US Foods(USFD) - 2022 Q4 - Annual Report

Financial Performance - In fiscal year 2022, total net sales reached $34.057 billion, an increase from $29.487 billion in 2021, representing a growth of approximately 15%[34] - Net sales for fiscal year 2022 reached $34,070 million, an increase of $4,570 million or 15.5% compared to the previous year, primarily driven by inflation across multiple product categories[154] - Gross profit increased by $837 million, or 18.0%, to $5,492 million in fiscal year 2022, with a gross profit margin of 16.1% compared to 15.8% in fiscal year 2021[155] - Operating income for fiscal year 2022 was $594 million, with an operating income margin of 1.7%, up from 1.4% in 2021[167] - Net income available to common shareholders was $228 million, resulting in a diluted net income per share of $1.01, compared to $0.54 in 2021[167] - Adjusted EBITDA for fiscal year 2022 was $1,310 million, reflecting an adjusted EBITDA margin of 3.8%, compared to 3.6% in 2021[167] - Free cash flow for fiscal year 2022 was $500 million, significantly up from $145 million in 2021[167] - Net income was $265 million in fiscal year 2022, compared to $164 million in fiscal year 2021, reflecting a significant increase in profitability[176] Sales and Customer Base - Sales to the top 50 customers accounted for approximately 43% of total net sales in fiscal year 2022, with no single customer representing more than 3%[23] - Group purchasing organizations (GPOs) contributed approximately 21% of net sales in fiscal year 2022, primarily from healthcare, hospitality, education, and government sectors[24] - Approximately 80% of customers utilize the company's e-commerce solutions, which enhance purchasing frequency and strengthen commercial relationships[28] - The product mix for fiscal year 2022 included $12.375 billion in meats and seafood, $5.758 billion in dry grocery products, and $3.564 billion in dairy[34] - Total case volume increased by 1.7% in fiscal year 2022, with independent restaurant case volume rising by 4.3%[154] Operational Insights - The company operates approximately 250,000 customer locations nationwide, including independent and chain restaurants, healthcare, hospitality, and educational institutions[20] - The company operates 70 distribution facilities totaling over 19 million square feet, with 72% owned and 28% leased[135] - The company has implemented cost savings initiatives, including routing improvements and new warehouse process enhancements, to offset rising operating expenses[156] Employee and Labor Relations - As of December 31, 2022, the company employed approximately 29,000 associates, with 21% covered by collective bargaining agreements[48] - Approximately 70% of associates were non-exempt, paid on an hourly basis, and 86% worked in field-based roles[51] - In fiscal year 2022, 12 collective bargaining agreements covering about 1,100 union associates were renegotiated, and 14 agreements covering approximately 1,200 union associates are set for renegotiation in fiscal year 2023[48] - The company is committed to diversity and inclusion, focusing on creating an inclusive work environment and investing in diverse talent pipelines[51] Risks and Challenges - The company is subject to various risks, including economic downturns and supply chain disruptions, which may adversely affect financial performance[65] - The company experienced significantly elevated commodity and supply chain costs in 2022, with ongoing inflation expected to continue into 2023[66] - Changes in consumer eating habits, such as a decline in dining out, could reduce demand for the company's products[77] - Competition in the U.S. foodservice distribution industry is intense, with low switching costs for customers, which may lead to loss of business[67] - The company may face challenges in maintaining relationships with customers and GPOs, as agreements are generally terminable upon advance written notice[72] Financial Obligations and Debt - The company had $4.9 billion of indebtedness outstanding as of December 31, 2022[100] - Approximately 42% of the net principal amount of the company's indebtedness accrued interest at variable rates as of December 31, 2022[107] - The company is subject to various financial covenants under its debt agreements, which may restrict its operational flexibility[104] - The company may face increased costs in servicing its debt due to the transition from U.S. dollar LIBOR to the Secured Overnight Financing Rate (SOFR)[108] Strategic Initiatives - The GREAT FOOD. MADE EASY.™ strategy emphasizes product innovation and customer service, targeting independent restaurants, healthcare, and hospitality sectors[30] - The company aims to leverage technology to enhance customer relationships and streamline operations, focusing on e-commerce and data analytics[28] - The company aims to reduce its absolute Scope 1 and 2 greenhouse gas emissions by 32.5% by 2032 from a 2019 base year, contingent on technological advancements[81] Legal and Compliance - The company may incur significant costs related to legal proceedings, which could materially affect its financial condition and operations[128] - The company is subject to oversight by the Department of Labor's Office of Federal Contract Compliance Programs, which could result in penalties or sanctions if compliance failures are found[99] - The company may face increased compliance costs and financial obligations due to changes in legal or regulatory requirements[83] Insurance and Liability - The company maintains insurance for health and safety risks, but there is no assurance that it will provide adequate coverage against all potential claims[127] - The company may experience product liability claims, and it believes it has sufficient liability insurance to cover such claims[89] - Negative publicity from product recalls or food-borne illnesses could adversely impact the company's reputation and financial condition[90] Acquisitions - The company completed the acquisition of Smart Foodservice for $972 million in April 2020, expanding its cash-and-carry store presence[31] - The company completed the acquisition of Smart Foodservice in April 2020, significantly expanding its cash and carry business in the West and Northwest parts of the U.S.[119]