What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-11-08 · 155 added, 296 removed, 346 unchanged (57% of the section changed)

3 unchanged sentences

(In millions, except par value)

October 2, 2021 January 2, 2021

April 2, 2022 January 1, 2022

Current assets:

27 unchanged sentences

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

0.5 issued and outstanding as of October 2, 2021 and

January 2, 2021 534 519

0.5 issued and outstanding as of April 2, 2022 and January 1, 2022 534 534

Shareholders’ equity:

1 unchanged sentence

224 and 223 issued and outstanding as of

October 2, 2021 and January 2, 2021, respectively

April 2, 2022 and January 1, 2022, respectively

Additional paid-in capital

9 unchanged sentences

(In millions, except per share data)

13 Weeks Ended 39 Weeks Ended

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

13 Weeks Ended

April 2, 2022 April 3, 2021

Net sales $ 7,798 $ 6,295

Cost of goods sold 6,603 5,292

1,241 974 3,413 2,711

Operating expenses:

Distribution, selling and administrative costs

1,099 873 3,115 2,779

Restructuring costs and asset impairment charges

Total operating expenses

1,106 896 3,126 2,818

Operating income (loss) 135 78 287 ( 107 )

Operating income 34 28

Other income—net ( 6 ) ( 7 )

1 unchanged sentence

Loss on extinguishment of debt — 23

Income (loss) before income taxes 91 21 125 ( 269 )

Income tax provision (benefit) 27 13 30 ( 53 )

Net income (loss)

64 8 95 ( 216 )

Other comprehensive income (loss)—net of tax:

Loss before income taxes ( 15 ) ( 42 )

Income tax benefit ( 8 ) ( 18 )

Other comprehensive loss—net of tax:

Changes in retirement benefit obligations

Unrecognized gain (loss) on interest rate swaps

Comprehensive income (loss)

Recognition of interest rate swaps

Comprehensive loss

$ ( 7 ) $ ( 22 )

Net income (loss) $ 64 $ 8 $ 95 $ ( 216 )

Net loss $ ( 7 ) $ ( 24 )

Series A convertible preferred stock dividends ( 9 ) ( 15 )

Net income (loss) available to common shareholders $ 55 $ ( 2 ) $ 62 $ ( 231 )

Net income (loss) per share

Net loss available to common shareholders $ ( 16 ) $ ( 39 )

Net loss per share

Basic (Note 12)

4 unchanged sentences

Basic (Note 12)

222 220 222 220

Diluted (Note 12)

225 220 225 220

See Notes to Consolidated Financial Statements (Unaudited).

14 unchanged sentences

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

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

Net Loss — — — ( 7 ) — ( 7 )

BALANCE—April 2, 2022 224 $ 2 $ 2,973 $ 766 $ ( 19 ) $ 3,722

Share-based compensation expense — — 13 — — 13

Proceeds from employee stock purchase plan — — 5 — — 5

Exercise of stock options — — 8 — — 8

Tax withholding payments for net share-settled equity awards — — ( 1 ) — — ( 1 )

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

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

Net income — — — 55 — 55

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

Share-based compensation expense — — 13 — — 13

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

Exercise of stock options — — 1 — — 1

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

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

Net income — — — 64 — 64

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

US FOODS HOLDING CORP.

6 unchanged sentences

Shares Amount

BALANCE—December 28, 2019 220 $ 2 $ 2,845 $ 916 $ ( 54 ) $ 3,709

BALANCE—January 2, 2021 221 $ 2 $ 2,901 $ 661 $ ( 34 ) $ 3,530

Share-based compensation expense — — 10 — — 10

Proceeds from employee stock purchase plan — — 5 — — 5

Vested restricted stock units, net 1 — — — — —

Exercise of stock options — — 4 — — 4

Tax withholding payments for net share-settled equity awards — — ( 12 ) — — ( 12 )

Unrecognized loss on interest rate swaps, net of income tax — — — — ( 6 ) ( 6 )

Adoption of ASU 2016-13 — — — ( 1 ) — ( 1 )

Net loss — — — ( 132 ) — ( 132 )

BALANCE—March 28, 2020 220 2 2,857 783 ( 60 ) 3,582

Share-based compensation expense — — 12 — — 12

Proceeds from employee stock purchase plan 1 — 5 — — 5

Tax withholding payments for net share-settled equity awards — — ( 3 ) — — ( 3 )

Series A convertible preferred stock dividends — — — ( 15 ) — ( 15 )

Changes in retirement benefit obligations, net of income tax — — — — 1 1

Net loss — — — ( 92 ) — ( 92 )

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

Share-based compensation expense — — 10 — — 10

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

Exercise of stock options — — 1 — — 1

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

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

Net income — — — 8 — 8

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

Net Loss — — — ( 24 ) — ( 24 )

BALANCE—April 3, 2021 222 $ 2 $ 2,908 $ 622 $ ( 32 ) $ 3,500

See Notes to Consolidated Financial Statements (Unaudited).

