What changed in this filing

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Item 1. Financial Statements

2023-05-11 compared with 2022-11-10 · 135 added, 207 removed, 344 unchanged (50% of the section changed)

3 unchanged sentences

(In millions, except par value)

October 1, 2022 January 1, 2022

April 1, 2023 December 31, 2022

Current assets:

10 unchanged sentences

Other intangibles—net 774 785

Deferred tax assets — 8

Other assets 373 372

14 unchanged sentences

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

0.5 issued and outstanding as of October 1, 2022 and January 1, 2022 534 534

0.4 and 0.5 issued and outstanding as of April 1, 2023 and December 31, 2022, respectively 373 534

Shareholders’ equity:

Common stock, $0.01 par value—600 shares authorized;

225 and 223 issued and outstanding as of

October 1, 2022 and January 1, 2022, respectively

233.9 issued and 232.6 outstanding as of April 1, 2023, and 225.2 issued and 224.8 outstanding as of December 31, 2022

Additional paid-in capital

2 unchanged sentences

( 72 ) ( 73 )

Treasury Stock, 1.3 and 0.4 shares, respectively ( 48 ) ( 14 )

Total shareholders’ equity

5 unchanged sentences

(In millions, except per share data)

13 Weeks Ended 39 Weeks Ended

October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021

13 Weeks Ended

April 1, 2023 April 2, 2022

Net sales $ 8,542 $ 7,798

Cost of goods sold 7,117 6,603

1,460 1,241 4,038 3,413

Operating expenses:

Distribution, selling and administrative costs

1,246 1,099 3,640 3,115

Restructuring costs and asset impairment charges

Total operating expenses

1,246 1,106 3,640 3,126

Operating income 187 34

1 unchanged sentence

Interest expense—net 81 55

Loss on extinguishment of debt — — — 23

Income before income taxes 154 91 234 125

Income tax provision 45 27 62 30

109 64 172 95

Other comprehensive income —net of tax:

Income (loss) before income taxes 107 ( 15 )

Income tax provision (benefit) 25 ( 8 )

Net income (loss)

Other comprehensive income (loss) —net of tax:

Changes in retirement benefit obligations

Recognition of interest rate swaps

Comprehensive income

$ 109 $ 65 $ 172 $ 100

Net income $ 109 $ 64 $ 172 $ 95

Comprehensive income (loss)

Net income (loss) $ 82 $ ( 7 )

Series A convertible preferred stock dividends ( 7 ) ( 9 )

Net income available to common shareholders $ 100 $ 55 $ 145 $ 62

Net income per share

Net income (loss) available to common shareholders $ 75 $ ( 16 )

Net income (loss) per share

Basic (Note 11)

4 unchanged sentences

Basic (Note 11)

225 222 224 222

Diluted (Note 11)

251 225 226 225

See Notes to Consolidated Financial Statements (Unaudited).

4 unchanged sentences

Capital Retained

Earnings Accumulated Other Comprehensive Loss Total

Earnings Treasury Stock Accumulated Other Comprehensive Loss Total

Shareholders’

Shares Amount

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

Shares Amount Shares Amount

BALANCE—December 31, 2022 225.2 $ 2 $ 3,036 $ 1,010 0.4 $ ( 14 ) $ ( 73 ) $ 3,961

Share-based compensation expense — — 14 — — — — 14

3 unchanged sentences

Tax withholding payments for net share-settled equity awards — — ( 11 ) — — — — ( 11 )

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

Net Loss — — — ( 7 ) — ( 7 )

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

Share-based compensation expense — — 9 — — 9

Proceeds from employee stock purchase plan — — 7 — — 7

Exercise of stock options — — 5 — — 5

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

Net Income — — — 70 — 70

BALANCE—July 2, 2022 224 $ 2 $ 2,994 $ 827 $ ( 19 ) $ 3,804

Share-based compensation expense — — 13 — — 13

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

Exercise of stock options 1 — 5 — — 5

Series A convertible preferred stock conversion to common stock 7.6 — 161 — — — — 161

