What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-17 compared with 2022-02-17 · 250 added, 311 removed, 1228 unchanged (31% of the section changed)

3 unchanged sentences

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of January 1, 2022 and January 2, 2021

Consolidated Statements of Comprehensive Income for the Fiscal Years Ended January 1, 2022, January 2, 2021, and December 28, 2019

Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended January 1, 2022, January 2, 2021, and December 28, 2019

Consolidated Statements of Cash Flows for the Fiscal Years Ended January 1, 2021, January 2, 2021, and December 28, 2019

Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022

Consolidated Statements of Comprehensive Income for the Fiscal Years Ended December 31, 2022, January 1, 2022, and January 2, 2021

Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended December 31, 2022, January 1, 2022, and January 2, 2021

Consolidated Statements of Cash Flows for the Fiscal Years Ended December 31, 2022, January 1, 2022, and January 2, 2021

Notes to Consolidated Financial Statements

3 unchanged sentences

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.

and subsidiaries (the “Company”) as of December 31, 2022 and January 1, 2022, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows, for each of the three fiscal years in the period ended December 31, 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 December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 31, 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 December 31, 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 16, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

16 unchanged sentences

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.

Consideration is typically received in the form of invoice deductions 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.

Total vendor receivables were $ 143 million at December 31, 2022.

Although many of these incentives are under long-term agreements others are negotiated on an annual basis or shorter.

2 unchanged sentences

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 tested the design and operating effectiveness of 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.

• We selected a sample of inventory on hand and evaluated whether the related vendor consideration was properly recognized at and during the period ended December 31, 2022.

• We tested the amount of vendor consideration recorded as a reduction to inventory by developing an independent expectation for the amount based on historical ratios experienced by the Company and comparing our expectation to the amount recorded in the current year.

/s/ DELOITTE & TOUCHE LLP

5 unchanged sentences

(In millions, except par value)

January 1, 2022 January 2, 2021

December 31, 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 January 1, 2022 and January 2, 2021 534 519

0.5 issued and outstanding as of December 31, 2022 and January 1, 2022 534 534

Shareholders’ equity:

1 unchanged sentence

225 and 223 issued and outstanding as of

January 1, 2022 and January 2, 2021, respectively

December 31, 2022 and January 1, 2022, respectively

Additional paid-in capital

2 unchanged sentences

( 73 ) ( 19 )

Treasury Stock, .5 and 0 shares, respectively ( 14 ) —

Total shareholders’ equity

6 unchanged sentences

Fiscal Years Ended

January 1, 2022 January 2, 2021 December 28, 2019

December 31, 2022 January 1, 2022 January 2, 2021

Net sales $ 34,057 $ 29,487 $ 22,885

8 unchanged sentences

Operating income (loss) 594 424 ( 77 )

Other (income) expense—net ( 26 ) ( 21 ) 4

Other income—net ( 22 ) ( 26 ) ( 21 )

Interest expense—net 255 213 238

7 unchanged sentences

Recognition of interest rate swaps

5 ( 3 ) ( 15 )

Comprehensive income (loss)

12 unchanged sentences

Retained Earnings

Accumulated Other

Treasury Stock Accumulated Other

Comprehensive Loss Total

9 unchanged sentences

— — ( 5 ) — — — ( 5 )

Series A convertible preferred stock dividends — — — ( 28 ) — — ( 28 )

Changes in retirement benefit obligations, net of income tax

2 unchanged sentences

— — — — — ( 3 ) ( 3 )

Adoption of ASU 2016-13 (Note 6) — — — ( 1 ) — — ( 1 )

— — — ( 226 ) — — ( 226 )

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

2 unchanged sentences

1 — 20 — — — 20

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

Exercise of stock options

— — 15 — — — 15

Tax withholding payments for net share-settled equity awards

5 unchanged sentences

— — — — — 5 5

Adoption of ASU 2016-13 (Note 6) — — — ( 1 ) — ( 1 )

— — — 164 — — 164

12 unchanged sentences

— — — — — ( 54 ) ( 54 )

Recognition of interest rate swaps, net of income tax

Stock repurchased

— — — — ( 14 ) — ( 14 )

BALANCE-January 1, 2022 223 $ 2 $ 2,970 $ 782 $ ( 19 ) $ 3,735

— — — 265 — — 265

BALANCE-December 31, 2022 225 $ 2 $ 3,036 $ 1,010 $ ( 14 ) $ ( 73 ) $ 3,961

See Notes to Consolidated Financial Statements.

