UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

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

SYSCO CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		74-1648137 (IRS employer identification number)

1390 Enclave Parkway
Houston, Texas 77077-2099
(Address of principal executive offices)
(Zip code)

Registrant’s telephone number, including area code: (281) 584-1390

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

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

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

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

Yes o     No þ

603,579,579 shares of the registrant’s common stock were outstanding as of January 26, 2008.

 

 

TABLE OF CONTENTS

				Page No.
Part I. Financial Information
Item 1.		Financial Statements			1
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			31
Item 4.		Controls and Procedures			31
Part II. Other Information
Item 1.		Legal Proceedings			33
Item 1A.		Risk Factors			33
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3.		Defaults Upon Senior Securities			34
Item 4.		Submission of Matters to a Vote of Security Holders			34
Item 5.		Other Information			35
Item 6.		Exhibits			35
Signatures					38
Letter re Appointment of New Trustee
Amended and Restated 2005 Non-Employee Directors Stock Plan
First Amended and Restated Board of Directors Deferred Compensation Plan
Fourth Amended and Restated Executive Deferred Compensation Plan
Amended and Restated 2004 Cash Performance Unit Plan
Form of Stock Option Grant Agreement
Report from Ernst & Young LLP
Acknowledgment Letter from Ernst & Young LLP
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 906
Certification Pursuant to Section 906

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

		26-Week Period Ended								13-Week Period Ended
		Dec. 29, 2007				Dec. 30, 2006				Dec. 29, 2007				Dec. 30, 2006
Sales		$	18,645,349			$	17,240,820			$	9,239,505			$	8,568,748
Cost of sales			15,086,427				13,918,115				7,471,725				6,915,259
Gross margin			3,558,922				3,322,705				1,767,780				1,653,489
Operating expenses			2,655,277				2,507,849				1,318,768				1,230,967
Operating income			903,645				814,856				449,012				422,522
Interest expense			55,286				53,772				28,915				28,006
Other income, net			(11,375	)			(12,413	)			(8,343	)			(3,375	)
Earnings before income taxes			859,734				773,497				428,440				397,891
Income taxes			328,597				296,811				164,292				151,353
Net earnings		$	531,137			$	476,686			$	264,148			$	246,538
Net earnings:
Basic earnings per share		$	0.87			$	0.77			$	0.43			$	0.40
Diluted earnings per share			0.86				0.76				0.43				0.39
Average shares outstanding			609,489,326				619,642,963				608,169,202				619,158,876
Diluted shares outstanding			615,893,115				626,777,041				614,620,234				628,429,841
Dividends declared per common share		$	0.41			$	0.36			$	0.22			$	0.19

See Notes to Consolidated Financial Statements.

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

		26-Week Period Ended								13-Week Period Ended
		Dec. 29, 2007				Dec. 30, 2006				Dec. 29, 2007				Dec. 30, 2006
Net earnings		$	531,137			$	476,686			$	264,148			$	246,538
Other comprehensive income, net of tax:
Foreign currency translation adjustment			49,896				(22,689	)			8,971				(22,135	)
Amortization of cash flow hedge			213				214				107				107
Amortization of unrecognized prior service cost			1,888				—				945				—
Amortization of unrecognized actuarial losses (gains), net			1,002				—				501				—
Amortization of unrecognized transition obligation			47				—				23				—
Total other comprehensive income (loss)			53,046				(22,475	)			10,547				(22,028	)
Comprehensive income		$	584,183			$	454,211			$	274,695			$	224,510

See Notes to Consolidated Financial Statements.

