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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  

FORM 10-K  

(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2019  
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No.  001-37786

 
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US FOODS HOLDING CORP.
(Exact name of registrant as specified in its charter)  

 
Delaware
26-0347906
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
9399 W. Higgins Road, Suite 100
Rosemont, IL 60018
(847720-8000
(Address, including Zip Code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
USFD
 
New York Stock Exchange
 

Securities registered pursuant to Section 12(g) of the Act: None 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes    No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐    No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  
Large accelerated filer
Accelerated filer
Non-accelerated filer
☐ 
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
As of June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant's common stock held by non-affiliates was $7.8 billion (based on the reported closing sale price of the registrant’s common stock on such date on the New York Stock Exchange). 219,858,531 shares of the registrant’s common stock were outstanding as of February 7, 2020.





DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, relating to the registrant’s Annual Meeting of Stockholders to be held on May 13, 2020, are incorporated herein by reference for purposes of Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K. The definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 28, 2019









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US Foods Holding Corp.
Annual Report on Form 10-K
TABLE OF CONTENTS
 
 
 
Page No.
PART I.
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 1B.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
PART II
 
 
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.
 
 
 
 
 
Item 7.
 
 
 
 
 
Item 7A.
 
 
 
 
 
Item 8.
 
 
 
 
 
Item 9.
 
 
 
 
 
Item 9A.
 
 
 
 
 
Item 9B.
 
 
 
 
PART III
 
 
 
 
 
 
 
Item 10.
 
 
 
 
 
Item 11.
 
 
 
 
 
Item 12.
 
 
 
 
 
Item 13.
 
 
 
 
 
Item 14.
 
 
 
 
PART IV
 
 
 
 
 
 
 
Item 15.
 
 
 
 
 
Item 16.
 
 
 
 
 







Basis of Presentation
We operate on a 52 or 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 fiscal fourth quarter. The fiscal years ended December 28, 2019, December 29, 2018, December 30, 2017, December 31, 2016 and January 2, 2016 are also referred to herein as fiscal years 2019, 2018, 2017, 2016 and 2015, respectively. Our fiscal years 2019, 2018, 2017 and 2016 were 52-week fiscal years. Our fiscal year 2015 was a 53-week fiscal year. Fiscal year 2020 will be a 53-week fiscal year.
Forward-Looking Statements
Statements in this Annual Report on Form 10-K (“Annual Report”) which are not historical in nature are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results, and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others, the risks, uncertainties, and other factors set forth in Item 1A of Part I, “Risk Factors,” and Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Annual Report.
In light of these risks, uncertainties and other important factors, the forward-looking statements in this Annual Report might not prove to be accurate, and you should not place undue reliance on them. All forward-looking statements attributable to us, or others acting on our behalf, are expressly qualified in their entirety by the cautionary statements above. All of these statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by law.
Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should be viewed only as historical data.


1



PART I
Item 1.
Business
US Foods Holding Corp. and its consolidated subsidiaries are referred to in this Annual Report as “we,” “our,” “us,” the “Company,” or “US Foods.” US Foods Holding Corp. conducts all of its operations through its wholly owned subsidiary US Foods, Inc. (“USF”) and its subsidiaries.
Our Company
We are among America’s great food companies and leading foodservice distributors. Built through organic growth and acquisitions, we trace our roots back over 150 years to a number of heritage companies with rich legacies in food innovation and customer service. These include Monarch Foods (established in 1853), Sexton (1883), PYA (1903), Rykoff (1911) and Kraft Foodservice (1976). US Foodservice was organized as a corporation in Delaware in 1989. In November 2011, we rebranded from “US Foodservice” to “US Foods.”
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.™, which is centered on providing customers with the innovative products and technology solutions they need to operate their businesses profitably. We operate as one business with standardized business processes, shared systems infrastructure, and an organizational model that optimizes national scale with local execution, allowing us to manage the business as a single operating segment. We have centralized activities where scale matters and our local field structure focuses on customer facing activities.

We supply approximately 300,000 customer locations nationwide. These customer locations include independently owned single and multi-unit restaurants, regional restaurant chains, national restaurant chains, hospitals, nursing homes, hotels and motels, country clubs, government and military organizations, colleges and universities, and retail locations. We provide more than 400,000 fresh, frozen, and dry food stock-keeping units, or SKUs, as well as non-food items, sourced from approximately 6,000 suppliers. Approximately 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, new business development managers and others that help us provide more comprehensive service to our customers. Our extensive network of more than 70 distribution facilities and fleet of approximately 7,000 trucks allow us to operate efficiently and provide high levels of customer service. This operating model allows us to leverage our nationwide scale and footprint while executing locally.
Our Industry
The U.S. foodservice distribution industry has a large number of companies competing in the space, including local, regional, and national foodservice distributors. Foodservice distributors typically fall into three categories, representing differences in customer focus, product offering, and supply chain:
Broadline distributors which offer a “broad line” of products and services;
System distributors which carry products specified for large chains; and
Specialized distributors which primarily focus on specific product categories (e.g., meat or produce) or customer types.

Given our mix of products and services, we are considered a broadline distributor. A number of adjacent competitors also serve the U.S. foodservice distribution industry, including cash-and-carry retailers, commercial wholesale outlets, warehouse clubs, commercial website outlets, and grocery stores. Customer buying decisions are based on the assortment of product offered, quality, price, and service levels.

The U.S. foodservice distribution industry serves different customer types of varying sizes, growth profiles, and product and service requirements, including independent restaurants, healthcare customers (such as hospital systems, nursing homes and long-term care facilities), hospitality customers (ranging from large hotel chains to local banquet halls, country clubs, casinos and entertainment complexes), regional and national restaurant chains, colleges and universities, K-12 schools, and retail locations. Our target customer typesindependent restaurants, healthcare and hospitalityvalue foodservice distributors with a broad product offering and value-added services that help them drive efficiency in their operations. As described in more detail below, our GREAT FOOD. MADE EASY. strategy resonates with these types of customers, and for this reason, we believe our growth prospects with these customers are greater than with other customer types.
In fiscal year 2019, no single customer represented more than 3% of our total customer sales. Sales to our top 50 customers represented approximately 43% of our net sales in fiscal year 2019.

2



We have entered into contractual relationships with certain group purchasing organizations ("GPOs") that negotiate pricing, delivery and other terms on behalf of their members. In fiscal year 2019, GPO members accounted for approximately 25% of our net sales. GPO members are primarily comprised of customers in the healthcare, hospitality, education, and government/military industries.
There are several important dynamics affecting the industry, including:
Evolving consumer tastes and preferences. Consumers demand healthy and authentic food alternatives with fewer artificial ingredients, and they value locally-harvested and sustainably-manufactured products. In addition, many ethnic food offerings are becoming more mainstream as consumers show a greater willingness to try new flavors and cuisines. Changes in consumer preferences create opportunities for new and innovative products and for unique food-away-from-home destinations. This, in turn, is expected to create growth, expand margins, and produce better customer retention opportunities for those distributors with the flexibility to balance national scale and local preferences. We believe foodservice distributors will need broader product assortments, extended supplier networks, effective supply chain management capabilities, and strong food safety and quality programs to meet these needs.
Generational shifts with millennials and baby boomers. Given their purchasing power and diverse taste profiles, millennials and baby boomers will continue to significantly influence food consumption and the food-away-from-home market. According to a U.S. Census Bureau survey, there were 83 million individuals born between 1982 and 2000 in the U.S., making millennials the largest demographic cohort. When it comes to food, millennials are open-minded and curious, and willing to seek out new flavors, dining experiences and diverse menu offerings, while also demanding customization, convenience and sustainable products. Independent restaurants are uniquely situated to capitalize on these preferences. As millennials’ disposable income increases, we believe this demographic will be key to driving growth in the broader U.S. food industry. We also expect that baby boomers will continue to shape the industry as they remain in the workplace longer, which is expected to prolong their contribution to food-away-from-home expenditures.
Growing importance of technology. We see significant future growth being driven by the increased utilization of and reliance on technology by foodservice distributors, customers (in particular, independent restaurants) and diners. E-commerce solutions streamline the purchasing process and increase customer retention. They also deepen the relationship between foodservice distributors and customers, creating personalized insights and services that can make both more efficient. We believe foodservice distributors with deeper, technology-enabled relationships with customers are better able to accelerate their customers’ adoption of new products and increase customer loyalty, giving them a competitive edge. Technology is also growing in importance and helping to level the playing field for independent restaurants. Mobile food delivery and social media apps make independent restaurants more competitive with larger restaurant chains, and help this customer type attract more diners at a relatively low cost. We believe these technology trends will accelerate, as millennials and Generation Z place a greater reliance on technology and become key influencers and decision-makers within the food industry, including at the customer level. Consequently, we believe foodservice distributors which are focused on strengthening their technology, data analytics, and related capabilities will be well-positioned to capitalize on these trends.
We believe that we have the scale, foresight and agility required to proactively address these trends and, in turn, benefit from higher sales growth, greater customer retention, increased private label penetration, and improved profitability.
Our Business Strategy
Our GREAT FOOD. MADE EASY. strategy is built on three key differentiators: product innovation, technology and team-based selling. Through this strategy, we serve our customers as consultants and business partners, bringing our customers personalized solutions and tailoring a suite of products and services to fit each customer’s needs.
The GREAT FOOD portion of our strategy is anchored by Scoop™, a program that introduces innovative and on-trend products multiple times a year, helping our customers keep their menus fresh and delivering back-of-house convenience to reduce their labor and food costs. A growing part of our Scoop portfolio is our Serve Good® program. The Serve Good program features more than 500 products that are sustainably-sourced or contribute to waste reduction. Our private brand portfolio is guided by a spirit of innovation and a commitment to delivering superior quality products and value to customers. While we offer products under a spectrum of private brands, and at different price points, all are designed to deliver quality, performance and value to our customers.
MADE EASY is aimed at providing restaurant operators with technology and expertise that make it easier to transact with us and run their businesses. Our mobile technology platform provides customers with a personalized e-commerce ordering experience and easy-to-use business analytics tools. Our portfolio of value-added services helps customers address key pain points like food waste, back-of-house operations and diner traffic. By delivering our products and services through a differentiated team-based selling approach, we provide customers access to a diverse team of experts including chefs, center of the plate and produce specialists and restaurant operations consultants. Customers utilizing these solutions tend to purchase more and have stronger commercial relationships with us.

