What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-09 · 122 added, 114 removed, 520 unchanged (31% of the section changed)

3 unchanged sentences

(In millions, except par value)

July 3, 2021 January 2, 2021

October 2, 2021 January 2, 2021

Current assets:

27 unchanged sentences

Series A convertible preferred stock, $0.01 par value—25 shares authorized;

0.5 issued and outstanding as of July 3, 2021 and

0.5 issued and outstanding as of October 2, 2021 and

January 2, 2021 534 519

2 unchanged sentences

223 and 221 issued and outstanding as of

July 3, 2021 and January 2, 2021, respectively

October 2, 2021 and January 2, 2021, respectively

Additional paid-in capital

10 unchanged sentences

13 Weeks Ended 39 Weeks Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Net sales $ 7,890 $ 5,848 $ 21,848 $ 16,747

60 unchanged sentences

BALANCE—July 3, 2021 222 2 2,933 668 ( 30 ) 3,573

Share-based compensation expense — — 13 — — 13

Proceeds from employee stock purchase plan 1 — 6 — — 6

Exercise of stock options — — 1 — — 1

Series A convertible preferred stock dividends — — — ( 9 ) — ( 9 )

Unrecognized gain on interest rate swaps, net of income tax — — — — 1 1

Net income — — — 64 — 64

BALANCE—October 2, 2021 223 $ 2 $ 2,952 $ 723 $ ( 29 ) $ 3,648

US FOODS HOLDING CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(In millions)

Common Stock Additional

19 unchanged sentences

BALANCE—June 27, 2020 221 2 2,871 686 ( 59 ) 3,500

Share-based compensation expense — — 10 — — 10

Proceeds from employee stock purchase plan — — 4 — — 4

Exercise of stock options — — 1 — — 1

Series A convertible preferred stock dividends — — — ( 10 ) — ( 10 )

Unrecognized gain on interest rate swaps, net of income tax — — — — 2 2

Net income — — — 8 — 8

BALANCE—September 26, 2020 221 $ 2 $ 2,886 $ 684 $ ( 57 ) $ 3,515

See Notes to Consolidated Financial Statements (Unaudited).

3 unchanged sentences

39 Weeks Ended

July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020

Cash flows from operating activities:

3 unchanged sentences

Depreciation and amortization

Loss on disposal of property and equipment—net

Gain on disposal of property and equipment—net

Intangible asset impairment charges

Loss on extinguishment of debt 23 —

6 unchanged sentences

(Increase) decrease in inventories—net

Increase in prepaid expenses and other assets

( 24 ) ( 12 )

Decrease in prepaid expenses and other assets

Increase in accounts payable and cash overdraft liability

62 unchanged sentences

Additionally, the new guidance requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share.

This guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

The Company is currently evaluating the impacts of the provision of the new standard on our financial position, results of operation and cash flows.

This guidance is effective for fiscal years beginning after December 15, 2021.The Company plans to adopt the provisions of ASU No.

2020-06 at the beginning of the first quarter of fiscal year 2022 and does not expect the provisions of the new standard to materially affect our financial position, results of operation or cash flows.

REVENUE RECOGNITION

5 unchanged sentences

Shipping and handling costs are treated as fulfillment costs and included in distribution, selling and administrative costs.

The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of July 3, 2021 and January 2, 2021.

Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $ 1.5 billion and $ 1.1 billion as of July 3, 2021 and January 2, 2021, respectively.

The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of October 2, 2021 or January 2, 2021.

Customer receivables, which are included in accounts receivable,

less allowances in the Company’s Consolidated Balance Sheets, were $ 1.5 billion and $ 1.1 billion as of October 2, 2021 and January 2, 2021, respectively.

The Company has certain customer contracts under which incentives are paid upfront to its customers.

1 unchanged sentence

These incentive payments are capitalized in prepaid expenses and other assets and amortized as a reduction of revenue over the life of the contract or as goods or services are transferred to the customer.

The Company’s contract assets for these upfront payments were $ 28 million and $ 30 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of July 3, 2021 and January 2, 2021, respectively, and $ 29 million and $ 27 million included in other assets in the Company’s Consolidated Balance Sheets as of July 3, 2021 and January 2, 2021, respectively.

The Company’s contract assets for these upfront payments were $ 26 million and $ 30 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of October 2, 2021 and January 2, 2021, respectively, and $ 27 million included in other assets in the Company’s Consolidated Balance Sheets as of both October 2, 2021 and January 2, 2021.

