Company Quick10K Filing
Quick10K
Sysco
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$70.10 513 $35,990
10-Q 2018-12-29 Quarter: 2018-12-29
10-Q 2018-09-29 Quarter: 2018-09-29
10-K 2018-06-30 Annual: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-30 Quarter: 2017-12-30
10-Q 2017-09-30 Quarter: 2017-09-30
10-K 2017-07-01 Annual: 2017-07-01
10-Q 2017-04-01 Quarter: 2017-04-01
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-10-01 Quarter: 2016-10-01
10-K 2016-07-02 Annual: 2016-07-02
10-Q 2016-03-26 Quarter: 2016-03-26
10-Q 2015-12-26 Quarter: 2015-12-26
10-Q 2015-09-26 Quarter: 2015-09-26
10-K 2015-06-27 Annual: 2015-06-27
10-Q 2015-03-28 Quarter: 2015-03-28
10-Q 2014-12-27 Quarter: 2014-12-27
10-Q 2014-09-27 Quarter: 2014-09-27
10-K 2014-06-28 Annual: 2014-06-28
10-Q 2014-03-29 Quarter: 2014-03-29
10-Q 2013-12-28 Quarter: 2013-12-28
8-K 2019-02-04 Earnings, Exhibits
8-K 2019-01-29 Officers
8-K 2018-11-16 Officers, Shareholder Vote, Other Events, Exhibits
8-K 2018-11-05 Earnings, Exhibits
8-K 2018-09-17 Other Events, Exhibits
8-K 2018-08-13 Earnings, Exhibits
8-K 2018-05-07 Earnings, Exhibits
8-K 2018-04-12 Officers, Exhibits
8-K 2018-03-19 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-08 Enter Agreement, Exhibits
8-K 2018-02-05 Earnings, Exhibits
STI Suntrust Banks 28,050
HSC Harsco 1,760
PLCE Children's Place 1,700
MSC Hexion 1,340
CBPX Continental Building Products 905
SOHU Sohu.com Limited 593
IMMR Immersion 279
CTRN Citi Trends 237
TSSI TSS 0
GCC Wisdomtree Continuous Commodity Index Master Fund 0
SYY 2018-12-29
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.2 exhibit102rsagrmtnondeferr.htm
EX-10.3 exhibit103rsagrmtdeferral-.htm
EX-31.1 exhibit311ceocertsec302-q2.htm
EX-31.2 exhibit312cfocertsec302-q2.htm
EX-32.1 exhibit321ceocertsec906-q2.htm
EX-32.2 exhibit322cfocertsec906-q2.htm

Sysco Earnings 2018-12-29

SYY 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 syy2019q210-q.htm 10-Q Document



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Form 10-Q
(Mark One)
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-6544
________________
 syy-logoa15.jpg
Sysco Corporation
(Exact name of registrant as specified in its charter)
Delaware
74-1648137
(State or other jurisdiction of incorporation or organization)
(IRS employer identification number)
 
 
1390 Enclave Parkway
 
Houston, Texas
77077-2099
(Address of principal executive offices)
(Zip Code)

Registrant’s Telephone Number, Including Area Code:
(281) 584-1390

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  ☑    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  þ
 
Accelerated Filer ¨
Non-accelerated Filer ¨
 
Smaller Reporting Company ¨
(Do not check if a smaller reporting company)
 
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes ☐     No ☑

513,462,661 shares of common stock were outstanding as of January 18, 2019.





TABLE OF CONTENTS





PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
 
Dec. 29, 2018
 
Jun. 30, 2018
 
Dec. 30, 2017
 
(unaudited)
 
 
 
(unaudited)
ASSETS
Current assets
 
 
 
 
 
Cash and cash equivalents
$
744,808

 
$
552,325

 
$
961,067

Accounts and notes receivable, less allowances of $44,418, $25,768 and $52,588
4,147,367

 
4,073,723

 
3,953,643

Inventories, net
3,310,312

 
3,125,413

 
3,174,012

Prepaid expenses and other current assets
212,289

 
187,880

 
183,446

Income tax receivable
23,007

 
64,112

 

Total current assets
8,437,783

 
8,003,453

 
8,272,168

Plant and equipment at cost, less depreciation
4,375,550

 
4,521,660

 
4,366,292

Other long-term assets
 
 
 
 
 
Goodwill
3,875,973

 
3,955,485

 
4,001,020

Intangibles, less amortization
899,939

 
979,812

 
1,056,335

Deferred income taxes
77,191

 
83,666

 
92,950

Other assets
527,740

 
526,328

 
430,605

Total other long-term assets
5,380,843

 
5,545,291

 
5,580,910

Total assets
$
18,194,176

 
$
18,070,404

 
$
18,219,370

 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
 
 
 
 
 
Notes payable
$
6,101

 
$
4,176

 
$
6,629

Accounts payable
4,230,215

 
4,136,482

 
3,745,817

Accrued expenses
1,723,246

 
1,608,966

 
1,567,362

Accrued income taxes
4,571

 
56,793

 
128,446

Current maturities of long-term debt
786,037

 
782,329

 
534,716

Total current liabilities
6,750,170

 
6,588,746

 
5,982,970

Long-term liabilities
 
 
 
 
 
