(PFG LOGO)
12500 West Creek Parkway
Richmond, VA 23238
Phone (804) 484-7700
FAX (804) 484-7701
NEWS RELEASE
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FOR MORE INFORMATION:
Investor Contact:
MEDIA CONTACT: KEVIN COLLIER
CHERYL MOORE DIRECTOR, INVESTOR RELATIONS
DIRECTOR, CORPORATE COMMUNICATIONS (804) 287-8109
(804) 484-6273
PERFORMANCE FOOD GROUP REPORTS $0.35
SECOND QUARTER NET EPS FROM CONTINUING OPERATIONS
o NET EPS FROM CONTINUING OPERATIONS INCREASED 35% VERSUS PRIOR YEAR
QUARTER TO $0.35 PER SHARE DILUTED
o STREET SALES INCREASED 6% VERSUS PRIOR YEAR QUARTER
RICHMOND, VA. (Aug. 7, 2006) - Performance Food Group (Nasdaq/NGS:PFGC) today
announced results for the second quarter ended July 1, 2006.
"We are pleased with our 35% increase in net earnings per share in the quarter
and we continue to be optimistic about the year," said Bob Sledd, Chairman and
CEO. "We are aggressively implementing our strategy to grow higher margin street
business while maintaining our focus on improving productivity by leveraging new
technologies and standardization programs and implementing our procurement
initiatives. Our efforts yielded solid progress in the growth of street
business. Overall sales declined slightly, reflecting our previously announced
exit of certain lower margin multi-unit business and a slowing of sales in
certain industry segments. In addition to our focus on growing street business,
we are actively pursuing attractive restaurant chain opportunities. In the prior
year quarter, we recognized a significant gain on the sale of our fresh-cut
segment, which enabled us to return over $400 million of proceeds to our
shareholders."
Consolidated net sales from continuing operations in the second quarter were
approximately $1.4 billion, a decrease of approximately 1%, compared to the
prior year quarter. Inflation for the quarter was nominal. Net earnings from
continuing operations for the second quarter amounted to approximately $12.2
million, which was unchanged compared to the same quarter in the previous year.
Net earnings include the impact of stock compensation expense of approximately
$0.9 million after tax for the quarter, or approximately $0.03 per share
diluted. Net earnings per share from continuing operations increased
approximately 35% to $0.35 per share diluted, compared to $0.26 per share
diluted in the prior year quarter, on approximately 27% fewer shares
outstanding. Excluding stock compensation expense, net earnings per share from
continuing operations in the second quarter amounted to approximately $0.38 per
share diluted.
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Performance Food Group Reports Second Quarter Earnings
Page 2
August 7, 2006
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Consolidated net sales from continuing operations for the first six months of
2006 were approximately $2.9 billion, an increase of approximately 1% from the
prior year period. Inflation was nominal for the same period. Net earnings from
continuing operations in the period increased approximately 5% to $17.8 million
compared to approximately $16.9 million in the prior year period. Net earnings
include the impact of stock compensation expense of approximately $1.4 million
after tax for the period, or approximately $0.04 per share diluted. Net earnings
per share from continuing operations increased approximately 42% to $0.51 per
share diluted, compared to $0.36 per share diluted in the same period in the
previous year, on approximately 27% fewer shares outstanding. Excluding stock
compensation expense, net earnings per share from continuing operations in the
period amounted to approximately $0.55 per share diluted.
On June 28, 2005, the Company completed the sale of its fresh-cut segment to
Chiquita Brands International, Inc. Accordingly, net earnings during the second
quarter of 2005 included the gain on the sale of the fresh-cut segment. All
amounts pertaining to the Company's fresh-cut segment are accounted for as
discontinued operations.
"Sales in our customized segment increased approximately 4% during the second
quarter compared to the prior year quarter," added Mr. Sledd. "Sales growth
during the quarter was driven by growth with existing customers. The customized
segment experienced deflation of approximately 2% in the quarter."
