What changed in this filing

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Item 1A. Risk Factors

2022-02-17 compared with 2021-02-16 · 96 added, 99 removed, 264 unchanged (42% of the section changed)

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An uneven level of general U.S.

economic activity, uncertainty in the financial markets, and slow job growth could have a negative impact on consumer confidence and discretionary spending.

economic activity, uncertainty in the financial markets, inflation, and supply chain disruptions could have a negative impact on consumer confidence and discretionary spending.

A decline in economic activity or the frequency and amount spent by consumers for food prepared away from home, as well as other macroenvironmental factors that could decrease general consumer confidence (including volatile financial markets or an uncertain political environment), may negatively impact our business, financial condition and results of operations.

The global COVID-19 pandemic and its sudden and significant effects on the economy have and will continue to impact many of our customers, consumers and suppliers and, as a result, it has and will continue to impact us for an indeterminable period of time.

Widespread adoption of “social distancing” measures, governmental directions to close non-essential businesses and public perceptions of the risks associated with the COVID-19 pandemic have resulted in a substantial disruption in many of our customers’ operations (including the limitation of dining options and the temporary (and, in some cases, permanent) closure of many restaurant, hospitality and education customers’ locations) and have significantly reduced the demand for our products and services.

Sustained disruption in our customers’ operations and reduced consumer spending on food prepared away from home as a result of the COVID-19 pandemic has had, and is expected to continue to have, a significant negative effect on our customers’ financial condition and, as a result, has adversely impacted, and is expected to continue to adversely impact, our business, financial condition and results of operations.

The global COVID-19 pandemic and its significant effect on the economy have impacted and is expected to continue to impact many of our customers, consumers and suppliers.

Widespread adoption of social distancing, masking and testing measures and public concerns about the risks associated with COVID-19 infection have resulted in substantial disruption to many of our customers’ operations (including the limitation of dining options and the temporary (and, in some cases, permanent) closure of many restaurant, hospitality and education customers’ locations) which resulted in a significant reduction in the demand for our products and services.

Sustained disruption in our customers’ operations and reduced consumer spending on food prepared away from home as a result of the COVID-19 pandemic has had, and may continue to have, a significant negative effect on our customers’ financial condition and, as a result, has adversely impacted, and may continue to adversely impact, our business, financial condition and results of operations.

We do not expect a full recovery for our business and the U.S.

foodservice industry until there has been widespread vaccination of the American public, and consumers are once again willing and able to resume consumption of food away from home, travel and attend sporting, entertainment and other events on a regular basis.

Although two vaccines for COVID-19 were approved by the United States Food and Drug Administration in December 2020, as of January 2, 2021, only a limited number of doses have been made available in the United States to certain frontline workers and at-risk individuals, and it remains unclear when either of these vaccines or others will be widely available to the American public.

General economic conditions, such as higher unemployment rates and uncertainty regarding when the COVID-19 pandemic will abate, have had, and are expected to continue to have, a negative impact on consumer confidence and discretionary spending which will likely slow the recovery of the U.S.

foodservice industry until consumers are once again willing and able to resume consumption of food away from home, travel and attend sporting, entertainment and other events on a regular basis.

We may continue to face challenges as the recovery continues, such as constraints on the availability of product supply, increased product and logistics costs, labor shortages, and shifts in the buying patterns of our customers.

General economic conditions, such as inflation, supply chain disruptions, labor shortages and uncertainty regarding when the COVID-19 pandemic will abate, have had, and are expected to continue to have, a negative impact on consumer confidence and discretionary spending which will likely slow the recovery of the U.S.

foodservice industry.

Even when economic conditions improve, we cannot predict when or if our business will recover to pre-COVID-19 levels or the long-term effects of the pandemic on our business.

If the restaurant and/or hospitality industry is fundamentally changed by the COVID-19 pandemic in ways that are detrimental to us, our business may continue to be adversely affected even as the pandemic abates and the broader economy begins to recover.

The negative impact of the COVID-19 pandemic led to a significant decline in net sales and total case volumes during the 53 weeks ended January 2, 2021, compared to the prior fiscal year.

Total case volumes were down approximately 11.0% for the 53 weeks ended January 2, 2021.

Because the COVID-19 situation is fluid and continues to evolve and because the duration and severity of the COVID-19 pandemic and its continued negative impact on the economy is unclear, it is difficult to forecast the impacts of the pandemic on our future results.

However, we currently expect that the COVID-19 pandemic and its effects will continue to have a significant adverse impact on our business, financial condition and results of operations for the duration of the pandemic and, if the subsequent economic recovery is slow and gradual, throughout substantial portions of that recovery.

Multiple factors could negatively impact the timing and extent of the industry’s recovery from the COVID-19 pandemic including the rate of vaccine adoption, the prevalence and impact of COVID-19 variants (and the continued effectiveness of the vaccines against those variants) and the duration and implications of continued restrictions and safety measures.

