The following table summarizes outstanding borrowings, availability, and the average interest rate under the ABL Facility:
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
As of September 26, 2026 |
|
|
As of June 27, 2026 |
|
Aggregate borrowings |
|
$ |
2,133.3 |
|
|
$ |
1,971.0 |
|
Letters of credit |
|
|
159.9 |
|
|
|
160.3 |
|
Excess availability, net of lenders’ reserves of $126.3 and $137.2 |
|
|
2,706.8 |
|
|
|
2,868.7 |
|
Average interest rate, excluding impact of interest rate swaps |
|
|
5.45 |
% |
|
|
5.49 |
% |
The ABL Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if Alternate Availability (as defined in the ABL Facility) falls below the greater of (i) $375.0 million and (ii) 10% of the lesser of the borrowing base and the sum of (a) the aggregate commitments plus (b) any outstanding term loans for five consecutive business days. The ABL Facility also contains customary restrictive covenants that include, but are not limited to, restrictions on the loan parties’ and their subsidiaries’ abilities to incur additional indebtedness, pay dividends, create liens, make investments, make prepayments, redemptions, or defeasances prior to the maturity of certain restricted debt and dispose of assets. The 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 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 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 a prior credit agreement, to redeem the 5.500% Senior Notes due 2024, and to pay the fees, expenses, and other transaction costs incurred in connection with the Notes due 2029.
The Notes due 2029 were issued at 100.0% of their par value. 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 a part of the Notes due 2029 at a redemption price equal to 100% of the principal amount redeemed, 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.
Senior Notes due 2032
On September 12, 2024, Performance Food Group, Inc. issued and sold $1.0 billion aggregate principal amount of its 6.125% Senior Notes due 2032 (the “Notes due 2032”). The Notes due 2032 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 2032 are not guaranteed by the Company.
The Company intended to use the proceeds from the Notes due 2032, together with borrowings under the ABL Facility, to finance the cash consideration in connection with the Company’s acquisition of Cheney Bros., Inc. (the “Cheney Brothers Acquisition”) and to pay the fees, expenses, and other transaction costs incurred in connection with the Notes due 2032. However, since there was no requirement to hold the funds in escrow until the Cheney Brothers Acquisition closed, the net proceeds for the Notes due 2032 were used to pay down a portion of the outstanding balance of the ABL Facility. The Company subsequently funded the cash consideration for the Cheney Brothers Acquisition with borrowings under the ABL Facility.
The Notes due 2032 were issued at 100.0% of their par value. The Notes due 2032 mature on September 15, 2032, and bear interest at a rate of 6.125% 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 2032 will have the right to require Performance Food Group, Inc. to repurchase each holder’s Notes due 2032 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 a part of the Notes due 2032 at any time prior to September 15, 2027, at a redemption price equal to 100% of the principal amount of the Notes due 2032 being redeemed plus a make-whole premium as defined in the indenture governing the Notes due 2032 and accrued and unpaid interest. In addition, beginning on September 15, 2027, Performance Food Group, Inc. may redeem all or a part of the Notes due 2032 at a redemption price equal to 103.063% of the principal amount redeemed, plus accrued and unpaid interest. The redemption price decreases to 101.531% and 100% of the principal amount redeemed on September 15, 2028, and September 15, 2029, respectively. In addition, at any time prior to September 15, 2027, Performance Food Group, Inc. may redeem up to 40% of the Notes due 2032 from the proceeds of certain equity offerings at a redemption price equal to 106.125% of the principal amount thereof, plus accrued and unpaid interest.
The indenture governing the Notes due 2032 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 2032 also contain customary events of default, the occurrence of which could result in the principal of and accrued interest on the Notes due 2032 to become or be declared due and payable.
Senior Notes due 2034
On February 19, 2026, Performance Food Group, Inc. issued and sold $1,060.0 million aggregate principal amount of its 5.625% Senior Notes due 2034 (the “Notes due 2034”). The Notes due 2034 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 2034 are not guaranteed by the Company.
The proceeds from the Notes due 2034, along with additional borrowings under the ABL Facility, were used to redeem the 5.500% Senior Notes due 2027, and to pay the fees, expenses, and other transaction costs incurred in connection with the issuance of the Notes due 2034.
