Good morning, and welcome to Sysco's Third Quarter Fiscal 2018 Conference Call. As a reminder, today's call is being recorded. We will begin today’s call with opening remarks and introductions. I would like to turn the call over to Neil Russell, Vice President of Investor Relations and Communications and Treasurer. Please go ahead.

Thank you, Dennis. Good morning, everyone, and welcome to Sysco's Third Quarter Fiscal 2018 Earnings Call. Joining me in Houston today are Tom Bené, our President and Chief Executive 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 SEC filings. This includes, but is not limited to risk factors contained in our Annual Report on Form 10-K for the year ended July 1, 2017; subsequent SEC filings; and in the news release issued earlier this morning. A copy of these materials can be found in the Investors section at sysco.com or via Sysco's IR app. Non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures are included at the end of the presentation slides and can also be found in the Investors section of our website. To ensure that we have sufficient time to answer all questions, we'd like to ask each participant to limit their time today to one question and one follow-up. At this time, I'd like to turn the call over to our President and Chief Executive Officer, Tom Bené. Tom Bené : Thank you, Neil, and good morning, everyone. I’d like to start the company’s key themes that drove our results for the quarter along with some comments on the current macroenvironment that we are operating in, followed by a discussion of our U.S.…

Thank you, Tom. Good morning, everyone. As Tom mentioned earlier, we are pleased with the top-line fundamental results for the third quarter. Sales and gross profit growth were strong as we saw positive impacts from case growth, inflation and continued Sysco brand growth. Adjusted operating income reflect continued investments while with some ongoing challenges this quarter. However, we are able to generate operating leverage leading to adjusted operating income growth of 7.1% and with the additional tax benefits, adjusted earnings per share of $0.67. In addition, we continue to generate meaningful free cash flow as we posted $768 million in the first 39 weeks of fiscal 2018. As for our quarterly results, for the third quarter, sales grew 6.1%, gross profit grew 5.6%, while adjusted operating expense grew 5.2%, which resulted in an adjusted operating income growth of 7.1% and adjusted earnings per share growth of 31.4% to $0.67 per share. For the third quarter of fiscal 2018, we saw foreign exchange benefit to sales of approximately 1.6%. Sysco experienced inflation across all of our segments in the third quarter. In our U.S. Broadline business, we experienced 2.6% inflation driven by a few categories including meat, dairy and produce. With our International business, inflation was a combination of both product cost increasing and currency translation in the UK. During the quarter, we had gross profit growth of 5.6% driven by overall volume growth and improved Sysco brand penetration. As Tom mentioned earlier, trade expense trends have somewhat improved and were not as significant of a headwind as in previous quarters. Adjusted operating expenses grew 5.2% for the quarter. The increase in expense was largely driven by supply chain costs both warehouse and transportation, which were partly related to adverse weather and increased fuel costs, the previously announced investment in our…

[Operator Instructions] And your first question is from the line of Judah Frommer with Credit Suisse. Please go ahead.

Hi, guys. Thanks for taking my question. First maybe just on the tax reform reinvestment. There is a little bit of confusion out there with the second three-year plan and whether anything has been restated for tax reform? I think, based on the CAGNY disclosure, it’s only EPS, but if you could help us out with what is and what isn’t good in that three year plan that that would be helpful?

Yes, it’s Joel, Judah, thanks for your question. Just to really make sure I am understanding your question properly. You are asking a benefit ultimately on the new three year plan of the tax reform. And so that’s what I am answering. At CAGNY, we talked about this benefit of $0.20 to $0.25 on the EPS line, which continues to be our view of how we see that little before. So that’s our – that’s current guidance we’ve given and that’s our continued current view of it.

Okay. So, like the operating income guidance, that would include any potential reinvestment of tax reform dollars?

Yes, I would say it this way. I mean, the three-year plan we’ve laid out – if you recall it doesn’t create a slightly increased level of capital investment, which wasn’t directly related to tax reform. But the answer to your question is that the net income impacts in the operating income over the next three years factor considers those areas where we have invested in the benefits thereof.

Okay. That’s helpful. And maybe just quickly, just in terms of the independent landscape and kind of all three public players, before talking the same way about the attractiveness of the opportunity there, is there any bumping up against larger competitors when you are competing for independent business more than there was, let’s say three, six, months ago? Tom Bené: Hey, Judah, this is Tom. I’d say, look, this business as we talk for a long time continues to be very competitive. I don’t think there is anything newer that we are seeing from either the bigger publicly traded guys or even the regional players that are out there. I think everyone knows that this is an attractive space and so, they always have and they’ll continue to participate in this space and it’s coming upon us to containing to do things that differentiates Sysco from everybody else to continue to earn that business. But I wouldn’t say there is anything new or different that’s come about lately.

