US Foods Reports Fourth Quarter & Fiscal 2016 Earnings
Source US Foods Holding Corp.
ROSEMONT, Ill.--(BUSINESS WIRE)--US Foods Holding Corp. (NYSE: USFD), one of the largest foodservice distributors in the United States, today announced results for the fourth quarter and fiscal year 2016.
Fourth Quarter Highlights
- Total case volume decreased 1.9%, Independent Restaurant volume decreased 1.0%. Excluding the extra week1, total case volume increased 4.1% and Independent Restaurant volume increased 6.1%.
- Net sales decreased 4.3% to $5.7 billion. Excluding the extra week, Net sales increased 1.7%.
- Gross profit of $1.0 billion decreased 4.7%. Excluding the extra week, Gross profit increased 0.8%.
- Operating income increased $64 million to $116 million. Excluding the extra week, Operating income increased $75 million.
- Net income of $77 million increased $87 million from a loss of $10 million in the prior year. Excluding the extra week, Net income increased $93 million.
- Adjusted EBITDA increased 3.9% to $265 million. Excluding the extra week, Adjusted EBITDA increased 8.6%.
- Diluted EPS of $0.34; Adjusted Diluted EPS of $0.53.
Full-Year Fiscal 2016 Highlights
- Total case volume increased 1.4%, Independent Restaurant volume increased 4.7%. Excluding the extra week, total case volume increased 2.9% and Independent Restaurant volume increased 6.4%.
- Net sales decreased 0.9% to $22.9 billion. Excluding the extra week, Net sales increased 0.6%.
- Gross profit of $4.1 billion increased 1.0%. Excluding the extra week, Gross profit increased 2.5%.
- Operating income increased $224 million to $414 million. Excluding the extra week, Operating income increased $235 million.
- Net income of $210 million increased $42 million from $168 million in the prior year. Excluding the extra week, Net income increased $48 million.
- Adjusted EBITDA increased 11.1% to $972 million. Excluding the extra week, Adjusted EBITDA increased 12.5%.
- Diluted EPS of $1.03; Adjusted Diluted EPS of $1.57
1 References to the exclusion of the “extra week” refer to the 53rd week in the fiscal 2015 fourth quarter and is presented to provide comparable 52-week and 13-week period results on a year over year basis.
CEO Perspective
“Our Great Food. Made Easy. strategy drove our strong performance, resulting in increased case volumes and improved profitability,” said CEO Pietro Satriano. “In our first year as a public company, we grew volumes with Independent Restaurant customers well above market rates and expanded profit margins in a challenging, deflationary environment. We also expanded both our broadline and specialty distribution capabilities through the successful integration of five acquisitions in the last year. Our focus on driving higher volumes with our targeted customers, expanding Gross profit, and reducing our operating costs resulted in full year Adjusted EBITDA above the high end of our guidance range.”
Satriano added, “Looking ahead to 2017, we will remain disciplined in our efforts to drive improved volumes and profitability and expect to deliver full year results in line with our mid-term guidance.”
Fourth Quarter Results
Total case volume decreased 1.9% and Independent Restaurant case volume decreased 1.0% from prior year, impacted by an extra week of operations in 2015. Excluding the extra week, total case volume increased 4.1%, of which 2.0% was organic growth, and Independent Restaurant case volume increased 6.1%, of which 3.8% was organic growth. Strong growth with Independent Restaurants and the addition of new healthcare and hospitality business contributed to the fourth quarter volume growth.
Net sales of $5.7 billion represent a 4.3% decrease from prior year, impacted by an extra week of operations in 2015. Excluding the extra week, Net sales increased 1.7% driven by case volume growth offset by deflation in dairy and beef. Excluding the extra week, sales from acquisitions completed in the last 12 months boosted Net sales by approximately 1.7%.
Gross profit of $1.0 billion decreased by $51 million, or 4.7% from prior year, impacted by the extra week and the year over year change in the Last-in, first-out (LIFO) reserve. Excluding the extra week, Gross profit increased 0.8%. Gross profit as a percentage of Net sales was 18.1% compared to prior year of 18.2% and Adjusted Gross profit was 18.2% compared to prior year of 17.6%. The increase in Adjusted Gross profit as a percentage of Net sales primarily resulted from favorable customer mix and margin improvement initiatives, including strategic vendor management.
Operating expenses were $911 million, a decrease of 11.2% from prior year, driven by progress on initiatives to reduce Distribution, selling and administrative expenses, a multi-employer pension settlement charge taken in the prior year and one less week of Operating expenses in the current year. Excluding the extra week, Operating expenses decreased 6.9%. Adjusted Operating expenses for the quarter were $768 million, a 2.8% decrease from prior year. Excluding the extra week, Adjusted Operating expenses increased 3.5% from prior year.