 4

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

		26-Week Period Ended
		Dec. 29, 2007				Dec. 30, 2006
Cash flows from operating activities:
Net earnings		$	531,137			$	476,686
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense			43,118				53,653
Depreciation and amortization			180,640				178,871
Deferred tax provision			301,276				271,473
Provision for losses on receivables			16,087				15,417
Gain on sale of assets			(653	)			(5,326	)
Additional investment in certain assets and liabilities, net of effect of businesses acquired:
(Increase) in receivables			(136,544	)			(81,371	)
(Increase) in inventories			(166,259	)			(113,283	)
Decrease (increase) in prepaid expenses and other current assets			58,939				(10,832	)
Increase in accounts payable			1,277				10,040
(Decrease) in accrued expenses			(165,581	)			(24,942	)
(Decrease) in accrued income taxes			(260,725	)			(195,621	)
(Increase) in other assets			(8,019	)			(24,841	)
Increase (decrease) in other long-term liabilities and prepaid pension cost, net			9,240				(5,180	)
Excess tax benefits from share-based compensation arrangements			(3,029	)			(4,564	)
Net cash provided by operating activities			400,904				540,180
Cash flows from investing activities:
Additions to plant and equipment			(277,552	)			(314,497	)
Proceeds from sales of plant and equipment			4,711				11,555
Acquisition of businesses, net of cash acquired			(34,729	)			(44,618	)
Decrease (increase) in restricted cash			1,418				(12,679	)
Net cash used for investing activities			(306,152	)			(360,239	)
Cash flows from financing activities:
Bank and commercial paper borrowings (repayments), net			361,954				112,169
Other debt borrowings			3,340				3,603
Other debt repayments			(4,303	)			(6,197	)
Debt issuance costs			(7	)			—
Common stock reissued from treasury			84,352				127,522
Treasury stock purchases			(352,832	)			(225,177	)
Dividends paid			(232,130	)			(210,528	)
Excess tax benefits from share-based compensation arrangements			3,029				4,564
Net cash used for financing activities			(136,597	)			(194,044	)
Effect of exchange rates on cash			2,759				(1,932	)
Net decrease in cash			(39,086	)			(16,035	)
Cash at beginning of period			207,872				201,897
Cash at end of period		$	168,786			$	185,862
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	55,670			$	54,092
Income taxes			277,455				220,406

See Notes to Consolidated Financial Statements.

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

	1.		Basis of Presentation
			Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “SYSCO,” or “the company” as used in this Form 10-Q refer to Sysco Corporation together with its consolidated subsidiaries and divisions.
			The consolidated financial statements have been prepared by the company, without audit, with the exception of the June 30, 2007 consolidated balance sheet which was taken from the audited financial statements included in the company’s Fiscal 2007 Annual Report on Form 10-K. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income and consolidated cash flows. Certain amounts in the prior periods presented have been reclassified to conform to the fiscal 2008 presentation. In the opinion of management, all adjustments, which consist of normal recurring adjustments, necessary to present fairly the financial position, results of operations, comprehensive income 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 2007 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 15.1 to this Form 10-Q.
	2.		Changes in Accounting
			SFAS 158
			As of June 30, 2007, SYSCO early adopted the measurement date provision of FASB Statement of Financial Accounting Standards (SFAS) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). The measurement date provision requires an employer to measure a plan’s assets and benefit obligations as of the end of the employer’s fiscal year. As a result, beginning in fiscal 2008, the measurement date for SYSCO’s defined benefit pension and other postretirement plans corresponds with fiscal year-end rather than the May 31st measurement date previously used. The company performed measurements as of May 31, 2007 and June 30, 2007 of the plan assets and benefit obligations. SYSCO recorded a charge to beginning retained earnings on July 1, 2007 of $3,572,000, net of tax, for the impact of the difference in our pension expense between the two measurement dates. The company also recorded a benefit to beginning accumulated other comprehensive income (loss) on July 1, 2007 of $22,780,000, net of tax, for the impact of the difference in the recognition provision between the two measurement dates.
			FIN 48
			Effective July 1, 2007, SYSCO adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in accordance with SFAS No. 109, “Accounting for Income Taxes” (SFAS 109). FIN 48 clarifies the application of SFAS 109 by defining criteria that an individual tax position must meet for any part of the

			benefit of that position to be recognized in the financial statements. Additionally, FIN 48 provides guidance on the measurement, derecognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. The impact of adopting this standard is discussed in Note 9, Income Taxes.
	3.		New Accounting Standards
			In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (SFAS 141(R)), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in a business combination. This statement also establishes recognition and measurement principles for the goodwill acquired in a business combination and disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. The statement will be effective for SYSCO primarily for business combinations beginning in fiscal 2010. Earlier application of the standard is prohibited.
	4.		Restricted Cash
			SYSCO is required by its insurers to collateralize a part of the self-insured portion of its workers’ compensation and liability claims. SYSCO has chosen to satisfy these collateral requirements by depositing funds in insurance trusts or by issuing letters of credit.
			In addition, for certain acquisitions, SYSCO has placed funds into escrow to be disbursed to the sellers in the event that specified operating results are attained or contingencies are resolved. Escrowed funds in the amount of $5,000,000 related to certain acquisitions were released to sellers of acquired businesses during the first 26 weeks of fiscal 2008.
			A summary of restricted cash balances appears below:

		Dec. 29, 2007				June 30, 2007				Dec. 30, 2006
Funds deposited in insurance trusts		$	91,511,000			$	92,929,000			$	91,333,000
Escrow funds related to acquisitions			4,000,000				9,000,000				21,120,000
Total		$	95,511,000			$	101,929,000			$	112,453,000

	5.		Debt
			In September 2007, an agreement was signed on the revolving credit facility supporting the company’s U.S. and Canadian commercial paper programs, which increased the facility amount to $1,000,000,000. In addition, the termination date on the facility was extended from November 4, 2011 to November 4, 2012.
			As of December 29, 2007, SYSCO had uncommitted bank lines of credit which provided for unsecured borrowings for working capital of up to $145,000,000, of which $4,500,000 was outstanding as of December 29, 2007.
			As of December 29, 2007, SYSCO’s outstanding commercial paper issuances were $908,180,000 and were classified as long-term debt since the company’s commercial paper programs are supported by its long-term revolving credit facility in the amount of $1,000,000,000.

