Q2 Fiscal 2021 Results August 9, 2021 Cautionary statements regarding forward-looking information This presentation contains "forward-looking statements" within the meaning of the federal securities laws concerning, among other things, our liquidity, our possible or assumed results of operations and our business strategies. These forward-looking statements, including any statements regarding EBITDA guidance, rely on a number of assumptions and our experience in the industry and are subject to risks, uncerta ...

US Foods Holding Corp. (NYSE:USFD) Q1 2021 Results Conference Call May 10, 2021 10:00 AM ET Â Company Participants Melissa Napier - SVP, IR and Treasury Pietro Satriano - CEO Dirk Locascio - CFO Conference Call Participants Kelly Bania - BMO Capital John Glass - Morgan Stanley John Heinbockel - Guggenheim Alex Slagle - Jefferies Lauren Silberman - Credit Suisse Edward Kelly - Wells Fargo Peter Saleh - BTIG Jeffrey Bernstein - Barclays Nicole Miller - Piper Sandler John Ivankoe - JP Morgan Jenna Giannelli - ...

Q1 Fiscal 2021 Results May 10, 2021 Cautionary statements regarding forward-looking information This presentation contains "forward-looking statements" within the meaning of the federal securities laws concerning, among other things, our liquidity, our possible or assumed results of operations and our business strategies. These forward-looking statements, including any statements regarding EBITDA guidance, rely on a number of assumptions and our experience in the industry and are subject to risks, uncertain ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 2, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 001-37786 US FOODS HOLDING CORP. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Delaware 26-0347906 (I.R. ...

Financial Data and Key Metrics Changes - The fourth quarter of fiscal 2020 included 14 weeks compared to 13 weeks in 2019, and the full fiscal year included 53 weeks versus 52 weeks in fiscal 2019 [4] - Adjusted EBITDA for the fourth quarter was $174 million, including approximately $8 million for the extra week, reflecting a decline of $26 million compared to the third quarter [41] - Adjusted net income was $10 million, with adjusted diluted EPS at $0.05 for the fourth quarter [41] - Sales inflation for the fourth quarter was 2%, similar to previous quarters, with the 53rd week contributing 5.3% to net sales [38] Business Line Data and Key Metrics Changes - The Smart Foodservice business continues to outperform the delivery business, with expectations for future growth opportunities in the cash and carry space [25] - Integration and synergy capture from acquisitions are on track, with $10 million of Food Group synergies achieved for 2020 and a target of $65 million by the end of 2023 [44] Market Data and Key Metrics Changes - Case volumes slowed in the last half of Q4 due to increased COVID cases and restrictions on in-person dining, but there was an improvement in restaurant and overall volume trends in January [32][33] - Southern markets with fewer restrictions are operating close to last year's levels, while regions like the Midwest and California have seen a quick increase in sales as restrictions have eased [62] Company Strategy and Development Direction - The company is focused on evolving its Great Food, Made Easy strategy to improve customer experience and capitalize on growth opportunities [10][12] - There is an emphasis on larger customers, with a robust pipeline for new business wins, and a focus on cash and carry as a higher-margin growth channel [56] - The company plans to open three to four stores in existing Smart Foodservice markets in 2021, with expectations for increased store openings in future years [27] Management's Comments on Operating Environment and Future Outlook - Management remains confident that case volume will recover as COVID cases decline and restaurant restrictions are lifted, although they are not providing specific financial guidance for 2021 [43] - The company expects to see improvements in gross profit margins as case volumes recover, driven by a better customer mix and fixed cost reductions [48] - The sentiment among independent restaurant owners is positive, with expectations for recovery supported by vaccine distribution and federal aid [63] Other Important Information - The company generated over $400 million of operating cash flow in fiscal 2020, demonstrating resilience despite pandemic impacts [49] - The company is focused on investing in its business and reducing debt, with a strong liquidity position of over $800 million in cash [44][46] Q&A Session Summary Question: Growth strategy in a post-COVID era - Management anticipates growth from independent restaurants, larger customers, and cash and carry channels, with a focus on expanding market share [53][56] Question: Addressable independent restaurant market recovery - Management sees a promising outlook for independents, with expectations for recovery to pre-COVID levels, although the exact timing is uncertain [61][66] Question: Competitive landscape and M&A opportunities - There has not been significant change in the competitive landscape, and management is focused on organic growth and successful integration of acquisitions [71][76] Question: Staffing and labor inflation dynamics - The company is hiring new employees in anticipation of increased demand, with some tightness in the labor market observed [129] Question: Incentive compensation changes - Changes were made to incentivize leadership for sales and profitability, with expectations for these changes to positively impact performance [122] Question: Gross margin performance and acquisition impact - Acquisitions had a modestly positive impact on overall EBITDA and gross margin, with expectations for improvement as volume recovers [95]

Business Overview - US Foods is a large, national distributor with scale advantages in a resilient industry poised to recover [6] - The company's "Great Food Made Easy" strategy drives profitable growth [6] - US Foods has a national footprint with 70 distribution facilities and 78 cash and carry stores [12] - The company offers a broad portfolio of products, with 400,000 SKUs [12] Financial Performance & Strategy - In Q3 2020, 35% of total sales came from private brands [20] - 70% of current sales revenue comes through e-commerce [21] - The company's omni-channel offering includes 78 cash and carry store locations [25] - The cash and carry business has 7-8% EBITDA margins and generated $85 million Adjusted EBITDA in 2019 [25] - The company's Organic Adjusted EBITDA grew from $875 million in FY2015 to $1,171 million in FY2019 [27] COVID-19 Impact & Recovery - Recent increases in COVID cases and temporary restrictions on restaurants have slowed near-term volume trends [7] - A slowdown in the pace of case volume recovery will result in Q4'20 Adjusted EBITDA below the previously communicated outlook [9]

Business Performance - Total legacy case volume for US Foods remained down by 18-20% year-over-year in November [6] - New restrictions on indoor dining have slowed restaurant recovery [6] - Modest improvement was seen in healthcare volume [6] - Steady total case volume continued in November, but temporary restrictions on restaurants are slowing near-term recovery [7] Financial Outlook - Fourth quarter 2020 Adjusted EBITDA is expected to be similar to the third quarter [6] Important Considerations - The presentation contains forward-looking statements that are subject to risks, uncertainties, and other important factors, many of which are beyond the company's control [2] - Legacy case volume refers to original US Foods locations only and does not include case volume from Smart Foodservice or the Food Group acquisitions [4]

US Foods Holding Corp (NYSE:USFD) Q3 2020 Results Conference Call November 2, 2020 10:00 AM ET Company Participants Melissa Napier - SVP, IR & Treasurer Pietro Satriano - Chairman & CEO Dirk Locascio - CFO Conference Call Participants John Heinbockel - Guggenheim Kelly Bania - BMO Capital Edward Kelly - Wells Fargo John Ivankoe - JPMorgan Lauren Silberman - Credit Suisse Alex Slagle - Jefferies Carla Casella - JPMorgan Jeff Priester - Barclays John Glass - Morgan Stanley William Reuter - Bank of America Ope ...

Q3 Fiscal 2020 Results November 2, 2020 Cautionary statements regarding forward-looking information This presentation contains "forward-looking statements" within the meaning of the federal securities laws concerning, among other things, our liquidity, our possible or assumed results of operations and our business strategies. These forward-looking statements, including any statements regarding EBITDA guidance, rely on a number of assumptions and our experience in the industry and are subject to risks, uncer ...

