Performance Food Group Co (Form: 8-K, Received: 11/18/2019 16:10:42)

false000161867300016186732019-11-182019-11-18

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 18, 2019

Performance Food Group Company

(Exact name of Registrant as Specified in Its Charter)

Delaware	001-37578	43-1983182
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
12500 West Creek Parkway Richmond, Virginia		23238
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (804) 484-7700

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PFGC	New York Stock Exchange

ITEM 8.01. OTHER EVENTS.

On November 18, 2019, Performance Food Group Company issued a press release to announce that it has commenced a public offering of an aggregate of 9,200,000 shares of its common stock on a forward sale basis.

In connection with the offering, filed as Exhibit 99.1 and Exhibit 99.2 herewith, respectively, are (a) the unaudited carve-out financial statements of the Reinhart Foodservice Business (a carve-out of certain operations of Reyes Holdings, L.L.C. and Lone Oak Realty LLC (the “Reinhart Businesses”) as of and for the nine months ended September 30, 2019 and 2018 and (b) the unaudited pro forma condensed combined financial statements of the Company for the three months ended September 28, 2019, to illustrate the estimated effects of the previously announced acquisition by the Company of the Reinhart Businesses.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements of Businesses Acquired.

The unaudited carve-out financial statements of the Reinhart Businesses as of and for the nine months ended September 30, 2019 and 2018 are attached hereto as Exhibit 99.1 and are incorporated herein by reference.

(b) Pro forma Financial Information.

The Company’s unaudited pro forma condensed combined statement of operations and explanatory notes as of and for the three months ended September 28, 2019, are attached as Exhibit 99.2 hereto and incorporated by reference herein.

(d) Exhibits

Exhibit Number		Description

99.1		Unaudited carve-out financial statements of the Reinhart Businesses as of and for the nine months ended September 30, 2019 and 2018

99.2		Unaudited pro forma condensed combined statements of operations and explanatory notes as of and for the three months ended September 28, 2019

104		Cover page Interactive Data File (embedded within Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PERFORMANCE FOOD GROUP COMPANY

Date: November 18, 2019	By:	/s/ A. Brent King
		A. Brent King
		Senior Vice President, General Counsel and Secretary

Reinhart Foodservice

Business (Carve-Out of

Certain Operations of Reyes

Holdings, L.L.C. and Lone

Oak Realty LLC)

Condensed Combined Financial Statements as of and for

the Nine Months Ended September 30, 2019 and 2018

REINHART FOODSERVICE BUSINESS

(CARVE-OUT OF CERTAIN OPERATIONS OF REYES

HOLDINGS, L.L.C. AND LONE OAK REALTY LLC)

CONDENSED COMBINED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

	2019		2018

ASSETS

CURRENT ASSETS:
Cash	$	18,067	$	18,096
Accounts receivable:
Trade—net		316,546		295,851
Other		6,633		5,415
Inventories—net		252,032		236,941
Prepaid expenses and other current assets		13,644		21,020

Total current assets		606,922		577,323

PROPERTY, PLANT AND EQUIPMENT—Net		411,827		392,934

INTANGIBLE ASSETS—Net		137,782		142,780

GOODWILL		576,456		576,456

OTHER ASSETS		9,962		12,751

TOTAL	$	1,742,949	$	1,702,244

LIABILITIES AND MEMBERS’ CAPITAL

CURRENT LIABILITIES:
Book overdrafts	$	119,676	$	146,028
Accounts payable		329,091		259,246
Accrued expenses		86,657		73,363
Current installments of long-term debt		4,225		4,054

Total current liabilities		539,649		482,691

LONG-TERM DEBT—Net of current installments		306,545		310,770

OTHER LONG-TERM LIABILITIES		36,255		34,430

DUE TO MEMBERS		285,095		327,295

MEMBERS’ CAPITAL		575,405		547,058

TOTAL	$	1,742,949	$	1,702,244

See notes to condensed combined financial statements.

REINHART FOODSERVICE BUSINESS

(CARVE-OUT OF CERTAIN OPERATIONS OF REYES

HOLDINGS, L.L.C. AND LONE OAK REALTY LLC)

CONDENSED COMBINED STATEMENTS OF EARNINGS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

	2019			2018

NET SALES	$	4,699,688		$	4,610,461

COST OF SALES		4,053,435			3,981,485

GROSS PROFIT		646,253			628,976

OPERATING EXPENSES:
Warehouse		125,356			121,944
Sales and marketing		95,001			96,022
Delivery		234,315			224,658
General and administrative		107,664			99,633

Total operating expenses		562,336			542,257

OPERATING INCOME		83,917			86,719

OTHER INCOME (EXPENSE):
Interest expense		(25,663	)		(24,970	)
Other income		18			119

EARNINGS BEFORE INCOME TAX EXPENSE		58,272			61,868

INCOME TAX EXPENSE		5			-

NET EARNINGS	$	58,267		$	61,868

See notes to condensed combined financial statements.