The following table presents the disaggregation of revenue for each of the Company’s principal product categories:

13 Weeks Ended 39 Weeks Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Meats and seafood $ 3,067 $ 2,069 $ 8,280 $ 5,989

5 unchanged sentences

Produce 391 313 1,074 884

Net sales $ 7,663 $ 4,560 $ 13,958 $ 10,899

Total Net sales $ 7,890 $ 5,848 $ 21,848 $ 16,747

BUSINESS ACQUISITIONS

6 unchanged sentences

The following table summarizes the final purchase price allocation recognized for the Smart Foodservice acquisition as of April 24, 2020.

The decrease in goodwill from January 2, 2021 to July 3, 2021 was due to the finalization of deferred income taxes associated with the acquisition in the first quarter of 2021.

The decrease in goodwill from January 2, 2021 to October 2, 2021 was due to the finalization of deferred income taxes associated with the acquisition in the first quarter of 2021.

Purchase Price Allocation

14 unchanged sentences

(2) Other intangibles consist of a trade name of $ 14 million with an estimated useful life of approximately 1 year.

Smart Foodservice acquisition and integration related costs included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income were $ 5 million and $ 10 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $ 9 million and $ 20 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

Pro Forma Financial Information — The following table presents the Company’s unaudited pro forma consolidated net sales, net income and earnings per share (“EPS”) for the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020.

Smart Foodservice acquisition and integration related costs included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income were $ 2 million and less than $ 1 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $ 11 million and $ 20 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

The unaudited pro forma financial information presents the combined results of operations as if the acquisition and related financing of Smart Foodservice had occurred as of December 30, 2018, which date represents the first day of the Company’s fiscal year prior to the Smart Foodservice acquisition date.

13 Weeks Ended 39 Weeks Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Pro forma net sales $ 7,890 $ 5,848 $ 21,848 $ 17,120

14 unchanged sentences

This “links” current costs to original costs in the base year when the Company adopted LIFO.

LIFO reserves in the Company’s Consolidated Balance Sheets were $ 295 million and $ 177 million as of July 3, 2021 and January 2, 2021, respectively.

As a result of changes in LIFO reserves, cost of goods sold increased $ 97 million and $ 19 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and increased $ 118 million and $ 6 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

LIFO reserves in the Company’s Consolidated Balance Sheets were $ 327 million and $ 177 million as of October 2, 2021 and January 2, 2021, respectively.

As a result of changes in LIFO reserves, cost of goods sold increased $ 32 million and $ 3 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and increased $ 150 million and $ 9 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

2 unchanged sentences

The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for doubtful accounts based on a combination of factors.

The Company maintains an

allowance for doubtful accounts, which is based upon historical experience, future expected losses, as well as specific customer collection issues that have been identified.

The Company maintains an allowance for doubtful accounts, which is based upon historical experience, future expected losses, as well as specific customer collection issues that have been identified.

The Company uses specific criteria to determine uncollectible receivables to be written off, including bankruptcy, accounts referred to outside parties for collection, and accounts past due over specified periods.

1 unchanged sentence

Starting in March 2020, in order to reduce the spread of COVID-19 and its variants, many countries, including the United States, took steps to restrict travel, temporarily close or enforce capacity restrictions on businesses, schools and other public gathering spaces, including restaurants and recreational, sporting and other similar venues.

Since December 2020, three vaccines for COVID-19 have been authorized by the United States Food and Drug Administration ("FDA") for emergency use and beginning in May 2021, all individuals 12 years old and older in the United States became eligible to receive a vaccine.

During the 13 weeks ended July 3, 2021, the Center for Disease Control and Prevention ("CDC") and most states have significantly relaxed restrictions and safety measures, such as capacity limits, physical distancing and face mask protocols, as a result of significant progress made in vaccinating the U.S.

public and the resulting decline in COVID-19 cases.

Due to the impact that the COVID-19 pandemic was expected to have on our customers, particularly our restaurant and hospitality customers, and to reflect the increased collection risk associated with our customers, we significantly increased our allowance for doubtful accounts during the 13 weeks ended March 28, 2020.

In each subsequent quarter of fiscal year 2020 and during the 13 weeks ended April 3, 2021, due to more favorable than anticipated collections on our pre-COVID-19 accounts receivable, we reduced our allowance for doubtful accounts while leaving the remaining pre-COVID-19 accounts receivable fully reserved.

During the 13 weeks ended July 3, 2021, amounts expensed for the period were more consistent with pre-pandemic activity.

