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What changed in Performance Food Group Co's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Performance Food Group Co's 2023 and 2024 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 2024 report.

+377 added−444 removedSource: 10-K (2024-08-14) vs 10-K (2022-08-19)

Top changes in Performance Food Group Co's 2024 10-K

377 paragraphs added · 444 removed · 275 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe 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.
Biggest changeConvenience'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. 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).
We believe we also benefit from supply chain efficiency, including a growing inbound logistics backhaul network that uses our collective distribution network to deliver inbound products across business segments; best practices in warehousing, transportation, and risk management; the ability to benefit from the scale of our purchases of items not for resale, such as trucks, construction materials, insurance, banking relationships, healthcare, and material handling equipment; and the ability to optimize our networks so that customers are served from the most efficient distribution centers, which minimizes the cost of delivery.
We believe we also benefit from supply chain efficiency, including a growing inbound logistics backhaul network that uses our collective distribution network to deliver inbound products across business segments; best practices in warehousing, transportation, and risk management; the ability to benefit from the scale of our purchases of items and services not for resale, such as trucks, construction materials, insurance, banking relationships, healthcare, and material handling equipment; and the ability to optimize our networks so that customers are served from the most efficient distribution centers, which minimizes the cost of delivery.
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.
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 processing and distribution facilities must be registered with the FDA biennially and are subject to periodic government agency inspections.
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
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.
If the pricing is set at time of order, the pricing is agreed to between our sales associate and the customer and is typically based on a product cost that fluctuates weekly or more frequently. If contracts are based on a fixed markup per unit or pound, then our customers bear the risk of cost fluctuations during the contract life.
If the pricing is set at time of order, the pricing is agreed to between our sales associate and the customer and is typically based on a product cost that fluctuates weekly or more frequently. If contracts are based on a fixed markup per unit or pound, our customers bear the risk of cost fluctuations during the contract life.
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.
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 5 fuel surcharges to our customers and through the use of costless collars.
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.
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.
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.
As a result, we expanded our convenience business, which 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.
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.
Our inventory turns, on average, every three-and-a-half weeks, which further protects us from cost fluctuations. 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 Performance Brands typically generate higher gross profit per case than other brands. Nationally branded products are attractive to chain, independent, and other customers seeking recognized national brands in their operations and complement sales of our Performance Brand products.
Our Performance Brands typically generate higher gross profit per case than other brands. Nationally branded products are 4 attractive to chain, independent, and other customers seeking recognized national brands in their operations and complement sales of our Performance Brand products.
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.
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 Holding Company, Inc. ("Core-Mark").
The information we file with the SEC or contained on or accessible through our corporate website or any other website that we may maintain is not incorporated by reference herein and is not part of this Form 10-K. Website and Social Media Disclosure We use our website (www.pfgc.com) and our corporate Facebook account as channels of distribution of company information.
The information we file with the SEC or contained on or accessible through our corporate website or any other website that we may maintain is not incorporated by reference herein and is not part of this Form 10-K. 8 Website and Social Media Disclosure We use our website (www.pfgc.com) and our corporate social media platforms as channels of distribution of company information.
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.
Our approximately 37,000 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.
We believe we have a competitive advantage over regional and local broadline distributors through economies of scale in purchasing and procurement, which allow us to offer a broad variety of products (including our proprietary Performance Brands) at competitive prices to our customers. Our customers benefit from our ability to provide them with extensive geographic coverage as they continue to grow.
We believe we have a competitive advantage through economies of scale in purchasing and procurement, which allow us to offer a broad variety of products (including our proprietary Performance Brands) at competitive prices to our customers. Our customers benefit from our ability to provide them with extensive geographic coverage as they continue to grow.
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.
Vistar is a leading national distributor of candy, snacks, beverages, and other items 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 27 Vistar distribution centers.
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.
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 144 distribution centers to over 300,000 customer locations across North America.
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.
Through our long-term incentive plan, we also grant eligible associates equity compensation awards that vest over time to align those incentives with the Company’s long-term strategic objectives and the interests of our stockholders. We offer an array of competitive benefits to our associates.
Additionally, we offer an Employee Assistance Program (EAP) that includes professional support for associates to balance the stress of personal and professional demands at home, in the office, in distribution centers and on the road. Workforce Diversity.
Additionally, we offer an Employee Assistance Program that provides professional support for associates and their family members to balance the stress of personal and professional demands at home, in the office, in distribution centers and on the road. Diversity and Inclusion.
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.
We continue to focus on the safety of our team members and the communities we serve by identifying and addressing safety risks through education, coaching, and process changes, as well as seeking new systems and technology to further our journey of keeping our associates safe and our Company compliant. Engagement.
We believe that we are in substantial compliance with applicable regulatory requirements relating to our motor carrier operations. Failure to comply with the applicable motor carrier regulations could result in substantial fines or revocation of our operating permits. Available Information We file annual, quarterly, and current reports, proxy statements and other information with the SEC.
We believe that we are in substantial compliance with applicable regulatory requirements relating to our motor carrier operations. Failure to comply with the applicable motor carrier regulations could result in substantial fines or revocation of our operating permits.
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.
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.
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.
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, 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.
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.
The FDA Food Safety Modernization Act (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 FDA has finalized regulations implementing the FSMA, which have significantly expanded our food safety requirements.
These smaller distributors often align themselves with other smaller distributors through purchasing cooperatives and marketing groups to enhance their geographic reach, private label offerings, overall purchasing power, cost efficiencies, and to assemble delivery networks for national or multi-regional distribution.
Certain of our competitors may have greater scale and financial and other resources than we do in certain markets. Smaller distributors often align themselves with other smaller distributors through purchasing cooperatives and marketing groups to enhance their geographic reach, private label offerings, overall purchasing power, cost efficiencies, and to assemble delivery networks for national or multi-regional distribution.
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.
Through our Learning Management System, we deliver a variety of required and optional on-demand learning opportunities linked to an associate’s role with the Company, including modules tied to safety and compliance, such as our Code of Business Conduct. Additionally, our segments provide segment specific training opportunities that align and compliment the overall learning and organizational development strategy.
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.
We believe these efficiencies and economies of scale provide opportunities for improvements in our operating margins. Seasonality Historically, the food-away-from-home and foodservice distribution industries are seasonal, with lower profit in the first quarter of each calendar year. Consequently, we may experience lower operating profit during our third fiscal quarter, depending on the timing of acquisitions, if any.
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.
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 2024, fiscal 2023, or fiscal 2022.
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.
Our Vice President of Diversity, Inclusion and Belonging provides regular updates to the Company's Board of Directors (“Board of Directors”). With six out of 12 members of the Board of Directors representing gender and ethnic diversity, our commitment to workforce diversity is reflected at every level of the organization and is connected to our business strategy. Learning and Organizational Development.
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.
Human Capital Resources Our vision is to create the best experience for our associates and the best outcomes for our Company, customers, and communities. An important component of our strategy is to attract, train, develop, and retain talented individuals who feel empowered to fully contribute their diverse backgrounds, experiences, and innovative ideas to help drive the success of the Company.
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.
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.
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 also recognize the importance of keeping our associates safe and healthy, giving them a voice and listening to their concerns and suggestions. Below, we discuss our efforts to achieve these objectives. Associates. As of June 29, 2024, our associate population (including associates of our consolidated subsidiaries) totaled approximately 37,000 full-time and part-time associates in North America.
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.
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 that further strengthen the connection between pay and performance.
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 are committed to empowering associates with the right training and development at the right time, throughout their career journey. Health, Safety and Wellness. The safety of our associates is paramount. An emphasis on training, safety awareness, behavioral-based work observation practices, telematics, and culture are the foundation of our ongoing effort to reduce workplace injuries and accidents.
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 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. Vistar’s scale in these channels enhances our ability to procure a broad variety of products for our customers.
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.
We have an enterprise-wide learning and organizational 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. We enable a purposeful career journey by supporting associates in mastering their current roles and preparing for future career paths.
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.
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.
The distribution model also includes a “pick and pack” capability, which utilizes third-party carriers and Vistar’s SKU variety to sell to customers whose order sizes are too small to be served effectively by our delivery network. We believe these capabilities, in conjunction with the breadth of our inventory, are differentiating and allow us to serve many distinct customer types.
The distribution model also includes “pick and pack” capabilities utilizing small parcel third-party carriers and Vistar’s SKU variety to sell to customers whose order sizes are too small to be served effectively by our delivery network, and to fulfill directly to consumers for our supplier partners.
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.
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. Our customers include several departments of the U.S. federal government, as well as certain state and local governmental entities. These customer relationships subject us to additional regulations applicable to government contractors.
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.
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 each of our reportable segments, while others sell to only one segment.
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.
Cheney Brothers will be reported in the Foodservice segment. Our Segments Based on the Company’s organization structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company has three reportable segments: Foodservice, Vistar, and Convenience.
