Market Overview

US Foods Reports Second Quarter Fiscal 2018 Earnings

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US Foods Holding Corp. (NYSE:USFD), one of the largest
foodservice distributors in the United States, today announced results
for second quarter fiscal 2018.

Second Quarter 2018 Highlights

  • Total case volume decreased 0.9%; independent restaurant case volume
    increased 3.8%
  • Net sales of $6.2 billion were flat compared to prior year
  • Gross profit of $1.1 billion increased 5.7%
  • Income before income taxes increased $76 million to $161 million
  • Net income increased $61 million to $126 million
  • Adjusted EBITDA increased 4.9% to $300 million
  • Diluted EPS of $0.58; Adjusted Diluted EPS of $0.57

Six Month Highlights

  • Total case volume decreased 1.6%; independent restaurant case volume
    increased 4.0%
  • Net sales increased 0.3% to $12.0 billion
  • Gross profit of $2.1 billion increased 3.0%
  • Income before income taxes increased $104 million to $223 million
  • Net income increased $101 million to $193 million
  • Adjusted EBITDA increased 4.4% to $523 million
  • Diluted EPS of $0.89; Adjusted Diluted EPS of $0.92

CEO Perspective

"Our focus on improving profitability across our customer base is
continuing to deliver positive results, with gross profit per case
expanding $0.16 from the prior year," said Chairman and CEO Pietro
Satriano. "Adjusted EBITDA grew a solid 4.9% for the quarter. While our
volume growth with independent restaurants was solid, it fell below our
expectation, mostly due to some operational challenges. We are working
diligently to address these and we expect to see accelerating volumes in
the second half of the year."

Second Quarter 2018 Results

Total case volume decreased 0.9% from the prior year with organic case
volume declining 1.5%. Independent restaurant case volume increased
3.8%, of which 2.7% was organic growth. The decrease in total case
volume was driven primarily by the previously discussed exits of select
chain customers.

Net sales of $6.2 billion were flat compared to the prior year.
Inflation in the grocery and dairy categories was offset by deflation in
pork and poultry combined with a decline in case volume. Sales from
acquisitions completed during the last four fiscal quarters increased
Net sales by approximately 0.7%.

Gross profit of $1.1 billion increased $60 million, or 5.7% from the
prior year, driven by margin expansion initiatives, a year-over-year
gain in the LIFO reserve and acquisitions which were partially offset by
a decline in case volume. Gross profit as a percentage of Net sales was
18.1%. Adjusted Gross profit was $1.1 billion, a 1.8% increase from
prior year, driven by margin expansion initiatives. Adjusted Gross
profit as a percentage of Net sales was 17.9%.

Operating expenses were $908 million, a decrease of 2.0% from the prior
year. Operating expenses benefited from lower amortization expense
resulting from the full amortization of an intangible asset as well as
ongoing efforts to reduce operating expenses. Adjusted Operating
expenses for the quarter were $806 million, a 1.0% increase from the
prior year, primarily driven by higher wage and benefit costs.

Income before income taxes was $161 million, a $76 million increase from
the prior year.

Net income for the quarter was $126 million, up $61 million from $65
million in the prior year, as a result of the Gross profit and Operating
expense factors discussed above. Adjusted EBITDA of $300 million
increased $14 million, or 4.9% compared to prior year. Diluted EPS was
$0.58 and Adjusted Diluted EPS was $0.57.

Six Month 2018 Results

Total case volume decreased 1.6% from the prior year with organic case
volume declining 2.3%. Independent restaurant case volume increased
4.0%, of which 2.7% was organic growth. The decrease in total case
volume was driven primarily by the previously discussed exits of select
chain customers and adverse weather conditions in the first quarter and
early second quarter.

Net sales of $12.0 billion increased 0.3% from the prior year, primarily
driven by inflation in the beef, dairy, grocery and produce categories
which was primarily offset by a decline in case volume. Sales from
acquisitions completed during the last four fiscal quarters increased
Net sales by approximately 1.1%.

Gross profit of $2.1 billion increased $61 million, or 3.0% from the
prior year, driven by margin expansion initiatives, a year-over-year
gain in the LIFO reserve and acquisitions which were partially offset by
higher inbound freight costs and a decline in case volume. Gross profit
as a percentage of Net sales was 17.6%. Adjusted Gross profit was $2.1
billion a 1.4% increase from prior year, driven by margin expansion
initiatives which were partially offset by higher inbound freight costs
and a decline in case volume. Adjusted Gross profit as a percentage of
Net sales was 17.6%.

