西斯柯 (SYY) 2010 Q2 法說會逐字稿

Good day, everyone. Thank you for holding and welcome to the SYSCO second quarter fiscal 2010 earnings call. As a reminder, today's call is being recorded. At this time for opening remarks and introductions, I'd like to turn it over to Neil Russell, Vice President Investor Relations.

Thank you, Kevin, and good morning everyone. Thank you for joining us for SYSCO's second quarter fiscal 2010 conference call. On today's call, you will hear from Bill DeLaney, our Chief Executive Officer; Ken Spitler, our Vice Chairman, President, and Chief Operating Officer; and Chris Kreidler, our Chief Financial Officer.

Before we begin, please note that statements made in the course of this presentation that state the Company's or Management's intentions, beliefs, expectations, or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ in a material manner. Additional information concerning the factors that could cause actual results to differ in a material manner from those in the forward-looking statements is contained in the Company's SEC filings, including but not limited to risk factors contained in the Company's annual report on Form 10-K for the year ended June 27th, 2009, and in the Company's press release issued earlier this morning. Please understand that all comparisons given during the call refer to changes between the second quarter of fiscal 2010 and the second quarter of fiscal 2009, unless otherwise noted. Also, all comments about earnings per share refer to diluted earnings per share unless otherwise noted.

With that out of the way, I'll turn the call over to our Chief Executive Officer, Bill DeLaney.

Thank you, Neil, and good morning everyone. In the second quarter of fiscal 2010, SYSCO reported net earnings of $268 million and earnings per share of $0.45, which is up 12.5% compared to the prior year. Sales trends improved throughout the quarter, with the year-over-year rate of decline slowing to only 3%, a result largely driven by deflation. Notwithstanding the challenging economic conditions, operating margin improved due in part to the favorable impact of COLI, as well as excellent cost control throughout the organization. Ken will discuss this in more detail in a few moments. Despite these challenging times, we remain steadfast in our commitment to helping our customers achieve their objectives. We are executing well and reinvesting in our business.

Challenging times have historically provided opportunities for SYSCO to further differentiate ourselves in the marketplace, because our customers increasingly look to us for support and business solutions. As the industry leader, we have an unsurpassed ability to leverage our size and scale to benefit our customers. Our financial results for the quarter reflect the disciplined operational execution and excellent customer service our operating companies deliver each and every day. While encouraged by our financial and operating performance to date, we remain committed to continuous improvement and consistently look for opportunities to gain additional efficiencies in this competitive industry. For example, our business transformation project remains on track with the objectives discussed at our Investor Day in December. We expect the improvements driven by this multi-year project will allow us to grow sales, reduce operating costs, and more effectively utilize data in our decision making.

Now I'll turn things over to Ken so he can provide further detail on this and other operational improvements and how we performed in the second quarter.

Thanks, Bill. I'd like to start by thanking our operating companies for their hard work during the quarter. These results reflect their dedication to our customers and to helping our business succeed in challenging times. Our sales during the quarter were impacted by deflation of 3.5%, which is measured as the estimated change in the cost of products we buy. Deflation from dairy and beef products had the largest impact, with the balance spread across several categories. On a year-over-year basis, deflation pressures appear to be moderating from the highs we saw earlier in the quarter. Our operating margin improved to 5.2% in the second quarter. While COLI contributed to this improvement, we also significantly reduced payroll expenses and improved productivity in all aspects of our business. We have continued to manage headcount in a manner consistent with the sales environment throughout the entire organization. Our headcount is down 4% year-over-year and 10% over two years as we improve productivity throughout the Company.

Operationally, we continue to focus on productivity, which is evident in many of our key operating metrics on a year-over-year basis. But the progress our operating companies have made is even more clear on a two-year basis. For example, in our US broadline companies, our diesel gallon usage is about flat with last year's second quarter, but is down more than 10% compared to the second quarter of 2008. Cases per trip increased 3% year-over-year and 4% versus two years ago. Warehouse cases per man hour improved 8% year-over-year and 15% versus two years ago, and we improved our error frequency per cases shipped from an error rate of one out of 1,229 in the second quarter of 2008, to an error rate of one out of 1,799 this quarter.

