Performance Food Group Company · NYSE:PFGC
Performance Food — Barclays 2016 Global Consumer Staples Conference
45 slides from Performance Food's conference presentation, Sep 8, 2016
Slide 1: Barclays Global Consumer Staples Conference
Barclays Global Consumer Staples Conference September 8, 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements This document has been prepared by Performance Food Group Company (the “Company,” “we,” “us” and “our”) solely for informational purposes. This presentation includes, and our responses to various questions may include, certain forward-looking statements, estimates and proj
Slide 3: PFG Overview
PFG Overview • Third largest foodservice 2016 Net Sales = $16.1BN distributor in the U.S. PFG Vistar Customized 17% 23% • A leading distributor to a wide variety of channels Performance Foodservice 60% • Operates three segments 2016 Adj. EBITDA1 = $366.6MM ̶ Performance Foodservice PFG Customized Vi
Slide 4: Growth Outpacing a Growing Industry
Growth Outpacing a Growing Industry PFG Net Sales CAGR = 8.2% $16.1 $15.3 $13.7 $12.8 Food Away From Home $11.5 $10.1 $10.6 CAGR = 5.2% $741 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 $331 PFG Adjusted EBITDA CAGR = 11.3% $367 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Slide 5: U.S. Foodservice Industry Structure
U.S. Foodservice Industry Structure 2014 Market Size = ~ $256.1 BN SYY USFD PFGC Top 3 $79.4 Billion $41.9 $23.0 $14.5 4 - 10 $22.7 BN Regional Broadliners 11 - 15,000+ $154 BN All Other Note: Technomic and company filings for Sysco, PFG, and US Foods. U.S. Sales only, where available Sysco 2014 sal
Slide 6: Top U.S. Foodservice Distributors
Top 3 U.S. Foodservice Distributors Broadline Specialty Systems • Street Restaurants • Candy, Snacks, and • National Casual Dining • QSR/ Fast Casual Beverages Chains PFG Chains • Regional Casual Dining Chains • Street Restaurants • Meat • QSR/ Fast Casual • National Casual Dining • Seafood Chains C
Slide 7: PFG
PFG FY2016 Net Sales = $16.1BN • PFG’s margins reflect the mix of customers we serve ̶ In the industry, street customers have PFG Vistar above chain average margins Customized 17% 23% ̶ Performance Foodservice is a mix of Street business, chain restaurants, and Performance Foodservice other channels
Slide 8: Steady Growth Pattern
Steady Growth Pattern $ in millions + 5.5% $16,105 +11.6% Net Sales Growth $15,270 $13,686 JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 We have delivered consistent sales growth since the great recession 7
Slide 9: PFG Total Case Growth Year-Over-Year
PFG Total Case Growth Year-Over-Year 14% -5% *FY2010 and FY2016 had 53 weeks 8
Slide 10: Top Distributors' Growth Rates
Top 3 Distributors’ Growth Rates Net Sales 170% 160% 156% 150% 140% 130% Sysco131% 120% US Foods 123% 110% 100% 90% CY2010 CY2011 CY2012 CY2013 CY2014 CY 2015 Jun-16 Adjusted EBITDA 170% 173% 160% 150% 140% 130% US Foods 128% 120% 110% Sysco 115% 100% 90% CY2010 CY2011 CY2012 CY2013 CY2014 CY 2015 J
Slide 11: Performance Foodservice Growth Strategy
Performance Foodservice Growth Strategy Net Sales CAGR = 9.5% 1• Customers First $9.6 $9.1 $8.1 $7.5 $6.7 2• Improve Mix through Street and $6.1 $5.6 Brands 3• PFG’s Winning Together Program FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 EBITDA 4• Increase geographic scope and $307 CAGR = 13.2% sc
Slide 12: Customers First
1 Customers First • Customers First is about building a company culture and organization around the customer experience ̶ Food is increasingly local, and especially so for the street business ̶ Street customers require a variety products to compete ̶ The street sales person is the focal point for me
Slide 13: Customers First
1 Customers First • The street sales force is supported by a strong, cross-functional business team, since locally-based decision making is essential to remaining nimble at the point of transaction ̶ Product assortment in the local warehouse is determined by the local Operating Company ̶ Local OpCos
Slide 14: Improve Mix through Street and Brands
2 Improve Mix through Street and Brands 2015 Independent Restaurant • Focus on selling to our most profitable customers, Market Size = ~ $64BN independent or “street” restaurants, and selling our most PFS profitable brands: Performance ~6% Brands USFD ~ 12% • Real organic growth to street All Other
Slide 15: Improve Mix through Street and Brands
2 Improve Mix through Street and Brands Street Mix of Broadline Sales Company Brand Mix of Street 44.1% 43.1% 43.4% 42.6% 41.3% 40.5% 39.1% 39.4% 38.7% 38.1% 37.9% 36.9% 37.2% 37.2% FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 14
Slide 16: PFS Independent Case Growth Year-Over-Year
