Performance Food Group Company (PFGC) announced its third-quarter and first-nine months fiscal 2022 business results.
Third-quarter fiscal 2022 highlights
Total case volume grew 35%
Net sales increased 82% to $13.1 billion
Gross profit improved 62% to $1.3 billion
Net income increased 408% to $23.4 million
Adjusted EBITDA increased 96% to $237.9 million
Diluted earnings per share (“EPS”) increased 350% to $0.15
Adjusted Diluted EPS increased 168% to $0.51
First-nine months fiscal 2022 highlights
Total case volume grew 34%
Net sales increased 72% to $36.3 billion
Gross profit improved 53% to $3.8 billion
Net income increased 292% to $36.5 million
Adjusted EBITDA increased 60% to $662.7 million
Diluted EPS increased 243% to $0.24
Adjusted diluted EPS increased 92% to $1.52
George Holm, PFG’s chairman and chief executive officer, said in the announcement: “PFG again delivered strong results in the fiscal third quarter as our company builds on the strength of all three operating segments. Our independent restaurant business kept its strong momentum, growing organic case volume by double digits even as we begin to lap a better operating environment in the year-ago period. The integration of Core-Mark continues to meet or exceed our expectations, and new business wins support our long-term vision for accelerating sales and profit growth in the convenience business. Vistar is experiencing very strong profit performance, and we are increasingly confident in a recovery as the theater and office coffee channels show signs of improvement. We have delivered these results while maintaining a strong financial position and generating solid cash flow. As a result, we are increasing our full year financial guidance and believe we now have a path to $1 billion of Adjusted EBITDA in the current fiscal year.”
Third-quarter fiscal 2022 financial summary
Total case volume increased 35.3% for the third quarter of fiscal 2022 compared to the prior year period. Total case volume included Core-Mark Holding Company, Inc. and a 13.7% increase in organic independent cases. Organic case volume increased 8.3% in the third quarter of fiscal 2022 compared to the prior year period.
Net sales for the third quarter of fiscal 2022 grew 81.6% to $13.1 billion compared to the prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark, an increase in selling price per case as a result of inflation, and the declining adverse effects of the novel coronavirus COVID-19 pandemic, which had a more significant adverse impact in the third quarter of the prior year. The acquisition of Core-Mark contributed $4.1 billion of net sales for the third quarter of fiscal 2022. Overall cost inflation for the company was approximately 13.6%.
Gross profit for the third quarter of fiscal 2022 grew 61.6% to $1.3 billion compared to the prior year period. The gross profit increase was led by the acquisition of Core-Mark and an increase in gross profit per case in foodservice driven by growth in the independent channel. The Core-Mark acquisition contributed gross profit of $243.1 million in the third quarter of fiscal 2022.
Operating expenses rose 57.8% to $1.3 billion in the third quarter of fiscal 2022 compared to the prior year period. The increase in operating expenses was primarily due to the acquisition of Core-Mark, which contributed $216.6 million of operating expenses in the third quarter of fiscal 2022. Operating expenses also increased as a result of an increase in case volume and the resulting impact on variable operational and selling expenses, as well as an increase in personnel expenses. In the third quarter of fiscal 2022, the company experienced a $16.0 million increase in temporary contract labor costs, including travel expenses associated with contract workers, compared to the prior year period as a result of the current labor market's impact on the company's ability to hire and retain qualified labor. Additionally, the company had increases in workers' compensation and automobile insurance expense and fuel expenses due to higher fuel prices compared to the prior year period.
Net income for the third quarter of fiscal 2022 increased 407.9% year-over-year to $23.4 million. The increase was primarily a result of the $45.2 million increase in operating profit, partially offset by a $15.1 million increase in income tax expense. The effective tax rate in the third quarter of fiscal 2022 was approximately 31.3% compared to 37.1% in the third quarter of fiscal 2021. The effective tax rate for the third quarter of fiscal 2022 differed from the prior year period due to the increase of state taxes and non-deductible expense as a percentage of book income and the decrease in deductible discrete items related to stock-based compensation as a percentage of book income.
EBITDA increased 92.8% to $204.0 million in the third quarter of fiscal 2022 compared to the prior year period. For the quarter, Adjusted EBITDA rose 96.3% to $237.9 million compared to the prior year period.
Diluted EPS increased 350.0% to $0.15 per share in the third quarter of fiscal 2022 compared to the prior year period. Adjusted Diluted EPS increased 168.4% to $0.51 per share in the third quarter of fiscal 2022 compared to the prior year period.
First-nine months fiscal 2022 financial summary
Total case volume increased 34.0% in the first nine months of fiscal 2022 compared to the prior year period. Total case volume included Core-Mark and an 18.5% increase in organic independent cases. Organic total case volume increased 13.9% in the first nine months of fiscal 2022 compared to the prior year period.
Net sales for the first nine months of fiscal 2022 was $36.3 billion, an increase of 72.1% versus the comparable prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark, an increase in selling price per case as a result of inflation, and the declining adverse effects of the COVID-19 pandemic, which had a more significant adverse impact in the first nine months of the prior year. The acquisition of Core-Mark contributed $9.9 billion of net sales since the acquisition date. Overall cost inflation for the company was approximately 11.2%.
Gross profit for the first nine months of fiscal 2022 increased 53.2% to $3.8 billion compared to the prior year period. The gross profit increase was led by the acquisition of Core-Mark and an increase in gross profit per case in Foodservice driven by growth in the independent channel. The Core-Mark acquisition contributed gross profit of $577.4 million since the acquisition date, which includes $8.8 million of amortization of the step up in fair value of inventory acquired.
