v3.26.1
Derivatives and Hedging Activities
 12 Months Ended
Jun. 27, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities
9.
Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

In the normal course of business, the Company is exposed primarily to interest rate and diesel fuel price fluctuations. The Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates and diesel fuel costs. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and payments related to the Company’s borrowings and diesel fuel purchases.

The entire change in the fair value of derivatives that are both designated and qualify as cash flow hedges is recorded in other comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction occurs. For derivatives that do not qualify as cash flow hedges or where the Company has elected not to apply hedge accounting, changes in the fair value of the derivative are recorded in the period of change as gains or losses within other, net on the consolidated statements of operations.

Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. Since the Company has a substantial portion of its debt in variable-rate instruments, it accomplishes this objective with interest rate swaps. These swaps are designated as cash flow hedges and involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. All of the Company’s interest rate swaps are designated and qualify as cash flow hedges.

As of June 27, 2026, Performance Food Group, Inc. had two interest rate swaps with a combined $150.0 million notional amount. The following table summarizes the outstanding swap agreements as of June 27, 2026 (in millions):

Effective Date

 

Maturity Date

 

Notional
Amount

 

 

Fixed Rate
Swapped

 

December 16, 2024

 

December 15, 2027

 

$

100.0

 

 

 

3.14

%

December 16, 2024

 

December 15, 2027

 

$

50.0

 

 

 

3.59

%

The table below presents the effect of the interest rate swaps designated in hedging relationships on the consolidated statements of operations for the fiscal years ended June 27, 2026, June 28, 2025, and June 29, 2024:

(In millions)

 

Fiscal Year
Ended
June 27, 2026

 

 

Fiscal Year
Ended
June 28, 2025

 

 

Fiscal Year
Ended
June 29, 2024

 

Amount of (gain) loss recognized in OCI, pre-tax

 

$

(1.7

)

 

$

1.8

 

 

$

(4.5

)

Tax expense (benefit)

 

 

0.4

 

 

 

(0.5

)

 

 

1.1

 

Amount of (gain) loss recognized in OCI, after-tax

 

$

(1.3

)

 

$

1.3

 

 

$

(3.4

)

Amount of gain reclassified from OCI into interest expense, pre-tax

 

$

0.9

 

 

$

7.9

 

 

$

16.1

 

Tax expense

 

 

(0.2

)

 

 

(2.0

)

 

 

(4.1

)

Amount of gain reclassified from OCI into interest expense, after-tax

 

$

0.7

 

 

$

5.9

 

 

$

12.0

 

Total interest expense

 

$

413.7

 

 

$

358.4

 

 

$

232.2

 

As hedged interest payments are made on the Company’s debt, amounts are reclassified from accumulated other comprehensive income (loss) to interest expense. During the next twelve months, the Company estimates that gains of approximately $0.9 million will be reclassified to interest expense.

Hedges of Forecasted Diesel Fuel Purchases

From time to time, the Company enters into costless collar or swaps to manage its exposure to variability in cash flows expected to be paid for its forecasted purchases of diesel fuel. As of June 27, 2026, Performance Food Group, Inc. had four outstanding fuel collar contracts, with an aggregate 16.3 million-gallon original notional amount of which an aggregate 4.1 million-gallon notional was remaining. The remaining 4.1 million gallon forecasted purchases of diesel fuel are expected to be made between June 28, 2026 and December 31, 2026. Additionally, subsequent to June 27, 2026, the Company entered into a fuel swap with an aggregate 12.0 million gallon notional for forecasted purchases of diesel fuel expected to be made between July 1, 2026 and June 30, 2027 at a fixed price of $4.46 per gallon.

The Company does not designate its fuel collar derivative instruments as hedges under ASC 815, Derivatives and Hedging. Accordingly, the instruments are recorded at fair value on the consolidated balance sheets, with all changes in fair value recognized as gains and losses in other, net on the consolidated statements of operations. During fiscal 2026 and 2024, the Company recognized net gains on fuel collar derivatives of $9.5 million and $1.8 million, respectively, while during fiscal 2025, the Company recognized a net loss of $0.2 million. The Company received net cash settlements of $6.4 million in fiscal 2026 and made net cash settlement payments of $0.7 million and $1.9 million in fiscal 2025 and 2024, respectively.

