What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 137 added, 73 removed, 178 unchanged (54% 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 ended March 30, 2024 are compared to the 13 weeks ended April 1, 2023, unless specifically noted otherwise.

Results of operations for the 13 weeks and 26 weeks ended June 29, 2024 are compared to the 13 weeks and 26 weeks ended July 1, 2023, unless specifically noted otherwise.

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

This mission is supported by our strategy of GREAT FOOD.

MADE EASY.™ , which is centered on providing customers with the innovative products, business support and technology solutions they need to operate their businesses profitably.

This mission is supported by our brand promise of WE HELP YOU MAKE IT.™ , which is centered on bringing four key elements to the forefront for our customers;

more quality products, including our large portfolio of exclusive brands, more tools, centering on our MOXē business platform, more support from our sellers and our team of experts and lastly, more deliveries, enabled by our traditional broadline services and Pronto ™ program.

We operate as one business with standardized business processes, shared systems infrastructure, and an organizational model that optimizes national scale with local execution, allowing us to manage our business as a single operating segment.

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This operating model allows us to leverage our nationwide scale and footprint while executing locally.

For the 13 weeks ended March 30, 2024, net sales increased, with a total case volume increase of 4.2% compared to the prior year driven by a 4.6% increase in independent restaurant case volume, a 6.4% increase in healthcare volume, a 0.9% increase in hospitality volume and a 3.7% increase in chain volume.

Total organic case volume increased 1.4% for the 13 weeks ended March 30, 2024 which includes 2.9% organic independent restaurant case volume growth.

On June 5, 2024, the Company announced it intends to explore the potential sale of its CHEF’STORE wholesale restaurant supply business and, if a sale is completed, then entirely focus on delivered broadline operations.

As of June 29, 2024, the Company was still in the early stages of this sale exploration.

For the 13 weeks ended June 29, 2024, net sales increased 7.7% driven by a total case volume increase of 5.2% compared to the prior year which was driven by a 5.7% increase in independent restaurant case volume, a 6.0% increase in healthcare volume, a 2.1% increase in hospitality volume and a 4.2% increase in chain volume.

Total organic case volume increase d 1.9% for the 13 weeks ended June 29, 2024 which includes 3.2% organic independent restaurant case volume growth.

For the 26 weeks ended June 29, 2024 , net sales increased 6.3% driven by a total case volume increase of 4.7% compared to the prior year which was driven by a 5.2% increase in independent restaurant case volume, a 6.2% increase in healthcare volume, 1.4% increase in hospitality volume, and a 3.9% increase in chain volume.

Total organic case volume increased 1.6% for the 26 weeks ended June 29, 2024 which includes 3.1% organic independent restaurant case volume growth.

Operating Metrics

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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 ended March 30, 2024, compared to the same period a year ago, total case volume increased 4.2% and independent restaurant case volume increased 4.6%.

For the 13 weeks ended March 30, 2024 , compared to the same period a year ago, total organic case volume increased 1.4% , organic independent restaurant case growth was 2.9% .

Net sales increased $407 million, or 4.8%, for the 13 weeks ended March 30, 2024 , driven primarily by case volume growth and food cost inflation of 1.5%.

Gross profit increased $70 million, or 4.9%, to $1,495 million for the 13 weeks ended March 30, 2024.

For the 13 weeks and 26 weeks ended June 29, 2024, compared to the same period a year ago, total case volume increased 5.2% and 4.7% , respectively, and independent restaurant case volume increased 5.7% and 5.2% , respectively.

For the 13 weeks and 26 weeks ended June 29, 2024 , compared to the same period a year ago, total organic case volume increase d 1.9% and 1.6%, respectively, and organic independent restaurant case volume increased 3.2% and 3.1%, respectively.

Net sales increased $696 million, o r 7.7%, and $1,103 million, or 6.3% for the 13 weeks and 26 weeks ended June 29, 2024 , respectively, driven primarily by organic case volume

growth, the impact of acquisitions and food cost inflation of 2.9% and 2.2% for the 13 weeks and 26 weeks ended June 29, 2024, respectively.

