pfgc-10q_20190330.htm

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

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 ☐

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 ☐

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.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

In addition to historical information, this Quarterly Report on Form 10-Q (this “Form 10-Q”) 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-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, our results of operations, financial position and our business outlook, business trends and other information, may be 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-Q. 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 the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018 (the “Form 10-K”), 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:

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, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct, or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report 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.

Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” or “PFG” as used in this Form 10-Q refer to Performance Food Group Company and its consolidated subsidiaries.

(In millions, except per share data)	As of March 30, 2019		As of June 30, 2018
ASSETS
Current assets:
Cash	$	7.7	$	7.5
Accounts receivable, less allowances of $25.2 and $19.3		1,128.5		1,065.6
Inventories, net		1,128.3		1,051.9
Prepaid expenses and other current assets		60.7		78.5
Total current assets		2,325.2		2,203.5
Goodwill		747.5		740.5
Other intangible assets, net		199.7		193.8
Property, plant and equipment, net		895.9		795.5
Restricted cash		10.7		10.3
Other assets		43.8		57.3
Total assets	$	4,222.8	$	4,000.9
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Outstanding checks in excess of deposits	$	276.0	$	260.8
Trade accounts payable		1,045.0		973.0
Accrued expenses and other current liabilities		260.9		227.8
Capital lease obligations—current installments		16.9		8.4
Total current liabilities		1,598.8		1,470.0
Long-term debt		1,042.1		1,123.0
Deferred income tax liability, net		107.1		106.3
Capital lease obligations, excluding current installments		125.9		52.8
Other long-term liabilities		114.7		113.5
Total liabilities		2,988.6		2,865.6
Commitments and contingencies (Note 10)
Shareholders’ equity:
Common Stock: $0.01 par value per share, 1.0 billion shares authorized, 103.8 million shares issued and outstanding as of March 30, 2019; 1.0 billion shares authorized, 103.2 million shares issued and outstanding as of June 30, 2018		1.0		1.0
Additional paid-in capital		862.4		861.2
Accumulated other comprehensive income, net of tax expense of $1.2 and $2.9		3.3		8.3
Retained earnings		367.5		264.8
Total shareholders’ equity		1,234.2		1,135.3
Total liabilities and shareholders’ equity	$	4,222.8	$	4,000.9

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

(In millions, except per share data)	Three Months Ended March 30, 2019			Three Months Ended March 31, 2018			Nine Months Ended March 30, 2019				Nine Months Ended March 31, 2018
Net sales	$	4,689.0			$	4,349.2		$	13,844.4			$	13,025.2
Cost of goods sold		4,084.3				3,790.5			12,031.5				11,344.2
Gross profit		604.7				558.7			1,812.9				1,681.0
Operating expenses		545.5				498.6			1,630.1				1,521.3
Operating profit		59.2				60.1			182.8				159.7
Other expense, net:
Interest expense		16.5				15.2			48.1				44.9
Other, net		(1.0	)			0.1			(0.5	)			(0.3	)
Other expense, net		15.5				15.3			47.6				44.6
Income before taxes		43.7				44.8			135.2				115.1
Income tax expense (benefit)		11.4				11.1			31.6				(19.2	)
Net income	$	32.3			$	33.7		$	103.6			$	134.3
Weighted-average common shares outstanding:
Basic		103.8				102.7			103.8				101.7
Diluted		105.1				104.5			105.1				104.5
Earnings per common share:
Basic	$	0.31			$	0.33		$	1.00			$	1.32
Diluted	$	0.31			$	0.32		$	0.99			$	1.29

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

($ in millions)	Three months ended March 30, 2019			Three months ended March 31, 2018				Nine Months Ended March 30, 2019			Nine Months Ended March 31, 2018
Net income	$	32.3			$	33.7		$	103.6		$	134.3
Other comprehensive (loss) income, net of tax:
Interest rate swaps:
Change in fair value, net of tax		(1.5	)			2.8			(3.7	)		4.6
Reclassification adjustment, net of tax		(0.9	)			(0.2	)		(2.2	)		-
Other comprehensive (loss) income		(2.4	)			2.6			(5.9	)		4.6
Total comprehensive income	$	29.9			$	36.3		$	97.7		$	138.9

