UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 1-6544
SYSCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1648137
(State or other jurisdiction of (IRS employer identification
incorporation or organization) number)
1390 Enclave Parkway
Houston, Texas 77077-2099
(Address of principal executive offices)
(Zip code)
Registrant's telephone number, including area code: (281) 584-1390
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
656,798,785 shares of common stock were outstanding as of October 25, 2002.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Item 4. Evaluation of Disclosure Controls and Procedures 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 18
Certifications 19
</Table>
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands Except for Share Data)
<Table>
<Caption>
Sept. 28, 2002 June 29, 2002 Sept. 29, 2001
-------------- ------------- --------------
(unaudited) (unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 163,189 $ 198,439 $ 123,586
Accounts and notes receivable, less
allowances of $40,967, $30,338 and $37,585 1,869,128 1,760,827 1,684,672
Inventories 1,226,885 1,117,869 1,119,856
Deferred taxes 41,699 34,188 8,981
Prepaid expenses 73,030 41,966 65,439
------------ ------------ ------------
Total current assets 3,373,931 3,153,289 3,002,534
Plant and equipment at cost, less depreciation 1,718,941 1,697,782 1,554,193
Goodwill and intangibles, less amortization 922,491 922,222 781,727
Restricted cash 57,000 32,000 --
Other assets 173,094 184,460 183,758
------------ ------------ ------------
Total other assets 1,152,585 1,138,682 965,485
------------ ------------ ------------
Total assets $ 6,245,457 $ 5,989,753 $ 5,522,212
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 50,016 $ 66,360 $ 108,671
Accounts payable 1,420,276 1,349,330 1,292,984
Accrued expenses 709,137 768,317 574,406
Accrued income taxes 38,241 41,596 130,676
Current maturities of long-term debt 13,474 13,754 22,665
------------ ------------ ------------
Total current liabilities 2,231,144 2,239,357 2,129,402
Long-term debt 1,265,938 1,176,307 1,081,305
Deferred taxes 554,690 441,570 177,845
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 shares 765,175 765,175 765,175
Paid-in capital 233,727 217,891 210,148
Retained earnings 2,992,849 2,869,417 2,532,458
Other comprehensive loss (65,435) (65,435) (5,624)
------------ ------------ ------------
3,926,316 3,787,048 3,502,157
Less cost of treasury stock, 113,371,374,
111,634,603 and 103,021,960 shares 1,732,631 1,654,529 1,368,497
------------ ------------ ------------
Total shareholders' equity 2,193,685 2,132,519 2,133,660
------------ ------------ ------------
Total liabilities and shareholders' equity $ 6,245,457 $ 5,989,753 $ 5,522,212
============ ============ ============
</Table>
Note: The June 29, 2002 balance sheet has been derived from the audited
financial statements at that date.
2
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands Except for Share and Per Share Data)
<Table>
<Caption>
13-Week Period Ended
----------------------------------
Sept. 28, 2002 Sept. 29, 2001
-------------- --------------
Sales $ 6,424,422 $ 5,828,678
Costs and expenses
Cost of sales 5,154,704 4,683,617
Operating expenses 960,635 864,456
Interest expense 16,828 15,864
Other, net (3,412) (769)
-------------- --------------
Total costs and expenses 6,128,755 5,563,168
-------------- --------------
Earnings before income taxes 295,667 265,510
Income taxes 113,093 101,558
-------------- --------------
Net earnings $ 182,574 $ 163,952
============== ==============
Net earnings:
Basic earnings per share $ 0.28 $ 0.25
============== ==============
Diluted earnings per share $ 0.28 $ 0.24
============== ==============
Average shares outstanding 654,176,221 666,765,148
============== ==============
Diluted shares outstanding 663,542,498 677,916,766
============== ==============
Dividends paid per common share $ 0.09 $ 0.07
============== ==============
</Table>
3
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
<Table>
<Caption>
13 - Week Period Ended
----------------------------------
Sept. 28, 2002 Sept. 29, 2001
-------------- --------------
Operating activities:
Net earnings $ 182,574 $ 163,952
Add non-cash items:
Depreciation and amortization 65,796 66,615
Deferred tax provision (benefit) 105,609 (12,075)
Provision for losses on accounts receivable 7,546 7,371
Additional investment in certain assets and liabilities,
net of effect of businesses acquired:
(Increase) in receivables (115,847) (37,823)
(Increase) in inventories (109,016) (74,304)
(Increase) in prepaid expenses (31,064) (24,954)
Increase in accounts payable 70,946 19,516
(Decrease) in accrued expenses (59,082) (79,893)
Increase in accrued income taxes 2,342 7,304
Decrease in other assets 7,433 4,985
-------------- --------------
Net cash provided by operating activities 127,237 40,694
-------------- --------------
Investing activities:
Additions to plant and equipment (88,025) (88,301)
Proceeds from sales of plant and equipment 4,782 1,716
Acquisition of businesses, net of cash acquired (48) (11,232)
Increase in restricted cash (25,000) --
-------------- --------------
Net cash used for investing activities (108,291) (97,817)
-------------- --------------
Financing activities:
Bank and commercial paper borrowings 75,509 197,452
Other debt repayments (2,502) (140)
Common stock reissued from treasury 41,936 35,619
Treasury stock purchases (109,899) (140,979)
Dividends paid (59,240) (46,986)
-------------- --------------
Net cash (used for) provided by financing activities (54,196) 44,966
-------------- --------------
Net decrease in cash (35,250) (12,157)
Cash at beginning of period 198,439 135,743
-------------- --------------
Cash at end of period $ 163,189 $ 123,586
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,938 $ 10,170
Income taxes 8,268 108,910
</Table>
4
SYSCO CORPORATION and its Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The following consolidated financial statements have been prepared by
the Company, without audit, with the exception of the June 29, 2002
consolidated balance sheet which was taken from the audited financial
statements included in the Company's Fiscal 2002 Annual Report on Form
10-K. The financial statements include consolidated balance sheets,
consolidated results of operations and consolidated cash flows. Certain
amounts in the prior periods presented have been reclassified to
conform to the fiscal 2003 presentation. In the opinion of management,
all adjustments, which consist of normal recurring adjustments,
necessary to present fairly the financial position, results of
operations and cash flows for all periods presented have been made.
These financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the
Company's Fiscal 2002 Annual Report on Form 10-K.
A review of the financial information herein has been made by Ernst &
Young LLP, independent auditors, in accordance with established
professional standards and procedures for such a review. A report from
Ernst & Young LLP concerning their review is included as Exhibit 15(a).
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<Table>
<Caption>
13-Week Period Ended
---------------------------------
Sept. 28, 2002 Sept. 29, 2001
-------------- --------------
Numerator:
Numerator for basic earnings per share --
income available to common shareholders $ 182,574,000 $ 163,952,000
============== ==============
Denominator:
Denominator for basic earnings per share --
weighted-average shares 654,176,221 666,765,148
Effect of dilutive securities:
Employee and director stock options 9,366,277 11,151,618
-------------- --------------
Denominator for diluted earnings per share --
adjusted for weighted-average shares 663,542,498 677,916,766
============== ==============
Basic earnings per share $ 0.28 $ 0.25
============== ==============
Diluted earnings per share $ 0.28 $ 0.24
============== ==============
</Table>
5
3. RESTRICTED CASH
SYSCO is required by its insurance companies to collateralize the self
insured portion of its workers' compensation and liability claims.
Previously the collateral requirements were met by issuing letters of
credit. These letters of credit were replaced with funds deposited in
an insurance trust. The increase from June 29, 2002 to September 28,
2002 was due to the timing of depositing funds to replace letters of
credit as they expired.
4. DEBT
As of September 28, 2002, SYSCO had uncommitted bank lines of credit,
which provide for unsecured borrowings for working capital of up to
$95,000,000, of which none was outstanding at September 28, 2002.
As of September 28, 2002, SYSCO's borrowings under its commercial paper
programs were $141,852,000. During the thirteen week period ended
September 28, 2002, commercial paper and short-term bank borrowings
ranged from approximately $55,813,000 to $176,079,000.
5. SUBSEQUENT ACQUISITIONS
In October 2002, SYSCO acquired Abbott Foods Inc., an independently
owned broadline foodservice distributor located in Columbus, Ohio.
In October 2002, SYSCO acquired the net assets of Pronamics, the
quick-service distribution division of priszm brandz (priszm). Priszm
is the owner and operator of more than 750 quick-service restaurants in
Canada. As part of the transaction, priszm entered into a distribution
contract in which SYSCO will become priszm's national Canadian
distributor of all food products, paper and other merchandise.
6. DERIVATIVE FINANCIAL INSTRUMENTS
SYSCO has outstanding one interest rate swap agreement with a notional
amount of $200,000,000 related to the $200,000,000 aggregate principal
amount of 4.75% notes due July 30, 2005. Under the interest rate swap
agreement, SYSCO receives a fixed rate equal to 4.75% per annum and
pays a variable interest rate equal to six-month LIBOR in arrears less
84.5 basis points. The fair value of the interest rate swap agreement
was not material.
7. NEW ACCOUNTING STANDARDS
SYSCO adopted the provisions of SFAS No. 142, "Accounting for Goodwill
and Other Intangible Assets" effective with the beginning of fiscal
year 2003. As a result, the amortization of goodwill was discontinued.
SYSCO has six months from the date it adopts SFAS No. 142 to test for
impairment. Management has completed its preliminary assessment of the
impact that the adoption of SFAS No. 142 will have on the Company's
consolidated financial statements and believes that goodwill is not
impaired.
The following table provides comparative net earnings and earnings per
share had the non-amortization provision been in effect for all periods
presented:
6
<Table>
<Caption>
13-Week Period Ended
---------------------------------
Sept. 28, 2002 Sept. 29, 2001
-------------- --------------
Reported net earnings $ 182,574,000 $ 163,952,000
Goodwill amortization, net of taxes -- 3,574,000
-------------- --------------
Adjusted net earnings $ 182,574,000 $ 167,526,000
============== ==============
Basic earnings per share:
Reported earnings per share $ 0.28 $ 0.25
Goodwill amortization, net of taxes -- 0.01
-------------- --------------
Adjusted earnings per share $ 0.28 $ 0.26
============== ==============
Diluted earnings per share:
Reported earnings per share $ 0.28 $ 0.24
Goodwill amortization, net of taxes -- 0.01
-------------- --------------
Adjusted earnings per share $ 0.28 $ 0.25
============== ==============
</Table>
SYSCO adopted the provisions of SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" effective with the
beginning of fiscal year 2003. The adoption of SFAS No. 144 has not had
a material effect on the Company's consolidated financial statements.
8. SUPPLEMENTAL GUARANTOR INFORMATION
In May 2002, SYSCO International, Co., a wholly owned subsidiary of
SYSCO, issued $200,000,000 of 6.10% notes due in 2012. The notes are
fully and unconditionally guaranteed by SYSCO.
The following condensed consolidating financial statements present
separately the financial position, results of operations and cash flows
of the parent guarantor (SYSCO), the subsidiary issuer (SYSCO
International) and all other non-guarantor subsidiaries of SYSCO (Other
Non-Guarantor Subsidiaries) on a combined basis and eliminating
entries. The financial information for SYSCO includes corporate
activities as well as certain operating companies which are operated as
divisions of SYSCO.
