Operator: Good morning, and welcome to the PFG Third Quarter Fiscal Year 2017 Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by PFG's management and the question-and-answer session.

I would now like to turn the call over to Michael Neese, Vice President, Investor Relations for PFG. Please go ahead, sir.

Michael Neese: Thank you, Kristin, and good morning, everyone.

We're here this morning with George Holm, Performance Food Group's CEO; and Tom Ondrof, PFG's CFO.

During our call this morning, unless otherwise stated, we are comparing third quarter fiscal 2017 results versus the same period in fiscal 2016. We issued a press release regarding our results this morning. You can find our earnings release in the Investor Relations section of our website at pfgc.com.

Our remarks and the earnings release contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking statement section in today's earnings release and in our SEC filings for various factors that could cause our actual results to differ materially from forward-looking statements and projections.

On today's call, we may reference certain non-GAAP financial measures. Descriptions of these non-GAAP financial measures and the reconciliations to the most closely comparable financial measures calculated in accordance with GAAP are included in today's earnings release.

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

George Holm: Thanks, Michael. Good morning, everyone, and thank you for joining us today.

I'm pleased to share with you PFG's strong third quarter financial results. Let me start with several highlights. Our team's strong execution enabled us to generate industry-leading case growth of nearly 8%, and we continue to take market share. We're seeing dividends from the strategic investments we made earlier in the year, which is evidenced by our strong adjusted EBITDA growth in this quarter. Gross profit dollar growth of 8.4% outpaced our case growth as we improved our customer mix, channel and product mix. Our Performance Foodservice segment EBITDA was up 8%, backed by 7% independent case growth. The investments in Vistar's automated retail segment and the dollar store channel are making good progress and will enhance profitability in the future.

Customized delivered EBITDA growth of more than 6%, result of the successful integration of Red Lobster.

In summary, our business performed well in the quarter. As we look to the balance of fiscal 2017, we are reiterating our 7% to 9% adjusted EBITDA guidance for fiscal year on a 52-week to 52-week basis.

Before I turn the call over to Tom to discuss the financial details, I would like to highlight one of our associates. With Armed Forces Day and Memorial Day coming up later this month, I'd like to take a moment to recognize [ Brooks Pearson ], a driver with our Customized distribution business in California. He is an Army veteran who served with the XVIII Airborne Corps in Desert Storm. Thank you, Brooks, for your service in our country and for your 17 years with PFG.

I would also like to recognize all our associates. We're very pleased to be included this year in the Forbes Top 75 of America's largest employers to work for. Thanks. This is a testament to our great associates and the outstanding service they provide to our customers.

I would now like to turn the call over to Tom.

Thomas Ondrof: Thank you, George, and good morning. Let's take a look at our third quarter financial results. We're very pleased to see net sales for the quarter increased more than 8% over prior year to $4.2 billion as a result of broad-based growth in all segments. PFS's independent case growth was up 7%, Customized benefited from having a full quarter of the Red Lobster business and Vistar sales team continues to deliver consistent new customer wins across all their channels.

As George mentioned, the company's gross profit increased 8.4% to $521.4 million compared to the prior year period. The gross profit increase was fueled by strong case growth and through an improved sales mix of customer channels and products, primarily in the independent channel.

Our adjusted EBITDA increased 17.3% to $89.6 million, driven by better-than-expected top line and gross profit growth in Vistar; lower operating expenses per case within PFS; the normalizing of professional fees and workers' comp expense within corporate; and early, albeit, small contributions from acquisitions completed during the year. We're very pleased with the sequential quarterly improvement in EBITDA growth during the course of our fiscal year. The strategic investments we made in the first half of fiscal 2017 are supporting our future growth platform, and we saw a continued positive business momentum in April.

Net income increased 121.3% to $20.8 million for the third quarter compared to the prior year period, driven by higher operating profit, a decrease in interest expense, partially offset by increased taxes. For the quarter, the income tax rate decreased 260 basis points to 36.8%. The lower tax rate was primarily a result of an increase in permanent deductions related to the adoption of a new accounting standard. The company still expects an effective tax rate of just under 40% for the full year.

Adjusted diluted EPS increased 80% over the prior year period to $0.27 per share.

Now let me take you briefly through the segment and corporate results.

