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Derivative Financial Instruments | 6 Months Ended
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Dec. 30, 2017
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. Hedging of foreign currency risk In fiscal 2017, Sysco entered into cross-currency swap contracts to hedge the foreign currency transaction risk of certain pound sterling-denominated intercompany loans. There are no credit-risk related contingent features associated with these swaps, which have been designated as cash flow hedges. The company has 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 the U.K. and Sweden 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 outstanding 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 these hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of December 30, 2017 are below:
Maturity Date of the Hedging Instrument |  | Currency / Unit of Measure |  | Notional Value
|  |  |  | (In millions)
Hedging of interest rate risk |  |  |  |
February 2018 |  | U.S. Dollar |  | 500 |
April 2019 |  | U.S. Dollar |  | 500 |
October 2020 |  | U.S. Dollar |  | 750 |
July 2021 |  | U.S. Dollar |  | 500 |
Hedging of foreign currency risk (1) |  |  |  |
July 2021 |  | British Pound Sterling |  | 234 |
August 2021 |  | British Pound Sterling |  | 466 |
June 2023 |  | Euro |  | 500 |
Hedging of fuel risk |  |  |  |
Various (January 2018 to November 2018) |  | Gallons |  | 44 |
(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 December 30, 2017, July 1, 2017 and December 31, 2016 are as follows:
|  |  | Derivative Fair Value
| Balance Sheet location |  | Dec. 30, 2017 |  | Jul. 1, 2017 |  | Dec. 31, 2016
|  |  | (In thousands)
Fair Value Hedges: |  |  |  |  |  |  |
Interest rate swaps | Other current assets |  | $ | 118 |  |  | $ | 707 |  |  | $ | — |
Interest rate swaps | Other assets |  | — |  |  | — |  |  | 1,149 |
Interest rate swaps | Other long-term liabilities |  | 33,003 |  |  | 21,390 |  |  | 25,391 |
Cash Flow Hedges: |  |  |  |  |  |  |
Fuel swaps | Other current assets |  | $ | 13,678 |  |  | $ | 717 |  |  | $ | 3,950 |
Foreign currency forwards | Other current assets |  | 555 |  |  | — |  |  | — |
Cross currency swaps | Other assets |  | — |  |  | — |  |  | 9,027 |
Fuel swaps | Other current liabilities |  | — |  |  | 6,320 |  |  | — |
Foreign currency forwards | Other current liabilities |  | 351 |  |  | 154 |  |  | 1,048 |
Cross currency swaps | Other long-term liabilities |  | 21,310 |  |  | 5,816 |  |  | — |
Net Investment Hedges: |  |  |  |  |  |  |
Foreign currency swaps | Other assets |  | $ | 7,822 |  |  | $ | — |  |  | $ | 28,395 |
Foreign currency swaps | Other long-term liabilities |  | 48,087 |  |  | 12,308 |  |  | 15,915 |
Foreign denominated debt | Long-term debt |  | 600,050 |  |  | 571,450 |  |  | 525,950 |
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:
|  | 13-Week Period Ended Dec. 30, 2017
|  | 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 |  | $ | 11,712,104 |  |  | $ | 2,167,104 |  |  | $ | 85,986 |
Gain or (loss) on fair value hedging relationships: |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |
Hedged items (1) |  | $ | — |  |  | $ | — |  |  | $ | (7,515 | )
Derivatives designated as hedging instruments |  | — |  |  | — |  |  | (9,942 | )
Gain or (loss) on cash flow hedging relationships: |  |  |  |  |  |
Fuel swaps: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income |  | $ | — |  |  | $ | 1,814 |  |  | $ | — |
Foreign currency contracts: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income |  | $ | 525 |  |  | $ | — |  |  | $ | — |
Interest rate swaps: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income (2) |  | $ | — |  |  | $ | — |  |  | $ | (2,873 | )
(1) The hedged total includes interest expense of $17,078 and change in fair value of debt of $9,563. (2) Losses reclassified from AOCI into income represent amortization of losses on forward starting interest rate swap agreements that were previously settled.
