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| 8-K - 8-K - US FOODS, INC. | d774408d8k.htm |
 Q2
2014 Performance Update
A Taste of What’s Cooking at US Foods
August 2014
Exhibit 99.1 |
 1
FOOD. FOOD PEOPLE. EASY. While
the
information
provided
herein
is
believed
to
be
accurate
and
reliable,
US
Foods
(“US
Foods”)
does
not
make
any
representations
or
warranties,
express
or
implied,
as
to
the
accuracy
or
completeness
of
such
information
or
as
to
future
results.
No
representation
or
warranty
is
made that any of the projections presented herein will be realized.
Forward-looking statements notice
This
presentation
and
related
comments
by
our
management
may
include
“forward-looking
statements.”
Our
use
of
the
words
“expect,”
“anticipate,”
“possible,”
“potential,”
“target,”
“believe,”
“commit,”
“intend,”
“continue,”
“may,”
“would,”
“could,”
“should,”
“project,”
“projected,”
“positioned”
or similar expressions is intended to identify forward-looking statements that
represent our current judgment about possible future events. We believe
these judgments are reasonable, but these statements are not guarantees of any events or financial results, and our actual
results may differ materially due to a variety of important factors. Among other
items, such factors might include: our ability to remain profitable during
times of cost inflation, commodity volatility, and other factors; competition in the industry and our ability to compete successfully; our
reliance on third-party suppliers, including the impact of any interruption of
supplies or increases in product costs; shortages of fuel and
increases
or
volatility
in
fuel
costs;
any
declines
in
the
consumption
of
food
prepared
away
from
home,
including
as
a
result
of
changes
in
the
economy or other factors affecting consumer confidence; costs and risks associated
with labor relations and the availability of qualified labor; any change in
our relationships with GPOs; our ability to increase sales to independent customers; changes in industry pricing practices;
changes in cost structure of competitors; costs and risks associated with
government laws and regulations, including environmental, health, and
safety, food safety, transportation, labor and employment, laws and regulations,
and changes in existing laws or regulations; technology disruptions
and
our
ability
to
implement
new
technologies;
product
liability
claims
relating
to
products
that
we
distribute;
our
ability
to
maintain
a
good reputation; costs and risks associated with litigation; our
ability to manage future expenses and liabilities with respect to our retirement
benefits; our ability to successfully integrate future acquisitions; our
ability to achieve the benefits that we expect to achieve from our cost
savings programs; risks relating to our indebtedness, including our substantial
amount of debt, our ability to incur substantially more debt,
increases
in
interest
rates,
and
our
proposed
acquisition
by
Sysco.
Additional
information
regarding
these
factors
is
contained
in
the
company’s
filings with the Securities and Exchange Commission, including, without limitation,
its Annual Report on Form 10-K for the fiscal year ended December 28,
2013. All
forward-looking
statements
speak
only
as
of
the
date
they
were
made.
The
company
does
not
undertake
any
obligation
to
update
or
publicly
release any revisions to any forward-looking statements to reflect events,
circumstances or changes in expectations after the date of this
presentation. |
 2
FOOD. FOOD PEOPLE. EASY. Non-GAAP financial measures
This presentation contains unaudited non-GAAP financial measures, including
Reported EBITDA, Adjusted EBITDA, Consolidated EBITDA, Debt Coverage Ratio,
Interest Coverage Ratio, Adjusted Operating Expenses and Adjusted Gross
Profit. Management believes these non- GAAP financial measures provide
meaningful supplemental information regarding our operating performance because they exclude amounts
that our management and our board of directors do not consider part of core
operating results when assessing the performance of the Company. Our
management uses these non-GAAP financial measures to evaluate the Company’s historical financial performance, establish future
operating and capital budgets and determine variable compensation for management
and employees. Accordingly, the Company believes these non-GAAP
financial measures are useful in allowing for a better understanding of the Company's core operations.
While
management
believes
that
these
non-GAAP
financial
measures
provide
useful
information,
they
are
not
operating
measures
under
U.S.
GAAP, and there are limitations associated with their use. The Company's
calculation of these non-GAAP financial measures may not be completely
comparable to similarly titled measures of other companies due to potential differences between companies in their method of
calculation. As a result the use of these non-GAAP financial measures has
limitations and should not be considered in isolation from, or as a
substitute for, other measures such as Net income or Net income attributable to
stockholders. Due to these limitations, these non-GAAP financial
measures are used as a supplement to U.S. GAAP measures and should not be
considered as a substitute for net income (loss) from continuing operations,
operating profit or any other performance measures derived in accordance with GAAP, nor are they a substitute for cash flow from
operating activities as a measure of our liquidity.
