US Foods Reports Third Quarter Fiscal Year 2022 Earnings

Announces $500 Million Share Repurchase Program

US Foods Holding Corp. (NYSE: USFD), one of the largest foodservice distributors in the United States, today announced results for the third quarter fiscal year 2022.

Third Quarter Fiscal 2022 Highlights

  • Net income available to common shareholders improved to $100 million
  • Adjusted EBITDA increased 20.6% to $351 million
  • Diluted EPS was $0.43; Adjusted Diluted EPS was $0.60
  • Net sales increased 13.0% to $8.9 billion
  • Total case volume increased 0.7%; independent restaurant case volume increased 2.9%
  • Gross profit increased 17.6% to $1.5 billion

Nine Month Fiscal 2022 Highlights

  • Net income available to common shareholders was $145 million
  • Adjusted EBITDA increased 20.8% to $960 million
  • Diluted EPS was $0.64; Adjusted Diluted EPS was $1.59
  • Net sales increased 16.9% to $25.5 billion
  • Total case volume increased 1.3%; independent restaurant case volume increased 3.8%
  • Gross profit increased 18.3% to $4.0 billion

CEO Perspective

“US Foods delivered strong results in the third quarter as we continue to execute on the three pillars of our long-range plan, which we introduced earlier this year,” said Andrew Iacobucci, Interim CEO. “Our performance reflects sustained positive momentum, as we drove profitable market share in key customer types and effectively managed gross profit and operating expenses. Our nearly 21% adjusted EBITDA growth underscores our confidence in achieving the high end of our prior adjusted outlook for the year and reflects the progress we are making on our long-range plan. Finally, further highlighting confidence in our future, our Board has authorized a $500 million share repurchase program, which we see as highly accretive to shareholder value at our current share price.”

Third Quarter Fiscal 2022 Results

Net income available to common shareholders was $100 million, an improvement of $45 million compared to the prior year. Adjusted EBITDA was $351 million, an increase of $60 million or 20.6%, compared to the prior year. Adjusted EBITDA margin was 3.9%, an increase of 20 basis points compared to the prior year. Diluted EPS was $0.43; Adjusted Diluted EPS was $0.60.

Net sales were $8.9 billion for the quarter, an increase of 13.0% from the prior year, driven by food cost inflation of 12% compared to the same quarter a year ago. Total case volume increased 0.7% from the prior year driven by a 2.9% increase in independent restaurant case volume, a 19.7% increase in hospitality volume and a 2.7% increase in healthcare volume, offset by a 6.8% decrease in chain volume. Year-over-year total case growth for the third quarter was negatively impacted approximately 2.0% by the planned mid-2021 exit of the lower margin grocery retail business the Company temporarily added during the pandemic and the strategic exit of a small number of lower margin chain restaurant and education customers.

Gross profit was $1.5 billion, an increase of 17.6% from the prior year. Key drivers included optimized pricing, increased freight income from improved inbound logistics, cost of goods sold optimization and food cost inflation in multiple product categories. The Company’s LIFO method of inventory costing resulted in an expense of $6 million in 2022 compared to expense of $32 million in 2021 due to inflation in multiple product categories including grocery, disposables and pork. Gross profit as a percentage of Net sales was 16.4%. Adjusted Gross profit was $1.5 billion, a 15.2% increase from the prior year. Adjusted Gross profit as a percentage of Net sales was 16.4% and adjusted Gross profit per case continued at strong levels due to the aforementioned factors.

Total operating expenses of $1.2 billion increased by $140 million, or 12.7% from the prior year. Operating expenses increased primarily driven by higher distribution costs, reflecting higher labor costs as a result of increased turnover and higher than normal wage inflation. These increases were partially offset by cost savings initiatives outlined in the long-range plan including: (1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements. Operating expenses as a percent of Net sales were 14.0%. Adjusted Operating expenses for the quarter were $1.1 billion, an increase of $132 million or 13.4% from the prior year due to the aforementioned factors. Adjusted Operating expenses as a percent of Net sales were 12.6%.

Nine Month Fiscal 2022 Results

Net income available to common shareholders was $145 million, an improvement of $83 million compared to the prior year. Adjusted EBITDA was $960 million, an increase of $165 million or 20.8%, compared to the prior year. Adjusted EBITDA margin was 3.8%, an increase of 20 basis points compared to the prior year, reflecting the operating leverage from Adjusted Gross profit increasing greater than Adjusted Operating expenses. Diluted EPS was $0.64; Adjusted Diluted EPS was $1.59.

Net sales were $25.5 billion for the first nine months of 2022, an increase of 16.9% from the prior year, driven by food cost inflation of 15% compared to the first nine months a year ago. Total case volume increased 1.3% from the prior year driven by a 3.8% increase in independent restaurant volume, a 35.5% increase in hospitality volume and a 1.9% increase in healthcare volume, partially offset by a 6.2% decrease in chain volume. Year-over-year total case growth for the first nine months was negatively impacted by approximately 3.5% by the planned mid-2021 exit of the lower margin grocery retail business the Company temporarily added during the pandemic and the strategic exit of a small number of lower margin chain restaurant and education customers.

