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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-6544
SYSCO CORPORATION
(Exact name of registrant as specified in its charter)
<Table>
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)
</Table>
Registrant's Telephone Number, Including Area Code: (281) 584-1390
Securities Registered Pursuant to Section 12(b) of the Act:
<Table>
<Caption>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Stock, $1.00 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
</Table>
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held by
stockholders who were not affiliates (as defined by regulations of the
Securities and Exchange Commission) of the registrant was approximately
$18,530,120,000 at September 14, 2001 (based on the closing sales price on the
New York Stock Exchange Composite Tape on September 10, 2001, as reported by The
Wall Street Journal (Southwest Edition)). At September 14, 2001, the registrant
had issued and outstanding an aggregate of 672,081,874 shares of its common
stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement filed on September 24, 2001 are
incorporated by reference into Part III.
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE NO.
--------
PART I.
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 6
Item 4. Submission of Matters to a Vote of Security Holders......... 6
Item 4A. Executive Officers of the Registrant........................ 7
PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 8
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 15
Item 8. Financial Statements and Supplementary Data................. 15
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 37
PART III.
Item 10. Directors and Executive Officers of the Registrant.......... 37
Item 11. Executive Compensation...................................... 37
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 37
Item 13. Certain Relationships and Related Transactions.............. 37
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 37
Signatures ............................................................ 41
</Table>
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PART I
ITEM 1. BUSINESS
OVERVIEW
Sysco Corporation, acting through its subsidiaries and divisions
(collectively referred to as "SYSCO" or "the company"), is the largest North
American distributor of food and food related products to the foodservice or
"food-prepared-away-from-home" industry. Founded in 1969, SYSCO provides its
products and services to approximately 370,000 customers, including restaurants,
healthcare and educational facilities, lodging establishments and other
foodservice customers.
SYSCO, which was formed when the stockholders of nine companies exchanged
their stock for SYSCO common stock, commenced operations in March 1970. Since
its formation, the company has grown from $115 million to over $21 billion in
annual sales both through internal expansion of existing operations and
acquisitions of formerly independent companies. Through the end of fiscal 2001,
SYSCO had acquired sixty-five companies or divisions of companies.
In December 2000, SYSCO acquired North Douglas Distributors, Ltd., a
broadline foodservice distributor operating on Vancouver Island, British
Columbia and the Albert M. Briggs Company, a specialty meat distributor in
Washington, D.C. In January 2001, the company acquired certain operations of the
Freedman Companies, a specialty meat supplier based in Houston, Texas. In March
2001, SYSCO acquired Guest Supply, Inc. through an exchange offer followed by a
merger. Guest Supply is a specialty distributor to the lodging industry
headquartered in Monmouth Junction, New Jersey. In May 2001, the company
acquired HRI Supply, Inc. a broadline foodservice distributor located in
Kelowna, British Columbia. In July 2001, the company acquired Fulton Provision
Co., a specialty meat company based in Portland, Oregon.
In July 1999, SYSCO acquired Newport Meat Co. Inc., a southern California
based distributor of fresh aged beef and other meats, seafood and poultry
products. In August 1999, the company acquired Doughtie's Foods, Inc., a food
distributor located in Virginia and bought substantially all of the assets of
Buckhead Beef Company, Inc., a Georgia based distributor of custom-cut fresh
steaks and other meats, seafood and poultry products. In November 1999, SYSCO
acquired Malcolm Meats, an Ohio based distributor of custom-cut fresh steaks and
other meat and poultry products. In January 2000, SYSCO acquired Watson
Foodservice, Inc., a broadline foodservice distributor located in Lubbock,
Texas. In March 2000, SYSCO acquired FreshPoint, Inc., a distributor of produce
with locations in the U.S. and Canada.
SYSCO is organized under the laws of Delaware. The address and telephone
number of the company's executive office are 1390 Enclave Parkway, Houston,
Texas 77077-2099, (281) 584-1390.
OPERATING SEGMENTS
SYSCO, through its 124 operating companies, provides food and other
products to the foodservice or "food-prepared-away-from-home" industry. Each of
SYSCO's operating companies generally represents a separate operating segment.
Under the provisions of SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), the company has aggregated
its operating companies into five 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 three other segments, including the
company's specialty produce, meat and lodging industry products segments. The
company's specialty produce companies distribute fresh produce and, on a limited
basis, other foodservice products. Specialty meat companies distribute
custom-cut fresh steaks, and other meat, seafood and poultry products. Our
lodging industry products company distributes personal care guest amenities,
housekeeping supplies, room accessories and textiles to the lodging industry.
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CUSTOMERS AND PRODUCTS
The foodservice industry consists of two major customer
types -- "traditional" and "chain restaurant." Traditional foodservice customers
include restaurants, hospitals, schools, hotels and industrial caterers. SYSCO's
chain restaurant customers include regional pizza and national hamburger,
chicken and steak chain operations.
Services to the company's traditional foodservice and chain restaurant
customers are supported by similar physical facilities, vehicles, materials
handling equipment and techniques, and administrative and operating staffs.
Traditional foodservice customers include businesses and organizations that
prepare and serve food to be eaten away from home. Products distributed by the
company include a full line of frozen foods, such as meats, fully prepared
entrees, fruits, vegetables and desserts, and a full line of canned and dry
goods, fresh meats, imported specialties and fresh produce. The company also
supplies a wide variety of nonfood items, including paper products such as
disposable napkins, plates and cups; tableware such as china and silverware;
restaurant and kitchen equipment and supplies; medical and surgical supplies;
and cleaning supplies. SYSCO's operating companies distribute both
nationally-branded merchandise and products packaged under SYSCO's private
brands.
The company believes that prompt and accurate delivery of orders, close
contact with customers and the ability to provide a full array of products and
services to assist customers in their foodservice operations are of primary
importance in the marketing and distribution of products to the traditional
customers. SYSCO's operating companies offer daily delivery to certain customer
locations and have the capability of delivering special orders on short notice.
Through the more than 12,350 sales, marketing and service representatives of
SYSCO and its operating companies, SYSCO stays informed of the needs of its
customers and acquaints them with new products. SYSCO's operating companies also
provide ancillary services relating to foodservice distribution such as
providing customers with product usage reports and other data, menu-planning
advice, contract services for installing kitchen equipment, installation and
service of beverage dispensing machines and assistance in inventory control.
No single foodservice customer accounted for as much as 5% of SYSCO's sales
for its fiscal year ended June 30, 2001. Approximately 5.7% of traditional
foodservice sales during fiscal 2001 resulted from a process of competitive
bidding. There are no material long-term contracts with any traditional
foodservice customer that may not be cancelled by either party at its option.
SYSCO's sales to chain restaurant customers consist of a variety of food
products necessitated by the increasingly broad menus of chain restaurants. The
company believes that consistent product quality and timely and accurate service
are important factors in the selection of a chain restaurant supplier. One chain
restaurant customer (Wendy's International, Inc.) accounted for 4.9% of SYSCO's
sales for its fiscal year ended June 30, 2001. There are no material long-term
contracts with any chain restaurant customer that may not be cancelled by either
party at its option.
Based upon available information, the company estimates that sales by type
of customer during the past three fiscal years were as follows:
<Table>
<Caption>
FISCAL FISCAL FISCAL
TYPE OF CUSTOMER 2001 2000 1999
---------------- ------ ------ ------
Restaurants................................................. 64% 65% 64%
Hospitals and nursing homes................................. 11 10 10
Schools and colleges........................................ 6 6 7
Hotels and motels........................................... 5 5 5
Other....................................................... 14 14 14
--- --- ---
Totals............................................ 100% 100% 100%
=== === ===
</Table>
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SOURCES OF SUPPLY
SYSCO estimates that it purchases from thousands of independent sources,
none of which individually account for more than 5% of the company's purchases.
These sources of supply consist generally of large corporations selling brand
name and private label merchandise and independent private label processors and
packers. Generally, purchasing is carried out on a decentralized basis through
centrally developed purchasing programs (see "Corporate Headquarters' Services"
below) and direct purchasing programs established by the company's various
operating companies. The company continually develops relationships with
suppliers but has no material long-term purchase commitments with any supplier.
CORPORATE HEADQUARTERS' SERVICES
SYSCO's corporate staff, consisting of approximately 900 persons, makes
available a number of services to the company's operating companies. These
persons possess experience and expertise in, among other areas, accounting and
finance, cash management, data processing, employee benefits, engineering and
insurance. Corporate also makes available legal, marketing and tax compliance
services as well as warehousing and distribution services, which provide
assistance in space utilization, energy conservation, fleet management and work
flow.
The corporate staff also administers a consolidated product procurement
program designed to develop, obtain and assure consistent quality food and
nonfood products. The program covers the purchasing and marketing of SYSCO brand
merchandise, as well as private label and national brand merchandise,
encompassing substantially all product lines. The company's operating companies
may participate in the program at their option.
CAPITAL IMPROVEMENTS
To maximize productivity and customer service, the company continues to
construct and modernize its distribution facilities. During fiscal 2001, 2000
and 1999, approximately $341,000,000, $266,000,000 and $287,000,000,
respectively, were invested in facility expansions, fleet additions and other
capital asset enhancements. The company estimates its capital expenditures in
fiscal 2002 should be in the range of $425,000,000 to $450,000,000. During the
three years ended June 30, 2001, capital expenditures were financed primarily by
internally generated funds, the company's commercial paper program and bank
borrowings. The Company expects to finance its fiscal 2002 capital expenditures
from the same sources.
EMPLOYEES
As of June 30, 2001, SYSCO and its operating companies had approximately
43,000 full-time employees, approximately 19% of whom were represented by
unions, primarily the International Brotherhood of Teamsters. Contract
negotiations are handled locally. Collective bargaining agreements covering
approximately 18% of the company's union employees expire during fiscal 2002.
SYSCO considers its labor relations to be satisfactory.
COMPETITION
The business of SYSCO is competitive with numerous companies engaged in
foodservice distribution. While competition is encountered primarily from local
and regional distributors, a few companies compete with SYSCO on a national
basis. The company believes that, although price and customer contact are
important considerations, the principal competitive factor in the foodservice
industry is the ability to deliver a wide range of quality products and related
services on a timely and dependable basis. Although SYSCO's share of the
foodservice industry market in the United States and Canada was approximately
11.5% as of June 30, 2001, SYSCO believes, based upon industry trade data, that
its sales to the U.S. "food-prepared-away-from-home" industry were the largest
of any foodservice distributor during fiscal 2001. While adequate industry
statistics are not available, the company believes that in most instances its
local operations are among the leading distributors of food and related nonfood
products to foodservice customers in their respective trading areas.
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6
GOVERNMENT REGULATION
As a marketer and distributor of food products, SYSCO is subject to the
Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by
the U.S. Food and Drug Administration ("FDA"). The FDA regulates manufacturing
and holding requirements for foods through its current good manufacturing
practice regulations, specifies the standards of identity for certain foods and
prescribes the format and content of certain information required to appear on
food product labels. For certain product lines, SYSCO is also subject to the
Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable
Agricultural Commodities Act and regulations promulgated thereunder by the U.S.
Department of Agriculture ("USDA"). The USDA imposes standards for product
quality and sanitation including the inspection and labeling of meat and poultry
products and the grading and commercial acceptance of produce shipments from the
company's suppliers. The company and its products are also subject to state and
local regulation through such measures as the licensing of its facilities,
enforcement by state and local health agencies of state and local standards for
the company's products and regulation of the company's trade practices in
connection with the sale of its products. SYSCO's facilities are generally
inspected at least annually by state and/or federal authorities. These
facilities are also subject to inspections and regulations issued pursuant to
the Occupational Safety and Health Act by the Department of Labor, which require
the company to comply with certain manufacturing, health and safety standards to
protect its employees from accidents and to establish hazard communication
programs to transmit information on the hazards of certain chemicals present in
products distributed by the company.
The company is also subject to regulation by numerous federal, state, and
local regulatory agencies, including but not limited to the U.S. Department of
Labor, which sets employment practice standards for workers, and the U.S.
Department of Transportation, which regulates transportation of perishable and
hazardous materials and waste, and similar state and local agencies.
The company's distribution facilities have tanks for the storage of diesel
fuel and other petroleum products which are subject to laws regulating such
storage tanks. Other federal, state and local provisions relating to the
protection of the environment or the discharge of materials do not materially
impact the company's use or operation of its facilities.
Compliance with these laws has not had and is not anticipated to have a
material effect on the capital expenditures, earnings or competitive position of
SYSCO.
GENERAL
SYSCO has numerous trademarks which are of significant importance to the
company. The loss of the SYSCO(R) trademark would have a material adverse effect
on SYSCO's results of operations.
SYSCO is not engaged in material research activities relating to the
development of new products or the improvement of existing products.
Sales of the company do not generally fluctuate on a seasonal basis;
therefore, the business of the company is not deemed to be seasonal.
As of September 14, 2001, SYSCO and its operating companies operated 130
facilities within the United States, of which 118 were distribution facilities,
and eleven in Canada, of which nine were distribution facilities.
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ITEM 2. PROPERTIES
The table below shows the number of distribution facilities and self-serve
centers occupied by SYSCO in each state or province and the aggregate cubic
footage devoted to cold and dry storage as of September 14, 2001.