Series A convertible preferred stock dividends — — — ( 7 ) — — — ( 7 )

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

Stock repurchased — — — — 0.9 ( 34 ) — ( 34 )

Net Income — — — 82 — — — 82

BALANCE—October 1, 2022 225 $ 2 $ 3,017 $ 927 $ ( 19 ) $ 3,927

BALANCE—April 1, 2023 233.9 $ 2 $ 3,212 $ 1,085 1.3 $ ( 48 ) $ ( 72 ) $ 4,179

US FOODS HOLDING CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(In millions)

Common Stock Additional

Capital Retained

Earnings Accumulated Other Comprehensive Loss Total

Earnings Treasury Stock Accumulated Other Comprehensive Loss Total

Shareholders’

Shares Amount

Shares Amount Shares Amount

BALANCE—January 1, 2022 223.0 $ 2 $ 2,970 $ 782 — $ — $ ( 19 ) $ 3,735

5 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 223.8 $ 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

See Notes to Consolidated Financial Statements (Unaudited).

3 unchanged sentences

13 Weeks Ended

October 1, 2022 October 2, 2021

April 1, 2023 April 2, 2022

Cash flows from operating activities:

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

Net income (loss)

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

Depreciation and amortization

Gain on disposal of property and equipment—net

Intangible asset impairment charges — 7

Loss on extinguishment of debt — 23

Amortization of deferred financing costs

1 unchanged sentence

Share-based compensation expense

Provision (benefit) for doubtful accounts

Provision for doubtful accounts

Changes in operating assets and liabilities:

3 unchanged sentences

( 9 ) ( 140 )

Decrease in prepaid expenses and other assets

Decrease (increase) in prepaid expenses and other assets

Increase in accounts payable and cash overdraft liability

Increase in accrued expenses and other liabilities

(Decrease) increase in accrued expenses and other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Proceeds from sales of divested assets

Proceeds from sales of property and equipment 1 2

8 unchanged sentences

Dividends paid on Series A convertible preferred stock ( 7 ) ( 9 )

Debt financing costs and fees

Repurchase of common stock ( 34 ) —

Proceeds from employee stock purchase plan

4 unchanged sentences

( 138 ) ( 46 )

Net increase (decrease) in cash, and cash equivalents and restricted cash 218 ( 57 )

Net increase in cash, and cash equivalents and restricted cash 81 42

Cash, cash equivalents and restricted cash—beginning of period 211 148

4 unchanged sentences

Property and equipment purchases included in accounts payable

Property and equipment transferred to assets held for sale — 11

Leased assets obtained in exchange for financing lease liabilities

1 unchanged sentence

Cashless exercise of stock options

Paid-in-kind Series A convertible preferred stock dividends — 15

See Notes to Consolidated Financial Statements (Unaudited).

21 unchanged sentences

Recently Adopted Accounting Pronouncements

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

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature.

As a result, convertible debt will be accounted for as a single liability measured at its amortized cost.

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

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

The Company 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.

In December 2022, the FASB issued ASU 2022-06 “Reference Rate Reform” (“Topic 848”) “Deferral of the Sunset Date of Topic 848”, which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

Topic 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The standard was effective upon issuance and the Company may apply the optional expedients and elections in Topic 848 prospectively through December 31, 2024.

For the Company, the provisions of this ASU were effective upon issuance and did not have a material impact on the Company’s consolidated financial statements.

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 to the customer

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 to the customer 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 1, 2022 or January 1, 2022.

Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $ 1.9 billion and $ 1.5 billion as of October 1, 2022 and January 1, 2022, respectively.

The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of April 1, 2023 or December 31, 2022.

Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $ 1.8 billion and $ 1.7 billion as of April 1, 2023 and December 31, 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 $ 27 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of October 1, 2022 and January 1, 2022, respectively, and $ 30 million and $ 26 million included in other assets in the Company’s Consolidated Balance Sheets as of October 1, 2022 and January 1, 2022, respectively.