A summary of the activity in the allowance for doubtful accounts for the 26 weeks ended July 3, 2021 was as follows:

A summary of the activity in the allowance for doubtful accounts for the 39 weeks ended October 2, 2021 was as follows:

Balance as of January 2, 2021 $ 67

1 unchanged sentence

Customer accounts written off—net of recoveries ( 10 )

Balance as of July 3, 2021 $ 45

This table excludes the vendor receivable related allowance for doubtful accounts of $ 6 million and $ 5 million as of July 3, 2021 and January 2, 2021, respectively.

Balance as of October 2, 2021 $ 39

This table excludes the vendor receivable related allowance for doubtful accounts of $ 6 million and $ 5 million as of October 2, 2021 and January 2, 2021, respectively.

PROPERTY AND EQUIPMENT

2 unchanged sentences

Property and equipment under financing leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining terms of the related leases or the estimated useful lives of the assets, if reasonably assured the Company will purchase the assets at the end of the lease terms.

As of July 3, 2021 and January 2, 2021, property and equipment-net included accumulated depreciation of $ 2,717 million and $ 2,566 million, respectively.

Depreciation expense was $ 81 million and $ 87 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $ 163 million and $ 169 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

As of October 2, 2021 and January 2, 2021, property and equipment-net included accumulated depreciation of $ 2,784 million and $ 2,566 million, respectively.

Depreciation expense was $ 79 million and $ 88 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $ 242 million and $ 257 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

GOODWILL AND OTHER INTANGIBLES

4 unchanged sentences

Customer relationships, amortizable trade names and noncompete agreements are amortized over their estimated useful lives (which range from approximately 3 to 15 years).

Amortization expense was $ 13 million and $ 19 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $ 32 million and $ 38 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

Amortization expense was $ 12 million and $ 21 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $ 44 million and $ 59 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Goodwill and other intangibles—net consisted of the following:

July 3, 2021 January 2, 2021

October 2, 2021 January 2, 2021

Goodwill $ 5,625 $ 5,637

15 unchanged sentences

Total other intangibles—net $ 841 $ 892

The net decrease in the gross carrying amount of customer relationships as of July 3, 2021 is attributable to the write-off of fully amortized intangible assets related to certain 2016 and 2017 business acquisitions.

The Company assesses for impairment of intangible assets with definite lives only if events occur that indicate that the carrying amount of an intangible asset may not be recoverable.

1 unchanged sentence

For goodwill and indefinite-lived intangible assets, the Company’s policy is to assess for impairment as of the beginning of each fiscal third quarter.

In the third quarter of fiscal year 2020, the Company performed a quantitative assessment in testing goodwill and indefinite-lived intangible assets for impairment, which resulted in the carrying value of two trade names acquired as part of the Food Group acquisition exceeding their fair value by $ 9 million, and impairment charges of this amount were recognized.

The Company completed its most recent annual impairment assessment for goodwill and indefinite-lived intangible assets for impairment as of July 4, 2021, the first day of the third quarter of fiscal year 2021.

During the third quarter of fiscal year 2021, the Company implemented rebranding initiatives related to the integration of a trade name acquired as part of the 2019 Food Group acquisition.

As a result of the rebranding initiatives, the Company recognized an impairment charge of $ 7 million, which was included in restructuring and asset impairment charges in the Company's Consolidated Statement of Comprehensive Income.

The remaining carrying value of the acquired trade name of $ 3 million as of October 2, 2021, was reclassified to trade names—amortizable and will be amortized with an estimated remaining useful life of 10 years.

No other impairments were noted as part of the annual impairment assessment.

The decrease in goodwill as of October 2, 2021 is attributable to the finalization of the purchase price allocation recognized for the Smart Foodservice acquisition, as described in Note 4, Business Acquisitions.

The net decrease in the gross carrying amount of customer relationships as of October 2, 2021 is attributable to the write-off of fully amortized intangible assets related to certain 2016 and 2017 business acquisitions.

The net decrease in the gross carrying amount of amortizable trade names is attributable to the write-off of the fully amortized trade name related to the Smart Foodservice acquisition, when Smart Foodservice® warehouse stores were rebranded to CHEF'STORE® in March 2021, partially offset by the aforementioned reclassification of the remaining carrying value of the trade name acquired with the Food Group acquisition.

The net decrease in the gross carrying amount of brand names and trademarks—not amortizing is primarily due to the aforementioned impairment

of the trade name acquired with the Food Group acquisition with the remaining balance being reclassified to trade names—amortizable.

FAIR VALUE MEASUREMENTS

The Company follows the accounting standards for fair value, under which fair value is a market-based measurement, not an entity-specific measurement.

Certain assets and liabilities are carried at fair value under GAAP, under which fair value is a market-based measurement, not an entity-specific measurement.

