Performance Food Group (Nasdaq/NM:PFGC)

Net sales increased to new quarterly high of $654.6 million.
Net income rose 24% to $6.7 million.
Second-quarter net earnings attained of $0.47 per share diluted.
Performance Food Group (Nasdaq/NM:PFGC) today announced that net earnings per share for the quarter increased 21% to $0.47 per share diluted compared with net earnings of $0.39 per share diluted in the year-earlier quarter. Net earnings for the quarter totaled $6.7 million, up 24% from $5.4 million a year ago. Net sales for the three months amounted to $654.6 million, up 30% from $502.0 million in the year-earlier period.

Net earnings per share for the first six months of 2000 increased 21% to $0.74 per share diluted compared with pro forma net earnings of $0.61 per share diluted in the first half of 2000. Pro forma adjustments in the first half of 1999 included the exclusion of $3.8 million of nonrecurring merger expenses and the effect of the change in tax status for NorthCenter Foodservice from an S-corporation to a C-corporation. The gains for the second quarter brought net sales for the first half of 2000 to $1.23 billion, up 27% from $968.3 million in the year-earlier period.

Robert C. Sledd, chairman and chief executive officer, remarked, “The substantial gain in net earnings per share for the second quarter continues the strong momentum that we recorded in the first quarter. Internal progress accounted for virtually all of the year-to-year growth. Based on our strong performance for the first half and the current trends in our business, we expect earnings per share for the full year 2000 to be at the upper end of the current published analyst estimates.”

Sledd said, “We are experiencing further success with our on going programs to achieve additional market penetration in our broadline business which experienced a 19% increase in net sales for the second quarter. Although our broadline focus continues to be on sales to independent restaurant operators, the gain for the quarter was aided by our selective addition of certain multi-unit restaurant chains. We are confident about the potential for further internal gains in broadline. We also remain interested in strategic acquisitions, especially those that can fill in our coverage of a service region, such as the Carroll County Foods transaction announced today.”

“Our customized operations recorded a 41% gain in net sales for the quarter. The major portion of the year-to-year increase reflects growth from existing accounts, but the second quarter did benefit from the addition of our newest customer, TGI Friday’s. We have established a proven record of partnering effectively with expanding restaurant chains and are working closely with our customers to ensure that we generate a reasonable return on our assets that are dedicated to their support.”

“Our fresh-cut produce unit recorded another outstanding quarter during a period in which we completed some significant facility changes. Our Texas-based operations moved to a new facility, and we completed the consolidation late in the quarter of three other operations into a new center in Georgia. Our new processing facilities should yield increased efficiency as we progress in the second half, and they provide the additional capacity for us to expand sales with existing accounts while continuing to broaden our customer base.”

Sledd concluded, “I am extremely pleased that we were able to achieve such strong earnings in the face of many initiatives undertaken this quarter, including the roll-out of two significant new customers and the opening of our two new fresh-cut processing centers. An important emphasis for us in 2000 is investing in new technologies to enhance our productivity and capitalize on the opportunities for using e-business in our industry. We are excited about the initial returns from offering customers the ability to order using the Internet. We are also progressing well in our initiative to manage purchasing information on a single information platform that will enhance our procurement capabilities with suppliers.”

Performance Food Group markets and distributes more than 25,000 national and private label food and food-related products to approximately 25,000 restaurants, hotels, cafeterias, schools, healthcare facilities and other institutions. 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. They include statements regarding anticipated earnings for the balance of the year, sales momentum, customer and product sales mix, expected efficiencies in the Company’s business and the ability of Performance Food Group to realize expected synergies following acquisitions. 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, the relatively low margins and economic sensitivity of the foodservice business, thee Company’s reliance on major customers, the ability to identify and successfully complete acquisitions of other foodservice distributors 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

Three Months Ended

July 1, July 3,
2000 1999
——————————–
Net sales $654,603,000 $501,960,000
Net earnings $ 6,733,000 $ 5,430,000
Net earnings per share:
Basic $ 0.49 $ 0.40
Diluted $ 0.47 $ 0.39
Weighted average number of
shares outstanding:
Basic 13,824,000 13,586,000
Diluted 14,385,000 14,043,000

Six Months Ended

July 1, July 3,
2000 1999
——————————–
Net sales $1,234,353,000 $968,338,000
Net earnings $ 10,604,000 $ 6,081,000
Net earnings per share:
Basic $ 0.76 $ 0.45
Diluted $ 0.74 $ 0.43
Pro forma net earnings per share:
Basic $ 0.76 $ 0.63
Diluted $ 0.74 $ 0.61
Weighted average number of
shares outstanding:
Basic 13,931,000 13,532,000
Diluted 14,385,000 14,010,000

Pro forma adjustments to net earnings per common share add back
nonrecurring merger expenses and adjust income taxes as if NorthCenter
Foodservice was taxed as a C-corporation for income tax purposes
rather than as an S-corporation prior to the merger of NorthCenter
Foodservice in February 1999.