REINHART FOODSERVICE BUSINESS

(CARVE-OUT OF CERTAIN OPERATIONS OF REYES

HOLDINGS, L.L.C. AND LONE OAK REALTY LLC)

CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

	2019		2018

NET EARNINGS	$	58,267	$	61,868

OTHER COMPREHENSIVE INCOME—Derivative instruments adjustment		2,124		2,736

COMPREHENSIVE INCOME	$	60,391	$	64,604

See notes to condensed combined financial statements.

REINHART FOODSERVICE BUSINESS

(CARVE-OUT OF CERTAIN OPERATIONS OF REYES

HOLDINGS, L.L.C. AND LONE OAK REALTY LLC)

CONDENSED COMBINED STATEMENTS OF MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

	Members’ Capital			Accumulated Other Comprehensive Income (Loss)			Total

BALANCE—December 31, 2017	$	508,181		$	4,766		$	512,947

Net earnings		61,868			-			61,868

Distributions to Members		(30,493	)		-			(30,493	)

Other comprehensive income		-			2,736			2,736

BALANCE—September 30, 2018	$	539,556		$	7,502		$	547,058

BALANCE—December 31, 2018	$	546,871		$	(4,668	)	$	542,203

Net earnings		58,267			-			58,267

Distributions to Members		(27,189	)		-			(27,189	)

Other comprehensive income		-			2,124			2,124

BALANCE—September 30, 2019	$	577,949		$	(2,544	)	$	575,405

See notes to condensed combined financial statements.

REINHART FOODSERVICE BUSINESS

(CARVE-OUT OF CERTAIN OPERATIONS OF REYES

HOLDINGS, L.L.C. AND LONE OAK REALTY LLC)

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands)

	2019			2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	58,267		$	61,868
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization		39,904			37,776
Loss (gain) on disposal of long-lived assets		188			(302	)
Changes in assets and liabilities:
Trade and other receivables		(23,330	)		(19,902	)
Inventories		(46,447	)		(31,263	)
Prepaid expenses and other assets		2,502			(2,642	)
Book overdrafts		(16,395	)		7,301
Accounts payable		94,431			27,126
Accrued expenses and other liabilities		(5,886	)		(13,739	)

Net cash flows from operating activities		103,234			66,223

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(53,362	)		(45,926	)
Proceeds from sale of long-lived assets		319			559

Net cash flows from investing activities		(53,043	)		(45,367	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt		(3,055	)		(2,922	)
Changes in Due to Members		(19,822	)		13,494
Distributions to Members		(27,189	)		(30,493	)

Net cash flows from financing activities		(50,066	)		(19,921	)

NET INCREASE IN CASH		125			935

CASH—Beginning of period		17,942			17,161

CASH—End of period	$	18,067		$	18,096

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	25,692		$	25,026

Taxes paid	$	5		$	-

See notes to condensed combined financial statements.

REINHART FOODSERVICE BUSINESS

(CARVE-OUT OF CERTAIN OPERATIONS OF REYES

HOLDINGS, L.L.C. AND LONE OAK REALTY LLC)

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollars in thousands, unless otherwise noted)

Reinhart Foodservice, L.L.C. (Reinhart), a Delaware limited liability company, is a broadline distributor of items consisting primarily of food, paper and related products to restaurants, schools, healthcare, government and other institutions in the mid-western, mid-eastern and eastern sections of the United States (U.S.). Reinhart is a wholly owned subsidiary of Reyes Holdings, L.L.C. (Reyes). Reinhart owns the following limited liabilities companies: Mississippi Valley Freight, LLC, Reinhart Louisiana Holdings, L.L.C., Reinhart Foodservice Louisiana, L.L.C. and Reinhart Transportation, LLC.

Lone Oak Realty LLC (Lone Oak, and collectively with Reyes, “Members”) owns commercial real estate in the continental U.S. through a series of wholly owned subsidiaries and leases those properties to subsidiaries of Reyes.

Reinhart leases certain of its facilities from subsidiaries of Lone Oak, including Lone Oak- Bowling Green, L.L.C., Lone Oak—Cincinnati, L.L.C., Lone Oak—Coal Township, L.L.C., Lone Oak—Detroit, L.L.C., Lone Oak—Essex, L.L.C., Lone Oak—Harahan, L.L.C., Lone Oak—Kansas City, L.L.C., Lone Oak—Mt. Pleasant, L.L.C., Lone Oak—Oak Creek, L.L.C., Lone Elm—Omaha, L.L.C., Lone Oak—Rogers, L.L.C., Lone Oak—Shreveport, L.L.C., Lone Oak—Shawano, L.L.C., Lone Oak—Springfield, L.L.C., Lone Oak—Suffolk, L.L.C., and Lone Oak—Taunton, L.L.C. and Lone Oak—Vermont, L.L.C., collectively the “Lone Oak Reinhart Subsidiaries.”

