##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-K
 ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the fiscal year ended December 31, 2005
 Commission File No.: 0-22192
 PERFORMANCE FOOD GROUP COMPANY
  Tennessee
    
    54-0402940(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)12500 West Creek Parkway
Richmond, Virginia
    
    23238(Address of Principal
Executive Offices)
    
    (Zip Code)
 
 
  Rights to Purchase
Preferred Stock
  þ Yes
    
    o No
  o Yes
    
    þ No
  þ Yes
    
    o No
   þ Large accelerated filer
    
    o Accelerated filer
    
    o Non-accelerated filer
  o Yes
    
    þ No
   DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K
    
    Documents from which portions are incorporated by referencePart III
    
    Portions of the registrants Proxy Statement relating to the registrants Annual Meeting of Shareholders to be held
on May 16, 2006 are incorporated by reference into Items 10, 11, 12, 13 and 14.




---



##### 



Forward-Looking Statements
    
    
    3Part IItem 1. Business
    
    
    3The Company and its Business Strategy
    
    
    3Growth Strategies
    
    
    4Customers and Marketing
    
    
    5Products and Services
    
    
    6Information Systems
    
    
    7Suppliers and Purchasing
    
    
    8Operations
    
    
    8Competition
    
    
    10Regulation
    
    
    10Intellectual Property
    
    
    10Employees
    
    
    11Executive Officers
    
    
    11Item 1A. Risk Factors
    
    
    12Item 1B. Unresolved Staff Comments
    
    
    15Item 2. Properties
    
    
    15Item 3. Legal Proceedings
    
    
    16Item 4. Submission of Matters to a Vote of Shareholders
    
    
    16Part IIItem 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    17Item 6. Selected Consolidated Financial Data
    
    
    19Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 8. Financial Statements and Supplementary Data
    
    
    33Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    33Item 9A. Controls and Procedures
    
    
    33Item 9B. Other Information
    
    
    34Part IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    35Item 11. Executive Compensation
    
    
    35Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    35Item 13. Certain Relationships and Related Transactions
    
    
    35Item 14. Principal Accountants Fees and Services
    
    
    35Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    36EX-10.35  DIRECTOR COMPENSATION SUMMARYEX-21  LIST OF SUBSIDIARIESEX-23.1  CONSENT OF PUBLIC ACCOUNTING FIRMEX-31.1  SECTION 302 CEO CERTIFICATIONEX-31.2  SECTION 302 CFO CERTIFICATIONEX-32.1  SECTION 906 CEO AND CFO CERTIFICATION
  2




---



##### Table of Contents



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




---



##### Table of Contents



Customized
  
 Growth Strategies
   Increase Broadline sales to existing customers and within existing markets.
  Increase sales to street customers.
 Improve category management.
  4




---



##### Table of Contents



Grow our Customized segment with existing and selected new customers.
 Improve operating efficiencies through systems and technology. ®
 Actively pursue strategic acquisitions.
 
 Customers and Marketing
  Street Customers
  Chain Customers
  5




---



##### Table of Contents



Products and Services
  Proprietary brands
  National brands
  Value-added services
  6




---



##### Table of Contents



Percentage
of Net
Sales(1)2005
    
    
    2004
    
    
    2003Center-of-the-plate
    
    
    42
    %
    
    
    42
    %
    
    
    39
    %Canned and dry groceries
    
    
    18
    
    
    
    18
    
    
    
    20Frozen foods
    
    
    17
    
    
    
    17
    
    
    
    15Refrigerated and dairy products
    
    
    10
    
    
    
    10
    
    
    
    11Paper products and cleaning supplies
    
    
    7
    
    
    
    7
    
    
    
    8Produce
    
    
    3
    
    
    
    4
    
    
    
    4Procurement, merchandising and other services
    
    
    2
    
    
    
    1
    
    
    
    2Equipment and supplies
    
    
    1
    
    
    
    1
    
    
    
    1Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
 
 Information Systems
 ® ®
    7




---



##### Table of Contents



Suppliers and Purchasing
   
 Operations
   8




---



##### Table of Contents



Approx.Number ofCustomerLocationsLocation of
    
    CurrentlyName of Subsidiary/Division
    
    Principal Region(s)
    
    Facilities
    
    Served
    
    Major CustomersBroadline:AFFLINK
    
    Nationwide
    
    Tuscaloosa, AL
    
    
    600
    
    
    Independent paper distributorsPFG  AFI Foodservice
    
    New Jersey and New
York City
metropolitan area
    
    Elizabeth, NJ
    
    
    3,300
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Batesville
    
    Mississippi
    
    Batesville, MS
    
    
    1,500
    
    
    Subway and other restaurants,
healthcare facilities and
schoolsPFG  Caro Foods
    
    South
    
    Houma, LA
    
    
    1,800
    
    
    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
    
    
    2,000
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Empire Seafood
    
    Florida
    
    Miami, FL
    
    
    5,200
    
    
    Cruise lines and restaurantsPFG  Florida
    
    Florida
    
    Tampa, FL
    
    
    1,800
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Hale
    
    Kentucky, Tennessee
and Virginia
    
    Morristown, TN
    
    
    1,600
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Lester
    
    South
    
    Lebanon, TN
    
    
    2,500
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Little Rock
    
    Arkansas, Missouri,
Oklahoma, Tennessee
and Texas
    
    Little Rock, AR
    
    
    6,100
    
    
    Subway and other restaurants,
healthcare facilities and
schoolsPFG  Magee
    
    Louisiana and
Mississippi
    
    Magee, MS
    
    
    1,900
    
    
    Subway and other restaurants,
healthcare facilities and
schoolsPFG  Middendorf
    
    St. Louis, Missouri
and surrounding
areas
    
    St. Louis, MO
    
    
    2,200
    
    
    Restaurants, clubs, hotels
and other foodservice
facilitiesPFG  Miltons
    
    South and Southeast
    
    Atlanta, GA
    
    
    5,900
    
    
    Copelands, Subway, Zaxbys
and other restaurants,
healthcare facilities and
schoolsPFG  NorthCenter
    
    Maine,
Massachusetts and
New Hampshire
    
    Augusta, ME
    
    
    5,900
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Powell
    
    Alabama, Florida
and Georgia
    
    Thomasville, GA
    
    
    800
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Progressive Group Alliance
    
    Nationwide
    
    Boise, ID
Richmond, VA
    
    
    400
    
    
    Independent foodservice
distributors and vendorsPFG  Springfield
    
    New England and
portions of New
York State
    
    Springfield, MA
    
    
    3,300
    
    
    Restaurants, healthcare
facilities and schoolsPFG  Temple, TX
    
    South and Southwest
    
    Temple, TX
    
    
    4,300
    
    
    Churchs, Dairy Queen, KFC,
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
    
    
    5,900
    
    
    Restaurants, healthcare
facilities and schools
 9




---



##### Table of Contents



Approx.Number ofCustomerLocationsLocation of
    
    CurrentlyName of Subsidiary/Division
    
    Principal Region(s)
    
    Facilities
    
    Served
    
    Major CustomersPFG  Victoria
    
    South and Southwest
    
    Victoria, TX
    
    
    2,500
    
    
    Subway and other restaurants,
healthcare facilities and
schoolsPFG  Virginia Foodservice
    
    Virginia
    
    Richmond, VA
    
    
    1,900
    
    
    Copelands, Texas Steakhouse
and other restaurants and
healthcare facilitiesCustomized
    
    Nationwide
    
    Bakersfield, CA
Elkton, MD
Rock Hill, SC
    
    
    3,300
    
    
    Cracker Barrel, Outback
Steakhouse, Ruby Tuesday,
T.G.I. Fridays, and other
casual-dining restaurantsGainesville, FLKendallville, INLebanon, TNMcKinney, TXWestampton, NJ
 
 Competition
  
 Regulation
     
 Intellectual Property
 ®
 10




---



##### Table of Contents



Employees
  
 Executive Officers
  Name
    
    Age
    
    PositionRobert C. Sledd
    
    
    53
    
    
    Chairman and Chief Executive OfficerSteven Spinner
    
    
    46
    
    
    President and Chief Operating OfficerThomas Hoffman
    
    
    66
    
    
    Senior Vice President, Chief Executive Officer  Customized DivisionJohn D. Austin
    
    
    44
    
    
    Senior Vice President and Chief Financial OfficerJoseph J. Traficanti
    
    
    54
    
    
    Senior Vice President, General Counsel, Chief Compliance Officer, Corporate SecretaryCharlotte L. Perkins
    
    
    47
    
    
    Chief Human Resources OfficerJ. Keith Middleton
    
    
    39
    
    
    Senior Vice President and Controller
 Robert C. Sledd
 Steven Spinner
 Thomas Hoffman
 John D. Austin
 Joseph J. Traficanti
 Charlotte L. Perkins
 11




---



##### Table of Contents



J. Keith Middleton
 Available Information
 www.pfgc.com
 
 Item 1A. Risk Factors.
 Foodservice distribution is a low-margin business and may be sensitive to economic conditions.
 We rely on major customers.
 Our growth is dependent on our ability to complete acquisitions and integrate operations of
acquired businesses.
  12




---



##### Table of Contents



Managing our growth may be difficult and our growth rate may decline.
 Our
debt 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.
 13