PART I [Business Overview](index=5&type=section&id=Item%201.%20Business) US Foods Holding Corp. is a leading U.S. foodservice distributor serving 300,000 locations with over 400,000 SKUs, emphasizing innovation and technology - US Foods Holding Corp. is a leading foodservice distributor in the U.S., serving approximately **300,000 customer locations** nationwide with over **400,000 fresh, frozen, and dry food SKUs**, as well as non-food items[17](index=17&type=chunk)[18](index=18&type=chunk) - The company's mission is 'First In Food', supported by the 'GREAT FOOD. MADE EASY.™' strategy, which emphasizes innovative products (e.g., Scoop™, Serve Good® program) and technology solutions (e.g., mobile ordering, business analytics) to help customers operate profitably[17](index=17&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - In September 2019, US Foods completed the acquisition of five foodservice companies (the "Food Group") for **$1.8 billion**, significantly expanding its network in the West and Northwest U.S. Integration and synergy realization are key priorities[29](index=29&type=chunk)[152](index=152&type=chunk) - The U.S. foodservice distribution industry is highly competitive, with customer buying decisions based on product assortment, quality, price, and service levels. US Foods is a broadline distributor, targeting independent restaurants, healthcare, and hospitality customers[19](index=19&type=chunk)[20](index=20&type=chunk) Sales Mix by Principal Product Categories (Fiscal Years 2017-2019) | Product Category | 2019 (in millions) | 2018 (in millions) | 2017 (in millions) | | :----------------- | :------------------ | :------------------ | :------------------ | | Meats and seafood | $9,313 | $8,635 | $8,692 | | Dry grocery products | $4,427 | $4,239 | $4,266 | | Refrigerated and frozen grocery products | $4,253 | $3,898 | $3,799 | | Dairy | $2,685 | $2,520 | $2,533 | | Equipment, disposables and supplies | $2,483 | $2,298 | $2,243 | | Beverage products | $1,403 | $1,315 | $1,306 | | Produce | $1,375 | $1,270 | $1,308 | | **Total** | **$25,939** | **$24,175** | **$24,147** | - The company had approximately **28,000 employees** as of December 28, 2019, with about **5,000 being union members** covered by collective bargaining agreements (CBAs). **14 CBAs** covering approximately **1,400 employees** are subject to renegotiation in fiscal year 2020[47](index=47&type=chunk)[48](index=48&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces intense competition, supply chain risks, commodity price volatility, and financial risks from substantial debt - The U.S. foodservice distribution industry is a low-margin business, and profitability is directly affected by cost deflation or inflation, commodity volatility, and intense competition from national, regional, local, and adjacent distributors[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - Reliance on third-party suppliers and the absence of long-term contracts expose the company to supply interruptions and product cost increases due to factors like weather, food-borne illnesses, and transportation issues[64](index=64&type=chunk) - Customer relationships, including those with Group Purchasing Organizations (GPOs), are generally not long-term and can be terminated, leading to pricing pressure or loss of business. Sales to GPO members accounted for approximately **25% of net sales** in fiscal year 2019[65](index=65&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - Failure to increase or maintain sales to independent restaurant customers and private label products, which are the most profitable segments, could negatively impact profitability[70](index=70&type=chunk) - Acquisitions, such as the Food Group in September 2019, carry risks related to integration and the realization of anticipated synergies[71](index=71&type=chunk)[72](index=72&type=chunk) - Fluctuations in fuel costs can increase operating expenses and reduce consumer discretionary spending, potentially impacting sales and margins[74](index=74&type=chunk)[76](index=76&type=chunk) - The company is subject to extensive government regulations (food handling, environmental, employment, transportation) and non-compliance could lead to significant liabilities, fines, or operational restrictions[37](index=37&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[88](index=88&type=chunk)[91](index=91&type=chunk) - As of December 28, 2019, the company had **$4,736 million of indebtedness**, with approximately **65% at variable interest rates**, exposing it to interest rate fluctuations and potentially limiting financial flexibility due to restrictive covenants[106](index=106&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[216](index=216&type=chunk) [Unresolved Staff Comments](index=28&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments were reported by the company - There are no unresolved staff comments[114](index=114&type=chunk) [Properties](index=29&type=section&id=Item%202.%20Properties) As of February 13, 2020, US Foods operated 92 primary facilities, including 72 distribution centers, with 77% owned - As of February 13, 2020, US Foods maintained **92 primary operating facilities**, including **72 distribution centers** and other supporting facilities[116](index=116&type=chunk) - Approximately **77% of the primary operating facilities were owned**, and **23% were leased**, with lease arrangements expiring between 2020 and 2031[116](index=116&type=chunk)[119](index=119&type=chunk) Primary Operating Facilities by State (as of February 13, 2020) | Location | Number of Facilities | Square Feet | | :--------- | :------------------- | :------------ | | Alabama | 2 | 438,804 | | Alaska | 1 | 131,285 | | Arizona | 4 | 566,196 | | Arkansas | 1 | 135,009 | | California | 7 | 1,687,663 | | Colorado | 2 | 501,427 | | Connecticut | 1 | 239,899 | | Florida | 5 | 1,173,162 | | Georgia | 2 | 691,017 | | Illinois | 4 | 856,147 | | Indiana | 1 | 233,784 | | Iowa | 1 | 114,250 | | Kansas | 1 | 350,859 | | Louisiana | 1 | 69,304 | | Michigan | 1 | 276,003 | | Minnesota | 3 | 414,963 | | Mississippi | 1 | 287,356 | | Missouri | 3 | 602,947 | | Montana | 1 | 194,088 | | Nebraska | 2 | 246,430 | | Nevada | 4 | 840,219 | | New Hampshire | 1 | 533,237 | | New Jersey | 3 | 1,073,375 | | New Mexico | 1 | 133,486 | | New York | 3 | 388,683 | | North Carolina | 3 | 954,736 | | North Dakota | 2 | 221,314 | | Ohio | 3 | 501,894 | | Oklahoma | 1 | 308,307 | | Oregon | 1 | 350,000 | | Pennsylvania | 6 | 1,179,319 | | South Carolina | 2 | 1,220,499 | | South Dakota | 1 | 47,400 | | Tennessee | 2 | 602,270 | | Texas | 4 | 963,732 | | Utah | 1 | 267,180 | | Virginia | 2 | 629,318 | | Washington | 5 | 893,570 | | West Virginia | 1 | 220,537 | | Wisconsin | 2 | 354,127 | | **Total** | **92** | **20,893,796** | | Owned | | 16,046,712 (77%) | | Leased | | 4,847,084 (23%) | [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal proceedings, none expected to materially impact its financial position - The company is party to legal proceedings arising in the ordinary course of business, but does not believe they will have a material adverse effect on its business, financial condition, or results of operations[120](index=120&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no disclosures related to mine safety - There are no mine safety disclosures[121](index=121&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) USFD common stock trades on NYSE since May 2016, with no dividends paid or planned, and 22,954 record holders - US Foods Holding Corp. common stock began trading publicly on the New York Stock Exchange ("NYSE") under the symbol "USFD" on **May 26, 2016**[124](index=124&type=chunk) - As of February 7, 2020, there were **22,954 holders of record** of the common stock[124](index=124&type=chunk) - The company has not paid any dividends on its common stock since its public trading began and has no plans to pay dividends in the foreseeable future[125](index=125&type=chunk)[126](index=126&type=chunk) Stock Performance (May 26, 2016 - December 28, 2019) | | 5/26/16 | 12/31/16 | 12/30/17 | 12/29/18 | 12/28/19 | | :----------------------------- | :------ | :------- | :------- | :------- | :------- | | US Foods Holding Corp. | $100 | $110 | $128 | $127 | $168 | | S&P 500 | $100 | $110 | $134 | $128 | $169 | | S&P Food and Staples Retailing Index | $100 | $107 | $132 | $131 | $167 | [Selected Financial Data](index=34&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides five-year historical consolidated financial data and reconciliations of non-GAAP measures for performance evaluation Consolidated Statements of Operations Data (Fiscal Years 2015-2019) | (in millions, except per share data) | 2019 | 2018 | 2017 | 2016 | 2015 | | :----------------------------------- | :---- | :---- | :---- | :---- | :---- | | Net sales | $25,939 | $24,175 | $24,147 | $22,919 | $23,127 | | Cost of goods sold | 21,352 | 19,869 | 19,929 | 18,866 | 19,114 | | Gross profit | 4,587 | 4,306 | 4,218 | 4,053 | 4,013 | | Operating expenses | 3,888 | 3,648 | 3,630 | 3,634 | 3,824 | | Operating income | 699 | 658 | 588 | 419 | 189 | | Income before income taxes | 511 | 496 | 404 | 131 | 193 | | Income tax provision (benefit) | 126 | 89 | (40) | (79) | 25 | | Net income | $385 | $407 | $444 | $210 | $168 | | Net income per share (Basic) | $1.77 | $1.88 | $2.00 | $1.05 | $0.99 | | Net income per share (Diluted) | $1.75 | $1.87 | $1.97 | $1.03 | $0.98 | | Cash flows—operating activities | $760 | $609 | $749 | $549 | $555 | | Cash flows—investing activities | (1,987) | (232) | (356) | (762) | (271) | | Cash flows—financing activities | 1,220 | (391) | (405) | (180) | (110) | | Capital expenditures | 258 | 235 | 221 | 164 | 187 | | EBITDA | 1,057 | 1,011 | 952 | 782 | 876 | | Adjusted EBITDA | 1,194 | 1,103 | 1,058 | 972 | 875 | | Adjusted net income | 523 | 472 | 370 | 476 | 300 | | Free cash flow | 502 | 374 | 528 | 385 | 368 | Balance Sheet Data (Fiscal Years 2015-2019) | (in millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :-------------- | :---- | :---- | :---- | :---- | :---- | | Cash, cash equivalents and restricted cash | $98 | $105 | $119 | $131 | $524 | | Total assets | 11,288 | 9,186 | 9,037 | 8,944 | 9,239 | | Total debt | 4,736 | 3,457 | 3,757 | 3,782 | 4,745 | | Total shareholders' equity | 3,709 | 3,229 | 2,751 | 2,538 | 1,873 | - Non-GAAP financial measures (EBITDA, Adjusted EBITDA, Adjusted net income, Free cash flow) are provided as supplemental information to GAAP measures, excluding certain items not considered part of core operating results or liquidity, and are used by management for performance evaluation, target setting, and compensation[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) Reconciliation of GAAP Net Income to Adjusted EBITDA and Adjusted Net Income (Fiscal Years 2015-2019) | (in millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :----------------------------------- | :---- | :---- | :---- | :---- | :---- | | Net income | $385 | $407 | $444 | $210 | $168 | | Interest expense—net | 184 | 175 | 170 | 229 | 285 | | Income tax provision (benefit) | 126 | 89 | (40) | (79) | 25 | | Depreciation expense | 311 | 300 | 283 | 266 | 253 | | Amortization expense | 51 | 40 | 95 | 155 | 146 | | **EBITDA** | **1,057** | **1,011** | **952** | **782** | **876** | | Adjustments (e.g., Former Sponsor fees, Restructuring costs, Share-based compensation, LIFO, Acquisition-related costs) | 137 | 92 | 106 | 190 | (1) | | **Adjusted EBITDA** | **1,194** | **1,103** | **1,058** | **972** | **875** | | Depreciation expense | (311) | (300) | (283) | (266) | (253) | | Interest expense—net | (184) | (175) | (170) | (229) | (285) | | Income tax provision, as adjusted | (176) | (156) | (235) | (1) | (37) | | **Adjusted net income** | **$523** | **$472** | **$370** | **$476** | **$300** | Reconciliation of Cash Flows from Operating Activities to Free Cash Flow (Fiscal Years 2015-2019) | (in millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :----------------------------------- | :---- | :---- | :---- | :---- | :---- | | Cash flows from operating activities | $760 | $609 | $749 | $549 | $555 | | Capital expenditures | (258) | (235) | (221) | (164) | (187) | | **Free cash flow** | **$502** | **$374** | **$528** | **$385** | **$368** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section details the company's financial performance for 2019 and 2018, including sales growth, profitability, liquidity, and critical accounting policies - Fiscal year 2019 highlights include a **4.6% increase in total case volume**, with independent restaurant case volume growing by **7.1%**[153](index=153&type=chunk)[161](index=161&type=chunk) - Net sales increased by **$1,764 million**, or **7.3%**, to **$25,939 million** in fiscal year 2019, primarily due to organic case volume growth and year-over-year inflation in multiple product categories. The Food Group acquisition contributed **$843 million** to net sales[153](index=153&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - Gross profit increased by **$281 million**, or **6.5%**, to **$4,587 million** in fiscal year 2019, driven by margin expansion initiatives, the Food Group acquisition, and increased organic case volume, partially offset by unfavorable LIFO adjustments[154](index=154&type=chunk)[164](index=164&type=chunk) - Operating income increased by **$41 million**, or **6.2%**, to **$699 million** in fiscal year 2019. As a percentage of net sales, operating income remained stable at **2.7%** in both 2019 and 2018[155](index=155&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - Net income decreased to **$385 million** in fiscal year 2019 from **$407 million** in fiscal year 2018, influenced by factors such as pension settlement charges and changes in income tax provisions[167](index=167&type=chunk)[170](index=170&type=chunk) - Adjusted EBITDA increased by **$91 million**, or **8.3%**, to **$1,194 million** in fiscal year 2019, maintaining **4.6%** as a percentage of net sales[167](index=167&type=chunk) - Cash flows provided by operating activities increased by **$151 million** to **$760 million** in fiscal year 2019, primarily due to improved business performance and working capital, and lower pension contributions[187](index=187&type=chunk) - Total indebtedness was **$4,736 million** as of December 28, 2019, net of unamortized deferred financing costs. The company refinanced its ABL Facility and amended its ABS and Initial Term Loan Facilities in 2019, and incurred new debt for the Food Group acquisition[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Critical accounting policies include the valuation of goodwill and other intangible assets, vendor consideration, and income taxes[204](index=204&type=chunk) [Operating Metrics](index=40&type=section&id=Operating%20Metrics) Defines how case growth and organic growth are measured and reported - Case growth, by customer type, is reported as of a point in time, with historical volume reclassified based on changes in customer characteristics[151](index=151&type=chunk) - Organic growth includes growth from operating business reflected in results for at least **12 months**[151](index=151&type=chunk) [Fiscal Year 2019 Highlights](index=40&type=section&id=Fiscal%20Year%202019%20Highlights) Summarizes key financial and operational achievements for fiscal year 2019, including the Food Group acquisition - The Food Group acquisition was completed on September 13, 2019, for **$1.8 billion**, expanding the company's network in the West and Northwest U.S[152](index=152&type=chunk) - Total case volume increased **4.6%** in fiscal year 2019, with independent restaurant growth at **7.1%**[153](index=153&type=chunk) - Net sales increased **$1,764 million (7.3%)** in fiscal year 2019, with the Food Group contributing **$843 million**[153](index=153&type=chunk) - Gross profit increased **$281 million (6.5%)** to **$4,587 million**, but as a percentage of net sales, it slightly decreased from **17.8% to 17.7%** due to unfavorable LIFO adjustments[154](index=154&type=chunk) - Total operating expenses increased **$240 million (6.6%)** to **$3,888 million**, primarily due to higher wage costs, Food Group inclusion, and acquisition-related costs[155](index=155&type=chunk) [Outlook](index=40&type=section&id=Outlook) Provides expectations for the U.S. foodservice distribution industry and the company's strategic focus for fiscal year 2020 - Moderate positive growth is expected in the U.S. foodservice distribution industry in fiscal year 2020, driven by favorable consumer confidence and unemployment rates[156](index=156&type=chunk) - The company anticipates continued high competitive pressures and moderate inflation in fiscal year 2020[156](index=156&type=chunk) - Sales to independent restaurant customers are expected to continue increasing as a proportion of total sales, contributing to margin expansion[156](index=156&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Presents a consolidated overview of financial results for fiscal years 2019 and 2018 Consolidated Statements of Operations (Fiscal Years 2018-2019) | (in millions) | 2019 | 2018 | | :----------------------------------- | :---- | :---- | | Net sales | $25,939 | $24,175 | | Cost of goods sold | 21,352 | 19,869 | | Gross profit | 4,587 | 4,306 | | Operating expenses | 3,888 | 3,648 | | Operating income | 699 | 658 | | Other expense (income) net | 4 | (13) | | Interest expense—net | 184 | 175 | | Income before income taxes | 511 | 496 | | Income tax provision | 126 | 89 | | Net income | $385 | $407 | | Gross profit (% of Net Sales) | 17.7% | 17.8% | | Operating income (% of Net Sales) | 2.7% | 2.7% | | Net income (% of