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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2022
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 001-37786
usfd-20221001_g1.jpg
US FOODS HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware26-0347906
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
9399 W. Higgins Road, Suite 100
Rosemont, IL 60018
(847720-8000
(Address, including Zip Code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareUSFDNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No
224,890,625 shares of the registrant’s common stock were outstanding as of November 3, 2022.







Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) which are not historical in nature are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions (although not all forward-looking statements may contain such words) and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others:
•    economic factors affecting consumer confidence and discretionary spending and reducing the consumption of food prepared away from home;
•    cost inflation/deflation, rising interest rates and volatile commodity costs including food and fuel costs;
•    competition;
•    reliance on third-party suppliers and interruption of product supply or increases in product costs;
•    changes in our relationships with customers and group purchasing organizations;
•    our ability to increase or maintain the highest margin portions of our business;
•    achievement of expected benefits from cost savings initiatives;
•    changes in consumer eating habits;
•    cost and pricing structures;
•    the extent and duration of the negative impact of the coronavirus (“COVID-19”) pandemic on us;
•    environmental, health and safety and other governmental regulation, including actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, and required closures of non-essential businesses;
•    impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets;
•    product recalls and product liability claims;
•    our reputation in the industry;
•    indebtedness and restrictions under agreements governing our indebtedness;
•    interest rate increases;
•    the replacement of London Interbank Offered Rate (“LIBOR”) with an alternative reference rate;
•    labor relations and increased labor costs and continued access to qualified and diverse labor;
•    risks associated with intellectual property, including potential infringement;
•    disruption of existing technologies and implementation of new technologies;
•    cybersecurity incidents and other technology disruptions;
•    effective integration of acquired businesses;
•    KKR’s interests may not align with our other shareholders;
•    changes in tax laws and regulations and resolution of tax disputes;
•    adverse judgments or settlements resulting from litigation;
•    extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses; and
•    management of retirement benefits and pension obligations.
For a detailed discussion of these and other risks, uncertainties and factors, see Part I, Item 1A— “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (the “2021 Annual Report”).
In light of these risks, uncertainties and other important factors, the forward-looking statements in this Quarterly Report might not prove to be accurate, and you should not place undue reliance on them. All forward-looking statements attributable to us, or others acting on our behalf, are expressly qualified in their entirety by the cautionary statements above and contained elsewhere in this Quarterly Report. All of these statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by law.
Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should be viewed only as historical data.







TABLE OF CONTENTS
Page
No.
Part I. Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II. Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.










PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
US FOODS HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
October 1, 2022January 1, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$366 $148 
Accounts receivable, less allowances of $32 and $33
1,853 1,469 
Vendor receivables, less allowances of $10 and $7
193 145 
Inventories—net
1,761 1,686 
Prepaid expenses
106 120 
Assets held for sale
8 8 
Other current assets
11 18 
Total current assets
4,298 3,594 
Property and equipment—net2,075 2,033 
Goodwill5,625 5,625 
Other intangibles—net797 830 
Deferred tax assets 8 
Other assets447 431 
Total assets
$13,242 $12,521 
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
Current liabilities:
Cash overdraft liability
$219 $183 
Accounts payable
2,180 1,662 
Accrued expenses and other current liabilities
671 610 
Current portion of long-term debt
100 95 
Total current liabilities
3,170 2,550 
Long-term debt4,837 4,916 
Deferred tax liabilities298 307 
Other long-term liabilities476 479 
Total liabilities
8,781 8,252 
Commitments and contingencies (Note 17)
Mezzanine equity:
Series A convertible preferred stock, $0.01 par value—25 shares authorized;
   0.5 issued and outstanding as of October 1, 2022 and January 1, 2022
534 534 
Shareholders’ equity:
Common stock, $0.01 par value—600 shares authorized;
225 and 223 issued and outstanding as of
October 1, 2022 and January 1, 2022, respectively
2 2 
Additional paid-in capital
3,017 2,970 
Retained earnings
927 782 
Accumulated other comprehensive loss
(19)(19)
Total shareholders’ equity
3,927 3,735 
Total liabilities, mezzanine equity and shareholders’ equity
$13,242 $12,521 

