US Foods Holding Corp

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 10, Debt, is a direct obligation of USF and its subsidiaries.

Business Description—The Company, through USF, operates inone 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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 September 28, 2024 or December 30, 2023. Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $2.1 billion and $1.9 billion as of September 28, 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 $42 million and $35 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of September 28, 2024 and December 30, 2023, respectively, and $48 million and $39 million included in other assets in the Company’s Consolidated Balance Sheets as of September 28, 2024 and December 30, 2023, respectively.

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

4. BUSINESS ACQUISITIONS

During the fiscal quarter ended June 29, 2024, the Company acquired IWC Food Service, a broadline distributor in Tennessee, for a purchase price of$220 million (less the amount of cash received, which was $6 million) for a net purchase price of $214 million, subject to adjustments. The acquisition, which was a stock acquisition, was funded with cash from operations and allows US Foods to further expand its reach into Tennessee and distribution channels to the southeast United States.

The IWC Food Service acquisition, reflected in the Company’s consolidated financial statements commencing from the date of the closing of the acquisition on April 5, 2024, did not materially affect the Company’s results of operations or financial position. The Company recorded goodwill of $81 million and intangible assets of $82 million for this acquisition. The intangible assets included $78 million related to customer relationships and $4 million related to noncompete agreements, which will be amortized on a straight-line basis over an estimated useful life of 15 and 5 years, respectively. The goodwill recognized from the IWC Food Service acquisition is deductible for tax purposes. IWC Food Service is integrated into the Company’s foodservice distribution network.

5. 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 aredetermined 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 $555 million and $488 million as of September 28, 2024 and December 30, 2023, respectively. As a result of changes in LIFO reserves, cost of goods increased$23 million and $37 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively and increased$68 million and$42 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

6. 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 39 weeks ended September 28, 2024 and September 30, 2023 was as follows:

This table excludes the vendor receivable related allowance for doubtful accounts of $8 million as of September 28, 2024, $5 million as of December 30, 2023, $7 million as of September 30, 2023 and $8 million as of December 31, 2022.

7. 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 September 28, 2024 and December 30, 2023, property and equipment-net included accumulated depreciation of $3,344 million and $3,219 million, respectively. Depreciation expense was $99 million and $85 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $288 million and $256 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

8. 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 $15 million and $12 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $39 million and $34 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

Goodwill and other intangibles—net consisted of the following:

The increase in goodwill is attributable to prior period acquisition purchase price adjustments and the IWC Food Service acquisition in the second quarter. The increase in the gross carrying amount of customer relationships is attributable to both prior period acquisition purchase price adjustments and the IWC Food Service acquisition. The increase in the gross carrying amount of noncompete agreements is attributable to the IWC Food Service acquisition.

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 39 weeks ended September 28, 2024 and September 30, 2023.

9. 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 andliabilities measured at fair value on a recurring basis as of September 28, 2024 and December 30, 2023, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

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 8, 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 intotwo, 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 onapproximately 25% 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 within other current assets 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. As of September 28, 2024 the fair value of the Company’s interest rate caps recorded within other current assets is $0.

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 and 39 weeks ended September 28, 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 and 39 weeks ended September 28, 2024:

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 $4.8 billion and $4.7 billion as of September 28, 2024 and December 30, 2023, respectively, as compared to its carrying value of $4.8 billion and $4.7 billion as of September 28, 2024 and December 30, 2023, respectively.

The fair value of the Company’s 6.88% senior unsecured notes due September 15, 2028 (the “Senior Notes due 2028”) was $0.5 billion as of both September 28, 2024 and December 30, 2023. The fair value of the Company’s 4.75% senior unsecured notes due February 15, 2029 (the “Senior Notes due 2029”) was $0.9 billion as of both September 28, 2024 and December 30, 2023. The fair value of the Company’s 4.63% senior unsecured notes due June 1, 2030 (the “Senior Notes due 2030”) was $0.5 billion as of both September 28, 2024 and December 30, 2023. The fair value of the Company’s 7.25% senior unsecured notes due January 15, 2032 (the “Senior Notes due 2032”) was $0.5 billion as of both September 28, 2024 and December 30, 2023. Fair value of the Senior Notes due 2028, the Senior Notes due 2029, the Senior Notes due 2030 and the Senior Notes due 2032 is based upon their quoted market prices on the respective dates. The fair value of the Senior Notes due 2028, the Senior Notes due 2029, the Senior Notes due 2030 and the 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.