Net Sales) | 1.5% | 1.7% | | Adjusted EBITDA (% of Net Sales) | 4.6% | 4.6% | [Comparison of Results Fiscal Years Ended December 28, 2019 and December 29, 2018](index=42&type=section&id=Comparison%20of%20Results%20Fiscal%20Years%20Ended%20December%2028%2C%202019%20and%20December%2029%2C%202018) Compares detailed financial performance metrics between fiscal years 2019 and 2018, highlighting key drivers - Net sales increased by **$1,764 million (7.3%)** in fiscal year 2019, driven by a **4.6% increase in case volume** and a **2.7% increase in net sales rate per case** due to inflation. Private brand sales remained at approximately **35% of net sales**[162](index=162&type=chunk)[163](index=163&type=chunk) - Gross profit increased by **$281 million (6.5%)** in fiscal year 2019, but the gross profit margin decreased slightly to **17.7%** from **17.8%** in 2018, primarily due to **$22 million in LIFO expense** in 2019 compared to de minimis in 2018[164](index=164&type=chunk) - Operating expenses increased by **$240 million (6.6%)** in 2019, mainly due to **$149 million in higher distribution-related wage costs**, Food Group contributions, and acquisition-related costs, partially offset by expense control initiatives[165](index=165&type=chunk) - Other expense—net was **$4 million** in 2019, including **$12 million in non-cash pension settlement charges**, compared to other income—net of **$13 million** in 2018[167](index=167&type=chunk) - Interest expense—net increased by **$9 million** in 2019, primarily due to borrowings for the Food Group acquisition[168](index=168&type=chunk) - The effective income tax rate was **25%** in 2019, compared to **18%** in 2018, influenced by state income taxes and discrete tax items[169](index=169&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's sources of liquidity, debt structure, cash flow activities, and contractual obligations - The company's primary liquidity sources are cash from operations and access to bank borrowings and other debt/financing arrangements[171](index=171&type=chunk) - Total indebtedness was **$4,736 million** as of December 28, 2019. Key debt facilities include the ABL Facility (**$1,600 million maximum, $1,227 million available capacity**), ABS Facility (**$800 million maximum, $552 million available capacity**), Initial Term Loan Facility (**$2,125 million carrying value**), Incremental Term Loan Facility (**$1,465 million carrying value**), and Senior Notes (**$596 million carrying value**)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) - Cash flows provided by operating activities increased by **$151 million** to **$760 million** in fiscal year 2019, driven by improved business performance and working capital[187](index=187&type=chunk) - Cash flows used in investing activities totaled **$1,987 million** in 2019, primarily due to the **$1.8 billion cash purchase price** for the Food Group acquisition and **$258 million in capital expenditures**[188](index=188&type=chunk) - Cash flows provided by financing activities were **$1,220 million** in 2019, including **$1.5 billion** from the Incremental Term Loan Facility and **$330 million** from revolving credit facilities to finance the Food Group acquisition[191](index=191&type=chunk)[193](index=193&type=chunk) Contractual Obligations (as of December 28, 2019) | | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | | :----------------------------------- | :---- | :--------------- | :-------- | :-------- | :---------------- | | Debt, including financing lease obligations | $4,779 | $142 | $398 | $2,783 | $1,456 | | Operating lease obligations | 203 | 48 | 71 | 42 | 42 | | Self-insured liabilities | 172 | 44 | 47 | 23 | 58 | | Pension plans and other postretirement benefits contributions | 7 | 1 | 2 | 2 | 2 | | Interest payments on debt | 882 | 181 | 358 | 231 | 112 | | Multiemployer contractual minimum pension contributions | 15 | 4 | 7 | 4 | — | | Purchase obligations | 1,092 | 1,028 | 55 | 9 | — | | **Total contractual cash obligations** | **$7,150** | **$1,448** | **$938** | **$3,094** | **$1,670** | [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Outlines key accounting policies and estimates, including goodwill valuation, vendor consideration, and income taxes - Critical accounting policies and estimates include the valuation of goodwill and other intangible assets, vendor consideration, and income taxes[204](index=204&type=chunk) - Goodwill and indefinite-lived intangible assets are assessed for impairment annually (beginning of fiscal third quarter) using a qualitative approach. For fiscal year 2019, no impairment was noted[205](index=205&type=chunk)[206](index=206&type=chunk)[208](index=208&type=chunk) - Vendor consideration (rebates and promotional incentives) is estimated based on purchasing activity and recognized as a reduction to inventory and cost of goods sold[210](index=210&type=chunk) - Income taxes are accounted for using the asset and liability method, recognizing deferred tax assets and liabilities. Uncertain tax positions are recognized when it is more likely than not that the position will be sustained[211](index=211&type=chunk)[212](index=212&type=chunk) [Recent Accounting Pronouncements](index=49&type=section&id=Recent%20Accounting%20Pronouncements) Details the adoption and expected impact of new accounting standards on the company's financial statements - The company adopted FASB ASU No. 2016-02, Leases (Topic 842), on December 30, 2018, using the modified retrospective approach, resulting in recording net lease assets and liabilities of approximately **$100 million**[275](index=275&type=chunk) - The adoption of ASU No. 2018-15 (Cloud Computing Arrangements) and ASU No. 2016-13 (Credit Losses) is not expected to materially affect the company's financial position or results of operations[278](index=278&type=chunk)[279](index=279&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk on variable debt with swaps and fuel price risk through various mitigation strategies - The company is exposed to interest rate risk from its floating rate debt (approximately **65% of total debt** as of December 28, 2019) and uses interest rate swaps to fix rates on a portion of its Initial Term Loan Facility[215](index=215&type=chunk)[216](index=216&type=chunk) - A hypothetical **1% change** in the applicable interest rate would cause interest expense on floating rate debt to change by approximately **$31 million per year**[216](index=216&type=chunk) - The company is exposed to fuel price risk due to significant diesel fuel requirements for its vehicle fleet. Mitigation strategies include route optimization, fleet utilization, fuel surcharges, and forward purchase commitments[217](index=217&type=chunk)[218](index=218&type=chunk) - As of December 28, 2019, the company had diesel fuel forward purchase commitments totaling **$96 million** through April 2021, covering approximately **50% of projected needs**[220](index=220&type=chunk) [Financial Statements and Supplementary Data](index=52&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Presents audited consolidated financial statements, independent auditor's report, and detailed notes for fiscal years 2017-2019 - The financial statements were audited by Deloitte & Touche LLP, who expressed an unqualified opinion on the financial statements and internal control over financial reporting as of December 28, 2019[224](index=224&type=chunk)[225](index=225&type=chunk) - The company adopted FASB ASC Topic 842, Leases, effective December 30, 2018, using the modified retrospective approach[226](index=226&type=chunk) - Vendor consideration and receivables were identified as a critical audit matter due to the effort required to evaluate recording in accordance with vendor agreements[230](index=230&type=chunk)[232](index=232&type=chunk) [Report of Independent Registered Public Accounting Firm](index=53&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on financial statements and internal controls, identifying vendor consideration as a critical audit matter - Deloitte & Touche LLP provided an unqualified opinion on the consolidated financial statements for the period ended December 28, 2019[224](index=224&type=chunk) - An unqualified opinion was also issued on the company's internal control over financial reporting as of December 28, 2019[225](index=225&type=chunk) - Vendor consideration and receivables were identified as a critical audit matter due to the complexity of evaluating whether amounts were recorded in accordance with vendor agreements[230](index=230&type=chunk)[232](index=232&type=chunk) [Consolidated Balance Sheets](index=56&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, as of December 28, 2019, and December 29, 2018 Consolidated Balance Sheets (as of December 28, 2019 and December 29, 2018) | (In millions) | December 28, 2019 | December 29, 