<Table>
<Caption>
NUMBER OF COLD STORAGE DRY STORAGE
FACILITIES (THOUSANDS (THOUSANDS
LOCATION AND CENTERS CUBIC FEET) CUBIC FEET)
-------- ----------- ------------ -----------
Alabama................................................... 2 1,677 2,399
Alaska.................................................... 1 246 317
Arizona................................................... 1 1,933 3,410
Arkansas.................................................. 1 1,577 3,157
California................................................ 17 15,760 26,198
Colorado.................................................. 3 3,212 5,050
Connecticut............................................... 1 2,489 2,737
District of Columbia...................................... 2 670 158
Florida................................................... 13 16,231 20,239
Hawaii.................................................... 1 -- 258
Georgia................................................... 6 5,605 9,105
Idaho..................................................... 1 998 1,154
Illinois.................................................. 3 3,926 7,419
Indiana................................................... 2 1,590 2,250
Iowa...................................................... 1 1,207 4,148
Kansas.................................................... 1 2,735 3,793
Kentucky.................................................. 1 2,330 2,648
Louisiana................................................. 1 2,577 3,254
Maine..................................................... 1 1,508 1,916
Maryland.................................................. 5 6,819 7,147
Massachusetts............................................. 2 7,965 7,185
Michigan.................................................. 4 5,220 8,195
Minnesota................................................. 1 3,636 3,063
Mississippi............................................... 1 2,125 2,690
Missouri.................................................. 1 1,128 1,348
Montana................................................... 1 2,043 1,830
Nebraska.................................................. 1 1,721 2,206
Nevada.................................................... 1 411 754
New Jersey................................................ 3 1,659 11,007
New Mexico................................................ 1 1,856 1,855
New York.................................................. 5 6,220 6,404
North Carolina............................................ 3 3,931 8,136
Ohio...................................................... 8 7,081 13,497
Oklahoma.................................................. 2 1,801 3,433
Oregon.................................................... 3 4,085 3,866
Pennsylvania.............................................. 4 6,134 7,084
South Dakota.............................................. 1 2 123
Tennessee................................................. 4 6,362 9,766
Texas..................................................... 14 13,587 18,367
Utah...................................................... 1 2,906 4,000
Virginia.................................................. 2 4,820 4,342
Washington................................................ 1 2,549 3,240
Wisconsin................................................. 2 5,016 4,073
Alberta, Canada........................................... 1 290 393
</Table>
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<Table>
<Caption>
NUMBER OF COLD STORAGE DRY STORAGE
FACILITIES (THOUSANDS (THOUSANDS
LOCATION AND CENTERS CUBIC FEET) CUBIC FEET)
-------- ----------- ------------ -----------
British Columbia, Canada.................................. 8 3,920 4,380
Ontario, Canada........................................... 2 1,452 1,561
--- ------- -------
Total........................................... 141 171,010 239,555
=== ======= =======
</Table>
SYSCO owns approximately 343,000,000 cubic feet of its distribution
facilities and self-serve centers (or 83.5% of the total cubic feet), and the
remainder is occupied under leases expiring at various dates from fiscal 2002 to
2015, exclusive of renewal options. Certain of the facilities owned by the
company are either subject to mortgage indebtedness or industrial revenue bond
financing arrangements totaling $29,143,000 at June 30, 2001. Such mortgage
indebtedness and industrial revenue bond financing arrangements mature at
various dates to 2026.
The company owns its approximately 188,000 square foot headquarters office
complex in Houston, Texas and leases approximately 150,600 square feet of
additional office space in Houston, Texas.
Facilities in Los Angeles, California, Memphis, Tennessee, Jersey City, New
Jersey and Jackson, Wisconsin (which in the aggregate accounted for
approximately 8% of fiscal 2001 sales) are operating near capacity and the
company is currently constructing expansions for these distribution facilities.
As of September 14, 2001, SYSCO's fleet of approximately 7,870 delivery
vehicles consisted of tractor and trailer combinations, vans and panel trucks,
most of which are either wholly or partially refrigerated for the transportation
of frozen or perishable foods. The company owns approximately 87% of these
vehicles and leases the remainder.
ITEM 3. LEGAL PROCEEDINGS
SYSCO is engaged in various legal proceedings which have arisen but have
not been fully adjudicated. These proceedings, in the opinion of management,
will not have a material adverse effect upon the consolidated financial position
or results of operations of the company when ultimately concluded.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the executive officers of SYSCO, each of whom serves at
the discretion of the Board and holds the office opposite his or her name below
until the meeting of the Board of Directors immediately preceding the next
Annual Meeting of Stockholders or until his or her successor has been elected or
qualified. Executive officers who also serve as directors, serve as directors
until expiration of their terms or until their successors have been elected and
qualified.
<Table>
<Caption>
SERVED IN THIS
NAME OF OFFICER CAPACITY POSITION SINCE AGE
--------------- -------- -------------- ---
Charles H. Cotros Chairman and Chief Executive Officer; Director 2000 & 1985 64
Larry J. Accardi Executive Vice President, Merchandising 2000 52
Services
Kenneth J. Carrig Senior Vice President, Administration 1999 44
O. Wayne Duncan Senior Vice President, Foodservice Operations 1995 63
James C. Graham Senior Vice President, Foodservice Operations 2000 51
James E. Lankford Senior Vice President, Foodservice Operations 2000 48
Thomas E. Lankford Executive Vice President, Foodservice 2000 54
Operations; Director
Gregory K. Marshall Senior Vice President 1993 54
Michael C. Nichols Vice President and General Counsel 1999 49
Diane Day Sanders Vice President and Treasurer 1994 52
Richard J. Schnieders President and Chief Operating Officer; 2000 & 1999 53
Director
Kenneth F. Spitler Senior Vice President, Foodservice Operations 2000 52
John K. Stubblefield, Jr. Executive Vice President, Finance and 2000 55
Administration
James D. Wickus Senior Vice President, Foodservice Operations 1995 59
</Table>
Each of the executive officers listed above has been employed by the
company throughout the past five years except Kenneth J. Carrig. Before joining
SYSCO, Mr. Carrig was Vice President of Human Resources for Continental
Airlines, Inc. from 1995 to 1997 and prior to that he was Senior Director of the
Southwest Region for PepsiCo from 1987 to 1995.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market for SYSCO's Common Stock is the New York Stock
Exchange. The table below sets forth the high and low sales prices per share for
SYSCO's Common Stock as reported on the New York Stock Exchange Composite Tape
and the cash dividends paid for the periods indicated, adjusted for the 2-for-1
stock split effected by a 100% stock dividend paid on December 15, 2000 to
stockholders of record on November 15, 2000.
<Table>
<Caption>
COMMON STOCK
PRICES
--------------- DIVIDENDS PAID
HIGH LOW PER SHARE
------ ------ --------------
Fiscal 2000:
First Quarter............................................. $18.13 $15.03 $0.05
Second Quarter............................................ 20.56 15.81 0.05
Third Quarter............................................. 20.28 13.06 0.06
Fourth Quarter............................................ 21.69 17.19 0.06
Fiscal 2001:
First Quarter............................................. $23.63 $19.38 $0.06
Second Quarter............................................ 30.44 21.75 0.06
Third Quarter............................................. 30.00 23.50 0.07
Fourth Quarter............................................ 30.12 25.70 0.07
</Table>
The number of record owners of SYSCO's Common Stock as of September 14,
2001 was 15,870.
ITEM 6. SELECTED FINANCIAL DATA
<Table>
<Caption>
FISCAL YEAR ENDED
-------------------------------------------------------------------
1999
2001 2000 (53 WEEKS) 1998 1997
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
Sales........................... $21,784,497 $19,303,268 $17,422,815 $15,327,536 $14,454,589
Earnings before income taxes.... 966,655 737,608 593,887 532,493 495,955
Income taxes.................... 369,746 283,979 231,616 207,672 193,422
----------- ----------- ----------- ----------- -----------
Earnings before cumulative
effect of accounting change... 596,909 453,629 362,271 324,821 302,533
Cumulative effect of accounting
change........................ -- (8,041) -- (28,053) --
----------- ----------- ----------- ----------- -----------
Net earnings.................... $ 596,909 $ 445,588 $ 362,271 $ 296,768 $ 302,533
=========== =========== =========== =========== ===========
Earnings before accounting
change:
Basic earnings per share...... $ 0.90 $ 0.69 $ 0.54 $ 0.48 $ 0.43
Diluted earnings per share.... 0.88 0.68 0.54 0.47 0.42
Cumulative effect of accounting
change:
Basic earnings per share...... -- (0.01) -- (0.04) --
Diluted earnings per share.... -- (0.01) -- (0.04) --
Net earnings:
Basic earnings per share...... 0.90 0.68 0.54 0.44 0.43
Diluted earnings per share.... 0.88 0.67 0.54 0.43 0.42
Cash dividends per share........ 0.26 0.22 0.19 0.17 0.14
Total assets.................... 5,468,521 4,813,955 4,096,582 3,780,189 3,433,823
Capital expenditures............ 341,138 266,413 286,687 259,353 210,868
Long-term debt.................. 961,421 1,023,642 997,717 867,017 685,620
Shareholders' equity............ 2,147,520 1,761,568 1,427,196 1,356,789 1,400,472
----------- ----------- ----------- ----------- -----------
Total
capitalization...... $ 3,108,941 $ 2,785,210 $ 2,424,913 $ 2,223,806 $ 2,086,092
=========== =========== =========== =========== ===========
Ratio of long-term debt to
capitalization................ 30.9% 36.8% 41.1% 39.0% 32.9%
</Table>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
SYSCO provides marketing and distribution services to foodservice customers
and suppliers throughout the contiguous United States, Alaska, Hawaii, the
District of Columbia and western and eastern Canada. The company intends to
continue to expand its market share through profitable sales growth and constant
emphasis on the development of its consolidated buying programs. The company
also strives to increase the effectiveness of its marketing associates and the
productivity of its warehousing and distribution activities. These objectives
require continuing investment. SYSCO's resources include cash provided by
operations and access to capital from financial markets.
SYSCO's operations historically have produced significant cash flow. Cash
generated from operations is first allocated to working capital requirements;
investments in facilities, fleet and other equipment required to meet customers'
needs; cash dividends; and acquisitions fitting within the company's overall
growth strategy. Any remaining cash generated from operations is applied toward
a portion of the cost of shares repurchased in the buyback program, while the
remainder of the cost may be financed with additional long-term debt. SYSCO's
initial share repurchase program was used primarily to offset shares issued
under various employee benefit and compensation plans. The company significantly
accelerated the repurchase program beginning in February 1996. The share
repurchase program reduces outstanding shares and generally increases earnings
per share. The long-term debt to total capitalization target ratio was increased
from a range of 30% to 40% to a range of 35% to 40% due to prior and anticipated
accelerated share repurchases, additional debt associated with those repurchases
and acquisitions. The ratio may exceed the target range from time to time in
order to take advantage of acquisitions and internal growth opportunities. The
ratio may also fall below the target range due to strong cash flow from
operations and fluctuations in the amount of share repurchases. This ratio was
30.9% and 36.8% at June 30, 2001 and July 1, 2000, respectively.
In fiscal 1992, SYSCO began a common stock repurchase program which
continued through fiscal 2001, resulting in the cumulative repurchase of
approximately 184,000,000 shares of common stock.
In July 1999, the Board authorized the repurchase of an additional
16,000,000 shares. Under this authorization, 16,000,000 shares were purchased
through December 31, 2000.
In November 2000, the Board authorized the repurchase of an additional
16,000,000 shares. Under this latest authorization 7,563,200 shares remain to be
repurchased at June 30, 2001. The number of shares acquired and their cost was
16,000,000 shares for $428,196,000 in fiscal 2001 and 11,320,800 shares for
$186,296,000 in fiscal 2000. In September 2001, the Board authorized the
repurchase of an additional 16,000,000 shares.
In February 2000, the company filed with the Securities and Exchange
Commission a shelf registration statement covering 5,700,000 shares of common
stock to be offered from time to time in connection with acquisitions. This
registration statement was amended in January 2001 to include an additional
1,100,000 shares. As of June 30, 2001, 493,359 shares remained available for
issuance under this registration statement. In July 2001, an additional 69,524
shares were issued under this registration statement.
In November 2000, the company filed with the Securities and Exchange
Commission a shelf registration statement covering 30,000,000 shares of common
stock to be offered from time to time in connection with acquisitions. As of
June 30, 2001, all of these shares remained available for issuance under this
registration statement. In July 2001, 522,165 shares were issued under this
registration statement.
Net cash generated from operating activities was $955,224,000 in fiscal
2001, $708,726,000 in fiscal 2000 and $585,303,000 in fiscal 1999. Expenditures
for facilities, fleet and other equipment were $341,138,000 in fiscal 2001,
$266,413,000 in fiscal 2000 and $286,687,000 in fiscal 1999. Expenditures in
fiscal 2002 should be in the range of $425,000,000 to $450,000,000.
On June 3, 1998, SYSCO filed with the Securities and Exchange Commission a
$500,000,000 shelf registration of debt securities. On July 22, 1998, SYSCO
issued 6.5% debentures totaling $225,000,000 under the shelf registration, due
August 1, 2028. These debentures were priced at 99.685% of par, are unsecured,
are
9
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not subject to any sinking fund requirement and include a redemption provision
which allows SYSCO the right to retire the debentures at any time prior to
maturity at the greater of par plus accrued interest or an amount designed to
insure that the debenture holders are not penalized by the early redemption.
Proceeds from the debentures were used to pay down outstanding commercial paper.
The net cash provided by operations less cash utilized for capital
expenditures, the stock repurchase program, cash dividends and other uses
resulted in net long-term debt of $961,421,000 at June 30, 2001. About 80% of
the long-term debt is at fixed rates averaging 6.76% and the remainder is at
floating rates averaging 4.28%. The long-term debt to capitalization ratio was
30.9% at June 30, 2001, down 5.9% from the 36.8% at July 1, 2000 and down 10.2%
from the 41.1% at July 3, 1999. SYSCO continues to have borrowing capacity
available and alternative financing arrangements are evaluated as appropriate.
SYSCO has uncommitted bank lines of credit, which provide for unsecured
borrowings for working capital up to $226,754,000 of which $30,640,000 and
$31,109,000 were outstanding at June 30, 2001 and July 1, 2000, respectively.
SYSCO has a commercial paper program which is currently supported by a
$300,000,000 bank credit facility. During fiscal 2001 and 2000, commercial paper
and short-term bank borrowings ranged from approximately $157,631,000 to
$411,790,000 and from approximately $199,028,000 to $469,094,000, respectively.
In summary, SYSCO believes that through continual monitoring and management
of assets together with the availability of additional capital in the financial
markets, it will meet its cash requirements while maintaining proper liquidity
for normal operating purposes.
MARKET RISK
SYSCO does not utilize financial instruments for trading purposes and holds
no derivative financial instruments which could expose the company to
significant market risk. SYSCO's exposure to market risk for changes in interest
rates relates primarily to its long-term obligations discussed above. At June
30, 2001, the company had outstanding $179,313,000 of commercial paper at
variable rates of interest with maturities through October 2, 2001. The
company's remaining long-term debt obligations of $782,108,000 were primarily at
fixed rates of interest. Because a relatively small portion of the company's
long-term debt bears interest at variable rates, SYSCO has no significant cash
flow exposure due to interest rate changes for long-term debt obligations.
SALES
The annual increases in sales of 12.8% in fiscal 2001, 10.8% in fiscal 2000
and 13.7% in fiscal 1999 result from several factors. Sales increases in fiscal
2001 and fiscal 2000 were attributable to a variety of factors, including the
progress of our Customers Are Really Everything to SYSCO (C.A.R.E.S.) customer
relationship initiatives, a persistent focus on increasing sales to marketing
associate-served customers, the continuing recognition by customers of the
quality and value of SYSCO Brand Products, and overall growth in the foodservice
industry. After adjusting for food price increases and acquisitions, real sales
growth was about 5.8% in fiscal 2001. Acquisitions represented 4.5% of total
sales for fiscal 2001 and food cost inflation was 2.5%.