The accompanying carve-out condensed combined financial statements include the historical accounts of the Reinhart foodservice business of Reyes and the historical accounts of the Lone Oak Reinhart Subsidiaries within Lone Oak related to the Reinhart foodservice business, collectively referred to as the “Reinhart Foodservice Business or the Business.”

In July 2019, Performance Food Group Company entered into an agreement with Reyes and Lone Oak to acquire the membership interests of Reinhart and the Lone Oak Reinhart Subsidiaries.

Fiscal Year—Reyes’ fiscal year consists of twelve months ending on December 31, but certain of its businesses, including Reinhart, use fiscal years consisting of 52 or 53 weeks ending on the Saturday in December closest to December 31. The Reinhart interim periods reported consist of 39 weeks ended September 28, 2019 and 39 weeks ended September 29, 2018.

Basis of Presentation—Stand-alone financial statements have not been historically prepared for the Business. The carve-out condensed combined financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and are presented on a stand-alone basis.

The Business is comprised of certain Reyes and Lone Oak wholly-owned legal entities and certain components of other legal entities in which the Reinhart Foodservice Business operates in conjunction with other Reyes and Lone Oak businesses. For the shared entities in which discrete financial information was not available, allocation methodologies were applied to certain accounts to attribute and allocate amounts to the Business as discussed further in Note 5—Relationship with Members and Related Entities.

For the purposes of the accompanying stand-alone carve-out condensed combined financial statements, the Business has (seen defined as the assets, liabilities, revenue, and expenses that are attributable to the Business’ operations including: distinct distribution facilities and the associated costs of those facilities, transportation vehicles and their costs which are dedicated to the aforementioned facilities, inventories, the dedicated workforce (e.g., facilities employees, sales force, product category management and back office), customer relationships specific to the Business and the receivables and revenues associated with those sales, direct vendor relationships and the payables and costs associated with those costs, and intellectual property specific to the Business (e.g., brands and trademarks) and the cost to maintain that intellectual property.

The results of operations also include allocations of (i) costs for administrative functions and services performed on behalf of the Business by centralized corporate functions within Reyes; and (ii) Reyes’ general corporate expenses. See Note 5—Relationship with Members and Related Entities for a description of the allocation methodologies employed.

All charges and allocations of costs for facilities, functions, and services performed by Reyes have been deemed paid by the Business to Reyes in the period in which the cost was recorded in the condensed combined statements of earnings. All of the allocations and estimates in the condensed combined financial statements are based on assumptions that management of Reyes and the Business believe are reasonable. However, the condensed combined financial statements included herein may not be indicative of the financial position, results of operations, and cash flows of the Business in the future or if the Business had been a separate, stand-alone entity during the periods presented. Actual costs that would have been incurred if the Business had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, such as the division of shared services in legal, finance, human resources, information systems, supply chain, tax, treasury, capital deployment, and marketing, among others. The Business believes that the condensed combined financial statements include all adjustments necessary for a fair presentation of the Business.

The condensed combined financial statements have been prepared by the Business without audit. The financial statements include condensed combined balance sheets, condensed combined statements of earnings, condensed combined statements of comprehensive income, condensed combined statements of members’ capital and condensed combined statements of cash flows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, except as otherwise disclosed, necessary to present fairly the financial position, results of operations, comprehensive income, members’ equity and cash flows for all periods presented have been made.

The results of the operations are not necessarily indicative of the results to be expected for the full calendar year. Therefore, these financial statements should be read in conjunction with the audited combined financial statements and notes thereto. Certain footnote disclosures included in the annual combined financial statements prepared in accordance with GAAP have been condensed or omitted.

2.	CHANGES IN ACCOUNTING—REVENUE FROM CONTRACTS WITH CUSTOMER

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and has issued subsequent amendments to this guidance. This new standard superseded existing revenue recognition standards and eliminated all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Business adopted the new standard effective January 1, 2019 using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on the Business’ condensed combined balance sheet or condensed combined results of operations as of the adoption date or for the nine months ended September 30, 2019.

3.	DEBT OBLIGATIONS

Reyes has an agreement to sell selected Reinhart trade receivables to third-party financial institutions on an ongoing basis and with limited recourse, subject to borrowing base availability and other terms and conditions. The aggregate maximum amount of borrowings under this agreement was $225,000 at September 30, 2019. Borrowings bear interest at LIBOR based rates plus applicable margins (2.84% to 2.99% as of September 30, 2019). This agreement expires in December 2020. At both September 30, 2019 and 2018, $225,000 was outstanding under this program and is included in long- term debt in the condensed combined balance sheets.