2018 | | :----------------------------------- | :------------------ | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $90 | $104 | | Accounts receivable, net | 1,455 | 1,347 | | Vendor receivables, net | 143 | 106 | | Inventories—net | 1,432 | 1,279 | | Total current assets | 3,262 | 2,979 | | Property and equipment—net | 2,075 | 1,842 | | Goodwill | 4,728 | 3,967 | | Other intangibles—net | 967 | 324 | | Total assets | $11,288 | $9,186 | | **LIABILITIES AND EQUITY** | | | | Cash overdraft liability | $222 | $157 | | Accounts payable | 1,460 | 1,359 | | Accrued expenses and other current liabilities | 538 | 454 | | Current portion of long-term debt | 142 | 106 | | Total current liabilities | 2,362 | 2,076 | | Long-term debt | 4,594 | 3,351 | | Deferred tax liabilities | 308 | 298 | | Other long-term liabilities | 315 | 232 | | Total liabilities | 7,579 | 5,957 | | Total shareholders' equity | 3,709 | 3,229 | | Total liabilities and shareholders' equity | $11,288 | $9,186 | [Consolidated Statements of Comprehensive Income](index=57&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Details the company's net income and other comprehensive income for fiscal years 2017-2019 Consolidated Statements of Comprehensive Income (Fiscal Years 2017-2019) | (In millions, except per share data) | December 28, 2019 | December 29, 2018 | December 30, 2017 | | :----------------------------------- | :------------------ | :------------------ | :------------------ | | Net sales | $25,939 | $24,175 | $24,147 | | Gross profit | 4,587 | 4,306 | 4,218 | | Operating expenses | 3,888 | 3,648 | 3,630 | | Operating income | 699 | 658 | 588 | | Other expense (income)—net | 4 | (13) | 14 | | Interest expense—net | 184 | 175 | 170 | | Income before income taxes | 511 | 496 | 404 | | Income tax provision (benefit) | 126 | 89 | (40) | | Net income | 385 | 407 | 444 | | Other comprehensive income—net of tax: | | | | | Changes in retirement benefit obligations | 45 | 6 | 16 | | Unrecognized (loss) gain on interest rate swaps | (15) | 5 | 8 | | Comprehensive income | $415 | $418 | $468 | | Net income per share (Basic) | $1.77 | $1.88 | $2.00 | | Net income per share (Diluted) | $1.75 | $1.87 | $1.97 | [Consolidated Statements of Shareholders' Equity](index=58&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shows changes in shareholders' equity over fiscal years 2017-2019, including net income and share-based compensation Consolidated Statements of Shareholders' Equity (Fiscal Years 2017-2019) | (In millions) | December 31, 2016 | December 30, 2017 | December 29, 2018 | December 28, 2019 | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Total Shareholders' Equity (Beginning) | $2,538 | $2,751 | $3,229 | | Share-based compensation expense | 19 | 28 | 32 | | Proceeds from employee stock purchase plan | 16 | 19 | 19 | | Exercise of stock options | 18 | 19 | 19 | | Tax withholding payments for net share-settled equity awards | (28) | (6) | (5) | | Common stock repurchased | (280) | — | — | | Changes in retirement benefit obligations, net of income tax | 16 | 6 | 45 | | Unrecognized (loss) gain on interest rate swaps, net of income tax | 8 | 5 | (15) | | Net income | 444 | 407 | 385 | | **Total Shareholders' Equity (Ending)** | **$2,751** | **$3,229** | **$3,709** | [Consolidated Statements of Cash Flows](index=59&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Provides a breakdown of cash flows from operating, investing, and financing activities for fiscal years 2017-2019 Consolidated Statements of Cash Flows (Fiscal Years 2017-2019) | (In millions) | December 28, 2019 | December 29, 2018 | December 30, 2017 | | :----------------------------------- | :------------------ | :------------------ | :------------------ | | Net cash provided by operating activities | $760 | $609 | $749 | | Net cash used in investing activities | (1,987) | (232) | (356) | | Net cash provided by (used in) financing activities | 1,220 | (391) | (405) | | Net decrease in cash, cash equivalents and restricted cash | (7) | (14) | (12) | | Cash, cash equivalents and restricted cash—end of year | $98 | $105 | $119 | | Supplemental disclosures: Interest paid—net | $173 | $160 | $158 | | Supplemental disclosures: Income taxes paid—net | $137 | $78 | $11 | [Notes to Consolidated Financial Statements](index=61&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the consolidated financial statements [Note 1. Overview and Basis of Presentation](index=61&type=section&id=Note%201.%20Overview%20and%20Basis%20of%20Presentation) Describes US Foods Holding Corp.'s business segment and fiscal year structure - US Foods Holding Corp. operates as one business segment, marketing and distributing food and non-food products to foodservice customers across the U.S[243](index=243&type=chunk) - The company operates on a **52 or 53-week fiscal year**, with fiscal years 2019, 2018, and 2017 being **52-week years**. Fiscal year 2020 will be a **53-week year**[244](index=244&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=61&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the company's key accounting principles, including inventory valuation, goodwill impairment, and self-insurance - The company's consolidated financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions[246](index=246&type=chunk) - Inventories are recorded at the lower of cost or market using the last-in, first-out ("LIFO") method. LIFO reserves were **$152 million** in 2019 and **$130 million** in 2018, resulting in a **$22 million increase** in cost of goods sold in 2019[252](index=252&type=chunk)[254](index=254&type=chunk) - Goodwill and indefinite-lived intangible assets (brand names and trademarks) are assessed for impairment annually, typically at the beginning of the fiscal third quarter[259](index=259&type=chunk)[260](index=260&type=chunk) - The company is self-insured for general, fleet, and workers' compensation claims, with liabilities estimated based on known claims and past history[261](index=261&type=chunk)[262](index=262&type=chunk) - Vendor consideration (rebates and incentives) is recognized as a reduction to inventory and cost of goods sold as obligations are fulfilled[249](index=249&type=chunk)[266](index=266&type=chunk) - Shipping and handling costs are included in distribution, selling and administrative costs, totaling **$1.8 billion** in 2019[268](index=268&type=chunk) [Note 3. Recent Accounting Pronouncements](index=65&type=section&id=Note%203.%20Recent%20Accounting%20Pronouncements) Details the adoption and impact of new accounting standards, including Topic 842 on leases - The company adopted ASU No. 2018-02 (Income Statement, Reporting Comprehensive Income) in fiscal year 2019, electing not to reclassify tax effects from accumulated other comprehensive income to retained earnings[274](index=274&type=chunk) - ASU No. 2016-02, Leases (Topic 842), was adopted on December 30, 2018, using a modified retrospective approach, resulting in approximately **$100 million** in net lease assets and liabilities[275](index=275&type=chunk) - Recently issued ASUs, including 2019-12 (Income Taxes) and 2018-15 (Cloud Computing Arrangements), are not expected to materially affect financial position or results of operations upon adoption[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) [Note 4. Revenue Recognition](index=67&type=section&id=Note%204.%20Revenue%20Recognition) Explains the company's revenue recognition policies, primarily upon goods delivery, and disaggregates revenue by product category - Revenue is recognized when performance obligations are satisfied, typically upon delivery of goods to customers[280](index=280&type=chunk) - Customer sales incentives are treated as a reduction of revenue. Upfront incentive payments are capitalized and amortized as a reduction of revenue over the contract life[280](index=280&type=chunk)[282](index=282&type=chunk) Disaggregation of Revenue by Principal Product Categories (Fiscal Years 2017-2019) | Product Category | 2019 | 2018 | 2017 | | :----------------- | :---- | :---- | :---- | | Meats and seafood | $9,313 | $8,635 | $8,692 | | Dry grocery products | 4,427 | 4,239 | 4,266 | | Refrigerated and frozen grocery products | 4,253 | 3,898 | 3,799 | | Dairy | 2,685 | 2,520 | 2,533 | | Equipment, disposables and supplies | 2,483 | 2,298 | 2,243 | | Beverage products | 1,403 | 1,315 | 1,306 | | Produce | 1,375 | 1,270 | 1,308 | | **Total** | **$25,939** | **$24,175** | **$24,147** | [Note 5. Business Acquisitions](index=69&type=section&id=Note%205.