The Company’s fair value measurements are based on the assumptions that market participants would use in pricing the asset or liability.

5 unchanged sentences

There were no transfers between fair value levels in any of the periods presented below.

The Company’s assets and liabilities measured at fair value on a recurring basis as of July 3, 2021 and January 2, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

The Company’s assets and liabilities measured at fair value on a recurring basis as of October 2, 2021 and January 2, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

October 2, 2021

Level 1 Level 2 Level 3 Total

1 unchanged sentence

$ 626 $ — $ — $ 626

Interest rate swaps

$ — $ 1 $ — $ 1

January 2, 2021

10 unchanged sentences

Derivative Financial Instruments

The Company uses interest rate swaps, designated as cash flow hedges, to manage its exposure to interest rate movements in connection with its variable-rate Initial Term Loan Facility (as defined in Note 10, Debt).

USF previously entered into four-year interest rate swap agreements, which collectively had a notional value of $ 550 million, which was reduced from $ 733 million on July 31, 2020.

The interest rate swap agreements expired on July 31, 2021.

The Company may use interest rate swaps, designated as cash flow hedges, to manage its exposure to interest rate movements in connection with its variable-rate debt.

As of January 2, 2021, the fair value of the Company’s interest rate swaps liability from certain previously entered into four-year interest rate swap agreements, which collectively had a notional value of $ 550 million, was $ 5 million, as reflected in its Consolidated Balance Sheet in accrued expenses and other current liabilities.

The Company recorded these interest rate swaps at fair value based on projections of cash flows and future interest rates.

The determination of fair value included the consideration of any credit valuation adjustments necessary, to reflect the creditworthiness of the respective counterparties and the Company.

These interest rate swap agreements expired on July 31, 2021.

Through the term of the swap agreements, the Company paid an aggregate effective rate of 3.45 % on the notional amount of the Initial Term Loan Facility covered by the interest rate swap agreements, comprised of a rate of 1.70 % plus a spread of 1.75 % (see Note 10, Debt).

The Company records its interest rate swaps in its Consolidated Balance Sheets at fair value, based on projections of cash flows and future interest rates.

The determination of fair value includes the consideration of any credit valuation adjustments necessary, giving consideration to the creditworthiness of the respective counterparties and the Company.

The following table presents the balance sheet location and fair value of the interest rate swaps as of July 3, 2021 and January 2, 2021:

Balance Sheet Location July 3, 2021 January 2, 2021

Derivatives designated as hedging instruments

Interest rate swaps

Accrued expenses and

other current liabilities $ 1 $ 5

Total liabilities $ 1 $ 5

Gains and losses on the interest rate swaps are initially recorded in accumulated o ther comprehensive loss and reclassified to interest expense during the period in which the hedged transaction affects income.

The following table presents the effect of the Company’s interest rate swaps in its Consolidated Statements of Comprehensive Income f or the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020:

Gains and losses on the interest rate swaps were initially recorded in accumulated o ther comprehensive loss and reclassified to interest expense during the period in which the hedged transaction affected income.

The following table presents the effect of the Company’s interest rate swaps in its Consolidated Statements of Comprehensive Income f or the 13 weeks and 39 weeks ended October 2, 2021 and September 26, 2020:

Derivatives in Cash Flow Hedging Relationships Amount of Loss Recognized in Accumulated Other Comprehensive Loss, net of tax Location of Amounts Reclassified from Accumulated Other Comprehensive Loss Amount of Loss Reclassified from Accumulated Other Comprehensive Loss to Income, net of tax

For the 13 weeks ended July 3, 2021

For the 13 weeks ended October 2, 2021

Interest rate swaps

$ — Interest expense—net $ 1

For the 13 weeks ended June 27, 2020

For the 13 weeks ended September 26, 2020

Interest rate swaps

$ — Interest expense—net $ 2

For the 26 weeks ended July 3, 2021

For the 39 weeks ended October 2, 2021

Interest rate swaps

$ — Interest expense—net $ 5

For the 26 weeks ended June 27, 2020

For the 39 weeks ended September 26, 2020

Interest rate swaps

$ ( 8 ) Interest expense—net $ 4

During the next twelve months, $ 1 million will be reclassified from accumulated other comprehensive loss to income.

Other Fair Value Measurements

The carrying value of cash, accounts receivable, vendor receivables, cash overdraft liability and accounts payable approximate their fair values due to their short-term maturities.

The fair value of the Company’s total debt approximated $ 5.6 billion, compared to its carrying value of $ 5.5 billion as of July 3, 2021.

The fair value of the Company’s total debt approximated its carrying value of $ 5.4 billion as of October 2, 2021.

