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What changed in Performance Food Group Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Performance Food Group Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+333 added−334 removedSource: 10-K (2022-08-19) vs 10-K (2021-08-24)

Top changes in Performance Food Group Co's 2023 10-K

333 paragraphs added · 334 removed · 222 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOf that total, approximately 99% were employed on a full-time basis, and approximately 66% were non-exempt, or paid on an hourly basis. Compensation and Benefits. We believe our base wages and salaries, which we review annually, are fair and competitive with the external labor markets in which our associates work.
Biggest changeAs of July 2, 2022, our employee population (including employees of our consolidated subsidiaries) totaled approximately 35,000 full-time and part-time employees in the U.S and Canada. Of that total, approximately 99% were employed on a full-time basis, and approximately 66% were non-exempt, or paid on an hourly basis. 5 Compensation and Benefits.
We participate in and celebrate industry efforts, such as the International Foodservice Distributors Association’s Truck Driving Championship and Truck Driver Hall of Fame, highlight locally and share internally and externally significant achievements for our warehouse associates, and honor the diversity of our associates, along with our customers and communities, by celebrating, among other things, heritage months.
We participate in, and celebrate, industry efforts such as the International Foodservice Distributors Association’s Truck Driving Championship and Truck Driver Hall of Fame, highlight locally and internally/externally share significant achievements for our warehouse associates, and honor the diversity of our associates, along with our customers and communities, by celebrating, among other things, heritage months.
Trademarks and Trade Names We have numerous perpetual trademarks and trade names that are of significant importance, including West Creek, Silver Source, Braveheart 100% Black Angus, Empire’s Treasure, Brilliance, Heritage Ovens, Village Garden, Guest House, Piancone, Luigi’s, Ultimo, Corazo, Assoluti, Peak Fresh Produce, Roma, First Mark, and Nature’s Best Dairy.
Trademarks and Trade Names We have numerous perpetual trademarks and trade names that are of significant importance, including Core-Mark, West Creek, Silver Source, Braveheart 100% Black Angus, Empire’s Treasure, Brilliance, Heritage Ovens, Village Garden, Guest House, Piancone, Luigi’s, Ultimo, Corazo, Assoluti, Peak Fresh Produce, Roma, First Mark, and Nature’s Best Dairy.
We believe these efficiencies and economies of scale will provide opportunities for improvements in our operating margins when combined with an incremental fixed-cost advantage. Seasonality Historically, the food-away-from-home and foodservice distribution industries are seasonal, with lower profit in the first and third quarters of each calendar year.
We believe these efficiencies and economies of scale provide opportunities for improvements in our operating margins when combined with an incremental fixed-cost advantage. Seasonality Historically, the food-away-from-home and foodservice distribution industries are seasonal, with lower profit in the first and third quarters of each calendar year.
Our Foodservice segment’s chain customers include regional businesses requiring short-haul routes as well as national businesses requiring long-haul routes, including many of the most recognizable family 4 and casual dining restaurant chains. Sales to chain customers are typically lower gross margin but have larger deliveries than those to independent customers.
Our Foodservice segment’s chain customers include regional businesses requiring short-haul routes as well as national businesses requiring long-haul routes, including many of the most recognizable family and casual dining restaurant chains. Sales to chain customers are typically lower gross margin but have larger deliveries than those to independent customers.
In addition to the products we offer, we provide value-added services by enabling our customers to benefit from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and operational strategy. Our products consist of Performance Brands, as well as nationally branded products and products bearing our customers’ brands.
In addition to the products we offer, we provide value-added services by enabling our customers to benefit from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and operational strategy. 3 Our products consist of Performance Brands, as well as nationally branded products and products bearing our customers’ brands.
Our more than 23,000 employees serve a diverse mix of customers, from independent and chain restaurants to schools, business and industry locations, hospitals, vending distributors, office coffee service distributors, retailers, convenience stores, and theaters. We source our products from various suppliers and serve as an important partner to our suppliers by providing them access to our broad customer base.
Our more than 35,000 employees serve a diverse mix of customers, from independent and chain restaurants to schools, business and industry locations, hospitals, vending distributors, office coffee service distributors, retailers, convenience stores, and theaters. We source our products from various suppliers and serve as an important partner to our suppliers by providing them access to our broad customer base.
In addition, you may automatically receive e-mail alerts and other information about PFG when you enroll your e-mail address by visiting the “Email Alerts” section of our website at investors.pfgc.com. The contents of our website and social media channels are not, however, a part of this Form 10-K. 8
In addition, you may automatically receive e-mail alerts and other information about PFG when you enroll your e-mail address by visiting the “Email Alerts” section of our website at investors.pfgc.com. The contents of our website and social media channels are not, however, a part of this Form 10-K. 7
Our inventory turns, on average, every three-and-a-half weeks, which further protects us from cost fluctuations. 5 We seek to minimize the effect of higher diesel fuel costs both by reducing fuel usage and by taking action to offset higher fuel prices.
Our inventory turns, on average, every three-and-a-half weeks, which further protects us from cost fluctuations. 4 We seek to minimize the effect of higher diesel fuel costs both by reducing fuel usage and by taking action to offset higher fuel prices.
Human Capital Resources One of our primary strategies is to attract, train, develop, and retain talented individuals that feel empowered to fully contribute their diverse backgrounds, experiences, and innovative ideas to the success of the Company.
Human Capital Resources One of our primary strategies is to attract, train, develop, and retain talented individuals who feel empowered to fully contribute their diverse backgrounds, experiences, and innovative ideas to the success of the Company.
Vistar has successfully built upon our national platform to broaden the channels we serve to include convenience stores, hospitality venues, concessionaires, airport gift shops, college book stores, corrections facilities, and impulse locations in various brick and mortar big box retailers nationwide. Merchant’s Marts are cash-and-carry operators where customers generally pick up orders rather than having them delivered.
Vistar has successfully built upon our national platform to broaden the channels we serve to include hospitality venues, concessionaires, airport gift shops, college bookstores, corrections facilities, and impulse locations in various brick and mortar big box retailers nationwide. Merchant’s Marts are cash-and-carry operators where customers generally pick up orders rather than having them delivered.
Vistar’s scale in these channels enhances our ability to procure a broad variety of products for our customers. Vistar OpCos deliver to vending and office coffee service distributors and directly to most theaters and some other locations.
Vistar’s scale in these channels enhances our ability to procure a broad variety of products for our customers. Vistar distribution centers deliver to vending and office coffee service distributors and directly to most theaters and some other locations.
We reduce usage by designing more efficient truck routes and by increasing miles per gallon through on-board computers that monitor and adjust idling time and maximum speeds and through other technologies. In our Foodservice and Vistar segments, we seek to manage fuel prices through diesel fuel surcharges to our customers and through the use of costless collars.
We reduce usage by designing more efficient truck routes and by increasing miles per gallon through on-board computers that monitor and adjust idling time and maximum speeds and through other technologies. We seek to manage fuel prices through diesel fuel surcharges to our customers and through the use of costless collars.
As of July 3, 2021 , we had collars in place for approximately 3 7 % of the gallons we expect to use over the 12 months following July 3, 2021 . Competition The foodservice distribution industry is highly competitive. Certain of our competitors have greater financial and other resources than we do.
As of July 2, 2022, we had collars in place for approximately 24% of the gallons we expect to use over the 12 months following July 2, 2022. Competition The foodservice distribution industry is highly competitive. Certain of our competitors have greater financial and other resources than we do.
Item 1. Business Performance Food Group Company (“we,” “our,” “us,” “the Company,” or “PFG”), through its subsidiaries, markets and distributes more than 250,000 food and food-related products from 107 distribution centers to over 250,000 customer locations across the United States.
Item 1. B usiness Performance Food Group Company (“we,” “our,” “us,” “the Company,” or “PFG”), through its subsidiaries, markets and distributes more than 250,000 food and food-related products from 142 distribution centers to over 300,000 customer locations across the United States.
Foodservice operates a network of 72 distribution centers, each of which is run by a business team who understands the local markets and the needs of its particular customers and who is empowered to make decisions on how best to serve them. This segment serves over 150,000 customer locations with over 185,000 food and food-related products.
Foodservice operates a network of 78 distribution centers, each of which is run by a business team who understands the local markets and the needs of its particular customers and who is empowered to make decisions on how best to serve them. This segment serves over 175,000 customer locations.
In addition to the products we offer to our customers, we provide value-added services by allowing our customers to benefit from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and operational strategy.
In addition to the products we offer to our customers, we provide value-added services by allowing our customers to benefit from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and operational strategy. On September 1, 2021, we completed the acquisition of Core-Mark.
Pricing Our pricing to customers is either set by contract with the customer or is priced at the time of order. If the price is by contract, then it is either based on a percentage markup over cost or a fixed markup per unit, and the unit may be expressed either in cases or pounds of product.
If the price is by contract, then it is either based on a percentage markup over cost or a fixed markup per unit, and the unit may be expressed either in cases or pounds of product.
Our supplier base consists principally of large corporations that sell their national brands, our Performance Brands, and sometimes both. We also buy from smaller suppliers, particularly on a regional basis, and particularly those that specialize in produce and other perishable commodities. Many of our suppliers provide sales material and sales call support for the products that we purchase.
Many of our suppliers provide products to each of our reportable segments, while others sell to only one segment. Our supplier base consists principally of large corporations that sell their national brands, our Performance Brands, and sometimes both. We also buy from smaller suppliers, particularly on a regional basis, and particularly those that specialize in produce and other perishable commodities.
PFG works to build, measure, and sustain associate engagement through a variety of communications and activities.
We work to build, measure, and enhance associate engagement through a variety of communications and activities.
The Federal 7 Perishable Agricultural Commodities Act, which specifies standards for the sale, shipment, inspection, and rejection of agricultural products, governs our relationships with our fresh food suppliers with respect to the grading and commercial acceptance of product shipments. We are also subject to regulation by state authorities for the accuracy of our weighing and measuring devices.
State and/or federal authorities generally inspect our facilities at least annually. The Federal Perishable Agricultural Commodities Act, which specifies standards for the sale, shipment, inspection, and rejection of agricultural products, governs our relationships with our fresh food suppliers with respect to the grading and commercial acceptance of product shipments.
Finally, through our online learning platform we deliver a variety of required and optional on-demand learning modules that are linked to an associate’s role with the Company, including those modules tied to our Code of Business Conduct and anticorruption, which are completed annually by all associates. Health, Safety and Wellness.
Through our Learning Management System (LMS), we deliver a variety of required and optional on-demand learning modules that are linked to an associate’s role with the company, including those modules tied to safety and compliance, such as our Code of Business Conduct.
From a workplace safety standpoint, we focus on training, awareness, behavioral based work observation practices, and culture in our continuous effort to reduce workplace injuries and accidents.
The safety of our associates is paramount. Emphasis on training, safety awareness, behavioral based work observation practices, telematics, and culture is the foundation in our continuous effort to reduce workplace injuries and accidents.
We also recognize the importance of keeping our associates safe and healthy, as well as giving them a voice and listening to their concerns and suggestions. Below, we discuss our efforts to achieve these objectives. Associates. As of July 3, 2021, our employee population (including employees of our consolidated subsidiaries) totaled approximately 23,000 full-time and part-time employees in the U.S.
We also recognize the importance of keeping our associates safe and healthy, as well as giving them a voice and listening to their concerns and suggestions. Below, we discuss our efforts to achieve these objectives. Associates.
We offer incentive programs that provide cash bonus opportunities to encourage and reward participants for the Company’s achievement of financial and other key performance metrics and strengthen the 6 connection between pay and performance.
We believe our base wages and salaries, which we review annually, are fair and competitive with the external labor markets in which our associates work. We offer incentive programs that provide cash bonus opportunities to encourage and reward participants for the Company’s achievement of financial and other key performance metrics and strengthen the connection between pay and performance.
Our Chief Human Resources Officer currently provides quarterly updates to the Board and will continue to do so. With five out of 11 Board leaders representing gender and ethnic diversity, our commitment to ensure workforce diversity is reflected at every level of the organization and connects to our social responsibility and business imperatives. Training and Development.
Our Vice President of DI&B also provides regular updates to the Company's Board of Directors. With five out of 11 members of the Board representing gender and ethnic diversity, our commitment to ensure workforce diversity is reflected at every level of the organization connects to our social responsibility and business imperatives. Learning and Development.
We also grant equity compensation awards that vest over time through our long-term incentive plan to eligible associates to align such associates’ incentives with the Company’s long-term strategic objectives and the interests of our stockholders PFG also offers competitive benefits to its associates, including paid vacation and holidays, family leave, disability insurance, life insurance, healthcare, adoption assistance, tuition reimbursement, dependent care flexible spending accounts, a 401(k) plan with a company match, and an Employee Stock Purchase Plan.
We also offer competitive benefits to our associates, including paid vacation and holidays, family leave, disability insurance, life insurance, healthcare, adoption assistance, tuition reimbursement, dependent care flexible spending accounts, a 401(k) plan with a company match, and an Employee Stock Purchase Plan.
Regulation Our operations are subject to regulation by state and local health departments, the U.S. Department of Agriculture (the “USDA”), and the U.S. Food and Drug Administration (the “FDA”), which generally impose standards for product quality and sanitation and are responsible for the administration of bioterrorism legislation affecting the foodservice industry.
Department of Agriculture (the “USDA”), and the U.S. Food and Drug Administration (the “FDA”), which generally impose standards for product quality and sanitation and are responsible for the administration of bioterrorism legislation affecting the foodservice industry. These government authorities regulate, among other things, the processing, packaging, storage, distribution, advertising, and labeling of our products.
The FSMA requires that the FDA impose comprehensive, prevention-based controls across the food supply chain, further regulates food products imported into the United States, and provides the FDA with mandatory recall authority. The FSMA requires the FDA to undertake numerous rulemakings and to issue numerous guidance documents, as well as reports, plans, standards, notices, and other tasks.
In 2010, the FDA Food Safety Modernization Act (the “FSMA”) was enacted. The FSMA requires that the FDA impose comprehensive, prevention-based controls across the food supply chain, further regulates food products imported into the United States, and provides the FDA with mandatory recall authority.
As a result, implementation of the legislation is ongoing and likely to take several years. Our seafood operations are also specifically regulated by federal and state laws, including those administered by the National Marine Fisheries Service, established for the preservation of certain species of marine life, including fish and shellfish.
Our seafood operations are also specifically regulated by federal and state laws, including those administered by the National Marine Fisheries Service, established for the preservation of certain species of marine life, 6 including fish and shellfish. Our processing and distribution facilities must be registered with the FDA biennially and are subject to periodic government agency inspections.
The segment provides national distribution of approximately 65,000 different SKUs of candy, snacks, beverages, and other items to over 100,000 customer locations from our network of 35 Vistar OpCos and 4 Merchant’s Marts locations.