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.
As of June 29, 2024, we had collars in place for approximately 21% of the gallons we expect to use over the 12 months following June 29, 2024. Competition The foodservice distribution industry is highly competitive, with numerous national, regional, local, and specialty distributors.
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.
Our E4 Leadership Development program is designed to provide training opportunities for all levels of leadership, from entry level to executive, advancing leadership skills at every point of their career. This program is intended to create a passionate, human-centric learning culture with current and future leaders who pursue innovation and embrace empathy.
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.
Vistar distribution centers deliver to vending and office coffee service distributors and directly to most theaters and various other locations.
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.
Convenience offers a full range of products, marketing programs and technology solutions to approximately 50,000 customer locations in the United States and Canada. 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.
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.
These benefits include time off through paid vacation, sick days, holidays, and personal time, as well as family leave; insurance offerings such as disability insurance, life insurance and healthcare; and 6 financial benefits such as a 401(k) plan with a company match, an Employee Stock Purchase Plan, adoption assistance, education assistance, scholarship program for children of associates, flexible spending accounts, and health savings accounts.
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.
We work to build, measure, and enhance associate engagement through a variety of communications and activities. We participate in and celebrate industry efforts such as the International Foodservice Distributors Association’s Truck Driving Championship and Truck Driver Hall of Fame and the Women in Foodservice Forum. We celebrate and honor our associates, customers, and communities during heritage months throughout the year.
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.
In response to associate feedback, we have introduced numerous initiatives to strengthen the associate experience, including day-one benefits, education assistance, leadership training program, career pathing, and enhanced communications.
As 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.
Of that total, approximately 99% were employed on a full-time basis, and approximately 70% were non-exempt, or paid on an hourly basis. Compensation and Benefits. We strive to deliver base wages and salaries that are fair and competitive with the external labor markets.
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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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On August 13, 2024, we entered into a definitive Stock Purchase Agreement to acquire Cheney Bros., Inc. ("Cheney Brothers") in a transaction valued at $2.1 billion. The closing of the contemplated transaction is subject to customary conditions, including the receipt of required regulatory approvals.
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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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The $2.1 billion purchase price is expected to be financed with borrowing under the ABL Facility (as defined below under "- Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Financing Activities" in Part II, Item 7 of this Form 10-K) and the net proceeds from the issuance of new senior unsecured notes.
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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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Corporate & All Other is comprised of corporate overhead and certain operating segments that are not considered separate reportable segments based on their size. This also includes the operations of the Company’s internal logistics unit responsible for managing and allocating inbound logistics revenue and expense. Foodservice .
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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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We believe these capabilities, in conjunction with the breadth of our inventory, are differentiating and allow us to serve many distinct customer types. Convenience . The Convenience segment is one of the largest foodservice and wholesaler consumer products distributors in the convenience retail industry.
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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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We are committed to building the most talented, diverse and an inclusive workforce that reflects the customers and communities we serve.
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Furthermore, there are two large broadline distributors, Sysco, and US Foods, with national footprints. In addition, there are numerous regional, local, and specialty distributors.
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Our diversity, inclusion, and belonging strategy consists of three areas of focus: • Promoting an inclusive culture and sense of belonging to engage our workforce. • Investing in attracting, hiring, and developing the best talent to reflect the communities we serve. • Supporting a diverse network of suppliers to drive economic development in our communities.
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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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With the active engagement of PFG’s senior leadership, we continue to foster a culture of inclusion through ongoing opportunities to learn and grow, and by continuing to sponsor our associate resource groups (ARGs). These associate-led networks drive associate engagement by fostering inclusion, enhancing career development, and promoting cultural awareness.
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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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Using a blended approach of instructor-led and self-paced training, our associates are provided role-specific training that is accessible and personalized. The learning journey for our associates starts with an onboarding experience and continues with individual development opportunities.
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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.
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Regulation Our operations are subject to various laws and regulations relating to, among other things, the manufacturing, processing, packaging, storage, distribution, advertising, and labeling of our products, including regulation by state and local health departments, the U.S. Department of Agriculture (the “USDA”), and the U.S.
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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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We have established and continue to maintain comprehensive, prevention-based controls 7 across the food supply chain that are both verified and validated, as required by the FDA regulations implementing FSMA.
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We work to build, measure, and enhance associate engagement through a variety of communications and activities.
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For the purchase of products produced, harvested or manufactured outside of the U.S., and for shipment of products to customers located outside of the U.S., we are subject to applicable customs laws regarding the import and export of various products. Available Information We file annual, quarterly, and current reports, proxy statements and other information with the SEC.
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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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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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

98 edited+54 added−34 removed58 unchanged
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.
Biggest changeOur level of indebtedness 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, share repurchases 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; 17 • 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.
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.
State 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.
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.
If there is any future product withdrawal that results in substantial and unexpected expenditures, destruction of product inventory, damage to our reputation, or 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.
Further, we may incur costs related to claims for which we have appropriate third-party indemnity, but such third parties may fail to fulfill their contractual obligations. Adverse publicity about us, lack of confidence in our products or services, and other risks could negatively affect our reputation and affect our business.
Further, we may incur costs related to claims for which we have appropriate third-party indemnity, but such third parties may fail to fulfill their contractual obligations. Adverse publicity about us, lack of confidence in our products or services, and other risks could negatively affect our reputation and our business.
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.
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; 18 • 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.
Some of our customers, particularly our larger customers, purchase their products from us through group purchasing organizations (“GPOs”) in an effort to lower the prices paid by these customers on their foodservice orders, and we have experienced some pricing pressure from these purchasers. These GPOs have also made efforts to include smaller, independent restaurants.
Some of our customers, particularly our larger customers, purchase their products from us through group purchasing organizations (“GPOs”) in an effort to lower the prices paid by these customers on their foodservice orders, and we have in the past experienced some pricing pressure from these purchasers. These GPOs have also made efforts to include smaller, independent restaurants.
If consumer eating habits change significantly, we may be required to modify or discontinue sales of certain items in our product portfolio, and we may experience higher costs associated with the implementation of those changes. Changing consumer eating habits may reduce the frequency with which consumers purchase meals outside of the home.
If consumer eating habits change significantly, we may be required to modify or discontinue sales of certain items in our product portfolio, and we may experience higher costs associated with the implementation of those changes. Changing consumer eating habits may also reduce the frequency with which consumers purchase meals outside of the home.
Furthermore, our business model requires us to maintain an inventory of products, and changes in price levels between the time that we acquire inventory from our suppliers and the time we sell the inventory to our customers could lead to unexpected shifts in demand for our products or could require us to sell inventory at lesser profit or a loss.
Furthermore, our business model requires us to maintain an inventory of products, and changes in price levels between the time that we acquire inventory from our suppliers and the time we sell the inventory to our customers could lead to unexpected shifts in demand for our products or could require us to sell inventory at 11 lesser profit or a loss.
However, if one or more of our competitors in the foodservice distribution industry adopted an everyday low-price strategy, we would potentially be pressured to lower prices to our customers and would need to achieve additional cost savings to offset these reductions.
However, if one or more of our competitors in the foodservice distribution industry adopted an everyday low-price strategy, we would potentially be pressured to lower prices to our customers and would need to achieve cost savings to offset these reductions.
Additionally, we could become the subject of future claims by third parties, including our employees; suppliers, customers, and other counterparties; our investors; or regulators. Any significant adverse judgments or settlements would reduce our profits and could limit our ability to operate our business.
Additionally, we could become the subject of future claims by third parties, including our employees; suppliers, customers, and other counterparties; our investors; or regulators. Any significant adverse judgments or settlements could reduce our profits and could limit our ability to operate our business.
These smaller distributors often align themselves with other smaller distributors through purchasing cooperatives and marketing groups to enhance their geographic reach, private label offerings, overall purchasing power, cost efficiencies and to assemble delivery networks for national or multi-regional distribution.
Smaller distributors often align themselves with other smaller distributors through purchasing cooperatives and marketing groups to enhance their geographic reach, private label offerings, overall purchasing power, and cost efficiencies and to assemble delivery networks for national or multi-regional distribution.
We may elect to enter into interest rate swaps to reduce our exposure to floating interest rates as described below under “— We may utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness and we will be exposed to risks related to counterparty creditworthiness or non-performance of these instruments .” However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
We may elect to enter into interest rate swaps to reduce our exposure to floating interest rates as described below under “— We utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness and we are be exposed to risks related to counterparty creditworthiness or non-performance of these instruments .” However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
These laws and regulations may change in the future and we may incur material costs in our efforts to comply with current or future laws and regulations or in any required product recalls.
These laws and regulations may change in the future and we could incur material costs in our efforts to comply with current or future laws and regulations or in any required product recalls.
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.
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.
