2023
ANNUAL
REPORT
T O O U R S T O C K H O L D E R S
We see a bright future for our Convenience
segment and believe we are uniquely positioned
to offer a full range of products and services to
the U.S. convenience operator.
ESG PROGRESS
During fiscal 2023, PFG also made progress
on our Environmental, Social and Governance
(“ESG”) initiatives. We published our third
annual ESG report, which highlighted the
progress we’ve made on a range of metrics.
Our company remains focused on reaching key
goals around energy efficiency, greenhouse gas
emissions, waste management and responsible
sourcing. Our leadership recognizes the
importance of these initiatives and is committed
to integrating our ESG efforts across our
business. Our ESG performance is embedded
into the fabric of our company and will help
guide us as we deliver exceptional service and
value to our customers. Our fiscal 2023 financial
results included:
Total case volume growth of 6%
n
n Net sales increased 13% to $57.3 billion
n Gross profit improved 19% to $6.3 billion
n Net income of $397.2 million
n Adjusted EBITDA increased 34% to
$1.4 billion1
n Diluted earnings per share (“EPS”) of $2.54
EXECUTING OUR STRATEGIC PRIORITIES
Our business is focused on three key strategic
priorities that guide how our organization
executes every day: 1) consistent, profitable
top-line growth, 2) Adjusted EBITDA profit
margin expansion and 3) leverage reduction.
I am pleased to report that we made great
progress in all three areas during fiscal 2023.
Our revenue, which increased 13% in the fiscal
year, was the result of strong sales growth
across our business segments and was achieved
despite lower inflation as we exited the fiscal
year. This is a testament to our company’s ability
to drive case growth by adding business in key
accounts, gaining market share and expanding
into new lines of business. We have invested
behind technology and resources to support
our 35,000+ associates to help make their work
more efficient. We have introduced our new
G E O R G E L . H O L M
Our organization had another excellent year
in fiscal 2023, with strong execution across
our business units and solid top- and bottom-
line growth contributing to our strong financial
position. We made significant strides during the
fiscal year as the macro-economic environment
continued to recover, which allowed us to grow
our business while improving upon our efficiency
and generating record cash flow.
All three of our operating segments contributed
to the results, with rapid growth in some of our
most profitable businesses. In Foodservice, this
was reflected in 6.2% organic case growth in
our Independent Restaurant business. This growth
accelerated in the back half of the fiscal year,
setting our company up for what we expect
will be a great fiscal 2024. We also had great
success with our company-owned brands, which
in fiscal 2023 represented approximately 52%
of total Independent Restaurant sales — a record
for our company.
Vistar improved through the fiscal year, as that
business continued to push into new lines of
business while growing the legacy channels.
As a result, Vistar experienced 23.6% revenue
growth for the fiscal year. Vistar remains an
important piece of our profit growth and margin
expansion.
Finally, our Convenience business has
progressed ahead of our original expectations,
with double-digit sales growth of food and
foodservice into the convenience store channel.
This growth was produced by a combination
of new business and organic same-store sales
growth. We are very pleased with the integration
of the Core-Mark organization, which has fit
nicely into our overall corporate structure.
ADJUSTED EBITDA*
CAGR = 26.2%
in $ millions
2018
2019
2020
2021
2022
2023
$427
$476
$406
$625
1 For a reconciliation of non-GAAP to GAAP measures, see the Appendix.
* Fiscal 2021 includes a 53rd week.
$1,020
$1,363
online ordering platform, Customer First, to the
marketplace. We believe this new tool will make
our team more efficient and produce increased
cross-selling revenue opportunities across all
three business segments.
Our growth is focused on highly profitable
channels, which is one of the key drivers for our
second goal — Adjusted EBITDA profit margin
expansion. During the fiscal year, we built
upon profitable revenue growth by being more
efficient as an organization and disciplined
on our cost line. The result was 34% Adjusted
EBITDA growth, representing 38 bps of Adjusted
EBITDA profit margin expansion improvement
over fiscal 2022.
This strong bottom-line result produced $832
million of operating cash flow during the fiscal
year. Our strong cash flow profile enabled
us to make significant investments to support
our business, including increased capacity to
support long-term growth.
We were also able to reduce our leverage
during the fiscal year, the third pillar of our
strategy. At the end of fiscal 2023, our net debt
to Adjusted EBITDA ratio was 2.9x, which is just
below the mid-point of our 2.5x to 3.5x target
range. I am incredibly pleased with the progress
our team has made on our financial position.
Our strong balance sheet allowed our company
to take advantage of the $300 million share
repurchase program authorized by our board
of directors last fall. During fiscal 2023, PFG
repurchased $11.2 million of our stock.
I am proud of how our organization finished the
fiscal year on a high note and excited for the
year ahead. I am grateful to all of our associates
who have worked hard to help make PFG a true
leader in our industry.
Best regards,
George L. Holm
Chairman of the Board of Directors
and Chief Executive Officer
October 10, 2023
TOTAL
$57.3 BILLION
49.8%7.9%42.1%0.2%NET SALES■ Foodservice■ Vistar■Convenience■Other UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
Washington, D.C. 20549
Washington, D.C. 20549
Washington, D.C. 20549
Washington, D.C. 20549
Washington, D.C. 20549
Form 10-K
Form 10-K
Form 10-K
Form 10-K
Form 10-K
Form 10-K
Form 10-K
(Mark One)
(Mark One)
(Mark One)
(Mark One)
(Mark One)
(Mark One)
(Mark One)
ACT OF 1934
ACT OF 1934
ACT OF 1934
ACT OF 1934
ACT OF 1934
ACT OF 1934
ACT OF 1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
For the fiscal year ended July 1, 2023
For the fiscal year ended July 1, 2023
For the fiscal year ended July 1, 2023
For the fiscal year ended July 1, 2023
For the fiscal year ended July 1, 2023
For the fiscal year ended July 1, 2023
For the fiscal year ended July 1, 2023
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934
For the transition period from
For the transition period from
For the transition period from
For the transition period from
For the transition period from
For the transition period from
For the transition period from
Commission File Number 001-37578
Commission File Number 001-37578
Commission File Number 001-37578
Commission File Number 001-37578
Commission File Number 001-37578
Commission File Number 001-37578
Commission File Number 001-37578
to
to
to
to
to
to
to
Performance Food Group Company
Performance Food Group Company
Performance Food Group Company
Performance Food Group Company
Performance Food Group Company
Performance Food Group Company
Performance Food Group Company
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
Delaware
Delaware
Delaware
Delaware
(State or other jurisdiction of
Delaware
Delaware
(State or other jurisdiction of
(State or other jurisdiction of
Delaware
incorporation or organization)
(State or other jurisdiction of
(State or other jurisdiction of
(State or other jurisdiction of
incorporation or organization)
incorporation or organization)
(State or other jurisdiction of
incorporation or organization)
incorporation or organization)
incorporation or organization)
12500 West Creek Parkway
incorporation or organization)
12500 West Creek Parkway
12500 West Creek Parkway
Richmond, Virginia 23238
12500 West Creek Parkway
12500 West Creek Parkway
12500 West Creek Parkway
Richmond, Virginia 23238
Richmond, Virginia 23238
12500 West Creek Parkway
Richmond, Virginia 23238
(Address of principal executive offices, including zip code)
Richmond, Virginia 23238
Richmond, Virginia 23238
(Address of principal executive offices, including zip code)
(Address of principal executive offices, including zip code)
Richmond, Virginia 23238
(Address of principal executive offices, including zip code)
(Address of principal executive offices, including zip code)
(Address of principal executive offices, including zip code)
(Address of principal executive offices, including zip code)
Title of each class
Title of each class
Title of each class
Title of each class
Common Stock, $0.01 par value
Title of each class
Title of each class
Common Stock, $0.01 par value
Common Stock, $0.01 par value
Title of each class
Common Stock, $0.01 par value
Common Stock, $0.01 par value
Common Stock, $0.01 par value
Common Stock, $0.01 par value
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
Trading Symbol(s)
Trading Symbol(s)
Trading Symbol(s)
PFGC
Trading Symbol(s)
Trading Symbol(s)
PFGC
PFGC
Trading Symbol(s)
PFGC
PFGC
PFGC
PFGC
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
43-1983182
43-1983182
43-1983182
43-1983182
(IRS Employer
43-1983182
43-1983182
(IRS Employer
(IRS Employer
43-1983182
Identification No.)
(IRS Employer
(IRS Employer
(IRS Employer
Identification No.)
Identification No.)
(IRS Employer
Identification No.)
Identification No.)
Identification No.)
Identification No.)
(804) 484-7700
(804) 484-7700
(804) 484-7700
(804) 484-7700
(Registrant’s telephone number, including area code)
(804) 484-7700
(804) 484-7700
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
(804) 484-7700
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
Name of each exchange on which registered
Name of each exchange on which registered
Name of each exchange on which registered
Name of each exchange on which registered
New York Stock Exchange
Name of each exchange on which registered
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
90 days. Yes ☒ No ☐
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
90 days. Yes ☒ No ☐
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
No ☐
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
12b-2 of the Exchange Act.
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
12b-2 of the Exchange Act.
12b-2 of the Exchange Act.
12b-2 of the Exchange Act.
☐
Large Accelerated Filer
☐
Large Accelerated Filer
☐
Large Accelerated Filer
☐
Large Accelerated Filer
☐
☐
Large Accelerated Filer
Large Accelerated Filer
☐
☐
Non-accelerated Filer
Large Accelerated Filer
☐
Non-accelerated Filer
☐
Non-accelerated Filer
☐
Non-accelerated Filer
☐
☐
Non-accelerated Filer
Non-accelerated Filer
☐
Emerging Growth Company
Non-accelerated Filer
Emerging Growth Company
Emerging Growth Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
Emerging Growth Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
☒
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
☒
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
reflect the correction of an error to previously issued financial statements. ☐
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At December 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Part III of this Annual Report on Form 10-K. The definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days
At December 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At December 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held
Part III of this Annual Report on Form 10-K. The definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days
by non-affiliates was $8,900,539,105 (based on the closing sale price of common stock on such date on the New York Stock Exchange).
At December 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held
At December 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held
At December 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held
by non-affiliates was $8,900,539,105 (based on the closing sale price of common stock on such date on the New York Stock Exchange).
by non-affiliates was $8,900,539,105 (based on the closing sale price of common stock on such date on the New York Stock Exchange).
after the Registrant’s fiscal year ended July 1, 2023.
At December 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common stock held
by non-affiliates was $8,900,539,105 (based on the closing sale price of common stock on such date on the New York Stock Exchange).
after the Registrant’s fiscal year ended July 1, 2023.
156,193,785 shares of the registrant's common stock were outstanding as of August 9, 2023.
by non-affiliates was $8,900,539,105 (based on the closing sale price of common stock on such date on the New York Stock Exchange).
by non-affiliates was $8,900,539,105 (based on the closing sale price of common stock on such date on the New York Stock Exchange).
156,193,785 shares of the registrant's common stock were outstanding as of August 9, 2023.
by non-affiliates was $8,900,539,105 (based on the closing sale price of common stock on such date on the New York Stock Exchange).
156,193,785 shares of the registrant's common stock were outstanding as of August 9, 2023.
156,193,785 shares of the registrant's common stock were outstanding as of August 9, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
156,193,785 shares of the registrant's common stock were outstanding as of August 9, 2023.
156,193,785 shares of the registrant's common stock were outstanding as of August 9, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
156,193,785 shares of the registrant's common stock were outstanding as of August 9, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A relating to the
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A relating to the
Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A relating to the
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A relating to the
Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A relating to the
Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A relating to the
Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A relating to the
Registrant’s Annual Meeting of Stockholders, to be held on or about November 15, 2023, are incorporated by reference in response to Items 10, 11, 12, 13 and 14 of
Registrant’s Annual Meeting of Stockholders, to be held on or about November 15, 2023, are incorporated by reference in response to Items 10, 11, 12, 13 and 14 of
Registrant’s Annual Meeting of Stockholders, to be held on or about November 15, 2023, are incorporated by reference in response to Items 10, 11, 12, 13 and 14 of
Registrant’s Annual Meeting of Stockholders, to be held on or about November 15, 2023, are incorporated by reference in response to Items 10, 11, 12, 13 and 14 of
Part III of this Annual Report on Form 10-K. The definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120
Registrant’s Annual Meeting of Stockholders, to be held on or about November 15, 2023, are incorporated by reference in response to Items 10, 11, 12, 13 and 14 of
Registrant’s Annual Meeting of Stockholders, to be held on or about November 15, 2023, are incorporated by reference in response to Items 10, 11, 12, 13 and 14 of
Part III of this Annual Report on Form 10-K. The definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120
Registrant’s Annual Meeting of Stockholders, to be held on or about November 15, 2023, are incorporated by reference in response to Items 10, 11, 12, 13 and 14 of
Part III of this Annual Report on Form 10-K. The definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the
days after the Registrant’s fiscal year ended July 1, 2023.
days after the Registrant’s fiscal year ended July 1, 2023.
Registrant’s fiscal year ended July 1, 2023.
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TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS .......................................................................................
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PART I ...................................................................................................................................................................................................
Item 1.
Business ...............................................................................................................................................................
Item 1A. Risk Factors .........................................................................................................................................................
Item 1B. Unresolved Staff Comments ................................................................................................................................
Item 2.
Properties .............................................................................................................................................................
Item 3.
Legal Proceedings ................................................................................................................................................
Item 4. Mine Safety Disclosures ......................................................................................................................................
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PART II ................................................................................................................................................................................................. 21
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
..............................................................................................................................................................................
Item 6.
[Reserved] ............................................................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ..............................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .............................................................................
Item 8.
Financial Statements and Supplementary Data ....................................................................................................
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure .............................
Item 9A. Controls and Procedures ......................................................................................................................................
Item 9B. Other Information ................................................................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .................................................................
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PART III ................................................................................................................................................................................................ 82
Item 10. Directors, Executive Officers and Corporate Governance ..................................................................................
Item 11. Executive Compensation .....................................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...........
Item 13. Certain Relationships and Related Transactions, and Director Independence ....................................................
Item 14. Principal Accountant Fees and Services ..............................................................................................................
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PART IV ................................................................................................................................................................................................ 83
Item 15. Exhibits and Financial Statement Schedules .......................................................................................................
Item 16. Form 10-K Summary ...........................................................................................................................................
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SIGNATURES ...................................................................................................................................................................................... 88
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K (this “Form 10-K”) may contain “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those
sections. All statements, other than statements of historical facts included in this Form 10-K, including statements concerning our
plans, objectives, goals, beliefs, business strategies, future events, business conditions, our results of operations, financial position, our
business outlook, business trends and other information, are forward-looking statements. Words such as “estimates,” “expects,”
“contemplates,” “will,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “should” and variations of such
words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical
facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by
their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in
good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations,
beliefs, estimates and projections will result or be achieved, and actual results may vary materially from what is expressed in or
indicated by the forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause
our actual results to differ materially from the forward-looking statements contained in this Form 10-K. Such risks, uncertainties and
other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth
under Part I, Item 1A. Risk Factors in this Form 10-K (“Item 1A”), as such risk factors may be updated from time to time in our
periodic filings with the Securities and Exchange Commission (the “SEC”), and are accessible on the SEC’s website at www.sec.gov,
and also include the following:
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economic factors, including inflation or other adverse changes such as a downturn in economic conditions or a public
health crisis, negatively affecting consumer confidence and discretionary spending;
our reliance on third-party suppliers;
labor relations and cost risks and availability of qualified labor;
costs and risks associated with a potential cybersecurity incident or other technology disruption;
our reliance on technology and risks associated with disruption or delay in implementation of new technology;
competition in our industry is intense, and we may not be able to compete successfully;
we operate in a low margin industry, which could increase the volatility of our results of operations;
we may not realize anticipated benefits from our operating cost reduction and productivity improvement efforts;
our profitability is directly affected by cost inflation and deflation and other factors;
we do not have long-term contracts with certain customers;
group purchasing organizations may become more active in our industry and increase their efforts to add our customers as
members of these organizations;
changes in eating habits of consumers;
extreme weather conditions, including hurricane, earthquake and natural disaster damage;
volatility of fuel and other transportation costs;
our inability to adjust cost structure where one or more of our competitors successfully implement lower costs;
our inability to increase our sales in the highest margin portion of our business;
changes in pricing practices of our suppliers;
our growth strategy may not achieve the anticipated results;
risks relating to acquisitions, including the risk that we are not able to realize benefits of acquisitions or successfully
integrate the businesses we acquire;
environmental, health, and safety costs, including compliance with current and future environmental laws and regulations
relating to carbon emissions and climate change and related legal or market measures;
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our inability to comply with requirements imposed by applicable law or government regulations, including increased
regulation of electronic cigarette and other alternative nicotine products;
a portion of our sales volume is dependent upon the distribution of cigarettes and other tobacco products, sales of which
are generally declining;
the potential impact of product recalls and product liability claims relating to the products we distribute and other
litigation;
adverse judgments or settlements or unexpected outcomes in legal proceedings;
negative media exposure and other events that damage our reputation;
decrease in earnings from amortization charges associated with acquisitions;
impact of uncollectibility of accounts receivable;
increase in excise taxes or reduction in credit terms by taxing jurisdictions;
the cost and adequacy of insurance coverage and increases in the number or severity of insurance and claims expenses;
risks relating to our substantial outstanding indebtedness; and
our ability to raise additional capital on commercially reasonable terms or at all.
We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and
other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that
we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the
way expected. We cannot assure you (i) we have correctly measured or identified all of the factors affecting our business or the extent
of these factors’ likely impact, or (ii) our strategy, which is based in part on this analysis, will be successful. All forward-looking
statements in this Form 10-K apply only as of the date of this Form 10-K or as of the date they were made and, except as required by
applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information,
future developments or otherwise.
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Item 1. Business
PART I
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
North America. Our more than 35,000 employees serve a diverse mix of customers, from independent and chain restaurants to
schools, business and industry locations, hospitals, vending distributors, office coffee service distributors, retailers, convenience
stores, and theaters. We source our products from various suppliers and serve as an important partner to our suppliers by providing
them access to our broad customer base. In addition 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"). 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.
Our business, our industry and the U.S. economy are influenced by a number of general macroeconomic factors, including, but
not limited to, changes in the rate of inflation and fuel prices, interest rates, supply chain disruptions, labor shortages, and the effects
of health epidemics and pandemics. We continue to actively monitor the impacts of the evolving macroeconomic and geopolitical
landscape on all aspects of our business. The Company and our industry may face challenges related to product and fleet supply,
increased product and logistics costs, access to labor supply, and lower disposable incomes due to inflationary pressures and
macroeconomic conditions. 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
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. 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. 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 operates a network of 78 distribution centers, each of which is run by a
business team who understands the local markets and the needs of its particular customers and who is empowered to make decisions
on how best to serve them. This segment serves over 175,000 customer locations.
The Foodservice segment markets and distributes food and food-related products to independent restaurants, chain restaurants,
and other institutional “food-away-from-home” locations. Independent customers predominantly include family dining, bar and grill,
pizza and Italian, and fast casual restaurants. We seek to increase the mix of our total sales to independent customers because they
typically use more value-added services, particularly in the areas of product selection and procurement, market trends, menu
development, and operational strategy and also use more of our proprietary-branded products (“Performance Brands”), which are our
highest margin products. As a result, independent customers generate higher gross profit per case that more than offsets the generally
higher supply chain costs that we incur in serving these customers. Chain customers are multi-unit restaurants with five or more
locations and include fine dining, family and casual dining, fast casual, and quick serve restaurants, as well as hotels, healthcare
facilities, and other multi-unit institutional customers. Our Foodservice segment’s chain customers include regional businesses
requiring short-haul routes as well as national businesses requiring long-haul routes, including many of the most recognizable family
and casual dining restaurant chains. Sales to chain customers are typically lower gross margin but have larger deliveries than those to
independent customers.
We offer our customers a broad product assortment that ranges from “center-of-the-plate” items (such as beef, pork, poultry, and
seafood), frozen foods, refrigerated products, and dry groceries to disposables, cleaning and kitchen supplies, and related products
used by our customers. In addition to the products we offer, we provide value-added services by enabling our customers to benefit
from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and
operational strategy.
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Our products consist of Performance Brands, as well as nationally branded products and products bearing our customers’
brands. 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. Some of our chain customers, particularly those with national distribution, develop exclusive stock
keeping units (“SKU”) specifications directly with suppliers and brand these SKUs. We purchase these SKUs directly from suppliers
and receive them into our distribution centers, where they are mixed with other SKUs and delivered to the chain customers’ locations.
Vistar. 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.
Vending operators comprise Vistar’s largest channel, where we distribute a broad selection of vending machine products to the
operators’ depots, from which they distribute products and stock machines. Additionally, Vistar is a leading distributor of products to
theater chains as well as in the office coffee service channel. Vistar has successfully built upon our national platform to broaden the
channels we serve to include hospitality venues, concessionaires, airport gift shops, college bookstores, corrections facilities, and
impulse locations in various brick and mortar big box retailers nationwide. Merchant’s Marts are cash-and-carry operators where
customers generally pick up orders rather than having them delivered. Vistar’s scale in these channels enhances our ability to procure
a broad variety of products for our customers. Vistar distribution centers deliver to vending and office coffee service distributors and
directly to most theaters and various other locations. 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.
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. The Convenience segment's customers include traditional
convenience stores, drug stores, mass merchants, grocery stores, liquor stores and other specialty and small format stores that carry
convenience products. Convenience's product offering includes cigarettes, other tobacco products, alternative nicotine products,
candy, snacks, food, including fresh products, groceries, dairy, bread, beverages, general merchandise and health and beauty care
products. 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 2023, fiscal 2022, or fiscal
2021.
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. 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.
Pricing
Our pricing to customers is either set by contract with the customer or is priced at the time of order. If the price is by contract,
then it is either based on a percentage markup over cost or a fixed markup per unit, and the unit may be expressed either in cases or
pounds of product. If the 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. In the case of a fixed markup percentage, we typically bear the risk of cost deflation or the benefit of cost inflation. If
pricing is set at the time of order, we have the current cost of goods in our inventory and typically pass cost increases or decreases to
our customers. We generally do not lock in or otherwise hedge commodity costs or other costs of goods sold except within certain
customer contracts where the customer bears the risk of cost fluctuation. We believe that our pricing mechanisms provide us with
significant insulation from fluctuations in the cost of goods that we sell. Our inventory turns, on average, every three-and-a-half
weeks, which further protects us from cost fluctuations.
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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. We reduce usage by designing more efficient truck routes and by increasing miles per gallon through on-board computers that
monitor and adjust idling time and maximum speeds and through other technologies. We seek to manage fuel prices through diesel
fuel surcharges to our customers and through the use of costless collars. As of July 1, 2023, we had collars in place for approximately
27% of the gallons we expect to use over the 12 months following July 1, 2023.
Competition
The foodservice distribution industry is highly competitive. Certain of our competitors have greater financial and other
resources than we do. Furthermore, there are two large broadline distributors, Sysco, and US Foods, with national footprints. In
addition, there are numerous regional, local, and specialty distributors. 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. 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 believe that most purchasing
decisions in the foodservice business are based on the quality and price of the product and a distributor’s ability to fill orders
completely and accurately and to provide timely deliveries.
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 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 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 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.
Trademarks and Trade Names
We have numerous perpetual trademarks and trade names that are of significant importance, including Core-Mark, West Creek,
Silver Source, Braveheart 100% Black Angus, Empire’s Treasure, Brilliance, Heritage Ovens, Village Garden, Guest House,
Piancone, Luigi’s, Ultimo, Corazo, Assoluti, Peak Fresh Produce, Roma, First Mark, and Nature’s Best Dairy. Although in the
aggregate these trademark and trade names are material to our results of operations, we believe the loss of a trademark or trade name
individually would not have a material adverse effect on our results of operations. The Company does not have any material patents or
licenses.
Human Capital Resources
Our vision is to create the best experience for our associates and the best outcomes for our Company, customers, and
communities. 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. We also recognize the
importance of keeping our associates safe and healthy, as well as giving them a voice and listening to their concerns and suggestions.
Below, we discuss our efforts to achieve these objectives.
Associates. As of July 1, 2023, our employee population (including employees of our consolidated subsidiaries) totaled over
35,000 full-time and part-time employees in North America. Of that total, approximately 99% were employed on a full-time basis, and
approximately 71% were non-exempt, or paid on an hourly basis.
Compensation and Benefits. We believe our base wages and salaries, which we review annually, are fair and competitive with
the external labor markets in which our associates work. We offer incentive programs that provide cash-bonus opportunities to
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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 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.
We 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. Additionally, we offer an Employee Assistance Program 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. We are committed to building an inclusive culture, where internal stakeholders feel heard, seen and
included. With the active engagement of PFG’s Senior Leadership, we implemented a Diversity, Inclusion & Belonging (DI&B)
strategy to guide us, making education and representation a priority. We established a goal to have candidate pool diversity for senior
leadership positions. We introduced Associate Resource Groups (ARGs) for women and Black/African American associates. Our
ARG investment is intended to broaden inclusivity, building a strong sense of belonging and community. We also use cultural
awareness and education campaigns to bring our strategy to life. Our Vice President of DI&B also provides regular updates to the
Company's Board of Directors (“Board of Directors”). With five out of 11 members of the Board representing gender and ethnic
diversity, our commitment to ensure workforce diversity is reflected at every level of the organization connects to our social
responsibility and business imperatives.
Learning and Development. We 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. We enable a purposeful career journey by supporting associates in mastering their current roles and preparing for
future career paths. 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. 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. This program is intended to create a passionate
learning culture with current and future leaders who pursue innovation and embrace empathy.
Through our Learning Management System, 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.
Additionally, our segments provide segment specific training opportunities that align and compliment the overall learning and
development strategy. We are focused on empowering associates with the right training at the right time, throughout their career
journey.
Health, Safety and Wellness. 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 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 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, 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
heritage months throughout the year. Community support efforts, both local and national, 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. In response to associate feedback, we identified and delivered a number of initiatives to strengthen the
associate experience, including day one benefits, our 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. Department of Agriculture (the
“USDA”), and the U.S. Food and Drug Administration (the “FDA”), which generally impose standards for product quality and
sanitation and are responsible for the administration of bioterrorism legislation affecting the foodservice industry. These government
authorities regulate, among other things, the processing, packaging, storage, distribution, advertising, and labeling of our products.
The FDA Food Safety Modernization Act (the “FSMA”) requires that the FDA impose comprehensive, prevention-based controls
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across the food supply chain, further regulates food products imported into the United States, and provides the FDA with mandatory
recall authority. The FSMA requires the FDA to undertake numerous rulemakings and to issue numerous guidance documents, as well
as reports, plans, standards, notices, and other tasks. As a result, implementation of the legislation is ongoing and likely to take several
years. Our seafood operations are also specifically regulated by federal and state laws, including those administered by the National
Marine Fisheries Service, established for the preservation of certain species of marine life, including fish and shellfish. Our processing
and distribution facilities must be registered with the FDA biennially and are subject to periodic government agency inspections. State
and/or federal authorities generally inspect our facilities at least annually. 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. 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.
The failure to comply with applicable regulatory requirements could result in, among other things, administrative, civil, or
criminal penalties or fines, mandatory or voluntary product recalls, warning or untitled letters, cease and desist orders against
operations that are not in compliance, closure of facilities or operations, the loss, revocation, or modification of any existing licenses,
permits, registrations, or approvals, or the failure to obtain additional licenses, permits, registrations, or approvals in new jurisdictions
where we intend to do business, any of which could have a material adverse effect on our business, financial condition, or results of
operations. 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.
Our operations are subject to a variety of federal, state, and local laws and other requirements, including, employment practice
standards for workers set by the U.S. Department of Labor, and relating to the protection of the environment and the safety and health
of personnel and the public. These include requirements regarding the use, storage, and disposal of solid and hazardous materials and
petroleum products, including food processing wastes, the discharge of pollutants into the air and water, and worker safety and health
practices and procedures. In order to comply with environmental, health, and safety requirements, we may be required to spend money
to monitor, maintain, upgrade, or replace our equipment; plan for certain contingencies; acquire or maintain environmental permits;
file periodic reports with regulatory authorities; or investigate and clean up contamination. We operate and maintain vehicle fleets, and
some of our distribution centers have regulated underground and aboveground storage tanks for diesel fuel and other petroleum
products. Some jurisdictions in which we operate have laws that affect the composition and operation of our truck fleet, such as limits
on diesel emissions and engine idling. A number of our facilities have ammonia- or freon-based refrigeration systems, which could
cause injury or environmental damage if accidentally released, and many of our distribution centers have propane or battery powered
forklifts. Proposed or recently enacted legal requirements, such as those requiring the phase-out of certain ozone-depleting substances
and proposals for the regulation of greenhouse gas emissions, may require us to upgrade or replace equipment, or may increase our
transportation or other operating costs. To date, our cost of compliance with environmental, health, and safety requirements has not
been material. The discovery of contamination for which we are responsible, any accidental release of regulated materials, the
enactment of new laws and regulations, or changes in how existing requirements are enforced could require us to incur additional
costs or subject us to unexpected liabilities, which could have a material adverse effect on our business, financial condition, or results
of operations.
