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What changed in US Foods Holding Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of US Foods Holding Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+314 added−333 removedSource: 10-K (2024-02-15) vs 10-K (2022-02-17)

Top changes in US Foods Holding Corp.'s 2023 10-K

314 paragraphs added · 333 removed · 228 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

57 edited+20 added−19 removed34 unchanged
Biggest changeIn addition, US Foods Direct™, an online ordering platform, more than doubles our product assortment and provides customers with access to thousands of specialty products which ship directly to them from the supplier. More recently, we expanded our US Foods Pronto™ service in select markets to let restaurant operators receive smaller orders more frequently.
Biggest changeWe have 90 cash and carry locations to provide more customers with a retail option in between deliveries and to cost effectively serve more price-conscious and smaller customers. Our US Foods Direct™ service more than doubles our product assortment and provides customers with access to thousands of specialty products which ship directly to them from the supplier.
The U.S. foodservice distribution industry serves different customer types of varying sizes, growth profiles, and product and service requirements, including independent restaurants, healthcare customers (such as hospital systems, nursing homes and long-term care facilities), hospitality customers (ranging from large hotel chains to local banquet halls, country clubs, casinos and entertainment complexes), regional and national restaurant chains, colleges and universities, K-12 schools, and retail locations.
The U.S. foodservice distribution industry serves different customer types of varying sizes, growth profiles, and product and service requirements, including independent restaurants, regional and national restaurant chains, healthcare customers (such as hospital systems, nursing homes and long-term care facilities), hospitality customers (ranging from large hotel chains to local banquet halls, country clubs, casinos and entertainment complexes), colleges and universities, K-12 schools, and retail locations.
We believe these technology trends will accelerate, as millennials and Generation Z place a greater reliance on technology and become key influencers and decision-makers within the food industry, including at the customer level. Consequently, we believe foodservice distributors which are focused on strengthening their technology, data analytics, and related capabilities will be well-positioned to capitalize on these trends.
We believe these technology trends will continue to accelerate as Millennials and Generation Z place a greater reliance on technology and become key influencers and decision-makers within the food industry, including at the customer level. Consequently, we believe foodservice distributors which are focused on strengthening their technology, data analytics, and related capabilities will be well-positioned to capitalize on these trends.
Our portfolio of value-added services helps customers address key pain points like food 3 waste, back-of-house operations and diner traffic. By delivering our products and services through a differentiated team-based selling approach, we provide customers access to a diverse team of experts including chefs, center of the plate and produce specialists and restaurant operations consultants.
Our portfolio of value-added services helps customers address key pain points like food waste, back-of-house operations and diner traffic. By delivering our products and services through a differentiated team-based selling approach, we provide customers access to a diverse team of experts including chefs, center-of-the-plate and produce specialists and restaurant operations consultants.
Given their purchasing power and diverse taste profiles, millennials, Generation Z and baby boomers will continue to significantly influence food consumption and the food away from home market. According to recent U.S. Census Bureau statistics, there were 89 million individuals born between 1982 and 2002 in the U.S., making millennials and Generation Z the largest demographic cohorts.
Given their purchasing power and diverse taste profiles, Millennials, Generation Z and Baby Boomers will continue to significantly influence food consumption and the food away from home market. According to U.S. Census Bureau statistics, there were 89 million individuals born between 1982 and 2002 in the U.S., making Millennials and Generation Z the largest demographic cohorts.
These associate-led groups strengthen networking among colleagues and further personal and professional development. Ongoing listening sessions between the ERGs and our executive leadership team allow for open dialogue and the identification of new opportunities to bolster our diversity and inclusion strategy and strengthen associate engagement.
These associate-led groups strengthen networking among colleagues and further personal and professional development. 6 Ongoing listening sessions between the ERGs and our executive leadership team allow for open dialogue and the identification of new opportunities to bolster our diversity and inclusion strategy and strengthen associate engagement.
In addition, many ethnic food offerings are becoming more mainstream as consumers show a greater willingness to try new flavors and cuisines. Changes in consumer preferences create opportunities for new and innovative products and for unique food away from home destinations.
In addition, many ethnic food offerings are becoming more mainstream as consumers show a greater willingness to try new flavors and cuisines. Changes in consumer preferences create opportunities for new and innovative products and for unique food- 2 away-from-home destinations.
We believe foodservice distributors with deeper, technology-enabled relationships with customers are better able to accelerate their customers’ adoption of new products and increase customer loyalty, giving them a competitive edge. Technology is also growing in importance and helping to level the playing field for independent restaurants.
We believe foodservice distributors that have deeper, technology-enabled relationships with customers are better able to accelerate their customers’ adoption of new products and increase customer loyalty, giving them a competitive edge. Technology is also growing in importance and helping to level the playing field for independent restaurants.
We are committed to compensation and benefits that respect and reward our associates for their dedication and hard work. All of our exempt associates participate in our incentive plans, which provides eligible associates with cash bonus opportunities based upon the Company’s achievement of financial and other key performance metrics.
We are committed to compensation and benefits that respect and reward our associates for their dedication and hard work. All of our exempt associates participate in our incentive plans, which provide eligible associates with cash bonus opportunities based upon the Company’s achievement of financial and other key performance metrics.
A growing part of our Scoop portfolio is our Serve Good® program. The Serve Good program features more than 500 products that are sustainably-sourced or contribute to waste reduction. Our private brand portfolio is guided by a spirit of innovation and a commitment to delivering superior quality products and value to customers.
A growing part of our Scoop portfolio is our Serve Good® program. The Serve Good program features more than 800 products that are sustainably-sourced or contribute to waste reduction. Our private brand portfolio is guided by a spirit of innovation and a commitment to delivering superior quality products and value to customers.
Hancock served as Senior Vice President of Supply Chain Operations of American Tire Distributors from November 2017 to October 2020, and was responsible for the oversight of 115 distribution facilities across America and a fleet of vehicles accountable for last-mile delivery to customers.
Hancock served as Senior Vice President of Supply Chain Operations of American Tire Distributors from November 2017 to October 2020, where he was responsible for the oversight of 115 distribution facilities across America and a fleet of vehicles accountable for last-mile delivery to customers.
MADE EASY . ™ strategy resonates with these types of customers, and for this reason, we believe our growth prospects with these customers are greater than with other customer types. In fiscal year 2021, no single customer represented more than 2% of our total customer sales.
MADE EASY . ™ strategy resonates with these types of customers, and for this reason, we believe our growth prospects with these customers are greater than with other customer types. In fiscal year 2023, no single customer represented more than 2% of our total customer sales.
Food Handling and Processing We are subject to various laws and regulations relating to the manufacturing, handling, storage, transportation, sale and labeling of food products, including the applicable provisions of the Federal Food, Drug and Cosmetic Act, Bioterrorism Act, Food Safety Modernization Act, Federal Meat Inspection Act, Poultry Products Inspection Act, Perishable Agricultural Commodities Act, Country of Origin Labeling Act, and regulations issued by the U.S.
Product Distribution We are subject to various laws and regulations relating to the manufacturing, processing, handling, storage, transportation, sale, advertising and labeling of food products, including the applicable provisions of the Federal Food, Drug and Cosmetic Act; Bioterrorism Act; Food Safety Modernization Act; Federal Meat Inspection Act; Poultry Products Inspection Act; Perishable Agricultural Commodities Act; Country of Origin Labeling Act; regulations issued by the U.S.
The information contained on or accessible through our corporate website or any other website that we may maintain is not incorporated by reference into and is not part of this Annual Report. 9
The information contained on or accessible through our corporate website or any other website that we may maintain is not incorporated by reference into and is not part of this Annual Report. 8
Of these: • substantially all were employed in the United States and on a full-time basis; • approximately 70% of our associates were non-exempt, or paid on an hourly basis; • approximately 5,900 of our associates were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations; and • approximately 86% of our associates were working in “field” based roles within our broadline distribution, retail operations and broadline support business production facilities, with the remaining 14% working in shared service or corporate roles.
Of these: • substantially all were employed in the United States and on a full-time basis; • approximately 69% of our associates were non-exempt, or paid on an hourly basis; 5 • approximately 6,300 of our associates were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations; and • approximately 86% of our associates were working in “field” based roles within our broadline distribution, retail operations and broadline support business production facilities, with the remaining 14% working in shared service or corporate roles.
GPO members are primarily comprised of customers in the healthcare, hospitality, education, and government/military industries. 2 There are several important dynamics affecting the industry, including: • Evolving consumer tastes and preferences. Consumers demand healthy and authentic food choices with fewer artificial ingredients, and they value locally-harvested and sustainably-manufactured food and packaging products.
GPOs are primarily comprised of customers in the healthcare, hospitality, education, and government/military industries. There are several important dynamics affecting the industry, including: • Evolving consumer tastes and preferences. Consumers demand healthy and authentic food choices with fewer artificial ingredients, and they value locally-harvested and sustainably-manufactured food and packaging products.
Trade For the purchase of products produced, harvested or manufactured outside of the U.S., and for the shipment of products to customers located outside of the U.S., we are subject to certain reporting requirements and applicable customs laws regarding the import and export of various products. Ground Transportation The U.S.
Trade For the purchase of products produced, harvested or manufactured outside of the U.S., and for the shipment of products to customers located outside of the U.S., we are subject to applicable customs laws regarding the import and export of various products. Ground Transportation The U.S.
We continue to cultivate a culture of inclusion through training programs for our leaders and associates and by sponsoring nine Employee Resource Groups (“ERGs”): ADAPT - Ability and Disability Allies Partnering Together; BRIDGE - Black Resource for Inclusion, Diversity, Growth and Empowerment; Collective Asian Network; HOLA - Hispanic Organization for Leadership and Advancement; LINK-UP – Linking Information, Networks and Knowledge; Multigenerational Empowerment Resource Group for Employees; Pride Alliance; Those Who Serve - Military ERG; and Women in Network.
We continue to cultivate a culture of inclusion through training programs for our leaders and associates and by sponsoring ten Employee Resource Groups (“ERGs”): ADAPT - Ability and Disability Allies Partnering Together; BRIDGE - Black Resource for Inclusion, Diversity, Growth and Empowerment; Collective Asian Network; HOLA - Hispanic Organization for Leadership and Advancement; LINK-UP – Linking Information, Networks and Knowledge; Multigenerational Empowerment Resource Group for Employees; PACT - Parents and Caregivers Together; Pride Alliance; Those Who Serve - Military ERG; and WIN - Women in Network.
This means on-time and complete orders and customer choice via the multi-channel offering we have to serve our customers. These offerings are supported with technology and expertise that make it easier to transact with us and run their businesses. Our mobile technology platform provides customers with a personalized e-commerce ordering experience and easy-to-use business analytics tools.
This means on-time and complete orders and customer choice via the omni-channel offering we have to serve our customers. These offerings are supported with technology and expertise that make it easier to transact with us and run their businesses. Our mobile technology platform provides customers with a personalized digital ordering experience and easy-to-use business analytics tools.
In many categories, we offer products under a spectrum of private brands based on price and quality covering a range of values and qualities. The table below presents the sales mix for our principal product categories for fiscal years 2021, 2020 and 2019.
In many categories, we offer products under a spectrum of private brands based on price and quality, covering a range of values and qualities. The table below presents the sales mix for our principal product categories for fiscal years 2023, 2022 and 2021.
Our extensive network of 69 distribution facilities and fleet of approximately 6,500 trucks, along with 80 cash and carry locations, allow us to operate efficiently and provide high levels of customer service. This operating model allows us to leverage our nationwide scale and footprint while executing locally.
Our extensive network of over 70 distribution facilities and fleet of over 6,500 trucks, along with approximately 90 cash and carry locations, allow us to operate efficiently and provide high levels of customer service. This operating model allows us to leverage our nationwide scale and footprint while executing locally.
We also distribute a variety of non-food products, such as food containers, kitchen equipment and cleaning materials, and are subject to various laws and regulations relating to the storage, transportation, distribution, sale and labeling of those non-food products, including requirements to provide information about the hazards of certain chemicals present in some of the products we distribute.
We also distribute and sell a variety of non-food products, such as food containers, kitchen equipment and cleaning materials, and are subject to various laws and regulations relating to the storage, transportation, distribution, sale, advertising and labeling of those non-food products, including requirements to provide information about the hazards of certain chemicals present in some of the products we distribute and regulations restricting the sale of products made with certain materials or chemicals.
Anticorruption Because we are organized under the laws of the State of Delaware and our principal place of business is in the U.S., we are considered a “domestic concern” under the Foreign Corrupt Practices Act and are covered by its anti-bribery provisions. Human Capital Management Employees As of January 1, 2022, we employed a total of approximately 28,000 associates.
Anticorruption Because we are organized under the laws of the State of Delaware and our principal place of business is in the U.S., we are considered a “domestic concern” under the Foreign Corrupt Practices Act and are covered by its anti-bribery provisions. Human Capital Management Employees As of December 30, 2023, we employed a total of approximately 30,000 associates.
Approximately 80% of our customers utilize our e-commerce solutions. Customers utilizing these solutions tend to purchase more and have stronger commercial relationships with us. As noted above, our strategy of making it easier for our customers includes servicing our customers through multiple channels.
More than 80% of our sales utilize our digital solutions. Customers utilizing these solutions tend to purchase more products and have stronger commercial relationships with us. As noted above, our strategy of making it easier for our customers includes servicing our customers through multiple channels.
Sales to our top 50 customers represented approximately 39% of our net sales in fiscal year 2021. We have entered into contractual relationships with certain group purchasing organizations (“GPOs”) that negotiate pricing, delivery and other terms on behalf of their members. In fiscal year 2021, GPO members accounted for approximately 19% of our net sales.
Sales to our top 50 customers, including group purchasing organizations (“GPOs”), represented approximately 44% of our net sales in fiscal year 2023. We have entered into contractual relationships with certain GPOs that negotiate pricing, delivery and other terms on behalf of their members. In fiscal year 2023, GPOs accounted for approximately 23% of our net sales.
Prior to joining American Tire Distributors, he served as Vice President of Global Supply Chain Operations for Target, where he spent 14 years, from 2003 to 2017, in various supply chain roles with the company. Mr. Iacobucci has served as Chief Commercial Officer since February 2021. He served the Company as Chief Merchandising Officer from January 2017 to February 2021.
Prior to joining American Tire Distributors, he served as Vice President of Global Supply Chain Operations for Target, where he spent 14 years, from 2003 to 2017, in various supply chain roles with the company. Mr. Poe has served as Executive Vice President, Chief Merchandising Officer since October 2023. Mr.
Food and Drug Administration (“FDA”) and the U.S. Department of Agriculture (“USDA”). Our distribution facilities must be registered with the FDA and are subject to periodic government agency inspections by federal and/or state authorities. We have a number of processing facilities for certain meat, poultry, seafood and produce products.
Our distribution facilities must be registered with the FDA and are subject to periodic government agency inspections by federal and/or state authorities. We have a number of processing facilities for certain meat, poultry, seafood and produce products.
