Sysco Corporation

Neil Russell - Vice President of Investor Relations and Communications William DeLaney - Chief Executive Officer Thomas Bené - President and Chief Operating Officer Joel Grade - Chief Financial Officer

Kelly Bania - BMO Capital John Heinbockel - Guggenheim Securities William Kirk - RBC Capital Markets Marisa Sullivan - Bank of America Merrill Lynch Shane Higgins - Deutsche Bank Karen Short - Barclays Capital Ajay Jain - Pivotal Research Group Christopher Mandeville - Jefferies John Ivankoe - JPMorgan Andrew Wolf - Loop Capital Markets Vincent Sinisi - Morgan Stanley Zachary Fadem - Wells Fargo Robert Summers - Macquarie Securities Group

Thanks, Christina. Good morning, everyone.

Thank you for joining us and thank you for your interest in Sysco. With me in Houston today are Bill DeLaney, our Chief Executive Officer; Tom Bené, our President and Chief Operating Officer; and Joel Grade, our Chief Financial Officer.

Before we begin, please note that statements made during this presentation that state the Company’s or management’s intentions, beliefs, expectations, or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act, and actual results could differ in a material manner. Additional information about factors that could cause results to differ from those in the forward-looking statements is contained in the Company’s press release issued this morning and in the Company’s SEC filings.

For discussion of additional factors, impacting Sysco’s business, see the Company’s Annual Report on Form-10-K, for the year ended July 1, 2017, which we expect to file shortly with the Securities and Exchange Commission and Company’s subsequent SEC filings with the SEC. A copy of these materials can be found in the Investors section at sysco.com or via Sysco’s IR app.

Please note, that our fiscal year 2016 results included a 14th week for the fourth fiscal and 53rd week for the fiscal year ended July 2, 2016. In fiscal 2017, the fourth quarter included 13 weeks and the year included 52 weeks.

As such, the results discussed on this call will include GAAP results and non-GAAP results adjusted for certain items. We will also share the adjusted non-GAAP results on a comparable 13 weeks and 52 weeks basis to provide reasonable year-over-year comparisons.

The reconciliation of these another non-GAAP measures to the corresponding measures are included at the end of the presentation slides and can also be found on the Investors section of our website. Additionally, our results for fiscal 2017 incorporates the financial performance of the Brakes Group, as such we will reference throughout our presentation today Sysco’s financial results both including and excluding this acquisition.

To ensure that we have sufficient time to answer all questions, we would like to ask each participant to limit for time today to one question and one follow-up. At this time, I would like to turn the call over to our Chief Executive Officer, Bill DeLaney.

Thank you Neil and good morning everyone. Earlier this morning Sysco reported strong fourth quarter and excellent fiscal year-end financial results.

For the quarter on a comparable 13 week basis, we delivered sales growth of 14% to $14.4 billion, adjusted operating income growth of 14% to $667 million and adjusted earnings per share growth 20% to $0.72. For fiscal year 2017 on a comparable 52 week basis sales grew 12% to $55.4 billion, adjusted operating income grew 20% to $2.4 billion and adjusted earnings per share also grew 20% to $2.48.

These results were driven by our 65,000 associates providing our customers with the products, services and business solutions they need to run their businesses successfully. I'm especially pleased with our local case growth performance in the United States, our overall gross profit growth while expanding gross margin the right way and our focused expense management throughout the Company.

In addition our European acquisition of the Brakes Group at the beginning of the fiscal year contributed meaningfully to our sales and earnings growth. Our results for the quarter and the year were achieved in a modestly growing U.S.

economy, disparate regional economic conditions in Canada and mixed economic backdrops in the United Kingdom, Ireland, France and Sweden. While we continue to transition some large contract customers in our U.S.

foodservice operations. Our case growth with local customers in that business segment improved during the second half of our fiscal year.

Favorable consumer confidence throughout much of the country contributed to restaurant check size increases, even though year-over-year traffic trends were unfavorable in certain customer segments. Taking a moment to reflect on our steadily improving and strong business performance over the past few years, there is no doubt that our customer-centric strategy with a one Sysco approach has been executed at a high level and that we are well positioned to deliver disciplined, profitable and sustainable growth moving forward.

We aspire to be the most valued and trusted business partner for all of our customers and are committed to delivering on our targeted financial objectives for Sysco’s shareholders. We will continue to develop new and refined current key strategic initiatives such as category management, revenue management, enhanced customer facing technology and multiple productivity improvement measures in order to further differentiate our industry leading customer offerings.

We will do this by deepening our customer insight work, continually enhancing our technology capabilities and by attracting and developing highly capable and increasing diverse leaders and associates. In closing, I would like to thank all of our associates for contributing to our success this past year and for driving our strong performance through the first two years of our 2016 to 2018 three-year plan.

I'm confident that we will achieve the high-end or a $600 million to $650 million adjusted operating growth goal, which excludes the impact of Brakes. Further we look forward to presenting our new 2018 to 2020 three-year plan later this calendar year.

In the spirit of looking forward and positioning Sysco well for future success, we recently announced that Tom Bené will become President and Chief Executive Officer of Sysco effective January 1, 2018. Tom is a strong accomplished leader and most deserving successor.

I look forward to working closely with Tom together with our senior leadership team over the next few months to ensure smooth transition process. And with that, I will turn the call over to Tom.

Thank you Bill, and good morning everyone. Fiscal 2017 was a successful year for Sysco and I'm proud of the results our associates have accomplished this year.