%20Business%20Acquisitions) Details the Food Group acquisition in September 2019 for $1.8 billion, including financing and preliminary purchase price allocation - On September 13, 2019, USF acquired the Food Group for **$1.8 billion in cash**, financed by a new incremental senior secured term loan and revolving credit facilities[285](index=285&type=chunk)[286](index=286&type=chunk) - As a condition for regulatory clearance, USF divested three Food Group distribution facilities for **$94 million**[287](index=287&type=chunk) Preliminary Purchase Price Allocation for Food Group Acquisition | Asset/Liability | Preliminary Purchase Price Allocation (in millions) | | :----------------------------------- | :------------------------------------------------ | | Accounts receivable | $145 | | Inventories | 165 | | Assets of discontinued operations | 133 | | Other current assets | 7 | | Property and equipment | 209 | | Goodwill | 761 | | Other intangibles (customer relationships, brand names/trademarks) | 695 | | Other assets | 47 | | Accounts payable | (200) | | Accrued expenses and other current liabilities | (69) | | Liabilities of discontinued operations | (19) | | Other long-term liabilities, including financing leases | (42) | | **Cash paid for acquisition** | **$1,832** | - The Food Group contributed **$843 million in net sales** and a net loss of **$21 million** to the company's consolidated results in fiscal year 2019[292](index=292&type=chunk) Unaudited Pro Forma Consolidated Financial Information (Fiscal Years 2018-2019) | | 2019 (Unaudited) | 2018 (Unaudited) | | :----------------------- | :--------------- | :--------------- | | Pro forma net sales | $28,020 | $26,985 | | Pro forma net income | $398 | $397 | | Pro forma net income per share (Basic) | $1.82 | $1.84 | | Pro forma net income per share (Diluted) | $1.81 | $1.82 | [Note 6. Restricted Cash](index=70&type=section&id=Note%206.%20Restricted%20Cash) Explains restricted cash as collateral for letters of credit and presents its balance - Restricted cash primarily consists of cash on deposit with financial institutions as collateral for certain letters of credit[295](index=295&type=chunk) Cash, Cash Equivalents and Restricted Cash (as of December 28, 2019 and December 29, 2018) | | December 28, 2019 | December 29, 2018 | | :----------------------------------- | :------------------ | :------------------ | | Cash and cash equivalents | $90 | $104 | | Restricted cash—included in other assets | 8 | 1 | | **Total cash, cash equivalents and restricted cash** | **$98** | **$105** | [Note 7. Allowance for Doubtful Accounts](index=71&type=section&id=Note%207.%20Allowance%20for%20Doubtful%20Accounts) Provides a summary of changes in the allowance for doubtful accounts for fiscal years 2017-2019 Allowance for Doubtful Accounts Activity (Fiscal Years 2017-2019) | | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Balance as of beginning of year | $29 | $26 | $25 | | Charged to costs and expenses | 21 | 17 | 18 | | Customer accounts written off—net of recoveries | (20) | (14) | (17) | | **Balance as of end of year** | **$30** | **$29** | **$26** | - This table excludes vendor receivable related allowance for doubtful accounts of **$4 million** as of December 28, 2019, and **$3 million** as of December 29, 2018, and December 30, 2017[296](index=296&type=chunk) [Note 8. Accounts Receivable Financing Program](index=71&type=section&id=Note%208.%20Accounts%20Receivable%20Financing%20Program) Describes the ABS Facility where eligible receivables are sold and used as collateral for lenders - Under the ABS Facility, USF sells eligible receivables to a wholly owned, special purpose subsidiary, which are then used as collateral for lenders[297](index=297&type=chunk) - Approximately **$1.0 billion** of eligible receivables were held as collateral for the ABS Facility as of December 28, 2019[297](index=297&type=chunk) [Note 9. Assets Held for Sale](index=71&type=section&id=Note%209.%20Assets%20Held%20for%20Sale) Explains the classification and changes in assets held for sale, primarily closed facilities - Closed facilities are classified as assets held for sale when management commits to a plan to sell, the facility is actively marketed, and sale is expected within one year[298](index=298&type=chunk) - During fiscal year 2019, two closed distribution facilities and an excess parcel of land were sold for aggregate proceeds of **$6 million**[299](index=299&type=chunk) Changes in Assets Held for Sale (Fiscal Years 2018-2019) | | 2019 | 2018 | | :----------------------------------- | :---- | :---- | | Balance as of beginning of year | $7 | $5 | | Transfers in | — | 3 | | Assets sold | (6) | — | | Tangible asset impairment charges | — | (1) | | **Balance as of end of the year** | **$1** | **$7** | [Note 10. Property and Equipment](index=72&type=section&id=Note%2010.%20Property%20and%20Equipment) Details the composition of property and equipment, net of depreciation, and their useful lives Property and Equipment (as of December 28, 2019 and December 29, 2018) | | December 28, 2019 | December 29, 2018 | Range of Useful Lives | | :----------------------------------- | :------------------ | :------------------ | :-------------------- | | Land | $378 | $323 | | | Buildings and building improvements | 1,411 | 1,252 | 10–40 years | | Transportation equipment | 1,137 | 1,031 | 5–10 years | | Warehouse equipment | 481 | 418 | 5–12 years | | Office equipment, furniture and software | 867 | 858 | 3–7 years | | Construction in process | 99 | 77 | | | Less accumulated depreciation and amortization | (2,298) | (2,117) | | | **Property and equipment—net** | **$2,075** | **$1,842** | | - Depreciation and amortization expense of property and equipment was **$311 million** in 2019, **$300 million** in 2018, and **$283 million** in 2017[302](index=302&type=chunk) [Note 11. Goodwill and Other Intangibles](index=72&type=section&id=Note%2011.%20Goodwill%20and%20Other%20Intangibles) Discusses the accounting for goodwill and other intangible assets, including annual impairment assessments and amortization - Goodwill and indefinite-lived intangible assets (brand names and trademarks) are not amortized but are subject to annual impairment assessments[303](index=303&type=chunk) - Customer relationships and noncompete agreements are amortized over estimated useful lives of **2 to 15 years**. Amortization expense was **$51 million** in 2019, **$40 million** in 2018, and **$95 million** in 2017[304](index=304&type=chunk) Goodwill and Other Intangibles (as of December 28, 2019 and December 29, 2018) | | December 28, 2019 | December 29, 2018 | | :----------------------------------- | :------------------ | :------------------ | | Goodwill | $4,728 | $3,967 | | Other intangibles—net: | | | | Customer relationships—amortizable (net) | 674 | 69 | | Noncompete agreements—amortizable (net) | 1 | 2 | | Brand names and trademarks—not amortizing | 292 | 253 | | **Total other intangibles—net** | **$967** | **$324** | - The increase in goodwill and other intangible assets in 2019 is primarily due to the Food Group acquisition[306](index=306&type=chunk) - The company completed its annual impairment assessment for goodwill and indefinite-lived intangible assets as of June 30, 2019, with no impairments noted[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) [Note 12. Fair Value Measurements](index=74&type=section&id=Note%2012.%20Fair%20Value%20Measurements) Explains the fair value hierarchy and the company's use of interest rate swaps to manage interest rate risk - Fair value measurements are categorized into a hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[311](index=311&type=chunk)[313](index=313&type=chunk) Assets and Liabilities Measured at Fair Value on a Recurring Basis (as of December 28, 2019 and December 29, 2018) | | Level 1 | Level 2 | Level 3 | Total | | :----------------------------------- | :------ | :------ | :------ | :---- | | **December 28, 2019** | | | | | | Liabilities: Interest rate swaps | $— | $1 | $— | $1 | | **December 29, 2018** | | | | | | Assets: Money market funds | $1 | $— | $— | $1 | | Assets: Interest rate swaps | $— | $19 | $— | $19 | - The company uses interest rate swaps as cash flow hedges to manage exposure to variable interest rates on its Initial Term Loan Facility. As of December 28, 2019, remaining swaps had a notional value of **$733 million**[316](index=316&type=chunk)[317](index=317&type=chunk)[319](index=319&type=chunk) - The fair value of total debt approximated its carrying value of **$4.7 billion** in 2019 and **$3.5 billion** in 2018. Senior Notes are classified under Level 2, while the balance of debt is primarily Level 3[323](index=323&type=chunk) [Note 13. Debt](index=77&type=section&id=Note%2013.