PFG: Reports First-Quarter Fiscal 2021 Results

Richmond / VA. (pfg) Performance Food Group Company (PFG) announced its first-quarter fiscal 2021 business results. «I am very pleased with our first-quarter results as the organization continues to take market share and prove its resiliency,» said George Holm, PFG’s Chairman, President + Chief Executive Officer. «Our Foodservice segment once again outperformed the industry, particularly in the independent restaurant channel. The integration of Reinhart has progressed smoothly and Vistar, despite its exposure to some of the hardest hit channels, has remained profitable due to strength in the convenience store channel. Our associates are engaged and winning new business every day, solidifying our position in the food distribution industry. Our organization has done an outstanding job managing costs and the balance sheet to put us in a strong financial position for the current operating environment.»

First-Quarter Fiscal 2021 Highlights

• Total case volume grew 8.9 percent
• Net sales increased 12.9 percent to USD 7.0 billion
• Gross profit improved 14.6 percent to USD 815.5 million
• Net loss of USD 0.7 million
• Adjusted Ebitda increased 5.9 percent to USD 135.2 million[1]
• Diluted loss per share of USD 0.01
• Adjusted Diluted earnings per share («EPS») declined 56.1 percent to USD 0.25[1]

[1] This earnings release includes several metrics, including Ebitda, Adjusted Ebitda, Adjusted Diluted EPS 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.

First-Quarter Fiscal 2021 Financial Summary

Total case volume increased 8.9 percent for the first quarter of fiscal 2021 compared to the prior year period. Total case volume included Reinhart Foodservice, LLC («Reinhart») and a 28.0 percent increase in independent cases. Excluding the impact of the Reinhart acquisition, case volume declined 17.5 percent and independent cases declined 6.3 percent in the first quarter of fiscal 2021 compared to the prior year period.

Net sales for the first quarter of fiscal 2021 grew 12.9 percent to USD 7.0 billion compared to the prior year period. The increase in net sales was primarily attributable to the acquisition of Reinhart, partially offset by the effects of the novel coronavirus («Covid-19») pandemic. The acquisition of Reinhart contributed USD 1,457.5 million to net sales for the first three months of fiscal 2021. Overall food cost inflation was approximately 1.5 percent.

Gross profit for the first quarter of fiscal 2021 increased 14.6 percent to USD 815.5 million as compared to the prior year period. The gross profit increase was led by the acquisition of Reinhart, partially offset by the current environment surrounding the outbreak of Covid-19. For the first three months of fiscal 2021, the Company recorded a total of USD 11.9 million of inventory write-offs primarily as a result of the impact of Covid-19 on our operations, which is a USD 5.7 million increase from the first three months of fiscal 2020. Gross margin as a percentage of net sales was 11.6 percent for the first quarter of fiscal 2021 compared to 11.4 percent for the prior year period.

Operating expenses rose by 20.3 percent to USD 779.7 million in the first quarter of fiscal 2021 compared to the prior year period. The increase in operating expenses was primarily due to the acquisition of Reinhart. In the first quarter of fiscal 2021, the Company recorded a benefit of USD 2.7 million related to reserves for expected credit losses as compared to bad debt expense of USD 3.6 million for the first quarter of 2020. The increase in operating expenses was partially offset by decreases in personnel expenses, fuel expense, travel expenses, professional fees, and contingent consideration accretion expense compared to the prior year period.

The first quarter of fiscal 2021 resulted in a net loss of USD 0.7 million compared to net income of USD 36.1 million in the prior year period. The decline was primarily a result of the USD 27.7 million decrease in operating profit and a USD 21.5 million increase in interest expense, partially offset by a USD 11.4 million decrease in income tax expense. The effective tax rate in the first quarter of fiscal 2021 was approximately 64.7 percent compared to 21.9 percent in the first quarter of fiscal 2020. The increase in the tax rate was due to the increase of non-deductible expenses and discrete items as a percentage of book income, which was significantly lower than the book income for the prior year period.

Ebitda increased 12.0 percent to USD 118.9 million in the first quarter of fiscal 2021 compared to the prior year period. For the quarter, Adjusted Ebitda rose 5.9 percent to USD 135.2 million compared to the prior year period.

Diluted loss per share was USD 0.01 in the first quarter of fiscal 2021 compared to diluted EPS of USD 0.34 in the prior year period. Adjusted Diluted EPS decreased 56.1 percent to USD 0.25 per share in the first quarter compared to Adjusted Diluted EPS of USD 0.57 per share in the prior year period.

Cash Flow and Capital Spending

In the first quarter of fiscal 2021, PFG used USD 132.0 million in cash flow from operating activities compared to USD 84.2 million of cash flow provided by operating activities in the prior year period. The decline in cash flow from operating activities was largely driven by the payment of USD 117.3 million contingent consideration related to the acquisition of Eby-Brown Company LLC and investments in working capital. For the first quarter of fiscal 2021, PFG invested USD 40.8 million in capital expenditures, an increase of USD 18.0 million versus the prior year period. PFG delivered negative free cash flow of USD 172.8 million1 compared to positive free cash flow of USD 61.4 million versus the prior year period.

First-Quarter Fiscal 2021 Segment Results

Foodservice: First-quarter net sales for Foodservice increased 28.1 percent to USD 5.0 billion compared to the prior year period. This increase in net sales was driven by the Reinhart acquisition, as well as an increase in selling price per case as a result of inflation. Reinhart contributed USD 1,457.5 million of net sales during the first three months of fiscal 2021. For the first quarter of fiscal 2021, independent sales as a percentage of total segment sales were 35.5 percent.

First-quarter Ebitda for Foodservice increased 50.2 percent to USD 156.2 million compared to the prior year period. Gross profit increased 33.1 percent in the first quarter of fiscal 2021 compared to the prior year period as a result of the Reinhart acquisition. The increase was partially offset by the decline in case volume and net sales discussed above. For the first three months of fiscal 2021, Foodservice recorded USD 8.1 million of inventory write-offs primarily due to the impact of Covid-19, which is an increase of USD 2.8 million over the prior year. Operating expenses, excluding depreciation and amortization, for Foodservice increased 28.6 percent for the first three months of fiscal 2021 compared to the prior year period as a result of the acquisition of Reinhart. In the first quarter of fiscal 2021, Foodservice recorded a benefit of USD 6.2 million related to reserves for expected credit losses compared to bad debt expense of USD 2.8 million for the first quarter of fiscal 2020. The increase in operating expenses was also partially offset by decreases in personnel and fuel expenses as compared to the prior year period.

Vistar: For the first quarter of fiscal 2021, net sales for Vistar decreased 13.2 percent to USD 2.0 billion compared to the prior year period. This decrease was driven by the continued economic effects of the Covid-19 pandemic.

First-quarter Ebitda for Vistar decreased 77.3 percent to USD 11.7 million versus the prior year period. Gross profit decline of 29.6 percent for the first quarter of fiscal 2021 compared to the prior year period was fueled by the current economic environment due to Covid-19. For the first three months of fiscal 2021, Vistar recorded USD 3.8 million of inventory write-offs primarily as a result of the current economic environment due to Covid-19, which is an increase of USD 2.8 million compared to the prior year period. Operating expenses decreased primarily as a result of the decrease in sales volume, decreases in personnel and fuel expenses, and a reduction in contingent consideration accretion expense as compared to the prior year period. In the first quarter of fiscal 2021, Vistar recorded a total of USD 3.5 million of bad debt expense related to expected credit losses for customer receivables due to the impact of Covid-19, which represents an increase of USD 2.7 million compared to the first quarter of fiscal 2020.