-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QClBYbWuNCk09JN5bl0p3+OsRof2RfG26M0sz0HISoVB6zh/AAcz2y5f7P0k5Fpb sdgcp4gawrLDrzb4uzgCkA== 0000950129-04-003145.txt : 20040511 0000950129-04-003145.hdr.sgml : 20040511 20040511105032 ACCESSION NUMBER: 0000950129-04-003145 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040327 FILED AS OF DATE: 20040511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSCO CORP CENTRAL INDEX KEY: 0000096021 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 741648137 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06544 FILM NUMBER: 04795241 BUSINESS ADDRESS: STREET 1: 1390 ENCLAVE PKWY CITY: HOUSTON STATE: TX ZIP: 77077 BUSINESS PHONE: 2815841390 MAIL ADDRESS: STREET 1: 1390 ENCLAVE PKWY CITY: HOUSTON STATE: TX ZIP: 77077 10-Q 1 h15218e10vq.txt SYSCO CORPORATION - MARCH 27, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 27, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to__________ Commission file number 1-6544 SYSCO CORPORATION (Exact name of registrant as specified in its charter) Delaware 74-1648137 (State or other jurisdiction of (IRS employer incorporation or organization) identification number) 1390 Enclave Parkway Houston, Texas 77077-2099 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (281) 584-1390 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes [X] No [ ] 639,425,930 shares of common stock were outstanding as of April 24, 2004. TABLE OF CONTENTS
PAGE NO. ------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 3. Quantitative and Qualitative Disclosures about Market Risk 22 Item 4. Controls and Procedures 23 PART II. OTHER INFORMATION Item 1. Legal Proceedings 24 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 24 Item 3. Defaults Upon Senior Securities 24 Item 4. Submission of Matters to a Vote of Security Holders 24 Item 5. Other Information 24 Item 6. Exhibits and Reports on Form 8-K 24 Signatures 27
1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS (In Thousands Except for Share Data)
Mar. 27, 2004 June 28, 2003 Mar. 29, 2003 ------------- ------------- ------------- (unaudited) (unaudited) ASSETS Current assets Cash $ 172,695 $ 337,447 $ 186,956 Accounts and notes receivable, less allowances of $66,986, $35,005 and $64,685 2,087,476 2,009,627 1,946,819 Inventories 1,373,251 1,230,080 1,256,397 Prepaid expenses 57,128 52,380 60,775 ------------- ------------- ------------- Total current assets 3,690,550 3,629,534 3,450,947 Plant and equipment at cost, less depreciation 2,088,314 1,922,660 1,829,021 Other assets Goodwill and intangibles, less amortization 1,177,161 1,113,960 1,084,693 Restricted cash 169,220 83,807 84,056 Other assets 201,587 186,560 207,168 ------------- ------------- ------------- Total other assets 1,547,968 1,384,327 1,375,917 ------------- ------------- ------------- Total assets $ 7,326,832 $ 6,936,521 $ 6,655,885 ============= ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $ 105,922 $ 101,822 $ 81,492 Accounts payable 1,717,438 1,637,505 1,522,670 Accrued expenses 655,985 624,451 617,373 Income taxes 67,673 9,193 15,242 Deferred taxes 296,567 307,211 250,383 Current maturities of long-term debt 10,296 20,947 24,684 ------------- ------------- ------------- Total current liabilities 2,853,881 2,701,129 2,511,844 Other liabilities Long-term debt 1,420,139 1,249,467 1,279,657 Deferred taxes 561,666 498,396 476,629 Other long-term liabilities 222,098 289,998 190,721 ------------- ------------- ------------- Total other liabilities 2,203,903 2,037,861 1,947,007 Contingencies Shareholders' equity Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none -- -- -- Common stock, par value $1 per share Authorized shares 2,000,000,000 at Mar. 27, 2004, 1,000,000,000 at June 28, 2003 and Mar. 29, 2003; issued 765,174,900 shares 765,175 765,175 765,175 Paid-in capital 317,003 249,235 246,756 Retained earnings 3,762,183 3,373,853 3,202,358 Other comprehensive loss (144,862) (152,381) (65,435) ------------- ------------- ------------- 4,699,499 4,235,882 4,148,854 Less cost of treasury stock, 127,201,965, 121,517,325 and 119,159,737 shares 2,430,451 2,038,351 1,951,820 ------------- ------------- ------------- Total shareholders' equity 2,269,048 2,197,531 2,197,034 ------------- ------------- ------------- Total liabilities and shareholders' equity $ 7,326,832 $ 6,936,521 $ 6,655,885 ============= ============= =============
Note: The June 28, 2003 balance sheet has been derived from the audited financial statements at that date. 2 SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In Thousands Except for Share and Per Share Data)
39-Week Period Ended 13-Week Period Ended ------------------------------- ------------------------------- Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Sales $ 21,196,386 $ 19,168,497 $ 7,025,585 $ 6,395,278 Costs and expenses Cost of sales 17,107,358 15,396,893 5,684,192 5,144,473 Operating expenses 3,029,682 2,860,385 1,008,493 962,459 Interest expense 50,744 52,607 15,737 18,276 Other, net (10,285) (8,679) (1,250) (2,661) ------------- ------------- ------------- ------------- Total costs and expenses 20,177,499 18,301,206 6,707,172 6,122,547 ------------- ------------- ------------- ------------- Earnings before income taxes 1,018,887 867,291 318,413 272,731 Income taxes 392,271 331,739 122,589 104,320 ------------- ------------- ------------- ------------- Net earnings $ 626,616 $ 535,552 $ 195,824 $ 168,411 ============= ============= ============= ============= Net earnings: Basic earnings per share $ 0.97 $ 0.82 $ 0.31 $ 0.26 ============= ============= ============= ============= Diluted earnings per share $ 0.95 $ 0.81 $ 0.30 $ 0.26 ============= ============= ============= ============= Average shares outstanding 644,219,976 652,148,645 642,038,004 649,267,210 ============= ============= ============= ============= Diluted shares outstanding 662,482,772 662,873,939 663,097,806 657,994,124 ============= ============= ============= ============= Dividends declared per common share $ 0.37 $ 0.31 $ 0.13 $ 0.11 ============= ============= ============= =============
3 SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS (Unaudited) (In Thousands)
39 - Week Period Ended ------------------------------- Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- Operating activities: Net earnings $ 626,616 $ 535,552 Add non-cash items: Depreciation and amortization 209,054 204,155 Deferred tax provision 408,139 320,469 Provision for losses on receivables 23,613 24,444 Additional investment in certain assets and liabilities, net of effect of businesses acquired: (Increase) in receivables (85,195) (175,262) (Increase) in inventories (134,750) (116,560) (Increase) in prepaid expenses (4,701) (18,740) Increase in accounts payable 77,154 152,606 (Decrease) in accrued expenses and other long-term liabilities (60,333) (2,328) (Decrease) in accrued income taxes (283,980) (20,158) (Increase) in other assets (18,982) (19,683) ------------- ------------- Net cash provided by operating activities 756,635 884,495 ------------- ------------- Investing activities: Additions to plant and equipment (379,390) (310,392) Proceeds from sales of plant and equipment 13,354 9,528 Acquisition of businesses, net of cash acquired (34,091) (169,492) Increase in restricted cash (90,223) (52,056) ------------- ------------- Net cash used for investing activities (490,350) (522,412) ------------- ------------- Financing activities: Bank and commercial paper (repayments) borrowings (15,779) 115,039 Other debt borrowings (repayments) 184,966 (7,432) Cash from termination of interest rate swap 1,305 -- Common stock reissued from treasury 135,816 81,971 Treasury stock purchases (508,963) (372,808) Dividends paid (226,271) (190,336) ------------- ------------- Net cash used for financing activities (428,926) (373,566) ------------- ------------- Effect of exchange rates on cash (2,111) -- ------------- ------------- Net decrease in cash (164,752) (11,483) Cash at beginning of period 337,447 198,439 ------------- ------------- Cash at end of period $ 172,695 $ 186,956 ============= ============= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 46,875 $ 44,451 Income taxes 257,102 36,734
4 SYSCO CORPORATION and its Consolidated Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The consolidated financial statements have been prepared by the company, without audit, with the exception of the June 28, 2003 consolidated balance sheet which was taken from the audited financial statements included in the company's Fiscal 2003 Annual Report on Form 10-K. The financial statements include consolidated balance sheets, consolidated results of operations and consolidated cash flows. Certain amounts in the prior periods presented have been reclassified to conform to the fiscal 2004 presentation, including other long-term liabilities related to pension and deferred compensation plans previously classified as accrued expenses. In the opinion of management, all adjustments, which consist of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for all periods presented, have been made. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the company's Fiscal 2003 Annual Report on Form 10-K. A review of the financial information herein has been made by Ernst & Young LLP, independent auditors, in accordance with established professional standards and procedures for such a review. A report from Ernst & Young LLP concerning their review is included as Exhibit 15(a). 2. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
39-Week Period Ended 13-Week Period Ended ------------------------------ ------------------------------ Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Numerator: Numerator for earnings per share -- income available to common shareholders $ 626,616,000 $ 535,552,000 $ 195,824,000 $ 168,411,000 ============= ============= ============= ============= Denominator: Denominator for basic earnings per share -- weighted-average shares 644,219,976 652,148,645 642,038,004 649,267,210 Effect of dilutive securities: Employee and director stock options 18,262,796 10,725,294 21,059,802 8,726,914 ------------- ------------- ------------- ------------- Denominator for diluted earnings per share -- Adjusted weighted-average shares 662,482,772 662,873,939 663,097,806 657,994,124 ============= ============= ============= ============= Basic earnings per share $ 0.97 $ 0.82 $ 0.31 $ 0.26 ============= ============= ============= ============= Diluted earnings per share $ 0.95 $ 0.81 $ 0.30 $ 0.26 ============= ============= ============= =============
5 3. 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. The increase in restricted cash from June 28, 2003 to March 27, 2004 was primarily due to the deposit of an additional $90,000,000 in insurance trusts due to a change in underwriting requirements adopted by an insurer regarding the percentage of the overall risks required to be collateralized and to meet the collateral requirements of a new insurer. In 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 resolved. Escrowed funds related to certain acquisitions in the amount of $4,810,000 were released to the sellers during the thirty-nine weeks ended March 27, 2004. 4. DEBT In March 2004, SYSCO issued 4.60% notes totaling $200,000,000 due March 15, 2014 in a private offering. These notes, which were priced at 99.943% of par, are unsecured, are not subject to any sinking fund requirement and include a redemption provision which allows SYSCO to retire the notes at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the note holders are not penalized by the early redemption. Proceeds from the notes were utilized to retire commercial paper borrowings. As of March 27, 2004, SYSCO had 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 March 27, 2004, SYSCO's outstanding borrowings under its commercial paper programs were $104,921,000. During the thirty-nine week period ended March 27, 2004, commercial paper and short-term bank borrowings ranged from approximately $73,102,000 to $478,114,000. 5. ACQUISITIONS In September 2003, SYSCO acquired certain assets of the Stockton, California foodservice operations of Smart & Final, Inc. In September 2003, a subsidiary of SYSCO acquired certain assets of Luzo Foodservice Corporation, located in New Bedford, Massachusetts. In April 2004, a subsidiary of 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. Acquisitions of businesses are accounted for using the purchase method of accounting and the financial statements include the results of acquired operations from the respective dates they joined SYSCO. The acquisitions were immaterial, individually and in the aggregate, to the consolidated financial statements. The balances included in the Consolidated Balance Sheets related to acquisitions made in the last twelve months are based upon preliminary information and are subject to change when 6 final asset and liability valuations are obtained. Material changes to the preliminary allocations are not anticipated by management. Certain acquisitions involve contingent consideration payable in the event that specified operating results are attained. Aggregate contingent consideration amounts outstanding as of March 27, 2004 included approximately 1,337,000 shares of common stock and $26,082,000 in cash, which, if distributed, could result in the company recording up to $54,493,000 in additional goodwill. Such amounts typically are to be paid out over periods of up to five years from the date of acquisition. 6. DERIVATIVE FINANCIAL INSTRUMENTS In October 2003, SYSCO entered into $500 million aggregate notional amount of interest rate swaps as a fair value hedge against the 7.00% Senior Notes due May 2006, 7.25% Senior Notes due April 2007 and 6.10% Senior Notes due June 2012. The swaps effectively converted the fixed interest rate on each of the three series of notes into a floating rate of six-month LIBOR averaged over a six month period plus 461, 430 and 171 basis points, respectively, which were designated as the respective benchmark interest rates on each of the interest payment dates until maturity of the respective notes. In March 2004, SYSCO terminated the $200 million aggregate notional amount swap which was a fair value hedge against the 6.10% Senior Notes due June 2012 and received approximately $1,305,000 representing the fair value of the swap agreement at the time of termination. In April 2004, subsequent to the company's third quarter end, SYSCO entered into an interest rate swap with $100 million aggregate notional amount as a fair value hedge against $100 million of the 4.60% Senior Notes due March 2014. The swap effectively converts the fixed rate on these notes into a floating rate of six-month LIBOR in arrears less 52 basis points, which was designated as the respective benchmark interest rate on each of the interest payment dates until maturity of the notes. In May 2004, subsequent to the company's third quarter end, SYSCO entered into an interest rate swap with $100 million aggregate notional amount as a fair value hedge against the remaining $100 million of the 4.60% Senior Notes due March 2014. The swap effectively converts the fixed rate on these notes into a floating rate of six-month LIBOR in arrears less 72 basis points, which was designated as the respective benchmark interest rate on each of the interest payment dates until maturity of the notes. The terms of the swap agreements and the hedged items are such that the hedges are considered perfectly effective against changes in the fair value of the debt due to changes in the benchmark interest rate over their term. As a result, the shortcut method provided by Statement of Financial Accounting Standards (SFAS) No. 133 is applied and there is no need to periodically reassess the effectiveness of the hedges during the terms of the swaps. Interest expense on the debt is adjusted to include payments made or received under the hedge agreements. The market value of the swaps is carried as an asset or a liability on the consolidated balance sheet and the carrying value of the hedged debt is adjusted accordingly. As of March 27, 2004, the market value of the outstanding swaps was $1,292,000, which is reflected in Other Assets on the Consolidated Balance Sheet, and the carrying amount of the related debt has been increased by the same amount. The amount received upon termination of a swap is reflected as an increase in the carrying value of the related debt to reflect its fair value at termination. This increase in the carrying 7 value of the debt is amortized as a reduction of interest expense over the remaining term of the debt. 7. INCOME TAXES The changes in the net deferred tax liability and accrued income tax balances from June 28, 2003 to March 27, 2004 were primarily due to the reclassification of certain deferred tax liabilities related to a portion of previously deferred supply chain distributions to accrued income taxes and to the payment of taxes during the fiscal year. The reclassification reflects the inclusion in the company's taxable income for fiscal 2004 of these previously deferred supply chain distributions. Fiscal year 2004 is the first period that these supply chain distributions are 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 2002. Taxes paid during the thirty-nine week period ended March 27, 2004 increased to $257,102,000 as compared to $36,734,000 during the comparable period in the prior year, primarily as a result of the factors described above. The effective tax rate in fiscal 2004 is 38.50%, an increase of 0.25% from the effective tax rate of 38.25% in fiscal 2003. The increase in the effective tax rate is attributable to increased state income taxes. 8. STOCK BASED COMPENSATION SYSCO accounts for its stock option plans and the employee stock purchase plan using the intrinsic value method of accounting provided under APB Opinion No. 25 and related interpretations under which no compensation cost has been recognized. 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 as set forth in SFAS No. 123 for all periods presented:
