##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 29, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No.: 0-22192
 PERFORMANCE FOOD GROUP COMPANY
  Tennessee
    
    54-0402940(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)12500 West Creek ParkwayRichmond, Virginia
    
    23238(Address of Principal
    
    (Zip Code)Executive Offices)
 
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.01 par value per share
    
    Nasdaq Global Select Market
 
 þ o
 o þ
 þ o
 o
  þ Large accelerated filer
    
    o Accelerated filer
    
    o  Non-accelerated filer (Do not check if a smaller reporting company)o Smaller Reporting Company
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K
    
    Documents from which portions are incorporated by referencePart III
    
    The information required by Part III, Item 11 will be (i) incorporated by reference from the Registrants definitive proxy statement for its 2008 annual meeting of
shareholders to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K pursuant to Regulation 14A, or (ii)
included in an amendment to this Annual Report on Form 10-K in lieu of including such information in such definitive proxy statement.




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##### 



Forward-Looking Statements
    
    
    3Part IItem 1. Business
    
    
    3The Company and its Business Strategy
    
    
    3Growth Strategies
    
    
    4Customers and Marketing
    
    
    6Products and Services
    
    
    6Information Systems
    
    
    7Suppliers and Purchasing
    
    
    8Operations
    
    
    9Competition
    
    
    10Regulation
    
    
    11Intellectual Property
    
    
    11Employees
    
    
    11Executive Officers
    
    
    11Item 1A. Risk Factors
    
    
    13Item 1B. Unresolved Staff Comments
    
    
    16Item 2. Properties
    
    
    16Item 3. Legal Proceedings
    
    
    18Item 4. Submission of Matters to a Vote of Shareholders
    
    
    18Part IIItem 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    19Item 6. Selected Consolidated Financial Data
    
    
    20Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    21Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 8. Financial Statements and Supplementary Data
    
    
    34Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    34Item 9A. Controls and Procedures
    
    
    34Item 9B. Other Information
    
    
    35Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    36Item 11. Executive Compensation
    
    
    37Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    38Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    40Item 14. Principal Accountant Fees and Services
    
    
    40Part IVItem 15. Exhibits, Financial Statement Schedules
    
    
    42Ex-10.41 Director Compensation SummaryEx-10.42 Amended and Restated Performance Food Group Company Deferred Compensation PlanEx-10.43 Form of Changes of Control Agreement by and between Performance Food Group Company and its Executive OfficersEx-10.44 Negative consent amendment to the Second Amended and Restated Credit AgreementEx-10.45 Fourteenth Amendment to the Performance Food Group Company Employee Savings and Stock Ownership PlanEx-10.46 Fifteenth Amendment to the Performance Food Group Company Employee Savings and Stock Ownership PlanEx-21   List of SubsidiariesEx-23.1 Consent of Independent Registered Public Accounting FirmEx-31.1 Section 302 Certification of the CEOEx-31.2 Section 302 Certification of the CFOEx-32.1 Section 906 Certification of the CEO & CFO
  2




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PERFORMANCE FOOD GROUP COMPANY
  
 Forward-Looking Statements
   
 PART I
 
 Item 1. Business.
 
 The Company and its Business Strategy
    3




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Broadline
  Customized
  
 Growth Strategies
   Increase sales to street customers.
 Improve category management.
  4




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Increase Broadline sales to existing customers and within existing markets.
  Grow our Customized segment with existing and selected new customers.
 Improve operating efficiencies through systems and technology. ®
 Actively pursue strategic acquisitions.
 5




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Customers and Marketing
  Street Customers
  Chain Customers
  
 Products and Services
  Proprietary brands
  6




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National brands
  Value-added services
   Percentage of Net Sales2007
    
    2006
    
    2005Center-of-the-plate
    
    
    41
    %
    
    
    41
    %
    
    
    42
    %Frozen foods
    
    
    19
    
    
    
    17
    
    
    
    17Canned and dry groceries
    
    
    16
    
    
    
    18
    
    
    
    18Refrigerated and dairy products
    
    
    11
    
    
    
    10
    
    
    
    10Paper products and cleaning supplies
    
    
    7
    
    
    
    7
    
    
    
    7Produce
    
    
    4
    
    
    
    4
    
    
    
    3Procurement, merchandising and other services
    
    
    1
    
    
    
    2
    
    
    
    2Equipment and supplies
    
    
    1
    
    
    
    1
    
    
    
    1Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 Information Systems
  Sales & Margin Management.
 Warehouse Management.
 7




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Logistics.
 Finance & HR.
 Business Intelligence.
 Infrastructure.
    
 Suppliers and Purchasing
  8




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Operations
    Approx.Number ofCustomerLocationsLocation of
    
    CurrentlyName of Subsidiary/Division
    
    Principal Region(s)
    
    Facilities
    
    Served
    
    Major CustomersBroadline:AFFLINK
    
    Nationwide
    
    Tuscaloosa, AL
    
    
    500
    
    
    Independent paper distributorsPFG  AFI Foodservice
    
    New Jersey and New
York City
metropolitan area
    
    Elizabeth, NJ
    
    
    4,000
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Batesville
    
    Mississippi
    
    Batesville, MS
    
    
    1,300
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Caro Foods
    
    South
    
    Houma, LA
    
    
    1,300
    
    
    Churchs, Copelands,
Popeyes and other
restaurants, healthcare
facilities and schoolsPFG  Carroll County Foods
    
    Baltimore, MD and
Washington, DC area
    
    New Windsor, MD
    
    
    2,100
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Empire Seafood
    
    Florida
    
    Miami, FL
    
    
    1,500
    
    
    Cruise lines and restaurantsPFG  Florida
    
    Florida
    
    Tampa, FL
    
    
    1,500
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Hale
    
    Kentucky, Tennessee
and Virginia
    
    Morristown, TN
    
    
    1,500
    
    
    Restaurants, healthcare
facilities and schools
 9




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##### Table of Contents



Approx.Number ofCustomerLocationsLocation of
    
    CurrentlyName of Subsidiary/Division
    
    Principal Region(s)
    
    Facilities
    
    Served
    
    Major CustomersPFG  Lester
    
    South
    
    Lebanon, TN
    
    
    2,400
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Little Rock
    
    Arkansas, Missouri,
Oklahoma, Tennessee
and Texas
    
    Little Rock, AR
    
    
    5,800
    
    
    Subway and other restaurants,
healthcare facilities and
schoolsPFG  Magee
    
    Louisiana and
Mississippi
    
    Magee, MS
    
    
    2,000
    
    
    Subway and other restaurants,
healthcare facilities and
schoolsPFG  Middendorf
    
    St. Louis, Missouri
and surrounding
areas
    
    St. Louis, MO
    
    
    1,800
    
    
    Restaurants, clubs, hotels
and other foodservice
facilitiesPFG  Miltons
    
    South and Southeast
    
    Atlanta, GA
    
    
    5,800
    
    
    Subway, Zaxbys and other
restaurants, healthcare
facilities and schoolsPFG  NorthCenter
    
    Maine,
Massachusetts and
New Hampshire
    
    Augusta, ME
    
    
    4,300
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Powell
    
    Alabama, Florida
and Georgia
    
    Cairo, GA
    
    
    800
    
    
    Restaurants, healthcare
facilities and schoolsProgressive Group Alliance
    
    Nationwide
    
    Boise, ID
Richmond, VA
    
    
    350
    
    
    Independent foodservice
distributors and vendorsPFG  Springfield
    
    New England and
portions of New
York State
    
    Springfield, MA
    
    
    3,200
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Temple
    
    South and Southwest
    
    Temple, TX
    
    
    4,100
    
    
    Churchs, Popeyes, Subway
and other restaurants,
healthcare facilities and
schoolsPFG  Thoms-Proestler
Company
    
    Chicago
metropolitan area
and other portions
of Illinois,
Indiana, Iowa and
Wisconsin
    
    Rock Island, IL
    
    
    4,100
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Victoria
    
    South and Southwest
    
    Victoria, TX
    
    
    2,300
    
    
    Subway and other restaurants,
healthcare facilities and
schoolsPFG  Virginia Foodservice
    
    Virginia
    
    Richmond, VA
    
    
    1,900
    
    
    Texas Steakhouse and other
restaurants and healthcare
facilitiesCustomized
    
    Nationwide
    
    Shafter, CA
Elkton, MD
Rock Hill, SC
Gainesville, FL
Kendallville, IN
Lebanon, TN
McKinney, TX
Westampton, NJ
    
    
    4,000
    
    
    Cracker Barrel, Logans,
Outback Steakhouse, Ruby
Tuesday, T.G.I. Fridays,
OCharleys, and other
casual-dining restaurants
 
 Competition
  10




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Regulation
     
 Intellectual Property
  
 Employees
  
 Executive Officers
  Name
    
    Age
    
    PositionRobert C.
Sledd
    
    
    55
    
    
    Chairman of the BoardSteven L.
Spinner
    
    
    48
    
    
    President and Chief Executive OfficerJohn D.
Austin
    
    
    46
    
    
    Senior Vice President and Chief Financial OfficerThomas
Hoffman
    
    
    68
    
    
    Senior Vice President, President and Chief
Executive Officer  Customized DivisionJoseph J. Paterak,
Jr.
    
    
    56
    
    
    Senior Vice President, Broadline OperationsCharlotte L.
Perkins
    
    
    49
    
    
    Senior Vice President, Chief Human Resources OfficerJoseph J.
Traficanti
    
    
    56
    
    
    Senior Vice President, General Counsel, Chief
Compliance Officer, Corporate SecretaryJ. Keith
Middleton
    
    
    41
    
    
    Senior Vice President and Controller
 Robert C. Sledd
 11




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Steven L. Spinner Officer -
 John D. Austin -
 Thomas Hoffman -
 Joseph J. Paterak, Jr.
 Charlotte L. Perkins
 Joseph J. Traficanti
 J. Keith Middleton
 Available Information
 www.pfgc.com
 12




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Item 1A. Risk Factors.
 Foodservice distribution is a low-margin business and may be sensitive to economic conditions.
 We rely on major customers.
 Failure
to complete our proposed merger with a wholly-owned subsidiary of VISTAR Corporation could negatively affect us.
 
    
    the current market price of our common stock may reflect a market assumption that the merger
will occur, and a failure to complete the merger could result in a decline in the market price
of our common stock;
    
    the occurrence of any event, change or other circumstances that could give rise to the
termination of the merger agreement, including a termination that
under certain circumstances would
require us to pay a $40.0 million or $20.0 million termination fee to VISTAR;
    
    the outcome of any legal proceedings that have been or may be instituted against us and
others relating to the merger agreement;
    
    the failure of the merger to close for any reason, including the inability to complete the
merger due to the failure to obtain shareholder approval or the
failure to satisfy other
conditions to consummation of the merger, or the failure of VISTAR to obtain the necessary debt
financing arrangements set forth in commitment letters received by us in connection with the merger,
and the risk that any failure of the merger to close may adversely affect our business and the
price of our common stock;
 13




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
    
    the potential adverse effect on our business, properties and operations of any affirmative or
negative covenants we agreed to in the merger agreement;
    
    risks that the proposed transaction diverts managements attention and disrupts current plans
and operations, and potential difficulties in employee retention as a result of the merger;
    
    the effect of the announcement of the merger and actions taken in anticipation of the merger
on our business relationships, operating results and business generally; and
    
    the amount of the costs, fees, expenses and charges related to the merger.
 Our success depends to a significant extent on discretionary consumer spending.
 We have experienced losses due to the uncollectibility of accounts receivable in the past and could
experience increases in such losses in the future if our customers are unable to timely pay their
debts to us.
 We may not be able to close our Magee, Mississippi distribution facility within the time and cost
estimates that we have internally established and we may not be able to retain those customers of
the facility that we desire to retain.
 Our growth is dependent on our ability to complete acquisitions and integrate operations of
acquired businesses.
   14




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Managing our growth may be difficult and our growth rate may decline
 Our debt agreements and certain of our operating agreements contain restrictive covenants, and our
debt and lease obligations require, or may require, substantial future payments.
  
    
    increasing our vulnerability to general adverse economic and industry conditions;
    
    limiting our ability to obtain additional financing;
    
    limiting our flexibility in planning for or reacting to changes in our business and the
industry in which we compete; and
    
    placing us at a possible competitive disadvantage compared to competitors with less
leverage or better access to capital resources.
  Product liability claims could have an adverse effect on our business.
 Competition in our industry is intense, and we may not be able to compete successfully.
 15




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Our success depends on our senior management.
 The market price for our common stock may be volatile.
 
    
    our quarterly operating results or the operating results of other distributors of food and
non-food products and of restaurants and other of our customers;
    
    changes in general conditions in the economy, the financial markets or the food
distribution or foodservice industries;
    
    changes in financial estimates or recommendations by stock market analysts regarding us or
our competitors;
    
    announcements by us or our competitors of significant acquisitions;
    
    increases in labor, energy, fuel costs or the costs of food products; and
    
    natural disasters, severe weather conditions or other developments affecting us or our
competitors.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  Approx. Area
    
    
    
    
    Owned/LeasedLocation
    
    In Square Feet
    
    
    Operating Segment
    
    (Expiration Date if Leased)AFFLINKTuscaloosa, AL
    
    
    45,000
    
    
    Broadline
    
    Leased (2016)PFG  AFI FoodserviceElizabeth, NJ
    
    
    267,000
    
    
    Broadline
    
    Leased (2033)(1)PFG  BatesvilleBatesville, MS
    
    
    183,000
    
    
    Broadline
    
    OwnedPFG  Caro FoodsHouma, LA
    
    
    129,000
    
    
    Broadline
    
    OwnedPFG  Carroll County FoodsNew Windsor, MD
    
    
    98,000
    
    
    Broadline
    
    Owned
 16




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Approx. Area
    
    
    
