Good morning and welcome to Sysco's Third Quarter Fiscal Year 2019 Conference Call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions. I would like to turn the call over to Neil Russell, Vice President of Investor Relations, Communications and Treasurer. Please go ahead.

Good morning, everyone, and welcome to Sysco's third quarter fiscal 2019 earnings call. Joining me in Houston today are Tom Bené, our Chairman, President and Chief Executive Officer; and Joel Grade, our Chief Financial Officer. Before we begin, please note that statements made during this presentation that states 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 and actual results could differ in a material manner. Additional information about factors that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings. This includes, but is not limited to, risk factors contained in our annual report on Form 10-K for the year ended June 30, 2018, subsequent SEC filings, and in the news release issued earlier this morning. A copy of these materials can be found in the Investors section at sysco.com or via Sysco's IR App. Non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures are included at the end of the presentation slides and can also be found in the Investors section of our website. To ensure that we have sufficient time to answer all questions, we'd like to ask each participant to limit their time today to one question and one follow-up. At this time, I'd like to turn the call over to our Chairman, President and Chief Executive Officer, Tom Bené. Tom Bené: Good morning, everyone, and thank you all for joining us. I'd like to start off this morning with an overview of our third quarter performance and a discussion around our business segment and the key highlights for the quarter. Following that, Joel will cover…

Thank you Tom and good morning everyone. I'd like to provide you with additional financial details surrounding our performance for the quarter. As Tom mentioned earlier, we saw improved year-over-year results for the third quarter. Although we saw some softness in the top line, our earnings reflect solid expense management and strong adjusted operating income growth which are in line with what we've previously stated and our results of our enterprise-wide transformational initiatives. These initiatives showed our streamlined efficiencies and allow us to reinvest in the business to facilitate continued growth include, our finance transformation roadmap, smart spending and the Canadian regionalization initiatives. For the third quarter of fiscal 2019, total Sysco sales grew 2.2%. Foreign exchange rates negatively affected total Sysco sales by approximately 1.1%. In our U.S. Broadline business we experienced 2.3% inflation driven by a few categories including the frozen potato, poultry and meat categories and we are managing this modest increase in inflation well. Gross profit in third quarter increased 2.9% and gross margin increased 14 basis points while adjusted operating expenses decreased by 0.4% resulting in strong adjusted operating income growth of 16.6% to $620 million. Changes in foreign exchange rates decreased adjusted operating income by 34 basis points. Although it will vary from quarter-to-quarter we are focused on maintaining the 150 basis point gap between gross profit dollars and operating expense dollars that we committed to as part of our 3-year plan in order to achieve our adjusted operating income growth targets. Turning to earnings per share, our adjusted earnings per share for the quarter increased $0.12 to $0.79 per share. Our EPS results this quarter were impacted by our strong operating income, adjusted tax rate, foreign exchange impact and stock option exercises. I would now like to discuss our tax rate for the…

[Operator Instructions] Your first question is from Christopher Mandeville from Jefferies. Your line is open.

Hey, good morning. Can you speak to the gross margin improvement in the quarter and maybe help us understand [those reference] [ph] impacts by order of magnitude? And then Tom or Joel as it relates to private label penetration, it was again expansion but it was one of the lower rates we've seen in recent quarters. So maybe you could help us understand as to whether or not it was an anomaly and we can return back to that 50 to 60 bps of expansion going forward or any color would be appreciated.

Yeah. Sure, Chris, good morning. It's Joel. I'll start. The way to think about that again it's really up balanced across some of the levers I would say, but I mean certainly our continued opportunities in our Sysco Brand, certainly are a strong driver as well as continued category management efforts where we continue to again obviously it's not what it was five years ago when we had this giant year-over-year jump, but the reality of it is we continue to enhance our relationships with our suppliers and continue to drive category management as well across. Again there are business and so I think those are a couple of areas that certainly are driving again [indiscernible] like a margin percentage, but again I'm really talking about what we think about most and that is our gross profit dollars. We obviously also have some favorable benefits of some inflation. Inflation in our world clearly is something that ultimately certainly in the moderate range it's at today is a good driver of opportunities again to move as we continue to push cost of goods through our customers and so that's certainly beneficial in terms of the dollars and gross profit. And I would say it's not necessarily at the levels of that detrimental really against the comments that I think we're managing these cost of goods inflation well. And I think that's really, really due to the fact that this is -- yes, there's ton of inflation really in our wheelhouse in terms of where those functions best. So, I don't really say those are some of the main drivers of what we're looking at here and just in general some of the tools that you heard about in the past in terms of again managements continue to help us drive the margins in a positive way. Tom Bené: Hey Chris this is Tom. Just maybe just two other things I reinforce as well. We did get some positive year-over-year benefit on the inbound freight side which as we've talked in the past does impact gross margin. And then your question around Sysco Brand, we look at 20 basis point improvement as a very positive number still as long as that continues to move in the right direction. That's a reflection for us of a couple of things. One, our customers are still reacting positively to all Sysco brands. And two, we continue to bring innovative ideas and solutions to the market. So, we actually view that to be a solid number, while it might be a little bit less than the growth that you've seen in a couple of quarters, it's still a really good number.