Management uses Adjusted EBITDA Margin and Consolidated EBITDA Margin to focus on
year-over-year changes in the Company’s business and believes
this information is also helpful to investors. The Company uses Adjusted EBITDA in these EBITDA-related margin measures
because it believes its investors are familiar with Adjusted EBITDA and that
consistency in presentation of EBITDA-related measures is helpful to
investors. Management also uses Debt Coverage Ratios and Interest Coverage Ratios to focus management on year-over-year changes in
the Company’s leverage and believes this information is also helpful to
investors. The Company cautions investors that these non-GAAP financial
measures presented also are intended to supplement the Company’s GAAP
results and are not a substitute for such results. Additionally, the Company
cautions investors that the non-GAAP financial measures used by the Company may differ from the non-GAAP
measures used by other companies. |
 3
FOOD. FOOD PEOPLE. EASY. Agenda
•
Business Highlights
•
Quarterly Financial Update
•
Closing Comments
•
Appendix |
 4
FOOD. FOOD PEOPLE. EASY. Agenda
•
Business Highlights
•
Quarterly Financial Update
•
Closing Comments
•
Appendix |
 5
FOOD. FOOD PEOPLE. EASY. Business Highlights
•
Q2 sales increased 4.2%, and units decreased 0.6%
•
Organic units decreased 0.9%
•
Acquisition units added 0.3%¹
•
Q2 results
•
Net income/(loss) was ($19) million
•
Adjusted EBITDA was $237 million, a 4.9% increase from last
year² •
Business transformation focused on differentiation and innovation
•
Category Management and Merchandising
•
Sales Force Effectiveness
•
Sysco merger
•
Deal is expected to close either late in Q3 or in Q4 2014
Note:
(1) Includes 2013 Acquisition volume
(2) Reconciliation of this non-GAAP measure is provided in the
appendix. |
 6
FOOD. FOOD PEOPLE. EASY. Agenda
•
Business Highlights
•
Quarterly Financial Update
•
Closing Comments
•
Appendix |
 7
FOOD. FOOD PEOPLE. EASY. Q2 Financial Performance
Notes:
(1) Reconciliations of these non-GAAP measures are provided in the
appendix. (2) Represents Adjusted EBITDA as a percentage of Net Sales.
Individual components may not add to total presented due to rounding.
$ IN MILLIONS
Q2 2014
Q2 2013
B/(W) Y-O-Y
CHANGE
NET SALES
$5,898
$5,659
4.2%
GROSS PROFIT
$964
$972
($8)
ADJUSTED GROSS PROFIT¹
$988
$977
+ $11
% OF NET SALES
16.8%
17.3%
(51)bps
OPERATING EXPENSES
$900
$872
($28)
ADJUSTED OPERATING
EXPENSES¹
$751
$751
$-
% OF NET SALES
12.7%
13.3%
+ 54bps
NET INCOME/(LOSS)
($19)
$16
($35)
ADJUSTED EBITDA¹
$237
$226
+$11
ADJUSTED EBITDA MARGIN²
4.0%
4.0%
+ 3bps |
 8
FOOD. FOOD PEOPLE. EASY. Q2 Last Twelve Month Financial Performance
Notes:
(1) Reconciliations of these non-GAAP measures are provided in the
appendix. (2) Represents Adjusted EBITDA or Consolidated EBITDA as a
percentage of Net Sales. (3) Consolidated EBITDA includes Adjusted EBITDA
plus $50 million for cost saving actions taken by the Company as specified under the Company’s debt agreements.
Individual components may not add to total presented due to rounding.