Vistar is a leading national distributor of candy, snacks, and beverages to vending and office coffee service distributors, retailers, theaters, and hospitality providers. The segment provides national distribution of candy, snacks, beverages, and other items to over 75,000 customer locations from our network of 25 Vistar distribution centers and 4 Merchant’s Marts locations.
Suppliers We source our products from various suppliers and serve as an important partner to our suppliers by providing them access to our broad customer base. Many of our suppliers provide products to both reportable segments, while others sell to only one segment.
For fiscal 2020, one of the Company’s customers within the Convenience segment accounted for 10.2% of our total net sales. Suppliers We source our products from various suppliers and serve as an important partner to our suppliers by providing them access to our broad customer base.
The extent to which these changes will affect our future financial position, liquidity, and results of operations remains uncertain. Our Segments Foodservice . Foodservice offers a “broad line” of products, including custom-cut meat and seafood, as well as products that are specific to our customers’ menu requirements.
This includes the operations of the Company’s internal logistics unit responsible for managing and allocating inbound logistics revenue and expense. Foodservice . Foodservice offers a “broad line” of products, including custom-cut meat and seafood, as well as products that are specific to our customers’ menu requirements.
Our suppliers are also subject to similar regulatory requirements and oversight.
We are also subject to regulation by state authorities for the accuracy of our weighing and measuring devices. Our suppliers are also subject to similar regulatory requirements and oversight.
As a company we are committed to building an inclusive and equitable culture that embraces and celebrates our associates’ diverse backgrounds and unique lived experiences. In fiscal 2021, we reinforced this commitment by hiring our first Vice President of Diversity & Inclusion (“D&I”).
As a company we are committed to building an inclusive and equitable culture that embraces and celebrates our associates’ diverse backgrounds and unique experiences. In fiscal 2022, we implemented a Diversity, Inclusion, and Belonging (DI&B) framework that includes, among other things, a focus on clear leadership roles and accountability, new talent acquisition practices, employee communities, and inclusive performance management.
Consequently, we typically experience lower operating profit during our first and third fiscal quarters, depending on the timing of acquisitions, if any. The impact of the COVID-19 pandemic has resulted in a temporary disruption to historic seasonal trends.
Consequently, we typically experience lower operating profit during our third fiscal quarter, depending on the timing of acquisitions, if any. The acquisition of Core-Mark expanded the Company's convenience business which is expected to result in first fiscal quarter profit higher than historical trends since this channel generally performs stronger in the spring and summer months.
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On May 17, 2021, we entered into a definitive agreement and plan of merger pursuant to which the Company will acquire Core-Mark in a stock and cash transaction.
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As a result, we expanded our convenience business, which now includes operations in Canada. Refer to Note 4. Business Combinations within the Notes to Consolidated Financial Statements included in Part II, Item 8. Financial Statements "("Item 8") for additional details regarding the acquisition of Core-Mark.
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Under the terms of the transaction, which has been unanimously approved by the board of directors of each company, Core-Mark shareholders will receive $23.875 per share in cash and 0.44 shares of PFG common stock for each share of Core-Mark common stock. The transaction values Core-Mark at approximately $2.5 billion, including CoreMark’s net debt.
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Our business, our industry and the U.S. economy are influenced by a number of general macroeconomic factors, including, but not limited to, the recent rise in the rate of inflation and fuel prices, interest rates, and the ongoing COVID-19 pandemic and related supply chain disruptions and labor shortages.
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The cash portion of the purchase price is expected to be financed with borrowing under the ABL Facility (as defined below under “- Financing Activities”). We believe that our short-term performance has been, and is expected to continue to be, adversely affected by the COVID-19 pandemic.
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We continue to actively monitor the impacts of the evolving macroeconomic and geopolitical landscape on all aspects of our business. During fiscal 2022, economic and operating conditions for our business improved significantly due to the declining adverse effects of the ongoing COVID-19 pandemic.
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In response to the rapid spread of COVID-19 across the country, federal, state, and local governments implemented measures to reduce the spread of COVID-19, including travel bans and restrictions, quarantines, shelter in place orders, shutdowns, and social distancing requirements.
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However, the Company and our industry may continue to face challenges as the recovery continues, such as availability of product supply, increased product and logistics costs, access to labor supply, lower disposable incomes due to inflationary pressures and macroeconomic conditions, and the emergence of COVID-19 variants.
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These measures adversely affected workforces, suppliers, customers, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, led to an economic downturn in many of our markets. As an essential element of the country’s food supply chain, the Company has continued to operate all of it distribution centers.
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The extent to which these challenges will affect our future financial position, liquidity, and results of operations remains uncertain. For further information on the risks posed to our business, please see Item 1A. Our Segments In the second quarter of fiscal 2022, the Company changed its operating segments to reflect the manner in which the business is managed.
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Despite the Company’s continued operations, mandatory and voluntary containment measures in response to COVID-19 had, and continues to have, a significant impact on the food-away-from-home industry. Many restaurants have closed, are restricting the number of patrons they will serve at one time, or are only providing carry-out or delivery options.
Added
Based on the Company’s organization structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company now has three reportable segments: Foodservice, Vistar, and Convenience. Corporate & All Other is comprised of corporate overhead and certain operating segments that are not considered separate reportable segments based on their size.
Removed
These restrictions have also impacted businesses throughout the economy, including theaters, retail operations, schools, and other businesses to whom we provide products and services, which collectively have adversely affected our results of operations, including significant decreases in sales.
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Convenience . The Convenience segment is one of the largest foodservice and wholesaler consumer products distributors in the convenience retail industry. Convenience offers a full range of products, marketing programs and technology solutions to approximately 50,000 customer locations in the United States and Canada.
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Despite these difficulties, we have taken steps to ensure a strong financial position, including steps to maintain financial liquidity, forging new customer relationships, supporting restaurant customers with the transition to higher volumes of take-out and delivery, and other means.
Added
The Convenience segment's customers include traditional convenience stores, drug stores, mass merchants, grocery stores, liquor stores and other specialty and small format stores that carry convenience products. Convenience's product offering includes cigarettes, other tobacco products, alternative nicotine products, candy, snacks, food, including fresh products, groceries dairy, bread, beverages, general merchandise and health and beauty care products.
Removed
Even as governmental restrictions are eased and economies gradually, partially, or fully reopen in certain states and markets, the ongoing economic impacts and health concerns associated with the pandemic, as well as the potential for restrictions being re-implemented as COVID-19 cases rise, may continue to affect consumer behavior and spending in the channels we serve.
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Convenience operates a network of 39 distribution centers in the U.S. and Canada (excluding two distribution facilities it operates as a third-party logistics provider). There are 35 distribution centers located in the U.S. and four located in Canada. The Company had no customers that comprised more than 10% of consolidated net sales for fiscal 2022 or fiscal 2021.
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Vistar is a leading national distributor of candy, snacks, beverages, cigarettes, and other tobacco products to vending and office coffee service distributors, retailers, theaters, convenience stores, and hospitality providers.
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Many of our suppliers provide sales material and sales call support for the products that we purchase. Pricing Our pricing to customers is either set by contract with the customer or is priced at the time of order.
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The Company had no customers that comprised more than 10% of consolidated net sales for fiscal 2021 or fiscal 2019. For fiscal 2020, one of the Company’s customers within the Vistar segment accounted for 10.2% of our total net sales.
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The ongoing COVID-19 pandemic and its accompanying impacts have resulted in a disruption to historic seasonal trends in recent years and may continue to impact seasonal trends in future periods.
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She will build on this commitment to create a more diverse and inclusive work environment by implementing a thoughtful D&I framework that will include, among other things, a focus on clear leadership roles and accountability, new talent acquisition practices, employee communities, and inclusive performance management.
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We also grant equity compensation awards that vest over time through our long-term incentive plan to eligible associates to align such associates’ incentives with the Company’s long-term strategic objectives and the interests of our stockholders.
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We have a longstanding and robust training program that provides role-specific training and also offers management training to advance leadership skills used in our succession planning process. Our annual process identifies key contributors, high impact performers, and those we feel represent our top talent at various levels of leadership in the business.
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We have an enterprise-wide learning and development strategy that has allowed us to build a lifelong learning culture by focusing on attracting, retaining and preparing our workforce for success in current roles and developing our future leaders. Using a blended approach of instructor-led and self-paced training, our associates are provided role-specific training that is just-in-time, accessible and personalized.
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This process is used to select participants in our leadership program. We have also been an active participant with the Women’s Foodservice Forum (WFF) in leveraging their annual leadership conference and other events centered around developing women leaders in our industry.
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The learning journey for our associates starts with an onboarding experience and continues with individual development opportunities. Our E3 Leadership Development program is designed to provide leadership training opportunities for all levels of leadership, from entry level to executive, advancing leadership skills at every point of their career.
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Additionally, our Foodservice segment has developed what we believe is an industry-leading sales training program that prepares our new sales associates for success while ensuring a more consistent, reliable, and positive customer experience.
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Additionally, our Foodservice segment continues to provide a sales training program that prepares our sales associates for success and sets our sales leaders apart to promote long-term customer relationships and positive customer experiences. We are focused on empowering associates with the right training at the right time, throughout their career journey. Health, Safety and Wellness.
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Our focus had a positive impact as we reduced our recordable injury rate in the workplace during fiscal 2021 by 3% as compared to the prior fiscal year, and we reduced road accidents per million miles driven by 20% during fiscal 2021 as compared to the prior fiscal year.
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We continue to focus on the safety of our team members and the motoring public by identifying and addressing safety risks through education, coaching, and process changes, and by seeking out new systems and technology to help us continue our journey in keeping our associates safe and our company compliant. Engagement.
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We are always focused on the safety of our associates and have a strong emphasis on identifying and addressing the safety risks to and concerns of our associates. We acted quickly to develop and implement enhanced safety protocols to address the COVID-19 pandemic and protect the health and safety of our associates. Engagement.
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Community support efforts such as Feeding American’s Hunger Action Month, promoting Truckers Against Trafficking, and supporting American Red Cross disaster relief efforts also provide opportunities to engage our associates.
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To measure associate engagement levels, PFG conducted its first enterprise-wide engagement survey in October 2020, with an overall response rate of 76%. We have parallel activities in progress to study and use the results of the survey for enterprise and more localized improvement efforts and are leveraging responses to help shape our diversity and inclusion strategy.
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In response to the results of our first enterprise-wide engagement survey in 2020, we identified and delivered a number of initiatives to strengthen the associate experience, including day one benefits, the E3 leadership training program, driver and selector career pathing and enhanced communications channels. Regulation Our operations are subject to regulation by state and local health departments, the U.S.
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These government authorities regulate, among other things, the processing, packaging, storage, distribution, advertising, and labeling of our products. In 2010, the FDA Food Safety Modernization Act (the “FSMA”) was enacted.
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The FSMA requires the FDA to undertake numerous rulemakings and to issue numerous guidance documents, as well as reports, plans, standards, notices, and other tasks. As a result, implementation of the legislation is ongoing and likely to take several years.
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Our processing and distribution facilities must be registered with the FDA biennially and are subject to periodic government agency inspections. State and/or federal authorities generally inspect our facilities at least annually.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

66 edited+15 added−58 removed109 unchanged
Biggest changeOur high degree of leverage could have important consequences for us, including: • requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity, and other general corporate purposes; • increasing our vulnerability to adverse economic, industry, or competitive developments; • exposing us to the risk of increased interest rates to the extent our borrowings are at variable rates of interest; • making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and 20 • limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.
Biggest changeIn addition, we had $2,201.1 million of availability under the ABL Facility (as defined below under "- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financing Activities in Part II, Item 7 of this Form 10-K ("Item 7")") after giving effect to $190.5 million of outstanding letters of credit and $104.4 million of lenders’ reserves under the ABL Facility. 16 Our high degree of leverage could have important consequences for us, including: • requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity, and other general corporate purposes; • increasing our vulnerability to adverse economic, industry, or competitive developments; • exposing us to the risk of increased interest rates to the extent our borrowings are at variable rates of interest; • making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and • limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.
Due to increases in the prices of cigarettes, restrictions on cigarette manufacturers’ marketing and promotions, increases in cigarette regulation and excise taxes, health concerns, increased pressure from anti-tobacco groups, the rise in popularity of tobacco alternatives, including electronic cigarettes, other alternative nicotine products, and other factors, cigarette consumption in the United States has been declining gradually over the past few decades.
Due to increases in the prices of cigarettes, restrictions on cigarette manufacturers’ marketing and promotions, increases in cigarette regulation and excise taxes, health concerns, increased pressure from anti-tobacco groups, the rise in popularity of tobacco alternatives, including electronic cigarettes and other alternative nicotine products, and other factors, cigarette consumption in the United States has been declining gradually over the past few decades.
These covenants limit the ability of our subsidiaries to, among other things: • incur, assume, or permit to exist additional indebtedness or guarantees; • incur liens; • make investments and loans; • pay dividends, make payments, or redeem or repurchase capital stock; • engage in mergers, liquidations, dissolutions, asset sales, and other dispositions (including sale leaseback transactions); • amend or otherwise alter terms of certain indebtedness; • enter into agreements limiting subsidiary distributions or containing negative pledge clauses; • engage in certain transactions with affiliates; • alter the business that we conduct; 21 • change our fiscal year; or • engage in any activities other than permitted activities.
These covenants limit the ability of our subsidiaries to, among other things: • incur, assume, or permit to exist additional indebtedness or guarantees; • incur liens; • make investments and loans; • pay dividends, make payments, or redeem or repurchase capital stock; • engage in mergers, liquidations, dissolutions, asset sales, and other dispositions (including sale leaseback transactions); • amend or otherwise alter terms of certain indebtedness; • enter into agreements limiting subsidiary distributions or containing negative pledge clauses; • engage in certain transactions with affiliates; • alter the business that we conduct; • change our fiscal year; and • engage in any activities other than permitted activities.
The failure to comply with applicable regulatory requirements could result in, among other things, administrative, civil, or criminal penalties or fines; mandatory or voluntary product recalls; warning or untitled letters; cease and desist orders against operations that are not in compliance; closure of facilities or operations; the loss, revocation, or modification of any existing licenses, permits, registrations, or approvals; or the failure to obtain additional licenses, permits, registrations, or approvals in new jurisdictions where we intend to do business, any of which could have a material adverse effect on our business, financial 13 condition, or results of operations.
The failure to comply with applicable regulatory requirements could result in, among other things, administrative, civil, or criminal penalties or fines; mandatory or voluntary product recalls; warning or untitled letters; cease and desist orders against operations that are not in compliance; closure of facilities or operations; the loss, revocation, or modification of any existing licenses, permits, registrations, or approvals; or the failure to obtain additional licenses, permits, registrations, or approvals in new jurisdictions where we intend to do business, any of which could have a material adverse effect on our business, financial condition, or results of operations.