In addition, our operations are subject to various federal, state, and local laws and regulations in many areas of our business, such as, minimum wage, overtime, wage payment, wage and hour and employment discrimination, immigration, human health and safety and relating to the protection of the environment, including those governing the discharge of pollutants into the air, soil, and water; the management and disposal of solid and hazardous materials and wastes; employee exposure to hazards in the workplace; and the investigation and remediation of contamination resulting from releases of petroleum products and other regulated materials.
In addition, our operations are subject to various federal, state, provincial, regional and local laws and regulations in many areas of our business, such as, minimum wage, overtime, wage payment, wage and hour and employment discrimination, harassment, immigration, human health and safety and relating to the protection of the environment, including those governing the discharge of pollutants into the air, soil, and water; the management and disposal of solid and hazardous materials and wastes; employee exposure to hazards in the workplace; and the investigation and remediation of contamination resulting from releases of petroleum products and other regulated materials.
These uses give rise to cybersecurity risks, including security breach, espionage, system disruption, theft, and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including customers’ and suppliers’ personal information, private information about employees, and financial and strategic information about us and our business partners.
These uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft, and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive or confidential information and intellectual property, including customers’ and suppliers’ personal information, private information about employees, and financial and strategic information about us and our business partners.
We rely upon information technology networks and systems to process, transmit, and store electronic information, and to manage or support virtually all of our business processes and activities. We also use mobile devices, social networking, and other online activities to connect with our employees, suppliers, business partners, and customers.
We rely upon information technology networks and systems to process, transmit, and store electronic information, and to manage or support substantially all of our business processes and activities. We also use mobile devices, social networking, and other online activities to connect with our employees, suppliers, business partners, and customers.
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.
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 may not be able to fulfill our obligations to our customers and, as a result, our customers may turn to other distributors.
In addition, labor organizing activities could result in additional employees becoming unionized, 8 which could result in higher labor costs.
In addition, labor organizing activities could result in additional employees becoming unionized, which could result in higher labor costs.
Furthermore, both the price and supply of fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns, and environmental concerns.
Furthermore, both the price and supply of fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments (such as the war in the Ukraine), supply and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns, and environmental concerns.
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.
Additionally, we may be 13 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 regularly evaluate opportunities to acquire other companies.
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.
In addition, compliance with current and future environmental laws and regulations relating to carbon emissions and the effects of global climate change 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.
Consumer eating habits could be affected by a number of factors, including changes in attitudes regarding diet and health or new information regarding the health effects of consuming certain foods.
Consumer eating habits can be affected by a number of factors, including changes in attitudes regarding diet and health or new information regarding the health effects of consuming certain foods.
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.
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 could have a material impact on our net income. Volatile food costs may have a direct impact upon our profitability.
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.
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 e-vapor products and other alternative nicotine products, and other factors, cigarette consumption in the United States has been declining over the past few decades.
Although we have not experienced any significant labor disputes or work stoppages in recent history, and we believe we have satisfactory relationships with our employees, including those who are union members, increased unionization or a work stoppage because of our failure to renegotiate union contracts could have a material adverse effect on us.
Although we have not experienced any significant labor disputes or work stoppages in recent history, and we believe we have satisfactory relationships with our employees, including those who are union members, increased unionization or a work stoppage because of our inability to renegotiate union contracts could have a material adverse effect on our business.
These tax increases negatively impact consumption and may cause a shift in sales from premium brands to discount brands, illicit channels, or tobacco alternatives, such as electronic cigarettes, as smokers seek lower priced options. Furthermore, taxing jurisdictions have the ability to change or rescind credit terms currently extended for the remittance of taxes that we collect on their behalf.
These tax increases negatively impact consumption and may cause a shift in sales from premium brands to discount brands, illicit channels, or tobacco alternatives, such as e-vapor products, as smokers seek lower priced options. Furthermore, taxing jurisdictions have the ability to change or rescind credit terms currently extended for the remittance of taxes that we collect on their behalf.
In many instances, tobacco alternatives, such as electronic cigarettes, are not subject to federal, state, and local excise taxes like the sale of conventional cigarettes or other tobacco products. We expect consumption trends of legal cigarette products will continue to be negatively impacted by the factors described above.
In many instances, tobacco alternatives, such as e-vapor products, are not subject to federal, state, and local excise taxes like the sale of 15 conventional cigarettes or other tobacco products. We expect consumption trends of legal cigarette products will continue to be negatively impacted by the factors described above.
Significant decreases in the volume and/or number of our customers’ purchase orders or our inability to retain or grow our current customer base may have a material adverse effect on our business, financial condition, or results of operations.
Significant decreases in the volume or number of our customers’ purchase orders or our inability to retain or grow our current customer base could have a material adverse effect on our business, financial condition, or results of operations.
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.
In addition, 14 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 vapor products), require ingredient listings be displayed on tobacco and alternative nicotine products, prohibit the use of certain terms that 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.
We are subject to a wide range of labor costs. Because our labor costs are, as a percentage of net sales, higher than in many other industries, we may be significantly harmed by labor cost increases. In addition, labor is a significant cost for many of our customers in the U.S. food-away-from-home industry.
Because our labor costs are, as a percentage of net sales, higher than in many other industries, we may be significantly harmed by labor cost increases. In addition, labor is a significant cost for many of our customers in the U.S. food-away-from-home industry.
We may utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness and we will be exposed to risks related to counterparty credit worthiness or non-performance of these instruments. We may enter into pay-fixed interest rate swaps to limit our exposure to changes in variable interest rates.
We utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness, and we are exposed to risks related to counterparty credit worthiness or non-performance of these instruments. We enter into pay-fixed interest rate swaps to limit our exposure to changes in variable interest rates.
Such extreme weather conditions, whether caused by global climate change or otherwise, may interrupt our operations and reduce the number of consumers who visit our customers’ facilities in such areas.
Such extreme weather conditions, whether caused by climate change or otherwise, could interrupt our operations and reduce the number of consumers who visit our customers’ facilities in such areas.
We may not be able to affect any of these actions on a timely basis, on commercially reasonable terms, or at all, and these actions may not be sufficient to meet our capital requirements.
We may not be able to affect any of these actions on a timely basis, on commercially reasonable terms, or at all, and these actions may not be sufficient to meet our debt service requirements.
In addition, instances of food-borne illnesses, food tampering, or other health concerns, such as flu epidemics or other pandemics (including COVID-19), even those unrelated to the use of our products, or public concern regarding the safety of our products, can result in negative publicity about the foodservice distribution industry and cause our sales to decrease dramatically.
In addition, instances of food-borne illnesses, food tampering, or other health concerns, such epidemics and pandemics, even those unrelated to the use of our products, or public concern regarding the safety of our products, can result in negative publicity about the foodservice distribution industry and cause our sales to decrease dramatically.
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.
Our success depends 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.
If we are unable to generate sufficient cash flow to service our debt and to meet our other commitments, we may need to restructure or refinance all or a portion of our debt, sell material assets or operations, or raise additional debt or equity capital.
If we are unable to generate sufficient cash flow to service our debt, we may need to restructure or refinance all or a portion of our debt, sell material assets or operations, or raise additional debt or equity capital.
Accordingly, we cannot assure you that we will be able to compete effectively against current and potential, future competitors, and increased competition may result in price reductions, reduced gross margins, and loss of market share, any of which could materially adversely affect our business, financial condition, or results of operations.
Accordingly, we may not be able to compete effectively against current and potential future competitors, and increased competition may result in price reductions, reduced gross margins, and loss of market share, any of which could materially adversely affect our business, financial condition, or results of operations.
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.
Furthermore, such extreme weather conditions may disrupt critical infrastructure in the United States and interrupt or impede access to our facilities or 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.
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.
Item 1A. Ris k Factors Risks Relating to Our Business and Industry Periods of difficult economic conditions, a public health crisis, 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, regional and international economic conditions.
Additionally, changes in consumer eating habits may result in the enactment of laws and regulations that affect the ingredients and nutritional content of our food products, or laws and regulations requiring us to disclose the nutritional content of our food products.
Additionally, changes in consumer eating habits may result in the enactment of laws and regulations that affect the ingredients and nutritional content of our food products, or laws and regulations requiring us to make additional disclosures regarding the ingredients and nutritional content of our food products.
Many of our customers buy from us pursuant to individual purchase orders, and we often do not enter into long-term agreements with these customers.
Many of our customers are not obligated to continue purchasing products from us. Many of our customers buy from us pursuant to individual purchase orders, and we often do not enter into long-term agreements with these customers.
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.
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 effect on our business, financial condition, or results of operations.
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.
A significant portion of our sales volume is dependent upon the distribution of cigarettes and other tobacco products, sales of which are generally declining. 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.
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.
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 remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
Changes in pricing practices of our suppliers could negatively affect our profitability. Distributors have traditionally generated a significant percentage of their gross margins from promotional allowances paid by their suppliers. Promotional allowances are payments from suppliers based upon the efficiencies that the distributor provides to its suppliers through purchasing scale and through marketing and merchandising expertise.