Gross profit increased $115 million, or 7.2%, to $1,706 million for the 13 weeks ended June 29, 2024 and increased $185 million, or 6.1%, to $3,201 million for the 26 weeks ended June 29, 2024.

The increase was primarily as a result of an increase in organic case volume, improved cost of goods sold, the impact of acquisitions and pricing optimization, partially offset by an unfavorable year-over-year LIFO adjustment.

Gross profit was negatively impacted by a LIFO expense of $45 million for the 13 weeks ended March 30, 2024 and $20 million for the 13 weeks ended April 1, 2023, respectively.

As a percentage of net sales, gross profit was 16.7% for both the 13 weeks ended March 30, 2024 and the 13 weeks ended April 1, 2023.

Total operating expenses increased $92 million, or 7.4%, to $1,330 million for the 13 weeks ended March 30, 2024.

Operating expenses increased primarily as a result of an increase in organic case volume, higher distribution costs, reflecting increased labor costs, the impact of acquisitions and incremental costs to serve our customers during January labor disruptions, partially offset by continued productivity improvement.

As a percentage of net sales, operating expenses were 14.9% for the 13 weeks ended March 30, 2024, compared to 14.5% for the prior year period.

Gross profit was not impacted by LIFO benefit or expense for the 13 weeks ended June 29, 2024.

Gross profit was negatively impacted by a LIFO expense of $45 million for the 26 weeks ended June 29, 2024.

Gross profit was positively impacted by a LIFO benefit of $15 million for the 13 weeks ended July 1, 2023, while gross profit was negatively impacted by a LIFO expense of $5 million for the 26 weeks ended July 1, 2023.

As a percentage of net sales, gross profit was 17.6% for the 13 weeks ended June 29, 2024, compared to 17.7% for the prior year period and was 17.2% for the 26 weeks ended July 1, 2023, compared to 17.2% for the prior year period.

Total operating expenses increased $84 million, or 6.6%, to $1,353 million for the 13 weeks ended June 29, 2024 and increased $176 million, or 7.0%, to $2,683 million for the 26 weeks ended June 29, 2024.

Operating expenses increased primarily as a result of an increase in organic case volume and higher distribution costs, reflecting increased labor costs and incremental costs to serve our customers during January labor disruptions, and the impact of acquisitions, partially offset by continued distribution productivity improvement driven by routing efficiency gains, turnover reduction and process standardization as well as actions to streamline administrative processes and costs.

As a percentage of net sales, operating expenses were 13.9% for the 13 weeks ended June 29, 2024, compared to 14.1% for the prior year period and were 14.4% for the 26 weeks ended June 29, 2024, compared to 14.3% for the prior year period.

Results of Operations

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

13 Weeks Ended

March 30, 2024 April 1, 2023

13 Weeks Ended 26 Weeks Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Consolidated Statements of Operations:

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Distribution, selling and administrative costs

Restructuring costs and other asset impairment costs 13 —

1,354 1,269 2,671 2,507

Restructuring activity and other asset impairment charges (1) — 12 —

Total operating expenses 1,353 1,269 2,683 2,507

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Operating income

3.6 % 3.6 % 2.8 % 2.9 %

2.0 % 2.0 % 1.5 % 1.5 %

Adjusted EBITDA (1)

5.0 % 4.8 % 4.5 % 4.4 %

Cash flows—operating activities

$ 482 $ 374 $ 621 $ 653

Cash flows—investing activities

(282) (46) (368) (106)

Cash flows—financing activities

(62) (241) (117) (379)

Capital expenditures

69 47 156 108

458 419 729 705

Adjusted EBITDA (1)

489 432 845 769

Adjusted EBITDA Margin (1)

5.0 % 4.8 % 4.5 % 4.4 %

Adjusted Net Income (1)

231 199 365 324

Free Cash Flow (2)

414 328 467 547

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

Adjusted EBITDA is defined as EBITDA adjusted for:

(1) restructuring costs and asset impairment charges;

(1) restructuring activity and asset impairment charges;

