shareholders’ equity was approximately 35% in fiscal 2005, 39% in fiscal 2004 and 36% in fiscal 2003. The
higher return in fiscal 2004 was primarily due to the impact of minimum pension liability adjustments to shareholders’ equity. Since its
inception, SYSCO has averaged approximately 20% return on average shareholders’ equity.

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:

Broadline ................................................................................................................................. 1.7%
SYGMA ................................................................................................................................... 10.4
Other ....................................................................................................................................... 8.2

5.3%

(28.1)
6.6

10.4%
21.7
19.0

13.0%
5.8
53.5

2005

2004

Earnings

Sales Before Taxes

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:

2005

2004

2003

Earnings

Sales Before Taxes

Broadline .................................................................................
SYGMA ...................................................................................
Other .......................................................................................
Intersegment sales .................................................................
Unallocated corporate expenses ............................................
Total ........................................................................................ 100.0%

79.7%
12.9
8.5
(1.1)
—

99.5%
1.2
5.5
—
(6.2)
100.0%

80.9%
12.1
8.1
(1.1)
—
100.0%

97.8%
1.7
5.3
—
(4.8)
100.0%

82.2%
11.2
7.7
(1.1)
—
100.0%

101.2%
1.9
4.1
—
(7.2)
100.0%

Broadline Segment

Acquisitions contributed 0.1% to the overall sales growth rate for fiscal 2005 and 0.2% in fiscal 2004. The fiscal 2005 sales growth
was primarily due to increased sales to marketing associate-served customers and multi-unit customers, including increased sales of
SYSCO Brand products and increases in both sales prices and unit volumes. The comparison of fiscal 2005 sales to fiscal 2004 is nega-
tively impacted by the additional week in fiscal 2004.

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 sales growth in fiscal 2005 and 2004 was obtained through increased sales to the
existing customer base as well as the acquisition of new customers.

The decrease of Broadline segment sales as a percentage of total SYSCO sales in fiscal 2005 was due primarily to strong sales
growth in the SYGMA and other segments outpacing the Broadline sales growth, as well as the contributions to sales growth from the
acquisitions of specialty produce and SYGMA operations during fiscal 2005 and fiscal 2004. The decrease of Broadline segment sales as
a percentage of total SYSCO sales in fiscal 2004 was due primarily to strong sales growth in the SYGMA and other segments outpacing
the Broadline sales growth, as well as the contribution to sales growth from the acquisition of the Asian cuisine foodservice operations
during fiscal 2003.

Marketing associate-served sales as a percentage of broadline sales in the U.S. increased to 53.8% in fiscal 2005 as compared to
53.5% in fiscal 2004. SYSCO Brand sales as a percentage of broadline sales in the U.S. decreased to 49.4% for fiscal 2005 as compared
to 49.5% in fiscal 2004.

The increase in earnings before income taxes for fiscal 2005 was primarily due to increases in sales and increased operating effi-
ciencies aided by lower expenses as a percentage of sales. Factors contributing to the lower expenses as a percentage of sales were
reduced performance based management incentive compensation and decreased net periodic pension costs, which overcame higher fuel
costs and increased expenditures related to the National Supply Chain project. The comparison of fiscal 2005’s earnings before income
taxes to fiscal 2004 was also negatively impacted by the additional 53rd week in fiscal 2004.

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 percentage of sales. The additional week also contributed to the
earnings growth in fiscal 2004.

SYGMA Segment

Acquisitions contributed 2.6% to the overall sales growth rate for fiscal 2005 and 1.9% in fiscal 2004. The comparison of fiscal
2005 sales to fiscal 2004 is negatively impacted by the additional week in fiscal 2004. Both the fiscal 2005 and 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 primarily from higher product costs and sales from
acquisitions. The additional week also contributed to the sales growth in fiscal 2004.

The decrease in earnings before income taxes in fiscal 2005 was due to several factors. During the fourth quarter of fiscal 2004
and the first quarter of fiscal 2005, SYGMA discontinued servicing a portion of its largest customer’s locations due to that customer’s
geographic supply chain realignment. SYGMA 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 is being served out of different SYGMA locations

than those that originally served the discontinued business. SYGMA opened a new facility to serve a portion of the new business which
it began serving in the fourth quarter of fiscal 2005. As a result, during the fourth quarter of fiscal 2004 and throughout fiscal 2005,
SYGMA’s operating profits have been impacted by increased operating expenses as it transitioned its operations to serve the new busi-
ness it has acquired. In addition, SYGMA’s gross margins as a percent of sales in fiscal 2005 have declined from the comparable period
in fiscal 2004 due to product cost increases and lower agreed upon pricing with its customers.

The increase in earnings before income taxes 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.

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 customer contact personnel, 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 acqui-
sitions 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 capitaliza-
tion 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 33.1% and 35.2% at July 2, 2005 and July 3, 2004, respectively. For purposes of calculating this ratio, long-term debt includes
both the current maturities and long-term portion.

In April 2005, SYSCO filed with the Securities and Exchange Commission a shelf registration statement covering $1,500,000,000 in
debt securities. The registration statement was declared effective in May 2005. In June 2005, SYSCO repaid the 6.5% senior notes totaling
$150,000,000 at maturity utilizing a combination of cash flow from operations and commercial paper issuances. In July 2005, SYSCO also
repaid the 4.75% senior notes totaling $200,000,000 at maturity also utilizing a combination of cash flow from operations and commer-
cial paper issuances. The company intends to issue between $350,000,000 and $500,000,000 of long-term debt in September 2005. The
amount of long-term debt that SYSCO issues will depend upon market conditions at the time of issuance. The proceeds from such issuance
are intended to be utilized to repay outstanding commercial paper issuances and for working capital and general corporate purposes.

Also during the fall of 2005, the company intends to renegotiate its revolving bank credit facility which supports the U.S. commercial

paper program.

Operating Activities

Cash flow from operations in fiscal 2005 was negatively impacted by increases in inventory balances of $35,014,000 and increases
in accounts receivable balances of $72,829,000, partially offset by an increase in accounts payable balances of $28,080,000. Cash flow
from operations in fiscal 2004 was negatively impacted by increases in inventory balances of $162,502,000 and increases in accounts
receivable balances of $177,058,000, offset by an increase in accounts payable balances of $95,874,000. Cash flow from operations in
fiscal 2003 was negatively impacted by increases in inventory balances of $69,959,000 and increases in accounts receivable balances of
$218,150,000, offset by an increase in accounts payable balances of $237,360,000.

Also impacting cash flow from operations was a decrease in accrued expenses of $32,674,000 in fiscal 2005, an increase in accrued
expenses of $61,544,000 in fiscal 2004 and a decrease in accrued expenses of $12,480,000 in fiscal 2003. The changes in accrued
expenses in each year are primarily due to the amount of accrued incentive bonuses related to that year.

Also impacting cash flow from operations were decreases in other long term liabilities and prepaid pension cost of $86,338,000 in
fiscal 2005, $35,056,000 in fiscal 2004 and $72,814,000 in fiscal 2003. The decreases in other long-term liabilities and prepaid pension
cost in each year are primarily due to the amount of pension contributions exceeding the net pension cost recognized in each year. The
company’s contributions to its defined benefit plans were $220,361,000, $165,512,000 and $164,565,000 during fiscal 2005, fiscal 2004
and fiscal 2003, respectively. Included in the amounts contributed in fiscal 2005 was $134,000,000 voluntarily contributed to the qualified

pension plan in the fourth quarter. The decision to increase the contributions to the qualified pension plan in fiscal 2005 was primarily
due to the decreased discount rate, which increased the pension obligation and negatively impacted the fiscal 2005 year-end pension
funded status. The company expects to contribute approximately $74,000,000 to its defined benefit plans in fiscal 2006.

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 dis-
tributed 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 net operating loss carryforwards, excess tax depreciation and
pension contributions, taxes paid during fiscal 2005 and 2004 increased to $436,378,000 and $344,414,000, respectively, as compared to
$28,747,000 in fiscal 2003. The net cash flow impact of supply chain distribution deferrals in fiscal 2005 was incrementally positive when
compared to what would have been paid on an annual basis without the deferral, due to increased volume through this structure.

The amount of taxes paid in fiscal 2004 was reduced by $70,615,000 as the result of the utilization of a U.S. federal net operat-
ing loss carryforward. This net operating loss carryforward was generated in fiscal 2003 primarily as a result of the deferral of supply
chain distributions.

Also impacting the amount of taxes paid in each year is the amount of deductible pension contributions made in each year. As
indicated above, the company expects that its pension contributions in fiscal 2006 will be substantially less than the contributions made
in the preceding three fiscal years.

Investing Activities

Fiscal 2005 capital expenditures included the construction of fold-out facilities in Spokane, Washington and Geneva, Alabama,
replacement or significant expansion of facilities in Baltimore, Maryland; Cleveland, Ohio; Denver, Colorado; Milwaukee, Wisconsin;
Miami, Florida; and Hartford, Connecticut, and the completion of the Northeast Redistribution Center in Front Royal, Virginia. Fiscal 2005
capital expenditures related to the National Supply Chain project were $34,009,000, bringing the total amount of capital expenditures on
the project since inception to $186,263,000.

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 the Northeast Redistribution Center in Front Royal, Virginia as well as continued expenditures related to the
National Supply Chain project.

Fiscal 2003 capital expenditures included the construction of fold-out facilities in Las Vegas, Nevada and Oxnard, California, replace-

ment facilities in Cleveland, Ohio; Dallas, Texas; and Miami, Florida and the Northeast Redistribution Center in Front Royal, Virginia.

Total expenditures in fiscal 2006 are expected to be in the range of $425,000,000 to $450,000,000. Fiscal 2006 expenditures will
include the continuation of the fold-out program; facility, fleet and other equipment replacements and expansions; a corporate office
expansion; the company’s National Supply Chain project; and investments in technology.

During fiscal 2005, SYSCO acquired for cash one broadline foodservice operation, four custom meat-cutting operations, and two
specialty produce distributors. During fiscal 2004, SYSCO acquired for cash certain assets of two broadline foodservice operations, a
specialty produce distributor, and one quickservice operation. During fiscal 2003, SYSCO acquired for cash a broadline foodservice opera-
tion, 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.

Financing Activities

The company routinely engages in Board-approved share repurchase programs. The number of shares acquired and their cost during
the past three fiscal years was 16,790,200 shares for $597,660,000 in fiscal 2005, 16,454,300 shares for $608,506,000 in fiscal 2004,
and 16,500,000 shares for $478,471,000 in fiscal 2003. An additional 5,375,000 shares have been purchased at a cost of $190,747,000
through August 27, 2005, resulting in 10,443,700 shares remaining available for repurchase as authorized by the Board as of that date.

The company made four regular quarterly dividend payments during each of fiscal years 2005, 2004 and 2003. SYSCO began paying
the current quarterly dividend rate of $0.15 per share in January 2005, an increase from the $0.13 per share that became effective in
January 2004. In May 2005, SYSCO declared its regular quarterly dividend for the first quarter of fiscal 2006 of $0.15 per share, which
was paid in July 2005. In September 2005, SYSCO also declared its regular quarterly dividend for the second quarter of fiscal 2006 of
$0.15 per share, payable in October 2005.

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 27, 2005, 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 27, 2005, $425,000,000 in debt securities had been issued under the registration statement, leaving
$75,000,000 available for issuance.

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 outstanding commercial paper.

In April 2005, SYSCO filed with the Securities and Exchange Commission a shelf registration statement covering $1,500,000,000 in
debt securities. The registration statement was declared effective in May 2005. In June 2005, SYSCO repaid the 6.5% senior notes total-
ing $150,000,000 at maturity utilizing a combination of cash flow from operations and commercial paper issuances. In July 2005, SYSCO
repaid the 4.75% senior notes totaling $200,000,000 at maturity also utilizing a combination of cash flow from operations and commer-
cial paper issuances. The company intends to issue between $350,000,000 and $500,000,000 of long-term debt in September 2005. The
amount of long-term debt that SYSCO issues will depend on market conditions at the time of issuance. The proceeds from such issuance
are intended to be utilized to repay outstanding commercial paper issuances and for working capital and general corporate purposes.

In March 2005, SYSCO entered into a forward-starting interest rate swap with a notional amount of $350,000,000 as a cash flow
hedge of the variability in the cash outflows of interest payments on the forecasted debt issuance due to changes in the benchmark
interest rate. The fair value of the swap as of July 2, 2005 was ($32,584,000), which is reflected in Accrued expenses on the Consolidated
Balance Sheet, with the corresponding amount reflected as a loss, net of tax, in Other comprehensive income.

SYSCO has uncommitted bank lines of credit, which provided for unsecured borrowings for working capital of up to $95,000,000, of

which $31,000,000 was outstanding as of July 2, 2005 and $33,200,000 was outstanding as of August 27, 2005.

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 facil-
ity in the amount of CAD $100,000,000, maturing in fiscal 2006. During fiscal 2005, 2004 and 2003, aggregate outstanding commercial
paper issuances and short-term bank borrowings ranged from approximately $28,560,000 to $253,384,000, $73,102,000 to $478,114,000,
and $55,813,000 to $495,703,000, respectively. Outstanding commercial paper issuances were $157,851,000 as of July 2, 2005 and
$519,186,000 as of August 27, 2005.

Also during the fall of 2005, the company intends to renegotiate its revolving bank credit facility which supports the U.S. commercial

paper program.

From August 1, 2005 through August 27, 2005, outstanding commercial paper issuances have averaged $511,847,000. This
increased level of commercial paper issuances is primarily a result of the repayment of the 6.5% senior notes and 4.75% senior notes,
which matured June 15, 2005 and July 30, 2005, respectively, coupled with a contribution to the qualified pension plan of $134,000,000
at the end of fiscal 2005. As described above, the company intends to issue long-term debt in September 2005. Until such time, SYSCO
believes that outstanding commercial paper issuances will continue at these current levels. The company expects to continue to meet
its capital investment and working capital requirements during this period. The company also believes that it continues to have access
to additional debt financing if needed.