Distributors have traditionally generated a significant percentage of their gross margins from promotional allowances paid by their suppliers. Promotional allowances are payments from suppliers based upon the efficiencies that the distributor provides to its suppliers through purchasing scale and through marketing and merchandising expertise.
Because such customers are not obligated to continue purchasing products from us, we cannot assure you that the volume and/or number of our customers’ purchase orders will remain constant or increase or that we will be able to maintain our existing customer base.
Because such customers are not obligated to continue purchasing products from us, the volume or number of our customers’ purchase orders may not remain constant or increase and we may be unable to maintain our existing customer base.
We cannot assure you that our current or potential, future competitors will not provide products or services that are comparable or superior to those provided by us or adapt more quickly than we do to evolving trends or changing market requirements.
Our current or potential future competitors may be able to provide products or services that are comparable or superior to those provided by us or adapt more quickly than we do to evolving trends or changing market requirements.
The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer.
The failure of our information technology systems, including those managed by third-party service providers, to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and results of operations to suffer.
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.
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 have a material adverse effect on our business, financial condition, or results of operations.
We have implemented measures to prevent security breaches and other cyber incidents, and, to date, interruption of our information technology networks and systems have been infrequent and have not had a material impact on our operations. However, because cyber-attacks are increasingly sophisticated and more frequent, our preventative measures and incident response efforts may not be entirely effective.
To date, interruption of our information technology networks and systems and unauthorized access to or theft of data have been infrequent and have not had a material impact on our operations. However, because cyber-attacks are increasingly sophisticated and more frequent, our preventative measures and incident response efforts may not be entirely effective.
We often do not have exclusive service agreements with our customers and our customers may switch to other distributors if those distributors can offer lower prices, differentiated products, or customer service that is perceived to be superior.
We often do not have exclusive service agreements with our customers and our customers may switch to other distributors if those distributors can offer lower prices, differentiated products, or customer service that is perceived to be superior. Such changes may occur particularly during periods of economic uncertainty or significant inflation.
In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, power outages, systems failures, security breaches, cyber-attacks, and viruses.
In addition, our information technology systems, including those managed by third-party service providers, may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, power outages, systems failures, security breaches, cyber-attacks, viruses, theft and inadvertent release of information.
Prolonged periods of product cost inflation also may have a negative impact on our profit margins and earnings to the extent such product cost increases are not passed on to customers because of their resistance to higher prices.
Prolonged periods of product cost inflation also may have a negative impact on our profit margins and earnings to the extent such product cost increases are not passed on to customers because of their resistance to higher prices. For example, we experienced inflation of 3.7% for fiscal 2024, which increased our product costs and decreased profit margins.
Competition in our industry is intense, and we may not be able to compete successfully. The foodservice distribution industry is highly competitive. Certain of our competitors have greater financial and other resources than we do. Furthermore, there are two larger broadline distributors, Sysco and US Foods, with national footprints. In addition, there are numerous regional, local, and specialty distributors.
Competition in our industry is intense, and we may not be able to compete successfully. The foodservice distribution industry is highly competitive, with numerous regional, local, and specialty distributors. Certain of our competitors may have greater scale, financial and other resources than we do in certain markets.
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
We are also 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.
To the extent our future growth includes acquisitions, we cannot assure you that we will be able to obtain any necessary financing for such acquisitions, consummate such potential acquisitions effectively, effectively and efficiently integrate any acquired entities, or successfully expand into new markets. Our earnings may be reduced by amortization charges associated with any future acquisitions.
To the extent our future growth includes acquisitions, we may not be able to obtain any necessary financing for such acquisitions, consummate such potential acquisitions effectively, effectively and efficiently integrate any acquired entities, or successfully expand into new markets.
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.
The integration of Cheney Brothers with our existing business will be a complex, costly and time-consuming process that may involve material challenges, including, without limitation: • the diversion of management’s attention from ongoing business concerns, potentially resulting in performance shortfalls; 20 • managing a larger company; • maintaining employee morale and attracting, motivating and retaining management personnel and other key employees; • the possibility of faulty assumptions underlying expectations regarding the integration process; • retaining existing, 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 Cheney Brothers Transaction.
If we are unable to integrate acquired businesses successfully or to realize anticipated economic, operational, and other benefits and synergies in a timely manner, our profitability could be adversely affected.
We may not be able to realize benefits of acquisitions or successfully integrate the businesses we acquire. Our growth strategy includes growth through strategic acquisitions. If we are unable to integrate acquired businesses successfully or to realize anticipated economic, operational, and other benefits and synergies in a timely manner, our profitability could be adversely affected.
The products we distribute may be subject to product recalls, including voluntary recalls or withdrawals, if they are alleged to cause injury or illness or if they are alleged to have been mislabeled, misbranded, or adulterated or to otherwise be in violation of governmental regulations.
The products we distribute may be subject to product recalls, including voluntary recalls or withdrawals, if they are alleged to cause injury or illness (including food-borne illness such as e. coli, bovine spongiform, encephalopathy, hepatitis A, trichinosis, listeria, or salmonella) or if they are alleged to have been mislabeled, misbranded, or adulterated or to otherwise be in violation of governmental regulations.
Servicing our indebtedness will require a significant amount of cash. Our ability to generate sufficient cash depends on many factors, some of which are not within our control. Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future.
Our ability to generate sufficient cash to service our indebtedness depends on many factors, some of which are not within our control. Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future.
In addition, our most profitable products are our Performance Brands. We typically provide a higher level of services to our independent customers and are able to earn a higher operating margin on sales to independent customers. Independent customers are also more likely to purchase our Performance Brands.
Distribution is a relatively low margin industry. The most profitable customers within the distribution industry are generally independent customers. In addition, our most profitable products are our Performance Brands. We typically provide a higher level of services to our independent customers and are able to earn a higher operating margin on sales to independent customers.
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.
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 (including pandemics and epidemics), and other events that trigger economic volatility.
If we are unable to sell other products to make up for these declines in cigarette sales, our operating results may suffer. If the products we distribute are alleged to cause injury or illness or fail to comply with governmental regulations, we may need to recall our products and may experience product liability claims.
If we are unable to sell other products to make up for these declines in cigarette sales, our business, financial condition, or results of operations could be materially adversely affected. If the products we distribute are alleged to cause injury or illness or fail to comply with governmental regulations, we may need to recall our products.
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.
The theft, destruction, loss, misappropriation, release of sensitive or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, including our third-party service providers, suppliers, and customers, could result in business disruption, a disruption in our supply chain, or reduced customer orders, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability, and remediation costs, which could adversely affect our business, financial condition, or results of operations.
These conditions include labor shortages, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, weather conditions or more prolonged climate change, crop conditions, water shortages, transportation interruptions, unavailability of fuel or increases in fuel costs, competitive demands, contamination with mold, bacteria or other contaminants, and natural disasters or other catastrophic events, including, the outbreak of e. coli or similar food borne illnesses or bioterrorism in the United States.
These conditions include labor shortages, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, government shutdowns, weather conditions (including as a result of climate change), crop conditions, product or raw material scarcity, water shortages, transportation interruptions, unavailability of fuel or increases in fuel costs, competitive demands, contamination with mold, bacteria or other contaminants, pandemics (such as the COVID-19 pandemic), natural disasters or other catastrophic events, including the outbreak of e. coli or similar food borne illnesses or acts of terrorism, international hostilities, civil insurrection, and social unrest.
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.
In particular, deteriorating economic conditions and heightened uncertainty in the financial markets, inflationary pressure, an uncertain political environment, and supply chain disruptions, such as those the global economy is currently facing, generally tend to negatively affect consumer confidence and discretionary spending.
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.
As of June 29, 2024, we had approximately 37,000 employees of whom approximately 2,245 were members of local unions associated with the International Brotherhood of Teamsters or other unions.
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.
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.
Increased regulation regarding greenhouse gas emissions, especially diesel engine emissions, could impose substantial costs upon us. These costs include an increase in the cost of the fuel and other energy we purchase, and capital costs associated with updating or replacing our vehicles prematurely.
These costs include an increase in the cost of the fuel and other energy we purchase, and capital costs associated with updating or replacing our vehicles prematurely.
Our ability to continue to penetrate this key customer type is critical to achieving increased operating profits. Changes in the buying practices of independent customers or decreases in our sales to independent customers or a decrease in the sales of our Performance Brands could have a material adverse effect on our business, financial condition, or results of operations.
Changes in the buying practices of independent customers or decreases in our sales to independent customers or a decrease in the sales of our Performance Brands could have a material adverse effect on our business, financial condition, or results of operations. Changes in pricing practices of our suppliers could negatively affect our profitability.