(2) share-based compensation expense;

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The following table reconciles EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, 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

March 30, 2024 April 1, 2023

13 Weeks Ended 26 Weeks Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Net income available to common shareholders and net income margin $ 198 2.0% $ 182 2.0% $ 280 1.5% $ 257 1.5 %

Series A Preferred Stock Dividends — — — (7)

Net income 82 82

Net income and net income margin 198 2.0% 182 2.0% 280 1.5% 264 1.5%

Interest expense—net 81 82 160 163

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EBITDA and EBITDA Margin 458 4.7% 419 4.6% 729 3.9% 705 4.0 %

Restructuring costs and asset impairment charges (1)

Restructuring activity and asset impairment charges (1)

Share-based compensation expense (2)

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Depreciation expense

(96) (84) (189) (171)

Interest expense—net

(81) (82) (160) (163)

Income tax provision, as adjusted (6)

(81) (67) (131) (111)

Adjusted Net Income $ 231 $ 199 $ 365 $ 324

Cash flows from operating activities

$ 482 $ 374 $ 621 $ 653

Proceeds from sales of property and equipment 1 1 2 2

Capital expenditures

(69) (47) (156) (108)

Free Cash Flow

$ 414 $ 328 $ 467 $ 547

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

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

For the 13 weeks ended March 30, 2024, business transformation costs related to projects associated with information technology and workforce efficiencies.

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 and 26 weeks ended June 29, 2024, business transformation costs related to projects associated with information technology infrastructure initiatives and workforce efficiencies.

For the 13 weeks and 26 weeks ended July 1, 2023, business transformation costs related to projects associated with information technology infrastructure initiatives.

(5) Includes:

(i) aggregate acquisition and integration related costs of $3 million and $4 million for the 13 weeks ended March 30, 2024 and April 1, 2023, respectively;

(ii) CEO sign on bonus of $3 million for the 13 weeks ended April 1, 2023 and (iii) 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 related costs of $8 million and $11 million for the 13 weeks ended June 29, 2024 and July 1, 2023, respectively, and $10 million and $21 million for the 26 weeks ended June 29, 2024 and July 1, 2023, respectively ;

(ii) CEO sign on bonus of $3 million for the 26 weeks ended July 1, 2023 and (iii) other gains, losses or costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(6) 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

March 30, 2024 April 1, 2023

13 Weeks Ended 26 Weeks Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

GAAP income tax provision $ 71 $ 60 $ 76 $ 85

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Comparison of Results

13 Weeks Ended March 30, 2024 and April 1, 2023

• Net income remained flat at $82 million in 2024.

• Adjusted EBITDA increased $19 million, or 5.6%, to $356 million in 2024.

As a percentage of net sales, Adjusted EBITDA was 4.0% in 2024, compared to 3.9% in 2023.

13 Weeks Ended June 29, 2024 and July 1, 2023

• Net sales increased $696 million, or 7.7%, to $9,709 million in 2024.

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• Total organic case volum e increased 1.9% and organic independent restaurant case volume increased 3.2%.

• Operating income decreased $22 million, to $165 million in 2024.

Net sales increased $407 million or 4.8%, to $8,949 million in 2024 driven by case volume growth and food cost inflation of 1.5%.

Total case volume increased 4.2% driven by a 4.6% increase in independent restaurant case volume, a 0.9% increase in hospitality volume, a 6.4% increase in healthcare volume and a 3.7% increase in chain volume.

• Operating income increased $31 million, to $353 million in 2024.

• Net income increased $16 million to $198 million in 2024.

• Adjusted EBITDA increased $57 million, or 13.2%, to $489 million in 2024.

As a percentage of net sales, Adjusted EBITDA was 5.0% in 2024, compared to 4.8% in 2023.

Net sales increased $696 million or 7.7%, to $9,709 million in 2024 driven by organic case volume growth, the impact of acquisitions and food cost inflation of 2.9%.

Total case volume increased 5.2% driven by a 5.7% increase in independent restaurant case volume, a 6.0% increase in healthcare volume, a 2.1% increase in hospitality volume and a 4.2% increase in chain volume.