The Surface Transportation Board and the Federal Highway Administration regulate our trucking operations. In addition,
interstate motor carrier operations are subject to safety requirements prescribed in the U.S. Department of Transportation and other
relevant federal and state agencies. Such matters as weight and dimension of equipment are also subject to federal and state
regulations. 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. Our filings with the SEC
are available to the public on the SEC’s website at www.sec.gov. Those filings are also available to the public on, or accessible
through, our website for free via the “Investors” section at www.pfgc.com. 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.
We use our website (www.pfgc.com) and our corporate Facebook account as channels of distribution of company information.
The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in
Website and Social Media Disclosure
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addition to following our press releases, SEC filings and public conference calls and webcasts. 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.
Item 1A. Risk 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 and regional economic conditions. 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. 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, negatively affect consumer confidence and discretionary spending. In fiscal 2023, product cost inflation contributed to an
increase in selling price per case and an increase in net sales. However, sustained inflationary pressure and macroeconomic challenges
could negatively affect consumer discretionary spending decisions within our customers’ establishments, which could negatively impact
our sales. The extent of any such effects on consumer spending depends in part on the magnitude and duration of such conditions, which
cannot be predicted at this time.
We rely on third-party suppliers, and our business may be affected by interruption of supplies or increases in product costs.
We obtain substantially all of our foodservice and related products from third-party suppliers. We typically do not have long-
term contracts with our suppliers. Although our purchasing volume can sometimes provide an advantage when dealing with suppliers,
suppliers may not provide the foodservice products and supplies needed by us in the quantities and at the prices requested. Our
suppliers may also be affected by higher costs to source or produce and transport food products, as well as by other related expenses
that they pass through to their customers, which could result in higher costs for the products they supply to us. Because we do not
control the actual production of most of the products we sell, we are also subject to material supply chain interruptions, delays caused
by interruption in production, and increases in product costs, including those resulting from product recalls or a need to find alternate
materials or suppliers, based on conditions outside our control. These conditions include labor shortages, work slowdowns, work
interruptions, strikes or other job actions by employees of suppliers, government shutdowns, weather conditions or more prolonged
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
bioterrorism in the United States, international hostilities, civil insurrection, and social unrest. Moreover, commodity prices continue
to be volatile and have generally increased due to supply chain disruptions and labor and transportation shortages. 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. Our
inability to anticipate and react to changing food costs through our sourcing and purchasing practices in the future could also have a
material adverse effect on our business, financial condition, or results of operations.
We face risks relating to labor relations, labor costs, and the availability of qualified labor.
As of July 1, 2023, 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. Although our labor contract negotiations have in the past generally
taken place with the local union representatives, we may be subject to increased efforts to engage us in multi-unit bargaining that
could subject us to the risk of multi-location labor disputes or work stoppages that would place us at greater risk of being materially
adversely affected by labor disputes. In addition, labor organizing activities could result in additional employees becoming unionized,
which could result in higher labor costs. 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 us.
Further, potential changes in labor legislation and case law could result in current non-union portions of our workforce, including
warehouse and delivery personnel, being subjected to greater organized labor influence. If additional portions of our workforce
became subject to collective bargaining agreements, this could result in increased costs of doing business as we would become subject
to mandatory, binding arbitration or labor scheduling, labor costs, and standards, which could reduce our operating flexibility.
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
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customers in the U.S. food-away-from-home industry. Any increase in their labor costs, including any increases in costs as a result of
increases in minimum wage requirements, wage inflation and/or increased overtime payments as a result of labor shortages, work
slowdowns, work interruptions, strikes, or other job actions by employees of customers could reduce the profitability of our customers
and reduce demand for our products.
We rely heavily on our employees, particularly warehouse workers and drivers, and any significant shortage of qualified labor
could significantly affect our business. 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. The current competitive labor market has impacted the Company’s ability to hire and retain qualified labor, particularly
warehouse workers and drivers, in certain geographies. See the discussion under “Human Capital Resources” in Item 1, “Business” for
additional information regarding our talent acquisition and talent management efforts in the context of these labor shortages.
Further, we continue to assess our healthcare benefit costs. Despite our efforts to control costs while still providing competitive
healthcare benefits to our associates, significant increases in healthcare costs continue to occur, and we can provide no assurance that
our cost containment efforts in this area will be effective. Our distributors and suppliers also may be affected by higher minimum
wage and benefit standards, wage inflation and/or increased overtime payments as a result of labor shortages, work slowdowns, work
interruptions, strikes, or other actions by their employees, which could result in higher costs for goods and services supplied to us. If
we are unable to raise our prices or cut other costs to cover this expense, such increases in expenses could materially reduce our
operating profit.
A cyber security incident or other technology disruptions could negatively affect our business and our relationships with
customers.
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. 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. We have implemented measures to prevent security breaches and other cyber incidents. However, we and
our third-party providers experience cybersecurity incidents of varying degrees from time-to-time, including ransomware and phishing
attacks, as well as distributed denial of service attacks and the theft of data. To date, interruption of our information technology
networks and systems and unauthorized access or exfiltration 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. Additionally, a portion of our corporate employees work remotely using smartphones,
tablets, and other wireless devices, which may further heighten these and other operational risks. Further, as we pursue our strategy to
grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, we are also expanding and
improving our information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk.
Failure to adequately assess and identify cybersecurity risks associated with acquisitions and new initiatives would increase our
vulnerability to such risks.
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, remediation
costs, and a competitive disadvantage.
We rely heavily on technology in our business and any technology disruption or delay in implementing new technology could
adversely affect our business.
The foodservice distribution industry is transaction intensive. Our ability to control costs and to maximize profits, as well as to
serve customers effectively, depends on the reliability of our information technology systems and related data entry processes. We rely
on software and other technology systems, some of which are managed by third-party service providers, to manage significant aspects
of our business, including making purchases, processing orders, managing our warehouses, loading trucks in the most efficient
manner, and optimizing the use of storage space. 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. 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. While we have invested and continue to invest in technology security initiatives and disaster
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recovery plans, these measures cannot fully insulate us from technology disruptions that could have a material adverse effect on our
business, financial condition, or results of operations.
Information technology systems evolve rapidly and in order to compete effectively we are required to integrate new
technologies in a timely and cost-effective manner. If competitors implement new technologies before we do, allowing such
competitors to provide lower priced or enhanced services of superior quality compared to those we provide, this could have a material
adverse effect on our business, financial condition, or results of operations.
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. 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. 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. We believe that most purchasing decisions in the foodservice business
are based on the quality and price of the product and a distributor’s ability to fill orders completely and accurately and provide timely
deliveries. 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. 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.
We operate in a low margin industry, which could increase the volatility of our results of operations.
Similar to other resale-based industries, the distribution industry is characterized by relatively low profit margins. 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 material impact on our net income.
Volatile food costs may have a direct impact upon our profitability.
We make a significant portion of our sales at prices that are based on the cost of products we sell plus a percentage markup. As a
result, volatile food costs may have a direct impact upon our profitability. Our profit levels may be negatively affected during periods
of product cost deflation, even though our gross profit percentage may remain relatively constant or even increase. 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, the impact of current economic conditions
has resulted in inflation of 8.6% for fiscal 2023, which has increased our product costs and decreased profit margins. 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. In addition, product cost inflation may negatively affect
consumer discretionary spending decisions within our customers’ establishments, which could negatively impact our sales. Our
inability to quickly respond to inflationary and deflationary cost pressures could have a material adverse impact on our business,
financial condition, or results of operations.
Many of our customers are not obligated to continue purchasing products from us.
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. Because such customers are not obligated to continue purchasing products from us, that the volume and/or
number of our customers’ purchase orders may not remain constant or increase and we may be unable to maintain our existing
customer base. Significant decreases in the volume and/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.
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Group purchasing organizations may become more active in our industry and increase their efforts to add our customers as
members of these organizations.
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. If these
GPOs are able to add a significant number of our customers as members, we may be forced to lower the prices we charge these
customers in order to retain their business, which would negatively affect our business, financial condition, or results of operations.
Additionally, if we are unable or unwilling to lower the prices we charge for our products to a level that is satisfactory to the GPOs,
we may lose the business of those customers that are members of these organizations, which could have a material adverse effect on
our business, financial condition, or results of operations.
Changes in consumer eating habits could reduce the demand for our products.
Changes in consumer eating habits (such as a decline in consuming food away from home, a decline in portion sizes, or a shift
in preferences toward restaurants that are not our customers) could reduce demand for our products, which could adversely affect our
business, financial condition, or results of operations. 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. There is a
growing consumer preference for sustainable, organic, and locally grown products, and a shift towards plant-based proteins and/or
animal proteins derived from animals that were humanely treated and antibiotic free. 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.
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. 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. 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.
Extreme weather conditions and natural disasters may interrupt our business or our customers’ businesses.
Many of our facilities and our customers’ facilities are located in areas that may be subject to extreme and occasionally
prolonged weather conditions, including hurricanes, blizzards, earthquakes, and extreme heat or cold. Such extreme weather
conditions, whether caused by global climate change or otherwise, could interrupt our operations and reduce the number of consumers
who visit our customers’ facilities in such areas. 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.
The high cost of fuel can negatively affect consumer confidence and discretionary spending and, as a result, reduce the
frequency and amount spent by consumers within our customers’ establishments for food away from home. The high price of fuel and
other transportation related costs, such as tolls, fuel taxes, and license and registration fees, can also increase the price we pay for
products as well as the costs incurred by us to deliver products to our customers. 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. These factors, if
occurring over an extended period of time, could have a material adverse effect on our sales, margins, operating expenses, or results of
operations. For example, in fiscal 2023, the United States experienced significant increases in fuel prices and, as a result, the
Company's fuel expense increased $30.8 million in fiscal 2023 compared to fiscal 2022.
From time to time, we may enter into arrangements to manage our exposure to fuel costs. Such arrangements, however, may not
be effective and may result in us paying higher than market costs for a portion of our fuel. In addition, while we have been successful
in the past in implementing fuel surcharges to offset fuel cost increases, we may not be able to do so in the future.
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.
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If one or more of our competitors implements a lower cost structure, they may be able to offer lower prices to customers and
we may be unable to adjust our cost structure in order to compete profitably.
Over the last several decades, the retail food industry has undergone significant change as companies such as Walmart and
Costco have developed a lower cost structure to provide their customer base with an everyday low-cost product offering. As a large-
scale foodservice distributor, we have similar strategies to remain competitive in the marketplace by reducing our cost structure.
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.
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. 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. 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 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. Promotional allowances are a standard
practice among suppliers to distributors and represent a significant source of profitability for us and our competitors. Any change in
such practices that results in the reduction or elimination of promotional allowances could be disruptive to us and the industry as a
whole and could have a material adverse effect on our business, financial condition, or results of operations.
Our growth strategy may not achieve the anticipated results.
Our 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 growth and innovation strategies require significant commitments of management
resources and capital investments and may not grow our net sales at the rate we expect or at all. As a result, we may not be able to
recover the costs incurred in developing our new projects and initiatives or to realize their intended or projected benefits, which could
have a material adverse effect on our business, financial condition, or results of operation.
We may not be able to realize benefits of acquisitions or successfully integrate the businesses we acquire.
From time to time, we acquire businesses that are intended to broaden our customer base, and/or increase our capabilities and
geographic reach. 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. Integration of an acquired business may
be more difficult when we acquire a business in a market in which we have limited expertise or with a company culture different from
ours. A significant expansion of our business and operations, in terms of geography or magnitude, could strain our administrative and
operational resources. Additionally, we may be unable to retain qualified management and other key personnel employed by acquired
companies and may fail to build a network of acquired companies in new markets. We could face significantly greater competition
from broadline foodservice distributors in these markets than we face in our existing markets.
We regularly evaluate opportunities to acquire other companies. 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.
Our earnings may be reduced by amortization charges associated with any future acquisitions.
After we complete an acquisition, we must amortize any identifiable intangible assets associated with the acquired company
over future periods. We also must amortize any identifiable intangible assets that we acquire directly. Our amortization of these
amounts reduces our future earnings in the affected periods.
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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. 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. 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. 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. We are also
subject to regulation by state authorities for the accuracy of our weighing and measuring devices. Additionally, the Surface
Transportation Board and the Federal Highway Administration regulate our trucking operations, and interstate motor carrier
operations are subject to safety requirements prescribed by the U.S. Department of Transportation and other relevant federal and state
agencies. Our suppliers are also subject to similar regulatory requirements and oversight. We have expanded the product lines of our
Vistar segment to include hemp-based CBD products authorized under the 2018 Farm Bill. Sales of certain hemp-based CBD products
are prohibited in some jurisdictions and the FDA and certain states and local governments may enact regulations that limit the
marketing and use of such products. In the event that the FDA or state and local governments impose regulations on CBD products,
we do not know what the impact would be on our products, and what costs, requirements, and possible prohibitions may be associated
with such regulations. The failure to comply with applicable regulatory requirements could result in, among other things,
administrative, civil, or criminal penalties or fines; mandatory or voluntary product recalls; warning or untitled letters; cease and desist
orders against operations that are not in compliance; closure of facilities or operations; the loss, revocation, or modification of any
existing licenses, permits, registrations, or approvals; or the failure to obtain additional licenses, permits, registrations, or approvals in
new jurisdictions where we intend to do business, any of which could have a material adverse effect on our business, financial
condition, or results of operations. 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.
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, 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. In the course of our operations, we operate, maintain, and fuel fleet vehicles; store fuel in on-site above and underground
storage tanks; operate refrigeration systems; and use and dispose of hazardous substances and food wastes. We could incur substantial
costs, including fines or penalties and third-party claims for property damage or personal injury, as a result of any violations of
environmental or workplace safety laws and regulations or releases of regulated materials into the environment. 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. For example, various jurisdictions have adopted or are considering legislation and
regulations restricting displays and marketing of tobacco and alternative nicotine products, requiring the disclosure of ingredients used
in the manufacture of tobacco and alternative nicotine products, and imposing restrictions on public smoking and vaping. In addition,
the FDA has been empowered to regulate changes to nicotine yields and the chemicals and flavors used in tobacco and alternative
nicotine products (including cigars, pipe and e-cigarette products), require ingredient listings be displayed on tobacco and alternative
nicotine products, prohibit the use of certain terms 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. Such legislation and related regulation are likely to
continue to adversely impact the market for tobacco and alternative nicotine products and, accordingly, our sales of such products.
Likewise, cigarettes and tobacco products are subject to substantial excise taxes. Significant increases in cigarette-related taxes and/or
fees have been proposed or enacted and are likely to continue to be proposed or enacted by various taxing jurisdictions within the U.S.
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. If these
excise taxes are substantially increased, or credit terms are substantially reduced, it could have a material adverse effect on our
business, financial condition, and results of operations.
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Climate change, or the legal, regulatory, or market measures being implemented to address climate change, could have an
adverse impact on our business.
The effects of climate change may create financial and operational risks to our business, both directly and indirectly. There is an
increased focus around the world by regulatory and legislative bodies at all levels towards policies relating to climate change and the
impact of global warming, including the regulation of greenhouse gas (GHG) emissions, energy usage, and sustainability efforts.
Increased compliance costs and expenses due to the impacts of climate change on our business, as well as additional legal or
regulatory requirements regarding climate change or designed to reduce or mitigate the effects of carbon dioxide and other GHG
emissions on the environment, particularly diesel engine emissions, may cause disruptions in, or an increase in the costs associated
with, the running of our business, particularly with regard to our distribution and supply chain operations. 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. Moreover, compliance with any such legal or regulatory requirements may require that we implement changes to our
business operations and strategy, which would require us to devote substantial time and attention to these matters and cause us to incur
additional costs. We may not be able to accurately predict, prepare for, and respond to new kinds of technological innovations with
respect to electric vehicles and other technologies that minimize emissions. Laws enacted to reduce GHG could also directly or
indirectly affect our suppliers, which could adversely affect our business, financial condition, or results of operations. The effects of
climate change, and legal or regulatory initiatives to address climate change, could have a long-term adverse effect on our business,
financial condition, or results of operations.
In addition, from time to time we establish and publicly announce goals and commitments related to corporate social
responsibility matters, including those related to reducing our impact on the environment. For example, in 2023, we established goals
for the reduction of GHG emissions, which include a target of reducing Scope 1 and 2 GHG emission intensity by 15% by 2030 from
a 2021 base year. Our ability to meet this and other related goals depends in part on significant technological advancements with
respect to the development and availability of reliable, affordable, and sustainable alternative solutions, including electric and other
alternative fuel vehicles as well as alternative energy sources, which may not be developed or be available to us in the timeframe
needed to achieve these goals. In addition, we may determine that it is in our best interests to prioritize other business, social,
governance, or sustainable investments over the achievement of our current goals based on economic, regulatory or social factors,
business strategy, or other factors. If we do not meet our publicly stated goals, then we may experience a negative reaction from the
media, stockholders, activists, and other interested stakeholders, and any perception that we have failed to act responsibly regarding
climate change, whether or not valid, could result in adverse publicity or legal challenges and negatively affect our business and
reputation. While we remain committed to being responsive to climate change and reducing our carbon footprint, there can be no
assurance that our goals and strategic plans to achieve those goals will be successful, that the costs related to climate transition will not
be higher than expected, that the necessary technological advancements will occur in the timeframe we expect, or at all, or that
proposed regulation or deregulation related to climate change will not have a negative competitive impact, any one of which could
have a material adverse effect on our business, financial condition, or results of operations.
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. 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 over the past few decades. 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. 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 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. We may also voluntarily recall or withdraw products that we consider not to meet our quality standards,
whether for taste, appearance, or otherwise, in order to protect our brand and reputation. 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
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the unavailability of the product for a period of time, our business, financial condition, or results of operations may be materially
adversely affected.
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. 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. For example, punitive damages may not be covered by
insurance. 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. We generally seek contractual indemnification and insurance coverage
from parties supplying products to us, but this indemnification or insurance coverage is limited, as a practical matter, to the
creditworthiness of the indemnifying party and the insured limits of any insurance provided by suppliers. If we do not have adequate
insurance or contractual indemnification available, the liability relating to defective products could adversely affect our business,
financial condition, or results of operations.
Adverse judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our
business could reduce our profits or limit our ability to operate our business.
In the normal course of our business, we are involved in various legal proceedings. The outcome of these proceedings cannot be
predicted. If any of these proceedings were to be determined adversely to us or a settlement involving a payment of a material sum of
money were to occur, it could materially and adversely affect our profits or 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. 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.
Maintaining a good reputation and public confidence in the safety of the products we distribute or services we provide is critical
to our business, particularly to selling our Performance Brands products. Anything that damages our reputation, or the public’s
confidence in our products, services, facilities, delivery fleet, operations, or employees, whether or not justified, including adverse
publicity about the quality, safety, or integrity of our products, could quickly affect our net sales and profits. Reports, whether true or
not, of food-borne illnesses or harmful bacteria (such as e. coli, bovine spongiform encephalopathy, hepatitis A, trichinosis, listeria, or
salmonella) and injuries caused by food tampering could also severely injure our reputation or negatively affect the public’s
confidence in our products. We may need to recall our products if they become adulterated. 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, instances of food-borne illnesses, food tampering, or other health concerns, such as flu
epidemics or other pandemics (such as 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, a widespread health epidemic (such as COVID-19) or food-borne illness, whether or not related to the use of
our products, as well as terrorist events may cause consumers to avoid public gathering places, like restaurants, or otherwise change
their eating behaviors. 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.
We have experienced losses because of the inability to collect accounts receivable in the past and could experience increases in
such losses in the future if our customers are unable to pay their debts to us when due.
Certain of our customers have from time to time experienced bankruptcy, insolvency, and/or an inability to pay their debts to us
as they come due. If our customers suffer significant financial difficulty, they may be unable to pay their debts to us timely or at all,
which could have a material adverse effect on our results of operations. It is possible that customers may contest their contractual
obligations to us under bankruptcy laws or otherwise. Significant customer bankruptcies could further adversely affect our net sales
and increase our operating expenses by requiring larger provisions for bad debt expense. In addition, even when our contracts with
these customers are not contested, if customers are unable to meet their obligations on a timely basis, it could adversely affect our
ability to collect receivables. Further, we may have to negotiate significant discounts and/or extended financing terms with these
customers in such a situation. If we are unable to collect upon our accounts receivable as they come due in an efficient and timely
manner, our business, financial condition, or results of operations may be materially adversely affected.
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Insurance and claims expenses could significantly reduce our profitability.
Our future insurance and claims expenses might exceed historic levels, which could reduce our profitability. We maintain high-
deductible insurance programs covering portions of general and vehicle liability and workers’ compensation. The amount in excess of
the deductibles is insured by third-party insurance carriers, subject to certain limitations and exclusions. We also maintain self-funded
group medical insurance.
We reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our
experience. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.
Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims costs, it is possible
that the amount of one or more claims could exceed our aggregate coverage limits. Insurance carriers have raised premiums for many
businesses in our industry, including ours, and our insurance and claims expense could continue to increase in the future. Our results
of operations and financial condition could be materially and adversely affected if (1) total claims costs significantly exceed our
coverage limits, (2) we experience a claim in excess of our coverage limits, (3) our insurance carriers fail to pay on our insurance
claims, (4) we experience a claim for which coverage is not provided, or (5) a large number of claims may cause our cost under our
deductibles to differ from historic averages.
Risks Relating to Our Indebtedness
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to
react to changes in the economy or in our industry, expose us to interest rate risk to the extent of our variable rate debt, and
prevent us from meeting our obligations under our indebtedness.
As of July 1, 2023, we had $4,010.0 million of indebtedness, including finance lease obligations. In addition, we had $2,673.8
million of availability under the Amended 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 $172.2 million of outstanding letters of credit and $99.7 million of lenders’ reserves under the Amended ABL Facility.
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.
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. As a result of the discontinuation of the London Inter-Bank
Offered Rate (“LIBOR”) as a reference rate on June 30, 2023, there is uncertainty as to whether the transition from LIBOR to the
Secured Overnight Financing Rate (“SOFR”) or another reference rate will result in financial market disruptions or higher interest
costs to borrowers, which could increase our interest expense and have an adverse effect on our business and results of operations. Our
ABL Facility was recently amended to replace LIBOR with SOFR. SOFR is a relatively new reference rate and has a very limited
history. The future performance of SOFR cannot be predicted based on its limited historical performance. Since the initial publication
of SOFR in April 2018, changes in SOFR have, on occasion, been more volatile than changes in other benchmark or market rates,
such as U.S. dollar LIBOR. Additionally, any successor rate to SOFR under the Amended ABL Facility may not have the same
characteristics as SOFR or LIBOR. As a result, the consequences of the phase-out of LIBOR cannot be entirely predicted at this time.
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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.
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. To a certain extent, this ability is subject to general economic, financial, competitive, legislative,
regulatory, and other factors that are beyond our control. 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. 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. In addition, any refinancing of our
indebtedness could be at a higher interest rate, and the terms of our existing or future debt arrangements may restrict us from effecting
any of these alternatives. 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.
Despite our high indebtedness level, we and our subsidiaries will still be able to incur significant additional amounts of debt,
which could further exacerbate the risks associated with our substantial indebtedness.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the agreements
governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number
of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in
compliance with these restrictions could be substantial.
The agreements governing our outstanding indebtedness contain restrictions that limit our flexibility in operating our
business.
The agreements governing our outstanding indebtedness contain various covenants that limit our ability to engage in specified
types of transactions. 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.
As a result of these restrictions, we are limited as to how we conduct our business and we may be unable to raise additional debt
or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness
we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these
covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
A breach of any of these covenants could result in a default under one or more of these agreements, including as a result of cross
default provisions, and, in the case of our ABL Facility, amounts due may be accelerated and the rights and remedies of the lenders
may be exercised, including rights with respect to the collateral securing the obligations.
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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 instruments may
result in economic losses should interest rates decline to a point lower than our fixed rate commitments. We are exposed to credit-
related losses, which could affect the results of operations in the event of fluctuations in the fair value of the interest rate swaps due to
a change in the credit worthiness or non-performance by the counterparties to the interest rate swaps.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
As of July 1, 2023, we operated 142 distribution centers across our three reportable segments. Of our 142 facilities, we owned
65 facilities and leased the remaining 77 facilities. Our Foodservice segment operated 78 distribution centers, our Vistar segment
operated 25 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.
Location
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
Florida
Georgia
Iowa
Illinois
Indiana
Kentucky
Louisiana
Massachusetts
Maryland
Maine
Michigan
Minnesota
Missouri
Mississippi
North Carolina
Nebraska
New Jersey
New Mexico
Nevada
Ohio
Oregon
Pennsylvania
South Carolina
Tennessee
Texas
Utah
Virginia
Vermont
Washington
Wisconsin
Canada
Total
Foodservice
1
1
1
4
1
—
7
3
1
2
1
3
3
3
2
1
1
3
4
4
1
1
3
—
—
3
1
2
3
5
5
—
3
2
—
3
—
78
Vistar
Convenience
—
1
—
5
1
—
2
2
1
1
1
2
—
2
—
1
1
1
—
—
2
—
—
2
1
2
1
2
—
—
1
1
—
—
1
1
4
39
—
—
1
2
1
1
1
1
—
1
—
1
—
—
—
—
2
1
1
1
1
—
2
—
1
1
1
1
—
1
2
—
—
—
—
1
—
25
Total
1
2
2
11
3
1
10
6
2
4
2
6
3
5
2
2
4
5
5
5
4
1
5
2
2
6
3
5
3
6
8
1
3
2
1
5
4
142
Our Foodservice “broad-line” customers are generally located no more than 200 miles from one of our distribution facilities,
and national chain customers are generally located no more than 450 miles from one of our distribution facilities. Of the 78
Foodservice distribution centers, 10 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. The
Convenience segment operates two additional facilities as a third-party logistics provider dedicated solely to supporting the logistics
and management requirements of one of our customers. These distribution facilities are located in Arizona and Texas.
Customer orders are typically assembled in our distribution facilities and then sorted, placed on pallets, and loaded onto trucks
and trailers in delivery sequence. Deliveries are generally made in large tractor-trailers that we usually lease. We use integrated
computer systems to design and track efficient route sequences for the delivery of our products.
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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.
Item 3. Legal Proceedings
We are a party to various claims, lawsuits and other legal proceedings arising in the ordinary course of business.
While it is impossible to determine with certainty the ultimate outcome of any of these proceedings, lawsuits, and claims,
management believes that adequate provisions have been made or insurance secured for all currently pending proceedings so that the
ultimate outcomes will not have a material adverse effect on our financial position. Refer to Note 15. Commitments and Contingencies
within the Notes to Consolidated Financial Statements included in Item 8 for disclosure of ongoing litigation.
Item 4. Mine Safety Disclosures
Not Applicable
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market and Price Range of Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol “PFGC.”
Approximate Number of Common Shareholders
At the close of business on August 9, 2023, there were approximately 1,423 holders of record of our shares of common stock.
This stockholder figure does not include a substantially greater number of holders whose shares are held of record by banks, brokers
and other financial institutions.
Dividends
We have no current plans to pay dividends on our common stock. 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. Any decision to declare and pay
dividends in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, our
results of operations, cash requirements, financial condition, contractual restrictions, and other factors that our Board of Directors may
deem relevant. Because we are a holding company, and have no direct operations, we will only be able to pay dividends from funds
we receive from our subsidiaries.
Recent Sales of Unregistered Securities
None.
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 2023.
Period
April 2, 2023—April 29, 2023
April 30, 2023—May 27, 2023
May 28, 2023—July 1, 2023
Total
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)
195 $
241 $
200,654 $
201,090 $
59.94
56.70
56.06
56.07
— $
— $
200,654 $
200,654
300.0
300.0
288.8
(1) During the fourth quarter of fiscal 2023, the Company purchased 436 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.
(2) On November 16, 2022, the Board of Directors authorized a new share repurchase program for up to $300 million of the
Company’s outstanding common stock. This authorization replaced the previously authorized $250 million share repurchase program.
The new 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. Repurchases under this program depend upon
market place conditions and other factors, including compliance with the covenants in the agreements governing our existing
indebtedness.
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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, the S&P Midcap 400 index, and
the S&P Midcap 400 Food, Beverage & Tobacco Industry Group. The Company has elected to replace the S&P Midcap 400 index
Stock Performance Graph
with the S&P Midcap 400 Food, Beverage & Tobacco Industry Group because the new index represents a group of companies more
aligned with our peer group. In this transition year, the stock performance graph below includes the new index and the previously
The performance graph below compares the cumulative total shareholder return of the Company’s common stock over the
reported index. The graph assumes the investment of $100 in our common stock and each of the indices as of the market close on June
previous five fiscal years, with the cumulative total return for the same period of the S&P 500 index, the S&P Midcap 400 index, and
29, 2018 and the reinvestment of dividends. Performance data for the Company, the S&P 500 index, the S&P Midcap 400 index, and
the S&P Midcap 400 Food, Beverage & Tobacco Industry Group. The Company has elected to replace the S&P Midcap 400 index
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
with the S&P Midcap 400 Food, Beverage & Tobacco Industry Group because the new index represents a group of companies more
years. The stock price performance graph is not necessarily indicative of future stock price performance.
aligned with our peer group. In this transition year, the stock performance graph below includes the new index and the previously
reported index. The graph assumes the investment of $100 in our common stock and each of the indices as of the market close on June
29, 2018 and the reinvestment of dividends. Performance data for the Company, the S&P 500 index, the S&P Midcap 400 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.