Okay. And then just my final question would be -- and you brought it up Joel inflation. What should we be expecting in the coming quarter? And if there's a willingness with you guys be able to disclose organic case growth quarter-to-date?

Yes. And so I mean I think just on your question on inflation I mean I think certainly our forecast is to continue to see I'd say moderate level of inflation as we move forward, certainly over the next couple of quarters. There's nothing that jumps up necessarily that would be really significant in terms of the overall inflation numbers. So, I would think we expect certainly an additional moderate level of inflation over the next couple of quarters. Organic case growth I think it was part of the U.S. Foodservice ops, 2.2% was the overall number that was organic. Tom Bené: But you're asking year-to-date right? Chris? And that's--

Quarter-to-date? Tom Bené: Quarter-to-date numbers. Okay.

Yes, strip out some of the noise from weather and what have you and may be expect the calendar shift for Easter as well.

Yes. So, I think -- so when we talk about there's local -- our local case volume for the quarter was the question I was answering, it was 2.2% was organic. Total case volume organic was 1.3% [indiscernible].

But is there any real comment for April? Tom Bené: Not really. I mean we continue to -- I think we feel good about continued momentum of the business. And I don't think there's anything necessarily -- Easter, there was a little bit of an Easter shift, but not a big shift given the timing of when it fell last year in the quarter versus this year.

Okay. Thanks guys.

Your next question comes from the line of Edward Kelly from Wells Fargo. Your line is open.

Yes. Hi, guys. Good morning.

Good morning.

Can I -- I want to start with OpEx and I was hoping that you could give us a little bit of help here. I mean, obviously, you had a big quarter from a cost perspective. Maybe just digging a little bit more related to the drivers and I'm asking this question, because I think a lot of the accelerated efforts that you guys have been talking about weren't supposed to be at a full run rate this quarter. So I'm just trying to figure out, how we think about OpEx going forward? And then, as part of this, Q4's comparison looks pretty hard. I think you had a worker's comp benefit last year that you had to lap. Can you get to that 1.5% spread in Q4?

Well, I'll start and I mean, I think, a couple of things I would say to that. Number one, I'll maybe take the last point first. 1.5 point spread obviously and I think I even said it in my prepared comments is, it's something we look at over the course of a three-year plan. It doesn't mean that necessarily a report has been all the same, some actually higher, some actually possibly be lower as, obviously, we've seen both here. I think the way I would look at it though, I mean, again, as we did signal, we did anticipate some improved performance in the second half of the year. Obviously, some of these benefits start to kick in from our finance technology roadmap, smart spending work, the Canadian Regionalization, some of the other administrative cost work that we did around some of our corporate office transitions. I think the -- again, we feel that about -- those things kicking in as we said in the second half of this year, as we headed to next year as well. I would also call out just -- again, overall, our operating performance continues to be pretty strong and the expense line -- that’s a good pace so that actually we had some a little bit of fuel headwind, this particular quarter. And it was about $0.03 a case. So, I mean, we had -- I think the question is, do we expect this to continue in these areas? I do. To your point, there are some headwinds that we're anticipating that we will be up against in the fourth quarter. But, certainly, as we've talked about here for a while, we certainly anticipated that our leverage from the second half of the year will be better than the first half and I think we're certainly starting to see that.

Okay. And then, just a follow-up on CapEx. So the CapEx guidance is down a bit. Can you just talk a bit about what's driving that? I don't know if Iowa Premium has anything to do with it. And how sustainable a rate of sort of 1.1% would be going forward?