Total organic case volume increased 1.9% and organic independent restaurant case volume increased 3.2% .

Sales of private brands represented approximately 33% of net sales in both 2024 and 2023.

Organic broadline sales of private brands represented approximately 35% and 34% of net sales in 2024 and 2023, respectively.

Gross profit increased $115 million, or 7.2%, to $1,706 million in 2024 primarily as a result of an increase in organic case volume, improved cost of goods sold, the impact of acquisitions and pricing optimization, partially offset by an unfavorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in an expense of $45 million in 2024 compared to expense of $20 million in 2023, driven by inflation in multiple product categories including beef and poultry.

Gross profit as a percentage of net sales was 16.7% in both 2024 and 2023.

Gross profit as a percentage of net sales in 2024 is due to the aforementioned factors.

Our LIFO method of inventory costing resulted in no benefit in 2024 compared to a benefit of $15 million i n 2023, driven by deflation in equipment and supplies and fruits and vegetables.

Gross profit as a percentage of net sales was 17.6% in 2024 due to the aforementioned factors.

Gross profit as a percentage of net sales was also 17.6% in 2023.

Operating Expenses

Operating expenses, comprised of distribution, selling and administrative costs, increased $84 million, or 6.6%, to $1,353 million in 2024.

Operating expenses increased primarily as a result of an increase in organic case volume and higher distribution costs, reflecting increased labor costs and the impact of acquisitions, partially offset by continued distribution productivity improvement driven by routing efficiency gains, turnover reduction and process standardization as well as actions to streamline administrative processes and costs.

Operating expenses as a percentage of net sales were 13.9% in 2024, compared to 14.1% in 2023.

Operating Income

Our operating income was $353 million in 2024, compared to operating income of $322 million in 2023.

The decrease 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 $1 million in both 2024 and 2023.

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

Other Expense (Income)—Net

Other expense (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 expense—net of $3 million in 2024 and other income—net of $2 million in 2023.

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 2023.

Interest Expense—Net

Interest expense—net decreased $2 million to $79 million in 2024 primarily due to the interest associated with the unrecognized tax benefit recorded as a result of the expiration of various statutes of limitations, partially offset by higher average interest rates.

For the 13 weeks ended March 30, 2024, the Company’s effective income tax rate of 6% 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 $15 million related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, a tax benefit of $6 million, primarily related to excess tax benefits associated with share-based compensation and a tax expense of $3 million, primarily related to adjustments to prior year provision estimates.

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.

Our net income was $82 million in both periods for 2024 and 2023.

Interest expense—net decreased $1 million to $81 million in 2024 primarily due to lower outstanding debt in 2024 compared to 2023.

For the 13 weeks ended June 29, 2024, 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.

These discrete tax items included a tax benefit of $1 million related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions and a tax benefit of $1 million, primarily related to excess tax benefits associated with share-based compensation.

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.

Our net income was $198 million in 2024, compared to a net income of $182 million in 2023.

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

26 Weeks Ended June 29, 2024 and July 1, 2023

• Net sales increased $1,103 million, or 6.3%, to $18,658 million in 2024.

• Total case volume increased 4.7% and independent restaurant case volume increased 5.2%.

• Operating income increased $9 million, to $518 million in 2024.

• Net income increased $16 million to $280 million in 2024.

• Adjusted EBITDA increased $76 million or 9.9%, to $845 million in 2024.

As a percentage of net sales, Adjusted EBITDA was 4.5% in 2024, compared to 4.4% in 2023.

Net sales increased $1,103 million, or 6.3%, to $18,658 million in 2024 driven by organic case volume growth, the impact of acquisitions and food cost inflation of 2.2%.

Total case volume increased 4.7% driven by a 5.2% increase in independent restaurant case volume, a 6.2% increase in healthcare volume, a 1.4% increase in hospitality volume and a 3.9% increase in chain volume.

Organic broadline sales of private brands represented approximately 35% and 34% of net sales in 2024 and 2023, respectively.

