0001193125-16-763117.txt : 20161108 0001193125-16-763117.hdr.sgml : 20161108 20161108171739 ACCESSION NUMBER: 0001193125-16-763117 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 92 CONFORMED PERIOD OF REPORT: 20161001 FILED AS OF DATE: 20161108 DATE AS OF CHANGE: 20161108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US Foods Holding Corp. CENTRAL INDEX KEY: 0001665918 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 260347906 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37786 FILM NUMBER: 161982044 BUSINESS ADDRESS: STREET 1: 9399 W. HIGGINS RD. STREET 2: SUITE 500 CITY: ROSEMONT STATE: IL ZIP: 60018 BUSINESS PHONE: 8477208000 MAIL ADDRESS: STREET 1: 9399 W. HIGGINS RD. STREET 2: SUITE 500 CITY: ROSEMONT STATE: IL ZIP: 60018 10-Q 1 d233034d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

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 October 1, 2016

OR

 

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

Commission File No. 001-37786

 

 

 

 

LOGO

US FOODS HOLDING CORP.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   24-0347906

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

9399 W. Higgins Road, Suite 500

Rosemont, IL 60018

(847) 720-8000

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

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ☒    No  ☐

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

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  

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

220,608,733 shares of common stock were outstanding as of October 31, 2016.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

     Page No.  
Part I. Financial Information   
Item 1. Financial Statements (Unaudited)   

Consolidated Balance Sheets as of October 1, 2016 and January  2, 2016

     1   

Consolidated Statements of Comprehensive Income (Loss) for the 13-weeks and 39-weeks ended October 1, 2016 and September 26, 2015

     2   

Consolidated Statements of Cash Flows for the 39-weeks ended October  1, 2016 and September 26, 2015

     3   

Notes to Consolidated Financial Statements

     5   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations      24   
Item 3. Quantitative and Qualitative Disclosures About Market Risk      37   
Item 4. Controls and Procedures      37   
Part II. Other Information   
Item 1. Legal Proceedings      39   
Item 1A. Risk Factors      39   
Item 5. Other Information      39   
Item 6. Exhibits      41   
Signatures      42   


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

US FOODS HOLDING CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     October 1,     January 2,  
     2016     2016  
     (Unaudited)        

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 149,976      $ 517,802   

Accounts receivable, less allowances of $21,948 and $22,623

     1,346,535        1,233,978   

Vendor receivables, less allowances of $2,156 and $1,566

     154,308        101,449   

Inventories

     1,218,765        1,112,967   

Prepaid expenses

     68,040        73,787   

Assets held for sale

     24,685        5,459   

Other current assets

     9,691        14,991   
  

 

 

   

 

 

 

Total current assets

     2,972,000        3,060,433   

PROPERTY AND EQUIPMENT — Net

     1,735,495        1,768,885   

GOODWILL

     3,899,514        3,875,719   

OTHER INTANGIBLES — Net

     410,036        477,601   

OTHER ASSETS

     63,324        56,721   

DEFERRED TAX ASSETS

     27,922        —     
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 9,108,291      $ 9,239,359   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

CURRENT LIABILITIES:

    

Bank checks outstanding

   $ 176,011      $ 191,314   

Accounts payable

     1,422,492        1,078,865   

Accrued expenses and other current liabilities

     414,317        470,005   

Current portion of long-term debt

     75,230        62,639   
  

 

 

   

 

 

 

Total current liabilities

     2,088,050        1,802,823   

LONG-TERM DEBT

     3,756,120        4,682,149   

DEFERRED TAX LIABILITIES

     395,822        455,794   

OTHER LONG-TERM LIABILITIES

     374,920        386,975   
  

 

 

   

 

 

 

Total liabilities

     6,614,912        7,327,741   
  

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 18)

    

REDEEMABLE COMMON STOCK (Note 14)

     —          38,441   

SHAREHOLDERS’ EQUITY:

    

Common stock, $.01 par value — 600,000 shares authorized; 220,609 and 166,667 issued and outstanding as of October 1, 2016 and January 2, 2016, respectively

     2,206        1,667   

Additional paid-in capital

     2,787,082        2,292,142   

Accumulated deficit

     (213,324     (346,254

Accumulated other comprehensive loss

     (82,585     (74,378
  

 

 

   

 

 

 

Total Shareholders’ equity

     2,493,379        1,873,177   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 9,108,291      $ 9,239,359   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements (Unaudited)

 

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US FOODS HOLDING CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In thousands, except share and per share data)

 

     13-Weeks Ended     39-Weeks Ended  
     October 1,     September 26,     October 1,     September 26,  
     2016     2015     2016     2015  

NET SALES

   $ 5,840,963      $ 5,796,066      $ 17,240,870      $ 17,192,251   

COST OF GOODS SOLD

     4,808,426        4,782,971        14,214,528        14,257,407   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     1,032,537        1,013,095        3,026,342        2,934,844   

OPERATING EXPENSES:

        

Distribution, selling and administrative costs

     902,784        910,740        2,689,339        2,715,602   

Restructuring and tangible asset impairment charges

     14,662        29,104        38,799        81,697   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     917,446        939,844        2,728,138        2,797,299   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

     115,091        73,251        298,204        137,545   

ACQUISITION TERMINATION FEES—Net

     —          —          —          287,500   

INTEREST EXPENSE—Net

     48,956        69,927        189,759        210,821   

LOSS ON EXTINGUISHMENT OF DEBT

     11,483        —          53,632        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     54,652        3,324        54,813        214,224   

INCOME TAX PROVISION (BENEFIT)

     (78,359     (2,063     (78,117     36,761   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

     133,011        5,387        132,930        177,463   

OTHER COMPREHENSIVE INCOME (LOSS)–Net of tax:

        

Changes in retirement benefit obligations, net of income tax

     8,036        93,362        (8,207     101,762   
  

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME

   $ 141,047      $ 98,749      $ 124,723      $ 279,225   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME PER SHARE

        

Basic

   $ 0.60      $ 0.03      $ 0.69      $ 1.05   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.59      $ 0.03      $ 0.68      $ 1.04   
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

        

Basic

     220,608,821        169,594,374        193,269,252        169,583,156   

Diluted

     225,054,051        170,841,583        196,805,990        170,881,801   

DISTRIBUTION DECLARED AND PAID

        

Distribution declared and paid per share (Note 12)

   $ —        $ —        $ 3.94      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 
        

See Notes to Consolidated Financial Statements (Unaudited)

 

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US FOODS HOLDING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

     39-Weeks Ended  
     October 1,     September 26,  
     2016     2015  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 132,930      $ 177,463   

Adjustments to reconcile Net income to Net cash provided by operating activities:

    

Depreciation and amortization

     313,985        298,701   

Gain on disposal of property and equipment - net

     (4,727     (1,455

Asset impairment charges

     125        6,293   

Loss on extinguishment of debt

     53,632        —     

Amortization of deferred financing costs

     6,175        10,325   

Amortization of Old Senior Notes original issue premium

     (1,664     (2,497

Insurance proceeds related to operating activities

     10,499        22,150   

Insurance benefit in Net income

     (10,499     (20,083

Deferred tax provision

     (82,292     28,195   

Share-based compensation expense

     14,429        7,888   

Provision for doubtful accounts

     7,334        7,152   

Changes in operating assets and liabilities, net of business acquisitions:

    

Increase in receivables

     (149,789     (102,217

Increase in Inventories

     (98,876     (100,576

Decrease in prepaid expenses and other assets

     5,495        2,136   

Increase in Accounts payable and Bank checks outstanding

     330,818        183,671   

(Decrease) increase in accrued expenses and other liabilities

     (87,893     68,573   
  

 

 

   

 

 

 

Net cash provided by operating activities

     439,682        585,719   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Acquisition of businesses—net of cash

     (94,938     —     

Proceeds from sales of property and equipment

     10,888        3,438   

Purchases of property and equipment

     (105,093     (142,422

Investment in Avero, LLC

     (7,658     —     

Investment in marketable securities

     (484,624     —     

Insurance proceeds related to investing activities

     —          2,771   

Purchase of industrial revenue bonds

     —          (21,914
  

 

 

   

 

 

 

Net cash used in investing activities

     (681,425     (158,127
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from debt refinancings

     2,213,803        —     

Proceeds from other debt borrowings

     1,935,994        21,914   

Principal payments on debt and capital leases

     (3,315,621     (89,704

Payment for debt financing costs and fees

     (25,941     (651

Redemption of Old Senior Notes

     (1,376,927     —     

Net proceeds from initial public offering

     1,113,799        —     

Cash distribution to shareholders

     (666,332     —     

Proceeds from common stock sales

     2,850        500   

Common stock repurchased

     (7,708     (4,801
  

 

 

   

 

 

 

Net cash used in financing activities

     (126,083     (72,742
  

 

 

   

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

     (367,826     354,850   

CASH AND CASH EQUIVALENTS—Beginning of period

     517,802        343,659   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS—End of period

   $ 149,976      $ 698,509   
  

 

 

   

 

 

 

 

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     39-Weeks Ended  
     October 1,      September 26,  
     2016      2015  

SUPPLEMENTAL DISCLOSURES :

     

Cash paid during the period for:

     

Interest (net of amounts capitalized)

   $ 175,370       $ 234,631   

Income taxes paid—net of refunds

     4,119         5,181   

NON-CASH INVESTING AND FINANCING ACTIVITIES:

     

Property and equipment purchases included in accounts payable

     13,691         5,399   

Capital lease additions

     77,012         57,619   

Contingent consideration payable for business acquisitions

     6,375         —     

Marketable securities transferred in connection with the legal defeasance of the CMBS Fixed Loan Facility

     484,624         —     

CMBS Fixed Loan Facility defeasance

     471,615         —     

See Notes to Consolidated Financial Statements (Unaudited)

 

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US FOODS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 

1. OVERVIEW AND BASIS OF PRESENTATION

US Foods Holding Corp., a Delaware corporation, and its consolidated subsidiaries are referred to here as “we,” “our,” “us,” “the Company,” or “US Foods.” US Foods conducts all of its operations through its wholly owned subsidiary US Foods, Inc. (“USF”). All of the indebtedness, as further described in Note 10, Debt, is an obligation of USF, and its subsidiaries. US Foods is controlled by investment funds associated with or designated by Clayton, Dubilier & Rice, LLC (“CD&R”) and Kohlberg Kravis Roberts & Co., L.P. (“KKR”). KKR and CD&R are collectively referred to herein as the “Sponsors”.

Terminated Acquisition by Sysco —On December 8, 2013, US Foods entered into an agreement and plan of merger (the “Acquisition Agreement”) with Sysco Corporation (“Sysco”); Scorpion Corporation I, Inc., a wholly owned subsidiary of Sysco (“Merger Sub One”); and Scorpion Company II, LLC, a wholly owned subsidiary of Sysco (“Merger Sub Two”), through which Sysco would have acquired US Foods (the “Acquisition”) on the terms and subject to the conditions set forth in the Acquisition Agreement. The closing of the Acquisition was subject to customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

On February 2, 2015, US Foods, USF and certain of its subsidiaries, and Sysco entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Performance Food Group, Inc. (“PFG”), through which PFG agreed to purchase, subject to the terms and conditions of the Asset Purchase Agreement, eleven USF distribution centers and related assets and liabilities, in connection with (and subject to) the closing of the Acquisition.

On February 19, 2015, the U.S. Federal Trade Commission (the “FTC”) voted by a margin of 3-2 to seek to block the proposed Acquisition by filing a federal district court action in the District of Columbia for a preliminary injunction. The preliminary injunctive hearing in federal district court commenced on May 5, 2015 and, on June 23, 2015, the federal district court granted the FTC’s request for a preliminary injunction to block the proposed Acquisition.

On June 26, 2015, US Foods, Sysco, Merger Sub One and Merger Sub Two entered into an agreement to terminate the Acquisition Agreement and Sysco paid a termination fee of $300 million to US Foods. Upon the termination of the Acquisition Agreement, the Asset Purchase Agreement automatically terminated and USF paid a termination fee of $12.5 million to PFG pursuant to the terms of the Asset Purchase Agreement.

Reverse Stock Split —In connection with its initial public offering (“IPO”), the Company’s Board of Directors approved a 2.7-for one reverse stock split of the Company’s common stock. The par value per share of common stock and authorized shares of common stock remain unchanged at $0.01 per share and 600 million shares, respectively. The reverse stock split became effective on May 17, 2016. All common share and per share amounts in the financial statements and notes have been retroactively adjusted to give effect to the reverse stock split. The Company also reclassified $3 million related to the reduction in aggregate par value of common stock to Additional paid-in-capital.

Initial Public Offering – On June 1, 2016 the Company closed its IPO selling 51,111,111 shares of common stock for a cash offering price of $23.00 per share ($21.9075 per share net of underwriter discounts and commissions and before offering expenses), including the exercise in full by underwriters of their option to purchase 6,666,667 additional shares. The IPO was registered under the Securities Act of 1933, as amended (the “Securities Act”), on a registration statement on Form S-1 (Registration No. 333-209442), as amended (the “Registration Statement”). The Company’s common stock is listed on the New York Stock Exchange under the ticker symbol “USFD.”

The Company used the net proceeds from the IPO of approximately $1,114 million (after the payment of underwriter discounts and commissions and offering expenses) to redeem $1,090 million principal amount, and pay the related $23 million early redemption premium, for USF’s 8.5% unsecured Senior Notes due June 30, 2019, (the “Old Senior Notes”).

USF Public Filer Status—During the fiscal second quarter 2013, USF completed the registration of $1,350 million aggregate principal amount of its Old Senior Notes and became subject to rules and regulations of the Securities and Exchange Commission (the “SEC”), including periodic and current reporting requirements under the Securities Exchange Act of 1934, as amended. USF did not receive any proceeds from the registration of the Old Senior Notes. USF had filed periodic reports as a voluntary filer pursuant to contractual obligations in the indenture governing the Old Senior Notes. On June 30, 2016, all of the Old Senior Notes were redeemed, as noted above, and USF ceased to be a voluntary filer. See Note 10, Debt.

Business Description—USF markets and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the United States. These customers include independently owned single and multi-location restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations.

 

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Basis of Presentation—The Company operates on a 52-53 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 fourth quarter. The Company’s fiscal year 2016 is a 52-week year and fiscal year 2015 was a 53-week year. The accompanying consolidated financial statements include the accounts of US Foods and its wholly owned subsidiary, USF and its wholly owned subsidiaries. All intercompany transactions have been eliminated.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the SEC. Accordingly, they do not include all the information and disclosures required by GAAP for annual financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Registration Statement. Certain footnote disclosures included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.

The consolidated financial statements have been prepared by the Company, without audit, with the exception of the January 2, 2016 Consolidated Balance Sheet which was included in the Registration Statement. The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The consolidated financial statements reflect all adjustments which are of a normal and recurring nature that are, in the opinion of management, 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 the full year.

 

2. RECENT ACCOUNTING PRONOUNCEMENTS

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payment, which addresses the classification and presentation of certain cash receipts and cash payments in the statement of cash flows, with the objective of reducing the existing diversity in practice. This guidance is effective for fiscal years—and interim periods within those fiscal years—beginning after December 15, 2017, with early adoption permitted. The Company is currently reviewing the provisions of the new standard.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years—and interim periods within those fiscal years—beginning after December 15, 2018, with early adoption permitted. The Company is currently reviewing the provisions of the new standard.

In March 2016, the FASB issued ASU No. 2016-09, Compensation —Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance is effective for fiscal years—and interim periods within those fiscal years—beginning after December 15, 2016, with early adoption permitted. The Company’s adoption of this ASU in the fiscal second quarter of 2016 did not materially affect its financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes Accounting Standards Codification (“ASC”) 840, Leases. This ASU, based on the principle that entities should recognize assets and liabilities arising from leases, does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. Leases are classified as finance or operating. The ASU’s primary change is the requirement for entities to recognize a lease liability for payments and a right of use asset representing the right to use the leased asset during the term of operating lease arrangements. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In addition, the ASU expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients. This guidance is effective for fiscal years—and interim periods within those fiscal years—beginning after December 15, 2018, with early adoption permitted. The Company is currently reviewing the provisions of the new standard.

 

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In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers, which will be introduced into the FASB’s ASC as Topic 606. Topic 606 replaces Topic 605, the previous revenue recognition guidance. The new standard’s core principle is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the Company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. The new standard will be effective for the Company in the first quarter of fiscal 2018, with early adoption permitted in the first quarter of fiscal 2017. The new standard permits two implementation approaches, one requiring full retrospective application of the new standard with restatement of prior years, and one requiring modified retrospective application of the new standard with disclosure of results under old standards. The Company is currently evaluating the impact of this ASU and has not yet selected an implementation approach.

 

3. BUSINESS ACQUISITIONS

Business acquisitions during the 39-weeks ended October 1, 2016, included the stock of Fresh Unlimited, Inc. d/b/a Freshway Foods, a produce processor, repacker, and distributor, acquired in June, and certain assets of Cara Donna Provisions Co., Inc. and Cara Donna Properties LLC, a broadline distributor, acquired in March. Total consideration consisted of cash of approximately $96 million, plus $6 million for the estimated fair value of contingent consideration. On December 31, 2015, the Company purchased Waukesha Wholesale Foods, Inc. d/b/a Dierks Waukesha, a broadline distributor for cash of $69 million. The acquisitions, made in order to expand the Company’s presence in the produce category and in certain geographic areas, are integrated into the Company’s foodservice distribution network and were funded with cash from operations.

In March 2016, approximately $1 million was received as a purchase price adjustment related to the 2015 business acquisition resulting in minimal decreases to Property and equipment- net and Goodwill.

The following table summarizes the purchase price allocations for the 2016 and 2015 business acquisitions (in thousands):

 

     October 1,      January 2,  
     2016      2016  

Accounts receivable

     17,180         6,724   

Inventories

     6,922         7,022   

Other current assets

     474         702   

Property and equipment

     21,403         7,200   

Goodwill

     24,472         40,242   

Other intangible assets

     48,600         21,200   

Accounts payable

     (12,484      (3,290

Accrued expenses and other current liabilities

     (8,397      (1,554

Long-term debt

     (2,514      —     

Deferred income taxes

     —           (8,765
  

 

 

    

 

 

 

Cash paid for acquisitions

   $ 95,656       $ 69,481   
  

 

 

    

 

 

 

The 2016 and 2015 acquisitions did not materially affect the Company’s results of operations or financial position and, therefore, pro forma financial information has not been provided.

 

4. INVENTORIES

The Company’s inventories—consisting mainly of food and other foodservice-related products—are primarily considered finished goods. Inventory costs include the purchase price of the product and freight charges to deliver it to the Company’s warehouses, as well as depreciation and labor related to processing facilities and equipment, and are net of certain cash or non-cash considerations 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.

 

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The Company records inventories at the lower of cost or market, using the last-in, first-out (“LIFO”) method. 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. At October 1, 2016, and January 2, 2016, the LIFO balance sheet reserves were $109 million and $134 million, respectively. As a result of net changes in LIFO reserves, Cost of goods sold decreased $7 million and $20 million, for the 13-weeks ended October 1, 2016 and September 26, 2015, respectively, and decreased $25 million and $42 million, for the 39-weeks ended October 1, 2016 and September 26, 2015, respectively.

 

5. ACCOUNTS RECEIVABLE FINANCING PROGRAM

Under its accounts receivable financing facility dated as of August 27, 2012, as amended (the “2012 ABS Facility”), USF, and from time to time certain of its subsidiaries, sell—on a revolving basis—their eligible receivables to a wholly owned, special purpose, bankruptcy remote subsidiary (the “Receivables Company”). The Receivables Company, in turn, grants a continuing security interest in all of its rights, title and interest in the eligible receivables to the administrative agent, for the benefit of the lenders as defined by the 2012 ABS Facility. The Company consolidates the Receivables Company and, consequently, the transfer of the receivables is a transaction internal to the Company and the receivables have not been derecognized from the Company’s Consolidated Balance Sheets. On a daily basis, cash from accounts receivable collections is remitted to the Company as additional eligible receivables are sold to the Receivables Company. If, on a weekly settlement basis, there are not sufficient eligible receivables available as collateral, the Company is required to either provide cash collateral or, in lieu of providing cash collateral, it can pay down its borrowings on the 2012 ABS Facility to cover the shortfall. Due to sufficient eligible receivables available as collateral, no cash collateral was held at October 1, 2016 or January 2, 2016. Included in the Company’s accounts receivable balance as of October 1, 2016 and January 2, 2016 was $1,008 million and $933 million, respectively, of receivables held as collateral in support of the 2012 ABS Facility. See Note 10, Debt for a further description of the 2012 ABS Facility.

 

6. ASSETS HELD FOR SALE

The Company classifies its closed facilities as Assets held for sale at the time management commits to a plan to sell the facility, the facility is actively marketed and available for immediate sale, and the sale is expected to be completed within one year. Due to market conditions, certain facilities may be classified as Assets held for sale for more than one year as the Company continues to actively market the facilities at reasonable prices.

The Assets held for sale activity for the 39-weeks ended October 1, 2016 was as follows (in thousands):

 

Balance at January 2, 2016

   $ 5,459   

Transfers in

     23,245   

Assets sold

     (3,894

Tangible asset impairment charges

     (125
  

 

 

 

Balance at October 1, 2016

   $ 24,685   
  

 

 

 

During the Company’s third quarter of 2016, the facility acquired as part of the Cara Donna acquisition was closed and transferred to Assets held for sale. During the Company’s second quarter of 2016, the Baltimore distribution facility was closed and reclassified to Assets held for sale. During the 39-weeks ended October 1, 2016 the Fairmont, Minnesota and Lakeland, Florida facilities were sold for aggregate proceeds of $7 million, resulting in a $3 million gain.

 

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 three to 40 years. Property and equipment under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining terms of the respective lease or the estimated useful lives of the assets. At October 1, 2016 and January 2, 2016, Property and equipment-net included accumulated depreciation of $1,671 million and $1,517 million, respectively. Depreciation expense was $66 million and $65 million for the 13-weeks ended October 1, 2016 and September 26, 2015, respectively, and $198 million and $189 million for the 39-weeks ended October 1, 2016 and September 26, 2015, respectively.

 

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8. GOODWILL AND OTHER INTANGIBLES

Goodwill and Other intangible assets includes the cost of acquired businesses in excess of the fair value of the tangible net assets acquired. Other intangible assets include Customer relationships, Noncompete agreements, and the Brand names and trademarks 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.

Customer relationship and Noncompete agreements are intangible assets with definite lives, and are carried at the acquired fair value less accumulated amortization. Customer relationship and Noncompete agreements are amortized over the estimated useful lives (four to ten years). Amortization expense was $40 million and $36 million for the 13-weeks ended October 1, 2016 and September 26, 2015, respectively, and $116 million and $110 million for the 39-weeks ended October 1, 2016 and September 26, 2015, respectively.

Goodwill and Other intangibles, net, consisted of the following (in thousands):

 

     October 1,      January 2,  
   2016      2016  

Goodwill

   $ 3,899,514       $ 3,875,719   
  

 

 

    

 

 

 

Other intangibles—net

     

Customer relationships—amortizable:

     

Gross carrying amount

   $ 1,391,812       $ 1,373,920   

Accumulated amortization

     (1,234,909      (1,149,572
  

 

 

    

 

 

 

Net carrying value

     156,903         224,348   
  

 

 

    

 

 

 

Noncompete agreements—amortizable:

     

Gross carrying amount

     800         800   

Accumulated amortization

     (467      (347
  

 

 

    

 

 

 

Net carrying value

     333         453   
  

 

 

    

 

 

 

Brand names and trademarks—not amortizing

     252,800         252,800   
  

 

 

    

 

 

 

Total Other intangibles—net

   $ 410,036       $ 477,601   
  

 

 

    

 

 

 

The 2016 increase in Goodwill reflects the 2016 business acquisitions, partially offset by a purchase price adjustment related to the December 2015 acquisition. The 2016 increase in the gross carrying amount of Customer relationships is attributable to the 2016 business acquisitions of $49 million – see Note 3, Business Acquisitions – partially offset by the write-off of fully amortized Customer relationships intangible assets of $31 million.

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 at the beginning of each fiscal third quarter. For intangible assets with definite lives, the Company assesses impairment only if events occur that indicate that the carrying amount of an asset may not be recoverable. All Goodwill is assigned to the consolidated company as the reporting unit. The Company completed its most recent annual impairment assessment for Goodwill and indefinite-lived intangible assets as of July 3, 2016—the first day of the fiscal third quarter of 2016—with no impairments noted.