10. DEBT

Total debt consisted of the following:

As of September 28, 2024, after considering interest rate caps that fixed the variable component of the interest rate on a total notional amount of $450 million of the current principal amount of the Term Loan Facilities described below, approximately 31% of the Company’s total debt bore interest at a floating rate.

ABL Facility

The Company’s asset based senior secured revolving credit facility (the “ABL Facility”) provides the Company with loan commitments having a maximum aggregate principal amount of $2,300 million. The ABL Facility is scheduled to mature on December 7, 2027.

Borrowings under the ABL Facility bear interest, at the Company’s periodic election, at a rate equal to the sum of an alternative base rate (“ABR”), as described in the ABL Facility, plus a margin ranging from 0.00% to 0.50% based on USF’s excess availability under the ABL Facility, or the sum of the Term Secured Overnight Financing Rate (“Term SOFR”) plus a margin ranging from 1.00% to 1.50%, based on USF’s excess availability under the ABL Facility, and a credit spread adjustment of 0.10%. The margin under the ABL Facility as of September 28, 2024 was 0.00% for ABR loans and 1.00% for Term SOFR loans.

On April 30, 2024, the ABL Facility was amended to provide certain providers of supply chain financings a security interest in certain assets of the Company under the ABL Facility. As of September 28, 2024, the Company did not have any active supply chain financing program participants.

The Company had outstanding borrowings totaling $75 million, and had outstanding letters of credit totaling $578 million, under the ABL Facility as of September 28, 2024. The outstanding letters of credit primarily relate to securing USF’s obligations with respect to its insurance program and certain real estate leases. There was available capacity of $1,647 million under the ABL Facility as of September 28, 2024.

Term Loan Facilities

Under its term loan credit agreement, the Company has entered into an incremental senior secured term loan facility borrowed in September 2019 (the “2019 Incremental Term Loan Facility”) and an incremental senior secured term loan facility borrowed in November 2021 (the “2021 Incremental Term Loan Facility”). On June 1, 2023, the Company entered into an amendment to its term loan credit agreement to replace the LIBOR-based interest rate option included in the term loan credit agreement with an interest rate option based upon Term SOFR. USF’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 caps described above.

2019 Incremental Term Loan Facility

The 2019 Incremental Term Loan Facility had an outstanding balance of $1,101 million, net of $8 million of unamortized deferred financing costs as of September 28, 2024. Borrowings under the 2019 Incremental Term Loan Facility bear interest at a rate per annum equal to, at USF’s option, either the sum of (i) Term SOFR plus (ii) a credit spread adjustment of (a)0.11448% for a one-month term, (b)0.26161% for a three-month term, or (c)0.42826% for a six month term, (with the sum of Term SOFR and the foregoing credit spread adjustment subject to a Term SOFR “floor” of 0.00%) plus (iii) a margin of 2.00%, or the sum of (i) an ABR, as described in the 2019 Incremental Term Loan Facility plus (ii) a margin of 1.00%. The 2019 Incremental Term Loan Facility will mature on September 13, 2026.

2021 Incremental Term Loan Facility

The 2021 Incremental Term Loan Facility had an outstanding balance of $719 million, net of $2 million of unamortized deferred financing costs as of September 28, 2024. Borrowings under the 2021 Incremental Term Loan Facility bear interest at a rate per annum equal to, at USF’s option, either the sum of (i) Term SOFR (with the Term SOFR subject to a “floor” of 0.00%) plus (ii) a margin of 2.00% or the sum of (i) an ABR, as described in the 2021 Incremental Term Loan Facility, plus (ii) a margin of 1.00%. The 2021 Incremental Term Loan Facility will mature on November 22, 2028.