Performance Foodservice net sales for the third quarter increased nearly 5% to $2.4 billion, driven by growth in new independent customers and further penetrating existing ones. Independent sales, as a percent of total segment sales, were up approximately 100 basis points to 43.3%. PFS' gross profit grew by 6%, slightly better than the sales growth rate due to improved customer mix and brand penetration. In addition, further operating leverage was captured through very strong operating expense control as EBITDA was up 8.1% to $68.1 million.

Customized net sales for the quarter increased more than 8%. Improved sales mix, higher case volume and higher revenue per case were partially offset by softness in the casual dining environment. Customized also posted a solid increase in EBITDA reflecting the full integration of the Red Lobster business, partially offset by rising personnel and benefit costs.

Vistar delivered a healthy increase in net sales to $750.5 million or just over 15%, driven by broad-based case growth across all their channels, including vending, retail, theater and hospitality and by recent acquisitions. Contributing to the growth in the quarter was the rollout of a number of new customers, including the Carmike theater business, but the segment also saw solid sales growth from existing customer base. EBITDA for Vistar was up nearly 10% to $29.3 million. Although operating expense increases outpaced sales growth, these expenses came in as expected for the quarter, and we continue to realize productivity improvements in our dollar store and automated retail investments.

Finally, a word on our corporate expenses. As anticipated, our professional and legal expenses were down significantly versus the same quarter last year. And we believe they will continue to normalize during the fourth quarter. Workers' compensation and medical expense also continue to abate and move towards historical norms.

Now let me turn to our cash flow. During the third quarter, the company delivered substantial growth in operating cash flow, up 18% compared to the same quarter a year ago. This was fueled by strong EBITDA growth, lower investment -- excuse me, lower interest expense and some working capital improvement. On a year-to-date basis, PFG's operating activities provided $102 million of cash flow compared to $118.4 million during the same period a year ago. The prior year included a positive impact of the $25 million breakup fee payment received related to the termination to -- agreement to acquire 11 U.S. foods facilities in Sysco -- from Sysco and U.S. Foods. Excluding the onetime breakup fee, year-to-date operating cash flow improved by almost 10%, again driven by strong growth in EBITDA, lower interest expense and solid working capital management.

Cash used in investing activities totaled $250.8 million for the first 9 months of fiscal 2017. These investments consisted primarily of business acquisitions totaling $144.9 million and capital expenditures of $106.6 million or 0.9% of net sales. The company continues to expect capital expenditures for fiscal 2017 will be between $140 million and $160 million.

As we look to the fourth quarter, we believe the business has positive momentum and will continue to deliver strong broad-based earnings growth. Our case growth is robust, dollar gross profit should benefit from slight inflation, and we expect our controllable corporate expenses to continue to normalize in the fourth quarter.

As a result, we confirmed our fiscal 2017 full year adjusted EBITDA growth outlook to be in the 7% to 9% range on a 52-week to 52-week basis, and between 5% to 7% on a 52-week to 53-week basis.

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

George Holm: Thanks, Tom. I'd like to provide you with a quick update of our strategic growth investments in Customized and Vistar, briefly discuss our performance brands, highlight our M&A strategy and transactions and summarize our outlook for the remainder of the fiscal year.

We have successfully transitioned all the costs associated with Red Lobster. We've reracked our buildings, reslotted, rerouted our fleet and we had all that in place at the beginning of last quarter, about January 1. So those costs are now behind us. We are benefiting from delivering all 678 domestic restaurants.

Vistar continued to face headwinds during the quarter with the additional expense of servicing new geographies in the dollar store channel. We're making good progress in improving productivity in Metro New York. We'll begin to lap some of the increased cost in the fourth quarter of this year and look forward to the strategic investments paying off in fiscal 2018. The prototype distribution center for handling our pick and pack volume continues to improve. We continue to fine-tune some of the processes as we drive automation in the warehouse. We're confident it will deliver cost savings to Vistar in the future. We plan to shut down the manual pick-and-pack distribution center later this month. Although these strategic investments impacted our first half results, we have seen benefits during last quarter and continue to see additional benefits this quarter. This should provide us with future growth in the fourth quarter of this year and beyond.

I'd like to take a minute and highlight our Performance Brands. As you may recall, these are proprietary brands that we have created to market directly to our customers. Case sales of our proprietary brands have been growing faster than our independent case growth for several years, and we enjoy higher margins. During the third quarter, our sales associates did an outstanding job of focusing on our Performance Brands, and they helped drive case growth of -- in excess of 9%. We've developed our own proprietary brands of food and food-related products names such as Braveheart, Roma, Allegiance and new brand names such as Contigo and Nature's Best Dairy to meet our customers' specific needs. We're continually in the test kitchen exploring new ways to add quality, value and flavor to our customers' menus.