"In the broadline segment, we maintained our momentum in growing higher margin
street business, however, sales in broadline decreased by approximately 4% in
the second quarter versus the prior year quarter and were impacted by our exit
of lower margin multi-unit business during late 2005 and the first quarter of
2006. Our higher margin street sales increased approximately 6% over the prior
year quarter. Inflation amounted to approximately 1% in the quarter. Results in
the broadline segment were also impacted by the investment in our expanded
street sales force and by higher fuel costs, offset in part by favorable trends
in insurance costs. We are pleased with the continued positive change in our mix
of higher margin street sales in broadline."
Mr. Sledd concluded, "Our balance sheet remains exceptionally strong with a debt
to capital ratio of less than 1% at the end of the second quarter, excluding
$130 million of interests in accounts receivable sold under an accounts
receivable purchase facility. Free cash flow was approximately $7.4 million
during the second quarter, compared to a use of free cash of approximately $0.5
million in the prior year quarter. Based on current business trends, we expect
net earnings per share to be in the range of $0.32 to $0.36 per share diluted
for the third quarter of 2006. For the 2006 year, we expect net earnings per
share to be in the range of $1.22 to $1.30 per share diluted, which reflects our
anticipated stock compensation expense for the year of approximately $5.0 to
$5.5 million, or approximately $0.09 to $0.10 per share. Excluding the impact of
stock compensation expense, our net earnings per share projection for the year
is approximately $1.31 to $1.40 per share diluted."
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Performance Food Group Reports Second Quarter Earnings
Page 3
August 7, 2006
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Performance Food Group markets and distributes more than 66,000 national and
private label food and food-related products to approximately 44,000
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. 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 Company's ability to achieve projected operational
efficiencies and increase sales; the relatively low margins and economic
sensitivity of the foodservice business; the Company's reliance on major
customers; 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.
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Performance Food Group Reports Second Quarter Earnings
Page 4
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
UNAUDITED FINANCIAL
HIGHLIGHTS
(IN THOUSANDS, EXCEPT NET EARNINGS PER COMMON SHARE) THREE MONTHS ENDED
- -------------------------------------------------------- ------------------------
JULY 1, JULY 2,
2006 2005
---------- ----------
Net sales from continuing operations $1,448,027 $1,456,735
Earnings from continuing operations, net of tax $ 12,168 $ 12,246
Earnings from discontinued operations, net of tax -- 10,591
Gain on sale of fresh-cut segment, net of tax 13 180,958
---------- ----------
Net earnings $ 12,181 $ 203,795
Weighted average number of shares outstanding:
Basic 34,191 46,955
Diluted 34,797 47,608
Earnings per common share:
Basic earnings per common share-continuing operations $ 0.36 $ 0.26
Basic earnings per common share-discontinued operations -- 0.23
Gain on sale of fresh-cut segment -- 3.85
---------- ----------
Net earnings $ 0.36 $ 4.34
Diluted earnings per common share-continuing operations $ 0.35 $ 0.26
Diluted earnings per common share-discontinued operations -- 0.22
Gain on sale of fresh-cut segment -- 3.80
---------- ----------
Net earnings $ 0.35 $ 4.28
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Performance Food Group Reports Second Quarter Earnings
Page 5
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
UNAUDITED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT NET EARNINGS PER COMMON SHARE) SIX MONTHS ENDED
- -------------------------------------------------------- -------------------------
JULY 1, JULY 2,
2006 2005
---------- ----------
Net sales from continuing operations $2,917,520 $2,879,542
Earnings from continuing operations, net of tax $ 17,842 $ 16,929
Earnings from discontinued operations, net of tax -- 19,603
(Loss) gain on sale of fresh-cut segment, net of tax (18) 180,958
---------- ----------
Net earnings $ 17,824 $ 217,490
Weighted average number of shares outstanding:
Basic 34,298 46,913
Diluted 34,858 47,505
Earnings per common share:
Basic earnings per common share-continuing operations $ 0.52 $ 0.36
Basic earnings per common share-discontinued operations -- 0.42
Gain on sale of fresh-cut segment -- 3.86
---------- ----------
Net earnings $ 0.52 $ 4.64