<Table>
<Caption>
CONDENSED CONSOLIDATING BALANCE SHEET -- SEPTEMBER 28, 2002
---------------------------------------------------------------------------------------------
SYSCO OTHER NON-GUARANTOR CONSOLIDATED
SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- ------------------- -------------- --------------
(IN THOUSANDS)
Current assets ............... $ 565,283 $ 4 $ 2,808,644 $ -- $ 3,373,931
Investment in subsidiaries ... 5,492,419 203,680 195,237 (5,891,336) --
Plant and equipment, net ..... 277,563 -- 1,441,378 -- 1,718,941
Other assets ................. 241,716 1,379 909,490 -- 1,152,585
-------------- -------------- -------------- -------------- --------------
Total assets ................. $ 6,576,981 $ 205,063 $ 5,354,749 $ (5,891,336) $ 6,245,457
============== ============== ============== ============== ==============
Current liabilities .......... $ 686,384 $ 54,287 $ 1,490,473 $ -- $ 2,231,144
Intercompany payables
(receivables) .............. 2,553,593 (45,376) (2,508,217) -- --
Long-term debt ............... 1,023,040 199,383 43,515 -- 1,265,938
Other liabilities ............ 120,279 -- 434,411 -- 554,690
Shareholders' equity ......... 2,193,685 (3,231) 5,894,567 (5,891,336) 2,193,685
-------------- -------------- -------------- -------------- --------------
Total liabilities and
shareholders' equity ....... $ 6,576,981 $ 205,063 $ 5,354,749 $ (5,891,336) $ 6,245,457
============== ============== ============== ============== ==============
</Table>
7
<Table>
<Caption>
CONDENSED CONSOLIDATING BALANCE SHEET -- JUNE 29, 2002
---------------------------------------------------------------------------------------------
SYSCO OTHER NON-GUARANTOR CONSOLIDATED
SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- ------------------- -------------- --------------
(IN THOUSANDS)
Current assets ............... $ 526,259 $ 10,010 $ 2,617,020 $ -- $ 3,153,289
Investment in subsidiaries ... 5,279,299 204,064 194,854 (5,678,217) --
Plant and equipment, net ..... 271,971 -- 1,425,811 -- 1,697,782
Other assets ................. 228,320 1,418 908,944 -- 1,138,682
-------------- -------------- -------------- -------------- --------------
Total assets ................. $ 6,305,849 $ 215,492 $ 5,146,629 $ (5,678,217) $ 5,989,753
============== ============== ============== ============== ==============
Current liabilities .......... $ 790,631 $ 64,554 $ 1,384,172 $ -- $ 2,239,357
Intercompany payables
(receivables) .............. 2,353,921 (47,508) (2,306,413) -- --
Long-term debt ............... 933,028 199,366 43,913 -- 1,176,307
Other liabilities ............ 95,750 -- 345,820 -- 441,570
Shareholders' equity ......... 2,132,519 (920) 5,679,137 (5,678,217) 2,132,519
-------------- -------------- -------------- -------------- --------------
Total liabilities and
shareholders' equity ....... $ 6,305,849 $ 215,492 $ 5,146,629 $ (5,678,217) $ 5,989,753
============== ============== ============== ============== ==============
</Table>
<Table>
<Caption>
CONDENSED CONSOLIDATING BALANCE SHEET -- SEPTEMBER 29, 2001
---------------------------------------------------------------------------------------------
SYSCO OTHER NON-GUARANTOR CONSOLIDATED
SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- ------------------- -------------- --------------
(IN THOUSANDS)
Current assets ............... $ 531,085 $ -- $ 2,471,449 $ -- $ 3,002,534
Investment in subsidiaries ... 4,691,456 -- -- (4,691,456) --
Plant and equipment, net ..... 246,015 -- 1,308,178 -- 1,554,193
Other assets ................. 193,181 -- 772,304 -- 965,485
-------------- -------------- -------------- -------------- --------------
Total assets ................. $ 5,661,737 $ -- $ 4,551,931 $ (4,691,456) $ 5,522,212
============== ============== ============== ============== ==============
Current liabilities .......... $ 810,172 $ -- $ 1,319,230 $ -- $ 2,129,402
Intercompany payables
(receivables) .............. 1,654,591 -- (1,654,591) -- --
Long-term debt ............... 1,031,052 -- 50,253 -- 1,081,305
Other liabilities ............ 32,262 -- 145,583 -- 177,845
Shareholders' equity ......... 2,133,660 -- 4,691,456 (4,691,456) 2,133,660
-------------- -------------- -------------- -------------- --------------
Total liabilities and
shareholders' equity ....... $ 5,661,737 $ -- $ 4,551,931 $ (4,691,456) $ 5,522,212
============== ============== ============== ============== ==============
</Table>
<Table>
<Caption>
CONDENSED CONSOLIDATING RESULTS OF OPERATIONS
FOR THE 13-WEEK PERIOD ENDED SEPTEMBER 28, 2002
---------------------------------------------------------------------------------------------
SYSCO OTHER NON-GUARANTOR CONSOLIDATED
SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- ------------------- -------------- --------------
(IN THOUSANDS)
Sales ........................ $ 847,894 $ -- $ 5,576,528 $ -- $ 6,424,422
Cost of sales ................ 655,633 -- 4,499,071 -- 5,154,704
Operating expenses ........... 166,263 316 794,056 -- 960,635
Interest expense (income) .... 75,619 2,536 (61,327) -- 16,828