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Building upon a strategy of making it easier for our customers, we deliver to our customers through multiple channels. US Foods Direct™, an online ordering platform, more than doubles our product assortment and provides customers with access to thousands of specialty products which ship directly to them from the supplier. More recently, we expanded our US Foods Pronto™ service in select markets to let restaurant operators receive smaller orders more frequently. We are also adding Chef’Store® locations (two new stores were added in 2018 and one new store is planned to open in 2020) to provide more customers with a retail option in between deliveries and to cost effectively service more price-conscious customers.
We believe our GREAT FOOD. MADE EASY. differentiation strategy will enable us to reach more customers and create deeper relationships with existing ones, particularly within our target customer types—independent restaurants, healthcare, and hospitality—and drive increased penetration of our private brand products. Further, we believe this strategy positions us to make the most of the continued growth in food-away-from-home consumption and consumer preferences for innovative, on-trend flavors.
This strategy is supported by our commitment to DELIVERING WITH EXCELLENCE, which ensures that our execution is as strong as our strategy. Recently, actions taken to support this commitment have included:
Completing the centralization of our replenishment function, which was designed to improve our service platform and gross profit over time;
Improving on-time delivery to customers, while also taking steps to reduce the number of miles driven to serve customers; and
Mitigating the impacts of higher freight costs through improved freight management.
We have also invested in embedding continuous improvement in our operations to increase consistency and efficiency and to engage employees in improving our day-to-day processes.
Acquisitions have also historically played an important role in supporting the execution of our growth strategy. In September 2019, we completed the acquisition of five foodservice companies (the “Food Group”) from Services Group of America, Inc.: Food Services of America, Inc., Systems Services of America, Inc., Amerifresh, Inc., Ameristar Meats, Inc. and GAMPAC Express, Inc. for $1.8 billion. The acquisition of the Food Group expands the Company’s network in the West and Northwest parts of the U.S. Integrating the Food Group and realizing synergies from the acquisition will be key priorities for the Company. While we prioritize deleveraging following the completion of the Food Group acquisition, we intend to selectively pursue acquisition opportunities and primarily focus our investments on transactions aligned with our strategic priorities.
Products and Brands
We have a broad assortment of products and brands designed to meet customers’ needs. In many categories, we offer products under a spectrum of private brands based on price and quality covering a range of values and qualities.
The table below presents the sales mix for our principal product categories for fiscal years 2019, 2018 and 2017.
 
Fiscal Years
 
2019
 
2018
 
2017
 
(in millions)
Meats and seafood
$
9,313

 
$
8,635

 
$
8,692

Dry grocery products
4,427

 
4,239

 
4,266

Refrigerated and frozen grocery products
4,253

 
3,898

 
3,799

Dairy
2,685

 
2,520

 
2,533

Equipment, disposables and supplies
2,483

 
2,298

 
2,243

Beverage products
1,403

 
1,315

 
1,306

Produce
1,375

 
1,270

 
1,308

 
$
25,939

 
$
24,175

 
$
24,147

We have registered the trademarks US Foods®, Food Fanatics® and Chef’Store® as part of our overall brand strategy and our retail outlets. We have also registered or applied for trademark protection in the U.S. for our private brands. These trademarks and our private brands are widely recognized within the U.S. foodservice industry. Our U.S. trademarks are effective as long as they are in use and their registrations are properly maintained. We do not have any patents or licenses that are material to our business.
Suppliers
We purchase from approximately 6,000 individual suppliers, none of which accounted for more than 5% of our aggregate purchases in fiscal year 2019. Our suppliers generally are large corporations selling national brand name and private brand products. Additionally, regional and local suppliers support targeted geographic initiatives and private label programs requiring regional and local distribution.

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Seasonality
Our business does not fluctuate significantly from quarter to quarter and, as a result, is not considered seasonal.
Working Capital Practices
Our operations and strategic initiatives require continuing capital investment, and our resources include cash provided by operations, as well as access to capital from bank borrowings and other types of debt and financing arrangements. See the discussion in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”
Government Regulation
As a marketer and distributor of food products, we are subject to various laws and regulations. A summary of some of these laws and regulations is provided below.
Food Handling and Processing
We are subject to various laws and regulations relating to the manufacturing, handling, storage, transportation, sale and labeling of food products, including the applicable provisions of the Federal Food, Drug and Cosmetic Act, Bioterrorism Act, Food Safety Modernization Act, Federal Meat Inspection Act, Poultry Products Inspection Act, Perishable Agricultural Commodities Act, Country of Origin Labeling Act, and regulations issued by the U.S. Food and Drug Administration (“FDA”) and the U.S. Department of Agriculture (“USDA”).
Our distribution facilities must be registered with the FDA and are subject to periodic government agency inspections by federal and/or state authorities. We have a number of processing facilities for certain meat, poultry, seafood and produce products. These units are registered and inspected by the USDA (with respect to meat and poultry) and the FDA (with respect to produce and seafood) as applicable.
We also distribute a variety of non-food products, such as food containers, kitchen equipment and cleaning materials, and are subject to various laws and regulations relating to the storage, transportation, distribution, sale and labeling of those non-food products, including requirements to provide information about the hazards of certain chemicals present in some of the products we distribute.
Our customers include several departments of the U.S. federal government, as well as certain state and local governmental entities. These customer relationships subject us to additional regulations that are applicable to government contractors. For example, as a U.S. federal government contractor, we are subject to audit by the Office of Federal Contract Compliance Programs.
Employment
The U.S. Department of Labor and its agencies, the Employee Benefits Security Administration, the Occupational Safety and Health Administration, and the Office of Federal Contract Compliance Programs, regulate our employment practices and standards for workers. We are also subject to laws that prohibit discrimination in employment based on non-merit categories, including Title VII of the Civil Rights Act and the Americans with Disabilities Act, and other laws relating to accessibility. Our workers’ compensation self-insurance is subject to regulation by the jurisdictions in which we operate.
Our facilities are subject to inspections under the Occupational Safety and Health Act related to our compliance with certain manufacturing, health and safety standards to protect our employees from accidents. We are also subject to the National Labor Relations Act, which governs the process for collective bargaining between employers and employees and protects the rights of both employers and employees in the workplace.
Trade
For the purchase of products produced, harvested or manufactured outside of the U.S., and for the shipment of products to customers located outside of the U.S., we are subject to certain reporting requirements and applicable customs laws regarding the import and export of various products.
Ground Transportation
The U.S. Department of Transportation and its agencies, the Surface Transportation Board, the Federal Highway Administration, the Federal Motor Carrier Safety Administration, and the National Highway Traffic Safety Administration, regulate our fleet operations through the regulation of operations, safety, insurance and hazardous materials. We must comply with the regulations promulgated by the Federal Motor Carrier Safety Administration, including those relating to drug and alcohol testing and hours of service for our drivers. Matters such as weight and dimension of equipment also fall under U.S. federal and state regulations.

