Good day, everyone, and welcome to the Sysco Reports Third Quarter Fiscal 2011 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Neil Russell. Please go ahead, sir.

Thank you, Rochelle, and good morning, everyone. Thank you for joining us for Sysco's third quarter 2011 conference call. On today's call, you will hear from Bill DeLaney, our President and Chief Executive Officer; and Chris Kreidler, our Chief Financial Officer. Before we begin, please note that statements made in the course of 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 of 1995. Actual results could differ in a material manner. Additional information concerning factors that could cause actual results to differ in a material manner from those in the forward-looking statements is contained in the company's SEC filings, including, but not limited to, risk factors contained in the company's annual report on Form 10-K for the year ended July 3, 2010 and in the company's press release issued earlier this morning. On the call today, we will discuss certain non-GAAP financial measures. You can find the reconciliation of these non-GAAP measures to the applicable GAAP measures on our Investor Relations website at sysco.com. Also, all comments about earnings per share refer to diluted earnings per share unless otherwise noted. With that out of the way, I'll turn the call over to our President and Chief Executive Officer, Bill DeLaney.

Thank you, Neil, and good morning, everyone. This morning, Sysco reported third quarter sales of $9.8 billion, operating income of $427 million and EPS of $0.44 per share. Sales grew more than 9% over the prior year, due mainly to higher prices and increased case volume. Higher prices were driven by an increase in our product costs of just over 5% compared to last year. Gross margin trends also improved compared to the first half of the year. Operating expenses increased year-over-year, due in large part to a $36 million charge related to the withdrawal of one of our operating companies from a multi-employer pension plan [MEPP], higher fuel prices and higher pension expense. Earnings per share on a GAAP basis increased nearly 5% compared to last year's third quarter. However, excluding the multi-employer pension charge and a one-time tax benefit that Chris will discuss in a few minutes, adjusted EPS increased nearly 10%. Amidst a slow industry recovery, our associates did a very good job supporting our customers while producing record third quarter results for Sysco. These results reflect both improved execution by our operating companies in a modestly improving market environment. While the foodservice industry and overall economy continue to recover slowly, we and our customers have also been faced with the dual challenges of product inflation and rising fuel costs. While not yet appearing to a significantly dampened consumer demand, these unfavorable economic factors do create ripple effects throughout our business that may continue to create choppiness in our near term results. With that said, I want to emphasize our commitment to successfully executing Sysco's long-term strategy. The majority of our resources and activities remain centered on optimizing our core business. Our recent results reflects steady progress on this front. Specifically, we've had success in improving our…

Thank you, Bill, and good morning, everyone. For the third quarter, sales were $9.8 billion, or an increase of 9.1% compared to the prior year, driven mainly by increased prices and case volume. Impacting prices was food cost and inflation. We estimate it to be 5.1% for the period. In addition, acquisitions within the last 12 months increased sales by 0.6%, and changes in the foreign exchange rates increased sales by 0.6%. We mentioned the last quarter a holiday shift that impacted the second and third quarters. As a brief reminder, last year's third quarter included the New Year holiday, which is one of our low-volume holidays, while this year's third quarter did not. We estimate that our reported increase in sales year-over-year in the third quarter would've been about 70 basis points lower on a comparable, holiday-adjusted basis. Taking the holiday shift into consideration, we estimate real sales growth, which is sales growth adjusted for the impact of inflation, acquisitions and foreign exchange rates, to have been 2.1% in the third quarter and is an improvement over the second quarter. Gross margin increased 7.6%, or $127 million, during the quarter, while gross margin as a percentage of sales declined 27 basis points year-over-year to 18.6%. Strategic pricing initiatives continue to impact margins but to a lesser extent than in previous quarters, with the magnitude of the impact estimated to be about 10 basis points this quarter, down from 15 basis points last quarter. So if you've been following this issue, the impact has declined each quarter as benefits from the program continued to build. We believe this confirms our view that these strategic pricing initiatives will increase our market share and grow our gross profit dollars over the long term. The remainder of the impact to gross margin was…

[Operator Instructions] And our first question will come from Greg Badishkanian from Citi.