			During the 26-week period ended December 29, 2007, the aggregate of commercial paper issuances and short-term bank borrowings ranged from approximately $532,045,000 to $1,133,241,000.
	6.		Employee Benefit Plans
			The components of net benefit cost for the 26-week periods presented are as follows:

		Pension Benefits								Other Postretirement Plans
		Dec. 29, 2007				Dec. 30, 2006				Dec. 29, 2007				Dec. 30, 2006
Service cost		$	45,284,000			$	42,328,000			$	242,000			$	226,000
Interest cost			50,609,000				45,656,000				285,000				266,000
Expected return on plan assets			(67,672,000	)			(58,372,000	)			—				—
Amortization of prior service cost			2,992,000				2,843,000				72,000				101,000
Recognized net actuarial loss (gain)			1,705,000				4,844,000				(78,000	)			(66,000	)
Amortization of net transition obligation			—				—				76,000				76,000
Net periodic benefit cost		$	32,918,000			$	37,299,000			$	597,000			$	603,000

The components of net benefit cost for the 13-week periods presented are as follows:

		Pension Benefits								Other Postretirement Plans
		Dec. 29, 2007				Dec. 30, 2006				Dec. 29, 2007				Dec. 30, 2006
Service cost		$	22,642,000			$	21,164,000			$	121,000			$	113,000
Interest cost			25,304,000				22,827,000				143,000				133,000
Expected return on plan assets			(33,836,000	)			(29,186,000	)			—				—
Amortization of prior service cost			1,496,000				1,423,000				36,000				51,000
Recognized net actuarial loss (gain)			853,000				2,422,000				(39,000	)			(33,000	)
Amortization of net transition obligation			—				—				38,000				38,000
Net periodic benefit cost		$	16,459,000			$	18,650,000			$	299,000			$	302,000

			SYSCO’s contributions to its defined benefit plans were $45,648,000 and $45,491,000 during the 26-week periods ended December 29, 2007 and December 30, 2006, respectively.
			Although contributions to its qualified pension plan (Retirement Plan) are not required to meet ERISA minimum funding requirements, the company anticipates it will make voluntary contributions of approximately $80,000,000 during fiscal 2008, of which $40,000,000 have been made through December 29, 2007. The company’s contributions to the Supplemental Executive Retirement Plan (SERP) and other post-retirement plans are made in the amounts needed to fund current year benefit payments. The estimated fiscal 2008 contributions to fund benefit payments for the SERP and other post-retirement plans are $12,221,000 and $268,000, respectively.

	7.		Earnings Per Share
			The following table sets forth the computation of basic and diluted earnings per share:

		26-Week Period Ended								13-Week Period Ended
		Dec. 29, 2007				Dec. 30, 2006				Dec. 29, 2007				Dec. 30, 2006
Numerator:
Net earnings		$	531,137,000			$	476,686,000			$	264,148,000			$	246,538,000
Denominator:
Weighted-average basic shares outstanding			609,489,326				619,642,963				608,169,202				619,158,876
Dilutive effect of employee and director stock options			6,403,789				7,134,078				6,451,032				9,270,965
Weighted-average diluted shares outstanding			615,893,115				626,777,041				614,620,234				628,429,841
Basic earnings per share		$	0.87			$	0.77			$	0.43			$	0.40
Diluted earnings per share		$	0.86			$	0.76			$	0.43			$	0.39

			The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 16,500,000 and 23,000,000 for the first 26 weeks of fiscal 2008 and 2007, respectively. The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 16,000,000 and 14,000,000 for the second quarter of fiscal 2008 and 2007, respectively.
	8.		Share-Based Compensation
			SYSCO provides compensation benefits to employees and non-employee directors under several share-based payment arrangements including the 2007 Stock Option Plan, the 2005 Non-Employee Directors Stock Plan, the Employees’ Stock Purchase Plan and the 2005 Management Incentive Plan.
			SYSCO accounts for share-based compensation using the fair value recognition provisions of FASB Statement No. 123(R), “Share-Based Payment” (SFAS 123(R)).
			Stock Option Plans
			SYSCO’s 2007 Stock Option Plan was adopted in November 2007 and reserved up to 30,000,000 shares of SYSCO common stock for share-based awards to directors, officers and other employees of the company and its subsidiaries at the fair market value (as defined in the plan) at the date of grant. Under the 2007 Stock Option Plan, grants may be made of options, stock appreciation rights, restricted stock, restricted stock units and other types of stock-based awards. In the first 26 weeks of fiscal 2008, options to purchase 6,415,800 shares were granted to employees from this plan.
			Options to purchase 6,504,200 shares were granted to employees in the first 26 weeks of fiscal 2007 from the 2004 Stock Option Plan. No further grants will be made from the 2004 Plan, which was replaced by the 2007 Stock Option Plan discussed above.

