US Foods(USFD) - 2024 Q4 - Annual Report

Financial Performance - Total net sales for fiscal year 2024 reached $37.877 billion, an increase of 6.4% from$ 35.597 billion in fiscal year 2023[33]. - Net sales increased by $2,280 million, or 6.4%, in fiscal year 2024, primarily driven by case volume growth and food cost inflation of 2.6%[166]. - Gross profit rose by$ 386 million, or 6.3%, to $6,534 million, maintaining a gross profit margin of 17.3%[167]. - Operating income for fiscal year 2024 was$ 1,099 million, representing an increase from $1,017 million in fiscal year 2023[169]. - Net income available to common shareholders was$ 494 million, with a diluted net income per share of $2.02[169]. - Adjusted EBITDA increased by$ 182 million, or 11.7%, to $1,741 million in fiscal year 2024, with an Adjusted EBITDA margin of 4.6%[186]. - Free Cash Flow was$ 836 million in fiscal year 2024, compared to $841 million in fiscal year 2023[182]. - The effective income tax rate for fiscal year 2024 was 23%, compared to 25% in fiscal year 2023[191][192]. Sales and Customer Base - Sales to the top 50 customers accounted for approximately 47% of net sales in fiscal year 2024, with no single customer representing more than 2% of total sales[21]. - Group purchasing organizations (GPOs) contributed approximately 25% of net sales in fiscal year 2024[22]. - The product category of meats and seafood generated$ 12.93 billion in sales for fiscal year 2024, representing a 8.1% increase from $11.953 billion in fiscal year 2023[33]. - Total case volume increased by 4.2%, with independent restaurant case volume growing by 4.4% in fiscal year 2024[166]. Operations and Infrastructure - The company operates over 70 distribution facilities and a fleet of over 6,500 trucks, enabling efficient service delivery[18]. - The company operates 180 facilities totaling approximately 23.26 million square feet, with 72% owned and 28% leased[145]. - The company operates 74 distribution facilities, 93 cash and carry locations, and 13 broadline support business production facilities[145]. Acquisitions and Investments - The company completed the acquisition of IWC Food Service for a net purchase price of$ 214 million, enhancing its distribution channels in the southeast United States[30]. - Cash flows used in investing activities included $341 million in fiscal year 2024 for investments in information technology and$ 214 million for the acquisition of IWC Food Service[210]. Workforce and Labor Relations - As of December 28, 2024, the company employed approximately 30,000 associates, with 22% (6,600 associates) covered by collective bargaining agreements[47]. - In fiscal year 2024, 14 collective bargaining agreements covering about 1,100 union associates were renegotiated, while 16 agreements covering approximately 1,750 union associates are set for renegotiation in fiscal year 2025[47]. - Approximately 70% of associates are non-exempt, paid on an hourly basis, and 88% work in field-based roles within distribution and retail operations[49]. - The company is committed to a comprehensive health and welfare benefits program, including medical, dental, and wellness programs, as well as a 401(k) savings plan[48]. - The diversity and inclusion strategy focuses on increasing workforce diversity, creating an inclusive environment, and supporting diverse communities[51]. Regulatory and Compliance - The company is subject to various federal, state, and local regulations, including environmental laws and safety standards[45][52]. - The company is subject to significant governmental regulation, which may lead to increased compliance costs and financial obligations[84]. - The company is committed to monitoring and responding to evolving legal and regulatory requirements impacting its operations[87]. Financial Position and Debt - As of December 28, 2024, the company had $4.9 billion of outstanding indebtedness[102]. - Approximately 32% of the net principal amount of the company's indebtedness accrued interest at variable rates as of December 28, 2024[108]. - The company’s ability to make scheduled payments on its debt depends on ongoing financial and operating performance[103]. - A material portion of cash flows from operations may be dedicated to the payment of principal and interest on indebtedness, reducing funds available for other purposes[108]. - The company may face increased vulnerability to adverse economic and industry conditions due to its debt levels[108]. Market Conditions and Competition - The U.S. foodservice distribution industry is sensitive to economic conditions, with potential adverse impacts from inflation and supply chain disruptions affecting consumer confidence and discretionary spending[64]. - Competition is intense in the foodservice distribution industry, with low switching costs for customers, which may lead to pressure on profit margins[66]. - Changes in consumer eating habits, including a shift towards sustainable and locally grown products, may reduce demand for the company's offerings[77]. - Competitors adopting lower cost structures may force the company to adjust its pricing and cost structure to remain competitive[78]. Sustainability and Environmental Initiatives - The Serve Good program features over 900 sustainably-sourced products, contributing to waste reduction and aligning with consumer preferences for sustainability[25]. - The company aims to reduce absolute Scope 1 and 2 GHG emissions by 32.5% by 2032 from a 2019 base year[82]. - Climate change and related regulatory measures may create financial and operational risks, increasing compliance costs and affecting supply chain operations[79]. Technology and Cybersecurity - Digital solutions are utilized in over 80% of sales transactions, enhancing customer relationships and increasing purchase volumes[27]. - The company relies heavily on technology for operations, and disruptions could negatively affect customer service and profits[111]. - The company has implemented cybersecurity measures, but risks remain, including potential significant costs from cyberattacks[116]. - The company has invested in a comprehensive cybersecurity program aligned with the NIST Cyber Security Framework to protect critical assets and information[136][137]. Shareholder Returns and Stock Performance - For the year ended December 28, 2024, the company repurchased 16,400,895 shares at an aggregate purchase price of approximately$ 958 million under the Amended Share Repurchase Program[156]. - The company has not paid any dividends on its common stock since it began trading publicly in 2016 and has no plans to do so in the foreseeable future[152][153]. - The company has approximately $75 million remaining in its Amended Share Repurchase Program as of December 28, 2024[156].