SYSCO CORP — Interim / Quarterly Report 2007

May 7, 2007

10-Q/A 1 h46252ae10vqza.htm AMENDMENT NO.1 TO FORM 10-Q e10vqza PAGEBREAK

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

OR

o 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ Accelerated Filer o Non-accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act.)

Yes o No þ

618,127,271 shares of common stock were outstanding as of October 28, 2006.

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TABLE OF CONTENTS

TOC

Amendment No. 1 Explanatory Note		1
Part I. Financial Information
Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and
Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30
Part II. Other Information
Item 6.	Exhibits	32
Signatures		34
Report from Ernst & Young LLP
Acknowledgment Letter form Ernst & Young LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

/TOC

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Amendment No. 1 Explanatory Note

On May 3, 2007, SYSCO concluded, after review of our interpretation of FASB Staff Position No. FTB 85-4-1, “Accounting for Life Settlement Contracts by Third-Party Investors” (FSP FTB 85-4-1) and discussions with our independent auditors, that we should restate our previously filed financial statements for the first and second quarters of fiscal 2007 to correct the accounting for our corporate-owned life insurance policies. We became aware of the misapplication of FSP FTB 85-4-1 in connection with our periodic review and evaluation of the corporate-owned life insurance policies. In the first quarter of fiscal 2007, we adopted FSP FTB 85-4-1 using the investment method. Our adoption resulted in a cumulative-effect charge to retained earnings of $39,735,000 to recognize the impact of adjusting the existing corporate-owned life insurance policies to historical cost, and we ceased to recognize the changes in the cash surrender value of these policies. We now have determined that our corporate-owned life insurance policies are not life settlement contracts as defined by FSP FTB 85-4-1 and therefore this accounting standard is not applicable to us. Accordingly, our Form 10-Q filings for the first and second quarter of fiscal 2007 are being restated to accurately account for our corporate-owned life insurance policies. This restatement results in the reversal of the cumulative effective of accounting change of $39,735,000 originally recorded by the company in the first quarter of fiscal 2007 and a decrease in operating expenses by $1,395,000 to record the change in cash surrender value for the 13 week period ended September 30, 2006.

This Amendment No. 1 on Form 10-Q/A, which amends and restates our Part I and Item 6 of Part II of Form 10-Q for the quarter ended September 30, 2006, initially filed with the Securities and Exchange Commission (SEC) on November 9, 2006, is being filed to reflect the restatement of the consolidated financial statements and other financial and related information of SYSCO, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, as presented herein. This Amendment reflects the accounting corrections discussed above. All other information in the amended Items, as well as Items 1, 1A and 2 – 5, is unchanged and reflects the disclosures made at the time of the original filing. In addition, currently-dated certifications from our Chief Executive Officer and Chief Financial Officer have been included as exhibits to this Amendment No. 1.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS (In Thousands Except for Share Data)

	Sept. 30, 2006	July 1, 2006	Oct. 1, 2005
	(unaudited)		(unaudited)
	(restated*)
ASSETS
Current assets
Cash	$ 180,721	$ 201,897	$ 177,918
Accounts and notes receivable, less
allowances of $41,432, $29,100 and $41,285	2,636,834	2,483,720	2,406,855
Inventories	1,715,608	1,608,233	1,568,546
Deferred taxes	87,292	—	65,184
Prepaid expenses	74,735	59,154	67,344
Prepaid income taxes	—	46,690	—
Total current assets	4,695,190	4,399,694	4,285,847
Plant and equipment at cost, less depreciation	2,486,301	2,464,900	2,280,580
Other assets
Goodwill	1,329,782	1,302,591	1,245,390
Intangibles, less amortization	96,136	95,651	79,706
Restricted cash	111,673	102,274	102,178
Prepaid pension cost	400,049	388,650	381,510
Other assets	242,959	238,265	230,575
Total other assets	2,180,599	2,127,431	2,039,359
Total assets	$ 9,362,090	$ 8,992,025	$ 8,605,786
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$ 6,000	$ 29,300	$ 31,606
Accounts payable	1,913,688	1,891,357	1,806,046
Accrued expenses	694,069	745,781	667,429
Accrued income taxes	480,775	—	473,645
Deferred taxes	—	453,700	—
Current maturities of long-term debt	106,933	106,265	210,431
Total current liabilities	3,201,465	3,226,403	3,189,157
Other liabilities
Long-term debt	1,738,858	1,627,127	1,451,697
Deferred taxes	861,776	723,349	854,889
Other long-term liabilities	372,149	362,862	389,653
Total other liabilities	2,972,783	2,713,338	2,696,239
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 2,000,000,000 shares; issued
765,174,900 shares	765,175	765,175	765,175
Paid-in capital	555,409	525,684	438,692
Retained earnings	5,124,362	4,999,440	4,667,348
Other comprehensive income	84,171	84,618	21,910
	6,529,117	6,374,917	5,893,125
Less cost of treasury stock, 146,144,059,
146,279,320 and 142,603,332 shares	3,341,275	3,322,633	3,172,735
Total shareholders’ equity	3,187,842	3,052,284	2,720,390
Total liabilities and shareholders’ equity	$ 9,362,090	$ 8,992,025	$ 8,605,786

• See Note 1 – Restatement and Basis of Presentation

Note: The July 1, 2006 balance sheet has been derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements

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SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED RESULTS OF OPERATIONS (unaudited) (In Thousands Except for Share and Per Share Data)

	13-Week Period Ended — Sept. 30, 2006	Oct. 1, 2005
	(*restated)
Sales	$ 8,672,072	$	8,010,484
Costs and expenses
Cost of sales	7,002,856		6,480,793
Operating expenses	1,276,882		1,176,656
Interest expense	25,766		22,246
Other, net	(9,038	)	(3,115	)
Total costs and expenses	8,296,466		7,676,580
Earnings before income taxes and cumulative effect of accounting change	375,606		333,904
Income taxes	145,458		134,694
Earnings before cumulative effect of accounting change	$ 230,148	$	199,210
Cumulative effect of accounting change	—		9,285
Net earnings	$ 230,148	$	208,495
Earnings before cumulative effect of accounting change:
Basic earnings per share	$ 0.37	$	0.32
Diluted earnings per share	0.37		0.31
Net earnings:
Basic earnings per share	0.37		0.33
Diluted earnings per share	0.37		0.33
Average shares outstanding	620,127,064		626,554,930
Diluted shares outstanding	625,486,950		634,959,278
Dividends declared per common share	$ 0.17	$	0.15

• See Note 1 – Restatement and Basis of Presentation

See Notes to Consolidated Financial Statements

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SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) (In Thousands)

	13-Week Period Ended — Sept. 30, 2006	Oct. 1, 2005
	(*restated)
Net earnings	$ 230,148	$	208,495
Other comprehensive income, net of tax:
Foreign currency translation adjustment	(554	)	28,511
Change in fair value of forward-starting interest rate swap	—		7,064
Amortization of cash flow hedge	107		12
Total other comprehensive income (loss)	(447	)	35,587
Comprehensive income	$ 229,701	$	244,082

• See Note 1 – Restatement and Basis of Presentation

See Notes to Consolidated Financial Statements

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SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS (unaudited) (In Thousands)

	13-Week Period Ended — Sept. 30, 2006	Oct. 1, 2005
	(*restated)
Operating activities:
Net earnings	$ 230,148	$	208,495
Add non-cash items:
Cumulative effect of accounting change	—		(9,285	)
Share-based compensation expense	29,621		41,280
Depreciation and amortization	90,060		85,056
Deferred tax provision	133,866		112,007
Provision for losses on receivables	8,915		7,703
(Gain) loss on sale of assets	(5,452	)	360
Additional investment in certain assets and liabilities,
net of effect of businesses acquired:
(Increase) in receivables	(151,316	)	(112,765	)
(Increase) in inventories	(104,342	)	(93,571	)
(Increase) in prepaid expenses	(15,588	)	(7,021	)
Increase (decrease) in accounts payable	27,364		(2,470	)
(Decrease) in accrued expenses	(53,704	)	(40,341	)
(Decrease) in accrued income taxes	(4,596	)	(23,462	)
(Increase) in other assets	(6,905	)	(6,005	)
(Decrease) increase in other long-term liabilities and prepaid
pension cost, net	(2,112	)	42,595
Excess tax benefits from share-based compensation
arrangements	(2,776	)	(2,236	)
Net cash provided by operating activities	173,183		200,340
Investing activities:
Additions to plant and equipment	(115,879	)	(94,028	)
Proceeds from sales of plant and equipment	10,252		9,654
Acquisition of businesses, net of cash acquired	(43,443	)	(28,357	)
Increase in restricted cash	(11,899	)	(447	)
Net cash used for investing activities	(160,969	)	(113,178	)
Financing activities:
Bank and commercial paper borrowings (repayments), net	90,544		(36,269	)
Other debt borrowings	831		499,765
Other debt repayments	(2,152	)	(202,533	)
Debt issuance costs	—		(3,752	)
Cash paid for termination of interest rate swap	—		(21,196	)
Common stock reissued from treasury	45,186		52,355
Treasury stock purchases	(65,281	)	(295,424	)
Dividends paid	(105,233	)	(94,557	)
Excess tax benefits from share-based compensation
arrangements	2,776		2,236
Net cash used for financing activities	(33,329	)	(99,375	)
Effect of exchange rates on cash	(61	)	(1,547	)
Net decrease in cash	(21,176	)	(13,760	)
Cash at beginning of period	201,897		191,678
Cash at end of period	$ 180,721	$	177,918
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$ 32,816	$	21,076
Income taxes	15,658		42,024