			In the first 26 weeks of fiscal 2008, 47,920 shares of restricted stock were granted to non-employee directors from the 2005 Non-Employee Directors Stock Plan. In the first 26 weeks of fiscal 2007, 30,000 shares of restricted stock and options to purchase 35,000 shares were granted to non-employee directors from the 2005 Non-Employee Directors Stock Plan.
			The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per share of options granted during the 26-week periods ended December 29, 2007 and December 30, 2006 was $6.50 and $6.85, respectively.
			Employees’ Stock Purchase Plan
			In November 2007, the SYSCO Employees’ Stock Purchase Plan was amended to reserve an additional 6,000,000 shares of SYSCO common stock for issuance under the plan.
			Shares of SYSCO common stock purchased by plan participants under the SYSCO Employees’ Stock Purchase Plan during the first 26 weeks of fiscal 2008 and 2007 were 833,605 and 900,987, respectively.
			The weighted average fair value per share of employee stock purchase rights issued pursuant to the Employees’ Stock Purchase Plan was $5.14 and $4.79 during the first 26 weeks of fiscal 2008 and 2007, respectively. The fair value of the stock purchase rights was calculated as the difference between the stock price and the employee purchase price.
			Management Incentive Compensation
			A total of 588,143 shares and 323,822 shares at a fair value per share of $32.99 and $30.56, respectively, were issued pursuant to the Management Incentive Plan in the first quarter of fiscal 2008 and fiscal 2007, respectively, for bonuses earned in the preceding fiscal years.
			All Share-Based Payment Arrangements
			The total share-based compensation cost that has been recognized in results of operations was $43,118,000 and $53,653,000 for the first 26 weeks of each of fiscal 2008 and fiscal 2007, respectively.
			The total share-based compensation cost that has been recognized in results of operations was $27,925,000 and $22,172,000 for the second quarter of each of fiscal 2008 and fiscal 2007, respectively.
			As of December 29, 2007, there was $91,379,000 of total unrecognized compensation cost related to share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 3.01 years.
	9.		Income Taxes
			SYSCO is subject to income tax primarily in the United States and Canada. As discussed in Note 2, Changes in Accounting, the company adopted FIN 48 effective July 1, 2007. As a result of this adoption, the company recognized, as a cumulative effect of change in accounting principle, a $91,635,000 decrease related to FIN 48 in its beginning retained earnings on its July 1, 2007 balance sheet.

