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PFG Reports Net Sales Increase of 15% in 1st Quarter

RICHMOND, VA - Performance Food Group reported today that sales for its first quarter that ended April 3 grew to $1.5 billion, up 15% from $1.3 billion in the year-earlier period, while net earnings and net earnings per share declined 54% to $7.5 million and $0.16 respectively.

The distributorship noted that the decline was the result of previously disclosed operational challenges in 2003 that were expected to impact first quarter results. Inflation for the quarter was approximately 4%.

"We are very pleased with our strong internal sales growth of 15% for the quarter. We remain focused on continuing to execute on our strategies to improve the efficiency and profitability of each of our business segments," Bob Sledd, chairman and chief executive officer, noted.

Sledd said the results represent the 37th consecutive period in which net sales have increased compared to the prior-year period. "Our first quarter sales growth of 15% consisted solely of internal growth in each of our business segments. We remain focused on driving improvements in our operations to address the challenges we faced in 2003," he reported.

"Our broadline sales continued to grow, increasing 13% versus the same period last year. Inflation was approximately 5% for the quarter. We are also pleased at the progress we've made in our Quality Foods operation, which did not meet our expectations in 2003. Sales at Quality for the first quarter of 2004 exceeded sales from the same period last year and sales per delivery continue to increase. We will maintain our focus on driving incremental improvements in Quality's results of operations," he said.

Sledd added that while PFG's long-term focus in the broadline division continues to be growing its mix of street sales, the company "will be opportunistic in adding new chain business that makes sense." He said the broadline division will begin servicing an additional $50 million in annualized new multi-unit business that will begin to roll-out in the third quarter of this year. During the period the company continued to show "solid gains" in sales per delivery, gross profit per delivery and proprietary brand sales throughout the broadline segment, he pointed out.

PFG's customized division recorded a 21% increase in first quarter sales, Sledd said, driven by the expansion of new product categories with existing customers and by the new business added in the first and second quarters of 2003. The increase in sales also reflected higher inflation, which amounted to approximately 5% for the quarter. The customized division's results were impacted by the incremental costs of approximately $1.8 million, associated with a labor dispute that began late in 2003. "We continue to negotiate in good faith with the local bargaining unit to reach a mutually satisfactory agreement. While these incremental costs are decreasing, we expect them to continue into the second quarter of 2004," he said.

PFG's Fresh-cut sales grew 13% in the reporting period. Inflation was nominal, Sledd reported. "Growth of our packaged salad products in retail continues its solid growth trend, as evidenced by continued improvement in market share, driven particularly by our Blends and Garden Plus categories," Sledd said.

Due to McDonald's roll-out of the Apple Dipper product and the test of the new Fruit 'n Walnut Salad, Sledd said the company is continuing to add production capacity and increase the overall efficiency of its production network by improving the throughput of its existing processing lines and by adding new lines.

Sledd further noted, "Our balance sheet remains strong with a debt-to-capital ratio of 28%, which excludes interests in accounts receivable sold under our receivables purchase facility of $110 million. While the second quarter anticipates a significant continued improvement in our business, we continue to expect earnings per share to be in the range of $0.50 to $0.54 for the second quarter of 2004."

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