Performance Food Group Co

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 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 and the first quarter of fiscal 2027, rapidly evolving tariff and global trade policies and geopolitical dynamics continued to cause uncertainty. Additionally, recent hostilities and geopolitical tensions, such as the conflict in the Middle East, contributed to significantly higher fuel prices in fiscal 2026 and the first quarter of fiscal 2027. 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.

We believe that our performance is principally affected by the following key factors:

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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.

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Food distribution market structure. The food distribution market consists of a wide spectrum of companies ranging from businesses selling a single category of product (e.g., produce) to large national and regional broadline distributors with many distribution centers and thousands of products across all categories. We believe our scale enables us to invest in our Performance Brands, to benefit from economies of scale in purchasing and procurement, and to drive supply chain efficiencies that enhance our customers’ satisfaction and profitability. We believe that the relative growth of larger foodservice distributors will continue to outpace that of smaller, independent players in our industry.

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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.

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.

Case Growth

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.

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.

Gross Profit

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.

Adjusted EBITDA

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.

Adjusted EBITDA is not a measure of operating income, operating performance, or liquidity presented in accordance with, or required by, GAAP and is subject to important limitations. We use this measure to evaluate the performance of our business on a consistent basis over time and for business planning purposes. 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. We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties, including our lenders under the ABL Facility and holders of our Notes due 2029, Notes due 2032, and Notes due 2034 in their evaluation of the operating performance of companies in industries similar to ours.

Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA:

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excludes certain tax payments that may represent a reduction in cash available to us;

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does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;

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does not reflect changes in, or cash requirements for, our working capital needs; and

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does not reflect the significant interest expense, or the cash requirements, necessary to service our debt.

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. Adjusted EBITDA among other things:

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does not include non-cash stock-based employee compensation expense and certain other non-cash charges;

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does not include acquisition, restructuring, and other costs incurred to realize future cost savings and enhance our operations; and

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does not include items outside of the ordinary course of the Company’s operations and not indicative of ongoing performance.

We have included below reconciliations of Adjusted EBITDA to the most directly comparable measure calculated in accordance with GAAP for the periods presented.

Results of Operations and Adjusted EBITDA

The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated:

We believe that the most directly comparable GAAP measure to Adjusted EBITDA is net income. The following table reconciles Adjusted EBITDA to net income for the periods presented:

(1)

Includes increases in the LIFO reserve of $0.9 million for Foodservice and $17.8 million for Convenience for the first quarter of fiscal 2027 compared to increases of $1.7 million for Foodservice and $22.8 million for Convenience for the first quarter of fiscal 2026.

(2)

Includes acquisition and integration costs related to in-process, completed and abandoned acquisitions, facility closing costs and business optimization costs incurred prior to formal launch of strategic projects with anticipated long-term benefits to the Company. These costs generally relate to professional fees.

(3)

Includes amounts related to gains and losses on other commodity derivatives, insurance proceeds due to hurricane and other weather-related events, franchise tax expense, favorable and unfavorable leases, gains and losses on disposals of fixed assets, litigation-related accruals, foreign currency transaction gains and losses, and other adjustments permitted by our ABL Facility. Additionally, for the three months ended September 27, 2025, other adjustments included $9.9 million of legal and professional fees incurred in connection with shareholder activism and the clean team agreement with US Foods Holding Corp.

Consolidated Results of Operations

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 $942.5 million, or 5.5%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by an increase of $437.8 million resulting from an increase in organic cases sold, $261.2 million of incremental net sales from recent acquisitions, and an increase of $243.5 million related to an increase in selling price per case as a result of inflation. Total case volume increased 4.2% during the first quarter of fiscal 2027 compared to the same period of fiscal 2026. Total organic case volume increased 2.5% in the first quarter of fiscal 2027 compared to the same period of fiscal 2026. Total organic case volume benefited from a 5.5% increase in organic independent Foodservice cases, 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 3.4% for the first quarter of fiscal 2027.

