RICHMOND, VA — Performance Food Group announced its second-quarter and first-half fiscal 2022 business results on Feb. 9.
Second-Quarter Fiscal 2022 Financial Summary
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.
Total case volume increased 40.0% for the second quarter of fiscal 2022 compared to the prior year period. Total case volume included Core-Mark Holding Company, Inc. and a 21.0% increase in independent cases. Excluding the impact of the Core-Mark acquisition, organic case volume increased 15.5% in the second quarter of fiscal 2022 compared to the prior year period.
Net sales for the second quarter of fiscal 2022 grew 87.6% to $12.8 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 pandemic, which had a more significant adverse impact in the second quarter of the prior year. The acquisition of Core-Mark contributed $4.2 billion of net sales for the second quarter of fiscal 2022. Overall cost inflation was approximately 12.5%.
Gross profit for the second quarter of fiscal 2022 grew 57.7% 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 $245.2 million in the second quarter of fiscal 2022.
Operating expenses rose 62.8% to $1.2 billion in the second quarter of fiscal 2022 compared to the prior year period. The increase in operating expenses was primarily due to the acquisition of Core-Mark. Core-Mark contributed $217.0 million of operating expenses in the second 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 second quarter of fiscal 2022, the company experienced a $34.0 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 second quarter of fiscal 2022 declined 52.3% year-over-year to $8.4 million. The decline was primarily a result of the $3.1 million decrease in operating profit and a $7.1 million increase in interest expense, partially offset by a $4.3 million decrease in income tax expense. The effective tax rate in the second quarter of fiscal 2022 was approximately 26.5% compared to 29.2% in the second quarter of fiscal 2021. The decrease in the tax rate was due to the decrease of state taxes and non-deductible expense as a percentage of book income and the increase in deductible discrete items related to stock-based compensation as a percentage of book income.
EBITDA increased 17.6% to $173.1 million in the second quarter of fiscal 2022 compared to the prior year period. For the quarter, Adjusted EBITDA rose 52.6% to $241.1 million compared to the prior year period.
Diluted EPS declined 61.5% to $0.05 per share in the second quarter of fiscal 2022 compared to the prior year period. Adjusted Diluted EPS increased 62.9% to $0.57 per share in the second quarter of fiscal 2022 compared to the prior year period.
Second-Quarter Fiscal 2022 Segment Results
Foodservice
Second-quarter net sales for Foodservice increased 27.2% to $6.2 billion compared to the prior year period. This increase in net sales was driven by growth in cases sold due to the declining effects of the COVID-19 pandemic on the restaurant industry, and an increase in selling price per case as a result of inflation. Securing new and expanding business with independent customers resulted in independent case growth of approximately 21.0% for the second quarter of fiscal 2022 compared to the prior year period. For the second quarter of fiscal 2022, independent sales as a percentage of total segment sales were 37.7%.
Second-quarter EBITDA for Foodservice increased 1.7% to $158.0 million compared to the prior year period. Gross profit increased 24.8% in the second 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 32.2% for the second 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.
On December 31, 2021, the company acquired Merchants Foodservice.
Vistar
For the second quarter of fiscal 2022, net sales for Vistar increased 54.3% to $907.3 million compared to the prior year period. This increase was driven primarily by the improving economic conditions due to the declining effects of the COVID-19 pandemic.
Second-quarter EBITDA for Vistar increased 123.6% to $49.2 million versus the prior year period. The increase was the result of a 53.8% increase in gross profit for the second quarter of fiscal 2022 compared to the prior year period, partially offset by a 34.2% 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
Second-quarter net sales for Convenience increased 318.6% to $5.7 billion compared to the prior year period. Net sales related to cigarettes for the second quarter of fiscal 2022 was $3,757.3 million, which includes $1,059.5 million related to tobacco excise taxes, compared to net sales of cigarettes of $978.8 million, which includes $281.4 million of tobacco excise taxes for the prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark. The acquisition of Core-Mark contributed $4,227.0 million of net sales for the second quarter of fiscal 2022.
Second-quarter EBITDA for Convenience increased 128.0% to $37.4 million compared to the prior year period. Gross profit growth of 374.7% for the second quarter of fiscal 2022 compared to the prior year period was fueled by the Core-Mark acquisition. Core-Mark contributed gross profit of $245.2 million in the second 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 $213.2 million of operating expenses, excluding depreciation and amortization, since the acquisition date, along with increases in personnel and fuel expenses.
Fiscal 2022 Outlook
For the fiscal third quarter of 2022, PFG expects net sales to be in a range of $12.9 billion to $13.1 billion and Adjusted EBITDA to be in a range of $220 million to $230 million.
For the full fiscal year 2022, PFG now expects 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. PFG had previously expected net sales to be in a range of $49.5 billion to $50.5 billion and Adjusted EBITDA to be in a range of $940 million to $960 million. This outlook includes the impact of 10 months of Core-Mark’s business results.