• See Note 1 – Restatement and Basis of Presentation

See Notes to Consolidated Financial Statements

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SYSCO CORPORATION and its Consolidated Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

| 1. |
| --- |
| The consolidated financial statements have been prepared by the company, without audit,
with the exception of the July 1, 2006 consolidated balance sheet which was taken from
the audited financial statements included in the company’s Fiscal 2006 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 2007 presentation.
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 2006 Annual Report on
Form 10-K. |
| On May 3, 2007, the company concluded, after review of its interpretation of FASB
Staff Position No. FTB 85-4-1, “Accounting for Life Settlement Contracts by Third-Party
Investors” (FSP FTB 85-4-1) and discussions with its independent auditors, that it
should restate its previously filed financial statements for the first and second
quarters in fiscal 2007 to correct the accounting for corporate-owned life insurance
policies. The company became aware of the misapplication of FSP FTB
85-4-1 in connection with its periodic review and evaluation of the
corporate-owned life
insurance policies. In the first quarter of fiscal 2007, SYSCO adopted FSP FTB 85-4-1
using the investment method and the company ceased to recognize
fair value adjustments for increases or decreases in cash surrender values of these
policies. The company’s adoption resulted in a cumulative-effect adjustment to
retained earnings of $39,735,000 to recognize the impact of adjusting
the existing corporate-owned life insurance policies to historical cost. SYSCO has now determined that its
corporate-owned life insurance policies are not life settlement contracts as defined by
FSP FTB 85-4-1 and therefore this accounting standard is not applicable to SYSCO. The
company is restating its previously issued financial statements to reverse the
cumulative effective of accounting change of $39,735,000 relating to the adoption of
FSP FTB 85-4-1 originally recorded by the company in the first quarter of fiscal 2007
and to decrease operating expenses by $1,395,000 to record the change in cash surrender
value for the 13 week period ended September 30, 2006. These corrections increased
retained earnings by $41,130,000, comprised of a reversal of $39,735,000 in expense and
a gain of $1,395,000 related to the cash surrender value of the life insurance
policies, and increase other assets by $41,130,000. For the actual impact of these
financial statement adjustments to the financial statements for the 13 week period
ended September 30, 2006, see the tables below. |

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Consolidated Balance Sheet (unaudited) — As of September 30, 2006	As Previously
(In Thousands Except For Share Data)	Reported	Adjustment	As Restated
ASSETS
Current assets
Cash	$ 180,721	$ —	$ 180,721
Accounts and
notes receivable, net	2,636,834	—	2,636,834
Inventories	1,715,608	—	1,715,608
Deferred taxes	87,292	—	87,292
Prepaid expenses	74,735	—	74,735
Prepaid income taxes	—	—	—
Total current assets	4,695,190	—	4,695,190
Plant and equipment at cost, less depreciation	2,486,301	—	2,486,301
Other assets
Goodwill	1,329,782	—	1,329,782
Intangibles, less amortization	96,136	—	96,136
Restricted cash	111,673	—	111,673
Prepaid pension cost	400,049	—	400,049
Other assets	201,829	41,130	242,959
Total other assets	2,139,469	41,130	2,180,599
Total assets	$ 9,320,960	$ 41,130	$ 9,362,090
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$ 6,000	$ —	$ 6,000
Accounts payable	1,913,688	—	1,913,688
Accrued expenses	694,069	—	694,069
Accrued income taxes	480,775	—	480,775
Deferred taxes	—	—	—
Current maturities of long-term debt	106,933	—	106,933
Total current liabilities	3,201,465	—	3,201,465
Other liabilities
Long-term debt	1,738,858	—	1,738,858
Deferred taxes	861,776	—	861,776
Other long-term liabilities	372,149	—	372,149
Total other liabilities	2,972,783	—	2,972,783
Contingencies
Shareholders’ equity
Preferred stock	—	—	—
Common stock	765,175	—	765,175
Paid-in capital	555,409	—	555,409
Retained earnings	5,083,232	41,130	5,124,362
Other comprehensive income	84,171	—	84,171
	6,487,987	41,130	6,529,117
Less cost of treasury stock	3,341,275	—	3,341,275
Total shareholders’ equity	3,146,712	41,130	3,187,842
Total liabilities and shareholders’ equity	$ 9,320,960	$ 41,130	$ 9,362,090

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Consolidated Results of Operations (unaudited)
13-Week Period Ended September 30, 2006	As Previously
(In Thousands Except for Share and Per Share Data)	Reported	Adjustment		As Restated
Sales	$ 8,672,072	$	—	$	8,672,072
Costs and expenses
Cost of sales	7,002,856		—		7,002,856
Operating expenses	1,278,277		(1,395	)	1,276,882
Interest expense	25,766		—		25,766
Other, net	(9,038	)	—		(9,038	)
Total costs and expenses	8,297,861		(1,395	)	8,296,466
Earnings before income taxes and cumulative
effect of accounting change	374,211		1,395		375,606
Income taxes	145,458		—		145,458
Earnings before cumulative effect of accounting
change	228,753		1,395		230,148
Cumulative effect of accounting change	(39,735	)	39,735		—
Net earnings	$ 189,018	$	41,130	$	230,148
Earnings before cumulative effect of accounting
change:
Basic earnings per share	$ 0.37	$	—	$	0.37
Diluted earnings per share	0.37		—		0.37
Net earnings:
Basic earnings per share	0.30		0.07		0.37
Diluted earnings per share	0.30		0.07		0.37
Average shares outstanding	620,127,064		—		620,127,064
Diluted shares outstanding	625,486,950		—		625,486,950

Consolidated Statements of Comprehensive Income
(unaudited)
13-Week Period Ended September 30, 2006	As Previously
(In Thousands)	Reported	Adjustment		As Restated
Net earnings	$ 189,018	$	41,130	$ 230,148
Other comprehensive income, net of tax:
Foreign currency translation adjustment	(554	)	—	(554	)
Amortization of cash flow hedge	107		—	107
Total other comprehensive income (loss)	(447	)	—	(447	)
Comprehensive income	$ 188,571	$	41,130	$ 229,701

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 15.1.

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| 2. |
| --- |
| In September 2005, the Emerging Issues Task Force (EITF) reached a consensus on Issue
No. 04-13, “Accounting for Purchases and Sales of Inventory With the Same
Counterparty,” which requires that two or more inventory transactions with the same
counterparty (as defined) should be viewed as a single nonmonetary transaction, if the
transactions were entered into in contemplation of one another. Exchanges of inventory
between entities in the same line of business should be accounted for at fair value or
recorded at carrying amounts, depending on the classification of such inventory. This
guidance was effective for the fourth quarter of fiscal 2006 for SYSCO. SYSCO has
certain transactions where finished goods are purchased from a customer or sourced by
that customer for warehousing and distribution and resold to the same customer. These
transactions are evidenced by title transfer and are separately invoiced. Historically,
the company has recorded such transactions in the Consolidated Results of Operations
for purchases within “Cost of Sales” and sales within “Sales.” In the first quarter of
fiscal 2007, the company recorded the net effect of such transactions in the
Consolidated Results of Operations within “Sales” by reducing sales and cost of sales
in the amount of $91,532,000. The amount included in the Consolidated Results of
Operations within “Cost of Sales” for the 13 week period ended October 1, 2005 which
was recorded on a gross basis prior to the adoption of EITF 04-13 was $101,791,000.
Such amount was not restated when the new standard was adopted because prospective
treatment is required. |
| Beginning in fiscal 2006, SYSCO changed the measurement date for the pension and other
postretirement benefit plans from fiscal year-end to May 31 st , which
represents a change in accounting. The one-month acceleration of the measurement date
will allow additional time for management to evaluate and report the actuarial pension
measurements in the year-end financial statements and disclosures within the accelerated
filing deadlines of the Securities and Exchange Commission. The cumulative effect of
this change in accounting resulted in an increase to earnings in the first quarter of
fiscal 2006 of $9,285,000, net of tax. |