See Notes to Consolidated Financial Statements (Unaudited).
1







US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions, except per share data)
13 Weeks Ended39 Weeks Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Net sales$8,917 $7,890 $25,542 $21,848 
Cost of goods sold7,457 6,649 21,504 18,435 
Gross profit
1,460 1,241 4,038 3,413 
Operating expenses:
Distribution, selling and administrative costs
1,246 1,099 3,640 3,115 
Restructuring costs and asset impairment charges
 7  11 
Total operating expenses
1,246 1,106 3,640 3,126 
Operating income214 135 398 287 
Other income—net(5)(6)(16)(19)
Interest expense—net65 50 180 158 
Loss on extinguishment of debt   23 
Income before income taxes154 91 234 125 
Income tax provision45 27 62 30 
Net income
109 64 172 95 
Other comprehensive income —net of tax:
Changes in retirement benefit obligations
    
Recognition of interest rate swaps
 1  5 
Comprehensive income
$109 $65 $172 $100 
Net income$109 $64 $172 $95 
Series A convertible preferred stock dividends(9)(9)(27)(33)
Net income available to common shareholders$100 $55 $145 $62 
Net income per share
Basic (Note 12)
$0.44 $0.25 $0.65 $0.28 
Diluted (Note 12)
$0.43 $0.24 $0.64 $0.28 
Weighted-average common shares outstanding
Basic (Note 12)
225 222 224 222 
Diluted (Note 12)
251 225 226 225 

See Notes to Consolidated Financial Statements (Unaudited).
2







US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions)
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
SharesAmount
BALANCE—January 1, 2022223 $2 $2,970 $782 $(19)$3,735 
Share-based compensation expense— — 12 — — 12 
Proceeds from employee stock purchase plan— — 5 — — 5 
Vested restricted stock units, net1 —  — —  
Exercise of stock options — 2 — — 2 
Tax withholding payments for net share-settled equity awards— — (16)— — (16)
Series A convertible preferred stock dividends— — — (9)— (9)
Net Loss— — — (7)— (7)
BALANCE—April 2, 2022224 $2 $2,973 $766 $(19)$3,722 
Share-based compensation expense— — 9 — — 9 
Proceeds from employee stock purchase plan— — 7 — — 7 
Exercise of stock options— — 5 — — 5 
Series A convertible preferred stock dividends— — — (9)— (9)
Net Income— — — 70 — 70 
BALANCE—July 2, 2022224 $2 $2,994 $827 $(19)$3,804 
Share-based compensation expense— — 13 — — 13 
Proceeds from employee stock purchase plan— — — — 
Exercise of stock options— — — 
Series A convertible preferred stock dividends— — — (9)— (9)
Net Income— — — 109 — 109 
BALANCE—October 1, 2022225 $2 $3,017 $927 $(19)$3,927 
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other Comprehensive LossTotal
Shareholders’
Equity
SharesAmount
BALANCE—January 2, 2021221 $2 $2,901 $661 $(34)$3,530 
Share-based compensation expense— — 10 — — 10 
Proceeds from employee stock purchase plan— — 5 — — 5 
Vested restricted stock units, net1 —  — —  
Exercise of stock options — 4 — — 4 
Tax withholding payments for net share-settled equity awards— — (12)— — (12)
Series A convertible preferred stock dividends— — — (15)— (15)
Unrecognized gain on interest rate swaps, net of income tax— — — — 2 2 
Net Loss— — — (24)— (24)
BALANCE—April 3, 2021222 $2 $2,908 $622 $(32)$3,500 
Share-based compensation expense— — 13 — — 13 
Proceeds from employee stock purchase plan— — 5 — — 5 
Exercise of stock options— — 8 — — 8 
Tax withholding payments for net share-settled equity awards— — (1)— — (1)
Series A convertible preferred stock dividends— — — (9)— (9)
Unrecognized gain on interest rate swaps, net of income tax— — — — 2 2 
Net Income— — — 55 — 55 
BALANCE—July 3, 2021222 $2 $2,933 $668 $(30)$3,573 
Share-based compensation expense— — 13 — — 13 
Proceeds from employee stock purchase plan1 — 6 — — 6 
Exercise of stock options— — 1 — — 1 
Series A convertible preferred stock dividends— — — (9)— (9)
Unrecognized gain on interest rate swaps, net of income tax— — — — 1 1 
Net income— — — 64 — 64 
BALANCE—October 2, 2021223 $2 $2,952 $723 $(29)$3,648 
See Notes to Consolidated Financial Statements (Unaudited).
3