For Goodwill, the reporting unit used in assessing impairment is the Company’s one business segment as described in Note 19—Business Segment Information. The Company’s assessment for impairment of Goodwill utilized a combination of discounted cash flow analysis, comparative market multiples, and comparative market transaction multiples, which were weighted 50%, 35% and 15% respectively, to determine the fair value of the reporting unit for comparison to the corresponding carrying value. If the carrying value of the reporting unit exceeds its fair value, the Company must then perform a comparison of the implied fair value of Goodwill with its carrying value. If the carrying value of the Goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to the excess. Based upon the Company’s fiscal 2016 annual Goodwill impairment analysis, the Company concluded the fair value of its reporting unit exceeded its carrying value.

 

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The Company’s fair value estimates of the brand names and trademarks indefinite-lived intangible assets are based on a relief- from-royalty method. The fair value of these intangible assets is determined for comparison to the corresponding carrying value. If the carrying value of these assets exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. Based upon the Company’s fiscal 2016 annual impairment analysis, the Company concluded the fair value of the Company’s brand names and trademarks exceeded its carrying value.

Due to the many variables inherent in estimating fair value and the relative size of the recorded indefinite-lived intangible assets, differences in assumptions may have a material effect on the results of the Company’s impairment analysis.

 

9. FAIR VALUE MEASUREMENTS

The Company follows the accounting standards for fair value, whereas 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 in 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 at 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 and nonrecurring basis as of October 1, 2016 and January 2, 2016, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):

 

Description    Level 1      Level 2      Level 3      Total  

Recurring fair value measurements:

           

Money market funds

   $ 54,464       $ —         $ —         $ 54,464   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at October 1, 2016

   $ 54,464       $ —         $ —         $ 54,464   
  

 

 

    

 

 

    

 

 

    

 

 

 

Recurring fair value measurements:

           

Money market funds

   $ 113,700       $ —         $ —         $ 113,700   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at January 2, 2016

   $ 113,700       $ —         $ —         $ 113,700   
  

 

 

    

 

 

    

 

 

    

 

 

 

Nonrecurring fair value measurements:

           

Contingent consideration payable for business acquisitions

   $ —         $ —         $ 6,375       $ 6,375   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at October 1, 2016

   $ —         $ —         $ 6,375       $ 6,375   
  

 

 

    

 

 

    

 

 

    

 

 

 

Nonrecurring fair value measurements:

           

Assets held for sale

   $ —         $ —         $ 2,600       $ 2,600   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at January 2, 2016

   $ —         $ —         $ 2,600       $ 2,600   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Recurring Fair Value Measurements

Money Market Funds

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

Nonrecurring Fair Value Measurements

Assets Held for Sale

The Company records Assets held for sale at the lesser of the carrying amount or estimated fair value less cost to sell. Certain Assets held for sale were adjusted to equal their estimated fair value, less cost to sell, resulting in insignificant Tangible asset impairment charges in 2016 and 2015. Fair value was estimated by the Company based on information received from real estate brokers. The amounts included in the tables above, classified under Level 3 within the fair value hierarchy, represent the estimated fair values of those Assets held for sale that became the new carrying amounts at the time the impairments were recorded.

Contingent Consideration Payable for Business Acquisitions

Certain 2016 business acquisitions involve contingent consideration in the event certain operating results are achieved over a one-year period from the respective dates of such acquisitions. The amount included in the above table represents the estimated fair value of the contingent consideration.

Other Fair Value Measurements

The carrying value of cash, restricted cash, Accounts receivable, Bank checks outstanding, Accounts payable and accrued expenses approximate their fair values due to their short-term maturities. The carrying value of the self-funded industrial revenue bond asset and the corresponding long-term liability approximate their fair values. See Note 10, Debt, for a further description of the industrial revenue bond agreement.

The fair value of USF’s total debt approximated $3.9 billion and $4.8 billion, as compared to its aggregate carrying value of $3.8 billion and $4.7 billion as of October 1, 2016 and January 2, 2016, respectively. The October 1, 2016 and January 2, 2016 fair value of USF’s 5.875% unsecured Senior Notes due June 15, 2024, (the “2016 Senior Notes”) and Old Senior Notes, estimated at $0.6 billion and $1.4 billion, respectively, was classified under Level 2 of the fair value hierarchy, with fair value based upon the closing market price at the end of the reporting period. The fair value of the balance of USF’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 USF’s overall credit risk. See Note 10, Debt for further description of USF’s debt.

 

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10. DEBT

As provided in Note 1, all indebtedness is an obligation of USF, and its subsidiaries.

USF’s debt consisted of the following (in thousands):

 

Debt Description    Maturity    Interest rate at
October 1, 2016
    October 1,
2016
   

January 2,

2016

 

ABL Facility

   October 20, 2020      3.04   $ 30,000      $ —     

2012 ABS Facility

   September 30, 2018      1.76        680,000        586,000   

Amended and Restated 2016 Term Loan (net of $13,825 of unamortized deferred financing costs)

   June 27, 2023      4.00        2,180,675        —     

Amended 2011 Term Loan (net of $9,848 of unamortized deferred financing costs)

   —        —          —          2,037,652   

2016 Senior Notes (net of $7,423 of unamortized deferred financing costs)

   June 15, 2024      5.88        592,577        —     

Old Senior Notes (net of $13,441 of unamortized deferred financing costs)

   —        —          —          1,334,835   

CMBS Fixed Facility (net of $1,473 of unamortized deferred financing costs)

   —        —          —          470,918   

Obligations under capital leases

   2018–2025      2.36 - 6.18        315,325        270,406   

Other debt

   2018–2031      5.75 - 9.00       32,773        33,325   
       

 

 

   

 

 

 

Total debt

          3,831,350        4,733,136   

Add unamortized premium

          —          11,652   

Current portion of long-term debt

          (75,230     (62,639
       

 

 

   

 

 

 

Long-term debt

        $ 3,756,120      $ 4,682,149   
       

 

 

   

 

 

 

At October 1, 2016, $0.9 billion of the total debt was at a fixed rate and $2.9 billion was at a floating rate.

Debt Transactions

IPO Proceeds

As discussed in Note 1, Overview and Basis of Presentation, in June 2016, US Foods completed its IPO. Net proceeds of $1,114 million were used to redeem $1,090 million in principal of USF’s Old Senior Notes and pay the related $23 million early redemption premium. The balance of the Old Senior Notes was redeemed with proceeds from the June 2016 refinancings further discussed below.

June 2016 Refinancings

In June 2016, USF entered into a series of transactions to refinance the $2,042 million principal of its senior secured term loan (the “Amended 2011 Term Loan”) and redeem the remaining $258 million principal of its Old Senior Notes. The Amended 2011 Term Loan was amended and restated to, among other things, increase the aggregate principal outstanding to $2,200 million (the “Amended and Restated 2016 Term Loan”). Additionally, USF issued $600 million in principal amount of 2016 Senior Notes.

 

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    Amended and Restated 2016 Term Loan Agreement–The aggregate principal of the Amended and Restated 2016 Term Loan of $2,200 million matures on June 27, 2023. Continuing lenders refinanced $1,393 million in term loan principal and purchased $238 million of additional principal from lenders electing not to participate in, or electing to decrease their holdings in the loan. Additionally, $569 million in principal was sold to new lenders.

USF performed an analysis, by creditor, to determine if the terms of the newly Amended and Restated 2016 Term Loan were substantially different from the previous term loan facility. Based upon the analysis, it was determined that pre-existing lenders holding a significant portion of the previous term loan facility either elected not to participate in the newly amended facility, or had terms that were substantially different from their original loan agreements. As a result, a portion of the transaction was accounted for as an extinguishment of debt and the contemporaneous acquisition of new debt. Pre-existing lenders holding the remaining portion of the newly amended facility that had terms that were not substantially different from their original loan agreements were accounted for as a debt modification.

 

    Old Senior Notes – In June 2016, USF redeemed the remaining $258 million in aggregate principal amount of its Old Senior Notes for $264 million, including a $6 million early redemption premium.

The debt redemption and refinancing transactions completed in June 2016 resulted in a loss on extinguishment of debt of $42 million, consisting of a $29 million early redemption premium related to the Old Senior Notes, $7 million of lender and third party fees, and a $6 million write-off of certain pre-existing unamortized deferred financing costs and premiums related to the refinanced and redeemed facilities. Unamortized deferred financing costs of $4 million related to the portion of the Amended 2011 Term Loan refinancing accounted for as a debt modification will be carried forward and amortized through June 27, 2023—the maturity date of the Amended and Restated 2016 Term Loan.

CMBS Fixed Facility Defeasance

On September 23, 2016, USF, through a wholly owned subsidiary, legally defeased the commercial mortgage backed securities facility (the “CMBS Fixed Facility”), scheduled to mature on August 1, 2017. The CMBS Fixed Facility, secured by mortgages on 34 properties, consisting of distribution centers, had an outstanding balance of $471 million net of unamortized deferred financing costs of $1 million, and provided for interest at 6.38%. The cash outlay for the defeasance of $485 million represented the purchase price of U.S. government securities that will generate sufficient cash flow to fund continued interest payments from the effective date of the defeasance through, and the repayment of the CMBS Fixed Facility on, February 1, 2017, the earliest date the loan could be prepaid. As a result of the defeasance, the mortgages on the properties were extinguished and all properties previously held as collateral were released. The defeasance resulted in a loss on extinguishment of debt of approximately $12 million consisting of the difference between the purchase price of the U.S. Government securities – not attributable to accrued interest through the effective date of the defeasance – and the outstanding principal of the CMBS Fixed Facility of $472 million, and other costs of $1 million, consisting of unamortized deferred financing costs and other third party costs.

Following is a description of each of USF’s debt instruments outstanding as of October 1, 2016:

Revolving Credit Agreement–USF’s asset backed senior secured revolving loan facility (the “ABL Facility”) provides for loans under its two tranches: ABL Tranche A-1 and ABL Tranche A, with its capacity limited by a borrowing base. The maximum borrowing available is $1,300 million with ABL Tranche A-1 at $100 million, and ABL Tranche A at $1,200 million. Due to the June 2016 refinancings, the maturity date of the ABL Facility is October 20, 2020.

As of October 1, 2016, USF had $30 million outstanding borrowings and had issued letters of credit totaling $403 million under the ABL Facility. Outstanding letters of credit included: (1) $69 million issued to secure USF’s obligations with respect to certain facility leases, (2) $331 million issued in favor of certain commercial insurers securing USF’s obligations with respect to its self-insurance program, and (3) $3 million in letters of credit for other obligations. There was available capacity on the ABL Facility of $866 million at October 1, 2016. As of October 1, 2016, on Tranche A-1 borrowings, USF can periodically elect to pay interest at an alternative base rate (“ABR”), as defined in USF’s credit agreements, plus 1.50% or the London Inter Bank Offered Rate (“LIBOR”) plus 2.50%. On Tranche A borrowings, USF can periodically elect to pay interest at ABR plus 0.25% or LIBOR plus 1.25%. The ABL Facility also carries letter of credit fees of 1.125% and an unused commitment fee of 0.125%.

 

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Accounts Receivable Financing Program–Under the 2012 ABS Facility, USF, and from time to time certain of its subsidiaries, sell—on a revolving basis—their eligible receivables to the Receivables Company, a wholly owned subsidiary of USF. The Receivables Company, in turn, grants a continuing security interest in all of its rights, title and interest in the eligible receivables to the administrative agent for the benefit of the lenders (as defined by the 2012 ABS Facility). See Note 5, Accounts Receivable Financing Program.

The maximum capacity under the 2012 ABS Facility is $800 million. Borrowings under the 2012 ABS Facility were $680 million and $586 million at October 1, 2016 and January 2, 2016, respectively. USF, at its option, can request additional borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $63 million at October 1, 2016 based on eligible receivables as collateral. The portion of the 2012 ABS Facility held by the lenders who fund the 2012 ABS Facility with commercial paper bears interest at the lender’s commercial paper rate, plus any other costs associated with the issuance of commercial paper plus 1.00%, and an unused commitment fee of 0.35%. The portion of the 2012 ABS Facility held by lenders that do not fund the 2012 ABS Facility with commercial paper bears interest at LIBOR plus 1.00%, and an unused commitment fee of 0.35%.

Amended and Restated 2016 Term Loan Agreement–The Amended and Restated 2016 Term Loan consists of a senior secured term loan with outstanding borrowings of $2,181 million at October 1, 2016, net of $14 million of unamortized deferred financing costs. This debt bears interest equal to ABR plus 2.25%, or LIBOR plus 3.25%, with a LIBOR floor of 0.75%, based on a periodic election of the interest rate by USF. Principal repayments of $5.5 million are payable quarterly with the balance due at maturity. The debt may require mandatory repayments if certain assets are sold, as defined in the agreement. The interest rate for all borrowings was 4.00%—the LIBOR floor of 0.75% plus 3.25%— at October 1, 2016.

2016 Senior Notes–The 2016 Senior Notes, with outstanding principal of $593 million at October 1, 2016, net of $7 million of unamortized deferred financing costs, bear interest at 5.875%. On or after June 15, 2019, this debt is redeemable, at USF’s option, in whole or in part at a price of 102.938% of the remaining principal, plus accrued and unpaid interest, if any, to the redemption date. On or after June 15, 2020 and June 15, 2021, the optional redemption price for the debt declines to 101.469% and 100.0%, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to the redemption date. Prior to June 15, 2019, up to 40% of the debt may be redeemed with the aggregate proceeds from equity offerings, as defined in the 2016 Senior Note indenture, at a redemption premium of 105.875%.

Other Debt–Obligations under capital leases consist of amounts due for transportation equipment and building leases. Other debt of $33 million at October 1, 2016 and January 2, 2016 consists primarily of various state industrial revenue bonds. To obtain certain tax incentives related to the construction of a new distribution facility, USF and a wholly owned subsidiary entered into an industrial revenue bond agreement with a state in January 2015, for the issuance of a maximum of $40 million in taxable demand revenue bonds (the “TRBs”). The TRBs are self-funded as USF’s wholly owned subsidiary purchases the TRBs, and the state loans the proceeds back to USF. The TRBs, which mature January 1, 2030, can be prepaid without penalty one year after issuance. Interest on the TRBs and the loan is 6.25%. At October 1, 2016 and January 2, 2016, $22 million has been drawn on TRBs resulting in $22 million being recognized as a long-term asset and a corresponding long-term liability in the Company’s Consolidated Balance Sheets.

Security Interests

Substantially all of USF’s assets are pledged under the various debt agreements. Debt under the 2012 ABS Facility is secured by certain designated receivables and, in certain circumstances, by restricted cash. The ABL Facility is secured by certain other designated receivables not pledged under the 2012 ABS Facility, inventories and tractors and trailers owned by USF. Additionally, the ABL Facility has a third priority interest in the assets pledged under the 2012 ABS Facility and a second priority interest in the assets pledged under the Amended and Restated 2016 Term Loan. USF’s obligations under the Amended and Restated 2016 Term Loan are secured by all of the capital stock of its subsidiaries, each of the direct and indirect wholly owned domestic subsidiaries –as defined in the agreements– and are secured by substantially all assets of USF and its subsidiaries not pledged under the 2012 ABS Facility or the ABL Facility. Additionally, the Amended and Restated 2016 Term Loan has a second priority interest in the assets pledged under the ABL Facility and the 2012 ABS facility.

Restrictive Covenants

USF’s credit facilities, loan agreements and indentures contain customary covenants. These include, among other things, covenants that restrict USF’s ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. As of October 1, 2016, USF had $432 million of restricted payment capacity under these covenants, and approximately $2,060 million of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation.

Certain debt agreements also contain customary events of default. Those include, without limitation, the failure to pay interest or principal when it is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true, and certain insolvency events. If a default event occurs and continues, the principal amounts

 

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outstanding—together with all accrued unpaid interest and other amounts owed—may be declared immediately due and payable by the lenders. Were such an event to occur, USF would be forced to seek new financing that may not be on as favorable terms as its current facilities. USF’s ability to refinance its indebtedness on favorable terms—or at all—is directly affected by the current economic and financial conditions. In addition, USF’s ability to incur secured indebtedness (which may enable it to achieve more favorable terms than the incurrence of unsecured indebtedness) depends in part on the value of its assets. This, in turn, relies on the strength of its cash flows, results of operations, economic and market conditions, and other factors.

 

11. RESTRUCTURING LIABILITIES

The following table summarizes the changes in the restructuring liabilities for the 39-weeks ended October 1, 2016 (in thousands):

 

     Severance and      Facility Closing      Total  
   Related Costs      Costs     

Balance at January 2, 2016

   $ 118,634       $ 210       $ 118,844   

Current period charges

     52,848         2,563         55,411   

Change in estimate

     (16,737      —           (16,737

Payments and usage—net of accretion

     (57,455      (1,970      (59,425
  

 

 

    

 

 

    

 

 

 

Balance at October 1, 2016

   $ 97,290       $ 803       $ 98,093   
  

 

 

    

 

 

    

 

 

 

The Company periodically closes or consolidates distribution facilities and implements initiatives in its ongoing efforts to reduce costs and improve operating effectiveness. In connection with these activities, the Company incurs various costs including multiemployer pension withdrawal liabilities, severance and other employee separation costs that are included in the above table.

During the 39-weeks ended October 1, 2016, the Company incurred a net charge of $36 million for Severance and Related Costs associated with its plan to streamline its field operations model and its decision to close its Baltimore, Maryland distribution facility. Additionally, the Company incurred $3 million related to an unused facility lease settlement.

At October 1, 2016, Severance and Related Costs consisted of $86 million of multiemployer pension withdrawal liabilities, of which $36 million related to distribution facilities closed prior to 2015 and payable through 2031 at interest rates ranging from 5.9% to 6.5%. Also included was $50 million of estimated withdrawal liability related to the closure of the Baltimore, Maryland distribution facility. The calendar year 2015 pension withdrawal estimate was based on the latest available information received from the respective plans’ administrator. Actual results could materially differ from initial estimates due to changes in market conditions and changes in the funded status of the related multiemployer pension plans. The balance of Severance and Related Costs of $11 million is primarily related to the Company’s initiative to reorganize its field procurement activities and field operations model.

 

12. RELATED PARTY TRANSACTIONS

The Company was a party to consulting agreements with each of the Sponsors pursuant to which each Sponsor provided the Company with ongoing consulting and management advisory services and received fees and reimbursement of related out of pocket expenses. On June 1, 2016, the agreements with each of the Sponsors were terminated. For the 39-week period ended October 1, 2016, the Company recorded $36 million in fees and expenses, including an aggregate termination fee of $31 million. For the 13-week and 39-week periods ended September 26, 2015, the Company recorded $3 million and $8 million, respectively, in fees and expenses, in the aggregate. All fees paid to the Sponsors, including the termination fees, are reported in Distribution, selling and administrative costs in the Consolidated Statements of Comprehensive Income (Loss). Investment funds or accounts managed or advised by an affiliate of KKR held approximately 1% of the Company’s outstanding debt as of October 1, 2016.

KKR Capital Markets LLC, an affiliate of KKR, received underwriter discounts and commissions of $5 million in connection with the Company’s IPO, described in Note 1, Overview and Basis of Presentation, and $1 million for services rendered in connection with the June 2016 USF debt refinancing transactions described in Note 10, Debt.

On January 8, 2016, the Company paid a $666 million, or $3.94 per share, one-time special cash distribution to its shareholders of record (including holders of unvested restricted shares) as of January 4, 2016, of which $657 million was paid to the Sponsors. The distribution was funded with cash on hand and approximately $314 million of additional borrowings under USF’s

 

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credit facilities. The Company has no current plans to pay future dividends on its common stock, and has never paid dividends on its common stock, other than the January 2016 one-time cash distribution. Any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors, and could be limited by USF debt covenants.

 

13. RETIREMENT PLANS

The Company sponsors defined benefit and defined contribution plans for its employees and provides certain health care benefits to eligible retirees and their dependents. The components of net pension and other postretirement benefit costs for Company sponsored plans for the periods presented are provided below (in thousands):

 

     13-Weeks Ended  
     Pension Benefits      Other Postretirement Plans  
     October 1,      September 26,      October 1,      September 26,  
     2016      2015      2016      2015  

Service cost

   $ 962       $ 11,349       $ 9       $ 9   

Interest cost

     10,114         9,716         73         66   

Expected return on plan assets

     (12,072      (14,208      —           —     

Amortization of prior service cost (credit)

     39         48         2         (16

Amortization of net loss (gain)

     2,063         2,027         (17      4   

Settlements

     750         650         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net periodic benefit costs

   $ 1,856       $ 9,582       $ 67       $ 63   
  

 

 

    

 

 

    

 

 

    

 

 

 
     39-weeks Ended  
     Pension Benefits      Other Postretirement Plans  
     October 1,      September 26,      October 1,      September 26,  
   2016      2015      2016      2015  

Service cost

   $ 2,887       $ 31,617       $ 28       $ 28   

Interest cost

     30,344         30,016         221         198   

Expected return on plan assets

     (36,220      (40,805      —           —     

Amortization of prior service cost (credit)

     118         146         5         (47

Amortization of net loss (gain)

     6,191         9,053         (53      11   

Settlements

     2,250         1,950         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net periodic benefit costs

   $ 5,570       $ 31,977       $ 201       $ 190   
  

 

 

    

 

 

    

 

 

    

 

 

 

In the second quarter of 2016, the Company recorded a $22 million increase to its pension obligation, with a corresponding increase to Accumulated other comprehensive loss, to correct a computational error related to the September 30, 2015 USF pension plan freeze. The Company determined the error did not materially impact the financial statements for any of the periods reported. The fiscal year 2016 decrease in net periodic pension benefit costs is primarily attributable to the September 30, 2015 USF pension plan freeze.

The Company contributed $36 million and $48 million to its defined benefit plans during the 39-week periods ended October 1, 2016 and September 26, 2015, respectively. The Company has funded all required contributions to the Company-sponsored pension plans for fiscal year 2016.

The Company’s employees are eligible to participate in a Company sponsored defined contribution 401(k) Plan which provides for Company matching on the participant’s contributions of up to 100% of the first 3% of participant’s compensation and 50% of the next 2% of a participant’s compensation, for a maximum Company matching contribution of 4%. During 2015, the Company match on the participant’s contributions was 50% of the first 6% of a participant’s compensation. The Company’s contributions to this plan were $10 million and $7 million for the 13-weeks ended October 1, 2016 and September 26, 2015, respectively. The Company’s contributions to this plan were $32 million and $21 million for the 39-weeks ended October 1, 2016 and September 26, 2015, respectively.

 

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The Company also contributes to numerous multiemployer pension plans under the terms of certain of its collective bargaining agreements that cover its union-represented employees. The Company does not administer these multiemployer pension plans. The Company’s contributions to these plans were $8 million and $9 million for the 13-week periods ended October 1, 2016 and September 26, 2015, respectively. The Company’s contributions to these plans were $24 million and $25 million for the 39-week periods ended October 1, 2016 and September 26, 2015, respectively.

 

14. REDEEMABLE COMMON STOCK

Redeemable common stock is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Prior to the Company’s IPO, common stock owned by management and key employees gave the holder, via the management stockholder’s agreement, the right to require the Company to repurchase all of his or her restricted common stock (“put option”) in the event of a termination of employment due to death or disability. If an employee terminated for any reason other than death or disability, the contingent put option was cancelled. Since this redemption feature, or put option, was outside of the control of the Company, the value of the shares was shown outside of permanent equity as Redeemable common stock. In addition to the value of the common stock held, stock-based awards with similar underlying common stock were also recorded in Redeemable common stock. Redeemable common stock included values for common stock issuances to key employees, vested restricted shares, vested restricted stock units and vested stock option awards.

In connection with the Company’s IPO, the management stockholder’s agreement was amended to remove the put option; therefore the common stock no longer has a redemption feature that is outside the Company’s control and could require the Company to redeem these shares. Accordingly, the entire amount reflected in Redeemable common stock was reclassified to Shareholders’ equity during the second quarter of 2016. The sole remaining redemption feature provides the Company with the right, but not the obligation, to repurchase all of the holder’s vested shares upon termination without cause. Based on the current redemption feature of the common stock, there will be no amounts attributed to Redeemable common stock in future periods.

 

15. EARNINGS PER SHARE

The Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings per Share, which requires that non-vested restricted stock containing non-forfeitable dividend rights be treated as participating securities pursuant to the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. The amounts of distributed and undistributed earnings allocated to participating securities for the 13-week and 39-week periods ended October 1, 2016 and September 26, 2015 were insignificant and did not materially impact the calculation of basic or diluted EPS.

Basic EPS is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock, shares in Redeemable common stock, if any, (including common stock issuances to key employees, vested restricted shares and vested restricted stock units) and non-vested restricted shares outstanding for the year.