This is Jeff Hans, actually, on behalf of Greg. Can you guys talk a little bit about your case volume growth and improvement through the quarter? I think you've mentioned last quarter that January was hurt a little bit by some bad weather. So did you see any sequential pickups in Feb [February] and March? And then just curious what type of momentum you're seeing already in April and early May?

Jeff, it's Bill. Case volume movement, it's really hard to characterize that on a month-to-month basis. If you go back to the second quarter, as reported, it was soft compared to the quarter before if you adjust for the holiday week, still a little less but not quite as much of a gap. So I would say this to you the -- we're pleased with the volume. We did see pretty good, consistent growth throughout the quarter. We saw in some places, we haven't seen it in 2 or 3, 4 years like Florida, which was really encouraging to see. We saw in most of the country -- we were hurt by weather in January in the Northeast, which -- we don't talk a whole lot about weather in the Northeast in the winter time. But we were actually hurt in the Southeast in Atlanta and that part of the country. But I'd also have to tell you that with the late Easter this year, that probably more than offset, or at least equally offset it. So I think with the call-out that Chris made here on the favorable benefit of not having a holiday week, it's pretty much straight up, what we're reporting in that 2% range.

And then on, one last one, I guess, inflation on "center of the plate" items. Are you seeing that inflation subside? Or have you just been able to pass more of that through to your customers?

We saw its subside a little bit in the Dairy area. It's kind of coming back some, but we're not seeing it subside at all in the Beef and Meat area or the Seafood area. And what we're also seeing now is it's starting to broaden out into other categories. Produce, there were some weather issues there, produce is obviously very volatile. I think Chris mentioned our Grocery, Dry Grocery or the Canned & Dry, the increase wasn't as much as what we saw in the Meat area, but that's a very significant piece of our mix. So I think this inflation, all of the commodities, and I think it's working its way through the whole supply chain right now. You're starting to see it be positive in more areas, whereas a couple of quarters ago, it was really driven pretty much by 3 areas, for us, 3 categories.

So you guys, basically, have been able to pass a little bit more of that through this quarter versus last quarter, basically?

Yes. I mean, when you hear us talk about execution, I mean, that's 3 pieces. I think, we're out there every day trying to grow cases in the right way, take share, pass along what we can and do that in the right way and obviously, keep working on our productivity and our cost structure. So I would say we did a better job, clearly, in the third quarter in passing it along.

And next, we'll move to John Ivankoe with JP Morgan. John Ivankoe - JP Morgan Chase & Co: A question again on the overall industry. Many restaurant companies are talking about taking more pricing in fiscal '11 than they give in '10 and I think even at levels we haven't seen for at least half a decade or so. I mean, what are you seeing in terms of not only their receptivity in terms of higher prices, but I think, more importantly, as kind of the industry overall improves, are you seeing some of your foodservice competition getting more competitive on price? Or is that something because of cost inflation and fuel that you're seeing even less competitive on price? And obviously, what I'm trying to understand is how via strategic price investments were less in the March quarter than the December quarter while you were expanding in case volume. I mean, does that say something specific about your competition?

I'll start and let Chris finish, maybe, on the strategic pricing issues. I would say, John, those are 2 different issues. On the strategic pricing initiatives that those are some areas where we chose to go at some things in an aggressive way where we feel that we have an opportunity to take share, and it's going to take a couple of years to get a payback on that. To the broader question of taking price increases in the industry, we're seeing what you're seeing. In terms of what -- the restaurants are beginning to be more receptive and to pass it along. This is just my view. I mean, I think that's a combination of 2 things. One, the nature and the level of the inflation is getting higher and higher and is more broad, as we just mentioned. So on the one hand, I think we're all at a point where we have to pass it along to some extent. But I also think it tells you that they're feeling little bit better about their business, and some of the surveys we see would confirm this. So I think as people get more confident that the growth, albeit modest, that they're seeing in their business is going to be able to sustain itself, that does give you the confidence to pass along increases in a way that maybe you wouldn't have been so comfortable doing 6 or 9 months ago. So I think more broadly, there's just a need to pass along, because all of our costs are going up. But I think people are modestly more confident right now. John Ivankoe - JP Morgan Chase & Co: And Bill, in terms of your competition, and this is obviously a marginal change question. I mean, are you seeing your competition more or less price-aggressive in this current environment? Again, with inflation, fuel cost and improving in case volumes, I mean, are you sensing that they're increasing [indiscernible] the pressure on you or perhaps even decreasing the pressure on you?