Operating expenses were $1.8 billion, a decrease of 2.4% from the prior
year. Operating expenses benefitted from lower amortization expense
resulting from the full amortization of an intangible asset as well as
ongoing efforts to reduce operating expenses. Adjusted Operating
expenses for the first six months of fiscal 2018 were $1.6 billion, a
0.7% increase from the prior year, primarily driven by higher wage and
benefit costs.

Income before income taxes was $223 million, a $104 million increase
from the prior year.

Net income through the first six months of the year was $193 million, up
$101 million from $92 million in the prior year, as a result of the
Gross profit and Operating expense factors discussed above. Adjusted
EBITDA of $523 million increased $22 million, or 4.4% compared to prior
year. Diluted EPS was $0.89 and Adjusted Diluted EPS was $0.92.

Cash Flow and Capital Transactions

Net cash provided by operating activities for the first six months of
fiscal 2018 was $311 million, net of a combined $74 million for an
incremental pension contribution and an increase in cash taxes. As a
result of these items Net cash provided by operating activities
decreased $57 million from the prior year. Cash capital expenditures for
the first six months totaled $117 million, an increase of $9 million
from prior year, due to an increase in capital spending for buildings
and equipment.

Net Debt at the end of the quarter was $3.5 billion, a decrease of $140
million versus the end of fourth quarter fiscal 2017. The ratio of Net
Debt to Adjusted EBITDA was 3.2x at the end of the quarter, down from
3.4x at the end of fourth quarter fiscal 2017.

Outlook for Fiscal Year 2018

For fiscal year 2018 the company now expects total case volume growth to
approach flat, Net sales growth of 1-2%, Adjusted Gross profit dollar
growth of approximately 3%, Adjusted EBITDA growth of 5-7% and
Depreciation and amortization of $330-$340 million. All other fiscal
year 2018 guidance numbers announced on February 15, 2018, remain
unchanged including Adjusted Diluted EPS of $2.00-$2.10.

Conference Call and Webcast Information

US Foods second quarter fiscal 2018 earnings call, which will also
include a discussion of SGA's Food Group of Companies acquisition
announced separately, will be broadcast live via the internet today on
July 30, 2018 at 7:30 a.m. CDT. The second quarter fiscal 2018 earnings
call has been rescheduled to today from its originally scheduled date of
Tuesday, August 7, 2018. The call can also be accessed live over the
phone by dialing (844) 292-0976; the conference ID number is 7567095.

The presentation slides reviewed during the webcast will be available
shortly before that time. The webcast, slides, and a copy of this news
release can be found in the Investor Relations section of our website at https://ir.usfoods.com.

About US Foods

US Foods is one of America's great food companies and a leading
foodservice distributor, partnering with approximately 250,000
restaurants and foodservice operators to help their businesses succeed.
With 25,000 employees and more than 60 locations, US Foods provides its
customers with a broad and innovative food offering and a comprehensive
suite of e-commerce, technology and business solutions. US Foods is
headquartered in Rosemont, Ill., and generates more than $24 billion in
annual revenue. Visit www.usfoods.com
to learn more.

Forward-Looking Statements

Statements in this press release which are not historical in nature 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," "goal," or similar expressions 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 factors that could cause our actual
results to differ materially from those expressed in the forward-looking
statements, including, among others: cost inflation/deflation and
commodity volatility; competition; reliance on third-party suppliers;
interruption of product supply or increases in product costs; our
substantial indebtedness and restrictions placed upon us under our debt
agreements; potential interest rate increases; customer retention and
changes in our relationships with group purchasing organizations; our
ability to achieve increased sales to independent restaurants;
successful consummation and integration of acquisitions, including our
contemplated acquisition of SGA's Food Group of Companies; realization
of the expected benefits from our cost savings initiatives; fuel
shortages or volatility in fuel costs; industry and general economic
factors affecting consumer confidence and buying habits; changes in
consumer eating habits and preferences; product liability claims; our
reputation in the industry; labor relations and continued access to
qualified labor; pricing and cost structures; environmental,
occupational health and safety, and food safety compliance; government
laws and regulations, and potential changes in existing laws or
regulations; technology disruptions and our ability to implement new
technologies; cybersecurity incidents; management of retirement benefits
and pension liabilities; business disruptions caused by extreme weather
conditions; litigation risk; adequate protection of our brand/trade
names; and risks associated with intellectual property including
potential infringement.