We may be unable to change our cost structure and pricing practices rapidly enough to successfully compete in such an environment. If we fail to increase our sales in the highest margin portions of our business, our profitability may suffer. Distribution is a relatively low margin industry. The most profitable customers within the distribution industry are generally independent customers.
We may be unable to change our cost structure and pricing practices rapidly enough to successfully compete in such an environment, resulting in an adverse affect on our business, financial condition and results of operations. If we fail to increase our sales in the highest margin portions of our business, our profitability may suffer.
Our recruiting and retention efforts and efforts to increase productivity may not be successful and we could encounter a shortage of qualified labor in future periods. Any such shortage would decrease our ability to serve our customers effectively. Such a shortage would also likely lead to higher wages for employees and a corresponding reduction in our profitability.
Any such shortage would decrease our ability to serve our customers effectively. Such a shortage would also likely lead to higher wages for employees and a corresponding reduction in our profitability.
Compliance with these laws and regulations, as well as others regarding the ingredients and nutritional content of our food products, may be costly and time-consuming.
Moreover, compliance with these laws and regulations, as well as others, may be costly and time-consuming.
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.
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.
We, like any other seller of food, may be exposed to product liability claims in the event that the use of products we sell causes injury or illness.
We may be subject to or affected by product liability claims relating to products we distribute. We may be exposed to product liability claims in the event that the use of the products we sell is alleged to cause injury or illness.
Health concerns and negative publicity may harm our results of operations and damage the reputation of, or result in a lack of acceptance of, our products or the brands that we carry or the services that we provide.
Health concerns and negative publicity may harm our results of operations and damage the reputation of, or result in a lack of acceptance of, our products or the brands that we carry or the services that we provide. 16 Moreover, the growing use of social and digital media by consumers has greatly increased the speed and extent that information or misinformation and opinions can be shared.
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.
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. These government authorities regulate, among other things, the processing, packaging, storage, distribution, advertising, and labeling of our 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.
In addition, we could incur investigation, remediation, or other costs related to environmental conditions at our currently or formerly owned or operated properties. 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.
While we believe we have sufficient primary and excess umbrella liability insurance with respect to product liability claims we cannot assure you that our limits are sufficient to cover all our liabilities or that we will be able to obtain replacement insurance on comparable terms, and any replacement insurance or our current insurance may not continue to be available at a reasonable cost, or, if available, may not be adequate to cover all of our liabilities.
In addition, we may not be able to continue to maintain our existing insurance or obtain replacement insurance on comparable terms, and any replacement insurance or our current insurance may not continue to be available at a reasonable cost, or, if available, may not be adequate to cover all of our liabilities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 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.
Biggest changeItem 2. P roperties As of June 29, 2024, we operated 144 distribution centers across our three reportable segments. Of our 144 facilities, we owned 62 facilities and leased the remaining 82 facilities.
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.
We use integrated computer systems to design and track efficient route sequences for the delivery of our products. 23 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 North America.
State 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.
Location Foodservice Vistar Convenience Total Alabama 1 — — 1 Arkansas 1 — 1 2 Arizona 1 1 — 2 California 4 3 5 12 Colorado 1 1 1 3 Connecticut — 1 — 1 Florida 6 1 2 9 Georgia 3 1 2 6 Iowa 1 — 1 2 Illinois 2 1 1 4 Indiana 1 1 1 3 Kentucky 3 1 2 6 Louisiana 3 — — 3 Massachusetts 3 1 2 6 Maryland 2 — — 2 Maine 1 — 1 2 Michigan 1 1 1 3 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 4 — — 4 Vermont 2 — — 2 Washington — — 1 1 Wisconsin 3 1 1 5 Canada — — 4 4 Total 78 27 39 144 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.
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.
Our Foodservice segment operated 78 distribution centers, our Vistar segment operated 27 distribution centers, and our Convenience segment operated 39 distribution centers, all of which had an average square footage of approximately 200,000 square feet per facility.
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.
Of the 78 Foodservice distribution centers, 9 have meat cutting operations that provide custom-cut meat products and one has seafood processing operations that provide custom-cut and packed seafood to our customers and our other distribution centers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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
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 24 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAlthough 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.
Biggest changeRepurchases under this program depend upon market place conditions and other factors, including compliance with the covenants in the agreements governing our existing indebtedness. 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 Midcap 400 Food, Beverage & Tobacco Industry Group.
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 .
In addition, our ability to pay dividends is limited by the 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 .
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.
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 2024.
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.
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 7, 2024, there were approximately 1,378 holders of record of our shares of common stock.
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
Performance data for the Company, the S&P 500 index, and the S&P Midcap 400 Food, Beverage & Tobacco Industry Group 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] 26
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.
The graph assumes the investment of $100 in our common stock and each of the indices as of the market close on June 28, 2019 and the reinvestment of dividends, as applicable.
(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.
(2) On November 16, 2022, the Board of Directors authorized a share repurchase program for up to $300 million of the Company’s outstanding common stock. The share repurchase program has an expiration date of November 16, 2026 and may be amended, suspended, or discontinued at any time at the Company’s discretion, subject to compliance with applicable laws.
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.
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) March 31, 2024—April 27, 2024 128 $ 70.30 — $ 210.6 April 28, 2024—May 25, 2024 143 $ 68.76 — $ 210.6 May 26, 2024—June 29, 2024 241 $ 69.67 — $ 210.6 Total 512 $ 69.57 — (1) During the fourth quarter of fiscal 2024, the Company purchased 512 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.
Removed
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).
Removed
The share repurchase program remains subject to the discretion of the Board of Directors.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeResults of Operations and Adjusted EBITDA The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated (dollars and shares in millions, except per share data): Fiscal Year Ended Fiscal 2024 Fiscal 2023 June 29, 2024 July 1, 2023 July 2, 2022 Change % Change % Net sales $ 58,281.2 $ 57,254.7 $ 50,894.1 $ 1,026.5 1.8 6,360.6 12.5 Cost of goods sold 51,704.1 50,999.8 45,637.7 704.3 1.4 5,362.1 11.7 Gross profit 6,577.1 6,254.9 5,256.4 322.2 5.2 998.5 19.0 Operating expenses 5,750.7 5,489.1 4,929.0 261.6 4.8 560.1 11.4 Operating profit 826.4 765.8 327.4 60.6 7.9 438.4 133.9 Other expense, net Interest expense 232.2 218.0 182.9 14.2 6.5 35.1 19.2 Other, net (2.6 ) 3.8 (22.6 ) (6.4 ) (168.4 ) 26.4 116.8 Other expense, net 229.6 221.8 160.3 7.8 3.5 61.5 38.4 Income before income taxes 596.8 544.0 167.1 52.8 9.7 376.9 225.6 Income tax expense 160.9 146.8 54.6 14.1 9.6 92.2 168.9 Net income $ 435.9 $ 397.2 $ 112.5 $ 38.7 9.7 284.7 253.1 Adjusted EBITDA $ 1,506.1 $ 1,363.4 $ 1,019.8 $ 142.7 10.5 343.6 33.7 Weighted-average common shares outstanding: Basic 154.4 154.2 149.8 0.2 0.1 4.4 2.9 Diluted 156.0 156.1 151.3 (0.1 ) (0.1 ) 4.8 3.2 Earnings per common share: Basic $ 2.82 $ 2.58 $ 0.75 $ 0.24 9.3 $ 1.83 244.0 Diluted $ 2.79 $ 2.54 $ 0.74 $ 0.25 9.8 $ 1.80 243.2 We believe that the most directly comparable GAAP measure to Adjusted EBITDA is net income.
Certain assumptions, estimates, and judgments are used in determining the fair value of net assets acquired, including goodwill and other intangible assets, as well as determining the allocation of goodwill to the reporting units. Accordingly, we may obtain the assistance of third-party valuation specialists for significant tangible and intangible assets.
Certain assumptions, estimates, and judgments are used in determining the fair value of net assets acquired, including goodwill and other intangible assets, as well as determining the allocation of goodwill to the reporting units. Accordingly, we may obtain the assistance of third-party valuation specialists for the valuation of significant tangible and intangible 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.
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.
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.
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 fully insured by third-party insurance carriers, subject to certain limitations and exclusions. We also maintain self-funded group medical insurance.
Consideration received for volume and growth rebates, annual incentives, and multi-year incentives are recorded as a reduction of cost of goods sold. We systematically and rationally allocate the consideration for these incentives to each of the underlying transactions that results in progress by the Company toward earning the incentives.
Consideration received for incentives that contain volume and growth rebates, annual incentives, and multi-year incentives are recorded as a reduction of cost of goods sold. We systematically and rationally allocate the consideration for these incentives to each of the underlying transactions that results in progress by the Company toward earning the incentives.
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.
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.
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).
Performance Food Group, Inc. 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).
Indicators of goodwill impairment include, but are not limited to, significant declines in the markets and industries that buy our products, changes in the estimated future cash flows of its reporting units, changes in capital markets, and changes in its market capitalization.