Obviously, it depends on the competitor. But I would have to tell you that the sense of competition on the price line value item right now, it is as intense as it's been. I don't think it's getting more intense, but we've been in a pretty acute level here for the last 1.5 years, and we're not feeling it subside at all.

And next, we'll move to Mark Wiltamuth with Morgan Stanley.

I wanted to dig in a little more on the inflation issue. When you talk about executing a little better, is it just that you're more on top of the increases as they're coming through, and the marketing associates are better manned to deal with that? Or characterize what was different in the last couple of quarters versus this quarter on the pass-through of inflation.

Well, I think, Mark, some of it is what I just went through, which is the environment that we're in. So while on the competitive side, it remains very intense and very competitive, on the customer side, I think we are working more effectively with our customers and helping them find ways to pass these increases along in the right manner. So I think that's part of it. But lookit, the other part of it is just -- we're more pleased with our results in the second quarter, and we went back to the drawing board and looked at everything we're doing, and we got 80 Broadline Companies out there and SYGMA and a bunch of specialty companies. So there's no magic buttons we're pushing from here. But I can assure you that the focus on striking the right balance between case growth and margin management expense control has been heightened, and we're encouraged with what we saw this quarter. So it's a combination of things.

Were you actually getting any pushback from customers, saying, "Look, these increases are too big, I just can't take them," or how was that going?

I'm sure our marketing associates get that pushback every day. And that's -- I think you work through it and you try to make good decisions each day and -- depending on the customer and their particular set of circumstances. So ultimately, our job is to get our customer to understand what it takes for us to be successful. And in the end, we're only successful if they're successful. So at some point, we're trying to paint a picture for them on how they can manage their menu more effectively and pass these increases along to their customer in the right way. But as we all understand, it's not easy. The biggest difference -- we've managed through inflationary times before, as we've discussed in the past. What make this one different is the environment that we're still coming out of. And when you hear us talk about choppiness or uneven recovery, that's kind of what we're getting at, which is it's hard to categorize where we're making improvements or how our customers are dealing with those in a consistent way, because it's case-by-case, and one month might be a little bit better than next month. That type of thing.

And lastly, on headcount, you said you were down 1%. Are you still working to add back MAs in certain areas for strategic reasons?

We're looking to adding MAs relative to what our expectations for growth are over the next 12, 18 months. So yes, our MA count is up slightly, and we'll continue to try to strike the right balance there.

And next, we'll move to Ajay Jain with Hapoalim Securities.

I just had a question on ERP. I think, Chris, you mentioned that the non-capitalized portion was going to be down relative to what you budgeted before. Can you just confirm the actual dollar amount that was expensed in Q3? And based on what you're expecting right now, can you give the outlook for the fourth quarter?

Yes, Ajay, we actually don't talk about the specific dollar amounts to be expensed. The guidance that we've given is that, and I think it goes back to the 10-K, we expect expenses to be about $25 million to $45 million higher for the year, and we're not updating that guidance at all. We expect the cash outlay to be $260 million to $280 million for the year. And again, we're not updating that guidance either. All we've really said is that our guidance that we gave early in the year of $0.06 to $0.09, we've adjusted down. And this is incremental impact, so it's not the same as cash outlay. We've adjusted that down to $0.02 to $0.04 and the difference in the entire adjustment was the fact that we were able to capitalize more than we originally thought, because testing ran longer than we had originally planned.

And then can you also talk a little bit more about the multi-employer pension? To what degree was this plan that you just exited an isolated issue, and is there any potential that you might take another earnings hit if you decide to exit another plan in the next year or so?