The fair value of the Company’s total debt approximated $ 5.8 billion, compared to its carrying value of $ 5.7 billion as of January 2, 2021.

The fair value of the Company's 4.75 % unsecured senior notes due February 15, 2029 (the "Unsecured Senior Notes due 2029") was $ 0.9 billion as of July 3, 2021.

The fair value of the Company's 4.75 % unsecured senior notes due February 15, 2029 (the “Unsecured Senior Notes due 2029”) was $ 0.9 billion as of October 2, 2021.

As discussed in Note 10, Debt, the proceeds from the Unsecured Senior Notes due 2029 were used to redeem the Company's 5.875 % unsecured senior notes due 2024 (the “Unsecured Senior Notes due 2024”) and other outstanding Company debt.

The fair value of the Unsecured Senior Notes due 2024 was $ 0.6 billion as of January 2, 2021.

The fair value of the Company’s 6.25 % senior secured notes due April 15, 2025 (the “Secured Notes”) was $ 1.1 billion as of both July 3, 2021 and January 2, 2021.

The fair value of the Company’s 6.25 % senior secured notes due April 15, 2025 (the “Secured Notes”) was $ 1.1 billion as of both October 2, 2021 and January 2, 2021.

Fair value of the Secured Notes, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2024 is based upon their closing market prices on the respective dates.

2 unchanged sentences

Total debt consisted of the following:

Debt Description Maturity Interest Rate as of July 3, 2021 Carrying Value as of July 3, 2021 Carrying Value as of January 2, 2021

Debt Description Maturity Interest Rate as of October 2, 2021 Carrying Value as of October 2, 2021 Carrying Value as of January 2, 2021

ABL Facility May 31, 2024 — % $ — $ —

26 unchanged sentences

The related unamortized deferred financing costs were written off in connection with the terminations.

As of July 3, 2021, after considering interest rate swaps that fixed the interest rate on $ 550 million of principal of the Initial Term Loan Facility described below, approximately 51 % of the Company’s total debt bears interest at a floating rate.

As of October 2, 2021, approximately 60 % of the Company’s total debt bears interest at a floating rate.

USF's asset based senior secured revolving credit facility (the “ABL Facility”) provides USF with loan commitments having a maximum aggregate principal amount of $ 1,990 million.

1 unchanged sentence

Borrowings under the ABL Facility bear interest, at USF’s periodic election, at a rate equal to the sum of an alternative base rate (“ABR”), as described under the ABL Facility, plus a margin ranging from 0.00 % to 0.50 %, or the sum of LIBOR plus a margin ranging from 1.00 % to 1.50 %, in each case based on USF’s excess availability under the ABL Facility.

The margin under the ABL Facility as of July 3, 2021 was 0.00 % for ABR loans and 1.00 % for LIBOR loans.

USF had no outstanding borrowings, and had issued letters of credit totaling $ 253 million, under the ABL Facility as of July 3, 2021.

The margin under the ABL Facility as of October 2, 2021 was 0.00 % for ABR loans and 1.00 % for LIBOR loans.

USF had no outstanding borrowings, and had issued letters of credit totaling $ 253 million, under the ABL Facility as of October 2, 2021.

The outstanding letters of credit primarily relate to securing USF’s obligations with respect to its insurance program and certain real estate leases.

There was available capacity of $ 1,737 million under the ABL Facility as of July 3, 2021.

There was available capacity of $ 1,737 million under the ABL Facility as of October 2, 2021.

Term Loan Facilities

Under its term loan credit agreement, USF has entered into an initial senior secured term loan facility (the “Initial Term Loan Facility”) and an incremental senior secured term loan facility (the “2019 Incremental Term Loan Facility”).

The Initial Term Loan Facility had a carrying value of $ 1.9 billion, net of $ 2 million of unamortized deferred financing costs as of July 3, 2021.

During the 13 weeks ended July 3, 2021, the Company made voluntary prepayments of the Initial Term Loan Facility totaling $ 200 million.

The table above reflects the interest rate on the unhedged portion of the Initial Term Loan Facility as of July 3, 2021.

The effective interest rate of the portion of the Initial Term Loan Facility subject to interest rate hedging agreements was 3.45 % as of July 3, 2021.

The Initial Term Loan Facility had a carrying value of $ 1,783 million, net of $ 2 million of unamortized deferred financing costs as of October 2, 2021.

During the 39 weeks ended October 2, 2021, the Company made voluntary prepayments of the Initial Term Loan Facility totaling $ 300 million.

The table above reflects the interest rate on the Initial Term Loan Facility as of October 2, 2021.

