Performance Food Group Company (PFGC) Q4 2021 Earnings Call Transcript

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Performance Food Group Company (PFGC 0.17%)
Q4 2021 Earnings Call
Aug 19, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to PFG's Fiscal year Q4 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Bill Marshall, Vice President, Investor Relations for PFG. Please go ahead, sir.

Bill Marshall -- Vice President of Investor Relations

Thank you, Britney, and good morning, everyone. We're here this morning with George Holm, PFG's CEO; and Jim Hope, PFG's CFO. We issued a press release regarding our 2021 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 2020 fiscal fourth quarter and full year. Additionally, occasionally during our call today, as noted, we are comparing results to the same period in our 2019 fiscal fourth quarter and full year. 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 statements 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.

George Holm -- Chairman, President and Chief Executive Officer

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. It is my pleasure to discuss PFG's fourth quarter results with you this morning. Fiscal 2021 was a dynamic year for our industry and company. We started the year with depressed levels of sales and profit as our industry and the country struggled through the COVID-19 pandemic. But I'm thrilled to say that we finished on a high note posting several record sales weeks during the fiscal fourth quarter, accompanied by a strong recovery in earnings.

The past year has shown that the restaurant industry is resilient and determined to serve everyone a wonderful dining experience. Our customers have pushed ahead, providing a steady path toward a return to better times for us. We appreciate all the hard work undertaken by our customers and suppliers as well as the role PFG associates play in our country's food supply chain. On May 18th, we announced our intention to acquire Core-Mark, which will boost our convivence to our capabilities and continue to expand our presence in the food away from home market. After providing more detail on the fourth quarter results, I'd like to spend some time discussing the strategic vision we have for Core-Mark. I will then turn the call over to Jim, who will review our financial performance.

As we entered the spring, we had high hopes that a full restaurant recovery was beginning to take hold. From a sales perspective, it is fair to say that our expectations were exceeded as our case volume and dollar sales again hitting record levels soon into the fiscal fourth quarter. The result was over $9.3 billion of net sales in the quarter, excluding the impact of the 53rd week, we estimate our net sales to be approximately $8.6 billion, well above anything our company has achieved in our history and an increase of 9.3% compared to the fourth quarter of 2019, including pro forma results for acquisitions. Compared to the fiscal fourth quarter of 2019, this results included 14.9% net sales growth for our legacy Foodservice business and 7.1% growth for Reinhart, excluding the impact of the 53rd week.

We are particularly pleased with our continued strength in the independent restaurant business. In the quarter, our independent case volume increased 69.2%, independent sales reached 37.8% of total foodservice sales in the fourth quarter, a 4.4% higher percentage of total sales in just two years ago. Importantly, channels that had been pockets of strength last year, namely independent pizza, Italian and Hispanic continue to grow in the most recent period despite difficult comparisons as the market shifted to in-store dining. And our average weekly dollar sales results in July and early August were very similar to weekly results in June.

Regionally, we still see strength in the Southeast, Southwest and West region. While our total broadline service volumes remains down for the Northeast and Midwest compared to the same period in 2019, both regions experienced sequential improvement into June. Our Foodservice independent case volume is now growing in every region compared to 2019. Our Foodservice business has taken advantage of this period of strength, continuing to roll out and expand on our customer-facing activity with many new programs designed to support the independent operator in areas such as recruiting and cost control.

Also PFG expanded its Golf Kitchen partnership to meet the growing demand of this segment. PFG's customer centric operating model has delivered strong results through the challenges of the past year and we believe our business is in a stronger position today than it was before the pandemic. Illustrating our strong position, we are seeing better results with new and existing customers and lower loss rate since March. Independent cases from new customer surge in the fourth quarter of fiscal 2021, representing the main driver of growth compared to 2019. Meanwhile, retained business has been very strong as dining restrictions eased through the spring and summer. At the same time, our loss business rate has decreased to the point that at end of the quarter below pre-pandemic levels. The combination of those three factors is what has driven our strong independent sales growth and positive business mix.