US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
39 Weeks Ended
October 1, 2022October 2, 2021
Cash flows from operating activities:
Net income
$172 $95 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
273 286 
Gain on disposal of property and equipment—net
(2) 
Intangible asset impairment charges 7 
Loss on extinguishment of debt 23 
Amortization of deferred financing costs
10 10 
Deferred tax provision
(1)19 
Share-based compensation expense
34 36 
Provision (benefit) for doubtful accounts
3 (18)
Changes in operating assets and liabilities:
Increase in receivables
(435)(530)
Increase in inventories—net
(74)(292)
Decrease in prepaid expenses and other assets
2 9 
Increase in accounts payable and cash overdraft liability
574 780 
Increase in accrued expenses and other liabilities
57 95 
Net cash provided by operating activities
613 520 
Cash flows from investing activities:
Proceeds from sales of divested assets
 5 
Proceeds from sales of property and equipment4 2 
Purchases of property and equipment
(201)(173)
Net cash used in investing activities
(197)(166)
Cash flows from financing activities:
Proceeds from debt borrowings
1,031 900 
Principal payments on debt and financing leases
(1,215)(1,291)
Dividends paid on Series A convertible preferred stock(27)(18)
Debt financing costs and fees
 (18)
Proceeds from employee stock purchase plan
17 16 
Proceeds from exercise of stock options
12 13 
Tax withholding payments for net share-settled equity awards
(16)(13)
Net cash used in financing activities
(198)(411)
Net increase (decrease) in cash, and cash equivalents and restricted cash218 (57)
Cash, cash equivalents and restricted cash—beginning of period148 829 
Cash, cash equivalents and restricted cash—end of period$366 $772 
Supplemental disclosures of cash flow information:
Interest paid—net of amounts capitalized
$162 $134 
Income taxes paid—net
45  
Property and equipment purchases included in accounts payable
25 32 
Property and equipment transferred to assets held for sale 11 
Leased assets obtained in exchange for financing lease liabilities
98 24 
Leased assets obtained in exchange for operating lease liabilities
35 24 
Cashless exercise of stock options
1 1 
Paid-in-kind Series A convertible preferred stock dividends 15 
See Notes to Consolidated Financial Statements (Unaudited).
4







US FOODS HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Amounts in tables in millions, except per share data, unless otherwise noted)
1.     OVERVIEW AND BASIS OF PRESENTATION
US Foods Holding Corp., a Delaware corporation, and its consolidated subsidiaries are referred to in these consolidated financial statements and notes as “we,” “our,” “us,” the “Company,” or “US Foods.” US Foods Holding Corp. conducts all of its operations through its wholly owned subsidiary US Foods, Inc. (“USF”) and its subsidiaries. All of the Company’s indebtedness, as further described in Note 9, Debt, is a direct obligation of USF and its subsidiaries.
Business Description—The Company, through USF, operates in one business segment in which it markets, sells and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the United States (“U.S.”). These customers include independently owned single and multi-unit restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities and retail locations.
Basis of Presentation—The Company operates on a 52- or 53-week fiscal year, with all periods ending on a Saturday. When a 53-week fiscal year occurs, the Company reports the additional week in the fiscal fourth quarter. Fiscal years 2022 and 2021 are both 52-week fiscal years.
The consolidated financial statements included in this Quarterly Report have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements and notes prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures included in this Quarterly Report are adequate to make the information presented not misleading. These interim consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes included in the 2021 Annual Report.
The consolidated interim financial statements reflect all adjustments (consisting of normal recurring items) necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for interim periods are not necessarily indicative of the results that might be achieved for any other interim period or the full fiscal year.
2.    RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, convertible debt will be accounted for as a single liability measured at its amortized cost. Additionally, the new guidance requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. This guidance is effective for fiscal years beginning after December 15, 2021. The Company adopted the provisions of ASU No. 2020-06 at the beginning of the first quarter of fiscal year 2022, with no impact on our financial position, results of operations, cash flows or diluted earnings per share reporting.
In October 2021, the FASB issued ASU No. 2021-08 Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends Accounting Standards Codification (“ASC”) 805 to require an acquirer to, at the date of acquisition, recognize and measure contract assets and contract liabilities acquired in accordance with ASU 2014-9, Revenue from Contracts with Customers (Topic 606). The guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, and is to be applied prospectively to business combinations occurring on or after adoption of the new guidance. The Company adopted the provisions of ASU No. 2021-08 at the beginning of the first quarter of fiscal year 2022, with no impact on our financial position, results of operations or cash flows.
3.    REVENUE RECOGNITION
The Company recognizes revenue when the performance obligation is satisfied, which occurs when a customer obtains control of the promised goods or services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these goods or services. The Company generates substantially all of its revenue from the distribution and sale of food and food-related products and recognizes revenue when title and risk of loss passes to the customer
5







