US Foods Holding Corp. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) 38 Consolidated Balance Sheets as of January 1, 2022 and January 2, 2021 40 Consolidated Statements of Comprehensive Income for the Fiscal Years Ended January 1, 2022, January 2, 2021, and December 28, 2019 41 Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended January 1, 2022, January 2, 2021, and December 28, 2019 42 Consolidated Statements of Cash Flows for the Fiscal Years Ended January 1, 2021, January 2, 2021, and December 28, 2019 43 Notes to Consolidated Financial Statements 44 37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of US Foods Holding Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of US Foods Holding Corp. and subsidiaries (the “Company”) as of January 1, 2022 and January 2, 2021, the related consolidated statements of comprehensive income, shareholders' equity, and cash flows, for each of the three fiscal years in the period ended January 1, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the three fiscal years in the period ended January 1, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Vendor Consideration and Receivables - Refer to Note 2 to the financial statements Critical Audit Matter Description The Company receives rebates and incentives from certain suppliers, primarily through purchase-based programs. Consideration earned under these incentives is estimated during the year based on purchasing activity, as obligations under the program are fulfilled primarily as products are purchased. Consideration is typically received in the form of invoice reductions to be applied against the amounts owed to the Company’s vendors, or less often in the form of cash payments. The purchase-based incentives are recorded as a reduction to inventory as they are earned based on inventory purchases. As the related inventory is sold, the amounts are recorded as a reduction to cost of goods sold. Total vendor receivables were $ 145 million at January 1, 2022. Although many of these incentives are under long-term agreements others are negotiated on an annual basis or shorter. We identified vendor consideration as a critical audit matter due to the extent of audit effort required to evaluate whether vendor consideration is recorded in accordance with the terms of the vendor agreements. 38 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the evaluation of the vendor agreements included the following, among others: • We tested the effectiveness of controls over vendor consideration including management’s controls over the calculation of the amount recorded and the accuracy of the agreement information input in the system utilized to calculate the amount of vendor consideration recorded. • We selected a sample of vendor consideration recorded and (1) confirmed the amount recorded directly with the vendors or (2) recalculated vendor consideration amounts recorded by the Company using the terms of the executed vendor agreement • We selected a sample of inventory on hand and evaluated whether the related vendor consideration was properly recognized at and during the period ended January 1, 2022. /s/ DELOITTE & TOUCHE LLP Chicago, Illinois February 17, 2022 We have served as the Company's auditor since 2006. 39 US FOODS HOLDING CORP. CONSOLIDATED BALANCE SHEETS (In millions, except par value) January 1, 2022 January 2, 2021 ASSETS Current assets: Cash and cash equivalents $ 148 $ 828 Accounts receivable, less allowances of $33 and $67 1,469 1,084 Vendor receivables, less allowances of $7 and $5 145 121 Inventories—net 1,686 1,273 Prepaid expenses 120 132 Assets held for sale 8 1 Other current assets 18 26 Total current assets 3,594 3,465 Property and equipment—net 2,033 2,021 Goodwill 5,625 5,637 Other intangibles—net 830 892 Deferred tax assets 8 1 Other assets 431 407 Total assets $ 12,521 $ 12,423 LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdraft liability $ 183 $ 136 Accounts payable 1,662 1,218 Accrued expenses and other current liabilities 610 497 Current portion of long-term debt 95 131 Total current liabilities 2,550 1,982 Long-term debt 4,916 5,617 Deferred tax liabilities 307 270 Other long-term liabilities 479 505 Total liabilities 8,252 8,374 Commitments and contingencies (Note 22) Mezzanine equity: Series A convertible preferred stock, $0.01 par value—25 shares authorized; 0.5 issued and outstanding as of January 1, 2022 and January 2, 2021 534 519 Shareholders’ equity: Common stock, $0.01 par value—600 shares authorized; 223 and 221 issued and outstanding as of January 1, 2022 and January 2, 2021, respectively 2 2 Additional paid-in capital 2,970 2,901 Retained earnings 782 661 Accumulated other comprehensive loss ( 19 ) ( 34 ) Total shareholders’ equity 3,735 3,530 Total liabilities, mezzanine equity and shareholders' equity $ 12,521 $ 12,423 See Notes to Consolidated Financial Statements. 40 ` US FOODS HOLDING CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions, except per share data) Fiscal Years Ended January 1, 2022 January 2, 2021 December 28, 2019 Net sales $ 29,487 $ 22,885 $ 25,939 Cost of goods sold 24,832 19,166 21,352 Gross profit 4,655 3,719 4,587 Operating expenses: Distribution, selling and administrative costs 4,220 3,757 3,888 Restructuring costs and asset impairment charges 11 39 — Total operating expenses 4,231 3,796 3,888 Operating income (loss) 424 ( 77 ) 699 Other (income) expense—net ( 26 ) ( 21 ) 4 Interest expense—net 213 238 184 Loss on extinguishment of debt 23 — — Income (loss) before income taxes 214 ( 294 ) 511 Income tax provision (benefit) 50 ( 68 ) 126 Net income (loss) 164 ( 226 ) 385 Other comprehensive income (loss)—net of tax: Changes in retirement benefit obligations 10 23 45 Recognition of interest rate swaps 5 ( 3 ) ( 15 ) Comprehensive income (loss) $ 179 $ ( 206 ) $ 415 Net income (loss) $ 164 $ ( 226 ) $ 385 Series A convertible preferred stock dividends ( 43 ) ( 28 ) — Net income (loss) available to common shareholders $ 121 $ ( 254 ) $ 385 Net income (loss) per share: Basic $ 0.55 $ ( 1.15 ) $ 1.77 Diluted $ 0.54 $ ( 1.15 ) $ 1.75 Weighted-average common shares outstanding Basic 222 220 218 Diluted 225 220 220 See Notes to Consolidated Financial Statements. 41 US FOODS HOLDING CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In millions) Number of Common Shares Common Shares at Par Value Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity BALANCE-December 29, 2018 217 $ 2 $ 2,780 $ 531 $ ( 84 ) $ 3,229 Share-based compensation expense — — 32 — — 32 Proceeds from employee stock purchase plan 1 — 19 — — 19 Exercise of stock options 2 — 19 — — 19 Tax withholding payments for net share-settled equity awards — — ( 5 ) — — ( 5 ) Changes in retirement benefit obligations, net of income tax — — — — 45 45 Recognition of interest rate swaps, net of income tax — — — — ( 15 ) ( 15 ) Net income — — — 385 — 385 BALANCE-December 28, 2019 220 $ 2 $ 2,845 $ 916 $ ( 54 ) $ 3,709 Share-based compensation expense — — 40 — — 40 Proceeds from employee stock purchase plan 1 — 18 — — 18 Exercise of stock options — — 3 — — 3 Tax withholding payments for net share-settled equity awards — — ( 5 ) — — ( 5 ) Series A convertible preferred stock dividends — — — ( 28 ) — ( 28 ) Changes in retirement benefit obligations, net of income tax — — — — 23 23 Recognition of interest rate swaps, net of income tax — — — — ( 3 ) ( 3 ) Adoption of ASU 2016-13 (Note 6) — — — ( 1 ) — ( 1 ) Net loss — — — ( 226 ) — ( 226 ) BALANCE-January 2, 2021 221 $ 2 $ 2,901 $ 661 $ ( 34 ) $ 3,530 Share-based compensation expense — — 48 — — 48 Proceeds from employee stock purchase plan 1 — 20 — — 20 Vested restricted stock units, net 1 — — — — — Exercise of stock options — — 15 — — 15 Tax withholding payments for net share-settled equity awards — — ( 14 ) — — ( 14 ) Series A convertible preferred stock dividends — — — ( 43 ) — ( 43 ) Changes in retirement benefit obligations, net of income tax — — — — 10 10 Recognition of interest rate swaps, net of income tax — — — — 5 5 Net income — — — 164 — 164 BALANCE-January 1, 2022 223 $ 2 $ 2,970 $ 782 $ ( 19 ) $ 3,735 See Notes to Consolidated Financial Statements. 42 US FOODS HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Fiscal Years Ended January 1, 2022 January 2, 2021 December 28, 2019 Cash flows from operating activities: Net income (loss) $ 164 $ ( 226 ) $ 385 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 378 422 362 Gain on disposal of property and equipment, net ( 1 ) ( 17 ) ( 1 ) Tangible asset impairment charges 1 3 1 Intangible asset impairment charges 7 9 — Loss on extinguishment of debt 23 — — Amortization of deferred financing costs 15 16 7 Deferred tax provision (benefit) 38 ( 51 ) 7 Share-based compensation expense 48 40 32 (Benefit) provision for doubtful accounts ( 24 ) 63 21 Changes in operating assets and liabilities, net of business acquisitions: (Increase) decrease in receivables ( 386 ) 334 ( 19 ) (Increase) decrease in inventories ( 413 ) 201 16 Decrease (increase) in prepaid expenses and other assets 4 ( 30 ) 9 Increase (decrease) in accounts payable and cash overdraft liability 471 ( 339 ) ( 56 ) Increase (decrease) in accrued expenses and other liabilities 94 ( 12 ) ( 4 ) Net cash provided by operating activities 419 413 760 Cash flows from investing activities: Acquisition of businesses—net of cash — ( 972 ) ( 1,832 ) Proceeds from sales of divested assets 5 7 94 Proceeds from sales of property and equipment 7 44 9 Purchases of property and equipment ( 274 ) ( 189 ) ( 258 ) Net cash used in investing activities ( 262 ) ( 1,110 ) ( 1,987 ) Cash flows from financing activities: Proceeds from debt borrowings 2,305 3,645 6,198 Principal payments on debt and financing leases ( 3,105 ) ( 2,692 ) ( 4,967 ) Net proceeds from issuance of Series A convertible preferred stock — 491 — Dividends paid on Series A convertible preferred stock ( 28 ) — — Debt financing costs and fees ( 30 ) ( 33 ) ( 44 ) Proceeds from employee stock purchase plan 20 18 19 Proceeds from exercise of stock options 15 3 19 Tax withholding payments for net share-settled equity awards ( 14 ) ( 5 ) ( 5 ) Net cash (used in) provided by financing activities ( 837 ) 1,427 1,220 Net (decrease) increase in cash, cash equivalents and restricted cash ( 680 ) 730 ( 7 ) Cash, cash equivalents and restricted cash—beginning of year 828 98 105 Cash, cash equivalents and restricted cash—end of year $ 148 $ 828 $ 98 Supplemental disclosures of cash flow information: Interest paid—net of amounts capitalized $ 185 $ 216 $ 173 Income taxes paid (received)—net 1 ( 1 ) 137 Property and equipment purchases included in accounts payable 40 21 49 Property and equipment transferred to assets held for sale 11 24 — Leased assets obtained in exchange for financing lease liabilities 56 73 86 Leased assets obtained in exchange for operating lease liabilities 32 48 39 Cashless exercise of stock options 1 — 1 Paid-in-kind Series A convertible preferred stock dividends 15 28 — See Notes to Consolidated Financial Statements. 43 US FOODS HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in tables in millions, except share and per share data, unless otherwise noted) 1. OVERVIEW AND BASIS OF PRESENTATION US Foods Holding Corp., a Delaware corporation, and its consolidated subsidiaries are referred to in these consolidated financial statements and notes as “we,” “our,” “us,” the “Company,” or “US Foods.” US Foods Holding Corp. conducts all of its operations through its wholly owned subsidiary US Foods, Inc. (“USF”) and its subsidiaries. All of the Company’s indebtedness, as further described in Note 11, Debt, is a direct obligation of USF and its subsidiaries. Business Description —The Company, through USF, operates in one business segment in which it markets and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the U.S. These customers include independently owned single and multi-unit restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations. Basis of Presentation —The Company operates on a 52 or 53-week fiscal year, with all periods ending on a Saturday. When a 53-week fiscal year occurs, the Company reports the additional week in the fiscal fourth quarter. The fiscal years ended January 1, 2022 and December 28, 2019, also referred to herein as fiscal years 2021 and 2019, respectively, were 52-week fiscal years. The fiscal year ended January 2, 2021, also referred to herein as fiscal year 2020, was a 53-week fiscal year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation —The Company's consolidated financial statements include the accounts of US Foods and its wholly owned subsidiary, USF, and its subsidiaries. Intercompany transactions have been eliminated in consolidation. Use of Estimates —The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). This requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Cash Equivalents —The Company considers all highly liquid investments purchased with an original maturity of three or fewer months to be cash equivalents. Accounts Receivable —Accounts receivable represent amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Receivables are presented net of the allowance for doubtful accounts in the Company's accompanying Consolidated Balance Sheets. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information. Collections and payments from customers are continuously monitored. 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 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. Vendor Consideration and Receivables —The Company participates in various rebate and promotional incentives with its suppliers, primarily through purchase-based programs. Consideration earned is estimated during the year as the Company’s obligations under the programs are fulfilled, which is primarily when products are purchased. Changes in the estimated amount of incentives earned are recognized in the period of change. Vendor consideration is typically deducted from invoices or collected in cash within 30 days of being earned. Vendor receivables represent the uncollected balance of the vendor consideration. Since collections occur primarily from deducting the consideration from the amounts due to the vendor, the Company does not experience significant collectability issues. The Company evaluates the collectability of its vendor receivables based on specific vendor information and vendor collection history. Inventories —The Company’s inventories, consisting mainly of food and other food-related products, are primarily considered finished goods. Inventory costs include the purchase price of the product, freight costs to deliver it to the Company’s distribution and retail facilities, and depreciation and labor related to processing facilities and equipment, and are net of certain cash or non-cash consideration received from vendors. The Company assesses the need for valuation allowances for slow-moving, excess and obsolete inventories by estimating the net recoverable value of such goods based upon inventory category, inventory age, specifically identified items, and overall economic conditions. The Company records inventories at the lower of cost or market primarily using the last-in, first-out (“LIFO”) method, except for Smart Foodservice, as further described in Note 5, Business Acquisitions, which uses the retail method of inventory 44 accounting. For our LIFO based inventories, the base year values of beginning and ending inventories are determined using the inventory price index computation method. This “links” current costs to original costs in the base year when the Company adopted LIFO. As of January 1, 2022 and January 2, 2021, LIFO reserves in the Company’s Consolidated Balance Sheets were $ 342 million and $ 177 million, respectively. As a