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Derivative Financial Instruments | 3 Months Ended
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Sep. 26, 2020
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 the first quarter of fiscal 2021, Sysco settled some of its previously held interest rate swap contracts, which had a notional value of $750 million, due to the redemption of Sysco’s 2.60% senior notes. Hedging of foreign currency risk Sysco previously entered into cross-currency swap contracts to hedge the foreign currency transaction risk of certain intercompany loans. There were no credit-risk related contingent features associated with these swaps, which had been designated as cash flow hedges. In the first quarter of 2021, Sysco settled its cross-currency swaps, which had a notional value of £234 million. The company also previously used euro-bond denominated debt to 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. Hedging of fuel price risk Sysco uses 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 September 26, 2020 are presented below:
Maturity Date of the Hedging Instrument |  | Currency / Unit of Measure |  | Notional Value
|  |  |  | (In millions)
Hedging of interest rate risk |  |  |  |
July 2021 |  | U.S. Dollar |  | 500
June 2023 |  | Euro |  | 500
March 2025 |  | U.S. Dollar |  | 500
Hedging of foreign currency risk |  |  |  |
Various (September 28, 2020 to October 2020) |  | Swedish Krona |  | 57
Various (October 2020 to February 2021) |  | British Pound Sterling |  | 7
June 2023 |  | Euro |  | 500
Hedging of fuel risk |  |  |  |
Various (September 30, 2020 to December 2021) |  | Gallons |  | 43
The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of September 26, 2020 and June 27, 2020 are as follows:
|  |  | Derivative Fair Value
| Balance Sheet location |  | Sep. 26, 2020 |  | Jun. 27, 2020
|  |  | (In thousands)
Fair Value Hedges: |  |  |  |  |
Interest rate swaps | Other current assets |  | $ | 4,013 |  |  | $ | 1,388 |
Interest rate swaps | Other assets |  | 62,594 |  |  | 69,782 |
Cash Flow Hedges: |  |  |  |  |
Fuel swaps | Other current assets |  | $ | 455 |  |  | $ | 233 |
Foreign currency forwards | Other current assets |  | 753 |  |  | 1,063 |
Fuel swaps | Other assets |  | 385 |  |  | 1,173 |
Cross currency swaps | Other assets |  | — |  |  | 19,614 |
Fuel swaps | Other current liabilities |  | 21,160 |  |  | 28,242 |
Foreign currency forwards | Other current liabilities |  | — |  |  | 222 |
Gains or losses recognized in the consolidated results of operations for cash flow hedging relationships are not significant for each of the periods presented. The location and amount of gains or losses recognized in the consolidated results of operations for fair value hedging relationships for each of the periods, presented on a pretax basis, are as follows:
|  | 13-Week Period Ended |  |
|  | Sep. 26, 2020 |  | Sep. 28, 2019 |  |  |  |
|  | (In thousands) |  |  |  |
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value hedges are recorded |  | $ | 146,717 |  |  | $ | 83,335 |  |  |  |  |
Gain or (loss) on fair value hedging relationships: |  |  |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |  |  |
Hedged items |  | $ | (9,998) |  |  | $ | (24,736) |  |  |  |  |
Derivatives designated as hedging instruments |  | 3,457 |  |  | 8,857 |  |  |  |  |
The losses on the fair value hedging relationships associated with the hedged items as disclosed in the table above are comprised of the following components for each of the periods presented:
|  | 13-Week Period Ended |  |
|  | Sep. 26, 2020 |  | Sep. 28, 2019 |  |  |  |
|  | (In thousands) |  |  |  |
Interest expense |  | $ | (14,834) |  |  | $ | (14,557) |  |  |  |  |
Increase (decrease) in fair value of debt |  | (4,836) |  |  | 10,179 |  |  |  |  |
Hedged items |  | $ | (9,998) |  |  | $ | (24,736) |  |  |  |  |
The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 13-week periods ended September 26, 2020 and September 28, 2019, presented on a pretax basis, are as follows:
| 13-Week Period Ended Sep. 26, 2020
| 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 | $ | 2,891 |  |  | Operating expense |  | $ | (8,652) |
Foreign currency contracts | (19,732) |  |  | Cost of sales / Other income |  | (2,692) |
Total | $ | (16,841) |  |  |  |  | $ | (11,344) |
Derivatives in net investment hedging relationships: |  |  |  |  |
Foreign denominated debt | (36,550) |  |  | N/A |  | — |
Total | $ | (36,550) |  |  |  |  | $ | — |
| 13-Week Period Ended Sep. 28, 2019
| 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 | $ | 344 |  |  | Operating expense |  | $ | (3,406) |
Foreign currency contracts | 12,307 |  |  | Cost of sales / Other income |  | 2 |
Total | $ | 12,651 |  |  |  |  | $ | (3,404) |
Derivatives in net investment hedging relationships: |  |  |  |  |
Foreign currency contracts | $ | 20,852 |  |  | N/A |  | $ | — |
Foreign denominated debt | 21,450 |  |  | N/A |  | — |
Total | $ | 42,302 |  |  |  |  | $ | — |
The location and carrying amount of hedged liabilities in the consolidated balance sheet as of September 26, 2020 are as follows:
| Sep. 26, 2020
| 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 | $ | (499,678) |  |  | $ | (4,198) |
Long-term debt | (1,064,374) |  |  | (62,594) |
The location and carrying amount of hedged liabilities in the consolidated balance sheet as of June 27, 2020 are as follows:
| Jun. 27, 2020
| 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 | $ | (749,924) |  |  | $ | (1,388) |
Long-term debt | (1,563,636) |  |  | (70,239) |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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