US Foods files for i.p.o.

by Eric Schroeder
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US Foods filed for an i.p.o. of about $100 million.

ROSEMONT, ILL. — US Foods Holding Corp. on Feb. 9 filed for an initial public offering of about $100 million. The announcement comes less than a year after the Rosemont-based broadline food service distributor was blocked from a potential merger with Houston-based food distributor Sysco Corp.

US Foods, which is owned by the private equity firms Clayton, Dubilier & Rice and Kohlberg Kravis Roberts & Co., sustained a loss of $73 million in fiscal 2014 and had net sales of $23,020 million, according to the prospectus. This compared with a loss of $57 million in fiscal 2013 and a loss of $51 million in fiscal 2012, but in the 39 weeks ended Sept. 26, 2015, the company posted net income of $177 million on $17,192 million in net sales.

According to the prospectus filed with the U.S. Securities and Exchange Commission, US Foods supplies more than 250,000 customer locations nationwide, including independently owned single and multi-unit restaurants, regional restaurant concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations. The company also provides more than 400,000 fresh, frozen and dry food stock-keeping units, as well as non-food items, sourced from more than 5,000 suppliers.

The company has more than 4,000 sales associates who manage a network of 61 distribution facilities and a fleet of approximately 6,000 trucks.

“This operating model allows us to leverage our nationwide scale and footprint while executing locally,” US Foods said.

US Foods said its growth strategy gives it an opportunity to outpace the projected growth of the U.S. foodservice distribution industry, and the company intends to do so by increasing its revenue with its target customers, continuing to drive greater cost savings and efficiencies, and making opportunistic acquisitions. To expand its net sales and profitability the company said it has identified three plans of action: increase its share with new and existing customers, grow its share in center-of-plate and produce, and expand its private brand program.

“Center-of-plate proteins and produce categories account for a significant portion of total industry sales,” US Foods noted in the prospectus. “These categories are often provided by a number of specialty distributors that have deep category knowledge but lack scale. Our objective is to be our customer’s ‘first choice’ in these categories. We expect this will drive additional revenue and gross profit from current customers, as they shift business from specialty distributors to US Foods. We have seen higher growth in markets where we are using this strategy, which includes industry-leading training for our sales force. We are strengthening our offering by expanding our Stock Yards manufacturing footprint. Stock Yards provides high-quality meat and seafood, custom cut and packaged to a customer’s specifications.

“We are committed to supporting our private brands, which offer a differentiated positioning and product selection, better price points, and higher gross margins than manufacturer-branded products. We intend to continue leveraging our scale to further reduce the cost of goods for our private brand offerings and enhance incentives for our sales force to drive private brand growth. We believe these efforts will increase profitability and customer loyalty.”

US Foods plans to list on the New York Stock Exchange under the symbol USFD.
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