Okay. Thanks a lot and good luck. Tom Bené: Thanks.

Your next question is from the line of Vincent Sinisi with Morgan Stanley. Please go ahead.

Hey, great. Thanks very much. Good morning guys. Thanks for taking my question. Just wanted to ask about freight. It was the current thing to hear that you said it improved somewhat this quarter. Just wonder if you can give us some color on, I mean, to our understanding certainly the capacity is still constrained. So was it more what you are doing when you are negotiating on the rates are – just give us a little more color on there and then kind of, are you holding things status quo from a freight perspective as we go forward the next couple quarters? Tom Bené: Hey, Vini, it’s Tom. So, look, the freight environment obviously continues to be somewhat challenging out there and I know everyone is seeing that, hearing that. I think our point here is there have been a few things that we’ve been able to do and we talked about this over the last couple quarters that we needed to be able to work with the suppliers and work with the carriers both to improve the situation we ran into especially in our second quarter or the fourth quarter of last calendar year. The more freight on the road obviously creates pressure for everybody. There is driver challenges and there is obviously just capacity challenges. I think the combination in Q3 will be probably saw as a little bit of softening of some of that pressure that was there and at the end of last calendar year or in our second quarter. But also I think our teams doing a nice job working with our various carrier partners ensuring that we were getting the loads we needed and the coverage that we expected as part of our agreements. And candidly working with suppliers too to help soften some of the impact that’s out there. As it relates to going forward, I think it’s anybody’s guess. I mean, we continue to manage this thing. It’s knock up I think on a lot of us at the end of last calendar year and we are doing everything we can to manage it. It’s still impacting us, but hopefully, we will see more of what we saw in Q3 – or Q3 going forward, but it’s a little too hard for us to call that from where we sit.

Okay. Thanks, Tom. And then, maybe just a quick follow-up on Brakes, specifically, more on the fundamental kind of the integration temperatures zones and all that, can you just kind of a little update where we are in terms of progress there? Tom Bené: Sure.

Thanks a lot. Tom Bené: So, If you think about the Brakes acquisition, we’re now about 18 months into the acquisition and over the last, call it, year or so, we spent a fair amount of time reinforcing of the Sysco approach and model to the business I’d say in that first nine months, we are just getting our bearings straight on what we acquired and what we had there. And what was going on in the market as you also know, at least in the UK a lot of things were happening in the UK market with Brexit. So with this last year what we’ve done is, spent more time focused on what are kind of things that we need in place to sustainably grow this business, similar to what we do here in the U.S. with a focus on local customers. And so what we’ve learned over that time is that there are investments we need to make in the supply chain area, specifically, and we’ve always talked about this transformation in the UK, but multi-temperature which is common ground here in the U.S. and not the way we operate is not necessarily that way in all of Europe and certainly in the business that we had acquired. So we are investing in multi-temperature, which means, think about that is, one facility being able to provide all three temperature frozen, chilled and dry on one truck and we didn’t have that in all markets. And that’s an ongoing investment we are going to make. We’ve also have a better sense of what capability we had from a technology perspective in each of the countries and we are making some investments there. And I’d say, lastly, there is some structural things that we needed to get in place to make sure we could operate the business the way needed to across this international segment and that’s with some resources we are putting in place in Europe, specifically to oversee a lot of the efforts we have going on over there. So it’s been a – it’s you hear and you see obviously the number of investments we are making there. We believe it really is important for us to continue to position ourselves well for the future and ultimately to start to get the value that we believe exists in those markets and in those businesses we acquired.

All right. That’s helpful color. Best of luck guys. Tom Bené: Thanks.

Your next question is from the line of Chris Mandeville with Jefferies. Please go ahead.

Hey, thanks for taking my question. Joel, if I could get some clarity and I apologize if I didn’t understand it correctly here, but, on the new three-year outlook, are you still evaluating how you might use tax reform on a go-forward basis and leaving things open to possibly adjusting your three-year goals on the EBIT line or is it’s effectively final you remain confident in growing EBIT $650 million to $700 million over 2017 numbers?

