February 12, 2019 06:45 AM Eastern Standard Time
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 full fiscal year 2018.
Fourth Quarter Fiscal 2018 Highlights
- Total case volume decreased 0.8%; independent restaurant case volume increased 3.9%
- Net sales increased 0.8% to $6.0 billion
- Gross profit of $1.1 billion increased 1.6%
- Income before income taxes decreased $5 million to $132 million
- Net income decreased $156 million to $100 million
- Adjusted EBITDA increased 2.4% to $297 million
- Diluted EPS of $0.46; Adjusted Diluted EPS of $0.56
Fiscal Year 2018 Highlights
- Total case volume decreased 1.2%; independent restaurant case volume increased 3.8%
- Net sales increased 0.1% to $24.2 billion
- Gross profit of $4.3 billion increased 2.1%
- Income before income taxes increased $92 million to $496 million
- Net income decreased $37 million to $407 million
- Adjusted EBITDA increased 4.3% to $1,103 million
- Diluted EPS of $1.87; Adjusted Diluted EPS of $2.03
CEO Perspective
“We made significant progress in 2018 as we implemented our key strategic initiatives which position us well for future growth,” said Chairman and CEO Pietro Satriano. “As part of our actions to drive profitability, we expanded sales of our private brands, implemented operational improvements in our merchandising and supply chain functions, and maintained strong cost discipline throughout the organization. Our differentiated product innovation, e-commerce and team-based selling strategies continue to give us a competitive advantage and contributed to us exiting the year with independent restaurant case growth exceeding our 4% exit rate target. We are confident in our ability to deliver improved growth and operating profitability in 2019."
Fourth Quarter Fiscal 2018 Results
Total case volume decreased 0.8% from the prior year while independent restaurant case volume increased 3.9%, all on an organic basis. Since all previously closed acquisitions are now included in total case volume, there was no difference between total and organic case volumes in the quarter. The decrease in total case volume was primarily driven by the previously discussed exits of select chain customers.
Net sales of $6.0 billion for the quarter increased 0.8% from the prior year, primarily due to year-over-year inflation in beef and grocery items and favorable product mix changes that were partially offset by the decrease in case volume.
Gross profit of $1.1 billion increased $17 million, or 1.6%, from the prior year, primarily driven by margin expansion initiatives that were partially offset by the decrease in case volume. Gross profit as a percentage of Net sales was 18.1%. Adjusted Gross profit was $1.1 billion, a 1.7% increase from the prior year, primarily driven by margin expansion initiatives that were partially offset by the decrease in case volume. Adjusted Gross profit as a percentage of Net sales was 18.1%.
Operating expenses were $922 million, an increase of 4.9% from the prior year. The increase was primarily driven by higher wage, fuel and acquisition-related costs that were partially offset by the positive impact of expense control initiatives. Adjusted Operating expenses for the quarter were $800 million, a 1.9% increase from the prior year, primarily driven by higher wage and fuel costs that were partially offset by the positive impact of expense control initiatives.
Income before income taxes was $132 million, a $5 million decrease from the prior year.
Net income was $100 million, down $156 million from $256 million in the prior year. Fourth quarter fiscal 2017 benefited from the changes in the U.S. federal income tax code that resulted in a net tax benefit of $119 million for that quarter compared to a tax expense of $32 million for fourth quarter fiscal 2018. Adjusted EBITDA of $297 million increased $7 million, or 2.4%, compared to the prior year. Diluted EPS was $0.46 and Adjusted Diluted EPS was $0.56.
Fiscal Year 2018 Results
Total case volume decreased 1.2% from the prior year, with organic case volume declining 1.6%. Independent restaurant case volume increased 3.8%, including 3.1% organic growth. The decrease in total case volume was driven primarily by the previously discussed exits of select chain customers. Sales from acquisitions made in 2017 increased Net sales by approximately 0.4%.
Net sales of $24.2 billion increased 0.1% from the prior year, primarily due to year-over-year inflation in beef and grocery items and the impact of acquisitions made in 2017 that were partially offset by the decrease in case volume.
Gross profit of $4.3 billion increased $88 million, or 2.1%, from the prior year, primarily driven by margin expansion initiatives and a reduction in our year-over-year last-in, first-out (LIFO) expense that were partially offset by the decrease in case volume. Gross profit as a percentage of Net sales was 17.8%. Adjusted Gross profit was $4.3 billion, a 1.7% increase from the prior year, primarily driven by margin expansion initiatives and the impact of acquisitions made in 2017 that were partially offset by the decrease in case volume. Adjusted Gross profit as a percentage of Net sales was 17.8%.
Operating expenses were $3.6 billion, an increase of 0.5% from the prior year. The increase was primarily driven by higher wage, fuel and acquisition-related costs that were partially offset by lower amortization expense resulting from the full amortization of an intangible asset and the positive impact of expense control initiatives. Adjusted Operating expenses were $3.2 billion, a 1.1% increase from the prior year, primarily driven by higher wage and fuel costs that were partially offset by the positive impact of expense control initiatives.
Income before income taxes was $496 million, a $92 million increase from the prior year.
Net income for fiscal year 2018 was $407 million, down $37 million from $444 million in the prior year primarily as a result of the Gross profit, Operating expense and income tax factors discussed above. Adjusted EBITDA of $1,103 million increased $45 million, or 4.3% compared to the prior year. Diluted EPS was $1.87 and Adjusted Diluted EPS was $2.03.
Cash Flow and Capital Transactions
Net cash provided by operating activities for fiscal year 2018 was $609 million, net of a combined $102 million of increased cash income taxes and an incremental, voluntary pension plan contribution. In fiscal year 2017, the company paid $11 million of cash income taxes compared to $78 million in fiscal year 2018. Primarily as a result of working capital investments to build safety stock, the increase in cash income taxes and the incremental, voluntary pension plan contribution, Net cash provided by operating activities decreased $140 million from the prior year. Cash capital expenditures for fiscal year 2018 totaled $235 million, an increase of $14 million from the prior year, primarily due to an increase in capital spending for buildings and equipment.
Net Debt at the end of fiscal year 2018 was $3.4 billion, a decrease of $286 million versus the end of fiscal year 2017. The ratio of Net Debt to Adjusted EBITDA was 3.0x at the end of fiscal year 2018, down from 3.4x at the end of fiscal year 2017.
Outlook for Fiscal Year 2019
For fiscal year 2019, the company expects total case volume growth of 1-2%, Adjusted EBITDA growth of at least 5% and Adjusted Diluted EPS of $2.15-$2.25. The company also expects cash capital expenditures of $260-$270 million, while fleet capital leases are expected to be approximately $75 million. Interest expense is expected to be $170-$175 million, Depreciation and amortization expenses are expected to be $340-$350 million and our adjusted effective income tax rate is expected to be 25-26%.
Conference Call and Webcast Information
US Foods' fourth quarter and full fiscal year 2018 earnings call will be broadcast live via the internet on February 12, 2019 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 2676279.
The presentation slides reviewed during the webcast will be available shortly before that time. The webcast, slides, and a copy of this press 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 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 more than $24 billion in annual revenue. Visit www.usfoods.com to learn more.