2 PFS Independent Case Growth Year-Over-Year 30% 0% *FY2010 and FY2016 had 53 weeks 15
Slide 17: Strength is with PFG Brands Sold to Foodservice Independent Customers
Strength is with PFG Brands Sold to Foodservice Independent Customers 30% PFG Unit Brand Sales Growth vs. Prior Year 0% We have performed particularly well with the Independents *FY2010 and FY2016 had 53 weeks 16
Slide 18: Performance Brands: a $2BN+ Business
2 Performance Brands: a $2BN+ Business • Proprietary brands are a key competitive advantage in the industry; growing double-digit • Only the largest players in the foodservice industry have the scale to carry a broad line of differentiated brands • Chefs embrace PFG’s portfolio of Performance Brand
Slide 19: Vistar Overview
Vistar Overview Segment Highlights Distribution Centers Leading distributor of candy, snacks, and beverages and other single serve/ impulse items Channels served: • Vending Distributors • Office Coffee Service Distributors • Theaters • Retail Impulse • Hospitality • College Bookstores • Concessions
Slide 20: Vistar Growth Strategy
Vistar Growth Strategy Net Sales CAGR = 8.4% • Utilize strengths to grow both $2.4 $2.7 $2.3 core and emerging channels $2.1 $1.9 $1.7 $1.7 • Improve mix • Improve cost structure through Winning Together and the FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 utilization of technology EBITDA CAGR =
Slide 21: Vistar Growth Drivers
Vistar Growth Drivers Vend OCS Theater Retail • Good to Go • Continue to • Meet • Dollar stores Line develop customers’ • Develop more • Micro- “better evolving impulse Core markets coffee” wave product locations Channels • Recovery in in office assortment • Seasonal U.S. non-farm coffee needs SKUs
Slide 22: Vistar Short-term Investments
Vistar Short-term Investments • In fiscal Q4 2016, Vistar began service into new geographies in the dollar store channel, which will require some extra short- term expense until the volume can be efficiently integrated into Vistar’s distribution network. • In the first half of fiscal 2017, Vistar is
Slide 23: Vistar Short-term Investments
Vistar Short-term Investments • A second investment for Vistar is a new prototype distribution center for handling our pick and pack volume more efficiently. • This prototype will use scanner and sorter technology that will enhance our productivity and enable us to be more competitive. As is typical
Slide 24: PFG Customized Overview
PFG Customized Overview • Systems distributor: serve up to 100% of customers’ SKU needs through an effective combination of inbound and outbound efficiencies • National network to serve casual and family dining restaurant chains that was developed around customers’ footprints • Long-standing custome
Slide 25: PFG Customized Growth Strategy
PFG Customized Growth Strategy Net Sales CAGR = 5.2% • Grow share of casual dining $3.8 $3.8 $3.2 $3.3 segment through new customer $2.9 $2.8 $2.8 wins • Broaden scope of business to add fast casual chains FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 • Continually improve cost EBITDA structure,
Slide 26: PFG Customized Has Longstanding Customer Relationships
PFG Customized Has Longstanding Customer Relationships 40 Years 22 Years 16 Years 14 Years 15 Years 8 Years 7 Years 6 Years 3 Years 25
Slide 27: PFG Customized New Customer Win
PFG Customized New Customer Win • PFG has entered into an agreement to distribute to Red Lobster’s 670+ U.S. restaurants • Winning Red Lobster as a customer solidifies PFG Customized’s position as the premier distributor to national casual dining chains • Red Lobster’s network of U.S. restaurants ha
Slide 28: PFG Customized Short-term Investment
PFG Customized Short-term Investment • As we previously mentioned, PFG Customized had planned exits of some customers to free up capacity for the addition of new business with Red Lobster, to which we began making shipments in some geographies this week • The planned exit of customers affected Custo
Slide 29: Continued Progress on Key Initiatives
Continued Progress on Key Initiatives • Grow organic share profitably ̶ Performance Foodservice: 28th consecutive quarter of growing independent cases in 6% to 10% range year-over-year; excluding the extra week: • FY2016 independent cases grew 8.6% • Q4 independent cases grew 9.0% 28th consecuti
Slide 30: Continued Progress on Key Initiatives
Continued Progress on Key Initiatives • Grow organic share profitably • Continue to improve PFG’s cost structure ̶ Winning Together continues to find ways to offset increases in wages, benefits, and other expenses ̶ In fiscal 2016, operating expense per case was essentially flat 29
Slide 31: PFG's Winning Together Program
