The ratings reflect U.S. Foodservice's position as one of the largest players in the growing, but fragmented, domestic food service distribution industry; solid profitability measures; and an experienced management team. These factors are offset by U.S. Foodservice's leveraged financial position in this low-margined, highly competitive industry, as well as the firm's moderately aggressive acquisition strategy. The merger of Rykoff-Sexton into U.S. Foodservice in December 1997 has enhanced the firm's business profile by enlarging its customer base and providing greater geographic diversity. This should translate into relatively stable operating performance, despite occasional regional downturns. The firm's gross margin has declined primarily because of the continuing shift in product mix to higher-turnover, lower-margin items from higher-margin, lower-turnover items at the former Rykoff-Sexton
