What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-11-10 · 72 added, 134 removed, 182 unchanged (53% of the section changed)

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Information regarding reconciliations of and the rationale for these measures is discussed under “Non-GAAP Reconciliations” below.

Results of operations for the 13 weeks and 39 weeks ended October 1, 2022 are compared to the 13 weeks and 39 weeks ended October 2, 2021, unless specifically noted otherwise.

Results of operations for the 13 weeks ended April 1, 2023 are compared to the 13 weeks ended April 2, 2022, unless specifically noted otherwise.

At US Foods, we strive to inspire and empower chefs and foodservice operators to bring great food experiences to consumers.

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Our operations, our industry and the U.S.

economy continue to be impacted by higher than normal inflation, supply chain disruptions, labor shortages, and the COVID-19 pandemic.

economy continue to be impacted by higher than normal inflation, supply chain disruptions, and labor shortages.

These factors also influence the buying patterns of our customers and potentially impact consumer confidence and spending.

We continue to actively monitor these risks to our business.

Net sales increased, primarily due to continued inflation, and total case volumes increased 0.7% and 1.3% for the 13 weeks and 39 weeks ended October 1, 2022 compared to the prior year.

For the 13 weeks ended April 1, 2023, net sales increased, with a total case volume increase of 5.7% compared to the prior year driven by an 8.1% increase in independent restaurant case volume, an 18.8% increase in hospitality volume and a 5.9% increase in healthcare volume and continued inflation.

We are unable to predict the extent these factors will continue to impact our results of operations.

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Customers periodically are reclassified, based on changes in size or other characteristics, and when those changes occur, the respective customer’s historical volume follows its new classification.

For the 13 weeks and 39 weeks ended October 1, 2022, compared to the same period a year ago, total case volume increased 0.7% and increased 1.3% respectively, and independent restaurant case volume increased 2.9% and 3.8%, respectively.

Net sales increased $1,027 million, or 13.0%, and $3,694 million, or 16.9% for the 13 weeks and 39 weeks ended October 1, 2022, driven primarily by food cost inflation of approximately 12.0% and 14.6% for the 13 weeks and 39 weeks ended October 1, 2022, respectively.

Gross profit increased $219 million, or 17.6%, to $1,460 million for the 13 weeks ended October 1, 2022, and increased $625 million or 18.3% to $4,038 million for the 39 weeks ended October 1, 2022 primarily as a result of food cost inflation in multiple product categories, optimized pricing, increased freight income from improved inbound logistics, and cost of goods sold optimization.

Gross profit was negatively impacted in all periods presented by LIFO expense which was $6 million and $143 million for the 13 weeks and 39 weeks ended October 1, 2022, respectively, and $32 million and $150 million for the 13 weeks and 39 weeks ended October 2, 2021, respectively.

As a percentage of Net sales, gross profit was 16.4% for the 13 weeks ended October 1, 2022, compared to 15.7% for the prior year period and was 15.8% for the 39 weeks ended October 1, 2022, compared to 15.6% for the prior year period.

Total operating expenses increased $140 million, or 12.7%, to $1,246 million for the 13 weeks ended October 1, 2022, and increased $514 million, or 16.4%, to $3,640 million for the 39 weeks ended October 1, 2022.

The increase was primarily due to higher distribution costs, largely due to higher labor costs as a result of increased turnover and higher than normal wage inflation.

These increases were partially offset by cost savings initiatives outlined in our long-range plan including:

(1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements.

As a percentage of Net sales, operating expenses were 14.0% for the 13 weeks ended October 1, 2022, compared to 14.0% for the prior year period and was 14.3% for both the 39 weeks ended October 1, 2022 and the prior year period.

For the 13 weeks ended April 1, 2023, compared to the same period a year ago, total case volume increased 5.7% and independent restaurant case volume increased 8.1%.

Net sales increased $744 million, or 9.5% for the 13 weeks ended April 1, 2023, driven primarily by case growth and by food cost inflation of 3.7% for the 13 weeks ended April 1, 2023.

