Operator: Good morning and welcome to the Performance Food Group's Second Quarter Fiscal 2016 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by PFG's management and the question-and-answer session. I would now like to turn the call over to Mr. Michael Neese, Vice President, Investor Relations, for PFG. Please go ahead sir.

Michael Neese: Good morning, and thank you for joining us. We are here this morning with George Holm, Performance Food Group's CEO; and Bob Evans, PFG's CFO, to discuss our second quarter fiscal 2016 business results. During our call today, unless otherwise stated, we are comparing second quarter and first half results versus the same period in fiscal 2015. Earlier this morning, we issued a press release regarding our second quarter results. For a detailed review of them, please see our earnings release on the Investor Relations section of our website at pfgc.com.

Our remarks and the earnings release contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking statements section in today's earnings release for various factors that could cause actual results to differ materially from projections. On today's call, we may reference certain non-GAAP financial measures. Descriptions of these non-GAAP financial measures and reconciliations to the most-closely comparable financial measures calculated in accordance with GAAP are included in today's earnings release and in our presentation slides. Now, I will turn the call over to George.

George Holm: Thank you, Michael. Good morning, everyone and thank you for joining us today. Our results for the second quarter were strong and exceeded our expectations. We grew our shares in the food service market and at the same time we expanded our profit margins. Our growth was across the board with each of our segments growing their EBITDA for the quarter, and earlier this morning we reaffirmed our full year fiscal 2016 adjusted EBITDA outlook and updated it to be toward the upper end of our previously announced range of 9% to 12%.

Our growth was powered by case volume growth to independent restaurants in our 6% to 10% guidance range. Our broad based growth in the Vistar segment and effective cost management. Our gross profit growth outpaced our growth in cases driven by selling a more profitable mixed channels and products. Our operating expenses grew less rapidly than gross profit which enabled us to grow our adjusted EBITDA by double digits. The results reflect the strength of our diverse business model with the focus of strong independent restaurant in proprietary brand growth in Performance Food Service.

Consistent chain restaurant business sales in our PFG customized channel and growth in Vistar's candy, snack and beverage business, these results also would not be possible without great people and I would like to recognize one of our 1,200 associates in particular, his name is Alfrado Lopez, he sever as a driver of our Vistar location in Southern California since 1975. Today more than 40 years later he has logged almost 2.5 million miles of accident free and citation free driving. Thank you Alfrado for your dedication to our customers and your commitment to safety. Let's turn to our second quarter's first half highlights. For the second quarter, case volume grew 4.2%.

We achieved net sales of $3.9 billion, an increase of 2.7%. Gross profit grew 6.5% to $486.8 million and we grew our adjusted EBITDA by 10.2% and our adjusted net income by 33.3%. These results cemented a strong first half, case volume growth of 4.7%. Our net sales increased 4.4%, $7.8 billion. Gross profit increase 6.7% to $967.9 million and we grew adjusted EBITDA by 11.9% and adjusted net income increased by 45%.

Now let me discuss our Q2 business and segment performance in a little bit more detail. PFG grew share in the quarter given that our 4.2% case growth exceeded forecasted real industry, case growth which is somewhere between 1% and 2%. Organic case growth grew by 3.9% during the quarter which paced total case growth of 4.2% including acquisitions. This growth is right in the middle of our long-term goal of growing organic case volume by 3% to 5%. Net sales for the second quarter were $3.9 million, an increase of 2.7%.

The net sales growth was primarily driven by an increase in cases sold. The estimated annual deflation rate in the second quarter was 1.3% compared to an annual inflation rate of 3.9% during the prior year period. I'd like to spend a few moments on inflation and deflation but first let me highlight one point. PFG has grown our cases and our gross profit per case consistently in both inflationary and deflationary environments. While inflation and deflation do affect our margin percentages, they have much less defect on our ability to generate gross profit dollars.

The effective inflation or deflation on gross profit per case depends on the type of pricing to our customers, generally PFG has three types of pricing. The first type of pricing is where we have a cost plus a fee per case contract, which accounts for over half of our sales and is comprised mostly of chain restaurants. In these contracts, the cost of goods sold is a pass through and we are agnostic about inflation or deflation. The second type of pricing is where we have a cost plus a percentage mark up which account for less than a quarter of the business and is where inflation and deflation makes a difference. An inflationary environment increases the gross profit per case, while a deflationary environment decreases it.