3 unchanged sentences

13 Weeks Ended

October 2, 2021 September 26, 2020

April 2, 2022 April 3, 2021

Cash flows from operating activities:

Net income (loss)

$ ( 7 ) $ ( 24 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

Gain on disposal of property and equipment—net

Intangible asset impairment charges

Loss on extinguishment of debt — 23

2 unchanged sentences

Share-based compensation expense

(Benefit) provision for doubtful accounts

Provision (benefit) for doubtful accounts

Changes in operating assets and liabilities:

(Increase) decrease in receivables

(Increase) decrease in inventories—net

Decrease in prepaid expenses and other assets

Increase in receivables

( 243 ) ( 315 )

Increase in inventories—net

( 140 ) ( 178 )

Increase in prepaid expenses and other assets

( 37 ) ( 25 )

Increase in accounts payable and cash overdraft liability

Increase (decrease) in accrued expenses and other liabilities

Increase in accrued expenses and other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Acquisition of businesses—net of cash — ( 973 )

Proceeds from sales of divested assets

Proceeds from sales of property and equipment 2 —

7 unchanged sentences

( 131 ) ( 926 )

Net proceeds from issuance of Series A convertible preferred stock — 491

Dividends paid on Series A convertible preferred stock ( 9 ) —

Debt financing costs and fees

( 18 ) ( 33 )

Proceeds from employee stock purchase plan

1 unchanged sentence

Tax withholding payments for net share-settled equity awards

Net cash (used in) provided by financing activities

( 16 ) ( 12 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 57 ) 921

Net cash used in financing activities

( 46 ) ( 47 )

Net increase in cash, and cash equivalents and restricted cash 42 83

Cash, cash equivalents and restricted cash—beginning of period 148 829

22 unchanged sentences

When a 53-week fiscal year occurs, the Company reports the additional week in the fiscal fourth quarter.

Fiscal year 2021 is a 52-week fiscal year.

Fiscal year 2020 was a 53-week fiscal year.

Fiscal years 2022 and 2021 are both 52-week fiscal years.

The consolidated financial statements included in this Quarterly Report have been prepared in accordance with accounting principles generally accepted in the U.S.

6 unchanged sentences

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2 unchanged sentences

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

This guidance is effective for fiscal years beginning after December 15, 2021.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.

This guidance is effective for fiscal years beginning after December 15, 2021.

The Company adopted the provisions of ASU No.

2020-06 at the beginning of the first quarter of fiscal year 2022, with no impact on our financial position, results of operations, cash flows or diluted earnings per share reporting.

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 adopted the provisions of ASU No.

2021-08 at the beginning of the first quarter of fiscal year 2022, with no impact on our financial position, results of operations or cash flows.

REVENUE RECOGNITION

1 unchanged sentence

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.

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.

1 unchanged sentence

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 October 2, 2021 or January 2, 2021.

Customer receivables, which are included in accounts receivable,

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

The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of April 2, 2022 or January 1, 2022.

Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $ 1.7 billion and $ 1.5 billion as of April 2, 2022 and January 1, 2022, respectively.

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

1 unchanged sentence

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

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

The Company’s contract assets for these upfront payments were $ 27 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of both April 2, 2022 and January 1, 2022, and $ 28 million and $ 26 million included in other assets in the Company’s Consolidated Balance Sheets as of April 2, 2022 and January 1, 2022 respectively.

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

13 Weeks Ended 39 Weeks Ended

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

13 Weeks Ended

April 2, 2022 April 3, 2021

Meats and seafood $ 2,950 $ 2,262

6 unchanged sentences

Total Net sales $ 7,798 $ 6,295

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 serving 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 a new $ 700 million incremental senior secured term loan facility under its existing term loan credit agreement, as further described in Note 10, 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 October 2, 2021 was due to the finalization of deferred income taxes associated with the acquisition in the first quarter of 2021.

Purchase Price Allocation

Accounts receivable $ 5

Inventories 43

Other current assets 24

Property and equipment 84

Other intangibles (2)

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 $ 2 million and less than $ 1 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $ 11 million and $ 20 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively.