Gross profit increased $230 million, or 19.2%, to $1,425 million for the 13 weeks ended April 1, 2023 due to case growth and as a result of food cost inflation in multiple product categories, cost of goods sold optimization, increased freight income from improved inbound logistics, optimized pricing and food cost inflation in multiple product categories.

Gross profit was negatively impacted in both periods by LIFO expense which was $20 million for the 13 weeks ended April 1, 2023 and $72 million for the 13 weeks ended April 2, 2022.

As a percentage of net sales, gross profit was 16.7% for the 13 weeks ended April 1, 2023, compared to 15.3% for the prior year period.

Total operating expenses increased $77 million, or 6.6%, to $1,238 million for the 13 weeks ended April 1, 2023.

Operating expenses increased primarily due to greater volume and higher distribution costs, reflecting higher labor costs as a result of higher than normal wage inflation.

These increases were partially offset by cost savings initiatives outlined in the long-range plan including routing improvements and focused efforts positively impacting labor turnover and productivity.

As a percentage of net sales, operating expenses were 14.5% for the 13 weeks ended April 1, 2023, compared to 14.9% for the prior year period.

Results of Operations

The following table presents selected historical results of operations for the periods indicated:

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

Consolidated Statements of Operations Data:

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Distribution, selling and administrative costs

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

Restructuring costs and asset impairment charges

Total operating expenses 1,238 1,161

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Interest expense—net 81 55

Loss on extinguishment of debt — — — 23

Income before income taxes 154 91 234 125

Income (loss) before income taxes 107 (15)

Income tax provision 25 (8)

Net income 109 64 172 95

Net income (loss) 82 (7)

Series A Preferred Stock Dividends (see Note 13) (7) (9)

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

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

Percentage of Net Sales:

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Operating income

2.4 % 1.7 % 1.6 % 1.3 %

Net income (loss)

1.0 % (0.1) %

Adjusted EBITDA (1)

3.9 % 3.7 % 3.8 % 3.6 %

Cash flows—operating activities

$ 354 $ 270 $ 613 $ 520

Cash flows—investing activities

(57) (65) (197) (166)

Cash flows—financing activities

(128) (132) (198) (411)

Capital expenditures

58 66 201 173

311 232 687 569

Adjusted EBITDA (1)

351 291 960 795

Adjusted net income (1)

151 119 400 292

Free cash flow (2)

296 204 412 347

(1) EBITDA is defined as net income, plus interest expense—net, income tax provision, and depreciation and amortization.

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and (6) other gains, losses, or costs as specified in the agreements governing our indebtedness.

Adjusted net income is defined as net income excluding the items used to calculate Adjusted EBITDA listed above and further adjusted for the tax effect of the exclusions and discrete tax items.

Adjusted net income is defined as net income excluding the items used to calculate Adjusted EBITDA listed above, except for amortization expense, and further adjusted for the tax effect of the exclusions and discrete tax items.

EBITDA, Adjusted EBITDA, and Adjusted net income as presented are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP.

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The following table reconciles EBITDA, Adjusted EBITDA, Adjusted net income and Free cash flow to the most directly comparable GAAP financial performance and liquidity measures for the periods indicated:

13 Weeks Ended 39 Weeks Ended

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

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

13 Weeks Ended

April 1, 2023 April 2, 2022

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

Series A Preferred Stock Dividends (see Note 13) (7) (9)

Net income 109 64 172 95

Net income (loss) 82 (7)

Interest expense—net 81 55

Income tax provision 45 27 62 30

Income tax provision (benefit) 25 (8)

Depreciation expense 87 78

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EBITDA 286 129

Restructuring costs and asset impairment charges (1)

Share-based compensation expense (1)

LIFO reserve adjustment (2)

Loss on extinguishment of debt (4)

Business transformation costs (3)

COVID-19 bad debt benefit (6)

COVID-19 other related expenses (7)

Business acquisition and integration related costs and other (4)

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Depreciation expense

(81) (79) (240) (242)

Interest expense—net

(65) (50) (180) (158)

Income tax provision, as adjusted (5)

(54) (43) (140) (103)

Adjusted net income $ 125 $ 80

Cash flows from operating activities

$ 354 $ 270 $ 613 $ 520

Capital expenditures

(58) (66) (201) (173)

Free cash flow

$ 296 $ 204 $ 412 $ 347

(1) Consists primarily of non-CEO severance and related costs, organizational realignment costs and asset impairment charges.

