RICHMOND, Va.--(BUSINESS WIRE)--Performance Food Group Company (NYSE: PFGC) today announced its second-quarter and first-half fiscal 2021 business results.

“I am proud of how our Company has continued to navigate through the current market conditions and distinguish ourselves as leaders in the food distribution industry,” said George Holm, PFG’s Chairman, President & Chief Executive Officer. “Despite the new challenges the holiday season brought for our business, our Foodservice segment still delivered a solid quarter while continuing the smooth integration of Reinhart. Looking ahead, I believe PFG is well-positioned to take advantage of a better operating environment in the not-too-distant future.”

Second-Quarter Fiscal 2021 Financial Summary

Total case volume increased 8.4% for the second quarter of fiscal 2021 compared to the prior year period. Total case volume included Reinhart Foodservice, LLC (“Reinhart”) and a 26.5% increase in independent cases. Excluding the impact of the Reinhart acquisition, case volume declined 16.9% and independent cases declined 5.0% in the second quarter of fiscal 2021 compared to the prior year period.

Net sales for the second quarter of fiscal 2021 grew 12.8% to $6.8 billion compared to the prior year period. The increase in net sales was primarily attributable to the acquisition of Reinhart, partially offset by the effects of the novel coronavirus (“COVID-19”) pandemic. The acquisition of Reinhart contributed $1,348.0 million to net sales for the second quarter of fiscal 2021. Overall food cost inflation was approximately 2.6%.

Gross profit for the second quarter of fiscal 2021 grew 14.0% to $811.1 million compared to the prior year period. The gross profit increase was led by the acquisition of Reinhart, partially offset by the current environment due to the COVID-19 pandemic. For the second quarter of fiscal 2021, the Company recorded a total of $7.0 million of inventory write-offs, which is a $1.9 million increase from the second quarter of fiscal 2020 primarily as a result of the impact of COVID-19 on our operations. Gross margin as a percentage of net sales was 11.8% for the second quarter of fiscal 2021 compared to 11.7% for the prior year period.

Operating expenses rose 18.9% to $750.2 million in the second quarter of fiscal 2021 compared to the prior year period. The increase in operating expenses was primarily due to the acquisition of Reinhart. Excluding the impact of Reinhart operating expenses, the Company decreased its operating expenses related to personnel expenses, fuel expense, insurance expense, travel expenses, professional fees, and contingent consideration accretion expense compared to the prior year period. In the second quarter of fiscal 2021, personnel expenses related to medical benefits and workers compensation insurance expense decreased $11.8 million as a result of reduced headcount, a seasoned workforce and a reduction in claims experienced. Additionally, in the second quarter of fiscal 2021, the Company recorded a benefit of $0.8 million related to reserves for expected credit losses as compared to bad debt expense of $4.9 million for the second quarter of 2020.

Net income for the second quarter of fiscal 2021 declined 57.3% year-over-year to $17.6 million. The decline was primarily a result of the $19.6 million decrease in operating profit and a $11.7 million increase in interest expense, partially offset by a $5.8 million decrease in income tax expense. The effective tax rate in the second quarter of fiscal 2021 was approximately 29.2% compared to 24.2% in the second quarter of fiscal 2020. The increase in the tax rate was due to the increase of state taxes and non-deductible expenses as a percentage of book income, which was significantly lower than the book income for the prior year period.

EBITDA increased 18.2% to $147.2 million in the second quarter of fiscal 2021 compared to the prior year period.1 For the quarter, Adjusted EBITDA rose 10.6% to $158.0 million compared to the prior year period.

Diluted EPS declined 66.7% to $0.13 per share in the second quarter of fiscal 2021 compared to the prior year period. Adjusted Diluted EPS declined 39.7% to $0.35 per share in the second quarter of fiscal 2021 compared to the prior year period.

First-Half Fiscal 2021 Financial Summary

Total case volume increased 8.7% in the first half of fiscal 2021 compared to the prior year period. Total case volume included Reinhart and a 27.3% increase in independent cases. Excluding the impact of the Reinhart acquisition, case volume declined 17.2% and independent cases declined 5.6% in the first half of fiscal 2021 compared to the prior year period.

Net sales for the first half of fiscal 2021 was $13.9 billion, an increase of 12.8% versus the comparable prior year period. The increase in net sales was primarily attributable to the acquisition of Reinhart, partially offset by the effects of the COVID-19 pandemic. The acquisition of Reinhart contributed $2,805.5 million to net sales for the first half of fiscal 2021.

Gross profit for the first half of fiscal 2021 increased 14.3% to $1.6 billion compared to the prior year period. The gross profit increase was led by the acquisition of Reinhart, partially offset by the current environment due to the COVID-19 pandemic. For the first half of fiscal 2021, the Company recorded a total of $19.0 million of inventory write-offs, which is a $7.6 million increase from the first half of fiscal 2020 primarily as a result of the impact of COVID-19 on our operations. Gross profit as a percentage of net sales was 11.7% for the first half of fiscal 2021 compared to 11.6% for the prior year period.

