Performance Food Group Announces 65% Increase in Operating Profit from

    Business Editors

    RICHMOND, Va.--(BUSINESS WIRE)--May 3, 2005--Performance Food Group (Nasdaq:PFGC) today announced results for the first quarter ended April 2, 2005. All amounts pertaining to the Company's Fresh-cut produce segment are accounted for as discontinued operations.
    Consolidated net sales from continuing operations in the first quarter increased to approximately $1.4 billion, a 16% increase compared to the prior year period. Inflation was approximately 3% in the first quarter. Net earnings from continuing operations amounted to approximately $4.7 million compared to approximately $2.2 million in the year earlier period. Net earnings per share for continuing operations were approximately $0.10 per share diluted, compared to $0.05 per share diluted in the prior year period. Net earnings from discontinued operations were approximately $9.0 million, compared to approximately $5.3 million in the year earlier period. Net earnings per share from discontinued operations were approximately $0.19 per share diluted, compared to approximately $0.11 per share diluted in the prior year earlier period. Consolidated net earnings per share, including both continuing operations and discontinued operations, amounted to approximately $0.29 per share diluted.
    On February 22, 2005, the Company signed a definitive agreement to sell all of its stock in the subsidiaries that comprise the Fresh-cut produce segment to Chiquita Brands International, Inc. As of that date, the Company met the criteria required to account for the Fresh-cut segment as a discontinued operation. As such, in accordance with generally accepted accounting principles, depreciation and amortization were discontinued as of February 23, 2005. This resulted in a reduction of pre-tax expense for the segment of approximately $3.7 million, or approximately $0.05 per share diluted in the first quarter. Excluding the impact from the discontinuation of depreciation and amortization for the segment, net earnings per share would have amounted to $0.14 per share diluted for discontinued operations and $0.24 per share diluted including both continuing operations and discontinued operations on a consolidated basis.
    Bob Sledd, Chairman and Chief Executive Officer, remarked, "We're very pleased with the strong growth of our internal sales and operating earnings in our continuing operations during the first quarter. Our focus on service excellence and operational improvement are contributing favorably to our growth with customers."
    "Sales in the Broadline distribution segment increased approximately 19% in the first quarter. Inflation amounted to approximately 3% in the quarter. Sales increases in the quarter were the result of previously announced new business rollouts, combined with incremental growth with existing customers."
    Mr. Sledd added, "In our Customized distribution segment, sales increased approximately 12% in the first quarter. Inflation was approximately 3% in the quarter. Sales gains in the quarter were driven by continued growth with existing customers. In April, we began shipping from our new 206,000 square foot distribution center in Indiana. Our Customized segment remains focused on the addition of new capacity throughout the year to position us for growth in 2006.
    "Sales from the discontinued operations of the Fresh-cut segment increased slightly in the first quarter over the prior year period. Retail sales increased ahead of category growth in the quarter, while foodservice sales decreased as a result of the rationalization of foodservice customers in the prior year.
    "All of our business segments are experiencing higher trends in insurance costs, particularly increases in healthcare costs. Our corporate costs increased during the first quarter primarily as a result of incremental costs associated with the completion of our previously disclosed Audit Committee investigation. Despite these costs, we continue to expect operating profit from continuing operations to be within our previously projected range of $73 to $78 million for the year. Although given these trends, we expect to be toward the lower end of this range. This includes corporate overhead, but excludes stock compensation expense. This would represent a solid mid-teens percentage improvement over 2004. In conjunction with the recently announced delay in the effective date of FASB 123-R for the expensing of stock options, we now expect to adopt the new standards in the first quarter of 2006. We have continued to focus on implementing cost effective equity compensation programs with an increasing emphasis on restricted stock. As a result, despite the delay in the implementation of FASB 123-R, the Company expects to incur pre-tax stock compensation expense of approximately $1.0 to $1.5 million related to restricted stock grants for the 2005 year."
    Mr. Sledd concluded, "Our balance sheet remains strong with a debt to capital ratio of approximately 23% at the end of the first quarter, excluding $130 million of interests in accounts receivable sold under an accounts receivable purchase facility. We remain focused on continued improvement of our operating performance and we expect to achieve solid operating earnings improvement throughout the year."