Its' important to note that over two thirds of the cost plus a percent markup contracts are in our Vistar business which principally sells national branded products and typically does not witness a deflationary environment. Excluding this star, cost plus the percent markup contracts represents less than 10% of PFG's sales. The remainder of our revenue which is over a quarter of the total for PFG is in our street business at Performance Food Service. In that business we buy goods at the current market price from our suppliers and resell them to independent restaurants for prices that reflect weekly cost changes. Because our inventory turns so rapidly, particularly in the protein categories, that typically experienced the most volatile inflation or deflation, we're generally able to hold our gross profits per case.

Our second quarter results show how successful we are in managing our business in the deflationary environment. Gross profit increase 6.5%, which was the result of 4.2% growth in cases sold and a higher gross profit per case which in turn was the result of selling an improved mix of channels and products. Operating expenses increased 5.6%, 90 basis points lower than our gross profit growth rate, despite a onetime non-cash stock comp expense and an increased investment in our sales and driver work force. Our winning together program which is aimed to drive productivity and non-customer facing areas, recognized cost savings benefits in the quarter in first half and we looked for it to yield continue savings throughout this fiscal year. Let's turn to performance in our three segments.

In our largest segment, net sales in Performance Foods Service for the quarter were $2.3 billion, an increase of 3%. Strong case growth drove the increase partially offset by deflation in net pricing. Case growth was driven by both securing new street and chain customers and by further penetrating existing customers. Independent case growth was within our 6% to 10% growth goal range and accelerated modestly between the first and second quarters. Street sales as a percentage of total sales were up 69 basis points to 43.3%.

Brand case sales to street customers which we target to grow a 100 to 400 basis points faster than total street case sales grew in the expected range. Strong case growth in performance food service combined with both gross margin expansion, from selling and improved mix of channels and products and well controlled operating expenses drove the EBITDA growth to 14.2% in the quarter and 20.1% in the first half of the fiscal year. Turning to PFG customized net sales for PFG customized is decreased 1.2% to $915.1 million, the decrease was primarily a result of a decrease in case volume which reflected trends in some of our customers in the casual dining channel. Segment EBITDA increased 9.5% driven by lower operating expenses which were partially offset by a decrease in gross profit and increase in transportation wages. In this to our net sales increased 7.5% to $661.2 million, driven by broad based case sales growth.

Our theatre business which historically comprises approximately 15% of our customer mix, was particularly strong for the quarter with Star Wars key contributor. Segment EBITDA increased 16.5% driven by solid case and gross profit per case growth and by good operating expense control. In summary, each of our segments grew their EBITDA, our independent case volume growth continue to grow at a strong clip and our Vistar business displayed strong year-over-year growth in its core business. We continue to remain confident in the strategies and goals we laid out for the year and the underlying profitable growth potential of our business. I would now turn the call over to Bob, who will provide details on our financial results for the quarter and our outlook.

Robert Evans: Thanks, George, and good morning everyone. Today I'll briefly go through our detailed financial results, discuss our cash flow and our amended ABL facility and wrap up with our fiscal 2016 outlook. Our results shows that PFG is successfully growing both our share in the food service industry and our profit margins. Case growth 4.2% continue to exceed forecast for industry real growth and adjusted EBITDA was $95.4 million or a 10.2% increase versus the prior year. Our net sales growth was 2.7% which reflects 4.2% case growth and the deflation as George mentioned.

Gross profit dollars grew 6.5% which means that our gross profit per case grows 2.2%. This per case increase reflects a mix shift across businesses towards our higher gross profit per case segments, channel shifts within our businesses such as the shift in performance food service towards the independent restaurant channel and product mix shifts as well. Our performance brands grew faster than other brands within performance food service. Our operating expense dollars grew 5.6% which includes a onetime non-cash stock compensation expense of $4.9 million which was associated with our initial public offering. Excluding that charge, our operating expense dollars which has grown 4.4% or just faster than our case growth.