I'd like to highlight one of our strongest and fastest-growing brands in our portfolio. Bacio cheese is carefully crafted from premium ingredients for delicious taste, exceptional melt and reheat, superb stretch and guaranteed quality. Bacio began with years of searching for the consummate pizza cheese. Passionate about premium cheese perfection, our master cheesemaker discovered that a kiss of buffalo milk added to a traditional mozzarella recipe enhanced both the taste and the performance of our pizza cheese, from its rich and creamy flavor to its distinctive stretch and return to life after reheating. Bacio brand grew double-digit through the first 9 months of this year and continued great growth for this brand is expected in the future.

Turning to M&A. As many of you know, our pipeline for transactions remains healthy. Over the past 3 quarters, we have diligently acquired small and strategic tuck-in and specialty companies. Although none of the deals that we've done individually or in aggregate are material to our 2017 results, we are very excited by the geographic expansion that we've been able to do, and even more so by the product line and customer channel expansion that we've been able to accomplish.

Last week, we closed on Presto Foods, which is one of the largest specialty Italian and pizza foodservice distributors in the U.S. with approximately $140 million in net revenues. This acquisition will complement our already strong pizza and Italian business and expand our business in the Midwest.

During the third quarter, we acquired Ellenbee Leggett, our first broadliner in the state of Ohio. This broadliner will allow us to service customers where we have a geographic void. We are attracted to the growing specialty meat and seafood segment as evidenced by our 3 protein-based transactions in the second and third quarters, which will allow us to better penetrate this higher margin foodservice segment. We acquired 2 premium meat operations, T.F. Kinnealey and Larry Kline Meats and 1 premium seafood operator, and that's Bar Harbor Seafood.

In addition, we completed 2 acquisitions in our Vistar segment. We expect to leverage our combined assets to help us expand in markets where we are underpenetrated and to adjacent channels. I'm very excited about Vistar's future growth prospects. We welcome all the newly acquired distribution centers to our PFG family.

Going forward, we will continue to target potential M&A candidates that are complementary additions to our existing businesses, fill in white spaces, provide us with new channels and are accretive to earnings.

To summarize, all of our segments are fortifying their growth paths. Our strategic investments are delivering our expected results. Our M&A pipeline continues to remain robust. The priority for all of our associates is to grow share and grow profits. We are focusing on growth segments like independent restaurants, which will allow us to achieve our goals and objectives this year and beyond.

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

Operator: [Operator Instructions] Our first question comes from the line of Karen Short with Barclays.

Ryan Gilligan: It's actually Ryan Gilligan on for Karen. Thanks for all of the different color -- thanks for all the color on the different acquisitions. Can you just walk us through how they impact each of the segment's top line?

George Holm: Well...

Thomas Ondrof: Yes. We're not inclined to go into that level of detail. But I would sort of mention that the top line impact of the acquisitions is not overall, as we said, material to the results, either for the quarter or for the year. And in relation to the bottom line, the EBITDA -- adjusted EBITDA, we would be within our guidance with or without them.

Ryan Gilligan: Got it. That's helpful. And just switching gears to the -- to Vistar. Can you quantify the year-to-date impact on expenses from operating 2 facilities in New York? And how should we think about that going forward since you guys are close to cycling it?

George Holm: Yes. I don't have that information handy. I mean, it's not difficult information to get. We continue to improve there. We've got a ways to go, our productivity gets better. It's not a real expensive facility from the standpoint that we don't need a full component of G&A. A lot of the transactional expenses are handled out of our main New York facility. We're continuing to look for the right warehouse that we can put those 2 businesses together. And I think that, Michael, that's some numbers that you can get for him and give him later. But what I would like to stress is that we have taken that facility to where it does produce some profit, albeit not much, but it's no longer a drain on our profitability today.

Operator: Our next question comes from Zach Fadem with Wells Fargo.

Zachary Fadem: So based on the volume growth in the quarter, it looks like you accelerated your chain customer sales within the broadline business versus last quarter. First of all, is this true? And I presume there were some new customer wins here. But just -- can you refresh us a little bit on your strategy with the national chains going forward, particularly as you work to balance your volume growth with profitability?