On August 22, 2023, the 2021 Incremental Term Loan Facility was amended to reduce the interest rate margins under the term loan facility to 2.50% for Term SOFR borrowings and 1.50% for ABR borrowings. The Company applied modification accounting to the majority of the continuing lenders as the terms were not substantially different from the terms that applied to those lenders prior to the amendment. For the remaining lenders, the Company applied debt extinguishment accounting. The Company recorded $1 million of third-party costs and a write-off of $1 million of unamortized deferred financing costs, related to the August 22, 2023 amendment in interest expense. Unamortized deferred financing costs of $3 million as of August 22, 2023 were carried forward and will be amortized through November 22, 2028, the maturity date of the term loan facility.

On February 27, 2024, the 2021 Incremental Term Loan Facility was further amended to reduce the interest rate margins under the term loan facility to 2.00% for Term SOFR borrowings and 1.00% for ABR borrowings and eliminate the credit spread adjustment. The Company applied modification accounting to the majority of the continuing lenders as the terms were not substantially different from the terms that applied to those lenders prior to the amendment. For the remaining lenders, the Company applied debt extinguishment accounting. The Company recorded $1 million of third-party costs related to the February 27, 2024 amendment in interest expense. Unamortized deferred financing costs of $3 million as of February 27, 2024 were carried forward and will be amortized through November 22, 2028, the maturity date of the term loan facility.

Senior Notes due 2028

The Senior Notes due 2028 had an outstanding balance of $496 million, net of the $4 million of unamortized deferred financing costs, as of September 28, 2024. The Senior Notes due 2028 bear interest at a rate of 6.88% per annum and will mature on September 15, 2028.

Senior Notes due 2029

The Senior Notes due 2029 had an outstanding balance of $895 million, net of $5 million of unamortized deferred financing costs, as of September 28, 2024. The Senior Notes due 2029 bear interest at a rate of 4.75% per annum and will mature on February 15, 2029.

Senior Notes due 2030

The Senior Notes due 2030 had an outstanding balance of $497 million, net of $3 million of unamortized deferred financing costs, as of September 28, 2024. The Senior Notes due 2030 bear interest at a rate of 4.63% per annum and will mature on June 1, 2030.

Senior Notes due 2032

The Senior Notes due 2032 had an outstanding balance of $496 million, net of the $4 million of unamortized deferred financing costs, as of September 28, 2024. The Senior Notes due 2032 bear interest at a rate of 7.25% per annum and will mature on January 15, 2032.

Debt Covenants

The agreements governing our indebtedness contain customary covenants. These include, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. The Company had approximately $2.3 billion of restricted payment capacity under these covenants, and approximately $2.3 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as of September 28, 2024.

11. RESTRUCTURING LIABILITIES

From time to time, the Company may implement initiatives, 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.

During the 13 weeks and 39 weeks ended September 28, 2024, the Company incurred net restructuring costs of $9 million and $21 million, respectively, primarily related to initiatives to improve operational effectiveness and workforce reductions. During the 13 weeks and 39 weeks ended September 30, 2023, the Company incurred net restructuring costs of $3 million primarily related to initiatives to improve operational effectiveness. Net restructuring liabilities were $9 million and $7 million as of September 28, 2024 and December 30, 2023, respectively.

The following table summarizes the changes in the restructuring liabilities for the 13 weeks and 39 weeks ended September 28, 2024:

12. RETIREMENT PLANS

The Company sponsors a defined benefit pension plan (the “Retirement Plan”) and a 401(k) savings plan for eligible employees, and provides certain postretirement health and welfare benefits to eligible retirees and their dependents.