Operating expenses increased 53.6% to $3.6 billion in the first nine months of fiscal 2022 compared to the prior year period. The increase in operating expenses was primarily due to the acquisition of Core-Mark, which contributed $512.0 million of operating expenses since the acquisition date. Operating expenses also increased as a result of an increase in case volume and the resulting impact on variable operational and selling expenses, as well as an increase in personnel expenses. In the first nine months of fiscal 2022, the company experienced a $102.3 million increase in temporary contract labor costs, including travel expenses associated with contract workers, compared to the prior year period, as a result of the current labor market's impact on the company's ability to hire and retain qualified labor. Additionally, the company had increases in workers' compensation and automobile insurance expense, professional fees, and fuel expenses due to higher fuel prices compared to the prior year period.
Net income increased 292.5% to $36.5 million for the first nine months of fiscal 2022 compared to the prior year period. The increase was primarily a result of the $54.5 million increase in operating profit, partially offset by a $21.1 million increase in interest expense. The effective tax rate in the first nine months of fiscal 2022 was approximately 28.4% compared to 14.2% in the first nine months of fiscal 2021. The effective tax rate differed from the prior year period due to the increase of state taxes and non-deductible expense as a percentage of book income and the decrease in deductible discrete items related to stock-based compensation as a percentage of book income.
EBITDA increased 41.2% to $525.3 million in the first nine months of fiscal 2022 compared to the prior year period. For the first nine months of fiscal 2022 Adjusted EBITDA increased 59.9% to $662.7 million compared to the prior year period.
Diluted EPS increased 242.9% to $0.24 per share in the first nine months of fiscal 2022 compared to the prior year period. Adjusted Diluted EPS increased 92.4% to $1.52 per share in the first nine months of fiscal 2022 over the prior year period.
Third-quarter fiscal 2022 segment results
In the second quarter of fiscal 2022, PFG changed its operating segments to reflect the manner in which the business is managed. Based on the Company’s organization structure and how the company’s management reviews operating results and makes decisions about resource allocation, the company now has three reportable segments: Foodservice, Vistar and Convenience.
Foodservice
Third-quarter net sales for Foodservice increased 27.3% to $6.6 billion compared to the prior year period. This increase in net sales was driven by growth in cases sold due to the declining adverse effects of the COVID-19 pandemic on the restaurant industry, and an increase in selling price per case as a result of inflation. Overall product cost inflation for Foodservice was approximately 19.2% for the third quarter of fiscal 2022. Securing new and expanding business with independent customers resulted in organic independent case growth of approximately 13.7% for the third quarter of fiscal 2022 compared to the prior year period. For the third quarter of fiscal 2022, independent sales as a percentage of total segment sales were 37.6%.
Third-quarter EBITDA for Foodservice increased 22.6% to $169.6 million compared to the prior year period. Gross profit increased 27.3% in the third quarter of fiscal 2022 compared to the prior year period driven by an increase in the gross profit per case, as well as an increase in cases sold. The increase in gross profit per case was driven by a favorable shift in the mix of cases sold to independent customers, including more Performance Brands products sold to our independent customers. Operating expenses, excluding depreciation and amortization, for Foodservice increased 28.5% for the third quarter of fiscal 2022 compared to the prior year period as a result of an increase in case volume and the resulting impact on variable operational and selling expenses, as well as an increase in personnel expenses, including temporary contract labor costs and the associated travel expenses. The increase in operating expenses was also driven by increases in fuel expense and workers' compensation and automobile insurance expenses.
Vistar
For the third quarter of fiscal 2022, net sales for Vistar increased 51.1% to $892.2 million compared to the prior year period. This increase was driven primarily by the declining adverse effects of the COVID-19 pandemic on the channels Vistar serves.
Third-quarter EBITDA for Vistar increased 222.1% to $48.0 million versus the prior year period. The increase was the result of a 61.0% increase in gross profit for the third quarter of fiscal 2022 compared to the prior year period, partially offset by a 31.0% increase in operating expenses. Operating expenses increased primarily as a result of increased sales volume described above, and the resulting impact on variable operational and selling expenses. Operating expenses also increased as a result of increases in personnel expense and fuel expense.
Convenience
Third-quarter net sales for Convenience increased 292.9% to $5.6 billion compared to the prior year period. Net sales related to cigarettes for the third quarter of fiscal 2022 was $3,522.2 million, which includes $981.6 million related to tobacco excise taxes, compared to net sales of cigarettes of $1,003.8 million, which includes $276.9 million of tobacco excise taxes for the prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark, which contributed $4,149.6 million of net sales for the third quarter of fiscal 2022.
Third-quarter EBITDA for Convenience increased 2,035.0% to $42.7 million compared to the prior year period. Gross profit growth of 436.9% for the third quarter of fiscal 2022 compared to the prior year period was fueled by the Core-Mark acquisition, which contributed gross profit of $243.1 million in the third quarter of fiscal 2022. The increase in gross profit was partially offset by increase of operating expenses primarily as a result of the Core-Mark acquisition, which contributed an additional $214.0 million of operating expenses in the third quarter of fiscal 2022, excluding depreciation and amortization, along with increases in personnel and fuel expenses.
Fiscal 2022 outlook
For the full fiscal year 2022, PFG now expects net sales to be in a range of $50.5 billion to $51 billion and Adjusted EBITDA to be in a range of $990 million to $1 billion. PFG had previously expected net sales to be in a range of $50 billion to $51 billion and Adjusted EBITDA to be in a range of $970 million to $990 million. This outlook includes the impact of 10 months of Core-Mark’s business results.