and the customer accepts the goods, which occurs at delivery. Customer sales incentives, such as volume-based rebates or discounts, are treated as a reduction of revenue at the time the revenue is recognized. Sales taxes invoiced to customers and remitted to governmental authorities are excluded from Net sales. Shipping and handling costs are treated as fulfillment costs and included in distribution, selling and administrative costs.
The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of October 1, 2022 or January 1, 2022. Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $1.9 billion and $1.5 billion as of October 1, 2022 and January 1, 2022, respectively.
The Company has certain customer contracts under which incentives are paid upfront to its customers. These payments have become industry practice and are not related to financing any customer’s business, nor are these payments associated with any distinct good or service to be received from any customer. These incentive payments are capitalized in prepaid expenses and other assets and amortized as a reduction of revenue over the life of the contract or as goods or services are transferred to the customer. The Company’s contract assets for these upfront payments were $26 million and $27 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of October 1, 2022 and January 1, 2022, respectively, and $30 million and $26 million included in other assets in the Company’s Consolidated Balance Sheets as of October 1, 2022 and January 1, 2022, respectively.
The following table presents the disaggregation of revenue for each of the Company’s principal product categories:
13 Weeks Ended39 Weeks Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Meats and seafood$3,207 $3,067 $9,443 $8,280 
Dry grocery products1,529 1,319 4,347 3,684 
Refrigerated and frozen grocery products1,386 1,168 3,880 3,303 
Dairy959 739 2,658 2,098 
Equipment, disposables and supplies916 815 2,622 2,305 
Beverage products441 391 1,248 1,104 
Produce479 391 1,344 1,074 
Total Net sales$8,917 $7,890 $25,542 $21,848 
4.    INVENTORIES
The Company’s inventories, consisting mainly of food and other food-related products, are primarily considered finished goods. Inventory costs include the purchase price of the product, freight costs to deliver it to the Company’s distribution and retail facilities, and depreciation and labor related to processing facilities and equipment, and are net of certain cash or non-cash consideration received from vendors. The Company assesses the need for valuation allowances for slow-moving, excess and obsolete inventories by estimating the net recoverable value of such goods based upon inventory category, inventory age, specifically identified items, and overall economic conditions.
The Company records inventories at the lower of cost or market primarily using the last-in, first-out (“LIFO”) method. For our LIFO based inventories, the base year values of beginning and ending inventories are determined using the inventory price index computation method. This “links” current costs to original costs in the base year when the Company adopted LIFO. LIFO reserves in the Company’s Consolidated Balance Sheets were $485 million and $342 million as of October 1, 2022 and January 1, 2022, respectively. As a result of changes in LIFO reserves, cost of goods sold increased $6 million and $32 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and increased $143 million and $150 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.
5.    ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information. Collections and payments from customers are continuously monitored. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for doubtful accounts based on a combination of factors. The Company maintains an allowance for doubtful accounts, which is based upon historical experience, future expected losses, as well as specific customer collection issues that have been identified. The Company uses specific criteria to determine uncollectible receivables to be written off, including bankruptcy, accounts referred to outside parties for collection, and accounts past due over specified periods.
6







