Strategic Acquisition of Leading Wholesale Consumer Products
Distributor Expands Presence in Fast-Growing Convenience Store Channel
Vistar and Eby-Brown Combined Will Service Over 75,000 Locations and
Vistar Would be No. 1 in Locations Served and No. 2 in Overall
Non-tobacco Convenience Volume
Reaffirms Fiscal 2019 Outlook
RICHMOND, Va.--(BUSINESS WIRE)--
Performance Food Group Company (“PFG”) (NYSE: PFGC) announced today that
it has signed a definitive agreement to acquire Eby-Brown Company LLC
(“Eby-Brown”), a leading U.S. distributor of pre-packaged candy, snacks,
specialty beverages and tobacco products in the convenience industry.
“We are excited about Eby-Brown joining the PFG family of companies and
adding their customer-centric approach to ours,” said PFG Chairman,
President & CEO George Holm. “Their impressive levels of order
fulfillment, on-time delivery and ability to adapt to customer needs
have helped build their reputation as a premier provider of convenience
industry solutions for independent operators and larger retail chains.
This acquisition will provide a new, complementary growth opportunity
for PFG with incremental revenue synergies in our foodservice platform.”
This acquisition will allow PFG’s Vistar segment to strategically expand
in the fast-growing convenience store channel where there is significant
overlap with suppliers and product categories, as well as opportunities
to use PFG brands for unique solutions in the prepared/made-to-order
foodservice market. Vistar and Eby-Brown combined will service over
75,000 locations and Vistar would be No. 1 in locations served and No. 2
in overall non-tobacco convenience volume.
Eby-Brown is a privately held company founded more than 125 years ago.
Headquartered in Naperville, Ill., the company is led today by Dick and
Tom Wake, and operates eight distribution facilities in Georgia,
Kentucky, Illinois, Indiana, Michigan, Ohio, Pennsylvania and Wisconsin
that serve 20 states. Eby-Brown had fiscal 2018 revenues of $5.3
billion, which included $1.0 billion of tobacco excise taxes. The
transaction is expected to be neutral to slightly accretive to PFG’s
Adjusted Earnings Per Share (“EPS”) in fiscal 2020.
“George and his management team understand and share our values and
belief in forming lasting relationships with customers and business
partners,” said Tom Wake, Co-President of Eby-Brown. Co-President Dick
Wake added, “We believe this acquisition will better position us to
serve existing and new customers, and we’re excited about the innovative
possibilities that we will be able to provide to our customers, as a
part of PFG.”
Subject to regulatory approval, the companies expect the transaction to
close in the second quarter of calendar 2019.
Fiscal 2019 Outlook
For fiscal 2019, PFG reaffirms its Adjusted EBITDA growth to be in a
range of 7% to 10% over its fiscal 2018 Adjusted EBITDA of $426.7 million1.
The Company continues to expect that the 7% to 10% Adjusted EBITDA
growth for fiscal 2019 will reflect second half Adjusted EBITDA growth
to be in the high single to low double-digit range.
PFG also reaffirms fiscal 2019 Adjusted Diluted EPS to grow in a range
of 10% to 16% over its fiscal 2018 Adjusted Diluted EPS of $1.541.
This transaction is not included in the fiscal 2019 outlook.
PFG’s Adjusted EBITDA and Adjusted Diluted EPS outlook exclude the
impact of certain income and expense items that management believes are
not part of underlying operations. These items may include, but are not
limited to, loss on early extinguishment of debt, restructuring charges,
certain tax items, and charges associated with non-recurring
professional and legal fees associated with acquisitions. PFG’s
management cannot estimate on a forward-looking basis the impact of
these income and expense items on its reported Net income and its
reported Diluted EPS, which could be significant, are difficult to
predict and may be highly variable. As a result, PFG does not provide a
reconciliation to the closest corresponding GAAP financial measure for
its Adjusted EBITDA and Adjusted Diluted EPS outlook. Please see the
“Forward-Looking Statements” section of this release for a discussion of
certain risks to PFG’s outlook.
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
approximately 75 distribution centers, 15,000-plus talented associates
and more than 5,000 valued suppliers across the country. With the goal
of helping our customers thrive, we market and deliver quality food and
related products to over 150,000 locations including independent and
chain restaurants, schools, business and industry locations, healthcare
facilities, vending distributors, office coffee service distributors,
big box retailers and theaters. 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 and our
divisions, Performance Foodservice, PFG Customized and Vistar, visit pfgc.com.
About Eby-Brown Company LLC
Eby-Brown Company LLC, with more than $5.3 billion in revenue, is the
third largest wholesale consumer products distributor in the convenience
industry, driving efficiencies and profitability for more than 130 years
through its industry leading programs, technology and variety of product
and foodservice solutions. Eby-Brown operates eight distribution centers
throughout the Midwest, Northeast and Southeast. To learn more about
Eby-Brown, visit eby-brown.com.