Gross profit was $4.0 billion, an increase of 18.3% from the prior year. Key drivers included an increase in total case volume, optimized pricing, increased freight income from improved inbound logistics, cost of goods sold optimization and food cost inflation in multiple product categories. The increase in Gross profit was partially offset by an unfavorable year-over-year LIFO adjustment. Gross profit as a percentage of Net sales was 15.8%. Adjusted Gross profit was $4.2 billion, a 17.3% increase from the prior year. Adjusted Gross profit as a percentage of Net sales was 16.4% and adjusted Gross profit per case was strong due to the aforementioned factors.

Total operating expenses of $3.6 billion increased $514 million, or 16.4% from the prior year. Operating expenses increased primarily due to greater volume and higher distribution costs, reflecting higher labor costs as a result of increased turnover and higher than normal wage inflation. These increases were partially offset by cost savings initiatives outlined in the long-range plan including: (1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements. Operating expenses as a percent of Net sales were 14.3%. Adjusted Operating expenses for the first nine months of 2022 were $3.2 billion, an increase of $450 million or 16.1% from the prior year due to the aforementioned factors. Adjusted Operating expenses as a percent of Net sales were 12.7%.

Cash Flow and Debt

Cash flow provided by operating activities for the first nine months of fiscal 2022 was $613 million, an increase of $93 million from the prior year. Cash capital expenditures for the first nine months of fiscal 2022 totaled $201 million, an increase of $28 million from the prior year period due to investments in information technology, new construction and expansion of distribution facilities and property and equipment for fleet replacement.

During the third quarter of fiscal 2022, the Company used cash-on-hand to make a $100 million voluntary prepayment on the 2021 Incremental Term Loan Facility. Subsequent to quarter-end, a $100 million voluntary prepayment was made on the 2019 Incremental Term Loan Facility in October 2022.

Net Debt at the end of the third quarter of fiscal 2022 was $4.6 billion. The ratio of Net Debt to Adjusted EBITDA was 3.7x at the end of the third quarter of fiscal 2022, compared to 4.6x at the end of fiscal 2021 and 4.8x at the end of the third quarter of fiscal 2021.

Share Repurchase Program

The Company's Board of Directors has approved a share repurchase program under which the Company is authorized to repurchase up to $500 million of its outstanding common stock. The size and timing of any repurchases will depend on a number of factors, including share price, general business and market conditions and other factors. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, including open market purchases, privately negotiated transactions, accelerated share repurchases and Rule 10b5-1 trading plans. The share repurchase program does not obligate the Company to acquire any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. The repurchase authorization does not have an expiration date.

Outlook for Fiscal Year 20221

The Company is updating its 2022 guidance to:

  • Adjusted EBITDA of $1.28-$1.30 billion
  • Adjusted Diluted EPS of $2.10-$2.20
  • Interest expense of $250-$255 million
  • Cash capital expenditures of $270-$280 million with fleet capital leases to be an additional ~$125 million
  • Net Debt to Adjusted EBITDA leverage of approximately 3.5x by end of fiscal year 2022

_______________________________

1 The Company is not providing a reconciliation of certain forward-looking non-GAAP financial measures, including Adjusted EBITDA and Adjusted Diluted EPS, because the Company is unable to predict with reasonable certainty the financial impact of certain significant items, including restructuring costs and asset impairment charges, share-based compensation expenses, non-cash impacts of LIFO reserve adjustments, losses on extinguishments of debt, business transformation costs, other gains and losses, business acquisition and integration related costs and diluted earnings per share. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance periods. For the same reasons, the Company is unable to address the significance of the unavailable information, which could be material to future results.

Conference Call and Webcast Information

US Foods will host a live webcast to discuss third quarter fiscal 2022 results on Thursday, November 10, 2022, at 9 a.m. CST. The call can also be accessed live over the phone by dialing (877) 344-2001; the conference passcode is 2528845. The presentation slides reviewed during the webcast will be available shortly before the webcast begins. The webcast, slides and a copy of this press release can be found in the Investor Relations section of our website at https://ir.usfoods.com.

About US Foods

With a promise to help its customers Make It, US Foods is one of America’s great food companies and a leading foodservice distributor, partnering with approximately 250,000 restaurants and foodservice operators to help their businesses succeed. With 70 broadline locations and more than 80 cash and carry stores, US Foods and its 28,000 associates provides its customers with a broad and innovative food offering and a comprehensive suite of e-commerce, technology and business solutions. US Foods is headquartered in Rosemont, Ill. Visit www.usfoods.com to learn more.