			As of July 1, 2007, the gross amount of unrecognized tax benefits was $82,639,000, which represents all tax jurisdictions. The company generally does not anticipate that settlement of the liabilities will require payment of cash within the next twelve months. As of July 1, 2007, the gross amount of accrued interest liabilities was $126,795,000 related to unrecognized tax benefits. The company does not have any accrued liabilities for penalties related to unrecognized tax benefits. To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, estimated amounts required under FIN 48 have been accrued and are classified as a component of income taxes in the consolidated results of operations. This was the company’s accounting policy prior to the adoption of FIN 48, and SYSCO elected to continue this accounting policy post-adoption.
			If SYSCO were to recognize all unrecognized tax benefits recorded as of July 1, 2007, approximately $56,034,000 of the $82,639,000 reserve would reduce the effective tax rate. As of the date of adoption of FIN 48 and as of December 29, 2007, the company does not anticipate that any of its unrecognized tax benefits will significantly increase or decrease within the next twelve months. The company does not anticipate accrued interest on unrecognized tax benefits to be material for fiscal 2008.
			SYSCO is currently in appeals as it relates to certain adjustments from the Internal Revenue Service (IRS) in relation to its audit of the company’s 2003 and 2004 federal income tax returns. See further discussion in Note 11, Commitments and Contingencies, under the caption “BSCC Cooperative Structure.” The IRS is also auditing SYSCO’s 2005 and 2006 federal income tax returns; however, the company does not believe these audits will conclude in fiscal 2008. SYSCO’s tax returns in the majority of the state and local jurisdictions are no longer subject to audit for years before 2003; however, some jurisdictions have audits open prior to 2003, with the earliest dating back to 1996. Several of the company’s subsidiaries are open to examination in Canada dating back to 2003. Although the outcome of tax audits is generally uncertain, the company believes that adequate amounts of tax, including interest and penalties, have been provided for any adjustments that may result from those years.
			Reflected in the changes in the net deferred tax liability and prepaid/accrued income tax balances from June 30, 2007 to December 29, 2007 is the reclassification of deferred tax liabilities to accrued income taxes related to supply chain distributions. This reclassification reflects the tax payments to be made during the next twelve months related to previously deferred supply chain distributions.
			The effective tax rate was 38.2% for the first 26 weeks of fiscal 2008 and 38.4% for the first 26 weeks of fiscal 2007. Included in the effective tax rate for the first 26 weeks of fiscal 2008 was a tax benefit of approximately $7,700,000 resulting from the recognition of a net operating loss deferred tax asset which arose due to a recently enacted state tax law and a decrease in tax provision for a foreign tax liability of approximately $1,600,000, primarily due to a reduction in future tax rates.
			The effective tax rate for the second quarter of fiscal 2008 was 38.3%, an increase from the effective tax rate of 38.0% for the second quarter of fiscal 2007. The increase in the effective tax rate for the second quarter of fiscal 2008 was primarily due to reduced gains in the carrying value of corporate-owned life insurance policies to their cash surrender values as compared to higher gains related to these policies in the second quarter of fiscal 2007.
			The determination of the company’s overall effective tax rate requires the use of estimates. The effective tax rate reflects a combination of income earned and taxed in the various U.S. federal and state, as well as Canadian federal and provincial, jurisdictions. Jurisdictional tax law changes, increases/decreases in permanent differences between book and tax items, tax credits

			and the company’s change in earnings from these taxing jurisdictions all affect the overall effective tax rate.
	10.		Acquisitions
			During the first 26 weeks of fiscal 2008, the company paid $34,729,000 for acquisitions made during fiscal 2008 and for contingent consideration related to operations acquired in previous fiscal years. In addition, escrowed funds in the amount of $5,000,000 were released to sellers of previously acquired businesses during the first 26 weeks of fiscal 2008.
			Some of the company’s acquisitions involve contingent consideration typically payable only in the event that specified operating results are attained or certain outstanding contingencies are resolved. Aggregate contingent consideration amounts outstanding as of December 29, 2007 included $72,228,000 in cash, which, if distributed, could result in the recording of additional goodwill. Such amounts are to be paid out over periods of up to four years from the date of acquisition if the contingent criteria are met.
	11.		Commitments and Contingencies
			SYSCO is engaged in various legal proceedings which have arisen but have not been fully adjudicated. Management believes these proceedings will not have a material adverse effect upon the consolidated financial position or results of operations of the company when ultimately concluded.
			Product Liability Claim
			In October 2007, an arbitration judgment against the company was issued related to a product liability claim from one of SYSCO’s former customers, which formalized a preliminary award by the arbitrator in July 2007. As of the year ended June 30, 2007, the company had recorded $50,296,000 on its consolidated balance sheet within accrued expenses related to the accrual of this loss and a corresponding receivable of $48,296,000 within prepaid expenses and other current assets, which represented the estimate of the loss less the $2,000,000 deductible on SYSCO’s insurance policy, as the company anticipated recovery from various parties. In December 2007, the company paid its deductible on its insurance policy and made arrangements with its insurance carrier and other parties who paid the remaining amount of the judgment in excess of the company’s deductible. The company no longer has any remaining contingent liabilities related to this claim.
			Multi-Employer Pension Plans
			SYSCO contributes to several multi-employer defined benefit pension plans based on obligations arising under collective bargaining agreements covering union-represented employees. SYSCO does not directly manage these multi-employer plans, which are generally managed by boards of trustees, half of whom are appointed by the unions and the other half by other employers contributing to the plan. Based upon the information available from plan administrators, management believes that several of these multi-employer plans are underfunded. In addition, the Pension Protection Act, enacted in August 2006, will require underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding, perhaps beginning as soon as calendar 2008. As a result, SYSCO expects its contributions to these plans to increase in the future.
			Under current law regarding multi-employer defined benefit plans, a plan’s termination, SYSCO’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any

