Strong Net Sales and Organic Independent
Restaurant Case Growth, Solid Cash Flow Generation;
Raises Bottom End of Fiscal 2023 Adjusted
EBITDA Outlook
Second-Quarter Fiscal
2023 Highlights
- Total case volume grew 3%
- Net sales increased 8% to $13.9 billion
- Gross profit improved 17% to $1.5 billion
- Net income increased to $71.1 million
- Adjusted EBITDA increased 28% to $308.8 million1
- Diluted Earnings Per Share (“EPS”) increased to $0.46
- Adjusted Diluted EPS increased 46% to $0.831
First-Half Fiscal 2023
Highlights
- Total case volume grew 9%
- Net sales increased 23% to $28.6 billion
- Gross profit improved 27% to $3.1 billion
- Net income increased to $166.8 million
- Adjusted EBITDA increased 56% to $663.5 million1
- Diluted EPS increased to $1.07
- Adjusted Diluted EPS increased 89% to $1.911
Performance Food Group Company (“PFG” or the “Company”) (NYSE:
PFGC) today announced its second quarter and first half fiscal 2023
business results.
“Our momentum continued into the fiscal second quarter, with
another period of strong sales and profit results for our company,”
said George Holm, PFG’s Chairman & Chief Executive Officer.
“Our Foodservice segment produced organic independent restaurant
case growth, leading to another quarter of market share gains. Our
execution across all business segments, along with positive mix
shift, led to margin expansion and strong cash flow generation. We
are increasing the bottom end of our full year Adjusted EBITDA
target as we look to complete the year with encouraging profit
results. I am proud of how our organization has risen to the
challenges in the external operating environment and believe we are
well positioned to see continued success in the years ahead.”
1
This earnings release includes several
metrics, including Adjusted EBITDA, Adjusted Diluted Earnings per
Share, and Free Cash Flow that are not calculated in accordance
with Generally Accepted Accounting Principles in the U.S. (“GAAP”).
Please see “Statement Regarding Non-GAAP Financial Measures” at the
end of this release for the definitions of such non-GAAP financial
measures and reconciliations of such non-GAAP financial measures to
their respective most comparable financial measures calculated in
accordance with GAAP.
Second-Quarter Fiscal 2023 Financial
Summary
Total case volume increased 3.0% for the second quarter of
fiscal 2023 compared to the prior year period, including 6.6%
independent case growth. Total organic case volume was flat in the
second quarter of fiscal 2023 compared to the prior year period.
Total organic case volume benefited from a 4.3% increase in organic
independent cases, growth in Performance Brands cases, and
broad-based growth across Vistar's channels, offset by declines in
our Foodservice Chain business.
Net sales for the second quarter of fiscal 2023 grew 8.3% to
$13.9 billion compared to 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 and channel mix. Overall
product cost inflation continued to decline through the second
quarter of fiscal 2023 and was approximately 10.3%.
Gross profit for the second quarter of fiscal 2023 grew 17.3% to
$1.5 billion compared to the prior year period. The gross profit
increase was primarily attributable to an increase in gross profit
per case driven by a favorable shift in the mix of cases sold and
growth in the independent channel.
Operating expenses rose 11.0% to $1.4 billion in the second
quarter of fiscal 2023 compared to the prior year period. The
increase in operating expenses were primarily due to increases in
personnel expenses, primarily related to salaries and wages,
commissions, annual bonus, and benefits, and fuel expense due to
higher fuel prices.
Net income for the second quarter of fiscal 2023 increased $62.7
million year-over-year to $71.1 million. The increase was primarily
a result of the $86.2 million increase in operating profit,
partially offset by a $22.1 million increase in income tax expense.
The effective tax rate in the second quarter of fiscal 2023 was
approximately 26.1% compared to 26.5% in the second quarter of
fiscal 2022. The effective tax rate for the second quarter of
fiscal 2023 differed from the prior year period due to the relative
size of stock-based compensation and other discrete permanent items
as a percentage of book income.
For the quarter, Adjusted EBITDA rose 28.1% to $308.8 million
compared to the prior year period.
Diluted EPS increased $0.41 to $0.46 per share in the second
quarter of fiscal 2023 compared to the prior year period. Adjusted
Diluted EPS increased 45.6% to $0.83 per share in the second
quarter of fiscal 2023 compared to the prior year period.