Indicators of goodwill impairment include, but are not limited to, significant declines in the markets, industries, and customers that buy our products, changes in the estimated future cash flows of its reporting units, changes in capital markets, and changes in its market capitalization.
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.
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.
We regularly analyze our significant customer accounts, and when we become aware of a specific customer’s inability to meet its financial obligations to us, such as a bankruptcy filing or a deterioration in the customer’s operating results or financial position, we record a specific reserve for bad debt to reduce the related receivable to the amount we reasonably believe is collectible.
We regularly analyze our significant customer accounts, and when we become aware of a specific customer’s inability to meet its financial obligations to us, such as bankruptcy filings or deterioration in the customer’s operating results or financial position, we record a specific reserve for bad debt to reduce the related receivable to the amount we reasonably believe is collectible.
In performing step zero for our goodwill impairment test, we are required to make assumptions and judgments, including but not limited to the following: the evaluation of macroeconomic conditions as related to our business, industry and market trends, and the overall future financial performance of our reporting units and future opportunities in the markets in which they operate.
In performing step zero for our 38 goodwill impairment test, we are required to make assumptions and judgments, including but not limited to: the evaluation of macroeconomic conditions as related to our business, industry and market trends, and the overall future financial performance of our reporting units and future opportunities in the markets in which they operate.
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 Company We market and distribute over 250,000 food and food-related products to customers across the United States from approximately 144 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.
The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain.
The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management but that are inherently uncertain.
Availability for loans and letters of credit under the ABL Facility is governed by a borrowing base, determined by the application of specified advance rates against eligible assets, including trade accounts receivable, inventory, owned real properties, and owned transportation equipment. The borrowing base is reduced quarterly by a cumulative fraction of the real properties and transportation equipment values.
Availability for loans and letters of credit under the ABL Facility is governed by a borrowing base, determined by the application of specified advance rates against eligible assets, including trade accounts receivable, inventory, owned real property, and owned transportation equipment. The borrowing base is reduced quarterly by a cumulative fraction of the real property and transportation equipment values.
Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. We are required to test goodwill and other intangible assets with indefinite lives for impairment annually or more often if circumstances indicate.
Unanticipated market or macroeconomic events and circumstances may occur, that could affect the accuracy or validity of the estimates and assumptions. We are required to test goodwill and other intangible assets with indefinite lives for impairment annually or more often if circumstances indicate.
Intangibles with definite lives are amortized on a straight-line basis over their useful lives, which generally range from two to eleven years. Annually, or when certain triggering events occur, the Company assesses the useful lives of its intangibles with definite lives.
Intangibles with definite lives are amortized on a straight-line basis over their useful lives, which generally range from two to twelve years. Annually, or when certain triggering events occur, the Company assesses the useful lives of its intangibles with definite lives.
Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statutes of limitations. Such adjustments are reflected in the tax provision as appropriate.
Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closings of statutes of limitations. Such adjustments are reflected in the tax provision as appropriate.
Such minimum estimated restricted payment capacity is calculated based on the most restrictive of our debt agreements and may fluctuate from period to period, which fluctuations may be material. Our restricted payment capacity under other debt instruments to which the Company is subject may be materially higher than the foregoing estimate.
Such minimum estimated restricted payment capacity is calculated based on the most restrictive of our debt agreements and may fluctuate from period to period, which fluctuations may be material. Our restricted payment capacity under other debt instruments to which the Company is subject may materially exceed the foregoing estimate.
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 .
Cross-segment opportunities include business development, 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 .
Under our ABL Facility and indentures, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments, and making restricted payments is tied to ratios based on Adjusted EBITDA (as defined in our ABL Facility and indentures). Our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.
Under our credit agreement and indentures, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments, and making restricted payments is tied to ratios based on Adjusted EBITDA (as defined in our credit agreement and indentures). Our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.
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.
The proceeds from the Notes due 2027 along with an offering of shares of the Company’s common stock and borrowings under a prior credit agreement, were used to fund the cash consideration for the acquisition of Reinhart Foodservice, L.L.C. and to pay related fees and expenses. The Notes due 2027 were issued at 100.0% of their par value.
(2) Includes professional fees and other costs related to completed and abandoned acquisitions, costs of integrating certain of our facilities, and facility closing costs.
(2) Includes professional fees and other costs related to in-progress, completed, and abandoned acquisitions, costs of integrating certain of our facilities, and facility closing costs.
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).
Such adjustments include certain unusual, non-cash, non-recurring, cost reduction, and other adjustment items permitted in calculating covenant compliance under our credit agreement and indentures (other than certain pro forma adjustments permitted under our credit agreement and indentures governing the Notes due 2027 and Notes due 2029 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date).
For example, EBITDA and Adjusted EBITDA: • exclude certain tax payments that may represent a reduction in cash available to us; • do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future; • do not reflect changes in, or cash requirements for, our working capital needs; and • do not reflect the significant interest expense, or the cash requirements, necessary to service our debt.
For example, Adjusted EBITDA: • excludes certain tax payments that may represent a reduction in cash available to us; • does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future; • does not reflect changes in, or cash requirements for, our working capital needs; and 28 • does not reflect the significant interest expense, or the cash requirements, necessary to service our debt.
However, in certain limited circumstances the consideration is recorded as a reduction of costs incurred by us. Consideration received may be in the form of cash and/or invoice deductions. Changes in the estimated amount of incentives to be received are treated as changes in estimates and are recognized in the period of change.
However, as described below, in certain limited circumstances the consideration is recorded as a reduction of operating expenses incurred by us. Consideration received may be in the form of cash and/or invoice deductions. Changes in the estimated amount of incentives to be received are treated as changes in estimates and are recognized in the period of change.
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.
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 our credit agreement and holders of our Notes due 2027 and Notes due 2029 in their evaluation of the operating performance of companies in industries similar to ours.
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.
In fiscal 2024, purchases of property, plant, and equipment primarily consisted of outlays for warehouse improvements and expansion, warehouse equipment, transportation equipment, and information technology. The following table presents the capital purchases of property, plant, and equipment by segment.
In calculating Adjusted EBITDA, we add back certain non-cash, non-recurring, and other items as permitted or required by our ABL Facility and indentures.
In calculating Adjusted EBITDA, we add back certain non-cash, non-recurring, and other items as permitted or required by our credit agreement and indentures.
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.
As of June 29, 2024, the Company had total purchase obligations of $229.9 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.
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”).
Senior Notes due 2029 : On July 26, 2021, Performance Food Group, Inc. issued and sold $1.0 billion aggregate principal amount of its Notes due 2029.
Borrowings under the ABL Facility bear interest, at Performance Food Group, Inc.’s option, at (a) the Base Rate (defined as the greater of (i) the Federal Funds Rate in effect on such date plus 0.5%, (ii) the Prime Rate on such day, or (iii) one month LIBOR plus 1.0%) plus a spread, or (b) LIBOR plus a spread.
Borrowings under the ABL Facility bear interest, at Performance Food Group, Inc.’s option, at (a) the Base Rate (defined as the greatest of (i) a floor rate of 0.00%, (ii) the federal funds rate in effect on such date plus 0.5%, (iii) the prime rate on such day, or (iv) one month Term SOFR plus 1.0%) plus a spread or (b) Adjusted Term SOFR plus a spread.
In addition, our management uses Adjusted EBITDA, defined as net income before interest expense, interest income, income and franchise taxes, and depreciation and amortization, further adjusted to exclude certain items that we do not consider part of our core operating results.
Adjusted EBITDA Management measures operating performance based on our Adjusted EBITDA, defined as net income before interest expense, interest income, income and franchise taxes, and depreciation and amortization, further adjusted to exclude certain items that we do not consider part of our core operating results.
The share increases in periods of increasing employment, rising disposable income, increases in the number of restaurants, and favorable demographic trends, such as smaller household sizes, an increasing number of dual income households, and an aging population base that spends more per capita at foodservice establishments.
The share increases in periods of increasing employment, rising disposable income, increases in the number of restaurants, and favorable demographic trends, such as smaller household sizes, an increasing number of dual income households, and an aging population base that spends more per capita at foodservice establishments and is adversely impacted when these factors move in the opposite direction.
In addition, beginning on August 1, 2024, Performance Food Group, Inc. may redeem all or a part of the Notes due 2029 at a redemption price equal to 102.125% of the principal amount redeemed, plus accrued and unpaid interest.
Beginning on August 1, 2024, Performance Food Group, Inc. may redeem all or part of the Notes due 2029 at a redemption price equal to 102.125% of the principal amount redeemed, plus accrued and unpaid interest. The redemption price decreases to 101.163% and 100% of the principal amount redeemed on August 1, 2025, and August 1, 2026, respectively.