result of changes in LIFO reserves, cost of goods sold increased $ 165 million, $ 25 million and $ 22 million in fiscal years 2021, 2020 and 2019, respectively. Property and Equipment —Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from 3 to 40 years. Property and equipment under financing leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining term of the related lease or the estimated useful lives of the assets. Routine maintenance and repairs are charged to expense as incurred. Applicable interest charges incurred during the construction of new facilities or development of software for internal use are capitalized as one of the elements of cost and are amortized over the useful life of the respective assets. Property and equipment held and used by the Company are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. For purposes of evaluating the recoverability of property and equipment, the Company compares the carrying value of the asset or asset group to the estimated, undiscounted future cash flows expected to be generated by the long-lived asset or asset group. If the future cash flows do not exceed the carrying value, the carrying value is compared to the fair value of such asset. If the carrying value exceeds the fair value, an impairment charge is recorded for the excess. The Company also assesses the recoverability of its vacant land and closed facilities actively marketed for sale. If an asset’s carrying value exceeds its fair value, less an estimated cost to sell, an impairment charge is recorded for the excess. Assets held for sale are not depreciated. Impairments resulting from restructuring activities are recorded as a component of restructuring costs and asset impairment charges in the Company's Consolidated Statements of Comprehensive Income, and a reduction of the asset’s carrying value in the Company's Consolidated Balance Sheets. Goodwill and Other Intangible Assets —Goodwill includes the cost of acquired businesses in excess of the fair value of the tangible and other intangible net assets acquired. Other intangible assets include customer relationships, amortizable trade names, noncompete agreements, the brand names comprising the Company’s portfolio of exclusive brands, and trademarks. Brand names and trademarks are indefinite-lived intangible assets and, accordingly, are not subject to amortization, but are subject to impairment assessments as described below. The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually, or more frequently if events occur that indicate an asset may be impaired. 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. For intangible assets with definite lives, the Company assesses impairment only if events occur that indicate that the carrying amount of an asset may not be recoverable. The reporting unit used in assessing impairment is the Company’s one business segment as described in Note 24, and all goodwill is assigned to the consolidated Company. Impairments are recorded as a component of restructuring costs and asset impairment charges in the Company’s Consolidated Statements of Comprehensive Income, and a reduction of the asset’s carrying value in the Company’s Consolidated Balance Sheets. Self-Insurance Programs —The Company estimates its liabilities for claims covering general, fleet, and workers’ compensation. Amounts in excess of certain levels, which range from $ 1 million to $ 10 million per occurrence, are insured as a risk reduction strategy, to mitigate catastrophic losses. The workers’ compensation liability is discounted, as the amount and timing of cash payments is reliably determinable given the nature of benefits and the level of historic claim volume to support the actuarial assumptions and judgments used to derive the expected loss payment pattern. The amount accrued is discounted using an interest rate that approximates the U.S. Treasury rate consistent with the duration of the liability. The inherent uncertainty of future loss projections could cause actual claims to differ from our estimates. We are primarily self-insured for group medical claims not covered under multiemployer health plans covering certain of our union-represented employees. The Company accrues its self-insured medical liability, including an estimate for incurred but not reported claims, based on known claims and past claims history. These accruals are included in accrued expenses and other current liabilities and other long-term liabilities in the Company's Consolidated Balance Sheets. Share-Based Compensation —The Company measures compensation expense for share-based awards at fair value as of the date of grant, and recognizes compensation expense over the service period for awards expected to vest, and as applicable based upon predetermined financial performance conditions for performance share-based awards. Forfeitures are recognized as incurred. Fair value is the closing price per share for the Company’s common stock as reported on the New York Stock Exchange. Prior to the Company's 2016 initial public offering, the grant date fair value of share-based awards was measured as of the end of each fiscal quarter using the combination of a market and income approach. The fair value was applied to all stock 45 and stock award activity in the subsequent fiscal quarter. Shares issued as a result of stock options exercises will be funded with the issuance of new shares. Compensation expense related to our employee stock purchase plan, which allows eligible employees to purchase our common stock at a discount of 15 % represents the difference between the fair market value as of acquisition date and the employee purchase price. Business Acquisitions —The Company accounts for business acquisitions under the acquisition method. Assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. The operating results of the acquired companies are included in the Company’s consolidated financial statements from the date of acquisition. Cost of Goods Sold —Cost of goods sold includes amounts paid to vendors for products sold, net of vendor consideration, including in-bound freight necessary to bring the products to the Company’s distribution facilities. Depreciation related to processing facilities and equipment is presented in cost of goods sold. Because the majority of the inventories are finished goods, depreciation related to warehouse facilities and equipment is presented in distribution, selling and administrative costs. See “Inventories” above for discussion of the LIFO impact on cost of goods sold. Shipping and Handling Costs —Shipping and handling costs, which include costs related to the selection of products and their delivery to customers, are presented in distribution, selling and administrative costs. Shipping and handling costs were $ 2.0 billion, $ 1.7 billion, and $ 1.8 billion in fiscal years 2021, 2020 and 2019, respectively. Income Taxes —The Company accounts for income taxes under the asset and liability method. This requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company's consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income during the period that includes the enactment date. Net deferred tax assets are recorded to the extent the Company believes these assets will more likely than not be realized. An uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Uncertain tax positions are recorded at the largest amount that is more likely than not to be sustained. The Company adjusts the amounts recorded for uncertain tax positions when its judgment changes, as a result of evaluating new information not previously available. These differences are reflected as increases or decreases to income tax expense (benefit) in the period in which they are determined. Derivative Financial Instruments —The Company has utilized derivative financial instruments to assist in managing its exposure to variable interest rates on certain borrowings. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company is not currently party to any interest rate swap agreements. In the normal course of business, the Company enters into forward purchase agreements to procure fuel, electricity and product commodities related to its business. These agreements often meet the definition of a derivative. However, the Company does not measure its forward purchase commitments at fair value as the amounts under contract meet the physical delivery criteria in the normal purchase exception. Concentration Risks —Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash equivalents and accounts receivable. The Company’s cash equivalents are invested primarily in money market funds at major financial institutions. The account balances at these institutions may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage, and as a result, there may be a concentration of risk related to amounts invested in excess of FDIC insurance coverage. Credit risk related to accounts receivable is dispersed across a significantly large number of customers located throughout the U.S. The Company attempts to reduce credit risk through initial and ongoing credit evaluations of its customers’ financial condition. There were no receivables from any one customer representing more than 5% of our consolidated gross accounts receivable as of January 1, 2022. 46 3. RECENT ACCOUNTING PRONOUNCEMENTS Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, convertible debt will be accounted for as a single liability measured at its amortized cost. 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. 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. In October 2021, the FASB issued ASU No. 2021-08 Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which amends Accounting Standards Codification (“ASC”) 805 to require an acquirer to, at the date of acquisition, recognize and measure contract assets and contract liabilities acquired in accordance with ASU 2014-9, Revenue from Contracts with Customers (Topic 606) . The guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, and is to be applied prospectively to business combinations occurring on or after adoption of the new guidance. The Company plans to adopt the provisions of ASU No. 2021-08 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. 4. REVENUE RECOGNITION The Company recognizes revenue when the performance obligation is satisfied, which occurs when a customer obtains control of the promised goods or services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these goods or services. The Company generates substantially all of its revenue from the distribution and sale of food and food-related products and recognizes revenue when title and risk of loss passes and the customer accepts the goods, which occurs at delivery. Customer sales incentives such as volume-based rebates or discounts are treated as a reduction of revenue at the time the revenue is recognized. Sales taxes invoiced to customers and remitted to governmental authorities are excluded from net sales. 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 January 1, 2022 or January 2, 2021. Customer receivables, which are included in accounts receivable, less allowances for doubtful accounts in the Company’s Consolidated Balance Sheets, were $ 1.5 billion and $ 1.1 billion as of January 1, 2022 and January 2, 2021, respectively. The Company has certain customer contracts under which incentives are paid upfront to its customers. These payments have become industry practice and are not related to financing any customer’s business, nor are these costs associated with any distinct good or service to be received from any customer. 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 $ 27 million and $ 30 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of January 1, 2022 and January 2, 2021, respectively, and $ 26 million and $ 27 million included in other assets in the Company’s Consolidated Balance Sheets as of January 1, 2022 and January 2, 2021, respectively. The following table presents the disaggregation of revenue for each of the Company’s principal product categories: 2021 2020 2019 Meats and seafood $ 11,245 $ 8,131 $ 9,313 Dry grocery products 4,979 3,931 4,427 Refrigerated and frozen grocery products 4,453 3,583 4,253 Dairy 2,801 2,394 2,685 Equipment, disposables and supplies 3,090 2,455 2,483 Beverage products 1,465 1,186 1,403 Produce 1,454 1,205 1,375 Total Net sales $ 29,487 $ 22,885 $ 25,939 47 5. BUSINESS ACQUISITIONS Smart Foodservice Acquisition —On April 24, 2020, USF completed the acquisition of Smart Stores Holding Corp., a Delaware corporation (“Smart Foodservice”), from funds managed by affiliates of Apollo Global Management, Inc. Total consideration paid at the closing of the acquisition (net of cash acquired) was $ 972 million. At the time of the acquisition, Smart Foodservice operated 70 small-format cash and carry stores across California, Idaho, Montana, Nevada, Oregon, Utah, and Washington that serve small and mid-sized restaurants and other food business customers. The acquisition of Smart Foodservice expanded the Company’s cash and carry business in the West and Northwest parts of the U.S. USF financed the Smart Foodservice acquisition with the new $ 700 million 2020 Incremental Term Loan Facility under the Term Loan Credit Agreement, as further described in Note 11, Debt, and with cash on hand. The assets, liabilities and results of operations of Smart Foodservice have been included in the Company’s consolidated financial statements since the date the acquisition was completed. 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 January 1, 2022 was due to the finalization of deferred income taxes associated with the acquisition in the first quarter of fiscal year 2021 . Purchase Price Allocation Accounts receivable $ 5 Inventories 43 Other current assets 24 Property and equipment 84 Goodwill (1) 895 Other intangibles (2) 14 Other assets 145 Accounts payable ( 38 ) Accrued expenses and other current liabilities ( 32 ) Deferred income taxes ( 8 ) Other long-term liabilities, including financing leases ( 160 ) Cash paid for acquisition $ 972 (1) Goodwill recognized is primarily attributable to intangible assets that do not qualify for separate recognition, as well as expected synergies from the combined company. The acquired goodwill is not deductible for U.S. federal income tax purposes. (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 $ 15 million and $ 21 million during fiscal years 2021 and 2020, respectively. Food Group Acquisition —On September 13, 2019, USF completed the $ 1.8 billion acquisition of five foodservice companies (the “Food Group”) from Services Group of America, Inc.: Food Services of America, Inc., Systems Services of America, Inc., Amerifresh, Inc., Ameristar Meats, Inc. and GAMPAC Express, Inc. The acquisition of the Food Group expanded the Company’s network in the West and Northwest parts of the U.S. USF financed the acquisition with the new $ 1.5 billion 2019 Incremental Term Loan Facility, as further described in Note 11, Debt, and with borrowings under its revolving credit facilities. The assets, liabilities and results of operations of the Food Group have been included in the Company’s consolidated financial statements since the date the acquisition was completed. As a condition to receiving regulatory clearance for the acquisition from the Federal Trade Commission, USF divested three Food Group distribution facilities (the “Divested Assets”). The total amount of proceeds received from the October 11, 2019 sales of the Divested Assets at closing was $ 94 million, which, together with approximately $ 20 million in holdback funds and working capital adjustments, approximated the fair value of the Divested Assets. The assets and liabilities of the Divested Assets were included in assets of discontinued operations and liabilities of discontinued operations, respectively, in the Company's Consolidated Balance Sheets until their disposition. The operating results of the Divested Assets from the date the acquisition was completed through the date of sale were not significant. 