What changed in this filing

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Item 1. Business

2021-02-16 compared with 2020-02-13 · 111 added, 52 removed, 184 unchanged (47% of the section changed)

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Built through organic growth and acquisitions, we trace our roots back over 150 years to a number of heritage companies with rich legacies in food innovation and customer service.

These include Monarch Foods (established in 1853), Sexton (1883), PYA (1903), Rykoff (1911) and Kraft Foodservice (1976).

US Foodservice was organized as a corporation in Delaware in 1989.

In November 2011, we rebranded from “US Foodservice” to “US Foods.”

Our mission is to be First In Food.

We strive to inspire and empower chefs and foodservice operators to bring great food experiences to consumers.

This mission is supported by our strategy of GREAT FOOD.

MADE EASY.™ , which is centered on providing customers with the innovative products and technology solutions they need to operate their businesses profitably.

MADE EASY.™ , which is centered on providing customers with the innovative products business support and technology solutions they need to operate their businesses profitably.

We operate as one business with standardized business processes, shared systems infrastructure, and an organizational model that optimizes national scale with local execution, allowing us to manage the business as a single operating segment.

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Approximately 3,000 sales associates manage customer relationships at local, regional, and national levels.

They are supported by sophisticated marketing and category management capabilities, as well as a sales support team that includes world-class chefs and restaurant operations consultants, new business development managers and others that help us provide more comprehensive service to our customers.

Our extensive network of more than 70 distribution facilities and fleet of approximately 7,000 trucks allow us to operate efficiently and provide high levels of customer service.

Our sales associates are supported by sophisticated marketing and category management capabilities, as well as a sales support team that includes world-class chefs and restaurant operations consultants, new business development managers and others that help us provide more comprehensive service to our customers.

Our extensive network of approximately 70 distribution facilities and fleet of approximately 6,500 trucks, along with nearly 80 cash and carry locations, allow us to operate efficiently and provide high levels of customer service.

This operating model allows us to leverage our nationwide scale and footprint while executing locally.

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A number of adjacent competitors also serve the U.S.

foodservice distribution industry, including cash-and-carry retailers, commercial wholesale outlets, warehouse clubs, commercial website outlets, and grocery stores.

foodservice distribution industry, including cash-and-carry retailers, commercial wholesale outlets, commercial website outlets, and grocery stores.

Customer buying decisions are based on the assortment of product offered, quality, price, and service levels.

foodservice distribution industry serves different customer types of varying sizes, growth profiles, and product and service requirements, including independent restaurants, healthcare customers (such as hospital systems, nursing homes and long-term care facilities), hospitality customers (ranging from large hotel chains to local banquet halls, country clubs, casinos and entertainment complexes), regional and national restaurant chains, colleges and universities, K-12 schools, and retail locations.

Our target customer types — independent restaurants, healthcare and hospitality — value foodservice distributors with a broad product offering and value-added services that help them drive efficiency in their operations.

As described in more detail below, our GREAT FOOD.

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GPO members are primarily comprised of customers in the healthcare, hospitality, education, and government/military industries.

There are several important dynamics affecting the industry, including:

In March 2020, the World Health Organization characterized a novel strain of coronavirus, COVID-19, as a pandemic amidst a rising number of confirmed cases and thousands of deaths worldwide.

In addition to the factors surrounding the COVID-19 pandemic as further discussed in Item 7 of Part II, “Management's Discussion and Analysis of Financial Condition and Results of Operations”, there are several important dynamics affecting the industry, including:

• Evolving consumer tastes and preferences.

Consumers demand healthy and authentic food alternatives with fewer artificial ingredients, and they value locally-harvested and sustainably-manufactured products.

Consumers demand healthy and authentic food alternatives with fewer artificial ingredients, and they value locally-harvested and sustainably-manufactured food and packaging products.

In addition, many ethnic food offerings are becoming more mainstream as consumers show a greater willingness to try new flavors and cuisines.

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• Generational shifts with millennials and baby boomers.

Given their purchasing power and diverse taste profiles, millennials and baby boomers will continue to significantly influence food consumption and the food-away-from-home market.

According to a U.S.

Census Bureau survey, there were 83 million individuals born between 1982 and 2000 in the U.S., making millennials the largest demographic cohort.

When it comes to food, millennials are open-minded and curious, and willing to seek out new flavors, dining experiences and diverse menu offerings, while also demanding customization, convenience and sustainable products.

Independent restaurants are uniquely situated to capitalize on these preferences.