Pro Forma Financial Information — The following table presents the Company’s unaudited pro forma consolidated net sales, net income and earnings per share (“EPS”) for the 13 weeks and 39 weeks ended October 2, 2021 and September 26, 2020.

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

13 Weeks Ended 39 Weeks Ended

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

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

Pro forma net income (loss) available to common shareholders $ 55 $ ( 2 ) $ 62 $ ( 202 )

Pro forma net income (loss) per share:

Basic $ 0.25 $ ( 0.01 ) $ 0.28 $ ( 0.92 )

Diluted $ 0.24 $ ( 0.01 ) $ 0.28 $ ( 0.92 )

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 intangible assets acquired, (3) interest expense related to the incremental senior secured term loan facility used to finance the acquisition, (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 with our previously existing operations or the standalone cost estimates and estimated costs that were incurred by the former parent company.

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 acquisition.

The Company’s inventories, consisting mainly of food and other food-related products, are primarily considered finished goods.

1 unchanged sentence

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 4, Business Acquisitions, which uses the retail method of inventory accounting.

The Company records inventories at the lower of cost or market primarily using the last-in, first-out (“LIFO”) method.

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.

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

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

LIFO reserves in the Company’s Consolidated Balance Sheets were $ 414 million and $ 342 million as of April 2, 2022 and January 1, 2022, respectively.

As a result of changes in LIFO reserves, cost of goods sold increased $ 72 million and $ 21 million for the 13 weeks ended April 2, 2022 and April 3, 2021, respectively.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

4 unchanged sentences

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.

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.

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

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

Balance as of January 2, 2021 $ 67

Reversed from costs and expenses ( 18 )

Due to the impact that the COVID-19 pandemic was expected to have on 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 for by $ 12 million the 13 weeks ended April 3, 2021.

Activity in the allowance for doubtful accounts for the 13 weeks ended April 2, 2022 was de minimis.

A summary of the activity in the allowance for doubtful accounts for the 13 weeks ended April 2, 2022 and April 3, 2021 was as follows:

April 2, 2022 April 3, 2021

Balance as of beginning of year $ 33 $ 67

Charged (benefit) to costs and expenses, net

Customer accounts written off—net of recoveries — ( 4 )

Balance as of October 2, 2021 $ 39

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

Balance as of end of period

This table excludes the vendor receivable related allowance for doubtful accounts of $ 11 million and $ 7 million as of April 2, 2022 and January 1, 2022, respectively.

PROPERTY AND EQUIPMENT

2 unchanged sentences

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

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

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

As of April 2, 2022 and January 1, 2022, property and equipment-net included accumulated depreciation of $ 2,788 million and $ 2,722 million, respectively.

Depreciation expense was $ 78 million and $ 82 million for the 13 weeks ended April 2, 2022 and April 3, 2021, respectively.

GOODWILL AND OTHER INTANGIBLES

4 unchanged sentences

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

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

Amortization expense was $ 11 million and $ 19 million for the 13 weeks ended April 2, 2022 and April 3, 2021, respectively.

Goodwill and other intangibles—net consisted of the following:

October 2, 2021 January 2, 2021

April 2, 2022 January 1, 2022

Goodwill $ 5,625 $ 5,625

9 unchanged sentences

Net carrying value

Noncompete agreements—amortizable:

Gross carrying amount

Accumulated amortization

Net carrying value

Brand names and trademarks—not amortizing

3 unchanged sentences

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.

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

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

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

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

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

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

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

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

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

No impairments were recognized for the 13 weeks ended April 2, 2022 and April 3, 2021, respectively.

FAIR VALUE MEASUREMENTS

7 unchanged sentences

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

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

October 2, 2021

The Company’s assets and liabilities measured at fair value on a recurring basis as of April 2, 2022 and January 1, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

April 2, 2022

Level 1 Level 2 Level 3 Total

5 unchanged sentences

$ 99 $ — $ — $ 99

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 for the periods presented above, except as further disclosed in Note 7, Goodwill and Other Intangibles.

4 unchanged sentences

Derivative Financial Instruments

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

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

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

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

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

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

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

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

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

For the 13 weeks ended October 2, 2021

Interest rate swaps

$ — Interest expense—net $ 1

For the 13 weeks ended September 26, 2020

Interest rate swaps

$ — Interest expense—net $ 2

For the 39 weeks ended October 2, 2021

Interest rate swaps

$ — Interest expense—net $ 5

For the 39 weeks ended September 26, 2020

Interest rate swaps

$ ( 8 ) Interest expense—net $ 4

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.

