PFG Performance Food Group | 12500 West Creek Parkway |
Richmond, VA 23238 |
Phone (804) 484-7700 |
FAX (804) 484-7701 |
NEWS RELEASE |
| |
FOR MORE INFORMATION: Media Contact: Cheryl Moore Director, Corporate Communications (804) 484-6273 | Investor Contact: Kevin Collier Director, Investor Relations (804) 287-8109 |
PERFORMANCE FOOD GROUP REPORTS NET SALES INCREASE
OF 14% TO $1.6 BILLION
- Net sales increased 14% to $1.6 billion
- Net earnings declined as recently projected to $18.8 million
- EPS amounted to $0.39 per share diluted
RICHMOND, Va. (August 3, 2004)- Performance Food Group (Nasdaq/NM:PFGC) today announced results for the second quarter ended July 3, 2004.
Net sales for the second quarter of 2004 grew to $1.6 billion, an increase of 14% from $1.4 billion in the year-earlier period. Net earnings declined approximately 22% to $18.8 million and earnings per share declined 20% to $0.39 per share diluted, as a result of previously disclosed operational challenges that were projected to impact second quarter results. Inflation for the quarter amounted to approximately 6%.
Second quarter sales growth of 14% was comprised solely of internal growth in each of the business segments. The second quarter results represent the 38th consecutive quarter in which the Company's net sales have increased compared to the same period in the previous year.
Sales for the first six months of 2004 were $3.0 billion, up 15% from $2.6 billion in the year-earlier period. Net earnings for the same period declined 35% to $26.3 million compared to $40.4 million in the prior-year period. Net earnings per share declined 33% to $0.56 per share diluted versus $0.84 per share diluted in the year-earlier period. Inflation for the first six months of 2004 amounted to approximately 5%.
Bob Sledd, Chairman and Chief Executive Officer remarked, "While we are very pleased with the strong internal sales growth of 14% for the quarter and the steady progress we are making in each of our business segments, we remain highly focused on addressing the operational challenges that have impacted our earnings in 2004. Our distribution business continues to show solid growth in both the Broadline and Customized segments. In our Fresh-cut business, our challenge is to fully leverage our infrastructure to better
capitalize on the market's demand for premium pre-cut salad and fresh-cut fruit products in both retail and foodservice."
"Broadline distribution sales increased 13% during the quarter, as we continue to focus on our strategy of account penetration with existing customers. Inflation in the Broadline segment was approximately 7% in the quarter. Street sales represented 50% of Broadline sales for the first half of 2004. Our Broadline division has been successful this year in growing sales while transitioning out of approximately $130 million in annualized multi-unit business in the first quarter of 2004, the loss of which we previously disclosed, while rolling out approximately $80 million in annualized replacement business during the second quarter. We are also pleased with our previously disclosed addition of approximately $250 million in new business to be added in the third and fourth quarters of this year. Also, we continue to drive improvements at our Quality Foods operation as total sales and sales per delivery increased as planned over the same period last year. While Quality Foods continues to negatively impact margin s in Broadline, we are encouraged with our results to date and will remain focused on achieving incremental improvements in this long term initiative. A major focus in our Broadline division is in the area of operational excellence and its impact on achieving high levels of customer service. Current efforts include the roll-out of activity-based compensation programs for warehouse workers and drivers designed to drive order accuracy, the testing of new on-board fleet management programs to track on-time delivery performance, and the implementation of an enhanced warehouse management system to track inbound and outbound product throughout the supply chain."
Mr. Sledd added, "Customized distribution recorded a solid 17% increase in sales for the quarter, driven by growth with existing customers and effective account penetration. Inflation in the segment was approximately 8% in the quarter. The Customized division's results were impacted during the second quarter by the steadily decreasing incremental costs of approximately $1.1 million, associated with a labor dispute that began in late 2003. We also remain focused on adding new capacity to the Customized division in 2004 and throughout 2005. We are on schedule to complete a new distribution center in Indiana during the fourth quarter of this year."
"Our Fresh-cut sales continued to grow, with an increase of approximately 11% compared to the same period last year. Fresh-cut experienced slight inflation of less than 1% for the quarter. Fresh-cut fruit contributed to the increase in sales with the previously announced roll-out of new products to retail and foodservice customers in the quarter. A primary objective in Fresh-cut continues to be the optimizing of our production infrastructure as we transition away from certain volatile non-value added foodservice business to more stable, high volume retail and foodservice customers. We are also refocusing our production at certain processing plants to better leverage our growing opportunities in the value-added product segment. In the retail market, our Fresh Express® packaged salad products continue to grow well ahead of the category growth as evidenced by our increases in market share. We have been conducting an on-going assessment of the recent trends in the category growth at retail, with the most recent data indicating a continued slowing in the category. While the category has occasionally experienced periods of slower growth, the second quarter slowdown was significant. We will continue to monitor these trends to assess any potential impact on our business for the balance of the year."