Prior to joining Hackensack, he served as President - Enterprise of Windstream Holdings, Inc., a voice and data communications provider, from December 2014 to August 2016, Executive Vice President and Chief Human Resources Officer of Windstream from February 2012 to December 2014, and Senior Vice President and President, Talent and Human Capital Services of Sears Holdings Corporation, a retailer, from September 2009 to January 2012. 8 Website and Availability of Information Our corporate website is located at www.usfoods.com .
Prior to joining Hackensack, he served as President - Enterprise of Windstream Holdings, Inc., a voice and data communications provider, from December 2014 to August 2016, Executive Vice President and Chief Human Resources Officer of Windstream from February 2012 to December 2014, and Senior Vice President and President, Talent and Human Capital Services of Sears Holdings Corporation, a retailer, from September 2009 to January 2012.
Approximately 4,000 sales associates manage customer relationships at local, regional, and national levels. Our sales associates are supported by sophisticated marketing and category management capabilities, as well as a sales support team that includes world-class chefs and restaurant operations consultants, new business development managers and others that help us provide more comprehensive service to our customers.
Our sales associates are supported by sophisticated marketing and category management capabilities, as well as a sales support team that includes world-class chefs and restaurant operations consultants, new business development managers and others that help us provide more comprehensive service to our customers.
Prior to joining US Foods, Mr. Locascio held senior finance roles with United Airlines, a global airline, and Arthur Andersen LLP, a public accounting firm. Ms. Coleman has served as Executive Vice President, General Counsel and Chief Compliance Officer since February 2017. Prior to joining US Foods, Ms.
Prior to joining US Foods, Mr. Locascio held senior finance roles with United Airlines, a global airline, and Arthur Andersen LLP, a public accounting firm. Ms. Ha has served as Executive Vice President and General Counsel since September 2023 and Corporate Secretary since November 2023. Prior to joining US Foods, Ms.
These units are registered and inspected by the USDA (with respect to meat and poultry) and the FDA (with respect to produce and seafood) as applicable.
These units are registered and inspected by the USDA (with respect to meat and poultry) and the FDA (with respect to produce and seafood) as applicable. Our CHEF’STORE locations are registered with and inspected by various state and local authorities.
Following the completion of these acquisitions, we have prioritized deleveraging our balance sheet, however we may selectively pursue acquisition opportunities in the future if they are aligned with and enhance our strategic priorities. Products and Brands We have a broad assortment of products and brands designed to meet customers’ needs.
The Company will selectively pursue acquisition opportunities in the future if they are aligned with and enhance our strategic priorities. Products and Brands We have a broad assortment of products and brands designed to meet customers’ needs.
Matters such as weight and dimension of equipment also fall under U.S. federal and state regulations. 5 Environmental Our operations are subject to a broad range of U.S. federal, state, and local environmental laws and regulations, as well as zoning and building regulations.
Environmental Our operations are subject to a broad range of U.S. federal, state, and local environmental laws and regulations, as well as zoning and building regulations.
Rickard began his career with Charles River Associates, an economic consulting firm. Mr. Tonnison has served as Executive Vice President, Chief Information and Digital Officer since July 2021. Prior to joining US Foods, Mr.
From September 1997 to March 2014, Mr. Rickard was Partner and Managing Director at the Boston Consulting Group, a consulting firm. Mr. Rickard began his career with Charles River Associates, an economic consulting firm. Mr. Tonnison has served as Executive Vice President, Chief Information and Digital Officer since July 2021. Prior to joining US Foods, Mr.
We must comply with the regulations promulgated by the Federal Motor Carrier Safety Administration, including those relating to drug and alcohol testing and hours of service for our drivers.
We must comply with the regulations promulgated by the Federal Motor Carrier Safety Administration, including those relating to drug and alcohol testing and hours of service for our drivers. Matters such as weight and dimension of equipment also fall under U.S. federal and state regulations.
During fiscal year 2021, 14 CBAs covering approximately 1,800 union associates were renegotiated. During fiscal year 2022, 13 CBAs covering approximately 1,200 union associates will be subject to renegotiation.
During fiscal year 2023, 14 CBAs covering approximately 1,100 union associates were renegotiated. During fiscal year 2024, 16 CBAs covering approximately 1,200 union associates will be subject to renegotiation.
MADE EASY.™ strategy is built on a differentiation focus in product assortment, customer experience and innovation. Through this strategy, we also serve our customers as consultants and business partners, bringing our customers personalized solutions and tailoring a suite of innovative products and services to fit each customer’s needs.
Through this strategy, we also serve our customers as consultants and business partners, bringing our customers personalized solutions and tailoring a suite of innovative products and services to fit each customer’s needs.
Collective Bargaining Agreements As of January 1, 2022, we were party to 51 collective bargaining agreements (“CBAs”) covering 5,900, or 21%, of our associates working at 29 (or 41%) of our distribution facilities, 4 of our broadline support business production facilities and 23 of our cash and carry locations.
Collective Bargaining Agreements As of December 30, 2023, we were party to 57 collective bargaining agreements (“CBAs”) covering 6,300, or 21%, of our associates working at 31 (or 41%) of our distribution facilities, 4 of our broadline support business production facilities and 23 of our cash and carry locations.
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our filings with the SEC are available to the public on the SEC’s website at www.sec.gov. Those filings are also available to the public on, or accessible through, our corporate website for free via the “Investors” section at ir.usfoods.com/investors.
Website and Availability of Information Our corporate website is located at www.usfoods.com . We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our filings with the SEC are available to the public on the SEC’s website at www.sec.gov.
In addition, we provide training and development programs that enable new associates to be safe and productive including: Sales Readiness, which gives new selling associates tools, resources and peer networking opportunities to help them succeed, and Selector Onboarding, which trains our warehouse selectors on safety, accuracy and performance standards. 6 Diversity and Inclusion As a company, we are committed to building a diverse and inclusive workforce and hiring the best talent that reflects the customers and communities we serve.
In addition, we provide training and development programs that enable new associates to be safe and productive including: Sales Readiness, which gives new selling associates tools, resources and peer networking opportunities to help them succeed, and Selector Onboarding, which trains our warehouse selectors on safety, accuracy and performance standards.
Guberman joined US Foods in 1991, originally as part of Kraft/Alliant Foodservice. Mr. Hancock has served as Executive Vice President, Chief Supply Chain Officer since November 2020. Prior to joining US Foods, Mr.
Hancock has served as Executive Vice President, Chief Supply Chain Officer since November 2020. Prior to joining US Foods, Mr.
We believe that we have the scale, foresight and agility required to proactively address these trends and, in turn, benefit from higher sales growth, greater customer retention, increased private label penetration, and improved profitability.
We believe that we have the scale, foresight and agility required to proactively address these trends and, in turn, benefit from higher sales growth, greater customer retention, increased private label penetration, and improved profitability. Our Business Strategy Our GREAT FOOD. MADE EASY.™ strategy is built on a differentiation focus in product assortment, customer experience and innovation.
Recruiting, Training and Development Our ability to attract, develop and retain high-performing associates is crucial to our success, from building trusting relationships with our customers to timely and accurately preparing and delivering orders.
Recruiting, Training and Development Our ability to attract, develop and retain high-performing associates is crucial to our success, from building trusting relationships with our customers to timely and accurately preparing and delivering orders. We have a program to train interested warehouse associates to become commercial driver’s license (“CDL”) Class A delivery drivers.
Rickard served from March 2014 to November 2015 as Vice President of Uline Corporation, a distributor of shipping, industrial, and packing materials, and was responsible for identifying, leading and implementing improvement initiatives across all aspects of the organization. From September 1997 to March 2014, Mr. Rickard was Partner and Managing Director at the Boston Consulting Group, a consulting firm. Mr.
Mr. Rickard has served as Executive Vice President, Strategy and Revenue Management, since November 2015. Prior to joining US Foods, Mr. Rickard served from March 2014 to November 2015 as Vice President of Uline Corporation, a distributor of shipping, industrial, and packing materials, and was responsible for identifying, leading and implementing improvement initiatives across all aspects of the organization.
E-commerce solutions streamline the purchasing process and increase customer retention. They also deepen the relationship between foodservice distributors and customers, creating personalized insights and services that can make both more efficient.
We see significant continued growth being driven by the increased utilization of, and reliance on technology by foodservice distributors, customers and diners. Digital solutions streamline the purchasing process and increase customer retention. They also deepen the relationship between foodservice distributors and customers, creating personalized insights and services that can make both more efficient.
Guberman has served as Executive Vice President, Nationally Managed Business since August 2016. Mr. Guberman served the Company as Chief Merchandising Officer from July 2015 to January 2017, Senior Vice President, Merchandising and Marketing Operations from January 2012 to July 2015 and Division President from August 2004 to December 2011. Mr.
Guberman served the Company as Chief Merchandising Officer from July 2015 to January 2017, Senior Vice President, Merchandising and Marketing Operations from January 2012 to July 2015 and Division President from August 2004 to December 2011. Mr. Guberman joined US Foods in 1991, originally as part of Kraft/Alliant Foodservice. Mr.
Fiscal Years 2021 2020 2019 (in millions) Meats and seafood $ 11,245 $ 8,131 $ 9,313 Dry grocery products 4,979 3,931 4,427 Refrigerated and frozen grocery products 4,453 3,583 4,253 Dairy 2,801 2,394 2,685 Equipment, disposables and supplies 3,090 2,455 2,483 Beverage products 1,465 1,186 1,403 Produce 1,454 1,205 1,375 Total Net sales $ 29,487 $ 22,885 $ 25,939 We have registered the trademarks US Foods ® , Food Fanatics ® , and CHEF’STORE ® as part of our overall brand strategy and our retail outlets.
Fiscal Years 2023 2022 2021 (in millions) Meats and seafood $ 11,953 $ 12,375 $ 11,245 Dry grocery products 6,407 5,758 4,979 Refrigerated and frozen grocery products 6,053 5,253 4,453 Dairy 3,727 3,564 2,801 Equipment, disposables and supplies 3,571 3,536 3,090 Produce 1,915 1,840 1,454 Beverage products 1,971 1,731 1,465 Total Net sales $ 35,597 $ 34,057 $ 29,487 We have registered the trademarks US Foods ® , Food Fanatics ® , and CHEF’STORE ® as part of our overall brand strategy and our retail outlets.
Our signature leadership development programs include Gateway to Leadership, Aspire to Grow and Aspire to Lead, which are focused on developing a diverse cohort of leaders in our Company.
Additionally, through training, mentoring, e-learning and on-the-job development, we help associates at all levels learn and grow, while building a pipeline of diverse talent. Our signature leadership development programs include Gateway to Leadership, Aspire to Grow and Aspire to Lead, which are focused on developing a diverse cohort of leaders in our Company.
We also expect that baby boomers will continue to shape the industry as they remain in the workplace longer, which is expected to prolong their contribution to food away from home expenditures. • Growing importance of technology. We see significant future growth being driven by the increased utilization of, and reliance on technology by foodservice distributors, customers and diners.
As Millennials’ and Generation Z’s disposable income increases, we believe this demographic will be key to driving growth in the broader U.S. food industry. We also expect that Baby Boomers will continue to shape the industry as they remain in the workplace longer, which is expected to prolong their contribution to food-away-from-home expenditures. • Growing importance of technology.
Information about our Executive Officers The section below provides information regarding our executive officers as of February 17, 2022: Name Age Position Pietro Satriano 59 Chief Executive Officer Dirk J. Locascio 49 Chief Financial Officer Kristin M. Coleman 53 Executive Vice President, General Counsel and Chief Compliance Officer Steven M. Guberman 57 Executive Vice President, Nationally Managed Business William S.
Information about our Executive Officers The section below provides information regarding our executive officers as of February 15, 2024: Name Age Position David E. Flitman 59 Chief Executive Officer Dirk J. Locascio 51 Executive Vice President, Chief Financial Officer Martha Ha 58 Executive Vice President, General Counsel and Corporate Secretary Steven M.
All of these channels provide our customers options to shop their way. We believe our GREAT FOOD. MADE EASY.™ strategy will enable us to reach more customers and create deeper relationships with existing ones, particularly within our target customer types—independent restaurants, healthcare, and hospitality—and drive increased penetration of our private brand products.
MADE EASY.™ strategy enables us to reach more customers and create deeper relationships with existing ones, particularly within our target customer types—independent restaurants, healthcare, and hospitality—and drive increased penetration of our private brand products. Further, we believe this strategy positions us to make the most of the continued growth in food-away-from-home consumption and consumer preferences for innovative, on-trend flavors.
Further, we believe this strategy positions us to make the most of the continued growth in food away from home consumption and consumer preferences for innovative, on-trend flavors. As an enabler of this strategy, we have invested in embedding continuous improvement in our operations to increase consistency and efficiency and to engage employees in improving our day-to-day processes.
As an enabler of this strategy, we have invested in embedding continuous improvement in our operations to increase service consistency and efficiency and to engage employees in improving our day-to-day processes. Acquisitions have also historically played an important role in supporting the execution of our growth strategy.
Kvasnicka has served as Executive Vice President, Field Operations since February 2021.
Taylor has served as Executive Vice President, Field Operations and Local Sales since October 2023. Mr.
We do not have any patents or licenses that are material to our business. 4 Suppliers We purchase from approximately 6,000 individual suppliers, none of which accounted for more than 5% of our aggregate purchases in fiscal year 2021. Our suppliers generally are large corporations selling national brand name and private brand products.
We do not have any patents or licenses that are material to our business. Suppliers Our suppliers generally are large corporations selling national brand name and private brand products. Additionally, regional and local suppliers support targeted geographic initiatives and private label programs requiring regional and local distribution.
He served the Company as Interim Chief Supply Chain Officer from October 2019 through March 2021, Executive Vice President, Locally Managed Business and Field Operations from September 2016 to February 2021, Executive Vice President, Locally Managed Sales from August 2015 to September 2016, Region President from April 2013 to July 2015 and Division President from October 2011 to March 2013.
Taylor served the Company as Executive Vice President, Field Operations from May 2023 to October 2023, Region President - Southeast from September 2016 to May 2023, Senior Vice President, Field Operations Deployment from August 2015 to September 2016, Division President from April 2010 to August 2015, Senior Vice President from January 2010 to April 2010 and Vice President, Finance from September 2005 to January 2010.
Rickard has served as Executive Vice President, Strategy, Insights and Financial Planning since February 2019. Mr. Rickard served the Company as Executive Vice President, Strategy and Revenue Management from November 2015 to February 2019. Prior to joining US Foods, Mr.
Poe served the Company as Senior Vice President, Chief Merchant from March 2023 to October 2023, Senior Vice President of Category Management from October 2016 to March 2023 and Vice President of Category Management from December 2015 to March 2023. Prior to joining US Foods, Mr.
A summary of some of these laws and regulations is provided below.
Government Regulation As a manufacturer, processor, marketer, distributor and seller of food and non-food products, we are subject to various laws and regulations. A summary of some of these laws and regulations is provided below.
Removed
These customer locations include independently owned single and multi-unit restaurants, regional restaurant chains, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations. We provide more than 400,000 fresh, frozen, and dry food stock-keeping units, or SKUs, as well as non-food items, sourced from approximately 6,000 suppliers.