Yes, just to be clear, there is only lack of clarification on this, you should ask it again. No, we are not adjusting our targets for our next three-year plan. Our targets for our next three-year plan is $650 million to $700 million as we talked at out Investor Day. We are simply – what we had said is we are continuing to evaluate the options for investing that, but certainly again, our targets are what they are.

Okay. So the timing could shift a bit, but nonetheless the end target is same, okay. And then, just any insights on how cases may have trended in U.S. during the quarter? And how Easter and/or weather may have affected yourselves? And then, any willingness to discuss quarter-to-day trends? Tom Bené: Chris, just on – I am missing pieces what you are saying. Are you just talking about how weather affected the U.S. or just share trends in general?

Yes, so, it’s just in terms of the case cadence throughout this quarter, how Easter and weather impacted the overall quarter and then, if you see willingness to discuss quarter-to-day trends? Tom Bené: Okay. So, actually, we talk through, we certainly had weather impacts, both in the U.S. and in some of our International businesses as everyone is pretty aware of what happened in the U.S., specifically, let’s say, in the Northeast, but also some around the whole eastern corridor. So we certainly saw some impacts for that weather on our volume. The other thing that we did not talk about last quarter, that we went back and did a little bit of work on, look, as we think about the shift that happened at the end of last quarter around the New Year’s holiday, we also probably had a small impact in our business in Q3, because of that shift that took place in Q2, meaning, we got a – what we think about a 50 basis point impact, volume that went into Q2 that hit the prior year would have gone into Q3. So I’d say, those kind of things slightly impacted our volume for this quarter. But we continue to feel pretty good about the overall industry trends. There has been some choppiness because of that weather, you saw that in the March sales numbers for a lot of our restaurant operators. But, generally speaking, we feel good about the fundamentals in the business and believe that these segments continue to be an opportunity and as we’ve talked numerous times, given our market share position, we believe there is plenty of opportunity for us to grow whether it’s in restaurants or other segments across the Food Service landscape.

And is there any real ability to quantify the weather impact and/or the Easter benefit as many restaurants call that out? Tom Bené: I don’t think it’s necessarily easy to quantify it, because you get so many year-over-year impacts. We believe – we certainly know when we lose shipping days that we – you don’t easily get those back in this business, as we all know, it’s not like, hey, I didn’t go out last week because of the weather, I am going to out twice this week. That’s not usually how it happens. So, I think the reality is, you lose those days, but we deal with this year in and year out. It just have to be a little more affected in fiscal year – in our fiscal year 2018.

Chris, we haven’t quantified that and like I said, so I think, to Tom’s point here, I mean, it’s not something we try to overly big deal, we are simply acknowledging the fact that both from a volume perspective and probably from an expensive, we had some areas that were impacted. But we are not trying to oversell it.

Okay, thanks guys.

Your next question is from the line of John Heinbockel with Guggenheim Securities. Please go ahead.

So, on the investment in MAs, how much do you think that, that contributed to the 6% SG&A growth in the quarter? Could that be 50 BPS or something like that? And then secondly, given the timing of onboarding those folks, when do you think they start to make an impact on local case growth? Tom Bené: Good morning. Thanks for the question. So, I’d say, when you think about the expense impacts, specifically the U.S. business that you are asking about, there really were three big areas of impact. Certainly, marketing associates and the investments we are making in the sales organization was one of them. I am not going to give you an exact number or as a percentage of that. But it’s a pretty important investment that we are making and we believe that that in addition to some of the technology that we are putting in place to support that organization is important and what I would say is, think about these as somewhat planned investments and we went into both this three-year plan knowing what we needed to get done and why we’ve committed to the numbers we’ve committed to and this was a key part of that investment strategy. So, think about it is planned and something that we think. From a timing, how long it will continue and how long it takes these MAs if you will to get up fully up to speed. I think, three to four quarters is still probably appropriate. What we’ve gotten better are getting folks ramped up and trained. We’ve got much better process and programs in place than we had in the past. It still takes a while to get these guys really impacting the business in the marketplace. So I’d say, I wouldn’t suggest we’re done with it after this quarter. We’d probably have another quarter or so of investment around the selling organization. The other two areas in expenses were around the – and Joel talk about this, when we do have some times with weather impacts is, we’ve got our fixed cost obviously are there. Often times, we are paying our warehouse depot and our drivers even if we are not shipping cases. So we do have incremental expenses associated with some of our operating expense. Fuel obviously is also up and we know that and we are dealing with the impacts of fuel and the operating expense. And then the last thing we called out was bad debt and part of that was just year-over-year. We had a really good year last year in bad debt and we had a less favorable year this year. And I’d say, more consistent this year was what we had maybe in our history, it’s not like we had a huge issue, but versus prior is why that stood out.