All in all, our Foodservice business is performing very well on the top and bottom line. Our integration of Reinhart continues to progress at or above expectations and we expect this momentum to continue into fiscal 2022. At Vistar, the recovery in movie theaters and office coffee remains slow. So we are seeing steady progress off a low base. Other Vistar channels, including convenience stores, retail, value and corrections have remained resilient. Those channels all grew sales in the quarter compared to fiscal 2019, excluding the additional week. We do expect theaters and office coffee to remain under pressure at least through the summer, as continued office closures and a slow build in theater persist. As a result, Vistar experienced 43.4 % sales growth in the fiscal fourth quarter, excluding the extra week. Of course, the strong topline results in both of our segments do come with costs. As you all know, the labor market has been tight up and down the supply chain. While this is not a PFG specific problem, we are not immune.

With that said, our team has done an outstanding job in most markets, managing the staffing issues and we believe that the labor supply situation will eventually ease. Right now, we are focused on improving our service levels with the customers who are experiencing challenges. We recognize our customers also have labor issues and we will get pushed to get back to exemplary service levels as soon as possible.

To wrap up the discussion of our base business, we are extremely pleased with the topline recovery and our company's performance during this period. Certain cost items have been near-term challenges, but we believe much of this is transitory. We continue to invest in driving sales growth and have expanded on key partnerships with our customers to adapt to the changing landscape. With the efforts across our enterprise, we believe we are all situated for a strong fiscal 2022.

Switching to Core-Mark, we are moving quickly through the closing process. Last week, we announced that the HSR waiting period expired with no second request from the FTC. As a result, the next step is the Core-Mark shareholder vote, which is scheduled for next week. Assuming approval by Core-Mark shareholders, we anticipate the close of the transaction in late August or early September. When we announced the Core-Mark acquisition three months ago, we were excited with the opportunity. Since then, our enthusiasm has only grown as we continue to evaluate the potential for value creation that this transaction brings. We are also very pleased with the quality of management at both Core-Mark and Eby-Brown.

Convenience store distribution represents about $110 billion of total addressable market. We are particularly excited about the $55 billion food and foodservice portion of in-store sales and we believe we're uniquely qualified to capture share and grow the overall market. Not only is Foodservice the fastest growing area in the C-store, it brings meaningful margins for both the distributor and the C-store operator. We expect the C-store mix to continue to shift away from low margin tobacco products toward more Foodservice, boosting both sales and profit growth long-term. We have continued to work with our current convenience store business to plan for an acceleration in Foodservice opportunities. And Foodservice is not the only area of value creation for PFG in the convenience channel. Currently, many convenience stores received a significant number of deliveries from various direct store delivery suppliers. Over time, we hope to bring some of these suppliers to our network, helping the suppliers lower costs and achieve better margins, adding sales to the PFG network and reducing complexity for the C-store operators. We have been successful with this strategy of Vistar over the years and hope to see similar results in the C-store space.

We are incredibly excited to close the Core-Mark transaction, welcome the new associates to PFG, and begin unlocking the value of this deal. We see significant topline opportunities that we can take to the 40,000 customers Core-Mark serves. We will continue to share more about the convenience store space as we move forward in this important strategic areas. Before turning it over to Jim, I want to highlight some of our recent efforts in ESG arena. ESG is an important focus area for our company and we significantly stepped up our commitment in fiscal 2021. This included allocating dedicated resources to ESG-related initiatives, creating a reporting structure for our ESG activity and heightened disclosure of our ESG-specific activities.

In December, we published our first ESG report and expect to follow this up with an update by the end of the calendar year. Our upcoming ESG report will include additional details around our 2030 goals and objectives. Last month, we announced a community solar project as the next step in PFGs journey toward delivering on our commitment to renewable energy procurement. Over the 20-year term of this agreement, PFG will purchase power generated from the 2.25 megawatt project estimated to be about 3,000 megawatt hours annually. This is a step toward our goal of purchasing 10% of our consumed power from renewable energy by 2015. Our entire team is proud of our ESG efforts to date. You should expect to hear more in this area in the months and years ahead.

With that, I'm going to turn things over to Jim, who will give you more detail on our fourth quarter and our financial position. Thank you.

James Hope -- Executive Vice President and Chief Financial Officer

Thank you, George, and good morning, everyone. Before I review our results for the fourth fiscal quarter, I would like to discuss some of the financial items. As George mentioned, a stronger recovery continues. While supply chain labor related cost pressures are not unique to our company or sector, they are an area of focus for us to manage. I am extremely pleased with how our organization has stepped up to the challenge and handle the situation, allowing us to deliver strong profit recovery in the fourth quarter despite the cost pressure.

