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From time to time, the Company may implement initiatives or close or consolidate facilities in an effort to reduce costs and improve operating effectiveness. In connection with these activities, the Company may incur various costs including severance and other employee-related separation costs.

Net restructuring costs were de minimis for the 13 weeks ended April 1, 2023 and April 2, 2022, respectively. Net restructuring liabilities were $1 million and $3 million as of April 1, 2023 and December 31, 2022, respectively.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2023

☐ 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)

Delaware

26-0347906

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

9399 W. Higgins Road, Suite 100

Rosemont, IL 60018

(847) 720-8000

(Address, including Zip Code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

USFD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

232,652,077 shares of the registrant’s common stock were outstanding as of May 5, 2023.

Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) which are not historical in nature are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions (although not all forward-looking statements may contain such words) and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others:


• economic factors affecting consumer confidence and discretionary spending and reducing the consumption of food prepared away from home;
• cost inflation/deflation, rising interest rates and volatile commodity costs;
• competition;
• reliance on third-party suppliers and interruption of product supply or increases in product costs;
• changes in our relationships with customers and group purchasing organizations;
• our ability to increase or maintain the highest margin portions of our business;
• achievement of expected benefits from cost savings initiatives;
• fluctuations in fuel costs;
• changes in consumer eating habits;
• cost and pricing structures;
• the impact of climate change or measures implemented to address climate change;
• impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets;
• changes to or failure to comply with applicable governmental regulations;
• product recalls and product liability claims;
• our reputation in the industry;
• labor relations and increased labor costs and continued access to qualified and diverse labor;
• our level of indebtedness and restrictions under agreements governing our indebtedness;
• interest rate increases;
• the replacement of London Interbank Offered Rate (“LIBOR”) with an alternative reference rate and the relative immaturity of any such replacement standard;
• disruption of existing technologies and implementation of new technologies;
• cybersecurity incidents and other technology disruptions;
• risks associated with intellectual property, including potential infringement;
• effective integration of acquired businesses;
• KKR’s interests may not align with our other shareholders;
• the impact of activist shareholders;
• changes in tax laws and regulations and resolution of tax disputes;
• limitations related to our governing documents;
• risks to the health and safety of our associates and others;
• adverse judgments or settlements resulting from litigation;
• extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses; and
• management of retirement benefits and pension obligations.

For a detailed discussion of these and other risks, uncertainties and factors, see Part I, Item 1A— “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”).

In light of these risks, uncertainties and other important factors, the forward-looking statements in this Quarterly Report might not prove to be accurate, and you should not place undue reliance on them. All forward-looking statements attributable to us, or others acting on our behalf, are expressly qualified in their entirety by the cautionary statements above and contained elsewhere in this Quarterly Report. All of these statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by law.

Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should be viewed only as historical data.


	TABLE OF CONTENTS
		Page No.
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of April 1, 2023 and December 31, 2022	1
	Consolidated Statements of Comprehensive Income for the 13 weeks ended April 1, 2023 and April 2, 2022	2
	Consolidated Statements of Shareholders’ Equity for the 13 weeks ended April 1, 2023 and April 2, 2022	3
	Consolidated Statements of Cash Flows for the 13 weeks ended April 1, 2023 and April 2, 2022	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	23

Part II. Other Information
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25

Signatures		26

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


US FOODS HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value)

	April 1, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	292	$	211
Accounts receivable, less allowances of $32 and $30	1,834		1,705
Vendor receivables, less allowances of $8 and $8	202		143
Inventories—net	1,625		1,616
Prepaid expenses	116		124
Assets held for sale	2		2
Other current assets	23		19
Total current assets	4,094		3,820
Property and equipment—net	2,172		2,171
Goodwill	5,625		5,625
Other intangibles—net	774		785
Other assets	373		372
Total assets	$	13,038	$	12,773
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
Current liabilities:
Cash overdraft liability	$	199	$	175
Accounts payable	2,134		1,855
Accrued expenses and other current liabilities	602		650
Current portion of long-term debt	117		116
Total current liabilities	3,052		2,796
Long-term debt	4,693		4,738
Deferred tax liabilities	303		298
Other long-term liabilities	438		446
Total liabilities	8,486		8,278
Commitments and contingencies (Note 16)
Mezzanine equity:
Series A convertible preferred stock, $0.01 par value—25 shares authorized; 0.4 and 0.5 issued and outstanding as of April 1, 2023 and December 31, 2022, respectively	373		534
Shareholders’ equity:
Common stock, $0.01 par value—600 shares authorized; 233.9 issued and 232.6 outstanding as of April 1, 2023, and 225.2 issued and 224.8 outstanding as of December 31, 2022	2		2
Additional paid-in capital	3,212		3,036
Retained earnings	1,085		1,010
Accumulated other comprehensive loss	(72)		(73)
Treasury Stock, 1.3 and 0.4 shares, respectively	(48)		(14)
Total shareholders’ equity	4,179		3,961
Total liabilities, mezzanine equity and shareholders’ equity	$	13,038	$	12,773

See Notes to Consolidated Financial Statements (Unaudited).