George Holm: Yes. We had wins and losses both during that -- during the quarter. As far as our strategy with it, I think, like a lot of things, we're opportunistic, if it's right to us. It isn't what we spend the bulk of our time on. And we've been in kind of a unique situation of late, where we've had opportunities where we just couldn't do it. Either we didn't feel like we wanted to stretch the miles or we felt like we didn't want to use up a good bit more of our capacity to take on that business. So I can't say that it's a thrust for us. But one of the things that we do have helping us as difficult as kind of the restaurant world is for chains today and it's certainly difficult, we have some very fast-growing chains. And that has helped us a good bit to offset some of the declines. And that's in the Performance Foodservice segment. But still, our emphasis is the independent customer and it's our branded products that's what's going to drive our future right now.

Zachary Fadem: Okay. And can you also walk us through some of the moving parts at the gross margin line in the quarter? Particularly, can you speak about the mix impact of some of the new customer wins that came in as well as the recent M&A? And also with deflation subsiding, can you talk about any margin impact in the quarter? And how should we think about it going forward?

George Holm: Well, our -- we did have a growth in our margin. That really was driven by just a change in our mix of business. And it was a unique quarter in that our independent food service business didn't grow as fast as our total business did. And that was more about us having so many wins on the Vistar side. So that grew faster than our other businesses. Red Lobster, which I think that this probably the last quarter we have to talk about that, but they have very high case prices and they drove some growth for us in Customized business even though really, it was a very difficult quarter for the casual dining segment. And just those combinations actually is what gave us the margin growth. It's just -- still had good independent growth, had very good brand growth and the channels in which we are growing in Vistar tends to give us some growth in the margin there. As far as deflation goes, we saw that reduce all during the quarter. We've seen inflation so far this quarter. That's hard to see within our case cost because we have -- we do have a lot of moving pieces in that our dollar store business is a lower case cost than our typical Vistar customer. And then within Customized, the Red Lobster is a much higher case cost than our typical casual dining customer.

Operator: Our next question comes from Kelly Biana (sic) [ Kelly Bania ] with BMO Capital.

Kelly Bania: It's Kelly Bania. Just had a couple of questions about the independent segment. I guess first, can you remind me the 7% number that you provide with independents, is that an organic number? And I think you had started out the quarter a little stronger. So just curious how the quarter progressed, if there was any impact from Easter and just how much share you think you're taking there. Always like a difficult number to measure, I guess, but lots of questions on the independents there, but also I was just curious if you could add in there on Presto what their mix of independents is.

George Holm: Okay. As far as the 7% and how much that was aided by acquisitions, the specialty companies that we purchased, we didn't put any of that into our independent number. We're just looking at that separately. Then when you get to where we did have a contribution, Ellenbee Leggett would be the only one that has independent business that we purchased. And that was late in the third quarter and really had no material impact at all on our growth. That is -- it is a broadline company, but they haven't had historically any real thrust in the independent business. What were -- the reason that makes sense for us is that we have a fairly significant amount of independent business that's in their distribution area, which we'll be able to cut some miles and move it. But we have not moved any of that business as of yet. Presto will be a little different situation. Their business is about 40% independent business. So that's going to have an impact somewhat in this quarter, but then more so into next year.

Kelly Bania: And do you have any idea of how much share you think you're gaining in that segment? Or how you measure that?

George Holm: Yes. I'll comment on that, but you also asked about the cadence. And I think this has been a year where it's been very different going from a 53-week year to a 52. And the weeks have been off. Easter was quite different than it was last year. So 5 weeks into the fiscal third quarter, we were in the middle of the range more like 8% in our independent growth. In the month of February, it dropped off some. In early March, we actually had some great weeks. We had 2 record sales weeks in the month of March, which is unusual for us to have record weeks then. And then it kind of fizzled at the end of the quarter, and I think that's got something to do with Easter being different. And then April looks really very similar, almost identical to Q3. And the first week of May was extremely strong. Not to get too deep in the weeds with this, but it's just been difficult to kind of keep track of. I mean, last week, we had a record independent week again, and we hope to turn around with Mother's Day and have one this week. But early in the week yet, but we're not seeing quite the increases that we saw last week, which was just a tremendous week for us. So it's quite varied, but we're -- in the end, pretty consistent quarter-to-quarter. And then as far as taking market share, we have a tough time with that. It's hard for us to calculate that. I mean, with the case growth that we're getting, obviously, we're taking share and we're taking a good bit of share. But I do continue to feel that the independent restaurant is probably doing better than most people give them credit for. I think it's just a hard number to get to.