We achieved affective operating expense control to leverage on our fixed costs, productivity improvements through our winning together program and lower fuel expense, partially offset by the mix shift towards higher cost served channels and by an ongoing investment in our sales force. The result of a strong increase in cases sold and a favorable spread between gross profit and operating expense growth rates, enabled us to grow operating profit by 14.2% and adjusted EBITDA by 10.2%. As mentioned on our last earnings call, when we think about margins, we look at adjusted EBITDA as percentage of gross profit which both largely neutralizes the effect of inflation or deflation and reflects the [indiscernible] of our sales or as pass through of inventory cost. On that measure, our margins in the quarter rose by 70 basis points to 19.6% a record for the second quarter. For the quarter, the income tax rate decreased 270 basis points to 40.7% and year-to-date, the income tax rate decreased to 170 basis points to 41%.

Those decreases are the result of leveraging a relatively fixed amount of non-deductable expenses as our net income as grown. For the fiscal year, our effective income tax rate should be approximately 41%. We have a daily focus on cash flow and our working capital. For the first half, PFG provided $10.7 million cash flows from operating activities versus a prior year use of $49.5 million, which is an improvement of $60 million. In the second quarter, the deflation PFG experienced mitigated our investment in accounts receivable.

Together with strong profit growth and a relatively stable CapEx investment, PFG generate substantial cash flow. Our net debt at the end of the second quarter stood at approximately $1.2 billion, a decline of just under $300,000 million versus the comparable prior year period. That pay down was a mixture of $223 million from IPO proceeds and $77 million from operations and other sources. Our net debt to adjusted EBITDA leverage was 3.6 times at the end of the quarter. That’s an improvement of 1.4 times, half of which gained from the use of IPO proceeds and the other half from the combined effect of increased adjusted EBITDA and lower net debt.

I would call your attention to one other P&L item, the slight increase in interest expense despite debt pay down. This increase was driven by an approximately $5 million charge for accelerating amortization and debt issuance cost, which was associated with repaying a portion of the term loan with IPO proceeds. Following the IPO, PFG has reexamined the debt portion of our capital structure, which primarily consists of our asset based lending facility in our second laying term loan. On February 1, this Monday, PFG amended our ABL which upsized the facility from $1.4 billion to $1.6 billion, lower the interest rates for LIBOR based loans by 25 basis points and extended the maturity to February 2021. In connection with closing of the ABL amendment, PFG is borrowing $200 million under the ABL and using the proceeds to repay $200 million of our second laying term loan facility.

We anticipate complete being the term loan pay down next week. Borrowing $200 million from the ABL, and using it to pay down the term loan will have no effect on our leverage, it just lowers our weighted average interest expense. This transaction, plus the lowering of interest rates under the ABL facility will save PFG's cash interest of approximately $9 million over the next 12 months, which translates into $0.05 per share. There will be a onetime non-cash charge of approximately $6 million or $0.03 per share related to accelerating the amortization of debt issuance cost, similar to what happened with the term loan pay down at IPO. PFG will recognize that $0.03 per share charge in our third quarter.

Turning to our outlook. For fiscal 2016, we reaffirm our previously announced adjusted EBITDA growth range of 9% to 12% versus the comparable fiscal 2015 adjusted EBITDA of $329 million. And we further update our outlook towards the upper end of that 9% to 12% range. The fiscal 2016 outlook for adjusted EBITDA includes a 53rd week which falls in the fourth quarter. The company anticipates the extra week will add approximately two percentage points to the fiscal 2016 outlook for adjusted EBITDA.

And with that operator, George and I will now be happy to take questions.

Operator: [Operator Instructions] The first questions will come Edward Kelly with Credit Suisse.

Edward Kelly: Hi guys, good morning and a nice quarter. My first question for you is just related to the momentum I guess of gross profit for case. When you had another strong quarter in Q2 it actually, I think it accelerated from Q1, obviously despite the deflationary environment.