    Performance Food Group markets and distributes more than 65,000 national and private label food and food-related products to approximately 44,000 restaurants, hotels, cafeterias, schools, healthcare facilities and other institutions. The Fresh Express(R) line is the industry leader and pioneer of fresh packaged salads. For more information on Performance Food Group, visit www.pfgc.com.

    Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and are based on current expectations and management's estimates; actual results may differ materially. The risks and uncertainties which could impact these statements include, but are not limited to, general economic conditions; the relatively low margins and economic sensitivity of the foodservice business; the Company's reliance on major customers; the level of demand for the Company's fresh-cut products; the possibility that the closing of the sale of the fresh-cut produce operations may not occur because of the failure of the closing conditions to be satisfied; the risk that the results of the Securities and Exchange Commission informal inquiry could have an adverse affect on the Company; the ability to identify and successfully complete acquisitions of other foodservice distributors; the Company's ability to successfully develop, produce and market new products and management of the Company's planned growth, all as detailed from time to time in the reports filed by the Company with the Securities and Exchange Commission.

Performance Food Group Company Unaudited Financial Highlights

(In thousands, except net earnings per common share) Three Months Ended -----------------------

April 2, April 3, 2005 2004 ---------- ---------- Net sales from continuing operations $1,422,807 $1,224,537

Net earnings from continuing operations $ 4,683 $ 2,157 Net earnings from discontinued operations 9,012 5,319 ---------- ---------- $ 13,695 $ 7,476

Weighted average number of shares outstanding: Basic 46,872 45,999 Diluted 47,403 47,067

Net earnings per common share: Basic net earnings per common share - continuing operations $ 0.10 $ 0.05 Basic net earnings per common share - discontinued operations 0.19 0.11 ---------- ---------- $ 0.29 $ 0.16

Diluted net earnings per common share - continuing operations $ 0.10 $ 0.05 Diluted net earnings per common share - discontinued operations 0.19 0.11 ---------- ---------- $ 0.29 $ 0.16

Note: Prior year data has been reclassified to conform to current year discontinued operations presentation

Performance Food Group Company Condensed Consolidated Balance Sheets (Unaudited) April 2, 2005 (In thousands) April 2, January 1, Assets 2005 2005 ---------------------------------------------------------------------- Cash and cash equivalents $ 49,710 $ 52,322 Accounts and notes receivable, net, including retained interest in securitized receivables 197,498 171,191 Inventories 287,097 287,019 Other current assets 22,929 25,463 Current assets of discontinued operations 669,061 109,924 ---------------------------------------------------------------------- Total current assets 1,226,295 645,919 ---------------------------------------------------------------------- Property, plant and equipment, net 214,247 201,248 Goodwill, net 354,037 354,038 Other intangible assets, net 53,405 54,471 Other assets 14,004 13,502 Non-current assets of discontinued operations - 558,587 ---------------------------------------------------------------------- Total assets $1,861,988 $1,827,765 ======================================================================

Liabilities and Shareholders' Equity ---------------------------------------------------------------------- Checks in excess of deposits $ 54,239 $ 103,948 Trade accounts payable 287,791 227,882 Current installments of long-term debt 661 661 Other current liabilities 128,104 112,580 Current liabilities of discontinued operations 203,298 116,024 ---------------------------------------------------------------------- Total current liabilities 674,093 561,095 ---------------------------------------------------------------------- Long-term debt, excluding current installments 255,719 263,859 Deferred income taxes 40,871 40,775 Long-term liabilities of discontinued operations - 87,723 Shareholders' equity 891,305 874,313 ---------------------------------------------------------------------- Total liabilities and shareholders' equity $1,861,988 $1,827,765 ======================================================================

Note: Prior year data has been reclassified to conform to current year discontinued operations presentation

Performance Food Group Company Condensed Consolidated Income Statements (Unaudited) April 2, 2005 (In thousands, except net earnings per common share) ---------------------------------------------------------------------- Three Months Ended ---------------------------------------------------------------------- April 2, 2005 April 3, 2004 ----------------------------------------------------------------------