    
    Owned/LeasedLocation
    
    In Square Feet
    
    
    Operating Segment
    
    (Expiration Date if Leased)PFG  CustomizedShafter, CA
    
    
    140,000
    
    
    Customized
    
    OwnedElkton, MD
    
    
    316,000
    
    
    Customized
    
    OwnedRock Hill, SC
    
    
    170,000
    
    
    Customized
    
    OwnedGainesville, FL
    
    
    256,000
    
    
    Customized
    
    OwnedKendallville, IN
    
    
    225,000
    
    
    Customized
    
    OwnedLebanon, TN
    
    
    323,000
    
    
    Customized
    
    OwnedMcKinney, TX
    
    
    194,000
    
    
    Customized
    
    OwnedWestampton, NJ
    
    
    122,000
    
    
    Customized
    
    Leased (2012)PFG  Empire SeafoodMiami, FL
    
    
    154,000
    
    
    Broadline
    
    Leased (2030)(1)PFG  FloridaTampa, FL
    
    
    145,000
    
    
    Broadline
    
    OwnedPFG  HaleMorristown, TN
    
    
    100,000
    
    
    Broadline
    
    Leased (2025)PFG  LesterLebanon, TN
    
    
    160,000
    
    
    Broadline
    
    Leased (2025)PFG  Little RockLittle Rock, AR
    
    
    269,000
    
    
    Broadline
    
    Leased (2026)PFG  MageeMagee, MS
    
    
    182,000
    
    
    Broadline
    
    Leased (2024)(2)PFG  MiddendorfSt. Louis, MO
    
    
    96,000
    
    
    Broadline
    
    OwnedPFG  MiltonsAtlanta, GA
    
    
    260,000
    
    
    Broadline
    
    OwnedPFG  NorthCenterAugusta, ME
    
    
    167,000
    
    
    Broadline
    
    OwnedPFG  PowellThomasville, GA
    
    
    75,000
    
    
    Broadline
    
    Owned(3)Cairo, GA
    
    
    113,000
    
    
    Broadline
    
    OwnedProgressive Group AllianceBoise, ID
    
    
    8,000
    
    
    Broadline
    
    Leased (2009)Richmond, VA
    
    
    33,000
    
    
    Broadline
    
    Leased (2024)PFG  RichmondRichmond, VA
    
    
    91,000
    
    
    Corporate
    
    Leased (2025)PFG  SpringfieldSpringfield, MA
    
    
    127,000
    
    
    Broadline
    
    Owned(3)Springfield, MA
    
    
    224,000
    
    
    Broadline
    
    OwnedPFG  TempleTemple, TX
    
    
    290,000
    
    
    Broadline
    
    Leased (2025)PFG  Thoms-Proestler 
CompanyRock Island, IL
    
    
    256,000
    
    
    Broadline
    
    Leased (2026)PFG  VictoriaVictoria, TX
    
    
    250,000
    
    
    Broadline
    
    OwnedPFG  Virginia FoodserviceRichmond, VA
    
    
    246,000
    
    
    Broadline
    
    Leased (2024)
 
 (1)
    
    Includes all renewal options that we believe will be exercised.(2)
    
    In January 2008, we announced the planned closing of the PFG-Magee facility. See
Note 20 to our consolidated financial statements for additional information.(3)
    
    Facilities are currently held for sale. 17




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Item 3. Legal Proceedings.
  th Crescente v. Performance Food Group Company, et al., Neel v. Performance Food Group Company, et al., Friends of
Ariel Center for Policy Research v. Sledd, et al. th
  Neel Crescente Crescente Neel In re: Performance Food Group
Co. Shareholders Litigation,
   
 Item 4. Submission of Matters to a Vote of Shareholders.
  18




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PART II
 
 Item 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
  2007High
    
    LowFirst Quarter
    
    $
    30.96
    
    
    $
    27.35Second Quarter
    
    
    35.88
    
    
    
    30.88Third Quarter
    
    
    33.49
    
    
    
    27.29Fourth Quarter
    
    
    30.62
    
    
    
    24.64For the Year
    
    $
    35.88
    
    
    $
    24.64
 2006High
    
    LowFirst Quarter
    
    $
    32.49
    
    
    $
    25.45Second Quarter
    
    
    33.45
    
    
    
    29.24Third Quarter
    
    
    30.96
    
    
    
    23.30Fourth Quarter
    
    
    29.75
    
    
    
    26.26For the Year
    
    $
    33.45
    
    
    $
    23.30
   19




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Item 6. Selected Consolidated Financial Data. (1)
 (Dollar and share amounts in thousands, except pershare amounts)
    
    2007
    
    2006
    
    2005
    
    2004(2)
    
    2003(2)(7)STATEMENT OF EARNINGS DATA:Net sales
    
    $
    6,304,892
    
    
    $
    5,826,732
    
    
    $
    5,721,372
    
    
    $
    5,173,078
    
    
    $
    4,602,792Cost of goods sold
    
    
    5,480,346
    
    
    
    5,052,097
    
    
    
    4,973,966
    
    
    
    4,496,117
    
    
    
    3,982,182Gross profit
    
    
    824,546
    
    
    
    774,635
    
    
    
    747,406
    
    
    
    676,961
    
    
    
    620,610Operating expenses
    
    
    737,378
    
    
    
    699,525
    
    
    
    676,928
    
    
    
    613,281
    
    
    
    548,285Operating profit
    
    
    87,168
    
    
    
    75,110
    
    
    
    70,478
    
    
    
    63,680
    
    
    
    72,325Other income (expense):Interest income
    
    
    3,307
    
    
    
    2,164
    
    
    
    4,651
    
    
    
    340
    
    
    
    280Interest expense
    
    
    (2,148
    )
    
    
    (1,732
    )
    
    
    (3,246
    )
    
    
    (8,274
    )
    
    
    (9,845
    )Loss on sale of receivables
    
    
    (7,735
    )
    
    
    (7,351
    )
    
    
    (5,156
    )
    
    
    (2,421
    )
    
    
    (1,765
    )Loss on redemption of convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,127
    )
    
    
    Other, net
    
    
    1,009
    
    
    
    351
    
    
    
    365
    
    
    
    141
    
    
    
    14Other expense, net
    
    
    (5,567
    )
    
    
    (6,568
    )
    
    
    (3,386
    )
    
    
    (20,341
    )
    
    
    (11,316
    )Earnings from continuing operations
before income taxes
    
    
    81,601
    
    
    
    68,542
    
    
    
    67,092
    
    
    
    43,339
    
    
    
    61,009Income tax expense from continuing operations
    
    
    30,474
    
    
    
    25,642
    
    
    
    25,328
    
    
    
    16,781
    
    
    
    23,206Earnings from continuing operations, net of tax
    
    
    51,127
    
    
    
    42,900
    
    
    
    41,764
    
    
    
    26,558
    
    
    
    37,803Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    18,499
    
    
    
    26,000
    
    
    
    36,388(Loss) gain on sale of fresh-cut segment, net of tax
    
    
    (271
    )
    
    
    (114
    )
    
    
    186,875
    
    
    
    
    
    
    
    Total (loss) earnings from discontinued
operations
    
    
    (271
    )
    
    
    (114
    )
    
    
    205,374
    
    
    
    26,000
    
    
    
    36,388Net earnings
    
    $
    50,856
    
    
    $
    42,786
    
    
    $
    247,138
    
    
    $
    52,558
    
    
    $
    74,191PER SHARE DATA:Weighted average common shares outstanding:Basic
    
    
    34,745
    
    
    
    34,348
    
    
    
    43,233
    
    
    
    46,398
    
    
    
    45,583Diluted
    
    
    35,156
    
    
    
    34,769
    
    
    
    43,795
    
    
    
    47,181
    
    
    
    53,002Basic net earnings per common share:Continuing operations
    
    $
    1.46
    
    
    $
    1.25
    
    
    $
    0.97
    
    
    $
    0.57
    
    
    $
    0.83Discontinued operations
    
    
    
    
    
    
    
    
    
    
    4.75
    
    
    
    0.56
    
    
    
    0.80Net earnings
    
    $
    1.46
    
    
    $
    1.25
    
    
    $
    5.72
    
    
    $
    1.13
    
    
    $
    1.63Diluted net earnings per common share:Continuing operations
    
    $
    1.45
    
    
    $
    1.23
    
    
    $
    0.95
    
    
    $
    0.56
    
    
    $
    0.80Discontinued operations
    
    
    
    
    
    
    
    
    
    
    4.69
    
    
    
    0.55
    
    
    
    0.74Net earnings
    
    $
    1.45
    
    
    $
    1.23
    
    
    $
    5.64
    
    
    $
    1.11
    
    
    $
    1.54Book value per share (3)
    
    $
    24.24
    
    
    $
    22.78
    
    
    $
    21.82
    
    
    $
    18.69
    
    
    $
    17.53Closing price per share
    
    $
    27.10
    
    
    $
    27.64
    
    
    $
    28.37
    
    
    $
    26.91
    
    
    $
    35.75BALANCE SHEET AND OTHER DATA:Working capital
    
    $
    188,008
    
    
    $
    140,745
    
    
    $
    143,194
    
    
    $
    84,824
    
    
    $
    112,951Property, plant and equipment, net (8)
    
    
    324,653
    
    
    
    291,947
    
    
    
    255,816
    
    
    
    201,248
    
    
    
    182,842Depreciation and amortization
    
    
    29,688
    
    
    
    28,869
    
    
    
    26,380
    
    
    
    24,996
    
    
    
    23,706Capital expenditures
    
    
    74,931
    
    
    
    53,688
    
    
    
    77,576
    
    
    
    40,635
    
    
    
    56,973Total assets
    
    
    1,452,040
    
    
    
    1,359,775
    
    
    
    1,312,290
    
    
    
    1,827,765
    
    
    
    1,736,468Current debt (including current installments
of long-term debt)
    
    
    64
    
    
    
    583
    
    
    
    573
    
    
    
    661
    
    
    
    875Long-term debt
    
    
    9,529
    
    
    
    11,664
    
    
    
    3,250
    
    
    
    263,859
    
    
    
    338,919Shareholders equity
    
    
    860,694
    
    
    
    794,809
    
    
    
    776,517
    
    
    
    874,313
    
    
    
    803,815Total capital
    
    
    870,287
    
    
    
    807,056
    
    
    
    780,340
    
    
    
    1,138,833
    
    
    
    1,143,609Debt-to-capital ratio(4)
    
    
    1.1
    %
    
    
    1.5
    %
    
    
    0.5
    %
    
    
    23.2
    %
    
    
    29.7
    %Return on equity (5)
    
    
    6.2
    %
    
    
    5.6
    %
    
    
    4.7
    %
    
    
    3.2
    %
    
    
    5.0
    %Price/earnings ratio (6)
    
    
    18.7
    
    
    
    22.5
    
    
    
    29.9
    
    
    
    24.2
    
    
    
    23.2
 20




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##### Table of Contents



(1)
    
    Selected consolidated financial data includes the effect of acquisitions from the date of each acquisition. See Managements Discussion and
Analysis of Financial Condition and Results of Operations  Business Combinations and the notes to our consolidated financial statements included
elsewhere in this Form 10-K and in our Form 10-K for the 2004 and 2003 fiscal years for additional information about these acquisitions.(2)
    
    2004 and 2003 amounts have been restated to reclassify discontinued operations to conform with 2007, 2006 and 2005 presentation.(3)
    
    Book value per share is calculated by dividing shareholders equity by the number of common shares outstanding at the end of the fiscal year.(4)
    
    The debt-to-capital ratio is calculated by dividing total debt, including capital lease obligation, by the sum of total debt and shareholders equity.(5)
    
    Return on equity is calculated by dividing net earnings of continuing operations by average shareholders equity.(6)
    
    The price/earnings ratio is calculated by dividing the closing market price of our common stock on the last trading day of the fiscal year by diluted
net earnings from continuing operations per common share for 2007, 2006 and 2005 and by diluted net earnings per common share (including both
continuing operations and discontinued operations) in 2004 and 2003.(7)
    
    As discussed previously in this Form 10-K, 2003 was a 53-week fiscal year.(8)
    
    Includes approximately $6.4 million of assets classified as held for sale for one of our Broadline facilities at December 29, 2007. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
        21




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##### Table of Contents



Sale of Fresh-cut Segment
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Results of Operations
 Net sales
 2007
    
    2006
    
    2005Net
    
    % of
    
    Net
    
    % of
    
    Net
    
    % of(In thousands)
    
    Sales
    
    total
    
    Sales
    
    total
    
    Sales
    
    totalBroadline
    
    $
    3,810,570
    
    
    
    60.4
    %
    
    $
    3,478,733
    
    
    
    59.7
    %
    
    $
    3,481,446
    
    
    
    60.8
    %Customized
    
    
    2,495,772
    
    
    
    39.6
    %
    
    
    2,348,738
    
    
    
    40.3
    %
    
    
    2,240,802
    
    
    
    39.2
    %Inter-segment*
    
    
    (1,450
    )
    
    
    
    
    
    
    (739
    )
    
    
    
    
    
    
    (876
    )
    
    
    Total net sales
    
    $
    6,304,892
    
    
    
    100.0
    %
    
    $
    5,826,732
    
    
    
