Performance Food Group Co

Previous wording

Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations

Current wording

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Previous wording

The following includes a comparison of our consolidated results of operations, our segment results and financial position for fiscal years 2025 and 2024. For a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2024 and 2023, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended June 29, 2024, filed with the SEC on August 14, 2024, which remains materially consistent with the recast prior period results disclosed herein reflecting the updates made to our reportable segments in the third quarter of fiscal 2025 discussed below.

Current wording

The following includes a comparison of our consolidated results of operations, our segment results and financial position for fiscal years 2026 and 2025. For a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2025 and 2024, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended June 28, 2025, filed with the SEC on August 13, 2025.

Previous wording

We market and distribute over 250,000 food and food-related products to customers across the United States from approximately 155 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 product assortment ranges from “center-of-the-plate” items (such as beef, pork, poultry, and seafood), frozen foods, and groceries to candy, snacks, and beverages. We also sell disposables, cleaning and kitchen supplies, and related products used by our customers, as well as cigarettes and other nicotine 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.

Current wording

We market and distribute over 300,000 food and food-related products to customers across the United States from approximately 154 distribution facilities to over 350,000 customer locations in the food-away-from-home industry. We offer our customers a broadline assortment of products including our proprietary-branded products, nationally branded products, and products bearing our customers’ brands. Our product assortment ranges from “center-of-the-plate” items (such as beef, pork, poultry, and seafood), frozen foods, and groceries to candy, snacks, and beverages. We also sell disposables, cleaning and kitchen supplies, and related products used by our customers, as well as cigarettes and alternative nicotine 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.

Previous wording

Based on the Company’s organizational structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company has three reportable segments: Foodservice, Convenience, and Specialty. Our Foodservice segment distributes a broad line of national brands, customer brands, and our proprietary-branded food and food-related products, or “Performance Brands.” Foodservice sells to independent and multi-unit chain restaurants and other institutions such as schools, healthcare facilities, business and industry locations, and retail establishments. Our chain customers are multi-unit restaurants with five or more locations and include some of the most recognizable family and casual dining restaurant chains. Our Convenience segment distributes candy, snacks, beverages, cigarettes, other nicotine products, food and foodservice related products and other items to convenience stores across North America. Our Specialty segment distributes candy, snacks, beverages, and other food items nationally to vending, office coffee service, theater, retail, and other channels and utilizes third-party carriers to deliver direct to consumers for our supplier partners and to our customers whose order sizes are too small to be served effectively by our truck network. We believe our diverse segments provide substantial opportunities for cross-segment collaboration to better serve our customers, including 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.

Current wording

Based on the Company’s organizational structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company has three reportable segments: Foodservice, Convenience, and Specialty. Our Foodservice segment distributes a broadline assortment of products under national brands, customer brands, and our Performance Brands. Foodservice sells to independent and multi-unit chain restaurants and other institutions such as schools, healthcare facilities, business and industry locations, and retail establishments. Our chain customers are multi-unit restaurants with five or more locations and include some of the most recognizable family and casual dining restaurant chains. Our Convenience segment distributes candy, snacks, beverages, cigarettes, alternative nicotine products, food and foodservice-related products and other items to convenience stores across North America. Our Specialty segment distributes candy, snacks, and beverages as well as fresh and frozen perishable foods and other non-food items nationally to vending and office coffee service distributors as well as direct to consumer locations, including retailers, entertainment venues, and theaters, and provides small parcel “pick and pack” capabilities, including fulfillment of ambient, frozen, fresh and temperature sensitive items, utilizing third-party carriers to deliver order sizes too small to be served effectively by our fleet network. We believe our diverse segments provide substantial opportunities for cross-segment collaboration to better serve our customers, including 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.

Previous wording

Our business, our industry and the economy are influenced by a number of general macroeconomic factors, including, but not limited to, reduced demand for our products related to unfavorable macroeconomic conditions triggered by developments beyond our control, including geopolitical dynamics and other events that trigger economic volatility or negatively affect consumer confidence and discretionary spending. We continue to actively monitor the impacts of the evolving macroeconomic and geopolitical landscape, including rapidly evolving tariff and global trade policies, on all aspects of our business. The Company and our industry may face challenges related to uncertain economic conditions and heightened uncertainty in the financial markets, inflationary pressure, an uncertain political environment, supply chain disruptions, and lower disposable incomes due to macroeconomic conditions. Although rapidly evolving tariff and global trade policies caused increased uncertainty in the second half of fiscal 2025, we saw little impact to our results in fiscal 2025. However, the extent and duration of the tariffs and the resulting future impact on general economic conditions and our future financial position, liquidity, and results of operations remains uncertain. Sustained macroeconomic challenges, whether due to tariffs or otherwise, could negatively affect consumer discretionary spending decisions within our customers’ establishments, which could negatively impact our sales and profitability.

