Good morning, and thank you for joining our presentation. Just as a reminder, our remarks today could contain forward looking statements. Please review the cautionary forward looking statements section in our SEC filings for various factors that could cause actual results to differ materially from forward looking statements and projections. With that, I'll turn it over to John Heinbockel. John?
Thanks, Phil. And I'm happy to, do our next session here. It would be quite an understatement to say that a lot has changed, since ICR at this time last year. But we are getting closer, right, to a recovery, in the overall economy, and it would appear in in terms of food service consumption as well. And performance, you know, has done well in the context of that environment.
So we have with us today, CEO, George Holm CFO, Jim Hope, and you just heard from Bill. We're gonna divide this session, hopefully, into a a couple of, pieces, starting with a fireside chat, which will run maybe about, thirty minutes, thirty five minutes or so. And then, it would be terrific, to have some incoming q and a. You can send that to us, through the normal channel, that we've been using for this conference, and, hopefully, that will take us the remaining the remaining twenty or twenty five minutes. Minutes, and that will be our session today.
So let me start. You know, maybe, George, as we get closer here, right, to cycling COVID, the Salesforce has always been, you know, I think, one of the great differentiators for you. Size, quality, training, culture. Maybe talk about where we sit today, right, with the size of the Salesforce productivity, and then your thoughts, right, as we go into recovery mode, how you want to expand that, both legacy performance and Reinhart.
Well, when we, went into the shelter in place, we reduced the sales force slightly, but it was just the people that were with us less than ninety days we furloughed. And we have brought many of those back, some we did not bring back. So we're sitting with slightly less salespeople today in Performance Foodservice, and about the same in Reinhart as we had at the time. And I don't see anything changing for us when things come back, except getting back to some normalcy. I still see us growing our sales force, being very opportunistic where there's good people available.
I think they did a stellar job for us as we went into shelter in place. And, they were great at continuing the contact with customer, phone when it had to be phone in person when they were able to do it safely in person. And I see us just, you know, going back to that same rhythm that we were in.
Because I think pre COVID, right, you know, the the model, I think, right, was three to 4% annual growth roughly, and that in theory, that growth would contribute a point and a half, right, to case growth, at least independent case growth. Has COVID changed any of that?
You know?
Yeah.
A little bit. Right now, we're running average sales per salesperson, the highest we've ever run, which we did not expect. We're also running highest sales per customer that we've had. And that tells me that we can be probably more productive than we've been with our existing people. But it won't slow us down as far as hiring people goes.
I think we'll be a little bit more conscious around the, you know, kind of the quality and the experience of the people, and more opportunistic and less trying to hit some certain number.
How do you guys you you talk about the sales the Salesforce being more productive than they've ever been. How do you think about their capacity? Right? And, you know, what's what's the right, you know, level of capacity and when you start bumping up against, know, then maybe hitting ceiling? Well, you know, one the reasons that we have the higher average salesperson is that we did disperse some sales.
I mean, you know, we furloughed some people.
Yep. And we found out putting, even
in
a COVID environment, putting a real experienced person into that account versus it being somebody that had been with us less than ninety days, we improved our position in those accounts. So we learned a lot from that. And I think that moving forward, we should be able to continue to increase the sales that we per person. I mean, the days where we used to grow at twice the rate that we added people, I don't think those days are coming But I think we continue to do real well.
And how does the quality of available sales look compared to maybe, you know, pre COVID, you know, is I I would imagine there's a lot of quality people at subscale distributors, you know, who might be available and and, you know, might might be more comfortable, right, in a in a large organisation potentially?
Yeah, the quality of the people have been very good. You know, we, like anybody, we still struggle with hiring people without experience and getting them to do well. One of the things that we've done going through the COVID, too, is that so much of our product training, we've been able to get online and virtual and use it more than once. And our people have gotten pretty effective with it. So I don't think we're gonna need to pull them out of what they do for a living, for training, as much as we used to because we're gonna be able to do a lot of that online.
Sort of transitioning when you think about now growth post COVID and the two opportunities. Right? So new accounts and existing account penetration. Right? So may maybe, you know, look at both of those.