48 The following table summarizes the final purchase price allocation for the acquisition of Food Group as of September 13, 2019. Adjustments to the preliminary purchase price allocation recorded in fiscal year 2020 were immaterial to the Company's consolidated financial statements. Purchase Price Allocation Accounts receivable $ 145 Inventories 165 Assets of discontinued operations 130 Other current assets 7 Property and equipment 210 Goodwill (1) 764 Other intangibles (2) 695 Other assets 47 Accounts payable ( 200 ) Accrued expenses and other current liabilities ( 69 ) Liabilities of discontinued operations ( 19 ) Other long-term liabilities, including financing leases ( 43 ) Cash paid for acquisition $ 1,832 (1) Goodwill recognized is primarily attributable to intangible assets that do not qualify for separate recognition, as well as expected synergies from the combined company. The acquired goodwill is deductible for U.S. federal income tax purposes. (2) Other intangibles consist of customer relationships of $ 656 million with estimated useful lives of 15 years and indefinite-lived brand names and trademarks of $ 39 million. Food Group acquisition and integration related costs included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income were $ 7 million, $ 24 million and $ 52 million for fiscal years 2021, 2020 and 2019, 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 fiscal years 2020 and 2019. The unaudited pro forma financial information presents the combined results of operations as if the acquisitions and related financings of Smart Foodservice and the Food Group had occurred as of December 30, 2018 and December 31, 2017, respectively, which dates represent the first day of the Company’s fiscal year prior to their respective acquisition dates. 2020 (Unaudited) 2019 (Unaudited) Pro forma net sales $ 23,258 $ 29,141 Pro forma net (loss) income available to common shareholders $ ( 225 ) $ 420 Pro forma net income per share: Basic $ ( 1.02 ) $ 1.92 Diluted $ ( 1.02 ) $ 1.91 The unaudited pro forma financial information for fiscal year 2019 presented above excludes the results of operations related to the Divested Assets, as the results of operations related to the Divested Assets were reflected as discontinued operations. Unaudited pro forma net sales, net income and net income per share related to the Divested Assets for fiscal year 2019: 2019 (Unaudited) Pro forma net sales $ 392 Pro forma net income available to common shareholders $ 5 Pro forma income per share: Basic $ 0.03 Diluted $ 0.02 The unaudited pro forma financial information above includes adjustments for: (1) incremental depreciation expense related to fair value increases of certain acquired property and equipment, (2) amortization expense related to the fair value of amortizable 49 intangible assets acquired, (3) interest expense related to the term loan facilities and revolving credit facilities used to finance the acquisitions, (4) the elimination of acquisition-related costs that were included in the Company’s historical results, and (5) adjustments to the income tax provision based on pro forma results of operations. No effect has been given to potential synergies, operating efficiencies or costs arising from the integration of Smart Foodservice and the Food Group with our previously existing operations or the standalone cost estimates and estimated costs incurred by their former respective parent companies. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the date indicated. Further, the pro forma financial information does not purport to project the Company’s future consolidated results of operations following the acquisitions. 6. ALLOWANCE FOR DOUBTFUL ACCOUNTS Since mid-March 2020, our business has been significantly impacted by the COVID-19 pandemic. 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. 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. Since that initial charge in 2020, due to more favorable than anticipated collections on our pre-COVID-19 accounts receivable, we reduced our allowance for doubtful accounts. All pre-COVID-19 accounts receivable have been collected or written off by the end of fiscal year 2021. A summary of the activity in the allowance for doubtful accounts for the last three fiscal years is as follows: 2021 2020 2019 Balance as of beginning of year $ 67 $ 30 $ 29 (Benefit) Charged to costs and expenses, net ( 24 ) 63 21 Adoption of ASU 2016-13 — 1 — Customer accounts written off—net of recoveries ( 10 ) ( 27 ) ( 20 ) Balance as of end of year $ 33 $ 67 $ 30 This table excludes the vendor receivable related allowance for doubtful accounts of $ 7 million, $ 5 million, and $ 4 million as of January 1, 2022, January 2, 2021, and December 28, 2019, respectively. At the beginning of fiscal year 2020, the Company adopted the provisions of ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which resulted in the recording of a cumulative-effect adjustment to retained earnings of $ 1 million. 7. ASSETS HELD FOR SALE The Company classifies its vacant land and closed facilities as assets held for sale at the time management commits to a plan to sell the asset, the asset is actively marketed and available for immediate sale, and the sale is expected to be completed within one year. Due to market conditions, certain assets may be classified as assets held for sale for more than one year as the Company continues to actively market the assets. During fiscal year 2021, two excess facilities and vacant land previously held for future use were transferred to assets held for sale. The Company sold one facility for cash proceeds of $ 4 million, which approximated the carrying value. During fiscal year 2020, vacant land previously held for future use and two excess facilities were transferred to assets held for sale. The Company sold the vacant land for cash proceeds of $ 32 million, resulting in a gain on sale of $ 17 million, which was included in distribution, selling and administrative costs in the Company's Consolidated Statements of Comprehensive Income. The Company also sold the two excess facilities for aggregate cash proceeds of $ 10 million, which approximated their aggregate carrying values. The changes in assets held for sale for fiscal years 2021 and 2020 were as follows: 2021 2020 Balance as of beginning of year $ 1 $ 1 Transfers in 11 24 Assets sold ( 4 ) ( 24 ) Balance as of end of the year $ 8 $ 1 50 8. PROPERTY AND EQUIPMENT Property and equipment as of January 1, 2022 and January 2, 2021 consisted of the following: January 1, 2022 January 2, 2021 Range of Useful Lives Land $ 379 $ 365 Buildings and building improvements 1,508 1,471 10–40 years Transportation equipment 1,250 1,181 5–10 years Warehouse equipment 520 501 5–12 years Office equipment, furniture and software 933 961 3–7 years Construction in process 165 108 4,755 4,587 Less accumulated depreciation and amortization ( 2,722 ) ( 2,566 ) Property and equipment—net $ 2,033 $ 2,021 Transportation equipment included $ 537 million and $ 530 million of financing lease assets as of January 1, 2022 and January 2, 2021, respectively. Buildings and building improvements included $ 15 million and $ 30 million of financing lease assets as of January 1, 2022 and January 2, 2021. Accumulated amortization of financing lease assets was $ 261 million and $ 244 million as of January 1, 2022 and January 2, 2021, respectively. Interest capitalized was not material in both fiscal years 2021 and 2020. Depreciation and amortization expense of property and equipment, including amortization of financing lease assets, was $ 323 million, $ 343 million and $ 311 million for fiscal years 2021, 2020 and 2019, respectively. 9. GOODWILL AND OTHER INTANGIBLES Goodwill includes the cost of acquired businesses in excess of the fair value of the tangible and other intangible net assets acquired. Other intangible assets include customer relationships, amortizable trade names, noncompete agreements, the brand names comprising the Company’s portfolio of exclusive brands, and trademarks. Brand names and trademarks are indefinite-lived intangible assets and, accordingly, are not subject to amortization, but are subject to impairment assessments as described below. Customer relationships, amortizable trade names and noncompete agreements are intangible assets with definite lives, and are carried at the acquired fair value less accumulated amortization. Customer relationships, amortizable trade names and noncompete agreements are amortized over the estimated useful lives (which range from approximately 1 to 15 years). Amortization expense was $ 55 million, $ 79 million and $ 51 million for fiscal years 2021, 2020 and 2019, respectively. The weighted-average remaining useful life of all definite lived intangibles was approximately ten years as of January 1, 2022. Amortization of these definite lived intangible assets is estimated to be $ 45 million for fiscal year 2022, $ 44 million for each of fiscal years 2023, 2024, 2025 and 2026, and $ 338 million in the aggregate thereafter. 51 Goodwill and other intangibles—net consisted of the following: January 1, 2022 January 2, 2021 Goodwill $ 5,625 $ 5,637 Other intangibles—net Customer relationships—amortizable: Gross carrying amount $ 655 $ 725 Accumulated amortization ( 99 ) ( 119 ) Net carrying value 556 606 Trade names—amortizable: Gross carrying amount 4 15 Accumulated amortization ( 1 ) ( 11 ) Net carrying value 3 4 Noncompete agreements—amortizable: Gross carrying amount 3 3 Accumulated amortization ( 3 ) ( 2 ) Net carrying value — 1 Brand names and trademarks—not amortizing 271 281 Total other intangibles—net $ 830 $ 892 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. The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually, or more frequently if events occur that indicate an asset may be impaired. 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. 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. For goodwill, the reporting unit used in assessing impairment is the Company’s one business segment as described in Note 24, Business Information. The Company performed the annual goodwill impairment assessment using a qualitative approach to determine whether it is more likely than not that the fair value of goodwill is less than its carrying value. In performing the qualitative assessment, the Company identified and considered the significance of relevant key factors, events, and circumstances that affect the fair value of its goodwill. These factors include external factors such as market conditions, macroeconomic, and industry, as well as entity-specific factors, such as actual and planned financial performance. Based upon the Company’s qualitative fiscal 2021 annual goodwill impairment analysis, the Company concluded that it is more likely than not that the fair value of goodwill exceeded its carrying value and there is no risk of impairment. The Company’s fair value estimates of the brand names and trademarks indefinite-lived intangible assets are based on a relief from royalty method. The fair value of these intangible assets is determined for comparison to the corresponding carrying value. If the carrying value of these assets exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. Key assumptions used in the relief from royalty method included the long-term growth rates of future revenues, the royalty rate for such revenue, and a discount rate. These assumptions require significant judgment by management, and are therefore considered Level 3 inputs in the fair value hierarchy. During 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 costs and asset impairment charges in the Company’s Consolidated Statements of Comprehensive Income. The remaining carrying value of the acquired trade name of $ 3 million was reclassified to trade names—amortizable and will be amortized with an estimated remaining useful life of 10 years. Due to the many variables inherent in estimating fair value and the relative size of the recorded indefinite-lived intangible assets, differences in assumptions may have a material effect on the results of the Company’s impairment analysis in future periods. No other impairments were noted as part of the annual impairment assessment for fiscal year 2021. Due to the adverse impacts of the COVID-19 pandemic in fiscal year 2020 on forecasted earnings and the discount rate utilized in our valuation models, the Company recognized impairment charges of $ 9 million related to two trade names acquired as part of the Food Group acquisition, which was included in restructuring costs and asset impairment charges in fiscal year 2020 in the Company's Consolidated Statements of Comprehensive Income. The decrease in goodwill as of January 1, 2022 is attributable to the finalization of the purchase price allocation recognized for the Smart Foodservice acquisition, as described in Note 5, Business Acquisitions. The net decrease in the gross carrying amount 52 of customer relationships as of January 1, 2022 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. 10. FAIR VALUE MEASUREMENTS 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. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: • Level 1—observable inputs, such as quoted prices in active markets • Level 2—observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active or inactive markets that are observable either directly or indirectly, or other inputs that are observable or can be corroborated by observable market data • Level 3—unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized as of the end of the reporting period in which the transfer occurs. 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 January 1, 2022 and January 2, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows: January 1, 2022 Level 1 Level 2 Level 3 Total Assets Money market funds $ 99 $ — $ — $ 99 January 2, 2021 Level 1 Level 2 Level 3 Total Assets Money market funds $ 696 $ — $ — $ 696 Liabilities Interest rate swaps $ — $ 5 $ — $ 5 There were no significant assets or liabilities on the Company's Consolidated Balance Sheets measured at fair value on a nonrecurring basis, except as further disclosed in Note 9, Goodwill and Other Intangibles. Recurring Fair Value Measurements Money Market Funds Money market funds include highly liquid investments with an original maturity of three or fewer months. These funds are valued using quoted market prices in active markets and are classified under Level 1 within the fair value hierarchy. Derivative Financial Instruments The Company has in the past, and may in the future, 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 1, 2022, the Company had no outstanding interest rate swap agreements. 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 53 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 11, Debt). 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 for the fiscal years ended January 1, 2022, January 2, 2021 , and December 28, 2019: Derivatives in Cash Flow Hedging Relationships Amount of (Loss) Gain Recognized in Accumulated Other Comprehensive Loss, net of tax Location of Amounts Reclassified from Accumulated Other Comprehensive Loss Amount of (Gain) Loss Reclassified from Accumulated Other Comprehensive Loss to Income, net of tax For the fiscal year ended January 1, 2022 Interest rate swaps $ — Interest expense—net $ 5 For the fiscal year ended January 2, 2021 Interest rate swaps $ ( 8 ) Interest expense—net $ 5 For the fiscal year ended December 28, 2019 Interest rate swaps $ ( 10 ) Interest expense—net $ ( 5 ) 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 $ 5.1 billion, compared to its carrying value of $ 5.0 billion as of January 1, 2022. 