Other, net ................... (37) 1 (3,376) -- (3,412)
-------------- -------------- -------------- -------------- --------------
Total costs and expenses ..... 897,478 2,853 5,228,424 -- 6,128,755
-------------- -------------- -------------- -------------- --------------
Earnings before income
taxes ...................... (49,584) (2,853) 348,104 -- 295,667
Income tax (benefit)
provision .................. (18,966) (1,091) 133,150 -- 113,093
Equity in earnings of
subsidiaries ............... 213,192 -- -- (213,192) --
-------------- -------------- -------------- -------------- --------------
Net earnings ................. $ 182,574 $ (1,762) $ 214,954 $ (213,192) $ 182,574
============== ============== ============== ============== ==============
</Table>
<Table>
<Caption>
CONDENSED CONSOLIDATING RESULTS OF OPERATIONS
FOR THE 13-WEEK PERIOD ENDED SEPTEMBER 29, 2001
---------------------------------------------------------------------------------------------
SYSCO OTHER NON-GUARANTOR CONSOLIDATED
SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- ------------------- -------------- --------------
(IN THOUSANDS)
Sales ........................ $ 826,182 $ -- $ 5,002,496 $ -- $ 5,828,678
Cost of sales ................ 643,054 -- 4,040,563 -- 4,683,617
Operating expenses ........... 142,210 -- 722,246 -- 864,456
Interest expense (income) .... 63,493 -- (47,629) -- 15,864
Other, net ................... 51 -- (820) -- (769)
-------------- -------------- -------------- -------------- --------------
Total costs and expenses ..... 848,808 -- 4,714,360 -- 5,563,168
-------------- -------------- -------------- -------------- --------------
Earnings before income
taxes ...................... (22,626) -- 288,136 -- 265,510
Income tax (benefit)
provision .................. (8,654) -- 110,212 -- 101,558
Equity in earnings of
subsidiaries ............... 177,924 -- -- (177,924) --
-------------- -------------- -------------- -------------- --------------
Net earnings ................. $ 163,952 $ -- $ 177,924 $ (177,924) $ 163,952
============== ============== ============== ============== ==============
</Table>
8
<Table>
<Caption>
CONDENSED CONSOLIDATING CASH FLOWS
FOR THE 13-WEEK PERIOD ENDED SEPTEMBER 28, 2002
---------------------------------------------------------------------------------------------
SYSCO OTHER NON-GUARANTOR CONSOLIDATED
SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- ------------------- -------------- --------------
(IN THOUSANDS)
Net cash provided by (used for):
Operating activities ......... $ (23,346) $ 1,287 $ 149,296 $ -- $ 127,237
Investing activities ......... (36,026) -- (72,265) -- (108,291)
Financing activities ......... (36,833) (13,628) (3,735) -- (54,196)
Intercompany activity ........ 62,369 2,335 (64,703) -- --
-------------- -------------- -------------- -------------- --------------
Net (decrease) increase
in cash .................... (33,836) (10,006) 8,593 -- (35,250)
Cash at the beginning of the
period ..................... 92,447 10,006 95,985 -- 198,439
-------------- -------------- -------------- -------------- --------------
Cash at the end of the
period ..................... $ 58,611 $ -- $ 104,578 $ -- $ 163,189
============== ============== ============== ============== ==============
</Table>
<Table>
<Caption>
CONDENSED CONSOLIDATING CASH FLOWS
FOR THE 13-WEEK PERIOD ENDED SEPTEMBER 29, 2001
---------------------------------------------------------------------------------------------
SYSCO OTHER NON-GUARANTOR CONSOLIDATED
SYSCO INTERNATIONAL SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- ------------------- -------------- --------------
(IN THOUSANDS)
Net cash provided by (used for):
Operating activities ......... $ (23,138) $ -- $ 63,832 $ -- $ 40,694
Investing activities ......... (16,716) -- (81,101) -- (97,817)
Financing activities ......... 43,386 -- 1,580 -- 44,966
Intercompany activity ........ 613 -- (613) -- --
-------------- -------------- -------------- -------------- --------------
Net increase (decrease)
in cash .................... 4,145 -- (16,302) -- (12,157)
Cash at the beginning of the
period ..................... 39,832 -- 95,911 -- 135,743
-------------- -------------- -------------- -------------- --------------
Cash at the end of the
period ..................... $ 43,977 $ -- $ 79,609 $ -- $ 123,586
============== ============== ============== ============== ==============
</Table>
9. BUSINESS SEGMENT INFORMATION
The accounting policies for the segments are the same as those
disclosed in the Company's Fiscal 2002 Annual Report on Form 10-K. 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 Canadian operations are not
significant for geographical disclosure purposes. Intersegment sales
represent specialty produce and meat company products distributed by
the Broadline and SYGMA operating companies. The segment results
include allocation of centrally incurred costs for shared services that
eliminate upon consolidation. Centrally incurred costs are allocated
based upon the relative level of service used by each operating
company.