For a detailed discussion of these risks and uncertainties, see the
section entitled "Risk Factors" in our Annual Report on Form 10-K for
the fiscal year ended December 30, 2017, which was filed with the
Securities and Exchange Commission on February 27, 2018. The
forward-looking statements contained in this release speak only as of
the date of this release. We undertake no obligation to update or revise
any forward-looking statements.

Non-GAAP Financial Measures

Adjusted Gross profit, Adjusted Operating expenses, EBITDA, Adjusted
EBITDA, Net Debt, Adjusted Net income and Adjusted Diluted EPS are
non-GAAP financial measures regarding our operational performance. 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 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 changes. 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, as well other items noted in our debt
agreements.

We believe EBITDA and Adjusted EBITDA 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, plus Interest
expense-net, Income tax (benefit)/provision, and Depreciation and
amortization. Adjusted EBITDA is EBITDA adjusted for 1) Restructuring
charges and Tangible asset impairments; 2) Share-based compensation
expense; 3) the non-cash impact of LIFO reserve adjustments; 4) Business
transformation costs; and 5) other gains, losses, or charges as
specified in our debt agreements.

We use Net Debt to review the liquidity of our operations. Net Debt is
defined as total debt net of total Cash, cash equivalents and restricted
cash remaining on the balance sheet as of June 30, 2018. We believe that
Net Debt is a useful financial metric to assess our ability to pursue
business opportunities and investments. Net Debt is not a measure of our
liquidity under GAAP and should not be considered as an alternative to
Cash Flows Provided by Operations or Cash Flows Used in Financing
Activities.

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,
amortization, interest expense, and Income taxes on a consistent basis
from period to period. Adjusted Net income is Net income excluding such
items as Restructuring benefits and charges, tangible asset impairments,
Share-based compensation expense, the non-cash impacts of LIFO reserve
adjustments, Business transformation costs (costs associated with the
redesign of systems and processes), and other items, and adjusted for
the tax effect of the exclusions and discrete tax items. We believe 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 our operating
performance.

We use Adjusted Diluted Earnings per Share, which is calculated by
adjusting the most directly comparable GAAP financial measure, Diluted
Earnings per Share, by excluding the same items excluded in our
calculation of Adjusted EBITDA to the extent that each such item was
included in the applicable GAAP financial measure. We believe the
presentation of Adjusted Diluted Earnings per Share is useful to
investors because the measurement excludes amounts that we do not
consider part of our core operating results when assessing our
performance. We also believe that the presentation of Adjusted EBITDA
and Adjusted Diluted Earnings per Share is useful to investors because
these metrics are frequently used by securities analysts, investors and
other interested parties in their evaluation of the operating
performance of companies in our industry.

Management uses these non-GAAP financial measures (a) to evaluate our
historical and prospective financial performance as well as our
performance relative to our 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. EBITDA and Adjusted EBITDA are also used in
connection with certain covenants and restricted activities under our
debt agreements. We also believe these non-GAAP financial measures are
frequently used by securities analysts, investors, and other interested
parties to evaluate companies in our industry.

We caution readers that our definitions of Adjusted Gross profit,
Adjusted Operating expenses, EBITDA, Adjusted EBITDA, Net Debt, Adjusted
Net income and Adjusted Diluted EPS may not be calculated in the same
manner as similar measures used by other companies. Definitions and
reconciliations of the non-GAAP financial measures to their most
comparable GAAP financial measures are included in the schedules
attached to this press release. We have not, however, provided a
reconciliation of our full fiscal year 2018 Adjusted EBITDA or Adjusted
Diluted EPS outlook because we are not able to accurately estimate all
the adjustments on a forward-looking basis and such items could have a
significant impact on our GAAP financial results as a result of their
variability.

   

US FOODS HOLDING CORP.