    100.0
    %
    
    $
    5,721,372
    
    
    
    100.0
    %
 *
    
    Inter-segment sales are sales between the segments, which are eliminated in consolidation.
 Consolidated.
 Broadline.
   Customized.
 22




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##### Table of Contents



Cost of goods sold
  Broadline.
 Customized.
 Gross profit
  Operating expenses
 Consolidated.
 Broadline.
 Customized.
 23




---



##### Table of Contents



Corporate.
 Operating profit
 2007
    
    2006
    
    2005Operating
    
    % of
    
    Operating
    
    % of
    
    Operating
    
    % of(In thousands)
    
    Profit
    
    Sales
    
    Profit
    
    Sales
    
    Profit
    
    SalesBroadline
    
    $
    82,700
    
    
    
    2.2
    %
    
    $
    71,619
    
    
    
    2.1
    %
    
    $
    71,723
    
    
    
    2.1
    %Customized
    
    
    33,551
    
    
    
    1.3
    %
    
    
    30,736
    
    
    
    1.3
    %
    
    
    24,981
    
    
    
    1.1
    %Corporate and inter-segment
    
    
    (29,083
    )
    
    
    
    
    
    
    (27,245
    )
    
    
    
    
    
    
    (26,226
    )
    
    
    Total operating profit
    
    $
    87,168
    
    
    
    1.4
    %
    
    $
    75,110
    
    
    
    1.3
    %
    
    $
    70,478
    
    
    
    1.2
    %
 Consolidated.
 Broadline.
 Customized.
 Other expense, net
   Income tax expense
  24




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##### Table of Contents



Earnings from continuing operations
  Diluted net earnings per share
  Liquidity and Capital Resources
   Operating activities of continuing operations
  Investing activities of continuing operations
  25




---



##### Table of Contents



Financing activities of continuing operations
       26




---



##### Table of Contents



(In thousands)
    
    Payments Due By Period1 Year
    
    Years 2
    
    Years 4
    
    More ThanContractual Obligations
    
    Total
    
    and Less
    
    and 3
    
    and 5
    
    5 YearsLong-term debt obligations, (excluding interest)
    
    $
    593
    
    
    $
    64
    
    
    $
    141
    
    
    $
    153
    
    
    $
    235Operating and capital lease obligations
    
    
    273,241
    
    
    
    38,141
    
    
    
    59,322
    
    
    
    39,352
    
    
    
    136,426Purchase obligations
    
    
    27,096
    
    
    
    27,096
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    300,930
    
    
    $
    65,301
    
    
    $
    59,463
    
    
    $
    39,505
    
    
    $
    136,661
   Stock Based Compensation
 Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation,
 Share-Based Payment,
 27




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##### Table of Contents



Discontinued Operations
 Accounting for the Impairment or Disposal of Long-Lived Assets, Allocation of Interest to
Discontinued Operations,
 Off Balance Sheet Activities
    28




---



##### Table of Contents



Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
 Business Combinations
  Subsequent Events
 Merger Agreement with VISTAR Corporation
     29




---



##### Table of Contents



Magee, Mississippi Broadline Facility Closing
  Application of Critical Accounting Policies
  Allowance for Doubtful Accounts.
 Inventory Valuation.
 Goodwill and Other Intangible Assets.
  30




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##### Table of Contents



Accounting for the Impairment or Disposal of Long-lived Assets.
 Insurance Programs.
 Vendor Rebates and Other Promotional Incentives. Accounting by a Customer (Including a Reseller) for Certain Consideration Received
from a Vendor Application of Issue No. 02-16 by Resellers to Sales Incentives
Offered to Consumers by Manufacturers.
   31




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##### Table of Contents



Income Taxes. Accounting for Income
Taxes.
    Share-Based Compensation.
   Recently Issued Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option of Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115
 32




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##### Table of Contents



Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 Quarterly Results and Seasonality
  2007(In thousands, except per share amounts)
    
    1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th QuarterNet sales
    
    $
    1,529,744
    
    
    $
    1,564,652
    
    
    $
    1,578,888
    
    
    $
    1,631,607Gross profit
    
    
    195,406
    
    
    
    206,528
    
    
    
    207,913
    
    
    
    214,699Operating profit
    
    
    12,846
    
    
    
    23,039
    
    
    
    25,196
    
    
    
    26,087Earnings from continuing operations before income taxes
    
    
    11,308
    
    
    
    21,512
    
    
    
    23,741
    
    
    
    25,040Earnings from continuing operations
    
    
    6,873
    
    
    
    13,081
    
    
    
    16,081
    
    
    
    15,091Earnings (loss) from discontinued operations
    
    
    52
    
    
    
    (246
    )
    
    
    (44
    )
    
    
    (32
    )Net earnings
    
    $
    6,925
    
    
    $
    12,835
    
    
    $
    16,037
    
    
    $
    15,059Basic earnings (loss) per common share:Continuing operations
    
    $
    0.20
    
    
    $
    0.38
    
    
    $
    0.46
    
    
    $
    0.43Discontinued operations
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    Net earnings
    
    $
    0.20
    
    
    $
    0.37
    
    
    $
    0.46
    
    
    $
    0.43Diluted earnings (loss) per common share:Continuing operations
    
    $
    0.20
    
    
    $
    0.37
    
    
    $
    0.46
    
    
    $
    0.43Discontinued operations
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    Net earnings
    
    $
    0.20
    
    
    $
    0.36
    
    
    $
    0.46
    
    
    $
    0.43
 33




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##### Table of Contents



2006(In thousands, except per share amounts)
    
    1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th QuarterNet sales
    
    $
    1,469,493
    
    
    $
    1,448,027
    
    
    $
    1,429,765
    
    
    $
    1,479,447Gross profit
    
    
    187,254
    
    
    
    193,203
    
    
    
    194,353
    
    
    
    199,825Operating profit
    
    
    10,722
    
    
    
    21,530
    
    
    
    20,111
    
    
    
    22,747Earnings from continuing operations before income taxes
    
    
    9,290
    
    
    
    19,754
    
    
    
    18,753
    
    
    
    20,745Earnings from continuing operations
    
    
    5,674
    
    
    
    12,168
    
    
    
    12,175
    
    
    
    12,883(Loss) earnings from discontinued operations
    
    
    (32
    )
    
    
    13
    
    
    
    (132
    )
    
    
    36Net earnings
    
    $
    5,642
    
    
    $
    12,181
    
    
    $
    12,043
    
    
    $
    12,919Basic earnings per common share
    
    $
    0.16
    
    
    $
    0.36
    
    
    $
    0.35
    
    
    $
    0.38Diluted earnings per common share
    
    $
    0.16
    
    
    $
    0.35
    
    
    $
    0.35
    
    
    $
    0.37
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
   
 Item 8. Financial Statements and Supplementary Data.
 Page of Form 10-KFinancial Statements:Reports of Independent Registered Public Accounting Firm
    
    48Consolidated Balance Sheets
    
    50Consolidated Statements of Earnings
    
    51Consolidated Statements of Shareholders Equity
    
    52Consolidated Statements of Cash Flows
    
    53Notes to Consolidated Financial Statements
    
    54Financial Statement Schedules:Report of Independent Registered Public Accounting Firm
    
    74Schedule II  Valuation and Qualifying Accounts
    
    75
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  34




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
  Internal
Control  Integrated Framework
 Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information.
  35




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance.
 Directors
  Robert C. Sledd,
 Mary C. Doswell,
 Fred C. Goad, Jr.,
 John E. Stokely,
 Steven L. Spinner,
 Charles E. Adair,
 36




---



##### Table of Contents



Timothy M. Graven,
 Executive Officers
  Section 16(a) Beneficial Ownership Reporting
   Audit Committee
   
 Item 11. Executive Compensation.
  37




---



##### Table of Contents



Compensation Committee Interlocks and Insider Participation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  Number of Shares to be
    
    Weighted AverageIssued upon Exercise of
    
    Exercise Price ofOutstanding Options,
    
    Outstanding Options,
    
    Number of Shares Remaining Available for FutureAppreciation Rights
    
    Appreciation Rights
    
    Issuance Under Equity Compensation PlansPlan Category
    
    and Warrants
    
    and Warrants
    
    (Excluding Shares Reflected in First Column)*Equity compensation
plans approved by
shareholders
    
    
    2,712,820
    
    
    $
    29.09
    
    
    
    1,932,793Equity compensation
plans not approved
by shareholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    2,712,820
    
    
    $
    29.09
    
    
    
    1,932,793
 
 *
    
    Includes 310,000 shares available for future issuance under our Employee Stock Purchase Plan as
of December 29, 2007, of which approximately 57,400 shares were issued in January 2008.  Amount and Nature of
    
    Percent ofName & Address of Beneficial Owner**
    
    Beneficial Ownership (1)
    
    Class(2)Prudential Financial, Inc.
    
    
    3,426,272
    (3)
    
    
    9.6
    %751 Broad Street
Newark, New Jersey 07102Dimensional Fund Advisors Inc.
    
    
    2,944,078
    (4)
    
    
    8.3
    %1299 Ocean Avenue 11th Floor
Santa Monica, California 90401Axa Financial, Inc.
    
    
    2,414,367
    (5)
    
    
    6.8
    %1290 Avenue of the Americas
New York, New York 10104Barclays Global Investors, NA
    
    
    1,991,639
    (6)
    
    
    5.6
    %45 Fremont Street
San Francisco, California 94105The Bank of New York Mellon Corporation
    
    
    1,959,090
    (7)
    
    
    5.5
    %One Wall Street, 31st Floor
New York, New York 10286FMR LLC
    
    
    1,834,435
    (8)
    
    
    5.2
    %82 Devonshire Street
Boston, Massachusetts 02109Charles E. Adair
    
    
    54,000
    
    
    
    *
 38




---



##### Table of Contents



Amount and Nature of
    
    Percent ofName & Address of Beneficial Owner**
    
    Beneficial Ownership (1)
    
    Class(2)Mary C. Doswell
    
    
    27,000
    (9)
    
    
    *Fred C. Goad, Jr.
    
    
    64,000
    (10)
    
    
    *Timothy M. Graven
    
    
    45,000
    
    
    
    *John E. Stokely
    
    
    50,908
    
    
    
    *Robert C. Sledd
    
    
    658,866
    (11)
    
    
    1.8
    %Steven L. Spinner
    
    
    190,393
    (12)
    
    
    *Other Named Executive OfficersJohn D. Austin
    
    
    83,629
    
    
    
    *Thomas Hoffman
    
    
    94,208
    
    
    
    *Joseph J. Paterak, Jr.
    
    
    38,623
    
    
    
    *Charlotte E. Perkins
    
    
    11,781
    
    
    
    *All directors and executive officers
as a group (13 persons), including the
foregoing directors and Named
Executive Officers
    
    
    1,367,806
    (13)
    
    
    3.8
    %
 
 *
    
    Indicates beneficial ownership of less than 1%.**
    
    Except as otherwise indicated below, the address of our directors and executive officers is c/o Performance Food Group
Company, 12500 West Creek Parkway, Richmond, Virginia 23238.(1)
    
    Unless otherwise noted, the indicated owner has sole voting power and sole investment power. Includes shares which may
be acquired pursuant to stock options and stock appreciation rights exercisable within 60 days of February 20, 2008 as
follows: Mr. Sledd, 319,400; Mr. Spinner, 87,850; Mr. Adair, 40,000; Ms. Doswell; 20,500, Mr. Goad, 35,000; Mr.
Graven, 25,000; Mr. Stokely, 45,750; Mr. Austin, 68,250; Mr. Hoffman, 49,000; Mr. Paterak, 26,000; and Ms. Perkins,
3,000.(2)
    
    Percentages reflected in the table are based on 35,581,403 shares of PFG common stock outstanding and entitled to vote
on February 20, 2008. Shares issuable upon exercise of stock options and stock appreciation rights that are
exercisable within 60 days of February 20, 2008, are considered outstanding for the purposes of calculating the
percentage of total outstanding common stock owned by directors and executive officers, and by directors and executive
officers together as a group, but the shares are not considered outstanding for the purposes of calculating the
percentage of total outstanding PFG common stock owned by any other person or group.(3)
    
    Based solely on information contained in a Schedule 13G filed by Prudential Financial, Inc. with the SEC on February
6, 2008.(4)
    
    Based solely on information contained in a Schedule 13G filed by Dimensional Fund Advisors Inc. with the SEC on
February 6, 2008.(5)
    
    Based solely on information contained in a Schedule 13G filed by AXA Financial, Inc. with the SEC on February 14, 2008.(6)
    
    Based solely on information contained in a Schedule 13G filed by Barclays Global Investors, NA with the Securities and
Exchange Commission on February 6, 2008.(7)
    
    Based solely on information contained in a Schedule 13G filed by Bank of New York Mellon Corporation with the SEC on
February 14, 2008.(8)
    
    Based solely on information contained in a Schedule 13G filed by FMR LLC with the SEC on February 14, 2008.(9)
    
    Includes 900 shares held by Ms. Doswells children.(10)
    
    Includes 3,000 shares held by Mr. Goads wife for which Mr. Goad disclaims beneficial ownership.(11)
    
    Includes 54,000 shares held by Mr. Sledd as trustee for the benefit of his children, 2,500 shares held by Mr. Sledds
wife for which Mr. Sledd disclaims beneficial ownership and 87,876 shares that are pledged.(12)
    
    Includes 4,230 shares held by Mr. Spinner as trustee for the benefit of his children.(13)
    
    Includes 745,250 shares which may be acquired pursuant to stock options and stock appreciation rights exercisable
within 60 days of February 20, 2008. 39




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##### Table of Contents



Change in Control
    
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
 Certain Transactions
  Director Independence
  
 Item 14. Principal Accountants Fees and Services.
 Relationship with Independent Registered Public Accounting Firm
  Audit Fees
  40




---



##### Table of Contents



Audit Related Fees
  Tax Fees
  All Other Fees
  Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent
Registered Public Accounting Firm
  41




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
 (a)
    
    
    1
    
    
    Financial Statements. See index to Financial Statements above.2
    
    
    Financial Statement Schedules. See index to Financial Statement Schedules above.3
    
    
    Exhibits:
 ExhibitNumber
    
    DescriptionA.
    