$ IN MILLIONS
Q2 2014 LTM
Q2 2013 LTM
B/(W) Y-O-Y CHANGE
NET SALES
$22,588
$22,006
2.6%
GROSS PROFIT
$3,801
$3,754
+$47
ADJUSTED GROSS PROFIT¹
$3,854
$3,771
+$83
% OF NET SALES
17.1%
17.1%
(8)bps
OPERATING EXPENSES
$3,523
$3,455
($68)
ADJUSTED OPERATING EXPENSES¹
$2,985
$2,953
($32)
% OF NET SALES
13.2%
13.4%
+21bps
NET INCOME/(LOSS)
($62)
($132)
+$70
ADJUSTED EBITDA¹
$869
$818
+$51
ADJUSTED EBITDA MARGIN²
3.8%
3.7%
+13bps
CONSOLIDATED EBITDA³
$919
CONSOLIDATED EBITDA MARGIN²
4.1% |
 9
FOOD. FOOD PEOPLE. EASY. Quarterly Cash Flow
$ IN MILLIONS
Q3 2013
Q4 2013
Q1 2014
Q2 2014
LTM
Cash from Operating Activities
$5
$208
$31
$216
$460
Capital Expenditures, net of Proceeds
($34)
($56)
($40)
($25)
($156)
Acquisitions
-
($11)
-
-
($11)
Cash (Used in)/Provided by Financing
Activities
($36)
($98)
$1
($45)
($178)
Net Cash Change
($66)
$43
($8)
$146
$114
Beginning Cash
$203
$137
$180
$172
$203
Ending Cash
$137
$180
$172
$317
$317
Individual components may not add to total presented due to rounding.
1
Notes:
(1) Q2 2014 capital expenditures net of proceeds includes $7 million from sales of property and
equipment as well as $2 million of insurance recoveries related to property and equipment. |
 1.3x
Capital Structure & Credit Statistics
1.3x
Notes:
(1) The ABS Facility was amended on August 8, 2014 to extend its maturity until the
earlier of August 5, 2016 or the termination date of the ABL (currently May 11, 2016).
(2) Total Debt includes $4,816 million of US GAAP debt as of June 28, 2014 less $17
million of unamortized premium on senior notes. (3) Debt coverage ratio
equals net debt divided by Consolidated EBITDA over last 12 months. (4)
Interest
coverage
ratio
equals
Consolidated
EBITDA
over
last
12
months
divided
by
net
interest
expense
over
last
12
months.
Credit Statistics
Debt Coverage
Interest Coverage
Ratio³
Ratio
4
Debt /LTM
As of
Consolidated
$ IN MILLIONS
6/28/2014
EBITDA
ABL Revolver (2016)
$0
ABS Facility (2015)¹
$686
CMBS Facility (2017)
$472
Term Loan (2019)
$2,084
Obligations Under Capital Leases
$195
Other Debt (2018 -
2031)
$12
Total Senior Secured Debt
$3,449
3.8x
Senior Notes (2019)
$1,350
Total Debt²
$4,799
5.2x
Less: Restricted Cash
($7)
Less: Cash and Cash Equivalents
($317)
Net Debt
$4,475
4.9x |
 11
FOOD. FOOD PEOPLE. EASY. We have $1,192 million of available liquidity.
Liquidity
As of
$ IN MILLIONS
6/28/2014
Borrowing Availability:
ABL Facility (2016)
$813
ABS Facility (2015)¹
$62
Total Cash & Equivalents
$317
Total Cash and Borrowing Availability
$1,192
Note:
(1) The ABS Facility was amended on August 8, 2014 to extend its maturity until the
earlier of August 5, 2016 or the termination date of the ABL (currently May 11, 2016). |
 12
FOOD. FOOD PEOPLE. EASY. Agenda
•
Business Highlights
•
Quarterly Financial Update
•
Closing Comments
•
Appendix |
 13
FOOD. FOOD PEOPLE. EASY. Agenda
•
Business Highlights
•
Quarterly Financial Update
•
Closing Comments
•
Appendix |
 14
FOOD. FOOD PEOPLE. EASY. Non-GAAP Reconciliations
Management believes these non-GAAP financial measures provide meaningful
supplemental information regarding our operating performance because they
exclude amounts that our management and our board of directors do not consider
part of core operating results when assessing the performance of
the Company. Our management uses these non-GAAP
financial measures to evaluate the Company’s historical financial performance,
establish future operating and capital budgets and determine variable
compensation for management and employees. Accordingly, the Company believes
these non-GAAP financial measures are useful in allowing for a better
understanding of the Company's core operations. While
management
believes
that
these
non-GAAP
financial
measures
provide
useful
information,
they
are
not
operating
measures under U.S. GAAP, and there are limitations associated with their use. The
Company's calculation of these non-GAAP financial measures may not be
completely comparable to similarly titled measures of other companies due to
potential differences between companies in their method of calculation. As a
result, the use of these non-GAAP financial measures has limitations and
should not be considered in isolation from, or as a substitute for, other measures such as
Net income or Net income attributable to stockholders. Due to these limitations,
these non-GAAP financial measures are used as a supplement to U.S. GAAP
measures. |
 15
FOOD. FOOD PEOPLE. EASY. Non-GAAP Reconciliation -
Adjusted EBITDA
Notes:
(1)
Consists of management fees paid to the Sponsors.
