Business Acquisitions

12 Months Ended

Dec. 28, 2019

Business Combination Disclosure [Text Block]

BUSINESS ACQUISITIONS

On September 13, 2019, USF completed the $1.8 billion all cash acquisition of five foodservice companies (the “Food Group”) from Services Group of America, Inc.: Food Services of America, Inc., Systems Services of America, Inc., Amerifresh, Inc., Ameristar Meats, Inc. and GAMPAC Express, Inc. The acquisition of the Food Group expands the Company’s network in the West and Northwest parts of the U.S.

USF financed the acquisition with borrowings under a new $1.5 billion incremental senior secured term loan facility, as further described in Note 13, Debt, and with borrowings under its revolving credit facilities. The assets, liabilities and results of operations of the Food Group have been included in the Company’s consolidated financial statements since the date the acquisition was completed.

As a condition to receiving regulatory clearance for the acquisition from the Federal Trade Commission, USF divested three Food Group distribution facilities (the "Divested Assets"). The total amount of proceeds received from the October 11, 2019 sale of the Divested Assets at closing was $94 million, which, together with approximately $20 million in holdback funds and working capital adjustments, approximates the fair value of the Divested Assets. The assets and liabilities of the Divested Assets were included in assets of discontinued operations and liabilities of discontinued operations, respectively, in the Company's Consolidated Balance Sheets until their disposition. The operating results of the Divested Assets from the date the acquisition was completed through the date of sale were de minimis.

The following table summarizes the preliminary purchase price allocation recognized for the acquisition based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. Adjustments to the preliminary purchase price allocation in the fourth quarter of fiscal year 2019, including working capital adjustments to acquired and divested assets and liabilities and adjustments to asset valuations, were immaterial to the Company's consolidated financial statements.

The preliminary purchase price allocation is subject to further adjustment as additional information becomes available and final valuations are completed. There can be no assurances that these final valuations and additional analyses and studies will not result in significant changes to the preliminary estimates of fair value set forth below.



	Preliminary Purchase Price Allocation
Accounts receivable	$	145
Inventories	165
Assets of discontinued operations	133
Other current assets	7
Property and equipment	209
Goodwill⁽¹⁾	761
Other intangibles⁽²⁾	695
Other assets	47
Accounts payable	(200		)
Accrued expenses and other current liabilities	(69		)
Liabilities of discontinued operations	(19		)
Other long-term liabilities, including financing leases	(42		)
Cash paid for acquisition	$	1,832


(1)	Goodwill recognized is primarily attributable to expected synergies from the combined company, as well as intangible assets that do not qualify for separate recognition. The acquired goodwill is deductible for U.S. federal income tax purposes.


(2)	Other intangibles consist of customer relationships of $656 million with estimated useful lives of 15 years and indefinite-lived brand names and trademarks of $39 million.

Net sales and net loss for the Food Group (exclusive of the Divested Assets, as the sales and net income of the Divested Assets were reflected in discontinued operations and were de minimis for fiscal year 2019), which have been included in the Company’s Consolidated Statements of Comprehensive Income since the date the acquisition was completed were $843 million and $21 million, respectively, during fiscal year 2019. Acquisition-related costs included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income were $52 million and $29 million for fiscal years 2019 and 2018, respectively.

The following table presents the Company’s unaudited pro forma consolidated net sales, net income and net income per share for fiscal years 2019 and 2018. The unaudited pro forma financial information includes the historical results of operations of the Company and the Food Group, giving effect to the acquisition and related financing as if they had occurred as of December 31, 2017, which was the first day of the Company’s fiscal year 2018.



	2019 (Unaudited)		2018 (Unaudited)
Pro forma net sales	$	28,020	$	26,985
Pro forma net income	$	398	$	397
Pro forma net income per share:
Basic	$	1.82	$	1.84
Diluted	$	1.81	$	1.82

The unaudited pro forma financial information for all periods presented above excludes the results of operations related to the Divested Assets, as the results of operations related to the Divested Assets were reflected as discontinued operations. Unaudited pro forma net sales, net income and net income per share related to the Divested Assets for fiscal years 2019 and 2018 are as follows:



	2019 (Unaudited)		2018 (Unaudited)
Pro forma net sales	$	392	$	516
Pro forma net income	$	5	$	13
Pro forma income per share:
Basic	$	0.03	$	0.06
Diluted	$	0.02	$	0.06

The unaudited pro forma financial information above includes adjustments for: (1) incremental depreciation expense related to fair value increases of certain acquired property and equipment, (2) amortization expense related to the fair value of intangible assets acquired, (3) interest expense related to the borrowings under the new incremental senior secured term loan facility and revolving credit facilities used to finance the acquisition, (4) the elimination of acquisition-related costs that were included in the Company’s historical results, and (5) adjustments to the income tax provision based on pro forma results of operations. No effect has been given to potential synergies, operating efficiencies or costs arising from the integration of the Food Group in our previously existing operations. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the date indicated. Further, the pro forma financial information does not purport to project the Company’s future consolidated results of operations following the acquisition.