The Initial Term Loan Facility is scheduled to mature on June 27, 2023.

The 2019 Incremental Term Loan Facility had a carrying value of $ 1,447 million, net of $ 27 million of unamortized deferred financing costs as of July 3, 2021.

The 2019 Incremental Term Loan Facility had a carrying value of $ 1,444 million, net of $ 26 million of unamortized deferred financing costs as of October 2, 2021.

Borrowings under the 2019 Incremental Term Loan Facility bear interest at a rate per annum equal to, at USF’s option, either the sum of LIBOR plus a margin of 2.00 %, or the sum of an ABR, determined in accordance with the term loan credit agreement, plus a margin of 1.00 %.

1 unchanged sentence

Secured Notes

The Secured Notes had a carrying value of $ 989 million, net of $ 11 million of unamortized deferred financing costs, as of July 3, 2021.

The Secured Notes had a carrying value of $ 989 million, net of $ 11 million of unamortized deferred financing costs, as of October 2, 2021.

The Secured Notes are scheduled to mature on April 15, 2025.

4 unchanged sentences

Lender fees and third-party costs of $ 9 million associated with the issuance of the Unsecured Senior Notes due 2029 were capitalized as deferred financing costs.

The Unsecured Senior Notes due 2029 had an outstanding balance of $ 891 million, net of $ 9 million of unamortized deferred financing costs, as of July 3, 2021.

The Unsecured Senior Notes due 2029 had an outstanding balance of $ 891 million, net of $ 9 million of unamortized deferred financing costs, as of October 2, 2021.

The Unsecured Senior Notes due 2029 bear interest at a rate of 4.75 % per annum and will mature on February 15, 2029.

4 unchanged sentences

These include, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations.

USF had approximately $ 1.3 billion of restricted payment capacity under these covenants, and approximately $ 2.8 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as of July 3, 2021.

USF had approximately $ 1.4 billion of restricted payment capacity under these covenants, and approximately $ 2.8 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as of October 2, 2021.

RESTRUCTURING LIABILITIES

1 unchanged sentence

In connection with these activities, the Company may incur various costs including severance and other employee-related separation costs.

During the 26 weeks ended July 3, 2021, the Company incurred net restructuring costs of $ 4 million for severance and related costs associated with the announced closure of an excess facility and initiatives to improve operational effectiveness.

During the 26 weeks ended June 27, 2020, in order to reduce operating expenses in line with the decrease in sales volume caused by the COVID-19 pandemic, the Company reduced its sales force and incurred net restructuring costs of $ 16 million for severance and related costs.

Net restructuring liabilities were $ 5 million and $ 2 million as of July 3, 2021 and January 2, 2021, respectively.

The following table summarizes the changes in the restructuring liabilities for the 26 weeks ended July 3, 2021:

Severance and Related Costs Facility Closing Costs Total

Balance at January 2, 2021 $ 1 $ 1 $ 2

Current period charges 4 — 4

Payments, net ( 1 ) — ( 1 )

Balance as of July 3, 2021 $ 4 $ 1 $ 5

During the 39 weeks ended October 2, 2021, the Company incurred net restructuring costs of $ 3 million for severance and related costs associated with the announced closure of an excess facility and initiatives to improve operational effectiveness.

During the 13 weeks ended October 2, 2021, net restructuring costs were de minimis.

During the 13 weeks and 39 weeks ended September 26, 2020, in order to reduce operating expenses in line with the decrease in sales volume caused by the COVID-19 pandemic, the Company reduced its work force and incurred net restructuring costs of $ 14 million and $ 30 million for severance and related costs.

Net restructuring liabilities were $ 3 million and $ 2 million as of October 2, 2021 and January 2, 2021, respectively.

RETIREMENT PLANS

4 unchanged sentences

13 Weeks Ended 39 Weeks Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Components of net periodic pension benefit credits

5 unchanged sentences

Net periodic pension benefit credits $ ( 6 ) $ ( 5 ) $ ( 17 ) $ ( 14 )

Other postretirement benefit costs were de minimis for both the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020.

Other postretirement benefit costs were de minimis for both the 13 weeks and 39 weeks ended October 2, 2021 and September 26, 2020.

The service cost component of net periodic benefit credits is included in distribution, selling and administrative costs, while the other components of net periodic benefit credits are included in other income—net, respectively, in the Company's Consolidated Statements of Comprehensive Income.

1 unchanged sentence

Certain employees are eligible to participate in the Company's 401(k) plan.