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3.	New Accounting Standards
	In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48), which clarifies the
accounting for uncertainty in income taxes recognized in accordance with FASB Statement
No. 109 (SFAS 109). FIN 48 clarifies the application of SFAS 109 by defining criteria
that an individual tax position must meet for any part of the benefit of that position to
be recognized in the financial statements. Additionally, FIN 48 provides guidance on the
measurement, derecognition, classification and disclosure of tax positions, along with
accounting for the related interest and penalties. The provisions of FIN 48 are effective
for fiscal years beginning after December 15, 2006, with the cumulative effect of the
change in accounting principle recorded as an adjustment to opening retained earnings.
SYSCO is currently evaluating the impact the adoption of FIN 48 will have on its
consolidated financial statements.
	In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157).
SFAS 157 defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles, and expands disclosures about
fair value measurements. The statement is effective for fiscal years beginning after
November 15, 2007. The company is currently evaluating the impact of the provisions of
SFAS 157.
	In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87,
88, 106, and 132(R)” (SFAS 158). SFAS 158 requires an employer to recognize a plan’s
funded status in its statement of financial position, measure a plan’s assets and
obligations as of the end of the employer’s fiscal year and recognize the changes in a
defined benefit postretirement plan’s funded status in comprehensive income in the year
in which the changes occur. SFAS 158’s requirement to recognize the funded status of a
benefit plan and new disclosure requirements are effective as of the end of the fiscal
year ending after December 15, 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year-end statement of financial
position is effective for fiscal years ending after December 15, 2008. The company is
currently evaluating the impact the adoption of SFAS 158 will have on its consolidated
financial statements. The effect of adoption at June 30, 2007, the adoption date, or any
other future date, cannot be determined, since the impact is dependent upon on the
measurements of each plan’s assets and obligations at such date. However, if this
standard had been applied at July 1, 2006, the result would have been an increase in
current liabilities of approximately $10,000,000, an increase in other long-term
liabilities of approximately $145,000,000, a decrease in prepaid pension cost of
approximately $160,000,000, a decrease in deferred taxes of approximately $120,000,000
and a decrease in shareholders’ equity of approximately $195,000,000.
4.	Restricted Cash
	SYSCO is required by its insurers to collateralize a part of the self-insured portion of
its workers’ compensation and liability claims. SYSCO has chosen to satisfy these
collateral requirements by depositing funds in insurance trusts or by issuing letters of
credit.
	In addition, for certain acquisitions, SYSCO has placed funds into escrow to be disbursed
to the sellers in the event that specified operating results are attained or
contingencies are resolved. Escrowed funds in the amount of $2,500,000 related to
certain acquisitions were released to sellers of acquired businesses during the first
quarter of fiscal 2007.

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A summary of restricted cash balances appears below:

	Sept. 30, 2006	July 1, 2006	Oct. 1, 2005
Funds deposited in insurance trusts	$ 90,553,000	$ 82,653,000	$ 80,857,000
Escrow funds related to acquisitions	21,120,000	19,621,000	21,321,000
Total	$ 111,673,000	$ 102,274,000	$ 102,178,000

5.	Debt
	In September 2006, the termination date on the revolving credit facility supporting the
company’s U.S. and Canadian commercial paper programs was extended from November 4, 2010
to November 4, 2011 in accordance with the terms of the agreement.
	As of September 30, 2006, SYSCO had uncommitted bank lines of credit which provide for
unsecured borrowings for working capital of up to $145,000,000, of which $6,000,000 was
outstanding as of September 30, 2006.
	As of September 30, 2006, SYSCO’s outstanding commercial paper issuances were
$513,412,000 and were classified as long-term debt since the company’s commercial paper
programs are supported by its long-term revolving credit facility in the amount of
$750,000,000.
	During the 13-week period ended September 30, 2006, commercial paper issuances and
short-term bank borrowings ranged from approximately $372,762,000 to $577,242,000.
	Included in current maturities of long-term debt at September 30, 2006 are the 7.25%
senior notes due April 2007 totaling $100,000,000. It is the company’s intention to fund
the repayment of these notes at maturity through issuances of commercial paper, senior
notes or a combination thereof.
6.	Employee Benefit Plans
	The components of net pension costs for the 13-week periods presented are as follows:

	Pension Benefits — Sept. 30, 2006	Oct. 1, 2005		Sept. 30, 2006		Oct. 1, 2005
Service cost	$ 21,164,000	$	25,007,000	$	113,000	$	128,000
Interest cost	22,829,000		20,901,000		133,000		118,000
Expected return on plan assets	(29,186,000	)	(26,044,000	)	—		—
Amortization of prior service cost	1,420,000		1,233,000		50,000		50,000
Recognized net actuarial loss (gain)	2,422,000		11,551,000		(33,000	)	(4,000	)
Amortization of net transition
obligation	—		—		38,000		38,000
Net pension costs	$ 18,649,000	$	32,648,000	$	301,000	$	330,000

| SYSCO’s contributions to its defined benefit plans were $22,622,000 and $1,551,000
during the 13-week periods ended September 30, 2006 and October 1, 2005, respectively. |
| --- |
| Although contributions to its qualified pension plan (Retirement Plan) are not
required to meet ERISA minimum funding requirements, the company anticipates it will
make voluntary contributions of approximately $80,000,000 during fiscal 2007. The
company’s |

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| | contributions to the Supplemental Executive Retirement Plan (SERP) and other
post-retirement plans are made in the amounts needed to fund current year benefit
payments. The estimated fiscal 2007 contributions to fund benefit payments for the
SERP and other post-retirement plans are $10,300,000 and $300,000, respectively. |
| --- | --- |
| 7. | Earnings Per Share |
| | The following table sets forth the computation of basic and diluted earnings per
share: |

	13-Week Period Ended — Sept. 30, 2006	Oct. 1, 2005
	(*restated)
Numerator:
Earnings before cumulative effect of accounting change	$ 230,148,000	$ 199,210,000
Cumulative effect of accounting change	—	9,285,000
Net earnings	$ 230,148,000	$ 208,495,000
Denominator:
Weighted-average basic shares outstanding	620,127,064	626,554,930
Dilutive effect of employee and director stock options	5,359,886	8,404,348
Weighted-average diluted shares outstanding	625,486,950	634,959,278
Basic earnings per share:
Earnings before cumulative effect of accounting change	$ 0.37	$ 0.32
Cumulative effect of accounting change	—	0.01
Net earnings	$ 0.37	$ 0.33
Diluted earnings per share:
Earnings before cumulative effect of accounting change	$ 0.37	$ 0.31
Cumulative effect of accounting change	—	0.02
Net earnings	$ 0.37	$ 0.33

• See Note 1 – Restatement and Basis of Presentation

| | The number of options that were not included in the diluted earnings per share
calculation because the effect would have been anti-dilutive was approximately 35,000,000
and 16,000,000 for the first quarter of fiscal 2007 and 2006, respectively. |
| --- | --- |
| 8. | Share-Based Compensation |
| | SYSCO provides compensation benefits to employees and non-employee directors under
several share-based payment arrangements including the 2004 Stock Option Plan, the 2005
Non-Employee Directors Stock Plan, the Employees’ Stock Purchase Plan and the Management
Incentive Plans. |
| | SYSCO accounts for share-based compensation using the fair value recognition provisions
of FASB Statement No. 123(R), “Share-Based Payment” (SFAS 123(R)), which it adopted using
the modified-prospective transition method effective July 3, 2005. |

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| Stock Option Plans |
| --- |
| SYSCO’s 2004 Stock Option Plan was adopted in fiscal 2005 and reserved 23,500,000 shares
of SYSCO common stock for grants of options and dividend equivalents to directors,
officers and other employees of the company and its subsidiaries at the fair market value
(as defined in the plan) at the date of grant. Options granted to employees were
6,504,200 and 4,827,500 in the first quarter of fiscal 2007 and 2006, respectively. |
| SYSCO’s 2005 Non-Employee Directors Stock Plan was adopted in fiscal 2006 and reserved
550,000 shares of common stock for grants to non-employee directors in the form of
options, stock grants, restricted stock units and dividend equivalents. In the first
quarter of fiscal 2007, 31,500 options and 27,000 shares of restricted stock were granted
to non-employee directors. There were no grants to non-employee directors in the first
quarter of fiscal 2006. |
| The fair value of each option award is estimated as of the date of grant using a
Black-Scholes option pricing model. The weighted average grant-date fair value per share
of options granted during the 13-week periods ended September 30, 2006 and October 1,
2005 was $6.85 and $7.88, respectively. |
| Employees’ Stock Purchase Plan |
| SYSCO’s Employees’ Stock Purchase Plan permits employees to invest by means of periodic
payroll deductions in SYSCO common stock at 85% of the closing price on the last business
day of each calendar quarter. Shares of SYSCO common stock purchased by plan
participants during the first quarter of fiscal 2007 and 2006 were 475,488 and 410,375,
respectively. |
| The weighted average fair value per share of employee stock purchase rights issued
pursuant to the Employees’ Stock Purchase Plan was $4.58 and $5.43 during the first
quarter of fiscal 2007 and 2006, respectively. The fair value of the stock purchase
rights was calculated as the difference between the stock price and the employee purchase
price. |
| Management Incentive Compensation |
| SYSCO’s Management Incentive Plans compensate key management personnel for specific
performance achievements. The bonuses earned and expensed under this plan during a fiscal
year are paid in the following fiscal year in both cash and stock, and a portion of the
bonus may be deferred for payment in future years at the election of each participant. |
| A total of 323,822 shares and 617,637 shares at a fair value per share of $30.56 and
$36.25 were issued pursuant to this plan in the first quarter of fiscal 2007 and fiscal
2006, respectively, for bonuses earned in the preceding fiscal years. |
| All Share-Based Payment Arrangements |
| The total share-based compensation cost that has been recognized in results of operations
was $29,621,000 and $41,280,000 for the first quarter of fiscal 2007 and fiscal 2006,
respectively. The total income tax benefit recognized in results of operations for
share-based compensation arrangements was $3,270,000 and $6,000,000 for the first quarter
of fiscal 2007 and fiscal 2006, respectively. |
| As of September 30, 2006, there was $131,700,000 of total unrecognized compensation cost
related to share-based compensation arrangements. That cost is expected to be recognized
over a weighted-average period of three years. |

