Operator: Good morning, and welcome to the Performance Food Group Third 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 and Investor Relations for PFG. Please go ahead, sir.

Michael Neese: Thank you, Crystal. Good morning and thank you for joining us. We are here there morning with George Holm, Performance Food's CEO; and Bob Evans, Performance Food Group's CFO to discuss our third quarter fiscal 2016 business results. During our call today, unless otherwise stated, we are comparing third quarter and first nine month results versus the same period in fiscal 2015. Earlier this morning, we issued a press release regarding our third quarter results.

You can find 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 reconciliation to the most closely comparable financial measures calculated in accordance with GAAP are included is today's earnings release and in our presentation slides.

Now, I would turn the call over to George.

George Holm: Thank you, Michael. Good morning everyone and thank you for joining us today. PFG's results for the third quarter were strong and in line with our expectations. Our double-digit adjusted EBITDA growth for the third quarter and first nine month reflect strong performances in our businesses.

We grew our total cases by 4.11% and we feel we gained market share. Our largest segment Performance Food Service posted its 27th consecutive quarter of growing its independent case volume in excess of 6% over the prior year and our proprietary performance brand case volume grew by double-digit. And we expanded margins to a combination of improved mix and effective cost management across our entire Company. Our strategic initiatives remain on track and as a result we have increased the bottom end of our EBITDA growth outlook from 9% to 10%, such so that our new EBITDA growth outlook for this fiscal year is 10% to 12%, reflecting our strong year-to-date results. These results reflect the strength of our diversed business model with the focus on strong independent restaurant and proprietary brand growth in Performance Food Service.

Consistent chain restaurant business in PFG customize in growth in Vistar’s candy snack and beverages business. We couldn’t achieve these results without the efforts of PFG's great people. I’d like to highlight an unselfish act by one of them in March, while making a special delivery in Lebanon, Tennessee Brad Anderson where Performance Food Service witnessed a vehicle veer off the roadway into a parking lot. Realizing that the driver was in distress and experiencing a medical emergency Brad pulled over and rushed to the driver's side to offer aid and to ensure the driver got the medical attention needed. The orderly drive had just left the dialysis treatment and experienced a drop in blood pressure, which led him passing out behind the wheel.

He was eventually taken back to the hospital and is doing fine today. Thank you, Brad, [indiscernible] 2016 we were ranked higher than other companies in our industry. I want to thank our associates across the country for their hardworking commitment to our terrific company. Let's turn to our third quarter and first nine month highlights. For the third quarter case volume grew 4.11%.

This is consistent with our growth target of 3% to 5% and net sales grew 3%. Gross profit dollars grew 6.5%, while gross profit per case was up 230 basis points. Adjusted EBITDA grew 10.2%. Adjusted EBITDA margin as a percentage of gross profit expanded 60 basis points to 15.9% and adjusted EPS was $0.15 per share or 36.4% higher than the previous year. Those results were quite consistent with our first nine months of 2016 where case volume grew 4.5%, net sales increased 4%, gross profit dollar increased 6.7% to $11.4 billion and we grew adjusted EBITDA by 11.4%.

Adjusted EBITDA margin expanding 80 basis points to 17.4% of the gross profit dollars, and adjusted EPS was $0.61 per share, which is 35.6% growth rate versus the prior year. Before I get into our segment performance, I would like to highlight a new customer whom we will have the pleasure of servicing in our customized business. We're excited to announce that we have secured Red Lobster as a key customer to our customized division. Red Lobster is an iconic market leader and the world’s largest seafood restaurant company, I guess I should say. Our new opportunity is a testament to our capabilities and food service distribution, the value of our supply chain efficiencies, and our shared compliment to providing high-quality products, and a world-class service to Red Lobster's millions of loyal customers.

Under the multi-year partnership, PFG will provide distribution solutions to all Red Lobster's 670 plus restaurants in the United States. We anticipate numerous strategic, financial and operational benefits from the distribution agreement. First, Red Lobster an it's management team have built one of the best and most enduring casual dining businesses in the world and winning it as a customer solidifies PFG Customized position, as the premier distributor to full-service chain restaurants. Second, Red Lobster's network of US restaurants has substantial overlap with PFG Customized existing business which enables us to increase sales by over half a billion dollars annually from within our current network of distribution centers. We anticipate that the agreement will be accretive to adjusted EBITDA and adjusted EPS in fiscal 2017 and we expect it to improve the Company's return on invested capital.

