Temporary working capital

PERFORMANCE FOOD GROUP CO Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read together with the unaudited consolidated financial
statements and notes thereto included elsewhere in this quarterly report on Form
10-Q and the audited consolidated financial statements and the notes thereto
included in 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 but not limited to those described in the "Item 1A. Risk Factors"
section 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 quarterly report on Form
10-Q.

                                  Our Company

We market and distribute over 250,000 food and food-related products to
customers across the United States and Canada from approximately 150
distribution facilities to over 300,000 customer locations in the
"food-away-from-home" industry. We offer our customers a broad assortment of
products including our proprietary-branded products, nationally branded
products, and products bearing our customers' brands. Our product assortment
ranges from "center-of-the-plate" items (such as beef, pork, poultry, and
seafood), frozen foods, and groceries to candy, snacks, and beverages. We also
sell disposables, cleaning and kitchen supplies, and related products used by
our customers, as well as cigarettes and other tobacco 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.

In the second quarter of fiscal 2022, the Company changed its operating segments
to reflect the manner in which the business is managed. Based on the Company's
organization structure and how the Company's management reviews operating
results and makes decisions about resource allocation, the Company now has three
reportable segments: Foodservice, Vistar, and Convenience. Our Foodservice
segment distributes a broad line of national brands, customer brands, and our
proprietary-branded food and food-related products, or "Performance Brands."
Foodservice sells to independent and multi-unit "Chain" restaurants and other
institutions such as schools, healthcare facilities, business and industry
locations, and retail establishments. Our Chain customers are multi-unit
restaurants with five or more locations and include some of the most
recognizable family and casual dining restaurant chains. Our Vistar segment
specializes in distributing candy, snacks, beverages, and other items nationally
to vending, office coffee service, theater, retail, hospitality, and other
channels. Our Convenience channel distributes candy, snacks, beverages,
cigarettes, other tobacco products, food and foodservice products and other
items to convenience stores across the United States and Canada. We believe that
there are substantial synergies across our segments. Cross-segment synergies
include procurement, operational best practices such as the use of new
productivity technologies, and supply chain and network optimization, as well as
shared corporate functions such as accounting, treasury, tax, legal, information
systems, and human resources.

On September 1, 2021, Performance Food Group Company completed the acquisition
of Core-Mark. As a result, the Company expanded its convenience business, which
now includes operations in Canada. Refer to Note 5. Business Combinations for
additional details regarding the acquisition of Core-Mark.

                       Key Factors Affecting Our Business

We believe that our short-term performance has been, and should continue to be, affected by the COVID-19 pandemic.

In response to the rapid spread of COVID-19 across the country, federal, state,
and local governments implemented measures to reduce the spread of COVID-19,
including travel bans and restrictions, quarantines, shelter in place orders,
shutdowns, and social distancing requirements. These measures adversely affected
workforces, suppliers, customers, consumer sentiment, economies, and financial
markets, and, along with decreased consumer spending, led to an economic
downturn in many of our markets.

As an essential element of the country's food supply chain, the Company has
continued to operate all of it distribution centers. Despite the Company's
continued operations, mandatory and voluntary containment measures in response
to COVID-19 had a significant impact on the food-away-from-home industry. Many
restaurants have closed, are restricting the number of patrons they will serve
at one time, or are only providing carry-out or delivery options. These
restrictions also impacted businesses throughout the economy, including
theaters, retail operations, schools, and other businesses to whom we provide
products and services, which collectively have adversely affected our results of
operations.

During the first half of fiscal 2022, economic and operating conditions for our
business improved significantly. As governmental restrictions are eased,
consumers are returning to consuming food away from home, traveling, and
attending events at entertainment venues. However, the Company and industry may
continue to face challenges as the recovery continues, such as

                                       25

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availability of product supply, increased product and logistics costs and access to labor supply. The extent to which these challenges will affect our future financial condition, liquidity and results of operations remains uncertain.

Despite the short-term impact of the COVID-19 pandemic, we believe our long-term performance is primarily impacted by the following key factors:

Changing demographic and macroeconomic trends. Until recently, due to the
COVID-19 pandemic, the share of consumer spending captured by the
food-away-from-home industry has increased steadily for several decades. The
share increases in periods of increasing employment, rising disposable income,
increases in the number of restaurants, and favorable demographic trends, such
as smaller household sizes, an increasing number of dual income households, and
an aging population base that spends more per capita at foodservice
establishments. The foodservice distribution industry is also sensitive to
national and regional economic conditions, such as changes in consumer spending,
changes in consumer confidence, and changes in the prices of certain goods.
•
Food distribution market structure. The food distribution market consists of a
wide spectrum of companies ranging from businesses selling a single category of
product (e.g., produce) to large national and regional broadline distributors
with many distribution centers and thousands of products across all categories.
We believe our scale enables us to invest in our Performance Brands, to benefit
from economies of scale in purchasing and procurement, and to drive supply chain
efficiencies that enhance our customers' satisfaction and profitability. We
believe that the relative growth of larger foodservice distributors will
continue to outpace that of smaller, independent players in our industry.
•
Our ability to successfully execute our segment strategies and implement our
initiatives. Our performance will continue to depend on our ability to
successfully execute our segment strategies and to implement our current and
future initiatives. The key strategies include focusing on independent sales and
Performance Brands, pursuing new customers for both of our reportable segments,
expansion of geographies, utilizing our infrastructure to gain further operating
and purchasing efficiencies, and making strategic acquisitions.

                 How We Assess the Performance of Our Business

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

Net Sales

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

Gross profit

Gross profit is equal to our net sales minus our cost of goods sold. Cost of
goods sold primarily includes inventory costs (net of supplier consideration),
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.

EBITDA and Adjusted EBITDA

Management measures operating performance based on our EBITDA, defined as net
income before interest expense, interest income, income taxes, and depreciation
and amortization. EBITDA is not defined under GAAP and is not a measure of
operating income, operating performance, or liquidity presented in accordance
with GAAP and is subject to important limitations. Our definition of EBITDA may
not be the same as similarly titled measures used by other companies.

We believe that the presentation of EBITDA enhances an investor's understanding
of our performance. We use this measure to evaluate the performance of our
segments and for business planning purposes. We present EBITDA in order to
provide supplemental information that we consider relevant for the readers of
our consolidated financial statements included elsewhere in this report, and
such information is not meant to replace or supersede GAAP measures.