Long-term debt
8,019,846

 
7,540,765

 
8,312,489

Deferred income taxes
233,601

 
319,124

 
143,794

Other long-term liabilities
987,566

 
1,077,163

 
1,477,991

Total long-term liabilities
9,241,013

 
8,937,052

 
9,934,274

Commitments and contingencies


 


 


Noncontrolling interest
35,357

 
37,649

 
33,524

Shareholders’ equity
 
 
 
 
 
Preferred stock, par value $1 per share
     Authorized 1,500,000 shares, issued none

 

 

Common stock, par value $1 per share
     Authorized 2,000,000,000 shares, issued 765,174,900 shares
765,175

 
765,175

 
765,175

Paid-in capital
1,465,461

 
1,383,619

 
1,361,471

Retained earnings
10,654,711

 
10,348,628

 
9,708,261

Accumulated other comprehensive loss
(1,524,407
)
 
(1,409,269
)
 
(1,116,028
)
Treasury stock at cost, 251,658,719,
244,533,248 and 243,764,879 shares
(9,193,304
)
 
(8,581,196
)
 
(8,450,277
)
Total shareholders’ equity
2,167,636

 
2,506,957

 
2,268,602

Total liabilities and shareholders' equity
$
18,194,176

 
$
18,070,404

 
$
18,219,370

Note: The June 30, 2018 balance sheet has been derived from the audited financial statements at that date.
See Notes to Consolidated Financial Statements

1



Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In thousands, except for share and per share data)
 
13-Week Period Ended
 
26-Week Period Ended
 
Dec. 29, 2018
 
Dec. 30, 2017
 
Dec. 29, 2018
 
Dec. 30, 2017
Sales
$
14,765,707

 
$
14,411,490

 
$
29,980,986

 
$
29,061,914

Cost of sales
11,993,995

 
11,712,104

 
24,305,489

 
23,568,860

Gross profit
2,771,712

 
2,699,386

 
5,675,497

 
5,493,054

Operating expenses
2,319,817

 
2,170,834

 
4,595,462

 
4,345,137

Operating income
451,895

 
528,552

 
1,080,035

 
1,147,917

Interest expense
87,113

 
85,986

 
176,129

 
166,870

Other expense (income), net
10,197

 
(9,162
)
 
11,329

 
(17,137
)
Earnings before income taxes
354,585

 
451,728

 
892,577

 
998,184

Income taxes
87,205

 
167,615

 
194,155

 
346,431

Net earnings
$
267,380

 
$
284,113

 
$
698,422

 
$
651,753

  
 
 
 
 
 
 
 
Net earnings:
 

 
 

 
 
 
 
Basic earnings per share
$
0.52

 
$
0.55

 
$
1.34

 
$
1.24

Diluted earnings per share
0.51

 
0.54

 
1.33

 
1.23

 
 
 
 
 
 
 
 
Average shares outstanding
517,871,328

 
521,284,182

 
519,363,973

 
524,286,931

Diluted shares outstanding
524,600,510

 
527,249,587

 
526,817,501

 
530,156,510


See Notes to Consolidated Financial Statements

2



Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands)
 
13-Week Period Ended
 
26-Week Period Ended
 
Dec. 29, 2018
 
Dec. 30, 2017
 
Dec. 29, 2018
 
Dec. 30, 2017
Net earnings
$
267,380

 
$
284,113

 
$
698,422

 
$
651,753

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustment
(101,533
)
 
19,254

 
(126,460
)
 
140,584

Items presented net of tax:
 
 
 
 
 
 
 
Amortization of cash flow hedges
2,155

 
2,155

 
4,310

 
3,925

Change in net investment hedges
26,469

 
(4,153
)
 
35,057

 
(16,177
)
Change in cash flow hedges
(8,784
)
 
917

 
(11,792
)
 
3,118

Amortization of prior service cost
1,600

 
1,807

 
3,200

 
3,291

Amortization of actuarial loss, net
6,529

 
6,571

 
13,058

 
11,968

Actuarial loss, net

 

 
(32,511
)
 

Total other comprehensive (loss) income
(73,564
)
 
26,551

 
(115,138
)
 
146,709

Comprehensive income
$
193,816

 
$
310,664

 
$
583,284

 
$
798,462


See Notes to Consolidated Financial Statements

3



Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In thousands)
 
26-Week Period Ended
 
Dec. 29, 2018
 
Dec. 30, 2017
Cash flows from operating activities:
 
 
 
Net earnings
$
698,422

 
$
651,753

Adjustments to reconcile net earnings to cash provided by operating activities:
 
 
 
Share-based compensation expense
54,199

 
51,612

Depreciation and amortization
392,413

 
370,316

Amortization of debt issuance and other debt-related costs
10,814

 
14,395

Deferred income taxes
(89,098
)
 
37,005

Provision for losses on receivables
27,647

 
20,151

Other non-cash items
411

 
12,986

Additional changes in certain assets and liabilities, net of effect of businesses acquired:
 
 
 
(Increase) decrease in receivables
(137,314
)
 
99,713

(Increase) in inventories
(204,437
)
 
(133,374
)
(Increase) in prepaid expenses and other current assets
(31,465
)
 
(33,484
)
Increase (decrease) in accounts payable
131,715

 
(286,899
)
Increase (decrease) in accrued expenses
92,100

 
(21,802
)
(Decrease) increase in accrued income taxes
(11,117
)
 
120,397

(Increase) in other assets
(21,138
)
 