Finally, we will begin rolling out service to Red Lobster in our fiscal first and second quarters of 2017. Now let me discuss our Q3 business and segment performance in more detail. We believe PFG grew share in the quarter since our 4.1% case growth exceeded forecasted real industry case growth of around 1% to 2%. Organic case volume grew 3.8% during the quarter, which reflected new and expanding business with street customers in the Performance Food Service segment and a broad based growth in Vistar's sales channels. Net sales for the third quarter were $3.9 billion, an increase of 3%.

The net sales growth was primarily driven by an increase in cases sold. We estimate overall food cost deflation was approximately 1.3% in the third quarter. We witnessed deflation in center the plate categories like meat, poultry, and seafood and to a lesser extent in dairy. We are managing the deflationary environment well as evidenced by the 6.5% growth in gross profit dollars, which substantially exceeded our case growth rate. Operating expenses increased 4.4%.

That's 210 basis points lower than our gross profit growth rate despite an increased investment in our sales force. This was driven by leverage of our fixed costs, the initiatives undertaken to reduce operating expenses, and by lower fuel prices. In the third quarter, gross profit dollars rose 6.5%, so that our gross profit per case rose 230 basis points. Our EBITDA as a percentage of our gross profit dollars at 15.9% is the best that we have done in the third quarter in our history. Our combination of strong case and gross profit growth plus effective operating expense management drove double-digit adjusted EBITDA and EPS growth.

Let's turn to the performance in our three segments. In our largest segment, which comprises nearly 60% of net sales Performance Food Service net sales for the quarter were $2.3 billion an increase of 3%. The 3% increase in net sales was driven by a strong case growth, case growth was driven both by securing new Street accounts and by further penetrating existing customers. Independent case growth has modestly accelerated as our fiscal year has progressed and now accounts for $43.2% of performance food services' sales up 135 basis points over the prior year. Strong case growth combined with gross margin expansion from selling an improved mix of channels and performance brand drove EBITDA growth for the quarter of 19.3%.

PFG customized net sales decreased 3.2% to approximately $958 million. The decrease was primarily result of a decrease in case volume, which reflected trends in some of our customers in the casual dining segment. For the quarter segment EBITDA increased 1% driven by lower operating expenses, which were partially offset by a decrease in gross profit, an increase in transportation wages, and an increase in costs associated with upgrading a portion of the fleet. In Vistar, net sales increased 9.0% to $651 million driven by broad-based case sales growth. Segment EBITDA increased 4.7%, driven by solid case growth and by good operating expense control.

In summary all of our segments are executing their strategies to grow our overall adjusted EBITDA and EPS. Our organic case growth story remains strong. We have demonstrated a strong track record of growing our independent case volume in the 6% to 10% range. In fact, we have grown in this range over the past several years, during a challenging macro-environment. We are very excited to begin distributing for Red Lobster, since it will strengthen PFG's customized business for the long-term and help PFG attain a higher return on invested capital.

Vistar continues to shift its focus on channel mix toward higher gross margin per case and make small fold in acquisitions. We have a strong pipeline of potential acquisitions candidates and we will remain disciplined in our approach to acquiring companies. We continue to make investments in our business without losing sites of generating strong cash flow and continuing to pay down debt. I started up this call by saying that we can't build PFG without great people and I would like to say something to one of the very best. As we stated in today's earnings release, Bob will be retiring from the Company.

We will miss Bob and his insight on the business. I thank him for his many contributions over his time here. In particular, Bob led the Company in our critical transition from a private to public company with a very successful IPO and an enhanced capital structure. During his tenure, PFG has grown its sales by more than 50%. He leaves us with a very solid financial foundation, not least of which is our excellent finance team.

I personally wish Bob the very best as do all the PFG associates and I will now turn this call over to Bob.

