Strong Independent Organic Case Growth,
Double Digit Gross Profit Growth and Strong Cash Flow;
Announces Fiscal 2024 Outlook
Fourth-Quarter Fiscal 2023
Highlights
- Total case volume grew 2%
- Net sales increased 2% to $14.9 billion
- Gross profit improved 12% to $1.7 billion
- Net income increased to $150.1 million
- Adjusted EBITDA increased 8% to $385.2 million1
- Diluted Earnings Per Share (“EPS”) increased to $0.96
- Adjusted Diluted EPS increased 7% to $1.141
Full-Year Fiscal 2023
Highlights
- Total case volume grew 6%
- Net sales increased 13% to $57.3 billion
- Gross profit improved 19% to $6.3 billion
- Net income increased to $397.2 million
- Adjusted EBITDA increased 34% to $1.4 billion1
- Diluted EPS increased to $2.54
- Adjusted Diluted EPS increased 49% to $3.881
- Cash flow from operating activities of $832.1 million
- Free cash flow of $562.4 million1
Performance Food Group Company (“PFG” or the “Company”) (NYSE:
PFGC) today announced its fourth-quarter and full-year fiscal 2023
business results.
“PFG closed out fiscal 2023 with strong financial results and
solid momentum as our organization continues to execute at a high
level. Our company is seeing broad-based strength across all three
reportable segments, particularly in our high margin, high return
businesses. Organic independent restaurant case growth of 7.6% in
the fiscal fourth quarter was a highlight, as the investments
behind our salesforce are paying off and producing market share
gains,” said George Holm, PFG’s Chairman & Chief Executive
Officer. “Our strong balance sheet position has allowed us to
invest behind important growth initiatives while returning cash to
shareholders through share repurchases. We have high expectations
for fiscal 2024 and are pleased with how our business is positioned
for growth.”
Fourth-Quarter Fiscal 2023 Financial
Summary
Total organic case volume increased 1.8% for the fourth quarter
of fiscal 2023 compared to the prior year period. Case volume was
not impacted by acquisitions in the fourth quarter of fiscal 2023
or the prior year period. Total organic case volume benefited from
a 7.6% increase in organic independent cases, growth in Performance
Brands cases, and broad-based growth across Vistar’s channels,
partially offset by declines in our Foodservice Chain business.
Net sales for the fourth quarter of fiscal 2023 grew 1.9% to
$14.9 billion compared to the prior year period. The increase in
net sales was primarily attributable to channel mix, growth in
cases sold, and an increase in selling price per case as a result
of inflation. The overall rate of product cost inflation continued
to decline through the fourth quarter of fiscal 2023 and was
approximately 4.6%.
Gross profit for the fourth quarter of fiscal 2023 grew 12.0% to
$1.7 billion compared to the prior year period. The gross profit
increase was primarily driven by a favorable shift in the mix of
cases sold and growth in the independent channel.
Operating expenses rose 5.2% to $1.4 billion in the fourth
quarter of fiscal 2023 compared to the prior year period. The
increase in operating expenses was primarily driven by increases in
personnel expenses, primarily related to wages, commissions, and
benefits, and repairs and maintenance expense. Included in the
fourth-quarter fiscal 2023 operating expenses is a $7.6 million
loss on the sale of a warehouse facility.
Net income for the fourth quarter of fiscal 2023 increased $74.1
million year-over-year to $150.1 million. The increase was
primarily a result of the $109.0 million increase in operating
profit, partially offset by increases in income tax expense,
interest expense, and other, net. The effective tax rate in the
fourth quarter of fiscal 2023 was approximately 27.2% compared to
34.6% in the fourth quarter of fiscal 2022. The effective tax rate
for the fourth quarter of fiscal 2023 differed from the prior year
period due to a decrease in non-deductible expenses and state
income tax expense as a percentage of book income.
For the quarter, Adjusted EBITDA rose 7.9% to $385.2 million
compared to the prior year period.
Diluted EPS increased $0.47 to $0.96 per share in the fourth
quarter of fiscal 2023 compared to the prior year period. Adjusted
Diluted EPS increased 6.5% to $1.14 per share in the fourth quarter
of fiscal 2023 compared to the prior year period.
Full-Year Fiscal 2023 Financial
Summary
Total case volume increased 5.8% in fiscal 2023 compared to the
prior year period, including 7.3% independent case growth. Total
organic case volume increased 1.6% in fiscal 2023 compared to the
prior year period. Total organic case volume benefited from a 6.2%
increase in organic independent cases, growth in Performance Brands
cases, and broad-based growth across Vistar’s channels, partially
offset by declines in our Foodservice Chain business.
Net sales for fiscal 2023 grew 12.5% to $57.3 billion compared
to the prior year period. The increase in net sales was primarily
attributable to the acquisition of Core-Mark Holding Company, Inc.
("Core-Mark") in the first quarter of fiscal 2022 and an increase
in selling price per case due to inflation and channel mix. Overall
product cost inflation for the Company was approximately 8.6%.