Total debt at July 2, 2005 was $1,431,108,000, of which approximately 86% was at fixed rates averaging 5.6% and the remain-
der was at floating rates averaging 3.2%. Included in current maturities of long-term debt at July 2, 2005 are the 4.75% senior notes
totaling $200,000,000, which were repaid at maturity in July 2005, and the 7.0% senior notes totaling $200,000,000, which mature in
May 2006.

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 2, 2005 and July 3, 2004, letters of credit outstanding were $76,817,000 and $11,001,000,
respectively. The increase in letters of credit outstanding from July 3, 2004 to July 2, 2005 was due primarily to the issuance of a letter of
credit in April 2005 in the amount of $72,000,000 to satisfy the collateral requirement for an insurance agreement which was previously
satisfied with funds on deposit in an insurance trust.

In summary, management believes that the company’s cash flows from operations, as well as the availability of capital under its
existing commercial paper programs, bank lines of credit, debt shelf registration and its ability to access capital from financial markets
in the future, will be sufficient to 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:

(In thousands)

Total

Short-term debt and commercial paper .................................... $ 188,851
1,207,586
Long-term debt ..........................................................................
34,671
Capital lease obligations ...........................................................
305,402
Long-term non-capitalized leases .............................................
Deferred compensation (1) .........................................................
98,929
Purchase obligations (2) .............................................................
725,436
Total contractual cash obligations ............................................ $ 2,560,875

Payments Due by Period

Less Than
1 Year

63,998
401,521
9,412
56,824
4,623
714,910
$ 1,251,288

1-3 Years

3-5 Years

$ 124,853
104,921
4,366
76,772
7,415
10,526
$ 328,853

$ —
469
1,024
51,917
5,318
—
$ 58,728

More Than
5 Years

$ —
700,675
19,869
119,889
81,573
—
$ 922,006

(1) 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.

(2) 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. Purchase obligations also includes amounts committed with a third party to provide hardware
and hardware hosting services (See discussion under Commitments and Contingencies in the Notes to Consolidated Financial Statements in Item 8).

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 2, 2005 included
approximately 1,059,000 shares of SYSCO’s common stock and $105,614,000 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, income taxes, vendor consideration
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 com-
pany 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 assump-
tions. 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

Amounts related to defined benefit plans recognized in the financial statements are 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.

The measurement date for the pension and other postretirement benefit plans is fiscal year end for fiscal years 2005 and prior.
Beginning in fiscal 2006, the measurement date will be May 31st which represents a change in accounting. The one-month accelera-
tion of the measurement date will allow additional time for management to evaluate and report the actuarial pension measurements in
the year-end financial statements and disclosures within the accelerated filing deadlines of the Securities and Exchange Commission.
The cumulative effect of this change in accounting is expected to result in an increase to earnings in the first quarter of fiscal 2006 of
approximately $9,400,000, net of tax.

For guidance in determining the discount rate, SYSCO calculates the implied rate of return on a hypothetical portfolio of high-quality
fixed-income investments for which the timing and amount of cash outflows approximates the estimated payouts of the pension plans.
The discount rate assumption is reviewed annually and revised as deemed appropriate. The discount rate assumption utilized impacts
the recorded amount of net pension costs. The discount rate utilized to determine net pension costs for fiscal 2005 increased 0.25% to
6.25% from the discount rate utilized to determine net pension costs for fiscal 2004 of 6.00%. This 0.25% increase in the discount rate
decreased SYSCO’s net pension costs for fiscal 2005 by approximately $9,500,000. The discount rate for determining fiscal 2006 net
pension costs, which was determined as of the May 31, 2005 measurement date, decreased 0.65% to 5.60%. This 0.65% decrease will
increase SYSCO’s net pension costs for fiscal 2006 by approximately $29,300,000.

SYSCO looks to actual plan experience in determining the rates of increase in compensation levels. SYSCO used a plan specific
age-related set of rates (equivalent to a single rate of 5.89%) for the qualified pension plan (Retirement Plan), as of July 2, 2005 and
July 3, 2004. The Supplemental Executive Retirement Plan assumes annual salary increases of 10% through fiscal 2007 and 7% there-
after as of July 2, 2005 and July 3, 2004.

The expected long-term rate of return on plan assets of the Retirement Plan was 9.00% for fiscal 2005 and 2004. 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 10.9%, 10.3%, 3.3% and 12.3% over
the 20-year, 10-year, 5-year and 1-year periods ended December 31, 2004, respectively. In addition, in nine of the last 15 years, the actual
return on plan assets has exceeded 9.00%. The rate of return assumption is reviewed annually and revised as deemed appropriate.

The expected return on plan assets impacts the recorded amount of net pension costs. A 1.0% increase (decrease) in the assumed

rate of return for fiscal 2006 would decrease (increase) SYSCO’s net pension costs for fiscal 2006 by approximately $11,600,000.

Minimum pension liability adjustments are recorded so that the recorded pension liability is at least equal to the unfunded accumu-
lated 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 (or benefit) to shareholders’ equity, net of tax, through comprehensive loss (or income).
Amounts reflected in accumulated other comprehensive income or loss related to minimum pension liability, were charges, net of tax, of
$54,286,000 as of July 2, 2005, and $20,733,000 as of July 3, 2004.

Changes in the assumptions, including changes to the discount rate discussed above, together with the normal growth of the plan,
the impact of actuarial losses from prior periods and the timing and amount of contributions, decreased net pension costs $7,374,000 in
fiscal 2005 and is expected to increase net pension costs in fiscal 2006 by approximately $23,700,000.

The company made cash contributions to its pension plans of $220,361,000 and $165,512,000 in fiscal years 2005 and 2004,
respectively, including voluntary contributions to the Retirement Plan of $214,000,000 and $160,000,000 in fiscal 2005 and fiscal 2004,
respectively. Included in the amounts contributed in fiscal 2005 was $134,000,000 voluntarily contributed to the qualified pension plan
in the fourth quarter. The decision to increase the contributions to the Retirement Plan in fiscal 2005 was primarily due to the decreased
discount rate, which increased the pension obligation and negatively impacted the fiscal 2005 year-end pension funded status. In fiscal
2006, 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 $66,000,000, which is the estimated maximum
amount that will be tax deductible in fiscal 2006. The estimated fiscal 2006 contributions to fund benefit payments for the SERP and other
post-retirement plans together are approximately $7,997,000.

Income Taxes

The determination of the company’s provision for income taxes requires significant judgment, the use of estimates and the interpre-
tation and application of complex tax laws. The company’s provision for income taxes reflects a combination of income earned and taxed
in the various U.S. federal and state, as well as Canadian federal and provincial jurisdictions. Jurisdictional tax law changes, increases or
decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation
allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

Vendor Consideration

SYSCO recognizes consideration received from vendors when the services performed in connection with the monies received are
completed and when the related product has been sold by SYSCO. 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 consider-
ation 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 consid-
eration 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 in which the costs are incurred and related services performed.

Accounting for Business Combinations

Goodwill and intangible assets represent the excess of consideration paid 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

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), “Share-Based
Payment” (SFAS 123(R)), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). SFAS 123(R)
supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (APB Opinion 25), and amends SFAS No. 95, “Statement of
Cash Flows.” Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires
all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on
their fair values. Pro forma disclosure is no longer an alternative under the new standard.

SYSCO will adopt SFAS 123(R) in the first quarter of fiscal 2006. SFAS 123(R) allows for two transition methods. The basic difference
between the two methods is that the modified-prospective transition method does not require restatement of prior periods, whereas the
modified-retrospective transition method will require restatement.

As permitted by SFAS 123, the company currently accounts for share-based payments to employees using APB Opinion 25’s intrinsic
value method and, as such, generally recognizes no compensation cost for employee stock options or stock issuances under the employee
stock purchase plan. Although the full impact of the company’s adoption of SFAS 123(R)’s fair value method has not yet been determined,
the company expects that it will have a significant impact on its results of operations. The disclosure in the footnotes to the company’s
consolidated financial statements under Stock-Based Compensation of pro forma net income and earnings per share as if the company
had recognized compensation cost for share-based payments under SFAS 123 for periods prior to fiscal 2006 is not necessarily indicative
of the potential impact of recognizing compensation cost for share-based payments under SFAS 123(R) in future periods. The company
estimates that the earnings per share impact to fiscal 2006 resulting from recording compensation expense related to stock options and
the Employees’ Stock Purchase Plan will be approximately $0.11 to $0.13. The potential impact of adopting SFAS 123(R) on fiscal 2006’s
results of operations and earnings per share is dependent on several factors, including the number of options granted in fiscal 2006, the
fair value of those options which will be determined at the date of grant, the level of participation in the Employees’ Stock Purchase Plan,

the related income tax benefits recorded and the diluted shares outstanding. This estimate is based on certain assumptions as to these
factors and the actual impact may differ if actual results vary from the assumptions.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of APB Opinion No. 20,
“Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements.” The standard changes the
requirements for accounting for and reporting of a voluntary change in accounting principle requiring a retrospective application to prior
periods’ financial statements of the change in principle unless it is impracticable rather than the recording of a cumulative effect of the
change in accounting principle in net income in the year of change. The standard is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005.

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 also may 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 difficul-
ties 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.

Increased Fuel Costs

Increased fuel costs may have a negative impact on the Company’s results of operations. The high cost of fuel can negatively impact
consumer confidence and discretionary spending and thus reduce the frequency and amount spent by consumers for food prepared
away from home. The high cost of fuel can also increase the price paid by SYSCO for product as well as the costs incurred by SYSCO
to deliver product to its customers. These factors in turn may negatively impact SYSCO’s sales, margins, operating expenses and operat-
ing results.

Interruption of Supplies and Increases in Product Costs

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 and at the prices requested. Because SYSCO does not control the actual production of the products it sells, it also is subject
to delays caused by interruption in production and increases in product costs based on conditions outside its control. These conditions
include job actions or strikes by employees of suppliers, weather, crop conditions, transportation interruptions, increases in fuel costs,
competitive demands 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.

Leverage and Debt Service

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

Product Liability Claims

SYSCO, like any other seller of food, faces the risk of exposure to product liability claims in the event that the use of products sold by
the company causes injury or illness. With respect to product liability claims, SYSCO believes it has sufficient primary or excess umbrella
liability insurance. However, this insurance may not continue to be available at a reasonable cost, or, if available, may not be adequate

to cover all of SYSCO’s liabilities. SYSCO generally seeks contractual indemnification and insurance coverage from parties supplying 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.

Labor Relations

As of July 2, 2005, approximately 8,700 employees at 54 operating companies were members of 61 different local unions associated
with the International Brotherhood of Teamsters and other labor organizations. In fiscal 2006, 16 agreements covering approximately
2,400 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 fail-
ure to integrate acquisitions successfully may divert management’s attention from SYSCO’s existing business and may damage SYSCO’s
relationships with its key customers and suppliers.

Charter and Stockholder Rights Plan

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

Forward-Looking Statements

Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the
occurrence of future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include
statements about SYSCO’s ability to increase its market share and sales, long-term debt to capitalization target ratios, anticipated capital
expenditures, timing and expected benefits of the National Supply Chain project 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 also may be affected by cash flow including amounts spent
on share repurchases and 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 creditworthi-
ness of the counterparties in such transactions.

At July 2, 2005, the company had outstanding $157,851,000 of commercial paper at variable rates of interest with maturities through
July 29, 2005. The company’s total long-term debt obligations of $1,367,110,000 were primarily at fixed rates of interest. The company
intends to issue between $350,000,000 and $500,000,000 of long-term debt in September 2005. The amount of long-term debt that
SYSCO issues will depend upon market conditions at the time of issuance. In March 2005, SYSCO entered into a forward-starting interest
rate swap with a notional amount of $350,000,000 as a cash flow hedge of the variability in the cash outflows of interest payments on
$350,000,000 of the forecasted debt issuance due to changes in the benchmark interest rate.

During fiscal 2004 and part of fiscal 2005, SYSCO had several fixed to floating interest rate swaps outstanding. These were entered
into in fiscal 2004 as management believed that floating interest rates were more advantageous. During fiscal 2005, SYSCO terminated
the fixed to floating interest rate swaps outstanding locking in effective yields on the related debt.

Management believes that present market conditions reflect fixed long term rates near historical lows. As such, management
believes that fixed long term rates present a better opportunity than in the recent past and intends to issue long term debt at fixed rates
with extended terms in September 2005.

In the following tables, commercial paper issuances are reflected as floating rate debt and the U.S. commercial paper is classified
as long-term based on the maturity of the company’s revolving loan agreement which supports the company’s U.S. commercial paper
program and the company’s intent to continue to refinance this facility on a long-term basis.

The following tables present the company’s interest rate position as of July 2, 2005. All amounts are stated in U.S. dollar equivalents.

Interest Rate Position as of July 2, 2005
Principal Amount by Expected Maturity
Average Interest Rate

(In thousands)

2006

2007

2008

2009

2010

Thereafter

Total

Fair
Value

U.S. $ Denominated:
Fixed Rate Debt
Average Interest Rate
Floating Rate Debt
Average Interest Rate
Canadian $ Denominated:
Fixed Rate Debt
Average Interest Rate
Floating Rate Debt
Average Interest Rate

$ 410,724

$ 104,725

3,918

4.7%

8.0%

7.4%

$ 31,000

3.6%

$ —
—

$ 124,853

3.4%

209
9.8%

306
9.8%

338
9.8%

$ 32,998

2.7%

$ —
—

$ 360
4.3%
$ —
—

$ 372
9.8%
$ —
—

$ 350
4.6%
$ —
—

$ 411
9.8%
$ —
—

$ 686,267

$ 1,206,344

$ 1,280,666

5.7%

5.5%

$ 15,000

$ 170,853

2.6%

3.3%

$ 19,277

20,913

22,201

9.8%
—
—

9.8%

32,998

2.7%

(In thousands)

2006

2007

2008

2009

2010

Thereafter

Total

Fair
Value

Interest Rate Position as of July 2, 2005
Notional Amount by Expected Maturity
Average Interest Swap Rate

Interest Rate Swaps
Related to Debt:
Pay fixed/receive
Variable
Fixed rate paid:
Average variable rate
received:

Rate A — six-month LIBOR (in advance)

$ 350,000

$ —

—

$ 350,000

(32,584)

5.345%

Rate A

5.345%

Rate A

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 entered into interest rate swap agreements totaling $500,000,000 in notional amount whereby the company received
interest payments at fixed rates of interest and paid 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.