After adjusting for food price increases, acquisitions and adjusting for
the extra week in fiscal 1999, real sales growth was about 9% in fiscal 2000.
Acquisitions represented 3.5% of total sales in fiscal 2000 and food cost
inflation was approximately 0.4% for fiscal 2000. This compares to an increase
of approximately 1% in fiscal 1999.
Industry sources estimate the total foodservice market experienced real
growth of approximately 2.8% in calendar year 2000 and 3.1% in calendar year
1999.
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13
Sales for fiscal 1999 through 2001 were as follows:
<Table>
<Caption>
FISCAL YEAR SALES % INCREASE
----------- --------------- ----------
2001...................................................... $21,784,497,000 12.8%
2000...................................................... 19,303,268,000 10.8
1999 (53 weeks)........................................... 17,422,815,000 13.7
</Table>
A comparison of the sales mix in the principal product categories during
the last three years is presented below:
<Table>
<Caption>
2001 2000 1999
---- ---- ----
Medical supplies............................................ 1% 1% 1%
Dairy products.............................................. 9 9 10
Fresh and frozen meats...................................... 18 17 15
Seafoods.................................................... 6 6 6
Poultry..................................................... 10 10 11
Frozen fruits, vegetables, bakery and other................. 13 14 14
Canned and dry products..................................... 19 21 22
Paper and disposables....................................... 8 8 7
Janitorial products......................................... 2 2 2
Equipment and smallwares.................................... 2 2 3
Fresh produce............................................... 9 7 6
Beverage products........................................... 3 3 3
--- --- ---
100% 100% 100%
=== === ===
</Table>
A comparison of sales by type of customer during the last three years is
presented below:
<Table>
<Caption>
2001 2000 1999
---- ---- ----
Restaurants................................................. 64% 65% 64%
Hospitals and nursing homes................................. 11 10 10
Schools and colleges........................................ 6 6 7
Hotels and motels........................................... 5 5 5
All other................................................... 14 14 14
--- --- ---
100% 100% 100%
=== === ===
</Table>
COST OF SALES
Cost of sales increased about 12% in fiscal 2001, 10% in fiscal 2000 and
14% in fiscal 1999(53 weeks). These increases were generally in line with the
increases in sales. The rate of increase is influenced by SYSCO's overall
customer and product mix as well as economies realized in product acquisition
and higher sales of SYSCO Brand products.
OPERATING EXPENSES
Operating expenses include the costs of warehousing and delivering products
as well as selling and administrative expenses. These expenses as a percent of
sales were 14.8% for fiscal 2001, 14.7% for fiscal 2000 and 14.6% for fiscal
1999. Changes in the percentage relationship of operating expenses to sales
result from an interplay of several economic influences, including customer mix.
Inflationary increases in operating costs generally have been offset through
improved productivity.
Part of the fiscal 2000 increase over 1999 was due to expenses related to
the closing of a facility and one-time non-recurring costs associated with the
completion of the SYSCO Uniform Systems implementation. There was also a charge
to non-operating expenses in connection with the facility closing. The costs
described above were approximately $13,000,000.
11
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INTEREST EXPENSE
Interest expense increased $944,000 or approximately 1.0% in fiscal 2001 as
compared to a decrease of $2,007,000 or approximately 3% in fiscal 2000, as
compared to an increase of $14,417,000 or approximately 25% in fiscal 1999.
Interest expense in fiscal 2000 included interest income in the amount of
$3,000,000 related to a Federal income tax refund on an amended return. After
adjusting for the refund, interest expense in fiscal 2001 decreased $2,056,000
or approximately 2.8%. This decrease was due to decreased borrowings. The
increase in fiscal 1999 was due primarily to increased borrowings, principally
to fund the share repurchase program, and the replacement of floating rate debt
at higher fixed rates. Interest capitalized during the past three years was
$2,995,000 in fiscal 2001, $964,000 in fiscal 2000 and $1,812,000 in fiscal
1999.
OTHER, NET
Other decreased $1,421,000 or about 93% in fiscal 2001, increased $559,000
or about 58% in fiscal 2000 and increased $910,000 or about 1,717% in fiscal
1999. Changes between the years result from fluctuations in miscellaneous
activities, primarily gains and losses on the sale of surplus facilities as well
as the expense related to the facility closing discussed above.
EARNINGS BEFORE INCOME TAXES
Earnings before income taxes rose $229,047,000, or approximately 31%, above
fiscal 2000 which had increased $143,721,000, or approximately 24%, over fiscal
1999. Additional sales and realization of operating efficiencies contributed to
the increases as well as the company's success in its continued efforts to
increase sales to the company's higher margin territorial street customers and
increasingly higher sales of SYSCO brand products, both of which generally yield
higher margins.
PROVISION FOR INCOME TAXES
The effective tax rate for fiscal 2001, 2000 and 1999 was 38.25%, 38.5% and
39%, respectively.
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Fiscal 2001 represents the twenty-fifth consecutive year of increased
earnings before the cumulative effect of an accounting change. Earnings before
cumulative effect of accounting change rose $143,280,000, or approximately 32%,
above fiscal 2000 which had increased $91,358,000, or approximately 25%, over
fiscal 1999.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In the first quarter of fiscal 2000, SYSCO recorded a one-time, after-tax,
non-cash charge of $8,041,000 to comply with the required adoption of AICPA
Statement Of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-up
Activities." SOP 98-5 requires the write-off of any unamortized costs of
start-up activities and organization costs.
NET EARNINGS
Net earnings for fiscal 2001 increased $151,321,000 or approximately 34%
above fiscal 2000, which had increased $83,317,000 or approximately 23% over
fiscal 1999. The increases were caused by additional sales, operating
efficiencies and other factors as discussed above.
DIVIDENDS
SYSCO began paying the quarterly dividend at a rate of $0.07 per share in
February 2001, an increase from the $0.06 per share that became effective in
February 2000.
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RETURN ON SHAREHOLDERS' EQUITY
The return on average shareholders' equity before the cumulative effect of
the accounting change for fiscal 2001 was approximately 31% compared to 29% in
2000 and 26% in 1999. Since its inception, SYSCO has averaged in excess of an
18% return on shareholders' equity before the cumulative effect of the
accounting change.
BROADLINE SEGMENT
Broadline segment sales increased by 8.8% in fiscal 2001 as compared to
fiscal 2000 and by 7.9% in fiscal 2000 as compared to fiscal 1999. The fiscal
2001 and fiscal 2000 sales growth were due primarily to increased sales to
marketing associate-served and multi-unit customers as well as increased sales
of SYSCO Brand products. Broadline segment sales as a percentage of total SYSCO
sales decreased from 86.2% in fiscal 2000 to 83.1% in fiscal 2001 and from 88.5%
in fiscal 1999 to 86.2% in fiscal 2000. The decrease in fiscal 2001 and fiscal
2000 was due primarily to acquisitions of specialty meat, produce and lodging
industry product companies in the Other segments and greater percentage growth
of the SYGMA segment as a percentage of overall SYSCO sales.
Earnings before income taxes from the Broadline segment increased by 25.6%
in fiscal 2001 as compared to fiscal 2000 and by 20.2% in fiscal 2000 as
compared to fiscal 1999. The increase in earnings before income taxes for fiscal
2001 and fiscal 2000 was driven by increased sales to marketing associate-served
customers as well as an increase in sales of SYSCO brand products. Completion of
the installation of SYSCO Uniform Systems in the second quarter of fiscal 2000
has also impacted earnings before income taxes with increased efficiencies and
productivity.
SYGMA SEGMENT
SYGMA segment sales increased by 12.2% in fiscal 2001 as compared to fiscal
2000 and 7.6% in fiscal 2000 as compared to fiscal 1999. The fiscal 2001 and
fiscal 2000 sales growth was due primarily to sales growth in SYGMA's existing
customer base. SYGMA segment sales as a percentage of total SYSCO sales
decreased from 11.2% in fiscal 2000 to 11.1% in fiscal 2001 and decreased from
11.5% in fiscal 1999 to 11.2% in fiscal 2000. The decrease in fiscal 2001 and
fiscal 2000 was due to the acquisitions of specialty meat, produce and lodging
industry product companies in the Other segments.
Earnings before income taxes for the segment increased by 213.3% in fiscal
2001 as compared to fiscal 2000 and decreased 58.4% in fiscal 2000 as compared
to fiscal 1999. The increase in fiscal 2001 was due to increased sales,
operating efficiencies and improved labor costs realized during fiscal 2001.
Fiscal 2000 results included an $8.3 million charge recorded during the second
quarter of fiscal 2000 for the shutdown of one of SYGMA's facilities.
OTHER SEGMENTS
Increases in sales and earnings before income taxes for the Other segments
were due primarily to the timing of acquisitions made during the periods
presented.
RISK FACTORS
Low Margin Business; Economic Sensitivity
The foodservice distribution industry is characterized by relatively high
inventory turnover with relatively low profit margins. SYSCO makes a significant
portion of its sales at prices that are based on the cost of products it sells
plus a percentage markup. As a result, SYSCO's profit levels may be negatively
impacted during periods of food price deflation, even though SYSCO's gross
profit percentage may remain relatively constant. The foodservice industry is
sensitive to national and economic conditions. SYSCO's operating results also
are sensitive to, and may be adversely affected by, other factors, including
difficulties with the collectability of accounts receivable, inventory control,
competitive price pressures, severe weather conditions and unexpected increases
in fuel or other transportation-related costs. Although such factors have not
had a
13
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material adverse impact on SYSCO's past operations, there can be no assurance
that one or more of these factors will not adversely affect future operating
results.
Leverage and Debt Service
Because historically a substantial part of SYSCO's growth has been the
result of acquisitions and capital expansion, SYSCO's continued growth depends,
in large part, on its ability to continue this expansion. As a result, its
inability to finance acquisitions and capital expenditures through borrowed
funds could restrict its ability to expand. Moreover, any default under the
documents governing the indebtedness of SYSCO could have a significant adverse
effect on the market value of SYSCO's common stock. Further, SYSCO's leveraged
position may also increase its vulnerability to competitive pressures.
Product Liability Claims
SYSCO, like any other seller of food, faces the risk of exposure to product
liability claims in the event that the use of products sold by the company
causes injury or illness. With respect to product liability claims, SYSCO
believes it has sufficient primary or excess umbrella liability insurance.
However, this insurance may not continue to be available at a reasonable cost,
or, if available, may not be adequate to cover liabilities. SYSCO generally
seeks contractual indemnification and insurance coverage from parties supplying
its products, but this indemnification or insurance coverage is limited, as a
practical matter, to the creditworthiness of the indemnifying party and the
insured limits of any insurance provided by suppliers. If SYSCO does not have
adequate insurance or contractual indemnification available, product liability
relating to defective products could materially reduce SYSCO's net income and
earnings per share.
Interruption of Supplies
SYSCO obtains all of its foodservice products from other suppliers. For the
most part, SYSCO does not have long-term contracts with any supplier committing
it to provide products to SYSCO. Although SYSCO's purchasing volume can provide
leverage when dealing with suppliers, suppliers may not provide the foodservice
products and supplies needed by SYSCO in the quantities requested. Because SYSCO
does not control the actual production of its products, it is also subject to
delays caused by interruption in production based on conditions outside its
control. These conditions include job actions or strikes by employees of
suppliers, weather, crop conditions, transportation interruptions, and natural
disasters or other catastrophic events. SYSCO's inability to obtain adequate
supplies of its foodservice products as a result of any of the foregoing factors
or otherwise, could mean that SYSCO could not fulfill its obligations to
customers, and customers may turn to other distributors.
Labor Relations
As of June 30, 2001, approximately 8,300 employees at 36 operating
companies were members of 49 different local unions associated with the
International Brotherhood of Teamsters and other labor organizations. In fiscal
2002, nine agreements covering approximately 1,500 employees will expire.
Failure of the operating companies to effectively renegotiate these contracts
could result in work stoppages. Although SYSCO's operating subsidiaries have not
experienced any significant labor disputes or work stoppages to date, and SYSCO
believes they have satisfactory relationships with their unions, a work stoppage
due to failure of one or more operating subsidiaries to renegotiate a union
contract, or otherwise, could have a material adverse effect on SYSCO.
Integration of Acquired Companies
If SYSCO is unable to integrate acquired businesses successfully and
realize anticipated economic, operational and other benefits in a timely manner,
its profitability may decrease. Integration of an acquired business may be more
difficult when SYSCO acquires a business in a market in which it has limited or
no expertise, or with a corporate culture different from SYSCO's. If SYSCO is
unable to integrate acquired businesses successfully, it may incur substantial
costs and delays in increasing its customer base. In addition,
14
17
'the failure to integrate acquisitions successfully may divert management's
attention from SYSCO's existing business and may damage SYSCO's relationships
with its key customers and suppliers.
Charter and Stockholder Rights Plan
Under its Restated Certificate of Incorporation, SYSCO's Board of Directors
is authorized to issue up to 1.5 million shares of preferred stock without
stockholder approval. Issuance of these shares could make it more difficult for
anyone to acquire SYSCO without approval of the Board of Directors, depending on
the rights and preferences of the stock issued. In addition, if anyone attempts
to acquire SYSCO without approval of the Board of Directors of SYSCO, the
stockholders of SYSCO have the right to purchase preferred stock of SYSCO
pursuant to its Stockholder Rights Plan, which could result in substantial
dilution to a potential acquiror. The existence of either of these provisions
could deter hostile takeover attempts that might result in an acquisition of
SYSCO that could otherwise have been financially beneficial to SYSCO's
stockholders.
FORWARD-LOOKING STATEMENTS
Certain statements made herein that look forward in time or express
management's expectations or beliefs with respect to the occurrence of future
events are forward-looking statements under the Private Securities Litigation
Reform Act of 1995. They include statements about SYSCO's ability to increase
its market share and sales, long-term debt to capitalization target ratios,
anticipated capital expenditures, and SYSCO's ability to meet future cash
requirements and remain profitable.
These statements are based on management's current expectations and
estimates; actual results may differ materially due in part to the risk factors
discussed above. In addition, SYSCO's ability to increase its market share and
sales, meet future cash requirements and remain profitable could be affected by
conditions in the economy and the industry and internal factors such as the
ability to control expenses. The ability to meet long-term debt to
capitalization target ratios may also be affected by share repurchases, cash
flow, acquisitions and internal growth.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of market risk see "Market Risk" under Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SYSCO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<Table>
<Caption>
PAGE
----
Consolidated Financial Statements:
Report of Management on Internal Accounting Controls...... 16
Report of Independent Public Accountants.................. 17
Consolidated Balance Sheets............................... 18
Consolidated Results of Operations........................ 19
Consolidated Shareholders' Equity......................... 20
Consolidated Cash Flows................................... 21
Summary of Accounting Policies............................ 22
Additional Financial Information.......................... 24
Schedule:
II -- Valuation and Qualifying Accounts................... S-1
</Table>
All other schedules are omitted because they are not applicable or the
information is set forth in the consolidated financial statements or notes
thereto.