First-Half Fiscal 2023 Financial
Summary
Total case volume increased 9.4% for the first half of fiscal
2023 compared to the prior year period, including 6.7% independent
case growth. Total organic case volume was flat in the first half
of fiscal 2023 compared to the prior year period. Total organic
case volume benefited from a 4.4% increase in organic independent
cases, growth in Performance Brands cases, and broad-based growth
across Vistar's channels, offset by declines in our Foodservice
Chain business.
Net sales for the first half of fiscal 2023 grew 23.2% to $28.6
billion compared to the prior year period. The increase in net
sales was primarily attributable to the acquisition of Core-Mark in
the first quarter of fiscal 2022 and an increase in selling price
per case as a result of inflation. Overall product cost inflation
for the Company was approximately 11.3%.
Gross profit for the first half of fiscal 2023 grew 27.0% to
$3.1 billion compared to the prior year period. The gross profit
increase was primarily attributable to an increase in gross profit
per case driven by the acquisition of Core-Mark, procurement
related gains, and growth in the independent channel, partially
offset by an increase in the last-in-first-out ("LIFO")
reserve.
Operating expenses rose 18.3% to $2.7 billion in the first half
of fiscal 2023 compared to the prior year period. The increase in
operating expenses was primarily due to the acquisition of
Core-Mark, which contributed an incremental $192.8 million of
operating expenses in the first six months of fiscal 2023 compared
to the four months of operating expenses in fiscal 2022. Operating
expenses also increased as a result of increases in personnel
expenses and fuel expense due to higher fuel prices, partially
offset by a decrease in professional fees. Depreciation and
amortization increased $29.2 million primarily as a result of prior
year acquisitions.
Net income for the first half of fiscal 2023 increased $153.7
million year-over-year to $166.8 million. The increase was
primarily a result of the $229.2 million increase in operating
profit, partially offset by a $55.5 million increase in income tax
expense and a $16.9 million increase in interest expense. The
effective tax rate in the first half of fiscal 2023 was
approximately 26.2% compared to 22.6% in the first half of fiscal
2022. The effective tax rate for the first half of fiscal 2023
differed from the prior year period due to the relative size of
stock-based compensation and other discrete permanent items as a
percentage of book income.
For the first half of fiscal 2023, Adjusted EBITDA rose 56.2% to
$663.5 million compared to the prior year period.
Diluted EPS increased $0.98 to $1.07 per share in the first half
of fiscal 2023 compared to the prior year period. Adjusted Diluted
EPS increased 89.1% to $1.91 per share in the first half of fiscal
2023 compared to the prior year period.
Cash Flow and Capital
Spending
In the first six months of 2023, PFG provided $424.5 million in
cash flow from operating activities compared to $153.8 million of
cash flow provided by operating activities in the prior year
period. The increase in cash flow provided by operating activities
in the first six months of fiscal 2023 was largely driven by higher
operating income and improvements in working capital compared to
the prior year period.
In the first six months of fiscal 2023, PFG invested $98.1
million in capital expenditures, an increase of $29.6 million
versus the prior year period. In the first six months of fiscal
2023, PFG delivered free cash flow of $326.4 million compared to
free cash flow of $85.3 million in the prior year.1
Second-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
Second-quarter fiscal 2023 net sales for Foodservice increased
11.0% to $6.9 billion compared to the prior year period. This
increase in net sales was driven by an increase in selling price
per case as a result of inflation and a prior year acquisition.
Overall product cost inflation for Foodservice was approximately
9.6% for the second quarter of fiscal 2023. Securing new and
expanding business with independent customers resulted in organic
independent case growth of approximately 4.3% for the second
quarter of fiscal 2023 compared to the prior year period. For the
second quarter of fiscal 2023, independent sales as a percentage of
total segment sales were 38.3%.
Second-quarter fiscal 2023 Adjusted EBITDA for Foodservice
increased 27.9% to $214.2 million compared to the prior year
period. Gross profit contributing to Adjusted EBITDA increased
15.5% in the second 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 as the
rate of inflation declines. Operating expenses impacting
Foodservice's Adjusted EBITDA increased 12.2% for the second
quarter of fiscal 2023 compared to the prior year period as a
result of a prior year acquisition, as well as an increase in
personnel expenses and fuel expense as compared to the prior year
period.