They are executing at a high level as we continue to achieve the key strategies levers of our current three-year plan, including delivering accelerated case growth through a focus on local customers, growing gross profit dollars and managing overall expenses. Fiscal 2017 was marked not only by our strong performance in which we continued our relentless focus on the customer, but also because of the some important highlights that include the addition of the Brakes business in Europe, a completion of the successful transition of 12 operating companies from SAP through enhanced version of our legacy ERP system, and validation of our customer-centric approach to our business as reinforced by the improvement in our customer loyalty scores.

An example is our approach to giving customers a choice in how they want to interact with us, whether it’s through our best-in-class sales force, via our mobile platform or through a phone call. I would now like to discuss our segment results starting with U.S.

Foodservice Operations including some highlights of key strategic initiatives that are helping to differentiate Sysco in the marketplace. In addition, I will speak to the performance of our International Foodservice Operations.

Our U.S. Foodservice segment had a solid year with fiscal 2017 results on a comparable 52 week basis of sales growth of 1.5% and gross profit growth of 4%, while adjusted operating expenses grew 1.7% resulting in adjusted operating income growth of 7.8%.

We once again experienced strong growth in our local business, up 2.4% in U.S. Broadline.

This was partially offset by declines in case volume for our multi-unit business due to our efforts to deliver disciplined profitable growth. This resulted in approximately 1% total case growth overall.

As we progress through the next year, we expect to see those trends around our multi-unit business begin to improve. Importantly, as we strive to provide value for our local customers through innovative product offerings and value-added services, along with e-commerce capabilities, we are seeing them reward us with growth for the 13th quarter in a row.

Looking at gross profit growth for U.S. Foodservice Operations, on a comparable 52 week basis, we delivered growth of 4% and gross margin expansion of 48 basis points, as we manage the deflationary environment in the first part of the year very well and are now working our way through an inflationary environment.

Poultry, produce, seafood and dairy are driving the current inflation and we expect inflation to continue for the balance of the calendar year. Our strategic focus on accelerating growth of local customers is working.

It all starts with an insight-based customer-centric approach that permeates everything we do. For example, we have improved the capabilities of our sales force through investments made in training, technology and targeted specialized resources and as a result our marketing associates are spending more time working with our customers on value-added activities and consultative services such as menu analysis, inventory management and business reviews.

These services foster a deeper relationship with our customers and further enforces the importance of sales force play in helping our customers succeed. From a cost perspective, within U.S.

Foodservice Operations our expense management was solid as we limited growth to 1.7% on an adjusted 52 week comparable basis for the year. Looking at U.S.

Broadline, cost-per-case for fiscal 2017 improved by approximately $0.01 compared to the prior year. And on a fuel price neutral basis, cost-per-case increased by one penny.

The consistent performance we have been to achieve is driven by key strategic initiatives which are supported by the expansive network of dedicated hard working front line associates in the warehouse and those team members delivering our products; through their efforts we have consistently been able to deliver a high level of service to our customers. Looking at the overall performance for the U.S.

foodservice operations on a 52 week comparable basis, I'm pleased with how all of our associates executed our plan; as our adjusted operating income performed well and we were able to improve adjusted operating margins by 45 basis points for the full-year. Moving to international foodservice operations; on a 52 week comparable basis sales and adjusted operating income nearly doubled both largely driven by our recent acquisition of the Brakes Group.

During the year Brakes performed reasonably well in midst of challenging environment in the UK as they exceed our expectation for EPS accretion contributing $0.14 per share. They are also making good progress in their supply chain transformational efforts as they move to multi-temp capability across the UK.

Growth in France remains steady and Sweden continues to produce favorable results. We also continue to see long-term opportunities for growth across our new European business.

Additionally we are in the process of integrating our Ireland businesses and things are progressing well; we expect to achieve modest benefits from these activities. Looking forward, we are excited about the long-term opportunities to create value for our customers in the European business.

Over the next few years we will invest capital and resources to build on the existing foundation of the business as we continue to work on key strategic initiatives that will position us well for the future. We remain pleased with our performance in Canada despite the continued softness in Alberta which has been driven primarily by the energy market decline.

Our Canadian business has seen positive momentum in the growth of its local business driven by improved sales execution and implementation of our customer focused initiatives such as category management and revenue management. In addition we are effectively managing costs by streamlining administrative expenses to improve productivity.

As a result, we expect the Canadian business to continue to deliver positive performance. Turning to Latin America we are excited about the new facilities in both Costa Rica and Panama.

Specifically in Costa Rica, we recently opened a 180,000 square foot state-of-the-art facility with the test kitchen and training facilities. This new space is enabling new products and full product lines to be available to our customers and we are excited about the accelerated growth potential those offerings will deliver.

As we enter the new fiscal year, we do so with strong momentum and I believe fiscal 2018 will bring opportunities for Sysco. Our ongoing focus on customer insights and delivering against their needs for innovative products and consultative services will enable our sales force to continue to add significant value and deliver growth with those local customers.

We will need to effectively manage the ongoing transition to an inflationary environment with our customers while staying focused on gross profit growth and we will continue to focus on driving efficiency from our supply chain through our expansive network that is built to provide a high level of service to our customers. In summary, fiscal 2017 showed important progress against our customer-centric strategy for Sysco.

Our customer and operational strategies are firmly aligned around improving our customers' experience, engaging our associates at the highest level to improve execution and delivering on our financial objectives. Finally, as I work through the leadership transition with Bill, I'm personally honored to be given the opportunity to lead this amazing Company and I'm incredibly excited about the future for Sysco.

Now, I'd like to turn the call over to Joel Grade for further details.

Thank you, Tom and good morning everyone. As Bill and Tom mentioned earlier, we are pleased with the results for the fourth quarter and for the year.