Well, I -- again, I -- the way I would look at that, I mean, number one, it's not that optimum of a forecast, but I mean the reality of it is, we spend our CapEx and make our investments based truly on the needs of the business. There's been absolutely no change in terms of our perspective on our capital allocation priorities that always start with investing in our business. We're obviously very committed to doing that. We've got a lot of changed programs and things transitioning our organization that will continue to require investments. I would just tell you, from a timing perspective, some of those things happened. And, again, things do move around in the businesses has been some ways, so some of that's probably the timing as much as anything, but I would definitely not takeaway that there's some changes in terms of the way we're looking at forecasting our CapEx. We just -- again, we just adjust spending in investment in terms of the needs of the businesses.

Great. Thanks guys.

Thanks, Ed.

Your next question comes from the line of Karen Short from Barclays. Your line is open.

Hi. Thanks. First thing I just want to ask was in terms of the composition of the -- now I guess the $650 million. Is there any change to the breakout between gross profit and then the supply chain versus the admin?

No, Karen. So there's not. I would just – the only shift at all was related to the anticipated sale of the business, but no there is no bucketing difference if you will.

Okay. And then the same question I just want to ask. I know you, obviously, mentioned and you have been mentioning positive same-store sales, but traffic weakness. So, I was just wondering if you can talk a little bit about trends of traffic and I guess same-store sales on a true like mom-and-pops local basis in terms of being independent versus the micro change? Any patterns or differences you could point to there? Tom Bené: Yeah, good morning, Karen. This is Tom. I mean I think we have seen certainly some choppiness this quarter particular. I think there are probably a bunch of different things driving that, but it depends really on what source you look at. I mean NPD would call out that while overall spend is up traffic is up in some areas as well and down in others, and Firefox, Naptrack they are probably a little more consistent than they have called traffic down really across most of the segment. So I think it's driven by everything from the weather choppiness in Q3, our Q3 and mostly in February and then I think again consumer efforts during that time. The small chains seemed to be doing a little bit better, so that's going to be your micro change. And then the pure independents at least in this quarter according to NPD tend to be a little bit softer, but I would say from our perspective we have seen necessarily any major difference in trend line that we've experienced over the last couple of quarters, so we continue to feel like this independent growth that we've had and that sector is doing well and we continue to feel pretty confident in our ability to continue to grow and take share in that space.

Okay. And so then just last housekeeping. Corporate came in on a dollar basis was higher than I would have expected given the layoffs that you'd announced. I don't know if that's just an allocation issue or what because I would have thought on the dollar basis that would have been quite a bit down sequentially and year-over-year.

Are you talking about the last kind of the specifically corporate layoffs? We're talking in stream stocks…

Yes, yes.

Obviously there are a lot of things that are part of our financing technology roadmap that are very much fueled focus. And so in fact one of the things we talked about in the first half of the year is that there were again why do we feel comfortable about this because there's been -- field personnel. And so I would tell you, I think the majority of what you're seeing is pretty – is probably even more fuel focus in corporate, but it's balanced between the two.

Okay. Thank you.

Your next question comes from the line of Andrew Wolf from Loop Capital Markets. Your line is open.

Good morning. I wanted to follow-up on the cadence of sales question that people asked about. You guys said, January was strong on a good weather comparison for February, but it's not good. Should we take away from that sort of March and April have somewhat normalized and if people are trying to get obviously trying to get a sense of whether the industry has slowed or not on a normalized basis? Tom Bené: Yeah. I think we would say that that's -- we feel like that certainly instances of weather impacts in the early part of the quarter, things have stabilized.

And I noticed you gave us -- I may have missed this but I heard the Technomics forecast for Canada. Do you have one for the U.S that you might be able to share with us?

As you know Technomic kind of gets out ahead of and they do it by quarter kind of by -- sorry by subsegment. I may have that information which if I have it I can get it to you. We may get back to you on that, but we generally do have that information.

Okay. And I just got one other question unrelated to sales. So in the -- you took a $35 million charge and I know it was related to the change in the business technology strategy. So could you expand a little upon that what the change is in your business spend -- business technology for us?

So – just can you clarify -- that question one more time maybe?

Of the $72 million charges you excluded out of operating expense $35 million was allocated for what you call the change in business technology strategy. Is that basically going to the cloud and could you expand on -- so we could understand a little bit better…

Yes some of that. It's also a variety of things being actually accelerated depreciation we took in Europe. That was really all due to technology change. So I think, there's been a few things that I get that number is also accelerated our G&A a little bit. But I would say there's one thing that fell into a number of things that are just part of our technology strategy that are included in that number and it's not necessarily one big thing there. And there's not one thing -- the takeaway would not be that we've somehow have a significant change in technology because we do not. It's just a variety of things going on.