Net sales $1,422,807 100.0 % $1,224,537 100.0 % Cost of goods sold 1,242,891 87.4 % 1,066,484 87.1 % ---------------------------------------------------------------------- Gross profit from continuing operations 179,916 12.6 % 158,053 12.9 % Operating expenses 170,490 11.9 % 152,341 12.4 % ---------------------------------------------------------------------- Operating profit from continuing operations 9,426 0.7 % 5,712 0.5 % Other income (expense): Interest expense (973 ) (1,982 ) Loss on sale of receivables (1,006 ) (468 ) Other, net 164 202 ---------------------------------------------------------------------- Other expense, net (1,815 ) -0.2 % (2,248 ) -0.2 % ---------------------------------------------------------------------- Earnings before income taxes from continuing operations 7,611 0.5 % 3,464 0.3 % Income taxes 2,928 0.2 % 1,307 0.1 % ---------------------------------------------------------------------- Net earnings from continuing operations 4,683 0.3 % 2,157 0.2 % Net earnings from discontinued operations 9,012 5,319 ---------------------------------------------------------------------- Net earnings $ 13,695 $ 7,476 ======================================================================

Weighted average common shares outstanding: Basic 46,872 45,999 Diluted 47,403 47,067 ======================================================================

Net earnings per common share: Basic net earnings per common share - continuing operations $ 0.10 $ 0.05 Basic net earnings per common share - discontinued operations 0.19 0.11 ---------- ---------- $ 0.29 $ 0.16

Diluted net earnings per common share - continuing operations $ 0.10 $ 0.05 Diluted net earnings per common share - discontinued operations 0.19 0.11 ---------- ---------- $ 0.29 $ 0.16

Note: Prior year data has been reclassified to conform to current year discontinued operations presentation

Performance Food Group Company Segment Disclosure

2005 Compared to 2004 1st Quarter

Total Corporate & Continuing 2005 Broadline Customized Intersegment Operations

---------------------------------------------------------------------- First Quarter

Net external sales $ 860,044 $ 562,763 $ - $1,422,807 Intersegment sales 225 62 (287) - Total sales 860,269 562,825 (287) 1,422,807 Operating profit 12,654 5,766 (8,994) 9,426 Operating profit margin 1.47 % 1.02 % - 0.66 % Interest expense (income) 3,899 267 (3,193) 973 Loss (gain) on sale of receivables 2,776 743 (2,513) 1,006 Depreciation 3,339 1,164 1,019 5,522 Amortization 907 - - 907 Capital expenditures 3,309 13,198 2,039 18,546

Total Corporate & Continuing 2004 Broadline Customized Intersegment Operations

---------------------------------------------------------------------- First Quarter

Net external sales $ 723,651 $ 500,886 $ - $1,224,537 Intersegment sales 267 77 (344) - Total sales 723,918 500,963 (344) 1,224,537 Operating profit 10,318 3,470 (8,076) 5,712 Operating profit margin 1.43 % 0.69 % - 0.47 % Interest expense (income) 3,080 171 (1,269) 1,982 Loss (gain) on sale of receivables 1,950 650 (2,132) 468 Depreciation 3,365 1,071 739 5,175 Amortization 900 - - 900 Capital expenditures 2,304 1,449 1,668 5,421

Total assets by reportable segment and a reconciliation to the condensed consolidated balance sheets were as follows:

April 2, 2005 January 1, 2005 ---------------- ----------------

Broadline $ 849,334 $ 830,421 Customized 196,474 176,827 Corporate & Intersegment 147,119 152,006 Discontinued Operations 669,061 668,511 ---------------- ----------------

Total Assets $ 1,861,988 $ 1,827,765 ---------------- ----------------

Note: Prior year data has been reclassified to conform to current year discontinued operations presentation

--30--MGO/sf*

CONTACT: Performance Food Group Cheryl Moore, 804-484-6273 (Media) Kevin Collier, 804-287-8109 (Investors)

KEYWORD: VIRGINIA INDUSTRY KEYWORD: BANKING ENVIRONMENT FOODS/BEVERAGES RETAIL FOREST PRODUCTS EARNINGS SOURCE: Performance Food Group

Copyright Business Wire 2005