Bob Evans: Thanks, George. Before I get into my prepared remarks, I want to take a moment to say thanks to George, our Board, certainly my finance team and really all the PFG people who have made this such a great adventure for me, the past seven years. I think we have built the best growth company in the Foodservice industry. I mean, we grew during a recession, we have grown during a recovery, we have grown organically, we have grown through acquisitions, and not only have we grown the topline, but we’ve also grown our margins too.

So, I am really proud to have been part of this team and as well as we have done I am completely confident that PFG's best days lie ahead. I contend to remain a shareholder for quite some time to come. So George, you're the architect of our growth and our leader, so let me thank you personally as well. Okay. Now, for those prepared remarks.

I will briefly go through our detailed financial results, discuss our cash flow and balance sheet, and wrap-up with our fiscal 2016 outlook. Our third quarter results saw PFG successfully grow both share and profit margins. Third quarter case growth of 4.1% continued to exceed forecasts for industry real growth. Gross profit dollars rose 6.5% to $481 million and our gross profit per case rose 20 basis points. This increase in gross profit per case was driven by favorable mix shifts, especially towards independent and performance brands in our Performance Foodservice business.

Operating expenses rose 4.4% or 30 basis points per case as a result of fixed cost leverage, initiatives undertaken to reduce operating expenses, an lower fuel prices. The combination of strong case growth and the favorable spread between gross profit and operating expense per case enabled us to grow adjusted EBITDA dollars by 10.2% to $76 million and our gross margins as a percentage of adjusted EBITDA rose by 60 basis points to 15.9%, an all-time high for the third quarter. Let me underscore for a moment what we're doing to expand our margins. In Performance Foodservice our focus remains to shift our mix towards independent and proprietary Performance brands. We do target 6% to 10% growth in independents, and 1% to 4% faster growth in Performance brands, and as George mentioned we have been delivering that consecutively for 27 quarters.

In Vistar our focus is on penetrating new channels that leverage three things. Our existing distribution network, our large variety of candy snack beverage and other SKUs, and our flexible delivery network that spans full truckload orders to small package deliveries. In Customized, our focus is winning new customers like Red Lobster that leverage our existing distribution network. These efforts have expanded our adjusted EBITDA margin by 210 basis points over the last five years and by a further 80 basis points in fiscal 2016 year-to-date. Adjusted EPS in the third quarter advanced 36% over the prior-year period to $0.15 per share, which benefited from a favorable tax rate and other items.

For the quarter, the income tax rate decreased 630 basis points to 39.4% and year-to-date the income tax rate decreased 250 basis points to 40.6%. The decreases in the tax rates were a result of the reduction of non-deductible expenses and state income taxes as a percentage of income before taxes. For the fiscal year, our effective income tax rate continues to be projected at approximately 41%. As we stated in our last quarter's earnings call, PFG borrowed $200 million under the ABL Facility and used the proceeds to repay $200 million aggregate principal amount of loans under our term loan facility. This payment plus the lowering of the interest rates under the ABL Facility will save PFG cash interest of approximately $9 million over the next 12 months, which is expected to translate into $0.5 per share after-tax.

In the third quarter there was a one-time noncash charge of approximately $5.8 million or $0.3 per share related to the term loan repayment transaction and can be found in the interest expense line of the P&L. Turning to PFG's cash flow, in the first nine months PFG delivered $118 million from operating activities versus $28 million in the prior-year period, an improvement of $89 million. In the first nine months, the company invested $68 million in capital expenditures versus $63.7 million in the prior year and we invested $40 million in acquisitions relative to $0.4 million. This cash flow has enabled us to pay down debt and to reduce our financial leverage. PFG's net debt at the end of the third quarter stood at just over $1.2 billion, a decline of $291 million versus the comparable prior-year period.

Our net debt to adjusted EBITDA leverage was 3.4 times at the end of the quarter, which is a decrease of nearly 1.3 turns. The decrease in leverage was approximately half from the primary proceeds of our IPO and half from operations. In terms of our fiscal 2016 outlook, PFG increased the bottom end of our EBITDA growth from 9% to 10% such that our new EBITDA growth outlook is 10% to 12%, which reflects our strong year-to-date results. The comparable full year fiscal 2015 adjusted EBITDA was $328.6 million. The fiscal 2016 outlook does include a 53rd week, which falls in the fourth quarter.

