Performance Food Group (Nasdaq/NGS:PFGC) announced results today for the first quarter ended March 29, 2008.
“The Company’s adjusted net earnings growth showed solid improvement this quarter,” commented Steve Spinner, president and chief executive officer of Performance Food Group. “Despite the current economic challenges, our progress in this first quarter underscores PFG’s continued execution of our core strategies.”
First Quarter Financial Highlights:
- Consolidated net sales in the first quarter were approximately $1.7 billion, an increase of approximately 9%, compared to the prior year quarter. Inflation was approximately 6% for the quarter.
- Adjusted net earnings in the first quarter amounted to approximately $9.0 million, which was an increase of 30% compared to net earnings of $6.9 million for the same quarter in the previous year. Adjusted net earnings exclude the after-tax impact of one-time costs of $2 million associated with closing our Magee, Mississippi broadline location and $2.6 million of costs related to the pending merger with an affiliate of The Blackstone Group and Wellspring Capital Management LLC. Including these items, net earnings were approximately $4.3 million for the current year quarter.
- Adjusted net earnings per share in the first quarter, excluding the impact of the one-time costs discussed above, increased approximately 25% to $0.25 per share diluted, compared to net earnings per share of $0.20 per share diluted for the same quarter in 2007. Net earnings per share diluted were $0.12 for the current year quarter including the impact of the facility closing and merger-related costs.
“In our customized segment, net sales increased approximately 14% in the first quarter as compared to the same period in the prior year,” added Mr. Spinner. “This reflects the impact of the previously announced O’Charley’s business that was added in late 2007 and the Joe’s Crab Shack business added during the first quarter of 2008. Inflation in our customized segment was approximately 5% for the quarter.
“Overall net sales in broadline increased 6% in the first quarter compared to the same prior year period, reflecting continued inflation, offset by the planned exit of certain business associated with the closing of our Magee facility. Our sales force is concentrated on improving our mix of higher margin street sales, and our operations team remains dedicated to improving productivity in our broadline warehouses. Inflation in the broadline segment was approximately 7% for the quarter.”
Mr. Spinner concluded, “Performance Food Group delivered solid results in the first quarter of 2008, despite slower industry growth and higher fuel and food costs. We continue to focus on leveraging our scale and growing street sales. Our balance sheet remained very strong and free cash flow for the quarter was approximately $8.1 million. Based on the current economic environment and business trends and excluding merger-related costs and costs associated with the closing of our Magee, Mississippi broadline location, we continue to expect full year 2008 earnings per share diluted to be within the range we have previously disclosed.”
Performance Food Group announced on April 14, 2008 that a record date and special meeting date have been established for the Company’s shareholders to consider and vote on the proposal to approve the previously announced agreement and plan of merger.
Performance Food Group shareholders of record at the close of business on April 3, 2008 will be entitled to notice of the special meeting and to vote on the proposal. The special meeting is scheduled to be held Wednesday, May 14, 2008 at 9 a.m. (EDT) at Performance Food Group’s corporate offices located at 12500 West Creek Parkway, Richmond, Virginia.
Consummation of the merger is subject to receipt of approval from Performance Food Group’s shareholders, as well as satisfaction of other customary closing conditions, and the merger is expected to be completed by the end of the second quarter of 2008.
Performance Food Group markets and distributes more than 68,000 national and private label food and food-related products to over 41,000 restaurants, hotels, cafeterias, schools, healthcare facilities and other institutions. For more information on Performance Food Group, visit www.pfgc.com.
IMPORTANT ADDITIONAL INFORMATION ABOUT THE TRANSACTION
In connection with the proposed merger, Performance Food Group Company has filed a definitive proxy statement with the United States Securities and Exchange Commission, or SEC. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES THERETO. Investors and security holders may obtain a free copy of the proxy statement and other documents filed by Performance Food Group Company at the SEC’s Web site at http://www.sec.gov. The proxy statement and such other documents may also be obtained for free from Performance Food Group Company by directing such request to Performance Food Group Company, 12500 West Creek Parkway, Richmond, VA 23238 Attention: Investor Relations. Investors and security holders are urged to read the proxy statement and the other relevant materials before making any voting or investment decision with respect to the proposed transaction.