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9.	Income Taxes
	The changes in the net deferred tax liability and prepaid/accrued income tax balances
from July 1, 2006 to September 30, 2006 were primarily due to the reclassification of
deferred tax liabilities to accrued income taxes related to supply chain distributions.
This reclassification reflects the tax payments to be made during the next twelve months
related to previously deferred supply chain distributions.
	The effective tax rate for the first quarter of fiscal 2007 was 38.7%, a decrease from
the effective tax rate of 40.3% for the first quarter of fiscal 2006. The decrease in
the effective tax rate was primarily due to lower share-based compensation expense in
fiscal 2007. SYSCO recorded a tax benefit of $3,270,000, or 11.0% of the total
$29,621,000 in share-based compensation expense recorded in the 13-week period ended
September 30, 2006. SYSCO recorded a tax benefit of $6,000,000, or 14.5% of the total
$41,280,000 in share-based compensation expense recorded in the 13-week period ended
October 1, 2005.
	The determination of the company’s overall effective tax rate requires the use of
estimates. The effective tax rate reflects a combination of income earned and taxed in
the various U.S. federal and state, as well as Canadian federal and provincial,
jurisdictions. Jurisdictional tax law changes, increases/decreases in permanent
differences between book and tax items, tax credits and the company’s change in earnings
from these taxing jurisdictions all affect the overall effective tax rate.
10.	Acquisitions
	During the first quarter of fiscal 2007, the company paid cash of $43,443,000 for
acquisitions during fiscal 2007 and for contingent consideration related to operations
acquired in previous fiscal years. In addition, escrowed funds in the amount of
$2,500,000 related to certain acquisitions were released to sellers of acquired
businesses during the first quarter of fiscal 2007.
	Certain acquisitions involve contingent consideration typically payable only in the event
that specified operating results are attained or certain outstanding contingencies are
resolved. Aggregate contingent consideration amounts outstanding as of September 30,
2006 included $128,084,000 in cash, which, if distributed, could result in the recording
of additional goodwill. Such amounts are to be paid out over periods of up to four years
from the date of acquisition if the contingent criteria are met.
11.	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.

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| 12. |
| --- |
| 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, “Disclosures
about Segments of an Enterprise and Related Information.” Broadline operating companies
distribute a full line of food products and a wide variety of non-food products to both
traditional and chain restaurant customers. SYGMA operating companies distribute a full
line of food products and a wide variety of non-food products to some of the chain
restaurant customer locations. “Other” financial information is attributable to the
company’s other segments, including the company’s specialty produce, custom-cut meat and
lodging industry segments and a company that distributes to internationally located chain
restaurants. 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 are eliminated upon consolidation.
Centrally incurred costs are allocated based upon the relative level of service used by
each operating company. The company does not allocate to its segments share-based
compensation expense related to stock option grants, issuances of stock pursuant to the
Employees’ Stock Purchase Plan and restricted stock grants. |

	13-Week Period Ended — Sept. 30, 2006	Oct. 1, 2005
Sales (in thousands):
Broadline	$ 6,844,822	$	6,403,567
SYGMA	1,072,077		1,008,438
Other	868,815		684,972
Intersegment sales	(113,642	)	(86,493	)
Total	$ 8,672,072	$	8,010,484

	13-Week Period Ended — Sept. 30, 2006	Oct. 1, 2005
	(*restated)
Earnings before income taxes and
cumulative effect of accounting change
(in thousands):
Broadline	$ 411,106	$	376,464
SYGMA	1,447		(2,787	)
Other	28,465		24,697
Total segments	441,018		398,374
Unallocated corporate expenses	(65,412	)	(64,470	)
Total	$ 375,606	$	333,904

	Sept. 30, 2006	July 1, 2006	Oct. 1, 2005
	(*restated)
Assets (in thousands):
Broadline	$ 5,549,038	$ 5,248,223	$ 5,186,997
SYGMA	342,153	359,116	299,366
Other	864,936	832,223	697,667
Total segments	6,756,127	6,439,562	6,184,030
Corporate	2,605,963	2,552,463	2,421,756
Total	$ 9,362,090	$ 8,992,025	$ 8,605,786

• See Note 1 – Restatement and Basis of Presentation

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| 13. |
| --- |
| SYSCO International, Co. is an unlimited liability company organized under the laws of
the Province of Nova Scotia, Canada and is a wholly-owned subsidiary of SYSCO. In May
2002, SYSCO International, Co. issued, in a private offering, $200,000,000 of 6.10% notes
due in 2012. 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. |

	Condensed Consolidating Balance Sheet
	September 30, 2006
	(*restated)
		SYSCO	Other Non-Guarantor				Consolidated
	SYSCO	International	Subsidiaries	Eliminations			Totals
	(In thousands)
Current assets	$ 203,705	$ 24	$ 4,491,461	$	—		$ 4,695,190
Investment in
subsidiaries	11,605,547	323,063	133,368		(12,061,978	)	—
Plant and equipment, net	181,123	—	2,305,178		—		2,486,301
Other assets	732,285	—	1,448,314		—		2,180,599
Total assets	$ 12,722,660	$ 323,087	$ 8,378,321	$	(12,061,978	)	$ 9,362,090
Current liabilities	$ 418,486	$ 3,976	$ 2,779,003	$	—		$ 3,201,465
Intercompany payables
(receivables)	7,217,895	49,657	(7,267,552	)	—		—
Long-term debt	1,485,016	211,259	42,583		—		1,738,858
Other liabilities	521,315	—	712,610		—		1,233,925
Shareholders’ equity	3,079,948	58,195	12,111,677		(12,061,978	)	3,187,842
Total liabilities and
shareholders’ equity	$ 12,722,660	$ 323,087	$ 8,378,321	$	(12,061,978	)	$ 9,362,090

• See Note 1 – Restatement and Basis of Presentation

	Condensed Consolidating Balance Sheet
	July 1, 2006
		SYSCO	Other Non-Guarantor				Consolidated
	SYSCO	International	Subsidiaries	Eliminations			Totals
	(In thousands)
Current assets	$ 162,177	$ 35	$ 4,237,482	$	—		$ 4,399,694
Investment in
subsidiaries	11,282,232	317,812	125,433		(11,725,477	)	—
Plant and equipment, net	174,020	—	2,290,880		—		2,464,900
Other assets	711,056	—	1,416,375		—		2,127,431
Total assets	$ 12,329,485	$ 317,847	$ 8,070,170	$	(11,725,477	)	$ 8,992,025
Current liabilities	$ 331,417	$ 1,022	$ 2,893,964	$	—		$ 3,226,403
Intercompany payables
(receivables)	7,207,923	38,308	(7,246,231	)	—		—
Long-term debt	1,358,452	224,247	44,428		—		1,627,127
Other liabilities	487,858	—	598,353		—		1,086,211
Shareholders’ equity	2,943,835	54,270	11,779,656		(11,725,477	)	3,052,284
Total liabilities and
shareholders’ equity	$ 12,329,485	$ 317,847	$ 8,070,170	$	(11,725,477	)	$ 8,992,025

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	Condensed Consolidating Balance Sheet
	October 1, 2005
		SYSCO	Other Non-Guarantor				Consolidated
	SYSCO	International	Subsidiaries	Eliminations			Totals
	(In thousands)
Current assets	$ 176,573	$ 23	$ 4,109,251	$	—		$ 4,285,847
Investment in
subsidiaries	10,272,749	303,786	107,678		(10,684,213	)	—
Plant and equipment, net	121,707	—	2,158,873		—		2,280,580
Other assets	694,680	—	1,344,679		—		2,039,359
Total assets	$ 11,265,709	$ 303,809	$ 7,720,481	$	(10,684,213	)	$ 8,605,786
Current liabilities	$ 514,491	$ 26,503	$ 2,648,163	$	—		$ 3,189,157
Intercompany payables
(receivables)	6,391,264	35,390	(6,426,654	)	—		—
Long-term debt	1,204,071	199,575	48,051		—		1,451,697
Other liabilities	524,734	—	719,808		—		1,244,542
Shareholders’ equity	2,631,149	42,341	10,731,113		(10,684,213	)	2,720,390
Total liabilities and
shareholders’ equity	$ 11,265,709	$ 303,809	$ 7,720,481	$	(10,684,213	)	$ 8,605,786