39-Week Period Ended 13-Week Period Ended ------------------------------- ------------------------------ Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Net earnings: Reported net earnings $ 626,616,000 $ 535,552,000 $ 195,824,000 $ 168,411,000 Stock based compensation expense, net of taxes (45,697,000) (38,393,000) (15,769,000) (13,402,000) ------------- ------------- ------------- ------------- Pro forma net earnings $ 580,919,000 $ 497,159,000 $ 180,055,000 $ 155,009,000 ============= ============= ============= ============= Basic earnings per share: Reported earnings per share $ 0.97 $ 0.82 $ 0.31 $ 0.26 Stock based compensation expense, net of taxes (0.07) (0.06) (0.03) (0.02) ------------- ------------- ------------- ------------- Pro forma net earnings $ 0.90 $ 0.76 $ 0.28 $ 0.24 ============= ============= ============= ============= Diluted earnings per share: Reported earnings per share $ 0.95 $ 0.81 $ 0.30 $ 0.26 Stock based compensation expense, net of taxes (0.07) (0.06) (0.03) (0.02) ------------- ------------- ------------- ------------- Pro forma net earnings $ 0.88 $ 0.75 $ 0.27 $ 0.24 ============= ============= ============= =============
8 The weighted average fair value of options granted was $6.74 and $6.88 during the thirty-nine weeks ended March 27, 2004 and March 29, 2003, respectively. The fair value was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the thirty-nine weeks ended March 27, 2004 and March 29, 2003, respectively: dividend yield of 1.49% and 1.45%; expected volatility of 22% and 25%; average risk-free interest rates of 3.2% and 2.7%; and expected lives of 5 years. The weighted average fair value of employee stock purchase rights issued was $4.96 and $4.27 during the thirty-nine weeks ended March 27, 2004 and March 29, 2003, respectively. The fair value of the stock purchase rights was calculated as the difference between the stock price at date of issuance and the employee purchase price. The pro forma presentation applies the fair value method to options and stock purchase rights granted after 1995. The pro forma effects for the periods presented are not necessarily indicative of the pro forma effects in future years. 9. COMPREHENSIVE INCOME Comprehensive income is net earnings plus certain other items that are recorded directly to shareholders' equity. The amounts recorded as other comprehensive income primarily related to foreign currency translation adjustments of ($2,835,000) and $6,770,000 for the thirteen weeks and thirty-nine weeks ended March 27, 2004, respectively. Comprehensive income was $192,989,000 and $168,411,000 for the thirteen weeks ended March 27, 2004 and March 29, 2003, respectively, and $634,135,000 and $535,552,000 for the thirty-nine weeks ended March 27, 2004 and March 29, 2003, respectively. 10. CONTINGENCIES SYSCO is engaged in various legal proceedings which have arisen but have not been fully adjudicated. These proceedings, in the opinion of management, will not have a material adverse effect upon the consolidated financial statements of the company when ultimately concluded. 11. NEW ACCOUNTING STANDARDS SYSCO adopted the provisions of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," effective at the beginning of fiscal 2004. The adoption of SFAS No. 150 has not had a material effect on the company's consolidated financial statements. The Financial Accounting Standards Board issued SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits." The standard requires that companies provide additional financial statement disclosures for defined benefit plans. These disclosure requirements become effective for SYSCO's financial statements for the third quarter of fiscal 2004. 12. SHAREHOLDERS' EQUITY On November 7, 2003, SYSCO's shareholders approved the adoption of 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. 9 13. BUSINESS SEGMENT INFORMATION The company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are reportable segments as defined in SFAS No. 131. Broadline operating companies distribute a full line of food products and a wide variety of non-food products to both our traditional and chain restaurant customers. SYGMA operating companies distribute a full line of food products and a wide variety of non-food products to some of our chain restaurant customer locations. "Other" financial information is attributable to the company's other segments, including the company's specialty produce, custom-cut meat, Asian foodservice and hotel supply segments. The company's Canadian operations are not significant for geographical disclosure purposes. Intersegment sales represent specialty produce and meat company products distributed by the Broadline and SYGMA operating companies. The segment results include allocation of centrally incurred costs for shared services that eliminate upon consolidation. Centrally incurred costs are allocated based upon the relative level of service used by each operating company.
39-Weeks Ended 13-Weeks Ended ------------------------------- ------------------------------- Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Sales (in thousands): Broadline $ 17,156,599 $ 15,796,806 $ 5,648,123 $ 5,247,872 SYGMA 2,561,446 2,133,252 873,344 713,334 Other 1,707,734 1,429,382 574,401 502,378 Intersegment sales (229,393) (190,943) (70,283) (68,306) ------------- ------------- ------------- ------------- Total $ 21,196,386 $ 19,168,497 $ 7,025,585 $ 6,395,278 ============= ============= ============= =============
39-Weeks Ended 13-Weeks Ended ------------------------------- ------------------------------- Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Earnings before income taxes (in thousands): Broadline $ 1,016,475 $ 884,738 $ 316,016 $ 281,114 SYGMA 16,271 15,789 5,005 5,174 Other 55,605 34,200 20,076 9,914 ------------- ------------- ------------- ------------- Total segments 1,088,351 934,727 341,097 296,202 Unallocated corporate expenses (69,464) (67,436) (22,684) (23,471) ------------- ------------- ------------- ------------- Total $ 1,018,887 $ 867,291 $ 318,413 $ 272,731 ============= ============= ============= =============
Mar. 27, 2004 June 28, 2003 Mar. 29, 2003 ------------- ------------- ------------- Assets (in thousands): Broadline $ 4,715,149 $ 4,513,533 $ 4,376,676 SYGMA 220,768 190,406 193,914 Other 538,913 501,236 469,618 ------------- ------------- ------------- Total segments 5,474,830 5,205,175 5,040,208 Corporate 1,852,002 1,731,346 1,615,677 ------------- ------------- ------------- Total $ 7,326,832 $ 6,936,521 $ 6,655,885 ============= ============= =============
10 14. 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. SYSCO International, Co. issued $200,000,000 of 6.10% notes due in 2012. These notes are fully and unconditionally guaranteed by SYSCO. 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) and 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 the third quarter of 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.
CONDENSED CONSOLIDATING BALANCE SHEET -- MARCH 27, 2004 ------------------------------------------------------------------------------------ OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Current assets................. $ 98,216 $ 42 $ 3,592,292 $ -- $ 3,690,550 Investment in subsidiaries................. 8,322,203 259,328 172,856 (8,754,387) -- Plant and equipment, net....... 144,879 -- 1,943,435 -- 2,088,314 Other assets................... 349,717 -- 1,198,251 -- 1,547,968 ------------- ------------- ------------- ------------- ------------- Total assets................... $ 8,915,015 $ 259,370 $ 6,906,834 $ (8,754,387) $ 7,326,832 ============= ============= ============= ============= ============= Current liabilities ........... $ 247,939 $ 102,213 $ 2,503,729 $ -- $ 2,853,881 Intercompany payables (receivables)................ 5,061,704 (42,983) (5,018,721) -- -- Long-term debt................. 1,166,918 199,479 53,742 -- 1,420,139 Other liabilities.............. 208,913 -- 574,851 -- 783,764 Shareholders' equity........... 2,229,541 661 8,793,233 (8,754,387) 2,269,048 ------------- ------------- ------------- ------------- ------------- Total liabilities and shareholders' equity......... $ 8,915,015 $ 259,370 $ 6,906,834 $ (8,754,387) $ 7,326,832 ============= ============= ============= ============= =============
CONDENSED CONSOLIDATING BALANCE SHEET -- JUNE 28, 2003 ------------------------------------------------------------------------------------ OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Current assets................. $ 203,219 $ 549 $ 3,425,766 $ -- $ 3,629,534 Investment in subsidiaries................. 7,529,006 213,247 217,315 (7,959,568) -- Plant and equipment, net....... 84,023 -- 1,838,637 -- 1,922,660 Other assets................... 254,047 2,135 1,128,145 -- 1,384,327 ------------- ------------- ------------- ------------- ------------- Total assets................... $ 8,070,295 $ 215,931 $ 6,609,863 $ (7,959,568) $ 6,936,521 ============= ============= ============= ============= ============= Current liabilities ........... $ (15,010) $ 72,399 $ 2,643,740 $ -- $ 2,701,129 Intercompany payables (receivables)................ 4,694,543 (57,185) (4,637,358) -- -- Long-term debt................. 989,899 199,431 60,137 -- 1,249,467 Other liabilities.............. 236,069 -- 552,325 -- 788,394 Shareholders' equity........... 2,164,794 1,286 7,991,019 (7,959,568) 2,197,531 ------------- ------------- ------------- ------------- ------------- Total liabilities and shareholders' equity......... $ 8,070,295 $ 215,931 $ 6,609,863 $ (7,959,568) $ 6,936,521 ============= ============= ============= ============= =============
11
CONDENSED CONSOLIDATING BALANCE SHEET -- MARCH 29, 2003 ------------------------------------------------------------------------------------ OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Current assets.................. $ 215,110 $ 3 $ 3,235,834 $ -- $ 3,450,947 Investment in subsidiaries.................. 7,192,974 221,311 198,586 (7,612,871) -- Plant and equipment, net........ 47,796 -- 1,781,225 -- 1,829,021 Other assets.................... 292,880 2,017 1,081,020 -- 1,375,917 ------------- ------------- ------------- ------------- ------------- Total assets.................... $ 7,748,760 $ 223,331 $ 6,296,665 $ (7,612,871) $ 6,655,885 ============= ============= ============= ============= ============= Current liabilities ............ $ 343,552 $ 103,325 $ 2,064,967 $ -- $ 2,511,844 Intercompany payables (receivables)................. 3,874,701 (73,140) (3,801,561) -- -- Long-term debt.................. 1,039,400 199,415 40,842 -- 1,279,657 Other liabilities............... 294,073 -- 373,277 -- 667,350 Shareholders' equity............ 2,197,034 (6,269) 7,619,140 (7,612,871) 2,197,034 ------------- ------------- ------------- ------------- ------------- Total liabilities and shareholders' equity.......... $ 7,748,760 $ 223,331 $ 6,296,665 $ (7,612,871) $ 6,655,885 ============= ============= ============= ============= =============
CONDENSED CONSOLIDATING RESULTS OF OPERATIONS FOR THE 39-WEEK PERIOD ENDED MARCH 27, 2004 ------------------------------------------------------------------------------------- OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Sales............................ $ -- $ -- $ 21,196,386 $ -- $ 21,196,386 Cost of sales.................... -- -- 17,107,358 -- 17,107,358 Operating expenses............... 79,788 81 2,949,813 -- 3,029,682 Interest expense (income)........ 184,413 10,687 (144,356) -- 50,744 Other, net....................... (197) (935) (9,153) -- (10,285) ------------- ------------- ------------- ------------- ------------- Total costs and expenses......... 264,004 9,833 19,903,662 -- 20,177,499 ------------- ------------- ------------- ------------- ------------- Earnings (losses) before income taxes.................. (264,004) (9,833) 1,292,724 -- 1,018,887 Income tax (benefit) provision... (101,641) (3,786) 497,698 -- 392,271 Equity in earnings of subsidiaries................... 788,979 5,267 -- (794,246) -- ------------- ------------- ------------- ------------- ------------- Net earnings (loss).............. $ 626,616 $ (780) $ 795,026 $ (794,246) $ 626,616 ============= ============= ============= ============= =============
CONDENSED CONSOLIDATING RESULTS OF OPERATIONS FOR THE 39-WEEK PERIOD ENDED MARCH 29, 2003 ------------------------------------------------------------------------------------- OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Sales............................. $ 1,651,729 $ -- $ 17,516,768 $ -- $ 19,168,497 Cost of sales..................... 1,278,537 -- 14,118,356 -- 15,396,893 Operating expenses................ 348,012 865 2,511,508 -- 2,860,385 Interest expense (income)......... 250,693 7,798 (205,884) -- 52,607 Other, net........................ 161 -- (8,840) -- (8,679) ------------- ------------- ------------- ------------- ------------- Total costs and expenses.......... 1,877,403 8,663 16,415,140 -- 18,301,206 ------------- ------------- ------------- ------------- ------------- Earnings (losses) before income taxes.................... (225,674) (8,663) 1,101,628 -- 867,291 Income tax (benefit) provision... (86,320) (3,314) 421,373 -- 331,739 Equity in earnings of subsidiaries.................... 674,906 -- -- (674,906) -- ------------- ------------- ------------- ------------- ------------- Net earnings...................... $ 535,552 $ (5,349) $ 680,255 $ (674,906) $ 535,552 ============= ============= ============= ============= =============
CONDENSED CONSOLIDATING RESULTS OF OPERATIONS FOR THE 13-WEEK PERIOD ENDED MARCH 27, 2004 ------------------------------------------------------------------------------------- OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Sales............................ $ -- $ -- $ 7,025,585 $ -- $ 7,025,585 Cost of sales.................... -- -- 5,684,192 -- 5,684,192 Operating expenses............... 20,892 25 987,576 -- 1,008,493 Interest expense (income)........ 62,762 3,266 (50,291) -- 15,737 Other, net....................... (5) (7) (1,238) -- (1,250) ------------- ------------- ------------- ------------- ------------- Total costs and expenses......... 83,649 3,284 6,620,239 -- 6,707,172 ------------- ------------- ------------- ------------- ------------- Earnings (losses) before income taxes................... (83,649) (3,284) 405,346 -- 318,413 Income tax (benefit) provision....................... (32,204) (1,265) 156,058 -- 122,589 Equity in earnings of subsidiaries................... 247,269 (790) -- (246,479) -- ------------- ------------- ------------- ------------- ------------- Net earnings (loss).............. $ 195,824 $ (2,809) $ 249,288 $ (246,479) $ 195,824 ============= ============= ============= ============= =============
12