The Notes due 2034 were issued at 100.0% of their par value. The Notes due 2034 mature on March 1, 2034, and bear interest at a rate of 5.625% 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 2034 will have the right to require Performance Food Group, Inc. to repurchase each holder’s Notes due 2034 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 a part of the Notes due 2034 at any time prior to March 1, 2029, at a redemption price equal to 100% of the principal amount of the Notes due 2034 being redeemed plus a make-whole premium as defined in the indenture governing the Notes due 2034 and accrued and unpaid interest. In addition, beginning on March 1, 2029, Performance Food Group, Inc. may redeem all or a part of the Notes due 2034 at a redemption price equal to 102.813% of the principal amount redeemed, plus accrued and unpaid interest. The redemption price decreases to 101.406% and 100% of the principal amount redeemed on March 1, 2030, and March 1, 2031, respectively. In addition, at any time prior to March 1, 2029, Performance Food Group, Inc. may redeem up to 40% of the Notes due 2034 from the proceeds of certain equity offerings at a redemption price equal to 105.625% of the principal amount thereof, plus accrued and unpaid interest.
The indenture governing the Notes due 2034 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 2034 also contain customary events of default, the occurrence of which could result in the principal of and accrued interest on the Notes due 2034 to become or be declared due and payable.
7. Derivatives and Hedging Activities
Hedges of Forecasted Diesel Fuel Purchases
From time to time, the Company enters into costless collars or swaps to manage its exposure to fuel costs and the related variability in cash flows for its forecasted purchases of diesel fuel. At the beginning of fiscal 2027, the Company had one fuel
The following table presents the future minimum lease payments under non-cancelable leases as of September 26, 2026 (in millions):
|
|
|
|
|
|
|
|
|
Fiscal Year |
|
Operating Leases |
|
|
Finance Leases |
|
2027 |
|
$ |
123.1 |
|
|
$ |
271.7 |
|
2028 |
|
|
156.1 |
|
|
|
338.2 |
|
2029 |
|
|
141.1 |
|
|
|
314.2 |
|
2030 |
|
|
127.4 |
|
|
|
286.8 |
|
2031 |
|
|
114.8 |
|
|
|
251.5 |
|
Thereafter |
|
|
643.4 |
|
|
|
951.9 |
|
Total future minimum lease payments |
|
$ |
1,305.9 |
|
|
$ |
2,414.3 |
|
Less: Interest |
|
|
342.1 |
|
|
|
635.2 |
|
Present value of future minimum lease payments |
|
$ |
963.8 |
|
|
$ |
1,779.1 |
|
As of September 26, 2026, the Company had additional operating and finance leases that had not yet commenced, which total $292.4 million in future minimum lease payments. These lease payments relate primarily to one build-to-suit warehouse lease that will replace an existing distribution center and will commence upon building completion with a term of 25 years. In addition, these leases include vehicle leases expected to commence in fiscal 2027 with lease terms of six to nine years.
9. 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 $5,170.0 million and $5,006.8 million, is $5,050.6 million and $4,987.7 million at September 26, 2026 and June 27, 2026, 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.
10. 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 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.
The Company’s effective tax rate was 25.2% for the three months ended September 26, 2026 and 23.0% for the three months ended September 27, 2025. The effective tax rate varies from the 21% statutory rate primarily due to state and foreign taxes, federal credits and other permanent items. The excess tax benefit of exercised and vested stock awards is treated as a discrete item. The effective tax rate for the three months ended September 26, 2026 differed from the prior year period primarily due to a decrease in deductible discrete items related to stock-based compensation and a decrease in federal tax credits net of valuation allowance established, partly offset by a decrease in non-deductible compensation and other non-deductible expenses and a decrease in foreign taxes as a percentage of income.
As of September 26, 2026 and June 27, 2026, the Company had net deferred tax assets of $263.8 million and $242.4 million, respectively, and deferred tax liabilities of $1,219.5 million and $1,217.2 million, respectively. As of September 26, 2026 and June 27, 2026, the Company had established a valuation allowance net of federal benefit of $20.4 million and $19.0 million, respectively, against deferred tax assets related to certain tax credit carryforwards and certain net operating losses which are not likely to be realized due to limitations on utilization. The Company believes that it is more likely than not that the remaining deferred tax assets will be realized.
11. Commitments and Contingencies
Purchase Obligations
The Company had outstanding contracts and purchase orders of $217.3 million related to capital projects and services at September 26, 2026. Amounts due under these contracts were not included on the Company’s consolidated balance sheet as of September 26, 2026.
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.
Tax Liabilities
The Company is subject to customary audits by authorities in the jurisdictions where it conducts business in the United States and foreign countries, which may result in assessments of additional taxes. These additional taxes are accrued when probable and reasonably estimable.
