RICHMOND, Va.--(BUSINESS WIRE)--Performance Food Group Company announced its third-quarter and first-nine months fiscal 2016 business results.
Third-Quarter and First-Nine Months Fiscal 2016 Financial Summary
Total case volume growth increased 4.1% in the third quarter of fiscal 2016 compared to the prior year period and was driven by 3.8% organic growth. For the third quarter and first nine months of fiscal 2016, case growth reflected new and expanding business with Street customers in the Performance Foodservice segment and broad-based growth in Vistar’s sales channels. For the first nine months of 2016, case volume grew 4.5% compared to the prior year period, of which 4.2% was organic.
Net sales for the third quarter of fiscal 2016 were $3.9 billion, an increase of 3.0% versus the comparable prior year period. The net sales growth was primarily driven by an increase in cases sold. Net sales for the first nine months were $11.7 billion, an increase of 4.0% versus the comparable prior year period.
Gross profit dollars increased 6.5% in the third quarter compared to the prior year period, to $480.8 million. The increase in gross profit was the result of growth in cases sold and a higher gross profit per case driven by selling an improved mix of customer channels and products. For the first nine months of 2016, gross profit dollars increased 6.7% compared to the prior year period, to $1.4 billion.
Operating expenses compared to the third quarter of fiscal 2015 and the nine-month period of fiscal 2015 rose 4.4% and 4.9%, respectively, which was slower than gross margin growth, as a result of leverage of our fixed expenses, initiatives undertaken to reduce operating expenses, and lower fuel prices.
In the third quarter, operating profit increased 38.7% compared to the prior year period, to $37.6 million. The increase was primarily driven by the growth in cases sold, improved gross profit, and strong control of operating expenses. For the first nine months of 2016, operating profit increased 26.7% over the prior year period, to $135.4 million.
Net income increased 224.1% to $9.4 million for the third quarter of 2016 compared to net income of $2.9 million in the prior year period. For the quarter, the income tax rate decreased 630 basis points to 39.4%. The decrease in the tax rate was a result of the reduction of non-deductible expenses and state income taxes as a percentage of income before taxes. Diluted earnings per share grew 200% in the third quarter over the prior year period, to $0.09. Adjusted diluted EPS advanced 36.4% in the third quarter over the prior year period, to $0.15 per share.
For the first nine months of 2016, net income increased 75.3% to $39.1 million. Year-to-date, the income tax rate decreased 250 basis points to 40.6%. The decrease in the tax rate was a result of the reduction of non-deductible expenses and state income taxes as a percentage of income before taxes. Diluted earnings per share grew 60% in the first nine months of 2016 compared to the prior year period, to $0.40. Adjusted diluted EPS of $0.61 grew 35.6%.
EBITDA increased 15.7% in the third quarter of 2016 to $66.5 million. Adjusted EBITDA increased 10.2% to $76.4 million. The Company’s Adjusted EBITDA margin as a percentage of gross profit expanded 60 basis points to 15.9% versus the prior year period, which reflects selling to a more profitable mix of customers and increasing the share of our sales mix in proprietary Performance Brands. For the first nine months of 2016, EBITDA increased 11.5% compared to the prior year period, to $217.9 million. Adjusted EBITDA was $251.9 million, or an 11.4% increase for the first nine months of 2016 compared to the prior year period.
Executive Management Change
PFG announced that its Chief Financial Officer (CFO), Bob Evans, has notified the company of his intention to retire from the company. The Company is actively working with an executive search firm to assist in the search for Mr. Evans’ successor. Mr. Evans has agreed to continue to serve as CFO until a successor comes on board and will be available for consulting thereafter to help assure a seamless transition. “We will miss Bob and his insight on the business,” said Holm. “I thank him for all the contributions he has made to PFG over the past seven years.” Mr. Evans led PFG in its critical transition from a private to a public company with a very successful IPO and an enhanced capital structure. During his tenure, PFG has grown its sales by more than 50%. Holm noted, “Bob leaves us with a very solid financial foundation, not least of which is our excellent Finance team. I personally wish Bob the very best, as do all of PFG’s associates.”
Performance Foodservice (PFS)
Third quarter net sales for PFS increased 4.1% to $2.3 billion, and year-to-date net sales increased 4.1% to $7.0 billion for the prior year periods. Net sales growth in both the third quarter and year-to-date was driven by an increase in cases sold. Strong independent and proprietary Performance Brand case growth led the increase, which in turn was driven by securing new Street customers and further penetrating existing customers. Independent case growth was within our 6% to 10% growth goal range and has gained sequential momentum from our fiscal first quarter through third quarter. Case sales of our proprietary Performance Brands to Street customers grew double digits in the third quarter.
Third quarter EBITDA for PFS increased 19.3% compared to the prior year period and increased 19.9% for the first nine months of 2016. The growth was a result of an increase in gross profit, partially offset by an increase in operating expenses excluding depreciation and amortization. Gross profit increased by 8.5% both in the third quarter and the first nine months of 2016, a result of an increase in cases sold as well as an increase in gross profit per case. The increase in gross profit per case was driven by a favorable shift in the mix of cases sold toward Street customers and Performance Brands, as well as by improved procurement gains from our Winning Together program.
Vistar
Third quarter net sales for Vistar increased 9.0% to $651.2 million and for the first nine months increased 8.7% to $1.9 billion compared to the respective prior year periods. The increase in sales was primarily driven by broad-based organic case sales growth across the channels Vistar serves.
Third quarter segment EBITDA for Vistar increased 4.7% to $26.7 million and for the first nine months increased 5.7% to $83.7 million compared to the respective prior year periods. This increase in EBITDA was the result of gross profits increasing faster than operating expenses excluding depreciation and amortization. Gross profit grew 4.4% for the third quarter and 5.9% for the first nine months, primarily driven by an increase in the number of cases sold, a favorable shift in channel mix toward higher gross margin per case, and the benefits of operational improvements, partially offset by a shift toward higher cost to serve customers and by inflation-based inventory gains in the prior year period. Full report.