And that was what I was trying to get to. So appreciate that. Tom Bené: Yes. Think of it as more specifically around Finance Transformation which is a technology component of it and then the European work we've been doing where we have an ERP in France that we've been updating and so those are the two main drivers of it.

Thank you.

Your next question comes from the line of Marisa Sullivan from Bank of America Merrill Lynch.

Great. Good morning. Thanks for taking the questions. I just wanted to touch on fuel quickly. You called it that there was a slight headwind in the third quarter. Well, how should we think about fuel in the fourth quarter as it impacts your assumption?

Marisa I’d anticipate some of the continued headwinds as we head into the fourth quarter and probably a little bit as we head into next year as well.

Got you. And then I haven't heard you guys talk about category management in a while on these calls. I'm wondering was there anything you guys are doing differently in the third quarter that kind of made it a greater impact, anything that you're planning for the fourth quarter as we should think about gross margin in CatMan? Tom Bené: Marisa, it's Tom. No, I wouldn’t say anything unique. I think we're just trying to highlight as we continue to -- it's an ongoing process. It has been now for years and we're starting to do some deeper work with some of our more strategic supplier partners and think about them more as some potentially long-term benefits as we the end partner more deeply with some suppliers.

Got you. And are you seeing any impacts or any customer feedback on category management? Are they like and what you're doing? Or is it -- are they having to adjust to assortment changes? Tom Bené: No. I think we're in a point now its – early, early days so call it a few years ago now. I think because we were changing some suppliers in some areas or products that was creating some choppiness and we've actually continue to have a very good feedback from our customers around the work we're doing with CatMan, obviously, that drives cost benefit for them and they're very excited about that. And as I mentioned, we are getting more focused on strategic partnerships so that we can have more consistent supply for the long-term. So, it's generally very positive.

Thank you so much.

Your next question comes from the line of Judah Frommer from Credit Suisse. Your line is open.

Hi thanks for taking the question. Maybe first just on the changes to guidance related to Iowa premium. I think you said it's the entire kind of reduction in guidance is due to Iowa premium. But if we're stripping $25 million out, obviously, that's not necessarily the low end. So, when you say the low end, are you saying $650 million to $675 million effectively?

Yes. No, I think here's the way I would think about that Judah. I think we talked about really -- really comes around the midpoint of the range. And so if you do $650 million or $700 million that will be $675 million. Really we're talking about here is a $25 million related Iowa premium and yes that was the only adjustment to our guidance at this point, which takes us from that midpoint down to the lower end of the range.

Okay, that's helpful. And switching gears. I thought you said that freight was a tailwind on the inbound side in Q3. Is that right? Are you telling us that you're actually getting a benefit there? Or that it was less of a headwind year-over-year? And any commentary around kind of the freight situation in driver shortages and ability to retain drivers lately will be helpful. Tom Bené: Sure. Just remember we had to separate a couple of things here. So, inbound is our gross margin and I did mention that we had charm year-over-year positive impact to that. Again -- because a year ago, we were still dealing with quite a few challenges related to inbound freight. So, I would think about it as it has gotten better. We're not feeling the kind of impact and there was a piece of that gross margin improvement that was driven by that this year. As it relates to outbound, we continue to have certainly we're managing that I think better than we were a year ago as well, but we still have challenges from transportation perspective although albeit I think the work that we're doing around recruiting and retention is much improved and we are seeing positive impacts across our operations versus a year ago in that regard.

Yes. Judah just one thing I would just add to that. I would characterize the inbound freight as less of a headwind and not necessarily a benefit. In other words, there is some level of resetting in the overall structure that happened. But relative to Tom's point to where we were at last year, we were really up against some real major challenges that we have left ahead. We have to think about that.

Great. Thanks.

Your next question comes from the line of John Heinbockel from Guggenheim Securities. Your line is open.

