Performance Food pany(PFGC) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total case volume increased by 8.4% in Q2 2021 compared to the prior year, driven by the acquisition of Reinhart. Excluding Reinhart, case volume declined by 16.9% [26][27] - Net sales grew by 12.8% in Q2 2021 to $6.8 billion, with Reinhart contributing approximately $1.3 billion to net sales [27] - Gross profit increased by 14% to $811.1 million, with gross profit margin at 11.8%, slightly up from 11.7% in the prior year [29] - Net income declined by 57.3% year-over-year to $17.6 million, while adjusted EBITDA rose by 10.6% to $158 million [32] Business Line Data and Key Metrics Changes - Food service segment net sales grew by 27% to $4.9 billion, with EBITDA increasing by 36.7% to $155.3 million [33] - Vistar segment net sales decreased by 11.9% to $2 billion, with EBITDA declining by 31.6% [33] Market Data and Key Metrics Changes - Independent case volume rose by 26.5% including Reinhart, and was down only 5% when excluding the acquisition [26][27] - The company noted a modest rebound in sales trends in January 2021, aligning more closely with year-over-year comparisons from October and November 2020 [9][18] Company Strategy and Development Direction - The integration of Reinhart is progressing as expected, with anticipated annualized cost synergies of approximately $15 million by the third full fiscal year post-acquisition [11] - The company is focused on long-term growth, investing in capacity and expansion into new lines of business, while maintaining a disciplined approach to capital allocation [20][37] - The company aims to leverage its strong liquidity position of about $1.9 billion to pursue potential M&A opportunities in the future [36][37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a surge in restaurant volume once public gatherings become more comfortable, preparing for this with appropriate inventory levels [10][39] - The company anticipates a slower recovery in certain segments like theater and office coffee services, but expects overall profitability to improve as conditions normalize [15][39] - Management highlighted the importance of community support and ESG initiatives during challenging times, reflecting a commitment to social responsibility [22] Other Important Information - The company reported a significant focus on safety and health, which contributed to lower operating expenses due to improved medical and safety experience rates [30][108] - The company published its first annual ESG report, emphasizing sustainability and social responsibility as key focus areas [22] Q&A Session Summary Question: Growth in Independent Sales - Management noted that several markets are experiencing growth in independent sales compared to the previous year, particularly in warmer areas, while some major markets remain challenged [44] Question: Vistar Business Performance - Management indicated gradual improvement in sales for Vistar, with significant contributions from the Eby-Brown convenience store business [49][51] Question: Investment for COVID Recovery - Management emphasized a long-term investment strategy, focusing on capacity and avoiding disruptions during recovery, while being prepared for potential labor market challenges [56][60] Question: Profitability by Channel in Vistar - Management confirmed that Vistar's profitability remains strong, with concerns primarily around theater and office coffee service channels, but potential growth in micro markets [70] Question: M&A Opportunities - Management is actively looking for acquisition opportunities that align culturally and strategically, similar to past successful acquisitions like Reinhart [74][76]