Interest Rate Position as of July 3, 2004
Principal Amount by Expected Maturity
Average Interest Rate

(In thousands)

2005

2006

2007

2008

2009

Thereafter

Total

Fair
Value

$ 162,734

$ 417,062

$ 105,093

$ 3,226

$ 1,442

$ 675,498

$ 1,365,055

$ 1,424,411

6.3%
—
—

99
9.4%

$ 73,834

2.2%

4.1%
—
—

196
9.8%
—
—

7.1%
—
—

287
9.8%
—
—

7.9%

5.5%

5.9%

5.5%

$ —
—

15,000

1.4%

$ 316

$ 350

18,453

9.8%

$ —
—

9.8%
—
—

19,701

20,558

9.8%

73,834

2.2%

(In thousands)

2005

2006

2007

2008

2009

Thereafter

Total

Fair
Value

Interest Rate Position as of July 3, 2004
Notional Amount by Expected Maturity
Average Interest Swap Rate

Interest Rate Swaps
Related to Debt:
Pay variable/receive

fixed

Average variable rate paid:
Rate A plus
Fixed rate received
Pay variable/receive

$ —

$ 200,000

$ 100,000

$ —

—

$ 300,000

$ (4,964)

—
—

4.61%
7.00%

4.30% —
7.25% —

—
—

4.50%
7.08%

fixed

$ —

$ 200,000

(466)

Average variable rate paid:
Rate B minus
Fixed rate received

—
—

0.62%
4.60%

Rate A — six-month LIBOR averaged over a six month period
Rate B — six-month LIBOR in arrears

The company does not believe that its foreign operations expose it to significant foreign exchange risk, since the exposure is limited

primarily to Canada and for which the amounts are not material on an overall basis to SYSCO.

Increased fuel costs may have a negative impact on the Company’s results of operations in three areas. First, the high cost of fuel
can negatively impact consumer confidence and discretionary spending and thus reduce the frequency and amount spent by consumers
for food prepared away from home. Second, the high cost of fuel can increase the price paid by SYSCO for product purchases for which
SYSCO may not be able to pass these costs fully to its customers. Third, increased fuel costs impact the costs incurred by SYSCO to
deliver product to its customers. During fiscal 2005, 2004 and 2003, fuel costs represented approximately 0.4%, 0.3% and 0.3% of sales,
respectively. Fuel costs incurred by SYSCO in fiscal 2005 increased by approximately $31,000,000 over fiscal 2004.

Item 8. Financial Statements and Supplementary Data

SYSCO CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements:

Page
Report of Management on Internal Control Over Financial Reporting ........................................................................................... 26
Report of Independent Registered Public Accounting Firm ............................................................................................................ 27
Report of Independent Registered Public Accounting Firm ............................................................................................................ 28
Consolidated Balance Sheets .......................................................................................................................................................... 29
Consolidated Results of Operations ................................................................................................................................................ 30
Consolidated Shareholders’ Equity .................................................................................................................................................. 31
Consolidated Cash Flows ................................................................................................................................................................. 32
Notes to Consolidated Financial Statements .................................................................................................................................. 33

Schedule:

II — Valuation and Qualifying Accounts ........................................................................................................................................S-1

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

statements or notes thereto.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of SYSCO Corporation (“SYSCO”) is responsible for establishing and maintaining adequate internal control over
financial reporting for the company. SYSCO’s internal control system is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation and fair presentation of published financial statements. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.

SYSCO’s management assessed the effectiveness of SYSCO’s internal control over financial reporting as of July 2, 2005. In making
this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control – Integrated Framework. Based on this assessment, management concluded that, as of July 2, 2005, SYSCO’s internal control
over financial reporting was effective based on those criteria.

Ernst & Young LLP has issued an audit report on management’s assessment of SYSCO’s internal control over financial reporting as

of July 2, 2005.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors
SYSCO Corporation

We have audited management’s assessment, included in the accompanying Report of Management on Internal Control Over
Financial Reporting, that SYSCO Corporation and its subsidiaries (“SYSCO” or “the Company”) maintained effective internal control over
financial reporting as of July 2, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the COSO criteria). SYSCO’s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal
control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over finan-
cial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial state-
ments.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projec-
tions of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that SYSCO maintained effective internal control over financial reporting as of July 2,
2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, SYSCO maintained, in all material respects,
effective internal control over financial reporting as of July 2, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), SYSCO’s
consolidated balance sheets as of July 2, 2005 and July 3, 2004 and the related consolidated results of operations, shareholders’
equity and cash flows for each of the three years in the period ended July 2, 2005 and our report dated September 9, 2005 expressed
an unqualified opinion thereon.

Houston, Texas
September 9, 2005

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 2, 2005 and July 3, 2004, and the related consolidated results of operations, shareholders’ equity, and cash flows for each of
the three years in the period ended July 2, 2005. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position
of SYSCO Corporation and subsidiaries at July 2, 2005 and July 3, 2004, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended July 2, 2005, 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of SYSCO Corporation’s internal control over financial reporting as of July 2, 2005, based on criteria established in the
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated September 9, 2005 expressed an unqualified opinion thereon.

Houston, Texas
September 9, 2005

SYSCO
CONSOLIDATED BALANCE SHEETS

(In thousands except for share data)

July 2, 2005

July 3, 2004

ASSETS
Current assets
Cash ........................................................................................................................................................... $ 191,678
2,284,033
Accounts and notes receivable, less allowances of $29,604 and $34,175 ............................................
1,466,161
Inventories .................................................................................................................................................
59,914
Prepaid expenses ......................................................................................................................................
Prepaid income taxes ................................................................................................................................
—
4,001,786
Total current assets ...............................................................................................................................
Plant and equipment at cost, less depreciation ...........................................................................................
2,268,301
Other assets
Goodwill and intangibles, less amortization ............................................................................................
Restricted cash ..........................................................................................................................................
Prepaid pension cost .................................................................................................................................
Other ..........................................................................................................................................................
Total other assets ..................................................................................................................................

1,284,459
101,731
389,766
221,859
1,997,815
Total assets .................................................................................................................................................... $ 8,267,902

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable ........................................................................................................................................... $
Accounts payable ......................................................................................................................................
Accrued expenses .....................................................................................................................................
Income taxes ..............................................................................................................................................
Deferred taxes ...........................................................................................................................................
Current maturities of long-term debt ........................................................................................................
Total current liabilities ..........................................................................................................................

63,998
1,795,824
742,282
10,195
434,338
410,933
3,457,570

Other liabilities
Long-term debt ..........................................................................................................................................
Deferred taxes ...........................................................................................................................................
Other long-term liabilities .........................................................................................................................
Total other liabilities .............................................................................................................................

956,177
724,929
370,387
2,051,493

Contingencies
Shareholders’ equity
Preferred stock, par value $1 per share

$ 199,706
2,189,127
1,404,410
54,903
3,265
3,851,411
2,166,809

1,218,700
169,326
243,996
197,390
1,829,412
$ 7,847,632

$
73,834
1,742,578
724,970
—
422,419
162,833
3,126,634

1,231,493
686,705
238,294
2,156,492

Authorized 1,500,000 shares, issued none ..........................................................................................

—

Common stock, par value $1 per share

Authorized shares 2,000,000,000; issued
765,174,900 shares ...............................................................................................................................
Paid-in capital ............................................................................................................................................
Retained earnings .....................................................................................................................................
Accumulated other comprehensive (loss) income ....................................................................................

765,175
389,053
4,552,379
(13,677)
5,692,930

Less cost of treasury stock, 136,607,370 and 128,639,869 shares .........................................................
Total shareholders’ equity .....................................................................................................................

2,934,091
2,758,839
Total liabilities and shareholders’ equity ...................................................................................................... $ 8,267,902

See Notes to Consolidated Financial Statements

765,175
332,041
3,959,714
17,640
5,074,570

2,510,064
2,564,506
$ 7,847,632

SYSCO
CONSOLIDATED RESULTS OF OPERATIONS

(In thousands except for share data)

July 2, 2005

Sales ....................................................................................................................... $ 30,281,914
Costs and expenses
Cost of sales .......................................................................................................
Operating expenses ............................................................................................
Interest expense .................................................................................................
Other, net ............................................................................................................
Total costs and expenses ...............................................................................
Earnings before income taxes ................................................................................
Income taxes ...........................................................................................................
Net earnings ........................................................................................................... $

24,498,200
4,194,184
75,000
(10,906)
28,756,478
1,525,436
563,979
961,457

Year Ended

July 3, 2004
(53 Weeks)

June 28, 2003

$ 29,335,403

$ 26,140,337

23,661,514
4,141,230
69,880
(12,365)
27,860,259
1,475,144
567,930
907,214

20,979,556
3,836,507
72,234
(8,347)
24,879,950
1,260,387
482,099
778,288

Net earnings:
Basic earnings per share .................................................................................... $
Diluted earnings per share .................................................................................

1.51
1.47

1.41
1.37

1.20
1.18

See Notes to Consolidated Financial Statements

SYSCO
CONSOLIDATED SHAREHOLDERS’ EQUITY

(In thousands except for share data)

Common Stock
Amount
Shares

Paid-in
Capital

Retained
Earnings

Accumulated Other
Comprehensive
Income (Loss)

Treasury Stock
Amount
Shares

Balance at June 29, 2002 .................... 765,174,900 $ 765,175 $ 217,891 $ 2,869,417 $ (65,435) 111,634,603 $ 1,654,529
Net earnings for year
ended June 28, 2003 ........................
Dividends declared ...............................
Treasury stock purchases .....................
Treasury stock issued for acquisitions .
Disqualifying dispositions ....................
Stock options exercised .......................
Employees’ Stock Purchase Plan .........
Management Incentive Plan ................
Minimum pension liability adjustment
Foreign currency

6,984
8,386
(8,895)
14,410
10,459

(2,918,905)
(1,886,090)
(861,156)

16,500,000
(951,127)

778,288
(273,852)

(42,588)
(29,809)
(12,982)

478,471
(9,270)

(119,683)

translation adjustment .....................

32,737

Balance at June 28, 2003 .................... 765,174,900 $ 765,175 $ 249,235 $ 3,373,853 $ (152,381) 121,517,325 $ 2,038,351
Net earnings for year
ended July 3, 2004 ...........................
Dividends declared ...............................
Treasury stock purchases .....................
Treasury stock issued for acquisitions .
Disqualifying dispositions ....................
Stock options exercised .......................
Employees’ Stock Purchase Plan .........
Management Incentive Plan ................
Minimum pension liability adjustment
Foreign currency

21,582
26,763
4,007
18,540
11,914

(5,193,289)
(1,620,535)
(940,843)

16,884,300
(2,007,089)

907,214
(321,353)

(86,745)
(28,833)
(15,951)

623,653
(20,411)

164,385

translation adjustment .....................

5,636
Balance at July 3, 2004 ........................ 765,174,900 $ 765,175 $ 332,041 $ 3,959,714 $ 17,640
Net earnings for year
ended July 2, 2005 ...........................
Dividends declared ...............................

961,457
(368,792)

128,639,869 $ 2,510,064

Treasury stock purchases .....................
Treasury stock issued for acquisitions .
Disqualifying dispositions ....................
Stock options exercised .......................
Employees’ Stock Purchase Plan .........
Management Incentive Plan ................
Minimum pension liability adjustment
Foreign currency
translation adjustment .....................
Change in fair value of forward-
starting interest rate swap ..............
Balance at July 2, 2005 ........................ 765,174,900 $ 765,175 $ 389,053 $ 4,552,379 $ (13,677) 136,607,370 $ 2,934,091

2,660
22,795
397
15,986
15,174

(5,901,240)
(1,712,244)
(1,001,624)

16,735,200
(152,591)

(116,468)
(34,375)
(19,673)

596,080
(1,537)

(33,553)

(20,121)

22,357

See Notes to Consolidated Financial Statements

SYSCO
CONSOLIDATED CASH FLOWS

(In thousands)

July 2, 2005

Year Ended

July 3, 2004
(53 Weeks)

June 28, 2003

Cash flows from operating activities:
Net earnings ............................................................................................................. $ 961,457
Add non-cash items:

Depreciation and amortization .............................................................................
Deferred tax provision ..........................................................................................
Provision for losses on receivables .....................................................................

316,743
554,850
18,587

$ 907,214

$ 778,288

283,595
608,152
27,377

273,142
481,330
27,133

(86,338)
1,191,840

(72,829)
(35,014)
(4,058)
28,080
(32,674)
(438,779)
(18,185)

Additional investment in certain assets and liabilities,
net of effect of businesses acquired:
(Increase) in receivables ...........................................................................................
(Increase) in inventories ...........................................................................................
(Increase) in prepaid expenses ................................................................................
Increase in accounts payable ...................................................................................
(Decrease) increase in accrued expenses ...............................................................
(Decrease) in accrued income taxes ........................................................................
(Increase) in other assets .........................................................................................
(Decrease) in other long-term liabilities and
prepaid pension cost, net .....................................................................................
Net cash provided by operating activities ...............................................................
Cash flows from investing activities:
Additions to plant and equipment ...........................................................................
Proceeds from sales of plant and equipment ..........................................................
Acquisition of businesses, net of cash acquired .....................................................
Decrease (increase) in restricted cash ....................................................................
Net cash used for investing activities .....................................................................
Cash flows from financing activities:
(9,836)
Bank and commercial paper (repayments) borrowings ...........................................
(32,796)
Other debt (repayments) borrowings .......................................................................
5,316
Cash from termination of interest rate swap ..........................................................
208,004
Common stock reissued from treasury ....................................................................
(597,660)
Treasury stock purchases .........................................................................................
(357,298)
Dividends paid ..........................................................................................................
(784,270)
Net cash used for financing activities .....................................................................
(2,158)
Effect of exchange rates on cash ................................................................................
(8,028)
Net (decrease) increase in cash ...................................................................................
199,706
Cash at beginning of year ............................................................................................
Cash at end of year ...................................................................................................... $ 191,678

(390,203)
25,482
(115,637)
66,918
(413,440)

(177,058)
(162,502)
(2,183)
95,874
61,544
(392,197)
(25,238)

(35,056)
1,189,522

(530,086)
15,851
(79,247)
(90,329)
(683,811)

(77,849)
185,087
1,305
167,652
(608,506)
(309,540)
(641,851)
(1,601)
(137,741)
337,447
$ 199,706

(218,150)
(69,959)
(9,509)
237,360
(12,480)
(33,121)
(8,380)

(72,814)
1,372,840

(435,637)
14,629
(209,010)
(51,807)
(681,825)

85,224
(12,098)
15,359
101,312
(478,471)
(261,854)
(550,528)
(1,479)
139,008
198,439
$ 337,447

Supplemental disclosures of cash flow information:
Cash paid during the year for:

Interest .................................................................................................................. $
Income taxes ........................................................................................................