And then just as a follow-up on the MAs. So, correct me if I am wrong. I think you kind of went from flat to maybe up 2% something like that in growth in MAs. Is that about right? And would that kind of pickup, can that add a couple 100 basis points once these guys are fully mature to local case growth? Or is that too much? Tom Bené: I am not going to try to quantify that. I don’t – we certainly believe that, as we’ve talked in the past, John, the ability to better analyze the opportunity is what enables us to focus these resources. So we are in the past, we might have just added resources and hope we put them in the right place and focus on the right things. We now are much more surgical in that approach. And so, we certainly believe that by adding them in the areas of where we have opportunity, we will accelerate our growth in those areas. But it’s not everywhere and it’s not certainly – it’s not something that – it is something that we think about. We’ve built it into our new three year plan. So it’s certainly embedded in the numbers we’ve shared with you all. But I can’t necessarily quantify if we hadn’t couple percentage in MAs, that’s going to drive a couple incremental percentage points of sales growth.

Hey, John, it’s Joel. Maybe if I can just add one little perspective on this – from that – I’ll just give you maybe two little data points here. Number one, you may recall, lot of conversations we had, as we are heading into this, even in the second year of this three-year plan, we are at an – what I would call, somewhat of an accelerated trajectory and people were actually – we are getting a lot of questions around, hey are you going to outperform what you’ve talked about this and that. We remain very firm on this, because part of that is a $600 million to $650 million target, it’s included some of the investment what we are talking about here and so, given we remain very constant and consistent in terms of how we stuck to that number. And then the other thing is, from a corporate expense perspective and one of the things I think we’ve done a good job of, and we will continue to is, it’s been saving some dollars on the corporate expense side and then reinvesting some of those dollars into our operations that ultimately will drive long-term benefits. So, I think there is a book- some of the effect of what you are seeing in both those cases here. But, again I think very consistent with what we’ve talked about and just to get a little bit of other perspective, I wanted to give you and the rest of other people on the call as it relates to some of the costs.

Thank you.

Your next question is from the line of Edward Kelly with Wells Fargo Securities. Please go ahead.

Hi, guys. Good morning, and thanks for taking my question. Tom Bené: Good morning, Ed.

Hey, Tom, can I ask you about the independent business or the local business and just an update from you on what you are seeing from that customer segment from a demand perspective? There has been, I think just, some concern about whether things may be slowing down there or not, it’s obviously a very hard channel to track. So just talk about what you are seeing on the demand side there and what your expectation is going forward? Tom Bené: Sure. So, look, we haven’t really seen a big change from what we said. I think we continue to believe this is a very important and growing segment of the restaurant space for all the reasons we’ve talked about, They are much more capable of flexing their business and their model to the changing consumer dynamics that are happening out there. They also – if you think about, whether it’s the technology that’s out there or this delivery that wasn’t off and available to these folks, those kind of things are out there. So there are lot of things that are happening in that space. We continue to feel good about and we see at least from our numbers and our dealing with these folks that we think there is still runway there. Clearly, there are some cost pressures that they are facing, obviously product cost inflation is impacting them some. Some markets, the labor challenges that are out there are certainly impacting them and labor – I think it’s always going to be a challenge for the restaurant industry as we go forward here. But generally we feel good and as I’ve said earlier, given our share position, we feel like there is plenty of room for us to grow and as we’ve talked in this local area, we’ve now grown our business for 16 straight quarters and we continue to believe that we can deliver the kind of growth we’ve talked with you all about. There is some growth happening in what we would call – kind of the micro change. So think about that as these emerging concepts we’ve talked about. There are some of these folks that are starting to get more traction. These are the – they can be start out as three or five units and then they continue to add as they get traction. So we are seeing some pretty good growth within that segment of the independent market.

Okay. I just got a follow-up quickly on the cost side. Can you talk about when we should expect the cost in U.S. Food Service to begin to normalize a bit and see the true underlying EBIT growth within that business shine through? Tom Bené: I think, as we get into fiscal year 2019, you should start to see us get back to a little more balanced top-line versus cost. You know, as Joel just said, I think we purposely plan some investments in these businesses and base we are executing that plan that we had built. But as we get into fiscal year 2019, you should – as we talked about for our next three-year plan, we are very committed to the gap that we have between our top-line, our gross profit, and our expense growth and I think you should expect that as we get into fiscal year 2019. And that’s through across our business, we are very focused on those numbers. We’ve delivered them. We’ve exceeded what we had said in our first three year plan and I think you should expect that we’ll deliver what we communicated in our new three-year plan.