9
<Table>
<Caption>
13-Week Period Ended
----------------------------------
Sept. 28, 2002 Sept. 29, 2001
-------------- --------------
Sales (in thousands):
Broadline $ 5,321,257 $ 4,802,933
SYGMA 709,584 650,298
Other 451,350 417,398
Intersegment sales (57,769) (41,951)
-------------- --------------
Total $ 6,424,422 $ 5,828,678
============== ==============
</Table>
<Table>
<Caption>
13-Week Period Ended
----------------------------------
Sept. 28, 2002 Sept. 29, 2001
-------------- --------------
Earnings before income taxes (in thousands):
Broadline $ 300,223 $ 274,339
SYGMA 5,238 4,482
Other 11,982 10,655
-------------- --------------
Total segments 317,443 289,476
Unallocated corporate expenses (21,776) (23,966)
-------------- --------------
Total $ 295,667 $ 265,510
============== ==============
</Table>
<Table>
<Caption>
Sept. 28, 2002 June 29, 2002 Sept. 29, 2001
-------------- -------------- --------------
Assets (in thousands):
Broadline $ 4,149,164 $ 3,983,216 $ 3,676,143
SYGMA 165,527 176,093 173,136
Other 459,835 424,982 428,174
-------------- -------------- --------------
Total segments 4,774,526 4,584,291 4,277,453
Corporate 1,470,931 1,405,462 1,244,759
-------------- -------------- --------------
Total $ 6,245,457 $ 5,989,753 $ 5,522,212
============== ============== ==============
</Table>
10. CONTINGENCIES
SYSCO is engaged in various legal proceedings which have arisen but
have not been fully adjudicated. These proceedings, in the opinion of
management, will not have a material adverse effect upon the
consolidated financial statements of the Company when ultimately
concluded.
10
Item 2. 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 United States and Canada. The
Company intends to continue to expand its market share through
profitable sales growth, foldouts, acquisitions, 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.
The Company generated $127,237,000 in net cash from operations for the
first thirteen weeks of fiscal 2003, compared with $40,694,000 for the
comparable period in fiscal 2002. The increase in deferred tax balances
was due to the deferral of federal and state income tax payments
resulting from the Company's reorganization of its supply chain and
amounted to approximately $107,000,000 for the first quarter of fiscal
2003. There was no such impact in the first quarter of fiscal 2002.
A federal tax payment of $75,000,000 normally due in the fourth quarter
of fiscal 2001 was deferred until the first quarter of fiscal 2002 as
allowed by the Internal Revenue Service due to the Texas tropical storm
Allison disaster.
In addition, cash flow from operations for the first quarter of fiscal
2003 was negatively impacted by increases in accounts receivables
balances of $115,847,000 and inventories balances of $109,016,000
offset by inceases in accounts payable balances of $70,946,000. These
increases were mainly due to two factors. The first is the increased
sales in the first quarter of fiscal 2003 as compared to the fourth
quarter fiscal 2002 which required investments in inventories and
caused accounts receivables and accounts payable balances to increase.
Secondly, the increased sales included increased sales to schools and
universities and to the operators who service them, all of which
generally have payment terms longer than the SYSCO average. A similar
impact occurred in the first quarter of fiscal 2002 but to a lesser
extent due to the impact of September 11, 2001. Although overall
accounts receivables and inventories balances increased from the June
29, 2002 period end, accounts receivables and inventories days sales
outstanding decreased at the end of the first quarter of fiscal 2003
when compared to the first quarter of fiscal 2002.
Cash used for investing activities was $108,291,000 for the first
quarter of fiscal 2003, compared with $97,817,000 used in the
comparable period in fiscal 2002. Expenditures for facilities, fleet
and other equipment were $88,025,000 for the first quarter 2003,
compared with $88,301,000 for the comparable period in fiscal 2002.
Total expenditures in fiscal 2003 are expected to be in the range of
$450,000,000 to $500,000,000 due to the continuation of the fold-out
program; facility, fleet and other equipment replacements and
expansions; and the Company's supply chain initiatives.
Cash used for financing activities was $54,196,000 for the first
quarter of fiscal 2003, compared with $44,966,000 provided by the
comparable period in fiscal 2002. Treasury stock purchases in the first
quarter of fiscal 2003 totaled 3,779,000 shares at a cost of
$109,899,000 as compared to 5,793,000 shares at a cost of $140,979,000
for the comparable period in fiscal 2002. The remaining number of
shares available for repurchase as of September 28, 2002 as authorized
by the Board was 21,784,400.
11
Dividends paid in the first quarter of fiscal 2003 were $59,240,000, or
$.09 per share, as compared to $46,986,000, or $.07 per share, in the
comparable quarter of fiscal 2002. In September 2002, SYSCO declared
its regular quarterly dividend for the second quarter of fiscal 2003 at
$.09 per share payable in October 2002. In November, SYSCO declared its
regular quarterly dividend for the third quarter of fiscal 2003,
increasing it to $.11 per share, payable in January 2003.
In October 2002, SYSCO acquired Abbott Foods, Inc., an independently
owned broadline foodservice distributor located in Columbus, Ohio, and
the net assets of Pronamics, the quick-service distribution division of
prizm brandz located in Canada. SYSCO has paid approximately
$123,000,000 for these acquisitions through October 2002.
As of September 28, 2002, SYSCO had uncommitted bank lines of credit,
which provide for unsecured borrowings for working capital of up to
$95,000,000, of which none was outstanding at September 28, 2002.
As of September 28, 2002, SYSCO's borrowings under its commercial paper
programs were $141,852,000. Such borrowings were $303,407,000 as of
November 1, 2002. During the thirteen week period ended September 28,
2002, commercial paper and short-term bank borrowings ranged from
approximately $55,813,000 to $176,079,000.
Long-term debt to capitalization ratio was 36.6% at September 28, 2002,
within the 35% to 40% target ratio.
Cash generated from operations is first allocated to working capital
requirements. Any remaining cash generated from operations, as
supplemented by commercial paper and other bank borrowings, may, in the
discretion of management, be applied towards investments in facilities,
fleet and other equipment; cash dividends; acquisitions fitting
within the Company's overall growth strategy; and the share repurchase
program. Management believes that the Company's cash flows from
operations, as well as the availability of additional capital under its
existing commercial paper programs, debt shelf registration and its
ability to access capital from financial markets in the future, will be
sufficient to meet its cash requirements while maintaining proper
liquidity for normal operating purposes.
