What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-10 · 90 added, 75 removed, 236 unchanged (41% 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 26 weeks ended July 1, 2023 are compared to the 13 weeks and 26 weeks ended July 2, 2022, unless specifically noted otherwise.

Results of operations for the 13 weeks and 39 weeks ended September 30, 2023 are compared to the 13 weeks and 39 weeks ended October 1, 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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We are unable to predict the extent these factors will continue to impact our results of operations, however we continue to actively monitor these risks to our business.

For the 13 weeks ended July 1, 2023, net sales increased, with a total case volume increase of 2.7% compared to the prior year driven by a 4.8% increase in independent restaurant case volume, a 6.9% increase in hospitality volume and a 6.6% increase in healthcare volume, partially offset by a 4.5% decrease in chain volume.

For the 26 weeks ended July 1, 2023, net sales increased, with a total case volume increase of 4.0% compared to the prior year driven by a 6.2% increase in independent restaurant case volume, a 12.1% increase in hospitality volume and a 6.3% increase in healthcare volume, partially offset by a 2.9% decrease in chain volume.

For the 13 weeks ended September 30, 2023, net sales increased, with a total case volume increase of 4.0% compared to the prior year driven by a 5.8% increase in independent restaurant case volume, a 7.7% increase in healthcare volume and a 5.8% increase in hospitality volume, partially offset by a 3.6% decrease in chain volume.

For the 39 weeks ended September 30, 2023, net sales increased, with a total case volume increase of 4.0% compared to the prior year driven by a 6.1% increase in independent restaurant case volume, a 6.8% increase in healthcare volume and a 9.9% increase in hospitality volume, partially offset by a 2.7% decrease in chain volume.

Total organic case volume increased 3.4% for the 13 weeks ended September 30, 2023 which includes 5.0% organic independent restaurant case volume growth.

Total organic case volume increased 3.8% for the 39 weeks ended September 30, 2023 which includes 5.8% organic independent restaurant case volume growth.

Operating Metrics

Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time.

Case growth —Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time.

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 26 weeks ended July 1, 2023, compared to the same period a year ago, total case volume increased 2.7% and 4.0%, respectively, and independent restaurant case volume increased 4.8% and 6.2%, respectively.

Net sales increased $186 million, or 2.1%, and $930 million, or 5.6% for the 13 weeks and 26 weeks ended July 1, 2023, driven primarily by case volume growth and by food cost deflation of 0.3% and inflation of 1.6% for the 13 weeks and 26 weeks ended July 1, 2023, respectively.

Independent restaurant case growth was negatively impacted by 0.7% and 0.9% for the 13 weeks and 26 weeks ended July 1, 2023, respectively, from slower growth in CHEF'STORE due to some system conversion challenges, which are largely resolved.

Broadline independent restaurant case growth was 5.5% and 7.1% for the 13 and 26 weeks ended July 1, 2023.

Gross profit increased $208 million, or 15.0%, to $1,591 million for the 13 weeks ended July 1, 2023 and increa sed $438 million, or 17.0%, to $3,016 million for the 26 weeks ended July 1, 2023 due to an increase in total case volume, cost of goods sold optimization, increased freight income from improved inbound logistics, and optimized pricing.

Gross profit was also positively impacted by a LIFO benefit of $15 million for the 13 weeks ended July 1, 2023.

Gross profit was negatively impacted by LIFO expense which was $5 million for the 26 weeks ended July 1, 2023 and $65 million and $137 million for the 13 weeks and 26 weeks ended July 2, 2022.

As a percentage of net sales, gross profit was 17.7% for the 13 weeks ended July 1, 2023, compared to 15.7% for the prior year period and was 17.2% for the 26 weeks ended July 1, 2023, compared to 15.5% for the prior year period.

Total operating expenses increased $36 million, or 2.9%, to $1,269 million for the 13 weeks ended July 1, 2023 and increased $113 million, or 4.7%, to $2,507 million for the 26 weeks ended July 1, 2023.

