Restaurant supplier's profit soars U.S. Foodservice posts 63% quarterly rise

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August 14, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

U.S. Foodservice's net income jumped 63 percent in the fourth quarter, the Columbia-based company reported yesterday.

Net income rose to $26.8 million for the quarter ended June 27, from $16.5 million for the same period a year ago, the company said. Earnings for the quarter beat analysts' estimate by a penny, rising 54 percent to 57 cents per share, the company, formerly JP Foodservice Inc., said.

"They accomplished it the way they said, they got their sales up in the double digit area, they're accelerating the sales, and that's happening through acquisitions," said Godfrey M. Birckhead, a senior analyst with Blaylock & Partners in Baltimore. "The ability to move that ahead at that rate is a very good sign."

Income from operations, before costs related to the company's December acquisition of Rykoff-Sexton Inc., increased 47 percent to $62.2 million.

That merger, along with the acquisition of three other companies in the past fiscal year with sales totaling $200 million, have made the Columbia company the nation's second largest food distributor, with $5.5 billion in sales for fiscal 1998, a 7 percent increase from $5.2 billion last year.

The company distributes food and related products to restaurants and institutions across the country.

"After the merger of Rykoff-Sexton, they created a national presence," Birckhead said. "They're able to service chains on a coast-to-coast basis."

Net sales continued a trend of growth over the last four quarters, increasing 11.5 percent to $1.5 billion in the fourth quarter, from $1.3 billion a year ago.

Analysts said they considered the double digit sales growth an accomplishment because Rykoff's sales had been declining by 1 percent for six months before the merger.

"We're clearly outpacing the industry," said Lew Hay, executive vice president and chief financial officer. "We were very happy with that growth."

The company incurred acquisition-related costs of $135 million in the second and third quarters.

But the company is ahead of schedule on savings, from combining or closing distribution centers in nine areas of the country where facilities overlapped with those of Rykoff's, on administrative costs and in additional buying leverage and debt refinancing, the company said.

"We not only successfully completed the largest merger ever in our industry, tripling the size of our company -- we did so achieving record earnings and meeting or exceeding virtually every goal set out in our merger plan," said Jim Miller, chairman and chief executive officer.

U.S. Foodservice shares closed at 35.8125, up $1.

Pub Date: 8/14/98

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