Yes, I hesitate to call it an isolated incident as we obviously have other multi-employer pension plans out there. Our general strategy is we look at all of these plans one at a time. Some of them are, we'll say, in worse shape than others. They give us some concern. And this is one that, frankly, we had some concern about. We look for opportunities to exit those plans when we get them, and this was an opportunity we had, and we took it for strategic reasons. We've got some multi-employer plans that are in good shape, and then again we've got some that aren't necessarily as bad as this one, but we'd prefer them be in better shape. I think one of the points to remind folks of, and we did put this in our 10-K but it bears reminding, the data we get on these multi-employer pension plans is very outdated. I think the latest information we have on these plans right now is December 31 of 2009. And so we don't have performance for 2010 or 2011. And so whether it's well-funded or underfunded, is -- you're really looking back a year and a half and making a best guess. And the charge that we take this year will be trued up for actual performance through the end of this fiscal calendar year. It's the best guess we have at the time, and frankly, we're hopeful that their performance has been better during the last 18 months of market.

And if I could just ask one final question. If you look at the comparisons for incentive compensation in the fourth quarter, to what degree could that be a material issue in the fourth quarter? Is that a potential headwind? And then also, do you expect any anomalies with the tax rate this quarter based on your current expectations?

I'll try both of those, and Bill may wade in. On incentive compensation for the third quarter, one thing, again, you'll see in it in the Q when we file it tomorrow -- I don't know that we break this out or not, but the $36 million of payroll incentive comp increase, about 1/3 of that was an accrual for a corporate bonus incentive. And frankly, it's a catch-up. We did not have an accrual for the year based upon the first 2 quarters for the first half-year performance. And so we've effectively put on 3 quarters worth of accrual in one quarter. So from that basis, it was probably a little heavy in Q3. If it goes up in Q4, frankly, it's due to performance. And I'll say the same thing about the field compensation. It that number is heavy in the fourth quarter, again, it's going to be driven by case growth and gross profit growth, which is a good thing.

Ajay, this is Bill. I don't usually hope for headwinds, but I'd love to have one in the fourth quarter. But I think we have pretty full accruals last year, so I don't think that's going to be a big issue.

As far as the tax rate, no, we don't have anything on the horizon that would cause me to think that we're going to have anything significant on the tax line. That can change very fairly quickly. The thing that we normally are talking about is COLI, and, again, we can't predict what's going to happen with COLI during the course of the quarter.

And next from Andrew Wolf with BB&T Capital Markets. Andrew Wolf - BB&T Capital Markets: Bill, I just wanted to get back to Greg's question on how the business trended during the quarter. I just want -- did you say it got up to a little over 2%, and that's sort of where it's at, or was there any cadence to it that we should -- that you'd like to tell us about?

Yes, I think I acknowledged that when you go through all the adjustments that we've verbalized here that you'd be around 2% the way we recharacterize volume growth, or real growth, I guess. And the only point I was trying to make is it's very difficult to describe a cadence a month at a time. I didn't comment on April, because we don't do that, as you know, during the quarter. But April happens to be a month where we had a late Easter. That's good, but at the same time, Mother's Day is falling on a different week. So it's really hard to stall [ph] on any one quarter. What I'll remind you, and I know you know this, is in the third quarter, in particular, March is a critical month. So we had a good March, and we needed to, to have a good quarter. Andrew Wolf - BB&T Capital Markets: Any noteworthy changes in your customer segments? Were the higher-end restaurants starting to do better or continuing to do better? Anything? And the 1% or so sequential pickup in real sales?

It's hard for us to kind of tell that from here. To be honest with you. We certainly have some perspective, but we also look at everything that you look at. And the best I can ascertain at this point, there's some, I won't call them conflicting, but there's some contradictory data or anecdotal views out there, but I think the quick-serve side continues to do well, and their traffic appears to be up a little bit. I'm not really sure what's driving that, necessarily, but it seems to be good. I think as you get into casual dining, family dining, the traffic isn't up that much, if at all, but as people go out today, they seem to be spending more than in the past. So for the most part, those folks are seeing a little bit of an increase. What's harder to gauge is just the overall industry number, because we go to different sources there. And some people believe right now that the market is still relatively flat. So in a few months, we'll know that a little bit more accurately. So I'd say the family, casual dining is holding its own, maybe up a little a little bit based on increased purchases. And the high end, I would say that that's doing better. Andrew Wolf - BB&T Capital Markets: And this might be for Chris. On the fuel, the $14 million in this quarter and your expectation, we'll see where that goes. But was any of that recaptured through the contract pricing? I know Bill said you're going -- or you said you're going to institute surcharge against -- for independents. But is that $14 million, I'm not sure I heard it right, was any of that we got recaptured due to contract pricing this quarter? Or is that the amount that wasn't?