The Company made employer matching contributions to the 401(k) plan of $ 13 million and $ 9 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $ 26 million and $ 23 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

The Company made employer matching contributions to the 401(k) plan of $ 13 million and $ 11 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $ 39 million and $ 34 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

The Company is also required to contribute to various multiemployer pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees.

The Company’s contributions to these plans were $ 12 million and $ 10 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $ 22 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

The Company’s contributions to these plans were $ 11 million for each of the 13 weeks ended October 2, 2021 and September 26, 2020, and $ 33 million for each of the 39 weeks ended October 2, 2021 and September 26, 2020.

EARNINGS PER SHARE

4 unchanged sentences

The Company applies the if-converted method to calculate the dilution impact of the Series A convertible preferred stock, if dilutive in the period.

For the 13 weeks ended July 3, 2021 and June 27, 2020, share-based awards representing 1 million and 9 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

For the 26 weeks ended July 3, 2021 and June 27, 2020, share-based awards representing 2 million and 9 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

For the 13 weeks ended July 3, 2021 and June 27, 2020, convertible preferred stock representing 25 million and 14 million of underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

For the 26 weeks ended July 3, 2021 and June 27, 2020, convertible preferred stock representing 25 million and 7 million of underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

For the 13 weeks and 39 weeks ended October 2, 2021 and September 26, 2020, share-based awards representing 2 million and 9 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

For the 13 weeks ended October 2, 2021 and September 26, 2020, convertible preferred stock representing 25 million and 23 million of underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

For the 39 weeks ended October 2, 2021 and September 26, 2020, convertible preferred stock representing 25 million and 12 million of underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

The following table sets forth the computation of basic and diluted EPS:

13 Weeks Ended 39 Weeks Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Net income (loss)

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Effect of dilutive share-based awards

Effect of dilutive underlying shares of the Series A convertible preferred stock (2)

Effect of dilutive underlying shares of the Series A

convertible preferred stock (2)

Weighted-average common shares outstanding—diluted

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(1) Preferred stock dividends for the first quarter of 2021 were paid in kind on March 31, 2021.

Preferred stock dividends for the second quarter of 2021 were paid in cash on June 30, 2021.

Preferred stock dividends for the second and third quarters of 2021 were paid in cash on June 30, 2021 and September 28, 2021, respectively.

Preferred stock dividends for the second and third quarters of 2020 were paid in kind on June 30, 2020 and September 30, 2020, respectively.

(2) The Company applies the if-converted method to calculate the dilution impact of the Series A convertible preferred stock, if dilutive in the period.

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Once converted, there would be no preferred stock outstanding and therefore no preferred stock dividend.

For the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020, the effect of the Series A convertible preferred stock was excluded, as the inclusion of the incremental shares would be anti-dilutive.

CONVERTIBLE PREFERRED STOCK

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On March 31, 2021, the Company paid a dividend on the shares of the Series A convertible preferred stock in the form of 9,154 shares of Series A convertible preferred stock, plus a de minimis amount in cash in lieu of fractional shares in accordance with the terms of the Certificate of Designations for the Series A convertible preferred stock.

On June 30, 2021, the Company paid a cash dividend of $ 9 million on the shares of the Series A convertible preferred stock.

The following table summarizes the activity for the outstanding Series A convertible preferred stock and associated carrying value for the 26 weeks ended July 3, 2021 was as follows:

On June 30, 2021 and September 28, 2021, the Company paid cash dividends of $ 9 million each on the shares of the Series A convertible preferred stock.

The following table summarizes the activity for the outstanding Series A convertible preferred stock and associated carrying value for the 39 weeks ended October 2, 2021 was as follows:

Series A Convertible Preferred Stock

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Shares issued as paid in kind dividend 9,154 15

Balance July 3, 2021 532,281 $ 534

Balance October 2, 2021 532,281 $ 534

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

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13 Weeks Ended 39 Weeks Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Accumulated other comprehensive loss components

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Change in fair value of interest rate swaps

— ( 2 ) — ( 10 )

Amounts reclassified to interest expense—net

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RELATED PARTY TRANSACTIONS

As of July 3, 2021, investment funds managed by an affiliate of KKR held approximately $ 56 million in aggregate principal amount of the Initial Term Loan Facility and the 2019 Incremental Term Loan Facility, as reported by the administrative agent.

During the 26 weeks ended July 3, 2021, KKR Capital Markets LLC, an affiliate of KKR, received $ 1 million for debt advisory services rendered in connection with the Unsecured Senior Notes due 2029 financing.

During the 26 weeks ended June 27, 2020, KKR Capital Markets LLC received aggregate fees of $ 6 million for debt advisory services rendered in connection with the 2020 Incremental Term Loan Facility, the Secured Notes and the ABL Facility amendment financings.