Capital expenditures for the quarter totaled $138 million. Looking ahead, we still expect capital spending for the full year to be in the range of $600 million to $650 million, as we continue to invest in our business. This spending includes maintenance items, such as ongoing fleet replacement and facility repairs, as well as growth items such as expansions of our current facilities, potential foldouts, and technology. Technology spend includes capital related to our business transformation project.

Now I'll turn it over to Chris for a discussion of our financial results for the quarter.

Thank you, Ken. As previously discussed, for the second quarter of fiscal 2010, sales were down 3%, and estimated deflation was 3.5%. As Ken just mentioned, deflation appears to be moderating from highs we saw earlier in the quarter. Sales were also impacted by foreign exchange rates, which increased sales by 1.2%, and the impact of acquisitions, which increased sales by 0.6%. While case volume remains negative early in the quarter, it turned positive towards the end of the period. Operating margin in the second quarter improved to 5.2% from 4.6% last year, a 60 basis point improvement. In addition, operating costs were lower in the second quarter by $96 million.

Ken walked through the main drivers earlier and I'd like to review the numbers in a little more detail now. The decline in operating cost was primarily due a $37 million benefit from the year-over-year change in value related to the performance of COLI, and a $25 million decline in payroll expense. Operating expenses also improved by $29 million due to lower fuel expenses. However, fuel surcharges, which are reflected in gross margin, were also lower during the period, offsetting most of the benefit from lower fuel expense.

Net earnings for the second quarter increased 12.9% to $268 million. Similarly, EPS for the quarter increased 12.5% to $0.45 per share. The $0.45 per share includes a $0.01 favorable impact related to an increase in the cash surrender value of COLI, compared to $0.40 in the prior year, which included a $0.05 negative impact from COLI.

Turning to a brief update on our business transformation initiative, you'll recall that at our Investor Day in December, we shared with you our expectation that the incremental impact of this project would decrease diluted EPS in fiscal 2010 by an estimated $0.05 per share. The project remains on track, and our expectations have not changed.

Cash flow from operations for the first half of the fiscal year was $144 million, compared to $562 million in the prior year period. Cash flow from operations was impacted by IRS settlement payments which totaled $422 million in the first half of the year. Additionally, cash flow in the first half of last year was impacted by the timing of certain other tax payments. Last year in the second quarter, we were allowed to defer approximately $280 million in tax payments until the third quarter, which was a benefit allowed to Houston area companies in the wake of Hurricane Ike. As you would expect, this year we were not afforded the same deferral and the net effect causes our tax payments this year to appear significantly greater than last year.

In closing, I'd like to thank all our associates for their hard work during the second quarter and for your interest in SYSCO. With that, operator, we'll take some questions.

Thanks very much. (Operator Instructions). First up on the roster we have John Heinbockel with Goldman Sachs.

Couple of things. What's been the trend this quarter, last quarter, in average drop size?

It's declining slightly, John.

That's -- obviously deflation is weighing on that. Do you think it's knocked down as much as deflation because you're seeing some weaker guys drop out and that's raising the average?

I don't know about the weaker guys part of it, but I think it is pretty much deflation.

Okay. So it might be down as much as the rate of deflation you're seeing.

Yes.

I think our guys are doing a good job, our folks are doing a good job managing the pieces, given there's still a lot of pressure in the marketplace, obviously.

What do you think -- when you think about incremental profit margin on something like that, as you go from 3% deflation to zero or a little bit positive, the incremental margin on that has got to be fairly high. Have you looked at what that might be? It's got to be double-digit, I would imagine. Maybe even higher than that.

