ROSEMONT, Ill.--(BUSINESS WIRE)--US Foods Holding Corp., one of the largest foodservice distributors in the United States, today announced results for the fourth quarter and fiscal year 2017.
Fourth Quarter 2017 Highlights
- Total case volume increased 1.9%; independent restaurant case volume increased 7.1%
- Net sales increased 5.6% to $6.0 billion
- Gross profit of $1.1 billion increased 4.6%
- Operating income increased $66 million to $182 million
- Net income of $256 million increased $179 million
- Adjusted EBITDA increased 9.4% to $290 million
- Diluted EPS of $1.15; Adjusted Diluted EPS of $0.44
Fiscal Year 2017 Highlights
- Total case volume increased 2.9%, independent restaurant case volume increased 5.2%
- Net sales increased 5.4% to $24.1 billion
- Gross profit of $4.2 billion increased 4.1%
- Operating income increased $160 million to $574 million
- Net income of $444 million increased $234 million
- Adjusted EBITDA increased 8.8% to $1.1 billion
- Diluted EPS of $1.97; Adjusted Diluted EPS of $1.38
CEO Perspective
“We had a strong year and delivered on our commitments to expand Gross profit dollars and grow Adjusted EBITDA,” said Chairman and CEO Pietro Satriano. “Through the continued execution of our Great Food. Made Easy. strategy, we increased sales with our targeted customers, including accelerating quarterly volume growth with Independent Restaurants. In 2018, we will continue to leverage our innovative products, industry-leading technology and value-added services to drive profitable growth.”
Fourth Quarter 2017 Results
Total case volume increased 1.9% from the prior year, of which 0.9% was organic growth, and independent restaurant case volume increased 7.1%, of which 5.2% was organic growth. The increase in total case volume was driven by strong growth with targeted independent restaurant, healthcare and hospitality customers, partially offset by the planned exit of select national chain customers.
Net sales of $6.0 billion increased 5.6% from the prior year, driven by total case volume growth, product mix changes, and year-over-year inflation mainly in produce, beef, dairy and grocery categories. Sales from acquisitions completed in fiscal 2017 increased Net sales by approximately 1.7%.
Gross profit of $1.1 billion increased $47 million or 4.6% from the prior year, driven by higher case volumes and margin expansion initiatives, partially offset by higher inbound freight costs related to increases in freight market pricing. Gross profit as a percentage of Net sales was 17.9%. Adjusted Gross profit was $1.1 billion, a 3.9% increase from prior year, driven by higher case volumes and margin expansion initiatives. Adjusted Gross profit as a percentage of Net sales was 17.9%.
Operating expenses were $892 million, a decrease of 2.1% from the prior year. Consistent with the third quarter of fiscal 2017, operating expenses benefitted from lower restructuring costs, lower depreciation and amortization expense due to the full amortization of an intangible asset, and ongoing efforts to reduce operating expenses. These benefits were partially offset by incremental expenses related to higher case volumes and wage costs. Adjusted Operating expenses for the quarter were $784 million, a 2.1% increase from the prior year, primarily driven by higher case volumes.
Operating income was $182 million, a $66 million increase from the prior year.
Net income for the quarter was $256 million, up $179 million from $77 million in the prior year, as a result of the volume, Gross profit and Operating expense factors discussed above as well as benefits from recent U.S. federal income tax legislation. The recent passage of U.S. tax reform legislation resulted in an overall net tax benefit of $118 million in the quarter, which is inclusive of a $173 million non-cash benefit resulting from a favorable adjustment to our deferred income tax liability due to tax reform legislation. Adjusted EBITDA of $290 million increased $25 million, or 9.4% compared to prior year. Diluted EPS was $1.15 and Adjusted Diluted EPS was $0.44.
Fiscal Year 2017 Results
For the fiscal year, total case volume increased 2.9%, of which 1.7% was organic growth, and independent restaurant case volume increased 5.2%, of which 3.7% was organic growth. The increase in total case volume reflects strong growth with independent restaurant, healthcare and hospitality customers.