Current wording

Our business, our industry and the economy are subject to a number of macroeconomic conditions triggered by developments beyond our control, which can result in reduced demand for our products. The Company and our industry may face challenges related to geopolitical dynamics and other events, which can drive economic volatility, market uncertainty, inflationary pressure, supply chain disruptions, or lower disposable incomes, negatively affecting consumer confidence and discretionary spending. We continue to actively monitor the impacts of the evolving macroeconomic and geopolitical landscape, including dynamic tariff and global trade policies, recovery of any potential tariff refunds, and recent geopolitical events (including the ongoing conflicts in Ukraine and the Middle East), on all aspects of our business. Although we saw little impact from tariffs on our results during fiscal 2026, rapidly evolving tariff and global trade policies and geopolitical dynamics continued to cause uncertainty throughout fiscal 2026. Additionally, recent hostilities and geopolitical tensions, such as the conflict in the Middle East, contributed to significantly higher fuel prices in fiscal 2026. To the extent increasing fuel expenses are not able to be offset by (i) diesel fuel surcharges (which are generally recognized on a one-month lag following changes in fuel prices) and/or (ii) gains on derivative instruments, prolonged high fuel prices could adversely affect our business, financial condition, or results of operations. Further, sustained macroeconomic challenges, whether due to tariffs, rising fuel prices, or otherwise, have in the past and could in the future negatively affect consumer discretionary spending decisions within our customers’ establishments, which could negatively impact our sales and profitability. For further information on the risks posed to our business, please see Item 1A. Risk Factors of this Form 10-K.

Previous wording

Changing demographic and macroeconomic trends. Excluding the peak years of the COVID-19 pandemic, the share of consumer spending captured by the food-away-from-home industry has increased steadily for several decades. 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. 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.

Current wording

Changing demographic and macroeconomic trends. Excluding the peak years of the COVID-19 pandemic, the share of consumer spending captured by the food-away-from-home industry has increased steadily for several decades. 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. The food-away-from-home 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.

Previous wording

Our ability to successfully execute our segment strategies and implement our initiatives. Our performance will continue to depend on our ability to successfully execute our segment strategies and to implement our current and future initiatives. 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.

Current wording

Our ability to successfully execute our segment and corporate strategies and implement our initiatives. Our performance will continue to depend on our ability to successfully execute our segment and corporate strategies and to implement our current and future initiatives. 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 and technology to gain further operating and purchasing efficiencies, and making strategic acquisitions.

Previous wording

Case volume represents the volume of products sold to customers during a given period of time. Case growth is calculated by dividing the increase (decrease) in the case volumes sold year-over-year by the number of cases sold in the prior year. We define a case as the lowest level of packaged products as received from our suppliers, with one case containing several individually packaged units of the same product. Where individual packaged units are sold separately, case volume is calculated using the case equivalent quantity sold. Case growth provides useful information to management and investors in evaluating sales performance and as an indicator of gross margin performance. In our assessment of sales performance, management utilizes total case growth, as well as organic case growth, which excludes acquisition-related growth until the acquired business has been reflected in our results of operations for at least 12 months. While overall case growth reflects a key component of sales growth, case growth by customer type provides additional context around gross profit performance. Management also reviews case volume growth by customer type, with distinction between Foodservice independent and chain customers, as this provides a measure of gross profit performance due to the pricing strategies and product mix differences associated with each customer type.

Current wording

Case volume represents the volume of products sold to customers during a given period of time. Case growth is calculated by dividing the increase (decrease) in the case volumes sold year-over-year by the number of cases sold in the prior year. We define a case as the lowest level of packaged products as received from our suppliers, with one case containing several individually packaged units of the same product. Where individual packaged units are sold separately, case volume is calculated using the case equivalent quantity sold. Case growth provides useful information to management and investors in evaluating sales performance and as an indicator of gross margin performance. In our assessment of sales performance, management utilizes total case growth, as well as organic case growth, which excludes acquisition-related growth until the acquired business has been reflected in our results of operations for at least 12 months. Management also reviews case volume growth by customer type, with distinction between Foodservice independent and chain customers, as this provides a measure of gross profit performance due to the pricing strategies and product mix differences associated with each customer type.