Forward-Looking Statements

Statements in this press release which are not historical in nature, including those under the heading “Share Repurchase Program” and “Outlook for Fiscal Year 2022” and about the anticipated size and timing of our share repurchases and the anticipated impact thereof on our financial performance and liquidity are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions (although not all forward-looking statements may contain such words) and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others: economic factors affecting consumer confidence and discretionary spending and reducing the consumption of food prepared away from home; cost inflation/deflation and volatile commodity costs; increases in food and fuel costs; competition; reliance on third party suppliers and interruption of product supply or increases in product costs; changes in our relationships with customers and group purchasing organizations; our ability to increase or maintain the highest margin portions of our business; achievement of expected benefits from cost savings initiatives; changes in consumer eating habits; cost and pricing structures; the extent and duration of the negative impact of the COVID-19 pandemic on us; environmental, health and safety and other governmental regulation, including actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, and required closures of non-essential businesses; impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets; product recalls and product liability claims; our reputation in the industry; indebtedness and restrictions under agreements governing our indebtedness; interest rate increases; the replacement of London Interbank Offered Rate with an alternative reference rate; labor relations and increased labor costs and continued access to qualified and diverse labor; risks associated with intellectual property, including potential infringement; disruption of existing technologies and implementation of new technologies; cybersecurity incidents and other technology disruptions; effective integration of acquired businesses; changes in tax laws and regulations and resolution of tax disputes; costs and risks associated with current and changing government laws and regulations; adverse judgments or settlements resulting from litigation; extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses; and management of retirement benefits and pension obligations.

For a detailed discussion of these risks, uncertainties and other factors that could cause our results to differ materially from those anticipated or expressed in any forward-looking statements, see the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022, which was filed with the Securities and Exchange Commission (“SEC”) on February 17, 2022. Additional risks and uncertainties are discussed from time to time in current, quarterly and annual reports filed by the Company with the SEC, which are available on the SEC’s website at www.sec.gov. Additionally, we operate in a highly competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time, and it is not possible to predict all risks nor identify all uncertainties. The forward-looking statements contained in this press release speak only as of the date of this press release and are based on information and estimates available to us at this time. We undertake no obligation to update or revise any forward-looking statements, except as may be required by law.

Non-GAAP Financial Measures

We report our financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, Adjusted Gross profit, Adjusted Operating expenses, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income, Adjusted Diluted EPS, Net Debt and Net Leverage Ratio are non-GAAP financial measures regarding our operational performance and liquidity. These non-GAAP financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.

We use Adjusted Gross profit and Adjusted Operating expenses as supplemental measures to GAAP measures to focus on period-over-period changes in our business and believe this information is helpful to investors. Adjusted Gross profit is Gross profit adjusted to remove the impact of the LIFO inventory reserve adjustments. Adjusted Operating expenses are Operating expenses adjusted to exclude amounts that we do not consider part of our core operating results when assessing our performance.

We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide meaningful supplemental information about our operating performance because they exclude amounts that we do not consider part of our core operating results when assessing our performance. EBITDA is Net income, plus Interest expense-net, Income tax provision, and Depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for (1) Restructuring costs and asset impairment charges; (2) Share-based compensation expense; (3) the non-cash impact of LIFO reserve adjustments; (4) loss on extinguishment of debt; (5) Business transformation costs; and (6) other gains, losses or costs as specified in the agreements governing our indebtedness. Adjusted EBITDA margin is Adjusted EBITDA divided by total net sales.

We use Net Debt and Net Leverage Ratio as supplemental measures to GAAP measures to review the liquidity of our operations. Net Debt is defined as total debt net of total Cash, cash equivalents and restricted cash remaining on the balance sheet as of the end of the most recent fiscal quarter. Net Leverage Ratio represents Net Debt divided by Trailing Twelve Months Adjusted EBITDA. We believe that Net Debt and Net Leverage Ratio are useful financial metrics to assess our ability to pursue business opportunities and investments. Net Debt is not a measure of our liquidity under GAAP and should not be considered as an alternative to Cash Flows Provided by Operations or Cash Flows Used in Financing Activities.

We believe that Adjusted Net income is a useful measure of operating performance for both management and investors because it excludes items that are not reflective of our core operating performance and provides an additional view of our operating performance including depreciation, interest expense, and Income taxes on a consistent basis from period to period. Adjusted Net income is Net income excluding such items as restructuring costs and asset impairment charges, Share-based compensation expense, the non-cash impacts of LIFO reserve adjustments, loss on extinguishment of debt, Business transformation costs and other items, and adjusted for the tax effect of the exclusions and discrete tax items. We believe that Adjusted Net income may be used by investors, analysts, and other interested parties to facilitate period-over-period comparisons and provides additional clarity as to how factors and trends impact our operating performance.