3 unchanged sentences

Fiscal Years Ended

January 1, 2022 January 2, 2021 December 28, 2019

December 31, 2022 January 1, 2022 January 2, 2021

Cash flows from operating activities:

11 unchanged sentences

Share-based compensation expense

(Benefit) provision for doubtful accounts

Provision (benefit) for doubtful accounts

Changes in operating assets and liabilities, net of business acquisitions:

1 unchanged sentence

( 240 ) ( 386 ) 334

(Increase) decrease in inventories

Decrease (increase) in inventories

70 ( 413 ) 201

Decrease (increase) in prepaid expenses and other assets

(Increase) decrease in prepaid expenses and other assets

( 24 ) 4 ( 30 )

Increase (decrease) in accounts payable and cash overdraft liability

1 unchanged sentence

Increase (decrease) in accrued expenses and other liabilities

94 ( 12 ) ( 4 )

Net cash provided by operating activities

1 unchanged sentence

Acquisition of businesses—net of cash

— ( 972 ) ( 1,832 )

Proceeds from sales of divested assets

13 unchanged sentences

( 4 ) ( 30 ) ( 33 )

Repurchase of common stock ( 14 ) — —

Proceeds from employee stock purchase plan

26 unchanged sentences

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.

Business Description —The Company, through USF, operates in one business segment in which it markets, sells, 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.

1 unchanged sentence

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.

The fiscal years ended December 31, 2022 and January 1, 2022, referred to herein as fiscal years 2022 and 2021, respectively, were 52-week fiscal years.

The fiscal year ended January 2, 2021, referred to herein as fiscal year 2020, was a 53-week fiscal year.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

16 unchanged sentences

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.

Vendor receivables represent the uncollected balance of 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.

6 unchanged sentences

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 of December 31, 2022 and January 1, 2022, LIFO reserves in the Company’s Consolidated Balance Sheets were $ 489 million and $ 342 million, respectively.

As a result of changes in LIFO reserves, cost of goods sold increased $ 147 million, $ 165 million and $ 25 million in fiscal years 2022, 2021 and 2020, respectively.

13 unchanged sentences

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.

Other intangible assets include customer relationships, amortizable trade names, 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.

2 unchanged sentences

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.

The reporting unit used in assessing goodwill 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.

8 unchanged sentences

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.

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, 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

and stock award activity in the subsequent fiscal quarter.

Fair value of each Option is estimated as of the date of grant using a Black-Scholes option-pricing model, the fair value of all other awards 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 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.

Treasury Stock — The company records treasury stock purchases at cost.

Business Acquisitions —The Company accounts for business acquisitions under the acquisition method.

27 unchanged sentences

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.

There were no receivables from any one customer representing more than 5% of our consolidated gross accounts receivable as of December 31, 2022.

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.

1 unchanged sentence

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.

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

5 unchanged sentences

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

The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of 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 did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of December 31, 2022 or January 1, 2022.

Customer receivables, which are included in accounts receivable, less allowances for doubtful accounts in the Company’s Consolidated Balance Sheets, were $ 1.7 billion and $ 1.5 billion as of December 31, 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 $ 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 Company’s contract assets for these upfront payments were $ 29 million and $ 27 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022, respectively, and $ 31 million and $ 26 million included in other assets in the Company’s Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022, respectively.

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

5 unchanged sentences

Equipment, disposables and supplies 3,536 3,090 2,455

Beverage products 1,465 1,186 1,403

Produce 1,840 1,454 1,205

Beverage products 1,731 1,465 1,186

Total Net sales $ 34,057 $ 29,487 $ 22,885

4 unchanged sentences

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.

USF financed the Smart Foodservice acquisition with a $ 700 million incremental senior secured term loan borrowed in April 2020 (the “2020 Incremental Term Loan Facility”), 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.

