Operator: Good morning, and welcome to the PFG Q4 Fiscal 2017 and Year-End Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by PFG's management and a question-and-answer session. I would now like town turn the call over to Mr. Michael Neese, Vice President, Investor Relations, for PFG. Please go ahead.

Michael Neese: Thank you, Crystal, and good morning, everyone. We are here this morning with George Holm, Performance Food Group's CEO; and Tom Ondrof, PFG’s CFO.
We issued a press release regarding our results of this morning. The results discussed in this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings release.

Please note that our fiscal year 2016 results included a 14th week for the fourth fiscal quarter and a 53rd week for the fiscal year of 2016. In fiscal 2017, the fourth quarter included 13 weeks and the year included 52 weeks. We will also discuss results in a comparable 13-week and 52-week basis to provide reasonable year-over-year comparisons. 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 and our SEC filings for various factors that could cause our actual results to differ materially from forward-looking statements and projections. Now I'd like to turn the call over to George.

George Holm: Thanks, Michael. Good morning, everyone, and thank you for joining us today. I'm very pleased to discuss our full year financial and operating results.

Our strong and consistent case growth, combined with increased gross profit per case, led to profitability growth at the high end of our expectations for fiscal 2017.
We started the fiscal year by making key strategic investments to help fuel our future growth and they are beginning to pay dividends, contributing to our strong second half results. As expected, our quarterly adjusted EBITDA growth improved as we progressed through fiscal 2017 to end the year 9% higher than fiscal 2016 on a 52- to 52-week basis. Our team's focused execution enabled us to generate case growth of over 6%, excluding the extra week, and we continue to achieve market share gains. We generated record net sales of $16.8 billion and gross profit of $2.1 billion.

Gross profit margins increased 20 basis points to 12.7% of sales. Gross profit dollar growth of nearly 8%, excluding the extra week, outpaced our case growth as we improved our mix of sales across customers, sales channels and products. The mix in independent cases continues to improve throughout the year. Our operating margins improved due to the benefits of improving mix and operating leverage from strong sales growth. Turning to our segments.

Performance Foodservice generated a net sales growth of more than 4%, excluding the extra week. This growth was driven by the addition of new independent customers and growth in existing customers. PFS' EBITDA grew by over 8% for the year on a 52- to 52-week basis, backed by approximately 7% independent case growth. Independent sales, as a percent of total segment sales, continue to climb on a year-over-year basis and are now at 44.4% of sales. During the year, our sales associates did an outstanding job of focusing on our private label business, helping drive Performance Brand case growth by nearly 10%.

Customized net sales for the year increased nearly 3%, excluding the extra week. Improved sales mix, higher case volume and higher revenue per case, were partially offset by softness in the casual dining environment and higher costs associated with closing a distribution center.
I'm proud of our associates for successfully integrating Red Lobster, and the higher costs from the integration are now behind us.
Vistar delivered a healthy increase in net sales in fiscal 2017 to $3 billion or just over 13% increase, excluding the extra week, driven by a broad-based case growth across all their channels, including vending, retail, theater and hospitality and by recent acquisitions. EBITDA from Vistar was up nearly 9% to $120.8 million on a 52-week basis.

The investments in Vistar's automated retail center and the dollar store channel made good progress and will enhance profitability in the future. Before I turn the call over to Tom to discuss the financial details, I'd like to highlight one of our associates, [ Roseanne Strong ], a customer service representative with our Vistar location in Southern California. Roseanne recently received extraordinary praise from American Multi-Cinema, a key Vistar customer in the theater segment. She was recognized by AMC for going above and beyond with her quick, accurate and empathetic communication style. Thanks, Roseanne, for your superior efforts and setting us apart from our competition.

I would also like to thank our 14,000-plus associates for their efforts and dedication. Your hard work has helped us finish the year strong, and I appreciate the tremendous level of service you provide to our customers.
Our diverse business model and motivated sales force provide us meaningful opportunities to continue gaining share and growing profits in fiscal 2018. I would now like to turn the call over to Tom, who will discuss our fourth quarter results.