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions, except per share data)

	13 Weeks Ended
		April 1, 2023		April 2, 2022
Net sales		$	8,542	$	7,798
Cost of goods sold		7,117		6,603
Gross profit		1,425		1,195
Operating expenses:
Distribution, selling and administrative costs		1,238		1,161
Total operating expenses		1,238		1,161
Operating income		187		34
Other income—net		(1)		(6)
Interest expense—net		81		55
Income (loss) before income taxes		107		(15)
Income tax provision (benefit)		25		(8)
Net income (loss)		82		(7)
Other comprehensive income (loss) —net of tax:
Changes in retirement benefit obligations		1		—
Comprehensive income (loss)		$	83	$	(7)
Net income (loss)		$	82	$	(7)
Series A convertible preferred stock dividends		(7)		(9)
Net income (loss) available to common shareholders		$	75	$	(16)
Net income (loss) per share
Basic (Note 11)		$	0.33	$	(0.07)
Diluted (Note 11)		$	0.32	$	(0.07)
Weighted-average common shares outstanding
Basic (Note 11)		226		223
Diluted (Note 11)		252		223

See Notes to Consolidated Financial Statements (Unaudited).


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions)
	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE—December 31, 2022	225.2	$	2	$	3,036	$	1,010	0.4	$	(14)	$	(73)	$	3,961
Share-based compensation expense	—	—		14		—		—	—		—		14
Proceeds from employee stock purchase plan	0.2	—		5		—		—	—		—		5
Vested restricted stock units, net	0.6	—		—		—		—	—		—		—
Exercise of stock options	0.3	—		7		—		—	—		—		7
Tax withholding payments for net share-settled equity awards	—	—		(11)		—		—	—		—		(11)
Series A convertible preferred stock conversion to common stock	7.6	—		161		—		—	—		—		161
Series A convertible preferred stock dividends	—	—		—		(7)		—	—		—		(7)
Changes in retirement benefit obligations, net of income tax	—	—		—		—		—	—		1		1
Stock repurchased	—	—		—		—		0.9	(34)		—		(34)
Net Income	—	—		—		82		—	—		—		82
BALANCE—April 1, 2023	233.9	$	2	$	3,212	$	1,085	1.3	$	(48)	$	(72)	$	4,179


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions)
	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE—January 1, 2022	223.0	$	2	$	2,970	$	782	—	$	—	$	(19)	$	3,735
Share-based compensation expense	—	—		12		—		—	—		—		12
Proceeds from employee stock purchase plan	0.1	—		5		—		—	—		—		5
Vested restricted stock units, net	0.7	—		—		—		—	—		—		—
Exercise of stock options	—	—		2		—		—	—		—		2
Tax withholding payments for net share-settled equity awards	—	—		(16)		—		—	—		—		(16)
Series A convertible preferred stock dividends	—	—		—		(9)		—	—		—		(9)
Net Loss	—	—		—		(7)		—	—		—		(7)
BALANCE—April 2, 2022	223.8	$	2	$	2,973	$	766	—	$	—	$	(19)	$	3,722

See Notes to Consolidated Financial Statements (Unaudited).