17 unchanged sentences

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

Smart Foodservice acquisition and integration related costs included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income were $ 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.

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

Other intangibles (2)

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) 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.

(Unaudited) 2019

Smart Foodservice acquisition and integration related costs included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income were $ 16 million, $ 15 million, and $ 21 million during fiscal years 2022, 2021, and 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 fiscal year 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 that preceded the year of acquisition.

Pro forma net sales $ 23,258

Pro forma net (loss) income available to common shareholders $ ( 225 ) $ 420

Pro forma net income per share:

Pro forma net loss available to common shareholders $ ( 225 )

Pro forma net loss per share:

Basic $ ( 1.02 )

Diluted $ ( 1.02 )

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:

Pro forma net sales $ 392

Pro forma net income available to common shareholders $ 5

Pro forma income per share:

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

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.

(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 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 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.

2 unchanged sentences

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.

3 unchanged sentences

Balance as of beginning of year $ 33 $ 67 $ 30

(Benefit) Charged to costs and expenses, net

Charged (benefit) to costs and expenses, net

Adoption of ASU 2016-13 — — 1

2 unchanged sentences

Balance as of end of year $ 30 $ 33 $ 67

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.

This table excludes the vendor receivable related allowance for doubtful accounts of $ 8 million, $ 7 million, and $ 5 million as of December 31, 2022, January 1, 2022, and January 2, 2021, respectively.

At the beginning of fiscal year 2020, the Company adopted the provisions of ASU 2016-13 Financial Instruments-Credit Losses (Topic 326):

3 unchanged sentences

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 2022, no excess facilities or vacant land previously held for future use were transferred to assets held for sale.

The Company sold vacant land for cash proceeds of $ 5 million, resulting in a gain on sale of $ 2 million, which was included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income.

The Company also sold one excess facility for aggregate cash proceeds of $ 1 million which approximated the carrying value.

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 2022 and 2021 were as follows:

4 unchanged sentences

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

Property and equipment as of December 31, 2022 and January 1, 2022 consisted of the following:

December 31, 2022 January 1, 2022 Range of

Land $ 397 $ 379

6 unchanged sentences

Property and equipment—net $ 2,171 $ 2,033

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.

Transportation equipment included $ 575 million and $ 537 million of financing lease assets as of December 31, 2022 and January 1, 2022, respectively.

Office equipment, furniture and software included $5 million of financing lease assets as of December 31, 2022.

Buildings and building improvements included $ 78 million and $ 15 million of financing lease assets as of December 31, 2022 and January 1, 2022.

Accumulated amortization of financing lease assets was $ 263 million and $ 261 million as of December 31, 2022 and January 1, 2022, respectively.

Interest capitalized was not material in both fiscal years 2022 and 2021.

2 unchanged sentences

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.

Other intangible assets include customer relationships, amortizable trade names, 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).

Customer relationships and amortizable trade names are intangible assets with definite lives, and are carried at the acquired fair value less accumulated amortization.

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

Amortization expense was $ 45 million, $ 55 million and $ 79 million for fiscal years 2022, 2021 and 2020, 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.

The weighted-average remaining useful life of all definite lived intangibles was approximately nine years as of December 31, 2022.

Amortization of these definite lived intangible assets is estimated to be $ 44 million for each of fiscal years 2023, 2024, 2025, 2026, and 2027, and $ 294 million in the aggregate thereafter.

Goodwill and other intangibles—net consisted of the following:

January 1, 2022 January 2, 2021

December 31, 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.

The Company completed its most recent annual impairment assessment for goodwill and indefinite-lived intangible assets as of the first day of the third quarter of fiscal year 2022, with no impairments noted.

For goodwill, the reporting unit used in assessing impairment is the Company’s one business segment as described in Note 24, Business Information.

8 unchanged sentences

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.

Based upon the Company’s fiscal year 2022 annual impairment analysis, the Company concluded the fair value of its brand names and trademarks exceeded its carrying value.

During fiscal year 2021, the Company implemented rebranding initiatives related to the integration of a trade name acquired as part of an earlier 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

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.

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 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

The Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and January 1, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

December 31, 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, except as further disclosed in Note 9, Goodwill and Other Intangibles.

5 unchanged sentences

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

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).