No, I mean, we actually note fuel costs separately from fuel surcharges. Fuel surcharges go through gross margin. And so what you'll see in the Q tomorrow, we'll break that out for you. But fuel expenses on the cost side was up $14 million. Fuel surcharges are always on for the contract side of the business. So there was an offset there. On the street side of the business, that's where I said we put in a fuel surcharge starting in March, they had very little impact for this quarter. But we do expect it to have a good offsetting impact in the fourth quarter to the increase. And we will be -- I think we do this in our Q tomorrow, updating some credits on Q4. I mean, as I've said in my statement, we expect fuel cost for the fourth quarter to be up $15 million to $20 million. We expect the fuel surcharge to be up $10 million to $15 million. So those will substantially offset. Andrew Wolf - BB&T Capital Markets: Just on other income, there was a big pickup there. Could you just tell us what the source was or just...

Yes, it was actually 2 transactions. In the third quarter of fiscal '11, so this third quarter, we recognized a gain on the sale of a facility up in Canada that was about $4.5 million. In the third quarter of last year, we recognized a loss of about $3 million on the sale of our Jamestown, New York facility. So the year-over-year lap of that looks pretty big. Andrew Wolf - BB&T Capital Markets: Actually one more. And then, also housekeeping, COLI was pretty de minimis, looks like stock market, foreign about the same in both periods, isn't that right?

Yes, we don't talk about COLI unless it has a significant year-over-year impact. So we didn't talk about COLI.

And next, we'll move on to John Heinbockel with Guggenheim Securities.

A couple things. So Bill, it seems very encouraging that price pass-through is picking up and there has been no sign of demand dampening, which I think maybe most of us might have expected some of that. Are you seeing that anywhere? If you look at categories, geographies, is there any early sign of demand getting hit a little bit by inflation or no, not yet?

John, I think I'm not going to call of them out, but I think there are some geographies, and you'd probably guess where they are, where the economy is still on a tougher place and maybe some others whether you look at it on an absolute sense or relative to a year ago, where you have high unemployment, that type of thing -- higher than average, obviously, it's pretty high in general right now. So yes, there's one or 2 markets that we see where we don't see as much growth as we might see in some other areas. But generally, I would say it's been pretty consistent across the country. So far as categories, no, I wouldn't say that I've noticed anything there that's worth getting into. I think, again, these things need to be managed. There's always pushback. We try to make good decisions with our customers through our MAs, and that's our job to manage it. So these high-inflation categories, that's typically where you're going to see the pushback. It's big increases, and often it's on items that cost a lot. So we're continuing to work through that, and like I said earlier, when you hear us speak about execution, that's just we're -- we feel like we're managing it better. But lookit, there's still work to be done here, I can tell you that.

Does the fact that the volumes are behaving as well as they are give you more confidence to put more pricing through, than if -- I would imagine that if volumes were negative, so we should see more of that?

Yes, I think it does. And I'll give you the same answer I gave in the context of our customers. It gives you more confidence, but we're also at a point where we need to. And again, the key, and I've said this couple of times now, it's really important. The key is how we do it. It's just not necessarily just passing along a price increase. I mean, it's working with the customer on their menu, working with them on different items, perhaps substitute items. Work with them on specials. Those types of things. All those things that our MAs are trained to do. Business reviews. All that type of thing. So you try to do it in the context of how can we help get through this together and still both of us run our businesses better?

The other thing, inventories were up a decent amount year-over-year. Is there a lot of forward-buying taking place? And do you think that's an opportunity to offset margin going forward?

No, we don't generally do a lot of forward-buy activity. I wouldn't say that that's coloring the numbers. The inventory increase is really driven by the case and overall performance. And then we did have -- DSOs went slightly the wrong way on us this quarter, and so that accounted for a little bit of the inventory as well.