Vistar
For the second quarter of fiscal 2023, net sales for Vistar
increased 23.3% to $1.1 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.
Second-quarter fiscal 2023 Adjusted EBITDA for Vistar increased
85.5% to $92.2 million versus the prior year period. The increase
was the result of a 34.8% increase in gross profit for the second
quarter of fiscal 2023 compared to the prior year period, partially
offset by an 10.5% increase in operating expenses. The increase in
gross profit was driven by a favorable shift in the mix of cases
sold, procurement related gains, and growth in cases sold.
Operating expenses impacting Vistar's Adjusted EBITDA increased
primarily as a result of the increased case volume described above,
and the resulting impact on variable operational and selling
expenses. Operating expenses also increased as a result of
increases in personnel expenses and fuel expense.
Convenience
Second-quarter fiscal 2023 net sales for Convenience increased
2.7% to $5.9 billion compared to the prior year period. Net sales
related to cigarettes for the second quarter of fiscal 2023 was
$3.6 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 case growth in food and
foodservice related products and an increase in selling price per
case as a result of inflation.
Second-quarter fiscal 2023 Adjusted EBITDA for Convenience
decreased 9.4% to $69.3 million compared to the prior year period.
Gross profit contributing to Convenience's Adjusted EBITDA
increased 5.5% in the second quarter of fiscal 2023 compared to the
prior year period driven by a favorable shift in mix of products
sold, partially offset by a decrease in procurement gains as a
result of the timing of price increases and a decline in the rate
of inflation. Operating expenses impacting Convenience's Adjusted
EBITDA increased $27.3 million in the second quarter of fiscal 2023
compared to the prior year, primarily as a result of increased
personnel expenses primarily related to related to salaries and
commissions, and fuel expense.
Fiscal 2023 & Long-Term
Outlook
For the third quarter of fiscal 2023, PFG expects net sales to
be in a range of $13.7 billion to $14.0 billion. For the third
quarter of fiscal 2023, PFG expects Adjusted EBITDA to be in a
range of $270 million to $290 million.
For the full fiscal year 2023, PFG continues to expect net sales
to be in a range of $57 billion to $59 billion. For the full fiscal
year of 2023, PFG now expects Adjusted EBITDA to be in a range of
$1.27 billion to $1.35 billion compared to the prior expectation of
$1.25 billion to $1.35 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, February 8, 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 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 200 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, integration of our acquisition of Core-Mark Holding
Company, Inc. ("Core-Mark") 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 the
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, negatively affecting
consumer confidence and discretionary spending;
- 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 of our
customers;
- group purchasing organizations may become more active in our
industry and increase their efforts to add our customers as members
of these organizations;
- the effects of health epidemics, including the ongoing impact
of the COVID-19 pandemic;
- changes in eating habits of consumers;
- extreme weather conditions, including hurricane, earthquake and
natural disaster damage;
- our reliance on third-party suppliers;
- 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 the effects of global warming;
- 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;
- if products we distribute are alleged to cause injury or
illness or fail to comply with governmental regulations, we may
need to recall our products and may experience product liability
claims;
- product liability claims relating to the products we distribute
and other litigation;
- adverse judgements 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;
- our ability to raise additional capital on commercially
reasonable terms or at all; and
- risks related to the integration of Core-Mark.