Performance Food Group Company
Condensed Consolidated Balance Sheet and Income Statement
July 1, 2000 (In thousands, except net earnings per common share)

July 1, 2000 Jan. 1, 2000
——————————-
Assets
Cash $ 6,028 $ 5,606
Accounts receivable, net 133,989 119,126
Inventory 124,063 108,550
Other current assets 9,615 9,600
Total current assets 273,695 242,882
Property, plant and equipment,
net 123,831 113,930
Intangible assets, net 103,178 103,328
Other assets 1,436 1,905
Total assets $ 502,140 $ 462,045

Liabilities and Shareholders’ Equity
Outstanding checks in excess of
deposits $ 15,880 $ 14,082
Current portion of long-term debt 704 703
Accounts payable 144,245 116,821
Other current liabilities 38,023 40,397
Total current liabilities 198,852 172,003
Notes payable 105,074 92,404
Deferred income taxes 8,379 8,294
Shareholders’ equity 189,835 189,344
Total liabilities and
shareholders’ equity $ 502,140 $ 462,045

Three Months Ended
July 1, July 3,
2000 1999
————————————–
Net sales $ 654,603 100.0% $ 501,960 100.0%
Cost of goods sold 567,624 86.7% 434,105 86.5%
Gross profit 86,979 13.3% 67,855 13.5%
Operating expenses 74,591 11.4% 57,779 11.5%
Operating profit 12,388 1.9% 10,076 2.0%
Other income (expense):
Interest expense (1,499) (1,357)
Nonrecurring merger expenses — —
Other, net (29) 110
Other expense, net (1,528) -0.2% (1,247) -0.2%
Earnings before income taxes 10,860 1.7% 8,829 1.8%
Income taxes 4,127 -0.7% 3,399 0.7%
Net earnings $ 6,733 1.0% $ 5,430 1.1%

Weighted average common shares
outstanding 13,824 13,586
Basic net earnings per
common share $ 0.49 $ 0.40
Weighted average common shares
and common share equivalents
outstanding 14,385 14,043
Diluted net earnings per common
share $ 0.47 $ 0.39
Pro forma basic net earnings
per common share $ 0.49 $ 0.40
Pro forma diluted net earnings
per common share $ 0.47 $ 0.39

Six Months Ended
July 1, July 3,
2000 1999
————————————–
Net sales $ 1,234,353 100.0% $ 968,338 100.0%
Cost of goods sold 1,069,965 86.7% 837,490 86.5%
Gross profit 164,388 13.3% 130,848 13.5%
Operating expenses 144,436 11.7% 114,492 11.8%
Operating profit 19,952 1.6% 16,356 1.7%
Other income (expense):
Interest expense (2,888) (2,643)
Nonrecurring merger expenses — (3,812)
Other, net 40 104
Other expense, net (2,848) 0.2% (6,351) -0.7%
Earnings before income taxes 17,104 1.4% 10,005 1.0%
Income taxes 6,500 0.5% 3,924 0.4%
Net earnings $ 10,604 0.9% $ 6,081 0.6%

Weighted average common
shares outstanding 13,931 13,532
Basic net earnings per
common share $ 0.76 $ 0.45
Weighted average common
shares and common share
equivalents outstanding 14,385 14,010
Diluted net earnings per
common share $ 0.74 $ 0.43
Pro forma basic net earnings
per common share $ 0.76 $ 0.63
Pro forma diluted net earnings
per common share $ 0.74 $ 0.61

Pro forma adjustments to net earnings per common share add back
nonrecurring merger expenses and adjust income taxes as if NorthCenter
Foodservice was taxed as a C-corporation for income tax purposes
rather than as an S-corporation prior to the merger of NorthCenter
Foodservice in February 1999.