A summary of long-term debt as of September 30, 2019 and 2018, is as follows:

	2019		2018
Mortgage notes payable, with varying interest at LIBOR plus 2.05% to 2.50%, due in varying monthly installments through May 2025	$	76,135	$	79,794
Mortgage notes payable, with interest at 4.15%, due in monthly principal and interest installments of $67 through September 2021 and a balloon principal payment of $8,755 due October 2021		9,635		10,030
Trade receivables-backed facilities		225,000		225,000
		310,770		314,824

Less current installments		4,225		4,054

Total long-term debt	$	306,545	$	310,770

4.	DERIVATIVES AND HEDGING ACTIVITIES

The Business uses diesel fuel swap agreements to manage its exposure to changes in diesel fuel costs. Proceeds or payments on these agreements are recorded as adjustments to fuel cost in delivery expenses in the accompanying condensed combined statements of earnings. The Business elected to use hedge accounting for certain of these swap agreements. As of September 30, 2019 and 2018, the notional amount outstanding on the fuel swap agreements accounted for as cash flow hedges was 9,003,000 and 11,724,000 gallons, respectively.

The Business uses interest rate swaps to manage its exposure to changes in interest rates for its floating rate debt. These interest rate swaps qualify as cash flow hedges. The interest rate differential received on the swaps was $373 and $63 for the nine months ended September 30, 2019 and 2018, respectively, and was recognized in the condensed combined statements of earnings as a decrease in interest expense. As of September 30, 2019, and 2018, the notional principal amount outstanding on the interest rate swaps was $76,135 and $79,793, respectively.

5.	RELATIONSHIP WITH MEMBERS AND RELATED ENTITIES

Historically, the Business has been managed and operated by Reyes. Accordingly, certain shared costs have been allocated to the Business and reflected as expenses in these condensed combined financial statements. Management believes the allocation methodologies are a reasonable reflection of the utilization of services provided to or the benefits received by the Business during the periods presented. The expenses reflected in the accompanying condensed combined statements of earnings may not be indicative of expenses that will be incurred by the Business in the future.

These condensed combined financial statements include direct and indirect expense allocations of costs associated with corporate finance, information services, human resources, corporate office and other services. These costs are allocated to the Business based on direct usage/benefit where identifiable or other measures as determined appropriate by management. The allocated functional service expenses and general corporate expenses included in the condensed combined statements of earnings were $4,949 and $4,374 for the nine months ended September 30, 2019 and 2018, respectively.

The Business participates in the Reyes’ centralized cash management and financing programs. Certain short and long-term debt needs for the Business are financed by Reyes and financing decisions for Reyes and Lone Oak wholly owned subsidiaries are determined by the Reyes’ central treasury operations.

At September 30, 2019, Reinhart provided guarantees of term notes and a revolving line of credit of Reyes, which expire through December 2030. The guarantees relate to borrowings made by Reyes principally for acquisitions, capital projects and to fund net working capital. Under the terms of the guarantees, Reinhart would be required to fulfill the guarantees should Reyes be in default of its terms. Several other companies owned by Reyes also guarantee this debt. No liability has been recorded in connection with this guarantee. Reyes has also pledged its ownership interest in Reinhart as security for its debt.

The Reyes’ debt facilities contain certain financial covenants which require that Reyes not exceed certain levels of leverage and minimum fixed charge coverage ratio. Reyes was in compliance with all covenants as of September 30, 2019 and 2018.

At September 30, 2019, certain of the Lone Oak Reinhart Subsidiaries provided guarantees of a term facility and a revolving line of credit of Lone Oak, which expire through November 2025. The guarantees relate to borrowings made by Lone Oak principally for purchases of or construction projects relating to commercial real estate properties. Under the terms of the guarantees, the Lone Oak Reinhart Subsidiaries would be required to fulfill the guarantees should Lone Oak be in default of its terms. Several other companies owned by Lone Oak also guarantee these debt instruments. No liability has been recorded in connection with these guarantees.

The Lone Oak term facility contains certain financial covenants which require Lone Oak to maintain a required level of tangible net worth and the related guaranteeing Lone Oak Reinhart Subsidiary to maintain required levels of fixed charge coverage. Lone Oak and each of the guaranteeing Lone Oak Reinhart Subsidiaries were in compliance with all covenants as of September 30, 2019 and 2018.

The amount Due to Members bears interest at rates that adjust periodically. At September 30, 2019, the interest rate ranged from 2.35% to 5.98%.

The Business paid fees to a related party of $14,730 and $10,299 for the nine months ended September 30, 2019 and 2018, respectively, in exchange for services provided related to maintaining certain of our transportation equipment.