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 December
31, 2022
Three Months Ended January 1,
2022
Six Months Ended December 31,
2022
Six Months Ended January 1,
2022
Net sales
$
13,898.9
$
12,838.8
$
28,618.2
$
23,225.1
Cost of goods sold
12,399.3
11,560.0
25,543.5
20,804.0
Gross profit
1,499.6
1,278.8
3,074.7
2,421.1
Operating expenses
1,355.6
1,221.0
2,739.5
2,315.1
Operating profit
144.0
57.8
335.2
106.0
Other expense, net:
Interest expense, net
55.7
45.2
106.1
89.2
Other, net
(7.9
)
1.2
3.0
(0.1
)
Other expense, net
47.8
46.4
109.1
89.1
Income before taxes
96.2
11.4
226.1
16.9
Income tax expense
25.1
3.0
59.3
3.8
Net income
$
71.1
$
8.4
$
166.8
$
13.1
Weighted-average common shares
outstanding:
Basic
154.1
152.9
153.9
146.3
Diluted
156.1
154.3
155.9
147.7
Earnings per common share:
Basic
$
0.46
$
0.05
$
1.08
$
0.09
Diluted
$
0.46
$
0.05
$
1.07
$
0.09
PERFORMANCE FOOD GROUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in millions)
As of December 31,
2022
As of July 2, 2022
ASSETS
Current assets:
Cash
$
6.1
$
11.6
Accounts receivable, less allowances of
$61.1 and $54.2
2,159.5
2,307.4
Inventories, net
3,344.3
3,428.6
Income taxes receivable
82.3
34.0
Prepaid expenses and other current
assets
215.6
240.4
Total current assets
5,807.8
6,022.0
Goodwill
2,304.4
2,279.2
Other intangible assets, net
1,119.7
1,195.6
Property, plant and equipment, net
2,157.3
2,134.5
Operating lease right-of-use assets
666.5
623.4
Other assets
133.9
123.3
Total assets
$
12,189.6
$
12,378.0
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Trade accounts payable and outstanding
checks in excess of deposits
$
2,417.5
$
2,559.5
Accrued expenses and other current
liabilities
786.6
882.6
Finance lease obligations-current
installments
88.1
79.9
Operating lease obligations-current
installments
103.8
111.0
Total current liabilities
3,396.0
3,633.0
Long-term debt
3,679.5
3,908.8
Deferred income tax liability, net
428.2
424.3
Finance lease obligations, excluding
current installments
378.9
366.7
Operating lease obligations, excluding
current installments
587.1
530.8
Other long-term liabilities
223.4
214.9
Total liabilities
8,693.1
9,078.5
Total shareholders’ equity
3,496.5
3,299.5
Total liabilities and shareholders’
equity
$
12,189.6
$
12,378.0
PERFORMANCE FOOD GROUP COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
($ in millions)
Six Months Ended December 31,
2022
Six Months Ended January 1,
2022
Cash flows from operating activities:
Net income
$
166.8
$
13.1
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and intangible asset
amortization
244.4
215.2
Provision for losses on accounts
receivables
7.2
3.1
Change in LIFO Reserve
51.8
34.2
Other non-cash activities
50.6
41.1
Changes in operating assets and
liabilities, net:
Accounts receivable
147.9
87.1
Inventories
90.1
(256.0
)
Income taxes receivable
(51.6
)
2.9
Prepaid expenses and other assets
9.3
14.6
Trade accounts payable and outstanding
checks in excess of deposits
(202.6
)
68.4
Accrued expenses and other liabilities
(89.4
)
(69.9
)
Net cash provided by operating
activities
424.5
153.8
Cash flows from investing activities:
Purchases of property, plant and
equipment
(98.1
)
(68.5
)
Net cash paid for acquisitions
(65.8
)
(1,651.1
)
Other
3.6
0.9
Net cash used in investing activities
(160.3
)
(1,718.7
)
Cash flows from financing activities:
Net (payments) borrowings under ABL
Facility
(232.1
)
962.7
Borrowing of Notes due 2029
—
1,000.0
Repayment of Notes due 2024
—
(350.0
)
Cash paid for debt issuance,
extinguishment and modifications
—
(24.3
)
Payments under finance lease
obligations
(42.8
)
(33.8
)
Proceeds from exercise of stock options
and employee stock purchase plan
14.7
14.7
Cash paid for shares withheld to cover
taxes
(9.1
)
(9.2
)
Other financing activities
(0.3
)
(0.7
)
Net cash (used in) provided by financing
activities
(269.6
)
1,559.4
Net decrease in cash and restricted