Our quality of earnings growth for the year reflects continued momentum from our business including strong case growth, excellent gross profit dollar growth and solid cost management. This morning, I will set with our quarterly results on the comparable week 13 basis excluding Brakes, where we delivered sales growth of 3.4%, gross profit growth of 4.2% which included margin expansion of 14 basis points and adjusted operating expenses growth of 2.6% resulting in adjusted operating income growth of 9%.

As Tom mentioned earlier, we saw inflation of approximately 2.6% in our U.S. Broadline business for the fourth quarter of fiscal 2017.

The pace of the transition from deflation to inflation has inferably rapid, as produced, poultry, seafood and dairy were increasing and driving overall inflation. We do not see negative impacts on our ability to grow gross profit dollars.

However, it is important to note that this change from deflation to inflation pressures gross margin as a percentage of sales. Shifting gears, I would like to transition to our results for the year on a comparable 52 weeks basis excluding Brakes.

Sales grew 1.6% and gross profit dollars grew 4.1% which included margin expansion of 43 basis points and adjusted operating expenses grew 1.7% which resulted in adjusted operating income growth of 12.4% and adjusted earnings per share growth of 13.6%. We continue to maintain a healthy gap between gross profit dollar growth and adjusted operating expense growth, which translated into an strong adjusted operating income leverage and continue to progress towards achieving our three-year plan objectives.

Cash flow from operations was $2.2 billion for the year, up approximately $309 million from last year. Free cash flow for the year $1.6 billion, which is about $150 million higher compared to last year.

These changes are largely due to improved business performance, improve working capital management and favorable year-over-year comparisons due to the U.S. Foods termination payment last year offset by higher fiscal 2017 cash taxes due to prior year deductions related to the U.S.

Foods payment and a deferral from flood relief. Net CapEx for the year was $663 million or about 1.2% of sales, which is $159 million higher than last year primarily due to ongoing capital investments and the addition of Brakes.

Net working capital performance has continued to improve. We have nearly achieve our three-year goal of four days and have improved our net DSO by 3.8 days compared to FY 2015 driven improvements in all three areas, payables, receivables and inventory.

Our fiscal 2017 results include certain items that were related to the Brakes acquisition including amortization associated with the transaction and accelerated depreciation related to our enhance business technology strategy. The accelerated depreciation related to technology has concluded and will not be part of our fiscal 2018.

Lastly I’m pleased with our adjusted return on invested capital performance which ended the year approximately 13%. Excluding Brakes our ROIC was approximately 16% which exceeded our original three-year plan objective of 15%.

Now I would like to close with some commentary and the outlook for fiscal year 2018. After two years, we have been able to achieve $417 million of operating income growth since fiscal 2015 and I share Bill's confidence that we will achieve the high-end of our $600 million to $650 million adjusted operating income growth goal which excludes the impact of Brakes.

As such, we anticipate another solid year in fiscal 2018 driven by gradually improving results throughout the year. The return to an inflationary environment will likely continue for the balance of the calendar year creating a gross margin headwind as a percentage of sales, but it should not hamper our ability to grow our gross profit dollars.

As we have previously stated, our capital allocation priorities include key focus on investing in our business. Capital expenditures will increase during fiscal 2018 and are expected to be approximately 1.3 to 1.4% of sales including Brakes.

The increase compared to our recent run rate is driven by a few factors, including increased investments and facility expansions and improvements and increased technology investments. To accelerate the success we are having with customer facing technology and increased investments in technologies to support our shared services organization.

Even with the increase in capital spend we still expect continued strong cash flow performance for fiscal year 2018. As such, we expect to continue to grow our dividend in fiscal 2018 and finally we have completed our $3 billion two year share repurchase program during fiscal 2017.

Our share buybacks in 2018 were in line with our capital allocation strategy and involve opportunistic purchases and buybacks that offset dilution. In summary, we had a strong year, reflecting continued momentum from our business driven by strong local case growth, excellent gross profit dollar growth and good cost management.

We achieved a healthy spread between gross profit growth and expense growth that has led to strong leverage for our earnings. We also have been able to effectively turn those earnings into cash and grow our free cash flows.

These results are just the ongoing commitment of our associates to serving our customers and delivering a high level of execution in all areas of our business. We remain committed to those high levels of service and executions translating into enhanced financial performance in both the near and long-term.

Operator, we are now ready for the question-and-answer session.

Hi, good morning, just wanted to go back to the comment about the operating income targets and the confidence in reaching the high-end I guess implies an acceleration, you mentioned kind of some gradually improving results in terms of expectations for next year. So I was just wondering if you could elaborate on that where that is.

It sound like may be some of the multi-unit trends may be could improve next year or just could you walk us through the thought process there?

Sure, absolutely. This is Joel.

So yes. Number one, I think the key point as I have talked about is, we certainly as Bill and I both said, are constant in our ability at the high-end of that target.

And I would say that the acceleration that I talked through the year really is partially related to some of the improved multi-unit volume throughout the year. In addition to that, in terms of timing, there are some elements of incorporating the Brakes business into our business that will result in some level of increasing transition between the first half and the second half of the year.

And so, again that I think as we have kind of talked about here, I wouldn’t look for anything dramatic there, but just a gradual acceleration I think over the course of the year is what we are really talking about.

Great. And then just to ask also about the independents, the growth with independents again was strong.

Just curious if in your discussions with them if you are sensing any change in their confidence or any change in how their outlook over the next couple of years?

Hey, Kelly. Good morning, it’s Tom.

I think we continue to feel that the independent segment is well positioned to continue to perform at a decent level. Obviously as we talked, there is been some I would say some softness in restaurants in general, but I think we still feel like the independents are well positioned whether it’s the product offering that they have, their ability to be flexible to meet the changing consumer needs.

I think the other thing just as always a reminder is because of our - whether it’s our current share of the market or the fragmentation that exists generally in foodservice, we continue to believe that there is lots of opportunity for us to grow and whether that’s in independent restaurant segment or other segments of our business.

