Item 2.02 Results of Operations and Financial Condition.
As disclosed in US Foods Holding Corp.’s (the “Company”) Registration Statement on Form S-1 (the “Registration Statement”), filed with the Securities and Exchange Commission (the “SEC”) on April 14, 2017, the Company announces the following estimated
first quarter of fiscal 2017
results.
Basis of Presentation
References to “fiscal 2017” are to the 52-week period ending December 30, 2017, references to “first quarter of fiscal 2017” are to the 13-week period ended April 1, 2017, references to “fiscal 2016” are to the 52-week period ended December 31, 2016 and references to “first quarter of fiscal 2016” are to the 13-week period ended April 2, 2016.
Estimated
First
Quarter of Fiscal 2017 Results
The Company’s first quarter of fiscal 2017
financial
results
are not yet finalized.
The following
information reflects
management’s
current
estimates.
First Quarter of Fiscal 2017
Net sales for the 13-week period ended April 1, 2017 are expected to be approximately $5.8 billion, an increase of approximately 3.5% from $5.6 billion in first quarter of fiscal 2016. Total case volume is expected to increase by approximately 4.3% in first quarter of fiscal 2017, inclusive of approximately 4.0% of independent restaurant growth, when compared to first quarter of fiscal 2016.
Net income for first quarter of fiscal 2017 is expected to be between $24 million and $26 million, an expected increase of between approximately 82.0% and 100.0% when compared to $13 million in the first quarter of fiscal 2016.
Adjusted EBITDA in first quarter of fiscal 2017 is expected to be between $213 million and $216 million, an increase of approximately 4.9% to 6.4% from $203 million of Adjusted EBITDA in first quarter of fiscal 2016.
As of April 1, 2017, we had approximately $152 million of cash and cash equivalents and approximately $3.9 billion of indebtedness, net of approximately $20 million of unamortized deferred financing costs.
The drivers of the estimated variances for net sales, case volume, net income, and Adjusted EBITDA for first quarter of fiscal 2017 as compared to first quarter of fiscal 2016 are consistent with those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on February 28, 2017.
Cautionary
Statement
Regarding Preliminary
Results
The estimated
first quarter of fiscal 2017
results
are preliminary,
unaudited
and subject
to completion,
reflect
management’s
current
views and may change as a result
of management’s
review of the results and other
factors,
including
a wide variety
of significant
business,
economic
and competitive
risks
and uncertainties.
Such preliminary
results
for the first quarter of fiscal 2017
are subject
to the finalization
and closing
of the Company’s accounting
books and records
(which have yet to be completed),
and should not be viewed as a substitute
for full
quarterly
financial
statements
prepared
in accordance
with accounting
principles
generally accepted
in the U.S.
(“GAAP”).
The Company cautions
you that
the first quarter of fiscal 2017
estimates
are not guarantees
of future
performance
or outcomes
and that
actual
results
may differ
materially
from
those described
above. Factors
that
could cause actual
results
to differ
from
those described
above
are set forth
in “Risk Factors”
and “Forward-Looking
Statements”
in the Registration Statement and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The Company
assumes
no obligation
to update any forward-looking
statement as a result
of new
information,
future
events
or other
factors.
You
should read this
information
together
with the financial
statements
and the related
notes and “Management’s
Discussion
and Analysis
of Financial
Condition and Results
of
Operations”
for prior
periods
included
elsewhere
in
the Registration Statement
.
Neither
the Company’s
independent registered
public
accounting
firm
nor any other
independent
registered
public
accounting
firm
has audited, reviewed
or compiled,
examined
or performed
any
procedures
with respect
to the preliminary
results,
nor have they expressed
any opinion or any other
form
of assurance
on the preliminary
results.
Adjusted EBITDA
Description
and
Reconciliations
The Company provides
Adjusted EBITDA as a supplemental
measures
to GAAP regarding
its operational
performance.
This non-GAAP
financial
measure
excludes
the impact
of certain
items and, therefore,
have not been calculated
in accordance
with GAAP.