Mr. Sledd concluded, "While our 14% internal sales growth for the quarter continues to be very strong, we remain aggressively focused on driving operational improvements in each of our divisions, particularly in our Fresh-cut business, to better leverage our leadership position in that segment. Our balance sheet remains strong with a debt-to-capital ratio of approximately 26% at the end of the second quarter, excluding $110 million of interests in accounts receivable sold under our accounts receivable purchase facility. Our strong balance sheet provides us with the flexibility to implement our growth and acquisition strategies. Our philosophy is to maintain an investment grade-like balance sheet and continue to effectively manage the working capital employed in our business.
Performance Food Group markets and distributes more than 64,000 national and private label food and food-related products to approximately 48,000 restaurants, hotels, cafeterias, schools, healthcare facilities and other institutions. Our Fresh Express line is the industry leader and pioneer of fresh packaged salads. For more information on Performance Food Group, visitwww.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 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, including the company's ability to successfully manage the transition of its sales mix and related production costs, 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 3,
2004 | |
| June 28,
2003 |
Net sales | $ | 1,555,722,000 | | $ | 1,366,883,000 |
Net earnings | $ | 18,796,000 | | $ | 23,944,000 |
Net earnings per share: | | | | | |
| Basic | $ | 0.41 | | $ | 0.53 |
| Diluted | $ | 0.39 | | $ | 0.49 |
Weighted average number of shares outstanding: | | | | | |
| Basic | | 46,344,000 | | | 45,451,000 |
| Diluted | | 53,325,000 | | | 52,817,000 |
|
| Six Months Ended |
| | | |
| | July 3,
2004 | | | June 28,
2003 |
| | | | | |
Net sales | $ | 3,020,789,000 | | $ | 2,635,988,000 |
Net earnings | $ | 26,272,000 | | $ | 40,364,000 |
Net earnings per share: | | | | | |
| Basic | $ | 0.57 | | $ | 0.89 |
| Diluted | $ | 0.56 | | $ | 0.84 |
Weighted average number of shares outstanding: | | | | | |
| Basic | | 46,161,000 | | | 45,398,000 |
| Diluted | | 47,166,000 | | | 52,749,000 |
Performance Food Group Company
Condensed Consolidated Balance Sheet and Income Statement (Unaudited)
July 3, 2004
(In thousands, except net earnings per common share) |
|
Assets | July 3, 2004 | | January 3, 2004 |
Cash and cash equivalents | $ | 55,123 | | $ | 38,916 |
Accounts and notes receivable, net, including | | | | | |
| retained interest in securitized receivables | | 250,040 | | | 242,340 |
Inventories | | 285,521 | | | 257,198 |
Other current assets | | 31,468 | | | 43,421 |
| Total current assets | | 622,152 | | | 581,875 |
Property, plant and equipment, net | | 381,437 | | | 363,052 |
Goodwill, net | | 584,016 | | | 582,966 |
Other intangible assets, net | | 191,992 | | | 196,814 |
Other assets | | 14,032 | | | 11,761 |
| Total assets | $ | 1,793,629 | | $ | 1,736,468 |
| | |
|
Checks in excess of deposits | $ | 102,532 | | $ | 81,797 |
Trade accounts payable | | 275,934 | | | 235,392 |
Current installments of long-term debt | | 1,133 | | | 1,358 |
Other current liabilities | | 164,779 | | | 150,377 |
| Total current liabilities | | 544,378 | | | 468,924 |
Long-term debt, excluding current installments | | 290,161 | | | 353,919 |