I was just hoping maybe you comprise a little bit more color around what you're seeing their into drivers, and then just back to the issue of deflation, I know you talked a little bit about your relatively lower exposure. And I guess my question is, could you provide a little more color on the street business here and you talked about how your holding gross profit per case in this environment, is that typical? I guess competition sort of determine some of that as well, so does it speak to the fact that the industry is fairly rational at this point and I guess the big question is like this, does that continue? Will you be able to continue to hold traffic per case over the next couple of quarters as inflation or deflation stays?

George Holm: Yeah, this is George, and I'll go ahead and take that. As far as sequentially into the second quarter having a little bit better increase in gross profit per case, that would really be much more mix drive than anything. Our better growth rates were in our independent business, Vistar had a very good quarter and our casual dining business is actually been soft. So, you kind of add all that together and we can continue at the same gross profit per case and actually add it together and we end up with little better gross profit per case, just simply because of that change in mix.

As far as the deflation goes, I look at back at 2010 when we last had some actually more severe deflation, and it was pretty broad base and I think it was demand driven and our industry was not doing well, I think it's doing better today. And quite frankly, I would describe it as our suppliers trying to be more competitive to keep share, where this deflation has been very commodity driven, heavy around the center of the plate, fuels had some impact on it and it hasn’t really been a wide spread demand deflation. So when I spoke earlier about the percentage of our business that’s in each one of those types of pricing, even where we have a program with a customer where it's a cost plus a margin, typically the proteins and cheese in there too are done with cents per pound. So, that’s part of I think why the deflation has had so much less impact on us. And the other question I think, if I got this right, that you asked was just a little more color around our street sales.

We kind of stayed in the first quarter right in the middle of the range that we've given with 6% to 10%. We saw each month in our fiscal second quarter slight improvement in our independent growth, I think part of it probably because we were doing a little better job and I think part of it is the industry was doing a little better. And that’s been something that is actually offset some of that case decline that we've seen in our chain business. And we've also seen it soft in our national account business in the Southwest. And we're just – I guess all cases are good but the quality of our case growth has been a little bit better.

Edward Kelly: So can I just ask as a follow-up of that, because I get this question from investors a lot which is that, you're driving very impressive street or independent case growth. Cisco reported yesterday where they have good independent case growth and the question I get right is, how does the number one and the number three player sort of both drive strong independent growth and where is it really coming from and how is the competition reacting to them?

George Holm: Yeah, I think that’s a great question. I think that the independent restaurant I would suspect is doing fairly well and those are tough numbers for people to get. At least we see that. I think for us it's a great focus for us, when we get outside of our independent business, it's almost all chain restaurant.

So we kind of have two things that we're doing and that performance food service part of our business and I think we're highly focused and I think that’s part of it. And I think that when we talk about gaining share, the question I always anticipate, so I get on the phone and talk to our people before this and they don’t really think we're gaining share any greater from any competitor than another one. There is a lot of business out there and there is a lot that we don’t have, and I think the independents are doing – I think fairly well, independent restaurateur.

Edward Kelly: And maybe just one quick one for Bob here. Bob, how much of the $5.6 million and the after tax non-cash item that you called out is actually stock based comp expense?

Robert Evans: On the running to the operating expense line, that is all $5.6 million was all non-cash stock comp and it's kind of a onetime charge associated with the IPO.

Edward Kelly: Got you. Okay, thank you.

George Holm: Thanks, Ed.

Operator: Your next question is from Vincent Sinisi with Morgan Stanley.

Vincent Sinisi: Hey, good morning and congrats as well.

Thanks for taking my question guys. I want to follow-up on Ed's last question, we do – I'm sure all of us on the slide, we always get the kind of question around the competitive landscape and just wondering, those comments were helpful George in terms of kind of where the share may or may not be coming from but can you maybe take it a step further and just give your personal perspectives on what's going on maybe even outside of the three larger players within the industry, like what are you seeing on even more kind of local levels. Are you seeing any of the smaller players out there go out of business, is consolidation happening between them, that would be helpful.

George Holm: Yeah, we really haven't seen anyone go out of business. I think in our business whenever you hit a deflationary cycle it's actually from a cash standpoint it seems to help independents and independent distributors I'm talking about.