The Company’s contract assets for these upfront payments were $ 31 million and $ 29 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of April 1, 2023 and December 31, 2022, respectively, and $ 32 million and $ 31 million included in other assets in the Company’s Consolidated Balance Sheets as of April 1, 2023 and December 31, 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 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021

13 Weeks Ended

April 1, 2023 April 2, 2022

Meats and seafood $ 2,826 $ 2,950

12 unchanged sentences

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

LIFO reserves in the Company’s Consolidated Balance Sheets were $ 485 million and $ 342 million as of October 1, 2022 and January 1, 2022, respectively.

As a result of changes in LIFO reserves, cost of goods sold increased $ 6 million and $ 32 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and increased $ 143 million and $ 150 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.

LIFO reserves in the Company’s Consolidated Balance Sheets were $ 509 million and $ 489 million as of April 1, 2023 and December 31, 2022, respectively.

As a result of changes in LIFO reserves, cost of goods sold increased $20 million and $ 72 million for the 13 weeks ended April 1, 2023 and April 2, 2022, 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.

Activity in the allowance for doubtful accounts for both the 13 weeks ended October 1, 2022 and October 2, 2021 was de minimis.

A summary of the activity in the allowance for doubtful accounts for the 39 weeks ended October 1, 2022 and October 2, 2021 was as follows:

October 1, 2022 October 2, 2021

A summary of the activity in the allowance for doubtful accounts for the 13 weeks ended April 1, 2023 and April 2, 2022 was as follows:

April 1, 2023 April 2, 2022

Balance as of beginning of year $ 30 $ 33

Charged (benefit) to costs and expenses, net

Charged to costs and expenses, net

Customer accounts written off—net of recoveries ( 8 ) —

Balance as of end of period

This table excludes the vendor receivable related allowance for doubtful accounts of $ 10 million and $ 7 million as of October 1, 2022 and January 1, 2022, respectively and $ 6 million and $ 5 million as of October 2, 2021 and January 2, 2021, respectively .

This table excludes the vendor receivable related allowance for doubtful accounts of $ 8 million as of both April 1, 2023 and December 31, 2022, and $ 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 1, 2022 and January 1, 2022, property and equipment-net included accumulated depreciation of $ 2,917 million and $ 2,722 million, respectively.

Depreciation expense was $ 81 million and $ 79 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $ 240 million and $ 242 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively .

As of April 1, 2023 and December 31, 2022, property and equipment-net included accumulated depreciation of $ 3,058 million and $ 2,981 million, respectively.

Depreciation expense was $ 87 million and $ 78 million for the 13 weeks ended April 1, 2023 and April 2, 2022, respectively .

GOODWILL AND OTHER INTANGIBLES

Goodwill includes the cost of acquired businesses in excess of the fair value of the tangible and other intangible net assets acquired.

Other intangible assets include customer relationships, amortizable trade names, noncompete agreements, the brand names comprising the Company’s portfolio of exclusive brands, and trademarks.

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 their estimated useful lives (which range from approximately 3 to 15 years).

Amortization expense was $ 11 million and $ 12 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $ 33 million and $ 44 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.

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 their estimated useful lives (which range from approximately 3 to 15 years).

Amortization expense was $11 million for both the 13 weeks ended April 1, 2023 and April 2, 2022.

Goodwill and other intangibles—net consisted of the following:

October 1, 2022 January 1, 2022

April 1, 2023 December 31, 2022

Goodwill $ 5,625 $ 5,625

12 unchanged sentences

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

The Company assesses goodwill and other intangible assets with

indefinite lives for impairment annually, or more frequently if events occur that indicate an asset may be impaired.

The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually, or more frequently if events occur that indicate an asset may be impaired.

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

The Company completed its most recent annual impairment assessment for goodwill and indefinite-lived intangible assets as of July 3, 2022, the first day of the third quarter of fiscal year 2022, with no impairments noted.

