Acquisition of SGA’s Food Group of Companies & Q2 Fiscal 2018 Results July 30, 2018
Cautionary Statements This presentation contains “forward-looking statements” within the meaning of the federal securities laws concerning, among other things, our liquidity, our possible or assumed results of operations and our business strategies. These forward-looking statements are subject to risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from those expressed in, or implied by, the forward ‐ looking statements. With respect to the contemplated acquisition of SGA Food Group of Companies, these forward-looking statements include, but are not limited to, financial estimates, statements as to the completion and benefits or effects of the acquisition, including financial and operating results, the combined company’s plans, objectives, expectations and intentions, and other statements that are not historical facts. Among the risks and uncertainties that could cause actual results to differ from those expressed in the forward-looking statements are: (1) the occurrence of any event, change or other circumstance that could give rise to the termination of the purchase agreement, (2) the risk that the necessary regulatory approvals may not be obtained as a result of conditions that are not anticipated, (3) risks that any of the closing conditions to the acquisition may not be satisfied in a timely manner, (4) failure to realize the benefits of the acquisition, (5) the effect of the announcement of the acquisition on the ability of the SGA Food Group of Companies to retain customers and retain and hire key personnel and maintain relationships with suppliers, and on their operating results and businesses generally and (6) potential litigation in connection with the acquisition. For a detailed discussion of additional risks and uncertainties, see the sections entitled “Risk Factors” and “Forward-Looking Statements” 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 and is available on our Investor Relations website and via EDGAR at www.sec.gov. The forward ‐ looking statements contained in this presentation speak only as of the date of this presentation. We undertake no obligation to update or revise any forward ‐ looking statements. 1
Compelling strategic and financial acquisition • Complementary geographic footprint and capabilities • Provides scale across attractive and growing Northwest region • Enhances network through strategically located facilities • Aligns with strategic priorities and supports growth strategy • Good reputation with independent restaurant operators, leading technology and private brands • Common, customer-centric culture • Opportunity to leverage best practices • Compelling financial benefits • Acquisition expected to be accretive to Adjusted EPS (1) • Strong combined cash flow and attractive rates support rapid deleveraging • Clear and attractive synergy opportunity (1) Excludes amortization 2
Acquisition overview • US Foods will acquire all of the shares of five subsidiary entities from Services Structure & Group of America, collectively known as SGA’s Food Group of Companies Consideration • All cash acquisition valued at $1.8 billion • Adjusted EBITDA multiple of 12.5x based on SGA Food Group’s estimated 2018 Adjusted EBITDA of $123 million and giving effect to tax benefits from acquisition (1) Attractive Valuation • Net of tax benefits and synergies, the price reflects a 2018E Adjusted EBITDA multiple of 8.6x • Expected to become accretive to US Foods’ Adjusted EPS in the second full year Expected following closing, excluding amortization Financial • $55 million in annual run-rate cost synergies by the end of fiscal 2022, primarily Benefits driven by savings in distribution, direct and indirect procurement and back office administration Organization • SGA Food Group to form the core of a new, sixth Northwest operating region Approvals • Subject to regulatory approval and other customary closing conditions (1) Estimated $260 million present value of cash benefits resulting from tax step-up in connection with acquisition 3
SGA Food Group is a great company known for its focus on the customer SGA Food Group’s Five Highlights Operating Companies • Founded by Thomas Stewart and family-owned since 1972 • $3.3 billion in 2018E net sales • $123 million in 2018E Adjusted EBITDA • 12 distribution centers • Strong sourcing for produce and meat • Diverse customer base, heavily weighted toward independent restaurants • Strong focus on private brands 4