Activity in the allowance for doubtful accounts for both the 13 weeks ended October 1, 2022 and October 2, 2021 was de minimis. A summary of the activity in the allowance for doubtful accounts for the 39 weeks ended October 1, 2022 and October 2, 2021 was as follows:
October 1, 2022October 2, 2021
Balance as of beginning of year$33 $67 
Charged (benefit) to costs and expenses, net
3 (18)
Customer accounts written off—net of recoveries(4)(10)
Balance as of end of period
$32 $39 
This table excludes the vendor receivable related allowance for doubtful accounts of $10 million and $7 million as of October 1, 2022 and January 1, 2022, respectively and $6 million and $5 million as of October 2, 2021 and January 2, 2021, respectively.
6.    PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from 3 to 40 years. Property and equipment under financing leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining terms of the related leases or the estimated useful lives of the assets, if reasonably assured the Company will purchase the assets at the end of the lease terms. As of October 1, 2022 and January 1, 2022, property and equipment-net included accumulated depreciation of $2,917 million and $2,722 million, respectively. Depreciation expense was $81 million and $79 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $240 million and $242 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.
7.    GOODWILL AND OTHER INTANGIBLES
Goodwill includes the cost of acquired businesses in excess of the fair value of the tangible and other intangible net assets acquired. Other intangible assets include customer relationships, amortizable trade names, noncompete agreements, the brand names comprising the Company’s portfolio of exclusive brands, and trademarks. Brand names and trademarks are indefinite-lived intangible assets and, accordingly, are not subject to amortization, but are subject to impairment assessments as described below.
Customer relationships, amortizable trade names and noncompete agreements are intangible assets with definite lives, and are carried at the acquired fair value less accumulated amortization. Customer relationships, amortizable trade names and noncompete agreements are amortized over their estimated useful lives (which range from approximately 3 to 15 years). Amortization expense was $11 million and $12 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $33 million and $44 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.
Goodwill and other intangibles—net consisted of the following:
October 1, 2022January 1, 2022
Goodwill$5,625 $5,625 
Other intangibles—net
Customer relationships—amortizable:
Gross carrying amount
$655 $655 
Accumulated amortization
(132)(99)
Net carrying value
523 556 
Trade names—amortizable:
Gross carrying amount
4 4 
Accumulated amortization
(1)(1)
Net carrying value
3 3 
Brand names and trademarks—not amortizing
271 271 
Total other intangibles—net$797 $830 
The Company assesses for impairment of intangible assets with definite lives only if events occur that indicate that the carrying amount of an intangible asset may not be recoverable. The Company assesses goodwill and other intangible assets with
7







indefinite lives for impairment annually, or more frequently if events occur that indicate an asset may be impaired. For goodwill and indefinite-lived intangible assets, the Company’s policy is to assess for impairment as of the beginning of each fiscal third quarter. The Company completed its most recent annual impairment assessment for goodwill and indefinite-lived intangible assets as of July 3, 2022, the first day of the third quarter of fiscal year 2022, with no impairments noted. During the third quarter of fiscal year 2021, the Company implemented rebranding initiatives related to the integration of a trade name acquired as part of the 2019 Food Group acquisition. As a result of the rebranding initiatives, the Company recognized an impairment charge of $7 million, which was included in restructuring costs and asset impairment charges in the Company’s Consolidated Statements of Comprehensive Income. The remaining carrying value of the acquired trade name of $3 million was reclassified to trade names—amortizable and is being amortized with an estimated remaining useful life of 10 years.
8.    FAIR VALUE MEASUREMENTS
Certain assets and liabilities are carried at fair value under GAAP, under which fair value is a market-based measurement, not an entity-specific measurement. The Company’s fair value measurements are based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1—observable inputs, such as quoted prices in active markets
Level 2—observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active or inactive markets that are observable either directly or indirectly, or other inputs that are observable or can be corroborated by observable market data
Level 3—unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions
Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized as of the end of the reporting period in which the transfer occurs. There were no transfers between fair value levels in any of the periods presented below.
The Company’s assets and liabilities measured at fair value on a recurring basis as of October 1, 2022 and January 1, 2022, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:
October 1, 2022
Level 1Level 2Level 3Total
Assets
Money market funds
$303 $ $ $303 
January 1, 2022
Level 1Level 2Level 3Total
Assets
Money market funds
$99 $ $ $99 
There were no significant assets or liabilities on the Company’s Consolidated Balance Sheets measured at fair value on a nonrecurring basis for the periods presented above, except as further disclosed in Note 7, Goodwill and Other Intangibles.
Recurring Fair Value Measurements
Money Market Funds
Money market funds include highly liquid investments with an original maturity of three or fewer months. These funds are valued using quoted market prices in active markets and are classified under Level 1 within the fair value hierarchy.
Derivative Financial Instruments
The Company has in the past, and may in the future, use interest rate swaps, designated as cash flow hedges, to manage its exposure to interest rate movements in connection with its variable-rate debt. The Company had no outstanding interest rate swap agreements as of either October 1, 2022 or January 1, 2022.
8