Great. Thank you.

So, Tom, I’m curious, if you look out the next year or two, what is the prognosis on accelerated growth in some of the centers of plate categories, seafood meals or produce, given that you have made some changes organizationally, is that maybe we see an acceleration in part of the business or is that going to take a little while longer?

Good morning, John. What I think specifically to those areas we are fortunate at Sysco, we have got an organization and a business structure that is exists around specialty meat and produce that positions us well.

And so, I think we continue to believe that center of the plate is an important category and I think we look at that and say whether it’s the way we have structured ourselves now or the fact that we have got those capabilities that we are well positioned to grow. And so, whether or not that’s going to be a significant acceleration or not probably has much to do with what is going on broadly in the marketplace, but I think we feel like we are well positioned and we continue to work on improving even our current position in those areas.

Okay. And then something completely differently, if you think about the international business again framing first, relative to the U.S., I know the goal has been right U.S.

to grow GP 100 basis points above SG&A. Is that something that you can duplicate internationally or given where Brakes is can the spread be wider for some period of time?

Well first of all John its Bill, good morning and I'm not sure that we have spoke into a 100 basis points [gaps] (Ph) going forward, but we certainly have talked a lot about that we are pleased with the way we are growing the GP relative to the expenses and we certainly do need to continue grow that faster. I think when you look at internationally, we will continue to report that segment and you have got a mix of things going on there; certainly a mature business in Canada where as Tom just said in U.S., we still see a lot of opportunity for growth up there and to leverage some of these strategic initiatives that we have rolled out for the most part in the United States to do that over in Canada, and we are swiftly here moving forward.

Brakes itself, you heard Joel kind of alluded to it, we have owned it now for about a year, we are really pleased with that acquisition, there's a lot of upside potential, we are in a normal part of a transition process now where we are going to be continuing to invest in some of the transformation work that they had already started to make their warehouses more efficient to put to a big merger that they did in France together and to continue with our integration work in Ireland. So I think Europe is a little harder to call on it, but you know certainly growing the bottom line the right way both in terms of top-line as well as leveraging the GPs is that mantra will continue there just as it will in the U.S.; and then in Latin America, smaller markets to be sure and we are really building for the future there with some of the countries that we are in, with the management team as we are partnering with them there.

And as Tom mentioned we have got a new facility or two coming along. So I would look at international as a little bit more variable relative to the U.S.

side, but certainly our overall levers that we talked about here over the medium to long-term which is to grow volume and to leverage that volume and to get a good return on invested capital, those will continue throughout the Company.

Okay. Thank you.

Hey guys, thank you for taking the question. I wanted to go back towards the inflation in food, it looks like restaurants their pass through or their pricing hasn't been as strong in the last couple of months as it had been over the last call it two years and that's happening at the same time their food product inflation has now arrived.

So that sounds to me like something that's hard for the vertical to manage. Can you help me understand if that dynamics is important and maybe what tier of the vertical it would impact the most?

Yes I will start Bill, its Bill here. I'm not as familiar with some of that data that you're just referencing, and I would just tell you generally what we have seen over the years and we have talked a lot of about this on calls like this.

When you have an inflationary period and where that overall inflation is in the 2% to 3% area, it's usually at a level just for the customer in a particular restaurant were able to pass along. So generally a 2% rate is a kind of sweet spot for our customers and not a huge challenge for us; now we did point here earlier that the transition from deflation to inflation has been a little more rapid than normal, and there are certainly some categories where we are seeing more than 2% to 3% inflation.

So that becomes a challenge both in terms of how we work with our customers and they work with their patrons, but I wouldn't say we are seeing anything out there today that would be overly difficult for our customers to pass along.

Okay, and related to that during this transitional period gross margin percentage comes under a little pressure. Would there be any way to discern - is increased competition is part of that or if that’s just a natural pressure during the inflection?

Yes. let me just address that, it’s Joel.

I think the main reason really calling that out is really more of what I will call a mathematical function of the inflationary pricing and so I think even in the previously deflationary periods we have talked about that that there was an element of that that was driving a margin as a percentage. So I think the main thing for you to take away and just have to remember, our key focus is on gross profit dollars and so while again there maybe some mathematical pressure on the margin percentage, at the end of the day we feel good about our ability to generate gross profit dollars which is ultimately the focus that we will continue to go after.

And look, I think that’s a really key point, we continue to make it - we are going to be going through and we are in the midst of going through transition now in this environment and our revenue management tools, this will be the first time that we have really utilized those in an inflation environment. So, that’s an opportunity to continue to manage the price movements more effectively than perhaps we had in the past, but if I really want to emphasize, our ability to grow the gross profit dollars to 4% in a deflationary environment that approach deflation of 2% over most of the fiscal year.

It’s really an extraordinary achievement and its one that in my judgment we would have not been able to produce those numbers if we didn’t have the tools available to us that we do today in terms of [CapMan] (Ph) and [RevMan] (Ph) a lot of the sales concentrated work that Tom was speaking to. So, obviously our job is to manage and to work closely with our customers through these dynamic periods, but we are much better positioned today to work through this, but the key here really is gross profit dollars that is what we pay our bills with and that’s what drives the earnings growth that John Heinbockel was referencing earlier.

Okay. Thank you for that that context.

That was useful. Thank you.

Question. Wanted to touch on Brakes and to get your thoughts on accretion that you are expecting for next year and where you see opportunities both on top-line and then also in productivity?

Yes. So, I will start with the accretion number.

I think as we have talked about when we originally had announced the deal, we have anticipated in the first year, a mid single-digit accretion and the second year, I think in the low double-digits of accretion. We certainly believe that continue to be the case.