Tariffs and Trade Regulations
On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). Because we are not the importer of record for most products we distribute, our direct exposure to potential tariff refunds is limited. We recognize tariff refunds when they become probable, as defined under ASC 450-20, under the loss recovery model. During the three months ended September 26, 2026, we recognized an immaterial amount of tariff refunds. The timing and amount of any future recovery of tariffs previously paid under IEEPA by our suppliers and passed through to the Company are uncertain and, therefore, we are unable to estimate the future financial effects of potential tariff refunds at this time.
12. 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 $17.9 million as of September 26, 2026 and $14.5 million as of June 27, 2026. For the three-month periods ended September 26, 2026 and September 27, 2025, the Company recorded purchases of $844.6 million and $794.8 million, respectively, through the purchasing alliance.
13. 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. Potential common shares of 0.3 million for the three months ended September 26, 2026 were not included in computing diluted earnings per common share because the effect would have been antidilutive. No potential common shares were considered antidilutive for the three months ended September 27, 2025.
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 more than 300,000 food and food-related products to customers across North America, from our over 150 distribution centers 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 food-related products and other non-food 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, retailers and entertainment venues, 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.
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 potential tariff refunds, and recent geopolitical events (including the ongoing conflicts in Ukraine and the Middle East), on all aspects of our business. Although we saw little impact from tariffs on our results during fiscal 2026 and the first quarter of fiscal 2027, rapidly evolving tariff and global trade policies and geopolitical dynamics continued to cause uncertainty. Additionally, recent hostilities and geopolitical tensions, such as the conflict in the Middle East, contributed to significantly higher fuel prices in fiscal 2026 and the first quarter of fiscal 2027. To the extent increasing fuel expenses are not able to be offset by (i) diesel fuel surcharges (which are generally recognized on a one-month lag following changes in fuel prices) and/or (ii) gains on derivative instruments, prolonged high fuel prices could adversely affect our business, financial condition, or results of operations. Further, sustained macroeconomic challenges, whether due to tariffs, rising fuel prices, or otherwise, have in the past and could in the future negatively affect consumer discretionary spending decisions within our customers’ establishments, which could negatively impact our sales and profitability.
We believe that our performance is principally affected by the following key factors:
•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 indentures, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments, and making restricted payments is tied to ratios based on Adjusted EBITDA (as defined in the ABL Facility and indentures). Our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.
Adjusted EBITDA is not a measure of operating income, operating performance, or liquidity presented in accordance with, or required by, GAAP and is subject to important limitations. We use this measure to evaluate the performance of our business on
a consistent basis over time and for business planning purposes. In addition, targets based on Adjusted EBITDA are among the measures we use to evaluate our management’s performance for purposes of determining their compensation under our incentive plans. We believe that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties, including our lenders under the ABL Facility and holders of our Notes due 2029, Notes due 2032, and Notes due 2034 in their evaluation of the operating performance of companies in industries similar to ours.
Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA:
•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 ABL Facility and indentures. Adjusted EBITDA among other things:
•does not include non-cash stock-based employee compensation expense and certain other non-cash charges;
•does not include acquisition, restructuring, and other costs incurred to realize future cost savings and enhance our operations; and
•does not include items outside of the ordinary course of the Company’s operations and not indicative of ongoing performance.
We have included below reconciliations of Adjusted EBITDA to the most directly comparable measure calculated in accordance with GAAP for the periods presented.
Results of Operations and Adjusted EBITDA
The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
(In millions, except per share data) |
|
September 26, 2026 |
|
|
September 27, 2025 |
|
|
Change |
|
|
% |
|
Net sales |
|
$ |
18,018.4 |
|
|
$ |
17,075.9 |
|
|
$ |
942.5 |
|
|
|
5.5 |
|
Cost of goods sold |
|
|
15,830.9 |
|
|
|
15,059.3 |
|
|
|
771.6 |
|
|
|
5.1 |