    Incorporated by reference to our Registration Statement on Form S-1 (No. 33-64930)
(File No. 0-22192), filed June 24, 1993:4.1
    
    Specimen Common Stock certificate.4.2
    
    Article 5 of the Registrants Restated Charter (included in Exhibit 3.1).4.3
    
    Article 6 of the Registrants Restated Bylaws (included in Exhibit 3.2).10.1
    
    1993 Outside Directors Stock Option Plan.*10.2
    
    Form of Pocahontas Food Group, Inc. Executive Deferred Compensation Plan.*10.3
    
    Form of Indemnification Agreement.B.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended
January 1, 1994 (File No. 0-22192), filed March 29, 1994:10.4
    
    First Amendment to the Trust Agreement for Pocahontas Food Group, Inc. Employee Savings
and Stock Ownership Plan.C.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended
December 28, 1996 (File No. 0-22192), filed March 27, 1997:10.5
    
    Performance Food Group Company Employee Savings and Stock Ownership Plan Savings Trust.D.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended
December 27, 1997 (File No. 0-22192), filed March 26, 1998:10.6
    
    Form of Change in Control Agreement dated October 27, 1997 with certain key executives.*E.
    
    Incorporated by reference to our Registration Statement on Form S-4 (Registration No
333-61612) (File No. 0-22192), filed May 25, 2001:3.1
    
    Restated Charter of Registrant.F.
    
    Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 (File No. 0-22192), filed August 14, 2001:10.7
    
    Receivables Purchase Agreement dated July 3, 2001, by and among PFG Receivables
Corporation, as Seller, Performance Food Group Company, as Servicer, Jupiter
Securitization Corporation and Bank One, NA as Agent. (Schedules and other exhibits are
omitted from this filing, but the Registrant will furnish supplemental copies of the
omitted material to the Securities and Exchange Commission upon request.)
 42




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##### Table of Contents



ExhibitNumber
    
    DescriptionG.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended
December 29, 2001 (File No. 0-22192), filed March 29, 2002:10.8
    
    1993 Employee Stock Incentive Plan (restated electronically for SEC filing purposes only).*H.
    
    Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June
29, 2002 (File No. 0-22192), filed August 13, 2002:10.9
    
    Amendment to Receivable Purchase Agreement dated as of July 12, 2002, by and among PFG
Receivables Corporation, as Seller, Performance Food Group Company, as Servicer, Jupiter
Securitization Corporation and Bank One, NA, as Agent.I.
    
    Incorporated by reference to our Registration Statement on Form S-8 (File No. 333-105082),
filed May 8, 2003:10.10
    
    2003 Equity Incentive Plan.*J.
    
    Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended June
28, 2003 (File No. 0-22192), filed August 12, 2003:10.11
    
    Amendment to Receivables Purchase Agreement dated as of June 30, 2003, by and among PFG
Receivables Corporation, as Seller, Performance Food Group Company, as Servicer, Jupiter
Securitization Corporation and Bank One, NA, as Agent.K.
    
    Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended July
3, 2004 (File No. 0-22192), filed August 11, 2004:10.12
    
    Amendment to Receivables Purchase Agreement dated as of June 28, 2004 by and between PFG
Receivables Corporation, as Seller, Performance Food Group Company, as Servicer, Jupiter
Securitization Corporation and Bank One, NA, as Agent.L.
    
    Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended
October 2, 2004 (File No. 0-22192), filed November 12, 2004:10.13
    
    Form of Non-Qualified Stock Option Agreement.*10.14
    
    Form of Incentive Stock Option Agreement.*M.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended
January 1, 2005:10.15
    
    Trust Agreement for the Performance Food Group Employee Savings and Stock Ownership Plan.N.
    
    Incorporated by reference to our Current Report on Form 8-K dated February 28, 2005 (File
No. 0-22192):2.1
    
    Stock Purchase Agreement, dated as of February 22, 2005, between Performance Food Group
Company and Chiquita Brands International, Inc. (Pursuant to Item 601(b)(2) of Regulation
S-K the schedules and exhibits to this agreement have been omitted from this filing.)O.
    
    Incorporated by reference to our Current Report on Form 8-K dated March 21, 2005 (File No.
0-22192):10.16
    
    Form of Restricted Share Award Agreement.*
 43




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##### Table of Contents



ExhibitNumber
    
    DescriptionP.
    
    Incorporated by reference to our Current Report on Form 8-K dated April 28, 2005 (File No.
0-22192):10.17
    
    Amendment and Waiver, dated as of April 26, 2005 among Performance Food Group Company, the
Lenders party to the Credit Agreement and Wachovia Bank, National Association, as
Administrative Agent for the Lenders.Q.
    
    Incorporated by reference to our Current Report on Form 8-K dated May 24, 2005 (File No.
0-22192):10.18
    
    Form of Non-Qualified Stock Option Agreement.*R.
    
    Incorporated by reference to our Current Report on Form 8-K dated June 30, 2005 (File No.
0-22192):10.19
    
    Amendment to Receivables Purchase Agreement dated as of June 27,
2005 by and between PFG Receivables Corporation, as Seller,
Performance Food Group Company, as Servicer, Jupiter Securitization
Corporation and JPMorgan Chase Bank, N.A., successor by merger to
Bank One, NA, as Agent.S.
    
    Incorporated by reference to our Current Report on Form 8-K dated
October 11, 2005 (File No. 0-22192):10.20
    
    Second Amended and Restated Credit Agreement dated as of October 7,
2005 by and among Performance Food Group Company, the Lenders a
party thereto, and Wachovia Bank, National Association as
Administrative Agent for the Lenders.10.21
    
    Form of Revolving Credit Note.T.
    
    Incorporated by reference to our Current Report on Form 8-K dated
March 1, 2006 (File No. 0-22192):10.22
    
    Performance Food Group Company 2006 Cash Incentive Plan.*U.
    
    Incorporated by reference to our Current Report on Form 8-K dated
April 13, 2006 (File No. 0-22192):10.23
    
    Form of Non-Qualified Stock Option Agreement.*V.
    
    Incorporated by reference to our Current Report on Form 8-K dated
May 17, 2006 (File No. 0-22192):10.24
    
    Form of Non-Employee Director Restricted Share Award Agreement.*W.
    
    Incorporated by reference to our Current Report on Form 8-K dated
June 29, 2006 (File No. 0-22192):10.25
    
    Amendment to Receivables Purchase Agreement dated as of June 26, 2006 by and between PFG
Receivables Corporation, as Seller, Performance Food Group Company, as Servicer, Jupiter
Securitization Corporation and JPMorgan Chase Bank, N.A., successor by merger to Bank One,
NA (Main Office Chicago).X.
    
    Incorporated by reference to our Current Report on Form 8-K dated August 21, 2006
(File No. 0-22192)10.26
    
    Steven L. Spinner Executive Compensation Summary.*
 44




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##### Table of Contents



ExhibitNumber
    
    DescriptionY.
    
    Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2006 (File No. 0-22192) filed November 7, 2006:10.27
    
    Amendment No. 3 to Rights Agreement dated September 8, 2006 between Performance
Food Group Company and Bank of New York, as subsequent Rights Agent.Z.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year
ended December 29, 2007 (File No. 0-22192):10.28
    
    2007 Named Executive Officer and Director Compensation Summary.*AA.
    
    Incorporated herein by reference to our Current Report on Form 8-K dated February
27, 2007 (File No. 0-22192):10.29
    
    Performance Food Group Company 2007 Cash Incentive Plan.*BB.
    
    Incorporated herein by reference to our Current Report on Form 8-K dated March 6,
2007 (File No. 0-22192):10.30
    
    Form of Stock Appreciation Right Award Agreement.*CC.
    
    Incorporated herein by reference to our Quarterly Report for the quarter ended
March 31, 2007 (File No. 0-22192) filed May 8, 2007:10.31
    
    Fourth Amendment to Performance Food Group Company 1993 Employee Stock Incentive
Plan.*10.32
    
    Amendment No. 1 to Performance Food Group Company 2003 Equity Incentive Plan.*10.33
    
    Third Amendment to Performance Food Group Company 1993 Outside Directors Stock
Option Plan.*DD.
    
    Incorporated herein by reference to our Current Report on Form 8-K dated June 27,
2007 (File No. 0-22192):10.34
    
    Amendment to Receivables Purchase Agreement, dated as of June 25, 2007 is by and
among PFG Receivables Corporation, as Seller, Performance Food Group Company, as
Servicer, Falcon Asset Securitization Company LLC (assignee of Jupiter
Securitization Company LLC) and JPMorgan Chase Bank, N.A., successor by merger to
Bank One, NA (Main Office Chicago), as Agent.EE.
    
    Incorporated herein by reference to our Quarterly Report for the quarter ended
September 29, 2007 (File No. 0-22192) filed November 6, 2007:10.35
    
    Amended and Restated Performance Food Group Company Employee Stock Purchase Plan.*10.36
    
    Amended and Restated Performance Food Group Company Employee Savings and Stock
Ownership Plan.*10.37
    
    Amended and Restated Performance Food Group Company Senior Management Severance
Plan.*10.38
    
    Amendment No. 1 to Performance Food Group Company 2006 Cash Incentive Plan.*10.39
    
    Amendment No. 1 to Performance Food Group Company 2007 Cash Incentive Plan.*
 45




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##### Table of Contents



ExhibitNumber
    
    Description10.40
    
    Amended and Restated Performance Food Group Company Supplemental Executive
Retirement Plan.*FF.
    
    Incorporated herein by reference to our Current Report on Form 8-K dated December
3, 2007 (File No. 0-22192):3.2
    
    Restated Bylaws of Performance Food Group Company, as amended (Restated for SEC
electronic filing purposes only).GG.
    
    Incorporated herein by reference to our Current Report on Form 8-K dated January
18, 2008 (File No. 0-22192):2.2
    
    Agreement and Plan of Merger, dated as of January 18, 2008, by and among
Performance Food Group Company, VISTAR Corporation and Panda Acquisition, Inc.
(Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K.
Performance Food Group Company agrees to furnish supplementally a copy of any
omitted schedule to the SEC upon request.)HH.
    
    Filed herewith:10.41
    
    Named Executive Officer and Director Compensation Summary.*10.42
    
    Amended and Restated Performance Food Group Company Deferred Compensation Plan.*10.43
    
    Form of Change of Control Agreement by and between Performance Food Group Company
and its Executive Officers.*10.44
    
    Negative consent amendment to the
Second Amended and Restated Credit Agreement dated as of October 7,
2005 by and among Performance Food Group Company, the Lenders a party
thereto, and Wachovia Bank, National Association as Administrative
Agent for the Lenders.10.45
    
    Fourteenth Amendment to the Performance Food Group Company Employee Savings and
Stock Ownership Plan.10.46
    
    Fifteenth Amendment to the Performance Food Group Company Employee Savings and
Stock Ownership Plan.21
    
    List of Subsidiaries.23.1
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Management contract or compensatory plan or arrangement 46




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##### Table of Contents



SIGNATURES
  PERFORMANCE FOOD GROUP COMPANYBy:
    
    /s/ Steven L. SpinnerSteven L. SpinnerPresident and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ Steven L. Spinner

Steven L. Spinner
    
    Director, President and Chief
Executive Officer (Principal
Executive Officer)
    
    February 26, 2008/s/ John D. Austin

John D. Austin
    
    Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
    
    February 26, 2008/s/ Robert C. Sledd
    
    Chairman of the Board
    
    February 26, 2008Robert C. Sledd/s/ Charles E. Adair

Charles E. Adair
    
    Director
    
    February 26,
2008/s/ Mary C. Doswell

Mary C. Doswell
    
    Director
    
    February 26,
2008/s/ Fred C. Goad, Jr.

Fred C. Goad, Jr.
    