			underfunded multi-employer defined benefit plan would require SYSCO to make payments to the plan for SYSCO’s proportionate share of the multi-employer plan’s unfunded vested liabilities. Based on the information available from plan administrators, SYSCO estimates that its share of withdrawal liability on all the multi-employer plans it participates in could be as much as $135,000,000 based on a voluntary withdrawal. In addition, if a multi-employer defined benefit plan fails to satisfy certain minimum funding requirements, the IRS may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund. Of the plans in which SYSCO participates, one plan is more critically underfunded than the others. During the first quarter of fiscal 2008, SYSCO obtained information that this plan failed to satisfy minimum funding requirements for certain periods and believes it is probable that additional funding will be required as well as the payment of excise tax. As a result, SYSCO recorded a liability of approximately $9,500,000 related to its share of the minimum funding requirements and related excise tax for these periods. Currently, management cannot estimate when the payment of this contribution will be required.
			BSCC Cooperative Structure
			SYSCO’s affiliate, Baugh Supply Chain Cooperative (BSCC), is a cooperative taxed under subchapter T of the United States Internal Revenue Code. SYSCO believes that the deferred tax liabilities resulting from the business operations and legal ownership of BSCC are appropriate under the tax laws. However, if the application of the tax laws to the cooperative structure of BSCC were to be successfully challenged by any federal, state or local tax authority, SYSCO could be required to accelerate the payment of all or a portion of its income tax liabilities associated with BSCC that it otherwise has deferred until future periods, and in that event, SYSCO would be liable for interest on such amounts. As of December 29, 2007, SYSCO has recorded deferred income tax liabilities of $734,468,000, net of federal benefit, related to the BSCC supply chain distributions. If the IRS and any other relevant taxing authorities determine that all amounts since the inception of BSCC were inappropriately deferred, and the determination is upheld, SYSCO estimates that in addition to making a current payment for amounts previously deferred, as discussed above, the company may be required to pay interest on the cumulative deferred balances. These interest amounts could range from $240,000,000 to $265,000,000, prior to federal and state income tax benefit, as of December 29, 2007. SYSCO calculated this amount based upon the amounts deferred since the inception of BSCC applying the applicable jurisdictions’ interest rates in effect in each period. The IRS, in connection with its audit of the company’s 2003 and 2004 federal income tax returns, proposed adjustments related to the taxability of the cooperative structure. The company is vigorously protesting these adjustments. The company has reviewed the merits of the issues raised by the IRS, and, while management believes it is probable the company will prevail, the company concluded the measurement model of FIN 48 required an accrual for a portion of the interest exposure.
			Fuel Commitments
			From time to time, SYSCO may enter into forward purchase commitments for a portion of its projected diesel fuel requirements. As of December 29, 2007, no outstanding forward diesel fuel purchase commitments existed; however, as of January 26, 2008, outstanding forward diesel fuel purchase commitments total approximately $47,227,000 at a fixed price through the end of fiscal 2008. These agreements meet the definition of a derivative. However, the company elected to use the normal purchase and sale exemption available under relevant accounting literature, which allows SYSCO to account for these agreements on an accrual basis and thus they are not recorded at fair value.

	12.		Business Segment Information
			The company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are reportable segments as defined in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Broadline operating companies distribute a full line of food products and a wide variety of non-food products to both traditional and chain restaurant customers. SYGMA operating companies distribute a full line of food products and a wide variety of non-food products to certain chain restaurant customer locations. “Other” financial information is attributable to the company’s other operating segments, including the company’s specialty produce, custom-cut meat and lodging industry segments and a company that distributes to internationally located chain restaurants.
			The 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 are eliminated upon consolidation. Centrally incurred costs are allocated based upon the relative level of service used by each operating company.
			The company does not allocate to its segments share-based compensation expense related to stock option grants, issuances of stock pursuant to the Employees’ Stock Purchase Plan and stock grants to non-employee directors. The decrease in unallocated corporate expenses for the first 26 weeks of fiscal 2008 over fiscal 2007 is primarily attributable to reduced share-based compensation expense partially offset by reduced gains recorded related to the cash surrender value of corporate-owned life insurance policies. The increase in unallocated corporate expenses for the second quarter of fiscal 2008 over fiscal 2007 is primarily attributable to increased share-based compensation expense and losses recorded in the second quarter of fiscal 2008 related to the cash surrender value of corporate-owned life insurance policies compared to gains recorded in fiscal 2007.

		26-Week Period Ended								13-Week Period Ended
		Dec. 29, 2007				Dec. 30, 2006				Dec. 29, 2007				Dec. 30, 2006
Sales (in thousands):
Broadline		$	14,830,471			$	13,554,116			$	7,333,071			$	6,709,294
SYGMA			2,233,033				2,158,171				1,098,326				1,086,094
Other			1,817,386				1,761,616				929,825				892,801
Intersegment sales			(235,541	)			(233,083	)			(121,717	)			(119,441	)
Total		$	18,645,349			$	17,240,820			$	9,239,505			$	8,568,748