Where's the opportunity the greatest? Well those two. Yeah.
That's a good question. I mean, our lifeblood in this business has always been new accounts, because there's quite a turnover. I mean, you know, lot of people don't make it. We, in a reduced volume environment, were able to increase our average sales per customer. And I think a lot of that was that people are using less distributors than before.
Part of that may be a reflection of the volume. And we're in an interesting industry. I mean, when they don't have the same salesperson, sometimes what they'll do is go to that person they have the best relationship with or the person that has always been around, but they had a primary that was more important to them. And that's created a lot of opportunity for us. So I think as we go back into a normal environment, that we'll go back to that new account being our lifeblood.
But we're always trying to penetrate the account as well as we can, but the lifeblood is in the accounts.
And I think, I mean, your structure has been, some people have, right, you know, sort of business managers that that are that are looking specifically for new accounts. Yeah. I think for the most part, right, you've done most of your prospecting with the existing Salesforce. Is that, is that fair, and is that a structure that likely continues going forward?
Yeah. You know, we have companies that don't have anybody that searches for new business. And we have companies that have multiple, what they call a business development manager. So I think a lot of it is where that sales force is at level of maturity. So I don't think you can throw a blanket over our opcos and say they all do it a certain way.
We do both, but more so the existing salesperson, getting that business. You know, a lot of times you go out and you get an account if you're a business development person, and they're buying from you because they like something in your skill set or they like you personally or whatever the reason. And you can't just insert another person. So it's always much better when that salesperson has the pride of ownership, and they went out and they got the business, and it was their skills and their relationship that was able to get it done.
So you mentioned, a little more, existing account consolidation, right, lately. Maybe talk about that because that always struck me, right, that it was, you know, far too, dispersed in a lot of accounts, right, when you think about specialty suppliers and then having a couple of extra broadliners. You know, that there there's an economic, you would think, an economic incentive, to consolidate some of that share. Is that now finally happening?
Yeah. I I would say it happened going through this period of time. Now as to whether or not that'll continue, I, you know, I really can't say. Obviously, we would like to see that continue, particularly as our SKU base has gotten bigger and we're more, capable of, you know, of being close to a sole supplier to a customer. I think logic would tell me that if they've got comfortable with less people and they know they can count on them, think they're gonna stay with less suppliers.
And one mean, one of the challenges, right, for all of you was on the specialty side, you know, and maybe, you know, center of the plate and in produce, you know, that, there was a halo effect, right, that the specialists had in terms of quality. Now do you is that also changing where, you know, accounts are more willing to look at your center of the plate versus a specialist that they might not have done in the past?
That's an interesting thing to bring up. Our companies that are just specialty, which we don't have a lot, they've suffered the most. And center of the plate, we've done really well going through this. I think people are more comfortable. You know?
And and if we're perceived, say, as a broadliner, think people are more comfortable putting their center of the plate with the same person that that they're buying, you know, traditional groceries from.
The I wanted to now maybe transition a little bit, to Reinhart in particular. Right? So, you know, Reinhart happened just prior to, COVID. Although, you know, Reinhart's performance looks like it's actually been very good, you know, even, without a ton of synergy. Where where are we kinda broadly with the Reinhart integration?
You know, Salesforce, product, IT, etcetera.
Well, I'll speak to the the Salesforce, and then I'll I'll turn it over to Jim to speak to some of the other areas. I'll preface it with we're extremely pleased with with the acquisition. No surprises. The person who runs each one of those distribution centers is the same person that day we closed. The sales force is we've got our whole sales force on the same compensation system.
We were able to do that very quickly. Very well run company. Didn't have the ability to grow for whatever reason, and they're doing really well. We got a ways to go from a product standpoint, but we like a lot of the things they're doing from a product standpoint. And we haven't rationalized any distribution centers and don't see ourselves doing that in the in the near future.
With that, I'll turn it over to Jim. He can give you a much better feel around the synergies.
Yeah. Thanks, George. So that Reinhardt acquisition all in was a really, really good and successful acquisition for us. And and we think about all the things that are important in acquisition, one of the ones is the cultural fit and the the shape or the design of the organizational structure. And both of those were were really good fits and dovetailed right into PFG.