15
18
REPORT OF MANAGEMENT ON INTERNAL ACCOUNTING CONTROLS
The management of SYSCO is responsible for the preparation and integrity of
the consolidated financial statements of the company. The accompanying
consolidated financial statements have been prepared by the management of the
company, in accordance with generally accepted accounting principles, using
management's best estimates and judgment where necessary. Financial information
appearing throughout this Annual Report is consistent with that in the
consolidated financial statements.
To help fulfill its responsibility, management maintains a system of
internal controls designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and that transactions are executed
in accordance with management's authorizations and are reflected accurately in
the company's records. The concept of reasonable assurance is based on the
recognition that the cost of maintaining a system of internal accounting
controls should not exceed benefits expected to be derived from the system.
SYSCO believes that its long-standing emphasis on the highest standards of
conduct and ethics, embodied in comprehensive written policies, serves to
reinforce its system of internal controls.
The company's operations review function monitors the operation of the
internal control system and reports findings and recommendations to management
and the Board of Directors. It also oversees actions taken to address control
deficiencies and seeks opportunities for improving the effectiveness of the
system.
Arthur Andersen LLP, independent public accountants, has been engaged to
express an opinion regarding the fair presentation of the company's financial
condition and operating results. As part of their audit of the company's
financial statements, Arthur Andersen LLP considered the company's system of
internal controls to the extent they deemed necessary to determine the nature,
timing and extent of their audit tests.
The Board of Directors oversees the company's financial reporting through
its Audit Committee which consists entirely of outside directors. The Board,
after a recommendation from the Audit Committee, selects and engages the
independent public accountants annually. The Audit Committee reviews both the
scope of the accountants' audit and recommendations from both the independent
public accountants and the internal operations review function for improvements
in internal controls. The independent public accountants have free access to the
Audit Committee and from time to time confer with them without management
representation.
SYSCO recognizes its responsibility to conduct business in accordance with
high ethical standards. This responsibility is reflected in a comprehensive code
of business conduct that, among other things, addresses potentially conflicting
outside business interests of company employees and provides guidance as to the
proper conduct of business activities. Ongoing communications and review
programs are designed to help ensure compliance with this code.
The company believes that its system of internal controls is effective and
adequate to accomplish the objectives discussed above.
<Table>
/s/ CHARLES H. COTROS /s/ JOHN K. STUBBLEFIELD, JR.
----------------------------------------------------- -----------------------------------------------------
Charles H. Cotros John K. Stubblefield, Jr.
Chairman and Chief Executive Officer Executive Vice President,
Finance and Administration
</Table>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Sysco Corporation
We have audited the accompanying consolidated balance sheets of Sysco
Corporation (a Delaware corporation) and subsidiaries as of June 30, 2001 and
July 1, 2000, and the related statements of consolidated results of operations,
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 2001. These financial statements and the schedule referred to
below are the responsibility of the company's management. Our responsibility is
to express an opinion on these financial statements and the schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sysco
Corporation and subsidiaries as of June 30, 2001 and July 1, 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 2001, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a), No. 2,
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
------------------------------------
Arthur Andersen LLP
Houston, Texas
August 1, 2001
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20
SYSCO
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
JUNE 30, 2001 JULY 1, 2000
------------- ------------
(IN THOUSANDS EXCEPT FOR
SHARE DATA)
ASSETS
Current assets
Cash...................................................... $ 135,743 $ 159,128
Accounts and notes receivable, less allowances of $27,984
and $27,628............................................ 1,658,044 1,519,038
Inventories............................................... 1,061,893 937,899
Deferred taxes............................................ 88,746 72,041
Prepaid expenses.......................................... 40,456 45,109
---------- ----------
Total current assets.............................. 2,984,882 2,733,215
Plant and equipment at cost, less depreciation.............. 1,518,593 1,344,693
Other assets
Goodwill and intangibles, less amortization............... 768,837 543,655
Other..................................................... 196,209 192,392
---------- ----------
Total other assets................................ 965,046 736,047
---------- ----------
Total assets...................................... $5,468,521 $4,813,955
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable............................................. $ 30,640 $ 31,109
Accounts payable.......................................... 1,271,817 1,186,721
Accrued expenses.......................................... 640,839 527,233
Income taxes.............................................. 123,332 17,914
Current maturities of long-term debt...................... 23,267 19,958
---------- ----------
Total current liabilities......................... 2,089,895 1,782,935
Long-term debt.............................................. 961,421 1,023,642
Deferred taxes.............................................. 269,685 245,810
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 1,000,000,000 shares, issued 765,174,900 and
382,587,450 shares..................................... 765,175 382,587
Paid-in capital........................................... 186,818 76,967
Retained earnings......................................... 2,462,145 2,332,238
Other comprehensive loss.................................. (5,624) --
---------- ----------
3,408,514 2,791,792
Less cost of treasury stock, 100,037,236 and 51,102,663
shares................................................. 1,260,994 1,030,224
---------- ----------
Total shareholders' equity................................ 2,147,520 1,761,568
---------- ----------
Total liabilities and shareholders' equity........ $5,468,521 $4,813,955
========== ==========
</Table>
See Summary of Accounting Policies and Additional Financial Information.
18
21
SYSCO
CONSOLIDATED RESULTS OF OPERATIONS
<Table>
<Caption>
YEAR ENDED
-------------------------------------------
JULY 3, 1999
JUNE 30, 2001 JULY 1, 2000 (53 WEEKS)
------------- ------------ ------------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Sales................................................. $21,784,497 $19,303,268 $17,422,815
Costs and expenses
Cost of sales....................................... 17,513,138 15,649,551 14,207,860
Operating expenses.................................. 3,232,827 2,843,755 2,547,266
Interest expense.................................... 71,776 70,832 72,839
Other, net.......................................... 101 1,522 963
----------- ----------- -----------
Total costs and expenses.................... 20,817,842 18,565,660 16,828,928
----------- ----------- -----------
Earnings before income taxes.......................... 966,655 737,608 593,887
Income taxes.......................................... 369,746 283,979 231,616
----------- ----------- -----------
Earnings before cumulative effect of accounting
change.............................................. 596,909 453,629 362,271
Cumulative effect of accounting change................ -- (8,041) --
----------- ----------- -----------
Net earnings.......................................... $ 596,909 $ 445,588 $ 362,271
=========== =========== ===========
Earnings before accounting change:
Basic earnings per share............................ $ 0.90 $ 0.69 $ 0.54
Diluted earnings per share.......................... 0.88 0.68 0.54
Cumulative effect of accounting change:
Basic earnings per share............................ -- (0.01) --
Diluted earnings per share.......................... -- (0.01) --
Net earnings:
Basic earnings per share............................ 0.90 0.68 0.54
Diluted earnings per share.......................... 0.88 0.67 0.54
</Table>
See Summary of Accounting Policies and Additional Financial Information.
19
22
SYSCO
CONSOLIDATED SHAREHOLDERS' EQUITY
<Table>
<Caption>
COMMON STOCK OTHER TREASURY STOCK
---------------------- PAID-IN RETAINED COMPREHENSIVE ------------------------
SHARES AMOUNT CAPITAL EARNINGS LOSS SHARES AMOUNT
----------- -------- -------- ---------- ------------- ----------- ----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Balance at June 27, 1998............ 382,587,450 $382,587 $ -- $1,796,488 47,578,288 $ 822,286
Net earnings for year ended July 3,
1999.............................. 362,271
Cash dividends paid, $0.19 per
share............................. (126,691)
Treasury stock purchases............ 7,567,300 203,958
Stock options exercised............. (5,621) (988,679) (15,954)
Employees' Stock Purchase Plan...... 3,679 (894,094) (15,906)
Management Incentive Plan........... 2,814 (347,750) (6,053)
----------- -------- -------- ---------- ------- ----------- ----------
Balance at July 3, 1999............. 382,587,450 $382,587 $ 872 $2,032,068 $ -- 52,915,065 $ 988,331
Net earnings for year ended July 1,
2000.............................. 445,588
Cash dividends paid, $0.22 per
share............................. (145,418)
Treasury stock purchases............ 5,660,400 186,296
Treasury stock issued for
acquisitions...................... 69,794 (4,984,497) (98,362)
Stock options exercised............. (7,526) (1,163,222) (20,104)
Employees' Stock Purchase Plan...... 9,446 (943,530) (18,585)
Management Incentive Plan........... 4,381 (381,553) (7,352)
----------- -------- -------- ---------- ------- ----------- ----------
Balance at July 1, 2000............. 382,587,450 $382,587 $ 76,967 $2,332,238 $ -- 51,102,663 $1,030,224
Net earnings for year ended June 30,
2001.............................. 596,909
Cash dividends paid, $0.26 per
share............................. (173,701)
Treasury stock purchases............ 16,000,000 428,196
Treasury stock issued for
acquisitions...................... 184,357 (12,025,208) (136,696)
Stock options exercised............. (11,099) (3,677,972) (34,529)
Employees' Stock Purchase Plan...... 16,713 (1,630,208) (17,770)
Management Incentive Plan........... 9,167 (834,702) (8,431)
Minimum pension liability
adjustment, net of tax benefit of
$3,484............................ (5,624)
2-for-1 stock split................. 382,587,450 382,588 (89,287) (293,301) 51,102,663
----------- -------- -------- ---------- ------- ----------- ----------
Balance at June 30, 2001............ 765,174,900 $765,175 $186,818 $2,462,145 $(5,624) 100,037,236 $1,260,994
=========== ======== ======== ========== ======= =========== ==========
</Table>
See Summary of Accounting Policies and Additional Financial Information.
20
23
SYSCO
CONSOLIDATED CASH FLOWS
<Table>
<Caption>
YEAR ENDED
-------------------------------------------
JULY 3, 1999
JUNE 30, 2001 JULY 1, 2000 (53 WEEKS)
------------- ------------ ------------
(IN THOUSANDS)
Cash flows from operating activities:
Net earnings........................................... $596,909 $445,588 $362,271
Add non-cash items:
Cumulative effect of accounting change.............. -- 8,041 --
Depreciation and amortization....................... 248,240 220,661 205,005
Deferred tax provision (benefit).................... 6,199 (25,528) 5,656
Provision for losses on receivables................. 21,740 27,082 26,208
Additional investment in certain assets and
liabilities, net of effect of businesses acquired:
(Increase) in receivables........................... (83,945) (118,578) (144,969)
(Increase) in inventories........................... (54,119) (56,943) (61,464)
Decrease (increase) in prepaid expenses............. 6,547 3,378 (3,180)
Increase in accounts payable........................ 33,377 105,790 164,143
Increase in accrued expenses........................ 86,582 128,174 82,016
Increase (decrease) in income taxes................. 106,047 16,254 (19,420)
(Increase) in other assets.......................... (12,353) (45,193) (30,963)
-------- -------- --------
Net cash provided by operating activities.............. 955,224 708,726 585,303
-------- -------- --------
Cash flows from investing activities:
Additions to plant and equipment....................... (341,138) (266,413) (286,687)
Proceeds from sales of plant and equipment............. 12,750 18,922 24,952
Acquisition of businesses, net of cash acquired........ (10,363) (211,901) --
-------- -------- --------
Net cash used for investing activities................. (338,751) (459,392) (261,735)
-------- -------- --------
Cash flows from financing activities:
Bank and commercial paper (repayments) borrowings...... (72,055) 51,810 (109,962)
Other debt (repayments) borrowings..................... (41,417) (11,947) 117,273
Common stock reissued from treasury.................... 75,511 52,342 38,785
Treasury stock purchases............................... (428,196) (186,296) (203,958)
Dividends paid......................................... (173,701) (145,418) (126,691)
-------- -------- --------
Net cash used for financing activities................. (639,858) (239,509) (284,553)
-------- -------- --------
Net (decrease) increase in cash.......................... (23,385) 9,825 39,015
Cash at beginning of year................................ 159,128 149,303 110,288
-------- -------- --------
Cash at end of year...................................... $135,743 $159,128 $149,303
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................ $ 71,791 $ 70,977 $ 66,706
Income taxes........................................ 251,567 272,022 237,990
</Table>
See Summary of Accounting Policies and Additional Financial Information.
21
24
SUMMARY OF ACCOUNTING POLICIES
BUSINESS AND CONSOLIDATION
Sysco Corporation (SYSCO) is engaged in the marketing and distribution of a
wide range of food and related products to the foodservice or
"food-prepared-away-from-home" industry. These services are performed from 115
distribution facilities for about 370,000 customers located in the 39 states
where facilities are situated, in nine adjacent states, Alaska, Hawaii and the
District of Columbia. The company also has six facilities in British Columbia
(three in Vancouver, two in Victoria and one in Kelowna), one in Peterborough,
Ontario, one in Mississauga, Ontario and one in Edmonton, Alberta which service
customers in those surrounding areas.
The accompanying financial statements include the accounts of SYSCO and its
subsidiaries. All significant intercompany transactions and account balances
have been eliminated. Certain amounts in the prior years have been reclassified
to conform to the fiscal 2001 presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the reported amounts of assets, liabilities, sales and expenses. Actual results
could differ from the estimates used.
Earnings of acquisitions recorded as purchases are included in SYSCO's
results of operations from the date of acquisition.
INVENTORIES
Inventories consist of food and related products held for resale and are
valued at the lower of cost (first-in, first-out method) or market.
PLANT AND EQUIPMENT
Capital additions, improvements and major renewals are classified as plant
and equipment and are carried at cost. Depreciation is recorded using the
straight-line method which reduces the book value of each asset in equal amounts
over its estimated useful life. Maintenance, repairs and minor renewals are
charged to earnings when they are incurred. Upon the disposition of an asset,
its accumulated depreciation is deducted from the original cost, and any gain or
loss is reflected in current earnings.
Applicable interest charges incurred during the construction of new
facilities are capitalized as one of the elements of cost and are amortized over
the assets' estimated useful lives.
