Performance Food Group Company Reports Fourth-Quarter and Full-Year Fiscal 2023 Results

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

RICHMOND, Va.–(BUSINESS WIRE)–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.

Contacts

Investors:
William S. Marshall
VP, Investor Relations
(804) 287-8108

[email protected]

Media:
Scott Golden
Director, Communications & Engagement
(804) 484-7873

[email protected]

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