In addition, the FDA has been empowered to regulate changes to nicotine yields and the chemicals and flavors used in tobacco and alternative nicotine products (including cigars, pipe and e-cigarette products), require ingredient listings be displayed on tobacco and alternative nicotine products, prohibit the use of certain terms which may attract youth or mislead users as to the risks involved with using tobacco and alternative nicotine products, as well as limit or otherwise impact the marketing of tobacco and alternative nicotine products by requiring additional labels or warnings that must be pre-approved by the FDA.
In addition, 12 the FDA has been empowered to regulate changes to nicotine yields and the chemicals and flavors used in tobacco and alternative nicotine products (including cigars, pipe and e-cigarette products), require ingredient listings be displayed on tobacco and alternative nicotine products, prohibit the use of certain terms which may attract youth or mislead users as to the risks involved with using tobacco and alternative nicotine products, as well as limit or otherwise impact the marketing of tobacco and alternative nicotine products by requiring additional labels or warnings that must be pre-approved by the FDA.
Additionally, we may be unable to retain qualified management and other key personnel employed by acquired companies and may fail to build a network of acquired companies in new markets. We could face significantly greater competition from broadline foodservice distributors in these markets than we face in our existing markets. We also regularly evaluate opportunities to acquire other companies.
Additionally, we may be unable to retain qualified management and other key personnel employed by acquired companies and may fail to build a network of acquired companies in new markets. We could face significantly greater competition from broadline foodservice distributors in these markets than we face in our existing markets. 11 We also regularly evaluate opportunities to acquire other companies.
If we do not have adequate insurance or contractual indemnification available, product liability relating to defective products could adversely affect our profitability. We rely heavily on technology in our business and any technology disruption or delay in implementing new technology could adversely affect our business. The foodservice distribution industry is transaction intensive.
If we do not have adequate insurance or contractual indemnification available, product liability relating to defective products could adversely affect our profitability. 13 We rely heavily on technology in our business and any technology disruption or delay in implementing new technology could adversely affect our business. The foodservice distribution industry is transaction intensive.
In addition, compliance with current and future environmental laws and regulations relating to carbon emissions and the effects of global warming can be expected to have a significant impact on our transportation costs and could have a material adverse effect on our business, financial condition, or results of operations.
In addition, compliance with current and future environmental laws and regulations relating to carbon emissions and the effects of global warming can be expected to have a significant impact on our transportation costs, which could have a material adverse effect on our business, financial condition, or results of operations.
Any change in such practices that results in the reduction or elimination of promotional allowances could be disruptive to us and the industry as a whole and could have a material adverse effect on our business, financial condition, or results of operations. 12 Our growth strategy may not achieve the anticipated results.
Any change in such practices that results in the reduction or elimination of promotional allowances could be disruptive to us and the industry as a whole and could have a material adverse effect on our business, financial condition, or results of operations. Our growth strategy may not achieve the anticipated results.
Our inability to anticipate and react to changing food costs through our sourcing and purchasing practices in the future could have a material adverse effect on our business, financial condition, or results of operations. We face risks relating to labor relations, labor costs, and the availability of qualified labor.
Our inability to anticipate and react to changing food costs through our sourcing and purchasing practices in the future could also have a material adverse effect on our business, financial condition, or results of operations. We face risks relating to labor relations, labor costs, and the availability of qualified labor.
Furthermore, such extreme weather conditions may interrupt or impede access to our customers’ facilities, all of which could have a material adverse effect on our business, financial condition, or results of operations. Fluctuations in fuel costs and other transportation costs could harm our business.
Furthermore, such extreme weather conditions may interrupt or impede access to our customers’ facilities, all of which could have a material adverse effect on our business, financial condition, or results of operations. Fluctuations in fuel prices and other transportation costs could harm our business.
If these excise taxes are substantially increased, or credit terms are substantially reduced, it could have a negative impact on our liquidity. A portion of our sales volume is dependent upon the distribution of cigarettes and other tobacco products, sales of which are generally declining.
If these excise taxes are substantially increased, or credit terms are substantially reduced, it could have a negative impact on our liquidity. A significant portion of our sales volume is dependent upon the distribution of cigarettes and other tobacco products, sales of which are generally declining.
Our inability to obtain adequate supplies of foodservice and related products as a result of any of the foregoing factors or otherwise could mean that we could not fulfill our obligations to our customers and, as a result, our customers may turn to other 9 distributors.
Our inability to obtain adequate supplies of foodservice and related products as a result of any of the foregoing factors or otherwise could mean that we could not fulfill our obligations to our customers and, as a result, our customers may turn to other distributors.
The high cost of fuel and other transportation related costs, such as tolls, fuel taxes, and license and registration fees, can also increase the price we pay for products as well as the costs incurred by us to deliver products to our customers.
The high price of fuel and other transportation related costs, such as tolls, fuel taxes, and license and registration fees, can also increase the price we pay for products as well as the costs incurred by us to deliver products to our customers.
If patrons of our restaurant customers become ill from food-borne illnesses, our customers could be forced to temporarily close restaurant locations and our sales would be correspondingly decreased.
If patrons of our restaurant customers 14 become ill from food-borne illnesses, our customers could be forced to temporarily close restaurant locations and our sales would be correspondingly decreased.
A substantial portion of our indebtedness is floating rate debt. If interest rates increase, our debt service obligations on such indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. In addition, interest on the ABL Facility is calculated based on LIBOR.
A substantial portion of our indebtedness is floating rate debt. As interest rates increase, our debt service obligations on such indebtedness increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. In addition, interest on the ABL Facility is calculated based on LIBOR.
To a certain extent, this is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.
To a certain extent, this ability is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.
We have not previously completed a transaction comparable in size or scope to the Proposed Core-Mark Acquisition.
We have not previously completed a transaction comparable in size or scope to the Core-Mark acquisition.
In addition, labor organizing activities could result in additional employees becoming unionized, which could result in higher labor costs.
In addition, labor organizing activities could result in additional employees becoming unionized, 8 which could result in higher labor costs.
We may not be able to realize benefits of acquisitions or successfully integrate the businesses we acquire. From time to time, we acquire businesses that broaden our customer base, and/or increase our capabilities and geographic reach.
We may not be able to realize benefits of acquisitions or successfully integrate the businesses we acquire. From time to time, we acquire businesses that are intended to broaden our customer base, and/or increase our capabilities and geographic reach.
Any increase in their labor costs, including any increases in costs as a result of increases in minimum wage requirements, could reduce the profitability of our customers and reduce demand for our products. We rely heavily on our employees, particularly drivers, and any shortage of qualified labor could significantly affect our business.
Any increase in their labor costs, including any increases in costs as a result of increases in minimum wage requirements, could reduce the profitability of our customers and reduce demand for our products. We rely heavily on our employees, particularly warehouse workers and drivers, and any significant shortage of qualified labor could significantly affect our business.
Additionally , our suppliers could be adversely impacted by the COVID-19 pandemic.
Additionally, our suppliers could be adversely impacted by the ongoing COVID-19 pandemic.
Further, we continue to assess our healthcare benefit costs. Despite our efforts to control costs while still providing competitive healthcare benefits to our associates, significant increases in healthcare costs continue to occur, and we can provide no assurance that our cost containment efforts in this area will be effective.
Despite our efforts to control costs while still providing competitive healthcare benefits to our associates, significant increases in healthcare costs continue to occur, and we can provide no assurance that our cost containment efforts in this area will be effective.
We expect to incur substantial expenses in connection with the completion of the Proposed Core-Mark Acquisition and the integration of Core-Mark’s business. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits.
We expect to incur substantial expenses in connection with the integration of Core-Mark’s business. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits.
Additionally, if we are unable or unwilling to lower the prices we charge for our products to a level that is satisfactory to the GPOs, we may lose the business of those customers that are members of these organizations, which could have a material adverse impact on our business, financial condition, or results of operations Changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations.
Additionally, if we are unable or unwilling to lower the prices we charge for our products to a level that is satisfactory to the GPOs, we may lose the business of those customers that are members of these organizations, which could have a material adverse impact on our business, financial condition, or results of operations Changes in consumer eating habits could reduce the demand for our products.
The integration of Core-Mark into our business may result in material challenges, including, without limitation: • the diversion of management’s attention from ongoing business concerns and performance shortfalls as a result of the devotion of management’s attention to the Proposed Core-Mark Acquisition; • managing a larger company; • maintaining employee morale and attracting and motivating and retaining management personnel and other key employees; • the possibility of faulty assumptions underlying expectations regarding the integration process; • retaining existing business and operational relationships and attracting new business and operational relationships; • consolidating corporate and administrative infrastructures and eliminating duplicative operations; • coordinating geographically separate organizations; • unanticipated issues in integrating information technology, communications and other systems; • unanticipated changes in federal or state laws or regulations; and • unforeseen expenses or delays associated with the Proposed Core-Mark Acquisition.
The integration of Core-Mark into our business may result in material challenges, including, without limitation: • the diversion of management’s attention from ongoing business concerns and performance shortfalls as a result of the devotion of management’s attention to the integration of Core-Mark; • managing a larger company; • the possibility of faulty assumptions underlying expectations regarding the integration process; • retaining existing business and operational relationships and attracting new business and operational relationships; • consolidating corporate and administrative infrastructures and eliminating duplicative operations; • coordinating geographically separate organizations; • unanticipated issues in integrating information technology, communications and other systems; • unanticipated changes in federal or state laws or regulations; and • unforeseen expenses or delays associated with the integration of Core-Mark.
We will be exposed to credit-related losses, which could affect the results of operations in the event of fluctuations in the fair value of the interest rate swaps due to a change in the credit worthiness or non-performance by the counterparties to the interest rate swaps. Item 1B. Unresolved Staff Comments None. 22
We will be exposed to credit-related losses, which could affect the results of operations in the event of fluctuations in the fair value of the interest rate swaps due to a change in the credit worthiness or non-performance by the counterparties to the interest rate swaps. Item 1B. Unresolve d Staff Comments None. 18
Our future success will depend on our ability to grow our business, including through increasing our independent sales, expanding our Performance Brands, making strategic acquisitions, including the Proposed Core-Mark Acquisition, and achieving improved operating efficiencies as we continue to expand and diversify our customer base.
Our future success will depend on our ability to grow our business, including through increasing our independent sales, expanding our Performance Brands, making strategic acquisitions, and achieving improved operating efficiencies as we continue to expand and diversify our customer base.
These low profit margins tend to increase the volatility of our reported net income since any decline in our net sales or increase in our costs that is small relative to our total net sales or costs may have a large impact on our net income.
These low profit margins tend to increase the volatility of our reported net income since any decline in our net sales or increase in our costs that is small relative to our total net sales or costs may have a large impact on our net income. Volatile food costs may have a direct impact upon our profitability.
Additionally, due to the COVID-19 pandemic, a substantial portion of our corporate employees are working remotely using smartphones, tablets, and other wireless devices, which may further heighten these and other operational risks.
Additionally, due to the ongoing COVID-19 pandemic, a substantial portion of our corporate employees continue to work remotely using smartphones, tablets, and other wireless devices, which may further heighten these and other operational risks.
Many of these factors will be outside of our control and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially affect our financial position, results of operations and cash flows.
Many of these factors will be outside of our control and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially affect our financial position, results of operations and cash flows. We expect to incur substantial expenses related to the integration of Core-Mark.
The success of the Proposed Core-Mark Acquisition will depend, to a large extent, on our ability to successfully combine Core-Mark, which currently operates as an independent public company, with our business and realize the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the combination.
The success of the Core-Mark acquisition will depend, to a large extent, on our ability to successfully combine Core-Mark with our business and realize the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the combination.
Changes in consumer eating habits (such as a decline in consuming food away from home, a decline in portion sizes, or a shift in preferences toward restaurants that are not our customers) could reduce demand for our products.
Changes in consumer eating habits (such as a decline in consuming food away from home, a decline in portion sizes, or a shift in preferences toward restaurants that are not our customers) could reduce demand for our products, which could adversely affect our business, financial condition, or results of operations.
Our results of operations and financial condition could be materially and adversely affected if (1) total claims costs significantly exceed our coverage limits, (2) we experience a claim in excess of our coverage limits, (3) our insurance carriers fail to pay on our insurance claims, (4) we experience a claim for which coverage is not provided or (5) a large number of claims may cause our cost under our deductibles to differ from historic averages. 16 Risks Related to the Proposed Core-Mark Acquisition The Proposed Core-Mark Acquisition is subject to conditions, some or all of which may not be satisfied, or completed on a timely basis.
Our results of operations and financial condition could be materially and adversely affected if (1) total claims costs significantly exceed our coverage limits, (2) we experience a claim in excess of our coverage limits, (3) our insurance carriers fail to pay on our insurance claims, (4) we experience a claim for which coverage is not provided or (5) a large number of claims may cause our cost under our deductibles to differ from historic averages.
These incremental transaction and merger-related costs may exceed the savings the C ompany expects to achieve after the consummation of the Proposed Core-Mark Acquisition from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs.
These incremental merger-related costs may exceed the savings the Company expects to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs.
If there is any future product withdrawal that results in substantial and unexpected expenditures, destruction of product inventory, damage to our reputation, and lost sales because of the unavailability of the product for a period of time, our business, financial condition, or results of operations may be materially adversely affected. 14 We also may be subject to product liability claims if the consumption or use of our products is alleged to cause injury or illness.
If there is any future product withdrawal that results in substantial and unexpected expenditures, destruction of product inventory, damage to our reputation, and lost sales because of the unavailability of the product for a period of time, our business, financial condition, or results of operations may be materially adversely affected.
As of July 3, 2021, we had more than 23,000 employees of whom approximately 1,200 were members of local unions associated with the International Brotherhood of Teamsters or other unions.
As of July 2, 2022, we had more than 35,000 employees of whom approximately 1,600 were members of local unions associated with the International Brotherhood of Teamsters or other unions.
There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Proposed Core-Mark Acquisition. We expect to incur substantial expenses related to the completion of the Proposed Core-Mark Acquisition and our integration of Core-Mark.
There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the acquisition of Core-Mark.
If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully, or at all, or may take longer to realize than expected and the value of our common stock may be harmed.
If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully, or at all, or may take longer to realize than expected and the value of our common stock may be harmed. 15 The integration of Core-Mark with our existing business is a complex, costly and time-consuming process.
The COVID-19 pandemic has impacted the Company’s ability to hire and retain qualified labor resulting in the payment of higher temporary contract labor costs. Additionally, if our employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, we could face additional shortages of qualified labor and higher labor costs.
Additionally, if our employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with the COVID-19 pandemic, we could face additional shortages of qualified labor and higher labor costs. Further, we continue to assess our healthcare benefit costs.
Following the acquisition of Eby-Brown, a significant portion of our sales volume depends upon the distribution of cigarettes and other tobacco products.
Following the acquisitions of Eby-Brown Company LLC (“Eby-Brown”) and Core-Mark, a significant portion of our sales volume depends upon the distribution of cigarettes and other tobacco products.