---



##### Table of Contents



Competition in our industry is intense, and we may not be able to compete successfully.
 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;
    
    changes in general conditions in the economy, the financial markets or the food
distribution or foodservice industries;
    
    the results of the informal inquiry of the Securities and Exchange Commission, or SEC,
into certain alleged accounting improprieties at one of our Broadline operating
subsidiaries and the alleged improper transfer of inventory within the Broadline segment;
    
    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 our competitors or us.
  An adverse outcome of the SECs informal inquiry into anonymous allegations questioning certain
accounting practices at one of our Broadline operating subsidiaries and the alleged improper
transfer of inventory within the Broadline segment, and any claims made with respect thereto could
have a material adverse effect on us.
 14




---



##### Table of Contents



Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  Owned/LeasedApprox. Area
    
    
    
    (Expiration DateLocation
    
    In Square Feet
    
    Operating Segment
    
    if Leased)AFFLINK
Tuscaloosa, AL
    
    
    45,000
    
    
    Broadline
    
    Leased (2016)PFG  AFI FoodserviceElizabeth, NJ
    
    
    160,000
    
    
    Broadline
    
    Leased (2023)Newark, NJ
    
    
    21,000
    
    
    Broadline
    
    Leased (2007)PFG  BatesvilleBatesville, MS
    
    
    183,000
    
    
    Broadline
    
    OwnedPFG  Caro FoodsHouma, LA
    
    
    157,000
    
    
    Broadline
    
    OwnedPFG  Carroll County FoodsNew Windsor, MD
    
    
    98,000
    
    
    Broadline
    
    OwnedPFG  CustomizedBakersfield, 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
    
    
    287,000
    
    
    Customized
    
    OwnedMcKinney, TX
    
    
    194,000
    
    
    Customized
    
    OwnedWestampton, NJ
    
    
    122,000
    
    
    Customized
    
    Leased (2012)PFG  Empire SeafoodMiami, FL
    
    
    66,000
    
    
    Broadline
    
    Leased (2006)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)PFG  MiddendorfSt. Louis, MO
    
    
    96,000
    
    
    Broadline
    
    OwnedPFG  MiltonsAtlanta, GA
    
    
    260,000
    
    
    Broadline
    
    OwnedPFG  NorthCenterAugusta, ME
    
    
    145,000
    
    
    Broadline
    
    OwnedPFG  PowellThomasville, GA
    
    
    75,000
    
    
    Broadline
    
    OwnedProgressive Group AllianceBoise, ID
    
    
    8,000
    
    
    Broadline
    
    Leased (2009)Richmond, VA
    
    
    33,000
    
    
    Broadline
    
    Leased (2024)
 15




---



##### Table of Contents



Owned/LeasedApprox. Area
    
    
    
    (Expiration DateLocation
    
    In Square Feet
    
    Operating Segment
    
    if Leased)PFG  RichmondRichmond, VA
    
    
    91,000
    
    
    Corporate
    
    Leased (2025)PFG  SpringfieldSpringfield, MA
    
    
    127,000
    
    
    Broadline
    
    OwnedPFG  Temple, TexasTemple, TX
    
    
    290,000
    
    
    Broadline
    
    Leased (2025)PFG  Thoms-ProestlerCompanyRock Island, IL
    
    
    256,000
    
    
    Broadline
    
    OwnedPFG  VictoriaVictoria, TX
    
    
    250,000
    
    
    Broadline
    
    OwnedPFG  Virginia FoodserviceRichmond, VA
    
    
    182,000
    
    
    Broadline
    
    Leased (2024)
 
 Item 3. Legal Proceedings.
     
 Item 4. Submission of Matters to a Vote of Shareholders.
  16




---



##### Table of Contents



PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
  2005High
    
    LowFirst Quarter
    
    $
    29.56
    
    
    $
    23.77Second Quarter
    
    
    30.41
    
    
    
    25.85Third Quarter
    
    
    31.96
    
    
    
    28.20Fourth Quarter
    
    
    32.25
    
    
    
    26.96For the Year
    
    
    32.25
    
    
    
    23.77
 2004High
    
    LowFirst Quarter
    
    $
    38.14
    
    
    $
    30.14Second Quarter
    
    
    35.92
    
    
    
    25.57Third Quarter
    
    
    27.25
    
    
    
    20.97Fourth Quarter
    
    
    27.15
    
    
    
    21.73For the Year
    
    
    38.14
    
    
    
    20.97
 17




---



##### Table of Contents



Total Number of
    
    
    Maximum Number (orShares Purchased
    
    
    Approximate Dollar Value)Total Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    of Shares that May Yet beof Shares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Purchased Under the PlansPeriod
    
    Repurchased
    
    
    per Share
    
    
    or Programs
    
    
    or
Programs(1)October 2, 2005 to
    
    
    
    
    
    
    
    
    
    
    
    
    
    $100.0 millionOctober 30, 2005October 31, 2005 to
    
    
    718,657
    
    
    $
    27.89
    
    
    
    718,657
    
    
    $80.0 millionNovember 26, 2005November 27, 2005
    
    
    1,376,608
    
    
    $
    29.26
    
    
    
    1,376,608
    
    
    $39.7 millionto December 31,
2005Total
    
    
    2,095,265
    
    
    $
    28.79
    
    
    
    2,095,265
    
    
    $39.7 million
 
 (1)
    
    On August 24, 2005, we announced that our
Board of Directors had authorized the repurchase of up to $100 million of our
common stock in either the open market or through private transactions. As of
December 31, 2005, 2,095,265 shares had been repurchased at prices ranging
from $27.55 to $30.17. Approximately $39.7 million remained available to
repurchase shares under this program which does not have an expiration date.
See Subsequent Events disclosures in this Form 10-K for
information pertaining to the completion of this repurchase. 18




---



##### Table of Contents



Item 6. Selected Consolidated Financial Data (1) (2)
 (Dollar amounts in thousands, except pershare amounts)
    
    2005
    
    2004(3)
    
    2003(3)
    
    2002(3)
    
    2001(3)STATEMENT OF EARNINGS DATA:Net sales
    
    $
    5,721,372
    
    
    $
    5,173,078
    
    
    $
    4,602,792
    
    
    $
    3,613,724
    
    
    $
    2,876,682Cost of goods sold
    
    
    4,973,966
    
    
    
    4,496,117
    
    
    
    3,982,182
    
    
    
    3,123,403
    
    
    
    2,509,380Gross profit
    
    
    747,406
    
    
    
    676,961
    
    
    
    620,610
    
    
    
    490,321
    
    
    
    367,302Operating expenses
    
    
    676,928
    
    
    
    613,281
    
    
    
    548,285
    
    
    
    433,166
    
    
    
    321,345Operating profit
    
    
    70,478
    
    
    
    63,680
    
    
    
    72,325
    
    
    
    57,155
    
    
    
    45,957Other income (expense):Interest income
    
    
    4,651
    
    
    
    340
    
    
    
    280
    
    
    
    724
    
    
    
    536Interest expense
    
    
    (3,246
    )
    
    
    (8,274
    )
    
    
    (9,845
    )
    
    
    (9,544
    )
    
    
    (3,205
    )Loss on sale of receivables
    
    
    (5,156
    )
    
    
    (2,421
    )
    
    
    (1,765
    )
    
    
    (1,832
    )
    
    
    (1,445
    )Loss on redemption of convertible notes
    
    
    
    
    
    
    (10,127
    )
    
    
    
    
    
    
    
    
    
    
    Other, net
    
    
    365
    
    
    
    141
    
    
    
    14
    
    
    
    98
    
    
    
    (148
    )Other expense, net
    
    
    (3,386
    )
    
    
    (20,341
    )
    
    
    (11,316
    )
    
    
    (10,554
    )
    
    
    (4,262
    )Earnings from continuing operations
before income taxes
    
    
    67,092
    
    
    
    43,339
    
    
    
    61,009
    
    
    
    46,601
    
    
    
    41,695Income tax expense from continuing operations
    
    
    25,328
    
    
    
    16,781
    
    
    
    23,206
    
    
    
    17,554
    
    
    
    16,251Earnings from continuing operations, net of tax
    
    
    41,764
    
    
    
    26,558
    
    
    
    37,803
    
    
    
    29,047
    
    
    
    25,444Earnings from discontinued operations, net of tax
    
    
    205,374
    
    
    
    26,000
    
    
    
    36,388
    
    
    
    37,429
    
    
    
    15,039Net earnings
    
    $
    247,138
    
    
    $
    52,558
    
    
    $
    74,191
    
    
    $
    66,476
    
    
    $
    40,483PER SHARE DATA:Weighted average common shares outstanding:Basic
    
    
    43,233
    
    
    
    46,398
    
    
    
    45,583
    
    
    
    44,445
    
    
    
    37,957Diluted
    
    
    43,795
    
    
    
    47,181
    
    
    
    53,002
    
    
    
    52,047
    
    
    
    39,328Basic net earnings per common share:Continuing operations
    
    $
    0.97
    
    
    $
    0.57
    
    
    $
    0.83
    
    
    $
    0.66
    
    
    $
    0.67Discontinued operations
    
    
    4.75
    
    
    
    0.56
    
    
    
    0.80
    
    
    
    0.84
    
    
    
