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Item 7. Management’s Discussion and Analysis

2025-02-13 compared with 2024-02-15 · 84 added, 83 removed, 268 unchanged (38% of the section changed)

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For a comparison of our consolidated results of operations for fiscal years 2023 and 2022, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of our Annual Report on Form 10-K for the fiscal year ended December 30, 2023, filed with the SEC on February 15, 2024.

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.

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 WE HELP YOU MAKE IT ™, which is centered on bringing four key elements to the forefront for our customers;

(1) more quality products, including our large portfolio of exclusive brands, (2) more tools, centering on our MOXē business platform, (3) more support from our sellers and our team of experts and lastly, (4) 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.

We have centralized activities where scale matters and our local field structure focuses on customer-facing activities.

Net sales increased 6.4%, driven by case volume growth.

Total case volumes increased 4.4% compared to the prior year driven by a 6.9% increase in independent restaurant case volume, a 7.2% increase in healthcare volume and a 8.9% increase in hospitality volume, offset by a 2.1% decrease in chain volume.

Total case volumes increased 4.2% compared to the prior year driven by a 4.4% increase in independent restaurant case volume, a 5.7% increase in healthcare volume, a 2.1% increase in hospitality volume and a 3.2% increase in chain volume.

Total organic case volume increased 1.4% which includes 2.6% organic independent restaurant case volume growth.

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

As of December 28, 2024, the Company is in the process of exploring this sale which has not met held for sale criteria in the current year.

Operating Metrics

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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 is included within the new classification.

Independent restaurant case volumes exclude the impacts of CHEF’STORE, which is recorded as other case volume.

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

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Financial Highlights —Total case volume increased 4.2% and independent restaurant case volume increased 4.4% in fiscal year 2024.

Total organic case volume increased 3.9% in fiscal year 2023.

Net sales increased $1,540 million, or 4.5%, in fiscal year 2023 primarily due to case volume growth.

Gross profit increased $656 million, or 11.9%, to $6,148 million in fiscal year 2023, primarily as a result of an increase in total case volume, cost of goods sold optimization, increased freight income from improved inbound logistics and optimized pricing.

As a percentage of net sales, gross profit was 17.3% in fiscal year 2023, compared to 16.1% in fiscal year 2022.

Total organic case volume increased 1.4% in fiscal year 2024, and organic independent restaurant case volume increased 2.6%.

Net sales increased $2,280 million, or 6.4%, in fiscal year 2024 driven primarily by case volume growth and food cost inflation of 2.6%.

Gross profit increased $386 million, or 6.3%, to $6,534 million in fiscal year 2024, primarily a result of an increase in total case volume, improved cost of goods sold and pricing optimization, partially offset by an unfavorable year-over-year LIFO adjustment.

As a percentage of net sales, gross profit was 17.3% in fiscal year 2024 and 17.3% in fiscal year 2023.

Total operating expenses increased $304 million, or 5.9%, to $5,435 million in fiscal year 2024.

The increase was primarily due to increased total case volume and higher seller compensation costs, partially offset by lower distribution cost per case from cost savings initiatives including routing improvements and focused efforts positively impacting labor turnover and productivity as well as lower fuel costs.

The increase was primarily a result of an increase in total case volume, higher distribution costs, reflecting increased labor costs, partially offset by continued distribution productivity improvement as well as actions to streamline administrative processes and costs.

As a percentage of net sales, operating expenses were 14.3% in fiscal year 2024, compared to 14.4% in fiscal year 2023.

Results of Operations

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Distribution, selling and administrative costs 5,412 5,117 4,886

5,117 4,886 4,220

Restructuring costs and asset impairment charges

Restructuring activity and asset impairment charges 23 14 12

Total operating expenses 5,435 5,131 4,898

Operating income 1,099 1,017 594

Other income—net (6) (22) (26)

Other expense (income)—net 6 (6) (22)

Interest expense—net 315 324 255

Loss on extinguishment of debt 10 21 —

Recognition of net actuarial loss for pension settlement 124 — —

Income before income taxes 644 678 361

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Net income 494 506 265

Series A Preferred Stock dividends (7) (37) (43)

Series A convertible preferred stock dividends — (7) (37)

Net income available to common shareholders $ 494 $ 499 $ 228

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For additional information, see the discussion under the caption “Non-GAAP Reconciliations” below.