As millennials’ disposable income increases, we believe this demographic will be key to driving growth in the broader U.S.

Given their purchasing power and diverse taste profiles, millennials, Generation Z and baby boomers will continue to significantly influence food consumption and the food-away-from-home market.

According to recent U.S.

Census Bureau statistics, there were 89 million individuals born between 1982 and 2002 in the U.S., making millennials and Generation Z the largest demographic cohorts.

When it comes to food, millennials and Generation Z are open-minded and curious, and willing to seek out new flavors, dining experiences and diverse menu offerings, while also demanding customization, convenience and sustainable products.

Independent restaurants are well positioned to capitalize on these preferences.

As millennials’ and Generation Z’s disposable income increases, we believe this demographic will be key to driving growth in the broader U.S.

food industry.

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Our GREAT FOOD.

strategy is built on three key differentiators:

product innovation, technology and team-based selling.

Through this strategy, we serve our customers as consultants and business partners, bringing our customers personalized solutions and tailoring a suite of products and services to fit each customer’s needs.

The GREAT FOOD portion of our strategy is anchored by Scoop™, a program that introduces innovative and on-trend products multiple times a year, helping our customers keep their menus fresh and delivering back-of-house convenience to reduce their labor and food costs.

strategy is built on a differentiation focus in product, customer experience and innovation.

Through this strategy, we also serve our customers as consultants and business partners, bringing our customers personalized solutions and tailoring a suite of innovative products and services to fit each customer’s needs.

The GREAT FOOD portion of our strategy is anchored by leading quality and innovation in produce and center-of the plate and other innovative products such as those featured in Scoop™, a program that introduces innovative and on-trend products multiple times a year, helping our customers keep their menus fresh and delivering back-of-house convenience to reduce their labor and food costs.

A growing part of our Scoop portfolio is our Serve Good® program.

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While we offer products under a spectrum of private brands, and at different price points, all are designed to deliver quality, performance and value to our customers.

MADE EASY is aimed at providing restaurant operators with technology and expertise that make it easier to transact with us and run their businesses.

MADE EASY is aimed at providing operators reliability and flexibility in our service model supported by tools and resources to support them in running their businesses.

This means on-time and complete orders and customer choice via the multi-channel offering we have to serve our customers.

These offerings are supported with technology and expertise that make it easier to transact with us and run their businesses.

Our mobile technology platform provides customers with a personalized e-commerce ordering experience and easy-to-use business analytics tools.

Our portfolio of value-added services helps customers address key pain points like food waste, back-of-house operations and diner traffic.

Our portfolio of value-added services helps customers address key pain points like food

waste, back-of-house operations and diner traffic.

By delivering our products and services through a differentiated team-based selling approach, we provide customers access to a diverse team of experts including chefs, center of the plate and produce specialists and restaurant operations consultants.

Customers utilizing these solutions tend to purchase more and have stronger commercial relationships with us.

Building upon a strategy of making it easier for our customers, we deliver to our customers through multiple channels.

US Foods Direct™, an online ordering platform, more than doubles our product assortment and provides customers with access to thousands of specialty products which ship directly to them from the supplier.

As noted above, our strategy of making it easier for our customers including servicing our customers through multiple channels.

We have nearly 80 cash and carry locations to provide more customers with a retail option in between deliveries and to cost effectively serve more price-conscious and smaller customers.

The cash and carry offering was significantly enhanced by our acquisition in 2020 of Smart Foodservice, a company that operated 70 small-format cash and carry stores across California, Idaho, Montana, Nevada, Oregon, Utah and Washington that serve small and mid-sized restaurants and other food business customers with a broad assortment of products.

In addition, US Foods Direct™, an online ordering platform, more than doubles our product assortment and provides customers with access to thousands of specialty products which ship directly to them from the supplier.

More recently, we expanded our US Foods Pronto™ service in select markets to let restaurant operators receive smaller orders more frequently.

We are also adding Chef’Store® locations (two new stores were added in 2018 and one new store is planned to open in 2020) to provide more customers with a retail option in between deliveries and to cost effectively service more price-conscious customers.

Truly giving our customers options to shop their way.

We believe our GREAT FOOD.

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Further, we believe this strategy positions us to make the most of the continued growth in food-away-from-home consumption and consumer preferences for innovative, on-trend flavors.

This strategy is supported by our commitment to DELIVERING WITH EXCELLENCE, which ensures that our execution is as strong as our strategy.