I mean, is forward-buy an opportunity? I mean, you got inflation for the first time in a while, you're carrying cost is pretty low. Do you -- is it more you really don't want to take advantage of it, or you don't see the opportunity from the vendors?

Well, I don't think we have any great expertise, to begin with, in terms of forward-buys. We do a little bit, John, in certain commodity areas. So generally, we just philosophically don't believe that that's part of our value package, to be honest with you. So we try to be smart, and where there's opportunities, we'll take advantage of them. But our role we see as being a marketer and a distributor, and we don't really -- we don't go real big into that area at this point. Frankly, John, we don't have -- we'd have to do a lot more work in the whole risk management area, I think, to take a bigger step in that area.

Then finally, with the Arkansas test, what one or 2 things kind of surprised you? You mentioned issues that you resolved, maybe surprised you negatively, what one or 2 things surprised you positively as you go forward to a bigger test?

Yes, I think there's really no negative at this point. There's delays, there's performance issues, that type of thing. So I'd say on the testing side, Chris alluded to this, we did extend testing, and we pushed the go-live date back appropriately. So because [indiscernible] do more testing. So I wouldn't call that a negative. I think I've made the right decision, but I -- trying to give you some color on how these things play out. The thing we're working on right now is what we call performance. So more consistent response time, shorter waits more of the time, that type of thing. We've made great strides -- just getting through the weekend, as I mentioned, was a huge stride, and we've made good strides in the last 3 weeks. But there's still work to be done on that. There's some work to be done on the reporting area. But the bigger issue, and I apologize if the people from Arkansas are listening right now, the broader issue for us is to take stock of what we're learning through this pilot and understand what that means as we go forward with this first wave. So we've got to do everything we can to help Arkansas operate their business at a high level, but at the same time, we're taking a step back and look at different things that we've learned from the processes that we put in place and the feedback we're getting from our MAs and customers.

John, I thought I'd weigh in just with my own thoughts. It's a bit of a shout-out to the teams here, but I think one of our surprises was how fairly quickly we were dealing with what I'll call moderate issues instead of really big issues. After 2.5 years of this journey, as Bill described, and the massive amount of people that we've had working on this project, you build up this expectation just from fear that something horrible is going to wrong and you're going to have to go backwards, or you're going to be able to ship groceries. And even though we've talked about mitigation strategies, every time we've talked about such a big project, you don't know how all that's going to work until you flip the switch. And I would say that we didn't have a problem shipping groceries, and the teams did a fabulous job of tackling the issues as they came up. And, as I said, fairly quickly, we were down to what I'd call moderate and then down to -- I don't want to say anything is a minor problem, but in a pilot site, frankly, I think we expected worse. The other thing just to note is, we've talked a lot about turning on the pilot site in Arkansas. We also turned on our Sysco business service center here outside of Houston, in Cypress, Texas, which is our, frankly, our shared service center, our back-office function. So a ton of work is going into preparing that group for the change-over as the operating companies go live. So again, flipping that switch and seeing the success was a very welcome thing.

Yes, I think, John, just to maybe crystallize the thought, the way we define success on this thing was we were able to ship groceries on time and accurately on Monday morning. And so we had some bumps along the way, and we're still working through some things. But that's how we define success, and that's why we're calling this a successful launch.

Just lastly, have the MAs there fundamentally changed how they're spending their time? And is it too early for that to increase productivity? Where has that gone?

Again, it's a pilot site. So I would say it's a little early on that front. Right now, we're trying to get the MAs through the transition. Certainly, some of them are, I'm sure, but I would say those are things that we'll look at over the next 90 to 180 days. Right now, we're very focused on the system and all that goes behind the system. So I'm sure there's some of that that's happening. Chris' point, the SPS is a new environment for them, and they're adjusting to that. But I would expect you or us to be able to see that improvement as we get 3 to 6 months into it. But that probably is more relevant as we get into the first wave and the subsequent waves. This is truly a pilot. We're trying to learn as much as we possibly can before we go forward any further.

Meredith Adler with Barclays Capital will have our next question.