Results of Operations
Sales increased 10.2% during the first quarter of fiscal 2003 over the
comparable period of the prior year. Cost of sales increased 10.1%
during the first quarter of fiscal 2003 over the comparable period of
the prior year leading to improved gross margins. After adjusting for
food cost decreases and acquisitions, real sales growth was
approximately 7.0% for the first quarter of fiscal 2003. Acquisitions
represented 5.4% of sales increases and food cost deflation was 2.2%.
This compared to real sales growth of 1.7% for the first quarter of
fiscal 2002, after adjusting the 8.7% in overall sales growth by 3.4%
for acquisitions and 3.6% for food cost inflation. In addition,
management estimates that approximately 1% of the sales growth in the
first quarter of fiscal 2003 was attributable to the comparison against
the slowdown in sales in the comparable period of prior year caused by
the events of September 11, 2001.
Operating expenses were 15.0% of sales for the first quarter of fiscal
2003, an increase over the 14.8% for the comparable period of the prior
year. Operating expenses were negatively impacted by a $15.5 million
expense incurred to adjust the carrying value of life insurance assets
to their cash surrender value. The Company maintains life insurance
policies on the
12
lives of participants in the Company's Supplemental Executive
Retirement Plan and the Executive Deferred Compensation Plan in order
to meet its obligations under these plans. Stock market declines
reduced the cash surrender value of these policies.
In addition, management expects that its net pension cost related to
its defined benefit obligations for the fiscal 2003 year will be
approximately $20,000,000 higher than fiscal year 2002, or
approximately $5,000,000 higher per quarter.
Interest expense increased 6.1% during the first quarter of fiscal 2003
over the comparable period of the prior year, primarily due to
increased borrowing levels.
Other, net income increased from $769,000 in the first quarter of
fiscal 2002 to $3,412,000 in the first quarter of fiscal 2003. The
increase was primarily due to a gain on the sale of a facility.
Income taxes for the periods presented reflect an effective rate of
38.25%.
Pretax earnings and net earnings for the first quarter of fiscal 2003
increased 11.4% over the comparable period in the prior year. The
increases were due to the factors discussed above as well as the
Company's success in its continued efforts to increase sales to the
Company's marketing associate-served customers and increasing sales of
SYSCO Brand products, both of which generate higher margins.
Basic earnings per share increased for the first quarter of fiscal 2003
12.0% over the comparable period of the prior year. Diluted earnings
per share for the first quarter of fiscal 2003 increased 16.7% over the
comparable period of the prior year. The increases were the result of
factors discussed above as well as a reduction of shares outstanding
due to share repurchases.
Broadline Segment
Broadline segment sales increased 10.8% in the first quarter of fiscal
2003 as compared to the comparable period of the prior year. This
increase was due primarily to the acquisition of SERCA as well as
increased sales to marketing associate-served customers including
increased sales of SYSCO Brand products and increased sales to
multi-unit customers. These increases were reflected in increased sales
to the Company's existing customer base and to new customers. Excluding
SERCA, marketing associate-served sales as a percentage of broadline
sales increased to 57.2% from 56.2% in the comparable prior period and
SYSCO Brand sales increased to 48.9% of overall broadline sales from
48.1% in the comparable period in the prior year. Broadline segment
sales as a percentage of total SYSCO sales increased from 82% for the
first quarter of fiscal 2002 to 83% for the for the first quarter of
fiscal 2003. This increase was due primarily to the acquisition of
SERCA.
Pretax earnings for the Broadline segment increased by 9.4% for the
first quarter of fiscal 2003 over the comparable period in prior year.
The increase in pretax earnings was primarily due to increases in sales
to marketing associate served customers and in sales of SYSCO Brand
products, both of which generate higher margins, and the acquisition of
SERCA.
SYGMA Segment
SYGMA segment sales increased 9.1% in the first quarter of fiscal 2003,
as compared to sales for the comparable period in the prior year. The
increase was due primarily to sales growth in SYGMA's existing customer
base. SYGMA sales as a percentage of total SYSCO
13
sales were 11.0% for the first quarter of fiscal 2003 and 11.2% for the
comparable period in the prior year.
Pretax earnings for the SYGMA segment increased by 16.9% for the first
quarter of fiscal 2003 over the comparable period in the prior year.
The increase was primarily a result of increased sales and operating
efficiencies.
Other Segment
Other segment sales increased 8.1% in the first quarter of fiscal 2003
as compared to sales for the comparable period in the prior year. The
increase was due to increased sales to the existing customer base,
sales to new customers and increased sales to SYSCO broadline
companies.
Pretax earnings for the Other segment increased by 12.5% for the first
quarter of fiscal 2003 over the comparable period in the prior year.
The increase was primarily a result of increased sales and operating
efficiencies.
Critical Accounting Policies
A discussion of critical accounting policies is included in the
Company's Fiscal 2002 Annual Report on Form 10-K.
New Accounting Standards
SYSCO adopted the provisions of SFAS No. 142, "Accounting for Goodwill
and Other Intangible Assets" effective with the beginning of fiscal
year 2003. As a result, the amortization of goodwill was discontinued.
SYSCO has six months from the date it adopts SFAS No. 142 to test for
impairment. Management has completed its preliminary assessment of the
impact that the adoption of SFAS No. 142 will have on the Company's
consolidated financial statements and believes that goodwill is not
impaired. Goodwill amortization, net of tax, for the first quarter of
fiscal 2002 was $3,574,000, or $.01 earnings per share on a basic and
diluted basis.