The they are, to a degree, relatively decentralized with good centralization on on back office activities that are farther away from the customer. And their leadership style and and the culture across the organization was exactly like ours, so much like ours. So we were we're really happy that we're able to keep the majority of the leadership in place, and and they've continued to thrive in our organization. There's been a lot of good best practice process sharing. They were they were a good process and disciplined company just like we are.
So the two companies have formed together and, you know, I'd I'd challenge anybody on any given day to try to to see a distinct difference between the two as it's really becoming one big broad line organization. From a synergy perspective, certainly right on track and and the largest the largest bucket of synergies or contribution was in the supplier procurement area and all that supplier program harmonization is is really gone well, and we've made considerable progress there. So we're very encouraged by what we see and and pleased with what we see at the same time.
You know, you know, maybe, George, you've done a lot of integrations. You haven't done obviously, you didn't you've never done any in this type of environment. Right? And culture's so important to you. So, you know, so maybe, you know, how did how did you attack, you know, managing and enhancing the Reinhart culture in this environment?
You know, was it was it a lot of Zoom? Because there's a lot of Nothing replaces being in there in person. But
Well, I did I did some of that too. Yeah. So did Jim, carefully. But, you know, I got to spend a good bit of time of them doing with them during the due diligence period. Went around to to everyone in the distribution centers.
And I knew a lot of them, had worked with a lot of them in the past, so that helped. But they just weren't surprises. I mean, we didn't surprise them with anything. They certainly didn't with us. It gave us, you know, time to to to really look close at their systems.
It's been, a weakness for us that we had so many different systems. They've been a big help on us. Given the customer one face, we work very hard on that, where we share customers, so that's been a big help. And, you know, we coexist extremely well. I mean, there's a lot of overlap in territory.
But when you got when you kinda got it together and everybody knows the ground rules and kinda how we operate, it it works fine.
The the one of the opportunities at Reinhart, right, is, have a good revenue base, you know, reasonably profitable, but, generating top line growth, right, you know, which was not quite, you know, the rate that you guys have had historically.
Yeah.
Maybe, you know, talk talk to that because I think part of that was also going to be accelerating investment in their Salesforce. Where do you stand with that? And how how quickly do you think post COVID they can re they can accelerate their top line?
Yeah. You know, we we've been more in that, you know, staying stable type of environment, particularly with, you know, with the pandemic we're dealing with. We have lapped, so we've got a, you know, a couple weeks with, you know, real good histories. And we're pleased. I mean, you know, we get a look every month, you know, at how we're doing and how they're doing versus the rest of the industry, and, we've kept the reporting separately.
And they certainly aren't performing at the level that the Performance Foodservice Salesforce is, but we didn't expect that early on, but continuous improvement. And I think we've probably got you know, a few more months where we wanna continue to see that, and then then we'll get a little bit more aggressive with with adding people on the side.
And just lastly, before we leave Reinhart, correct me if I'm wrong, but it it looks like if you try to triangulate right, from your your September quarter that their profitability has actually held up, really well.
Extremely well.
You know, some somewhat surprisingly. So, you know, what what do you what do you attribute that to?
Well, you know, part of it is the synergies. You know? That that's that's been a help. Kinda hard to put our finger on, you know, exactly. No real loss of business, no loss of people.
So as they started to get some traction and started to add accounts and started to get some things going, they didn't have stuff falling out of the bucket while they were throwing things in the bucket. So I think that's a lot of it as well. They've always been a company that that was well run, looked close at expenses. We've had some margin improvement, which has been, you know, real rewarding. A little bit better than we expected there.
And you just add all those things together, and and it's it's been very helpful for us.
One thing I wanted to do is go go back a little bit. I know new accounts are, you know, are gonna be more critical to growth going forward, but, you know, back sort of to existing account penetration. When you, look at and and sort of dissect that and where the opportunity lies for you. Right? Is there a a type of customer you know, you do really well with Italian.