Comparison of Shareholder Stock Return
June 29, 2018 – June 30, 2023
Performance Food Group S&P 500 S&P Mid Cap 400 S&P Mid Cap 400/Food Beverage & Tobacco
$200
$180
$160
$140
$120
$100
$ 80
$ 60
6/29/18
Item 6. [Reserved]
Item 6. [Reserved]
6/28/19
6/26/20
7/2/21
7/1/22
6/30/2023
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Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the
audited Consolidated Financial Statements and the Notes thereto included in Item 8. Financial Statements and Supplementary Data of
this Form 10-K. In addition to historical consolidated financial information, this discussion contains forward-looking statements that
reflect our plans, estimates, and beliefs and involve numerous risks and uncertainties, including those described in Item 1A. Actual
results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note
Regarding Forward-Looking Statements” in this Form 10-K.
The following includes a comparison of our consolidated results of operations, our segment results and financial position for
fiscal years 2023 and 2022. For a comparison of our consolidated results of operations and financial position for fiscal years 2022
and 2021, 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 July 2, 2022, filed with the SEC on August 19, 2022. For a comparison of
segment results for fiscal years 2022 and 2021, 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 July 2, 2022, filed with the SEC on August
19, 2022, as updated by Exhibit 99.1 of the Current Report filed on Form 8-K with the SEC on November 21, 2022.
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 product assortment ranges from “center-of-the-plate” items (such as beef, pork, poultry, and
seafood), frozen foods, and groceries to candy, snacks, beverages, cigarettes, and other tobacco products. We also sell disposables,
cleaning and kitchen supplies, and related products used by our customers. 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.
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. 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 Vistar segment
specializes in distributing candy, snacks, beverages, and other items nationally to vending, office coffee service, theater, retail,
hospitality, and other channels. 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. 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 30th. This resulted in a 52-week year for fiscal 2023, a 52-week
year for fiscal 2022 and a 53-week year for fiscal 2021. References to “fiscal 2023” are to the 52-week period ended July 1, 2023,
references to “fiscal 2022” are to the 52-week period ended July 2, 2022, and references to “fiscal 2021” are to the 53-week period
ended July 3, 2021.
Key Factors Affecting Our Business
Our business, our industry and the U.S. economy are influenced by a number of general macroeconomic factors, including, but
not limited to, changes in the rate of inflation and fuel prices, interest rates, supply chain disruptions, labor shortages, and the effects
of health epidemics and pandemics. We continue to actively monitor the impacts of the evolving macroeconomic and geopolitical
landscape on all aspects of our business. The Company and our industry may face challenges related to product and fleet supply,
increased product and logistics costs, access to labor supply, and lower disposable incomes due to inflationary pressures and
macroeconomic conditions. The extent to which these challenges will affect our future financial position, liquidity, and results of
operations remains uncertain.
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We believe that our long-term performance is principally affected by the following key factors:
•
•
•
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. The foodservice distribution industry is
also sensitive to national and regional economic conditions, such as changes in consumer spending, changes in consumer
confidence, and changes in the prices of certain goods.
Food distribution market structure. The 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.
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.
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.
Net Sales
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, and mix of products sold.
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
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.
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. 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 2025, Notes due 2027, and Notes due
2029 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date). 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.
Adjusted EBITDA is not defined under GAAP, is not a measure of operating income, operating performance, or liquidity
presented in accordance with 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
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analysts, investors, and other interested parties, including our lenders under our credit agreement 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.
Adjusted EBITDA has important limitations as analytical tools 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:
•
•
•
•
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
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
credit agreement and indentures. Adjusted EBITDA among other things:
•
•
does not include non-cash stock-based employee compensation expense and certain other non-cash charges; and
does not include acquisition, restructuring, and other costs incurred to realize future cost savings and enhance our
operations.
We have included below reconciliations of Adjusted EBITDA to the most directly comparable measure calculated in accordance
with GAAP for the periods presented.
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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 (dollars in
millions, except per share data):
Net sales
Cost of goods sold
Gross profit
Operating expenses
Operating profit
Other expense, net
Interest expense
Other, net
Other expense, net
Income before income taxes
Income tax expense
Net income
Adjusted EBITDA
Weighted-average common shares
outstanding:
Basic
Diluted
Earnings per common share:
Basic
Diluted
Fiscal Year Ended
Fiscal 2023
Fiscal 2022
July 1,
2023
July 2,
2022
July 3, 2021
Change
%
Change
$ 57,254.7 $ 50,894.1 $ 30,398.9 $ 6,360.6 12.5
5,362.1 11.7
50,999.8 45,637.7 26,873.7
998.5 19.0
3,525.2
6,254.9 5,256.4
560.1 11.4
3,324.5
5,489.1 4,929.0
438.4 133.9
200.7
327.4
765.8
20,495.2
18,764.0
1,731.2
1,604.5
126.7
%
67.4
69.8
49.1
48.3
63.1
218.0
3.8
221.8
544.0
146.8
397.2 $
182.9
(22.6 )
160.3
167.1
54.6
112.5 $
$
$ 1,363.4 $ 1,019.8 $
152.4
(6.4 )
146.0
54.7
14.0
40.7 $
625.3 $
35.1 19.2
26.4 116.8
61.5 38.4
376.9 225.6
92.2 168.9
284.7 253.1
343.6 33.7
30.5
(16.2 )
14.3
112.4
40.6
71.8
394.5
20.0
(253.1 )
9.8
205.5
290.0
176.4
63.1
154.2
156.1
149.8
151.3
132.1
133.4
4.4
4.8
2.9
3.2
17.7
17.9
13.4
13.4
$
$
2.58 $
2.54 $
0.75 $
0.74 $
0.31 $
0.30 $
1.83 244.0
1.80 243.2
$
$
0.44
0.44
141.9
146.7
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:
Net income
Interest expense
Income tax expense
Depreciation
Amortization of intangible assets
Change in LIFO reserve (1)
Stock-based compensation expense
Loss (gain) on fuel derivatives
Acquisition, integration & reorganization expenses (2)
Other adjustments (3)
Adjusted EBITDA
July 1, 2023
Fiscal year ended
July 2, 2022
(In millions)
July 3, 2021
$
$
397.2 $
218.0
146.8
315.7
181.0
39.2
43.3
5.7
10.6
5.9
1,363.4 $
112.5 $
182.9
54.6
279.7
183.1
122.9
44.0
(20.7 )
49.9
10.9
1,019.8 $
40.7
152.4
14.0
213.9
125.0
36.4
25.4
(6.4 )
16.2
7.7
625.3
(1)
(2)
(3)
Includes a (decrease) in the last-in-first-out (“LIFO”) reserve of (19.2) million for Foodservice and an increase of $58.4 million
for Convenience for fiscal 2023 compared to increases of $31.9 million for Foodservice and $91.0 million for Convenience for
fiscal 2022 and increases of $11.8 million for Foodservice and $24.6 million for Convenience for fiscal 2021.
Includes professional fees and other costs related to completed and abandoned acquisitions, costs of integrating certain of our
facilities, and facility closing costs.
Includes asset impairments, gains and losses on disposal of fixed assets, amounts related to favorable and unfavorable leases,
foreign currency transaction gains and losses, franchise tax expense, and other adjustments permitted by our credit agreement.
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Consolidated Results of Operations
Fiscal year ended July 1, 2023 compared to fiscal year ended July 2, 2022
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. Net sales increased $6.4 billion, or
12.5%, in fiscal 2023 compared to fiscal 2022.
The increase in net sales was primarily a result of the acquisition of Core-Mark in the first quarter of fiscal 2022 and an increase
in selling price per case due to inflation and channel mix. The overall rate of product cost inflation declined throughout fiscal 2023
and was approximately 8.6% for fiscal 2023. Total case volume increased 5.8% in fiscal 2023 compared to fiscal 2022. Total organic
case volume increased 1.6% in fiscal 2023 compared to the prior fiscal year.
Gross Profit
Gross profit increased $998.5 million, or 19.0%, in fiscal 2023 compared to fiscal 2022. The increase in gross profit was
primarily driven by the acquisition of Core-Mark in the first quarter of fiscal 2022, a favorable shift in the mix of cases sold, including
growth in the independent channel, and procurement related gains.
Operating Expenses
Operating expenses increased $560.1 million, or 11.4%, for fiscal 2023 compared to fiscal 2022. The increase in operating
expenses were primarily driven by the acquisition of Core-Mark in the first quarter of fiscal 2022, as well as increases in personnel
expense, fuel expense, and repairs and maintenance expense. Operating expenses include a $190.0 million increase in personnel
expenses primarily related to wages, commissions and benefits, a $34.9 million increase in repairs and maintenance expense primarily
related to transportation equipment and cloud-based information technology services and a $30.8 million increase in fuel expense
primarily due to higher fuel prices for fiscal 2023 compared to the prior fiscal year. These increases were partially offset by a $10.2
million decrease for fiscal 2023 in professional fees primarily related to prior year acquisitions.
Depreciation and amortization of intangible assets increased from $462.8 million in fiscal 2022 to $496.7 million in fiscal 2023,
an increase of 7.3%. Depreciation of fixed assets and amortization of intangible assets increased as a result of the Core-Mark
acquisition and a prior fiscal year acquisition within Foodservice.
Net Income
Net income was $397.2 million for fiscal 2023 compared to $112.5 million for fiscal 2022. This increase in net income was
attributable to the $438.4 million increase in operating profit, partially offset by increases in income tax expense, interest expense and
other, net. The increase in interest expense was primarily the result of an increase in the average interest rate in fiscal 2023 compared
to the prior fiscal year. The increase in other, net primarily relates to changes in the fair value of fuel hedging derivatives.
The Company reported income tax expense of $146.8 million for fiscal 2023 compared to $54.6 million for fiscal 2022. Our
effective tax rate in fiscal 2023 was 27.0% compared to 32.7% in fiscal 2022. The effective tax rate for fiscal 2023 differed from the
prior fiscal years primarily due to a decrease in non-deductible acquisition-related expenses and state income tax expense as a
percentage of book income.
Segment Results
The Company has three reportable segments: Foodservice, Vistar, and Convenience. Management evaluates the performance of
these segments based on various operating and financial metrics, including their respective sales growth and Adjusted EBITDA.
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.
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 following provides a comparison of our segment results for fiscal years 2023 and 2022.
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The following tables set forth net sales and Adjusted EBITDA by segment for the periods indicated (dollars in millions):
Net Sales
Foodservice
Vistar
Convenience
Corporate & All Other
Intersegment Eliminations
Total net sales
Adjusted EBITDA
Foodservice
Vistar
Convenience
Corporate & All Other
Total Adjusted EBITDA
Fiscal year ended
Fiscal 2023
Fiscal 2022
July 1, 2023
July 2, 2022
July 3, 2021
$28,490.6
4,549.3
24,119.6
700.4
(605.2)
$57,254.7
$26,579.2
3,681.8
20,603.3
526.5
(496.7)
$50,894.1
$21,890.0
2,539.6
5,946.8
428.6
(406.1)
$30,398.9
Change
$1,911.4
867.5
3,516.3
173.9
(108.5)
$6,360.6
%
7.2
23.6
17.1
33.0
(21.8)
12.5
Change
$4,689.2
1,142.2
14,656.5
97.9
(90.6)
$20,495.2
%
21.4
45.0
246.5
22.8
(22.3)
67.4
July 1, 2023
Fiscal year ended
July 2, 2022
July 3, 2021
Change
%
Change
%
Fiscal 2023
Fiscal 2022
$943.6
325.3
328.8
(234.3)
$1,363.4
$786.5
193.0
257.1
(216.8)
$1,019.8
$677.5
84.8
36.4
(173.4)
$625.3
$157.1
132.3
71.7
(17.5)
$343.6
20.0
68.5
27.9
(8.1)
33.7
$109.0
108.2
220.7
(43.4)
$394.5
16.1
127.6
606.3
(25.0)
63.1
Segment Results—Foodservice
Fiscal year ended July 1, 2023 compared to fiscal year ended July 2, 2022
Net Sales
Net sales for Foodservice increased $1.9 billion, or 7.2%, from fiscal 2022 to fiscal 2023. This increase in net sales was driven
by an increase in selling price per case as a result of inflation and a favorable shift in mix. The overall rate of product cost inflation
declined throughout fiscal 2023 and was approximately 6.4% for fiscal 2023. Securing new and expanding business with independent
customers resulted in organic independent case growth of 6.2% in fiscal 2023 compared to the prior fiscal year. For fiscal 2023,
independent sales as a percentage of total segment sales were 39.3%.
Adjusted EBITDA
Adjusted EBITDA for Foodservice increased $157.1 million, or 20.0%, from fiscal 2022 to fiscal 2023. 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 $389.9 million, or 11.3% in fiscal 2023 compared to the prior fiscal year. The increase in gross profit
was driven by a favorable shift in the mix of cases sold to independent customers, including more Performance Brands products sold
to independent customers, partially offset by an expected decrease in procurement gains as the rate of inflation declines.
Operating expenses impacting Foodservice’s Adjusted EBITDA increased by $233.2 million, or 8.7%, from fiscal 2022 to fiscal
2023. Operating expenses increased as a result of a prior year acquisition, a $122.4 million increase in personnel expenses primarily
related to commissions, wages, and benefits, an increase in fuel expense of $22.5 million primarily as a result of an increase in fuel
prices compared to the prior fiscal year, a $16.9 million increase in repairs and maintenance expense related to transportation
equipment as the Company is waiting on replacement fleet compared to the prior fiscal year.
Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $260.0 million in
fiscal 2022 to $279.8 million in fiscal 2023. Depreciation of fixed assets and amortization of intangible assets increased in fiscal 2023
as a result of a prior year acquisition, which included accelerated amortization of certain customer relationships, and an increase in
transportation equipment under finance leases, partially offset by fully amortized intangible assets.
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Segment Results—Vistar
Fiscal year ended July 1, 2023 compared to fiscal year ended July 2, 2022
Net Sales
Net sales for Vistar increased $867.5 million, or 23.6%, from fiscal 2022 to fiscal 2023. The increase in net sales was driven
primarily by an increase in selling price per case as a result of inflation and channel mix, as well as case volume growth in the
vending, office coffee service, office supply, theater, value stores, hospitality, and travel channels in fiscal 2023 compared to the prior
fiscal year.
Adjusted EBITDA
Adjusted EBITDA for Vistar increased $132.3 million, or 68.5%, from fiscal 2022 to fiscal 2023. The increase was the result of
an increase in gross profit, partially offset by an increase in operating expenses. Gross profit increased $172.0 million, or 28.0%, in
fiscal 2023 compared to fiscal 2022, driven by a favorable shift in the mix of cases sold, growth in cases sold, and procurement related
gains. Gross profit as a percentage of net sales increased from 16.7% for fiscal 2022 to 17.3% for fiscal 2023.
Operating expenses impacting Vistar’s Adjusted EBITDA increased $40.1 million, or 9.5%, for fiscal 2023 compared to the
prior fiscal year. Operating expenses increased primarily as a result of the increased case volume described above, and the resulting
impact on variable operational and selling expenses, including a $24.5 million increase in personnel expenses.
Depreciation of fixed assets and amortization of intangible assets recorded in this segment decreased from $52.6 million in
fiscal 2022 to $42.1 million in fiscal 2023 due to fully amortized intangible assets.
Segment Results—Convenience
Fiscal year ended July 1, 2023 compared to fiscal year ended July 2, 2022
Net Sales
Net sales for Convenience increased $3.5 billion, or 17.1%, from $20.6 billion for fiscal 2022 to $24.1 billion for fiscal 2023.
Net sales related to cigarettes for fiscal 2023 was $14.9 billion, which includes $3.9 billion of excise taxes, compared to net sales of
cigarettes of $13.2 billion, which includes $3.7 billion of excise taxes, for fiscal 2022. The increase in net sales for Convenience was
driven primarily by the acquisition of Core-Mark in the first quarter of fiscal 2022, case growth in food and foodservice related
products and an increase in selling price per case as a result of inflation.
Adjusted EBITDA
Adjusted EBITDA for Convenience increased $71.7 million, or 27.9%, from fiscal 2022 to fiscal 2023. This increase was a
result of an increase in gross profit, partially offset by an increase in operating expenses driven by the acquisition of Core-Mark. Gross
profit contributing to Convenience’s Adjusted EBITDA increased $315.2 million, or 24.7%, for fiscal 2023 compared to the prior
fiscal year as a result of the Core-Mark acquisition, procurement gains, and a favorable shift in product mix. Gross profit contributing
to Convenience's Adjusted EBITDA as a percentage of net sales increased from 6.2% for fiscal 2022 to 6.6% for fiscal 2023.
Operating expenses impacting Convenience’s Adjusted EBITDA, increased $244.4 million, or 23.9%, for fiscal 2023 compared
to the prior fiscal year. Operating expenses increased primarily as a result of the acquisition of Core-Mark and an increase in personnel
expense in fiscal 2023 compared to the prior fiscal year.
Depreciation and amortization of intangible assets recorded in this segment increased from $125.7 million in fiscal 2022 to
$148.0 million in fiscal 2023. Depreciation of fixed assets and amortization of intangible assets primarily increased as a result of the
Core-Mark acquisition.
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Segment Results—Corporate & All Other
Fiscal year ended July 1, 2023 compared to fiscal year ended July 2, 2022
Net Sales
Net sales for Corporate & All Other increased $173.9 million from fiscal 2022 to fiscal 2023. The increase was primarily
attributable to an increase in services provided to our other segments and a recent acquisition.
Adjusted EBITDA
Adjusted EBITDA for Corporate & All Other was a negative $234.3 million for fiscal 2023 compared to a negative $216.8
million for fiscal 2022. This decline in Adjusted EBITDA was primarily driven by a $15.4 million increase in professional fees related
to consulting, audit and information technology services and maintenance and a $14.1 million increase in personnel expenses,
primarily related to salaries and annual bonus for fiscal 2023 compared to the prior fiscal year.
Depreciation and amortization of intangible assets recorded in this segment was $26.8 million in fiscal 2023 compared to $24.5
million in fiscal 2022.
Liquidity and Capital Resources
We have historically financed our operations and growth primarily with cash flows from operations, borrowings under our credit
facility, operating and finance leases, and normal trade credit terms. We have typically funded our acquisitions with additional
borrowings under our credit facility. Our borrowing levels are subject to seasonal fluctuations, typically with the lowest borrowing
levels in the third and fourth fiscal quarters and the highest borrowing levels occurring in the first and second fiscal quarters. 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.
As market conditions warrant, we may from time to time seek to repurchase our securities or loans in privately negotiated or
open market transactions, by tender offer or otherwise. Any such repurchases may be funded by incurring new debt, including
additional borrowings under our credit facility. In addition, 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.
On November 16, 2022, the Board of Directors authorized a new share repurchase program for up to $300 million of the
Company’s outstanding common stock. This authorization replaced the previously authorized $250 million share repurchase program.
The new 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. Repurchases under this program depend upon
marketplace conditions and other factors, including compliance with the covenants in the agreements governing our existing
indebtedness. During fiscal 2023, the Company repurchased 0.3 million shares of the Company's common stock for a total of $11.2
million. As of July 1, 2023, $288.8 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. Debt and Note 12. Leases, respectively, within the Notes to
Consolidated Financial Statements included in Item 8. As of July 1, 2023, the Company had total purchase obligations of $163.4
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. As of July 1, 2023, the Company had commitments of $109.8 million for capital projects related to warehouse
expansion and improvements and warehouse equipment. The Company anticipates using cash flows from operations or borrowings
under our credit agreement to fulfill these commitments. Amounts due under these agreements were not included in the Company’s
consolidated balance sheet as of July 1, 2023.
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.
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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.
At July 1, 2023, our cash balance totaled $20.0 million, including restricted cash of $7.3 million, as compared to a cash balance
totaling $18.7 million, including restricted cash of $7.1 million, at July 2, 2022.
Operating Activities
Fiscal year ended July 1, 2023 compared to fiscal year ended July 2, 2022
During fiscal 2023 and fiscal 2022, our operating activities provided cash flow of $832.1 million and $276.5 million,
respectively. The increase in cash flows provided by operating activities in fiscal 2023 compared to fiscal 2022 was largely driven by
higher operating income and less cash used to fund working capital in fiscal 2023. Toward the end of fiscal 2022, the Company made
advanced purchases of $220.3 million of tobacco related inventory to take advantage of preferred pricing and as a result of one of the
Company's cigarette suppliers shutting down for a system conversion.
Investing Activities
Fiscal year ended July 1, 2023 compared to fiscal year ended July 2, 2022
Cash used in investing activities totaled $294.6 million in fiscal 2023 compared to $1,861.5 million in fiscal 2022 . These
investments consisted primarily of net cash paid for recent acquisitions of $63.8 million and $1,650.5 million for fiscal years 2023 and
2022 , respectively, along with capital purchases of property, plant, and equipment of $269.7 million and $215.5 million for fiscal
years 2023 and 2022, respectively. In fiscal 2023, purchases of property, plant, and equipment primarily consisted of outlays for
warehouse expansion and improvements, warehouse equipment, transportation equipment, and information technology. The following
table presents the capital purchases of property, plant, and equipment by segment.
(Dollars in millions)
Foodservice
Vistar
Convenience
Corporate & All Other
Total capital purchases of property, plant and equipment
July 1, 2023
Fiscal year ended
July 2, 2022
July 3, 2021
$191.4
18.0
46.3
14.0
$269.7
$148.2
19.1
31.9
16.3
$215.5
$99.9
48.0
26.5
14.4
$188.8
Financing Activities
During fiscal 2023, our financing activities used cash flow of $536.2 million, which consisted primarily of $454.4 million in net
payments under our credit agreement.
During fiscal 2022, our financing activities provided cash flow of $1,581.5 million, which consisted primarily of $1.0 billion in
cash received from the issuance and sale of the Notes due 2029 and $1,019.7 million in net borrowings under our credit agreement,
partially offset by $350.0 million in cash used for the repayment of the Notes due 2024.
The following describes our financing arrangements as of July 1, 2023:
Credit Agreement: On April 17, 2023, PFGC, Inc. (“PFGC), a wholly-owned subsidiary of the Company, and Performance
Food Group, Inc., a wholly-owned subsidiary of PFGC, entered into the First Amendment (“First Amendment”) to the existing 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 (as amended by the First Amendment, the “Amended ABL Facility”).
The Amended ABL Facility has an aggregate principal amount available of $4.0 billion and matures September 17, 2026.
Performance Food Group, Inc., a wholly-owned subsidiary of PFGC, is the lead borrower under the Amended 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). Availability
for loans and letters of credit under the Amended 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
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equipment values. Advances on accounts receivable and inventory are subject to change based on periodic commercial finance
examinations and appraisals, and the real property and transportation equipment values included in the borrowing base are subject to
change based on periodic appraisals. Audits and appraisals are conducted at the direction of the administrative agent for the benefit
and on behalf of all lenders.
Prior to the First Amendment, borrowings under the ABL Facility bore 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. The ABL Facility also provided for an unused
commitment fee rate of 0.25% per annum.
The First Amendment, among other things, transitioned the benchmark interest rate for borrowings under the Amended ABL
Facility from LIBOR to the term secured overnight funding rate (“SOFR”). As a result of the First Amendment, borrowings under the
Amended 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 (as defined in the Amended ABL Facility) plus 1.0%) plus a spread or (b) Adjusted Term SOFR (as defined in the Amended
ABL Facility) plus a spread. The Amended ABL Facility also provides for an unused commitment fee at a rate of 0.250% per annum.
The following table summarizes outstanding borrowings, availability, and the average interest rate under the credit agreement in
place as of the applicable date:
(Dollars in millions)
Aggregate borrowings
Letters of credit
Excess availability, net of lenders’ reserves of $99.7 and $104.4
Average interest rate, excluding impact of interest rate swaps
$
As of July 1, 2023
1,154.0
172.2
2,673.8
As of July 2, 2022
$
1,608.4
190.5
2,201.1
6.35 %
2.89 %
The Amended 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 Amended 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 Amended ABL Facility
provides for customary events of default, including payment defaults and cross-defaults on other material indebtedness. If an event of
default occurs and is continuing, amounts due under the Amended ABL Facility may be accelerated and the rights and remedies of the
lenders may be exercised, including rights with respect to the collateral securing the obligations under such agreement.
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”). The Notes due 2025 are jointly and severally guaranteed on a
senior unsecured basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance
subsidiaries and other excluded subsidiaries). The Notes due 2025 are not guaranteed by the Company.
The proceeds from the Notes due 2025 were used for working capital and general corporate purposes and to pay the fees,
expenses, and other transaction costs incurred in connection with the Notes due 2025.
The Notes due 2025 were issued at 100.0% of their par value. The Notes due 2025 mature on May 1, 2025, and bear interest at a
rate of 6.875% per year, payable semi-annually in arrears.
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 2025 will have the right to require Performance Food
Group, Inc. to repurchase each holder’s Notes due 2025 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. Performance Food Group, Inc. may
redeem all or part of the Notes due 2025 at a redemption price equal to 101.719% of the principal amount redeemed, plus accrued and
unpaid interest. The redemption price decreases to 100% of the principal amount redeemed on May 1, 2024.
The indenture governing the Notes due 2025 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 covenants are subject to a number of important exceptions and qualifications.
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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.
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”). The
Notes due 2027 are jointly and severally guaranteed on a senior unsecured basis by PFGC and all domestic direct and indirect wholly-
owned subsidiaries of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries). The Notes due 2027 are not
guaranteed by the Company.
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 acquisition of Reinhart Foodservice, L.L.C. (“Reinhart”)
and to pay related fees and expenses.
The Notes due 2027 were issued at 100.0% of their par value. 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.
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. Performance Food Group, Inc. may
redeem all or part of the Notes due 2027 at a redemption price equal to 102.750% of the principal amount redeemed, plus accrued and
unpaid interest. Beginning on October 15, 2023, 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 to100% of the principal amount redeemed, plus accrued and unpaid interest on October 15, 2024.
The indenture governing the Notes due 2027 contains covenants limiting, among other things, PFGC’s and its restricted
subsidiaries’ ability to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other
distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with
affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the ability of
PFGC’s restricted subsidiaries to make dividends or other payments to PFGC; designate restricted subsidiaries as unrestricted
subsidiaries; and transfer or sell certain assets. These covenants are subject to a number of important exceptions and qualifications.
The Notes due 2027 also contain customary events of default, the occurrence of which could result in the principal of and accrued
interest on the Notes due 2027 to become or be declared due and payable.
Senior Notes due 2029: On July 26, 2021, Performance Food Group, Inc. issued and sold $1.0 billion aggregate principal
amount of its 4.250% Senior Notes due 2029 (the “Notes due 2029”). The Notes due 2029 are jointly and severally guaranteed on a
senior unsecured basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance
subsidiaries and other excluded subsidiaries). The Notes due 2029 are not guaranteed by the Company.
The 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 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.
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 2029 will have the right to require Performance Food
Group, Inc. to repurchase each holder’s Notes due 2029 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. Performance Food Group, Inc. may
redeem all or 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. In addition, 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. In addition, at any time prior to August 1, 2024, Performance Food Group, Inc. may redeem up to 40% of the Notes due
2029 from the proceeds of certain equity offerings at a redemption price equal to 104.250% of the principal amount thereof, plus
accrued and unpaid interest.
The 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
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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 covenants are subject to a number of important exceptions and qualifications.
The Notes due 2029 also contain customary events of default, the occurrence of which could result in the principal of and accrued
interest on the Notes due 2029 to become or be declared due and payable.
The Amended 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 $2,007.7 million of restricted payment capacity available under such
debt agreements, as of July 1, 2023. 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.
As of July 1, 2023, the Company was in compliance with all of the covenants under the Amended ABL Facility and the
indentures governing the Notes due 2025, the Notes due 2027, and the Notes due 2029.
Total assets by segment discussed below exclude intercompany receivables between segments.
Total Assets by Segment
Total assets for Foodservice increased $56.3 million from $6,455.3 million as of July 2, 2022 to $6,511.6 million as of July 1,
2023. During this period, this segment increased its property, plant, and equipment and operating lease right-of-use assets, partially
offset by a decrease in intangible assets.
Total assets for Vistar increased $159.0 million from $1,133.7 million as of July 2, 2022 to $1,292.7 million as of July 1, 2023.
During this period, Vistar increased its inventory and accounts receivable.
Total assets for Convenience decreased $185.4 million from $4,411.6 million as of July 2, 2022 to $4,226.2 million as of July 1,
2023. During this period, this segment decreased its inventory and intangible assets.
Total assets for Corporate & All Other increased $91.1 million from $377.4 million as of July 2, 2022 to $468.5 million as of
July 1, 2023. During this period, Corporate & All Other primarily increased its assets due to a recent immaterial acquisition.
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, and
acquisitions, goodwill and other intangible assets.
Accounts Receivable
Accounts receivable are comprised of trade receivables from customers in the ordinary course of business, are recorded at the
invoiced amount, 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.
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Inventory Valuation
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 and last-in, first-out ("LIFO") using the link chain technique of the dollar
value method. FIFO was used for approximately 63% of total inventories at July 1, 2023. We adjust our inventory balances for slow-
moving, excess, and obsolete inventories. These adjustments are based upon inventory category, inventory age, specifically identified
items, and overall economic conditions.
