PFG: Reports Q4 and Full-Year Fiscal 2023 Results

Richmond / VA. (pfg) Performance Food Group Company (PFG) 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 percent 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, 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 percent 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 percent 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 percent to USD 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 percent.

Gross profit for the fourth quarter of fiscal 2023 grew 12.0 percent to USD 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 percent to USD 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 USD 7.6 million loss on the sale of a warehouse facility.

Net income for the fourth quarter of fiscal 2023 increased USD 74.1 million year-over-year to USD 150.1 million. The increase was primarily a result of the USD 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 percent compared to 34.6 percent 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 percent to USD 385.2 million compared to the prior year period.

Diluted EPS increased USD 0.47 to USD 0.96 per share in the fourth quarter of fiscal 2023 compared to the prior year period. Adjusted Diluted EPS increased 6.5 percent to USD 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 percent in fiscal 2023 compared to the prior year period, including 7.3 percent independent case growth. Total organic case volume increased 1.6 percent in fiscal 2023 compared to the prior year period. Total organic case volume benefited from a 6.2 percent 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 percent to USD 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 percent.

Gross profit for fiscal 2023 grew 19.0 percent to USD 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 percent to USD 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 USD 33.9 million primarily as a result of prior year acquisitions.

Net income for fiscal 2023 increased USD 284.7 million year-over-year to USD 397.2 million. The increase was primarily a result of the USD 438.4 million increase in operating profit, partially offset by a USD 92.2 million increase in income tax expense and a USD 35.1 million increase in interest expense. The effective tax rate in fiscal 2023 was approximately 27.0 percent compared to 32.7 percent 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 percent to USD 1.4 billion compared to the prior year period.

Diluted EPS increased USD 1.80 to USD 2.54 per share in fiscal 2023 compared to the prior year period. Adjusted Diluted EPS increased 49.2 percent to USD 3.88 per share in fiscal 2023 compared to the prior year period.

Cash Flow and Capital Spending

In fiscal 2023, PFG provided USD 832.1 million in cash flow from operating activities compared to USD 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 USD 269.7 million in capital expenditures, an increase of USD 54.2 million versus the prior year period. In fiscal 2023, PFG delivered free cash flow of USD 562.4 millioncompared to free cash flow of USD 61.0 million in the prior year.

Share Repurchase Program

On November 16, 2022, the Board of Directors authorized a new share repurchase program for up to USD 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 USD 11.2 million or an average cost of USD 56.06 per share. As of July 1, 2023, approximately USD 288.8 million remained available for additional share repurchases.

Fiscal 2024 and Long-Term Outlook

For the fiscal first quarter of 2024, PFG expects net sales to be in a range of USD 14.7 billion to USD 15.0 billion and Adjusted Ebitda to be in a range of USD 360 million to USD 380 million.

For the full fiscal year 2024, PFG expects net sales to be in a range of USD 59 billion to USD 60 billion. For the full fiscal year 2024, PFG expects Adjusted Ebitda to be in a range of USD 1.45 billion to USD 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 USD 62 to USD 64 billion and Adjusted Ebitda between USD 1.5 and USD 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.