RICHMOND, Va.–(BUSINESS WIRE)–Performance Food Group Company (NYSE: PFGC) today announced its second quarter and first half fiscal 2024 business results.
“Our strong business momentum continued through the fiscal second quarter, producing solid top and bottom-line results for our company,” said George Holm, PFG’s Chairman & Chief Executive Officer. “Our company benefitted from outstanding organic independent case growth, leading to another quarter of strong market share gains. Solid execution across our business segments, along with positive mix shift and broad channel growth, led to margin expansion and strong cash flow generation. I am very pleased with the organization’s successful execution of our business strategy with the goal of maximizing value for our shareholders.”
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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 2024 Financial Summary
Total organic case volume increased 2.1% for the second quarter of fiscal 2024 compared to the prior year period. Total organic case volume benefited from an 8.7% increase in organic independent cases, growth in Performance Brands cases, growth in cases sold to Foodservice’s Chain business, and broad-based growth across Vistar’s channels.
Net sales for the second quarter of fiscal 2024 grew 2.9% to $14.3 billion compared to the prior year period. The increase in net sales was primarily attributable to an increase in cases sold. Overall product cost inflation for the Company was approximately 3.6%.
Gross profit for the second quarter of fiscal 2024 grew 6.6% to $1.6 billion compared to the prior year period. The gross profit increase was primarily attributable to growth in cases sold and a favorable shift in the mix of cases sold, including growth in the independent channel and Performance Brands.
Operating expenses rose 5.1% to $1.4 billion in the second quarter of fiscal 2024 compared to the prior year period. The increase in operating expenses were primarily due to increases in personnel expense, primarily related to wages, commissions, and benefits, insurance expense, and repairs and maintenance expense.
Net income for the second quarter of fiscal 2024 increased $7.2 million year-over-year to $78.3 million. The increase was primarily a result of the $29.9 million increase in operating profit, partially offset by an increase in income tax expense, other expense, and interest expense. The effective tax rate in the second quarter of fiscal 2024 was approximately 29.9% compared to 26.1% in the second quarter of fiscal 2023. The effective tax rate for the second quarter of fiscal 2024 differed from the prior year period primarily due to an increase in non-deductible expenses and state and foreign taxes as a percentage of income, partially offset by an increase in deductible discrete items related to stock-based compensation.
For the quarter, Adjusted EBITDA rose 11.9% to $345.4 million compared to the prior year period.
Diluted EPS increased 8.7% to $0.50 per share in the second quarter of fiscal 2024 compared to the prior year period. Adjusted Diluted EPS increased 8.4% to $0.90 per share in the second quarter of fiscal 2024 compared to the prior year period.
First-Half Fiscal 2024 Financial Summary
Total organic case volume increased 2.4% for the first half of fiscal 2024 compared to the prior year period. Total organic case volume benefited from an 8.1% increase in organic independent cases, growth in Performance Brands cases, growth in cases sold to Foodservice’s Chain business, and broad-based growth across Vistar’s channels.
Net sales for the first half of fiscal 2024 grew 2.2% to $29.2 billion compared to the prior year period. The increase in net sales was primarily attributable to an increase in cases sold, partially offset by a decrease in selling price per case as a result of 1.4% deflation in our Foodservice segment.
Gross profit for the first half of fiscal 2024 grew 6.1% to $3.3 billion compared to the prior year period. The gross profit increase was primarily attributable to cost of goods sold optimization through procurement efficiencies, as well as growth in cases sold, including growth in the independent channel.
Operating expenses rose 4.8% to $2.9 billion in the first half of fiscal 2024 compared to the prior year period. The increase in operating expenses was primarily due to increases in personnel expense, insurance expense, and repairs and maintenance expense. Depreciation and amortization increased $28.2 million primarily as a result of recent acquisitions, accelerated amortization of certain customer relationships and trade names, and an increase in transportation equipment under finance leases.
Net income for the first half of fiscal 2024 increased $32.2 million year-over-year to $199.0 million. The increase was primarily a result of the $54.9 million increase in operating profit, partially offset by a $16.7 million increase in income tax expense and a $11.4 million increase in interest expense. The effective tax rate in the first half of fiscal 2024 was approximately 27.6% compared to 26.2% in the first half of fiscal 2023. The effective tax rate for the first half of fiscal 2024 differed from the prior year period primarily due to an increase in non-deductible expenses and state and foreign taxes as a percentage of income, partially offset by an increase in deductible discrete items related to stock-based compensation.
For the first half of fiscal 2024, Adjusted EBITDA rose 9.9% to $729.2 million compared to the prior year period.