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)	13 Weeks Ended
	April 1, 2023		April 2, 2022
Cash flows from operating activities:
Net income (loss)	$	82	$	(7)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	98		89
Gain on disposal of property and equipment—net	(1)		(1)
Amortization of deferred financing costs	7		3
Deferred tax provision	5		4
Share-based compensation expense	14		12
Provision for doubtful accounts	10		—
Changes in operating assets and liabilities:
Increase in receivables	(197)		(243)
Increase in inventories—net	(9)		(140)
Decrease (increase) in prepaid expenses and other assets	2		(37)
Increase in accounts payable and cash overdraft liability	321		463
(Decrease) increase in accrued expenses and other liabilities	(53)		15
Net cash provided by operating activities	279		158
Cash flows from investing activities:
Proceeds from sales of property and equipment	1		2
Purchases of property and equipment	(61)		(72)
Net cash used in investing activities	(60)		(70)
Cash flows from financing activities:
Proceeds from debt borrowings	13		103
Principal payments on debt and financing leases	(111)		(131)
Dividends paid on Series A convertible preferred stock	(7)		(9)
Repurchase of common stock	(34)		—
Proceeds from employee stock purchase plan	5		5
Proceeds from exercise of stock options	7		2
Tax withholding payments for net share-settled equity awards	(11)		(16)
Net cash used in financing activities	(138)		(46)
Net increase in cash, and cash equivalents and restricted cash	81		42
Cash, cash equivalents and restricted cash—beginning of period	211		148
Cash, cash equivalents and restricted cash—end of period	$	292	$	190
Supplemental disclosures of cash flow information:
Interest paid—net of amounts capitalized	$	61	$	37
Income taxes paid—net	3		1
Property and equipment purchases included in accounts payable	17		29
Leased assets obtained in exchange for financing lease liabilities	47		7
Leased assets obtained in exchange for operating lease liabilities	9		7
Cashless exercise of stock options	1		1

See Notes to Consolidated Financial Statements (Unaudited).

US FOODS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Amounts in tables in millions, except per share data, unless otherwise noted)

1. OVERVIEW AND BASIS OF PRESENTATION

US Foods Holding Corp., a Delaware corporation, and its consolidated subsidiaries are referred to in these consolidated financial statements and notes as “we,” “our,” “us,” the “Company,” or “US Foods.” US Foods Holding Corp. conducts all of its operations through its wholly owned subsidiary US Foods, Inc. (“USF”) and its subsidiaries. All of the Company’s indebtedness, as further described in Note 9, Debt, is a direct obligation of USF and its subsidiaries.

Business Description—The Company, through USF, operates in one business segment in which it markets, sells and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the United States (“U.S.”). These customers include independently owned single and multi-unit restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities and retail locations.

Basis of Presentation—The Company operates on a 52- or 53-week fiscal year, with all periods ending on a Saturday. When a 53-week fiscal year occurs, the Company reports the additional week in the fiscal fourth quarter. Fiscal years 2023 and 2022 are both 52-week fiscal years.

The consolidated financial statements included in this Quarterly Report have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements and notes prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures included in this Quarterly Report are adequate to make the information presented not misleading. These interim consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes included in the 2022 Annual Report.

The consolidated interim financial statements reflect all adjustments (consisting of normal recurring items) necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for interim periods are not necessarily indicative of the results that might be achieved for any other interim period or the full fiscal year.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In December 2022, the FASB issued ASU 2022-06 “Reference Rate Reform” (“Topic 848”) “Deferral of the Sunset Date of Topic 848”, which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. Topic 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The standard was effective upon issuance and the Company may apply the optional expedients and elections in Topic 848 prospectively through December 31, 2024. For the Company, the provisions of this ASU were effective upon issuance and did not have a material impact on the Company’s consolidated financial statements.

3. REVENUE RECOGNITION

The Company recognizes revenue when the performance obligation is satisfied, which occurs when a customer obtains control of the promised goods or services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these goods or services. The Company generates substantially all of its revenue from the distribution and sale of food and food-related products and recognizes revenue when title and risk of loss passes to the customer and the customer accepts the goods, which occurs at delivery. Customer sales incentives, such as volume-based rebates or discounts, are treated as a reduction of revenue at the time the revenue is recognized. Sales taxes invoiced to customers and remitted to governmental authorities are excluded from net sales. Shipping and handling costs are treated as fulfillment costs and included in distribution, selling and administrative costs.

The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of April 1, 2023 or December 31, 2022. Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $1.8 billion and $1.7 billion as of April 1, 2023 and December 31, 2022, respectively.

The Company has certain customer contracts under which incentives are paid upfront to its customers. These payments have become industry practice and are not related to financing any customer’s business, nor are these payments associated with any distinct good or service to be received from any customer. These incentive payments are capitalized in prepaid expenses and other assets and amortized as a reduction of revenue over the life of the contract or as goods or services are transferred to the customer. The Company’s contract assets for these upfront payments were $31 million and $29 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of April 1, 2023 and December 31, 2022, respectively, and $32 million and $31 million included in other assets in the Company’s Consolidated Balance Sheets as of April 1, 2023 and December 31, 2022, respectively.

The following table presents the disaggregation of revenue for each of the Company’s principal product categories:


	13 Weeks Ended
		April 1, 2023		April 2, 2022
Meats and seafood		$	2,826	$	2,950
Dry grocery products		1,551		1,333
Refrigerated and frozen grocery products		1,445		1,179
Dairy

SEC Form 10-Q filed by US Foods Holding Corp.