Operating income was $116 million, a $64 million increase from prior year. Excluding the extra week, Operating income increased $75 million.
Net income for the quarter was $77 million, up from a loss of $10 million in the prior year. Excluding the extra week, Net income increased $93 million. Adjusted EBITDA of $265 million increased $10 million, or 3.9% compared to prior year. Excluding the extra week, Adjusted EBITDA increased 8.6%, driven by volume growth and the Adjusted Gross profit and Adjusted Operating expense factors discussed above. Diluted EPS was $0.34 and Adjusted Diluted EPS was $0.53 for the quarter.
Fiscal Year 2016 Results
For the fiscal year, total case volume increased 1.4% and Independent Restaurant case volume increased 4.7% from prior year. Excluding the extra week, total case volume increased 2.9%, of which 1.3% was organic growth, and Independent Restaurant case volume increased 6.4%, of which 4.5% was organic growth. Case volumes were affected by strong Independent Restaurant volume growth and customer wins in the healthcare and hospitality arenas, partially offset by the planned exits from certain national chain business during the first three quarters of the fiscal year.
Net sales of $22.9 billion decreased 0.9% from prior year, impacted by an extra week of operations in 2015. Excluding the extra week, Net sales increased 0.6% driven by case volume growth, partially offset by the planned exits from certain national chain accounts, deflation in dairy and beef, and product mix changes driven by the acquisition of Freshway, a distributor of produce products that typically have a lower average selling price. Excluding the extra week, sales from acquisitions completed in the last 12 months boosted Net sales by approximately 1.3%.
Gross profit of $4.1 billion increased $40 million or 1.0% from prior year, driven by higher case volumes, favorable customer mix, and positive impacts from merchandising initiatives, which were partially offset by year over year LIFO reserve changes. Excluding the extra week, Gross profit increased 2.5%. Gross profit as a percentage of Net sales, was 17.7% compared to prior year of 17.4% and Adjusted Gross profit was 17.6% compared to prior year of 17.0%. The increase in Adjusted Gross profit as a percentage of Net sales primarily resulted from favorable customer mix and other margin improvement initiatives.
Operating expenses for the fiscal year were $3.6 billion, a decrease of 4.8% from prior year, driven by progress on company initiatives to reduce Distribution, selling and administrative expenses, favorable fuel costs and one less week of Operating expenses in the current year. These gains were partially offset by the payment of a consulting and management agreement termination fee and higher Depreciation and amortization expenses. Excluding the extra week, Operating expenses decreased 3.6%. Adjusted Operating expenses were $3.1 billion, flat to prior year. Excluding the extra week, Adjusted Operating expenses increased 1.6% from prior year.
Operating income was $414 million, a $224 million increase from the prior year. Excluding the extra week, Operating income increased by $235 million.
Net income for the fiscal year was $210 million, up from $168 million in the prior year. Excluding the extra week, Net income increased $48 million. Adjusted EBITDA of $972 million increased $97 million, or 11.1% compared to prior year. Excluding the extra week, Adjusted EBITDA increased 12.5%, driven by the Adjusted Gross profit and Adjusted Operating expense factors discussed above. Diluted EPS was $1.03 and Adjusted Diluted EPS was $1.57 for the fiscal year, up from Diluted EPS of $0.98 and Adjusted Diluted EPS of $0.90.
Cash Flow and Capital Transactions
Cash flow from operations for fiscal 2016 was $556 million. Excluding the cash inflow from the Sysco termination fee in 2015, Cash flow from operations for the fiscal year improved $289 million, driven by improvements in Gross profit and Operating expenses. Free cash flow was $392 million. Cash capital expenditures for fiscal 2016 totaled $164 million, a decrease of $23 million from prior year.
Net Debt at the end of the fiscal year was $3.7 billion, a decrease of $558 million versus the comparable prior year period. Net Debt to Adjusted EBITDA was 3.8x at year end, down from 4.8x in the prior year.
Outlook for Fiscal 2017
For fiscal 2017 the company expects total case volume growth of 2-4%, Net sales growth of 1-3% and Adjusted EBITDA growth of 7-10%. We expect first quarter Adjusted EBITDA to be approximately 2% below the full year range, driven by weather, holiday timing and other factors. Adjusted Diluted EPS for fiscal 2017 is expected to be between $1.26 and $1.40.
The company expects fiscal 2017 Interest expense to be approximately $180-$190 million. Fiscal 2017 cash capital expenditures are expected to be approximately $230-$250 million, and fleet capital leases are expected to be approximately $100 million. Depreciation and amortization expense for fiscal 2017 is expected to be approximately $370-$380 million. The company’s effective tax rate for fiscal 2017 is estimated to be approximately 39% while cash taxes are expected to be approximately $25-$35 million.