Thomas Ondrof: Thank you, George, and good morning.

Let's take a look at our fourth quarter consolidated financial results on a comparable 52-week basis or excluding the extra week in fiscal 2016. We were very pleased to see net sales for the quarter increase more than 9% to $4.4 billion compared to prior year as a result of broad-based growth in all segments, the impact of inflation and contributions from acquisitions. PFS' independent case growth was up almost 7%. Customized benefited from the rollout of the Red Lobster business. And Vistar had solid case sales growth across all their customer channels.

Overall food cost inflation in the quarter was approximately 2%. We're experiencing inflation in produce, seafood, cheese and poultry with a more modest increase in meats, offset by deflation in eggs.
Over the course of the past few months, our experienced and well-trained sales force has been able to make the transition from a deflationary to inflationary environment, most notably in independent restaurants. In fact, more than 70% of our growing sales force has been with us at least 3 years, so they've dealt with inflation and have the tools to handle the current pricing environment without much issue from a customer or financial perspective.
To that point, our Q4 gross profit dollars increased more than 10% to $574.9 million compared to the same period last year, and gross profit margin improved by 15 basis points.

The gross profit increase was fueled by strong case growth and through an improved sales mix of customer channels and products, primarily in the independent channel. Total company adjusted EBITDA for the quarter was up over 23% to $131.5 million, driven by strong top line and gross profit growth, contributions from acquisitions and lower operating expenses, including more normalized professional and legal fees and worker's comp expenses within corporate. We're very pleased to have delivered the expected sequential quarterly improvement in EBITDA growth during the course of our fiscal year. Net income increased to $40.4 million for the fourth quarter compared to the prior period, driven by higher operating profit and a decrease in interest expense, partially offset by increased tax expense.
For the quarter, the income tax rate decreased 10 basis points to 39.9%.

The lower tax rate was primarily a result of an increase in permanent deductions to stock-based compensation activity.
Adjusted diluted EPS advanced 26.3% to $0.48 per share as a result of higher net income, or 37.1% after adjusting for the extra week. Now let me take you briefly through the segment and corporate results. Performance Foodservice net sales for Q4 increased roughly 7% to $2.6 billion, driven by growth in new independent customers and further penetrating existing ones. EBITDA for PFS increased in the mid-teens on a 52-week basis, driven by higher cases, an increase in gross profit per case and tight control of operating expenses.

Customized net sales for the quarter increased nearly 8% to $983.7 million, driven by the new business with Red Lobster, offset partially by a soft casual dining environment. In the fourth quarter, Customized operating expenses included $5.2 million of costs related to the closing of a historically unprofitable distribution center in Georgia. I would note that without the onetime charge, Customized EBITDA would have increased significantly in the quarter on a 52-week basis. Vistar delivered a solid increase in net sales with $773.7 million, or just over 10%, during Q4 driven by broad-based case growth across all their channels, including vending, retail, theater and hospitality and by recent acquisition. EBITDA from Vistar was up more than 20% to $35.2 million on a 52-week basis.

Although operating expense increases slightly outpaced sales growth during the quarter, gross profit margin improved substantially due to implementing contracted customer price increases and procurement gains.
As expected, corporate expenses continued to abate during the quarter compared to prior year as we work to manage down professional and legal fees and workers' compensation expense continued to stabilize. Finally, let me turn to our cash flow. For fiscal 2017, the company generated cash flow from operating activities of $201.7 million, slightly less than last year after adjusting for the benefit of a $25 million breakup fee -- payment PFG received in 2016 related to the terminated agreement to acquire 11 facilities from Sysco and US Foods. The decrease in operating cash flow was driven by the required working capital investment within of the Red Lobster business and by a shift in our sales mix.