Kelly Bania: Great. And then if I could just ask one more about Vistar. You mentioned some kind of new business there, I think, with some theater customers. But how much of Vistar's growth was from new customer wins versus just growth with existing customers? Is there -- can you elaborate on that a little bit?

George Holm: Well, there was growth within existing customer with Regal, because we had the Regal business everywhere but the Southeast, and we're fortunate enough to get that. So that was a big help. Most of our growth that we get out of Vistar is new business. We tend to -- if we have the customer, we tend to, if not fully penetrated, be very close to that. But what's helped us is that kind of the legacy business for them is vending. And in our Vistar division, these micro markets and micro kitchens, which are fairly new phenomenon to that industry, have really helped the vend operator. It's new business for them. It's new business for us. And we're putting out growth in virtually every channel that we're in today. We're vending with something that hadn't grown for years.

Operator: Our next question comes from Edward Kelly with Crédit Suisse.

Edward Kelly: George, could you maybe just start off with a little bit of an assessment, I guess, of the current year and how things are playing out? And what I mean by that is obviously, you started off with some headwinds. I think it was probably -- it was a consensus view that your guidance seemed a little aggressive. Now things clearly are better. The guidance looks very achievable. So could you maybe just give us an assessment of how's the underlying business performing relative to what you initially thought? And then the headwinds that you experienced in the first half, are we really through all those? Are the risks behind you now there?

George Holm: Well, the risk is behind us but we're not through all of it. We still have some issues dealing with our dollar store business. We still need to improve that, which we feel confident that we will. It's taken us longer than what we expected. I would say the same thing for our Retail Central. We took that on. We really thought it was the right decision for us to do for the long term, but we just didn't expect it to be that long term. And we're still getting through that. I mean, we have missed couple of deadlines to get the manual facility in Memphis closed down. We'll do that later this month. But we're extremely pleased with the performance of the pick-and-pack facility that we automated and we want to do more of that. It's just one of those things there that took longer than we thought it would take. I would characterize the year as having more of a difficult time getting those 2 issues handled than what we thought took a lot of time and a lot of attention. I would say that the underlying business is performing better right now. I would not have expected to have quite as good a quarter as we had if you would have told me at the beginning that we would still be fighting some of those headwinds. But the other things have come in line and the Red Lobster came together just as we expected. But I would also say that if you would have told me that there would be this many closures of casual dining restaurants and some of the issues that we've dealt with there, I would also have been somewhat concerned about how our quarter would be. And I know there was a lot of concern about the way the year was coming together, but we sat down and went through it. And just didn't see the reason to get people really alarmed. We felt like we would have those things behind us. We would have a really good third and fourth quarter and be set for next year. And that's how I feel we are right now.

Edward Kelly: I know you're not going to give guidance for next year, but is there any reason for us to think that the outsized EBITDA growth that you get in the back half because of these comparisons now wouldn't continue into the first half of next year? Is there anything looming out there that we should be thinking about?

George Holm: No, not that we know of. We're not ready to give guidance just because we want to be really thoughtful about it, and make sure that we've looked at everything, that we've looked at the investments. Because we got other investments that we want to make not to the degree to which we did a couple of quarters ago. But I think once we get it to you, I think you'll see that we were thoughtful about it and that it is achievable for us.

Edward Kelly: Okay. And then just last thing for you, George, on hiring of sales associates. It's obviously been an area of strength for you. How are things looking from an activity standpoint there? How is that impacting your ability to grow cases as these new people are rolling in and coming off non-compete? Just thoughts around the momentum there would be helpful, I think.

George Holm: Yes. I don't see really any change. And we've continued to grow our cases at twice the rate that we've grown our sales force. I would say we tapped the brakes a little bit with that because we had to regroup around training. And sometimes you can get ahead of yourself, but certainly didn't affect our case growth. And I see the foreseeable future. We're going to be able to continue to grow our cases about twice what we grow our people as long as we can continue to find really good people and train them right, and they fit our culture and they like what we do, and then things just seem to come together.

Operator: Our next question comes from Karru Martinson with Jefferies.

Karru Martinson: Just wanted to get a little color on the M&A environment out there. Are you seeing more properties come to market? And how are we looking at multiples out there?