John, to be honest with you, we really don't look at it like that. What we look at is more along the lines of your first question. The key economic metric for us is gross profit dollars per stop. And as long as we can manage that, even through these difficult times when penetration was off some and pieces were down -- if we can somehow compete to minimize that loss of pieces, obviously price our products appropriately, that's what we do. And generally that works, that usually ends up with good results for us.

Okay. Secondly, ERP cost or business transformation cost, what was that? Do you have that first half of the year that we can back into the second half?

Yes, let me -- I'll preview a little of what you'll see in the 10-Q. As we said in December, the total cost of the project is $900 million. We expect that the total spend in 2010 -- or we do expect now to be somewhere between $250 million and $275 million. The first half we spent approximately one-third of that, and so the rest will be in the second half of the year. The capital portion of that, $250 million to $275 million, is estimated to be about $160 million to $175 million. So the incremental impact from business transformation we expect to be $40 million to $50 million, which would be a reduction in operating income this year. That's our $0.05 a share that we we previewed in December.

And would the OpEx part of that also be one-third, two-third split?

It's roughly correct, yes.

Finally, what's the environment right now? I imagine it hasn't changed much since December, but the environment acquisition-wise? Is there much difference, domestic versus international?

The focus is more domestic right now, John, I would say to you. We certainly are continuing to try to develop relationships where that makes sense. I would say to your point, the environment's not a lot different. I would say also, our environment continues to be very proactive. We're looking at as much as we can. We're not waiting for the calls to come in, but I think it's still you could characterize it as an environment where if you don't need to sell your business right now, you're probably not going to be overly interested in doing it.

The problem is more quality of asset as opposed to price? I know price was a problem in the past.

That all comes together once you're talking to people. I think right now, folks -- they've got earnings pressure. That's not necessarily a great way to start a negotiation in terms of applying a multiple. Maybe there's just an element that everyone is so focused on running their business right now that they don't really look at it that way. I think it will pick up. We've been saying that for a while. We've been disappointed that we haven't seen more activity, but I can tell you internally, we're tightening up our process and making sure that we're exploring things that make sense.

Okay. Thanks.

Next up we have a question from JPMorgan's John Ivankoe.

Great. Hi. Thanks. I was wondering if you could illuminate the comment that case volumes have stabilized toward the end of the second quarter. Casual dining at least on a reported basis stayed very weak, with traffic down approaching 5%. QSR from what we understand got worse in the fourth quarter relative to the third quarter. So I mean, if you could just give us a little bit of a look through in terms of what types of accounts that you have, restaurants or other business, that's doing really well for you? And if you could also put that comment in terms of how much of the stabilization in sales trends is just from the fact that you're taking much more share per account?

Got a lot there, John.

The question was a lot shorter than the comment. I apologize. Can you answer?

I'll do the best I can. I think the question is how did the quarter look for us in terms of increasing our cases through our operation. And it got -- sequentially it got better as we went along to the point of -- December was relative to the rest of the environment a pretty good month where we saw nice little bump in cases. That's, hence, probably the rest of the question is how does it look in January, and we're still seeing positive cases, but it's declined from the December numbers. So we're still optimistic, because it generally does that anyway. So it's following a standard pattern, if you will, but the good news is it's still positive.

As far as there's still closures going on in the restaurant business, you're still seeing certain parts of the industry that you guys know about that are declining in case sales. Part of our business too is not related to the -- necessarily to the restaurant business, which is healthcare is -- no pun intended, quite healthy and growing, and of course our institutional business, schools and those things have maintained their sales.

So the other part is, yes, I think we are taking share. It's still one of those difficult questions to answer for you, because it's hard to know -- it's hard to sort out the declining cases in certain customer bases and where you're gaining share in other cases. So it's really hard to sort out. It's just at the end of the day, the real measurement that we've got to use is are we increasing our cases, and the answer to that's yes. So did I get them all?