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 4.625 % unsecured senior notes due June 1, 2030 (the “Unsecured Senior Notes due 2030”) was $ 0.5 billion as of January 1, 2022. As discussed in Note 11, Debt, the proceeds from the Unsecured Senior Notes due 2030, along with proceeds from issuance of the 2021 Incremental Term Loan Facility (as further described in Note 11, Debt) and cash on hand were used to repay all of the then outstanding borrowings under the Initial Term Loan Facility (as further described in Note 11, Debt). 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 January 1, 2022. As discussed in Note 11, 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 $ 1.0 billion and $ 1.1 billion as of January 1, 2022 and January 2, 2021, respectively. The Fair value of the Secured Notes, the Unsecured Senior Notes due 2030, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2024 is based upon their closing market prices on the respective dates. The fair value of the Secured Notes, the Unsecured Senior Notes due 2030, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2024 is classified under Level 2 of the fair value hierarchy. The fair value of the balance of the Company’s debt is primarily classified under Level 3 of the fair value hierarchy, with fair value estimated based upon a combination of the cash outflows expected under these debt facilities, interest rates that are currently available to the Company for debt with similar terms, and estimates of the Company’s overall credit risk. 54 11. DEBT Total debt consisted of the following: Debt Description Maturity Interest Rate as of January 1, 2022 Carrying Value as of January 1, 2022 Carrying Value as of January 2, 2021 ABL Facility May 31, 2024 — % $ — $ — Initial Term Loan Facility (net of $3 of unamortized deferred financing costs) (1) June 27, 2023 — % — 2,098 2019 Incremental Term Loan Facility (net of $25 and $30 of unamortized deferred financing costs, respectively) September 13, 2026 2.10 % 1,442 1,451 2020 Incremental Term Loan Facility (net of $11 of unamortized deferred financing costs) (2) April 24, 2025 — % — 284 2021 Incremental Term Loan Facility (net of $7 of unamortized deferred financing costs) November 22, 2028 2.85 % 893 — Senior Secured Notes (net of $11 and $13 of unamortized deferred financing costs, respectively) April 15, 2025 6.25 % 989 987 Unsecured Senior Notes due 2024 (net of $3 of unamortized deferred financing costs) (2) June 15, 2024 — % — 597 Unsecured Senior Notes due 2029 (net of $8 of unamortized deferred financing costs) (2) February 15, 2029 4.75 % 892 — Unsecured Senior Notes due 2030 (net of $5 of unamortized deferred financing costs) (1) June 1, 2030 4.625 % 495 — Obligations under financing leases 2022–2039 1.25% - 8.63% 292 323 Other debt January 1, 2031 5.75% 8 8 Total debt 5,011 5,748 Current portion of long-term debt ( 95 ) ( 131 ) Long-term debt $ 4,916 $ 5,617 (1) The Initial Term Loan Facility was paid in full on November 22, 2021, with the proceeds from the issuance of the Unsecured Notes due 2030 and borrowings under the 2021 Incremental Term Loan Facility, as well as cash on hand, as further discussed below. (2) The 2020 Incremental Term Loan Facility and Unsecured Senior Notes due 2024 were paid in full on February 4, 2021 with the issuance of the Unsecured Senior Notes due 2029 and subsequently terminated as further discussed below. The related unamortized deferred financing costs were written off in connection with the termination. As of January 1, 2022, approximately 47 % of the Company’s total debt bears interest at a floating rate. Principal payments to be made on outstanding debt, exclusive of deferred financing costs, as of January 1, 2022, were as follows: 2022 $ 95 2023 95 2024 80 2025 1,062 2026 1,440 Thereafter 2,295 $ 5,067 ABL Facility 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. Extensions of credit under the ABL Facility are subject to availability under a borrowing base comprised of various percentages of the value of eligible accounts receivable, inventory, transportation equipment and certain unrestricted cash and cash equivalents, which, along with other assets, also serve as collateral for borrowings under the ABL Facility. The ABL Facility is scheduled to mature on May 31, 2024, subject to a springing maturity date in the event that more than $ 300 million of aggregate principal amount of earlier maturing indebtedness under USF’s Term 55 Loan Credit Agreement (described below) remains outstanding on a date that is sixty (60) days prior to the maturity date for such indebtedness under the Term Loan Credit Agreement. 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 a 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 January 1, 2022, was 0.00 % for ABR loans and 1.00 % for LIBOR loans. The ABL Facility also carries letter of credit financing fees equal to 0.125 % per annum in respect of each letter of credit outstanding, letter of credit participation fees equal to a percentage per annum equal to the applicable LIBOR margin minus the letter of credit facing fees in respect of each letter of credit outstanding and a commitment fee of 0.25 % per annum on the average unused amount of the commitments under the ABL Facility. The weighted-average interest rate on outstanding borrowings for the ABL Facility was 3.25 % and 1.95 % for fiscal years 2021 and 2020, respectively. USF had no outstanding borrowings, and had outstanding letters of credit totaling $ 268 million, under the ABL Facility as of January 1, 2022. 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 $ 1,722 million under the ABL Facility as of January 1, 2022. Term Loan Facilities The Amended and Restated Term Loan Credit Agreement, dated as of June 27, 2016 (as amended, the “Term Loan Credit Agreement”), provides USF with an incremental senior secured term loan borrowed in September 2019 (the “2019 Incremental Term Loan Facility”), an incremental senior secured term loan borrowed in November 2021 (the “2021 Incremental Term Loan Facility”) and the right to request additional incremental senior secured term loan commitments. Additionally, the Term Loan Credit Agreement provided USF with a senior secured term loan borrowed in June 2016 (the “Initial Term Loan Facility”) and an incremental senior secured term loan borrowed in April 2020 (the “2020 Incremental Term Loan Facility”), each of which were repaid in 2021, as discussed below. Initial Term Loan Facility On November 22, 2021, we repaid all of the then outstanding borrowings under the Initial Term Loan Facility, using proceeds from the issuance of the Unsecured Senior Notes due 2030 and the 2021 Incremental Term Loan Facility, along with cash on hand, as discussed below. 2019 Incremental Term Loan Facility The 2019 Incremental Term Loan Facility had an outstanding balance of $ 1,442 million, net of $ 25 million of unamortized deferred financing costs, as of January 1, 2022. 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, as described under the 2019 Incremental Term Loan Facility, plus a margin of 1.00 % (subject to a LIBOR “floor” of 0.00 %). The 2019 Incremental Term Loan Facility is scheduled to mature on September 13, 2026. Borrowings under the 2019 Incremental Term Loan Facility may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of LIBOR-based borrowings. The 2019 Incremental Term Loan Facility may require mandatory repayments if certain assets are sold. 2020 Incremental Term Loan Facility On February 4, 2021, we repaid all of the then outstanding borrowings under the 2020 Incremental Term Loan Facility using proceeds from the issuance of the Unsecured Senior Notes due 2029 as discussed below. 2021 Incremental Term Loan Facility On November 22, 2021, USF entered into a new incremental term loan under the Term Loan Credit Agreement, the 2021 Incremental Term Loan Facility, in an aggregate principal amount of $ 900 million. USF used the proceeds of the borrowings under the 2021 Incremental Term Loan Facility, together with the proceeds of the Unsecured Senior Notes due 2030 and cash on hand, to repay all of the then outstanding borrowings under the Initial Term Loan Facility, and to pay related fees and expenses. The 2021 Incremental Term Loan Facility had an outstanding balance of $ 893 million, net of $ 7 million of unamortized deferred financing costs, as of January 1, 2022. Borrowings under the 2021 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 2.75 %, or the sum of an ABR, as described under the 2021 Incremental Term Loan Facility, plus a margin of 1.75 % (subject to a LIBOR “floor” of 0.00 %). 56 The 2021 Incremental Term Loan Facility is scheduled to mature on November 22, 2028. Borrowings under the 2021 Incremental Term Loan Facility may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of LIBOR-based borrowings and a 1.00 % premium in the case of any “repricing transaction” within six months of November 22, 2021. The 2021 Incremental Term Loan Facility may require mandatory repayments if certain assets are sold. Senior Secured Notes due 2025 As of January 1, 2022, the Secured Notes had a carrying value of $ 989 million, net of $ 11 million of unamortized deferred financing costs. The Secured Notes bear interest at a rate of 6.25 % per annum and will mature on April 15, 2025. On or after April 15, 2022, the Secured Notes are redeemable, at USF’s option, in whole or in part at a price of 103.125 % of the remaining principal, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. On or after April 15, 2023 and April 15, 2024, the optional redemption price for the Secured Notes declines to 101.563 % and 100.000 %, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. Unsecured Senior Notes due 2024 As of June 15, 2020, the Unsecured Senior Notes due 2024 became redeemable, at USF’s option, in whole or in part at a price of 101.469 % of the remaining principal, plus accrued and unpaid interest, if any, to, but not including the applicable redemption date. On February 4, 2021, we redeemed all of the then outstanding Unsecured Senior Notes due 2024, including the early redemption premium, using proceeds from the issuance of the Unsecured Senior Notes due 2029 as discussed below. Unsecured Senior Notes due 2029 On February 4, 2021, USF completed a private offering of $ 900 million aggregate principal amount of Unsecured Senior Notes due 2029. USF used the proceeds of the Unsecured Senior Notes due 2029, together with cash on hand, to redeem all of the Company’s then outstanding Unsecured Senior Notes due 2024, repay all of the then outstanding borrowings under the 2020 Incremental Term Loan Facility and to pay related fees and expenses. In connection with the repayment of the Unsecured Senior Notes due 2024 and the 2020 Incremental Term Loan Facility, the Company applied debt extinguishment accounting and recorded $ 23 million in the Company’s Consolidated Statements of Comprehensive Income, consisting of a $ 14 million write-off of pre-existing unamortized deferred financing costs related to the redeemed facilities and a $ 9 million early redemption premium related to the Unsecured Senior Notes due 2024. 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 $ 892 million, net of $ 8 million of unamortized deferred financing costs, as of January 1, 2022. The Unsecured Senior Notes due 2029 bear interest at a rate of 4.75 % per annum and will mature on February 15, 2029. On or after February 15, 2024, the Unsecured Senior Notes due 2029 are redeemable, at USF's option, in whole or in part at a price of 102.375 % of the remaining principal, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. On or after February 15, 2025 and February 15, 2026, the optional redemption price for the Unsecured Senior Notes due 2029 declines to 101.188 % and 100.000 %, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. Unsecured Senior Notes due 2030 On November 22, 2021, USF completed a private offering of $ 500 million aggregate principal amount of Unsecured Senior Notes due 2030. USF used the proceeds of the Unsecured Senior Notes due 2030, together with borrowings under the 2021 Incremental Term Loan Facility and cash on hand, to repay all of the then outstanding borrowings under the Initial Term Loan Facility, and to pay related fees and expenses. In connection with the repayment of the Initial Term Loan Facility, the Company applied debt extinguishment accounting and recorded $ 2 million in the Company’s Consolidated Statements of Comprehensive Income, primarily consisting of a write-off of pre-existing unamortized deferred financing costs related to the Initial Term Loan Facility. Lender fees and third-party costs of $ 12 million with the issuance of 2021 Incremental Term Loan Facility and the Unsecured Senior Notes due 2030 were capitalized as deferred financing costs. The Unsecured Senior Notes due 2030 had an outstanding balance of $ 495 million, net of $ 5 million of unamortized deferred financing costs, as of January 1, 2022. The Unsecured Senior Notes due 2030 bear interest at a rate of 4.625 % per annum and will mature on June 1, 2030. On or after June 1, 2025, the Unsecured Senior Notes due 2030 are redeemable, at USF’s option, in whole or in part at a price of 102.313 % of the remaining principal, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. On or after June 1, 2026 and June 1, 2027, the optional redemption price for the Unsecured Senior Notes due 2030 declines to 101.156 % and 100.000 %, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. 57 Financing Leases— Obligations under financing leases of $ 292 million as of January 1, 2022 consist primarily of amounts due for transportation equipment and building leases. Security Interests Substantially all of the Company’s assets are pledged under the various agreements governing our indebtedness. The ABL Facility is secured by certain designated receivables, as well as inventory and certain owned transportation equipment and certain unrestricted cash and cash equivalents. Additionally, the lenders under the ABL Facility have a second priority interest in all of the capital stock of USF and its subsidiaries and substantially all other non-real estate assets of USF and its subsidiaries. USF’s obligations under the 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility are secured by all the capital stock of USF and its subsidiaries and substantially all the non-real estate assets of USF. Additionally, the lenders under the 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility have a second priority interest in the inventory and certain transportation equipment pledged under the ABL Facility. Debt Covenants The agreements governing our indebtedness contain customary covenants. 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 $ 1.4 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 January 1, 2022. The agreements governing our indebtedness also contain customary events of default. Those include, without limitation, the failure to pay interest or principal when it is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true when made, and certain insolvency events. If an event of default occurs and remains uncured, the principal amounts outstanding, together with all accrued unpaid interest and other amounts owed, may be declared immediately due and payable. Were such an event to occur, the Company would be forced to seek new financing that may not be on as favorable terms as its existing debt. The Company’s ability to refinance its indebtedness on favorable terms, or at all, is directly affected by the then prevailing economic and financial conditions. In addition, the Company’s ability to incur secured indebtedness (which may enable it to achieve more favorable terms than the incurrence of unsecured indebtedness) depends in part on the value of its assets. This, in turn, is dependent on the strength of its cash flows, results of operations, economic and market conditions, and other factors. 12. ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES Accrued expenses and other long-term liabilities consisted of the following: January 1, 2022 January 2, 2021 Accrued expenses and other current liabilities: Salary, wages and bonus expenses $ 156 $ 105 Operating expenses 82 64 Workers’ compensation, general and fleet liability 41 43 Group medical liability 28 26 Customer rebates and other selling expenses 116 89 Property and sales tax payable 47 44 Operating lease liability 36 44 Interest payable 34 18 Other 70 64 Total accrued expenses and other current liabilities $ 610 $ 497 Other long-term liabilities: Workers’ compensation, general and fleet liability $ 151 $ 132 Operating lease liability 244 263 Accrued pension and other postretirement benefit obligations 6 8 Uncertain tax positions 31 33 Other 47 69 Total Other long-term liabilities $ 479 $ 505 58 Self-Insured Liabilities — The Company is self-insured for general liability, fleet liability and workers’ compensation claims. Claims in excess of certain levels are insured by external parties. The workers’ compensation liability, included in the table above under “Workers’ compensation, general liability and fleet liability,” is recorded at present value. This table summarizes self-insurance liability activity for the last three fiscal years: 2021 2020 2019 Balance as of beginning of the year $ 175 $ 165 $ 159 Charged to costs and expenses 95 83 80 Acquisition — 3 17 Reinsurance recoverable 7 2 — Payments ( 85 ) ( 78 ) ( 91 ) Balance as of end of the year $ 192 $ 175 $ 165 Discount rate 0.49 % 0.15 % 1.58 % Estimated future payments for self-insured liabilities are as follows: 2022 $ 41 2023 39 2024 20 2025 13 2026 10 Thereafter 71 Total self-insured liability 194 Less amount representing interest ( 2 ) Present value of self-insured liability $ 192 59 13. RESTRUCTURING LIABILITIES The following table summarizes the changes in the restructuring liabilities for the last three fiscal years: Severance and Related Costs Facility Closing Costs Total Balance as of December 29, 2018 $ 1 $ 1 $ 2 Current period costs — — — Payments, net — ( 1 ) ( 1 ) Balance at December 28, 2019 1 — 1 Current period costs 27 3 30 Payments, net ( 27 ) ( 2 ) ( 29 ) Balance as of January 2, 2021 1 1 2 Current period costs (benefits) 5 ( 1 ) 4 Payments, net ( 3 ) — ( 3 ) Balance as of January 1, 2022 $ 3 $ — $ 3 From time to time, the Company may implement initiatives or close or consolidate facilities in an effort to reduce costs and improve operating effectiveness. In connection with these activities, the Company may incur various costs including severance and other employee-related separation costs. 2021 Activities During fiscal year 2021, the Company incurred net restructuring costs of $ 4 million for severance and related costs associated with the closure of an excess facility and initiatives to improve operational effectiveness. 2020 Activities During fiscal year 2020, in order to adjust its cost structure in line with the decrease in Net sales caused by the impact of the COVID-19 pandemic on the operations of our restaurant, hospitality and education customers, the Company reduced its work force, and separately closed two facilities, incurring net restructuring costs of $ 30 million. 2019 Activities During fiscal year 2019, the Company incurred de minimis restructuring costs. See Note 9, Goodwill and Other Intangibles, for discussion related to asset impairment charges incurred during fiscal years 2021 and 2020. 14. CONVERTIBLE PREFERRED STOCK On May 6, 2020 (the “Issuance Date”), pursuant to the terms of an Investment Agreement (the “Investment Agreement”) with KKR Fresh Aggregator L.P., a Delaware limited partnership, which agreement was joined on February 25, 2021 by permitted transferee KKR Fresh Holdings L.P., a Delaware limited partnership (“KKR”), the Company issued and sold 500,000 shares of the Company’s Series A convertible preferred stock, par value $0.01 per share (the “Series A Preferred Stock”) to KKR Fresh Aggregator L.P. for an aggregate purchase price of $ 500 million, or $ 1,000 per share (the “Issuance”). The Company used the net proceeds from the Issuance for working capital and general corporate purposes. In accordance with the terms of the Certificate of Designations for the Series A Preferred Stock (the “Certificate of Designations”), the Company paid dividends on the shares of the Series A Preferred Stock in the form of (a) 5,288 ; 8,842 ; 8,997 and 9,154 shares of Series A Preferred Stock on June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021, respectively, plus a de minimis amount in cash in lieu of fractional shares and (b) cash in the amount of $ 28 million in the aggregate during subsequent quarters in fiscal year 2021. The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, par value $ 0.01 per share (the “Common Stock”), with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Series A Preferred Stock has a liquidation preference of $ 1,000 per share. Holders of the Series A Preferred Stock are entitled to a cumulative dividend at the rate of 7.0 % per annum. If the Company does not declare and pay a dividend on the Series A Preferred Stock, the dividend rate will increase by 3.0 % to 10.0 % per annum until all accrued but unpaid dividends have been paid in full. Dividends are payable in kind through the issuance of additional shares of Series A Preferred Stock for the first four dividend payments following the Issuance Date, and thereafter, in cash or in kind, or a combination of both, at the option of the Company. 60 The Series A Preferred Stock is convertible at the option of the holders thereof at any time into shares of Common Stock at an initial conversion price of $ 21.50 per share and an initial conversion rate of 46.5116 shares of Common Stock per share of Series A Preferred Stock, subject to certain anti-dilution adjustments set forth in the Certificate of Designations. At any time after May 6, 2023 (the third anniversary of the Issuance Date), if the volume weighted average price of the Common Stock exceeds $ 43.00 per share, as may be adjusted pursuant to the Certificate of Designations, for at least 20 trading days in any period of 30 consecutive trading days, at the election of the Company, all of the Series A Preferred Stock will be convertible into the relevant number of shares of Common Stock. At any time after May 6, 2025 (the fifth anniversary of the Issuance Date), the Company may redeem some or all of the Series A Preferred Stock for a per share amount in cash equal to: (i) the sum of (x) 100 % of the liquidation preference thereof, plus (y) all accrued and unpaid dividends, multiplied by (ii) (A) 105 % if the redemption occurs at any time after the fifth anniversary of the Issuance Date and prior to the sixth anniversary of the Issuance Date, (B) 103 % if the redemption occurs at any time after May 6, 2026 (the sixth anniversary of the Issuance Date) and prior to May 6, 2027 (the seventh anniversary of the Issuance Date), and (C) 100 % if the redemption occurs at any time after May 6, 2027 (the seventh anniversary of the Issuance Date). Upon certain change of control events involving the Company, the holders of the Series A Preferred Stock must either (i) convert their shares of Series A Preferred Stock into Common Stock at the then-current conversion price or (ii) cause the Company to redeem their shares of Series A Preferred Stock for an amount in cash equal to 100 % of the liquidation preference thereof plus all accrued but unpaid dividends. If any such change of control event occurs on or before May 6, 2025 (the fifth anniversary of the Issuance Date), the Company will also be required to pay the holders of the Series A Preferred Stock a “make-whole” premium of 5 %. Holders of the Series A Preferred Stock are entitled to vote with the holders of the Common Stock on an as-converted basis. Holders of the Series A Preferred Stock are also entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series A Preferred Stock, authorization or issuances by the Company of securities that are senior to, or equal in priority with, the Series A Preferred Stock, increases or decreases in the number of authorized shares of Series A Preferred Stock, and issuances of shares of Series A Preferred Stock after the Issuance Date, other than shares issued as in-kind dividends with respect to shares of the Series A Preferred Stock issued after the Issuance Date. The following table summarizes the activity for the outstanding Series A Preferred Stock and associated carrying value for fiscal years 2021 and 2020: Series A Preferred Stock Shares Carrying Value Balance, December 28, 2019 — $ — Shares issued for cash - Series A Preferred Stock, net of issuance costs 500,000 491 Shares issued as paid in kind dividend - Series A Preferred Stock 23,127 $ 28 Balance, January 2, 2021 523,127 $ 519 Shares issued as paid in kind dividend - Series A Preferred Stock 9,154 15 Balance, January 1, 2022 532,281 $ 534 15. RELATED PARTY TRANSACTIONS FMR LLC, is a holder of approximately 10 % of the Company’s outstanding common stock. As of January 1, 2022, investment funds managed by an affiliate of FMR LLC held approximately $ 24 million in aggregate principal amount of the 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility. Certain FMR LLC affiliates also provide administrative and trustee services for the Company’s 401(k) Plan and provide administrative services for other Company sponsored employee benefit plans. Fees earned by FMR LLC affiliates are not material to the Company’s consolidated financial statements. KKR Capital Markets LLC (“KKR Capital Markets”), an affiliate of KKR, received an aggregate of $2 million for debt advisory services rendered in connection with the Unsecured Senior Notes due 2029, the 2021 Incremental Term Loan Facility, and the Unsecured Senior Notes due 2030 financings during fiscal year 2021 and $ 6 million for debt advisory services rendered in connection with the financing of the Smart Foodservice acquisition during fiscal year 2020. As reported by the administrative agent of the Initial Term Loan Facility and the 2019 Incremental Term Loan Facility (the “Term Loan Agent”), investment funds managed by an affiliate of KKR held approximately $ 17 million in aggregate principal amount of the 2019 Incremental Term Loan Facility as of January 1, 2022 and approximately $ 65 million in aggregate principal amount of the Initial Term Loan Facility and the 2019 Incremental Term Loan Facility as of January 2, 2021. 61 16. SHARE-BASED COMPENSATION, COMMON STOCK ISSUANCES AND COMMON STOCK Our long-term incentive plans provide for the grant of various forms of share-based awards to our directors, officers and other eligible employees. Total compensation expense related to share-based arrangements was $ 48 million, $ 40 million and $ 32 million for fiscal years 2021, 2020 and 2019, respectively, and is reflected in distribution, selling and administrative costs in the Company's Consolidated Statements of Comprehensive Income. The total income tax benefit associated with share-based compensation recorded in the Company's Consolidated Statements of Comprehensive Income was $ 10 million, $ 8 million and $ 8 million for fiscal years 2021, 2020 and 2019, respectively. In addition, the Company sponsors an employee stock purchase plan to provide eligible employees with the opportunity to acquire shares of our common stock at a discount of 15 % of the fair market value of the common stock on the date of purchase, and as such, the plan is considered compensatory for federal income tax purposes. The Company recorded $ 4 million, $ 3 million and $ 4 million of share-based compensation expense for fiscal years 2021, 2020 and 2019, respectively, associated with the employee stock purchase plan. Stock Options —Certain directors, executive officers and other eligible employees have been granted time-based stock options (the “Time-Based Options”) and performance-based options (the “Performance Options” and, together with the Time-Based Options, the “Options”) to purchase shares of our common stock. The Time-Based Options generally vest and become exercisable ratably over a period of three to four years, from the date of the grant. Share-based compensation expense related to the Time-Based Options was $ 12 million, $ 10 million and $ 8 million for fiscal years 2021, 2020 and 2019, respectively. The Performance Options generally vest and become exercisable ratably over a period o f four years, from the date of the grant, provided that the Company achieves a predetermined financial performance condition established by the Compensation Committee of our Board of Directors for the respective award tranche. The Company recorded no share-based compensation expense attributable to Performance Options in fiscal years 2020 and 2019 as a result of the performance conditions for fiscal years 2019 and 2018, respectively, were not met and the Performance Options related to these performance periods were subsequently forfeited. There was no share-based compensation expense recorded in fiscal year 2021 related to the Performance Options. The Options are nonqualified, with exercise prices equal to the estimated fair value of a share of common stock as of the date of the grant. Exercise prices range from $ 9.86 to $ 38.17 per share and generally have a 10 -year life. The fair value of each Option is estimated as of the date of grant using a Black-Scholes option-pricing model. The weighted-average assumptions for Options granted in fiscal years 2021, 2020 and 2019 are included in the following table: 2021 2020 2019 Expected volatility 53.0 % 29.3 % 23.7 % Expected dividends — — — Risk-free interest rate 1.1 % 0.5 % 2.3 % Expected term (in years) 6.1 6.1 5.6 Expected volatility is calculated leveraging the historical volatility of public companies similar to US Foods. The assumed dividend yield is zero because the Company has not historically paid dividends. The risk-free interest rate is the implied zero-coupon yield for U.S. Treasury securities having a maturity approximately equal to the expected term, as of the grant date. Due to a lack of relevant historical data, the simplified approach was used to determine the expected term of the options. 