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

						Additional			Accumulated Other					Total
	Common Stock					Paid-in			Comprehensive			Retained		Shareholders’
(In millions)	Shares			Amount		Capital			Income			Earnings		Equity
Balance as of December 30, 2017		102.3		$	1.0	$	842.9		$	4.4		$	167.2	$	1,015.5
Issuance of common stock under stock-based compensation plans		0.5			—		6.1			—			—		6.1
Net income		—			—		—			—			33.7		33.7
Interest rate swaps		—			—		—			2.6			—		2.6
Stock-based compensation expense		—			—		3.5			—			—		3.5
Balance as of March 31, 2018		102.8		$	1.0	$	852.5		$	7.0		$	200.9	$	1,061.4

Balance as of December 29, 2018		103.8		$	1.0	$	863.2		$	5.7		$	335.2	$	1,205.1
Issuance of common stock under stock-based compensation plans		0.1			—		(0.5	)		—			—		(0.5	)
Net income		—			—		—			—			32.3		32.3
Interest rate swaps		—			—		—			(2.4	)		—		(2.4	)
Stock-based compensation expense		—			—		3.8			—			—		3.8
Common stock repurchased		(0.1	)		—		(4.1	)		—			—		(4.1	)
Balance as of March 30, 2019		103.8		$	1.0	$	862.4		$	3.3		$	367.5	$	1,234.2

						Additional			Accumulated Other						Total
	Common Stock					Paid-in			Comprehensive			Retained			Shareholders’
(In millions)	Shares			Amount		Capital			Income			Earnings			Equity
Balance as of July 1, 2017		100.8		$	1.0	$	855.5		$	2.4		$	66.6		$	925.5
Issuance of common stock under stock-based compensation plans		2.0			—		(21.0	)		—			—			(21.0	)
Net income		—			—		—			—			134.3			134.3
Interest rate swaps		—			—		—			4.6			—			4.6
Stock-based compensation expense		—			—		18.0			—			—			18.0
Balance as of March 31, 2018		102.8		$	1.0	$	852.5		$	7.0		$	200.9		$	1,061.4

Balance as of June 30, 2018		103.2		$	1.0	$	861.2		$	8.3		$	264.8		$	1,135.3
Issuance of common stock under stock-based compensation plans		0.9			—		(1.3	)		—			—			(1.3	)
Net income		—			—		—			—			103.6			103.6
Interest rate swaps		—			—		—			(5.9	)		—			(5.9	)
Stock-based compensation expense		—			—		11.8			—			—			11.8
Common stock repurchased		(0.3	)		—		(9.3	)		—			—			(9.3	)
Change in accounting principle⁽¹⁾		—			—		—			0.9			(0.9	)		—
Balance as of March 30, 2019		103.8		$	1.0	$	862.4		$	3.3		$	367.5		$	1,234.2

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

($ in millions)	Nine months ended March 30, 2019			Nine months ended March 31, 2018
Cash flows from operating activities:
Net income	$	103.6		$	134.3
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		83.7			73.7
Amortization of intangible assets		28.6			22.1
Amortization of deferred financing costs and other		3.4			3.6
Provision for losses on accounts receivables		12.4			12.0
Stock compensation expense		11.8			18.0
Deferred income tax expense (benefit)		2.5			(38.4	)
Change in fair value of derivative assets and liabilities		0.1			(0.1	)
Other		(0.2	)		8.2
Changes in operating assets and liabilities, net
Accounts receivable		(63.6	)		(38.7	)
Inventories		(61.3	)		(24.2	)
Prepaid expenses and other assets		24.9			(9.8	)
Trade accounts payable		67.4			106.5
Outstanding checks in excess of deposits		15.2			(24.9	)
Accrued expenses and other liabilities		32.0			(12.7	)
Net cash provided by operating activities		260.5			229.6
Cash flows from investing activities:
Purchases of property, plant and equipment		(93.1	)		(73.2	)
Net cash paid for acquisitions		(57.7	)		(70.9	)
Proceeds from sale of property, plant and equipment		1.0			0.6
Net cash used in investing activities		(149.8	)		(143.5	)
Cash flows from financing activities:
Net payments under ABL Facility		(81.7	)		(43.5	)
Payment of Promissory Note		-			(6.0	)
Payments on financed property, plant and equipment		(5.0	)		(1.5	)
Cash paid for acquisitions		(3.5	)		(8.4	)
Payments under capital lease obligations		(9.3	)		(5.1	)
Proceeds from exercise of stock options		6.2			7.1
Cash paid for shares withheld to cover taxes		(7.5	)		(28.0	)
Repurchases of common stock		(9.3	)		—
Other		—			(1.2	)
Net cash used in financing activities		(110.1	)		(86.6	)
Net increase (decrease) in cash and restricted cash		0.6			(0.5	)
Cash and restricted cash, beginning of period		17.8			21.0
Cash and restricted cash, end of period	$	18.4		$	20.5