|
Gross profit |
|
|
2,187.5 |
|
|
|
2,016.6 |
|
|
|
170.9 |
|
|
|
8.5 |
|
Operating expenses |
|
|
1,915.3 |
|
|
|
1,791.9 |
|
|
|
123.4 |
|
|
|
6.9 |
|
Operating profit |
|
|
272.2 |
|
|
|
224.7 |
|
|
|
47.5 |
|
|
|
21.1 |
|
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
98.4 |
|
|
|
104.4 |
|
|
|
(6.0 |
) |
|
|
(5.7 |
) |
Other, net |
|
|
0.7 |
|
|
|
(1.2 |
) |
|
|
1.9 |
|
|
|
158.3 |
|
Other expense, net |
|
|
99.1 |
|
|
|
103.2 |
|
|
|
(4.1 |
) |
|
|
(4.0 |
) |
Income before income taxes |
|
|
173.1 |
|
|
|
121.5 |
|
|
|
51.6 |
|
|
|
42.5 |
|
Income tax expense |
|
|
43.6 |
|
|
|
27.9 |
|
|
|
15.7 |
|
|
|
56.3 |
|
Net income (GAAP) |
|
$ |
129.5 |
|
|
$ |
93.6 |
|
|
$ |
35.9 |
|
|
|
38.4 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
528.0 |
|
|
$ |
480.1 |
|
|
$ |
47.9 |
|
|
|
10.0 |
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
156.7 |
|
|
|
155.5 |
|
|
|
1.2 |
|
|
|
0.8 |
|
Diluted |
|
|
157.5 |
|
|
|
156.9 |
|
|
|
0.6 |
|
|
|
0.4 |
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.83 |
|
|
$ |
0.60 |
|
|
$ |
0.23 |
|
|
|
38.3 |
|
Diluted |
|
$ |
0.82 |
|
|
$ |
0.60 |
|
|
$ |
0.22 |
|
|
|
36.7 |
|
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:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
(In millions) |
|
September 26, 2026 |
|
|
September 27, 2025 |
|
Net income (GAAP) |
|
$ |
129.5 |
|
|
$ |
93.6 |
|
Interest expense |
|
|
98.4 |
|
|
|
104.4 |
|
Income tax expense |
|
|
43.6 |
|
|
|
27.9 |
|
Depreciation |
|
|
149.7 |
|
|
|
128.7 |
|
Amortization of intangible assets |
|
|
61.0 |
|
|
|
66.7 |
|
Change in LIFO reserve (1) |
|
|
18.7 |
|
|
|
24.5 |
|
Stock-based compensation expense |
|
|
13.2 |
|
|
|
13.0 |
|
Acquisition & business optimization expenses (2) |
|
|
12.0 |
|
|
|
9.2 |
|
Other adjustments (3) |
|
|
1.9 |
|
|
|
12.1 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
528.0 |
|
|
$ |
480.1 |
|
(1)Includes increases in the LIFO reserve of $0.9 million for Foodservice and $17.8 million for Convenience for the first quarter of fiscal 2027 compared to increases of $1.7 million for Foodservice and $22.8 million for Convenience for the first quarter of fiscal 2026.
(2)Includes acquisition and integration costs related to in-process, completed and abandoned acquisitions, facility closing costs and business optimization costs incurred prior to formal launch of strategic projects with anticipated long-term benefits to the Company. These costs generally relate to professional fees.
(3)Includes amounts related to gains and losses on other commodity derivatives, insurance proceeds due to hurricane and other weather-related events, franchise tax expense, favorable and unfavorable leases, gains and losses on disposals of fixed assets, litigation-related accruals, foreign currency transaction gains and losses, and other adjustments permitted by our ABL Facility. Additionally, for the three months ended September 27, 2025, other adjustments included $9.9 million of legal and professional fees incurred in connection with shareholder activism and the clean team agreement with US Foods Holding Corp.
Consolidated Results of Operations
Three months ended September 26, 2026 compared to the three months ended September 27, 2025
Net Sales
Net sales growth is primarily a function of acquisitions, case growth, pricing, including product inflation/deflation, and a changing mix of customers, channels, and product categories sold. Net sales increased $942.5 million, or 5.5%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by an increase of $437.8 million resulting from an increase in organic cases sold, $261.2 million of incremental net sales from recent acquisitions, and an increase of $243.5 million related to an increase in selling price per case as a result of inflation. Total case volume increased 4.2% during the first quarter of fiscal 2027 compared to the same period of fiscal 2026. Total organic case volume increased 2.5% in the first quarter of fiscal 2027 compared to the same period of fiscal 2026. Total organic case volume benefited from a 5.5% increase in organic independent Foodservice cases, including growth in Performance Brands cases, and growth in cases sold to Foodservice’s chain business. The overall rate of product cost inflation was approximately 3.4% for the first quarter of fiscal 2027.
Gross Profit
Gross profit increased $170.9 million, or 8.5%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by vendor rebates and promotional incentives, a favorable shift in the mix of cases sold, including growth in the independent channel which generates higher gross profit due to additional services provided, as well as recent acquisitions.
Operating Expenses
Operating expenses increased $123.4 million, or 6.9%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by recent acquisitions, a $42.8 million increase in personnel expenses primarily related to salaries, wages, commissions and benefits, and a $34.2 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices and miles driven as a result of new business, partially offset by realized gains related to fuel hedges. The increase in operating expenses was partially offset by a $4.5 million decrease in professional fees and a $4.1 million decrease in insurance expense primarily related to auto insurance and workers’ compensation.