    0.40Net earnings
    
    $
    5.72
    
    
    $
    1.13
    
    
    $
    1.63
    
    
    $
    1.50
    
    
    $
    1.07Diluted net earnings per common share:Continuing operations
    
    $
    0.95
    
    
    $
    0.56
    
    
    $
    0.80
    
    
    $
    0.65
    
    
    $
    0.65Discontinued operations
    
    
    4.69
    
    
    
    0.55
    
    
    
    0.74
    
    
    
    0.77
    
    
    
    0.38Net earnings
    
    $
    5.64
    
    
    $
    1.11
    
    
    $
    1.54
    
    
    $
    1.42
    
    
    $
    1.03Book value per share (4)
    
    $
    21.82
    
    
    $
    18.69
    
    
    $
    17.53
    
    
    $
    15.79
    
    
    $
    13.90Closing price per share
    
    $
    28.37
    
    
    $
    26.91
    
    
    $
    35.75
    
    
    $
    33.73
    
    
    $
    36.10BALANCE SHEET AND OTHER DATA:Working capital (5)
    
    $
    143,194
    
    
    $
    84,824
    
    
    $
    112,951
    
    
    $
    81,082
    
    
    $
    69,755Property, plant and equipment, net
    
    
    255,816
    
    
    
    201,248
    
    
    
    182,842
    
    
    
    146,276
    
    
    
    114,670Depreciation and amortization
    
    
    26,380
    
    
    
    24,996
    
    
    
    23,706
    
    
    
    21,146
    
    
    
    18,797Capital expenditures
    
    
    77,576
    
    
    
    40,635
    
    
    
    56,973
    
    
    
    20,785
    
    
    
    22,145Total assets
    
    
    1,312,290
    
    
    
    1,827,765
    
    
    
    1,736,468
    
    
    
    1,617,717
    
    
    
    1,277,791Current debt (including current installments
of long-term debt)
    
    
    573
    
    
    
    661
    
    
    
    875
    
    
    
    1,513
    
    
    
    873Long-term debt
    
    
    3,250
    
    
    
    263,859
    
    
    
    338,919
    
    
    
    354,620
    
    
    
    254,113Shareholders equity
    
    
    776,517
    
    
    
    874,313
    
    
    
    803,815
    
    
    
    714,869
    
    
    
    608,197Total capital
    
    
    780,340
    
    
    
    1,138,833
    
    
    
    1,143,609
    
    
    
    1,071,002
    
    
    
    863,183Debt-to-capital ratio(6)
    
    
    0.5
    %
    
    
    23.2
    %
    
    
    29.7
    %
    
    
    33.3
    %
    
    
    29.5
    %Return on equity (7)
    
    
    4.7
    %
    
    
    3.2
    %
    
    
    5.0
    %
    
    
    4.4
    %
    
    
    5.8
    %Price/earnings ratio (8)
    
    
    29.9
    
    
    
    24.2
    
    
    
    23.2
    
    
    
    23.8
    
    
    
    35.0
 (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 for additional information about these acquisitions.
 19




---



##### Table of Contents



(2)
    
    We adopted Statement of Financial Accounting Standards, or SFAS, No. 142, Goodwill and Other Intangible Assets, at the beginning of 2002.
As a result, operating expenses in 2005, 2004, 2003 and 2002 do not include amortization expense on goodwill and other intangible assets
with indefinite lives. For further details of the impact of the adoption of SFAS No. 142, see Note 2 to our consolidated financial
statements included elsewhere in this Form 10-K.(3)
    
    2004, 2003, 2002 and 2001 amounts have been restated to remove discontinued operations to conform with 2005 presentation.(4)
    
    Book value per share is calculated by dividing shareholders equity by the number of common shares outstanding at the end of the fiscal year.(5)
    
    In July 2001, we entered into a receivables purchase
facility under which we have sold, and in the future intend to sell, undivided interests
in some of our receivables to a financial institution. These sales have resulted in lower current assets and working capital since July
2001. For additional information on the receivables purchase facility, see Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources and Note 7 to our consolidated financial statements included elsewhere in this Form
10-K.(6)
    
    The debt-to-capital ratio is calculated by dividing total debt by the sum of total debt and shareholders equity.(7)
    
    Return on equity is calculated by dividing net earnings of continuing operations by average shareholders equity. Return on equity for 2001
has been adjusted for the impact of the common stock offering completed in October 2001.(8)
    
    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 2005 and by consolidated diluted net earnings per share (including
both continuing operations and discontinued operations) in 2004, 2003, 2002 and 2001.
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
  Overview
        20




---



##### Table of Contents



Sale of Fresh-cut Segment
 Accounting for the Impairment or
Disposal of Long-Lived Assets
 Results of Operations
 Net sales
 2005
    
    2004
    
    2003Net
    
    % of
    
    Net
    
    % of
    
    Net
    
    % of(In thousands)
    
    Sales
    
    total
    
    Sales
    
    total
    
    Sales
    
    totalBroadline
    
    $
    3,481,446
    
    
    
    60.8
    %
    
    $
    3,121,306
    
    
    
    60.3
    %
    
    $
    2,805,977
    
    
    
    61.0
    %Customized
    
    
    2,240,802
    
    
    
    39.2
    %
    
    
    2,052,880
    
    
    
    39.7
    %
    
    
    1,798,219
    
    
    
    39.0
    %Inter-segment*
    
    
    (876
    )
    
    
    
    
    
    
    (1,108
    )
    
    
    
    
    
    
    (1,404
    )
    
    
    Total net sales
    
    $
    5,721,372
    
    
    
    100.0
    %
    
    $
    5,173,078
    
    
    
    100.0
    %
    
    $
    4,602,792
    
    
    
    100.0
    %
  Consolidated.
 Broadline.
    21




---



##### Table of Contents



Customized.
   Cost of goods sold
  Broadline.
 Customized.
 Gross profit
  Operating expenses
 Consolidated.
 Broadline.
 Customized.
 22




---



##### Table of Contents



Corporate.
 Operating profit
 2005
    
    2004
    
    2003Operating
    
    % of
    
    Operating
    
    % of
    
    Operating
    
    % of(In thousands)
    
    Profit
    
    Sales
    
    Profit
    
    Sales
    
    Profit
    
    SalesBroadline
    
    $
    76,789
    
    
    
    2.2
    %
    
    $
    70,196
    
    
    
    2.2
    %
    
    $
    69,664
    
    
    
    2.5
    %Customized
    
    
    24,981
    
    
    
    1.1
    %
    
    
    21,538
    
    
    
    1.0
    %
    
    
    19,704
    
    
    
    1.1
    %Corporate and inter-segment
    
    
    (31,292
    )
    
    
    
    
    
    
    (28,054
    )
    
    
    
    
    
    
    (17,043
    )
    
    
    Total operating profit
    
    $
    70,478
    
    
    
    1.2
    %
    
    $
    63,680
    
    
    
    1.2
    %
    
    $
    72,325
    
    
    
    1.6
    %
 Consolidated.
 Broadline.
 Customized.
 Other expense, net
   23




---



##### Table of Contents



Income tax expense
  Earnings from continuing operations
  Diluted net earnings
  Liquidity and Capital Resources
   24




---



##### Table of Contents



Operating activities of continuing operations
    Investing activities of continuing operations
    Financing activities of continuing operations
  25




---



##### Table of Contents



(In thousands)
    
    Payments Due By Period1 Year and
    
    Years 2 and
    
    Years 4
    
    More ThanContractual Obligations
    
    Total
    
    Less
    
    3
    
    and 5
    
    5 YearsLong-term debt obligations
(including capital leases)
    
    $
    3,823
    
    
    $
    573
    
    
    $
    1,209
    
    
    $
    1,382
    
    
    $
    659Operating lease obligations
    
    
    253,665
    
    
    
    35,486
    
    
    
    58,112
    
    
    
    40,078
    
    
    
    119,989Purchase obligations
    
    
    16,649
    
    
    
    16,649
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    274,137
    
    
    $
    52,708
    
    
    $
    59,321
    
    
    $
    41,460
    
    
    $
    120,648
  26




---



##### Table of Contents



Discontinued Operations
 Allocation of Interest to Discontinued Operations,
 Off Balance Sheet Activities
   27




---



##### Table of Contents



Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities
 Business Combinations
    28




---



##### Table of Contents



Application of Critical Accounting Policies
  Allowance For Doubtful Accounts.
 Inventory Valuation.
 Goodwill and Other Intangible Assets.
   29




---



##### 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
   Income Taxes. Accounting for Income
Taxes
  30




---



##### Table of Contents



Recently Issued Accounting Pronouncements
 Inventory Costs, an Amendment of ARB No. 43,
Chapter 4.
 Share-Based Payment Accounting for Stock Issued to
Employees, Statement
of Cash Flows
   Subsequent Events
  31




---



##### Table of Contents



Quarterly Results And Seasonality
  2005(In thousands, except per share amounts)
    
    1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th QuarterNet sales
    
    $
    1,422,807
    
    
    $
    1,456,735
    
    
    $
    1,401,780
    
    
    $
    1,440,050Gross profit
    
    
    179,916
    
    
    
    189,392
    
    
    
    185,868
    
    
    
    192,230Operating profit
    
    
    9,426
    
    
    
    21,951
    
    
    
    17,623
    
    
    