We use Adjusted Diluted Earnings per Share, which is calculated by adjusting the most directly comparable GAAP financial measure, Diluted Earnings per Share, by excluding the same items excluded in our calculation of Adjusted EBITDA to the extent that each such item was included in the applicable GAAP financial measure. We believe the presentation of Adjusted Diluted Earnings per Share is useful to investors because the measurement excludes amounts that we do not consider part of our core operating results when assessing our performance. We also believe that the presentation of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Diluted Earnings per Share is useful to investors because these metrics may be used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in our industry.

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance as well as our performance relative to our competitors as they assist in highlighting trends, (b) to set internal sales targets and spending budgets, (c) to measure operational profitability and the accuracy of forecasting, (d) to assess financial discipline over operational expenditures, and (e) as an important factor in determining variable compensation for management and employees. EBITDA and Adjusted EBITDA are also used in connection with certain covenants and restricted activities under the agreements governing our indebtedness. We also believe these and similar non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to evaluate companies in our industry.

We caution readers that our definitions of Adjusted Gross profit, Adjusted Operating expenses, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income, Adjusted Diluted EPS, Net Debt and Net Leverage Ratio may not be calculated in the same manner as similar measures used by other companies. Definitions and reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures are included in the schedules attached to this press release.

Source: US Foods

US FOODS HOLDING CORP.

Consolidated Balance Sheets

(Unaudited)

 

($ in millions)

 

October 1, 2022

 

January 1, 2022

 

 

 

 

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

366

 

 

$

148

 

Accounts receivable, less allowances of $32 and $33

 

 

1,853

 

 

 

1,469

 

Vendor receivables, less allowances of $10 and $7

 

 

193

 

 

 

145

 

Inventories—net

 

 

1,761

 

 

 

1,686

 

Prepaid expenses

 

 

106

 

 

 

120

 

Assets held for sale

 

 

8

 

 

 

8

 

Other current assets

 

 

11

 

 

 

18

 

Total current assets

 

 

4,298

 

 

 

3,594

 

Property and equipment—net

 

 

2,075

 

 

 

2,033

 

Goodwill

 

 

5,625

 

 

 

5,625

 

Other intangibles—net

 

 

797

 

 

 

830

 

Deferred tax assets

 

 

 

 

 

8

 

Other assets

 

 

447

 

 

 

431

 

Total assets

 

$

13,242

 

 

$

12,521

 

 

 

 

 

 

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Cash overdraft liability

 

$

219

 

 

$

183

 

Accounts payable

 

 

2,180

 

 

 

1,662

 

Accrued expenses and other current liabilities

 

 

671

 

 

 

610

 

Current portion of long-term debt

 

 

100

 

 

 

95

 

Total current liabilities

 

 

3,170

 

 

 

2,550

 

Long-term debt

 

 

4,837

 

 

 

4,916

 

Deferred tax liabilities

 

 

298

 

 

 

307

 

Other long-term liabilities

 

 

476

 

 

 

479

 

Total liabilities

 

 

8,781

 

 

 

8,252

 

Mezzanine equity:

 

 

 

 

Series A convertible preferred stock

 

 

534

 

 

 

534

 

Shareholders’ equity:

 

 

 

 

Common stock

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

3,017

 

 

 

2,970

 

Retained earnings

 

 

927

 

 

 

782

 

Accumulated other comprehensive loss

 

 

(19

)

 

 

(19

)

Total shareholders’ equity

 

 

3,927

 

 

 

3,735

 

Total liabilities, mezzanine equity and shareholders’ equity

 

$

13,242

 

 

$

12,521

 

US FOODS HOLDING CORP.

Consolidated Statements of Operations

(Unaudited)

 

 

13 Weeks Ended

 

39 Weeks Ended

($ in millions, except share and per share data)

October 1, 2022

 

October 2, 2021

 

October 1, 2022

 

October 2, 2021

Net sales

$

8,917

 

$

7,890

 

$

25,542

 

$

21,848

Cost of goods sold

 

7,457

 

 

6,649

 

 

21,504

 

 

18,435

Gross profit

 

1,460

 

 

1,241

 

 

4,038

 

 

3,413

Operating expenses:

 

 

 

 

 

 

 

Distribution, selling and administrative costs

 

1,246

 

 

1,099

 

 

3,640

 

 

3,115

Restructuring costs and asset impairment charges

 

 

 

7

 

 

 

 

11

Total operating expenses

 

1,246

 

 

1,106

 

 

3,640

 

 

3,126

Operating income

 

214

 

 

135

 

 

398

 

 

287

Other income—net

 

(5)

 

 

(6)

 

 

(16)

 

 

(19)

Interest expense—net

 

65

 

 

50

 

 

180

 

 

158

Loss on extinguishment of debt

 

 

 

 

 

 

 

23

Income before income taxes

 

154

 

 

91

 

 

234

 

 

125

Income tax provision

 

45

 

 

27

 

 

62

 

 

30

Net income

$

109

 

$

64

 

$

172

 

$

95

 

 

 

 

 

 

 

 

Net income

$

109

 