A summary of plant and equipment, including the related accumulated
depreciation, appears below:
<Table>
<Caption>
ESTIMATED
JUNE 30, 2001 JULY 1, 2000 USEFUL LIVES
--------------- --------------- ------------
Plant and equipment, at cost
Land................................. $ 120,836,000 $ 110,546,000
Buildings and improvements........... 1,202,701,000 1,050,417,000 10-40 years
Equipment............................ 1,572,161,000 1,398,555,000 3-20 years
--------------- ---------------
2,895,698,000 2,559,518,000
Accumulated depreciation............... (1,377,105,000) (1,214,825,000)
--------------- ---------------
Net plant and equipment................ $ 1,518,593,000 $ 1,344,693,000
=============== ===============
</Table>
GOODWILL AND INTANGIBLES
Goodwill and intangibles represent the excess of cost over the fair value
of tangible net assets acquired and are amortized over 25 to 40 years using the
straight-line method. The company reviews goodwill and intangibles to evaluate
whether events or changes have occurred that would suggest an impairment of
carrying value. An impairment would be recognized when expected future operating
cash flows are lower than the
22
25
carrying value. Accumulated amortization at June 30, 2001, July 1, 2000 and July
3, 1999 was $116,439,000, $96,862,000 and $84,160,000, respectively.
COSTS OF START-UP ACTIVITIES
In the first quarter of fiscal 2000, SYSCO recorded a one-time, after-tax,
non-cash charge of $8,041,000 to comply with the required adoption of AICPA
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-up
Activities." SOP 98-5 requires the write-off of any unamortized costs of
start-up activities and organization costs. Such costs are now expensed as
incurred.
INSURANCE PROGRAM
SYSCO maintains a self-insurance program covering portions of workers'
compensation and general and automobile liability costs. The amounts in excess
of the self-insured levels are fully insured. Self-insurance accruals are based
on claims filed and an estimate for significant claims incurred but not
reported.
REVENUE RECOGNITION
The Company recognizes revenue from the sale of a product at the time the
product is delivered to the customer.
INCOME TAXES
SYSCO follows the liability method of accounting for income taxes as
required by the provisions of Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes."
CASH FLOW INFORMATION
For cash flow purposes, cash includes cash equivalents such as time
deposits, certificates of deposit and all highly liquid instruments with
original maturities of three months or less.
SHIPPING AND HANDLING COSTS
Shipping and handling costs includes costs associated with selection of
products for delivery to customers. Included in operating expenses are shipping
and handling costs of approximately $1,297,944,000 in fiscal 2001,
$1,140,116,000 in fiscal 2000 and $1,026,097,000 in fiscal 1999.
ACQUISITIONS
During fiscal 2001, SYSCO acquired for cash and stock, two custom-meat
operations, two broadline foodservice companies and one company that supplies
products to the lodging industry. In the aggregate, SYSCO paid cash of
$8,848,000 and issued 12,399,957 shares to the former owners of the acquired
companies.
During fiscal 2000, SYSCO acquired for cash and stock, three custom-meat
operations, two broadline foodservice companies and one specialty produce
company. In the aggregate, SYSCO paid cash of $211,901,000 and issued 9,968,994
shares to the former owners of the acquired companies. During fiscal 2001, SYSCO
paid additional cash of $1,515,000 related to these acquisitions and issued an
additional 152,002 shares to former owners of the acquired companies.
The transactions were accounted for using the purchase method of accounting
and the financial statements include the results of the acquired companies from
the respective dates they joined SYSCO.
The purchase price was allocated to the net assets acquired based on the
estimated fair value at the date of acquisition. The balances included in the
Consolidated Financial Position related to the current year acquisitions are
based upon preliminary information and are subject to change when final asset
and liability valuations are obtained. Material changes to the preliminary
allocations are not anticipated by management.
23
26
NEW ACCOUNTING STANDARDS
In fiscal 1999, SYSCO adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement did not change the
measurement or recognition of those plans, but revised the disclosure
requirements for pensions and other postretirement plans.
In fiscal 2000, SYSCO adopted AICPA Statement of Position 98-1 (SOP 98-1),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance with respect to accounting for the
various types of costs incurred for computer software developed or obtained for
SYSCO's use. The adoption of SOP 98-1 did not have a significant effect on
SYSCO's consolidated results of operations or financial position.
In fiscal 2001, SYSCO adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No.
133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities -- an amendment of SFAS No. 133." These statements
outline the accounting treatment for all derivative activity and the adoption
did not have a significant effect on SYSCO's consolidated results of operations
or financial position.
In fiscal 2001, SYSCO adopted the Securities and Exchange Commission Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition." SAB 101 provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements. The adoption of SAB 101 had no effect on SYSCO's consolidated
results of operations or financial position.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Accounting for Business Combinations" and SFAS No. 142, "Accounting for
Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business
combinations be accounted for using the purchase method of accounting and
prohibits the pooling-of-interests method of accounting for business
combinations initiated after June 30, 2001. According to SFAS No. 142, goodwill
which arises from business combinations after June 30, 2001 cannot be amortized.
In addition, SFAS No. 142 requires the discontinuation of goodwill amortization
and the amortization of intangible assets with indeterminate lives effective the
date SYSCO adopts the statement, which is expected to be June 30, 2002. SYSCO
has six months from the date it adopts SFAS No. 142 to test for impairment and
any impairment charge resulting from the initial application of the new rule
must be classified as the cumulative effect of a change in accounting principle.
Thereafter, goodwill and intangible assets with indeterminate lives should be
tested for impairment annually or as needed.
Management is currently assessing the impact that the adoption of SFAS No.
142, but has not yet determined the impact that the adoption will have on its
consolidated financial statements.
ADDITIONAL FINANCIAL INFORMATION
INCOME TAXES
The income tax provisions consist of the following:
<Table>
<Caption>
2001 2000 1999
------------ ------------ ------------
Federal income taxes....................... $322,837,000 $250,309,000 $200,537,000
State, local and other income taxes........ 46,909,000 33,670,000 31,079,000
------------ ------------ ------------
Total............................ $369,746,000 $283,979,000 $231,616,000
============ ============ ============
</Table>
Included in the income taxes charged to earnings are net deferred tax
provisions (benefits) of $6,199,000, ($25,528,000) and $5,656,000 in fiscal
2001, 2000 and 1999 respectively. The deferred tax provisions (benefits) result
from the effects of net changes during the year in deferred tax assets and
liabilities arising from temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes.
24
27
Significant components of SYSCO's deferred tax assets and liabilities are
as follows:
<Table>
<Caption>
JUNE 30, 2001 JULY 1, 2000
------------- ------------
Deferred tax liabilities:
Excess tax depreciation and basis differences of
assets.............................................. $238,846,000 $219,786,000
Computer systems development project................... 9,700,000 9,838,000
Inventory.............................................. 15,595,000 7,961,000
Other.................................................. 5,544,000 8,225,000
------------ ------------
Total deferred tax liabilities................. 269,685,000 245,810,000
------------ ------------
Deferred tax assets:
Accrued pension expenses............................... 19,733,000 20,008,000
Accrued medical and casualty insurance expenses........ 14,234,000 16,387,000
Other.................................................. 54,779,000 35,646,000
------------ ------------
Total deferred tax assets...................... 88,746,000 72,041,000
------------ ------------
Net deferred tax liabilities............................. $180,939,000 $173,769,000
============ ============
</Table>
The company has enjoyed taxable earnings during each year of its thirty-two
year existence and knows of no reason such profitability should not continue.
Consequently, SYSCO believes that it is more likely than not that the entire
benefit of existing temporary differences will be realized and therefore no
valuation allowance has been established for deferred tax assets.
Reconciliations of the statutory Federal income tax rate to the effective
income tax rates are as follows:
<Table>
<Caption>
2001 2000 1999
----- ---- ----
Statutory Federal income tax rate........................... 35.00% 35.0% 35.0%
State and local income taxes, net of Federal income tax
benefit................................................... 2.63 3.0 3.8
Other....................................................... 0.62 0.5 0.2
----- ---- ----
38.25% 38.5% 39.0%
===== ==== ====
</Table>
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
The allowance for doubtful accounts receivable was $27,984,000 as of June
30, 2001 and $27,628,000 as of July 1, 2000. Customer accounts written off, net
of recoveries, were $23,045,000 or 0.11% of sales, $24,881,000 or 0.13% of sales
and $25,914,000 or 0.15% of sales for fiscal 2001, 2000 and 1999, respectively.
SHAREHOLDERS' EQUITY
On November 3, 2000 the Board of Directors declared a 2-for-1 stock split
effected by a 100% stock dividend paid on December 15, 2000 to shareholders of
record on November 15, 2000. All share and per share data in these financial
statements have been restated to reflect the stock split.
In fiscal 1998, SYSCO adopted the provisions of SFAS No. 128, "Earnings Per
Share," which replaced primary and fully-diluted earnings per share with a
presentation of basic and diluted earnings per share. Basic earnings per share
have been computed by dividing net earnings by 665,551,228 in 2001, 659,164,948
in 2000 and 665,827,092 in 1999, which represents the weighted average number of
shares of common stock outstanding during those respective years. Diluted
earnings per share have been computed by dividing net earnings by 677,949,351 in
2001, 669,555,856 in 2000 and 673,593,338 in 1999, which represents the weighted
average number of shares of common stock outstanding during those respective
years adjusted for the diluted effect of stock options outstanding using the
treasury stock method.
Comprehensive income is net earnings, plus certain other items that are
recorded directly to shareholders' equity. The only such item currently
applicable to the company is minimum pension liability in fiscal 2001.
Comprehensive income was $591,285,000, $445,588,000 and $362,271,000 at June 30,
2001, July 1, 2000 and July 3, 1999, respectively.
25
28
In May 1986, the Board of Directors adopted a Warrant Dividend Plan
designed to protect against those unsolicited attempts to acquire control of
SYSCO that the Board believes are not in the best interest of the shareholders.
In May 1996, the Board of Directors adopted an amended and restated plan which,
among other things, extends the expiration of the plan through May 2006. The
plan was further amended in May 1999. As amended, the plan provides for a
dividend distribution of one-fourth of one Preferred Stock Purchase Right
(Right) for each outstanding share of SYSCO common stock. Each Right may be
exercised to purchase one-half of one two-thousandth of a share of Series A
Junior Participating Preferred Stock at an exercise price of $175, subject to
adjustment. The Rights will not be exercisable until a party either acquires 10%
of the company's common stock or makes a tender offer for 10% or more of its
common stock. In the event of a merger or other business combination
transaction, each Right effectively entitles the holder to purchase $350 worth
of stock of the surviving company for a purchase price of $175.
The Rights expire on May 21, 2006, and may be redeemed before expiration by
SYSCO at a price of $0.01 per Right until a party acquires 10% of the company's
common stock or thereafter under certain circumstances. As a result of the
Rights distribution, 450,000 of the 1,500,000 authorized preferred shares have
been reserved for issuance as Series A Junior Participating Preferred Stock.
DEBT
SYSCO has uncommitted bank lines of credit, which provide for unsecured
borrowings for working capital of up to $226,754,000 of which $30,640,000 and
$31,109,000 were outstanding at June 30, 2001 and July 1, 2000, respectively.
SYSCO's long-term debt consists of the following:
<Table>
<Caption>
JUNE 30, 2001 JULY 1, 2000
------------- --------------
Commercial paper, interest averaging 4.2% in 2001 and
6.9% in 2000......................................... $179,313,000.. $ 247,870,000
Senior notes, interest at 6.5%, maturing in 2005....... 149,643,000 149,553,000
Senior notes, interest at 7.0%, maturing in 2006....... 200,000,000 200,000,000
Senior notes, interest at 7.25%, maturing in 2007...... 99,774,000 99,735,000
Debentures, interest at 7.16%, maturing in 2027........ 50,000,000 50,000,000
Debentures, interest at 6.50%, maturing in 2029........ 224,359,000 224,336,000
Industrial Revenue Bonds, mortgages and other debt,
interest averaging 6.2% in 2001 and 5.8% in 2000,
maturing at various dates to 2026.................... 81,599,000 72,106,000
------------ --------------
Total long-term debt................................... 984,688,000 1,043,600,000
Less current maturities................................ (23,267,000) (19,958,000)
------------ --------------
Net long-term debt..................................... $961,421,000 $1,023,642,000
============ ==============
</Table>
The principal payments required to be made on long-term debt during the
next five years are shown below:
<Table>
<Caption>
FISCAL YEAR AMOUNT
----------- ------------
2002................................................... $ 23,267,000
2003................................................... 9,564,000
2004................................................... 196,412,000
2005................................................... 152,451,000
2006................................................... 202,757,000
</Table>
SYSCO has a $300,000,000 revolving loan agreement maturing in fiscal 2004
which currently supports the company's commercial paper program. The commercial
paper borrowings at June 30, 2001 were $179,313,000.
In June 1995, SYSCO issued 6.5% senior notes totaling $150,000,000 due June
12, 2005, under a $500,000,000 shelf registration filed with the Securities and
Exchange Commission. These notes, which were
26
29
priced at 99.4% of par, are unsecured, not redeemable prior to maturity and are
not subject to any sinking fund requirement. In May 1996, SYSCO issued 7.0%
senior notes totaling $200,000,000 due May 1, 2006, under this shelf
registration. These notes, which were priced at par, are unsecured, not
redeemable prior to maturity and are not subject to any sinking fund
requirement. On April 22, 1997 in two separate offerings, SYSCO drew down the
remaining $150,000,000 of the $500,000,000 shelf registration. SYSCO issued
7.16% debentures totaling $50,000,000 due April 15, 2027. These debentures were
priced at par, are unsecured, are not subject to any sinking fund requirement
and are redeemable at the option of the holder on April 15, 2007, but otherwise
are not redeemable prior to maturity. At that time SYSCO also issued 7.25%
senior notes totaling $100,000,000 due April 15, 2007. These notes were priced
at 99.611% of par and are unsecured, not redeemable prior to maturity and not
subject to any sinking fund requirement.
On June 3, 1998, SYSCO filed with the Securities and Exchange Commission
another $500,000,000 shelf registration of debt securities. On July 22, 1998,
SYSCO issued 6.5% debentures totaling $225,000,000 under this shelf
registration, due on August 1, 2028. These debentures were priced at 99.685% of
par, are unsecured, are not subject to any sinking fund requirement and include
a redemption provision which allows SYSCO to retire the debentures at any time
prior to maturity at the greater of par plus accrued interest or an amount
designed to ensure that the debenture holders are not penalized by the early
redemption. Proceeds from the debentures were used to pay down outstanding
commercial paper.
The Industrial Revenue Bonds have varying structures. Final maturities
range from one to twenty-four years and certain of the bonds provide SYSCO the
right to redeem (or call) the bonds at various dates. These call provisions
generally provide the bondholder a premium in the early call years, declining to
par value as the bonds approach maturity.
Net long-term debt at June 30, 2001 was $961,421,000, of which 80% is at
fixed rates averaging 6.76% with an average life of thirteen years, while the
remainder is financed at floating rates averaging 4.28%. Certain loan agreements
contain typical debt covenants to protect noteholders including provisions to
maintain tangible net worth in excess of a specified level. SYSCO is in
compliance with all debt covenants at June 30, 2001.
