US Foods Holding (USFD) 8-KUS Foods Reports Fourth Quarter and Fiscal Year 2023 Earnings

“2023 was an exciting year at US Foods and marked my first full year with this strong company. Through execution of our strategy and long-range plan, we captured profitable market share and enhanced margins,” said Dave Flitman, CEO. “This resulted in record full-year 2023 Adjusted EBITDA of $1.56 billion, driven by strong case growth with our independent restaurant, healthcare and hospitality customers and the implementation of key operational initiatives. I believe our differentiated model and our sustainable competitive advantages will drive continued market outperformance and we are well-positioned to win in any macro environment. As we move into 2024, we will continue to execute our strategy and maintain our disciplined approach to capital deployment to drive long-term value creation for our shareholders. We have strong momentum entering this year, which is a reflection of the hard work and tireless commitment of our 30,000 dedicated associates.”

“I am proud of our associates’ ability to deliver solid financial results in the fourth quarter and record Adjusted EBITDA for 2023,” added Dirk Locascio, CFO. “We generated strong free cash flow, reduced our debt, invested organically and inorganically via two tuck-in acquisitions that expand our position in underserved markets and repurchased shares. Our

debt reduction and Adjusted EBITDA growth resulted in net leverage reduction from 3.5x at the end of 2022 to 2.8x at the end of 2023, within our targeted range. I am confident that our 2023 financial performance and our healthy balance sheet will enable us to execute our capital allocation priorities in 2024.”

Net sales of $8.9 billion for the quarter increased 4.9% from the prior year, driven by case volume growth. Total case volume increased 5.6% from the prior year on a 7.3% increase in independent restaurant case volume, an 8.1% increase in healthcare volume, a 5.0% increase in hospitality volume and a 0.8% increase in chain volume.

Gross profit of $1.6 billion increased $136 million, or 9.4%, from the prior year, primarily as a result of an increase in total case volume, cost of goods sold optimization, optimized pricing and a favorable year-over-year LIFO adjustment. Gross profit as a percent of Net sales was 17.8%. Adjusted Gross profit was $1.5 billion, a 6.1% increase from the prior year. Adjusted Gross profit as a percent of Net sales was 17.3% and adjusted Gross profit per case continued at strong levels due to the aforementioned factors.

Net income available to common shareholders was $147 million, an increase of $64 million compared to the prior year. Adjusted EBITDA was $388 million, an increase of $38 million, or 10.9%, compared to the prior year. Adjusted EBITDA margin was 4.3%, an increase of 23 basis points compared to the prior year. Diluted EPS was $0.59; Adjusted Diluted EPS was $0.64.

Gross profit of $6.1 billion increased $656 million, or 11.9%, from the prior year, primarily as a result of an increase in total case volume, cost of goods sold optimization, increased freight income from improved inbound logistics and optimized pricing. Gross profit as a percent of Net sales was 17.3%. Adjusted Gross profit was $6.1 billion, a 9.0% increase from the prior year. Adjusted Gross profit as a percent of Net sales was 17.3% and adjusted Gross profit per case was strong due to the aforementioned factors.

Operating expenses of $5.1 billion increased $233 million, or 4.8%, from the prior year. Operating expenses increased primarily due to increased total case volume and higher seller compensation costs, partially offset by lower distribution cost per case from cost savings initiatives including routing improvements and focused efforts positively impacting labor turnover and productivity as well as lower fuel costs. Operating expenses as a percent of Net sales were 14.4%. Adjusted Operating expenses were $4.6 billion, an increase of $243 million, or 5.6% from the prior year, due to the aforementioned factors. Adjusted Operating expenses as a percent of Net sales were 12.9%.

Net income available to common shareholders was $499 million, an increase of $271 million compared to the prior year. Adjusted EBITDA was $1.56 billion, an increase of $249 million, or 19.0% compared to the prior year. Adjusted EBITDA margin was 4.4%, an increase of 53 basis points compared to the prior year. Diluted EPS was $2.02; Adjusted Diluted EPS was $2.63.

The Company is providing First Quarter 2024 guidance of:

The Company is providing Fiscal Year 2024 guidance of:

Statements in this press release which are not historical in nature, including those under the heading “Outlook for Fiscal Year 2024,” are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions (although not all forward-looking statements may contain such words) and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results and there are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others: economic factors affecting consumer confidence and discretionary spending and reducing the consumption of food prepared away from home; cost inflation/deflation and commodity volatility; competition; reliance on third party suppliers and interruption of product supply or increases in product costs; changes in our relationships with customers and group purchasing organizations; our ability to increase or maintain the highest margin portions of our business; achievement of expected benefits from cost savings initiatives; increases in fuel costs; changes in consumer eating habits; cost and pricing structures; the impact of climate change or related legal, regulatory or market measures; impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets; the impact of governmental regulations; product recalls and product liability claims; our reputation in the industry; labor relations and increased labor costs and continued access to qualified and diverse labor; indebtedness and restrictions under agreements governing our indebtedness; interest rate increases; disruption of existing technologies and implementation of new technologies; cybersecurity incidents and other technology disruptions; risks associated with intellectual property, including potential infringement; effective consummation of pending acquisitions and effective integration of acquired businesses; potential costs associated with shareholder activism; changes in tax laws and regulations and resolution of tax disputes; certain provisions in our governing documents; health and safety risks to our associates and related losses; adverse judgments or settlements resulting from litigation; extreme weather conditions, natural disasters and other catastrophic events; and management of retirement benefits and pension obligations.

We report our financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, Adjusted Gross profit, Adjusted Operating expenses, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Net Debt, Adjusted Net income and Adjusted Diluted EPS are non-GAAP financial measures regarding our operational performance and liquidity. These non-GAAP financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.

We use Adjusted Gross profit and Adjusted Operating expenses as supplemental measures to GAAP measures to focus on period-over-period changes in our business and believe this information is helpful to investors. Adjusted Gross profit is Gross profit adjusted to remove the impact of the LIFO inventory reserve adjustments. Adjusted Operating expenses are Operating expenses adjusted to exclude amounts that we do not consider part of our core operating results when assessing our performance.

We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide meaningful supplemental information about our operating performance because they exclude amounts that we do not consider part of our core operating results when assessing our performance. EBITDA is Net income (loss), plus Interest expense-net, Income tax provision (benefit), and Depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for (1) Restructuring costs and asset impairment charges; (2) Share-based compensation expense; (3) the non-cash impact of LIFO reserve adjustments;

(4) loss on extinguishment of debt; (5) Business transformation costs; and (6) other gains, losses or costs as specified in the agreements governing our indebtedness. Adjusted EBITDA margin is Adjusted EBITDA divided by total net sales.

We believe 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 our core operating performance and provides an additional view of our operating performance including depreciation, 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 costs and asset impairment charges, Share-based compensation expense, the non-cash impacts of LIFO reserve adjustments, amortization expense, loss on extinguishment of debt, Business transformation costs and other items, and adjusted for the tax effect of the exclusions and discrete tax items. We believe that Adjusted Net income may be 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 our operating performance.