10-Q 1 pfgc-20220402.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to ___________

Commission File Number 001-37578

 

Performance Food Group Company

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Delaware

 

43-1983182

(State or other jurisdiction of

incorporation or organization)

 

(IRS employer

identification number)

 

 

12500 West Creek Parkway

Richmond, Virginia 23238

 

(804) 484-7700

(Address of principal executive offices)

 

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

PFGC

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large Accelerated Filer

 

 

Accelerated Filer

 

 

 

 

 

Non-accelerated Filer

 

 

Smaller Reporting Company

 

 

 

 

 

Emerging Growth Company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

155,001,940 shares of common stock were outstanding as of May 4, 2022.

 


 

 

 

 


 

TABLE OF CONTENTS

 

 

Page

 

 

Special Note Regarding Forward-Looking Statements

4

 

 

PART I - FINANCIAL INFORMATION

6

 

 

Item 1.

 

Financial Statements

6

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

37

 

 

 

 

Item 4.

 

Controls and Procedures

38

 

 

 

 

PART II - OTHER INFORMATION

39

 

 

Item 1.

 

Legal Proceedings

39

 

 

 

 

Item 1A.

 

Risk Factors

39

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

39

 

 

 

 

Item 4.

 

Mine Safety Disclosures

39

 

 

 

 

Item 5.

 

Other Information

39

 

 

 

 

Item 6.

 

Exhibits

40

 

 

 

 

SIGNATURE

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q (this “Form 10-Q”) may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, our results of operations, financial position, our business outlook, business trends and other information are forward-looking statements. Words such as “estimates,” “expects,” “contemplates,” “will,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “should” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates, projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved, and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended July 3, 2021 (the “Form 10-K”), as such risk factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), including under Part II, Item 1A, Risk Factors of this Form 10-Q, and are accessible on the SEC’s website at www.sec.gov, and also include the following:

 

the material adverse impact the novel coronavirus (“COVID-19”) pandemic has had and is expected to continue to have on the global markets, the restaurant industry, and our business specifically, including the effects on vehicle miles driven, on the financial health of our business partners, on supply chains, and on financial and capital markets;
competition in our industry is intense, and we may not be able to compete successfully;
we operate in a low margin industry, which could increase the volatility of our results of operations;
we may not realize anticipated benefits from our operating cost reduction and productivity improvement efforts;
our profitability is directly affected by cost inflation and deflation and other factors;
we do not have long-term contracts with certain of our customers;
group purchasing organizations may become more active in our industry and increase their efforts to add our customers as members of these organizations;
changes in eating habits of consumers;
extreme weather conditions, including hurricane, earthquake and natural disaster damage;
our reliance on third-party suppliers;
labor relations and cost risks and availability of qualified labor;
volatility of fuel and other transportation costs;
inability to adjust cost structure where one or more of our competitors successfully implement lower costs;
we may be unable to increase our sales in the highest margin portion of our business;
changes in pricing practices of our suppliers;
our growth strategy may not achieve the anticipated results;
risks relating to acquisitions, including the risk that we are not able to realize benefits of acquisitions or successfully integrate the businesses we acquire;
environmental, health, and safety costs, including compliance with current and future environmental laws and regulations relating to carbon emissions and the effects of global warming;
the risk that we fail to comply with requirements imposed by applicable law or government regulations, including increased regulation of electronic cigarette and other alternative nicotine products;

4


 

a portion of our sales volume is dependent upon the distribution of cigarettes and other tobacco products, sales of which are generally declining;
if products we distribute are alleged to cause injury or illness or fail to comply with governmental regulations, we may need to recall our products and may experience product liability claims;
our reliance on technology and risks associated with disruption or delay in implementation of new technology;
costs and risks associated with a potential cybersecurity incident or other technology disruption;
product liability claims relating to the products we distribute and other litigation;
adverse judgements or settlements or unexpected outcomes in legal proceedings;
negative media exposure and other events that damage our reputation;
decrease in earnings from amortization charges associated with acquisitions;
impact of uncollectibility of accounts receivable;
difficult economic conditions affecting consumer confidence;
increase in excise taxes or reduction in credit terms by taxing jurisdictions;
the cost and adequacy of insurance coverage and increases in the number or severity of insurance and claims expenses;
risks relating to our outstanding indebtedness;
our ability to raise additional capital; and
the following risks related to the acquisition of Core-Mark Holding Company, Inc. (“Core-Mark”):
the possibility that the expected synergies and value creation from the acquisition will not be realized or will not be realized within the expected time period;
the risk that unexpected costs will be incurred in connection with the integration of the acquisition or that the integration of Core-Mark will be more difficult or time consuming than expected;
the inability to retain key personnel;
disruption from the acquisition including potential adverse reactions or changes to business relationships with customers, employees, suppliers or regulators, making it more difficult to maintain business and operational relationships; and
the risk that the combined company may not be able to effectively manage its expanded operations.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. We cannot assure you (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct, or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “the Company,” or “PFG” as used in this Form 10-Q refer to Performance Food Group Company and its consolidated subsidiaries.

