Performance Food pany(US:PFGC)2023-08-16 20:16Business Operations - Performance Food Group Company distributes over 250,000 food products from 142 distribution centers to more than 300,000 customer locations across North America[16]. - The acquisition of Core-Mark Holding Company on September 1, 2021, expanded the convenience business, now including operations in Canada[17]. - The Company operates three reportable segments: Foodservice, Vistar, and Convenience, with Foodservice serving over 175,000 customer locations[20][21]. - Vistar is a leading distributor of candy, snacks, and beverages to over 75,000 customer locations from 25 distribution centers[25]. - The Convenience segment serves approximately 50,000 customer locations in the U.S. and Canada, operating 39 distribution centers[27]. - The Company had no customers that comprised more than 10% of consolidated net sales for fiscal years 2023, 2022, or 2021[28]. - The company operates in a low margin industry, which increases the volatility of reported net income[80]. - The company has 142 distribution centers across three segments, with an average square footage of approximately 200,000 square feet per facility[124]. - The Foodservice segment operates 78 distribution centers, while the Vistar and Convenience segments operate 25 and 39 centers, respectively[124]. - The company distributes over 250,000 food and food-related products to more than 300,000 customer locations across the U.S. from approximately 142 distribution facilities[144]. Financial Performance - Net sales increased by $6.4 billion, or 12.5%, in fiscal 2023 compared to fiscal 2022, reaching $57.3 billion[161]. - Total case volume increased by 5.8% in fiscal 2023, with organic case volume growth of 1.6%[162]. - Gross profit rose by $998.5 million, or 19.0%, to $6.3 billion in fiscal 2023, driven by the acquisition of Core-Mark and a favorable mix of cases sold[163]. - Operating expenses increased by $560.1 million, or 11.4%, primarily due to the Core-Mark acquisition and rising personnel and fuel costs[164]. - Net income for fiscal 2023 was $397.2 million, compared to $112.5 million in fiscal 2022, reflecting a significant increase in operating profit[166]. - Adjusted EBITDA grew by $343.6 million, or 33.7%, to $1.4 billion in fiscal 2023[172]. - Cash flow from operating activities increased to $832.1 million in fiscal 2023 from $276.5 million in fiscal 2022, driven by higher operating income and reduced working capital needs[196]. - Cash used in investing activities decreased significantly to $294.6 million in fiscal 2023 from $1,861.5 million in fiscal 2022, with major investments in acquisitions and capital expenditures[197]. Cost and Inflation - In fiscal 2023, product cost inflation led to an increase in selling price per case and net sales[67]. - The company experienced an inflation rate of 8.6% for fiscal 2023, which increased product costs and decreased profit margins[81]. - Fuel expenses increased by $30.8 million in fiscal 2023 compared to fiscal 2022 due to significant increases in fuel prices[88]. - The overall rate of product cost inflation was approximately 8.6% for fiscal 2023, with a decline observed throughout the year[162]. - Volatile food costs directly impact profitability, as sales prices are based on product costs plus a markup[81]. Labor and Employment - The Company employs over 35,000 individuals, with approximately 99% in full-time positions[44]. - The company had over 35,000 employees as of July 1, 2023, with approximately 1,600 being union members[69]. - Labor costs are a significant concern, as they are higher as a percentage of net sales compared to many other industries[70]. - The company faces challenges in recruiting and retaining qualified labor, particularly warehouse workers and drivers, due to a competitive labor market[72]. Regulatory and Compliance - The company is subject to various federal, state, and local regulations, including those from the USDA and FDA, which impose standards for product quality and sanitation[56]. - Compliance with regulatory requirements is critical, as failure could result in penalties, product recalls, or operational shutdowns[58]. - The company is subject to significant governmental regulations, which could result in administrative penalties or fines if not complied with[98]. - The company faces potential substantial costs due to compliance with environmental and workplace safety laws, which could include fines or penalties[99]. Competition and Market Trends - The company faces intense competition from larger distributors like Sysco and US Foods, which may pressure pricing and market share[79]. - Changes in consumer eating habits, such as a shift towards sustainable and organic products, could reduce demand for the company's products[85]. - The market for tobacco and alternative nicotine products is adversely impacted by legislation and regulations, which could negatively affect the company's sales[100]. - The company anticipates that cigarette consumption trends will continue to decline due to various factors, including health concerns and increased regulation[103]. Debt and Financial Management - As of July 1, 2023, the company had $4,010.0 million in indebtedness, including finance lease obligations[114]. - The company has $2,673.8 million of availability under the Amended ABL Facility after accounting for $172.2 million of outstanding letters of credit and $99.7 million of lenders' reserves[114]. - The company may incur substantial additional indebtedness in the future, despite existing restrictions on incurring new debt[118]. - A substantial portion of the company's indebtedness is floating rate debt, which increases debt service obligations as interest rates rise, potentially decreasing net income and cash flows[115]. - The average interest rate on borrowings increased to 6.35% as of July 1, 2023, compared to 2.89% the previous year[206]. Strategic Initiatives - The company has implemented a Diversity, Inclusion & Belonging strategy, aiming for diverse candidate pools for senior leadership positions[48]. - The company aims to expand its customer base and geographic reach while focusing on independent sales and Performance Brands[155]. - The company emphasizes the importance of executing segment strategies and making strategic acquisitions to drive growth[155]. - The company has a share repurchase program authorized for up to $300 million, which may be amended or suspended at the company's discretion[137]. - The company has no current plans to pay dividends on its common stock, limited by covenants in existing debt agreements[133].