In addition, our management uses Adjusted EBITDA, defined as net income before
interest expense, interest income, income and franchise taxes, and depreciation
and amortization, further adjusted to exclude certain items that we do not
consider part of our core operating results. Such adjustments include certain
unusual, non-cash, non-recurring, cost reduction, and other adjustment items

                                       26

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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 2025, Notes due 2027, and Notes
due 2029 relating to the Adjusted EBITDA contribution of acquired entities or
businesses prior to the acquisition date). Under our 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 defined under GAAP and is subject to important
limitations. 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 2025, Notes due 2027, and Notes due 2029 in their
evaluation of the operating performance of companies in industries similar to
ours. 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.

EBITDA and Adjusted EBITDA have important limitations as analytical tools and
you should not consider them in isolation or as substitutes for analysis of our
results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:

exclude certain tax payments that may represent a reduction in cash available to
us;
•
do not reflect any cash capital expenditure requirements for the assets being
depreciated and amortized that may have to be replaced in the future;
•
do not reflect changes in, or cash requirements for, our working capital needs;
and
•
do not reflect the significant interest expense, or the cash requirements,
necessary to service our debt.

When 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 others:

does not include non-cash stock-based employee compensation expense and other
non-cash charges; and
•
does not include acquisition, restructuring, and other costs incurred to realize
future cost savings and enhance our operations.

We have included calculations of EBITDA and Adjusted EBITDA for the periods presented.

               Results of Operations, EBITDA, and Adjusted EBITDA

The following table sets forth a summary of our results of operations, EBITDA,
and Adjusted EBITDA for the periods indicated (in millions, except per share
data):

                                                                 Three Months Ended
                                         January 1, 2022       December 26, 2020       Change          %
Net sales                               $        12,838.8     $           6,845.2     $ 5,993.6         87.6
Cost of goods sold                               11,560.0                 6,034.1       5,525.9         91.6
Gross profit                                      1,278.8                   811.1         467.7         57.7
Operating expenses                                1,221.0                   750.2         470.8         62.8
Operating profit                                     57.8                    60.9          (3.1 )       (5.1 )
Other expense, net
Interest expense                                     45.2                    38.1           7.1         18.6
Other, net                                            1.2                    (2.1 )         3.3       (157.1 )
Other expense, net                                   46.4                    36.0          10.4         28.9
Income before income taxes                           11.4                    24.9         (13.5 )      (54.2 )
Income tax expense                                    3.0                     7.3          (4.3 )      (58.9 )
Net income                              $             8.4     $              17.6     $    (9.2 )      (52.3 )
EBITDA                                  $           173.1     $             147.2     $    25.9         17.6
Adjusted EBITDA                         $           241.1     $             158.0     $    83.1         52.6
Weighted-average common shares
outstanding:
Basic                                               152.9                   132.0          20.9         15.8
Diluted                                             154.3                   133.2          21.1         15.8
Earnings per common share:
Basic                                   $            0.05     $              0.13     $   (0.08 )      (61.5 )
Diluted                                 $            0.05     $              0.13     $   (0.08 )      (61.5 )




                                       27
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                                                             Six Months Ended
                                                             December 26,
                                        January 1, 2022          2020           Change          %
Net sales                              $        23,225.1     $    13,892.0     $ 9,333.1        67.2
Cost of goods sold                              20,804.0          12,265.4       8,538.6        69.6
Gross profit                                     2,421.1           1,626.6         794.5        48.8
Operating expenses                               2,315.1           1,529.9         785.2        51.3
Operating profit                                   106.0              96.7           9.3         9.6
Other expense, net
Interest expense                                    89.2              76.9          12.3        16.0
Other, net                                          (0.1 )            (3.1 )         3.0       (96.8 )
Other expense, net                                  89.1              73.8          15.3        20.7
Income before income taxes                          16.9              22.9          (6.0 )     (26.2 )
Income tax expense                                   3.8               6.0          (2.2 )     (36.7 )
Net income                             $            13.1     $        16.9     $    (3.8 )     (22.5 )
EBITDA                                 $           321.3     $       266.1     $    55.2        20.7
Adjusted EBITDA                        $           424.8     $       293.2     $   131.6        44.9
Weighted-average common shares
outstanding:
Basic                                              146.3             131.9          14.4        10.9
Diluted                                            147.7             132.9          14.8        11.1
Earnings per common share:
Basic                                  $            0.09     $        0.13     $   (0.04 )     (30.8 )
Diluted                                $            0.09     $        0.13     $   (0.04 )     (30.8 )






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

                                              Three Months Ended                       Six Months Ended
                                                            December 26,                            December 26,
                                      January 1, 2022           2020           January 1, 2022          2020
                                                (In millions)                            (In millions)
Net income                           $             8.4      $        17.6     $            13.1     $        16.9
Interest expense (1)                              45.2               38.1                  89.2              76.9
Income tax expense                                 3.0                7.3                   3.8               6.0
Depreciation                                      70.4               54.9                 127.4             107.7
Amortization of intangible assets                 46.1               29.3                  87.8              58.6
EBITDA                                           173.1              147.2                 321.3             266.1
Non-cash items (2)                                61.0                7.1                  60.7              18.1
Acquisition, integration and
reorganization (3)                                 4.5                4.9                  37.3               9.4
Productivity initiatives and other
adjustment items (4)                               2.5               (1.2 )                 5.5              (0.4 )
Adjusted EBITDA                      $           241.1      $       158.0     $           424.8     $       293.2




(1)
Includes a $3.2 million loss on extinguishment of debt for the six months ended
January 1, 2022 related to the early redemption of the Notes due 2024.
(2)
Includes adjustments for non-cash charges arising from stock-based compensation
and gain/loss on disposal of assets. Stock-based compensation expense was $14.3
million and $7.7 million for the second quarters of fiscal 2022 and fiscal 2021,
respectively, and $24.3 million and $12.4 million in the first six months of
fiscal 2022 and fiscal 2021, respectively. In addition, this includes increases
in the last-in-first-out ("LIFO") reserve of $8.2 million and $37.3 million for
Foodservice and Convenience, respectively, for the second quarter of fiscal 2022
compared to an increase of $2.3 million for Foodservice and a decrease of $3.1
million for Convenience for the second quarter of fiscal 2021. The LIFO reserve
increased $13.9 million for Foodservice and $20.3 million for Convenience for
the first six months of fiscal 2022 compared to increases of $7.4 million for
Foodservice and $0.5 million for Convenience for the first six months fiscal
2021.
(3)
Includes professional fees and other costs related to completed and abandoned
acquisitions, costs of integrating certain of our facilities, and facility
closing costs.
(4)
Consists primarily of amounts related to fuel collar derivatives, certain
financing transactions, lease amendments, legal settlements, franchise tax
expense, insurance proceeds, and other adjustments permitted by our ABL
Facility.

