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SYSCO CORPORATION-Form10-K40
PARTII
ITEM7AQuantitative and Qualitative Disclosures AboutMarket Risk
participating in the plan and the level of contributions made by each employee. Company-sponsored pension plan liabilities are impacted by a number of
factors including the discount rate for determining the current value of plan bene ts, the assumption for the rate of increase in future compensation levels
and the expected rate of return on plan assets. The amount ofshares repurchased in a given period is subject to a number of factors, including available
cash and our general working capital needs at the time. Meeting our dividend target objectives depends on our level of earnings. Our plans with respect
to growth in international markets and adjacent areas that complement our core business are subject to the company’s other strategic initiatives and plans
and economic conditions generally. Legal proceedings are impacted by events, circumstances and individuals beyond the control of Sysco. The need for
additional borrowing or other capital is impacted by factors that include capital expenditures or acquisitions in excess of those currently anticipated, stock
repurchases at historical levels, or other unexpected cash requirements. Plans regarding the repayment of debt are subject to change at any time based
on management’s assessment of the overall needs of the company. The anticipated impact of compliance with laws and regulations also involves the risk
that estimates may turn out to be materially incorrect, and laws and regulations, as well as methods of enforcement, are subject to change.
ITEM7A Quantitative and Qualitative Disclosures
AboutMarket Risk
Interest Rate Risk
We do not utilize  nancial instruments for trading purposes. Our use of debt directly exposes us to interest rate risk. Floating rate debt, where the interest
rate  uctuates periodically, exposes us to short-term changes in market interest rates. Fixed rate debt, where the interest rate is  xed over the life of the
instrument, exposes us to changes in market interest rates re ected in the fair value of the debt and to the risk that we may need to re nance maturing
debt with new debt at higher rates.
We manage our debt portfolio to achieve an overall desired position of  xed and  oating rates and may employ interest rate swaps as a tool to achieve that
position. The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments, potential increases
in interest expense due to market increases in  oating interest rates and the creditworthiness of the counterparties in such transactions.
Fiscal 2013
As of June29,2013, we had $95.5million of commercial paper outstanding. Total debt as of June29,2013 was $2.9billion, of which approximately 88%
was at  xed rates of interest, including the impact of our interest rate swap agreement.
In  scal 2010, we entered into two interest rate swap agreements that effectively converted $250million of  xed rate debt maturing in  scal 2013 (the  scal
2013 swap) and $200million of  xed rate debt maturing in  scal 2014 (the  scal 2014 swap) to  oating rate debt. Both transactions were entered into
with the goal of reducing overall borrowing cost. These transactions were designated as fair value hedges since the swaps hedge against the changes in
fair value of  xed rate debt resulting from changes in interest rates. The swap agreement related to the  scal 2013 debt was settled upon maturity of the
senior notes in February2013, leaving one remaining outstanding swap agreement as of June29,2013.
As of June29,2013, the  scal 2014 swap was recognized as an asset within the consolidated balance sheet at fair value within prepaid expenses and
other current assets of $3.0million. The  xed interest rate on the hedged debt is 4.6% and the  oating interest rate on the swap is three-month LIBOR
which resets quarterly.