	Condensed Consolidating Results of Operations
	For the 13-Week Period Ended September 30, 2006
	(*restated)
		SYSCO		Other Non-Guarantor					Consolidated
	SYSCO	International		Subsidiaries		Eliminations			Totals
	(In thousands)
Sales	$ —	$	—	$	8,672,072	$	—		$ 8,672,072
Cost of sales	—		—		7,002,856		—		7,002,856
Operating expenses	61,469		32		1,215,381		—		1,276,882
Interest expense (income)	98,278		2,724		(75,236	)	—		25,766
Other, net	(6,429	)	—		(2,609	)	—		(9,038	)
Total costs and expenses	153,318		2,756		8,140,392		—		8,296,466
Earnings (losses) before
income
taxes and cumulative effect
of
accounting change	(153,318	)	(2,756	)	531,680		—		375,606
Income tax (benefit) provision	(60,135	)	(1,071	)	206,664		—		145,458
Equity in earnings of
subsidiaries	323,331		5,676		—		(329,007	)	—
Net earnings	$ 230,148	$	3,991	$	325,016	$	(329,007	)	$ 230,148

• See Note 1 – Restatement and Basis of Presentation

	Condensed Consolidating Results of Operations
	For the 13-Week Period Ended October 1, 2005
		SYSCO		Other Non-Guarantor					Consolidated
	SYSCO	International		Subsidiaries		Eliminations			Totals
	(In thousands)
Sales	$ —	$	—	$	8,010,484	$	—		$ 8,010,484
Cost of sales	—		—		6,480,793		—		6,480,793
Operating expenses	59,666		28		1,116,962		—		1,176,656
Interest expense (income)	84,658		3,217		(65,629	)	—		22,246
Other, net	(677	)	—		(2,438	)	—		(3,115	)
Total costs and expenses	143,647		3,245		7,529,688		—		7,676,580
Earnings (losses) before
income
taxes and cumulative effect
of
accounting change	(143,647	)	(3,245	)	480,796		—		333,904
Income tax (benefit) provision	(44,387	)	(1,217	)	180,298		—		134,694
Equity in earnings of
subsidiaries	298,470		3,228		—		(301,698	)	—
Net earnings before cumulative
effect of accounting change	199,210		1,200		300,498		(301,698	)	199,210
Cumulative effect of
accounting
change	9,285		—		—		—		9,285
Net earnings	$ 208,495	$	1,200	$	300,498	$	(301,698	)	$ 208,495

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	Condensed Consolidating Cash Flows
	For the 13-Week Period Ended September 30, 2006
		SYSCO		Other Non-Guarantor		Consolidated
	SYSCO	International		Subsidiaries		Totals
	(In thousands)
Net cash provided by:
Operating activities	$ 28,654	$	1,280	$	143,249	$	173,183
Investing activities	(27,304	)	—		(133,665	)	(160,969	)
Financing activities	(19,936	)	(12,988	)	(405	)	(33,329	)
Effect of exchange rate on
cash	—		—		(61	)	(61	)
Intercompany activity	12,293		11,708		(24,001	)	—
Net decrease in cash	(6,293	)	—		(14,883	)	(21,176	)
Cash at the beginning of the
period	131,275		—		70,622		201,897
Cash at the end of the
period	$ 124,982	$	—	$	55,739	$	180,721

	Condensed Consolidating Cash Flows
	For the 13-Week Period Ended October 1, 2005
		SYSCO		Other Non-Guarantor		Consolidated
	SYSCO	International		Subsidiaries		Totals
	(In thousands)
Net cash provided by:
Operating activities	$ 21,830	$	1,646	$	176,864	$	200,340
Investing activities	(7,567	)	—		(105,611	)	(113,178	)
Financing activities	(86,572	)	(11,477	)	(1,326	)	(99,375	)
Effect of exchange rate on
cash	—		—		(1,547	)	(1,547	)
Intercompany activity	54,567		9,831		(64,398	)	—
Net (decrease) increase in cash	(17,742	)	—		3,982		(13,760	)
Cash at the beginning of the
period	125,748		—		65,930		191,678
Cash at the end of the
period	$ 108,006	$	—	$	69,912	$	177,918

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

| Unless this Form 10-Q/A indicates otherwise or the context otherwise requires, the terms
“we,” “our,” “us,” or “SYSCO” as used in this Form 10-Q/A refer to Sysco Corporation
together with our consolidated subsidiaries and divisions. This discussion should be
read in conjunction with our consolidated financial statements as of July 1, 2006, and
the fiscal year then ended, and Management’s Discussion and Analysis of Financial
Condition and Results of Operations, both contained in our Annual Report on Form 10-K for
the fiscal year ended July 1, 2006. |
| --- |
| Highlights |
| Results of Operations |
| Sales increased 8.3% in the first quarter of fiscal 2007 over the comparable prior year
period. Accounting pronouncement EITF 04-13 (see below) negatively impacted sales growth
in fiscal 2007 by 1.1% and also affects the comparison of gross margins, operating
expenses and earnings as a percentage of sales between the periods. Gross margins as a
percentage of sales for the first quarter of fiscal 2007 were 19.2%, which was an
increase of 0.1% from the first quarter of fiscal 2006. Operating expenses as a
percentage of sales for the first quarter of fiscal 2007 were consistent with the
comparable prior year period. The comparison of the two periods is impacted by decreased
share-based compensation expense and decreased pension costs, offset by increased fuel
costs. Earnings before the cumulative effect of accounting change and diluted earnings
per share before the cumulative effect of accounting change increased 15.5% and 19.4%,
respectively, in the first quarter of fiscal 2007 over the comparable prior year period. |
| Accounting Changes |
| In the beginning of the fourth quarter of fiscal 2006, we adopted accounting
pronouncement EITF 04-13 “Accounting for Purchases and Sales of Inventory with the Same
Counterparty,” (EITF 04-13). The accounting standard requires certain transactions, where
inventory is purchased by us from a customer and then resold at a later date to the same
customer (as defined), to be presented in the income statement on a net basis. This
situation primarily arises for SYSCO when our customer has a proprietary item which they
have either manufactured or sourced, but they require our distribution and logistics
capabilities to get the product to their restaurants. The impact of adopting this new
standard resulted in sales being reduced by $91,532,000 for the first quarter of fiscal
2007. Cost of sales were also reduced by the same amount and thus net earnings are
unaffected by the adoption of this standard. We adopted this accounting pronouncement
beginning in the fourth quarter of fiscal 2006 and will apply it to similar transactions
prospectively. Prior period’s sales and cost of sales have not been restated. Therefore,
the calculation of sales growth and the comparison of gross margins, operating expenses
and earnings as a percentage of sales between the periods are affected. |
| In the first quarter of fiscal 2006, we changed the measurement date for pension and
other postretirement benefit plans from fiscal year-end to May 31 st to assist
us in meeting accelerated SEC filing dates. As a result of this change, we recorded a
cumulative effect of a change in accounting, which increased net earnings for fiscal 2006
by $9,285,000, net of tax. |
| Overview |
| SYSCO distributes food and related products to restaurants, healthcare and educational
facilities, lodging establishments and other foodservice customers. Our operations are
located |

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| throughout the United States and Canada and include broadline companies,
specialty produce companies, custom-cut meat operations, hotel supply operations, SYGMA
(our chain restaurant distribution subsidiary) and a company that distributes to
internationally located chain restaurants. |
| --- |
| We estimate that we serve about 14% of an approximately $232 billion annual market that
includes the North American foodservice and hotel amenity, furniture and textile markets.
According to industry sources, the foodservice, or food-prepared-away-from-home, market
represents approximately one-half of the total dollars spent on food purchases made at
the consumer level. This share grew from about 37% in 1972 to about 50% in 1998 and has
not changed materially since that time. |
| General economic conditions and consumer confidence can affect the frequency of purchases
and amounts spent by consumers for food-prepared-away-from-home and, in turn, can impact
our sales. Historically, we have grown at a faster rate than the overall industry and
have grown our market share in this fragmented industry. We intend to continue to expand
our market share and grow earnings by focusing on sales growth, brand management,
productivity gains, sales force effectiveness and supply chain management. |
| National Supply Chain Project |
| We expect our National Supply Chain project to lower inventory, operating costs, working
capital requirements and future facility expansion needs at our operating companies while
providing greater value to our suppliers and customers. We expect to build from seven to
nine regional distribution centers in the United States. The first of these centers, the
Northeast RDC located in Front Royal, Virginia, opened during the third quarter of fiscal
2005. |
| In January 2006, we completed the purchase of land in Alachua, Florida for the future
site of our second RDC, which will service our five broadline operating companies in
Florida. The permitting process for this facility has been completed, and land work for
the construction of the facility has begun. This facility is expected to be operational
in fiscal 2008. We have also purchased the site for construction of a third RDC in
Hamlet, Indiana. |