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Consolidated operating results

Three and six months ended January 1, 2022 compared to the three and six months ended December 26, 2020

Net Sales

Net sales growth is a function of case growth, pricing (which is primarily based
on product inflation/deflation), and a changing mix of customers, channels, and
product categories sold. Net sales increased $6.0 billion, or 87.6%, for the
second quarter of fiscal 2022 compared to the second quarter of fiscal 2021 and
increased $9.3 billion, or 67.2%, for the first six months of fiscal 2022
compared to the first six months of fiscal 2021.

The increase in net sales was primarily attributable to the acquisition of
Core-Mark on September 1, 2021, which contributed $4,227.0 million of net sales
for the second quarter of fiscal 2022, and $5,799.3 million of net sales since
the acquisition date. The increase in net sales was also driven by growth in
cases sold due to the declining effects of COVID-19 on the restaurant industry,
and an increase in selling price per case as a result of inflation. Overall food
cost inflation was approximately 12.5% for the second quarter of fiscal 2022 and
11.8% for the first six months of fiscal 2022. Total case volume increased 40.0%
and 33.3% in the second quarter and first six months of fiscal 2022,
respectively, compared to the same periods of fiscal 2021. Excluding Core-Mark,
organic case volume increase 15.5% and 16.7% in the second quarter and first six
months of fiscal 2022, respectively, compared to the same periods of fiscal
2021.

Gross profit

Gross profit increased $467.7 million, or 57.7%, for the second quarter of
fiscal 2022 compared to the second quarter of fiscal 2021 and increased $794.5
million, or 48.8%, for the first six months of fiscal 2022 compared to the first
six months of fiscal 2021. The increase in gross profit was primarily driven by
the acquisition of Core-Mark. The Core-Mark acquisition contributed gross profit
of $245.2 million in the second quarter of fiscal 2022, and $334.3 million since
the acquisition date, which includes $8.8 million of amortization of the step up
in fair value of inventory acquired. Also, gross profit increased due to case
growth in Foodservice and an increase in the gross profit per case driven by
growth in the independent channel. Independent customers typically receive more
services from us, cost more to serve, and pay a higher gross profit per case
than other customers.

Operating Expenses

Operating expenses increased $470.8 million, or 62.8%, for the second quarter of
fiscal 2022 compared to the second quarter of fiscal 2021 and increased $785.2
million, or 51.3%, for the first six months of fiscal 2022 compared to the first
six months of fiscal 2021. The increase in operating expenses for both the
second quarter and first six months of fiscal 2022 was primarily driven by the
acquisition of Core-Mark. Core-Mark contributed $217.0 million of operating
expenses in the second quarter of fiscal 2022 and $295.4 million of operating
expenses since the acquisition date. Operating expenses also increased as a
result of an increase in case volume and the resulting impact on variable
operational and selling expenses, as well as an increase in personnel expenses.
The increases in personnel expense includes increases of $34.0 million and $86.3
million in temporary contract labor costs, including travel expense associated
with the contract workers, for the second quarter and first six months of fiscal
2022, respectively, compared to the prior year periods, as a result of the
current labor market's impact on the Company's ability to hire and retain
qualified labor. Operating expenses also experienced increases in fuel expenses
of $18.9 million and $34.1 million, due to higher fuel prices in the second
quarter and first six months of fiscal 2022 as compared to prior year periods,
increases in workers compensation and automobile insurance expense of $11.3
million and $8.9 million, and increases in professional fees of $0.2 million and
$20.9 million related to recent acquisition during the second quarter and first
six months of fiscal 2022, respectively, compared to the prior year periods.

Depreciation and amortization of intangible assets increased from $84.2 million
in the second quarter of fiscal 2021 to $116.5 million in the second quarter of
fiscal 2022. Depreciation and amortization of intangible assets increased from
$166.3 million for the first six months of fiscal 2021 to $215.2 million in the
first six months of fiscal 2022. Depreciation of fixed assets and amortization
of intangible assets increased as a result of the Core-Mark acquisition, along
with the accelerated amortization of certain customer relationships and trade
names. These increases were partially offset by fully depreciated assets during
the second quarter of fiscal 2022.

Net revenue

Net income decreased $9.2 million, or 52.3%, for the second quarter of fiscal
2022 compared to the second quarter of fiscal 2021. Net income decreased $3.8
million, or 22.5%, for the first six months of fiscal 2022 compared to the first
six months of fiscal 2021. The decrease in net income was primarily attributable
to the increase in operating expenses discussed above, and an increase in
interest expense. The increase in interest expense was primarily the result of
an increase in average borrowings outstanding during fiscal 2022 compared to the
prior year period.

The Company reported income tax expense of $3.0 million and $3.8 million for the
second quarter and first six months of fiscal 2022 , respectively, compared to
income tax expense of $7.3 million and $6.0 million for the second quarter and
first six months of fiscal 2021. Our effective tax rates for the second quarter
and first six months of fiscal 2022 were 26.5% and 22.6%, respectively, compared
to 29.2% and 26.2% for the three and six months ended December 26, 2020. The
effective tax rates for periods ended

                                       29

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January 1, 2022 differed from the prior year periods due to the decrease of
state taxes and non-deductible expense as a percentage of book income and the
increase in deductible discrete items related to stock-based compensation as a
percentage of book income.

Segment Results

In the second quarter of fiscal 2022, the Company changed its operating segments
to reflect the manner in which the business is managed. Based on the Company's
organization structure and how the Company's management reviews operating
results and makes decisions about resource allocation, the Company now has three
reportable segments: Foodservice, Vistar, and Convenience. Management evaluates
the performance of these segments based on various operating and financial
metrics, including their respective sales growth and EBITDA.