Added
These customer locations include independent restaurants, chain restaurants, healthcare, hospitality, education and other customers. We provide fresh, frozen, and dry food products, as well as non-food items, sourced from thousands of suppliers. Approximately 4,000 sales associates manage customer relationships at local, regional, and national levels.
Removed
As millennials’ and Generation Z’s disposable income increases, we believe this demographic will be key to driving growth in the broader U.S. food industry.
Added
Additionally, US Foods Pronto™ service allows restaurant operators to receive smaller orders more frequently. All of these channels provide our customers options to shop their way. 3 We believe our GREAT FOOD.
Removed
Since the World Health Organization characterized a novel strain of coronavirus, COVID-19, as a pandemic in March 2020, the pandemic has impacted our industry as further discussed in Item 7 of Part II, “Management's Discussion and Analysis of Financial Condition and Results of Operations.” Our Business Strategy Our GREAT FOOD.
Added
On July 7, 2023, USF completed the acquisition of Renzi Foodservice (“Renzi”), a broadline distributor in New York, for a purchase price of $142 million (less the amount of the post-closing working capital adjustment, which was $2 million). The acquisition allows US Foods to further expand its reach into central upstate New York.
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We have 80 cash and carry locations to provide more customers with a retail option in between deliveries and to cost effectively serve more price-conscious and smaller customers. The cash and carry offering was significantly enhanced by our acquisition in 2020 of Smart Foodservice (as described below).
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On December 1, 2023, USF completed the acquisition of Saladino’s Foodservice (“Saladino’s”), a broadline distributor in California, for a purchase price of $56 million. The acquisition allows US Foods to further expand its reach into California. Integrating the above acquisitions and realizing synergies from these acquisitions are key priorities for the Company.
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Acquisitions have also historically played an important role in supporting the execution of our growth strategy. In September 2019, we completed the acquisition of five foodservice companies (the “Food Group”) from Services Group of America, Inc.: Food Services of America, Inc., Systems Services of America, Inc., Amerifresh, Inc., Ameristar Meats, Inc. and GAMPAC Express, Inc. for $1.8 billion.
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We purchase from thousands of suppliers, with no suppliers accounting for more than 5% of our aggregate purchases in fiscal year 2023. Seasonality Our business does not fluctuate significantly from quarter to quarter and, as a result, is not considered seasonal.
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The acquisition of the Food Group expanded the Company’s network in the West and Northwest parts of the U.S. On April 24, 2020, USF completed the acquisition of Smart Stores Holding Corp., a Delaware corporation (“Smart Foodservice”), from funds managed by affiliates of Apollo Global Management, Inc. for $972 million.
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Food and Drug Administration 4 (“FDA”) and the U.S. Department of Agriculture (“USDA”), and other federal, state and local laws and regulations relating to our operations and products that could restrict the sale of certain products or result in enforcement actions by federal, state and local government agencies under applicable standards.
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Smart Foodservice, a company that operated 70 small-format cash and carry stores across California, Idaho, Montana, Nevada, Oregon, Utah and Washington that serve small and mid-sized restaurants and other food business customers with a broad assortment of products. Integrating the Food Group and Smart Foodservice and realizing synergies from the acquisitions are key priorities for the Company.
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Diversity and Inclusion As a company, we are committed to building a diverse and inclusive workforce and hiring the best talent that reflects the customers and communities we serve.
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Additionally, regional and local suppliers support targeted geographic initiatives and private label programs requiring regional and local distribution. Seasonality Our business does not fluctuate significantly from quarter to quarter and, as a result, is not considered seasonal. Government Regulation As a marketer and distributor of food products, we are subject to various laws and regulations.
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Guberman 59 Executive Vice President, Nationally Managed Business & Chief Transformation Officer William S. Hancock 44 Executive Vice President, Chief Supply Chain Officer David Poe 50 Executive Vice President, Chief Merchandising Officer Randy J. Taylor 51 Executive Vice President, Field Operations and Local Sales David A. Rickard 53 Executive Vice President, Strategy and Revenue Management John A.
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In 2021, in response to the challenging job market, we initiated a program to train interested warehouse associates to become commercial driver’s license (“CDL”) Class A delivery drivers. Additionally, through training, mentoring, e-learning and on-the-job development, we help associates at all levels learn and grow, while building a pipeline of diverse talent.
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Tonnison 55 Executive Vice President, Chief Information and Digital Officer David Works 56 Executive Vice President, Chief Human Resources Officer Mr. Flitman has served as the Chief Executive Officer since January 2023. Mr. Flitman previously served as Chief Executive Officer and a member of the board of directors of Builders FirstSource, Inc., serving in this role since April 2021.
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During fiscal years 2020 and 2021, in response to the COVID-19 pandemic, we implemented, and continue to maintain, protocols and enhanced safety measures to protect the health and safety of our associates and customers.
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Prior to that, Mr. Flitman served as President and Chief Executive Officer and a member of the board of directors of BMC Stock Holdings, Inc. from August 2018 until its merger with Builders FirstSource. In addition, Mr.
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During 2021, we partnered with third-party providers to host more than 90 on-site COVID-19 vaccination clinics for associates and their family members, supporting thousands of associates in becoming vaccinated.
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Flitman previously served as Executive Vice President of Performance Food Group Company and was President and Chief Executive Officer of its Performance Foodservice division from January 2015 to September 2018. From January 2014 to December 2014, Mr. Flitman served as Chief Operating Officer and President USA & Mexico of Univar Solutions Inc. Mr.
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We continue to proactively monitor guidance and requirements from the Centers for Disease Control (“CDC”), OSHA and various other federal, state and local authorities and public health agencies and adjust our protocols and safety measures as appropriate to help mitigate the impact of the pandemic on our associates and customers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

85 edited+37 added−41 removed75 unchanged
Biggest changeOur business is a low-margin business, and our profitability is directly affected by cost deflation or inflation, commodity volatility and other factors. The U.S. foodservice distribution industry is characterized by relatively high inventory turnover with relatively low profit margins. Volatile commodity costs have a direct impact on our industry.
Biggest changeThe U.S. foodservice distribution industry is characterized by relatively high inventory turnover with relatively low profit margins. Volatile commodity costs have a direct impact on our industry. We make a significant portion of our sales at prices that are based on the cost of products we sell, plus a margin percentage or markup.
We also experience competition from online direct food wholesalers and retailers. We generally do not have exclusive distribution agreements with our customers, and they may switch to other distributors that offer lower prices or differentiated products or customer service. The cost of switching distributors is very low, as are the barriers to entry into the U.S. foodservice distribution industry.
We also experience competition from online direct food wholesalers and other retailers. We generally do not have exclusive distribution agreements with our customers, and they may switch to other distributors that offer lower prices or differentiated products or customer service. The cost of switching distributors is very low, as are the barriers to entry into the U.S. foodservice distribution industry.
If our current insurance does not continue to be available at a reasonable cost or is inadequate to cover all of our liabilities, or if our indemnification or insurance 14 coverage is limited, as a practical matter, by the creditworthiness of the indemnifying party or the insured limits of our suppliers’ insurance coverage, the liability related to allegedly defective products that we distribute or manufacture could adversely affect our business, financial condition and results of operations.
If our current insurance does not continue to be available at a reasonable cost or is inadequate to cover all of our liabilities, or if our indemnification or insurance coverage is limited, as a practical matter, by the creditworthiness of the indemnifying party or the insured limits of our suppliers’ insurance coverage, the liability related to allegedly defective products that we distribute or manufacture could adversely affect our business, financial condition and results of operations.
Furthermore, extreme weather conditions may disrupt critical infrastructure in the United States and interrupt or impede access to our customers’ facilities, reduce the number of consumers who visit our customers’ facilities, interrupt our suppliers’ production or shipments or increase our suppliers’ product costs, all of which could have an adverse effect on our business, financial condition and results of operations.
Furthermore, extreme weather conditions may disrupt critical infrastructure in the United States and interrupt or impede access to our customers’ facilities, reduce the number of 18 consumers who visit our customers’ facilities, interrupt our suppliers’ production or shipments or increase our suppliers’ product costs, all of which could have an adverse effect on our business, financial condition and results of operations.
The agreements and instruments governing our indebtedness contain covenants that, among other things, restrict our ability to: dispose of assets; incur additional indebtedness (including guarantees of additional indebtedness); pay dividends and make certain payments; create liens on assets; make investments; engage in certain business combination transactions; engage in certain transactions with 15 affiliates; change the business we conduct; and amend specific debt agreements.
The agreements and instruments governing our indebtedness contain covenants that, among other things, restrict our ability to: dispose of assets; incur additional indebtedness (including guarantees of additional indebtedness); pay dividends and make certain payments; create liens on assets; make investments; engage in certain business combination transactions; engage in certain transactions with affiliates; change the business we conduct; and amend specific debt agreements.
Consumer eating habits could be affected by a number of factors, including changes in attitudes regarding diet and health or new information regarding the health effects of consuming certain foods. There is a growing consumer preference for sustainable, organic and locally grown products. Changing consumer eating habits also occur due to generational shifts.
Consumer eating habits could be affected by a number of factors, including changes in attitudes regarding diet and health or new information regarding the health effects of consuming certain foods. There is a growing consumer preference for sustainable, organic and locally grown products. Changes to consumer eating habits also occur due to generational shifts.
If the ultimate determination of these examinations is that taxes are owed by us for an amount in excess of amounts previously accrued, our business, financial condition and results of operations could be adversely affected. The Company’s Amended and Restated Certificate of Incorporation includes a forum selection clause.
If the ultimate determination of these examinations is that taxes are owed by us for an amount in excess of amounts previously accrued, our business, financial condition and results of operations could be adversely affected. The Company’s Amended and Restated Certificate of Incorporation and Bylaws includes a forum selection clause.
Some multiemployer plans, including ones to which we contribute, are reported to have significant underfunded liabilities, which could increase the size of potential withdrawal liability. Any withdrawal liability payments that we are required to make could adversely affect our business, financial condition and results of operations. Item 1B. Unresolved Staff Comments None. 20
Some multiemployer plans, including ones to which we contribute, are reported to have significant underfunded liabilities, which could increase the size of potential withdrawal liability. Any withdrawal liability payments that we are required to make could adversely affect our business, financial condition and results of operations. Item 1B. Unresolved Staff Comments None.
Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of our management and key personnel from our business operations. We also may be subject to significant damages or injunctions against development, launch and sale of certain products. Any of these occurrences may harm our business, financial condition and results of operations.
Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of key personnel from our business operations. We also may be subject to significant damages or injunctions against development, launch and sale of certain products. Any of these occurrences may harm our business, financial condition and results of operations.
If a court were to find the choice of forum provision contained in the Company’s Amended and Restated Certificate of Incorporation to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions.
If a court were to find the choice of forum provision contained in the Company’s Amended and Restated Certificate of Incorporation or Bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions.
We require significant quantities of fuel for our vehicle fleet, and 12 the price and supply of fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments, supply and demand for oil and gas, regional production patterns, weather conditions and environmental concerns.
We require significant quantities of fuel for our vehicle fleet, and the price and supply of fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments, supply and demand for oil and gas, regional production patterns, weather conditions and environmental concerns.
If we are unable to repay debt, creditors having secured obligations could proceed against the collateral securing the debt. In any such case, we may be unable to borrow under our credit facilities and may not be able to repay the amounts due under our indebtedness.
If we are unable to repay debt, creditors having secured obligations could proceed against the 15 collateral securing the debt. In any such case, we may be unable to borrow under our credit facilities and may not be able to repay the amounts due under our indebtedness.
The various federal, state and local requirements and guidance continue to evolve, but we are continually monitoring for updates and responding to updated requirements and guidance applicable to our business as we become aware of them.
The various federal, state and local requirements and guidance impacting our business continue to evolve, but we are continually monitoring for updates and responding to updated requirements and guidance applicable to our business as we become aware of them.
If the products we distribute are alleged to cause injury, illness or other damage or to fail to comply with applicable governmental regulations, we may need to recall products.
If the products we distribute are alleged to cause injury, illness or other damage or to fail to comply with applicable governmental regulations, we may need to recall or withdraw products.
Potential actions by Sachem Head or other activist stockholders may interfere with our ability to execute our strategic plans; create perceived uncertainties as to the future direction of our business or strategy; cause uncertainty with our regulators; make it more difficult to attract and retain qualified personnel; and adversely affect our relationships with our existing and potential customers, suppliers and other business partners.
Potential actions by activist stockholders may interfere with our ability to execute our strategic plans; create perceived uncertainties as to the future direction of our business or strategy; cause uncertainty with our regulators; make it more difficult to attract and retain qualified personnel; and adversely affect our relationships with our existing and potential customers, suppliers and other business partners.
Our ability to make scheduled payments on, or to refinance our obligations under, our debt facilities depends on our ongoing financial and operating performance, among other things, and may be affected by economic, financial and industry conditions beyond our control, including as discussed under the caption “Risks Related to Our Business and Industry” above.
Our ability to make scheduled payments on, or to refinance our obligations under, our debt facilities depend on our ongoing financial and operating performance, among other things, and may be affected by economic, financial and industry conditions beyond our control, including as discussed under the caption “Risks Related to Our Business and Industry” above.
As a distributor and manufacturer of food and non-food products, we may be subject to product recalls, including voluntary recalls or withdrawals, if the products we distribute or manufacture are alleged to cause injury, illness or other damage, to have been mislabeled, misbranded or adulterated or to otherwise violate applicable governmental regulations.
As a distributor and manufacturer of food and non-food products, we may be subject to product recalls, including voluntary recalls or withdrawals, if the products we distribute or manufacture are alleged to cause injury, illness or other damage, to be mislabeled, misbranded, or adulterated, or to otherwise violate applicable governmental regulations.
While we have implemented measures such as implementing cybersecurity policies, training our employee and monitoring our information technology systems, to prevent security breaches, disruptions or other system failures, our preventative measures and incident response efforts may not be entirely effective.
While we have implemented measures such as implementing cybersecurity policies, training our employees and monitoring our information technology systems, to prevent security breaches, disruptions or other system failures, our preventative measures and incident response efforts may not be entirely effective.
In the course of our operations, we process, handle, store and transport a wide variety of food and non-food products, operate and maintain vehicle fleets, operate forklifts, store fuel in on-site aboveground and underground storage tanks, and use and dispose of hazardous substances including in connection with our use of our ammonia or freon-based refrigeration systems, propane, and battery-powered forklifts.
In the course of our operations, we process, handle, store and transport a wide variety of food and non-food products, operate and maintain vehicle fleets, operate forklifts and other equipment, store fuel in on-site aboveground and underground storage tanks, and sell, use and dispose of hazardous substances including in connection with our use of our ammonia or freon-based refrigeration systems, propane, and battery-powered forklifts.