Operating expenses increased primarily due to increased total case volume, higher seller compensation costs and higher incentive compensation costs versus prior year.

These increases were partially offset by lower distribution cost per case from lower fuel costs and cost savings initiatives including routing improvements and focused efforts positively impacting labor turnover and productivity.

As a percentage of net sales, operating expenses were 14.1% for the 13 weeks ended July 1, 2023, compared to 14.0% for the prior year period and were 14.3% for the 26 weeks ended July 1, 2023, compared to 14.4% for the prior year period.

Organic growth —Organic growth includes growth from operating businesses that have been reflected in our results of operations for at least 12 months.

For the 13 weeks and 39 weeks ended September 30, 2023, compared to the same period a year ago, total case volume increased 4.0% and 4.0%, respectively, and independent restaurant case volume increased 5.8% and 6.1%, respectively.

For the 13 weeks and 39 weeks ended September 30, 2023, compared to the same period a year ago, total organic case volume increased 3.4% and 3.8%, respectively, and independent case volume increased 5.0% and 5.8%, respectively.

For the 13 weeks and 39 weeks ended September 30, 2023, independent restaurant case growth was negatively impacted 0.8% and 0.8%, respectively, from slower growth in CHEF'STORE.

Net sales increased $189 million, or 2.1%, for the 13 weeks ended September 30, 2023, driven primarily by case volume growth, partially offset by food cost deflation of 1.3%.

Net sales increased $1,119 million, or 4.4%, for the 39 weeks ended September 30, 2023, driven primarily by case volume growth and inflation of 0.6% for the 39 weeks ended September 30, 2023.

Gross profit increased $82 million, or 5.6%, to $1,542 million for the 13 weeks ended September 30, 2023 and increased $520 million, or 12.9%, to $4,558 million for the 39 weeks ended September 30, 2023.

For both the 13 weeks and 39 weeks ended September 30, 2023, these increase were due to an increase in total case volume and cost of goods sold optimization.

For the 39 weeks ended September 30, 2023, these increases were also attributed to freight income from improved inbound logistics and optimized pricing.

Gross profit was negatively impacted by a LIFO expense of $37 million and $42 million for the 13 weeks and 39 weeks ended September 30, 2023 and $6 million and $143 million for the 13 weeks and 39 weeks ended October 1, 2022, respectively.

As a percentage of net sales, gross profit was 16.9% for the 13 weeks ended September 30, 2023, compared to 16.4% for the prior year period and was 17.1% for the 39 weeks ended September 30, 2023, compared to 15.8% for the prior year period.

Total operating expenses increased $66 million, or 5.3%, to $1,312 million for the 13 weeks ended September 30, 2023 and increased $179 million, or 4.9%, to $3,819 million for the 39 weeks ended September 30, 2023.

Operating expenses increased primarily due to increased total case volume and higher seller compensation costs.

These increases were partially offset by lower distribution cost per case from cost savings initiatives including routing improvements and focused efforts positively impacting labor turnover and productively as well as lower fuel costs.

As a percentage of net sales, operating expenses were 14.4% for the 13 weeks ended September 30, 2023, compared to 14.0% for the prior year period and were 14.3% for the 39 weeks ended September 30, 2023 and the comparable period in the prior year.

Results of Operations

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13 Weeks Ended 39 Weeks Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Consolidated Statements of Operations Data:

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Interest expense—net 81 65 244 180

Loss on extinguishment of debt 21 — 21 —

Income before income taxes 129 154 478 234

Income tax provision 60 25 85 17

Income tax (benefit) provision 34 45 119 62

Net income 95 109 359 172

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13 Weeks Ended 39 Weeks Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Net income available to common shareholders $ 95 $ 100 $ 352 $ 145

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EBITDA 307 311 1012 687

Restructuring costs and asset impairment charges (1)

Share-based compensation expense (2)

LIFO reserve adjustment (3)

(15) 65 5 137

Loss on extinguishment of debt (4)

Business transformation costs (5)

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$ 223 $ 296 $ 768 $ 412

(1) Consists primarily of severance and related costs, organizational realignment costs and other asset impairment charges

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

(3) Represents the impact of LIFO reserve adjustments.