(2)
Consists primarily of facility closing, severance and related costs, and
tangible asset impairment charges. (3)
Share-based
compensation
expense
represents
costs
recorded
for
vesting
of
USF
Holding
Corp.
stock
option
awards,
restricted
stock,
and
restricted
stock
units.
(4)
Consists of changes in the LIFO reserve.
(5)
Includes fees paid to debt holders, third party costs, early redemption premiums,
and write-off of unamortized debt issuance costs. (6)
Consists of charges resulting from lump-sum payment settlements to retirees and
former employees participating in several Company sponsored pension plans.
(7)
Consists primarily of costs related to functionalization and significant
process and systems redesign. (8) Consists of direct and
incremental costs related to the Sysco merger. (9)
Other
includes
gains,
losses
or
charges,
as
specified
under
the
US
Foods’
debt
agreements.
Individual components may not add to total presented due to rounding.
Quarter Ended
LTM
(In millions)
June 28, 2014
June 29, 2013
June 28, 2014
June 29, 2013
Net loss (income)
(19)
$
16
$
(62)
$
(132)
$
Interest expense, net
74
78
292
326
Income tax provision (benefit)
9
(12)
48
41
Depreciation and amortization expense
106
97
403
375
EBITDA
170
179
681
610
Adjustments:
Sponsor fees (1)
2
2
10
10
Restructuring and tangible asset impairment charges (2)
-
2
5
4
Share-based compensation expense (3)
3
2
8
7
LIFO reserve change (4)
24
5
53
17
Loss on extinguishment of debt (5)
-
18
-
64
Pension settlement (6)
-
-
2
18
Business transformation costs (7)
14
15
59
63
Sysco merger costs (8)
16
-
24
-
Other (9)
8
3
27
25
Adjusted EBITDA
237
$
226
$
869
$
818
$
|
 16
FOOD. FOOD PEOPLE. EASY. Non-GAAP Reconciliation -
Adjusted Gross Profit
and Adjusted Operating Expense
Notes:
(1)
Consists of changes in the LIFO reserve.
(2)
Consists of management fees paid to the Sponsors.
(3)
Consists primarily of facility closing, severance and related costs, and tangible
asset impairment charges. (4)
Share-based
compensation
expense
represents
costs
recorded
for
vesting
of
USF
Holding
Corp.
stock
option
awards,
restricted
stock,
and
restricted
stock
units.
(5)
Consists of charges resulting from lump-sum payment settlements to retirees and
former employees participating in several Company sponsored pension plans.
(6)
Consists primarily of costs related to functionalization and significant
process and systems redesign. (7) Consists of direct and
incremental costs related to the Sysco merger . (8)
Other
includes
gains,
losses
or
charges,
as
specified
under
the
US
Foods’
debt
agreements.
Individual components may not add to total presented due to rounding.
Quarter Ended
LTM
(In millions)
June 28, 2014
June 29, 2013
June 28, 2014
June 29, 2013
Gross Profit
964
$
972
$
3,801
$
3,754
$
LIFO reserve change (1)
24
5
53
17
Adjusted Gross Profit
988
$
977
$
3,854
$
3,771
$
Net sales
5,898
$
5,659
$
22,588
$
22,006
$
Operating Expenses
900
$
872
$
3,523
$
3,455
$
Adjustments:
Depreciation and amortization expense
(106)
(97)
(403)
(375)
Sponsor fees (2)
(2)
(2)
(10)
(10)
Restructuring and tangible asset impairment charges (3)
-
(2)
(5)
(4)
Share-based compensation expense (4)
(3)
(2)
(8)
(7)
Pension settlement (5)
-
-
(2)
(18)
Business transformation costs (6)
(14)
(15)
(59)
(63)
Sysco merger costs (7)
(16)
-
(24)
-
Other (8)
(8)
(3)
(27)
(25)
Adjusted Operating Expenses
751
$
751
$
2,985
$
2,953
$
|
 |