Our level of indebtedness could have important consequences, including the following: • a substantial portion of our cash flows from operations may be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available for other purposes, including working capital, capital expenditures, acquisitions and general corporate purposes; • we are exposed to the risk of increased interest rates because approximately 47% of the net principal amount of our indebtedness accrued interest at variable rates of interest as of January 1, 2022; • it may be difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; • we may be at a competitive disadvantage compared to our competitors with less debt or lower debt service requirements and they, as a result, may be better positioned to withstand competitive pressures and general adverse economic and industry conditions; • our ability to refinance indebtedness may be limited or the associated costs may increase; and • our ability to refinance indebtedness and obtain additional financing may be limited or the associated costs of refinancing and obtaining additional financing may increase.
Our level of indebtedness could have important consequences, including the following: • a substantial portion of our cash flows from operations may be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available for other purposes, including working capital, capital expenditures, acquisitions and general corporate purposes; • we are exposed to the risk of increased interest rates because approximately 30% of the net principal amount of our indebtedness accrued interest at variable rates of interest as of December 30, 2023; • it may be difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; • we may be at a competitive disadvantage compared to our competitors with less debt or lower debt service requirements and they, as a result, may be better positioned to withstand competitive pressures and general adverse economic and industry conditions; • our ability to refinance indebtedness may be limited or the associated costs may increase; and • our ability to refinance indebtedness and obtain additional financing may be limited or the associated costs of refinancing and obtaining additional financing may increase.
Product recalls, occurrences of food-borne illness or food tampering may cause negative publicity about the quality, safety, sustainability or integrity of our products, whether or not such events are related to our products.
Events like product recalls, occurrences of food-borne illness, or alleged food tampering may cause negative publicity about the quality, safety, sustainability or integrity of our products, whether or not such events are related to our products.
Changes in the buying practices of independent restaurant customers, including their ability to require us to sell to them at discounted rates, or decreases in our sales to this type of customer or a decrease in the sales of our private label products could have a material negative impact on our profitability.
Changes in the buying practices of independent restaurant customers, including their ability to require us to sell to them at discounted rates, or decreases in our sales to this type of customer or a decrease in the sales of our private label products in general could have a material adverse impact on our profitability.
The Company’s response to suggested actions, proposals, director nominations and/or contests for the election of directors from Sachem Head or other activist stockholders could disrupt our business and operations, divert the attention of our Board of Directors, management and employees and be costly and time‐consuming.
The Company’s response to suggested actions, proposals, director nominations and/or contests for the election of directors from activist stockholders could disrupt our business and operations, divert the attention of our Board of Directors, management and employees and be costly and time consuming.
Our operations are subject to a broad range of laws and regulations including regulations governing the processing, packaging, storage, distribution, marketing, advertising, labeling, quality and safety of our food products, as well as rights of our employees and the protection of the environment.
Our operations are subject to a broad range of laws and regulations including regulations governing the processing, packaging, storage, distribution, marketing, advertising, labeling, transportation, export, quality and safety of our food and non-food products, as well as rights of our employees and the protection of the environment.
Changes in legal or regulatory requirements (such as new food safety requirements, revised regulatory requirements for the processing and packaging of food products and requirements to phase-out of certain ozone-depleting substances or otherwise regulating greenhouse gas emissions), or evolving interpretations of existing legal or regulatory requirements, may result in increased compliance cost, capital expenditures and other financial obligations including costs to upgrade or replace products or equipment that could adversely affect our business, financial condition and results of operations.
Changes in legal or regulatory requirements (such as new product safety requirements, revised regulatory requirements for the sourcing, processing and packaging of products, and requirements to restrict or phase-out certain chemicals and ozone-depleting substances or otherwise regulating greenhouse gas emissions), or evolving interpretations of existing legal or regulatory requirements, may result in increased compliance cost, capital expenditures and other financial obligations including costs to upgrade, phase out, modify or replace products or equipment that could adversely affect our business, financial condition and results of operations.
At several current and former facilities, we are investigating and remediating known or suspected contamination from historical releases of fuel and other hazardous substances that is not currently the subject of any administrative or judicial proceeding, but we may be subject to administrative or judicial proceedings in the future for contamination related to releases of fuel or other hazardous substances.
At various facilities, we are investigating and remediating known or suspected contamination from historical releases of fuel and other hazardous substances that is not currently the subject of any administrative or judicial proceeding, but we may be subject to administrative or judicial proceedings in the future for contamination related to releases of fuel or other hazardous substances.
Further, the market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties described above. General Risk Factors Changes in applicable tax laws and regulations and the resolution of tax disputes may negatively affect our financial results.
Further, the market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties described above. General Risk Factors 17 Changes in applicable tax laws and regulations and the resolution of tax disputes may adversely affect our business, financial condition and results of operations.
In addition, our business could be affected by large-scale terrorist acts or the outbreak or escalation of armed hostilities (especially those directed against or otherwise involving the U.S.), the outbreak of food-borne illnesses, the widespread outbreak of infectious diseases, such as the COVID-19 pandemic, or the occurrence of other catastrophic events.
In addition, our business could be affected by large-scale terrorist acts or the outbreak or escalation of armed hostilities (especially those directed against or otherwise involving the U.S.), the outbreak of food-borne illnesses, the widespread outbreak of infectious diseases, or the occurrence of other catastrophic events.
If we are unable to integrate acquired businesses successfully or realize anticipated synergies in a timely manner, we may not realize our projected return on investment and our business, financial condition and results of operations may be adversely affected.
If we are unable to successfully execute on acquisitions in the future, integrate acquired businesses successfully or realize anticipated synergies from acquisitions in a timely manner, we may not realize our projected return on investment and our business, financial condition and results of operations may be adversely affected.
Recruiting and retention efforts (particularly with respect to driver and warehouse personnel) and actions to increase productivity may not be successful, and we could encounter a shortage of qualified employee talent in the future. Shortages of, and increased competition for, qualified employees may result in increased labor costs.
Recruiting and retention efforts (particularly with respect to driver and warehouse personnel) and actions to increase productivity may not be successful, and we could encounter a shortage of qualified employee talent in the future. Shortages of, and increased competition for, qualified employees may result in increased labor costs and could decrease our ability to serve our customers effectively.
Because our industry’s labor costs are, as a percentage of net sales, higher than many other industries’ labor costs, even if we are able to successfully renegotiate CBAs and avoid work stoppages, we may be significantly impacted by labor cost increases.
Because our industry’s labor costs are, as a percentage of net sales, higher than many other industries’ labor costs, even if we are able to successfully renegotiate CBAs and avoid work stoppages, we may be significantly impacted by labor cost increases, which could adversely affect our results of operations.
While no single customer represented more than 2% of our total net sales in fiscal year 2021, approximately 19% of our net sales in fiscal year 2021 were made to customers under terms negotiated by GPOs (including approximately 11% of our net sales in fiscal year 2021 that were made to customers that are members of one GPO).
While no single customer represented more than 2% of our total net sales in fiscal year 2023, approximately 23% of our net sales in fiscal year 2023 were made to customers under terms negotiated by GPOs (including approximately 14% of our net sales in fiscal year 2023 that were made to customers that are members of one GPO).
This would place us at greater risk of being unable to continue to operate one or more facilities, possibly delaying deliveries, causing customers to seek alternative distributors, or otherwise being materially adversely affected by labor disputes.
This would place us at greater risk of being unable to continue to operate one or more facilities, possibly delaying deliveries, or not allowing customers to purchase our products, causing customers to seek alternative distributors or retail locations, or otherwise being materially adversely affected by labor disputes.
These actions and conditions include changes in supplier pricing practices (including promotional allowances); labor shortages, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers; government shutdowns; severe weather and climate conditions; crop conditions; product or raw material scarcity; water shortages; outbreak of food-borne illnesses; product recalls; transportation interruptions; unavailability of fuel or increases in fuel costs; competitive demands; impact of climate change; and natural disasters, pandemics, such as COVID-19, terrorist attacks or other catastrophic events.
These actions and conditions include changes in supplier pricing practices (including promotional 9 allowances); labor shortages, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers or carriers; government shutdowns; severe weather and climate conditions; crop conditions; product or raw material scarcity; water shortages; outbreak of food-borne illnesses; product recalls; transportation interruptions; unavailability of fuel or increases in fuel costs; competitive demands; impact of climate change; and natural disasters, pandemics, terrorist attacks, international hostilities, civil insurrection or social unrest; or any other catastrophic events.
Although our purchasing volume can provide an advantage when dealing with suppliers, suppliers may not provide the foodservice products and supplies we need in the quantities and at the time and prices requested. We do not control the actual production of most of the products we sell.
Although our purchasing volume can provide an advantage when dealing with suppliers, suppliers may not provide the foodservice products and supplies we need in the quantities and at the time and prices requested.
If a material number of our employees are unable to work or terminate their employment, or become ill as a result of the COVID-19 pandemic, our business operations may be adversely affected. The success of our business depends on our ability to attract, train, develop and retain a highly skilled and diverse workforce.
If a material number of our employees are unable to work or terminate their employment, or become ill at one point in time, our business operations may be adversely affected. The success of our business depends on our ability to attract, train, develop and retain a highly skilled and diverse workforce.
Regional and local companies may align themselves with other smaller distributors through purchasing cooperatives and marketing groups, with the goal of enhancing their geographic reach, private label offerings, overall purchasing power, cost efficiencies, and ability to meet customer distribution requirements.
Regional and local companies may align themselves with other smaller distributors through purchasing cooperatives and marketing groups, with the goal of enhancing their geographic reach, private label offerings, overall purchasing power, cost efficiencies, and ability to meet customer distribution requirements. Such changes may occur particularly during periods of economic uncertainty or significant inflation.
A variety of factors, including the COVID-19 pandemic, could cause us not to realize expected cost savings, including, among others, delays in the anticipated timing of activities related to our cost savings initiatives, lack of sustainability in cost savings over time, and unexpected costs associated with operating our business.
A variety of factors could cause us not to realize expected cost savings, including, among others, delays in the anticipated timing of activities related to our cost savings initiatives, lack of sustainability in cost savings over time, and unexpected costs associated with operating our business. All of these factors could adversely affect our business, financial condition and results of operations.
For example, the Company completed its most recent annual impairment assessment for goodwill and indefinite-lived intangible assets as of July 4, 2021, the first day of the third quarter of fiscal year 2021.
For example, the Company completed its most recent annual impairment assessment for goodwill and indefinite-lived intangible assets as of the first day of the third quarter of fiscal year 2023 with no impairments noted.
We review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. We test goodwill and other indefinite-lived intangible assets for impairment at least annually, or more frequently if events or changes in circumstances indicate an asset may be impaired.
We test goodwill and other indefinite-lived intangible assets for impairment at least annually, or more frequently if events or changes in circumstances indicate an asset may be impaired.
Impairment analysis requires significant judgment by management and is sensitive to changes in key assumptions used, such as future cash flows, discount rates and growth rates as well as current market conditions in both the United States and globally, all of which are being unfavorably impacted by the ongoing COVID-19 pandemic.
Impairment analysis requires significant judgment by management and is sensitive to changes in key assumptions used, such as future cash flows, discount rates and growth rates as well as current market conditions in both the United States and globally.
If we are not able to effectively adapt our menu offerings to trends in eating habits or respond to changes in consumer health perceptions or resulting new laws and regulations, our business, financial condition and results of operations could be adversely affected.
Compliance with these and other laws and regulations may be costly and time-consuming. If we are not able to effectively adapt our product portfolio to trends in eating habits or respond to changes in consumer health perceptions or resulting new laws and regulations, our business, financial condition and results of operations could be adversely affected.
Any increase in their labor costs, including any increases in costs as a result of wage inflation, increases in minimum wage requirements or labor shortages resulting in increased overtime, could reduce the profitability of our customers and reduce their demand for our products. 16 We may be unable to attract or retain a qualified and diverse workforce.
Any increase in their labor costs, including any increases in costs as a result of wage inflation, increases in minimum wage requirements or labor shortages resulting in increased overtime, could reduce the profitability of our customers and reduce their demand for our products.
Additionally, changes in consumer eating habits may result in the enactment or amendment of laws and regulations that impact the ingredients and nutritional content of our food products, or laws and regulations requiring us to make additional disclosure regarding the nutritional content of our food products. Compliance with these and other laws and regulations may be costly and time-consuming.
Additionally, changes in consumer eating habits may result in the enactment or amendment of laws and regulations that impact the sourcing, ingredients and nutritional content of our food products, or laws and regulations requiring us to make additional disclosures regarding the ingredients and nutritional content of our food products.
A decline in economic activity or the frequency and amount spent by consumers for food prepared away from home, as well as other macroenvironmental factors that could decrease general consumer confidence (including volatile financial markets or an uncertain political environment), may negatively impact our business, financial condition and results of operations.
A decline in economic activity or the frequency and amount spent by consumers for food prepared away from home, as well as other macroenvironmental factors that could decrease general consumer confidence (including deteriorating economic conditions, heightened volatility in the financial markets, inflationary pressure, an uncertain political environment and supply chain disruptions, such as those the global economy is currently facing), may negatively impact our business, financial condition and results of operations.
This means we are also subject to delays caused by interruption in production and increases in product costs based on actions and conditions outside our control including the continuing challenges experienced during the COVID-19 pandemic.
This means we are also subject to delays caused by interruption in production and increases in product costs based on actions and conditions outside our control.
Competition in our industry is intense, and we may not be able to compete successfully. The U.S. foodservice distribution industry is highly competitive, with national, multi-regional, regional and local distributors and specialty competitors.
Competition in our industry is intense, and we may not be able to compete successfully, which may have an adverse impact on our business, financial condition and results of operations. The U.S. foodservice distribution industry is highly competitive, with national, multi-regional, regional and local distributors and specialty competitors.
We rely heavily on technology, and we may experience a disruption in existing technology or delay in effectively implementing new technology. Our ability to control costs and maximize profits, as well as to serve customers most effectively, depends on the reliability of our information technology systems and related data entry processes in our transaction intensive business.
Our ability to serve customers most effectively, as well as to control costs and maximize profits, depends on the reliability of our information technology systems and related data entry processes in our transaction intensive business.
Risks Relating to Our Business and Industry An economic downturn, public health crisis, such as the COVID-19 pandemic, and/or other factors affecting consumer spending and confidence, may reduce the amount of food prepared away from home, which may adversely affect our business, financial condition and results of operations.
Risks Relating to Our Business and Industry An economic downturn, public health crisis, and/or other factors affecting consumer spending and confidence, may reduce the amount of food prepared away from home, which may adversely affect our business, financial condition and results of operations. The U.S. foodservice distribution industry is sensitive to national, regional and local economic conditions.
We may fail to increase or maintain the highest margin portions of our business, including sales to independent restaurant customers and sales of our private label products. Our most profitable customers are independent restaurants.
We may fail to increase or maintain the highest margin portions of our business, including sales to independent restaurant customers and sales of our private label products, which could have an adverse impact on our business, financial condition and results of operations. Our most profitable customers are independent restaurants.
We may be unable to achieve some or all of the benefits that we expect from our cost savings initiatives. We may not be able to realize some or all of our expected cost savings.
We may not be able to realize some or all of our expected cost savings from our various cost savings initiatives.