Yes, you did. But if you wouldn't mind, I mean, can you even look through a little bit more especially on your broadline business? I mean, is there geography specifically that's doing very well? Is there a type of account within broadlines, perhaps restaurants, that's doing particularly well, relative to for example the first quarter?

Sure. We still continue to have rough go in the Midwest and in the Florida area and somewhat on the southern West Coast. So that kind of remains the same. The South and Southwest is doing pretty good. The Northeast is holding its own. Northwest seems to be holding its own. Within the category of restaurants, it seems to us that the family style restaurant, the restaurant that is value-driven, is doing pretty well right now.

Great. Thank you.

If I could just jump in real quick.

And the top end is still suffering, meaning $100 a meal and up kind of places are still trailing pretty badly. Does that help?

Thank you.

Move on to our next question, that's Mark Wiltamuth at Morgan Stanley.

Hi. Good morning. Just curious, if you look at your headcount reduction, about 4%, how much of that do you think will hold when we start coming out of things and volumes really start picking up? Seems to me like you're going to have to start adding back bodies when the case volume starts picking up.

We're already starting to add back bodies in terms of the sales force sequentially. We're up -- I was looking at that number, it's about 75 to 100 we've added sequentially over the last few months. So yes, we've already started adding back salespeople because we think that the environment's right for us to start continuing to leverage to grow sales. Then, it becomes a matter of -- we have improved some productivity. We're still improving productivity. It's not going to be a one for one bring-back, although it does have a lot to do with cases.

To tell you that I have that exactly in mind, but I can tell you this, that we will be a leaner organization as the sales start to grow, because as we've been forced by this environment, we've gotten a lot more productive when you -- when you have an error rate in our business of one in 1,800, and then you -- just in the last from 2008 to 2009 to 2010, we've gone from 695 cases to 701 to 722, those are all the things that you don't back up on. You don't need to back up on. Continuous improvement, your cases per man hour, those are big numbers to us and we're getting improvement on those. Just because the economy gets better, those numbers don't go down. So we've really been force -- in some ways been forced to do, to get better faster, and we've still got a lot of initiatives out there that we talked about in December to really improve our productivity. So long story short there, I rambled a little bit, I'm sorry. But these improvements are sticking.

Okay. And if you could just give us a little snapshot, you talked a little bit about share and which segments are doing better or worse and parts of the country are doing better or worse, but how is price competition out there right now? What are you seeing in that regard?

It's tough. Very aggressive competitors on the price front. That's not our first rodeo there, of course. So we're used to being the market leader, so we're used to staving off price attacks. It's been a lot more frequent, and of course the customer base gets a little more receptive. So we've had to be cautiously defensive about that, but, yes, it's -- there's definitely an uptick to it.

And you've generally been matching where you've been meeting competition?

We've done what we -- I wouldn't say we always match the price, but that's a waterfall that you don't want to go over. But we found ways to hang onto our business without destroying our margins, which is no mean trick.

Okay. Thank you very much.

Question now from Ajay Jain at Hapoalim Securities.

Hi, good morning. I just wanted to go back to the question about the improved case volume trends. If I understood correctly, it sounds like volumes stabilized further in November and December relative to what you presented at the Analyst Day. Is there any readthrough for the Indiana RDC based on what you're seeing right now? Are you close to a decision there?

We're pretty close. What we would like to see is, as you know, our business, Ajay, it's -- we make this quarter in March, and if we continue to see good case growth through end of -- through March, that we'll feel very comfortable about going forward. We couldn't put a shovel in the ground in Indiana right now anyway. So we will -- I will feel comfortable after we see the March numbers and the quarter numbers. I feel pretty comfortable that we're going to go forward with it. But we would like to see those numbers stabilize. We need case -- we need positive cases to make the RDC go round, and we won't build it until we see it.

It's Bill. I just want to clarify something in terms of how you caveated that question. I would say to you that the volume trends we've seen since the Analyst Day are very consistent with what we talked about at the Analyst Day. We were starting to see an uptick in late November, December, very mild and modest, and that's how it's been. But to Ken's point, this is a unique quarter, and until we get into March it's really hard to drive the conclusions.