    Director
    
    February 26,
2008/s/ Timothy M. Graven

Timothy M. Graven
    
    Director
    
    February 26,
2008/s/ John E. Stokely

John E. Stokely
    
    Director
    
    February 26,
2008
 47




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control-Integrated
Framework Managements Report on Internal Control over
Financial Reporting
    Internal
Control-Integrated Framework
   
 48




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     Internal Control-Integrated Framework
  
 49




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##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
 
 CONSOLIDATED BALANCE SHEETS
 (Dollar amounts in thousands, except per share amounts)
    
    2007
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    87,711
    
    
    $
    75,087Accounts receivable, net, including residual interest in securitized receivables
    
    
    256,306
    
    
    
    226,668Inventories
    
    
    329,686
    
    
    
    308,901Prepaid expenses and other current assets
    
    
    11,182
    
    
    
    9,991Deferred income taxes
    
    
    22,463
    
    
    
    24,818Total current assets
    
    
    707,348
    
    
    
    645,465Goodwill, net
    
    
    356,509
    
    
    
    356,509Property, plant and equipment, net
    
    
    318,264
    
    
    
    291,947Other intangible assets, net
    
    
    44,238
    
    
    
    47,575Other assets
    
    
    19,292
    
    
    
    18,279Assets held for sale
    
    
    6,389
    
    
    
    Total assets
    
    $
    1,452,040
    
    
    $
    1,359,775LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Outstanding checks in excess of deposits
    
    $
    96,633
    
    
    $
    88,023Current installments of long-term debt
    
    
    64
    
    
    
    583Trade accounts payable
    
    
    275,580
    
    
    
    272,041Accrued expenses
    
    
    147,063
    
    
    
    144,073Total current liabilities
    
    
    519,340
    
    
    
    504,720Long-term debt, excluding current installments
    
    
    9,529
    
    
    
    11,664Income taxes  long-term
    
    
    3,530
    
    
    
    Deferred income taxes
    
    
    58,947
    
    
    
    48,582Total liabilities
    
    
    591,346
    
    
    
    564,966Shareholders equity:Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued,
preferences to be defined when issued
    
    
    
    
    
    
    Common stock, $.01 par value; 100,000,000 shares authorized, 35,503,683 and
34,894,380 shares issued and outstanding
    
    
    355
    
    
    
    349Additional paid-in capital
    
    
    171,265
    
    
    
    155,783Retained earnings
    
    
    689,074
    
    
    
    638,677Total shareholders equity
    
    
    860,694
    
    
    
    794,809Total liabilities and shareholders equity
    
    $
    1,452,040
    
    
    $
    1,359,775
 See accompanying notes to consolidated financial statements.
 50




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##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 (In thousands, except per share amounts)
    
    2007
    
    2006
    
    2005Net sales
    
    $
    6,304,892
    
    
    $
    5,826,732
    
    
    $
    5,721,372Cost of goods sold
    
    
    5,480,346
    
    
    
    5,052,097
    
    
    
    4,973,966Gross profit
    
    
    824,546
    
    
    
    774,635
    
    
    
    747,406Operating expenses
    
    
    737,378
    
    
    
    699,525
    
    
    
    676,928Operating profit
    
    
    87,168
    
    
    
    75,110
    
    
    
    70,478Other income (expense):Interest income
    
    
    3,307
    
    
    
    2,164
    
    
    
    4,651Interest expense
    
    
    (2,148
    )
    
    
    (1,732
    )
    
    
    (3,246
    )Loss on sale of receivables
    
    
    (7,735
    )
    
    
    (7,351
    )
    
    
    (5,156
    )Other, net
    
    
    1,009
    
    
    
    351
    
    
    
    365Other expense, net
    
    
    (5,567
    )
    
    
    (6,568
    )
    
    
    (3,386
    )Earnings from continuing operations before income taxes
    
    
    81,601
    
    
    
    68,542
    
    
    
    67,092Income tax expense from continuing operations
    
    
    30,474
    
    
    
    25,642
    
    
    
    25,328Earnings from continuing operations, net of tax
    
    
    51,127
    
    
    
    42,900
    
    
    
    41,764Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    18,499(Loss) gain on sale of fresh-cut segment, net of tax
    
    
    (271
    )
    
    
    (114
    )
    
    
    186,875Total (loss) earnings from discontinued operations (Note 3)
    
    
    (271
    )
    
    
    (114
    )
    
    
    205,374Net earnings
    
    $
    50,856
    
    
    $
    42,786
    
    
    $
    247,138Weighted average common shares outstanding:Basic
    
    
    34,745
    
    
    
    34,348
    
    
    
    43,233Diluted
    
    
    35,156
    
    
    
    34,769
    
    
    
    43,795Basic earnings per common share:Continuing operations
    
    $
    1.46
    
    
    $
    1.25
    
    
    $
    0.97Discontinued operations
    
    
    
    
    
    
    
    
    
    
    4.75Net earnings
    
    $
    1.46
    
    
    $
    1.25
    
    
    $
    5.72Diluted earnings per common share:Continuing operations
    
    $
    1.45
    
    
    $
    1.23
    
    
    $
    0.95Discontinued operations
    
    
    
    
    
    
    
    
    
    
    4.69Net earnings
    
    $
    1.45
    
    
    $
    1.23
    
    
    $
    5.64
 See accompanying notes to consolidated financial statements.
 51




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##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Common Stock
    
    Additional
    
    
    
    
    
    Total Shareholders(Dollar amounts in thousands)
    
    Shares
    
    Amount
    
    Paid-in Capital
    
    Retained Earnings
    
    EquityBalance at January 1, 2005
    
    
    46,770,660
    
    
    $
    468
    
    
    $
    525,092
    
    
    $
    348,753
    
    
    $
    874,313Issuance of shares for equity based
awards, net of cancellations
    
    
    977,694
    
    
    
    10
    
    
    
    12,641
    
    
    
    
    
    
    
    12,651Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    999
    
    
    
    
    
    
    
    999Repurchase and retirement of common stock
    
    
    (12,166,429
    )
    
    
    (122
    )
    
    
    (361,596
    )
    
    
    
    
    
    
    (361,718
    )Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    3,134
    
    
    
    
    
    
    
    3,134Net earnings-continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,764
    
    
    
    41,764Net earnings-discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,374
    
    
    
    205,374Balance at December 31, 2005
    
    
    35,581,925
    
    
    
    356
    
    
    
    180,270
    
    
    
    595,891
    
    
    
    776,517Issuance of shares for equity based
awards, net of cancellations
    
    
    772,410
    
    
    
    8
    
    
    
    8,217
    
    
    
    
    
    
    
    8,225Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    4,880
    
    
    
    
    
    
    
    4,880Repurchase and retirement of common stock
    
    
    (1,459,955
    )
    
    
    (15
    )
    
    
    (39,602
    )
    
    
    
    
    
    
    (39,617
    )Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    2,018
    
    
    
    
    
    
    
    2,018Net earnings-continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,900
    
    
    
    42,900Net loss-discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (114
    )
    
    
    (114
    )Balance at December 30, 2006
    
    
    34,894,380
    
    
    
    349
    
    
    
    155,783
    
    
    
    638,677
    
    
    
    794,809Issuance of shares for equity based
awards, net of cancellations
    
    
    609,303
    
    
    
    6
    
    
    
    7,135
    
    
    
    
    
    
    
    7,141Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    6,609
    
    
    
    
    
    
    
    6,609Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    1,738
    
    
    
    
    
    
    
    1,738Impact of FIN 48 adoption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (459
    )
    
    
    (459
    )Net earnings-continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,127
    
    
    
    51,127Net loss-discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (271
    )
    
    
    (271
    )Balance at December 29, 2007
    
    
    35,503,683
    
    
    $
    355
    
    
    $
    171,265
    
    
    $
    689,074
    
    
    $
    860,694
 See accompanying notes to consolidated financial statements.
 52




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##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollar amounts in thousands)
    
    2007
    
    
    2006
    
    
    2005Cash flows from operating activities of continuing operations:Earnings from continuing operations
    
    $
    51,127
    
    
    $
    42,900
    
    
    $
    41,764Adjustments to reconcile net earnings to net cash provided
by operating activities:Depreciation
    
    
    26,679
    
    
    
    25,557
    
    
    
    22,818Amortization
    
    
    3,009
    
    
    
    3,312
    
    
    
    3,562Stock compensation expense
    
    
    6,609
    
    
    
    4,880
    
    
    
    999Deferred income taxes
    
    
    12,720
    
    
    
    (4,566
    )
    
    
    2,919Tax benefit from exercise of equity awards
    
    
    911
    
    
    
    1,115
    
    
    
    3,134Gain on sale of investments
    
    
    (832
    )
    
    
    
    
    
    
    Other
    
    
    172
    
    
    
    952
    
    
    
    611Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (29,638
    )
    
    
    (35,577
    )
    
    
    (19,290
    )Increase in inventories
    
    
    (20,785
    )
    
    
    (5,828
    )
    
    
    (16,054
    )(Increase) decrease in prepaid expenses and other current assets
    
    
    (1,191
    )
    
    
    (663
    )
    
    
    374Increase in other assets
    
    
    (1,134
    )
    
    
    (1,933
    )
    
    
    (2,843
    )Increase in trade accounts payable
    
    
    3,539
    
    
    
    10,799
    
    
    
    30,909Increase in accrued expenses
    
    
    9,581
    
    
    
    10,643
    
    
    
    11,661Change in income taxes payable/receivable, net
    
    
    (3,878
    )
    
    
    14,082
    
    
    
    (4,394
    )Net cash provided by operating activities of continuing operations
    
    
    56,889
    
    
    
    65,673
    
    
    
    76,170Cash flows from investing activities of continuing operations:Purchases of property, plant and equipment
    
    
    (74,931
    )
    
    
    (53,688
    )
    
    
    (77,576
    )Net cash paid for acquisitions
    
    
    
    
    
    
    
    
    
    
    (3,917
    )Proceeds from sale of property, plant and equipment
    
    
    16,060
    
    
    
    462
    
    
    
    290Proceeds from sale of investments
    
    
    953
    
    
    
    
    
    
    
    Cash paid for intangibles
    
    
    
    
    
    
    
    
    
    
    (150
    )Net cash used in investing activities of continuing operations
    
    
    (57,918
    )
    
    
    (53,226
    )
    
    
    (81,353
    )Cash flows from financing activities of continuing operations:Increase (decrease) in outstanding checks in excess of deposits
    
    
    8,610
    
    
    
    (12,312
    )
    
    
    (3,613
    )Net payments on revolving credit facility
    
    
    
    
    
    
    
    
    
    
    (210,000
    )Principal payments on long-term debt
    
    
    (2,654
    )
    
    
    (576
    )
    
    
    (697
    )Proceeds from employee stock option, incentive and purchase plans
    
    
    7,141
    
    
    
    8,225
    
    
    
    12,651Excess tax benefit from exercise of equity awards
    
    
    827
    
    
    
    903
    
    
    
    Cash paid for debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (864
    )Repurchase of common stock
    
    
    
    
    
    
    (39,617
    )
    
    
    (361,718
    )Net cash provided by (used in) financing activities of continuing
operations
    
    
    13,924
    
    
    
    (43,377
    )
    
    
    (564,241
    )Net cash provided by (used in) continuing operations
    
    
    12,895
    
    
    
    (30,930
    )
    
    
    (569,424
    )Cash flows from discontinued operations (Note 3):Cash provided by operating activities of discontinued operations
    
    
    
    
    
    
    6,670
    
    
    
    1,121Cash (used in) provided by investing activities of discontinued operations
    
    
    (271
    )
    
    
    (114
    )
    
    
    611,083Cash provided by financing activities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    4,359Total cash (used in) provided by discontinued operations
    
    
    (271
    )
    
    
    6,556
    
    
    
    616,563Net increase (decrease) in cash and cash equivalents
    
    
    12,624
    
    
    
    (24,374
    )
    
    
    47,139Cash and cash equivalents, beginning of year
    
    
    75,087
    
    
    
    99,461
    
    
    
    52,322Cash and cash equivalents, end of year
    
    $
    87,711
    
    
    $
    75,087
    
    
    $
    99,461Supplemental disclosure of non-cash transaction:Debt assumed through capital lease obligation
    
    
    
    
    
    $
    9,000
    
    
    
    
 See accompanying notes to consolidated financial statements.
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PERFORMANCE FOOD GROUP COMPANY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Description of BusinessPerformance Food Group Company and subsidiaries (the Company) market and distribute over 68,000
national and proprietary brand food and non-food products to over 41,000 customers in the
foodservice or food-away-from-home industry. The Company services both of the major customer
types in the foodservice industry: street foodservice customers, which include independent
restaurants, hotels, cafeterias, schools, healthcare facilities and other institutional customers,
and multi-unit, or chain customers, which include regional and national family and casual dining
and quick-service restaurants.The Company services these customers through two operating segments: broadline foodservice
distribution (Broadline) and customized foodservice distribution (Customized). Broadline
markets and distributes more than 65,000 national and proprietary brand food and non-food products
to over 41,000 street and chain customers. The Broadline segment has 19 distribution facilities
that design their own product mix, distribution routes and delivery schedules to accommodate the
needs of a large number of customers whose individual purchases vary in size. Broadlines
customers are typically located within 250 miles of one of the Companys Broadline distribution
centers in the Eastern, Midwestern and Southern United States. Customized services casual and
family dining chain restaurants. These customers generally prefer a centralized point of contact
that facilitates item and menu changes, tailored distribution routing and customer service.
Customized segment customers can be located up to 1,800 miles away from one of its eight
distribution centers, located throughout the United States. The Customized segment also supplies
products to some of its customer locations internationally.The fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005 are referred to
herein as the years 2007, 2006 and 2005, respectively. The Company uses a 52/53-week fiscal year
ending on the Saturday closest to December 31. Consequently, the Company periodically has a
53-week fiscal year. None of the 2007, 2006 or 2005 fiscal years had 53 weeks.In 2005, the Company sold all its stock in the subsidiaries that comprised its fresh-cut segment
to Chiquita Brands International, Inc. (Chiquita). In accordance with Statement of Financial
Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets(SFAS 144), depreciation and amortization were discontinued beginning February 23, 2005,
the day after the Company entered into a definitive agreement to sell its fresh-cut segment.
Accordingly, unless otherwise noted, all amounts presented in the accompanying consolidated
financial statements, including all note disclosures, contain only information related to the
Companys continuing operations. See Note 3 for additional discontinued operations disclosures.2.
    
    Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements include the accounts of Performance Food Group Company and
its majority-owned subsidiaries. All significant inter-company balances and transactions have been
eliminated.Use of EstimatesThe preparation of the consolidated financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the Companys consolidated financial statements and notes
thereto. The most significant estimates used by management are related to the accounting for the
allowance for doubtful accounts, reserve for inventories, goodwill and other intangible assets,
reserves for claims under self-insurance programs, vendor rebates and other promotional
incentives, bonus accruals, depreciation, amortization, share-based compensation and income taxes.
Actual results could differ from these estimates.Cash and Cash EquivalentsThe Company considers all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
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Accounts ReceivableAccounts receivable represent receivables from customers in the ordinary course of business, are
recorded at the invoiced amount and do not bear interest. Receivables are recorded net of the
allowance for doubtful accounts in the accompanying consolidated balance sheets. The Company
evaluates the collectibility of its accounts receivable based on a combination of factors. The
Company regularly analyzes its significant customer accounts, and when it becomes aware of a
specific customers inability to meet its financial obligations to the Company, such as in the
case of bankruptcy filings or deterioration in the customers operating results or financial
position, the Company records a specific reserve for bad debt to reduce the related receivable to
the amount it reasonably believes is collectible. The Company also records reserves for bad debt
for other customers based on a variety of factors, including the length of time the receivables
are past due, the financial health of the customer, macroeconomic considerations and historical
experience. If circumstances related to specific customers change, the Companys estimates of the
recoverability of receivables could be further adjusted. At December 29, 2007 and December 30,
2006, the allowance for doubtful accounts was $11.2 million and $7.0 million, respectively.InventoriesThe Companys inventories consist primarily of food and non-food products. The Company values
inventories at the lower of cost or market using the first-in, first-out (FIFO) method. At
December 29, 2007 and December 30, 2006, the Companys inventory balances of $329.7 million and
$308.9 million, respectively, consisted primarily of finished goods. Costs in inventory include
the purchase price of the product and freight charges to deliver the product to the Companys
warehouses. The Company maintains reserves for slow-moving, excess and obsolete inventories. These
reserves are based upon inventory category, inventory age, specifically identified items and
overall economic conditions.Property, Plant and EquipmentProperty, plant and equipment are stated at cost. Depreciation of property, plant and equipment,
including capital lease assets, is calculated primarily using the straight-line method over the
estimated useful lives of the assets, which range from three to 39 years, and is included in
operating expenses on the consolidated statements of earnings.When assets are retired or otherwise disposed of, the costs and related accumulated depreciation
are removed from the accounts. The difference between the net book value of the asset and proceeds
from disposition is recognized as a gain or loss. Routine maintenance and repairs are charged to
expense as incurred, while costs of betterments and renewals are capitalized.Goodwill and Other Intangible AssetsGoodwill and other intangible assets primarily include the cost of acquired subsidiaries in excess
of the fair value of the tangible net assets recorded in conjunction with acquisitions. Other
intangible assets include customer relationships, trade names, trademarks, patents and non-compete
agreements. SFAS No. 142, Goodwill and Other Intangible Assets(SFAS 142), requires the Company
to assess goodwill and other intangible assets with indefinite lives for impairment annually, or
more often if circumstances indicate. If impaired, the assets are written down to their fair
values. To perform the assessment of goodwill, the Company compared the net assets of its
Broadline segment to the discounted expected future operating cash flows of the segment. To
perform the assessment of significant other non-amortized intangible assets, the Company compared
the book value of the asset to the discounted expected future operating cash flows generated by
the asset. The Companys Customized segment has no goodwill or other intangible assets. Based on
the Companys assessments for 2007, 2006 and 2005, no impairment losses were recorded.In accordance with SFAS 142, the Company ceased amortizing goodwill and other intangible assets
with indefinite lives as of the beginning of 2002. Intangible assets with definite lives are
carried at cost less accumulated amortization. Amortization is computed over the estimated useful
lives of the respective assets, generally three to 30 years.Impairment of Long-Lived AssetsLong-lived assets held and used by the Company are tested for recoverability whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For
purposes of evaluating the recoverability of long-lived assets, the Company compares the carrying
value of the asset or asset group to the estimated, undiscounted future cash flows expected to be
generated by the long-lived asset or asset group, as required by SFAS 144.Based on the Companys
assessments for 2007, 2006 and 2005, no impairment losses were recorded.
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Insurance ProgramThe Company maintains a self-insured program covering portions of general and vehicle liability,
workers compensation and group medical insurance. The amounts in excess of the self-insured
levels are fully insured by third parties, subject to certain limitations and exclusions. The
Company accrues its estimated liability for these self-insured programs, including an estimate for
incurred but not reported claims, based on known claims and past claims history. These accruals
are included in accrued expenses on the Companys consolidated balance sheets. The provisions for
insurance claims include estimates of the frequency and timing of claims occurrences, as well as
the ultimate amounts to be paid.Revenue RecognitionThe Company recognizes sales when persuasive evidence of an arrangement exists, the price is fixed
and determinable, the product has been delivered to the customer and there is reasonable assurance
of collection of the sales proceeds. Sales returns are recorded as reductions of sales.Cost of Goods SoldCost of goods sold includes amounts paid to manufacturers for products sold, plus the cost of
transportation necessary to bring the products to the Companys facilities.Operating ExpensesOperating expenses include warehouse, delivery, selling and administrative expenses, which include
occupancy, insurance, depreciation, amortization, salaries and wages and employee benefits
expenses.Vendor Rebates and Other Promotional IncentivesThe Company participates in various rebate and promotional incentives with its suppliers,
primarily including volume and growth rebates, annual and multi-year incentives and promotional
programs. Consideration received under these incentives is generally recorded as a reduction of
cost of goods sold. However, in certain circumstances the consideration is recorded as a reduction
of costs incurred by the Company. Consideration received may be in the form of cash and/or invoice
deductions. Changes in the estimated amount of incentives to be received are treated as changes in
estimates and are recognized in the period of change.Consideration received for incentives that contain volume and growth rebates and annual and
multi-year incentives are recorded as a reduction of cost of goods sold. The Company
systematically and rationally allocates the consideration for these incentives to each of the
underlying transactions that results in progress by the Company toward earning the incentives. If
the incentives are not probable and reasonably estimable, the Company records the incentives as
the underlying objectives or milestones are achieved. The Company records annual and multi-year
incentives when earned, generally over the agreement period. The Company uses current and
historical purchasing data, forecasted purchasing volumes and other factors in estimating whether
the underlying objectives or milestones will be achieved. Consideration received to promote and
sell the suppliers products is typically a reimbursement of costs incurred by the Company and is
recorded as a reduction of the Companys costs. If the amount of consideration received from the
suppliers exceeds the Companys costs, any excess is recorded as a reduction of cost of goods
sold. The Company follows the requirements of Emerging Issues Task Force (EITF) No. 02-16,
Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor
and EITF No. 03-10, Application of Issue No. 02-16 by Resellers to Sales incentives offered to
Consumers by Manufacturers.
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Stock Based Compensation
 Share-Based Payment
  (In thousands)
    
    2005Net earnings, as reported
    
    $
    247,138Add: Stock-based compensation included in net earnings, net of related tax effects
    
    
    621Deduct: Total stock-based employee compensation expense determined under the fair
value based method for all awards, net of related tax effects (includes
approximately $7.3 million in 2005 related to the accelerated vesting of certain
awards)
    
    
    (10,328
    )Pro forma net earnings
    
    $
    237,431Net earnings per common share:Basic  as reported
    
    $
    5.72Basic  pro forma
    
    $
    5.49Diluted  as reported
    
    $
    5.64Diluted  pro forma
    
    $
    5.42
 Shipping and Handling Fees and Costs
  Income Taxes
 Accounting for Income Taxes,
 Reclassifications
  Recently Issued Accounting Pronouncements
 Fair Value Measurements
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In February 2007, the FASB issued SFAS No. 159, The Fair Value Option of Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115(SFAS No. 159). SFAS No.
159 allows an entity the irrevocable option to elect fair value for the initial and subsequent
measurement for certain financial assets and liabilities. Subsequent changes in fair value of
these financial assets and liabilities would be recognized in earnings when they occur. SFAS No.
159 is effective for fiscal years beginning after November 15, 2007; however, the pronouncement
will not have a material impact on the Companys consolidated financial position or results of
operations at the date of adoption.In December 2007, the FASB issued SFAS No. 141 (Revised) Business Combinations(SFAS No. 141R).
SFAS No. 141R establishes principles and requirements for how the acquirer in a business
combination recognizes, measures and reports the identifiable assets acquired, the liabilities
assumed and any noncontrolling interest in the acquiree. The pronouncement also provides guidance
for recognizing and measuring the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. SFAS No. 141R is effective for fiscal years
beginning after December 15, 2008. The Company will adopt this pronouncement in the first quarter
of fiscal 2009, and it will impact any acquisitions consummated subsequent to the effective date.In December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51(SFAS No. 160). SFAS No. 160 establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. This pronouncement is effective for fiscal years beginning after December 15, 2008.
The Company does not anticipate the pronouncement to have a material impact on its consolidated
financial position and results of operations.3.
    
    Discontinued OperationsIn 2005, the Company sold all its stock in the subsidiaries that comprised its fresh-cut segment
to Chiquita for $860.6 million and recorded a net gain of approximately $186.8 million, net of
approximately $77.0 million in net tax expense. Earnings from discontinued operations for 2005,
excluding gain on sale, were $18.5 million, net of tax expense of $14.3 million. In accordance
with Emerging Issues Task Force No. 87-24, Allocation of Interest to Discontinued Operations,the
Company allocated to discontinued operations certain interest expense on debt that was required to
be repaid as a result of the sale and a portion of interest expense associated with the Companys
revolving credit facility and subordinated convertible notes. The allocation percentage was
calculated based on the ratio of net assets of the discontinued operations to consolidated net
assets. Interest expense allocated to discontinued operations in 2005 totaled $3.2 million.4.
    
    Business CombinationsDuring 2005, the Company paid approximately $2.7 million related to contractual obligations in the
purchase agreements for companies it acquired in 2002 and 2004. Also during 2005, the Company paid
approximately $1.3 million related to the settlement of an earnout agreement with the former
owners of Middendorf Meat Company (Middendorf Meat); this amount was accrued, with a
corresponding increase to goodwill, in 2004.
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5.
    
    Goodwill and Other Intangible AssetsThe following table presents details of the Companys intangible assets as of December 29, 2007
and December 30, 2006:
 2007
    
    2006Gross
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    
    
    
    
    Carrying
    
    Accumulated(In thousands)
    
    Amount
    
    Amortization
    
    Net
    
    Amount
    
    Amortization
    
    NetIntangible assets with definite lives:Customer relationships
    
    $
    31,746
    
    
    $
    13,108
    
    
    $
    18,638
    
    
    $
    32,859
    
    
    $
    12,100
    
    
    $
    20,759Trade names and trademarks
    
    
    17,228
    
    
    
    4,277
    
    
    
    12,951
    
    
    
    17,228
    
    
    
    3,539
    
    
    
    13,689Deferred financing costs
    
    
    3,570
    
    
    
    2,660
    
    
    
    910
    
    
    
    3,570
    
    
    
    2,332
    
    
    
    1,238Non-compete agreements
    
    
    2,663
    
    
    
    2,658
    
    
    
    5
    
    
    
    3,353
    
    
    
    3,198
    
    
    
    155Total intangible assets with definite lives
    
    $
    55,207
    
    
    $
    22,703
    
    
    $
    32,504
    
    
    $
    57,010
    
    
    $
    21,169
    
    
    $
    35,841Intangible assets with indefinite lives:Goodwill*
    
    $
    368,535
    
    
    $
    12,026
    
    
    $
    356,509
    
    
    $
    368,535
    
    
    $
    12,026
    
    
    $
    356,509Trade names*
    
    
    11,869
    
    
    
    135
    
    
    
    11,734
    
    
    
    11,869
    
    
    
    135
    
    
    
    11,734Total intangible assets with indefinite lives
    
    $
    380,404
    
    
    $
    12,161
    
    
    $
    368,243
    
    
    $
    380,404
    
    
    $
    12,161
    
    
    $
    368,243
 *
    
    Amortization was recorded before the Companys adoption of SFAS No. 142.
 The Company recorded amortization expense of $3.3 million, $3.6 million and $4.2 million in 2007,
2006 and 2005, respectively. These amounts include amortization of deferred financing costs of
approximately $0.3 million, $0.3 million and $0.7 million in 2007, 2006 and 2005, respectively.
The estimated future amortization expense on intangible assets as of December 29, 2007 is as
follows:
 (In thousands)2008
    
    $
    3,1502009
    
    
    3,1462010
    
    
    3,0562011
    
    
    2,7912012
    
    
    2,785Thereafter
    
    
    17,576Total amortization expense
    
    $
    32,504
 The following table presents the changes in the net carrying amount of goodwill, all of which is
allocated to the Companys Broadline segment, as defined in Note 19, during 2007, 2006 and 2005:
 (In thousands)Balance as of December 31, 2005
    
    $
    356,597Purchase accounting adjustments
    
    
    (88
    )Balance as of December 30, 2006 and December 29, 2007
    
    $
    356,509
 6.
    
