Greetings and welcome to the Chefs' Warehouse Second Quarter 2020 Earnings Conference Call. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Alex Aldous, General Counsel, Corporate Secretary and Chief Government Relations Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone. With me on today's call are Chris Pappas, Founder, Chairman and CEO; and Jim Leddy, our CFO. By now, you should have access to our second quarter 2020 earnings press release. It can also be found at www.chefswarehouse.com under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial measures, including, among others, historical and estimated EBITDA and adjusted EBITDA as well as both historical and estimated adjusted net income and adjusted earnings per share. These measurements are not calculated in accordance with GAAP and may be calculated differently in similarly titled non-GAAP financial measures used by other companies. Quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements, including statements regarding our estimated financial performance. Such forward-looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's release. Others are discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q, which are available on the SEC website. Today, we are going to provide a business update and go over our second quarter results in detail. Then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

Thank you, Alex, and thank you all for joining our second quarter 2020 earnings call. The second quarter was one of the most challenging quarters in our company's history. Our team's focus was centered on supporting our customers and supplier partners during the very fluid and gradual transition from limited service, takeout and curbside operations as well as developing and enhancing our direct-to-consumer Shop Like a Chef platform. In addition we took a number of employment strength in our balance sheet and right sized our cost structure to ensure Chefs will eventually get back in the path to growth and improving profitability that we were on prior to this period of volatility and uncertainty driven by the COVID-19 pandemic. During the quarter, we saw gradual improvement from April activity, averaging approximately 40% prior year's revenues to June averaging approximately 60% of prior year revenue. While reopening in stages were different for each market, our largest markets in the Northeast, Mid Atlantic and West Coast were delayed by a number of weeks due to the wide spread social activity in early June. Later in June delays in full opening in these key markets continue due to the observed resurgence of COVID cases in certain states. During the quarter, organic net sales were 57.8% lower versus the prior year quarter. Specialty sales were down 68.2% organically over the prior year, which was driven by a reduction in customers of approximately 56.3% and lower placements of approximately 69.1%, a reduction in specialty cases by 68.3%, organic found were approximately 51.3% lower than the prior year quarter. Gross profit margins decreased approximately 222 basis points during the quarter. Gross margin of specialty category decreased 641 basis points as compared to the second quarter of 2019 while gross margin in the center of the plain…

Thank you, Chris, and good afternoon, everyone. Our net sales for the quarter ended June 26, 2020 decreased approximately 51.3% to $200.5 million from $411 million in the second quarter of 2019. The decrease in net sales was a result of the decline in organic sales of approximately 57.8% as well as the contribution of sales from acquisitions which added approximately 6.5% sales growth for the quarter. Net inflation was 3.1% in the second quarter consisting of 0.2% inflation in our specialty category and inflation of 6.7% in our center-of-the-plate category versus the prior year quarter. Gross profit decreased 55.4% to $47.4 million for the second quarter of 2020 versus $106.5 million for the second quarter of 2019. Gross profit margins decreased approximately 222 basis points to 23.7%. Gross profit and margin were significantly impacted by additional reserve adjustments or inventory valuation loss of approximately $5.5 million due to the expected extended impact of COVID-19 on certain markets and certain customer openings. Flat net specialty inflation was driven by above average price increases in dairy and cheese categories offset by significant deflation in bakery and produce categories. Second quarter inflation in center-of-the- plate category was driven by broad-based higher pricing across beef categories as well as continued higher percentage of overall sales attributed to our prime and other premium cuts sales in our Allen Brothers division. Total operating expense decreased approximately 19.95 to $72.8 million for the second quarter of 2020 from $90.9 million for the second quarter of 2019. Lower cost associated with compensation and benefits as well as distribution related cost were the primary driver of the decrease in operating expense in the quarter. On an adjusted basis, operating expenses decreased 24% year-over-year. As a percentage of net sales, adjusted operating expenses were 30.5% for the second quarter…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Chris Mandeville with Jefferies. Please proceed with your question.