Right? I imagine your share of Italian's higher than than some other cuisines. Is is there a particular account type where there's a really big existing account opportunity? And what type of products? You know, is it is it really center of the plate?
Well, center of the plate
is where we've done well, and we consider cheese to be center of the plate too. You know, that's big for us. But I wouldn't say there's specific type of accounts. You know, our legacy Roma companies, that's what they are. I mean, the bulk of their business is pizza and Italian, and they've done real well, partly because we've always gained share in that part of our business and partly because pizza travels well.
You know, it's good for pickup. It's good for delivery. But, you know, the delivery part of that, I'm sure it's helped with party people, but that's pretty dominated by the big chains that we don't do business with. Hispanic has always been good for us too, you know, real oriented to cheese. That's continued to do well.
But our share gains have been every type of restaurant, literally every type of restaurant we've seen between very modest share gains and pretty substantial share gains.
You know, when you, one of the things you've you've done really well, historically, right, is emerging businesses, emerging chains. Some of that's been pizza. Some of it's been, you know, quick casual. Where where does that sit today, and has COVID sort of interrupted that? You know, are we, you know, are we not are we not gonna see, you know, those emerging chains be as important as they were historically?
You know, there's it's it's like there's no in between right now. People that that were really dependent on indoor dining are suffering no matter chain, emerging chain, independent, doesn't matter. You know, they're suffering. You got a drive through. If you're not doing well, it's because you were a chain that was in some type of decline that existed even without COVID.
Also, not a lot of business has changed hands. You know, when you get some of these people to do an RFP every certain amount of years, most of those are just continued with theirs, added another year, done something like that. So not a lot of change there. I think that when things come back, I think the emerging chain will be just as important as they always were. You've got to look at them close and try to get in early, you know, make sure that you're treating them right, and that as they get bigger, that they're being treated as as a big account.
And I I think that's gonna continue to be important. A lot of creativity out there.
Do you do you well, on the on on that front, do you think ghost kitchens are how big is that gonna be? You know, is that is is that in and of itself an emerging channel that, you know, you think you can take disproportionate share in? Is it is it built or or is it not gonna you all think it's gonna be bigger, is it not gonna be?
I don't know about disproportional share. That's kind of a tough one to call, but we're doing a lot of business that way. And it's typically very streamlined product offering, obviously things that travel well. I think that's one of those things probably here to stay. I think that will, I think that, nice boost for party delivery.
I think there's a tipping point where, it's got to work for everybody, including the restaurateur, and they've got to make money, but they seem to be doing well. I think takeout, it's going to go down, certainly from these levels, down a lot. But I think it'll be higher than it was pre COVID. That's one of the things I think, I hope that will help our business grow. And, you know, we've got a lot of restaurateurs that have invested a lot of money in outdoor dining, and I think that that's here to stay too.
There's gonna be more outdoor dining. They're gonna stretch out, you know, based on the weather by, you know, heating or cooling. That that's that's another thing that's gonna be more than just a, you know, a COVID fad. That's gonna be around.
So transitioning to Vistar. Right? And so you think about you got a lot of channels, different share, different growth rates. So how do you think about managing the portfolio that is Vistar? You know, let let's say and I I know you purposely not taken resources out of that business because
Yeah.
Think there's there's growth to come in the future, but managing all of those channels and putting resources maybe towards some as opposed to others.
Well, that's our part of the business that's most impacted.
Right.
And, you know, a lot of the businesses in the workplace travel, people gathering in groups. So it's all the things people aren't doing today. Not really too concerned, in general with that business. I think that, as things come back, I think it's going to come back real strong. Probably slower than food service.
The only two parts of it that really concern me, I don't know that theaters will come back as big as they were. I guess I personally think they will, but that, you know, I hear a lot of people that have a different opinion. And then the workplace. Office coffee, particularly, I think, you know, could come back smaller. I think that a lot of companies, us included, have figured out that they don't quite need the number of people that they needed before, you know, based on, you know, they came back to the same revenue base.
So, you know, those things concern me, but also we have so many good things going on in in the Vistar part of the business. And then convenience Mhmm. Has done extremely well. Been been a real pleasant surprise.