Fair enough. Just on the improvement in comparisons for bad debt expense, my question is whether that improvement is a function of the operating environment just getting better, or if there's something specific that you're seeing with your customers in terms of their credit quality?

It's -- we managed the credit the same way we've managed it for 35 years. So we're -- we just have been very careful and cautious, and I can't really tell you whether it's the -- I think we have good customer quality at SYSCO and that's one of the things that you're seeing in our write-offs, is that our customers are managing their business pretty well.

I think if you look at last year, you'll see the third quarter, we really took a pretty substantial hit by our standards. So we'll be going up against that this quarter. So again, our folks do a good job managing credit. We've been fortunate. Part of that is customer quality. We haven't had any big hits, and hopefully that will continue. I would still tell you it's fragile out there.

Okay. And finally, just on the headcount reduction, I just want to clarify one thing. It sounded like you're hiring more salespeople. So I'm just trying to reconcile the additional headcount in marketing associates that Ken talked about with the the decrease in payroll cost that you just reported. Should we infer you're adding more customer contact personnel, but lowering headcount in other areas of the Company?

Not necessarily, no. It's sequential, first of all. We're still down from like over a year ago, but we're not -- it's strictly marketing associates we're adding.

Okay. So just -- I'm still trying to reconcile the delta there. So if your payroll costs are down, year-over-year, you're saying that's all marketing associate driven?

No, what we're saying is we're down year-over-year in headcount including in sales and down in payroll. And then what Ken was saying earlier is that as we're managing the business going forward, sequentially, we're beginning to add salespeople, but we're still down in salespeople year-over-year. So that's consistent with the payroll number.

I got you. Okay. Thank you very much.

Meredith Adler at Barclays is next.

Thanks. Hey, guys.

Hey, Meredith.

Could we talk a little first just about fuel? I know you had less fuel cost, but also less fuel surcharge. Fuel prices are starting to go up again. Can you talk a little bit about how you think that plays out for the rest of the year?

Yes, we of course very concerned about how it plays out the rest of the year. And everything that we're seeing, reading, being coached on tells us that what we're seeing about -- seeing as a barrel price right now is about what we can expect the rest of the year. So we're not looking --

Sorry. Go ahead.

So we're not looking for any big increases.

And we do have some purchased. We still have some forward contracts out there as well, Meredith, for about one-third.

About 40%, yes. So we've protected this as much as we think we need to. So again, we're not diesel experts. We just try to make the year-over-year comparison flat. But we're, again, who knows. So our prediction is and from our experts that we rely on that next year is going to be relatively flat to today.

And the fuel surcharges would come back into place if they needed to?

They could at a certain level, yes, they're always out there. We don't see that being triggered at this level.

Okay. And then maybe -- we haven't spoken about pension costs in a long time, but is there anything to just comment on there?

Well, can you be more specific?

Pension expense.

I'm sure there is, Meredith. I just don't want to go down the wrong road here.

Pension expense up meaningfully this year versus last year?

In the K, we detailed what pension expense would be for the year, and we're on track on that. We don't have or foresee any significant multi employer pension payments at this point, and as you recall, we took a write-off or write-down on that last year, I believe in the third quarter.

Okay.

So it's up about $8 million a quarter, I think, roughly.

Yes, $8 million to $9 million.

I'd like to just talk back to the question about promotional environment. I'm just wondering whether the gross margin ended up being pretty much in line with what you had expected for the quarter? You did have a pretty good gross margin performance last quarter, but we're about flat this quarter. Was there a surprise in that to you or was that in line to your expectation?

I'd say it's in line with our expectation, given Ken's characterization of the market. It's extremely competitive out there. It remains that way. I think we'll be fighting margins here for a while.