Previous wording

Net sales is equal to gross sales, plus excise taxes, minus sales returns; minus sales incentives that we offer to our customers, such as rebates and discounts that are offsets to gross sales; and certain other adjustments. Our net sales are driven by changes in case volumes, product inflation that is reflected in the pricing of our products, mix of products sold, and acquisitions.

Current wording

Net sales is equal to gross sales, plus excise taxes, minus sales returns; minus sales incentives that we offer to our customers, such as rebates and discounts that are offsets to gross sales; and certain other adjustments. Our net sales are driven by changes in case volumes, product inflation or deflation that is reflected in the pricing of our products, mix of products sold, and acquisitions.

Previous wording

Gross profit is equal to our net sales minus our cost of goods sold. Cost of goods sold primarily includes inventory costs (net of supplier consideration) and inbound freight. Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes.

Current wording

Gross profit is equal to our net sales minus our cost of goods sold. Cost of goods sold primarily includes inventory costs (net of vendor rebates and promotional incentives), inbound freight, and remittances of excise tax. Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes.

Previous wording

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. Such adjustments include certain unusual, non-cash, non-recurring, cost reduction, or 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 2027, Notes due 2029, and Notes due 2032 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date). 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 the ABL Facility and indentures). Our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.

Current wording

Management measures operating performance based on our Adjusted EBITDA, defined as net income before interest expense, interest income, income taxes, and depreciation and amortization, further adjusted to exclude certain items that we do not consider part of our core operating results. Such adjustments include certain unusual, non-cash, non-recurring, cost reduction, or 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 2029, Notes due 2032, and Notes due 2034 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date). 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 the ABL Facility and indentures). Our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.

Previous wording

Includes increases in the last-in-first-out (“LIFO”) reserve of $6.6 million for Foodservice and $81.5 million for Convenience for fiscal 2025 compared to increases of $3.8 million for Foodservice and $58.5 million for Convenience for fiscal 2024 and a decrease of $19.2 million for Foodservice and an increase of $58.4 million for Convenience for fiscal 2023.

Current wording

Includes increases in the last-in-first-out (“LIFO”) reserve of $4.4 million for Foodservice and $96.7 million for Convenience for fiscal 2026 compared to increases of $6.6 million for Foodservice and $81.5 million for Convenience for fiscal 2025 and increases of $3.8 million for Foodservice and $58.5 million for Convenience for fiscal 2024.

Previous wording

Includes a $3.8 million gain on the sale of a Foodservice warehouse facility for fiscal year 2025 and an $8.1 million gain on the sale of a Foodservice warehouse facility for fiscal year 2024, as well as amounts related to favorable and unfavorable leases, litigation-related accruals, severance, franchise tax expense, insurance proceeds due to hurricane and other weather related events, foreign currency transaction gains and losses, gains and losses on disposals of other fixed assets, and other adjustments permitted by our ABL Facility.

Current wording

Includes a $3.8 million gain on the sale of a Foodservice warehouse facility in fiscal 2025 and an $8.1 million gain on the sale of a Foodservice warehouse facility in fiscal 2024, as well as amounts related to certain litigation-related accruals, professional fees related to the modification of debt, franchise tax expense, gains and losses on disposals of fixed assets, foreign currency transaction gains and losses, insurance proceeds due to hurricane and other weather-related events, favorable and unfavorable leases, and other adjustments permitted by our ABL Facility. Additionally, for the fiscal year ended June 27, 2026, Other adjustments includes $20.2 million of legal and professional fees incurred in connection with shareholder activism and the clean team agreement with US Foods Holding Corp.

Previous wording

The increase in net sales was driven by recent acquisitions, including the Cheney Brothers Acquisition, an increase in cases sold, including a favorable shift in mix of cases sold, and an increase in selling price per case as a result of inflation. Total case volume increased 8.5% during fiscal 2025 compared to fiscal 2024. Total organic case volume increased 2.1% in fiscal 2025 compared to the prior fiscal year. Total organic case volume benefited from a 4.6% increase in organic independent cases sold during fiscal 2025, including growth in Performance Brands cases and growth in cases sold to Foodservice's chain business. The overall rate of product cost inflation was approximately 4.7% for fiscal 2025.