As of December 31, 2022, the Company had no outstanding interest rate swap agreements.

On July 31, 2021, a four-year interest rate swap with a notional value of $ 550 million expired.

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:

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 December 31, 2022, January 1, 2022 , and January 2, 2021:

Derivatives in Cash Flow Hedging Relationships Amount of (Loss) Gain Recognized in Accumulated

1 unchanged sentence

Location of Amounts Reclassified from Accumulated Other Comprehensive Loss Amount of (Gain) Loss Reclassified from Accumulated Other Comprehensive Loss to Income,

For the fiscal year ended January 1, 2022

For the fiscal year ended December 31, 2022

Interest rate swaps

3 unchanged sentences

$ — Interest expense—net $ 5

For the fiscal year ended December 28, 2019

For the fiscal year ended January 2, 2021

Interest rate swaps

2 unchanged sentences

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 $ 4.6 billion, compared to its carrying value of $ 4.8 billion as of December 31, 2022.

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 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 Company’s 4.625 % unsecured senior notes due June 1, 2030 (the “Unsecured Senior Notes due 2030”) was $ 0.4 billion and $ 0.5 billion as of December 31, 2022 and January 1, 2022, respectively.

The fair value of the Company’s 4.75 % unsecured senior notes due February 15, 2029 (the “Unsecured Senior Notes due 2029”) was $ 0.8 billion and $ 0.9 billion as of December 31, 2022 and January 1, 2022, respectively.

The fair value of the Company’s 6.25 % senior secured notes due April 15, 2025 (the “Secured Senior Notes due 2025”) was $ 1.0 billion as of both December 31, 2022 and January 1, 2022.

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

The fair value of the Unsecured Senior Notes due 2030, the

Unsecured Senior Notes due 2029, and the Secured Senior Notes due 2025 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 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

Debt Description Maturity Interest Rate as of December 31, 2022 Carrying Value as of December 31, 2022 Carrying Value as of January 1, 2022

ABL Facility December 7, 2027 — % $ — $ —

2019 Incremental Term Loan Facility (net of $19 and $25 of unamortized deferred financing

costs, respectively) September 13, 2026 6.38 % 1,232 1,442

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,

2021 Incremental Term Loan Facility (net of $6 and $7 of unamortized deferred financing costs, respectively) November 22, 2028 7.13 % 786 893

Secured Senior Notes due 2025 (net of $7 and $11 of unamortized deferred financing costs,

respectively)

April 15, 2025 6.25 % 993 989

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)

Unsecured Senior Notes due 2029 (net of $7 and $8 of unamortized deferred financing costs, respectively)

February 15, 2029 4.75 % 893 892

Unsecured Senior Notes due 2030 (net of $5 of

unamortized deferred financing costs) (1)

Unsecured Senior Notes due 2030 (net of $4 and $5 of unamortized deferred financing costs, respectively)

June 1, 2030 4.625 % 496 495

5 unchanged sentences

Long-term debt $ 4,738 $ 4,916

(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:

As of December 31, 2022, approximately 42 % 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 December 31, 2022, were as follows:

Thereafter 2,228

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.

On December 7, 2022, USF entered into an amendment to its asset based senior secured revolving credit facility (the “ABL Facility”).

Pursuant to this amendment, the total aggregate amount of commitments under the ABL facility was increased from $ 1,990 million to $ 2,300 million.

The amendment also replaced the London Interbank Offered Rate (“LIBOR”) interest rate benchmark with a forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”) as administered by the Federal Reserve Bank of New York, as determined in accordance with the ABL Facility.

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

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 is now scheduled to mature on December 7, 2027, 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 Loan Credit Agreement or any of USF’s Secured Senior Notes due 2025, Unsecured Senior Notes due 2029 or Unsecured Senior Notes due 2030 (the “Senior Notes”) (described below) remains

outstanding on a date that is sixty (60) days prior to such earlier maturity date for such indebtedness under the Term Loan Credit Agreement or any of such Senior Notes.

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 SOFR plus a margin ranging from 1.00 % to 1.50 % and a credit spread adjustment of 0.10%, in each case based on USF’s excess availability under the ABL Facility.