|  | 26-Week Period Ended Dec. 30, 2017
|  | 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 |  | $ | 23,568,860 |  |  | $ | 4,337,680 |  |  | $ | 166,870 |
Gain or (loss) on fair value hedging relationships: |  |  |  |  |  |
Interest contracts: |  |  |  |  |  |
Hedged items (1) |  | $ | — |  |  | $ | — |  |  | $ | (22,745 | )
Derivatives designated as hedging instruments |  | — |  |  | — |  |  | (10,989 | )
Gain or (loss) on cash flow hedging relationships: |  |  |  |  |  |
Fuel swaps: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income |  | $ | — |  |  | $ | 1,658 |  |  | $ | — |
Foreign currency contracts: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income |  | $ | 834 |  |  | $ | — |  |  | $ | — |
Interest contracts: |  |  |  |  |  |
Gain or (loss) reclassified from AOCI into income (2) |  | $ | — |  |  | $ | — |  |  | $ | (5,746 | )
(1) The hedged total includes interest expense of $34,156 and change in fair value of debt of $11,411. (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 derivatives not designated as hedging instruments on the consolidated results of operations for the 13-week period ended December 30, 2017, presented on a pretax basis, are as follows:
| 13-Week Period Ended Dec. 30, 2017
| Location of Gain or (Loss) Recognized in Income on Derivative |  | Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments: | (In thousands)
Foreign currency contracts | Other expense (income) |  | $ | (2,516 | )
The location and effect of derivatives not designated as hedging instruments on the consolidated results of operations for the 26-week period ended December 30, 2017, presented on a pretax basis, are as follows:
| 26-Week Period Ended Dec. 30, 2017
| Location of Gain or (Loss) Recognized in Income on Derivative |  | Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments: | (In thousands)
Foreign currency contracts | Other expense (income) |  | $ | (2,280 | )
The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 13-week period ended December 30, 2017, presented on a pretax basis, are as follows:
| 13-Week Period Ended Dec. 30, 2017
| 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 | $ | 8,505 |  |  | Operating income |  | $ | 1,814 |
Foreign currency contracts | 6,331 |  |  | Cost of goods sold |  | 525 |
Total | $ | 14,836 |  |  |  |  | $ | 2,339 |
Derivatives in net investment hedging relationships: |  |  |  |  |
Foreign currency contracts | $ | (12,063 | ) |  | Other expense (income) |  | $ | — |
Foreign denominated debt | (9,450 | ) |  | Other expense (income) |  | — |
Total | $ | (21,513 | ) |  |  |  | $ | — |
The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 26-week period ended December 30, 2017, presented on a pretax basis, are as follows:
| 26-Week Period Ended Dec. 30, 2017
| 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 | $ | 19,706 |  |  | Operating income |  | $ | 1,658 |
Foreign currency contracts | (15,462 | ) |  | Cost of goods sold |  | 834 |
Total | $ | 4,244 |  |  |  |  | $ | 2,492 |
Derivatives in net investment hedging relationships: |  |  |  |  |
Foreign currency contracts | $ | (27,957 | ) |  | Other expense (income) |  | $ | — |
Foreign denominated debt | (28,600 | ) |  | Other expense (income) |  | — |
Total | $ | (56,557 | ) |  |  |  | $ | — |
The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 30, 2017 are as follows:
| Dec. 30, 2017 |  | Dec. 30, 2017
| 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 | $ | (499,960 | ) |  | $ | — |
Long-term debt | (1,747,194 | ) |  | 18,282 |
As of December 30, 2017, the total notional amount of Sysco’s pay-fixed/receivable-variable interest rate swaps was $2.3 billion. The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 13-week period ending December 30, 2017, presented on a pretax basis, are as follows:
| 13-Week Period Ended Dec. 30, 2017
| Location of (Gain) or Loss Recognized (1) |  | Amount of (Gain) or Loss Recognized
|  |  | (In thousands)
Fair Value Hedge Relationships: |  |  |
Interest rate swap agreements (1) | Interest expense |  | $ | 379 |
(1) The effect of derivative instruments and related hedged items that are recorded in other comprehensive income (loss) are disclosed in Note 9, “Other Comprehensive Income.” The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 26-week period ending December 30, 2017, presented on a pretax basis, are as follows:
| 26-Week Period Ended Dec. 30, 2017
| Location of (Gain) or Loss Recognized (1) |  | Amount of (Gain) or Loss Recognized
|  |  | (In thousands)
Fair Value Hedge Relationships: |  |  |
Interest rate swap agreements (1) | Interest expense |  | $ | (422 | )
(1) The effect of derivative instruments and related hedged items that are recorded in other comprehensive income (loss) are disclosed in Note 9, “Other Comprehensive Income.”

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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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