usfd-20240330

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 March 30, 2024

☐ 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 ☒

245,866,992 shares of the registrant’s common stock were outstanding as of May 3, 2024.

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;
• 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;
• 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 30, 2023 (the “2023 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 March 30, 202 4 and December 3 0 , 202 3	1
	Consolidated Statements of Comprehensive Income for the 13 weeks ended March 30, 202 4 and April 1, 202 3	2
	Consolidated Statements of Shareholders’ Equity for the 13 weeks ended March 30, 202 4	3
	Consolidated Statements of Cash Flows for the 13 weeks ended March 30, 202 4 and April 1, 202 3	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25

Part II. Other Information
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27

Signatures		28

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


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

	March 30, 2024		December 30, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	267	$	269
Accounts receivable, less allowances of $20 and $18	1,966		1,854
Vendor receivables, less allowances of $6 and $5	210		156
Inventories—net	1,620		1,600
Prepaid expenses	152		138

Other current assets	19		14
Total current assets	4,234		4,031
Property and equipment—net	2,303		2,280
Goodwill	5,697		5,697
Other intangibles—net	796		803
Other assets	360		376
Total assets	$	13,390	$	13,187
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Cash overdraft liability	$	198	$	220
Accounts payable	2,273		2,051
Accrued expenses and other current liabilities	651		731
Current portion of long-term debt	116		110
Total current liabilities	3,238		3,112
Long-term debt	4,585		4,564
Deferred tax liabilities	300		293
Other long-term liabilities	442		469
Total liabilities	8,565		8,438
Commitments and contingencies (Note 16)


Shareholders’ equity:
Common stock, $0.01 par value—600 shares authorized; 253.9 issued and 245.8 outstanding as of March 30, 2024, and 252.9 issued and 245.1 outstanding as of December 30, 2023	3		3
Additional paid-in capital	3,668		3,663
Retained earnings	1,591		1,509
Accumulated other comprehensive loss	(113)		(115)
Treasury Stock, 8.1 and 7.8 shares, respectively	(324)		(311)
Total shareholders’ equity	4,825		4,749
Total liabilities and shareholders’ equity	$	13,390	$	13,187

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
		March 30, 2024		April 1, 2023
Net sales		$	8,949	$	8,542
Cost of goods sold		7,454		7,117
Gross profit		1,495		1,425
Operating expenses:
Distribution, selling and administrative costs		1,317		1,238
Restructuring costs and asset impairment charges		13		—
Total operating expenses		1,330		1,238
Operating income		165		187
Other income—net		(1)		(1)
Interest expense—net		79		81

Income before income taxes		87		107
Income tax provision		5		25
Net income		82		82
Other comprehensive income —net of tax:
Changes in retirement benefit obligations		2		1

Comprehensive income		$	84	$	83
Net income		$	82	$	82
Series A convertible preferred stock dividends		—		(7)
Net income available to common shareholders		$	82	$	75
Net income per share
Basic (Note 12)		$	0.33	$	0.33
Diluted (Note 12)		$	0.33	$	0.32
Weighted-average common shares outstanding
Basic (Note 12)		245		226
Diluted (Note 12)		248		252

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 30, 2023	252.9	$	3	$	3,663	$	1,509	7.8	$	(311)	$	(115)	$	4,749
Share-based compensation expense	—	—		15		—		—	—		—		15
Proceeds from employee stock purchase plan	0.1	—		5		—		—	—		—		5
Vested restricted stock units, net	0.7	—		—		—		—	—		—		—
Exercise of stock options	0.2	—		5		—		—	—		—		5
Tax withholding payments for net share-settled equity awards	—	—		(20)		—		—	—		—		(20)


Changes in retirement benefit obligations, net of income tax	—	—		—		—		—	—		2		2

Common stock repurchased	—	—		—		—		0.3	(13)		—		(13)

Net Income	—	—		—		82		—	—		—		82
BALANCE—March 30, 2024	253.9	$	3	$	3,668	$	1,591	8.1	$	(324)	$	(113)	$	4,825


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
Common 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

See Notes to Consolidated Financial Statements (Unaudited).