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Environmental
Our operations are subject to a broad range of U.S. federal, state, and local environmental laws and regulations, as well as zoning and building regulations. Environmental laws and regulations cover a variety of procedures, including appropriately managing wastewater and stormwater; complying with clean air laws, including those governing vehicle emissions; properly handling and disposing of solid and hazardous wastes; protecting against and appropriately investigating and remediating spills and releases; and monitoring and maintaining underground and aboveground storage tanks for diesel fuel and other petroleum products.
Anticorruption
Because we are organized under the laws of the State of Delaware and our principal place of business is in the U.S., we are considered a “domestic concern” under the Foreign Corrupt Practices Act and are covered by its anti-bribery provisions.
Employees
We had approximately 28,000 employees as of December 28, 2019, substantially all of which were full-time employees. Approximately 5,000 employees were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations. Approximately one-third of our distribution facilities have employees represented by these local unions and are covered by collective bargaining agreements (“CBAs”).
During fiscal year 2019, 13 CBAs covering approximately 1,300 employees were renegotiated. During fiscal year 2020, 14 CBAs covering approximately 1,400 employees will be subject to renegotiation. While we have experienced work stoppages from time to time in the past, we generally believe we have good relations with both our union and non-union employees, and we strive to be a well-regarded employer in the communities in which we operate.
Information about our Executive Officers

Name
 
Age
 
Position
Pietro Satriano
 
57
 
Chairman and Chief Executive Officer
Dirk J. Locascio
 
47
 
Chief Financial Officer
Kristin M. Coleman
 
51
 
Executive Vice President, General Counsel and Chief Compliance Officer
Steven M. Guberman
 
55
 
Executive Vice President, Nationally Managed Business
Andrew E. Iacobucci
 
53
 
Chief Merchandising Officer
Jay A. Kvasnicka
 
52
 
Executive Vice President, Locally Managed Business and Field Operations
David A. Rickard
 
49
 
Executive Vice President, Strategy, Insights and Financial Planning
Keith D. Rohland
 
52
 
Chief Information Officer
David Works
 
52
 
Executive Vice President, Chief Human Resources Officer

Mr. Satriano has served as Chief Executive Officer and a director of US Foods since July 2015. In December 2017, Mr. Satriano was elected Chairman of the Board of Directors. From February 2011 to July 2015, Mr. Satriano served as our Chief Merchandising Officer. Prior to joining US Foods, Mr. Satriano was President of LoyaltyOne Canada, a provider of loyalty marketing and programs, from 2009 to 2011. From 2002 to 2008, he served in a number of leadership positions at Loblaw Companies Limited, a Canadian grocery retailer and wholesale food distributor, including Executive Vice President, Loblaw Brands, and Executive Vice President, Food Segment. Mr. Satriano began his career in strategy consulting, first in Toronto, Canada with Canada Consulting Group and then in Milan, Italy with the Monitor Company. Mr. Satriano currently serves on the board of directors of CarMax, Inc.
Mr. Locascio has served as Chief Financial Officer since February 2017. Mr. Locascio served the Company as Senior Vice President, Financial Accounting and Analysis from November 2016 to February 2017, Senior Vice President, Operations Finance and Financial Planning from May 2015 to November 2016, and Senior Vice President, Financial Planning and Analysis from May 2013 to May 2015. Mr. Locascio joined US Foods in June 2009 as Senior Vice President, Corporate Controller. Prior to joining US Foods, Mr. Locascio held senior finance roles with United Airlines, a global airline, and Arthur Andersen LLP, a public accounting firm.
Ms. Coleman has served as Executive Vice President, General Counsel and Chief Compliance Officer since February 2017. Prior to joining US Foods, Ms. Coleman served as Senior Vice President, General Counsel and Corporate Secretary of Sears Holdings Corporation, a retailer, beginning in July 2014. Prior to joining Sears, she served as Vice President, General Counsel and Corporate Secretary of

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Brunswick Corporation, a manufacturing company, from May 2009 to July 2014. Before moving in-house, she worked in private practice with Sidley Austin LLP.
Mr. Guberman has served as Executive Vice President, Nationally Managed Business since August 2016. Mr. Guberman served the Company as Chief Merchandising Officer from July 2015 to January 2017, Senior Vice President, Merchandising and Marketing Operations from January 2012 to July 2015 and Division President from August 2004 to December 2012. Mr. Guberman joined US Foods in 1991, originally as part of Kraft/Alliant Foodservice.
Mr. Iacobucci has served as Chief Merchandising Officer since January 2017. Prior to joining US Foods, Mr. Iacobucci served as Executive Vice President, Merchandising of Ahold USA, Inc., a food retailer, from April 2016 to January 2017. Prior to joining Ahold, he served from February 2012 to November 2015 in several senior roles at Loblaw Companies Limited, a Canadian grocery retailer and wholesale food distributor, including President, Discount Division.
Mr. Kvasnicka has served as Executive Vice President, Locally Managed Business and Field Operations since September 2016. Mr. Kvasnicka has also served the Company as Interim Chief Supply Chain Officer since October 2019. Mr. Kvasnicka served the Company as Executive Vice President, Locally Managed Sales from August 2015 to September 2016, Region President from April 2013 to July 2015 and Division President from October 2011 to March 2013. Mr. Kvasnicka served the Company as Vice President of Sales for the Stock Yards division, President of the Stock Yards division and in various other roles between 2005 and 2011. He was Vice President of Sales for the Minneapolis Division from 2003 to 2005. Mr. Kvasnicka joined US Foods in 1995, originally as part of Alliant Foodservice.
Mr. Rickard has served as Executive Vice President, Strategy, Insights and Financial Planning since February 2019. Mr. Rickard served the Company as Executive Vice President, Strategy and Revenue Management from November 2015 to February 2019. Prior to joining US Foods, Mr. Rickard served from March 2014 to November 2015 as Vice President of Uline Corporation, a distributor of shipping, industrial, and packing materials, and was responsible for identifying, leading and implementing improvement initiatives across all aspects of the organization. From September 1997 to March 2014, Mr. Rickard was Partner and Managing Director at the Boston Consulting Group, a consulting firm. Mr. Rickard began his career with Charles River Associates, an economic consulting firm.
Mr. Rohland has served as Chief Information Officer since April 2011. Prior to joining US Foods, Mr. Rohland served in several leadership positions at Citigroup, Inc., an investment bank and financial services provider, from March 2007 to April 2011, including Managing Director of Risk and Program Management. Prior to joining Citigroup, Mr. Rohland was Chief Information Officer of Volvo Car Corporation of Sweden, an automaker, from November 2005 to March 2007 and held a number of leadership positions at Ford Motor Company, also an automaker, from July 1990 to November 2005.

Mr. Works has served as Executive Vice President, Chief Human Resources Officer since February 2018. Prior to joining US Foods, Mr. Works served as Chief Human Resources Officer of Hackensack Meridian Health, an integrated health care network, beginning in July 2017. Prior to joining Hackensack, he served as President - Enterprise of Windstream Holdings, Inc., a voice and data communications provider, from December 2014 to August 2016, Executive Vice President and Chief Human Resources Officer of Windstream from February 2012 to December 2014, and Senior Vice President and President, Talent and Human Capital Services of Sears Holdings Corporation, a retailer, from September 2009 to January 2012.
Website and Availability of Information

Our corporate website is located at www.usfoods.com. We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our filings with the SEC are available to the public on the SEC’s website at www.sec.gov. Those filings are also available to the public on, or accessible through, our corporate website for free via the “Investors” section at ir.usfoods.com/investors. The information contained on or accessible through our corporate website or any other website that we may maintain is not incorporated by reference into and is not part of this Annual Report.

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Item 1A.
Risk Factors
We are subject to many risks and uncertainties. Some of these risks and uncertainties, including those described below, may cause our business, financial condition and results of operations to vary, and they may materially or adversely affect our financial performance. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties, which are not currently known to us or which we currently believe are immaterial, may also materially or adversely affect our business, financial condition and results of operations.
Risks Relating to Our Business and Industry
Our business is a low-margin business, and our profitability is directly affected by cost deflation or inflation, commodity volatility and other factors.
The U.S. foodservice distribution industry is characterized by relatively high inventory turnover with relatively low profit margins. Volatile commodity costs have a direct impact on our industry. We make a significant portion of our sales at prices that are based on the cost of products we sell, plus a margin percentage or markup. As a result, our profit levels may be negatively affected during periods of product cost deflation, even though our gross profit percentage may remain relatively constant. Prolonged periods of product cost inflation also may reduce our profit margins and earnings if product cost increases cannot be passed on to customers because they resist paying higher prices. In addition, periods of rapid inflation may have a negative effect on our business. There may be a lag between the time of the price increase and the time at which we are able to pass it along to customers, as well as the impact it may have on discretionary spending by consumers.
Competition in our industry is intense, and we may not be able to compete successfully.
The U.S. foodservice distribution industry is highly competitive, with national, multi-regional, regional and local distributors and specialty competitors. Regional and local companies often align themselves with other smaller distributors through purchasing cooperatives and marketing groups, with the goal of enhancing their geographic reach, private label offerings, overall purchasing power, cost efficiencies, and ability to meet customer distribution requirements. These distributors may also rely on local presence as a source of competitive advantage, and they may have lower costs and other competitive advantages due to geographic proximity. Additionally, adjacent competition, such as cash-and-carry operations, commercial wholesale outlets, warehouse clubs and grocery stores, continue to serve the commercial foodservice market. We also experience competition from online direct food wholesalers and retailers. We generally do not have exclusive service agreements with our customers, and they may switch to other suppliers that offer lower prices or differentiated products or customer service. The cost of switching suppliers is very low, as are the barriers to entry into the U.S. foodservice distribution industry. We believe most purchasing decisions in the U.S. foodservice distribution industry are based on the type, quality and price of the product, plus a distributor’s ability to completely and accurately fill orders and provide timely deliveries.
Increased competition has caused the U.S. foodservice distribution industry to change as distributors seek to lower costs, further increasing pressure on the industry’s profit margins. Heightened competition among our suppliers, significant pricing initiatives and discount programs established by competitors, new entrants, and trends toward consolidation and vertical integration could create additional competitive pressures that reduce margins and adversely affect our business, financial condition, and results of operations.
We rely on third party suppliers, and our business may be affected by interruption of supplies or increases in product costs.
We obtain most of our foodservice and related products from third party suppliers. We typically do not have long-term contracts with suppliers. Although our purchasing volume can provide an advantage when dealing with suppliers, suppliers may not provide the foodservice products and supplies we need in the quantities and at the time and prices requested. We do not control the actual production of most of the products we sell. This means we are also subject to delays caused by interruption in production and increases in product costs based on actions and conditions outside our control. These actions and conditions include changes in supplier pricing practices (including promotional allowances); work slowdowns, work interruptions, strikes or other job actions by employees of suppliers; severe weather and climate conditions; crop conditions; outbreak of food-borne illnesses; product recalls; transportation interruptions; unavailability of fuel or increases in fuel costs; competitive demands; and natural disasters, terrorist attacks or other catastrophic events. Our inability to obtain adequate supplies of foodservice and related products because of any of these or other factors could mean that we could not fulfill our obligations to our customers and, as a result, our customers may turn to other distributors.
Our relationships with our customers and GPOs may be materially diminished, terminated or otherwise changed, which may adversely affect our business, financial condition and results of operations.
Most of our customers buy from us pursuant to individual purchase orders, and we often do not enter into long-term agreements with these customers. Because these customers are not contractually obligated to continue purchasing products from us, we cannot be assured that the volume and/or number of our customers’ purchase orders will remain consistent or increase or that we will be able to maintain our existing customer base.