Gross profit for fiscal 2023 grew 19.0% to $6.3 billion compared
to the prior year period. The gross profit increase was primarily
driven by the acquisition of Core-Mark, a favorable shift in the
mix of cases sold, including growth in the independent channel, and
procurement related gains.
Operating expenses rose 11.4% to $5.5 billion in fiscal 2023
compared to the prior year period. The increase in operating
expenses was primarily due to the acquisition of Core-Mark and
increases in personnel expenses, fuel expense, and repairs and
maintenance expense. Depreciation and amortization increased $33.9
million primarily as a result of prior year acquisitions.
Net income for fiscal 2023 increased $284.7 million
year-over-year to $397.2 million. The increase was primarily a
result of the $438.4 million increase in operating profit,
partially offset by a $92.2 million increase in income tax expense
and a $35.1 million increase in interest expense. The effective tax
rate in fiscal 2023 was approximately 27.0% compared to 32.7% in
fiscal 2022. The effective tax rate for fiscal 2023 differed from
the prior year period primarily due to a decrease in non-deductible
expenses and state income tax expense as a percentage of book
income.
For fiscal 2023, Adjusted EBITDA rose 33.7% to $1.4 billion
compared to the prior year period.
Diluted EPS increased $1.80 to $2.54 per share in fiscal 2023
compared to the prior year period. Adjusted Diluted EPS increased
49.2% to $3.88 per share in fiscal 2023 compared to the prior year
period.
Cash Flow and Capital
Spending
In fiscal 2023, PFG provided $832.1 million in cash flow from
operating activities compared to $276.5 million in cash flow from
operating activities in the prior year period. The increase in cash
flow provided by operating activities in fiscal 2023 was largely
driven by higher operating income and less cash used to fund
working capital compared to the prior year period.
In fiscal 2023, PFG invested $269.7 million in capital
expenditures, an increase of $54.2 million versus the prior year
period. In fiscal 2023, PFG delivered free cash flow of $562.4
million compared to free cash flow of $61.0 million in the prior
year.1
Share Repurchase Program
On November 16, 2022, the Board of Directors authorized a new
share repurchase program for up to $300 million of the Company’s
outstanding common stock. During the fourth quarter of fiscal 2023,
the Company repurchased 0.2 million shares of common stock for a
total of $11.2 million or an average cost of $56.06 per share. As
of July 1, 2023, approximately $288.8 million remained available
for additional share repurchases.
Fourth-Quarter Fiscal 2023 Segment Results
In the first quarter of fiscal 2023, the Company changed its
measure of segment profit to Adjusted EBITDA as this is the metric
reported to the Company’s management for purposes of reviewing
operating results and making decisions about allocating resources.
Adjusted EBITDA is defined as net income before interest expense,
interest income, income taxes, and depreciation and amortization,
and excludes certain items that the Company does not consider part
of its segments’ core operating results, including stock-based
compensation expense, changes in the LIFO reserve, acquisition,
integration and reorganization expenses, and gains and losses
related to fuel derivatives.
Foodservice
Fourth-quarter fiscal 2023 net sales for Foodservice decreased
1.1% to $7.3 billion compared to the prior year period. This
decrease in net sales was driven by a decrease in selling price per
case as a result of deflation compared to the prior year period,
which was driven primarily by price decreases for items such as
poultry, cheese, and eggs, partially offset by an increase in case
growth. Securing new and expanding business with independent
customers resulted in independent case growth of approximately 7.6%
for the fourth quarter of fiscal 2023 compared to the prior year
period. For the fourth quarter of fiscal 2023, independent sales as
a percentage of total segment sales were 40.8%.
Fourth-quarter fiscal 2023 Adjusted EBITDA for Foodservice
increased 1.7% to $273.3 million compared to the prior year period.
Gross profit contributing to Adjusted EBITDA increased 3.7% in the
fourth quarter of fiscal 2023 compared to the prior year period
driven by a favorable shift in the mix of cases sold to independent
customers, including more Performance Brands products sold to our
independent customers. The increase in gross profit was partially
offset by expected decreases in procurement gains. Operating
expenses impacting Foodservice’s Adjusted EBITDA increased 4.6% for
the fourth quarter of fiscal 2023 compared to the prior year period
primarily as a result of an increase in personnel expenses,
partially offset by a decrease in fuel expense.
Vistar
For the fourth quarter of fiscal 2023, net sales for Vistar
increased 18.3% to $1.2 billion compared to the prior year period.
This increase was driven primarily by an increase in selling price
per case as a result of inflation and channel mix, as well as case
volume growth.
Fourth-quarter fiscal 2023 Adjusted EBITDA for Vistar increased
31.5% to $85.6 million versus the prior year period. The increase
was the result of a 15.8% increase in gross profit for the fourth
quarter of fiscal 2023 compared to the prior year period, partially
offset by a 6.7% increase in operating expenses. The increase in
gross profit was driven by a favorable shift in the mix of cases
sold, growth in cases sold, and procurement related gains.
Operating expenses impacting Vistar’s Adjusted EBITDA increased
primarily as a result of the increased case volume and the
resulting impact on variable operational and selling expenses,
including a $7.7 million increase in personnel expenses.
