ROSEMONT, Ill.--(BUSINESS WIRE)--US Foods Holding Corp. (NYSE: USFD), one of the largest foodservice distributors in the United States, announced results for second quarter fiscal 2018.
Second Quarter 2018 Highlights
- Total case volume decreased 0.9%; independent restaurant case volume increased 3.8%
- Net sales of $6.2 billion were flat compared to prior year
- Gross profit of $1.1 billion increased 5.7%
- Income before income taxes increased $76 million to $161 million
- Net income increased $61 million to $126 million
- Adjusted EBITDA increased 4.9% to $300 million
- Diluted EPS of $0.58; Adjusted Diluted EPS of $0.57
Six Month Highlights
- Total case volume decreased 1.6%; independent restaurant case volume increased 4.0%
- Net sales increased 0.3% to $12.0 billion
- Gross profit of $2.1 billion increased 3.0%
- Income before income taxes increased $104 million to $223 million
- Net income increased $101 million to $193 million
- Adjusted EBITDA increased 4.4% to $523 million
- Diluted EPS of $0.89; Adjusted Diluted EPS of $0.92
CEO Perspective
“Our focus on improving profitability across our customer base is continuing to deliver positive results, with gross profit per case expanding $0.16 from the prior year,” said Chairman and CEO Pietro Satriano. “Adjusted EBITDA grew a solid 4.9% for the quarter. While our volume growth with independent restaurants was solid, it fell below our expectation, mostly due to some operational challenges. We are working diligently to address these and we expect to see accelerating volumes in the second half of the year.”
Second Quarter 2018 Results
Total case volume decreased 0.9% from the prior year with organic case volume declining 1.5%. Independent restaurant case volume increased 3.8%, of which 2.7% was organic growth. The decrease in total case volume was driven primarily by the previously discussed exits of select chain customers.
Net sales of $6.2 billion were flat compared to the prior year. Inflation in the grocery and dairy categories was offset by deflation in pork and poultry combined with a decline in case volume. Sales from acquisitions completed during the last four fiscal quarters increased Net sales by approximately 0.7%.
Gross profit of $1.1 billion increased $60 million, or 5.7% from the prior year, driven by margin expansion initiatives, a year-over-year gain in the LIFO reserve and acquisitions which were partially offset by a decline in case volume. Gross profit as a percentage of Net sales was 18.1%. Adjusted Gross profit was $1.1 billion, a 1.8% increase from prior year, driven by margin expansion initiatives. Adjusted Gross profit as a percentage of Net sales was 17.9%.
Operating expenses were $908 million, a decrease of 2.0% from the prior year. Operating expenses benefited from lower amortization expense resulting from the full amortization of an intangible asset as well as ongoing efforts to reduce operating expenses. Adjusted Operating expenses for the quarter were $806 million, a 1.0% increase from the prior year, primarily driven by higher wage and benefit costs.
Income before income taxes was $161 million, a $76 million increase from the prior year.
Net income for the quarter was $126 million, up $61 million from $65 million in the prior year, as a result of the Gross profit and Operating expense factors discussed above. Adjusted EBITDA of $300 million increased $14 million, or 4.9% compared to prior year. Diluted EPS was $0.58 and Adjusted Diluted EPS was $0.57.
Six Month 2018 Results
Total case volume decreased 1.6% from the prior year with organic case volume declining 2.3%. Independent restaurant case volume increased 4.0%, of which 2.7% was organic growth. The decrease in total case volume was driven primarily by the previously discussed exits of select chain customers and adverse weather conditions in the first quarter and early second quarter.
Net sales of $12.0 billion increased 0.3% from the prior year, primarily driven by inflation in the beef, dairy, grocery and produce categories which was primarily offset by a decline in case volume. Sales from acquisitions completed during the last four fiscal quarters increased Net sales by approximately 1.1%.
Gross profit of $2.1 billion increased $61 million, or 3.0% from the prior year, driven by margin expansion initiatives, a year-over-year gain in the LIFO reserve and acquisitions which were partially offset by higher inbound freight costs and a decline in case volume. Gross profit as a percentage of Net sales was 17.6%. Adjusted Gross profit was $2.1 billion a 1.4% increase from prior year, driven by margin expansion initiatives which were partially offset by higher inbound freight costs and a decline in case volume. Adjusted Gross profit as a percentage of Net sales was 17.6%.
Operating expenses were $1.8 billion, a decrease of 2.4% from the prior year. Operating expenses benefitted from lower amortization expense resulting from the full amortization of an intangible asset as well as ongoing efforts to reduce operating expenses. Adjusted Operating expenses for the first six months of fiscal 2018 were $1.6 billion, a 0.7% increase from the prior year, primarily driven by higher wage and benefit costs.
Income before income taxes was $223 million, a $104 million increase from the prior year.
Net income through the first six months of the year was $193 million, up $101 million from $92 million in the prior year, as a result of the Gross profit and Operating expense factors discussed above. Adjusted EBITDA of $523 million increased $22 million, or 4.4% compared to prior year. Diluted EPS was $0.89 and Adjusted Diluted EPS was $0.92.
Cash Flow and Capital Transactions
Net cash provided by operating activities for the first six months of fiscal 2018 was $311 million, net of a combined $74 million for an incremental pension contribution and an increase in cash taxes. As a result of these items Net cash provided by operating activities decreased $57 million from the prior year. Cash capital expenditures for the first six months totaled $117 million, an increase of $9 million from prior year, due to an increase in capital spending for buildings and equipment.
Net Debt at the end of the quarter was $3.5 billion, a decrease of $140 million versus the end of fourth quarter fiscal 2017. The ratio of Net Debt to Adjusted EBITDA was 3.2x at the end of the quarter, down from 3.4x at the end of fourth quarter fiscal 2017.
Outlook for Fiscal Year 2018
For fiscal year 2018 the company now expects total case volume growth to approach flat, Net sales growth of 1-2%, Adjusted Gross profit dollar growth of approximately 3%, Adjusted EBITDA growth of 5-7% and Depreciation and amortization of $330-$340 million. All other fiscal year 2018 guidance numbers announced on February 15, 2018, remain unchanged including Adjusted Diluted EPS of $2.00-$2.10.
Conference Call and Webcast Information
US Foods second quarter fiscal 2018 earnings call, which will also include a discussion of SGA’s Food Group of Companies acquisition announced separately, will be broadcast live via the internet today on July 30, 2018 at 7:30 a.m. CDT. The second quarter fiscal 2018 earnings call has been rescheduled to today from its originally scheduled date of Tuesday, August 7, 2018. The call can also be accessed live over the phone by dialing (844) 292-0976; the conference ID number is 7567095.
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 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.comto learn more.