(1) Share-based compensation expense for expected vesting of stock awards and employee stock purchase plan.

(2) Represents the impact of LIFO reserve adjustments.

(4) Includes early redemption premium and the write-off of certain pre-existing debt issuance costs.

(5) Consists primarily of costs related to significant process and systems redesign across multiple functions.

(6) Includes the changes in the reserve for doubtful accounts expense reflecting the collection risk associated with our customer base as a result of the COVID-19 pandemic.

(7) Includes COVID-19 related costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(3) Transformational costs represent non-recurring expenses prior to formal launch of strategic projects with anticipated long-term benefits to the Company.

These costs generally relate to third party consulting and non-capitalizable construction or technology.

For the 13 weeks ended April 1, 2023, business transformation costs related to projects associated with several supply chain strategy initiatives.

For the 13 weeks ended April 2, 2022, business transformation costs consist of new facility openings, supply chain strategy improvements, and information technology infrastructure initiatives.

(4) Includes:

(i) aggregate acquisition and integration related costs of $6 million and $4 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $18 million and $16 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively;

(ii) contested proxy and related legal and consulting costs of $21 million for the 39 weeks ended October 1, 2022;

(iii) CEO severance of $5 million for the 39 weeks ended October 1, 2022;

(iv) a favorable legal settlement recovery of $13 million for the 39 weeks ended October 2, 2021;

and (v) other gains, losses or costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(i) aggregate acquisition and integration related costs of $4 million and $6 million for the 13 weeks ended April 1, 2023 and April 2, 2022, respectively;

(ii) CEO sign on bonus of $3 million for the 13 weeks ended April 1, 2023 (iii) contested proxy and related legal and consulting costs of $7 million for the 13 weeks ended April 1, 2023;

and (iv) other gains, losses or costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(5) Represents our income tax provision adjusted for the tax effect of pre-tax items excluded from Adjusted net income and the removal of applicable discrete tax items.

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A reconciliation between the GAAP income tax provision and the income tax provision, as adjusted, is 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

GAAP income tax provision $ 25 $ (8)

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Comparison of Results

13 Weeks Ended October 1, 2022 and October 2, 2021

• Net income improved $45 million to $109 million in 2022.

13 Weeks Ended April 1, 2023 and April 2, 2022

• Net income increased $89 million to $82 million in 2023.

• Adjusted EBITDA increased $96 million, or 39.8%, to $337 million in 2023.

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• Total case volume increased 5.7% and independent restaurant case volume increased 8.1%.

• Operating income increased $79 million, or 58.5%, to $214 million in 2022.

Net sales increased $1,027 million, or 13.0%, to $8,917 million in 2022 driven by food cost inflation of 12.0%.

• Operating income increased $153 million, to $187 million in 2023.

Net sales increased $744 million, or 9.5%, to $8,542 million in 2023 driven by case growth and food cost inflation of 3.7%.

Total case volume increased 5.7%, and independent restaurant case volume grew 8.1%.

Year-over-year total case growth for the third quarter was negatively impacted roughly 2.0% by the mid-2021 exit of the lower margin grocery retail business we temporarily added during the pandemic and the strategic exit of a small number of lower margin chain restaurant and education customers.

The year-over-year increase in inflation, which was seen in multiple product categories including grocery, disposables, and pork, benefited Net sales since a significant portion of our Net sales is based on a pre-established markup over product cost.

The year-over-year increase in inflation, which was seen in multiple product categories including grocery and dairy, benefited net sales since a significant portion of our net sales are based on a pre-established markup over product cost.