Gross profit increased $185 million, or 6.1%, to $3,201 million in 2024 primarily as a result of an increase in organic case volume, improved cost of goods sold, the impact of acquisitions and pricing optimization, partially offset by an unfavorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in an expense of $45 million in 2024, compared to expense of $5 million in 2023.

LIFO expense in both periods is driven by a reduction in inventory values in multiple categories.

Gross profit as a percentage of net sales was 17.2% in 2024 due to the aforementioned factors.

Gross profit as a percentage of net sales was also 17.2% in 2023.

Operating Expenses

Operating expenses, comprised of distribution, selling and administrative costs, increased $176 million, or 7.0%, to $2,683 million in 2024.

Operating expenses increased primarily due to an increase in organic case volume, higher distribution costs, reflecting increased labor costs, the impact of acquisitions and incremental costs to serve our customers during January labor disruptions, partially offset by continued productivity improvement.

Operating expenses as a percentage of net sales were 14.4% in 2024, compared to 14.3% in 2023.

Operating Income

Our operating income was $518 million in 2024, compared to operating income of $509 million in 2023.

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

Other Expense (Income)—Net

Other expense (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 expense—net of $2 million in 2024 and other income —net of $3 million in 2023.

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 2023.

Interest Expense—Net

Interest expense—net decreased $3 million to $160 million in 2024 primarily due to lower outstanding debt in 2024 compared to 2023.

For the 26 weeks ended June 29, 2024, the Company’s 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.

These discrete tax items included a tax benefit of $16 million, primarily related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, a tax benefit of $7 million, primarily related to excess tax benefits associated with share-based compensation and a tax expense of $3 million, primarily related to adjustments to prior year tax provision estimates.

For the 26 weeks ended July 1, 2023, 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 included a tax benefit of $6 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.

Our net income was $280 million in 2024, compared to a net income of $264 million in 2023.

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

Liquidity and Capital Resources

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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 March 30, 2024, the Company had approximately $2.0 billion in cash and available liquidity.

The aggregate outstanding balance of our indebtedness was $4,701 million, net of $32 million of unamortized deferred financing costs, as of March 30, 2024.

We had no outstanding borrowings and had issued letters of credit totaling $542 million under the ABL Facility as of March 30, 2024.

There was remaining capacity of $1,758 million under the ABL Facility as of March 30, 2024.

The 2019 Incremental Term Loan Facility had an outstanding balance of $1,102 million, net of $10 million of unamortized deferred financing costs, as of March 30, 2024.

The 2021 Incremental Term Loan Facility had an outstanding balance of $719 million, net of $3 million of unamortized deferred financing costs, as of March 30, 2024.

The Unsecured Senior Notes due 2028 had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs, as of March 30, 2024.

The Unsecured Senior Notes due 2029 had an outstanding balance of $894 million, net of $6 million of unamortized deferred financing costs, as of March 30, 2024.

The Unsecured Senior Notes due 2030 had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs, as of March 30, 2024.

The Unsecured Senior Notes due 2032 had an outstanding balance of $495 million, net of $5 million of unamortized deferred financing costs, as of March 30, 2024.

We also had $491 million of obligations under financing leases for transportation equipment and building leases as of March 30, 2024.

As of June 29, 2024, the Company had approximately $2.1 billion in cash and available liquidity.

The aggregate outstanding balance of our indebtedness was $4,707 million, net of $29 million of unamortized deferred financing costs, as of June 29, 2024.

We had no outstanding borrowings and had issued letters of credit totaling $562 million under the ABL Facility as of June 29, 2024.

There was remaining capacity of $1,738 million under the ABL Facility as of June 29, 2024.

The 2019 Incremental Term Loan Facility had an outstanding balance of $1,100 million, net of $9 million of unamortized deferred financing costs, as of June 29, 2024.

The 2021 Incremental Term Loan Facility had an outstanding balance of $718 million, net of $3 million of unamortized deferred financing costs, as of June 29, 2024.

The Unsecured Senior Notes due 2028 had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs, as of June 29, 2024.