The Business is a party to various litigation, which arises in the ordinary course of business. Management makes provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Management believes the provisions are adequate to address potential liability in litigation matters. Management is of the opinion that the outcome of such litigation will not have material adverse effect on the Business’ financial position, results of operations or cash flows.

7.	SUBSEQUENT EVENTS

The Business has evaluated subsequent events through November 4, 2019. There were no other subsequent events that require recognition of disclosure.

Exhibit 99.2

UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF THE COMPANY AND REINHART

The unaudited pro forma combined statement of operations for the fiscal year ended June 29, 2019 and the three months ended September 28, 2019, combines the historical consolidated statements of operations of the Company and Reinhart, giving effect to the Proposed Reinhart Acquisition and the financing of the Proposed Reinhart Acquisition (the “Acquisition Financing”) as if they each had occurred on July 1, 2018. The unaudited pro forma combined balance sheet as September 28, 2019, combines the historical consolidated balance sheets of the Company and Reinhart, giving effect to the Acquisition Financing and the Proposed Reinhart Acquisition, as if they each had occurred on September 28, 2019.

The historical consolidated financial information has been adjusted in the unaudited pro forma combined financial statements to give effect to pro forma events that are (i) directly attributable to the Proposed Reinhart Acquisition, (ii) factually supportable and (iii) with respect to the statements of income, expected to have a continuing impact on the combined results. The unaudited pro forma combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma combined financial statements. In addition, the unaudited pro forma combined financial information was derived from and should be read in conjunction with the following historical consolidated financial statements and accompanying notes:

•

separate historical unaudited interim financial statements of Reinhart as of and for the nine months ended September 30, 2019 and 2018, and the related notes;

•

separate historical unaudited financial statements of the Company as of and for the three months ended September 28, 2019, and the related notes, included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2019;

•

separate historical audited financial statements of the Company as of and for the year ended June 29, 2019, and the related notes, included in the Company’s Annual Report on Form 10-K for the year ended June 29, 2019; and

•

separate historical audited financial statements of Reinhart as of and for the year ended December 31, 2018, and the related notes.

The Company and Reinhart have different fiscal years. The unaudited pro forma combined statements of operations include Reinhart’s unaudited consolidated statement of operations for the twelve-month period ended June 30, 2019 and for the three-month period ended September 30, 2019. Reinhart’s results for the twelve-month period ended June 30, 2019 were derived by adding the results of the six-month period ended June 30, 2019 to its statement of operations for the fiscal year ended December 31, 2018 and subtracting the results of the six-month period ended June 30, 2018. Reinhart’s results for the three-month period ended September 30, 2019 were derived by subtracting the results for the six-month period ended June 30, 2019 from the results of the nine-month period ended September 30, 2019.

The unaudited pro forma combined financial information has been prepared by us using the acquisition method of accounting in accordance with GAAP. The acquisition accounting is dependent upon certain valuation and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. The consummation of the Proposed Reinhart Acquisition remains subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals, and there can be no assurance that the Proposed Reinhart Acquisition will occur on or before a certain time, on the terms described herein, or at all. The Proposed Reinhart Acquisition or any other financing transaction are not conditioned upon each other. In addition, under certain relevant laws and regulations, before completion of the Proposed Reinhart Acquisition, there are certain limitations regarding what we can learn about Reinhart. Until the Proposed Reinhart Acquisition is completed, we will not have complete access to all relevant information. The assets and liabilities of Reinhart have been measured based on various preliminary estimates using assumptions that we believe are reasonable based on information that is currently available. Differences between these preliminary estimates and the final acquisition accounting may occur, and those differences could have a material impact on the accompanying unaudited pro forma combined financial statements and the combined company’s future results of operations and financial position. The pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial statements prepared in accordance with the rules and regulations of the SEC.

We intend to commence the necessary valuation and other studies required to complete the acquisition accounting promptly upon completion of the Proposed Reinhart Acquisition and will finalize the acquisition accounting as soon as practicable within the required measurement period in accordance with ASC 805, but in no event later than one year following completion of the Proposed Reinhart Acquisition.

The unaudited pro forma adjustments are based upon available information and certain assumptions that our management believes are reasonable. The unaudited pro forma combined financial information has been presented for informational purposes only and is based on assumptions and estimates considered appropriate by our management; however, it is not necessarily indicative of our financial position or results of operations that would have been achieved had the pro forma events taken place on the dates indicated, or of the future consolidated results of operations or of the financial position of the combined company.

Management expects that the strategic and financial benefits of the Proposed Reinhart Acquisition will result in certain cost savings opportunities. However, given the preliminary nature of those cost savings, they have not been reflected in the accompanying unaudited pro forma combined statements of operations for either period.