Upon the occurrence of a change of control triggering event or upon the sale of certain assets in which Performance Food Group, Inc. does not apply the proceeds as required, the holders of the Notes due 2027 will have the right to require Performance Food Group, Inc. to repurchase each holder’s Notes due 2027 at a price equal to 101% (in the case of a change of control triggering event) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest.
The Notes due 2027 mature on October 15, 2027 and bear interest at a rate of 5.500% per year, payable semi-annually in arrears. 35 Upon the occurrence of a change of control triggering event or upon the sale of certain assets in which Performance Food Group, Inc. does not apply the proceeds as required, the holders of the Notes due 2027 will have the right to require Performance Food Group, Inc. to repurchase each holder’s Notes due 2027 at a price equal to 101% (in the case of a change of control triggering event) or 100% (in the case of an asset sale) of their principal amount, plus accrued and unpaid interest.
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.
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 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.
The ABL Facility and the indentures governing 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 are restricted from distribution to Performance Food Group Company, except for approximately $2,268.7 million of restricted payment capacity available under such debt agreements, as of June 29, 2024.
Leases , respectively, within the Notes to Consolidated Financial Statements included in Item 8.
Debt and Note 12. Leases , respectively, within the Notes to Consolidated Financial Statements included in Item 8.
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.
The Company values inventories at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method and last-in, first-out ("LIFO") using the link chain technique of the dollar value method. FIFO was used for approximately 65% of total inventories at June 29, 2024. We adjust our inventory balances for slow-moving, excess, and obsolete inventories.
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”).
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”). On April 19, 2024, Performance Food Group, Inc. elected to exercise its right to redeem all of its outstanding Notes due 2025.
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.
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 facilities.
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.
As of June 29, 2024, the Company was in compliance with all of the covenants under the ABL Facility and the indentures governing the Notes due 2027 and the Notes due 2029.
In addition, beginning on October 15, 2022, Performance Food Group, Inc. may redeem all or a part of the Notes due 2027 at a redemption price equal to 102.750% of the principal amount redeemed, plus accrued and unpaid interest.
Performance Food Group, Inc. may redeem all or part of the Notes due 2027 at a redemption price equal to 101.375% of the principal amount redeemed, plus accrued and unpaid interest. The redemption price decreases to 100% of the principal amount redeemed, plus accrued and unpaid interest, on October 15, 2024.
Our Convenience channel distributes candy, snacks, beverages, cigarettes, other tobacco products, food and foodservice products and other items to convenience stores across the United States and Canada. We believe that there are substantial synergies across our segments.
Our Convenience segment distributes candy, snacks, beverages, cigarettes, other tobacco products, food and foodservice related products and other items to convenience stores across North America. We believe that there are substantial synergies across our segments.
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 June 29, 2024, $210.6 million remained available for share repurchases. 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.
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.
It is anticipated that the ABL Amendment will be consummated in the first quarter of fiscal 2025. 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.
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.
Purchase obligations also include amounts committed to various capital projects in process or scheduled to be completed in the coming fiscal years. Included in the total purchase obligations above are commitments of $146.8 million for capital projects related to warehouse expansion and improvements and warehouse equipment.
The key strategies include focusing on independent sales and Performance Brands, pursuing new customers for both of our reportable segments, expansion of geographies, utilizing our infrastructure to gain further operating and purchasing efficiencies, and making strategic acquisitions.
The key strategies include focusing on independent sales and Performance Brands, pursuing new customers for our three reportable segments, expansion of geographies, utilizing our infrastructure to gain further operating and purchasing efficiencies, and making strategic acquisitions. How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of performance and financial measures.
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.
Segment Information of the consolidated financial statements in this Form 10-K. Corporate & All Other is comprised of unallocated corporate overhead and certain operations that are not considered separate reportable segments based on their size. This also includes the operations of our internal logistics unit responsible for managing and allocating inbound logistics revenue and expense.
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.
The proceeds from the Notes due 2029 were used to pay down the outstanding balance of a prior credit agreement, to redeem the 5.500% Senior Notes due 2024, and to pay the fees, expenses, and other transaction costs incurred in connection with the Notes due 2029. The Notes due 2029 were issued at 100.0% of their par value.
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.
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 2024, fiscal 2023, and fiscal 2022, we performed the step zero analysis for our goodwill impairment test and no further quantitative impairment test was deemed necessary for our reporting units within our reportable segments.
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.
The foodservice distribution industry is also sensitive to national and regional economic conditions, such as changes in consumer spending, changes in consumer confidence, changes in the rate of inflation and fuel prices, supply chain disruptions, and labor shortages. 27 • Food distribution market structure.
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.
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 acquisitions, goodwill and other intangible assets.
This increase in net income was attributable to the $126.7 million increase in operating profit and an increase in other income, partially offset by increases in interest expense and income tax expense. The increase in other income primarily relates to realized and unrealized gains on fuel hedging instruments.
Net Income Net income increased $38.7 million, or 9.7% for fiscal 2024 compared to fiscal 2023 due to the $60.6 million increase in operating profit and an increase in other income, partially offset by increases in income tax expense and interest expense. The increase in other income primarily relates to realized and unrealized gains on fuel hedging instruments.
In the second quarter of fiscal 2022, the Company changed its operating segments to reflect the manner in which the business is managed. 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.
Based on the Company’s organization structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company has three reportable segments: Foodservice, Vistar, and Convenience.
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.
The following table summarizes outstanding borrowings, availability, and the average interest rate under the ABL Facility: (Dollars in millions) As of June 29, 2024 As of July 1, 2023 Aggregate borrowings $ 1,160.8 $ 1,154.0 Letters of credit 160.4 172.2 Excess availability, net of lenders’ reserves of $96.3 and $99.7 2,678.8 2,673.8 Average interest rate, excluding impact of interest rate swaps 6.79 % 6.35 % 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.
On September 17, 2021, PFGC and Performance Food Group, Inc. entered into the Fifth Amended and Restated Credit Agreement (the “ABL Facility”) with Wells Fargo Bank, National Association, as Administrative Agent and Collateral Agent, and the other lenders party thereto, which amended the Prior Credit Agreement.
(“PFGC”), a wholly-owned subsidiary of the Company, and Performance Food Group, Inc., a wholly-owned subsidiary of PFGC, are parties to the Fifth Amended and Restated Credit Agreement dated September 17, 2021, as amended by the First Amendment to the Fifth Amended and Restated Credit Agreement, dated April 17, 2023 (as amended, the “ABL Facility”), with Wells Fargo Bank, National Association, as Administrative Agent and Collateral Agent, and the other lenders party thereto.
In addition, targets based on Adjusted EBITDA are among the measures we use to evaluate our management’s performance for purposes of determining their compensation under our incentive plans. EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.
In addition, targets based on Adjusted EBITDA are among the measures we use to evaluate our management’s performance for purposes of determining their compensation under our incentive plans.
How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures used by our management are discussed below. The percentages on the results presented below are calculated based on rounded numbers.
The key measures used by our management are discussed below. The percentages on the results presented below are calculated based on rounded numbers.
At July 2, 2022, our cash balance totaled $18.7 million, including restricted cash of $7.1 million, as compared to a cash balance totaling $22.2 million, including restricted cash of $11.1 million, at July 3, 2021.
At June 29, 2024, our cash balance totaled $27.7 million, including restricted cash of $7.7 million, as compared to a cash balance totaling $20.0 million, including restricted cash of $7.3 million, at July 1, 2023.
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.
Operating Activities Fiscal year ended June 29, 2024 compared to fiscal year ended July 1, 2023 During fiscal 2024 and fiscal 2023, our operating activities provided cash flow of $1,163.0 million and $832.1 million, respectively.
Also, gross profit increased due to an increase in the gross profit per case driven by case growth in Foodservice, particularly in the independent channel. Independent customers typically receive more services from us, cost more to serve, and pay a higher gross profit per case than other customers.
The increase in gross profit was primarily driven by cost of goods sold optimization through procurement efficiencies, as well as growth in cases sold, including growth in the independent channel and Performance Brands, and recent acquisitions. Independent customers typically receive more services from us, cost more to serve, and pay a higher gross profit per case than other customers.
Income Taxes We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes—Overall , which requires the use of the asset and liability method of accounting for deferred income taxes.
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. 37 Income Taxes We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes—Overall , which requires the use of the asset and liability method of accounting for deferred income taxes.
Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes. EBITDA and Adjusted EBITDA Management measures operating performance based on our EBITDA, defined as net income before interest expense, interest income, income taxes, and depreciation and amortization.
Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes.
Accounts Receivable Accounts receivable are primarily comprised of trade receivables from customers in the ordinary course of business, are recorded at the invoiced amount, and primarily do not bear interest. Receivables are recorded net of the allowance for doubtful accounts on the accompanying consolidated balance sheets. We evaluate the collectability of our accounts receivable based on a combination of factors.
Receivables are recorded net of the allowance for credit losses on the accompanying consolidated balance sheets. We evaluate the collectability of our accounts receivable based on a combination of factors.
