DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Dec. 28, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Sysco uses derivative financial instruments to enact hedging strategies for risk mitigation purposes; however, we do 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’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.

Sysco has cross-currency swaps and foreign currency forwards designated as fair value hedges for the purpose of hedging foreign currency risk associated with changes in spot rates on foreign denominated intercompany loans and intercompany payables. Sysco has elected to exclude the changes in fair value of the forward points from the assessments of hedge effectiveness. Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components. Unrealized gains or losses on components excluded from hedge effectiveness are recorded as a component of accumulated other comprehensive income (loss) and recognized into earnings over the life of the hedged instrument. Except for the excluded components, changes in the fair value of the hedge are offset against changes in the fair value of the hedged assets or liabilities through earnings.

Sysco also has a cross-currency swap that hedges the foreign currency exposure of our net investment in certain foreign operations. This cross-currency swap is designated as a net investment hedge with gains and losses recognized within accumulated other comprehensive income (loss).

Hedging of fuel price risk

Sysco uses fuel commodity swap contracts to hedge against the risk of the change in the price of diesel fuel on anticipated future purchases. These swaps have been designated as cash flow hedges.

None of our hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of December 28, 2024 are presented below:

Maturity Date of the Hedging Instrument

Currency / Unit of Measure

Notional Value

(In millions)

Hedging of interest rate risk

January 2034

U.S. Dollar

500

Hedging of foreign currency risk

Various (December 2024 to April 2025)

Swedish Krona

378

Various (December 2024 to May 2025)

British Pound Sterling

April 2025

Canadian Dollar

180

June 2025

Canadian Dollar

137

January 2029

Euro

470

Hedging of fuel risk

Various (December 2024 to September 2026)

Gallons

The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheets as of December 28, 2024 and June 29, 2024 are as follows:


		Derivative Fair Value
	Balance Sheet location	Dec. 28, 2024		Jun. 29, 2024
		(In millions)
Fair Value Hedges:


Interest rate swaps	Other assets	$	—	$	6
Interest rate swaps	Other current liabilities	—		1
Interest rate swaps	Other long-term liabilities	2		—
Cross currency swaps	Other current assets	—		2
Cross currency swaps	Other current liabilities	10		3

Foreign currency forwards	Other current assets	2		—


Cash Flow Hedges:
Fuel swaps	Other current assets	$	—	$	1


Foreign currency forwards	Other current liabilities	1		—

Fuel swaps	Other current liabilities	11		2
Fuel swaps	Other assets	—		1
Fuel swaps	Other long-term liabilities	2		—

Net Investment Hedges:
Cross currency swaps	Other current assets	$	4	$	4
Cross currency swaps	Other long-term liabilities	5		10

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, 2024		Dec. 30, 2023		Dec. 28, 2024		Dec. 30, 2023
	(In millions)
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	$	179	$	155	$	344	$	296
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items	$	26	$	(30)	$	(6)	$	(30)
Derivatives designated as hedging instruments	(32)		22		(8)		22
Cross currency swaps and foreign currency forwards:
Hedged items	$	5	$	(3)	$	2	$	—
Derivatives designated as hedging instruments	(6)		3		(2)		—

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. 28, 2024		Dec. 30, 2023		Dec. 28, 2024		Dec. 30, 2023
	(In millions)
Interest expense	$	(8)	$	(3)	$	(15)	$	(3)
Increase (decrease) in fair value of debt	(34)		27		(9)		27
Foreign currency gain (loss)	5		(3)		2		—
Hedged items	$	31	$	(33)	$	(4)	$	(30)

The location and effect of cash flow, net investment, and excluded components of fair value hedges on the consolidated statements of comprehensive income for the 13-week periods ended December 28, 2024 and December 30, 2023, presented on a pretax basis, are as follows:


	13-Week Period Ended Dec. 28, 2024
	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 millions)			(In millions)
Derivatives in cash flow hedging relationships:
Fuel swaps	$	7	Operating expense	$	3




Derivatives in net investment hedging relationships:
Cross currency contracts	$	22	N/A	$	—




Derivatives in fair value hedging relationships:
Change in excluded component of fair value hedge	$	(2)	Other expense (income)	$	—

	13-Week Period Ended Dec. 30, 2023
	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 millions)			(In millions)
Derivatives in cash flow hedging relationships:
Fuel swaps	$	(24)	Operating expense	$	1
Foreign currency contracts	(1)		Cost of sales / Other income	—

Total	$	(25)		$	1

Derivatives in net investment hedging relationships:
Cross currency contracts	$	(22)	N/A	$	—

The location and effect of cash flow, net investment, and excluded components of fair value hedges on the consolidated statements of comprehensive income for the 26-week periods ended December 28, 2024 and December 30, 2023, presented on a pretax basis, are as follows:


	26-Week Period Ended Dec. 28, 2024
	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 millions)			(In millions)
Derivatives in cash flow hedging relationships:
Fuel swaps	$	(11)	Operating expense	$	5
Foreign currency contracts	(1)		Cost of sales / Other income	—

Total	$	(12)		$	5

Derivatives in net investment hedging relationships:
Cross currency contracts	$	4	N/A	$	—




Derivatives in fair value hedging relationships:
Change in excluded component of fair value hedge	$	(2)	Other expense (income)	$	—

	26-Week Period Ended Dec. 30, 2023
	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 millions)			(In millions)
Derivatives in cash flow hedging relationships:
Fuel swaps	$	10	Operating expense	$	3
Foreign currency contracts	(1)		Cost of sales / Other income	—

Total	$	9		$	3

Derivatives in net investment hedging relationships:
Cross currency contracts	$	(22)	N/A	$	—

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 28, 2024 are as follows:


	Dec. 28, 2024
	Carrying Amount of Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)
	(In millions)
Balance sheet location:

Long-term debt	$	(489)	$	3

The carrying amount of hedged liabilities in the consolidated balance sheet as of June 29, 2024 is $498 million.