62 The summary of Options outstanding and changes during fiscal year 2021 are presented below: Time Options Performance Options Total Options Weighted- Average Fair Value Weighted- Average Exercise Price Weighted- Average Remaining Contractual Years Outstanding as of January 2, 2021 5,126,908 358,829 5,485,737 $ 6.85 $ 21.10 Granted 966,251 — 966,251 $ 18.59 $ 36.85 Exercised ( 709,819 ) ( 91,843 ) ( 801,662 ) $ 6.65 $ 19.97 Forfeited ( 199,168 ) ( 3,343 ) ( 202,511 ) $ 6.77 $ 19.03 Outstanding as of January 1, 2022 5,184,172 263,643 5,447,815 $ 8.96 $ 24.14 7.2 Vested and exercisable as of January 1, 2022 2,426,951 263,643 2,690,594 $ 8.50 $ 25.05 5.9 The weighted-average grant date fair value of Options granted for fiscal years 2021, 2020 and 2019 was $ 18.59 , $ 3.91 and $ 10.63 , respectively. During fiscal years 2021, 2020 and 2019, Options were exercised with total intrinsic values of $ 14 million, $ 3 million and $ 21 million, respectively, representing the excess of fair value over the exercise price. There was $ 15 million of total unrecognized compensation costs related to unvested Options expected to vest as of January 1, 2022, which is expected to be recognized over a weighted-average period of two years. Restricted Stock Awards —Certain executive officers have been granted restricted stock awards (“RSAs”), some of which vest ratably over a three-year period from the date of grant (the “Time-Based RSA”) and others of which vest to the extent certain performance conditions are met (the “Performance RSAs”). The Company recorded share-based compensation expense for the Time-Based RSAs of $ 1 million in each of fiscal years 2021, 2020, and 2019. The Performance RSAs were granted assuming the maximum level of performance and vest on the third anniversary of the grant date if specific performance conditions over a three-year performance period are achieved. The number of shares eligible to vest on the vesting date range from zero to 200 % of the target award amount, based on the achievement of the performance conditions. The fair value of the Performance RSAs is measured using the fair market value of our common stock on the date of grant and recognized over the three-year vesting period for the portion of the award that is expected to vest. Compensation expense for the Performance RSAs is remeasured as of the end of each reporting period, based on management’s evaluation of whether, and to what extent, it is probable that performance conditions will be met. Share-based compensation expense for the Performance RSAs was $ 1 million, $ 2 million and $ 3 million for fiscal years 2021, 2020 and 2019, respectively. The summary of unvested RSAs and changes during fiscal year 2021 is presented below: Time-Based RSAs Performance RSAs Total RSAs Weighted- Average Fair Value Unvested as of January 2, 2021 77,811 462,874 540,685 $ 34.14 Granted — — — $ — Vested ( 38,902 ) ( 32,356 ) ( 71,258 ) $ 34.11 Forfeited ( 3,216 ) ( 19,292 ) ( 22,508 ) $ — Performance adjustment (1) — ( 197,092 ) ( 197,092 ) $ 33.56 Unvested as of January 1, 2022 35,693 214,134 249,827 $ 34.56 (1) Represents an adjustment to the 2018 Performance RSAs based on the actual performance during the three-year performance period. The weighted-average grant date fair value for the RSAs granted in fiscal year 2019 was $ 34.56 . There were no RSAs granted in fiscal years 2020 and 2021. There was $ 1 million of unrecognized compensation expense related to the RSAs as of January 1, 2022, that is expected to be recognized over a weighted average period of one year. Restricted Stock Units —Certain directors, executive officers and other eligible employees have been granted time-based restricted stock units (the “Time-Based RSUs”), performance-based restricted stock units (the “Performance RSUs”) and, market performance-based restricted stock units (the “Market Performance RSUs” and collectively with the Time-Based RSUs 63 and Performance RSUs, the “RSUs”). The Time-Based RSUs generally vest ratably over three years, starting on the anniversary date of the grant. For fiscal years 2021, 2020 and 2019, the Company recognized $ 26 million, $ 23 million and $ 14 million, respectively, in share-based compensation expense related to the Time-Based RSUs. The Performance RSUs generally vest over a three year period, as and to the extent predetermined performance conditions are met. The fair value of each share underlying the Performance RSUs is measured at the fair market value of our common stock on the date of grant and recognized over the vesting period for the portion of the award that is expected to vest. Compensation expense for the Performance RSUs is remeasured as of the end of each reporting period, based on management’s evaluation of whether it is probable that the performance conditions will be met. The Company recognized $ 1 million, $ 1 million and $ 2 million of share-based compensation expense in fiscal years 2021, 2020 and 2019, respectively, for the Performance RSUs. During fiscal year 2021, the Company granted Market Performance RSUs to certain executive officers and other eligible employees. These Market Performance RSUs awards vest at the end of a four-year performance period contingent on our achievement of certain total shareholder return performance (“TSR”) targets during the performance period. The grant date fair value of the Market Performance RSUs was estimated using a Monte-Carlo simulation. The Company recognized $ 3 million of share-based compensation expense in fiscal years 2021 for the Market Performance RSUs. There were no Market Performance RSUs outstanding prior to fiscal year 2021 and therefore no share-based compensation expense was recorded in 2020 and 2019 related to the Market Performance RSUs. A summary of RSUs outstanding and changes during fiscal year 2021 is presented below. Time-Based RSUs Performance RSUs Market Performance RSUs Total RSUs Weighted- Average Fair Value Unvested as of January 2, 2021 2,692,450 209,737 — 2,902,187 $ 18.16 Granted 857,273 — 357,755 1,215,028 $ 37.74 Vested ( 1,058,863 ) ( 27,423 ) — ( 1,086,286 ) $ 19.46 Forfeited ( 185,564 ) ( 6,648 ) ( 7,612 ) ( 199,824 ) $ 22.05 Performance adjustment (1) — ( 69,603 ) — ( 69,603 ) $ 33.56 Unvested as of January 1, 2022 2,305,296 106,063 350,143 2,761,502 $ 25.60 (1) Represents an adjustment to the 2018 Performance RSUs based on actual performance during the respective three-year performance period. The weighted-average grant date fair values for the RSUs granted in fiscal years 2021, 2020, and 2019 was $ 37.74 , $ 13.83 and $ 35.09 , respectively. As of January 1, 2022, there was $ 41 million of unrecognized compensation cost related to the RSUs that is expected to be recognized over a weighted-average period of two years. 17. LEASES The Company leases certain distribution and warehouse facilities, office facilities, fleet vehicles, and office and warehouse equipment. The Company determines if an arrangement is a lease at inception and recognizes a financing or operating lease liability and right-of-use (“ROU”) asset in the Company’s Consolidated Balance Sheets. ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term as of commencement date. For the Company’s leases that do not provide an implicit borrowing rate, the Company uses its incremental borrowing rate based on the information available as of commencement date in determining the present value of future payments. The lease terms may include options to extend, terminate or buy out the lease. When it is reasonably certain that the Company will exercise these options, the associated payments are included in ROU assets and the estimated lease liabilities. Leases with an initial term of 12 months or less are not recorded in the Company's Consolidated Balance Sheets. The Company recognizes lease expense for leases on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately. For office and warehouse equipment leases, the Company accounts for the lease and non-lease components as a single lease component. Variable lease payments that do not depend on an index or a rate, such as insurance and property taxes, are excluded from the measurement of the lease liability and are recognized as variable lease cost when the obligation for that payment is incurred. 64 The following table presents the location of the ROU assets and lease liabilities in the Company’s Consolidated Balance Sheets: Leases Consolidated Balance Sheet Location January 1, 2022 January 2, 2021 Assets Operating Other assets $ 275 $ 284 Financing Property and equipment-net (1) 291 316 Total leased assets $ 566 $ 600 Liabilities Current: Operating Accrued expenses and other current liabilities $ 36 $ 44 Financing Current portion of long-term debt 72 86 Noncurrent: Operating Other long-term liabilities 244 263 Financing Long-term debt 220 237 Total lease liabilities $ 572 $ 630 (1) Financing lease assets are recorded net of accumulated amortization of $ 261 million and $ 244 million as of January 1, 2022 and January 2, 2021. The following table presents the location of lease costs in fiscal years 2021, 2020 and 2019 in the Company's Consolidated Statements of Comprehensive Income: Lease Cost Statements of Comprehensive Income Location 2021 2020 2019 Operating lease cost Distribution, selling and administrative costs $ 58 $ 52 $ 29 Financing lease cost: Amortization of leased assets Distribution, selling and administrative costs 73 79 76 Interest on lease liabilities Interest expense-net 10 12 12 Short-term lease cost Distribution, selling and administrative costs 1 — — Variable lease cost Distribution, selling and administrative costs 11 13 6 Net lease cost $ 153 $ 156 $ 123 Future lease payments under lease agreements as of January 1, 2022 were as follows: Maturity of Lease Liabilities Operating Leases Financing Lease Obligation Total 2022 $ 56 $ 79 $ 135 2023 55 77 132 2024 40 60 100 2025 39 41 80 2026 35 26 61 After 2026 140 30 170 Total lease payments 365 313 678 Less amount representing interest ( 85 ) ( 21 ) ( 106 ) Present value of lease liabilities $ 280 $ 292 $ 572 65 Other information related to lease agreements for fiscal years 2021, 2020 and 2019 was as follows: Cash Paid For Amounts Included In Measurement of Liabilities 2021 2020 2019 Operating cash flows from operating leases $ 55 $ 56 $ 37 Operating cash flows from financing leases 10 12 12 Financing cash flows from financing leases 87 102 90 Lease Term and Discount Rate January 1, 2022 January 2, 2021 December 28, 2019 Weighted-average remaining lease term (years): Operating leases 8.30 8.42 6.14 Financing leases 5.74 5.31 4.85 Weighted-average discount rate: Operating leases 6.1 % 6.6 % 4.4 % Financing leases 3.2 % 3.2 % 3.5 % 18. RETIREMENT PLANS The Company sponsors a defined benefit pension plan and 401(k) plan for eligible employees, and provides certain postretirement health and welfare benefits to eligible retirees and their dependents. Company Sponsored Defined Benefit Plans — The Company sponsors the US Foods Consolidated Defined Benefit Retirement Plan (the “Retirement Plan”), a qualified defined benefit retirement plan, that pays benefits to eligible employees at the time of retirement, using actuarial formulas based upon a participant’s years of credited service and compensation. Only certain union associates are eligible to participate and continue to accrue benefits under the plan per the collective bargaining agreements. The plan is closed and frozen to all other employees. During fiscal year 2020, in connection with the Smart Foodservice acquisition, the Company assumed a defined benefit pension plan with net liabilities of approximately $ 19 million. This defined benefit pension plan was merged into the Retirement Plan as of December 31, 2020. The Company also maintains postretirement health and welfare plans for certain employees. Amounts related to the Retirement Plan and other postretirement plans recognized in the Company's consolidated financial statements are determined on an actuarial basis. The components of net periodic pension benefit costs (credits) for the Retirement Plan the last three fiscal years were as follows: 2021 2020 2019 Components of net periodic pension benefit (credits) costs: Service cost $ 3 $ 3 $ 2 Interest cost 29 32 37 Expected return on plan assets ( 54 ) ( 55 ) ( 49 ) Amortization of net loss — 1 4 Settlements — — 12 Net periodic pension benefit (credits) costs $ ( 22 ) $ ( 19 ) $ 6 Other postretirement benefit costs were de minimis for fiscal years 2021, 2020 and 2019. The service cost component of net periodic benefit credits (costs) is included in distribution, selling and administrative costs, while the other components of net periodic benefit credits (costs) are included in other (income) expense—net in the Company's Consolidated Statements of Comprehensive Income. The Company did not make a significant contribution to the Retirement Plan in fiscal years 2021, 2020 and 2019. During fiscal year 2019, the Company completed a voluntary lump sum settlement offer to certain terminated plan participants who held vested accrued benefits under a certain threshold amount. In addition, during fiscal year 2019, the Company completed a spin-off of liabilities associated with certain active participants with small, accrued benefits and retirees into a separate plan and immediately terminated that plan. As a result of the termination of the spin-off of the plan, those participants were able to elect to receive immediate lump sum payouts, with any remaining liabilities transferred to an insurance company through the purchase of an annuity contract. Pension obligation settlement payments of $ 66 million related to these 66 transactions, consisting of lump sum payments and the annuity contract premium, were paid from plan assets. The Company incurred non-cash settlement costs of $ 12 million in fiscal year 2019. The fiscal year 2019 settlement costs were included in other (income) expense—net in the Company's Consolidated Statements of Comprehensive Income. No non-cash settlement costs were incurred in fiscal years 2021 and 2020. Changes in plan assets and benefit obligations recorded in accumulated other comprehensive loss for pension benefits for the last three fiscal years were as follows: 2021 2020 2019 Changes recognized in accumulated other comprehensive loss: Actuarial gain $ 14 $ 29 $ 44 Amortization of net loss — 1 4 Settlements — — 12 Net amount recognized $ 14 $ 30 $ 60 Changes in plan assets and benefit obligations recorded in accumulated other comprehensive loss for other postretirement benefits for the last three fiscal years were de minimis. The funded status of the Retirement Plan for the last three fiscal years was as follows: Pension Benefits 2021 2020 2019 Change in benefit obligation: Benefit obligation as of beginning of year $ 1,061 $ 903 $ 871 Service cost 3 3 2 Interest cost 29 32 37 Actuarial (gain) loss ( 30 ) 98 100 Settlements — — ( 84 ) Benefit disbursements ( 47 ) ( 45 ) ( 23 ) Smart Foodservice assumed benefit obligations — 70 — Benefit obligation as of end of year 1,016 1,061 903 Change in plan assets: Fair value of plan assets as of beginning of year 1,112 923 836 Return on plan assets 38 183 193 Employer contribution — — 1 Settlements — — ( 84 ) Benefit disbursements ( 47 ) ( 45 ) ( 23 ) Smart Foodservice acquired plan assets — 51 — Fair value of plan assets as of end of year 1,103 1,112 923 Net funded status $ 87 $ 51 $ 20 The net funded status of the Retirement Plan for fiscal year 2021 improved from a net asset of $ 51 million to a net asset of $ 87 million, primarily due to asset returns, and an increase in the discount rate. The net funded status of the Retirement Plan for fiscal year 2020 improved from a net asset of $ 20 million to a net asset of $ 51 million, primarily due to asset returns, partially offset by a decrease in the discount rate and the merger of the Smart Foodservice pension plan into the Retirement Plan. The net funded status of the Retirement Plan for fiscal year 2019 improved from a net liability of $ 35 million to a net asset of $ 20 million, primarily due to asset returns and lump sum payments made that released more benefit obligation than assets paid, partially offset by a decrease in the discount rate. The fiscal year 2021 pension benefits actuarial gain of $ 30 million was primarily due to an increase in the discount rate. The fiscal year 2020 pension benefits actuarial loss of $ 98 million was primarily due to a decrease in the discount rate. The fiscal year 2019 pension benefits actuarial loss of $ 100 million was primarily due to a decrease in the discount rate. 67 Other Postretirement Plans 2021 2020 2019 Change in benefit