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Further, some of our customers purchase their products under arrangements with GPOs. GPOs act as agents on behalf of their members by negotiating pricing, delivery, and other terms with us. Our customers who are members of GPOs purchase products directly from us on the terms negotiated by their GPO. GPOs use the combined purchasing power of their members to negotiate more favorable prices than their members would typically be able to negotiate on their own, and we have experienced some pricing pressure from customers which associate themselves with a GPO. While no single customer represented more than 3% of our total net sales in fiscal year 2019, approximately 25% of our net sales in fiscal year 2019 were made to customers under terms negotiated by GPOs (including approximately 13% of our net sales in fiscal year 2019 that were made to customers that are members of one GPO). If an independent restaurant customer becomes a member of a GPO that has a contract with us, we may be forced to lower our prices to that customer, which would negatively impact our operating margin. In addition, if we are unable to maintain our relationships with GPOs, or if GPOs are able to negotiate more favorable terms for their members with our competitors, we could lose some or all of that business.
Market competition, customer requirements, customer financial condition and customer consolidation through mergers and acquisitions also could adversely affect our ability to continue or expand our relationships with customers and GPOs. There is no guarantee that we will be able to retain or renew existing agreements, maintain relationships with any of our customers or GPOs on acceptable terms or at all or collect amounts owed to us from insolvent customers. Our customer and GPO agreements are generally terminable upon advance written notice (typically ranging from 30 days to six months) by either us or the customer or GPO, which provides our customers and GPOs with the opportunity to renegotiate their contracts with us or to award more business to our competitors.
Significant decreases in the volume and/or number of our customers’ purchase orders, the loss of one or more of our major customers or GPOs or our inability to grow to our current customer base could adversely affect our business, financial condition, and results of operations.
We may fail to increase or maintain the highest margin portions of our business, including sales to independent restaurant customers and sales of our private label products.
Our most profitable customers are independent restaurants. We tend to work closely with independent restaurant customers, providing them access to our customer value-added tools and as a result are able to earn a higher operating margin on sales to them. These customers are also more likely to purchase our private label products, which are our most profitable products. Our ability to continue to gain market share of independent restaurant customers is critical to achieving increased operating profits. Changes in the buying practices of independent restaurant customers, including their ability to require us to sell to them at discounted rates, or decreases in our sales to this type of customer or a decrease in the sales of our private label products could have a material negative impact on our profitability.
We may fail to realize the expected benefits of acquisitions or effectively integrate the businesses we acquire.
Historically, a portion of our growth has come through acquisitions. In September 2019, we completed the acquisition of the Food Group, which significantly expands the Company’s network in the West and Northwest parts of the U.S.
If we are unable to integrate acquired businesses successfully or realize anticipated synergies in a timely manner, we may not realize our projected return on investment and our business, financial condition and results of operations may be adversely affected. Integrating acquired businesses may be more difficult in a region or market where we have limited expertise or with a company culture or operating structure different than ours. A significant acquisition, in terms of geography or magnitude, could strain our administrative and operational resources. We also may be unable to retain qualified management and other key personnel of the acquired businesses, which may be necessary to integrate acquired businesses successfully or realize anticipated synergies in a timely manner.
We may be unable to achieve some or all of the benefits that we expect from our cost savings initiatives.
We may not be able to realize some or all of our expected cost savings. A variety of factors could cause us not to realize expected cost savings, including, among others, delays in the anticipated timing of activities related to our cost savings initiatives, lack of sustainability in cost savings over time, and unexpected costs associated with operating our business. All of these factors could negatively affect our business, financial condition and results of operations.

Fuel costs may fluctuate, which may adversely affect our business, financial condition and results of operations.
Higher costs of fuel may negatively affect consumer confidence and discretionary spending. This may reduce the frequency and amount spent by consumers for food prepared away from home. In addition, higher costs of fuel may increase the price we pay for products and the costs we incur to deliver products to our customers. We require significant quantities of fuel for our vehicle fleet, and the price and supply of fuel are unpredictable and fluctuate based on events outside our control, including geopolitical developments, supply and demand for oil and gas, regional production patterns, weather conditions and environmental concerns. Although, from time to time, we enter into forward purchase commitments for some of our fuel requirements at prices equal to the then-current market price, these forward purchases may prove ineffective in protecting us from changes in fuel prices or even result in us paying higher than market costs for part

9



of our fuel. There is no guarantee that we will be able to pass along increased fuel costs to customers in the future. These factors may, in turn, adversely affect our sales, margins, operating expenses, and operating results.
An economic downturn, or other factors affecting consumer confidence, may reduce the amount of food prepared and consumed away from home, which may adversely affect our business, financial condition and results of operations.
The U.S. foodservice distribution industry is sensitive to national, regional and local economic conditions. In the past, an uneven level of general U.S. economic activity, uncertainty in the financial markets, and slow job growth had a negative impact on consumer confidence and discretionary spending. A decline in economic activity or the frequency and amount spent by consumers for food prepared away from home, as well as other macroenvironmental factors which could decrease general consumer confidence (including volatile financial markets or an uncertain political environment), may negatively impact our business, financial condition and results of operations.
Changes in consumer eating habits may reduce demand for our products.
Changes in consumer eating habits (such as a decline in consuming food away from home, a decline in portion sizes, or a shift in preferences toward restaurants that are not our customers) could reduce demand for our products. Consumer eating habits could be affected by a number of factors, including changes in attitudes regarding diet and health or new information regarding the health effects of consuming certain foods. There is a growing consumer preference for sustainable, organic and locally grown products. Changing consumer eating habits also occur due to generational shifts. Millennials, the largest demographic group in the U.S. in terms of spend, generally seek new and different, as well as more ethnic and diverse, menu options and menu innovation. If consumer eating habits change significantly, we may be required to modify or discontinue sales of certain items in our product portfolio, and we may experience higher costs associated with the implementation of those changes. Changing consumer eating habits may reduce the frequency with which consumers purchase meals outside of the home. Additionally, changes in consumer eating habits may result in the enactment or amendment of laws and regulations that impact the ingredients and nutritional content of our food products, or laws and regulations requiring us to make additional disclosure regarding the nutritional content of our food products. Compliance with these and other laws and regulations may be costly and time-consuming. If we are not able to effectively adapt our menu offerings to trends in eating habits or respond to changes in consumer health perceptions or resulting new laws and regulations, our business, financial condition and results of operations could suffer.
Negative publicity or an event which calls into question the safety or integrity of the products we distribute may adversely impact our reputation and business.
Maintaining a good reputation and the safety and integrity of the products we distribute is critical to our business, particularly in selling our private label products. Any event that damages our reputation or calls into question the safety or integrity of our products, whether justified or not, could quickly and negatively affect our business, financial condition and results of operations. This includes negative publicity about the quality, safety, sustainability or integrity of our products. Reports, whether or not they are true, of food-borne illnesses (such as e. coli, avian flu, bovine spongiform encephalopathy, hepatitis A, trichinosis, salmonella or swine flu) and injuries caused by food tampering could severely injure our reputation and reduce public confidence in our products. If patrons of our customers become ill from food-borne illnesses, the customers could be forced to temporarily close locations and our sales would correspondingly decrease. We may be subject to mandatory or voluntary product recalls or withdrawals. In addition, instances of food-borne illnesses or food tampering or other health concerns, even those unrelated to our products, can result in negative publicity about the U.S. foodservice distribution industry and adversely affect our business, financial condition and results of operations.
We face risks related to labor relations and costs.
We had approximately 28,000 employees as of December 28, 2019, of which approximately 5,000 were members of local unions associated with the International Brotherhood of Teamsters and other labor organizations. Our failure to effectively renegotiate any CBAs could result in work stoppages. From time to time, we may face increased efforts to subject us to multi-location labor disputes, as individual labor agreements expire or labor disputes arise. This would place us at greater risk of being unable to continue to operate one or more facilities, possibly delaying deliveries, causing customers to seek alternative suppliers, or otherwise being materially adversely affected by labor disputes. When there are labor related issues at a facility represented by a local union, sympathy strikes may occur at other facilities that are represented by other local unions. While we generally believe we have good relations with our employees, including the unions that represent some of our employees, a work stoppage due to a failure to renegotiate union contracts or for other reasons could have a material adverse effect on our business, financial condition and results of operations.
Further, potential changes in labor legislation and case law could result in current non-union portions of our workforce, including warehouse and delivery personnel, being subjected to greater organized labor influence. If additional portions of our workforce became subject to CBAs, this could result in increased costs of doing business as we would become subject to mandatory, binding arbitration or labor scheduling, costs and standards, which may reduce our operating flexibility.
We are subject to a wide range of labor costs. Because our industry's labor costs are, as a percentage of net sales, higher than many other industries' labor costs, even if we are able to successfully renegotiate CBAs and avoid work stoppages, we may be significantly impacted