Cash used in investing activities totaled $332 million for fiscal 2017. These investments consisted primarily of business acquisitions totaling $192.9 million and capital expenditures of $140.2 million or 0.8% of net sales.
While our net debt increased by $129.5 million during the fiscal year, net debt to adjusted EBITDA remained comfortably at 3.3x. We have and will remain disciplined in our uses of cash and leverage as we evaluate future investment opportunities.
We expect capital expenditures for fiscal 2018 to be a little closer to 1% of net sales or between $160 million and $180 million as we expand capacity in the PFS and Vistar distribution networks as well as build out space related to our acquisition of Presto earlier this year.

Turning to our guidance. For the full year fiscal 2018, we expect the following for

the company: Organic case growth in a range of 3% to 5%; adjusted EBITDA growth to be in the 8% to 11% range; interest expense of approximately $55 million to $65 million and effective tax rate on operations of approximately 40%; and adjusted diluted EPS growth in the 13% to 18% range or $1.40 to $1.46.
As we noted in today's earnings release, the company expects that the 8% to 11% adjusted EBITDA growth for fiscal 2018 will reflect first half growth in the range of mid- to high-teens. Second half adjusted EBITDA growth is expected to be in the mid-single-digit range. First half fiscal 2018 growth is expected to reflect easier comparisons versus in the first half of fiscal 2017 as the company laps higher corporate costs and its strategic investments in Customized and Vistar.

Now I'd like to turn the call back over to George.

George Holm: Thanks, Tom. I'd like to wrap up with a quick update on our strategic investments, discuss our performance plans and make a comment on M&A. As we expected, we lapped some of the Vistar increased cost during the fourth quarter and drove an EBITDA increase of 20%. We made good progress with our retail automation distribution center and closed the manual facility in May.

We are improving productivity in Metro New York to the point where it is adding to year-over-year profit growth. We continue to partner with our client to discuss long-term strategies which will ultimately influence our capacity and location requirements in the area. Until then, we will operate the 2 separate facilities. We are serving all of the Red Lobster stores in the U.S., and those transition costs are behind us. As Tom mentioned, our higher corporate expenses normalized throughout the year, and we expect those significant headwinds to be behind us.

Turning to our Performance Brands. We continue to grow our private label business ahead of our independent case sales. In fact, our Performance Brands grew nearly 10% this year and are now more than a $2 billion private brand portfolio. This year alone, we launched over 800 SKUs, which was a record for PFG. Our tracking shows that most of these new brands are enjoying double and even triple digit growth week-after-week.

Our sales and marketing teams did an outstanding job of creating brands that filled the need for chefs around the country. I would like to highlight one of our strongest and highest-margin brands in our portfolio, and that's our Braveheart Black Angus Beef. It stands out from the rest because it was designed to exceed operators' expectations for quality beef. We spent time talking with chefs, restaurant owners, asking them about their beef selections with other brands on the market and about what they were looking for in a premium line. They unanimously focused on 4 critical areas

of importance: Taste, quality, trim and consistency.

Our cattle are born in the Upper Midwest of the U.S. and are 100% grass- and grain-fed on family farms. Best feeding and location contributes to the beautiful marbling that produces superior flavor and tenderness. We have an exclusive process of ensuring the highest quality for Braveheart. Part of this program incorporates of the nation's first of its kind DNA-based traceability to system and site audits.

Braveheart's case growth was up over 20% versus the prior year and has a double-digit CAGR over the past 5 years. We will provide more details about our Braveheart brand at our Investor Day next month. A quick comment on M&A. We remain excited and disciplined about our M&A opportunities. As I mentioned on the last call, we've acquired several small companies in the specialty market and in our Vistar segment.

The pipeline continues to be robust, and we are looking at candidates that are complimentary additions to our existing businesses, fill in white space opportunities and companies that are cultural fits and would be accretive to earnings. To summarize, we had a strong year in fiscal 2017. We made strategic investments in certain areas of our businesses, and we delivered on our stated goals and objectives. We expect fiscal 2018 to be another year of best-in-class case growth and continued solid earnings improvement. We will remain focused on increasing our market share and investing in our associates and customers.