Sales of private brands represented approximately 34% of net sales in both 2023 and 2022.

Gross profit increased $219 million, or 17.6%, to $1,460 million in 2022 primarily as a result of food cost inflation in multiple product categories, optimized pricing, increased freight income from improved inbound logistics, cost of goods sold optimization, and a favorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in an expense of $6 million in 2022 compared to expense of $32 million in 2021 due to inflation in multiple product categories including grocery, disposables and pork.

Gross profit increased $230 million, or 19.2%, to $1,425 million in 2023 primarily as a result of case growth and food cost inflation in multiple product categories, optimized pricing, increased freight income from improved inbound logistics, cost of goods sold optimization, and a favorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in an expense of $20 million in 2023 compared to expense of $72 million in 2022.

2023 LIFO expense is driven by inflation in multiple product categories including grocery and dairy.

Gross profit as a percentage of net sales was 16.7% in 2023, compared to 15.3% in 2022, due to the aforementioned factors.

Operating Expenses

Operating expenses, comprised of distribution, selling and administrative and restructuring costs and asset impairment charges, increased $140 million, or 12.7%, to $1,246 million in 2022.

Operating expenses, comprised of distribution, selling and administrative costs, increased $77 million, or 6.6%, to $1,238 million in 2023.

Operating expenses as a percentage of net sales were 14.5% in 2023, compared to 14.9% in 2022.

The increase in operating expenses was primarily due to higher distribution costs, largely due to higher labor costs as a result of increased turnover and higher than normal wage inflation.

The increase was partially offset by cost savings initiatives outlined in our long-range plan including:

(1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements.

Operating Income

Our operating income was $214 million in 2022, compared to operating income of $135 million in 2021.

The increase in operating income was due to the factors discussed in the relevant sections above.

Other Income—Net

Other income—net includes components of net periodic pension benefit credits, exclusive of the service cost component associated with our defined benefit and other postretirement plans.

We recognized other income—net of $5 million and $6 million in 2022 and 2021, respectively.

Interest Expense—Net

Interest expense—net increased $15 million to $65 million in 2022 primarily due to an increase in interest rates, partially offset by lower outstanding debt in 2022 compared to 2021.

For the 13 weeks ended October 1, 2022, our 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, our 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.

Our net income was $109 million in 2022, compared to net income of $64 million in 2021.

The improvement in net income was due to the relevant factors discussed above.

39 Weeks Ended October 1, 2022 and October 2, 2021

• Net income was $172 million in 2022, compared to net income of $95 million in 2021.

• Adjusted EBITDA increased $165 million, or 20.8%, to $960 million in 2022.

As a percentage of Net sales, Adjusted EBITDA was 3.8% in 2022, compared to 3.6% in 2021.

• Net sales increased $3,694 million, or 16.9%, to $25,542 million in 2022.

• Total case volume increased 1.3% and independent restaurant case volume increased 3.8%.

• Operating income was $398 million in 2022, compared to operating income of $287 million in 2021.

Net sales increased $3,694 million, or 16.9%, to $25,542 million in 2022, comprised of a $3,400 million, or 15.6%, increase in the overall Net sales rate per case and a $294 million, or 1.3%, increase in case volume.

The increase in Net sales rate per case primarily reflects a year-over-year average inflation increase of 14.6%.

The year-over-year increase in inflation, which was seen in multiple product categories including grocery, disposables, and dairy benefited Net sales since a significant portion of our Net sales is based on a pre-established markup over product cost.

Total case volume increased 1.3% in 2022 with independent restaurant case volume growth of 3.8%.

The increase in case volume was primarily driven by increased leisure and business travel and increased restaurant traffic.

Year-over-year total case growth for the first nine months of 2022 was negatively impacted roughly 3.5% by the mid-2021 exit of the lower margin grocery retail business we temporarily added during the pandemic and the strategic exit of a small number of lower margin chain restaurant and education customers.

Sales of private brands represented approximately 34% of Net sales in both 2022 and 2021.