To the extent the COVID-19 pandemic adversely affects the business and financial results of our Company and our customers, it may also have the effect of amplifying many of the other risks described in this “Risk Factors” section.

The COVID-19 pandemic has had and will have a significant negative impact on our liquidity position and we expect that the impact will continue until the pandemic and any related negative economic effects abate.

Sustained disruption in our customers’ operations as a result of the COVID-19 pandemic will have a significant negative effect on our customers’ financial condition and, as a result, will adversely impact our business, financial condition and results of operations.

As a result of the COVID-19 pandemic, we have experienced some deterioration in the collectability of our existing accounts receivable

and a decrease in the generation of new accounts receivable.

If the COVID-19 pandemic continues to persist for a prolonged period of time, we may experience further deterioration in the collectability of our existing accounts receivable and a continued decrease in the generation of our accounts receivable, which could adversely affect our cash flows and results of operations and require an increased level of working capital.

The COVID-19 pandemic could have a significant negative impact on our liquidity position.

Sustained disruption in our customers’ operations as a result of the COVID-19 pandemic has had a significant negative effect on our customers’ financial condition and could result in deterioration in the collectability of our existing accounts receivable and a decrease in the generation of new accounts receivable, which could adversely affect our cash flows and results of operations and require an increased level of working capital.

In addition, our ability to borrow under our asset based senior secured revolving credit facility (the “ABL Facility”) is subject to a borrowing base limitation that is based on certain criteria, including the amount and collectability of new accounts receivable.

Thus, a decline in the amount and collectability of our accounts receivable not only adversely affects our cash flows and results of operations, but also reduces our access to additional liquidity due its negative impact on the borrowing base of the ABL Facility.

Furthermore, due to the negative impact that the COVID-19 pandemic had on our Adjusted EBITDA in the last three quarterly periods and is expected to have on future quarterly periods, we anticipate that our future ability to incur additional indebtedness under the incurrence “baskets” of our debt agreements that are based on a leverage ratio or coverage ratio calculation will be constrained.

In addition, the COVID-19 pandemic is has previously adversely affected, and in the future may again adversely affect, the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be readily available or available on favorable terms, especially the longer the COVID-19 pandemic lasts.

Two rating agencies announced downgrades to our credit ratings in May and September 2020, respectively.

Our access to capital and the cost of any financing could be negatively impacted by this downgrade or any future downgrade or if financing sources were to ascribe higher credit risk to us or our industry.

As a result, the COVID-19 pandemic has had a significant impact on our liquidity position and we expect that impact will continue until the pandemic and any related negative economic effects abate.

We expect to have sufficient liquidity to fund our operations and meet ordinary course obligations through 2022 even if total case volumes remain at current levels.

Furthermore, the negative impact that the COVID-19 pandemic may have on our Adjusted EBITDA could constrain our future ability to incur additional indebtedness under the incurrence “baskets” of our debt agreements that are based on a leverage ratio or coverage ratio calculation.

In addition, the COVID-19 pandemic has previously adversely affected, and in the future may again adversely affect, the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be readily available or available on favorable terms, especially the longer the impact of the COVID-19 pandemic lasts.

We believe that the combination of cash on hand and cash generated from operations, together with borrowing capacity under the agreements governing our indebtedness and other financing arrangements, will be adequate to permit us to meet our debt service obligations, ongoing costs of operations, working capital needs, and capital expenditure requirements for the next 12 months.

We cannot, however, assure you that this will be the case.

Any further significant reduction to our liquidity position caused by the COVID-19 pandemic could impair our ability to service our outstanding indebtedness and pay our other payables as they become due.

Any future significant reduction to our liquidity position caused by the COVID-19 pandemic could impair our ability to service our outstanding indebtedness and pay our other payables as they become due.

Our business is a low-margin business, and our profitability is directly affected by cost deflation or inflation, commodity volatility and other factors.

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Prolonged periods of product cost inflation, or periods of rapid inflation, also may negatively impact our business as a result of decreased discretionary consumer spending.

Such inflation may also reduce our profit margins and earnings if product cost increases cannot be passed on to customers because they resist paying higher prices or if there is a lag between when costs increase and when we are able to pass it along to customers.

Such inflation may also reduce our profit margins and earnings if there is a lag between when costs increase and when we are able to pass it along to customers or if product cost increases cannot be passed on to customers because they resist paying higher prices.

Competition in our industry is intense, and we may not be able to compete successfully.

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foodservice distribution industry are based on the type, quality and price of the product and a distributor’s ability to completely and accurately fill orders and provide timely deliveries.

Disruption caused by the COVID-19 pandemic to our ability to completely and accurately fill orders and provide timely deliveries of quality products at competitive prices has had, and is expected to continue to have, a negative impact on our business, financial condition and results of operations.