The margin under the ABL Facility as of December 31, 2022, was 0.00 % for ABR loans and 1.00 % for SOFR 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 2.87 % and 3.25 % for fiscal years 2022 and 2021, 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.

The Company incurred $4 million of third party costs in connection with the ABL Facility amendment which were capitalized as deferred financing costs recorded in other assets in the Company’s Consolidated Balance Sheet.

These deferred financing costs, along with $3 million of unamortized deferred financing costs related to the former asset based senior secured revolving credit facility, will be amortized through December 7, 2027, the ABL Facility maturity date.

USF had no outstanding borrowings, and had outstanding letters of credit totaling $ 462 million, under the ABL Facility as of December 31, 2022.

The outstanding letters of credit are entered into in favor of certain commercial insurers to secure obligations with respect to our insurance programs and certain real estate leases, under the ABL Facility as of December 31, 2022.

There was available capacity of $ 1,838 million under the ABL Facility as of December 31, 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.

The 2019 Incremental Term Loan Facility had an outstanding balance of $ 1,232 million, net of $ 19 million of unamortized deferred financing costs, as of December 31, 2022.

During fiscal year 2022 we voluntarily prepaid $ 200 million of the 2019 Incremental Term Loan Facility.

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 %).

3 unchanged sentences

2021 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.

The 2021 Incremental Term Loan Facility had an outstanding balance of $ 786 million, net of $ 6 million of unamortized deferred financing costs, as of December 31, 2022.

During fiscal year 2022 we voluntarily prepaid $ 100 million of the 2021 Incremental Term Loan Facility.

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 %).

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.

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 The 2021 Incremental Term Loan Facility may require mandatory repayments if certain assets are sold.

Secured Senior Notes due 2025

As of December 31, 2022, the Secured Senior Notes due 2025 had a carrying value of $ 993 million, net of $ 7 million of unamortized deferred financing costs.

The Secured Senior Notes due 2025 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 Senior Notes due 2025 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 Senior Notes due 2025 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 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 had an outstanding balance of $ 893 million, net of $ 7 million of unamortized deferred financing costs, as of December 31, 2022.

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

2 unchanged sentences

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 had an outstanding balance of $ 496 million, net of $ 4 million of unamortized deferred financing costs, as of December 31, 2022.

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

1 unchanged sentence

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.

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.

Financing Leases— Obligations under financing leases of $ 446 million as of December 31, 2022 consist primarily of amounts due for transportation equipment and building leases.

Security Interests

7 unchanged sentences

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

USF had approximately $ 1.4 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.

USF had approximately $ 1.6 billion of restricted payment capacity under these covenants, and approximately $ 2.9 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 December 31, 2022.

The agreements governing our indebtedness also contain customary events of default.

5 unchanged sentences

This, in turn, is dependent on the strength of its cash flows, results of operations, economic and market conditions, and other factors.

2021 Refinancing Activities

In February 2021, USF completed a private offering of the Unsecured Senior Notes due 2029 and used the proceeds, together with cash on hand, to redeem all of the Company’s then outstanding 5.875 % Unsecured Senior Notes due 2024 (the “Unsecured Senior Notes due 2024”), and repay all of the then outstanding borrowings under the 2020 Incremental Term Loan Facility.

In November 2021, USF entered into the 2021 Incremental Term Loan Facility and completed a private offering of Unsecured Senior Notes due 2030 and used the proceeds and cash on hand, to repay all of the then outstanding borrowings under the Initial Term Loan Facility.

ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES

Accrued expenses and other long-term liabilities consisted of the following:

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

Accrued expenses and other current liabilities:

37 unchanged sentences

Payments, net ( 27 ) ( 2 ) ( 29 )

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

2 unchanged sentences

Balance as of January 1, 2022 3 — 3

Current period costs 3 — 3

Payments, net ( 3 ) — ( 3 )

Balance as of December 31, 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.

1 unchanged sentence

2022 Activities

During fiscal year 2022, the Company incurred restructuring costs of $ 3 million for severance and related costs associated with support office work force reductions.

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.

1 unchanged sentence

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.

3 unchanged sentences

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 ;

8,997 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.

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 ;

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.