Insurance Programs
We maintain high-deductible insurance programs covering portions of general and vehicle liability and workers’ compensation.
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. 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. The provisions for insurance claims include estimates of the frequency and timing
of claims occurrence, as well as the ultimate amounts to be paid. These insurance programs are managed by a third party, and the
deductibles for general and vehicle liability and workers compensation are primarily collateralized by letters of credit and restricted
cash.
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. 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. 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. Income tax calculations are based on the tax laws
enacted as of the date of the financial statements.
Vendor Rebates and Other Promotional Incentives
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.
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. If the incentives are not probable
and reasonably estimable, we record the incentives as the underlying objectives or milestones are achieved. We record annual and
multi-year incentives when earned, generally over the agreement period. We use current and historical purchasing data, forecasted
purchasing volumes, and other factors in estimating whether the underlying objectives or milestones will be achieved. Consideration
received to promote and sell the supplier’s products is typically a reimbursement of marketing costs incurred by the Company and is
recorded as a reduction of our operating expenses. If the amount of consideration received from the suppliers exceeds our marketing
costs, any excess is recorded as a reduction of cost of goods sold.
Acquisitions, Goodwill, and Other Intangible Assets
We account for acquired businesses using the acquisition method of accounting. Our financial statements reflect the operations
of an acquired business starting from the completion of the acquisition. Goodwill and other intangible assets represent the excess of
cost of an acquired entity over the amounts specifically assigned to those tangible net assets acquired in a business combination. Other
identifiable intangible assets typically include customer relationships, trade names, technology, non-compete agreements, and
favorable lease assets. Goodwill and intangibles with indefinite lives are not amortized. 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. Certain assumptions, estimates, and
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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 fair value estimates are based on available historical
information and on future expectations and assumptions deemed reasonable by management but that are inherently uncertain.
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. 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. 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.
We apply the guidance in FASB Accounting Standards Update (“ASU”) 2011-08 “Intangibles—Goodwill and Other—Testing
Goodwill for Impairment,” which provides entities with an option to perform a qualitative assessment (commonly referred to as “step
zero”) to determine whether further quantitative analysis for impairment of goodwill is necessary. 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. 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 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 the Company's reporting units within its reportable segments. Based on the
Company's assessment, there was an immaterial impairment of goodwill related to reporting units within the Corporate & All Other
segment for fiscal 2023. No impairments were recorded in fiscal 2022 or fiscal 2021.
Recently Issued Accounting Pronouncements
Refer to Note 3. Recently Issued Accounting Pronouncements within the Notes to Consolidated Financial Statements included in
Item 8 for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected
effects on the Company’s consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
All of our market sensitive instruments are entered into for purposes other than trading.
Interest Rate Risk
We are exposed to interest rate risk related to changes in interest rates for borrowings under our Amended ABL Facility.
Although we hedge a portion of our interest rate risk through interest rate swaps, any borrowings under our Amended ABL Facility in
excess of the notional amount of the swaps will be subject to variable interest rates.
As of July 1, 2023, our subsidiary, Performance Food Group, Inc., had two interest rate swaps with a combined value of $450.0
million notional amount that were designated as cash flow hedges of interest rate risk. See Note 9. Derivatives and Hedging Activities
within the Notes to Consolidated Financial Statements included in Item 8 for further discussion of these interest rate swaps.
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. 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 $15.3
million will be reclassified as an decrease to interest expense.
Based on the fair values of these interest rate swaps as of July 1, 2023, a hypothetical 100 bps decrease in SOFR would result in
a loss of $7.1 million and a hypothetical 100 bps increase in SOFR would result in a gain of $6.9 million within accumulated other
comprehensive income.
Assuming an average daily balance on our Amended ABL Facility of approximately $1.2 billion, approximately $350.0 million
of our outstanding long-term debt is fixed through interest rate swap agreements over the next 12 months and approximately $0.8
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billion represents variable-rate debt. A hypothetical 100 bps increase in SOFR on our variable-rate debt would lead to an increase of
approximately $8.0 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. 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 of July 1, 2023, we had collars in place for approximately 27% of the gallons we expect to use over the twelve months
following July 1, 2023. 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. 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
$28.1 million in fuel costs included in Operating expenses. As discussed above, this increase in fuel costs would be partially offset by
fuel surcharges passed through to our customers.
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Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements as of July 1, 2023 and July 2, 2022 and for the fiscal years
ended July 1, 2023, July 2, 2022, and July 3, 2021
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting (PCAOB ID No. 34) ...
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements (PCAOB ID No. 34) ...............
Consolidated Balance Sheets ..............................................................................................................................................................
Consolidated Statements of Operations ..............................................................................................................................................
Consolidated Statements of Comprehensive Income .........................................................................................................................
Consolidated Statements of Shareholders’ Equity .............................................................................................................................
Consolidated Statements of Cash Flows ............................................................................................................................................
Notes to Consolidated Financial Statements ......................................................................................................................................
Schedule 1—Registrant’s Condensed Financial Statements ..............................................................................................................
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40
42
43
44
45
46
48
76
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Performance Food Group Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Performance Food Group Company and subsidiaries (the “Company”)
as of July 1, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of July 1, 2023, based on criteria established in Internal Control — Integrated
Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended July 1 2023, of the Company and our report dated August
16, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual report on internal
control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Richmond, Virginia
August 16, 2023
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Performance Food Group Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Performance Food Group Company and subsidiaries (the
"Company") as of July 1, 2023 and July 2, 2022, the related consolidated statements of operations, comprehensive income,
shareholders' equity, and cash flows, for the fiscal year ended July 1 , 2023, July 2, 2022, and July 3, 2021, and the related notes and
the schedule listed in the Index at Item 8 (collectively referred to as the "financial statements"). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of July 1, 2023, July 2, 2022, and July 3, 2021 and the
results of its operations and its cash flows for each of the fiscal years ended July 1, 2023, July 2, 2022, and July 3, 2021, in conformity
with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of July 1, 2023, based on criteria established in Internal Control
— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated August 16, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Vendor Rebates and Other Promotional Incentives – Refer to Note 2 to the financial statements
Critical Audit Matter Description
The Company receives various rebate and promotional incentives from its suppliers, which include volume and growth rebates, annual
and multi-year incentives, and promotional programs. Consideration received for incentives that contain volume and growth rebates
and annual and multi-year incentives are recorded as a reduction of cost of goods sold. The Company systematically and rationally
allocates the consideration for these incentives to each of the underlying transactions that results in progress by the Company towards
earning the incentives. If the incentives are not probable and reasonably estimable, the Company records the incentives as the
underlying objectives or milestones are achieved. The Company records annual and multi-year incentives when earned, generally over
the agreement period as stipulated in individual contracts. The Company uses current and historical purchasing data, forecasted
purchasing volumes, and other factors in estimating whether the underlying objectives or milestones will be achieved.
Auditing vendor rebates and other promotional incentives involved especially challenging judgment due to the volume of individual
transactions, complexities in complying with the terms of the vendor agreements and the estimates involved, which increased the
extent of audit effort required.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to vendor rebates and other promotional incentives included the following, among others:
• We tested the effectiveness of the controls over vendor rebates and other promotional incentives, including controls over
the completeness and accuracy of the programs and related purchasing data.
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• We selected a sample of recorded vendor incentives and (1) sent confirmations directly to vendors to confirm the
incentive amount and the terms of the executed agreement (2) tested for subsequent cash collections and (3) recalculated
the incentive amount using the terms of the executed vendor agreement.
• We obtained an understanding of the types of vendor rebates and other promotional incentives the Company receives, and
the Company's accounting policies related to these incentives. Based on that understanding, we performed substantive
analytical procedures by developing an independent estimate for each type of incentive and compared our estimate to the
amount recorded by management.
• We selected a sample of upward and downward adjustments made throughout the year for previously recorded vendor
rebates and other promotional incentives to assess management’s initial estimates. For the selected adjustments, we
assessed the size and nature of adjustments, compared the balance to prior years to evaluate historical consistency and
considered the direction of the adjustments to evaluate management bias.
• We performed a monthly margin analysis whereby we compared margins generated in prior periods to identify anomalies
in margin. We investigated significant variances from the same periods in prior years.
/s/ DELOITTE & TOUCHE LLP
Richmond, Virginia
August 16, 2023
We have served as the Company’s auditor since 2007.
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PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED BALANCE SHEETS
PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED BALANCE SHEETS
As of
July 1, 2023
As of
July 1, 2023
As of
July 2, 2022
As of
July 2, 2022
(In millions, except per share data)
ASSETS
Current assets:
(In millions, except per share data)
Cash
ASSETS
Accounts receivable, less allowances of $56.3 and $54.2
Current assets:
Inventories, net
Cash
Income taxes receivable
Accounts receivable, less allowances of $56.3 and $54.2
Prepaid expenses and other current assets
Inventories, net
Total current assets
Income taxes receivable
Prepaid expenses and other current assets
Total assets
Goodwill
Other intangible assets, net
Total current assets
Property, plant and equipment, net
Goodwill
Operating lease right-of-use assets
Other intangible assets, net
Other assets
Property, plant and equipment, net
Operating lease right-of-use assets
Other assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable and outstanding checks in excess of deposits
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accrued expenses and other current liabilities
Current liabilities:
Finance lease obligations—current installments
Trade accounts payable and outstanding checks in excess of deposits
Operating lease obligations—current installments
Accrued expenses and other current liabilities
Finance lease obligations—current installments
Operating lease obligations—current installments
Total current liabilities
Total assets
Long-term debt
Deferred income tax liability, net
Total current liabilities
Finance lease obligations, excluding current installments
Long-term debt
Operating lease obligations, excluding current installments
Deferred income tax liability, net
Other long-term liabilities
Finance lease obligations, excluding current installments
Total liabilities
Operating lease obligations, excluding current installments
Other long-term liabilities
Commitments and contingencies (Note 15)
Shareholders’ equity:
Total liabilities
Commitments and contingencies (Note 15)
Shareholders’ equity:
Common Stock: $0.01 par value per share, 1.0 billion shares authorized, 154.5
million shares issued and outstanding as of July 1, 2023;
153.6 million shares issued and outstanding as of July 2, 2022
Common Stock: $0.01 par value per share, 1.0 billion shares authorized, 154.5
Additional paid-in capital
million shares issued and outstanding as of July 1, 2023;
Accumulated other comprehensive income, net of tax expense of $4.9 and $3.8
153.6 million shares issued and outstanding as of July 2, 2022
Retained earnings
Additional paid-in capital
Accumulated other comprehensive income, net of tax expense of $4.9 and $3.8
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
$
$
$
$
$
12.7 $
2,399.3
3,390.0
12.7 $
41.7
2,399.3
227.8
3,390.0
6,071.5
41.7
2,301.0
227.8
1,028.4
6,071.5
2,264.0
2,301.0
703.6
1,028.4
130.5
2,264.0
12,499.0 $
703.6
130.5
12,499.0 $
2,453.5
891.5
102.6
2,453.5
105.5
891.5
3,553.1
102.6
3,460.1
105.5
446.2
3,553.1
447.3
3,460.1
628.9
446.2
217.9
447.3
8,753.5
628.9
217.9
8,753.5
1.5
2,863.0
14.0
1.5
867.0
2,863.0
3,745.5
14.0
867.0
12,499.0 $
3,745.5
12,499.0 $
11.6
2,307.4
3,428.6
11.6
34.0
2,307.4
240.4
3,428.6
6,022.0
34.0
2,279.2
240.4
1,195.6
6,022.0
2,134.5
2,279.2
623.4
1,195.6
123.3
2,134.5
12,378.0
623.4
123.3
12,378.0
2,559.5
882.6
79.9
2,559.5
111.0
882.6
3,633.0
79.9
3,908.8
111.0
424.3
3,633.0
366.7
3,908.8
530.8
424.3
214.9
366.7
9,078.5
530.8
214.9
9,078.5
1.5
2,816.8
11.4
1.5
469.8
2,816.8
3,299.5
11.4
469.8
12,378.0
3,299.5
12,378.0
See accompanying notes to consolidated financial statements, which are an integral part of these audited
consolidated financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of these audited
consolidated financial statements.
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PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal year ended
July 1, 2023
Fiscal year ended
July 1, 2023
Fiscal year ended
July 2, 2022
Fiscal year ended
July 2, 2022
Fiscal year ended
July 3, 2021
Fiscal year ended
July 3, 2021
(In millions, except per share data)
Net sales
Cost of goods sold
(In millions, except per share data)
Gross profit
Net sales
Operating expenses
Cost of goods sold
Operating profit
Gross profit
Operating expenses
Other expense, net:
Interest expense
Operating profit
Other, net
Other expense, net:
Other expense, net
Interest expense
Other, net
Income before taxes
Income tax expense
Other expense, net
Net income
Income before taxes
Income tax expense
Weighted-average common shares
Net income
outstanding:
Basic
Weighted-average common shares
Diluted
outstanding:
Earnings per common share:
Basic
Basic
Diluted
Diluted
Basic
Diluted
Earnings per common share:
$
$
$
$
$
$
$
$
57,254.7 $
50,999.8
6,254.9
57,254.7 $
5,489.1
50,999.8
765.8
6,254.9
5,489.1
218.0
765.8
3.8
221.8
218.0
3.8
544.0
146.8
221.8
397.2 $
544.0
146.8
397.2 $
154.2
156.1
154.2
2.58 $
156.1
2.54 $
2.58 $
2.54 $
50,894.1 $
45,637.7
5,256.4
50,894.1 $
4,929.0
45,637.7
327.4
5,256.4
4,929.0
182.9
327.4
(22.6 )
160.3
182.9
(22.6 )
167.1
54.6
160.3
112.5 $
167.1
54.6
112.5 $
149.8
151.3
149.8
0.75 $
151.3
0.74 $
0.75 $
0.74 $
30,398.9
26,873.7
3,525.2
30,398.9
3,324.5
26,873.7
200.7
3,525.2
3,324.5
152.4
200.7
(6.4 )
146.0
152.4
(6.4 )
54.7
14.0
146.0
40.7
54.7
14.0
40.7
132.1
133.4
132.1
0.31
133.4
0.30
0.31
0.30
See accompanying notes to consolidated financial statements, which are an integral part of these audited
consolidated financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of these audited
consolidated financial statements.
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PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Year Ended
July 2, 2022
Fiscal Year Ended
July 1, 2023
Fiscal Year Ended
July 1, 2023
397.2
Fiscal Year Ended
July 2, 2022
112.5 $
Fiscal Year Ended
July 3, 2021
Fiscal Year Ended
July 3, 2021
Interest rate swaps:
($ in millions)
Net income
Other comprehensive income, net of tax:
($ in millions)
Net income
Change in fair value, net of tax
Other comprehensive income, net of tax:
Reclassification adjustment, net of tax
Change in fair value, net of tax
Reclassification adjustment, net of tax
Interest rate swaps:
Foreign currency translation adjustment, net of tax
Foreign currency translation adjustment, net of tax
Other comprehensive income
Total comprehensive income
Other comprehensive income
Total comprehensive income
$
$
$
$
$
$
$
$
397.2
11.5
(8.1 )
11.5
(0.8 )
2.6
(8.1 )
399.8
(0.8 )
2.6
399.8
112.5 $
14.3
3.7
(1.3 )
14.3
16.7
3.7
(1.3 )
129.2 $
16.7
129.2 $
40.7
40.7
1.8
3.2
1.8
—
5.0
3.2
45.7
—
5.0
45.7
See accompanying notes to consolidated financial statements, which are an integral part of these audited
consolidated financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of these audited
consolidated financial statements.
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Retained
Earnings
Retained
Earnings
Total
Shareholders’
Total
Equity
Shareholders’
2,010.6
Equity
40.7
2,010.6
5.0
40.7
5.0
0.8
316.6
40.7
316.6
—
40.7
—
—
PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
PERFORMANCE FOOD GROUP COMPANY
Accumulated
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Other
Accumulated
Comprehensive
Other
(Loss) Income
Comprehensive
(Loss) Income
Paid-in
Capital
Paid-in
Capital
Common Stock
Additional
Additional
Amount
Shares
Shares
Amount
1.3
—
1.3
—
—
—
—
(10.3 )
—
(10.3 )
5.0
—
5.0
—
1,703.0
—
1,703.0
—
—
—
0.8
—
—
—
—
1.3 $
—
—
1.3 $
—
—
—
—
—
—
Common Stock
131.3 $
—
131.3 $
—
—
—
0.5
0.5
0.7
—
0.7
132.5 $
—
—
132.5 $
—
—
—
—
—
0.7
0.8
26.2
22.8
26.2
1,752.8 $
22.8
—
1,752.8 $
—
—
—
—
—
(8.7 )
(In millions)
Balance as of June 27, 2020
(In millions)
Net income
Balance as of June 27, 2020
Interest rate swaps
Net income
Issuance of common stock under stock-based
Interest rate swaps
compensation plans
Issuance of common stock under stock-based
Issuance of common stock under employee stock
compensation plans
purchase plan
Issuance of common stock under employee stock
Stock-based compensation expense
purchase plan
Balance as of July 3, 2021
Stock-based compensation expense
Net income
Balance as of July 3, 2021
Interest rate swaps
Net income
Foreign currency translation adjustment
Interest rate swaps
Issuance of common stock under stock-based
Foreign currency translation adjustment
compensation plans
Issuance of common stock under stock-based
Issuance of common stock under employee stock
compensation plans
purchase plan
Issuance of common stock under employee stock
Conversion of Core-Mark shares of common stock
purchase plan
Conversion of Core-Mark stock-based compensation
Conversion of Core-Mark shares of common stock
(1)
Conversion of Core-Mark stock-based compensation
Stock-based compensation expense
(1)
Balance as of July 2, 2022
Stock-based compensation expense
Net income
Balance as of July 2, 2022
Interest rate swaps
Net income
Foreign currency translation adjustment
Interest rate swaps
Issuance of common stock under stock-based
Foreign currency translation adjustment
compensation plans
Issuance of common stock under stock-based
Issuance of common stock under employee stock
compensation plans
purchase plan
Issuance of common stock under employee stock
Common stock repurchased
purchase plan
Stock-based compensation expense
Common stock repurchased
Balance as of July 1, 2023
Stock-based compensation expense
Balance as of July 1, 2023
(1) Represents the portion of replacement stock-based compensation awards that relates to pre-combination vesting.
(8.7 )
24.6
998.6
24.6
998.6
9.2
40.3
9.2
2,816.8 $
40.3
—
2,816.8 $
—
—
—
—
—
(9.5 )
0.7
0.5
19.9
0.5
19.9
—
—
—
153.6 $
—
—
153.6 $
—
—
—
—
—
0.6
—
—
—
—
—
—
—
—
11.4 $
—
—
11.4 $
3.4
—
(0.8 )
3.4
(0.8 )
—
—
—
0.2
—
0.2
—
—
—
1.5 $
—
—
1.5 $
—
—
—
—
—
—
—
—
—
—
(5.3 ) $
—
—
(5.3 ) $
18.0
—
(1.3 )
18.0
(1.3 )
—
(9.5 )
27.7
(11.2 )
27.7
39.2
(11.2 )
2,863.0 $
39.2
2,863.0 $
0.6
0.5
(0.2 )
0.5
—
(0.2 )
154.5 $
—
154.5 $
—
—
—
—
—
—
14.0 $
—
14.0 $
—
—
—
—
—
—
1.5 $
—
1.5 $
—
—
—
—
357.3 $
—
112.5
357.3 $
—
112.5
—
—
—
—
—
—
—
—
—
—
—
—
469.8 $
—
397.2
469.8 $
—
397.2
—
—
—
—
—
—
—
—
—
—
867.0 $
—
867.0 $
0.8
26.2
22.8
26.2
2,106.1
22.8
112.5
2,106.1
18.0
112.5
(1.3 )
18.0
(1.3 )
(8.7 )
(8.7 )
24.6
998.8
24.6
998.8
9.2
40.3
9.2
3,299.5
40.3
397.2
3,299.5
3.4
397.2
(0.8 )
3.4
(0.8 )
(9.5 )
(9.5 )
27.7
(11.2 )
27.7
39.2
(11.2 )
3,745.5
39.2
3,745.5
(1) Represents the portion of replacement stock-based compensation awards that relates to pre-combination vesting.
See accompanying notes to consolidated financial statements, which are an integral part of these audited consolidated financial
statements.
See accompanying notes to consolidated financial statements, which are an integral part of these audited consolidated financial
statements.
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PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal year ended
July 1, 2023
Fiscal year ended
July 2, 2022
Fiscal year ended
July 3, 2021
$
Fiscal year ended
July 1, 2023
397.2
Fiscal year ended
July 2, 2022
112.5
$
Fiscal year ended
July 3, 2021
40.7
$
$
($ in millions)
Cash flows from operating activities:
($ in millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided
by operating activities
Net income
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation
Amortization of intangible assets
Amortization of deferred financing costs
Depreciation
Provision for losses on accounts receivables
Amortization of intangible assets
Change in LIFO reserve
Amortization of deferred financing costs
Stock compensation expense
Provision for losses on accounts receivables
Deferred income tax expense
Change in LIFO reserve
Loss on extinguishment of debt
Stock compensation expense
Change in fair value of derivative assets and liabilities
Deferred income tax expense
Other non-cash activities
Loss on extinguishment of debt
Changes in operating assets and liabilities, net
Change in fair value of derivative assets and liabilities
Accounts receivable
Other non-cash activities
Inventories
Changes in operating assets and liabilities, net
Income taxes receivable
Accounts receivable
Prepaid expenses and other assets
Inventories
Trade accounts payable and outstanding checks in excess of deposits
Income taxes receivable
Accrued expenses and other liabilities
Prepaid expenses and other assets
Net cash provided by operating activities
Trade accounts payable and outstanding checks in excess of deposits
Accrued expenses and other liabilities
Purchases of property, plant and equipment
Net cash provided by operating activities
Net cash paid for acquisitions
Proceeds from sale of property, plant and equipment and other
Purchases of property, plant and equipment
Net cash used in investing activities
Net cash paid for acquisitions
Proceeds from sale of property, plant and equipment and other
Net (payments) borrowings under ABL Facility
Net cash used in investing activities
Payment of Additional Junior Term Loan
Borrowing of Notes due 2029
Net (payments) borrowings under ABL Facility
Repayment of Notes due 2024
Payment of Additional Junior Term Loan
Cash paid for debt issuance, extinguishment and modifications
Borrowing of Notes due 2029
Payments under finance lease obligations
Repayment of Notes due 2024
Cash paid for acquisitions
Cash paid for debt issuance, extinguishment and modifications
Proceeds from employee stock purchase plan
Payments under finance lease obligations
Proceeds from exercise of stock options
Cash paid for acquisitions
Cash paid for shares withheld to cover taxes
Proceeds from employee stock purchase plan
Repurchases of common stock
Proceeds from exercise of stock options
Other financing activities
Cash paid for shares withheld to cover taxes
Repurchases of common stock
Other financing activities
Net cash (used in) provided by financing activities
Cash flows from investing activities:
Cash flows from investing activities:
Cash flows from financing activities:
Cash flows from financing activities:
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and restricted cash
Cash and restricted cash, beginning of period
Cash and restricted cash, end of period
Net increase (decrease) in cash and restricted cash
Cash and restricted cash, beginning of period
Cash and restricted cash, end of period
397.2
315.7
181.0
10.3
315.7
6.0
181.0
39.2
10.3
43.4
6.0
20.0
39.2
—
43.4
19.0
20.0
9.0
—
19.0
(95.6 )
9.0
56.9
(11.0 )
(95.6 )
(3.2 )
56.9
(164.6 )
(11.0 )
8.8
(3.2 )
832.1
(164.6 )
8.8
(269.7 )
832.1
(63.8 )
38.9
(269.7 )
(294.6 )
(63.8 )
38.9
(454.4 )
(294.6 )
—
—
(454.4 )
—
—
—
—
(88.5 )
—
—
—
27.7
(88.5 )
3.1
—
(12.6 )
27.7
(11.2 )
3.1
(0.3 )
(12.6 )
(536.2 )
(11.2 )
1.3
(0.3 )
18.7
(536.2 )
20.0
1.3
18.7
20.0
$
$
$
112.5
279.7
183.1
9.7
279.7
9.0
183.1
122.9
9.7
44.0
9.0
4.8
122.9
3.2
44.0
(10.5 )
4.8
6.2
3.2
(10.5 )
(195.1 )
6.2
(582.4 )
46.7
(195.1 )
(0.4 )
(582.4 )
182.5
46.7
60.6
(0.4 )
276.5
182.5
60.6
(215.5 )
276.5
(1,650.5 )
4.5
(215.5 )
(1,861.5 )
(1,650.5 )
4.5
1,019.7
(1,861.5 )
—
1,000.0
1,019.7
(350.0 )
—
(25.0 )
1,000.0
(72.1 )
(350.0 )
(6.9 )
(25.0 )
24.6
(72.1 )
2.7
(6.9 )
(11.4 )
24.6
—
2.7
(0.1 )
(11.4 )
1,581.5
—
(3.5 )
(0.1 )
22.2
1,581.5
18.7
(3.5 )
22.2
18.7
$
$
$
40.7
213.9
125.0
12.7
213.9
(23.8 )
125.0
36.4
12.7
25.4
(23.8 )
21.2
36.4
—
25.4
(8.5 )
21.2
12.2
—
(8.5 )
(296.5 )
12.2
(323.1 )
106.9
(296.5 )
(34.9 )
(323.1 )
57.8
106.9
99.2
(34.9 )
64.6
57.8
99.2
(188.8 )
64.6
(18.1 )
7.1
(188.8 )
(199.8 )
(18.1 )
7.1
(16.2 )
(199.8 )
(110.0 )
—
(16.2 )
—
(110.0 )
(0.1 )
—
(37.9 )
—
(136.4 )
(0.1 )
26.2
(37.9 )
5.0
(136.4 )
(4.2 )
26.2
—
5.0
(0.8 )
(4.2 )
(274.4 )
—
(409.6 )
(0.8 )
431.8
(274.4 )
22.2
(409.6 )
431.8
22.2
$
$
46
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The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets that sum to
the total of the same such amounts shown in the consolidated statements of cash flows:
(In millions)
Cash
Restricted cash(1)
Total cash and restricted cash
As of July 1, 2023 As of July 2, 2022
11.6
12.7 $
$
7.1
7.3
18.7
20.0 $
$
(1) Restricted cash is reported within Other assets and represents the amounts required by insurers to collateralize a part of the deductibles
for the Company’s workers’ compensation and liability claims.
Supplemental disclosures of non-cash transactions are as follows (2):
(In millions)
Non-cash issuance of Common Stock in exchange for Core-Mark stock
Fiscal year ended
July 1, 2023
Fiscal year ended
July 2, 2022
Fiscal year ended
July 3, 2021
—
1,008.0
—
(2) Disclosure of non-cash transactions related to right-of-use assets and lease obligations is included in Note 12. Leases.
Supplemental disclosures of cash flow information are as follows:
(In millions)
Cash paid during the year for:
Interest
Income tax payments net of refunds
Fiscal year ended
July 1, 2023
Fiscal year ended
July 2, 2022
Fiscal year ended
July 3, 2021
$
218.5 $
134.1
152.4 $
8.7
139.3
(117.4 )
See accompanying notes to consolidated financial statements, which are an integral part of these audited
consolidated financial statements.
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PERFORMANCE FOOD GROUP COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Business Activities
Business Overview
Performance Food Group Company (the “Company”), through its subsidiaries, markets and distributes primarily national and
company-branded food and food-related products to customer locations across North America. The Company serves both of the major
customer types in the restaurant industry: (i) independent customers, and (ii) multi-unit, or “Chain” customers, which include some of
the most recognizable family and casual dining restaurant chains, as well as schools, business and industry locations, healthcare
facilities, and retail establishments. The Company also specializes in distributing candy, snacks, beverages, cigarettes, other tobacco
products, health and beauty care products and other items to vending distributors, big box retailers, theaters, convenience stores, drug
stores, grocery stores, travel providers, and hospitality providers.
Fiscal Years
The Company’s fiscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year for fiscal 2023, a 52-week
year for fiscal 2022 and a 53-week year for fiscal 2021. References to “fiscal 2023” are to the 52-week period ended July 1, 2023,
references to “fiscal 2022” are to the 52-week period ended July 2, 2022, and references to “fiscal 2021” are to the 53-week period
ended July 3, 2021.
Share Repurchase Program
On November 16, 2022, the Board of Directors of the Company authorized a share repurchase program for up to $300 million of
the Company’s outstanding common stock. This authorization replaces the previously authorized $250 million share repurchase
program. 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. During the fiscal year ended July 1,
2023, the Company repurchased and subsequently retired 0.2 million shares of common stock, for a total of $11.2 million. As of July
1, 2023, approximately $288.8 million remained available for additional share repurchases.
2.
Summary of Significant Accounting Policies and Estimates
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company balances and
transactions have been eliminated.