Current wording

Net sales growth is primarily a function of acquisitions, case growth, pricing, including product inflation/deflation, and a changing mix of customers, channels, and product categories sold. Net sales increased $4.5 billion, or 7.2%, in fiscal 2026 compared to fiscal 2025, primarily driven by an increase in organic cases sold, including a favorable shift in mix of cases sold, acquisitions, including the acquisition of Cheney Bros., Inc. (the “Cheney Brothers Acquisition”), and an increase in selling price per case as a result of inflation. Total case volume increased 5.1% during fiscal 2026 compared to fiscal 2025. Total organic case volume increased 2.8% in fiscal 2026 compared to the prior fiscal year. Total organic case volume benefited from a 5.9% increase in organic independent cases sold during fiscal 2026, including growth in Performance Brands cases and growth in cases sold to Foodservice’s chain business. The overall rate of product cost inflation was approximately 4.5% for fiscal 2026.

Previous wording

Net income decreased $95.7 million, or 22.0%, for fiscal 2025 compared to fiscal 2024 driven by an increase in depreciation and amortization and interest expense primarily related to recent acquisitions, partially offset by a decrease in income tax expense and gross profit contributions from recent acquisitions. The increase in interest expense was primarily the result of an increase in the average borrowings, including finance lease obligations, during fiscal 2025 compared to the prior fiscal year.

Current wording

Net income increased $19.1 million, or 5.6%, for fiscal 2026 compared to fiscal 2025 primarily driven by increases in gross profit and other income due to gains on fuel collars, partially offset by increases in operating expenses and interest expense. The increase in interest expense was primarily the result of an increase in the average borrowings, including finance lease obligations, during fiscal 2026 compared to the prior fiscal year.

Previous wording

The Company reported income tax expense of $118.6 million for fiscal 2025 compared to $160.9 million for fiscal 2024. Our effective tax rate for fiscal 2025 was 25.8% compared to 27.0% for the prior fiscal year. The effective tax rate differed from the prior year primarily due to an increase in benefit from stock-based compensation and an increase in income tax credits net of valuation allowance established, partially offset by an increase in non-deductible expenses and an increase in state taxes as a percentage of income.

Current wording

The Company reported income tax expense of $126.5 million for fiscal 2026 compared to $118.6 million for fiscal 2025. Our effective tax rate for fiscal 2026 was 26.0% compared to 25.8% for the prior fiscal year. The effective tax rate differed from the prior year primarily due to a decrease in income tax credits net of valuation allowance established, partially offset by state income tax credits and favorable tax planning initiatives.

Previous wording

In the third quarter of fiscal 2025, the Company updated its operating segments to reflect the manner in which the business is managed. The Company continues to have three reportable segments: Foodservice, Convenience, and Specialty (formerly Vistar). 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. Segment Adjusted EBITDA is defined as net income before interest expense, interest income, income taxes, depreciation, and amortization and excludes certain items that the Company does not consider part of its segments’ core operating results, including stock-based compensation expense, changes in the LIFO reserve, acquisition, integration and reorganization expenses, and gains and losses related to fuel derivatives. The presentation and amounts for the fiscal years ended June 29, 2024 and July 1, 2023 have been recast to reflect these segment changes. See Note 19. Segment Information of the consolidated financial statements in this Form 10-K.

Current wording

Based on the Company’s organizational structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company has three reportable segments: Foodservice, Convenience, and Specialty. 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. Segment Adjusted EBITDA is defined as net income before interest expense, interest income, income taxes, depreciation, and amortization and excludes certain items that the Company does not consider part of its segments’ core operating results, including stock-based compensation expense, changes in the LIFO reserve, acquisition, integration and reorganization expenses, and gains and losses related to fuel derivatives. See Note 19. Segment Information of the consolidated financial statements in this Form 10-K.

Previous wording

Corporate & All Other is comprised of unallocated corporate overhead and certain operations that are not considered separate reportable segments based on their size.

Current wording

Corporate & All Other is comprised of unallocated corporate overhead and certain operations that are not considered separate reportable segments based on their size. Corporate & All Other may also include capital expenditures for certain information technology projects that are transferred to the segments once placed in service.

Previous wording

Net sales for Foodservice increased $4.6 billion, or 15.8%, from fiscal 2024 to fiscal 2025. This increase in net sales was driven by recent acquisitions, an increase in selling price per case as a result of inflation, and case volume growth, including growth in our independent and chain business. The Cheney Brothers Acquisition contributed $2.7 billion to net sales in fiscal 2025. Total case growth for Foodservice was 12.7% from fiscal 2024 to fiscal 2025. Total independent case growth was 16.9% in fiscal 2025 compared to the prior fiscal year driven by recent acquisitions. Securing new and expanding business with independent customers resulted in organic independent case growth of 4.6% in fiscal 2025 compared to the prior fiscal year. For fiscal 2025, independent sales as a percentage of total segment sales were 40.6%.