We assume that worker shortages, particularly for drivers and warehouse associates will persist. However, we do believe that the market will ultimately stabilize and reach equilibrium. We also see that our capital structure is in excellent shape. At the close of fiscal 2021, PFG had [Technical Issues] total net debt outstanding. Using our trailing 12-month adjusted EBITDA, this means we were [Technical Issues] net debt to adjusted EBITDA at the end of the year and at the announcement of the Reinhart transaction, well ahead of schedule [Technical Issues] adjusted EBITDA due to the impact of COVID.

As you know, after the quarter close, we went to the debt markets to pre-finance the Core-Mark transaction and retire $350 million of our outstanding 2024 notes, which had a 5.5% coupon rate. Oversubscription of our debt offering allowed us to upsize the issuance to $1 billion at 4.25%. We are very pleased with this rate, which we believe reflects both the strength of the company and its capital position. As George mentioned earlier, our recent sales trends in July and early August have kept that momentum our business has created. While we have not yet seen any indication that business was slow with the recent uptick in COVID cases, we are prepared for any change in the external environment. This includes our strong capital position, which we will not only use to support our growth profile but also have in reserve in the event of another temporary decline in business volume.

We certainly do not expect to see anything nearly as bad as what the country experienced in early calendar 2020. However, we believe that our company is in a strong of a financial position as we have ever been. One use of our balance sheet could be for strategic M&A activity. We are excited to welcome the Core-Mark team to our organization hopefully within the next few weeks. In the meantime, we still have the [Technical Issues] they were to arise and what enhance our business. This include [Technical Issues] in the foodservice space [Technical Issues] did not happen overnight and required significant due diligence from both the buyer and the seller. We want to protect our well-established reputation for a high-quality M&A process and we will not deviate from our typical routine.

Turning to our results for the fiscal fourth quarter and full year 2021, a strong financial position is underpinned by our ability to generate cash and as appropriate reinvest behind our growth initiatives. In total, for the full fiscal year, cash flow from operations were $6 million. This was down from the prior year as we continue to ramp up our inventory and experienced an increase in accounts receivable. [Technical Issues] working capital is a direct result of strong sales growth and a healthier operating environment. As we mentioned last year, our business typically generates reserves when reverses when in the business builds back up as we are seeing now. The capital allocation decisions we made last year and during the early part of this fiscal year had us well prepared for these investments.

Importantly, we continue to see favorable trends in our working capital. For example, our accounts receivable aging schedule has improved significantly, including the smallest amount of receivables over 60 days, due since the pandemic began. Similarly, while our total inventory level increased in the quarter to support higher order flow, June's days of inventory outstanding was near all time lows at 21.2 days. Throughout the fiscal year, PFG invested $188.8 million in capital and warehouse space. We continue to build capacity to support the growth in our business, while also prioritizing more profitable business and making the right business decisions for our organization.

With that, let's quickly review some highlights from our fiscal fourth quarter business performance. Note that when stated, we've adjusted for the extra week to provide numbers more comparable to a typical 13-week quarter. Adjusting for the extra week, this was a 49.6% increase over last year and 9.3% growth compared to the same period in fiscal 2019, including pro forma acquisitions.

Our net sales performance was driven by a 55.8% increase in total case volume or 44.7% growth, adjusting for the extra week. Independent cases increased 69.2% in the fiscal fourth quarter. We could not be happier with the results in our independent business. Not only does this have a positive impact on our net sales results, it also provides positive mix to our profit. Total PFG gross profit increased 66.8% in the quarter to $1.1 billion, and was up 54.9% after adjusting for the extra week. Our reported gross profit margin in the quarter was 11.5%, up from 11.1% in the prior year period. On an adjusted basis, gross profit margins were 11.7%, up 66 basis points over the year ago period and 17 basis points from the fiscal third quarter. The improvement in gross margins was due to better mix and some benefit from inflation.

Food cost inflation moved higher as expected. Our weighted cost inflation was about 7.8% in the quarter, driven by increases in disposables and poultry products. As illustrated by our gross profit dollar results, we successfully passed along cost inflation and expect this trend to continue into fiscal year 2022. Gross profit per case was up 34% in the fourth quarter compared to the prior year period. In the fourth quarter, PFG had a net income of $31.4 million. Adjusted EBITDA increased substantially to $210.9 million. Please note that our adjusted EBITDA results for the quarter included a $6.4 million net benefit related to reserves for expected credit losses and cost of inventory write-offs.