(29,508
)
Increase in other long-term liabilities
4,638

 
59,943

Net cash provided by operating activities
917,790

 
933,204

Cash flows from investing activities:
 
 
 
Additions to plant and equipment
(223,825
)
 
(258,577
)
Proceeds from sales of plant and equipment
6,901

 
3,878

Acquisition of businesses, net of cash acquired
(88
)
 
(147,644
)
Net cash (used for) investing activities
(217,012
)
 
(402,343
)
Cash flows from financing activities:
 
 
 
Bank and commercial paper borrowings, net
109,900

 
630,265

Other debt borrowings
383,163

 
5,465

Other debt repayments
(16,617
)
 
(10,368
)
Proceeds from stock option exercises
137,896

 
172,298

Treasury stock purchases
(739,205
)
 
(750,532
)
Dividends paid
(379,216
)
 
(346,920
)
Other financing activities
(6,653
)
 
(10,136
)
Net cash (used for) financing activities
(510,732
)
 
(309,928
)
Effect of exchange rates on cash, cash equivalents and restricted cash
(8,904
)
 
23,510

Net increase in cash, cash equivalents and restricted cash
181,142

 
244,443

Cash, cash equivalents and restricted cash at beginning of period
715,844

 
869,502

Cash, cash equivalents and restricted cash at end of period
$
896,986

 
$
1,113,945

Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
158,574

 
$
136,279

Income taxes
328,574

 
75,841


See Notes to Consolidated Financial Statements

4



Sysco Corporation and its Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or “the company” as used in this Form 10-Q refer to Sysco Corporation together with its consolidated subsidiaries and divisions.

1.  BASIS OF PRESENTATION

The consolidated financial statements have been prepared by the company, without audit, with the exception of the June 30, 2018 consolidated balance sheet, which was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018 (our 2018 Form 10-K). The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income and consolidated cash flows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, except as otherwise disclosed, necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for all periods presented have been made.

These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our 2018 Form 10-K. Certain footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.

These financial statements and related notes have been presented in compliance with the Securities and Exchange Commission’s (SEC) Final Rule Release No. 33-10532, Disclosure Update and Simplification, effective for all filings made on or after November 5, 2018. Sysco has complied with all relevant disclosure requirements, with the exception of adding the changes in stockholders’ equity disclosures for interim periods, which for Sysco, is allowed to be first included in its Form 10-Q for the quarter ending March 30, 2019.

Supplemental Cash Flow Information

The following table sets forth the company’s reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows:
 
Dec. 29, 2018
 
Dec. 30, 2017
 
(In thousands)
Cash and cash equivalents
$
744,808

 
$
961,067

Restricted cash (1)
152,178

 
152,878

Total cash, cash equivalents and restricted cash shown in the Consolidated Statement of Cash Flows
$
896,986

 
$
1,113,945


(1) 
Restricted cash as of December 29, 2018 primarily represents cash and cash equivalents of Sysco’s wholly owned captive insurance subsidiary, restricted for use to secure the insurer’s obligations for workers’ compensation, general liability and auto liability programs. Restricted cash is located within other assets in the consolidated balance sheet as of December 29, 2018.

2. CHANGES IN ACCOUNTING

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and has issued subsequent amendments to this guidance. This new standard superseded existing revenue recognition standards and eliminated all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Sysco adopted the new standard effective July 1, 2018 using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on Sysco’s consolidated balance sheet or consolidated results of operations as of the adoption date or for the period ended December 29, 2018.


5



Guidance in Presentation of Cash Flows - Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The eight specific issues are: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Businesses Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6) Distributions Received from Equity Method Invitees; (7) Beneficial Interests in Securitization Transactions; and (8) Separately Identifiable Cash and Application of the Predominance Principle. The company adopted this ASU retrospectively, effective July 1, 2018. The adoption of ASU 2016-15 did not have a material effect on the company’s consolidated cash flow statement as of the adoption date or for the period ended December 29, 2018.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, requiring that an employer report the service cost component of pension and postretirement benefits in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. In addition, only the service cost component will be eligible for capitalization as applicable. The company adopted this ASU effective July 1, 2018, resulting in net cost of $8.9 million in the second quarter of fiscal 2019 and net cost of $17.8 million for the first 26 weeks of fiscal 2019 being reported in other expense (income), net that would have previously been included in operating expense. The ASU was applied retrospectively, resulting in net benefit of $3.7 million in the second quarter of fiscal 2019 and net benefit of $7.5 million for the first 26 weeks of fiscal 2018 being reported in other expense (income), net.

3.  NEW ACCOUNTING STANDARDS

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The amended guidance requires the recognition of lease assets and lease liabilities on the balance sheet for those leases currently classified as operating leases. In addition, Topic 842 expands the disclosure requirements of lease arrangements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, which is fiscal 2020 for Sysco, with early adoption permitted.

To assess the impact of the standard, the company has formed a cross-functional steering committee to review the amended guidance and subsequent clarifications in order to understand the potential impact the new standard could have on the company’s consolidated financial statements and disclosures, business processes, and internal controls. The company is in the process of gathering lease data, reviewing its lease portfolio, and completing an impact assessment with respect to the adoption of the provisions of the new standard. To facilitate this ongoing process, the company is currently implementing a third-party lease accounting software. The company will finalize its assessment in fiscal 2019 and adopt this standard on June 30, 2019, the first day of fiscal 2020.

Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance amends Accounting Standards Codification (ASC) 350 to include in its scope implementation costs of a cloud computing arrangement that is a service contract and clarifies that a customer should apply ASC 350 to determine which implementation costs should be capitalized in such a cloud computing arrangement. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which is the first quarter of fiscal 2021 for Sysco, with early adoption permitted. The company is currently reviewing the provisions of the new standard.


6



4. REVENUE

Adoption of ASC Topic 606, “Revenues from Contracts with Customers”

On July 1, 2018, Sysco adopted ASC Topic 606 with no significant impact to its financial position or results of operations, using the modified retrospective method. There were no contracts which were not completed as of July 1, 2018. Results for reporting periods beginning after July 1, 2018 are presented under Topic 606, while prior period amounts have not been restated and continue to be reported in accordance with our historic accounting under Topic 605. Sysco had no adjustment to opening retained earnings as of July 1, 2018 as a result of adopting ASC Topic 606. There was no material impact on revenues for the quarter and 26 weeks ended December 29, 2018 as a result of applying ASC Topic 606.

Revenue Recognition

The company recognizes revenues when the performance obligation is satisfied, which is the point at which control of the promised goods or services are transferred to its customers, in an amount that reflects the consideration Sysco expects to be entitled to receive in exchange for those goods or services. For the majority of Sysco’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered, as that is generally when legal title, physical possession and risks and rewards of goods/services transfers to the customer. The timing of satisfaction of the performance obligation is not subject to significant judgment. While certain additional services may be identified within a contract, we have concluded that those services are individually immaterial in the context of the contract with the customer, and therefore, not assessed as performance obligations.

Sales tax collected from customers is not included in revenue, but rather recorded as a liability due to the respective taxing authorities. Shipping and handling costs include costs associated with the selection of products and delivery to customers and are included within operating expenses.

Product Sales Revenues

Sysco generates revenue primarily from the distribution and sale of food and related products to its customers. Substantially all revenue is recognized at the point in time in which the product is delivered to the customer. The company grants certain customers sales incentives, such as rebates or discounts, which are accounted for as variable consideration. The variable consideration is based on amounts known at the time the performance obligation is satisfied and, therefore, requires minimal judgment.

Contract Balances

After completion of Sysco’s performance obligations, the company has an unconditional right to consideration as outlined in its contracts with customers. Sysco’s customer receivables will generally be collected in less than 30 days in accordance with the underlying payment terms. Customer receivables, which are included in Accounts and notes receivable, less allowances in the consolidated balance sheet, were $3.9 billion and $3.8 billion as of December 29, 2018 and June 30, 2018, respectively.

Sysco has certain customer contracts in which upfront monies are paid to its customers. These payments have become industry practice and are not related to financing of the customer’s business. They are not associated with any distinct good or service to be received from the customer and, therefore, are treated as a reduction of transaction prices. All upfront payments are capitalized in Other Assets and amortized over the life of the contract or the expected life of the relationship with the customer on a straight-line basis. As of December 29, 2018, Sysco’s contract assets were immaterial. Sysco has no material commissions paid that are directly attributable to obtaining a particular contract.


7



Disaggregation of Sales

The following tables present our sales disaggregated by reportable segment and sales mix for the company’s principal product categories for the periods presented:

 
 
13-Week Period Ended Dec. 29, 2018
 
 
US Foodservice Operations
 
International Foodservice Operations
 
SYGMA
 
Other
 
Total
 
 
(In thousands)
Principal Product Categories
 
 
 
 
 
 
 
 
 
 
Fresh and frozen meats
 
$
2,084,648

 
$
409,086

 
$
374,069

 
$

 
$
2,867,803

Canned and dry products
 
1,799,535

 
611,609

 
66,719

 

 
2,477,863

Frozen fruits, vegetables, bakery and other
 
1,417,063

 
354,178

 
315,129

 

 
2,086,370

Dairy products
 
1,041,436

 
306,364

 
148,103

 

 
1,495,903

Poultry
 
1,001,579

 
209,542

 
208,674

 

 
1,419,795

Fresh produce
 
927,997

 
322,020

 
57,048

 

 
1,307,065

Paper and disposables
 
681,890

 
87,376

 
181,896

 
14,175

 
965,337

Seafood
 
581,655

 
196,413

 
23,451

 

 
801,519

Beverage products
 
271,182

 
161,317

 
136,244

 
20,422

 
589,165

Other (1)
 
280,120

 
232,693

 
25,274

 
216,800

 
754,887

Total Sales
 
$
10,087,105

 
$
2,890,598

 
$
1,536,607

 
$
251,397

 
$
14,765,707


(1) 
Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.

 
 
13-Week Period Ended Dec. 30, 2017
 
 
US Foodservice Operations
 
International Foodservice Operations
 
SYGMA
 
Other
 
Total
 
 
(In thousands)
Principal Product Categories
 
 
 
 
 
 
 
 
 
 
Fresh and frozen meats
 
$
1,975,717

 
$
411,726

 
$
375,602

 
$

 
$
2,763,045

Canned and dry products
 
1,742,913

 
579,881

 
89,274

 

 
2,412,068

Frozen fruits, vegetables, bakery and other
 
1,316,229

 
645,354

 
289,133

 

 
2,250,716

Dairy products
 
1,019,134

 
308,362

 
162,372

 

 
1,489,868

Poultry
 
997,225

 
212,552

 
277,820

 

 
1,487,597

Fresh produce
 
902,943

 
256,746

 
63,947

 

 
1,223,636

Paper and disposables
 
637,520

 
98,258

 
183,205

 
13,445

 
932,428

Seafood
 
555,996

 
182,393

 
21,109

 

 
759,498

Beverage products
 
266,102

 
48,819

 
140,190

 
19,441

 
474,552

Other (1)
 
267,446

 
124,952

 
30,493

 
195,191

 
618,082

Total Sales
 
$
9,681,225

 
$
2,869,043

 
$
1,633,145

 
$
228,077

 
$
14,411,490


(1) 
Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.