Disruptions caused by the COVID-19 pandemic and related labor shortages that impact our ability to completely and accurately fill orders and provide timely deliveries of quality products at competitive prices have had, and may continue to have, a negative impact on our business, financial condition and results of operations.

Increased competition has caused the U.S.

foodservice distribution industry to change as distributors seek to lower costs, further increasing pressure on the industry’s profit margins.

The continuing impact of the COVID-19 pandemic may further increase those competitive pressures including as a result of product availability from our suppliers, disruptions to timely and cost effective shipments from our suppliers due to increased freight demand and/or tightened truckload capacity, new pricing initiatives and discount programs established by competitors, consolidation and vertical integration, and increased customer cost consciousness.

Any or all of these competitive pressures may continue to affect us during any recovery in the U.S.

foodservice distribution industry following the widespread vaccination of the American public.

The continuing impact of the COVID-19 pandemic may further increase those competitive pressures including as a result of constraints on product availability from our suppliers, disruptions to timely and cost effective shipments from our suppliers due to labor shortages, supply chain disruptions, increased freight demand and/or tightened truckload capacity, new pricing initiatives and discount programs established by competitors, consolidation and vertical integration, and increased customer cost consciousness.

Any or all of these competitive pressures may continue to affect us during the recovery of the U.S.

foodservice distribution industry from the impact of the COVID-19 pandemic.

To the extent we are not able to compete successfully, our business, financial condition, and results of operations may be adversely affected.

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We do not control the actual production of most of the products we sell.

This means we are also subject to delays caused by interruption in production and increases in product costs based on actions and conditions outside our control.

This means we are also subject to delays caused by interruption in production and increases in product costs based on actions and conditions outside our control including the continuing challenges experienced during the COVID-19 pandemic.

These actions and conditions include changes in supplier pricing practices (including promotional allowances);

work slowdowns, work interruptions, strikes or other job actions by employees of suppliers;

labor shortages, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers;

government shutdowns;

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product or raw material scarcity;

water shortages;

outbreak of food-borne illnesses;

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competitive demands;

impact of climate change;

and natural disasters, pandemics, such as COVID-19, terrorist attacks or other catastrophic events.

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Our customer and GPO agreements are generally terminable upon advance written notice (typically ranging from 30 days to 6 months) by either us or the customer or GPO, which provides our customers and GPOs with the opportunity to renegotiate their contracts with us or to award more business to our competitors.

Significant decreases in the volume and/or number of our customers’ purchase orders, the loss of one or more of our major customers or GPOs or our inability to grow to our current customer base could adversely affect our business, financial condition and results of operations.

Significant decreases in the number and/or size of our customers’ purchase orders, the loss of one or more of our major customers or GPOs or our inability to grow to our current customer base could adversely affect our business, financial condition and results of operations.

We may fail to increase or maintain the highest margin portions of our business, including sales to independent restaurant customers and sales of our private label products.

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Changes in the buying practices of independent restaurant customers, including their ability to require us to sell to them at discounted rates, or decreases in our sales to this type of customer or a decrease in the sales of our private label products could have a material negative impact on our profitability.

The COVID-19 pandemic has resulted in a substantial disruption in many of our independent restaurant customers’ operations (including, reduced seating capacity, inability to seat customers indoors, reduced hours of operations, and temporary restaurant closures) and, in some cases, permanent closures of restaurants.

Loss of business as a result of the COVID-19 pandemic and its negative economic impact has changed the buying practices of our independent restaurant customers and may also result in

additional permanent closures of restaurants, which could have a negative impact on our business, financial condition and results of operations.

The COVID-19 pandemic has resulted in a substantial disruption in many of our independent restaurant customers’ operations (including, reduced seating capacity, inability to seat customers indoors, labor shortages, wage inflation, reduced hours of operations, and temporary restaurant closures) and, in some cases, permanent closures of restaurants.

Loss of business as a result of the COVID-19 pandemic and its negative economic impact has changed the buying practices of our independent restaurant customers and may also result in additional permanent closures of restaurants, which could have a negative impact on our business, financial condition and results of operations.

We may be unable to achieve some or all of the benefits that we expect from our cost savings initiatives.

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All of these factors could negatively affect our business, financial condition and results of operations.

Fuel costs may fluctuate, which may adversely affect our business, financial condition and results of operations.

Fuel costs fluctuate, which may adversely affect our business, financial condition and results of operations.

Higher costs of fuel may negatively affect consumer confidence and discretionary spending.

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In addition, higher costs of fuel may increase the price we pay for products and the costs we incur to deliver products to our customers.

We require significant quantities of fuel for our vehicle fleet, and the price and supply of fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments, supply and demand for oil and gas, regional production patterns, weather conditions and environmental concerns.

We require significant quantities of fuel for our vehicle fleet, and

the price and supply of fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments, supply and demand for oil and gas, regional production patterns, weather conditions and environmental concerns.