73,939
436,378

68,481
344,414

$ 69,103
28,747

See Notes to Consolidated Financial Statements

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 prod-
ucts primarily to the foodservice or “food-prepared-away-from-home” industry. These services are performed for approximately 390,000
customers from 160 principal distribution facilities located throughout the United States and Canada.

The accompanying financial statements include the accounts of SYSCO and its subsidiaries. All significant intercompany transac-
tions and account balances have been eliminated. Certain amounts in the prior years have been reclassified to conform to the fiscal 2005
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 estimate used.

Accounts Receivable

Accounts receivable consist primarily of trade receivables from customers and receivables from suppliers for marketing or incen-
tive 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 $29,604,000 as of July 2, 2005 and $34,175,000 as of July 3, 2004. Customer accounts written off, net of recoveries,
were $20,840,000 or 0.07% of sales, $28,485,000 or 0.10% of sales, and $24,771,000 or 0.09% of sales for fiscal 2005, 2004 and 2003,
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 $4,316,000 in 2005, $7,495,000 in 2004 and $5,244,000 in 2003.

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

July 2, 2005

July 3, 2004

Plant and equipment, at cost:
Land .......................................................................................................... $ 208,189,000
1,916,454,000
Buildings and improvements ...................................................................
2,121,307,000
Fleet, equipment and software ...............................................................
4,245,950,000
(1,977,649,000)
Accumulated depreciation ..........................................................................
Net plant and equipment ............................................................................ $ 2,268,301,000

$ 186,628,000
1,774,870,000
2,021,326,000
3,982,824,000
(1,816,015,000)
$ 2,166,809,000

Estimated
Useful Lives

10-40 years
3-20 years

Depreciation expense for the past three years was $298,111,000 in 2005, $273,030,000 in 2004 and $263,480,000 in 2003.

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. Goodwill and intangibles
with indefinite lives are not amortized. Intangibles with definite lives are amortized over their useful lives, generally ranging from three
to ten years. Intangibles, net of amortization, totaled $71,856,000 and $43,716,000 as of July 2, 2005 and July 3, 2004, respectively,
and relate primarily to customer relationships, trademarks and non-compete agreements with key personnel. 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:

Broadline ............................................................................................................................................ $ 674,682,000
SYGMA ..............................................................................................................................................
60,660,000
Other ..................................................................................................................................................
549,117,000
Total ................................................................................................................................................... $ 1,284,459,000

$ 658,075,000
61,851,000
498,774,000
$ 1,218,700,000

July 2, 2005

July 3, 2004

The above amounts are presented net of accumulated amortization of $153,544,000 and $145,975,000 as of July 2, 2005 and July 3,

2004, respectively. Amortization expense for the past three years was $7,569,000 in 2005, $4,244,000 in 2004 and $1,754,000 in 2003.

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 com-
pany 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

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.

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. SYSCO will adopt SFAS No. 123 (revised 2004), “Share-Based Payment” in the first quarter of fiscal
2006. See “New Accounting Standards” for further discussion of this new standard and the impact to SYSCO.

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:

Net earnings:
Reported net earnings ......................................................................................... $ 961,457,000
Add: Stock-based employee compensation

expense included in reported earnings, net of

$ 907,214,000

$ 778,288,000

related tax effects (1) .......................................................................................

11,349,000

22,620,000

17,307,000

Deduct: Total stock-based employee

2005

2004
(53 Weeks)

2003

compensation expense determined under fair
value based method for all awards, net of related tax effects .....................

(99,330,000)
Pro forma net earnings ........................................................................................ $ 873,476,000
Basic earnings per share:
Reported basic earnings per share ..................................................................... $
Pro forma basic earnings per share ....................................................................
Diluted earnings per share:
Reported diluted earnings per share .................................................................. $
Pro forma diluted earnings per share .................................................................

1.51
1.37

1.47
1.36

(1) Amounts represent the after-tax compensation costs for stock grants.

(108,179,000)
$ 821,665,000

(100,838,000)
$ 694,757,000

1.41
1.28

1.37
1.26

1.20
1.07

1.18
1.06

The weighted average fair value of options granted was $7.12, $6.74 and $6.88 per share during fiscal 2005, 2004 and 2003,
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:

Dividend yield
Expected volatility
Risk-free interest rate
Expected life

2005

2004

1.45%
22%
3.4%
5 years

1.49%
22%
3.2%
5 years

2003

1.45%
25%
2.7%
5 years

The weighted average fair value of employee stock purchase rights issued pursuant to the Employees’ Stock Purchase Plan was
$5.19, $5.17 and $4.14 per share during fiscal 2005, 2004 and 2003, respectively. The fair value of the stock purchase rights was calcu-
lated 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 2005, 2004 and 2003 are not

necessarily indicative of the pro forma effects in future years.

Shipping and Handling Costs

Shipping and handling costs include costs associated with the selection of products and delivery to customers. Included in oper-
ating expenses are shipping and handling costs of approximately $1,718,485,000 in fiscal 2005, $1,624,552,000 in fiscal 2004, and
$1,505,360,000 in fiscal 2003.

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 2005, in the aggregate, the company paid cash of $115,637,000 and issued 214,145 shares with a value of $4,196,000
for acquisitions during fiscal 2005 and for contingent consideration related to operations acquired in previous fiscal years. In addition,
escrowed funds related to certain acquisitions in the amount of $676,000 were released to sellers during fiscal 2005.

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 infor-
mation 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 2, 2005 included
approximately 1,059,000 shares and $105,614,000 in cash, which, if distributed, could result in the recording of up to $126,992,000 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.

During fiscal years 2003, 2004 and 2005, the company entered into various interest rate swap agreements as fair value hedges of
the related debt. The terms of these swap agreements and the hedged items were 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,” was applied and there was no need
to periodically reassess the effectiveness of the hedges during the terms of the swaps. Interest expense on the debt was adjusted to
include payments made or received under the hedge agreements. The fair value of the swaps was carried as an asset or a liability on the
Consolidated Balance Sheet and the carrying value of the hedged debt was adjusted accordingly. As of July 3, 2004, the fair value of the
outstanding swaps designated as fair value hedges was ($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 fair value hedges
outstanding as of July 2, 2005.

The amount received upon termination of swap agreements was $5,316,000, $1,305,000 and $15,359,000 in fiscal years 2005, 2004
and 2003, respectively. The amount received upon termination of swap agreements 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.

The company intends to issue between $350,000,000 and $500,000,000 of long-term debt in September 2005. The amount of long-
term debt that SYSCO issues will depend on market conditions at the time of issuance. In March 2005, SYSCO entered into a forward-
starting interest rate swap with a notional amount of $350,000,000. In accordance with SFAS No. 133, the company has designated
this derivative as a cash flow hedge of the variability in the cash outflows of interest payments on $350,000,000 of the forecasted
debt issuance due to changes in the benchmark interest rate. The fair value of the swap as of July 2, 2005 was ($32,584,000), which is
reflected in Accrued expenses on the Consolidated Balance Sheet, with the corresponding amount reflected as a loss, net of tax, in Other
comprehensive income.

New Accounting Standards

On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123(R)), which is a revision of
SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). SFAS 123(R) supersedes APB Opinion No. 25, “Accounting for
Stock Issued to Employees” (APB Opinion 25), and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS
123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer
an alternative under the new standard.

As permitted by SFAS 123, the company currently accounts for share-based payments to employees using APB Opinion 25’s intrinsic
value method and, as such, generally recognizes no compensation cost for employee stock options or stock issuances under the employee
stock purchase plan. Although the full impact of the company’s adoption of SFAS 123(R)’s fair value method has not yet been determined,
the company expects that it will have a significant impact on its results of operations. The disclosure in the footnotes to the company’s
consolidated financial statements under Stock-Based Compensation of pro forma net income and earnings per share as if the company
had recognized compensation cost for share-based payments under SFAS 123 for periods prior to fiscal 2006 is not necessarily indicative
of the potential impact of recognizing compensation cost for share-based payments under SFAS 123(R) in future periods. The company
estimates that the earnings per share impact to fiscal 2006 resulting from recording compensation expense related to stock options and
the Employees’ Stock Purchase Plan will be approximately $0.11 to $0.13. The potential impact of adopting SFAS 123(R) on fiscal 2006’s
results of operations and earnings per share is dependent on several factors including the number of options granted in fiscal 2006, the
fair value of those options which will be determined at the date of grant, the level of participation in the Employees’ Stock Purchase Plan,
the related income tax benefits recorded and the diluted shares outstanding. This estimate is based on certain assumptions as to these
factors and the actual impact may differ if actual results vary from the assumptions.

ADDITIONAL FINANCIAL INFORMATION

Income Taxes

The income tax provision for each fiscal year consists of the following:

United States federal income taxes ......................................................................... $ 485,499,000
State, local and foreign income taxes ......................................................................
78,480,000
Total ........................................................................................................................... $ 563,979,000

$ 473,757,000
94,173,000
$ 567,930,000

$ 408,902,000
73,197,000
$ 482,099,000

2005

2004
(53 Weeks)

2003

Included in the income taxes charged to earnings are net deferred tax provisions of $554,850,000, $608,152,000, and $481,330,000
in fiscal 2005, 2004 and 2003, 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 in fiscal 2005, 2004 and 2003 were also impacted by 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. These
reclassifications were $473,970,000 and $412,339,000 in fiscal 2005 and 2004, respectively.

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

July 2, 2005

July 3, 2004

Deferred tax liabilities:
Deferred supply chain distributions ............................................................................................... $ 856,741,000
Excess tax depreciation and basis differences of

$ 814,707,000

Assets .........................................................................................................................................
Pension ...........................................................................................................................................
Other ...............................................................................................................................................
Total deferred tax liabilities .......................................................................................................

398,690,000
59,836,000
13,864,000
1,329,131,000

373,369,000
33,610,000
12,499,000
1,234,185,000

Deferred tax assets:
83,609,000
Net operating tax loss carryforwards ............................................................................................
40,640,000
Deferred compensation ..................................................................................................................
33,246,000
Casualty insurance .........................................................................................................................
25,081,000
Receivables .....................................................................................................................................
32,856,000
Inventory .........................................................................................................................................
31,766,000
Other ...............................................................................................................................................
247,198,000
Total deferred tax assets ..........................................................................................................
77,334,000
Valuation allowances .....................................................................................................................
Total net deferred tax liabilities ......................................................................................................... $ 1,159,267,000

68,501,000
31,343,000
30,479,000
23,123,000
23,738,000
16,378,000
193,562,000
68,501,000
$ 1,109,124,000

Deferred supply chain distributions are classified as current or deferred tax liabilities based on when the related income tax pay-
ments 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 net operating loss carryforwards,
excess tax depreciation and pension contributions, taxes paid during fiscal 2005 and 2004 increased to $436,378,000 and $344,414,000,
respectively, as compared to $28,747,000 in fiscal 2003. The net cash flow impact of supply chain distribution deferrals in fiscal 2005 was

incrementally positive when compared to what would have been paid on an annual basis without the deferral, due to increased volume
through this structure.

The amount of taxes paid in fiscal 2004 was reduced by $70,615,000 as the result of the utilization of a U.S. federal net operating
loss carryforward. This net operating loss carryforward was generated in fiscal 2003 primarily as a result of the deferral of supply chain
distributions.

Also impacting the amount of taxes paid in each year is the amount of deductible pension contributions made in each year. The
company expects that its pension contributions in fiscal 2006 will be substantially less than the contributions made in the preceeding
three fiscal years.

The company had state and Canadian net operating losses at July 2, 2005 and July 3, 2004, respectively. The net operating losses
outstanding at July 2, 2005 expire in fiscal years 2006 through 2025. A valuation allowance of $77,334,000 and $68,501,000 was recorded
as of July 2, 2005 and July 3, 2004, 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:

United States statutory federal income tax rate ...................................................................................... 35.00%
State and local income taxes, net of federal income tax benefit ...........................................................
Other ..........................................................................................................................................................

2.74
(0.77)
36.97%

35.00%
3.21
0.29
38.50%

35.00%
3.07
0.18
38.25%

2005

2004

2003

In evaluating the exposures connected with the various tax filing positions, the company establishes an accrual when, despite
management’s belief that the company’s tax return positions are supportable, management believes that certain positions may be suc-
cessfully challenged and a loss is probable. When facts and circumstances change, these accruals are adjusted. Included in income tax
expense for fiscal 2005 is the reversal of an accrual for tax contingencies of $11,000,000. Based on additional information and supported
by a third party analysis, the company concluded that the accrual was no longer necessary. Liabilities recorded related to tax contingen-
cies as of July 2, 2005 are not material.

Also included in income tax expense in the fourth quarter of fiscal 2005 are income tax adjustments totaling $8,500,000. These
adjustments primarily related to the reversal of valuation allowances of certain state tax loss carryforwards. In the fourth quarter of fiscal
2005, management determined that it is more likely than not that the benefits of certain state tax loss carryforwards will be realized and
reversed the related valuation allowances recording a benefit to income tax expense totaling $6,275,000.