Good morning, guys. Chris, can I start off just asking with respect to the exposure you guys have in the various COVID hotspots around the country? Maybe you can talk a little bit about the recent performance, how that looked relative to say New York City where the pandemic is more or less well under control.

If there's any good news for Chef really it's that where getting -- the hotspots right now where some of our smallest businesses. So Texas, Arizona, obviously Florida, it’s off season, so it hasn't really been a tremendous headwind for us. Obviously it affects the business but it's really getting New York inside dining going, California Dining going California, Chicago is open, so we were looking at our numbers today, Chris and obviously, we had expected more to be in a better place by now. Even though we did budget kind of at the levels that we're at. So it's not a big surprise. So obviously, we were more optimistic. But today, besides the holiday week, today was actually like our best day since the pandemic. So we're starting to see our numbers creeping up into the 60s compared to last year. So our goal was to get to in the 70s. We said that, we right sized our overhead to be profitable again. At 70-plus-percent of last year. So we're starting to inch closer and closer to that goal. And if there's any optimistic part of this is that, without New York really being open, and California in-house dining being open, we can get back right now into the 60s. Gives me a lot of optimism.

I think I just said Chris that, I think a lot of the surveys you’ve seen out there showed negative same-store sales July versus June. I think that's been pretty prevalent across the country. And we were able to maintain kind of a flat level as we saw more of our independent customers open. And saw a little bit of decline in some of the retail that we had been selling during the first months of the pandemic. But being able to maintain that 60% while same-store sales across the country were lower. We saw that as a positive.

Okay. That’s actually very helpful. And then just Chris, as we think about trying to accomplish reaching that 75% run rate goal by the end of the calendar year. As you just kind of alluded to you expect to kind of being a better place right now but in light of certain states electing not to reopen indoor dining, how should we think about your ability to get to that 75% run rate by year-end? And really I guess I'm curious about the performance you've seen thus far, how influential has the growth of outdoor dining been to your business be it that, I think a lot of folks within the investment community are concerned about how that might not necessarily be available for the industry as we move into the cooler season of fall and winter?

Sure. Well, the good news is that we do a lot of business in warm states so I think outdoor dining is going to be very prevalent out west and Florida as the season starts in some of the Southern states obviously. Again, I keep saying it as a white paper that came out about the flexibility and innovation of independent restaurants which is a big part of who we sell. And if you go through New York, Chicago you'll start to see streets being closed, whole outdoor gardens being planted outside of restaurants, they're adding tables obviously take out is through the roof. So our customers are survivors and they're going to find ways I think obviously we're watching the medical breakthroughs on therapeutics and the talks of vaccines. But I really feel that management's job right now is to protect the balance sheet and this will pass. It's not a matter of if, it's just when. And that's kind of why we strengthen our balance sheet to get to the other side of this and take advantage of situations. Not everybody will make it, we know that. Not all our customers will make it. I think that’s why we took such a big reserve for bad debt and bad inventory. I think we were really conservative. And we’re starting to see the benefits of our balance sheet. We've been hiring people from -- and when I say, we're just not going out to hire, we're getting people that have tremendous experience and reputation in the industry who want to join Chef who have sales, who want to bring their customers to Chef. And that's a tremendous positive on a platform that I've been building with this team for 35-plus-years. We look at it as get to the other side, get through the winter and sunshine will come out eventually. Restaurants, some will close, a lot of will reopen. We're already seeing -- we’re having openings during the pandemic. People love restaurants. So at the end of the day, I think we'll have a stronger team. We've learned how to be leaner and we'll just -- we'll go with the flow and then ride the tide as we get through this really difficult time. But I’m really proud of what the team has been able to do. We've preserved our cash. We've got a strong balance sheet and we have a stronger team than ever coming out of this thing.