I talked to our people, they think it's still very competitive in the market place. The lower fuel prices have helped our ability to make sure that we're real competitive, we've been investing that money back into our sales force and our driver force, keeping high levels of service I think have a lot to do with keeping your street sales on track. And I just think it's still competitive and I'm not out there every day, I'm out there enough but I sure get communication from our people and they consider this to be a very competitive as it has been for few years.

Vincent Sinisi: Okay. And then maybe just a quick follow-up, in terms of the casual dining channel, it's been soft now for a little while.

Anything that you're seeing that – is it pretty stable or anything that you're seeing that leads you to believe it could get either a little worse or are we kind of toward a bottom and just kind of bump along and hopefully get better, any further thoughts there?

George Holm: Well, based on time that I spend with those people I think they're working very hard to improve their business. One of the things we will see in general is I think some help from deflation with them, they tend to lock in their pricing for fairly long period of time. And as we went through this deflationary period we saw very little of that in our customized division. We'll see more of that coming up, I think it'll give them some flexibility around their business and hopefully they'll be more aggressive. But I just think it's a group of customers that are working very hard to improve their business today.

We just have seen softness from our fiscal first quarter to fiscal second quarter.

Vincent Sinisi: Okay, that’s helpful, thanks George. Best of luck.

George Holm: Thanks.

Operator: Your next question will come from Meredith Adler with Barclays.

Meredith Adler: Good morning guys. Can you hear me.?

Robert Evans: Yes.

George Holm: Yes we can. It sounds like you've got a little bit of a cold there Meredith.

Meredith Adler: I have a bad cold, yes.

I was wondering if we could talk first a little bit about expenses. And besides fuel, is there anything in particular that’s allowing you to control expenses so well? And then yeah, I'll start with that question and then I have another one.

George Holm: Yeah, well we spent a lot of time on our winning together project and we are working hard as an organization to make sure that we keep our expenses as low as we can in our non-customer facing areas. Our biggest investments say probably are around IT like most people. And we're able to leverage the growth that we put out particularly in our G&A area and our warehouse expense area and obviously in our fixed expenses.

We feel that’s one of the advantages that we have in the market places that we do operate on pretty low expense ratios, good bit of that is because of our customer base but we think our underlying expenses are in good shape but we do think we have more work to do.

Meredith Adler: And then I have another question, I mean with data that we get about the restaurant industry is almost entirely the dining chains. Do you have much data, do you have any data that suggest that traffic trends at independent restaurants all stronger, I know you said they're doing well. Is it fair to be thinking about this industry as kind of a shift from what we've had in the last few years with chains starting to weaken and independents starting to take market share perhaps to say a field to younger customers?

George Holm: Now, well that’s a tough question because like you we look at the numbers that are reported and I do feel it's a difficult industry to kind of get under the covers and really see what's going on. I will tell you that just from the perspective that I sit and the people that I talk to particularly within our company, there is an opinion that the independent restaurant is doing very well today and I see it as a consumer as well when I'm out, I mean these a good operator is full.

I wish I could give you more color than that but that’s just what we see.

Meredith Adler: Obviously that boards well for the future of your business however, because of the differences in profitability.

George Holm: Yes, we'd like to see them all doing well, every one of those customers. But it does, yes.

Meredith Adler: Okay, great.

That’s very helpful. Thank you.

George Holm: Thanks.

Operator: Your next question is from Zack Fadem with Wells Fargo.

Zack Fadem: Hi, good morning.

Thanks for taking my question. So, can you walk us through the puts and takes to gross margin in a little bit more detail, so gross margin is up about 50 basis points, maybe you could help me parse out this specific impacts of customer mix deflation and also your initiatives to reduce supplier costs. And is there anything else in there that’s contributing?

George Holm: Well one thing I feel dimension which I probably should have and that’s that we've seen accelerated growth in our branded products, our performance brands. And that has certainly helped our margins and our increase in gross profit per case.

Zack Fadem: Okay.