The Unsecured Senior Notes due 2029 had an outstanding balance of $894 million, net of $6 million of unamortized deferred financing costs, as of June 29, 2024.

The Unsecured Senior Notes due 2030 had an outstanding balance of $497 million, net of $3 million of unamortized deferred financing costs, as of June 29, 2024.

The Unsecured Senior Notes due 2032 had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs, as of June 29, 2024.

We also had $498 million of obligations under financing leases for transportation equipment and building leases as of June 29, 2024.

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.

The Company had approximately $2.0 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 March 30, 2024.

The Company had approximately $2.2 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 June 29, 2024.

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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26 Weeks Ended

March 30, 2024 April 1, 2023

June 29, 2024 July 1, 2023

Changes in operating assets and liabilities 90 143

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Net cash used in financing activities

Net (decrease) increase in cash, and cash equivalents and restricted cash (2) 81

Net increase in cash, and cash equivalents and restricted cash 136 168

Cash, cash equivalents and restricted cash—beginning of period 269 211

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Operating Activities

Cash flows provided by operating activities was $139 million for the 13 weeks ended March 30, 2024, representing a decrease of $140 million as compared to cash flows provided by operating activities of $279 million for the 13 weeks ended April 1, 2023, due to less working capital benefit for the 13 weeks ended March 30, 2024 compared to the 13 weeks ended April 1, 2023.

Cash flows provided by operating activities was $621 million for the 26 weeks ended June 29, 2024, representing a decrease of $32 million as compared to cash flows provided by operating activities of $653 million for the 26 weeks ended July 1, 2023, due to less working capital benefit for the 26 weeks ended June 29, 2024 compared to the 26 weeks ended July 1, 2023.

Investing Activities

Cash flows used in investing activities in the 13 weeks ended March 30, 2024 and April 1, 2023 included cash expenditures of $87 million and $61 million, respectively, on investments in information technology, property and equipment for fleet replacement and maintenance of distribution facilities.

During the 26 weeks ended June 29, 2024, the Company completed the asset acquisition of IWC Food Service.

Total consideration consisted of cash of approximately $220 million (less the amount of cash received, which was $6 million) for a net purchase price of $214 million.

In addition, c ash flows used in investing activities in the 26 weeks ended June 29, 2024 and July 1, 2023 included cash expenditures of $156 million and $108 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 2024 to be between $325 million and $375 million.

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Financing Activities

Cash flows used by financing activities in the 13 weeks ended March 30, 2024 included $31 million of scheduled payments under our Term Loan Facilities and financing leases, $14 million for repricing of the 2021 Term Loan Facility, $1 million of financing fees related to the 2021 Term Loan Facility repricing and no net payments under the ABL Facility.

Financing activities in the 13 weeks ended March 30, 2024 also included $13 million common stock repurchased under the Share Repurchase Program, $5 million of proceeds received from stock purchases under our employee stock purchase plan, $5 million of proceeds from the exercise of employee stock options and $20 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 26 weeks ended June 29, 2024 included $65 million of scheduled payments under our Term Loan Facilities and financing leases, $14 million for repricing of the 2021 Term Loan Facility, $1 million of financing fees

related to the 2021 Term Loan Facility repricing and no net payments under the ABL Facility.

Financing activities in the 26 weeks ended June 29, 2024 also included $54 million common stock repurchased under the Share Repurchase Program, inclusive of $1 million of excise taxes, fees and commissions, $14 million of proceeds received from stock purchases under our employee stock purchase plan, $9 million of proceeds from the exercise of employee stock options and $20 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 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.

Other Obligations and Commitments

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Off-Balance Sheet Arrangements

We had $542 million of letters of credit outstanding primarily securing the Company’s obligations with respect to its insurance program and certain real estate leases, under the ABL Facility as of March 30, 2024.

We had $562 million of letters of credit outstanding primarily securing the Company’s obligations with respect to its insurance program and certain real estate leases, under the ABL Facility as of June 29, 2024.

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.

5 unchanged sentences

Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 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 13 weeks ended March 30, 2024.

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 June 29, 2024.

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