Gross profit increased $625 million, or 18.3%, to $4,038 million in 2022 primarily as a result of food cost inflation in multiple product categories, an increase in total case volume, optimized pricing and increased freight income from improved inbound logistics, and a favorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in an expense of $143 million in 2022 compared to expense of $150 million in 2021 due to inflation in multiple product categories including grocery, disposables, and dairy.

Gross profit as a percentage of Net sales was 15.8% in 2022, compared to 15.6% in 2021.

Operating Expenses

Operating expenses, comprised of distribution, selling and administrative and restructuring costs and asset impairment costs, increased $514 million or 16.4%, to $3,640 million in 2022.

Operating expenses as a percentage of Net sales were 14.3% in both 2022 and 2021.

The increase in operating expenses was primarily due to greater volume and higher distribution costs, largely due to higher labor costs as a result of increased turnover and higher than normal wage inflation, as well as contested proxy and related legal and consulting costs and CEO severance.

The increase was partially offset by cost savings initiatives outlined in our long-range plan including:

(1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements.

Operating expenses increased primarily due to greater volume and higher distribution costs, reflecting higher labor costs as a result of higher than normal wage inflation.

Operating Income

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We recognized other income—net of $1 million and $6 million in 2023 and 2022, respectively.

The decrease in other income - net is due to an increase in the pension benefit interest cost and a decrease in the expected return on pension assets compared to 2022.

Interest Expense—Net

Interest expense—net increased $26 million to $81 million in 2023 primarily due to an increase in interest rates, partially offset by lower outstanding debt in 2023 compared to 2022.

For the 39 weeks ended October 1, 2022, our 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.

For the 13 weeks ended April 1, 2023, our 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, our 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.

For the 13 weeks ended April 2, 2022, our 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.

Our net income was $172 million in 2022, compared to net income of $95 million in 2021.

Net Income (Loss)

Our net income was $82 million in 2023, compared to a net loss of $7 million in 2022.

The improvement in net income was due to the relevant factors discussed above.

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Our primary sources of liquidity include cash provided by operations, as well as access to capital from bank borrowings and other types of debt and financing arrangements.

As of October 1, 2022, the Company had approximately $2.1 billion in cash and available liquidity.

The aggregate outstanding balance of our indebtedness was $4,937 million, net of $46 million of unamortized deferred financing costs, as of October 1, 2022.

We had no outstanding borrowings and had issued letters of credit totaling $247 million under the ABL Facility as of October 1, 2022.

There was remaining capacity of $1,743 million under the ABL Facility as of October 1, 2022.

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 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.

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.

As of October 1, 2022, 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 2030 had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs.

We also had $327 million of obligations under financing leases for transportation equipment and building leases as of October 1, 2022.

As of April 1, 2023, the Company had approximately $2.1 billion in cash and available liquidity.

The aggregate outstanding balance of our indebtedness was $4,810 million, net of $37 million of unamortized deferred financing costs, as of April 1, 2023.

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

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

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.

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.

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 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 2030 had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs, as of April 1, 2023.

We also had $468 million of obligations under financing leases for transportation equipment and building leases as of April 1, 2023.

The ABL Facility will mature in 2027.

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These include, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on our 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.

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.

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

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13 Weeks Ended

October 1, 2022 October 2, 2021

April 1, 2023 April 2, 2022

Net income (loss)

Changes in operating assets and liabilities 64 58

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Net cash used in financing activities

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

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Operating Activities

Cash flows provided by operating activities was $613 million for the 39 weeks ended October 1, 2022, representing an increase of $93 million as compared to cash flows provided by operating activities of $520 million for the 39 weeks ended October 2, 2021 driven by higher net income and changes in operating assets and liabilities, partially offset by lower depreciation and amortization for the 39 weeks ended October 1, 2022.

Cash flows provided by operating activities was $279 million for the 13 weeks ended April 1, 2023, representing an increase of $121 million as compared to cash flows provided by operating activities of $158 million for the 13 weeks ended April 2, 2022 driven by higher net income (loss) and depreciation, partially offset by lower changes in operating assets and liabilities for the 13 weeks ended April 1, 2023.