US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)	13 Weeks Ended
	March 30, 2024		April 1, 2023
Cash flows from operating activities:
Net income	$	82	$	82
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	105		98
Gain on disposal of property and equipment—net	—		(1)


Amortization of deferred financing costs	3		7
Deferred tax provision	5		5
Share-based compensation expense	15		14
Provision for doubtful accounts	7		10
Changes in operating assets and liabilities:
Increase in receivables	(173)		(197)
Increase in inventories—net	(20)		(9)
(Increase) decrease in prepaid expenses and other assets	(1)		2
Increase in accounts payable and cash overdraft liability	221		321
Decrease in accrued expenses and other liabilities	(105)		(53)
Net cash provided by operating activities	139		279
Cash flows from investing activities:
Proceeds from sales of property and equipment	1		1
Purchases of property and equipment	(87)		(61)

Net cash used in investing activities	(86)		(60)
Cash flows from financing activities:
Principal payments on debt and financing leases	(457)		(111)


Principal payments on debt repricing	(14)		—
Proceeds from debt repricing	14		—
Proceeds from debt borrowings	426		13
Dividends paid on Series A convertible preferred stock	—		(7)
Repurchase of common stock	(13)		(34)
Debt financing costs and fees	(1)		—
Proceeds from employee stock purchase plan	5		5
Proceeds from exercise of stock options	5		7

Tax withholding payments for net share-settled equity awards	(20)		(11)
Net cash used in financing activities	(55)		(138)
Net (decrease) increase in cash, and cash equivalents and restricted cash	(2)		81
Cash, cash equivalents and restricted cash—beginning of period	269		211
Cash, cash equivalents and restricted cash—end of period	$	267	$	292
Supplemental disclosures of cash flow information:
Conversion of Series A Convertible Preferred Stock	$	—	$	162
Interest paid—net of amounts capitalized	93		61
Income taxes paid—net	5		3
Property and equipment purchases included in accounts payable	20		17
Leased assets obtained in exchange for financing lease liabilities	56		47
Leased assets obtained in exchange for operating lease liabilities	7		9
Cashless exercise of stock options	4		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 2024 and 2023 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 Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (the “2023 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 Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (“Topic 280”) “Improvements to Reportable Segment Disclosures Topic 280,” which enhances the transparency of segment disclosures primarily related to conclusions on consolidated net income as a measure of segment profit or loss that is most consistent with U.S. GAAP. This guidance also applies to single reportable segment entities. This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. This guidance is effective on a retrospective basis unless it is impracticable to do so and early adoption is permitted. The Company plans to adopt the provisions of ASU No. 2023-07 at the beginning of the fourth quarter of fiscal year 2024 and does not expect the provisions of the new standard to materially affect our financial position, results of operation or cash flows.

In December 2023, the FASB issued ASU No 2023-09 Income Taxes (“Topic 740”) “Improvements to Income Tax Disclosures Topic 740”, which enhances the transparency of income tax disclosures primarily related to rate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after December 15, 2024. This guidance is effective on a prospective basis, though retrospective application is permitted. The Company plans to adopt the provisions of ASU No. 2023-09 at the beginning of the first quarter of fiscal year 2025 and does not expect the provisions of the new standard to materially affect our financial position, results of operation or cash flows.

In March 2024, the SEC adopted amendments to its rules under the Securities Act and Exchanges Act The Enhancement and Standardization of Climate-Related Disclosures for Investors (“SEC Climate Rule”), which enhances the transparency of climate-related disclosures primarily related to climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, business strategy, results of operations, or financial condition. The SEC has been the subject of various lawsuits since adopting these amendments, and has voluntarily stayed these standards pending further developments on the legal front. Under the currently issued SEC Climate Rule, these amendments would be effective for large accelerated filers for fiscal year 2025. The Company is continuing to monitor developments associated with these standards and has begun to assess the impacts they may have on the Company’s financial position, results of operation and cash flows.

3. REVENUE RECOGNITION

The Company recognizes revenue when the performance obligation is satisfied, which occurs when a customer obtains control of the promised goods or services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these goods or services. The Company generates substantially all of its revenue from the distribution and sale of food and food-related products and recognizes revenue when title and risk of loss passes to the customer 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 March 30, 2024 or December 30, 2023. Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $2.0 billion and $1.9 billion as of March 30, 2024 and December 30, 2023, 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 $40 million and $35 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of March 30, 2024 and December 30, 2023, respectively, and $43 million and $39 million included in other assets in the Company’s Consolidated Balance Sheets as of March 30, 2024 and December 30, 2023, respectively.

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


	13 Weeks Ended
		March 30, 2024		April 1, 2023
Meats and seafood		$	2,976	$	2,826
Dry grocery products		1,614		1,551
Refrigerated and frozen grocery products		1,551		1,445
Dairy		927		935
Equipment, disposables and supplies		864		880
Beverage products		509		461
Produce		508		444
Total net sales		$	8,949	$	8,542

4. INVENTORIES

The Company’s inventories, consisting mainly of food and other food-related products, are primarily considered finished goods. Inventory costs include the purchase price of the product, freight costs to deliver it to the Company’s distribution and retail facilities, and depreciation and labor related to processing facilities and equipment and are net of certain cash or non-cash consideration received from vendors. The Company assesses the need for valuation allowances for slow-moving, excess and obsolete inventories by estimating the net recoverable value of such goods based upon inventory category, inventory age, specifically identified items, and overall economic conditions.