Current wording

Net sales for Foodservice increased $2.9 billion, or 8.7%, from fiscal 2025 to fiscal 2026 driven primarily by acquisitions, including the Cheney Brothers Acquisition, in addition to organic case volume growth and an increase in selling price per case as a result of inflation. The Cheney Brothers Acquisition contributed $3.7 billion in net sales for fiscal 2026 compared to $2.7 billion for fiscal 2025. Total case growth for Foodservice was 6.6% in fiscal 2026 compared to the prior fiscal year. Total independent case growth was 10.2% in fiscal 2026 compared to the prior fiscal year. Securing new, and expanding business with, independent customers resulted in organic independent case growth of 5.9% in fiscal 2026 compared to the prior fiscal year. For fiscal 2026, independent sales as a percentage of total Foodservice sales were 42.1%.

Previous wording

Adjusted EBITDA for Foodservice increased $239.4 million, or 24.4%, from fiscal 2024 to fiscal 2025. This increase was the result of an increase in gross profit, partially offset by an increase in operating expenses. Gross profit contributing to Foodservice’s Adjusted EBITDA increased $805.6 million, or 19.7% in fiscal 2025 compared to the prior fiscal year. The increase in gross profit was driven by recent acquisitions, including the Cheney Brothers Acquisition, a favorable shift in the mix of cases sold, and growth in cases sold, including more Performance Brands products sold to our independent customers. The Cheney Brothers Acquisition contributed $485.0 million to Foodservice’s gross profit impacting Adjusted EBITDA in fiscal 2025.

Current wording

Adjusted EBITDA for Foodservice increased $71.4 million, or 5.8%, from fiscal 2025 to fiscal 2026. This increase was the result of an increase in gross profit, partially offset by an increase in operating expenses. Gross profit contributing to Foodservice’s Adjusted EBITDA increased $500.9 million, or 10.2% in fiscal 2026 compared to the prior fiscal year primarily due to acquisitions, including the Cheney Brothers Acquisition, growth in cases sold, and a favorable shift in mix of cases sold, including more Performance Brands products sold to our independent customers. The Cheney Brothers Acquisition contributed an additional $142.8 million of gross profit impacting Adjusted EBITDA in fiscal 2026. Operating expenses impacting Foodservice’s Adjusted EBITDA increased by $430.7 million, or 11.7%, from fiscal 2025 to fiscal 2026 primarily as a result of a $181.9 million increase in personnel expenses related to salaries and wages, commissions, and benefits, additional operating expenses as a result of acquisitions, including $123.5 million related to the Cheney Brothers Acquisition, a $35.5 million increase in fuel expense due to higher fuel prices and miles driven as a result of new business, and a $28.2 million increase in insurance expense related to auto insurance and workers’ compensation.

Previous wording

We have historically financed our operations and growth primarily with cash flows from operations, borrowings under our ABL Facility, operating and finance leases, and normal trade credit terms. We have typically funded our acquisitions with additional borrowings under our ABL Facility or with the net proceeds from the issuances of senior notes. Our borrowing levels are subject to seasonal fluctuations, as well as procurement and acquisition activities. We borrow under our credit facility or pay it down regularly based on our cash flows from operating and investing activities. Our practice is to minimize interest expense while maintaining reasonable liquidity.

Current wording

We have historically financed our operations and growth primarily with cash flows from operations, borrowings under our ABL Facility, operating and finance leases, and normal trade credit terms. We have typically funded our acquisitions with additional borrowings under our ABL Facility and occasionally with the net proceeds from the issuances of senior notes and/or equity. Our borrowing levels are subject to seasonal fluctuations, as well as procurement and acquisition activities. We borrow under our ABL Facility or pay it down regularly based on our cash flows from operating and investing activities. Our practice is to minimize interest expense while maintaining sufficient liquidity.

Previous wording

We are exposed to interest rate risk related to changes in interest rates for borrowings under our ABL Facility. To add stability to interest expense and manage our exposure to interest rate movements, we enter into interest rate swap agreements. These swaps are designated as cash flow hedges and involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments. As of June 28, 2025, $150.0 million of the outstanding ABL Facility balance is currently hedged under interest rate swaps, which results in 68% of our total debt outstanding, including finance lease obligations, being fixed-rate debt.

