RICHMOND, Va.—( May 9, 2018) Performance Food Group Company today announced its third-quarter and first-nine months fiscal 2018 business results.
Third-quarter fiscal 2018: key metrics
- Total case volume grew 0.8 percent
- Net sales increased 2.7 percent to $4.3 billion
- Gross profit improved 7.2 percent to $558.7 million
- Net income was up 62 percent to $33.7 million
- Adjusted EBITDA grew 6.7 percent to $95.6 million₁
- Diluted earnings per share (“EPS”) increased 60.0 percent to $0.32
- Adjusted Diluted EPS increased 25.9 percent to $0.34₁
First-nine months fiscal 2018: key metrics
- Total case volume increased 2.8 percent
- Net sales grew 5.6 percent to $13.0 billion
- Gross profit was up 8.5 percent to $1.7 billion
- Net income increased 140.3 percent to $134.3 million
- Adjusted EBITDA grew 12.4 percent to $291.3 million₁
- Diluted EPS increased 138.9 percent to $1.29
- Adjusted Diluted EPS grew 32.9 percent to $1.01₁
“We are pleased with our third-quarter net sales and profitability, particularly given the multiple snow storms that occurred in March,” said George Holm, PFG’s president and CEO. “Vistar’s third- quarter results were strong with EBITDA up 14 percent, driven by its strong channel growth. As a result of our businesses’ strong performance during the first nine months, we are tightening our fiscal 2018 Adjusted EBITDA outlook for growth from a range of 8 percent to 11 percent to a range of 9 percent to 11 percent. We remain confident in our full-year outlook and our strategies for future growth.”
PFG third-quarter fiscal 2018 financial summary
Total case volume increased 0.8 percent in the third quarter of fiscal 2018 compared to the prior year period, with underlying organic growth of 0.1 percent. Total case volume included a 4.8 percent increase in independent cases, growth in Performance Brands cases and broad-based growth in Vistar’s sales channels, partially offset by declines in the casual dining segment within Customized and the impact of an unusually large number of snow storms.
Net sales for the third quarter of fiscal 2018 grew 2.7 percent to $4.3 billion versus the comparable 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 mix. Overall food cost inflation was approximately 2.1 percent in the third quarter. The increase in net sales was also attributable to growth in Vistar and case growth in Performance Foodservice (“PFS”), specifically in the independent restaurant channel, and recent acquisitions.
Gross profit for the third quarter of fiscal 2018 grew 7.2 percent compared to the prior year period, to $558.7 million. The gross profit increase was led by case growth and from selling an improved mix of customer channels and products, specifically to the independent restaurant channel. Gross profit per case increased 26 cents, while gross margin as a percentage of net sales was up 50 basis points over the prior year period to 12.8 percent.
Operating expenses rose by 5 percent to $498.6 million in the third quarter of fiscal 2018 compared to the prior year period. The increase in operating expenses was primarily due to acquired case volume and the resulting impact on variable operational expenses, higher fuel prices, acquisition integration costs within Vistar, as well as an accelerating increase in the number of sales personnel within Performance Foodservice.
Operating profit was up 28.7 percent driven by a strong gross profit increase of 7.2 percent. Net income for the third quarter of fiscal 2018 grew 62.0 percent year-over-year to $33.7 million. The growth was primarily a result of an increase in operating profit and a decrease in income tax expense, partially offset by interest and other expenses. The decrease in income tax expense was primarily a result of the impact of the Tax Cuts and Jobs Act (the “Act”). The effective tax rate in the third quarter of fiscal 2018 was 24.8 percent compared to 36.8 percent in the third quarter of fiscal 2017.
EBITDA increased 15.7 percent in the third quarter of fiscal 2018 compared to the prior year period to $92.1 million. For the quarter, Adjusted EBITDA rose 6.7 percent to $95.6 million compared to the prior year period.
Diluted EPS grew 60.0 percent to $0.32 in the third quarter of fiscal 2018 over the prior year period. Adjusted diluted EPS increased 25.9 percent to $0.34 per share in the third quarter over the prior year period.
“We are pleased with our third-quarter net sales and profitability, particularly given the multiple snow storms that occurred in March.” – George Holm, president & CEO
PFG first-Nine months fiscal 2018 financial summary
Total case volume increased 2.8 percent in the first nine months of fiscal 2018 compared to the prior year period, with underlying organic growth of 1.4 percent.
Net sales for the first nine months of fiscal 2018 was $13.0 billion, an increase of 5.6 percent versus the comparable prior year period. The increase in net sales was primarily attributable to case growth in Performance Foodservice, specifically in the independent restaurant channel, a higher selling price per case, sales growth in Vistar, and recent acquisitions.
Gross profit rose 8.5 percent compared to the prior year period, to $1.7 billion. The gross profit increase in the first nine months of fiscal 2018 was led by case growth and an improved sales mix of customer channels and products, specifically to the independent restaurant channel. Gross margin as a percentage of net sales was up 30 basis points over the prior year period to 12.9 percent.