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

Operator: [Operator Instructions] And your first question comes from the line of Kelly Bania with BMO Capital.

Kelly Bania: I guess just a question on the guidance. You explained the first half EBITDA growth a little higher, I think that makes sense. But the second half, why is that expected to be in the mid-single-digit range? Is that conservatism? Or is there any other an expense or things going on in the second half that we should be aware of to drive that kind of below-average growth in the second half?

Thomas Ondrof: No.

Kelly, this is Tom. It's really just the progression of lapping the costs and the hockey stick, so to speak, for this year. As you know, Red Lobster was fully implemented by Thanksgiving, and so that will be fully reflected in the -- or was fully reflected in the second half. So that higher bar, if you will, is going to be part of the second half of 2018. Same thing with the Metro New York dollar channel -- dollar store channel.

The improvements were made in the second half of this year, so that won't to have as much of an impact. And even the automated retail, the last 2 months of the year; basically this year, it was in a better place, so to speak. So I just think there's a lot of things in the second half of this year that improved and that we'll be lapping those as we go into fiscal '18.

Kelly Bania: Got it. Okay.

And just a question about the Georgia closure. I guess, was that -- the expenses associated with that, was that planned or unplanned? And are there any other facilities in that segment that are unprofitable or close to unprofitable?

George Holm: Yes. I'm quite sure, at the end of this year, we'll be able to say that we had our first year without having any distribution center that was unprofitable. That situation there has been a tough building for us and a tough labor market for us for a long time. We converted that to a Customized facility 5 years ago and have never been able to get that to work from a profitability standpoint.

As far as it being a planned closing, it was, but when you're in a situation like that and you want to service a customer up until the last day, it's not something you want to communicate until you get to that 60-day plant closing. So that's why we were not real transparent about it.

Operator: You next question comes from the line of Andrew Wolf with Loop Capital Market.

Thomas Ondrof: Andy?

Andrew Wolf: Sorry, I've been on mute. Can you hear me?

Michael Neese: We can hear you now.

Andrew Wolf: George, can you talk about how the competitive environment is intersecting with some rising product cost inflation? I mean, you said for the company, your sales force has the tools to deal with what's going on. But are you getting pushback from restaurants? Or you help -- how is that interaction going? Is the independent channel still having an [indiscernible] outperformance versus the chains, where they're not too overly concerned with a little bit of inflation? Can you just give us a feel for the mark -- what you think the conditions are up and down the street?

George Holm: Any time you go from a deflationary environment to an inflationary environment, it takes a little bit of time to get that to work. We've made great improvement, as we've seen, this inflation come into fold. But I will tell you that our margin growth is due to the change in our mix of business, not because we were able to grow margins in that inflationary environment, but we were able to continue to get increases in our gross profit per case through that inflationary and that's -- environment, and that's the thing that really means the most to us.

Andrew Wolf: Sort of as a follow-up.

I mean, when inflation comes and the burden -- the cost burden starts to hit the restaurants, are they look -- I would assume they're looking much more for solutions. And could you -- does private label penetration just sort of ramp because of that? And other things, menu consultation, ingredient substitution ideas? I mean, do all the things that a large company can bring start to really come to the fore?

George Holm: Well, I think any time they're faced with inflation, they look for ways to ease that inflation. And I think it does help our brands when we enter those type of periods. But for the most part, Andy, our customers just -- they do just continue to buy the same thing they were buying before. And it's just our responsibility to make sure that we continue to get that gross profit per case that we need.

Andrew Wolf: Okay. And last one, on the financial side. You indicated, clearly, you did hit the higher end of the revised guidance. And I guess as we look at this year's guidance and I guess try to figure out how conservative, or not, you guys are. Looking at Q4 and sort of the second half of the year, where you came in at the higher of your guidance, can you kind of talk about a specific part of the P&L that kind of got you there? It looks like the sales were more or less in line, I think.