T he Company had no outstanding interest rate swap agreements a s of both April 2, 2022 and January 1, 2022.

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 its carrying value of $ 5.4 billion as of October 2, 2021.

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

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

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

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

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

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

The fair value of the Secured Notes, 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 Company’s total debt approximated $ 4.9 billion and $ 5.1 billion as of April 2, 2022 and January 1, 2022, respectively, as compared to its carrying value of $ 5.0 billion as of both April 2, 2022 and January 1, 2022.

The fair value of the Company’s 6.25 % senior secured notes due April 15, 2025 (the “Senior Secured Notes due 2025”) was $ 1.0 billion as of both April 2, 2022 and January 1, 2022.

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 both April 2, 2022 and January 1, 2022.

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 both April 2, 2022 and January 1, 2022.

Fair value of the Senior Secured Notes due 2025, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2030 is based upon their closing market prices on the respective dates.

The fair value of the Senior Secured Notes due 2025, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2030 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.

Total debt consisted of the following:

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

Debt Description Maturity Interest Rate as of April 2, 2022 Carrying Value as of April 2, 2022 Carrying Value as of January 1, 2022

ABL Facility May 31, 2024 — % $ — $ —

Initial Term Loan Facility (net of $2 and $3

of unamortized deferred financing costs,

respectively)

June 27, 2023 1.83 % 1,783 2,098

2019 Incremental Term Loan Facility (net of $23

2 unchanged sentences

2021 Incremental Term Loan Facility (net of $6

of unamortized deferred financing costs) (1)

April 24, 2025 — % — 284

Secured Notes (net of $11 and $13 of

unamortized deferred financing costs)

and $7 of unamortized deferred financing

costs, respectively) November 22, 2028 3.26 % 891 893

Senior Secured Notes due 2025 (net of $9 and $11 of unamortized deferred financing costs,

respectively)

April 15, 2025 6.25 % 991 989

Unsecured Senior Notes due 2024 (net of $3 of

unamortized deferred financing costs) (1)

June 15, 2024 — % — 597

Unsecured Senior Notes due 2029 (net of $9 of

unamortized deferred financing costs)

Unsecured Senior Notes due 2029 (net of $8 and $8 of unamortized deferred financing costs, respectively)

February 15, 2029 4.75 % 892 892

Unsecured Senior Notes due 2030 (net of $5 of and $5 of unamortized deferred financing costs, respectively) June 1, 2030 4.625 % 495 495

Obligations under financing leases 2022–2039 1.25% - 8.63% 277 292

Other debt 2021–2031 5.75% - 9.00% 8 8

Other debt January 1, 2031 5.75% 8 8

Total debt 4,993 5,011

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Long-term debt $ 4,890 $ 4,916

(1) 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 terminations.

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

As of April 2, 2022, approximately 47 % of the Company’s total debt bears interest at a floating rate.

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

The ABL Facility is scheduled to mature on May 31, 2024.

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

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

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

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 in the ABL Facility, plus a margin ranging from 0.00 % to 0.50 %, or the sum of LIBOR plus a margin ranging from 1.00 % to 1.50 %, in each case based on USF’s excess availability under the ABL Facility.

The margin under the ABL Facility as of April 2, 2022 was 0.00 % for ABR loans and 1.00 % for LIBOR loans.

USF had no outstanding borrowings, and had outstanding letters of credit totaling $ 263 million, under the ABL Facility as of April 2, 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 $ 1,737 million under the ABL Facility as of October 2, 2021.

There was available capacity of $ 1,727 million under the ABL Facility as of April 2, 2022.

Term Loan Facilities

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

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

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

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

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

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

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

The 2019 Incremental Term Loan Facility is scheduled to mature on September 13, 2026.

Secured Notes

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

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

Under its term loan credit agreement, USF has entered into an incremental senior secured term loan facility borrowed in September 2019 (the “2019 Incremental Term Loan Facility”) and an incremental senior secured term loan borrowed in November 2021 (the “2021 Incremental Term Loan Facility”).

2019 Incremental Term Loan Facility

The 2019 Incremental Term Loan Facility had an outstanding balance of $ 1,439 million, net of $ 23 million of unamortized deferred financing costs as of April 2, 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 in 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 will mature on September 13, 2026.