So, Tom maybe 18 months ago you guys selectively added MAs in a few markets. So, how are they performing? And then if you think about the opportunity on the share side, is there an opportunity today to go out and redirect some of the cost savings into more MA hiring to try to drive more share? Or is that not productive? Tom Bené: hey good morning John. I'll answer the question. So, I would say first of all we felt really good about the work we did around MAs a little over a year ago. And if you recall when we talked about it back then, what we were really focused on was a few tools that enabled us to do a better of understanding where the biggest opportunities were and then applying those resources to those specific geographies or areas. And so, we continue to believe that targeted approach is the right approach. And as I think about it overtime, it's -- so it's not as much just about adding MAs for the sake of adding MAs. It's about adding them where we now know we have the biggest opportunity to succeed. And so, we'll continue to selectively do that. And we're kindling all the time evaluating our territories in each of our opportunity areas and that may encourage us to shift in certain areas versus others, but I would say just outright adding a bunch of more MAs for the sake of that is not really our strategy. We continue to see our territory size get a little bit larger as we are able to provide the marketing associates with more tools and support. We're talking a lot about the tools and support that we offer our customers on that side of the business and we continue to do, I think, a really nice job of building up those capabilities, whether that be things like menu planning and analysis for our business review process, where we have our chefs engaged. So I think we're continuing to focus those total resources on the local side of the business, not just the marketing associate, but leveraging the MAs to bring these other tools and capabilities that we built behind them to the market.

And then, if you guys started to give thought to when you provide the next plan, right, what's the time frame for that? And is the idea another three-year plan? Or, sort of, shift to year-by-year outlook? Tom Bené: I don't think we -- we've never made that call on that yet, John. And so we're -- I think, we're still working through ourselves, what the best approach and so I'd say, kind of, more to come. We'll certainly talk with you all when we're in a place where we want to do that.

Okay. Thank you. Tom Bené: Thank you.

[Operator Instructions] Your next question comes from the line of Ajay Jain from Pivotal Research Group. Your line is open.

Yeah. Hi. I know you guys don't typically comment on case growth internationally. And Tom, you did mention in the prepared comments that top line in Canada is really strong and then you also talked about some of the challenges in France and the U.K, but is there any way you can give some directional commentary about organic case growth internationally, specifically, for Canada, the U.K. and the rest of Europe sequentially and year-over-year? Tom Bené: Honestly, Ajay, I think part of the challenge for us sincerely is the way we are still, I would say, managing through that transition. The cases that we talked about in the U.S. and the consistency that we can provide you guys, does not exist in that business yet. And so, potentially over time, we might be in a place to do that, but today the way we still account for the sales and the way we think about the cases or the pounds of the units that we sell in different parts of the world are not on account on a consistent basis. But what I did say and I will reinforce here, we did have strong top line growth in Canada. And what we said in Europe is, look, we had a couple of things going on in Europe that are impacting us. Certainly, the U.K. and everything with Brexit, has created some choppiness over there. Our sales are positive. It's just that they are not -- they're not growing at the rate we would like them to or would want them to at this point. And then in France, look, I think, we all thought the unrest that was going, the total social unrest in France would have, by now, certainly cleared and it just has not. And while that’s -- it's not a huge impact because it's a big country, there's certainly still some things going on there that are creating issues for our customers and therefore us getting products to them. So, long way of saying, I think we still feel generally good about those businesses. We would have like to see a little bit more top line growth in Europe in this last quarter, and that's kind of built into my prepared comments driving that overall numbers and we feel good about the U.S. numbers and certainly about Canada. We just don't have the information in a way that we feel like it's easily providable to you guys.

Okay, thank you. Would it be possible to confirm how much you've allocated for severance in Q3 and year-to-date? I think there were some kind of breakdown provided last quarter for Canada and Europe, but I'm just wondering if there's any update on severance that includes U.S. Foodservice and also wondering if you can give your outlook for severance for Q4.

Ajay, there's volumes to that -- I mean, they're not GAAP rest. I mean, we do have a fair amount of detail that is probably the best I'd be able to give you here in terms of spilling that out. Again obviously if you think about the areas, certainly really across our business we've had a little bit finance technology roadmaps certainly we talked about our corporate here in the U.S. side versus the Canada regionalization, some of the work being done freight in terms of programs, I mean obviously again some of that I think you'll see fallout in our non-GAAP product, but I think that's part of the back up. And the only thing I would say is, obviously, there's some pretty sizable numbers in there, particularly last quarter as it relates to Europe, obviously, that was -- well not all inclusive. That was some of the biggest majority what's going to come there and at least in that part of the world.

Okay. And in terms of the impact from the recent headcount restructuring, will that be more reflected in Q4, or will the majority of that allocated in Q3?

