DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTSSysco 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

The company uses 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, British pound sterling, 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 31, 2022 are presented below:

Maturity Date of the Hedging Instrument	Currency / Unit of Measure	Notional Value
		(In millions)
Hedging of interest rate risk
June 2023	Euro	500
Hedging of foreign currency risk
Various (January 2023 to April 2023)	Swedish Krona	266
Various (January 2023 to March 2023)	British Pound Sterling	9
June 2023	Euro	500
Hedging of fuel risk
Various (January 2023 to March 2025)	Gallons	74

The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of December 31, 2022 and July 2, 2022 are as follows:

		Derivative Fair Value
	Balance Sheet location	Dec. 31, 2022		Jul. 2, 2022
		(In thousands)
Fair Value Hedges:
Interest rate swaps	Other current liabilities	$	6,391	$	2,820
Cash Flow Hedges:
Fuel swaps	Other current assets	$	13,490	$	47,170
Foreign currency forwards	Other current assets	1,014		633
Fuel swaps	Other assets	1,331		—
Fuel swaps	Other current liabilities	1,303		—
Foreign currency forwards	Other current liabilities	1		—
Fuel swaps	Other long-term liabilities	1,638		209

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. 31, 2022		Jan. 1, 2022		Dec. 31, 2022		Jan. 1, 2022
	(In thousands)
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	$	132,042	$	242,899	$	256,192	$	371,113
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items	$	(2,685)	$	29,787	$	(309)	$	27,355
Derivatives designated as hedging instruments	742		(39,473)		(5,501)		(47,862)

The gains and losses on the fair value hedging relationships associated with the hedged items as disclosed in the table above consist of the following components for each of the periods presented:

	13-Week Period Ended				26-Week Period Ended
	Dec. 31, 2022		Jan. 1, 2022		Dec. 31, 2022		Jan. 1, 2022
	(In thousands)
Interest expense	$	(1,940)	$	(5,367)	$	(3,879)	$	(11,892)
Decrease in fair value of debt	745		(35,154)		(3,570)		(39,247)
Hedged items	$	(2,685)	$	29,787	$	(309)	$	27,355

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 31, 2022 and January 1, 2022, presented on a pretax basis, are as follows:

	13-Week Period Ended Dec. 31, 2022
	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	$	1,140	Operating expense	$	12,377
Foreign currency contracts	49		Cost of sales / Other income	—
Total	$	1,189		$	12,377
Derivatives in net investment hedging relationships:
Foreign denominated debt	$	(44,999)	N/A	$	—
	13-Week Period Ended Jan. 1, 2022
	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	$	(7,588)	Operating expense	$	9,608
Foreign currency contracts	(356)		Cost of sales / Other income	—
Total	$	(7,944)		$	9,608
Derivatives in net investment hedging relationships:
Foreign denominated debt	$	11,149	N/A	$	—

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 31, 2022 and January 1, 2022, presented on a pretax basis, are as follows:

	26-Week Period Ended Dec. 31, 2022
	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	$	(35,155)	Operating expense	$	25,362
Foreign currency contracts	335		Cost of sales / Other income	—
Total	$	(34,820)		$	25,362
Derivatives in net investment hedging relationships:
Foreign denominated debt	$	(13,653)	N/A	$	—
	26-Week Period Ended Jan. 1, 2022
	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	$	(8,073)	Operating expense	$	17,580
Foreign currency contracts	(434)		Cost of sales / Other income	—
Total	$	(8,507)		$	17,580
Derivatives in net investment hedging relationships:
Foreign denominated debt	$	24,702	N/A	$	—

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 31, 2022 are as follows:

	Dec. 31, 2022
	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	$	(568,932)	$	6,391

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of July 2, 2022 are as follows:

	Jul. 2, 2022
	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	$	(568,601)	$	2,820