Diluted EPS is computed using the weighted average number of shares of common stock, shares in Redeemable common stock, for the 13-week and 39-week periods ended September 26, 2015, and non-vested restricted shares outstanding for the period, plus the effect of potentially dilutive securities. Stock options and unvested restricted stock units are considered potentially dilutive securities.

 

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The following table sets forth the computation of basic and diluted earnings per share:

 

     13-Weeks Ended      39-Weeks Ended  
     October 1,      September 26,      October 1,      September 26,  
     2016      2015      2016      2015  

Numerator:

           

Net income (in thousands)

   $ 133,011       $ 5,387       $ 132,930       $ 177,463   
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator:

           

Weighted-average common shares outstanding

     220,608,821         169,594,374         193,269,252         169,583,156   

Dilutive effect of Share-based awards

     4,445,230         1,247,209         3,536,738         1,298,645   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average dilutive shares outstanding

     225,054,051         170,841,583         196,805,990         170,881,801   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic income per share

   $ 0.60       $ 0.03       $ 0.69       $ 1.05   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted income per share

   $ 0.59       $ 0.03       $ 0.68       $ 1.04   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

16. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents changes in Accumulated other comprehensive loss by component for the periods presented (in thousands):

 

     13-Weeks Ended     39-Weeks Ended  
     October 1,     September 26,     October 1,     September 26,  

Accumulated Other Comprehensive Loss Components

   2016     2015     2016     2015  

Defined benefit retirement plans:

        

Accumulated Other Comprehensive Loss beginning of period (1)

   $ (90,621   $ (149,641   $ (74,378   $ (158,041
  

 

 

   

 

 

   

 

 

   

 

 

 

Reclassification adjustments:

        

Amortization of prior service cost(2)(3)

     41        32        123        99   

Amortization of net loss(2)(3)

     2,046        2,031        6,138        9,064   

Settlements(2)(3) 

     750        650        2,250        1,950   

Pension curtailment(5)

       90,649          90,649   

Prior year correction(5)

     —          —          (21,917     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total before income tax(2)(3)

     2,837        93,362        (13,406     101,762   

Income tax benefit(4)

     (5,199     —          (5,199     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Current period Comprehensive (Loss) Income—net of tax

     8,036        93,362        (8,207     101,762   
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated Other Comprehensive Loss end of period (1)

   $ (82,585   $ (56,279   $ (82,585   $ (56,279
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Amounts are presented net of tax.
(2) Included in the computation of Net periodic benefit costs. See Note, 13 Retirement Plans for additional information.
(3) Included in Distribution, selling and administrative costs in the Consolidated Statements of Comprehensive Income.
(4) No impact in the 13-week and 39-week periods ended September 26, 2015 due to the Company’s full valuation allowance. See Note 17, Income Taxes.
(5) The third quarter 2015 pension curtailment is due to the freeze of non-union participants’ benefits for a USF sponsored defined benefit pension plan. In the second quarter of 2016, the curtailment was corrected for a computational error. See Note 13, Retirement Plans.

 

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17. INCOME TAXES

The determination of the Company’s overall effective tax rate requires the use of estimates. The effective tax rate reflects the income earned and taxed in various United States federal and 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 tax rate for the full fiscal year and applied the annual effective tax rate to the results of the 39-weeks ended October 1, 2016 and September 26, 2015 for purposes of determining its year to date tax provision (benefit).

The valuation allowance against the net deferred tax assets was $152 million at January 2, 2016. The valuation allowance against the net deferred tax assets decreased $101 million during the 39-weeks ended October 1, 2016, which resulted in a $51 million valuation allowance at October 1, 2016. The Company released the valuation allowance against its federal net deferred tax assets and certain of its state net deferred tax assets in the 13-weeks ended October 1, 2016, as the Company determined it was more likely than not that the deferred tax assets would be realized. The Company maintained a valuation allowance on certain state net operating loss and tax credit carryforwards expected to expire unutilized as a result of insufficient forecasted taxable income in the carryforward period, or the utilization of which are subject to limitation. The decision to release the valuation allowance was made after management considered all available evidence, both positive and negative, including but not limited to, historical operating results, cumulative income in recent years, forecasted earnings, and a reduction of uncertainty regarding forecasted earnings as a result of developments in certain customer and strategic initiatives during the 13-weeks ended October 1, 2016.

The effective tax rate for the 13-weeks ended October 1, 2016 and September 26, 2015 of (143)% and (62)%, respectively, varied from the 35% federal statutory rate primarily due to a change in the valuation allowance and the recognition of various discrete tax items. During the 13-weeks ended October 1, 2016 and September 26, 2015, the valuation allowance decreased $101 million and $3 million, respectively. The decrease in the valuation allowance for the 13-weeks ended October 1, 2016 was primarily the result of the year to date ordinary income and the corresponding release of the valuation allowance. The discrete tax items for the 13-weeks ended October 1, 2016 included a tax benefit of $80 million, primarily related to the release of the valuation allowance. The decrease in the valuation allowance for the 13-weeks ended September 26, 2015 was primarily the result of the year to date ordinary income, partially offset by an increase in the valuation allowance due to an increase in deferred tax liabilities related to indefinite-lived intangibles. The discrete tax items for the 13-weeks ended September 26, 2015 included a tax benefit of $2 million, primarily related to the settlement of tax audits and the expiration of the statute of limitations in various state and local jurisdictions, which had a significant impact on the effective tax rate, as compared to the ordinary income of $3 million for the 13-weeks ended September 26, 2015.

The effective tax rate for the 39-weeks ended October 1, 2016 and September 26, 2015 of (143)% and 17%, respectively, varied from the 35% federal statutory rate primarily as a result of a change in the valuation allowance and the recognition of various discrete tax items. During the 39-weeks ended October 1, 2016 and September 26, 2015, the valuation allowance decreased $101 million and $43 million, respectively. The decrease in the valuation allowance for the 39-weeks ended October 1, 2016 was primarily the result of the year to date ordinary income and the corresponding release of the valuation allowance. The discrete tax items for the 39-weeks ended October 1, 2016 included a tax benefit of $80 million, primarily related to the release of the valuation allowance. The decrease in the valuation allowance for the 39-weeks ended September 26, 2015 was primarily the result of the year to date ordinary income, partially offset by an increase in the valuation allowance due to an increase in deferred tax liabilities related to indefinite-lived intangibles. The year to date ordinary income for the 39-weeks ended September 26, 2015 was impacted by the $288 million net termination fee received pursuant to the terminated Acquisition Agreement. The discrete tax items for the 39-weeks ended September 26, 2015 included a tax benefit of $2 million, primarily related to the settlement of tax audits and the expiration of the statute of limitations in various state and local jurisdictions.

 

18. 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. As of October 1, 2016, the Company had $956 million of purchase orders and purchase contract commitments, of which $696 million, $130 million and $130 million pertain to products to be purchased in the balance of fiscal year 2016, and in fiscal years 2017, and 2018, respectively, and are not recorded in the Consolidated Balance Sheets.

To minimize fuel cost risk, the Company enters into forward purchase commitments for a portion of its projected diesel fuel requirements. At October 1, 2016, the Company had diesel fuel forward purchase commitments totaling $109 million through March 2018. The Company also enters into forward purchase agreements for electricity. At October 1, 2016, the Company had electricity forward purchase commitments totaling $10 million through September 2018. 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 under GAAP guidance.

Legal Proceedings–The Company and its subsidiaries are parties to a number of legal proceedings arising from 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 recognizes provisions with respect to the proceedings where appropriate. These are reflected in the Consolidated Balance Sheets. It is possible that the Company could be required to make expenditures, in excess of the established provisions, in amounts that cannot be reasonably estimated. However, the Company believes that the ultimate resolution of these proceedings will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows. It is the Company’s policy to expense attorney fees as incurred.

 

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19. BUSINESS SEGMENT INFORMATION

The Company operates in one business segment based on how the Company’s chief operating decision maker—the CEO— views the business for purposes of evaluating performance and making operating decisions.

The Company markets and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the United States. 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 centers. The Company’s distribution centers form a single network to reach its customers; it is common for a single customer to make purchases from several different distribution centers. Capital projects—whether for cost savings or generating incremental revenue—are evaluated based on estimated economic returns to the organization as a whole (e.g., net present value, return on investment).

The measure used by the CEO to assess operating performance is Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure defined as Net income (loss), plus Interest expense – net, Income tax provision (benefit), and Depreciation and amortization – collectively “EBITDA” – adjusted for: (1) Sponsor fees; (2) Restructuring and tangible asset impairment charges; (3) Share-based compensation (4) the non-cash impact of LIFO adjustments; (5) Loss on extinguishment of debt (6) Business transformation costs; (7) Acquisition-related costs; (8) Acquisition termination fees–net; and (9) Other gains, losses or charges as specified under the Company’s debt agreements. Costs to optimize and transform the Company’s business are noted as business transformation costs in the table below and are added to EBITDA in arriving at Adjusted EBITDA. Business transformation costs include costs related to significant process and systems redesign in the Company’s replenishment and category management functions; cash & carry retail store strategy; and process and system redesign related to the Company’s sales model.

The aforementioned items are specified as items to add to EBITDA in arriving at Adjusted EBITDA per the Company’s debt agreements and, accordingly, the Company’s management includes such adjustments when assessing the operating performance of the business.

 

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The following is a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial performance measure, which is Net (loss) income for the periods presented (in thousands):

 

     13-Weeks Ended     39-Weeks Ended  
     October 1,     September 26,     October 1,     September 26,  
     2016     2015     2016     2015  

Adjusted EBITDA

   $ 244,097      $ 225,433      $ 706,934      $ 620,090   

Adjustments:

        

Sponsor fees (1)

     —          (2,527     (35,691     (7,571

Restructuring and tangible asset impairment charges(2)

     (14,662     (29,104     (38,799     (81,697

Share-based compensation expense (3)

     (4,762     (2,575     (14,429     (7,888

LIFO reserve change(4)

     7,066        20,145        24,808        41,999   

Loss on extinguishment of debt(5)

     (11,483     —          (53,632     —     

Business transformation costs (6)

     (10,006     (10,976     (25,777     (30,969

Acquisition related costs(7)

     —          (22,631     (671     (78,616

Acquisition termination fees–net(8)

     —          —          —          287,500   

Other(9)

     (604     (3,045     (4,186     (19,102
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     209,646        174,720        558,557        723,746   

Interest expense–net

     (48,956     (69,927     (189,759     (210,821

Income tax benefit (provision)

     78,359        2,063        78,117        (36,761

Depreciation and amortization expense

     (106,038     (101,469     (313,985     (298,701
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 133,011      $ 5,387      $ 132,930      $ 177,463   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Consists of fees paid to the Sponsors for consulting and management advisory services. On June 1, 2016, the consulting and management agreements with each of the Sponsors were terminated for an aggregate termination fee of $31 million.
(2) Consists primarily of facility related closing costs, including severance and related costs, tangible asset impairment charges, organizational realignment costs and estimated multiemployer pension withdrawal liabilities.
(3) Share-based compensation expense for vesting of stock awards.
(4) Represents the non-cash impact of LIFO reserve adjustments.
(5) Includes fees paid to debt holders, third party costs, early redemption premium, and the write off of certain pre-existing unamortized deferred financing costs, partially offset by the write-off of unamortized issue premium related to the June 2016 debt refinancing, and the loss related to the September 2016 CMBS Fixed Facility defeasance. See Note 10, Debt.
(6) Consists primarily of costs related to significant process and systems redesign, across multiple functions.
(7) Consists of costs related to the Acquisition, including certain employee retention costs.
(8) Consists of net fees received in connection with the termination of the Acquisition Agreement.
(9) Other includes gains, losses or charges as specified under USF’s debt agreements. The balance for the 13-weeks ended September 26, 2015 includes $9 million of brand re-launch and marketing costs and $3 million of closed facility carrying costs, partially offset by a $9 million net insurance benefit. The balance for the 39-weeks ended October 1, 2016 includes $5 million of IPO readiness costs, $4 million of closed facility carrying costs and $3 million of business acquisition related costs, partially offset by a $10 million insurance benefit. The balance for the 39-weeks ended September 26, 2015 includes a $16 million legal settlement charge, $9 million of brand re-launch and marketing costs, and $4 million of closed facility carrying costs, partially offset by a $11 million net insurance benefit.

 

20. SUBSEQUENT EVENTS

Subsequent to the balance sheet date, the Company acquired Jeraci Food Distributors, Inc. (“Jeraci”) and Save on Seafood with combined annual sales totaling approximately $100 million. The Jeraci acquisition is in furtherance of our strategy to expand our geographic market share with independent restaurants. Save on Seafood helps strengthen our capabilities in the center-of-the-plate category. The acquisitions have been funded with cash flows from operations.

 

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Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” “mission,” “strive,” “more,” “goal,” or similar expressions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results to differ materially from the forward-looking statements contained in this report include, among others:

 

    Our ability to remain profitable during times of cost inflation/deflation, commodity volatility, and other factors

 

    Industry competition and our ability to successfully compete

 

    Our reliance on third-party suppliers, including the impact of any interruption of supplies or increases in product costs

 

    Risks related to our indebtedness, including our substantial amount of debt, our ability to incur substantially more debt, and increases in interest rates

 

    Any change in our relationships with group purchasing organizations

 

    Any change in our relationships with long-term customers

 

    Our ability to increase sales to independent restaurant customers

 

    Our ability to successfully consummate and integrate future acquisitions

 

    Our ability to achieve the benefits that we expect from our cost savings programs

 

    Shortages of fuel and increases or volatility in fuel costs

 

    Any declines in the consumption of food prepared away from home, including as a result of changes in the economy or other factors affecting consumer confidence

 

    Liability claims related to products we distribute

 

    Our ability to maintain a good reputation

 

    Costs and risks associated with labor relations and the availability of qualified labor

 

    Changes in industry pricing practices

 

    Changes in competitors’ cost structures

 

    Our ability to retain customers not obligated by long-term contracts to continue purchasing products from us

 

    Environmental, health and safety costs

 

    Costs and risks associated with government laws and regulations, including environmental, health, safety, food safety, transportation, labor and employment laws and regulations, and changes in existing laws or regulations

 

    Technology disruptions and our ability to implement new technologies

 

    Costs and risks associated with a potential cybersecurity incident

 

    Our ability to manage future expenses and liabilities associated with our retirement benefits

 

    Disruptions to our business caused by extreme weather conditions

 

    Costs and risks associated with litigation

 

    Changes in consumer eating habits

 

    Costs and risks associated with our intellectual property protections

 

    Risks associated with potential infringements of the intellectual property of others

 

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For a detailed discussion of these risks and uncertainties, see the section entitled “Risk Factors,” in our prospectus dated May 25, 2016 (the “Prospectus”) which was filed with the SEC on May 27, 2016 pursuant to Rule 424(b)(4) of the Securities Act (File No. 333-209442, as amended). All forward-looking statements made in this report are qualified by these cautionary statements. The forward-looking statements contained in this presentation are based only on information currently available to us and speak only as of the date of this report. We undertake no obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise. 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 only be viewed as historical data.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and the notes thereto for the 13- and 39-weeks ended October 1, 2016 and the audited consolidated financial statements and the notes thereto for the fiscal year ended January 2, 2016, included in the Company’s prospectus dated May 25, 2016 (the “Prospectus”), which was filed with the SEC on May 27, 2016 (pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (“the Securities Act”). This discussion of our results includes certain financial measures that are not in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We believe these non-GAAP measures provide meaningful supplemental information about our operating performance, because they exclude amounts that our management and board of directors do not consider part of core operating results when assessing our performance and underlying trends. More information on the rationale for these non-GAAP measures is discussed in the Non-GAAP Reconciliations below.

Overview

With net sales of $23 billion in the fiscal year ended January 2016, we are the second largest foodservice distributor in the United States with a 2015 market share of approximately 9%. The U.S. foodservice distribution industry is large, fragmented and growing, with total industry sales of $268 billion in 2015.

Foodservice distribution is a competitive and fragmented industry, with over 15,000 foodservice distributors of various types and sizes of distributors serving the food-away-from-home market. In addition there is competitive pressure from cash and carry retail stores, and club stores and new market entrants.

Our mission is to be First in Food. We strive to inspire and empower chefs and foodservice operators to bring great food experiences to consumers. This mission is supported by our strategy of Great Food. Made Easy. This strategy centers on providing a broad and innovative offering of high-quality products to our customers, as well as a comprehensive suite of industry-leading e-commerce, technology and business solutions.

We have significant scale and an efficient operating model. We supply approximately 250,000 customer locations nationwide. These customer locations include independently owned single and multi-unit restaurants, regional restaurant concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations. We provide over 400,000 fresh, frozen, and dry food stock-keeping units, or SKUs, as well as non-food items, sourced from over 5,000 suppliers. Our more than 4,000 sales associates manage customer relationships at local, regional, and national levels. They are supported by sophisticated marketing and category management capabilities, as well as a sales support team that includes world-class chefs and restaurant operations consultants. Our extensive network of 61 distribution facilities and fleet of approximately 6,000 trucks allow us to operate efficiently and provide high levels of customer service.

Termination of Sysco Acquisition Agreement

In December 2013, we entered into an agreement (the “Acquisition Agreement”) to merge with Sysco Corporation (the “Acquisition”). Following the failure to obtain regulatory approvals, the Acquisition Agreement was subsequently terminated on June 26, 2015. This 18-month period was challenging for our business. Sales growth slowed as many potential new customers were hesitant to switch their business to us during this period of uncertainty. During this time, we remained focused on our strategy by bringing innovative products to market, expanding our portfolio of business solutions for our customers and driving advancements in technology. As it became apparent that obtaining regulatory approval would be more challenging than expected, we began to see a recovery of sales momentum, particularly with our independent restaurant customers. Following the termination of the Acquisition Agreement, this momentum has continued to build.

Business Drivers, Trends and Outlook

Our results for the 13- and 39-weeks reflect steady execution of our growth strategy as evidenced by case volume growth, improving profitability and strategic acquisitions.

Case volume growth of 4% during the 13-weeks ended October 1, 2016 was driven by approximately 5.5% growth with independent restaurant customers and included growth across most customer categories. Net sales growth was impacted by significant deflation in the period, particularly in beef and dairy categories. For the 39 weeks, case volume growth was 2.5% and included similar impacts.

Product deflation also has a negative impact on gross profit dollars. These deflationary pressures were offset by favorable customer mix, acquisitions, and merchandising initiatives. Gross profit increased $20 million in the 13 weeks ended October 1, 2016. As a percent of sales gross profit was 17.7% up from 17.5% in the prior year period. Gross profit increased $91 million for the 39 weeks ended October 1, 2016. As a percentage of sales gross profit was 17.6%, up from 17.1% in the prior year period.

 

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Efficiency and cost initiatives supported lower distribution, selling and administrative expenses. During the 13-and 39-weeks ended October 1, 2016, these expenses declined $8 million and $29 million versus the comparable prior period, respectively. In addition restructuring and tangible asset impairment charges were $14 million and $43 million lower in the 13- and 39-weeks ended October 1, 2016 versus the comparable prior period, respectively. These actions reflect continued focus on ensuring we have a cost efficient and effective organization model. We closed our Baltimore distribution facility in the second quarter of 2016, and transferred the volume to lower cost facilities. We have substantially completed our field reorganization, which enables us to more efficiently manage multiple distribution centers from a hub and region structure. We have taken actions to begin centralizing certain field procurement activities in furtherance of our overall centralization efforts. We expect to complete these actions during 2017 and realize benefits in product costs and logistics resulting from more effective management of procurement and replenishment initiatives. In October, we launched a corporate and administrative cost reduction program that will focus on streamlining the organization, through creating greater spans of control and expanded use of business shared services. We expect to incur costs in our fourth quarter related to employee separation benefits, with savings to be realized over the next 12- 18 months.

Since December of 2015, we have completed five acquisitions, representing in excess of $450 million in annual sales. Three of the acquisitions were broadline distributors, which have helped further our growth with independent restaurants. The remaining two acquisitions were specialty distributors, which further our penetration in center-of-the-plate and produce product categories.

For the balance of fiscal 2016, we expect continued growth in foodservice industry demand. We expect competitive pressures to remain high. We also expect a continuation of the deflationary environment for the balance of the year and potentially into early 2017. General economic trends and conditions, including demographic changes, inflation, deflation, consumer confidence and disposable income, coupled with changing tastes and preferences, influence the amount that consumers spend on food-away-from-home, which can affect our customers and in turn our sales. On balance, we believe that these general trends will support positive real growth in food-away-from home consumption and the growth of foodservice industry sales.

Sales to our independent restaurant customers, which generally have higher margins, continue to be an increasing proportion of our sales mix. Favorable customer mix, additional volume from acquisitions, as well as other merchandising initiatives, have contributed to our ability to expand our margins during a deflationary environment. Additionally, given that a large portion of our business is based on markups over cost, sudden inflation or prolonged deflation can negatively impact our sales and gross profit.

Operating expense reductions reflect the savings realized from actions summarized above. Additionally, we believe our investments in a common technology platform, efficient transactional and operational model, e-commerce and analytic tools that support our team-based selling approach, coupled with merchandising and product innovation, have helped us leverage our costs, maintain our sales, and differentiate us from our competitors.

As of October 1, 2016, approximately one-third of our facilities have employees represented by unions with collective bargaining agreements. While we believe we generally have good relations with our employees, including those represented by unions, from time to time we experience work stoppages or strikes. In May 2016, employees represented by the Teamsters Local at our Corona California distribution center went on strike for a period of three days. In September 2016, we reached a successor collective bargaining agreement with the Local at our Corona California distribution center. In June 2016, we ceased operations at our Baltimore, Maryland distribution center. The Baltimore employees represented by the Teamsters Locals 570 and 355 went on strike. In June 2016, we reached a closure agreement with Local 570 and in October 2016 we reached a closure agreement with Local 355. In October 2016, Teamsters Local 455 at our Denver distribution center went on strike for a period of three days. These labor disruptions did not have a material impact on our business, because of our contingency plans to mitigate any adverse effects of such labor disputes and work stoppages. Future labor disruptions and work stoppages may be disruptive to our business and can lead to lower sales and higher operating costs, and could cause customer deliveries to be delayed and our warehouse and delivery costs to increase, which could result in a material impact on our business. During the remainder of fiscal year 2016, five collective bargaining agreements covering approximately 850 employees are subject to renegotiation. We will remain focused on executing our growth strategies, adding value for and differentiating ourselves with our customers, and driving continued operational improvement in the business.

 

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Results of Operations

Accounting Periods

We operate on a 52-53 week fiscal year with all periods ending on a Saturday. When a 53-week fiscal year occurs, we report the additional week in the fourth quarter. Fiscal year 2016 is a 52-week fiscal year. Fiscal year 2015 was a 53-week fiscal year.

Selected Historical Results of Operations

The following table presents selected historical results of operations of our business for the periods indicated:

 

     13-Weeks Ended     39-Weeks Ended  
     October 1,
2016
    September 26,
2015
    October 1,
2016
    September 26,
2015
 
     (in millions)*  

Net sales

   $ 5,841      $ 5,796      $ 17,241      $ 17,192   

Cost of goods sold

     4,808        4,783        14,215        14,257   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     1,033        1,013        3,026        2,935   

Operating expenses:

        

Distribution, selling and administrative costs

     903        911        2,689        2,716   

Restructuring and tangible asset impairment charges

     15        29        39        82   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     917        940        2,728        2,797   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     115        73        298        137   

Acquisition termination fees—net

     —          —          —          288   

Interest expense—net

     49        70        190        211   

Loss on extinguishment of debt

     12        —          54        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     55        3        55        214   

Income tax (benefit) provision

     (78     (2     (78     37   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 133      $ 5      $ 133      $ 177   
  

 

 

   

 

 

   

 

 

   

 

 

 

Percentage of Net Sales:

        

Gross profit

     17.7     17.5     17.6     17.1

Distribution, selling and administrative costs

     15.5     15.7     15.6     15.8

Operating expenses

     15.7     16.2     15.8     16.3

Operating income

     2.0     1.3     1.7     0.8

Net income

     2.3     0.1     0.8     1.0

Other Data:

        

Cash flows-operating activities

     139        321        440        586   

Cash flows-investing activities

     (520     (31     (681     (158

Cash flows-financing activities

     417        (64     (126     (73

Capital Expenditures

     38        31        105        142   

EBITDA (1)

     210        175        559        724   

Adjusted EBITDA (1)

     244        225        707        620   

Adjusted Net income (1)

     87        55        201        72   

Free cash flow (1)

     101        290        335        444   

 

(*) Amounts may not add due to rounding.
(1)

EBITDA, Adjusted EBITDA, and Adjusted Net income are non-GAAP measures used by management to measure operating performance. EBITDA is defined as Net income (loss), plus Interest expense—net, Income tax provision (benefit), and Depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for 1) Sponsor fees; 2) Restructuring and tangible asset impairment charges; 3) Share-based compensation expense; 4) the non-cash impact of LIFO reserve adjustments; 5) Loss on extinguishment of debt; 6) Business transformation costs; 7) Acquisition-related costs; 8) Acquisition termination fees—net; and 9) Other gains, losses, or charges as specified in USF’s agreements. Adjusted Net income is defined as Net income (loss) excluding the items used to calculate Adjusted EBITDA listed above and further adjusted for the tax effect of the exclusions. EBITDA, Adjusted EBITDA, and Adjusted Net income as presented in this Quarterly Report on Form 10-Q are

 

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  supplemental measures of our performance that are not required by—or presented in accordance with—GAAP. They are not measurements of our performance under GAAP and should not be considered as alternatives to Net income (loss) or any other performance measures derived in accordance with GAAP.