And quite honestly, without that happening, we wouldn’t be able to deliver that present NAV gap and we certainly feel – again we certainly feel good about our ability to do that. So I think that’s certainly the way to think about this.

Great, thanks guys. Tom Bené: Thank you.

Your next question is from the line of Karen Short with Barclays. Please go ahead.

Hey, thanks. Just a quick question on your operating profit goals. You stated you are still planning to be at the high-end for this three years, and then 2018. Can you just give us an update where you are now? Tom Bené: Sure. Yes, we are at $561 million through, essentially through 11 quarters.

Okay. Tom Bené: So we think we are in a good place.

Well, so I guess, just as I look at the way you have delivered each quarter this year, it seems like the fourth quarter, there is definitely a lot larger percent will be – need to be achieved in the fourth quarter this year. Is there anything specific about the fourth quarter that we should think about? I mean, if you were to get 100-ish million in the fourth quarter, that would be a lot bigger than you had in the past? Tom Bené: Yes, I mean, I agree. I think, but, number one, again just, certainly we continue to feel good about it. Two, it’s certainly a big quarter for us typically as there is some seasonality, it’s typically a strong quarter and so, obviously, Q3 being a smaller quarter and Q4 typically being a larger one. We do anticipate some positives on some – couple expense comparison areas as well. But I’d just say in general, nothing shattering there, but we certainly continue – we certainly expect – continue to expect to get those numbers we talked about.

Okay, thanks. And then, in terms of freight, I guess, in general. I guess, obviously, you said, you had a plan in place to help mitigate some of the headwinds, but did it also get easier this quarter to pass on freight or is that kind of unchanged? Tom Bené: Hey, Karen. Yes, I think – look, as time moves on, it have to become a little easier, but that’s primarily in the contract customers, okay? I mean, if you think about the way this works, it comes to us for the independent customers isn’t just another part of inflation if you really think about it. The cost of the products, the landing cost of the products go up and so it takes what’s already normal inflation of 2.5% or so and takes it up even further. So, in the independents, it’s a little harder, but as you have some more time, you can pass that along. And from a contract customer, given the cycle on the way that freight impacts actually hit us and ultimately we pass those along to the contract customers, we are able to pass more of that along. So, the longwinded answer is, yes to some extent. And that’s certainly helping as well.

But I guess in that context then fourth quarter for you should be better than third sequentially, shouldn’t it? Tom Bené: I think, what you maybe should expect is, we are hoping a continuation of what we had in the third quarter. I would necessarily say better. Having said that, we are still a little nervous about is the summer season kicks out, there is all kinds of new freight that’s on the road. Things like produce, I mean, there is a lot of movement of freight in this country and summer season seems to be a big season. So, we are a little nervous about that relative to what we saw in Q4 of last year. But, time will tell.

But just the one thing I’d add to that, I mean, to be clear, we are not banking our ability to hit the $600 million to $650 million based on an assumption in improved freight market. That have to – right.

Right. I wasn’t requiring that. Okay, and just last question, within the local organic case growth, I know that you’ve been asked this before and it’s hard to do, but do you have any more insight into how much it’s really coming from same-store sales or I guess, same-door sales versus new doors? Tom Bené: Well, we do manage in our business, what we would call penetration, so think about that is what you are asking is how much is coming from current customers buying more as well as business that’s new or business we’ve lost. Our penetration numbers are positive, which would suggest that we are getting more sales. But Karen, as you know, that’s highly variable, every customer and every concept and every market can be a little bit different depending on what’s going on in that market. So, it’s hard to take that across the business, but as I said earlier, we continue to feel pretty good about a lot of these customers in the space. Not everybody has got a winning concept, not everybody is succeeding. But, we feel good about the customers that we do business with and many of them are doing well.

Great. Thanks very much.

Your next question is from the line of Andrew Wolf with Loop Capital Markets. Please go ahead.

Thanks. Just wanted to ask you about the gross margin., it’ s getting a lot better sequentially on a consolidated basis. So would ascribe that mainly to less inflation making the markets a little more efficient for distributors for – or is it max or pricing, give us a sense of what you think drove the improvement there?