%20Debt) Provides a detailed breakdown of the company's total debt, including maturity dates, interest rates, and principal payment schedules Total Debt (as of December 28, 2019 and December 29, 2018) | Debt Description | Maturity | Interest Rate (12/28/19) | 2019 (in millions) | 2018 (in millions) | | :----------------------------------- | :------- | :----------------------- | :----------------- | :----------------- | | ABL Facility | May 31, 2024 | 4.75% | $— | $81 | | ABS Facility | September 21, 2022 | 2.75% | 190 | 275 | | Initial Term Loan Facility (net) | June 27, 2023 | 3.44% | 2,125 | 2,145 | | Incremental Term Loan Facility (net) | September 13, 2026 | 3.69% | 1,465 | — | | Senior Notes (net) | June 15, 2024 | 5.88% | 596 | 595 | | Obligations under financing leases | 2020–2026 | 2.00% - 6.17% | 352 | 352 | | Other debt | 2021–2031 | 5.75% - 9.00% | 8 | 9 | | **Total debt** | | | **$4,736** | **$3,457** | | Current portion of long-term debt | | | (142) | (106) | | **Long-term debt** | | | **$4,594** | **$3,351** | - Approximately **65% of total debt** was at a floating rate as of December 28, 2019, after considering interest rate swaps[326](index=326&type=chunk) Principal Payments on Outstanding Debt (as of December 28, 2019) | Year | Amount (in millions) | | :----- | :------------------- | | 2020 | $142 | | 2021 | 114 | | 2022 | 284 | | 2023 | 2,128 | | 2024 | 655 | | Thereafter | 1,456 | | **Total** | **$4,779** | - The ABL Facility has a maximum aggregate principal amount of **$1.6 billion**, with **$1,227 million available capacity** as of December 28, 2019[329](index=329&type=chunk)[333](index=333&type=chunk) - The ABS Facility has a maximum borrowing capacity of **$800 million**, with **$552 million available capacity** as of December 28, 2019[334](index=334&type=chunk) - The Initial Term Loan Facility was amended in November 2019 to lower interest rate margins, with an outstanding balance of **$2.1 billion**[337](index=337&type=chunk)[338](index=338&type=chunk) - The Incremental Term Loan Facility of **$1.5 billion** was entered into on September 13, 2019, to finance the Food Group acquisition[341](index=341&type=chunk) - Substantially all of the company's assets are pledged under various debt agreements[346](index=346&type=chunk) - Debt covenants restrict the company's ability to incur additional indebtedness, create liens, pay dividends, or engage in certain transactions. USF had approximately **$1.3 billion of restricted payment capacity** as of December 28, 2019[347](index=347&type=chunk)[182](index=182&type=chunk) [Note 14. Accrued Expenses and Other Long-Term Liabilities](index=82&type=section&id=Note%2014.%20Accrued%20Expenses%20and%20Other%20Long-Term%20Liabilities) Details the components of accrued expenses and other long-term liabilities, including self-insured liabilities Accrued Expenses and Other Long-Term Liabilities (as of December 28, 2019 and December 29, 2018) | | December 28, 2019 | December 29, 2018 | | :----------------------------------- | :------------------ | :------------------ | | **Accrued expenses and other current liabilities:** | | | | Salary, wages and bonus expenses | $172 | $132 | | Operating expenses | 75 | 69 | | Workers' compensation, general and fleet liability | 44 | 39 | | Group medical liability | 25 | 28 | | Customer rebates and other selling expenses | 105 | 96 | | Property and sales tax | 37 | 30 | | Operating lease liability | 40 | 6 | | Interest payable | 14 | 13 | | Other | 26 | 41 | | **Total accrued expenses and other current liabilities** | **$538** | **$454** | | **Other long-term liabilities:** | | | | Workers' compensation, general and fleet liability | $121 | $120 | | Operating lease liability | 131 | 21 | | Accrued pension and other postretirement benefit obligations | 7 | 40 | | Uncertain tax positions | 33 | 31 | | Other | 23 | 20 | | **Total Other long-term liabilities** | **$315** | **$232** | Self-Insurance Liability Activity (Fiscal Years 2017-2019) | | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Balance as of beginning of the year | $159 | $170 | $164 | | Charged to costs and expenses | 80 | 56 | 64 | | Acquisition | 17 | — | — | | Reinsurance recoverable | — | 7 | 8 | | Payments | (91) | (74) | (66) | | **Balance as of end of the year** | **$165** | **$159** | **$170** | | Discount rate | 1.58% | 2.50% | 1.98% | Estimated Future Payments for Self-Insured Liabilities | Year | Amount (in millions) | | :----- | :------------------- | | 2020 | $44 | | 2021 | 28 | | 2022 | 19 | | 2023 | 13 | | 2024 | 10 | | Thereafter | 58 | | **Total self-insured liability** | **$172** | | Less amount representing interest | (7) | | **Present value of self-insured liability** | **$165** | [Note 15. Related Party Transactions](index=83&type=section&id=Note%2015.%20Related%20Party%20Transactions) Summarizes past related party transactions, noting no such transactions in fiscal years 2019 and 2018 - During fiscal year 2017, the company completed four secondary offerings of common stock held by former sponsors (CD&R and KKR), who no longer held shares after December 2017[353](index=353&type=chunk) - The company repurchased **10,000,000 shares of common stock** for **$280 million** in December 2017, reducing additional paid-in capital and retained earnings[353](index=353&type=chunk) - There were no related party transactions in fiscal years 2019 and 2018[354](index=354&type=chunk) [Note 16. Share-Based Compensation, Common Stock Issuances and Common Stock](index=83&type=section&id=Note%2016.%20Share-Based%20Compensation%2C%20Common%20Stock%20Issuances%20and%20Common%20Stock) Details share-based compensation expense, stock options, and restricted stock awards for employees - Total share-based compensation expense was **$32 million** in 2019, **$28 million** in 2018, and **$21 million** in 2017[356](index=356&type=chunk) - The company sponsors an employee stock purchase plan, recording **$4 million, $3 million, and $3 million** in share-based compensation expense for fiscal years 2019, 2018, and 2017, respectively[357](index=357&type=chunk) - Time-Based Stock Options generally vest over **three to four years**, with related compensation expense of **$8 million** in 2019[359](index=359&type=chunk) - Performance Options vest over **four years**, contingent on financial performance goals. No expense was recorded for Performance Options in 2019 as the performance goal was not met[360](index=360&type=chunk)[361](index=361&type=chunk) Summary of Options Outstanding and Changes (Fiscal Year 2019) | | Time Options | Performance Options | Total Options | Weighted Average Fair Value | Weighted Average Exercise Price | | :----------------------------------- | :------------- | :------------------ | :------------ | :-------------------------- | :------------------------------ | | Outstanding as of December 29, 2018 | 2,713,564 | 1,222,832 | 3,936,396 | $9.45 | $22.44 | | Granted | 922,893 | 195,692 | 1,118,585 | $10.63 | $32.60 | | Exercised | (688,964) | (443,875) | (1,132,839) | $7.58 | $18.11 | | Forfeited | (176,643) | (30,268) | (206,911) | $10.78 | $29.22 | | Performance adjustment | — | (192,929) | (192,929) | $15.31 | $23.19 | | **Outstanding as of December 28, 2019** | **2,770,850** | **751,452** | **3,522,302** | **$10.03** | **$26.62** | - Restricted Stock Awards (RSAs) include Time-Based RSAs and Performance RSAs. Compensation expense for Performance RSAs was **$3 million** in 2019[366](index=366&type=chunk)[369](index=369&type=chunk) - Restricted Stock Units (RSUs) include Time-Based RSUs and Performance RSUs. Compensation expense for Time-Based RSUs was **$14 million** in 2019, and for Performance RSUs was **$2 million**[372](index=372&type=chunk)[375](index=375&type=chunk) [Note 17. Leases](index=87&type=section&id=Note%2017.%20Leases) Describes the company's lease arrangements for facilities and equipment, recognizing ROU assets and lease liabilities - The company leases distribution and warehouse facilities, office facilities, fleet vehicles, and equipment, recognizing financing or operating lease liabilities and right-of-use (ROU) assets[378](index=378&type=chunk) ROU Assets and Lease Liabilities (as of December 28, 2019) | | Consolidated Balance Sheet Location | 2019 (in millions) | | :----------------------------------- | :----------------------------------- | :----------------- | | **Assets** | | | | Operating | Other assets | $145 | | Financing | Property and equipment-net | 333 | | **Total leased assets** | | **$478** | | **Liabilities** | | | | Current: Operating | Accrued expenses and other current liabilities | $40 | | Current: Financing | Current portion of long-term debt | 95 | | Noncurrent: Operating | Other long-term liabilities | 131 | | Noncurrent: Financing | Long-term debt | 257 | | **Total lease liabilities** | | **$523** | Lease Costs (Fiscal Year 2019) | Lease Cost | Statement of Comprehensive Income Location | 2019 (in millions) | | :----------------------------------- | :----------------------------------- | :----------------- | | Operating lease cost | Distribution, selling and administrative costs | $29 | | Financing lease cost: Amortization of leased assets | Distribution, selling and administrative costs | 76 | | Financing lease cost: Interest on lease liabilities | Interest expense-net | 12 | | Variable lease cost | Distribution, selling and administrative costs | 6 | | **Net lease cost** | | **$123** | Future Lease Payments (as of December 28, 2019) | | Operating Leases | Financing Lease Obligation | Total | | :----------------------------------- | :--------------- | :------------------------- | :---- | | 2020 | $48 | $106 | $154 | | 2021 | 38 | 84 | 122 | | 2022 | 33 | 62 | 95 | | 2023 | 30 | 58 | 88 | | 2024 | 12 | 41 | 53 | | After 2024 | 42 | 29 | 71 | | **Total lease payments** | **$203** | **$380** | **$583** | | Less amount representing interest | (32) | (28) | (60) | | **Present value of lease liabilities** | **$171** | **$352** | **$523** | [Note 18. Retirement Plans](index=91&type=section&id=Note%2018.