Recently, actions taken to support this commitment have included:

Completing the centralization of our replenishment function, which was designed to improve our service platform and gross profit over time;

Improving on-time delivery to customers, while also taking steps to reduce the number of miles driven to serve customers;

Mitigating the impacts of higher freight costs through improved freight management.

We have also invested in embedding continuous improvement in our operations to increase consistency and efficiency and to engage employees in improving our day-to-day processes.

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The acquisition of the Food Group expands the Company’s network in the West and Northwest parts of the U.S.

Integrating the Food Group and realizing synergies from the acquisition will be key priorities for the Company.

While we prioritize deleveraging following the completion of the Food Group acquisition, we intend to selectively pursue acquisition opportunities and primarily focus our investments on transactions aligned with our strategic priorities.

On April 24, 2020, as noted above, USF completed the acquisition of Smart Stores Holding Corp., a Delaware corporation (“Smart Foodservice”), from funds managed by affiliates of Apollo Global Management, Inc.

for $972 million.

The acquisition of Smart Foodservice expands the Company's cash and carry business in the West and Northwest parts of the U.S.

Integrating the Food Group and Smart Foodservice and realizing synergies from the acquisitions are key priorities for the Company.

We are prioritizing deleveraging following the completion of these acquisitions, however we may selectively pursue acquisition opportunities in the future if they are aligned with and enhance our strategic priorities.

Products and Brands

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The table below presents the sales mix for our principal product categories for fiscal years 2020, 2019 and 2018.

2020 2019 2018

(in millions)

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Refrigerated and frozen grocery products 3,583 4,253 3,898

Dairy 2,394 2,685 2,520

Equipment, disposables and supplies 2,455 2,483 2,298

Beverage products 1,186 1,403 1,315

We have registered the trademarks US Foods ® , Food Fanatics ® and Chef’Store ® as part of our overall brand strategy and our retail outlets.

Produce 1,205 1,375 1,270

Total Net sales $ 22,885 $ 25,939 $ 24,175

We have registered the trademarks US Foods ® , Food Fanatics ® , Chef’Store ® and Smart Foodservice ® as part of our overall brand strategy and our retail outlets.

We have also registered or applied for trademark protection in the U.S.

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Our business does not fluctuate significantly from quarter to quarter and, as a result, is not considered seasonal.

Working Capital Practices

Our operations and strategic initiatives require continuing capital investment, and our resources include cash provided by operations, as well as access to capital from bank borrowings and other types of debt and financing arrangements.

See the discussion in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”

Government Regulation

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Because we are organized under the laws of the State of Delaware and our principal place of business is in the U.S., we are considered a “domestic concern” under the Foreign Corrupt Practices Act and are covered by its anti-bribery provisions.

We had approximately 28,000 employees as of December 28, 2019 , substantially all of which were full-time employees.

Approximately 5,000 employees were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations.

Approximately one-third of our distribution facilities have employees represented by these local unions and are covered by collective bargaining agreements (“CBAs”).

During fiscal year 2019 , 13 CBAs covering approximately 1,300 employees were renegotiated.

During fiscal year 2020 , 14 CBAs covering approximately 1,400 employees will be subject to renegotiation.

While we have experienced work stoppages from time to time in the past, we generally believe we have good relations with both our union and non-union employees, and we strive to be a well-regarded employer in the communities in which we operate.

Human Capital Management

As of January 2, 2021, we employed a total of approximately 26,000 associates.

• substantially all were employed in the United States and on a full-time basis;

• approximately 69% of our associates were non-exempt, or paid on an hourly basis;

• approximately 5,800 of our associates were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations;

• approximately 88% of our associates were working in the “field” supporting our sales function, supply chain organization and retail operations and specialty production facilities, with the remaining 12% working in shared service or corporate roles.

Collective Bargaining Agreements

As of January 2, 2021, we were party to 48 collective bargaining agreements (“CBAs”) covering certain associates at 27 (or 39%) of our distribution facilities, 4 of our specialty processing facilities and 22 of our cash and carry locations.

During fiscal year 2020, 11 CBAs covering approximately 1,300 union associates were renegotiated.

During fiscal year 2021, 16 CBAs covering approximately 2,000 union associates will be subject to renegotiation.

While we have experienced work stoppages from time to time in the past, we generally believe we have good relations with both our union and non-union associates, and we strive to be a well-regarded employer in the communities in which we operate.

Compensation and Benefits

We strive to make a positive difference in the lives of our associates.

We are committed to compensation and benefits that respect and reward our associates for their dedication and hard work.

