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| 8-K - FORM 8-K - US FOODS, INC. | d57599d8k.htm |
 Q3
2015 Performance Update
A Taste of What’s Cooking at US Foods
November 2015 Exhibit 99.1 |
 While
the information provided herein is believed to be accurate and reliable, US Foods, Inc. (the “Company”) 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. This information should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2014.
Forward-looking statements notice
This presentation and related comments by our management may include “forward-looking statements” made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. 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, cost deflation or commodity volatility; 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 group purchasing organizations; our ability to increase sales to
independent restaurant customers; changes in industry pricing practices;
changes in cost structure of competitors; costs and risks associated with government
laws and regulations, including environmental, health, safety, food
safety, transportation, labor and employment laws and regulations, and changes in existing laws or regulations; a cyber-security incident, technology disruptions and our ability to implement new technologies; liability claims relating to products that we distribute; our ability to maintain a good reputation; costs and risks associated with litigation or governmental investigations; 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, restrictions and limitations placed on us by our debt agreements and increases in interest rates; and the termination of the proposed acquisition of the Company by Sysco Corporation (“Sysco”), including risks to our relationships with customers, vendors and employees. Additional information regarding these factors is contained in our filings with the Securities and Exchange
Commission, including, without limitation, our Annual Report on Form
10-K for the fiscal year ended December 27, 2014. All
forward-looking statements speak only as of the date they were made. We do 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.
1 |
 Non-GAAP financial measures
This presentation contains unaudited financial measures which are not required by, or
presented in accordance with, accounting principals generally accepted in
the United States of America (“GAAP”), including 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 our performance. Our management uses these non-GAAP financial measures to evaluate our historical financial performance, establish future operating and capital budgets and
determine variable compensation for management and employees.
Accordingly, we believe these non-GAAP financial measures are useful in
allowing for a better understanding of our core operations.
While management believes that these non-GAAP financial measures provide useful
information, they are not operating measures under GAAP, and there are
limitations associated with their use. The 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. Due to these limitations, these non-GAAP
financial measures are used as a supplement to 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 our business and believes
this information is also helpful to investors. We use Adjusted EBITDA in these EBITDA-related margin measures because we believe our 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 on year-over-year changes in our leverage and believes this
information is also helpful to investors. We caution investors that these non-GAAP financial measures presented also are intended to supplement our GAAP results and are not a substitute for such results and may differ from the non-GAAP measures used by other
companies. Please see the Appendix for a reconciliation of the
differences between the non-GAAP financial measures to the most directly comparable GAAP financial measures. 2 |
 Agenda • Business Highlights • Financial Update • Closing Comments • Appendix 3 |
 Business
Highlights •
US Foods Act II • ‘We’re Just Taking Off’ brand re-launch and marketing campaign
• Q3 Performance Highlights • Unit volume decreased (0.6%) due to low margin chain business exits • Sales decreased (1.9%) due to the volume decrease and deflation • Adjusted EBITDA was $225 million 1 • Net Income was $36 million • Business Focus Areas • Doubling down on differentiation – Great Food. Made Easy. • Volume Growth • Margin Improvement • Responsible cost management Note: (1) Reconciliation of this non-GAAP measure is provided in the Appendix.