SYSCO adopted the provisions of SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" effective with the
beginning of fiscal year 2003. The adoption of SFAS No. 144 has not had
a material effect on the Company's financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
SYSCO does not utilize financial instruments for trading purposes.
SYSCO's use of debt directly exposes the Company to interest rate risk.
Floating rate debt, where the interest rate fluctuates periodically,
exposes the Company to short-term changes in market interest rates.
Fixed rate debt, where the interest rate is fixed over the life of the
instrument, exposes the Company to changes in market interest rates
reflected in the fair value of the debt and to the risk the Company may
need to refinance maturing debt with new debt.
14
SYSCO manages its debt portfolio to achieve an overall desired position
of fixed and floating rates and may employ interest rate swaps as a
tool to achieve that goal. The major risks from interest rate
derivatives include changes in interest rates affecting the fair value
of such instruments, potential increases in interest expense due to
market increases in floating interest rates and the creditworthiness of
the counterparties in such transactions. At September 28, 2002, the
Company had outstanding one interest rate swap agreement whereby SYSCO
exchanged the fixed interest payments on the $200,000,000 principal
amount of 4.75% notes for floating interest rates. At September 28,
2002 the Company had outstanding $141,852,000 of commercial paper at
variable rates of interest with maturities through February 3, 2003.
The Company's remaining debt obligations of $1,187,576,000 were
primarily at fixed rates of interest except for $200,000,000 in fixed
rate debt swapped to a floating rate of interest as discussed above.
Item 4. Evaluation of Disclosure Controls and Procedures
Within the 90-day period prior to the date of this report, an
evaluation was performed under the supervision and with the
participation of the Company's management, including the CEO and CFO,
of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the
Company's management, including the CEO and CFO, concluded that the
Company's disclosure controls and procedures were effective as of the
evaluation date. There have been no significant changes in the
Company's internal controls or in other factors that could
significantly affect internal controls subsequent to the date the
Company carried out its evaluation.
Forward-Looking Statements
Certain statements made herein are forward-looking statements under the
Private Securities Litigation Reform Act of 1995. They include
statements regarding potential future repurchases under the share
repurchase program, market risks, the impact of ongoing legal
proceedings, anticipated capital expenditures, the ability to increase
market share, sales growth, and SYSCO's ability to meet cash
requirements while maintaining proper liquidity. These statements
involve risks and uncertainties and are based on management's current
expectations and estimates; actual results may differ materially. Those
risks and uncertainties that could impact these statements include the
risks relating to the foodservice distribution industry's relatively
low profit margins and sensitivity to general economic conditions,
including the current economic environment; SYSCO's leverage and debt
risks; the ultimate outcome of litigation; and internal factors such as
the ability to control expenses. In addition, share repurchases could
be affected by market prices for the Company's securities as well as
management's decision to utilize its capital for other purposes. The
effect of market risks could be impacted by future borrowing levels and
certain economic factors such as interest rates. For a discussion of
additional factors that could cause actual results to differ from those
contained in the forward-looking statements, see the Company's Annual
Report on Form 10-K for the fiscal year ended June 29, 2002.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
SYSCO is engaged in various legal proceedings which have arisen but
have not been fully adjudicated. These proceedings, in the opinion of
management, will not have a material adverse effect upon the
consolidated financial statements of the Company when ultimately
concluded.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
3(a) Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3(a) to Form 10-K for the year ended
June 28, 1997 (File No. 1-6544).
3(b) Bylaws, as amended and restated February 8, 2002,
incorporated by reference to 3(b) Exhibit 3(b) to Form 10-Q
for the quarter ended December 29, 2001 (File No. 1-6544).
3(c) Form of Amended Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock,
incorporated by reference to Exhibit 3(c) to Form 10-K for
the year ended June 29, 1996 (File No. 1-6544).
3(d) Certificate of Amendment of Certificate of Incorporation
increasing authorized shares, incorporated by reference to
Exhibit 3(d) to Form 10-Q for the quarter ended January 1,
2000 (File No. 1-6544).
16
4(a) Senior Debt Indenture, dated as of June 15, 1995, between
Sysco Corporation and First Union National Bank of North
Carolina, Trustee, incorporated by reference to Exhibit 4(a)
to Registration Statement on Form S-3 filed June 6, 1995
(File No. 33-60023).
4(b) First Supplemental Indenture, dated June 27, 1995, between
Sysco Corporation and First Union National Bank of North
Carolina, Trustee, as amended, incorporated by reference to
Exhibit 4(e) to Form 10-K for the year ended June 29, 1996
(File No. 1-6544).
4(c) Second Supplemental Indenture, dated as of May 1, 1996,
between Sysco Corporation and First Union National Bank of
North Carolina, Trustee, as amended, incorporated by
reference to Exhibit 4(f) to Form 10-K for the year ended
June 29, 1996 (File No. 1-6544).
4(d) Third Supplemental Indenture, dated as of April 25, 1997,
between Sysco Corporation and First Union National Bank of
North Carolina, Trustee, incorporated by reference to
Exhibit 4(g) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
4(e) Fourth Supplemental Indenture, dated as of April 25, 1997,
between Sysco Corporation and First Union National Bank of
North Carolina, Trustee, incorporated by reference to
Exhibit 4(h) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
4(f) Fifth Supplemental Indenture, dated as of July 27, 1998,
between Sysco Corporation and First Union National Bank,
Trustee, incorporated by reference to Exhibit 4 (h) to Form
10-K for the year ended June 27, 1998 (File No. 1-6554).
4(g) Sixth Supplemental Indenture, including form of Note, dated
April 5, 2002 between SYSCO Corporation, as Issuer, and
Wachovia Bank, National Association (formerly First Union
National Bank of North Carolina), as Trustee, incorporated
by reference to Exhibit 4.1 to Form 8-K dated April 5, 2002
(File No. 1-6544).