Free cash flow is defined as Cash flows provided by operating activities less Capital expenditures. Free cash flow is used by management as a supplemental measure of our liquidity. For additional information, see non-GAAP reconciliations below.

Non-GAAP Reconciliations

We provide EBITDA, Adjusted EBITDA, Adjusted Net income as supplemental measures to GAAP regarding our operational performance. These non-GAAP financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.

We believe EBITDA and Adjusted EBITDA provide meaningful supplemental information about our operating performance because they exclude amounts that we do not consider part of our core operating results when assessing our performance. Items excluded from Adjusted EBITDA include Restructuring and tangible asset impairment charges, Loss on extinguishment of debt, Sponsor fees, Share-based compensation expense, the non-cash impact of LIFO reserve adjustments, Business transformation costs (business costs associated with the redesign of systems and processes), Acquisition related costs, Acquisition termination fees—net, and other items as specified in our debt agreements.

We believe that Adjusted Net income is a useful measure of operating performance for both management and investors because it excludes items that are not reflective of our core operating performance and provides an additional view of our operating performance including depreciation, amortization, interest expense, and income taxes on a consistent basis from period to period. Adjusted Net income is Net income (loss) excluding such items as Restructuring and tangible asset impairment charges, Loss on extinguishment of debt, Sponsor fees, Share-based compensation expense, Business transformation costs (cost associated with redesign of systems and process), and other items, and adjusted for the tax effect of the exclusions and discrete tax items. We believe that Adjusted Net income is used by investors, analysts and other interested parties to facilitate period-over-period comparisons and provides additional clarity as to how factors and trends impact our operating performance.

Management uses these non-GAAP financial measures (a) to evaluate our historical and prospective financial performance as well as our performance relative to our competitors as they assist in highlighting trends, (b) to set internal sales targets and spending budgets, (c) to measure operational profitability and the accuracy of forecasting, (d) to assess financial discipline over operational expenditures, and (e) as an important factor in determining variable compensation for management and employees. EBITDA and Adjusted EBITDA are also used for certain covenants and restricted activities under our debt agreements. We also believe these non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to evaluate companies in our industry.

We use Free cash flow to review the liquidity of our operations. We measure Free cash flow as Cash flows provided by operating activities less capital expenditures. We believe that Free cash flow is a useful financial metric to assess our ability to pursue business opportunities and investments. Free cash flow is not a measure of our liquidity under GAAP and should not be considered as an alternative to Cash flows provided by operating activities.

We caution readers that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, Adjusted Net income, and Free cash flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate EBITDA, Adjusted EBITDA, Adjusted Net income or Free cash flow in the same manner. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

 

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The following table reconciles EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Free cash flow to the most directly comparable GAAP financial performance and liquidity measures for the periods indicated:

 

     13-Weeks Ended     39-Weeks Ended  
     October 1,
2016
    September 26,
2015
    October 1,
2016
    September 26,
2015
 
     (in millions)*  

Net income

   $ 133      $ 5      $ 133      $ 177   

Interest expense, net

     49        70        190        211   

Income tax (benefit) provision

     (78     (2     (78     37   

Depreciation and amortization expense

     106        101        314        299   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     210        175        559        724   

Adjustments:

        

Sponsor fees(1)

     —          3        36        8   

Restructuring and tangible asset impairment charges(2)

     15        29        39        82   

Share-based compensation expense(3)

     5        3        14        8   

LIFO reserve change (4)

     (7     (20     (25     (42

Loss on extinguishment of debt (5)

     12        —          54        —     

Business transformation costs(6)

     10        11        26        31   

Acquisition related costs(7)

     —          23        1        79   

Acquisition termination fees—net (8)

     —          —          —          (288

Other(9)

     —          3        4        19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     244        225        707        620   

Depreciation and amortization expense

     (106     (101     (314     (299

Interest expense—net

     (49     (70     (190     (211

Income tax (provision) benefit, as adjusted (10)

     (2     1        (2     (38
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net income

   $ 87      $ 55      $ 201      $ 72   
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

        

Cash flows from operating activities

   $ 139      $ 321      $ 440      $ 586   

Capital expenditures

     38        31        105        142   
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 101      $ 290      $ 335      $ 444   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(*) Amounts may not add due to rounding.
(1) Consists of fees paid to Clayton, Dubilier & Rice, LLC (“CD&R”) and Kohlberg Kravis Roberts & Co. L.P. (“KKR”), collectively, (the “Sponsors”) for consulting and management advisory services. On June 1, 2016, the consulting and management agreements with each of the Sponsors were terminated for an aggregate termination fee of $31 million.
(2) Consists primarily of facility related closing costs, including severance and related costs, tangible asset impairment charges, organizational realignment costs and estimated multiemployer pension withdrawal liabilities.
(3) Share-based compensation expense for vesting of stock awards.
(4) Represents the non-cash impact of LIFO reserve adjustments.
(5) Includes fees paid to debt holders, third party costs, early redemption premium, and the write-off of certain pre-existing unamortized deferred financing costs, partially offset by the write-off of unamortized issue premium related to the June 2016 debt refinancing, and the loss related to the September 2016 CMBS Fixed Facility defeasance. See Note 10, Debt in our unaudited consolidated financial statements.
(6) Consists primarily of costs related to significant process and systems redesign across multiple functions.
(7) Consists of costs related to the Acquisition, including certain employee retention costs.
(8) Consists of net fees received in connection with the termination of the Acquisition Agreement.

 

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(9) Other includes gains, losses or charges as specified under USF’s debt agreements. The balance for the 13-weeks ended September 26, 2015 includes $9 million of brand re-launch and marketing costs and $3 million of closed facility carrying costs, partially offset by a $9 million net insurance benefit. The balance for the 39-weeks ended October 1, 2016 includes $5 million of IPO readiness costs, $4 million of closed facility carrying costs and $3 million of business acquisition related costs, partially offset by a $10 million insurance benefit. The balance for the 39-weeks ended September 26, 2015 includes a $16 million legal settlement charge, $9 million of brand re-launch and marketing costs, and $4 million of closed facility carrying costs, partially offset by a $11 million net insurance benefit.
(10) Represents our income tax (provision) benefit adjusted for the tax effect of pre-tax items excluded from Adjusted Net income and the removal of applicable discrete tax items. Applicable discrete tax items include changes in tax laws or rates, changes related to prior year unrecognized tax benefits, discrete changes in valuation allowances, and the tax benefits recognized in continuing operations due to the existence of a gain in Other comprehensive income and loss in continuing operations. The tax effect of pre-tax items excluded from Adjusted Net income is computed using a statutory tax rate after taking into account the impact of permanent differences and valuation allowances. We released the valuation allowance against federal and certain state net deferred tax assets in the 13-week and 39-week periods ended October 1, 2016. We were required to reflect the portion of the valuation allowance release related to current year ordinary income in the estimated annual effective tax rate and the portion of the valuation allowance release related to future years’ income discretely in the 13-weeks ended October 1, 2016. We maintained a valuation allowance against federal and state net deferred tax assets in the 13-week and 39-week periods ended September 26, 2015. The result was an immaterial tax effect related to pre-tax items excluded from Adjusted Net income in the 13-week and 39-week periods ended October 1, 2016 and September 26, 2015.

Comparison of Results

13-Weeks Ended October 1, 2016 and September 26, 2015

Highlights

The comparison of results between the 13-weeks ended October 1, 2016 and September 26, 2015 is as follows:

 

    Case volume increased 4.0%. Independent restaurant case volume increased 5.5 %.

 

    Net sales increased $45 million, or 0.8%, to $5,841 million.

 

    Operating income increased $42 million, or 57.5%, to $115 million in 2016. As a percentage of Net sales, Operating income increased to 2% in 2016, as compared to 1.3% in 2015.

 

    Net income increased $128 million, to $133 million in 2016. Adjusted EBITDA increased $19 million, or 8.4%, to $244 million in 2016. As a percentage of Net sales, Adjusted EBITDA increased to 4.2% in 2016, compared to 3.9% in 2015.

Net Sales

Total case growth of 4% reflected growth across most customer categories, with independent restaurants being the largest contributor. The total case growth was partially offset by planned exits of certain national restaurant chain business. Organic case growth was 1.7%, and reflected similar customer growth trends. Independent restaurant case growth increased approximately 5.5% over the prior quarter, with organic independent restaurant case growth contributing approximately 3.5%.

Net sales increased $45 million, or 0.8%, to $5,841 million in 2016, which is comprised of a 4.0% increase in case volume and a 3.2% reduction in the overall rate per case. The increase in case volume improved Net sales by approximately $232 million, while the rate per case reduced Net sales by approximately $187 million. Acquisitions increased sales by approximately $85 million or 1.5%. Sales of private brand products represented approximately 33% of total Net sales for the 13-weeks ended 2016 and 2015.

The overall rate per case decline of 3.2% as compared to the 13-weeks of 2015 reflects a continuation of the deflationary environment and product mix changes. Deflation is estimated to contribute to approximately two-thirds of the rate per case decline with mix shifts driving the remainder. Deflation was experienced in several commodity categories, but particularly in beef and dairy which contributed to lower average selling prices per case. Changes in product costs impact Net sales since a significant portion of our business is based on markups over cost. Product mix changes stem primarily from our recent acquisition of Freshway. Freshway is a produce distributor with annual sales of approximately $130 million. Produce, as a category, has lower selling prices per case than our average, which brings down our average selling price per case when these sales are consolidated in our overall results. Mix changes also include the transition away from certain national restaurant chain customers whose purchases were concentrated in certain protein categories.

Gross Profit

Gross profit increased $20 million, or 2.0%, to $1,033 million in the 13-weeks of 2016. As a percentage of Net sales, Gross profit increased by 0.2% to 17.7% in 2016 from 17.5% in 2015. The increase in gross profit, as a percent of sales, was driven by higher case

 

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volume, inclusive of acquisitions, which increased Gross profit by 0.4%, compared to 2015. This increase was partially offset by a $13 million or a 0.2% decline, as a percent of sales, in the LIFO benefit recognized year over year. Deflationary trends resulted in a LIFO benefit of $7 million in 2016 compared to a benefit of $20 million in 2015. We experienced deflation in center-of-plate items, most notably from beef.

Distribution, Selling and Administrative Costs

Distribution, selling and administrative costs decreased $8 million, or 0.9%, to $903 million in 2016. As a percentage of Net sales, Distribution, selling and administrative costs were 15.5% in 2016 compared to 15.7% in 2015. The decrease included approximately $7 million of favorable self-insurance experience, $8 million of lower distribution costs largely driven by fuel savings, and $5 million of lower postretirement costs. These benefits were partially offset by a $7 increase in costs due to a year over year reduction in the amount of insurance benefit realized from a claim for a facility destroyed by a tornado in 2014 and $5 million of additional depreciation and amortization, primarily driven by amortization of newly acquired intangible assets from recent business acquisitions.

Restructuring and Tangible Asset Impairment Charges

Restructuring and tangible asset impairment charges decreased $14 million, or 48%, to $15 million in 2016. During the 13-weeks ended October 1, 2016, we announced a plan to centralize certain field procurement activities with an eye toward improving the effectiveness of how we manage product costs and logistics activities. These actions resulted in a $7 million charge, primarily related to employee separation benefits. Additional costs of approximately $8 million were recognized related to the field reorganization announced in 2015, and other facility closure costs, which were focused on network optimization and distribution productivity.

During the 13-weeks ended September 26, 2015, the Company recognized an initial restructuring charge of $29 million related to its plan to streamline the field operational model discussed above. This charge consisted primarily of employee separation costs.

Operating Expenses

Operating expenses, comprised of Distribution, selling, and administrative costs and Restructuring and tangible asset impairment charges, decreased $23 million or 2.5% to $917 million. Operating expenses as a percent of Net sales were 15.7% in 2016, down from 16.2% in 2015. The change was primarily due to the factors discussed in the relevant sections above.

Operating Income

Operating income increased $42 million, or 57.5%, to $115 million in 2016. Operating income as a percent of Net sales was 2.0% in 2016, up from 1.3% in 2015. The change was primarily due to the factors discussed above.

Interest Expense—Net

Interest expense—net was $21 million lower primarily due to the pay down and refinancing of debt during the second quarter of 2016. See Note 10, Debt in our unaudited consolidated financial statements.

Loss on Extinguishment of debt

In September 2016, USF, through a wholly owned subsidiary, legally defeased its CMBS fixed rate loan dated as of July 3, 2007, (the “CMBS Fixed Facility”), scheduled to mature on August 1, 2017. The defeasance resulted in a loss on extinguishment of debt of $12 million consisting of the difference between the purchase price of the U.S. Government securities – not attributable to accrued interest through the effective date of the defeasance – and the outstanding principal of the CMBS Fixed Facility of $472 million, and other costs of $1 million, consisting of unamortized deferred financing costs and third party costs. See Note 10, Debt in our unaudited consolidated financial statements.

Income Taxes

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

We released the valuation allowance against our federal net deferred tax assets and certain of our state net deferred tax assets in the 13-weeks ended October 1, 2016 as we determined it was more likely than not the deferred tax assets would be realized. We maintained a valuation allowance on certain state net operating loss and tax credit carryforwards expected to expire unutilized as a result of insufficient forecasted taxable income in the carryforward period or the utilization of which are subject to limitation. The decision to release the valuation allowance was made after management considered all available evidence, both positive and negative, including but not limited to, historical operating results, cumulative income in recent years, forecasted earnings, and a reduction of uncertainty regarding forecasted earnings as a result of developments in certain customer and strategic initiatives during the 13-weeks ended October 1, 2016.

The effective tax rate for the 13-weeks ended October 1, 2016 and September 26, 2015 of (143)% and (62)%, respectively, varied from the 35% federal statutory rate, primarily due to a change in the valuation allowance and the recognition of various discrete tax items. During the 13-weeks ended October 1, 2016 and September 26, 2015, the valuation allowance decreased $101 million and $3 million, respectively. The decrease in the valuation allowance for the 13-weeks ended October 1, 2016 was primarily the result of the year to date ordinary income and the corresponding release of the valuation allowance. The discrete tax items for the 13-weeks ended October 1, 2016 included a tax benefit of $80 million, primarily related to the release of the valuation allowance. The decrease in the valuation allowance for the 13-weeks ended September 26, 2015 was primarily the result of the year to date ordinary income, partially offset by an increase in the valuation allowance due to an increase in deferred tax liabilities related to indefinite-lived intangibles. The discrete tax items for the 13-weeks ended September 26, 2015 included a tax benefit of $2 million primarily related to the settlement of tax audits and the expiration of the statute of limitations in various state and local jurisdictions which had a significant impact on the effective tax rate as compared to the ordinary income of $3 million for the 13- weeks ended September 26, 2015.

 

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Net Income

Our Net income was $133 million in 2016 as compared to $5 million in 2015. The improvement in our results of operations was primarily due to the factors discussed above.

39-weeks ended October 1, 2016 and September 26, 2015

Highlights

 

    Case volume increased 2.5%. Independent restaurant case volume increased 6.5%.

 

    Net sales increased $49 million, or 0.3%, to $17,241 million.

 

    Operating income increased $161 million, or 117.5%, to $298 million in 2016. As a percentage of Net sales, Operating income increased to 1.7% in 2016, as compared to 0.8% in 2015.

 

    Net income decreased $44 million, or 24.9% to $133 million. Adjusted EBITDA increased to $707 million in 2016 from $620 million in 2015. As a percentage of Net sales, Adjusted EBITDA increased to 4.1% in 2016 compared to 3.6% in 2015.

Net Sales

Total case growth of 2.5% reflected growth with independent restaurants, education, and hospitality customers, partially offset by planned exits from national restaurant chains. Total organic case volume increased 1.1%, and reflected similar customer growth trends. Independent restaurant case growth was approximately 6.5% over the prior year, with organic independent restaurant growth contributing approximately 4.5%.

Net sales increased $49 million, or 0.3% to $17,241 in 2016, comprised of a 2.5% increase in case volume, partially offset by a 2.2% reduction in the overall rate per case. The increase in case volume improved Net sales by approximately $434 million, while the rate per case reduced Net sales by approximately $385 million. Acquisitions increased sales by approximately $196 million or 1.1%. Sales of private brand products represented approximately 33% and 32% of total sales for the 39-weeks in 2016 and 2015, respectively.

The overall rate per case decline of 2.2% as compared to the 39-weeks of 2015 reflects a continuation of the deflationary environment and product mix changes. Deflation is estimated to contribute to approximately two-thirds of the rate per case decline with mix shifts driving the remainder. Deflation was experienced in several commodity categories, but particularly in beef, which contributed to lower average selling prices per case. Changes in product costs impact Net sales since a significant portion of our business is based on markups over cost. Product mix changes include impacts from our produce company acquisition. Produce, as a category, has lower selling prices per case than our average, which brings down our average selling price per case when these sales are consolidated in our overall results. Mix changes also include the transition away from certain national restaurant chain customers whose purchases were concentrated in certain protein categories.

Gross Profit

Gross profit increased $91 million, or 3.1%, to $3,026 million in the 39-weeks of 2016. As a percentage of Net sales, Gross profit increased by 0.5% to 17.6% in 2016 from 17.1% in 2015. Higher case volume, including the impact of acquisitions, increased Gross profit, as a percent of sales, by 0.2%, compared to 2015. Additionally, merchandising initiatives, including efforts to reduce product costs through vendor management and other margin improvement initiatives, increased Gross profit, as a percent of sales by 0.4% compared to the 39-weeks of 2015. Our LIFO inventory costing decreased Gross profit by $17 million or 0.1%, as a percent of sales, as compared to 2015. Deflationary trends resulted in a LIFO benefit of $25 million in 2016 compared to a benefit of $42 million in 2015. We experienced deflation in center-of-plate items, most notably from beef and dairy.

 

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Distribution, Selling and Administrative Costs

Distribution, selling and administrative costs decreased $27 million, or 1.0%, to $2,689 million in 2016. As a percentage of Net sales, Distribution, selling and administrative costs decreased 0.2%, to 15.6% in 2016 from 15.8% in 2015. The decrease included $25 million of lower distribution expenses, driven by fuel savings, $16 million of net reductions in postretirement benefit costs, a $14 million net benefit related to an improvement in litigation settlements, $10 million of favorable self-insurance experience, and $7 million of wage benefits resulting from the non-recurrence of certain 2015 retention benefits related to the Acquisition. These improvements were partially offset by the $31 million termination fee paid to our Sponsors during the second quarter of 2016, and a $15 million increase in depreciation and amortization expense, primarily related to fleet assets and additional intangible asset amortization.

Restructuring and Tangible Asset Impairment Charges

Restructuring and tangible asset impairment charges decreased $43 million, or 52.4%, to $39 million in 2016. During the 39-weeks ended October 1, 2016, we recognized $39 million of costs comprised of $7 million of employee separation costs to centralize field procurement activities and $32 million of costs related the field reorganization and Baltimore distribution facility closure.

During the 39-weeks ended September 26, 2015, we recognized $82 million of costs related to the field reorganization and Baltimore distribution facility closure. The field reorganization costs of approximately $31 million, were primarily comprised of employee separation costs. The Baltimore costs of approximately $51 million were comprised of $46 million for estimated multiemployer pension withdrawal liabilities and $5 million related to other employee separation and related costs. The estimated multiemployer pension cost was based on the latest available information received from the respective plans’ administrator and represented an estimate for a calendar year 2014 withdrawal. Due to the lack of current information, including changes in market conditions, and funded status of the related multiemployer pension plans, the settlement of these multiemployer pension withdrawal liabilities could materially differ from initial estimates.

Operating Expenses

Operating expenses, comprised of Distribution, selling, and administrative costs and Restructuring and tangible asset impairment charges, decreased $69 million, or 2.5% to $2,728 million. Operating expenses as a percent of Net sales were 15.8% for the 39-weeks of 2016, down from 16.3% in 2015. The change was primarily due to the factors discussed in the relevant sections above.

Operating Income

Operating income increased $161 million, or 117.5%, to $298 million in 2016. Operating income as a percent of Net sales increased 0.9% to 1.7% for the 39-weeks of 2016, up from 0.8% in 2015. The change was primarily due to the factors discussed above.

Acquisition Termination Fees—Net

The 39-weeks of 2015 included net Acquisition termination fee income of $288 million, comprised of $300 million paid to us in connection with the termination of the Acquisition Agreement offset in part by a $12.5 million termination fee paid by us in connection with the termination of the related asset purchase agreement.

Interest Expense—Net

Interest expense—net was $21 million lower primarily due to the pay down and refinancing of debt during the second quarter of 2016. See Note 10, Debt in our unaudited consolidated financial statements.

Loss on Extinguishment of debt

As discussed in Note 10, Debt, in our unaudited consolidated financial statements, USF incurred a $54 million loss on extinguishment of debt in 2016. Approximately $42 million of the loss related to the June 2016 debt redemption and refinancing. The remaining $12 million resulted from the defeasance of the CMBS Fixed Facility.

Income Taxes

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

We estimated our annual effective tax rate for the full fiscal year and applied the annual effective tax rate to the results of the 39-weeks ended October 1, 2016 and September 26, 2015 for purposes of determining our year-to-date tax provision (benefit).

 

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We released the valuation allowance against our federal net deferred tax assets and certain of our state net deferred tax assets in the 13-weeks ended October 1, 2016 as we determined it was more likely than not the deferred tax assets would be realized. We maintained a valuation allowance on certain state net operating loss and tax credit carryforwards expected to expire unutilized as a result of insufficient forecasted taxable income in the carryforward period or the utilization of which are subject to limitation. The decision to release the valuation allowance was made after management considered all available evidence, both positive and negative, including but not limited to, historical operating results, cumulative income in recent years, forecasted earnings, and a reduction of uncertainty regarding forecasted earnings as a result of developments in certain customer and strategic initiatives during the 13-weeks ended October 1, 2016

The effective tax rate for the 39-weeks ended October 1, 2016 and September 26, 2015 of (143)% and 17%, respectively, varied from the 35% federal statutory rate, primarily as a result of a change in the valuation allowance and the recognition of various discrete tax items. During the 39-weeks ended October 1, 2016 and September 26, 2015, the valuation allowance decreased $101 million and $43 million, respectively. The decrease in the valuation allowance for the 39-weeks ended October 1, 2016 was primarily the result of the year to date ordinary income and the corresponding release of the valuation allowance. The discrete tax items for the 39-weeks ended October 1, 2016 included a tax benefit of $80 million, primarily related to the release of the valuation allowance. The decrease in the valuation allowance for the 39-weeks ended September 26, 2015 was primarily the result of the year to date ordinary income, partially offset by an increase in the valuation allowance due to an increase in deferred tax liabilities related to indefinite-lived intangibles. The year to date ordinary income for the 39-weeks ended September 26, 2015 was impacted by the $288 million net termination fee received pursuant to the terminated Acquisition Agreement. The discrete tax items for the 39-weeks ended September 26, 2015 included a tax benefit of $2 million primarily related to the settlement of tax audits and the expiration of the statute of limitations in various state and local jurisdictions.

Net Income

Our Net income was $133 million in 2016 as compared to $177 million in 2015. The decrease in the results of operations is due to the factors discussed above.

Liquidity and Capital Resources

Our operations and strategic objectives require continuing capital investment. Our resources include cash provided by operations, as well as access to capital from bank borrowings, various types of debt, and other financing arrangements.

Indebtedness

We are highly leveraged and a substantial portion of our liquidity needs arise from debt service requirements, and from the ongoing costs of operations, working capital and capital expenditures. As discussed below, we used the net proceeds from our IPO to paydown debt.

In June 2016, we issued 51,111,111 shares of common stock pursuant to our IPO for a cash offering price of $23.00 per share ($21.9075 per share net of underwriter discounts and commissions and before offering expenses), including the exercise in full by underwriters of their option to purchase 6,666,667 additional shares. We used the net proceeds from the IPO of $1,114 million (after the payment of underwriter discounts and commissions and offering expenses) to repay $1,090 million principal amount, and $23 million early redemption premium, for USF’s 8.5% unsecured Senior Notes due June 30, 2019 (the “Old Senior Notes”).