Convenience
Fourth-quarter fiscal 2023 net sales for Convenience increased
2.3% to $6.3 billion compared to the prior year period. Net sales
related to cigarettes for the fourth quarter of fiscal 2023 was
$3.8 billion, including $1.0 billion related to excise taxes,
compared to net sales of cigarettes of $3.8 billion, including $1.1
billion of excise taxes, for the prior year period. The increase in
net sales was primarily attributable to an increase in selling
price per case as a result of inflation.
Fourth-quarter fiscal 2023 Adjusted EBITDA for Convenience
decreased 7.6% to $80.7 million compared to the prior year period.
Gross profit contributing to Convenience’s Adjusted EBITDA
increased 1.8% in the fourth quarter of fiscal 2023 compared to the
prior year period driven by a favorable shift in mix of products
sold. Operating expenses impacting Convenience’s Adjusted EBITDA
increased 4.0% in the fourth quarter of fiscal 2023 compared to the
prior year, primarily as a result of an increase in personnel
expenses.
Fiscal 2024 & Long-Term
Outlook
For the fiscal first quarter of 2024, PFG expects net sales to
be in a range of $14.7 billion to $15.0 billion and Adjusted EBITDA
to be in a range of $360 million to $380 million.
For the full fiscal year 2024, PFG expects net sales to be in a
range of $59 billion to $60 billion. For the full fiscal year 2024,
PFG expects Adjusted EBITDA to be in a range of $1.45 billion to
$1.5 billion.
PFG reiterates its previously announced 3-year net sales and
Adjusted EBITDA targets. The Company continues to expect to achieve
annual net sales of $62 to $64 billion and Adjusted EBITDA between
$1.5 and $1.7 billion in fiscal 2025.
PFG’s Adjusted EBITDA outlook excludes the impact of certain
income and expense items that management believes are not part of
underlying operations. These items may include, but are not limited
to, loss on early extinguishment of debt, restructuring charges,
certain tax items, and charges associated with non-recurring
professional and legal fees associated with acquisitions. PFG’s
management cannot estimate on a forward-looking basis the impact of
these income and expense items on its reported net income, which
could be significant, are difficult to predict, and may be highly
variable. As a result, PFG does not provide a reconciliation to the
closest corresponding GAAP financial measure for its Adjusted
EBITDA outlook. Please see the “Forward-Looking Statements” section
of this release for a discussion of certain risks to PFG’s
outlook.
Conference Call
As previously announced, a conference call with the investment
community and news media will be webcast today, August 16, 2023, at
9:00 a.m. Eastern Time. Access to the webcast is available at
www.pfgc.com.
About Performance Food Group Company
Performance Food Group is an industry leader and one of the
largest food and foodservice distribution companies in North
America with more than 150 locations. Founded and headquartered in
Richmond, Virginia, PFG and our family of companies market and
deliver quality food and related products to over 300,000 customer
locations including independent and chain restaurants; businesses,
schools and healthcare facilities; vending and office coffee
service distributors; and big box retailers, theaters and
convenience stores. PFG’s success as a Fortune 100 company is
achieved through our more than 35,000 dedicated associates
committed to building strong relationships with the valued
customers, suppliers and communities we serve. To learn more about
PFG, visit pfgc.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements include, but are not limited to,
statements related to our expectations regarding the performance of
our business, our financial results, our liquidity and capital
resources, and other non-historical statements. You can identify
these forward-looking statements by the use of words such as
“outlook,” “believes,” “expects,” “potential,” “continues,” “may,”
“will,” “should,” “could,” “seeks,” “projects,” “predicts,”
“intends,” “plans,” “estimates,” “anticipates” or the negative
version of these words or other comparable words.