5


 

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

PERFORMANCE FOOD GROUP COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions, except per share data)

 

As of
April 2, 2022

 

 

As of
July 3, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

13.7

 

 

$

11.1

 

Accounts receivable, less allowances of $56.5 and $42.6

 

 

2,185.7

 

 

 

1,580.0

 

Inventories, net

 

 

3,085.3

 

 

 

1,839.4

 

Income taxes receivable

 

 

57.6

 

 

 

49.6

 

Prepaid expenses and other current assets

 

 

226.1

 

 

 

100.3

 

Total current assets

 

 

5,568.4

 

 

 

3,580.4

 

Goodwill

 

 

2,291.5

 

 

 

1,354.7

 

Other intangible assets, net

 

 

1,243.8

 

 

 

796.4

 

Property, plant and equipment, net

 

 

2,104.7

 

 

 

1,589.6

 

Operating lease right-of-use assets

 

 

642.8

 

 

 

438.7

 

Restricted cash

 

 

7.1

 

 

 

11.1

 

Other assets

 

 

121.3

 

 

 

74.8

 

Total assets

 

$

11,979.6

 

 

$

7,845.7

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Trade accounts payable and outstanding checks in excess of deposits

 

 

2,556.3

 

 

 

1,776.5

 

Accrued expenses and other current liabilities

 

 

758.6

 

 

 

625.0

 

Finance lease obligations—current installments

 

 

76.2

 

 

 

48.7

 

Operating lease obligations—current installments

 

 

112.8

 

 

 

77.0

 

Total current liabilities

 

 

3,503.9

 

 

 

2,527.2

 

Long-term debt

 

 

3,721.1

 

 

 

2,240.5

 

Deferred income tax liability, net

 

 

423.8

 

 

 

140.4

 

Finance lease obligations, excluding current installments

 

 

362.4

 

 

 

255.0

 

Operating lease obligations, excluding current installments

 

 

546.8

 

 

 

378.0

 

Other long-term liabilities

 

 

217.1

 

 

 

198.5

 

Total liabilities

 

 

8,775.1

 

 

 

5,739.6

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Common Stock: $0.01 par value per share, 1.0 billion shares authorized, 153.3 million shares issued and outstanding as of April 2, 2022;
132.5 million shares issued and outstanding as of July 3, 2021

 

 

1.5

 

 

 

1.3

 

Additional paid-in capital

 

 

2,797.1

 

 

 

1,752.8

 

Accumulated other comprehensive income (loss), net of tax (expense) benefit of $(4.1) and $1.9

 

 

12.1

 

 

 

(5.3

)

Retained earnings

 

 

393.8

 

 

 

357.3

 

Total shareholders’ equity

 

 

3,204.5

 

 

 

2,106.1

 

Total liabilities and shareholders’ equity

 

$

11,979.6

 

 

$

7,845.7

 

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

 

6


 

PERFORMANCE FOOD GROUP COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

(In millions, except per share data)

 

Three Months Ended April 2, 2022

 

 

Three Months Ended March 27, 2021

 

 

Nine Months Ended April 2, 2022

 

 

Nine Months Ended March 27, 2021

 

Net sales

 

$

13,079.0

 

 

$

7,202.5

 

 

$

36,304.1

 

 

$

21,094.5

 

Cost of goods sold

 

 

11,733.4

 

 

 

6,369.8

 

 

 

32,537.4

 

 

 

18,635.2

 

Gross profit

 

 

1,345.6

 

 

 

832.7

 

 

 

3,766.7

 

 

 

2,459.3

 

Operating expenses

 

 

1,277.0

 

 

 

809.3

 

 

 

3,592.1

 

 

 

2,339.2

 

Operating profit

 

 

68.6

 

 

 

23.4

 

 

 

174.6

 

 

 

120.1

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

45.9

 

 

 

37.1

 

 

 

135.1

 

 

 

114.0

 

Other, net

 

 

(11.3

)

 

 

(1.6

)

 

 

(11.4

)

 

 

(4.7

)

Other expense, net

 

 

34.6

 

 

 

35.5

 

 

 

123.7

 

 

 

109.3

 

Income (loss) before taxes

 

 

34.0

 

 

 

(12.1

)

 

 

50.9

 

 

 

10.8

 

Income tax expense (benefit)

 

 

10.6

 

 

 

(4.5

)

 

 

14.4

 

 

 

1.5

 

Net income (loss)

 

$

23.4

 

 

$

(7.6

)

 

$

36.5

 

 

$

9.3

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

153.3

 

 

 

132.3

 

 

 

148.6

 

 

 

132.0

 

Diluted

 

 

154.9

 

 

 

132.3

 

 

 

150.2

 

