Us Foods Holding Corp. · NYSE:USFD
Us Foods — Q2 2018 Earnings Presentation
28 slides from Us Foods's earnings presentation, Jul 30, 2018
Slide 1: Acquisition of SGA's Food Group of Companies & Q2 Fiscal 2018 Results
Acquisition of SGA’s Food Group of Companies & Q2 Fiscal 2018 Results July 30, 2018
Slide 2: Cautionary Statements
Cautionary Statements This presentation contains “forward-looking statements” within the meaning of the federal securities laws concerning, among other things, our liquidity, our possible or assumed results of operations and our business strategies. These forward-looking statements are subject to ri
Slide 3: Compelling strategic and financial acquisition
Compelling strategic and financial acquisition • Complementary geographic footprint and capabilities • Provides scale across attractive and growing Northwest region • Enhances network through strategically located facilities • Aligns with strategic priorities and supports growth strategy • Good repu
Slide 4: Acquisition overview
Acquisition overview • US Foods will acquire all of the shares of five subsidiary entities from Services Structure & Group of America, collectively known as SGA’s Food Group of Companies Consideration • All cash acquisition valued at $1.8 billion • Adjusted EBITDA multiple of 12.5x based on SGA Food
Slide 5: SGA Food Group is a great company known for its focus on the customer
SGA Food Group is a great company known for its focus on the customer SGA Food Group’s Five Highlights Operating Companies • Founded by Thomas Stewart and family-owned since 1972 • $3.3 billion in 2018E net sales • $123 million in 2018E Adjusted EBITDA • 12 distribution centers • Strong sourcing for
Slide 6: Strong rationale for acquisition of SGA Food Group
Strong rationale for acquisition of SGA Food Group Delivering Compelling Combining Strengths and Capabilities Cost Synergies US Foods SGA Food Group • Distribution • National footprint • Well-established • Direct and indirect footprint in the procurement • National scale Northwest • Back office • In
Slide 7: SGA Food Group strengthens US Foods network and expands presence across Northwest region
SGA Food Group strengthens US Foods network and expands presence across attractive and growing Northwest region SSA Chain Distribution FSA Broadline Distribution 6
Slide 8: Acquisition adds ~15% to US Foods Adjusted EBITDA on pro forma basis
Acquisition of SGA Food Group adds ~15% to US Foods Adjusted EBITDA on proforma basis Pro Forma Net Sales Pro Forma Adjusted EBITDA (FY2018E, $bn) (FY2018E, $mm) $27.7 - $27.9 $1,289 - $1,310 $24.4 - $24.6 $1,111 - $1,132 (1-2% Growth) (5-7% Growth) With $55mm run-rate synergies $3.3 $123 US Foods S
Slide 9: Acquisition offers compelling returns post tax step-up and synergies
Acquisition offers compelling returns post tax step-up and synergies EV / 2018E EBITDA Multiple 14.6x 12.5x (2.1x) 8.6x (3.9x) Purchase Price Tax Step- Adjusted for Run-Rate Adjusted for Multiple Up Tax Step-Up Synergies Tax Step-Up and Synergies Enterpr. Val. ($mm) $1,800 ($260) $1,540 – $1,540 Adj
Slide 10: Our balance sheet continues to be healthy post acquisition; 3.0x leverage expected in 2020
Our balance sheet continues to be healthy post acquisition; 3.0x leverage expected in 2020 Financing Details Pro Forma Leverage Profile • Acquisition to be funded primarily through $1.5 • Day one net leverage of approx. 4.1x vs. 3.2x billion fully committed term loan financing from today lender grou
Slide 11: Q2 Fiscal 2018 Earnings
GREAT FOOD. MADE EASY.” US.