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 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 is being amortized with an estimated remaining useful life of 10 years.

No impairments were recognized for the 13 weeks ended April 1, 2023 and April 2, 2022, 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 1, 2022 and January 1, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

October 1, 2022

The Company’s assets and liabilities measured at fair value on a recurring basis as of April 1, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

April 1, 2023

Level 1 Level 2 Level 3 Total

1 unchanged sentence

$ 207 $ — $ — $ 207

January 1, 2022

December 31, 2022

Level 1 Level 2 Level 3 Total

7 unchanged sentences

Derivative Financial Instruments

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

T he Company had no outstanding interest rate swap agreements a s of either October 1, 2022 or January 1, 2022.

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

The Company had no outstanding interest rate hedge agreements as of either April 1, 2023 or December 31, 2022.

See Note 18, Subsequent Events, for a description of the interest rate cap agreements entered into subsequent to April 1, 2023.

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 $ 4.6 billion and $ 5.1 billion as of October 1, 2022 and January 1, 2022, respectively, as compared to its carrying value of $ 4.9 billion and $ 5.0 billion as of October 1, 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 October 1, 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 $ 0.8 billion and $ 0.9 billion as of October 1, 2022 and January 1, 2022, respectively.

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 October 1, 2022 and January 1, 2022, respectively.

The fair value of the Company’s total debt approximated $ 4.7 billion and $ 4.6 billion as of April 1, 2023 and December 31, 2022, respectively, as compared to its carrying value of $ 4.8 billion and $ 4.9 billion as of April 1, 2023 and December 31, 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 April 1, 2023 and December 31, 2022.

The fair value of the Company’s 4.75 % unsecured senior notes due February 15, 2029 (the “Unsecured Senior Notes due 2029”) was $ 0.8 billion as of both April 1, 2023 and December 31,

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 as of both April 1, 2023 and December 31, 2022, respectively.

Fair value of the Secured Senior 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.

2 unchanged sentences

Total debt consisted of the following:

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

ABL Facility May 31, 2024 — % $ — $ —

Debt Description Maturity Interest Rate as of April 1, 2023 Carrying Value as of April 1, 2023 Carrying Value as of December 31, 2022

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

2019 Incremental Term Loan Facility (net of $16 and $19 of unamortized deferred financing costs, respectively) September 13, 2026 6.84 % 1,232 1,232

4 unchanged sentences

February 15, 2029 4.75 % 893 893

Unsecured Senior Notes due 2030 (net of $4 of and $5 of unamortized deferred financing costs, respectively) June 1, 2030 4.625 % 496 495

Unsecured Senior Notes due 2030 (net of $4 and $4 of unamortized deferred financing costs, respectively) June 1, 2030 4.625 % 496 496

Obligations under financing leases 2023–2040 1.26%-8.31% 468 446

4 unchanged sentences

Long-term debt $ 4,693 $ 4,738

As of October 1, 2022, approximately 45 % of the Company’s total debt bore interest at a floating rate.

As of April 1, 2023, approximately 41 % of the Company’s total debt bore 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 $ 2,300 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 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 October 1, 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 $ 247 million, under the ABL Facility as of October 1, 2022.

The ABL Facility is scheduled to mature on December 7, 2027.

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 the Secured Overnight Financing Rate (“SOFR”) plus a margin ranging from 1.00 % to 1.50 %, based on USF’s excess availability under the ABL Facility, and a credit spread adjustment of 0.10%.

The margin under the ABL Facility as of April 1, 2023 was 0.00 % for ABR loans and 1.00 % for SOFR loans.

USF had no outstanding borrowings, and had outstanding letters of credit totaling $ 458 million, under the ABL Facility as of April 1, 2023.

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 $ 1,743 million under the ABL Facility as of October 1, 2022.

There was available capacity of $ 1,842 million under the ABL Facility as of April 1, 2023.