Operating expenses increased 19.7% to $1.5 billion in the first half of fiscal 2021 compared to the prior year period. The increase in operating expenses was primarily due to the acquisition of Reinhart. Excluding the impact of Reinhart operating expenses, the Company decreased its operating expenses related to personnel expenses, fuel expense, insurance expense, travel expenses, professional fees, and contingent consideration accretion expense compared to the prior year period. In the first half of fiscal 2021, the Company recorded a benefit of $3.4 million related to reserves for expected credit losses as compared to bad debt expense of $8.5 million for the first half of 2020.

Net income decreased 78.1% to $16.9 million for the first half of fiscal 2021 compared to the prior year period. The decline was primarily a result of the $47.3 million decrease in operating profit and a $33.2 million increase in interest expense, partially offset by a $17.2 million decrease in income tax expense. The effective tax rate in the first half of fiscal 2021 was approximately 26.2% compared to 23.1% in the first half of fiscal 2020. The increase in the tax rate was due to the increase of state taxes and non-deductible expenses as a percentage of book income, which was significantly lower than the book income for the prior year period.

EBITDA increased 15.3% to $266.1 million in the first half of fiscal 2021 compared to the prior year period. For the first half of fiscal 2021 Adjusted EBITDA increased 8.4% to $293.2 million compared to the prior year period.

Diluted EPS declined 82.2% to $0.13 per share in the first half of fiscal 2021 compared to the prior year period. Adjusted Diluted EPS declined 47.4% to $0.60 per share in the first half of fiscal 2021 over the prior year period.

Cash Flow and Capital Spending

In the first six months of fiscal 2021, PFG used $24.4 million in cash flow from operating activities compared to $157.8 million of cash flow provided by operating activities in the prior year period. The decrease in cash flow from operating activities was largely driven by investments in working capital and the payment of $117.3 million contingent consideration related to the acquisition of Eby-Brown Company LLC, partially offset by income tax refunds of $118.7 million received in the first six months of fiscal 2021. For the first six months of fiscal 2021, PFG invested $83.0 million in capital expenditures, an increase of $34.0 million versus the prior year period. During the first six months of fiscal 2021, PFG delivered negative free cash flow of $107.4 millioncompared to positive free cash flow of $108.8 million in the prior year period.1

Second-Quarter Fiscal 2021 Segment Results

Foodservice

Second-quarter net sales for Foodservice increased 27.0% to $4.9 billion compared to the prior year period. This increase in net sales was driven by the Reinhart acquisition, as well as an increase in selling price per case as a result of inflation. Reinhart contributed $1,348.0 million of net sales during the second quarter of fiscal 2021. For the second quarter of fiscal 2021, independent sales as a percentage of total segment sales were 33.9%.

Second-quarter EBITDA for Foodservice increased 36.7% to $155.3 million compared to the prior year period. Gross profit increased 29.7% in the second quarter of fiscal 2021 compared to the prior year period as a result of the Reinhart acquisition. Operating expenses, excluding depreciation and amortization, for Foodservice increased 27.5% for the second quarter of fiscal 2021 compared to the prior year period as a result of the acquisition of Reinhart. Excluding the impact of Reinhart operating expenses, operating expenses declined due to decreases in sales volumes and reduced personnel expenses as compared to the prior year period. Operating expenses also experienced decreases in fuel expense of $7.0 million and insurance expense of $8.1 million as compared to the prior year period. In the second quarter of fiscal 2021, Foodservice recorded a benefit of $1.9 million related to reserves for expected credit losses compared to bad debt expense of $3.3 million for the second quarter of fiscal 2020.

Vistar

For the second quarter of fiscal 2021, net sales for Vistar decreased 11.9% to $2.0 billion compared to the prior year period. This decrease was driven by the continued economic effects of the COVID-19 pandemic.

Second-quarter EBITDA for Vistar decreased 31.6% to $38.7 million versus the prior year period. Gross profit decline of 21.2% for the second quarter of fiscal 2021 compared to the prior year period was fueled by the current economic environment due to COVID-19. Operating expenses decreased primarily as a result of the decrease in sales volume, decreases in personnel and fuel expenses, and a reduction in contingent consideration accretion expense of $4.8 million as compared to the prior year period. In the second quarter of fiscal 2021, Vistar recorded bad debt expense of $1.1 million, which is a decrease of $0.5 million compared to the prior year period.

About Performance Food Group Company

Built on the many proud histories of our family of companies, Performance Food Group is a customer-centric foodservice distribution leader headquartered in Richmond, Virginia. Grounded by roots that date back to a grocery peddler in 1885, PFG today has a nationwide network of over 100 distribution facilities, thousands of talented associates and valued suppliers across the country. With the goal of helping our customers thrive, we market and deliver quality food and related products to over 200,000 locations including independent and chain restaurants, schools, business and industry locations, healthcare facilities, vending distributors, office coffee service distributors, big box retailers, theaters and convenience stores. Building strong relationships is core to PFG’s success – from connecting associates with great career opportunities to connecting valued suppliers and quality products with PFG’s broad and diverse customer base. To learn more about PFG, visit pfgc.com.