Okay. And then the final one for me before I hop back to the queue here. Jim, you guys have made some very solid progress with respect to the reduction in OpEx. I think you noted that June OpEx are down close to 33% versus down 20% for the full quarter. So maybe you can just go back gaining a little bit and disclose kind of what were the primary drivers there to get you there and how much more progress can be made in the coming quarter or two and to what extent you can offer up any color on what represents a variable opportunity versus a fixed opportunity that’d be helpful as well.

Sure. Thanks for the question, Chris. So, look, I think if you -- we're not adding back the COVID-related reserves which in the first half of the year totaled almost $25 million inventory and AR. So when you look at the first half of the year and then the cadence of Q2, first half of the year very close to breakeven. When you take adjusted EBITDA and you back out what we’re calling the COVID-related reserves which are truly related COVID, obviously we have inventory reserves as a normal course of business like every distributor but not at the exponential rate that -- that's happening as well as on the AR. So in terms of Q2 cadence, once again, backing up the reserves that we talked about in our prepared remarks, it's really the April loss where we were at 40% of revenue. May -- as we built volume, right-sized the cost structure, May and June we moved more towards breakeven and then even to a slight profitable position on an adjusted basis once again backing out the COVID-related reserve. So we feel that we’ve put the cost structure in a place where we're striking the right balance between managing the short-term volatility. We are actually, as volume is building, gradually layering in volume-related variable cost and doing that in a very measured way to manage the business. And we haven't had any cash burn since the 4.5 months or five months that we've been in this. So that cost structure work by the team has greatly contributed to that. What we're trying to balance is the short term, the medium term and, as Chris talked about, the long term. We feel that we have the liquidity and the cost structure to get us through this period of volatility. It's not going to be completely even as we ramp up to that kind of 70% to 75% of pro-forma prior year that our goal. That operating leverage will eventually come as we build that way. It won't be completely even as we build routes and continue the high-touch service that Chef’s is known for. But we will get the operating leverage as we build towards that.

Our next question comes from line Peter Saleh with BTIG. Please proceed with your question.

Great. Thanks for taking the question. Jim, I just want to get some clarity. I know you guys commented on the June operating expense and the cuts you guys have made. Were you burning cash in June or was that kind of more of a breakeven type level on the cash side in June?

Well, we haven't burned cash really any week since March 16th. And really that's been a combination of, as I mentioned, ex the non-cash reserves essentially breakeven from adjusted profitability perspective on a cash basis and then really some incredible working capital management by our teams and that's our collection teams, our sales teams, our procurement teams, and really all of our people across the company. We've been collecting more on a weekly basis than we've been selling and that's you can see from our balance sheet in our release, AR has come down 40% since the beginning of the year or the end of last year. Inventories come down 30%. And so, we feel good about where we put the risk adjustment from a reserve perspective. And we feel good about managing the quiddity from here as Chris mentioned to keep the balance sheet strong and really kind of get us through this I think what everybody views as a short to medium-term period of volatility.

Great. Good to hear. Chris, can you just talk about the -- maybe the customer churn. Have you seen -- I know, it still might be early, but have you seen many of your customers, restaurant partners permanently closing? Do you guys have any sense of how many you may lose and how many you may pick up this year given it's kind of an off year for the industry?