The Company records inventories at the lower of cost or market primarily using the last-in, first-out (“LIFO”) method. For our LIFO based inventories, the base year values of beginning and ending inventories are determined using the inventory price index computation method. This “links” current costs to original costs in the base year when the Company adopted LIFO. LIFO reserves in the Company’s Consolidated Balance Sheets were $533 million and $488 million as of March 30, 2024 and December 30, 2023, respectively. As a result of changes in LIFO reserves, cost of goods sold increased $45 million and $20 million for the 13 weeks ended March 30, 2024 and April 1, 2023, respectively.

5. ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information. Collections and payments from customers are continuously monitored. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for doubtful accounts based on a combination of factors. The Company maintains an

allowance for doubtful accounts, which is based upon historical experience, future expected losses, as well as specific customer collection issues that have been identified. The Company uses specific criteria to determine uncollectible receivables to be written off, including bankruptcy, accounts referred to outside parties for collection, and accounts past due over specified periods.

A summary of the activity in the allowance for doubtful accounts for the 13 weeks ended March 30, 2024 and April 1, 2023 was as follows:


	March 30, 2024		April 1, 2023
Balance as of beginning of year	$	18	$	30
Charged to costs and expenses, net	7		10
Customer accounts written off—net of recoveries	(5)		(8)
Balance as of end of period	$	20	$	32

This table excludes the vendor receivable related allowance for doubtful accounts of $6 million as of March 30, 2024, $5 million as of December 30, 2023, $8 million as of April 1, 2023 and $8 million as of December 31, 2022, respectively.

6. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from 3 to 40 years. Property and equipment under financing leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining terms of the related leases or the estimated useful lives of the assets, if reasonably assured the Company will purchase the assets at the end of the lease terms. As of March 30, 2024 and December 30, 2023, property and equipment-net included accumulated depreciation of $3,224 million and $3,219 million, respectively. Depreciation expense was $93 million and $87 million for the 13 weeks ended March 30, 2024 and April 1, 2023, respectively.

7. GOODWILL AND OTHER INTANGIBLES

Goodwill includes the cost of acquired businesses in excess of the fair value of the tangible and other intangible net assets acquired. Other intangible assets include customer relationships, noncompete agreements, amortizable trade names, the brand names comprising the Company’s portfolio of exclusive brands, and trademarks. Brand names and trademarks are indefinite-lived intangible assets and, accordingly, are not subject to amortization, but are subject to impairment assessments as described below.

Customer relationships, noncompete agreements and amortizable trade names are intangible assets with definite lives, and are carried at the acquired fair value less accumulated amortization. Customer relationships, noncompete agreements and amortizable trade names are amortized over their estimated useful lives (which range from approximately 3 to 15 years). Amortization expense was $12 million and $11 million for the 13 weeks ended March 30, 2024 and April 1, 2023, respectively.

Goodwill and other intangibles—net consisted of the following:


	March 30, 2024		December 30, 2023
Goodwill	$	5,697	$	5,697
Other intangibles—net
Customer relationships—amortizable:
Gross carrying amount	$	720	$	715
Accumulated amortization	(201)		(189)
Net carrying value	519		526
Trade names—amortizable:
Gross carrying amount	4		4
Accumulated amortization	(2)		(2)
Net carrying value	2		2
Noncompete agreements—amortizable:
Gross carrying amount	4		4
Accumulated amortization	—		—
Net carrying value	4		4
Brand names and trademarks—not amortizing	271		271
Total other intangibles—net	$	796	$	803

The increase in the gross carrying amount of customer relationships is attributable to acquisition purchase price adjustments.

The Company assesses for impairment of intangible assets with definite lives only if events occur that indicate that the carrying amount of an intangible asset may not be recoverable. The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually, or more frequently if events occur that indicate an asset may be impaired. For goodwill and indefinite-lived intangible assets, the Company’s policy is to assess for impairment as of the beginning of each fiscal third quarter. No impairments were recognized for the 13 weeks ended March 30, 2024 and April 1, 2023, respectively.

8. FAIR VALUE MEASUREMENTS

Certain assets and liabilities are carried at fair value under GAAP, under which fair value is a market-based measurement, not an entity-specific measurement. The Company’s fair value measurements are based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

•Level 1—observable inputs, such as quoted prices in active markets

•Level 2—observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active or inactive markets that are observable either directly or indirectly, or other inputs that are observable or can be corroborated by observable market data

•Level 3—unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions

Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized as of the end of the reporting period in which the transfer occurs. There were no transfers between fair value levels in any of the periods presented below.