10



by labor cost increases. In addition, labor is a significant cost of many of our customers in the U.S. food-away-from-home industry. Any increase in their labor costs, including any increases in costs as a result of increases in minimum wage requirements, could reduce the profitability of our customers and reduce their demand for our products.
We may be unable to attract or retain a qualified and diverse workforce.
The success of our business depends on our ability to attract, train, develop and retain a highly skilled and diverse workforce. Recruiting and retention efforts (particularly with respect to driver and warehouse personnel) and actions to increase productivity may not be successful, and we could encounter a shortage of qualified employee talent in the future. Changes in immigration laws and policies could also make it more difficult for us to recruit or relocate qualified employee talent to meet our business needs. A labor shortage could potentially increase labor costs, reduce our profitability and/or decrease our ability to effectively serve customers.
If our competitors implement a lower cost structure and offer lower prices to our customers, we may be unable to adjust our cost structure to compete profitably and retain those customers.
Over the last several decades, the U.S. food retail industry has undergone significant change. Companies such as Wal-Mart and Costco have developed a lower cost structure, providing their customers with an everyday low-cost product offering. In addition, commercial wholesale outlets, such as Restaurant Depot, offer an additional low-cost option in the markets they serve. As a large-scale U.S. foodservice distributor, we have similar strategies to remain competitive in the marketplace by reducing our cost structure. However, to the extent more of our competitors adopt an everyday low price strategy, we would potentially be pressured to offer lower prices to our customers. That would require us to achieve additional cost savings to offset these reductions. If we are unable to change our cost structure and pricing practices rapidly enough to successfully compete in that environment, our business, financial condition and results of operations may be adversely affected.
Changes in applicable tax laws and regulations and the resolution of tax disputes may negatively affect our financial results.
We are subject to income and other taxes in the U.S. and various state and local jurisdictions, and changes in tax laws or regulations or tax rulings may have an adverse impact on our effective tax rate. The U.S. and many state and local jurisdictions where we do business have recently enacted or are actively considering changes in relevant tax, accounting and other laws, regulations and interpretations. For example, on December 22, 2017, the U.S. federal government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. federal income tax code, the impacts of which are described elsewhere in this Annual Report. Given the unpredictability of possible changes to U.S. federal and state and local tax laws and regulations, it is very difficult to predict their cumulative effect on our results of operations and cash flows, but new and changed laws and regulations could adversely impact our results of operations. We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service (the “IRS”) and other state and local tax authorities and governmental bodies, for which we regularly assess the likelihood of an adverse outcome. If the ultimate determination of these examinations is that taxes are owed by us for an amount in excess of amounts previously accrued, our business, financial condition and results of operations could be adversely affected.
Our business is subject to significant government regulation, and failure to comply with applicable government regulations may lead to lawsuits, investigations and other liabilities and restrictions on our operations.
Our operations are subject to a broad range of laws and regulations relating to the protection of the environment, health and safety. These laws and regulations govern many issues, including discharges to air, soil and water; the handling and disposal of hazardous substances; the investigation and remediation of contamination resulting from the release of petroleum products and other hazardous substances; employee health and safety; food safety and quality; and fleet safety. In the course of our operations, we process, handle and transport a wide variety of food and non-food products, operate and maintain vehicle fleets, use and dispose of hazardous substances, and store fuel in on-site aboveground and underground storage tanks. At several current and former facilities, we are investigating and remediating known or suspected contamination from historical releases of fuel and other hazardous substances that is not currently the subject of any administrative or judicial proceeding, but we may be subject to administrative or judicial proceedings in the future for contamination related to releases of fuel or other hazardous substances. Some jurisdictions in which we operate have laws and regulations that affect the composition and operation of truck fleets, such as limits on diesel emissions and engine idling. A number of our facilities have ammonia or freon-based refrigeration systems, propane, and battery powered forklifts, which could cause injury or environmental damage. Proposed or recently enacted legal requirements, such as those requiring the phase-out of certain ozone-depleting substances or otherwise regulating greenhouse gas emissions, may require us to upgrade or replace equipment or may otherwise increase our operating costs. We are additionally subject to governmental regulation in many other areas of our business, including trade, minimum wage, overtime, wage payment, wage and hour and employment discrimination, immigration and anticorruption. As an example, due to contracts we have with federal and state governmental entities, governmental agencies have, from time to time, conducted audits of or requested information regarding our pricing practices as part of investigations of providers of services under governmental contracts.
Failing to comply with applicable legal and regulatory requirements, or encountering disagreements with respect to our contracts subject to governmental regulation, could result in a number of adverse situations. These could include investigations; litigation or other legal

11



proceedings; administrative, civil, or criminal penalties or fines; mandatory or voluntary product recalls; cease and desist orders against operations that are not in compliance; closing facilities or operations; debarments from contracting with governmental entities; and loss or modification of existing, or rejection of additional, licenses, permits, registrations, or approvals. These laws and regulations may change in the future. The costs of compliance and consequences of non-compliance could have a material adverse effect on our business, financial condition and results of operations.

If the products we distribute are alleged to have caused injury, illness or other damage or to have failed to comply with applicable government regulations, we may need to recall products and may experience product liability claims.
As a distributor and manufacturer of food, we may be subject to product recalls, including voluntary recalls or withdrawals, if the products we distribute or manufacture are alleged to have caused injury, illness or other damage, to have been mislabeled, misbranded or adulterated or to otherwise have violated applicable governmental regulations. We may also choose to voluntarily recall or withdraw products that we determine do not satisfy our quality standards, whether for taste, appearance or otherwise, in order to protect our brand and reputation. Any future product recall or withdrawal that results in substantial and unexpected expenditures, destruction of product inventory, damage to our reputation and/or lost sales due to the unavailability of the product for an extended period of time could adversely affect our business, financial condition and results of operations.
We may be exposed to potential product liability claims in the event that the products we distribute or manufacture are alleged to have caused injury, illness or other damage. We believe we have sufficient liability insurance to cover product liability claims. We also generally seek contractual indemnification and insurance coverage from parties supplying products to us. If our current insurance does not continue to be available at a reasonable cost or is inadequate to cover all of our liabilities, or if our indemnification or insurance coverage is limited, as a practical matter, by the creditworthiness of the indemnifying party or the insured limits of our suppliers’ insurance coverage, the liability related to defective products we distribute or manufacture could adversely affect our business, financial condition and results of operations.
Adverse judgments or settlements resulting from legal proceedings in which we are or may be involved in the normal course of our business could limit our ability to operate our business and adversely affect our financial condition and results of operations.
In the normal course of our business, we are involved in various legal proceedings. The outcome of these proceedings cannot be predicted. If any of these proceedings were determined adversely to us or require a settlement involving a payment of a material sum of money, it could materially and adversely affect our business, financial condition and results of operations. Additionally, we could become the subject of future claims by third parties, including our employees, suppliers, customers, GPOs, investors, or regulators. Any significant adverse judgments or settlements could reduce our profits and limit our ability to operate our business.
We rely heavily on technology, and we may experience a disruption in existing technology or delay in effectively implementing new technology.

Our ability to control costs and maximize profits, as well as to serve customers most effectively, depends on the reliability of our information technology systems and related data entry processes in our transaction intensive business. We rely on software and other information technology to manage significant aspects of our business, such as purchasing, order processing, warehouse/inventory management, truck loading and logistics and optimization of storage space. Any disruption to this information technology could negatively affect our customer service, decrease the volume of our business, and result in increased costs. We have invested in and continue to invest in technology security initiatives, business continuity, and disaster recovery plans in order to insulate ourselves from technology disruption that could impair operations and profits.
Information technology evolves rapidly. To compete effectively, we are required to integrate new technologies in a timely and cost-effective manner. If competitors implement new technologies before we do, allowing them to provide lower priced or enhanced services of superior quality compared to those we provide, our business, financial condition and results of operations could be adversely affected.