Current wording

We are exposed to interest rate risk related to changes in interest rates for borrowings under our ABL Facility. To add stability to interest expense and manage our exposure to interest rate movements, we enter into interest rate swap agreements. These swaps are designated as cash flow hedges and involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments. As of June 27, 2026, $150.0 million of the outstanding ABL Facility balance is hedged under interest rate swaps, which results in 73% of our total debt outstanding, including finance lease obligations, being fixed-rate debt.

Previous wording

On May 27, 2025, the Board of Directors authorized a new share repurchase program for up to $500 million of the Company’s outstanding common stock. This authorization replaces the previously authorized $300 million share repurchase program. The new share repurchase program has an expiration date of May 27, 2029. Repurchases of the Company’s outstanding common stock will be made in accordance with applicable securities laws and may be made at management’s discretion from time to time in the open market, through privately negotiated transactions or otherwise, including pursuant to Rule 10b5-1 trading plans. The share repurchase program may be amended, suspended or discontinued at any time at the Board’s discretion, and does not commit the Company to repurchase any specified number of shares of its common stock. The actual timing, number and value of the shares to be purchased under the program will be determined by the Company at its discretion and will depend on a number of factors, including the performance of the Company’s stock price, general market and other conditions, applicable legal requirements and compliance with the terms of the Company’s outstanding indebtedness. As of June 28, 2025, $500 million remained available for additional share repurchases under the program.

Current wording

On May 27, 2025, the Board of Directors authorized a new share repurchase program for up to $500 million of the Company’s outstanding common stock. This authorization replaced the previously authorized $300 million share repurchase program. The new share repurchase program has an expiration date of May 27, 2029. Repurchases of the Company’s outstanding common stock will be made in accordance with applicable securities laws and may be made at management’s discretion from time to time in the open market, through privately negotiated transactions or otherwise, including pursuant to Rule 10b5-1 trading plans. The share repurchase program may be amended, suspended or discontinued at any time at the Board’s discretion, and does not commit the Company to repurchase any specified number of shares of its common stock. The actual timing, number and value of the shares to be purchased under the program will be determined by the Company at its discretion and will depend on a number of factors, including the performance of the Company’s stock price, general market and other conditions, applicable legal requirements and compliance with the terms of the Company’s outstanding indebtedness. During the fiscal year ended June 27, 2026, the Company repurchased and subsequently retired less than 0.1 million shares of common stock, for a total of $1.5 million or an average cost of $83.12 per share. As of June 27, 2026, $498.5 million remained available for additional share repurchases under the program.

Previous wording

In November 2022, the Board of Directors authorized a share repurchase program for up to $300 million of the Company’s outstanding common stock. Under this share repurchase program, during the fiscal year ended June 28, 2025, the Company repurchased and subsequently retired 0.8 million shares of common stock, for a total cost of $57.6 million or an average cost of $75.53 per share. During the fiscal year ended June 29, 2024, the Company repurchased and subsequently retired 1.3 million shares of common stock, for a total cost of $78.1 million or an average cost of $58.83 per share. During the fiscal year ended July 1, 2023, the Company repurchased and subsequently retired 0.2 million shares of common stock, for a total cost of $11.2 million or an average cost of $56.06 per share.

Current wording

Under the previous share repurchase program, during the fiscal year ended June 28, 2025, the Company repurchased and subsequently retired 0.8 million shares of common stock, for a total cost of $57.6 million or an average cost of $75.53 per share. Also under the previous share repurchase program, during the fiscal year ended June 29, 2024, the Company repurchased and subsequently retired 1.3 million shares of common stock, for a total of $78.1 million or an average cost of $58.83 per share.

Previous wording

Our contractual 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. Leases, respectively, within the Notes to Consolidated Financial Statements included in Item 8. As of June 28, 2025, the Company had total purchase obligations of $276.8 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. 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 $170.9 million for capital projects related to warehouse expansion and improvements and warehouse equipment. The Company anticipates using cash flows from operations or borrowings under the ABL Facility to fulfill these commitments. Amounts due under these agreements were not included in the Company’s consolidated balance sheet as of June 28, 2025.

Current wording

Our contractual cash requirements over the next twelve 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. Leases, respectively, within the Notes to Consolidated Financial Statements included in Item 8. As of June 27, 2026, the Company had total purchase obligations of $193.2 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. 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 $68.9 million for capital projects related to warehouse expansion and improvements and warehouse equipment. The Company anticipates using cash flows from operations or borrowings under the ABL Facility to fulfill these commitments. Amounts due under these agreements were not included in the Company’s consolidated balance sheet as of June 27, 2026.