    Net Earnings per Common ShareBasic net earnings per common share (EPS) is computed by dividing net earnings available to
common shareholders by the weighted-average number of common shares outstanding during the period.
Diluted EPS is calculated using the weighted-average number of common shares and dilutive
potential common shares outstanding during the period. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be purchased with the
proceeds from the exercise of stock options under the treasury stock method.
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A reconciliation of the numerators and denominators for the basic and diluted EPS computations is
as follows:
 2007
    
    2006
    
    2005(In thousands, except per share
    
    
    
    
    
    
    
    
    
    Per - Share
    
    
    
    
    
    
    
    
    
    Per - Share
    
    
    
    
    
    
    
    
    
    Per - Shareamounts)
    
    Earnings
    
    Shares
    
    Amount
    
    Earnings
    
    Shares
    
    Amount
    
    Earnings
    
    Shares
    
    AmountAmounts reported for basic EPS
    
    $
    51,127
    
    
    
    34,745
    
    
    $
    1.46
    
    
    $
    42,900
    
    
    
    34,348
    
    
    $
    1.25
    
    
    $
    41,764
    
    
    
    43,233
    
    
    $
    0.97Dilutive effect of equity awards
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    
    
    
    
    421
    
    
    
    
    
    
    
    
    
    
    
    562Amounts reported for diluted EPS
    
    $
    51,127
    
    
    
    35,156
    
    
    $
    1.45
    
    
    $
    42,900
    
    
    
    34,769
    
    
    $
    1.23
    
    
    $
    41,764
    
    
    
    43,795
    
    
    $
    0.95
 Options and stock appreciation rights to purchase approximately 2.2 million shares outstanding at
December 29, 2007 were excluded from the computation of diluted EPS because of their anti-dilutive
effect on EPS for 2007. The exercise prices of these options ranged from $28.02 to $41.15. Options
to purchase approximately 2.1 million shares outstanding at December 30, 2006 were excluded from
the computation of diluted EPS because of their anti-dilutive effect on EPS for 2006. The exercise
prices of these options ranged from $28.02 to $41.15. Options to purchase approximately 1.5 million
shares outstanding at December 31, 2005 were excluded from the computation of diluted EPS because
of their anti-dilutive effect on EPS for 2005. The exercise prices of these options ranged from
$29.40 to $41.15.7.
    
    Receivables FacilityThe Company maintains a receivables purchase facility (the Receivables Facility) under which PFG
Receivables Corporation, a wholly owned, special-purpose subsidiary, sells an undivided interest in
certain of the Companys trade receivables. PFG Receivables Corporation was formed for the sole
purpose of buying receivables generated by certain of the Companys operating units and selling an
undivided interest in those receivables to a financial institution. Under the Receivables
Facility, certain of the Companys operating units sell their accounts receivable to PFG
Receivables Corporation, which in turn, subject to certain conditions, may from time to time sell
an undivided interest in these receivables to a financial institution. The Companys operating
units continue to service the receivables on behalf of the financial institution at estimated
market rates. Accordingly, the Company has not recognized a servicing asset or liability. In June
2007, the Company extended the term of the Receivables Facility through June 23, 2008.At December 29, 2007, securitized accounts receivable totaled $264.9 million, including $130.0
million sold to the financial institution and derecognized from the consolidated balance sheet.
Total securitized accounts receivable includes the Companys residual interest in accounts
receivable (Residual Interest) of $134.9 million. At December 30, 2006, securitized accounts
receivable totaled $250.8 million, including $130.0 million sold to the financial institution and
derecognized from the consolidated balance sheet and the Residual Interest of $120.8 million. The
Residual Interest represents the Companys retained interest in receivables held by PFG Receivables
Corporation. The Residual Interest was measured using the estimated discounted cash flows of the
underlying accounts receivable based on estimated collections and a discount rate approximately
equivalent to the Companys incremental borrowing rate. The loss on sale of the undivided interest
in receivables of $7.7 million, $7.4 million and $5.2 million in 2007, 2006 and 2005, respectively,
is included in other expense, net, in the consolidated statements of earnings and represents the
Companys cost of securitizing those receivables with the financial institution.The Company records the sale of the undivided interest in accounts receivable to the financial
institution in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. Accordingly, at the time the undivided interest in
receivables is sold, the receivables are removed from the Companys consolidated balance sheet.
The Company records a loss on the sale of the undivided interest in these receivables, which
includes a discount, based upon the receivables credit quality and a financing cost for the
financial institution, based upon a 30-day commercial-paper rate. At December 29, 2007, the rate
under the Receivables Facility was 5.8% per annum.The key economic assumptions used to measure the Residual Interest at December 29, 2007 were a
discount rate of 6% and an estimated life of approximately 1.5 months. At December 29, 2007, an
immediate adverse change in the discount rate and estimated life of 10% and 20%, with other factors
remaining constant, would reduce the fair value of the Residual Interest with a corresponding
increase in the loss on sale of receivables but would not have a material impact on the Companys
consolidated financial position or results of operations.
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8. Concentration of Sales and Credit Risk
   9. Property, Plant and Equipment
  (In thousands)
    
    2007
    
    2006
    
    Range of LivesLand
    
    $
    16,838
    
    
    $
    15,783Buildings and building improvements
    
    
    245,671
    
    
    
    232,374
    
    
    15  39 yearsTransportation equipment
    
    
    10,937
    
    
    
    10,144
    
    
    7  12 yearsWarehouse and plant equipment
    
    
    55,063
    
    
    
    50,753
    
    
    3  10 yearsOffice equipment, furniture and fixtures
    
    
    75,310
    
    
    
    66,902
    
    
    3  10 yearsLeasehold improvements
    
    
    30,726
    
    
    
    21,478
    
    
    Lease termConstruction-in-process
    
    
    40,395
    
    
    
    26,910474,940
    
    
    
    424,344Less: accumulated depreciation and amortization
    
    
    (150,287
    )
    
    
    (132,397
    )Property, plant and equipment, net
    
    $
    324,653
    
    
    $
    291,947
  10. Long-term Debt
  (In thousands)
    
    2007
    
    2006Industrial Revenue Bonds
    
    $
    
    
    
    $
    2,642Other notes payable
    
    
    593
    
    
    
    605Long-term debt
    
    
    593
    
    
    
    3,247Capital lease obligation
    
    
    9,000
    
    
    
    9,000Total long-term debt
    
    
    9,593
    
    
    
    12,247Less: current installments
    
    
    (64
    )
    
    
    (583
    )Total long-term debt, excluding current installments
    
    $
    9,529
    
    
    $
    11,664
 Credit Facility
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Industrial Revenue Bonds
   (In thousands)2008
    
    $
    642009
    
    
    682010
    
    
    732011
    
    
    792012
    
    
    74Thereafter
    
    
    235Total long-term debt, excluding capital lease obligation
    
    $
    593
 Capital Lease Obligation
 Accounting for Leases
 11. Fair Value of Financial Instruments
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12. Leases
  (In thousands)2008
    
    $
    37,2752009
    
    
    32,2342010
    
    
    25,2772011
    
    
    21,1812012
    
    
    16,249Thereafter
    
    
    113,459Total minimum lease payments
    
    $
    245,675
   Sale-leaseback
 Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate
 13. Income Taxes
  (In thousands)
    
    2007
    
    2006
    
    2005Current:Federal
    
    $
    16,185
    
    
    $
    25,063
    
    
    $
    18,674State
    
    
    1,637
    
    
    
    5,145
    
    
    
    3,38517,822
    
    
    
    30,208
    
    
    
    22,059Deferred:Federal
    
    
    10,358
    
    
    
    (2,986
    )
    
    
    3,449State
    
    
    2,294
    
    
    
    (1,580
    )
    
    
    (180
    )12,652
    
    
    
    (4,566
    )
    
    
    3,269Total income tax expense
    
    $
    30,474
    
    
    $
    25,642
    
    
    $
    25,328
 63




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##### Table of Contents



(In thousands)
    
    2007
    
    2006
    
    2005Federal income taxes computed at statutory rate
    
    $
    28,560
    
    
    $
    23,990
    
    
    $
    23,482Increase (decrease) in income taxes resulting from:State income taxes, net of federal income tax benefit
    
    
    3,137
    
    
    
    1,879
    
    
    
    1,820Non-deductible expenses
    
    
    668
    
    
    
    1,198
    
    
    
    224Tax credits
    
    
    (1,267
    )
    
    
    (1,338
    )
    
    
    (332
    )Change in valuation allowance for deferred tax assets
    
    
    (348
    )
    
    
    (216
    )
    
    
    139Other, net
    
    
    (276
    )
    
    
    129
    
    
    
    (5
    )Total income tax expense
    
    $
    30,474
    
    
    $
    25,642
    
    
    $
    25,328
  (In thousands)
    
    2007
    
    2006Deferred tax assets:Allowance for doubtful accounts
    
    $
    1,514
    
    
    $
    2,853Inventories
    
    
    5,578
    
    
    
    5,673Accrued employee benefits
    
    
    7,839
    
    
    
    7,951Self-insurance reserves
    
    
    3,804
    
    
    
    3,868Deferred income
    
    
    963
    
    
    
    2,841Net operating loss carry-forwards
    
    
    3,205
    
    
    
    3,816State income tax credit carry-forwards
    
    
    402
    
    
    
    247Stock options
    
    
    3,815
    
    
    
    1,496Other accrued expenses
    
    
    4,488
    
    
    
    4,826Total gross deferred tax assets
    
    
    31,608
    
    
    
    33,571Less: Valuation allowance
    
    
    (651
    )
    
    
    (999
    )Total net deferred tax assets
    
    
    30,957
    
    
    
    32,572Deferred tax liabilities:Property, plant and equipment
    
    
    20,387
    
    
    
    16,704Basis difference in intangible assets
    
    
    40,383
    
    
    
    35,347Prepaid expenses
    
    
    3,605
    
    
    
    690Other
    
    
    3,066
    
    
    
    3,595Total deferred tax liabilities
    
    
    67,441
    
    
    
    56,336Net deferred tax liability
    
    $
    36,484
    
    
    $
    23,764
  (In thousands)
    
    2007
    
    2006Current deferred tax asset
    
    $
    22,463
    
    
    $
    24,818Non-current deferred tax liability
    
    
    58,947
    
    
    
    48,582Net deferred tax liability
    
    $
    36,484
    
    
    $
    23,764
   64




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##### Table of Contents



(In thousands)
    
    TotalBalance at adoption
    
    $
    6,942Settlements with taxing authorities
    
    
    (755
    )Expiration of statutes of limitations
    
    
    (1,718
    )Balance at December 29, 2007
    
    $
    4,469
    14. Shareholders Equity
 Share Repurchase and Retirement
   15. Retirement Plans
     65




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##### Table of Contents



16. Stock Based Compensation
 Accounting for
Stock Issued to Employees Accounting for Stock-Based Compensation
    Stock Option and Incentive Plans
   66




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##### Table of Contents



2007WeightedAverage Exercise(In thousands, except per share data)
    
    Shares
    
    Price(1)Outstanding at beginning of period
    
    
    2,863
    
    
    $
    27.75Granted
    
    
    225
    
    
    
    29.46Exercised
    
    
    (306
    )
    
    
    15.51Canceled
    
    
    (69
    )
    
    
    32.14Outstanding at end of period
    
    
    2,713
    
    
    $
    29.09Vested or
expected to vest at end of period(2)
    
    
    2,688
    
    
    $
    29.09Options exercisable at end of period
    
    
    2,103
    
    
    $
    29.01
 (1)
    
    Grant price for stock appreciation rights(2)
    
    Total outstanding less expected forfeitures
  67




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##### Table of Contents



(Number of shares in thousands)
    
    Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageShares Unexercised
    
    Contractual
    
    Exercise
    
    Exercisable at
    
    ExerciseRange of Exercise Prices
    
    
    
    
    
    
    
    at Dec. 29, 2007
    
    Life in Years
    
    Price(1)
    
    Dec. 29, 2007
    
    Price$  9.25
    -
    $ 18.44
    
    
    
    
    
    
    
    
    387
    
    
    
    1.87
    
    
    $
    12.29
    
    
    
    387
    
    
    $
    12.2918.45
    -
    28.48
    
    
    
    
    
    
    
    
    589
    
    
    
    5.18
    
    
    
    27.70
    
    
    
    384
    
    
    
    27.8728.49
    -
    31.82
    
    
    
    
    
    
    
    
    762
    
    
    
    6.91
    
    
    
    30.85
    
    
    
    387
    
    
    
    31.4831.83
    -
    34.58
    
    
    
    
    
    
    
    
    565
    
    
    
    5.80
    
    
    
    34.01
    
    
    
    535
    
    
    
    34.0934.59
    -
    41.15
    
    
    
    
    
    
    
    
    410
    
    
    
    4.47
    
    
    
    36.93
    
    
    
    410
    
    
    
    36.93$  9.25
    -
    41.15
    
    
    
    
    
    
    
    
    2,713
    
    
    
    5.21
    
    
    $
    29.09
    
    
    
    2,103
    
    
    $
    29.01
 (1)
    
    Grant price for stock appreciation rights
  2007Weighted AverageGrant Date(In thousands, except per share data)
    
    Shares
    
    Fair ValueNon-vested at beginning of period
    
    
    443
    
    
    $
    29.85Awarded
    
    
    259
    
    
    
    29.73Vested
    
    
    (20
    )
    
    
    30.81Forfeited
    
    
    (53
    )
    
    
    29.22Non-vested at end of period
    
    
    629
    
    
    $
    29.83
 68




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##### Table of Contents



Valuation of Stock Options and Stock Appreciation Rights
  2007Stock price (both Lattice and Black-Scholes)
    
    $
    29.46Exercise price (Lattice)
    
    $
    29.46Exercise price (Black-Scholes)
    
    $
    89.46Volatility (Lattice)
    
    
    31.31
    %Volatility (Black-Scholes)
    