4 |
 Agenda • Business Highlights • Financial Update • Closing Comments • Appendix 5 |
 Q3
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. 6
$ IN MILLIONS Q3 2015 Q3 2014 B/(W) Y-O-Y CHANGE NET SALES $5,796 $5,911 (1.9%) GROSS PROFIT $1,013 $961 +$52 ADJUSTED GROSS PROFIT 1 $993 $981 +$12 % OF NET SALES 17.1% 16.6% +52 bps OPERATING EXPENSES $940 $904 ($36) ADJUSTED OPERATING EXPENSES 1 $768 $762 ($6) % OF NET SALES 13.2% 12.9% (36) bps NET INCOME (LOSS) $36 ($37) +$73 ADJUSTED EBITDA 1 $225 $220 +$6 ADJUSTED EBITDA MARGIN 2 3.9% 3.7% +16 bps |
 Q3 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 Q3 2015 Q3 2014 B/(W) Y-O-Y CHANGE NET SALES $22,946 $22,813 +0.6% GROSS PROFIT $3,913 $3,792 +$121 ADJUSTED GROSS PROFIT 1 $3,862 $3,866 ($4) % OF NET SALES 16.8% 16.9% (12) bps OPERATING EXPENSES $3,675 $3,545 ($130) ADJUSTED OPERATING EXPENSES 1 $3,002 $2,994 ($8) % OF NET SALES 13.1% 13.1% +4 bps NET LOSS ($36) ($121) +$84 ADJUSTED EBITDA 1 $860 $872 ($12) ADJUSTED EBITDA MARGIN 2 3.7% 3.8% (7) bps CONSOLIDATED EBITDA 3 $910 CONSOLIDATED EBITDA MARGIN 2 4.0% 7 |
 Cash
Flow Notes:
(1) (2) Individual components may not add to total presented due to rounding. 8 $ IN MILLIONS Q4 2014 Q1 2015 Q2 2015 Q3 2015 LTM Cash from Operating Activities $99 $102 $164 $20 $384 Cash used by Investing Activities Capital Expenditures 1 ($42) ($57) ($54) ($31) ($184) Other Investing Activities, net 2 $5 ($8) ($8) - ($11) Cash used by Financing Activities 2 ($64) ($3) ($6) ($64) ($136) Net Cash Change ($1) $34 $96 ($75) $54 Beginning Cash $345 $344 $378 $473 $345 Ending Cash $344 $378 $473 $398 $398 LTM Capital Expenditures does not include $58 million of fleet investment financed by capital leases. LTM Other, net includes proceeds from the sale of PP&E of $9 million, insurance proceeds related to PP&E of $5 million, less $22 million
for the purchase of industrial revenue bonds. The
outflow for the purchase of industrial revenue bonds is offset by a $22 million cash inflow in financing activities. |
 Capital
Structure & Credit Statistics Notes:
(1) On October 20, 2015 the ABL Facility was amended to increase the maximum
available borrowing $200 million to $1,300 million and to extend the maturity date to October 20, 2020 subject to the maturities of our Term Loan and Senior Notes in 2019. The earliest possible maturity date is December 31, 2018. (2) On October 19, 2015 the 2012 ABS Facility was amended to extend the maturity date to September 30, 2018.
(3) Total Debt as of September 26, 2015 of $4,724 million excludes $12 million of
unamortized premium on the Senior Notes. (4) Debt Coverage Ratio
equals Net Debt divided by LTM Consolidated EBITDA . (5)
Interest Coverage Ratio equals LTM Consolidated EBITDA divided by LTM Interest Expense - Net. 1.3x 3.2x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x At Close 7/2/2007 9/26/2015 Credit Statistics Debt Coverage Interest Coverage Ratio 4 Ratio 5 8.2x 4.7x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x At Close 7/2/2007 9/26/2015 9 Debt /LTM As of Consolidated $ IN MILLIONS 9/26/2015 EBITDA ABL Facility (2018) 1 $0 ABS Facility (2018) 2 $586 CMBS Facility (2017) $472 Term Loan (2019) $2,058 Obligations Under Capital Leases $227 Other Debt (2018 - 2031) $32 Total Senior Secured Debt $3,376 3.7x Senior Notes (2019) $1,348 Total Debt 3 $4,724 5.2x Less: Restricted Cash ($6) Less: Cash and Cash Equivalents ($398) Net Debt $4,320 4.7x |
 We have
$1.3 billion of available liquidity Notes:
(1) On October 20, 2015 the ABL Facility was amended to increase the maximum
available borrowing $200 million to $1,300 million and to extend the maturity date to October 20, 2020 subject to the maturities of our Term Loan and Senior Notes in 2019. The earliest possible maturity date is December 31, 2018. (2) On October 19, 2015 the 2012 ABS Facility was amended to extend the maturity date to September 30, 2018.
