usfd-20210403

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-37786

US FOODS HOLDING CORP.

(Exact name of registrant as specified in its charter)

Delaware

26-0347906

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

9399 W. Higgins Road, Suite 100

Rosemont, IL 60018

(847) 720-8000

(Address, including Zip Code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

USFD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

221,911,590 shares of the registrant's common stock were outstanding as of May 5, 2021.

Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) 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,” “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 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;
• the extent and duration of the negative impact of the coronavirus ("COVID-19") pandemic on us;
• 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;
• impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets;
• environmental, health and safety and other governmental regulation, including actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, and required closures of non-essential businesses;
• product recalls and product liability claims;
• reputation in the industry;
• indebtedness and restrictions under agreements governing indebtedness;
• interest rate increases;
• changes in the method of determining London Interbank Offered Rate ("LIBOR") or the replacement of LIBOR with an alternative reference rate;
• labor relations and costs and continued access to qualified and diverse labor;
• risks associated with intellectual property, including potential infringement;
• disruption of existing technologies and implementation of new technologies;
• cybersecurity incidents and other technology disruptions;
• effective integration of acquired businesses;
• changes in tax laws and regulations and resolution of tax disputes;
•
• extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses;
• costs and risks associated with current and changing government laws and regulations, and potential changes as a result of a new administration in the United States; and
• management of retirement benefits and pension obligations.

For a detailed discussion of these and other risks, uncertainties and factors, see Part I, Item 1A— “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “2020 Annual Report”).

In light of these risks, uncertainties and other important factors, the forward-looking statements in this Quarterly Report might not prove to be accurate, and you should not place undue reliance on them. All forward-looking statements attributable to us, or others acting on our behalf, are expressly qualified in their entirety by the cautionary statements above. All of these statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by law.

Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should be viewed only as historical data.


	TABLE OF CONTENTS
		Page No.
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of April 3, 2021 and January 2, 2021	1
	Consolidated Statements of Comprehensive Income for the 13 weeks ended April 3, 2021 and March 28, 2020	2
	Consolidated Statements of Shareholders' Equity for the 13 weeks ended April 3, 2021 and March 28, 2020	3
	Consolidated Statements of Cash Flows for the 13 weeks ended April 3, 2021 and March 28, 2020	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27

Part II. Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

Signatures		29

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


US FOODS HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value)

	April 3, 2021		January 2, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	912	$	828
Accounts receivable, less allowances of $51 and $67	1,354		1,084
Vendor receivables, less allowances of $7 and $5	177		121
Inventories—net	1,451		1,273
Prepaid expenses	160		132
Assets held for sale	10		1
Other current assets	20		26
Total current assets	4,084		3,465
Property and equipment—net	1,987		2,021
Goodwill	5,625		5,637
Other intangibles—net	874		892
Deferred tax assets	21		1
Other assets	409		407
Total assets	$	13,000	$	12,423
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft liability	$	178	$	136
Accounts payable	1,733		1,218
Accrued expenses and other current liabilities	538		497
Current portion of long-term debt	122		131
Total current liabilities	2,571		1,982
Long-term debt	5,616		5,617
Deferred tax liabilities	275		270
Other long-term liabilities	504		505
Total liabilities	8,966		8,374
Commitments and contingencies (Note 18)
Mezzanine equity:
Series A convertible preferred stock, $0.01 par value—25 shares authorized; 0.5 issued and outstanding as of April 3, 2021 and January 2, 2021	534		519
Shareholders’ equity:
Common stock, $0.01 par value—600 shares authorized; 222 and 221 issued and outstanding as of April 3, 2021 and January 2, 2021, respectively	2		2
Additional paid-in capital	2,908		2,901
Retained earnings	622		661
Accumulated other comprehensive loss	(32)		(34)
Total shareholders’ equity	3,500		3,530
Total liabilities, mezzanine equity and shareholders' equity	$	13,000	$	12,423

See Notes to Consolidated Financial Statements (Unaudited).