A cybersecurity incident may negatively affect our business and our relationships with customers.
We rely upon information technology networks and systems to process, transmit and store electronic information, to process online credit card payments, and to manage or support virtually all of our business processes and activities. We also use mobile devices, social networking and other online activities to connect with our employees, customers, suppliers and other business partners. These uses give rise to cybersecurity risks, including security breach, espionage, system disruption, theft, online platform hijacking that could redirect online credit card payments to another credit card processing website, and inadvertent or unauthorized release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property, including personal information of customers and suppliers, private information about employees, and financial and strategic information about us and our business partners. We are also expanding and improving our information technologies, resulting in a larger technological presence and corresponding increase in exposure to cybersecurity risk. Additionally, while we have implemented measures to prevent security

12



breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability, and competitive disadvantage, which in turn could adversely affect our business, financial condition and results of operations.
Our retirement benefits may give rise to significant expenses and liabilities in the future.
We sponsor defined benefit pension and other postretirement plans. These pension and postretirement obligations give rise to costs that are dependent on various assumptions, including those discussed in Note 18, Retirement Plans, in our consolidated financial statements, many of which are outside of our control, such as performance of financial markets, interest rates, participant age and mortality. In the event we determine that our assumptions should be revised, our future pension and postretirement plan benefit costs could increase or decrease. The assumptions we use may differ from actual results, which could have a significant impact on our pension and postretirement obligations and related costs and funding requirements.
In addition to the plans we sponsor, we also contribute to various multiemployer pension plans administered by labor unions representing some of our employees. We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants. In the event that we withdraw from participating in one of these plans—including by deciding to discontinue participation in a plan in the ordinary course renegotiation of a CBA or by reducing the number of employees participating in a plan to a certain degree over a certain period of time as a result of a facility closure or other change in our operations—then applicable law could require us to make additional withdrawal liability payments to the plan based on the applicable plan’s funding status. Some multiemployer plans, including ones to which we contribute, are reported to have significant underfunded liabilities, which could increase the size of potential withdrawal liability. Any withdrawal liability payments that we are required to make could adversely affect our business, financial condition and results of operations.
Extreme weather conditions and natural disasters, and other catastrophic events, may interrupt our business, or our customers’ or suppliers' businesses.
Some of our facilities and our customers’ and suppliers' facilities are located in areas that may be subject to extreme, and occasionally prolonged, weather conditions, including hurricanes, tornadoes, blizzards, and extreme cold. Extreme weather conditions may interrupt our operations in such areas. Furthermore, extreme weather conditions may interrupt or impede access to our customers’ facilities, reduce the number of consumers who visit our customers’ facilities, interrupt our suppliers’ production or shipments or increase our suppliers’ product costs, all of which could have an adverse effect on our business, financial condition and results of operations.
In addition, our business could be affected by large-scale terrorist acts or the outbreak or escalation of armed hostilities (especially those directed against or otherwise involving the U.S.), the outbreak of food-borne illnesses, the widespread outbreak of infectious diseases or the occurrence of other catastrophic events. Any of these events could impair our ability to manage our business and/or cause disruption of economic activity, which could have an adverse effect on our business, financial condition and results of operations.
We rely on trademarks, trade secrets, and other forms of intellectual property protections, which may not be adequate to protect us from misappropriation or infringement of our intellectual property.
We rely on a combination of trademark, trade secret and other intellectual property laws in the U.S. We have applied for registration of a limited number of trademarks in the U.S. and in certain other countries, some of which have been registered or issued. We cannot guarantee that our applications will be approved by the applicable governmental authorities, or that third parties will not seek to oppose or otherwise challenge our registrations or applications. We also rely on unregistered proprietary rights, including common law trademark protection. Third parties may use trademarks identical or confusingly similar to ours, or independently develop trade secrets or know-how similar or equivalent to ours. If our proprietary information is divulged to third parties, including our competitors, or our intellectual property rights are otherwise misappropriated or infringed, our business could be harmed or adversely affected.
Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.
We cannot be certain that our products do not and will not infringe intellectual property rights of others. We may be subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of intellectual property rights of third parties by us or our customers in connection with their use of our products. Any such claims, whether or not meritorious, could result in costly litigation and divert the efforts of our management and personnel. Moreover, if we were found liable for infringement or enter into a settlement, we may be required to enter into licensing agreements (if available on acceptable terms or at all), pay damages or cease making or selling certain products, which could cause us to incur significant costs and/or prevent us from selling or manufacturing certain products.

13



Risks Relating to Our Indebtedness
Our level of indebtedness may adversely affect our financial condition and our ability to raise additional capital or obtain financing in the future, react to changes in our business, and make required payments on our debt.
We had $4,736 million of indebtedness, net of $43 million of unamortized deferred financing costs, as of December 28, 2019.
Our ability to make scheduled payments on, or to refinance our obligations under, our debt facilities depends on our ongoing financial and operating performance, among other things, and may be affected by economic, financial and industry conditions beyond our control, including as discussed under the caption “Risks Related to Our Business and Industry” above. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, raise additional equity capital or restructure our debt. However, there is no assurance that such alternative measures may be successful or permitted under the agreements governing our indebtedness and, as a result, we may not be able to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.
Our level of indebtedness could have important consequences, including the following:
a substantial portion of our cash flows from operations may be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available for other purposes, including working capital, capital expenditures, acquisitions and general corporate purposes;
we are exposed to the risk of increased interest rates because approximately 65% of the net principal amount of our borrowings was at variable rates of interest as of December 28, 2019;
it may be difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness;
we may be more vulnerable to general adverse economic and industry conditions;
we may be at a competitive disadvantage compared to our competitors with less debt or more favorable interest rates and they, as a result, may be better positioned to withstand competitive pressures and general adverse economic and industry conditions; and
our ability to refinance indebtedness and obtain additional financing may be limited or the associated costs of refinancing and obtaining additional financing may increase.

Our indebtedness may further increase from time to time and we may be able to incur substantial additional indebtedness, including secured debt, in the future for various reasons. Although the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. Incurring substantial additional indebtedness could further exacerbate the risks associated with our level of indebtedness.
The agreements governing our indebtedness contain restrictions and limitations that may significantly impact our ability to operate our business.
The agreements governing our indebtedness contain covenants that, among other things, restrict our ability to: dispose of assets; incur additional indebtedness (including guarantees of additional indebtedness); pay dividends and make certain payments; create liens on assets; make investments; engage in certain business combination transactions; engage in certain transactions with affiliates; change the business we conduct; and amend specific debt agreements. In addition, these agreements subject us to various financial covenants.
The restrictions under the agreements governing our indebtedness may prevent us from taking actions that we believe would be in the best interest of our business, and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional restrictive and financial covenants that could affect our financial and operational flexibility. We cannot assure that we will be granted waivers of or amendments to these obligations if for any reason we are unable to comply with them, or that we will be able to refinance our debt on acceptable terms or at all.
Our ability to comply with the covenants and restrictions contained in the agreements governing our indebtedness depends on our ongoing financial and operating performance, among other things, and may be affected by economic, financial and industry conditions beyond our control, including as discussed under the caption “Risks Related to Our Business and Industry” above. The breach of any of these covenants or restrictions could result in a default under the agreements governing our indebtedness that would permit the applicable lenders or note holders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt. In any such case, we may be unable to borrow under and may not be able to repay the amounts due under our indebtedness. This

14



could have serious consequences to our business, financial condition and results of operations and could cause us to become bankrupt or insolvent.

Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect the cost of servicing our debt.
In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it intends to phase out the use of LIBOR by the end of 2021. It is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. Amounts drawn under each of our asset based senior secured revolving credit facility (the “ABL Facility”), accounts receivable financing facility (the “ABS Facility”) and initial and incremental senior secured term loan facilities (the “Initial Term Loan Facility” and the “Incremental Term Loan Facility,” respectively) may bear interest at rates based upon, among other things, U.S. dollar LIBOR. As such, depending on the future of LIBOR, we may need to renegotiate certain standards in or terms of the agreements governing this indebtedness to replace U.S. dollar LIBOR with a new standard or we may be required to borrow this indebtedness based upon alternate interest rate conventions as set forth in those agreements, which could increase the cost of servicing this debt and have an adverse effect on our business, financial condition and results of operations.
Item 1B.
Unresolved Staff Comments
None.

15



Item 2.    Properties
We maintained 92 primary operating facilities, consisting of 72 distribution centers and other supporting facilities as of February 13, 2020. Approximately 77% were owned and 23% were leased. Our real estate includes our corporate headquarters in Rosemont, Illinois and our shared services center in Tempe, Arizona, both of which are leased. Our properties also include a number of Chef’Stores, US Foods Culinary Equipment & Supply outlet locations, temporary storage sites, remote sales offices, trailer “drop-sites,” and vacant land not included in the count above. The lease arrangements for the leased properties expire at various dates from 2020 to 2031, although certain of these lease arrangements include options for renewal. We believe our properties are suitable and adequate to serve the needs of our business.
The following table lists our primary operating facilities and their aggregate square footage, by state. These operating facilities, include distribution centers that may contain multiple locations or buildings and other supporting facilities. In addition, the table includes our leased Rosemont headquarters and Tempe shared services center. The table does not include Chef’Stores, or US Foods Culinary Equipment & Supply outlet locations. It also does not include closed locations, vacant properties or ancillary use properties, such as temporary storage sites, remote sales offices and trailer drop-sites.
Location
 
Number of
Facilities
 
Square Feet
 
 
Alabama
 
2

 
438,804

 
 
Alaska
 
1

 
131,285

 
 
Arizona
 
4

 
566,196

 
 
Arkansas
 
1

 
135,009

 
 
California
 
7

 
1,687,663

 
 
Colorado
 
2

 
501,427

 
 
Connecticut
 
1

 
239,899

 
 
Florida
 
5

 
1,173,162

 
 
Georgia
 
2

 
691,017

 
 
Illinois
 
4

 
856,147

 
 
Indiana
 
1

 
233,784

 
 
Iowa
 
1

 
114,250

 
 
Kansas
 
1

 
350,859

 
 
Louisiana
 
1

 
69,304

 
 
Michigan
 
1

 
276,003

 
 
Minnesota
 
3

 
414,963

 
 
Mississippi
 
1

 
287,356

 
 
Missouri
 
3

 
602,947

 
 