20 unchanged sentences

Balance, January 1, 2022 532,281 534

Shares issued as paid in kind dividend - Series A Preferred Stock — —

Balance, December 31, 2022 532,281 $ 534

RELATED PARTY TRANSACTIONS

FMR LLC, is a holder of approximately 10 % of the Company’s outstanding common stock.

As of December 31, 2022 FMR LLC, is a holder of approximately 11 % of the Company’s outstanding common stock based on information provided in its most recent amendment to its Schedule 13G filed with the SEC.

As of December 31, 2022 investment funds managed by an affiliate of FMR LLC held approximately $ 19 million in aggregate principal amount of the 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility.

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.

1 unchanged sentence

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.

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 Company’s 2021 debt refinancing activities 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 $ 15 million and $ 17 million in aggregate principal amount of the 2019 Incremental Term Loan Facility as of December 31, 2022 and January 1, 2022, respectively.

SHARE-BASED COMPENSATION, COMMON STOCK ISSUANCES AND COMMON STOCK

5 unchanged sentences

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.

The Time-Based Options generally vest and become exercisable ratably over a three year period from the date of the grant.

Share-based compensation expense related to the Time-Based Options was $ 6 million, $ 12 million and $ 10 million for fiscal years 2022, 2021 and 2020, 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 Performance Options generally vest and become exercisable ratably over a period o f three years, from the date of the grant, provided that the Company achieves a predetermined financial performance condition established by the Compensation and Human Capital Committee of our Board of Directors for the respective award tranche.

There was no share-based compensation expense recorded in fiscal year 2022, 2021 and 2020 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.

2 unchanged sentences

The weighted-average assumptions for Options granted in fiscal years 2021 and 2020 are included in the following table.

2021 2020 2019

No options were granted in fiscal year 2022.

Expected volatility 53.0 % 29.3 %

18 unchanged sentences

( 750,891 ) ( 966 ) ( 751,857 ) $ 11.29 $ 29.01

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

Outstanding as of December 31, 2022 3,650,606 186,321 3,836,927 $ 9.05 $ 24.32 6.1

Vested and exercisable as of December 31, 2022 2,610,641 186,321 2,796,962 $ 8.54 $ 24.53 5.5

The weighted-average grant date fair value of Options granted for fiscal years 2021 and 2020 was $ 18.59 and $ 3.91 , respectively.

During fiscal years 2022, 2021 and 2020, Options were exercised with total intrinsic values of $ 13 million, $ 14 million and $ 3 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.

There was $ 5 million of total unrecognized compensation costs related to unvested Options expected to vest as of December 31, 2022, which is expected to be recognized over a weighted-average period of 1 year.

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 Company recorded de minimis share-based compensation expense for the Time-Based RSAs in fiscal year 2022, and $ 1 million in both fiscal years 2021 and 2020.

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.

2 unchanged sentences

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.

Share-based compensation expense for the Performance RSAs was de minimis for fiscal year 2022, and $ 1 million and $ 2 million for fiscal years 2021 and 2020, respectively.

The summary of unvested RSAs and changes during fiscal year 2022 is presented below:

7 unchanged sentences

— ( 104,483 ) ( 104,483 ) $ 34.56

Unvested as of January 1, 2022 35,693 214,134 249,827 $ 34.56

Unvested as of December 31, 2022 — — — $ —

(1) Represents an adjustment to the 2019 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 2022, 2021 and 2020.

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.

There was no unrecognized compensation expense related to the RSAs as of December 31, 2022.

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

9 unchanged sentences

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.

The Company recognized $ 1 million and $ 3 million of share-based compensation expense in fiscal years 2022 and 2021, respectively, 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 related to the Market Performance RSUs.

A summary of RSUs outstanding and changes during fiscal year 2022 is presented below.

8 unchanged sentences

— 2,536 — 2,536 $ 34.61

Unvested as of January 1, 2022 2,305,296 106,063 350,143 2,761,502 $ 25.60

Unvested as of December 31, 2022 2,172,937 391,776 209,327 2,774,040 $ 31.62

(1) Represents an adjustment to the 2019 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 2022, 2021, and 2020 was $ 35.81 , $ 37.74 and $ 13.83 , 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.