Yes, I’ll start Andy and I’ll let Tom to chime in here. I mean, first of all on the inflation comment, I mean, I would say broadly speaking, inflation – there wasn’t much of it really a significant change there from that perspective. I think what we continue to see that ultimately drives, again, solid improvement in margins. We continue to talk about a continued good mix of local case growth, our brand growth and continued to be strong and so that’s certainly always, again, a positive contributor into our overall margin. I think the point Tom made, we just talked about in this last conversation regarding freight. Again, that doesn’t suggest that we’ve had some dramatic shift there. But the ability that overtime – that variability to pass some of those cost along particularly to the contract customers as that ultimately translates some of the margin improvement as well. So, again, I wouldn’t see, really there has been any sort of macro swing that’s kind of mathematically caused it. But just in general, when you couple those things with continued enhancements with the technology and utilization of the technologies to improve our pricing through our revenue management, I think it’s just overall continue to allow us to do well in that area.

Okay. I just wanted to follow-up real quickly if I could, on the International side of the business where for the first three quarters it’s still substantially down, but this quarter you are up a bit. First I just want to make sure I heard your explanation, what’s this quarter’s increase in operating profit internationally, just mainly driven by the harmonization of the calendar – the fiscal calendar at Brakes? Just wanted to make sure I heard that right. And I am – what I am really trying to get you is what the implication for Q4, should it be a better improvement?

Well, so, Andy, so I think what I would say to that is, again, number one, keep in mind, Q3 for our International business is a small quarter in terms of dollars. But, I mean, so percentages get bigger based on smaller dollar movements. But I mean, there is certainly some element of calendarization that was one of the main drivers of the improvement in this quarter and we’ve talked about that over the last few quarters. We anticipated some of the negative impacts, certainly in the first half of the year and we’ve talked about the second half being better and you started to see some of that in this quarter. So, I think, again that’s – and you’ll see some more of that as we have anticipated in the fourth quarter as well. So I think, obviously there is lot of work being done to continue to announce the underlying operations of that. But certainly again, gives us certainly as we anticipated, first half of the year and some calendar impacts that some which we picked up here and we’ll pick up a little more in Q4. But, that’s not to suggest recovering all that, but that’s what you are seeing there.

Thanks. That’s helpful. So, we can now think of modeling the International operations in terms of seasonal leverage and such similar to U.S. part assembly?

Yes, I would say, it’s certainly much more similar. Obviously, the stuff that we’ve called out heading into this year, we certainly anticipate smoothing out, again keep in mind, we saw it one quarter to go where you are going to see some of that. But starting in our next fiscal year, yes, I think that’s a fair comment, Andy.

Thank you.

Your next question is from the line of Bill Kirk with RBC Capital. Please go ahead.

Thank you. I have another question on International. I think it will be in the Q tomorrow, but what impact did the currency have on top-line and on profitability for that segment in the period?

Yes, you know what, you are going to have to – you’ll have to wait for the Q now and I don’t have that right in front of me and certainly the last segment itself. As an overall enterprise, our foreign exchange contributed about little over about 1.6% in terms of top-line. It had fairly similar – that impacts from gross profit and OpEx but at the end of the day, on the net bottom-line, there was a minimal impact for the enterprise as a whole, but you’ll have to wait on the impact, specifically for that segment until tomorrow.

Okay. And maybe another way to get to the same idea. What were the cases – what were case growth for International segment in the 3Q?

Yes, so that’s not actually something we break out our volume metrics in our International business or not the same in all cases as they are in our – what we call our U.S. or Canadian businesses. And so, we don’t actually have, again, there is different volume metrics across those businesses. We haven’t get – what I would call harmonized volume metric for that segment.

Okay. That’s all for me. Thank you.

Your next question is from the line of Marisa Sullivan with Bank of America Merrill Lynch. Please go ahead.

Good morning. Thanks for taking my questions. I am not sure if you stated this exactly so far, but what is your expectations for inflation moving into the fourth quarter and then into the back half of the calendar year?

Yes, I think the way I’d look that is, it’s pretty consistent with where we are at, maybe slightly up, I think is our view. I don’t know that I’d necessarily call out anything really dramatic there. But certainly, again our three year plan expectations that we’ve laid out at our Investor Day were, I’d say, little below where we are at today and what our expectation is here as we move forward over the next few months.