Consolidated Balance Sheets

(Unaudited)

 
($ in millions) * June 30, 2018 December 30, 2017
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 100 $ 119
Accounts receivable, less allowances of $27 and $26 1,339 1,302
Vendor receivables, less allowances of $3 141 97
Inventories—net 1,208 1,208
Prepaid expenses 96 80
Assets held for sale 5 5
Other current assets 23   8  
Total current assets 2,913 2,819
Property and equipment—net 1,823 1,801
Goodwill 3,967 3,967
Other intangibles—net 344 364
Deferred tax assets 12 22
Other assets 77   65  
Total assets $ 9,135   $ 9,037  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank checks outstanding $ 147 $ 154
Accounts payable 1,454 1,289
Accrued expenses and other current liabilities 397 451
Current portion of long-term debt 101   109  
Total current liabilities 2,100 2,003
Long term debt 3,498 3,648
Deferred tax liabilities 305 263
Other long-term liabilities 212   372  
Total liabilities 6,115   6,286  
Shareholders' equity:
Common stock 2 2
Additional paid-in capital 2,759 2,721
Retained earnings 316 124
Accumulated other comprehensive loss (57 ) (96 )
Total shareholders' equity 3,020   2,751  
Total liabilities and shareholders' equity $ 9,135   $ 9,037  
 

(*) Amounts may not add due to rounding.

 
   

US FOODS HOLDING CORP.

Consolidated Statements of Operations

(Unaudited)

 
13-Weeks Ended 26-Weeks Ended
($ in millions, except share and per share data) * June 30, 2018   July 1, 2017 June 30, 2018   July 1, 2017
Net sales $ 6,158 $ 6,159 $ 11,981 $ 11,947
Cost of goods sold 5,045   5,105   9,875   9,902
Gross profit 1,114 1,054 2,106 2,045
Distribution, selling and administrative costs 908 926 1,797 1,840
Restructuring charges   1   1   3
Total operating expenses 908   927   1,798   1,843
Operating income 205 127 308 203
Other (income) expense—net (3 ) 1 (6 ) 1
Interest expense—net 48   41   91   83
Income before income taxes 161 85 223 119
Income tax provision 35   19   30   27
Net income $ 126   $ 65   $ 193   $ 92
Net income per share
Basic $ 0.58 $ 0.29 $ 0.90 $ 0.42
Diluted $ 0.58 $ 0.29 $ 0.89 $ 0.41
Weighted-average common shares outstanding
Basic 215,827,074 222,754,030 215,453,656 222,059,022
Diluted 217,770,313 226,791,449 217,491,267 226,557,430
 

(*) Amounts may not add due to rounding.

 
 

US FOODS HOLDING CORP.

Consolidated Statements of Cash Flows

(Unaudited)

 
26-Weeks Ended
($ in millions) * June 30, 2018   July 1, 2017
Cash Flows From Operating Activities:
Net income $ 193 $ 92

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization 165 214
Gain on disposal of property and equipment—net (1 )
Amortization and write-off of deferred financing costs 5 2
Deferred tax provision 38 18
Share-based compensation expense 17 9
Provision for doubtful accounts 9 9
Changes in operating assets and liabilities, net of business
acquisitions:
Increase in receivables (98 ) (189 )
Decrease in inventories 4
Increase in prepaid expenses and other assets (19 ) (21 )
Increase in accounts payable and bank checks outstanding 175 276
Decrease in accrued expenses and other liabilities (173 ) (47 )
Net cash provided by operating activities 311   368  
Cash Flows From Investing Activities:
Acquisition of businesses—net of cash (135 )
Proceeds from sales of property and equipment 2 2
Purchases of property and equipment (117 ) (108 )
Proceeds from from redemption of industrial revenue bonds   22  
Net cash used in investing activities (116 ) (219 )
Cash Flows From Financing Activities:
Proceeds from debt borrowings 2,151 1,117
Principal payments on debt and capital leases (2,382 ) (1,213 )
Redemption of industrial revenue bonds (22 )
Contingent consideration paid for business acquisitions (2 ) (5 )
Proceeds from employee share purchase plan 10 8
Proceeds from exercise of stock options 16 11
Tax withholding payments for net share-settled equity awards (6 ) (26 )
Net cash used in financing activities (214 ) (131 )
Net (decrease) increase in cash and cash equivalents (19 ) 19
Cash, cash equivalents and restricted cash—beginning of period (1) 119   131  
Cash, cash equivalents and restricted cash—end of period(1) $ 101   $ 150  
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 88 $ 79
Income taxes paid—net 42 3
Non-cash Investing and Financing Activities:
Property and equipment purchases included in accounts payable 13 17
Capital lease additions 68 61
Cashless exercise of equity awards 1 26
Contingent consideration payable for business acquisitions 4

(*) Amounts may not add due to rounding.