    
    27.69
    %Dividend Yield
    
    
    0
    %Sub-optimal exercise factor
    
    
    2.83Risk-free interest rate (4 years)
    
    
    4.34
    %Risk-free interest rate (10 years)
    
    
    4.59
    %Expected
term - Black Scholes (in years)
    
    
    4Expected
term - Lattice (in years)
    
    
    10
  2006
    
    2005Dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    38.3
    %
    
    
    38.1
    %Risk-free interest rate
    
    
    4.9
    %
    
    
    4.0
    %Expected term (in years)
    
    
    8.3
    
    
    
    8.0Weighted average grant date fair value of stock options
    
    $
    15.99
    
    
    $
    13.99Weighted average grant date fair value of restricted stock
    
    $
    30.93
    
    
    $
    28.18
 Employee Stock Purchase Plan
 th th
 All Share-Based Compensation Plans
  69




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##### Table of Contents



Statement of Cash Flows,
 17. Supplemental Cash Flow Information
  (In thousands)
    
    2007
    
    2006
    
    2005Cash paid during the year for:Interest  continuing operations
    
    $
    1,506
    
    
    $
    1,010
    
    
    $
    3,209Interest  discontinued operations
    
    $
    183
    
    
    $
    
    
    
    $
    3,551Income taxes, net of refunds  continuing operations
    
    $
    24,356
    
    
    $
    14,284
    
    
    $
    23,829Income taxes, net of refunds  discontinued operations
    
    $
    160
    
    
    $
    14
    
    
    $
    163,332Effects of companies acquired:Fair value of assets acquired
    
    $
    
    
    
    $
    
    
    
    $
    3,917Net cash paid for acquisitions
    
    $
    
    
    
    $
    
    
    
    $
    3,917
 18. Commitments and Contingencies
  Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others,
  70




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##### Table of Contents



On January 18, 2008, January 22, 2008 and January 29,
2008, respectively, three of the Companys shareholders filed three separate class action
lawsuits against the Company and its individual directors in the Chancery Court for the State of
Tennessee, 20th Judicial District at Nashville styled as Crescente v. Performance Food
Group Company, et al.,Case No. 08-140-IV; Neel v. Performance Food Group Company, et al.,Case No.
08-151-II; and Friends of Ariel Center for Policy Research v. Sledd, et al.Case No. 08-224-II.
The allegations in all three suits arise from the Companys January 18, 2008, public announcement
of entering into a certain merger agreement by and among VISTAR Corporation, Panda Acquisition,
Inc. and the Company. VISTAR Corporation is a foodservice distributor controlled by affiliates of
The Blackstone Group with a minority interest held by an affiliate of
Wellspring Capital Management LLC. Two of the lawsuits also include The
Blackstone Group and Wellspring Capital Management as named defendants, and one includes VISTAR
Corporation as a named defendant. All three lawsuits were filed in the Chancery Court for the State of Tennessee,
specifically in the 20th Judicial District at Nashville.Each complaint asserts claims for breach of fiduciary duties against the Companys directors,
alleging, among other things, that the consideration to be paid to the Companys shareholders
pursuant to the merger agreement is unfair and inadequate, and not the result of a full and
adequate sale process, and that the Companys directors engaged in self-dealing. Two of the
complaints also allege aiding and abetting or undue control claims against The Blackstone Group,
Wellspring Capital Management LLC and VISTAR. The complaints each seek, among other relief, class
certification, an injunction preventing completion of the merger and attorneys fees and expenses.By order entered January 28, 2008, the Neel case was transferred to Chancery Court Part IV where
the Crescente case is pending. An agreed order has entered by
the Court on February 14, 2008 consolidating the Crescente and
Neel cases and appointing counsel for those plaintiffs as
co-lead counsel for the renamed consolidated matter, In re:
Performance Food Group Co. Shareholders Litigation,Case
No. 08-140-IV. On February 22, 2008, a motion to reconsider the
consolidation order was filed by Friends of Ariel Center for Policy
Research. That motion is scheduled to be heard on March 7, 2008.
Discovery requests have been served by the plaintiffs on the
defendants and various third parties.The Company intends to vigorously defend itself and its directors against these suits. The Company
currently believes these lawsuits will not have a materially adverse effect on its financial
condition or its results of operations.From time to time, the Company is involved in various legal proceedings and litigation arising in
the ordinary course of business. In the opinion of management, the outcome of such proceedings and
litigation currently pending will not have a material adverse effect on the Companys consolidated
financial condition or results of operations.19.
    
    Segment InformationThe Company markets and distributes food and non-food products to customers in the foodservice, or
food-away-from-home, industry. The Company has aggregated its subsidiaries into two segments, as
defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131) based upon their respective economic characteristics. The Broadline segment markets
and distributes food and non-food products to both street and chain customers. The Customized
segment services family and casual dining chain restaurants nationwide and internationally. As
discussed in Note 3, the sale of the Companys fresh-cut segment was completed in 2005 and, as
such, it is accounted for as a discontinued operation. The accounting policies of the segments are
the same as those described in Note 2. Inter-segment sales represent sales between the segments,
which are eliminated in consolidation.
 Corporate &(In thousands)
    
    Broadline
    
    Customized
    
    Intersegment
    
    Consolidated2007Net external sales
    
    $
    3,809,367
    
    
    $
    2,495,525
    
    
    $
    
    
    
    $
    6,304,892Inter-segment sales
    
    
    1,203
    
    
    
    247
    
    
    
    (1,450
    )
    
    
    Total sales
    
    
    3,810,570
    
    
    
    2,495,772
    
    
    
    (1,450
    )
    
    
    6,304,892Operating profit
    
    
    82,700
    
    
    
    33,551
    
    
    
    (29,083
    )
    
    
    87,168Interest expense (income)
    
    
    7,708
    
    
    
    4,766
    
    
    
    (13,633
    )
    
    
    (1,159
    )Loss (gain) on sale of receivables
    
    
    10,777
    
    
    
    3,213
    
    
    
    (6,255
    )
    
    
    7,735Depreciation
    
    
    19,575
    
    
    
    6,850
    
    
    
    254
    
    
    
    26,679Amortization
    
    
    3,009
    
    
    
    
    
    
    
    
    
    
    
    3,009Capital expenditures
    
    
    61,206
    
    
    
    13,603
    
    
    
    122
    
    
    
    74,931
 71




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##### Table of Contents



Corporate &(In thousands)
    
    Broadline
    
    Customized
    
    Intersegment
    
    Consolidated2006Net external sales
    
    $
    3,478,206
    
    
    $
    2,348,526
    
    
    $
    
    
    
    $
    5,826,732Inter-segment sales
    
    
    527
    
    
    
    212
    
    
    
    (739
    )
    
    
    Total sales
    
    
    3,478,733
    
    
    
    2,348,738
    
    
    
    (739
    )
    
    
    5,826,732Operating profit
    
    
    71,619
    
    
    
    30,736
    
    
    
    (27,245
    )
    
    
    75,110Interest expense (income)
    
    
    15,394
    
    
    
    5,864
    
    
    
    (21,690
    )
    
    
    (432
    )Loss (gain) on sale of receivables
    
    
    9,937
    
    
    
    3,038
    
    
    
    (5,624
    )
    
    
    7,351Depreciation
    
    
    18,969
    
    
    
    6,294
    
    
    
    294
    
    
    
    25,557Amortization
    
    
    3,312
    
    
    
    
    
    
    
    
    
    
    
    3,312Capital expenditures
    
    
    48,206
    
    
    
    5,172
    
    
    
    310
    
    
    
    53,6882005Net external sales
    
    $
    3,480,793
    
    
    $
    2,240,579
    
    
    $
    
    
    
    $
    5,721,372Inter-segment sales
    
    
    653
    
    
    
    223
    
    
    
    (876
    )
    
    
    Total sales
    
    
    3,481,446
    
    
    
    2,240,802
    
    
    
    (876
    )
    
    
    5,721,372Operating profit
    
    
    71,723
    
    
    
    24,981
    
    
    
    (26,226
    )
    
    
    70,478Interest expense (income)
    
    
    16,970
    
    
    
    2,963
    
    
    
    (21,338
    )
    
    
    (1,405
    )Loss (gain) on sale of receivables
    
    
    7,832
    
    
    
    2,849
    
    
    
    (5,525
    )
    
    
    5,156Depreciation
    
    
    17,341
    
    
    
    5,174
    
    
    
    303
    
    
    
    22,818Amortization
    
    
    3,562
    
    
    
    
    
    
    
    
    
    
    
    3,562Capital expenditures
    
    
    29,212
    
    
    
    48,252
    
    
    
    112
    
    
    
    77,576
  (In thousands)
    
    2007
    
    2006Broadline
    
    $
    943,460
    
    
    $
    901,752Customized
    
    
    289,450
    
    
    
    261,975Corporate & Intersegment
    
    
    219,130
    
    
    
    196,048Total assets
    
    $
    1,452,040
    
    
    $
    1,359,775
  (In thousands)
    
    2007
    
    2006
    
    2005Center-of-the-plate
    
    $
    2,554,373
    
    
    $
    2,393,103
    
    
    $
    2,393,658Frozen foods
    
    
    1,167,347
    
    
    
    1,003,986
    
    
    
    981,013Canned and dry groceries
    
    
    1,005,830
    
    
    
    1,040,222
    
    
    
    1,006,854Refrigerated and dairy products
    
    
    717,599
    
    
    
    576,892
    
    
    
    576,908Paper products and cleaning supplies
    
    
    466,388
    
    
    
    432,547
    
    
    
    417,375Produce
    
    
    260,498
    
    
    
    223,954
    
    
    
    198,337Procurement, merchandising and other services
    
    
    71,270
    
    
    
    116,801
    
    
    
    107,115Equipment and supplies
    
    
    61,587
    
    
    
    39,227
    
    
    
    40,112Total
    
    $
    6,304,892
    
    
    $
    5,826,732
    
    
    $
    5,721,372
 72




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##### Table of Contents



20.
    
    Subsequent EventsMerger Agreement with VISTAR CorporationOn January 18, 2008, the Company entered into an agreement and plan of merger with VISTAR
Corporation, a Colorado corporation (VISTAR) and Panda Acquisition, Inc., a wholly owned
subsidiary of VISTAR. VISTAR is a food distributor specializing in the areas of Italian, pizza,
vending, office coffee, concessions, fundraising and theater markets,
controlled by private investment
funds affiliated with The Blackstone Group with a minority interest
held by an affiliate of Wellspring Capital Management LLC.At the effective time of the merger, each outstanding share of the Companys common stock will be
cancelled and converted into the right to receive $34.50 in cash,
without interest and subject to applicable withholding requirements. At the
effective time of the merger, each outstanding stock option and stock appreciation right, whether
vested or unvested, shall become fully vested and exercisable and all restricted shares under the
Companys equity plans shall become fully vested. Each holder of
an outstanding stock option or stock
appreciation right as of the effective time shall be entitled to receive in exchange for the
cancellation of such stock option or stock appreciation right an amount in cash equal to the
product of (i) the difference between the $34.50 per share consideration and the applicable
exercise price of such stock option or grant price of such stock appreciation right and (ii) the
aggregate number of shares issuable upon exercise of such stock option or the number of shares with
respect to which such stock appreciation right was granted, without
interest and subject to applicable withholding
requirements and any appreciation cap set forth in such stock appreciation right.Consummation of the merger is subject to various closing conditions, including approval of the
merger agreement by the Companys shareholders, expiration or termination of applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and other customary
closing conditions. The Company expects to close the transaction during the second quarter of
2008. In connection with the proposed merger, the Company suspended the offering period under its
Stock Purchase Plan on January 18, 2008. No new shares will be issued under this plan if the
merger is consummated. See Note 16 for details of this plan.Subsequent to the announcement of the planned merger, three of the Companys shareholders filed
three separate class action lawsuits against the Company and its directors. See Note 18 for
additional details.Magee, Mississippi Broadline Facility ClosingOn January 9, 2008, the Companys Board of Directors authorized the closure of the Magee,
Mississippi Broadline distribution facility. In connection with the closure of this facility, the
Company expects to incur one-time costs during 2008 in the range of approximately $8 million to
$10 million on a pre-tax basis. The Company expects that the facility will be closed on or about
March 10, 2008. Within the range of expected costs, the Company anticipates that it will incur
costs of between $1.5 million and $2.0 million related to severance pay and stay bonuses; $5.0
million to $6.0 million related to real estate valuation reserves and facility lease payments and
$1.5 million to $2.0 million for other expenses that include the write-down of assets and costs to
consolidate facilities. The Company estimates approximately $2.0 million to $2.5 million of this
charge will be cash expenditures incurred during 2008.
 73




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Report of Independent Registered Public Accounting Firm
 
   /s/ KPMG LLP 
 74




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PERFORMANCE FOOD GROUP COMPANY AND SUBSIDIARIES
 
 VALUATION AND QUALIFYING ACCOUNTS
 (In thousands)
    
    Beginning Balance
    
    Additions(1)
    
    Deductions
    
    Ending BalanceAllowance for Doubtful AccountsDecember 31, 2005
    
    $
    8,682
    
    
    
    8,415
    
    
    
    9,278
    
    
    $
    7,819December 30, 2006
    
    $
    7,819
    
    
    
    5,558
    
    
    
    6,413
    
    
    $
    6,964December 29, 2007
    
    $
    6,964
    
    
    
    10,171
    
    
    
    5,978
    
    
    $
    11,157
 
 (1)
    
    Includes provisions and recoveries 75