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| Strategy Initiative |
| --- |
| During the past year our executive team, with the approval of the Board of Directors,
began a strategic planning process of the businesses and processes at SYSCO. The
undertaking is a disciplined study of our current businesses and what initiatives may be
required to help ensure our continued growth. |
| We have established a strategy team which is examining many aspects of our businesses
with an initial emphasis on five strategic focus areas established to help us achieve our
long-term vision of becoming the global leader of the efficient, multi-temperature food
product value chain. These five areas will serve as the foundation in our efforts to
ensure a sustainable future and identify areas for growth. Each area is staffed with
full-time associates who are focused on the following: |

| • | The Sourcing Team is focusing on lowering our cost of goods sold by leveraging
SYSCO’s purchasing power and procurement expertise. |
| --- | --- |
| • | The Integrated Delivery Team’s objective is working to optimize our current
infrastructure in order to reduce costs and provide a growth platform in North
America. |
| • | The Demand Team is developing strategies to better understand and more profitably
sell to and service SYSCO’s customers. |
| • | The Organizational Capabilities Team is working to align management reporting
systems and metrics with the new strategic priorities. |
| • | The New Growth Team is exploring potential new markets and acquisitions and
enhancing the processes for evaluating and integrating them with existing operations. |

| Our primary focus will be on growing and optimizing the core foodservice distribution
business in North America. To a lesser extent, we will also explore and identify
opportunities to grow our global capabilities over time. |
| --- |
| We will start testing the first strategic initiatives over the next several quarters.
The Sourcing team recently began a trial of sourcing a relatively small number of
products in order to better understand the outcomes and practices required for us to
procure product as a single, integrated entity. The Integrated Delivery team is
pilot-testing processes to optimize warehousing and delivery activities to achieve a more
efficient delivery of products to our customers. |

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

Sept. 30, 2006		Oct. 1, 2005
Sales	100.0	%	100.0 %
Costs and Expenses
Cost of sales	80.8		80.9
Operating expenses	14.7		14.7
Interest expense	0.3		0.2
Other, net	(0.1	)	0.0
Total costs and expenses	95.7		95.8
Earnings before income taxes and cumulative effect of
accounting change	4.3		4.2
Income taxes	1.7		1.7
Earnings before cumulative effect of accounting change	2.6		2.5
Cumulative effect of accounting change	—		0.1
Net earnings	2.6	%	2.6 %

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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:

Sales	8.3	%
Costs and Expenses
Cost of sales	8.1
Operating expenses	8.5
Interest expense	15.8
Other, net	190.1
Total costs and expenses	8.1
Earnings before income taxes and cumulative effect
of accounting change	12.5
Income taxes	8.0
Earnings before cumulative effect of accounting change	15.5
Cumulative effect of accounting change	—
Net earnings	10.4	%
Earnings before cumulative effect of accounting change:
Basic earnings per share	15.6	%
Diluted earnings per share	19.4
Net earnings:
Basic earnings per share	12.1
Diluted earnings per share	12.1
Average shares outstanding	(1.0	)
Diluted shares outstanding	(1.5	)

| Sales |
| --- |
| Sales increased 8.3% in the first quarter of fiscal 2007 over the comparable period of
the prior year. The application of EITF 04-13 negatively impacted sales growth in the
first quarter of fiscal 2007 by 1.1%, or $91,532,000. Acquisitions contributed 1.0%
to the overall sales growth rate for the first quarter of fiscal 2007. Estimated
product cost increases, an internal measure of inflation, were 2.4% during the first
quarter of fiscal 2007, as compared to 0.4% in the first quarter of fiscal 2006. |
| We believe that our continued focus on customer account penetration through the use of
business reviews with customers and the continued investment in increasing the number
of customer contact personnel contributed to the sales growth in the first quarter of
fiscal 2007. |
| Gross Margins |
| Gross margins as a percentage of sales were 19.2% for the first quarter of fiscal 2007
and 19.1% for the first quarter of fiscal 2006. The impact of EITF 04-13 contributed
0.2% to the increase in gross margins as a percentage of sales in the first quarter of
fiscal 2007. The reduction in margins prior to the benefit obtained from the impact of
EITF 04-13 was attributable to a shift in sales mix as some lower margin segments grew faster than our
broadline segment. |

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| Operating Expenses |
| --- |
| Operating expenses were 14.7% of sales for both the first quarter of fiscal 2007 and the
comparable period in the prior year. Share-based compensation cost decreased $11,659,000
in the first quarter of fiscal 2007 as compared to the first quarter of fiscal 2006, due
primarily to the completion of expense recognition in fiscal 2006 of a significant number
of options granted in fiscal 2002. Net pension costs decreased $13,999,000 in the first
quarter of fiscal 2007 over the first quarter of fiscal 2006, due primarily to the
increase in the discount rate used to determine fiscal 2007 pension costs. Fuel costs
increased approximately $9,011,000 in the first quarter of fiscal 2007 over the first
quarter of fiscal 2006. Operating expenses were reduced by $1,395,000 in the first
quarter of fiscal 2007 to adjust the carrying value of life insurance assets to their
cash surrender value, as compared to the recognition of a gain of $4,608,000 in the first
quarter of fiscal 2006. |
| Consistent with the decrease in net pension costs in the first quarter of fiscal 2007,
net pension costs for fiscal 2007 are expected to decrease by approximately $55,000,000
over the prior year. |
| In order to partially manage the volatility and uncertainty of fuel costs, from time to
time, we may enter into forward purchase commitments for a portion of our projected diesel
fuel requirements. Forward diesel fuel purchase commitments outstanding as of September
30, 2006 were not material. In October 2006, we entered into several additional forward
diesel fuel purchase contracts to purchase diesel at a fixed price. As of October 31,
2006, outstanding commitments total approximately $103,000,000, which will fix the price
on a substantial portion of our fuel purchases through the end of calendar year 2007. |
| Interest Expense |
| The increase to interest expense of $3,520,000 in the first quarter of fiscal 2007 over
the comparable period in fiscal 2006 was primarily due to increased borrowing levels. |
| Other, Net |
| Changes between the periods result from fluctuations in various activities. The increase
in the first quarter of fiscal 2007 over the comparable prior year period is primarily
due to a gain of approximately $5,800,000 on the sale of land. |
| Income Taxes |
| The effective tax rate for the first quarter of fiscal 2007 was 38.7%, a decrease from
the effective tax rate of 40.3% for the first quarter of fiscal 2006. The decrease in the
effective tax rate was primarily due to lower share-based compensation expense in fiscal
2007. |
| We recorded a tax benefit of $3,270,000, or 11.0% of the total $29,621,000 in share-based
compensation expense recorded in the 13-week period ended September 30, 2006. We
recorded a tax benefit of $6,000,000, or 14.5% of the total $41,280,000 in share-based
compensation expense recorded in the 13-week period ended October 1, 2005. |

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| Net Earnings |
| --- |
| Net earnings before cumulative effect of accounting change increased 15.5% in the first
quarter of fiscal 2007 over the comparable period of the prior year. The increase was
due primarily to the factors discussed above. |
| Net earnings increased 10.4% in the first quarter of fiscal 2007 over the comparable
period of the prior year due primarily to the factors discussed above. In addition, in
the first quarter of fiscal 2006, we recorded a cumulative effect of a change in
accounting, due to a change in the measurement date for pension and other postretirement
benefits, which increased net earnings by $9,285,000, net of tax. |
| Earnings Per Share |
| Basic earnings per share before cumulative effect of accounting change and diluted
earnings per share before cumulative effect of accounting change increased 15.6% and
19.4%, respectively, in the first quarter of fiscal 2007 over the comparable period of
the prior year. These increases were due primarily to the factors discussed above, as
well as a net reduction in shares outstanding. The net reduction in average shares
outstanding is primarily due to share repurchases. The net reduction in diluted shares
outstanding is primarily due to share repurchases and the exclusion of certain options
from the diluted share calculation due to their anti-dilutive effect. |
| Both basic earnings per share and diluted earnings per share increased 12.1% in the first
quarter of fiscal 2007 over the comparable period of the prior year. These increases
were primarily due to the factors discussed above. |
| Segment Results |
| The following table sets forth the change in the selected financial data of each of our
reportable segments expressed as a percentage increase over the comparable period in the
prior year and should be read in conjunction with Note 12, Business Segment Information
beginning on page 15: |

	Earnings
Sales	before taxes
Broadline	6.9 %	9.2	%
SYGMA	6.3	151.9	(1)
Other	26.8	15.3

(1) SYGMA had earnings before taxes of $1,447,000 in the first quarter of fiscal 2007 and a loss of $2,787,000 in the first quarter of fiscal 2006.