Strong rationale for acquisition of SGA Food Group Delivering Compelling Combining Strengths and Capabilities Cost Synergies US Foods SGA Food Group • Distribution • Direct and indirect • National footprint • Well-established procurement footprint in the • National scale Northwest • Back office administration • Innovative • Highly-developed produce and center products and technology of plate capabilities • Strong customer service culture 5
SGA Food Group strengthens US Foods network and expands presence across attractive and growing Northwest region SSA Chain Distribution FSA Broadline Distribution 6
Acquisition of SGA Food Group adds ~15% to US Foods Adjusted EBITDA on proforma basis Pro Forma Net Sales Pro Forma Adjusted EBITDA (FY2018E, $bn) (FY2018E, $mm) $1,289 - $1,310 $27.7 - $27.9 $24.4 - $24.6 $1,111 - $1,132 (1-2% Growth) (5-7% Growth) With $55mm run-rate synergies es $3.3 $123 US Foods SGA Food Combined US Foods SGA Food Combined Group Group 7
Acquisition offers compelling returns post tax step-up and synergies EV / 2018E EBITDA Multiple 14.6x 12.5x (2.1x) 8.6x (3.9x) Purchase Price Tax Step- Adjusted for Run-Rate Adjusted for Multiple Up Tax Step-Up Synergies Tax Step-Up and Synergies Enterpr. Val. ($mm) $1,800 ($260) $1,540 – $1,540 Adj. EBITDA ($mm) $123 – $123 $55 $178 8
Our balance sheet continues to be healthy post acquisition; 3.0x leverage expected in 2020 Financing Details Pro Forma Leverage Profile • Acquisition to be funded primarily through $1.5 • Day one net leverage of approx. 4.1x vs. 3.2x billion fully committed term loan financing from today lender group led by J.P. Morgan and Bank of • Continued strong credit profile; rapid de-levering America Merrill Lynch driven by strong cash flow, strong underlying • Remaining needs met by existing US Foods EBITDA fundamentals and realization of synergies liquidity resources • No change to planned investments in facilities, fleet and systems Financial Summary • Postpone planned 2018 initiation of share Sources $mm % repurchases, focus will be on reducing leverage Transaction Facility $1,500 82% US Foods Net Leverage Existing US Foods Liquidity 340 18% 4.1x Total Sources $1,840 100% 3.2x ~3.0x Uses Transaction Value $1,800 98% Estimated Fees & Expenses 40 2% Jun. 2018 Pro Forma at Year-End Fiscal Total Uses $1,840 100% Actual Close 2020 9
Q2 Fiscal 2018 Earnings
Solid quarter but below expectations • Case growth impacted by: • Operational challenges • Weather and calendar • Adjusted EBITDA growth of 4.9% • ~100 bps negative impact from inbound freight costs • Strong operating leverage expansion of $0.09 per case • Adjusted Gross Profit expansion of $0.16 per case • Year-over-year private brand growth of approximately 100 bps • Adjusted Diluted EPS significantly increased to $0.57 • Guidance Updates • FY’18 case volume is now expected to be approaching flat • Adj. EBITDA growth is now expected to be 5-7% 1 1
Growth lower than expected in Q2; internal challenges impacted IND while timing of new customer onboarding impacted HC/Hospitality Independent Restaurant Case Growth Case Growth by quarter YoY percent change* YoY Change Organic Acquisitions 7.1% IND Case Growth 6.0% 10% HC/Hosp Case Growth All Other 4.7% 4.3% 4.0% 5.2% 3.8% 8% 4.1% 3.7% 6% 2.8% 2.7% 2.7% 4% Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 2% 4.7% 4.2% 3.3% Normalized* Organic Growth 0% Total Case Growth Organic Acquisitions YoY percent change* -2% 4.3% 3.6% -4% 2.0% 1.9% (2.3%) 2.7% (0.9%) 2.3% 1.0% 0.9% -6% (1.5%) (3.2%) -8% Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2018 2017 2018 2017 Normalized* Organic Growth 0.4% -1.7% -1.3% * Impacts of weather, calendar and sales promotions (Q1 2018 only) on a YOY basis. 12
Moderating inflation and lower volume growth contributing to flat sales Results Summary Q2 Net Sales $ Millions b/(w) Net Sales drivers: $6,159 $6,158 0.0% 0.0% • Volume growth with independent restaurants • Positive acquisition volume • Total organic volume declined, primarily on exits • YOY inflation moderating Case Growth Inflation/Mix 2017 2018 0.9% (0.9%) YOY Inflation Trends Product & Acquisition Mix YTD Net Sales Product Inflation $ Millions b/(w) Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 $11,981 $11,947 0.3% 0.3% ~240 bps ~420 bps ~370 bps ~290 bps ~90 bps Case Growth Inflation/Mix 2017 2018 1.9% (1.6%) 13
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