So, I think I would look at that as probably roughly similar to the current year as far as that goes. Tom, I don’t know, if you want to talk about the top-line.

Yes. And then regarding just generally how we are feeling about it, as I mentioned the UK market certainly had some choppiness in it, but I think we are feeling good about where we can be positioned there.

We had good movement in growth in France and we feel good about our business in Sweden and obviously with what we are doing in Ireland we continue to feel pretty good about that as well. So, I think overall we feel like we remain pretty well positioned and I think we are just obviously going to have to keep an eye on what is going on from a market perspective, but I think we are positioned how we are performing we feel pretty good.

We do have some investments we need to make over the next year there and we feel like that’s an important part of us continuing to build on the work they had started pre-acquisition and we shared and talked a little bit about that earlier.

Got it and just to change topics, want to touch on the Sigma business. Can you comment on the sales growth trends excluding 53rd week question and also was curious to see the gross margin up a little bit year-over-year, wonder if you could give some more context on that.

Sure, I mean related to Sigma, we had good top-line growth from Sigma perspective. We had some new customers that have come on board in that business over the last year and so I think that's driving some of that top-line, obviously very competitive out there still in this space and we continue to work through that part of it.

From a margin standpoint again I think that has much to do with some of the - think about how that business has managed on a cost plus basis, there's some margin impact of that, but it's mostly driven by new business that is driving the improvements there.

Got it, thank you.

Thanks, good morning guys. Just wanted to get a sense of how local case or both U.S.

Broadline and local case has kind of trended during the fourth quarter and what you guys are seeing in terms of trends, any color you can give 1Q to-date?

Hey Shane how are you. Well as we said, we had solid, what was it Joel?

2.4 for the year and 2.7 for the quarter coming off of the third quarter we were over three on the local side, so we were pleased with that. You know as I mentioned and Tom alluded to I think as well, we have been transitioning some large contract customer business, some of it our own choice, some of it not, we are in the midst of continuing to do that but we are in a good place there and we expect those trends to gradually improve as we talked earlier you know later in the year.

So overall cases flat to one, but local cases 2.5 to 3.

I would just remind you too, I mean it’s part of our - again this is now the 13th quarter in a row we have grown our local cases and in addition to that if you think about the range that we said at the time when we thought about this original three-year plan, I think that you know this range is 2.5%-ish was right close to where we are at and so I think we feel good overall above that.

Great and just a follow-up on the gross profit dollars and impact of the transition to inflation. Did that actually benefit that 4% type number that you guys put up for the quarter, the return to inflation and how should we think about that impacting your gross profit dollar growth in the first quarter.

Yes, so I think the way I would think about that for this quarter, I think certainly again we are pleased with the 4% plus growth. I think the transition as I mentioned and Bill mentioned as well was fairly quick and so while we don't have a real significant lag in terms of turning over pricing there is some lag and so what I would just say in general is that in fairly rough and rapid uptick in a few categories that I would say again slow to little bit the acceleration of the gross profit growth.

So that's how I would think about that in terms of how it impacted this quarter. But again, as we talked about going forward, we certainly are confident in our ability to grow our gross profit dollars despite that inflation as Bill talked about.

The overall inflation number is well within the range of modern inflation that we think works in this industry well and so feel good in general, but to answer your question directly there wasn't I'd say a major impact in this quarter on that.

Great. Thanks, I will get back in the queue.

Hi, thanks. Joel just to clarify one thing in terms of the Brakes accretion, mid single-digit year one, I think you said low double-digit year two, is that pennies or percent?

Pennies.

Okay. And then I guess I was curious on a couple of things.

One of your competitors last week commented on Technomics outlook for independent restaurants. And it just seemed very counter intuitive, I mean when you talk to any restaurant analysts that independents are actually slowing.

So wondering if you could give some color on that and I just had one other housekeeping question.

Yes, I will take a shot of that Karen. Technomics you know there is a lot of different sources as you know in the industry that we all rely on to get as much data as we can, and a lot of the data crosses over between custom segments and is somewhat defined differently by different people.

Technomics has been kind of that consistent barometers, it’s been out there for years and they do a good job. But the reality is while their data comes from people in our industry that they interview and talk to and so I would characterize it as directional and I would tell you six or nine months ago people were saying that the independent was going to grow a lot faster and be in the upper 2% and I don’t know if that totally bought into that.

And now we are seeing that their forward view in the medium term, even short-term is lower than 2%. So from our perspective I think it’s good information, it’s consistently done.

You have got an economy out that’s growing at about 2%. And I think in industry there is no big shocks in this industry right now, so there is nothing going on anywhere close to similar to what we saw in 2009.

So what I’m trying to say is that I think there is no big secular trends going on, there is some cyclical things, there is always weather, there is comparisons. But I think I 1.5% to 2.5% range out there at different points of time is where we have historically have been and that is certainly how we are looking at it in terms how we work through our strategy and how we plan the business.

So I wouldn’t get too excited about it being where it was six months ago and I wouldn’t be too excited about the most recent forecast. And the key is growth here and the business is still growing and it’s growing - those check sizes are growing and we are well positioned to take advantage of that growth and Tom pointed out.

Okay, thanks. And then I just was curious, I know you don’t want to be pinned down to a spread between gross profit dollar growth versus OpEx growth, but as we look kind of to the next three-years, once we get into 2018, just may be qualitatively could you give us a sense of where you think operating profit growth will come from more, is it more on the OpEx opportunity side or do you think it’s still fairly down the same gross profit, or gross margin, gross profit opportunities in OpEx?

Yes, I think the way I would think about that Karen first of all, as we talked about, we will certainly give more guidance on our next three-year plan later this calendar year. But I would look at this as a very balanced approach to growth, which certainly we have talked about our three-year plan and I would certainly think about as we move forward.

