Performance Food Group Company

Good day and welcome to PFG's fiscal year Q2 2021 earnings conference call. If you would like to ask a question at the conclusion of the prepared remarks, please press the star key followed by the number one on your telephone keypad at any time. I would now like to turn the call over to Bill Marshall, Vice President, Investor Relations for PFG. Please go ahead, sir.

Thank you, Laurie, and good morning. We are here with George Holm, PFG's CEO, and Jim Hope, PFG's CFO. We issued a press release regarding our 2021 fiscal second quarter and first half results this morning, which can be found in the investor relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results for the same period in our 2020 fiscal second quarter and first half. The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings release. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results. Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. Now, I'd like to turn the call over to George. Thanks, Bill.

Good morning, everyone, and thank you for joining our call today. I'm excited to share PFG's second quarter results with you this morning. I'm proud to say that our company has continued to weather the challenging market conditions and distinguish ourselves as leaders in the food distribution industry. It is our hope that we will soon be able to gather together at our favorite restaurant with friends and family, and we all look forward to the day when our lives resume a more normal pattern. In the meantime, our associates have been working hard to position our business for long-term success. We also want to say we are humbled but not surprised by the creativity, tenacity, and resilience our customers have shown. We are proud to be partners with so many hardworking individuals in the restaurant industry, doing our part to help make each of them successful. As expected, the winter brought its challenges. And like the rest of the industry, our business did experience a modest slowdown in December. And while January is typically a seasonally softer month for PFG, we were encouraged by a modest acceleration in sales trends in recent weeks in our food service business. With that said, until the pace of vaccination picks up dramatically, we do not expect a return to a more normal operating run rate for some time. However, once the public feels comfortable gathering in groups, we anticipate a surge of volume at restaurants. Therefore, we are prepared for this acceleration with appropriate levels of inventory. We feel very good about our capabilities to execute this plan and are equipped with ample liquidity. Jim will share more about our financial position in a moment. Meanwhile, the integration of Reinhart continues to meet our original expectations. truly a great feat considering the external challenges that could have been a distraction. This speaks to the dedication of our associates who have worked diligently to accelerate growth and capture our targeted cost synergies. We also continue to believe that we will achieve the roughly $50 million of annualized cost synergies in the third full fiscal year following the closing. And furthermore, we are pleased to announce that we have completed our transition services agreement with Ryan Hurst. We are pleased to see the pace of sales recovery at Reinhart. While still not quite at the growth level of legacy performance food service, Reinhart sales trends have steadily improved. Importantly, the sales compensation structures have been fully aligned, and we are moving ahead on all plans to accelerate Reinhart's growth profile. As you know, as of the beginning of our fiscal third quarter of 2021, we are fully lapping the acquisition of Reinhart. In a moment, Jim will provide color on how this will impact the modeling of our business in the quarters ahead. As we have said over the past several quarters, many of Vistar's channels continue to be significantly impacted by the current environment. Still, the resilience in several channels, including convenience stores, value, retail, and corrections, plus a focus on cost containment, have kept that segment profitable. When people return to work, begin to travel, and once again gather in groups, we anticipate a full recovery in Vistar. we continue to expect a much slower recovery in theater and office coffee services. While we have been hopeful there would be a modest rebound in some of these areas early in 2021, it is now evident that we should not expect a pickup until the vaccination plan is more fully executed. It is difficult to predict whether occupancy in movie theaters and professional offices will return to normal levels. However, we do expect these lines of business to improve from where they are currently and remain profitable streams of business for PFG. Meanwhile, Vistar remains focused on executing on the plan that has made it so successful for decades, finding new channels and lines of business to provide long-term profitable growth. One of these areas is our E.B. Brown convenience store business, which has been a bright spot for our Vistar segments. a testament to the team's hard work and the resilience of that channel. We have successfully opened and are currently shipping from two new distribution centers in the southeast that service the C-Store channel. Looking at our entire business, I am extremely pleased with how our organization has responded to current headwinds. Including the benefit of Reinhart, our total case volume increased 8.4% in the quarter, and importantly, our independent case volume rose 26.5%. Excluding the Reinhart acquisition, total organic case volume, total case volume fell 16.9%, but was down only 5% in the independent channel. And we enjoyed the margin benefit from the mix change. We believe that these results validate our strategy around investing for growth in the independent channel. We feel extremely well positioned for a full recovery later in the year. Now, I would like to briefly address the current operating environment. As I mentioned earlier, along with the total industry, our food service business did experience some modest slowdown in December. We believe this is a result of greater restrictions, fewer holiday parties, and some impact to outdoor dining in colder weather states. With that said, we have experienced a modest rebound in January, more in line with year-over-year comparisons that we experienced in October and November. However, remember that we had a strong start to calendar 2020 before the shelter-in-place orders took effect. Our fiscal third quarter 2020 results only began to reflect the impact of the pandemic in very late March. And as you know, the year-ago quarter also benefited from the acquisition of Reinhart, which closed in late December. As always, our intention is to run our business for the long term and invest as appropriate for sustainable growth. We are pleased with how this strategy has played out over the past year and strive to continue our momentum. Before turning it over to Jim, I want to highlight a few ways that PFG Associates have helped us do more for our company, our customers, and our communities during these extraordinary times. Many of our operating companies reached out into their local communities, making donations to support the elderly, healthcare workers, and families in need. While those actions were local, the generosity, care, and commitment to serving others are universal across our family of companies. Last quarter, PFG published its first annual ESG report. Sustainability and social responsibility have long been important focus areas for our organization. To support these efforts, we have developed an internal governance team to oversee our ESG efforts as we continue to address the issues that are most important to our business and stakeholders. We also celebrated our customer service professionals who, along with our dedicated sales teams, are helping our customers find success in difficult times. Finally, we are so proud of our drivers, selectors, and frontline supervisors who are essential to our business and in keeping our country's food supply chain moving. Last quarter, 21 of our drivers were officially inducted into the IFTA Hall of Fame, and one of our drivers, Darrell Breeden, recently retired after more than 42 years with zero accidents, zero tickets, and a commitment to delivering service that has been second to none. That is truly an amazing accomplishment. The bottom line is supporting our local communities and our customers with such care shows in our results. I am proud of all the ways our people have risen to the occasion, both for our business and all the stakeholders we serve. With that, I'm going to turn things over to Jim, who will give you more detail on our second quarter and our financial position.