The Company does not currently have a payable or receivable related to cash collateral for its derivatives, and therefore it has not established an accounting policy for offsetting the fair value of its derivatives against such balances. The table below presents the fair value of the derivative financial instruments as well as their classification on the balance sheet as of June 27, 2026 and June 28, 2025:

(In millions)

 

Balance Sheet Location

 

Fair Value
as of
June 27, 2026

 

 

Fair Value
as of
June 28, 2025

 

Assets

 

 

 

 

 

 

 

 

Derivatives designated as hedges:

 

 

 

 

 

 

 

 

Interest rate swaps

 

Prepaid expenses and other current assets

 

$

0.8

 

 

$

0.8

 

Interest rate swaps

 

Other assets

 

 

0.5

 

 

 

—

 

Derivatives not designated as hedges:

 

 

 

 

 

 

 

 

Diesel fuel derivative instruments

 

Prepaid expenses and other current assets

 

$

3.0

 

 

$

0.1

 

Other derivative instruments

 

Prepaid expenses and other current assets

 

 

0.7

 

 

 

0.2

 

Total assets

 

 

 

$

5.0

 

 

$

1.1

 

Liabilities

 

 

 

 

 

 

 

 

Derivatives designated as hedges:

 

 

 

 

 

 

 

 

Interest rate swaps

 

Other long-term liabilities

 

 

—

 

 

 

0.3

 

Derivatives not designated as hedges:

 

 

 

 

 

 

 

 

Diesel fuel derivative instruments

 

Accrued expenses and other current liabilities

 

 

—

 

 

$

0.2

 

Total liabilities

 

 

 

$

—

 

 

$

0.5

 

All of the Company’s derivative contracts are subject to a master netting arrangement with the respective counterparties that provide for the net settlement of all derivative contracts in the event of default or upon the occurrence of certain termination events. Upon exercise of termination rights by the non-defaulting party (i) all transactions are terminated, (ii) all transactions are valued and the positive value or “in the money” transactions are netted against the negative value or “out of the money” transactions, and (iii) the only remaining payment obligation is of one of the parties to pay the netted termination amount.

The Company has elected to present the derivative assets and derivative liabilities on the balance sheet on a gross basis for periods ended June 27, 2026 and June 28, 2025. The tables below present the derivative assets and liability balance, before and after the effects of offsetting, as of June 27, 2026 and June 28, 2025:

 

 

June 27, 2026

 

 

June 28, 2025

 

(In millions)

 

Gross
Amounts
Presented
in the
Consolidated
Balance Sheet

 

 

Gross Amounts
Not Offset in
the Consolidated
Balance Sheet
Subject to
Netting
Agreements

 

 

Net
Amounts

 

 

Gross Amounts
Presented in
the Consolidated
Balance Sheet

 

 

Gross Amounts
Not Offset in
the Consolidated
Balance Sheet
Subject to
Netting
Agreements

 

 

Net
Amounts

 

Total asset derivatives:

 

$

5.0

 

 

$

—

 

 

$

5.0

 

 

$

1.1

 

 

$

(0.3

)

 

$

0.8

 

Total liability derivatives:

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.5

)

 

 

0.3

 

 

 

(0.2

)

 

The derivative instruments are the only assets or liabilities that are recorded at fair value on a recurring basis. The fuel collars represent Level 2 on the fair value hierarchy because they are not actively traded and are valued using pricing models that utilize observable market inputs including commodity prices. The fair values of the Company’s interest rate swap agreements are determined using a valuation model with several inputs and assumptions, some of which may be unobservable. A specific unobservable input used by the Company in determining the fair value of its interest rate swaps is an estimation of both the unsecured borrowing spread to SOFR for the Company as well as that of the derivative counterparties. Based on the lack of significance of this estimated spread component to the overall value of the Company’s interest rate swaps, the Company has concluded that these swaps represent Level 2 on the hierarchy.

Credit-Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that provide that if the Company either defaults or is capable of being declared in default on any of its indebtedness, the Company can also be declared in default on its derivative obligations.