Many of our facilities and our customers’ facilities are located in areas that may be subject to extreme and occasionally prolonged weather conditions, including hurricanes, blizzards, earthquakes, and extreme heat or cold. Such extreme weather conditions may interrupt our operations and reduce the number of consumers who visit our customers’ facilities in such areas.
Extreme weather conditions and natural disasters may interrupt our business or our customers’ businesses. Many of our facilities and our customers’ facilities are located in areas that may be subject to extreme and occasionally prolonged weather conditions, including hurricanes, blizzards, earthquakes, and extreme heat or cold.
The agreements governing our outstanding indebtedness contain restrictions that limit our flexibility in operating our business. The agreements governing our outstanding indebtedness, including indebtedness incurred or to be incurred in connection with the Proposed Core-Mark Acquisition, contain various covenants that limit our ability to engage in specified types of transactions.
The agreements governing our outstanding indebtedness contain restrictions that limit our flexibility in operating our business. The agreements governing our outstanding indebtedness contain various covenants that limit our ability to engage in specified types of transactions.
The theft, destruction, loss, misappropriation, release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability, and competitive disadvantage. 15 Adverse judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profits or limit our ability to operate our business.
The theft, destruction, loss, misappropriation, release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability, and competitive disadvantage.
Our inability to effectively respond to changes in food away from home consumer trends, consumer health perceptions or resulting new laws or regulations or to adapt our menu offerings to trends in eating habits could materially and adversely affect our business, financial condition, or results of operations. 11 Extreme weather conditions and natural disasters may interrupt our business or our customers’ businesses, which could have a material adverse effect on our business, financial condition, or results of operations.
Our inability to effectively respond to changes in food away from home consumer trends, consumer health perceptions or resulting new laws or regulations or to adapt our menu offerings to trends in eating habits could materially and adversely affect our business, financial condition, or results of operations.
In addition, product cost inflation may negatively affect consumer discretionary spending decisions within our customers’ establishments, which could impact our sales. Our inability to quickly respond to inflationary and deflationary cost pressures could have a material adverse impact on our business, financial condition, or results of operations. Many of our customers are not obligated to continue purchasing products from us.
Our inability to quickly respond to inflationary and deflationary cost pressures could have a material adverse impact on our business, financial condition, or results of operations. 9 Many of our customers are not obligated to continue purchasing products from us.
We obtain substantially all of our foodservice and related products from third-party suppliers. We typically do not have long-term contracts with our suppliers. Although our purchasing volume can sometimes provide an advantage when dealing with suppliers, suppliers may not provide the foodservice products and supplies needed by us in the quantities and at the prices requested.
Although our purchasing volume can sometimes provide an advantage when dealing with suppliers, suppliers may not provide the foodservice products and supplies needed by us in the quantities and at the prices requested.
While we carry product liability insurance, our insurance may not be adequate to cover all liabilities we may incur in connection with product liability claims. For example, punitive damages may not be covered by insurance.
We also may be subject to product liability claims if the consumption or use of our products is alleged to cause injury or illness. While we carry product liability insurance, our insurance may not be adequate to cover all liabilities we may incur in connection with product liability claims. For example, punitive damages may not be covered by insurance.
The FSMA requires that the FDA impose comprehensive, prevention-based controls across the food supply, further regulates food products imported into the United States, and provides the FDA with mandatory recall authority.
These government authorities regulate, among other things, the processing, packaging, storage, distribution, advertising, and labeling of our products. The FSMA requires that the FDA impose comprehensive, prevention-based controls across the food supply, further regulates food products imported into the United States, and provides the FDA with mandatory recall authority.
For example, the impact of the COVID-19 pandemic on the economy has resulted in inflation of 4.6% for fiscal 2021, which has had, and could continue to have, an impact our product costs and profit margins.
For example, the impact of current economic conditions has resulted in inflation of 11.9% for fiscal 2022, which has had, and could continue to have, an impact our product costs and profit margins.
On July 27, 2017, the U.K. Financial Conduct Authority (the “FCA”) announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. In the meantime, actions by the FCA, other regulators, or law enforcement agencies may result in changes to the method by which LIBOR is calculated.
On July 27, 2017, the U.K. Financial Conduct Authority (the “FCA”) announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021.
A breach of any of these covenants could result in a default under one or more of these agreements, including as a result of cross default provisions, and, in the case of our ABL Facility, permit the lenders to cease making loans to us.
A breach of any of these covenants could result in a default under one or more of these agreements, including as a result of cross default provisions, and, in the case of our ABL Facility, amounts due may be accelerated and the rights and remedies of the lenders may be exercised, including rights with respect to the collateral securing the obligations.
Our failure to make the required interest and principal payments on our indebtedness would result in an event of default under the agreement governing such indebtedness, which may result in the acceleration of some or all of our outstanding indebtedness.
Our failure to make the required interest and principal payments on our indebtedness would result in an event of default under the agreement governing such indebtedness, which may result in the acceleration of some or all of our outstanding indebtedness. 17 Despite our high indebtedness level, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.
We may incur additional costs to maintain employee morale and to attract, motivate or retain management personnel and other key employees. We and Core-Mark will also incur transaction fees and costs related to formulating integration plans for the combined business, and the 19 execution of these plans may lead to additional unanticipated costs.
We will also incur costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs.
Our operations are subject to regulation by state and local health departments, the USDA, and the FDA, which generally impose standards for product quality and sanitation and are responsible for the administration of recent bioterrorism legislation affecting the foodservice industry. These government authorities regulate, among other things, the processing, packaging, storage, distribution, advertising, and labeling of our products.
Our business is subject to significant governmental regulation, and costs or claims related to these requirements could adversely affect our business. Our operations are subject to regulation by state and local health departments, the USDA, and the FDA, which generally impose standards for product quality and sanitation and are responsible for the administration of bioterrorism legislation affecting the foodservice industry.
In the normal course of our business, we are involved in various legal proceedings. The outcome of these proceedings cannot be predicted.
Adverse judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profits or limit our ability to operate our business. In the normal course of our business, we are involved in various legal proceedings. The outcome of these proceedings cannot be predicted.
In addition, our and Core-Mark’s businesses will continue to maintain a presence in Richmond, Virginia and Westlake, Texas, respectively. The substantial majority of these costs will be non-recurring expenses related to the Proposed Core-Mark Acquisition (including financing of the Proposed Core-Mark Acquisition), facilities and systems consolidation costs.
In addition, our and Core-Mark’s businesses will continue to maintain a presence in Richmond, Virginia and Westlake, Texas, respectively. The substantial majority of these costs will be facilities and systems consolidation costs. We may incur additional costs to maintain employee morale and to attract, motivate or retain management personnel and other key employees.
After the Proposed Core-Mark Acquisition, we may be unable to successfully integrate the businesses and realize the anticipated benefits of the Proposed Core-Mark Acquisition. The combination of two independent businesses is a complex, costly and time-consuming process.
Risks Related to the Integration of Core-Mark We may be unable to successfully integrate the businesses and realize the anticipated benefits of the acquisition of Core-Mark.
These factors, if occurring over an extended period of time, could have a material adverse effect on our sales, margins, operating expenses, or results of operations. From time to time, we may enter into arrangements to manage our exposure to fuel costs.
These factors, if occurring over an extended period of time, could have a material adverse effect on our sales, margins, operating expenses, or results of operations. For example, in fiscal 2022, the Russian invasion of Ukraine had a significant impact on fuel supply and fuel prices.
Item 1A. Ris k Factors Risks Relating to Our Business and Industry The impact of the COVID-19 pandemic on the global markets, the restaurant industry, and our business specifically has had and is expected to continue to have an adverse effect on our business, financial condition and results of operations.
Additionally, the COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The ongoing COVID-19 pandemic has had, and may continue to have, an adverse effect on our business, financial condition, and results of operations.
Despite our high indebtedness level, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness. We and our subsidiaries may be able to incur substantial additional indebtedness in the future.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future.
As restrictions eased during the end of fiscal 2021, we experienced rapid growth which resulted in an overall increase in organic case volume of 2.7% for fiscal 2021 compared to fiscal 2020. Group purchasing organizations may become more active in our industry and increase their efforts to add our customers as members of these organizations.
Group purchasing organizations may become more active in our industry and increase their efforts to add our customers as members of these organizations.
As a result, current PFG stockholders and have less influence on the policies of the combined company than they now have on the policies of PFG. Our future results may be adversely impacted if we do not effectively manage our expanded operations following the completion of the Proposed Core-Mark Acquisition.
Our future results may be adversely impacted if we do not effectively manage our expanded operations. Following the completion of the acquisition of Core-Mark, the size of our business is significantly larger than it was prior to the acquisition.
Finally, following our acquisition of Eby-Brown Company LLC (“Eby-Brown”), a distributor of pre-packaged candy, snacks, specialty beverages and tobacco products in the convenience industry, in the fourth quarter of fiscal 2019, we became subject to legislation, regulation and other matters regarding the marketing, distribution, sale, taxation and use of cigarette, tobacco and alternative nicotine products.
Finally, we are subject to legislation, regulation and other matters regarding the marketing, distribution, sale, taxation and use of cigarette, tobacco and alternative nicotine products.
The foodservice industry is sensitive to national and regional economic conditions. Deteriorating economic conditions and heightened uncertainty in the financial markets, such as those the global economy is currently facing as it recovers from the effects of the COVID-19 pandemic, negatively affect consumer confidence and discretionary spending.
Item 1A. Ris k Factors Risks Relating to Our Business and Industry Periods of difficult economic conditions, a public health crisis, such as the ongoing global COVID-19 pandemic, other macroeconomic events and heightened uncertainty in the financial markets affect consumer spending and confidence, which can adversely affect our business. The foodservice industry is sensitive to national and regional economic conditions.
The continuation of these or similar economic conditions in the future or permanent changes in consumers’ dining habits as a result of such conditions would likely negatively affect our operating results. We rely on third-party suppliers, and our business may be affected by interruption of supplies or increases in product costs.
We rely on third-party suppliers, and our business may be affected by interruption of supplies or increases in product costs. We obtain substantially all of our foodservice and related products from third-party suppliers. We typically do not have long-term contracts with our suppliers.
Removed
The COVID-19 global pandemic has had and is expected to continue to have an adverse effect on our business, financial condition, and results of operations. Governmental authorities around the world have implemented measures to reduce the spread of COVID-19, including travel bans and restrictions, quarantines, shelter in place orders, shutdowns and social distancing requirements.
Added
Our business could be negatively impacted by reduced demand for our products related to unfavorable macroeconomic conditions triggered by developments beyond our control, including geopolitical events, health crises such as the COVID-19 pandemic, and other events that trigger economic volatility on a national or regional basis.
Removed
These measures have adversely affected, and continue to adversely affect, workforces, suppliers, customers, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, have resulted in an economic downturn in many of our markets. As an essential element of the country’s food supply chain, the Company has continued to operate all of it distribution centers.
Added
In particular, deteriorating economic conditions and heightened uncertainty in the financial markets, inflationary pressure, and supply chain disruptions, such as those the global economy is currently facing, negatively affect consumer confidence and discretionary spending. In fiscal 2022, product cost inflation contributed to an increase in selling price per case and an increase in net sales.
Removed
Despite the Company’s continued operations, mandatory and voluntary containment measures in response to COVID-19 have had a significant adverse impact on the food-away-from-home industry, along with other businesses throughout the economy, including theaters, retail operations, schools, and other businesses to whom we provide products and services, which collectively have adversely affected our results of operations.
Added
However, sustained inflationary pressure and macroeconomic challenges could negatively affect consumer discretionary spending decisions within our customers’ establishments, which could negatively impact our sales The extent of any such effects on consumer spending depends in part on the magnitude and duration of such conditions, which cannot be predicted at this time.
Removed
At the end of fiscal 2020 through fiscal 2021, we saw the impact of COVID-19 in our operations, including significant decreases in sales.
Added
The continuing impact of the COVID-19 pandemic, including the extent of its effect on our business, operations and financial performance will depend on future developments that remain uncertain and cannot be predicted, including the duration of the outbreak, the emergence and spread of variants, the effectiveness and outreach of vaccines, infection rates in areas where we operate, travel restrictions and social distancing in the United States, changes to the regulatory regimes under which we operate, the extent and effectiveness of actions taken in United States to contain and treat the disease and whether the United States is required to move to complete lock-down status, and the impact on economic activity including the possibility of recession or financial market instability.
Removed
Although we believe we have taken prudent measures to maintain our financial liquidity and support our business, the impacts of COVID-19 have had, and are expected to continue to have, an adverse impact on numerous aspects of our business, financial condition and results of operations including, our growth, product costs, supply chain disruptions, labor shortages, logistics constraints, customer demand for our products and industry demand generally, consumer spending, our liquidity, the price of our securities and trading markets with respect thereto, and the global economy and financial markets generally.
Added
To the extent the ongoing COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening many other risks described in this section, any of which could materially and adversely affect our business, results of operations, and financial condition.
Removed
While vaccination efforts have proved successful, we cannot predict the duration of the COVID-19 pandemic or future governmental regulations or legislation that may be passed as a result of ongoing or future COVID-19 outbreaks.
Added
The current competitive labor market has impacted the Company’s ability to hire and retain qualified labor, particularly warehouse workers and drivers, in certain geographies, resulting in an $81.2 million increase in temporary contract labor costs and associated travel expenses for fiscal 2022.
Removed
The continued impact of COVID-19 and the enactment of additional governmental regulations and restrictions may further adversely impact the global economy, the restaurant industry, and our business specifically, despite prior or future actions taken by the Company. Periods of difficult economic conditions and heightened uncertainty in the financial markets affect consumer confidence, which can adversely affect our business.
Added
In addition, product cost inflation may negatively affect consumer discretionary spending decisions within our customers’ establishments, which could negatively impact our sales.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeState Foodservice Vistar Total Arkansas 1 — 1 Arizona 1 1 2 California 4 2 6 Colorado 1 1 2 Connecticut — 1 1 Florida 6 2 8 Georgia 3 2 5 Iowa 1 - 1 Illinois 2 2 4 Indiana 1 1 2 Kentucky 3 2 5 Louisiana 3 — 3 Massachusetts 3 — 3 Maryland 2 — 2 Maine 1 - 1 Michigan 1 3 4 Minnesota 3 1 4 Missouri 4 1 5 Mississippi 1 1 2 North Carolina 1 2 3 Nebraska 1 - 1 New Jersey 3 2 5 Nevada - 1 1 Ohio 3 2 5 Oregon 1 1 2 Pennsylvania 2 2 4 South Carolina 2 - 2 Tennessee 5 1 6 Texas 5 2 7 Virginia 3 — 3 Vermont 2 — 2 Wisconsin 3 2 5 Total 72 35 107 Our Foodservice “broad-line” customers are generally located no more than 200 miles from one of our distribution facilities, and national chain customers are generally located no more than 450 miles from one of our distribution facilities.