Sure. So what I could say is that, we are picking up a very, very nice increase in new customers. I think that a lot of companies just were not prepared to have a service level like ours. So, I was pleasantly surprised to see so many new customers coming on board. You always have to remember that we have a 10% to 14% natural attrition rate. So restaurants are always closing. So I think a lot of the restaurants that have closed that won't open probably were going to close anyway. I think that the last to come is in the big cities, some of the restaurants that really depend on international travel, local offices being -- the customer is coming in on a daily basis. I think those will be the last to reopen. [Indiscernible] hasn’t opened let's say our Midtown Manhattan. But what we’re seeing is our business is increasing in the suburbs where people -- a lot of people have second homes and are staying or stay vacations. We think that will continue. We think that we’re seeing a lot of innovation and entrepreneurialism in the cities. We're starting to see, like I said -- we’re starting to look more like Paris where you have big outdoor gardens and heat lamps. They're putting infrared blue lights on their air conditioning systems to purify the air. So necessity is the mother of inventions and restaurateurs are very innovative. They have to fight. They've always had slim margins. And we're starting to see that more and more. And starting -- looking at this week even with all the bad news that keeps circulating in the media, everybody loves headlines. We're starting to see more openings and we're starting to see the creeps start to go the positive way. I think including myself, a lot of people are getting tired of cooking. So I think we're starting to see that. There's places where -- where we are in Connecticut and parts of New York, COVID is down. So I think people are -- the fatigue is starting to set in and people are going out. They're wearing masks. They're going to their table and they're starting to feel more and more secure. So we think that especially with modern medicine and therapeutics, I think the confidence will start to build and it's getting through the next year, as you know. And the way I’m running the business at this point is to make sure by next summer we're in an incredible position going into 2022 to have an incredible team to really leverage our strengths and all the investments and really get that tremendous uptick once this is past us.

Peter, I would just say that, one positive that we’ve noted especially in July is that, we have certain regions that we've seen 70% to 75% of their -- what we classify as our independent restaurant customers or street customers opening really the restrictions are restricting demand. So we know that demand is there. It's restricted by the government regulations and restrictions, but it's positive to see that that level of openings kind of gradually getting there as we go through the summer.

Our next question comes from the line of Nicole Miller with Piper Sandler. Please proceed with your question.

Thank you. Good morning. Just a couple of quick ones. Chris, in the prepared commentary, you mentioned you know largest market. I'm assuming that's New York City or perhaps you define it as the northeast, but can you just you know help us understand how big is that in terms of sales mix?

Yeah. Nicole, I think we’d break it out. New York is Metro New York, so it includes half of Connecticut. A big part of New Jersey obviously, the five boroughs. So that is our largest business. So that was obviously in March and April was tremendously impacted. And I'm glad to see that starting to inch up in shop every day. So it is our biggest market. I don't think we’ve broken it out exactly, but I'm pleased to say that that market is coming back today. I'm pleased to see how it is starting to rebound.

And then you had someone in the prior question just mention about 75% of stores being opened in these markets that mobility is increasing and there's clearly restrictions. So let me ask the question this way. How many of your core customer base are back online in your platform today?

It's really different across every market. I mean, as you know, the regulations, the restrictions, and the state of COVID-19 Sturgeons, Nicola Sturgeon or resurgence, whatever you want to call it, is different across every market. So we're not disclosing a level but as I mentioned there -- it was very positive to see certain key markets where the level of openings are higher than the demand that we're seeing. And that's really driven by the current environment as well as the restrictions.

Yeah. I think what I can tell you, Nicole, is that there's a huge amount of our customers that have still not opened for various reasons. They got PPP money. They're writing it out. They want to wait. So to get into the 60s with so many of our core customers still not open and these restrictions, I'm kind of amazed sometimes. I mean I thought we'd be further. I thought the states would have opened up more, the in-house dining would open up more, the know 25% to 50% limit would have been better. But all that being said I think it's showing that the take out demand is increasing and people going to -- sitting outside and even sitting inside where they're allowed I think every day is getting better. So we’re taking it a day at a time. But I think all things considered and all the states that still are pretty much shut down, to be in the 60s, I'm pretty pleased today.

Thank you. And just a last one, what would you say about the payment terms? I'm sure there was some volatility in the middle part of the quarter but perhaps you're seeing a better trend in that way as well.