10 As of $ IN MILLIONS 9/26/2015 Borrowing Availability: ABL Facility (2018) 1 $713 ABS Facility (2018) 2 $141 Total Cash & Equivalents $398 Total Cash and Borrowing Availability $1,252 |
 Agenda • Business Highlights • Financial Update • Closing Comments • Appendix 11 |
 Non-GAAP Reconciliation -
Adjusted EBITDA Notes: (1) Consists of management fees paid to Clayton, Dubilier & Rice, Inc. and Kohlberg Kravis Roberts & Co. (collectively, the “Sponsors”). (2) Consists primarily of facility related closing costs, including severance and related costs, asset impairment charges, organizational realignment
costs, and estimated multiemployer pension withdrawal liabilities.
(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 charges resulting from lump-sum payment settlements to retirees and
former employees participating in several Company sponsored pension plans.
(5) Consists primarily of costs related to significant process and systems redesign.
(6) Consists of direct and incremental costs related to the terminated Sysco acquisition.
(7) Other includes restructuring gains, losses or charges, as specified under the Company’s debt agreements. The Q3 2015 period
includes $9 million of brand re- launch and marketing costs, offset by
a net insurance recovery gain of $9 million . The 2015 LTM period includes a $16 million legal settlement charge and $9 million of brand re-launch and marketing costs, offset by a net insurance recovery gain of $11 million.
Individual components may not add to total presented due to rounding.
12 LTM (In millions) Sept 26, 2015 Sept 27, 2014 Sept 26, 2015 Sept 27, 2014 Net income (loss) 36 $
(37) $
(36) $
(121) $ Interest expense, net 70 71 281 292 Income tax (benefit) provision (33) 23 (7) 76 Depreciation and amortization expense 102 105 401 411 EBITDA 175 162 639 658 Adjustments: Sponsor fees 1 3 3 10 10 Restructuring and asset impairment charges 2 29 - 82 3 Share-based compensation expense 3 3 3 11 8 Net LIFO reserve change (20) 21 (51) 74 Pension settlement 4 - - 2 2 Business transformation costs 5 11 14 45 57 Acquisition related costs 6 22 7 102 31 Other 7 2 10 20 29 Adjusted EBITDA 225 $
220 $
860 $
872 $
Quarter Ended |
 Non-GAAP Reconciliation -
Adjusted Gross Profit and Adjusted Operating Expenses Notes: (1) Consists of management fees paid to Clayton, Dubilier & Rice, Inc. and Kohlberg Kravis Roberts & Co. (collectively, the “Sponsors”). (2) Consists primarily of facility related closing costs, including severance and related costs, asset impairment charges, organizational realignment
costs, and estimated multiemployer pension withdrawal liabilities.
(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 charges resulting from lump-sum payment settlements to retirees and
former employees participating in several Company sponsored pension plans.
(5) Consists primarily of costs related to significant process and systems redesign.
(6) Consists of direct and incremental costs related to the terminated Sysco acquisition.
(7) Other includes restructuring gains, losses or charges, as specified under the Company’s debt agreements. The Q3 2015 period
includes $9 million of brand re- launch and marketing costs, offset
by a net insurance recovery gain of $9 million . The 2015 LTM period includes a $16 million legal settlement charge and $9 million of brand re-launch and marketing costs, offset by a net insurance recovery gain of $11 million.
Individual components may not add to total presented due to rounding.
13 LTM (In millions) Sept 26, 2015 Sept 27, 2014 Sept 26, 2015 Sept 27, 2014 Net sales 5,796 $
5,911 $
22,946 $ 22,813 $ Gross Profit 1,013 $
961 $
3,913 $ 3,792 $ Net LIFO reserve change (20) 21 (51) 74 Adjusted Gross Profit 993 $
981 $
3,862 $ 3,866 $ Operating Expenses 940 $
904 $
3,675 $ 3,545 $ Adjustments: Depreciation and amortization expense (102) (105) (401) (411) Sponsor fees 1 (3) (3) (10) (10) (29) - (82) (3) (3) (3) (11) (8) Pension settlement 4 - - (2) (2) (11) (14) (45) (57) Acquisition related costs 6 (22) (7) (102) (31) Other 7 (2) (10) (20) (29) Adjusted Operating Expenses 768 $
762 $
3,002 $ 2,994 $ Quarter Ended Restructuring and asset impairment charges Share-based compensation expense Business transformation costs 5 3 2 |
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