Fair Value Measurements

9 Months Ended

Mar. 26, 2016

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 7, "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.

• Foreign exchange option contracts, discussed further in Note 7, "Derivative Financial Instruments" are valued using a standard industry valuation model that projects future cash flows and discounts the future amounts to a present value using market-based observable inputs including foreign exchange rates, credit risk and forward and spot prices for currencies. These inputs are observable in active markets over the contract term of the derivative instruments held; accordingly, the company classifies these valuation techniques 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 March 26, 2016, June 27, 2015 and March 28, 2015:  

	Assets and Liabilities Measured at Fair Value as of Mar. 26, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	134,925	$	34,050	$	—	$	168,975
Prepaid expenses and other current assets
Foreign exchange option contracts	—		37,244		—		37,244
Other assets
Interest rate swap agreement	—		11,801		—		11,801
Total assets at fair value	$	134,925	$	83,095	$	—	$	218,020
Liabilities:
Long-term debt	$	—	$	1,293,507	$	—	$	1,293,507
Total liabilities at fair value	$	—	$	1,293,507	$	—	$	1,293,507

	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:
Current maturities 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 Mar. 28, 2015
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	4,760,760	$	63,213	$	—	$	4,823,973
Restricted cash	166,208		—		—		166,208
Other assets
Interest rate swap agreement	—		23,295		—		23,295
Total assets at fair value	$	4,926,968	$	86,508	$	—	$	5,013,476
Liabilities:
Long-term debt	$	—	$	1,770,798	$	—	$	1,770,798
Total liabilities at fair value	$	—	$	1,770,798	$	—	$	1,770,798

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$3.4 billion, $5.6 billion and $7.7 billion as of March 26, 2016, June 27, 2015 and March 28, 2015, respectively. The carrying value of total non-hedged debt was $3.1 billion, $5.4 billion and $7.2 billion as of March 26, 2016, June 27, 2015 and March 28, 2015, respectively.