    21,478Earnings from continuing operations before
income taxes
    
    
    7,611
    
    
    
    19,817
    
    
    
    19,206
    
    
    
    20,457Earnings from continuing operations
    
    
    4,683
    
    
    
    12,246
    
    
    
    11,911
    
    
    
    12,923Earnings (loss) from discontinued operations
    
    
    9,012
    
    
    
    191,549
    
    
    
    (464
    )
    
    
    5,278Net earnings
    
    $
    13,695
    
    
    $
    203,795
    
    
    $
    11,447
    
    
    $
    18,201Basic earnings (loss) per common share:Continuing operations
    
    $
    0.10
    
    
    $
    0.26
    
    
    $
    0.28
    
    
    $
    0.35Discontinued operations
    
    
    0.19
    
    
    
    4.08
    
    
    
    (0.01
    )
    
    
    0.14Net earnings
    
    $
    0.29
    
    
    $
    4.34
    
    
    $
    0.27
    
    
    $
    0.49Diluted earnings (loss) per common share:Continuing operations
    
    $
    0.10
    
    
    $
    0.26
    
    
    $
    0.28
    
    
    $
    0.35Discontinued operations
    
    
    0.19
    
    
    
    4.02
    
    
    
    (0.01
    )
    
    
    0.14Net earnings
    
    $
    0.29
    
    
    $
    4.28
    
    
    $
    0.27
    
    
    $
    0.49
 2004(In thousands, except per share amounts)
    
    1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th QuarterNet sales
    
    $
    1,224,537
    
    
    $
    1,292,863
    
    
    $
    1,306,826
    
    
    $
    1,348,852Gross profit
    
    
    158,053
    
    
    
    169,542
    
    
    
    170,487
    
    
    
    178,879Operating profit
    
    
    5,712
    
    
    
    19,292
    
    
    
    20,361
    
    
    
    18,315Earnings from continuing operations
before income taxes
    
    
    3,464
    
    
    
    16,075
    
    
    
    17,391
    
    
    
    6,409Earnings from continuing operations
    
    
    2,157
    
    
    
    9,693
    
    
    
    10,847
    
    
    
    3,861Earnings from discontinued operations
    
    
    5,319
    
    
    
    9,103
    
    
    
    6,916
    
    
    
    4,662Net earnings
    
    $
    7,476
    
    
    $
    18,796
    
    
    $
    17,763
    
    
    $
    8,523Basic earnings per common share:Continuing operations
    
    $
    0.05
    
    
    $
    0.21
    
    
    $
    0.23
    
    
    $
    0.08Discontinued operations
    
    
    0.11
    
    
    
    0.20
    
    
    
    0.15
    
    
    
    0.10Net earnings
    
    $
    0.16
    
    
    $
    0.41
    
    
    $
    0.38
    
    
    $
    0.18Diluted earnings per common share:Continuing operations
    
    $
    0.05
    
    
    $
    0.21
    
    
    $
    0.23
    
    
    $
    0.08Discontinued operations
    
    
    0.11
    
    
    
    0.18
    
    
    
    0.14
    
    
    
    0.10Net earnings
    
    $
    0.16
    
    
    $
    0.39
    
    
    $
    0.37
    
    
    $
    0.18
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  32




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data.
 Page of Form 10-KFinancial Statements:Reports of Independent Registered Public Accounting Firm
    
    41Consolidated Balance Sheets
    
    43Consolidated Statements of Earnings
    
    44Consolidated Statements of Shareholders Equity
    
    45Consolidated Statements of Cash Flows
    
    46Notes to Consolidated Financial Statements
    
    47Financial Statement Schedules:Report of Independent Registered Public Accounting Firm
    
    67Schedule II  Valuation and Qualifying Accounts
    
    68
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
  Internal
Control-Integrated Framework
 33




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information.
  34




---



##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant.
   
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  Number of SharesRemaining Availablefor Future IssuanceNumber of Shares to
    
    
    
    Under Equitybe Issued upon
    
    Weighted Average
    
    Compensation PlansExercise of
    
    Exercise Price of
    
    (Excluding SharesOutstanding Options
    
    Outstanding Options
    
    Reflected in FirstPlan Category
    
    and Warrants
    
    and Warrants
    
    Column)*Equity compensation
plans approved by
shareholders
    
    3,148,744
    
    $26.16
    
    2,896,847Equity compensation
plans not approved
by shareholders
    
    N/A
    
    N/A
    
    N/ATotal
    
    3,148,744
    
    $26.16
    
    2,896,847
 
 *
    
    Includes 586,026 shares available for future issuance under our Employee Stock
Purchase Plan as of December 31, 2005, of which 87,000 were issued on January 14,
2006.  
 Item 13. Certain Relationships and Related Transactions.
  
 Item 14. Principal Accountants Fees and Services.
  35




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and 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:
 Exhibit Number
    
    DescriptionA.
    
    Incorporated by reference to our Registration Statement on Form S-1 (No. 33-64930) (File
No. 0-22192), filed June 24, 1993:3.2
    
    Restated Bylaws of Registrant.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.10.5
    
    Performance Food Group Employee Stock Purchase 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, 1997:10.6
    
    Performance Food Group Company Employee Savings and Stock Ownership Plan Savings Trust.D.
    
    Incorporated by Reference to our Report on Form 8-K dated May 20, 1997 (File No.
0-22192), filed May 20, 1997:10.7
    
    Rights Agreement dated as of May 16, 1997 between Performance Food Group Company and
First Union National Bank of North Carolina, as Rights Agent.E.
    
    Incorporated by reference to our Annual Report on Form 1O-K for the fiscal year ended
December 27, 1997 (File No. 0-22192), filed March 26, 1998:10.8
    
    Form of Change in Control Agreement dated October 29, 1997 with, John D. Austin, Thomas
Hoffman and Robert C. Sledd.10.9
    
    Form of Change in Control Agreement dated October 27, 1997 with certain key executives.F.
    
    Incorporated by Reference to our Annual Report on Form 10-K for the fiscal year ended
January 2, 1999 (File No. 0-22192), filed April 1, 1999:10.10
    
    Performance Food Group Company Executive Deferred Compensation Plan.
 36




---



##### Table of Contents



Exhibit Number
    
    DescriptionG.
    
    Incorporated by reference to our Report on Form 8-K dated November 27, 2000 (File No.
0-22192), filed November 27, 2000:10.11
    
    Amendment No. 1 to Rights Agreement dated June 30, 1999 between Performance Food Group
Company and American Stock Transfer Trust Company, as subsequent Rights Agent.10.12
    
    Amendment No. 2 to Rights Agreement dated November 22, 2000 between Performance Food
Group Company and American Stock Transfer Trust Company, as subsequent Rights Agent.H.
    
    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 RegistrantI.
    
    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, 2001:10.13
    
    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.)J.
    
    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, 2002:10.14
    
    1993 Employee Stock Incentive Plan (restated electronically for SEC filing purposes only)K.
    
    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, 2002:10.15
    
    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, N.A. as Agent.L.
    
    Incorporated by reference to our Registration Statement on Form S-8 (File No.
333-105082), filed May 8, 2003:10.16
    
    2003 Equity Incentive PlanM.
    
    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, 2003:10.17
    
    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.N.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended
February 3, 2004 (File No. 0-22192), filed March 18, 2004:10.18
    
    Performance Food Group Company Supplemental Executive Retirement Plan.10.19
    
    Amended and Restated Performance Food Group Company Employee Savings and Stock Ownership
Plan, as amended.O.
    
    Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended
April 3, 2004 (File No. 0-22192), filed May 12, 2004:10.20
    
    Lease agreement for our Little Rock, Arkansas facility.
 37




---



##### Table of Contents



Exhibit Number
    
    Description10.21
    
    Severance agreement with C. Michael Gray.P.
    
    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, 2004:10.22
    
    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.Q.
    
    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, 2004:10.23
    
    Form of Non-Qualified Stock Option Agreement.10.24
    
    Form of Incentive Stock Option Agreement.R.
    
    Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended
January 1, 2005:10.25
    
    Trust Agreement for the Performance Food Group Employee Savings and Stock Ownership Plan.S.
    
    Incorporated by reference to our Current Report on Form 8-K dated January 6, 2005 (File
No. 0-22192):10.26
    
    Senior Management Severance Plan.T.
    
    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.)U.
    
    Incorporated by reference to our Current Report on Form 8-K dated March 21, 2005 (File
No. 0-22192):10.27
    
    Performance Food Group Company 2005 Cash Incentive Plan.10.28
    
    Form of Restricted Share Award Agreement.V.
    
    Incorporated by reference to our Current Report on Form 8-K dated April 28, 2005 (File
No. 0-22192):10.29
    
    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.W.
    
    Incorporated by reference to our Current Report on Form 8-K dated May 24, 2005 (File No.
0-22192):10.30
    
    Form of Non-Qualified Stock Option Agreement.X.
    
    Incorporated by reference to our Current Report on Form 8-K dated June 30, 2005 (File
No. 0-22192):10.31
    
    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.
 38




---



##### Table of Contents



Exhibit Number
    
    DescriptionY.
    
    Incorporated by reference to our Current Report on Form 8-K dated August 29, 2005 (File
No. 0-22192):10.32
    
    Director Compensation Summary.Z.
    
