Performance Food Group Co (PFGC)

Item 2. Management’s 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 unaudited Consolidated Financial Statements and the Notes thereto included in Item 1. Financial Statements (“Item 1”) of this Form 10-Q and the audited Consolidated Financial Statements and the Notes thereto included in Item 8. Financial Statements and Supplementary Data of the 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. Risk Factors of the Form 10-K. 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-Q.

Our Company

We market and distribute food and food-related products to customers across North America from our over 150 locations to over 300,000 customer locations in the “food-away-from-home” industry. We offer our customers a broad assortment of products including our proprietary-branded products, nationally branded products, and products bearing our customers’ brands. Our product assortment ranges from “center-of-the-plate” items (such as beef, pork, poultry, and seafood), frozen foods, and groceries to candy, snacks, and beverages. We also sell disposables, cleaning and kitchen supplies, and related products used by our customers, as well as cigarettes and other nicotine products. In addition to the products we offer to our customers, we provide value-added services by allowing our customers to benefit from our industry knowledge, scale, and expertise in the areas of product selection and procurement, menu development, and operational strategy.

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

Key Factors Affecting Our Business

Our business, our industry and the economy are subject to a number of macroeconomic conditions triggered by developments beyond our control, which can result in reduced demand for our products. The Company and our industry may face challenges related to geopolitical dynamics and other events, which can drive economic volatility, market uncertainty, inflationary pressure, supply chain disruptions, or lower disposable incomes, negatively affecting consumer confidence and discretionary spending. We continue to actively monitor the impacts of the evolving macroeconomic and geopolitical landscape, including rapidly evolving tariff and global trade policies and recent geopolitical events (such as the military conflict in the Middle East), on all aspects of our business. Although we have seen little impact from tariffs on our results during the first nine months of fiscal 2026, rapidly evolving tariff and global trade policies and geopolitical dynamics have continued to cause uncertainty throughout the first nine months of fiscal 2026. On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). Although U.S. Customs and Border Protection is developing refund procedures for tariffs previously paid under IEEPA, significant uncertainty remains regarding potential tariff refunds and replacement tariffs under other statutes. The timing and amount of any recovery are uncertain and, therefore, we are unable to estimate the financial effects of potential tariff refunds, if any, at this time. The situation continues to evolve, and further legislative, regulatory, or judicial developments may affect the ultimate outcome and the availability or timing of any refunds. The scope and duration of existing and new tariffs imposed under alternate authorities and the resulting future impact on general economic conditions and our future financial position, liquidity, and results of operations likewise remains uncertain. Additionally, recent hostilities and geopolitical tensions, such as the conflict in the Middle East, have contributed to significantly higher fuel prices. To the extent increasing fuel expenses are not able to be offset by (i) fuel collar derivatives and/or (ii) diesel fuel surcharges (which are generally recognized on a one-month lag behind changes in fuel prices), prolonged high fuel prices could adversely affect our business, financial condition, or results of operations. Further, sustained macroeconomic challenges, whether due to tariffs, rising fuel prices, or otherwise, could negatively affect consumer discretionary spending decisions within our customers’ establishments, which could negatively impact our sales and profitability.

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We believe that our 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 and is adversely impacted when these factors move in the opposite direction. The foodservice distribution industry is also sensitive to national and regional economic conditions, such as changes in consumer spending, changes in consumer confidence, changes in the rate of inflation and fuel prices, supply chain disruptions, and labor shortages.

•
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 and corporate strategies and implement our initiatives. Our performance will continue to depend on our ability to successfully execute our segment and corporate strategies and to implement our current and future initiatives. The key strategies include focusing on independent sales and Performance Brands, pursuing new customers for our three reportable segments, expansion of geographies, utilizing our infrastructure and technology to gain further operating and purchasing efficiencies, and making strategic acquisitions.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures used by our management are discussed below. The percentages on the results presented below are calculated based on rounded numbers.

Case Growth

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

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, mix of products sold and acquisitions.

Gross Profit

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

Adjusted EBITDA

Management measures operating performance based on our Adjusted EBITDA, defined as net income before interest expense, interest income, income and franchise taxes, and depreciation and amortization, further adjusted to exclude certain items that we do not consider part of our core operating results. Such adjustments include certain unusual, non-cash, non-recurring, cost reduction, or other adjustment items permitted in calculating covenant compliance under our ABL Facility and indentures (other than certain pro forma adjustments permitted under our ABL Facility and indentures governing the Notes due 2029, Notes due 2032, and Notes due 2034 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date). Under our ABL

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Facility and indentures, ou

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Item 7. Management’s 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 (“Item 8”) 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. Risk Factors. 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 2026 and 2025. For a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2025 and 2024, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended June 28, 2025, filed with the SEC on August 13, 2025.

Our Company

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

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

The Company’s fiscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year for fiscal 2026, 2025, and 2024. References to “fiscal 2026” are to the 52-week period ended June 27, 2026, references to “fiscal 2025” are to the 52-week period ended June 28, 2025, and references to “fiscal 2024” are to the 52-week period ended June 29, 2024.

Key Factors Affecting Our Business

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

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We believe that our 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 and is adversely impacted when these factors move in the opposite direction. The food-away-from-home industry is also sensitive to national and regional economic conditions, such as changes in consumer spending, changes in consumer confidence, changes in the rate of inflation and fuel prices, supply chain disruptions, and labor shortages.

•
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 and corporate strategies and implement our initiatives. Our performance will continue to depend on our ability to successfully execute our segment and corporate strategies and to implement our current and future initiatives. The key strategies include focusing on independent sales and Performance Brands, pursuing new customers for our three reportable segments, expansion of geographies, utilizing our infrastructure and technology to gain further operating and purchasing efficiencies, and making strategic acquisitions.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures used by our management are discussed below. The percentages on the results presented below are calculated based on rounded numbers.

Case Growth

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

Net Sales

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

Gross Profit

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

Adjusted EBITDA

Management measures operating performance based on our Adjusted EBITDA, defined as net income before interest expense, interest income, income taxes, and depreciation and amortization, further adjusted to exclude certain items that we do not consider part of our core operating results. Such adjustments include certain unusual, non-cash, non-recurring, cost reduction, or other adjustment items permitted in calculating covenant compliance under our ABL Facility and indentures (other than certain pro forma adjustments permitted under our ABL Facility and indentures governing the Notes due 2029, Notes due 2032, and Notes due 2034 relating to the Adjusted EBITDA contribution of acquired entities or businesses prior to the acquisition date). Under our ABL Facility and

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indentures, our ability to engage in certain ac

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