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.
These investments consisted primarily of capital purchases of property, plant, and equipment of $395.6 million and $269.7 million for fiscal years 2024 and 2023, respectively, along with net cash paid for recent acquisitions of $307.7 million and $63.8 million for fiscal years 2024 and 2023, respectively.
Securing new and expanding business with independent customers resulted in organic independent case growth of 11.8% in fiscal 2022 compared to the prior year. Excluding the impact of the 53 rd week, organic independent case growth was 14.4% compared to the prior year. For fiscal 2022, independent sales as a percentage of total segment sales were 38.2%.
This increase in net sales was driven by case volume growth, including growth in our independent and Chain business. Securing new and expanding business with independent customers resulted in organic independent case growth of 6.0% in fiscal 2024 compared to the prior fiscal year. For fiscal 2024, independent sales as a percentage of total segment sales were 39.5%.
We accrue our estimated liability for these deductibles, including an estimate for incurred but not reported claims, based on known claims and past claims history. The estimated short-term portion of these accruals is included in Accrued expenses on our consolidated balance sheets, while the estimated long-term portion of the accruals is included in Other long-term liabilities.
We accrue our estimated liability for these deductibles, including an estimate, calculated with the assistance of third party actuaries, for incurred but not reported claims, based on known claims and past claims history.
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.
The overall rate of product cost inflation was approximately 0.2% for fiscal 2024. Segment Adjusted EBITDA Adjusted EBITDA for Foodservice increased $57.6 million, or 6.1%, from fiscal 2023 to fiscal 2024. This increase was the result of an increase in gross profit, partially offset by an increase in operating expenses.
Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 Net Sales Net sales for Foodservice increased $5.1 billion, or 30.8%, from fiscal 2020 to fiscal 2021.
Segment Results—Vistar Fiscal year ended June 29, 2024 compared to fiscal year ended July 1, 2023 Net Sales Net sales for Vistar increased $240.5 million, or 5.3%, from fiscal 2023 to fiscal 2024.
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.
Future tax benefits, including net operating loss carryforwards, are recognized to the extent that realization of such benefits is more likely than not. Investment tax credits are recognized as a reduction of income tax expense.
Performance Food Group, Inc. may redeem all or a part of the Notes due 2029 at any time prior to August 1, 2024, at a redemption price equal to 100% of the principal amount of the Notes due 2029 being redeemed plus a make-whole premium and accrued and unpaid interest, if any, to, but not including, the redemption date.
Performance Food Group, Inc. redeemed the Notes due 2025 on May 1, 2024 (the “Redemption Date”) at a redemption price equal to 100% of the aggregate principal amount of the Notes due 2025, plus accrued and unpaid interest thereon to, but not including, the Redemption Date, in accordance with the terms and conditions set forth in the indenture governing the Notes due 2025.
The increase in net sales was driven by the Reinhart acquisition and an increase in selling price per case as a result of inflation, as well as the 53 rd week in fiscal 2021. Net sales for the extra week in fiscal 2021 were approximately $484.3 million.
The increase in net sales was primarily driven by an increase in selling price per case as a result of inflation and an acquisition in the second quarter of fiscal 2024. The overall rate of product cost inflation was 5.8% for fiscal 2024.
An increase in cases sold and an increase in gross profit per case also contributed to the increase in gross profit. The increase in gross profit per case was driven by a favorable shift in the mix of cases sold, including more Performance Brands products sold to independent customers.
The increase in gross profit was driven by a favorable shift in the mix of cases sold and growth in cases sold, including more Performance Brands products sold to independent customers. 31 Operating expenses impacting Foodservice’s Adjusted EBITDA increased by $148.8 million, or 5.1%, from fiscal 2023 to fiscal 2024.
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.
During this period, this segment increased its property, plant, and equipment, operating lease right-of-use assets, and accounts receivable, partially offset by a decrease in intangible assets. Total assets for Vistar increased $226.4 million from $1,292.7 million as of July 1, 2023 to $1,519.1 million as of June 29, 2024.
The increase in interest expense was primarily the result of an increase in average borrowings outstanding, partially offset by a decrease in the average interest rate during fiscal 2022 compared to fiscal 2021. The Company reported income tax expense of $54.6 million for fiscal 2022 compared to $14.0 million for fiscal 2021.
The increase in interest expense was primarily the result of an increase in the average interest rate in fiscal 2024 compared to the prior fiscal year. The Company reported income tax expense of $160.9 million for fiscal 2024 compared to $146.8 million for fiscal 2023.
(3) Consists primarily of amounts related to fuel collar derivatives, certain financing transactions, lease amendments, legal settlements, franchise tax expense, insurance proceeds, and other adjustments permitted by our ABL Facility. 26 Consolidated Results of Operations Fiscal year ended July 2, 2022 compared to fiscal year ended July 3, 2021 Net Sales Net sales growth is primarily a function of acquisitions, case growth, pricing (which is primarily based on product inflation/deflation), and a changing mix of customers, channels, and product categories sold.
Consolidated Results of Operations Fiscal year ended June 29, 2024 compared to fiscal year ended July 1, 2023 Net Sales Net sales growth is primarily a function of acquisitions, case growth, pricing (which is primarily based on product inflation/deflation), and a changing mix of customers, channels, and product categories sold.
Based on the Company’s organization structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company's three reportable segments are: Foodservice, Vistar, and Convenience. Management evaluates the performance of these segments based on various operating and financial metrics, including their respective sales growth and EBITDA.
Management evaluates the performance of these segments based on various operating and financial metrics, including their respective sales growth and Segment Adjusted EBITDA, which is the Company’s GAAP measure of segment profit.
Fiscal year ended July 3, 2021 compared to fiscal year ended June 27, 2020 Net Sales Net sales for Convenience increased $773.4 million, or 14.9%, from fiscal 2020 to fiscal 2021. Net sales for fiscal 2021 included $1.2 billion related to tobacco excise taxes, as compared to $1.1 billion for fiscal 2020.
Segment Results—Convenience Fiscal year ended June 29, 2024 compared to fiscal year ended July 1, 2023 Net Sales Net sales for Convenience increased $57.4 million, or 0.2% from fiscal 2023 to fiscal 2024.
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. 36 Senior Notes due 2027 : On September 27, 2019, PFG Escrow Corporation (the “Escrow Issuer”), a wholly-owned subsidiary of PFGC, issued and sold $1,060.0 million aggregate principal amount of its 5.500% Senior Notes due 2027 (the “Notes due 2027”).
Senior Notes due 2027 : On September 27, 2019, PFG Escrow Corporation (which subsequently merged with and into Performance Food Group, Inc.), issued and sold $1,060.0 million aggregate principal amount of its 5.500% Senior Notes due 2027 (the “Notes due 2027”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+0 added−1 removed3 unchanged
Biggest changeAs 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.
Biggest changeAs of June 29, 2024, we had collars in place for approximately 21% of the gallons we expect to use over the twelve months following June 29, 2024. Any changes in fair value are recorded in the period of the change as unrealized gains or losses on fuel hedging instruments within Other, net in the consolidated statements of operations.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction impacts earnings.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction impacts earnings.
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 or swap arrangements.
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 or swap arrangements.
As discussed above, this increase in fuel costs would be partially offset by fuel surcharges passed through to our customers. 41
As discussed above, this increase in fuel costs would be partially offset by fuel surcharges passed through to our customers. 40
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.
A hypothetical 100 bps increase in SOFR on our variable-rate debt would lead to an increase of approximately $9.2 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.
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.
Assuming an average daily balance on our ABL Facility of approximately $1.2 billion, approximately $242.9 million of our outstanding long-term debt is fixed through interest rate swap agreements over the next 12 months and approximately $0.9 billion represents variable-rate debt.
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.
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 39 $27.8 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 gains of approximately $7.7 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 $8.3 million will be reclassified as a decrease to interest expense.
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.
As of June 29, 2024, our subsidiary, Performance Food Group, Inc., had three interest rate swaps with a combined notional value of $500.0 million that were designated as cash flow hedges of interest rate risk. See Note 9.
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.
Based on the fair values of these interest rate swaps as of June 29, 2024, a hypothetical 100 bps decrease in SOFR would result in a loss of $5.4 million and a hypothetical 100 bps increase in SOFR would result in a gain of $5.3 million within accumulated other comprehensive income.
Any changes in fair value are recorded in the period of the change as unrealized gains or losses on fuel hedging instruments. A hypothetical 10% increase or decrease in expected diesel fuel prices would result in an immaterial gain or loss for these derivative instruments. Our fuel purchases occur at market prices.
A hypothetical 10% increase or decrease in expected diesel fuel prices would result in an immaterial gain or loss for these derivative instruments. Our fuel purchases occur at market prices.
Removed
Subsequent 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.

Other PFGC 10-K year-over-year comparisons