Performance Food Group Company and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the proposed merger. Information concerning the interests of Performance Food Group Company’s participants in the solicitation, which may be different than those of Performance Food Group Company’s shareholders generally, is set forth in Performance Food Group Company’s proxy statements and Annual Reports on Form 10-K, as amended, previously filed with the SEC, and in the definitive proxy statement relating to the merger.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and are based on current expectations and management’s estimates; actual results may differ materially. The risks and uncertainties which could impact these statements include, but are not limited to, Performance Food Group Company’s sensitivity to general economic conditions, including the current economic environment, changes in disposable income levels and consumer spending trends; increased fuel costs; Performance Food Group Company’s ability to close its Magee, Mississippi distribution facility within its cost estimates and the potential that customers of that facility may not remain customers of Performance Food Group Company; Performance Food Group Company’s sensitivity to inflationary pressures; Performance Food Group Company’s ability to achieve projected operational efficiencies and increase sales, particularly higher margin street sales; the risk to Performance Food Group Company from severe weather disturbances that are beyond Performance Food Group Company’s control; Performance Food Group Company’s ability to add new customers, particularly in its customized segment; the relatively low margins and economic sensitivity of the foodservice business; Performance Food Group Company’s reliance on major customers; the ability to identify and successfully complete acquisitions of other foodservice distributors; management’s allocation of capital and the timing of capital expenditures; Performance Food Group Company’s ability to successfully develop, produce and market new products, management of Performance Food Group Company’s planned growth and continued development of technological investments; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including a termination that under circumstances could require Performance Food Group Company to pay a $40.0 million termination fee to VISTAR Corporation; the outcome of any legal proceedings that have been or may be instituted against Performance Food Group Company and others relating to the merger agreement; the failure of the merger to close for any reason, including the inability to complete the merger due to the failure to obtain shareholder approval or the failure to satisfy other conditions to consummation of the merger or the failure to obtain the necessary debt financing arrangements set forth in commitment letters received in connection with the merger, and the risk that any failure of the merger to close may adversely affect our business and the price of Performance Food Group Company’s common stock; risks that the proposed transaction diverts management’s attention and disrupts current plans and operations, and potential difficulties in employee retention as a result of the merger; the effect of the announcement of the merger and actions taken in anticipation of the merger on Performance Food Group Company’s business relationships, operating results and business generally; and the amount of the costs, fees, expenses and charges related to the merger all as detailed from time to time in the reports filed by Performance Food Group Company with the SEC. Many of the factors that will determine the outcome of the subject matter of this press release are beyond Performance Food Group Company’s ability to control or predict. Performance Food Group Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