Early in the pandemic, we made the decision that credit related reserves and inventory write-offs, while certainly impacted by the pandemic, were part of our ongoing operations. And as such, we absorbed these items in our adjusted results. With an improved operating environment, we are now seeing the benefit these items have flowing through our financials. While we continue to believe that it is appropriate to record both the ups and downs of these items as they occur, it is likely that some of these benefits will dissipate as the operating environment continues to normalize.

Diluted earnings per share was $0.23 in the fourth quarter, while adjusted diluted earnings per share was $0.56. In summary, we are extremely pleased with how we closed out the fiscal year. While there are certainly challenges in the market, PFG has successfully navigated a dynamic fiscal 2021. Our independent restaurant business continues to impress, outpacing the overall market and remaining well above 2019 levels. Our balance sheet is strong, which should allow us to invest behind long-term growth, while protecting us from an unforeseen downturn in the market and recent business trends have been strong, extending our current positive momentum.

Organization is engaged and we're pushing forward with important enterprise initiatives. We are specifically focused on our ESG efforts. We are very proud of how our organization and associates perform and our success is directly attributable to their hard work. We're looking forward to closing the Core-Mark transaction, which we believe will generate long-term value for PFG shareholders and provide the company with another avenue for growth, particularly in the foodservice space. We look to build off the strong finish to 2021 as we move into fiscal 2022, and we appreciate your interest in Performance Food Group. And with that, we'd be happy to take your questions.

Questions and Answers:

Operator

[Operator Instructions] We will take our first question from John Heinbockel with Guggenheim Partners.

John Heinbockel -- Guggenheim Partners -- Analyst

George, let me start with labor cost, right, in the supply chain. It sounds like it may last longer than you thought a couple of months ago. Is that fair? And is the primary challenge, is it finding new people because of the growth you've seen or is it existing employees are getting bid away and retaining them is a challenge? And then what do you do about that? Is there anything to mitigate that or you just have to pay market prices for now?

George Holm -- Chairman, President and Chief Executive Officer

The challenge is, number one, getting new employees. And then the second challenge would be churn. People, they don't stay very long, they find the work to be too physical or something they don't like about or maybe they don't like hours. As far as our core of workers not have an issues there and we don't we don't know who are losing people too. And that is just something that's hard to determine. What we do know is that we were for a period of time, they're losing drivers to over the road jobs and many of those came back and I think that had to do with, no, it's just that being out over the road and spending nights away from home and they found that the additional pay they got for that job was the change in lifestyle. But I do think that the employment issues are probably around for a while. We've done the best job that we could do to offer the right incentives to attract people and to retain people, and it's a very localized situation. We had markets where we have been highly affected by a shortage of people and we've had markets where we've benefited tremendously by not having that issue.

John Heinbockel -- Guggenheim Partners -- Analyst

Okay, great. And then maybe as a second topic, right. Going back on to C-stores and Core-Mark. How quickly do you think once this closes you can begin to get the cross selling mechanism in place, your guys and theirs? And I guess is the opportunity more, I guess would be more existing customers, right, because new ones will have contracts would have to expire or some of the will. So is it more in their existing customers doing more on the Foodservice front. And then lastly, do you think the potential is there. When I think about their non-tobacco growth cannot exceed performance, sort of legacy, case growth, you think about an apples to apples. Can growth rate be higher than yours because of the share opportunity?

George Holm -- Chairman, President and Chief Executive Officer

I'll start with that foodservice ramp up. We've got some experience doing this with our involvement with Eby-Brown. Certainly, it was somewhat curtailed by COVID. It was a tough period of time for the foodservice side of the convenience business. But we've got programs put in place. We're ready to hit the ground running. Certainly, we during this period of time we're not able to do detailed work with Core-Mark, but I can tell you that their senior people are anxious, they understand it, they see the fit between the two businesses. And it's not just in the foodservice area, I would put a broadly in the food area, and I think I would say that candy is a great opportunity for us as well.