%20Retirement%20Plans) Outlines the company's defined benefit pension plan, 401(k) plan, and multiemployer pension plan contributions - The company sponsors a defined benefit pension plan and 401(k) plan, and provides postretirement health and welfare benefits[385](index=385&type=chunk) Components of Net Periodic Pension Benefit Costs (Credits) (Fiscal Years 2017-2019) | | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Service cost | $2 | $2 | $2 | | Interest cost | 37 | 36 | 40 | | Expected return on plan assets | (49) | (52) | (48) | | Amortization of net loss | 4 | 3 | 4 | | Settlements | 12 | — | 18 | | **Net periodic pension benefit costs (credits)** | **$6** | **$(11)** | **$16** | - In fiscal year 2019, the company completed a voluntary lump sum settlement offer and a spin-off/termination of a separate plan, resulting in **$12 million in non-cash settlement charges**[391](index=391&type=chunk) Funded Status of the Retirement Plan (Fiscal Years 2017-2019) | | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Benefit obligation as of end of year | $903 | $871 | $976 | | Fair value of plan assets as of end of year | 923 | 836 | 851 | | **Net funded status** | **$20** | **$(35)** | **$(125)** | - Employer matching contributions to the 401(k) plan were **$51 million** in 2019, **$47 million** in 2018, and **$46 million** in 2017[406](index=406&type=chunk) - The company contributes to various multiemployer pension plans, with an estimated aggregate withdrawal liability of approximately **$120 million** as of December 28, 2019[407](index=407&type=chunk)[416](index=416&type=chunk) Multiemployer Pension Plan Contributions (Fiscal Years 2017-2019) | Pension Fund | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Minneapolis Food Distributing Industry Pension Plan | $5 | $5 | $5 | | Teamster Pension Trust Fund of Philadelphia and Vicinity | 4 | 4 | 4 | | Local 703 I.B. of T. Grocery and Food Employees' Pension Plan | 2 | 2 | 1 | | United Teamsters Trust Fund A | 2 | 2 | 2 | | Warehouse Employees Local 169 and Employers Joint Pension Fund | 1 | 1 | 1 | | Other funds | 24 | 21 | 21 | | **Total** | **$38** | **$35** | **$34** | [Note 19. Earnings Per Share](index=103&type=section&id=Note%2019.%20Earnings%20Per%20Share) Presents the computation of basic and diluted earnings per share for fiscal years 2017-2019 Computation of Basic and Diluted EPS (Fiscal Years 2017-2019) | | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Net income (in millions) | $385 | $407 | $444 | | Weighted-average common shares outstanding (in millions) | 218 | 216 | 223 | | Dilutive effect of share-based awards (in millions) | 2 | 2 | 3 | | Weighted-average dilutive shares outstanding (in millions) | 220 | 218 | 226 | | **Net income per share (Basic)** | **$1.77** | **$1.88** | **$2.00** | | **Net income per share (Diluted)** | **$1.75** | **$1.87** | **$1.97** | [Note 20. Changes in Accumulated Other Comprehensive Loss](index=103&type=section&id=Note%2020.%20Changes%20in%20Accumulated%20Other%20Comprehensive%20Loss) Details the changes in accumulated other comprehensive loss, primarily from retirement benefits and interest rate swaps Changes in Accumulated Other Comprehensive Loss (Fiscal Years 2017-2019) | (in millions) | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | **Retirement benefit obligations:** | | | | | Balance as of beginning of year | $(97) | $(103) | $(119) | | Current year comprehensive income (loss), net of tax | 45 | 6 | 16 | | **Balance as of end of year** | **$(52)** | **$(97)** | **$(103)** | | **Interest rate swaps:** | | | | | Balance as of beginning of year | $13 | $8 | $— | | Current year comprehensive income, net of tax | (15) | 5 | 8 | | **Balance as of end of year** | **$(2)** | **$13** | **$8** | | **Accumulated other comprehensive loss as of end of year** | **$(54)** | **$(84)** | **$(95)** | [Note 21. Income Taxes](index=105&type=section&id=Note%2021.%20Income%20Taxes) Provides a breakdown of income tax provision, effective tax rates, and deferred tax assets and liabilities Income Tax Provision (Benefit) (Fiscal Years 2017-2019) | (in millions) | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Current income tax provision | $119 | $44 | $83 | | Deferred income tax provision (benefit) | 7 | 45 | (123) | | **Total income tax provision (benefit)** | **$126** | **$89** | **$(40)** | - The effective income tax rates were **25.0%** in 2019, **18.0%** in 2018, and **(10.0%)** in 2017[422](index=422&type=chunk) Reconciliation of Income Tax Provision (Benefit) to U.S. Federal Statutory Rate (Fiscal Years 2017-2019) | | 2019 | 2018 | 2017 | | :----------------------------------- | :---- | :---- | :---- | | Federal income taxes computed at statutory rate (21% in 2019/2018, 35% in 2017) | $107 | $104 | $141 | | State income taxes, net of federal income tax benefit | 24 | 20 | 16 | | Stock-based compensation | (4) | (6) | (26) | | Change in U.S. federal statutory tax rate | — | (8) | (173) | | **Total income tax provision (benefit)** | **$126** | **$89** | **$(40)** | Deferred Tax Assets and Liabilities (as of December 28, 2019 and December 29, 2018) | (in millions) | December 28, 2019 | December 29, 2018 | | :----------------------------------- | :------------------ | :------------------ | | Total net deferred tax assets | $255 | $131 | | Total deferred tax liabilities | (563) | (422) | | **Net deferred tax liability** | **$(308)** | **$(291)** | - The company had tax affected state net operating loss carryforwards of **$64 million** as of December 28, 2019, expiring from 2020 to 2039[425](index=425&type=chunk) - The balance of unrecognized tax benefits was **$39 million** as of December 28, 2019, with **$35 million** affecting the effective income tax rate if recognized[431](index=431&type=chunk)[432](index=432&type=chunk) [Note 22. Commitments and Contingencies](index=108&type=section&id=Note%2022.%20Commitments%20and%20Contingencies) Outlines the company's purchase commitments, fuel forward contracts, and legal proceedings - The company had **$916 million in purchase orders** and purchase contract commitments for fiscal year 2020, and **$75 million in information technology commitments** through May 2024[434](index=434&type=chunk) - Diesel fuel forward purchase commitments totaled **$96 million** through April 2021, covering approximately **50% of projected needs**[435](index=435&type=chunk) - The company is subject to legal proceedings in the normal course of business, but believes their ultimate resolution will not have a material adverse effect on its financial position, results of operations, or cash flows[437](index=437&type=chunk) [Note 23. US Foods Holding Corp. Condensed Financial Information](index=110&type=section&id=Note%2023.%20US%20Foods%20Holding%20Corp.%20Condensed%20Financial%20Information) Presents condensed parent company financial information, highlighting restricted payment capacity - Under debt agreements, net assets of USF are restricted from transfer to US Foods, with **$1.3 billion of restricted payment capacity** as of December 28, 2019[438](index=438&type=chunk) Condensed Parent Company Balance Sheets (as of December 28, 2019 and December 29, 2018) | (In millions) | December 28, 2019 | December 29, 2018 | | :----------------------------------- | :------------------ | :------------------ | | Investment in subsidiary | $3,715 | $3,235 | | Total assets | $3,715 | $3,235 | | Total liabilities | $6 | $6 | | Total shareholders' equity | $3,709 | $3,229 | | Total liabilities and equity | $3,715 | $3,235 | Condensed Parent Company Statements of Comprehensive Income (Fiscal Years 2017-2019) | (In millions) | December 28, 2019 | December 29, 2018 | December 30, 2017 | | :----------------------------------- | :------------------ | :------------------ | :------------------ | | Net income | $385 | $407 | $444 | | Comprehensive income | $415 | $418 | $468 | Condensed Parent Company Statements of Cash Flows (Fiscal Years 2017-2019) | (In millions) | December 28, 2019 | December 29, 2018 | December 30, 2017 | | :----------------------------