Net Income
Net income increased $35.9 million, or 38.4%, for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 primarily driven by an increase in gross profit and decrease in interest expense, partially offset by increases in operating expenses and income tax expense. The decrease in interest expense was primarily the result of decreases in the average borrowings and average interest rate during the first quarter of fiscal 2027 compared to the prior year period.
The Company reported income tax expense of $43.6 million for the first quarter of fiscal 2027 compared to $27.9 million for the first quarter of fiscal 2026. Our effective tax rate for the first quarter of fiscal 2027 was 25.2% compared to 23.0% for the first quarter of fiscal 2026. The effective tax rate differed from the prior year period primarily due to a decrease in deductible discrete items related to stock-based compensation and a decrease in federal tax credits net of valuation allowance established, partly offset by a decrease in non-deductible compensation and other non-deductible expenses and a decrease in foreign taxes as a percentage of income.
Segment Results
Based on the Company’s organizational structure and how the Company’s management reviews operating results and makes decisions about resource allocation, the Company has three reportable segments: Foodservice, Convenience, and Specialty. Management evaluates the performance of these segments based on various operating and financial metrics, including their respective sales growth and Segment Adjusted EBITDA, which is the Company’s GAAP measure of segment profit. Segment Adjusted EBITDA is defined as net income before interest expense, interest income, income taxes, depreciation, and amortization and excludes certain items that the Company does not consider part of its segments’ core operating results, including changes in the LIFO reserve, stock-based compensation expense, and acquisition and business optimization expenses. See Note 14. Segment Information of the consolidated financial statements in this Form 10-Q.
Corporate & All Other is comprised of unallocated corporate overhead and certain operations that are not considered separate reportable segments based on their size. Corporate & All Other may also include capital expenditures for certain information technology projects that are transferred to the segments once placed in service.
The following tables set forth total net sales and Segment Adjusted EBITDA by reportable segment and the reconciling items for Corporate & All Other and eliminations for the periods indicated (dollars in millions):
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
September 26, 2026 |
|
|
September 27, 2025 |
|
|
Change |
|
|
% |
|
Foodservice |
|
$ |
9,604.6 |
|
|
$ |
9,146.1 |
|
|
$ |
458.5 |
|
|
|
5.0 |
|
Convenience |
|
|
6,940.1 |
|
|
|
6,586.9 |
|
|
|
353.2 |
|
|
|
5.4 |
|
Specialty |
|
|
1,407.3 |
|
|
|
1,276.2 |
|
|
|
131.1 |
|
|
|
10.3 |
|
Total segments |
|
$ |
17,952.0 |
|
|
$ |
17,009.2 |
|
|
$ |
942.8 |
|
|
|
5.5 |
|
Corporate & All Other |
|
|
269.8 |
|
|
|
250.2 |
|
|
|
19.6 |
|
|
|
7.8 |
|
Intersegment eliminations |
|
|
(203.4 |
) |
|
|
(183.5 |
) |
|
|
(19.9 |
) |
|
|
(10.8 |
) |
Total net sales |
|
$ |
18,018.4 |
|
|
$ |
17,075.9 |
|
|
$ |
942.5 |
|
|
|
5.5 |
|
Segment Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
September 26, 2026 |
|
|
September 27, 2025 |
|
|
Change |
|
|
% |
|
Foodservice |
|
$ |
367.9 |
|
|
$ |
324.4 |
|
|
$ |
43.5 |
|
|
|
13.4 |
|
Convenience |
|
|
125.6 |
|
|
|
121.0 |
|
|
|
4.6 |
|
|
|
3.8 |
|
Specialty |
|
|
89.5 |
|
|
|
94.0 |
|
|
|
(4.5 |
) |
|
|
(4.8 |
) |
Total segments |
|
$ |
583.0 |
|
|
$ |
539.4 |
|
|
$ |
43.6 |
|
|
|
8.1 |
|
Corporate & All Other |
|
|
(55.0 |
) |
|
|
(59.3 |
) |
|
|
4.3 |
|
|
|
7.3 |
|
Total Adjusted EBITDA |
|
$ |
528.0 |
|
|
$ |
480.1 |
|
|
$ |
47.9 |
|
|
|
10.0 |
|
Segment Results—Foodservice
Three months ended September 26, 2026 compared to the three months ended September 27, 2025
Net Sales
Net sales for Foodservice increased $458.5 million, or 5.0%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily driven by $261.2 million of incremental net sales contributions from recent acquisitions, a $151.8 million increase as a result of organic case volume growth, and a $45.5 million increase related to an increase in selling price per case as a result of
inflation. Total case growth for Foodservice was 4.2% and organic case growth was 1.7% for the first quarter of fiscal 2027, compared to the prior year period. Total independent case growth was 7.8% for the first quarter of fiscal 2027 compared to the prior year period. Securing new, and expanding business with, independent customers resulted in organic independent case growth of 5.5% in the first quarter of fiscal 2027 compared to the prior year period. For the first quarter of fiscal 2027, independent sales as a percentage of total Foodservice segment sales were 43.0%.