As far as what the growth potential there is, certainly the initial focus will be on the existing customer base because they are experiencing as I think anybody in distribution, they're experiencing the same labor shortages that we are. But I do think that it won't take long and we'll be pursuing new business, but that's where I believe the opportunities are going to be with their existing customer base. And of course, we'll be early on and focused on making sure that we deliver on the synergies. I think that will be a little bit easier to do then that it was with Reinhart just because the SKU mixes and are so similar. As far as growth, I think in the independent area that will do well. Eby-Brown has done exceptionally well in that area since we've owned them. But when you get outside of the independent, I think it will come in chunks and that's something that will be very transparent about and very communicative about, but it will come in bigger chunks when you get outside of the independent.

John Heinbockel -- Guggenheim Partners -- Analyst

Thank you.

George Holm -- Chairman, President and Chief Executive Officer

Thanks, John.

Operator

And we will take our next question from Alex Slagle with Jefferies.

Alexander Slagle -- Jefferies -- Analyst

Hey, good morning. I just wanted to follow-up on the previous question. Maybe just thinking about the magnitude of the impact on operating expenses related to the staffing during the fourth quarter and what you expected in the first quarter? Sorry, just again trying to figure it out when you think you kind of hit the peak of these incremental costs and start to see it moderate a bit?

George Holm -- Chairman, President and Chief Executive Officer

Well, once again I'm going to say that's very localized. When you talk to the guys that run our companies and ladies that run our companies, some will tell you that it is difficult as it's ever been and some will tell you that you feel that its over the hump and some just haven't experienced, that's how much it varies by marketplace. So its kind of hard for us to tell. I think one thing that will help us is, as people come back to work and people go back to school, the kind of that contract seating area and then the school area are areas that we don't participate very much. And so I think that if we continue to run the increases that we're running over two years [Speech Overlap] and preferencing it, we don't get a big surge this time of year, I think we will improve.

Alexander Slagle -- Jefferies -- Analyst

And then on the rebound in the casual dining chain business, this carries how much that sort of recovery strive in your stronger than expected topline and if you think there is opportunity to build some more share in that channel going forward?

George Holm -- Chairman, President and Chief Executive Officer

Well, once again I say this often. We don't want to report on how any specific customer is doing. The chain casual diner has not been a big contributor to our rebound. They have certainly rebounded but not to the extent that our independent business has. And in many ways that has been the more difficult part of our business to handle through this process.

Alexander Slagle -- Jefferies -- Analyst

Got you. Thanks.

George Holm -- Chairman, President and Chief Executive Officer

Thank you.

Operator

And we will take our next question from, I apologize, Lauren Silberman with Credit Suisse.

Lauren Silberman -- Credit Suisse -- Analyst

Thank you. So first on the Core acquisition. You've talked about the opportunity to expand further Foodservice and C-stores. So can you talk about how that relationship currently works? Would you deliver your customer from the Performance Foodservice division or Eby-Brown? And then as Core is integrated into the business, is foodservice coming from Performance Foodservice or Core?

George Holm -- Chairman, President and Chief Executive Officer

Well, once again we have experience in that area with Eby. What we have found is that if their foodservice offering goes beyond what we consider to be a certain point where we got from the skewed standpoint and it's different by distribution center because they have different size coolers and freezers. But there is a point at which there is much more logic in delivering at a Performance Foodservice than there is delivering it out of Core-Mark or Eby. And then we have decisions to make as to where we expand facilities to handle that business.

Today, we do more convenience store foodservice business, how about our Performance Foodservice than we do out of Eby at significantly more and will be comparable when we close on the Core-Mark acquisition. So I think it's going to be mixed as we move forward. But certainly our goal is to expand the foodservice offering within Core-Mar and Eby distribution center as much as possible.

Lauren Silberman -- Credit Suisse -- Analyst

On gross margin. Looking at the adjusted gross profit margin excluding LIFO impact, it looks like it improved sequentially and year-over-year. Seems like foodservice gross margins were flat year-over-year, we saw nice improvement despite the [Indecipherable] inflation. Can you talk about the dynamics of that gross profit margin? I think we've seen just across other peers by inflation weighing on the percentage. And then excluding Core, how do we think about that gross margin percentage going forward?

