Performance Food Group Company

And welcome to PFG's Fiscal Year Q3 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're here with George Holm, PFG's CEO, and Jim Hope, PFG's CFO. We issued a press release regarding our 2021 fiscal third quarter and first nine months 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 to the same period in our 2020 fiscal third quarter and first nine months. Additionally, occasionally during our call today, as noted, we are comparing results to the same period in our 2019 fiscal third quarter and first nine months. The results discussed on this call will include gaps and non-gap results adjusted for certain items. The reconciliation of these non-gap measures to the corresponding gap 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. It is my pleasure to discuss PFG's third quarter financial results with you this morning. It is an exciting time for our company and industry with increasing confidence that a recovery is taking hold. We're excited to see more and more of our business grow above and beyond 2019 levels. As we reflect upon what the past 12 months has brought, I could not be more pleased with how far our organization has come and how well we have responded to the market challenges. Over the past year, we have made strategic investments in our business, despite a tough operating environment, including retaining our sales force. I am pleased to say that these investments have paid off, reflected in market share gains, particularly in the independent restaurant business and sales growth. The progress we made would not be possible without the strong partnerships with our customers and suppliers and, of course, our service-minded associates. Although it has been a difficult time for restaurants, many of them have not only survived but are looking forward to a stronger business in the months and years ahead. The resilience of the restaurant industry has been something to watch, and we are proud of the role we play in the food supply chain. Let's begin by discussing some of the dynamics of our third fiscal quarter. As you know, we lapped the Reinhardt acquisition in January, and we're comparing against a very strong start to calendar 2020. Also, several of our markets, particularly in Texas and other areas of the central U.S., experienced severe winter weather, which temporarily shut down the ability to ship product and kept many individuals at home. While this created a difficult February, the restaurant business picked up significantly in March to finish the quarter strong. Also, while we are beginning to see some improving trends at Vistar, many of the channels they serve are still under pressure, though we do expect those channels to eventually move into recovery mode. Nonetheless, we posted a record quarter with over $7.2 billion of total net sales. In fact, during the last two weeks of March, our dollar sales were larger than they have ever been, and that continued into April. The last seven weeks are the seven highest sales weeks we have experienced ever. We are encouraged by the number of markets that are growing the business compared to 2019 results. Our independent restaurant business continues to be a highlight for the organization. During the third quarter, our independent case sales were up 6.3% with considerable improvement late in April and early May. We've consistently increased share in this important channel and are now working hard to retain these gains. As you know, the next shift of our business to independent restaurants from change had a positive impact on our gross margins. Our chain business skews towards the casual dining space, which has been slower to recover. With that said, we are seeing encouraging signs that many of the casual chains we do business with have seen a pickup in demand. We are prepared for potential strong recovery in chains, which at some point may outpace the growth of independence. With that said, we are not seeing that at this point in time as a combination of our independent restaurant mix and market share gains in that channel have driven strong performance. The recovery of this store is moving forward, though, at a slower pace than food service, as expected. There are bright spots within this business, including convenience stores, retail, value stores, and corrections. These channels have somewhat offset sizable declines in our theater and office coffee service businesses. And we're beginning to see signs of improvement as movie theaters begin to slowly reopen, We are cautiously optimistic that this business will continue to make headway. Similarly, as some workers begin to return to offices, we expect to see some improvement in our office coffee business. However, the prospect of a continued environment of work from home could keep this business below 2019 levels for some time. Importantly, however, we believe that this star still has a bright future, even if theater and office coffee do not fully recover. In fact, some of our businesses, like micro markets and micro kitchens, may benefit from different work patterns over the long run. Our top line recovery is exciting, but does require investment to support the business momentum. For example, we accelerated the pace of hiring, particularly drivers and warehouse workers. We also continue to support our sales forge, which is an integral piece of our ability to gain share, grow our business, and generate profit over the long term. With the sales recovery, we have also accrued bonus expense during fiscal 2021. We are purposefully staffing our business to support our growth profile and prepare for success in the coming fiscal year when we expect a more normal operating environment. Simply put, we are investing in our organization today to support the ability to generate higher sales and profit in the future. Jim will provide even more color on our cost items in a moment. The strong sales recovery also puts the supply fill rates under pressure. The labor headwinds that I just mentioned for our business are being felt by companies across the supply chain, from manufacturers to restaurants. Through this environment, our suppliers are working diligently to fill demand. On each of our quarterly earnings calls, you have heard us discuss the integration of Reinhart, which has met or exceeded our original expectations across the board We remain incredibly pleased with how the Reinhart organization has become a part of the PFT business. Let's now move to more recent trends, including an early look at the fiscal fourth quarter in April. As you know, in late March, we began lapping the shelter-in-place orders from 2020. As you'd expect, our dollar sales growth year over year quickly moved into the triple-digit percentage range. We believe it is more instructive to look at our current trends compared to 2019 to get a clearer picture how the recovery is progressing. In this analysis, we've included Reinhart and E.B. Brown pro forma results in the 2019 results. We are pleased to say that both our legacy performance food service and Reinhart segments pro forma dollar sales turned to positive growth versus 2019 in the third week of March and have remained positive since. In April, pro forma dollar sales for performance food service in Reinhardt accelerated to higher levels of growth compared to 2019. Vistar has not seen the same level of recovery but saw dollar sales essentially flat in April compared to 2019, including E.B. Brown. Keep in mind that these results are in spite of the fact that many markets have retained restrictions or are just beginning to return to a somewhat more normal operating environment. As I mentioned earlier on the call, we are investing to support this growth and are pleased with how our organization is situated for a full recovery. Before turning it over to Jim, I want to highlight how PFG associates go above and beyond their day-to-day business activities to give back to the community. In February, PFG worked with World Central Kitchen to supply Food for Kids Meals Inc., a Houston-based nonprofit organization serving preschool children facing hunger due to poverty. With PFG's support, World Central Kitchen was able to provide 42,000 meals following the destructive winter storms in Texas. In addition, PFG made a $50,000 donation to further support the work, providing nourishing meals for the communities in need. PFG proudly continues to focus efforts beyond our core business dynamics to support ways that we can help the communities we serve. With the generous spirit of our associates across the country, I look forward to sharing more of our company's good work in the months and years ahead. With that, I'm going to turn things over to Jim, who will give you more detail on third quarter and financial business.