Eby-Brown Contact
Christina Dokos, Senior Vice President, Marketing
Christina.Dokos@eby-brown.com
;
630-536-3645
1 This press release includes metrics, including Adjusted
EBITDA and Adjusted Diluted EPS that are not calculated in accordance
with Generally Accepted Accounting Principles in the U.S. (“GAAP”).
Please see “Statement Regarding Non-GAAP Financial Measures” at the end
of this release for the definitions of such non-GAAP financial measures
and reconciliations of such non-GAAP financial measures to their
respective most comparable financial measures calculated in accordance
with GAAP
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include, but are not limited to, statements related to our
expectations regarding the performance of our business, our financial
results, our liquidity and capital resources, our proposed acquisition
of Eby-Brown Company LLC and other non-historical statements. You can
identify these forward-looking statements by the use of words such as
“outlook,” “believes,” “expects,” “potential,” “continues,” “may,”
“will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,”
“plans,” “estimates,” “anticipates” or the negative version of these
words or other comparable words.
Such forward-looking statements are subject to various risks and
uncertainties. The following factors, in addition to those discussed
under the section entitled Item 1A Risk Factors in PFG’s Annual Report
on Form 10-K for the fiscal year ended June 30, 2018 filed with the
Securities and Exchange Commission (the “SEC”) on August 16, 2018 as
such factors may be updated from time to time in our periodic filings
with the SEC, which are accessible on the SEC’s website at
www.sec.gov
,
could cause actual future results to differ materially from those
expressed in any forward-looking statements:
• 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 or
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;
• our reliance on third-party suppliers;
• labor relations and costs 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
portions of our business;
• changes in pricing practices of our suppliers;
• our growth strategy may not achieve the anticipated results;
• risks relating to any future acquisitions;
• environmental, health, and safety costs;
• the risk that we fail to comply with requirements imposed by
applicable law or government regulations;
• 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 judgments or settlements;
• negative media exposure and other events that damage our reputation;
• anticipated multiemployer pension related liabilities and
contributions to our multiemployer pension plan;
• decrease in earnings from amortization charges associated with
future acquisitions;
• impact of uncollectibility of accounts receivable;
• difficult economic conditions affecting consumer confidence;
• departure of key members of senior management;
• risks relating to federal, state, and local tax rules;
• the cost and adequacy of insurance coverage;
• risks relating to our outstanding indebtedness;
• our ability to maintain an effective system of disclosure controls
and internal control over financial reporting;
• our ability to consummate the acquisition of Eby-Brown Company LLC
as expected;
• the possibility that one or more of the conditions to the
consummation of the acquisition of Eby-Brown Company LLC may not be
satisfied;
• the possibility that regulatory approvals required for the
acquisition of Eby-Brown Company LLC may not be obtained in a timely
manner, if at all;
• the expected benefits of the acquisition of Eby-Brown Company LLC
may not materialize in the expected manner or timeframe, if at all;
Accordingly, there are or will be important factors that could cause
actual outcomes or results to differ materially from those indicated in
these statements. These factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements
that are included in this release and in our filings with the SEC. Any
forward-looking statement, including any contained herein, speaks only
as of the time of this release and we do not undertake to update or
revise them as more information becomes available or to disclose any
facts, events, or circumstances after the date of this release that may
affect the accuracy of any forward-looking statement, except as required
by law.
Statement Regarding Non-GAAP Financial Measures
This press release includes financial measures that are not calculated
in accordance with GAAP, including Adjusted EBITDA and Adjusted Diluted
EPS. Such measures are not recognized terms under GAAP, should not be
considered in isolation or as a substitute for measures prepared in
accordance with GAAP, and are not indicative of net income and diluted
EPS as determined under GAAP. Adjusted EBITDA, Adjusted Diluted EPS and
other non-GAAP financial measures have limitations that should be
considered before using these measures to evaluate PFG’s financial
performance. Adjusted EBITDA and Adjusted Diluted EPS, as presented, may
not be comparable to similarly titled measures of other companies
because of varying methods of calculation.
Management uses Adjusted EBITDA, defined as net income before interest
expense, interest income, income and franchise taxes, and depreciation
and amortization, further adjusted to exclude certain items we do not
consider part of our core operating results. Such adjustments include
certain unusual, non-cash, non-recurring, cost reduction and other
adjustment items permitted in calculating covenant compliance under the
PFG’s credit agreement and indenture (other than certain pro forma
adjustments permitted under our credit agreement and indenture relating
to the Adjusted EBITDA contribution of acquired entities or businesses
prior to the acquisition date). Under PFG’s credit agreement and
indenture, PFG’s ability to engage in certain activities such as
incurring certain additional indebtedness, making certain investments
and making restricted payments is tied to ratios based on Adjusted
EBITDA (as defined in the credit agreement and indenture).