$

64

 

$

172

 

$

95

Series A convertible preferred stock dividends

 

(9)

 

 

(9)

 

 

(27)

 

 

(33)

Net income available to common shareholders

$

100

 

$

55

 

$

145

 

$

62

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

Basic

$

0.44

 

$

0.25

 

$

0.65

 

$

0.28

Diluted

$

0.43

 

$

0.24

 

$

0.64

 

$

0.28

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

Basic

 

224,584,298

 

 

222,313,747

 

 

223,840,992

 

 

221,624,799

Diluted

 

251,174,198

 

 

225,240,185

 

 

226,300,639

 

 

225,072,474

 

 

 

 

 

 

 

 

US FOODS HOLDING CORP.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

39 Weeks Ended

($ in millions)

 

October 1, 2022

 

October 2, 2021

Cash flows from operating activities:

 

 

 

 

Net income

 

$

172

 

 

$

95

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

273

 

 

 

286

 

Gain on disposal of property and equipment—net

 

 

(2

)

 

 

 

Intangible asset impairment charges

 

 

 

 

 

7

 

Loss on extinguishment of debt

 

 

 

 

 

23

 

Amortization of deferred financing costs

 

 

10

 

 

 

10

 

Deferred tax provision

 

 

(1

)

 

 

19

 

Share-based compensation expense

 

 

34

 

 

 

36

 

Provision (benefit) for doubtful accounts

 

 

3

 

 

 

(18

)

Changes in operating assets and liabilities:

 

 

 

 

Increase in receivables

 

 

(435

)

 

 

(530

)

Increase in inventories—net

 

 

(74

)

 

 

(292

)

Decrease in prepaid expenses and other assets

 

 

2

 

 

 

9

 

Increase in accounts payable and cash overdraft liability

 

 

574

 

 

 

780

 

Increase in accrued expenses and other liabilities

 

 

57

 

 

 

95

 

Net cash provided by operating activities

 

 

613

 

 

 

520

 

Cash flows from investing activities:

 

 

 

 

Proceeds from sales of divested assets

 

 

 

 

 

5

 

Proceeds from sales of property and equipment

 

 

4

 

 

 

2

 

Purchases of property and equipment

 

 

(201

)

 

 

(173

)

Net cash used in investing activities

 

 

(197

)

 

 

(166

)

Cash flows from financing activities:

 

 

 

 

Proceeds from debt borrowings

 

 

1,031

 

 

 

900

 

Principal payments on debt and financing leases

 

 

(1,215

)

 

 

(1,291

)

Dividends paid on Series A convertible preferred stock

 

 

(27

)

 

 

(18

)

Debt financing costs and fees

 

 

 

 

 

(18

)

Proceeds from employee stock purchase plan

 

 

17

 

 

 

16

 

Proceeds from exercise of stock options

 

 

12

 

 

 

13

 

Tax withholding payments for net share-settled equity awards

 

 

(16

)

 

 

(13

)

Net cash used in financing activities

 

 

(198

)

 

 

(411

)

Net increase (decrease) in cash, and cash equivalents and restricted cash

 

 

218

 

 

 

(57

)

Cash, cash equivalents and restricted cash—beginning of period

 

 

148

 

 

 

829

 

Cash, cash equivalents and restricted cash—end of period

 

$

366

 

 

$

772

 

Supplemental disclosures of cash flow information:

 

 

 

 

Interest paid—net of amounts capitalized

 

$

162

 

 

$

134

 

Income taxes paid—net

 

 

45

 

 

 

 

Property and equipment purchases included in accounts payable

 

 

25

 

 

 

32

 

Property and equipment transferred to assets held for sale

 

 

 

 

 

11

 

Leased assets obtained in exchange for financing lease liabilities

 

 

98

 

 

 

24

 

Leased assets obtained in exchange for operating lease liabilities

 

 

35

 

 

 

24

 

Cashless exercise of stock options

 

 

1

 

 

 

1

 

Paid-in-kind Series A convertible preferred stock dividends

 

 

 

 

 

15

 

US FOODS HOLDING CORP.

Non-GAAP Reconciliation

(Unaudited)

 

 

 

13 Weeks Ended

 

 

 

 

($ in millions, except share and per share data)

 

October 1, 2022

 

October 2, 2021

 

Change

 

%

Net income available to common shareholders

 

$

100

 

 

$

55

 

 

$

45

 

 

81.8

%

Series A Preferred Stock Dividends

 

 

(9

)

 

 

(9

)

 

 

 

 

%

Net income (GAAP)

 

 

109

 

 

 

64

 

 

 

45

 

 

70.3

%

Interest expense—net

 

 

65

 

 

 

50

 

 

 

15

 

 

30.0

%

Income tax provision

 

 

45

 

 

 

27

 

 

 

18

 

 

66.7

%

Depreciation expense

 

 

81

 

 

 

79

 

 

 