Corporate & All Other is comprised of unallocated corporate overhead and certain
operations that are not considered separate reportable segments based on their
size. This includes the operations of our internal logistics unit responsible
for managing and allocating inbound logistics revenue and expense. Beginning in
the second quarter of fiscal 2022, this also includes the operating results from
certain recent immaterial acquisitions.



Presentation and amounts for the three and six months ended December 26, 2020 have been restated to reflect the segment changes described above.

The following tables present net sales and EBITDA by segment for the periods indicated (in millions of dollars):

Net Sales



                                                         Three Months Ended
                               January 1, 2022       December 26, 2020        Change             %
Foodservice                   $         6,214.4     $           4,887.4     $   1,327.0            27.2
Vistar                                    907.3                   587.9           319.4            54.3
Convenience                             5,710.0                 1,364.1         4,345.9           318.6
Corporate & All Other                     121.4                    98.2            23.2            23.6
Intersegment Eliminations                (114.3 )                 (92.4 )         (21.9 )         (23.7 )
Total net sales               $        12,838.8     $           6,845.2     $   5,993.6            87.6




                                                          Six Months Ended
                               January 1, 2022       December 26, 2020        Change             %
Foodservice                   $        12,576.4     $           9,923.8     $   2,652.6            26.7
Vistar                                  1,753.8                 1,148.8           605.0            52.7
Convenience                             8,881.2                 2,809.5         6,071.7           216.1
Corporate & All Other                     242.0                   199.1            42.9            21.5
Intersegment Eliminations                (228.3 )                (189.2 )         (39.1 )         (20.7 )
Total net sales               $        23,225.1     $          13,892.0     $   9,333.1            67.2




EBITDA



                                               Three Months Ended
                         January 1, 2022       December 26, 2020      Change         %
Foodservice             $           158.0     $             155.3     $   2.7         1.7
Vistar                               49.2                    22.0        27.2       123.6
Convenience                          37.4                    16.4        21.0       128.0
Corporate & All Other               (71.5 )                 (46.5 )     (25.0 )     (53.8 )
Total EBITDA            $           173.1     $             147.2     $  25.9        17.6




                                                Six Months Ended
                         January 1, 2022       December 26, 2020      Change         %
Foodservice             $           317.9     $             311.5     $   6.4         2.1
Vistar                               78.9                    27.1        51.8       191.1
Convenience                          76.7                    23.0        53.7       233.5
Corporate & All Other              (152.2 )                 (95.5 )     (56.7 )     (59.4 )
Total EBITDA            $           321.3     $             266.1     $  55.2        20.7




                                       30
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Segment Results-Foodservice

Three and six months ended January 1, 2022 compared to the three and six months ended December 26, 2020

Net Sales

Net sales for Foodservice increased $1.3 billion, or 27.2%, from the second
quarter of fiscal 2021 to the second quarter of fiscal 2022 and increased $2.7
billion, or 26.7%, from the first six months of fiscal 2021 to the first six
months of fiscal 2022. This increase in net sales was driven by growth in cases
sold due to the declining effects of COVID-19 on the restaurant industry and an
increase in selling price per case as a result of inflation. Overall food cost
inflation was approximately 15.5% for the second quarter of fiscal 2022 and
14.9% for the first six months of fiscal 2022, compared to the prior year
periods, which was driven primarily by price increases for disposable items and
center-of-the plate items such as meat, poultry, and seafood. Securing new and
expanding business with independent customers resulted in independent case
growth of approximately 21.0% in the second quarter of fiscal 2022 and
approximately 20.9% in the first six months of fiscal 2022, compared to the
prior year periods. For the quarter, independent sales as a percentage of total
Foodservice segment sales were 37.7%.

EBITDA

EBITDA for Foodservice increased $2.7 million, or 1.7%, from the second quarter
of fiscal 2021 to the second quarter of fiscal 2022 and increased $6.4 million,
or 2.1%, from the first six months of fiscal 2021 to the first six months of
fiscal 2022. These increases were the result of an increase in gross profit,
partially offset by an increase in operating expenses excluding depreciation and
amortization. Gross profit increased 24.8% in the second quarter of fiscal 2022
and 23.7% in the first six months of fiscal 2022, compared to the prior year
periods, driven by an increase in the gross profit per case, as well as an
increase in cases sold. The increase in gross profit per case was driven by a
favorable shift in the mix of cases sold to independent customers, including
more Performance Brands products sold to our independent customers. Cases sold
to independent businesses result in higher gross margins within this segment.

Operating expenses, excluding depreciation and amortization, for Foodservice
increased by $155.6 million, or 32.2%, from the second quarter of fiscal 2021 to
the second quarter of fiscal 2022 and increased by $302.3 million, or 30.5%,
from the first six months of fiscal 2021 to the first six months of fiscal 2022.
Operating expenses increased primarily as a result of an increase in case volume
and the resulting impact on variable operational and selling expenses, as well
as increases in personnel expense. The increases in personnel expense includes
$31.6 million and $79.1 million increases in temporary contract labor costs,
including travel expense associated with the contract workers, for the second
quarter and first six months of fiscal 2022, respectively, compared to the prior
year periods as a result of the current labor market's impact on the Company's
ability to hire and retain qualified labor. Operating expenses also experienced
increases in fuel expenses of $12.7 million and $22.7 million and increases in
workers compensation and automobile insurance expense of $7.3 million and $4.6
million during the second quarter and first six months of fiscal 2022,
respectively, compared to the prior year periods.

Depreciation and amortization of intangible assets recorded in this segment
decreased from $62.7 million in the second quarter of fiscal 2021 to $60.7
million in the second quarter of fiscal 2022 and increased from $124.5 million
in the first six months of fiscal 2021 to $125.0 million in the first six months
of fiscal 2022. Depreciation of fixed assets and amortization of intangible
assets increased during the first six months of fiscal 2022 as a result of the
accelerated amortization of certain customer relationships. These increases were
offset by fully depreciated assets during the second quarter of fiscal 2022.

Segment Results – Vistar

Three and six months ended January 1, 2022 compared to the three and six months ended December 26, 2020

Net Sales

Net sales for Vistar increased $319.4 million, or 54.3%, from the second quarter
of fiscal 2021 to the second quarter of fiscal 2022 and increased $605.0
million, or 52.7%, from the first six months of fiscal 2021 to the first six
months of fiscal 2022. The increases in net sales were driven primarily by the
improving economic conditions due to the declining effects of the COVID-19
pandemic. Case volume in the channels significantly impacted by the COVID-19
pandemic is gradually improving. The vending, theater, office coffee service,
hospitality, and travel channels all experienced case volume growth in the
second quarter and first six months of fiscal 2022 compared to the prior year
period.