Robert Evans: Sure. Zack, in terms of gross margin as percent of sales, that for us is kind of a number that comes out of the P&L, what we tend to look at more is the gross profit per case and the growth we're having in gross profit per case. And when we kind of unpack it we are really changing that number, not based on kind of taking our gross profit per channel up within any given – our growth profit per case, excuse me, up within any particular channel. What's really driving it is the shift in the mix of the business and that shift is in this past quarter are higher gross profit per case segments which are Vistar Performance Food Service grew faster than customized which is the chain restaurant oriented segment. Within each one of the segments, we also had kind of a mix shift towards more gross profit per case customers, that’s really kind of the independent restaurant towards the chain restaurants that you have in performance food service in particular.

And then as George mentioned, it's really brands particularly within performance food service did very well in the quarter as they have been doing for quite some time. So really it is all mix, it's not a heck a lot of primary pricing.

George Holm: Yeah, I want to be careful to add there that I mean for us right now this is really a good thing for us that our independent business is growing so much faster than the rest of our business. But should we have an opportunity to bring in a large excellent customer in the chain restaurant world, we would certainly do that, and we could in the future there could be times where that business is growing faster, that would actually be a good thing if we could grow that business faster than a 6% to 10% rate that we're very committed to and independent. So I want to make sure that we don’t confuse that, I mean we don’t dislike any profitable business sold.

One of our modest is you don’t cash flow percents, you cash flow cases.

Zack Fadem: Got you. And as a follow-up on the Vistar business, we're seeing some retailers are moving away from candy at the checkout isles in favor of healthier alternatives. I'm just curious if you're seeing anything like this in your business and perhaps you could provide some color on the potential impact?

Robert Evans: Well, we are seeing it. And we're not just seeing it with the retailers, we're seeing it with the operators and particularly people that have micro markets.

I just went to our winter meeting with our Vistar people and we had the suppliers there as a group and just walking through the supplier show I was just amazed that the number of suppliers that weren't that showed just a couple of years ago and are more helpful reentered type of product. And it's kind of something that we felt would come into that part of our industry, we've been saying it for years and it hasn’t been happening and it's finally happening. So, I would go so far as to say that today that that is really a trend. And it's the trend that we think will help our business.

Zack Fadem: Great.

And I just have one more housekeeping item. You guided for an effective tax rate of 41%. How you're thinking about the adjusted tax rate, are you thinking the same or maybe a little bit lower?

Robert Evans: It's going to be approximately the same Zack.

Zack Fadem: Okay, I appreciate the color. Thanks, Bob.

Robert Evans: Sure.

Operator: Your next question is from John Heinbockel with Guggenheim.

John Heinbockel: Hey, George. A question – the significant deflation we're seeing at the center of the play, is there any signs yet or does that have the potential to stimulate demand either from I guess your customers and then ultimately their end customers? And obviously it'll give them an opportunity to promote a little more. Are we seeing that yet and you think that'll happen?

George Holm: Well, we've seen some.

And remember to with the large kind of casual diners for the most part they're just starting to see the benefit of the deflation because, as I said before, they lock product in. This quarter I would characterize us as being off to a slow start with that group of customers, but we did have some bad weather that we didn’t have the previous year during that period of time. And in some respects for us as a company, if you're going to have bad weather that’s the time to have it because it's kind of slow during that period of time but that isn't the case with the big casual diners, most of them doing excellent job with gift cards and actually early in the calendar year is a good period for them. We've seen – now this is really making an early call, but I mean the bad weathers pretty much left us a little bit trouble in the Midwest right now but we've certainly seen the results of the cabin fever this week with some excellent sales coming in the early part of this week. I think that the deflation around proteins, I think people will steer particularly specials and marketing efforts that they have towards some of those products that are lower priced today and that could be a good thing to stimulate sales, but we just – I think it's just too early for us to see that yet.

John Heinbockel: And did you also see last year where you talked about, weather hurting you in January but last year weather hurts you towards the end of the quarter, right or at least the later half. So if we get – you think about that comparison, things could certainly pickup at least weather wise as we move through the end of March?

George Holm: Yeah, I'll give some color on that. The day we had the conversation about where we'll go with our guidance I was in my house and couldn’t get out. So it's kind of put a damper on, what do you want to tell these people. And then last year was an interesting year because January and February were good weather months compared to the previous year.