We consider our intellectual property rights, particularly our trademarks, to be a valuable aspect of our business. We protect our intellectual property rights through a combination of trademark, copyright and trade secret protection.
Our intellectual property rights are valuable, and any failure to protect them could reduce the value of our products and brands. We consider our intellectual property rights, particularly our trademarks, to be a valuable aspect of our business. We protect our intellectual property rights through a combination of trademark, copyright and trade secret protection.
All of these factors could negatively affect our business, financial condition and results of operations. Fuel costs fluctuate, which may adversely affect our business, financial condition and results of operations. Higher costs of fuel may negatively affect consumer confidence and discretionary spending. This may reduce the frequency and amount spent by consumers for food prepared away from home.
Fuel costs fluctuate, which may adversely affect our business, financial condition and results of operations. Fuel costs related to outbound deliveries approximated $191 million during fiscal year 2023. Higher costs of fuel may negatively affect consumer confidence and discretionary spending. This may reduce the frequency and amount spent by consumers for food prepared away from home.
Negative publicity may adversely impact our reputation and business. Maintaining a good reputation and the safety and integrity of the products we distribute is critical to our business, particularly in selling our private label products.
Negative publicity from product recalls, instances of food-borne illness, or alleged food tampering may adversely impact our reputation and business. Ensuring the safety and integrity of the products we distribute is critical to our business, particularly in selling our private label products, and to maintaining our good reputation.
The U.S. foodservice distribution industry is sensitive to national, regional and local economic conditions. An uneven level of general U.S. economic activity, uncertainty in the financial markets, inflation, and supply chain disruptions could have a negative impact on consumer confidence and discretionary spending.
An uneven level of general U.S. economic activity, uncertainty in the financial markets, inflation, and supply chain disruptions could have an adverse impact on consumer confidence and discretionary spending.
We may be subject to actions or proposals from activist stockholders or others that may not be aligned with our long-term strategy or the interests of our other stockholders.
We have been, and may in the future be, subject to actions or proposals initiated by activist stockholders or others, and some such actions or proposals may not be aligned with our long-term strategy or the interests of our other stockholders.
To the extent that business conditions deteriorate further, or if changes in key assumptions and estimates differ significantly from 13 management’s expectations, it may be necessary to record additional future impairment charges, which could be material.
To the extent that business conditions deteriorate further, or if changes in key assumptions and estimates differ significantly from management’s expectations, it may be necessary to record additional future impairment charges, which could be material. For more information on the goodwill assessment, see the section captioned “Valuation of Goodwill and Other Intangible Assets” in Item 7.
Risks Relating to Product Safety and Regulatory Requirements Our business is subject to significant governmental regulation, and failure to comply with applicable governmental regulations may lead to lawsuits, investigations and other liabilities and restrictions on our operations.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 9, Goodwill and Other Intangibles, in our consolidated financial statements. Risks Relating to Product Safety and Regulatory Requirements Our business is subject to significant governmental regulation, and failure to comply with applicable governmental regulations may lead to lawsuits, investigations and other liabilities and restrictions on our operations.
Any disruption to this information technology could negatively affect our customer service, decrease the volume of our business, impair operations and profits and result in increased costs.
The importance of such networks and systems has increased due to many of our employees, and the employees of our customers, suppliers and business partners, working remotely. Any disruption to this information technology could negatively affect our customer service, decrease the volume of our business, impair operations and profits and result in increased costs.
Our inability to obtain adequate supplies of foodservice and related products because of any of these or other factors could mean that we could not fulfill our obligations to our customers and, as a result, our customers may turn to other distributors. 11 Our relationships with our customers and GPOs may be materially diminished, terminated or otherwise changed, which may adversely affect our business, financial condition and results of operations.
Our inability to obtain adequate supplies of foodservice and related products because of any of these or other factors could mean that we could not fulfill our obligations to our customers and, as a result, our customers may turn to other distributors.
We also may be unable to retain qualified management and other key personnel of the acquired businesses, that may be necessary to integrate acquired businesses successfully or realize anticipated synergies in a timely manner.
We also may be unable to retain qualified management and other key personnel of the acquired businesses, that may be necessary to integrate acquired businesses successfully or realize anticipated synergies in a timely manner. Risks Relating to our Common Stock Actions of activist stockholders could adversely impact our business and cause us to incur significant expenses.
We may recall products based on alleged occurrences of food-borne illnesses (such as E. coli, avian flu, bovine spongiform encephalopathy, hepatitis A, trichinosis, salmonella or swine flu) and food tampering.
We may recall products based on alleged occurrences of food-borne illnesses (such as E. coli, listeriosis, hepatitis A, trichinosis, salmonella, etc.), contamination, adulteration, mislabeling, misbranding, or food tampering.
Disruptions caused by the COVID-19 pandemic and related labor shortages that impact our ability to completely and accurately fill orders and provide timely deliveries of quality products at competitive prices have had, and may continue to have, a negative impact on our business, financial condition and results of operations.
Disruptions caused by macroeconomic conditions, inflationary pressure, supply chain disruptions, geopolitical events and labor shortages that impact our ability to completely and accurately fill orders and provide timely deliveries of quality products at competitive prices may have an adverse impact on our business, financial condition and results of operations.
The use of these networks and systems gives rise to cybersecurity risks, and the risk of other security breaches (including access to or acquisition of supplier, customer, employee or other confidential information).
Our reliance on such networks and systems has increased due to many of our employees, and the employees of our customers, suppliers and business partners, working remotely. The use of these networks and systems gives rise to cybersecurity risks, and the risk of other security breaches (including access to or acquisition of supplier, customer, employee or other confidential information).
Any significant adverse judgments or settlements could reduce our profits and limit our ability to operate our business. 19 Extreme weather conditions and natural disasters, and other catastrophic events, may interrupt our business, or our customers’ or suppliers ’ businesses.
Additionally, we could become the subject of future claims by third parties, including our employees, suppliers, customers, GPOs, investors, or regulators. Any significant adverse judgments or settlements could reduce our profits and limit our ability to operate our business. Extreme weather conditions and natural disasters, and other catastrophic events, may interrupt our business, or our customers’ or suppliers ’ businesses.
If competitors implement new technologies before we do, allowing them to provide lower priced or enhanced services of superior quality compared to those we provide, our business, financial condition and results of operations could be adversely affected. 17 A cybersecurity incident may negatively affect our operations, business, financial condition and our relationships with customers.
Information technology evolves rapidly. To compete effectively, we are required to integrate new technologies in a timely and cost-effective manner. If competitors implement new technologies before we do, allowing them to provide lower priced or enhanced services of superior quality compared to those we provide, our business, financial condition and results of operations could be adversely affected.
Although we maintain insurance that may, subject to policy terms and conditions, cover certain cyber incidents, it may be insufficient to cover all losses.
However, there is a risk that we may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents. Although we maintain insurance that may, subject to policy terms and conditions, cover certain cyber incidents, it may be insufficient to cover all losses.
Most of our customers buy from us pursuant to individual purchase orders, and we often do not enter into long-term agreements with these customers.
Our relationships with our customers and GPOs may be materially diminished, terminated or otherwise changed, which may adversely affect our business, financial condition and results of operations. Most of our customers buy from us pursuant to individual purchase orders, and we often do not enter into long-term agreements with these customers.
Risks Relating to Our Indebtedness Our level of indebtedness may adversely affect our financial condition and our ability to raise additional capital or obtain financing in the future, react to changes in our business, and make required payments on our debt. We had $5.0 billion of indebtedness outstanding, as of January 1, 2022.
Any of these actions could increase our expenses, reduce our revenue and damage our reputation as a reliable government supplier. 14 Risks Relating to Our Indebtedness Our level of indebtedness may adversely affect our financial condition and our ability to raise additional capital or obtain financing in the future, react to changes in our business and make required payments on our debt.
Risks Relating to Human Capital Management We face risks related to labor relations and increases in labor costs. We employed approximately 28,000 associates as of January 1, 2022, of which approximately 5,900 were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations. Our failure to effectively renegotiate any CBAs could result in work stoppages.
We employed approximately 30,000 associates as of December 30, 2023, of which approximately 6,300 were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations. Any failure to effectively negotiate CBAs could result in work stoppages.
We are subject to governmental regulation regarding our relationship with our employees including minimum wage, overtime, wage payment, wage and hour, employment discrimination, harassment and immigration. Due to contracts we have with federal and state governmental entities as customers, we are subject to audits of, or requests for information regarding, our employment practices and business operations.
We are subject to governmental regulation regarding our relationship with our employees including minimum wage, overtime, wage payment, wage and hour, employment discrimination, harassment and immigration.
Any event that damages our reputation or calls into question the safety or integrity of our products, whether justified or not, could quickly and negatively affect our business, financial condition and results of operations.
Any event that damages our reputation or calls into question the safety or integrity of our products, whether justified or not, could quickly and negatively affect our business, financial condition and results of operations. 13 Risks Relating to Human Capital Management We face risks related to labor relations, increased labor costs and the availability of qualified labor, any of which could have an adverse effect on our business, financial condition and results of operations.
Loss of business as a result of the COVID-19 pandemic and its negative economic impact has changed the buying practices of our independent restaurant customers and may also result in additional permanent closures of restaurants, which could have a negative impact on our business, financial condition and results of operations.
Loss of business as a result of a pandemic or recession and its negative economic impact could change the buying practices of our independent restaurant customers and may also result in additional permanent closures of restaurants, which could have an adverse impact on our business, financial condition and results of operations. 10 We may be unable to achieve some or all of the benefits that we expect from our cost savings initiatives, any of which could adversely affect our business, financial condition and results of operations.
We believe we have sufficient liability insurance to cover product liability claims. We also generally seek contractual indemnification and insurance coverage from parties supplying products to us.
We may be exposed to potential product liability claims in the event that the products we distribute or manufacture are alleged to have caused injury, illness or other damage. We believe we have sufficient liability insurance to cover product liability claims. We also generally seek contractual indemnification and insurance coverage from parties supplying products to us.
If we are unable to change our cost structure and pricing practices rapidly enough to successfully compete in that environment, our business, financial condition and results of operations may be adversely affected. Impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets could adversely affect the Company’s financial condition and results of operations.
If we are unable to change our cost structure and pricing practices rapidly enough to successfully compete in that environment, our business, financial condition and results of operations may be adversely affected. Climate change, or the legal, regulatory or market measures being implemented to address climate change, may have an adverse impact on our business.
Risks Relating to Acquisitions We may fail to realize the expected benefits of acquisitions or effectively integrate the businesses we acquire. Historically, a portion of our growth has come through acquisitions. In September 2019, we completed the acquisition of the Food Group, which significantly expanded the Company’s network in the West and Northwest parts of the U.S.
Risks Relating to Acquisitions We may fail to realize the expected benefits of acquisitions or effectively integrate the businesses we acquire, which may adversely affect our business, financial condition and results of operations. Historically, a portion of our growth has come through acquisitions.
Prolonged periods of product cost inflation, or periods of rapid inflation, also may negatively impact our business as a result of decreased discretionary consumer spending.
As a result, our profit levels may be negatively affected during periods of product cost deflation, even though our gross profit percentage may remain relatively constant. Prolonged periods of product cost inflation, or periods of rapid inflation, may negatively impact our results of operations as a result of decreased discretionary consumer spending.
If patrons of our customers become ill from food-borne illnesses, our customers could be forced to temporarily close locations and our sales would correspondingly decrease. We may experience product liability claims. We may be exposed to potential product liability claims in the event that the products we distribute or manufacture are alleged to have caused injury, illness or other damage.
If patrons of our customers become ill from food-borne illnesses, our customers could be forced to temporarily close locations and our sales would correspondingly decrease. We may experience product liability claims, which could adversely affect our business, financial condition and results of operations.
While cyber-attackers have threatened and attempt to breach our security and access the information stored in our information systems, no incident has been material or had a material impact on our business or financial condition. There is a risk that we may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents.
Additionally, continued geopolitical turmoil, including the ongoing conflict between Russia and Ukraine, has heightened the risk of cyberattacks. While cyberattackers have threatened and attempted to breach our security and access the information stored in our information systems, no incident has been material or had a material impact on our business or financial condition.
Labor shortages, low levels of unemployment or decreasing workforce availability in the United States, and resulting wage inflation and/or increased overtime, could adversely affect our results of operations. In addition, labor is a significant cost of many of our customers in the U.S. food away from home industry.
In addition, labor is a significant cost of many of our customers in the U.S. food away from home industry.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Number of Facilities Square Feet Alabama 2 458,304 Alaska 1 131,285 Arizona 4 493,116 Arkansas 1 135,009 California 21 2,010,675 Colorado 2 501,427 Connecticut 1 239,899 Florida 5 1,173,162 Georgia 2 691,017 Idaho 6 121,644 Illinois 3 528,295 Indiana 1 233,784 Iowa 1 114,250 Kansas 1 350,859 Louisiana 1 130,200 Michigan 1 276,003 Minnesota 2 414,963 Mississippi 1 287,356 Missouri 3 602,947 Montana 3 239,194 Nebraska 2 246,430 Nevada 5 872,110 New Hampshire 1 533,237 New Jersey 3 1,073,375 New Mexico 1 133,486 New York 3 388,683 North Carolina 3 1,001,423 North Dakota 2 221,314 Ohio 3 501,894 Oklahoma 2 345,559 Oregon 22 775,146 Pennsylvania 4 977,719 South Carolina 5 1,370,311 Tennessee 2 602,270 Texas 5 1,011,501 Utah 2 288,834 Virginia 2 830,798 Washington 32 1,476,983 West Virginia 1 220,537 Wisconsin 1 172,826 Total 163 22,177,825 Owned 15,878,787 72 % Leased 6,299,038 28 % In addition, we leased our corporate headquarters in Rosemont, Illinois (consisting of more than 250,000 square feet) and our shared services center in Tempe, Arizona (consisting of more than 100,000 square feet).
Biggest changeLocation Number of Facilities Square Feet Alabama 2 458,304 Alaska 1 131,285 Arizona 4 493,116 Arkansas 1 135,009 California 28 2,722,565 Colorado 2 501,427 Connecticut 1 239,899 Florida 5 1,173,162 Georgia 2 691,017 Idaho 6 121,644 Illinois 3 528,295 Indiana 1 233,784 Iowa 1 114,250 Kansas 1 350,859 Louisiana 1 207,200 Michigan 1 276,003 Minnesota 2 414,963 Mississippi 1 287,356 Missouri 3 602,947 Montana 4 259,198 Nebraska 2 246,430 Nevada 5 895,956 New Hampshire 1 533,237 New Jersey 3 1,073,375 New Mexico 1 133,486 New York 4 533,408 North Carolina 4 1,024,923 North Dakota 2 221,314 Ohio 3 501,894 Oklahoma 2 345,559 Oregon 22 775,146 Pennsylvania 4 980,417 South Carolina 7 1,423,859 Tennessee 2 602,270 Texas 5 1,011,380 Utah 3 308,833 Virginia 4 878,257 Washington 31 1,580,339 West Virginia 1 220,537 Wisconsin 1 172,826 Total 177 23,405,729 Owned 16,411,888 70 % Leased 6,993,841 30 % In addition, we lease our corporate headquarters in Rosemont, Illinois (consisting of more than 250,000 square feet).