| Performance Food Group Company | ||||||||||||||
| Condensed Consolidated Income Statements (Unaudited) | ||||||||||||||
| March 29, 2008 | ||||||||||||||
| (In thousands, except net earnings per common share) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| March 29, 2008 | March 31, 2007 | |||||||||||||
| Net sales | $ | 1,671,895 | 100.0 | % | $ | 1,529,744 | 100.0 | % | ||||||
| Cost of goods sold | 1,461,746 | 87.4 | % | 1,334,338 | 87.2 | % | ||||||||
| Gross profit | 210,149 | 12.6 | % | 195,406 | 12.8 | % | ||||||||
| Operating expenses | 193,926 | 11.6 | % | 182,560 | 12.0 | % | ||||||||
| Merger-related costs | 4,369 | 0.3 | % | - | ||||||||||
| Facility closing costs | 3,348 | 0.2 | % | - | ||||||||||
| Operating profit | 8,506 | 0.5 | % | 12,846 | 0.8 | % | ||||||||
| Other income (expense): | ||||||||||||||
| Interest income | 591 | 843 | ||||||||||||
| Interest expense | (592 | ) | (575 | ) | ||||||||||
| Loss on sale of receivables | (1,424 | ) | (1,826 | ) | ||||||||||
| Other, net | 12 | 20 | ||||||||||||
| Other expense, net | (1,413 | ) | -0.1 | % | (1,538 | ) | -0.1 | % | ||||||
| Earnings before income taxes | 7,093 | 0.4 | % | 11,308 | 0.7 | % | ||||||||
| Income taxes | 2,801 | 0.1 | % | 4,435 | 0.3 | % | ||||||||
| Earnings from continuing operations, net of tax | 4,292 | 0.3 | % | 6,873 | 0.4 | % | ||||||||
| (Loss) gain on sale of fresh-cut segment, net of tax | (197 | ) | 52 | |||||||||||
| Net earnings | $ | 4,095 | $ | 6,925 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 34,937 | 34,534 | ||||||||||||
| Diluted | 35,434 | 34,907 | ||||||||||||
| Earnings per common share: | ||||||||||||||
| Basic | $ | 0.12 | $ | 0.20 | ||||||||||
| Diluted | $ | 0.12 | $ | 0.20 | ||||||||||
| Performance Food Group Company | ||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||||||
| March 29, 2008 | ||||||
| (In thousands) | ||||||
Assets | March 29, 2008 | Dec. 29, 2007 | ||||
| Cash and cash equivalents | $ | 95,087 | $ | 87,711 | ||
Accounts and notes receivable, net, including retained interest in securitized receivables | 253,100 | 256,306 | ||||
| Inventories | 348,817 | 329,686 | ||||
| Other current assets | 11,728 | 11,182 | ||||
| Deferred income taxes | 23,105 | 22,463 | ||||
| Total current assets | 731,837 | 707,348 | ||||
| Property, plant and equipment, net | 318,387 | 318,264 | ||||
| Goodwill, net | 356,509 | 356,509 | ||||
| Other intangible assets, net | 42,877 | 44,238 | ||||
| Other assets | 16,626 | 19,292 | ||||
| Assets held for sale | 8,943 | 6,389 | ||||
| Total assets | $ | 1,475,179 | $ | 1,452,040 | ||
Liabilities and Shareholders’ Equity | ||||||
| Checks in excess of deposits | $ | 99,357 | $ | 96,633 | ||
| Trade accounts payable | 296,172 | 275,580 | ||||
| Current installments of long-term debt | - | 64 | ||||
| Other current liabilities | 139,452 | 147,063 | ||||
| Total current liabilities | 534,981 | 519,340 | ||||
| Long-term debt, excluding current installments | 9,030 | 9,529 | ||||
| Income taxes | 4,057 | 3,530 | ||||
| Deferred income taxes | 59,017 | 58,947 | ||||
| Shareholders’ equity | 868,094 | 860,694 | ||||
| Total liabilities and shareholders’ equity | $ | 1,475,179 | $ | 1,452,040 | ||