Biggest changeState Foodservice Vistar Convenience Total Alabama 1 — — 1 Arkansas 1 — 1 2 Arizona 1 1 — 2 California 4 2 5 11 Colorado 1 1 1 3 Connecticut — 1 — 1 Florida 7 1 2 10 Georgia 3 1 2 6 Iowa 1 — 1 2 Illinois 2 1 1 4 Indiana 1 — 1 2 Kentucky 3 1 2 6 Louisiana 3 — — 3 Massachusetts 3 — 2 5 Maryland 2 — — 2 Maine 1 — 1 2 Michigan 1 2 1 4 Minnesota 3 1 1 5 Missouri 4 1 — 5 Mississippi 4 1 — 5 North Carolina 1 1 2 4 Nebraska 1 — — 1 New Jersey 3 2 — 5 New Mexico — — 2 2 Nevada — 1 1 2 Ohio 3 1 2 6 Oregon 1 1 1 3 Pennsylvania 2 1 2 5 South Carolina 3 — — 3 Tennessee 5 1 — 6 Texas 5 2 1 8 Utah — — 1 1 Virginia 3 — — 3 Vermont 2 — — 2 Washington — — 1 1 Wisconsin 3 1 1 5 Canada — — 4 4 Total 78 25 39 142 Our Foodservice “broad-line” customers are generally located no more than 200 miles from one of our distribution facilities, and national chain customers are generally located no more than 450 miles from one of our distribution facilities.
Of the 72 Foodservice distribution centers, 10 have meat cutting operations that provide custom-cut meat products and two have seafood processing operations that provide custom-cut and packed seafood to our customers and our other distribution centers. In addition to the 35 distribution centers operated by Vistar, Vistar has 4 cash-and-carry Merchant’s Mart facilities.
Of the 78 Foodservice distribution centers, 10 have meat cutting operations that provide custom-cut meat products and two have seafood processing operations that provide custom-cut and packed seafood to our customers and our other distribution centers. In addition to the 25 distribution centers operated by Vistar, Vistar has four cash-and-carry Merchant’s Mart facilities.
Our Vistar segment operated 35 distribution centers and had an average square footage of approximately 200,000 square feet per facility.
Our Vistar segment operated 25 distribution centers and had an average square footage of approximately 200,000 square feet per facility. Our Convenience segment operated 39 distribution centers and had an average square footage of approximately 200,000 square feet per facility.
Item 2. Properties As of July 3, 2021, we operated 107 distribution centers across our two reportable segments. Of our 107 facilities, we owned 57 facilities and leased the remaining 50 facilities. Our Foodservice segment operated 72 distribution centers and had an average square footage of approximately 200,000 square feet per facility.
Item 2. P roperties As of July 2, 2022, we operated 142 distribution centers across our three reportable segments. Of our 142 facilities, we owned 66 facilities and leased the remaining 76 facilities. Our Foodservice segment operated 78 distribution centers and had an average square footage of approximately 200,000 square feet per facility.
Our properties also include a combined headquarters facility for our corporate offices and the Foodservice segment that is located in Richmond, Virginia; a combined support service center and headquarters facility for Vistar that is located in Englewood, Colorado; and other support service centers and corporate offices located in the United States. 23
We use integrated computer systems to design and track efficient route sequences for the delivery of our products. 19 Our properties also include a combined headquarters facility for our corporate offices and the Foodservice segment that is located in Richmond, Virginia; a combined support service center and headquarters facility for Vistar that is located in Englewood, Colorado; headquarters for Convenience located in Westlake, Texas; locations to support Other segment operations; and other support service centers and corporate offices located in the United States.
Customer orders are typically assembled in our distribution facilities and then sorted, placed on pallets, and loaded onto trucks and trailers in delivery sequence. Deliveries are generally made in large tractor-trailers that we usually lease. We use integrated computer systems to design and track efficient route sequences for the delivery of our products.
The Convenience segment operates two additional facilities as a third-party logistics provider dedicated solely to supporting the logistics and management requirements of one of our customers. These distribution facilities are located in Arizona and Texas. Customer orders are typically assembled in our distribution facilities and then sorted, placed on pallets, and loaded onto trucks and trailers in delivery sequence.
Added
Deliveries are generally made in large tractor-trailers that we usually lease.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeCommitments and Contingencies within Part II, Item 8. Financial Statements for disclosure of ongoing litigation. Item 4. Mine Safety Disclosures Not Applicable 24 PART II
Biggest changeCommitments and Contingencies within the Notes to Consolidated Financial Statements included in Item 8 for disclosure of ongoing litigation. Item 4. Mine Saf ety Disclosures Not Applicable 20 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee Part II, Item 7. — “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities .” Any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, and other factors that our Board of Directors may deem relevant.
Biggest changeAny decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, and other factors that our Board of Directors may deem relevant.
Purchases of Equity Securities by the Issuer On November 13, 2018, the Board of Directors authorized a share repurchase program for up to $250 million of the Company’s outstanding common stock. The share repurchase program does not have an expiration date and may be amended, suspended, or discontinued at any time.
(2) On November 13, 2018, the Board of Directors authorized a share repurchase program for up to $250 million of the Company’s outstanding common stock. The share repurchase program does not have an expiration date and may be amended, suspended, or discontinued at any time.
Performance data for the Company, the S&P 500 index and the S&P 400 Midcap Index is provided as of the last trading day of each of our last five fiscal years. The stock price performance graph is not necessarily indicative of future stock price performance. Item 6. Selected Financial Data Reserved. 26
Performance data for the Company, the S&P 500 index and the S&P 400 Midcap Index is provided as of the last trading day of each of our last five fiscal years. The stock price performance graph is not necessarily indicative of future stock price performance. Item 6. [ R eserved] 22
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market and Price Range of Common Stock Our common stock is listed on the New York Stock Exchange under the symbol “PFGC.” Approximate Number of Common Shareholders At the close of business on August 11, 2021, there were approximately 222 holders of record of our shares of common stock.
Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market and Price Range of Common Stock Our common stock is listed on the New York Stock Exchange under the symbol “PFGC.” Approximate Number of Common Shareholders At the close of business on August 10, 2022, there were approximately 1,483 holders of record of our shares of common stock.
The graph assumes the investment of $100 in our common stock and each of the indices as of the market close on July 1, 2016 and the reinvestment of dividends.
The graph assumes the investment of $100 in our common stock and each of the indices as of the market close on June 30, 2017 and the reinvestment of dividends.
As of July 3, 2021, approximately $235.7 million remained available for additional share repurchases. 25 Stock Performance Graph The performance graph below compares the cumulative total shareholder return of the Company’s common stock over the previous five fiscal years, with the cumulative total return for the same period of the S&P 500 index and the S&P 400 Midcap Index.
Although no shares have been repurchased subsequent to March 23, 2020, approximately $235.7 million remained available for additional share repurchases as of July 2, 2022. 21 Stock Performance Graph The performance graph below compares the cumulative total shareholder return of the Company’s common stock over the previous five fiscal years, with the cumulative total return for the same period of the S&P 500 index and the S&P 400 Midcap Index.
Repurchases under this program depend upon market place conditions and other factors, including compliance with the covenants under the ABL Facility and the indentures governing the Notes due 2024, Notes due 2025, Notes due 2027, and Notes due 2029 (each as defined under “- Financing Activities” below),.
Repurchases under this program depend upon market place conditions and other factors, including compliance with the covenants under the ABL Facility and the indentures governing the Notes due 2025, Notes due 2027, and Notes due 2029 (each as defined under Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities in Item 7).
In addition, our ability to pay dividends is limited by covenants in the agreements governing our existing indebtedness and may be further limited by the agreements governing other indebtedness we or our subsidiaries may incur in the future.
In addition, our ability to pay dividends is limited by covenants in the agreements governing our existing indebtedness and may be further limited by the agreements governing other indebtedness we or our subsidiaries may incur in the future. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities .
The share repurchase program remains subject to the discretion of the Board of Directors. On March 23, 2020, the Company discontinued further purchases under the plan and, therefore, no shares were repurchased subsequent to this date.
The share repurchase program remains subject to the discretion of the Board of Directors.
Added
Purchases of Equity Securities by the Issuer The following table provides information relating to our purchases of shares of the Company's common stock during the fourth quarter of fiscal 2022.
Added
Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan(2) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plan (in millions)(2) April 3, 2022—April 30, 2022 — $ - — $ 235.7 May 1, 2022—May 28, 2022 1,095 $ 46.00 — $ 235.7 May 29, 2022—July 2, 2022 13,104 $ 47.34 — $ 235.7 Total 14,199 $ 47.24 — (1) During the fourth quarter of fiscal 2022, the Company purchased 14,199 shares of the Company's common stock via share withholding for payroll tax obligations due from employees in connection with the delivery of shares of the Company's common stock under our incentive plans.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe have included the calculations of EBITDA and Adjusted EBITDA for the periods presented. 29 Results of Operations, EBITDA, and Adjusted EBITDA The following table sets forth a summary of our results of operations, EBITDA, and Adjusted EBITDA for the periods indicated (dollars in millions, except per share data): Fiscal Year Ended Fiscal 2021 Fiscal 2020 July 3, 2021 June 27, 2020 June 29, 2019 Change % Change % Net sales $ 30,398.9 $ 25,086.3 $ 19,743.5 $ 5,312.6 21.2 5,342.8 27.1 Cost of goods sold 26,873.7 22,217.1 17,230.5 4,656.6 21.0 4,986.6 28.9 Gross profit 3,525.2 2,869.2 2,513.0 656.0 22.9 356.2 14.2 Operating expenses 3,324.5 2,968.2 2,229.7 356.3 12.0 738.5 33.1 Operating profit (loss) 200.7 (99.0 ) 283.3 299.7 302.7 (382.3 ) (134.9 ) Other expense, net Interest expense 152.4 116.9 65.4 35.5 30.4 51.5 78.7 Other, net (6.4 ) 6.3 (0.4 ) (12.7 ) (201.6 ) 6.7 1,675.0 Other expense, net 146.0 123.2 65.0 22.8 18.5 58.2 89.5 Income (loss) before income taxes 54.7 (222.2 ) 218.3 276.9 124.6 (440.5 ) (201.8 ) Income tax expense (benefit) 14.0 (108.1 ) 51.5 122.1 113.0 (159.6 ) (309.9 ) Net income (loss) $ 40.7 $ (114.1 ) $ 166.8 $ 154.8 135.7 (280.9 ) (168.4 ) EBITDA $ 546.0 $ 171.0 $ 438.7 $ 375.0 219.3 (267.7 ) (61.0 ) Adjusted EBITDA $ 625.3 $ 405.5 $ 475.5 $ 219.8 54.2 (70.0 ) (14.7 ) Weighted-average common shares outstanding: Basic 132.1 113.0 103.8 19.1 16.9 9.2 8.9 Diluted 133.4 113.0 105.2 20.4 18.1 7.8 7.4 Earnings (loss) per common share: Basic $ 0.31 $ (1.01 ) $ 1.61 $ 1.32 130.7 $ (2.62 ) (162.7 ) Diluted $ 0.30 $ (1.01 ) $ 1.59 $ 1.31 129.7 $ (2.60 ) (163.5 ) We believe that the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA is net income.
Biggest changeWe have included below reconciliations of EBITDA and Adjusted EBITDA to the most directly comparable measure calculated in accordance with GAAP for the periods presented. 25 Results of Operations, EBITDA, and Adjusted EBITDA The following table sets forth a summary of our results of operations, EBITDA, and Adjusted EBITDA for the periods indicated (dollars in millions, except per share data): Fiscal Year Ended Fiscal 2022 Fiscal 2021 July 2, 2022 July 3, 2021 June 27, 2020 Change % Change % Net sales $ 50,894.1 $ 30,398.9 $ 25,086.3 $ 20,495.2 67.4 5,312.6 21.2 Cost of goods sold 45,637.7 26,873.7 22,217.1 18,764.0 69.8 4,656.6 21.0 Gross profit 5,256.4 3,525.2 2,869.2 1,731.2 49.1 656.0 22.9 Operating expenses 4,929.0 3,324.5 2,968.2 1,604.5 48.3 356.3 12.0 Operating profit (loss) 327.4 200.7 (99.0 ) 126.7 63.1 299.7 302.7 Other expense, net Interest expense 182.9 152.4 116.9 30.5 20.0 35.5 30.4 Other, net (22.6 ) (6.4 ) 6.3 (16.2 ) (253.1 ) (12.7 ) (201.6 ) Other expense, net 160.3 146.0 123.2 14.3 9.8 22.8 18.5 Income (loss) before income taxes 167.1 54.7 (222.2 ) 112.4 205.5 276.9 124.6 Income tax expense (benefit) 54.6 14.0 (108.1 ) 40.6 290.0 122.1 113.0 Net income (loss) $ 112.5 $ 40.7 $ (114.1 ) $ 71.8 176.4 154.8 135.7 EBITDA $ 812.8 $ 546.0 $ 171.0 $ 266.8 48.9 375.0 219.3 Adjusted EBITDA $ 1,019.8 $ 625.3 $ 405.5 $ 394.5 63.1 219.8 54.2 Weighted-average common shares outstanding: Basic 149.8 132.1 113.0 17.7 13.4 19.1 16.9 Diluted 151.3 133.4 113.0 17.9 13.4 20.4 18.1 Earnings (loss) per common share: Basic $ 0.75 $ 0.31 $ (1.01 ) $ 0.44 141.9 $ 1.32 130.7 Diluted $ 0.74 $ 0.30 $ (1.01 ) $ 0.44 146.7 $ 1.31 129.7 We believe that the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA is net income.
Operating Activities Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 During fiscal 2021 and fiscal 2020, our operating activities provided cash flow of $64.6 million and $623.6 million, respectively.
Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 During fiscal 2021 and fiscal 2020, our operating activities provided cash flow of $64.6 million and $623.6 million, respectively.
Performance Food Group, Inc., a wholly-owned subsidiary of PFGC, is the lead borrower under the ABL Facility, which is jointly and severally guaranteed by, and secured by the majority of the assets of, PFGC and all material domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries).
Performance Food Group, Inc., a wholly-owned subsidiary of PFGC, is the lead borrower under the ABL Facility, which is jointly and severally guaranteed by, and secured by the majority of the assets of, PFGC and all material domestic direct and indirect wholly-owned subsidiaries of PFGC (other than the captive insurance subsidiary and other excluded subsidiaries).
If an event of default occurs and is continuing, amounts due under such agreement may be accelerated and the rights and remedies of the lenders under the ABL Facility may be exercised, including rights with respect to the collateral securing the obligations under such agreement.
If an event of default occurs and is continuing, amounts due under the ABL Facility may be accelerated and the rights and remedies of the lenders may be exercised, including rights with respect to the collateral securing the obligations under such agreement.
The indenture governing the Notes due 2027 contains covenants limiting, among other things, PFGC and its restricted subsidiaries’ ability to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the ability of PFGC’s restricted subsidiaries to make dividends or other payments to PFGC; designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell certain assets.