I want to go back to something Chris said about having paid pension early at the end of last year. Did that change the way pension was expensed or only a cash impact?

It's only a cash impact, Meredith. We still expense it quarterly. We just sent the cash early, frankly, to take advantage of what we thought were good market conditions, and given the result of our pension investments for the year, we're pretty happy we did it.

And then I'm assuming that if you've been able to apply fuel surcharges in this latest quarter, then the competitive environment must be allowing you to do that? But others are also taking fuel surcharges. Is that fair to say?

Well, we've done this in the past, Meredith. And then we've unwound them on the street as well at the appropriate time. So we did some surveys, if you will, or analysis, and different competitors are doing different things. And so essentially, this is an example of something we're -- if someone's going to do it consistently around the country, it's going to be Sysco, and so we did it. We really didn't think so much about the competitors.

And then I know that you got a question about forward-buy, which it doesn't sound like you want to take that risk, really. But often, distributors just naturally have inventory profits for when there's inflation in the Dry Grocery category, obviously not in perishable, because it turns too quickly. Is them is there some reason to believe that you will be able to realize some inventory profits?

We typically have that running through in our variance every quarter, to the extent prices are going up, of course. Whether you'll see significant quarter-over-quarter improvement, one, it's hard to say, and 2, I wouldn't expect it. So, yes, I don't think you'll see much from us in the way of significant increases from inventory valuation.

I mean, our inventory turns on average around every 20 days, Meredith, so there's not much time for that.

No I guess, but some categories are slower than others, I would think.

You're right. There would be in some in the Nonfood categories.

Yes. But again, the average days on hand that we have across all categories including the slowest of categories is not significant enough that we would -- we could roll that much of an improvement around.

And then I have a question about -- you talked about because the testing went on a little bit longer, you were able to capitalize more. Can you give us some sense -- I don't think you want to tell us how much has been capitalized, but can you give us some sense of what the depreciation period would be for when you capitalize those things?

Yes. Generally, sometimes I've had my team when I do this, but I call it the machine. So when we capitalize stuff, we're basically saying we're building the machine, and at some at some point we start depreciating the machine. We did that when we turned on Arkansas, effectively, and generally that's going to be capitalized over 7 years.

And when does it start being capitalized? I mean, when will that 7 -- it's already started, presumably.

It has now started, yes.

Okay. And the others' investment for the business transformation process, are most of them going to be 7-year depreciation?

No, it's going to vary. I'd say on the short side, there'll be some things we do that are 3-year investment or a 3-year depreciation period. And some of the SPS investment, which is building plant equipment, will be materially longer than that.

And next, we'll move Colin Guheen with Cowen and Company.

A question on inflation and the real growth dynamics that are going on now. I guess historically, at a 5% inflation level, you would expect some demand destruction. Are the operators out there saying or feeling that they have some pent-up pricing given the deflationary environment and, thus, we're seeing a stronger pricing power halo, maybe, coming forward? Or is that not the way to look at it?

Can you give me that one again? I'm not sure I understood the question.

Yes, I mean, normally, when you're seeing 5% inflation, you would think that they have some demand destruction if you look historically, I think, at the business with this inflation levels. Are the operators feeling because you're lapping over deflationary period that they have some pent-up pricing ability and, therefore, are willing to take price, and they do have that with the consumers? Or how would you characterize, I guess, the willingness to take price right now at the operator level?

I think going back to some of the earlier questions, I would say that they're reluctantly taking price increases right now, because they know they have to, to run their business. But I think it has very little do with the fact that are there was deflation a year ago. The memory bank in this business is not that real long. So I think it's just more of a perception of what they need to do to run their business and a little more confidence than maybe couple of years ago that their business is going to be in better stead than it would have might have been before. So I think there's a higher degree of confidence on the -- modestly higher degree of confidence on the next few months. And just the reality that that's what good business people do.