Although, from time to time, we enter into forward purchase commitments for some of our fuel requirements at prices equal to the then-current market price, these forward purchases may prove ineffective in protecting us from changes in fuel prices or even result in us paying higher than market costs for part of our fuel.

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Compliance with these and other laws and regulations may be costly and time-consuming.

In addition, actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, restaurant seating capacity limitations, and required closures of non-essential businesses caused a sudden and significant decline in consumers’ consumption of food away from home in fiscal year 2020.

Even when the aforementioned restrictions are eased, public perceptions of the risks associated with COVID-19 may cause consumers to continue to avoid or limit gatherings in restaurants and other public places and reduce or eliminate business or personal travel, each of which would impact our restaurant and hospitality customers and reduce demand for our products.

If we are not able to effectively adapt our menu offerings to trends in eating habits or respond to changes in consumer health perceptions or resulting new laws and regulations, our business, financial condition and results of operations could be adversely affected.

In addition, actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, restaurant seating capacity limitations, and required closures of non-essential businesses caused a significant decline in consumers’ consumption of food away from home.

Even when the aforementioned restrictions were eased, public perceptions of the risks associated with COVID-19 and its variants caused and could continue to cause some consumers to continue to avoid or limit gatherings in restaurants and other public places and reduce or eliminate business or personal travel, each of which could continue to impact our restaurant and hospitality customers and reduce demand for our products.

As a result, we do not expect a full recovery for our business and the U.S.

foodservice industry until consumers are once again willing and able to resume consumption of food away from home, travel and attend sporting, entertainment and other events on a regular basis.

If our competitors implement a lower cost structure and offer lower prices to our customers, we may be unable to adjust our cost structure to compete profitably and retain those customers.

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food retail industry has undergone significant change.

Companies such as Wal-Mart and Costco have developed a lower cost structure, providing their customers with an everyday low-cost product offering.

In addition, commercial wholesale outlets, such as Restaurant Depot, offer an additional low-cost option in the markets they serve.

As a result of consumers’ growing desire to shop online, traditional grocery chains are subject to increasing competition from new market participants, food retailers who have incorporated the Internet as a direct-to-consumer channel and Internet-only retailers that sell grocery products.

For example, Amazon has expanded into grocery retail including fresh prepared foods through Amazon Fresh and Whole Foods.

Additionally, online food delivery services are increasingly competing with traditional grocery chains in the food sales market.

Competition from these new market participants and selling channels could negatively impact traditional grocery chains, resulting in

declining same-store sales and store closings in the retail and grocery sector, which could adversely affect our grocery-anchored revenues and cash flow.

Club stores, commercial wholesale outlets, direct food wholesalers and online food retailers have developed lower cost structures, creating increased pressure on the industry’s profit margins.

As a large-scale U.S.

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We may be required to record a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets is determined, which would negatively affect our results of operations.

For example, the Company completed its most recent annual impairment assessment for goodwill and indefinite-lived intangible assets as of June 28, 2020, the first day of the third quarter of fiscal year 2020.

Due to the adverse impacts of the COVID-19 pandemic on forecasted earnings and the discount rate utilized in our valuation models, we recognized an impairment charge of $9 million related to two trade names acquired as part of the Food Group acquisition.

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

As a result of rebranding initiatives related to the integration of a trade name acquired as part of the 2019 Food Group acquisition, we recognized an impairment charge of $7 million.

Impairment analysis requires significant judgment by management and is sensitive to changes in key assumptions used, such as future cash flows, discount rates and growth rates as well as current market conditions in both the United States and globally, all of which are being unfavorably impacted by the ongoing COVID-19 pandemic.

To the extent that business conditions deteriorate further, or if changes in key assumptions and estimates differ significantly from management’s expectations, it may be necessary to record additional future impairment charges, which could be material.

For more information on the goodwill assessment and related impairment charge, see section captioned “Valuation of Goodwill and Other Intangible Assets” in Item 7.

To the extent that business conditions deteriorate further, or if changes in key assumptions and estimates differ significantly from

management’s expectations, it may be necessary to record additional future impairment charges, which could be material.

For more information on the goodwill assessment and related impairment charge, see the section captioned “Valuation of Goodwill and Other Intangible Assets” in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 9, Goodwill and Other Intangibles, in our consolidated financial statements.

Risks Relating to Food Safety and Regulatory Requirements

Risks Relating to Product Safety and Regulatory Requirements

Our business is subject to significant governmental regulation, and failure to comply with applicable governmental regulations may lead to lawsuits, investigations and other liabilities and restrictions on our operations.

In the course of our operations, we process, handle, store and transport a wide variety of food and non-food products, operate and maintain vehicle fleets, operate fork-lifts store fuel in on-site aboveground and underground storage tanks, and use and dispose of hazardous substances including in connection with our use of our ammonia or freon-based refrigeration systems, propane, and battery-powered fork-lifts.