Basis of Presentation
The financial statements include consolidated balance sheets, consolidated statements of operations, consolidated statements of
comprehensive income, consolidated statements of shareholders’ equity, and consolidated statements of cash flows. Certain prior
period amounts have been reclassified to conform to current period presentation. In the opinion of management, all adjustments,
which consist of normal recurring adjustments, except as otherwise disclosed, necessary to present fairly the financial position, results
of operations, comprehensive income, shareholders’ equity, and cash flows for all periods presented have been made.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue
and expenses during the reporting period. The most significant estimates used by management are related to the accounting for the
allowance for doubtful accounts, reserve for inventories, impairment testing of goodwill and other intangible assets, acquisition
accounting, reserves for claims and recoveries under insurance programs, vendor rebates and other promotional incentives, bonus
accruals, depreciation, amortization, determination of useful lives of tangible and intangible assets, and income taxes. Actual results
could differ from these estimates.
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Risks and Uncertainties
Our business, our industry, and the U.S. economy are influenced by a number of general macroeconomic factors, including, but
not limited to, changes in the rate of inflation and fuel prices, interest rates, supply chain disruptions, labor shortages, and the effects
of health epidemics and pandemics. We continue to actively monitor the impacts of the evolving macroeconomic and geopolitical
landscape on all aspects of our business. The Company and our industry may face challenges related to product and fleet supply,
increased product and logistics costs, access to labor supply, and lower disposable incomes due to inflationary pressures and
macroeconomic conditions. The extent to which these challenges will affect our future financial position, liquidity, and results of
operations remains uncertain.
Cash
The Company maintains its cash primarily in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At
times, the Company’s cash balance may be in amounts that exceed the FDIC insurance limits. Outstanding checks in excess of
deposits are book overdrafts that result in a credit cash balance in the general ledger and are then reinstated as accounts payable.
Changes in accounts payable, including checks in excess of deposits, are presented in the operating section of the statement of cash
flows.
Restricted Cash
The Company is required by its insurers to collateralize a part of the deductibles for its workers’ compensation and liability
claims. The Company has chosen to satisfy these collateral requirements primarily by depositing funds in trusts or by issuing letters of
credit. All amounts in restricted cash at July 1, 2023 and July 2, 2022 represent funds deposited in insurance trusts, and $7.3 million
and $7.1 million, respectively, represent Level 1 fair value measurements.
Accounts Receivable
Accounts receivable are comprised of trade receivables from customers in the ordinary course of business, are recorded at the
invoiced amount, and primarily do not bear interest. Accounts receivable also includes other receivables primarily related to various
rebate and promotional incentives with the Company’s suppliers. Receivables are recorded net of the allowance for credit losses on the
accompanying consolidated balance sheets. The Company evaluates the collectability of its accounts receivable based on a
combination of factors. The Company regularly analyzes its significant customer accounts, and when it becomes aware of a specific
customer’s inability to meet its financial obligations to the Company, such as bankruptcy filings or deterioration in the customer’s
operating results or financial position, the Company records a specific reserve for bad debt to reduce the related receivable to the
amount it reasonably believes is collectible. The Company also records 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, the Company’s estimates of the recoverability of receivables could be further
adjusted. The Company recorded $6.0 million in provision in fiscal 2023, $9.0 million in provision in fiscal 2022, and a benefit of
$23.8 million in fiscal 2021 related to reserves for expected credit losses.
Inventories
The Company’s 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 and last-in, first-out ("LIFO") using the link chain technique of
the dollar value method. At July 1, 2023, the Company’s inventory balance of $3,390.0 million consists primarily of finished goods,
$2,126.6 million of which was valued at FIFO. As of July 1, 2023, $1,263.4 million of the inventory balance was valued at LIFO. At
July 1, 2023 and July 2, 2022, the LIFO balance sheet reserves were $212.7 million and $173.5 million, respectively. Costs in
inventory include the purchase price of the product and freight charges to deliver the product to the Company’s warehouses and are
net of certain consideration received from vendors in the amount of $97.2 million and $101.8 million as of July 1, 2023 and July 2,
2022, respectively. The Company adjusts its 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. As of July 1, 2023
and July 2, 2022, the Company had adjusted its inventories by approximately $17.4 million and $26.4 million, respectively.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation of property, plant and equipment, including finance lease assets,
is calculated primarily using the straight-line method over the estimated useful lives of the assets, which range from two to 39 years,
and is included primarily in operating expenses on the consolidated statement of operations.
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Certain internal and external costs related to the development of internal use software are capitalized within property, plant, and
equipment during the application development stage.
When assets are retired or otherwise disposed, the costs and related accumulated depreciation are removed from the accounts.
The difference between the net book value of the asset and proceeds from disposition is recognized as a gain or loss. Routine
maintenance and repairs are charged to expense as incurred, while costs of betterments and renewals are capitalized.
Impairment of Long-Lived Assets
Long-lived assets held and used by the Company, including intangible assets with definite lives, are tested for recoverability
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of
evaluating the recoverability of long-lived assets, the Company compares the carrying value of the asset or asset group to the
projected, undiscounted future cash flows expected to be generated by the long-lived asset or asset group. Based on the Company’s
assessments, no impairment losses were recorded in fiscal 2023, fiscal 2022, or fiscal 2021.
Acquisitions, Goodwill, and Other Intangible Assets
The Company accounts for acquired businesses using the acquisition method of accounting. The Company’s financial
statements reflect the operations of an acquired business starting from the completion of the acquisition. Goodwill and other intangible
assets represent the excess of cost of an acquired entity over the amounts specifically assigned to those tangible net assets acquired in
a business combination. Other identifiable intangible assets typically include customer relationships, trade names, technology, non-
compete agreements, and favorable lease assets. Goodwill and intangibles with indefinite lives are not amortized. 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. 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, the Company may obtain the
assistance of third-party valuation specialists for the valuation of significant tangible and intangible assets. 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. 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. Unanticipated market or
macroeconomic events and circumstances may occur that could affect the accuracy or validity of the estimates and assumptions. Refer
to Note 4. Business Combinations for further discussion of the goodwill and other intangible assets associated with the Company's
acquisitions.
The Company is required to test goodwill and other intangible assets with indefinite lives for impairment annually, or more
often if circumstances indicate. Indicators of goodwill impairment include, but are not limited to, significant declines in the markets
and industries that buy the Company’s products, changes in the estimated future cash flows of its reporting units, changes in capital
markets, and changes in its market capitalization. For goodwill and indefinite-lived intangible assets, the Company’s policy is to
assess impairment at the end of each fiscal year.
The Company applies the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)
2011-08 “Intangibles—Goodwill and Other—Testing Goodwill for Impairment,” which provides entities with an option to perform a
qualitative assessment (commonly referred to as “step zero”) to determine whether further quantitative analysis for impairment of
goodwill is necessary. In performing step zero for the Company’s goodwill impairment test, the Company is required to make
assumptions and judgments including but not limited to the following: the evaluation of macroeconomic conditions as related to the
Company’s business, industry and market trends, and the overall future financial performance of its reporting units and future
opportunities in the markets in which they operate. If impairment indicators are present after performing step zero, the Company
would perform a quantitative impairment analysis to estimate the fair value of goodwill.
During fiscal 2023, fiscal 2022, and fiscal 2021, the Company performed the step zero analysis for its goodwill impairment test
and no further quantitative impairment test was deemed necessary for the Company's reporting units within its reportable segments.
Based on the Company's assessment, there was an immaterial impairment of goodwill related to reporting units within the Corporate
& All Other segment for fiscal 2023. No impairments were recorded in fiscal 2022 or fiscal 2021.
Insurance Program
The Company maintains 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
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limitations and exclusions. The Company also maintains self-funded group medical insurance. The Company accrues its 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 the Company’s consolidated balance
sheets, while the estimated long-term portion of the accruals is included in Other long-term liabilities. The provisions for insurance
claims include estimates of the frequency and timing of claims occurrence, as well as the ultimate amounts to be paid. These insurance
programs are managed by a third party, and the deductibles for general and vehicle liability and workers compensation are primarily
collateralized by letters of credit and restricted cash.
Other Comprehensive Income (Loss) (“OCI”)
Other comprehensive income (loss) is defined as all changes in equity during each period except for those resulting from net
income (loss) and investments by or distributions to shareholders. Other comprehensive income (loss) consists primarily of gains or
losses from derivative financial instruments that are designated in a hedging relationship and foreign currency translation from foreign
operations. For derivative instruments that qualify as cash flow hedges, the gain or loss on the derivative instrument is reported as a
component of other comprehensive income and reclassified into earnings during the same period or periods during which the hedged
transaction affects earnings.
Revenue Recognition
The Company markets and distributes primarily national and Company-branded food and food-related products to customer
locations across North America. The Foodservice segment primarily services restaurants and supplies a “broad line” of products to its
customers, including the Company’s Performance Brands and custom-cut meats and seafood, as well as products that are specific to
each customer’s menu requirements. Vistar specializes in distributing candy, snacks, beverages, and other items nationally to vending,
office coffee service, theater, retail, hospitality, and other channels. The Convenience segment distributes candy, snacks, beverages,
cigarettes, other tobacco products, food and food-service products, and other items to convenience stores. The Company disaggregates
revenue by customer type and product offerings and determined that disaggregating revenue at the segment level achieves the
disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic
factors. Refer to Note 19. Segment Information for external revenue by reportable segment.
The Company assesses the products and services promised in its contracts with customers and identifies a performance
obligation for each promise to transfer to the customer a product or service (or a bundle of products or services) that is distinct. The
Company determined that fulfilling and delivering customer orders constitutes a single performance obligation. Revenue is recognized
at the point in time when the Company has satisfied its performance obligation and the customer has obtained control of the products.
The Company determined that the customer is able to direct the use of, and obtain substantially all of the benefits from, the products at
the time the products are delivered to the customer’s requested destination. The Company considers control to have transferred upon
delivery because the Company has a present right to payment at this time, the customer has legal title to the products, the Company
has transferred physical possession of the assets, and the customer has significant risks and rewards of ownership of the products.
The transaction price recognized is the invoiced price, adjusted for any incentives, such as rebates and discounts granted to the
customer. The Company estimates expected returns based on an analysis of historical experience. We adjust our estimate of revenue at
the earlier of when the amount of consideration we expect to receive changes or when the consideration becomes fixed. The Company
determined it is responsible for collecting and remitting state and local excise taxes on cigarettes and other tobacco products and
presents billed excise taxes as part of revenue. Net sales include amounts related to state and local excise taxes which totaled $3.9
billion, $3.7 billion, and $1.2 billion for fiscal 2023, fiscal 2022, and fiscal 2021, respectively. The Company has made a policy
election to exclude sales tax from the transaction price. The Company does not have any material significant payment terms as
payment is received shortly after the point of sale.
The Company has customer contracts in which incentives are paid upfront to certain customers. These payments have become
industry practice and are not related to financing the customer’s business, nor are they associated with any distinct good or service to
be received from the customer. These incentive payments are capitalized and amortized over the life of the contract or the expected
life of the customer relationship on a straight-line basis. The Company’s contract asset for these incentives totaled $32.5 million and
$26.4 million as of July 1, 2023 and July 2, 2022, respectively.
The Company recognizes substantially all of its revenue on a gross basis as a principal. When assessing whether the Company is
acting as a principal or an agent, the Company considered the indicators that an entity controls the specified good or service before it
is transferred to the customer detailed in FASB Accounting Standards Codification (“ASC”) 606-10-55-39. The Company believes it
earns substantially all revenue as a principal from the sale of products because the Company is responsible for the fulfillment and
acceptability of products purchased. Additionally, the Company holds the general inventory risk for the products, as it takes title to the
products before the products are ordered by customers and maintains products in inventory.
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Cost of Goods Sold
Cost of goods sold includes amounts paid to manufacturers for products sold, the cost of transportation necessary to bring the
products to the Company’s facilities, plus depreciation related to processing facilities and equipment. The Company determined it is
responsible for remitting state and local excise taxes on cigarettes and other tobacco products and presents remittances of excise taxes
as part of cost of goods sold. Additionally, federal excise taxes are levied on manufacturers who pass these taxes on to the Company
as a portion of the product costs. As a result, federal excise taxes are not a component of the Company’s excise taxes, but are reflected
in the cost of inventory until products are sold.
Operating Expenses
Operating expenses include warehouse, delivery, occupancy, insurance, depreciation, amortization, salaries and wages, and
employee benefits expenses.
Vendor Rebates and Other Promotional Incentives
The Company participates in various rebate and promotional incentives with its 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 the Company. 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.
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. The Company systematically and rationally allocates the consideration for these
incentives to each of the underlying transactions that results in progress by the Company toward earning the incentives. If the
incentives are not probable and reasonably estimable, the Company records the incentives as the underlying objectives or milestones
are achieved. The Company records annual and multi-year incentives when earned, generally over the agreement period. The
Company uses current and historical purchasing data, forecasted purchasing volumes, and other factors in estimating whether the
underlying objectives or milestones will be achieved. Consideration received to promote and sell the supplier’s products is typically a
reimbursement of marketing costs incurred by the Company and is recorded as a reduction of the Company’s operating expenses. If
the amount of consideration received from the suppliers exceeds the Company’s marketing costs, any excess is recorded as a reduction
of cost of goods sold.
Shipping and Handling Fees and Costs
Shipping and handling fees billed to customers are included in net sales. Estimated shipping and handling costs incurred by the
Company of $2,502.8 million, $2,253.2 million, and $1,450.7 million are recorded in operating expenses in the consolidated statement
of operations for fiscal 2023, fiscal 2022, and fiscal 2021, respectively.
Stock-Based Compensation
The Company participates in the Performance Food Group Company 2007 Management Option Plan (the “2007 Option Plan”),
the Performance Food Group Company 2015 Omnibus Incentive Plan (the “2015 Incentive Plan”), the Core-Mark 2010 Long-Term
Incentive Plan, and the Core-Mark 2019 Long-Term Incentive Plan, and follows the fair value recognition provisions of FASB ASC
718-10-25, Compensation—Stock Compensation—Overall—Recognition. This guidance requires that all stock-based compensation be
recognized as an expense in the financial statements. The Company recognizes expense for its stock-based compensation based on the
fair value of the awards that are granted. The Company estimates the fair value of service-based options using a Black-Scholes option
pricing model. The fair values of service-based restricted stock, restricted stock with performance conditions and restricted stock units
are based on the Company’s stock price on the date of grant. The Company estimates the fair value of options and restricted stock with
market conditions using a Monte Carlo simulation. Compensation cost is recognized ratably over the requisite service period. For
those options and restricted stock that have a performance condition, compensation expense is based upon the number of option or
shares, as applicable, expected to vest after assessing the probability that the performance criteria will be met. The Company has made
a policy election to account for forfeitures as they occur.
Compensation expense related to our employee stock purchase plan, which allows eligible employees to purchase our common
stock at a 15% discount, represents the difference between the fair market value as of the purchase date and the employee purchase
price.
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Income Taxes
The Company follows FASB ASC 740-10, Income Taxes—Overall, which requires the use of the asset and liability method of
accounting for deferred income taxes. 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. 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. Income tax calculations are based on the tax laws enacted as of the date of the financial statements.
Derivative Instruments and Hedging Activities
As required by FASB ASC 815-20, Derivatives and Hedging—Hedging—General, the Company records all derivatives on the
balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative,
whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the
hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company primarily uses derivative contracts
to manage the exposure to variability in expected future cash flows. A portion of these derivatives is designated and qualify as cash
flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging
instrument with the recognition of the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may
enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not
apply, or the Company elects not to apply hedge accounting under FASB ASC 815-20. In the event that the Company does not apply
the provisions of hedge accounting, the derivative instruments are recorded as an asset or liability on the consolidated balance sheets
at fair value, and any changes in fair value are recorded as unrealized gains or losses and included in Other expense in the
accompanying consolidated statement of operations. See Note 9. Derivatives and Hedging Activities for additional information on the
Company’s use of derivative instruments.
The Company discloses derivative instruments and hedging activities in accordance with FASB ASC 815-10-50, Derivatives
and Hedging—Overall—Disclosure. FASB ASC 815-10-50 sets forth the disclosure requirements with the intent to provide users of
financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under FASB ASC 815-20, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and cash flows. FASB ASC 815-10-50 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of and gains and losses
on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.
Fair Value Measurements
Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The accounting guidance establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are
as follows:
•
•
•
Level 1—Observable inputs such as quoted prices for identical assets or liabilities in active markets;
Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly for
substantially the full term of the asset or liability; and
Level 3—Unobservable inputs in which there are little or no market data, which include management’s own assumption
about the risk assumptions market participants would use in pricing an asset or liability.
The Company’s derivative instruments are carried at fair value and are evaluated in accordance with this hierarchy.
Contingent Liabilities
The Company records a liability related to contingencies when a loss is considered to be probable and a reasonable estimate of
the loss can be made. This estimate would include legal fees, if applicable.
Foreign Currency Translation
The assets and liabilities of the Company’s foreign operations, whose functional currency is the local currency, are translated to
U.S. dollars at exchange rates in effect at period-end. Translation gains and losses are recorded in Accumulated Other Comprehensive
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Income (“AOCI”) as a component of stockholders’ equity. Revenue and expenses from foreign operations are translated using the
monthly average exchange rates in effect during the period in which the transactions occur. The Company recognizes gains or losses
on foreign currency exchange transactions in the consolidated statements of operations. The Company currently does not hedge
foreign currency cash flows.
3. Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance. The update increases the transparency in financial reporting of government assistance by requiring the
disclosure of the types of transactions, an entity’s accounting for the transactions and the effect of those transactions on an entity’s
financial statements. This pronouncement is effective for annual periods beginning after December 15, 2021. The Company adopted
the new standard at the beginning of fiscal 2023. The amendments in this update have been applied using the prospective approach to
all applicable transactions at the date of initial application and as new transactions occur. The Company determined that adoption of
this update has not had a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In September 2022, the FASB issued ASU 2022-04, Liabilities— Supplier Finance Programs (Subtopic 405-50): Disclosure of
Supplier Finance Program Obligations. The update enhances the transparency of supplier finance programs by requiring the
disclosure of the effect of those programs on an entity’s working capital, liquidity, and cash flows. The guidance requires disclosure of
the key terms of supplier finance programs as well as the obligation amount outstanding as of the end of the period, a description of
where the obligation is presented in the balance sheet and a rollforward of the obligations balance during the period, including the
amount of obligations confirmed and the amount of obligations paid. The amendments in this update will be applied retrospectively to
each period in which a balance sheet is presented, except for the amendment on rollforward information, which will be applied
prospectively. The Company has substantially completed its analysis of the impact of adopting the new standard and determined that
adoption of this update will not have a material impact on the Company's consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers. The update improves the accounting for acquired revenue contracts with
customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired
contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The guidance requires that an
acquiring entity in a business combination recognize and measure contract assets and contract liabilities acquired in accordance with
Topic 606 as if it had originated the contract. This pronouncement is effective for interim and annual periods beginning after
December 15, 2022, with early adoption permitted. The amendments in this update will be applied prospectively to applicable
business combinations occurring in or after fiscal 2024. Historically, the contract assets and liabilities included in the Company’s
business combinations have been limited to prepaid customer incentives that are immaterial in comparison to total assets acquired.
The Company determined that adoption of this update will not have a material impact on the Company's consolidated financial
statements.
4.
Business Combinations
During fiscal year 2023, the Company paid cash of $63.8 million for one acquisition. This acquisition did not materially affect
the Company's results of operations. During fiscal year 2022, the Company made two acquisitions in cash and stock transactions
totaling $2.7 billion and during fiscal year 2021, the Company paid cash of $18.1 million for two acquisitions. Subsequent to July 1,
2023, the Company paid $224.4 million for an acquisition. The Company is in the process of determining the fair values of the assets
acquired and liabilities assumed. Below is information related to the Company’s material acquisition of Core-Mark Holding Company,
Inc. (“Core-Mark”) in fiscal 2022.
Core-Mark Acquisition
On September 1, 2021, the Company acquired Core-Mark in a transaction valued at $2.4 billion, net of cash received. Under the
terms of the transaction, Core-Mark shareholders received $23.875 per share in cash and 0.44 shares of the Company’s stock for each
Core-Mark share outstanding as of August 31, 2021. The following table summarizes the purchase price for the acquisition:
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(In millions, except shares, cash per share, exchange ratio, and closing price)
Core-Mark shares outstanding at August 31, 2021
Cash consideration (per Core-Mark share)
Cash portion of purchase price
Core-Mark shares outstanding at August 31, 2021
Exchange ratio (per Core-Mark share)
Total PFGC common shares issued
Closing price of PFGC common stock on August 31, 2021
Equity issued
Equity compensation (1)
Total equity portion of purchase price
Debt assumed, net of cash
Total purchase price
45,201,975
23.875
1,079.2
45,201,975
0.44
19,888,869
50.22
998.8
9.2
1,008.0
306.9
2,394.1
$
$
$
$
$
$
$
$
(1) Represents the portion of replacement share-based payment awards that relates to pre-combination vesting.
The $1.1 billion cash portion of the acquisition was financed using borrowings from the ABL Facility (as defined in Note 8.
Debt). The Core-Mark acquisition strengthens the Company’s business diversification and expands its presence in the convenience
store channel. The Core-Mark acquisition is reported in the Convenience segment.
Assets acquired and liabilities assumed are recognized at their respective fair values as of the acquisition date of September 1,
2021. The following table summarizes the purchase price allocation for each major class of assets acquired and liabilities assumed for
the Core-Mark acquisition:
(In millions)
Net working capital
Goodwill
Intangible assets with definite lives:
Customer relationships
Trade names
Technology
Property, plant and equipment
Operating lease right-of-use assets
Other assets
Deferred tax liabilities
Finance lease obligations
Operating lease obligations
Other liabilities
Total purchase price
Fiscal 2022
979.5
863.2
360.0
140.0
7.0
391.4
235.3
26.1
(234.6 )
(105.6 )
(221.7 )
(46.5 )
2,394.1
$
$
Intangible assets consist primarily of customer relationships, trade names, and technology with useful lives of 11 years, 5 years,
and 5 years, respectively, and a total weighted-average useful life of 9.3 years. The excess of the estimated fair value of assets
acquired and the liabilities assumed over consideration paid was recorded as $863.2 million of goodwill on the acquisition date. The
goodwill reflects the value to the Company associated with the expansion of geographic reach and scale of our distribution footprint
and enhancements to the Company’s customer base.
The net sales and net loss related to Core-Mark recorded in the Company’s consolidated statements of operations for the fiscal
year ended July 2, 2022, since the acquisition date of September 1, 2021 are $14.5 billion and $17.6 million, respectively. The net loss
related to Core-Mark since the acquisition date was driven by purchase accounting and LIFO inventory reserve adjustments.
The following table summarizes the unaudited pro-forma consolidated financial information of the Company as if the
acquisition had occurred on June 28, 2020.
(in millions)
Net sales
Net income (loss)
Fiscal year ended
July 2, 2022
July 3, 2021
53,972.4
150.8
$
47,581.7
(14.6 )
$
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These pro-forma results include nonrecurring pro-forma adjustments related to acquisition costs incurred, including the
amortization of the step up in fair value of inventory acquired. The pro-forma net income for the fiscal year ended July 3, 2021
includes $54.7 million, after-tax, of acquisition costs assuming the acquisition had occurred on June 28, 2020. The recurring pro-
forma adjustments include estimates of interest expense for the Company's 4.250% Senior Notes due 2029 ("Notes due 2029") and
estimates of depreciation and amortization associated with fair value adjustments for property, plant and equipment and intangible
assets acquired
These unaudited pro-forma results do not necessarily represent financial results that would have been achieved had the
acquisition actually occurred on June 28, 2020 or future consolidated results of operations of the Company.
Other
In the first quarter of fiscal 2021, the Company paid a total of $67.3 million for the final net working capital acquired related to
the acquisition of Reinhart Foodservice, L.L.C, which is reflected as a financing activity cash outflow in the consolidated statement of
cash flows for the fiscal year ended July 3, 2021.
The acquisition of Eby-Brown Company LLC included contingent consideration, including earnout payments in the event
certain operating results were achieved during a defined post-closing period. In the first quarter of fiscal 2021, the Company paid the
first earnout payment of $185.6 million, which included $68.3 million recorded as a financing activity cash outflow and $117.3
million recorded as an operating activity cash outflow in the consolidated statement of cash flows for fiscal 2021.
5. Goodwill and Other Intangible Assets
The Company recorded additions to goodwill in connection with its acquisitions. The goodwill is a result of expected synergies
from combined operations of the acquisitions and the Company. The following table presents the changes in the carrying amount of
goodwill:
(In millions)
Balance as of July 3, 2021
Acquisitions
Balance as of July 2, 2022
Acquisitions—current year
Impairments—current year
Adjustments related to prior year acquisition (1)
Balance as of July 1, 2023
Foodservice
Vistar
Convenience
Other
Total
$
$
1,199.4 $
61.3
1,260.7
—
—
1.0
1,261.7 $
93.9 $
—
93.9
—
—
—
93.9 $
20.9 $
863.2
884.1
—
—
—
884.1 $
40.5 $
—
40.5
22.1
(1.3 )
—
61.3 $
1,354.7
924.5
2,279.2
22.1
(1.3 )
1.0
2,301.0
(1) The fiscal 2023 adjustment related to prior year acquisition is the result of net working capital adjustments.
The following table presents the Company’s intangible assets by major category as of July 1, 2023 and July 2, 2022:
(In millions)
Intangible assets with definite lives:
Customer relationships
Trade names and trademarks
Deferred financing costs
Non-compete
Technology
Total intangible assets with definite lives
Intangible assets with indefinite lives:
Goodwill
Trade names
Total intangible assets with indefinite lives
As of July 1, 2023
As of July 2, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Range of
Lives
$ 1,568.2 $
466.3
73.3
42.3
36.2
(777.2 ) $ 791.0 $ 1,562.1 $
186.6 458.2
(279.7 )
73.2
15.2
(58.1 )
38.1
3.9
(38.4 )
36.2
6.1
(30.1 )
$ 2,186.3 $ (1,183.5 ) $ 1,002.8 $ 2,167.8 $
(659.8 ) $ 902.3 4 – 12 years
237.8
4 – 9 years
(220.4 )
19.9
Debt term
(53.3 )
2 – 5 years
2.1
(36.0 )
(28.3 )
5 – 8 years
7.9
(997.8 ) $ 1,170.0
$ 2,301.0 $
25.6
$ 2,326.6 $
— $ 2,301.0 $ 2,279.2 $
—
25.6
25.6
— $ 2,326.6 $ 2,304.8 $
— $ 2,279.2
—
25.6
— $ 2,304.8
Indefinite
Indefinite
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For the intangible assets with definite lives, the Company recorded amortization expense of $185.7 million for fiscal 2023,
$187.5 million for fiscal 2022, and $130.4 million for fiscal 2021. For the next five fiscal periods and thereafter, the estimated future
amortization expense on intangible assets with definite lives are as follows:
(In millions)
2024
2025
2026
2027
2028
Thereafter
Total amortization expense
170.9
164.4
159.3
102.4
91.8
314.0
1,002.8
$
6.
Concentration of Sales and Credit Risk
The Company had no customers that comprised more than 10% of consolidated net sales for fiscal 2023, fiscal 2022, or fiscal
2021. At July 1, 2023 and July 2, 2022, the Company had no customers that comprised more than 10% of consolidated accounts
receivable. The Company maintains an allowance for doubtful accounts for which details are disclosed in the accounts receivable
portion of Note 2. Summary of Significant Accounting Policies and Estimates—Accounts Receivable.
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of trade accounts
receivable. The Company’s customer base includes a large number of individual restaurants, national and regional chain restaurants,
and franchises and other institutional customers. The credit risk associated with accounts receivable is minimized by the Company’s
large customer base and ongoing monitoring of customer creditworthiness.
7.
Property, Plant, and Equipment
Property, plant, and equipment as of July 1, 2023 and July 2, 2022 consisted of the following:
(In millions)
Buildings and building improvements
Land
Transportation equipment
Warehouse and plant equipment
Office equipment, furniture, and fixtures
Leasehold improvements
Construction-in-process
Less: accumulated depreciation and amortization
Property, plant and equipment, net
$
As of
July 1, 2023
As of
July 2, 2022
$
1,019.1 $
102.2
1,076.4
657.3
415.4
300.3
163.2
3,733.9
(1,469.9 )
2,264.0 $
943.2
101.4
880.6
599.6
377.8
281.5
147.3
3,331.4
(1,196.9 )
2,134.5
Range of Lives
10 – 39 years
—
2 – 10 years
3 – 20 years
2 – 10 years
Lease term(1)
(1)
Leasehold improvements are depreciated over the shorter of the useful life of the asset or the lease term.
Total depreciation expense for the fiscal 2023, fiscal 2022, and fiscal 2021 was $315.7 million, $279.7 million, and $213.9
million, respectively, and is included in operating expenses on the consolidated statement of operations.
8.
Debt
The Company is a holding company and conducts its operations through its subsidiaries, which have incurred or guaranteed
indebtedness as described below.