The leases related to these facilities expire at various dates from 2022 to 2040, although some provide options for us to renew. The table below lists the aggregate square footage, by state for these operating facilities.
The leases related to these facilities expire at various dates from 2024 to 2040, although some provide options for us to renew. The table below lists the aggregate square footage, by state for these operating facilities.
Properties As of the date of this report, we operated (i) 69 distribution facilities (consisting of more than 19,000,000 square feet), 56 of which are owned, (ii) 80 cash and carry locations (consisting of more than 1,900,000 square feet), all of which are leased, and (iii) 14 broadline support business production facilities (consisting of more than 900,000 square feet), 9 of which are owned.
Properties As of the date of this report, we operated (i) 74 distribution facilities (consisting of more than 20,000,000 square feet), 57 of which are owned, (ii) 90 cash and carry locations (consisting of more than 2,000,000 square feet), all of which are leased, and (iii) 13 broadline support business production facilities (consisting of more than 1,000,000 square feet), 9 of which are owned.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere were 22,142 holders of record of our common stock as of February 11, 2022. This figure does not include a substantially greater number of “street name” holders whose shares are held of record by banks, brokers and other financial institutions.
Biggest changeThis figure does not include a substantially greater number of “street name” holders whose shares are held of record by banks, brokers and other financial institutions. Dividends We have not paid any dividends on our common stock since our common stock began trading publicly in 2016.
The graph assumes the investment of $100 in our common stock and each of such indices on December 31, 2016 and the reinvestment of dividends, as applicable.
The graph assumes the investment of $100 in our common stock and each of such indices on December 30, 2018 (the beginning of our fiscal year) and the reinvestment of dividends, as applicable.
The declaration, amount, and payment of any future dividends on shares of common stock will be at the sole discretion of our Board of Directors.
We have no plans to pay dividends on our common stock in the foreseeable future. The declaration, amount, and payment of any future dividends on shares of common stock will be at the sole discretion of our Board of Directors.
Performance data for the Company, the S&P 500 Index and the S&P 500 Food and Staples Retailing Index is provided as of the last trading day of each of our last five fiscal years. 12/31/16 12/30/17 12/29/18 12/28/19 01/02/21 01/01/22 US Foods Holding Corp. $ 100 $ 116 $ 115 $ 152 $ 121 $ 127 S&P 500 100 122 116 153 181 233 S&P Food and Staples Retailing Index 100 124 124 157 186 220 Item 6.
Performance data for the Company, the S&P 500 Index and the S&P 500 Food and Staples Retailing Index is provided as of the last trading day of each of our last five fiscal years. 12/29/18 12/28/19 01/02/21 01/01/22 12/31/22 12/30/23 US Foods Holding Corp. $ 100 $ 132 $ 105 $ 110 $ 108 $ 144 S&P 500 100 131 156 200 164 207 S&P Food and Staples Retailing Index 100 107 120 127 122 138 Item 6. [Reserved] 24
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock and Stockholders Our common stock began trading publicly on the New York Stock Exchange (“NYSE”) under the symbol “USFD” as of May 26, 2016. Prior to that time, there was no public market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock and Stockholders Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “USFD”. There were 20,364 holders of record of our common stock as of February 9, 2024.
On June 30, 2021, September 30, 2021, and December 31, 2021, the Company paid cash dividends in the aggregate of $28 million on the shares of the Series A Preferred Stock.
During the 52 weeks ended December 30, 2023, the Company’s Board of Directors declared dividends on the shares of the Series A Preferred Stock outstanding on March 31, 2023. The Company paid cash dividends in the aggregate of $7 million on the shares of the Series A Preferred Stock.
Removed
Dividends We have not paid any dividends on our common stock since our common stock began trading publicly on the NYSE. We have no plans to pay dividends on our common stock in the foreseeable future.
Added
See Note 14, Convertible Preferred Stock, in our consolidated financial statements for further information. Share Repurchase Program On November 2, 2022, our Board of Directors approved, and we publicly announced, a Share Repurchase Program under which the Company is authorized to repurchase up to $500 million of its outstanding common stock.
Removed
During the 52 weeks ended January 1, 2022, the Company’s Board of Directors declared dividends on the shares of the Series A Preferred Stock outstanding as of the respective record dates.
Added
At December 30, 2023, there was approximately $192 million in remaining funds authorized under this program. For the year ended December 30, 2023, the Company repurchased 7,396,224 shares at an aggregate purchase price of approximately $294 million under the program.
Removed
On March 31, 2021, the Company paid a dividend on the shares of the Series A Preferred Stock in the form of 9,154 shares of Series A Preferred Stock, plus a de minimis amount in cash in lieu of fractional shares. The value of the dividend-in-kind paid by the Company was $15 million.
Added
The size and timing of any repurchases will depend on a number of factors, including share price, general business and market conditions and other factors. Under the Share Repurchase Program, repurchases can be made from time to time using a variety of methods, including open market purchases, privately negotiated transactions, accelerated share repurchases and Rule 10b5-1 trading plans.
Removed
See Note 14, Convertible Preferred Stock, in our consolidated financial statements for further information. 23 Stock Performance Graph The following stock performance graph compares the cumulative total stockholder return of the Company’s common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Food and Staples Retailing Index for the last five fiscal years.
Added
The Share Repurchase Program does not obligate the Company to acquire any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. The repurchase authorization does not have an expiration date.
Added
The following table summarizes repurchases of US Foods common stock in the three months ended December 30, 2023: Period (Millions of dollars, except number and price per share) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program October 1, 2023 through November 4, 2023 534,846 $ 37.41 534,846 $ 237 November 5, 2023 through December 2, 2023 698,397 42.96 698,397 207 December 3, 2023 through December 30, 2023 338,830 44.27 338,830 $ 192 Total 1,572,073 $ 41.35 1,572,073 23 Stock Performance Graph The following stock performance graph compares the cumulative total stockholder return of the Company’s common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Food and Staples Retailing Index for the last five fiscal years.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe assets, liabilities and results of operations of Smart Foodservice have been included in our consolidated financial statements since the date the acquisition was completed. 26 Results of Operations The following table presents selected consolidated results of operations of our business for fiscal years 2021, 2020 and 2019: Fiscal Year 2021 2020 2019 (in millions) Consolidated Statements of Operations: Net sales $ 29,487 $ 22,885 $ 25,939 Cost of goods sold 24,832 19,166 21,352 Gross profit 4,655 3,719 4,587 Operating expenses: Distribution, selling and administrative costs 4,220 3,757 3,888 Restructuring costs and asset impairment charges 11 39 — Total operating expenses 4,231 3,796 3,888 Operating income (loss) 424 (77) 699 Other (income) expense—net (26) (21) 4 Interest expense—net 213 238 184 Loss on extinguishment of debt 23 — — Income (loss) before income taxes 214 (294) 511 Income tax provision (benefit) 50 (68) 126 Net income (loss) 164 (226) 385 Series A Preferred Stock dividends (43) (28) — Net income (loss) available to common shareholders $ 121 $ (254) $ 385 Net income (loss) per share: Basic $ 0.55 $ (1.15) $ 1.77 Diluted $ 0.54 $ (1.15) $ 1.75 Weighted-average number of shares used in per share amounts: Basic 222 220 218 Diluted 225 220 220 Percentage of Net Sales: Gross profit 15.8 % 16.3 % 17.7 % Operating expenses 14.3 % 16.6 % 15.0 % Operating income (loss) 1.4 % (0.3) % 2.7 % Net income (loss) 0.6 % (1.0) % 1.5 % Adjusted EBITDA (1) 3.6 % 2.8 % 4.6 % Other Data: Cash flows—operating activities $ 419 $ 413 $ 760 Cash flows—investing activities (262) (1,110) (1,987) Cash flows—financing activities (837) 1,427 1,220 Capital expenditures 274 189 258 EBITDA (1) 805 366 1,057 Adjusted EBITDA (1) 1,057 648 1,194 Adjusted net income (1) 388 48 523 Free cash flow (2) 145 224 502 (1) EBITDA is defined as net income (loss), plus interest expense—net, income tax provision (benefit), and depreciation and amortization.
Biggest changeThe 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. 25 Results of Operations The following table presents selected consolidated results of operations of our business for fiscal years 2023, 2022 and 2021: Fiscal Year 2023 2022 2021 (in millions) Consolidated Statements of Operations: Net sales $ 35,597 $ 34,057 $ 29,487 Cost of goods sold 29,449 28,565 24,832 Gross profit 6,148 5,492 4,655 Operating expenses: Distribution, selling and administrative costs 5,117 4,886 4,220 Restructuring costs and asset impairment charges 14 12 11 Total operating expenses 5,131 4,898 4,231 Operating income 1,017 594 424 Other income—net (6) (22) (26) Interest expense—net 324 255 213 Loss on extinguishment of debt 21 — 23 Income before income taxes 678 361 214 Income tax provision 172 96 50 Net income 506 265 164 Series A Preferred Stock dividends (7) (37) (43) Net income available to common shareholders $ 499 $ 228 $ 121 Net income per share: Basic $ 2.09 $ 1.02 $ 0.55 Diluted $ 2.02 $ 1.01 $ 0.54 Weighted-average number of shares used in per share amounts: Basic 239 224 222 Diluted 250 226 225 Percentage of Net Sales: Gross profit 17.3 % 16.1 % 15.8 % Operating expenses 14.4 % 14.4 % 14.3 % Operating income 2.9 % 1.7 % 1.4 % Net income 1.4 % 0.8 % 0.6 % Adjusted EBITDA (1) 4.4 % 3.8 % 3.6 % Other Data: Cash flows—operating activities $ 1,140 $ 765 $ 419 Cash flows—investing activities (495) (255) (262) Cash flows—financing activities (587) (447) (837) Capital expenditures 309 265 274 EBITDA (1) 1,397 988 805 Adjusted EBITDA (1) 1,559 1,310 1,057 Adjusted Net Income (1) 658 538 388 Free Cash Flow (2) 831 500 145 (1) EBITDA is defined as net income, plus interest expense—net, income tax provision, and depreciation and amortization.
We continue to monitor the credit markets generally and the strength of our lender counterparties. From time to time, we repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our leverage. These actions may include open market repurchases, negotiated repurchases, and other retirements of outstanding debt.
We continue to monitor the credit markets generally and the strength of our lender counterparties. From time to time, we may repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our leverage. These actions may include open market repurchases, negotiated repurchases, and other retirements of outstanding debt.
Our long-term cash requirements under our various contractual obligations and commitments include: • Debt, including financing lease obligations – See Note 11, Debt, in our consolidated financial statements for further detail of our debt and the timing of expected future principal payments. 33 • Operating and finance lease obligations – See Note 17, Leases, in our consolidated financial statements for further detail of our obligations and the timing of expected future payments. • Pension plans and other postretirement benefit contributions – We sponsor a defined benefit plan that pays benefits to eligible employees at retirement.
Our long-term cash requirements under our various contractual obligations and commitments include: • Debt, including financing lease obligations – See Note 11, Debt, in our consolidated financial statements for further detail of our debt and the timing of expected future principal payments. • Operating and finance lease obligations – See Note 17, Leases, in our consolidated financial statements for further detail of our obligations and the timing of expected future payments. • Pension plans and other postretirement benefit contributions – We sponsor a defined benefit plan that pays benefits to eligible employees at retirement.
Due to the many variables inherent in estimating fair value and the relative size of the goodwill and indefinite-lived intangible assets, differences in assumptions could have a material effect on the results of the Company’s impairment analysis in future periods. Vendor Consideration We participate in various rebate and promotional incentives with our suppliers, primarily through purchase-based programs.
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. Vendor Consideration We participate in various rebate and promotional incentives with our suppliers, primarily through purchase-based programs.
We believe the following sources will be sufficient to meet our anticipated cash requirements for at least the next twelve months, while maintaining sufficient liquidity for normal operating purposes: • Our cash flow from operations; • The availability of additional capital under our existing ABL Facility; and • Our availability to access capital from financial markets.
We believe the following sources will be sufficient to meet our anticipated cash requirements for at least the next twelve months, while maintaining sufficient liquidity for normal operating purposes: • Our cash flow from operations; • The availability of additional capital under our existing ABL Facility; and 32 • Our availability to access capital from financial markets.
Non-GAAP Reconciliations We provide EBITDA, Adjusted EBITDA, Adjusted net income and Free cash flow as supplemental measures to GAAP financial measures regarding our operating performance and liquidity. These non-GAAP financial measures, as defined above, exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.
Non-GAAP Reconciliations We provide EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Free Cash Flow as supplemental measures to GAAP financial measures regarding our operating performance and liquidity. These non-GAAP financial measures, as defined above, exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.
EBITDA, Adjusted EBITDA and Adjusted net income are not measurements of our performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP. We use Free cash flow as a supplemental measure to GAAP financial measures regarding the liquidity of our operations.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income are not measurements of our performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP. We use Free Cash Flow as a supplemental measure to GAAP financial measures regarding the liquidity of our operations.
We caution readers that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, Adjusted net income, and Free cash flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate EBITDA, Adjusted EBITDA, Adjusted net income or Free cash flow in the same manner.
We caution readers that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Free Cash Flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate EBITDA, Adjusted EBITDA, Adjusted Net Income or Free Cash Flow in the same manner.
EBITDA, Adjusted EBITDA, and Adjusted net income as presented in this Annual Report are supplemental measures of our performance that are not required by, or presented in accordance with GAAP. They are not measurements of our performance under GAAP and should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP.
EBITDA, Adjusted EBITDA, and Adjusted Net Income as presented in this Annual Report are supplemental measures of our performance that are not required by, or presented in accordance with GAAP. They are not measurements of our performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP.
A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution. 35 Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 3, Recent Accounting Pronouncements, in our consolidated financial statements.
A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 3, Recent Accounting Pronouncements, in our consolidated financial statements.
We believe EBITDA and Adjusted EBITDA provide meaningful supplemental information about our operating performance because they exclude amounts that we do not consider part of our core operating results when assessing our performance.
We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide meaningful supplemental information about our operating performance because they exclude amounts that we do not consider part of our core operating results when assessing our performance.
Critical Accounting Policies and Estimates Except as otherwise set forth, we have prepared the financial information in this Annual Report in accordance with GAAP.
Critical Accounting Policies and Estimates Except as otherwise set forth herein, we have prepared the financial information in this Annual Report in accordance with GAAP.
(2) Share-based compensation expense for expected vesting of stock awards and employee stock purchase plan. (3) Represents the non-cash impact of LIFO reserve adjustments. (4) Includes early redemption premium and the write-off of certain pre-existing debt issuance costs. See Note 11, Debt, in our consolidated financial statements for additional information.