Other Fair Value Measurements
The carrying value of cash, accounts receivable, vendor receivables, cash overdraft liability and accounts payable approximate their fair values due to their short-term maturities.
The fair value of the Company’s total debt approximated $4.6 billion and $5.1 billion as of October 1, 2022 and January 1, 2022, respectively, as compared to its carrying value of $4.9 billion and $5.0 billion as of October 1, 2022 and January 1, 2022, respectively.
The fair value of the Company’s 6.25% senior secured notes due April 15, 2025 (the “Secured Senior Notes due 2025”) was $1.0 billion as of both October 1, 2022 and January 1, 2022. The fair value of the Company’s 4.75% unsecured senior notes due February 15, 2029 (the “Unsecured Senior Notes due 2029”) was $0.8 billion and $0.9 billion as of October 1, 2022 and January 1, 2022, respectively. The fair value of the Company’s 4.625% unsecured senior notes due June 1, 2030 (the “Unsecured Senior Notes due 2030”) was $0.4 billion and $0.5 billion as of October 1, 2022 and January 1, 2022, respectively. Fair value of the Secured Senior Notes due 2025, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2030 is based upon their closing market prices on the respective dates. The fair value of the Secured Senior Notes due 2025, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2030 is classified under Level 2 of the fair value hierarchy. The fair value of the balance of the Company’s debt is primarily classified under Level 3 of the fair value hierarchy, with fair value estimated based upon a combination of the cash outflows expected under these debt facilities, interest rates that are currently available to the Company for debt with similar terms, and estimates of the Company’s overall credit risk.
9.    DEBT
Total debt consisted of the following:
Debt DescriptionMaturityInterest Rate as of October 1, 2022Carrying Value as of October 1, 2022Carrying Value as of January 1, 2022
ABL FacilityMay 31, 2024%$ $ 
2019 Incremental Term Loan Facility (net of $21 and $25 of unamortized deferred financing costs, respectively)September 13, 20265.12%1,434 1,442 
2021 Incremental Term Loan Facility (net of $5 and $7 of unamortized deferred financing costs, respectively)November 22, 20285.87%788 893 
Secured Senior Notes due 2025 (net of $8 and $11 of unamortized deferred financing costs, respectively)
April 15, 20256.25%992 989 
Unsecured Senior Notes due 2029 (net of $8 and $8 of unamortized deferred financing costs, respectively)
February 15, 20294.75%892 892 
Unsecured Senior Notes due 2030 (net of $4 of and $5 of unamortized deferred financing costs, respectively)June 1, 20304.625%496 495 
Obligations under financing leases2022–20321.26%-7.16%327 292 
Other debtJanuary 1, 20315.75%8 8 
Total debt4,937 5,011 
Current portion of long-term debt
(100)(95)
Long-term debt$4,837 $4,916 
As of October 1, 2022, approximately 45% of the Company’s total debt bore interest at a floating rate.
ABL Facility
USF’s asset based senior secured revolving credit facility (the “ABL Facility”) provides USF with loan commitments having a maximum aggregate principal amount of $1,990 million. The ABL Facility is scheduled to mature on May 31, 2024.
Borrowings under the ABL Facility bear interest, at USF’s periodic election, at a rate equal to the sum of an alternative base rate (“ABR”), as described in the ABL Facility, plus a margin ranging from 0.00% to 0.50%, or the sum of LIBOR plus a margin ranging from 1.00% to 1.50%, in each case based on USF’s excess availability under the ABL Facility. The margin under the ABL Facility as of October 1, 2022 was 0.00% for ABR loans and 1.00% for LIBOR loans.
9







