Performance Food Group Company

Please stand by, your program is about to begin. If you need assistance during your conference today, please press star zero. Good day and welcome to the PFG's fiscal year Q4 2022 earnings conference call. If you would like to ask a question at the conclusion of the prepared remarks, please press the star key followed by the number one on your telephone keypad at any time. I would now like to turn the call over to Bill Marshall, Vice President, Investor Relations for PFG. Please go ahead, sir.

Thank you and good morning. We're here with George Holm, PFG's CEO, Jim Hope, PFG's CFO, and Patrick Hatcher, Vistar President and Chief Operating Officer. We issued a press release regarding our 2022 fiscal fourth quarter and full year results this morning. which can be found in the investor relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results to the same period in our 2021 fiscal fourth quarter and full year. As a reminder, in the second quarter, we changed our operating segments to reflect how we manage the business. Amounts for the 2021 fiscal fourth quarter and full year have been restated to reflect the segment changes. The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings release. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results. Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. Now, I'd like to turn the call over to George. Thanks, Bill.

Good morning, everyone, and thank you for joining our call today. I'm excited to share our results for the 2022 fiscal fourth quarter and discuss some of the recent trends we have observed in the market. It is a dynamic time for our industry and economy, but we believe we are very well positioned to continue to produce strong results and maintain the momentum we saw as we closed out the fiscal year. Our organization is operating at a high level and the dedication of our workforce has made this performance possible. Importantly, as we shared with you just over a month ago at our investor day, we believe our company is uniquely constructed to do well and create value for our shareholders in a range of economic climates. Our company has been resilient during challenging times in the past and our recent strategic activity, including the core market acquisition, have only increased our ability to weather various challenges. But as you saw in our press release earlier today, we have not yet seen significant impact from what some believe may continue to be a more difficult environment for the consumer. Our fourth quarter results show how our company is balanced across a range of channels and categories. In particular, the continued rebound of our Vistar business which experienced strength in the movie theater and vending channels, along with consistent performance from our convenience segment, helped offset modest slowing in some of our chain restaurant business. We are seeing the benefit of return to more normal activities, including vacations, business travel, and family outings to the movies, sporting events, and other group activities. For several quarters, we have discussed how certain areas of our business, particularly at Vistar, would extend our recovery and build upon the strength we have seen in restaurants. This is exactly what is playing out today. We believe there is still room to improve, which gives us confidence in the duration of our strong top-line results. We are also beginning to see some encouraging signs that the supply chain is improving. We watch our inbound fill rate closely, and during the last week of July and early August, we are pleased to see our fill rates from performance food service suppliers reach the highest level in over a year. There is certainly more room to improve, but we are hopeful that this is an indication that we are heading in the right direction, and we believe another reason why we feel confident for the future. Similarly, the labor market has slowly improved. Better labor trends along with the focus on our cost structure and favorable product and channel mix produced another strong quarter of year-over-year margin expansion. Considering all of these factors, we feel very good about the potential to continue to grow revenue and profit as shown by the fiscal 2023 guidance we set this morning. Jim will describe some of the items impacting our guidance in a moment. As you know, inflation remains elevated. However, there have been some signs of moderation, particularly due to declines in some commodity proteins. This may continue in the short term. However, we believe inflation will remain high for the next several quarters, particularly as shortages in certain grains, feed and fertilizer impact the supply of center-of-the-plate items. We will continue to work with our customers to find alternatives that keep costs down but allow for the same high-quality meals that their consumers are looking for. We believe this dynamic creates a great opportunity for our company-owned brands As we shared at Investor Day, performance brands often provide a win-win situation where a customer is able to find high-quality products at a lower price. For PFG, increased sales of our own brands improves customer loyalty and gives us better control of the supply chain. Through the fiscal year, inbound fill rates of our company brands have been generally higher than for national brands. In the quarter, performance brands grew 8.4%. Another topic that has gained significant attention over the past few months is the possibility of a recession hitting the US economy. While we do not have the ability to predict the likelihood of this happening, we do plan for a range of outcomes that could impact our business. Through this process, we believe