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EBITDA

EBITDA for Vistar increased $27.2 million, or 123.6%, from the second quarter of
fiscal 2021 to the second quarter of fiscal 2022 and increased $51.8 million, or
191.1%, from the first six months of fiscal 2021 to the first six months of
fiscal 2022. The increases were the result of increases in gross profit,
partially offset by increases in operating expenses excluding depreciation and
amortization. Gross profit increased $53.7 million, or 53.8%, for the second
quarter fiscal 2022 and $98.5 million, or 52.4%, for the first six months of
fiscal 2022 compared to the respective prior year periods. Additionally, for
first six months of fiscal 2022, Vistar experienced an increase in procurement
gains, as well as a favorable shift in the channel mix that impacted the
segment.

Operating expenses, excluding depreciation and amortization, increased $26.6
million, or 34.2%, for the second quarter of fiscal 2022 and $46.8 million, or
29.1%, for the first six months of fiscal 2022 compared to the prior year
periods. Operating expenses increased primarily as a result of increased sales
volume described above, and the resulting impact on variable operational and
selling expenses. Operating expenses also increased as a result of increases in
personnel expense and fuel expense.

Depreciation and amortization of intangible assets recorded in this segment
increased from $11.4 million in the second quarter of fiscal 2021 to $13.1
million in the second quarter of fiscal 2022 and increased from $21.3 million in
the first six months of fiscal 2021 to $26.2 million in the first six months of
fiscal 2022. These increases were the result of the accelerated amortization of
certain trade names and recent capital outlays for transportation and warehouse
equipment, warehouse expansion, and information technology.

Segment Results – Convenience

Three and six months ended January 1, 2022 compared to the three and six months ended December 26, 2020

Net Sales

Net sales for Convenience increased $4.3 billion, or 318.6%, from $1.4 billion
for the second quarter of fiscal 2021 to $5.7 billion for the second quarter of
fiscal 2022. Net sales for Convenience increased $6.1 billion, or 216.1%, from
$2.8 billion for the first six months of fiscal 2021 to $8.9 billion for the
first six months of fiscal 2022. Net sales related to cigarettes for the second
quarter of fiscal 2022 was $3,757.3 million, which includes $1,059.5 million of
excise taxes, compared to net sales of cigarettes of $978.8 million, which
includes $281.4 million of excise taxes, for the second quarter of fiscal 2021.
Net sales related to cigarettes for the first six months of fiscal 2022 was
$5,838.8 million, which includes $1,645.5 million of excise taxes, compared to
net sales of cigarettes of $2,035.2 million, which includes $586.7 million of
excise taxes, for the first six months of fiscal 2021.

The increase in net sales for Convenience was driven primarily by the Core-Mark
acquisition. The Core-Mark acquisition contributed $4,227.0 million of net sales
for the second quarter of fiscal 2022, which includes $786.3 million related to
tobacco excise taxes, and $5,799.3 million of net sales since the acquisition
date, which includes $1,069.4 million related to tobacco excise taxes.

EBITDA

EBITDA for Convenience increased $21.0 million, or 128.0%, from the second
quarter of fiscal 2021 to the second quarter of fiscal 2022 and increased $53.7
million, or 233.5%, from the first six months of fiscal 2021 to the first six
months of fiscal 2022. These increases were a result of an increase in gross
profit, partially offset by an increase in operating expenses excluding
depreciation and amortization driven by the acquisition of Core-Mark. Gross
profit increased $252.3 million, or 374.7%, for the second quarter fiscal 2022
and $381.7 million, or 305.2%, for the first six months of fiscal 2022 compared
to the respective prior year periods. Core-Mark contributed gross profit of
$245.2 million in the second quarter of fiscal 2022, and $334.3 million since
the acquisition date, which includes $8.8 million of amortization of the step up
in fair value of inventory acquired. Gross profit as a percentage of net sales
increased from 4.9% for the second quarter of fiscal 2021 to 5.6% for the second
quarter of fiscal 2022 and from 4.5% for the first six months of fiscal 2021 to
5.7% the first six months of fiscal 2022 as a result of the Core-Mark
acquisition.

Operating expenses, excluding depreciation and amortization, increased $231.8
million, or 456.9%, for the second quarter of fiscal 2022 and increased $328.1
million, or 321.1%, for the first six months of fiscal 2022 compared to the
prior year periods. Operating expenses increased primarily as a result of the
acquisition of Core-Mark, which contributed an additional $213.2 million of
operating expenses in the second quarter of fiscal 2022 and an additional $290.5
million of operating expenses since the acquisition date. Operating expenses
also experienced increases in personnel expense and fuel expense in the second
quarter and first six months of fiscal 2022 as compared to prior year periods.

Depreciation and amortization of intangible assets recorded in this segment
increased from $2.4 million in the second quarter of fiscal 2021 to $36.6
million in the second quarter of fiscal 2022 and increased from $4.2 million in
the first six months of fiscal 2021 to $51.7 million in the first six months of
fiscal 2022. Depreciation of fixed assets and amortization of intangible assets
increased as a result of the Core-Mark acquisition. Total depreciation and
amortization related to the acquisition of Core-Mark was $32.8 million and $44.1
million in the second quarter and the period since the acquisition date,
respectively. The remaining increase was the result of recent capital outlays
for transportation and warehouse equipment and information technology.

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Segment Results – Business and Others

Three and six months ended January 1, 2022 compared to the three and six months ended December 26, 2020

Net Sales

Corporate & All Other net sales increased $23.2 million from the second quarter of fiscal 2021 to the second quarter of fiscal 2022 and increased $42.9 million from the first half of Fiscal 2021 to the first half of Fiscal 2022. The increases are primarily attributable to an increase in logistics services provided to our other segments for increased case volume.