Such forward-looking statements are subject to various risks and
uncertainties. The following factors, in addition to those
discussed under the section entitled Item 1A. Risk Factors in PFG’s
Annual Report on Form 10-K for the fiscal year ended July 2, 2022
filed with the Securities and Exchange Commission (the “SEC”) on
August 19, 2022, as such factors may be updated from time to time
in our periodic filings with the SEC, which are accessible on the
SEC’s website at www.sec.gov, could cause actual future results to
differ materially from those expressed in any forward-looking
statements:
- economic factors, including inflation or other adverse changes
such as a downturn in economic conditions or a public health
crisis, negatively affecting consumer confidence and discretionary
spending;
- our reliance on third-party suppliers;
- labor relations and cost risks and availability of qualified
labor;
- costs and risks associated with a potential cybersecurity
incident or other technology disruption;
- our reliance on technology and risks associated with disruption
or delay in implementation of new technology;
- competition in our industry is intense, and we may not be able
to compete successfully;
- we operate in a low margin industry, which could increase the
volatility of our results of operations;
- we may not realize anticipated benefits from our operating cost
reduction and productivity improvement efforts;
- our profitability is directly affected by cost inflation and
deflation and other factors;
- we do not have long-term contracts with certain customers;
- group purchasing organizations may become more active in our
industry and increase their efforts to add our customers as members
of these organizations;
- changes in eating habits of consumers;
- extreme weather conditions, including hurricane, earthquake and
natural disaster damage;
- volatility of fuel and other transportation costs;
- our inability to adjust cost structure where one or more of our
competitors successfully implement lower costs;
- our inability to increase our sales in the highest margin
portion of our business;
- changes in pricing practices of our suppliers;
- our growth strategy may not achieve the anticipated
results;
- risks relating to acquisitions, including the risk that we are
not able to realize benefits of acquisitions or successfully
integrate the businesses we acquire;
- environmental, health, and safety costs, including compliance
with current and future environmental laws and regulations relating
to carbon emissions and climate change and related legal or market
measures;
- our inability to comply with requirements imposed by applicable
law or government regulations, including increased regulation of
electronic cigarette and other alternative nicotine products;
- a portion of our sales volume is dependent upon the
distribution of cigarettes and other tobacco products, sales of
which are generally declining;
- the potential impact of product recalls and product liability
claims relating to the products we distribute and other
litigation;
- adverse judgments or settlements or unexpected outcomes in
legal proceedings;
- negative media exposure and other events that damage our
reputation;
- decrease in earnings from amortization charges associated with
acquisitions;
- impact of uncollectibility of accounts receivable;
- increase in excise taxes or reduction in credit terms by taxing
jurisdictions;
- the cost and adequacy of insurance coverage and increases in
the number or severity of insurance and claims expenses;
- risks relating to our substantial outstanding indebtedness;
and
- our ability to raise additional capital on commercially
reasonable terms or at all.
Accordingly, there are or will be important factors that could
cause actual outcomes or results to differ materially from those
indicated in these statements. These factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included in this release and
in our filings with the SEC. Any forward-looking statement,
including any contained herein, speaks only as of the time of this
release or as of the date they were made and we do not undertake to
update or revise them as more information becomes available or to
disclose any facts, events, or circumstances after the date of this
release or our statement, as applicable, that may affect the
accuracy of any forward-looking statement, except as required by
law.
PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per share
data)
Three Months Ended July 1,
2023
Three Months Ended July 2,
2022
Fiscal year ended July 1,
2023
Fiscal year ended July 2,
2022
Net sales
$
14,865.2
$
14,590.0
$
57,254.7
$
50,894.1
Cost of goods sold
13,196.9
13,100.3
50,999.8
45,637.7
Gross profit
1,668.3
1,489.7
6,254.9
5,256.4
Operating expenses
1,406.5
1,336.9
5,489.1
4,929.0
Operating profit
261.8
152.8
765.8
327.4
Other expense, net:
Interest expense, net
56.0
47.8
218.0
182.9
Other, net
(0.3
)
(11.2
)
3.8
(22.6
)
Other expense, net
55.7
36.6
221.8
160.3
Income before taxes
206.1
116.2
544.0
167.1
Income tax expense
56.0
40.2
146.8
54.6
Net income
$
150.1
$
76.0
$
397.2
$
112.5
Weighted-average common shares
outstanding:
Basic
154.5
153.4
154.2
149.8
Diluted
156.6
155.0
156.1
151.3
Earnings per common share:
Basic
$
0.97
$
0.50
$
2.58
$
0.75
Diluted
$
0.96
$
0.49
$
2.54
$
0.74
PERFORMANCE FOOD GROUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in millions)
As of July 1, 2023
As of July 2, 2022
ASSETS
Current assets:
Cash
$
12.7
$
11.6
Accounts receivable, less allowances of
$56.3 and $54.2
2,399.3
2,307.4
Inventories, net
3,390.0
3,428.6
Income taxes receivable
41.7
34.0
Prepaid expenses and other current
assets
227.8
240.4
Total current assets
6,071.5
6,022.0
Goodwill
2,301.0
2,279.2
Other intangible assets, net
1,028.4
1,195.6
Property, plant and equipment, net
2,264.0
2,134.5