The company intends to permanently reinvest the undistributed earnings of its Canadian subsidiaries in those businesses outside of
the United States and, therefore, has not provided for deferred income taxes on such undistributed foreign earnings. The determination
of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable.

Restricted Cash

SYSCO is required by its insurers to collateralize a part of 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 or by issuing letters of credit.

In addition, for certain acquisitions, SYSCO has placed funds into escrow to be disbursed to the sellers in the event that specified
operating results are attained or contingencies are resolved. Escrowed funds related to certain acquisitions in the amount of $676,000
were released to sellers during fiscal 2005.

A summary of restricted cash balances appears below:

Funds deposited in insurance trusts .......................................................................................................... $ 80,410,000
21,321,000
Escrow funds related to acquisitions .........................................................................................................
Total ............................................................................................................................................................ $ 101,731,000

$ 147,329,000
21,997,000
$ 169,326,000

July 2, 2005

July 3, 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:

Numerator:

2005

2004
(53 Weeks)

2003

Income available to common shareholders ........................................................... $ 961,457,000

$ 907,214,000

$ 778,288,000

Denominator:
Weighted-average basic shares outstanding ........................................................
Dilutive effect of employee and director stock options ........................................
Weighted-average diluted shares outstanding .....................................................
Basic earnings per share ............................................................................................ $
Diluted earnings per share .........................................................................................

636,068,266
17,088,851
653,157,117
1.51
1.47

642,688,614
19,230,620
661,919,234
1.41
$
1.37

650,600,652
10,934,730
661,535,382
1.20
$
1.18

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 68,000, zero and 13,620,000 for fiscal 2005, 2004 and 2003, respectively.

Dividends declared were $368,792,000, $321,353,000 and $273,852,000 in fiscal 2005, 2004 and 2003, respectively. Included in
dividends declared for each year were dividends declared but not yet paid at year end of approximately $95,000,000, $83,000,000 and
$71,000,000 in fiscal 2005, 2004 and 2003, 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 associ-
ated 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, fol-
lowing 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:

Minimum Pension
Liability

Foreign Currency
Translation

Forward-Starting
Interest Rate Swap

(119,683,000)
—
(185,118,000)

Balance at June 29, 2002 ................................................. $ (65,435,000)
Minimum pension liability adjustment,
net of tax of ($74,136,000) ............................................
Foreign currency translation adjustment ..........................
Balance at June 28, 2003 .................................................
Minimum pension liability adjustment,
net of tax of $101,689,000 ............................................
Foreign currency translation adjustment ..........................
Balance at July 3, 2004 .....................................................
Minimum pension liability adjustment,
net of tax of ($20,861,000) ............................................
Foreign currency translation adjustment ..........................
Change in fair value of forward-starting
interest rate swap, net of tax of
($12,463,000) .................................................................

—
Balance at July 2, 2005 ..................................................... $ (54,286,000)

164,385,000
—
(20,733,000)

(33,553,000)
—

—

—
32,737,000
32,737,000

—
5,636,000
38,373,000

—
22,357,000

—

—
—
—

—
—

Total

$ (65,435,000)

(119,683,000)
32,737,000
(152,381,000)

164,385,000
5,636,000
17,640,000

(33,553,000)
22,357,000

—
$ 60,730,000

(20,121,000)
$ (20,121,000)

(20,121,000)
$ (13,677,000)

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

Net earnings ......................................................................................................... $ 961,457,000
(33,553,000)
Minimum pension liability adjustment, net of tax ..............................................
Foreign currency translation adjustment .............................................................
22,357,000
Change in fair value of forward-starting

2005

2004
(53 Weeks)

$ 907,214,000
164,385,000
5,636,000

2003

$ 778,288,000
(119,683,000)
32,737,000

interest rate swap, net of tax ..........................................................................

(20,121,000)
Other comprehensive income ............................................................................... $ 930,140,000

—
$ 1,077,235,000

—
$ 691,342,000

Debt

SYSCO’s debt consists of the following:

July 2, 2005

July 3, 2004

Short-term borrowings, interest at 3.6% as of July 2, 2005 ............................................................... $ 31,000,000
Commercial paper, interest averaging 3.2% as of
July 2, 2005 and 2.1% as of July 3, 2004 ........................................................................................ 157,851,000
Senior notes, interest at 6.5%, maturing in fiscal 2005 ......................................................................
—
Senior notes, interest at 7.0%, maturing in fiscal 2006 ...................................................................... 198,011,000
Senior notes, interest at 4.75%, maturing in fiscal 2006 .................................................................... 200,551,000
Senior notes, interest at 7.25%, maturing in fiscal 2007 ....................................................................
98,335,000
Senior notes, interest at 6.1%, maturing in fiscal 2012 ...................................................................... 200,655,000
Senior notes, interest at 4.6%, maturing in fiscal 2014 ...................................................................... 209,644,000
Debentures, interest at 7.16%, maturing in fiscal 2027 .....................................................................
50,000,000
Debentures, interest at 6.5%, maturing in fiscal 2029 ........................................................................ 224,453,000
Industrial Revenue Bonds, mortgages and other debt,

—

73,834,000
149,915,000
197,151,000
207,739,000
97,776,000
200,749,000
199,423,000
50,000,000
224,427,000

interest averaging 5.7% as of July 2, 2005 and 5.5%

as of July 3, 2004, maturing at various dates to

fiscal 2026 .........................................................................................................................................

60,608,000
Total debt ............................................................................................................................................... 1,431,108,000
(474,931,000)
Less current maturities and short-term debt ........................................................................................
Net long-term debt ................................................................................................................................ $ 956,177,000

67,146,000
1,468,160,000
(236,667,000)
$ 1,231,493,000

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

2006 ................................................................................................... $ 474,931,000
105,031,000
2007 ...................................................................................................
129,109,000
2008 ...................................................................................................
732,000
2009 ...................................................................................................
761,000
2010 ...................................................................................................

Amount

SYSCO has uncommitted bank lines of credit, which provided for unsecured borrowings for working capital of up to $95,000,000.

Borrowings outstanding under these lines of credit were $31,000,000 and zero, as of July 2, 2005 and July 3, 2004, respectively.

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 and expects to do
so in the fall of 2005. As a result, the commercial paper issuances supported by this agreement have been classified as long-term debt.
The United States commercial paper issuances outstanding at July 2, 2005 and July 3, 2004 were $124,853,000 and zero, respectively.

SYSCO also has a revolving loan agreement in the amount of $100,000,000 in Canadian dollars (CAD), maturing in fiscal 2006, which
supports the company’s Canadian commercial paper program. The Canadian commercial paper issuances outstanding at July 2, 2005 and
July 3, 2004 were CAD $40,996,000 ($32,998,000 in U.S. dollars) and CAD $97,768,000 ($73,834,000 in U.S. dollars), respectively.

In April 2005, SYSCO filed with the Securities and Exchange Commission a shelf registration statement covering $1,500,000,000 in
debt securities. The registration statement was declared effective in May 2005. In June 2005, SYSCO repaid the 6.5% senior notes totaling
$150,000,000 at maturity utilizing a combination of cash flow from operations and commercial paper issuances. In July 2005, SYSCO repaid
the 4.75% senior notes totaling $200,000,000 at maturity also utilizing a combination of cash flow from operations and commercial paper
issuances. The company intends to issue between $350,000,000 and $500,000,000 of long-term debt in September 2005. The amount
of long-term debt that SYSCO issues will depend upon market conditions at the time of issuance. The proceeds from such issuance are
intended to be utilized to repay outstanding commercial paper issuances and for working capital and general corporate purposes.

The 6.5% debentures due August 1, 2028 and the 4.60% Notes due March 15, 2014 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.

The 7.0% senior notes due May 1, 2006 and the 7.25% senior notes due April 15, 2007 are unsecured, are not redeemable prior to

maturity and are not subject to any sinking fund requirement.

The 7.16% debentures due April 15, 2027 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.

The 6.10% senior notes due June 1, 2012 , issued by SYSCO International, Co., a wholly-owned subsidiary of SYSCO, are fully and
unconditionally guaranteed by Sysco Corporation, are not subject to any sinking fund requirement, and include a redemption provision
which allow 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.

SYSCO’s Industrial Revenue Bonds have varying structures. Final maturities range from six to 21 years and certain of the bonds
provide SYSCO the right to redeem (or call) the bonds at various dates. These call provisions generally provide the bondholder a premium
in the early call years, declining to par value as the bonds approach maturity.

Total debt at July 2, 2005 was $1,431,108,000, of which approximately 86% was at fixed rates averaging 5.6% with an average life
of 9 years, and the remainder was at floating rates averaging 3.2%. 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 2, 2005.

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
$1,442,721,000 at July 2, 2005 and $1,459,969,000 at July 3, 2004, respectively.

As of July 2, 2005 and July 3, 2004, letters of credit outstanding were $76,817,000 and $11,001,000, 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 $92,710,000, $86,842,000, and $83,597,000 in fiscal 2005, 2004
and 2003, respectively. Contingent rentals, subleases and assets and obligations under capital leases are not significant.

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

2006 ...............................................................................................
2007 ...............................................................................................
2008 ...............................................................................................
2009 ...............................................................................................
2010 ...............................................................................................
Later years ....................................................................................

Amount

$ 56,824,000
42,355,000
34,417,000
27,973,000
23,944,000
119,889,000

Stock-Based Compensation Plans

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:

Options Exercisable

Options Outstanding

Maximum
Shares
Exercisable

Weighted
Average Exercise
Price Per Share

Shares
Under
Option

Weighted
Average Exercise
Price Per Share

Balance at June 29, 2002 ................................................ 11,251,541
Cancelled .........................................................................
Exercised ..........................................................................
Balance at June 28, 2003 ................................................ 11,514,379
Cancelled .........................................................................
Exercised ..........................................................................
Balance at July 3, 2004 .................................................... 10,020,584
Cancelled .........................................................................
Exercised ..........................................................................
Balance at July 2, 2005 .................................................... 8,256,214

$ 11.38

13.01

14.50

$ 15.29

17,939,346
(224,261)
(2,686,279)
15,028,806
(120,053)
(3,334,121)
11,574,632
(74,530)
(2,628,670)
8,871,432

$ 13.78
16.33
11.76
14.12
15.25
12.13
14.68
16.39
12.85
$ 15.20

The following table summarizes information about options outstanding under the 1991 Plan as of July 2, 2005:

Options Exercisable

Options Outstanding

Range of Exercise Prices

$7.19 to $8.75 .................................. 2,125,816
$10.94 to $16.28 .............................. 3,025,575
$17.25 to $20.97 .............................. 3,104,823
Balance at July 2, 2005 ................... 8,256,214

2000 Stock Incentive Plan

Weighted
Average Exercise
Price Per Share

$ 8.24
14.52
20.86
$ 15.29

2,416,253
3,100,862
3,354,317
8,871,432

Weighted Average
Remaining
Contractual Life (Yrs)

Weighted
Average Exercise
Price Per Share

1.54
3.83
5.17
3.71

$ 8.26
14.49
20.87
$ 15.20

The 2000 Stock Incentive Plan (2000 Plan) was adopted in fiscal 2001 and provided 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
originally reserved 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 and any shares issued under the 1991 Plan that are forfeited, expire or
are cancelled and up to 10,000,000 shares of common stock which were reacquired by the company in the open market or in private
transactions after November 3, 2000. The 2000 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, 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; options granted after July 3, 2004
have a contractual life of seven years. No stock appreciation rights or other stock-based awards were issued under this plan. No further
grants will be made under this plan, which expired in November 2004 and was replaced by the 2004 Stock Option Plan.

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

Options Exercisable

Options Outstanding

Maximum
Shares
Exercisable

Weighted
Average Exercise
Price Per Share

Shares
Under
Option

Weighted
Average Exercise
Price Per Share

Balance at June 29, 2002 ................................................ 2,422,383
Granted .............................................................................
Cancelled ..........................................................................
Exercised ...........................................................................
Balance at June 28, 2003 ................................................ 5,391,843
Granted .............................................................................
Cancelled ..........................................................................
Exercised ...........................................................................
Balance at July 3, 2004 .................................................... 21,420,393
Granted .............................................................................
Cancelled ..........................................................................
Exercised ...........................................................................
Balance at July 2, 2005 .................................................... 28,541,947

$ 27.77

27.78

28.89

$ 29.09

30,219,105
13,650,211
(1,332,640)
(292,313)
42,244,363
13,344,746
(1,097,937)
(2,223,216)
52,267,956
8,515,000
(1,464,852)
(3,151,807)
56,166,297

$ 27.80
30.57
28.48
27.79
28.67
31.77
29.45
28.15
29.47
32.19
30.24
28.69
$ 29.90

The following table summarizes information about options outstanding under the 2000 Plan as of July 2, 2005:

Options Exercisable

Options Outstanding

Range of Exercise Prices

$26.16 to $29.82 .............................. 17,163,127
$30.57 to $34.73 .............................. 11,378,820
Balance at July 2, 2005 ................... 28,541,947

Weighted
Average Exercise
Price Per Share

$ 27.79
31.06
$ 29.09

23,749,467
32,416,830
56,166,297

Weighted Average
Remaining
Contractual Life (Yrs)

Weighted
Average Exercise
Price Per Share

6.20
7.31
6.84

$ 27.80
31.45
$ 29.90

The total number of options granted under the 2000 Plan was 8,515,000, 13,344,746 and 13,650,211 in fiscal years 2005, 2004 and
2003, respectively. During fiscal 2005, 2,763,000 options were granted to approximately 2,700 non-executive employees based on tenure,
557,000 options were granted to 18 executive officers and 5,195,000 options were granted to approximately 1,700 other key employees.
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.