So was it on the expense side? Or the gross margin realization? Or maybe it was in sales. Just some help on us understanding.

Thomas Ondrof: I think it was no one silver bullet to it. I think it was across the board. I think the top line certainly helped and probably contributed to -- then some of the growth profit opportunities that -- and the growth we had there, really relentless focus on the OpEx, including holding off on the -- or the -- some of the corporate and expenses being able to abate in the second half of the year.

So I think it was up and down the P&L, starting with the top line through GP and then on to the OpEx line as well. No one thing.

George Holm: Yes, and Andy, I'm going to mention in the same word again with the mix, but that's been real important for us. And Performance Foodservice, when we got outside of our independent business, we had very little growth. So that makes continued to move in the right direction for us.

And the same within Vistar. Vistar has done a great job of exceeding their growth as a company in the higher-margin channels, that also come with higher expenses, but they've done a great job of getting a lot of incremental business that hasn't hit their expense line hard. So it's just a combination of those things. And then our corporate expenses, we've really worked hard to get those where we want to have them, and that's helped us a good bit in the second half.

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

Vincent Sinisi: Wanted to ask. Last week, of course, we all know there was a reference to that Technomic report around independent case growth possibly slowing as -- over the next few months. You guys, obviously, had nice, more than 6% growth in the quarter. So I just wanted to kind of get direction to that report out there, if you are seeing any changes within the independent channel. Any color there would be great.

George Holm: Yes. Well first, I haven't seen the report. So I'm just not familiar with it. And I think that when it comes to independent restaurant business particularly, I don't know that anybody really knows what those numbers are and it's just conversations and people have different opinions. And of course, I have mine.

But I think the independent business is still doing well. I have the sense it's not doing as well at the same-store level as it was doing before. I think that more of the growth has been new restaurants, and we see that in our penetration numbers when you look at like-for-like items from one year to the next, that the same-store growth is more difficult to get. But I think if you look at overall independent restaurants, my personal opinion is that they're doing just fine.

Vincent Sinisi: Okay, perfect, George, that's helpful.

And then just a quick follow-up to the M&A opportunities. Just wondering if you have any further thoughts around -- it seems like Vistar, obviously, is a differentiator for you guys. How do you kind of weigh opportunities in that specific segment versus more of the broadlines as you're continuing to build out more of a national scale?

George Holm: Well, most of the acquisitions -- or really all of the acquisitions that we've done have been fairly specialized. We haven't purchased in a while what I would call a large broadliner. We did buy a broadliner in Ohio, but small and not a street or independent-focused company.

We continue to see opportunities with Vistar, and that's very important to us. So we're going to continue to make acquisitions that fit our business there. We bought a pizza distribution business in Ohio as well, and we hadn't bought one of those for a while and it's been really good and very helpful for us. And the meat and seafood areas where we're quite, from a fresh processed-by-yourself, that market, we're very, very underpenetrated. So that's an area that we really want to grow.

We don't see the potential right now for any, like, transformative, big, broadline acquisition, but we think that we can continue to pursue some of the smaller ones. And where the fit's right, I think we can be successful with it. But the key for our business in that broadline area is just for us to continue to put out organic growth. That's the most important thing for us.

Operator: Your next question comes from the line of Karru Martinson with Jefferies.

Karru Martinson: Just wanted to take a step back and look at kind of the sustained growth that we've had in the independent channel. I mean, what has been the competitive response from the chain side of the equation? I mean, the 2 seem to be very much going in different directions here.

George Holm: Yes, I think that the independent business has always been real competitive. I think it's real competitive right now. But it's large and our shares are not great, some market's better than others, but we don't have big market share.