EBITDA

EBITDA for Corporate & All Other was a negative $71.5 million for the second
quarter of fiscal 2022 compared to a negative $46.5 million for the second
quarter of fiscal 2021 and was a negative $152.2 million for the first six
months of fiscal 2022 compared to a negative $95.5 million for the first six
months of fiscal 2021. The decline in EBITDA was primarily driven by increases
in personnel expense, increases in stock-based compensation expense of $6.7
million and $12.0 million, and increases in professional fees of $1.7 million
and $23.0 million related to recent acquisitions for the second quarter of
fiscal 2022 and first six months of fiscal 2022, respectively, as compared to
the respective prior year periods.

Depreciation and amortization of intangible assets recorded in this segment
decreased from $7.7 million in the second quarter of fiscal 2021 to $6.1 million
in the second quarter of fiscal 2022 and decreased from $16.3 million in the
first six months of fiscal 2021 to $12.3 million in the first six months of
fiscal 2022 as a result of accelerated depreciation for abandoned information
technology projects in the prior year.

                        Liquidity and Capital Resources

We have historically financed our operations and growth primarily with cash
flows from operations, borrowings under our credit facility, operating and
finance leases, and normal trade credit terms. We have typically funded our
acquisitions with additional borrowings under our credit facility. Our working
capital and borrowing levels are subject to seasonal fluctuations, typically
with the lowest borrowing levels in the third and fourth fiscal quarters and the
highest borrowing levels occurring in the first and second fiscal quarters. We
borrow under our credit facility or pay it down regularly based on our cash
flows from operating and investing activities. Our practice is to minimize
interest expense while maintaining reasonable liquidity.

As market conditions warrant, we may from time to time seek to repurchase our
securities or loans in privately negotiated or open market transactions, by
tender offer or otherwise. Any such repurchases may be funded by incurring new
debt, including additional borrowings under our credit facility. In addition,
depending on conditions in the credit and capital markets and other factors, we
will, from time to time, consider other financing transactions, the proceeds of
which could be used to refinance our indebtedness, make investments or
acquisitions or for other purposes. Any new debt may be secured debt.

Our cash requirements over the next 12 months and beyond relate to our long-term
debt and associated interest payments, operating and finance leases, and
purchase obligations. For information regarding the Company's expected cash
requirements related to long-term debt and operating and finance leases, see
Note 6. Debt and Note 7. Leases, respectively, of the consolidated financial
statements. As of January 1, 2022, the Company had total purchase obligations of
$121.1 million, which includes agreements for purchases related to capital
projects and services in the normal course of business, for which all
significant terms have been confirmed, as well as a minimum amount due for
various Company meetings and conferences. Purchase obligations also include
amounts committed to various capital projects in process or scheduled to be
completed in the coming fiscal years. As of January 1, 2022, the Company had
commitments of $83.3 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 January 1, 2022.

We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.

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 to maintain sufficient liquidity for normal operating
purposes and to fund capital expenditures.

From January 1, 2022our cash balance totaled $16.7 millionincluding restricted cash of $7.1 millionagainst a cash balance totaling $22.2 millionincluding restricted cash of $11.1 millionfrom July 3, 2021.

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Six months ended January 1, 2022 compared to the half-year ended December 26, 2020

Operating Activities

During the first six months of fiscal 2022 and fiscal 2021, our operating
activities provided cash flow of $153.8 million and used cash flow $24.4
million, respectively. The increase in cash flow provided by operating
activities in the first six months of fiscal 2022 compared to the first six
months of fiscal 2021 was largely driven by improvements in working capital and
the prior year payment of $117.3 million of contingent consideration related to
the acquisition of Eby-Brown.

Investing Activities

Cash used in investing activities totaled $1,718.7 million in the first six
months of fiscal 2022 compared to $88.8 million in the first six months of
fiscal 2021. These investments consisted primarily of cash paid for recent
acquisitions of $1,651.1 million in the first six months of fiscal 2022 compared
to $12.2 million of payments for one acquisition in the first six months of
fiscal 2021, along with capital purchases of property, plant, and equipment of
$68.5 million and $83.0 million for the first six months of fiscal 2022 and the
first six months of fiscal 2021, respectively. For the first six months of
fiscal 2022, purchases of property, plant, and equipment primarily consisted of
outlays for information technology, warehouse equipment, warehouse expansions
and improvements, and transportation equipment. The following table presents the
capital purchases of property, plant, and equipment by segment. Capital
expenditures for the six months ended December 26, 2020 have been restated to
reflect the segment changes discussed above.



                                                                  Six Months Ended
(Dollars in millions)                                 January 1, 2022        December 26, 2020
Foodservice                                          $            46.7      $              20.0
Vistar                                                             5.3                     35.1
Convenience                                                       10.0                     19.4
Corporate & All Other                                              6.5                      8.5
Total capital purchases of property, plant and
equipment                                            $            68.5      $              83.0


Financing Activities

During the first six months of fiscal 2022, our financing activities provided
cash flow of $1,559.4 million, which consisted primarily of $1.0 billion in cash
received from the issuance and sale of the Notes due 2029 and $962.7 million in
net borrowings under our Prior Credit Agreement and ABL facility, partially
offset by $350.0 million in cash used for the repayment of the Notes due 2024.

During the first six months of fiscal 2021, our financing activities provided
cash flow of $109.2 million, which consisted primarily of $256.2 million in net
borrowings under our ABL facility, partially offset by $136.3 million in
payments related to recent acquisitions.

The following describes our funding arrangements as of January 1, 2022:

Credit facility: PFGC, a wholly-owned subsidiary of the Company, was a party to the prior credit agreement. The prior credit agreement had an aggregate principal amount of $3.0 billion under the Revolving Loan Facility and was due to mature on December 20, 2024.

On September 17, 2021, PFGC and Performance Food Group, Inc. entered into the
ABL Facility with Wells Fargo Bank, National Association, as Administrative
Agent and Collateral Agent, and the other lenders party thereto, which amended
the Prior Credit Agreement. The ABL Facility, among other things, (i) increases
the aggregate principal amount available under the revolving loan facility from
$3.0 billion under the Prior Credit Agreement to $4.0 billion under the ABL
Facility, (ii) extends the stated maturity date from December 30, 2024 under the
Prior Credit Agreement to September 17, 2026 under the ABL Facility, and (iii)
includes an alternative reference rate, which provides mechanisms for the use of
the Secured Overnight Financing Rate as a replacement rate upon a LIBOR
cessation event.