Investing Activities

Cash flows used in investing activities in the 39 weeks ended October 1, 2022 and October 2, 2021 included cash expenditures of $201 million and $173 million, respectively, on investments in information technology, new construction and expansion of certain existing distribution facilities, and property and equipment for fleet replacement.

Cash flows used in investing activities in the 13 weeks ended April 1, 2023 and April 2, 2022 included cash expenditures of $61 million and $72 million, respectively, on investments in information technology, new construction and expansion of certain existing distribution facilities, and property and equipment for fleet replacement.

We expect total cash capital expenditures in fisc al year 2023 to be between $290 million and $310 million, exclusive of approximately $120 million of capital expenditures under our fleet financing leases.

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Financing Activities

Cash flows used by financing activities in the 39 weeks ended October 1, 2022 included $80 million of scheduled payments under our Term Loan Facilities and financing leases, $100 million of voluntary prepayments of our 2021 Incremental Term Loan Facility, $27 million of dividends on our Series A Preferred Stock and no net payments under the ABL Facility.

Financing activities in the 39 weeks ended October 1, 2022 also included $17 million of proceeds received from stock purchases under our employee stock purchase plan and $12 million of proceeds from the exercise of employee stock options, which were offset by $16 million of employee tax withholdings paid in connection with the vesting of stock awards.

C ash flows used by financing activities for the 39 weeks ended October 2, 2021 included aggregate borrowings of $900 million under the Unsecured Senior Notes due 2029.

We used the proceeds from the issuance of the Unsecured Senior Notes due 2029, together with cash on hand, to redeem all of the then outstanding 5.875% unsecured senior notes due 2024 and repay all of the then outstanding borrowings under the incremental senior secured term loan facility borrowed in April 2020.

Financing activities for the 39 weeks ended October 2, 2021 also included $16 million of proceeds received from stock purchases under our employee stock purchase plan and $13 million of proceeds from the exercise of employee stock options, which were offset by $13 million of employee tax withholdings paid in connection with the vesting of stock awards.

Cash flows used by financing activities in the 13 weeks ended April 1, 2023 included $33 million of scheduled payments under our Term Loan Facilities and financing leases, $65 million of voluntary prepayments of our 2021 Incremental Term Loan Facility, $7 million of dividends on our Series A Preferred Stock and no net payments under the ABL Facility.

Financing activities in the 13 weeks ended April 1, 2023 also included $34 million common stock repurchased under the Share Repurchase Program, $5 million of proceeds received from stock purchases under our employee stock purchase plan and $7 million of proceeds from the exercise of employee stock options, which were offset by $11 million of employee tax withholdings paid in connection with the vesting of stock awards.

Cash flows used by financing activities in the 13 weeks ended April 2, 2022 included $28 million of scheduled payments under our Term Loan Facilities and financing leases, $9 million of dividends on our Series A Preferred Stock and no net payments under the ABL Facility.

Financing activities in the 13 weeks ended April 2, 2022 also included $5 million of proceeds received from stock purchases under our employee stock purchase plan and $2 million of proceeds from the exercise of employee stock options, which were offset by $16 million of employee tax withholdings paid in connection with the vesting of stock awards.

Other Obligations and Commitments

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Off-Balance Sheet Arrangements

We had $247 million of letters of credit outstanding primarily in favor of certain commercial insurers to secure obligations with respect to our insurance programs, under the ABL Facility as of October 1, 2022.

We had $458 million of letters of credit outstanding primarily securing USF’s obligations with respect to its insurance program and certain real estate leases, under the ABL Facility as of April 1, 2023.

Except as disclosed above, we have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

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Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2022 Annual Report includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results.

There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenue, or expenses during the 39 weeks ended October 1, 2022.

There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenue, or expenses during the 13 weeks ended April 1, 2023.

Recent Accounting Pronouncements

1 unchanged sentence

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 2. Management’s Discussion and Analysis