All of our exempt associates participate in our annual incentive plan, which provides eligible associates with annual cash bonus opportunities based upon the Company’s achievement of financial and other key performance metrics.

Under our long-term incentive plan, we grant equity compensation awards, such as stock options, restricted stock units and performance awards, which vest over a period of time, to eligible associates in order to attract and retain key personnel, strengthen their commitment to the welfare of the Company and align their interests with those of our stockholders.

Additionally, our comprehensive health and welfare benefits program provides our associates with a variety of medical and dental plans, plus voluntary benefits like vision or critical illness protection.

In addition, we offer innovative, no-cost wellness programs, paid time off programs including a paid parental leave policy, an employee assistance program, an employee stock purchase plan, a 401(k) savings plan, and a tuition reimbursement program.

Training and Development

Through training, mentoring, e-learning and on-the-job development, we help associates at all levels learn and grow, while building a pipeline of diverse talent.

Our signature leadership development programs include Gateway to Leadership for new people managers, Aspire to Grow for high-potential leaders, and Aspire to Lead, which is focused on developing a diverse cohort of future leaders.

Our Leadership Foundations program provides training to sales managers, and supervisors and managers in our supply chain organization, and is designed to strengthen leadership capabilities and provide networking opportunities with other leaders across our organization.

In addition, we provide training and development programs that enable new associates to be safe and productive including:

Sales Readiness, which gives new selling associates tools, resources and peer networking opportunities to help them succeed, and Selector Onboarding, which trains our warehouse selectors on safety, accuracy and performance standards.

Lastly, through our e-Cademy program, we offer all associates online learning resources to develop a variety of skills that align with our business strategy.

Diversity and Inclusion

As a company, we are committed to building a diverse and inclusive workforce and hiring the best talent that reflects the customers and communities we serve.

We believe our success relies upon a diverse and dynamic workplace built upon our Cultural Beliefs, which define how we live and create an equitable environment where all our associates can grow and thrive.

In fiscal year 2018, we introduced a Respectful Workplace training as part of our effort to promote respectful communication and foster greater inclusion.

Through the end of fiscal year 2020, more than 2,900 of our associates, including our executive and senior leadership teams and sales managers, had participated in a live, interactive Respectful Workplace training workshop.

During fiscal year 2020, we embedded Respectful Workplace modules into our orientation programs for new frontline and sales associates, and our annual Code of Conduct training which is assigned to all associates.

We also launched a new Disrupting Bias training program to provide a common framework for recognizing and addressing bias in the workplace, with a focus on reaching associates across all levels and functions of our business, as well as our executive and senior leadership teams.

We sponsor eight Employee Resource Groups (ERGs):

Black Resource Utilization Hub, Collective Asian Network, Hispanic and Latino ERG, LINK-UP – Linking Information, Networks and Knowledge, Pride Alliance, Those Who Serve – Military ERG, Women in Network, and Young Professionals.

The ERGs are associate-led groups that strengthen networking among colleagues, further personal and professional development, and promote diversity and inclusion.

Ongoing listening sessions between the ERGs and our executive leadership team allow for open dialogue and the identification of new opportunities to bolster our diversity and inclusion strategy and strengthen associate engagement.

As a result of the efforts of our ERG program, we also recently trained 200 leaders to facilitate Allyship and Anti-Racism workshops for corporate and frontline associates, including drivers and selectors.

Impact of the COVID-19 Pandemic on our Employees

During fiscal year 2020, in response to the COVID-19 pandemic, we acted quickly to protect the health and safety of our associates by directing associates whose functions could be performed remotely to work off site and implementing new protocols and enhanced safety measures to protect the health and safety of our associates and customers, many of whom are classified as “essential” under local and/or state ordinances.

We continue to proactively monitor guidance and requirements from the Centers for Disease Control, the Occupational Safety and Health Administration and various other federal, state and local authorities and public health agencies and adjust our protocols and safety measures as appropriate to help mitigate the impact of the pandemic on our associates and customers.

In response to the immediate and severe impact of the COVID-19 pandemic on our business, results of operations and financial position, predominately from March through August 2020, we implemented multiple cost savings measures including:

temporary furloughs or hours reductions;

reducing compensation for our board, executives and other senior leaders;

making adjustments to our sales-based compensation program;

freezing non-business critical hiring;

suspending non-essential business travel;

reducing the use of third-party consultants;

and deferring annual corporate salary and wage increases.

In addition, during fiscal year 2020, to bring costs in line with decreased demand caused by the pandemic, we reduced the size of our workforce by eliminating open positions and laying off approximately 5% of our associates.