CONDENSED CONSOLIDATING RESULTS OF OPERATIONS FOR THE 13-WEEK PERIOD ENDED MARCH 29, 2003 ------------------------------------------------------------------------------------- OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Sales....................... $ -- $ -- $ 6,395,278 $ -- $ 6,395,278 Cost of sales............... -- -- 5,144,473 -- 5,144,473 Operating expenses.......... 34,685 259 927,515 -- 962,459 Interest expense (income)... 98,929 2,697 (83,350) -- 18,276 Other, net.................. 34 -- (2,695) -- (2,661) ------------- ------------- ------------- ------------- ------------- Total costs and expenses.... 133,648 2,956 5,985,943 -- 6,122,547 ------------- ------------- ------------- ------------- ------------- Earnings (losses) before income taxes.............. (133,648) (2,956) 409,335 -- 272,731 Income tax (benefit) provision................. (51,120) (1,131) 156,571 -- 104,320 Equity in earnings of subsidiaries.............. 250,939 -- -- (250,939) -- ------------- ------------- ------------- ------------- ------------- Net earnings................ $ 168,411 $ (1,825) $ 252,764 $ (250,939) $ 168,411 ============= ============= ============= ============= =============
CONDENSED CONSOLIDATING CASH FLOWS FOR THE 39-WEEK PERIOD ENDED MARCH 27, 2004 ---------------------------------------------------------------- OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES TOTALS ------------- ------------- ------------- ------------- (IN THOUSANDS) Net cash provided by (used for): Operating activities................... $ (235,736) $ 3,866 $ 988,505 $ 756,635 Investing activities................... (162,254) -- (328,096) (490,350) Financing activities................... (388,381) (26,852) (13,693) (428,926) Effect of exchange rate on cash........ -- -- (2,111) (2,111) Intercompany activity.................. 651,937 22,472 (674,409) -- ------------- ------------- ------------- ------------- Net (decrease) in cash................. (134,434) (514) (29,804) (164,752) Cash at the beginning of the period.... 206,043 514 130,890 337,447 ------------- ------------- ------------- ------------- Cash at the end of the period.......... $ 71,609 $ -- $ 101,086 $ 172,695 ============= ============= ============= =============
CONDENSED CONSOLIDATING CASH FLOWS FOR THE 39-WEEK PERIOD ENDED MARCH 29, 2003 ---------------------------------------------------------------- OTHER SYSCO NON-GUARANTOR CONSOLIDATED SYSCO INTERNATIONAL SUBSIDIARIES TOTALS ------------- ------------- ------------- ------------- (IN THOUSANDS) Net cash provided by (used for): Operating activities.............. $ (87,029) $ 14,625 $ 956,899 $ 884,495 Investing activities.............. (247,725) -- (274,687) (522,412) Financing activities.............. (383,658) 18,232 (8,140) (373,566) Intercompany activity............. 746,144 (42,863) (703,281) -- ------------- ------------- ------------- ------------- Net increase (decrease) in cash... 27,732 (10,006) (29,209) (11,483) Cash at the beginning of the period.......................... 155,461 10,006 32,972 198,439 ------------- ------------- ------------- ------------- Cash at the end of the period.......................... $ 183,193 $ -- $ 3,763 $ 186,956 ============= ============= ============= =============
13 15. EMPLOYEE BENEFIT PLANS The components of net benefit cost for the thirty-nine week periods presented are as follows:
Pension Benefits Other Postretirement Plans ------------------------------ ------------------------------ Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Service cost $ 56,199,000 $ 38,854,000 $ 316,000 $ 238,000 Interest cost 45,873,000 38,106,000 302,000 279,000 Expected return on plan assets (45,861,000) (34,847,000) -- -- Amortization of prior service cost 981,000 3,110,000 151,000 152,000 Recognized net actuarial loss (gain) 28,274,000 11,507,000 (30,000) (92,000) Amortization of net transition obligation 209,000 (414,000) 115,000 114,000 ------------- ------------- ------------- ------------- Net periodic benefit cost $ 85,675,000 $ 56,316,000 $ 854,000 $ 691,000 ============= ============= ============= =============
The components of net benefit cost for the thirteen week periods presented are as follows:
Pension Benefits Other Postretirement Plans ------------------------------ ------------------------------ Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Service cost $ 18,733,000 $ 12,951,000 $ 105,000 $ 79,000 Interest cost 15,291,000 12,702,000 101,000 93,000 Expected return on plan assets (15,287,000) (11,616,000) -- -- Amortization of prior service cost 327,000 236,000 50,000 50,000 Recognized net actuarial loss (gain) 9,425,000 3,836,000 (10,000) (30,000) Amortization of net transition obligation 70,000 (138,000) 38,000 38,000 ------------- ------------- ------------- ------------- Net periodic benefit cost $ 28,559,000 $ 17,971,000 $ 284,000 $ 230,000 ============= ============= ============= =============
SYSCO's contributions to its defined benefit plans were $164,012,000 through the thirty-nine weeks ended March 27, 2004. The company does not expect to make significant additional contributions this fiscal year. Contributions in fiscal year 2003 were $164,565,000, of which approximately $46,183,000 were made through the thirty-nine week period ended March 29, 2003. 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations HIGHLIGHTS Sales increased 10.6% for the first thirty-nine weeks and 9.9% for the third quarter of fiscal 2004 over the comparable prior year periods. Gross margins as a percent to sales for both the first thirty-nine weeks and third quarter of fiscal 2004 decreased from the comparable prior year periods due to changes in customer mix, segment mix, product mix and inflation. Operating expenses as a percent to sales for both the first thirty-nine weeks and third quarter of fiscal 2004 decreased from the comparable prior year periods due to operating efficiencies and operating costs increasing at lower rates than product cost inflation. Operating expenses were negatively impacted by increased pension costs and expenses incurred in connection with the national supply chain initiative. During both the first thirty-nine weeks and the third quarter of fiscal 2004, the company also recorded gains related to the cash surrender value of life insurance assets. Primarily as a result of these factors, net earnings increased 17.0% for the first thirty-nine weeks and 16.3% for the third quarter of fiscal 2004 over the comparable prior year periods. OVERVIEW SYSCO distributes food and food related products to the foodservice industry including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. SYSCO's operations are located throughout the United States and Canada and include broadline companies, specialty produce companies, custom-cut meat operations, Asian foodservice, hotel supply operations and SYGMA, the company's chain restaurant distribution subsidiary. The company estimates that it serves about 13% of an approximately $200 billion annual foodservice market that includes the North American foodservice, non-food and hotel amenity markets. The foodservice, or food-prepared-away-from-home, market represents approximately one-half of the total food purchases made at the consumer level This share has grown from about 37% thirty years ago, since food purchases in the foodservice industry have grown more rapidly than food purchases in the retail grocery industry over most of that time period. Factors influencing this trend, and therefore SYSCO's growth, include increases in dual-worker and single-parent families; busier lifestyles; the general aging of the population; growing affluence; and the increasing demand for the variety, convenience and entertainment afforded by the proliferation of restaurants and other foodservice operations. Industry statisticians and demographers expect these general trends to continue, although they may not continue at the same pace. General economic conditions and consumer confidence can have an effect on the frequency and amount spent by consumers for food prepared away from home and therefore on SYSCO. However, we have consistently grown at a faster rate than the overall industry and have grown our market share in this fragmented industry. The company intends to continue to expand its market share and grow earnings through strategies which include: - Profitable sales growth: In addition to expansion through foldouts (new operating companies created in established markets previously served by other SYSCO operating companies) and a disciplined acquisition program, refining the use of customer purchasing potential and profitability data in targeting new customers, deepening relationships with existing customers, tailoring products and services and 15 allocating associated resources by customer, and managing the profitability of, or exiting, low profit or unprofitable customers. - Brand management: Leveraging brand strength to grow sales and profitability while ensuring strict quality control processes and providing greater value to customers. - Productivity: Deploying the latest technology and leveraging best business practices to improve operating efficiencies and leverage expenses to sales growth. - Sales force effectiveness: Targeted recruiting, training and compensation of marketing associates. Expanding the business development and business review functions to further strengthen our marketing associate-customer relationships. - Supply chain optimization: Creating a more efficient and effective supply chain infrastructure through the national supply chain initiative. The company's national supply chain initiative is intended to optimize the supply chain activities for certain products from SYSCO's operating companies in each respective region and as a result, lower inventory and operating costs, reduce working capital requirements and reduce future facility expansion needs at SYSCO's operating companies while providing greater value to our suppliers and customers. The company expects to build from five to ten regional distribution centers over a period of ten years. The first regional distribution center in the Northeast is expected to be operational during fiscal 2005. 16 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:
39-Week Period Ended 13-Week Period Ended ------------------------------ ------------------------------ Mar. 27, 2004 Mar. 29, 2003 Mar. 27, 2004 Mar. 29, 2003 ------------- ------------- ------------- ------------- Sales 100.0% 100.0% 100.0% 100.0% Costs and Expenses Cost of sales 80.7 80.3 80.9 80.4 Operating expenses 14.3 14.9 14.4 15.1 Interest expense 0.2 0.3 0.2 0.3 Other, net 0.0 0.0 0.0 (0.1) ----- ----- ----- ----- Total costs and expenses 95.2 95.5 95.5 95.7 ----- ----- ----- ----- Earnings before income taxes 4.8 4.5 4.5 4.3 Income taxes 1.8 1.7 1.7 1.7 ----- ----- ----- ----- Net earnings 3.0% 2.8% 2.8% 2.6% ===== ===== ===== =====
The following table sets forth the change in the components of the Results of Operations expressed as a percentage increase or decrease over the comparable period in the prior year:
% Increase (Decrease) -------------------------------- 39-Week Period 13-Week Period -------------- -------------- Sales 10.6% 9.9% Costs and Expenses Cost of sales 11.1 10.5 Operating expenses 5.9 4.8 Interest expense (3.5) (13.9) Other, net 18.5 (53.0) ---- ---- Total costs and expenses 10.3 9.5 ---- ---- Earnings before income taxes 17.5 16.8 Income taxes 18.2 17.5 ---- ---- Net earnings 17.0% 16.3% ==== ==== Basic earnings per share 18.3% 19.2% Diluted earnings per share 17.3 15.4 Average shares outstanding (1.2) (1.1) Diluted shares outstanding (0.1) 0.8
17 SALES Sales increased 10.6% during the first thirty-nine weeks and 9.9% in the third quarter of fiscal 2004 over the comparable periods of the prior year. This compares to sales increases of 12.5% during the first thirty-nine weeks and 13.8% in the third quarter of fiscal 2003 over the comparable prior year periods. Acquisitions contributed 1.0% to the overall sales growth rate for the first thirty-nine weeks of fiscal 2004 and 0.4% for the third quarter of fiscal 2004, as compared to 6.5% and 7.3%, respectively, for the comparable periods in the prior year. Also contributing to sales growth were estimated product cost increases, an internal measure of inflation, of 5.5% during the first thirty-nine weeks of fiscal 2004 and 5.2% during the third quarter of fiscal 2004 over the comparable periods in the prior year. The company estimated its product costs decreased by 0.8% during the first thirty-nine weeks of fiscal 2003 and increased by 0.8% during the third quarter of fiscal 2003 from the comparable periods in the prior year. 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. COST OF SALES Cost of sales increased 11.1% in the first thirty-nine weeks and 10.5% in the third quarter of fiscal 2004 over the comparable periods of the prior year. Management believes that cost of sales as a percentage to sales was impacted by several factors including change in customer mix, segment mix, product mix and inflation; however, the specific impact of each factor is difficult to quantify. Multi-unit customer sales in the Broadline segment, which traditionally yield lower gross margins and lower expenses than marketing associate-served sales, grew faster than sales to marketing associate-served sales over the comparable period in the prior year. Sales at the SYGMA and the Other segments, which traditionally have lower margins than the Broadline segment, grew faster than sales at the Broadline segment. In the area of product mix, meat sales continued to grow as a percentage of overall sales and also experienced a high rate of cost increases. Meat products typically generate higher prices and higher gross margin dollars per case. However, meat products result in lower gross margins as a percentage of sales. Therefore, increased sales of these products had the effect of decreasing overall gross margins as a percentage of sales even as gross margin dollars were maintained or increased. Product cost increases in substantially all product categories also had the impact of reducing gross margins as a percentage of sales as gross profit dollars are earned on a higher sales dollar base. OPERATING EXPENSES Operating expenses increased 5.9% in the first thirty-nine weeks and 4.8% in the third quarter of fiscal 2004 over the comparable periods of the prior year. 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 contributed to the decreases in operating expenses as a percentage to sales. Increases in product costs and the resulting increased average sales price per item also impacted expenses as a percentage to sales favorably as operating costs increased at a lower rate. Operating expenses were also favorably impacted by the recognition in income of $19,221,000 in the first thirty-nine weeks and $2,437,000 in the third quarter of fiscal 2004 to adjust the carrying value of life insurance assets to their cash surrender value as compared to the recognition of a loss of $13,156,000 and $3,271,000 in the comparable periods of fiscal 2003, respectively. Operating expenses were negatively impacted by the recognition of $85,675,000 in net pension cost in the first thirty-nine weeks and $28,559,000 in the third quarter of fiscal 2004 as compared to $56,316,000 and $17,971,000 in the comparable periods of fiscal 2003. In addition, operating expenses related to the national supply chain initiative were $20,684,000 in the first thirty-nine weeks and $3,392,000 in the third quarter of fiscal 2004 as compared to $14,252,000 and $4,454,000 in the comparable periods of fiscal 2003. 18 OTHER, NET Other net income was $10,285,000 in the first thirty-nine weeks of fiscal 2004 and $1,250,000 in the third quarter of fiscal 2004. The company recognized a gain on the sale of a facility of approximately $5,700,000 in the second quarter of fiscal 2004. EARNINGS BEFORE INCOME TAXES AND NET EARNINGS Earnings before income taxes increased 17.5% for the first thirty-nine weeks and 16.8% for the third quarter of fiscal 2004 over the comparable periods of the prior year. Net earnings increased 17.0% for the first thirty-nine weeks and 16.3% for the third quarter of fiscal 2004 over the comparable periods of the prior year. These increases were due to the factors discussed above. EARNINGS PER SHARE Basic earnings per share increased 18.3% for the first thirty-nine weeks and 19.2% for the third quarter of fiscal 2004 over the comparable periods of the prior year. Diluted earnings per share increased 17.3% for the first thirty-nine weeks and 15.4% for the third quarter of fiscal 2004 over the comparable periods of the prior year. These increases were due to the factors discussed above. 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 comparable period in the prior year and should be read in conjunction with Business Segment Information (Footnote No. 13) in the Notes to Consolidated Financial Statements:
% Increase (Decrease) ------------------------------------------ 39-Week Period 13-Week Period ------------------ ------------------- Earnings Earnings before before Sales taxes Sales taxes ----- -------- ----- -------- Broadline 8.6% 14.9% 7.6% 12.4% SYGMA 20.1 3.1 22.4 (3.3) Other 19.5 62.6 14.3 102.5
The following table sets forth sales and earnings before income 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 (Footnote No. 13) in the Notes to Consolidated Financial Statements:
% of Total ------------------------------------------------- 39-Week Period 13-Week Period ----------------------- --------------------- Earnings Earnings Sales before taxes Sales before taxes -------- ------------ ----- ------------ Broadline 80.9% 99.8% 80.4% 99.2% SYGMA 12.1 1.6 12.4 1.6 Other 8.1 5.4 8.2 6.3 Intersegment sales (1.1) -- (1.0) -- Unallocated corporate expenses -- (6.8) -- (7.1) ----- ----- ----- ----- Total 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
19 BROADLINE SEGMENT The Broadline segment sales increased 8.6% for the thirty-nine weeks and 7.6% for the third quarter of fiscal 2004 over the comparable periods of the prior year. Acquisitions contributed 0.3% to the overall sales growth rate for the first thirty-nine weeks and 0.0% percent for the third quarter of fiscal 2004. The sales increases were 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. These increases were reflected in increased sales to the company's existing customer base and to new customers. Marketing associate-served sales as a percentage of broadline sales in the U.S. decreased to 54.1% and 52.8% for the thirty-nine weeks and thirteen weeks ended March 27, 2004, respectively, as compared to 54.5% and 53.3%, respectively for the comparable prior year periods. This decrease was due to the increase in sales to multi-unit customers exceeding the increase in sales to marketing associate-served customers. The growth in sales to multi-unit customers is being fueled by strong sales of those multi-unit customers resulting in increased sales to existing locations and the addition of new locations. SYSCO Brand sales as a percentage of broadline sales in the U.S. increased to 48.9% and 48.7% for the thirty-nine weeks and thirteen weeks ended March 27, 2004, respectively, as compared to 48.8% and 48.4%, respectively for the comparable prior year periods. Earnings before taxes for the Broadline segment increased 14.9% for the thirty-nine weeks and 12.4% for third quarter of fiscal 2004 over the comparable periods of the prior year. These increases were primarily due to increases in sales and expense controls resulting in lower expenses as a percentage to sales. SYGMA SEGMENT SYGMA segment sales increased 20.1% for the thirty-nine weeks and 22.4% for the third quarter of fiscal 2004 over the comparable periods of the prior year. Acquisitions contributed 2.2% to the overall sales growth rate for the first thirty-nine weeks and 0.0% for the third quarter of fiscal 2004. The sales increases were primarily due to sales to new customers, sales growth in SYGMA's existing customer base related to new locations added by those customers as well as increases in sales to existing locations, price increases resulting from higher product costs and the acquisitions of Pronamic in October 2002 and the Denver operations of Marriott Distribution Services, Inc. in December 2002. Earnings before taxes for the SYGMA segment increased 3.1% for the thirty-nine weeks and decreased 3.3% for the third quarter of fiscal 2004 over the comparable periods of the prior year. In the third quarter of fiscal 2004, increased expenses were 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. Beginning in March 2004 and continuing in the fourth quarter of fiscal 2004 and the first quarter of fiscal 2005, SYGMA will discontinue servicing a portion of its largest customer's locations due to that customer's geographic supply chain realignment. SYGMA expects to offset these lost sales by obtaining additional locations from this customer and obtaining new business from other customers. In many cases, this new business will be served out of different SYGMA locations than those that served the business which was discontinued. As a result, in the third quarter of fiscal 2004, SYGMA incurred additional expenses including severance payments and equipment moving costs as it began to transition its operations to serve these new customers. SYGMA expects to incur similar expenses in the fourth quarter of fiscal 2004 and the first quarter of fiscal 2005 as it continues to transition to serve these new customers. Any net lost sales and the related additional expenses are not expected to be material to SYSCO overall, and we expect SYGMA to continue to be a profitable segment. 20 OTHER SEGMENTS Sales for the Other segments, which include the company's specialty businesses, increased 19.5% for the thirty-nine weeks and 14.3% for the third quarter of fiscal 2004 over the comparable periods of the prior year. Acquisitions contributed 7.3% to the overall sales growth rate for the first thirty-nine weeks and 4.6% for the third quarter of fiscal 2004. The sales increases were due to increased sales to the existing customer base, sales to new customers, price increases resulting from higher product costs, the acquisitions of Asian Foods, Inc. in October 2002 and the specialty meat-cutting division of Colorado Boxed Beef Company in April 2003 and increased intersegment sales to SYSCO Broadline companies. Earnings before taxes for the Other segments increased 62.6% for the thirty-nine weeks and 102.5% for the third quarter of fiscal 2004 over the comparable periods of the prior year. These increases were primarily due to increases in sales, margin enhancement and expense controls. LIQUIDITY AND CAPITAL RESOURCES The company generated $756,635,000 in net cash from operations for the thirty-nine week period ended March 27, 2004, compared with $884,495,000 for the comparable period in fiscal 2003. Cash flow from operations for the thirty-nine week period ended March 27, 2004 was negatively impacted by increases in accounts receivable balances of $85,195,000 and inventory balances of $134,750,000, offset by increases in accounts payable of $77,154,000. A contributor to the increase in accounts receivable balances was sales to multi-unit customers which represented a larger percentage of total SYSCO sales for March 2004 as compared to June 2003. This is due to normal sales patterns where sales to multi-unit customers as a group are traditionally higher in March as compared to June due to many educational facilities being closed in June. In addition, the growth in sales to multi-unit customers outpaced the growth in SYSCO's overall sales. Multi-unit customer payment terms are traditionally longer than the overall SYSCO average; thus, the increased sales to this group of customers caused the accounts receivable balances at March 27, 2004 to increase. The company showed improvements in its working capital cycle for the fiscal quarter ended March 27, 2004 as accounts receivable, inventory and accounts payable days sales outstanding and accounts payable leverage ratios all showed improvement as compared to the same period last year. The decrease in accrued expenses and other long-term liabilities of $60,333,000 for the thirty-nine weeks was primarily due to pension contributions of $164,012,000 during the thirty-nine week period ended March 27, 2004, as compared to $46,183,000 during the comparable prior year period. Pension contributions for the third quarter of fiscal 2004 were $81,374,000 as compared to $4,266,000 during the comparable prior year period. SYSCO does not expect to make significant additional contributions in fiscal 2004. Contributions in fiscal 2003 were $164,565,000. Taxes paid during the thirty-nine week period ended March 27, 2004 were $257,102,000 as compared to $36,734,000 during the comparable period in the prior year. The increase in taxes paid was due to the company's inclusion in taxable income for fiscal 2004 of supply chain distributions deferred in prior years. Fiscal year 2004 is the first period that these supply chain distributions are 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 2002. The company expects the net cash flow impact of the deferral of supply chain distributions in fiscal 2004 and beyond to be incrementally positive when compared to what would have been 21 paid in taxes on an annual basis without the deferral. This is due to the company's expectations that its volume of purchases through this structure will continue to grow. Total capital expenditures in fiscal 2004 are expected to be approximately $500,000,000. Projected capital expenditures include the continuation of the fold-out program; facility, fleet and other equipment replacements and expansions; and the national supply chain project. Expenditures in the thirty-nine week period ended March 27, 2004 related to the company's national supply chain project totaled $101,419,000 of which $80,735,000 was capitalized. Total expenditures on the project since inception are $182,629,000 of which $125,167,000 has been capitalized. The Northeast Redistribution Center is expected to be operational during fiscal 2005. During the thirty-nine week period ended March 27, 2004 a total of 13,805,400 shares were purchased at a cost of $508,963,000 as compared to 12,963,700 shares at a cost of $372,808,000 for the comparable period in fiscal 2003. An additional 242,300 shares at a cost of $9,394,000 have been purchased through April 24, 2004 resulting in 15,015,000 shares remaining available for repurchase as authorized by the Board as of that date. Dividends paid in the thirty-nine week period ended March 27, 2004 were $226,271,000, or $0.35 per share, as compared to $190,336,000, or $0.29 per share, in the comparable period of fiscal 2003. In February 2004, SYSCO declared its regular quarterly dividend for the fourth quarter of fiscal 2004, at $0.13 per share, which was paid in April 2004. Long-term debt to capitalization ratio was 38.5% at March 27, 2004, within the company's long-term 35% to 40% target range. In March 2004, SYSCO issued 4.60% notes totaling $200,000,000 due March 15, 2014 in a private offering. These notes, which were priced at 99.943% of par, are unsecured, are not subject to any sinking fund requirement and include a redemption provision which allows SYSCO to retire the notes at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the note holders are not penalized by the early redemption. Proceeds from the notes were utilized to retire commercial paper borrowings. As of March 27, 2004, SYSCO's borrowings under its commercial paper programs were $104,921,000. Such borrowings were $248,705,000 as of April 24, 2004. During the thirty-nine week period ended March 27, 2004, commercial paper and short-term bank borrowings ranged from approximately $73,102,000 to $478,114,000. Cash provided by operating activities, as supplemented by commercial paper and other bank borrowings, may, at the discretion of management, be applied towards investments in facilities, fleet and other equipment; cash dividends; acquisitions fitting within the company's overall growth strategy; and the share repurchase program. Management believes that the company's cash flows from operations, as well as the availability of additional 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. 22 FORWARD-LOOKING STATEMENTS Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements regarding potential future repurchases under the share repurchase program; market risks; industry growth; the impact of ongoing legal proceedings; the timing, expected cost savings and other benefits of the national supply chain project, including the Northeast Redistribution Center; anticipated capital expenditures; the ability to increase market share and grow earnings; sales growth; growth strategies; the impact of discontinued business at the SYGMA segment and SYGMA's ability to offset such impact with additional business; and SYSCO's ability to meet its cash requirements while maintaining proper liquidity. These statements involve risks and uncertainties and are based on management's current expectations and estimates; actual results may differ materially. Those risks and uncertainties that could impact these statements include the risks relating to the foodservice distribution industry's relatively low profit margins and sensitivity to general economic conditions, including the current economic environment; changing customer needs; SYSCO's leverage and debt risks; the successful completion of acquisitions and integration of acquired companies; the effect of competition on SYSCO and its customers; the ultimate outcome of litigation; potential impact of product liability claims; the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise; labor issues; construction schedules; management's allocation of capital and the timing of capital purchases; risks relating to the successful completion and operation of the national supply chain project including the Northeast Redistribution Center; and internal factors such as the ability to increase efficiencies, control expenses and successfully execute growth strategies. In addition, share repurchases could be affected by market prices for the company's securities as well as management's decision to utilize its capital for other purposes. The effect of market risks could be impacted by future borrowing levels and certain economic factors such as interest rates. For a more detailed discussion of these and other factors 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 June 28, 2003. Item 3. 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 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 interest rates affecting the fair value of such instruments, potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties in such transactions. In October 2003, SYSCO entered into $500 million aggregate notional amount of interest rate swaps as a fair value hedge against the 7.00% Senior Notes due May 2006, 7.25% Senior Notes due April 2007 and 6.10% Senior Notes due June 2012. The swaps effectively convert the fixed interest rate on each of the three series of notes into a floating rate of six-month LIBOR averaged over a six month period plus 461, 430 and 171 basis points, respectively. In March 2004, SYSCO terminated the $200 million aggregate notional amount swap which was a fair 23 value hedge against the 6.10% Senior Notes due June 2012, leaving $300 million aggregate notional amount of interest rate swaps outstanding at March 27, 2004. At March 27, 2004, the company had a total of $435,921,000 in debt at variable rates of interest including commercial paper with maturities through June 28, 2004 and $300,000,000 in fixed rate debt swapped to floating rate as discussed above. The company's remaining debt obligations of $1,100,436,000 were at fixed rates of interest. In April 2004, subsequent to the company's third quarter end, SYSCO entered into an interest rate swap with $100 million aggregate notional amount as a fair value hedge against $100 million of the 4.60% Senior Notes due March 2014. The swap effectively converts the fixed rate on these notes into a floating rate of six-month LIBOR in arrears less 52 basis points. In May 2004, subsequent to the company's third quarter end, SYSCO entered into an interest rate swap with $100 million aggregate notional amount as a fair value hedge against the remaining $100 million of the 4.60% Senior Notes due March 2014. The swap effectively converts the fixed rate on these notes into a floating rate of six-month LIBOR in arrears less 72 basis points. Item 4. Controls and Procedures As of March 27, 2004, an evaluation was performed under the supervision and with the participation of the company's management, including the CEO and CFO, of the effectiveness of the design and operation of the company's disclosure controls and procedures. Based on that evaluation, the company's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 27, 2004 in providing reasonable assurances that material information required to be disclosed is included on a timely basis in the reports it files with the Securities and Exchange Commission. Furthermore, the company's management noted that no changes occurred during the third quarter of fiscal 2004 that materially affected, or would be reasonably likely to materially affect, the company's internal controls over financial reporting. 24 PART II. OTHER INFORMATION Item 1. 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 statements of the company when ultimately concluded. Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities ISSUER PURCHASES OF EQUITY SECURITIES