And our final question today will come from Bob Cummins with Wellington Shields & Co. Robert Cummins - Shields & Company: I have to say, as a long-time shareholder, I'm pleased to see your stock up $4 to a new 12-month high today, in case people haven't noticed. And I wonder if you could elaborate somewhat on your acquisition strategy. I see for the year-to-date, you've spent quite a bit more on acquisitions than you did a year ago during the same period. But is that likely to be stepped up further? And in particular, are you emphasizing regional acquisitions to strengthen your position where you maybe don't have the market share that you would like? And to what extent would your expansion translate into more international operations as you go forward?

Let me start with the domestic stuff. We've talked about pretty much everywhere we've gone. Most you that cover the industry know that there are a few large players, but when you get down half, maybe number 15, the numbers drop off, even though we've got over 16,000 competitors in the industry, the size of those competitors drops off fairly quickly. We decided that we can wait around and try to strike relationships and hopefully get some opportunities to acquire some of the biggest players in the industry, or, frankly, we can go out and do what's Sysco's always done extremely well, which is form relationships with all of the other companies that are out there, at least as many of them as we can, and build what Bill referred to as a pipeline of quality transaction. So people that we meet today may not have any interest in selling today, but if they get to know us, we get to know them, 3 or 4 or 5 years down the road, they may have a family event that causes them to want to sell. Hopefully we get the phone call. We've been building that pipeline. It takes a while to build that pipeline. So the answer to your first question is, we've actually now closed or within days of closing about $420 million worth of -- I should say that differently. Acquisitions that represent $420 million worth of sales. And so that's, I'd say, an increase in performance and tempo. We've said publicly that we'd like to do at least a half-point of sales generation every year through acquisitions. Internally, we'd like to do even better than that. But you've got to have a willing seller as well as a willing buyer. So we'll take them as they come. So we're going to work on the smaller transactions. We're going to keep working on regional opportunities, to your point, where they make sense for us and where we have an interested party on the other side, we'll build those relationships, and we'll try to work through those deals if they're available to us. Moving to the last part of your question, we've said that the 3 strategic streams that we're working down, one being broadening our U.S. and Canadian opportunities, the core as we call it, 2 being adjacencies, the third one in there is international. We continue to look at other geographies and try to understand where we might find something that would be a good fit for Sysco, where we could add some value and we could set up Sysco for long-term growth and new markets, and we'll continue to look at those opportunities. Robert Cummins - Shields & Company: Being a Texas-based company, is Mexico an option?

Mexico is always an option, Bob. It's just a little bit of timing. We've looked at Mexico before. I think when you look at countries like Mexico, maybe other developing markets, one of the questions becomes how would you go in, and that would probably be a market where we'd want to affiliate ourself with a partner, that type of thing. So we have some good relationships with a couple of organizations in Mexico, and we'll continue to look at that. And to Chris' point, we're right now how we focus on the quarter, but at the same time, if we can find some strategic opportunities that will either help us better differentiate ourselves with our customers, i.e., the adjacent side, for example, or provide a broader platform for growth in the future, then we'd like to do that. But it's a whole different approach and assessment process and highly strategic. Robert Cummins - Shields & Company: And how is your Irish operation performing?

Well, they're performing great. I mean, I was over there, Chris and I were over there for some investor meetings a month and half ago and we stopped by and spent an afternoon and evening with their people and their management team, and when you factor in what's going on in that country, we're exceptionally pleased with the effort, enthusiasm. They're growing the business. There's a lot of pressure, as you would expect on the profit line, but they're performing very well, and we couldn't be more pleased with the people in that company. Robert Cummins - Shields & Company: Just one final question. I see that your share buyback expenditures so far this fiscal year are way up from the prior year, and that's understandable. And I'm not going to ask if you're going to cut back on that. But would be your strategy between stock repurchases and keeping that money on hand to use it for acquisitions?

Actually, Bob, our strategy in share repurchases, as we've talked about, has been really just to offset dilution from options issuances. The reason it's heavier this year is as we entered the year with the share price where it was and the plan that we have in front of us, we set a target for how many shares we thought we need to buy back. Then the share price declines, and suddenly we didn't need to buy back that many shares. And so we haven't had a lot of activity here recently. But our strategy right now is not to increase in the share repurchase program it's not to spend a certain of amount of money. It's, frankly, just to offset dilution.

And that will conclude today's conference. We thank you for your participation.