Diluted earnings per common share-continuing operations $ 0.51 $ 0.36
Diluted earnings per common share-discontinued operations -- 0.41
Gain on sale of fresh-cut segment -- 3.81
---------- ----------
Net earnings $ 0.51 $ 4.58
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Performance Food Group Reports Second Quarter Earnings
Page 6
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JULY 1, 2006
(IN THOUSANDS)
JULY 1, DEC. 31,
2006 2005
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ASSETS
- ------
Cash and cash equivalents $ 98,658 $ 99,461
Accounts and notes receivable, net, including
retained interest in securitized receivables 186,830 190,481
Inventories 283,881 303,073
Other current assets 28,554 29,188
Current assets from discontinued operations 3,108 10,115
---------- ----------
Total current assets 601,031 632,318
---------- ----------
Property, plant and equipment, net 268,813 255,816
Goodwill, net 356,597 356,597
Other intangible assets, net 49,346 51,213
Other assets 17,439 16,346
---------- ----------
Total assets $1,293,226 $1,312,290
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Checks in excess of deposits $ 93,110 $ 100,335
Trade accounts payable 256,195 258,791
Current installments of long-term debt 572 573
Other current liabilities 126,590 122,885
Current liabilities from discontinued operations 5,811 6,540
---------- ----------
Total current liabilities 482,278 489,124
---------- ----------
Long-term debt, excluding current installments 2,961 3,250
Deferred income taxes 44,441 43,399
Shareholders' equity 763,546 776,517
---------- ----------
Total liabilities and shareholders' equity $1,293,226 $1,312,290
========== ==========
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Performance Food Group Reports Second Quarter Earnings
Page 7
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
JULY 1, 2006
(IN THOUSANDS, EXCEPT NET EARNINGS PER COMMON SHARE)
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 1, JULY 2, JULY 1, JULY 2,
2006 2005 2006 2005
------------------------------------------- ----------------------------------------
Net sales $ 1,448,027 100.0% $ 1,456,735 100.0% $ 2,917,520 100.0% $ 2,879,542 100.0%
Cost of goods sold 1,254,824 86.7% 1,267,343 87.0% 2,537,063 87.0% 2,510,234 87.2%
---------------------------------------- ----------------------------------------
Gross profit 193,203 13.3% 189,392 13.0% 380,457 13.0% 369,308 12.8%
Operating expenses 171,673 11.8% 167,441 11.5% 348,205 11.9% 337,931 11.7%
---------------------------------------- ----------------------------------------
Operating profit 21,530 1.5% 21,951 1.5% 32,252 1.1% 31,377 1.1%
---------------------------------------- ----------------------------------------
Other income (expense):
Interest income 390 377 862 502
Interest expense (370) (1,540) (724) (2,513)
Loss on sale of receivables (1,862) (1,235) (3,499) (2,241)
Other, net 66 264 153 303
---------------------------------------- ----------------------------------------
Other expense, net (1,776) -0.1% (2,134) -0.1% (3,208) -0.1% (3,949) -0.1%
---------------------------------------- ----------------------------------------
Earnings before income taxes from
continuing operations 19,754 1.4% 19,817 1.4% 29,044 1.0% 27,428 1.0%
Income taxes 7,586 0.6% 7,571 0.6% 11,202 0.4% 10,499 0.4%
---------------------------------------- ----------------------------------------
Earnings from continuing operations,
net of tax 12,168 0.8% 12,246 0.8% 17,842 0.6% 16,929 0.6%
---------------------------------------- ----------------------------------------
Earnings from discontinued operations,
net of tax -- 10,591 -- 19,603
Gain (loss) on sale of fresh-cut
segment, net of tax 13 180,958 (18) 180,958
---------------------------------------- ----------------------------------------
Total earnings (loss) from discontinued
operations, net of tax 13 191,549 (18) 200,561
---------------------------------------- ----------------------------------------
Net earnings $ 12,181 $ 203,795 $ 17,824 $ 217,490
======================================== ========================================
Weighted average common shares outstanding:
Basic 34,191 46,955 34,298 46,913
Diluted 34,797 47,608 34,858 47,505
======================================== ========================================
Earnings per common share:
Basic net earnings per common share:
Continuing operations $ 0.36 $ 0.26 $ 0.52 $ 0.36
---------------------------------------- ----------------------------------------
Discontinued operations -- 0.23 -- 0.42
Gain on sale of fresh-cut segment -- 3.85 -- 3.86
---------------------------------------- ----------------------------------------
Total earnings from discontinued
operations -- 4.08 -- 4.28