The, because when you think about Vista, right, so, I mean, you you you use the same DCs, right, for the different channels. You may have a slightly different sales force, but let's say theater and office coffee is weaker and retail and ecommerce is stronger. Right? The degree to which you can shift those resources, you know, from one channel to another, there's there's a fair bit of flexibility, to do that. Correct?
Yeah. Because the SKU base is quite similar. So there's a definite ability to do that. And then we've opened another, automated pick and pack facility, in Pennsylvania. And then we've got another one that's opening soon in Reno, Nevada.
And that's helping, because the fulfillment side of our business is a good growth business for us. So, the company may look different, but it'll it'll produce really well. I've got all the confidence in the world in
And I and I don't think, correct me if I'm wrong, I I don't think that when you look at the Evista warehouses, I don't think there's any that's that are so reliant on theater and coffee that those particular locations, you know, are are being the the economics are being hurt, disproportionately. Is that that fair?
Yeah. I mean, anytime you take out, you know, fairly significant volumes, and you wanna make sure that you're not dialing the business all the way down, and you've gotta have the people in place that can handle that business, it's gonna impact you. But once again, I I I would say with Vistar, it's a slower recovery, but it'll be a good recovery.
Now you you you mentioned convenience. Right? So, there always seem to be a ton of potential with with the EV acquisition. Right? So, you know, maybe you start with when you think about when you think about, new new account, wins or new account attraction, there was always, a lot of potential there, pre COVID.
You know, where where does that sit now kinda post COVID? Like, your ability to pick up, new convenience store chains and geographies.
Yeah. We've we've done well with new accounts, mostly independent. Well, almost entirely independent. We did pick up a couple markets with some chain business. So we've opened a new facility in Tampa that started shipping the December.
And we have one opening in Raleigh that will start shipping next month. So those have been a big help. And, you know, we're still learning the business. We certainly bought a company that's got people that know the business extremely well. But, you know, we're still learning.
Food service got within the convenience store was pretty heavily impacted, particularly things that, like a roller grill. Nobody's going to pick product up in this kind of environment. But that's starting to come back. What's been real good for us is that we actually today do more food service business into convenience stores out of Performance Foodservice and Reinhart than we do out of Eby. So we expect to see that continue.
Pizza's been big for us. You know, we've got a good feeling about that business, but we need a little bit more time.
Well, you would think, right, the the longer term trends, right, in in that business, that, you know, they need to rely more on food service, right, if they're gonna differentiate themselves. You know, you you keep hearing, you know, they it sounds like they would like a lot of those operators might like to have more drive throughs, right, to, you know, to do more food service. You you would think that's a growth business for them. And so does your capabilities, your food service capabilities versus other convenience store distributors, is that is that a key advantage that can allow you to win business? Because that's a focus for them, and that's a strength for you.
Yeah. We we believe so. And, obviously, you know, we need to prove that out, but so far, so good.
And the you know, when when you look at the the other part of EB, right, was, getting a foot into tobacco and, you know, what that could do for you versus other, retailers who also sold tobacco and would want that on the same truck. I think that was that was part of the, right, the case for EV. Where does that sit? And is is that a is that a big opportunity to
I believe it could be a big opportunity. We've only had very small wins Yeah. So far. And I think that's another one of those things post COVID when when people are looking at maybe doing something different. That's when I think our opportunities will come.
But so far, it's it's been really small wins.
One of the, you know, I guess when you think about the competitive landscape so it's it's sort of been interesting. Right? There haven't been you go back to March, and you thought there was gonna be a lot of, fallout from your competitors, the smaller ones. So there hasn't been as much of that. But, you know, is now the real opportunity that they may may struggle, right, to invest in sales, inventory, capabilities in the recovery phase, right, that now that's the opportunity against some of the smaller subscale operators?
Yeah. Working capital is a big part of our business. And you can have a heavily impacted P and L and at the same time improve your balance sheet as accounts receivable goes down and inventory goes down. And I think it has been very resilient, and I think that our competitors, we've got a lot of tough competitors, they have hung in there really, really well. But I think if there's going to be opportunities, particularly from an M and A standpoint, it's going to come when it's time to reload on inventory and reload receivables as business comes back.