The fair value of SYSCO's total long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the company for debt of the same remaining maturities. The fair value
of total long-term debt approximates $990,390,000 at June 30, 2001 and
$986,966,000 at July 1, 2000.
As part of normal business activities, SYSCO issues letters of credit
through major banking institutions as required by certain vendor and insurance
agreements. As of June 30, 2001 and July 1, 2000, letters of credit outstanding
were $42,129,000 and $37,319,000, respectively. As of June 30, 2001 SYSCO has
not entered into any significant derivative or other off-balance-sheet financing
arrangements.
LEASES
Although SYSCO normally purchases assets, it has obligations under capital
and operating leases for certain distribution facilities, vehicles and
computers. Total rental expense under operating leases was $59,833,000,
$44,015,000 and $36,904,000 in fiscal 2001, 2000 and 1999, respectively.
Contingent rentals, subleases and assets and obligations under capital leases
are not significant.
Aggregate minimum lease payments under existing non-capitalized long-term
leases are as follows:
<Table>
<Caption>
FISCAL YEAR AMOUNT
----------- -----------
2002.................................................... $36,875,000
2003.................................................... 29,848,000
2004.................................................... 23,627,000
2005.................................................... 19,125,000
2006.................................................... 17,912,000
Later years............................................. 27,201,000
</Table>
27
30
STOCK COMPENSATION PLANS
Employee Incentive Stock Option Plan
The Employee Incentive Stock Option Plan adopted in fiscal 1982 provided
for the issuance of options to purchase SYSCO common stock to officers and key
personnel of the company and its subsidiaries at the market price at date of
grant, as adjusted for stock splits. No further grants will be made under this
plan which expired in November 1991 and was replaced by the 1991 Stock Option
Plan.
The following summary presents information with regard to options under
this plan:
<Table>
<Caption>
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
--------------------------- -------------------------
MAXIMUM WEIGHTED SHARES WEIGHTED
SHARES AVERAGE PRICE UNDER AVERAGE PRICE
EXERCISABLE PER SHARE OPTION PER SHARE
----------- ------------- --------- -------------
Balance at June 27, 1998.............. 1,038,534 $4.86 1,038,534 $4.86
Exercised........................... (323,478) 4.61
---------
Balance at July 3, 1999............... 715,056 4.97 715,056 4.97
Exercised........................... (321,478) 4.89
---------
Balance at July 1, 2000............... 393,578 5.04 393,578 5.04
Cancelled........................... (4,000) 5.56
Exercised........................... (281,200) 4.83
---------
Balance at June 30, 2001.............. 108,378 $5.56 108,378 $5.56
=========
</Table>
The options outstanding at June 30, 2001 under this plan have an exercise
price of $5.56 and expired on September 5, 2001.
1991 Stock Option Plan
The 1991 Stock Option Plan (1991 plan) was adopted in fiscal 1992 and
originally reserved 12,000,000 shares of SYSCO common stock for options to
directors, officers and key personnel of the company and its subsidiaries at the
market price at date of grant. This plan provided for the issuance of options
which are qualified as incentive stock options under the Internal Revenue Code
of 1986, options which are not so qualified and stock appreciation rights.
During fiscal 1996, the shareholders approved an amendment to the 1991 plan for
an additional 32,000,000 shares to be made available for future grants of
options. To date, the company has issued stock options but no stock appreciation
rights under this plan.
The following summary presents information with regard to options under the
1991 plan:
<Table>
<Caption>
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
--------------------------- --------------------------
MAXIMUM WEIGHTED SHARES WEIGHTED
SHARES AVERAGE PRICE UNDER AVERAGE PRICE
EXERCISABLE PER SHARE OPTION PER SHARE
----------- ------------- ---------- -------------
Balance at June 27, 1998............ 9,773,056 $6.99 17,019,584 $ 7.56
Granted........................... 3,101,210 10.94
Cancelled......................... (615,758) 7.95
Exercised......................... (1,965,538) 7.06
----------
Balance at July 3, 1999............. 10,683,008 7.33 17,539,498 8.20
Granted........................... 4,950,784 16.33
Cancelled......................... (946,688) 8.78
Exercised......................... (2,312,126) 7.36
----------
Balance at July 1, 2000............. 11,323,692 7.90 19,231,468 10.36
Granted........................... 5,674,910 20.98
Cancelled......................... (459,626) 16.74
Exercised......................... (3,651,651) 8.57
----------
Balance at June 30, 2001............ 11,417,314 $9.23 20,795,101 $13.43
==========
</Table>
28
31
No further grants will be made under this plan which expired in November
2000 and was replaced by the 2000 Stock Incentive Plan. The following table
summarizes information about options outstanding as of June 30, 2001:
<Table>
<Caption>
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
----------------------------- -----------------------------------------------------
WEIGHTED WEIGHTED AVERAGE WEIGHTED
AVERAGE EXERCISE REMAINING CONTRACTUAL AVERAGE EXERCISE
RANGE OF EXERCISE PRICE SHARES PRICE SHARES LIFE (YRS) PRICE
----------------------- ---------- ---------------- ---------- --------------------- ----------------
$6.31 to $8.75............. 8,444,382 $ 7.76 8,500,282 4.59 $ 7.71
$10.94 to $26.16........... 2,972,932 13.39 12,294,819 8.25 17.38
---------- ----------
Balance at June 30, 2001... 11,417,314 $ 9.23 20,795,101 6.80 $13.43
========== ==========
</Table>
2000 Stock Incentive Plan
The 2000 Stock Incentive Plan (2000 plan)was adopted in fiscal 2001 and
provides for option grants and other stock based awards to directors, officers
and other employees of the company and its subsidiaries at the market price at
date of grant. The 2000 plan reserves 40,000,000 shares of SYSCO common stock,
plus any shares of common stock which were available for grants under the 1991
plan but which were not utilized prior to its expiration and any shares issued
under the 1991 plan that are forfeited, expire or are canceled (approximately
12,417,000 shares at June 30, 2001) and to the extent authorized by the Board of
Directors, up to 10,000,000 shares of common stock which are reacquired by the
company in the open market or private transactions after November 3, 2000. This
plan provides for the issuance of options which are qualified as incentive stock
options under the Internal Revenue Code of 1986, options which are not so
qualified, stock appreciation rights and other stock based awards. To date, the
company has issued stock options but no stock appreciation rights under the
plan.
The following summary presents information with regard to options under the
2000 plan:
<Table>
<Caption>
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
--------------------------- -----------------------
MAXIMUM WEIGHTED SHARES WEIGHTED
SHARES AVERAGE PRICE UNDER AVERAGE PRICE
EXERCISABLE PER SHARE OPTION PER SHARE
----------- ------------- ------- -------------
Granted................................. -- $26.16 150,000 $26.16
-------
Balance at June 30, 2001................ -- $26.16 150,000 $26.16
=======
</Table>
The options outstanding at June 30, 2001 under this plan have an exercise
price of $26.16 and have a weighted average remaining contractual life of nine
years.
1993 and 1996 Guest Supply Stock Incentive Plans
Prior to March 2001, Guest Supply, Inc. maintained the 1993 Stock Option
Plan and the 1996 Long Term Incentive Plan (Guest Supply plans). In connection
with SYSCO's acquisition of Guest Supply in March 2001, all outstanding options
exercisable to purchase Guest Supply common stock were converted into options to
purchase shares of SYSCO common stock. The number of shares underlying such
options, as well as the exercise price, were adjusted pursuant to the terms of
the Merger Agreement and Plan of Reorganization dated January 22, 2001. These
options are fully vested and expire in ten years from the original grant date.
No new options will be issued under any of the Guest Supply plans.
29
32
The following summary presents information with regard to options under the
Guest Supply plans:
<Table>
<Caption>
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
--------------------------- -----------------------
MAXIMUM WEIGHTED SHARES WEIGHTED
SHARES AVERAGE PRICE UNDER AVERAGE PRICE
EXERCISABLE PER SHARE OPTION PER SHARE
----------- ------------- ------- -------------
Granted................................. 571,920 $11.04 571,920 $11.04
Exercised............................... (9,564) 13.50
-------
Balance at June 30, 2001................ 562,356 $11.00 562,356 $11.00
=======
</Table>
The following table summarizes information about options outstanding as of
June 30, 2001:
<Table>
<Caption>
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
-------------------------- --------------------------------------------------
WEIGHTED WEIGHTED AVERAGE WEIGHTED
AVERAGE EXERCISE REMAINING CONTRACTUAL AVERAGE EXERCISE
RANGE OF EXERCISE PRICE SHARES PRICE SHARES LIFE (YRS) PRICE
----------------------- ------- ---------------- ------- --------------------- ----------------
$4.88 to $12.03........... 409,336 $ 8.87 409,336 1.6 $ 8.87
$14.84 to $18.43.......... 153,020 16.70 153,020 6.3 16.70
------- -------
Balance at June 30,
2001.................... 562,356 $11.00 562,356 4.1 $11.00
======= =======
</Table>
Non-Employee Directors Stock Option Plan
The Non-Employee Directors Stock Option Plan adopted in fiscal 1996
permitted the issuance of up to 800,000 shares of common stock to directors who
were not employees of SYSCO. As of June 30, 2001, options for 272,000 shares,
net of cancellations, had been granted to nine non-employee directors under this
plan, 72,000 shares had been exercised and 200,000 shares were available for
exercise. No further grants will be made under this plan, which was replaced by
the Non-Employee Directors Stock Plan.
Non-Employee Directors Stock Plan
The Non-Employee Directors Stock Plan adopted in fiscal 1999 permits the
issuance of up to 800,000 shares of common stock to directors who are not
employees of SYSCO. Under this plan non-employee directors will receive a one
time retainer stock award of 4,000 shares when first elected as a non-employee
director and an annual automatic grant of options to purchase 8,000 shares of
common stock provided certain earnings goals are met. As of June 30, 2001,
options for 232,000 shares had been granted to ten non-employee directors under
this plan, 13,330 shares had been exercised and 66,650 shares were available for
exercise.
Employees' Stock Purchase Plan
SYSCO has an Employees' Stock Purchase Plan which permits employees (other
than directors) to invest by means of periodic payroll deductions in SYSCO
common stock at 85% of the closing price on the last business day of each
calendar quarter. During fiscal 2001, 1,619,001 shares of SYSCO common stock
were purchased by the participants as compared to 1,820,752 purchased in fiscal
2000 and 1,891,422 purchased in fiscal 1999. The total number of shares which
may be sold pursuant to the plan may not exceed 68,000,000 shares, of which
13,308,651 remained available at June 30, 2001.
Accounting Issues Relating to all Plans
SYSCO accounts for these plans under APB Opinion No. 25 and related
interpretations under which no compensation cost has been recognized. Had
compensation cost for these plans been determined using the fair value method of
SFAS No. 123, SYSCO's pro forma net earnings and diluted earnings per share
would have been $585,503,000 and $0.86 in fiscal 2001, $437,773,000 and $0.65 in
fiscal 2000 and $357,148,000 and $0.53 in fiscal 1999. The disclosure
requirements of SFAS No. 123 are applicable to options granted after 1995. The
pro forma effects for fiscal 2001, 2000 and 1999 are not necessarily indicative
of the pro forma effects in future years.
30
33
The weighted average fair value of options granted was $7.98 and $6.14
during fiscal 2001 and 2000, respectively. The fair value was estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in fiscal 2001 and 2000,
respectively; dividend yield of 1.33% and 1.20%; expected volatility of 24% and
23%; risk-free interest rates of 6.3% and 6.1%; and expected lives of 8 years.
The weighted average fair value of employee stock purchase rights issued
was $3.98 and $2.62 during fiscal 2001 and 2000, 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.
EMPLOYEE BENEFIT PLANS
SYSCO has defined benefit and defined contribution retirement plans for its
employees. Also, the company contributes to various multi-employer plans under
collective bargaining agreements.
The defined contribution 401(k) plan provides that under certain
circumstances the company may make matching contributions of up to 50% of the
first 6% of a participant's compensation. SYSCO's contribution to this plan was
$9,561,000 in 2001, $15,899,000 in 2000 and $5,813,000 in 1999. The defined
benefit pension plans pay benefits to employees at retirement using formulas
based on a participant's years of service and compensation.
SYSCO also has a Management Incentive Plan that compensates key management
personnel for specific performance achievements. The awards under this plan were
$52,540,000 in 2001, $40,977,000 in 2000 and $27,197,000 in 1999 and were paid
in both cash and stock. In addition to receiving benefits upon retirement under
the company's defined benefit plan, participants in the Management Incentive
Plan will receive benefits under a Supplemental Executive Retirement Plan
(SERP). This plan is a nonqualified, unfunded supplementary retirement plan. In
order to meet its obligations under the SERP, SYSCO maintains life insurance
policies on the lives of the participants with carrying values of $79,083,000 at
June 30, 2001 and $76,480,000 at July 1, 2000. SYSCO is the sole owner and
beneficiary of such policies, which are excluded from assets in the table below.
In addition to providing pension benefits, SYSCO provides certain health
care benefits to eligible retirees and their dependents in the United States.
31
34
The funded status of the employee benefit plans is as follows:
<Table>
<Caption>
PENSION BENEFITS OTHER POSTRETIREMENT PLANS
---------------------------- ----------------------------
JUNE 30, 2001 JULY 1, 2000 JUNE 30, 2001 JULY 1, 2000
------------- ------------ ------------- ------------
Change in benefit obligation:
Benefit obligation at beginning of
year................................ $ 433,323,000 $393,119,000 $ 3,615,000 $ 2,072,000
Service cost.......................... 36,365,000 35,451,000 218,000 145,000
Interest cost......................... 34,194,000 29,109,000 283,000 150,000
Amendments............................ 5,320,000 13,568,000 -- 1,486,000
Actuarial loss (gain)................. 83,231,000 (22,883,000) 342,000 (152,000)
Actual expenses....................... (3,201,000) (3,041,000) -- --
Settlements........................... -- (2,830,000) -- --
Total disbursements................... (12,472,000) (9,170,000) (67,000) (86,000)
------------- ------------ ----------- -----------
Benefit obligation at end of year..... 576,760,000 433,323,000 4,391,000 3,615,000
------------- ------------ ----------- -----------
Change in plan assets:
Fair value of plan assets at beginning
of year............................. 391,631,000 330,441,000 -- --
Actual return on plan assets.......... (2,327,000) 32,838,000 -- --
Employer contribution................. 42,743,000 40,563,000 67,000 86,000
Actual expenses....................... (3,201,000) (3,041,000) -- --
Total disbursements................... (12,472,000) (9,170,000) (67,000) (86,000)
------------- ------------ ----------- -----------
Fair value of plan assets at end of
year................................ 416,374,000 391,631,000 -- --
------------- ------------ ----------- -----------
Funded status......................... (160,386,000) (41,692,000) (4,391,000) (3,615,000)
Unrecognized net actuarial loss
(gain).............................. 113,348,000 (12,042,000) (2,830,000) (3,346,000)
Unrecognized net (asset) obligation
due to initial application of SFAS
No. 87.............................. (1,120,000) (1,967,000) 1,840,000 1,994,000
Unrecognized prior service cost....... 17,422,000 12,581,000 1,801,000 2,003,000
------------- ------------ ----------- -----------
Accrued benefit cost.................. $ (30,736,000) $(43,120,000) $(3,580,000) $(2,964,000)
============= ============ =========== ===========
</Table>
The assumptions used to value obligations at year end were:
<Table>
<Caption>
PENSION BENEFITS OTHER POSTRETIREMENT PLANS
---------------------------- ----------------------------
JUNE 30, 2001 JULY 1, 2000 JUNE 30, 2001 JULY 1, 2000
------------- ------------ ------------- ------------
Weighted-average assumptions as of year end:
Discount rate................................ 7.50% 8.00% 7.50% 8.00%
Expected rate of return...................... 10.50% 10.50% -- --
Rate of compensation increase................ 4.50% 4.50% -- --
</Table>
A health care cost trend rate is not used in the calculations because SYSCO
subsidizes the cost of postretirement medical coverage by a fixed dollar amount
with the retiree responsible for the cost of coverage in excess of the subsidy,
including all future cost increases.