The Company believes
Adjusted EBITDA
provides
meaningful
supplemental
information
about its operating performance
because
it excludes
amounts
that
the Company does not consider
part
of its core operating
results
when assessing
its performance.
Items
excluded
from
Adjusted EBITDA
include
Restructuring
and tangible
asset impairment
charges,
Loss on extinguishment
of debt, Sponsor fees,
Share-based
compensation
expense, the non-cash
impact
of LIFO
reserve
adjustments,
Business transformation
costs
(business
costs associated
with the redesign
of systems
and processes),
Acquisition
related
costs,
Acquisition
termination
fees—net, and other
items
as specified
in its debt agreements.
The Company believes
that
Adjusted Net income
is a useful
measure
of operating
performance
for both management
and investors
because
it excludes
items
that
are not reflective
of the Company’s core operating
performance
and provides
an additional
view of its operating
performance
including
depreciation,
amortization,
interest
expense, and income taxes
on a consistent
basis
from
period
to period.
Adjusted Net income
is Net income
(loss)
excluding
such items
as Restructuring
and tangible
asset
impairment
charges,
Loss on extinguishment
of debt, Sponsor fees,
Share-based compensation
expense, Business transformation
costs
(cost
associated
with redesign
of systems and process),
and other
items,
and adjusted
for the tax effect
of the exclusions
and discrete
tax items.
The Company believes that
Adjusted Net income
is used by investors,
analysts
and other
interested
parties
to facilitate
period-over-period comparisons
and provides
additional
clarity
as to how
factors
and trends
impact
the Company’s operating
performance.
Management
uses these
non-GAAP
financial
measures
(a)
to evaluate
its historical
and prospective
financial performance
as well as its performance
relative
to its competitors
as they assist
in highlighting
trends,
(b) to set internal
sales
targets
and spending budgets, (c)
to measure
operational
profitability
and the accuracy
of forecasting, (d) to assess
financial
discipline
over operational
expenditures,
and (e)
as an important
factor
in determining variable
compensation
for management
and employees.
Adjusted EBITDA
is also used for certain covenants
and restricted
activities
under the Company’s debt agreements.
The Company also believe
these
non-GAAP
financial
measures are frequently
used by securities
analysts,
investors,
and other
interested
parties
to evaluate
companies
in its industry.
The Company cautions
readers
that
amounts
presented
in accordance
with its definition
of Adjusted EBITDA may not be the same
as similar
measures
used by other
companies.
Not all companies
and analysts
calculate
Adjusted EBITDA in the same manner.
The Company compensates
for these
limitations
by using this
non-GAAP
financial
measures
as a supplement
to GAAP
financial
measures
and by presenting
the reconciliation
of the non-GAAP
financial
measure
to its most comparable
GAAP
financial
measure.
The
following
table reconciles Adjusted EBITDA to net income for the periods presented
($ in millions)(*)
|
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(*)
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Amounts may not add due to rounding.
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(1)
|
Consists of fees paid to investment funds associated with Clayton, Dubilier & Rice, LLCand Kohlberg Kravis Roberts & Co. L.P. (collectively, the “Sponsors”) for consulting and management advisory services. On June 1, 2016, the consulting agreements with each of the Sponsors were terminated for an aggregate termination fee of $31 million.
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(2)
|
Consists primarily of facility-related closing costs, including severance and related costs and organizational realignment costs.
|
(3)
|
Share-based compensation expense for vesting of stock awards and share purchase plan.
|
(4)
|
Represents the non-cash impact of last-in, first-out (“LIFO”) reserve adjustments.
|
(5)
(6)
|
Consists primarily of costs related to significant process and systems redesign across multiple functions.
Consists of certain employee retention costs related to the terminated merger with Sysco Corporation.
|
(7)
|
Other includes gains, losses or charges as specified under US Foods, Inc.’s debt agreements.
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Pursuant to General Instruction B.2. to Form 8-K, the information set forth in this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.