Fair Value Measurements

9 Months Ended

Apr. 01, 2017

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. Any derivative instruments described below are discussed further in Note 5, "Derivative Financial Instruments."

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 as Level 1 measurements in the tables below. 

• The interest rate swap agreements 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 as Level 2 measurements in the tables below.

• The foreign currency swap agreements, including cross-currency swaps, are valued using a swap valuation model that utilizes an income approach applying observable market inputs including interest rates, LIBOR swap rates for U.S. dollars, pound sterling and Euro currencies, and credit default swap rates.  These are included as Level 2 measurements in the tables below.

• Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. These are included as Level 2 measurements in the tables below.

• Fuel swap contracts are valued based on observable market transactions of forward commodity prices. These are included 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 April 1, 2017, July 2, 2016 and March 26, 2016:

	Assets and Liabilities Measured at Fair Value as of Apr. 1, 2017
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	91	$	44,270	$	—	$	44,361
Other assets
Interest rate swap agreements	—		659		—		659
Cross-currency swaps	—		4,211		—		4,211
Foreign currency swaps	—		26,691		—		26,691
Fuel swaps	—		831		—		831
Total assets at fair value	$	91	$	76,662	$	—	$	76,753
Liabilities:
Contingent consideration	$	—	$	—	$	3,871	$	3,871
Other long-term liabilities
Interest rate swap agreements	—		28,062		—		28,062
Foreign currency swaps	—		22,693		—		22,693
Foreign currency forwards	—		431		—		431
Total liabilities at fair value	$	—	$	51,186	$	3,871	$	55,057

	Assets and Liabilities Measured at Fair Value as of Jul. 2, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	634,230	$	43,270	$	—	$	677,500
Other assets
Interest rate swap agreements	—		36,805		—		36,805
Total assets at fair value	$	634,230	$	80,075	$	—	$	714,305
Liabilities:
Contingent consideration	$	—	$	—	$	16,439	$	16,439
Total liabilities at fair value	$	—	$	—	$	16,439	$	16,439

	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:
Contingent consideration	$	—	$	—	$	19,965	$	19,965
Total liabilities at fair value	$	—	$	—	$	19,965	$	19,965

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 fair value of total debt approximated$8.9 billion, $7.9 billion and $3.4 billion as of April 1, 2017, July 2, 2016 and March 26, 2016, respectively. The carrying value of total debt was $8.6 billion, $7.4 billion and $3.1 billion as of April 1, 2017, July 2, 2016 and March 26, 2016, respectively.