01—Abstract
Summary
Summary of the 10-K filed February 16, 2021. Cited figures are marked; the original filing is the authoritative source.
US Foods Holding Corp. reported a difficult fiscal year 2020, a 53-week period ended January 2, 2021, in which the COVID-19 pandemic sharply reduced demand from restaurant, hospitality and education customers.
Net sales fell $3,054 milliona, or 11.8%, to $22,885 million, and total case volume decreased 11.0%. The company posted an operating loss of $77 million, compared with operating income of $699 million in fiscal 2019, and a net loss of $226 million, or $(1.15) per share after $28 million of preferred dividends. Adjusted EBITDA declined $546 million, or 45.7%, to $648 million, with the margin falling to 2.8% of net sales from 4.6%.
The company made two significant acquisitions during the period: the Food Group, completed in September 2019 for $1.8 billionb, and Smart Foodservice, completed in April 2020 for $972 million. Management states that it is prioritizing deleveraging. Total indebtedness was $5,748 million as of January 2, 2021, and roughly 57% of debt bore floating rates.
Two rating agencies downgraded the company's credit ratings in May and September 2020. To bolster liquidity, the company issued $1.0 billionc of 6.25% senior secured notes, sold $500 million of Series A convertible preferred stock to KKR, and expanded its ABL facility to $1,990 million. Cash rose to $828 million at year-end.
Management expects sufficient liquidity to fund operations through 2022 even if case volumes stay at current levels, though it cautions that this is not assured. Cash flow from operations was $413 milliond, down from $760 million, and free cash flow was $224 million, compared with $502 million. Management expects fiscal 2021 capital expenditures of $290 million to $305 million.
The company does not pay common dividends. Management states that it does not expect a full recovery until widespread vaccination of the American public, and that case volumes will recover only gradually.
02—Key points
Key Highlights
- Net sales fell 11.8% to $22,885 million, driven by an 11.0% decline in total case volume tied to COVID-19 disruption to restaurant, hospitality and education customers.
- The company swung to an operating loss of $77 million from operating income of $699 million in fiscal 2019, and reported a net loss of $226 million.
- Adjusted EBITDA fell 45.7% to $648 million, and the margin declined to 2.8% from 4.6%.
- Acquisitions of the Food Group ($1.8 billion, September 2019) and Smart Foodservice ($972 million, April 2020) expanded the West and Northwest footprint, and the company now prioritizes deleveraging.
- Total indebtedness stood at $5,748 million, with about 57% at floating rates. Two rating agencies downgraded the company's credit ratings in 2020.
- Liquidity was bolstered through a $1.0 billion secured notes issuance, a $500 million KKR preferred stock investment, and an expanded ABL facility, leaving $828 million of cash at year-end. Management expects liquidity to last through 2022.
- Cash flow from operations fell to $413 million and free cash flow to $224 million, versus $760 million and $502 million a year earlier.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2021, US Foods Holding lost $0.01.
- Revenue$22.89B100.0%
- Cost of revenue−$19.17B83.7%
- Gross profit$3.72B16.3%
- Operating costs−$3.80B16.6%
- Operating income−$77.0M0.3%
- Interest, other & tax−$149.0M0.7%
- Net income−$226.0M1.0%
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 16, 2021Financial Statements
| Revenue | $22.89B |
| Cost of Revenue | $19.17B |
| Gross Profit | $3.72B |
| SG&A Expenses | $3.76B |
| Operating Expenses | $3.80B |
| Operating Income | -$77.00M |
| Interest Expense | $238.00M |
| Net Income | -$226.00M |
| EPS (Basic) | $-1.15 |
| EPS (Diluted) | $-1.15 |
| Shares Outstanding (Basic) | 220.00M |
| Shares Outstanding (Diluted) | 220.00M |
05—Questions
Frequently Asked Questions
How much did US Foods' sales and profitability decline in fiscal 2020?
Net sales fell $3,054 million, or 11.8%, to $22,885 million. The company recorded an operating loss of $77 million and a net loss of $226 million, versus operating income of $699 million and net income of $385 million in fiscal 2019. Adjusted EBITDA fell 45.7% to $648 million.
What drove the decline in results?
The filing attributes the decline primarily to the negative impact of COVID-19 on total case volume, which fell 11.0% for the 53 weeks ended January 2, 2021. Restaurant, hospitality and education customers were most affected. Gross profit also fell to 16.3% of net sales from 17.7%, due to higher logistics costs and COVID-19-related product donations and inventory adjustments.
How is the company managing its liquidity and debt?
Management issued $1.0 billion of 6.25% senior secured notes and $500 million of Series A convertible preferred stock to KKR, and expanded the ABL facility to $1,990 million. It also terminated the ABS facility and, in February 2021, issued $900 million of 4.75% senior notes due 2029 to refinance 2024 notes and repay the 2020 incremental term loan. Management believes liquidity will fund operations through 2022 even if case volumes remain at current levels.
Does US Foods pay dividends, and what are the prospects for the common stock?
The company has not paid common dividends since its stock began trading on the NYSE, and it has no plans to pay them in the foreseeable future. The filing notes that Series A preferred dividends were paid in kind, totaling $28 million for the year.
What does management expect for the recovery and for 2021 capital spending?
Management does not expect a full recovery until widespread vaccination of the American public and until consumers resume eating out, traveling and attending events on a regular basis. It expects fiscal 2021 cash capital expenditures of $290 million to $305 million, excluding approximately $35 million to $45 million under fleet financing leases.
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