Term Loan Facilities

1 unchanged sentence

2019 Incremental Term Loan Facility

The 2019 Incremental Term Loan Facility had an outstanding balance of $ 1,434 million, net of $ 21 million of unamortized deferred financing costs as of October 1, 2022.

The 2019 Incremental Term Loan Facility had an outstanding balance of $ 1,232 million, net of $ 16 million of unamortized deferred financing costs as of April 1, 2023.

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.

See Note 18, Subsequent Events, for a description of the interest rate cap agreements entered into subsequent to April 1, 2023.

2021 Incremental Term Loan Facility

The 2021 Incremental Term Loan Facility had an outstanding balance of $ 788 million, net of $ 5 million of unamortized deferred financing costs as of October 1, 2022.

During the 13 and 39 weeks ended October 1, 2022 we voluntarily prepaid $ 100 million of the 2021 Incremental Term Loan Facility.

The 2021 Incremental Term Loan Facility had an outstanding balance of $ 719 million, net of $ 4 million of unamortized deferred financing costs as of April 1, 2023.

During the 13 weeks ended April 1, 2023 we voluntarily prepaid $ 65 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 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.

See Note 18, Subsequent Events, for a description of the interest rate cap agreements entered into subsequent to April 1, 2023.

Secured Senior Notes due 2025

The Secured Senior Notes due 2025 had an outstanding balance of $ 992 million, net of $ 8 million of unamortized deferred financing costs, as of October 1, 2022.

The Secured Senior Notes due 2025 had an outstanding balance of $ 994 million, net of $ 6 million of unamortized deferred financing costs, as of April 1, 2023.

The Secured Senior 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

The Unsecured Senior Notes due 2029 had an outstanding balance of $ 892 million, net of $ 8 million of unamortized deferred financing costs, as of October 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 April 1, 2023.

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

Unsecured Senior Notes due 2030

The Unsecured Senior Notes due 2030 had an outstanding balance of $ 496 million, net of $ 4 million of unamortized deferred financing costs, as of October 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 April 1, 2023.

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

2 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 $ 1.6 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 October 1, 2022.

RESTRUCTURING LIABILITIES

From time to time, the Company may implement initiatives or close or consolidate facilities in an effort to reduce costs and improve operating effectiveness.

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

Net restructuring costs were de minimis for both the 13 weeks and 39 weeks ended October 1, 2022.

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

During the 39 weeks ended October 2, 2021, the Company incurred net restructuring costs of $ 3 million primarily related to initiatives to improve operational effectiveness.

Net restructuring liabilities were $ 0 million and $ 3 million as of October 1, 2022 and January 1, 2022, respectively.

USF had approximately $ 1.7 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 April 1, 2023.

RETIREMENT PLANS

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

13 Weeks Ended 39 Weeks Ended

October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021

13 Weeks Ended

April 1, 2023 April 2, 2022

Components of net periodic pension benefit credits

$ 1 $ — $ 2 $ 2

Interest cost

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Net periodic pension benefit credits $ ( 1 ) $ ( 5 )

Other postretirement benefit costs were de minimis for both the 13 weeks and 39 weeks ended October 1, 2022 and October 2, 2021.

Other postretirement benefit costs were de minimis for both the 13 weeks ended April 1, 2023 and April 2, 2022.

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.

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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 $ 14 million and $ 13 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $ 44 million and $ 39 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.

The Company made employer matching contributions to the 401(k) plan of $ 17 million and $ 16 million for the 13 weeks ended April 1, 2023 and April 2, 2022, respectively.

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

The Company’s contributions to these plans were $ 12 million and $ 11 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $ 36 million and $ 33 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.

The Company’s contributions to these plans were $ 13 million and $ 12 million for the 13 weeks ended April 1, 2023 and April 2, 2022, respectively .

STOCKHOLDERS’ EQUITY

Earnings Per Share

The Company computes EPS in accordance with ASC 260, Earnings per Share .