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:

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

Performance Food Group Company, through its subsidiaries, markets and distributes national and company-branded food and food-related products to customer locations across the United States. 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 regional and national family and casual dining restaurant chains, fast casual chains, and quick-service restaurants. The Company also serves schools, healthcare facilities, business and industry locations, and other institutional customers.

On November 13, 2018, the Board of Directors of the Company (the “Board of Directors”) authorized a share repurchase program for up to $250 million of the Company’s outstanding common stock. The repurchases are executed 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 does not have an expiration date and may be amended, suspended, or discontinued at any time. Repurchases under this program depend upon market place conditions and other factors, including compliance with the covenants under the ABL Facility, as defined in Note 6. Debt, and the indenture governing the Notes, as define in Note 6. Debt. The share repurchase program remains subject to the discretion of the Board of Directors. During the three months and nine months ended March 30, 2019, the Company repurchased and subsequently retired 0.1 million and 0.3 million shares of common stock, respectively, for a total of $4.1 million and $9.3 million for the respective periods. As of March 30, 2019, approximately $240.7 million remained available for additional share repurchases.

The consolidated financial statements have been prepared by the Company, without audit, with the exception of the June 30, 2018 consolidated balance sheet, which was derived from the audited consolidated financial statements included in the Form 10-K. 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. 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.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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.

The results of operations are not necessarily indicative of the results to be expected for the full fiscal year. Therefore, these financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K. Certain footnote disclosures included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and has issued subsequent amendments to this guidance. This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue that represents the transfer of promised goods or services to a customer in an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company adopted this standard at the beginning of fiscal 2019, with no significant impact to the Company’s financial position or results of operations, using the modified retrospective approach. See Note 4. Revenue Recognition.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business in order to assist companies in the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amended guidance also removes the existing evaluation of a market

participant’s ability to replace missing elements and narrows the definition of output to achieve consistency with other topics. This ASU was effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and should be applied on a prospective basis. The Company adopted this ASU as of the beginning of fiscal 2019 and concluded that it did not have a material impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU expands hedge accounting for both financial and nonfinancial risk components to better align hedge accounting with a company’s risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. The ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. For cash flow hedges existing at the adoption date, the standard requires adoption on a modified retrospective basis with a cumulative-effect adjustment to the Consolidated Balance Sheet as of the beginning of the year of adoption. The amendments to presentation guidance and disclosure requirements are required to be adopted prospectively. The Company elected to early adopt ASU 2017-12 as of the beginning of fiscal 2019. Upon adoption of the ASU, the Company concluded that it did not have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and has issued subsequent amendments to this guidance. The ASU is a comprehensive new lease accounting model that requires companies to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. As part of the implementation of this new standard, the Company is in the process of reviewing current accounting policies and assessing the practical expedients allowed under this new guidance. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements, as well as on its systems, processes, and controls to properly account for its leases. The Company has identified the complete population of leases affected and gathered all the necessary information required to calculate the lease liabilities and right-of-use assets. In addition, the Company has implemented software to assist with future reporting. For public entities, the ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt the guidance in fiscal 2020. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provided companies with an additional (and optional) transition method to adopt the new lease standard. Under this new transition method companies would apply the new lease standard at the date of adoption and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASC 842, as originally issued, required companies to use a modified retrospective transition approach as of the beginning of the earliest comparable period presented in a company’s financial statements. The Company plans to apply the modified retrospective approach with a cumulative-effect adjustment at the beginning of the period of adoption. Additionally, the Company currently plans to elect the “package of three” practical expedients which allow companies not to reassess whether arrangements contain leases, the classification of leases, and the capitalization of initial direct costs. The Company believes adoption of this standard will have a significant impact on our Consolidated Balance Sheet, however, it does not expect the standard to have a material impact on our Consolidated Statements of Operations or Cash Flows. Information about our undiscounted future lease payments and the timing of those payments is in Note 12 Leases in the Form 10-K.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and has issued subsequent amendments to this guidance. The pronouncement changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019; however, the Company currently plans to adopt the new standard in fiscal 2021. Companies are required to apply the standard using a modified retrospective approach, with a cumulative-effect adjustment recorded to beginning retained earnings on the effective date. The Company is in the process of evaluating the impact of this ASU on its future consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. For public entities, this ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company plans to adopt this guidance in the fourth quarter of fiscal 2019. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that