In the quarter ending July 1, 2023, the Company issued a notice of intent to terminate the majority of the Retirement Plan. This was previously approved by the Company’s Board of Directors. Effective December 30, 2023, the Retirement Plan was split into the Retirement Plan that is continuing, the “Ongoing Plan”, and the portion of the Retirement Plan that is terminating, the “Terminating Plan.” The Company has commenced the plan termination process for the Terminating Plan and expects all benefits to be settled during 2024, either through a lump-sum payment to participants or the purchase of an annuity offering on behalf of the participants. The Company does not expect to make significant contributions to the Retirement Plan in fiscal year 2024 for the cost of settlement of the Terminating Plan. See Note 19, Subsequent Events for additional information.

The components of net periodic pension benefit costs (credits) for Company sponsored defined benefit plans were as follows:

Other postretirement benefit costs were de minimis for both the 13 weeks and 39 weeks ended September 28, 2024 and September 30, 2023.

The service cost component of net periodic benefit costs (credits) is included in distribution, selling and administrative costs, while the other components of net periodic benefit credits are included in other expense (income)—net in the Company’s Consolidated Statements of Comprehensive Income.

The Company does not expect to make significant contributions to its defined benefit pension plan in fiscal year 2024.

Certain employees are eligible to participate in the Company’s 401(k) plan. The Company made employer matching contributions to the 401(k) plan of $21 million and $16 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $63 million and $48 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

The Company is also required to contribute to various multiemployer pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees. The Company’s contributions to these plans were $15 million and $14 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $44 million and $42 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

13. STOCKHOLDERS’ EQUITY

Earnings Per Share

The Company computes EPS in accordance with Accounting Standards Codification (“ASC”) 260, Earnings per Share. Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding.

Diluted EPS is computed using the weighted average number of shares of common stock, plus the effect of potentially dilutive securities. The Company applied the treasury method to calculate the dilution impact of share-based awards—stock options, non-vested restricted shares with forfeitable dividend rights, restricted stock units, and employee stock purchase plan deferrals. The Company applies the if-converted method to calculate the dilution impact of the Series A convertible preferred stock (the “Series A Preferred Stock”), if dilutive in the period. For the 13 weeks ended September 28, 2024, there were no anti-dilutive shares excluded from the dilutive share based calculation. For the 13 weeks ended September 30, 2023, share-based awards representing less than 1 million underlying common shares were not included in the computation because the effect would have been anti-dilutive. For both the 39 weeks ended September 28, 2024 and September 30, 2023, share-based awards representing less than 1 million underlying common shares were not included in the computation because the effect would have been anti-dilutive. Additionally, Series A Preferred Stock shares were dilutive for the 39 weeks ended September 30, 2023. For the 13 weeks and 39 weeks ended September 28, 2024, there are no shares of Series A Preferred Stock outstanding.

The following table sets forth the computation of basic and diluted EPS:

(1) Under the if-converted method, outstanding shares of the Series A Preferred Stock were treated as if converted to common shares for inclusion in the calculation of the weighted-average common shares outstanding—diluted. Under this approach, if converted, there would be no preferred stock outstanding and therefore no Series A Preferred Stock dividend. As of September 28, 2024, there are no shares of Series A Preferred Stock outstanding.

Share Repurchase Programs

On November 2, 2022, our Board of Directors approved a share repurchase program (“Original Share Repurchase Program”) under which the Company was authorized to repurchase up to $500 million of its outstanding common stock. On June 1, 2024, the Board approved, and on June 5, 2024, the Company announced, an increase in the amount of common stock that could be purchased under the Original Share Repurchase Program to $1 billion (“Amended Share Repurchase Program”). As of September 28, 2024, there was approximately $398 million in remaining funds authorized under the Amended Share Repurchase Program. For the 13 weeks ended September 28, 2024, the Company repurchased 10,399,672 shares at an aggregate purchase price of approximately $580 million under the Amended Share Repurchase Program, inclusive of $6 million of excise taxes, fees and commissions. For the 39 weeks ended September 28, 2024, the Company repurchased 11,433,047 shares at an aggregate purchase price of approximately $634 million under the Amended Share Repurchase Program and the Original Share Repurchase Program, inclusive of $7 million of excise taxes, fees and commissions.