4(h) Indenture dated May 23, 2002 between SYSCO International,
Co., SYSCO Corporation and Wachovia Bank, National
Association, incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-4 filed August 21, 2002
(File No. 333-98489).
*4(i) Credit Agreement dated September 13, 2002 by and among SYSCO
Corporation, JPMorgan Chase Bank, individually and as
Administrative Agent, the Co-Syndication Agents named
therein and the other financial institutions party thereto.
17
*15(a) Report from Ernst & Young LLP dated November 11, 2002, re:
unaudited financial statements.
*15(b) Acknowledgement letter from Ernst & Young LLP.
*99(a) CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
*99(b) CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
- ----------
* Filed herewith.
(b) Reports on Form 8-K:
On July 31, 2002, the Company filed a current report on Form 8-K
announcing the results of its fiscal year ended June 29, 2002.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYSCO CORPORATION
(Registrant)
By /s/ CHARLES H. COTROS
------------------------------------
Charles H. Cotros
Chairman and Chief Executive Officer
Date: November 11, 2002
By /s/ JOHN K. STUBBLEFIELD, JR.
------------------------------------
John K. Stubblefield, Jr.
Executive Vice President,
Finance & Administration
Date: November 11, 2002
19
CERTIFICATION
I, Charles H. Cotros, Chairman and Chief Executive Officer of Sysco Corporation
(the "Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sysco Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
20
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
---------------------
/s/ CHARLES H. COTROS
---------------------
Charles H. Cotros
Chairman and Chief Executive Officer
Date: November 11, 2002
- -----------------------
21
CERTIFICATION
I, John K. Stubblefield, Jr., Executive Vice President, Finance and
Administration of Sysco Corporation (the "Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sysco Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;
22
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
-----------------------------
/s/ JOHN K. STUBBLEFIELD, JR.
-----------------------------
John K. Stubblefield, Jr.
Executive Vice President,
Finance and Administration
Date: November 11, 2002
- -----------------------
EXHIBIT INDEX
<Table>
<Caption>
NO. DESCRIPTION
--- -----------
3(a) Restated Certificate of Incorporation, incorporated by reference
to Exhibit 3(a) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
3(b) Bylaws, as amended and restated February 8, 2002, incorporated by
reference to Exhibit 3(b) to Form 10-Q for the quarter ended
December 29, 2001 (File No. 1-6544).
3(c) Form of Amended Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock, incorporated by
reference to Exhibit 3(c) to Form 10-K for the year ended June 29,
1996 (File No. 1-6544).
3(d) Certificate of Amendment of Certificate of Incorporation increasing
authorized shares, incorporated by reference to Exhibit 3(d) to
Form 10-Q for the quarter ended January 1, 2000 (File No. 1-6544).
4(a) Senior Debt Indenture, dated as of June 15, 1995, between Sysco
Corporation and First Union National Bank of North Carolina,
Trustee, incorporated by reference to Exhibit 4(a) to Registration
Statement on Form S-3 filed June 6, 1995 (File No. 33-60023).
4(b) First Supplemental Indenture, dated June 27, 1995, between Sysco
Corporation and First Union National Bank of North Carolina,
Trustee, as amended, incorporated by reference to Exhibit 4(e) to
Form 10-K for the year ended June 29, 1996 (File No. 1-6544).
4(c) Second Supplemental Indenture, dated as of May 1, 1996, between
Sysco Corporation and First Union National Bank of North Carolina,
Trustee, as amended, incorporated by reference to Exhibit 4(f) to
Form 10-K for the year ended June 29, 1996 (File No. 1-6544).
4(d) Third Supplemental Indenture, dated as of April 25, 1997, between
Sysco Corporation and First Union National Bank of North Carolina,
Trustee, incorporated by reference to Exhibit 4(g) to Form 10-K for
the year ended June 28, 1997 (File No. 1-6544).
4(e) Fourth Supplemental Indenture, dated as of April 25, 1997, between
Sysco Corporation and First Union National Bank of North Carolina,
Trustee, incorporated by reference to Exhibit 4(h) to Form 10-K for
the year ended June 28, 1997 (File No. 1-6544).
</Table>
<Table>
4(f) Fifth Supplemental Indenture, dated as of July 27, 1998, between
Sysco Corporation and First Union National Bank, Trustee,
incorporated by reference to Exhibit 4 (h) to Form 10-K for the
year ended June 27, 1998 (File No. 1-6554).
4(g) Sixth Supplemental Indenture, including form of Note, dated April
5, 2002 between SYSCO Corporation, as Issuer, and Wachovia Bank,
National Association (formerly First Union National Bank of North
Carolina), as Trustee, incorporated by reference to Exhibit 4.1 to
Form 8-K dated April 5, 2002 (File No. 1-6544).
4(h) Indenture dated May 23, 2002 between SYSCO International, Co.,
SYSCO Corporation and Wachovia Bank, National Association,
incorporated by reference to Exhibit 4.1 to Registration Statement
on Form S-4 filed August 21, 2002 (File No. 333-98489).
*4(i) Credit Agreement dated September 13, 2002 by and among SYSCO
Corporation, JPMorgan Chase Bank, individually and as
Administrative Agent, the Co-Syndication Agents named therein and
the other financial institutions party thereto.
*15(a) Report from Ernst & Young LLP dated November 11, 2002, re:
unaudited financial statements.
*15(b) Acknowledgement letter from Ernst & Young LLP.
*99(a) CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
*99(b) CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
</Table>
- ----------
* Filed herewith.