George Holm -- Chairman, President and Chief Executive Officer

Well, much of our increase in gross margin is a function of the change in mix as our independent business continues to grow at a faster rate. We not only passed it on per case profit, but we did it in actual margin as well in spite of the heavy inflation. And I think that a lot of it is attributed to our salespeople and their ability to make sure that they've kind of got that ratio right with the customers to what value they're bringing versus what they charge. And then we've had great success at the higher end of our product line. So we've had increase in inflation because our business has grown faster in the higher case cost areas, which is even more significant when you consider that we were able to raise the margin as well. And then our chain business has just not been as robust.

Lauren Silberman -- Credit Suisse -- Analyst

And if I could just ask one more related to Core. Within foodservice and then I guess among independents, we also think about independents having about five to seven distributors, 30% average wallet share or so. How does that compare in the C-store space in terms of average wallet share and how do you see those opportunities in...

George Holm -- Chairman, President and Chief Executive Officer

And I don't profess to be an expert at this point in convenience or foodservice distribution. But I've been out with our people and I've been in a tremendous amount of convenience stores. They typically for a core supplier, they pick someone. So normally, the core of the store will come all from one person. Now if they have a larger food service offering, they could be buying from a foodservice distributor as well. And then there are multiple DSD players that are in the business. And that can be fairly regional but there's a great deal of them. But as far as like splitting the business, which is so common in foodservice or having like a main supplier and a backup supplier on those core convenience items, I think I can count on one hand the number of times I've seen that. They pick somebody and they go with them.

Lauren Silberman -- Credit Suisse -- Analyst

Thank you, guys, so much.

Operator

And we will take our next question from Edward Kelly with Wells Fargo.

Edward J. Kelly -- Wells Fargo -- Analyst

Hi, guys, good morning. I jumped on the call a little bit late so hopefully I didn't miss this, but I don't think you gave any guidance. You have been giving sort of like an at least number for the out quarter. Any color here that you could provide? And I'm just kind of curious as to why you didn't provide any guidance?

James Hope -- Executive Vice President and Chief Financial Officer

Yeah, Ed, we gave guidance on a quarter basis for a couple of quarters just to make sure we had good information out there. I think that things are still -- there's still plenty of uncertainty in the market. You heard George's commentary about labor and very difficult to predict when that issue will turn. And of course, there's other unknowns in the marketplace. So you didn't miss anything. We are not providing guidance.

Edward J. Kelly -- Wells Fargo -- Analyst

Okay. Maybe just a follow-up on that. George, you mentioned the average weekly sales in July and August similar to June levels. I think in June you mentioned you were $100 million a week ahead of 2019. I'm just kind of curious does that hold? And then does that mean that Q1 sales are kind of running at least like that $9.3 billion range or better?

George Holm -- Chairman, President and Chief Executive Officer

Well, certainly not $9.3 billion here. We don't get a 14-week quarter every quarter. I wish we did.

Edward J. Kelly -- Wells Fargo -- Analyst

Oh, sorry, right, right, right.

George Holm -- Chairman, President and Chief Executive Officer

Its all right. But we do have some seasonal differences, typically January and July are kind of the tougher months and our sales held up extremely well in July. We had a little bit of softness just in like the last nine days. It takes some work to figure that out. Last year, we did not have a back-to-school. But when you go back to when we did have a normal back-to-school, that slight softening is quite normal for us. So I would say all in all and we're being cautious here because you just don't know what's going to happen out there with restrictions, and that's a good reason for not giving guidance. But all in all, we haven't seen a change as things are kind of rolling along as good as they were in June despite some of the pockets of very difficult labor issues that we're dealing with.

Edward J. Kelly -- Wells Fargo -- Analyst

Okay. And then maybe just one last one, and maybe this is for Jim. But you had $211 million in EBITDA in Q4 excluding the extra week, you're at $196 million. The extra week of $15 million, right, if you were to take that a quarter, that's around $195 million, I mean those numbers are kind of close. But there's typically seasonality in Q1, but Q4 was kind of ramping I think. So should we expect to see some of that normal seasonality if all things sort of being equal in Q1?

James Hope -- Executive Vice President and Chief Financial Officer

Tough for a lot of businesses for you to model because very few folks are providing guidance and we aren't either. I think seasonality is also a tough thing to predict because businesses isn't the way it was in all the years that we knew the industry in the past that things are different right now. So it's hard to use seasonality as a calibration point. I'd just leave it at this. We see good trends coming off of Q4 going into Q1. We're happy with how the business is running. We're pleased with our business results. We couldn't be more proud of how our employees are stepping up and working hard to take care of our customers, and we'll continue that momentum.