The size and timing of any repurchases will depend on a number of factors, including share price, general business and market conditions and other factors. Under the Amended Share Repurchase Program, repurchases can be made from time to time using a variety of methods, including open market purchases, privately negotiated transactions, accelerated share repurchases and Rule 10b5-1 trading plans. The Amended Share Repurchase Program does not obligate the Company to acquire any particular amount of shares, and the Amended Share Repurchase Program may be suspended or discontinued at any time at the Company’s discretion. The Amended Share Repurchase Program does not have an expiration date.

14. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents changes in accumulated other comprehensive loss by component for the periods presented:

(1) Amounts are presented net of tax.

(2) Included in the computation of net periodic benefit costs. See Note 12, Retirement Plans, for additional information.

(3) Included in other income—net in the Company’s Consolidated Statements of Comprehensive Income.

15. RELATED PARTY TRANSACTIONS

As of both September 28, 2024 and December 30, 2023, as reported by the administrative agent of the 2019 and 2021 Incremental Term Loan Facilities, investment funds managed by an affiliate of FMR LLC held approximately $2 million in aggregate principal amount of the 2021 Incremental Term Loan Facility. Certain FMR LLC affiliates also provide administrative and trustee services for the Company’s 401(k) Plan and provide administrative services for other Company sponsored employee benefit plans. Fees earned by FMR LLC affiliates are not material to the Company’s consolidated financial statements.

16. INCOME TAXES

The determination of the Company’s overall effective income tax rate requires the use of estimates. The effective income tax rate reflects the income earned and taxed in U.S. federal and various state jurisdictions based on enacted tax law, permanent differences between book and tax items, tax credits and the Company’s change in relative income in each jurisdiction.

The Company estimated its annual effective income tax rate for the full fiscal year and applied the annual effective income tax rate to the results of the 39 weeks ended September 28, 2024 and September 30, 2023, and then recognized the impact of discrete tax items for purposes of determining its year-to-date tax provision.

For the 13 weeks ended September 28, 2024, the Company’s effective income tax rate of 26% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $1 million related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, and a tax benefit of $1 million, primarily related to excess tax benefits associated with share-based compensation.

For the 13 weeks ended September 30, 2023, the Company’s effective income tax rate of 27% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items were not material individually or in the aggregate.

For the 39 weeks ended September 28, 2024, the Company’s effective income tax rate of 23% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $17 million, primarily related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, a tax benefit of $8 million, primarily related to excess tax benefits associated with share-based compensation and a tax expense of $3 million, primarily related to adjustments to prior year tax provision estimates.

For the 39 weeks ended September 30, 2023, the Company’s effective income tax rate of 25% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $6 million, primarily related to excess tax benefits associated with share-based compensation and a tax benefit of $4 million, primarily related to adjustments to prior year tax provision estimates.

17. COMMITMENTS AND CONTINGENCIES

Purchase Commitments—The Company enters into purchase orders with vendors and other parties in the ordinary course of business and has a limited number of purchase contracts with certain vendors that require it to buy a predetermined volume of products. The Company had $1,160 million of purchase orders and purchase contract commitments as of September 28, 2024 to be purchased in the remainder of fiscal year 2024 and continuing through fiscal year 2029 and $93 million of information technology commitments through 2028 that are not recorded in the Company’s Consolidated Balance Sheets.

The Company has entered into various minimum volume purchase agreements at various pricing terms. Minimum amounts committed to as of September 28, 2024 totaled approximately $1.2 billion. Minimum amounts committed to by year are as follows:

To minimize fuel price risk, the Company enters into forward purchase commitments for a portion of its projected diesel fuel requirements. The Company had diesel fuel forward purchase commitments totaling $37 million through December 2025 as of September 28, 2024. Additionally, the Company had electricity forward purchase commitments totaling $4 million through July 2026, as of September 28, 2024. The Company does not measure its forward purchase commitments for fuel and electricity at fair value, as the amounts under contract meet the physical delivery criteria in the normal purchase exception.