| Performance Food Group Company | ||||||||||||||||
| 2008 Compared to 2007 | ||||||||||||||||
| 1st Quarter | ||||||||||||||||
| Segment Disclosure | ||||||||||||||||
| Corporate & | Total Continuing | |||||||||||||||
| 2008 | Broadline | Customized | Intersegment | Operations | ||||||||||||
| First Quarter | ||||||||||||||||
| Net external sales | $ | 971,845 | $ | 700,050 | $ | - | $ | 1,671,895 | ||||||||
| Intersegment sales | 181 | 56 | (237 | ) | - | |||||||||||
| Total sales | 972,026 | 700,106 | (237 | ) | 1,671,895 | |||||||||||
| Operating profit | 11,230 | 9,729 | (12,453 | ) | 8,506 | |||||||||||
| Operating profit margin | 1.16 | % | 1.39 | % | - | 0.51 | % | |||||||||
| Interest expense (income) | 3,168 | 924 | (4,091 | ) | 1 | |||||||||||
| Loss (gain) on sale of receivables | 2,495 | 1,027 | (2,098 | ) | 1,424 | |||||||||||
| Depreciation | 5,429 | 1,904 | 59 | 7,392 | ||||||||||||
| Amortization | 1,267 | - | - | 1,267 | ||||||||||||
| Capital expenditures | 6,727 | 1,099 | 2,282 | 10,108 | ||||||||||||
| Corporate & | Total Continuing | |||||||||||||||
| 2007 | Broadline | Customized | Intersegment | Operations | ||||||||||||
| First Quarter | ||||||||||||||||
| Net external sales | $ | 915,651 | $ | 614,093 | $ | - | $ | 1,529,744 | ||||||||
| Intersegment sales | 311 | 50 | (361 | ) | - | |||||||||||
| Total sales | 915,962 | 614,143 | (361 | ) | 1,529,744 | |||||||||||
| Operating profit | 11,539 | 8,378 | (7,071 | ) | 12,846 | |||||||||||
| Operating profit margin | 1.26 | % | 1.36 | % | - | 0.84 | % | |||||||||
| Interest expense (income) | 899 | 1,275 | (2,442 | ) | (268 | ) | ||||||||||
| Loss (gain) on sale of receivables | 2,890 | 931 | (1,995 | ) | 1,826 | |||||||||||
| Depreciation | 4,981 | 1,622 | 68 | 6,671 | ||||||||||||
| Amortization | 814 | - | - | 814 | ||||||||||||
| Capital expenditures | 4,171 | 2,778 | 27 | 6,976 | ||||||||||||
Total assets by reportable segment and a reconciliation to the condensed consolidated balance sheets were as follows:
| Mar. 29, 2008 | Dec. 29, 2007 | |||||
| Broadline | $ | 951,643 | $ | 943,460 | ||
| Customized | 287,818 | 289,450 | ||||
| Corporate & Intersegment | 235,718 | 219,130 | ||||
| Total Assets | $ | 1,475,179 | $ | 1,452,040 | ||
| Performance Food Group Company | ||||
| Non-GAAP Reconciliations | ||||
| Free Cash Flow | ||||
Quarterly | Q1 2008 | |||
| Net income from continuing operations | $ | 4,292 | ||
| Add back: | ||||
| Stock compensation expense | 1,819 | |||
| Amortization expense | 1,267 | |||
| Amortization of deferred issue costs | 94 | |||
| Depreciation expense | 7,392 | |||
| Non-cash portion of: | ||||
| Facility closure costs | 1,855 | |||
| Merger-related costs | 1,500 | |||
| Subtract: | ||||
| Capital expenditures | (10,108 | ) | ||
| Free Cash Flow | $ | 8,111 | ||
Impact of Facility Closing and Merger-Related Charges on Q1 2008 Diluted EPS | ||||||||
| Net Earnings | Shares | EPS | ||||||
| Amounts Reported for diluted EPS | $ | 4,292 | 35,434 | $ | 0.12 | |||
| Add back: | ||||||||
| Facility closing costs, net of tax (1) | 2,026 | |||||||
| Merger-related costs, net of tax (1) | 2,644 | |||||||
| Adjusted diluted EPS excluding impact of one-time charges | $ | 8,962 | 35,434 | $ | 0.25 | |||
(1) Amount calculated using effective tax rate of 39.5% | ||||||||
Contacts:
Media Contact:
Cheryl Moore
Director,
Corporate Communications
804-484-6273
or
Investor
Contacts:
John Austin
SVP and CFO
804-484-7753
or
Jeff
Fender
VP and Treasurer
804-484-6231