(2) Free Cash Flow is defined as cash flows provided by operating activities less cash capital expenditures.

(2) Free Cash Flow is defined as cash flows provided by operating activities and proceeds from sales of property and equipment less cash capital expenditures.

Free Cash Flow as presented in this Annual Report is a supplemental measure of our liquidity that is not required by, or presented in accordance with, GAAP.

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We use Free Cash Flow as a supplemental measure to GAAP financial measures regarding the liquidity of our operations.

We measure Free Cash Flow as cash flows provided by operating activities less cash capital expenditures.

We measure Free Cash Flow as cash flows provided by operating activities and proceeds from sales of property and equipment less cash capital expenditures.

We believe that Free Cash Flow is a useful financial metric to assess our ability to pursue business opportunities and investments.

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(in millions)

Net income available to common shareholders $ 499 $ 228 $ 121

Series A Preferred Stock dividends (see Note 14) (7) (37) (43)

Net income 506 265 164

Net income available to common shareholders and net income margin $ 494 1.3% $ 499 1.4% $ 228 0.7 %

Series A convertible preferred stock dividends — (7) (37)

Net income and net income margin 494 1.3% 506 1.4% 265 0.8%

Interest expense—net 315 324 255

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Amortization expense 54 46 45

EBITDA 1,397 988 805

Restructuring costs and asset impairment charges (1)

EBITDA and EBITDA margin 1,397 3.7% 1,397 3.9% 988 2.9 %

Restructuring activity and asset impairment charges (1)

Share-based compensation expense (2)

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Loss on extinguishment of debt (4)

Recognition of net actuarial loss for pension settlement (5)

Business transformation costs (6)

COVID-19 bad debt benefit (6)

COVID-19 other related expenses (7)

Business acquisition and integration related costs and other (8)

Adjusted EBITDA 1,559 1,310 1,057

Business acquisition, integration related costs, divestitures and other (7)

Adjusted EBITDA and Adjusted EBITDA margin 1,741 4.6% 1,559 4.4% 1,310 3.8 %

Depreciation expense (384) (349) (327)

(349) (327) (323)

Interest expense—net (315) (324) (255)

(324) (255) (213)

Income tax provision, as adjusted (8)

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Adjusted Net Income $ 770 $ 658 $ 538

$ 658 $ 538 $ 388

Cash flows from operating activities $ 1,174 $ 1,140 $ 765

$ 1,140 $ 765 $ 419

Proceeds from sales of property and equipment 3 10 10

Capital expenditures (341) (309) (265)

(309) (265) (274)

Free Cash Flow $ 836 $ 841 $ 510

$ 831 $ 500 $ 145

(1) Consists primarily of non-CEO severance and related costs associated with organizational realignment and other impairment charges.

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

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

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

(5) Recognition of net actuarial loss for pension settlement represents non-recurring expense for the termination of certain defined benefit plans.

(6) 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.

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

For fiscal year 2024, business transformation costs related to projects associated with information technology infrastructure initiatives and related workforce efficiencies.

For fiscal year 2023, business transformation costs related to projects associated with information technology infrastructure initiatives.

For fiscal year 2022, business transformation costs consist of new facility openings, supply chain strategy improvements, and information technology infrastructure initiatives.

(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 add back under certain agreements governing our indebtedness.

(7) Includes:

(i) aggregate acquisition and integration related costs of $41 million for fiscal year 2023 and $22 million for both fiscal years 2022 and 2021 (ii) contested proxy and related legal and consulting costs of $21 million for fiscal year 2022;

(iii) CEO severance of $5 million for fiscal year 2022;

(iv) favorable legal settlement recoveries of $29 million for fiscal year 2021;

(i) aggregate acquisition, integration related costs and planned divestiture costs of $22 million for fiscal year 2024, $41 million for fiscal year 2023 and $22 million for fiscal year 2022 (ii) CEO sign on bonus of $3 million for fiscal year 2023 (iii) contested proxy and related legal and consulting costs of $21 million for fiscal year 2022;

(iv) CEO severance of $5 million for fiscal year 2022;

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

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The tax effect of pre-tax items excluded from Adjusted Net Income is computed using a statutory tax rate after taking into account the impact of permanent differences and valuation allowances.