Yeah. Nicole, I think we mentioned on the last call from a working capital perspective, we've been focused on really working with our -- both our customer partners and our supplier partners on payment terms. And that's really contributed to the zero cash burn that we've had to date. And so we're continuing to do that. I think what we've been surprised -- pleasantly surprised with is the low number of actual bankruptcies that have actually happened among our customers. As Chris mentioned, there's a lot of customers that are kind of waiting in the wings and even customers that haven't opened yet have been open to working with us on payment terms. Now payment terms going forward for go-forward business obviously we're very focused on working capital management and also on supporting our customers. So every case is unique. But we've been seeing our DSOs come down from the peak. And it’s kind of been mid-quarter with where they reached the peak and we're very pleased with the reduction in the AR balance and where we are right now.

Our next question comes from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.

Hi. Good morning. Thanks for taking our questions. Was just hoping if -- wondering if you can help us understand and unpack maybe the sales, trying to just understand what your typical independent customer sales are tracking at within the kind of down 40% in June and July when you kind of unpack maybe what's happening across DTC, grocery and some new customers and market share gains? Just trying to understand how -- what's happening to your core customer and how long do you think that they can continue that kind of level?

Yeah. I think it's all over the place. Kelly. I can tell you that there’s customer is actually beating last year's numbers because so many people are working from home. So they're going out to eat in these neighborhoods. Our neighborhood would be a great example up here in Connecticut. There's more people here this summer than ever before and they're getting the benefit between outdoor dining. We have indoor dining in Connecticut as well and take out. Speaking to some of our top, top customers in the cities. They're all operating with skeleton crews and they're waiting for indoor dining. I mean, it's unbelievable to think that New York City still has no indoor dining and restaurants are open and they're doing take out and they're doing like I said, they're setting up beautiful gardens. I think actually there's going to be a contest in New York of who has the most beautiful outdoor dining available. And they're hiring designers to do their outdoor dining areas and make it more cozy and invite people to sit and especially as we're going into the fall. They're going to put all the outdoor heating available as well and covering it with tents. So they’re getting very creative. So I think it's all over the place and I think the super high end is going to be the last to go. It’s a smaller part of our business. Obviously, it’s a very prestigious part and -- but when you think about all the top, top Chef’s in the world they have their top two, three star Michelin restaurant. And then they have usually all they're more casual dining is where the volume is. So it's really upscale casual is our biggest business and we have an upscale casual takeout is becoming our big business. We could just see the volume and it's impressive of the support they're getting from their loyal clientele and people really wanting to support them. So I think it's all over the place at this point.

Kelly, I would just add that by far the preponderance of our sales growth from the 40% in April to the 60% in June and July has been with our core independent customers. Obviously, hospitality is not back yet, the hotels but country clubs and especially the suburban markets has been the growth engine of that. While B2C and retail have been good contributors during the crisis, it's still a smaller part of our business.

Okay. That's helpful. I guess just, anything that you can help us with just in terms of seasonality, just mentioned country clubs and outdoor dining and just how we could -- should be thinking about that into the next quarter or two? And how you're planning inventory around those dynamics?

Yeah. I mean, I think inventory, I think the team now has figured out that every day is like a startup. So we do sell a lot of non-perishables obviously, the perishables are the hardest parts. So customers are very understanding. So if you’re going to eat or you're doing takeout, you’re seeing more limited menus, you're seeing them running out of product and substituting, so I think that’s become the new norm. The know to expect that there will be products that will be sold out. We'd rather sell out than have products that are going bad or send customers stuff that's not up to par. So I think that's the new norm. And I think what you'll see in the fall is you'll see clubs continue with tents outside and heaters. That's already I think baked in. We know that that's going to exist. I always use Paris as the example because I've always been -- that impression has been on me since I started the business, how many outdoor cafes, how many people sit outside when you go to Europe. And I think you're starting to see that. I saw it in Florida, before we were shut out visiting Florida really without quarantine. So Naples was the first place I saw a street shut down and allowing tables and restaurants to serve in the streets. And I think you're going to see that more and more in places like New York and L.A. and San Francisco and Chicago. So I think that will be the new norm going into the fall time. I think we're going day by day with what we're hearing from the medical community and therapeutics. And following the trends today, we're starting to see that the infections are going down in the hotspots. Obviously, New York, Connecticut, Massachusetts is doing really well. So really -- we're really glad to see that going into August. And I think we’re -- Kelly, we're day by day and really again the focus is getting through this year. And that's why we strengthened the balance sheet and really getting ready as this thing starts to die down and one day normality comes back.

