What drove the increase in net sales in fiscal 2022?

Net sales increased $4,570 million, or 15.5%, to $34,057 million. The filing attributes $4,082 million, or 13.8%, of the increase to a higher net sales rate per case, which primarily reflects a year-over-year average inflation increase of 13.0% in multiple product categories. Total case volume contributed $488 million, or 1.7%.

How did profitability change in fiscal 2022?

Gross profit rose $837 million, or 18.0%, to $5,492 million, and gross margin improved to 16.1% from 15.8%. Operating income increased to $594 million from $424 million, and operating margin rose to 1.7% from 1.4%. Net income increased to $265 million from $164 million.

What is the company's debt position and how is it being managed?

Total debt was $4,854 million carrying value at December 31, 2022, down from $5,011 million a year earlier. Approximately 42% of debt bears floating interest rates. During fiscal 2022 the company made $300 million of voluntary prepayments of term loans, and management stated it prioritizes deleveraging while considering opportunities to repurchase or refinance debt as conditions permit.

Does the company pay dividends or repurchase shares?

The company has not paid dividends on common stock since its NYSE listing and has no plans to do so in the foreseeable future. In November 2022 the Board authorized a $500 million share repurchase program. In fiscal 2022 the company repurchased 396,069 shares for about $14 million, leaving approximately $486 million authorized at year end. Series A Preferred Stock dividends totaling $37 million were paid in cash in fiscal 2022.

What are the key risks highlighted for investors?

The filing highlights exposure to economic conditions affecting restaurant spending, low margins sensitive to cost inflation and deflation, intense competition with low switching costs for customers, and labor costs and availability, including 57 collective bargaining agreements covering 21% of associates. It also cites customer and GPO concentration, with GPO members representing about 21% of net sales, fuel price volatility, and leverage with $4.9 billion of indebtedness. KKR holds roughly 10% of common stock on an as-converted basis and has a board designation right.

USFD 10-K Filed Feb 17, 2023

01—Abstract

Summary

Summary of the 10-K filed February 17, 2023. Cited figures are marked; the original filing is the authoritative source.

US Foods Holding Corp. reported net sales of $34.06 billion^a for fiscal year 2022, up $4,570 million, or 15.5%, from $29,487 million in fiscal 2021, driven mainly by inflation (average inflation increase of 13.0% in multiple product categories) and total case volume growth of 1.7%.

Operating income rose to $594 million^b from $424 million, and net income increased to $265 million from $164 million. Adjusted EBITDA grew 23.9% to $1,310 million, or 3.8% of net sales, and free cash flow was $500 million, compared with $145 million in fiscal 2021. Gross profit increased $837 million, or 18.0%, to $5,492 million, with gross margin of 16.1% versus 15.8% a year earlier.

The company's balance sheet remains leveraged, with $4.9 billion^c of indebtedness outstanding as of December 31, 2022, and approximately 42% of total debt bearing floating rates. Management prioritized deleveraging, making $300 million of voluntary term loan prepayments in fiscal 2022 and reducing total debt from $5,011 million to $4,854 million. The company had approximately $2.0 billion in cash and available liquidity at year end, and the ABL Facility commitments were increased to $2.3 billion in December 2022.

Management expects fiscal 2023 cash capital expenditures of $290 million to $310 million^d. The filing also highlights ongoing risks, including exposure to labor costs (about 21% of associates covered by collective bargaining agreements), customer and GPO concentration (GPO members accounted for about 21% of net sales), fuel price volatility (fuel costs of $195 million in fiscal 2022), and the influence of KKR, which owns approximately 10% of common stock on an as-converted basis through Series A Preferred Stock. The company did not pay common dividends, but it repurchased 396,069 shares for about $14 million in fiscal 2022 under a $500 million authorization, and Dirk Locascio, CFO, and David Flitman, who became CEO in January 2023, were among its executives.

02—Key points

Key Highlights

Net sales rose $4,570 million, or 15.5%, to $34,057 million in fiscal 2022, primarily from inflation; total case volume increased 1.7% and independent restaurant case volume increased 4.3%.
Operating income increased to $594 million from $424 million, and net income increased to $265 million from $164 million.
Adjusted EBITDA increased $253 million, or 23.9%, to $1,310 million, or 3.8% of net sales, versus 3.6% in fiscal 2021.
Cash flow from operations was $765 million, and free cash flow was $500 million, compared with $145 million in fiscal 2021.
Total indebtedness was $4.9 billion at December 31, 2022, with approximately 42% at floating rates; the company voluntarily prepaid $300 million of term loans during fiscal 2022.
Liquidity was approximately $2.0 billion at year end, and the ABL Facility was expanded to $2.3 billion in December 2022.
Operating risks include labor cost pressures and 57 collective bargaining agreements covering 21% of associates, customer and GPO concentration, and fuel price volatility; KKR holds roughly 10% of common stock on an as-converted basis.

03—Questions

Frequently Asked Questions

What drove the increase in net sales in fiscal 2022?
Net sales increased $4,570 million, or 15.5%, to $34,057 million. The filing attributes $4,082 million, or 13.8%, of the increase to a higher net sales rate per case, which primarily reflects a year-over-year average inflation increase of 13.0% in multiple product categories. Total case volume contributed $488 million, or 1.7%.
How did profitability change in fiscal 2022?
Gross profit rose $837 million, or 18.0%, to $5,492 million, and gross margin improved to 16.1% from 15.8%. Operating income increased to $594 million from $424 million, and operating margin rose to 1.7% from 1.4%. Net income increased to $265 million from $164 million.
What is the company's debt position and how is it being managed?
Total debt was $4,854 million carrying value at December 31, 2022, down from $5,011 million a year earlier. Approximately 42% of debt bears floating interest rates. During fiscal 2022 the company made $300 million of voluntary prepayments of term loans, and management stated it prioritizes deleveraging while considering opportunities to repurchase or refinance debt as conditions permit.
Does the company pay dividends or repurchase shares?
The company has not paid dividends on common stock since its NYSE listing and has no plans to do so in the foreseeable future. In November 2022 the Board authorized a $500 million share repurchase program. In fiscal 2022 the company repurchased 396,069 shares for about $14 million, leaving approximately $486 million authorized at year end. Series A Preferred Stock dividends totaling $37 million were paid in cash in fiscal 2022.
What are the key risks highlighted for investors?
The filing highlights exposure to economic conditions affecting restaurant spending, low margins sensitive to cost inflation and deflation, intense competition with low switching costs for customers, and labor costs and availability, including 57 collective bargaining agreements covering 21% of associates. It also cites customer and GPO concentration, with GPO members representing about 21% of net sales, fuel price volatility, and leverage with $4.9 billion of indebtedness. KKR holds roughly 10% of common stock on an as-converted basis and has a board designation right.

04—Continue

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