(2) Share-based compensation expense for expected vesting of stock awards and employee stock purchase plan. (3) Represents the impact of LIFO reserve adjustments. (4) Includes early redemption premium and the write-off of certain pre-existing debt issuance costs. See Note 11, Debt, in our consolidated financial statements for additional information.
For additional information, see the discussion under the caption “Non-GAAP Reconciliations” below. 27 (2) Free cash flow is defined as cash flows provided by operating activities 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.
For additional information, see the discussion under the caption “Non-GAAP Reconciliations” below. 26 (2) Free Cash Flow is defined as cash flows provided by operating activities 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.
Purchase obligations also include amounts committed with various third-party service providers to provide information technology services for periods up to fiscal 2025. See Note 22, Commitments and Contingencies, in our consolidated financial statements for further detail of our obligations and the expected timing of expected future payments.
Purchase obligations also include amounts committed with various third-party service providers to provide information technology services for periods up to fiscal 2028. See Note 22, Commitments and Contingencies, in our consolidated financial statements for further detail of our obligations and the expected timing of expected future payments.
The Company estimates it is reasonably possible that the liability for unrecognized tax benefits will decrease by up to $17 million in the next 12 months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions.
The Company estimates it is reasonably possible that the liability for unrecognized tax benefits will decrease by up to $15 million in the next 12 months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions.
The increase in operating income was due to the factors discussed in the relevant sections above. Other (Income) Expense—Net Other (income) expense—net includes components of net periodic benefit costs (credits), exclusive of the service cost component associated with our defined benefit and other postretirement plans.
The increase in operating income was due to the factors discussed in the relevant sections above. 29 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.
Our fiscal year 2021 assessment for impairment of goodwill was performed using a qualitative approach to determine, as of the date of the assessment, whether it was more likely than not that the fair value of goodwill was less than its carrying value.
Our fiscal year 2023 assessment for impairment of goodwill was performed using a qualitative approach to determine, as of the date of the assessment, whether it was more likely than not that the fair value of goodwill was less than its carrying value.
Based on our qualitative fiscal year 2021 annual impairment analysis for goodwill, we concluded that it is more likely than not that the fair value of goodwill exceeded its carrying value.
Based on our qualitative fiscal year 2023 annual impairment analysis for goodwill, we concluded that it is more likely than not that the fair value of goodwill exceeded its carrying value.
(11) Represents our income tax provision (benefit) adjusted for the tax effect of pre-tax items excluded from Adjusted net income and the removal of applicable discrete tax items. Applicable discrete tax items include changes in tax laws or rates, changes related to prior year unrecognized tax benefits, discrete changes in valuation allowances, and excess tax benefits associated with share-based compensation.
(9) 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. Applicable discrete tax items include changes in tax laws or rates, changes related to prior year unrecognized tax benefits, discrete changes in valuation allowances, and excess tax benefits associated with share-based compensation.
Other intangible assets include customer relationships, amortizable trade names, non- 34 compete agreements, the brand names comprising our portfolio of private brands, and trademarks. We assess goodwill and other intangible assets with indefinite lives for impairment each year, or more frequently if events or changes in circumstances indicate an asset may be impaired.
Other intangible assets include customer relationships, amortizable trade names, noncompete agreements, the brand names comprising our portfolio of private brands, and trademarks. We assess goodwill and other intangible assets with indefinite lives for impairment each year, or more frequently if events or changes in circumstances indicate an asset may be impaired.
Adjusted EBITDA is defined as EBITDA adjusted for (1) restructuring costs and asset impairment charges; (2) share-based compensation expense; (3) the non-cash impact of LIFO reserve adjustments; (4) loss on extinguishment of debt; (5) pension settlements; (6) business transformation costs; and (7) other gains, losses, or costs as specified in the agreements governing our indebtedness.
Adjusted EBITDA is defined as EBITDA adjusted for (1) restructuring costs and asset impairment charges; (2) share-based compensation expense; (3) the impact of LIFO reserve adjustments; (4) loss on extinguishment of debt; (5) business transformation costs; and (6) other gains, losses, or costs as specified in the agreements governing our indebtedness.
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. The agreements governing our indebtedness contain customary covenants.
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 as well as beyond 12 months.
Income Taxes Our effective income tax rate for fiscal year 2021 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.
Income Taxes 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.
Our effective income tax rate for fiscal year 2020 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.
Our effective income tax rate for fiscal year 2022 of 27% 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.
For additional information, see Item 1A of Part I, “Risk Factors-Risks Relating to Our Indebtedness.” USF had approximately $1.4 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 January 1, 2022.
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.
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 agreements governing our indebtedness contain customary covenants. These include, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on our assets, pay dividends, or engage in mergers or consolidations.
For a comparison of our consolidated results of operations for fiscal years 2020 and 2019, 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 January 2, 2021, filed with the SEC on February 16, 2021.
For a comparison of our consolidated results of operations for fiscal years 2022 and 2021, 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 31, 2022, filed with the SEC on February 16, 2023.
Adjusted net income is defined as net income excluding the items used to calculate Adjusted EBITDA listed above and further adjusted for the tax effect of the exclusions and discrete tax items.
Adjusted EBITDA margin is Adjusted EBITDA divided by total net sales. Adjusted Net Income is defined as net income excluding the items used to calculate Adjusted EBITDA listed above and further adjusted for the tax effect of the exclusions and discrete tax items.
These discrete tax items included an aggregate tax benefit of $10 million consisting of a tax benefit of $2 million related to a decrease in an unrecognized tax benefit and a tax benefit of $8 million, primarily related to excess tax benefits associated with share-based compensation.
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.
Cash flows provided by financing activities in fiscal year 2021 also included $20 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 $14 million of employee tax withholdings paid in connection with the vesting of stock awards.
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.
The following includes a comparison of our consolidated results of operations for fiscal years 2021 and 2020.
The following includes a comparison of our consolidated results of operations for fiscal years 2023 and 2022.
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 January 1, 2022, the Company had approximately $1.9 billion in cash and available liquidity.
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 December 30, 2023, the Company had approximately $2.0 billion in cash and available liquidity.
The incremental senior secured term loan borrowed in September 2019 (the “2019 Incremental Term Loan Facility”) had a carrying value of $1,442 million, net of $25 million of unamortized deferred financing costs, as of January 1, 2022.
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.
Net Income (Loss) Our net income was $164 million in fiscal year 2021, compared to a net loss of $226 million in fiscal year 2020. The increase in net income was due to the relevant factors discussed above. Liquidity and Capital Resources Our ongoing operations and strategic objectives require working capital and continuing capital investment.
Net Income 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. Liquidity and Capital Resources Our ongoing operations and strategic objectives require working capital and continuing capital investment.
Organic growth —Organic growth includes growth from operating business that has been reflected in our results of operations for at least 12 months. Fiscal Year 2021 Highlights Financial Highlights —Total case volume increased 16.9% and independent restaurant case volume increased 28.0% in fiscal year 2021.
Organic growth —Organic growth includes growth from operating businesses that have been reflected in our results of operations for at least 12 months. Fiscal Year 2023 Highlights Financial Highlights —Total case volume increased 4.4% and independent restaurant case volume increased 6.9% in fiscal year 2023. Total organic case volume increased 3.9% in fiscal year 2023.
We incurred approximately $18 million of lender fees and third-party costs in connection with our issuance of the Unsecured Notes due 2029, consisting of a $9 million early redemption premium related to the Unsecured Senior Notes due 2024 and $9 million of costs associated with the issuance of the Unsecured Senior Notes due 2029, which were capitalized as deferred financing costs.
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.
Investing Activities Cash flows used in investing activities in fiscal years 2021 and 2020 included cash expenditures of $274 million and $189 million, respectively, on investments in information technology, new construction and/or expansion of distribution facilities, and property and equipment for fleet replacement.
Investing Activities Cash flows used in investing activities in fiscal years 2023 and 2022 included cash expenditures of $309 million and $265 million, respectively, and related to investments in information technology, new construction and expansion of distribution facilities and property and equipment for fleet replacement.
Certain employees are eligible to participate in our 401(k) savings plan. We made employer matching contributions to the 401(k) plan of $52 million and $47 million in fiscal years 2021 and 2020, respectively. We also are required to contribute to various multiemployer pension plans under the terms of certain of our CBAs.
We made employer matching contributions to the 401(k) plan of $65 million and $57 million in fiscal years 2023 and 2022, respectively. We also are required to contribute to various multiemployer pension plans under the terms of certain of our CBAs. Our contributions to these plans were $55 million and $47 million in fiscal years 2023 and 2022, respectively.
(10) Includes: (i) aggregate acquisition and integration related costs of $22 million, $45 million and $52 million for fiscal years 2021, 2020 and 2019, respectively; (ii) favorable legal settlement recoveries of $29 million for fiscal year 2021; and (iii) other gains, losses or costs that we are permitted to add back for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.
(8) 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; 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.
As a percentage of Net sales, gross profit was 15.8% in fiscal year 2021, compared to 16.3% in fiscal year 2020. Total operating expenses increased $435 million, or 11.5%, to $4,231 million in fiscal year 2021.
As a percentage of net sales, gross profit was 17.3% in fiscal year 2023, compared to 16.1% in fiscal year 2022. Total operating expenses increased $233 million, or 4.8%, to $5,131 million in fiscal year 2023.
Cash flows from financing activities in fiscal year 2020 also included $18 million of proceeds received from stock purchases under our employee stock purchase plan and $3 million of proceeds from the exercise of employee stock options, which were partially offset by $5 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 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 compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures. 28 The following table reconciles EBITDA, Adjusted EBITDA, Adjusted net income and Free cash flow to the most directly comparable GAAP financial performance and liquidity measures for the periods indicated: Fiscal Year 2021 2020 2019 (in millions) Net income (loss) available to common shareholders $ 121 $ (254) $ 385 Series A Preferred Stock dividends (see Note 14) (43) (28) — Net income (loss) 164 (226) 385 Interest expense—net 213 238 184 Income tax provision (benefit) 50 (68) 126 Depreciation expense 323 343 311 Amortization expense 55 79 51 EBITDA 805 366 1,057 Adjustments: Restructuring costs and asset impairment charges (1) 11 39 — Share-based compensation expense (2) 48 40 32 LIFO reserve adjustment (3) 165 25 22 Loss on extinguishment of debt (4) 23 — — Pension settlements (5) — — 12 Business transformation costs (6) 22 22 9 COVID-19 bad debt (benefit) expense (7) (15) 47 — COVID-19 product donations and inventory adjustments (8) — 50 — COVID-19 other related expenses (9) 3 13 — Business acquisition and integration related costs and other (10) (5) 46 62 Adjusted EBITDA 1,057 648 1,194 Depreciation expense (323) (343) (311) Interest expense—net (213) (238) (184) Income tax provision, as adjusted (11) (133) (19) (176) Adjusted net income (12) $ 388 $ 48 $ 523 Cash flow Cash flows from operating activities $ 419 $ 413 $ 760 Capital expenditures (274) (189) (258) Free cash flow $ 145 $ 224 $ 502 (1) Consists primarily of severance and related costs, organizational realignment costs and asset impairment charges.
We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures. 27 The following table reconciles EBITDA, Adjusted EBITDA, Adjusted Net Income and Free Cash Flow to the most directly comparable GAAP financial performance and liquidity measures for the periods indicated: Fiscal Year 2023 2022 2021 (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 Interest expense—net 324 255 213 Income tax provision 172 96 50 Depreciation expense 349 327 323 Amortization expense 46 45 55 EBITDA 1,397 988 805 Adjustments: Restructuring costs and asset impairment charges (1) 14 12 11 Share-based compensation expense (2) 56 45 48 LIFO reserve adjustment (3) (1) 147 165 Loss on extinguishment of debt (4) 21 — 23 Business transformation costs (5) 28 52 22 COVID-19 bad debt benefit (6) — — (15) COVID-19 other related expenses (7) — — 3 Business acquisition and integration related costs and other (8) 44 66 (5) Adjusted EBITDA 1,559 1,310 1,057 Depreciation expense (349) (327) (323) Interest expense—net (324) (255) (213) Income tax provision, as adjusted (9) (228) (190) (133) Adjusted Net Income $ 658 $ 538 $ 388 Cash flow Cash flows from operating activities $ 1,140 $ 765 $ 419 Capital expenditures (309) (265) (274) Free Cash Flow $ 831 $ 500 $ 145 (1) Consists primarily of non-CEO severance and related costs associated with organizational realignment and other impairment charges.
We incurred approximately $33 million of lender fees and third-party costs in connection with the aforementioned financing transactions.
We incurred approximately $4 million of lender fees and third-party costs in connection with the ABL Facility refinancing transaction.
Our contributions to these plans were $43 million and $44 million in fiscal years 2021 and 2020, respectively. Off-Balance Sheet Arrangements We had entered into $268 million of letters of credit, primarily in favor of certain commercial insurers to secure obligations with respect to our insurance programs, under the ABL Facility as of January 1, 2022.
Off-Balance Sheet Arrangements We had entered into $567 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 30, 2023.
These discrete tax items included a tax expense of $2 million primarily related to an increase in an unrecognized tax benefit and a tax expense of $1 million, primarily related to a tax benefit shortfall associated with share-based compensation.
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.
Gross profit as a percentage of net sales was 15.8% in fiscal year 2021, compared to 16.3% in fiscal year 2020, primarily driven by our increase in LIFO expense in fiscal year 2021 as compared to fiscal year 2020. 30 Operating Expenses Operating expenses, comprised of distribution, selling and administrative costs and restructuring costs and asset impairment charges, increased $435 million, or 11.5%, to $4,231 million in fiscal year 2021.
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 as a percentage of net sales were 14.4% in fiscal year 2023, compared to 14.4% in fiscal year 2022.
As a percentage of net sales, Adjusted EBITDA was 3.6% in fiscal year 2021, as compared to 2.8% in fiscal year 2020. Net Sales Total case volume increased 16.9% and independent restaurant case volume growth of 28.0% in fiscal year 2021.
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 $1,540 million, or 4.5% to $35,597 million in fiscal year 2023. • Total case volume increased 4.4% and independent restaurant case volume increased 6.9% in fiscal year 2023. • Total organic case volume increased 3.9% and organic independent restaurant case volume increased 6.4%. • Operating income was $1,017 million in fiscal year 2023, compared to operating income of $594 million in fiscal year 2022.
The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, our debt trading levels, our cash position, and other considerations. See Note 11, Debt, in our consolidated financial statements for a further description of our indebtedness.
The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, our debt trading levels, our cash position, and other considerations. Any potential debt reduction or other debt retirement could require significant use of our other available liquidity and capital resources.
The Unsecured Senior Notes due 2029 had an outstanding balance of $892 million, net of $8 million of unamortized deferred financing costs, as of January 1, 2022.
The Company’s 4.75% Senior Notes due 2029 (the “Unsecured Senior Notes due 2029”), had an outstanding balance of $894 million, net of $6 million of unamortized deferred financing costs, as of December 30, 2023.