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Debt consisted of the following:
(In millions)
Credit Agreement
6.875% Notes due 2025, effective interest rate 7.211%
5.500% Notes due 2027, effective interest rate 5.930%
4.250% Notes due 2029, effective interest rate 4.439%
Less: Original issue discount and deferred financing costs
Long-term debt
Less: current installments
Total debt, excluding current installments
$
$
As of July 1, 2023
As of July 2, 2022
1,154.0 $
275.0
1,060.0
1,000.0
(28.9 )
3,460.1
—
3,460.1 $
1,608.4
275.0
1,060.0
1,000.0
(34.6 )
3,908.8
—
3,908.8
Credit Agreement
On April 17, 2023, PFGC, Inc. (“PFGC), a wholly-owned subsidiary of the Company, and Performance Food Group, Inc., a
wholly-owned subsidiary of PFGC, entered into the First Amendment (“First Amendment”) to the existing 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 (as amended by the First Amendment, the “Amended ABL Facility). The
Amended ABL Facility has an aggregate principal amount available of $4.0 billion and matures September 17, 2026.
Performance Food Group, Inc., a wholly-owned subsidiary of PFGC, is the lead borrower under the Amended 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). Availability
for loans and letters of credit under the Amended 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. Advances on accounts receivable and inventory are subject to change based on periodic commercial finance
examinations and appraisals, and the real property and transportation equipment values included in the borrowing base are subject to
change based on periodic appraisals. Audits and appraisals are conducted at the direction of the administrative agent for the benefit
and on behalf of all lenders.
Prior to the First Amendment, borrowings under the ABL Facility bore 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. The ABL Facility also provided for an unused
commitment fee rate of 0.25% per annum.
The First Amendment, among other things, transitioned the benchmark interest rate for borrowings under the Amended ABL
Facility from LIBOR to the term secured overnight funding rate (“SOFR”). As a result of the First Amendment, borrowings under the
Amended 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 (as defined in the Amended ABL Facility) plus 1.0%) plus a spread or (b) Adjusted Term SOFR (as defined in the Amended
ABL Facility) plus a spread. The Amended ABL Facility also provides for an unused commitment fee at a rate of 0.250% per annum.
The following table summarizes outstanding borrowings, availability, and the average interest rate under the credit agreement:
(Dollars in millions)
Aggregate borrowings
Letters of credit
Excess availability, net of lenders’ reserves of $99.7 and $104.4
Average interest rate, excluding impact of interest rate swaps
As of July 1, 2023
$
1,154.0
172.2
2,673.8
As of July 2, 2022
1,608.4
$
190.5
2,201.1
6.35 %
2.89 %
The Amended 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 Amended 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 Amended ABL Facility
provides for customary events of default, including payment defaults and cross-defaults on other material indebtedness. If an event of
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default occurs and is continuing, amounts due under the Amended ABL Facility may be accelerated and the rights and remedies of the
lenders may be exercised, including rights with respect to the collateral securing the obligations under such agreement.
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”). The Notes due 2025 are jointly and severally guaranteed on a senior unsecured basis
by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and other
excluded subsidiaries). The Notes due 2025 are not guaranteed by the Company.
The proceeds from the Notes due 2025 were used for working capital and general corporate purposes and to pay the fees,
expenses, and other transaction costs incurred in connection with the Notes due 2025.
The Notes due 2025 were issued at 100.0% of their par value. The Notes due 2025 mature on May 1, 2025, and bear interest at a
rate of 6.875% per year, payable semi-annually in arrears.
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 2025 will have the right to require Performance Food
Group, Inc. to repurchase each holder’s Notes due 2025 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. Performance Food Group, Inc. may
redeem all or part of the Notes due 2025 at a redemption price equal to 101.719% of the principal amount redeemed, plus accrued and
unpaid interest. The redemption price decreases to 100% of the principal amount redeemed on May 1, 2024.
The indenture governing the Notes due 2025 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 covenants are subject to a number of important exceptions and qualifications.
The Notes due 2025 also contain customary events of default, the occurrence of which could result in the principal of and accrued
interest on the Notes due 2025 to become or be declared due and payable.
Senior Notes due 2027
On September 27, 2019, PFG Escrow Corporation (which 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”). The Notes due 2027 are
jointly and severally guaranteed on a senior unsecured basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries
of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries). The Notes due 2027 are not guaranteed by the
Company.
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. (“Reinhart”) and
to pay related fees and expenses.
The Notes due 2027 were issued at 100.0% of their par value. 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.
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. Performance Food Group, Inc. may
redeem all or part of the Notes due 2027 at a redemption price equal to 102.750% of the principal amount redeemed, plus accrued and
unpaid interest. Beginning on October 15, 2023, 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 to100% of the principal amount redeemed, plus accrued and unpaid interest, on October 15, 2024.
The indenture governing the Notes due 2027 contains covenants limiting, among other things, PFGC’s and its restricted
subsidiaries’ ability to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other
distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with
affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the ability of
PFGC’s restricted subsidiaries to make dividends or other payments to PFGC; designate restricted subsidiaries as unrestricted
subsidiaries; and transfer or sell certain assets. These covenants are subject to a number of important exceptions and qualifications.
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The Notes due 2027 also contain customary events of default, the occurrence of which could result in the principal of and accrued
interest on the Notes due 2027 to become or be declared due and payable.
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,
pursuant to an indenture dated as of July 26, 2021. The Notes due 2029 are jointly and severally guaranteed on a senior unsecured
basis by PFGC and all domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and
other excluded subsidiaries). The Notes due 2029 are not guaranteed by the Company.
The proceeds from the Notes due 2029 were used to pay down the outstanding balance of the prior credit agreement, to redeem
the Senior Notes due 2024, and to pay the fees, expenses, and other transaction costs incurred in connection with the Notes due 2029.
The 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.
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 2029 will have the right to require Performance Food
Group, Inc. to repurchase each holder’s Notes due 2029 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. Performance Food Group, Inc. may
redeem all or 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. In addition, 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. In addition, at any time prior to August 1, 2024, Performance Food Group, Inc. may redeem up to 40% of the Notes due
2029 from the proceeds of certain equity offerings at a redemption price equal to 104.250% of the principal amount thereof, plus
accrued and unpaid interest.
The 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 covenants are subject to a number of important exceptions and qualifications.
The Notes due 2029 also contain customary events of default, the occurrence of which could result in the principal of and accrued
interest on the Notes due 2029 to become or be declared due and payable.
The Amended 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 $2,007.7 million of restricted payment capacity available under such
debt agreements, as of July 1, 2023. 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.
Fiscal year maturities of long-term debt, excluding finance lease obligations, are as follows:
(In millions)
2024
2025
2026
2027
2028
Thereafter
Total long-term debt, excluding finance lease obligations
$
—
275.0
—
1,154.0
1,060.0
1,000.0
3,489.0
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9. Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company
principally manages its exposures to a wide variety of business and operational risks through management of its core business
activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount,
sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into
derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future
known and uncertain cash amounts, the value of which are determined by interest rates and diesel fuel costs. The Company’s
derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or
expected cash receipts and payments related to the Company’s borrowings and diesel fuel purchases.
The entire change in the fair value of derivatives that are both designated and qualify as cash flow hedges is recorded in other
comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction occurs.
Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to
interest rate movements. Since the Company has a substantial portion of its debt in variable-rate instruments, it accomplishes this
objective with interest rate swaps. These swaps are designated as cash flow hedges and involve the receipt of variable-rate amounts
from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the
underlying notional amount. All of the Company’s interest rate swaps are designated and qualify as cash flow hedges.
On March 20, 2023, Performance Food Group, Inc. entered into an interest rate swap for a $100.0 million notional amount
effective from December 16, 2024 and expiring on December 15, 2027. The Company receives floating monthly interest payments
based on the greater of one month SOFR CME term or 0.00% and pays a fixed rate of 3.14% to the swap counterparty.
On April 10, 2023, Performance Food Group, Inc. entered into an amended interest rate swap with the swap counterparty for
the $350.0 million notional amount effective from April 17, 2023 and expiring on December 16, 2024. The Company receives floating
monthly interest payments based on the greater of one-month SOFR CME term or a negative 0.10% and pays a fixed rate of 0.77% to
the swap counterparty Prior to April 17, 2023, the Company was receiving interest payments based on one-month LIBOR term and
paid a fixed rate of 0.84% to the swap counterparty.
As of July 1, 2023, Performance Food Group, Inc. had two interest rate swaps with a combined $450.0 million notional amount.
The following table summarizes the outstanding swap agreements as of July 1, 2023 (in millions):
Effective Date
April 17, 2023
December 16, 2024
Maturity Date
December 15, 2024 $
December 15, 2027 $
Notional
Amount
Fixed Rate
Swapped
350.0
100.0
0.77 %
3.14 %
The tables below present the effect of the interest rate swaps designated in hedging relationships on the consolidated statement
of operations for the fiscal years ended July 1, 2023, July 2, 2022, and July 3, 2021:
(in millions)
Amount of (gain) loss recognized in OCI, pre-tax
Tax expense (benefit)
Amount of (gain) loss recognized in OCI, after-tax
Amount of (loss) gain reclassified from OCI into interest
expense, pre-tax
Tax benefit (expense)
Amount of (loss) gain reclassified from OCI into interest
expense, after-tax
Total interest expense
Fiscal year
ended
July 1, 2023
Fiscal year
ended
July 2, 2022
Fiscal year
ended
July 3, 2021
$
$
$
$
$
(15.4 ) $
3.9
(11.5 ) $
(19.3 ) $
5.0
(14.3 ) $
10.8 $
(2.7 )
(4.9 ) $
1.2
(2.4 )
0.6
(1.8 )
(4.3 )
1.1
8.1 $
218.0 $
(3.7 ) $
182.9 $
(3.2 )
152.4
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As hedged interest payments are made on the Company’s debt, amounts are reclassified from Accumulated other comprehensive
income (loss) to Interest expense. During the next twelve months, the Company estimates that gains of approximately $15.3 million
will be reclassified to interest expense.
Hedges of Forecasted Diesel Fuel Purchases
From time to time, Performance Food Group, Inc. enters into costless collar or swap arrangements to manage its exposure to
variability in cash flows expected to be paid for its forecasted purchases of diesel fuel. As of July 1, 2023, Performance Food Group,
Inc. was a party to five such arrangements, with an aggregate 18.9 million-gallon original notional amount for forecasted purchases of
diesel fuel expected to be made between July 2, 2023 and June 30, 2024.
The fuel collar and swap instruments do not qualify for hedge accounting. Accordingly, the derivative instruments are recorded
as an asset or liability on the balance sheet at fair value and any changes in fair value are recorded in the period of change as
unrealized gains or losses on fuel hedging instruments and included in Other, net in the accompanying consolidated statement of
operations. For the fiscal years ended July 1, 2023, July 2, 2022, and July 3, 2021 the Company recognized a loss of $18.3 million, a
gain of $10.5 million, and a gain of $8.4 million, respectively, related to changes in the fair value of fuel collar and swap instruments
along with $12.6 million of income, $10.2 million of income, and $2.0 million of expense, respectively, related to cash settlements.
The Company does not currently have a payable or receivable related to cash collateral for its derivatives, and therefore it has
not established an accounting policy for offsetting the fair value of its derivatives against such balances. The table below presents the
fair value of the derivative financial instruments as well as their classification on the balance sheet as of July 1, 2023 and July 2, 2022:
(in millions)
Assets
Derivatives designated as hedges:
Interest rate swaps
Interest rate swaps
Derivatives not designated as hedges:
Diesel fuel derivative instruments
Diesel fuel derivative instruments
Other derivative instruments
Total assets
Liabilities
Derivatives designated as hedges:
Interest rate swaps
Interest rate swaps
Derivatives not designated as hedges:
Diesel fuel derivative instruments
Diesel fuel derivative instruments
Other derivative instruments
Total liabilities
Balance Sheet Location
Fair Value
as of
July 1, 2023
Fair Value
as of
July 2, 2022
Prepaid expenses and other current assets
Other assets
$
Prepaid expenses and other current assets
Other assets
Prepaid expenses and other current assets
Accrued expenses and other current
liabilities
Other long-term liabilities
Accrued expenses and other current
liabilities
Other long-term liabilities
Accrued expenses and other current
liabilities
$
$
$
$
$
14.8 $
6.9
— $
—
—
21.7 $
— $
—
4.2 $
—
0.5 $
4.7 $
7.3
9.9
16.1
—
0.2
33.5
—
—
1.2
0.9
—
2.1
All of the Company’s derivative contracts are subject to a master netting arrangement with the respective counterparties that
provide for the net settlement of all derivative contracts in the event of default or upon the occurrence of certain termination events.
Upon exercise of termination rights by the non-defaulting party (i) all transactions are terminated, (ii) all transactions are valued and
the positive value or “in the money” transactions are netted against the negative value or “out of the money” transactions, and (iii) the
only remaining payment obligation is of one of the parties to pay the netted termination amount.
The Company has elected to present the derivative assets and derivative liabilities on the balance sheet on a gross basis for
periods ended July 1, 2023 and July 2, 2022. The tables below present the derivative assets and liability balance, before and after the
effects of offsetting, as of July 1, 2023 and July 2, 2022:
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Gross
Amounts
Presented
in the
Consolidated
Balance Sheet
July 1, 2023
Gross Amounts
Not Offset in
the Consolidated
Balance Sheet
Subject to
Netting
Agreements
Net
Amounts
Gross Amounts
Presented in
the Consolidated
Balance Sheet
July 2, 2022
Gross Amounts
Not Offset in
the Consolidated
Balance Sheet
Subject to
Netting
Agreements
Net
Amounts
$
21.7 $
(4.7 )
(2.9 ) $
2.9
18.8 $
(1.8 )
33.5 $
(2.1 )
(2.1 ) $
2.1
31.4
—
(In millions)
Total asset derivatives:
Total liability derivatives:
The derivative instruments are the only assets or liabilities that are recorded at fair value on a recurring basis. The fuel collars
are exchange-traded commodities and their fair value is derived from valuation models based on certain assumptions regarding market
conditions, some of which may be unobservable. Based on the lack of significance of these unobservable inputs, the Company has
concluded that these instruments represent Level 2 on the fair value hierarchy. The fair values of the Company’s interest rate swap
agreements are determined using a valuation model with several inputs and assumptions, some of which may be unobservable. A
specific unobservable input used by the Company in determining the fair value of its interest rate swaps is an estimation of both the
unsecured borrowing spread to SOFR for the Company as well as that of the derivative counterparties. Based on the lack of
significance of this estimated spread component to the overall value of the Company’s interest rate swaps, the Company has
concluded that these swaps represent Level 2 on the hierarchy.
Credit-Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that provide that if the Company either defaults or is
capable of being declared in default on any of its indebtedness, the Company can also be declared in default on its derivative
obligations.
As of July 1, 2023, the aggregate fair value amount of derivative instruments in a liability position that contain contingent
features was $1.8 million. As of July 1, 2023, the Company has not been required to post any collateral related to these agreements. If
the Company breached any of these provisions, it would be required to settle the obligations under the agreements at their termination
value of $1.8 million.
10.
Insurance Program Liabilities
The Company maintains high-deductible insurance programs covering portions of general and vehicle liability, workers’
compensation, and group medical insurance. The amounts in excess of the deductibles are fully insured by third-party insurance
carriers, subject to certain limitations. A summary of the activity in all types of deductible liabilities appears below:
(In millions)
Balance at June 27, 2020
Charged to costs and expenses
Payments
Balance at July 3, 2021
Additional liabilities assumed in connection with an acquisition
Charged to costs and expenses
Payments
Balance at July 2, 2022
Charged to costs and expenses
Payments
Balance at July 1, 2023
$
$
$
$
$
181.8
236.6
(240.3 )
178.1
40.8
346.5
(338.4 )
227.0
398.7
(382.6 )
243.1
11. Fair Value of Financial Instruments
The carrying values of cash, accounts receivable, outstanding checks in excess of deposits, trade accounts payable, and accrued
expenses approximate their fair values because of the relatively short maturities of those instruments. The derivative assets and
liabilities are recorded at fair value on the balance sheet. The fair value of long-term debt, which has a carrying value of $3,460.1
million and $3,908.8 million, is $3,338.2 million and $3,704.6 million at July 1, 2023 and July 2, 2022, respectively, and is
determined by reviewing current market pricing related to comparable debt issued at the time of the balance sheet date, and is
considered a Level 2 measurement.
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12. Leases
The Company determines if an arrangement is a lease at inception and recognizes a financing or operating lease liability and
right-of-use asset in the Company’s consolidated balance sheet. Right-of-use assets and lease liabilities for both operating and finance
leases are recognized based on present value of lease payments over the lease term at commencement date. When the Company’s
leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at
commencement date to determine the present value of lease payments. This rate was determined by using the yield curve based on the
Company’s credit rating adjusted for the Company’s specific debt profile and secured debt risk. Leases with an initial term of 12
months or less are not recorded on the balance sheet. The lease expenses for these short-term leases are recognized on a straight-line
basis over the lease term. The Company has several lease agreements that contain lease and non-lease components, such as
maintenance, taxes, and insurance, which are accounted for separately. The difference between the operating lease right-of-use assets
and operating lease liabilities primarily relates to adjustments for deferred rent, favorable leases, and prepaid rent.
Subsidiaries of the Company have entered into numerous operating and finance leases for various warehouses, office facilities,
equipment, tractors, and trailers. Our leases have remaining lease terms of less than 1 year to 20 years, some of which include options
to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Certain full-service
fleet lease agreements include variable lease payments associated with usage, which are recorded and paid as incurred. When
calculating lease liabilities, lease terms will include options to extend or terminate the lease when it is reasonably certain that the
Company will exercise that option.
Certain of the leases for tractors, trailers, and other vehicles and equipment provide for residual value guarantees to the lessors.
Circumstances that would require the subsidiary to perform under the guarantees include either (1) default on the leases with the
leased assets being sold for less than the specified residual values in the lease agreements, or (2) decisions not to purchase the assets at
the end of the lease terms combined with the sale of the assets, with sales proceeds less than the residual value of the leased assets
specified in the lease agreements. Residual value guarantees under these operating lease agreements typically range between 6% and
20% of the value of the leased assets at inception of the lease. These leases have original terms ranging from 5 to 7 years and
expiration dates ranging from 2023 to 2030. As of July 1, 2023, the undiscounted maximum amount of potential future payments for
lease residual value guarantees totaled approximately $13.3 million, which would be mitigated by the fair value of the leased assets at
lease expiration.
The following table presents the location of the right-of-use assets and lease liabilities in the Company’s consolidated balance
sheet as of July 1, 2023 and July 2, 2022 (in millions), as well as the weighted-average lease term and discount rate for the Company’s
leases:
Leases
Assets:
Operating
Finance
Total lease assets
Liabilities:
Current
Operating
Finance
Non-current
Operating
Finance
Total lease liabilities
Consolidated Balance Sheet Location
Operating lease right-of-use assets
Property, plant and equipment, net
Operating lease obligations—current installments
Finance lease obligations—current installments
Operating lease obligations, excluding current installments
Finance lease obligations, excluding current installments
Weighted average remaining
lease term
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
As of
July 1, 2023
As of
July 2, 2022
$
$
$
$
703.6
566.2
1,269.8
105.5
102.6
628.9
447.3
1,284.3
$
$
$
$
623.4
463.8
1,087.2
111.0
79.9
530.8
366.7
1,088.4
8.7 years
5.7 years
8.2 years
5.7 years
4.7 %
4.2 %
3.9 %
3.7 %
The following table presents the location of lease costs in the Company consolidated statement of operations for the periods
reported (in millions):
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Lease Cost
Finance lease cost:
Statement of Operations Location
July 1, 2023
Fiscal year ended
July 2, 2022
July 3, 2021
Amortization of finance lease assets Operating expenses
Interest on lease liabilities
Total finance lease cost
Interest expense
Operating lease cost
Short-term lease cost
Total lease cost
Operating expenses
Operating expenses
$
$
$
88.4
19.6
108.0
147.9
73.7
329.6
$
$
$
71.8
16.4
88.2
149.3
51.6
289.1
$
$
$
37.0
13.0
50.0
108.4
23.7
182.1
Supplemental cash flow information related to leases for the periods reported is as follows (in millions):
(In millions)
Cash paid for amounts included in the measurement of lease liabilities:
July 1, 2023
Fiscal year ended
July 2, 2022
July 3, 2021
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations:
$
Operating leases
Finance leases
135.7 $
19.6
88.5
201.3
191.8
134.5 $
16.4
72.1
75.0
109.4
100.5
13.0
37.9
92.5
125.6
Future minimum lease payments under non-cancelable leases as of July 1, 2023, are as follows (in millions):
Fiscal Year
2024
2025
2026
2027
2028
Thereafter
Total future minimum lease payments
Less: Interest
Present value of future minimum lease payments
Operating Leases Finance Leases
137.3 $
$
125.6
106.0
96.5
85.6
372.9
923.9 $
189.5
734.4 $
124.7
116.7
112.0
96.1
71.1
105.3
625.9
76.0
549.9
$
$
As of July 1, 2023, the Company had additional operating and finance leases that had not yet commenced which total $451.8
million in future minimum lease payments. Subsequent to July 1, 2023, the Company executed an operating lease that has not yet
commenced which totals $355.1 million in future minimum lease payments. These leases relate primarily to build-to-suit warehouse
leases which will replace existing distribution centers and will commence upon building completion with terms of 15 to 25 years. In
addition, these leases include vehicle leases expected to commence in fiscal 2024 with lease terms of 3 to 10 years.
13.
Income Taxes
The determination of the Company’s overall effective tax rate requires significant judgment, the use of estimates, and the
interpretation and application of complex tax laws. The effective tax rate reflects the income earned and taxed in various federal, state,
and foreign jurisdictions. Tax law changes, increases and decreases in temporary and permanent differences between book and tax
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items, tax credits, and the Company’s change in income in each jurisdiction all affect the overall effective tax rate. It is the Company’s
practice to recognize interest and penalties related to uncertain tax positions in income tax expense.
Income tax expense (benefit) for fiscal 2023, fiscal 2022 and fiscal 2021 consisted of the following:
(In millions)
Current income tax expense (benefit):
Federal
State
Foreign
Total current income tax expense (benefit)
Deferred income tax expense (benefit):
$
Federal
State
Foreign
Total deferred income tax expense
Total income tax expense (benefit), net
$
For the fiscal
year ended
July 1, 2023
For the fiscal
year ended
July 2, 2022
For the fiscal
year ended
July 3, 2021
95.3 $
28.8
2.7
126.8
17.8
2.3
(0.1 )
20.0
146.8 $
38.2 $
10.6
1.0
49.8
1.0
4.4
(0.6 )
4.8
54.6 $
(10.6 )
3.4
-
(7.2 )
19.9
1.3
-
21.2
14.0
The Company’s effective income tax rate for continuing operations for fiscal 2023, fiscal 2022 and fiscal 2021 was 27.0%,
32.7%, and 25.6%, respectively. Actual income tax expense (benefit) differs from the amount computed by applying the applicable
U.S. federal statutory corporate income tax rate of 21% in fiscal 2023, fiscal 2022, and fiscal 2021 to earnings before income taxes as
follows:
(In millions)
Federal income tax expense computed at statutory rate
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal income tax benefit
Foreign taxes
Non-deductible expenses and other
Net Operating Loss Carryback - Rate Differential
Stock-based compensation
Other
Total income tax expense, net
$
For the fiscal
year ended
July 1, 2023
For the fiscal
year ended
July 2, 2022
For the fiscal
year ended
July 3, 2021
$
114.2 $
35.1 $
11.5
25.3
2.5
6.9
—
(1.2 )
(0.9 )
146.8 $
13.1
—
9.6
—
(1.9 )
(1.3 )
54.6 $
4.1
—
2.1
(2.1 )
(1.5 )
(0.1 )
14.0
66
66
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9/25/23 4:02 PM
9/25/23 4:02 PM
Deferred income taxes are recorded based upon the tax effects of differences between the financial statement and tax bases of
assets and liabilities and available tax loss and credit carryforwards. Temporary differences and carry-forwards that created significant
deferred tax assets and liabilities were as follows:
$
(In millions)
Deferred tax assets:
Allowance for doubtful accounts
Inventories
Accrued employee benefits
Insurance reserves
Net operating loss carry-forwards
Stock-based compensation
Lease obligations
Tax credit carry-forwards
Other assets
Total gross deferred tax assets
Less: Valuation allowance
Total net deferred tax assets
Deferred tax liabilities:
Property, plant, and equipment
Right of use assets
Other comprehensive income
Basis difference in intangible assets
Inventories
Branch Taxes
Other Liabilities
Total deferred tax liabilities
Total net deferred income tax liability
$
As of
July 1, 2023
As of
July 2, 2022
9.3
4.1
2.0
4.5
8.5
8.7
132.9
3.5
7.1
180.6
(2.1 )
178.5
310.7
131.4
4.9
93.9
82.6
1.0
0.2
624.7
446.2
$
$
8.7
7.4
26.9
3.6
10.3
10.1
137.2
4.0
6.7
214.9
(2.6 )
212.3
307.8
140.5
3.9
102.3
81.3
0.7
0.1
636.6
424.3
The Company has taken current and future expirations into consideration when evaluating the need for valuation allowances
against deferred tax assets. A valuation allowance is provided when it is more likely than not that all or a portion of the deferred tax
assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. State net operating loss carry-forwards generally expire in fiscal years 2023
through 2042. Certain state net operating losses generated in fiscal year 2021 and after have an indefinite carry-forward period. For the
fiscal years ending July 1, 2023 and July 2, 2022 the Company established a valuation allowance of $2.1 million and $2.6 million,
respectively, net of federal tax benefit, against deferred tax assets related to certain net operating loss and state tax credit carry-
forwards which are not likely to be realized due to limitations on utilization.
The Company records a liability for Uncertain Tax Positions in accordance with FASB ASC 740-10-25, Income Taxes—
General—Recognition. Included in the balances as of July 1, 2023 and July 2, 2022, is $0.3 million and $0.4 million, respectively, of
unrecognized tax benefits that could affect the effective tax rate for continuing operations. The balance in unrecognized tax benefits
relates primarily to state tax issues and non-deductible expenses. The Company does not anticipate that changes in the amount of
unrecognized tax benefits over the next twelve months will have a significant impact on its results of operations or financial position.
As of July 1, 2023, substantially all federal, state and local, and foreign income tax matters have been concluded for years prior
to fiscal year 2014. The Internal Revenue Service commenced an audit with respect to the loss for fiscal year ended June 27, 2020 and
the carryback to the prior five tax years. The audit was ongoing at the end of fiscal 2023.
14. Retirement Plans
Employee Savings Plans
The Company sponsors the Performance Food Group Employee Savings Plan (the “401(k) Plan”). Eligible U.S. and Canadian
employees participating in the 401(k) Plan may elect to contribute between 1% and 50% of their qualified compensation, up to a
maximum dollar amount as specified by the provisions of the Internal Revenue Code in the U.S. or Income Tax Act in Canada, as
applicable. The Company matched 100% of the first 3.5% of the employee contributions, resulting in matching contributions of $52.0
million for fiscal 2023, $42.3 million for fiscal 2022, and $36.4 million for fiscal 2021.
Beginning in May 2022, Core-Mark employees transitioned to the Company’s 401(k) Plan. Prior to May 2022, Core-Mark
67
maintained defined-contribution plans in the U.S., subject to the provisions of the Internal Revenue Code, and in Canada, subject to
the Income Tax Act. For fiscal 2022, the Company made matching contributions of $4.2 million to this plan.
15. Commitments and Contingencies
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Purchase Obligations
67
68
The Company had outstanding contracts and purchase orders of $163.4 million related to capital projects and services including
purchases of compressed natural gas for its trucking fleet at July 1, 2023. Amounts due under these contracts were not included on the
Company’s consolidated balance sheet as of July 1, 2023.
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9/25/23 7:01 PM
The Company from time to time enters into certain types of contracts that contingently require it to indemnify various parties
against claims from third parties. These contracts primarily relate to: (i) certain real estate leases under which subsidiaries of the
Company may be required to indemnify property owners for environmental and other liabilities and other claims arising from their use
of the applicable premises; (ii) certain agreements with the Company’s officers, directors, and employees under which the Company
may be required to indemnify such persons for liabilities arising out of their employment relationship; and (iii) customer agreements
under which the Company may be required to indemnify customers for certain claims brought against them with respect to the
supplied products. Generally, a maximum obligation under these contracts is not explicitly stated. Because the obligated amounts
associated with these types of agreements are not explicitly stated, the overall maximum amount of the obligation cannot be
reasonably estimated. Historically, the Company has not been required to make payments under these obligations and, therefore, no
liabilities have been recorded for these obligations in the Company’s consolidated balance sheets.
Guarantees
Litigation
The Company is engaged in various legal proceedings that have arisen but have not been fully adjudicated. The likelihood of
loss arising from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to
reasonably possible to probable. When losses are probable and reasonably estimable, they have been accrued. Based on estimates of
The Company has taken current and future expirations into consideration when evaluating the need for valuation allowances
against deferred tax assets. A valuation allowance is provided when it is more likely than not that all or a portion of the deferred tax
assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. State net operating loss carry-forwards generally expire in fiscal years 2023
through 2042. Certain state net operating losses generated in fiscal year 2021 and after have an indefinite carry-forward period. For the
fiscal years ending July 1, 2023 and July 2, 2022 the Company established a valuation allowance of $2.1 million and $2.6 million,
respectively, net of federal tax benefit, against deferred tax assets related to certain net operating loss and state tax credit carry-
forwards which are not likely to be realized due to limitations on utilization.