Hey, Kelly, I’ll just add that similar to the cost structure, the exponential COVID-related inventory reserves we've taken have really helped us right-size inventory from a go-forward basis. So as I mentioned earlier, every distribution company has inventory adjustments and reserves as your normal course of business. They're usually a very small percentage of our gross profit margin. I mean, we've been pretty consistent in the 25% to 26% range for the last few years. Excluding the reserves, we're actually in the higher end of that this year. So I think our team has done a good job of right-sizing that and really managing inventory toward -- to demand right now. And so that's how we're thinking about it going forward.

Okay. Thank you. That's helpful. And maybe just one other one here. Just curious if you’ve surveyed your customers, your core customers and have an understanding of how many of them took PPP loans, how they're feeling about that program and how important it is if there’s an additional extension or new program for independent restaurants there.

Yeah. I think most of them took PPP and I'm hopeful that this next round has another round of PPP for them. We work really closely. I'm on the board of [indiscernible] and some other organization, independent restaurants that are really lobbying. And I think Washington hears loud and clear. Again, I think it's over 15 million jobs, okay, in hospitality and they know that they cannot lose those jobs. So I think that -- I think the White House and Washington knows that they have to do everything possible to keep restaurants in business and get them to the other side of this. So, I'm hopeful that another round is coming. But I rarely have spoken to a customer who has not taken the PPP money.

Our next question comes from the line of Todd Brooks with C.L. King. Please proceed with your question.

Following up on Kelly's question specifically, I know it's an acronym [indiscernible] the restaurant relief bill that's making its way through Congress. Chris I didn't know if you had any knowledge of how it's progressing and maybe with its specific targeting towards independent restaurants your thoughts on how meaningful it could be for the Chefs’ customer base?

I think anything right now Todd is helpful. I'm hopeful having been on many other calls and speaking to the coalition that's driving it, if the -- and our lobbyists have really been pushing hard and we're getting optimistic a lot of senators are getting behind with their signatures that part of it should be to make sure that suppliers are getting paid. So we're really happy to see that. And I'm hopeful that is part of it. I think public companies like ourselves such small public companies, we're basically on our own. Thank God we have the ability to raise capital. But I think that they know that we are very important part of this. I mean obviously if there's no supplies, restaurants don't get products. So they’re realizing that we’re a very important part of that whole food chain and I think there’s a concerted effort to make sure that that money starts to flow back to us. I think as Jim said earlier that I’m really -- I’m not surprised, but it’s moving to see that our customers have made such a concerted effort to make sure that the money keeps flowing to us. I think that shows that there’s a lot of respect to the supply side. They know they’re going to need us on the other side. We are their banks, right? We give credit. So, a lot of our customers, we are their banking system. So, as they start to do more and more business and get back to normal, they're going to need healthy suppliers to be able to supply them and give them credit. So, I think from my seat today, I'm really pleased to see that the money is coming in. The bankruptcies have -- there have been some bankruptcies, but not nearly as many as I think the media was expecting, and our customers are fighters. I think they're finding ways to renegotiate their leases and run skeleton crews and get to the other side because this is what they do for a living. They're not going to become analysts and they’re not going to become bankers. They’re not going to become lawyers. This is what they do. They run restaurants and they're going to fight.

Okay. Great. And then just following up, when you look to your supplier partners, kind of health of the supply chain, financial health of kind of key suppliers and what are you seeing there, are you having to second source any key products because of any sort of stress on the supply chain side?