cash
(5.4
)
(5.5
)
Cash and restricted cash, beginning of
period
18.7
22.2
Cash and restricted cash, end of
period
$
13.3
$
16.7
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 December 31,
2022
As of July 2, 2022
Cash
$
6.1
$
11.6
Restricted cash(1)
7.2
7.1
Total cash and restricted cash
$
13.3
$
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)
Six Months Ended December 31,
2022
Six Months Ended January 1,
2022
Cash paid during the year for:
Interest
$
105.0
$
64.4
Income tax payments net of refunds
105.1
2.6
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 the 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)
December 31, 2022
January 1, 2022
Change
%
Net income (GAAP)
$
71.1
$
8.4
$
62.7
746.4
Interest expense, net
55.7
45.2
10.5
23.2
Income tax expense
25.1
3.0
22.1
736.7
Depreciation
77.4
70.4
7.0
9.9
Amortization of intangible assets
47.8
46.1
1.7
3.7
Change in LIFO reserve (A)
25.0
45.5
(20.5
)
(45.1
)
Stock-based compensation expense
11.4
14.3
(2.9
)
(20.3
)
(Gain) loss on fuel derivatives
(7.3
)
1.4
(8.7
)
(621.4
)
Acquisition, integration &
reorganization expenses (B)
2.8
4.5
(1.7
)
(37.8
)
Other adjustments (C)
(0.2
)
2.3
(2.5
)
(108.7
)
Adjusted EBITDA (Non-GAAP)
$
308.8
$
241.1
$
67.7
28.1
Diluted earnings per share
(GAAP)
$
0.46
$
0.05
$
0.41
820.0
Impact of amortization of intangible
assets
0.30
0.30
—
—
Impact of change in LIFO reserve
0.16
0.29
(0.13
)
(44.8
)
Impact of stock-based compensation
expense
0.07
0.09
(0.02
)
(22.2
)
Impact of (gain) loss on fuel
derivatives
(0.05
)
0.01
(0.06
)
(600.0
)
Impact of acquisition, integration &
reorganization charges
0.02
0.03
(0.01
)
(33.3
)
Impact of other adjustment items
—
0.02
(0.02
)
(100.0
)
Tax impact of above adjustments
(0.13
)
(0.22
)
0.09
40.9
Adjusted Diluted Earnings per Share
(Non-GAAP)
$
0.83
$
0.57
$
0.26
45.6
A.
Includes an increase in the LIFO inventory
reserve of $2.0 million for Foodservice and an increase of $23.0
million for Convenience for the second quarter of fiscal 2023
compared to an increase of $8.2 million for Foodservice and an
increase of $37.3 million for Convenience for the second quarter of
fiscal 2022.
B.
Includes professional fees and other costs
related to completed and abandoned acquisitions, costs of
integrating certain of our facilities, and facility closing
costs.
C.
Includes asset impairments, gains and
losses on disposal of fixed assets, amounts related to favorable
and unfavorable leases, foreign currency transaction gains and
losses, franchise tax expense, and other adjustments permitted by
our ABL Facility.
PERFORMANCE FOOD GROUP COMPANY
Non-GAAP Reconciliation
(Unaudited)
Six Months Ended
($ in millions, except share and per
share data)
December 31, 2022
January 1, 2022
Change
%
Net income (GAAP)
$
166.8
$
13.1
$
153.7
1,173.3
Interest expense, net
106.1
89.2
16.9
18.9
Income tax expense
59.3
3.8
55.5
1,460.5
Depreciation
153.5
127.4
26.1
20.5
Amortization of intangible assets
90.9
87.8
3.1
3.5
Change in LIFO reserve (A)
51.8
34.2
17.6
51.5
Stock-based compensation expense
22.9
24.3
(1.4
)
(5.8
)
Loss on fuel derivatives
2.5
0.1
2.4
2,400.0
Acquisition, integration &
reorganization expenses (B)
5.8
37.3
(31.5
)
(84.5
)
Other adjustments (C)
3.9
7.6
(3.7
)
(48.7
)
Adjusted EBITDA (Non-GAAP)
$
663.5
$
424.8
$
238.7
56.2
Diluted earnings per share
(GAAP)
$
1.07
$
0.09
$
0.98
1,088.9
Impact of amortization of intangible
assets
0.58
$
0.60
(0.02
)
(3.3
)
Impact of change in LIFO reserve
0.33
$
0.23
0.10
43.5
Impact of stock-based compensation
0.14
0.16
(0.02
)
(12.5
)
Impact of loss on fuel derivatives
0.02
$
—
0.02
NM
Impact of acquisition, integration &
reorganization charges
0.04
$
0.25
(0.21
)
(84.0
)
Impact of other adjustment items
0.03
$
0.06
(0.03
)
(50.0
)
Tax impact of above adjustments
(0.30
)
$
(0.38
)
0.08
21.1
Adjusted Diluted Earnings per Share
(Non-GAAP)
$
1.91
$
1.01
$
0.90
89.1
A.