Segment Adjusted EBITDA
Adjusted EBITDA for Foodservice increased $43.5 million, or 13.4%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of an increase in gross profit, partially offset by an increase in operating expenses. Gross profit contributing to Foodservice’s Adjusted EBITDA increased $141.9 million, or 10.7%, in the first quarter of fiscal 2027, compared to the prior year period, primarily driven by growth in cases sold, a favorable shift in the mix of cases sold, including more Performance Brands products sold to independent customers, vendor rebates and promotional incentives, and recent acquisitions.
Operating expenses impacting Foodservice’s Adjusted EBITDA increased $97.9 million, or 9.7%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of recent acquisitions, a $38.5 million increase in personnel expenses primarily related to salaries, wages, commissions, and benefits, and a $24.5 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices and miles driven as a result of new business, partially offset by realized gains related to fuel hedges.
Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $130.3 million in the first quarter of fiscal 2026 to $142.2 million in the first quarter of fiscal 2027, primarily driven by recent acquisitions.
Segment Results—Convenience
Three months ended September 26, 2026 compared to the three months ended September 27, 2025
Net Sales
Net sales for Convenience increased $353.2 million, or 5.4%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily driven by an increase of $274.4 million as a result of case growth due to the addition of new chain customers and an increase of $78.8 million related to an increase in selling price per case related to inflation, partially offset by a mix shift from cigarettes to alternative nicotine products. Total Convenience cases sold increased 4.1% in the first quarter of fiscal 2027 compared to the prior year period.
Segment Adjusted EBITDA
Adjusted EBITDA for Convenience increased $4.6 million, or 3.8%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of an increase in gross profit, partially offset by an increase in operating expenses. Gross profit contributing to Convenience’s Adjusted EBITDA increased $16.7 million, or 3.7%, for the first quarter of fiscal 2027 compared to the prior year period primarily due to vendor rebates and promotional incentives and income earned from manufacturers for distribution and related services.
Operating expenses impacting Convenience’s Adjusted EBITDA increased $11.6 million, or 3.5%, for the first quarter of fiscal 2027 compared to the prior year period primarily as a result of an $8.6 million increase in personnel expenses primarily related to salaries, wages and benefits and a $6.9 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices, partially offset by realized gains related to fuel hedges. These increases in operating expenses were partially offset by a $1.1 million decrease in fleet maintenance and repair expenses, a $1.1 million decrease in rent expense primarily related to fleet leases, and a $0.9 million decrease in insurance expense primarily related to auto insurance and workers’ compensation.
Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $39.9 million in the first quarter of fiscal 2026 to $41.1 million in the first quarter of fiscal 2027.
Segment Results—Specialty
Three months ended September 26, 2026 compared to the three months ended September 27, 2025
Net Sales
During the current fiscal year, Specialty has revised its sales channel classifications to better align with how management evaluates operating performance and market opportunities. As a result, the former value channel is presented as grocery retail, and the theater, concessions and hospitality channels are presented on a combined basis within entertainment. Comparative channel information discussed below has been reclassified to conform to the current presentation.
Net sales for Specialty increased $131.1 million, or 10.3%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily driven by an increase of $73.0 million related to an increase in selling price per case due to a favorable channel mix as well as inflation and an increase of $58.1 million as a result of case growth in the vending, grocery retail, entertainment, and office supply channels, partially offset by declines in retail. Total Specialty cases sold increased 4.3% in the first quarter of fiscal 2027 compared to the prior year period.
Segment Adjusted EBITDA
Adjusted EBITDA for Specialty decreased $4.5 million, or 4.8%, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027 primarily as a result of an increase in operating expenses, partially offset by an increase in gross profit. Gross profit contributing to Specialty’s Adjusted EBITDA increased $8.2 million, or 3.5%, for the first quarter of fiscal 2027 compared to the prior year period primarily driven by vendor rebates and promotional incentives and net sales growth.