The Company records a liability for Uncertain Tax Positions in accordance with FASB ASC 740-10-25, Income Taxes—
General—Recognition. Included in the balances as of July 1, 2023 and July 2, 2022, is $0.3 million and $0.4 million, respectively, of
unrecognized tax benefits that could affect the effective tax rate for continuing operations. The balance in unrecognized tax benefits
relates primarily to state tax issues and non-deductible expenses. The Company does not anticipate that changes in the amount of
unrecognized tax benefits over the next twelve months will have a significant impact on its results of operations or financial position.
to fiscal year 2014. The Internal Revenue Service commenced an audit with respect to the loss for fiscal year ended June 27, 2020 and
the carryback to the prior five tax years. The audit was ongoing at the end of fiscal 2023.
14. Retirement Plans
Employee Savings Plans
The Company sponsors the Performance Food Group Employee Savings Plan (the “401(k) Plan”). Eligible U.S. and Canadian
employees participating in the 401(k) Plan may elect to contribute between 1% and 50% of their qualified compensation, up to a
maximum dollar amount as specified by the provisions of the Internal Revenue Code in the U.S. or Income Tax Act in Canada, as
applicable. The Company matched 100% of the first 3.5% of the employee contributions, resulting in matching contributions of $52.0
million for fiscal 2023, $42.3 million for fiscal 2022, and $36.4 million for fiscal 2021.
Beginning in May 2022, Core-Mark employees transitioned to the Company’s 401(k) Plan. Prior to May 2022, Core-Mark
maintained defined-contribution plans in the U.S., subject to the provisions of the Internal Revenue Code, and in Canada, subject to
the Income Tax Act. For fiscal 2022, the Company made matching contributions of $4.2 million to this plan.
15. Commitments and Contingencies
Purchase Obligations
The Company had outstanding contracts and purchase orders of $163.4 million related to capital projects and services including
purchases of compressed natural gas for its trucking fleet at July 1, 2023. Amounts due under these contracts were not included on the
Company’s consolidated balance sheet as of July 1, 2023.
Guarantees
The Company from time to time enters into certain types of contracts that contingently require it to indemnify various parties
against claims from third parties. These contracts primarily relate to: (i) certain real estate leases under which subsidiaries of the
Company may be required to indemnify property owners for environmental and other liabilities and other claims arising from their use
of the applicable premises; (ii) certain agreements with the Company’s officers, directors, and employees under which the Company
may be required to indemnify such persons for liabilities arising out of their employment relationship; and (iii) customer agreements
under which the Company may be required to indemnify customers for certain claims brought against them with respect to the
supplied products. Generally, a maximum obligation under these contracts is not explicitly stated. Because the obligated amounts
associated with these types of agreements are not explicitly stated, the overall maximum amount of the obligation cannot be
reasonably estimated. Historically, the Company has not been required to make payments under these obligations and, therefore, no
liabilities have been recorded for these obligations in the Company’s consolidated balance sheets.
Litigation
The Company is engaged in various legal proceedings that have arisen but have not been fully adjudicated. The likelihood of
loss arising from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to
reasonably possible to probable. When losses are probable and reasonably estimable, they have been accrued. Based on estimates of
the range of potential losses associated with these matters, management does not believe that the ultimate resolution of these
proceedings, either individually or in the aggregate, will have a material adverse effect upon the consolidated financial position or
results of operations of the Company. However, the final results of legal proceedings cannot be predicted with certainty and, if the
Company failed to prevail in one or more of these legal matters, and the associated realized losses were to exceed the Company’s
current estimates of the range of potential losses, the Company’s consolidated financial position or results of operations could be
materially adversely affected in future periods.
68
JUUL Labs, Inc. Marketing Sales Practices, and Products Liability Litigation. In October 2019, a Multidistrict Litigation action
(“MDL”) was initiated in order to centralize litigation against JUUL Labs, Inc. (“JUUL”) and other parties in connection with JUUL’s
e-cigarettes and related devices and components in the United States District Court for the Northern District of California. On March
11, 2020, counsel for plaintiffs and the Plaintiffs’ Steering Committee filed a Master Complaint in the MDL ("Master Complaint")
naming, among several other entities and individuals including JUUL, Altria Group, Inc., Philip Morris USA, Inc., Altria Client
Services LLC, Altria Group Distribution Company, Altria Enterprises LLC, certain members of management and/or individual
investors in JUUL, various e-liquid manufacturers, and various retailers, including the Company’s subsidiaries Eby-Brown and Core-
Mark, as defendants. The Master Complaint also named additional distributors of JUUL products (collectively with Eby-Brown and
Core-Mark, the “Distributor Defendants”). The Master Complaint contains various state law claims and alleges that the Distributor
Defendants: (i) failed to disclose JUUL’s nicotine contents or the risks associated; (ii) pushed a product designed for a youth market;
(iii) engaged with JUUL in planning and marketing its product in a manner designed to maximize the flow of JUUL products; (iv) met
with JUUL management in San Francisco, California to further these business dealings; and (v) received incentives and business
development funds for marketing and efficient sales. Individual plaintiffs may also file separate and abbreviated Short Form
Complaints (“SFC”) that incorporate the allegations in the Master Complaint. JUUL and Eby-Brown are parties to a Domestic
Wholesale Distribution Agreement dated March 10, 2020 (the "Distribution Agreement"), and JUUL has agreed to defend and
indemnify Eby-Brown under the terms of that agreement and is paying Eby-Brown’s outside counsel fees directly. In addition, Core-
Mark and JUUL have entered into a Defense and Indemnity Agreement dated March 8, 2021 (the "Defense Agreement") pursuant to
68
which JUUL has agreed to defend and indemnify Core-Mark, and JUUL is paying Core-Mark’s outside counsel fees directly.
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On September 3, 2020, the Cherokee Nation filed a parallel lawsuit in Oklahoma state court against several entities, including
JUUL, e-liquid manufacturers, various retailers, and various distributors, including Eby-Brown and Core-Mark, alleging similar
claims to the claims at issue in the MDL (the “Oklahoma Litigation”). The defendants in the Oklahoma Litigation attempted to
transfer the case into the MDL, but a federal court in Oklahoma remanded the case to Oklahoma state court before the Judicial Panel
on Multidistrict Litigation effectuated the transfer of the MDL, which means the Oklahoma Litigation is no longer eligible for transfer
to the MDL. Since then, parties agreed to stay the Oklahoma Litigation and proceed to mediation after the Oklahoma Supreme Court
held that public nuisance claims cannot be brought in consumer products cases. On October 25, 2022, JUUL notified the Company
that JUUL had reached a settlement agreement that will resolve the Oklahoma Litigation. On November 9, 2022, an order was entered
dismissing the Oklahoma litigation, with prejudice, pursuant to the settlement.
9/25/23 4:02 PM
9/25/23 4:02 PM
On December 6, 2022, JUUL announced that it had reached settlements with the plaintiffs in the MDL and related cases that had
been consolidated in the U.S. District Court for Northern District of California (the “MDL Settlement”). On January 18, 2023, the
parties who were set to participate in the first round of bellwether trials in the MDL submitted a joint status filing with the court in
which they notified the court of, among other things, the settlement JUUL reached with the plaintiffs (the “Joint Status Filing”). Per
the settlement agreement, the MDL Settlement encompasses the various personal injury, consumer class action, government entity,
and Native American tribe claims made against JUUL and includes, among others, all of the Distributor Defendants (including Core-
Mark and Eby-Brown) as released parties; however, the release applicable to the Distributor Defendants, as well as certain other
defendants, will not take effect until after JUUL makes the first settlement payment required in the settlement agreement to a
settlement trust account. That payment is due forty-five days after final approval of the MDL Settlement is entered by the court. The
court held a final approval hearing on August 9, 2023. As a result of the MDL Settlement, all scheduling order dates (e.g., discovery
and motion deadlines and the bellwether trial dates) in the MDL have been stayed with respect to Eby-Brown and Core-Mark.
On September 10, 2021, Michael Lumpkins filed a parallel lawsuit in Illinois state court against several entities, including
JUUL, e-liquid manufacturers, various retailers, and various distributors, including Eby-Brown and Core-Mark, alleging similar
claims to the claims at issue in the MDL (the “Illinois Litigation”). Because there is no federal jurisdiction for this case, it will proceed
in Illinois state court. Plaintiff alleges as damages that his use of JUUL products caused a brain injury that was later exacerbated by
medical negligence. The court has entered a case management schedule, with a trial tentatively scheduled to take place in the first
calendar quarter of 2024. Eby-Brown and Core-Mark have filed a substantive motion to dismiss. The parties are engaged in discovery.
The defense and indemnity of Eby-Brown and Core-Mark for the Illinois Litigation is covered by the Distribution Agreement and the
Defense Agreement, respectively. At this time, JUUL has not indicated that the Illinois Litigation is included under the MDL
Settlement. If the Illinois Litigation is not resolved pursuant to the MDL Settlement or otherwise, the Company will continue to
vigorously defend itself.
69
the range of potential losses associated with these matters, management does not believe that the ultimate resolution of these
proceedings, either individually or in the aggregate, will have a material adverse effect upon the consolidated financial position or
results of operations of the Company. However, the final results of legal proceedings cannot be predicted with certainty and, if the
current estimates of the range of potential losses, the Company’s consolidated financial position or results of operations could be
materially adversely affected in future periods.
JUUL Labs, Inc. Marketing Sales Practices, and Products Liability Litigation. In October 2019, a Multidistrict Litigation action
(“MDL”) was initiated in order to centralize litigation against JUUL Labs, Inc. (“JUUL”) and other parties in connection with JUUL’s
e-cigarettes and related devices and components in the United States District Court for the Northern District of California. On March
11, 2020, counsel for plaintiffs and the Plaintiffs’ Steering Committee filed a Master Complaint in the MDL ("Master Complaint")
naming, among several other entities and individuals including JUUL, Altria Group, Inc., Philip Morris USA, Inc., Altria Client
Services LLC, Altria Group Distribution Company, Altria Enterprises LLC, certain members of management and/or individual
investors in JUUL, various e-liquid manufacturers, and various retailers, including the Company’s subsidiaries Eby-Brown and Core-
Mark, as defendants. The Master Complaint also named additional distributors of JUUL products (collectively with Eby-Brown and
Core-Mark, the “Distributor Defendants”). The Master Complaint contains various state law claims and alleges that the Distributor
Defendants: (i) failed to disclose JUUL’s nicotine contents or the risks associated; (ii) pushed a product designed for a youth market;
(iii) engaged with JUUL in planning and marketing its product in a manner designed to maximize the flow of JUUL products; (iv) met
with JUUL management in San Francisco, California to further these business dealings; and (v) received incentives and business
development funds for marketing and efficient sales. Individual plaintiffs may also file separate and abbreviated Short Form
Complaints (“SFC”) that incorporate the allegations in the Master Complaint. JUUL and Eby-Brown are parties to a Domestic
Wholesale Distribution Agreement dated March 10, 2020 (the "Distribution Agreement"), and JUUL has agreed to defend and
indemnify Eby-Brown under the terms of that agreement and is paying Eby-Brown’s outside counsel fees directly. In addition, Core-
Mark and JUUL have entered into a Defense and Indemnity Agreement dated March 8, 2021 (the "Defense Agreement") pursuant to
which JUUL has agreed to defend and indemnify Core-Mark, and JUUL is paying Core-Mark’s outside counsel fees directly.
On September 3, 2020, the Cherokee Nation filed a parallel lawsuit in Oklahoma state court against several entities, including
JUUL, e-liquid manufacturers, various retailers, and various distributors, including Eby-Brown and Core-Mark, alleging similar
claims to the claims at issue in the MDL (the “Oklahoma Litigation”). The defendants in the Oklahoma Litigation attempted to
transfer the case into the MDL, but a federal court in Oklahoma remanded the case to Oklahoma state court before the Judicial Panel
on Multidistrict Litigation effectuated the transfer of the MDL, which means the Oklahoma Litigation is no longer eligible for transfer
to the MDL. Since then, parties agreed to stay the Oklahoma Litigation and proceed to mediation after the Oklahoma Supreme Court
held that public nuisance claims cannot be brought in consumer products cases. On October 25, 2022, JUUL notified the Company
that JUUL had reached a settlement agreement that will resolve the Oklahoma Litigation. On November 9, 2022, an order was entered
dismissing the Oklahoma litigation, with prejudice, pursuant to the settlement.
On December 6, 2022, JUUL announced that it had reached settlements with the plaintiffs in the MDL and related cases that had
been consolidated in the U.S. District Court for Northern District of California (the “MDL Settlement”). On January 18, 2023, the
parties who were set to participate in the first round of bellwether trials in the MDL submitted a joint status filing with the court in
which they notified the court of, among other things, the settlement JUUL reached with the plaintiffs (the “Joint Status Filing”). Per
the settlement agreement, the MDL Settlement encompasses the various personal injury, consumer class action, government entity,
and Native American tribe claims made against JUUL and includes, among others, all of the Distributor Defendants (including Core-
Mark and Eby-Brown) as released parties; however, the release applicable to the Distributor Defendants, as well as certain other
defendants, will not take effect until after JUUL makes the first settlement payment required in the settlement agreement to a
settlement trust account. That payment is due forty-five days after final approval of the MDL Settlement is entered by the court. The
court held a final approval hearing on August 9, 2023. As a result of the MDL Settlement, all scheduling order dates (e.g., discovery
and motion deadlines and the bellwether trial dates) in the MDL have been stayed with respect to Eby-Brown and Core-Mark.
On September 10, 2021, Michael Lumpkins filed a parallel lawsuit in Illinois state court against several entities, including
JUUL, e-liquid manufacturers, various retailers, and various distributors, including Eby-Brown and Core-Mark, alleging similar
claims to the claims at issue in the MDL (the “Illinois Litigation”). Because there is no federal jurisdiction for this case, it will proceed
in Illinois state court. Plaintiff alleges as damages that his use of JUUL products caused a brain injury that was later exacerbated by
medical negligence. The court has entered a case management schedule, with a trial tentatively scheduled to take place in the first
calendar quarter of 2024. Eby-Brown and Core-Mark have filed a substantive motion to dismiss. The parties are engaged in discovery.
The defense and indemnity of Eby-Brown and Core-Mark for the Illinois Litigation is covered by the Distribution Agreement and the
Defense Agreement, respectively. At this time, JUUL has not indicated that the Illinois Litigation is included under the MDL
Settlement. If the Illinois Litigation is not resolved pursuant to the MDL Settlement or otherwise, the Company will continue to
vigorously defend itself.
69
69
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On June 23, 2022, the FDA announced it had issued marketing denial orders (“MDOs”) to JUUL for all of its products currently
marketed and sold in the U.S. According to the FDA, the MDOs banned the distribution and sale of all JUUL products domestically.
That same day, JUUL filed a petition for review of the MDOs with the United States Court of Appeals for the D.C. Circuit. On June
24, 2022, the court of appeals stayed the MDOs and issued a briefing schedule in the case. Thereafter, JUUL informed the FDA that
per applicable regulations it would submit a request for supervisory review of the MDOs to the FDA. In response, the FDA notified
JUUL that upon further review of the briefing JUUL made to the court of appeals, the FDA determined there are scientific issues
unique to JUUL’s Pre-Market Tobacco Application (“PMTA”) that warrant additional review. Accordingly, the FDA entered an
administrative stay of the MDOs. If the FDA ultimately decides to maintain or re-issue the MDOs, the administrative stay will remain
in place for an additional thirty days to provide JUUL the opportunity to seek further judicial relief. JUUL and the FDA filed a joint
motion with the court of appeals to hold the petition for review in abeyance on July 6, 2022, which the court of appeals granted on
July 7, 2022.
At this time, the Company is unable to predict whether the FDA will approve JUUL’s PMTA or re-issue the MDOs, nor is the
Company able to estimate any potential loss or range of loss in the event of an adverse finding against JUUL in any case that falls
outside of the MDL Settlement.
Tax Liabilities
The Company is subject to customary audits by authorities in the jurisdictions where it conducts business in the United States
and Canada, which may result in assessments of additional taxes.
16. Related-Party Transactions
The Company participates in, and has an equity method investment in, a purchasing alliance that was formed to obtain better
pricing, to expand product options, to reduce internal costs, and to achieve greater inventory turnover. The Company’s investment in
the purchasing alliance was $9.9 million as of July 1, 2023, and $8.7 million as of July 2, 2022. For fiscal 2023, fiscal 2022, and fiscal
2021, the Company recorded purchases of $2,006.2 million, $1,858.4 million, and $1,300.2 million, respectively, through the
purchasing alliance.
17. Earnings Per Common Share
Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-
average number of common shares outstanding during the period. Diluted earnings per common share is calculated using the
weighted-average number of common shares and dilutive potential common shares outstanding during the period. The Company’s
potential common shares include outstanding stock-based compensation awards and expected issuable shares under the employee
stock purchase plan. In computing diluted earnings per common share, the average closing stock price for the period is used in
determining the number of shares assumed to be purchased with the assumed proceeds under the treasury stock method. No potential
common shares were considered antidultive for the fiscal years ended July 1, 2023 and July 3, 2021. Potential common shares of 0.1
million for the fiscal year ended July 2, 2022 were not included in computing diluted earnings per common share because the effect
would have been antidilutive.
A reconciliation of the numerators and denominators for the basic and diluted earnings per common share computations is as
follows:
(In millions, except per share amounts)
Numerator:
Net income
Denominator:
Fiscal Year Ended
July 1, 2023
Fiscal Year Ended
July 2, 2022
Fiscal Year Ended
July 3, 2021
$
397.2 $
112.5 $
Weighted-average common shares outstanding
Dilutive effect of potential common shares
Weighted-average dilutive shares outstanding
Basic earnings per common share
Diluted earnings per common share
$
$
154.2
1.9
156.1
2.58 $
2.54 $
149.8
1.5
151.3
0.75 $
0.74 $
40.7
132.1
1.3
133.4
0.31
0.30
18. Stock-based Compensation
The Company provides compensation benefits to employees and non-employee directors under share-based payment
arrangements. These arrangements are designed to promote the long-term growth and profitability of the Company by providing
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70
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employees and non-employee directors who are or will be involved in the Company’s growth with an opportunity to acquire an
ownership interest in the Company, thereby encouraging them to contribute to and participate in the success of the Company.
The Company also provides an employee stock purchase plan (“ESPP”) which allows eligible employees the opportunity to
acquire shares of common stock, at a 15% discount on the fair market value as of the date of purchase, through periodic payroll
deductions. The ESPP is considered compensatory for federal income tax purposes. The Company recorded $4.2 million, $3.7 million,
and $2.6 million of stock-based compensation expense for fiscal 2023, fiscal 2022, and fiscal 2021, respectively, attributable to the
ESPP.
The Performance Food Group Company 2007 Management Option Plan
The 2007 Option Plan allowed for the granting of awards to employees, officers, directors, consultants, and advisors of the
Company or its affiliates in the form of nonqualified options. The terms and conditions of awards granted under the 2007 Option Plan
were determined by the Board of Directors. The contractual term of the options is ten years. The Company no longer grants awards
from this plan and no options were granted from the 2007 Option Plan in fiscal 2023, 2022 or 2021. Each of the employee awards
under the 2007 Option Plan was divided into three equal portions. Tranche I options were subject to time vesting. Tranche II and
Tranche III options were subject to both time and performance vesting, including performance criteria as outlined in the 2007 Option
Plan.
The following table summarizes the stock option activity for fiscal 2023 under the 2007 Option Plan.
Outstanding as of July 2, 2022
Exercised
Outstanding as of July 1, 2023
Vested or expected to vest as of July 1, 2023
Exercisable as of July 1, 2023
Number of
Options
Weighted
Average
Exercise Price
673,842 $
(85,687 ) $
588,155 $
588,155 $
588,155 $
18.82
16.69
19.13
19.13
19.13
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
(in millions)
2.2 $
2.2 $
2.2 $
24.2
24.2
24.2
The intrinsic value of exercised options was $3.6 million, $2.4 million, and $4.7 million for fiscal 2023, fiscal 2022, and fiscal
2021, respectively.
The Performance Food Group Company 2015 Omnibus Incentive Plan
In July 2015, the Company approved the 2015 Incentive Plan. The 2015 Incentive Plan allows for the granting of awards to
current employees, officers, directors, consultants, and advisors of the Company. The terms and conditions of awards granted under
the 2015 Option Plan are determined by the Board of Directors. There are 8,850,000 shares of common stock reserved for issuance
under the 2015 Incentive Plan, including non-qualified stock options and incentive stock options, stock appreciation rights, restricted
shares (time-based and performance-based), restricted stock units, and other equity based or cash-based awards. As of July 1, 2023,
there are 3,916,455 shares available for grant under the 2015 Incentive Plan. The contractual term of options granted under the 2015
Incentive Plan is ten years.
Shares of time-based restricted stock granted in fiscal 2021, fiscal 2022 and fiscal 2023 vest ratably over the requisite service
period. Additionally, in fiscal 2021, one-time grants of shares of time-based restricted stock, which vest at the end of a three year
period, were issued. No stock options were granted from the 2015 Incentive Plan in fiscal 2023, fiscal 2022 or fiscal 2021.
Performance-based restricted shares granted vest upon the achievement of a specified Relative Total Shareholder Return (“Relative
TSR”), a market condition, at the end of a three year performance period. Actual shares earned range from 0% to 200% of the initial
grant, depending upon performance relative to the Relative TSR goal. Restricted stock units and deferred stock units granted to non-
employee directors vest in full on the earlier of the first anniversary of the date of grant or the next regularly scheduled annual meeting
of the stockholders of the Company.
The fair values of time-based restricted shares, restricted stock units, and deferred stock units were based on the Company’s
closing stock price as of the date of grant.
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The Company, with the assistance of a third-party valuation expert, estimated the fair value of performance-based restricted
shares with a Relative TSR market condition granted in fiscal 2021, fiscal 2022, and fiscal 2023 using a Monte Carlo simulation with
the following weighted-average assumptions:
Risk-Free Interest Rate
Dividend Yield
Expected Volatility
Expected Term (in years)
Fair Value of Awards Granted
For the fiscal year
ended July 1, 2023
For the fiscal year
ended July 2, 2022
For the fiscal year
ended July 3, 2021
3.31 %
0.00 %
75.45 %
2.84
68.06
$
$
0.45 %
0.00 %
71.76 %
2.83
62.34
$
0.16 %
0.00 %
67.66 %
2.87
47.55
The risk-free interest rate is based on a zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield
curve at the time of grant for the expected term. The Company assumed a dividend yield of zero percent when valuing the grants
under the 2015 Incentive Plan because the Company announced that it does not intend to pay dividends on its common stock.
Expected volatility is based on the historical volatility of the Company for the expected term. The expected term represents the period
of time from the date of grant to the end of the three-year performance period.
The compensation cost that has been charged against income for the Company’s 2015 Incentive Plan was $34.4 million for
fiscal 2023, $27.6 million for fiscal 2022, and $22.8 million for fiscal 2021, and it is included within operating expenses in the
consolidated statement of operations. The total income tax benefit recognized in the consolidated statements of operations was $9.3
million in fiscal 2023, $7.4 million in fiscal 2022, and $6.1 million in fiscal 2021. Total unrecognized compensation cost for all
awards under the 2015 Incentive Plan is $40.0 million as of July 1, 2023. This cost is expected to be recognized over a weighted-
average period of 1.8 years.
The following table summarizes the stock option activity for fiscal 2023 under the 2015 Incentive Plan.
Outstanding as of July 2, 2022
Exercised
Outstanding as of July 1, 2023
Vested or expected to vest as of July 1, 2023
Exercisable as of July 1, 2023
Number of
Options
Weighted
Average
Exercise Price
722,959 $
(60,402 ) $
662,557 $
662,557 $
662,557 $
27.67
28.28
27.62
27.62
27.62
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in millions)
3.7 $
3.7 $
3.7 $
21.6
21.6
21.6
The intrinsic value of exercised options was $1.8 million, $0.8 million, and $1.4 million for fiscal 2023, fiscal 2022 and fiscal
2021, respectively.
The following table summarizes the changes in nonvested restricted shares and restricted stock units for fiscal 2023 under the
2015 Incentive Plan.
Nonvested as of July 2, 2022
Granted
Vested
Forfeited
Nonvested as of July 1, 2023
Shares
Weighted Average
Grant Date Fair Value
1,688,339 $
686,586 $
(610,242 ) $
(112,554 ) $
1,652,129 $
41.64
54.99
41.48
48.72
46.76
The total fair value of shares vested was $32.0 million, $21.7 million, and $13.7 million for fiscal 2023, fiscal 2022, and fiscal
2021, respectively.
The Core-Mark 2010 and 2019 Long Term Incentive Plans
In connection with the Core-Mark acquisition, the Company assumed the outstanding stock-based compensation awards from
Core-Mark’s 2010 Long-Term Incentive Plan and 2019 Long-Term Incentive Plan. On September 1, 2021, each outstanding time-
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based restricted stock unit (“RSU”) held by a non-employee director of Core-Mark was cancelled and converted into the right to
receive 0.44 shares of Company common stock (“Exchange Ratio”) and $23.875 in cash, without interest (“Per-Share Cash Amount”).
Time-based RSUs held by Core-Mark employees were converted to Company RSUs based on the prescribed ratio in the merger
agreement. The ratio was calculated as the sum of the Exchange Ratio plus the quotient of the Per-Share Cash Amount divided by the
volume weighted average sale price of Company common stock for the ten full consecutive trading days ending on August 31, 2021
(“Stock Award Exchange Ratio”). Each performance-based restricted stock unit (“PSU”) of Core-Mark was converted into a
Company RSU based on the greater of the actual performance as of the acquisition date or the target performance level multiplied by
the Stock Award Exchange Ratio. The pro-rata actual level of performance for the applicable performance metrics were greater than
target, therefore, the PSUs were converted based on actual performance. The Company RSUs granted as a result of the conversion are
subject to the same terms and conditions, such as vesting schedule and termination related vesting provisions, as the Core-Mark
awards were subject to prior to their conversion.
On September 1, 2021, the Company granted 614,056 RSUs with a grant date fair value of $49.55 per share. The total $30.4
million grant date fair value was bifurcated with $9.2 million recognized as pre-combination vesting within the purchase price as
consideration transferred and $21.2 million is post-combination expense to be recognized over the weighted average remaining
vesting period of 1.80 years.
Awards under the Core-Mark 2010 Long-Term Incentive Plan fully vested in fiscal 2022. The compensation cost that has been
charged against income for the Core-Mark 2010 and 2019 Long-Term Incentive Plans was $4.8 million for fiscal 2023 and $12.7
million for fiscal 2022, and it is included within operating expenses in the consolidated statement of operations. The total income tax
benefit recognized in the consolidated statements of operations was $1.3 million in fiscal 2023 and $3.4 million in fiscal 2022. Total
unrecognized compensation cost for all awards under the 2019 Long-Term Incentive Plan is $1.5 million as of July 1, 2023. This cost
is expected to be recognized over a weighted-average period of 0.5 years.
The following table summarizes the changes in nonvested RSUs for fiscal 2023 under the Core-Mark 2019 Long-Term
Incentive Plan.
Nonvested as of July 2, 2022
Vested
Forfeited
Nonvested as of July 1, 2023
Shares
Weighted Average
Grant Date Fair Value
246,850 $
(167,111 ) $
(6,157 ) $
73,582 $
49.55
49.55
49.55
49.55
The total fair value of shares vested was $9.6 million and $14.3 million for fiscal 2023 and fiscal 2022, respectively.
19. Segment Information
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 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 Vistar segment specializes in distributing candy, snacks, beverages, and other items nationally to vending, office coffee
service, theater, retail, hospitality, and other channels. 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.
Corporate & All Other is comprised of corporate overhead and certain operations that are not considered separate reportable
segments based on their size. This includes the operations of the Company’s internal logistics unit responsible for managing and
allocating inbound logistics revenue and expense. Corporate & All Other may also include capital expenditures for certain information
technology projects that are transferred to the segments once placed in service.
Intersegment sales represent sales between the segments, which are eliminated in consolidation.
The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies
and Estimates. Management evaluates the performance of each operating segment based on various operating and financial metrics,
including total sales and Adjusted EBITDA, 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.
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(In millions)
For the fiscal year ended July 1, 2023
Net external sales
Inter-segment sales
Total sales
Depreciation and amortization
Capital expenditures
For the fiscal year ended July 2, 2022
Net external sales
Inter-segment sales
Total sales
Depreciation and amortization
Capital expenditures
For the fiscal year ended July 3, 2021
Net external sales
Inter-segment sales
Total sales
Depreciation and amortization
Capital expenditures
Foodservice
Vistar
Convenience
Corporate
& All Other
Eliminations Consolidated
$ 28,467.5 $
23.1
28,490.6
279.8
191.4
$ 26,561.1 $
18.1
26,579.2
260.0
148.2
$ 21,880.0 $
10.0
21,890.0
248.3
99.9
4,546.3
3.0
4,549.3
42.1
18.0
3,679.4
2.4
3,681.8
52.6
19.1
2,537.4
2.2
2,539.6
47.9
48.0
$ 24,119.5 $
0.1
24,119.6
148.0
46.3
$ 20,603.3 $
—
20,603.3
125.7
31.9
$
5,946.8 $
—
5,946.8
12.6
26.5
121.4 $
579.0
700.4
26.8
14.0
50.3 $
476.2
526.5
24.5
16.3
34.7 $
393.9
428.6
30.1
14.4
— $ 57,254.7
—
57,254.7
496.7
269.7
(605.2 )
(605.2 )
—
—
— $ 50,894.1
—
50,894.1
462.8
215.5
(496.7 )
(496.7 )
—
—
— $ 30,398.9
—
30,398.9
338.9
188.8
(406.1 )
(406.1 )
—
—
Adjusted EBITDA for each reportable segment and Corporate & All Other is presented below along with a reconciliation to
consolidated income before taxes.