George Holm -- Chairman, President and Chief Executive Officer

Ed, it's hard to say much more than what Jim has said. I think we're just dealing with so many variables. But I will say this, I mean, if you look at a two-year stack of our independent growth, it's the best we've ever had for a two-year stack. And we had a pretty long history of 6% to 10% case growth and that's the best we've ever been. So we have a lot of confidence, but we are really cautious around future growth right now.

Edward J. Kelly -- Wells Fargo -- Analyst

Okay. Thank you.

Operator

And we will take our next question from Mark Carden with UBS.

Mark Carden -- UBS -- Analyst

Good morning. Thanks a lot for taking my questions. Now that food-away-from home sales momentum has really picked up, have you seen independent restaurants start to work with more distributors again or are they still concentrating more of their business with larger players that can provide more consistent service levels? Thanks.

George Holm -- Chairman, President and Chief Executive Officer

Yeah, what I've seen, and this is mostly from conversations with our people, not the accounts, is the whole supply chain has some serious labor issues. I mean, we're not trying to downplay that. And our customers are dealing with it as well and we don't see anybody really making changes. We do see people scrambling to get product. And I mean, I look at the [Technical Issues] So I don't think that it's a question that could be answered yet. I think we've got to get back into some sense of normalcy and then see what this period of time we've been through, see how that's affected, how people look at their purchasing, because I don't think you can do that right now.

Mark Carden -- UBS -- Analyst

Fair enough. That makes sense. And then you noted that inflation has remained elevated, is it continuing at the peak levels that you saw this past quarter or has it tapered off at all? Thanks.

James Hope -- Executive Vice President and Chief Financial Officer

Yeah, you're right. Inflation has been strong. At some point, it will taper off. And I don't think we see quite the trajectory that we had in the past. I mean at some point, it begins to lap where it was previous year. I can tell you this, I'm really pleased with how the organization is managing inflation, how we're passing inflation through to our customers appropriately and at the right pace. And we'll continue to do that. I guess in summary, I would say that I believe it's reasonable to expect inflation to be temporary, very tough to predict.

George Holm -- Chairman, President and Chief Executive Officer

And if you go by this, that we track our inbound service levels extremely close, daily. And last week, just last week was the worst that we've experienced in both Foodservice and Vistar. And scarcity brings inflation. It always does. And it's hard to get product today. And with that has come inflation. And if you look at those areas that have had very little problems, those product areas very little problems, getting product to us, the inflation is nowhere near as much. It's more about their increased fuel prices and maybe some with labor. But as long as we have the scarcity going, I think that we're going to have inflation.

Mark Carden -- UBS -- Analyst

Got it. Thanks so much, guys.

Operator

And we will take our next question from John Glass with Morgan Stanley.

Brian -- Morgan Stanley -- Analyst

Hi, this is Brian [Phonetic] on for John. Maybe just first question just on the Core-Mark deal. Could you just kind of explain moving forward without kind of full SEC approval -- or FTC, is there any risk they come back and say, there's some divestitures you have to do or anything else they might require? Could you just walk us through that kind of thinking?

James Hope -- Executive Vice President and Chief Financial Officer

Yeah, I think the only comment we want to make on that is we have what we need and the information we need to be able to move forward and we're going to do that. We're very comfortable with the situation we're in. I would add that we believe we worked well with the FTC and provided them the information they needed for them to do their job. And now we're moving forward.

Brian -- Morgan Stanley -- Analyst

Okay, great. Maybe the other question is just on kind of independent case growth. Did you give that number on a 13-week basis? And I guess, just curious more broadly, anything differently you're doing there or anything that you think is really kind of working well right now? Obviously, your trends in that segment have been quite strong. But just curious about anything that's changed there recently?

George Holm -- Chairman, President and Chief Executive Officer

No, it really hasn't changed at all. I think our approach is the same that it's always been. What is pleasing to me is that we were running significant growth in this time last year in pizza and Italian and Hispanic. And as we came up against those big growth numbers, I was concerned that we would have trouble continuing to put out particularly double digit growth, and we have not had trouble. And then the other areas of the business where we're not, certainly not over-indexed, we gained share, particularly early in COVID, and we've been able to hold on to that share. So we're just real pleased right now.