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,
and secured by the majority of the assets of, PFGC and all material domestic
direct and indirect wholly-owned subsidiaries of PFGC (other than captive
insurance subsidiaries and other excluded subsidiaries). Availability for loans
and letters of credit under the ABL Facility is governed by a borrowing base,
determined by the application of specified advance rates against eligible
assets, including trade accounts receivable, inventory, owned real properties,
and owned transportation equipment. The borrowing base is reduced quarterly by a
cumulative fraction of the real properties and transportation equipment values.
Advances on accounts receivable and inventory are subject to change based on
periodic commercial finance examinations and appraisals, and the

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real property and transportation equipment values included in the borrowing base
are subject to change based on periodic appraisals. Audits and appraisals are
conducted at the direction of the administrative agent for the benefit and on
behalf of all lenders.

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 rate of 0.25% per annum.

The following table summarizes outstanding borrowings, availability, and the
average interest rate under the Prior Credit Agreement and the ABL Facility:



(Dollars in millions)                          As of January 1,       As of July 3, 2021
                                                     2022
Aggregate borrowings                           $         1,549.0     $              586.3
Letters of credit under ABL Facility                       200.2            

161.7

Excess availability, net of lenders'                     2,250.8                  2,252.0
reserves of $95.7 and $55.1
Average interest rate                                       1.57 %                   2.32 %




The ABL Facility contains covenants requiring the maintenance of a minimum
consolidated fixed charge coverage ratio if excess availability falls below the
greater of (i) $320.0 million and (ii) 10% of the lesser of the borrowing base
and the revolving credit facility amount for five consecutive business days. The
ABL Facility also contains customary restrictive covenants that include, but are
not limited to, restrictions on PFGC's and certain of its subsidiary's ability
to incur additional indebtedness, pay dividends, create liens, make investments
or specified payments, 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 such agreement may be accelerated and the rights and remedies
of the lenders under the ABL Facility may be exercised, including rights with
respect to the collateral securing the obligations under such agreement.

Senior Notes due 2027: On September 27, 2019, PFG Escrow Corporation (which
merged with and into Performance Food Group, Inc.) issued and sold $1,060.0
million aggregate principal amount of the Noted due 2027. The Notes due 2027 are
jointly and severally guaranteed on a senior unsecured basis by PFGC and all
domestic direct and indirect wholly-owned subsidiaries of PFGC (other than
captive insurance subsidiaries and other excluded subsidiaries). The Notes due
2027 are not guaranteed by Performance Food Group Company.

The proceeds from the Notes due 2027, along with an offering of shares of the
Company's common stock and borrowings under the Prior Credit Agreement, were
used to fund the cash consideration for the acquisition of Reinhart Foodservice,
L.L.C. and to pay related fees and expenses.

The Bonds maturing in 2027 were issued at 100.0% of their nominal value. The Bonds maturing in 2027 mature on October 15, 2027 and bear interest at the rate of 5.500% per annum, payable semi-annually in arrears.

Upon the occurrence of a change of control triggering event or upon the sale of
certain assets in which Performance Food Group, Inc. does not apply the proceeds
as required, the holders of the Notes due 2027 will have the right to require
Performance Food Group, Inc. to repurchase each holder's Notes due 2027 at a
price equal to 101% (in the case of a change of control triggering event) or
100% (in the case of an asset sale) of their principal amount, plus accrued and
unpaid interest. Performance Food Group, Inc. may redeem all or a part of the
Notes due 2027 at any time prior to October 15, 2022 at a redemption price equal
to 100% of the principal amount of the Notes due 2027 being redeemed plus a
make-whole premium and accrued and unpaid interest, if any, to, but not
including, the redemption date. In addition, beginning on October 15, 2022,
Performance Food Group, Inc. may redeem all or a part of the Notes due 2027 at a
redemption price equal to 102.750% of the principal amount redeemed, plus
accrued and unpaid interest. The redemption price decreases to 101.375% and 100%
of the principal amount redeemed on October 15, 2023 and October 15, 2024,
respectively. In addition, at any time prior to October 15, 2022, Performance
Food Group, Inc. may redeem up to 40% of the Notes due 2027 from the proceeds of
certain equity offerings at a redemption price equal to 105.500% of the
principal amount thereof, plus accrued and unpaid interest.

The indenture governing the Notes due 2027 contains covenants limiting, among
other things, PFGC and its restricted subsidiaries' ability to incur or
guarantee additional debt or issue disqualified stock or preferred stock; pay
dividends and make other distributions on, or redeem or repurchase, capital
stock; make certain investments; incur certain liens; enter into transactions
with affiliates; consolidate, merge, sell or otherwise dispose of all or
substantially all of its assets; create certain restrictions on the ability of
PFGC's restricted subsidiaries to make dividends or other payments to PFGC;
designate restricted subsidiaries as unrestricted subsidiaries; and transfer or
sell certain assets. These covenants are subject to a number of important
exceptions and qualifications.

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The Notes due 2027 also contain customary events of default, the occurrence of
which could result in the principal of and accrued interest on the Notes due
2027 to become or be declared due and payable.

Senior Notes due 2025: On April 24, 2020, Performance Food Group, Inc. issued
and sold $275.0 million aggregate principal amount of the Notes due 2025,
pursuant to an indenture dated as of April 24, 2020. The Notes due 2025 are
jointly and severally guaranteed on a senior unsecured basis by PFGC and all
domestic direct and indirect wholly-owned subsidiaries of PFGC (other than
captive insurance subsidiaries and other excluded subsidiaries). The Notes due
2025 are not guaranteed by Performance Food Group Company.

The proceeds from the Notes due 2025 were used for working capital and general
corporate purposes and to pay the fees, expenses, and other transaction costs
incurred in connection with the Notes due 2025.

The Notes due 2025 were issued at 100.0% of their par value. The Notes due 2025
mature on May 1, 2025 and bear interest at a rate of 6.875% per year, payable
semi-annually in arrears.