The indenture governing the Notes due 2027 contains covenants limiting, among other things, PFGC’s and its restricted subsidiaries’ ability to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the ability of PFGC’s restricted subsidiaries to make dividends or other payments to PFGC; designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell certain assets.
Due to the restrictions implemented by governments to slow the spread of COVID-19, there were significant declines in case volume in the theater, office coffee service, office supply, hospitality, and travel channels for fiscal 2021, however these declines have gradually improved, as certain states eased restrictions allowing many of our customers in these channels to resume operations during the fourth quarter of fiscal 2021 .
Due to the restrictions implemented by governments to slow the spread of COVID-19, there were significant declines in case volume in the theater, office coffee service, office supply, hospitality, and travel channels for fiscal 2021, however, these declines gradually improved, as certain states eased restrictions allowing many of our customers in these channels to resume operations during the fourth quarter of fiscal 2021.
Such adjustments include certain unusual, non-cash, non-recurring, cost reduction, and other adjustment items permitted in calculating covenant compliance under our ABL Facility and indentures (other than certain pro forma adjustments permitted under our ABL Facility and indentures governing the Notes due 2024, Notes due 2025, Notes due 2027, and Notes due 2029 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date).
Such adjustments include certain unusual, non-cash, non-recurring, cost reduction, and other adjustment items permitted in calculating covenant compliance under our ABL Facility and indentures (other than certain pro forma adjustments permitted under our ABL Facility and indentures governing the Notes due 2025, Notes due 2027, and Notes due 2029 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date).
This increase was the result of an increase in gross profit, partially offset by an increase in operating expenses excluding depreciation and amortization. Gross profit increased 33.6% in fiscal 2021 compared to the prior fiscal year, driven by the Reinhart acquisition, which contributed an increase in 32 gross profit of $501.4 million for fiscal 2021 .
This increase was the result of an increase in gross profit, partially offset by an increase in operating expenses excluding depreciation and amortization. Gross profit increased 33.6% in fiscal 2021 compared to the prior fiscal year, driven by the Reinhart acquisition, which contributed an increase in gross profit of $501.4 million for fiscal 2021.
Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability), economic barriers to entry, a brand’s relative market position, and the discount rate applied to the cash flows.
Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of 39 future cash flows (including expected growth rates and profitability), economic barriers to entry, a brand’s relative market position, and the discount rate applied to the cash flows.
Deferred tax assets 40 and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Future tax benefits, including net operating loss carryforwards , are recognized to the extent that realization of such benefits is more likely than not.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Future tax benefits, including net operating loss carryforwards, are recognized to the extent that realization of such benefits is more likely than not.
The increase in interest expense was primarily the result of an increase in average borrowings outstanding along with a higher average interest rate during fiscal 2021 compared to fiscal 2020. 31 The Company reported income tax expense of $14.0 million for fiscal 2021 compared to an income tax benefit of $108.1 million for fiscal 2020.
The increase in interest expense was primarily the result of an increase in average borrowings outstanding along with a higher average interest rate during fiscal 2021 compared to fiscal 2020. The Company reported income tax expense of $14.0 million for fiscal 2021 compared to an income tax benefit of $108.1 million for fiscal 2020.
The foodservice distribution industry is also sensitive to national and regional economic conditions, such as changes in consumer spending, changes in consumer confidence, and changes in the prices of certain goods. • Food distribution market structure.
The foodservice distribution industry is 23 also sensitive to national and regional economic conditions, such as changes in consumer spending, changes in consumer confidence, and changes in the prices of certain goods. • Food distribution market structure.
Total depreciation and amortization related to the 53 rd week in fiscal 2021 was approximately $0.5 million for Corporate & All Other. Liquidity and Capital Resources We have historically financed our operations and growth primarily with cash flows from operations, borrowings under our credit facility, operating and finance leases, and normal trade credit terms.
Total depreciation and amortization related to the 53 rd week in fiscal 2021 was approximately $0.5 million for Corporate & All Other. Liquidity and Capital Resources We have historically financed our operations and growth primarily with cash flows from operations, borrowings under our credit facility (currently our ABL Facility), operating and finance leases, and normal trade credit terms.
We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties, including our lenders under the ABL Facility and holders of our Notes due 2024, Notes due 2025, Notes due 2027, and Notes due 2029, in their evaluation of the operating performance of companies in industries similar to ours.
We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties, 24 including our lenders under the ABL Facility and holders of our Notes due 2025, Notes due 2027, and Notes due 2029, in their evaluation of the operating performance of companies in industries similar to ours.
EBITDA EBITDA for Corporate & All Other was a negative $206.3 million for fiscal 2021 compared to a negative $203.8 million for fiscal 2020. This decline in EBITDA was primarily driven by the additional corporate operating expenses, excluding depreciation and amortization, of $2.5 million associated with the acquisition of Reinhart, as well as the additional week in fiscal 2021.
EBITDA EBITDA for Corporate & All Other was a negative $206.6 million for fiscal 2021 compared to a negative $203.8 million for fiscal 2020. This decline in EBITDA was primarily driven by the additional corporate operating expenses, excluding depreciation and amortization, of $2.5 million associated with the acquisition of Reinhart, as well as the additional week in fiscal 2021.
As a result of our step zero analysis, no further quantitative impairment test was deemed necessary for fiscal 2021 and fiscal 2020 . There were no impairments of goodwill or intangible assets with indefinite lives for fiscal 2021 and fiscal 2020 . Recently Issued Accounting Pronouncements Refer to Note 3.
As a result of our step zero analysis, no further quantitative impairment test was deemed necessary for fiscal 2022 and fiscal 2021. There were no impairments of goodwill or intangible assets with indefinite lives for fiscal 2022 and fiscal 2021. Recently Issued Accounting Pronouncements Refer to Note 3.
These covenants are subject to a number of important exceptions and qualifications. The Notes due 2025 also contain customary events of default, the occurrence of which could result in the principal of and accrued interest on the Notes due 2025 to become or be declared due and payable.
These covenants are subject to a number of important exceptions and qualifications. The Notes due 2027 also contain customary events of default, the occurrence of which could result in the principal of and accrued interest on the Notes due 2027 to become or be declared due and payable.
The Notes due 2029 are jointly and severally guaranteed on a senior unsecured basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries). The Notes due 2029 are not guaranteed by the Company.
The Notes due 2025 are jointly and severally guaranteed on a senior unsecured basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries). The Notes due 2025 are not guaranteed by the Company.
Our Company We market and distribute over 250,000 food and food-related products to customers across the United States from approximately 107 distribution facilities to over 250,000 customer locations in the “food-away-from-home” industry. We offer our customers a broad assortment of products including our proprietary-branded products, nationally branded products, and products bearing our customers’ brands.
Our Company We market and distribute over 250,000 food and food-related products to customers across the United States from approximately 142 distribution facilities to over 300,000 customer locations in the “food-away-from-home” industry. We offer our customers a broad assortment of products including our proprietary-branded products, nationally branded products, and products bearing our customers’ brands.
Our Chain customers are multi-unit restaurants with five or more locations and include some of the most recognizable family and casual dining restaurant chains. Our Vistar segment specializes in distributing candy, snacks, beverages, cigarettes, other tobacco products, and other items nationally to the vending, office coffee service, theater, retail, hospitality, convenience, and other channels.
Our Chain customers are multi-unit restaurants with five or more locations and include some of the most recognizable family and casual dining restaurant chains. Our Vistar segment specializes in distributing candy, snacks, beverages, and other items nationally to vending, office coffee service, theater, retail, hospitality, and other channels.
The decrease in cash flows provided by operating activities in fiscal 2021 compared to fiscal 2020 was largely driven by larger investments in net working capital and the payment of $117.3 million of contingent consideration related to the acquisition of Eby-Brown Company, LLC (“Eby-Brown”), partially offset by net income tax refunds of $117.4 million received during fiscal 2021.
The decrease in cash flows provided by operating activities in fiscal 2021 compared to fiscal 2020 was largely driven by larger investments in net working capital and the payment of $117.3 million of contingent consideration related to the acquisition of Eby-Brown, partially offset by net income tax refunds of $117.4 million received during fiscal 2021.
The Notes due 2027 are jointly and severally guaranteed on a senior unsecured basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries). The Notes due 2027 are not guaranteed by Performance Food Group Company.
The Notes due 2027 are jointly and severally guaranteed on a senior unsecured basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries). The Notes due 2027 are not guaranteed by the Company.
If impairment indicators are present after performing step zero, we would perform a quantitative impairment analysis to estimate the fair value of goodwill. 41 During fiscal 2021 and fiscal 2020 , we performed the step zero analysis for our goodwill impairment test.
If impairment indicators are present after performing step zero, we would perform a quantitative impairment analysis to estimate the fair value of goodwill. During fiscal 2022 and fiscal 2021, we performed the step zero analysis for our goodwill impairment test.
Net sales increased $5,312.6 million, or 21.2%, in fiscal 2021 compared to fiscal 2020. The increase in net sales was primarily attributable to the acquisition of Reinhart on December 31, 2019, along with the 53 rd week in fiscal year 2021. Net sales for the extra week in fiscal 2021 were approximately $664.6 million.
Net sales increased $5,312.6 million, or 21.2%, in fiscal 2021 compared to fiscal 2020. The increase in net sales was primarily attributable to the acquisition of Reinhart Foodservice, L.L.C. (“Reinhart”) on December 31, 2019, along with the 53 rd week in fiscal year 2021. Net sales for the extra week in fiscal 2021 were approximately $664.6 million.
During fiscal 2020, net cash provided by financing activities was $1,928.8 million, which consisted primarily of $1,060.0 million in cash received from the issuance and sale of the Notes due 2027, $275.0 million in cash received from the issuance and sale of the Notes due 2025, $828.1 million in net proceeds from the issuance of common stock, and $110.0 million in borrowings under the Additional Junior Term Loan, partially offset by $259.0 million in net payments under our ABL Facility.
During fiscal 2020, net cash provided by financing activities was $1,928.8 million, which consisted primarily of $1,060.0 million in cash received from the issuance and sale of the Notes due 2027, $275.0 million in cash received from the issuance and sale of the Notes due 2025, $828.1 million in net proceeds from the issuance of common stock, and $110.0 million in borrowings under the Additional Junior Term Loan, partially offset by $259.0 million in net payments under our Prior Credit Agreement.
(2) Includes professional fees and other costs related to completed and abandoned acquisitions, costs of integrating certain of our facilities, facility closing costs, advisory fees and offering fees.
(2) Includes professional fees and other costs related to completed and abandoned acquisitions, costs of integrating certain of our facilities, and facility closing costs.
We present EBITDA in order to provide supplemental information that we consider relevant for the readers of our consolidated financial statements included elsewhere in this report, and such information is not meant to replace or supersede GAAP measures.
We present EBITDA in order to provide supplemental information that we consider relevant for the readers of our consolidated financial statements included elsewhere in this Form 10-K, and such information is not meant to replace or supersede GAAP measures.
The Company anticipates using cash flows from operations or borrowings under the ABL Facility to fulfill these commitments. Amounts due under these agreements were not included in the Company’s consolidated balance sheet as of July 3, 2021.
The Company anticipates using cash flows from operations or borrowings under the ABL Facility to fulfill these commitments. Amounts due under these agreements were not included in the Company’s consolidated balance sheet as of July 2, 2022.
The proceeds from the Notes due 2027, along with an offering of shares of the Company’s common stock and borrowings under the ABL Facility, were used to fund the cash consideration for the Reinhart acquisition and to pay related fees and expenses. The Notes due 2027 were issued at 100.0% of their par value.
The proceeds from the Notes due 2027 along with an offering of shares of the Company’s common stock and borrowings under the Prior Credit Agreement, were used to fund the cash consideration for the Reinhart acquisition and to pay related fees and expenses. The Notes due 2027 were issued at 100.0% of their par value.
Additionally, operating expenses increased as a result of an increase in annual bonus expense of $17.0 million and an increase in insurance expense of $7.9 million fiscal 2021 as compared to the prior year. These increases were partially offset by a decline of $29.0 million in fiscal 2021 for professional and legal fees related primarily to prior year acquisitions.
Additionally, operating expenses increased as a result of an increase in annual bonus expense of $17.3 million and an increase in insurance expense of $8.1 million fiscal 2021 as compared to the prior year. These increases were partially offset by a decline of $29.0 million in fiscal 2021 for professional and legal fees related primarily to acquisitions in fiscal 2020.
The Company estimates that operating expenses excluding depreciation and amortization were approximately $4.9 million in the 53 rd week of fiscal 2021 . Depreciation of fixed assets and amortization of intangible assets recorded in this segment was $28.5 million in fiscal 2021 compared to $28.6 million for fiscal 2020.
The Company estimates that operating expenses excluding depreciation and amortization were approximately $5.0 million in the 53 rd week of fiscal 2021. Depreciation of fixed assets and amortization of intangible assets recorded in this segment was $30.1 million in fiscal 2021 compared to $28.6 million for fiscal 2020.
Additionally, in fiscal 2021, Vistar recorded a benefit of $2.1 million related to reserves for expected credit losses for customer receivables as compared to bad debt expense of $14.7 million for the prior year. These decreases were partially offset by an increase in bonus expense of $21.0 million for fiscal 2021 compared to the prior year.
Additionally, in fiscal 2021, Vistar recorded a benefit of $2.0 million related to reserves for expected credit losses for customer receivables as compared to bad debt expense of $14.4 million for the prior year. These decreases were partially offset by an increase in bonus expense of $15.9 million for fiscal 2021 compared to the prior year.
The ABL Facility also contains customary restrictive covenants that include, but are not limited to, restrictions on PFGC’s ability to incur additional indebtedness, pay dividends, create liens, make investments or specified payments, and dispose of assets. The ABL Facility provides for customary events of default, including payment defaults and cross-defaults on other material indebtedness.
The ABL Facility also contains customary restrictive covenants that include, but are not limited to, restrictions on the loan parties’ and their subsidiaries abilities to incur additional indebtedness, pay dividends, create liens, make investments or specified payments, and dispose of assets. The ABL Facility provides for customary events of default, including payment defaults and cross-defaults on other material indebtedness.
Purchase obligations also include amounts committed to various capital projects in process or scheduled to be completed in the coming fiscal years. As of July 3, 2021, the Company had commitments of $68.8 million for capital projects related to warehouse expansion and improvements and warehouse equipment.
Purchase obligations also include amounts committed to various capital projects in process or scheduled to be completed in the coming fiscal years. As of July 2, 2022, the Company had commitments of $101.8 million for capital projects related to warehouse expansion and improvements and warehouse equipment.
The ABL Facility and the indentures governing the Notes due 2024, the Notes due 2027, the Notes due 2025, and the Notes due 2029 contain customary restrictive covenants under which all of the net assets of PFGC and its subsidiaries were restricted from distribution to Performance Food Group Company, except for approximately $1,543.6 million of restricted payment capacity available under such debt agreements, as of July 3, 2021.