is a service contract is not affected by the amendments in this update. The amendments in this update are effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company plans to adopt this new ASU in fiscal 2021. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements but does not expect this update to have a material impact on the Company's consolidated financial statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. This ASU permits the use of the Overnight Index Swap rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. For public entities that already adopted the amendments in ASU 2017-12, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company plans to adopt this guidance in the fourth quarter of fiscal 2019. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

The Company markets and distributes national and company-branded food and food-related products to customer locations across the United States. The Foodservice segment 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 distributes candy, snacks and beverages to various customer channels. The Company disaggregates revenue by 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 13. 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 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 $9.9 million and $6.9 million as of March 30, 2019 and June 30, 2018, 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 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.

During the first nine months of fiscal 2019, the Company paid cash of $58.1 million for three acquisitions and during the first nine months of fiscal 2018, the Company paid cash of $72.6 million for two acquisitions. These acquisitions did not materially affect the Company’s results of operations.

The following table summarizes the preliminary purchase price allocation for each major class of assets acquired and liabilities assumed for the fiscal 2019 acquisitions.

Subsequent to March 30, 2019, the Company paid $150.6 million for an acquisition. This acquisition includes contingent consideration related to future earnings of the acquired company. The acquisition will be reported within the Company’s Vistar segment. The Company is in the process of determining the fair values of the assets acquired and liabilities assumed.

The Company is a holding company and conducts its operations through its subsidiaries, which have incurred or guaranteed indebtedness as described below.


(In millions)	As of March 30, 2019			As of June 30, 2018
ABL Facility	$	698.4		$	780.1
5.500% Notes due 2024		350.0			350.0
Less: Original issue discount and deferred financing costs		(6.3	)		(7.1	)
Long-term debt		1,042.1			1,123.0
Capital and finance lease obligations		142.8			61.2
Total debt		1,184.9			1,184.2
Less: current installments		(16.9	)		(8.4	)
Total debt, excluding current installments	$	1,168.0		$	1,175.8

PFGC, Inc. (“PFGC”), a wholly-owned subsidiary of the Company, is a party to the Second Amended and Restated Credit Agreement dated February 1, 2016, as amended by the First Amendment to Second Amended and Restated Credit Agreement dated August 3, 2017 (the “ABL Facility”). The ABL Facility has an aggregate principal amount of $1.95 billion and matures February 2021. The ABL Facility is secured by the majority of the tangible assets of PFGC and its subsidiaries. Performance Food Group, Inc., a wholly-owned subsidiary of PFGC, is the lead borrower under the ABL Facility, which is jointly and severally guaranteed by PFGC and all material domestic direct and indirect wholly-owned subsidiaries of PFGC (other than captive insurance subsidiaries and other excluded subsidiaries).

Borrowings under the ABL Facility bear 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 provides for an unused commitment fee ranging from 0.25% to 0.375%.

The following table summarizes outstanding borrowings, availability, and the end of period average interest rate under the ABL Facility:


Delaware		43-1983182
(State or other jurisdiction of incorporation or organization)		(IRS employer identification number)

12500 West Creek Parkway Richmond, Virginia		23238
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PFGC	New York Stock Exchange

		Page

Special Note Regarding Forward-Looking Statements		3

PART I - FINANCIAL INFORMATION		5

Item 1.	Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	32

PART II - OTHER INFORMATION		33

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

SIGNATURE		35

(In millions)	Fiscal 2019
Net working capital	$	11.9
Goodwill		7.2
Other intangible assets		37.1
Property, plant and equipment		1.9
Total purchase price	$	58.1


(Dollars in millions)		As of March 30, 2019				As of June 30, 2018