32
35
The components of net pension and other postretirement benefit costs are as
follows:
<Table>
<Caption>
PENSION BENEFITS OTHER POSTRETIREMENT PLANS
---------------------------- ----------------------------
JUNE 30, 2001 JULY 1, 2000 JUNE 30, 2001 JULY 1, 2000
------------- ------------ ------------- ------------
Components of net periodic benefit cost:
Service cost............................. $ 36,365,000 $ 35,451,000 $ 218,000 $ 145,000
Interest cost............................ 34,194,000 29,109,000 283,000 150,000
Expected return on plan assets........... (40,504,000) (34,168,000) -- --
Amortization of prior service cost....... 479,000 (625,000) 202,000 72,000
Recognized net actuarial loss (gain)..... 672,000 628,000 (173,000) (194,000)
Amortization of net transition
obligation............................. (847,000) (847,000) 153,000 153,000
------------ ------------ --------- ---------
Net pension costs........................ $ 30,359,000 $ 29,548,000 $ 683,000 $ 326,000
============ ============ ========= =========
</Table>
Multi-employer pension costs were $26,246,000 and $23,540,000 in 2001 and
2000, respectively.
The projected benefit obligation and accumulated benefit obligation were
$465,348,000 and $401,192,000, respectively, as of June 30, 2001 and
$365,934,000 and $319,067,000, respectively, as of July 1, 2000. The projected
benefit obligation and accumulated benefit obligation for the SERP were
$111,411,000 and $70,648,000, respectively, as of June 30, 2001 and $67,389,000
and $50,232,000, respectively as of July 1, 2000.
CONTINGENCIES
SYSCO is engaged in various legal proceedings which have arisen but have
not been fully adjudicated. These proceedings, in the opinion of management,
will not have a material adverse effect upon the consolidated financial position
or results of operations of the company when ultimately concluded.
BUSINESS SEGMENT INFORMATION
SYSCO, through its 124 operating companies, provides food and other
products to the foodservice or "food-prepared-away-from-home" industry. Each of
SYSCO's operating companies generally represents a separate operating segment.
Under the provisions of SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", the company has aggregated its operating
companies into five segments based upon the economic characteristics of each
operating company, 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 SYSCO's
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 SYSCO's three other segments, including the company's specialty
produce, lodging industry and meat segments. SYSCO's Canadian operations are
insignificant for geographical disclosure purposes.
33
36
The accounting policies for the segments are the same as those disclosed by
SYSCO. Intersegment sales represent specialty produce and meat company products
distributed by the Broadline and SYGMA operating companies. The segment results
include allocation of centrally incurred costs for shared services that
eliminate upon consolidation. Centrally incurred costs are allocated based upon
the relative level of service used by each operating company.
<Table>
<Caption>
YEAR ENDED
-------------------------------------------
JUNE 30, 2001 JULY 1, 2000 JULY 3, 1999
------------- ------------ ------------
(IN THOUSANDS)
Sales:
Broadline................................... $18,106,842 $16,643,578 $15,420,858
SYGMA....................................... 2,415,840 2,154,043 2,001,957
Other....................................... 1,377,987 534,750 --
Intersegment sales.......................... (116,172) (29,103) --
----------- ----------- -----------
Total............................... $21,784,497 $19,303,268 $17,422,815
=========== =========== ===========
Earnings before income taxes:
Broadline................................... $ 1,006,213 $ 800,932 $ 666,085
SYGMA....................................... 16,319 5,208 12,513
Other....................................... 42,288 21,283 --
----------- ----------- -----------
Total segments.............................. 1,064,820 827,423 678,598
Unallocated corporate expenses.............. (98,165) (89,815) (84,711)
----------- ----------- -----------
Total............................... $ 966,655 $ 737,608 $ 593,887
=========== =========== ===========
Depreciation and amortization:
Broadline................................... $ 189,058 $ 180,256 $ 172,312
SYGMA....................................... 14,492 13,987 14,730
Other....................................... 13,150 2,577 --
----------- ----------- -----------
Total segments.............................. 216,700 196,820 187,042
Corporate................................... 31,540 23,841 17,963
----------- ----------- -----------
Total............................... $ 248,240 $ 220,661 $ 205,005
=========== =========== ===========
Capital expenditures:
Broadline................................... $ 288,934 $ 227,834 $ 255,125
SYGMA....................................... 16,996 21,061 41,600
Other....................................... 14,327 7,583 --
----------- ----------- -----------
Total segments.............................. 320,257 256,478 296,725
Corporate................................... 20,881 9,935 (10,038)
----------- ----------- -----------
Total............................... $ 341,138 $ 266,413 $ 286,687
=========== =========== ===========
Assets:
Broadline................................... $ 3,531,851 $ 3,302,796 $ 3,149,670
SYGMA....................................... 352,062 180,811 150,516
Other....................................... 425,376 238,761 --
----------- ----------- -----------
Total segments.............................. 4,309,289 3,722,368 3,300,186
Corporate................................... 1,159,232 1,091,587 796,396
----------- ----------- -----------
Total............................... $ 5,468,521 $ 4,813,955 $ 4,096,582
=========== =========== ===========
</Table>
34
37
The sales mix for the principal product categories during the three years
ended June 30, 2001 is as follows:
<Table>
<Caption>
YEAR ENDED
-------------------------------------------
JUNE 30, 2001 JULY 1, 2000 JULY 3, 1999
------------- ------------ ------------
(IN THOUSANDS)
Medical supplies.............................. $ 150,241 $ 161,146 $ 135,978
Dairy products................................ 1,905,596 1,734,472 1,736,234
Fresh and frozen meats........................ 3,848,523 3,311,323 2,638,032
Seafood....................................... 1,330,880 1,216,421 1,041,400
Poultry....................................... 2,156,847 1,968,632 1,825,018
Frozen fruits, vegetables, bakery and other... 2,925,615 2,686,012 2,503,206
Canned and dry products....................... 4,212,677 3,998,358 3,842,238
Paper and disposables......................... 1,708,697 1,473,905 1,304,563
Janitorial products........................... 405,662 325,513 300,682
Equipment and smallwares...................... 534,217 469,419 461,596
Fresh produce................................. 1,939,222 1,341,613 1,066,432
Beverage products............................. 666,320 616,454 567,436
----------- ----------- -----------
Total............................... $21,784,497 $19,303,268 $17,422,815
=========== =========== ===========
</Table>
35
38
QUARTERLY RESULTS (UNAUDITED)
Financial information for each quarter in the years ended June 30, 2001 and
July 1, 2000:
<Table>
<Caption>
QUARTER ENDED
----------------------------------------------------
SEPTEMBER 30 DECEMBER 30 MARCH 31 JUNE 30 FISCAL YEAR
------------ ----------- ---------- ---------- -----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
2001
Sales.............................. $5,360,174 $5,290,530 $5,344,496 $5,789,297 $21,784,497
Cost of sales...................... 4,322,784 4,250,987 4,301,029 4,638,338 17,513,138
Operating expenses................. 787,497 795,674 800,156 849,500 3,232,827
Interest expense................... 17,401 18,034 18,498 17,843 71,776
Other, net......................... (633) 46 (879) 1,567 101
---------- ---------- ---------- ---------- -----------
Earnings before income taxes....... 233,125 225,789 225,692 282,049 966,655
Income taxes....................... 89,170 86,365 86,327 107,884 369,746
---------- ---------- ---------- ---------- -----------
Net earnings....................... $ 143,955 $ 139,424 $ 139,365 $ 174,165 $ 596,909
========== ========== ========== ========== ===========
Per share:
Diluted net earnings............. $ 0.21 $ 0.21 $ 0.21 $ 0.26 $ 0.88
Cash dividends................... 0.06 0.06 0.07 0.07 0.26
Market price -- high/low......... 24-19 30-22 30-20 30-22 30-19
</Table>
<Table>
<Caption>
QUARTER ENDED
-------------------------------------------------
OCTOBER 2 JANUARY 1 APRIL 1 JULY 1 FISCAL YEAR
---------- ---------- ---------- ---------- -----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
2000
Sales............................... $4,657,034 $4,651,535 $4,722,935 $5,271,764 $19,303,268
Cost of sales....................... 3,793,200 3,771,998 3,829,148 4,255,205 15,649,551
Operating expenses.................. 674,244 695,418 709,499 764,594 2,843,755
Interest expense.................... 17,944 16,680 18,354 17,854 70,832
Other, net.......................... (189) 1,754 88 (131) 1,522
---------- ---------- ---------- ---------- -----------
Earnings before income taxes........ 171,835 165,685 165,846 234,242 737,608
Income taxes........................ 66,156 63,789 63,851 90,183 283,979
---------- ---------- ---------- ---------- -----------
Earnings before accounting change... 105,679 101,896 101,995 144,059 453,629
Accounting change................... (8,041) -- -- -- (8,041)
---------- ---------- ---------- ---------- -----------
Net earnings........................ $ 97,638 $ 101,896 $ 101,995 $ 144,059 $ 445,588
========== ========== ========== ========== ===========
Per share:
Diluted net earnings before
accounting change.............. $ 0.16 $ 0.15 $ 0.15 $ 0.21 $ 0.68
Diluted earnings accounting change
effect......................... (0.01) -- -- -- (0.01)
Diluted net earnings.............. 0.15 0.15 0.15 0.21 0.67
Cash dividends.................... 0.05 0.05 0.06 0.06 0.22
Market price -- high/low.......... 18-15 21-16 21-13 22-17 22-13
PERCENTAGE INCREASES -- 2001 VS.
2000:
Sales............................... 15% 14% 13% 10% 13%
Earnings before income taxes........ 36 36 36 20 31
Earnings before accounting change... 36 37 37 21 32
Net earnings........................ 47 37 37 21 34
Diluted earnings per share before
accounting change................. 31 40 40 24 29
Diluted net earnings per share...... 40 40 40 24 31
</Table>
36
39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Except as otherwise indicated, the information required by Items 10, 11, 12
and 13 is included in the company's definitive proxy statement which was filed
pursuant to Regulation 14A under the Securities Exchange Act of 1934 on
September 24, 2001 and such portions of said proxy statement are hereby
incorporated by reference thereto.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Executive Officers is included in Part I (Item 4A)
of this Form 10-K (page 7).
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed, or incorporated by reference, as
part of this Form 10-K:
1. All financial statements. See index to Consolidated Financial
Statements on page 15 of this Form 10-K.
2. Financial Statement Schedule. See page 15 of this Form 10-K.
3. Exhibits.
<Table>
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 of Sysco Corporation as amended May 12, 1999,
incorporated by reference to Exhibit 3(b) to Form 10-K
for the year ended July 3, 1999 (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).
4(a) -- Sixth Amendment and Restatement of Competitive Advance
and Revolving Credit Facility Agreement dated May 31,
1996, incorporated by reference to Exhibit 4(a) to Form
10-K in the year ended June 27, 1996 (File No. 1-6544).
4(b) -- Agreement and Seventh Amendment to Competitive Advance
and Revolving Credit Facility Agreement dated as of June
27, 1997, incorporated by reference to Exhibit 4(a) to
Form 10-K for the year ended June 28, 1997 (File No.
1-6544).
4(c) -- Agreement and Eighth Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of June 22,
1998, incorporated by reference to Exhibit 4(c) to Form
10-K for the year ended July 3, 1999 (File No. 1-6544).
</Table>
37
40
<Table>
4(d) -- Senior Debt Indenture, dated as of June 15, 1995, between
Sysco Corporation and First Union National Bank of North
Carolina, Trustee, incorporated by reference to Exhibit
4(a) to Registration Statement on Form S-3 filed June 6,
1995 (File No. 33-60023).
4(e) -- First Supplemental Indenture, dated June 27, 1995,
between Sysco Corporation and First Union National Bank
of North Carolina, Trustee as amended, incorporated by
reference to Exhibit 4(e) to Form 10-K for the year ended
June 29, 1996 (File No. 1-6544).
4(f) -- Second Supplemental Indenture, dated as of May 1, 1996,
between Sysco Corporation and First Union National Bank
of North Carolina, Trustee as amended, incorporated by
reference to Exhibit 4(f) to Form 10-K for the year ended
June 29, 1996 (File No. 1-6544).
4(g) -- Third Supplemental Indenture, dated as of April 25, 1997,
between Sysco Corporation and First Union National Bank
of North Carolina, Trustee, incorporated by reference to
Exhibit 4(g) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
4(h) -- Fourth Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union National
Bank of North Carolina, Trustee, incorporated by
reference to Exhibit 4(h) to Form 10-K for the year ended
June 28,1997 (File No. 1-6544).
4(i) -- Fifth Supplemental Indenture, dated as of July 27, 1998
between Sysco Corporation and First Union National Bank,
Trustee, incorporated by reference to Exhibit 4(h) to
Form 10-K for the year ended June 27, 1998 (File No.
1-6544).
4(j) -- Agreement and Ninth Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of December
1, 1999, incorporated by reference to Exhibit 4(j) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(a)+ -- Amended and Restated Sysco Corporation Executive Deferred
Compensation Plan, incorporated by reference to Exhibit
10(a) to Form 10-K for the year ended July 1, 1995 (File
No. 1-6544).