USF had no outstanding borrowings, and had outstanding letters of credit totaling $247 million, under the ABL Facility as of October 1, 2022. The outstanding letters of credit primarily relate to securing USF’s obligations with respect to its insurance program and certain real estate leases. There was available capacity of $1,743 million under the ABL Facility as of October 1, 2022.
Term Loan Facilities
Under its term loan credit agreement, USF has entered into an incremental senior secured term loan facility borrowed in September 2019 (the “2019 Incremental Term Loan Facility”) and an incremental senior secured term loan facility borrowed in November 2021 (the “2021 Incremental Term Loan Facility”).
2019 Incremental Term Loan Facility
The 2019 Incremental Term Loan Facility had an outstanding balance of $1,434 million, net of $21 million of unamortized deferred financing costs as of October 1, 2022. Borrowings under the 2019 Incremental Term Loan Facility bear interest at a rate per annum equal to, at USF’s option, either the sum of LIBOR plus a margin of 2.00%, or the sum of an ABR, as described in the 2019 Incremental Term Loan Facility plus a margin of 1.00% (subject to a LIBOR “floor” of 0.00%). The 2019 Incremental Term Loan Facility will mature on September 13, 2026.
2021 Incremental Term Loan Facility
The 2021 Incremental Term Loan Facility had an outstanding balance of $788 million, net of $5 million of unamortized deferred financing costs as of October 1, 2022. During the 13 and 39 weeks ended October 1, 2022 we voluntarily prepaid $100 million of the 2021 Incremental Term Loan Facility. Borrowings under the 2021 Incremental Term Loan Facility bear interest at a rate per annum equal to, at USF’s option, either the sum of LIBOR plus a margin of 2.75%, or the sum of an ABR, as described in the 2021 Incremental Term Loan Facility, plus a margin of 1.75% (subject to a LIBOR “floor” of 0.00%). The 2021 Incremental Term Loan Facility will mature on November 22, 2028.
Secured Senior Notes due 2025
The Secured Senior Notes due 2025 had an outstanding balance of $992 million, net of $8 million of unamortized deferred financing costs, as of October 1, 2022. The Secured Senior Notes due 2025 bear interest at a rate of 6.25% per annum and will mature on April 15, 2025.
Unsecured Senior Notes due 2029
The Unsecured Senior Notes due 2029 had an outstanding balance of $892 million, net of $8 million of unamortized deferred financing costs, as of October 1, 2022. The Unsecured Senior Notes due 2029 bear interest at a rate of 4.75% per annum and will mature on February 15, 2029.
Unsecured Senior Notes due 2030
The Unsecured Senior Notes due 2030 had an outstanding balance of $496 million, net of $4 million of unamortized deferred financing costs, as of October 1, 2022. The Unsecured Senior Notes due 2030 bear interest at a rate of 4.625% per annum and will mature on June 1, 2030.
Debt Covenants
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 assets, pay dividends, or engage in mergers or consolidations. USF had approximately $1.6 billion of restricted payment capacity under these covenants, and approximately $2.9 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as of October 1, 2022.
10.    RESTRUCTURING LIABILITIES
From time to time, the Company may implement initiatives or close or consolidate facilities in an effort to reduce costs and improve operating effectiveness. In connection with these activities, the Company may incur various costs including severance and other employee-related separation costs.
Net restructuring costs were de minimis for both the 13 weeks and 39 weeks ended October 1, 2022. During the 13 weeks ended October 2, 2021, net restructuring costs were de minimis. During the 39 weeks ended October 2, 2021, the Company incurred net restructuring costs of $3 million primarily related to initiatives to improve operational effectiveness. Net restructuring liabilities were $0 million and $3 million as of October 1, 2022 and January 1, 2022, respectively.
10