Previous wording

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.

Current wording

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Previous wording

We believe that our cash flows from operations and available borrowing capacity will be sufficient to meet our anticipated cash requirements over the next 12 months and beyond, to maintain sufficient liquidity for normal operating purposes, and to fund capital expenditures.

Current wording

We believe that our cash flows from operations and available borrowing capacity will be sufficient to meet our anticipated cash requirements over the next twelve months and beyond, to maintain sufficient liquidity for normal operating purposes, and to fund capital expenditures.

Previous wording

At June 28, 2025, our cash balance totaled $86.7 million, including restricted cash of $8.2 million, as compared to a cash balance totaling $27.7 million, including restricted cash of $7.7 million, at June 29, 2024.

Current wording

At June 27, 2026, our cash balance totaled $103.1 million, including restricted cash of $10.7 million, as compared to a cash balance totaling $86.7 million, including restricted cash of $8.2 million, at June 28, 2025.

Previous wording

During fiscal 2025 and fiscal 2024, our operating activities provided cash flow of $1,210.1 million and $1,163.0 million, respectively. The increase in cash flows provided by operating activities in fiscal 2025 compared to fiscal 2024 was largely driven by higher cash-based operating income, partially offset by changes in the timing of advanced purchases of inventory.

Current wording

During fiscal 2026 and fiscal 2025, our operating activities provided cash flow of $1,413.7 million and $1,210.1 million, respectively. The increase in cash flows provided by operating activities in fiscal 2026 compared to fiscal 2025 was largely driven by higher cash-based operating income and income tax refunds of $52.3 million received during fiscal 2026, partially offset by advanced purchases of inventory to take advantage of preferred pricing.

Previous wording

Cash used in investing activities totaled $3,089.0 million in fiscal 2025 compared to $682.7 million in fiscal 2024. These investments consisted primarily of net cash paid for recent acquisitions of $2,596.4 million and $307.7 million for fiscal years 2025 and 2024, respectively, along with capital purchases of property, plant, and equipment of $506.0 million and $395.6 million for fiscal years 2025 and 2024, respectively. In fiscal 2025, purchases of property, plant, and equipment primarily consisted of outlays for warehouse improvements and expansions, warehouse equipment, transportation equipment, and information technology. The following table presents the capital purchases of property, plant, and equipment by segment.

Current wording

Cash used in investing activities totaled $772.5 million in fiscal 2026 compared to $3,089.0 million in fiscal 2025. These investments consisted primarily of net cash paid for recent acquisitions of $383.4 million and $2,596.4 million for fiscal years 2026 and 2025, respectively, along with capital purchases of property, plant, and equipment of $384.1 million and $506.0 million for fiscal years 2026 and 2025, respectively. In fiscal 2026, purchases of property, plant, and equipment primarily consisted of outlays for warehouse improvements and expansions, warehouse equipment, transportation equipment, and information technology. The following table presents the capital purchases of property, plant, and equipment by segment.

Previous wording

During fiscal 2024, our financing activities used cash flow of $472.6 million, which consisted primarily of $275.0 million in cash used for the repayment of the Notes due 2025, $122.2 million in payments under finance lease obligations, and $78.1 million in repurchases of common stock.

Current wording

During fiscal 2026, cash used in financing activities totaled $624.8 million, which consisted primarily of the repayment of the $1.1 billion aggregate principal amount of the 5.500% Senior Notes due 2027, $384.0 million in net repayments under our ABL Facility, $241.6 million in payments under finance lease obligations, and $1.5 million in repurchases of common stock, partially offset by $1.1 billion in cash received from the issuance and sale of the Notes due 2034.

Previous wording

During fiscal 2025, our financing activities provided cash flow of $1,937.9 million, which consisted primarily of $1,194.2 million in net borrowings under our ABL Facility and $1.0 billion in cash received from the issuance and sales of the Notes due 2032, partially offset by $188.0 million in payments under finance lease obligations and $57.6 million in repurchases of common stock.

Current wording

During fiscal 2025, our financing activities provided cash flow of $1,937.9 million, which consisted primarily of $1,194.2 million in net borrowings under our ABL Facility and $1.0 billion in cash received from the issuance and sale of the Notes due 2032, partially offset by $188.0 million in payments under finance lease obligations, and $57.6 million in repurchases of common stock.

