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%
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