11.    RETIREMENT PLANS
The Company sponsors a defined benefit pension plan and a 401(k) savings plan for eligible employees, and provides certain postretirement health and welfare benefits to eligible retirees and their dependents.
The components of net periodic pension benefit credits for Company sponsored defined benefit plans were as follows:
13 Weeks Ended39 Weeks Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Components of net periodic pension benefit credits
Service cost
$1 $ $2 $2 
Interest cost
7 8 22 22 
Expected return on plan assets
(12)(14)(38)(41)
Amortization of net loss    
Net periodic pension benefit credits$(4)$(6)$(14)$(17)
Other postretirement benefit costs were de minimis for both the 13 weeks and 39 weeks ended October 1, 2022 and October 2, 2021.
The service cost component of net periodic benefit credits is included in distribution, selling and administrative costs, while the other components of net periodic benefit credits are included in other income—net in the Company’s Consolidated Statements of Comprehensive Income.
The Company does not expect to make significant contributions to its defined benefit pension plan in fiscal year 2022.
Certain employees are eligible to participate in the Company’s 401(k) plan. The Company made employer matching contributions to the 401(k) plan of $14 million and $13 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $44 million and $39 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.
The Company is also required to contribute to various multiemployer pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees. The Company’s contributions to these plans were $12 million and $11 million for the 13 weeks ended October 1, 2022 and October 2, 2021, respectively, and $36 million and $33 million for the 39 weeks ended October 1, 2022 and October 2, 2021, respectively.
12.    EARNINGS PER SHARE
The Company computes EPS in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding.
Diluted EPS is computed using the weighted average number of shares of common stock, plus the effect of potentially dilutive securities. The Company applies the treasury method to calculate the dilution impact of share-based awards—stock options, non-vested restricted shares with forfeitable dividend rights, restricted stock units, and employee stock purchase plan deferrals. The Company applies the if-converted method to calculate the dilution impact of the Series A convertible preferred stock (the “Series A Preferred Stock”), if dilutive in the period. For the 13 weeks and 39 weeks ended October 1, 2022 and October 2, 2021, share-based awards representing 3 million and 2 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive. Additionally, for the 13 weeks ended October 2, 2021 and for both the 39 weeks ended October 1, 2022 and October 2, 2021, Series A Preferred Stock representing 25 million of underlying common shares was not included in the computation because the effect would have been anti-dilutive. The Series A Preferred Stock shares were dilutive for the 13 weeks ended October 1, 2022.
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The following table sets forth the computation of basic and diluted EPS:
13 Weeks Ended39 Weeks Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Numerator:
Net Income
$109 $64 $172 $95 
Less: Series A Preferred Stock Dividends (1)
(9)(9)(27)(33)
Net income available to common shareholders
$100 $55 $145 $62 
Denominator:
Weighted-average common shares outstanding—basic
225 222 224 222 
Effect of dilutive share-based awards
1 3 2 3 
Effect of dilutive underlying shares of the Series A
     Preferred Stock (2)
25    
Weighted-average common shares outstanding—diluted
251 225 226 225 
Net income per share
Basic$0.44 $0.25 $0.65 $0.28 
Diluted
$0.43 $0.24 $0.64 $0.28 

(1)    Series A Preferred Stock dividends for the first quarter of 2021 were paid in kind on March 31, 2021 in the form of shares of Series A Preferred Stock. Series A Preferred Stock dividends for the second and third quarter of 2021 were paid in cash on June 30, 2021 and September 28, 2021, respectively. Preferred Stock dividends for the first, second and third quarters of 2022 were paid in cash on March 31, 2022, June 30, 2022, and September 30, 2022, respectively.
(2)    Under the if-converted method, outstanding shares of the Series A Preferred Stock are converted to common shares for inclusion in the calculation of the weighted-average common shares outstanding—diluted. Once converted, there would be no preferred stock outstanding and therefore no Series A Preferred Stock dividend.
13.    CONVERTIBLE PREFERRED STOCK
On May 6, 2020 (the “Issuance Date”), pursuant to the terms of an Investment Agreement (the “Investment Agreement”) with KKR Fresh Aggregator L.P., a Delaware limited partnership, which agreement was joined on February 25, 2021 by permitted transferee KKR Fresh Holdings L.P., a Delaware limited partnership (“KKR”), the Company issued and sold 500,000 shares of the Company’s Series A Preferred Stock, par value $0.01 per share, to KKR Fresh Aggregator L.P. for an aggregate purchase price of $500 million, or $1,000 per share (the “Issuance”). The Company used the net proceeds from the Issuance for working capital and general corporate purposes. As of both October 1, 2022 and January 1, 2022, the Company had issued a total of 532,281 shares of Series A Preferred Stock. The Series A Preferred Stock had a carrying value of $534 million as of both October 1, 2022 and January 1, 2022. On September 30, 2022, June 30, 2022, and March 31, 2022, the Company paid cash dividends of $9 million each on the shares of the Series A Preferred Stock.
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14.    CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents changes in accumulated other comprehensive loss by component for the periods presented:
13 Weeks Ended39 Weeks Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Accumulated other comprehensive loss components
Retirement benefit obligations:
Balance as of beginning of period (1)
$(19)$(29)$(19)$(29)
Reclassification adjustments:
Amortization of net loss(2) (3)
    
Total before income tax
    
Income tax provision
    
Current period comprehensive income, net of tax
    
Balance as of end of period(1)
$(19)$(29)$(19)