Gross Profit

Gross profit increased $170.9 million, or 8.5%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by vendor rebates and promotional incentives, a favorable shift in the mix of cases sold, including growth in the independent channel which generates higher gross profit due to additional services provided, as well as recent acquisitions.

Operating Expenses

Operating expenses increased $123.4 million, or 6.9%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by recent acquisitions, a $42.8 million increase in personnel expenses primarily related to salaries, wages, commissions and benefits, and a $34.2 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices and miles driven as a result of new business, partially offset by realized gains related to fuel hedges. The increase in operating expenses was partially offset by a $4.5 million decrease in professional fees and a $4.1 million decrease in insurance expense primarily related to auto insurance and workers’ compensation.

Net Income

Net income increased $35.9 million, or 38.4%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by an increase in gross profit and decrease in interest expense, partially offset by increases in operating expenses and income tax expense. The decrease in interest expense was primarily the result of decreases in the average borrowings and average interest rate during the first quarter of fiscal 2027 compared to the prior year period.

The Company reported income tax expense of $43.6 million for the first quarter of fiscal 2027 compared to $27.9 million for the first quarter of fiscal 2026. Our effective tax rate for the first quarter of fiscal 2027 was 25.2% compared to 23.0% for the first quarter of fiscal 2026. The effective tax rate differed from the prior year period primarily due to a decrease in deductible discrete items related to stock-based compensation and a decrease in federal tax credits net of valuation allowance established, partly offset by a decrease in non-deductible compensation and other non-deductible expenses and a decrease in foreign taxes as a percentage of income.

Segment Results

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 changes in the LIFO reserve, stock-based compensation expense, and acquisition and business optimization expenses. See Note 14. Segment Informationof the consolidated financial statements in this Form 10-Q.

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.

The following tables set forth total net sales and Segment Adjusted EBITDA by reportable segment and the reconciling items for Corporate & All Other and eliminations for the periods indicated (dollars in millions):

Segment Results—Foodservice

Net sales for Foodservice increased $458.5 million, or 5.0%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily driven by $261.2 million of incremental net sales contributions from recent acquisitions, a $151.8 million increase as a result of organic case volume growth, and a $45.5 million increase related to an increase in selling price per case as a result of inflation. Total case growth for Foodservice was 4.2% and organic case growth was 1.7% for the first quarter of fiscal 2027, compared to the prior year period. Total independent case growth was 7.8% for the first quarter of fiscal 2027 compared to the prior year period. Securing new, and expanding business with, independent customers resulted in organic independent case growth of 5.5% in the first quarter of fiscal 2027 compared to the prior year period. For the first quarter of fiscal 2027, independent sales as a percentage of total Foodservice segment sales were 43.0%.

Adjusted EBITDA for Foodservice increased $43.5 million, or 13.4%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of an increase in gross profit, partially offset by an increase in operating expenses. Gross profit contributing to Foodservice’s Adjusted EBITDA increased $141.9 million, or 10.7%, in the first quarter of fiscal 2027, compared to the prior year period, primarily driven by growth in cases sold, a favorable shift in the mix of cases sold, including more Performance Brands products sold to independent customers, vendor rebates and promotional incentives, and recent acquisitions.

Operating expenses impacting Foodservice’s Adjusted EBITDA increased $97.9 million, or 9.7%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of recent acquisitions, a $38.5 million increase in personnel expenses primarily related to salaries, wages, commissions, and benefits, and a $24.5 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices and miles driven as a result of new business, partially offset by realized gains related to fuel hedges.

Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $130.3 million in the first quarter of fiscal 2026 to $142.2 million in the first quarter of fiscal 2027, primarily driven by recent acquisitions.

