Fair Value Measurements

6 Months Ended

Dec. 26, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price).  The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The three levels of the fair value hierarchy are as follows: 

• Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets; 

• Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and 

• Level 3 – Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk. 

Sysco’s policy is to invest in only high-quality investments.  Cash equivalents primarily include time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less.  Restricted cash consists of investments in high-quality money market funds.    

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:

• Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value.  These are included within cash equivalents as a Level 2 measurement in the tables below. 

• Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange.  These are included within cash equivalents and restricted cash as Level 1 measurements in the tables below. 

• The interest rate swap agreements, discussed further in Note 6, "Derivative Financial Instruments" are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates.  These are included within other assets and other long-term liabilities as Level 2 measurements in the tables below.

The following tables present the company’s assets and liabilities measured at fair value on a recurring basis as of December 26, 2015, June 27, 2015 and December 27, 2014:  

	Assets and Liabilities Measured at Fair Value as of Dec. 26, 2015
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	234,161	$	61,473	$	—	$	295,634
Other assets
Interest rate swap agreement	—		3,936		—		3,936
Total assets at fair value	$	234,161	$	65,409	$	—	$	299,570
Liabilities:
Long-term debt	$	—	$	1,241,786	$	—	$	1,241,786
Other long-term liabilities:
Interest rate swap agreement	—		6,575		—		6,575
Total liabilities at fair value	$	—	$	1,248,361	$	—	$	1,248,361

	Assets and Liabilities Measured at Fair Value as of Jun. 27, 2015
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	4,677,735	$	63,689	$	—	$	4,741,424
Restricted cash	168,274		—		—		168,274
Other assets
Interest rate swap agreement	—		12,597		—		12,597
Total assets at fair value	$	4,846,009	$	76,286	$	—	$	4,922,295
Liabilities:
Accrued expenses
Current portion of long-term debt	$	—	$	1,257,127	$	—	$	1,257,127
Long-term debt	—		503,379		—		503,379
Total liabilities at fair value	$	—	$	1,760,506	$	—	$	1,760,506

	Assets and Liabilities Measured at Fair Value as of Dec. 27, 2014
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	4,655,434	$	21,841	$	—	$	4,677,275
Restricted cash	165,465		—		—		165,465
Other assets
Interest rate swap agreement	—		4,802		—		4,802
Total assets at fair value	$	4,820,899	$	26,643	$	—	$	4,847,542
Liabilities:
Long-term debt	$	—	$	1,752,118	$	—	$	1,752,118
Other long-term liabilities
Interest rate swap agreement	—		152		—		152
Total liabilities at fair value	$	—	$	1,752,270	$	—	$	1,752,270

The carrying values of accounts receivable and accounts payable approximated their respective fair values due to their short-term maturities.  The fair value of Sysco’s total debt is estimated based on the quoted market prices for the same or similar issue or on the current rates offered to the company for debt of the same remaining maturities and is considered a Level 2 measurement.  The table above reflects the fair value for any long-term debt that has been hedged and is recorded at fair value. Non-hedged debt is recorded at book value. The fair value of total non-hedged debt approximated$3.3 billion, $5.6 billion and $7.6 billion as of December 26, 2015, June 27, 2015 and December 27, 2014, respectively.  The carrying value of total non-hedged debt was $3.1 billion, $5.4 billion and $7.1 billion as of December 26, 2015, June 27, 2015 and December 27, 2014, respectively.