Operating lease right-of-use assets
703.6
623.4
Other assets
130.5
123.3
Total assets
$
12,499.0
$
12,378.0
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable and outstanding
checks in excess of deposits
$
2,453.5
$
2,559.5
Accrued expenses and other current
liabilities
891.5
882.6
Finance lease obligations-current
installments
102.6
79.9
Operating lease obligations-current
installments
105.5
111.0
Total current liabilities
3,553.1
3,633.0
Long-term debt
3,460.1
3,908.8
Deferred income tax liability, net
446.2
424.3
Finance lease obligations, excluding
current installments
447.3
366.7
Operating lease obligations, excluding
current installments
628.9
530.8
Other long-term liabilities
217.9
214.9
Total liabilities
8,753.5
9,078.5
Total shareholders’ equity
3,745.5
3,299.5
Total liabilities and shareholders’
equity
$
12,499.0
$
12,378.0
PERFORMANCE FOOD GROUP COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
($ in
millions)
Fiscal year ended July 1,
2023
Fiscal year ended July 2,
2022
Cash flows from operating activities:
Net income
$
397.2
$
112.5
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and intangible asset
amortization
496.7
462.8
Provision for losses on accounts
receivables
6.0
9.0
Change in LIFO Reserve
39.2
122.9
Other non-cash activities
101.7
57.4
Changes in operating assets and
liabilities, net:
Accounts receivable
(95.6
)
(195.1
)
Inventories
56.9
(582.4
)
Income taxes receivable
(11.0
)
46.7
Prepaid expenses and other assets
(3.2
)
(0.4
)
Trade accounts payable and outstanding
checks in excess of deposits
(164.6
)
182.5
Accrued expenses and other liabilities
8.8
60.6
Net cash provided by operating
activities
832.1
276.5
Cash flows from investing activities:
Purchases of property, plant and
equipment
(269.7
)
(215.5
)
Net cash paid for acquisitions
(63.8
)
(1,650.5
)
Proceeds from sale of property, plant and
equipment and other
38.9
4.5
Net cash used in investing activities
(294.6
)
(1,861.5
)
Cash flows from financing activities:
Net (payments) borrowings under ABL
Facility
(454.4
)
1,019.7
Borrowing of Notes due 2029
—
1,000.0
Repayment of Notes due 2024
—
(350.0
)
Cash paid for debt issuance,
extinguishment and modifications
—
(25.0
)
Payments under finance lease
obligations
(88.5
)
(72.1
)
Cash paid for acquisitions
—
(6.9
)
Proceeds from exercise of stock options
and employee stock purchase plan
30.8
27.3
Cash paid for shares withheld to cover
taxes
(12.6
)
(11.4
)
Repurchases of common stock
(11.2
)
—
Other financing activities
(0.3
)
(0.1
)
Net cash (used in) provided by financing
activities
(536.2
)
1,581.5
Net increase (decrease) in cash and
restricted cash
1.3
(3.5
)
Cash and restricted cash, beginning of
period
18.7
22.2
Cash and restricted cash, end of
period
$
20.0
$
18.7
The following table provides a reconciliation of cash and
restricted cash reported within the condensed consolidated balance
sheets that sum to the total of the same such amounts shown in the
condensed consolidated statements of cash flows:
(In millions)
As of July 1, 2023
As of July 2, 2022
Cash
$
12.7
$
11.6
Restricted cash(1)
7.3
7.1
Total cash and restricted cash
$
20.0
$
18.7
(1)
Restricted cash is reported within Other
assets and represents the amounts required by insurers to
collateralize a part of the deductibles for the Company’s workers’
compensation and liability claims.
Supplemental disclosures of cash flow information:
($ in
millions)
Fiscal year ended July 1,
2023
Fiscal year ended July 2,
2022
Cash paid during the year for:
Interest
$
218.5
$
152.4
Income tax payments net of refunds
134.1
8.7
Statement Regarding Non-GAAP Financial Measures
This earnings release and the accompanying financial statement
tables include several financial measures that are not calculated
in accordance with GAAP, including Adjusted EBITDA, Adjusted
Diluted EPS, and Free Cash Flow. Such measures are not recognized
terms under GAAP, should not be considered in isolation or as a
substitute for measures prepared in accordance with GAAP, and are
not indicative of net income as determined under GAAP. Adjusted
EBITDA, Adjusted Diluted EPS, Free Cash Flow, and other non-GAAP
financial measures have limitations that should be considered
before using these measures to evaluate PFG’s liquidity or
financial performance. Adjusted EBITDA, Adjusted Diluted EPS, and
Free Cash Flow, as presented, may not be comparable to similarly
titled measures of other companies because of varying methods of
calculation.
PFG uses Adjusted EBITDA to evaluate the performance of its
business on a consistent basis over time and for business planning
purposes. In addition, targets based on Adjusted EBITDA are among
the measures we use to evaluate our management’s performance for
purposes of determining their compensation under our incentive
plans. PFG believes that the presentation of Adjusted EBITDA
enhances an investor’s understanding of PFG’s performance. PFG
believes this measure is a useful metric to assess PFG’s operating
performance from period to period by excluding certain items that
PFG believes are not representative of PFG’s core business.
Management measures operating performance based on our Adjusted
EBITDA, defined as net income before interest expense, interest
income, income and franchise taxes, and depreciation and
amortization, further adjusted to exclude certain items 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 permitted in calculating covenant
compliance under PFG’s $4.0 billion secured credit facility (the
"ABL Facility") and indentures governing its outstanding notes
(other than certain pro forma adjustments permitted under our ABL
Facility and indentures relating to the Adjusted EBITDA
contribution of acquired entities or businesses prior to the
acquisition date). Under our ABL Facility and indentures, PFG’s
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).