In order to ease the impact of these actions on our associates, and to support our associates during the pandemic, at various times during fiscal year 2020, we:

• contracted some of our distribution associates to customers and other retailers such as grocery retailers, which were experiencing a significant increase in demand during the onset of the COVID-19 pandemic;

• expanded short-term disability benefit eligibility to provide benefits to asymptomatic associates who were required to quarantine or unable to work due to school or other dependent-care center closures;

• enhanced our health and welfare benefits by temporarily waiving cost-sharing (deductibles, coinsurance and copayments) for COVID-19 testing and non-COVID-19 telehealth visits with in-network providers;

• offered participants in our 401(k) savings plan who may have suffered adverse financial consequences as a result of the COVID-19 pandemic the ability to take penalty-free distributions and suspend loan repayments;

• waived employee health insurance premiums for associates placed on unpaid, temporary furlough;

• provided associates who were asked to work remotely with a one-time $200 equipment stipend;

• encouraged the use of existing free wellness and mental health services through our employee assistance program;

• when and where available, packaged excess inventory and distributed free, drive-thru food packages to our associates, including those on temporary furlough.

Information about our Executive Officers

The section below provides information regarding our executive officers as of February 16, 2021:

Name Age Position

Pietro Satriano

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56 Executive Vice President, Nationally Managed Business

Chief Merchandising Officer

Executive Vice President, Locally Managed Business and Field Operations

Hancock 41 Executive Vice President, Chief Supply Chain Officer

54 Chief Commercial Officer

53 Executive Vice President, Field Operations

50 Executive Vice President, Strategy, Insights and Financial Planning

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Coleman served as Senior Vice President, General Counsel and Corporate Secretary of Sears Holdings Corporation, a retailer, beginning in July 2014.

Prior to joining Sears, she served as Vice President, General Counsel and Corporate Secretary of

Brunswick Corporation, a manufacturing company, from May 2009 to July 2014.

Prior to joining Sears, she served as Vice President, General Counsel and Corporate Secretary of Brunswick Corporation, a manufacturing company, from May 2009 to July 2014.

Before moving in-house, she worked in private practice with Sidley Austin LLP.

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Guberman joined US Foods in 1991, originally as part of Kraft/Alliant Foodservice.

Iacobucci has served as Chief Merchandising Officer since January 2017.

Hancock has served as Executive Vice President, Chief Supply Chain Officer since November 2020.

Prior to joining US Foods, Mr.

Hancock served as Senior Vice President of Supply Chain Operations of American Tire Distributors from November 2017 to October 2020, and was responsible for the oversight of 115 distribution facilities across America and a fleet of vehicles accountable for last-mile delivery to customers.

Prior to joining American Tire Distributors, he served as Vice President of Global Supply Chain Operations for Target, where he spent 14 years, from 2003 to 2017, in various supply chain roles with the company.

Iacobucci has served as Chief Commercial Officer since February 2021.

He served the Company as Chief Merchandising Officer from January 2017 to February 2021.

Prior to joining US Foods, Mr.

Iacobucci served as Executive Vice President, Merchandising of Ahold USA, Inc., a food retailer, from April 2016 to January 2017.

Prior to joining Ahold, he served from February 2012 to November 2015 in several senior roles at Loblaw Companies Limited, a Canadian grocery retailer and wholesale food distributor, including President, Discount Division.

Kvasnicka has served as Executive Vice President, Locally Managed Business and Field Operations since September 2016.

Kvasnicka has also served the Company as Interim Chief Supply Chain Officer since October 2019.

Kvasnicka served the Company as Executive Vice President, Locally Managed Sales from August 2015 to September 2016, Region President from April 2013 to July 2015 and Division President from October 2011 to March 2013.

Kvasnicka served the Company as Vice President of Sales for the Stock Yards division, President of the Stock Yards division and in various other roles between 2005 and 2011.

Kvasnicka has served as Executive Vice President, Field Operations since February 2021 and Interim Chief Supply Chain Officer since October 2019.

He served the Company as Executive Vice President, Locally Managed Business and Field Operations from September 2016 to February 2021, Executive Vice President, Locally Managed Sales from August 2015 to September 2016, Region President from April 2013 to July 2015 and Division President from October 2011 to March 2013.

Kvasnicka served the

Company as Vice President of Sales for the Stock Yards division, President of the Stock Yards division and in various other roles between 2005 and 2011.

He was Vice President of Sales for the Minneapolis Division from 2003 to 2005.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business