Slide 12: Solid quarter but below expectations
Solid quarter but below expectations • Case growth impacted by: • Operational challenges • Weather and calendar • Adjusted EBITDA growth of 4.9% • ~100 bps negative impact from inbound freight costs • Strong operating leverage expansion of $0.09 per case • Adjusted Gross Profit expansion of $0.16 pe
Slide 13: Growth lower than expected in Q2; internal challenges impacted IND
Growth lower than expected in Q2; internal challenges impacted IND while timing of new customer onboarding impacted HC/Hospitality Independent Restaurant Case Growth Case Growth by quarter YoY percent change* YoY Change Organic Acquisitions 7.1% IND Case Growth 6.0% 10% HC/Hosp Case Growth All Other
Slide 14: Moderating inflation and lower volume growth contributing to flat sales
Moderating inflation and lower volume growth contributing to flat sales Q2 Net Sales $ Millions b/(w) Results Summary $6,159 $6,158 Net Sales drivers: 0.0% • Volume growth with independent restaurants • Positive acquisition volume • Total organic volume declined, primarily on exits • YOY inflation m
Slide 15: Gross profit dollar growth outpacing volume; margins expanding
Gross profit dollar growth outpacing volume; margins expanding Q2 Gross Profit Results Summary $ Millions; Percent of Sales b/(w) $1,114 Gross Profit drivers: 5.7% • Positive customer mix impact $1,054 • Margin initiatives driving gains • Private brand growth of ~100 bps 17.1% 18.1% 100 bps • Strate
Slide 16: Operating expense improvement on lower amortization and solid cost control
Operating expense improvement on lower amortization and solid cost control Q2 Operating Expense Results Summary $ Millions; Percent of Sales b/(w) $927 Operating Expense drivers: $908 • Positive impact from amortization drop off 2.0% • Unfavorable volume deleveraging on fixed costs • Solid cost cont
Slide 17: Growth in Gross Profit per case continues to outpace change in Operating Expense per case
Growth in Gross Profit per case continues to outpace change in Operating Expense per case Adj Gross Profit and Adj Operating Expense $/case higher/lower than prior year Adj GP Adj OPEX $0.20 $0.08 per case $0.09 per case $0.15 $0.08 per case $0.18 better $0.10 $0.16 better $0.12 per case $0.11 $0.10
Slide 18: Key profitability metrics improved over prior year
Key profitability metrics improved over prior year Q2 Adjusted EBITDA* Q2 Adjusted Diluted Earnings Q2 Net Income $ Millions; Percent of Sales Per Share* $ Millions 2017 2018 $300 $ $286 $0.57 $126 $124 4.9% $0.37 $85 54.1% $65 4.6% 4.9% 2017 2018 2017 2018 GAAP Adjusted* YTD Adjusted EBITDA* YTD Ad
Slide 19: Stronger cash flow offset by higher cash taxes and pension contribution; Net Debt improves
Stronger cash flow offset by higher cash taxes and additional pension contribution; Net Debt and leverage continue to improve YTD Operating Cash Flow Q2 Net Debt* and Leverage Leverage ** $ Millions $ Millions Pension and cash taxes were a ~$75M YoY increased use $368 of cash $3,638 $3,577 $3,498 $3
Slide 20: Updated 2018 guidance
Updated 2018 guidance 2018 Guidance Case Growth Approaching Flat Net Sales Growth 1–2% Adjusted Gross Profit ~3% Adjusted EBITDA Growth 5 – 7% Cash CAPEX $250 - $260M (ex Future Acquisitions) Interest Expense $175 - $180M Depreciation & Amortization $330 - $340M Adj Effective Tax Rate 25% - 26% Adju
Slide 21: Appendix
APPENDIX: • Q2 FISCAL 2018 SUMMARY • NON-GAAP RECONCILIATIONS
Slide 22: Second Quarter Financial Performance
Second Quarter Financial Performance Reported Adjusted (1) (unaudited) (unaudited) 13-Weeks 13-Weeks 13-Weeks 13-Weeks Ended Ended Ended Ended $ in millions, except per share data* June 30, 2018 July 1, 2017 Change June 30, 2018 July 1, 2017 Change Case Growth (0.9)% Net Sales 6,158 6,159 —% Gross P
Slide 23: Year to Date Financial Performance
Year to Date Financial Performance Reported Adjusted (1) (unaudited) (unaudited) 26-Weeks 26-Weeks 26-Weeks 26-Weeks Ended Ended Ended Ended $ in millions, except per share data* June 30, 2018 July 1, 2017 Change June 30, 2018 July 1, 2017 Change Case Growth (1.6)% Net Sales 11,981 11,947 0.3% Gross
Slide 24: Non-GAAP Reconciliation - Adjusted Gross Profit and Adjusted Operating Expenses
Non-GAAP Reconciliation - Adjusted Gross Profit and Adjusted Operating Expenses 13-Weeks Ended 26-Weeks Ended (unaudited) (unaudited) June 30, July 1, June 30, July 1, ($ in millions)* 2018 2017 2018 2017 Gross profit (GAAP) $1,114 $1,054 $2,106 $2,045 LIFO reserve change (1) (11) 30 8 40 Adjusted G
Slide 25: Non-GAAP Reconciliation - Adjusted EBITDA and Adjusted Net Income
Non-GAAP Reconciliation - Adjusted EBITDA and Adjusted Net Income 13-Weeks Ended 26-Weeks Ended (unaudited) (unaudited) June 30, July 1, June 30, July 1, ($ in millions)* 2018 2017 2018 2017 Net income (GAAP) $126 $65 $193 $92 Interest expense—net 48 41 91 83 Income tax provision 35 19 30 27 Depreci
Slide 26: Non-GAAP Reconciliation - Adjusted Diluted Earnings Per Share (EPS)
Non-GAAP Reconciliation - Adjusted Diluted Earnings Per Share (EPS) 13-Weeks Ended 26-Weeks Ended (unaudited) (unaudited) June 30, July 1, June 30, July 1, 2018 2017 2018 2017 Diluted EPS (GAAP) $0.58 $0.29 $0.89 $0.41 Restructuring charges (1) — — — 0.01 Share-based compensation expense (2) 0.05 0.
Slide 27: Non-GAAP Reconciliation - Net Debt and Net Leverage Ratios
Non-GAAP Reconciliation - Net Debt and Net Leverage Ratios (unaudited) June 30, December 30, July 1, ($ in millions, except ratios) * 2018 2017 2017 Total Debt (GAAP) $3,599 $3,757 $3,727 Cash, cash equivalents and restricted cash (101) (119) (150) Net Debt (Non-GAAP) $3,498 $3,638 $3,577 Adjusted E
Slide 28: We Help You Make It
WE HELP YOU US. MAKE IT