Montana
 
1

 
194,088

 
 
Nebraska
 
2

 
246,430

 
 
Nevada
 
4

 
840,219

 
 
New Hampshire
 
1

 
533,237

 
 
New Jersey
 
3

 
1,073,375

 
 
New Mexico
 
1

 
133,486

 
 
New York
 
3

 
388,683

 
 
North Carolina
 
3

 
954,736

 
 
North Dakota
 
2

 
221,314

 
 
Ohio
 
3

 
501,894

 
 
Oklahoma
 
1

 
308,307

 
 
Oregon
 
1

 
350,000

 
 
Pennsylvania
 
6

 
1,179,319

 
 
South Carolina
 
2

 
1,220,499

 
 
South Dakota
 
1

 
47,400

 
 
Tennessee
 
2

 
602,270

 
 
Texas
 
4

 
963,732

 
 
Utah
 
1

 
267,180

 
 
Virginia
 
2

 
629,318

 
 
Washington
 
5

 
893,570

 
 
West Virginia
 
1

 
220,537

 
 
Wisconsin
 
2

 
354,127

 
 
Total
 
92

 
20,893,796

 
 
 
 
 
 
 
 
 
Owned
 
 
 
16,046,712

 
77
%
Leased
 
 
 
4,847,084

 
23
%

16



Item 3.
Legal Proceedings
From time to time, we may be party to legal proceedings that arise in the ordinary course of our business. We do not believe that any of our pending legal proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition or results of operations.
Item 4.    Mine Safety Disclosures
None.

17



PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock and Stockholders
Our common stock began trading publicly on the New York Stock Exchange (“NYSE”) under the symbol “USFD” as of May 26, 2016. Prior to that time, there was no public market for our common stock. There were 22,954 holders of record of our common stock as of February 7, 2020. This figure does not include a substantially greater number of “street name” holders whose shares are held of record by banks, brokers and other financial institutions.
Dividends
We have not paid any dividends on our common stock since our common stock began trading publicly on the NYSE.
We have no plans to pay dividends on our common stock in the foreseeable future. The declaration, amount, and payment of any future dividends on shares of common stock will be at the sole discretion of our Board of Directors. In making any such decision, our Board of Directors may take into account, among other things, our results of operations, capital requirements, financial condition, contractual restrictions, and other factors that our Board of Directors may deem relevant.

18



Stock Performance Graph
The following stock performance graph compares the cumulative total stockholder return of the Company’s common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Food and Staples Retailing Index since May 26, 2016, the date the Company’s common stock began trading on the NYSE. The graph assumes the investment of $100 in our common stock and each of such indices on May 26, 2016 and the reinvestment of dividends, as applicable. Performance data for the Company, the S&P 500 Index and the S&P 500 Food and Staples Retailing Index is provided as of the last trading day of each of our last four fiscal years.

chart-8759c88eb3395a479f3a10.jpg
 
5/26/16

 
12/31/16

 
12/30/17

 
12/29/18

12/28/19

US Foods Holding Corp.
$
100

 
$
110

 
$
128

 
$
127

$
168

S&P 500
100

 
110

 
134

 
128

169

S&P Food and Staples Retailing Index
100

 
107

 
132

 
131

167



19



Item 6.
Selected Financial Data
The selected historical consolidated statements of operations data for fiscal years 2019, 2018 and 2017, and the related selected balance sheet data as of the end of fiscal years 2019 and 2018, have been derived from our consolidated financial statements and related notes contained elsewhere in this Annual Report. The selected historical consolidated statements of operations data for fiscal years 2016 and 2015, and the related selected balance sheet data as of the end of fiscal years 2017, 2016, and 2015, have been derived from our consolidated financial statements not included in this Annual Report.
The following selected consolidated financial data should be read together with Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes included in Item 8 of Part II.
The following tables set forth our selected financial data for the periods and as of the dates indicated:
 
Fiscal Year
 
2019
 
2018
 
2017
 
2016
 
2015
 
(in millions, except per share data)
Consolidated Statements of Operations Data:
 
 
 
 
 
 
 
 
 
Net sales
$
25,939

 
$
24,175

 
$
24,147

 
$
22,919

 
$
23,127

Cost of goods sold
21,352

 
19,869

 
19,929

 
18,866

 
19,114

Gross profit
4,587

 
4,306

 
4,218

 
4,053

 
4,013

Operating expenses:
 
 
 
 
 
 
 
 
 
Distribution, selling and administrative costs
3,888

 
3,647

 
3,631

 
3,581

 
3,651

Restructuring costs (benefit)

 
1

 
(1
)
 
53

 
173

Total operating expenses
3,888

 
3,648

 
3,630

 
3,634

 
3,824

Operating income
699

 
658

 
588

 
419

 
189

Formerly Proposed Sysco Acquisition termination fees—net

 

 

 

 
288

Other expense (income)—net
4

 
(13
)
 
14

 
5

 
(1
)
Interest expense—net
184

 
175

 
170

 
229

 
285

Loss on extinguishment of debt

 

 

 
54

 

Income before income taxes
511

 
496

 
404

 
131

 
193

Income tax provision (benefit)
126

 
89

 
(40
)
 
(79
)
 
25

Net income
$
385

 
$
407

 
$
444

 
$
210

 
$
168

Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
1.77

 
$
1.88

 
$
2.00

 
$
1.05

 
$
0.99

Diluted
$
1.75

 
$
1.87

 
$
1.97

 
$
1.03

 
$
0.98

Weighted-average number of shares used in per share amounts:
 
 
 
 
 
 
 
 
 
Basic
218

 
216

 
223

 
200

 
170

Diluted
220

 
218

 
226

 
204

 
171

Other Data:
 
 
 
 
 
 
 
 
 
Cash flows—operating activities
$
760

 
$
609

 
$
749

 
$
549

 
$
555

Cash flows—investing activities
(1,987
)
 
(232
)
 
(356
)
 
(762
)
 
(271
)
Cash flows—financing activities
1,220

 
(391
)
 
(405
)
 
(180
)
 
(110
)
Capital expenditures
258

 
235

 
221

 
164

 
187

EBITDA(1)
1,057

 
1,011

 
952

 
782

 
876

Adjusted EBITDA(1)
1,194

 
1,103

 
1,058

 
972

 
875

Adjusted net income(1)
523

 
472

 
370

 
476

 
300

Free cash flow(2)
502

 
374

 
528

 
385

 
368


20




 
As of Fiscal Year
 
2019
 
2018
 
2017
 
2016
 
2015
 
(in millions)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash
$
98

 
$
105

 
$
119

 
$
131

 
$
524

Total assets
11,288

 
9,186

 
9,037

 
8,944

 
9,239

Total debt
4,736

 
3,457

 
3,757

 
3,782

 
4,745

Total shareholders’ equity
3,709

 
3,229

 
2,751

 
2,538

 
1,873


(1)
EBITDA is defined as net income, plus interest expense—net, income tax provision (benefit), and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (1) fees paid to Clayton, Dubilier & Rice, LLC (“CD&R”) and Kohlberg Kravis Roberts & Co., L.P. (“KKR” and, together with CD&R, the “Former Sponsors”); (2) restructuring costs (benefit); (3) share-based compensation expense; (4) the non-cash impact of last-in first-out (“LIFO”) reserve adjustments; (5) loss on extinguishment of debt; (6) pension settlements; (7) business transformation costs; (8) costs related to the formerly proposed acquisition of US Foods by Sysco Corporation (the “Formerly Proposed Sysco Acquisition”), which was contemplated by the Agreement and Plan of Merger, dated as of December 8, 2013; (9) Formerly Proposed Sysco Acquisition termination fees—net; and (10) other gains, losses, or costs as specified in the agreements governing our indebtedness. Adjusted net income is defined as net income excluding the items used to calculate Adjusted EBITDA listed above and further adjusted for the tax effect of the exclusions and discrete tax items. Effective as of fiscal year 2019, we revised the definition of Adjusted net income to also exclude the effect of intangible asset amortization expense. Prior year amounts have been revised to conform with the current year presentation. EBITDA, Adjusted EBITDA, and Adjusted net income as presented in this Annual Report are supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the U.S. (“GAAP”). They are not measurements of our performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP. For additional information, see the discussion under the caption “Non-GAAP Reconciliations” below.
(2)
Free cash flow is defined as cash flows provided by operating activities less capital expenditures. Free cash flow as presented in this Annual Report is a supplemental measure of our liquidity that is not required by, or presented in accordance with, GAAP. It is not a measurement of our liquidity under GAAP and should not be considered as an alternative to cash flows provided by operating activities or any other liquidity measures derived in accordance with GAAP. For additional information, see the discussion under the caption “Non-GAAP Reconciliations” below.
Non-GAAP Reconciliations
We provide EBITDA, Adjusted EBITDA, Adjusted net income and Free cash flow as supplemental measures to GAAP financial measures regarding our operating performance and liquidity. These non-GAAP financial measures, as defined above, 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.
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, interest expense, and income taxes on a consistent basis from period to period. We believe that Adjusted net income may be 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 (1) to evaluate our historical and prospective financial performance as well as our performance relative to our competitors as they assist in highlighting trends, (2) to set internal sales targets and spending budgets, (3) to measure operational profitability and the accuracy of forecasting, (4) to assess financial discipline over operational expenditures, and (5) as an important factor in determining variable compensation for management and employees. EBITDA and Adjusted EBITDA are also used in connection with certain covenants and activity restrictions under the agreements governing our indebtedness. We also believe these and similar non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to evaluate companies in our industry. EBITDA, Adjusted EBITDA and Adjusted net income are not measurements of our performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP.
We use Free cash flow as a supplemental measure to GAAP financial measures regarding 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 or any other liquidity measures derived in accordance with GAAP.
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-