Segment Results—Convenience

Net sales for Convenience increased $353.2 million, or 5.4%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily driven by an increase of $274.4 million as a result of case growth due to the addition of new chain customers and an increase of $78.8 million related to an increase in selling price per case related to inflation, partially offset by a mix shift from cigarettes to alternative nicotine products. Total Convenience cases sold increased 4.1% in the first quarter of fiscal 2027 compared to the prior year period.

Adjusted EBITDA for Convenience increased $4.6 million, or 3.8%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of an increase in gross profit, partially offset by an increase in operating expenses. Gross profit contributing to Convenience’s Adjusted EBITDA increased $16.7 million, or 3.7%, for the first quarter of fiscal 2027 compared to the prior year period primarily due to vendor rebates and promotional incentives and income earned from manufacturers for distribution and related services.

Operating expenses impacting Convenience’s Adjusted EBITDA increased $11.6 million, or 3.5%, for the first quarter of fiscal 2027 compared to the prior year period primarily as a result of an $8.6 million increase in personnel expenses primarily related to salaries, wages and benefits and a $6.9 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices, partially offset by realized gains related to fuel hedges. These increases in operating expenses were partially offset by a $1.1 million decrease in fleet maintenance and repair expenses, a $1.1 million decrease in rent expense primarily related to fleet leases, and a $0.9 million decrease in insurance expense primarily related to auto insurance and workers’ compensation.

Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $39.9 million in the first quarter of fiscal 2026 to $41.1 million in the first quarter of fiscal 2027.

Segment Results—Specialty

During the current fiscal year, Specialty has revised its sales channel classifications to better align with how management evaluates operating performance and market opportunities. As a result, the former value channel is presented as grocery retail, and the theater, concessions and hospitality channels are presented on a combined basis within entertainment. Comparative channel information discussed below has been reclassified to conform to the current presentation.

Net sales for Specialty increased $131.1 million, or 10.3%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily driven by an increase of $73.0 million related to an increase in selling price per case due to a favorable channel mix as well as inflation and an increase of $58.1 million as a result of case growth in the vending, grocery retail, entertainment, and office supply channels, partially offset by declines in retail. Total Specialty cases sold increased 4.3% in the first quarter of fiscal 2027 compared to the prior year period.

Adjusted EBITDA for Specialty decreased $4.5 million, or 4.8%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of an increase in operating expenses, partially offset by an increase in gross profit. Gross profit contributing to Specialty’s Adjusted EBITDA increased $8.2 million, or 3.5%, for the first quarter of fiscal 2027 compared to the prior year period primarily driven by vendor rebates and promotional incentives and net sales growth.

Operating expenses impacting Specialty’s Adjusted EBITDA increased $12.7 million, or 9.0%, for the first quarter of fiscal 2027 compared to the prior year period, primarily due to a $4.3 million increase in personnel expenses primarily driven by salaries, wages and benefits, a $2.6 million increase in bad debt expense, a $2.5 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices and miles driven, partially offset by realized gains related to fuel hedges, and an increase of $1.4 million in third-party outbound freight expense.

Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $13.0 million in the first quarter of fiscal 2026 to $14.2 million in the first quarter of fiscal 2027.

Liquidity and Capital Resources

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 reasonable liquidity.

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 ABL Facility. In addition, depending on conditions in the credit and capital markets and other factors, we will, from time to time, consider other financing transactions, the proceeds of which could be used to refinance our indebtedness, make investments or acquisitions or for other purposes. Any new debt may be secured debt.

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 September 26, 2026, $150.0 million of the outstanding ABL Facility balance is hedged under interest rate swaps, which results in 71% of our total debt outstanding, including finance lease obligations, being fixed-rate debt.

On May 27, 2025, the Board of Directors authorized a 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 current 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 September 26, 2026, $498.5 million remained available for share repurchases.

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 6. Debt and Note 8. Leases, respectively, within the Notes to Consolidated Financial Statements included in Item 1. As of September 26, 2026, the Company had total purchase obligations of $217.3 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 $85.5 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 September 26, 2026.

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.

