01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. Cited figures are marked; the original filing is the authoritative source.
US Foods Holding Corp. (USFD) reported fiscal 2016 net sales of $22.92 billiona, down $208 million, or 0.9%, from $23.13 billion in fiscal 2015, which included a 53rd week.
Excluding the extra week, net sales rose $141 millionb, or 0.6%, driven by a 2.9% increase in case volume partly offset by a 2.3% decline in the rate per case from deflation and product mix. Net income increased to $210 million from $168 million, and operating income rose to $414 million from $190 million. Fiscal 2015 had also included $288 million of net acquisition termination fees from the terminated Sysco merger, so year-over-year comparisons are affected by that item.
Adjusted EBITDA rose to $972 millionc from $875 million, and the company reported free cash flow of $392 million. The balance sheet improved meaningfully during the year. The company completed its IPO in June 2016, with net proceeds of $1,114 million used to repay senior notes, and refinanced its term loan and senior notes.
Total debt fell to $3,782 milliond at December 31, 2016, from $4,745 million a year earlier, and shareholders' equity rose to $2,538 million. The company remains highly leveraged, with $2.9 billion of floating-rate debt, and its Sponsors, CD&R and KKR, each hold approximately 28.34% of common stock after a January 2017 secondary offering, giving them control as a controlled company under NYSE rules.
Management expects positive industry growth in 2017 and a continuation of deflation, and it plans capital additions of $330 million to $350 million. Key risks include thin margins, competition, reliance on independent restaurant customers, labor relations, multiemployer pension exposure, and the Sponsors' controlling influence.
02—Key points
Key Highlights
- Net sales of $22.92 billion in fiscal 2016, down 0.9% from $23.13 billion; excluding the 53rd week in 2015, net sales rose 0.6%.
- Case volume grew 1.4% (2.9% excluding the extra week), with independent restaurant case volume up 4.7%.
- Operating income rose to $414 million from $190 million, and net income rose to $210 million from $168 million.
- Adjusted EBITDA increased to $972 million from $875 million, or 4.2% of net sales versus 3.8% in 2015.
- Total debt fell to $3,782 million from $4,745 million, following the June 2016 IPO and debt refinancing.
- Fiscal 2015 included $288 million of net acquisition termination fees from the terminated Sysco merger, which affects year-over-year comparisons.
- Sponsors CD&R and KKR each hold approximately 28.34% of common stock, and the company is a controlled company under NYSE rules.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, US Foods Holding kept $0.01.
- Revenue$23.13B100.0%
- Cost of revenue−$19.07B82.5%
- Gross profit$4.05B17.5%
- Operating costs−$3.63B15.7%
- Operating income$419.0M1.8%
- Interest, other & tax−$209.0M0.9%
- Net income$210.0M0.9%
Where FY2016 revenue went
$23.13B- Cost of revenue: $19.11B, 83% of revenue
- SG&A: $3.58B, 15% of revenue
- Net income: $210.0M, 0.9% of revenue
- Interest, other & tax: $209.0M, 0.9% of revenue
Kept 0.9% as net incomeNet income $210.0M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 28, 2017Financial Statements
| Revenue | $23.13B |
| Cost of Revenue | $19.11B |
| Gross Profit | $4.05B |
| SG&A Expenses | $3.58B |
| Operating Expenses | $3.63B |
| Operating Income | $419.00M |
| Interest Expense | $229.00M |
| Net Income | $210.00M |
| EPS (Basic) | $1.05 |
| EPS (Diluted) | $1.03 |
| Shares Outstanding (Basic) | 200.13M |
| Shares Outstanding (Diluted) | 204.02M |
05—Questions
Frequently Asked Questions
How did US Foods perform financially in fiscal 2016?
Net sales were $22.92 billion, down $208 million or 0.9% from 2015, which included a 53rd week. Gross profit rose $40 million to $4.05 billion, and operating income increased to $414 million from $190 million. Net income was $210 million, compared with $168 million in 2015.
What drove the change in sales, and what is the pricing environment?
Excluding the extra week, net sales rose $141 million. Case volume growth of 2.9% was offset by a 2.3% decline in the rate per case, which the company attributed to ongoing deflation and product mix changes. Management expects deflation to continue into 2017.
How did the company's debt and capital structure change?
The June 2016 IPO raised net proceeds of about $1,114 million, which were used to redeem senior notes and support refinancing of the term loan and senior notes. Total debt declined to $3,782 million, and shareholders' equity increased to $2,538 million. About $2.9 billion of the debt bears floating rates, so interest rate increases would raise costs.
Does the company pay dividends, and who controls it?
The company has no current plans to pay regular dividends; its only cash distribution was a $666.3 million one-time special distribution in January 2016. Sponsors CD&R and KKR each own about 28.34% of common stock after a January 2017 secondary offering, and together they control a majority of voting power, which makes the company a controlled company under NYSE rules.
What are the key risks highlighted in the filing?
Key risks include low margins with exposure to cost inflation and deflation, intense competition, substantial debt and covenant restrictions, dependence on GPO relationships and independent restaurant customers, labor relations and union contracts, potential multiemployer pension withdrawal liabilities, and the Sponsors' ability to control corporate decisions.
06—Continue