that we are well positioned to handle a softer economic landscape. In fact, we believe that we are moving towards a more normal supply chain environment which we expect would lead to better productivity and higher profit margins going forward. Furthermore, we have high exposure to resilient channels and categories. In the restaurant space, our strength in pizza continues to pay dividends, as we have once again gained significant share in independent pizza during the fourth quarter. As we saw during the depths of the pandemic, pizza and Italian cuisine tend to perform very well in difficult times as an affordable meal options for families. I'm very happy with how our pizza business has performed, and we have not missed a beat. But pizza is not the only area of strength. In fact, during the quarter, we gained share in all 15 of our largest independent categories. This includes very strong share performance in seafood, Hispanic, and Seastore concepts, in addition to the pizza games I just mentioned. Overall, our year-over-year independent restaurant share gains improved sequentially each month of the fourth quarter, demonstrating our leadership in this important area for our business. Our organic independent restaurant cases in the fourth quarter were up 16% compared to the fourth quarter of 2019. Within Vistar, the value store channel and vending have also been bright spots. We believe that both of these lines of business are also very recession resilient, particularly value stores. In vending, our micro-market business remains one of the more exciting growth initiatives at our company. If you are interested in more details, I would point you back to our Investor Day presentation, which gives good insight into the micro-market opportunity. And it goes without saying that our theater business saw a strong fourth quarter as box office numbers rebounded significantly. Our theater business will fluctuate depending upon a variety of factors, including the quality of movies being released. But we were very encouraged by the consumer's willingness to return to the theater when there's good content in the market. Finally, we have all seen the consistent performance the convenience store channel has provided, not only during the pandemic, but also through previous economic downturns. We see no reason for this to change in the future and believe our emphasis on food, food service, and related products elevates the opportunity that this channel provides. In the fourth quarter, dollar sales of food, food service, and related products into our convenience channel increased 17.6%, reflecting the benefit of inflation, same-store sales growth, and market share gains. This compares to sales of nicotine products, which were down 3.5% in the quarter. This shows the incremental sales opportunity and positive mix shift that we believe will drive significant value for the Coremark transaction. We're also very pleased with the pipeline of new business in the convenience space. Since closing the Coremark transaction, we have highlighted several of these new business wins. We continue to see a similar consistency of potential new business in this space. This could only be achieved with a smooth integration process which is exactly what we are seeing. The integration and related synergies are very much on track. Taken all together, we are pleased with our segment's ability to collaborate and create new business opportunities, while also providing diversification, which reduces volatility created by external factors. Our fourth quarter results position us well for the upcoming fiscal year. We posted net sales at the top end of our guidance range and higher than anticipated margins, Sales results in July and early August continue to keep pace with our June run rate. Before turning it over to Jim, I wanted to make a few comments about the announcement we made last week that Jim will be retiring at the end of the calendar year and transitioning the CFO role to Patrick Hatcher. I've known Jim personally and professionally for 34 years and consider him a personal friend as well as a close colleague. Jim's leadership over these years has been an important part of PFG's success. For the past five years, Jim has guided PFG's financials through some of the most challenging conditions and multiple acquisitions. But through it all, Jim was the consummate professional and has achieved the monumental task of creating an even stronger financial position than he inherited when he took over. He is also leaving behind a top-notch staff. I will miss Jim's stewardship as he enters the next chapter of retirement. At the same time, I am incredibly excited to see Patrick Hatcher rise into the CFO role. Patrick has been with our organization since 2010, holding a number of leadership positions at Fistar, including the CFO of that division. Patrick's knowledge of our business and financial position will be an invaluable asset to our organization. Like Jim, Patrick has excelled in both financial and operating roles. A number of you were able to meet Patrick at our Investor Day in June, As we transition the role from Jim to Patrick over the next several months, there will be many more opportunities to interact with Patrick. I'm confident that it will be a smooth transition process. Jim and Patrick will work closely over the next several months as they have for many years as leaders of the organization. We are pleased to have Patrick join us on this call, his first of many to come. Please join me in congratulating both Jim and Patrick on their new endeavors. We wish them both the best. I'd now like to turn it over to Jim, who will review our financial position and earnings results in more detail. Jim?