    Incorporated by reference to our Current Report on Form 8-K dated October 11, 2005 (File
No. 0-22192):10.33
    
    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.10.34
    
    Form of Revolving Credit Note.AA.
    
    Filed herewith:10.35
    
    Named Executive Officer and Director Compensation Summary.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.
 39




---



##### Table of Contents



SIGNATURES
  PERFORMANCE FOOD GROUP COMPANYBy: /s/ Robert C. SleddRobert C. SleddChairman and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ Robert C. Sledd

Robert C. Sledd
    
    Chairman and Chief Executive
Officer (Principal Executive
Officer)
    
    March 6, 2006/s/ John D. Austin

John D. Austin
    
    Senior Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
    
    March 6, 2006/s/ Charles E. Adair

Charles E. Adair
    
    Director
    
    March 6, 2006/s/ Mary C. Doswell

Mary C. Doswell
    
    Director
    
    March 6, 2006/s/ Fred C. Goad, Jr.

Fred C. Goad, Jr.
    
    Director
    
    March 6, 2006/s/ Timothy M. Graven

Timothy M. Graven
    
    Director
    
    March 6, 2006/s/ John E. Stokely

John E. Stokely
    
    Director
    
    March 6, 2006
 40




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Managements Report on
Internal Control over Financial Reporting, Internal ControlIntegrated Framework .
    Internal ControlIntegrated Framework Internal ControlIntegrated Framework
   
 41




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Internal
ControlIntegrated Framework
  
 42




---



##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED BALANCE SHEETS
 (Dollar amounts in thousands, except per share amounts)
    
    2005
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    99,461
    
    
    $
    52,322Accounts receivable, net, including residual interest in
securitized receivables
    
    
    190,481
    
    
    
    171,191Inventories
    
    
    303,073
    
    
    
    287,019Prepaid expenses and other current assets
    
    
    9,328
    
    
    
    9,702Income taxes receivable
    
    
    6,448
    
    
    
    2,054Deferred income taxes
    
    
    13,412
    
    
    
    13,707Current assets from discontinued operations (Note 3)
    
    
    10,115
    
    
    
    109,924Total current assets
    
    
    632,318
    
    
    
    645,919Goodwill, net
    
    
    356,597
    
    
    
    354,037Property, plant and equipment, net
    
    
    255,816
    
    
    
    201,248Other intangible assets, net
    
    
    51,213
    
    
    
    54,471Other assets
    
    
    16,346
    
    
    
    13,503Non-current assets from discontinued operations (Note 3)
    
    
    
    
    
    
    558,587Total assets
    
    $
    1,312,290
    
    
    $
    1,827,765LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Outstanding checks in excess of deposits
    
    $
    100,335
    
    
    $
    103,948Current installments of long-term debt
    
    
    573
    
    
    
    661Trade accounts payable
    
    
    258,791
    
    
    
    227,882Accrued expenses
    
    
    122,885
    
    
    
    112,580Current liabilities from discontinued operations (Note 3)
    
    
    6,540
    
    
    
    116,024Total current liabilities
    
    
    489,124
    
    
    
    561,095Long-term debt, excluding current installments
    
    
    3,250
    
    
    
    263,859Deferred income taxes
    
    
    43,399
    
    
    
    40,775Non-current liabilities from discontinued operations (Note 3)
    
    
    
    
    
    
    87,723Total liabilities
    
    
    535,773
    
    
    
    953,452Shareholders equityPreferred 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, 35,581,925 and 46,770,660 shares issued and
outstanding
    
    
    356
    
    
    
    468Additional paid-in capital
    
    
    180,270
    
    
    
    525,092Retained earnings
    
    
    595,891
    
    
    
    348,753Total shareholders equity
    
    
    776,517
    
    
    
    874,313Total liabilities and shareholders equity
    
    $
    1,312,290
    
    
    $
    1,827,765
 See accompanying notes to consolidated financial statements.
 43




---



##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
 (In thousands, except per share amounts)
    
    2005
    
    2004
    
    2003Net sales
    
    $
    5,721,372
    
    
    $
    5,173,078
    
    
    $
    4,602,792Cost of goods sold
    
    
    4,973,966
    
    
    
    4,496,117
    
    
    
    3,982,182Gross profit
    
    
    747,406
    
    
    
    676,961
    
    
    
    620,610Operating expenses
    
    
    676,928
    
    
    
    613,281
    
    
    
    548,285Operating profit
    
    
    70,478
    
    
    
    63,680
    
    
    
    72,325Other income (expense):Interest income
    
    
    4,651
    
    
    
    340
    
    
    
    280Interest expense
    
    
    (3,246
    )
    
    
    (8,274
    )
    
    
    (9,845
    )Loss on sale of receivables
    
    
    (5,156
    )
    
    
    (2,421
    )
    
    
    (1,765
    )Loss on redemption of convertible notes (Note 10)
    
    
    
    
    
    
    (10,127
    )
    
    
    Other, net
    
    
    365
    
    
    
    141
    
    
    
    14Other expense, net
    
    
    (3,386
    )
    
    
    (20,341
    )
    
    
    (11,316
    )Earnings from continuing operations before income taxes
    
    
    67,092
    
    
    
    43,339
    
    
    
    61,009Income tax expense from continuing operations
    
    
    25,328
    
    
    
    16,781
    
    
    
    23,206Earnings from continuing operations, net of tax
    
    
    41,764
    
    
    
    26,558
    
    
    
    37,803Earnings from discontinued operations, net of tax (Note 3)
    
    
    205,374
    
    
    
    26,000
    
    
    
    36,388Net earnings
    
    $
    247,138
    
    
    $
    52,558
    
    
    $
    74,191Weighted average common shares outstanding:Basic
    
    
    43,233
    
    
    
    46,398
    
    
    
    45,583Diluted
    
    
    43,795
    
    
    
    47,181
    
    
    
    53,002Basic earnings per common share:Continuing operations
    
    $
    0.97
    
    
    $
    0.57
    
    
    $
    0.83Discontinued operations
    
    
    4.75
    
    
    
    0.56
    
    
    
    0.80Net earnings
    
    $
    5.72
    
    
    $
    1.13
    
    
    $
    1.63Diluted earnings per common share:Continuing operations
    
    $
    0.95
    
    
    $
    0.56
    
    
    $
    0.80Discontinued operations
    
    
    4.69
    
    
    
    0.55
    
    
    
    0.74Net earnings
    
    $
    5.64
    
    
    $
    1.11
    
    
    $
    1.54
 See accompanying notes to consolidated financial statements.
 44




---



##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Loan to
    
    TotalCommon Stock
    
    Additional
    
    Deferred
    
    Retained
    
    leveraged
    
    shareholders(Dollar amounts in thousands)
    
    Shares
    
    Amount
    
    paid-in capital
    
    compensation
    
    earnings
    
    ESOP
    
    equityBalance at December 28, 2002
    
    
    45,275,993
    
    
    $
    453
    
    
    $
    492,946
    
    
    $
    
    
    
    $
    222,004
    
    
    $
    (534
    )
    
    $
    714,869Issuance (return) of shares for
acquisitions, net
    
    
    (20,453
    )
    
    
    
    
    
    
    (509
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (509
    )Employee stock option, incentive and
purchase plans
    
    
    606,939
    
    
    
    6
    
    
    
    11,030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,036Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    3,694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,694Principal payments on loan to leveraged
ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    534
    
    
    
    534Net earnings-continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,803
    
    
    
    
    
    
    
    37,803Net earnings-discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,388
    
    
    
    
    
    
    
    36,388Balance at January 3, 2004
    
    
    45,862,479
    
    
    
    459
    
    
    
    507,161
    
    
    
    
    
    
    
    296,195
    
    
    
    
    
    
    
    803,815Issuance of shares for acquisitions, net
of shares returned
    
    
    8,904
    
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400Employee stock option, incentive and
purchase plans
    
    
    899,277
    
    
    
    9
    
    
    
    12,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,642Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    4,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,898Net earnings-continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,558
    
    
    
    
    
    
    
    26,558Net earnings-discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,000
    
    
    
    
    
    
    
    26,000Balance at January 1, 2005
    
    
    46,770,660
    
    
    
    468
    
    
    
    525,092
    
    
    
    
    
    
    
    348,753
    
    
    
    
    
    
    
    874,313Employee stock option, incentive and
purchase plans
    
    
    778,186
    
    
    
    8
    
    
    
    12,643
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,651Repurchase and retirement of common stock
    
    
    (12,166,429
    )
    
    
    (122
    )
    
    
    (361,596
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (361,718
    )Issuances of restricted stock, net of
forfeitures
    
    
    199,508
    
    
    
    2
    
    
    
    5,473
    
    
    
    (5,475
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    999
    
    
    
    
    
    
    
    
    
    
    
    999Tax 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
    
    
    $
    184,746
    
    
    $
    (4,476
    )
    
    $
    595,891
    
    
    $
    
    
    
    $
    776,517
 See accompanying notes to consolidated financial statements.
 45




---



##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollar amounts in thousands)
    
    2005
    
    2004
    
    2003Cash flows from operating activities of continuing operations:Net earnings
    
    $
    247,138
    
    
    $
    52,558
    
    
    $
    74,191Net earnings from discontinued operations
    
    
    (205,374
    )
    