The company anticipates the extra week will add approximately 2 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] And your first question comes from the line of John Heinbockel with Guggenheim Securities.

John Heinbockel: Hey, George, a question, if you break your independent case growth down into existing customers, right more with them and the new customer additions, how does that break down percentage-wise roughly? Has that changed a lot in the last, I don’t know, maybe two years and I'm thinking is it more difficult because a lot of your competitors are more focused on independent case growth as well. Is it more difficult to win over a new customer than it might have been a couple of years ago?

George Holm: Well, we don't give those numbers, but I can give you a kind of some general statements, I guess, here.

John Heinbockel: Yeah.

George Holm: The biggest part of our growth comes from new customers and that's been the case as long as I have been in this business and looking at that new [indiscernible] penetration. Where we have been improving, I think that's why we're seeing some kind of continued improvement as the year goes in our independent growth and we're getting closer to that top end of our range. Actually, in March, we were able to exceed it is because we're not losing quite as much business as we have in the past. I think that's just a reflection maybe of the independent being a little more stable ground financially and we're penetrating a little better than we were before within existing customers.

I mean I would like to think part of that is that we're doing a better job, but I also think that's a reflection that the independent customer is a little stronger than they used to be. But if you really look at those three components of new business and lost business and how we're penetrating, it really hasn't changed that much over the last five years. Just slightly better with the loss and slightly better with the penetration.

John Heinbockel: And then, obviously, it would have a positive impact, right? You think about those components that would be – the margin composition of that of losing less and penetrating more is incrementally better, right?

George Holm: Yeah. I think that's one of the reasons why we're just under 20% growth in EBITDA in that division for us so far this year.

I think they're getting a great benefit from that.

John Heinbockel: All right. And then just secondly with regard to the Red Lobster on boarding, is there any capital that you have to outlay for that and any up front integration cost that you might bear early in the next fiscal year and then how do you think about sort of the incremental profit margin, whence you bring on the $500 million obviously it leverages fixed assets. So you would think the incremental margin to you is better than the average, you know, how do you think about that?

George Holm: Yeah. I'll try not to make this too long an answer.

If you look at our numbers for last quarter for customized, you see that we had a fairly substantial drop in our case growth. Our customers aren't struggling that much. Part of it is because we have not renewed some contracts, not real large accounts, but to make the capacity to handle Red Lobster available, and as we get into this -- deeper into the fourth quarter, we're going to have a little bit more of that. We are not trimming our number of drivers or our number of warehouse people because we want those fully trained people onboard. We're utilizing seven of our distribution centers and those seven centers by that time will pretty much be – well, they will be entirely full-service restaurants.

The Red Lobster contract and how we do business with them is real consistent with our other contracts. So we do feel even though it's very low gross margin business that will be accretive as far as EBITDA as a percent of sales or our EBITDA ratio is for our customized business. The other thing with it is that when we look at the SKU base of the contracts that we're not renewing versus the SKU base for Red Lobster, we will not be adding additional SKUs at all so we will not need any brick-and-mortar for this business and we're going to need just slightly less than 50 new drivers, so for the most part we will have that driver pool on hand because of the business that we're not renewing and we will be getting those drivers on early. We still have I think as the whole world knows there's still a driver shortage, so we're making sure we get them on early, we get them fully trained and ready to go. And then we will have a business there that will be quite accretive for customized and we'll also at the same time add a $0.5 billion on revenues, but it will actually reduce the complexity of the business.

John Heinbockel: Okay. Thank you.

Operator: Your next question comes from the line of Vincent Sinisi with Morgan Stanley.

Vincent Sinisi: Great. Thanks very much for taking my question.

Good morning, guys. And, Bob, let me – was sorry to read the upcoming retirement, but certainly wish you all the best and happiness in the upcoming retirement for you there.

Bob Evans: Thanks, Viny.