obligation: Benefit obligation as of beginning of year $ 6 $ 6 $ 6 Benefit disbursements ( 1 ) ( 1 ) ( 1 ) Other 1 1 1 Benefit obligation as of end of year 6 6 6 Change in plan assets: Fair value of plan assets as of beginning of year — — — Employer contribution 1 1 1 Benefit disbursements ( 1 ) ( 1 ) ( 1 ) Fair value of plan assets as of end of year — — — Net funded status $ ( 6 ) $ ( 6 ) $ ( 6 ) Service cost, interest cost and actuarial (gain) loss for other postretirement benefits were de minimis for fiscal years 2021, 2020 and 2019. The amounts recognized on the Company's Consolidated Balance Sheets related to the company-sponsored defined benefit plans and other postretirement benefit plans consisted of the following: Pension Benefits 2021 2020 2019 Amounts recognized in the consolidated balance sheets consist of the following: Prepaid benefit obligation—noncurrent $ 89 $ 53 $ 22 Accrued benefit obligation—noncurrent ( 1 ) ( 2 ) ( 2 ) Net amount recognized in the consolidated balance sheets $ 88 $ 51 $ 20 Amounts recognized in accumulated other comprehensive loss consist of the following: Net loss $ 85 $ 98 $ 129 Net loss recognized in accumulated other comprehensive loss $ 85 $ 98 $ 129 Additional information: Accumulated benefit obligation $ 1,012 $ 1,057 $ 899 Other Postretirement Plans 2021 2020 2019 Amounts recognized in the consolidated balance sheets consist of the following: Accrued benefit obligation—current $ ( 1 ) $ — $ ( 1 ) Accrued benefit obligation—noncurrent ( 5 ) ( 6 ) ( 5 ) Net amount recognized in the consolidated balance sheets $ ( 6 ) $ ( 6 ) $ ( 6 ) Amounts recognized in accumulated other comprehensive loss consist of the following: Gain, net of prior service cost $ 1 $ — $ 1 Net gain recognized in accumulated other comprehensive loss $ 1 $ — $ 1 Additional information: Accumulated postretirement benefit obligation $ 6 $ 6 $ 6 68 Weighted average assumptions used to determine benefit obligations as of period-end and net pension costs for the last three fiscal years were as follows: Pension Benefits 2021 2020 2019 Benefit obligation: Discount rate 3.00 % 2.80 % 3.50 % Annual compensation increase 2.96 % 2.96 % 3.60 % Net cost: Discount rate 2.80 % 3.50 % 4.35 % Expected return on plan assets 5.00 % 6.00 % 6.00 % Annual compensation increase 2.96 % 3.60 % 3.60 % Other Postretirement Plans 2021 2020 2019 Benefit obligation—discount rate 3.00 % 2.80 % 3.50 % Net cost—discount rate 2.80 % 3.50 % 4.35 % The measurement date for the defined benefit and other postretirement benefit plans was December 31 for fiscal years 2021, 2020 and 2019. The Company applies the practical expedient under ASU No. 2015-4 to measure defined benefit retirement obligations and related plan assets as of the month-end that is closest to its fiscal year-end. The mortality assumptions used to determine the pension benefit obligation as of December 31, 2021 are based on the Pri-2012 base mortality table with the MP-2020 mortality improvement scale published by the Society of Actuaries. A health care cost trend rate is used in the calculations of postretirement medical benefit plan obligations. The assumed healthcare trend rates for the last three fiscal years were as follows: 2021 2020 2019 Immediate rate 5.50 % 5.60 % 5.90 % Ultimate trend rate 4.50 % 4.50 % 4.50 % Year the rate reaches the ultimate trend rate 2037 2037 2037 Retirees covered under these plans are responsible for the cost of coverage in excess of the subsidy, including all future cost increases. In determining the discount rate, the Company determines the implied rate of return on a hypothetical portfolio of high-quality fixed-income investments, for which the timing and amount of cash outflows approximates the estimated pension plan payouts. The discount rate assumption is reviewed annually and revised as appropriate. The expected long-term rate of return on plan assets is derived from a mathematical asset model. This model incorporates assumptions on the various asset class returns, reflecting a combination of historical performance analysis and the forward-looking views of the financial markets regarding the yield on long-term bonds and the historical returns of the major stock markets. The rate of return assumption is reviewed annually and revised as deemed appropriate. The US Foods, Inc. Retirement Investment Committee (the “Committee”) has authority and responsibility to oversee the investment and management of the trust (“the Trust”) which holds the assets of the Retirement Plan and has adopted an Investment Policy to provide a framework for the management of the Trust’s assets, including the objectives and long-term strategy with respect to the investment program of the Trust. Pursuant to the Investment Policy, the primary goal of investing Trust assets is to ensure that pension liabilities are met over time, and that Trust assets are invested in a manner that maximizes the probability of meeting pension liabilities. The secondary goal of investing Trust assets is to maximize long-term investment return consistent with a reasonable level of risk. Through consultation with its investment consultant, the Committee has developed long-term asset allocation guidelines intended to achieve investment objectives relative to projected liabilities. Based on those projections, the Committee has approved a dynamic asset allocation strategy that increases the liability-hedging assets of the Trust and decreases the return-seeking assets of the Trust as the funded ratio of the Retirement Plan improves. Based upon the funded ratio of the Retirement Plan, an asset allocation of 30 % equity securities (U.S. large cap equities, U.S. small and mid-cap equities and non-U.S. equities) and 70 % fixed income securities (U.S. Treasuries, STRIPs, and investment grade corporate bonds) was targeted during the Company’s fiscal year 2021. The actual mix of assets in the Trust as of January 1, 2022 consisted of 31 % equity securities and 69 % fixed income securities. 69 The following table sets forth the fair value of our defined benefit plans’ assets by asset fair value hierarchy level: Asset Fair Value as of January 1, 2022 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 2 $ — $ — $ 2 Equities: Domestic 44 — — 44 International 2 — — 2 Mutual fund: International equities 26 — — 26 Long-term debt securities: Corporate debt securities: Domestic — 286 — 286 International — 45 — 45 U.S. government securities — 7 — 7 $ 74 $ 338 $ — 412 Common collective trust funds: Cash equivalents 24 Domestic equities 219 International equities 49 Treasury STRIPS 303 U.S. government securities 96 Total investments measured at net asset value as a practical expedient 691 Total defined benefit plans’ assets $ 1,103 Asset Fair Value as of January 2, 2021 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 7 $ — $ — $ 7 Equities: Domestic 56 — — 56 International 2 — — 2 Mutual fund: International equities 29 — — 29 Long-term debt securities: Corporate debt securities: Domestic — 292 — 292 International — 36 — 36 U.S. government securities — 53 — 53 Other — 3 — 3 $ 94 $ 384 $ — 478 Common collective trust funds: Cash equivalents 11 Domestic equities 240 International equities 62 Treasury STRIPS 321 Total investments measured at net asset value as a practical expedient 634 Total defined benefit plans’ assets $ 1,112 70 A description of the valuation methodologies used for assets measured at fair value is as follows: • Cash and cash equivalents are valued at original cost plus accrued interest. • Equities are valued at the closing price reported on the active market on which individual securities are traded. • Mutual funds are valued at the closing price reported on the active market on which individual funds are traded. • Long-term debt securities are valued at the estimated price a dealer will pay for the individual securities. • Common collective trust funds are measured at the net asset value as of the December 31, 2021 and 2020 measurement dates. This class represents investments in common collective trust funds that invest in: ◦ Equity securities, which may include common stocks, options and futures in actively managed funds; and ◦ Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) representing zero coupon Treasury securities with long-term maturities. ◦ U.S. government securities representing government bonds with long-term maturities. Estimated future benefit payments, under Company sponsored plans as of January 1, 2022, were as follows: Pension Benefits Other Postretirement Plans 2022 $ 52 $ — 2023 53 1 2024 53 1 2025 53 1 2026 54 — Subsequent five years 245 2 The Company does not expect to make a significant contribution to the Retirement Plans in fiscal year 2022. Other Company Sponsored Benefit Plans —Certain employees are eligible to participate in the Company's 401(k) savings plan. The Company made employer matching contributions to the 401(k) plan of $ 52 million, $ 47 million and $ 51 million for fiscal years 2021, 2020 and 2019, respectively. Multiemployer Pension Plans —The Company is also required to contribute to various multiemployer pension plans under the terms of collective bargaining agreement (“CBAs”) that cover certain of its union-represented employees. These plans are jointly administered by trustees for participating employers and the applicable unions. The risks of participating in multiemployer pension plans differ from traditional single-employer defined benefit plans as follows: • Assets contributed to a multiemployer pension plan by one employer may be used to provide benefits to the employees of other participating employers. • If a participating employer stops contributing to a multiemployer pension plan, the unfunded obligations of the plan may be borne by the remaining participating employers. • If the Company elects to stop participation in a multiemployer pension plan, or if the number of the Company’s employees participating in a plan is reduced to a certain degree over certain periods of time, the Company may be required to pay a withdrawal liability based upon the underfunded status of the plan. The Company’s participation in multiemployer pension plans for the fiscal year ended January 1, 2022 is outlined in the tables below. The Company considers significant plans to be those plans to which the Company contributed more than 5 % of total contributions to the plan in a given plan year, or for which the Company believes its estimated withdrawal liability, should it decide to voluntarily withdraw from the plan, may be material to the Company. For each plan that is considered individually significant to the Company, the following information is provided: • The EIN/Plan Number column provides the Employee Identification Number (“EIN”) and the three-digit plan number assigned to a plan by the Internal Revenue Service. • The most recent Pension Protection Act (“PPA”) zone status available for fiscal years 2021 and 2020 is for the plan years beginning in 2020 and 2019, respectively. The zone status is based on information provided to participating employers by each plan and is certified by the plan’s actuary. A plan in the red zone has been determined to be in critical status, or 71 critical and declining status, based on criteria established under the Internal Revenue Code (the “Code”), and is generally less than 65% funded. Plans are generally considered “critical and declining” if they are projected to become insolvent within 20 years. A plan in the yellow zone has been determined to be in endangered status, based on criteria established under the Code, and is generally less than 80% but more than 65% funded. A plan in the green zone has been determined to be neither in critical status nor in endangered status, and is generally at least 80% funded. • The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. In addition to regular plan contributions, participating employers may be subject to a surcharge if the plan is in the red zone. • The Surcharge Imposed column indicates whether a surcharge has been imposed on participating employers contributing to the plan. • The Expiration Dates column indicates the expiration dates of the CBAs to which the plans are subject. Pension Fund EIN/ Plan Number PPA Zone Status FIP/RP Status Pending/ Implemented Surcharge Imposed Expiration Dates 2021 2020 Minneapolis Food Distributing Industry Pension Plan 41-6047047/001 Green Green N/A No 4/5/25 Teamster Pension Trust Fund of Philadelphia and Vicinity 23-1511735/001 Yellow Yellow Implemented No 2/13/22 Local 703 I.B. of T. Grocery and Food Employees’ Pension Plan 36-6491473/001 Green Green N/A No 6/30/21 United Teamsters Trust Fund A 13-5660513/001 Yellow Yellow Implemented No 5/30/22 Warehouse Employees Local 169 and Employers Joint Pension Fund 23-6230368/001 Red Red Implemented No 2/13/22 UFCW National Pension Fund 51-6055922 / 001 Green Green N/A No 6/24/23 The following table provides information about the Company’s contributions to its multiemployer pension plans. For plans that are not individually significant to the Company, the total amount of the Company's contributions is aggregated. Contributions (1)(2) Contributions That Exceed 5% of Total Plan Contributions (3) 2021 2020 2019 2020 2019 Pension Fund Minneapolis Food Distributing Industry Pension Plan $ 5 $ 5 $ 5 Yes Yes Teamster Pension Trust Fund of Philadelphia and Vicinity 4 4 4 No No Local 703 I.B. of T. Grocery and Food Employees’ Pension Plan 4 2 2 Yes Yes United Teamsters Trust Fund A 1 1 2 Yes Yes Warehouse Employees Local 169 and Employers Joint Pension Fund 1 1 1 Yes Yes UFCW National Pension Fund 1 1 1 No No Other funds 27 30 23 — — $ 43 $ 44 $ 38 (1) Contributions made to these plans during the Company’s fiscal year, which may not coincide with the plans’ respective fiscal years. (2) Contributions do not include payments related to multiemployer pension plan withdrawals/settlements. (3) Indicates whether the Company was listed in the respective multiemployer pension plan Form 5500 for the applicable plan year as having made more than 5 % of total contributions to the plan. 72 If the Company elects to voluntarily withdraw from a multiemployer pension plan, it may be responsible for its proportionate share of the respective plan’s unfunded vested liability. Based on the latest information available from plan administrators, the Company estimates its aggregate withdrawal liability from the multiemployer pension plans in which it participates to be approximately $ 160 million as of January 1, 2022. Actual withdrawal liabilities incurred by the Company, if it were to withdraw from one or more plans, could be materially different from the estimates noted here, based on better or more timely information from plan administrators or other changes affecting the respective plans' funded status. 19. EARNINGS PER SHARE The Company computes EPS in accordance with ASC 260, Earnings per Share . Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding. Diluted EPS is computed using the weighted average number of shares of common stock, plus the effect of potentially dilutive securities. The Company applies the treasury method to calculate the dilution impact of share-based awards—stock options, non-vested restricted shares with forfeitable dividend rights, restricted stock units, and employee stock purchase plan deferrals. The Company applies the if-converted method to calculate the dilution impact of the Series A Preferred Stock, if dilutive in the period. For fiscal years 2021, 2020 and 2019, share-based awards representing 2 million, 9 million and 2 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive. For fiscal years 2021 and 2020, Series A Preferred Stock representing 25 million and 15 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: 2021 2020 2019 Numerator: Net income (loss) $ 164 $ ( 226 ) $ 385 Less: Series A Preferred Stock dividends (1) ( 43 ) ( 28 ) — Net income (loss) available to common shareholders $ 121 $ ( 254 ) $ 385 Denominator: Weighted-average common shares outstanding 222 220 218 Effect of dilutive share-based awards 3 — 2 Effect of dilutive underlying shares of the Series A Preferred Stock (2) — — — Weighted-average dilutive shares outstanding 225 220 220 Net income (loss) per share: Basic $ 0.55 $ ( 1.15 ) $ 1.77 Diluted $ 0.54 $ ( 1.15 ) $ 1.75 (1) As discussed in Note 14 Convertible Preferred Stock, Series A Preferred Stock dividends for fiscal year 2020 and the first quarter of 2021 were paid-in-kind in the form of shares of Series A Preferred Stock. Series A Preferred Stock dividends for the remaining quarters of fiscal year 2021 were paid in cash. (2) The Company applies the if-converted method to calculate the dilution impact of the Series A Preferred Stock, if dilutive in the period. Under the if-converted method, the Series A Preferred Stock are converted to common shares for inclusion in the calculation of the weighted-average common shares outstanding—diluted. Once converted, there would be no Series A Preferred Stock outstanding and therefore no Series A convertible preferred stock dividend. 73 20. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS The following table presents changes in accumulated other comprehensive loss, by component, for the last three fiscal years: 2021 2020 2019 Accumulated other comprehensive loss components Retirement benefit obligations: Balance as of beginning of year (1) $ ( 29 ) $ ( 52 ) $ ( 97 ) Other comprehensive income before reclassifications 14 29 44 Reclassification adjustments: Amortization of net loss (2) (3) — 1 4 Settlements (2) (3) — — 12 Total before income tax 14 30 60 Income tax provision 4 7 15 Current year comprehensive income, net of tax 10 23 45 Balance as of end of year (1) $ ( 19 ) $ ( 29 ) $ ( 52 ) Interest rate swaps: Balance as of beginning of year (1) $ ( 5 ) $ ( 2 ) $ 13 Change in fair value of interest rate swaps 1 ( 11 ) ( 14 ) Amounts reclassified to interest expense 5 6 ( 6 ) Total before income tax 6 ( 5 ) ( 20 ) Income tax (benefit) provision 1 ( 2 ) ( 5 ) Current year comprehensive income (loss), net of tax 5 ( 3 ) ( 15 ) Balance as of end of year (1) $ — $ ( 5 ) $ ( 2 ) Accumulated other comprehensive loss as of end of year (1) $ ( 19 ) $ ( 34 ) $ ( 54 ) (1) Amounts are presented net of tax. (2) Included in the computation of net periodic benefit costs. See Note 18, Retirement Plans, for additional information. (3) Included in other (income) expense—net in the Company's Consolidated Statements of Comprehensive Income. 21. INCOME TAXES The income tax provision (benefit) for the fiscal years 2021, 2020 and 2019 consisted of the following: 2021 2020 2019 Current: Federal $ 11 $ ( 20 ) $ 102 State 1 3 17 Current income tax provision (benefit) 12 ( 17 ) 119 Deferred: Federal 31 ( 39 ) ( 6 ) State 7 ( 12 ) 13 Deferred income tax provision (benefit) 38 ( 51 ) 7 Total income tax provision (benefit) $ 50 $ ( 68 ) $ 126 The Company’s effective income tax rates for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 were 23 %, 23 % and 25 %, respectively. The determination of the Company’s overall effective income tax rate requires the use of estimates. The effective income tax rate reflects the income earned and taxed in U.S. 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. Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company’s effective income tax rate in the future. 74 The reconciliation of the provision (benefit) for income taxes at the U.S. federal statutory income tax rate of 21 % to the Company’s income tax provision (benefit) for the fiscal years 2021, 2020 and 2019 is shown below: 2021 2020 2019 Federal income taxes computed at statutory rate $ 45 $ ( 62 ) $ 107 State income taxes, net of federal income tax benefit 10 ( 10 ) 24 Share-based compensation ( 5 ) 1 ( 4 ) Non-deductible expenses 5 7 4 Change in the valuation allowance for deferred tax assets ( 7 ) ( 1 ) 6 Net operating loss expirations 5 3 — Tax credits ( 1 ) ( 3 ) ( 10 ) Change in unrecognized tax benefits ( 2 ) ( 3 ) ( 1 ) Total income tax provision (benefit) $ 50 $ ( 68 ) $ 126 Temporary differences and carryforwards that created significant deferred tax assets and liabilities were as follows: January 1, 2022 January 2, 2021 Deferred tax assets: Operating lease liabilities $ 70 $ 71 Workers’ compensation, general and fleet liabilities 45 40 Financing lease and other long term liabilities 71 78 Net operating loss carryforwards 68 64 Other deferred tax assets 97 100 Total gross deferred tax assets 351 353 Less valuation allowance ( 28 ) ( 35 ) Total net deferred tax assets 323 318 Deferred tax liabilities: Property and equipment ( 195 ) ( 201 ) Operating lease assets ( 68 ) ( 70 ) Inventories ( 40 ) ( 21 ) Intangibles ( 290 ) ( 274 ) Other deferred tax liabilities ( 29 ) ( 21 ) Total deferred tax liabilities ( 622 ) ( 587 ) Net deferred tax liability $ ( 299 ) $ ( 269 ) The net deferred tax liabilities presented in the Company's Consolidated Balance Sheets were as follows: January 1, 2022 January 2, 2021 Noncurrent deferred tax assets $ 8 $ 1 Noncurrent deferred tax liability ( 307 ) ( 270 ) Net deferred tax liability $ ( 299 ) $ ( 269 ) 75 The Company had tax affected state net operating loss carryforwards of $ 68 million as of January 1, 2022. The Company’s net operating loss carryforwards expire as follows: State 2022-2026 $ 32 2027-2031 10 2032-2036 9 2037-2041 14 Indefinite 3 $ 68 The Company also has state credit carryforwards of $ 20 million. The U.S. federal and state net operating loss carryforwards in the income tax returns filed included unrecognized tax benefits taken in prior years. The net operating losses for which a deferred tax asset is recognized for financial statement purposes in accordance with ASC 740, Income Taxes, are presented net of these unrecognized tax benefits. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of the Company’s domestic net operating losses and tax credit carryforwards may be limited in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities. The Company maintained a valuation allowance on certain state net operating loss and tax credit carryforwards expected to expire unutilized as a result of insufficient forecasted taxable income in the carryforward period or the utilization of which is subject to limitation. A summary of the activity in the valuation allowance for the fiscal years 2021, 2020 and 2019 is as follows: 2021 2020 2019 Balance as of beginning of year $ 35 $ 36 30 (Benefit) expense recognized ( 7 ) ( 1 ) 6 Balance as of end of year $ 28 $ 35 $ 36 The calculation of the Company’s tax liabilities involves uncertainties in the application of complex tax laws and regulations in U.S. federal and state jurisdictions. The Company (1) records unrecognized tax benefits as liabilities in accordance with ASC 740, Income Taxes and (2) adjusts these liabilities when the Company’s judgment changes because of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of liabilities for unrecognized tax benefits. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. The Company recognizes an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Reconciliation of the beginning and ending amount of unrecognized tax benefits as of fiscal years 2021, 2020, and 2019 was as follows: Balance as of December 29, 2018 $ 40 Decreases due to lapses of statute of limitations ( 1 ) Balance as of December 28, 2019 39 Gross increases due to positions taken in prior years 3 Decreases due to lapses of statute of limitations ( 1 ) Decreases due to changes in tax rates ( 5 ) Positions assumed in business acquisition 3 Balance as of January 2, 2021 39 Gross increases due to positions taken in prior years 5 Gross decreases due to positions taken in prior years ( 2 ) Decreases due to lapses of statute of limitations ( 5 ) Decreases due to settlements with taxing authorities ( 5 ) Balance at January 1, 2022 $ 32 76 The Company estimates it is reasonably possible that the liability for unrecognized tax benefits will decrease by up to $ 17 million in the next 12 months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. Included in the balance of unrecognized tax benefits as of the end of fiscal years 2021, 2020 and 2019 was $ 28 million, $ 34 million and $ 35 million, respectively, of tax benefits that, if recognized, would affect the effective income tax rate. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had accrued interest and penalties of approximately $ 7 million as of both January 1, 2022 and January 2, 2021. The Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations. Our 2007 through 2020 U.S. federal income tax years, and various state income tax years from 2000 through 2020, remain subject to income tax examinations by the relevant taxing authorities. Prior to 2007, the Company was owned by Royal Ahold N.V. (“Ahold”). Ahold indemnified the Company for 2007 pre-closing consolidated U.S. federal and certain combined state income taxes, and the Company is responsible for all other taxes, interest and penalties. 22. COMMITMENTS AND CONTINGENCIES 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 $ 1,911 million of purchase orders and purchase contract commitments as of January 1, 2022 to be purchased in fiscal year 2022 and $ 89 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 $ 33 million through March 2023, as of January 1, 2022. Additionally, the Company had electricity forward purchase commitments totaling $ 16 million through June 2024, as of January 1, 2022. 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. Legal Proceedings —The Company is subject to a number of legal proceedings arising in the normal course of business. These legal proceedings, whether pending, threatened or unasserted, if decided adversely to or settled by the Company, may result in liabilities material to its financial position, results of operations, or cash flows. The Company has recognized provisions with respect to the proceedings, where appropriate, in its Consolidated Balance Sheets. It is possible that the Company could settle one or more of these proceedings or could be required to make expenditures, in excess of the established provisions, in amounts that cannot be reasonably estimated. However, the Company, at present, believes that the ultimate outcome of these proceedings will not have a material adverse effect on its consolidated financial position, results of operations or cash flows. 23. US FOODS HOLDING CORP. CONDENSED FINANCIAL INFORMATION These condensed parent company financial statements should be read in conjunction with the Company's consolidated financial statements. Under terms of the agreements governing its indebtedness, the net assets of USF are restricted from being transferred to US Foods in the form of loans, advances or dividends with the exception of income tax payments, share-based compensation settlements and minor administrative costs. USF had $ 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 January 1, 2022. See Note 16, Share-Based Compensation, Common Stock Issuances and Common Stock, for a discussion of the Company’s equity-related transactions. In the condensed parent company financial statements below, the investment in the operating subsidiary, USF, is accounted for using the equity method. 77 Condensed Parent Company Balance Sheets (In millions, except par value) January 1, 2022 January 2, 2021 ASSETS Investment in subsidiary $ 4,266 $ 4,050 Other assets 4 — Total assets $ 4,270 $ 4,050 LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY Deferred tax liabilities $ 1 $ 1 Total liabilities 1 1 Commitments and Contingencies (Note 22) Mezzanine equity: Series A convertible preferred stock, $0.01 par value—25 shares authorized; 0.5 issued and outstanding as of January 1, 2022 and January 2, 2021 534 519 Shareholders’ Equity Common stock, $0.01 par value—600 shares authorized; 223 and 221 issued and outstanding as of January 1, 2022 and January 2, 2021, respectively 2 2 Additional paid-in capital 2,970 2,901 Retained earnings 782 661 Accumulated other comprehensive loss ( 19 ) ( 34 ) Total shareholders’ equity 3,735 3,530 Total liabilities, mezzanine equity and shareholders’ equity $ 4,270 $ 4,050 Condensed Parent Company Statements of Comprehensive Income Fiscal Years Ended January 1, 2022 January 2, 2021 December 28, 2019 Income before income taxes $ — $ — $ — Income tax benefit ( 4 ) ( 5 ) — Income before equity in net earnings of subsidiary 4 5 — Equity in net earnings of subsidiary 160 ( 231 ) 385 Net income (loss) 164 ( 226 ) 385 Other comprehensive income—net of tax: Changes in retirement benefit obligations 10 23 45 Unrecognized gain (loss) on interest rate swaps 5 ( 3 ) ( 15 ) Comprehensive income (loss) $ 179 $ ( 206 ) $ 415 Net income (loss) $ 164 $ ( 226 ) $ 385 Series A convertible preferred stock dividends ( 43 ) ( 28 ) — Net income (loss) available to common shareholders $ 121 $ ( 254 ) $ 385 78 Condensed Parent Company Statements of Cash Flows Fiscal Years Ended January 1, 2022 January 2, 2021 December 28, 2019 Cash flows from operating activities: Net income (loss) $ 164 $ ( 226 ) $ 385 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net earnings of subsidiary ( 160 ) 231 ( 385 ) Changes in operating assets and liabilities: Increase in other assets ( 4 ) — — Decrease in accrued expenses and other liabilities — ( 5 ) — Net cash used in operating activities — — — Cash flows from investing activities: Investment in subsidiary 28 ( 491 ) — Net cash provided by (used in) investing activities 28 ( 491 ) — Cash flows from financing activities: Net proceeds from issuance of Series A convertible preferred stock — 491 — Dividends paid on Series A convertible preferred stock ( 28 ) — — Net cash (used in) provided by financing activities ( 28 ) 491 — Net increase in cash, cash equivalents and restricted cash — — — Cash, cash equivalents and restricted cash—beginning of year — — — Cash, cash equivalents and restricted cash—end of year $ — $ — $ — 24. BUSINESS INFORMATION The Company’s consolidated results represent the results of its one business segment based on how the Company’s chief operating decision maker, the Chief Executive Officer, views the business for purposes of evaluating performance and making operating decisions. The Company markets and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the U.S. The Company uses a centralized management structure, and its strategies and initiatives are implemented and executed consistently across the organization to maximize value to the organization as a whole. The Company uses shared resources for sales, procurement, and general and administrative activities across each of its distribution facilities and operations. The Company’s distribution facilities form a single network to reach its customers; it is common for a single customer to make purchases from several different distribution facilities. Capital projects, whether for cost savings or generating incremental revenue, are evaluated based on estimated economic returns to the organization as a whole. No single customer accounted for more than 2% of the Company’s consolidated net sales in fiscal year 2021, and 3% of the Company’s consolidated net sales for fiscal years 2020 and 2019. However, customers who are members of one group purchasing organization accounted, in the aggregate, for approximately 11 % of the Company's consolidated net sales in fiscal year 2021 and 13% of the Company's consolidated net sales for fiscal years 2020 and 2019. 79 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.