    
    (26,000
    )
    
    
    (36,388
    )Adjustments to reconcile net earnings to net cash provided
by operating activities:Depreciation
    
    
    22,818
    
    
    
    21,370
    
    
    
    19,913Amortization
    
    
    3,562
    
    
    
    3,626
    
    
    
    3,793Tax benefit from exercise of stock options
    
    
    3,134
    
    
    
    4,898
    
    
    
    3,694Restricted stock expense
    
    
    999
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    2,919
    
    
    
    3,690
    
    
    
    12,263Write-off of debt issuance costs
    
    
    
    
    
    
    3,801
    
    
    
    Other
    
    
    611
    
    
    
    1,239
    
    
    
    2,092Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (19,290
    )
    
    
    (4,976
    )
    
    
    (9,717
    )Increase in inventories
    
    
    (16,054
    )
    
    
    (57,403
    )
    
    
    (9,673
    )Decrease (increase) in prepaid expenses and other current assets
    
    
    374
    
    
    
    (636
    )
    
    
    (974
    )Increase in other assets
    
    
    (2,843
    )
    
    
    (2,992
    )
    
    
    (5,479
    )Increase in trade accounts payable
    
    
    30,909
    
    
    
    31,825
    
    
    
    981Increase in accrued expenses
    
    
    11,661
    
    
    
    9,295
    
    
    
    25,456(Decrease) increase in income taxes payable/receivable, net
    
    
    (4,394
    )
    
    
    7,315
    
    
    
    (19,025
    )Net cash provided by operating activities of continuing operations
    
    
    76,170
    
    
    
    47,610
    
    
    
    61,127Cash flows from investing activities of continuing operations:Net cash paid for acquisitions
    
    
    (3,917
    )
    
    
    (3,086
    )
    
    
    (2,924
    )Purchases of property, plant and equipment
    
    
    (77,576
    )
    
    
    (40,635
    )
    
    
    (56,973
    )Proceeds from sale of property, plant and equipment
    
    
    290
    
    
    
    967
    
    
    
    355Cash paid for intangibles
    
    
    (150
    )
    
    
    
    
    
    
    Net cash used in investing activities of continuing operations
    
    
    (81,353
    )
    
    
    (42,754
    )
    
    
    (59,542
    )Cash flows from financing activities of continuing operations:(Decrease) increase in outstanding checks in excess of deposits
    
    
    (3,613
    )
    
    
    45,446
    
    
    
    10,971Net (payments on) proceeds from revolving credit facility
    
    
    (210,000
    )
    
    
    126,771
    
    
    
    (14,771
    )Principal payments on long-term debt
    
    
    (697
    )
    
    
    (202,046
    )
    
    
    (1,567
    )Cash paid for debt issuance costs
    
    
    (864
    )
    
    
    (461
    )
    
    
    (792
    )Repurchase of common stock
    
    
    (361,718
    )
    
    
    
    
    
    
    Proceeds from employee stock option, incentive and purchase plans
    
    
    12,651
    
    
    
    12,642
    
    
    
    11,036Net cash (used in) provided by financing activities of continuing
operations
    
    
    (564,241
    )
    
    
    (17,648
    )
    
    
    4,877Net cash (used in) provided by continuing operations
    
    
    (569,424
    )
    
    
    (12,792
    )
    
    
    6,462Net cash provided by (used in) discontinued operations:Net cash provided by operating activities of discontinued operations
    
    
    1,121
    
    
    
    68,364
    
    
    
    65,956Net cash provided by (used in) investing activities of discontinued
operations
    
    
    611,083
    
    
    
    (42,520
    )
    
    
    (62,245
    )Net cash provided by (used in) financing activities of discontinued
operations
    
    
    4,359
    
    
    
    354
    
    
    
    (4,917
    )Total net cash provided by (used in) discontinued operations
    
    
    616,563
    
    
    
    26,198
    
    
    
    (1,206
    )Net increase in cash and cash equivalents
    
    
    47,139
    
    
    
    13,406
    
    
    
    5,256Cash and cash equivalents, beginning of year
    
    
    52,322
    
    
    
    38,916
    
    
    
    33,660Cash and cash equivalents, end of year
    
    $
    99,461
    
    
    $
    52,322
    
    
    $
    38,916
 See accompanying notes to consolidated financial statements.
 46




---



##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Description of Business
    Accounting for the Impairment or Disposal of Long-Lived Assets
 2. Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  47




---



##### Table of Contents



Accounts Receivable
  Inventories
  Property, Plant and Equipment
   Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
  Impairment of Long-Lived Assets
 Accounting for the
Impairment or Disposal of Long-lived Assets
 48




---



##### Table of Contents



Insurance Program
  Revenue Recognition
  Cost of Goods Sold
  Operating Expenses
  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.
 Shipping and Handling Fees and Costs
  Stock-Based Compensation
 Accounting for Stock Issued to Employees
 49




---



##### Table of Contents



Accounting for Stock-Based
Compensation
 2005
    
    
    2004
    
    
    2003Net earnings, as reported
    
    $
    247,138
    
    
    $
    52,558
    
    
    $
    74,191Add: Stock-based compensation included in net
earnings,
net of related tax effects
    
    
    621
    
    
    
    228
    
    
    
    Deduct: Total stock-based compensation determined
under
the fair-value based method for all awards, net of
related tax effects (includes approximately $7.3
million in the year ended December 31, 2005
related to
the accelerated vesting of certain awards)
    
    
    (10,328
    )
    
    
    (8,424
    )
    
    
    (7,971
    )Pro forma net earnings
    
    $
    237,431
    
    
    $
    44,362
    
    
    $
    66,220Net earnings per common share:Basic  as reported
    
    $
    5.72
    
    
    $
    1.13
    
    
    $
    1.63Basic  pro forma
    
    $
    5.49
    
    
    $
    0.96
    
    
    $
    1.45Diluted  as reported
    
    $
    5.64
    
    
    $
    1.11
    
    
    $
    1.54Diluted  pro forma
    
    $
    5.42
    
    
    $
    0.95
    
    
    $
    1.39
  Income Taxes
 Accounting for Income Taxes
 Reclassifications
  Recently Issued Accounting Pronouncements
 Inventory Costs, an Amendment of ARB No. 43,
Chapter 4.
 Share-Based Payment .
 50




---



##### Table of Contents



Accounting Changes and Error Corrections Accounting Changes Reporting Accounting Changes in Interim
Financial Statements
 3. Discontinued Operations
 Allocation of
Interest to Discontinued Operations,
 51




---



##### Table of Contents



(In thousands)
    
    2005
    
    
    2004AssetsAccounts receivable, net
    
    $
    8,229
    
    
    $
    74,563Inventories
    
    
    
    
    
    
    27,816Other current assets
    
    
    1,886
    
    
    
    7,545Total current assets
    
    
    10,115
    
    
    
    109,924Property, plant and equipment, net
    
    
    
    
    
    
    193,453Goodwill, net
    
    
    
    
    
    
    232,473Other intangible assets, net
    
    
    
    
    
    
    130,399Other assets
    
    
    
    
    
    
    2,262Total non-current assets
    
    
    
    
    
    
    558,587Total assets
    
    $
    10,115
    
    
    $
    668,511LiabilitiesOutstanding checks in excess of deposits
    
    $
    
    
    
    $
    24,131Current installments of long-term debt
    
    
    
    
    
    
    275Trade accounts payable
    
    
    
    
    
    
    39,775Other current liabilities
    
    
    6,540
    
    
    
    51,843Total current liabilities
    
    
    6,540
    
    
    
    116,024Long-term debt
    
    
    
    
    
    
    14,725Deferred income taxes
    
    
    
    
    
    
    72,998Total non-current liabilities
    
    
    
    
    
    
    87,723Total liabilities
    
    $
    6,540
    
    
    $
    203,747
   (In thousands)
    
    2005
    
    
    2004
    
    
    2003Net sales
    
    $
    510,987
    
    
    $
    975,845
    
    
    $
    917,019Earnings before income taxes
    
    $
    295,828
    
    
    $
    41,337
    
    
    $
    58,654Income tax expense
    
    $
    90,454
    
    
    $
    15,337
    
    
    $
    22,266
 4. Business Combinations
    52




---



##### Table of Contents



5. Goodwill and Other Intangible Assets
  2005
    
    
    2004Gross Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Gross Carrying
    
    
    Accumulated(In thousands)
    
    Amount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetIntangible assets with definite lives:Customer relationships
    
    $
    32,859
    
    
    $
    9,875
    
    
    $
    22,984
    
    
    $
    32,859
    
    
    $
    7,625
    
    
    $
    25,234Trade names and trademarks
    
    
    17,228
    
    
    
    2,797
    
    
    
    14,431
    
    
    
    17,228
    
    
    
    2,058
    
    
    
    15,170Deferred financing costs
    
    
    3,573
    
    
    
    2,008
    
    
    
    1,565
    
    
    
    2,801
    
    
    
    1,390
    
    
    
    1,411Non-compete agreements
    
    
    3,353
    
    
    
    2,854
    
    
    
    499
    
    
    
    3,203
    
    
    
    2,281
    
    
    