2021 Incremental Term Loan Facility

The 2021 Incremental Term Loan Facility had an outstanding balance of $ 891 million, net of $ 6 million of unamortized deferred financing costs as of April 2, 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 in the 2021 Incremental Term Loan Facility, plus a margin of 1.75 % (subject to a LIBOR “floor” of 0.00 %).

The 2021 Incremental Term Loan Facility will mature on November 22, 2028.

Senior Secured Notes due 2025

The Senior Secured Notes due 2025 had an outstanding balance of $ 991 million, net of $ 9 million of unamortized deferred financing costs, as of April 2, 2022.

The Senior Secured Notes due 2025 bear interest at a rate of 6.25 % per annum and will mature on April 15, 2025.

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 incremental senior secured term loan facility borrowed in April 2020 (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 2020 Incremental Term Loan Facility, the Company applied debt extinguishment accounting and recorded $ 23 million in loss on extinguishment of debt 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 $ 891 million, net of $ 9 million of unamortized deferred financing costs, as of October 2, 2021.

The Unsecured Senior Notes due 2029 had an outstanding balance of $ 892 million, net of $ 8 million of unamortized deferred financing costs, as of April 2, 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 the 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 the redemption date.

Unsecured Senior Notes due 2030

The Unsecured Senior Notes due 2030 had an outstanding balance of $ 495 million, net of $ 5 million of unamortized deferred financing costs, as of April 2, 2022.

The Unsecured Senior Notes due 2030 bear interest at a rate of 4.625 % per annum and will mature on June 1, 2030.

Debt Covenants

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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 October 2, 2021.

RESTRUCTURING LIABILITIES

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

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

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

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

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

During the 13 weeks ended April 2, 2022, net restructuring costs were de minimis.

During the 13 weeks ended April 3, 2021, $ 3 million of net restructuring costs were recognized primarily related to initiatives to improve operational effectiveness.

Net restructuring liabilities were $ 1 million and $ 3 million as of April 2, 2022 and January 1, 2022, respectively.

RETIREMENT PLANS

The Company sponsors a defined benefit pension plan and a 401(k) plan for eligible employees, and provides certain postretirement health and welfare benefits to eligible retirees and their dependents.

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 plan was merged into the US Foods Consolidated Defined Benefit Retirement Plan as of December 31, 2020.

The Company sponsors a defined benefit pension plan and a 401(k) savings plan for eligible employees, and provides certain postretirement health and welfare benefits to eligible retirees and their dependents.

The components of net periodic pension benefit credits for Company sponsored defined benefit plans were as follows:

13 Weeks Ended 39 Weeks Ended

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

13 Weeks Ended

April 2, 2022 April 3, 2021

Components of net periodic pension benefit credits

$ — $ 1 $ 2 $ 2

Interest cost

3 unchanged sentences

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

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

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

Other postretirement benefit costs were de minimis for both the 13 weeks ended April 2, 2022 and April 3, 2021.

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

The Company does not expect to make significant contributions to its defined benefit pension plan in fiscal year 2022.

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

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

The Company made employer matching contributions to the 401(k) plan of $ 16 million and $ 13 million for the 13 weeks ended April 2, 2022 and April 3, 2021, respectively.

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

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

The Company’s contributions to these plans were $ 12 million and $ 10 million for the 13 weeks ended April 2, 2022 and April 3, 2021, respectively.

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.

Basic EPS is computed by dividing net (loss) income 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 convertible preferred stock, if dilutive in the period.

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

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

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

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

For the 13 weeks ended April 2, 2022 and April 3, 2021, share-based awards representing 8 million and 9 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

For the 13 weeks ended April 2, 2022 and April 3, 2021, Series A Preferred Stock representing 25 million and 24 million of underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

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

13 Weeks Ended 39 Weeks Ended

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

Net income (loss)

$ 64 $ 8 $ 95 $ ( 216 )

Series A convertible preferred stock dividends (1)

13 Weeks Ended

April 2, 2022 April 3, 2021

$ ( 7 ) $ ( 24 )

Net income (loss) available to common shareholders

Series A Preferred Stock Dividends (1)

Net loss available to common shareholders

$ ( 16 ) $ ( 39 )

Weighted-average common shares outstanding—basic

222 220 222 220

Effect of dilutive share-based awards

Effect of dilutive underlying shares of the Series A

convertible preferred stock (2)

Preferred Stock (2)

Weighted-average common shares outstanding—diluted

225 220 225 220

Net income (loss) per share

Net loss per share

Basic $ ( 0.07 ) $ ( 0.18 )

$ ( 0.07 ) $ ( 0.18 )

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

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

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

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

Under the if-converted method, the Series A convertible 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 preferred stock outstanding and therefore no preferred stock dividend.