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

As of September 26, 2026, our cash balance totaled $46.6 million, including restricted cash of $10.7 million, as compared to a cash balance totaling $103.1 million, including restricted cash of $10.7 million, as of June 27, 2026.

Operating Activities

During the first three months of fiscal 2027 and fiscal 2026, net cash used in operating activities was $89.3 million and $145.2 million, respectively. The improvement in net cash used in operating activities in the first three months of fiscal 2027 compared to the first three months of fiscal 2026 was largely driven by a change in the timing and volume of advanced purchases of inventory to take advantage of preferred pricing.

Investing Activities

Net cash used in investing activities was $53.8 million in the first three months of fiscal 2027 compared to $78.0 million in the first three months of fiscal 2026. These investments consisted of $4.1 million cash paid for an acquisition in the first three months of fiscal 2027 compared to no cash paid for acquisitions in the first three months of fiscal 2026, along with capital purchases of property, plant, and equipment of $53.9 million and $78.9 million for the first three months of fiscal 2027 and the first three months of fiscal 2026, respectively. For the first three months of fiscal 2027, purchases of property, plant, and equipment primarily consisted of outlays for transportation equipment, information technology, warehouse equipment, and warehouse improvements and expansions. The following table presents the capital purchases of property, plant, and equipment by segment.

Financing Activities

During the first three months of fiscal 2027, net cash provided by financing activities was $86.6 million, which consisted primarily of $162.3 million in net borrowings under our ABL Facility, which was partially offset by $70.3 million in payments under finance lease obligations.

During the first three months of fiscal 2026, net cash provided by financing activities was $182.9 million, which consisted primarily of $246.3 million in net borrowings under our ABL Facility, which was partially offset by $57.5 million in payments under finance lease obligations.

The Company’s financing arrangements as of September 26, 2026 are described in Note 6. Debtof the consolidated financial statements within this Form 10-Q. As of September 26, 2026, the Company was in compliance with all of the covenants under the ABL Facility and the indentures governing the Notes due 2029, the Notes due 2032, and the Notes due 2034.

Total Assets by Segment

Total assets by segment discussed below exclude intercompany receivables between segments.

Total assets for Foodservice increased $549.9 million from $11,358.1 million as of September 27, 2025 to $11,908.0 million as of September 26, 2026 primarily due to recent acquisitions as well as increases in property, plant and equipment through additional transportation equipment under finance leases. Total assets for Foodservice decreased $56.1 million from $11,964.1 million as of June 27, 2026 to $11,908.0 million as of September 26, 2026 primarily driven by decreases in property, plant and equipment and intangible assets due to normal depreciation and amortization.

Total assets for Convenience increased $21.4 million from $4,718.6 million as of September 27, 2025 to $4,740.0 million as of September 26, 2026 primarily due to increases in inventory, prepaid expenses, and property, plant and equipment through additional transportation equipment under finance leases, partially offset by decreases in intangible assets and right-of-use assets due to normal amortization. Total assets for Convenience increased $278.5 million from $4,461.5 million as of June 27, 2026 to $4,740.0 million as of September 26, 2026 primarily due to increases in inventory due to advanced purchases to take advantage of preferred pricing, partially offset by a decrease in cash and accounts receivable.

Total assets for Specialty increased $20.2 million from $1,509.9 million as of September 27, 2025 to $1,530.1 million as of September 26, 2026 primarily due to increases in accounts receivable, partially offset by decreases in property, plant and equipment, and right-of-use assets due to normal depreciation and amortization. Total assets for Specialty decreased $93.5 million from $1,623.6 million as of June 27, 2026 to $1,530.1 million as of September 26, 2026 primarily due to decreases in inventory as a result of sales in the normal course of business, as well as decreases in accounts receivable and property, plant and equipment due to normal depreciation.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that are most important to portraying our financial position and results of operations. 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, leases, and goodwill and other intangible assets, which are described in the Form 10-K. There have been no material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates described in the Form 10-K.