The Company computes EPS in accordance with Accounting Standards Codification (“ASC”) 260, Earnings per Share .

Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding.

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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 and 39 weeks ended October 1, 2022 and October 2, 2021, share-based awards representing 3 million and 2 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

Additionally, for the 13 weeks ended October 2, 2021 and for both the 39 weeks ended October 1, 2022 and October 2, 2021, Series A Preferred Stock representing 25 million of underlying common shares was not included in the computation because the effect would have been anti-dilutive.

The Series A Preferred Stock shares were dilutive for the 13 weeks ended October 1, 2022.

For the 13 weeks ended April 1, 2023 and April 2, 2022, share-based awards representing 1 million and 8 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

Additionally, for the 13 weeks ended April 2, 2022, Series A Preferred Stock representing 25 million of underlying common shares was not included in the computation because the effect would have been anti-dilutive.

The Series A Preferred Stock shares were dilutive for the 13 weeks ended April 1, 2023.

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

13 Weeks Ended 39 Weeks Ended

October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021

$ 109 $ 64 $ 172 $ 95

13 Weeks Ended

April 1, 2023 April 2, 2022

Net income (loss)

Series A Preferred Stock Dividends

( 9 ) ( 9 ) ( 27 ) ( 33 )

Net income available to common shareholders

Net income (loss) available to common shareholders

$ 75 $ ( 16 )

Weighted-average common shares outstanding—basic

225 222 224 222

Effect of dilutive share-based awards

Effect of dilutive underlying shares of the Series A

Preferred Stock (2)

Effect of dilutive underlying shares of the Series A Preferred Stock (1)

Weighted-average common shares outstanding—diluted

251 225 226 225

Net income per share

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$ 0.32 $ ( 0.07 )

(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 second and third quarter of 2021 were paid in cash on June 30, 2021 and September 28, 2021, respectively.

Preferred Stock dividends for the first, second and third quarters of 2022 were paid in cash on March 31, 2022, June 30, 2022, and September 30, 2022, respectively.

(1) 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.

As of April 1, 2023, the 23 million shares represent the weighted average impact on these shares during the 13 weeks ended April 1, 2023.

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.

During the 13 weeks ended April 1, 2023 the Company repurchased 917,704 shares at an aggregate purchase price of approximately $34 million under the program.

At April 1, 2023, there was approximately $452 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.

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 Preferred Stock, par value $ 0.01 per share, to KKR Fresh Aggregator L.P.

On May 6, 2020, pursuant to the terms of an 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 both October 1, 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 October 1, 2022 and January 1, 2022.

On September 30, 2022, June 30, 2022, and March 31, 2022, the Company paid cash dividends of $ 9 million each on the shares of the Series A Preferred Stock.

As of April 1, 2023 and December 31, 2022, the Company had outstanding a total of 371,044 and 532,281 shares of Series A Preferred Stock, respectively.

The Series A Preferred Stock had a carrying value of $373 million and $ 534 million as of April 1, 2023 and December 31, 2022, respectively.

On March 10, 2023, KKR converted 161,237 shares of Series A Preferred Stock into 7,600,037 shares of the Company’s common stock.

Pursuant to the terms of conversion of the Series A Preferred Stock set forth in the Certificate of Designations for the Series A Preferred Stock, each such share is convertible at the option of the holder at any time into a number of shares of Common Stock equal to (A) the sum of the liquidation preference for such share ($1,000) and the accrued and unpaid dividends with regard to such share divided, by (B) the applicable conversion price ($21.50, subject to certain adjustments).

The issuance of the 7,600,037 shares of Common Stock was exempt from registration under Section 3(a)(9) under the Securities Act of 1933, as amended, as the Series A Preferred Stock was exchanged for Common Stock by an existing security holder and no commission or other remuneration was paid.