Upon the occurrence of a change of control triggering event or upon the sale of
certain assets in which Performance Food Group, Inc. does not apply the proceeds
as required, the holders of the Notes due 2025 will have the right to require
Performance Food Group, Inc. to repurchase each holder's Notes due 2025 at a
price equal to 101% (in the case of a change of control triggering event) or
100% (in the case of an asset sale) of their principal amount, plus accrued and
unpaid interest. Performance Food Group, Inc. may redeem all or a part of the
Notes due 2025 at any time prior to May 1, 2022 at a redemption price equal to
100% of the principal amount of the Notes due 2025 being redeemed plus a
make-whole premium and accrued and unpaid interest, if any, to, but not
including, the redemption date. In addition, beginning on May 1, 2022,
Performance Food Group, Inc. may redeem all or a part of the Notes due 2025 at a
redemption price equal to 103.438% of the principal amount redeemed, plus
accrued and unpaid interest. The redemption price decreases to 101.719% and 100%
of the principal amount redeemed on May 1, 2023 and May 1, 2024, respectively.
In addition, at any time prior to May 1, 2022, Performance Food Group, Inc. may
redeem up to 40% of the Notes due 2025 from the proceeds of certain equity
offerings at a redemption price equal to 106.875% of the principal amount
thereof, plus accrued and unpaid interest.

The indenture governing the Notes due 2025 contains covenants limiting, among
other things, PFGC's and its restricted subsidiaries' ability to incur or
guarantee additional debt or issue disqualified stock or preferred stock; pay
dividends and make other distributions on, or redeem or repurchase, capital
stock; make certain investments; incur certain liens; enter into transactions
with affiliates; consolidate, merge, sell or otherwise dispose of all or
substantially all of its assets; create certain restrictions on the ability of
PFGC's restricted subsidiaries to make dividends or other payments to PFGC;
designate restricted subsidiaries as unrestricted subsidiaries; and transfer or
sell certain assets. These covenants are subject to a number of important
exceptions and qualifications. The Notes due 2025 also contain customary events
of default, the occurrence of which could result in the principal of and accrued
interest on the Notes due 2025 to become or be declared due and payable.

Senior Notes due 2029: On July 26, 2021, Performance Food Group, Inc. issued and
sold $1.0 billion aggregate principal amount of its Notes due 2029, pursuant to
an indenture dated as of July 26, 2021. The Notes due 2029 are jointly and
severally guaranteed on a senior unsecured basis by PFGC and all domestic direct
and indirect wholly-owned subsidiaries of PFGC (other than captive insurance
subsidiaries and other excluded subsidiaries). The Notes due 2029 are not
guaranteed by Performance Food Group Company.

The proceeds from the Notes due 2029 were used to pay down the outstanding
balance of the Prior Credit Agreement, to redeem the Senior Notes due 2024, and
to pay the fees, expenses, and other transaction costs incurred in connection
with the Notes due 2029.

The Notes due 2029 were issued at 100.0% of their par value. The Notes due 2029
mature on August 1, 2029 and bear interest at a rate of 4.250% per year, payable
semi-annually in arrears.

Upon the occurrence of a change of control triggering event or upon the sale of
certain assets in which Performance Food Group, Inc. does not apply the proceeds
as required, the holders of the Notes due 2029 will have the right to require
Performance Food Group, Inc. to repurchase each holder's Notes due 2029 at a
price equal to 101% (in the case of a change of control triggering event) or
100% (in the case of an asset sale) of their principal amount, plus accrued and
unpaid interest. Performance Food Group, Inc. may redeem all or a part of the
Notes due 2029 at any time prior to August 1, 2024 at a redemption price equal
to 100% of the principal amount of the Notes due 2029 being redeemed plus a
make-whole premium and accrued and unpaid interest, if any, to, but not
including, the redemption date. In addition, beginning on August 1, 2024,
Performance Food Group, Inc. may redeem all or a part of the Notes due 2029 at a
redemption price equal to 102.125% of the principal amount redeemed, plus
accrued and unpaid interest. The redemption price decreases to 101.163% and 100%
of the principal amount redeemed on August 1, 2025 and August 1, 2026,
respectively. In addition, at any time prior to August 1, 2024, Performance Food
Group, Inc. may redeem up to 40% of the Notes due

                                       36

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2029 of the proceeds of certain share offerings at a redemption price equal to 104.250% of their principal amount, 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.

From January 1, 2022the Company has complied with all the covenants of the ABL facility and the indentures governing the notes due 2025, notes due 2027 and notes due 2029.

                            Total Assets by Segment

Total assets by segment discussed below exclude intercompany receivables between
segments and amounts in prior periods have been restated to reflect the changes
to our reportable segments as of January 1, 2022.

Total assets for Foodservice increased $846.8 million from $5,341.9 million as
of December 26, 2020 to $6,188.7 million as of January 1, 2022. During this time
period, this segment increased its inventory, accounts receivable, property,
plant and equipment, and goodwill, primarily due to a recent acquisition,
partially offset by decreases in intangible assets and operating lease
right-of-use assets. Total assets for Foodservice increased $397.0 million from
$5,791.7 million as of July 3, 2021 to $6,188.7 million as of January 1, 2022.
During this time period, the segment increased its inventory, property, plant
and equipment, goodwill, and intangible assets, partially offset by a decrease
in accounts receivable.

Total assets for Vistar increased $203.2 million from $903.5 million as of
December 26, 2020 to $1,106.7 million as of January 1, 2022. During this time
period, this segment increased its accounts receivable, inventory, operating
lease right-of-use assets, and property, plant and equipment, partially offset
by a decrease in intangible assets. Total assets for Vistar increased $58.2
million from $1,048.5 million as of July 3, 2021 to $1,106.7 million as of
January 1, 2022. During this time period, the segment increased its inventory,
accounts receivable, and property, plant and equipment, partially offset by
decreases in intangible assets and operating lease right-of-use assets.

Total assets for Convenience increased $3,769.5 million from $555.0 million as
of December 26, 2020 to $4,324.5 million as of January 1, 2022. Total assets for
Convenience increased $3,645.3 million from $679.2 million as of July 3, 2021 to
$4,324.5 million as of January 1, 2022. During both time periods, the segment
increased its inventory, goodwill, intangible assets, accounts receivable,
property, plant and equipment, operating lease right-of-use assets, prepaid
expenses, and other assets as a result of the Core-Mark acquisition.

                   Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that are most important to
portraying our financial position and results of operations. These policies
require our most subjective or complex judgments, often employing the use of
estimates about the effect of matters that are inherently uncertain. Our most
critical accounting policies and estimates include those that pertain to the
allowance for doubtful accounts receivable, inventory valuation, insurance
programs, income taxes, vendor rebates and promotional incentives, 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.

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