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions, except per share data)

	13 Weeks Ended
		April 3, 2021		March 28, 2020
Net sales		$	6,295	$	6,339
Cost of goods sold		5,292		5,273
Gross profit		1,003		1,066
Operating expenses:
Distribution, selling and administrative costs		972		1,192
Restructuring costs and asset impairment charges		3		—
Total operating expenses		975		1,192
Operating income (loss)		28		(126)
Other income—net		(7)		(6)
Interest expense—net		54		52
Loss on extinguishment of debt		23		—
Loss before income taxes		(42)		(172)
Income tax benefit		(18)		(40)
Net loss		(24)		(132)
Other comprehensive loss—net of tax:
Changes in retirement benefit obligations		—		—
Unrecognized gain (loss) on interest rate swaps		2		(6)
Comprehensive loss		$	(22)	$	(138)
Net loss		$	(24)	$	(132)
Series A convertible preferred stock dividends		15		—
Net loss available to common shareholders		$	(39)	$	(132)
Net loss per share
Basic		$	(0.18)	$	(0.60)
Diluted		$	(0.18)	$	(0.60)
Weighted-average common shares outstanding
Basic		221		219
Diluted		221		219

See Notes to Consolidated Financial Statements (Unaudited).


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions)
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount
BALANCE—January 2, 2021	221	$	2	$	2,901	$	661	$	(34)	$	3,530
Share-based compensation expense	—	—		10		—		—		10
Proceeds from employee stock purchase plan	—	—		5		—		—		5
Vested restricted stock units, net	1	—		—		—		—		—
Exercise of stock options	—	—		4		—		—		4
Tax withholding payments for net share-settled equity awards	—	—		(12)		—		—		(12)
Series A convertible preferred stock dividends	—	—		—		(15)		—		(15)
Unrecognized gain on interest rate swaps, net of income tax	—	—		—		—		2		2
Net loss	—	—		—		(24)		—		(24)
BALANCE—April 3, 2021	222	$	2	$	2,908	$	622	$	(32)	$	3,500





	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount
BALANCE—December 28, 2019	220	$	2	$	2,845	$	916	$	(54)	$	3,709
Share-based compensation expense	—	—		7		—		—		7
Proceeds from employee stock purchase plan	—	—		6		—		—		6
Exercise of stock options	—	—		1		—		—		1
Tax withholding payments for net share-settled equity awards	—	—		(2)		—		—		(2)
Unrecognized loss on interest rate swaps, net of income tax	—	—		—		—		(6)		(6)
Adoption of ASU 2016-13	—	—		—		(1)		—		(1)
Net loss	—	—		—		(132)		—		(132)
BALANCE—March 28, 2020	220	$	2	$	2,857	$	783	$	(60)	$	3,582

See Notes to Consolidated Financial Statements (Unaudited).


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
	13 Weeks Ended
	April 3, 2021		March 28, 2020
Cash flows from operating activities:
Net loss	$	(24)	$	(132)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	101		101
Loss on disposal of property and equipment—net	—		1
Loss on extinguishment of debt	23		—
Amortization of deferred financing costs	3		2
Deferred tax benefit	(4)		(17)
Share-based compensation expense	10		7
(Benefit) provision for doubtful accounts	(12)		180
Changes in operating assets and liabilities:
(Increase) decrease in receivables	(315)		157
(Increase) decrease in inventories—net	(178)		6
Increase in prepaid expenses and other assets	(25)		(26)
Increase (decrease) in accounts payable and cash overdraft liability	555		(215)
Increase (decrease) in accrued expenses and other liabilities	42		(126)
Net cash provided by (used in) operating activities	176		(62)
Cash flows from investing activities:
Proceeds from sales of assets	—		5
Purchases of property and equipment	(46)		(79)
Net cash used in investing activities	(46)		(74)
Cash flows from financing activities:
Proceeds from debt borrowings	900		1,945
Principal payments on debt and financing leases	(926)		(827)
Debt financing costs and fees	(18)		—
Proceeds from employee stock purchase plan	5		6
Proceeds from exercise of stock options	4		1
Tax withholding payments for net share-s

SEC Form 10-Q filed by US Foods Holding Corp.