2

 

 

2.5

%

Amortization expense

 

 

11

 

 

 

12

 

 

 

(1

)

 

(8.3

)%

EBITDA (Non-GAAP)

 

 

311

 

 

 

232

 

 

 

79

 

 

34.1

%

Adjustments:

 

 

 

 

 

 

 

 

Restructuring costs and asset impairment charges (1)

 

 

 

 

 

7

 

 

 

(7

)

 

(100.0

)%

Share-based compensation expense (2)

 

 

13

 

 

 

13

 

 

 

 

 

%

LIFO reserve adjustment (3)

 

 

6

 

 

 

32

 

 

 

(26

)

 

(81.3

)%

Business transformation costs (4)

 

 

12

 

 

 

3

 

 

 

9

 

 

NM

 

Business acquisition and integration related costs and other (5)

 

 

9

 

 

 

4

 

 

 

5

 

 

125.0

%

Adjusted EBITDA (Non-GAAP)

 

 

351

 

 

 

291

 

 

 

60

 

 

20.6

%

Depreciation expense

 

 

(81

)

 

 

(79

)

 

 

(2

)

 

2.5

%

Interest expense—net

 

 

(65

)

 

 

(50

)

 

 

(15

)

 

30.0

%

Income tax provision, as adjusted (7)

 

 

(54

)

 

 

(43

)

 

 

(11

)

 

25.6

%

Adjusted Net Income (Non-GAAP)

 

$

151

 

 

$

119

 

 

$

32

 

 

26.9

%

 

 

 

 

 

 

 

 

 

Diluted EPS (GAAP)

 

$

0.43

 

 

$

0.24

 

 

$

0.19

 

 

79.2

%

Restructuring and asset impairment costs (1)

 

 

 

 

 

0.03

 

 

 

(0.03

)

 

(100.0

)%

Share-based compensation expense (2)

 

 

0.05

 

 

 

0.05

 

 

 

 

 

%

LIFO reserve adjustment (3)

 

 

0.02

 

 

 

0.13

 

 

 

(0.11

)

 

(84.6

)%

Business transformation costs (4)

 

 

0.05

 

 

 

0.01

 

 

 

0.04

 

 

NM

 

Business acquisition and integration related costs and other (5)

 

 

0.04

 

 

 

0.02

 

 

 

0.02

 

 

100.0

%

Income tax provision, as adjusted (6)

 

 

0.01

 

 

 

 

 

 

0.01

 

 

NM

 

Adjusted Diluted EPS (Non-GAAP) (7)

 

$

0.60

 

 

$

0.48

 

 

$

0.12

 

 

25.0

%

 

 

 

 

 

 

 

 

 

Weighted-average diluted shares outstanding (Non-GAAP) (8)

 

 

251,174,198

 

 

 

249,997,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (GAAP)

 

$

1,460

 

 

$

1,241

 

 

$

219

 

 

17.6

%

LIFO reserve change (3)

 

 

6

 

 

 

32

 

 

 

(26

)

 

(81.3

)%

Adjusted Gross profit (Non-GAAP)

 

$

1,466

 

 

$

1,273

 

 

$

193

 

 

15.2

%

 

 

 

 

 

 

 

 

 

Operating expenses (GAAP)

 

$

1,246

 

 

$

1,106

 

 

$

140

 

 

12.7

%

Depreciation expense

 

 

(81

)

 

 

(79

)

 

 

(2

)

 

2.5

%

Amortization expense

 

 

(11

)

 

 

(12

)

 

 

1

 

 

(8.3

)%

Restructuring costs and asset impairment charges (1)

 

 

 

 

 

(7

)

 

 

7

 

 

(100.0

)%

Share-based compensation expense (2)

 

 

(13

)

 

 

(13

)

 

 

 

 

%

Business transformation costs (4)

 

 

(12

)

 

 

(3

)

 

 

(9

)

 

NM

 

Business acquisition and integration related costs and other (5)

 

 

(9

)

 

 

(4

)

 

 

(5

)

 

125.0

%

Adjusted Operating expenses (Non-GAAP)

 

$

1,120

 

 

$

988

 

 

$

132

 

 

13.4

%

NM - Not Meaningful

(1)

Consists primarily of non-CEO severance and related costs, organizational realignment costs and asset impairment charges.

(2)

Share-based compensation expense for expected vesting of stock awards and employee stock purchase plan.

(3)

Represents the impact of LIFO reserve adjustments.

(4)

Consists primarily of costs related to significant process and systems redesign across multiple functions.

(5)

Includes: (i) aggregate acquisition and integration related costs of $6 million and $4 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively; and (ii) other gains, losses or costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(6)

Represents our income tax provision adjusted for the tax effect of pre-tax items excluded from Adjusted net income and the removal of applicable discrete tax items. Applicable discrete tax items include changes in tax laws or rates, changes related to prior year unrecognized tax benefits, discrete changes in valuation allowances, and excess tax benefits associated with share-based compensation. The tax effect of pre-tax items excluded from Adjusted net income is computed using a statutory tax rate after taking into account the impact of permanent differences and valuation allowances.