(c) TOTAL NUMBER OF SHARES (d) MAXIMUM NUMBER PURCHASED AS PART OF SHARES THAT MAY (b) AVERAGE OF PUBLICLY YET BE PURCHASED (a) TOTAL NUMBER PRICE PAID ANNOUNCED PLANS OR UNDER THE PLANS OR PERIOD OF SHARES PURCHASED PER SHARE PROGRAMS PROGRAMS - ------------------------ ------------------- ----------- ------------------ ------------------- Month #1 December 28 - January 24 529,900 $ 36.52 529,900 22,239,600 Month #2 January 25 - February 21 1,350,000 37.74 1,350,000 20,889,600 Month #3 February 22 - March 27 5,631,800 39.15 5,631,800 15,257,800 --------- ----------- --------- ---------- Total 7,511,700 38.71 7,511,700 15,257,800 --------- ----------- --------- ----------
The 2003 share repurchase program approved by the Board of Directors covered 20,000,000 shares and was announced on July 31, 2002. This program was completed during the third quarter of fiscal 2004. The 2004 share repurchase program approved by the Board of Directors covered 20,000,000 shares and was announced on September 12, 2003. Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) 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) Bylaws, as amended and restated February 8, 2002, incorporated by reference 25 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) 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(b) First Supplemental Indenture, dated June 27, 1995, between Sysco Corporation and First Union National Bank of North Carolina, Trustee, as amended, incorporated by reference to Exhibit 4(e) to Form 10-K for the year ended June 29, 1996 (File No. 1-6544). 4(c) 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(d) 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(e) 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(f) 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. 1-6554). 4(g) Sixth Supplemental Indenture, including form of Note, dated April 5, 2002 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 4.1 to Form 8-K dated April 5, 2002 (File No. 1-6544). 4(h) Indenture dated May 23, 2002 between SYSCO International, Co., SYSCO Corporation and Wachovia Bank, National Association, incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-4 filed August 26 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 reference to Exhibit 4(i) to Form 10-Q for the quarter ended September 28, 2002 (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. *15(a) Report from Ernst & Young LLP dated May 11, 2004, re: unaudited financial statements. *15(b) Acknowledgment letter from Ernst & Young LLP. *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. - -------------------------------------- * Filed herewith. (b) Reports on Form 8-K: 1. On January 26, 2004, the company filed a current report on Form 8-K announcing under Items 7 and 12 thereof the results of its second quarter ended December 27, 2003. 27 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SYSCO CORPORATION (Registrant) By /s/ RICHARD J. SCHNIEDERS --------------------------------------- Richard J. Schnieders Chairman and Chief Executive Officer Date: May 11, 2004 By /s/ JOHN K. STUBBLEFIELD, JR. ----------------------------------------- John K. Stubblefield, Jr. Executive Vice President, Finance & Administration Date: May 11, 2004 28 EXHIBIT INDEX
NO. DESCRIPTION - ---- -------------------------------------------------------- 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) Bylaws, as amended and restated 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) 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(b) First Supplemental Indenture, dated June 27, 1995, between Sysco Corporation and First Union National Bank of North Carolina, Trustee, as amended, incorporated by reference to Exhibit 4(e) to Form 10-K for the year ended June 29, 1996 (File No. 1-6544). 4(c) 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(d) 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(e) 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(f) 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. 1-6554). 4(g) Sixth Supplemental Indenture, including form of Note, dated April 5, 2002 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 4.1 to Form 8-K dated April 5, 2002 (File No. 1-6544). 4(h) Indenture dated May 23, 2002 between SYSCO International, Co., SYSCO Corporation and Wachovia Bank, National Association, incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-4 filed August 21, 2002 (File No. 333-98489). 4(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 reference to Exhibit 4(i) to Form 10-Q for the quarter ended September 28, 2002 (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. *15(a) Report from Ernst & Young LLP dated May 11, 2004, re: unaudited financial statements. *15(b) Acknowledgment letter from Ernst & Young LLP. *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.
- ------------------------------------ * Filed herewith. EX-4.J 2 h15218exv4wj.txt SEVENTH SUPPLEMENTAL INDENTURE EXHIBIT 4(j) -------------------------------------------------------------------- -------------------------------------------------------------------- SYSCO CORPORATION AND WACHOVIA BANK, NATIONAL ASSOCIATION (Formerly First Union National Bank of North Carolina) Trustee ---------------------- SEVENTH SUPPLEMENTAL INDENTURE Dated as of March 5, 2004 ---------------------- Supplementing the Indenture dated as of June 15, 1995 -------------------------------------------------------------------- -------------------------------------------------------------------- SEVENTH SUPPLEMENTAL INDENTURE, dated as of the 5th day of March, 2004, between SYSCO CORPORATION, a corporation organized and existing under the laws of the State of Delaware (the "Company"), and WACHOVIA BANK, NATIONAL ASSOCIATION (formerly First Union National Bank of North Carolina), a national banking association, as trustee (the "Trustee"); WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture dated as of June 15, 1995 (the "Original Indenture") providing for the issuance by the Company from time to time of its unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (in the Original Indenture and herein called the "Securities"); and WHEREAS, the Company has heretofore executed and delivered to the Trustee (i) a First Supplemental Indenture dated as of June 27, 1995 providing for the issuance by the Company of $150,000,000 aggregate principal amount of 6-1/2% Senior Notes due June 15, 2005, (ii) a Second Supplemental Indenture dated as of May 1, 1996 providing for the issuance by the Company of $200,000,000 aggregate principal amount of 7% Senior Notes due May 1, 2006, (iii) a Third Supplemental Indenture dated as of April 25, 1997 providing for the issuance by the Company of $50,000,000 aggregate principal amount of 7.16% Debentures due April 15, 2027, (iv) a Fourth Supplemental Indenture dated as of April 25, 1997 providing for the issuance by the Company of $100,000,000 aggregate principal amount of 7.25% Senior Notes due April 15, 2007, (v) a Fifth Supplemental Indenture dated as of July 27, 1998 providing for the issuance by the Company of $225,000,000 aggregate principal amount of 6-1/2% Debentures due August 1, 2028 and (v) a Sixth Supplemental Indenture dated as of April 5, 2002 providing for the issuance by the Company of $200,000,000 aggregate principal amount of 4.75% Notes due July 30, 2005; and WHEREAS, the Company, in the exercise of the power and authority conferred upon and reserved to it under the provisions of the Original Indenture, including Section 2.3 thereof, and pursuant to appropriate resolutions of the Board of Directors, has duly determined to make, execute and deliver to the Trustee this Seventh Supplemental Indenture to the Original Indenture as permitted by Sections 2.1, 2.3 and 8.1 of the Original Indenture in order to establish the form or terms of, and to provide for the creation and issue of, a series of Securities under the Original Indenture in the aggregate principal amount of $200,000,000; and WHEREAS, all things necessary to make the Securities provided for herein, when executed by the Company and authenticated and delivered by the Trustee or any Authenticating Agent and issued upon the terms and subject to the conditions hereinafter and in the Original Indenture set forth against payment therefor, the valid, binding and legal obligations of the Company and to make this Seventh Supplemental Indenture a valid, binding and legal agreement of the Company, have been done; NOW, THEREFORE, THIS SEVENTH SUPPLEMENTAL INDENTURE WITNESSETH that, in order to establish the terms of a series of Securities, and for and in consideration of the premises and of the covenants contained in the Original Indenture and in this Seventh Supplemental Indenture and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, it is mutually covenanted and agreed as follows: -1- ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1.1 Definitions. Each capitalized term that is used herein and is defined in the Original Indenture shall have the meaning specified in the Original Indenture unless that term is otherwise defined herein. 1.2 Section References. Each reference to a particular section set forth in this Seventh Supplemental Indenture shall, unless the context otherwise requires, refer to this Seventh Supplemental Indenture. ARTICLE II TITLE AND TERMS OF SECURITIES 2.1 Title of the Securities. This Seventh Supplemental Indenture hereby establishes a series of Securities designated as the "4.60% Senior Notes due March 15, 2014" of the Company (collectively referred to herein as the "Notes"). For purposes of the Original Indenture, the Notes shall constitute a single series of Securities. 2.2 Term of the Notes. The Notes shall mature on March 15, 2014 (the "Stated Maturity"). In the event that the Stated Maturity of any Note is not a Business Day, principal and interest payable at maturity shall be paid on the next succeeding Business Day with the same effect as if that Business Day were the Stated Maturity and no interest shall accrue or be payable for the period from and after the Stated Maturity to the next succeeding Business Day. 2.3 Amount and Denominations; Currency of Payment. The aggregate principal amount in which the Notes may be issued under this Seventh Supplemental Indenture is limited to $200,000,000. The Notes shall be issued in the form of one or more Registered Global Securities in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York ("DTC"). DTC shall initially act as Depositary for the Notes. The Notes that are initially issued for resale to "qualified institutional buyers" ("QIBs") under Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), shall be issued as one or more permanent Registered Global Securities under the Indenture (each a "Rule 144A Global Security"). The Notes that are initially issued for resale to non-U.S. persons outside the United States in offshore transactions in reliance on Regulation S under the Securities Act shall be issued as one or more permanent Registered Global Securities under the Indenture (each a "Regulation S Global Security"). The Notes shall be denominated in United States dollars in denominations of $1,000 and integral multiples of $1,000. -2- 2.4 Interest and Interest Rates. Each Note shall bear interest at the rate of 4.60% per annum from the date of issue or from the most recent Interest Payment Date (as defined in Section 2.5 below) to which interest on such Note has been paid or duly provided for, commencing with the Interest Payment Date next succeeding the date of issue, until the principal thereof is paid or made available for payment. Interest shall be payable to the Person in whose name a Note is registered at the close of business on the Regular Record Date (as defined in Section 2.5 below) next preceding an Interest Payment Date. Notwithstanding the foregoing, if a Note is originally issued after the Regular Record Date and before the corresponding Interest Payment Date, the first payment of interest on the Note shall be made on the next succeeding Interest Payment Date to the Person in whose name that Note was registered on the Regular Record Date with respect to such next succeeding Interest Payment Date. Interest on each Note shall be computed on the basis of a 360-day year comprising twelve 30-day months. 2.5 Interest Payments. The interest payment dates for each Note shall be March 15 and September 15, in each year (the "Interest Payment Dates"), beginning September 15, 2004 and the regular record dates shall be the March 1 and September 1 (the "Regular Record Dates") preceding those Interest Payment Dates, respectively. Interest shall also be payable at maturity of any Note. If an Interest Payment Date with respect to the Notes would otherwise fall on a day that is not a Business Day, such Interest Payment Date shall be postponed to the next succeeding Business Day with respect to the Notes and no interest shall accrue or be payable on such next succeeding Business Day for the period from and after such original Interest Payment Date to such next succeeding Business Day. Except as provided in the immediately preceding paragraph, interest payments shall be in the amount of interest accrued to, but excluding, the Interest Payment Date. 2.6 Place of Payment, Transfer and Exchange. (i) Place of Payment. The Company authorizes and appoints the Trustee as the sole paying agent (the "Paying Agent") with respect to any Notes represented by Registered Global Securities, without prejudice to the Company's authority to appoint additional paying agents from time to time pursuant to Section 3.4 of the Original Indenture. Payments of principal on each Note and interest thereon payable at maturity or upon redemption shall be made in immediately available funds in such currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, at the request of the Holder, at the office or agency of the Paying Agent in New York, New York or any other duly appointed Paying Agent, provided that the Note is presented to the Paying Agent in time for the Paying Agent to make the payments in immediately available funds in accordance with its normal procedures. So long as any Notes are represented by a Registered Global Security, interest (other than interest payable at maturity or upon redemption) shall be paid in immediately available funds by wire transfer to the Depositary for such Notes, on the written order of the Depositary. In addition, the Company may maintain a drop agent, in such location or locations as the Company may select, to provide the Holders with an office at which they may present the Notes for payment. The Company hereby acknowledges that any drop agent maintained will -3- accept Notes for presentment, take payment instructions from the Holder and forward the Notes presented and any related payment instructions to the Paying Agent by overnight courier, for next day delivery. Notes presented as set forth in the previous sentence shall be deemed to be presented to the Paying Agent on the Business Day next succeeding the day the Notes are delivered to the drop agent. Payment of interest (other than interest payable in accordance with the preceding provisions of this subsection (i)) will, subject to certain exceptions provided in the Indenture, be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security register as of the applicable Regular Record Date or, at the option of the Company, by wire transfer to an account maintained by such Person with a bank located in the United States. (ii) Transfer and Exchange of Notes. The Company appoints the Trustee as the sole Security registrar with respect to the Notes, without prejudice to the Company's authority to appoint additional Security registrars from time to time pursuant to Section 2.8 of the Original Indenture. The Notes may be presented by the Holders thereof for registration of transfer or