As of October 2, 2021, investment funds managed by an affiliate of KKR held approximately $ 54 million in aggregate principal amount of the Initial Term Loan Facility and the 2019 Incremental Term Loan Facility, as reported by the administrative agent.

During the 39 weeks ended October 2, 2021, KKR Capital Markets LLC, an affiliate of KKR, received $ 1 million for debt advisory services rendered in connection with the Unsecured Senior Notes due 2029 financing.

During the 39 weeks ended September 26, 2020, KKR Capital Markets LLC received aggregate fees of $ 6 million for debt advisory services rendered in connection with the 2020 Incremental Term Loan Facility, the Secured Notes and the ABL Facility amendment financings.

The determination of the Company’s overall effective income tax rate requires the use of estimates.

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federal and various state jurisdictions based on enacted tax law, permanent differences between book and tax items, tax credits and the Company’s change in relative income in each jurisdiction.

The Company estimated its annual effective income tax rate for the full fiscal year and applied the annual effective income tax rate to the results of the 26 weeks ended July 3, 2021 and June 27, 2020 for purposes of determining its year-to-date tax provision.

For the 13 weeks ended July 3, 2021, the Company's effective income tax rate of 28 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes.

For the 13 weeks ended June 27, 2020, the Company's effective income tax rate of 22 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

These discrete tax items included a tax expense of $ 2 million, primarily related to an increase in an unrecognized tax benefit.

For the 26 weeks ended July 3, 2021, the Company's effective income tax rate of 9 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

The Company estimated its annual effective income tax rate for the full fiscal year and applied the annual effective income tax rate to the results of the 39 weeks ended October 2, 2021 and September 26, 2020, and then recognized the impact of discrete tax items for purposes of determining its year-to-date tax provision.

For the 13 weeks ended October 2, 2021, the Company's effective income tax rate of 30 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

The discrete tax items were not material individually or in the aggregate;

however, when compared to the pre-tax income of $91 million for the period on a percentage basis, these tax items had a significant impact on the effective tax rate.

For the 13 weeks ended September 26, 2020, the Company's effective income tax rate of 58 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

Because pre-tax income for the 13 weeks ended September 26, 2020 was $ 21 million, all tax adjustments had a significant impact on a

percentage basis on the effective income tax rate.

The discrete tax items were not material individually or in the aggregate;

however, when compared to the pre-tax income of $ 21 million for the period on a percentage basis, these tax items had a significant impact on the effective tax rate.

For the 39 weeks ended October 2, 2021, the Company's effective income tax rate of 24 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

These discrete tax items include a tax benefit of $ 5 million, primarily related to excess tax benefits associated with share-based compensation.

the 26 weeks ended June 27, 2020, the Company's effective income tax rate of 23 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

For the 39 weeks ended September 26, 2020, the Company's effective income tax rate of 20 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

These discrete tax items included a tax expense of $ 2 million primarily related to an increase in an unrecognized tax benefit and a tax expense of $ 2 million primarily related to a tax benefit shortfall associated with share-based compensation.

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Purchase Commitments —The Company enters into purchase orders with vendors and other parties in the ordinary course of business and has a limited number of purchase contracts with certain vendors that require it to buy a predetermined volume of products.

The Company had $ 1,481 million of purchase orders and purchase contract commitments as of July 3, 2021 to be purchased in the remainder of fiscal year 2021 and $ 55 million of information technology commitments through August 2025 that are not recorded in the Company's Consolidated Balance Sheets.

The Company had $ 1,337 million of purchase orders and purchase contract commitments as of October 2, 2021 to be purchased in the remainder of fiscal year 2021 and $ 46 million of information technology commitments through August 2025 that are not recorded in the Company's Consolidated Balance Sheets.

To minimize fuel price risk, the Company enters into forward purchase commitments for a portion of its projected diesel fuel requirements.

The Company had diesel fuel forward purchase commitments totaling $ 28 million through June 2022, as of July 3, 2021.

Additionally, the Company had electricity forward purchase commitments totaling $ 5 million through June 2024, as of July 3, 2021.

The Company had diesel fuel forward purchase commitments totaling $ 31 million through December 2022, as of October 2, 2021.

Additionally, the Company had electricity forward purchase commitments totaling $ 4 million through June 2024, as of October 2, 2021.

The Company does not measure its forward purchase commitments for fuel and electricity at fair value, as the amounts under contract meet the physical delivery criteria in the normal purchase exception.

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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-Q

Item 1. Financial Statements