Subsequently, USF entered into a series of transactions to refinance the $2,042 million principal of its senior secured term loan dated as of May 11, 2011 (the “Amended 2011 Term Loan”), and redeem the remaining $258 million in principal of its Old Senior Notes. The aggregate principal outstanding of the Amended 2011 Term Loan was increased to $2,200 million pursuant to USF entering into the Amended and Restated 2016 Term Loan. Additionally, USF issued $600 million principal of 5.875% unsecured Senior Notes due June 15, 2024, (the “2016 Senior Notes”).

In September 2016, USF, through a wholly owned subsidiary, legally defeased its CMBS Fixed Facility, scheduled to mature on August 1, 2017. The CMBS Fixed Facility, had an outstanding balance of $471 million net of unamortized deferred financing costs of $1 million. The cash outlay for the defeasance of $485 million represented the purchase price of U.S. government securities that will generate sufficient cash flow to fund interest payments from the effective date of the defeasance through the repayment of the CMBS Fixed Facility on February 1, 2017, the earliest date the loan could be prepaid at its outstanding principal. The defeasance resulted in a loss on extinguishment of debt of approximately $12 million consisting of the difference between the purchase price of the U.S. Government securities – not attributable to accrued interest through the effective date of the defeasance – and the outstanding principal of the CMBS Fixed Facility of $472 million, and other costs of $1 million, consisting of unamortized deferred financing costs and other third party costs.

As of October 1, 2016, we had $3,831 million in aggregate indebtedness outstanding, net of $21 million of unamortized deferred financing costs.

Our primary financing sources for working capital and capital expenditures are our asset-backed senior secured revolving loan dated as of October 20, 2015 (the “ABL Facility”) and our accounts receivable financing facility dated as of August 27, 2012, as amended (the “2012 ABS Facility”). As of October 1, 2016, we had aggregate commitments for additional borrowings under the ABL Facility and the 2012 ABS Facility of $987 million, of which $929 million was available based on our borrowing base, all of which was secured.

 

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The ABL Facility provides for loans of up to $1,300 million, with its capacity limited by borrowing base calculations. As of October 1, 2016, we had $30 million of outstanding borrowings and had issued letters of credit totaling $403 million under the ABL Facility. There was available capacity on the ABL Facility of $866 million at October 1, 2016, based on the borrowing base calculation.

Under the 2012 ABS Facility, USF and from time to time certain of its subsidiaries, sell, on a revolving basis, their eligible receivables to a wholly owned, special purpose, bankruptcy remote subsidiary. This subsidiary, in turn, grants to the administrative agent, for the benefit of the lenders, a continuing security interest in all of its rights, title and interest in the eligible receivables (as defined by the 2012 ABS Facility). See Note 5, Accounts Receivable Financing Program in our unaudited consolidated financial statements. The maximum capacity under the 2012 ABS Facility is $800 million, with its capacity limited by borrowing base calculations. Borrowings under the 2012 ABS Facility were $680 million at October 1, 2016. At its option, USF can request additional 2012 ABS Facility borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $63 million at October 1, 2016, based on the borrowing base calculation.

The Amended and Restated 2016 Term Loan had outstanding borrowings, as of October 1, 2016 of $2,181 million, net of $14 million of unamortized deferred financing costs. The Amended and Restated 2016 Term Loan bears interest of 4.0% – the London Inter Bank Offered Rate (“LIBOR”) floor of 0.75% plus 3.25%, at October 1, 2016 – and matures on June 27, 2023.

As of October 1, 2016, we had $593 million outstanding of 2016 Senior Notes, net of $7 million of unamortized deferred financing costs. The 2016 Senior Notes bear interest of 5.875% and mature on June 15, 2024. On or after June 15, 2019, the 2016 Senior Notes are redeemable, at USF’s option, in whole or in part at a price of 102.938% of their principal, plus accrued and unpaid interest, if any, to the redemption date. On or after June 15, 2020 and June 15, 2021, the optional redemption price for the 2016 Senior Notes declines to 101.469% and 100.0%, respectively, of their principal amount, plus accrued and unpaid interest, if any, to the redemption date. Prior to June 15, 2019, up to 40% of the 2016 Senior Notes may be redeemed with the aggregate proceeds from equity offerings, as defined in the 2016 Senior Notes indenture, at a redemption premium of 105.875%.

In January 2015, USF entered into a self-funded industrial revenue bond agreement providing for the issuance of a maximum of $40 million in taxable demand revenue bonds (the “TRBs”) that provide certain tax incentives related to the construction of a new distribution facility. As of October 1, 2016, $22 million has been drawn on the TRBs resulting in $22 million being recognized as a long-term asset and a corresponding long-term liability in our Consolidated Balance Sheet. As of October 1, 2016, USF also had $315 million of obligations under capital leases for transportation equipment and building leases.

USF’s June 2016 debt refinancings extended maturities of debt facilities and lowered borrowing costs. USF’s largest debt facilities will mature in 2023 and 2024 with scheduled principal payments of $2.1 billion and $600 million, respectively. As economic conditions permit, we will consider further opportunities to repurchase, refinance or otherwise reduce our debt obligations on favorable terms. Any further potential debt reduction or refinancing could require significant use of our liquidity and capital resources. For a detailed description of USF’s indebtedness, see Note 10, Debt, in our unaudited consolidated financial statements.

We believe that the combination of cash generated from operations—together with availability under our debt agreements and other financing arrangements—will be adequate to permit us to meet our debt service obligations, ongoing costs of operations, working capital needs, and capital expenditure requirements for the next 12 months.

Our future financial and operating performance, ability to service or refinance our debt, and ability to comply with covenants and restrictions contained in our debt agreements will be subject to: (1) future economic conditions, (2) the financial health of our customers and suppliers, and (3) financial, business and other factors—many of which are beyond our control.

Every quarter, we review rating agency changes for all of the lenders that have a continuing obligation to provide us with funding. We are not aware of any facts that indicate our lenders will not be able to comply with the contractual terms of their agreements with us. We continue to monitor the credit markets generally and the strength of our lender counterparties.

From time-to-time, we repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our balance sheet. These actions may include open market repurchases, negotiated repurchases, and other retirements of outstanding debt. The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, our debt trading levels, our cash position, and other considerations. The Sponsors or their affiliates may also purchase our debt from time to time, through open market purchases or other transactions. In these cases, our debt is not retired, and we would continue to pay interest in accordance with the terms of the related debt agreements.

USF’s credit facilities, loan agreements and indentures contain customary covenants. These include, among other things, covenants that restrict USF’s ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. As of October 1, 2016, USF had $432 million of restricted payment capacity under these covenants, and approximately $2,060 million of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation.

 

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Certain debt agreements also contain customary events of default. Those include, without limitation, the failure to pay interest or principal when it is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true, and certain insolvency events. If a default event occurs and continues, the principal amounts outstanding, together with all accrued unpaid interest and other amounts owed, may be declared immediately due and payable by the lenders. Were such an event to occur, we would be forced to seek new financing that may not be on as favorable terms as our current facilities. Our ability to refinance our indebtedness on favorable terms, or at all, is directly affected by the current economic and financial conditions. In addition, our ability to incur secured indebtedness (which may enable us to achieve more favorable terms than the incurrence of unsecured indebtedness) depends on the strength of our cash flows, results of operations, economic and market conditions and other factors. As of October 1, 2016, we were in compliance with all of our debt agreements.

Cash Flows

For the periods presented, the following table presents condensed highlights from the cash flow statements:

 

     39-Weeks Ended  
     October 1,      September 26,  
   2016      2015  
     (in millions)*  

Net income

   $ 133       $ 177   

Changes in operating assets and liabilities - net of business acquisitions

     —           52   

Other adjustments

     307         357   
  

 

 

    

 

 

 

Net cash provided by operating activities

     440         586   
  

 

 

    

 

 

 

Net cash used in investing activities

     (681      (158
  

 

 

    

 

 

 

Net cash used in financing activities

     (126      (73
  

 

 

    

 

 

 

Net (decrease) increase in cash and cash equivalents

     (368      355   

Cash and cash equivalents, beginning of period

     518         344   
  

 

 

    

 

 

 

Cash and cash equivalents, end of period

   $ 150       $ 699   
  

 

 

    

 

 

 

 

(*) Amounts may not add due to rounding.

Operating Activities

Cash flows provided by operating activities were $440 million and $586 million for the 39-weeks ended October 1, 2016 and September 26, 2015, respectively. Prior year cash flows provided by operating activities included a $288 million net cash inflow related to the termination of the Acquisition. Excluding the net termination fee received, cash flows provided by operating activities in 2015 were $298 million. The $142 million increase in the year over year cash flows provided by operating activities, excluding the termination fee, is driven by year over year margin improvements and reductions in operating expenses.

Investing Activities

Cash flows used in investing activities in 2016 reflects our strategy to selectively pursue acquisitions to accelerate our growth. During the 39-weeks ended October 1, 2016, business acquisitions included a produce processor, repacker, and distributor, and a broadline distributor. Total consideration consisted of cash of approximately $96 million plus $6 million for the estimated value of contingent consideration. We also purchased a noncontrolling interest of approximately $8 million in a technology company that provides point-of-sale business intelligence to restaurants, which serves to support our sales initiatives. Approximately $105 million of purchases were made for property and equipment. Cash spending on property and equipment was down from the prior year primarily due to 2015 spending of approximately $60 million for two distribution facility construction/expansion projects.

Cash flows used in investing activities in 2016 also included the purchase of $485 million of U.S. Government securities that were subsequently used to defease USF’s $472 million principal CMBS Fixed Facility. See Note 10, Debt, in our unaudited consolidated financial statements.

 

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During the 39-weeks ended September 26, 2015, we spent $142 million for property and equipment and purchased $22 million of self-funded industrial revenue bonds. See – “Financing Activities” below for the offsetting cash inflow and further discussion in Note 10, Debt, in our unaudited consolidated financial statements.

We expect total capital additions in 2016 to be between $260 and $280 million, inclusive of approximately $80 million in fleet capital leases. During the 39-weeks ended October 1, 2016, capital additions totaled $182 million, of which $77 million was fleet capital leases. We expect to fund our capital expenditures with available cash generated from operations.

Financing Activities

Cash flows used in financing activities of $126 million in the 39-weeks ended October 1, 2016 included net proceeds from our IPO of $1,114 million, and net proceeds from debt issuances and refinancings. We used the proceeds from these transactions to redeem the $1,348 million in principal of the Old Senior Notes, plus an early redemption premium of $29 million, and to purchase the U.S. Government securities that were subsequently used to defease USF’s CMBS Fixed Facility. In addition to the early redemption premium, we have incurred approximately $26 million of other debt financing costs and fees in connection with the debt refinancings and defeasance. We also paid a $666 million one-time special cash distribution to our shareholders, of which $657 million was paid to the Sponsors. We funded the distribution through a $75 million borrowing under the 2012 ABS Facility, a $239 million borrowing under the ABL Facility, and $352 million in available cash.

Cash flows used in financing activities of $73 million in 2015 included $90 million of payments on debt and capital leases, including $2 million of Old Senior Notes repurchased from certain entities associated with KKR. Additionally, we repurchased $5 million of common stock from terminated employees.

In January 2015, we entered into a self-funded industrial revenue bond agreement providing for the issuance of a maximum of $40 million in TRBs that provide certain tax incentives related to the construction of a new distribution facility. We borrowed $22 million of the TRBs in 2015.

Retirement Plans

We sponsor several qualified retirement plans and a nonqualified retirement plan (“Retirement Plans”) that pay benefits to certain employees at retirement, generally using formulas based on a participant’s years of service and compensation. In addition, we maintain several postretirement health and welfare plans that provide benefits for eligible retirees and their dependents. We contributed $36 million and $48 million to the Retirement plans during the 39-week periods ended October 1, 2016 and September 26, 2015, respectively. We have made all required contributions to the Company-sponsored pension plans for fiscal year 2016.

Certain employees are eligible to participate in USF’s defined contribution 401(k) plan. This plan provides that, under certain circumstances, we may match participant contributions of up to 100% of the first 3% of a participant’s compensation and 50% of the next 2% of a participant’s compensation, for a maximum matching contribution of 4%. Our contributions to this plan were $32 million and $21 million for the 39-weeks ended October 1, 2016 and September 26, 2015, respectively.

We also contribute to various multiemployer benefit plans under certain collective bargaining agreements. Additionally, at October 1, 2016, we had $86 million of multiemployer pension withdrawal liabilities relating to closed facilities, of which $36 million is payable in monthly installments through 2031, at effective interest rates ranging from 5.9% to 6.5%. The remaining balance of $50 million reflects our estimate of our withdrawal liability for the Baltimore, Maryland facility, closed earlier this year. Due to changes in market conditions and the funded status of the plan, the actual settlement could materially differ from our initial estimates.

Contractual Obligations

See the Contractual Obligations section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Prospectus for our contractual cash obligations as of January 2, 2016. There have been no material changes to our specified contractual obligations through October 1, 2016, except for the change in long term maturities due to the June 2016 debt refinancings and debt defeasance discussed above.

Off-Balance Sheet Arrangements

We entered into $69 million in letters of credit to secure our obligations with respect to certain facility leases. Additionally, we entered into $331 million in letters of credit in favor of certain commercial insurers securing our obligations with respect to our self-insurance programs, and $3 million in letters of credit for other obligations.

 

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Except as disclosed above, we have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

We have prepared the financial information in this report in accordance with GAAP. Preparing these unaudited consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our Prospectus includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenue or expenses during quarter ended October 1, 2016.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements in our unaudited consolidated financial statements in Part I Item 1 of this Quarterly Report on Form 10-Q for information related to new accounting standards.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain risks arising from both our business operations and overall economic conditions. We principally manage our exposures to a wide variety of business and operational risks through managing our core business activities. We manage economic risks—including interest rate, liquidity, and credit risk—primarily by managing the amount, sources, and duration of our debt funding. While we have held derivative financial instruments in the past to assist in managing our exposure to variable interest rate terms on certain of our borrowings, we are not currently party to any derivative contracts.

Interest Rate Risk

Market risk is the possibility of loss from adverse changes in market rates and prices, such as interest rates and commodity prices. A substantial portion of our debt facilities bear interest at floating rates, based on LIBOR or the alternate base rate, as defined in USF’s credit agreements. Accordingly, we will be exposed to fluctuations in interest rates. A 1% change in LIBOR and the prime rate would cause the interest expense on USF’s $2.9 billion of floating rate debt facilities to change by approximately $29 million per year (see Note 10, Debt in our unaudited consolidated financial statements). This change does not consider the LIBOR floor of 1.0% on $2.2 billion in principal of USF’s variable rate term loan.

Commodity Price Risk

We are also exposed to risk due to fluctuations in the price and availability of diesel fuel. Increases in the cost of diesel fuel can negatively affect consumer spending, raise the price we pay for products, and increase the costs we incur to deliver products to our customers. To minimize fuel cost risk, we enter into forward purchase commitments for a portion of our projected diesel fuel requirements. As of October 1, 2016, we had diesel fuel forward purchase commitments totaling $109 million through March 2018. These locked in approximately 60% of our projected diesel fuel purchase needs for the contracted periods. Our remaining fuel purchase needs will occur at market rates. Using published market price projections for diesel and estimated fuel consumption needs, a 10% unfavorable change in diesel prices from the projected market prices could result in approximately $8 million in additional fuel cost on such uncommitted volumes.

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated and communicated to Company management—including our Chief Executive Officer and Chief Financial Officer—as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

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As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of October 1, 2016.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ending October 1, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

For information relating to legal proceedings, see Note 18, Commitments and Contingencies in our unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

Item 1A. Risk Factors

There have been no material changes to our principal risks that we believe are material to our business, results of operations, and financial condition from the risk factors previously disclosed in the Prospectus, which is accessible on the SEC’s website at www.sec.gov.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

 

Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures

Not applicable.

 

Item 5. Other Information

Annual Meeting and Stockholder Proposals

Our Board of Directors has determined that we will hold our 2017 annual meeting of stockholders (the “2017 Annual Meeting”) on May 10, 2017.

The expected date of the 2017 Annual Meeting represents a change of more than 30 days from the first anniversary of the deemed date of our first annual meeting of stockholders of June 30, 2017, which is set forth in Section 1.12(a)(ii) of our Amended and Restated Bylaws (the “Bylaws”). In accordance with Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have established a new deadline for the receipt of stockholder proposals submitted for inclusion in our proxy materials for the 2017 Annual Meeting. In order to be considered for inclusion, such proposals must be received in writing by us before the close of business on January 9, 2017.

Proposals must also comply with the applicable requirements of Rule 14a-8 of the Exchange Act regarding the inclusion of stockholder proposals in Company-sponsored proxy materials and other applicable laws. The January 9, 2017 deadline will also apply in determining whether notice of a stockholder proposal is timely for purposes of exercising discretionary voting authority with respect to proxies under Rule 14a-4(c)(1) of the Exchange Act.

Additionally, in order for a stockholder to bring business before the 2017 Annual Meeting outside of Rule 14a-8 of the Exchange Act or to nominate a director for election, it must provide timely notice within the applicable time period set forth in the advance notice provision of the Bylaws. The Bylaws provide that where the annual meeting is advanced by more than 30 days from the anniversary of the previous year’s annual meeting, notice must be delivered to the Secretary of the Company no more than 120 and no fewer than 90 days before the new meeting date. In this case, because the date of the 2017 Annual Meeting is advanced by more than 30 days from June 30, 2017, the Secretary must receive written notice no earlier than the start of business on January 10, 2017 and no later than the close of business on February 9, 2017, and the stockholder must otherwise comply with the requirements set forth in the Bylaws.

Any stockholder proposal for inclusion in our proxy materials, notice of proposed business to be brought before the 2017 annual Meeting, or director nomination should be sent to our principal executive offices located at 9399 W. Higgins Rd., Suite 500, Rosemont, IL 60018, Attention: Corporate Secretary.

 

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Future Sales of our Common Stock

The Sponsors hold approximately 166,666,663 shares, or 75.5%, of our common stock, and have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. The resale of shares held by the Sponsors is currently prohibited or otherwise restricted as a result of lock-up agreements entered into by our stockholders with the underwriters in connection with the IPO; however, subject to applicable securities law restrictions these shares will be able to be sold in the public market beginning 180 days after the effective date of our IPO or upon waiver by the underwriters of the remainder of the 180-day lock-up period.

Shares issued upon the exercise of stock options outstanding under our equity incentive plans or pursuant to future awards granted under those plans will become available for sale in the public market to the extent permitted by the provisions of applicable vesting schedules, lock-up agreements, and Rule 144 and Rule 701 under the Securities Act.

 

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Item 6. Exhibits

 

Exhibit

Number

    
  10.54*§    US Foods Holding Corp. Amended and Restated Employee Stock Purchase Plan.
  10.55*§    Form of Omnibus Amendment to Outstanding Stock Option Agreements.
  31.1*    Section 302 Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2*    Section 302 Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1†    Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2†    Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*    Interactive Data File.

 

* Filed herewith.
§ Indicates exhibits that consist of a management contract or compensatory plan or arrangement.
Furnished with this Report.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    US FOODS HOLDING CORP.
    (Registrant)
Date: November 8, 2016     By:  

/s/ PIETRO SATRIANO

      Pietro Satriano
      President and Chief Executive Officer
Date: November 8, 2016     By:  

/s/ FAREED KHAN

      Fareed Khan
      Chief Financial Officer

 

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EX-10.54 2 d233034dex1054.htm EX-10.54 EX-10.54

Exhibit 10.54

US FOODS HOLDING CORP.

AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

 

1. Introduction

 

  1.1. Purpose of the Plan

The purpose of the Plan is to provide Employees with the opportunity to acquire Shares or an interest in Shares in the Company.

Employees who participate in the Plan are given a right, called a Purchase Right, to buy Shares at the end of the specified Purchase Period.

The Plan is a discretionary plan. Participation by any Employee is purely voluntary.

 

  1.2. Employee Stock Purchase Plan

The Plan is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Code. The provisions of the Plan will be construed so as to extend and limit participation in a manner consistent with that section of the Code.

 

  1.3. Other Similar Plans

The Company may establish similar plans for operation in other countries (“Sub-Plans”), as set out in Section 18. The Sub-Plans may be scheduled to the rules of this Plan or set out in separate documents. The Plan is, however, a separate and independent plan from the Sub-Plans.

 

  1.4. Shares for the Plan and Sub-Plans

The number of Shares authorized to be issued under the Plan in Section 8 applies in total to both the Plan and any Sub-Plans. The Committee will determine, at its discretion, the method for allocating the Shares under the Plan and the Sub-Plans without stockholder approval.

 

2. Definitions

 

  2.1. As used in the Plan:

Account” means the bookkeeping account established for a Participant in accordance with Section 10.6.

Acquiring Company” means a person who obtains control of the Company.

Acquisition Date” means the end of the Purchase Period (as specified by the Committee in the invitation), at which time the Purchase Right granted under the Plan may be exercised and Shares acquired on behalf of the Participant.

Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such first Person. For these purposes, “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person by reason of ownership of voting securities, by contract or otherwise.

Board” means the Board of Directors of the Company or, where appropriate, a duly authorized committee of it.

Business Day” means any day on which the New York Stock Exchange is open for the transaction of business.

Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation (including proposed regulation) include any successor provisions or regulations.


Committee” means the Compensation Committee of the Board or such other committee selected by the Board to administer the Plan.

Company” means US Foods Holding Corp, a company incorporated and organized under the laws of the state of Delaware and any successor entity.

Compensation” as defined in the US Foods 401(k) Plan, as may be amended from time to time

Contribution” means the amount of after-tax payroll deduction an Employee has agreed to make, as set out in his application for a Purchase Right.

Dealing Restrictions” means restrictions imposed by statute, order, regulation or Government directive, or by any code adopted by the Company, or any US or other regulatory requirement restricting dealings in Shares.

Eligible Employee” means an Employee who meets the requirements specified in the invitation to participate in the Offering and as set forth in Section 3 of the Plan.

Employee” means an individual employed by a Participating Company.

Grant Date” means a date selected by the Committee for an Offering to commence.

Offering” means the grant of Purchase Rights to acquire Shares under the Plan to Eligible Employees.

Parent” means a Person which is a “parent corporation” of the Company within the meaning of Section 424(e) of the Code.

Participant” means a person holding a Purchase Right, including Representatives.“Participating Companies” means:

 

  (i) any Subsidiary organized under the laws of any state of the United States of America, unless the Committee has determined a Subsidiary is not designated to participate in the Plan; and

 

  (ii) any other Subsidiary designated by the Committee to participate in the Plan (as long as it is not participating in any Sub-Plan).

Person” means any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.

Plan” means this plan known as the US Foods Holding Corp. Amended and Restated Employee Stock Purchase Plan.

Purchase Period” means a period of time specified in the invitation within an Offering, beginning on the Grant Date and ending on the Acquisition Date, or such earlier date as may be established under Section 11 of the Plan.

Purchase Price” means the amount payable for each Share on the exercise of a Purchase Right calculated as described in Section 6 of the Plan.

Purchase Right” means a right to acquire Shares granted under the Plan.

Representative” means the person entitled to receive the assets of a Participant under a Participant’s will or the laws of intestate succession, in the case of a deceased Participant, or to act as a guardian or conservator for a Participant, in the case of a Participant who is found to be incompetent.

Securities Act” means the Securities Act of 1933, as amended.

Share” means a share of the common stock of the Company.

Sub-Plan” means any employee stock purchase plan established in accordance with Section 18.


Subsidiary” means a Person which is a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.

Any references in the Plan to the masculine gender shall include references to the feminine gender and vice versa.

 

  2.2. Headings

Headings will be ignored in construing the terms of the Plan.

Eligibility

 

  2.3. Eligible Employees

A person will be eligible to participate if he or she:

 

                2.3.1. is employed for the purposes of Section 423(b)(4) of the Code by a Participating Company, including officers and directors, on the Grant Date; and

 

                2.3.2. (i) has such qualifying period (if any) of continuous service (not exceeding two years prior to the Grant Date), (ii) has such qualifying (if any) minimum number of customarily scheduled hours of work (not exceeding twenty), and/or (iii) such qualifying (if any) minimum number of months customarily worked per calendar year (not exceeding five), in each case as the Committee may from time to time determine.