The Company’s assets and liabilities measured at fair value on a recurring basis as of March 30, 2024 and December 30, 2023, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:


	March 30, 2024
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	109	$	—	$	—	$	109
Interest rate caps	—		1		—		1
	December 30, 2023
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	208	$	—	$	—	$	208
Interest rate caps	—		1		—		1

There were no significant assets or liabilities on the Company’s Consolidated Balance Sheets measured at fair value on a nonrecurring basis for the periods presented above, except as further disclosed in Note 7, Goodwill and Other Intangibles.

Recurring Fair Value Measurements

Money Market Funds

Money market funds include highly liquid investments with an original maturity of three or fewer months. These funds are valued using quoted market prices in active markets and are classified under Level 1 within the fair value hierarchy.

Derivative Financial Instruments

The Company has in the past, and may in the future, use interest rate hedges, designated as cash flow hedges, to manage its exposure to interest rate movements in connection with its variable-rate debt. In April 2023, the Company entered into two, two-year rate cap agreements, which will mature on April 30, 2025, with a total notional amount of $450 million, which effectively cap the interest rate on approximately 24% of the current principal amount of the Term Loan Facilities. The Company’s maximum exposure to the variable component of the interest rate on the Term Loan Facilities will be 5% on the notional amount covered by the interest rate cap.

The Company records its interest rate caps in the Consolidated Balance Sheet at fair value, based on projections of cash flows and future interest rates. The determination of fair value includes the consideration of any credit valuation adjustments necessary, giving consideration to the creditworthiness of the respective counterparties or the Company, as appropriate. The following table presents the balance sheet location and fair value of the interest rate caps at March 30, 2024:

Balance at March 30, 2024

Balance Sheet Location

Fair Value

Derivatives designed as hedging instruments

Interest rate caps

Other current assets

Interest rate caps

Other noncurrent assets

—

The effective portion of gains and losses on the interest rate caps are initially recorded in other comprehensive loss and reclassified to interest expense during the period in which the hedged transaction affects income. There was no ineffectiveness attributable to the Company’s interest rate caps during the 13 weeks ended March 30, 2024. The following table presents the

effect of the Company’s interest rate caps in the Consolidated Statement of Comprehensive Income for the 13 weeks ended March 30, 2024:

Derivatives in Cash Flow Hedging Relationships

Amount of Gain Recognized in Other Comprehensive Loss, net of tax

Location of Amounts Reclassified from Accumulated Other Comprehensive Loss

Amount of Gain Reclassified from Accumulated Other Comprehensive Loss to Income, net of tax

For the 13 weeks ended March 30, 2024

Interest Rate Caps

—

Interest expense ─ net

—

During the next twelve months, the Company estimates $1 million will be reclassified from accumulated other comprehensive loss to income.

Other Fair Value Measurements

The carrying value of cash, accounts receivable, vendor receivables, cash overdraft liability and accounts payable approximate their fair values due to their short-term maturities.

The fair value of the Company’s total debt approximated $4.7 billion and $4.7 billion as of March 30, 2024 and December 30, 2023, respectively, as compared to its carrying value of $4.8 billion and $4.6 billion as of March 30, 2024 and December 30, 2023 respectively.

The fair value of the Company’s 6.88% senior unsecured notes due September 15, 2028 (the “Unsecured Senior Notes due 2028”) was $0.5 billion as of both March 30, 2024 and December 30, 2023. The fair value of the Company’s 4.75% unsecured senior notes due February 15, 2029 (the “Unsecured Senior Notes due 2029”) was $0.8 billion and $0.9 billion as of March 30, 2024 and December 30, 2023. The fair value of the Company’s 4.63% unsecured senior notes due June 1, 2030 (the “Unsecured Senior Notes due 2030”) was $0.5 billion as of both March 30, 2024 and December 30, 2023. The fair value of the Company’s 7.25% senior unsecured notes due January 15, 2032 (the “Unsecured Senior Notes due 2032”) was $0.5 billion as of both March 30, 2024 and December 30, 2023. Fair value of the Unsecured Senior Notes due 2028, the Unsecured Senior Notes due 2029, the Unsecured Senior Notes due 2030 and the Unsecured Senior Notes due 2032 is based upon their quoted market prices on the respective dates. The fair value of the Unsecured Senior Notes due 2028, the Unsecured Senior Notes due 2029, the Unsecured Senior Notes due 2030 and the Unsecured Senior Notes due 2032 is classified under Level 2 of the fair value hierarchy. The fair value of the balance of the Company’s debt is primarily classified under Level 3 of the fair value hierarchy, with fair value estimated based upon a combination of the cash outflows expected under these debt facilities, interest rates that are currently available to the Company for debt with similar terms, and estimates of the Company’s overall credit risk.

9. DEBT

Total debt consisted of the following:

Debt Description

Maturity

Interest Rate as of March 30, 2024

Carrying Value as of March 30, 2024

Carrying Value as of December 30, 2023

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