Yeah, I mean I think the majority -- again the majority of that is actually going to be in -- within Q2 but then also here in Q3, so I wouldn't expect that -- a lot of that is reflected in Q4. The benefits we were starting to realize here as we talk about the second half of the year as we head into next year.

Okay. I had one final question if I can. I think you've made some adjustments in the financials for accelerated depreciation year-to-date. I'm not sure if there was any impact in Q3 itself, but I thought at this point you should cycle the technology restructuring plan from a few years ago. And maybe I can get some clarification offline, but I thought conceptually at this point there shouldn’t be any residual impact from the SAT accelerated depreciation less your year-to-date adjustments are for Europe or unrelated to the previous?

Yeah, I wouldn't think about it that way. It's actually was in D&A, in particularly the site volume increased this quarter. That was related to I would call accelerated depreciation in Europe for the most part, actually accelerated some depreciation there. And so the majority of the depreciation increase you're seeing is related to some technology transitions in Europe, but it's not related to what you're talking about before in terms of the mess right here in the U.S.

Okay. Thank you.

Your next question comes from the line of Vincent Sinisi from Morgan Stanley. Your line is open.

Hey, great. Good morning, guys. Thanks very much guys for taking my questions. Wanted to just go back to the choppiness and the top line in the domestic business, obviously as you said a few times, it seems like you know more kind of February and weather specifically. Just wondering was there are a lot of variability that you could see by region? Another way of asking was it basically, the weather and largely February the way to think of it? Or were there any other factors that just might be worth us knowing? Tom Bené: Yes. I would say nothing that was inconsistent with what you just said. I mean I think we just -- when I talked about weather we saw certain parts of the country where there were more impacts than others, so I wouldn't say nothing else beyond that we saw.

Okay. And then just I appreciate the color on the Iowa Premium versus the 3-year plan. But as you had this quarter very nice expense control, just kind of curious more from like a high level perspective like with the buckets that you are getting more the kind of cost of efforts pulled to date, how much kind of lead time or planning is there with some of the levers that you had to pull? Kind of said another way like, kind of how much quarter-by-quarter planning or impact are not -- is there any kind of way to think about that? Tom Bené: Maybe I'll start and then let Joel chime in. If you think about the way our business operates, we have regular operating expense which is generally built into the businesses that is going to have a primarily consistent cadence depending on volume and our topline being a big driver, right? Just a lot of it is driven by cost per unit. In addition we've talked about vague strategic initiatives like Finance Transformation, like Canada Regionalization, like Smart Spending that we have planned out and we believe we have a good use to win those impacts will be happening. And then we have things like our last quarter when we announced the corporate restructuring. There's more of a onetime event where we would see that coming into the business. So a long way of saying it I think generally speaking our operating expense moves with our business performance meeting our volume. And then -- and certainly the headwinds or tailwinds we see in the business, few are being a great example of headwind we're feeling right now, certainly things like driver and warehouse turnover in the past and just a low employment rates driving higher cost of some of those roles in the company. But everything else is generally planned out and we have visibility to that, except for these one timers. Does that get what you're asking?

Yes. That was very helpful. Thank you, Tom.

Your next question comes from the line of John Ivankoe from JPMorgan. Your line is open.

Hi, thank you. I want to follow-up on your some comments that were made about maybe independent restaurants being a little bit softer in the March quarter. I mean whether we adjust for weather or not. And the context of the question really what I'm getting at is, have you seen a significant rate of openings for independent restaurants? In other words, your addressable customer base maybe over the last 12 months? And considering the amount of labor pressure that independent restaurants are facing and just margins which were in general lower than chains are you actually seeing a pickup in closures on the independent side that's noteworthy even on like a very market-specific basis? Tom Bené: John good morning. I wouldn't say anything that's unique that's happened there. I mean as you – we all know, in this industry you've got a lot of new business coming online all the time and you also have folks that are closing. I don't -- wouldn't say we have seen any dramatic shift in that area. As I mentioned the different data sources have some mixed information, but all of them generally talk about positive spend dollars being up in that kind of 2.5% to 3.5% range and then you have traffic generally down with the exception of NPD which is showing slight increase in traffic. So, I don't think there's anything unique or anything in this quarter that we've seen as highly different than what we've seen in the past quarters.