		26-Week Period Ended								13-Week Period Ended
		Dec. 29, 2007				Dec. 30, 2006				Dec. 29, 2007				Dec. 30, 2006
Earnings before income taxes (in thousands):
Broadline		$	896,906			$	819,997			$	456,866			$	408,891
SYGMA			4,528				5,781				1,742				4,334
Other			64,340				61,808				34,064				33,343
Total segments			965,774				887,586				492,672				446,568
Unallocated corporate expenses			(106,040	)			(114,089	)			(64,232	)			(48,677	)
Total		$	859,734			$	773,497			$	428,440			$	397,891

		Dec. 29, 2007				June 30, 2007				Dec. 30, 2006
Assets (in thousands):
Broadline		$	5,906,764			$	5,573,079			$	5,448,037
SYGMA			409,156				385,470				377,048
Other			1,016,770				929,573				906,145
Total segments			7,332,690				6,888,122				6,731,320
Corporate			2,620,137				2,630,809				2,586,150
Total		$	9,952,827			$	9,518,931			$	9,317,380

13.		Supplemental Guarantor Information
		SYSCO International, Co. is an unlimited liability company organized under the laws of the Province of Nova Scotia, Canada and is a wholly owned subsidiary of SYSCO. In May 2002, SYSCO International, Co. issued, in a private offering, $200,000,000 of 6.10% notes due in 2012. These notes are fully and unconditionally guaranteed by SYSCO.
		The following condensed consolidating financial statements present separately the financial position, results of operations and cash flows of the parent guarantor (SYSCO), the subsidiary issuer (SYSCO International) and all other non-guarantor subsidiaries of SYSCO (Other Non-Guarantor Subsidiaries) on a combined basis and eliminating entries.

		Condensed Consolidating Balance Sheet
		December 29, 2007
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Current assets		$	161,933			$	—			$	4,722,547			$	—			$	4,884,480
Investment in subsidiaries			13,408,552				388,751				102,030				(13,899,333	)			—
Plant and equipment, net			205,278				—				2,635,951				—				2,841,229
Other assets			698,086				1,463				1,527,569				—				2,227,118
Total assets		$	14,473,849			$	390,214			$	8,988,097			$	(13,899,333	)		$	9,952,827
Current liabilities		$	321,830			$	932			$	2,945,921			$	—			$	3,268,683
Intercompany payables (receivables)			8,574,425				98,257				(8,672,682	)			—				—
Long-term debt			1,877,939				213,997				43,611				—				2,135,547
Other liabilities			552,989				—				665,545				—				1,218,534
Shareholders’ equity			3,146,666				77,028				14,005,702				(13,899,333	)			3,330,063
Total liabilities and shareholders’ equity		$	14,473,849			$	390,214			$	8,988,097			$	(13,899,333	)		$	9,952,827

		Condensed Consolidating Balance Sheet
		June 30, 2007
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Current assets		$	244,441			$	—			$	4,431,105			$	—			$	4,675,546
Investment in subsidiaries			12,675,360				349,367				126,364				(13,151,091	)			—
Plant and equipment, net			170,288				—				2,550,945				—				2,721,233
Other assets			654,287				—				1,467,865				—				2,122,152
Total assets		$	13,744,376			$	349,367			$	8,576,279			$	(13,151,091	)		$	9,518,931
Current liabilities		$	371,149			$	1,034			$	3,042,906			$	—			$	3,415,089
Intercompany payables (receivables)			8,251,239				44,757				(8,295,996	)			—				—
Long-term debt			1,471,428				243,786				43,013				—				1,758,227
Other liabilities			505,660				—				561,555				—				1,067,215
Shareholders’ equity			3,144,900				59,790				13,224,801				(13,151,091	)			3,278,400
Total liabilities and shareholders’ equity		$	13,744,376			$	349,367			$	8,576,279			$	(13,151,091	)		$	9,518,931

		Condensed Consolidating Balance Sheet
		December 30, 2006
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Current assets		$	179,844			$	12			$	4,344,883			$	—			$	4,524,739
Investment in subsidiaries			11,939,935				317,203				150,730				(12,407,868	)			—
Plant and equipment, net			187,257				—				2,406,617				—				2,593,874
Other assets			752,294				—				1,446,473				—				2,198,767
Total assets		$	13,059,330			$	317,215			$	8,348,703			$	(12,407,868	)		$	9,317,380
Current liabilities		$	408,181			$	1,018			$	2,834,028			$	—			$	3,243,227
Intercompany payables (receivables)			7,486,181				16,994				(7,503,175	)			—				—
Long-term debt			1,482,019				233,094				40,869				—				1,755,982
Other liabilities			532,062				—				549,462				—				1,081,524
Shareholders’ equity			3,150,887				66,109				12,427,519				(12,407,868	)			3,236,647
Total liabilities and shareholders’ equity		$	13,059,330			$	317,215			$	8,348,703			$	(12,407,868	)		$	9,317,380