Operating expenses impacting Specialty’s Adjusted EBITDA increased $12.7 million, or 9.0%, for the first quarter of fiscal 2027 compared to the prior year period, primarily due to a $4.3 million increase in personnel expenses primarily driven by salaries, wages and benefits, a $2.6 million increase in bad debt expense, a $2.5 million increase in fuel expenses (excluding the impact of fuel surcharges in net sales) primarily due to higher fuel prices and miles driven, partially offset by realized gains related to fuel hedges, and an increase of $1.4 million in third-party outbound freight expense.
Depreciation of fixed assets and amortization of intangible assets recorded in this segment increased from $13.0 million in the first quarter of fiscal 2026 to $14.2 million in the first quarter of fiscal 2027.
Liquidity and Capital Resources
We have historically financed our operations and growth primarily with cash flows from operations, borrowings under our ABL Facility, operating and finance leases, and normal trade credit terms. We have typically funded our acquisitions with additional borrowings under our ABL Facility and occasionally with the net proceeds from the issuances of senior notes and/or equity. Our borrowing levels are subject to seasonal fluctuations, as well as procurement and acquisition activities. We borrow under our ABL Facility or pay it down regularly based on our cash flows from operating and investing activities. Our practice is to minimize interest expense while maintaining reasonable liquidity.
As market conditions warrant, we may from time to time seek to repurchase our securities or loans in privately negotiated or open market transactions, by tender offer or otherwise. Any such repurchases may be funded by incurring new debt, including additional borrowings under our ABL Facility. In addition, depending on conditions in the credit and capital markets and other factors, we will, from time to time, consider other financing transactions, the proceeds of which could be used to refinance our indebtedness, make investments or acquisitions or for other purposes. Any new debt may be secured debt.
We are exposed to interest rate risk related to changes in interest rates for borrowings under our ABL Facility. To add stability to interest expense and manage our exposure to interest rate movements, we enter into interest rate swap agreements. These swaps are designated as cash flow hedges and involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments. As of September 26, 2026, $150.0 million of the outstanding ABL Facility balance is hedged under interest rate swaps, which results in 71% of our total debt outstanding, including finance lease obligations, being fixed-rate debt.
On May 27, 2025, the Board of Directors authorized a share repurchase program for up to $500 million of the Company’s outstanding common stock. This authorization replaced the previously authorized $300 million share repurchase program. The current share repurchase program has an expiration date of May 27, 2029. Repurchases of the Company’s outstanding common stock will be made in accordance with applicable securities laws and may be made at management’s discretion from time to time in the open market, through privately negotiated transactions or otherwise, including pursuant to Rule 10b5-1 trading plans. The share repurchase program may be amended, suspended or discontinued at any time at the Board’s discretion, and does not commit the Company to repurchase any specified number of shares of its common stock. The actual timing, number and value of the shares to be purchased under the program will be determined by the Company at its discretion and will depend on a number of factors, including the performance of the Company’s stock price, general market and other conditions, applicable legal requirements and compliance with the terms of the Company’s outstanding indebtedness. As of September 26, 2026, $498.5 million remained available for share repurchases.
Our contractual cash requirements over the next 12 months and beyond relate to our long-term debt and associated interest payments, operating and finance leases, and purchase obligations. For information regarding the Company’s expected cash requirements related to long-term debt and operating and finance leases, see Note 6. Debt and Note 8. Leases, respectively, within the Notes to Consolidated Financial Statements included in Item 1. As of September 26, 2026, the Company had total purchase obligations of $217.3 million, which includes agreements for purchases related to capital projects and services in the normal course of business, for which all significant terms have been confirmed, as well as a minimum amount due for various Company meetings and conferences. Purchase obligations also include amounts committed to various capital projects in process or scheduled to be completed in the coming fiscal years. Included in the total purchase obligations above are commitments of $85.5
million for capital projects related to warehouse expansion and improvements and warehouse equipment. The Company anticipates using cash flows from operations or borrowings under the ABL Facility to fulfill these commitments. Amounts due under these agreements were not included in the Company’s consolidated balance sheet as of September 26, 2026.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
We believe that our cash flows from operations and available borrowing capacity will be sufficient both to meet our anticipated cash requirements over at least the next 12 months and beyond, to maintain sufficient liquidity for normal operating purposes, and to fund capital expenditures.
As of September 26, 2026, our cash balance totaled $46.6 million, including restricted cash of $10.7 million, as compared to a cash balance totaling $103.1 million, including restricted cash of $10.7 million, as of June 27, 2026.
Operating Activities
Three months ended September 26, 2026 compared to the three months ended September 27, 2025
During the first three months of fiscal 2027 and fiscal 2026, net cash used in operating activities was $89.3 million and $145.2 million, respectively. The improvement in net cash used in operating activities in the first three months of fiscal 2027 compared to the first three months of fiscal 2026 was largely driven by a change in the timing and volume of advanced purchases of inventory to take advantage of preferred pricing.