Management also uses Adjusted Diluted EPS, which is calculated
by adjusting the most directly comparable GAAP financial measure by
excluding the same items excluded in PFG’s calculation of Adjusted
EBITDA, as well as amortization of intangible assets, to the extent
that each such item was included in the applicable GAAP financial
measure. For business combinations, the Company generally allocates
a portion of the purchase price to intangible assets and such
intangible assets contribute to revenue generation. The amount of
the allocation is based on estimates and assumptions made by
management and is subject to amortization over the useful lives of
the intangible assets. The amount of the purchase price from an
acquisition allocated to intangible assets and the term of its
related amortization can vary significantly and are unique to each
acquisition, and thus the Company does not believe it is reflective
of ongoing operations. Intangible asset amortization excluded from
Adjusted Diluted EPS represents the entire amount recorded within
the Company’s GAAP financial statements, and the revenue generated
by the associated intangible assets has not been excluded from
Adjusted Diluted EPS. Intangible asset amortization is excluded
from Adjusted Diluted EPS because the amortization, unlike the
related revenue, is not affected by operations of any particular
period unless an intangible asset becomes impaired, or the
estimated useful life of an intangible asset is revised.
Management also uses Free Cash Flow, which is defined as net
cash provided by operating activities less capital expenditures
(purchases of property, plant, and equipment). PFG also believes
that the presentation of Free Cash Flow enhances an investor’s
understanding of PFG’s ability to make strategic investments and
manage debt levels.
PFG believes that the presentation of Adjusted EBITDA, Adjusted
Diluted EPS, and Free Cash Flow is useful to investors because
these metrics provide insight into underlying business trends and
year-over-year results and are frequently used by securities
analysts, investors, and other interested parties in their
evaluation of the operating performance of companies in PFG’s
industry.
The following tables include a reconciliation of non-GAAP
financial measures to the applicable most comparable GAAP financial
measures.
PERFORMANCE FOOD GROUP COMPANY
Non-GAAP Reconciliation
(Unaudited)
Three Months Ended
($ in millions, except share and per
share data)
July 1, 2023
July 2, 2022
Change
%
Net income (GAAP)
$
150.1
$
76.0
$
74.1
97.5
Interest expense, net
56.0
47.8
8.2
17.2
Income tax expense
56.0
40.2
15.8
39.3
Depreciation
83.5
76.5
7.0
9.2
Amortization of intangible assets
44.0
47.0
(3.0
)
(6.4
)
Change in LIFO reserve (A)
(29.1
)
67.6
(96.7
)
(143.0
)
Stock-based compensation expense
10.2
9.1
1.1
12.1
Loss (gain) on fuel derivatives
0.5
(10.3
)
10.8
104.9
Acquisition, integration &
reorganization expenses (B)
3.4
2.9
0.5
17.2
Other adjustments (C)
10.6
0.3
10.3
3,433.3
Adjusted EBITDA (Non-GAAP)
$
385.2
$
357.1
$
28.1
7.9
Diluted earnings per share
(GAAP)
$
0.96
$
0.49
$
0.47
95.9
Impact of amortization of intangible
assets
0.28
0.30
(0.02
)
(6.7
)
Impact of change in LIFO reserve
(0.19
)
0.44
(0.63
)
(143.2
)
Impact of stock-based compensation
expense
0.07
0.06
0.01
16.7
Impact of loss (gain) on fuel
derivatives
—
(0.07
)
0.07
100.0
Impact of acquisition, integration &
reorganization charges
0.02
0.02
—
—
Impact of other adjustment items
0.07
0.01
0.06
600.0
Tax impact of above adjustments
(0.07
)
(0.18
)
0.11
61.1
Adjusted Diluted Earnings per Share
(Non-GAAP)
$
1.14
$
1.07
$
0.07
6.5
A.
Includes (decreases) increases in the LIFO inventory reserve of
($4.1) million for Foodservice and ($25.0) million for Convenience
for the fourth quarter of fiscal 2023 compared to $14.8 million and
$52.8 million for Foodservice and Convenience, respectively, for
the fourth quarter of fiscal 2022.
B.
Includes professional fees and other costs related to completed
and abandoned acquisitions, costs of integrating certain of our
facilities, and facility closing costs.
C.
Includes gains and losses on disposal of fixed assets, including
a $7.6 million loss on the sale of a Foodservice warehouse facility
for the three months ended July 1, 2023, as well as asset
impairments, amounts related to favorable and unfavorable leases,
foreign currency transaction gains and losses, franchise tax
expense, and other adjustments permitted by our ABL Facility.