Again I think both from the focus on local customers, growing local cases and overall profitable cases, focus on growing our gross profit dollars and again being very effectively, aggressively and thoughtfully managing our costs is really a very balanced you know is how I would really think about this moving forward.

Great. Thanks.

Yes, hi good morning. Joel I think you mentioned that you're at $417 million in operating income growth towards that three-year target.

So I wanted to first confirm that number and I was also wondering if you can confirm how much incremental growth you had in the latest quarter. Correct me if I'm wrong, I thought you are already close to around $410 million at the end of Q3, so that might imply not much incremental growth in the fourth quarter?

So, first of all $417 million Ajay is the number, now keep in mind when you're looking at comparatives you're looking at a quarter of last year that had the additional week versus this year. So the incremental growth on a quarter-to-quarter basis purely is not something you're going to be able to look at just directly.

So the incremental growth - Neil if you want to take that during the quarter?

Yes sure Ajay you're right. If you're looking at 13 week versus 14 week it's relatively modest, but if you look at 13 weeks versus 13 week comparable the rate of operating income growth is pretty much in line with what you're seeing throughout the year.

Okay. I was asking about the sequential increase from Q3 and Q4?

We had $52 million ex-Brakes, so if you're comparing to the $417 million again is part of the three-year plan; so $52 million on a comparable quarterly basis what we added in the fourth quarter this year when you factor 13-13.

And I just had a question about the U.S. case growth, can you talk about the sequential decrease, typically total case growth should be higher compared to case growth in the street business and that wasn't the case in Q4.

I know you mentioned in your prepared remarks that they always had transitioning of the less profitable business about 1%, but if you adjust for the calendar shift and the transitional impact for those multi-unit accounts, what was the case growth for the non local portion of the U.S. Broadline, can you quantify that or at least confirm its positive or negative?

Yes. So, a couple of things, as we talked, we had consistent improvement in the local growth over the last 13 quarters quite honestly, but we talked about the 2.7% in the fourth quarter for local; the contract business or the CNU we talked about it was in fact negative for the quarter and that's consistent with what we have talked about as we have looked at our portfolio and as Bill mentioned earlier we had certain customers we made some decisions on and there are customers who had made some decisions around doing business with us.

But we continue to feel really good about the overall number that 1% comes from a combination of the contract business declining and the local business continuing to be strong; and my comment about improving is we do see some lapping of that happening in fiscal year 2018 and we also have some new business, will be coming on later in the year.

Okay. Thank you.

Hey good morning. The majority of my questions have already been asked, but I guess I was hoping you could touch on wage pressures and the availability of qualified labor, has that worsened at all over the last 12 months or what kind of level of growth can we expect as we look to 2018?

Chris I will start and I will let Tom and Joel jump in here too. I think there's two things going on as it relates to labor, certainly with our customers in certain parts of the country there continues to be some pressure to source employees as well as labor wages and rates to pay and of all that.

So, that continues to be phenomena out there that we are working closely with our customers on. And on our end of it, when you hear us talk about flat cost per apiece in the most simplicity way what that really is about especially on the supply chain and the operation side of the business is to be keep our wage and benefit increases in line with our productivity increases and productivity obviously comes in a different way.

But it’s largely productivity in the warehouse on the truck how we manage overtime all those types of things. And so, we are pleased with where we are there right now.

I would say most of our contracts and most of our annual increases are in line with that productivity goals that we have set, but it something we have to manage very aggressively and very hard, but over the last few years we have done a nice job of it.

Yes and I think as Bill covered the financial part of that, from a retention standpoint, we measure employee retention and we feel good about where we are today and where we have been as it relates to lot of those types of roles. So, I think the marketplace is I guess in a decent place and obviously I think we as a employer doing a nice job of attracting and retaining the people we need.

I think the only thing I would just add, just lot of the questions that we get - questions on minimum wage loss and this and that and the other thing and that’s an impact on our customers in terms of the things they are dealing with that doesn’t necessarily or doesn’t really impact us at all and that most of our labors as well double or wage rates.

All right. That’s helpful.

And I guess I have got a random one for you. I’m curious as the Brakes business is been affected by the recent [Agra call] (Ph) in Europe and if so can you help us understand how and whether or not that’s incorporated into the new outlook?

I don’t know if we can help you with that one today, Chris. So we will come back to you.

All right. Thank you again guys.

Hi. Two questions if I may.

Firstly, the restaurant industry or at least some of the public data that we see show June is kind of one of the softer months of the quarter and that softness continuing from June into July it’s not actually getting a little bit worse. So, just wanted to get a sense in terms of what you are seeing just in terms of the broad industry and independent restaurants specifically?

Hey, John. Look, I think what we see is it moves around, okay.

So there is periods where you have a couple of months where it’s spikes up or at least goes up somewhat and then it comes back down and sometimes it’s hard to explain from one quarter even one month or two months stretch to another. So, I don’t know that I would get overly excited about one or two months of data, it’s somewhat mixed out there.

Consumer confidence is positive for the most part our restaurant operators and customer feel good about the business not quite, maybe is feasibly good as they were a few months ago, but my experience tells me that these numbers move around and they are still very much on a range that as I said earlier it translates to go to the industry and that’s certainly good for us.

Okay. And then secondly regarding the CapEx, I think the guidance is 1.3% to 1.4% of sales and I do understand for you that that moves around.

Maybe a little bit forward looking on that comment, I mean is that’s the new level of CapEx as a percentage of revenue as we think about your capital needs over the next couple of years where might 2018 be kind of a peak or a trough I guess and the level changes in the years after?