Vincent Sinisi: But just wanted to ask you guys, just kind of more theoretically first question, just kind of on the national account focus and obviously a nice win with Red Lobster, is the right way to look at it that of course the major focus is as you said the higher margin, more independent type of customers, but within more of the customized and larger accounts, is it basically a focus where you're going to be going after the highest volumes possible because that does ultimately help the overall margin and maybe not so much of a focus on maybe kind of the mid and smaller tiered accounts on that side of the business? Is that kind of how we should theoretically think of it?

George Holm: Well, I think for the seven distribution centers that the Red Lobster business is going into, you do things in this business and you learn from what you do, but those buildings are really geared to the large family dining, casual dining type of customer. Our expense ratios are very low as we introduce the different type of customer; we found our expense ratios went up, not down.

And this is a little bit kind of going back to our roots. And within that type of distribution center, yes, this is the type of business that fits for us and that's not to say that we won't continue to pursue other types of national accounts, but we're more likely to handle those out of our performance food service division.

Vincent Sinisi: Okay. That makes sense, George. Thank you.

And then maybe just a quick follow-up just in terms of the deflation number, the 11.3% that you guys mentioned. Maybe just by category kind of what was in line or out of line versus your expectations? And just general thoughts how you see that going forward.

George Holm: Yeah, for the most part the story is unchanged from last quarter. It's the proteins that we're seeing the deflation. It's just not quite to the extent that it was before.

As we have gotten into our – a month into our fourth quarter, we're really continuing to see pretty much the same. We’ve got some relief from deflation in the dairy category just by lapping the real low pricing. I think that poultry and seafood are harder for us to get a handle on what's coming up, but it does appear as if meat, there's very in expensive feed demand is down, particularly export and we think that that will probably continue to -- to be in a deflationary kind of mode.

Vincent Sinisi: Okay. Thank you, George.

George Holm: Most of our other categories were not experiencing deflation right now.

Vincent Sinisi: Got it. Okay. Best of luck.

George Holm: Yeah.

Thanks.

Operator: Your next question comes from the line of Zack Fadem with Wells Fargo.

Zack Fadem: Hi, guys. There's been so much focus on the independent customers; I'm actually curious how the chain customers are doing within the broad line business. I know you have some faster growing chains in there.

Perhaps you could update us on how that business has been trending and how do you think about growth for those customers relative to the market?

George Holm: Well, some of the newer ones that we have particularly are showing very good growth in both stores and same-store sales. We're real careful not to comment on any specific customer, that's more of their job. But if you look at our chain business as a whole from the same-store sales point, it has been soft. Interestingly, March was our peak and independent as far as same-store sales and it was our trough in national accounts, so it just kind of is what it is today. The newer ones are – many of them are doing very, very well, but it was certainly a softer quarter for that type of business.

Zack Fadem: Okay. Thanks.

George Holm: Yeah, sequentially we have been a little bit slower with case growth. Obviously, it hasn't had an effect on the bottom line, but all of that softness in excess of 100% of it actually is in our national accounts segment.

Zack Fadem: Okay.

And when looking at just gross profit growth in excess of your operating expenses, you know, you’ve done a really nice job hereof growing the spreads by at least 1% over the next -- over the last two years. As we look over the next couple ever quarters, do you think this can continue or would you expect that spread to begin to level off over the next couple of quarters particularly with the new Red Lobster business coming on?

George Holm: Well, as a percent of sales you're certainly going to see it continue because of the size of Red Lobster and it has very high case cost and a lot of seafood and that's why we really need to look at it kind of segment by segment. But in our biggest category in Performance Food Service I think we'll continue to grow our gross profit dollars at a faster rate than our sales. In Vistar that's something that we have always done. This was an unusual quarter from us from the standpoint that we did grow our sales faster than we grew our EBITDA.

We’ve brought some business that started this week that we brought on that we needed to get the drivers in place. We had to do some re-racking and some re-slotting to get set up to handle the business. It's a dollar store business. It's business that we handle in other parts of the country. We just picked it up in new geographies.

So we know we will climb the learning curve quick, but we did experience some cost increases kind of getting ready there, but I expect them to be able to turn that around and begin to grow their gross profit faster than their cases as well.

Zack Fadem: Okay. And if I could just ask one more, George, the $500 million of annual new Red Lobster business, is that net of the business exits that you're talking about or the decision not to renew certain customized contracts?