Diluted EPS increased 18.7% to $1.27 per share in the first half of fiscal 2024 compared to the prior year period. Adjusted Diluted EPS increased 7.3% to $2.05 per share in the first half of fiscal 2024 compared to the prior year period.
Cash Flow and Capital Spending
In the first six months of 2024, PFG provided $554.0 million in cash flow from operating activities compared to $424.5 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 2024 was largely driven by improvements in working capital and higher operating income compared to the prior year period.
In the first six months of fiscal 2024, PFG invested $147.1 million in capital expenditures, an increase of $49.0 million versus the prior year period. In the first six months of fiscal 2024, PFG delivered free cash flow of $406.9 million compared to free cash flow of $326.4 million in the prior year.1
Share Repurchase Program
During the three months ended December 30, 2023, the Company repurchased and subsequently retired 0.8 million shares of common stock, for a total of $50.0 million or an average cost of $58.01 per share. During the six months ended December 30, 2023, the Company repurchased and subsequently retired 1.3 million shares of common stock, for a total of $78.1 million or an average cost of $58.83 per share. As of December 30, 2023, approximately $210.6 million remained available for additional share repurchases.
Second-Quarter Fiscal 2024 Segment Results
Foodservice
Second-quarter fiscal 2024 net sales for Foodservice increased 2.6% to $7.1 billion compared to the prior year period. This increase in net sales were driven by case volume growth in our independent and Chain businesses, partially offset by a decrease in selling price per case. Overall product cost deflation for Foodservice was approximately 0.4% for the second quarter of fiscal 2024. Securing new and expanding business with independent customers resulted in organic independent case growth of approximately 8.7% for the second quarter of fiscal 2024 compared to the prior year period. For the second quarter of fiscal 2024, independent sales as a percentage of total segment sales were 39.1%.
Second-quarter fiscal 2024 Adjusted EBITDA for Foodservice increased 4.6% to $224.1 million compared to the prior year period. Gross profit contributing to Adjusted EBITDA increased 5.2% in the second quarter of fiscal 2024 compared to the prior year period driven by growth in cases sold and a favorable shift in the mix of cases sold to independent customers, including more Performance Brands products sold to our independent customers. Operating expenses impacting Foodservice’s Adjusted EBITDA increased 5.3% for the second quarter of fiscal 2024 compared to the prior year period primarily as a result of an increase in personnel, insurance, and building rent expenses as compared to the prior year period.
Vistar
For the second quarter of fiscal 2024, net sales for Vistar increased 7.4% 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 a recent acquisition, as well as case volume growth.
Second-quarter fiscal 2024 Adjusted EBITDA for Vistar increased 1.5% to $93.6 million versus the prior year period. The increase was the result of a 9.0% increase in gross profit for the second quarter of fiscal 2024 compared to the prior year period, partially offset by a 14.7% increase in operating expenses. The increase in gross profit contributing to Vistar’s Adjusted EBITDA was driven by a recent acquisition, pricing improvement from procurement efficiencies, and growth in cases sold, partially offset by expected decreases in inventory holding gains. Operating expenses impacting Vistar’s Adjusted EBITDA increased primarily as a result of a recent acquisition and an increase in building rent expense.
Convenience
Second-quarter fiscal 2024 net sales for Convenience increased 1.3% to $5.9 billion compared to the prior year period. The increase in net sales was driven primarily by an increase in selling price per case as a result of cigarette manufacturers’ price increases and continued inflation for food and foodservice related products, partially offset by a decline in cigarette carton sales and food and foodservice related cases sold.
Second-quarter fiscal 2024 Adjusted EBITDA for Convenience increased 20.5% to $83.5 million compared to the prior year period. Gross profit contributing to Convenience’s Adjusted EBITDA increased 2.2% in the second quarter of fiscal 2024 compared to the prior year period driven by pricing improvement from procurement efficiencies. Operating expenses impacting Convenience’s Adjusted EBITDA decreased $5.9 million in the second quarter of fiscal 2024 compared to the prior year, primarily as a result of decreases in personnel expenses from reduced contract labor and overtime.
Fiscal 2024 & Long-Term Outlook
For the third quarter of fiscal 2024, PFG expects net sales to be in a range of $14.0 billion to $14.3 billion. For the third quarter of fiscal 2024, PFG expects Adjusted EBITDA to be in a range of $310 million to $330 million.
For the full fiscal year 2024, PFG continues to expect net sales to be in a range of $59 billion to $60 billion. For the full fiscal year 2024, PFG continues to expect Adjusted EBITDA to be at the upper end of the previously announced $1.45 billion to $1.5 billion range.
PFG reiterates its 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.
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 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.