A reconciliation between the GAAP income tax provision (benefit) and the income tax provision, as adjusted, is as follows:

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

2024 2023 2022

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Fiscal Years Ended December 28, 2024 and December 30, 2023

• Net income was $506 million in fiscal year 2023, compared to net income of $265 million in fiscal year 2022.

• Adjusted EBITDA increased $249 million, or 19.0%, to $1,559 million in fiscal year 2023.

As a percentage of net sales, Adjusted EBITDA was 4.4% in fiscal year 2023, as compared to 3.8% in fiscal year 2022.

• Net sales increased $2,280 million, or 6.4% to $37,877 million in fiscal year 2024.

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• Total organic case volume increased 1.4% and organic independent restaurant case volume increased 2.6%.

• Operating income was $1,017 million in fiscal year 2023, compared to operating income of $594 million in fiscal year 2022.

As a percentage of net sales, operating income was 2.9% in fiscal year 2023, as compared to 1.7% in fiscal year 2022.

Total case volume increased 4.4% driven by a 6.9% increase in independent restaurant case volume, a 7.2% increase in healthcare volume and a 8.9% increase in hospitality volume, offset by a 2.1% decrease in national chain volume.

Total organic case volume increased 3.9% and organic independent restaurant case volume increased 6.4%.

Net sales increased $1,540 million, or 4.5%, to $35,597 million in fiscal year 2023, comprised of a $1,330 million, or 4.4%, increase in total case volume.

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

Our LIFO method of inventory costing resulted in a gain of $1 million in fiscal year 2023, compared to an expense of $147 million in fiscal year 2022.

Gross profit as a percentage of net sales was 17.3% in fiscal year 2023, compared to 16.1% in fiscal year 2022, primarily driven by increased case volume and a decrease in LIFO expense in fiscal year 2023 as compared to fiscal year 2022.

• Operating income increased $82 million to $1,099 million in fiscal year 2024.

• Net income available to common shareholders decreased $5 million to $494 million in fiscal year 2024.

• Adjusted EBITDA increased $182 million, or 11.7%, to $1,741 million in fiscal year 2024.

As a percentage of net sales, Adjusted EBITDA was 4.6% in fiscal year 2024, as compared to 4.4% in fiscal year 2023.

Net sales increased $2,280 million, or 6.4%, to $37,877 million in fiscal year 2024 driven by case volume growth and food cost inflation of 2.6%.

Total case volume increased 4.2% driven by a 4.4% increase in independent restaurant case volume, a 5.7% increase in healthcare volume, a 2.1% increase in hospitality volume and a 3.2% increase in chain volume.

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

Gross profit increased $386 million, or 6.3%, to $6,534 million in fiscal year 2024, primarily as a result of an increase in total case volume, improved cost of goods sold and pricing optimization, partially offset by an unfavorable year-over-year LIFO adjustment.

Our LIFO method of inventory costing resulted in an expense of $61 million in fiscal year 2024, compared to a gain of $1 million in fiscal year 2023.

Gross profit as a percentage of net sales was 17.3% in fiscal years 2024 and 2023.

Operating Expenses

Operating expenses, comprised of distribution, selling and administrative costs and restructuring costs and asset impairment charges, increased $233 million, or 4.8%, to $5,131 million in fiscal year 2023.

Operating expenses, comprised of distribution, selling and administrative costs and restructuring activity and asset impairment charges, increased $304 million, or 5.9%, to $5,435 million in fiscal year 2024.

Operating expenses increased primarily as a result of an increase in total case volume, higher distribution costs, reflecting increased labor costs, partially offset by continued distribution productivity improvement as well as actions to streamline administrative processes and costs.

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

The increase in operating expenses was primarily due to increased total case volume and higher seller compensation costs, partially offset by lower distribution cost per case from cost savings initiatives including routing improvements and focused efforts positively impacting labor turnover and productivity as well as lower fuel costs.