---------------------------------------- ----------------------------------------
Net earnings $ 0.36 $ 4.34 $ 0.52 $ 4.64
======================================== ========================================
Diluted net earnings per common share:
Continuing operations $ 0.35 $ 0.26 $ 0.51 $ 0.36
---------------------------------------- ----------------------------------------
Discontinued operations -- 0.22 -- 0.41
Gain on sale of fresh-cut segment -- 3.80 -- 3.81
---------------------------------------- ----------------------------------------
Total earnings from discontinued
operations -- 4.02 -- 4.22
---------------------------------------- ----------------------------------------
Net earnings $ 0.35 $ 4.28 $ 0.51 $ 4.58
======================================== ========================================
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Performance Food Group Reports Second Quarter Earnings
Page 8
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
2006 COMPARED TO 2005
SECOND QUARTER
SEGMENT DISCLOSURE
CORPORATE & TOTAL CONTINUING
2006 BROADLINE CUSTOMIZED INTERSEGMENT OPERATIONS
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SECOND QUARTER
Net external sales $ 863,463 $ 584,564 $ -- $ 1,448,027
Intersegment sales 101 53 (154) --
Total sales 863,564 584,617 (154) 1,448,027
Operating profit 21,123 7,891 (7,484) 21,530
Operating profit margin 2.45% 1.35% -- 1.49%
Interest expense (income) 5,858 1,571 (7,059) 370
Loss (gain) on sale of receivables 2,454 735 (1,327) 1,862
Depreciation 4,670 1,559 79 6,308
Amortization 845 -- -- 845
Capital expenditures 11,596 1,697 167 13,460
CORPORATE & TOTAL CONTINUING
2005 BROADLINE CUSTOMIZED INTERSEGMENT OPERATIONS
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SECOND QUARTER
Net external sales $895,853 $ 560,882 $ -- $ 1,456,735
Intersegment sales 78 54 (132) --
Total sales 895,931 560,936 (132) 1,456,735
Operating profit 22,197 6,096 (6,342) 21,951
Operating profit margin 2.48% 1.09% -- 1.51%
Interest expense (income) 3,964 377 (2,801) 1,540
Loss (gain) on sale of receivables 2,269 758 (1,792) 1,235
Depreciation 4,358 1,268 75 5,701
Amortization 904 -- -- 904
Capital expenditures 3,974 15,819 20 19,813
Total assets by reportable segment and a reconciliation to the condensed
consolidated balance sheets were as follows:
JULY 1, DEC. 31,
2006 2005
--------- ----------
Broadline $ 848,483 $ 858,211
Customized 236,084 250,397
Corporate & Intersegment 205,551 193,567
Discontinued Operations 3,108 10,115
---------- ----------
Total Assets $1,293,226 $1,312,290
========== ==========
Note: 2005 segment disclosure has been reclassified to reflect the reallocation
of certain corporate costs to the broadline segment to be consistent with the
2006 presentation.
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Performance Food Group Reports Second Quarter Earnings
Page 9
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
2006 COMPARED TO 2005
SIX MONTHS YTD
SEGMENT DISCLOSURE
CORPORATE & TOTAL CONTINUING
2006 BROADLINE CUSTOMIZED INTERSEGMENT OPERATIONS
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SIX MONTHS YTD
Net external sales $1,731,949 $1,185,571 $ -- $2,917,520
Intersegment sales 269 120 (389) --
Total sales 1,732,218 1,185,691 (389) 2,917,520
Operating profit 31,326 15,764 (14,838) 32,252
Operating profit margin 1.81% 1.33% -- 1.11%
Interest expense (income) 10,901 2,959 (13,136) 724
Loss (gain) on sale of receivables 5,011 1,559 (3,071) 3,499
Depreciation 9,022 3,129 159 12,310
Amortization 1,706 -- -- 1,706
Capital expenditures 22,655 2,633 213 25,501
CORPORATE & TOTAL CONTINUING
2005 BROADLINE CUSTOMIZED INTERSEGMENT OPERATIONS
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SIX MONTHS YTD
Net external sales $1,755,897 $1,123,645 $ -- $2,879,542
Intersegment sales 303 116 (419) --
Total sales 1,756,200 1,123,761 (419) 2,879,542
Operating profit 33,880 11,862 (14,365) 31,377
Operating profit margin 1.93% 1.06% -- 1.09%
Interest expense (income) 7,863 644 (5,994) 2,513
Loss (gain) on sale of receivables 5,045 1,501 (4,305) 2,241
Depreciation 8,641 2,432 150 11,223
Amortization 1,811 -- -- 1,811
Capital expenditures 9,236 29,017 106 38,359
Total assets by reportable segment and a reconciliation to the condensed
consolidated balance sheets were as follows:
JULY 1, DEC. 31,
2006 2005
---------- -----------
Broadline $ 848,483 $ 858,211
Customized 236,084 250,397
Corporate & Intersegment 205,551 193,567
Discontinued Operations 3,108 10,115
---------- ----------
Total Assets $1,293,226 $1,312,290
========== ==========
Note: 2005 segment disclosure has been reclassified to reflect the reallocation
of certain corporate costs to the broadline segment to be consistent with the
2006 presentation.