(7)

Adjusted Diluted EPS is calculated as Adjusted net income divided by weighted average diluted shares outstanding (Non-GAAP).

(8)

For purposes of the Adjusted Diluted EPS calculation (Non-GAAP), when the Company has net income (GAAP), weighted average diluted shares outstanding (Non-GAAP) is used and assumes conversion of the Series A convertible preferred stock, and, when the Company has net loss (GAAP) and assumed conversion of the Series A convertible preferred stock would be antidilutive, weighted-average diluted shares outstanding (GAAP) is used.

US FOODS HOLDING CORP.

Non-GAAP Reconciliation

(Unaudited)

 

 

 

39 Weeks Ended

 

 

 

 

($ in millions, except share and per share data)

 

October 1, 2022

 

October 2, 2021

 

Change

 

%

Net income available to common shareholders

 

$

145

 

 

$

62

 

 

$

83

 

 

133.9

%

Series A convertible preferred stock dividends

 

 

(27

)

 

 

(33

)

 

 

6

 

 

(18.2

)%

Net income (GAAP)

 

 

172

 

 

 

95

 

 

 

77

 

 

81.1

%

Interest expense—net

 

 

180

 

 

 

158

 

 

 

22

 

 

13.9

%

Income tax provision

 

 

62

 

 

 

30

 

 

 

32

 

 

106.7

%

Depreciation expense

 

 

240

 

 

 

242

 

 

 

(2

)

 

(0.8

)%

Amortization expense

 

 

33

 

 

 

44

 

 

 

(11

)

 

(25.0

)%

EBITDA (Non-GAAP)

 

 

687

 

 

 

569

 

 

 

118

 

 

20.7

%

Adjustments:

 

 

 

 

 

 

 

 

Restructuring and asset impairment costs(1)

 

 

 

 

 

11

 

 

 

(11

)

 

(100.0

)%

Share-based compensation expense (2)

 

 

34

 

 

 

36

 

 

 

(2

)

 

(5.6

)%

LIFO reserve change (3)

 

 

143

 

 

 

150

 

 

 

(7

)

 

(4.7

)%

Loss on extinguishment of debt (4)

 

 

 

 

 

23

 

 

 

(23

)

 

(100.0

)%

Business transformation costs (5)

 

 

41

 

 

 

17

 

 

 

24

 

 

141.2

%

COVID-19 bad debt benefit (6)

 

 

 

 

 

(15

)

 

 

15

 

 

(100.0

)%

COVID-19 other related expenses (7)

 

 

2

 

 

 

1

 

 

 

1

 

 

100.0

%

Business acquisition and integration related costs and other (8)

 

 

53

 

 

 

3

 

 

 

50

 

 

NM

 

Adjusted EBITDA (Non-GAAP)

 

 

960

 

 

 

795

 

 

 

165

 

 

20.8

%

Depreciation expense

 

 

(240

)

 

 

(242

)

 

 

2

 

 

(0.8

)%

Interest expense—net

 

 

(180

)

 

 

(158

)

 

 

(22

)

 

13.9

%

Income tax provision, as adjusted (9)

 

 

(140

)

 

 

(103

)

 

 

(37

)

 

35.9

%

Adjusted net income (Non-GAAP)

 

$

400

 

 

$

292

 

 

$

108

 

 

37.0

%

 

 

 

 

 

 

 

 

 

Diluted EPS (GAAP)

 

$

0.64

 

 

$

0.28

 

 

$

0.36

 

 

128.6

%

Restructuring and asset impairment costs(1)

 

 

 

 

 

0.04

 

 

 

(0.04

)

 

(100.0

)%

Share-based compensation expense (2)

 

 

0.14

 

 

 

0.14

 

 

 

 

 

%

LIFO reserve change (3)

 

 

0.57

 

 

 

0.60

 

 

 

(0.03

)

 

(5.0

)%

Loss on extinguishment of debt (4)

 

 

 

 

 

0.09

 

 

 

(0.09

)

 

(100.0

)%

Business transformation costs (5)

 

 

0.16

 

 

 

0.07

 

 

 

0.09

 

 

128.6

%

COVID-19 bad debt benefit (6)

 

 

 

 

 

(0.06

)

 

 

0.06

 

 

(100.0

)%

COVID-19 other related expenses (7)

 

 

0.01

 

 

 

 

 

 

0.01

 

 

NM

 

Business acquisition and integration related costs and other (8)

 

 

0.21

 

 

 

0.01

 

 

 

0.20

 

 

NM

 

Income tax impact of adjustments (9)

 

 

(0.14

)

 

 

 

 

 

(0.14

)

 

NM

 

Adjusted Diluted EPS (Non-GAAP) (10)