So we think we can continue to grow well there. I think that in the chain business, I really do believe it's less competitive. We certainly haven't been pursuing much in the way of business in the chain world. But it's still a low-margin business. And a great deal of the customers that we have, a very high percentage of them, do not have same-store sales growth.

So it makes for a difficult business. We're in it and we want to continue to be in it. We're real proud of our Customized and what they can accomplish, but I think that I would have to put us as careful in that business, very careful.

Karru Martinson: Okay. And just with the step up in CapEx.

I mean, is there any change in the cadence of how that will flow through the year? Or how should we think about that from a modeling perspective?

Thomas Ondrof: It may be a little first-half-weighted. We got a couple of the larger products -- projects, including the Presto acquisition expansion, which will probably get going -- or underway and get going here in the first half. So I think that we would be slightly first-half-weighted in terms of spend.

George Holm: Well, I will also mention in CapEx that it's not all that inconsistent from where we have been in the past, the amount that we plan to spend this year. But where we have capacity constraints, we want to make sure that we're addressing those, and that would be in Performance Foodservice.

And then in Vistar, we've done this one automated facility which continues to get better and better. And our plan eventually is to make sure that we have service out of an automated pick-and-pack facility to each market in the country on a next-day basis. So when we are real comfortable that we're getting the productivity from that, that we should be getting, we'll also be continuing to spend some money on those facilities. I think those are just great investments in our business, and we're going to continue to make those.

Operator: Your next question comes from the line of John Heinbockel with Guggenheim.

John Heinbockel: So George, where are you in building up the specialty organization? And if you look at center-of-the-plate case growth versus independent, how would that generally compare? Is that running ahead or lagging overall case growth?

George Holm: Yes, it's very much running ahead. If you look at last quarter, we had 2% inflation, but we grew our business 4% above, in sales, above what our cases grew. So half of that was inflation and half of it was just an increase in our average case, and it's because of our center of the plate sales. So when I say that we're underpenetrated there, we do well and we're growing faster from a case standpoint than we are the rest of our business. But today, we have 7 meat-cutting facilities that are embedded into our existing warehouses.

We have 2 that are freestanding. We have 1 seafood cutting operation that is embedded, and we have 1 that's freestanding. So in many markets, we have somebody else that's doing that for us, and we look at that as an opportunity to increase profitability by doing it ourselves. So that's the reason that we want to do more of these type of acquisitions. And we have our first kind of launch into doing one ourselves without doing it through acquisition, and we've had that opening this fiscal year.

And that will be in North Carolina.

John Heinbockel: So do you think -- is this part of what you want to do here, is that the ones that are embedded, do you now pull them out? And if you pull them out and they're sort of on their own, does that make a difference to the customer in terms of perception of quality?

George Holm: Yes. Yes, I would -- that would be the short answer. That's something that we're going to be highlighting in our Investor Day here in September. And we probably should wait until then to discuss that.

We'll give a much better view of what our plans are.

Operator: Your next question comes from the line of Karen Short with Barclays.

Karen Short: Just a couple of questions. First, could you -- if you gave this, I missed it. Did you give inflation expectations for fiscal '18?

George Holm: No, we didn't, probably cause our crystal ball is broke.

But the crops have been very, very good in this country. There's some issues in Europe. There seems to be plenty of cattle out there. There's plenty of milk. So we don't necessarily think that the inflation's going to continue at the pace it's at.

The people we've talked to say that it isn't, that later in the year, that we could go through some sequential deflationary times. When you get to, really, to cheese, that -- and poultry, those, they vary all the time. They're very volatile. So we don't think that we're going to see this level of inflation later in the year. That doesn't mean that it won't happen.

That's just our guess.

Karen Short: Okay. So I guess to the extent that we look at how we model Foodservice total sales growth, obviously, you've given organic case growth, we should kind of assume inflation as maybe flat. And then other and mix, which had historically kind of been model at around 1%, is that still fair? So 3% to 5% for organic, flat inflation and then maybe 1-ish percent for other and mix as it relates to total Foodservice growth. Is that fair?