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Performance Food Group Reports Second Quarter Earnings
Page 10
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
NON-GAAP RECONCILIATIONS
PROJECTED 2006 EPS RECONCILIATION EXCLUDING IMPACT OF STOCK COMPENSATION EXPENSE
ESTIMATED DILUTED EPS
-----------------------------
LOW HIGH
-------- ---------
Estimated full year 2006 diluted EPS $ 1.22 -- $ 1.30
Add: Projected stock compensation expense (1) 0.09 -- 0.10
------- ---- ------
Adjusted estimated full year 2006 diluted EPS to exclude
stock compensation expense $ 1.31 -- $ 1.40
======= ==== ======
(1) Amount calculated as estimated pre-tax expense of $5.0 - $5.5 million, a
projected tax rate of 38.5% and a projected weighted average shares of
approximately 35.0 million.
IMPACT OF STOCK COMPENSATION ON DILUTED EPS
NET
THREE MONTHS ENDED JULY 1, 2006 EARNINGS SHARES EPS
- ------------------------------- -------- ------ -------
Amounts reported for diluted EPS from continuing
operations $ 12,168 34,797 $ 0.35
Stock compensation, net of tax (2) 909
-------- ------- -------
Adjusted diluted EPS from continuing operations
excluding impact of stock compensation $ 13,077 34,797 $ 0.38
======== ====== ======
(2) Amount calculated using continuing operations effective tax rate of 38.4%.
NET
SIX MONTHS ENDED JULY 1, 2006 EARNINGS SHARES EPS
- ----------------------------- --------- ------ -------
Amounts reported for diluted EPS from continuing
operations $ 17,842 34,858 $ 0.51
Stock compensation, net of tax (3) 1,430
-------- ------- ------
Adjusted diluted EPS from continuing operations
excluding impact of stock compensation $ 19,272 34,858 $ 0.55
======== ======= ======
(3) Amount calculated using continuing operations effective tax rate of 38.6%.
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Performance Food Group Reports Second Quarter Earnings
Page 11
August 7, 2006
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PERFORMANCE FOOD GROUP COMPANY
NON-GAAP RECONCILIATIONS
FREE CASH FLOW
QUARTERLY Q2 2006 Q2 2005
- --------- --------- ---------
Net income from continuing operations $ 12,168 $ 12,246
ADD BACK:
Stock compensation expense 1,478 295
Amortization expense 845 904
Amortization of deferred issue costs 82 187
Depreciation expense 6,308 5,701
SUBTRACT:
Capital expenditures (13,460) (19,813)
-------- --------
FREE CASH FLOW $ 7,421 $ (480)
======== ========
YEAR-TO-DATE Q2 2006 YTD Q2 2005 YTD
- ------------ ----------- -----------
Net income from continuing operations $ 17,842 $ 16,929
ADD BACK:
Stock compensation expense 2,329 314
Amortization expense 1,706 1,811
Amortization of deferred issue costs 160 375
Depreciation expense 12,310 11,223
SUBTRACT:
Capital expenditures (25,501) (38,359)
-------- ---------
FREE CASH FLOW $ 8,846 $ (7,707)
======== =========
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