Net sales of $24.1 billion increased 5.4% from the prior year, primarily driven by higher case volumes, product mix changes and year-over-year inflation in several center of the plate categories as well as produce and grocery. Sales from acquisitions completed in fiscal 2017 increased Net sales by approximately 1.6%.
Gross profit of $4.2 billion increased $165 million or 4.1% from the prior year, driven by higher case volumes, favorable customer mix, and margin expansion initiatives, which were partially offset by the adverse year-over-year LIFO reserve changes. Gross profit as a percentage of Net sales was 17.5%. Adjusted Gross profit was $4.2 billion, a 4.9% increase from the prior year, driven by higher case volumes and margin expansion initiatives. Adjusted Gross profit as a percentage of net sales was 17.5%.
Operating expenses were $3.6 billion, an increase of 0.1% from the prior year. Operating expenses for the year benefitted from lower restructuring costs, lower depreciation and amortization expense due to the full amortization of an intangible asset and ongoing efforts to reduce operating expenses. These benefits were partially offset by incremental expenses related to higher case volumes and wage costs. Adjusted Operating expenses for the year were $3.2 billion, a 3.7% increase from the prior year, primarily driven by higher case volumes.
Operating income was $574 million, a $160 million increase from the prior year.
Net income for the year was $444 million, up $234 million from $210 million in the prior year, driven by improved business results, lower interest expense and the volume, Gross profit, Operating expense and deferred income tax factors discussed above. Adjusted EBITDA of $1.1 billion increased $86 million, or 8.8% compared to the prior year. Diluted EPS was $1.97 and Adjusted Diluted EPS was $1.38.
Cash Flow and Capital Transactions
Net cash provided by operating activities for the year was $748 million, an increase of $192 million from the prior year related to the increase in Operating income which was driven by improved business performance and reduced Interest expense. Cash capital expenditures for the year totaled $221 million, an increase of $57 million from prior year, due to the timing of payments made for assets acquired late in the fourth quarter of 2016 and increased capital spending, as planned.
In December the company purchased and retired 10 million shares of common stock from its former private equity sponsors as part of the final secondary offering of the company’s common stock. The $280 million repurchase price was funded primarily with borrowings under the company’s secured asset based revolving credit facility.
Net Debt at the end of the year was $3.6 billion, a decrease of $13 million versus the end of the prior year. The ratio of Net Debt to Adjusted EBITDA was 3.4x at the end of the year, down from 3.8x at the end of the prior year.
Outlook for Fiscal Year 2018
For fiscal year 2018 the company expects total case volume growth of 1-2%, Net sales growth of 3-4%, Adjusted EBITDA growth of 6-8% and Adjusted Diluted EPS of $2.00-$2.10. For Q1 fiscal 2018, we expect year-over-year Adjusted EBITDA growth to be approximately 100 basis points below the low end of the range, primarily due to poor weather conditions and timing of the New Year’s holiday. Adjusted EBITDA growth is expected to sequentially accelerate through the fiscal year. The company is also raising its mid-term target for Adjusted EBITDA growth from 7-10% to 8-10%.
The company expects fiscal year 2018 Interest expense to be approximately $175-$180 million. Cash capital expenditures during fiscal 2018 are expected to be approximately $250-$260 million, and fleet capital leases are expected to be approximately $80 million. Depreciation and amortization expenses for fiscal year 2018 are expected to be approximately $340-$350 million. The company’s adjusted effective tax rate for fiscal year 2018 is estimated to be approximately 25-26%.
Conference Call and Webcast Information
US Foods fourth quarter and fiscal year 2017 earnings call will be broadcast live via the internet on February 15, 2018 at 9:00 a.m. CST. The call can also be accessed live over the phone by dialing (844) 292-0976; the conference ID number is 73186016.
The presentation slides reviewed during the webcast will be available shortly before that time. The webcast, slides, and a copy of this news release can be found in the Investor Relations section of our website at https://ir.usfoods.com.
About US Foods
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 nearly 25,000 employees and more than 60 locations, US Foods 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., and generates approximately $24 billion in annual revenue. Visit www.usfoods.com to learn more.