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

See Note 10, Debt, in our consolidated financial statements for additional information

(5) 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 and 26 weeks ended July 1, 2023, business transformation costs related to projects associated with information technology infrastructure initiatives.

For the 13 weeks and 26 weeks ended July 2, 2022, business transformation costs consist of new facility openings, supply chain strategy improvements, and information technology infrastructure initiatives.

For the 13 weeks and 39 weeks ended September 30, 2023, business transformation costs related to projects associated with information technology infrastructure initiatives.

For the 13 weeks and 39 weeks ended October 1, 2022, business transformation costs consist of new facility openings, supply chain strategy improvements, and information technology infrastructure initiatives.

(6) Includes:

(i) aggregate acquisition and integration related costs of $11 million and $6 million for the 13 weeks ended July 1, 2023 and July 2, 2022, respectively, and $21 million and $12 million for the 26 weeks ended July 1, 2023 and July 2, 2022, respectively ;

(ii) CEO sign on bonus of $3 million for the 26 weeks ended July 1, 2023 (iii) contested proxy and related legal and consulting costs of $14 million for the 13 weeks ended July 2, 2022, and $21 million for the 26 weeks ended July 2, 2022, respectively;

and (iv) CEO severance for $5 million for the 13 and 26 weeks ended July 2, 2022 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 $10 million and $6 million for the 13 weeks ended September 30, 2023 and October 1, 2022, respectively, and $31 million and $18 million for the 39 weeks ended September 30, 2023 and October 1, 2022, respectively ;

(ii) CEO sign on bonus of $3 million for the 39 weeks ended September 30, 2023 (iii) contested proxy and related legal and consulting costs of $21 million for the 39 weeks ended October 1, 2022, and (iv) CEO severance for $5 million for the 39 weeks ended October 1, 2022 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.

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

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13 Weeks Ended 39 Weeks Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

GAAP income tax provision $ 34 $ 45 $ 119 $ 62

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Comparison of Results

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

• Net income increased $112 million to $182 million in 2023.

13 Weeks Ended September 30, 2023 and October 1, 2022

• Net income decreased $14 million to $95 million in 2023.

• Adjusted EBITDA increased $51 million, or 14.5%, to $402 million in 2023.

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• Total case volume increased 4.0% and independent restaurant case volume increased 5.8%.

• Total organic case volum e increased 3.4% and organic independent restaurant case volume increased 5.0%.

• Operating income increased $16 million, to $230 million in 2023.

Net sales increased $186 million, or 2.1%, to $9,013 million in 2023 driven by case volume growth, partially offset by food cost deflation of 0.3%.

Total case volume increased 2.7% driven by a 4.8% increase in restaurant case volume, a 6.9% increase in hospitality volume and a 6.6% increase in healthcare volume, offset by a 4.5% decrease in chain volume.

Independent restaurant case growth was negatively impacted 0.7% from slower growth in CHEF'STORE due to some system conversion challenges, which are largely resolved.

Net sales increased $189 million, or 2.1%, to $9,106 million in 2023 driven by case volume growth and contributions from the Renzi Foodservice acquisition, partially offset by food cost deflation of 1.3%.

Total case volume increased 4.0% driven by a 5.8% increase in independent restaurant case volume, a 5.8% increase in hospitality volume and a 7.7% increase in healthcare volume, offset by a 3.6% decrease in chain volume.

Total organic case volume increased 3.4% and organic independent restaurant case volume increased 5.0%.

Independent restaurant case growth was negatively impacted 0.8% from slower growth in CHEF'STORE.

Broadline independent case growth was 6.6%.