And some people may not want to go they may have had enough at this point of dealing with the business and may not want to do that. So we're always hopeful from an M and A standpoint. We've got a lot of white space in the West that that were either not present at all or were were subscale, basically, you know, a legacy Roma. So we're hopeful. But so far, I you know, we haven't we just haven't seen a lot of weakness in competitors.
When when is the time to, reload reload, you know, or, you know, lean into inventory? You know, obviously, you don't you don't wanna do it too soon, too quickly, but, you know, are we is is it really kinda summertime, warm weather, vaccine, etcetera?
Yeah. I mean, it's it's it's it's a tough one. You wanna comment there, Jim?
Yeah. Thanks, George. I was gonna say that that could be the right time. We watch it really close. What we've seen though in in the past, at least four or five months is our operating companies who make the the biggest decisions about how much inventory to carry have really done a good job of of managing that closely.
Been very efficient with with working capital investments, same time seeing no deterioration in service levels. So I I think that could be right. At the same time, whenever that comes, we'll be ready. We have a really strong, well fortified balance sheet, and we'll be prepared to do what we need to do to keep keep providing the service levels our customers are accustomed to.
The you know, so so, George, you you brought up the topic of m and a. One of one of the challenges, right, for, I think, for for the industry the last, you know, six to nine months, figuring out where EBITDA lands. Right? And, right, the the sellers wanna use 19, and the buyers wanna use 20. And so, yeah, it always struck me that we probably needed to get to the end of twenty one or early twenty two before we knew the answer to that question.
Is that is that fair, or do you think, you know, we'll we'll get No.
We can
get you quicker?
You know, I think that's very fair. I mean, it's tough to use 19 numbers because you don't know what things are gonna come back. And I don't think anybody is gonna sell based on their 2020 numbers. It's food service. Right.
But that's their business. You know, as we get, you know, get in the earlier stages of more of a recovery, you know, you get two willing people, and you can sit down and work it out. Yeah. You know, that that could happen. We certainly are are willing partners to do that.
But I I think that it's it's stalled right now, and it it it may be a
Well and once once you determine what the the applicable, EBITDA base is, do you think the the value of let's just think about tuck ins in particular, but the value has changed. Right? Because it used to be sort of low double digit multiples on whatever you thought the EBITDA was. Has that now changed permanently? Or once we're in recovery mode, no?
It goes back to that level.
You know, I I think that's to be determined. I I don't have a great feel there yet.
The the other question I think is sort of interesting. Right? When you look at learnings from COVID. Right? Because I think, you know, on on a continuum, you guys have been really good at driving market share.
You've been less focused, right, on optimizing profit margin, right, which is which I think, you know, there's a lot of share opportunities. That's the right approach. But did you learn anything through COVID where you said we can be more efficient in these areas without impacting our ability to grow share?
We definitely learned. And I guess what I the remark I would make is that if if sales come back the market comes back to normal, we'll come back with lower expense ratios. I mean, we learned, when you do $620,000,000 a week, and two weeks later, you do $2.90, you tend to learn a little bit, you know, as to what you really need to operate the business. But we're also getting a lot of benefit that I don't think will necessarily be long term, when you've got workers' comp that's really dropped because you had all experienced people out there, and it's the inexperienced ones that are more likely to get injured. You know, health care.
I mean, people couldn't go to a doctor, so you can imagine expenses went down. I'm sure there's other areas that Jim could probably add to that. But the only thing that I would be confident to say is that we should come back with lower expense ratios than we were pre COVID. And you
think the biggest differences, you know, are, what, you know, is it warehouse labor cost primarily? You know, warehouse productivity?
Yeah. I mean, those are both things that we benefited. And are those benefits because of the time and the circumstances and, you know, that you're basically operating your business with all quite experienced people. You know, those are things that we'll find out, and that's why we are really hesitant to give any hard numbers, because we know these things aren't all permanent. One of the things that Jim has mentioned is travel.