In the course of our operations, we process, handle, store and transport a wide variety of food and non-food products, operate and maintain vehicle fleets, operate forklifts, store fuel in on-site aboveground and underground storage tanks, and use and dispose of hazardous substances including in connection with our use of our ammonia or freon-based refrigeration systems, propane, and battery-powered forklifts.

Our operations are subject to a broad range of laws and regulations including regulations governing the processing, packaging, storage, distribution, marketing, advertising, labeling, quality and safety of our food products, as well as rights of our employees and the protection of the environment.

Changes in legal or regulatory requirements (such as new food safety requirements, revised regulatory requirements for the processing and packaging of food products and requirements to phase-out of certain ozone-depleting substances or otherwise regulating greenhouse gas emissions), or evolving interpretations of existing legal or regulatory requirements, may result in increased compliance cost, capital expenditures and other financial obligations including costs to upgrade or replace equipment that could adversely affect our business, financial condition and results of operations.

Changes in legal or regulatory requirements (such as new food safety requirements, revised regulatory requirements for the processing and packaging of food products and requirements to phase-out of certain ozone-depleting substances or otherwise regulating greenhouse gas emissions), or evolving interpretations of existing legal or regulatory requirements, may result in increased compliance cost, capital expenditures and other financial obligations including costs to upgrade or replace products or equipment that could adversely affect our business, financial condition and results of operations.

We are subject to governmental regulation regarding our relationship with our employees including minimum wage, overtime, wage payment, wage and hour, employment discrimination, harassment and immigration.

Due to contracts we have with federal and state governmental entities, we are subject to audits of, or requests for information regarding, our employment practices.

In addition, in response to the COVID-19 pandemic, the Centers for Disease Control (CDC), the Occupational Safety and Health Administration and various other federal, state, and local authorities have issued guidance, new interpretations of existing requirements, and implemented new requirements for employers that affect the operation of our facilities and the management of our workforce.

Due to contracts we have with federal and state governmental entities as customers, we are subject to audits of, or requests for information regarding, our employment practices and business operations.

In addition, in response to the COVID-19 pandemic, the CDC, OSHA and various other federal, state, and local authorities have issued guidance, new interpretations of existing requirements, and implemented new requirements for employers that affect the operation of our facilities and the management of our workforce.

The various federal, state and local requirements and guidance continue to evolve, but we are continually monitoring for updates and responding to updated requirements and guidance applicable to our business as we become aware of them.

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These could include investigations;

litigation or

other legal proceedings;

litigation or other legal proceedings;

administrative, civil, or criminal penalties or fines;

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and loss or modification of existing, or denial of additional, licenses, permits, registrations, or approvals.

If the products we distribute are alleged to have caused injury, illness or other damage or to have failed to comply with applicable governmental regulations, we may need to recall products.

As a distributor and manufacturer of food, we may be subject to product recalls, including voluntary recalls or withdrawals, if the products we distribute or manufacture are alleged to have caused injury, illness or other damage, to have been mislabeled, misbranded or adulterated or to otherwise have violated applicable governmental regulations.

We may recall products based on occurrences of food-borne illnesses (such as E.

If the products we distribute are alleged to cause injury, illness or other damage or to fail to comply with applicable governmental regulations, we may need to recall products.

As a distributor and manufacturer of food and non-food products, we may be subject to product recalls, including voluntary recalls or withdrawals, if the products we distribute or manufacture are alleged to cause injury, illness or other damage, to have been mislabeled, misbranded or adulterated or to otherwise violate applicable governmental regulations.

We may recall products based on alleged occurrences of food-borne illnesses (such as E.

coli, avian flu, bovine spongiform encephalopathy, hepatitis A, trichinosis, salmonella or swine flu) and food tampering.

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We also generally seek contractual indemnification and insurance coverage from parties supplying products to us.

If our current insurance does not continue to be available at a reasonable cost or is inadequate to cover all of our liabilities, or if our indemnification or insurance coverage is limited, as a practical matter, by the creditworthiness of the indemnifying party or the insured limits of our suppliers’ insurance coverage, the liability related to allegedly defective products that we distribute or manufacture could adversely affect our business, financial condition and results of operations.

If our current insurance does not continue to be available at a reasonable cost or is inadequate to cover all of our liabilities, or if our indemnification or insurance

coverage is limited, as a practical matter, by the creditworthiness of the indemnifying party or the insured limits of our suppliers’ insurance coverage, the liability related to allegedly defective products that we distribute or manufacture could adversely affect our business, financial condition and results of operations.

Negative publicity may adversely impact our reputation and business.

Maintaining a good reputation and the safety and integrity of the products we distribute is critical to our business, particularly in selling our private label products.

Product recalls, occurrences of food-borne illness or food tampering may cause negative publicity about the quality, safety, sustainability or integrity of food products, whether or not they are related to our products.