Unaudited Pro Forma Combined Statement of Operations
for the three months ended September 28, 2019

(In millions, except per share data)	Company		Reinhart		Pro Forma Adjustments				Pro Forma As Adjusted Combined
Net sales	$	6,243.0		1,627.5	$	-			$	7,870.5
Cost of goods sold		5,531.6		1,402.2		-				6,933.8
Gross profit		711.4		225.3		-				936.7
Operating expenses		647.9		188.9		(6.6	)	(a)		849.9
						19.7		(b)
Operating profit		63.5		36.4		(13.1	)			86.8
Other expense, net:
Interest expense		17.3		7.9		11.8		(c)		37.0
Other, net		-		-		-				-
Other expense, net		17.3		7.9		11.8				37.0
Income before taxes		46.2		28.5		(24.9	)			49.8
Income tax expense (benefit)		10.1		-		(6.5	)	(d)		3.6
Net income	$	36.1	$	28.5	$	(18.4	)		$	46.2
Weighted-average common shares outstanding:
Basic		104.0		-		9.5		(e)		113.5
Diluted		105.6		-		9.5		(e)		115.1
Earnings per common share:
Basic	$	0.35							$	0.41
Diluted	$	0.34							$	0.40

See the accompanying notes to the unaudited pro forma condensed combined financial statements, which are an integral part of this statement. The pro forma adjustments are explained in Note 4.

Unaudited Pro Forma Combined Statement of Operations
for the fiscal year ended June 29, 2019

(In millions, except per share data)	Company			Reinhart		Pro Forma Adjustments				Pro Forma As Adjusted Combined
Net sales	$	19,743.5		$	6,186.6	$	-			$	25,930.1
Cost of goods sold		17,230.5			5,339.5		-				22,570.0
Gross profit		2,513.0			847.1		-				3,360.1
Operating expenses		2,229.7			736.2		(2.0	)	(a)		3,042.4
							78.5		(b)
Operating profit		283.3			110.9		(76.5	)			317.7
Other expense, net:
Interest expense		65.4			34.3		46.1		(c)		145.8
Other, net		(0.4	)		0.2		-				(0.2	)
Other expense, net		65.0			34.5		46.1				145.6
Income before taxes		218.3			76.4		(122.6	)			172.1
Income tax expense (benefit)		51.5			0.1		(31.9	)	(d)		19.7
Net income	$	166.8		$	76.3	$	(90.7	)		$	152.4
Weighted-average common shares outstanding:
Basic		103.8			-		9.5		(e)		113.3
Diluted		105.2			-		9.5		(e)		114.7
Earnings per common share:
Basic	$	1.61								$	1.35
Diluted	$	1.59								$	1.33

See the accompanying notes to the unaudited pro forma condensed combined financial statements, which are an integral part of this statement. The pro forma adjustments are explained in Note 4.

Unaudited Pro Forma Combined Balance Sheet
as of September 28, 2019

(In millions)	Company			Reinhart			Pro Forma Adjustments				Pro Forma As Adjusted Combined
ASSETS
Current assets:
Cash	$	16.0		$	18.1		$	(18.1	)	(a)	$	16.4
								0.4		(c)
Accounts receivable		1,226.9			323.2							1,550.1
Inventories, net		1,411.2			252.0			53.8		(b)		1,717.0
Restricted cash		1,060.4						(1,060.4	)	(c)		-
Prepaid expenses and other current assets		55.2			13.6							68.8
Total current assets		3,769.7			606.9			(1,024.3	)			3,352.3
Goodwill		765.8			576.5			234.4		(d)		1,576.7
Other intangible assets, net		179.6			137.8			499.3		(e)		821.6
								4.9		(h)
Property, plant and equipment, net		966.9			411.8			59.4		(f)		1,438.1
Operating lease right-of-use asset		409.4						30.2		(j)		439.6
Restricted cash		11.0			-							11.0
Other assets		60.6			9.9			(3.5	)	(g)		67.0
Total assets	$	6,163.0		$	1,742.9		$	(199.6	)		$	7,706.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Outstanding checks in excess of deposits	$	187.9		$	119.7						$	307.6
Trade accounts payable		1,188.7			329.1							1,517.8
Accrued expenses and other current liabilities		344.1			86.6			4.7		(h)		435.4
Long-term debt, current maturities		-			4.2			(4.2	)	(a)		-
Finance lease obligations—current installments		21.5			-							21.5
Operating lease obligations—current installments		80.8			-			5.1		(j)		85.9
Total current liabilities		1,823.0			539.6			5.6				2,368.2
Long-term debt		2,212.1			306.5			574.0		(h)		2,786.1
								(306.5	)	(a)
Deferred income tax liability, net		102.0			-							102.0
Finance lease obligations, excluding current installments		147.9			-							147.9
Operating lease obligations, excluding current installments		330.1			-			25.1		(j)		355.2
Other long-term liabilities		214.8			36.3			(3.5	)	(g)		247.6
Due to Members		-			285.1			(285.1	)	(i)		-
Total liabilities		4,829.9			1,167.5			9.6				6,007.0
Commitments and contingencies
Shareholders’ equity:
Common Stock		1.0			-			0.1		(l)		1.1
Additional paid-in capital/Members’ capital		866.6			577.9			(577.9	)	(k)		1,246.7
								380.1		(l)
Accumulated other comprehensive loss		(1.3	)		(2.5	)		2.5		(k)		(1.3	)
Retained earnings		466.8			-			(14.0	)	(h)		452.8
Total shareholders’ equity		1,333.1			575.4			(209.2	)			1,699.3
Total liabilities and shareholders’ equity	$	6,163.0		$	1,742.9		$	(199.6	)		$	7,760.3