Got it. And I think you mentioned in your prepared remarks, there was some operational challenges, was this just related to weather or is there anything else to call out there that might continue into the fourth quarter? Tom Bené: What I talked about, Marisa, was, primarily the weather-related impacts that we had. And some of the ongoing transportation challenges, fuel, obviously was also an impact for us in the quarter. So I think, fuel obviously is going to continue, but, a lot of the weather ones. Obviously, we are hoping we don’t have those problems.

Yes, and I think one of the things, I mean, we do a better re-ramp up or bit of staffing in this time of year and when we had a little bit of a – given weather impact on volume that outsize of negative overall impact operational metrics. The only other thing I’d add is, I did mentioned, we still – kind of we mentioned this in our Q2 and the – as we’ve taken on some of this new business, mostly on the contract side, we have not mitigated some of those start-up cost as quickly as we would have liked. And so, there was a little bit of that in Q3 as well. And we do think that that will certainly, that’s kind of mitigated now and we should be in good shape going forward.

Great. That’s helpful. Thanks so much.

Your next question is from the line of Kelly Bania with BMO Capital. Please go ahead.

Hi, good morning. Thanks for taking my questions. Just wanted to ask again, maybe a different way on operating expenses. Can you help us understand of the growth and operating expenses this quarter and last quarter, maybe how much of that is maybe some of the investments and things like MA and technology, that maybe you have to accelerate some of your momentum versus maybe some of the things that are out – a little bit more outside of your direct control in terms of the operating expenses?

Yes, Kelly, again, we kind of talked about each of these – I would say, I’m not going to probably quantify specific level you would like each of those areas. But I think the important thing to remember is, many of these expenses in the quarter were planned expenses and again, it’s built into that three year plan that we laid out 2.5 years ago at this point. And, knowing we needed to make some investments in these areas of business it’s not a big part of what’s happening in the U.S. I think, look, we just talked about some of these operational expense challenges and those are real, certainly on the transportation and warehousing side, whether it’s the ramp up of new customers, or some of the weather impacts where we’ve got the expense without the volume and sales are real and then the bad debt was the other one. So, those are the big areas. And when we talk about sales and MAs, I would include in that this technology investment we are making to make that selling organization more efficient, more effective and certainly continuing to work on how that experience our customers have with doing business with us gets improved. So, those are the big focus areas. But as I said earlier, most of these were planned. It just relates to the selling side of this and I think, as we talked earlier, we should start to see those mitigate in the first part of fiscal year 2019. Tom Bené: Yes, and again, I just – Kelly, I just remind you, I mean, again, we – part of my prepared comments, I did talk about we continue to anticipate seeing better expect this gap between GP and OpEx improve. And then, certainly, obviously, our next three-year plan as we laid out at out Investor Day continues this path as one of that point spreads and again, we feel good about where those are at. Again, there is just some – again, we’ve talked, as we headed into this last part of the three year plan, while making some of these investments, you are seeing some of it. But we certainly still feel good about all of the – we talked about here both for the last part of this three year plan as well as the next one.

Okay. Thank you, that’s helpful. And then, maybe just another one in terms of freight. You mentioned a little better performance this quarter, last quarter, but do you think we’ve hit the peak in terms of impact of that or is this something we are going to be doing for a couple of years here? And also, at what point do we get to a level where either on freight or fuel that surcharges kind of come back in the industry?

So, we’ve talked a little bit about freight this morning. I think we feel good about what happened in our Q3 and some of that’s driven by, probably industry, and some of it’s driven by actions that we were taking. It’s really too hard to call it right now, whether we think that level of performance is going to continue. And I think as I said earlier, a lot of this has to do with capacity and as capacity gets tight, then obviously the challenges, if anybody who is moving a lot of freight start to show up. And so, we obviously receive a lot of freight from suppliers. Because the pressure is really been on drivers and the drivers – that’s not going to change overnight. There aren’t a lot of drivers coming into the workforce as they are probably necessary. And I think we’ve all got to continue to work for find better ways to move freight, rail at one point was a good option. It’s not been as great of option in the last year or so. But, it’s something we got to continue to look at. So we are going to continue everything we can. But it’s hard for us to sit here and make a call on that. Regarding fuel and surcharges, that we have in place a surcharge approach for fuel primarily, and that process is out there and articulated to our customers. So, as fuel continues to grow, we have a process to mitigate some of that as and recover all of it. But we do have those plans in place.

Your next question is from the line of Karen Holthouse with Goldman Sachs. Please go ahead.