exchange at the office or agency of the Security registrar or any successor or co-registrar in New York, New York. In addition, the Company may maintain a drop agent, in such location or locations as the Company may select, to provide the Holders with an office at which they may present the Notes for registration of transfer or exchange. The Company hereby acknowledges that any drop agent maintained by the Company will accept Notes for registration of transfer or exchange and forward those Notes to the Security registrar by overnight courier, for next day delivery. Notes accepted as set forth in the immediately preceding sentence shall be deemed to be presented to the Security registrar on the Business Day next succeeding the day that Notes are delivered to the drop agent. (iii) Transfer and Exchange of Notes in Definitive Form. In addition to the requirements set forth in Section 2.8 of the Indenture, Notes in definitive form that bear the Private Placement Legend (as defined in Section 2.10 below) presented or surrendered for registration of transfer or exchange pursuant to Section 2.8 of the Indenture shall be accompanied by the following additional information and documents, as applicable, upon which the Security registrar may conclusively rely: (a) if such Notes are being delivered to the Security registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form of Annex B hereto); (b) if such Notes are being transferred (1) to a QIB in accordance with Rule 144A under the Securities Act or (2) pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act (based upon an opinion of counsel if the Company or the Trustee so requests) or (3) pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Annex B hereto); (c) if such Notes are being transferred to an Institutional Accredited Investor (as defined in Section 2.10 below) in accordance with Regulation D under the Securities Act pursuant to a private placement exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of -4- Annex B hereto) and a certification from the applicable transferee (in substantially the form of Annex C hereto) and an opinion of counsel to that effect if the Company or the Trustee so requests; (d) if such Notes are being transferred pursuant to an exemption from registration in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act (i) prior to the end of the 40-day distribution compliance period as defined in Regulation S which, in the case of the Notes, ends April 14, 2004 (the "Restricted Period") or (ii) after the end of the Restricted Period and the Note to be transferred is not a Note in definitive form that has been sold to persons outside the United States pursuant to Regulation S under the Securities Act (a "Regulation S Note"), certifications to that effect from such Holder (in substantially the form of Annexes B and D hereto) and an opinion of counsel to that effect if the Company or the Trustee so requests; or (e) if such Notes are being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Annex B hereto) and an opinion of counsel to that effect if the Company or the Trustee so requests. (iv) Transfer and Exchange of Registered Global Securities. The transfer and exchange of Registered Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with Section 2.8 of the Indenture, this Section 2.6 and Section 2.10 hereof (including the restrictions on transfer set forth therein and herein) and the rules and procedures of the Depositary therefor, which shall include restrictions on transfer comparable to those set forth therein and herein to the extent required by the Securities Act. (v) Transfer from Registered Global Security to Registered Global Security. If a beneficial interest in a Rule 144A Global Security is transferred or exchanged for a beneficial interest in a Regulation S Global Security or a beneficial interest in a Regulation S Global Security is transferred or exchanged for a beneficial interest in a Rule 144A Global Security, the Trustee will (x) record a decrease in the principal amount of the Registered Global Security being transferred or exchanged equal to the principal amount of such transfer or exchange and (y) record a like increase in the principal amount of the other Registered Global Security. Any beneficial interest in one Registered Global Security that is transferred to a Person who takes delivery in the form of an interest in another Registered Global Security, or exchanged for an interest in another Registered Global Security, will, upon transfer or exchange, cease to be an interest in such Registered Global Security and become an interest in the other Registered Global Security and, accordingly, will thereafter be subject to all transfer and exchange restrictions, if any, and other procedures applicable to beneficial interests in such other Registered Global Security for as long as it remains such an interest. Any person to whom a beneficial interest is transferred in compliance with Regulation S under the Securities Act shall take delivery in the form of an interest in a Regulation S Global Security, and any person to whom a beneficial interest is transferred other than in compliance with Regulation S under the Securities Act shall, unless the Company determines otherwise, take delivery in the form of an interest in a Rule 144A Global Security. If a Rule 144A Global Security or a Regulation S Global Security to evidence all or a portion of the Notes has not theretofore been issued, in the event of any transfer -5- or exchange contemplated by the foregoing provisions, the Company will cause such Registered Global Security to be issued and the Trustee will authenticate such Registered Global Security. 2.7 No Sinking Fund. The Notes shall not be subject to any sinking fund. 2.8 Redemption at Option of the Company. The Notes are redeemable in whole or in part at any time and from time to time prior to the Stated Maturity, at the option of the Company, at a redemption price equal to the greater of the following amounts, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to the date of redemption: (i) 100% of the principal amount of the Notes being redeemed; or (ii) the sum of the present values of the remaining scheduled payments of the principal of and interest on the Notes to be redeemed (exclusive of interest accrued to the date of redemption), discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points. As used in this Section 2.8 only, the terms set forth below shall have the following respective meanings: "Business Day" means any calendar day that is not a Saturday, Sunday or legal holiday in New York, New York and on which commercial banks are open for business in New York, New York. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes. "Comparable Treasury Price" means, with respect to any redemption date, the average of two Reference Treasury Dealer Quotations for that redemption date. "Quotation Agent" means Goldman, Sachs & Co. or its successor. "Reference Treasury Dealer" means each of (1) Goldman, Sachs & Co. or its successor and (2) one other firm that is a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer") which the Company specifies from time to time; provided, however, that if any of them ceases to be a Primary Treasury Dealer, the Company will substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked price for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding that redemption date. -6- "Treasury Rate" means, with respect to any redemption date, the rate per year equal to: (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue; provided that, if no maturity is within three months before or after the maturity date of the Notes, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month; or (2) if such release or any successor release is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue, expressed as a percentage of its principal amount, equal to the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third Business Day preceding the redemption date. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the date of redemption to each holder of Notes to be redeemed. If fewer than all of the Notes are to be redeemed, the Trustee shall select, in such manner as the Trustee shall deem appropriate and fair, the particular Notes to be redeemed in whole or in part. Unless the Company defaults in payment of the redemption price, on or after the date of redemption, interest will cease to accrue on the Notes or portions thereof called for redemption. 2.9. Form and Other Terms of the Notes. Attached hereto as Annex A is a form of a Note denominated in United States dollars, which form is hereby established as a form in which Notes may be issued. In addition, any Note may be issued in such other form as may be provided by, or not inconsistent with, the terms of the Original Indenture and this Seventh Supplemental Indenture. 2.10. Legends. -7- (i) Each Registered Global Security shall bear the legends set forth in the first two paragraphs on the face of the Form of Note. (ii) Except as permitted by the following subsection (iii), (a) each Rule 144A Global Security evidencing the Notes and each Note in definitive form that has been sold to a QIB under Rule 144A of the Securities Act (a "Rule 144A Note") evidencing the Notes shall bear the following legend set forth below (the "Private Placement Legend") on the face thereof and shall be subject to the transfer restrictions set forth therein and (b) each Regulation S Global Security evidencing the Notes and each Regulation S Note evidencing the Notes shall bear the Private Placement Legend on the face thereof until the termination of the Restricted Period and shall be subject to the transfer restrictions set forth therein: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF THAT REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ("RULE 144A") UNDER THE SECURITIES ACT), (B) AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF NOT LESS THAN $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION HEREOF IN VIOLATION OF THE SECURITIES ACT, (C) A PERSON THAT, AT THE TIME THE BUY ORDER FOR THIS SECURITY WAS ORIGINATED, WAS OUTSIDE THE UNITED STATES AND WAS NOT A U.S. PERSON (AND WAS NOT PURCHASING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON), OR (D) A PERSON THAT ACQUIRED THIS SECURITY PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2) AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO (X) THE DATE THAT IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) OF THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE (AS DEFINED BELOW) AND THE LAST DATE ON WHICH SYSCO CORPORATION OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF SYSCO CORPORATION WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), EXCEPT (A) TO SYSCO CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN -8- DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF NOT LESS THAN $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION HEREOF IN VIOLATION OF THE SECURITIES ACT, (F) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO COMPLIANCE WITH ANY APPLICABLE STATE OR OTHER SECURITIES LAWS, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT (I) PRIOR TO ANY SALE OR TRANSFER A CERTIFICATE OF TRANSFER (THE FORM OF WHICH MAY BE OBTAINED FROM THE TRUSTEE) IS COMPLETED BY THE TRANSFEREE AND DELIVERED BY THE TRANSFEROR TO SYSCO CORPORATION AND THE TRUSTEE AND (II) SYSCO CORPORATION AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY OFFER, SALE OR TRANSFER OF THIS SECURITY TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 2(B) ABOVE OR UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. (iii) Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Security registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Security registrar shall deliver only Notes that bear the Private Placement Legend, unless (i) the requested transfer is after the relevant Resale Restriction Termination Date with respect to such Notes, (ii) upon written request of the Company after there is delivered to the Security registrar an opinion of counsel (which opinion and counsel must be reasonably satisfactory to the Company and the Trustee) to the effect that neither such legend nor the related -9- restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act, (iii) with respect to a Regulation S Global Security or a Regulation S Note, with the agreement of the Company on or after the termination of the Restricted Period with respect to such Note, (iv) such Notes are sold or exchanged pursuant to an effective registration statement under the Securities Act or (v) such Notes are sold pursuant to Rule 144 under the Securities Act and the requirements of the Indenture. In the case of any Note in the form of a Registered Global Security that is transferred, exchanged or replaced pursuant to subsection (iv) or (v) above, such Note shall not be required to bear the Private Placement Legend only if all other interests in such Registered Global Security have been or are concurrently being sold or transferred pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 under the Securities Act, but such Registered Global Security shall continue to be subject to the provisions of Sections 2.8 of the Indenture, and Sections 2.6 and 2.10 hereof. ARTICLE III MISCELLANEOUS PROVISIONS The Trustee makes no undertaking or representation in respect of, and shall not be responsible in any manner whatsoever for and in respect of, the validity or sufficiency of this Seventh Supplemental Indenture or the proper authorization or the due execution hereof by the Company or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. Except as expressly amended hereby, the Original Indenture, as heretofore amended and supplemented, shall continue in full force and effect in accordance with the provisions thereof and the Original Indenture is in all respects hereby ratified and confirmed. This Seventh Supplemental Indenture and all its provisions shall be deemed a part of the Original Indenture in the manner and to the extent herein and therein provided. THIS SEVENTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION. This Seventh Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -10- IN WITNESS WHEREOF, the parties hereto have caused this Seventh Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. SYSCO CORPORATION By: /s/ Diane Day Sanders ------------------------------------------ Diane Day Sanders Senior Vice President of Finance and Treasurer WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee By: /s/ R. Douglas Milner -------------------------------------- Name: R. Douglas Milner Title: Vice President Annex A [FORM OF FACE OF SECURITY] [Rule 144A Registered Global Security] [Regulation S Registered Global Security] THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. [THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF THAT REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ("RULE 144A") UNDER THE SECURITIES ACT), (B) AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF NOT LESS THAN $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION HEREOF IN VIOLATION OF THE SECURITIES ACT, (C) A PERSON THAT, AT THE TIME THE BUY ORDER FOR THIS SECURITY WAS ORIGINATED, WAS OUTSIDE THE UNITED STATES AND WAS A-1 NOT A U.S. PERSON (AND WAS NOT PURCHASING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON), OR (D) A PERSON THAT ACQUIRED THIS SECURITY PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (2) AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO (X) THE DATE THAT IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) OF THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE (AS DEFINED BELOW) AND THE LAST DATE ON WHICH SYSCO CORPORATION OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF SYSCO CORPORATION WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), EXCEPT (A) TO SYSCO CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF NOT LESS THAN $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION HEREOF IN VIOLATION OF THE SECURITIES ACT, (F) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO COMPLIANCE WITH ANY APPLICABLE STATE OR OTHER SECURITIES LAWS, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT (I) PRIOR TO ANY SALE OR TRANSFER A CERTIFICATE OF TRANSFER (THE FORM OF WHICH MAY BE OBTAINED FROM THE TRUSTEE) IS COMPLETED BY THE TRANSFEREE AND DELIVERED BY THE TRANSFEROR TO SYSCO CORPORATION AND THE TRUSTEE AND (II) SYSCO CORPORATION AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY OFFER, SALE