And is there anything to note by category or by regional that you're beginning to see? And obviously I think there's a lot of questions that are being asked you of whether you think there's a slowdown and I think the answer, at least, as it stands today is no. But when you look at different categories or different regions, is there anything interesting that you're seeing in the marketplace a little bit more detail either positive or negative that you can basically talk about now that gives us I guess somewhat of a forecast of the future from Sysco's perspective as opposed to some of the third-party sources that you use for your data? Tom Bené: Not really. I mean there's nothing else that I would tell you that we're seeing is any different.

Understood. Thank you. Tom Bené: Thank you.

Your next question comes from the line of Kelly Bania from BMO Capital. Your line is open.

Hui, good morning. Thanks for taking my questions. Just going back to expenses, again, it seems like there was a good amount of upside at least in our model on the international. Can we think about the performance this quarter? I think it was down about $30 million year-over-year. Is that kind of the right run rate to think about for the next few quarters international? And then maybe you can tie in just the impact of the corporate restructuring on the expense performance this quarter?

Yes, Kelly, I'll start. And I think the answer to that I mean obviously we're continuing to do a lot of work there as to streamlining our operations more efficient. I guess I'd say there is some run rate consistency there, but I would tell you is that, reason a lot of room in -- right now in some of our international business. What I would not necessarily tie it to one of the things we talked about in the past is the sizable transformation we're doing in France. I think the majority of that benefit really we start to see next year, so I would not tie a lot of that necessarily to the restructuring that we're doing in our French business. But I would say generally speaking, I think it's fair to continue to see that as a relative run rate realizing again we just got a lot of moving parts over there that in terms of transformation were doing. So, I guess my answer is generally is yes but again, just realize things are not going to move around quarter-to-quarter based on the amount of stuffs we got moving around that business.

Okay, that's helpful. And maybe just in terms of the U.S. Broadline business. Can you talk a little bit about some of the specialty meat and produce, some of the categories that aren't necessarily part of the normal case growth? And what kind of trends you're seeing in those other areas of the U.S. business? Tom Bené: Sure. This is Tom, Kelly. Good morning. I think we continue to feel really good about our specialty company strategy. As we've talked for a few years we know that our customers truly value Broadline, but they also have these -- oftentimes they can be better met by some specialty companies. And in our case, meat, seafood, poultry, and that side and then the produce with FreshPoint. And so I think we continue to feel really good about overall -- what we bring to the market and the value proposition we have there. We've been working on ways of even helping our customers, to make that easier for them to procure products both from Sysco and from the Sysco specialty companies and we're seeing benefits of that as well. And so, creating the environment where it's easier for them to kind of do business with both of those entities as they need to and as they feel like they want to and so -- versus the feeling, maybe like two or three different companies that they're doing business with, the idea that they can do business with one Sysco and get the value out of that. So we continue to believe that's an important part of the market and we continue to feel really good about the work we're doing there.

Thank you.

Your final question comes from the line of the Bob Summers at Buckingham. Your line is open.

Hey, good morning, guys. So I just wanted to dig a little deeper into the transportation. Your dry van spot rates have been contracting all year. So can you maybe talk about how that flows through in your business, either by talking about the percent of business that you do at the spot rate? Maybe talk about how that spot rate influences contract rates as you may be threatened to move more to the spot market? And then, lastly, how that impacts what you have to pay your drivers. Tom Bené: Hey, Bob. Again, getting back to this conversation about transportation and cost, the piece you're referring to is the inbound freight part for us, which does hit our gross margin and we called out in the prepared comment and we've talked a bit here this morning about that we are seeing some year-over-year improvement that have been there. It's not huge and it's not something that is a major driver for us but the market has come down certainly from where it was a year ago and obviously everybody benefits from that. We, obviously, try to minimize the spot market, because when that -- that's the one that gets the most out of whack the fastest and that's what happened a year ago, so we continue to manage that side of our business mostly with contracts. But, yes, it's certainly is that whole market comes down that affects both sides, the spot and contract side. And then as it relates to our drivers, as we said, I think, we've done a lot of work around both recruiting and retention and the way we're operating our business to improve as much as we can our driver retention. And so, we feel better about where we're at than we were year ago. But it continues to be a challenging part of the business and I think will be as long as of the markets the way it is, meaning unemployment's low and there's a lot of freight on the road. So we feel much better where we are now than we were a year ago, but that doesn't mean that we don't still have ongoing challenges associated with hiring and retention of drivers.

Okay. Thanks. Tom Bené: You bet.

That concludes today's conference call. You may now disconnect.