2004 Stock Option Plan

The 2004 Stock Option Plan (2004 Plan) was adopted in fiscal 2005 and reserves 23,500,000 shares of SYSCO common stock for
grants of options and dividend equivalents to directors, officers and other employees of the company and its subsidiaries at the market
price at the date of grant. The 2004 Plan provides for the issuance of options qualified as incentive stock options under the Internal
Revenue Code of 1986, options which are not so qualified, and dividend equivalents. Vesting requirements for awards under this plan
will vary by individual grant and may include a combination of both time-based and performance-based vesting. The contractual life
of all options granted under this plan will be no greater than seven years. During fiscal 2005, 108,000 options were granted to 20 key
employees. As of July 2, 2005, there were 23,392,000 remaining shares authorized and available for grant.

The following summary presents information with regard to options under the 2004 Plan:

Granted ................................................................................
Balance at July 2, 2005 .......................................................

—

$ —

Maximum
Shares
Exercisable

Weighted
Average Exercise
Price Per Share

Shares
Under
Option

108,000
108,000

Weighted
Average Exercise
Price Per Share

$ 37.06
$ 37.06

Options Exercisable

Options Outstanding

The following table summarizes information about options outstanding under the 2004 Plan as of July 2, 2005:

Options Exercisable

Options Outstanding

Range of Exercise Prices

Weighted
Average Exercise
Price Per Share

$37.05 to $37.18 ...............................
Balance at July 2, 2005 ....................

—
—

$ —
—
$

108,000
108,000

Weighted Average
Remaining
Contractual Life (Yrs)

Weighted
Average Exercise
Price Per Share

6.88
6.88

$ 37.06
$ 37.06

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:

Options Exercisable

Options Outstanding

Maximum
Shares
Exercisable

Weighted
Average Exercise
Price Per Share

Balance at June 29, 2002 .................................................. 466,719
Exercised .............................................................................
Balance at June 28, 2003 .................................................. 332,468
Exercised .............................................................................
Balance at July 3, 2004 ...................................................... 229,688
Exercised .............................................................................
Balance at July 2, 2005 ...................................................... 220,315

$ 10.82

12.31

13.19

$ 13.26

Shares
Under
Option

466,719
(134,251)
332,468
(102,780)
229,688
(9,373)
220,315

Weighted
Average Exercise
Price Per Share

$ 10.82
7.11
12.31
10.35
13.19
11.59
$ 13.26

The following table summarizes information about options outstanding under the Guest Supply Plans as of July 2, 2005:

Options Exercisable

Options Outstanding

Range of Exercise Prices

$10.00 to $14.84 ............................... 132,634

87,681
$15.95 to $18.43 ...............................
Balance at July 2, 2005 .................... 220,315

Weighted
Average Exercise
Price Per Share

$ 10.94

16.76
$ 13.26

132,634

87,681
220,315

Weighted Average
Remaining
Contractual Life (Yrs)

Weighted
Average Exercise
Price Per Share

3.28

2.57
3.00

$ 10.94

16.76
$ 13.26

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 in November 1998. The plan was amended and restated in November 2001.

The Non-Employee Directors Stock Plan 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 this plan through July 3, 2004 is 10 years; options
granted after July 3, 2004 have a contractual life of seven years.

As of July 2, 2005, options for a total of 824,000 shares have been granted under these plans, of which 194,664 have been exercised,
32,000 have been cancelled and 432,536 are available for exercise. As of July 2, 2005, there were 135,898 remaining shares authorized
and available for grant under the Non-Employee Directors Stock Plan.

The following table summarizes information about options outstanding under both of the Non-Employee Director Plans as of

July 2, 2005:

Options Exercisable

Options Outstanding

Range of Exercise Prices

$7.47 to $10.00 ................................. 128,000

$13.75 to $19.56 ............................... 114,668

$25.56 to $35.06 ............................... 189,868
Balance at July 2, 2005 .................... 432,536

Weighted
Average Exercise
Price Per Share

$ 8.82

16.72

27.56
$ 19.14

128,000

114,668

354,668
597,336

Weighted Average
Remaining
Contractual Life (Yrs)

Weighted
Average Exercise
Price Per Share

1.47

3.86

6.68
5.02

$ 8.82

16.72

29.55
$ 22.65

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 $35.25 per share in fiscal 2005, 4,000 shares with
a fair value at date of grant of $34.12 per share in fiscal 2004 and 4,000 shares with a fair value at date of grant of $31.47 per share in
fiscal 2003.

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 11,836, 11,640 and 12,496 shares with a weighted-average grant date fair value of $35.38, $30.82 and $28.73
per share were issued in fiscal 2005, 2004 and 2003, respectively.

In total, 144,102 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 fis-
cal 2005, 1,712,244 shares of SYSCO common stock were purchased by the participants as compared to 1,620,535 shares purchased
in fiscal 2004 and 1,886,090 shares purchased in fiscal 2003. The total number of shares which may be sold pursuant to the plan may
not exceed 68,000,000 shares, of which 6,735,112 remained available at July 2, 2005. In July 2005, 410,375 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 $50,505,000 in fiscal 2005, $77,494,000 in fiscal 2004 and $62,486,000 in fiscal
2003; these amounts were paid in the following fiscal year in both cash and stock or deferred for payment in future years at the election
of each participant. There were 174, 174 and 165 participants in the plan in fiscal 2005, 2004 and 2003, respectively. A total of 1,001,624
shares, 940,843 shares and 861,156 shares at a fair value of $34.80, $29.55 and $27.22 were issued pursuant to this plan in fiscal 2005,
2004 and 2003, respectively, for bonuses earned in the preceding fiscal years. As of July 2, 2005, there were 4,345,650 remaining shares
that may be issued under the Management Incentive Plan. In August 2005, 617,637 shares were issued in payment for the portion of
the bonuses earned in fiscal 2005 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.

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 $28,109,000 in 2005, $27,390,000 in
2004, and $24,102,000 in 2003.

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 $138,931,000 at July 2,
2005 and $87,104,000 at July 3, 2004. 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 $375,491,000 and $264,010,000, respectively, as of July 2, 2005 and $269,815,000 and $153,652,000, respectively, as of July 3,
2004.

The company made cash contributions to its pension plans of $220,361,000 and $165,512,000 in fiscal years 2005 and 2004, respec-
tively, including $214,000,000 and $160,000,000 in voluntary contributions to the Retirement Plan in fiscal 2005 and 2004, respectively.
Included in the amounts contributed in fiscal 2005 was $134,000,000 voluntarily contributed to the qualified pension plan in the fourth
quarter. The decision to increase the contributions to the qualified pension plan in fiscal 2005 was primarily due to the decreased discount
rate, which increased the pension obligation and negatively impacted the fiscal 2005 year-end pension funded status. In fiscal 2006, 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 $66,000,000. 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 2006 contributions to fund
benefit payments for the SERP and other post-retirement plans are $7,659,000 and $338,000, respectively.

Estimated future benefit payments are as follows:

2006 ................................................................................................................................................
2007 ................................................................................................................................................
2008 ................................................................................................................................................
2009 ................................................................................................................................................
2010 ................................................................................................................................................
Subsequent five years ....................................................................................................................

$ 27,316,000
29,356,000
33,825,000
39,738,000
46,957,000
355,550,000

Pension Benefits

Other Postretirement Plans

July 2, 2005

July 3, 2004

July 2, 2005

July 3, 2004

Change in benefit obligation:
Benefit obligation at beginning of year .............. $ 1,192,357,000
81,282,000
Service cost .........................................................
73,824,000
Interest cost .........................................................
25,617,000
Amendments ........................................................
230,052,000
Actuarial loss (gain) .............................................
Actual expenses ..................................................
(6,815,000)
(21,599,000)
Total disbursements ............................................
Benefit obligation at end of year ........................ 1,574,718,000
Change in plan assets:
Fair value of plan assets at

beginning of year ........................................
859,279,000
Actual return on plan assets ...............................
90,412,000
Employer contribution ..........................................
220,361,000
Actual expenses ..................................................
(6,815,000)
(21,599,000)
Total disbursements ............................................
Fair value of plan assets at end of year ............. 1,141,638,000
(433,080,000)
Funded status ......................................................
Unrecognized net actuarial loss (gain) ................
644,116,000
Unrecognized net obligation due to

—
initial application of SFAS No. 87/106 .......
Unrecognized prior service cost ..........................
45,087,000
Net amount recognized ....................................... $ 256,123,000

$ 1,028,352,000
74,934,000
61,162,000
2,155,000
48,316,000
(4,456,000)
(18,106,000)
1,192,357,000

605,202,000
111,127,000
165,512,000
(4,456,000)
(18,106,000)
859,279,000
(333,078,000)
454,468,000

$ 7,996,000
477,000
488,000
—
(65,000)
—
(78,000)
8,818,000

—
—
78,000
—
(78,000)
—
(8,818,000)
(773,000)

$ 6,836,000
422,000
402,000
—
516,000
—
(180,000)
7,996,000

—
—
180,000
—
(180,000)
—
(7,996,000)
(708,000)

—
21,230,000
$ 142,620,000

1,227,000
994,000
$ (7,370,000)

1,381,000
1,196,000
$ (6,127,000)

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

July 2, 2005

July 3, 2004

Net amount recognized consists of:
Prepaid pension cost .................................................................................................................... $ 389,766,000
(264,010,000)
Accrued benefit liability ...............................................................................................................
Intangible asset ............................................................................................................................
42,240,000
88,127,000
Accumulated other comprehensive loss ......................................................................................
Net amount recognized ................................................................................................................ $ 256,123,000

$ 243,996,000
(153,652,000)
18,563,000
33,713,000
$ 142,620,000

Plans with accumulated benefit obligation in excess of fair
value of plan assets:
Projected benefit obligation ......................................................................................................... $ 375,491,000
264,010,000
Accumulated benefit obligation ...................................................................................................
—
Fair value of plan assets at end of year ......................................................................................

$ 269,815,000
153,652,000
—

Additional information:
Accumulated benefit obligation ................................................................................................... $ 1,329,725,000
Increase (decrease) in minimum liability included in other
comprehensive income .............................................................................................................

54,414,000

$ 954,875,000

(266,075,000)

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 unfunded 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 (or benefit) to shareholders’ equity, net of tax, through comprehensive loss (or income) rather than net income.

Amounts reflected in accumulated other comprehensive income or loss related to minimum pension liability, were charges, net of

tax, of $54,286,000 as of July 2, 2005, and $20,733,000 as of July 3, 2004.

As a result of changes in assumptions, including the increase in the discount rate to 6.25% for fiscal 2005 from 6.00% in fiscal 2004,
together with the normal growth of the plan, the impact of losses from prior periods and the amount and timing of contributions, net pen-
sion costs decreased $7,374,000 in fiscal 2005. Net pension costs in fiscal 2006 are expected to increase by approximately $23,700,000
due primarily to a decrease in the discount rate to 5.60%, which is based on the new measurement date of May 31st discussed below,
for fiscal 2006. The components of net pension costs for each fiscal year are as follows:

2005

Service cost .............................................................................................................. $ 81,282,000
Interest cost .............................................................................................................. 73,824,000
(82,613,000)
Expected return on plan assets ................................................................................
Amortization of prior service cost ............................................................................
1,760,000
Recognized net actuarial loss .................................................................................. 32,605,000
—
Amortization of net transition obligation .................................................................
Net pension costs ..................................................................................................... $ 106,858,000

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

Pension Benefits

2004
(53 Weeks)

$ 74,934,000
61,162,000
(61,148,000)
1,308,000
37,697,000
279,000
$ 114,232,000

2003

$ 51,806,000
50,809,000
(46,462,000)
3,346,000
15,341,000
(552,000)
$ 74,288,000

Other Postretirement Plans

2005

Service cost .............................................................................................................. $
477,000
Interest cost ..............................................................................................................
488,000
Expected return on plan assets ................................................................................
—
Amortization of prior service cost ............................................................................
202,000
Recognized net actuarial gain ..................................................................................
—
154,000
Amortization of net transition obligation .................................................................
Net other postretirement benefit costs ................................................................... $ 1,321,000

2004
(53 Weeks)

422,000
402,000
—
202,000
(40,000)
153,000
$ 1,139,000

2003

318,000
372,000
—
202,000
(123,000)
153,000
922,000

Multi-employer pension costs were $28,822,000, $29,479,000, and $27,808,000 in fiscal 2005, 2004 and 2003, respectively.

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

Pension Benefits

Other Postretirement Plans

July 2, 2005

July 3, 2004

July 2, 2005

July 3, 2004

Discount rate .......................................................................... 5.40%
Rate of compensation increase — Retirement Plan ............. 5.89

6.25%
5.89

5.40%
—

6.25%
—

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 2, 2005 and July 3, 2004.

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

Discount rate .................................................................................. 6.25%
Expected rate of return ................................................................... 9.00
Rate of compensation increase — Retirement Plan .................... 5.89

6.00%
9.00
5.89

7.25%
9.50
5.89

Pension Benefits

2005

2004

2003

Other Postretirement Plans

2005

2004

2003

6.25%
—
—

6.00%
—
—

7.25%
—
—

For determining net pension costs for each fiscal year, the SERP calculations assume annual salary increases of 10% through fiscal

2007 and 7% thereafter for fiscal 2005 and annual salary increases of 8% through fiscal 2005 and 7% thereafter for fiscal 2004 and 2003.

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

The 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.

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:

Equity securities ................................................................................................................................................
Debt securities ...................................................................................................................................................
Total ...................................................................................................................................................................

71.2%
28.8
100.0%

70.5%
29.5
100.0%

July 2, 2005

July 3, 2004

Commitments and Contingencies

SYSCO has committed with a third party service provider to provide hardware and hardware hosting services. The services are to
be provided over a ten year period beginning in fiscal 2005 and ending in fiscal 2015. The total cost of the services over that period are
expected to be approximately $300,000,000. This amount may be reduced by SYSCO utilizing less than estimated resources and can be
increased by SYSCO utilizing more than estimated resources and the adjustments for inflation provided for in the agreements. SYSCO
may also cancel a portion or all of the services provided beginning in fiscal 2007 subject to termination fees which decrease over time.
Although it does not expect to, if SYSCO were to terminate all of the services in fiscal 2007, the total estimated costs incurred during
fiscal 2006 and fiscal 2007 would be approximately $32,000,000. SYSCO believes that these agreements will provide a more secure
environment for its data processing as well as reduce overall operating costs over the ten year period.