Legal Proceedings—The Company is subject to a number of legal proceedings arising in the normal course of business. These legal proceedings, whether pending, threatened or unasserted, if decided adversely to or settled by the Company, may result in liabilities material to its financial position, results of operations, or cash flows. The Company has recognized provisions with respect to the proceedings, where appropriate, in its Consolidated Balance Sheets. It is possible that the Company could settle one or more of these proceedings or could be required to make expenditures, in excess of the established provisions, in amounts that cannot be reasonably estimated. However, the Company, at present, believes that the ultimate outcome of these proceedings will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

18. BUSINESS INFORMATION

The Company’s consolidated results represent the results of itsone business segment based on how the Company’s chief operating decision maker, our Chief Executive Officer, views the business for purposes of evaluating performance and making operating decisions.

The Company markets, sells and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the U.S. The Company uses a centralized management structure, and its strategies and initiatives are implemented and executed consistently across the organization to maximize value to the organization as a whole. The Company uses shared resources for sales, procurement, and general and administrative activities across each of its distribution facilities and operations. The Company’s distribution facilities form a single network to reach its customers; it is common for a single customer to make purchases from several different distribution facilities. Capital projects, whether for cost savings or generating incremental revenue, are evaluated based on estimated economic returns to the organization as a whole.

On June 5, 2024, the Company announced it intends to explore the potential sale of its CHEF’STORE wholesale restaurant supply business and, if a sale is completed, then entirely focus on delivered broadline operations. As of September 28, 2024, the Company is in the process of exploring this sale.

During the 13 weeks ended September 28, 2024, the Company began offering a supplier financing program, in which participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. No third parties have signed the supplier finance program agreements as of September 28, 2024.

19. SUBSEQUENT EVENTS

Senior Notes and Incremental Term Loan Facility—On October 3, 2024, the Company completed a private offering of $500 million aggregate principal amount of 5.75% senior unsecured notes due April 15, 2033 (the “Senior Notes due 2033”). Additionally, on October 3, 2024, the Company further amended its term loan credit agreement. The Company issuedtwo new term loan tranches of the term loan credit facility, one for $725 million (the “2024 Term Loan Facility”) and one for $610 million (the “2021 Term Loan Facility”). The Company used the proceeds of the Senior Notes due 2033 and the 2024 Term Loan Facility and the 2021 Term Loan Facility, and cash on hand, to pay in full the 2019 Incremental Term Loan Facility and, other than amounts that were rolled on a cashless basis into the 2021 Term Loan Facility, the 2021 Incremental Term Loan Facility. The Company incurred lender fees and third-party costs of approximately $13 million in connection with the issuance of the Senior Notes due 2033. The Company plans to apply debt modification or extinguishment accounting as applicable.

Pension Plan Termination—In October 2024, the Company began settling its obligations under the Terminating Plan through the purchase of an annuity contract from a highly rated insurance company for $414 million. Additionally, in October 2024, the Company made $254 million of lump sum payments directly to eligible participants who elected that payment option. Given that the annuity contract premium and lump sum payments do not exceed the assets of the Terminating Plan, there will be no cash contributions made by the Company. Management estimates that the Company will recognize a one-time non-cash pre-tax pension settlement charge of $124 million in the fiscal fourth quarter of 2024 related to actuarial losses previously recorded in Accumulated Other Comprehensive Loss.

Share Repurchases—For the fiscal fourth quarter through November 4, 2024, the Company repurchased 2,592,612 shares at an aggregate purchase price of approximately $160 million under the Amended Share Repurchase Program. At November 4, 2024, there was approximately $238 million in remaining funds authorized under the Amended Share Repurchase Program.