    922Total intangible assets with definite lives
    
    $
    57,013
    
    
    $
    17,534
    
    
    $
    39,479
    
    
    $
    56,091
    
    
    $
    13,354
    
    
    $
    42,737Intangible assets with indefinite lives:Goodwill*
    
    $
    368,623
    
    
    $
    12,026
    
    
    $
    356,597
    
    
    $
    366,063
    
    
    $
    12,026
    
    
    $
    354,037Trade names*
    
    
    11,869
    
    
    
    135
    
    
    
    11,734
    
    
    
    11,869
    
    
    
    135
    
    
    
    11,734Total intangible assets with indefinite lives
    
    $
    380,492
    
    
    $
    12,161
    
    
    $
    368,331
    
    
    $
    377,932
    
    
    $
    12,161
    
    
    $
    365,771
 
 *Amortization was recorded before the Companys adoption of SFAS No. 142.  (In thousands)2006
    
    $
    3,6092007
    
    
    3,3712008
    
    
    3,1482009
    
    
    3,1462010
    
    
    3,052Thereafter
    
    
    23,153Total amortization expense
    
    $
    39,479
 53




---



##### Table of Contents



(In thousands)Balance as of January 3, 2004
    
    $
    350,493Goodwill acquired
    
    
    4,626Purchase accounting adjustments
    
    
    (1,082
    )Balance as of January 1, 2005
    
    
    354,037Goodwill acquired
    
    
    2,710Purchase accounting adjustments
    
    
    (150
    )Balance as of December 31, 2005
    
    $
    356,597
  6. Net Earnings per Common Share
  1 2
 2005
    
    
    2004
    
    
    2003(In thousands, except per share
    
    Net
    
    
    
    
    
    
    Per- Share
    
    
    Net
    
    
    
    
    
    
    Per- Share
    
    
    Net
    
    
    
    
    
    
    Per- Shareamounts)
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    Shares
    
    
    AmountAmounts reported for basic EPS
    
    $
    41,764
    
    
    
    43,233
    
    
    $
    0.97
    
    
    $
    26,558
    
    
    
    46,398
    
    
    $
    0.57
    
    
    $
    37,803
    
    
    
    45,583
    
    
    $
    0.83Effect of dilutive securities:Stock options
    
    
    
    
    
    
    562
    
    
    
    
    
    
    
    
    
    
    
    783
    
    
    
    
    
    
    
    
    
    
    
    1,311Convertible Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,622
    
    
    
    6,108Amounts reported for diluted EPS
    
    $
    41,764
    
    
    
    43,795
    
    
    $
    0.95
    
    
    $
    26,558
    
    
    
    47,181
    
    
    $
    0.56
    
    
    $
    42,425
    
    
    
    53,002
    
    
    $
    0.80
  54




---



##### Table of Contents



7. Receivables Facility
    Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities
  8. Concentration of Sales and Credit Risk
   55




---



##### Table of Contents



9. Property, Plant and Equipment
  Range of(In thousands)
    
    2005
    
    
    2004
    
    
    LivesLand
    
    $
    15,783
    
    
    $
    11,359Buildings and building improvements
    
    
    216,422
    
    
    
    151,437
    
    
    15  39 yearsTransportation equipment
    
    
    11,667
    
    
    
    13,420
    
    
    7  12 yearsWarehouse and plant equipment
    
    
    49,400
    
    
    
    45,506
    
    
    3  10 yearsOffice equipment, furniture and fixtures
    
    
    56,884
    
    
    
    53,388
    
    
    3  10 yearsLeasehold improvements
    
    
    2,870
    
    
    
    3,024
    
    
    Lease termConstruction-in-process
    
    
    17,961
    
    
    
    25,593370,987
    
    
    
    303,727Less: accumulated depreciation and amortization
    
    
    (115,171
    )
    
    
    (102,479
    )Property, plant and equipment, net
    
    $
    255,816
    
    
    $
    201,248
 10.
    
    Long-term DebtLong-term debt as of December 31, 2005 and January 1, 2005 consisted of the following:
 (In thousands)
    
    2005
    
    
    2004Industrial Revenue Bonds
    
    $
    3,138
    
    
    $
    3,601Other notes payable
    
    
    685
    
    
    
    919Credit Facility
    
    
    
    
    
    
    210,000Senior Notes
    
    
    
    
    
    
    50,000Total long-term debt
    
    
    3,823
    
    
    
    264,520Less: current installments
    
    
    (573
    )
    
    
    (661
    )Long-term debt, excluding current installments
    
    $
    3,250
    
    
    $
    263,859
 Credit Facility
  Industrial Revenue Bonds
  56




---



##### Table of Contents



Convertible Notes
 1 2
 Senior Notes
   (In thousands)2006
    
    $
    5732007
    
    
    5852008
    
    
    6242009
    
    
    6672010
    
    
    715Thereafter
    
    
    659Total long-term debt
    
    $
    3,823
 11 . Fair Value of Financial Instruments
  57




---



##### Table of Contents



12. Leases
  (In thousands)2006
    
    $
    35,4862007
    
    
    31,3342008
    
    
    26,7782009
    
    
    22,5452010
    
    
    17,533Thereafter
    
    
    119,989Total minimum lease payments
    
    $
    253,665
   13. Income Taxes
  (In thousands)
    
    2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    18,674
    
    
    $
    13,961
    
    
    $
    12,252State
    
    
    3,385
    
    
    
    1,929
    
    
    
    71322,059
    
    
    
    15,890
    
    
    
    12,965Deferred:Federal
    
    
    3,449
    
    
    
    1,868
    
    
    
    9,158State
    
    
    (180
    )
    
    
    (977
    )
    
    
    1,0833,269
    
    
    
    891
    
    
    
    10,241Total income tax expense
    
    $
    25,328
    
    
    $
    16,781
    
    
    $
    23,206
  (In thousands)
    
    2005
    
    
    2004
    
    
    2003Federal income taxes computed at statutory rate
    
    $
    23,482
    
    
    $
    15,169
    
    
    $
    21,353Increase (decrease) in income taxes resulting from:State income taxes, net of federal income tax benefit
    
    
    1,820
    
    
    
    1,228
    
    
    
    2,070Non-deductible expenses
    
    
    224
    
    
    
    593
    
    
    
    734Tax credits
    
    
    (332
    )
    
    
    (379
    )
    
    
    (403
    )Valuation allowance for deferred tax assets
    
    
    139
    
    
    
    1,076
    
    
    
    Other, net
    
    
    (5
    )
    
    
    (906
    )
    
    
    (548
    )Total income tax expense
    
    $
    25,328
    
    
    $
    16,781
    
    
    $
    23,206
 58




---



##### Table of Contents



(In thousands)
    
    2005
    
    
    2004Deferred tax assets:Allowance for doubtful accounts
    
    $
    2,900
    
    
    $
    2,259Inventories
    
    
    3,198
    
    
    
    2,930Accrued employee benefits
    
    
    5,142
    
    
    
    5,004Self-insurance reserves
    
    
    4,766
    
    
    
    6,060Deferred income
    
    
    1,039
    
    
    
    1,665Net operating loss carry-forwards
    
    
    3,347
    
    
    
    3,258Tax credit carry-forwards
    
    
    268
    
    
    
    150Other accrued expenses
    
    
    2,750
    
    
    
    2,066Total gross deferred tax assets
    
    
    23,410
    
    
    
    23,392Less: Valuation allowance
    
    
    (1,215
    )
    
    
    (1,076
    )Total net deferred tax assets
    
    
    22,195
    
    
    
    22,316Deferred tax liabilities:Property, plant and equipment
    
    
    14,870
    
    
    
    16,345Basis difference in intangible assets
    
    
    30,928
    
    
    
    26,762Other
    
    
    6,384
    
    
    
    6,277Total deferred tax liabilities
    
    
    52,182
    
    
    
    49,384Net deferred tax liability
    
    $
    29,987
    
    
    $
    27,068
  (In thousands)
    
    2005
    
    
    2004Current deferred tax asset
    
    $
    13,412
    
    
    $
    13,707Non-current deferred tax liability
    
    
    43,399
    
    
    
    40,775Net deferred tax liability
    
    $
    29,987
    
    
    $
    27,068
  14. Shareholders Equity
 Shareholders Rights Plan
  Share Repurchase and Retirement
  59




---



##### Table of Contents



15. Retirement Plans
      16. Stock Compensation Plans
  Stock Option and Incentive Plans
   60




---



##### Table of Contents



61




---



##### Table of Contents



2005
    
    2004
    
    2003Weighted-
    
    
    
    
    
    Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    Exercise(In thousands, except per share data)
    
    Shares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of year
    
    
    4,311
    
    
    $
    25.48
    
    
    
    4,493
    
    
    $
    21.90
    
    
    
    4,374
    
    
    $
    19.30Granted(1)
    
    
    206
    
    
    
    27.82
    
    
    
    839
    
    
    
    34.37
    
    
    
    757
    
    
    
    32.04Exercised
    
    
    (535
    )
    
    
    12.91
    
    
    
    (691
    )
    
    
    10.50
    
    
    
    (403
    )
    
    
    9.34Canceled
    
    
    (833
    ) (2)
    
    
    31.44
    
    
    
    (330
    )
    
    
    30.71
    
    
    
    (235
    )
    
    
    27.69Outstanding at end of year
    
    
    3,149
    
    
    $
    26.16
    
    
    