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

Gross profit increased $208 million, or 15.0%, to $1,591 million in 2023 primarily as a result of an increase in total case volume, cost of goods sold optimization, increased freight income from improved inbound logistics, optimized pricing and a favorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in a benefit of $15 million in 2023 compared to expense of $65 million in 2022, related to a reduction in inventory values in multiple product categories.

Gross profit increased $82 million, or 5.6%, to $1,542 million in 2023 primarily as a result of an increase in total case volume and cost of goods sold optimization, partially offset by an unfavorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in an expense of $37 million in 2023 compared to expense of $6 million in 2022, related to a reduction in inventory values in multiple product categories.

Gross profit as a percentage of net sales was 16.9% in 2023, compared to 16.4% in 2022, due to the aforementioned factors.

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Operating expenses as a percentage of net sales were 14.4% in 2023, compared to 14.0% in 2022.

Operating expenses increased primarily due to increased total case volume, higher seller compensation costs and higher incentive compensation costs versus prior year.

Operating expenses increased primarily due to increased total case volume and higher seller compensation costs.

Operating Income

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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 $2 million and $5 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.

We recognized other income—net of $1 million and $5 million in 2023 and

2022, respectively.

The decrease in other income-net is due primarily to a decrease in the expected return on pension assets compared to 2022.

Interest Expense—Net

Interest expense—net increased $16 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 13 weeks ended July 1, 2023, the Company’s effective income tax rate of 25% 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 $2 million, primarily related to excess tax benefits associated with share-based compensation and a tax benefit of $3 million, primarily related to adjustments to prior year tax provision estimates.

For the 13 weeks ended July 2, 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.

These discrete tax items included a tax benefit of $1 million primarily related to excess tax benefits associated with share-based compensation.

For the 13 weeks ended September 30, 2023, the Company’s effective income tax rate of 27% 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.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.

Our net income was $95 million in 2023, compared to a net income of $109 million in 2022.

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

26 Weeks Ended July 1, 2023 and July 2, 2022

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

39 Weeks Ended September 30, 2023 and October 1, 2022

• Net income increased $187 million to $359 million in 2023.

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• Total case volume increased 4.0% and independent restaurant case volume increased 6.1%.

• Total organic case volume increased 3.8% and organic independent restaurant case volume increased 5.8%.

• Operating income increased $341 million, to $739 million in 2023.

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Total case volume increased 4.0% driven by a 6.1% increase in independent restaurant case volume, a 9.9% increase in hospitality volume and a 6.8% increase in healthcare volume, partially offset by a 2.7% decrease in chain volume.

Independent restaurant case growth was negatively impacted 0.9% from slower growth in CHEF'STORE due to some system conversion challenges, which are largely resolved.

Total organic case volume increased 3.8% and organic independent restaurant case volume increased 5.8%.

Independent restaurant case growth was negatively impacted 0.8% from slower growth in CHEF'STORE.

Broadline independent restaurant case growth was 6.9%.

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Operating expenses, comprised of distribution, selling and administrative costs, increased $179 million, or 4.9%, to $3,819 million in 2023.

Operating expenses as a percentage of net sales were 14.3% in 2023, compared to 14.4% in 2022.

Operating expenses increased primarily due to increased total case volume, higher seller compensation costs and higher incentive compensation costs versus prior year.

Operating expenses as a percentage of net sales were 14.3% in 2023, consistent with the same period in the prior year..

Operating expenses increased primarily due to increased total case volume and higher seller compensation costs.

Operating Income

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We recognized other income—net of $4 million and $16 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.

The decrease in other income-net is due primarily to a decrease in the expected return on pension assets compared to 2022.

Interest Expense—Net

Interest expense—net increased $64 million to $244 million in 2023 primarily due to an increase in interest rates, partially offset by lower outstanding debt in 2023 compared to 2022.

For the 26 weeks ended July 1, 2023, 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 39 weeks ended September 30, 2023, our effective income tax rate of 25% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items.