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The following table sets forth sales and earnings before income taxes of each of our reportable segments expressed as a percentage of the respective consolidated total and should be read in conjunction with Note 12, Business Segment Information beginning on page 15:

September 30, 2006				October 1, 2005
		Earnings before				Earnings before
Sales		taxes		Sales		taxes
Broadline	78.9	%	109.4	%	79.9	%	112.7	%
SYGMA	12.4		0.4		12.6		(0.8	)
Other	10.0		7.6		8.6		7.4
Intersegment sales	(1.3	)	—		(1.1	)	—
Unallocated corporate expenses	—		(17.4	)	—		(19.3	)
Total	100.0	%	100.0	%	100.0	%	100.0	%

| We do not allocate to our segments share-based compensation expense related to stock
option grants, issuances of stock pursuant to the Employees’ Stock Purchase Plan and
restricted stock grants. |
| --- |
| Broadline Segment |
| Broadline segment sales increased 6.9% in the first quarter of fiscal 2007 as compared to
the comparable period of the prior year. The application of EITF 04-13 negatively
impacted sales growth in the first quarter of fiscal 2007 by 0.8%, or $50,533,000.
Acquisitions did not have an impact to the overall sales growth rate for the first
quarter of fiscal 2007. The sales increases were primarily due to increased sales to
marketing associate-served customers and multi-unit customers. Marketing
associate-served sales as a percentage of broadline sales in the U.S. increased to 53.5%
for the first quarter of fiscal 2007 as compared to 53.0% for the comparable prior year
period. SYSCO Brand sales as a percentage of broadline sales in the U.S. decreased to
46.6% for the first quarter of fiscal 2007 as compared to 49.2% for the comparable prior
year period. |
| Earnings before income taxes for the Broadline segment increased 9.2% in the first
quarter of fiscal 2007 over the comparable prior year period. The increase in earnings
before income taxes was primarily due to increases in sales partially offset by higher
fuel costs and lower margins on certain products. |
| SYGMA Segment |
| SYGMA segment sales increased 6.3% in the first quarter of fiscal 2007 over the
comparable prior year period. The application of EITF 04-13 negatively impacted sales
growth in the first quarter of fiscal 2007 by 4.1%, or $40,963,000. Acquisitions
contributed 2.5% to the overall sales growth rate for the first quarter of fiscal 2007.
The remainder of the increase was primarily due to sales to new customers and sales
growth in SYGMA’s existing customer base related to both new locations added by those
customers and increased sales at existing locations. |
| Earnings before income taxes for the SYGMA segment increased 151.9% to $1,447,000 in the
first quarter of fiscal 2007 over the comparable prior year period loss of $2,787,000.
This increase was due to several factors, including sales growth, increased margins and
improved operating efficiencies partially offset by increased fuel costs and costs of
labor. |

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| Liquidity and Capital Resources |
| --- |
| We may apply cash provided by operating activities, as supplemented by commercial paper
issuances and other bank borrowings, towards investments in facilities, fleet and other
equipment; cash dividends; acquisitions consistent with our overall growth strategy; and
the share repurchase program. |
| Operating Activities |
| Cash flow from operations in the first quarter of fiscal 2007 was negatively impacted by
an increase in inventory balances of $104,342,000 and an increase in accounts receivable
balances of $151,316,000, partially offset by an increase in accounts payable balances of
$27,364,000. Cash flow from operations in the first quarter of fiscal 2006 was
negatively impacted by an increase in inventory balances of $93,571,000 and an increase
in accounts receivable balances of $112,765,000. |
| The increases in accounts receivable were primarily a result of sales growth and change
in customer mix. Due to normal seasonal patterns, sales to multi-unit customers
represented a larger percentage of total SYSCO sales at the end of the first quarter as
compared to the end of the prior fiscal year. Payment terms for multi-unit customers are
traditionally longer than the overall SYSCO average. Inventory balances are impacted by
many factors including current and anticipated sales volumes, changes in product mix and
product cost increases. Accounts payable balances are impacted by many factors,
including changes in product mix, cash discount terms and changes in payment terms with
vendors due to the use of more efficient electronic payment methods. On a days sales
outstanding ratio basis, our accounts receivable, inventory and accounts payable balances
at September 30, 2006 were largely comparable to those balances as of October 1, 2005. |
| Cash flow from operations was also negatively impacted by the decrease in accrued
expenses of $53,704,000 for the first quarter of fiscal 2007 and a decrease of
$40,341,000 for the first quarter of fiscal 2006. These decreases were primarily due to
the payment of prior year annual incentive bonuses partially offset by accruals for
current year incentives and to the payment of 401(k) matching contributions in the first
quarter of each fiscal year. |
| Other long-term liabilities and prepaid pension cost, net, decreased $2,112,000 during
the first quarter of fiscal 2007 and increased $42,595,000 during the first quarter of
fiscal 2006. The change in these accounts is primarily attributable to the recording of
net pension costs and the timing of pension contributions. In the first quarter of
fiscal 2007, we recorded net pension costs of $18,649,000 and contributed $22,622,000 to
our pension plans. In the first quarter of fiscal 2006, we recorded net pension costs of
$32,648,000 and contributed $1,551,000 to our pension plans. |
| Financing Activities |
| During the first quarter of fiscal 2007, a total of 2,044,000 shares were repurchased at
a cost of $65,281,000 as compared to 8,622,000 shares at a cost of $295,424,000 for the
comparable period in fiscal 2006. An additional 2,180,000 shares were repurchased at a
cost of $72,477,000 through October 28, 2006, resulting in 15,115,000 shares remaining
available for repurchase as authorized by the Board. |
| Dividends paid in the first quarter of fiscal 2007 were $105,233,000, or $0.17 per share,
as compared to $94,557,000, or $0.15 per share, in the comparable period of fiscal 2006.
In |

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| September 2006, we declared our regular quarterly dividend for the second quarter of
fiscal 2007, at $0.17 per share, which was paid in October 2006. |
| --- |
| As of September 30, 2006, we had uncommitted bank lines of credit, which provide for
unsecured borrowings for working capital of up to $145,000,000, of which $6,000,000 was
outstanding at September 30, 2006. Such borrowings totaled $10,900,000 as of October 28,
2006. |
| As of September 30, 2006, our outstanding commercial paper issuances totaled
$513,412,000. Such borrowings were $691,384,000 as of October 28, 2006. During the
13-week period ended September 30, 2006, commercial paper issuances and short-term bank
borrowings ranged from approximately $372,762,000 to $577,242,000. |
| In September 2006, the termination date on the revolving credit facility supporting our
U.S. and Canadian commercial paper programs was extended from November 4, 2010 to
November 4, 2011 in accordance with the terms of the agreement. |
| Included in current maturities of long-term debt at September 30, 2006 are the 7.25%
senior notes due April 2007 totaling $100,000,000. It is our intention to fund the
repayment of these notes at maturity through issuances of commercial paper, senior notes
or a combination thereof. |
| The long-term debt to capitalization ratio was 36.7% at September 30, 2006. For purposes
of calculating this ratio, long-term debt includes both the current maturities and
long-term portions. |
| We believe that our cash flows from operations, as well as the availability of additional
capital under our existing commercial paper programs, bank lines of credit, debt shelf
registration and our ability to access capital from financial markets in the future, will
be sufficient to meet our cash requirements while maintaining proper liquidity for normal
operating purposes. |
| Critical Accounting Policies |
| Critical accounting policies are those that are most important to the portrayal of our
financial position and results of operations. These policies require management’s most
subjective judgments, often employing the use of estimates about the effect of matters
that are inherently uncertain. SYSCO’s most critical accounting policies include those
that pertain to the allowance for doubtful accounts, self-insurance program, pension
plans, income taxes, vendor consideration, accounting for business combinations and
share-based compensation, which are described in Item 7 of our Annual Report on Form 10-K
for the year ended July 1, 2006. |
| New Accounting Standards |
| In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48), which clarifies the
accounting for uncertainty in income taxes recognized in accordance with FASB Statement
No. 109 (SFAS 109). FIN 48 clarifies the application of SFAS 109 by defining criteria
that an individual tax position must meet for any part of the benefit of that position to
be recognized in the financial statements. Additionally, FIN 48 provides guidance on the
measurement, derecognition, classification and disclosure of tax positions, along with
accounting for the related interest and penalties. The provisions of FIN 48 are effective
for fiscal years beginning after December 15, 2006, with the cumulative effect of the
change in accounting principle recorded as an adjustment to opening retained earnings. We are
currently evaluating the impact the adoption of FIN 48 will have on our consolidated
financial statements. |