    4,311
    
    
    $
    25.48
    
    
    
    4,493
    
    
    $
    21.90Options exercisable at end of year
    
    
    2,917
    
    
    $
    25.96
    
    
    
    1,631
    
    
    $
    14.19
    
    
    
    1,259
    
    
    $
    10.99Weighted average fair value of
options granted during the year
    
    
    
    
    
    $
    13.99
    
    
    
    
    
    
    $
    15.92
    
    
    
    
    
    
    $
    14.41
 
 (1)
    
    Options granted in 2005 included approximately 168,000 options related to
an annual grant, 25,000 options to directors and approximately 13,000 other options. Options
granted in 2004 included 691,000 options related to an annual grant, approximately 25,000
options to directors and approximately 123,000 other options. Options granted in 2003
included approximately 658,000 options related to an annual grant, 30,000 options to directors
and approximately 69,000 other options.(2)
    
    Includes approximately 619,000 options held by former fresh-cut associates
that were cancelled subsequent to the sale of the fresh-cut segment.   (Number of shares in thousands)
    
    Options Outstanding
    
    Options ExercisableWeighted-Average
    
    Weighted-Number
    
    Remaining
    
    Average
    
    ExercisableRange of Exercise
    
    Outstanding at
    
    Contractual
    
    Exercise
    
    at
    
    Weighted- AveragePrices
    
    Dec. 31, 2005
    
    Life
    
    Price
    
    Dec. 31, 2005
    
    Exercise Price$  7.25
    
    
    
    
    
    $
    10.32
    
    
    
    555
    
    
    
    2.84
    
    
    $
    9.32
    
    
    
    555
    
    
    $
    9.3210.50
    
    
    
    
    
    
    28.02
    
    
    
    667
    
    
    
    5.90
    
    
    
    20.25
    
    
    
    475
    
    
    
    17.2028.08
    
    
    
    
    
    
    31.62
    
    
    
    823
    
    
    
    6.32
    
    
    
    30.09
    
    
    
    819
    
    
    
    30.0831.82
    
    
    
    
    
    
    34.18
    
    
    
    567
    
    
    
    7.92
    
    
    
    33.96
    
    
    
    536
    
    
    
    34.0334.38
    
    
    
    
    
    
    41.15
    
    
    
    537
    
    
    
    6.50
    
    
    
    36.66
    
    
    
    532
    
    
    
    36.65$  7.25
    
    
    
    
    
    $
    41.15
    
    
    
    3,149
    
    
    
    5.94
    
    
    $
    26.16
    
    
    
    2,917
    
    
    $
    25.96
 Employee Stock Purchase Plan
 th th
 62




---



##### Table of Contents



17. Supplemental Cash Flow Information
  (In thousands)
    
    2005
    
    2004
    
    2003Cash paid during the year for:Interest
 continuing operations
    
    $
    3,209
    
    
    $
    8,718
    
    
    $
    8,503Interest
 discontinued operations
    
    $
    3,551
    
    
    $
    8,515
    
    
    $
    9,254Income taxes
 continuing operations
    
    $
    23,829
    
    
    $
    11,712
    
    
    $
    23,601Income taxes
 discontinued operations
    
    $
    163,332
    
    
    $
    6,078
    
    
    $
    12,333Effects of companies acquired:Fair value of assets acquired
    
    $
    3,917
    
    
    $
    4,650
    
    
    $
    2,516Fair value of liabilities assumed
    
    
    
    
    
    
    (1,164
    )
    
    
    (101
    )Stock issued for acquisitions, net
    
    
    
    
    
    
    (400
    )
    
    
    509Net cash paid for acquisitions
    
    $
    3,917
    
    
    $
    3,086
    
    
    $
    2,924
 18. Commitments and Contingencies
  Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,
    63




---



##### Table of Contents



19. Segment Information
 Disclosures about Segments of an Enterprise and Related Information
 64




---



##### Table of Contents



Corporate &(In thousands)
    
    Broadline
    
    Customized
    
    Inter-segment
    
    Consolidated2005Net 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
    
    
    76,789
    
    
    
    24,981
    
    
    
    (31,292
    )
    
    
    70,478Interest expense (income)
    
    
    16,998
    
    
    
    2,963
    
    
    
    (16,715
    )
    
    
    3,246Loss (gain) on sale of receivables
    
    
    7,832
    
    
    
    2,849
    
    
    
    (5,525
    )
    
    
    5,156Depreciation
    
    
    13,172
    
    
    
    5,174
    
    
    
    4,472
    
    
    
    22,818Amortization
    
    
    3,562
    
    
    
    
    
    
    
    
    
    
    
    3,562Capital expenditures
    
    
    25,069
    
    
    
    48,252
    
    
    
    4,255
    
    
    
    77,5762004Net external sales
    
    $
    3,120,500
    
    
    $
    2,052,578
    
    
    $
    
    
    
    $
    5,173,078Inter-segment sales
    
    
    806
    
    
    
    302
    
    
    
    (1,108
    )
    
    
    Total sales
    
    
    3,121,306
    
    
    
    2,052,880
    
    
    
    (1,108
    )
    
    
    5,173,078Operating profit
    
    
    70,196
    
    
    
    21,538
    
    
    
    (28,054
    )
    
    
    63,680Interest expense (income)
    
    
    12,366
    
    
    
    747
    
    
    
    (4,839
    )
    
    
    8,274Loss (gain) on sale of receivables
    
    
    7,845
    
    
    
    2,596
    
    
    
    (8,020
    )
    
    
    2,421Depreciation
    
    
    13,457
    
    
    
    4,355
    
    
    
    3,558
    
    
    
    21,370Amortization
    
    
    3,626
    
    
    
    
    
    
    
    
    
    
    
    3,626Capital expenditures
    
    
    15,089
    
    
    
    20,770
    
    
    
    4,776
    
    
    
    40,6352003Net external sales
    
    $
    2,804,921
    
    
    $
    1,797,871
    
    
    $
    
    
    
    $
    4,602,792Inter-segment sales
    
    
    1,056
    
    
    
    348
    
    
    
    (1,404
    )
    
    
    Total sales
    
    
    2,805,977
    
    
    
    1,798,219
    
    
    
    (1,404
    )
    
    
    4,602,792Operating profit
    
    
    69,664
    
    
    
    19,704
    
    
    
    (17,043
    )
    
    
    72,325Interest expense (income)
    
    
    13,599
    
    
    
    325
    
    
    
    (4,079
    )
    
    
    9,845Loss (gain) on sale of receivables
    
    
    5,674
    
    
    
    2,182
    
    
    
    (6,091
    )
    
    
    1,765Depreciation
    
    
    14,038
    
    
    
    3,741
    
    
    
    2,134
    
    
    
    19,913Amortization
    
    
    3,793
    
    
    
    
    
    
    
    
    
    
    
    3,793Capital expenditures
    
    
    32,250
    
    
    
    21,577
    
    
    
    3,146
    
    
    
    56,973
  (In thousands)
    
    2005
    
    2004Broadline
    
    $
    848,996
    
    
    $
    830,421Customized
    
    
    250,397
    
    
    
    176,827Corporate & Intersegment
    
    
    202,782
    
    
    
    152,006Discontinued operations
    
    
    10,115
    
    
    
    668,511Total assets
    
    $
    1,312,290
    
    
    $
    1,827,765
 65




---



##### Table of Contents



(In thousands)
    
    2005
    
    2004
    
    2003Center-of-the-plate
    
    $
    2,393,658
    
    
    $
    2,171,304
    
    
    $
    1,817,859Canned and dry groceries
    
    
    1,006,854
    
    
    
    911,691
    
    
    
    932,961Frozen foods
    
    
    981,013
    
    
    
    864,829
    
    
    
    708,102Refrigerated and dairy products
    
    
    576,908
    
    
    
    537,363
    
    
    
    511,718Paper products and cleaning supplies
    
    
    417,375
    
    
    
    360,590
    
    
    
    347,157Produce
    
    
    198,337
    
    
    
    184,255
    
    
    
    179,345Procurement, merchandising and other services
    
    
    107,115
    
    
    
    93,130
    
    
    
    70,995Equipment and supplies
    
    
    40,112
    
    
    
    49,916
    
    
    
    34,655Total
    
    $
    5,721,372
    
    
    $
    5,173,078
    
    
    $
    4,602,792
 20. Subsequent Events
  66




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   /s/ KPMG LLPRichmond, VirginiaMarch 6, 2006
 67




---



##### Table of Contents



PERFORMANCE FOOD GROUP COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
 Ending(In thousands)
    
    Beginning Balance
    
    Additions
    
    Deductions(1)
    
    BalanceAllowance for Doubtful AccountsJanuary 3, 2004
    
    $
    11,406
    
    
    $
    4,248
    
    
    $
    9,698
    
    
    $
    5,956January 1, 2005
    
    
    5,956
    
    
    
    7,793
    
    
    
    5,067
    
    
    
    8,682December 31, 2005
    
    
    8,682
    
    
    
    8,415
    
    
    
    9,278
    
    
    
    7,819
 
 (1)
    
    For the year ended January 3, 2004, deductions included accounts receivable
write-offs, net of recoveries, of $4.4 million and purchase accounting reversals to goodwill of
$5.3 million. 68