These discrete tax items included a tax benefit of $6 million primarily related to excess tax benefits associated with share-based compensation and a tax benefit of $4 million, primarily related to adjustments to prior year tax provision estimates.

For the 26 weeks ended July 2, 2022, our effective income tax rate of 21% was equivalent to 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 39 weeks ended October 1, 2022, our effective income tax rate of 26% was equivalent to 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 $3 million, primarily related to excess tax benefits associated with share-based compensation.

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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 July 1, 2023, the Company had approximately $2.2 billion in cash and available liquidity.

The aggregate outstanding balance of our indebtedness was $4,751 million, net of $34 million of unamortized deferred financing costs, as of July 1, 2023.

We had no outstanding borrowings and had issued letters of credit totaling $471 million under the ABL Facility as of July 1, 2023.

There was remaining capacity of $1,829 million under the ABL Facility as of July 1, 2023.

The 2019 Incremental Term Loan Facility had an outstanding balance of $1,170 million, net of $14 million of unamortized deferred financing costs, as of July 1, 2023.

The 2021 Incremental Term Loan Facility had an outstanding balance of $717 million, net of $4 million of unamortized deferred financing costs, as of July 1, 2023.

The Secured Senior Notes due 2025 had an outstanding balance of $995 million, net of $5 million of unamortized deferred financing costs, as of July 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 July 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 July 1, 2023.

We also had $472 million of obligations under financing leases for transportation equipment and building leases as of July 1, 2023.

As of September 30, 2023, the Company had approximately $2.2 billion in cash and available liquidity.

The aggregate outstanding balance of our indebtedness was $4,686 million, net of $35 million of unamortized deferred financing costs, as of September 30, 2023.

We had no outstanding borrowings and had issued letters of credit totaling $487 million under the ABL Facility as of September 30, 2023.

There was remaining capacity of $1,813 million under the ABL Facility as of September 30, 2023.

The 2019 Incremental Term Loan Facility had an outstanding balance of $1,108 million, net of $12 million of unamortized deferred financing costs, as of September 30, 2023.

The 2021 Incremental Term Loan Facility had an outstanding balance of $718 million, net of $3 million of unamortized deferred financing costs, as of September 30, 2023.

The Unsecured Senior Notes due 2028 had an outstanding balance of $495 million, net of $5 million of unamortized deferred financing costs, as of September 30, 2023.

The Unsecured Senior Notes due 2029 had an outstanding balance of $894 million, net of $6 million of unamortized deferred financing costs, as of September 30, 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 September 30, 2023.

The Unsecured Senior Notes due 2032 had an outstanding balance of $495 million, net of $5 million of unamortized deferred financing costs, as of September 30, 2023.

We also had $472 million of obligations under financing leases for transportation equipment and building leases as of September 30, 2023.

The ABL Facility will mature in 2027.

The 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility will mature in 2026 and 2028, respectively.

The Secured Senior Notes due 2025 will mature in 2025.

The Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2030 will mature in 2029 and 2030, respectively.

The Unsecured Senior Notes due 2028, the Unsecured Senior Notes due 2029, the Unsecured Senior Notes due 2030 and the Unsecured Senior Notes due 2032 will mature in 2028, 2029, 2030 and 2032, respectively.

The agreements governing our indebtedness contain customary covenants.

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

USF had approximately $1.8 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 July 1, 2023.

USF had approximately $1.9 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 September 30, 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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These actions may include open market repurchases, negotiated repurchases, and other retirements of outstanding debt.

The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, our debt trading levels, our

cash position, and other considerations.

The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, our debt trading levels, our cash position, and other considerations.

Any potential debt reduction or other debt retirement could require significant use of our other available liquidity and capital resources.

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39 Weeks Ended

July 1, 2023 July 2, 2022

September 30, 2023 October 1, 2022

Changes in operating assets and liabilities 188 124

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Operating Activities

Cash flows provided by operating activities was $653 million for the 26 weeks ended July 1, 2023, representing an increase of $394 million as compared to cash flows provided by operating activities of $259 million for the 26 weeks ended July 2, 2022 driven by higher net income and positive increases in operating assets and liabilities for the 26 weeks ended July 1, 2023.