And then my final question is to just go back to what Chris was saying about the business transformation process. I think I'm a little thick this morning. The numbers that Chris you talked about, the $900 million, that's both CapEx and operating expenses. And then you gave specific numbers, and I was just trying to make sure the numbers you -- $250 million to $275 million in the first half, is that a combination of CapEx and operating expenses?

No. Let me go back through it just to make sure we're clear. If you recall back in December, we said $900 million was the total cost of the project, both capital and operating expense. We also shared a bar chart that said that we expected 2010 to be about $275 million. We are now saying, and you'll see this in the Q, we expect that to be a range of $250 million to $275 million for the year, so that's both operating expense and capital. The capital portion of that we expect to be $160 million to $175 million. Okay. That's the full year number. Right? And then we gave the breakout of we've spent about one-third of that to date and roughly one-third both on the capital side and the operating expense side, so the remainder will be in the back half of the year.

That's very clear now. Thank you very much.

You're welcome.

Moving on now to Andrew Wolf at BB&T Capital Markets.

Hey. Just on the last -- the expenses with the SAP and the transformation project. So $100 million for you all is roughly about $0.10 a share. Does that mean you had $0.05 in there last year or am I just doing -- what am I missing here? I'm also having a thickness issue.

Not a thickness. It's a new topic. We haven't talked about it a lot. We know there's going to be some education process here. We use the term incremental not to mean year-over-year. We discussed in December, we put a lot of folks that were already here at SYSCO onto this project. I think 312 was the number that we talked about in December. So those people were in our run rates, our expense run rates last year. Those folks are now working on the project. When we talk about a $900 million project, that's the total cost, including those people, but those people aren't incremental expense. Okay. When we talk about year-over-year -- that was the number I gave earlier -- we expect the expense year year-over-year to be about $40 million to $50 million additional.

It was already -- let's use $100 million as a round number. It was already -- you were already spending $50 million to $60 million?

Round numbers, that's about right.

You'd already hired those folks. Got it. Thank you.

That's correct. We're now looking at all the outside folks that we had to hire to bring in to manage the projects.

Okay. The tax rate, that is -- is that swinging around just on the COLI? Is that why it was -- ?

Primarily the COLI and the tax settlement, if you're looking at the first half. Tax settlement obviously affected the tax rate to the tune of I think 300 basis points, 320 basis points. And then COLI, which is not deductible for income tax purposes, affected it both this year and last year, different directions.

Got it. On the consolidation side, Ken or Bill or both you guys, read a recent news story out of Michigan where this company up there, Clark Foodservice, is apparently closing one of their DCs and looks like they're doing an orderly liquidation and SYSCO's coming in and servicing those customers. Is this -- ?

We were the white knight here.

Okay.

Was an orderly shutdown, at best.

Okay. You guys had referenced that, that as an industry leader you have a certain responsibility, and I understand that. But what I really want to know is I assume in the long run this -- getting these customers is probably a good thing. Is this kind of liquidation something you think is sort of a one-off, or is this something if the environment doesn't pick up, that we might see some more of?

I think we're going to see some more of it, Andy. They just run up to the post here and it's over. And they do care about their employees, they want a little help with their inventory. We can do all of that for them. And are glad to do it. It's good for us, it's good for them.

So on consolidation, kind of looks like if things don't get better, this could happen. And if things get better, SYSCO might be able to hit the bids on some improving businesses? Is that somewhat realistic way to look at how consolidation could -- ?

I'm not sure I understand that question, Andy.

Say the environment gets better and these reluctant sellers, their EBITDA goes up, might be easier to buy them?

We certainly hope so. Like I say, our antenna's up and we're -- we're doing what we can do, but they've got to get to a point where they want to sell their business and negotiate in a reasonable way. And as Ken said, sometimes -- these types of deals you're talking about right now are -- sometimes these ran out of fumes at the finish line. I mean, it's not always protracted discussions.