As of December 31, 2022, there was $ 52 million of unrecognized compensation cost related to the RSUs that is expected to be recognized over a weighted-average period of 2 years.

Share Repurchase Program - On November 2, 2022, our Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $ 500 million of its outstanding common stock.

For the year ended December 31, 2022, the Company repurchased 396,069 shares at an aggregate purchase price of approximately $ 14 million under the program.

At December 31, 2022, there was approximately $ 486 million in remaining funds authorized under this program.

The size and timing of any repurchases will depend on a number of factors, including share price, general business and market conditions and other factors.

Under the share repurchase program, repurchases can be made from time to time using a variety of methods, including open market purchases, privately negotiated transactions, accelerated share repurchases and Rule 10b5-1 trading plans.

The share repurchase program does not obligate the Company to acquire any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion.

The repurchase authorization does not have an expiration date.

The Company leases certain distribution and warehouse facilities, office facilities, fleet vehicles, and office and warehouse equipment.

9 unchanged sentences

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.

As of December 31, 2022, lease agreements included residual value guarantees of up to $221 million that could potentially come due in future periods.

For leases which we believe it probable amounts will be owed under these guarantees we have included the residual value guarantee within the lease payments to measure the right-of-use assets and lease liabilities.

During 2022, the Company entered into new lease agreements for four distribution facilities that were previously classified as operating leases.

As a result of terminating the original leases, the Company recognized a charge of $9 million, which was recorded in distribution, selling and administrative costs.

These new leases are classified as financing leases, were measured using our incremental borrowing rate and are included in our right of use assets and lease liabilities in the Consolidated Balance Sheets.

Rental payments are calculated at the applicable reference rate plus a margin.

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

Leases Consolidated Balance Sheet Location December 31, 2022 January 1, 2022

Other assets $ 265 $ 275

6 unchanged sentences

Total lease liabilities

(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.

(1) Financing lease assets are recorded net of accumulated amortization of $ 263 million and $ 261 million as of December 31, 2022 and January 1, 2022.

The following table presents the location of lease costs in fiscal years 2022, 2021 and 2020 in the Company’s Consolidated Statements of Comprehensive Income:

9 unchanged sentences

Net lease cost $ 162 $ 153 $ 156

Future lease payments under lease agreements as of January 1, 2022 were as follows:

Future lease payments under lease agreements as of December 31, 2022 were as follows:

Maturity of Lease Liabilities Operating Leases Financing Lease

14 unchanged sentences

Financing cash flows from financing leases 73 87 102

Lease Term and Discount Rate January 1, 2022 January 2, 2021 December 28, 2019

Lease Term and Discount Rate December 31, 2022 January 1, 2022 January 2, 2021

Weighted-average remaining lease term (years):

11 unchanged sentences

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.

Only certain union associates are eligible to participate and continue to accrue benefits under the plan per the collective bargaining

The plan is closed and frozen to all other employees.

12 unchanged sentences

Other postretirement benefit costs were de minimis for fiscal years 2022, 2021 and 2020.

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 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—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 2022, 2021 and 2020.

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

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.

There have been no non-cash settlement costs incurred in fiscal years 2022, 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:

1 unchanged sentence

Changes recognized in accumulated other comprehensive loss:

Actuarial gain

Actuarial (loss) gain

$ ( 73 ) $ 14 $ 29

14 unchanged sentences

Smart Foodservice assumed benefit obligations — — 70

Benefit obligation as of end of year

Projected benefit obligation as of end of year

720 1,016 1,061

2 unchanged sentences

1,103 1,112 923

Return on plan assets

Employer contribution

(Loss) return on plan assets

( 295 ) 38 183

Benefit disbursements

4 unchanged sentences

Net funded status $ 33 $ 87 $ 51

The net funded status of the Retirement Plan for fiscal year 2022 decreased from a net asset of $ 87 million to a net asset of $ 33 million, primarily due to negative investment returns on assets, offset by an increase in the discount rate.

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 2022 pension benefits actuarial gain of $ 274 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 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 funded status of the Other Post Retirement Plans for the last three fiscal years was as follows:

What changed 10-K

Item 8. Financial Statements and Supplementary Data