George Holm: That is a net number, correct.

Vincent Sinisi: Okay. Perfect.

Thanks a lot, George.

George Holm: Thanks.

Operator: [Operator Instructions] Your next question comes from the line of Edward Kelly with Credit Suisse.

Edward Kelly: Hi. Good morning, guys.

Nice quarter and, let me also say good luck to Bob. I'm sure you're going to be missed over there. George, could we just maybe start off with M&A and where you guys stand today in terms of the potential pipeline that's out there for you? It's been a little while I guess since you have done something more material in this front, but I know it is an important part of your story going forward. Just kind of thoughts on what's out there and how we should be thinking about it?

George Holm: Yes. We have completed a couple small ones in the candy, snack and beverage arena.

When it comes to performance food service, we're very active right now. We're comfortable that we're – that we've kind of got enough in the works that will get some successes coming up. We're obviously very careful with what we do and what we pay and the type of business that we buy. I think that M&A is important to us. I don't think it's necessarily an important part of our story, though.

I think organically that we can move along just fine. That said, we are anxious to get some M&A done. We have people working hard. We're currently visiting people and we feel good.

Edward Kelly: Okay.

And then a follow-up on Vistar, you mentioned bringing on some new dollar store business and retail is a good business there. Could you just maybe talk about the opportunity that you’ve got to grow Vistar in some of these higher margin channels and really kind of what you're seeing on that front?

George Holm: Well, we like to continue to kind of take our offering and introduce that product into different channels. We’ve been quite successful there. Even our retail business, which I think everybody understands that retail has been quite slow, but we’ve been able to add more product to our offering. We're continuing to do more kind of health and beauty aid type products, anything that's impulse by.

So that has helped us. We supply customers everywhere from a FedEx, UPS type of delivery model all the way to 52-foot trucks and we’ve put an automated pick and pack distribution in place, which we’ve been shipping now for just a few weeks that's in Mississippi, but basically in the Memphis area. That's going to be a big help for us in that smaller drop. We do fulfillment for other people where it comes from us, but it's on their invoice. That business we expect to continue to see grow.

We just see opportunity in several areas. The hospitality has been a great opportunity for us. We can't really talk market share there because we're kind of creating the market as we get these hotels to put in pantries. Our core business, the theater area, the retail, the office coffee service, they all continue to grow and we see a bright future in that business.

Edward Kelly: And then, just last question for you.

Can you maybe talk to what you're seeing in the industry from a competition standpoint whether that be pricing for the higher margin street business or competition for sales people for instance, which I know is important as well?

George Holm: Yeah, I don't think we have seen any real change from the last time that question came up, which was last quarter. I think the market is still very competitive. Certainly when I talk to our people, we had a group of sales managers in last night from around the country and you listen to them and it's a very competitive marketplace. I think that our major competitors are – they're very focused and they do a good job and they're chasing business hard and we're chasing business hard and it’s just a matter of executing and getting it.

Edward Kelly: Great.

Thank you.

George Holm: Thank you.

Operator: Your next question comes from the line of Bob Summers with Macquarie.

Bob Summers: Yes. Good morning, guys.

Can we just talk about the independent business a little bit? I mean it's, obviously, it's been exhibiting strength. It seems that we're now close to maybe fully recovered from the damage the recession has done, but I guess the questions I have here or within that what kind of visibility do you get around new formation? And then, you know, as you think about the cyclicality of the business, casual dining versus independents, I mean what's the right way to think about it? Or are we sort of entering a new paradigm at this point where because the independent restaurants are better on trend in terms of consumer tastes, profiles, what they want that this relative growth could continue for a lot longer than maybe people think?

George Holm: Well, I think one of the things that's really helped is the independent appears to have pretty good access to capital today. And I think that coming out of that great recession that it was very hard for somebody to get the capital unless they’ve got a very big check to open a restaurant. So I do think that's helped. I do think they are more on trend and they can move quicker.