Thomas Ondrof: No, I think that would be fair.

Karen Short: Okay. And then I guess just wondering on Vistar. I guess you commented on price increases. Maybe can you give a little color there? What categories? And then, I mean, one of the things that we've been talking about for a while is just the benefit to the top line from price increases. But any -- also the benefit to margins from -- followed by your inventory gains.

So maybe just a little color on that.

George Holm: Yes, and I'll try not to get too deep in the weeds with this because it's pretty complex. The biggest contributor to margin gains for us in Vistar is just our mix of business. That is the biggest catalyst that we have to get our margins up. We did get some increases with some customers that we needed to get and they were more around kind of the lower case cost type of customer, where we were working on a margin and it just wasn't happening properly for us.

So we've worked through some things with some customers, they've been great about it. But in the future, we'll see the bulk of any margin increases that we get will come through just change in mix of business.

Karen Short: Okay. And then just the last question. The -- so your long term -- so adjusted EBITDA growth is kind of slightly above the long-term algorithm, right? But EPS is a little below.

Can you -- is the delta just interest expense and share count more than anything?

Thomas Ondrof: It is, yes.

Operator: Your next question comes from the line of Ajay Jain with Pivotal Research.

Ajay Jain: I was hoping to get a clearer picture on profitability for Customized. I would have thought that comparisons would start to get better in Customized beginning in Q4 and then they get a lot better in next 6 months. So 2 questions for Customized.

First, for the facility in Georgia, can you confirm that the store closure costs were excluded from EBITDA? I'm assuming that they were not. And then I also want to confirm the EBITDA growth in Q4 for Customized after accounting for the calendar shift. So can you give a directional sense, profitability for Customized in the fourth quarter after adjusting for the calendar shift? And then any other type of anomaly?

Thomas Ondrof: Well the -- yes. In the disclosure of the Customized, the closure cost for the Georgia facility was in their numbers, so depressed it. If you strip that out and adjusted for the 53rd week in essence, their number would have been over 20% for the quarter.

Ajay Jain: Okay. And you're not expecting any residual impact from store -- from those closure costs in fiscal '18, is that correct?

Thomas Ondrof: No, no.

Ajay Jain: Okay. And then you talked about the cadence of the EBITDA outlook, I guess, on a consolidated basis for the first half relative to the back half of the year. And so as you start to further cycle the start-up cost for Vistar and Red Lobster, can you give any further color on your EBITDA outlook in the first half of fiscal '18 by segment for Customized and Vistar? At least directionally?

George Holm: Well, if you want to talk about directionally, I mean, Vistar and Customized will have higher EBITDA growth than our total EBITDA growth in the first half of the year because that's really where they're lapping the easier comparisons.

Ajay Jain: Okay, that's helpful. I had one final question. I know that there was an earlier question about the outlook for independents, and I had kind of a bigger question -- a bigger-picture question on restaurant spending in general. I think there's been some indication or some data out there that casual dining comps and traffic took a step back in July. And I was just wondering if you're seeing any evidence of that in terms of sequential softness in the current quarter.

George Holm: Yes. I say this all the time and I'll make sure I say it again. We're not going to comment on any individual chain. But if we had to look across our casual dining chain business, there is definitely a continued softness in the same-store sales and it slightly -- it got slightly worse. We had, this month last year, we -- was the worse month we had for closures of stores.

And this month this year, we're also having some closures. Not anywhere near of what we had a year ago. And what we do find is that after we get those closures, that tends to help same-store sales. And we're -- we feel better about same-store sales as we get later into this year. Part of it is the change in our customer mix.

We no longer have any QSR in ours. And the bulk of the closures of underperforming stores have been in casual dining.

Operator: [Operator Instructions] And your next question comes from the line of Karen Holthouse with Goldman Sachs.

Gregory Lum: This is actually Greg Lum on for Karen today. Had a couple of questions, the first on interest expense.