 

  2.4. Restrictions on Eligibility

A person will not be eligible for the grant of any Purchase Rights if, immediately after the grant of a Purchase Right, the person owns stock possessing 5 percent or more of the total combined voting power or value of all classes of shares of the Company or any Subsidiary. For the purpose of this Section 3.2, the rules of Section 424(d) of the Code apply in determining the share ownership of any Employee and the Shares which he or she may acquire under all outstanding Purchase Rights. Purchase Rights will be treated as stock owned by the person.

 

3. Invitations

 

  3.1. Operation

The Committee has discretion to decide whether the Plan will be operated. When the Committee operates the Plan it must invite all Eligible Employees to apply to participate.

The invitation will continue to have effect in respect of subsequent Offerings under the Plan such that a Participant who has withdrawn from an Offering under Section 10.4 may re-apply to join the Plan under Section 5.1 provided he or she continues to be an Eligible Employee.

 

  3.2. Time when Invitations May be Made

 

                3.2.1. Invitations may be made at any such time as the Committee determines, subject to any Dealing Restrictions.

 

                3.2.2. If the Committee cannot make the invitation due to Dealing Restrictions, the Committee may make the invitations at any time after the lifting of such restrictions.


  3.3. Form of Invitation

The invitation will specify:

 

                3.3.1. the Grant Date;

 

                3.3.2. the requirements a person must satisfy in order to be eligible to participate;

 

                3.3.3. the Purchase Price or how it is to be calculated;

 

                3.3.4. the length of the Offering, which must not exceed 27 months beginning with the Grant Date;

 

                3.3.5. how applications must be submitted and the closing date for applying to join the Offering;

 

                3.3.6. the maximum number, “if any, of Shares over which Purchase Rights may be granted:

 

  (i) individually;

 

  (ii) for the Offering;

 

  (iii) taken in conjunction with Offerings under the Sub-Plans; or

 

  (iv) for a specific Purchase Period;

 

                3.3.7. the maximum and minimum permitted Contribution which can be specified in a currency or as a percentage of the Participant’s Compensation;

 

                3.3.8. when and how frequently the payroll deductions will be made;

 

                3.3.9. the Acquisition Date at the end of the Offering when the Shares will be acquired; and

 

                3.3.10. any other terms, consistent with the terms and conditions of the Plan.

The invitation and Offering must comply with the requirements of Section 423(b)(5) of the Code.

 

  3.4. Limit on Participation

 

                3.4.1. No person may be granted a Purchase Right which permits his rights to purchase Shares under all plans of the Company, any Subsidiary or Parent of the Company that are qualified under Section 423 of the Code to exceed US$25,000 of the Fair Market Value of such Shares, determined at the time the Purchase Right is granted, for each calendar year in which such Purchase Right is outstanding at any time.

 

                3.4.2. To the extent necessary to comply with this requirement, the Committee may:

 

  (i) cause a Participants Contributions to be decreased in respect of any Offering; or

 

  (ii) take other actions it considers necessary to ensure compliance with Section 423 of the Code.

 

4. Enrollment

 

  4.1. Form of Application

An application for a Purchase Right will be made in writing, or electronically, in a form specified by the Committee and will require the Eligible Employee to state:

 

                4.1.1. the Contribution he or she wishes to make;


                4.1.2. that his proposed Contribution, when added to any contributions he or she makes under any other stock purchase plans of the Company, its Subsidiaries or its Parent, will not exceed the maximum permitted under Section 423 of the Code.

An application in the form determined by the Committee which is improperly completed or late may be rejected.

 

  4.2. Subsequent Offerings

Unless the Participant withdraws from an Offering under Section 10.4, the Participant’s application is deemed to apply in respect of any subsequent Offerings if they are made available by the Company.

 

  4.3. Incorporation of Terms

The terms of each Offering will include, through incorporation by reference, the provisions of this Plan.

 

5. Purchase Price

 

  5.1. Setting the Price

The Committee will determine the Purchase Price (or the method by which it shall be determined) at the beginning of the Offering. The Purchase Price must not be less than 85 percent of the Fair Market Value of a Share at the Acquisition Date.

 

  5.2. Fair Market Value

Fair Market Value” on any particular day means the closing selling price for a Share on the New York Stock Exchange on that day.

If no selling price is reported for a particular date, “Fair Market Value” will be the closing selling price for a Share on the closest preceding Business Day for which such selling price is provided unless otherwise determined by the Committee. If the Shares are listed on any established stock exchange of a national market system (but they are not listed on the New York Stock Exchange), their “Fair Market Value” shall be the closing selling price for the Shares, as quoted on such exchange (or the exchange with the greatest volume of trading in Shares) or system on the date of such determination, as reported in The Wall Street Journal or such other recognized source as the Committee determines. If the Share is no longer listed on an established market, “Fair Market Value” of a Share will be determined in good faith by the Committee.

 

6. Grant of Purchase Right

 

  6.1. Grant

Unless there has been scaling down as described in Section 9, or the Committee decides not to proceed with an Offering, for example, because there are not enough Shares, the Committee must, on the Grant Date, grant to each Eligible Employee who has submitted and not withdrawn a valid application a Purchase Right to acquire, at the Purchase Price, the number of Shares for which the Eligible Employee has applied (or is deemed to have applied) based on the amount of Contributions he or she will make during the Offering.

The Committee will not grant a Purchase Right to anyone who is not an Eligible Employee on the Grant Date. If the Committee tries to do so, the grant will be void.

 

  6.2. Correction

Any grant of a Purchase Right in excess of the limit in Section 8 or Section 4.4 may be adjusted in any way so as to not exceed those limits.

 

  6.3. Transferability

Purchase Rights are not transferable by the Participant otherwise than by will or the laws of descent and distribution, and shall only be exercisable during the Participant’s lifetime by the Participant.


7. Shares Available for the Plan

 

  7.1. Limit Required by IRS Rules

Shares that may be issued or sold pursuant to Purchase Rights granted under the Plan and any Sub-Plan shall not exceed in the aggregate 1,250,000 Shares of the Company. This number is subject to the provisions of Section 14.3 relating to adjustments upon changes in capitalization.

 

  7.2. Exclusions

Where a Purchase Right is terminated or lapses without being exercised, these Shares are ignored when calculating the limits in this Section 8.

 

  7.3. Types of Shares

The Shares subject to the Plan may be Shares that have been authorized but unissued, Shares that have been bought, or treasury shares.

 

8. Scaling Down

 

  8.1. Method

If valid applications are received for a total number of Shares in excess of any maximum number specified in the invitation under Section 4.3, Section 4.4 or any limit under Section 8 the Committee will scale down applications by choosing one or more of the following methods:

 

                8.1.1. reducing the proposed Contributions by the same proportion to an amount not less than the minimum specified in the invitation; or

 

                8.1.2. reducing the proposed Contributions to a maximum amount chosen by the Committee, which must not be less than the minimum specified in the invitation; or

 

                8.1.3. using other methods, but these must treat Eligible Employees fairly.

 

  8.2. Insufficient Shares

If, having scaled down as described in Section 9.1, the number of Shares available is insufficient to enable Purchase Rights to be granted to all Eligible Employees making valid applications, the Committee may decide not to grant any Purchase Rights.

 

9. Payroll Deductions

 

  9.1. Start and End

Contributions will be deducted from payroll on each pay date during an Offering that includes Compensation for time worked during the Offering (unless terminated early in accordance with this section) or such other dates as the Committee may decide. All Contributions are made on an after-tax basis.

 

  9.2. Suspending Contributions

A Participant may request to suspend making Contributions at any time prior to the Acquisition Date by notifying the Company in the form and manner designated by the Company. On the Acquisition Date the Participant’s Purchase Right will be exercised and Shares purchased to the extent of the Contributions made until the suspension date, unless a Participant withdraws from the Offering in accordance with Section 10.4. Any suspension under this Section 10.2 will take effect no later than the first pay date following ten (10) business days from the Company’s receipt of the change form and shall be effective for the entire duration of the Offering in which it is made (but not for any succeeding Offering), unless the Committee determines otherwise.

A Participant shall not be permitted to make up any missed Contributions as a result of suspension under this Section 10.2 or otherwise.


  9.3. Changing Contributions

Changes to Contributions during an Offering may be permitted, as the Committee may decide.

 

  9.4. Withdrawal from an Offering

A Participant may request to withdraw from an Offering at any time prior to the Acquisition Date by notifying the Company in the form and manner designated by the Company. The request will take effect no later than fifteen (15) business days following the Company’s receipt of the request. For the avoidance of doubt, the Company is not obliged to process a request to withdraw from an Offering if the request is submitted later than fifteen (15) days prior to an Acquisition Date. If not processed prior to the relevant Acquisition Date, the request will take effect in respect of the next Offering.

All of the Participant’s Contributions credited to his Account will be paid to him no later than 30 days after receipt of his notice of withdrawal and his Purchase Right for the current Offering will be automatically terminated. No further Contributions for the purchase of Shares will be permitted or made during the Offering. Unless otherwise required by local law as determined by the Committee in its sole discretion, no interest or earnings shall be payable upon a Participant’s withdrawal from an Offering.

Unless the Committee sets forth limits on the frequency of a Participant’s ability to withdraw from an Offering, a Participant’s withdrawal from an Offering will not have any effect upon his eligibility to participate in the next Offering.

 

  9.5. Continued Participation

If so specified on the application, the Participant will continue to participate in successive Offerings unless terminated as provided in this Section 10.

 

  9.6. Account

The Contributions will be credited to a bookkeeping account for the Participant and may be deposited with the general funds of the Company or the Participating Company or, if the Committee so decides, with a banking institution or custodian as designated by the Committee. No interest or earnings shall be paid or credited to the Participant’s Account with respect to any payroll deductions except where required by local law as determined by the Committee.

 

  9.7. Compliance with Section 423

A Participant’s Contributions will, at any time, be decreased to the extent necessary to comply with Section 423(b)(8) of the Code and Section 4.4. Contributions shall recommence at the rate provided in the Participant’s application at the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless otherwise withdrawn by the Participant under Section 10.4 or changed under Section 10.3.

 

  9.8. Approved Leave of Absence

During an approved leave of absence, a Participant may continue to participate in the Plan but may elect to suspend Contributions in accordance with Section 10.2 during such leave period.

For the purposes of this Section 10.8, “approved leave of absence” means an Employee’s leave of absence (for example, military leave, maternity leave or sick leave) with the prior approval of an authorized person of his employer, during which period the Employee’s employment relationship is treated as continuing for the purposes of the Plan.

However, if the period of leave exceeds 90 days and the individual’s right to re-employment is not guaranteed either by statute or by contract, the employment relationship is deemed to terminate for the purposes of the Plan on the first day immediately following such 90-day period.

 

10. Termination of Employment

 

  10.1. General Rule on Termination and Death

A Purchase Right lapses immediately if a Participant dies or ceases to be employed by a Participating Company (for example, if he or she resigns). The Contributions credited to his Account will be returned to him or his Representative, as appropriate, without interest, no later than 30 days following the termination of employment and his Purchase Right will be automatically terminated.


  10.2. Beneficiary Designation

Notwithstanding Section 11.1, the Company may allow Participants to designate a beneficiary to receive the Contributions credited to the Participant and any Shares issued pursuant to the Plan which are held by a custodian on behalf of the Participant in the event of the Participant’s death, in accordance with such rules as it shall establish from time to time.

 

11. Exercise of Purchase Right

 

  11.1. Exercise

Unless a Participant withdraws from the Plan as provided in Section 10.4, his Purchase Right will be exercised automatically on each Acquisition Date, and the maximum number of whole Shares subject to the Purchase Right will be purchased at the applicable Purchase Price with the accumulated Contributions in his Account. The Purchase Right cannot be exercised in part. Any surplus in the Account which is insufficient to purchase a whole Share will be either paid directly to the Participant in cash or carried forward, in either case pursuant to rules established from time to time. However, there are some conditions and exceptions to this general rule on exercise (See, Sections 12.2 and 12.3).

 

  11.2. Contributions

A Participant may exercise his Purchase Right only using funds equal to or less than the Contributions for the applicable Offering. A Participant can only use Contributions made before the Acquisition Date applicable to the Purchase Right.

 

  11.3. Registration Compliance

No Purchase Right may be exercised unless the Shares to be issued or transferred upon exercise are covered by an effective registration statement pursuant to the Securities Act or are eligible for an exemption from the registration requirements, and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other laws applicable to the Plan.

If, on an Acquisition Date during any Offering, the Shares are not registered or exempt or the Plan is not in such compliance, no Purchase Rights granted under the Plan or any Offering shall be exercised on the Acquisition Date. The Acquisition Date will be delayed until the Shares are subject to such an effective registration statement or exempt, and the Plan is in such compliance. The Acquisition Date will in no event be more than 27 months from the Grant Date.

If, on the Acquisition Date under any Offering, as delayed to the maximum extent permissible, the Shares are not registered or exempt and the Plan is not in such compliance, no Purchase Rights will be exercised, and all Contributions accumulated during the Offering (reduced to the extent, if any, such deductions have been used to acquire Shares) will be distributed to the Participants with any interest.

 

  11.4. Lapse

A Purchase Right will lapse and automatically terminate on the earliest of the dates specified below:

 

                11.4.1. the date on which the person ceases to be an Employee;

 

                11.4.2. the date on which the Participant gives notice under Section 10.4 that he or she intends to withdraw from the Plan; and

 

                11.4.3. as provided in Section 14.1.

 

12. Acquisition of Shares

 

  12.1. Issue or Transfer

The Shares may be issued to a Participant or transferred to a custodian on behalf of the Participant. Subject to Section 12.3:

 

                12.1.1. Shares to be issued to a Participant following the exercise of a Purchase Right must be issued within 30 days of the Acquisition Date; and


                12.1.2. if Shares are to be transferred to a custodian following the exercise of a Purchase Right, the Committee must effect this transfer within 30 days of the Acquisition Date.

 

  12.2. Rights

 

                12.2.1. Shares issued to a Participant on exercise of a Purchase Right rank equally in all respects with the Shares in issue on the date of issue. They are not entitled to any rights attaching to Shares by reference to a record date preceding the date of issue.

 

                12.2.2. Where Shares are to be transferred to a custodian on the exercise of a Purchase Right, Participants are entitled to all rights attaching to the Shares by reference to a record date after the transfer date. They are not entitled to any rights before that date.

 

  12.3. Certificate of Incorporation and Bylaws

Any Shares acquired on the exercise of Purchase Rights are subject to the certificate of incorporation and bylaws of the Company in effect from time to time.

 

  12.4. Listing

If and so long as the Shares are listed on the New York Stock Exchange or on any other stock exchange where Shares are traded, the Company must apply for listing of any Shares issued pursuant to the Plan prior to or as soon as practicable after their issuance.

 

13. Corporate Events

 

  13.1. Change in Control

Upon the occurrence of a Change in Control (as defined below), the Board, in its sole discretion may:

 

                13.1.1. Provide that each Purchase Right shall be assumed or an equivalent Purchase Right shall be substituted by the successor corporation or parent or subsidiary of such successor corporation;

 

                13.1.2. Establish a date prior to the consummation of the Change in Control that shall be treated as the Acquisition Date, and all outstanding Purchase Rights shall be deemed exercised on such date; or

 

                13.1.3. the Participant’s accumulated Contributions and any interest (if applicable) will be returned to the Participant as soon as practicable, the Purchase Rights will be cancelled and the Offering will terminate.

 

                13.1.4. If a Change in Control is pending, the Committee may delay the commencement of an Offering.

 

  13.2. Liquidation or Dissolution of the Company

If the Company passes a resolution for its liquidation or dissolution, any Offering shall terminate and Purchase Rights will be cancelled as at that date. Any Contributions and interest (if applicable), will be returned to the Participant as soon as practicable.

 

  13.3. Change in the Securities of the Company

If any change is made in the Shares of the Company (including by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, change in corporate structure or other transaction), the Committee shall make an equitable and proportionate anti-dilution adjustment to offset any resultant change in the pre-share price of the Shares. Such mandatory adjustment may include a change in the type(s), class(es) and the maximum number of Shares subject to the Plan pursuant to Section 8, and shall adjust the type(s), class(es) number of Shares and purchase limits of each outstanding Purchase Right and the Purchase Price in any manner equitable to the Participants; this may include retrospective adjustments. If making such an adjustment, the Committee may consider any consideration received by the Company in the transaction. Adjustments may only be made if consistent with the applicable rules under Sections 423 and 424 of the Code.

The Company may notify the Participant of any adjustment made under this Section 14.3.


  13.4. Terms Used

For the purpose of this Section 14:

Change in Control” means the first to occur of the following events after the adoption of the Plan:

 

                13.4.1. the acquisition (whether by purchase, merger, consolidation, combination, or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended (the “Exchange Act”)) of more than 50% (on a fully diluted basis) of either (A) the then outstanding Shares, taking into account as outstanding for this purpose such Shares issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Shares or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate; or (III) in respect of an equity award held by a particular participant in an employee incentive plan, any acquisition by such participant or any group of Persons including such participant (or any entity controlled by such participant or any group of Persons including the participant);

 

                13.4.2. during any period of twelve (12) months, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14 A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or

 

                13.4.3. the sale, transfer, or other disposition of all or substantially all of the assets of the Company to any Person that is not an Affiliate of the Company.

 

14. General

 

  14.1. Notices

 

                14.1.1. Any notice or other document which has to be given to an Eligible Employee or Participant under or in connection with the Plan may be:

 

  (i) delivered or mailed to him at his address according to the records of his employing company; or

 

  (ii) sent by e-mail or fax to any e-mail address or fax number which, according to the records of his employing company, is used by him,

or in either case such other address which the Company considers appropriate.

 

                14.1.2. Any notice or other document which has to be given to the Company or other appointed agent under or in connection with the Plan may be delivered or mailed to it at such place as the Committee or its duly appointed agent may from time to time decide and notify to Participants or sent by e-mail or fax to any e-mail address or fax number notified to the sender.

 

                14.1.3. Notices mailed will be deemed to have been given on the earlier of the date of actual receipt and the seventh day after the mailing date.

 

                14.1.4. Notices sent by e-mail or fax, in the absence of evidence of non-delivery, will be deemed to have been received on the day after sending.


  14.2. Documents Sent to Stockholders

The Company may send to Participants copies of any documents or notices normally sent to the holders of its Shares.

 

  14.3. Costs

The Company or a Participating Company (as appropriate) will pay the costs of establishing and administering the Plan. The Company may require each other Participating Company to reimburse the Company for any costs incurred in connection with the grant of Purchase Rights to, or exercise of Purchase Rights by, Employees of that Participating Company.

 

  14.4. Terms of Employment

 

                14.4.1. For the purposes of this Section 15.4, “Employee” means any employee of the Company or any Subsidiary or associated company of the Company.

 

                14.4.2. This Section 15.4 applies during an Employee’s employment and after the termination of an Employee’s employment, whether or not the termination is lawful.

 

                14.4.3. Nothing in this Section or the operation of the Plan forms part of any contract of employment of an Employee. The rights and obligations arising from the employment relationship between the Employee and the Participating Company are separate from, and are not affected by, the Plan. Participation in the Plan does not create any right to, or expectation of, continued employment.

 

                14.4.4. Subject to Section 4.1, no Employee has a right to participate in the Plan. Participation in the Plan or the grant of Purchase Rights on a particular basis in any year does not create any right to or expectation of participation in the Plan or the grant of Purchase Rights on the same basis, or at all, in any future year.

 

                14.4.5. The terms of the Plan do not entitle the Employee to the exercise of any discretion by the Company, a Participating Company or the Committee in his favor.

 

                14.4.6. No Employee will have a claim or right of action in respect of any decision, omission or exercise of discretion, not relating to an existing Purchase Right, which may operate to the disadvantage of the Employee.

 

                14.4.7. No Employee has any right to compensation for any loss in relation to the Plan, including any loss in relation to:

 

  (i) any loss or reduction of rights or expectations under the Plan in any circumstances (including lawful or unlawful termination of employment);

 

  (ii) any exercise of discretion or a decision made in relation to a Purchase Right or to the Plan, or any failure to exercise discretion or make a decision; or

 

  (iii) the operation, suspension, termination or amendment of the Plan.

 

                14.4.8. Participation in the Plan is permitted only on the basis that the Participant accepts all terms and conditions of the Plan, including this Section 15.4. By participating in the Plan, an Employee waives all rights under the Plan, other than the rights expressly granted herein or in any invitation to participate in accordance with the express terms of this Section in consideration for, and as a condition of, the grant of a Purchase Right under the Plan.

 

                14.4.9. Nothing in this Plan confers any benefit, right or expectation on a person who is not an Employee. No such third party has any rights to enforce any term of this Plan. This does not affect any other right or remedy of a third party which may exist.

 

                14.4.10. Benefits under this Plan shall not be taken into account for the purpose of determining any benefits under any benefit plan unless such plan (or arrangement) specifically provides otherwise.


  14.5. Corporate Actions

The existence of any Purchase Right shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or preferred or prior preference stock ahead of or convertible into, or otherwise affecting, the Shares or the rights of them, or the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

  14.6. Employee Trust

The Company and any Subsidiary may provide money to the trustee of any trust or any other person to enable the trust or him to acquire Shares for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted by law.

 

  14.7. Withholding

Unless the Participant discharges the liability himself, the Company or a Participating Company, the trustee of any trust or other third party administrator may withhold any amount and make any arrangements as it considers necessary to meet any tax withholding obligation of the Company in respect of Purchase Rights. These arrangements include the sale of any Shares on behalf of a Participant.

 

  14.8. Data Privacy

By participating in the Plan the Participant consents to the holding and processing of personal data provided by the Participant to the Company, any Subsidiary or associated company trustee or third party service provider, for all purposes relating to the operation of the Plan. These include, but are not limited to:

 

                14.8.1. administering and maintaining Participant records;

 

                14.8.2. providing information to an associated company, trustees of any trust, registrars, brokers or other third party administrators of the Plan;

 

                14.8.3. providing information to future purchasers of the Company or the business in which the Participant works; and

 

                14.8.4. transferring information about the Participant to a country or territory outside the United States of America that may not provide the same statutory protection for the information as the Participant’s home country.

 

  14.9. Offset

To the extent permitted by law, the Company shall have the absolute right to withhold any amounts payable to any Participant under the terms of the Plan to the extent of any amounts owed for any reason by such Participant to the Company or Participating Company and to set off and apply the amounts so withheld from payment of any such amount owed to the Company or Participating Company, whether or not such amount shall then be immediately due and payable and in such order or priority as among such amounts owed as the Company, in its sole discretion, shall determine.

 

  14.10. Repurchase

The Company shall have no obligation to repurchase from any Participant any Shares acquired under the Plan.

 

  14.11. Legal Compliance

If in the opinion of counsel for the Company, it is necessary or desirable in order to comply with applicable laws or regulations relating to securities or exchange control, the Company may:

 

                14.11.1. require the Participant to provide confirmation of compliance with such local laws and regulations, without which the Purchase Right may lapse; and/or


                14.11.2. upon the exercise of the Purchase Right, substitute cash equal to the value of any spread (less any tax and social security contributions) for any Shares.

 

  14.12. Crediting Service

In the event of the adoption of the Plan by an Acquiring Company, the merger or consolidation of another company with a Participating Company, or the acquisition by the Company of another company, the Committee shall determine the extent, if any, to which employees affected by the event shall be credited under the Plan with service rendered to his employer prior to the event.

 

15. Administration

 

  15.1. Committee’s Powers

The Committee will administer the Plan. Subject to the provisions of the Plan, the Committee has the power:

 

                15.1.1. to determine when and how Purchase Rights to acquire Shares will be granted and the provisions of each Offering of such Purchase Rights;

 

                15.1.2. to convert, when necessary, any value denominated in US dollars and cents to an equivalent currency based on a currency exchange rate that it selects for such purpose;

 

                15.1.3. to designate from time to time which Subsidiaries shall become Participating Companies;

 

                15.1.4. to construe and interpret the Plan and Purchase Rights granted under the Plan, and to establish, amend and revoke rules and regulations for the administration of the Plan. The Committee, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan; and

 

                15.1.5. generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and other Participating Companies and to carry out the intent that the Plan be treated as an “employee stock purchase plan” within the meaning of Section 423 of the Code.

 

  15.2. Committee’s Decision Final and Binding

All determinations of the Committee are final and binding on Employees, Participants and any other party claiming a right or a benefit under the Plan or in connection with any Offering.

 

  15.3. Indemnification of Committee

To the extent permitted by law, the Company shall indemnify the members of the Committee from all claims for liability, loss or damage (including payment of expenses in connection with the defense again such claim) arising from any act or failure to act under the Plan, provided any such member shall give the Company an opportunity, at its own expense, to handle and defend such claims. This shall not include actions which could be held to include criminal liability under applicable law. The provision of this Section 16.3 shall survive the termination of the Plan under Section 17.