Operating Income

Our operating income was $1,099 million in fiscal year 2024, compared to operating income of $1,017 million in fiscal year 2023.

Operating income as a percentage of net sales was 2.9% in fiscal year 2023, compared to 1.7% in fiscal year 2022.

Operating income as a percentage of net sales was 2.9% in fiscal year 2024 and 2.9% in fiscal year 2023.

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 benefit costs (credits), exclusive of the service cost component associated with our defined benefit and other postretirement plans.

We recognized other income—net of $6 million and $22 million in fiscal years 2023 and 2022, respectively.

The decrease in other income—net in 2023 is primarily due to a decrease in the expected return on assets and the value of pension assets compared to fiscal year 2022.

Other Expense (Income)—Net

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

We recognized other expense—net of $6 million in 2024 and other income—net of $6 million in 2023, respectively.

Other expense—net is due to a increase in the pension benefit interest cost and a decrease in the expected return on assets compared to fiscal year 2023.

Interest Expense—Net

Interest expense—net increased $69 million in fiscal year 2023, primarily due to an increase in interest rates, partially offset by lower outstanding debt in fiscal year 2023 compared to fiscal year 2022.

Interest expense—net decreased $9 million in fiscal year 2024, primarily due to lower outstanding debt in 2024 compared to 2023.

Loss on Extinguishment of Debt

We recognized a loss on extinguishment of debt of $21 million in fiscal year 2023 due to the early redemption of the Company’s 6.25% senior secured notes due April 15, 2025 (the “Secured Senior Notes due 2025”).

There was no gain or loss on extinguishment of debt in fiscal year 2022.

We recognized a loss on extinguishment of debt of $10 million in fiscal year 2024 due to the amendment of the Company’s Incremental Term Loan Facility due September 13, 2026 (the “2024 Incremental Term Loan Facility”) and repricing of the Company’s Incremental Term Loan Facility due November 22, 2028 (the “2021 Incremental Term Loan Facility”).

We recognized a loss on extinguishment of debt of $21 million in fiscal year 2023 due to the repayment of the Company’s 6.25% senior secured notes due April 15, 2025 (the “Secured Senior Notes due 2025”).

Recognition of Net Actuarial Loss for Pension Settlement

We recognized a net actuarial loss for pension settlement of $124 million in fiscal 2024 due to a termination of certain defined benefit plans.

We did not recognize any net actuarial loss for pension settlement in fiscal year 2023.

Our effective income tax rate for fiscal year 2024 of 23% varied 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 an aggregate tax benefit of $11 million consisting of a tax benefit of $5 million related to excess tax benefits associated with share-based compensation, a tax benefit of $3 million related to a decrease in an unrecognized tax benefit, and a tax benefit of $3 million, primarily related to adjustments to prior year tax provision estimates.

These discrete tax items included an aggregate tax benefit of $24 million consisting of a tax benefit of $17 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 $9 million primarily related to excess tax benefits associated with share-based compensation, and a tax expense of $2 million, primarily related to adjustments to prior year tax provision estimates.

Our effective income tax rate for fiscal year 2023 of 25% varied 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 an aggregate tax benefit of $5 million consisting primarily of a tax benefit of $1 million related to a decrease in an unrecognized tax benefit and a tax benefit of $4 million, related to excess tax benefits associated with share-based compensation.

Our net income was $506 million in fiscal year 2023, compared to $265 million in fiscal year 2022.

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

Our net income available to common shareholders was $494 million in fiscal year 2024, compared to a net income available to common shareholders of $499 million in fiscal year 2023.

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

Liquidity and Capital Resources

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The aggregate carrying value of our indebtedness was $4,928 million, net of $28 million of unamortized deferred financing costs, as of December 28, 2024.

We had no outstanding borrowings and had issued letters of credit totaling $567 million under the ABL Facility as of December 30, 2023.

We had $223 million outstanding borrowings and had issued letters of credit totaling $592 million under the ABL Facility as of December 28, 2024.

There was remaining capacity of $1,485 million under the ABL Facility based on our borrowing base as of December 28, 2024.

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The Company’s 7.250% Senior Notes due 2032 (the “Unsecured Senior Notes due 2032”) had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs, as of December 28, 2024.