So we started a quarter out very strong and then when March came, a big thing was very bad weather, okay and our wheelhouse kind of the Southeast up to the East coast for our Performance Food Service Company. And then we also – that was the first signs of the deflation, particularly sequential deflation. So we are in a quarter where I think March kind of makes the quarter, the first calendar quarter, our fiscal third quarter and I think that that will be more so the case this year, March will be the very important month.

John Heinbockel: Okay. And then just finally, it's a very nice quarter from customized, really probably the best quarter in a while.

So are you now more optimistic about the existing business you have being somewhat more profitable and then that business in total kind of more profitable long-term, again it's might never be a 2% or 3% margin business but at least margin being flat to up, perhaps you can invest a little more there?

George Holm: Yeah John, first of all we're always optimistic and confident. I think that we've got a group of customers that for the most are really working with us. We've been able to get more efficient in an already low expense ratio business. We have also learned that we've got certain types of business that don’t necessarily fit into our customized and we've been able to streamline a little bit to make sure that we have the right type of customers in there. It's an extremely well run business.

And I don’t know that the 9.5% EBITDA we put out in the fiscal second quarter is where we're going to be, if the customers are soft that’s just not going to be the case but we are confident that we have a business there that we can grow, that we can put out a good return on invested capital and that we can run it very well. We have a great level of confidence there. And like I said, these customers – they're not sitting still, they're working hard on improving their business and should they be successful which I think they will be and we'll benefit from that.

John Heinbockel: Okay, thank you.

Operator: Your next question is from Andrew Wolf with BB&T Capital Markets.

Andrew Wolf: Hi, good morning.

George Holm: Good morning, Andy.

Andrew Wolf: Thanks. George, I just want to ask you about your customers expectations with regard to big changes and swings in commodity inflation and deflation, what seem to happen pretty regularly. I would think that when there is a lot of inflation in a commodity category say they might be some push back, and I know there were thousands of transactions but just sort of generally.

And I'm trying to get the distributor to absorb some of that. And then I would expect that the restaurateur when pricing got better and started coming down would kind of anticipate some give back. Is that sort of generally how things play out in the real world, lot of analyst having done this ever, haven't tried to sell stakes into a restaurant chain or [indiscernible] independent restaurant?

George Holm: Well, I think when you talk about the chains obviously it's contractually driven and there is not much of a reaction that we have to do with a high inflation or high deflation. When it's very inflationary particularly in the proteins, our people really need to be in there with the customer and working with them on what the special maybe when to change the price on their menu and we try to be very proactive. It is hard to get increases in as quick as they come to us in an inflationary period of time.

It's not so hard to give the customer decreases, they tend to like that. As far as being able to increase your gross profit per case say somewhat in the deflationary period of time, I think so much of that is so specific that every different customer and the relationship that our sales person has with that customer and I think they tend to find their way and get to a point that is good for both, and at least that’s the way we train our people to be and that’s what we hope the result is. And there is always customers that are extremely price sensitive and are going to test the market place when there is inflation and we deal with that and deal with it as best we can. I think there is in the heavy inflationary or deflationary period, I think that it's probably a little easier for the independent restaurant because they can move a little quicker, little bit easier from the change items, change specials, they haven't made commitments around product with suppliers. So I think it's our biggest challenges is helping them through it and making sure that we retain the business as we help them through it.

Andrew Wolf: To follow-on to that, and I think you've alluded to kind of the restaurant's training [indiscernible] which would make sense if they could future similar – lower price points better or the same price points just to better product. And I would imagine that would also help just the distributor maintain or expand their profits?

George Holm: Yes. Yeah, and that’s why – we really work hard at our brand and making sure that through those difficult competitor situations or difficult inflationary periods of time that they're looking at that box and they see that brand and to them that brand is a certain specification that they're pleased with and their customers pleased with and it makes it easier to work through those cycles. Because they seem to be here to stay, it's like there is just been more volatility in pricing and I don’t see that changing, I mean I don’t have a crystal ball with when this deflation will end but one thing I'm convinced off is that there is going to be volatility.

Andrew Wolf: And just one last thing, I think for the quarter you did a little better than I guess the 8% last quarter on the street case volume.