(1)   Includes restricted cash due to retrospective adoption of a new
accounting standard at the beginning of fiscal year 2018. Restricted
cash was immaterial in all periods presented.
 
     

US FOODS HOLDING CORP.

Non-GAAP Reconciliation

(Unaudited)

 
13-Weeks Ended
($ in millions, except share and per share data) * June 30, 2018   July 1, 2017 Change %
Net income (GAAP) $ 126 $ 65 $ 61 93.8 %
Interest expense—net 48 41 7 17.1 %
Income tax provision 35 19 16 84.2 %
Depreciation and amortization expense 84   106   (22 ) (20.8 )%
EBITDA (Non-GAAP) 293 232 61 26.3 %
Adjustments:
Restructuring charges (1) 1 (1 ) (100.0 )%
Share-based compensation expense (2) 10 5 5 100.0 %
LIFO reserve change (3) (11 ) 30 (41 ) (136.7 )%
Business transformation costs (4) 7 13 (6 ) (46.2 )%
Other (5) 1   5   (4 ) (80.0 )%
Adjusted EBITDA (Non-GAAP) 300 286 14 4.9 %
Depreciation and amortization expense (84 ) (106 ) 22 (20.8 )%
Interest expense—net (48 ) (41 ) (7 ) 17.1 %
Income tax provision, as adjusted (6) (43 ) (54 ) 11   (20.4 )%
Adjusted Net income (Non-GAAP) $ 124   $ 85   $ 39   45.9 %
 
Diluted EPS (GAAP) $ 0.58 $ 0.29 $ 0.29 100.0 %
Restructuring charges (1) NM
Share-based compensation expense (2) 0.05 0.02 0.03 150.0 %
LIFO reserve change (3) (0.05 ) 0.13 (0.18 ) (138.5 )%
Business transformation costs (4) 0.03 0.06 (0.03 ) (50.0 )%
Other (5) 0.02 (0.02 ) (100.0 )%
Income tax impact of adjustments (6) (0.04 ) (0.15 ) 0.11   (73.3 )%
Adjusted Diluted EPS (Non-GAAP) $ 0.57   $ 0.37   $ 0.20   54.1 %
 
Weighted-average diluted shares outstanding (GAAP) 217,770,313 226,791,449
 
Gross profit (GAAP) $ 1,114 $ 1,054 $ 60 5.7 %
LIFO reserve change (3) (11 ) 30   (41 ) (136.7 )%
Adjusted Gross profit (Non-GAAP) $ 1,103   $ 1,084   $ 19   1.8 %
 
Operating expenses (GAAP) $ 908 $ 927 $ (19 ) (2.0 )%
Depreciation and amortization expense (84 ) (106 ) 22 (20.8 )%
Restructuring charges (1) (1 ) 1 (100.0 )%
Share-based compensation expense (2) (10 ) (5 ) (5 ) 100.0 %
Business transformation costs (4) (7 ) (13 ) 6 (46.2 )%
Other (5) (1 ) (5 ) 4   (80.0 )%
Adjusted Operating expenses (Non-GAAP) $ 806   $ 798   $ 8   1.0 %
 

(*) Amounts may not add due to rounding.

NM - Not Meaningful

(1)   Consists primarily of severance and related costs and organizational
realignment costs.
(2) Share-based compensation expense for vesting of stock awards and
share purchase plan.
(3) Represents the non-cash impact of LIFO reserve adjustments.
(4) Consists primarily of costs related to significant process and
systems redesign across multiple functions.
(5) Other includes gains, losses or charges as specified under our debt
agreements.
(6)

Represents our income tax provision adjusted for the tax effect of
pre-tax items excluded from Adjusted Net income and the removal of
applicable discrete tax items. Applicable discrete tax items
include changes in tax laws or rates, changes related to prior
year unrecognized tax benefits, discrete changes in valuation
allowances, and excess tax benefits associated with share-based
compensation. The tax effect of pre-tax items excluded from
Adjusted Net income is computed using a statutory tax rate after
considering the impact of permanent differences and valuation
allowances.

 
     

US FOODS HOLDING CORP.