 

16. Changing the Plan and Termination

 

  16.1. Changing the Plan

The Committee may at any time change the Plan in any way. The Company shall obtain stockholder approval of such amendments in such a manner and to such a degree as required and to the extent necessary to comply with Section 423 of the Code (or any other applicable law). The Plan may not be amended in any manner that will retroactively impair or otherwise adversely affect the rights of any person to benefits under the Plan which have accrued prior to the date of such action.

 

  16.2. Notice

The Committee may give written notice of any changes made to any Participant affected.


  16.3. Termination of the Plan

The Committee may terminate the Plan at any time; provided, that no termination will adversely affect the rights of any person to benefits under the Plan which have accrued prior to the date of such termination. For the avoidance of doubt, Purchase Rights granted before such termination will continue to be valid and exercisable as described in this Section.

 

17. Overseas Participants

 

  17.1. Establishing Plans

The Committee may establish plans to operate overseas either by scheduling sub-plans to the Plan, or adopting separate plans in accordance with the authority given by stockholders (together “Sub-Plans”). This includes:

 

                17.1.1. designating from time to time which Subsidiaries will participate in a particular Sub-Plan;

 

                17.1.2. determining procedures for eligible employees to enroll in or withdraw from a Sub-Plan, setting or changing payroll deduction percentages, and obtaining necessary tax withholdings; and

 

                17.1.3. allocating the available Shares under the Plan to the Sub-Plans for particular offerings.

 

  17.2. Overseas Laws

If, in the opinion of the Committee, local laws or regulations cause participation in the Plan to become unduly onerous for the Company, a Participating Company or a Participant, the relevant Purchase Right will not be exercised and all Contributions accumulated during the Offering (reduced to the extent, if any, such deductions have been used to acquire Shares) will be distributed to the Participant without any interest (unless required by applicable law). No right to compensation for loss of benefit will arise as a result of such an event.

 

18. Governing Law

The laws of the state of Delaware (without regard to its conflicts of laws rules) govern the Plan and all Purchase Rights and their construction. The courts of the state of Delaware have non-exclusive jurisdiction in respect of disputes arising under or in connection with the Plan or any Purchase Right.

EX-10.55 3 d233034dex1055.htm EX-10.55 EX-10.55

Exhibit 10.55

FORM OF OMNIBUS AMENDMENT TO

OUTSTANDING

STOCK OPTION AGREEMENTS

THIS FORM OF OMNIBUS AMENDMENT TO OUTSTANDING STOCK OPTION AGREEMENTS (this “Amendment”), effective as of August 25, 2016, amends the terms and conditions of those certain stock option agreements (each, a “Stock Option Agreement”) governing the terms of Option awards granted under the 2007 Stock Incentive Plan for Key Employees of USF Holding Corp. and its Affiliates (the “Plan”), by and between US Foods Holding Corp. (f/k/a USF Holding Corp., and referred to herein as the “Company”) and the Optionee whose name appears on the signature page of such Stock Option Agreement. Any capitalized terms herein not otherwise defined shall have the meaning ascribed to them in the Plan and in the specified Stock Option Agreement.

WHEREAS, the Committee is empowered, pursuant to the authority granted to the Committee under Section 10(a) of the Plan, to amend, without Participant consent, the terms and conditions of any award previously granted under the Plan if such amendment does not impair the Participant’s rights under the existing terms of the award and does not otherwise violate any provision of the Plan; and

WHEREAS, the Committee has approved an amendment to each outstanding Stock Option Award issued under the Plan to provide that both the exercise price payable and the minimum taxes due upon exercise of all outstanding Options granted under the Plan be payable by withholding of shares issuable upon exercise of the Options.

AMENDMENT

1.     Amendment. Section 4.3 of the each outstanding Stock Option Agreement is hereby replaced in its entirety with the following:

“Section 4.3. Manner of Exercise

The Option, or any exercisable portion thereof, may be exercised solely by delivering to the Secretary or his office all of the following prior to the time when the Option or such portion becomes unexercisable under Section 3.2:

(a) Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee;

(b) (i) Full payment (in cash or by check or by a combination thereof) for the Shares with respect to which such Option or portion thereof is exercised or (ii) indication that the Optionee elects to have the number of Shares that would otherwise be issued to the Optionee reduced by a number of Shares having an equivalent Fair Market Value to the payment that would otherwise be made by Optionee to the Company pursuant to clause (i) of this subsection (b);

(c) (i) Full payment (in cash or by check or by a combination thereof) to satisfy the minimum withholding tax obligation with respect to which such Option or portion thereof is exercised, or (ii) indication that the Optionee elects to have the number of Shares that would otherwise be issued to the Optionee reduced by a number of Shares having an equivalent Fair Market Value to the payment that would otherwise be made by Optionee to the Company pursuant to clause (i) of this subsection (c);

(d) A bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that the shares of Common Stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the “Act”), and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion thereof will indemnify the Company against and hold it free and


harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above; provided, however, that the Committee may, in its reasonable discretion, take whatever additional actions it deems reasonably necessary to ensure the observance and performance of such representation and agreement and to effect compliance with the Act and any other federal or state securities laws or regulations; and

(e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option.

(f) An Optionee may use a broker-assisted, cash-less exercise program to sell Shares to pay the exercise price and the minimum taxes due upon exercise of any then vested Options subject to any limitations on transfer imposed under applicable securities laws or any underwriter or under any blackout policy of the Company.

Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on exercise of an Option does not violate the Act, and may issue stop-transfer orders covering such shares. The registration in the books and records of the Company evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of subsection (d) above and the agreements herein. The written representation and agreement referred to in subsection (d) above shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Act, and such registration is then effective in respect of such shares.”

2.     Continuing Effect. Except as specifically provided herein, the Stock Option Agreements amended by this Amendment shall remain in full force and effect in accordance with their respective terms and are hereby ratified and confirmed in all respects.

3.     No Waiver. This Amendment is limited as specified and the execution, delivery and effectiveness of this Amendment shall not operate as a modification, acceptance or waiver of any provision of any of the Stock Option Agreements except as specifically set forth herein.

4.     Binding Effect. This Amendment shall be binding upon and inure to the benefit of the Company (including Service Recipients) and Optionee and their respective heirs, representatives, successors and permitted assigns.

[Remainder of Page Intentionally Left Blank]

 

 

2


IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed by its officer thereunto duly authorized, effective as of the date referred to above.

 

    US FOODS HOLDING CORP. (F/K/A USF HOLDING CORP.)
    By:   /s/ Tiffany Monroe
    Name:   Tiffany Monroe
    Title:   Chief Human Resources Officer
EX-31.1 4 d233034dex311.htm EX-31.1 EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Pietro Satriano, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of US Foods Holding Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information related to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) [Paragraph omitted in accordance with SEC transition instructions.];

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2016

 

/s/ PIETRO SATRIANO

Pietro Satriano
President and Chief Executive Officer
EX-31.2 5 d233034dex312.htm EX-31.2 EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Fareed Khan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of US Foods Holding Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information related to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) [Paragraph omitted in accordance with SEC transition instructions.];

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2016

 

/s/ FAREED KHAN

Fareed Khan
Chief Financial Officer
EX-32.1 6 d233034dex321.htm EX-32.1 EX-32.1

Exhibit 32.1

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of US Foods Holding Corp. (the “Company”) on Form 10-Q for the quarterly period ended October 1, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Pietro Satriano, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2016

 

/s/ PIETRO SATRIANO

Pietro Satriano
President and Chief Executive Officer
EX-32.2 7 d233034dex322.htm EX-32.2 EX-32.2

Exhibit 32.2

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of US Foods Holding Corp. (the “Company”) on Form 10-Q for the quarterly period ended October 1, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fareed Khan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2016

 