OR TRANSFER OF THIS SECURITY TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 2(B) ABOVE OR UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S. PERSON" HAVE THE A-2 RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.] A-3 REGISTERED REGISTERED SYSCO CORPORATION 4.60% Senior Note due March 15, 2014 No. _______ CUSIP: ___________ PRINCIPAL AMOUNT: $___________ AUTHENTICATION DATE: March 5, 2004 ORIGINAL ISSUE DATE: March 5, 2004 STATED MATURITY: March 15, 2014 INTEREST RATE: 4.60% per annum SUBJECT TO DEFEASANCE PURSUANT TO SECTION 10.1 OF THE INDENTURE REFERRED TO HEREIN ISSUE PRICE (%): 99.943% SYSCO Corporation, a corporation organized and existing under the laws of the State of Delaware (herein called the "Company", which term includes any successor Person under the Indenture referred to herein), for value received, hereby promises to pay to CEDE & Co., or registered assigns, the principal sum of ___________________________ ($___________) on March 15, 2014 (the "Stated Maturity") and to pay interest thereon at the rate of 4.60% per annum, computed on the basis of a 360-day year comprising twelve 30-day months, from March 5, 2004 (the "Original Issue Date") or from the most recent Interest Payment Date to which interest has been paid or duly provided for, on March 15 and September 15 in each year and at the Stated Maturity or upon redemption, commencing with September 15, 2004, until the principal hereof is paid or made available for payment. If an Interest Payment Date would otherwise fall on a day that is not a Business Day, such Interest Payment Date shall be postponed to the next succeeding Business Day and no interest shall accrue or be payable on such next succeeding Business Day for the period from and after such original Interest Payment Date to such next succeeding Business Day. Except as provided in the immediately preceding sentence, interest payments shall be in the amount of interest accrued to, but excluding, the Interest Payment Date. The interest payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to herein, be paid to the Person in whose name this Note is registered at the close of business on the Regular Record Date for such interest, which shall be March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Payments of principal on this Note and interest payable on this Note at the Stated Maturity or upon redemption of this Note shall be made in immediately available funds in such A-4 currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, at the request of the Holder upon presentation and surrender of this Note, at the office or agency of the Paying Agent in New York, New York or any other duly appointed Paying Agent, provided that this Note is presented to the Paying Agent in time for the Paying Agent to make payments in immediately available funds in accordance with its normal procedures. So long as any Notes are represented by a Registered Global Security, interest (other than interest payable at maturity or upon redemption) shall be paid in immediately available funds by wire transfer to the Depositary for such Notes, on the written order of the Depositary. In addition, the Company may maintain a drop agent, in such location or locations as the Company may select, to provide the Holders with an office at which they may present the Notes for payment. Notes presented to a drop agent in accordance with the provisions of the Indenture referred to herein shall be deemed to be presented to the Paying Agent on the Business Day next succeeding the day the Notes are delivered to the drop agent. Payment of interest (other than interest payable in accordance with the provisions of the immediately preceding paragraph) will, subject to certain exceptions provided in the Indenture referred to herein, be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security register as of the applicable Regular Record Date or, at the option of the Company, by wire transfer to an account maintained by such Person with a bank located in the United States. The Notes are redeemable in whole or in part at any time and from time to time prior to the Stated Maturity, at the option of the Company, at a redemption price equal to the greater of the following amounts, plus, in either case, accrued and unpaid interest on the principal amount being redeemed to the date of redemption: (1) 100% of the principal amount of the Notes being redeemed; or (2) the sum of the present values of the remaining scheduled payments of the principal of and interest on the Notes to be redeemed (exclusive of interest accrued to the date of redemption), discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in the following paragraph) plus 15 basis points. As used in this paragraph and in the immediately preceding paragraph only, the terms set forth below shall have the following respective meanings: "Business Day" means any calendar day that is not a Saturday, Sunday or legal holiday in New York, New York or Houston, Texas and on which commercial banks are open for business in New York, New York and Houston, Texas. "Comparable Treasury Issue" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes. "Comparable Treasury Price" means, with respect to any redemption date, the average of two Reference Treasury Dealer Quotations for that redemption date. A-5 "Quotation Agent" means Goldman, Sachs & Co. or its successor. "Reference Treasury Dealer" means each of (1) Goldman, Sachs & Co. or its successor and (2) one other firm that is a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer") which the Company specifies from time to time; provided, however, that if any of them ceases to be a Primary Treasury Dealer, the Company will substitute therefor another Primary Treasury Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked price for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding that redemption date. "Treasury Rate" means, with respect to any redemption date, the rate per year equal to: (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15 (519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue; provided that, if no maturity is within three months before or after the maturity date of the Notes, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined, and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month; or (2) if such release or any successor release is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue, expressed as a percentage of its principal amount, equal to the Comparable Treasury Price for such redemption date. The Treasury Rate will be calculated on the third Business Day preceding the redemption date. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the date of redemption to each holder of Notes to be redeemed. If fewer than all of the Notes are to be redeemed, the Trustee shall select, in such manner as the Trustee shall deem appropriate and fair, the particular Notes to be redeemed in whole or in part. A-6 Unless the Company defaults in payment of the redemption price, on or after the date of redemption, interest will cease to accrue on the Notes or portions thereof called for redemption. In the event of redemption of this Note in part only, a new Note or Notes of like tenor and in an aggregate principal amount equal to the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. The Notes are not subject to any sinking fund. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH IN FULL ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH IN FULL AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof, directly or through an Authenticating Agent, by manual signature of an authorized signatory, this Note shall not be entitled to any benefit under the Indenture referred to herein or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. SYSCO CORPORATION [Seal] By________________________________________ Diane Day Sanders Senior Vice President of Finance and Treasurer Attest____________________________________ Ann F. Gullion Assistant Secretary A-7 TRUSTEE'S CERTIFICATE OF AUTHENTICATION Date: March 5, 2004 This is one of the Securities referred to in the within-mentioned Indenture. WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee By________________________________________ Authorized Signatory A-8 [REVERSE OF NOTE] SYSCO CORPORATION 4.60% Senior Note due March 15, 2014 This Note is one of a duly authorized issue of securities of the Company (the "Securities"), issued and to be issued in one or more series under an Indenture dated as of June 15, 1995 and executed and delivered by the Company to Wachovia Bank, National Association (formerly First Union National Bank of North Carolina), as trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), as supplemented by a First Supplemental Indenture dated as of June 27, 1995, a Second Supplemental Indenture dated as of May 1, 1996, a Third Supplemental Indenture dated as of April 25, 1997, a Fourth Supplemental Indenture dated as of April 25, 1997, a Fifth Supplemental Indenture dated as of July 27, 1998, a Sixth Supplemental Indenture dated as of April 5, 2002 and a Seventh Supplemental Indenture dated as of March 5, 2004, all executed and delivered by the Company to the Trustee (such Indenture, as supplemented by the First Supplemental Indenture, Second Supplemental Indenture, Third Supplemental Indenture, Fourth Supplemental Indenture, Fifth Supplemental Indenture, Sixth Supplemental Indenture and Seventh Supplemental Indenture, is referred to herein as the "Indenture"), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. The acceptance of this Note shall be deemed to constitute the consent and agreement of the Holder hereof to all the terms and conditions of the Indenture. This Note is a Security of the series designated on the face hereof, limited in aggregate principal amount to $200,000,000. If an Event of Default with respect to the Notes shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. Events of Default are defined in the Indenture and generally include: (i) default for 30 days in payment of any interest on the Securities; (ii) default in any payment of principal on any of the Securities when due and payable; (iii) failure on the part of the Company duly to observe or perform any of the covenants or agreements on the part of the Company in the Securities or in the Indenture which shall not have been remedied within 90 days after written notice by the Trustee or by the holders of at least 25% in aggregate principal amount of the Outstanding Securities of all series affected thereby; or (iv) certain events involving bankruptcy, insolvency or reorganization of the Company. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities of each such affected series of then Outstanding Securities (voting as a single class) may declare the entire principal of all Securities of all such affected series, and the interest accrued thereon, if any, to be immediately due and payable, except that, in the case of an Event of Default arising from certain events of bankruptcy, insolvency or reorganization of the Company, the principal and interest on the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. Subject to certain limitations, the Holders of a majority in aggregate principal amount of the Securities of each series affected (with all such series voting as a single class) at the time Outstanding shall have the right to direct the Trustee in its exercise of any trust or power conferred on the Trustee with A-9 respect to the Securities of such series by the Indenture, provided that the Trustee may decline to follow any such direction if the Trustee determines the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interest of Holders of the Securities of all series so affected not joining in the giving of said direction. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their best interests. The Company must furnish an annual compliance certificate to the Trustee. The Indenture contains provisions permitting the Company and the Trustee to modify the Indenture or any supplemental indenture without the consent of the Holders for one or more of the following purposes (as more particularly set forth in the Indenture): (1) to convey, transfer, assign, mortgage or pledge any property or assets to the Trustee as security for the Securities of one or more series; (2) to evidence the succession of another entity to the Company; (3) to add to the covenants of the Company or add Events of Default for the benefit of Holders; (4) to cure any ambiguity, to correct or supplement any provision of the Indenture which may be defective or inconsistent with any other provision of the Indenture, or to make any other provisions with respect to matters or questions arising under the Indenture as shall not adversely affect the interests of the Holders in any material respect; (5) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.3 of the Indenture; and (6) to evidence the appointment of a successor Trustee. The Indenture also permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities then Outstanding of each series to be affected (voting as a single class). The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding with respect to which a default or Event of Default shall have occurred and be continuing (voting as a single class), on behalf of the Holders of all such Securities, to waive certain past defaults and Events of Default under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Security issued upon the registration of transfer hereof or in exchange for or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. Without the consent of each Holder of each Note so effected, the Company may not extend the final maturity of any Note, or reduce the rate (or alter the method of computation) or interest thereon or extend the time for payment thereof, or reduce (or alter the method of computation of) any amount payable on redemption or repayment thereof or extend the time for payment thereof, or make the principal thereof or interest thereon (including any amount in respect of original issue discount) payable in any coin or currency other than that provided in the Notes or in accordance with the terms thereof, or reduce the amount that would be due and A-10 payable upon an acceleration of the maturity of any Note, or impair or affect the right of any Holder to institute suit for the payment thereof. A supplemental indenture that changes or eliminates any covenant or other provision of the Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of Holders of Securities of such series, or of Coupons appertaining to such Securities, with respect to such covenant provision, shall be deemed not to affect the rights under the Indenture of Holders of Securities of any other series or of the Coupons appertaining to such Securities. As set forth in, and subject to the provisions of, the Indenture, no Holder of any Note will have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture or for any remedy thereunder, unless (1) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Notes, (2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Notes shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, (3) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Outstanding Notes a direction inconsistent with such request and (4) the Trustee shall have failed to institute such proceeding within 60 days; provided, however, that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of or any interest on this Note on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Note, as described on the face hereof, at the times, place and rate, and in the coin or currency, herein prescribed. The Notes are issuable only in fully registered form and are represented either by one or more global certificates registered in the name of a depositary or in the name of its nominee or by a certificate or certificates registered in the name of the beneficial owner(s) of such Notes or its or their nominee(s). The Notes are issuable in denominations of $1,000 and integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes and of like tenor of any authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations set forth in the Indenture or this Note, the transfer of this Note is registrable in the Security register, upon surrender of this Note for registration of transfer or exchange at the office or agency of the Security registrar or any successor or co-registrar in New York, New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of like tenor, of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. The Company shall not be required to exchange or register a transfer of (a) any Notes for a period of 15 days next preceding the first mailing of notice of redemption of the Notes, or (b) the Notes A-11 selected, called or being called for redemption, in whole or in part, except, in the case of any Note to be redeemed in part, the portion thereof not so to be redeemed. In addition, the Company may maintain a drop agent, in such location or locations as the Company may select, to provide the Holders with an office at which they may present the Notes for registration of transfer or exchange. Notes accepted as set forth in the immediately preceding sentence shall be deemed to be presented to the Security registrar on the Business Day next succeeding the day that Notes are delivered to the drop agent. No service charge shall be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. By its acceptance of any Note bearing a legend restricting transfer, each Holder of such Note acknowledges the restrictions on transfer of such Note set forth in the Seventh Supplemental Indenture establishing the terms of the Notes pursuant to the Indenture and in such legend and agrees that it will transfer such Note only as provided in the Seventh Supplemental Indenture and the Indenture. Subject to the terms of the Indenture, prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and none of the Company, the Trustee or any such agent shall be affected by notice to the contrary. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note or of certain restrictive covenants and Events of Default with respect to this Note, in each case upon compliance with certain conditions set forth in the Indenture. The Indenture with respect to the Notes shall be discharged and canceled upon the payment of all of the Notes and shall be discharged except for certain obligations upon the irrevocable deposit with the Trustee of any combination of funds and U.S. Government Obligations sufficient for such payment. In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control. THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. All capitalized terms used but not defined in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. As provided in the Indenture, no recourse under or upon any obligation, covenant or agreement contained in the Indenture, or in this Note, or because of any indebtedness evidenced hereby, shall be had against any incorporator, as such, or against any past, present or future stockholder, officer, director or employee, as such, of the Company or of any successor, A-12 either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being, by acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. A-13 FORM OF ASSIGNMENT ABBREVIATIONS Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). Additional abbreviations may also be used though not in the above list. __________________________________________________ FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto ________________________________ Please insert Social Security or other identifying number of assignee PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE ______________________________________ ______________________________________ ______________________________________ ______________________________________ the within Note and all rights thereunder, hereby irrevocably constituting and appointing __________________________________, attorney to transfer said Note on the books of the Company, with full power of substitution in the premises. Dated:_____________________________ Notice: The signature(s) to this assignment must correspond with the name(s) as written on the face of the within instrument in every particular, without alteration or enlargement, or any change whatsoever. A-14 SCHEDULE OF INCREASES OR DECREASES IN THE PRINCIPAL AMOUNT OF THIS NOTE The original principal amount of this Note is ______________ U.S. Dollars ($__________). The following increases or decreases in the principal amount of this Note have been made:
Amount of Amount of Principal amount Signature of decrease in increase in of this authorized Date of principal amount principal amount Note following signatory of increase or of this of this such decrease Trustee or decrease Note Note (or increase) Depository - ----------- ---------------- ---------------- ---------------- ------------
A-15 Annex B [FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR TRANSFER OF NOTES] Re: 4.60% Notes due March 15, 2014 of SYSCO Corporation (the "Notes") This Certificate relates to $_____ principal amount of Notes held in ______ book-entry or ______ definitive form by _____________________ (the "Transferor"). The Transferor has requested the Trustee by written order to exchange or register the transfer of a Note or Notes or beneficial interests therein (the "Transfer"). In connection with such request and in respect of each such Note or beneficial interest therein, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above-captioned Notes and that the Transfer does not require registration under the Securities Act of 1933, as amended (the "Securities Act"), because: Check One [ ] (a) Such Note or beneficial interest is being acquired for the Transferor's own account without transfer. [ ] (b) Such Note or beneficial interest is being transferred (i) to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act), in accordance with Rule 144A under the Securities Act, that is purchasing for its own account or for the account of another qualified institutional buyer, in each case to whom notice is given that the Transfer is being made in reliance on Rule 144A and the certificate attached hereto has been completed; or (ii) to a non-U.S. person in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act (and in the case of clause (ii), a certification in substantially the form of Annex D to the Supplemental Indenture relating to the above-captioned Notes and an opinion of counsel to that effect if the Company or the Trustee so requests are being furnished herewith). [ ] (c) Such Note or a beneficial interest therein is being transferred (i) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder and an opinion of counsel to that effect if the Company or the Trustee so requests is being furnished herewith, or (ii) pursuant to an effective registration statement under the Securities Act. [ ] (d) Such Note or beneficial interest is being transferred to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act that is acquiring such Note or beneficial interest for its own account or for the account of another institutional accredited investor, in each case in a minimum principal amount of the Notes of not less than $250,000, for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, and a certification in substantially the form of Annex C to the Supplemental B-1 Indenture and an opinion of counsel to that effect if the Company or the Trustee so requests are being furnished herewith. [ ] (e) Such Note or beneficial interest is being transferred in reliance on and in compliance with another exemption from the registration requirements of the Securities Act and an opinion of counsel to that effect if the Company or the Trustee so requests is being furnished herewith. If none of the foregoing boxes is checked, the Trustee or other registrar shall not be obligated to register the Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Indenture shall have been satisfied. Date:_________________________ ______________________________ ___________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: _______________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. TO BE COMPLETED BY PURCHASER IF (b) ABOVE IS CHECKED AND TRANSFEROR IS RELYING ON SUBSECTION (i) THEREOF. The undersigned represents and warrants that it is purchasing the Note or a beneficial interest therein for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding SYSCO Corporation as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:___________________________ ______________________________________ To be executed by an executive officer B-2 Annex C [FORM OF LETTER TO BE DELIVERED BY INSTITUTIONAL ACCREDITED INVESTORS ] SYSCO Corporation c/o Wachovia Bank, National Association 5847 San Felipe, Suite 1050 Houston, Texas 77057 Dear Sirs: This certificate is delivered to request a transfer of $__________ principal amount of the 4.60% Senior Notes Due March 15, 2014 (the "Notes") of SYSCO Corporation (the "Company"). Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows: Name: Address: Taxpayer ID Number: The undersigned represents and warrants to you that: (1) We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Notes, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Notes, and we invest in or purchase securities similar to the Notes in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. (2) We understand and acknowledge that the Notes have not been registered under the Securities Act or any other applicable securities law and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date which is two years (or such shorter period of time as permitted by Rule 144(k) under the Securities Act) after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Notes (or any predecessor thereto) or such later date, if any, as may be required by applicable law (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Notes are eligible for resale pursuant to Rule 144A, in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a C-1 qualified institutional buyer under Rule 144A (a "QIB"), that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to a non-U.S. person in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, (e) to an institutional "accredited investor" (within the meaning Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) that is purchasing for its own account or for the account of such an institutional "accredited investor" in each case in a minimum principal amount of Notes of $250,000, for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, (f) pursuant to an exemption from the registration requirements of the Securities Act provided by Rule 144 thereunder (if available) or (g) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) that is acquiring such notes for investment purposes and not for distribution in violation of the Securities Act. We acknowledge that the Company and the Trustee reserve the right prior to any offer, sale or other transfer of the Notes prior to the Resale Restriction Termination Date pursuant to clause (d), (e), (f) or (g) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company and the Trustee. (3) You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy of this letter to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered in this letter, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete. THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Transferee: By:____________________________ C-2 Annex D [FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S] __________________,_____ SYSCO Corporation c/o Wachovia Bank, National Association, Trustee 5847 San Felipe, Suite 1050 Houston, Texas 77057 Re: SYSCO Corporation 4.60% Notes due March 15, 2014 (the "Notes") Dear Sirs: In connection with our proposed sale of U.S.$________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: - the offer of the Notes was not made to a person in the United States; - at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; or the transaction was executed in, on or through the facilities of a designated offshore securities market and neither we nor any person acting on our behalf knows that the transaction was prearranged with a buyer in the United States; - no directed selling efforts have been made by us, or any person acting on our behalf, in the United States in contravention of the requirements of Rule 903(a) or Rule 904(a) of Regulation S under the Securities Act, as applicable; - the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and - if the proposed transfer is being made prior to the expiration of a 40-day "distribution compliance period" as defined in Regulation S under the Securities Act, the transfer is being made (a) to a person that is not a U.S. person or for the account or benefit of a person that is not a U.S. person within the meaning of Regulation S under the Securities Act; (b) to a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act; or (c) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. D-1 You and SYSCO Corporation are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S under the Securities Act. Very truly yours, [Name of Transferor] By:____________________________ Authorized Signatory D-2 EX-15.A 3 h15218exv15wa.txt REPORT OF ERNST & YOUNG LLP Exhibit 15(a) INDEPENDENT ACCOUNTANT'S REVIEW REPORT To the Board of Directors and Shareholders of Sysco Corporation: We have reviewed the accompanying consolidated balance sheets of Sysco Corporation (a Delaware corporation) and its subsidiaries as of March 27, 2004 and March 29, 2003, and the related statements of consolidated results of operations for the thirteen and thirty-nine week periods and cash flows for the thirty-nine week period then ended. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Sysco Corporation and subsidiaries as of June 28, 2003, and the related consolidated results of operations, shareholders' equity and cash flows for the year then ended (not presented herein) and in our report dated August 11, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of June 28, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Ernst & Young LLP Houston, Texas May 11, 2004 EX-15.B 4 h15218exv15wb.txt ACKNOWLEDGMENT LETTER Exhibit 15(b) May 11, 2004 To Shareholders and Board of Directors of Sysco Corporation: We are aware of the incorporation by reference in the Registration Statements on Form S-3 (333-52897), Form S-4 (333-30050, 333-53510, 333-50842 and 333-98489) and Form S-8 (33-10906, 2-76096, 33-45804, 33-45820, 333-01259, 333-01255, 333-01257, 333-27405, 333-66987, 333-49840 and 333-58276) of Sysco Corporation of our report dated February 9, 2004 relating to the unaudited consolidated interim financial statements of Sysco Corporation that are included in its Form 10-Q for the quarter ended March 27, 2004. Very truly yours, /s/ Ernst & Young LLP Houston, Texas EX-31.A 5 h15218exv31wa.txt CEO CERTIFICATION PURSUANT TO SECTION 302 Exhibit 31(a) CERTIFICATION I, Richard J. Schnieders, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Sysco Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 11, 2004 /s/ RICHARD J. SCHNIEDERS ------------------------------------ Richard J. Schnieders Chairman and Chief Executive Officer EX-31.B 6 h15218exv31wb.txt CFO CERTIFICATION PURSUANT TO SECTION 302 Exhibit 31(b) CERTIFICATION I, John K. Stubblefield, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Sysco Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 11, 2004 /s/ JOHN K. STUBBLEFIELD, JR. -------------------------------------- John K. Stubblefield, Jr. Executive Vice President, Finance and Administration EX-32.A 7 h15218exv32wa.txt CEO CERTIFICATION PURSUANT TO SECTION 906 Exhibit 32(a) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard J. Schnieders, Chairman and Chief Executive Officer of Sysco Corporation (the "company"), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. The company's Quarterly Report on Form 10-Q for the quarterly period ended March 27, 2004 ("Quarterly Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. All of the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the company. Date: May 11, 2004 /s/ RICHARD J. SCHNIEDERS ------------------------------------- Richard J. Schnieders Chairman and Chief Executive Officer EX-32.B 8 h15218exv32wb.txt CFO CERTIFICATION PURSUANT TO SECTION 906 Exhibit 32(b) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, John K. Stubblefield, Jr., Executive Vice President, Finance and Administration, of Sysco Corporation (the "company"), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. The company's Quarterly Report on Form 10-Q for the quarterly period ended March 27, 2004 ("Quarterly Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. All of the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the company. Date: May 11, 2004 /s/ JOHN K. STUBBLEFIELD, JR. ------------------------------------- John K. Stubblefield, Jr. Executive Vice President, Finance and Administration -----END PRIVACY-ENHANCED MESSAGE-----