Cash flows provided by operating activities was $935 million for the 39 weeks ended September 30, 2023, representing an increase of $322 million as compared to cash flows provided by operating activities of $613 million for the 39 weeks ended October 1, 2022 driven by earnings growth and strong working capital management for the 39 weeks ended September 30, 2023.

Investing Activities

Cash flows used in investing activities in the 26 weeks ended July 1, 2023 and July 2, 2022 included cash expenditures of $108 million and $143 million, respectively, on investments in information technology, new construction and expansion of certain existing distribution facilities, and property and equipment for fleet replacement.

During the 39 weeks ended September 30, 2023, the Company completed the asset acquisition of Renzi Foodservice.

Total consideration consisted of cash of approximately $142 million.

In addition, cash flows used in investing activities in the 39 weeks ended September 30, 2023 and October 1, 2022 included cash expenditures of $167 million and $201 million, respectively, on investments in information technology, property and equipment for fleet replacement and maintenance of distribution facilities.

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 26 weeks ended July 1, 2023 included $66 million of scheduled payments under our Term Loan Facilities and financing leases, $65 million of voluntary prepayments of our 2021 Incremental Term Loan Facility, $60 million of voluntary prepayments of our 2019 Incremental Term Loan Facility, $3 million associated with interest rate cap purchases, $7 million of dividends on our Series A Preferred Stock and no net payments under the ABL Facility.

Financing activities in the 26 weeks ended July 1, 2023 also included $200 million common stock repurchased under the Share Repurchase Program, $2 million of excise tax associated with common stock repurchases, $13 million of proceeds received from stock purchases under our employee stock purchase plan and $22 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 26 weeks ended July 2, 2022 included $55 million of scheduled payments under our Term Loan Facilities and financing leases, $18 million of dividends on our Series A Preferred Stock and no net payments under the ABL Facility.

Financing activities in the 26 weeks ended July 2, 2022 also included $12 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 $16 million of employee tax withholdings paid in connection with the vesting of stock awards.

Cash flows used by financing activities in the 39 weeks ended September 30, 2023 included $95 million of scheduled payments under our Term Loan Facilities and financing leases, $1 billion for refinancing of the Unsecured Senior Notes due 2025, $10 million of financing fees related to the refinancing, $65 million of voluntary prepayments of our 2021 Incremental Term Loan Facility, $120 million of voluntary prepayments of our 2019 Incremental Term Loan Facility, $3 million associated with interest rate cap purchases, $7 million of dividends on our Series A Preferred Stock and no net payments under the ABL Facility.

Financing activities in the 39 weeks ended September 30, 2023 also included $229 million common stock repurchased under the Share Repurchase Program, $2 million of excise tax associated with common stock repurchases, $19 million of proceeds received from stock purchases under our employee stock purchase plan and $23 million of proceeds from the exercise of employee stock options, which were offset by $12 million of employee tax withholdings paid in connection with the vesting of stock awards.

We incurred approximately $26 million total of lender fees and third party costs in connection with our issuance of the Unsecured Senior Notes due 2028 and the Unsecured Senior Notes due 2032, consisting of a $16 million redemption premium related to the Secured Senior Notes due 2025 and $10 million of costs associated with the issuance of the Unsecured Senior Notes due 2028 and the Unsecured Senior Notes due 2032, which were capitalized as deferred financing costs.

We incurred approximately $1 million total of lender fees and third party costs in connection with the repricing of the 2021 Incremental Term Loan Facility, which were capitalized as deferred financing costs.

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.

Other Obligations and Commitments

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Off-Balance Sheet Arrangements

We had $471 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 July 1, 2023.

We had $487 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 September 30, 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 26 weeks ended July 1, 2023.

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 September 30, 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