Performance Food Sells Subsidiaries to Chiquita

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Performance Food Group is selling its subsidiaries that comprise the fresh-cut produce segment for a purchase price of $855 million to Chiquita Brands International.

Chiquita has received commitments from Morgan Stanley Senior Funding, Wachovia Bank, National Association and Goldman Sachs Credit Partners, L.P. to finance the purchase price. Net proceeds after taxes and expenses related to the transaction are expected to be approximately $695 million. Closing of the transaction is subject to customary closing conditions, including the expiration of the waiting period under the Hart Scott Rodino Act, and is expected to be completed during the second quarter.

Bob Sledd, Chairman and CEO remarked, “The sale of Fresh-cut represents an exciting new opportunity for the segment to maximize its future growth potential and achieve its long term strategies by partnering with a respected industry leader. We are most appreciative of the dedicated efforts of our Fresh-cut associates whose hard work over the years has contributed to the leadership position of the Fresh Express brand. This sale will enable Performance Food Group to focus entirely on our core Broadline and Customized foodservice distribution businesses.”

Mr. Sledd added, “We expect to use approximately $290 million from the net proceeds of the sale to repay all of the Company’s indebtedness, including estimated prepayment penalties. The balance of these net proceeds will be used primarily for a significant return of capital to shareholders through either share repurchases, cash dividends or some combination of the two. We expect this will leave the Company well positioned to pursue continued growth opportunities in the future.”

Goldman, Sachs & Co. has acted as financial advisor to the Company in connection with the transaction, and Merrill Lynch and Co. rendered a fairness opinion to the Company’s Board of Directors.

The Company is also providing certain forward looking information for its Broadline and Customized distribution segments. In Broadline distribution, sales are expected to continue to outpace industry growth in 2005. For the year, internal sales growth is expected to be in the high single digits to low double digits. The recent addition of new multi unit business in Broadline will contribute to a faster rate of growth in multi unit sales versus street sales for most of the year, which will slow the rate of margin growth. As such, Broadline operating margins are expected to improve in the low double digits for the year. Continued improvement in the performance of the Broadline operating companies will remain a high priority as the Company focuses on executing its strategies.

In Customized distribution, internal sales growth is expected to be in the mid to upper single digits for the year. During the year, the Company is focused on adding new capacity through the completion of a new distribution center in Indiana, the construction of replacement facilities in California and South Carolina and the expansion of the Texas and Florida facilities. Operating margins are expected to be favorably impacted in the first quarter as the Company laps the higher labor costs incurred in early 2004 related to the previously disclosed labor issue. For the remainder of the year, operating margins will be negatively impacted as the Company absorbs costs associated with the opening of these new distribution centers. As a result, the Company does not expect operating margins to increase compared to the prior year.

Mr. Sledd concluded, “Based on our current view of the business, we expect combined operating profit improvement in our remaining distribution businesses during 2005. We expect internal sales growth for the consolidated distribution business to be in the high single digits to low double digits. Based on the results of the aforementioned factors, we expect combined operating profit for our core distribution business (segment operating income less corporate overhead) to be in the range of $73 to $78 million. This excludes any impact associated with the new accounting requirements to expense stock options which take affect in the third quarter.”

“As a company, we are focused on achieving both our short term and long term objectives while we manage the growth of our business, invest in new capacity and continue to improve our operations in 2005.”

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Performance Food Sells Subsidiaries to Chiquita
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