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Derivative Financial Instruments
 6 Months Ended
Dec. 28, 2019
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.

Hedging of foreign currency risk

Sysco enters into cross-currency swap contracts to hedge the foreign currency transaction risk of certain intercompany loans. There are no credit-risk related contingent features associated with these swaps, which have been designated as cash flow hedges. The company also uses cross-currency swap contracts and 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 December 28, 2019 are presented below:
Maturity Date of the Hedging Instrument
 
Currency / Unit of Measure
 
Notional Value
 
 
 
 
(In millions)
Hedging of interest rate risk
 
 
 
 
October 2020
 
U.S. Dollar
 
750
July 2021
 
U.S. Dollar
 
500
June 2023
 
Euro
 
500
March 2025
 
U.S. Dollar
 
500
 
 
 
 
 
Hedging of foreign currency risk
 
 
 
 
Various (December 30, 2019 to April 2020)
 
Swedish Krona
 
281
Various (January 2020 to December 2020)
 
British Pound Sterling
 
23
July 2021
 
British Pound Sterling
 
234
August 2021
 
British Pound Sterling
 
466
June 2023
 
Euro
 
500
 
 
 
 
 
Hedging of fuel risk
 
 
 
 
Various (December 31, 2019 to December 2020)
 
Gallons
 
54


The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of December 28, 2019 and June 29, 2019 are as follows:
 
 
 
Derivative Fair Value
 
Balance Sheet location
 
Dec. 28, 2019
 
Jun. 29, 2019
 
 
 
(In thousands)
Fair Value Hedges:
 
 
 
 
 
Interest rate swaps
Other assets
 
$
34,208

 
$
37,396

Interest rate swaps
Other current liabilities
 
2,154

 
—

Interest rate swaps
Other long-term liabilities
 
2,836

 
9,285

 
 
 
 
 
 
Cash Flow Hedges:
 
 
 
 
 
Fuel Swaps
Other current assets
 
$
4,325

 
$
154

Foreign currency forwards
Other current assets
 
11

 
624

Fuel swaps
Other assets
 
207

 
136

Cross currency swaps
Other assets
 
—

 
8,592

Fuel Swaps
Other current liabilities
 
278

 
6,537

Foreign currency forwards
Other current liabilities
 
1,922

 
162

Fuel swaps
Other long-term liabilities
 
—

 
239

Cross currency swaps
Other long-term liabilities
 
1,739

 
—

 
 
 
 
 
 
Net Investment Hedges:
 
 
 
 
 
Foreign currency swaps
Other assets
 
$
4,250

 
$
18,614

Foreign currency swaps
Other long-term liabilities
 
11,894

 
9,973



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
 
26-Week Period Ended
 
 
Dec. 28, 2019
 
Dec. 29, 2018
 
Dec. 28, 2019
 
Dec. 29, 2018
 
 
 
 
 
 
 
 
 
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
 
$
76,762

 
$
87,113

 
$
160,097

 
$
176,129

Gain or (loss) on fair value hedging relationships:
 
 
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
 
 
Hedged items
 
$
(5,350
)
 
$
(46,919
)
 
$
(30,086
)
 
$
(55,506
)
Derivatives designated as hedging instruments
 
(9,248
)
 
31,550

 
(391
)
 
20,691


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
 
26-Week Period Ended
 
 
Dec. 28, 2019
 
Dec. 29, 2018
 
Dec. 28, 2019
 
Dec. 29, 2018
Interest expense
 
$
(14,560
)
 
$
(15,669
)
 
$
(29,117
)
 
$
(30,783
)
Increase (decrease) in fair value of debt
 
(9,210
)
 
31,250

 
969

 
24,723

Hedged items
 
$
(5,350
)
 
$
(46,919
)

$
(30,086
)

$
(55,506
)




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 December 28, 2019 and December 29, 2018, presented on a pretax basis, are as follows:
 
13-Week Period Ended Dec. 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
$
10,345

 
Operating expense
 
$
(3,213
)
Foreign currency contracts
(29,658
)
 
Cost of sales / Other income
 
3,624

Total
$
(19,313
)
 
 
 
$
411

 
 
 
 
 
 
Derivatives in net investment hedging relationships:
 
 
 
 
 
Foreign currency contracts
$
(34,639
)
 
N/A
 
$
—

Foreign denominated debt
(11,650
)
 
N/A
 
—

Total
$
(46,289
)
 
 
 
$
—

 
 
 
 
 
 
 
13-Week Period Ended Dec. 29, 2018
 
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
$
(36,843
)
 
Operating expense
 
$
5,040

Foreign currency contracts
25,463

 
Cost of sales / Other income
 
8

Total
$
(11,380
)
 
 
 
$
5,048

 
 
 
 
 
 
Derivatives in net investment hedging relationships:
 
 
 
 
 
Foreign currency contracts
$
27,143

 
N/A
 
$
—

Foreign denominated debt
8,150

 
N/A
 
—

Total
$
35,293

 
 
 
$
—


The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 26-week periods ended December 28, 2019 and December 29, 2018, presented on a pretax basis, are as follows:
 
26-Week Period Ended Dec. 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
$
10,689

 
Operating expense
 
$
(6,619
)
Foreign currency contracts
(17,351
)
 
Cost of sales / Other income
 
3,626

Total
$
(6,662
)
 
 
 
$
(2,993
)
 
 
 
 
 
 
Derivatives in net investment hedging relationships:
 
 
 
 
 
Foreign currency contracts
$
(13,787
)
 
N/A
 
$
—

Foreign denominated debt
9,800

 
N/A
 
—

Total
$
(3,987
)
 
 
 
$
—

 
 
 
 
 
 
 
26-Week Period Ended Dec. 29, 2018
 
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
$
(35,817
)
 
Operating expense
 
$
9,393

Foreign currency contracts
20,660

 
Cost of sales / Other income
 
491

Total
$
(15,157
)
 
 
 
$
9,884

 
 
 
 
 
 
Derivatives in net investment hedging relationships:
 
 
 
 
 
Foreign currency contracts
$
34,371

 
N/A
 
$
—

Foreign denominated debt
12,100

 
N/A
 
—

Total
$
46,471

 
 
 
$
—



The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 28, 2019 are as follows:
 
Dec. 28, 2019
 
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
$
(749,782
)
 
$
2,154

Long-term debt
(1,562,810
)
 
(31,739
)


The location and carrying amount of hedged liabilities in the consolidated balance sheet as of June 29, 2019 are as follows:
 
Jun. 29, 2019
 
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:
 
 
 
Long-term debt
$
(2,311,636
)
 
$
(28,616
)