The incremental senior secured term loan borrowed in September 2019 (the “2019 Incremental Term Loan Facility”) had a carrying value of $1,105 million, net of $11 million of unamortized deferred financing costs, as of December 30, 2023.

The incremental senior secured term loan borrowed in November 2021 (the “2021 Incremental Term Loan Facility”) had a carrying value of $718 million, net of $3 million of unamortized deferred financing costs, as of December 30, 2023.

The Amended and Restated Term Loan Credit Agreement, dated as of June 27, 2016 (as amended, the “Term Loan Credit Agreement”) provides USF with the 2019 Incremental Term Loan Facility and 2021 Incremental Term Loan Facility.

The Company’s 5.75% Senior Notes due 2033 (the “Unsecured Senior Notes due 2033”) had an outstanding balance of $496 million net of $4 million of unamortized deferred financing costs, as of December 28, 2024.

The 2021 Incremental Term Loan Facility had a carrying value of $610 million, with no unamortized deferred financing costs, as of December 28, 2024.

The 2024 Incremental Term Loan Facility borrowed in October 2024 had a carrying value of $717 million, net of $8 million of unamortized deferred financing costs, as of December 28, 2024.

The Amended and Restated Term Loan Credit Agreement, dated as of June 27, 2016 (as amended, the “Term Loan Credit Agreement”) provides USF with the 2021 Incremental Term Loan Facility and the 2024 Incremental Term Loan Facility.

We also had $490 million of obligations under financing leases for transportation equipment and building leases as of December 28, 2024.

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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.

For additional information, see Item 1A of Part I, “Risk Factors-Risks Relating to Our Indebtedness.” USF 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 December 30, 2023.

For additional information, see Item 1A of Part I, “Risk Factors-Risks Relating to Our Indebtedness.” The Company had approximately $2.4 billion of restricted payment capacity under these covenants and approximately $2.1 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as of December 28, 2024.

Every quarter, we review rating agency changes for all of the lenders that have a continuing obligation to provide us with funding.

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Operating Activities

Cash flows provided by operating activities increased $375 million to $1,140 million in fiscal year 2023 driven by higher net income and changes in operating assets and liabilities.

Net cash provided by operating activities in fiscal year 2022 benefited from a reduction in working capital needs.

Cash flows provided by operating activities increased $34 million to $1,174 million in fiscal year 2024 driven by changes in operating assets and liabilities.

Net cash provided by operating activities in fiscal year 2023 benefited from higher net income and changes in operating assets and liabilities.

Investing Activities

Cash flows used in investing activities in fiscal years 2024 and 2023 included cash expenditures of $341 million and $309 million, respectively, and related to investments in information technology, new construction and expansion of distribution facilities and property and equipment for fleet replacement.

Cash flows used in investing activities in fiscal year 2024 also included $214 million cash purchase price for the acquisition of IWC Food Service.

Cash flows used in investing activities in fiscal year 2023 also included $140 million cash purchase price for the acquisition of Renzi Food Service and $56 million cash purchase price for the acquisition of Saladino’s.

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Financing Activities

Cash flows used in financing activities in fiscal year 2024 included $112 million of scheduled payments under our Term Loan Facilities and financing leases, $1,217 million for repayment of the 2019 Incremental Term Loan Facility and paydown of the 2021 Incremental Term Loan Facility, $14 million in principal payments for the repricing of the 2021 Incremental Term Loan Facility and $13 million of financing fees related to the repayment of the 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility repricing, $223 million in net proceeds under the ABL Facility, $725 million from the 2024 Incremental Term Loan Facility issuance and $500 million from the 2033 Unsecured Senior Note issuance.

Financing activities in fiscal year 2024 also included $948 million of common stock repurchased, exclusive of approximately $10 million of fees, commissions and the related 1% of excise tax under the Amended Share Repurchase Program, $28 million of proceeds received from stock purchases under our employee stock purchase plan and $15 million of proceeds from the exercise of employee stock options, which were offset by $21 million of employee tax withholdings paid in connection with the vesting of stock awards.

We incurred approximately $5 million of lender fees and third-party costs in connection with our issuance of the 2033 Unsecured Senior Notes, which were capitalized as deferred financing costs.