See the accompanying notes to the unaudited pro forma condensed combined financial statements, which are an integral part of this statement. The pro forma adjustments are explained in Note 5.

NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS

(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)

(UNAUDITED)

Note 1. Basis of Presentation

The unaudited pro forma combined statement of operations for the three months ended September 28, 2019 has been derived from the following:

•

The unaudited consolidated statement of operations of the Company for the fiscal quarter ended September 28, 2019

•

The unaudited consolidated statement of operations of Reinhart for the three-month period ended September 30, 2019

The unaudited pro forma combined statement of operations for the fiscal year ended June 29, 2019 has been derived from the following:

•

The audited consolidated statement of operations of the Company for the fiscal year ended June 29, 2019

•

The unaudited consolidated statement of operations of Reinhart for the twelve-month period ended June 30, 2019

Reinhart’s results for the three-month period ended September 30, 2019 were derived by subtracting the results for the six-month period ended June 30, 2019 from the results of the nine-month period ended September 30, 2019. Reinhart’s results for the twelve-month period ended June 30, 2019 were derived by adding the results of the six-month period ended June 30, 2019 to its statement of operations for the fiscal year ended December 31, 2018, and subtracting the results of the six-month period ended June 30, 2018.

The unaudited pro forma combined balance sheet has been derived from the following:

•

The unaudited consolidated balance sheet of the Company as of September 28, 2019

•

The unaudited consolidated balance sheet of Reinhart as of September 30, 2019

The pro forma adjustments have been prepared as if the acquisition of Reinhart occurred on September 28, 2019 in the case of the unaudited pro forma combined balance sheet and on July 1, 2018 in the case of the unaudited pro forma combined statement of operations for the three months ended September 28, 2019 and fiscal year ended June 29, 2019. The adjustments give pro forma effect to events that are (i) directly attributable to the Company’s acquisition of Reinhart, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined statement of operations, expected to have a continuing impact on the Company. The adjustments are based on currently available information and certain estimates and assumptions, and therefore the actual effects of these transactions will differ from the pro forma adjustments. However, management believes that the assumptions used provide a reasonable basis for presenting the significant effects of the transaction, and that the pro forma adjustments in the unaudited pro forma combined financial statements give appropriate effect to the assumptions. The effects on the unaudited pro forma combined financial statements of the transaction described above are more fully described in Note 4 and Note 5.

Note 2. Summary of Significant Accounting Policies

The accounting policies followed in preparing the unaudited pro forma combined financial statements are those used by the Company as set forth in the audited historical financial statements and notes of the Company included in its Annual Report on Form 10-K for the fiscal year ended June 29, 2019 and those updated as a result of the adoption of new accounting standards in the unaudited historical financial statements and notes of the Company included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2019, as filed. The unaudited pro forma combined financial statements reflect any adjustments known at this time to conform Reinhart’s historical financial information to the Company’s significant accounting policies based on the Company’s review of Reinhart’s summary of significant accounting policies, as disclosed in the Reinhart historical financial statements incorporated by reference, and preliminary discussions with Reinhart’s management. Upon completion of the acquisition and a more comprehensive comparison and assessment, additional differences may be identified.

Note 3. Preliminary Purchase Price Allocation

On July 1, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) to acquire Reinhart in a transaction valued at $2.0 billion. The $2.0 billion purchase price is expected to be financed with new senior unsecured notes, borrowings under an amendment to the credit agreement governing the Company’s asset-based revolving loan facility (“ABL Facility”), and net proceeds from an offering of shares of the Company’s common stock of $400 million.

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of Reinhart are recorded at fair value on the acquisition date and added to those of the Company. The pro forma adjustments included herein are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition. The final purchase price allocation is dependent upon certain valuation and other studies that have not yet been completed. The final determination of the purchase price allocation, upon the consummation of the acquisition, will be based on the net assets acquired as of that date and will depend on a number of factors, which cannot be predicted with any certainty at this time. The purchase price allocation may change materially based on the receipt of more detailed information. Accordingly, the pro forma purchase price allocation is preliminary and is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurance that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

The following table provides a summary of the preliminary allocation of the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed of Reinhart, based on Reinhart’s consolidated balance sheet as of September 28, 2019, with all excess value over consideration paid recorded as goodwill.