 

$

1.59

 

 

$

1.17

 

 

$

0.42

 

 

35.9

%

 

 

 

 

 

 

 

 

 

Weighted-average diluted shares outstanding (Non-GAAP) (11)

 

 

251,057,880

 

 

 

249,692,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (GAAP)

 

$

4,038

 

 

$

3,413

 

 

$

625

 

 

18.3

%

LIFO reserve change (3)

 

 

143

 

 

 

150

 

 

 

(7

)

 

(4.7

)%

Adjusted Gross profit (Non-GAAP)

 

$

4,181

 

 

$

3,563

 

 

$

618

 

 

17.3

%

 

 

 

 

 

 

 

 

 

Operating expenses (GAAP)

 

$

3,640

 

 

$

3,126

 

 

$

514

 

 

16.4

%

Depreciation expense

 

 

(240

)

 

 

(242

)

 

 

2

 

 

(0.8

)%

Amortization expense

 

 

(33

)

 

 

(44

)

 

 

11

 

 

(25.0

)%

Restructuring and asset impairment costs(1)

 

 

 

 

 

(11

)

 

 

11

 

 

(100.0

)%

Share-based compensation expense (2)

 

 

(34

)

 

 

(36

)

 

 

2

 

 

(5.6

)%

Business transformation costs (5)

 

 

(41

)

 

 

(17

)

 

 

(24

)

 

141.2

%

COVID-19 bad debt benefit (6)

 

 

 

 

 

15

 

 

 

(15

)

 

(100.0

)%

COVID-19 other related expenses (7)

 

 

(2

)

 

 

(1

)

 

 

(1

)

 

100.0

%

Business acquisition and integration related costs and other (8)

 

 

(53

)

 

 

(3

)

 

 

(50

)

 

NM

 

Adjusted Operating expenses (Non-GAAP)

 

$

3,237

 

 

$

2,787

 

 

$

450

 

 

16.1

%

NM - Not Meaningful

(1)

Consists primarily of non-CEO severance and related costs, organizational realignment costs and asset impairment charges.

(2)

Share-based compensation expense for expected vesting of stock awards and employee stock purchase plan.

(3)

Represents the impact of LIFO reserve adjustments.

(4)

Includes early redemption premium and the write-off of certain pre-existing debt issuance costs.

(5)

Consists primarily of costs related to significant process and systems redesign across multiple functions.

(6)

Includes the changes in the reserve for doubtful accounts expense reflecting the collection risk associated with our customer base as a result of the COVID-19 pandemic.

(7)

Includes COVID-19 related costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(8)

Includes: (i) aggregate acquisition and integration related costs of $18 million and $16 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively; (ii) contested proxy and related legal and consulting costs of $21 million for the 39 weeks ended October 1, 2022; (iii) CEO severance of $5 million for the 39 weeks ended October 1, 2022; (iv) a favorable legal settlement recovery of $13 million for the 39 weeks ended October 2, 2021, and (v) other gains, losses or costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(9)

Represents our income tax provision adjusted for the tax effect of pre-tax items excluded from Adjusted net income and the removal of applicable discrete tax items. Applicable discrete tax items include changes in tax laws or rates, changes related to prior year unrecognized tax benefits, discrete changes in valuation allowances, and excess tax benefits associated with share-based compensation. The tax effect of pre-tax items excluded from Adjusted net income is computed using a statutory tax rate after taking into account the impact of permanent differences and valuation allowances.

(10)

Adjusted Diluted EPS is calculated as Adjusted net income divided by weighted average diluted shares outstanding (Non-GAAP).

(11)

For purposes of the Adjusted Diluted EPS calculation (Non-GAAP), when the Company has net income (GAAP), weighted average diluted shares outstanding (Non-GAAP) is used and assumes conversion of the Series A convertible preferred stock, and, when the Company has net loss (GAAP) and assumed conversion of the Series A convertible preferred stock would be antidilutive, weighted-average diluted shares outstanding (GAAP) is used.

US FOODS HOLDING CORP.

Non-GAAP Reconciliation

Net Debt and Net Leverage Ratios

 

($ in millions, except ratios)

 

October 1, 2022

 

January 1, 2022

 

October 2, 2021

Total Debt (GAAP)

 

$

4,937

 

 

$

5,011

 

 

$

5,396

 

Cash, cash equivalents and restricted cash

 

 

(366

)

 

 

(148

)

 

 

(772

)

Net Debt (Non-GAAP)

 

$

4,571

 

 

$

4,863

 

 

$

4,624

 

Adjusted EBITDA (1)

 

$

1,222

 

 

$

1,057

 

 

$

969

 

Net Leverage Ratio (2)

 

 

3.7

 

 

 

4.6

 

 

 

4.8

 

(1)

Trailing Twelve Months (TTM) Adjusted EBITDA

(2)

Net Debt/TTM Adjusted EBITDA

 

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