The ABL Facility and the indentures governing the Notes due 2025, the Notes due 2027, and the Notes due 2029 contain customary restrictive covenants under which all of the net assets of PFGC and its subsidiaries were restricted from distribution to Performance Food Group Company, except for approximately $1,632.5 million of restricted payment capacity available under such debt agreements, as of July 2, 2022.
Reinhart contributed $6,049.3 million of net sales during fiscal 2021 compared to $2,525.0 million in fiscal 2020. The Reinhart acquisition also expanded business with independent customers, resulting in independent case growth of approximately 31.6% in fiscal 2021 compared to the prior year.
Reinhart contributed $6.0 billion of net sales during fiscal 2021 compared to $2.5 billion in fiscal 2020. The Reinhart acquisition also expanded business with independent customers, resulting in independent case growth of approximately 31.6% in fiscal 2021 compared to the prior year.
As of July 3, 2021, the Company had total purchase obligations of $93.5 million, which includes agreements for purchases related to capital projects and services in the normal course of business, for which all significant terms have been confirmed, as well as a minimum amount due for various Company meetings and conferences.
As of July 2, 2022, the Company had total purchase obligations of $163.9 million, which includes agreements for purchases related to capital projects and services in the normal course of business, for which all significant terms have been confirmed, as well as a minimum amount due for various Company meetings and conferences.
In addition to the products we offer to our customers, we provide value-added services by allowing our customers to benefit from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and operational strategy. The Company has two reportable segments: Foodservice and Vistar.
In addition to the products we offer to our customers, we provide value-added services by allowing our customers to benefit from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and operational strategy.
In addition, at any time prior to May 1, 2022, Performance Food Group, Inc. may redeem up to 40% of the Notes due 2025 from the proceeds of certain equity offerings at a redemption price equal to 106.875% of the principal amount thereof, plus accrued and unpaid interest.
In addition, at any time prior to August 1, 2024, Performance Food Group, Inc. may redeem up to 40% of the Notes due 2029 from the proceeds of certain equity offerings at a redemption price equal to 104.250% of the principal amount thereof, plus accrued and unpaid interest.
The following table reconciles EBITDA and Adjusted EBITDA to net income for the periods presented: Fiscal Year Ended July 3, 2021 June 27, 2020 June 29, 2019 (In millions) Net income (loss) $ 40.7 $ (114.1 ) $ 166.8 Interest expense 152.4 116.9 65.4 Income tax expense (benefit) 14.0 (108.1 ) 51.5 Depreciation 213.9 178.5 116.2 Amortization of intangible assets 125.0 97.8 38.8 EBITDA 546.0 171.0 438.7 Non-cash items (1) 64.9 24.8 19.8 Acquisition, integration and reorganization (2) 16.2 182.8 11.8 Productivity initiatives and other adjustment items (3) (1.8 ) 26.9 5.2 Adjusted EBITDA $ 625.3 $ 405.5 $ 475.5 (1) Includes adjustments for non-cash charges arising from stock-based compensation and gain/loss on disposal of assets.
The following table reconciles EBITDA and Adjusted EBITDA to net income for the periods presented: Fiscal year ended July 2, 2022 July 3, 2021 June 27, 2020 (In millions) Net income (loss) $ 112.5 $ 40.7 $ (114.1 ) Interest expense 182.9 152.4 116.9 Income tax expense (benefit) 54.6 14.0 (108.1 ) Depreciation 279.7 213.9 178.5 Amortization of intangible assets 183.1 125.0 97.8 EBITDA 812.8 546.0 171.0 Non-cash items (1) 170.5 64.9 24.8 Acquisition, integration and reorganization (2) 49.9 16.2 182.8 Productivity initiatives and other adjustment items (3) (13.4 ) (1.8 ) 26.9 Adjusted EBITDA $ 1,019.8 $ 625.3 $ 405.5 (1) Includes adjustments for non-cash charges arising from stock-based compensation and gain/loss on disposal of assets.
As market conditions warrant, we may from time to time seek to repurchase our securities or loans in privately negotiated or open market transactions, by tender offer or otherwise. Any such repurchases may be funded by incurring new debt, including additional borrowings under our credit facility.
Our practice is to minimize interest expense while maintaining reasonable liquidity. 33 As market conditions warrant, we may from time to time seek to repurchase our securities or loans in privately negotiated or open market transactions, by tender offer or otherwise. Any such repurchases may be funded by incurring new debt, including additional borrowings under our credit facility.
In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and involve numerous risks and uncertainties, including those described in Item 1A. Risk Factors of this Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.
In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates, and beliefs and involve numerous risks and uncertainties, including those described in Item 1A. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Form 10-K.
The gross profit dollar decrease of $58.7 million for fiscal 2021 compared to fiscal 2020, was driven by the impact of COVID-19 on the channels we serve, partially offset by gross profit of approximately $13.7 million in the 53 rd week in fiscal 2021.
The gross profit decrease of $64.2 million for fiscal 2021 compared to fiscal 2020, was driven by the impact of COVID-19 on the channels we serve, partially offset by gross profit of approximately $9.4 million in the 53 rd week in fiscal 2021.
Total additional incremental depreciation and amortization related to the acquisition of Reinhart was $48.9 million for fiscal 2021 as compared to the prior year . Segment Results—Vistar Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 Net Sales Net sales for Vistar increased $157.3 million, or 1.9%, from fiscal 2020 to fiscal 2021.
Total additional incremental depreciation and amortization related to the acquisition of Reinhart was $48.9 million for fiscal 2021 as compared to the prior year. 30 Segment Results—Vistar Fiscal year ended July 2, 2022 compared to fiscal year ended July 3, 2021 Net Sales Net sales for Vistar increased $1.1 billion, or 45.0%, from fiscal 2021 to fiscal 2022.
In addition, beginning on May 1, 2022, Performance Food Group, Inc. may redeem all or a part of the Notes due 2025 at a redemption price equal to 103.438% of the principal amount redeemed, plus accrued and unpaid interest.
Performance Food Group, Inc. may redeem all or a part of the Notes due 2025 at any time prior to May 1, 2023 at a redemption price equal to 103.438% of the principal amount redeemed, plus accrued and unpaid interest.
The Notes due 2029 mature on August 1, 2029 and bear interest at a rate of 4.250% per year, payable semi-annually in arrears.
The Notes due 2029 were issued at 100.0% of their par value. The Notes due 2029 mature on August 1, 2029 and bear interest at a rate of 4.250% per year, payable semi-annually in arrears.
Investing Activities Cash used in investing activities totaled $199.8 million in fiscal 2021 compared to $2,146.0 million in fiscal 2020.
Investing Activities Cash used in investing activities totaled $1,861.5 million in fiscal 2022 compared to $199.8 million in fiscal 2021 and $2,146.0 million in fiscal 2020.
The increase was primarily attributable to an increase in logistics services provided to our other segments for increased case volume due to the acquisition of Reinhart as well as approximately $8.9 million of net sales for the 53 rd week in fiscal 2021.
The increase was primarily attributable to an increase in logistics services provided to our other segments for increased case volume due to the acquisition of Reinhart, sales contributions from other recent immaterial acquisitions, and approximately $9.2 million of net sales for the 53 rd week in fiscal 2021.
References to “fiscal 2021” are to the 53-week period ended July 3, 2021, references to “fiscal 2020” are to the 52-week period ended June 27, 2020, and references to “fiscal 2019” are to the 52-week period ended June 29, 2019.
References to “fiscal 2022” are to the 52-week period ended July 2, 2022, references to “fiscal 2021” are to the 53-week period ended July 3, 2021, and references to “fiscal 2020” are to the 52-week period ended June 27, 2020.
In addition, this includes increases in the last-in-first-out (“LIFO”) reserve of $11.8 million for Foodservice and $24.6 million for Vistar for fiscal 2021 compared to increases of $0.8 million for Foodservice and $3.1 million for Vistar for fiscal 2020 and an increase of $3.4 million for Foodservice and no change for Vistar for fiscal 2019.
In addition, this includes increases in the last-in-first-out (“LIFO”) reserve of $31.9 million for Foodservice and $91.0 million for Convenience for fiscal 2022 compared to increases of $11.8 million for Foodservice and $24.6 million for Convenience for fiscal 2021 and an increase of $0.8 million for Foodservice and $3.1 million for Convenience for fiscal 2020.
Stock-based compensation cost was $25.4 million, $17.9 million and $15.7 million for fiscal 2021, fiscal 2020 and fiscal 2019, respectively.
Stock-based compensation cost was $44.0 million, $25.4 million and $17.9 million for fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
The Company estimates that operating expenses excluding depreciation and amortization for Vistar were approximately $11.8 million in the 53 rd week of fiscal 2021. Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $50.0 million in fiscal 2020 to $62.1 million in fiscal 2021.
The Company estimates that operating expenses excluding depreciation and amortization for Foodservice were approximately $47.1 million in the 53 rd week of fiscal 2021. Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $248.3 million in fiscal 2021 to $260.0 million in fiscal 2022.
EBITDA EBITDA for Vistar increased $54.9 million, or 142.6%, from fiscal 2020 to fiscal 2021. This increase was the result of a decrease in operating expenses excluding depreciation and amortization, partially offset by a decrease in gross profit.
EBITDA EBITDA for Foodservice increased $82.9 million, or 12.6%, from fiscal 2021 to fiscal 2022. This increase was the result of an increase in gross profit, partially offset by an increase in operating expenses excluding depreciation and amortization.
EBITDA is not defined under accounting principles generally accepted in the United States of America (“GAAP”) and is not a measure of operating income, operating performance, or liquidity presented in accordance with GAAP and is subject to important limitations.
EBITDA is not defined under accounting principles generally accepted in the United States of America (“GAAP”) and is not a measure of operating income, operating performance, or liquidity presented in accordance with GAAP and is subject to important limitations. Our definition of EBITDA may not be the same as similarly titled measures used by other companies.
On July 26, 2021, Performance Food Group, Inc., a wholly-owned subsidiary of PFGC, Inc. (“PFGC”), issued and sold $1.0 billion aggregate principal amount of its 4.250% Senior Notes due 2029 (the “Notes due 2029”), pursuant to an indenture dated as of July 26, 2021.
Senior Notes due 2029 : On July 26, 2021, Performance Food Group, Inc. issued and sold $1.0 billion aggregate principal amount of its 4.250% Senior Notes due 2029 (the “Notes due 2029”).
The following table summarizes outstanding borrowings, availability, and the average interest rate under the ABL Facility: (Dollars in millions) As of July 3, 2021 As of June 27, 2020 Aggregate borrowings $ 586.3 $ 710.0 Letters of credit under ABL Facility 161.7 139.6 Excess availability, net of lenders’ reserves of $55.1 and $64.9 2,252.0 1,712.2 Average interest rate 2.32 % 2.85 % The ABL Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $200.0 million and (ii) 10% of the lesser of the borrowing base and the revolving credit facility amount for five consecutive business days.
The ABL Facility also provides for an unused commitment fee rate of 0.25% per annum. 35 The following table summarizes outstanding borrowings, availability, and the average interest rate under the credit facility in place as of the applicable date: (Dollars in millions) As of July 2, 2022 As of July 3, 2021 Aggregate borrowings $ 1,608.4 $ 586.3 Letters of credit 190.5 161.7 Excess availability, net of lenders’ reserves of $104.4 and $55.1 2,201.1 2,252.0 Average interest rate 2.89 % 2.32 % The ABL Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $320.0 million and (ii) 10% of the lesser of the borrowing base and the revolving credit facility amount for five consecutive business days.
We borrow under our credit facility or pay it down regularly based on our cash flows from operating and investing activities. Our practice is to minimize interest expense while maintaining reasonable liquidity.
We borrow under our credit facility or pay it down regularly based on our cash flows from operating and investing activities.
These investments consisted primarily of capital purchases of property, plant, and equipment of $188.8 million and $158.0 million for fiscal years 2021 and 2020, respectively, and payments for business acquisitions of $18.1 million and $1,989.0 million for fiscal years 2021 and 2020, respectively.
These investments consisted primarily of net cash paid for recent acquisitions of $1,650.5 million, $18.1 million, and $1,989.0 million for fiscal year 2022, 2021 and 2020, respectively, along with capital purchases of property, plant, and equipment of $215.5 million, $188.8 million, and $158.0 million for fiscal years 2022, 2021, and 2020, respectively.
In fiscal 2021, purchases of property, plant, and equipment primarily consisted of outlays for information technology, warehouse equipment, warehouse expansions and improvements, and transportation equipment.
In fiscal 2022, purchases of property, plant, and equipment primarily consisted of outlays for information technology, warehouse equipment, warehouse expansions and improvements, and transportation equipment. The following table presents the capital purchases of property, plant, and equipment by segment.
Our most critical accounting policies and estimates include those that pertain to the allowance for doubtful accounts receivable, inventory valuation, insurance programs, income taxes, vendor rebates and promotional incentives, and goodwill and other intangible assets.
These policies require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies and estimates include those that pertain to the allowance for doubtful accounts receivable, inventory valuation, insurance programs, income taxes, vendor rebates and promotional incentives, and goodwill and other intangible assets.
The proceeds from the Notes due 2029 were used to pay down the outstanding balance of the ABL Facility, to redeem the Senior Notes due 2024, and to pay the fees, expenses, and other transaction costs incurred in connection with the Notes due 2029.
The proceeds from the Notes due 2029 were used to pay down the outstanding balance of the Prior Credit Agreement, to redeem the $350.0 million aggregate principal amount of the 5.500% Senior Notes due 2024 (“Notes due 2024”), and to pay the fees, expenses, and other transaction costs incurred in connection with the Notes due 2029.
These insurance programs are managed by a third party, and the deductibles for general and vehicle liability and workers compensation are primarily collateralized by letters of credit and restricted cash.
The provisions for insurance claims include estimates of the frequency and timing of claims occurrence, as well as the ultimate amounts to be paid. These insurance programs are managed by a third party, and the deductibles for general and vehicle liability and workers compensation are primarily collateralized by letters of credit and restricted cash.
In addition, at any time prior to August 1, 2024, Performance Food Group, Inc. may redeem up to 40% of the Notes due 2029 from the proceeds of certain equity offerings at a redemption price equal to 104.250% of the principal amount thereof, plus accrued and unpaid interest. 38 The indenture governing the Notes due 2029 contains covenants limiting, among other things, PFGC’s and its restricted subsidiaries’ ability to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the ability of PFGC’s restricted subsidiaries to make dividends or other payments to PFGC; designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell certain assets.
The indenture governing the Notes due 2029 contains covenants limiting, among other things, PFGC’s and its restricted subsidiaries’ ability to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other 37 distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the ability of PFGC’s restricted subsidiaries to make dividends or other payments to PFGC; designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell certain assets.