I mean, our travel costs, you can imagine how much lower that is. Well, I can assure you we've learned that we don't need to travel as much as we did before, and there are things that we can do, like we're doing this meeting right now that can be done Zoom. But we will travel more. I mean, we've got to get back out there and see people and, see customers in particular. It's very important.
So we'll come back. Look, I keep repeating myself, but we'll come back with lower expense ratios. But, as to what degree, I don't know. And that's provided the volume comes back.
Well, think, tell me if I'm wrong, both of your peers have announced somewhat sizable, right, you know, cost reduction, programs. You you haven't announced anything. Did did you guys do any of that, you know, and just didn't wanna talk about it, or did you not do it because, you know, you you you wanted to make sure and your top line's been better than theirs, but you wanted to make sure that you had the people for the recovery.
Yeah. We wanted to make sure we had the people. And, you know, we had markets where we're more than recovered, where we're doing a good bit more business than we were a year ago. And as soon as we picked up and we started to do more business than a year ago, we had the same problems we had a year ago, and that's getting the right amount of labor. It's not easy in today's world to get that done.
I mean, we dialed the business back, or the way I like to say it, we dialed it back, but we didn't shut it off. And yet, we've got shareholders to be responsible and make sure we get our expenses as low as we can get them. And hopefully we kind of balance those two things. I'm sure we didn't do it perfectly, but We didn't make any long term structural changes where we could say, we've got this many dollars that for sure aren't coming back. That we did not do.
John, what one of the things we did do though early on as you expect a a company like us to do is we made a very long and exhaustive list of operating expense levers that we could pull when we needed to pull them. And we all reviewed them as a senior team and along with the field, we made decisions to to early on pull quite a few of those levers to get OpEx where George mentioned. So the the approach was was detailed and disciplined, and we we knew what we're doing, but no. We we didn't publicize it.
Right. Did you know, the the the synergy target that you had for Reinhart always seemed, say, conservative, you know, with with plenty of room. You know, I I always thought on the idea that, you know, there was going to be a level of reinvestment, right, back into their business specifically. Is is that fair? And then has COVID changed in your mind either the, you know, feasibility of that number or the timing to realization?
Or is it, you know, basically still on on track as it was a year ago?
Well, we're certainly on track. How the company performs and the impact we have on the business long term are more important actually than than I mean, they're nice when you get them, but if you disrupt the business to get it done, that's not very good. So, we are investing. We've completed a new facility in Wisconsin with them.
We're doing a major addition in Pittsburgh. We're building a new facility in Louisiana. So we'll invest. We, at this point, haven't seen a reason to consolidate. There's certainly synergies there if we consolidate it, but the synergies may come, with other issues that we're not prepared for right now.
So I I I I'm comfortable that we'll get that number. Jim can comment on that as well. But we're not gonna do anything real disruptive right now. We're gonna continue to coexist.
Yeah. That that's absolutely concur. And I think the one thing I would
add
is, it it could have been easy for for companies to slow down integration and synergy capture during the last six months, and and, we took it as an opportunity to apply bandwidth and resources to go out and continue pushing through integration and synergy capture, and and the team responded exceptionally well.
Is the, the the new facilities you mentioned, they are replacement facilities? Is that is that is that right? And
did you Yeah. One is replacement. One is just a major addition, and then the other one also is a replacement. Yes.
And when you think about right. Because one of the opportunities without closing any facilities is to reroute and reduce stem miles. Was was that a a was that a sizable part or or any part of the 50,000,000? And I I I believe if it was, that was toward the tail end, right, of your time period.
Yeah. You know, John, we we're not in a position where we wanna give up any capacity at all. Consolidating would be, certainly synergistic, but I think the downside would be greater right now. So we're we feel good about about hitting the synergy number, and, you know, we feel better than ever about the growth of the business. And that that that's really, the important part, is being able to get both those things done.
And as we sort of get toward the end here, maybe one maybe have you address bigger, right, larger scale M and A. When you think putting aside being able to value business, when you think, from a balance sheet and an operational perspective, that becomes something where you have the bandwidth, you know, and and are willing to take that on.