Includes a decrease in the LIFO inventory
reserve of $2.0 million for Foodservice and an increase of $53.8
million for Convenience for the first half of fiscal 2023 compared
to an increase of $13.9 million for Foodservice and an increase of
$20.3 million for Convenience for the first half of fiscal
2022.
B.
Includes professional fees and other costs
related to completed and abandoned acquisitions, costs of
integrating certain of our facilities, and facility closing
costs.
C.
Includes asset impairments, gains and
losses on disposal of fixed assets, amounts related to favorable
and unfavorable leases, foreign currency transaction gains and
losses, franchise tax expense, and other adjustments permitted by
our ABL Facility.
PERFORMANCE FOOD GROUP COMPANY
Non-GAAP Reconciliation
(Unaudited)
Fiscal year ended July 2,
2022
($ 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, $3.1 million, and
$14.9 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 for 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.
(In millions)
Six Months Ended December 31,
2022
Six Months Ended January 1,
2022
Net cash provided by operating
activities (GAAP)
$
424.5
$
153.8
Purchases of property, plant and
equipment
(98.1
)
(68.5
)
Free cash flow (Non-GAAP)
$
326.4
$
85.3
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. 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 chief operating decision maker 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.
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 presentation and amounts for the three and six months ended
January 1, 2022 have been restated to reflect the change to the
measure of segment profit to Adjusted EBITDA as described
above.
The following tables set forth net sales and Adjusted EBITDA by
segment for the periods indicated (dollars in millions):
Net Sales
Three Months Ended
December 31, 2022
January 1, 2022
Change
%
Foodservice
$
6,896.6
$
6,214.4
$
682.2
11.0
Vistar
1,118.9
907.3
211.6
23.3
Convenience
5,864.1
5,710.0
154.1
2.7
Corporate & All Other
154.0
121.4
32.6
26.9
Intersegment Eliminations
(134.7
)
(114.3
)
(20.4
)
(17.8
)
Total net sales
$
13,898.9
$
12,838.8
$
1,060.1
8.3
Six Months Ended
December 31, 2022
January 1, 2022
Change
%
Foodservice
$
14,226.6
$
12,576.4
$
1,650.2
13.1
Vistar
2,209.0
1,753.8
455.2
26.0
Convenience
12,151.0
8,881.2
3,269.8
36.8
Corporate & All Other
306.3
242.0
64.3
26.6
Intersegment Eliminations
(274.7
)
(228.3
)
(46.4
)
(20.3
)
Total net sales
$
28,618.2
$
23,225.1
$
5,393.1
23.2
Adjusted EBITDA
Three Months Ended
December 31, 2022
January 1, 2022
Change
%
Foodservice
$
214.2
$
167.5
$
46.7
27.9
Vistar
92.2
49.7
42.5
85.5
Convenience
69.3
76.5
(7.2
)
(9.4
)
Corporate & All Other
(66.9
)
(52.6
)
(14.3
)
(27.2
)
Total Adjusted EBITDA
$
308.8
$
241.1
$
67.7
28.1
Six Months Ended
December 31, 2022
January 1, 2022
Change
%
Foodservice
$
450.3
$
337.6
$
112.7
33.4
Vistar
166.6
79.9
86.7
108.5
Convenience
174.9
107.9
67.0
62.1
Corporate & All Other
(128.3
)
(100.6
)
(27.7
)
(27.5
)
Total Adjusted EBITDA
$
663.5
$
424.8
$
238.7
56.2
Fiscal year ended July 2,
2022
($ in millions)
Q1
Q2
Q3
Q4
Foodservice
170.1
167.5
180.1
268.8
Vistar
30.2
49.7
48.0
65.1
Convenience
31.4
76.5
61.9
87.3
Corporate & All Other
(48.0
)
(52.6
)
(52.1
)
(64.1
)
Total Adjusted EBITDA
$
183.7
$
241.1
$
237.9
$
357.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230208005312/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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