PERFORMANCE FOOD GROUP COMPANY
Non-GAAP Reconciliation
(Unaudited)
Fiscal year ended
($ in millions,
except share and per share data)
July 1, 2023
July 2, 2022
Change
%
Net income (GAAP)
$
397.2
$
112.5
$
284.7
253.1
Interest expense, net
218.0
182.9
35.1
19.2
Income tax expense
146.8
54.6
92.2
168.9
Depreciation
315.7
279.7
36.0
12.9
Amortization of intangible assets
181.0
183.1
(2.1
)
(1.1
)
Change in LIFO reserve (A)
39.2
122.9
(83.7
)
(68.1
)
Stock-based compensation expense
43.3
44.0
(0.7
)
(1.6
)
Loss (gain) on fuel derivatives
5.7
(20.7
)
26.4
127.5
Acquisition, integration &
reorganization expenses (B)
10.6
49.9
(39.3
)
(78.8
)
Other adjustments (C)
5.9
10.9
(5.0
)
(45.9
)
Adjusted EBITDA (Non-GAAP)
$
1,363.4
$
1,019.8
$
343.6
33.7
Diluted earnings per share
(GAAP)
$
2.54
$
0.74
$
1.80
243.2
Impact of amortization of intangible
assets
1.16
1.21
(0.05
)
(4.1
)
Impact of change in LIFO reserve
0.25
0.81
(0.56
)
(69.1
)
Impact of stock-based compensation
0.28
0.29
(0.01
)
(3.4
)
Impact of loss (gain) on fuel
derivatives
0.03
(0.14
)
0.17
121.4
Impact of acquisition, integration &
reorganization charges
0.07
0.33
(0.26
)
(78.8
)
Impact of other adjustment items
0.04
0.08
(0.04
)
(50.0
)
Tax impact of above adjustments
(0.49
)
(0.72
)
0.23
31.9
Adjusted Diluted Earnings per Share
(Non-GAAP)
$
3.88
$
2.60
$
1.28
49.2
A.
Includes (decreases) increases in the LIFO inventory reserve of
($19.2) million for Foodservice and $58.4 million for Convenience
for fiscal 2023 compared $31.9 million for Foodservice and $91.0
million for Convenience for fiscal 2022.
B.
Includes professional fees and other costs related to completed
and abandoned acquisitions, costs of integrating certain of our
facilities, and facility closing costs.
C.
Includes asset impairments, gains and losses on disposal of
fixed assets, amounts related to favorable and unfavorable leases,
foreign currency transaction gains and losses, franchise tax
expense, and other adjustments permitted by our ABL Facility.
(In millions)
Fiscal year ended July 1,
2023
Fiscal year ended July 2,
2022
Net cash provided by operating
activities (GAAP)
$
832.1
$
276.5
Purchases of property, plant and
equipment
(269.7
)
(215.5
)
Free cash flow (Non-GAAP)
$
562.4
$
61.0
PERFORMANCE FOOD GROUP COMPANY
Non-GAAP Reconciliation
(Unaudited)
Fiscal year ended July 1,
2023
($ in
millions)
Q1
Q2
Q3
Q4
Net income (GAAP)
$
95.7
$
71.1
$
80.3
$
150.1
Interest expense, net
50.4
55.7
55.9
56.0
Income tax expense
34.2
25.1
31.5
56.0
Depreciation
76.1
77.4
78.7
83.5
Amortization of intangible assets
43.1
47.8
46.1
44.0
Change in LIFO reserve (A)
26.8
25.0
16.5
(29.1
)
Stock-based compensation expense
11.5
11.4
10.2
10.2
Loss (gain) on fuel derivatives
9.8
(7.3
)
2.7
0.5
Acquisition, integration &
reorganization expenses (B)
3.0
2.8
1.4
3.4
Other adjustments (C)
4.1
(0.2
)
(8.6
)
10.6
Adjusted EBITDA (Non-GAAP)
$
354.7
$
308.8
$
314.7
$
385.2
Diluted earnings per share
(GAAP)
$
0.62
$
0.46
$
0.51
$
0.96
Impact of amortization of intangible
assets
0.28
0.30
0.29
0.28
Impact of change in LIFO reserve
0.17
0.16
0.11
(0.19
)
Impact of stock-based compensation
0.07
0.07
0.06
0.07
Impact of loss (gain) on fuel
derivatives
0.06
(0.05
)
0.02
—
Impact of acquisition, integration &
reorganization charges
0.02
0.02
0.01
0.02
Impact of other adjustment items
0.03
—
(0.05
)
0.07
Tax impact of above adjustments
(0.17
)
(0.13
)
(0.12
)
(0.07
)
Adjusted Diluted Earnings per Share
(Non-GAAP)
$
1.08
$
0.83
$
0.83
$
1.14
A.
Includes (decreases) increases in the LIFO inventory reserve of
($4.0) million, $2.0 million, ($13.1) million, and ($4.1) million
for Foodservice and $30.8 million, $23.0 million, $29.6 million,
and ($25.0) million for Convenience for Q1, Q2, Q3, and Q4 of
fiscal 2023, respectively.
B.
Includes professional fees and other costs related to completed
and abandoned acquisitions, costs of integrating certain of our
facilities, and facility closing costs.
C.
Includes gains and losses on disposal of fixed assets, including
a $10.5 million gain on the sale of a Vistar warehouse facility for
Q3 of fiscal 2023 and a $7.6 million loss on the sale of a
Foodservice warehouse facility for Q4 of fiscal 2023, as well as
asset impairments, amounts related to favorable and unfavorable
leases, foreign currency transaction gains and losses, franchise
tax expense, and other adjustments permitted by our ABL
Facility.