8



 
 
26-Week Period Ended Dec. 29, 2018
 
 
US Foodservice Operations
 
International Foodservice Operations
 
SYGMA
 
Other
 
Total
 
 
(In thousands)
Principal Product Categories
 
 
 
 
 
 
 
 
 
 
Fresh and frozen meats
 
$
4,206,167

 
$
829,542

 
$
746,401

 
$

 
$
5,782,110

Canned and dry products
 
3,651,702

 
1,223,079

 
144,341

 

 
5,019,122

Frozen fruits, vegetables, bakery and other
 
2,840,449

 
982,735

 
606,995

 

 
4,430,179

Dairy products
 
2,127,840

 
624,711

 
302,909

 

 
3,055,460

Poultry
 
2,028,515

 
425,124

 
480,735

 

 
2,934,374

Fresh produce
 
1,865,577

 
579,564

 
121,897

 

 
2,567,038

Paper and disposables
 
1,392,649

 
191,915

 
370,512

 
30,584

 
1,985,660

Seafood
 
1,243,342

 
384,850

 
48,835

 

 
1,677,027

Beverage products
 
561,752

 
213,388

 
283,538

 
43,601

 
1,102,279

Other (1)
 
568,523

 
356,640

 
51,901

 
450,673

 
1,427,737

Total Sales
 
$
20,486,516

 
$
5,811,548

 
$
3,158,064

 
$
524,858

 
$
29,980,986


(1) 
Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.

 
 
26-Week Period Ended Dec. 30, 2017
 
 
US Foodservice Operations
 
International Foodservice Operations
 
SYGMA
 
Other
 
Total
 
 
(In thousands)
Principal Product Categories
 
 
 
 
 
 
 
 
 
 
Fresh and frozen meats
 
$
4,006,857

 
$
846,365

 
$
761,851

 
$

 
$
5,615,073

Canned and dry products
 
3,481,591

 
1,173,234

 
166,759

 

 
4,821,584

Frozen fruits, vegetables, bakery and other
 
2,582,958

 
1,271,422

 
561,725

 

 
4,416,105

Poultry
 
2,043,911

 
420,017

 
574,719

 

 
3,038,647

Dairy products
 
2,036,796

 
624,016

 
329,059

 

 
2,989,871

Fresh produce
 
1,826,735

 
522,329

 
129,493

 

 
2,478,557

Paper and disposables
 
1,293,829

 
202,368

 
365,034

 
28,835

 
1,890,066

Seafood
 
1,176,317

 
365,664

 
44,884

 

 
1,586,865

Beverage products
 
541,232

 
99,878

 
285,264

 
42,452

 
968,826

Other (1)
 
539,941

 
247,005

 
55,028

 
414,346

 
1,256,320

Total Sales
 
$
19,530,167

 
$
5,772,298

 
$
3,273,816

 
$
485,633

 
$
29,061,914


(1) 
Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.

5.  ACQUISITIONS

There were no new acquisitions in the first 26 weeks of fiscal 2019. Certain acquisitions involve contingent consideration that may include earnout agreements that are typically payable over periods of up to three years in the event that certain operating results are achieved. As of December 29, 2018, aggregate contingent consideration outstanding was $14.1 million, of which $9.4 million was recorded as earnout liabilities. Earnout liabilities are all measured using unobservable inputs that are considered a Level 3 measurement.


9



6.  FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and
Level 3 – Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include cash deposits, time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:

Cash deposits included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 1 measurement in the tables below.
Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 2 measurement in the tables below.
Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. These are included within cash equivalents as Level 1 measurements in the tables below.
The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates.
The foreign currency swap agreements, including cross-currency swaps, are valued using a swap valuation model that utilizes an income approach applying observable market inputs including interest rates, LIBOR swap rates for U.S. dollars, Canadian dollars, pound sterling and euro currencies, and credit default swap rates.
Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments.
Fuel swap contracts are valued based on observable market transactions of forward commodity prices.

The fair value of the company’s derivative instruments are all measured using inputs that are considered a Level 2 measurement, as they are not actively traded and are valued using pricing models that use observable market quotations. The location and the fair value of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note 7, “Derivative Financial Instruments.”


10



The following tables present the company’s assets measured at fair value on a recurring basis as of December 29, 2018June 30, 2018 and December 30, 2017:
 
Assets and Liabilities Measured at Fair Value as of Dec. 29, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
 
Cash and cash equivalents
$
298,461

 
$
200

 
$

 
$
298,661

Other assets (1)
152,178

 

 

 
152,178

Total assets at fair value
$
450,639

 
$
200

 
$

 
$
450,839


(1) 
Represents restricted cash balance recorded within other assets in the consolidated balance sheet.
 
