5. DERIVATIVE FINANCIAL INSTRUMENTS

Sysco manages its debt portfolio to achieve an overall desired position of fixed and floating rates and may employ interest rate swaps from time to time to achieve this position. The company does not use derivative financial instruments for trading or speculative purposes.

In fiscal 2010, the company entered into two interest rate swap agreements that effectively converted $250.0 million of fixed rate debt maturing in fiscal 2013 and $200.0 million of fixed rate debt maturing in fiscal 2014 to floating rate debt. These transactions were entered into with the goal of reducing overall borrowing cost and increasing floating interest rate exposure. These transactions were designated as fair value hedges since the swaps hedge against the changes in fair value of fixed rate debt resulting from changes in interest rates. The swap agreement related to the fiscal 2013 debt was settled upon maturity of the senior notes in February 2013, leaving one remaining outstanding swap agreement outstanding as of March 30, 2013.

The location and the fair value of derivative instruments in the consolidated balance sheet as of March 30, 2013, June 30, 2012 and March 31, 2012 are as follows:



	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Fair value hedge relationships:
Interest rate swap agreements
Mar. 30, 2013	Prepaid expenses and other current assets	$	3,990	N/A	N/A
Jun. 30, 2012	Prepaid expenses and other current assets		2,475	N/A	N/A
Jun. 30, 2012	Other assets		6,219	N/A	N/A
Mar. 31, 2012	Prepaid expenses and other current assets		3,440	N/A	N/A
Mar. 31, 2012	Other assets		7,005	N/A	N/A

The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 13-week periods ended March 30, 2013 and March 31, 2012 presented on a pre-tax basis are as follows:



	Location of (Gain) or Loss Recognized in Income	Amount of (Gain) or Loss Recognized in Income
		13-Week Period Ended
		Mar. 30, 2013		Mar. 31, 2012
		(In thousands)
Fair Value Hedge Relationships:
Interest rate swap agreements	Interest expense	$	832	$	(2,163)

Cash Flow Hedge Relationships:
Interest rate contracts	Interest expense		156		174

The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 39-week periods ended March 30, 2013 and March 31, 2012 presented on a pre-tax basis are as follows:



	Location of (Gain) or Loss Recognized in Income	Amount of (Gain) or Loss Recognized in Income
		39-Week Period Ended
		Mar. 30, 2013		Mar. 31, 2012
		(In thousands)
Fair Value Hedge Relationships:
Interest rate swap agreements	Interest expense	$	(3,492)	$	(5,993)

Cash Flow Hedge Relationships:
Interest rate contracts	Interest expense		469		522

Hedge ineffectiveness represents the difference between the changes in the fair value of the derivative instruments and the changes in fair value of the fixed rate debt attributable to changes in the benchmark interest rate. Hedge ineffectiveness is recorded directly in earnings within interest expense and was immaterial for the 13-week periods and 39-week periods ended March 30, 2013 and March 31, 2012. The interest rate swaps do not contain credit-risk-related contingent features.