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| In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. The statement is effective for fiscal
years beginning after November 15, 2007. We are currently evaluating the impact of
the provisions of SFAS 157. |
| --- |
| In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87,
88, 106, and 132(R)” (SFAS 158). SFAS 158 requires an employer to recognize a plan’s
funded status in its statement of financial position, measure a plan’s assets and
obligations as of the end of the employer’s fiscal year and recognize the changes in a
defined benefit postretirement plan’s funded status in comprehensive income in the year
in which the changes occur. SFAS 158’s requirement to recognize the funded status of a
benefit plan and new disclosure requirements are effective as of the end of the fiscal
year ending after December 15, 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year-end statement of financial
position is effective for fiscal years ending after December 15, 2008. We are currently
evaluating the impact the adoption of SFAS 158 will have on our consolidated financial
statements. The effect of adoption at June 30, 2007, the adoption date, or any other
future date, cannot be determined, since the impact is dependent upon on the measurements
of each plan’s assets and obligations at such date. However, if this standard had been
applied at July 1, 2006, the result would have been an increase in current liabilities of
approximately $10,000,000, an increase in other long-term liabilities of approximately
$145,000,000, a decrease in prepaid pension cost of approximately $160,000,000, a
decrease in deferred taxes of approximately $120,000,000 and a decrease in shareholders’
equity of approximately $195,000,000. |
| Forward-Looking Statements |
| Certain statements made herein are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. They include statements regarding expense
trends; the impact of ongoing legal proceedings; the timing, expected cost savings and
other long-term benefits of the National Supply Chain project and regional distribution
centers; anticipated capital expenditures which may vary from projections; the ability to
increase sales and market share and grow earnings; continued competitive advantages and
positive results from growth initiatives; the potential for future success; pension plan
contributions; the continuing impact of economic conditions on sales growth; growth
strategies; SYSCO’s ability to refinance current maturities of long-term debt; and our
ability to meet our 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, increased fuel
costs and consumer spending; SYSCO’s leverage and debt risks; the successful completion
of acquisitions and integration of acquired companies as well as the risk that
acquisitions could require additional debt or equity financing and negatively impact our
stock price or operating results; the effect of competition on us and our 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.
The expected impact of option expensing is based on certain assumptions regarding the
number and |

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| fair value of options granted, resulting tax benefits and shares outstanding.
The actual impact of option expensing could vary significantly to the extent actual
results vary significantly from assumptions. |
| --- |
| In addition, share repurchases could be affected by market prices for the company’s
securities as well as management’s decision to utilize our capital for other purposes.
Interest paid is impacted by capital and borrowing needs and changes in interest rates.
The effect of market risks could be impacted by future borrowing levels and 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 risk factors discussion contained in Part II, Item 1A of this
Quarterly Report on Form 10-Q. |

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

| We do not utilize financial instruments for trading purposes. Our use of debt directly
exposes us to interest rate risk. Floating rate debt, for which the interest rate
fluctuates periodically, exposes us to short-term changes in market interest rates.
Fixed rate debt, for which the interest rate is fixed over the life of the instrument,
exposes us to changes in market interest rates reflected in the fair value of the debt
and to the risk we may need to refinance maturing debt with new debt at higher rates. |
| --- |
| We manage our 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. |
| At September 30, 2006, we had outstanding $513,412,000 of commercial paper issuances at
variable rates of interest with maturities through December 21, 2006. Excluding
commercial paper issuances, our long-term debt obligations at September 30, 2006 were
$1,332,379,000 and were primarily at fixed rates of interest. |
| In order to partially manage the volatility and uncertainty of fuel costs, from time to
time, we may enter into forward purchase commitments for a portion of our projected diesel
fuel requirements. Forward diesel fuel purchase commitments outstanding as of September
30, 2006 were not material. In October 2006, we entered into several additional forward
diesel fuel purchase contracts to purchase diesel at a fixed price. As of October 31,
2006, outstanding commitments total approximately $103,000,000, which will fix the price
on a substantial portion of our fuel purchases through the end of calendar year 2007. |

ITEM 4. Controls and Procedures

SYSCO’s management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2006. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,

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including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2006, our chief executive officer and chief financial officer concluded that, as of such date, SYSCO’s disclosure controls and procedures were effective at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 6. Exhibits

(a) Exhibits.

| 3.1 | 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). |
| --- | --- |
| 3.2 | 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). |
| 3.3 | 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). |
| 3.4 | 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). |
| 3.5 | Amended and Restated Bylaws of Sysco Corporation dated February 8,
2002, incorporated by reference to Exhibit 3(b) to Form 10-Q for the
quarter ended December 29, 2001 (File No. 1-6544). |
| 4.1 | 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). |
| 4.2 | 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). |
| 4.3 | 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). |
| 4.4 | 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). |
| 4.5 | Fifth Supplemental Indenture, dated as of July 27, 1998 between Sysco
Corporation and First Union National Bank, Trustee, incorporated by
reference to Exhibit 4(h) to Form 10-K for the year ended June 27,
1998 (File No. 1-6544). |
| 4.6 | Sixth Supplemental Indenture, including form of Note, dated April 5,
2002 |

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| | between Sysco Corporation 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). |
| --- | --- |
| 4.7 | Seventh Supplemental Indenture, including form of Note, dated March 5,
2004 between Sysco Corporation, as Issuer, and Wachovia Bank, National
Association (formerly First Union National Bank of North Carolina), as
Trustee, incorporated by reference to Exhibit 4(j) to Form 10-Q for
the quarter ended March 27, 2004 (File No. 1-6544). |
| 4.8 | Eighth Supplemental Indenture, including form of Note, dated September
22, 2005 between Sysco Corporation, as Issuer, and Wachovia Bank,
National Association, as Trustee, incorporated by reference to
Exhibits 4.1 and 4.2 to Form 8-K filed on September 20, 2005 (File No.
1-6544). |
| 4.9 | 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). |
| †10.1 | First Amendment to the Third Amended and Restated
Sysco Corporation Executive Deferred Compensation
Plan, incorporated by reference to Exhibit 10.2 to
Form 8-K filed on September 13, 2006 (File No.
1-6544). |
| †10.2 | Second Amendment to the Sixth Amended and Restated
Sysco Corporation Supplemental Executive Retirement
Plan, incorporated by reference to Exhibit 10.1 to
Form 8-K filed on September 13, 2006 (File No.
1-6544). |
| †10.3 | Form of Performance Unit Grant Agreement issued to
executive officers effective September 7, 2006 under
the Long-Term Incentive Cash Plan, incorporated by
reference to Exhibit 10.3 to Form 8-K filed on
September 13, 2006 (File No. 1-6544). |
| 15.1 | Report from Ernst & Young LLP dated May 3, 2007,
re: unaudited financial statements. |
| 15.2 | Acknowledgment letter from Ernst & Young LLP. |
| 31.1 | CEO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
| 31.2 | CFO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
| 32.1 | CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
| 32.2 | CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |

†	Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of Regulation S-K
*	Filed herewith

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34

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 of the Board,
Chief Executive Officer and President

Date: May 7, 2007

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

Date: May 7, 2007

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

Date: May 7, 2007

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EXHIBIT INDEX

NO.	DESCRIPTION
3.1	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).
3.2	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).
3.3	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).
3.4	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).
3.5	Amended and Restated Bylaws of Sysco Corporation dated February 8, 2002,
incorporated by reference to Exhibit 3(b) to Form 10-Q for the quarter
ended December 29, 2001 (File No. 1-6544).
4.1	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).
4.2	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).
4.3	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).
4.4	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).
4.5	Fifth Supplemental Indenture, dated as of July 27, 1998 between Sysco
Corporation and First Union National Bank, Trustee, incorporated by
reference to Exhibit 4(h) to Form 10-K for the year ended June 27, 1998
(File No. 1-6544).
4.6	Sixth Supplemental Indenture, including form of Note, dated April 5, 2002
between Sysco Corporation 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).

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NO.	DESCRIPTION
4.7	Seventh Supplemental Indenture, including form of Note, dated March 5, 2004
between Sysco Corporation, as Issuer, and Wachovia Bank, National
Association (formerly First Union National Bank of North Carolina), as
Trustee, incorporated by reference to Exhibit 4(j) to Form 10-Q for the
quarter ended March 27, 2004 (File No. 1-6544).
4.8	Eighth Supplemental Indenture, including form of Note, dated September 22,
2005 between Sysco Corporation, as Issuer, and Wachovia Bank, National
Association, as Trustee, incorporated by reference to Exhibits 4.1 and 4.2
to Form 8-K filed on September 20, 2005 (File No. 1-6544).
4.9	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).
†10.1	First Amendment to the Third Amended and Restated Sysco Corporation
Executive Deferred Compensation Plan, incorporated by reference to Exhibit
10.2 to Form 8-K filed on September 13, 2006 (File No. 1-6544).
†10.2	Second Amendment to the Sixth Amended and Restated Sysco Corporation
Supplemental Executive Retirement Plan, incorporated by reference to
Exhibit 10.1 to Form 8-K filed on September 13, 2006 (File No. 1-6544).
†10.3	Form of Performance Unit Grant Agreement issued to executive officers
effective September 7, 2006 under the Long-Term Incentive Cash Plan,
incorporated by reference to Exhibit 10.3 to Form 8-K filed on September
13, 2006 (File No. 1-6544).
*15.1	Report from Ernst & Young LLP dated May 3, 2007, re: unaudited financial
statements.
*15.2	Acknowledgment letter from Ernst & Young LLP.
*31.1	CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†	Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of Regulation S-K
*	Filed herewith.

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