Operating expenses increased 7.1 percent in the first nine months of fiscal 2018 compared to the prior year period, to $1.5 billion. The increase was primarily due to case volume growth and the resulting impact on variable operational expenses, one-time costs primarily related to the exit of the Company’s private-equity shareholders and acquisition integration costs within Vistar, partially offset by decreases in insurance and professional, legal, and consulting expenses within Corporate.
Operating profit was up 23.2 percent to $159.7 million driven by strong top-line and gross profit growth and mix of business specifically within the independent restaurant channel. Net income was up 140.3percent to $134.3 million for the first nine months of fiscal 2018 compared to the prior year period. The significant increase in net income was a result of the Company’s strong operating profit performance combined with the $53.9 million decrease in income tax expense. The decrease in income tax expense was primarily driven by non-cash gains as a result of the Act and the excess tax benefit of $15.4 million associated with the performance vesting of certain stock-based compensation awards.
EBITDA grew 14.3 percent in the first nine months of fiscal 2018 compared to the prior year period to $255.8 million. For the first nine months of fiscal 2018, Adjusted EBITDA increased 12.4 percent to $291.3 million compared to the prior year period.
Diluted EPS increased 138.9 percent in the first nine months of fiscal 2018 over the prior year period, to $1.29. Adjusted diluted EPS rose 32.9 percent in the first nine months of fiscal 2018 over the prior year period, to $1.01 per share.
PFG cash flow and capital spending
In the first nine months of fiscal 2018, PFG generated $229.6 million in cash flow from operating activities, an increase of $127.6 million versus the prior year period. The improvement in cash flow from operating activities was largely driven by higher operating income and improvements in working capital. The Company delivered free cash flow of $156.4 million through the first nine months of fiscal 2018.
For the first nine months of fiscal 2018, the Company invested $73.2 million in capital expenditures. PFG now expects capital expenditures for fiscal 2018 will be between $115 million and $140 million. The fiscal 2018 capital expenditures estimate is lower than the Company’s previously provided estimate due to the timing of projects.
Third-quarter fiscal 2018 segment results
Performance Foodservice
PFS net sales for the third quarter of fiscal 2018 increased 4.7 percent to $2.5 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. Net sales growth was also driven by an increase in cases sold, including independent case growth and solid independent customer demand for Performance Brands. For the quarter, independent sales as a percentage of total segment sales was up 80 basis points to 44.1 percent.
EBITDA for PFS increased 4.5 percent to $69.7 million in the third quarter of fiscal 2018 compared to the prior year period. EBITDA growth was driven by a 6.2 percent increase in gross profit, offset slightly by an increase in fuel expense. The increase in gross profit per case resulted from a favorable shift in the mix of cases sold to independent customers and increased sales of Performance Brands.
Vistar
For the third quarter of fiscal 2018, Vistar net sales grew 9.3 percent to $820.2 million compared to the prior year period. This increase was driven by broad-based growth in Vistar’s sales channels and as a result of recent acquisitions.
Third-quarter EBITDA for Vistar was up 14.0 percent versus the prior year to $32.5 million. Gross profit dollar growth of 16.9 percent for the third quarter was fueled by an increase in the number of cases sold and a favorable change in sales mix. Third quarter EBITDA was impacted by higher variable operating costs associated with higher case volume and integration costs related to recent acquisitions.
PFG Customized
Net sales for PFG Customized decreased 7.3 percent to $960.3 million in the third quarter of fiscal 2018 compared to the prior year period. This decrease was primarily a result of the Georgia facility that was closed in the fourth quarter of fiscal 2017.
PFG Customized EBITDA decreased 1.0 percent to $10.2 million in the third quarter of fiscal 2018 compared to the prior year period. The decrease in EBITDA was driven by higher operating expenses, including higher warehouse personnel costs and fuel expense, partially offset by an increase in gross profit, which was primarily the result of a favorable shift in customer mix.
PFG fiscal 2018 outlook
For fiscal 2018, PFG tightens its fiscal 2018 Adjusted EBITDA outlook for growth to a range of 9 percent to 11 percent. The previous fiscal 2018 Adjusted EBITDA range was 8 percent to 11 percent. The Company’s fiscal 2017 Adjusted EBITDA was $390.7 million.
PFG reaffirms its Adjusted Diluted EPS outlook representing growth in the range of 24 percent to 30 percent to $1.54 to $1.61 over its fiscal 2017 Adjusted Diluted EPS of $1.24.
PFG’s Adjusted EBITDA and Adjusted Diluted EPS outlook and full-year forecast for its effective tax rate on operations exclude 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, its reported Diluted EPS, and its reported effective tax rate because these items, 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 and Adjusted Diluted EPS outlook or its effective tax rate on operations forecast. Please see the “Forward-Looking Statements” section of this release for a discussion of certain risks to PFG’s outlook.
₁This earnings release includes several metrics, including EBITDA, Adjusted EBITDA, Free Cash Flow, and Adjusted Diluted Earnings per Share 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 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.
Source: Business Wire