SYSCO CORP 10-Q

Item 3. Quantitative and Qualitative Disclosures about Market Risk Our market risks consist of interest rate risk, foreign currency exchange rate risk, fuel price risk and investment risk. For a discussion on our exposure to market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risks” in our fiscal 2020 Form 10-K and the risk factor discussion contained in Part II, Item 1A of this report. There have been no significant changes to our market risks since June 27, 2020, except as noted below. Interest Rate Risk At March 27, 2021, there were no commercial paper issuances outstanding under our U.S. commercial paper program, and we had £300.0 million outstanding under our U.K. commercial paper program. Total debt as of March 27, 2021 was $12.7 billion, of which approximately 87% was at fixed rates of interest, including the impact of our interest rate swap agreements. Fuel Price Risk Due to the nature of our distribution business, we are exposed to potential volatility in fuel prices. The price and availability of diesel fuel fluctuates due to changes in production, seasonality and other market factors generally outside of our control. Increased fuel costs may have a negative impact on our results of operations in three areas. First, the high cost of fuel can negatively impact consumer confidence and discretionary spending and thus reduce the frequency and amount spent by consumers for food-away-from-home purchases. Second, the high cost of fuel can increase the price we pay for product purchases and we may not be able to pass these costs fully to our customers. Third, increased fuel costs impact the costs we incur to deliver product to our customers. Fuel costs related to outbound deliveries represented approximately 0.5% of sales during the first 39 weeks of fiscal 2021 and fiscal 2020. Our activities to mitigate fuel costs include routing optimization with the goal of reducing miles driven, improving fleet utilization by adjusting idling time and maximum speeds and using fuel surcharges that primarily track with the change in market prices of fuel. We use diesel fuel swap contracts to fix the price of a portion of our projected monthly diesel fuel requirements. As of March 27, 2021, we had diesel fuel swaps with a total notional amount of approximately 34 million gallons through March 2022. These swaps are expected to lock in the price of approximately 50% of our projected fuel purchase needs for fiscal 2021. Additional swaps have been entered into for hedging activity in fiscal 2022. As of March 27, 2021, we had diesel fuel swaps with a total notional amount of approximately 23 million gallons specific to fiscal 2022. Our remaining fuel purchase needs will occur at market rates unless contracted for a fixed price or hedged at a later date.