 

 

133.2

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

 

$

(0.06

)

 

$

0.25

 

 

$

0.07

 

Diluted

 

$

0.15

 

 

$

(0.06

)

 

$

0.24

 

 

$

0.07

 

 

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

 

7


 

PERFORMANCE FOOD GROUP COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

($ in millions)

 

Three Months Ended
April 2, 2022

 

 

Three Months Ended
March 27, 2021

 

 

Nine Months Ended
April 2, 2022

 

 

Nine Months Ended
March 27, 2021

 

Net income (loss)

 

$

23.4

 

 

$

(7.6

)

 

$

36.5

 

 

$

9.3

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps:

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value, net of tax

 

 

10.5

 

 

 

2.2

 

 

 

13.6

 

 

 

2.1

 

Reclassification adjustment, net of tax

 

 

0.7

 

 

 

0.6

 

 

 

3.4

 

 

 

2.0

 

Foreign currency translation adjustment, net of tax

 

 

0.4

 

 

 

 

 

 

0.4

 

 

 

 

Other comprehensive income

 

 

11.6

 

 

 

2.8

 

 

 

17.4

 

 

 

4.1

 

Total comprehensive income (loss)

 

$

35.0

 

 

$

(4.8

)

 

$

53.9

 

 

$

13.4

 

 

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

 

8


 

PERFORMANCE FOOD GROUP COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Shareholders’

 

(In millions)

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Earnings

 

 

Equity

 

Balance as of December 26, 2020

 

 

132.0

 

 

$

1.3

 

 

$

1,721.1

 

 

$

(9.0

)

 

$

333.5

 

 

$

2,046.9

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7.6

)

 

 

(7.6

)

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

2.8

 

 

 

 

 

 

2.8

 

Issuance of common stock under stock-based compensation plans

 

 

0.2

 

 

 

 

 

 

1.0

 

 

 

 

 

 

 

 

 

1.0

 

Issuance of common stock under employee stock purchase plan

 

 

0.1

 

 

 

 

 

 

8.5

 

 

 

 

 

 

 

 

 

8.5

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6.1

 

 

 

 

 

 

 

 

 

6.1

 

Balance as of March 27, 2021

 

 

132.3

 

 

$

1.3

 

 

$

1,736.7

 

 

$

(6.2

)

 

$

325.9

 

 

$

2,057.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2022

 

 

153.3

 

 

$

1.5

 

 

$

2,788.5

 

 

$

0.5

 

 

$

370.4

 

 

$

3,160.9

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23.4

 

 

 

23.4

 

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

11.2

 

 

 

 

 

 

11.2

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

0.4

 

 

 

 

 

 

0.4

 

Issuance of common stock under stock-based compensation plans

 

 

 

 

 

 

 

 

(1.2

)

 

 

 

 

 

 

 

 

(1.2

)

Issuance of common stock under employee stock purchase plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

9.8

 

 

 

 

 

 

 

 

 

9.8

 

Balance as of April 2, 2022

 

 

153.3

 

 

$

1.5

 

 

$

2,797.1

 

 

$

12.1

 

 

$

393.8

 

 

$

3,204.5

 

 

 

 

 

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Shareholders’

 

(In millions)

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Earnings

 

 

Equity

 

Balance as of June 27, 2020

 

 

131.3

 

 

$

1.3

 

 

$

1,703.0

 

 

$

(10.3

)

 

$

316.6

 

 

$

2,010.6

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.3

 

 

 

9.3

 

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

4.1

 

 

 

 

 

 

4.1

 

Issuance of common stock under stock-based compensation plans

 

 

0.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

 

0.4

 

 

 

 

 

 

16.3

 

 

 

 

 

 

 

 

 

16.3

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

17.4

 

 

 

 

 

 

 

 

 

17.4

 

Balance as of March 27, 2021

 

 

132.3

 

 

$

1.3

 

 

$

1,736.7

 

 

$

(6.2

)

 

$

325.9

 

 

$

2,057.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of July 3, 2021

 

 

132.5

 

 

 

1.3

 

 

 

1,752.8

 

 

 

(5.3

)

 

 

357.3

 

 

 

2,106.1

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36.5

 

 

 

36.5

 

Interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

17.0

 

 

 

 

 

 

17.0

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

0.4

 

 

 

 

 

 

0.4

 

Issuance of common stock under stock-based compensation plans

 

 

0.6

 

 

 

 

 

 

(8.0

)

 

 

 

 

 

 

 

 

(8.0

)

Issuance of common stock under employee stock purchase plan

 

 

0.3

 

 

 

 

 

 

12.3

 

 

 

 

 

 

 

 

 

12.3

 

Conversion of Core-Mark shares of common stock

 

 

19.9

 

 

 

0.2

 

 

 

998.6

 

 

 

 

 

 

 

 

 

998.8

 

Conversion of Core-Mark stock-based compensation (1)