		Condensed Consolidating Results of Operations
		For the 26-Week Period Ended December 29, 2007
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	18,645,349			$	—			$	18,645,349
Cost of sales			—				—				15,086,427				—				15,086,427
Gross margin			—				—				3,558,922				—				3,558,922
Operating expenses			97,959				74				2,557,244				—				2,655,277
Operating income			(97,959	)			(74	)			1,001,678				—				903,645
Interest expense (income)			224,082				5,958				(174,754	)			—				55,286
Other income, net			(5,433	)			—				(5,942	)			—				(11,375	)
Earnings (losses) before income taxes			(316,608	)			(6,032	)			1,182,374				—				859,734
Income tax (benefit) provision			(121,010	)			(2,305	)			451,912				—				328,597
Equity in earnings of subsidiaries			726,735				14,865				—				(741,600	)			—
Net earnings		$	531,137			$	11,138			$	730,462			$	(741,600	)		$	531,137

		Condensed Consolidating Results of Operations
		For the 26-Week Period Ended December 30, 2006
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	17,240,820			$	—			$	17,240,820
Cost of sales			—				—				13,918,115				—				13,918,115
Gross margin			—				—				3,322,705				—				3,322,705
Operating expenses			101,121				63				2,406,665				—				2,507,849
Operating income			(101,121	)			(63	)			916,040				—				814,856
Interest expense (income)			199,724				6,040				(151,992	)			—				53,772
Other income, net			(7,168	)			—				(5,245	)			—				(12,413	)
Earnings (losses) before income taxes			(293,677	)			(6,103	)			1,073,277				—				773,497
Income tax (benefit) provision			(118,746	)			(2,377	)			417,934				—				296,811
Equity in earnings of subsidiaries			651,617				11,792				—				(663,409	)			—
Net earnings		$	476,686			$	8,066			$	655,343			$	(663,409	)		$	476,686

		Condensed Consolidating Results of Operations
		For the 13-Week Period Ended December 29, 2007
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	9,239,505			$	—			$	9,239,505
Cost of sales			—				—				7,471,725				—				7,471,725
Gross margin			—				—				1,767,780				—				1,767,780
Operating expenses			62,467				41				1,256,260				—				1,318,768
Operating income			(62,467	)			(41	)			511,520				—				449,012
Interest expense (income)			113,473				3,207				(87,765	)			—				28,915
Other income, net			(4,610	)			—				(3,733	)			—				(8,343	)
Earnings (losses) before income taxes			(171,330	)			(3,248	)			603,018				—				428,440
Income tax (benefit) provision			(65,641	)			(1,244	)			231,177				—				164,292
Equity in earnings of subsidiaries			369,837				8,522				—				(378,359	)			—
Net earnings		$	264,148			$	6,518			$	371,841			$	(378,359	)		$	264,148

		Condensed Consolidating Results of Operations
		For the 13-Week Period Ended December 30, 2006
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	8,568,748			$	—			$	8,568,748
Cost of sales			—				—				6,915,259				—				6,915,259
Gross margin			—				—				1,653,489				—				1,653,489
Operating expenses			39,652				31				1,191,284				—				1,230,967
Operating income			(39,652	)			(31	)			462,205				—				422,522
Interest expense (income)			101,446				3,316				(76,756	)			—				28,006
Other income, net			(739	)			—				(2,636	)			—				(3,375	)
Earnings (losses) before income taxes			(140,359	)			(3,347	)			541,597				—				397,891
Income tax (benefit) provision			(58,611	)			(1,306	)			211,270				—				151,353
Equity in earnings of subsidiaries			328,286				6,116				—				(334,402	)			—
Net earnings		$	246,538			$	4,075			$	330,327			$	(334,402	)		$	246,538

		Condensed Consolidating Cash Flows
		26-Week Period Ended December 29, 2007
						SYSCO				Other Non-Guarantor				Consolidated
		SYSCO				International				Subsidiaries				Totals
						(In thousands)
Net cash provided by (used for):
Operating activities		$	(105,286	)		$	9,574			$	496,616			$	400,904
Investing activities			(52,093	)			—				(254,059	)			(306,152	)
Financing activities			(107,836	)			(29,790	)			1,029				(136,597	)
Effect of exchange rate on cash			—				—				2,759				2,759
Intercompany activity			245,888				20,216				(266,104	)			—
Net decrease in cash			(19,327	)			—				(19,759	)			(39,086	)
Cash at the beginning of the period			135,877				—				71,995				207,872
Cash at the end of the period		$	116,550			$	—			$	52,236			$	168,786