Hey John this is Joel. I think you're first comment was probably the right one in that that does move around somewhat.

I don’t know that I wouldn't look at that necessarily as the new norm, I think I would characterize it as the fact that we have strong cash flows, we have opportunities to invest as I have talked about in some things to continue to transform the Brakes business as well technology initiatives and some facility opportunities we have. So I would certainly look at that, I would call as much opportunistic and again just really consistent with our priorities of continue to reinvest in this Company and we will benefit if that is long-term rate.

And is there anything discrete, I think you said a number of things in your prepared comments, but is there anything discrete that we can point to in terms of capital spend on 2018 that will be a material benefit in 2019 or beyond?

No, I wouldn't look at it that way. Again, across the category as I talked about, again our return on invested capital continues to grow, we certainly feel good about the investments we are making but there is nothing I would finger point as one discrete item.

I mean I would say the aggregate John, the incremental part of that will be a benefit in 2019 and probably more beyond 2019 to be fair, these are capital investments we are making.

Thank you.

Thank you, just a quick housekeeping to start with and I might have missed this, but did you say how much acquisitions helped sales in the U.S. foodservice segment.

We did not.

Did you provided that number so is...

Andy I guess the biggest acquisition - we certainly talked about Brakes, which is clearly been a significant acquisition for us, but in terms of any small fold ins we didn't get it. Its minor I will tell you just in general, it certainly remains a point of focus here for us going forward in terms of our teams and we see opportunities there're different opportunities.

As we talked earlier, we still see some fold in opportunities in this country and in Canada, both on the Broadline but in particular on the specialty side of the business. Certainly with Brakes we have a platform over there now in the countries that we are in as well as some other countries to grow and invest overtime.

You know it's a long-term investment and then what I spoke to as it relate to Latin America that's probably although modest in size at this point in time, you know probably will be the most wide open area that we have for acquisition opportunities.

Okay, so I mean I'm sort of throwing in a number of somewhere less than 1% for the whole business not just for the U.S...

It's well less than that, again when you take the Brakes number out again for this year that's was with a key focus. Bill talked about certainly a focus for us moving forward.

So on the inflation side for the case growth slowed yet the gross profit dollars were the same as last quarter, so clearly there is some pass through or lot. Could you speak to the cadence of that, did it improve or are there any other players out there who might be struggling, looking for share and maybe using price as a lever.

Could you just give us a sense of what's going on in the market as you see on price pass through.

Andy this is Tom, I think the first thing I'd start with is when we talk we talk a lot about this, it remains very competitive out there. We have lots of competitors in general and from a market perspective I think we continue to look at leveraging all of the capabilities we have whether it’s things like the category management we talked about to make sure we have got the best cost on products or its revenue management tool, so we make sure that we are pricing products appropriately in the marketplace and making sure we are taking care of our customers.

We still feel really good about obviously our ability to grow and our ability to do it in the right way and I think that’s really what you are seeing. I don’t think there is any specific thing that’s happened in addition to that.

This is really about a balanced approach, making sure we are focused the right levers of the business that starts with that local customer where we can incremental value and doing the things that help basically get recognized and rewarded by them for providing the right products and the right services in a right way. So I don’t think there is anything beyond that that you should read into it.

No, I don’t think so either, I mean guess I’m going to go back and reiterate a couple of points I made in my prepared comments that as you know the way we look at this business is we are in a sort of long haul here and we have got a very customer-centric strategy that’s predicated and more and better growing customer insights in terms of what they need to run their business better, how do they deal with commodity pressure, how do they deal with price increases, how do they deal with non-traditional competitive forces in the marketplace. And so, that customer insight work that we have done over the years we are going to continue to invest in that, deepen it, broaden it, accelerate it where necessary.

And that’s what brings us to where we are today and where we have come over the last several years which is a strategy and a platform here that starts with the customers. But very much is about differentiating ourselves in the marketplace from all types of competitors, and in particular, utilizing our sales force more efficiently, more productively providing them tool they need to provide consulted service that Tom referenced to our customer base and leveraging our supply chain.

We have got a footprint globally now today and growing brand and differentiating products and services in a way that provide values to those customers, but also providing that wide range of products fresh, frozen, dry whatever folks are looking for, utilizing the brand in a way that provides value for them, but also where we can source from around the world. And then obviously technology is another area that we continue to hear from our customers.

Anything we can do to help them run their businesses more efficiently, we need to do. And that’s where you have seen us pivot here over the last couple of years and on the margin, invest more of our spend on the technology side, in the customer facing side, in the things like supplies on fly, cape, Sysco Labs that are trying to stay current at least with the evolving needs of our customer base.

So clearly it’s a competitive business and clearly a lot of competition, but we feel we are very well positioned here not just for today, but continue to go forward as long as we stay close to our customer base.

Thank you. And a similar question just to follow-up.

On the multi-unit side, it sounds like you are stacking better trends there with both sales and profitability. And it sounds like some of the other large players at least one of them sounded sort of has the same expectation.

Is it kind of tough market for I think the distributors, but sort of lacking price discipline. But it seems like - just want to get your sense, do you think that might be changing somewhat either from your perspective or again from the market perspective?

I think what we have been really consistent on Andy is that we continue to see opportunities for growth, we are about growth, but we look at growth a little differently than we probably did 10 or 15 years ago, it’s about profitable disciplined, sustainable, i.e. repeatable growth and doing it in the right way in the communities that we serve.

So I don’t know that there is anything really different out there, this is a strategy that we have put together and executed I think increasingly well over the last few years. It’s going to remain competitive out there and we all go after the business hard, but I think everybody understands it we have got shareholders out there that we need to provide returns for as well.

Yes, thank you.

Sure.