Brian -- Morgan Stanley -- Analyst

Thank you.

Operator

[Operator Instructions] We'll take our next question from Joshua Long with Piper Sandler.

Joshua Long -- Piper Sandler -- Analyst

Great. Thank you for taking the question. Wanted to circle back on the food inflation in the front and can understand that it's difficult to forecast and follow. It doesn't sound like there has been much of a tapering, although as some of your comments suggest you would expect some of that tapering going forward. Just curious if maybe coming up that question a little bit differently, are there pieces in the basket that reset on a contract pricing basis or things that would move around that benefit that we saw of about almost 8% inflation in 4Q, maybe as we think into 2022?

James Hope -- Executive Vice President and Chief Financial Officer

I think you could tackle that from two angles. One, from a customer pricing perspective and one with suppliers. So our supplier pricing is updated pretty frequently. And that information comes to us and of course, we make decisions on what we'll buy and from whom we'll buy on a regular basis. So that's pretty fluid and updated regularly. With our customers we have our independent customers where pricing is updated on a much more frequent basis than our chain customers. Many of our chain customers have more of a monthly price or a twice-a-month price update approach. But all in, we feel very comfortable about how we're passing it on. And back to our earlier answer, really not certain exactly when it will dissipate, but we're comfortable handling it either way and eventually it will dissipate.

Joshua Long -- Piper Sandler -- Analyst

Understood. Thanks for that. And interesting and great to hear that we're not seeing any sort of slowdown here as we move from 4Q into the early fiscal 1Q period. I'm curious if that stability or that trend is maintained on a cuisine region basis as well, if there's just anything as we dig a little bit further down into those trends if there were any sort of moving pieces that you'd be willing to share on the just added color basis?

George Holm -- Chairman, President and Chief Executive Officer

The only thing I would say there would be regionally and the Northeast has been slower to recover. We have the most labor issues in the Northeast. The Southeast, which we were running nice growth this time last year, our growth isn't as great but continuing to do real well. From a cuisine standpoint, we're not -- I don't think we have the kind of share to comment on a lot of the areas. But certainly where we have share we see those channels continuing to do real well, particularly the affected area.

Joshua Long -- Piper Sandler -- Analyst

Great. Thank you for that. And then thinking about the net leverage target that you had said, that you had reached ahead of expectations or ahead of schedule, curious on how you think about balancing that now if you have other targets that you had worked toward knowing that you're going to maintain some flexibility and you're in a great cash position or liquidity position to hit on some of those strategic initiatives you talked about. So just curious on anything on how to think about net leverage or the balance sheet going forward?

James Hope -- Executive Vice President and Chief Financial Officer

Yeah, really nothing has changed other than we feel confident about any markers or comments that we've made in the past about leverage and how we'll manage our capital structure and the balance sheet in general. Again, we feel very pleased with liquidity that we have. We're very comfortable with the liquidity we have available to us. Very appreciative to the debt and the capital markets and how they responded to our request. I think that we've also, in addition to those things really done a good job, a strong job of managing working capital receivables and inventory and payables in the way that we wanted to in the way that fit our business. And I don't see any reason why that would change going forward. So all in, we believe we're positioned really well.

Joshua Long -- Piper Sandler -- Analyst

Thank you for taking the questions.

Operator

And we have no further questions on the line at this time. I'll turn the program back over to Bill Marshall for any additional or closing remarks.

Bill Marshall -- Vice President of Investor Relations

Thank you for joining our call today. If you have any follow-up questions, please contact us at Investor Relations.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Bill Marshall -- Vice President of Investor Relations

George Holm -- Chairman, President and Chief Executive Officer

James Hope -- Executive Vice President and Chief Financial Officer

John Heinbockel -- Guggenheim Partners -- Analyst

Alexander Slagle -- Jefferies -- Analyst

Lauren Silberman -- Credit Suisse -- Analyst

Edward J. Kelly -- Wells Fargo -- Analyst

Mark Carden -- UBS -- Analyst

Brian -- Morgan Stanley -- Analyst

Joshua Long -- Piper Sandler -- Analyst

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