(1) Series A Preferred Stock dividends for the first quarter of 2021 were paid in kind on March 31, 2021 in the form of shares of Series A Preferred Stock.

Series A Preferred Stock dividends for the first quarter of 2022 were paid in cash on March 31, 2022.

(2) Under the if-converted method, outstanding shares of 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 preferred stock outstanding and therefore no Series A Preferred Stock dividend.

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 to KKR Fresh Aggregator L.P.

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 Preferred Stock, par value $ 0.01 per share, 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.

As of January 2, 2021, the Company had issued a total of 523,127 shares of Series A convertible preferred stock.

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

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

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

Series A Convertible Preferred Stock

Shares Carrying Value

Balance, January 2, 2021 523,127 $ 519

Shares issued as paid in kind dividend 9,154 15

Balance October 2, 2021 532,281 $ 534

As of both April 2, 2022 and January 1, 2022, the Company had issued a total of 532,281 shares of Series A Preferred Stock.

The Series A Preferred Stock had a carrying value of $534 million as of both April 2, 2022 and January 1, 2022.

On March 31, 2022, the Company paid cash dividends of $ 9 million on the shares of the Series A Preferred Stock.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents changes in accumulated other comprehensive loss by component for the periods presented:

13 Weeks Ended 39 Weeks Ended

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

13 Weeks Ended

April 2, 2022 April 3, 2021

Accumulated other comprehensive loss components

11 unchanged sentences

Balance as of beginning of period (1)

$ ( 1 ) $ ( 8 ) $ ( 5 ) $ ( 2 )

Change in fair value of interest rate swaps

1 unchanged sentence

Total before income tax

Income tax provision (benefit)

Current period comprehensive income (loss), net of tax

Income tax provision

Current period comprehensive income, net of tax

Balance as of end of period (1)

$ — $ ( 6 ) $ — $ ( 6 )

Accumulated other comprehensive loss as of end of period (1)

4 unchanged sentences

(3) Included in other income—net in the Company’s Consolidated Statements of Comprehensive Income.

(4) The Company’s interest rate swaps expired on July 31, 2021.

The Company has not entered into any new interest rate swap agreements.

RELATED PARTY TRANSACTIONS

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

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

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

As of December, 31, 2021, FMR LLC, held approximately 11 % of the Company’s outstanding common stock.

As of both April 2, 2022 and January 1, 2022, as reported by the administrative agent of the 2019 and 2021 Incremental Term Loan Facilities, 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.

As of April 2, 2022, KKR held 100% of the Company’s outstanding Series A Preferred Stock, representing approximately 10% of the Company’s outstanding stock on a converted basis.

As reported by the administrative agent of the 2019 Incremental Term Loan Facility, 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 both April 2, 2022 and January 1, 2022.

During the 13 weeks ended April 3, 2021, KKR Capital Markets LLC, an affiliate of KKR, received $ 1 million for debt advisory services rendered in connection with the Unsecured Senior Notes due 2029 financing.

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

1 unchanged sentence

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

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

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

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

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

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

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

percentage basis on the effective income tax rate.

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

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

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

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

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

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

The Company estimated its annual effective income tax rate for the full fiscal year and applied the annual effective income tax rate to the results of the 13 weeks ended April 2, 2022 and April 3, 2021, and then recognized the impact of discrete tax items for purposes of determining its year-to-date tax provision.

For the 13 weeks ended April 2, 2022, the Company's effective income tax rate of 51 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

These discrete tax items included a tax benefit of $ 4 million, primarily related to excess tax benefits associated with share-based compensation.

For the 13 weeks ended April 3, 2021, the Company’s effective income tax rate of 43 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

These discrete tax items included a tax benefit of $ 6 million, primarily related to excess tax benefits associated with share-based compensation.

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

The Company had $ 1,890 million of purchase orders and purchase contract commitments as of April 2, 2022 to be purchased in the remainder of fiscal year 2022 and $ 49 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 $ 31 million through December 2022, as of October 2, 2021.

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

The Company had diesel fuel forward purchase commitments totaling $ 33 million through March 2023, as of April 2, 2022.

Additionally, the Company had electricity forward purchase commitments totaling $ 14 million through June 2024, as of April 2, 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.

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

What changed 10-Q

Item 1. Financial Statements