So one of the things that you mentioned is that you're comfortable with your current leverage level. So I'm wondering what actually contributes to the range that you gave for interest expense. Is it just a range around rate assumptions?

Thomas Ondrof: Both rate assumptions and capital expenditures and potential acquisition opportunities. So just -- it's both debt levels and interest rate.

Gregory Lum: Okay.

And then one of the things that you mentioned is that you're not really pursuing chain. And some competitors have also talked about walking away from some less profitable consumers. So I'm wondering if this has actually reached a point where it's actually starting to help your pricing power.

George Holm: That is a difficult question. It is so specific to certain accounts in certain parts of the country.

But if I looked in general, I would say that we probably have better pricing power than we've had before. And it's just not an area that we're pursuing a great deal of business today. I mean, we're always calling on customers. We always want to grow. We're always opportunistic.

But it's just not a huge area of focus for us right now.

Operator: Our final question comes from the line of Bob Summers with Macquarie.

Robert Summers: So just -- look, I mean, the weakness in the multichain segment is pretty well documented at this point. And I guess, in one sense, I'm a little surprised that the people are surprised. But within that, just on a broad-based basis, if you had to address why this is happening and maybe say -- are the concepts getting tired? Is there a consumer weakness issue here? Are there geographic differences? Any way to frame that? And I guess, George, within this, have you ever seen the divergence between independent trends and sort of multiunit trends be this high?

George Holm: I just think there's accounts -- not accounts, there's restaurant and there's chains that, for some reason, are out of favor maybe with the consumer.

And they're working at changes to get better. And I think that if you just had to go to the core issue, and that's there's too many restaurants and too many feet in that casual dining area. And those things tend to be self-correcting, and that's what's happening. I mean, they're getting self-corrected. I mean, people are closing stores, they're getting highly focused on making sure that they're -- the guests are having good experience there and the menus are being tweaked to make sure that the menus are right.

But it's still a huge industry. The casual dining business is very large, there just aren't enough customers to fill the seats that they have, and that will self-correct. And I think that the industry has a real good future. And then I'm seeing some of that in independent, that there's just so many restaurants going up and they're good and they know what they're doing. And the business is just getting spread a little bit right now.

But I think it's still healthy. I do think there probably is a move towards going to something unique and something, I guess I would say, independent because it's unique. As to why, I don't know, okay? But I would say that that's happened. And I would say that I've never seen it to the degree that it is today. People are looking for a different experience and they're going to independent restaurants.

Robert Summers: Okay. I guess related to that, given that the independent case volume trends are still really solid and didn't fall off nearly as much as the total number. Any -- I mean, I think we know generally that the probability is higher. What's the right way to think about that? Either in terms of percentage of upside or gross profit dollars of differential or what have you, just to try and think about the incremental benefit of growing that piece of business faster than everything else.

George Holm: Well, it certainly more profitable.

It varies so much by account, though, just so much. And as for us, we will keep it pretty simple. We just want to make sure that we continue to grow that business. We don't have a real high share. We're extremely confident that we can continue to grow that business.

And it's just about focus. We just don't get that deep into it and that analytical about it, we just get out and make those calls and we'll be fine. And I do think that the chain business will stabilize and we're in a good spot with it. I think we have some real good customers and we're been very attentive to them. Our service levels in Customized are incredibly good, I mean, better than I've ever seen them.

And that's just where we're headed with things. We just want to continue to do well in each one of those businesses. And so I'm not sure, from a future standpoint, that there's some type of model that we can put together as to what impact it's going to have to continue to grow those businesses faster. But I do know that, that's something that we can continue to do.

Operator: At this time, there are no further questions.

I'll turn the call back to the presenters for closing remarks.

Michael Neese: Thank you for your interest in PFG. We look forward to seeing many of you at our Investor Day in New York City on September 12. Have a great day.

Operator: This concludes today's conference call.

You may now disconnect.