(In millions)
Total current assets	$	642.6
Goodwill		810.9
Other intangible assets, net		637.1
Property, plant and equipment		471.2
Operating lease right-of-use assets		30.2
Other assets		6.4
Total assets		2,598.4
Total current liabilities		540.5
Operating lease liabilities, excluding current		25.1
Other long-term liabilities		32.8
Total liabilities		598.4
Total preliminary purchase price	$	2,000.0

Note 4. Income Statement Pro Forma Adjustments

(a) Reflects the removal of transaction costs incurred by the Company related to the acquisition of Reinhart.

(b) Reflects the additional depreciation expense for the step up in fair value for the real estate properties acquired, as well as an estimate of the amortization of intangible assets. Amortization is expected to be recognized on a straight-line basis over a weighted average useful life of approximately 7.7 years. In addition, this reflects the removal of Reinhart’s previously recorded amortization of intangible assets.

(c) Reflects adjustments to interest expense related to pro forma long-term debt. As discussed in Note (h) within Note 5. Balance Sheet Pro Forma Adjustments, we have assumed the incurrence of total long-term indebtedness of $1,660 million in connection with the Proposed Reinhart Acquisition. For purposes of this calculation, we assumed a weighted average interest rate of 4.6%. The assumed interest rates were based on current interest rates at the time the pro forma financial information was prepared, and interest expense may be higher or lower if our actual interest rate or credit ratings change. A change in assumed interest rates of 12.5 basis points for new variable rate debt would change the pro forma annual interest expense by $0.8 million. In addition, this reflects the removal of Reinhart’s previously recorded interest expense related to debt PFG’s will not assume in the transaction.

(d) Reflects income taxes on pro forma adjustments based on an estimated statutory tax rate of 26.0%.

(e) Reflects an assumed number of shares issued in a $400 million offering of the Company's common stock. The number of shares was calculated based on the last reported sale price of the Company’s common stock on November 1, 2019.

Note 5. Balance Sheet Pro Forma Adjustments

(a) Reflects the removal of Reinhart’s previously recorded cash and long-term debt that the Company did not assume in the transaction.

(b) Reflects the removal of Reinhart’s LIFO inventory reserve ($35 million) and an estimate of the step up in fair value of inventory ($18.8 million).

(c) Reflects the use of restricted cash held in escrow to fund the purchase of Reinhart ($1,060 million) and the reclassification of restricted cash held in escrow related to accrued interest to cash.

(d) Reflects the excess of the Company’s consideration paid of approximately $2.0 billion over the amount of identifiable assets and liabilities assumed in the transaction as shown in Note 3 above. In addition, this reflects the removal of Reinhart’s previously recorded goodwill.

(e) Reflects an estimate of the fair values of intangible assets identified, as well as the removal of Reinhart’s previously recorded intangible assets.

(f) Reflects the step up in basis for real estate acquired in the transaction.

(g) Reflects the removal of Reinhart’s deferred compensation plan assets and liabilities that the Company did not assume in the transaction.

(h) Reflects the issuance of $600.0 million of borrowings under the Company’s amended ABL Facility. Of the $1,060.0 million of new senior unsecured notes issued on September 27, 2019, $60.0 million is to be used to fund debt issuance costs, audit, legal, and advisory transaction fees, and equity issuance costs. The pro forma adjustments reflect the deferred issuance costs of $26.0 million for the new senior unsecured notes that were payable upon closing of the Proposed Reinhart Acquisition within Long-term debt and deferred issuance costs of $4.9 million for the amended ABL Facility within Other intangible assets, net. The $11.0 million of advisory transaction fees, as well as $3.0 million of audit and legal fees are considered non-recurring costs and are reflected as a pro forma adjustment to Retained earnings. The $19.8 million of equity issuance cost is reflected as an offset to the proceeds received for the equity issuance within Additional paid in capital. The $4.7 million above the $60.0 million borrowed to cover the total amount payable for transaction fees is reflected as Accrued expenses and other current liabilities within the pro forma adjustments.

(i) Reflects the removal of amounts payable to Reinhart’s parent company Reyes Holdings, L.L.C.

(j) Reflects Reinhart’s adoption of Accounting Standards Update 2016-02, Leases (Topic 842) as of June 30, 2019, consistent with the Company’s adoption date of the new standard.

(k) Reflects the removal of Reinhart’s members’ capital and previously recorded accumulated other comprehensive loss.

(l) Reflects the issuance of $400 million of the Company’s common stock offset by equity issuance costs of $19.8 million.