George Holm: Yes. We're seeing -- I would say more activity than we've seen since, really, we put these 2 companies together. We feel real good about the ones that we've done. They're not large, but they were all negotiated deals. We had plenty of time to do them, to know the people well before. They're the type of people that fit into our organization and they're going to add a lot in the future, even outside of their own company just because some of the product expertise that we brought in. We recently through -- went through one that we really wanted to get, but it was an auction process and we tend to struggle a little bit when we go through those. We're kind of methodical about how we do it and the time we get with the people. Multiples, I think, are high, but we tend to always think they're high. But one thing I'd like to say, too, is that the 2 times that we felt like we paid up are the 2 best acquisitions that we've done and they produced the best returns for us. So there is that element of you get what you pay for. So we're not really that concerned around where multiples are at as long as it's the right people, the right company, and that we're keeping the management. Those are the things that are more key to us than actually what we pay for.

Karru Martinson: Okay. In that same vein, I mean, are there certain skill sets or properties and geographies that you would price over others?

George Holm: Yes. Yes. I would say yes. But I would start out with that we're opportunistic. If it's going to fit us, we're going to do it as long as, like I say, the people are there and the culture matches. I mean, for us to go out and do something of significance in the broadline areas since we have so much white space, that would just be great. So that would be a priority. We really want to build our business in center of the plate. We think we've got 3 great companies to get that started with. We've got 7 embedded cutting facilities for meat in our own distribution centers, which I think that our acquisitions will help us improve their capabilities. And then we had a seafood one, before we did Bar Harbor and they will help us there. So those are real important to us. And then when you get to the Vistar part of our business, really, anything that fits our product strengths, we're not certainly afraid of adjacencies. That's been a lot of what's driven our growth. I mean, it sounds a little out there, but I would say anything within our product strengths there, we would do. And then with our Customized business, we're just not at a point where we think that, that's a good place to invest from an M&A standpoint.

Operator: Our next question comes from John Heinbockel with Guggenheim Securities.

John Heinbockel: When you think about the independent business, what has been the trend lately in drop size? And when you think about your share opportunity with existing customers, how big is that opportunity with the center of plate, right? And do you think you now have everywhere the capabilities to drive share in center of the plate like you think you should?

George Holm: Yes, we do. We feel good with center of the plate. We don't have a portion stake just-in-time offering everywhere. So there, we have some upside. And as far as from a drop size standpoint, I mean, right now we're fortunate in that our sales are growing. Our sales are growing faster than our number of customers are growing. Our sales are growing faster than our number of drops are growing. Our gross profit dollar per case is growing. So we right now have all of those things kind of going in our favor. I think the biggest thing we have is our sales growing twice as fast as our people are growing. So our individual salespeople continue to grow their income because of their commissioned people, and they're compensated based on performance. So it's -- if they're putting out those kind of growth rates, I think that bodes well. We have a lot of work to do around product areas, and that's where a lot of our upside is. We have several companies where we know that we don't have the SKU base that we need to really be able go in and be the dominant distributor in an account. So that's something that we have to work on. But today, not a lot of concerns about drop sizes and that type of thing.

John Heinbockel: And then when you look at Vistar, so just remind us, when you look at the channels, right, so your market share when you think about vending theater is very high. Retail and hospitality, not so much. But generally speaking, where are the shares today after Regal and Carmike in those channels? And are there any channels that you have not gotten into or are very, very tiny and you think there's an opportunity or is there nothing left there?

George Holm: Well, our shares are high and I have no reason to try to get to very precise numbers there, because I think they're hard to get, but we have really very high shares. Where our shares are not high, one is corrections. That is a pretty heavy thrust for us and that's around the commissaries, not the trayline business. And we think that we have a lot of headway there. The hospitality, that's an interesting one in that share probably doesn't matter that much. It's more about getting the property to invest and doing the pantry. So we're kind of developing the market, not so much trying to get share. Because I think we could get to 100% share, and we wouldn't be satisfied with the amount of business in that channel. Retail continues to do well for us in spite of that being challenging for our customer. I think what's happened is they just keep looking for other avenues to grow their revenue and to get as many dollars as they can from the traffic that they produce. So that continues to be a good one for us. And I mentioned, micro markets and micro kitchens. Within our world, that shows up as vend business because it's typically vend operators that do it, but growing very fast, just very, very fast, both of those channels.

John Heinbockel: And then just lastly, there was some thought and expectation, right, that the card reader aspect of the vending business would accelerate demand. Have we started to see that and that you still believe that?