Our definition of EBITDA may not be the same as similarly titled measures used by other companies. 28 We believe that the presentation of EBITDA enhances an investor’s understanding of our performance. We use this measure to evaluate the performance of our segments and for business planning purposes.
We believe that the presentation of EBITDA enhances an investor’s understanding of our performance. We use this measure to evaluate the performance of our segments and for business planning purposes.
Additionally, for fiscal 2021, Vistar recorded $7.0 million of inventory write-offs primarily as result of the impact of COVID-19 on the channels we serve, which was a decrease of $8.6 million compared to the prior year.
Additionally, for fiscal 2021, Vistar recorded $4.3 million of inventory write-offs primarily as result of the impact of COVID-19 on the channels we serve, which was a decrease of $9.3 million compared to the prior year. Gross profit as a percentage of net sales increased from 15.1% for fiscal 2020 to 16.3% for fiscal 2021.
We believe that there are substantial synergies across our segments. Cross-segment synergies include procurement, operational best practices such as the use of new productivity technologies, and supply chain and network optimization, as well as shared corporate functions such as accounting, treasury, tax, legal, information systems, and human resources.
Cross-segment synergies include procurement, operational best practices such as the use of new productivity technologies, and supply chain and network optimization, as well as shared corporate functions such as accounting, treasury, tax, legal, information systems, and human resources. The Company’s fiscal year ends on the Saturday nearest to June 30 th .
Consolidated Results of Operations Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 Net Sales Net sales growth is primarily a function of case growth, pricing (which is primarily based on product inflation/deflation), and a changing mix of customers, channels, and product categories sold.
The effective tax rate for fiscal 2021 was impacted by a benefit from a federal net operating loss carryback to tax years with a statutory rate higher than the current statutory tax rate. 27 Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 Net Sales Net sales growth is primarily a function of case growth, pricing (which is primarily based on product inflation/deflation), and a changing mix of customers, channels, and product categories sold.
Total assets for Foodservice increased $262.6 million from $5,529.1 million as of June 27, 2020 to $5,791.7 million as of July 3, 2021. During this time period, this segment increased its accounts receivable, inventory, and property, plant, and equipment, partially offset by decreases in intangible assets and operating lease right-of-use assets.
Total assets for Foodservice increased $663.6 million from $5,791.7 million as of July 3, 2021 to $6,455.3 million as of July 2, 2022. During this period, this segment increased its inventory, property, plant, and equipment, accounts receivable, and goodwill primarily due to a recent acquisition, partially offset by a decrease in intangible assets.
We primarily value inventories at the lower of cost or market using the first-in, first-out method (“FIFO”). FIFO was used for approximately 87% of total inventories at July 3, 2021. The remainder of the inventory was valued using LIFO method using the link chain technique of the dollar value method.
The Company values inventories at the lower of cost or market using the first-in, first-out (“FIFO”) method and last-in, first-out ("LIFO") using the link chain technique of the dollar value method. 38 FIFO was used for approximately 57% of total inventories at July 2, 2022. We adjust our inventory balances for slow-moving, excess, and obsolete inventories.
Operating expenses decreased primarily as a result of decreased sales volume described above, decreases in personnel expenses, and a $109.8 million reduction in contingent consideration accretion expense for fiscal 2021 as compared to prior year period .
Operating expenses, excluding depreciation and amortization, decreased $91.7 million, or 28.2%, for fiscal 2021 primarily as a result of a $108.6 million reduction in contingent consideration accretion expense for fiscal 2021 as compared to prior year period.
For information regarding the Company’s expected cash requirements related to long-term debt and operating and finance leases, see Note 8. Debt and Note 12. Leases , respectively, of the consolidated financial statements.
Our cash requirements over the next 12 months and beyond relate to our long-term debt and associated interest payments, operating and finance leases, and purchase obligations. For information regarding the Company’s expected cash requirements related to long-term debt and operating and finance leases, see Note 8. Debt and Note 12.
As of July 3, 2021, the Company was in compliance with all of the covenants under the ABL Facility and the indentures governing the Notes due 2024, the Notes due 2025, the Notes due 2027, and the Notes due 2029. 39 Total Assets by Segment Total assets by segment discussed below exclude intercompany receivables between segments.
As of July 2, 2022, the Company was in compliance with all of the covenants under the ABL Facility and the indentures governing the Notes due 2025, the Notes due 2027, and the Notes due 2029.
The effective tax rate for fiscal 2020 was impacted by the $46.3 million benefit from a federal net operating loss carryback to tax years with a statutory tax rate higher than the current statutory tax rate. Segment Results We have two reportable segments as described above – Foodservice and Vistar.
The effective tax rate for fiscal 2020 was impacted by the $46.3 million benefit from a federal net operating loss carryback to tax years with a statutory tax rate higher than the current statutory tax rate. 28 Segment Results As previously disclosed, in the second quarter of fiscal 2022, the Company changed its operating segments to reflect the manner in which the business is managed.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. 34 We believe that our cash flows from operations and available borrowing capacity will be sufficient to meet our anticipated cash requirements over at least the next 12 months , to maintain sufficient liquidity for normal operating purposes , and to fund capital expenditures .
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Despite the near-term impact of the COVID-19 pandemic, we believe that our long-term performance is principally affected by the following key factors: • Changing demographic and macroeconomic trends. Until recently, due to the COVID-19 pandemic, the share of consumer spending captured by the food-away-from-home industry has increased steadily for several decades.
Until recently, due to the COVID-19 pandemic, the share of consumer spending captured by the food-away-from-home industry has increased steadily for several decades.
Total depreciation and amortization related to the 53 rd week in fiscal 2021 was approximately $1.4 million for Vistar.
Total depreciation and amortization related to the 53 rd week in fiscal 2021 was approximately $1.0 million for Vistar. Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 Net Sales Net sales for Vistar decreased $626.4 million, or 19.8%, from fiscal 2020 to fiscal 2021.
The following tables set forth net sales and EBITDA by segment for the periods indicated (dollars in millions): Net Sales Fiscal Year Ended Fiscal 2021 Fiscal 2020 July 3, 2021 June 27, 2020 June 29, 2019 Change % Change % Foodservice $ 21,890.0 $ 16,740.5 $ 15,095.1 $ 5,149.5 30.8 $ 1,645.4 10.9 Vistar 8,496.7 8,339.4 4,641.8 157.3 1.9 3,697.6 79.7 Corporate & All Other 418.3 345.8 291.6 72.5 21.0 54.2 18.6 Intersegment Eliminations (406.1 ) (339.4 ) (285.0 ) (66.7 ) (19.7 ) (54.4 ) (19.1 ) Total net sales $ 30,398.9 $ 25,086.3 $ 19,743.5 $ 5,312.6 21.2 $ 5,342.8 27.1 EBITDA Fiscal Year Ended Fiscal 2021 Fiscal 2020 July 3, 2021 June 27, 2020 June 29, 2019 Change % Change % Foodservice $ 658.9 $ 336.3 $ 428.0 $ 322.6 95.9 $ (91.7 ) (21.4 ) Vistar 93.4 38.5 165.6 54.9 142.6 (127.1 ) (76.8 ) Corporate & All Other (206.3 ) (203.8 ) (154.9 ) (2.5 ) (1.2 ) (48.9 ) (31.6 ) Total EBITDA $ 546.0 $ 171.0 $ 438.7 $ 375.0 219.3 $ (267.7 ) (61.0 ) Segment Results—Foodservice Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 Net Sales Net sales for Foodservice increased $5,149.5 million, or 30.8%, from fiscal 2020 to fiscal 2021.
The following tables set forth net sales and EBITDA by segment for the periods indicated (dollars in millions): Net Sales Fiscal Year Ended Fiscal 2022 Fiscal 2021 July 2, 2022 July 3, 2021 June 27, 2020 Change % Change % Foodservice $ 26,579.2 $ 21,890.0 $ 16,740.5 $ 4,689.2 21.4 $ 5,149.5 30.8 Vistar 3,681.8 2,539.6 3,166.0 1,142.2 45.0 (626.4 ) (19.8 ) Convenience 20,603.3 5,946.8 5,173.4 14,656.5 246.5 773.4 14.9 Corporate & All Other 526.5 428.6 345.8 97.9 22.8 82.8 23.9 Intersegment Eliminations (496.7 ) (406.1 ) (339.4 ) (90.6 ) (22.3 ) (66.7 ) (19.7 ) Total net sales $ 50,894.1 $ 30,398.9 $ 25,086.3 $ 20,495.2 67.4 $ 5,312.6 21.2 EBITDA Fiscal Year Ended Fiscal 2022 Fiscal 2021 July 2, 2022 July 3, 2021 June 27, 2020 Change % Change % Foodservice $ 741.8 $ 658.9 $ 336.3 $ 82.9 12.6 $ 322.6 95.9 Vistar 192.0 81.6 119.9 110.4 135.3 (38.3 ) (31.9 ) Convenience 151.4 12.1 (81.4 ) 139.3 1,151.2 93.5 114.9 Corporate & All Other (272.4 ) (206.6 ) (203.8 ) (65.8 ) (31.8 ) (2.8 ) (1.4 ) Total EBITDA $ 812.8 $ 546.0 $ 171.0 $ 266.8 48.9 $ 375.0 219.3 Segment Results—Foodservice Fiscal year ended July 2, 2022 compared to fiscal year ended July 3, 2021 Net Sales Net sales for Foodservice increased $4.7 billion, or 21.4%, from fiscal 2021 to fiscal 2022.
Management evaluates the performance of these segments based various operating and financial metrics, including their respective sales growth and EBITDA. Corporate & All Other is comprised of unallocated corporate overhead and certain operations that are not considered separate reportable segments based on their size.
Corporate & All Other is comprised of unallocated corporate overhead and certain operating segments that are not considered separate reportable segments based on their size, including the operations of our internal logistics unit responsible for managing and allocating inbound logistics revenue and expense.
The Notes due 2027 also contain customary events of default, the occurrence of which could result in the principal of and accrued interest on the Notes due 2027 to become or be declared due and payable. 37 Senior Notes due 2025 : On April 24, 2020, Performance Food Group, Inc. issued and sold $275.0 million aggregate principal amount of its 6.875% Senior Notes due 2025 (“Notes due 2025”) , pursuant to an indenture dated as of April 24, 2020.
Senior Notes due 2025: On April 24, 2020, Performance Food Group, Inc. issued and sold $275.0 million aggregate principal amount of its 6.875% Senior Notes due 2025 (the “Notes due 2025”).
We adjust our inventory balances for slow-moving, excess, and obsolete inventories. These adjustments are based upon inventory category, inventory age, specifically identified items, and overall economic conditions. Insurance Programs We maintain high-deductible insurance programs covering portions of general and vehicle liability and workers’ compensation.
These adjustments are based upon inventory category, inventory age, specifically identified items, and overall economic conditions. Insurance Programs We maintain high-deductible insurance programs covering portions of general and vehicle liability and workers’ compensation. The amounts in excess of the deductibles are insured by third-party insurance carriers, subject to certain limitations and exclusions. We also maintain self-funded group medical insurance.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−1 removed5 unchanged
Biggest changeAs of July 3, 2021, we had collars in place for approximately 37% of the gallons we expect to use over the twelve months following July 3, 2021. These collars are recorded at fair value as either an asset or liability on the balance sheet.
Biggest changeSubsequent to July 2, 2022, we entered into additional collars that increased the collars in place to approximately 30% of the gallons we expect to use over the twelve months following July 2, 2022. These collars are recorded at fair value as either an asset or liability on the balance sheet.
A hypothetical 100 bps increase in LIBOR on our variable-rate debt would lead to an increase of approximately $7.2 million in annual interest expense. Fuel Price Risk We seek to minimize the effect of higher diesel fuel costs both by reducing fuel usage and by taking action to offset higher fuel prices.
A hypothetical 100 bps increase in LIBOR on our variable-rate debt would lead to an increase of approximately $12.2 million in annual interest expense. 40 Fuel Price Risk We seek to minimize the effect of higher diesel fuel costs both by reducing fuel usage and by taking action to offset higher fuel prices.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk All of our market sensitive instruments are entered into for purposes other than trading. Interest Rate Risk We are exposed to interest rate risk related to changes in interest rates for borrowings under our ABL Facility.
Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk All of our market sensitive instruments are entered into for purposes other than trading. Interest Rate Risk We are exposed to interest rate risk related to changes in interest rates for borrowings under our ABL Facility.
As discussed above, this increase in fuel costs would be partially offset by fuel surcharges passed through to our customers. 42
As discussed above, this increase in fuel costs would be partially offset by fuel surcharges passed through to our customers. 41
Using published market price projections for diesel and estimates of fuel consumption, a 10% hypothetical increase in diesel prices from the market price would result in a potential increase of approximately $14.5 million in fuel costs included in Operating expenses.
Using published market price projections for diesel and estimates of fuel consumption, a 10% hypothetical increase in diesel prices from the market price would result in a potential increase of approximately $34.3 million in fuel costs included in Operating expenses.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as hedged interest payments are made on our debt. During the next twelve months, we estimate that losses of approximately $5.6 million will be reclassified as an increase to interest expense.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as hedged interest payments are made on our debt. During the next twelve months, we estimate that gains of approximately $7.7 million will be reclassified as an increase to interest expense.
Assuming an average daily balance on our ABL Facility of approximately $1.2 billion, approximately $505.0 million of our outstanding long-term debt is fixed through interest rate swap agreements over the next 12 months and approximately $723.0 million represents variable-rate debt.
Assuming an average daily balance on our ABL Facility of approximately $1.6 billion, approximately $388.6 million of our outstanding long-term debt is fixed through interest rate swap agreements over the next 12 months and approximately $1.2 billion represents variable-rate debt.
Based on the fair values of these interest rate swaps as of July 3, 2021, a hypothetical 100 bps decrease in LIBOR would result in a loss of $7.7 million and a hypothetical 100 bps increase in LIBOR would result in a gain of $13.0 million within accumulated other comprehensive income.
Based on the fair values of these interest rate swaps as of July 2, 2022, a hypothetical 100 bps decrease in LIBOR would result in a loss of $8.1 million and a hypothetical 100 bps increase in LIBOR would result in a gain of $8.0 million within accumulated other comprehensive income.
As of July 3, 2021, our subsidiary, Performance Food Group, Inc., had five interest rate swaps with a combined value of $700.0 million notional amount that were designated as cash flow hedges of interest rate risk. See Note 9.
As of July 2, 2022, our subsidiary, Performance Food Group, Inc., had two interest rate swaps with a combined value of $400.0 million notional amount that were designated as cash flow hedges of interest rate risk. See Note 9.
Removed
In fiscal 2022 once all required approvals for the Proposed Core-Mark Acquisition are received, the Company plans to fund the cash consideration for the Proposed Core-Mark Acquisition and to pay off any outstanding Core-Mark long-term debt with borrowings from the ABL Facility.
Added
As of July 2, 2022, we had collars in place for approximately 24% of the gallons we expect to use over the twelve months following July 2, 2022.

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