/s/ FAREED KHAN

Fareed Khan
Chief Financial Officer
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Total consideration consisted of cash of approximately $96 million, plus $6 million for the estimated fair value of contingent consideration. On December&#xA0;31, 2015, the Company purchased Waukesha Wholesale Foods, Inc. d/b/a Dierks Waukesha, a broadline distributor for cash of $69 million.&#xA0;The acquisitions, made in order to expand the Company&#x2019;s presence in the produce category and in certain geographic areas, are integrated into the Company&#x2019;s foodservice distribution network and were funded with cash from operations.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 62px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> In March 2016, approximately $1 million was received as a purchase price adjustment related to the 2015 business acquisition resulting in minimal decreases to Property and equipment- net and Goodwill.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 62px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The following table summarizes the purchase price allocations for the 2016 and 2015 business acquisitions (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="78%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>October&#xA0;1,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>January&#xA0;2,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accounts receivable</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">17,180</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,724</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Inventories</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,922</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,022</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other current assets</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">474</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">702</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Property and equipment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">21,403</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Goodwill</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">24,472</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">40,242</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other intangible assets</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">48,600</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">21,200</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accounts payable</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(12,484</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(3,290</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued expenses and other current liabilities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(8,397</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,554</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Long-term debt</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(2,514</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Deferred income taxes</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(8,765</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Cash paid for acquisitions</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">95,656</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">69,481</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 62px; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The 2016 and 2015 acquisitions did not materially affect the Company&#x2019;s results of operations or financial position and, therefore, pro forma financial information has not been provided.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>10.</b></td> <td valign="top" align="left"><b>DEBT</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> As provided in Note 1, all indebtedness is an obligation of USF, and its subsidiaries.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> USF&#x2019;s debt consisted of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="57%"></td> <td valign="bottom" width="2%"></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom" nowrap="nowrap"><b>Debt Description</b></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center"><b>Maturity</b></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>Interest&#xA0;rate at<br /> October&#xA0;1,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>October 1,<br /> 2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>January 2,</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2016</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> ABL Facility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">October 20,&#xA0;2020</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3.04</td> <td valign="bottom" nowrap="nowrap">%&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">30,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2012 ABS Facility</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center"> September&#xA0;30,&#xA0;2018</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1.76</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">680,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">586,000</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Amended and Restated 2016 Term Loan (net of $13,825 of unamortized deferred financing costs)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">June 27, 2023</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4.00</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,180,675</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Amended 2011 Term Loan (net of $9,848 of unamortized deferred financing costs)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="center"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,037,652</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2016 Senior Notes (net of $7,423 of unamortized deferred financing costs)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">June 15, 2024</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5.88</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">592,577</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Old Senior Notes (net of $13,441 of unamortized deferred financing costs)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="center"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,334,835</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> CMBS Fixed Facility (net of $1,473 of unamortized deferred financing costs)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="center"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">470,918</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Obligations under capital leases</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">2018&#x2013;2025</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2.36&#xA0;-&#xA0;6.18</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">315,325</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">270,406</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other debt</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" align="center">2018&#x2013;2031</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right"><font style="WHITE-SPACE: nowrap">5.75&#xA0;-&#xA0;9.00</font></td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">32,773</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">33,325</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total debt</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,831,350</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,733,136</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Add unamortized premium</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">11,652</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Current portion of long-term debt</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(75,230</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(62,639</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Long-term debt</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,756,120</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,682,149</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 12pt"> At October&#xA0;1, 2016, $0.9 billion of the total debt was at a fixed rate and $2.9 billion was at a floating rate.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Debt Transactions</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> <i>IPO Proceeds</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> As discussed in Note 1, Overview and Basis of Presentation, in June 2016, US Foods completed its IPO. Net proceeds of $1,114 million were used to redeem $1,090 million in principal of USF&#x2019;s Old Senior Notes and pay the related $23 million early redemption premium. The balance of the Old Senior Notes was redeemed with proceeds from the June 2016 refinancings further discussed below.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 18pt"> <i>June 2016 Refinancings</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> In June 2016, USF entered into a series of transactions to refinance the $2,042 million principal of its senior secured term loan (the &#x201C;Amended 2011 Term Loan&#x201D;) and redeem the remaining $258 million principal of its Old Senior Notes. The Amended 2011 Term Loan was amended and restated to, among other things, increase the aggregate principal outstanding to $2,200 million (the &#x201C;Amended and Restated 2016 Term Loan&#x201D;). Additionally, USF issued $600 million in principal amount of 2016 Senior Notes.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="14%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><b>Amended and Restated 2016 Term Loan Agreement&#x2013;</b>The aggregate principal of the Amended and Restated 2016 Term Loan of $2,200 million matures on June&#xA0;27, 2023. Continuing lenders refinanced $1,393 million in term loan principal and purchased $238 million of additional principal from lenders electing not to participate in, or electing to decrease their holdings in the loan. Additionally, $569 million in principal was sold to new lenders.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 17%; MARGIN-TOP: 6pt"> USF performed an analysis, by creditor, to determine if the terms of the newly Amended and Restated 2016 Term Loan were substantially different from the previous term loan facility. Based upon the analysis, it was determined that pre-existing lenders holding a significant portion of the previous term loan facility either elected not to participate in the newly amended facility, or had terms that were substantially different from their original loan agreements. As a result, a portion of the transaction was accounted for as an extinguishment of debt and the contemporaneous acquisition of new debt. Pre-existing lenders holding the remaining portion of the newly amended facility that had terms that were not substantially different from their original loan agreements were accounted for as a debt modification.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="14%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><b>Old Senior Notes &#x2013;</b> In June&#xA0;2016, USF redeemed the remaining $258 million in aggregate principal amount of its Old Senior Notes for $264 million, including a $6 million early redemption premium.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> The debt redemption and refinancing transactions completed in June 2016 resulted in a loss on extinguishment of debt of $42 million, consisting of a $29 million early redemption premium related to the Old Senior Notes, $7 million of lender and third party fees, and a $6 million write-off of certain pre-existing unamortized deferred financing costs and premiums related to the refinanced and redeemed facilities. Unamortized deferred financing costs of $4 million related to the portion of the Amended 2011 Term Loan refinancing accounted for as a debt modification will be carried forward and amortized through June&#xA0;27, 2023&#x2014;the maturity date of the Amended and Restated 2016 Term Loan.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 18pt"> <i>CMBS Fixed Facility Defeasance</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> On September&#xA0;23, 2016, USF, through a wholly owned subsidiary, legally defeased the commercial mortgage backed securities facility (the &#x201C;CMBS Fixed Facility&#x201D;), scheduled to mature on August&#xA0;1, 2017. The CMBS Fixed Facility, secured by mortgages on 34 properties, consisting of distribution centers, had an outstanding balance of $471 million net of unamortized deferred financing costs of $1 million, and provided for interest at 6.38%.&#xA0;The cash outlay for the defeasance of $485 million represented the purchase price of U.S. government securities that will generate sufficient cash flow to fund continued interest payments from the effective date of the defeasance through, and the repayment of the CMBS Fixed Facility on, February&#xA0;1, 2017, the earliest date the loan could be prepaid. As a result of the defeasance, the mortgages on the properties were extinguished and all properties previously held as collateral were released. The defeasance resulted in a loss on extinguishment of debt of approximately $12 million consisting of the difference between the purchase price of the U.S. Government securities &#x2013; not attributable to accrued interest through the effective date of the defeasance &#x2013; and the outstanding principal of the CMBS Fixed Facility of $472 million, and other costs of $1 million, consisting of unamortized deferred financing costs and other third party costs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Following is a description of each of USF&#x2019;s debt instruments outstanding as of October&#xA0;1, 2016:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> <b>Revolving Credit Agreement&#x2013;</b>USF&#x2019;s asset backed senior secured revolving loan facility (the &#x201C;ABL Facility&#x201D;) provides for loans under its two tranches: ABL Tranche A-1 and ABL Tranche A, with its capacity limited by a borrowing base. The maximum borrowing available is $1,300 million with ABL Tranche A-1 at $100 million, and ABL Tranche A at $1,200 million. Due to the June 2016 refinancings, the maturity date of the ABL Facility is October&#xA0;20, 2020.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> As of October&#xA0;1, 2016, USF had $30 million outstanding borrowings and had issued letters of credit totaling $403 million under the ABL Facility. Outstanding letters of credit included: (1)&#xA0;$69 million issued to secure USF&#x2019;s obligations with respect to certain facility leases, (2)&#xA0;$331 million issued in favor of certain commercial insurers securing USF&#x2019;s obligations with respect to its self-insurance program, and (3)&#xA0;$3 million in letters of credit for other obligations. There was available capacity on the ABL Facility of $866 million at October&#xA0;1, 2016. As of October&#xA0;1, 2016, on Tranche A-1 borrowings, USF can periodically elect to pay interest at an alternative base rate (&#x201C;ABR&#x201D;), as defined in USF&#x2019;s credit agreements, plus 1.50% or the London Inter Bank Offered Rate (&#x201C;LIBOR&#x201D;) plus 2.50%. On Tranche A borrowings, USF can periodically elect to pay interest at ABR plus 0.25% or LIBOR plus 1.25%. The ABL Facility also carries letter of credit fees of 1.125% and an unused commitment fee of 0.125%.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 0pt"> <b>Accounts Receivable Financing Program&#x2013;</b>Under the 2012 ABS Facility, USF, and from time to time certain of its subsidiaries, sell&#x2014;on a revolving basis&#x2014;their eligible receivables to the Receivables Company, a wholly owned subsidiary of USF. The Receivables Company, in turn, grants a continuing security interest in all of its rights, title and interest in the eligible receivables to the administrative agent for the benefit of the lenders (as defined by the 2012 ABS Facility). See Note 5, Accounts Receivable Financing Program.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> The maximum capacity under the 2012 ABS Facility is $800 million. Borrowings under the 2012 ABS Facility were $680 million and $586 million at October&#xA0;1, 2016 and January&#xA0;2, 2016, respectively. USF, at its option, can request additional borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $63 million at October&#xA0;1, 2016 based on eligible receivables as collateral. The portion of the 2012 ABS Facility held by the lenders who fund the 2012 ABS Facility with commercial paper bears interest at the lender&#x2019;s commercial paper rate, plus any other costs associated with the issuance of commercial paper plus 1.00%, and an unused commitment fee of 0.35%. The portion of the 2012 ABS Facility held by lenders that do not fund the 2012 ABS Facility with commercial paper bears interest at LIBOR plus 1.00%, and an unused commitment fee of 0.35%.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> <b>Amended and Restated 2016 Term Loan Agreement&#x2013;</b>The Amended and Restated 2016 Term Loan consists of a senior secured term loan with outstanding borrowings of $2,181 million at October&#xA0;1, 2016, net of $14 million of unamortized deferred financing costs. This debt bears interest equal to ABR plus 2.25%, or LIBOR plus 3.25%, with a LIBOR floor of 0.75%, based on a periodic election of the interest rate by USF. Principal repayments of $5.5 million are payable quarterly with the balance due at maturity. The debt may require mandatory repayments if certain assets are sold, as defined in the agreement. The interest rate for all borrowings was 4.00%&#x2014;the LIBOR floor of 0.75% plus 3.25%&#x2014; at October&#xA0;1, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> <b>2016 Senior Notes&#x2013;</b>The 2016 Senior Notes, with outstanding principal of $593 million at October&#xA0;1, 2016, net of $7 million of unamortized deferred financing costs, bear interest at 5.875%. On or after June&#xA0;15, 2019, this debt is redeemable, at USF&#x2019;s option, in whole or in part at a price of 102.938% of the remaining principal, plus accrued and unpaid interest, if any, to the redemption date. On or after June&#xA0;15, 2020 and June&#xA0;15, 2021, the optional redemption price for the debt declines to 101.469% and 100.0%, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to the redemption date. Prior to June&#xA0;15, 2019, up to 40% of the debt may be redeemed with the aggregate proceeds from equity offerings, as defined in the 2016 Senior Note indenture, at a redemption premium of 105.875%.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> <b>Other Debt&#x2013;</b>Obligations under capital leases consist of amounts due for transportation equipment and building leases. Other debt of $33 million at October&#xA0;1, 2016 and January&#xA0;2, 2016 consists primarily of various state industrial revenue bonds. To obtain certain tax incentives related to the construction of a new distribution facility, USF and a wholly owned subsidiary entered into an industrial revenue bond agreement with a state in January 2015, for the issuance of a maximum of $40 million in taxable demand revenue bonds (the &#x201C;TRBs&#x201D;). The TRBs are self-funded as USF&#x2019;s wholly owned subsidiary purchases the TRBs, and the state loans the proceeds back to USF. The TRBs, which mature January&#xA0;1, 2030, can be prepaid without penalty one year after issuance. Interest on the TRBs and the loan is 6.25%. At October&#xA0;1, 2016 and January&#xA0;2, 2016, $22 million has been drawn on TRBs resulting in $22 million being recognized as a long-term asset and a corresponding long-term liability in the Company&#x2019;s Consolidated Balance Sheets.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Security Interests</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Substantially all of USF&#x2019;s assets are pledged under the various debt agreements. Debt under the 2012 ABS Facility is secured by certain designated receivables and, in certain circumstances, by restricted cash. The ABL Facility is secured by certain other designated receivables not pledged under the 2012 ABS Facility, inventories and tractors and trailers owned by USF. Additionally, the ABL Facility has a third priority interest in the assets pledged under the 2012 ABS Facility and a second priority interest in the assets pledged under the Amended and Restated 2016 Term Loan. USF&#x2019;s obligations under the Amended and Restated 2016 Term Loan are secured by all of the capital stock of its subsidiaries, each of the direct and indirect wholly owned domestic subsidiaries &#x2013;as defined in the agreements&#x2013; and are secured by substantially all assets of USF and its subsidiaries not pledged under the 2012 ABS Facility or the ABL Facility. Additionally, the Amended and Restated 2016 Term Loan has a second priority interest in the assets pledged under the ABL Facility and the 2012 ABS facility.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Restrictive Covenants</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> USF&#x2019;s credit facilities, loan agreements and indentures contain customary covenants. These include, among other things, covenants that restrict USF&#x2019;s ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. As of October&#xA0;1, 2016, USF had $432 million of restricted payment capacity under these covenants, and approximately&#xA0;$2,060&#xA0;million of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Certain debt agreements also contain customary events of default. Those include, without limitation, the failure to pay interest or principal when it is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true, and certain insolvency events. If a default event occurs and continues, the principal amounts outstanding&#x2014;together with all accrued unpaid interest and other amounts owed&#x2014;may be declared immediately due and payable by the lenders. Were such an event to occur, USF would be forced to seek new financing that may not be on as favorable terms as its current facilities. USF&#x2019;s ability to refinance its indebtedness on favorable terms&#x2014;or at all&#x2014;is directly affected by the current economic and financial conditions. In addition, USF&#x2019;s ability to incur secured indebtedness (which may enable it to achieve more favorable terms than the incurrence of unsecured indebtedness) depends in part on the value of its assets. This, in turn, relies on the strength of its cash flows, results of operations, economic and market conditions, and other factors.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>8.</b></td> <td valign="top" align="left"><b>GOODWILL AND OTHER INTANGIBLES</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Goodwill and Other intangible assets includes the cost of acquired businesses in excess of the fair value of the tangible net assets acquired. Other intangible assets include Customer relationships, Noncompete agreements, and the Brand names and trademarks comprising the Company&#x2019;s portfolio of exclusive brands and trademarks. Brand names and trademarks are indefinite-lived intangible assets, and accordingly, are not subject to amortization.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Customer relationship and Noncompete agreements are intangible assets with definite lives, and are carried at the acquired fair value less accumulated amortization. Customer relationship and Noncompete agreements are amortized over the estimated useful lives (four to ten years). Amortization expense was $40 million and $36 million for the 13-weeks ended October&#xA0;1, 2016 and September&#xA0;26, 2015, respectively, and $116 million and $110 million for the 39-weeks ended October&#xA0;1, 2016 and September&#xA0;26, 2015,&#xA0;respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 12pt"> Goodwill and Other intangibles, net, consisted of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="72%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom" rowspan="2">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>October&#xA0;1,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>January&#xA0;2,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Goodwill</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,899,514</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,875,719</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Other intangibles&#x2014;net</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Customer relationships&#x2014;amortizable:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Gross carrying amount</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,391,812</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,373,920</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accumulated amortization</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,234,909</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,149,572</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 7em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net carrying value</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">156,903</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">224,348</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Noncompete agreements&#x2014;amortizable:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Gross carrying amount</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">800</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">800</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accumulated amortization</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(467</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(347</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 7em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net carrying value</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">333</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">453</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Brand names and trademarks&#x2014;not amortizing</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">252,800</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">252,800</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total Other intangibles&#x2014;net</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">410,036</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">477,601</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 12pt"> The 2016 increase in Goodwill reflects the 2016 business acquisitions, partially offset by a purchase price adjustment related to the December 2015 acquisition. The 2016 increase in the gross carrying amount of Customer relationships is attributable to the 2016 business acquisitions of $49 million &#x2013; see Note 3, Business Acquisitions &#x2013; partially offset by the write-off of fully amortized Customer relationships intangible assets of $31 million.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> 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&#x2019;s policy is to assess for impairment at the beginning of each fiscal third quarter. For intangible assets with definite lives, the Company assesses impairment only if events occur that indicate that the carrying amount of an asset may not be recoverable. All Goodwill is assigned to the consolidated company as the reporting unit. The Company completed its most recent annual impairment assessment for Goodwill and indefinite-lived intangible assets as of July&#xA0;3, 2016&#x2014;the first day of the fiscal third quarter of 2016&#x2014;with no impairments noted.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> For Goodwill, the reporting unit used in assessing impairment is the Company&#x2019;s one business segment as described in Note 19&#x2014;Business Segment Information. The Company&#x2019;s assessment for impairment of Goodwill utilized a combination of discounted cash flow analysis, comparative market multiples, and comparative market transaction multiples, which were weighted 50%, 35% and 15% respectively, to determine the fair value of the reporting unit for comparison to the corresponding carrying value. If the carrying value of the reporting unit exceeds its fair value, the Company must then perform a comparison of the implied fair value of Goodwill with its carrying value. If the carrying value of the Goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to the excess. Based upon the Company&#x2019;s fiscal 2016 annual Goodwill impairment analysis, the Company concluded the fair value of its reporting unit exceeded its carrying value.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 0pt"> The Company&#x2019;s fair value estimates of the brand names and trademarks indefinite-lived intangible assets are based on a relief- from-royalty method. The fair value of these intangible assets is determined for comparison to the corresponding carrying value. If the carrying value of these assets exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. Based upon the Company&#x2019;s fiscal 2016 annual impairment analysis, the Company concluded the fair value of the Company&#x2019;s brand names and trademarks exceeded its carrying value.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Due to the many variables inherent in estimating fair value and the relative size of the recorded indefinite-lived intangible assets, differences in assumptions may have a material effect on the results of the Company&#x2019;s impairment analysis.</p> </div> 2016-10-01 -367826000 14429000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>1.</b></td> <td valign="top" align="left"><b>OVERVIEW AND BASIS OF PRESENTATION</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> US Foods Holding Corp., a Delaware corporation, and its consolidated subsidiaries are referred to here as &#x201C;we,&#x201D; &#x201C;our,&#x201D; &#x201C;us,&#x201D; &#x201C;the Company,&#x201D; or &#x201C;US Foods.&#x201D; US Foods conducts all of its operations through its wholly owned subsidiary US Foods, Inc. (&#x201C;USF&#x201D;). All of the indebtedness, as further described in Note&#xA0;10, Debt, is an obligation of USF, and its subsidiaries. US Foods is controlled by investment funds associated with or designated by Clayton, Dubilier&#xA0;&amp; Rice, LLC (&#x201C;CD&amp;R&#x201D;) and Kohlberg Kravis Roberts&#xA0;&amp; Co., L.P. (&#x201C;KKR&#x201D;). KKR and CD&amp;R are collectively referred to herein as the &#x201C;Sponsors&#x201D;.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <b>Terminated Acquisition by Sysco</b> &#x2014;On December&#xA0;8, 2013, US Foods entered into an agreement and plan of merger (the &#x201C;Acquisition Agreement&#x201D;) with Sysco Corporation (&#x201C;Sysco&#x201D;); Scorpion Corporation I, Inc., a wholly owned subsidiary of Sysco (&#x201C;Merger Sub One&#x201D;); and Scorpion Company II, LLC, a wholly owned subsidiary of Sysco (&#x201C;Merger Sub Two&#x201D;), through which Sysco would have acquired US Foods (the &#x201C;Acquisition&#x201D;) on the terms and subject to the conditions set forth in the Acquisition Agreement. The closing of the Acquisition was subject to customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> On February&#xA0;2, 2015, US Foods, USF and certain of its subsidiaries, and Sysco entered into an asset purchase agreement (the &#x201C;Asset Purchase Agreement&#x201D;) with Performance Food Group, Inc. (&#x201C;PFG&#x201D;), through which PFG agreed to purchase, subject to the terms and conditions of the Asset Purchase Agreement, eleven USF distribution centers and related assets and liabilities, in connection with (and subject to) the closing of the Acquisition.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> On February&#xA0;19, 2015, the U.S. Federal Trade Commission (the &#x201C;FTC&#x201D;) voted by a margin of 3-2 to seek to block the proposed Acquisition by filing a federal district court action in the District of Columbia for a preliminary injunction. The preliminary injunctive hearing in federal district court commenced on May&#xA0;5, 2015 and, on June&#xA0;23, 2015, the federal district court granted the FTC&#x2019;s request for a preliminary injunction to block the proposed Acquisition.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> On June&#xA0;26, 2015, US Foods, Sysco, Merger Sub One and Merger Sub Two entered into an agreement to terminate the Acquisition Agreement and Sysco paid a termination fee of $300 million to US Foods. Upon the termination of the Acquisition Agreement, the Asset Purchase Agreement automatically terminated and USF paid a termination fee of $12.5 million to PFG pursuant to the terms of the Asset Purchase Agreement.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <b>Reverse Stock Split</b> &#x2014;In connection with its initial public offering (&#x201C;IPO&#x201D;), the Company&#x2019;s Board of Directors approved a 2.7-for one reverse stock split of the Company&#x2019;s common stock. The par value per share of common stock and authorized shares of common stock remain unchanged at $0.01 per share and 600&#xA0;million shares, respectively. The reverse stock split became effective on May&#xA0;17, 2016. All common share and per share amounts in the financial statements and notes have been retroactively adjusted to give effect to the reverse stock split. The Company also reclassified $3 million related to the reduction in aggregate par value of common stock to Additional paid-in-capital.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <b>Initial Public Offering</b> &#x2013; On June&#xA0;1, 2016 the Company closed its IPO selling 51,111,111 shares of common stock for a cash offering price of $23.00 per share ($21.9075 per share net of underwriter discounts and commissions and before offering expenses), including the exercise in full by underwriters of their option to purchase 6,666,667 additional shares. The IPO was registered under the Securities Act of 1933, as amended (the &#x201C;Securities Act&#x201D;), on a registration statement on Form S-1 (Registration No.&#xA0;333-209442), as amended (the &#x201C;Registration Statement&#x201D;). The Company&#x2019;s common stock is listed on the New York Stock Exchange under the ticker symbol &#x201C;USFD.&#x201D;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company used the net proceeds from the IPO of approximately $1,114 million (after the payment of underwriter discounts and commissions and offering expenses) to redeem $1,090 million principal amount, and pay the related $23 million early redemption premium, for USF&#x2019;s 8.5% unsecured Senior Notes due June&#xA0;30, 2019, (the &#x201C;Old Senior Notes&#x201D;).</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <b>USF Public Filer Status</b>&#x2014;During the fiscal second quarter 2013, USF completed the registration of $1,350 million aggregate principal amount of its Old Senior Notes and became subject to rules and regulations of the Securities and Exchange Commission (the &#x201C;SEC&#x201D;), including periodic and current reporting requirements under the Securities Exchange Act of 1934, as amended.&#xA0;USF did not receive any proceeds from the registration of the Old Senior Notes. USF had filed periodic reports as a voluntary filer pursuant to contractual obligations in the indenture governing the Old Senior Notes. On June&#xA0;30, 2016, all of the Old Senior Notes were redeemed, as noted above, and USF ceased to be a voluntary filer. See Note&#xA0;10, Debt.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <b>Business Description</b>&#x2014;USF markets and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the United States. These customers include independently owned single and multi-location restaurants, regional concepts, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 0pt"> <b>Basis of Presentation</b>&#x2014;The Company operates on a 52-53&#xA0;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 fourth quarter. The Company&#x2019;s fiscal year 2016 is a 52-week year and fiscal year 2015 was a 53-week year. The accompanying consolidated financial statements include the accounts of US Foods and its wholly owned subsidiary, USF and its wholly owned subsidiaries. All intercompany transactions have been eliminated.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (&#x201C;GAAP&#x201D;) for interim financial information and the applicable rules and regulations of the SEC. Accordingly, they do not include all the information and disclosures required by GAAP for annual financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Registration Statement. Certain footnote disclosures included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The consolidated financial statements have been prepared by the Company, without audit, with the exception of the January&#xA0;2, 2016 Consolidated Balance Sheet which was included in the Registration Statement. The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The consolidated financial statements reflect all adjustments which are of a normal and recurring nature that are, in the opinion of management, 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 the full year.</p> </div> 2016 false <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>16.</b></td> <td valign="top" align="left"><b>CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The following table presents changes in Accumulated other comprehensive loss by component for the periods presented (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="66%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>13-Weeks Ended</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>39-Weeks Ended</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>October&#xA0;1,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>September&#xA0;26,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>October&#xA0;1,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>September&#xA0;26,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom" nowrap="nowrap"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 185.65pt; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt"> <b>Accumulated Other Comprehensive Loss Components</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Defined benefit retirement plans:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accumulated Other Comprehensive Loss beginning of period <sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(1)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(90,621</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(149,641</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(74,378</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(158,041</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Reclassification adjustments:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Amortization of prior service cost<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(2)(3)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">41</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">32</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">123</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">99</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Amortization of net loss<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(2)(3)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,046</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,031</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,138</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9,064</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Settlements<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(2)(3)&#xA0;</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">750</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">650</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,250</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,950</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Pension curtailment<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(5)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">90,649</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">90,649</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 5em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Prior year correction<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(5)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(21,917</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total before income tax<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(2)(3)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,837</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">93,362</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(13,406</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">101,762</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Income tax benefit<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(4)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(5,199</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(5,199</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Current period Comprehensive (Loss) Income&#x2014;net of tax</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,036</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">93,362</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(8,207</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">101,762</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accumulated Other Comprehensive Loss end of period <sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">(1)</sup></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(82,585</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(56,279</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(82,585</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(56,279</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left">(1)</td> <td valign="top" align="left">Amounts are presented net of tax.</td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left">(2)</td> <td valign="top" align="left">Included in the computation of Net periodic benefit costs. See Note, 13 Retirement Plans for additional information.</td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left">(3)</td> <td valign="top" align="left">Included in Distribution, selling and administrative costs in the Consolidated Statements of Comprehensive Income.</td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left">(4)</td> <td valign="top" align="left">No impact in the 13-week and 39-week periods ended September 26, 2015 due to the Company&#x2019;s full valuation allowance. See Note 17, Income Taxes.</td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left">(5)</td> <td valign="top" align="left">The third quarter 2015 pension curtailment is due to the freeze of non-union participants&#x2019; benefits for a USF sponsored defined benefit pension plan. In the second quarter of 2016, the curtailment was corrected for a computational error. See Note 13, Retirement Plans.</td> </tr> </table> </div> --12-31 0.69 671000 313985000 <div> <p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"> The Company&#x2019;s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of October&#xA0;1, 2016 and January&#xA0;2, 2016, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):</p> <p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt"> &#xA0;</p> <table cellspacing="0" cellpadding="0" width="92%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center"> <tr> <td width="69%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="font-family:Times New Roman; font-size:8pt"> <td valign="bottom"><b>Description</b></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>Level 1</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>Level&#xA0;2</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>Level 3</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>Total</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Recurring fair value measurements:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Money market funds</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Balance at October 1, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Recurring fair value measurements:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Money market funds</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Balance at January&#xA0;2, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Nonrecurring fair value measurements:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Contingent consideration payable for business acquisitions</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Balance at October 1, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">$</td> <td nowrap="nowrap" valign="bottom" align="right"> &#x2014;&#xA0;&#xA0;</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 198000000 The Company has no current plans to pay future dividends on its common stock, and has never paid dividends on its common stock, other than the January 2016 one-time cash distribution. Any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors, and could be limited by USF debt covenants. Q3 0.68 124723000 Non-accelerated Filer 116000000 14214528000 <div> <p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"> The Assets held for sale activity for the 39-weeks ended October&#xA0;1, 2016 was as follows (in thousands):</p> <p style="font-size:12pt;margin-top:0pt;margin-bottom:0pt"> &#xA0;</p> <table cellspacing="0" cellpadding="0" width="68%" border="0" style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" align="center"> <tr> <td width="88%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style="margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Balance at January&#xA0;2, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,459</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Transfers in</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">23,245</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Assets sold</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(3,894</td> <td nowrap="nowrap" valign="bottom">)&#xA0;</td> </tr> <tr style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Tangible asset impairment charges</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(125</td> <td nowrap="nowrap" valign="bottom">)&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:1.00px solid #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr bgcolor="#CCEEFF" style="font-family:Times New Roman; font-size:10pt"> <td valign="top"> <p style=" margin-top:0pt ; margin-bottom:0pt; margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"> Balance at October 1, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">24,685</td> <td nowrap="nowrap" valign="bottom">&#xA0;&#xA0;</td> </tr> <tr style="font-size:1px;"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td valign="bottom"> <p style=" margin-top:0pt ; margin-bottom:0pt; border-top:3.00px double #000000"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 49000000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>18.</b></td> <td valign="top" align="left"><b>COMMITMENTS AND CONTINGENCIES</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 62px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Purchase Commitments</b>&#x2014;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. As of October&#xA0;1, 2016, the Company had $956 million of purchase orders and purchase contract commitments, of which $696 million, $130 million and $130 million pertain to products to be purchased in the balance of fiscal year 2016, and in fiscal years 2017, and 2018, respectively, and are not recorded in the Consolidated Balance Sheets.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 62px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> To minimize fuel cost risk, the Company enters into forward purchase commitments for a portion of its projected diesel fuel requirements. At October&#xA0;1, 2016, the Company had diesel fuel forward purchase commitments totaling $109 million through March 2018. The Company also enters into forward purchase agreements for electricity. At October&#xA0;1, 2016, the Company had electricity forward purchase commitments totaling $10 million through September 2018. 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 under GAAP guidance.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 62px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Legal Proceedings</b>&#x2013;The Company and its subsidiaries are parties to a number of legal proceedings arising from the normal course of business. These legal proceedings&#x2014;whether pending, threatened or unasserted, if decided adversely to or settled by the Company&#x2014;may result in liabilities material to its financial position, results of operations, or cash flows. The Company recognizes provisions with respect to the proceedings where appropriate. These are reflected in the Consolidated Balance Sheets. It is possible that the Company could be required to make expenditures, in excess of the established provisions, in amounts that cannot be reasonably estimated. However, the Company believes that the ultimate resolution of these proceedings will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows. It is the Company&#x2019;s policy to expense attorney fees as incurred.</p> </div> 77012000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>9.</b></td> <td valign="top" align="left"><b>FAIR VALUE MEASUREMENTS</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company follows the accounting standards for fair value, whereas fair value is a market-based measurement, not an entity-specific measurement. The Company&#x2019;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:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left">Level&#xA0;1&#x2014;observable inputs, such as quoted prices in active markets</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left">Level&#xA0;2&#x2014;observable inputs other than those included in Level&#xA0;1&#x2014;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</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left">Level&#xA0;3&#x2014;unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Any transfers of assets or liabilities between Level&#xA0;1, Level&#xA0;2, and Level&#xA0;3 of the fair value hierarchy will be recognized at 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company&#x2019;s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of October&#xA0;1, 2016 and January&#xA0;2, 2016, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="69%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom"><b>Description</b></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>Level 1</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>Level&#xA0;2</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>Level 3</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>Total</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Recurring fair value measurements:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Money market funds</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at October 1, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">54,464</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Recurring fair value measurements:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Money market funds</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at January&#xA0;2, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">113,700</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Nonrecurring fair value measurements:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Contingent consideration payable for business acquisitions</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at October 1, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,375</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Nonrecurring fair value measurements:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Assets held for sale</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,600</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,600</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Balance at January&#xA0;2, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,600</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,600</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 0pt"> <b>Recurring Fair Value Measurements</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> <b><i>Money Market Funds</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Money market funds include highly liquid investments with a maturity of three or fewer months. They are valued using quoted market prices in active markets and are classified under Level 1 within the fair value hierarchy.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Nonrecurring Fair Value Measurements</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 6pt"> <b><i>Assets Held for Sale</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company records Assets held for sale at the lesser of the carrying amount or estimated fair value less cost to sell. Certain Assets held for sale were adjusted to equal their estimated fair value, less cost to sell, resulting in&#xA0;insignificant Tangible asset impairment charges in 2016 and 2015. Fair value was estimated by the Company based on information received from real estate brokers. The amounts included in the tables above, classified under Level 3 within the fair value hierarchy, represent the estimated fair values of those Assets held for sale that became the new carrying amounts at the time the impairments were recorded.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 8%; MARGIN-TOP: 18pt"> <b><i>Contingent Consideration Payable for Business Acquisitions</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Certain 2016 business acquisitions involve contingent consideration in the event certain operating results are achieved over a one-year period from the respective dates of such acquisitions. The amount included in the above table represents the estimated fair value of the contingent consideration.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Other Fair Value Measurements</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The carrying value of cash, restricted cash, Accounts receivable, Bank checks outstanding, Accounts payable and accrued expenses approximate their fair values due to their short-term maturities. The carrying value of the self-funded industrial revenue bond asset and the corresponding long-term liability approximate their fair values. See Note 10, Debt, for a further description of the industrial revenue bond agreement.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The fair value of USF&#x2019;s total debt approximated $3.9 billion and $4.8 billion, as compared to its aggregate carrying value of $3.8 billion and $4.7 billion as of October&#xA0;1, 2016 and January&#xA0;2, 2016, respectively. The October&#xA0;1, 2016 and January&#xA0;2, 2016 fair value of USF&#x2019;s 5.875% unsecured Senior Notes due June&#xA0;15, 2024, (the &#x201C;2016 Senior Notes&#x201D;) and Old Senior Notes, estimated at $0.6 billion and $1.4 billion, respectively, was classified under Level 2 of the fair value hierarchy, with fair value based upon the closing market price at the end of the reporting period. The fair value of the balance of USF&#x2019;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 USF&#x2019;s overall credit risk. See Note 10, Debt for further description of USF&#x2019;s debt.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>15.</b></td> <td valign="top" align="left"><b>EARNINGS PER SHARE</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company computes earnings per share (&#x201C;EPS&#x201D;) in accordance with ASC 260, <i>Earnings per Share</i>, which requires that non-vested restricted stock containing non-forfeitable dividend rights be treated as participating securities pursuant to the two-class method. Under the two-class method, net income is reduced by the amount of dividends declared in the period for common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. The amounts of distributed and undistributed earnings allocated to participating securities for the 13-week and 39-week periods ended October&#xA0;1, 2016 and September&#xA0;26, 2015 were insignificant and did not materially impact the calculation of basic or diluted EPS.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Basic EPS is computed by dividing income or loss available to common stockholders by the weighted average number of shares of common stock, shares in Redeemable common stock, if any, (including common stock issuances to key employees, vested restricted shares and vested restricted stock units) and non-vested restricted shares outstanding for the year.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Diluted EPS is computed using the weighted average number of shares of common stock, shares in Redeemable common stock, for the 13-week and 39-week periods ended September&#xA0;26, 2015, and non-vested restricted shares outstanding for the period, plus the effect of potentially dilutive securities. Stock options and unvested restricted stock units are considered potentially dilutive securities.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 0pt"> The following table sets forth the computation of basic and diluted earnings per share:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="58%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>13-Weeks Ended</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>39-Weeks Ended</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>October&#xA0;1,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>September&#xA0;26,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>October&#xA0;1,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>September&#xA0;26,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Numerator:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net income (in thousands)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">133,011</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,387</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">132,930</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">177,463</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Denominator:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted-average common shares outstanding</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">220,608,821</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">169,594,374</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">193,269,252</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">169,583,156</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Dilutive effect of Share-based awards</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,445,230</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,247,209</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,536,738</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,298,645</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted-average dilutive shares outstanding</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">225,054,051</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">170,841,583</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">196,805,990</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">170,881,801</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic income per share</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.60</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.03</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.69</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.05</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted income per share</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.59</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.03</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.68</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.04</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -1.43 6375000 -82292000 0.35 24000000 17240870000 175370000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>4.</b></td> <td valign="top" align="left"><b>INVENTORIES</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company&#x2019;s inventories&#x2014;consisting mainly of food and other foodservice-related products&#x2014;are primarily considered finished goods. Inventory costs include the purchase price of the product and freight charges to deliver it to the Company&#x2019;s warehouses, as well as depreciation and labor related to processing facilities and equipment, and are net of certain cash or non-cash considerations 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.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 0pt"> The Company records inventories at the lower of cost or market, using the last-in, first-out (&#x201C;LIFO&#x201D;) method. The base year values of beginning and ending inventories are determined using the inventory price index computation method. This &#x201C;links&#x201D; current costs to original costs in the base year when the Company adopted LIFO. At October&#xA0;1, 2016, and January&#xA0;2, 2016, the LIFO balance sheet reserves were $109 million and $134 million, respectively. As a result of net changes in LIFO reserves, Cost of goods sold decreased $7 million and $20 million, for the 13-weeks ended October&#xA0;1, 2016 and September&#xA0;26, 2015, respectively, and decreased $25 million and $42 million, for the 39-weeks ended October&#xA0;1, 2016 and September&#xA0;26, 2015, respectively.</p> </div> <div> <table style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td width="4%" valign="top" align="left"><b>7.</b></td> <td align="left" valign="top"><b>PROPERTY AND EQUIPMENT</b></td> </tr> </table> <p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"> 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 three to 40 years. Property and equipment under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining terms of the respective lease or the estimated useful lives of the assets. At October&#xA0;1, 2016 and January&#xA0;2, 2016, Property and equipment-net included accumulated depreciation of $1,671 million and $1,517 million, respectively. Depreciation expense was $66 million and $65 million for the 13-weeks ended October&#xA0;1, 2016 and September&#xA0;26, 2015, respectively, and $198 million and $189 million for the 39-weeks ended October&#xA0;1, 2016 and September&#xA0;26, 2015, respectively.</p> </div> 3026342000 <div> <p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 18px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; WORD-SPACING: 0px; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>17.</b></td> <td valign="top" align="left"><b>INCOME TAXES</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 56px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The determination of the Company&#x2019;s overall effective tax rate requires the use of estimates. The effective tax rate reflects the income earned and taxed in various United States federal and state jurisdictions based on enacted tax law, permanent differences between book and tax items, tax credits and the Company&#x2019;s change in relative income in each jurisdiction.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 56px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company estimated its annual effective tax rate for the full fiscal year and applied the annual effective tax rate to the results of the 39-weeks ended October&#xA0;1, 2016 and September&#xA0;26, 2015 for purposes of determining its year to date tax provision (benefit).</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 56px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The valuation allowance against the net deferred tax assets was $152 million at January 2, 2016. The valuation allowance against the net deferred tax assets decreased $101 million during the 39-weeks ended October 1, 2016, which resulted in a $51 million valuation allowance at October 1, 2016. The Company released the valuation allowance against its federal net deferred tax assets and certain of its state net deferred tax assets in the 13-weeks ended October 1, 2016, as the Company determined it was more likely than not that the deferred tax assets would be realized. The Company maintained a valuation allowance on certain state net operating loss and tax credit carryforwards expected to expire unutilized as a result of insufficient forecasted taxable income in the carryforward period, or the utilization of which are subject to limitation. The decision to release the valuation allowance was made after management considered all available evidence, both positive and negative, including but not limited to, historical operating results, cumulative income in recent years, forecasted earnings, and a reduction of uncertainty regarding forecasted earnings as a result of developments in certain customer and strategic initiatives during the 13-weeks ended October 1, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 56px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The effective tax rate for the 13-weeks ended October 1, 2016 and September 26, 2015 of (143)% and (62)%, respectively, varied from the 35% federal statutory rate primarily due to a change in the valuation allowance and the recognition of various discrete tax items. During the 13-weeks ended October 1, 2016 and September 26, 2015, the valuation allowance decreased $101 million and $3 million, respectively. The decrease in the valuation allowance for the 13-weeks ended October 1, 2016 was primarily the result of the year to date ordinary income and the corresponding release of the valuation allowance. The discrete tax items for the 13-weeks ended October 1, 2016 included a tax benefit of $80 million, primarily related to the release of the valuation allowance. The decrease in the valuation allowance for the 13-weeks ended September 26, 2015 was primarily the result of the year to date ordinary income, partially offset by an increase in the valuation allowance due to an increase in deferred tax liabilities related to indefinite-lived intangibles. The discrete tax items for the 13-weeks ended September 26, 2015 included a tax benefit of $2 million, primarily related to the settlement of tax audits and the expiration of the statute of limitations in various state and local jurisdictions, which had a significant impact on the effective tax rate, as compared to the ordinary income of $3 million for the 13-weeks ended September 26, 2015.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; WORD-SPACING: 0px; TEXT-TRANSFORM: none; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 56px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The effective tax rate for the 39-weeks ended October 1, 2016 and September 26