Okay. Lastly, on inflation, are you -- or diesel, has it switched to inflation yet overall? And can you give a little bit of a category, some of the big categories, little bit of a category flavor?

It hasn't switched. It continues to moderate, and the categories would be, in terms of the deflation categories, the ones that are driving it would be -- up to this point would have been the dairy, beef, that type of thing. Going forward, some of this, like a lot of these numbers, you've got to wrap some numbers here pretty soon. So we would expect the dairy deflation pressure to ease, and beef's probably a harder one to call on the supply side. There's not an oversupply, but the demand continues to be weak and that seems to be keeping those prices under pressure. So we'll have to see there. So we're hoping to see a continuation of the moderation, if you will, and at some point see some mild inflation. But it's hard to call in terms of timing.

Yes. We're not sure of the timing, but from our merchandising folks, them talking to manufacturers, there is a feeling and a prediction of inflation that come in those significantly big areas of beef, pork, poultry, dairy. So that would be good news for us. I hope that's right.

Again, when you start talking inflation with us, especially in this environment, the best scenario for us is 2 to 3 points. We're not -- we certainly wouldn't be fans of returning to where we were 1.5 years ago where it's 6 and 8 points, because our customers have enough challenges as it is without that.

Got it. All right. Thanks a lot.

(Operator Instructions). We'll go now to Greg Badishkanian at Citi.

Great. Thanks. Hey, just a question with respect to discounting by your customers. How's that changed versus maybe last quarter? Any particular segment discounting, either less or more heavily, when you look at QSR versus casual dining chains versus independents?

It's coming from all fronts.

Is it a little bit more -- ?

There's even -- we're getting some pressure on the chain business, so it's everywhere.

I'm thinking more are your customers discounting to their -- to the end user?

Oh, sorry. I don't think it's any more or less than what we've seen in the past.

I think our customers are getting smarter on the discounting. Where it works in some form or fashion, I'm sure they are, but there's been some other people out there that have tried some things that they haven't gotten the return for it.

And then you also spoke about productivity, which you guys have done an amazing job over the last two years or so. Obviously, you're hiring a few more people back, but what's the real opportunity there to cut costs so that you can improve efficiencies further in 2010 calendar versus what you did in calendar 2009? Or have you basically taken up all the low-hanging fruit?

Well, none of it's low-hanging. It all takes a lot of work. We'll still got plenty of room out there to improve. And we're still -- we've still got -- we've got 10 initiatives prior to the installation of our first SAP that we want to finish that will give us another pretty significant boost in our productivity. Just to give you an example is, we continue -- we're going to continue to run on our SWIMS platform which is our operating system in the warehouse, as opposed to SAPs. So we have an initiative out there that is a best practices initiative that we will -- it's all -- I call it switch-driven, but doing certain things a certain way, and all of our operating companies within three months are going to go best practices, and we'll have that finalized in July. We should see a really nice uptick in across the board productivity. So -- but again, we have 10 of those out there. That is just one of them. To say that we're all done is not true. We've still got lots of room. We've still got lots of improvement. There are some definitive spots where we run up against physically, we'll probably be able to get to about 750 to 760 cases per truck, and then you run out of room. But there's lots of other productivity measures that we continue to increase on and continue to have room to do.

Greg, I mean, I just, real quick, I think when you read the Q, I think you'll see the tone on this issue is what Ken said. We certainly see room for improvement. There's a lot going on with that. The rate of improvement is not going to be what you've seen over the last 12 to 18 months, unless we get some case growth.

Nice to see the improvements in volume and overall trends. So keep up the good work.

Keep in mind too that most of these are case-driven, and we've got cases [going] down. You get some case improvement, you get improvement just by the nature of the math. So I mean, we've got headwinds all over the place and still improving.

Absolutely.

Thanks.

With that, ladies and gentlemen, there are no other questions in the roster. So we thank you for your participation in the Q&A session and for joining us today. That will conclude today's conference call. Again, have a good day and thanks for joining.