Investing Activities
Three months ended September 26, 2026 compared to the three months ended September 27, 2025
Net cash used in investing activities was $53.8 million in the first three months of fiscal 2027 compared to $78.0 million in the first three months of fiscal 2026. These investments consisted of $4.1 million cash paid for an acquisition in the first three months of fiscal 2027 compared to no cash paid for acquisitions in the first three months of fiscal 2026, along with capital purchases of property, plant, and equipment of $53.9 million and $78.9 million for the first three months of fiscal 2027 and the first three months of fiscal 2026, respectively. For the first three months of fiscal 2027, purchases of property, plant, and equipment primarily consisted of outlays for transportation equipment, information technology, warehouse equipment, and warehouse improvements and expansions. The following table presents the capital purchases of property, plant, and equipment by segment.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
(In millions) |
|
September 26, 2026 |
|
|
September 27, 2025 |
|
Foodservice |
|
$ |
46.0 |
|
|
$ |
51.5 |
|
Convenience |
|
|
9.6 |
|
|
|
13.9 |
|
Specialty |
|
|
1.2 |
|
|
|
2.5 |
|
Corporate & All Other |
|
|
(2.9 |
) |
|
|
11.0 |
|
Total capital purchases of property, plant and equipment |
|
$ |
53.9 |
|
|
$ |
78.9 |
|
Financing Activities
Three months ended September 26, 2026 compared to the three months ended September 27, 2025
During the first three months of fiscal 2027, net cash provided by financing activities was $86.6 million, which consisted primarily of $162.3 million in net borrowings under our ABL Facility, which was partially offset by $70.3 million in payments under finance lease obligations.
During the first three months of fiscal 2026, net cash provided by financing activities was $182.9 million, which consisted primarily of $246.3 million in net borrowings under our ABL Facility, which was partially offset by $57.5 million in payments under finance lease obligations.
The Company’s financing arrangements as of September 26, 2026 are described in Note 6. Debt of the consolidated financial statements within this Form 10-Q. As of September 26, 2026, the Company was in compliance with all of the covenants under the ABL Facility and the indentures governing the Notes due 2029, the Notes due 2032, and the Notes due 2034.
Total Assets by Segment
Total assets by segment discussed below exclude intercompany receivables between segments.
Total assets for Foodservice increased $549.9 million from $11,358.1 million as of September 27, 2025 to $11,908.0 million as of September 26, 2026 primarily due to recent acquisitions as well as increases in property, plant and equipment through
additional transportation equipment under finance leases. Total assets for Foodservice decreased $56.1 million from $11,964.1 million as of June 27, 2026 to $11,908.0 million as of September 26, 2026 primarily driven by decreases in property, plant and equipment and intangible assets due to normal depreciation and amortization.
Total assets for Convenience increased $21.4 million from $4,718.6 million as of September 27, 2025 to $4,740.0 million as of September 26, 2026 primarily due to increases in inventory, prepaid expenses, and property, plant and equipment through additional transportation equipment under finance leases, partially offset by decreases in intangible assets and right-of-use assets due to normal amortization. Total assets for Convenience increased $278.5 million from $4,461.5 million as of June 27, 2026 to $4,740.0 million as of September 26, 2026 primarily due to increases in inventory due to advanced purchases to take advantage of preferred pricing, partially offset by a decrease in cash and accounts receivable.
Total assets for Specialty increased $20.2 million from $1,509.9 million as of September 27, 2025 to $1,530.1 million as of September 26, 2026 primarily due to increases in accounts receivable, partially offset by decreases in property, plant and equipment, and right-of-use assets due to normal depreciation and amortization. Total assets for Specialty decreased $93.5 million from $1,623.6 million as of June 27, 2026 to $1,530.1 million as of September 26, 2026 primarily due to decreases in inventory as a result of sales in the normal course of business, as well as decreases in accounts receivable and property, plant and equipment due to normal depreciation.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those that are most important to portraying our financial position and results of operations. These policies require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies and estimates include those that pertain to the allowance for doubtful accounts receivable, inventory valuation, insurance programs, income taxes, vendor rebates and promotional incentives, leases, and goodwill and other intangible assets, which are described in the Form 10-K. There have been no material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates described in the Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our market risks consist of interest rate risk and fuel price risk. There have been no material changes to our market risks since June 27, 2026. For further discussion on our exposure to market risk, see Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in the Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Regulations under the 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-Q, 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-Q, were effective to accomplish their objectives at a reasonable assurance level.
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 September 26, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