Assets and Liabilities Measured at Fair Value as of Jun. 30, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
 
Cash and cash equivalents
$
169,214

 
$
30,190

 
$

 
$
199,404

Other assets (1)
163,519

 

 

 
163,519

Total assets at fair value
$
332,733

 
$
30,190

 
$

 
$
362,923


(1) 
Represents restricted cash balance recorded within other assets in the consolidated balance sheet.

 
Assets and Liabilities Measured at Fair Value as of Dec. 30, 2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
 
Cash and cash equivalents
$
241,071

 
$
43,191

 
$

 
$
284,262

Other assets (1)
145,734

 
7,143

 

 
152,877

Total assets at fair value
$
386,805

 
$
50,334

 
$

 
$
437,139


(1) 
Represents restricted cash balance recorded within other assets in the consolidated balance sheet.

The carrying values of accounts receivable and accounts payable approximated their respective fair values due to their short-term maturities. The fair value of Sysco’s total debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the company for new debt with the same maturities as existing debt, and is considered a Level 2 measurement. The fair value of total debt was approximately $8.8 billion, $8.4 billion and $9.2 billion as of December 29, 2018, June 30, 2018 and December 30, 2017, respectively. The carrying value of total debt was $8.8 billion, $8.3 billion and $8.9 billion as of December 29, 2018June 30, 2018 and December 30, 2017, respectively.

7.  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.


11



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. In December 2018, the company entered into an interest rate swap agreement that effectively converted €500.0 million of fixed rate debt maturing in 2023 to floating rate debt.

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 29, 2018 are below:
Maturity Date of the Hedging Instrument
 
Currency / Unit of Measure
 
Notional Value
 
 
 
 
(In millions)
Hedging of interest rate risk
 
 
 
 
April 2019
 
U.S. Dollar
 
500
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 (January 2019 to April 2019)
 
Swedish Krona
 
261
Various (January 2019 to October 2019)
 
British Pound Sterling
 
20
Various (January 2019 to December 2019)
 
U.S. Dollar
 
1
June 2021
 
Canadian Dollar
 
300
July 2021
 
British Pound Sterling
 
234
August 2021
 
British Pound Sterling
 
466
June 2023
 
Euro
 
500
 
 
 
 
 
Hedging of fuel risk
 
 
 
 
Various (December 31, 2018 to December 2019)
 
Gallons
 
52

12




The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of December 29, 2018, June 30, 2018 and December 30, 2017 are as follows:
 
 
 
Derivative Fair Value
 
Balance Sheet location
 
Dec. 29, 2018
 
Jun. 30, 2018
 
Dec. 30, 2017
 
 
 
(In thousands)
Fair Value Hedges:
 
 
 
 
 
 
 
Interest rate swaps
Other current assets
 
$

 
$

 
$
118

Interest rate swaps
Other assets
 
5,207

 

 

Interest rate swaps
Other current liabilities
 
2,180

 
6,820

 

Interest rate swaps
Other long-term liabilities
 
31,488

 
49,734

 
33,003

 
 
 
 
 
 
 
 
Cash Flow Hedges:
 
 
 
 
 
 
 
Fuel Swaps
Other current assets
 
$

 
$
15,316

 
$
13,678

Foreign currency forwards
Other current assets
 
246

 
693

 
555

Cross currency swaps
Other current assets
 

 
4,284

 

Cross currency swaps
Other assets
 
13,773

 
3,454

 

Fuel Swaps
Other current liabilities
 
19,548

 

 

Foreign currency forwards
Other current liabilities
 
226

 
71

 
351

Fuel swaps
Other long-term liabilities
 
742

 

 

Cross currency swaps
Other long-term liabilities
 

 
14,201

 
21,310

 
 
 
 
 
 
 
 
Net Investment Hedges:
 
 
 
 
 
 
 
Foreign currency swaps
Other assets
 
$
23,349

 
$
10,709

 
$
7,822

Foreign currency swaps
Other long-term liabilities
 
20,361

 
39,690

 
48,087



13



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 Dec. 29, 2018
 
 
Cost of Goods Sold
 
Operating Expense
 
Interest Expense
 
 
(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded
 
$
11,993,995

 
$
2,319,817

 
$
87,113

Gain or (loss) on fair value hedging relationships:
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
Hedged items (1)
 
$

 
$

 
$
(46,919
)
Derivatives designated as hedging instruments
 

 

 
31,550


(1) 
The hedged total includes interest expense of $15.7 million and change in fair value of debt of $31.3 million.

 
 
13-Week Period Ended Dec. 30, 2017
 
 
Cost of Goods Sold
 
Operating Expense
 
Interest Expense
 
 
(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded
 
$
11,712,104

 
$
2,170,834

 
$
85,986

Gain or (loss) on fair value hedging relationships:
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
Hedged items (1)
 
$

 
$

 
$
(7,515
)
Derivatives designated as hedging instruments
 

 

 
(9,942
)

(1) 
The hedged total includes interest expense of $17.1 million and change in fair value of debt of $9.6 million.

 
 
26-Week Period Ended Dec. 29, 2018
 
 
Cost of Goods Sold
 
Operating Expense
 
Interest Expense
 
 
(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded
 
$
24,305,489

 
$
4,595,462

 
$
176,129

Gain or (loss) on fair value hedging relationships:
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
Hedged items (1)
 
$

 
$

 
$
(55,506
)
Derivatives designated as hedging instruments
 

 

 
20,691


(1) 
The hedged total includes interest expense of $30.8 million and change in fair value of debt of $24.7 million.