Well, we don't suffer for bandwidth to do that. That that's for sure. And and, Jim, you should you should probably speak to just capital structure and our confidence there.
Yeah. We're very confident in our capital structure. Look. I'm so pleased that we've we've the the capital market debt market responded really well when when we called for help and supported us. We've done, I think, all the right things the company should do as far as strengthening the balance sheet, but also preserving the liquidity that that we added.
That incremental liquidity, for the most part, is in place. So we're we're in very good shape from a liquidity standpoint.
The you know, when you think about mix of business, right, because, George, you had talked about that you think your operating cost structure will be more efficient. Given the recovery you've seen, right, particularly in your independent business, it doesn't sound like there are any structural headwinds to mix that would prevent you from getting back
to or
exceeding prior profitability levels.
Today, no. I mean, our independent business has declined at a much lower rate than our chain business. Part of that is because so much of our chain business is casual dining, which has suffered pretty heavy. I personally this is just my opinion, but I think that when things come back, I think there's a lot of pent up demand. And I think a lot of the chains are going to do well.
And we'll see what kind of happens to our mix then. But most of the chains we saw have retrenched somewhat. I mean, they've closed some units, but not to the degree I think it's probably independents have. So when that demand comes back, we may find ourselves in a position we haven't been in in a long time in the industry, in a somewhat healthy position to be in. But there may be more demand than supply.
But those are single purpose buildings, so somebody's going to end up in those restaurants. It's rare that you see a restaurant go out of business and something come in other than a restaurant.
What what are you what are you seeing on the the larger chain, new account front? I don't think we've seen much movement there.
There there really hasn't been a lot of movement. I think it's been more people just, you know, signing on with whatever agreement they have for a longer period of time. But, you know, we're always pursuing, and and we would you know, where we got capacity, we we certainly have an interest in in the chain business.
I think maybe I'm wrong, but I think capacity is somewhat limited on on that side. Would you have to take business out to to accommodate new business? You're okay.
For the most part, we would have to do that. You know, we've really only done that once. It's not something we like doing. But we're we're, you know, we're always looking, John. If the right opportunity came along, we we would certainly look close at it.
But we don't like telling customers we're not gonna do business with them anymore. So we'd rather get more capacity.
And and maybe, maybe one last big picture topic. You know, we've talked we've talked a lot about, you know, how COVID's changed, you know, how you run your business. But I'm I'm thinking when you look
at product
assortment, right, you know, what you're gonna, keep in your in your warehouses, pricing, you know, routing, you know, as as you think about the the profound impacts, right, structurally that that maybe COVID has had, not just now, but I'm saying for the next couple of years. You know, what what would the impact be on any of that? Is is there is there less structural assortment? Is there you know, has been there a change in routing for
a while? Yeah. You know, routing was obviously a challenge. You know, most of that is not a manual process, and our people did really a great job. I think it's one of the things that helped us from a sales standpoint, is that they were able to pivot quick and change these routes and still keep them reasonably efficient and make sure that we take care of the customer.
We have had some SKU consolidation, mostly done by our manufacturers. You know, a lot of them reduced their SKU offering, and some fairly substantially, particularly those that are strong in retail, and they were running those lines nonstop, and they didn't want to stop and go to a different packaging. They just kept producing product and reducing the SKU base. So that's an important part of it. But we need, in most of our distribution centers, we need more SKUs, not less SKUs.
Those would be the primary impacts, operational impacts from COVID, you think?
Yeah. You know, the tough areas were routing and purchasing, you know, because our customer base changed and our item base changed a good bit. We saw, I don't think it was huge, but we had many customers who reduced their menu or reduced their menu at least a a period of time to get some complexity out of the business and to have a a menu that was better suited for items that traveled well as, you know, as the bulk of the business was takeout.
Right. Well, I think, we have a few minutes left, but I think we've covered a lot of ground.
We sure have.
You know, we don't have any questions in the queue, so I think we'll we'll stop it there. And I thank you guys. This has been extremely helpful.
Yeah. Thank you for your time, John.
Great. Thank you, guys.
Bye bye.