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.

Condensed Consolidating Balance Sheet
July 2, 2005

(In thousands)

SYSCO

SYSCO
International

Other Non-Guarantor
Subsidiaries

156,812
Current assets ...................................................... $
9,979,188
Investment in subsidiaries ..................................
120,800
Plant and equipment, net ....................................
Other assets .........................................................
698,283
Total assets .......................................................... $ 10,955,083

Current liabilities ................................................. $
Intercompany payables (receivables) ..................
Long-term debt ....................................................
Other liabilities ....................................................
Shareholders’ equity ............................................
Total liabilities and
shareholders’ equity ........................................ $ 10,955,083

696,995
6,342,306
709,452
508,221
2,698,109

32
$
283,033
—
—
$ 283,065

$ 34,330
10,546
199,560
—
38,629

$ 3,844,942
164,218
2,147,501
1,299,532
$ 7,456,193

$ 2,726,245
(6,352,852)
47,165
587,095
10,448,540

Eliminations

—
$
(10,426,439)
—
—
$ (10,426,439)

Consolidated
Totals

$ 4,001,786
—
2,268,301
1,997,815
$ 8,267,902

—
—
—
—
(10,426,439)

$ 3,457,570
—
956,177
1,095,316
2,758,839

(In thousands)

SYSCO

SYSCO
International

Other Non-Guarantor
Subsidiaries

$ 283,065

$ 7,456,193

$ (10,426,439)

$ 8,267,902

Condensed Consolidating Balance Sheet
July 3, 2004

$
34
260,501
—
—
$ 260,535

$ 74,948
(14,924)
199,496
—
1,015

$ 3,731,851
173,986
2,052,424
1,234,601
$ 7,192,862

$ 2,677,542
(5,284,003)
50,521
598,228
9,150,574

Eliminations

—
(9,113,216)
—
—
$ (9,113,216)

Consolidated
Totals

$ 3,851,411
—
2,166,809
1,829,412
$ 7,847,632

—
—
—
—
(9,113,216)

$ 3,126,634
—
1,231,493
924,999
2,564,506

$ 260,535

$ 7,192,862

$ (9,113,216)

$ 7,847,632

Current assets ...................................................... $ 119,526
8,678,729
Investment in subsidiaries ..................................
114,385
Plant and equipment, net ....................................
Other assets .........................................................
594,811
Total assets .......................................................... $ 9,507,451

Current liabilities ................................................. $ 374,144
5,298,927
Intercompany payables (receivables) ..................
981,476
Long-term debt ....................................................
326,771
Other liabilities ....................................................
2,526,133
Shareholders’ equity ............................................
Total liabilities and
shareholders’ equity ........................................ $ 9,507,451

Condensed Consolidating Results of Operations
Year Ended July 2, 2005

(In thousands)

SYSCO

SYSCO
International

Other Non-Guarantor
Subsidiaries

—
Sales .................................................................... $
—
Cost of sales ........................................................
100,595
Operating expenses .............................................
312,901
Interest expense (income) ...................................
(747)
Other, net .............................................................
412,749
Total costs and expenses ....................................
(412,749)
Earnings (loss) before income taxes ...................
(157,876)
Income tax (benefit) provision .............................
1,216,330
Equity in earnings of subsidiaries .......................
Net earnings (loss) ............................................... $ 961,457

$ —
—
115
11,510
—
11,625
(11,625)
(4,447)
6,500
(678)

$ 30,281,914
24,498,200
4,093,474
(249,411)
(10,159)
28,332,104
1,949,810
726,302
—
$ 1,223,508

Eliminations

—
—
—
—
—
—
—
—
(1,222,830)
$ (1,222,830)

Consolidated
Totals

$ 30,281,914
24,498,200
4,194,184
75,000
(10,906)
28,756,478
1,525,436
563,979
—
961,457

Condensed Consolidating Results of Operations
Year Ended July 3, 2004
(53 Weeks)

(In thousands)

SYSCO

SYSCO
International

Other Non-Guarantor
Subsidiaries

—
Sales .................................................................... $
—
Cost of sales ........................................................
118,937
Operating expenses .............................................
255,708
Interest expense (income) ...................................
(372)
Other, net .............................................................
374,273
Total costs and expenses ....................................
(374,273)
Earnings (loss) before income taxes ...................
(144,095)
Income tax (benefit) provision .............................
1,137,392
Equity in earnings of subsidiaries .......................
Net earnings (loss) ............................................... $ 907,214

$ —
—
109
13,923
(1,028)
13,004
(13,004)
(5,007)
5,267
(2,730)

$ 29,335,403
23,661,514
4,022,184
(199,751)
(10,965)
27,472,982
1,862,421
717,032
—
$ 1,145,389

Eliminations

—
—
—
—
—
—
—
—
(1,142,659)
$ (1,142,659)

Condensed Consolidating Results of Operations
Year Ended June 28, 2003

(In thousands)

SYSCO

SYSCO
International

Other Non-Guarantor
Subsidiaries

Sales .................................................................... $ 1,651,729
1,278,537
Cost of sales ........................................................
377,861
Operating expenses .............................................
355,192
Interest expense (income) ...................................
Other, net .............................................................
272
2,011,862
Total costs and expenses ....................................
(360,133)
Earnings (loss) before income taxes ...................
(137,751)
Income tax (benefit) provision .............................
Equity in earnings of subsidiaries .......................
1,000,670
Net earnings ........................................................ $ 778,288

$ —
—
975
10,586
—
11,561
(11,561)
(4,422)
7,204
65

$ 24,488,608
19,701,019
3,457,671
(293,544)
(8,619)
22,856,527
1,632,081
624,272
—
$ 1,007,809

Eliminations

—
—
—
—
—
—
—
—
(1,007,874)
$ (1,007,874)

Consolidated
Totals

$ 29,335,403
23,661,514
4,141,230
69,880
(12,365)
27,860,259
1,475,144
567,930
—
907,214

Consolidated
Totals

$ 26,140,337
20,979,556
3,836,507
72,234
(8,347)
24,879,950
1,260,387
482,099
—
778,288

(In thousands)

Condensed Consolidating Cash Flows
Year Ended July 2, 2005

SYSCO

SYSCO
International

Other Non-Guarantor Consolidated

Subsidiaries

Totals

Net cash provided by (used for):
Operating activities .......................................................................... $ (223,678)
36,865
Investing activities ............................................................................
(739,109)
Financing activities ...........................................................................
Exchange rate on cash .....................................................................
—
Intercompany activity ....................................................................... 964,163
38,241
Net increase (decrease) in cash .......................................................
Cash at the beginning of the period ................................................
87,507
Cash at the end of the period .......................................................... $ 125,748

$ (6,958)
—
(40,772)
—
47,730
—
—
$ —

$ 1,422,476
(450,305)
(4,389)
(2,158)
(1,011,893)
(46,269)
112,199
65,930

$ 1,191,840
(413,440)
(784,270)
(2,158)
—
(8,028)
199,706
$ 191,678

Condensed Consolidating Cash Flows
Year Ended July 3, 2004
(53 Weeks)

(In thousands)

SYSCO

SYSCO
International

Other Non-Guarantor Consolidated

Subsidiaries

Totals

Net cash provided by (used for):
Operating activities .......................................................................... $ (171,732)
(193,274)
Investing activities ............................................................................
(597,137)
Financing activities ...........................................................................
Exchange rate on cash .....................................................................
—
843,607
Intercompany activity .......................................................................
(118,536)
Net (decrease) in cash ......................................................................
Cash at the beginning of the period ................................................
206,043
Cash at the end of the period .......................................................... $ 87,507

$ 24,676
—
(27,923)
—
2,733
(514)
514
$ —

$ 1,336,578
(490,537)
(16,791)
(1,601)
(846,340)
(18,691)
130,890
$ 112,199

$ 1,189,522
(683,811)
(641,851)
(1,601)
—
(137,741)
337,447
$ 199,706

(In thousands)

Condensed Consolidating Cash Flows

Year Ended June 28, 2003

SYSCO

SYSCO
International

Other Non-Guarantor Consolidated

Subsidiaries

Totals

Net cash provided by (used for):
Operating activities .......................................................................... $ (180,033)
(307,303)
Investing activities ............................................................................
(576,747)
Financing activities ...........................................................................
Exchange rate on cash .....................................................................
—
1,177,679
Intercompany activity .......................................................................
113,596
Net increase (decrease) in cash .......................................................
92,447
Cash at the beginning of the period ................................................
Cash at the end of the period .......................................................... $ 206,043

$ (28,100)
—
38,594
—
(19,986)
(9,492)
10,006
514
$

$ 1,580,973
(374,522)
(12,375)
(1,479)
(1,157,693)
34,904
95,986
$ 130,890

$ 1,372,840
(681,825)
(550,528)
(1,479)
—
139,008
198,439
$ 337,447

Business Segment Information

The company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are report-
able 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 accounting policies for the segments are the same as those disclosed by SYSCO. Intersegment sales represent specialty pro-
duce 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.

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

(In thousands)

2005

Sales:
Broadline ............................................................................................................. $ 24,128,143
3,916,255
SYGMA ...............................................................................................................
2,578,923
Other ...................................................................................................................
(341,407)
Intersegment sales .............................................................................................
Total .................................................................................................................... $ 30,281,914
Earnings before income taxes:
Broadline ............................................................................................................. $ 1,518,336
18,143
SYGMA ...............................................................................................................
Other ...................................................................................................................
83,709
Total segments ...................................................................................................
1,620,188
(94,752)
Unallocated corporate expenses .......................................................................
Total .................................................................................................................... $ 1,525,436
Depreciation and amortization:
Broadline ............................................................................................................. $
SYGMA ...............................................................................................................
Other ...................................................................................................................
Total segments ...................................................................................................
Corporate ............................................................................................................
Total .................................................................................................................... $
Capital expenditures:
Broadline ............................................................................................................. $
SYGMA ...............................................................................................................
Other ...................................................................................................................
Total segments ...................................................................................................
Corporate ............................................................................................................
Total .................................................................................................................... $
Assets:
Broadline ............................................................................................................. $ 4,840,989
301,729
SYGMA ...............................................................................................................
680,735
Other ...................................................................................................................
5,823,453
Total segments ...................................................................................................
Corporate ............................................................................................................
2,444,449
Total .................................................................................................................... $ 8,267,902

260,411
51,840
34,503
346,754
43,449
390,203

236,081
20,836
22,283
279,200
37,543
316,743

Fiscal Year

2004
(53 Weeks)

$ 23,718,955
3,548,693
2,383,692
(315,937)
$ 29,335,403

$ 1,442,105
25,231
78,531
1,545,867
(70,723)
$ 1,475,144

221,699
18,684
18,698
259,081
24,514
283,595

342,374
24,475
33,782
400,631
129,455
530,086

$ 4,792,595
240,418
588,275
5,621,288
2,226,344
$ 7,847,632

2003

$ 21,489,862
2,916,174
2,003,060
(268,759)
$ 26,140,337

$ 1,276,206
23,841
51,170
1,351,217
(90,830)
$ 1,260,387

213,877
17,479
17,669
249,025
24,117
273,142

338,346
17,898
18,519
374,763
60,874
435,637

$ 4,513,533
190,406
501,236
5,205,175
1,731,346
$ 6,936,521

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

(In thousands)

2005

Fresh and frozen meats .......................................................................................... $ 5,732,834
5,417,418
Canned and dry products ........................................................................................
4,104,170
Frozen fruits, vegetables, bakery and other ..........................................................
3,222,927
Poultry .....................................................................................................................
2,878,904
Dairy products .........................................................................................................
2,459,295
Fresh produce .........................................................................................................
2,353,104
Paper and disposables ...........................................................................................
1,591,022
Seafood ...................................................................................................................
962,039
Beverage products ..................................................................................................
681,653
Equipment and smallwares ....................................................................................
670,105
Janitorial products ..................................................................................................
Medical supplies ....................................................................................................
208,443
Total ........................................................................................................................ $ 30,281,914

Information concerning geographic areas is as follows:

(In thousands)

2005

Sales: (1)
United States ...................................................................................................... $ 27,850,921
Canada ................................................................................................................
2,430,993
Total .................................................................................................................... $ 30,281,914
Long-lived assets: (2)
United States ...................................................................................................... $ 2,156,588
Canada ................................................................................................................
111,713
Total .................................................................................................................... $ 2,268,301

(1) Represents sales from external customers from businesses operating in these countries.
(2) Long-lived assets represents net property, plant and equipment reported in the country in which they are held.

2004
(53 Weeks)

$ 5,533,217
5,370,859
3,946,468
3,166,806
2,766,425
2,329,638
2,225,532
1,559,133
928,073
625,801
655,305
228,146
$ 29,335,403

Fiscal Year

2004
(53 Weeks)

$ 27,144,352
2,191,051
$ 29,335,403

$ 2,073,404
93,405
$ 2,166,809

2003

$ 4,671,794
4,966,046
3,607,449
2,666,831
2,264,145
2,228,954
2,053,362
1,474,140
809,562
592,234
591,663
214,157
$ 26,140,337

2003

$ 24,218,466
1,921,871
$ 26,140,337

$ 1,833,118
89,542
$ 1,922,660

Quarterly Results (unaudited)

Financial information for each quarter in the years ended July 2, 2005 and July 3, 2004 is set forth below:

Fiscal 2005 Quarter Ended

(In thousands except for share data)

October 2

January 1

April 2

July 2

Fiscal Year

Sales .................................................................... $ 7,531,925
Cost of sales ........................................................ 6,094,931
Operating expenses ............................................. 1,055,412
17,699
Interest expense ..................................................
Other, net .............................................................
(1,969)
Total costs and expenses .................................... 7,166,073
365,852
Earnings before income taxes .............................
Income taxes ........................................................
139,938
Net earnings ........................................................ $ 225,914
Per share:
Basic net earnings ........................................... $
Diluted net earnings ........................................
Dividends declared ..........................................
Market price — high/low ...............................