14



 
 
26-Week Period Ended Dec. 30, 2017
 
 
Cost of Goods Sold
 
Operating Expense
 
Interest Expense
 
 
(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded
 
$
23,568,860

 
$
4,345,137

 
$
166,870

Gain or (loss) on fair value hedging relationships:
 
 
 
 
 
 
Interest rate swaps:
 
 
 
 
 
 
Hedged items (1)
 
$

 
$

 
$
(22,745
)
Derivatives designated as hedging instruments
 

 

 
(10,989
)

(1) 
The hedged total includes interest expense of $34.2 million and change in fair value of debt of $11.4 million.

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 29, 2018 and December 30, 2017, presented on a pretax basis, are as follows:
 
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 goods sold
 
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

 
 
 
$

 
 
 
 
 
 
 
13-Week Period Ended Dec. 30, 2017
 
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
$
8,505

 
Operating expense
 
$
1,814

Foreign currency contracts
6,331

 
Cost of goods sold
 
525

Total
$
14,836

 
 
 
$
2,339

 
 
 
 
 
 
Derivatives in net investment hedging relationships:
 
 
 
 
 
Foreign currency contracts
$
(12,063
)
 
N/A
 
$

Foreign denominated debt
(9,450
)
 
N/A
 

Total
$
(21,513
)
 
 
 
$



15



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 29, 2018 and December 30, 2017, presented on a pretax basis, are as follows:
 
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 goods sold
 
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

 
 
 
$

 
 
 
 
 
 
 
26-Week Period Ended Dec. 30, 2017
 
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
$
19,706

 
Operating expense
 
$
1,658

Foreign currency contracts
(15,462
)
 
Cost of goods sold
 
834

Total
$
4,244

 
 
 
$
2,492

 
 
 
 
 
 
Derivatives in net investment hedging relationships:
 
 
 
 
 
Foreign currency contracts
$
(27,957
)
 
N/A
 
$

Foreign denominated debt
(28,600
)
 
N/A
 

Total
$
(56,557
)
 
 
 
$



16



The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 29, 2018 are as follows:
 
Dec. 29, 2018
 
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
$
(499,867
)
 
$
2,152

Long-term debt
(2,310,689
)
 
25,776


The location and carrying amount of hedged liabilities in the consolidated balance sheet as of June 30, 2018 are as follows:
 
Jun. 30, 2018
 
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
$
(499,610
)
 
$
5,097

Long-term debt
(1,743,732
)
 
47,555


The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 30, 2017, are as follows:
 
Dec. 30, 2017
 
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
$
(499,960
)
 
$

Long-term debt
(1,747,194
)
 
18,282


8. DEBT

Sysco has a commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $2.0 billion. As of December 29, 2018, there was $109.9 million in commercial paper issuances outstanding. Any outstanding amounts are classified within long-term debt, as the program is supported by a long-term revolving credit facility. During the first 26 weeks of fiscal 2019, aggregate outstanding commercial paper issuances and short-term bank borrowings ranged from zero to approximately $669.0 million.


17



Senior notes offering

On September 25, 2018, Sysco issued senior notes totaling CDN $500.0 million. The senior notes were issued in Canada with a coupon rate of 3.65% and pricing, as a percentage of par, of 99.962%. Net proceeds from the offering were used to repay internal debt that was created in fiscal 2018 when the company repatriated earnings from its Canadian operations back to Sysco Corporation, and to repay outstanding borrowings under Sysco’s commercial paper program, along with other general corporate purposes. Interest on the senior notes will be paid semi-annually on April 25 and October 25, beginning April 25, 2019. At Sysco’s option, any or all of the senior notes may be redeemed, in whole or in part, at any time prior to maturity. If Sysco elects to redeem the senior notes before the date that is two months prior to the maturity date, Sysco will pay an amount equal to the greater of (1) 100% of the principal amount of the senior notes to be redeemed; or (2) the applicable yield price, plus in either case, any accrued and unpaid interest on the senior notes to be redeemed to the date of redemption. If Sysco elects to redeem a series of senior notes on or after the applicable date described in the preceding sentence, Sysco will pay an amount equal to 100% of the principal amount of the senior notes to be redeemed plus accrued and unpaid interest on the senior notes redeemed to the redemption date.

9.  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:
 
13-Week Period Ended
 
26-Week Period Ended
 
Dec. 29, 2018
 
Dec. 30, 2017
 
Dec. 29, 2018
 
Dec. 30, 2017
 
(In thousands, except for share
and per share data)
 
(In thousands, except for share
and per share data)
Numerator:
 
 
 
 
 
 
 
Net earnings
$
267,380

 
$
284,113

 
$
698,422

 
$
651,753

Denominator:
 
 
 
 
 
 
 
Weighted-average basic shares outstanding
517,871,328

 
521,284,182

 
519,363,973

 
524,286,931

Dilutive effect of share-based awards
6,729,182

 
5,965,405

 
7,453,528

 
5,869,579

Weighted-average diluted shares outstanding
524,600,510

 
527,249,587

 
526,817,501

 
530,156,510

Basic earnings per share
$
0.52

 
$
0.55

 
$
1.34

 
$
1.24

Diluted earnings per share
$
0.51

 
$
0.54

 
$
1.33

 
$
1.23

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.39

 
$
0.36

 
$
0.75

 
$
0.69


The number of securities that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 2,565,000 and 2,749,000 for the second quarter of fiscal 2019 and fiscal 2018, respectively. The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 3,630,000 and 4,594,000 for the first 26 weeks of fiscal 2019 and fiscal 2018, respectively.