Cash Flows The following table presents condensed highlights from our Consolidated Statements of Cash Flows for fiscal years 2021 and 2020: Fiscal Year 2021 2020 (in millions) Net income (loss) $ 164 $ (226) Changes in operating assets and liabilities (230) 154 Other adjustments 485 485 Net cash provided by operating activities 419 413 Net cash used in investing activities (262) (1,110) Net cash provided by financing activities (837) 1,427 Net (decrease) increase in cash, cash equivalents and restricted cash (680) 730 Cash, cash equivalents and restricted cash—beginning of year 828 98 Cash, cash equivalents and restricted cash—end of year $ 148 $ 828 32 Operating Activities Cash flows provided by operating activities increased $6 million to $419 million in fiscal year 2021.
Cash Flows The following table presents condensed highlights from our Consolidated Statements of Cash Flows for fiscal years 2023 and 2022: Fiscal Year 2023 2022 (in millions) Net income $ 506 $ 265 Changes in operating assets and liabilities 117 43 Other adjustments 517 457 Net cash provided by operating activities 1,140 765 Net cash used in investing activities (495) (255) Net cash used by financing activities (587) (447) Net increase in cash, cash equivalents and restricted cash 58 63 Cash, cash equivalents and restricted cash—beginning of year 211 148 Cash, cash equivalents and restricted cash—end of year $ 269 $ 211 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.
Operating Income (Loss) Our operating income was $424 million in fiscal year 2021, compared to an operating loss of $77 million in fiscal year 2020. Operating income as a percentage of Net sales was 1.4% in fiscal year 2021, while operating loss as a percentage of Net sales was 0.3% in fiscal year 2020.
Operating Income Our operating income was $1,017 million in fiscal year 2023, compared to operating income of $594 million in fiscal year 2022. Operating income as a percentage of net sales was 2.9% in fiscal year 2023, compared to 1.7% in fiscal year 2022.
Any potential debt reduction or refinancing could require significant use of our available liquidity and capital resources.
As economic conditions permit, we will consider opportunities to repurchase, refinance or otherwise reduce our debt obligations on favorable terms. Any potential debt reduction or refinancing could require significant use of our available liquidity and capital resources.
Cash flows used in investing activities in fiscal year 2020 also included the $972 million cash purchase price for the acquisition of Smart Foodservice. We expect total cash capital expenditures in fiscal year 2022 to be between $280 million and $300 million, exclusive of approximately $110 million of capital expenditures under our fleet financing leases.
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. 31 We expect total cash capital expenditures in fiscal year 2024 to be between $325 million and $375 million.
If the carrying value of the asset exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. During 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.
If the carrying value of the asset exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.
We recognized other income—net of $26 million and $21 million fiscal years 2021 and 2020, respectively. The increase in other income—net in 2021 is primarily due to the improved funded status of our defined benefit pension plan compared to fiscal year 2020.
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.
The Unsecured Senior Notes due 2030 had an outstanding balance of $495 million, net of $5 million of unamortized deferred financing costs, as of January 1, 2022. The 2021 Incremental Term Loan Facility had a carrying value of $893 million, net of $7 million of unamortized deferred financing costs, as of January 1, 2022.
The Company’s 7.250% Senior Notes due 2032 ( the “Unsecured Senior Notes due 2032”) had an outstanding balance of $495 million, net of $5 million of unamortized deferred financing costs, as of December 30, 2023.
In addition, we provide certain postretirement health and welfare benefits to eligible retirees and their dependents. We did not make significant contributions to the Company-sponsored defined benefit and other postretirement plans in fiscal years 2021 and 2020, and we do not expect to make significant contributions in fiscal year 2022.
We did not make significant contributions to the Company-sponsored defined benefit and other postretirement plans in fiscal years 2023 and 2022. In connection with the plan termination, we expect to make a contribution in 2024. Certain employees are eligible to participate in our 401(k) savings plan.
Our product development efforts continue to deliver product innovations that resonate with our customers. Operating Metrics Case growth —Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time. Customers periodically are reclassified, based on changes in size or other characteristics, and when those changes occur, the respective customer’s historical volume follows its new classification.
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.
Interest Expense—Net Interest expense—net decreased $25 million in fiscal year 2021, primarily due to a decrease in outstanding debt and reduced interest rates in fiscal year 2021 compared to fiscal year 2020.
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.
The Company’s working capital requirements increased in fiscal year 2021 in line with the recovery of sales volumes. Net cash provided by operating activities in fiscal year 2020 benefited from a reduction in working capital needs, primarily related to reduced sales volumes caused by the COVID-19 pandemic.
Net cash provided by operating activities in fiscal year 2022 benefited from a reduction in working capital needs.
Cash flows used by financing activities in fiscal year 2020 included $158 million of scheduled payments under our Term Loan Facilities and financing leases.
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.
Previously, we presented Adjusted net income (loss) available to common shareholders. 29 A reconciliation between the GAAP income tax provision (benefit) and the income tax provision, as adjusted, is as follows: Fiscal Year 2021 2020 2019 (in millions) GAAP income tax provision (benefit) $ 50 $ (68) $ 126 Tax impact of pre-tax income adjustments 74 92 47 Discrete tax items 9 (5) 3 Income tax provision, as adjusted $ 133 $ 19 $ 176 Comparison of Results Fiscal Years Ended January 1, 2022 and January 2, 2021 Highlights • Total case volume increased 16.9% and independent restaurant case volume increased 28.0% in fiscal year 2021.
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. 28 A reconciliation between the GAAP income tax provision (benefit) and the income tax provision, as adjusted, is as follows: Fiscal Year 2023 2022 2021 (in millions) GAAP income tax provision $ 172 $ 96 $ 50 Tax impact of pre-tax income adjustments 48 89 74 Discrete tax items 8 5 9 Income tax provision, as adjusted $ 228 $ 190 $ 133 Comparison of Results Fiscal Years Ended December 30, 2023 and December 31, 2022 Highlights • 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, operating income was 1.4% in fiscal year 2021, and operating loss was 0.3% in fiscal year 2020. • Net income was $164 million in fiscal year 2021, compared to a net loss of $226 million in fiscal year 2020. • Adjusted EBITDA increased $409 million, or 63.1%, to $1,057 million in fiscal year 2021.
As a percentage of net sales, operating income was 2.9% in fiscal year 2023, as compared to 1.7% in fiscal year 2022.
(7) 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. (8) Includes COVID-19 related expenses related to inventory adjustments and product donations. (9) Includes COVID-19 related costs that we are permitted to add back under certain agreements governing our indebtedness.
(7) Includes COVID-19 related costs that we are permitted to add back under certain agreements governing our indebtedness.
We had no outstanding borrowings and had issued letters of credit totaling $268 million under the ABL Facility as of January 1, 2022. There was remaining capacity of $1,722 million under the ABL Facility based on our borrowing base as of January 1, 2022.
Indebtedness The aggregate carrying value of our indebtedness was $4,674 million, net of $34 million of unamortized deferred financing costs, as of December 30, 2023. We had no outstanding borrowings and had issued letters of credit totaling $567 million under the ABL Facility as of December 30, 2023.
We incurred $12 million of cost associated with the issuance of the Unsecured Senior Notes due 2030 and the 2021 Incremental Term Loan Facility, which were capitalized as deferred financing costs. Cash flows used by financing activities in fiscal year 2021 also included $28 million of Series A Preferred Stock dividends.
Financing Activities 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.
On November 22, 2021, we (i) issued $500 million aggregate principal amount of 4.625% Senior Notes due 2030 (the “Unsecured Senior Notes due 2030”) and (ii) entered into a new incremental senior secured term “B” loan facility in an aggregate principal amount 31 of $900 million (the “2021 Incremental Term Loan Facility”) pursuant to a Ninth Amendment to the Amended and Restated Term Loan Credit Agreement, dated as of June 27, 2016 (as amended, the “Term Loan Credit Agreement”).
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. 30 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.
These increases in gross profit were partially offset by unfavorable year-over-year LIFO adjustments primarily due to inflation. Our LIFO method of inventory costing resulted in expense of $165 million in fiscal year 2021, compared to expense of $25 million in fiscal year 2020.
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.
The ABL Facility will mature in 2024 . The 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility will mature in 2026 and 2028, respectively. As economic conditions permit, we will consider opportunities to repurchase, refinance or otherwise reduce our debt obligations on favorable terms.
We also had $463 million of obligations under financing leases for transportation equipment and building leases as of December 30, 2023. The ABL Facility will mature in 2027 . The 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility will mature in 2026 and 2028, respectively.
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COVID-19 Our operations, our industry and the U.S. economy continue to be disrupted by the COVID-19 pandemic and related supply chain disruptions and labor shortages.
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Overview 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.
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The timing and extent of the economic recovery from the COVID-19 pandemic is dependent upon many factors, including the rate of vaccination, the emergence and severity of COVID-19 variants, the continued effectiveness of the vaccines against those variants, the frequency of booster vaccinations and the duration and implications of continued restrictions and safety measures.
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Net sales increased 4.5%, 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.
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Impact of COVID-19 on Our Business We continue to actively monitor the impacts of the COVID-19 pandemic on all aspects of our business including related actions taken by government authorities. We saw improvement in Net sales and total case volumes during fiscal year 2021 coinciding with declining infection rates and loosening of indoor dining restrictions and other safety measures.
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Total organic case volume increased 3.9% which includes 6.4% organic independent restaurant case volume growth. Operating Metrics Case growth —Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time.
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Overall demand started to return to pre-COVID-19 levels at times during 2021; however, full year case volumes remained lower than pre-COVID-19 levels. Economic and operating conditions for our business have improved in each quarter of 2021 as compared to the fourth quarter of 2020.
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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.
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However, uncertainty around the pandemic persists and, as a result, we and the industry may continue to face pandemic-related challenges, such as the recent Omicron variant and related case increases, as the recovery continues, such as constraints on the availability of product supply, increased product and logistics costs, labor shortages, inflation and shifts in the buying patterns of our customers.
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(5) Transformational costs represent non-recurring expenses prior to formal launch of strategic projects with anticipated long-term benefits to the Company. These costs generally relate to third party consulting and non-capitalizable construction or technology. For fiscal year 2023, business transformation costs related to projects associated with information technology infrastructure initiatives.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe are unable to predict the impact of using alternative reference rates and corresponding rate risk as of this time. Fuel Price Risk We are also exposed to risk due to fluctuations in the price and availability of diesel fuel.
Biggest changeThe future performance of Term SOFR cannot be predicted based on its limited historical performance. As a result, we are unable to predict the impact of using alternative reference rates and corresponding rate risk as of this time.
Using current published market price projections for diesel and estimated fuel consumption needs, a hypothetical 10% unfavorable change in diesel prices from the market price could result in approximately $17 million in additional fuel cost on uncommitted volumes through March 2023. 36
Using current published market price projections for diesel and estimated fuel consumption needs, a hypothetical 10% unfavorable change in diesel prices from the market price could result in approximately $14 million in additional fuel cost on uncommitted volumes through December 2024. 35
We also enter into forward purchase commitments for a portion of our projected diesel fuel requirements. As of January 1, 2022, we had diesel fuel forward purchase commitments totaling $33 million, which fix approximately 19% of our projected diesel fuel purchase needs through March 2023.
We also enter into forward purchase commitments for a portion of our projected diesel fuel requirements. As of December 30, 2023, we had diesel fuel forward purchase commitments totaling $33 million, which fix approximately 26% of our projected diesel fuel purchase needs through December 2024.
A hypothetical 1% change in the applicable rate would cause the interest expense on our floating rate debt to change by approximately $24 million per year (see Note 11, Debt, in our consolidated financial statements).
A hypothetical 1% change in the applicable rate would cause the interest expense on our floating rate debt to change by approximately $16 million per year (see Note 11, Debt, in our consolidated financial statements). Fuel Price Risk We are also exposed to risk due to fluctuations in the price and availability of diesel fuel.
Increases in the cost of diesel fuel can negatively affect consumer confidence and discretionary spending and increase the prices we pay for products, and the costs we incur to deliver products to our customers. Our activities to minimize fuel cost risk include route optimization, improving fleet utilization and assessing fuel surcharges.
Increases in the cost of diesel fuel can negatively affect consumer confidence and discretionary spending and increase the prices we pay for products, and the costs we incur to deliver products to our customers. Fuel costs related to outbound deliveries approximated $191 million during the fiscal year ended December 30, 2023.
We manage our debt portfolio to achieve an overall desired position of fixed and floating rates and may employ interest rate swaps as a tool to achieve that position.
We manage our debt portfolio to achieve an overall desired position of fixed and floating rates and may employ interest rate hedges as a tool to achieve that position. In April 2023, USF entered into two two-year rate cap 34 agreements, which will each mature on April 30, 2025 with a total notional amount of $450 million .
Approximately 47% of the principal amount of our debt bore interest at floating rates based on LIBOR or an alternative base rate, as defined in our credit agreements, as of January 1, 2022 .
After considering interest rate caps that fixed the interest rate on a total notional amount of $450 million of the current principal amount of the Term Loan Facilities, approximately 30% of the principal amount of our debt bore interest at floating rates based on Term SOFR or an alternative reference rate, as defined in our credit agreements, as of December 30, 2023.
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We have in the past entered into interest rate swap agreements to limit our exposure to variable interest rate terms on certain borrowings under our Initial Term Loan Facility, however, our remaining interest rate swap agreements expired on July 31, 2021.
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The interest rate cap agreements will effectively cap the interest rate on approximately 24% of the principal amount of the Term Loan Facilities. The Company’s maximum exposure to the variable component of the interest rate on the Term Loan Facilities will be 5% on the notional amount covered by the interest rate cap agreements.
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On March 5, 2021, the IBA, the administrator of LIBOR, announced that it will cease publication of U.S. dollar LIBOR tenors as of June 30, 2023 (instead of December 31, 2021), for the most common tenors (overnight and one, three, six and twelve months) and it will cease publication of U.S. dollar LIBOR tenors for less common tenors (one week and two months) as well as all tenors of non-U.S. dollar LIBOR as of December 31, 2021.
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We may, in the future, enter into additional interest rate hedges, the risks of which include changes in the interest rates affecting the fai r value of such instruments, potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties.
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Our remaining fuel purchase needs will occur at market rates unless contracted for a fixed price or hedged at a later date.
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Following the Intercontinental Exchange Benchmark Administration’s announcement that it will cease publication of the U.S. dollar LIBOR tenors as of June 30, 2023, we evaluated the impact of such announcement and the use of alternative reference rates on our existing contracts, including with respect to our term loan credit agreement.
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On June 1, 2023, we entered into an amendment to our term loan credit agreement to replace the LIBOR-based interest rate option included in the term loan credit agreement with an interest rate option based upon the Term Secured Overnight Financing Rate (“Term SOFR”). Term SOFR is a relatively new reference rate and has a very limited history.
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Our activities to minimize fuel cost risk include route optimization, improving fleet utilization, assessing fuel surcharges and enhancing fleet technology and transitioning to alternative fuel sources, including electric vehicles. We typically directly offset approximately 40% of the increases in fuel costs through fuel surcharges to customers.

Other USFD 10-K year-over-year comparisons