0.35
0.35
0.13
36-29

$ 7,331,257
5,933,515
1,004,919
17,766
(1,693)
6,954,507
376,750
144,107
$ 232,643

0.36
0.36
0.15
38-30

$ 7,437,453
6,032,165
1,052,477
20,151
(2,919)
7,101,874
335,579
117,359
$ 218,220

0.34
0.34
0.15
38-33

$ 7,981,279
6,437,589
1,081,376
19,384
(4,325)
7,534,024
447,255
162,575
$ 284,680

0.45
0.44
0.15
38-34

$ 30,281,914
24,498,200
4,194,184
75,000
(10,906)
28,756,478
1,525,436
563,979
961,457

1.51
1.47
0.58
38-29

Fiscal 2004 Quarter Ended

(In thousands except for share data)

September 27

December 27

March 27

Sales .................................................................... $ 7,134,281
Cost of sales ........................................................ 5,753,767
Operating expenses ............................................. 1,024,336
Interest expense ..................................................
18,631
(1,983)
Other, net .............................................................
Total costs and expenses .................................... 6,794,751
339,530
Earnings before income taxes .............................
130,719
Income taxes ........................................................
Net earnings ........................................................ $ 208,811
Per share:
Basic net earnings .............................................. $
Diluted net earnings ...........................................
Dividends declared .............................................
Market price — high/low ..................................

0.32
0.32
0.11
34-29

$ 7,036,520
5,669,399
996,853
16,376
(7,052)
6,675,576
360,944
138,963
$ 221,981

0.34
0.34
0.13
38-31

$ 7,025,585
5,684,192
1,008,493
15,737
(1,250)
6,707,172
318,413
122,589
$ 195,824

0.31
0.30
0.13
41-35

July 3
(14 Weeks)

Fiscal Year
(53 Weeks)

$ 8,139,017
6,554,156
1,111,548
19,136
(2,080)
7,682,760
456,257
175,659
$ 280,598

0.44
0.43
0.13
40-35

$ 29,335,403
23,661,514
4,141,230
69,880
(12,365)
27,860,259
1,475,144
567,930
907,214

1.41
1.37
0.50
41-29

Percentage increases — 2005 vs. 2004:
Sales ....................................................................
Earnings before income taxes .............................
Net earnings ........................................................
Basic net earnings per share ..............................
Diluted net earnings per share ...........................

6%
8
8
9
9

4%
4
5
6
6

6%
5
11
10
13

(2)%
(2)
1
2
2

3%
3
6
7
7

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

As of July 2, 2005, 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 proce-
dures were effective as of July 2, 2005 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, as a result of their evaluation of changes in internal control over financial reporting, they identified no changes during the fourth
quarter of fiscal 2005 that materially affected, or would be reasonably likely to materially affect, the company’s internal control over
financial reporting. See Management’s Report on Internal Control Over Financial Reporting included under Item 8.

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 2005 Annual Meeting of Stockholders under the fol-
lowing 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 2005 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 2005 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 2005 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 2005 Annual Meeting of Stockholders under the

following caption, and is incorporated herein by reference thereto: “Fees Paid to Independent Public Accountants.”

PART IV

Item 15. Exhibits and Financial Statement Schedules

(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 25 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) — Amended and Restated Shareholder Rights Agreement, incorporated by reference to Exhibit 1 to Registration Statement on Form 8-A/A,

filed May 29, 1996 (File No. 1-6544).

4(b) — 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).

4(c) — 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(d) — 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(e) — 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(f) — 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(g) — Fifth Supplemental Indenture, dated as of July 27, 1998 between Sysco Corporation and First Union National Bank, Trustee, incorporated

by reference to Exhibit 4(h) to Form 10-K for the year ended June 27, 1998 (File No. 1-6544).

4(h) — Indenture dated May 23, 2002 between Sysco International, Co., Sysco Corporation and Wachovia Bank, National Association, incorpo-

rated by reference to Exhibit 4.1 to Registration Statement on Form S-4 filed August 21, 2002 (File No. 333-98489).
4(i) — 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 refer-
ence 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(j) — 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 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(d)† — 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(e)† — 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(f)† — 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(g)† — 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(h)† — Sysco Corporation Non-Employee Directors Stock Plan, incorporated by reference to Appendix A of the 1998 Proxy Statement

(File No. 1-6544).

10(i)† — 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(j)† — 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(k)† — 2000 Management Incentive Plan, incorporated by reference to Appendix A to Proxy Statement filed September 25, 2000

(File No. 1-6544).

10(l)† — 2000 Stock Incentive Plan, incorporated by reference to Appendix B to Proxy Statement filed on September 25, 2000 (File No. 1-6544).

10(m)† — 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(n)† — 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(o)† — 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(p)† — 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(q)† — 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(r)† — 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(s)† — 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(t)† — 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(u)† — 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(v)† — Third Amendment to Fifth Amended and Restated Supplemental Executive Retirement Plan dated July 12, 2002, incorporated by

reference to Exhibit 10(ee) to Form 10-K for the year ended June 29, 2002 filed on September 25, 2002 (File No. 1-6544).
10(w)† — 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(x)† — Second Amendment to Second Amended and Restated Executive Deferred Compensation Plan effective July 9, 2004, incorporated by

reference to Exhibit 10(gg) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(y)† — Fourth Amendment to Fifth Amended and Restated Supplemental Executive Retirement Plan effective July 9, 2004, incorporated by ref-

erence to Exhibit 10(hh) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(z)† — Executive Severance Agreement dated July 6, 2004 between SYSCO Corporation and Richard J. Schnieders, incorporated by reference

to Exhibit 10(ii) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(aa)† — 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), incorporated
by reference to Exhibit 10(jj) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).
10(bb)† — 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, incorporated by reference to Exhibit
10(kk) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(cc)† — 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(dd)† — 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(ee)† — 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(ff)† — 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 field on September 9, 2004 (File No. 1-6544).

10(gg)† — Form of Stock Option Grant Agreement issued to executive officers on August 31, 1995 under the 1991 Stock Option Plan, incorporated
by reference to Exhibit 10(pp) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(hh)† — Form of Stock Option Grant Agreement issued to executive officers on September 5, 1996 under the 1991 Stock Option Plan,

incorporated by reference to Exhibit 10(qq) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(ii)† — Form of Stock Option Grant Agreement issued to executive officers on September 4, 1997 under the 1991 Stock Option Plan,

incorporated by reference to Exhibit 10(rr) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(jj)† — Form of Stock Option Grant Agreement issued to executive officers on September 3, 1998 under the 1991 Stock Option Plan,

incorporated by reference to Exhibit 10(ss) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(kk)† — Form of Stock Option Grant Agreement issued to executive officers on September 2, 1999 under the 1991 Stock Option Plan,

incorporated by reference to Exhibit 10(tt) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(ll)† — Form of Stock Option Grant Agreement issued to executive officers on September 7, 2000 under the 1991 Stock Option Plan,

incorporated by reference to Exhibit 10(uu) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(mm)† — Form of Stock Option Grant Agreement issued to executive officers on September 11, 2001 under the 2000 Stock Incentive Plan,

incorporated by reference to Exhibit 10(vv) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(nn)† — Form of Stock Option Grant Agreement issued to executive officers on September 11, 2001 under the 2000 Stock Incentive Plan,

incorporated by reference to Exhibit 10(ww) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(oo)† — Form of Stock Option Grant Agreement issued to executive officers on September 12, 2002 under the 2000 Stock Incentive Plan,

incorporated by reference to Exhibit 10(xx) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).

10(pp)† — Form of Stock Option Grant Agreement issued to executive officers on September 11, 2003 under the 2000 Stock Incentive Plan,

incorporated by reference to Exhibit 10(yy) to Form 10-K for the year ended July 3, 2004 filed on September 16, 2004 (File No. 1-6544).
10(qq)† — Form of Retainer Stock Agreement for issuance to Non-Employee Directors under the Non-Employee Directors Stock Plan, incorporated

by reference to Exhibit 10(a) to Form 10-Q for the quarter ended January 1, 2005 filed on February 10, 2005 (File No. 1-6544).
10(rr)† — Supplemental Performance Based Bonus Plan dated November 11, 2004, incorporated by reference to Exhibit 10(b) to Form 10-Q for the

quarter ended January 1, 2005 filed on February 10, 2005 (File No. 1-6544).
10(ss)†# — Description of Compensation Arrangements with Named Executive Officers.

10(tt)† — Description of Compensation Arrangements with Non-Employee Directors, incorporated by reference to Exhibit 10(d) to Form 10-Q for

the quarter ended January 1, 2005 filed on February 10, 2005 (File No. 1-6544).

10(uu)† — Form of CEO Supplemental Performance-Based Bonus Agreement, incorporated by reference to Exhibit 10(a) to Form 10-Q for the

quarter ended April 2, 2005 filed on May 12, 2005 (File No. 1-6544).

10(vv)†# — Form of 2006 Management Incentive Bonus Grant Agreement issued to Richard J. Schnieders, John K. Stubblefield, Jr., Larry J. Accardi,

Kenneth F. Spitler, Kenneth J. Carrig and Larry G. Pulliam under the 2000 Management Incentive Plan.

10(ww)†# — Separation Agreement and Mutual Release dated June 14, 2005 between the Company and Thomas E. Lankford.
10(xx)† — Form of Stock Option Grant Agreement issued to executive officers on September 8, 2005 under the 2004 Stock Option Plan,

incorporated by reference to Exhibit 99.1 to Form 8-K filed on September 14, 2005 (File No. 1-6544).

10(yy)†# — Form of 2006 Management Incentive Bonus Grant Agreement issued to Senior Vice Presidents of Operations under the 2000

Management Incentive Plan.
21# — Subsidiaries of the Registrant.
23# — Consent of Independent Registered Public Accounting Firm.

31(a)# — CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)# — CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32(a)# — CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32(b)# — CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of Regulation S-K
# Filed Herewith

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 15th day of September, 2005.

SYSCO CORPORATION

/s/ RICHARD J. SCHNIEDERS

Richard J. Schnieders
Chairman of the Board,
Chief Executive Officer and President

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

Richard J. Schnieders

/s/ JOHN K. STUBBLEFIELD, JR.

John K. Stubblefield, Jr.

/s/ G. MITCHELL ELMER

G. Mitchell Elmer

/s/ COLIN G. CAMPBELL

Colin G. Campbell

/s/ JOHN M. CASSADAY

John M. Cassaday

/s/ JUDITH B. CRAVEN

Judith B. Craven

/s/ JONATHAN GOLDEN

Jonathan Golden

/s/ JOSEPH A. HAFNER, JR.

Joseph A. Hafner, Jr.

/s/ RICHARD G. MERRILL

Richard G. Merrill

DIRECTORS:

Chairman of the Board, Chief Executive Officer
and President
(principal executive officer)

Executive Vice President, Finance
and Chief Financial Officer
(principal financial officer)

Vice President, Controller and
Chief Accounting Officer
(principal accounting officer)

/s/ RICHARD J. SCHNIEDERS

Richard J. Schnieders

/s/ PHYLLIS S. SEWELL

Phyllis S. Sewell

/s/ JOHN K. STUBBLEFIELD, JR.

John K. Stubblefield, Jr.

/s/ RICHARD G. TILGHMAN

Richard G. Tilghman

/s/ JACKIE M. WARD

Jackie M. Ward

SYSCO CORPORATION AND SUBSIDIARIES

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Description

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

Charged tor
Other Accounts
Describe (1)

Deductions
Describe (2)

Balance at
End of
Period

For year ended
June 28, 2003 ...................................... Allowance
for doubtful

accounts

For year ended
July 3, 2004 ............................................ Allowance
for doubtful

accounts

For year ended
July 2, 2005 ............................................ Allowance
for doubtful

accounts

$ 30,338,000

$ 27,133,000

$ 2,305,000

$ 24,771,000

$ 35,005,000

$ 27,392,000

263,000

$ 28,485,000

$ 34,175,000

$ 17,959,000

$ (1,690,000) $ 20,840,000

$ 29,604,000

(1) Allowance accounts resulting from acquisitions and other adjustments.
(2) Customer accounts written off, net of recoveries.

S-1

FINANCIAL HIGHLIGHTS

(dollars in thousands, except for share data)

July 2, 2005

Fiscal Year Ended

July 3, 2004
(53 Weeks)

June 28, 2003

2005-04

2004-03

Percent Change

Sales

$ 30,281,914

$ 29,335,403

$ 26,140,337

12%

Earnings before income taxes

Net earnings

Diluted earnings per share

Dividends declared per share

Shareholders’ equity per share

1,525,436

961,457

1.47

0.58

4.39

1,475,144

907,214

1,260,387

778,288

1.37

0.50

4.03

1.18

0.42

3.41

Capital expenditures

390,203

530,086

435,637

Return on average shareholders’ equity

35%

39%

36%

Diluted average shares outstanding

653,157,117

661,919,234

661,535,382

Number of shares repurchased

16,790,200

16,454,300

16,500,000

Number of employees

Number of shareholders of record

47,500

15,083

47,800

15,337

47,400

15,533

(26)

(4)

(1)

(2)

—

(1)

GENERAL INFORMATION

CORPORATE OFFICES
SYSCO Corporation
1390 Enclave Parkway
Houston, Texas 77077-2099
(281) 584-1390
Internet: http://www.sysco.com

ANNUAL SHAREHOLDERS’
MEETING
The Houstonian Hotel
111 North Post Oak Lane
Houston, Texas 77024
November 11, 2005 at 10:00 a.m.

INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
Houston, Texas

COUNSEL
Arnall Golden Gregory LLP
Atlanta, Georgia

TRANSFER AGENT
AND REGISTRAR
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
1-800-730-4001
Internet:
http://www.equiserve.com

INVESTOR CONTACT
Financial analysts and other
investment professionals should
direct inquiries to:

Mr. John M. Palizza
Assistant Treasurer
(281) 584-1308

Ms. Toni R. Spigelmyer
Director
Investor/Media Relations
(281) 584-1458

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SYSCO CORPORATION

1390 Enclave Parkway
Houston, Texas 77077-2099
Phone (281) 584-1390

www.sysco.com

SYSCO-AR-05

S Y S C O C O R P O R A T I O N