Previous wording

Total assets for Foodservice increased $4,218.7 million from $7,052.4 million as of June 29, 2024 to $11,271.1 million as of June 28, 2025, primarily due to recent acquisitions within the segment as well as an increase in property, plant, and equipment under finance leases.

Current wording

Total assets for Foodservice increased $693.0 million from $11.3 billion as of June 28, 2025 to $12.0 billion as of June 27, 2026, primarily due to recent acquisitions within the segment, increases in inventory, and increases in property, plant, and equipment through additional transportation equipment under finance leases.

Previous wording

Total assets for Specialty increased $67.8 million from $1,519.1 million as of June 29, 2024 to $1,586.9 million as of June 28, 2025. During this time period, the segment increased its inventory due to advanced purchases to take advantage of preferred pricing, increased its accounts receivable, and increased its property, plant, and equipment through additional transportation equipment under finance leases. These increases were partially offset by a decrease in intangible assets due to normal amortization.

Current wording

Total assets for Convenience increased $184.7 million from $4.3 billion as of June 28, 2025 to $4.5 billion as of June 27, 2026, primarily due to increases in inventory through advanced purchases to take advantage of preferred pricing and increases in property, plant, and equipment through additional transportation equipment under finance leases, partially offset by decreases in intangible assets due to normal amortization.

Previous wording

Accounts receivable are comprised of trade receivables from customers in the ordinary course of business, are recorded at the invoiced amount, adjusted for any discounts granted to customers, and primarily do not bear interest. Accounts receivable also includes other receivables primarily related to various rebate and promotional incentives with our suppliers. 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. 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. We also record reserves for bad debt for other customers based on a variety of factors, including the length of time the receivables are past due, macroeconomic considerations, and historical experience. If circumstances related to specific customers change, our estimates of the recoverability of receivables could be further adjusted.

Current wording

Accounts receivable are comprised of trade receivables from customers in the ordinary course of business, are recorded at the invoiced amount, adjusted for any discounts granted to customers, and primarily do not bear interest. Accounts receivable also includes other receivables primarily related to various rebates and promotional incentives with our suppliers. 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. 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. We also record reserves for bad debt for other customers based on a variety of factors, including the length of time the receivables are past due, macroeconomic considerations, and historical experience. If circumstances related to specific customers change, our estimates of the recoverability of receivables could be further adjusted.

Previous wording

Our inventories consist primarily of food and non-food products. The Company values inventories at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method, weighted average cost method, and last-in, first-out ("LIFO") method. For its LIFO based inventory, the Company utilizes the link chain technique of the dollar value method. FIFO was used for approximately 55.6%, LIFO was used for approximately 38.2%, and weighted average costing was used for approximately 6.2% of total inventories at June 28, 2025. We adjust our inventory balances for slow-moving, excess, and obsolete inventories. These adjustments are based upon inventory category, inventory age, specifically identified items, and overall economic conditions.

Current wording

Our inventories consist primarily of food and non-food products. The Company values inventories at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method, weighted average cost method, and LIFO method. For its LIFO based inventory, the Company utilizes the link chain technique of the dollar value method. FIFO was used for approximately 54.4%, LIFO was used for approximately 38.6%, and weighted average costing was used for approximately 7.0% of total inventories at June 27, 2026. We adjust our inventory balances for slow-moving, excess, and obsolete inventories. These adjustments are based upon inventory category, inventory age, specifically identified items, and overall economic conditions.

Previous wording

We participate in various rebate and promotional incentives with our suppliers, either unilaterally or in combination with purchasing cooperatives and other procurement partners, that consist primarily of volume and growth rebates, annual and multi-year incentives, and promotional programs. Consideration received under these incentives is generally recorded as a reduction of cost of goods sold. 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.

Current wording

We participate in various rebates and promotional incentives with our suppliers, either unilaterally or in combination with purchasing cooperatives and other procurement partners, that consist primarily of volume and growth rebates, annual and multi-year incentives, and promotional programs. Consideration received under these incentives is generally recorded as a reduction of cost of goods sold. 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.

Previous wording

During fiscal 2025, fiscal 2024, and fiscal 2023, 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. Based on our assessment, there were no impairments recorded in fiscal 2025 or fiscal 2024. There was an immaterial impairment of goodwill related to reporting units within the Corporate & All Other segment for fiscal 2023.

Current wording

During fiscal 2026, fiscal 2025, and fiscal 2024, 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. Based on our assessment, there were no impairments recorded in fiscal 2026, 2025, or fiscal 2024.