Deferred income taxes | | 118,074 | | | 109,810 |
Shareholders' equity | | 841,016 | | | 803,815 |
| Total liabilities and shareholders' equity | $ | 1,793,629 | | $ | 1,736,468 |
| Three Months Ended | | Six Months Ended |
|
| July 3, 2004 | | June 28, 2003 | | July 3, 2004 | | June 28, 2003 |
|
Net sales | $ | 1,555,722 | | 100.0 | % | | $ | 1,366,883 | | 100.0 | % | | $ | 3,020,789 | | 100.0 | % | | $ | 2,635,988 | | 100.0 | % |
Cost of goods sold | | 1,320,321 | | 84.9 | % | | | 1,151,879 | | 84.3 | % | | | 2,566,870 | | 85.0 | % | | | 2,221,646 | | 84.3 | % |
| Gross profit | | 235,401 | | 15.1 | % | | | 215,004 | | 15.7 | % | | | 453,919 | | 15.0 | % | | | 414,342 | | 15.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses | | 200,098 | | 12.8 | % | | | 171,258 | | 12.5 | % | | | 401,861 | | 13.3 | % | | | 340,192 | | 12.9 | % |
| Operating profit | | 35,303 | | 2.3 | % | | | 43,746 | | 3.2 | % | | | 52,058 | | 1.7 | % | | | 74,150 | | 2.8 | % |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | (4,786 | ) | | | | | (4,955 | ) | | | | | (9,535 | ) | | | | | (9,745 | ) | | |
| Loss on sale of receivables | | (506 | ) | | | | | (378 | ) | | | | | (974 | ) | | | | | (702 | ) | | |
| Other, net | | 374 | | | | | | 207 | | | | | | 894 | | | | | | 1,400 | | | |
| Other expense, net | | (4,918 | ) | -0.3 | % | | | (5,126 | ) | -0.4 | % | | | (9,615 | ) | -0.3 | % | | | (9,047 | ) | -0.3 | % |
| Earnings before income taxes | | 30,385 | | 2.0 | % | | | 38,620 | | 2.8 | % | | | 42,443 | | 1.4 | % | | | 65,103 | | 2.5 | % |
Income taxes | | 11,589 | | 0.8 | % | | | 14,676 | | 1.0 | % | | | 16,171 | | 0.5 | % | | | 24,739 | | 1.0 | % |
| Net earnings | $ | 18,796 | | 1.2 | % | | $ | 23,944 | | 1.8 | % | | $ | 26,272 | | 0.9 | % | | $ | 40,364 | | 1.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average common | | | | | | | | | | | | | | | | | | | | | | | |
| shares outstanding | | 46,344 | | | | | | 45,451 | | | | | | 46,161 | | | | | | 45,398 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Basic net earnings per common share | $ | 0.41 | | | | | $ | 0.53 | | | | | $ | 0.57 | | | | | $ | 0.89 | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Weighted average common shares and | | | | | | | | | | | | | | | | | | | | | | | |
| dilutive potential common shares outstanding | | 53,325 | | | | | | 52,817 | | | | | | 47,166 | | | | | | 52,749 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted net earnings per common share | $ | 0.39 | | | | | $ | 0.49 | | | | | $ | 0.56 | | | | | $ | 0.84 | | | |
Performance Food Group Company
2004 Compared to 2003
2nd Quarter
Segment Disclosure |
|
| | | | | | | | | | | | | |
2004 | Broadline | Customized | Fresh-Cut | Corporate &
Intersegment | Consolidated |
|
Second Quarter |
|
Net external sales | $ | 775,084 | | $ | 517,779 | | $ | 262,859 | | $ | - | | $ | 1,555,722 | |
Intersegment sales | | 188 | | | 77 | | | 3,658 | | | (3,923 | ) | | - | |
Total sales | | 775,272 | | | 517,856 | | | 266,517 | | | (3,923 | ) | | 1,555,722 | |
Operating profit | | 20,262 | | | 6,093 | | | 16,011 | | | (7,063 | ) | | 35,303 | |
| Operating profit margin | | 2.61 | % | | 1.18 | % | | 6.01 | % | | - | | | 2.27 | % |
Total assets | | 815,224 | | | 156,420 | | | 672,372 | | | 149,613 | | | 1,793,629 | |
Interest expense (income) | | 2,722 | | | 148 | | | 4,580 | | | (2,664 | ) | | 4,786 | |
Loss (gain) on sale of receivables | | 2,101 | | | 667 | | | - | | | (2,262 | ) | | 506 | |