Foodservice Adjusted EBITDA
Vistar Adjusted EBITDA
Convenience Adjusted EBITDA
Corporate & All Other Adjusted EBITDA
Depreciation and amortization
Interest expense
Change in LIFO reserve
Stock-based compensation expense
(Loss) gain on fuel derivatives
Acquisition, integration & reorganization expenses
Other adjustments (1)
Income before taxes
July 1, 2023
July 2, 2022
July 3, 2021
Fiscal year ended
$
$
943.6 $
325.3
328.8
(234.3 )
(496.7 )
(218.0 )
(39.2 )
(43.3 )
(5.7 )
(10.6 )
(5.9 )
544.0 $
786.5 $
193.0
257.1
(216.8 )
(462.8 )
(182.9 )
(122.9 )
(44.0 )
20.7
(49.9 )
(10.9 )
167.1 $
677.5
84.8
36.4
(173.4 )
(338.9 )
(152.4 )
(36.4 )
(25.4 )
6.4
(16.2 )
(7.7 )
54.7
(1) Other adjustments include asset impairments, gains and losses on disposal of fixed assets, amounts related to favorable and
unfavorable leases, foreign currency transaction gains and losses, and franchise tax expense.
Total assets by reportable segment and Corporate & All Other, excluding intercompany receivables between segments, are as
follows:
(In millions)
Foodservice
Vistar
Convenience
Corporate & All Other
Total assets
As of
July 1, 2023
As of
July 2, 2022
$
$
6,511.6 $
1,292.7
4,226.2
468.5
12,499.0 $
6,455.3
1,133.7
4,411.6
377.4
12,378.0
The sales mix for the Company’s principal product and service categories is as follows:
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(In millions)
Cigarettes
Center of the plate
Canned and dry groceries
Frozen Foods
Candy/snack/theater and concession
Refrigerated and dairy products
Paper products and cleaning supplies
Other tobacco products
Beverage
Produce
Other miscellaneous goods and services
Total
For the fiscal
year ended
July 1, 2023
For the fiscal
year ended
July 2, 2022
For the fiscal
year ended
July 3, 2021
14,902.7 $
11,285.7
5,537.4
4,989.2
4,986.9
4,557.4
3,189.3
2,978.8
2,823.3
1,336.8
667.2
57,254.7 $
13,197.4 $
11,332.2
4,602.5
4,086.8
3,826.7
4,230.2
2,695.5
2,511.1
2,511.6
1,049.2
850.9
50,894.1 $
4,231.4
8,931.1
3,290.0
3,484.4
1,725.0
2,951.0
2,312.1
704.0
1,534.9
876.6
358.4
30,398.9
$
$
Cigarette sales represented 26.0%, 25.9%, and 13.9% of net sales for the years ended July 1, 2023, July 2, 2022, and July 3,
2021, respectively. The Company’s significant suppliers include Altria Group, Inc. (parent company of Philip Morris USA Inc.) and
R.J. Reynolds Tobacco Company, which, in the aggregate, represents approximately 23.1% and 20.7% of products purchased for the
years ended July 1, 2023 and July 2, 2022, respectively. Although cigarettes represent a significant portion of the Company’s total net
sales and cost of goods sold, the majority of the Company's gross profit is generated from the sales of food and food-related products.
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SCHEDULE 1—Registrant’s Condensed Financial Statements
PERFORMANCE FOOD GROUP COMPANY
Parent Company Only
CONDENSED BALANCE SHEETS
(In millions per share data)
ASSETS
Investment in wholly owned subsidiary
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses and other current liabilities
Total current liabilities
Intercompany payable
Total liabilities
Commitments and contingencies
Shareholders’ equity:
Common Stock
As of
July 1, 2023
As of
July 2, 2022
$
$
3,826.3 $
3,826.3 $
3,370.0
3,370.0
0.4
0.4
80.4
80.8
-
-
70.5
70.5
Common Stock: $0.01 par value per share, 1.0 billion shares authorized, 154.5
million shares issued and outstanding as of July 1, 2023;
153.6 million shares issued and outstanding as of July 2, 2022
Additional paid-in capital
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
1.5
2,863.0
881.0
3,745.5
3,826.3 $
1.5
2,816.8
481.2
3,299.5
3,370.0
$
See accompanying notes to condensed financial statements.
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PERFORMANCE FOOD GROUP COMPANY
Parent Company Only
PERFORMANCE FOOD GROUP COMPANY
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Parent Company Only
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Fiscal year ended
July 2, 2022
Fiscal year ended
July 2, 2022
Fiscal year ended
July 1, 2023
Fiscal year ended
July 1, 2023
($ in millions)
Operating expenses
($ in millions)
Operating loss
Operating expenses
Loss before equity in net income of subsidiary
Operating loss
Equity in net income of subsidiary, net of tax
Loss before equity in net income of subsidiary
Net income
Equity in net income of subsidiary, net of tax
Other comprehensive income
Net income
Total comprehensive income
Other comprehensive income
Total comprehensive income
$
$
$
$
0.8 $
(0.8 )
0.8 $
(0.8 )
(0.8 )
398.0
(0.8 )
397.2
398.0
2.6
397.2
399.8 $
2.6
399.8 $
Fiscal year ended
July 3, 2021
Fiscal year ended
1.1
July 3, 2021
(1.1 )
1.1
(1.1 )
(1.1 )
41.8
(1.1 )
40.7
41.8
5.0
40.7
45.7
5.0
45.7
0.7 $
(0.7 )
0.7 $
(0.7 )
(0.7 )
113.2
(0.7 )
112.5
113.2
16.7
112.5
129.2 $
16.7
129.2 $
See accompanying notes to condensed financial statements.
See accompanying notes to condensed financial statements.
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PERFORMANCE FOOD GROUP COMPANY
PERFORMANCE FOOD GROUP COMPANY
Parent Company Only
Parent Company Only
CONDENSED STATEMENTS OF CASH FLOWS
CONDENSED STATEMENTS OF CASH FLOWS
($ in millions)
($ in millions)
Cash flows from operating activities:
Cash flows from operating activities:
Net income
Net income
Adjustments to reconcile net income to net cash provided by (used in)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities
operating activities
Equity in net income of subsidiary
Equity in net income of subsidiary
Changes in operating assets and liabilities, net
Changes in operating assets and liabilities, net
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities
Intercompany payables
Intercompany payables
Net cash provided by (used in) operating activities
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Cash flows from investing activities:
Net cash paid for acquisitions
Net cash paid for acquisitions
Capital contribution to subsidiary
Capital contribution to subsidiary
Distribution from subsidiary
Distribution from subsidiary
Net cash used in investing activities
Net cash used in investing activities
Cash flows from financing activities:
Cash flows from financing activities:
Proceeds from exercise of stock options
Proceeds from exercise of stock options
Proceeds from employee stock purchase plan
Proceeds from employee stock purchase plan
Cash paid for shares withheld to cover taxes
Cash paid for shares withheld to cover taxes
Repurchase of common stock
Repurchase of common stock
Net cash provided by financing activities
Net cash provided by financing activities
Net (decrease) increase in cash and restricted cash
Net (decrease) increase in cash and restricted cash
Cash and restricted cash, beginning of period
Cash and restricted cash, beginning of period
Cash and restricted cash, end of period
Cash and restricted cash, end of period
Fiscal year
Fiscal year
ended
ended
July 1, 2023
July 1, 2023
Fiscal year
Fiscal year
ended
ended
July 2, 2022
July 2, 2022
Fiscal year
Fiscal year
ended
ended
July 3, 2021
July 3, 2021
$
$
397.2 $
397.2 $
112.5 $
112.5 $
40.7
40.7
(398.0 )
(398.0 )
(113.2 )
(113.2 )
0.4
0.4
9.9
9.9
9.5
9.5
—
—
(27.7 )
(27.7 )
11.2
11.2
(16.5 )
(16.5 )
3.1
3.1
27.7
27.7
(12.6 )
(12.6 )
(11.2 )
(11.2 )
7.0
7.0
—
—
—
—
— $
— $
—
—
9.4
9.4
8.7
8.7
(1,386.1 )
(1,386.1 )
(83.1 )
(83.1 )
1,444.6
1,444.6
(24.6 )
(24.6 )
2.7
2.7
24.6
24.6
(11.4 )
(11.4 )
—
—
15.9
15.9
—
—
—
—
— $
— $
(41.8 )
(41.8 )
(0.2 )
(0.2 )
0.5
0.5
(0.8 )
(0.8 )
—
—
(26.2 )
(26.2 )
—
—
(26.2 )
(26.2 )
5.0
5.0
26.2
26.2
(4.2 )
(4.2 )
—
—
27.0
27.0
—
—
—
—
—
—
$
$
See accompanying notes to condensed financial statements.
See accompanying notes to condensed financial statements.
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Notes to Condensed Parent Company Only Financial Statements
1. Description of Performance Food Group Company
Performance Food Group Company (the “Parent”) was incorporated in Delaware on July 23, 2002, to effect the purchase of all
the outstanding equity interests of PFGC, Inc. (“PFGC”). The Parent has no significant operations or significant assets or liabilities
other than its investment in PFGC. Accordingly, the Parent is dependent upon distributions from PFGC to fund its obligations.
However, under the terms of PFGC’s various debt agreements, PFGC’s ability to pay dividends or lend to the Parent is restricted,
except that PFGC may pay specified amounts to the Parent to fund the payment of the Parent’s franchise and excise taxes and other
fees, taxes, and expenses required to maintain its corporate existence.
2. Basis of Presentation
The accompanying condensed financial statements (parent company only) include the accounts of the Parent and its investment
in PFGC, Inc. accounted for in accordance with the equity method, and do not present the financial statements of the Parent and its
subsidiary on a consolidated basis. These parent company only financial statements should be read in conjunction with the
Performance Food Group Company consolidated financial statements. The Parent is included in the consolidated federal and certain
unitary, consolidated and combined state income tax returns with its subsidiaries. The Parent’s tax balances reflect its share of such
filings.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Regulations under the Securities Exchange Act of 1934, as amended (“Exchange Act”), require public companies, including us,
to maintain “disclosure controls and procedures,” which are defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act to
mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in
the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure
that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to
management, including our principal executive officer and principal financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required or necessary disclosures. In designing and evaluating our disclosure controls
and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in
designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Exchange Act, as of the
end of the period covered by this Form 10-K, an evaluation was carried out under the supervision and with the participation of the
Company’s management, including its principal executive officer and principal financial officer, of the effectiveness of its disclosure
controls and procedures. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded
that the Company’s disclosure controls and procedures, as of the end of the period covered by this Form 10-K, were effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
In order to evaluate the effectiveness of internal control over financial reporting, management, with the participation of the Company’s
principal executive officer and principal financial officer, has conducted an assessment, including testing, using the criteria established
in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”).
The Company’s internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, is a process
designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes
those policies and procedures that:
i.
ii.
iii.
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;
provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only
in accordance with authorizations of management and our board of directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on our assessment, under the criteria established in Internal Control—Integrated Framework (2013) issued by the COSO,
management has concluded that the Company maintained effective internal control over financial reporting as of July 1, 2023.
The effectiveness of the Company’s internal control over financial reporting as of July 1, 2023, has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their attestation report, which appears in Item 8.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as that term is defined in Rule 13a-15(f) under the
Exchange Act), that occurred during the fiscal quarter ended July 1, 2023, that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information
During the three months ended July 1, 2023, no director or officer of the Company adopted, terminated or modified a ‘Rule
10b5-1 trading arrangement’ or ‘non-Rule 10b5-1 trading arrangement,’ as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item will be included in our definitive proxy statement for the 2023 Annual Meeting of
Stockholders under the captions “Corporate Governance at Performance Food Group,” “Executive Officers of the Company,” “Report
of the Audit and Finance Committee” and “Election of Directors” and is incorporated herein by reference. We expect to file such
definitive proxy statement with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended July 1, 2023.
Item 11. Executive Compensation
The information required by this item will be included in our definitive proxy statement for the 2023 Annual Meeting of
Stockholders under the captions “Compensation Discussion and Analysis,” “Report of the Human Capital and Compensation
Committee,” “Executive Compensation,” and “Compensation of Directors” and is incorporated herein by reference. We expect to file
such definitive proxy statement with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended July 1, 2023.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included in our definitive proxy statement for the 2023 Annual Meeting of
Stockholders under the caption “Ownership of Securities” and is incorporated herein by reference. We expect to file such definitive
proxy statement with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended July 1, 2023.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in our definitive proxy statement for the 2023 Annual Meeting of
Stockholders under the captions “Election of Directors,” “Corporate Governance at Performance Food Group” and “Transactions with
Related Persons” and is incorporated herein by reference. We expect to file such definitive proxy statement with the SEC pursuant to
Regulation 14A within 120 days after our fiscal year ended July 1, 2023.
Item 14. Principal Accountant Fees and Services
The information required by this item will be included in our definitive proxy statement for the 2023 Annual Meeting of
Stockholders under the caption “Ratification of Independent Registered Public Accounting Firm” and is incorporated herein by
reference. We expect to file such definitive proxy statement with the SEC pursuant to Regulation 14A within 120 days after our fiscal
year ended July 1, 2023.
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Item 15. Exhibits and Financial Statement Schedules
(a)
The following documents are filed, or incorporated by reference, as part of this Form 10-K:
PART IV
1.
2.
3.
All financial statements. See Index to Consolidated Financial Statements on page 38 of this Form 10-K.
All financial statement schedules are omitted because they are not present, not present in material amounts, or
presented within the Consolidated Financial Statements or Notes thereto within Item 8.
Exhibits. See the Exhibit Index immediately following Item 16. Form 10-K Summary, which is incorporated by
reference as if fully set forth herein.
Item 16. Form 10-K Summary
None.
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Exhibit No.
2.1
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
EXHIBIT INDEX
Description
Agreement and Plan of Merger, dated as of May 17, 2021, by and among Performance Food Group Company,
Longhorn Merger Sub I, Inc., Longhorn Merger Sub II, LLC and Core-Mark Holding Company, Inc. (incorporated by
reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-37578) filed with the Securities
and Exchange Commission on May 18, 2021).
Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on
November 13, 2019).
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Current
Report on Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on May 24, 2023).
Indenture, dated as of September 27, 2019, by and between PFG Escrow Corporation and U.S. Bank National
Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File
No. 001-37578) filed with the Securities and Exchange Commission on October 2, 2019).
First Supplemental Indenture, dated as of December 30, 2019, among Performance Food Group, Inc., PFGC, Inc., the
Guaranteeing Subsidiaries and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to
the Company’s Current Report on Form 8-K (File No. 001-37578) filed with the Securities and Exchange
Commission on December 30, 2019).
Form of 5.500% Senior Notes due 2027 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on
Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on October 2, 2019).
Indenture, dated as of April 24, 2020, by and between Performance Food Group, Inc., the guarantors party thereto and
U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report
on Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on April 27, 2020).
Form of 6.875% Senior Notes due 2025 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on
Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on April 27, 2020).
Indenture, dated as of July 26, 2021, by and between Performance Food Group, Inc., the guarantors party thereto and
U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report
on Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on July 26, 2021).
Form of 4.250% Senior Notes due 2029 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on
Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on July 26, 2021).
4.8*
Description of Capital Stock of Performance Food Group Company
10.1
10.2
Fifth Amended and Restated Credit Agreement, dated September 17, 2021, among PFGC, Inc., Performance Food
Group, Inc., Wells Fargo, National Association, as Administrative Agent and Collateral Agent, the other borrowers
from time to time party thereto, and the other lenders thereto. (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (File No. 001-37578) filed with the Securities and Exchange Commission on
September 20, 2021).
First Amendment to Fifth Amended and Restated Credit Agreement, dated April 17, 2023, among PFGC, Inc.,
Performance Food Group, Inc., Wells Fargo Bank, National Association, as Administrative Agent and Collateral
Agent, the other borrowers from time to time party thereto, and the other lenders thereto (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-37578) filed with the Securities and
Exchange Commission on April 18, 2023).
10.3†
Amended and Restated 2007 Management Option Plan (incorporated by reference to Exhibit 10.7 to Amendment No.
4 to the Company’s Registration Statement on Form S-1 (File 333-198654), filed with the Securities and Exchange
Commission on August 5, 2015).
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10.4†
10.5†
10.6†
10.7†
10.8†
2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.8 to Amendment No. 4 to the Company’s
Registration Statement on Form S-1 (File 333-198654), filed with the Securities and Exchange Commission on
August 5, 2015).
Amendment No. 1 to the 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K/A (File No. 001-37578) filed with the Securities and Exchange Commission on
November 19, 2019).
Employment Letter Agreement, dated September 6, 2002, between George L. Holm and Performance Food Group
Company (f/k/a Wellspring Distribution Corp.) (incorporated by reference to Exhibit 10.8 to the Company’s
Registration Statement on Form S-1 (File 333-198654), filed with the Securities and Exchange Commission on
September 9, 2014).
Form of Option Award Agreement for Named Executive Officers under the 2007 Management Option Plan
(incorporated by reference to Exhibit 10.14 to Amendment No. 5 to the Company’s Registration Statement on Form
S-1 (File 333-198654), filed with the Securities and Exchange Commission on August 31, 2015).
Form of Option Grant under the 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.18 to
Amendment No. 5 to the Company’s Registration Statement on Form S-1 (File 333-198654), filed with the Securities
and Exchange Commission on August 31, 2015).
10.9†
Form of Deferred Stock Unit Agreement (Non-Employee Director) under the 2015 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37578),
filed with the Securities and Exchange Commission on February 7, 2018).
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
10.17†
Form of Restricted Stock Unit Agreement (Non-Employee Director) under the 2015 Omnibus Incentive Plan, as
amended (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-
37578) filed with the Securities and Exchange Commission on February 5, 2020).
Form of Deferred Stock Unit Agreement (Non-Employee Director) under the 2015 Omnibus Incentive Plan, as
amended (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-
37578) filed with the Securities and Exchange Commission on February 5, 2020).
Performance Food Group Company Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q (File No. 001-37578) filed with the Securities and Exchange Commission
on February 5, 2020).
Amendment No. 1 to Performance Food Group Company Deferred Compensation Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37578) filed with the Securities and
Exchange Commission on May 11, 2023).
Performance Food Group Company Executive Severance Plan (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q (File No. 001-37578) filed with the Securities and Exchange Commission
on May 5, 2020).
Form of Performance Food Group Company Executive Severance Plan Participation Agreement (incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37578) filed with the
Securities and Exchange Commission on May 5, 2020).
Form of Time-Based Restricted Stock Agreement (Graded Vesting) under the 2015 Omnibus Incentive Plan, as
amended (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-
37578) filed with the Securities and Exchange Commission on November 4, 2020).
Form of Time-Based Restricted Stock Agreement (Cliff Vesting) under the 2015 Omnibus Incentive Plan, as amended
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37578)
filed with the Securities and Exchange Commission on November 4, 2020).
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10.18†
10.19†
10.20†
Form of Performance-Based Restricted Stock Agreement (with Retirement provision) under the 2015 Omnibus
Incentive Plan, as amended (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q (File No. 001-37578) filed with the Securities and Exchange Commission on November 4, 2020).
Form of Performance-Based Restricted Stock Agreement (without Retirement provision) under the 2015 Omnibus
Incentive Plan, as amended (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form
10-Q (File No. 001-37578) filed with the Securities and Exchange Commission on November 4, 2020).
Form of Option Grant under the 2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q (File No. 001-37578) filed with the Securities and Exchange Commission
on May 11, 2022).
10.21†*
Form of Performance-Based Restricted Stock Agreement under the 2015 Omnibus Incentive Plan.
10.22†
10.23†
10.24†
10.25†
10.26†
21.1*
23.1*
24.1*
31.1*
31.2*
32.1*
32.2*
Core-Mark Holding Company, Inc. 2019 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of
Core-Mark’s Current Report on Form 8-K (file No. 000-51515) filed with the Securities and Exchange Commission
on May 24, 2019).
Amendment No. 1 to the Core-Mark Holding Company, Inc. 2019 Long-Term Incentive Plan, dated as of September
1, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-8 (File No.
333-259238) filed with the Securities and Exchange Commission on September 1, 2021).
Core-Mark Holding Company, Inc. 2010 Long-Term Incentive Plan (as amended, effective May 20, 2014)
(incorporated by reference to Annex II of Core-Mark’s Proxy Statement on Schedule 14A (File No. 000-51515) filed
with the Securities and Exchange Commission on April 8, 2014).
Executive Employment Agreement, dated September 1, 2021, between Scott McPherson and Performance Food
Group Company (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K (File No.
001-37578) filed with the Securities and Exchange Commission on August 19, 2022).
Consulting Agreement, dated August 9, 2022, between the Company and James D. Hope (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 11, 2022).
Subsidiaries of the Registrant.
Consent of Deloitte & Touche LLP.
Power of Attorney (included on signature pages to this Annual Report on Form 10-K).
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**
Inline XBRL Instance Document
101.SCH**
Inline XBRL Taxonomy Extension Schema Document
101.CAL**
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE**
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104**
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Filed herewith.
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** Inline XBRL (Extensible Business Reporting Language) information is furnished and not filed for purposes of Sections 11 and 12
of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
† Identifies exhibits that consist of a management contract or compensatory plan or arrangement.
The agreements and other documents filed as exhibits to this Form 10-K are not intended to provide factual information or other
disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for
that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely
within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they
were made or at any other time.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly authorized on the 16th day of August 2023.
SIGNATURES
PERFORMANCE FOOD GROUP COMPANY
(Registrant)
By:
Name:
/s/ George L. Holm
George L. Holm
Title:
Chief Executive Officer
(Principal Executive Officer and Authorized Signatory)
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POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature appears below hereby constitutes and appoints A. Brent
King and Jeffery Fender, and each of them, as his or her true and lawful attorneys-in-fact and agents, with power to act with or
without the others and with full power of substitution and resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents and each of them may deem necessary or desirable to enable the registrant to comply with
the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange
Commission thereunder in connection with the registrant’s Annual Report on Form 10-K for the fiscal year ended July 1, 2023 (the
“Annual Report”), including specifically, but without limiting the generality of the foregoing, power and authority to sign the name of
the registrant and the name of the undersigned, individually and in his or her capacity as a director or officer of the registrant, to the
Annual Report as filed with the Securities and Exchange Commission, to any and all amendments thereto, and to any and all
instruments or documents filed as part thereof or in connection therewith; and each of the undersigned hereby ratifies and confirms all
that said attorneys and agents and each of them shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on the 16th day of August 2023.
Signatures
Title
/s/ George L. Holm
George L. Holm
/s/ H. Patrick Hatcher
H. Patrick Hatcher
/s/ Christine Vlahcevic
Christine Vlahcevic
/s/ Barbara J. Beck
Barbara J. Beck
/s/ William F. Dawson Jr.
William F. Dawson Jr.
/s/ Manuel A. Fernandez.
Manuel A. Fernandez
/s/ Laura J. Flanagan
Laura J. Flanagan
/s/ Matthew C. Flanigan
Matthew C. Flanigan
/s/ Kimberly S. Grant
Kimberly S. Grant
/s/ Jeffrey M. Overly
Jeffrey M. Overly
/s/ David V. Singer
David V. Singer
/s/ Randall N. Spratt
Randall N. Spratt
/s/ Warren M. Thompson
Warren M. Thompson
Chief Executive Officer; Director
(Principal Executive Officer)
Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
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Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES
Refer to Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K
for the fiscal year ended July 1, 2023, filed with the SEC on August 16, 2023 for statements regarding our use of non-GAAP financial measures and
the definitions of such non-GAAP financial measures. 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:
July 1,
2023
July 2,
2022
Fiscal year ended
July 3,
2021
June 27,
2020
June 29,
2019
June 30,
2018
Net income (loss)
Interest expense
Income tax expense (benefit)
Depreciation
Amortization of intangible assets
Change in LIFO reserve (1)
Stock-based compensation expense
Loss (gain) on fuel derivatives
Acquisition, integration & reorganization expenses (2)
Other adjustments (3)
Adjusted EBITDA
________________
$
397.2
218.0
146.8
315.7
181.0
39.2
43.3
5.7
10.6
5.9
$ 1,363.4
$ 112.5
182.9
54.6
279.7
183.1
122.9
44.0
(20.7 )
49.9
10.9
$ 1,019.8
$
(In millions)
40.7
152.4
14.0
213.9
125.0
36.4
25.4
(6.4 )
16.2
7.7
$ 625.3
$ (114.1 )
116.9
(108.1 )
178.5
97.8
3.9
17.9
6.6
182.8
23.3
$ 405.5
$ 166.8
65.4
51.5
116.2
38.8
3.4
15.7
0.1
11.8
5.8
$ 475.5
$ 198.7
60.4
(5.1 )
100.3
29.8
0.3
21.6
(0.2 )
5.0
15.9
$ 426.7
(1)
(2)
(3)
Includes (decreases) increases in the last-in-first-out (“LIFO”) reserve of $(19.2) million, $31.9 million, $11.8 million, $0.8 million,
$3.4 million, and $0.3 million for Foodservice for fiscal 2023, fiscal 2022, fiscal 2021, fiscal 2020, fiscal 2019, and fiscal 2018,
respectively and $58.4 million, $91.0 million, $24.6 million, $3.1 million for Convenience for fiscal 2023, fiscal 2022, fiscal 2021, and
fiscal 2020, respectively.
Includes professional fees and other costs related to completed and abandoned acquisitions, costs of integrating certain of our facilities,
and facility closing costs. Fiscal 2020 includes $108.6 million of contingent consideration accretion expense related to the acquisition of
Eby-Brown and $9.3 million of costs related to information technology projects the Company is no longer pursuing as a result of the
Reinhart acquisition.
Includes asset impairments, gains and losses on disposal of fixed assets, amounts related to favorable and unfavorable leases, foreign
currency transaction gains and losses, franchise tax expense, and other adjustments permitted by our credit agreement. This line item
also includes development costs of $5.8 million for fiscal 2020 and $8.0 million for fiscal 2018 related to certain productivity initiatives
the Company is no longer pursuing.
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90
B O A R D O F D I R E C T O R S
S T O C K H O L D E R I N F O R M A T I O N
GEORGE L. HOLM
Chairman of the
Board of Directors and
Chief Executive Officer
MANUEL A. FERNANDEZ
Lead Independent Director
Human Capital and
Compensation Committee
Member
Nominating and Corporate
Governance Committee Member
Technology and Cybersecurity
Committee Member
BARBARA J. BECK
Director
Human Capital and
Compensation Committee
(Chair)
Nominating and Corporate
Governance Committee Member
WILLIAM F. DAWSON, JR.
Director
Audit and Finance Committee
Member
Technology and Cybersecurity
Committee Member
LAURA FLANAGAN
Director
Audit and Finance Committee
Member
Technology and Cybersecurity
Committee Member
MATTHEW C. FLANIGAN
Director
Audit and Finance Committee
(Chair)
Technology and Cybersecurity
Committee Member
KIMBERLY S. GRANT
Director
Human Capital and
Compensation Committee
Member
Nominating and Corporate
Governance Committee Member
JEFFREY M. OVERLY
Director
Human Capital and
Compensation Committee
Member
Nominating and Corporate
Governance Committee (Chair)
DAVID V. SINGER
Director
Audit and Finance Committee
Member
Technology and Cybersecurity
Committee Member
RANDALL N. SPRATT
Director
Audit and Finance Committee
Member
Technology and Cybersecurity
Committee (Chair)
WARREN M. THOMPSON
Director
Human Capital and
Compensation Committee
Member
Nominating and Corporate
Governance Committee Member
ANNUAL MEETING
OF STOCKHOLDERS
PFG’s annual meeting of
stockholders will be held
November 30, 2023 at
10:30 a.m. Eastern Time.
Details are included in the
Proxy Statement.
INTERNET ACCESS
HELPS REDUCE COSTS
Please visit us at
www.pfgc.com.
STOCK EXCHANGE
LISTING
PFG’s common stock is
traded on the New York Stock
Exchange under the symbol
“PFGC.”
CORPORATE
HEADQUARTERS
Performance Food Group
12500 West Creek Parkway
Richmond, Virginia 23238
804.484.7700
OFFICE OF
INVESTOR RELATIONS
Bill Marshall
12500 West Creek Parkway
Richmond, Virginia 23238
804.287.8108
bill.marshall@pfgc.com
TRANSFER AGENT
AND REGISTRAR
Computershare
Investor Services
P.O. Box 43006
Providence RI 02940-3006
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Richmond, Virginia
Design: AndraDesignStudio.com
Photography: PFG Archives
Printer: dg3 | Diversified Global Graphics Group
© 2023 Performance Food Group Company
12500 WEST CREEK PARKWAY
RICHMOND, VA 23238
PFGC.COM