Non-GAAP Reconciliation

(Unaudited)

 
26-Weeks Ended
($ in millions, except share and per share data) * June 30, 2018   July 1, 2017 Change %
Net income (GAAP) $ 193 $ 92 $ 101 109.8 %
Interest expense—net 91 83 8 9.6 %
Income tax provision 30 27 3 11.1 %
Depreciation and amortization expense 165   214   (49 ) (22.9 )%
EBITDA (Non-GAAP) 480 416 64 15.4 %
Adjustments:
Restructuring charges (1) 1 3 (2 ) (66.7 )%
Share-based compensation expense (2) 17 9 8 88.9 %
LIFO reserve change (3) 8 40 (32 ) (80.0 )%
Business transformation costs (4) 15 27 (12 ) (44.4 )%
Other (5) 3   7   (4 ) (57.1 )%
Adjusted EBITDA (Non-GAAP) 523 501 22 4.4 %
Depreciation and amortization expense (165 ) (214 ) 49 (22.9 )%
Interest expense—net (91 ) (83 ) (8 ) 9.6 %
Income tax provision, as adjusted (6) (68 ) (79 ) 11   (13.9 )%
Adjusted Net income (Non-GAAP) $ 199   $ 125   $ 74   59.2 %
 
Diluted EPS (GAAP) $ 0.89 $ 0.41 $ 0.48 117.1 %
Restructuring charges (1) 0.01 (0.01 ) (100.0 )%
Share-based compensation expense (2) 0.08 0.04 0.04 100.0 %
LIFO reserve change (3) 0.04 0.18 (0.14 ) (77.8 )%
Business transformation costs (4) 0.07 0.12 (0.05 ) (41.7 )%
Other (5) 0.01 0.03 (0.02 ) (66.7 )%
Income tax impact of adjustments (6) (0.17 ) (0.23 ) 0.06   (26.1 )%
Adjusted Diluted EPS (Non-GAAP) $ 0.92   $ 0.56   $ 0.36   64.3 %
 
Weighted-average diluted shares outstanding (GAAP) 217,491,267 226,557,430
 
Gross profit (GAAP) $ 2,106 $ 2,045 $ 61 3.0 %
LIFO reserve change (3) 8   40   (32 ) (80.0 )%
Adjusted Gross profit (Non-GAAP) $ 2,114   $ 2,085   $ 29   1.4 %
 
Operating expenses (GAAP) $ 1,798 $ 1,843 $ (45 ) (2.4 )%
Depreciation and amortization expense (165 ) (214 ) 49 (22.9 )%
Restructuring charges (1) (1 ) (3 ) 2 (66.7 )%
Share-based compensation expense (2) (17 ) (9 ) (8 ) 88.9 %
Business transformation costs (4) (15 ) (27 ) 12 (44.4 )%
Other (5) (3 ) (7 ) 4   (57.1 )%
Adjusted Operating expenses (Non-GAAP) $ 1,596   $ 1,585   $ 11   0.7 %
 

(*) Amounts may not add due to rounding.

NM - Not Meaningful

(1)   Consists primarily of severance and related costs and organizational
realignment costs.
(2) Share-based compensation expense for vesting of stock awards and
share purchase plan.
(3) Represents the non-cash impact of LIFO reserve adjustments.
(4) Consists primarily of costs related to significant process and
systems redesign across multiple functions.
(5) Other includes gains, losses or charges as specified under our debt
agreements.
(6)

Represents our income tax provision adjusted for the tax effect of
pre-tax items excluded from Adjusted Net income and the removal of
applicable discrete tax items. Applicable discrete tax items
include changes in tax laws or rates, changes related to prior
year unrecognized tax benefits, discrete changes in valuation
allowances, and excess tax benefits associated with share-based
compensation. The tax effect of pre-tax items excluded from
Adjusted Net income is computed using a statutory tax rate after
considering the impact of permanent differences and valuation
allowances.

 
     

US FOODS HOLDING CORP.

Non-GAAP Reconciliation

Net Debt and Net Leverage Ratios

 
($ in millions, except ratios) * June 30, 2018 December 30, 2017 July 1, 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 EBITDA (1) $ 1,080   $ 1,058   $ 1,010  
Net Leverage Ratio (2) 3.2   3.4   3.5  

(*) Amounts may not add due to rounding.

(1)   Trailing Twelve Months (TTM) Adjusted EBITDA
(2) Net Debt/TTM Adjusted EBITDA

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