On March 31, 2023, the Company paid cash dividends of $ 7 million on the remaining outstanding 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 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021

13 Weeks Ended

April 1, 2023 April 2, 2022

Accumulated other comprehensive loss components

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$ ( 72 ) $ ( 19 )

Interest rate swaps (4) :

Balance as of beginning of period (1)

$ — $ ( 1 ) $ — $ ( 5 )

Change in fair value of interest rate swaps

Amounts reclassified to interest expense—net

Total before income tax

Income tax provision

Current period comprehensive income, net of tax

Balance as of end of period (1)

$ — $ — $ — $ —

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

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(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 January 1, 2022, FMR LLC held approximately 11 % of the Company’s outstanding common stock based solely on information provided in its most recent amendment to its Schedule 13G filed with the SEC.

As of October 1, 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 $ 22 million and $ 24 million in aggregate principal amount of the 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility.

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

As of April 1, 2023 and December 31, 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 $ 19 million and $ 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 October 1, 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 October 1, 2022 and January 1, 2022.

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.

As of April 1, 2023, KKR held 100% of the Company’s outstanding Series A Preferred Stock, representing approximately 7 % 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 $ 15 million in aggregate principal amount of the 2019 Incremental Term Loan Facility as of both April 1, 2023 and December 31, 2022.

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

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

The Company estimated its annual effective income tax rate for the full fiscal year and applied the annual effective income tax rate to the results of the 39 weeks ended October 1, 2022 and October 2, 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 October 1, 2022, the Company’s effective income tax rate of 29 % 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 a tax benefit shortfall associated with share-based compensation.

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 39 weeks ended October 1, 2022, the Company’s effective income tax rate of 26 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

The Company estimated its annual effective income tax rate for the full fiscal year and applied the annual effective income tax rate to the results of the 13 weeks ended April 1, 2023 and April 2, 2022, 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 1, 2023, the Company’s effective income tax rate of 23 % differed from the 21 % federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

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

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 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.

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 $ 1,147 million of purchase orders and purchase contract commitments as of October 1, 2022 to be purchased in the remainder of fiscal year 2022 and $ 85 million of information technology commitments through September 2025 that are not recorded in the Company’s Consolidated Balance Sheets.

The Company had $ 1,845 million of purchase orders and purchase contract commitments as of April 1, 2023 to be

purchased in the remainder of fiscal year 2023 and $ 50 million of information technology commitments through September 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 $ 43 million through December 2023, as of October 1, 2022.

Additionally, the Company had electricity forward purchase commitments totaling $ 10 million through June 2024, as of October 1, 2022.

The Company had diesel fuel forward purchase commitments totaling $ 34 million through December 2023, as of April 1, 2023.

Additionally, the Company had electricity forward purchase commitments totaling $ 6 million through June 2024, as of April 1, 2023.

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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BUSINESS INFORMATION

The Company’s consolidated results represent the results of its one business segment based on how the Company’s chief operating decision maker, our Interim Chief Executive Officer, views the business for purposes of evaluating performance and making operating decisions.

The Company’s consolidated results represent the results of its one business segment based on how the Company’s chief operating decision maker, our Chief Executive Officer, views the business for purposes of evaluating performance and making operating decisions.

The Company markets, sells and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the U.S.

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SUBSEQUENT EVENTS

2019 Incremental Term Loan Facility - Following the fiscal third quarter principal prepayment discussed within Note 9.

Debt, on October 31, 2022 the Company voluntarily prepaid $ 100 million of the 2019 Incremental Term Loan Facility principal.

The outstanding balance as of November 10, 2022 was $ 1,334 million, net of $ 21 million of unamortized deferred financing costs.

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.

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.

The repurchase authorization does not have an expiration date.

Interest Rate Cap - In April 2023, USF entered into two two-year interest rate cap agreements, which will mature on April 30, 2025, with a total notional amount of $ 450 million, which will effectively cap the interest rate on approximately 23 % of the principal amount of the Term Loan Facilities.

The Company’s maximum exposure to the variable component of interest on the Term Loan Facilities will be 5 % on the notional amount covered by the interest rate cap.

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