We incurred approximately $8 million total of lender fees and third-party costs in connection with the repayment of the 2019 Incremental Term Loan Facility, consisting of a $2 million original issue discount fee related to the 2019 Incremental Term Loan Facility and $6 million of costs associated related to the issuance of the 2024 Incremental Term Loan Facility of which $5 million was 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 in financing activities in fiscal year 2023 included $125 million of scheduled payments under our Term Loan Facilities and financing leases, $1 billion for refinancing of the Secured 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 and $7 million of dividends on our Series A Preferred Stock.

Financing activities in fiscal year 2023 also included $294 million of common stock repurchased under the Share Repurchase Program, $24 million of proceeds received from stock purchases under our employee stock purchase plan and $26 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.

Financing activities in fiscal year 2023 also included $294 million of common stock repurchased under the Original Share Repurchase Program, $24 million of proceeds received from stock purchases under our employee stock purchase plan and $26 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 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 prepayment 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.

Cash flows used in financing activities in fiscal year 2022 included $108 million of schedule payments under our Term Loan Facilities and financing leases, $100 million of voluntary prepayments of our 2021 Incremental Term Loan Facility, $200 million of voluntary prepayments of our 2019 Incremental Term Loan Facility, $37 million of dividends on our Series A Preferred Stock and $14 million of share repurchases.

We incurred approximately $4 million of lender fees and third-party costs in connection with the ABL Facility refinancing transaction.

Financing activities in fiscal year 2022 also included $22 million of proceeds received from stock purchases under our employee stock purchase plan and $15 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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• Pension plans and other postretirement benefit contributions – We sponsor a defined benefit plan that pays benefits to eligible employees at retirement.

On October 31, 2024, the Company terminated and settled the majority of the defined benefit plan.

In addition, we provide certain postretirement health and welfare benefits to eligible retirees and their dependents.

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In addition, we provide certain postretirement health and welfare benefits to eligible retirees and their dependents.

In the quarter ending July 1, 2023, the Company issued a notice of intent to terminate the majority of the US Foods Consolidated Defined Benefit Retirement Plan.

On October 31, 2024, the Company terminated and settled the majority of the defined benefit plan.

See Note 17, Retirement Plans, in our consolidated financial statements for further detail on the plan termination.

We did not make significant contributions to the Company-sponsored defined benefit and other postretirement plans in fiscal years 2024 and 2023.

In connection with the plan termination, we expect to make a contribution in 2024.

We do not expect to make any contributions in 2025.

Certain employees are eligible to participate in our 401(k) savings plan.

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We had entered into $592 million of letters of credit, primarily in favor of certain commercial insurers to secure obligations with respect to our insurance programs and certain real estate leases, under the ABL Facility as of December 28, 2024.

In the quarter ending December 28, 2024, we entered into approximately $58 million of surety bonds, primarily in favor of certain commercial insurers to secure obligations with respect to our insurance programs.

In certain cases, surety bonds may be used as an alternative to letters of credit.

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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If the carrying value of the asset exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.

Based on our fiscal year 2023 annual impairment analysis for indefinite-lived intangible assets, we concluded that the fair value of our trademark indefinite-lived intangible asset and brand name indefinite-lived intangible asset exceeded their respective carrying values

by substantial margins.

Based on our fiscal year 2024 annual impairment analysis for indefinite-lived intangible assets, we concluded that the fair value of our trademark indefinite-lived intangible asset and brand name indefinite-lived intangible asset exceeded their respective carrying values by substantial margins.

These margins would not be materially impacted by a 5% increase in the discount rate.

The recoverability of our indefinite-lived intangible assets could be impacted if estimated future cash flows are not achieved.

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

As a result of the rebranding initiatives, the Company recognized an impairment charge of $7 million, which was included in restructuring costs and asset impairment charges in the Company’s Consolidated Statements of Comprehensive Income.

Due to the many variables inherent in estimating fair value and the relative size of the indefinite-lived intangible assets, differences in assumptions could have a material effect on the results of the Company’s impairment analysis in future periods.

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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-K

Item 7. Management’s Discussion and Analysis