Depreciation | | 3,258 | | | 1,073 | | | 7,003 | | | 846 | | | 12,180 | |
Amortization | | 908 | | | - | | | 1,132 | | | - | | | 2,040 | |
Capital expenditures | | 1,809 | | | 4,131 | | | 14,562 | | | 1,263 | | | 21,765 | |
2003 | Broadline | Customized | Fresh-Cut | Corporate &
Intersegment | Consolidated |
|
Second Quarter |
|
Net external sales | $ | 687,695 | | $ | 442,464 | | $ | 236,724 | | $ | - | | $ | 1,366,883 | |
Intersegment sales | | 259 | | | 106 | | | 4,475 | | | (4,840 | ) | | - | |
Total sales | | 687,954 | | | 442,570 | | | 241,199 | | | (4,840 | ) | | 1,366,883 | |
Operating profit | | 20,620 | | | 5,953 | | | 21,543 | | | (4,370 | ) | | 43,746 | |
| | Operating profit margin | | 3.00 | % | | 1.35 | % | | 8.93 | % | | - | | | 3.20 | % |
Total assets | | 774,024 | | | 132,232 | | | 647,346 | | | 119,185 | | | 1,672,787 | |
Interest expense (income) | | 3,738 | | | 51 | | | 4,914 | | | (3,748 | ) | | 4,955 | |
Loss (gain) on sale of receivables | | 1,529 | | | 569 | | | - | | | (1,720 | ) | | 378 | |
Depreciation | | 3,457 | | | 869 | | | 5,527 | | | 585 | | | 10,438 | |
Amortization | | 942 | | | - | | | 1,124 | | | - | | | 2,066 | |
Capital expenditures | | 6,628 | | | 13,605 | | | 13,070 | | | (390 | ) | | 32,913 | |
Performance Food Group Company
2004 Compared to 2003
Year-To-Date
Segment Disclosure |
| | | | | |
2004 | Broadline | Customized | Fresh-Cut | Corporate &
Intersegment | Consolidated |
|
Year-to-Date |
|
Net external sales | $ | 1,498,735 | | $ | 1,018,665 | | $ | 503,389 | | $ | - | | $ | 3,020,789 | |
Intersegment sales | | 455 | | | 154 | | | 7,852 | | | (8,461 | ) | | - | |
Total sales | | 1,499,190 | | | 1,018,819 | | | 511,241 | | | (8,461 | ) | | 3,020,789 | |
Operating profit | | 30,580 | | | 9,563 | | | 27,054 | | | (15,139 | ) | | 52,058 | |
| Operating profit margin | | 2.04 | % | | 0.94 | % | | 5.29 | % | | - | | | 1.72 | % |
Total assets | | 815,224 | | | 156,420 | | | 672,372 | | | 149,613 | | | 1,793,629 | |
Interest expense (income) | | 5,802 | | | 319 | | | 9,262 | | | (5,848 | ) | | 9,535 | |
Loss (gain) on sale of receivables | | 4,051 | | | 1,317 | | | - | | | (4,394 | ) | | 974 | |
Depreciation | | 6,623 | | | 2,144 | | | 13,781 | | | 1,585 | | | 24,133 | |
Amortization | | 1,808 | | | - | | | 2,263 | | | - | | | 4,071 | |
Capital expenditures | | 4,113 | | | 5,580 | | | 30,275 | | | 2,931 | | | 42,899 | |
2003 | Broadline | Customized | Fresh-Cut | Corporate &
Intersegment | Consolidated |
|
Year-to-Date |
|
Net external sales | $ | 1,330,378 | | $ | 855,406 | | $ | 450,204 | | $ | - | | $ | 2,635,988 | |
Intersegment sales | | 472 | | | 200 | | | 8,273 | | | (8,945 | ) | | - | |
Total sales | | 1,330,850 | | | 855,606 | | | 458,477 | | | (8,945 | ) | | 2,635,988 | |
Operating profit | | 32,582 | | | 10,828 | | | 39,769 | | | (9,029 | ) | | 74,150 | |
| Operating profit margin | | 2.45 | % | | 1.27 | % | | 8.67 | % | | - | | | 2.81 | % |
Total assets | | 774,024 | | | 132,232 | | | 647,346 | | | 119,185 | | | 1,672,787 | |
Interest expense (income) | | 7,559 | | | 116 | | | 9,596 | | | (7,526 | ) | | 9,745 | |
Loss (gain) on sale of receivables | | 2,561 | | | 1,071 | | | - | | | (2,930 | ) | | 702 | |
Depreciation | | 7,031 | | | 1,719 | | | 10,890 | | | 953 | | | 20,593 | |
Amortization | | 1,885 | | | - | | | 2,259 | | | - | | | 4,144 | |
Capital expenditures | | 8,255 | | | 16,267 | | | 27,944 | | | 655 | | | 53,121 | |