Product recalls, occurrences of food-borne illness or food tampering may cause negative publicity about the quality, safety, sustainability or integrity of our products, whether or not such events are related to our products.

Any event that damages our reputation or calls into question the safety or integrity of our products, whether justified or not, could quickly and negatively affect our business, financial condition and results of operations.

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Our level of indebtedness may adversely affect our financial condition and our ability to raise additional capital or obtain financing in the future, react to changes in our business, and make required payments on our debt.

We had $5,748 million of indebtedness outstanding, net of $60 million of unamortized deferred financing costs, as of January 2, 2021.

We had $5.0 billion of indebtedness outstanding, as of January 1, 2022.

Our ability to make scheduled payments on, or to refinance our obligations under, our debt facilities depends on our ongoing financial and operating performance, among other things, and may be affected by economic, financial and industry conditions beyond our control, including as discussed under the caption “Risks Related to Our Business and Industry” above.

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• a substantial portion of our cash flows from operations may be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available for other purposes, including working capital, capital expenditures, acquisitions and general corporate purposes;

• we are exposed to the risk of increased interest rates because approximately 57% of the net principal amount of our indebtedness was at variable rates of interest as of January 2, 2021 (after considering interest rate swaps that fixed the interest rate on $550 million of the principal amount of our borrowings under the Initial Term Loan Facility);

• we are exposed to the risk of increased interest rates because approximately 47% of the net principal amount of our indebtedness accrued interest at variable rates of interest as of January 1, 2022;

• it may be difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness;

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• our ability to refinance indebtedness may be limited or the associated costs may increase;

• our ability to obtain additional financing may be limited or the associated costs of obtaining additional financing may increase.

• our ability to refinance indebtedness and obtain additional financing may be limited or the associated costs of refinancing and obtaining additional financing may increase.

Our level of indebtedness may further increase from time to time.

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engage in certain business combination transactions;

engage in certain transactions with affiliates;

engage in certain transactions with

change the business we conduct;

and amend specific debt agreements.

In addition, these agreements subject us to various financial covenants.

In addition, certain of these agreements subject us to various financial covenants.

The restrictions under the agreements governing our indebtedness may prevent us from taking actions that we believe would be in the best interest of our business, and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted.

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In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it intends to phase out the use of LIBOR by the end of 2021.

In November 2020, the ICE Benchmark Administration (“IBA”), the administrator of LIBOR, announced plans to consult on ceasing publication of the one week and two month U.S.

dollar LIBOR tenors immediately following their publication on December 31, 2021, and all other U.S.

dollar LIBOR tenors immediately following their publication on June 30, 2023.

IBA published its consultation on December 4, 2020 and solicited feedback through January 25, 2021.

We cannot predict the outcome of this consultation, and there can be no assurance that LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Amounts drawn under each of our ABL Facility and initial and incremental senior secured term loan facilities (the “Initial Term Loan Facility” and “Incremental Term Loan Facilities”, respectively) may bear interest at rates based upon, among other things, U.S.

On March 5, 2021, the Intercontinental Exchange Benchmark Administration (“IBA”), the administrator of LIBOR, announced that it will cease publication of U.S.

dollar LIBOR tenors as of June 30, 2023, for the most common tenors (overnight and one, three, six and twelve months) and it will cease publication of U.S.

dollar LIBOR tenors for less common tenors (one week and two months) as well as all tenors of non-U.S.

dollar LIBOR as of December 31, 2021.

Amounts drawn under each of our ABL Facility and incremental senior secured term loan facilities may bear interest at rates based upon, among other things, U.S.

dollar LIBOR.

As such, depending on the future of LIBOR, we may need to renegotiate certain standards in or terms of the agreements governing this indebtedness to replace U.S.

As such, we will need to renegotiate certain standards in, or terms of the agreements governing this indebtedness to replace U.S.

dollar LIBOR with a new standard, or we may be required to borrow this indebtedness based upon alternate interest rate conventions as set forth in those agreements, which could increase the cost of servicing this debt and have an adverse effect on our business, financial condition and results of operations.

Risks Relating to Human Capital Management

We face risks related to labor relations and costs.

We face risks related to labor relations and increases in labor costs.

We employed approximately 28,000 associates as of January 1, 2022, of which approximately 5,900 were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations.

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Because our industry’s labor costs are, as a percentage of net sales, higher than many other industries’ labor costs, even if we are able to successfully renegotiate CBAs and avoid work stoppages, we may be significantly impacted by labor cost increases.

Labor shortages, low levels of unemployment or decreasing workforce availability in the United States, and resulting wage inflation and/or increased overtime, could adversely affect our results of operations.

In addition, labor is a significant cost of many of our customers in the U.S.

food away from home industry.

Any increase in their labor costs, including any increases in costs as a result of increases in minimum wage requirements, could reduce the profitability of our customers and reduce their demand for our products.

