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PARTII
ITEM8Financial Statements and Supplementary Data
In January 2014, the company entered into two forward starting swap agreements with notional amounts totaling $2.0 billion in contemplation of securing
long-term nancing for the proposed US Foods merger or for other long-term nancing purposes in the event the merger did not occur. The company
designated these derivatives as cash ow hedges to reduce interest rate exposure on forecasted 10-year and 30-year debt due to changes in the benchmark
interest rates for debt the company issued in scal 2015. In September 2014, in conjunction with the pricing of the $1.25 billion senior notes maturing
in scal 2025 and the $1 billion senior notes maturing in scal 2045, the company terminated these swaps, locking in the effective yields on the related
debt. Cash of $58.9 million was paid to settle the 10-year swap in September 2014, and cash of $129.9 million was paid to settle the 30-year swap in
October 2014. The cash payments are located within the line Cash paid for settlement of cash ow hedge within nancing activities in the statement of
consolidated cash ows. The cumulative losses recorded in Accumulated other comprehensive (loss) income related to these swaps will continue to be
amortized through interest expense over the term of the originally issued debt as the amount hedged is anticipated to remain within our capital structure.
In August 2015, the company entered into two forward starting swap agreements with notional amounts totaling $500 million. The company designated
these derivatives as cash ow hedges to reduce interest rate exposure on forecasted 10-year debt due to changes in the benchmark interest rates for
debt the company expects to issue in scal 2016.
The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of each scal year-end are as follows:
(Inthousands)
Asset Derivatives Liability Derivatives
Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Interest rate swap agreements:
June 27, 2015 Other assets $ 12,597 Accrued expenses $ -
June 28, 2014 Other assets 4,828 Accrued expenses 133,466
The location and effect of derivative instruments and related hedged items on the consolidated comprehensive income for each scal year presented ona
pretax basis are as follows:
(Inthousands)
Location of (Gain) or
Loss Recognized in
Comprehensive Income
Amount of (Gain) or Loss
Recognized in Comprehensive Income
2015 2014 2013
Fair Value Hedge Relationships:
Interest rate swap agreements Interest expense $ (21,960) $ (10,879) $ (4,492)
Cash Flow Hedge Relationships:
Forward starting interest rate swap
agreements Other comprehensive income - 133,466 N/A
Forward starting interest rate swap
agreements (1) Interest expense 8,305 625 626
(1) Represents amortization of losses on forward starting interest rate swap agreements that were previously settled.
Hedge ineffectiveness represents the difference between the changes in the fair value of the derivative instruments and the changes in fair value of the xed
rate debt attributable to changes in the benchmark interest rates. Hedge ineffectiveness is recorded directly in earnings within interest expense and was
immaterial for scal 2015, scal 2014 and scal 2013. The interest rate swaps do not contain credit-risk-related contingent features.
NOTE10 Self-Insured Liabilities
Sysco maintains a self-insurance program covering portions of workers’ compensation, general and vehicle liability and property insurance costs. The
amounts in excess of the self-insured levels are fully insured by third party insurers. The company also maintains a fully self-insured group medical program.
A summary of the activity in self-insured liabilities appears below:
(Inthousands)
2015 2014 2013
Balance at beginning of period $ 194,476 $ 147,598 $ 129,749
Charged to costs and expenses 367,025 375,267 352,374
Payments (368,189) (328,389) (334,525)
BALANCE AT END OF PERIOD $ 193,312 $ 194,476 $ 147,598