Hi, thank you for taking the question. Just another one on the commodity inflation side. We are now a couple quarters in a row in the 2%, 3% inflation and I think when it initially moved, it started to move up a lot of that, what sort of attributed to noise around hurricanes and maybe produce? Are you starting to view it maybe as a little bit more structural or starting to see pressure in sort of the underlying grain or protein areas? Tom Bené: Yes, I wouldn’t see us getting anything really dramatic there. I mean, I would say, from a produce perspective, we are actually still seeing some level of produce inflation that I would say frankly as probably little higher and a little longer than we anticipated. So that’s kind of still there. The main categories here are dairy, produce and meats. And so, I think, I don’t know that I’d really call Karen, anything really kind of underlying structurally that’s really outrageous there. But that again, I would just – I would say, the produce is probably been a little bit higher and a little bit longer than we anticipated.

Okay. And then, on the current three-year plan throughout 2020, it sounds like this year is going to come in a little bit below sort of the implied case during – previously talked about, sort of pretty balanced cadence between the three years. How should we think about that as it translates into the next two years? Would it still be sort of balanced between 2019, 2020 or would 2019 potentially be a little bit of a catch up year?

Yes, so, I guess, sort of I would say is, just as a reminder, I mean, Karen, we’ve been very consistent in the time of the fact that we are very confident in our ability to achieve the objectives we’ve set up for our last three year plan, which is sort of the high-end of the $600 million to $650 million. We feel – we are very much, we feel on track in terms of heading into our next three year plan or it’s just being the first year of next three year plan. And one of the things we’ve talked about as well at our Investor Day is that, there is, we are pretty balanced in terms of the growth that we are experiencing year-over-year as part of these plans. And so, well, certainly this year we anticipated a little - as Tom talked about, with some of the investments we’ve made, we did anticipate some higher level of expense coming into this year that suggests a little bit of a bigger ramp over the next couple. But I would just say in general, we are kind of on track on where we said it’s being and feel good about where we are at.

Okay. Thank you.

Your next question is from the line of John Ivankoe with JPMorgan. Please go ahead.

Hi, great. Thank you. Just a clarification, I think of two different comments that you made. So, do you expect on the corporate basis, GP dollar growth gap to expand versus OpEx in the fourth quarter, but still not with expansion in U.S. Food Service, is that correct?

Yes, I didn’t go into the second part. What I was really saying you is on the – on an overall enterprise basis, I was expecting that to expand, yes.

Okay. And – but I did hear, when as you were talking about optimizing the sales force, especially the new sales force, that you would – you kind of expect improvement beginning in fiscal 2019, so perhaps that you interpreted that fourth quarter would be relatively slow as third quarter. So, correct me if I am wrong.

Yes, I don’t know that we actually gave that kind of guidance, John. As you know, it does takes a little bit of time as Tom has pointed out for those sales people. I wouldn’t necessarily look at this – there has been anything dramatic on that in Q4. But again, we didn’t guided that.

Okay. Tom Bené: And also, John, that’s one piece of the overall cost puzzle for all the businesses and certainly the U.S. business. So, I wouldn’t assume anything in that.

Okay. Fair enough. And finally, obviously, digital is very important for your customer, very important for your sales force efficiency and effectiveness. I mean, is there a certain point that you expect that you can have much more effective and efficient sales people? I mean, does that happen in early 2019 and based on that type of comment, I mean, are there any markets and specifically that you piloted that shows what the margin opportunity is with technology? Tom Bené: We continue to feel really good about the work we are doing in the technology space and we continue to see improvement in the number of customers who are using our technology solution to both order products from us and operate their business. We also have seen, certainly as we’ve talked a little bit more improved penetration in customers who use the technology solutions. But, broadly speaking, we feel good about where we are at in that space and feel like it’s going to continue to be an investment we need to make and one that will drive some benefits for us long-term.

I think the only other thing I would add to that is, just as a reminder though, I mean, there is some of the investments we’ve made that we’ve talked about in our sales force are very targeted. So, in other words, this isn’t necessarily in anyway sort of reflection of – like we were actually anticipating over time, both increased productivity from our sales force as a result of the technology, but the investments we’ve made here are again, I would say, very targeted based on areas where we see additional opportunities to penetrate our market. So, just as a reminder to that as well.

Thank you.

And at this time, there are no further questions. Please continue with any closing remarks.

Tom Bené: Thank you, everyone.

Thanks.

Ladies and gentlemen, this does conclude the Sysco’s third quarter and fiscal 2018 conference call. You may now disconnect.