Any increase in their labor costs, including any increases in costs as a result of wage inflation, increases in minimum wage requirements or labor shortages resulting in increased overtime, could reduce the profitability of our customers and reduce their demand for our products.

We may be unable to attract or retain a qualified and diverse workforce.

A labor shortage could potentially increase labor costs, reduce our profitability and/or decrease our ability to effectively serve customers.

In addition, in response to the decreased demand for our products and services caused by the COVID-19 pandemic, during fiscal year 2020, we implemented multiple cost savings measures relating to our workforce, including temporary furloughs or hours reductions, freezing non-business critical hiring, deferring annual corporate salary and wage increases, reducing our board of directors, executive and other senior leadership compensation, and reducing the size of our workforce.

While we have ended the furloughs and discontinued the temporary salary reductions, employees who were impacted by these actions may seek and find other employment.

If key personnel terminate their employment, become ill as a result of the COVID-19 pandemic, or if an insufficient number of employees is retained to maintain effective operations, our business operations may be adversely affected.

Although we have not experienced any material labor shortage to date, we have recently observed tightening and increased competitiveness in the labor market.

A labor shortage or increased employee turnover, caused by the COVID-19 pandemic or other general macroeconomic factors, could potentially increase labor costs, reduce our profitability and/or decrease our ability to effectively serve customers.

If a material number of our employees are unable to work or terminate their employment, or become ill as a result of the COVID-19 pandemic, our business operations may be adversely affected.

The success of our business depends on our ability to attract, train, develop and retain a highly skilled and diverse workforce.

Recruiting and retention efforts (particularly with respect to driver and warehouse personnel) and actions to increase productivity may not be successful, and we could encounter a shortage of qualified employee talent in the future.

Shortages of, and increased competition for, qualified employees may result in increased labor costs.

Additionally, productivity may be negatively impacted by labor shortages or high employee turnover.

Any prolonged labor shortage or period of high employee turnover could adversely affect our business operations.

Furthermore, as a government contractor, we are subject to oversight by the Department of Labor’s Office of Federal Contract Compliance Programs, which reviews our employment practices including affirmative action and non-discrimination based on race, sex and disability, among other characteristics.

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If competitors implement new technologies before we do, allowing them to provide lower priced or enhanced services of superior quality compared to those we provide, our business, financial condition and results of operations could be adversely affected.

A cybersecurity incident may negatively affect our business and our relationships with customers.

We rely upon information technology networks and systems to process, transmit and store electronic information, to manage our data, communications and business processes, including our marketing, sales, manufacturing, procurement, logistics, customer service, accounting and administrative functions.

A cybersecurity incident may negatively affect our operations, business, financial condition and our relationships with customers.

We rely upon information technology networks and systems, some of which are outsourced to and managed by third parties, to process, transmit and store electronic information, to manage our data, communications and business processes, including our marketing, sales, manufacturing, procurement, logistics, customer service, accounting and administrative functions.

Our reliance on such networks and systems has increased due to many of our employees, and the employees of our customers, suppliers and business partners, working remotely as a result of the COVID-19 pandemic.

The use of these networks and systems gives rise to cybersecurity risks, and the risk of other security breaches (including access to or acquisition of supplier, customer, employee or other confidential information).

Since the outbreak of the COVID-19 pandemic in March 2020, there have been reports of a surge in widespread cyberattacks, particularly with the increase in the number of employees working remotely from home and not in their usual office environment which exacerbate the aforementioned risks.

The theft, destruction, loss, misappropriation, or release of secured data or interference with the networks and systems on which we rely could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability, and competitive disadvantage, which in turn could adversely affect our business, financial condition and results of operations.

While we have implemented measures to prevent security breaches, disruptions or other system failures, our preventative measures and incident response efforts may not be entirely effective.

While we have implemented measures such as implementing cybersecurity policies, training our employee and monitoring our information technology systems, to prevent security breaches, disruptions or other system failures, our preventative measures and incident response efforts may not be entirely effective.

The cost to remediate damages to our information technology systems suffered as a result of a cyberattack or other unauthorized access to secured data could be significant.

Cyberattacks have been occurring globally at a more frequent rate and are rapidly and continually evolving, making them more difficult to detect and protect against.

While cyber-attackers have threatened and attempt to breach our security and access the information stored in our information systems, no incident has been material or had a material impact on our business or financial condition.

There is a risk that we may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents.

Although we maintain insurance that may, subject to policy terms and conditions, cover certain cyber incidents, it may be insufficient to cover all losses.

In addition, in the event our suppliers or customers experience a breach or system failure, cyberattack or other security breach, their businesses could be disrupted or otherwise negatively affected, which may result in a disruption in our supply chain or reduced customer orders, which would adversely affect our business, financial condition and results of operations.

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We also may be unable to retain qualified management and other key personnel of the acquired businesses, that may be necessary to integrate acquired businesses successfully or realize anticipated synergies in a timely manner.

