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PFG Reports Sales Up; Earnings Down

RICHMOND, VA - Performance Food Group here, the third largest foodservice distributor in the country, reported that net sales increased during the second quarter, which ended July 2, while net earnings declined as expected.

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 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 with $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%.

Broadline distribution sales increased 13% during the quarter, as the company continued to focus on its 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. The 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 was previously disclosed, while rolling out approximately $80 million in annualized replacement business during the second quarter.

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."

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