10(b)+ -- Fifth Amended and Restated Sysco Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(b) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(c)+ -- Sysco Corporation Employee Incentive Stock Option Plan,
incorporated by reference to Exhibit 10(c) to Form 10-K
for the year ended July 3, 1999 (File No. 1-6544).
10(d)+ -- Sysco Corporation 1995 Management Incentive Plan,
incorporated by reference to Exhibit 10(e) to Form 10-K
for the year ended July 1, 1995 (File No. 1-6544).
10(e)+ -- Sysco Corporation 1991 Stock Option Plan, incorporated by
reference to Exhibit 10(e) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
10(f)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective September 4, 1997, incorporated by
reference to Exhibit 10(f) to Form 10-K for the year
ended June 28, 1997 (File No. 1-6544).
10(g)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective November 5, 1998, incorporated by
reference to Exhibit 10(g) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
</Table>
38
41
<Table>
10(h)+ -- Sysco Corporation Amended and Restated Non-Employee
Directors Stock Option Plan, incorporated by reference to
Exhibit 10(g) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(i)+ -- Amendment to the Amended and Restated Non-Employee
Directors Stock Option Plan dated effective November 5,
1998, incorporated by reference to Exhibit 10(i) to Form
10-K for the year ended July 3, 1999 (File No. 1-6544).
10(j)+ -- Sysco Corporation Non-Employee Directors Stock Plan,
incorporated by reference to Appendix A of the 1998 Proxy
Statement (File No. 1-6544).
10(k) -- Amended and Restated Shareholder Rights Agreement,
incorporated by reference to Registration Statement on
Form 8-A/A, filed May 29, 1996 (File No. 1-6544).
10(l) -- Amendment to the Amended and Restated Shareholder Rights
Agreement dated as of May 20, 1996, incorporated by
reference to Exhibit 1 to Registration Statement on Form
8-A/A, filed July 16, 1999 (File No. 1-6544).
10(m)+ -- Sysco Corporation Split Dollar Life Insurance Plan,
incorporated by reference to Exhibit 10(m) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(n)+ -- Executive Compensation Adjustment Agreement -- Bill M.
Lindig, incorporated by reference to Exhibit 10(n) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(o)+ -- Executive Compensation Adjustment Agreement -- Charles H.
Cotros, incorporated by reference to Exhibit 10(o) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(p)+ -- First Amendment to Fifth Amended and Restated Sysco
Corporation Supplemental Executive Retirement Plan dated
effective June 29, 1997, incorporated by reference to
Exhibit 10(p) to Form 10-Q for the quarter ended January
1, 2000 (File No. 1-6544).
10(q)+ -- First Amendment to Amended and Restated Sysco Corporation
Executive Deferred Compensation Plan dated effective June
29, 1997, incorporated by reference to Exhibit 10(q) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(r)+ -- First Amendment to Sysco Corporation 1995 Management
Incentive Plan dated effective June 29, 1997,
incorporated by reference to Exhibit 10(r) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(s)+ -- 2000 Management Incentive Plan, incorporated by reference
to Appendix A to Proxy Statement filed September 25, 2000
(File No. 1-6544).
10(t)+ -- 2000 Stock Incentive Plan, incorporated by reference to
Appendix B to Proxy Statement filed on September 25, 2000
(File No. 1-6544).
10(u)+ -- Amended and Restated Non-Employee Directors Stock Plan,
incorporated by reference to Appendix B to Proxy
Statement filed on September 24, 2001 (File No. 1-6544).
10(v)+ -- Second Amendment dated as of May 10, 2000, to the Fifth
Amended and Restated SYSCO Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(a) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000 (File No.
1-6544).
10(w)+ -- Second Amendment dated as of May 10, 2000, to Amended and
Restated SYSCO Corporation Executive Deferred
Compensation Plan, incorporated by reference to Exhibit
10(b) to Form 10-Q for the quarter ended September 30,
2000 filed on November 13, 2000 (File No. 1-6544).
</Table>
39
42
<Table>
10(x)+ -- First Amendment dated as of May 10, 2000 to Amended and
Restated SYSCO Corporation Board of Directors Deferred
Compensation Plan, incorporated by reference to Exhibit
10(c) to Form 10-Q for the quarter ended September 30,
2000 filed on November 13, 2000 (File No. 1-6544).
10(y)+ -- First Amendment, dated September 1, 2000, to the
Executive Compensation Adjustment Agreement between Sysco
and Charles H. Cotros, incorporated by reference to
Exhibit 10(d) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000 (File No.
1-6544).
21# -- Subsidiaries of the Registrant.
23# -- Independent Public Accountants' Consent.
</Table>
---------------
+ Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of
Regulation S-K
# Filed Herewith
(b) The following reports on Form 8-K were filed during the fourth quarter
of fiscal 2001:
1. On April 12, 2001, the company filed a Form 8-K announcing the
expected results of its third quarter ended March 31, 2001.
2. On April 19, 2001, the company filed a Form 8-K announcing the
results of its third quarter ended March 31, 2001.
40
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Sysco Corporation has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, on this 27th
day of September, 2001.
SYSCO CORPORATION
By /s/ CHARLES H. COTROS
-----------------------------------
Charles H. Cotros
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated and on the date indicated above.
PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS:
<Table>
/s/ CHARLES H. COTROS Chairman of the Board and Chief Executive
----------------------------------------------------- Officer
Charles H. Cotros
/s/ JOHN K. STUBBLEFIELD, JR. Executive Vice President, Finance and
----------------------------------------------------- Administration
John K. Stubblefield, Jr.
</Table>
DIRECTORS:
<Table>
/s/ JOHN W. ANDERSON /s/ RICHARD G. MERRILL
----------------------------------------------------- -----------------------------------------------------
John W. Anderson Richard G. Merrill
/s/ COLIN G. CAMPBELL /s/ FRANK H. RICHARDSON
----------------------------------------------------- -----------------------------------------------------
Colin G. Campbell Frank H. Richardson
/s/ CHARLES H. COTROS /s/ RICHARD J. SCHNIEDERS
----------------------------------------------------- -----------------------------------------------------
Charles H. Cotros Richard J. Schnieders
/s/ JUDITH B. CRAVEN /s/ PHYLLIS S. SEWELL
----------------------------------------------------- -----------------------------------------------------
Judith B. Craven Phyllis S. Sewell
/s/ FRANK A. GODCHAUX III /s/ JACKIE M. WARD
----------------------------------------------------- -----------------------------------------------------
Frank A. Godchaux III Jackie M. Ward
/s/ JONATHAN GOLDEN /s/ JOHN F. WOODHOUSE
----------------------------------------------------- -----------------------------------------------------
Jonathan Golden John F. Woodhouse
/s/ THOMAS E. LANKFORD
-----------------------------------------------------
Thomas E. Lankford
</Table>
41
44
SYSCO CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<Table>
<Caption>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE(1) DESCRIBE(2) PERIOD
------------ ----------- ----------- -------------- ----------- -----------
For year ended
July 3, 1999.......... Allowance $20,081,000 $26,208,000 -- $25,194,000 $21,095,000
for doubtful
accounts
For year ended
July 1, 2000.......... Allowance $21,095,000 $27,082,000 $4,332,000 $24,881,000 $27,628,000
for doubtful
accounts
For year ended
June 30, 2001......... Allowance $27,628,000 $21,740,000 $1,661,000 $23,045,000 $27,984,000
for doubtful
accounts
</Table>
---------------
(1) Allowance accounts resulting from acquisitions.
(2) Customer accounts written off, net of recoveries.
S-1
45
INDEX TO EXHIBITS
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
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 of Sysco Corporation as amended May 12, 1999,
incorporated by reference to Exhibit 3(b) to Form 10-K
for the year ended July 3, 1999 (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).
4(a) -- Sixth Amendment and Restatement of Competitive Advance
and Revolving Credit Facility Agreement dated May 31,
1996, incorporated by reference to Exhibit 4(a) to Form
10-K in the year ended June 27, 1996 (File No. 1-6544).
4(b) -- Agreement and Seventh Amendment to Competitive Advance
and Revolving Credit Facility Agreement dated as of June
27, 1997, incorporated by reference to Exhibit 4(a) to
Form 10-K for the year ended June 28, 1997 (File No.
1-6544).
4(c) -- Agreement and Eighth Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of June 22,
1998, incorporated by reference to Exhibit 4(c) to Form
10-K for the year ended July 3, 1999 (File No. 1-6544).
4(d) -- Senior Debt Indenture, dated as of June 15, 1995, between
Sysco Corporation and First Union National Bank of North
Carolina, Trustee, incorporated by reference to Exhibit
4(a) to Registration Statement on Form S-3 filed June 6,
1995 (File No. 33-60023).
4(e) -- First Supplemental Indenture, dated June 27, 1995,
between Sysco Corporation and First Union National Bank
of North Carolina, Trustee as amended, incorporated by
reference to Exhibit 4(e) to Form 10-K for the year ended
June 29, 1996 (File No. 1-6544).
4(f) -- Second Supplemental Indenture, dated as of May 1, 1996,
between Sysco Corporation and First Union National Bank
of North Carolina, Trustee as amended, incorporated by
reference to Exhibit 4(f) to Form 10-K for the year ended
June 29, 1996 (File No. 1-6544).
4(g) -- Third Supplemental Indenture, dated as of April 25, 1997,
between Sysco Corporation and First Union National Bank
of North Carolina, Trustee, incorporated by reference to
Exhibit 4(g) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
4(h) -- Fourth Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union National
Bank of North Carolina, Trustee, incorporated by
reference to Exhibit 4(h) to Form 10-K for the year ended
June 28,1997 (File No. 1-6544).
4(i) -- Fifth Supplemental Indenture, dated as of July 27, 1998
between Sysco Corporation and First Union National Bank,
Trustee, incorporated by reference to Exhibit 4(h) to
Form 10-K for the year ended June 27, 1998 (File No.
1-6544).
</Table>
46
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
4(j) -- Agreement and Ninth Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of December
1, 1999, incorporated by reference to Exhibit 4(j) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(a)+ -- Amended and Restated Sysco Corporation Executive Deferred
Compensation Plan, incorporated by reference to Exhibit
10(a) to Form 10-K for the year ended July 1, 1995 (File
No. 1-6544).
10(b)+ -- Fifth Amended and Restated Sysco Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(b) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(c)+ -- Sysco Corporation Employee Incentive Stock Option Plan,
incorporated by reference to Exhibit 10(c) to Form 10-K
for the year ended July 3, 1999 (File No. 1-6544).
10(d)+ -- Sysco Corporation 1995 Management Incentive Plan,
incorporated by reference to Exhibit 10(e) to Form 10-K
for the year ended July 1, 1995 (File No. 1-6544).
10(e)+ -- Sysco Corporation 1991 Stock Option Plan, incorporated by
reference to Exhibit 10(e) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
10(f)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective September 4, 1997, incorporated by
reference to Exhibit 10(f) to Form 10-K for the year
ended June 28, 1997 (File No. 1-6544).
10(g)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective November 5, 1998, incorporated by
reference to Exhibit 10(g) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
10(h)+ -- Sysco Corporation Amended and Restated Non-Employee
Directors Stock Option Plan, incorporated by reference to
Exhibit 10(g) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(i)+ -- Amendment to the Amended and Restated Non-Employee
Directors Stock Option Plan dated effective November 5,
1998, incorporated by reference to Exhibit 10(i) to Form
10-K for the year ended July 3, 1999 (File No. 1-6544).
10(j)+ -- Sysco Corporation Non-Employee Directors Stock Plan,
incorporated by reference to Appendix A of the 1998 Proxy
Statement (File No. 1-6544).
10(k) -- Amended and Restated Shareholder Rights Agreement,
incorporated by reference to Registration Statement on
Form 8-A/A, filed May 29, 1996 (File No. 1-6544).
10(l) -- Amendment to the Amended and Restated Shareholder Rights
Agreement dated as of May 20, 1996, incorporated by
reference to Exhibit 1 to Registration Statement on Form
8-A/A, filed July 16, 1999 (File No. 1-6544).
10(m)+ -- Sysco Corporation Split Dollar Life Insurance Plan,
incorporated by reference to Exhibit 10(m) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(n)+ -- Executive Compensation Adjustment Agreement -- Bill M.
Lindig, incorporated by reference to Exhibit 10(n) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(o)+ -- Executive Compensation Adjustment Agreement -- Charles H.
Cotros, incorporated by reference to Exhibit 10(o) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
</Table>
47
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10(p)+ -- First Amendment to Fifth Amended and Restated Sysco
Corporation Supplemental Executive Retirement Plan dated
effective June 29, 1997, incorporated by reference to
Exhibit 10(p) to Form 10-Q for the quarter ended January
1, 2000 (File No. 1-6544).
10(q)+ -- First Amendment to Amended and Restated Sysco Corporation
Executive Deferred Compensation Plan dated effective June
29, 1997, incorporated by reference to Exhibit 10(q) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(r)+ -- First Amendment to Sysco Corporation 1995 Management
Incentive Plan dated effective June 29, 1997,
incorporated by reference to Exhibit 10(r) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(s)+ -- 2000 Management Incentive Plan, incorporated by reference
to Appendix A to Proxy Statement filed September 25, 2000
(File No. 1-6544).
10(t)+ -- 2000 Stock Incentive Plan, incorporated by reference to
Appendix B to Proxy Statement filed on September 25, 2000
(File No. 1-6544).
10(u)+ -- Amended and Restated Non-Employee Directors Stock Plan,
incorporated by reference to Appendix B to Proxy
Statement filed on September 24, 2001 (File No. 1-6544).
10(v)+ -- Second Amendment dated as of May 10, 2000, to the Fifth
Amended and Restated SYSCO Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(a) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000 (File No.
1-6544).
10(w)+ -- Second Amendment dated as of May 10, 2000, to Amended and
Restated SYSCO Corporation Executive Deferred
Compensation Plan, incorporated by reference to Exhibit
10(b) to Form 10-Q for the quarter ended September 30,
2000 filed on November 13, 2000 (File No. 1-6544).
10(x)+ -- First Amendment dated as of May 10, 2000 to Amended and
Restated SYSCO Corporation Board of Directors Deferred
Compensation Plan, incorporated by reference to Exhibit
10(c) to Form 10-Q for the quarter ended September 30,
2000 filed on November 13, 2000 (File No. 1-6544).
10(y)+ -- First Amendment, dated September 1, 2000, to the
Executive Compensation Adjustment Agreement between Sysco
and Charles H. Cotros, incorporated by reference to
Exhibit 10(d) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000 (File No.
1-6544).
21# -- Subsidiaries of the Registrant.
23# -- Independent Public Accountants' Consent.
</Table>
---------------
+ Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of
Regulation S-K
# Filed Herewith