In particular, the COVID-19 pandemic has presented challenges to the effective and timely

integration of our acquisitions due to workforce disruptions and reduced productivity caused by travel restrictions and work-from-home policies and in the future may again adversely affect our integration efforts.

In addition, our acquisition strategy may be impacted by our efforts to maintain our liquidity position in response to the COVID-19 pandemic.

Risks Relating to our Common Stock

As a result of its Series A Preferred Stock investment, KKR owns a substantial portion of our equity and its interests may not be aligned with yours.

As a result of its Series A Preferred Stock investment, KKR owns approximately 10% of our Common Stock on an as-converted basis and has the right to designate one director to our board of directors.

On May 6, 2020, KKR Fresh Aggregator L.P., a Delaware limited partnership, purchased 500,000 shares of the Company’s Series A convertible preferred stock, par value $0.01 per share (the “Series A Preferred Stock”), which it subsequently transferred to its affiliate, KKR Fresh Holdings L.P., a Delaware limited partnership (“KKR”), for an aggregate purchase price of $500 million, or $1,000 per share.

As a result of its Series A Preferred Stock investment, KKR owns the equivalent of approximately 10% of our Common Stock on an as-converted basis and has the right to designate one director to our board of directors.

As a result, KKR may have the ability to influence the outcome of certain matters relating to the Company.

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For example, the existence of KKR as a significant shareholder and KKR’s board designation rights may have the effect of delaying or preventing changes in control or management or limiting the ability of our other shareholders to approve transactions that they may deem to be in the best interests of the Company.

Actions of activist stockholders could adversely impact our business and cause us to incur significant expenses.

We may be subject to actions or proposals from activist stockholders or others that may not be aligned with our long-term strategy or the interests of our other stockholders.

On February 15, 2022, Sachem Head Capital Management (“Sachem Head”) issued a press release disclosing its intent to nominate seven directors for election to the Company’s ten-member Board of Directors at the Company’s 2022 annual meeting of stockholders.

The Company’s response to suggested actions, proposals, director nominations and/or contests for the election of directors from Sachem Head or other activist stockholders could disrupt our business and operations, divert the attention of our Board of Directors, management and employees and be costly and time‐consuming.

Potential actions by Sachem Head or other activist stockholders may interfere with our ability to execute our strategic plans;

create perceived uncertainties as to the future direction of our business or strategy;

cause uncertainty with our regulators;

make it more difficult to attract and retain qualified personnel;

and adversely affect our relationships with our existing and potential customers, suppliers and other business partners.

Any of the foregoing could adversely impact our business, financial condition and results of operations.

Also, we may be required to incur significant fees and expenses related to responding to stockholder activism, including for third-party advisors.

Further, the market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties described above.

General Risk Factors

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and many state and local jurisdictions where we do business from time to time enact changes in relevant tax, accounting and other laws, regulations and interpretations.

For example, on December 22, 2017, the U.S.

federal government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

The Tax Act made broad and complex changes to the U.S.

federal income tax code, the impacts of which are described elsewhere in this Annual Report.

Given the unpredictability of possible changes to U.S.

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If any of these proceedings were determined adversely to us or require a settlement involving a payment of a material sum of money, it could materially and adversely affect our business, financial condition and results of operations.

Additionally, we could

become the subject of future claims by third parties, including our employees, suppliers, customers, GPOs, investors, or regulators.

Additionally, we could become the subject of future claims by third parties, including our employees, suppliers, customers, GPOs, investors, or regulators.

Any significant adverse judgments or settlements could reduce our profits and limit our ability to operate our business.

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Some of our facilities and our customers’ and suppliers’ facilities are located in areas that may be subject to extreme, and occasionally prolonged, weather conditions, including hurricanes, tornadoes, blizzards, and extreme cold.

Extreme weather conditions may interrupt our operations in such areas.

Furthermore, extreme weather conditions may interrupt or impede access to our customers’ facilities, reduce the number of consumers who visit our customers’ facilities, interrupt our suppliers’ production or shipments or increase our suppliers’ product costs, all of which could have an adverse effect on our business, financial condition and results of operations.

Extreme weather conditions, whether caused by global climate change or otherwise, may interrupt our operations in such areas.

Furthermore, extreme weather conditions may disrupt critical infrastructure in the United States and interrupt or impede access to our customers’ facilities, reduce the number of consumers who visit our customers’ facilities, interrupt our suppliers’ production or shipments or increase our suppliers’ product costs, all of which could have an adverse effect on our business, financial condition and results of operations.

In addition, our business could be affected by large-scale terrorist acts or the outbreak or escalation of armed hostilities (especially those directed against or otherwise involving the U.S.), the outbreak of food-borne illnesses, the widespread outbreak of infectious diseases, such as the COVID-19 pandemic, or the occurrence of other catastrophic events.

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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 1A. Risk Factors