10.  OTHER COMPREHENSIVE INCOME

Comprehensive income is net earnings plus certain other items that are recorded directly to shareholders’ equity, such as foreign currency translation adjustment, amounts related to cash flow hedging arrangements and certain amounts related to pension and other postretirement plans. Comprehensive income was $193.8 million and $310.7 million for the second quarter of fiscal 2019 and fiscal 2018, respectively. Comprehensive income was $583.3 million and $798.5 million for the first 26 weeks of fiscal 2019 and fiscal 2018, respectively.


18



A summary of the components of other comprehensive income (loss) and the related tax effects for each of the periods presented is as follows:
 
 
 
13-Week Period Ended Dec. 29, 2018
 
Location of
Expense (Income) Recognized in
Net Earnings
 
Before Tax
Amount
 
Tax
 
Net of Tax
Amount
 
 
 
(In thousands)
Pension and other postretirement benefit plans:
 
 
 

 
 

 
 

Reclassification adjustments:
 
 
 
 
 
 
 
Amortization of prior service cost
Other expense, net
 
$
2,133

 
$
533

 
$
1,600

Amortization of actuarial loss (gain), net
Other expense, net
 
8,706

 
2,177

 
6,529

Total reclassification adjustments
 
 
10,839

 
2,710

 
8,129

Foreign currency translation:
 
 
 
 
 
 
 
Foreign currency translation adjustment
N/A
 
(101,533
)
 

 
(101,533
)
Hedging instruments:
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassification adjustments:
 
 
 
 
 
 
 
Change in cash flow hedges
Operating expenses (1)
 
(11,380
)
 
(2,596
)
 
(8,784
)
Change in net investment hedges
N/A
 
35,293

 
8,824

 
26,469

Total other comprehensive income (loss) before reclassification adjustments
 
 
23,913

 
6,228

 
17,685

Reclassification adjustments:
 
 
 
 
 
 
 
Amortization of cash flow hedges
Interest expense
 
2,873

 
718

 
2,155

Total other comprehensive income (loss)
 
 
$
(63,908
)
 
$
9,656

 
$
(73,564
)

(1) 
Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

19



 
 
 
13-Week Period Ended Dec. 30, 2017
 
Location of
Expense (Income) Recognized in
Net Earnings
 
Before Tax
Amount
 
Tax
 
Net of Tax
Amount
 
 
 
(In thousands)
Pension and other postretirement benefit plans:
 
 
 

 
 

 
 

Reclassification adjustments:
 
 
 

 
 

 
 

Amortization of prior service cost
Other expense, net
 
$
2,409

 
$
602

 
$
1,807

Amortization of actuarial loss (gain), net
Other expense, net
 
8,761

 
2,190

 
6,571

Total reclassification adjustments
 
 
11,170

 
2,792

 
8,378

Foreign currency translation:
 
 
 
 
 
 
 
Foreign currency translation adjustment
N/A
 
19,254

 

 
19,254

Hedging instruments:
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassification adjustments:
 
 
 
 
 
 
 
Change in cash flow hedges
Operating expenses (1)
 
2,944

 
2,027

 
917

Change in net investment hedges
N/A
 
(6,543
)
 
(2,390
)
 
(4,153
)
Total other comprehensive income (loss) before reclassification adjustments
 
 
(3,599
)
 
(363
)
 
(3,236
)
Reclassification adjustments:
 
 
 
 
 
 
 
Amortization of cash flow hedges
Interest expense
 
2,873

 
718

 
2,155

Total other comprehensive income (loss)
 
 
$
29,698

 
$
3,147

 
$
26,551


(1) 
Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

20




 
 
 
26-Week Period Ended Dec. 29, 2018
 
Location of
Expense (Income) Recognized in
Net Earnings
 
Before Tax
Amount
 
Tax
 
Net of Tax
Amount
 
 
 
(In thousands)
Pension and other postretirement benefit plans:
 
 
 

 
 

 
 

Other comprehensive income before
reclassification adjustments:
 
 
 
 
 
 
 
Net actuarial loss
 
 
$
(36,891
)
 
$
(4,380
)
 
$
(32,511
)
Reclassification adjustments:
 
 
 
 
 
 
 
Amortization of prior service cost
Other expense, net
 
4,266

 
1,066

 
3,200

Amortization of actuarial loss (gain), net
Other expense, net
 
17,412

 
4,354

 
13,058

Total reclassification adjustments
 
 
21,678

 
5,420

 
16,258

Foreign currency translation:
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassification adjustments:
 
 
 
 
 
 
 
Foreign currency translation adjustment
N/A
 
(126,460
)
 

 
(126,460
)
Hedging instruments:
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassification adjustments:
 
 
 
 
 
 
 
Change in cash flow hedges
Operating expenses (1)
 
(15,157
)
 
(3,365
)
 
(11,792
)
Change in net investment hedges
N/A
 
46,471

 
11,414

 
35,057

Total other comprehensive income (loss) before reclassification adjustments