Was there any change in whether that’s penetration driven or new customer driven and I know if you'd care to share the – sort of how that breaks out between the two?

George Holm: Yeah, we're careful around that because I think when we look at our growth at independent it really can vary. It's consistent quarter-to-quarter for the most part but you can have holidays fall different, you can have weather impact it. But what we really follow closely is, are we adding net customers at the rate in which we want and are we further penetrating our accounts, and we've been able to do both of those things and we like to make sure that we're growing our number of customers at 6% or better and we've been able to continue to do that. And that’s probably the biggest driver of our growth but we have not gone through a period where we didn’t penetrate.

Andrew Wolf: Okay, thank you.

Operator: [Operator Instructions] Your next question is from Ajay Jain with Pivotal Research Group.

Ajay Jain: Yeah, hi. Thanks for the question. It looks like there is more variability in the segment results this quarter at least in terms of revenues. I think last quarter you had more broad based sales growth in each of the segments and so I'm just wondering apart from the softness and casual dining at specific to customize, can you talk a little more about what's driving that variability by segment and can you comment it all about the segment specific sales outlook for the back half of the year?

Robert Evans: Yeah, I'll be as I guess as detailed as I can be there.

The quarters from the growth standpoint were actually quite similar, like I said, we had a little bit of a sequential increase each month in our food service independent business. Our casual dining as we discussed got softer. Another fairly large impact was that in the first quarter we had much better growth in Vistar than we did in the second quarter. If you went to fiscal year 2014 before we were public, I'm sorry, 2015, we had a very poor quarter for theatre, there just wasn’t a lot of great products out there. So we had a big increase in our fiscal first quarter in the business for Vistar in the theatre area.

Obviously we had a strong December in theatre because of Star Wars, that’s a business that can be choppy. At the end of the year it always seems to – the industry itself seems to be in that 2.5% to 3% range, no matter what but it just doesn’t come with any consistency. There are blockbusters and there are ones that don’t do so well. So, that had an impact but those would be – the one positive that slight increase in independent and then the two neglects would be the casual and the theatre versus the previous year. But the quarters really resembled each other quite a bit other than that.

Ajay Jain: Okay. And just as a follow-up, I think based on your prepared comments, I think volumes for customized have been negative in each of the last two quarters. Is there any way you can quantify that further, I'm just wondering if customized volumes were more negative on a sequential basis?

George Holm: Yeah, Ajay, thanks for the question but we are not going to be talking about case volumes by segment, it's not something we'll disclose.

Ajay Jain: Okay, thank you.

Operator: Your next question is from Bob Summers with Macquarie.

Robert Summers: Hey guys. Just – so understanding that you're not going to want to be too specific and ignoring weather related issues. Could you tell us how the regions performed, if there are any differences and I guess what I'm trying to get at is, there seems to be a broader concern in the market about geographies that are over exposed to the energy complex. Are you seeing any difference in performance in those regions?

George Holm: We saw softness in the Southwest in our national account business. Otherwise, unless weather related, really no difference.

Robert Summers: Okay. And then an bigger step back, just as you contemplate or as you think about competitive dynamics, do you think that changes if we move to an environment where the top three players in the space are public companies?

George Holm: That would be hard for me to comment on, because I don’t see us doing anything different because we're public.

Robert Summers: Okay, all right. Thanks.

George Holm: Yeah.

Operator: And your final question is a follow-up from Meredith Adler with Barclays Capital.

Meredith Adler: I was wondering if you could talk a little bit about the M&A environment when you were on the role with your IPO you talked about being eager to make acquisitions. What are you seeing right now, are there properties that were available, are the prices reasonable?

George Holm: We have a robust pipeline, that’s for sure. And we want to be acquisitive and we just want to make sure that when we do it, it's the right culture fit, it's the right, all the things you need to make sure it works. We are very hard to work on it and don’t really have anything to report beyond that.

Meredith Adler: Okay, that’s good. Thank you very much.

Operator: I would now like to turn the conference back to Mr. Michael Neese for closing remarks.

Michael Neese: We'd like to thank everyone for their participation on today's call.

Have a great day.

Operator: Thank you ladies and gentlemen. This does conclude today's conference call. You may now disconnect.