I think that it's an industry that it's hard to track the numbers. I think that – this is just my opinion and our people's opinion, I think the independent is probably doing a bit better than they're getting credit for when you look at numbers that get released. And I look at the big chains and I think they're working really hard. They are doing what they can do to appeal to a wider customer base and I think at some point some of them get traction today. I think at some point more of them will get traction, but it's just a changing and how people consuming and what they want to eat.

And I think that just changes faster than it used to change. And today at least for now the independent just changes quicker.

Bob Summers: Okay. And then just one housekeeping item, when you had - when you take a step back and you think about your three year plan and you had an acquisition number when they are not in there, I mean is, is the Red Lobster deal bigger than something that you had originally contemplated?

George Holm: Yes. Bob, if you go back and you look at kind of the three year plan, we feared with analysts during the IPO standpoint that was all kind of an organic growth plan.

There were no acquisitions built-in and at that time we were kind of assuming that Customized was going to be kind of - have the same rough customer base that it has right now. We thought we might get a fuel small wins in, but we didn't anticipate anything as large as Red Lobster, so yes this as little bit incremental too.

Bob Evans: Yes. Because as we looked at our planning going forwards back then we really had a low expectation levels for our customized business and one thing about customers scale of Red Lobster for us that's a - you know to your point it's as big an acquisition of - on the M&A side. Obviously, when you buy something on the M&A side it's with you always Red Lobster, you know, we anticipate a good, long relationship with them and, you know, the culture - our culture and their cultures fit just really well together, so we're really excited about having them as part of the family.

George Holm: Yes and I think we need to be a little careful here. I mean that when you say $500 million, that sounds like a very large number. I remember our cases and - as where our profit is and these are very expensive cases on the part of the seafood part of it. It's going to be a nice incremental increase for us in our customized and we will operate with extremely low gross margins, but it's not the impact of buying a company with $500 million in revenues. It's definitely not that kind of impact.

Bob Summers: Okay. Thank you.

Operator: Your next question comes from the line of Andrew Wolf with BB&T Capital Market.

Andrew Wolf: Thanks. Good morning.

George, I was also going to ask you about the nature of the competitive environment and - but let me sort of look at it a differently, it looks like you and some of the other large players are doing good with local business. You’ve been for a long time and some of the other players more recently. What is it, do you have a sense if that implies that smaller players for structural reasons or any other reasons at least some of them are struggling and seating share, which often happens in many industries to larger players.

George Holm: I think logic would tell me that either the growth of the independent business is understated or there has to be somebody that's losing that business. When I ask our people their opinion of where they're getting the business, they pretty much feel it's, you know, dependent on how the competitors do in that market.

It's pretty evenly split. So, I don't think that our growth probably has any big impact on any individual competitor of ours, but obviously if the market is growing 1% to 2% and the big players are growing substantially better than that, then there's someone that's probably going backwards.

Rob Evans: And one of the other things to call to your attention, Andy, is the fact that we say we're going to grow independent 6% to 10% in cases year-over-year and we're going to grow our brands 0.4% faster than that, you know, we have been growing brand substantially faster than cases and that's one of those things that the large broad line companies have a good brands portfolio and some of the smaller independents obviously don't [indiscernible] now scale to develop their own.

George Holm: That's very true. That's very true.

Even for us as he we get larger we find that we can do a deeper offering of our brand just by having the scale to pack it in a brand that we can really support.

Andrew Wolf: Okay. That's really interesting actually. You know, how much runway do you have to continue to enhance the brand versus either industry best practices or internal goals and, you know, is it still multi-year penetration opportunity?

Bob Evans: We believe so, yes. Part of it is just our brand will - you know, we’ll think just naturally be a little bit more successful than our case growth and we certainly have product areas where we don't have as complete an offering as our larger competitors do and as we get bigger we'll just continue to increase that offering.

George Holm: Yes. Andy, our brands penetration in the Street business is in the low 40% of the business. You know, our largest competitor is closer to 50% and we have got some of our [indiscernible] right now that are well above 50% already so yes, we think there's a ton of runway.

Operator: [Operator Instructions] At this time there are no further questions. I will now turn the conference back to Michael Neese.

Michael Neese: We would like to thank everyone for their participation on today's calling. Have a great day.

Operator: This concludes today's conference call. You may now disconnect.