Yeah. I know there was -- there might have been some blips especially in the beginning that demand at retail was so tremendous. So, some things like flour, I would hear, that we were selling out of, and obviously, some of the cleaning supplies, but I’m not hearing a lot of noise right now. Again, I think what I was most proud of building this business was that our supply sources were over 45 countries, over 2,000 suppliers. So we kind of had redundancies in just about everything. And our customers are right now very understanding. If you're going to run out of, say, a Tuscan olive oil, they'll take one from Puglia, they'll take one from California. I think the fresh was the most challenged. A lot of farmers -- a lot of what they produce was mainly for foodservice. So I think there was a lot of damage and people got hurt. And I think they've gotten some aid. So I'm glad to hear that. So it's really from the fresh side I'm not hearing tremendous issues right now. So I'm pleased to give you that information. But the good thing about fresh is it comes in daily. So you're constantly restocking. You're not taking two, three months of inventory like we do on a lot of our dry goods. And products like dairy, your milk and cream and product like that is constantly coming in every day. So you can kind of control that. And then other things like most of our cheeses, our Parmigiano and products that age, they have plenty of life on them. So I think we’re in a pretty good spot.

Okay. Great. And then just final question for me. Jim, the working capital performance really has been very impressive especially considering the environment. If you look at the receivable base now, I guess how healthy is the aging relative to where we were maybe four, six weeks ago? And if you look at reserves that were taken, what do you think is the right window to judge if you're going to fully use reserves taken for bad debt? Is that more towards the end of the year as we work through some PPP funding, or what are the thoughts there? Thank you.

Well. Thanks for the question, Todd. I think -- look, I think given the size of the reserve that we took in the first quarter and how we look at the aging now and the number of flexible payment plans that we've been able to work out with hundreds of our customers, we feel good about the age balance. Obviously, it has a little bit of an impact on our capacity on our revolver, but we paid down $60 million of that. And so, we have created additional capacity there. So, there’s no impact there. I think we feel good about the reserve given the level of collections and the current low level of bankruptcies that we've seen, and the conversations that we're having with our customers as they open up and we support them. We feel good about, I mean, especially the net of reserves, the 40% decline since the end of last year in our AR balance. Similar to the inventory decline, it makes us feel good about where we are from an AR and an inventory, both of those perspectives.

Our next question comes from the line of Ben Klieve with National Securities Corporation. Please proceed with your question.

All right. Thanks for taking my question. Just one quick one from me here, kind of as a piggyback to a lot of the conversation on inventory levels, one of the kind of trends that we've seen is that restaurants are really kind of simplifying their menus to reduce their inventory level. Can you comment on, first of all, if this kind of menu simplification as the trend that you're seeing and kind of a large scale? And if so, do you anticipate that this kind of meaningfully lowers the revenue or profit per customer, or is this kind of really just kind of shift spend and profit to a more concentrated SKU count.

Yeah. But again restaurants, right now, they just want to get to the other side of this. So, they're very creative. The inventory that I see moving shifts every day depending on the price of the product. So if you get a real big spike in a lot of the beef products that you're going to see a lot more seafood and chicken on the menu. You're seeing a lot of, I mean, a lot of healthy products being sold, people are gorging on produce now in the summertime and legumes and grains. And at the same time our protein business is doing remarkably well. So there's a lot of I guess that the barbecues, the comfort food, the hamburgers, steaks, chicken breasts, pork chops. So, it's all over the place, I think they are limiting. I think they have to keep it interesting. So I could just see from my own habits, I'm ordering for four or five different restaurants constantly during the week and there's always specials. So I think that the menus are a lot more limited and I think there's more specials. So they're taking advantage of where products do take tips. They'll buy and they'll create specials and that's really the great part about independent restaurants is their flexibility. Where the menu is semi-fixed but it does change on a daily basis.

Great. Thanks for taking my questions. I'll get back in queue here.

Great. Thank you.

Thank you. We've reached the end of the question-and-answer session and with that the conclusion of today's call. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.