Management also uses Adjusted Diluted EPS, which is calculated by
adjusting the most directly comparable GAAP financial measure by
excluding the same items excluded in PFG’s calculation of Adjusted
EBITDA, as well as certain one-time income tax items, to the extent that
each such item was included in the applicable GAAP financial measure.
PFG believes that the presentation of Adjusted EBITDA and Adjusted
Diluted EPS is useful to investors because these metrics provide insight
into underlying business trends and year-over-year results and are
frequently used by securities analysts, investors and other interested
parties in their evaluation of the operating performance of companies in
PFG’s industry.
The following table includes a reconciliation of non-GAAP financial
measures to the applicable most comparable U.S. GAAP financial measures.
PERFORMANCE FOOD GROUP COMPANY
Non-GAAP
Reconciliation (Unaudited)
|
|
|
|
|
|
|
Fiscal year ended
|
|
($ in millions, except share and per
share data)
|
|
June 30, 2018
|
|
Net income (GAAP)
|
|
$
|
198.7
|
|
Interest expense, net
|
|
|
60.4
|
|
Income tax (benefit) expense
|
|
|
(5.1
|
)
|
Depreciation
|
|
|
100.3
|
|
Amortization of intangible assets
|
|
|
29.8
|
|
EBITDA (Non-GAAP)
|
|
|
384.1
|
|
Impact of non-cash items (A)
|
|
|
23.2
|
|
Impact of acquisition, integration & reorganization charges (B)
|
|
|
5.0
|
|
Impact of productivity initiatives (C)
|
|
|
10.6
|
|
Impact of other adjustment items (D)
|
|
|
3.8
|
|
Adjusted EBITDA (Non-GAAP)
|
|
$
|
426.7
|
|
|
|
|
|
|
Diluted earnings per share (GAAP)
|
|
$
|
1.90
|
|
Impact of non-cash items
|
|
|
0.22
|
|
Impact of acquisition, integration & reorganization charges
|
|
|
0.04
|
|
Impact of productivity initiatives
|
|
|
0.10
|
|
Impact of other adjustment items
|
|
|
0.04
|
|
Tax impact of above adjustments
|
|
|
(0.14
|
)
|
Tax impact of revaluation of net deferred tax liability (E)
|
|
|
(0.37
|
)
|
Tax impact of other tax law change items (F)
|
|
|
(0.11
|
)
|
Tax impact of stock-based compensation - performance vesting (G)
|
|
|
(0.14
|
)
|
Adjusted Diluted Earnings per Share (Non-GAAP)
|
|
$
|
1.54
|
|
|
|
A.
|
|
Includes adjustments for non-cash charges arising from stock-based
compensation, interest rate swap hedge ineffectiveness, and
gain/loss on disposal of assets. Stock-based compensation cost was
$21.6 million fiscal 2018. In addition, this includes an increase
in the LIFO reserve of $0.3 million for fiscal 2018.
|
|
|
|
|
|
|
|
B.
|
|
Includes professional fees and other costs related to completed
and abandoned acquisitions, costs of integrating certain of our
facilities, facility closing costs, certain equity transactions,
and advisory fees.
|
|
|
|
|
|
|
|
C.
|
|
Consists primarily of professional fees and related expenses
associated with productivity initiatives.
|
|
|
|
|
|
|
|
D.
|
|
Consists primarily of amounts related to fuel collar derivatives,
certain financing transactions, lease amendments, and franchise
tax expense and other adjustments permitted under our credit
agreement.
|
|
|
|
|
|
|
|
E.
|
|
Represents the per share impact of the $38.5 million net benefit
to deferred income tax expense as a result of the Act and the
revaluation of the Company’s net deferred tax liability.
|
|
|
|
|
|
|
|
F.
|
|
Represents the per share impact of the $11.9 million net benefit
to income tax expense as a result of the blended statutory rate
for fiscal 2018 and the resulting rate differential related to
temporary differences.
|
|
|
|
|
|
|
|
G.
|
|
Represents the per share impact of the $15.4 million excess tax
benefit recognized as a result of the performance metrics being
met for certain stock-based compensation awards upon the exit of
the Company’s private-equity shareholders.
|
.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190319005171/en/
Investor Contact:
Michael D. Neese
VP, Investor
Relations
(804) 287-8126
michael.neese@pfgc.com
Media Contact:
Trisha Meade
Communications & Engagement
Manager
(804) 285-5390
communications@pfgc.com
Source: Performance Food Group Company