George Holm: Well, it's definitely helped us. Once again, it's a hard thing to get at the numbers, but it's like a lot of things that are technology changes. I mean, people adopted never as fast as you think they're going to adopt it. And for the most part, we're dealing with the gatekeeper and that's the vend operator. And it's a lot of work for the vend operator to go out and change out all those machines. But it's something that's gaining momentum and we still have a lot of confidence in it. But also some people instead of going that route, they're going with the micro market or the micro kitchen route, which actually is for us a decision that we like. I mean, it's better for us.

Thomas Ondrof: I mean, I'd add that the cashless -- the benefit of cash has paled in comparison to the pantry and micro market rollouts, because that's really where the consumer has benefited and there's been a huge uptake there.

George Holm: Broader choice. It's a big thing.

Thomas Ondrof: Yes.

Operator: [Operator Instructions] Our next question comes from Vincent Sinisi with Morgan Stanley.

Vincent Sinisi: Just wanted to ask around, just kind of more theoretical, but when you make these different acquisitions, particularly the ones that kind of give you more product assortment, and of course, new customers, just kind of what lift do you see particularly when you get more of an assortment from your existing customers? And how does that kind of factor in to, kind of, the overall M&A landscape, benefits for newer as well as existing customers and maybe any thoughts on leverage, too?

George Holm: Well, we run the specialty businesses very separately, and we will continue to do that where we have had early success. And we think we'll continue to have success is their relationships with the customer being transferred to a relationship on the part of our broadline company that's there. And that's been good for us and that's good for our competitors when they do it, too. When they make those kind of acquisitions, I'm sure they get that kind of lift as well. Because it still is a pretty heavy relationship-driven business. When you get to the Vistar side, it's more about just continuing to have a broader offering. And it seems like once we get those products into our distribution centers and they may be geared for a different channel, but they tend to end up -- if it's not a specific item, it may be the vendor, but they tend to end up getting sold to other people. So when you get channels that are driven by certain product areas, and your product line just gets deeper and deeper and deeper and the assortment just gets wider, it just is a big help for us. I think we'll see more around penetration help with acquisitions like Ellenbee Leggett or Presto, which are just extremely new to us. And we haven't seen any kind of product cross-selling benefits from there yet.

Vincent Sinisi: Okay. And just any thoughts on leverage particularly as you're continuing to look at the M&A front?

George Holm: Yes. I think I'll turn that over to Tom.

Thomas Ondrof: That's right. But help me with what you mean by the leverage. The capital structure?

Vincent Sinisi: Yes. Yes. Exactly.

Thomas Ondrof: Yes. I mean, we -- where we are now, I guess, we're sitting right about 3.5x as we finish out. And we're comfortable in that range. We -- would we push it up for the right deal? Absolutely. But we're comfortable in the size of deals we're doing right now. Again, I don't think it's anything that's concerning us right now in terms of pushing above forward or anything like that.

George Holm: And what we'll always do is we'll see -- we make these acquisitions and it hits our balance sheet right away and it's a while before it hits the P&L. So we're always going to have that issue to deal with. And we don't get real active in these acquisitions to get some EBITDA benefits through synergies and that type of thing early on. I mean, these are people that own the business. They've run the business themselves for many years. And we're not going to turn their lives upside down. We're going to give them a period of time to learn our company, and then they come to us and they want to get some things done that help their bottom line. And that's more how we do it.

Vincent Sinisi: That makes sense. And maybe just a quick follow-up, if I can. Just on the Vistar segment, specifically. Obviously, as you said, a lot of opportunity in there, higher margin business. Do see that over time kind of having a potential to become increasingly more a percent of your overall business? And I know you said kind of still working through the dollar store, but feeling pretty good about how that's going so far.

George Holm: I think if you set aside M&A, okay? Because obviously that -- if we could -- we're fortunate enough to [indiscernible] that could affect where your earnings end up. But I would say in the next year, maybe 2, I would expect Vistar to probably exceed in EBITDA growth our company as whole. I would expect that.

Operator: With that, I will turn the call back over to Michael Neese for any additional or closing remarks.

Michael Neese: We would like to thank everyone for their participation in today's call. We look forward to presenting at the BMO conference next Thursday, and have a great day. Thank you.

Operator: Ladies and gentlemen, that does conclude today's conference call. You may now disconnect your line.