PFG’s Winning Together Program • Spans PFG, but largest impact is in Winning Together Winning Together Performance Through Procurement Through Operations Foodservice • Structured supplier • Best practices to drive • Continuous negotiations continuous improvement improvement program to offset • Inbou
Slide 32: Continued Progress on Key Initiatives
Continued Progress on Key Initiatives • Grow organic share profitably • Continue to improve PFG’s cost structure • Opportunistically pursue value creating acquisitions ̶ Acquired one small candy, snack, and beverage distributor in Q4 ̶ M&A pipeline remains active 31
Slide 33: M&A: Increase Geographic Scope and Scale
M&A: Increase Geographic Scope and Scale Recent Acquisitions Acquisition Priorities • Operating Companies • Stand-alone Broadline OpCos ̶ IFH: 2 OpCos in the ̶ Adjacent geographies Carolinas ̶ Base of street business ̶ Fox River: Chicago area ̶ Strong management team ̶ Ledyard: Northern California •
Slide 34: Full-Year FY2016 Highlights
Full-Year FY2016 Highlights • Record Fiscal 2016 results ̶ Net sales topped $16 billion for the first time and increased 5.5% ̶ Gross profit topped $2 billion for the first time and increased 8.7% ̶ Operating profit grew 26.3% to $202.2 million ̶ Adjusted EBITDA1 grew 11.6% to $366.6 million ̶ Margi
Slide 35: Full-Year FY2016 Segment Results
Full-Year FY2016 Segment Results Net Sales EBITDA $ MM $ vs. PY $ MM $ vs. PY Performance $9,616.3 + 5.8% $307.0 + 20.8% Foodservice PFG 3,782.1 + 0.8% 34.1 (6.6%) Customized Vistar 2,701.5 + 11.4% 113.0 + 7.1% 34 Note: Segment results are As Reported and compare FY2016’s 53 weeks to FY2015’s 52 wee
Slide 36: FY2016 Cash Flow and Balance Sheet
FY2016 Cash Flow and Balance Sheet • YTD Cash Flow highlights ̶ Operating Cash Flow of $234.9MM vs. $127.4MM PY ̶ CapEx of $119.7MM vs. $98.6MM PY ̶ Acquisitions of $39MM vs. $0.4MM PY • Net Debt ̶ FY2015 year-end: $ 1,413.4MM ̶ FY2016 year-end: $ 1,134.6MM ̶ Improvement vs. PY: $ 278.8MM • Net Debt
Slide 37: FY2017 Outlook
FY2017 Outlook 52 vs. 52 weeks 52 vs. 53 Weeks PFGC provides fiscal 2017 Adjusted EBITDA1 growth 7%-10% 5%-8% versus PY outlook: PFGC provides fiscal 2017 Adjusted Diluted EPS1 31%-36% 27%-32% growth versus PY outlook: • 1H FY2017 Adjusted EBITDA growth is projected to be in the low-to-mid single di
Slide 38: What we really do is deliver.
What we really do is deliver. 37
Slide 39: Non-GAAP Financial Measures
Non-GAAP Financial Measures PERFORMANCE FOOD GROUP COMPANY Non-GAAP Reconciliation (Unaudited) A. Includes a $3.6 million loss on extinguishment during the fourth quarter of fiscal 2016. B. Includes adjustments for non-cash charges arising from employee equity award compensation, gain/loss on dispos
Slide 40: Non-GAAP Financial Measures
Non-GAAP Financial Measures PERFORMANCE FOOD GROUP COMPANY Non-GAAP Reconciliation (Unaudited) A. Includes a $9.4 million loss on extinguishment and $5.5 million of accelerated amortization of original issuance discount and deferred financing costs during the fiscal year ended July 2, 2016. B. Inclu
Slide 41: Non-GAAP Financial Measures
Non-GAAP Financial Measures PERFORMANCE FOOD GROUP COMPANY Non-GAAP Reconciliation (Unaudited) A. Includes a $5.5 million of accelerated amortization of original issuance discount and deferred financing costs during Q2, and a $5.8 million and a $3.6 million loss on extinguishment for Q3 and Q4, resp
Slide 42: Non-GAAP Financial Measures
Non-GAAP Financial Measures PERFORMANCE FOOD GROUP COMPANY Non-GAAP Reconciliation (Unaudited) A. Includes adjustments for non-cash charges arising from employee equity award compensation and adjustments to reflect certain assets held for sale to their net realizable value. In addition, this include
Slide 43: Historical EBITDA Reconciliation
Historical EBITDA Reconciliation ($ in millio ns) FYE June FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Net Income $0.9 $13.7 $21.0 $8.4 $15.5 $56.5 $68.3 Interest expense, net 84.7 78.9 76.3 93.9 86.1 85.7 83.9 Income tax expense 8.1 10.9 12.9 11.1 14.7 40.1 46.2 Depreciation 44.4 43.2 46.4 58.
Slide 44: Historical EBITDA Reconciliation (continued)
Historical EBITDA Reconciliation (continued) ($ in millio ns) FYE June Q4 2015 Q4 2016 Net Income $34.2 $29.2 Interest Expense 21.1 18.0 Income Tax Expense 23.3 19.5 Depreciation 19.2 22.2 Amortization of intangible assets 10.4 10.2 EBITDA $108.2 $99.1 1 Non-Cash Items 3.0 5.4 2 Acquisition, Integra
Slide 45: FY2017 Outlook Non-GAAP Reconciliation
FY2017 Outlook Non-GAAP Reconciliation PFG’s Adjusted EBITDA and Adjusted Diluted EPS outlook excludes 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,
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