Hey guys, thanks very much for taking my question here. I wanted to just go back to the comment that you made that - you have made in prior quarters as well of course about some of typically the larger customer exits, some that you decide some maybe not, just trying to get a better sense of kind of the dynamics of the competitive environment like are you able to kind of follow some of those customers like where do they go or if you're getting them from others where do they come from is that more kind of shifting between the three larger players or are there any other dynamics to be aware of?

So, Vini I assume we are back talking about really the contract side of the business here. I guess we have said and I will reiterate is that Bill just said this as well.

We are very focused on kind of disciplined profitable growth and wanted to make sure that we are making the right decisions and sometimes those decisions that we make drive a customer to make a different decision; we certainly know when we lose the customer where it goes and we certainly know when we gain a customer where it came from. But I wouldn't say there's anything unique or different going on in the marketplace, it's always been competitive, it continues to be competitive and it's really about making sure that we are making the right decisions for Sysco and for our shareholders and that's how we try to approach this business and so aside from that I wouldn't say there's a whole lot else to say.

Yes, and we stick close them Vini. I mean this business what goes around comes around in this business, sometimes in that part of it takes a while, but we certainly maintain a relationship as best we can and we are investing for the long-term so it's not unusual for a customer perhaps to move on and then come back to Sysco at some point in time in the future.

Okay. And then just a quick follow-up to the comments on the 2018 CapEx, I know you guys have said in the prepared kind of facilities expansion, tech investment things of that nature, I'm sure we will get more color in the fall, but anything you could tell us today in terms of anything that we should be kind of be expecting with any of those and also maybe a split between the U.S.

and in the international sides of the business?

This is Joel. I think as we have talked a little bit before, I mean it's a pretty broad portfolio of investments we are planning to make that we certainly anticipate benefits from in aggregate over the upcoming years.

Again, it's really focused around just broadly opportunities to reinvest in our facilities, add capabilities and expansions there, technology again really focused to the most part around our customer facing technologies and the customer experience as well as opportunities to enhance our shared services platform to drive further efficiency and then from the standpoint of investing in the continued transformation opportunities in Brakes. I think again that would be broadly characterizing the high points of that and so I think you have a little bit of a sense from this year's earnings where the amount of investment that we put into Brakes, we called that out as we talked of our FY 2017 CapEx, it's probably reasonable and fairly consistent here over the next year.

Okay. Great, thanks Joel and Bill, Tom best of luck to you guys over the next few months here preparing for the transition.

Thanks Vini.

Thank you.

Hey good morning, thanks for fitting me in. Quickly on the three-year plan, you said you're tracking at the high-end of the six to 650 range, but as you look at the year ahead with a little more clarity on the current operating environment is there still potential to come in above the high-end and if so what are the drivers that need to happen to get there?

Hey Zac. There is always potential, but I think where we are at right now is we are trying to signal that we feel good about the high-end and that’s where we would like to leave that for today, but certainly we are not going to stop at 650 if we don’t have to and that’s really our message for the day.

We have said now several times that the markets are going to be somewhat fluid here, but overall we now operate in several large markets, we are well positioned if not the leading player in all of those markets and we see plenty of opportunity for growth and we are much more disciplined about how we go after growth today. So, if you put all this in some type of historical context that 650 is about $200 million higher than where we started two years ago.

So, I’m not ready to go above that today, but we certainly feel good about the number.

Fair enough. And is there any directional commentary you could provide on Broadline case growth in the next year, for the national account level should we anticipate further calling here?

And then second, should we think about continued share gains for the local customers in 2018?

So on the contract side, as I said earlier, I think you will see us showing some improvement in those numbers as we get into fiscal year 2018, because of the both lapping some of the decision were made last year and also we have some new business that will be coming on. So, I think you should feel like there will be some improvement there.

Regarding the local business, I mean we continue to feel really good about how we are positioned and as we talked about why we feel like we are able to succeed in that space has really more to do with how we are focused on delivering the value for those customers. I did say in my prepared comments about our loyalty score is going up.

And I think one of the things as we think about what drove that, we talk to our customers a lot and what we have heard was everything from they are feeling about our marketing associates and continuing to add a lot of value through our selling resources and that means we are accomplishing the things we said, which is making them much more capable on and be more consultative and how they are working with our customers. We also heard good things around our technology platform, so I think we feel really good about the types of strides we are making the strategic initiatives we have been talking about.

And so I think to us that’s confirmation that the things we are trying to do for these customers is working.

Got it. Thanks so much Tom, really appreciate the time guys.

Best of luck.

Thanks Zack.

Thanks Zack.

Hello. Thanks guys for squeezing me in.

I just wanted to a dig a little more into the deflation, inflation dynamic and better understanding and maybe you have something here from the customer insight work that you have done. But, the situation seems unique and that overall product cost have been coming down in aggregate for the last you call it 20 months against that backdrop restaurants have generally been taking pricing.

I’m not really sure what that pass through has been to the end operator. But as you think about the resistance to price increases what is the risk, hat there is more margin risk here than you have seen historical in inflection points?

Hey, Bob. I think the risk is that it spikes in some high cost boxes.

In another words, - if it were to spike into double-digits as it has in the past with meat or poultry that type of thing. That would move the number overall and those boxes tend to be expensive and that puts a little more pressure on our customer and we have to manage that the right way.

So, as I said earlier I think the range right now is still in that range that is manageable, but I think the bigger issue is one or two key categories that are high dollar categories may spike. Things like produce and dairy they are going to move around.

They move around multiple times within a 12 month period generally. So that would be maybe my contingent caveat there that if it were to spike up in meat, poultry, seafood not as big a category obviously that would put more pressure on the customer, but right now it's in the manageable range.

Okay, thanks.

Sure.