PERFORMANCE FOOD GROUP COMPANY
Non-GAAP Reconciliation
(Unaudited)
Fiscal year ended July 2,
2022
($ in
millions)
Q1
Q2
Q3
Q4
Net income (GAAP)
$
4.7
$
8.4
$
23.4
$
76.0
Interest expense, net
44.0
45.2
45.9
47.8
Income tax expense
0.8
3.0
10.6
40.2
Depreciation
57.0
70.4
75.8
76.5
Amortization of intangible assets
41.7
46.1
48.3
47.0
Change in LIFO reserve (A)
(11.3
)
45.5
21.1
67.6
Stock-based compensation expense
10.0
14.3
10.6
9.1
(Gain) loss on fuel derivatives
(1.3
)
1.4
(10.5
)
(10.3
)
Acquisition, integration &
reorganization expenses (B)
32.8
4.5
9.7
2.9
Other adjustments (C)
5.3
2.3
3.0
0.3
Adjusted EBITDA (Non-GAAP)
$
183.7
$
241.1
$
237.9
$
357.1
Diluted earnings per share
(GAAP)
$
0.03
$
0.05
$
0.15
$
0.49
Impact of amortization of intangible
assets
0.30
0.30
0.31
0.30
Impact of change in LIFO reserve
(0.08
)
0.29
0.14
0.44
Impact of stock-based compensation
0.07
0.09
0.07
0.06
Impact of (gain) loss on fuel
derivatives
(0.01
)
0.01
(0.07
)
(0.07
)
Impact of acquisition, integration &
reorganization charges
0.23
0.03
0.06
0.02
Impact of other adjustment items
0.04
0.02
0.02
0.01
Tax impact of above adjustments
(0.15
)
(0.22
)
(0.17
)
(0.18
)
Adjusted Diluted Earnings per Share
(Non-GAAP)
$
0.43
$
0.57
$
0.51
$
1.07
A.
Includes increases (decreases) in the LIFO inventory reserve of
$5.7 million, $8.2 million, $3.2 million, and $14.8 million for
Foodservice and ($17.0) million, $37.3 million, $17.9 million, and
$52.8 million for Convenience for Q1, Q2, Q3, and Q4 of fiscal
2022, respectively.
B.
Includes professional fees and other costs related to completed
and abandoned acquisitions, costs of integrating certain of our
facilities, and facility closing costs.
C.
Includes asset impairments, gains and losses on disposal of
fixed assets, amounts related to favorable and unfavorable leases,
foreign currency transaction gains and losses, franchise tax
expense, and other adjustments permitted by our ABL Facility.
Segment Results
The Company 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 Adjusted EBITDA.
Adjusted EBITDA is defined as net income before interest expense,
interest income, income taxes, and depreciation and amortization,
and excludes certain items that the Company does not consider part
of its segments' core operating results, including stock-based
compensation expense, changes in the LIFO reserve, acquisition,
integration and reorganization expenses, and gains and losses
related to fuel derivatives.
Corporate & All Other is comprised of 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.
The following tables set forth net sales and Adjusted EBITDA by
segment for the periods indicated (dollars in millions):
Net Sales
Three Months Ended
July 1, 2023
July 2, 2022
Change
%
Foodservice
$
7,317.8
$
7,397.9
$
(80.1
)
(1.1
)
Vistar
1,225.5
1,035.8
189.7
18.3
Convenience
6,287.3
6,147.5
139.8
2.3
Corporate & All Other
210.0
149.8
60.2
40.2
Intersegment Eliminations
(175.4
)
(141.0
)
(34.4
)
(24.4
)
Total net sales
$
14,865.2
$
14,590.0
$
275.2
1.9
Fiscal year ended
July 1, 2023
July 2, 2022
Change
%
Foodservice
$
28,490.6
$
26,579.2
$
1,911.4
7.2
Vistar
4,549.3
3,681.8
867.5
23.6
Convenience
24,119.6
20,603.3
3,516.3
17.1
Corporate & All Other
700.4
526.5
173.9
33.0
Intersegment Eliminations
(605.2
)
(496.7
)
(108.5
)
(21.8
)
Total net sales
$
57,254.7
$
50,894.1
$
6,360.6
12.5
Adjusted EBITDA
Three Months Ended
July 1, 2023
July 2, 2022
Change
%
Foodservice
$
273.3
$
268.8
$
4.5
1.7
Vistar
85.6
65.1
20.5
31.5
Convenience
80.7
87.3
(6.6
)
(7.6
)
Corporate & All Other
(54.4
)
(64.1
)
9.7
15.1
Total Adjusted EBITDA
$
385.2
$
357.1
$
28.1
7.9
Fiscal year ended
July 1, 2023
July 2, 2022
Change
%
Foodservice
$
943.6
$
786.5
$
157.1
20.0
Vistar
325.3
193.0
132.3
68.5
Convenience
328.8
257.1
71.7
27.9
Corporate & All Other
(234.3
)
(216.8
)
(17.5
)
(8.1
)
Total Adjusted EBITDA
$
1,363.4
$
1,019.8
$
343.6
33.7
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230816846538/en/
Investors: William S. Marshall VP, Investor
Relations (804) 287-8108 Bill.Marshall@pfgc.com
Media: Scott Golden Director, Communications
& Engagement (804) 484-7873 Scott.Golden@pfgc.com
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