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DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended
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Jun. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS Sysco uses derivative financial instruments to enact hedging strategies for risk mitigation purposes; however, the company does not use derivative financial instruments for trading or speculative purposes. Hedging strategies are used to manage interest rate risk, foreign currency risk and fuel price risk. Hedging of interest rate risk Sysco manages its debt portfolio with interest rate swaps from time to time to achieve an overall desired position of fixed and floating rates. In March 2018, the company entered into an interest rate swap agreement that effectively converted $500.0 million of fixed rate debt maturing in 2025 to floating rate debt. Hedging of foreign currency risk Sysco entered into cross-currency swap contracts to hedge the foreign currency transaction risk of certain Canadian dollar and pound sterling-denominated intercompany loans in fiscal 2018 and fiscal 2017, respectively. There are no credit-risk related contingent features associated with these swaps, which have been designated as cash flow hedges. In fiscal 2017, the company had also entered into cross-currency swap contracts and Euro-bond denominated debt that hedge the foreign currency exposure of our net investment in certain foreign operations. Additionally, Sysco’s operations in Europe have inventory purchases denominated in currencies other than their functional currency, such as the Euro, U.S. dollar, Polish zloty and Danish krone. These inventory purchases give rise to foreign currency exposure between the functional currency of each entity and these currencies. The company enters into foreign currency forward swap contracts to sell the applicable entity’s functional currency and buy currencies matching the inventory purchase, which operate as cash flow hedges of the company’s foreign currency-denominated inventory purchases. Sysco uses certain foreign currency contracts to hedge the effects of fluctuations in exchange rates on certain intercompany loans. The company does not formally designate and document such derivative instruments as hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loans are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net earnings. Hedging of fuel price risk In fiscal 2017, Sysco began utilizing fuel commodity swap contracts to hedge against the risk of the change in the price of diesel on anticipated future purchases. These swaps have been designated as cash flow hedges. None of the Company’s hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of June 30, 2018 are below:
Maturity Date of the Hedging Instrument |  | Currency / Unit of Measure |  | Notional Value
|  |  |  | (In millions)
Hedging of interest rate risk |  |  |  |
April 2019 |  | U.S. Dollar |  | 500
October 2020 |  | U.S. Dollar |  | 750
July 2021 |  | U.S. Dollar |  | 500
March 2025 |  | U.S. Dollar |  | 500
Hedging of foreign currency risk (1) |  |  |  |
June 2019 |  | U.S. Dollar |  | 384
June 2021 |  | U.S. Dollar |  | 44
June 2021 |  | Canadian Dollar |  | 300
July 2021 |  | Canadian Dollar |  | 30
July 2021 |  | British Pound Sterling |  | 234
August 2021 |  | British Pound Sterling |  | 466
June 2023 |  | Euro |  | 500
Hedging of fuel risk |  |  |  |
Various (July 2018 to June 2019) |  | Gallons |  | 46
(1) | Foreign currency forward contracts used to hedge against foreign exchange exposures related to inventory purchases are not material to Sysco’s overall hedging portfolio.
The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of June 30, 2018, July 1, 2017 and July 2, 2016 are as follows:
|  |  | Derivative Fair Value
| Balance Sheet Location |  | Jun. 30, 2018 |  | Jul. 1, 2017
|  |  | (In thousands)
Fair Value Hedges: |  |  |  |  |
Interest rate swaps | Other current assets |  | $ | — |  |  | $ | 707 |
Interest rate swaps | Other current liabilities |  | 6,820 |  |  | — |
Interest rate swaps | Other long-term liabilities |  | 49,734 |  |  | 21,390 |
Cash Flow Hedges: |  |  |  |  |
Fuel Swaps | Other current assets |  | $ | 15,316 |  |  | $ | 717 |
Foreign currency forwards | Other current assets |  | 693 |  |  | — |
Cross currency swaps | Other current assets |  | 4,284 |  |  | — |
Cross currency swaps | Other assets |  | 3,454 |  |  | — |
Fuel Swaps | Other current liabilities |  | — |  |  | 6,160 |
Foreign currency forwards | Other current liabilities |  | 71 |  |  | 154 |
Fuel swaps | Other long-term liabilities |  | — |  |  | 160 |
Cross currency swaps | Other long-term liabilities |  | 14,201 |  |  | 5,816 |
Net Investment Hedges: |  |  |  |  |
Foreign currency swaps | Other assets |  | $ | 10,709 |  |  | $ | — |
Foreign currency swaps | Other long-term liabilities |  | 39,690 |  |  | 12,308 |
Foreign denominated debt | Long-term debt |  | 584,150 |  |  | 571,450 |
The location and amount of gains or losses recognized in the consolidated results of operations for fair value and cash flow hedging relationships for each of the periods, presented on a pretax basis, are as follows:
|  | 2018
|  | Cost of Goods Sold |  | Operating Expense |  | Interest Expense
|  | (In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded |  | $ | 47,641,933 |  |  | $ | 8,756,417 |  |  | $ | 395,483 |
Gain or (loss) on fair value hedging relationships: |  |  |  |  |  |
Interest contracts: |  |  |  |  |  |
Hedged items (1) |  | $ | — |  |  | $ | — |  |  | $ | (30,418 | )
Derivatives designated as hedging instruments |  | — |  |  | — |  |  | (39,540 | )
Gain or (loss) on cash flow hedging relationships: |  |  |  |  |  |
Fuel swaps: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income |  | $ | — |  |  | $ | 13,983 |  |  | $ | — |
Foreign currency contracts: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income |  | $ | 1,776 |  |  | $ | — |  |  | $ | — |
Interest contracts: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income (2) |  | $ | — |  |  | $ | — |  |  | $ | (11,499 | )
(1) | The hedged total includes interest expense of $63.5 million and change in fair value of debt of $33.1 million.
(2) | Losses reclassified from AOCI into income represent amortization of losses on forward starting interest rate swap agreements that were previously settled.
The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the fiscal period ended June 30, 2018, presented on a pretax basis, are as follows:
| 2018
| Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives |  | Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income |  | Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
| (In thousands) |  |  |  | (In thousands)
Derivatives in cash flow hedging relationships: |  |  |  |  |
Fuel swaps | $ | 21,878 |  |  | Operating expense |  | $ | 13,983 |
Foreign currency contracts | 1,118 |  |  | Cost of goods sold |  | 1,776 |
Total | $ | 22,996 |  |  |  |  | $ | 15,759 |
Derivatives in net investment hedging relationships: |  |  |  |  |
Foreign currency contracts | $ | (20,584 | ) |  | N/A |  | $ | — |
Foreign denominated debt | (12,700 | ) |  | N/A |  | — |
Total | $ | (33,284 | ) |  |  |  | $ | — |
The location and carrying amount of hedged liabilities in the consolidated balance sheet as of June 30, 2018 are as follows:
| Jun. 30, 2018
| Carrying Amount of Hedged Assets (Liabilities) |  | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)
| (In thousands)
Balance sheet location: |  |  |
Current maturities of long-term debt | $ | (499,610 | ) |  | $ | 5,097 |
Long-term debt | (1,743,732 | ) |  | 47,555 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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