21



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.
The following table reconciles EBITDA, Adjusted EBITDA, Adjusted net income and Free cash flow to the most directly comparable GAAP financial performance and liquidity measures for the periods indicated:
 
Fiscal Year
 
2019
 
2018
 
2017
 
2016
 
2015
 
(in millions)
Net income
$
385

 
$
407

 
$
444

 
$
210

 
$
168

Interest expense—net
184

 
175

 
170

 
229

 
285

Income tax provision (benefit)
126

 
89

 
(40
)
 
(79
)
 
25

Depreciation expense
311

 
300

 
283

 
266

 
253

Amortization expense
51

 
40

 
95

 
155

 
146

EBITDA
1,057

 
1,011

 
952

 
782

 
876

Adjustments:
 
 
 
 
 
 
 
 
 
Former Sponsor fees(1)

 

 

 
36

 
10

Restructuring costs (benefit)(2)

 
1

 
(1
)
 
53

 
173

Share-based compensation expense(3)
32

 
28

 
21

 
18

 
16

LIFO reserve adjustment(4)
22

 

 
14

 
(18
)
 
(74
)
Loss on extinguishment of debt(5)

 

 

 
54

 

Pension settlements(6)
12

 

 
18

 

 

Business transformation costs(7)
9

 
22

 
40

 
37

 
46

Formerly Proposed Sysco Acquisition termination fees—net(8)

 

 

 

 
(288
)
Formerly Proposed Sysco Acquisition-related costs(9)

 

 

 
1

 
85

Food Group acquisition-related costs and other(10)
62

 
41

 
14

 
10

 
31

Adjusted EBITDA
1,194

 
1,103

 
1,058

 
972

 
875

Depreciation expense
(311
)
 
(300
)
 
(283
)
 
(266
)
 
(253
)
Interest expense—net
(184
)
 
(175
)
 
(170
)
 
(229
)
 
(285
)
Income tax provision, as adjusted(11)(12)
(176
)
 
(156
)
 
(235
)
 
(1
)
 
(37
)
Adjusted net income(11)
$
523

 
$
472

 
$
370

 
$
476

 
$
300

Free cash flow
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
$
760

 
$
609

 
$
749

 
$
549

 
$
555

Capital expenditures
(258
)
 
(235
)
 
(221
)
 
(164
)
 
(187
)
Free cash flow
$
502

 
$
374

 
$
528

 
$
385

 
$
368


(1)
Consists of fees paid to the Former Sponsors for consulting and management advisory services. On June 1, 2016, the consulting agreements with each of the Former 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 and subsequent gains on sale, organizational realignment costs and estimated multiemployer pension withdrawal liabilities and settlements.
(3)
Share-based compensation expense for stock and option awards and discounts provided under employee stock purchase plan.
(4)
Represents the non-cash impact of LIFO reserve adjustments.
(5)
Includes fees paid to debt holders, third party costs, the write-off of certain pre-existing unamortized deferred financing costs related to the 2016 debt refinancing transactions; early redemption premium and the write-off of unamortized issue premium related to the June 2016 debt refinancing; and the loss related to the September 2016 defeasance of our commercial mortgage backed securities facility.
(6)
Consists of settlement charges resulting from payments to settle benefit obligations with former and current participants in our defined benefit pension plan. See Note 18, Retirement Plans, in our consolidated financial statements for a further description of the pension settlement charges for fiscal years 2019 and 2017.
(7)
Consists primarily of costs related to significant process and systems redesign across multiple functions.
(8)
Consists of net fees received in connection with the termination of the Agreement and Plan of Merger dated as of December 8, 2013, which contemplated the Formerly Proposed Sysco Acquisition.
(9)
Consists of costs related to the Formerly Proposed Sysco Acquisition, including certain employee retention costs.
(10)
Includes Food Group acquisition-related costs of $52 million and $29 million for fiscal years 2019 and 2018, respectively. Also includes gains, losses or costs as specified under the agreements governing our indebtedness.
(11)
Effective as of fiscal year 2019, we revised the definition of Adjusted net income to also exclude the effect of intangible asset amortization expense. Prior year amounts have been revised to conform with the current year presentation.
(12)
Represents our income tax provision 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, excess tax benefits associated with share-based compensation, 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 a valuation

22



allowance against federal and certain state net deferred tax assets in fiscal year 2016. We were required to reflect the portion of the valuation allowance release related to 2016 ordinary income in the estimated annual effective income tax rate and the portion of the valuation allowance release related to future years’ income discretely in fiscal year 2016. We maintained a valuation allowance against federal and state net deferred tax assets for fiscal year 2015. The result was an immaterial tax effect related to pre-tax items excluded from Adjusted net income for fiscal years 2015 and 2016.

A reconciliation between the GAAP income tax provision (benefit) and the income tax provision, as adjusted, is as follows:
 
Fiscal Year
 
2019
 
2018
 
2017
 
2016
 
2015
 
(in millions)
GAAP income tax provision (benefit)
$
126

 
$
89

 
$
(40
)
 
$
(79
)
 
$
25

Tax impact of pre-tax income adjustments(1)
47

 
32

 
76

 

 

Discrete tax items
3

 
35

 
199

 
80

 
12

Income tax provision, as adjusted
$
176

 
$
156

 
$
235

 
$
1

 
$
37

(1)
Effective as of the third quarter of fiscal year 2019, we revised the definition of Adjusted net income to also exclude the effect of intangible asset amortization expense. Prior year amounts have been revised to conform with the current year presentation




23



Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to help the reader understand the Company, our financial condition and results of operations and our present business environment. It should be read together with Item 6 of Part II, “Selected Financial Data,” and our consolidated financial statements and related notes contained elsewhere in this Annual Report. The following discussion and analysis contain certain financial measures that are not required by, or presented in accordance with, GAAP. We believe these non-GAAP financial measures provide meaningful supplemental information about our operating performance and liquidity. Information regarding reconciliations of and the rationale for these measures is discussed in “Non-GAAP Reconciliations” in Item 6 of Part II, “Selected Financial Data.”

The following includes a comparison of our consolidated results of operations for fiscal years 2019 and 2018. For a comparison of our consolidated results of operations for fiscal years 2018 and 2017, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources,” of our Annual Report on Form 10-K for the fiscal year ended December 29, 2018, filed with the SEC on February 14, 2019.
Operating Metrics
Case growth—Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time. Customers periodically are reclassified, based on changes in size or other characteristics, and when those changes occur, the respective customer’s historical volume follows its new classification.
Organic growth—Organic growth includes growth from operating business that has been reflected in our results of operations for at least 12 months. 
Fiscal Year 2019 Highlights
Food Group Acquisition—On September 13, 2019, USF completed the $1.8 billion all cash acquisition of the Food Group. The acquisition of the Food Group expands the Company’s network in the West and Northwest parts of the U.S. The assets, liabilities and results of operations of the Food Group have been included in the Company’s consolidated financial statements since the date the acquisition was completed.
Financial Highlights—Total case volume in fiscal year 2019, increased 4.6%, reflecting growth with independent restaurants of 7.1%. Net sales increased $1,764 million, or 7.3%, in fiscal year 2019 primarily due to the increase in organic case volume and year-over-year inflation in multiple product categories, including grocery, poultry, beef and produce. The inclusion of the Food Group in our operations contributed net sales of $843 million in fiscal year 2019.
Gross profit increased $281 million, or 6.5%, to $4,587 million in fiscal year 2019, primarily as a result of the impact of margin expansion initiatives, the inclusion of the Food Group in our operations, and an increase in organic case volume, which were partially offset by unfavorable year-over-year LIFO adjustments. As a percentage of net sales, gross profit was 17.7%, compared to 17.8% in fiscal year 2018.
Total operating expenses increased $240 million, or 6.6%, to $3,888 million in fiscal year 2019, primarily as a result of higher wage costs, which were primarily distribution related, the inclusion of the Food Group in our operations and acquisition-related costs, which were partially offset by the positive impact of expense control initiatives.
Outlook
With favorable trends in consumer confidence and the unemployment rate, we expect moderate positive growth in the U.S. foodservice distribution industry in fiscal year 2020. General economic trends and conditions, including demographic shifts, inflation, deflation, consumer confidence, and disposable income, coupled with evolving consumer tastes and preferences, influence the amount that consumers spend on food-away-from-home and create opportunities for new and innovative products, which in turn, is expected to create growth, expand margins and produce better retention opportunities for foodservice distributors with the flexibility to balance national scale and local preferences. On balance, we believe that we have the scale, foresight and agility required to proactively address and benefit from these general industry trends, and that our strategy positions us to make the most out of the continued growth in food-away-from-home consumption. Notwithstanding, we expect competitive pressures to remain high and a moderate amount of inflation in fiscal year 2020. Given that a large portion of our business is based on a contracted margin percentage or markups over cost, sudden inflation or prolonged deflation could negatively impact our sales and gross profit. We expect sales to our independent restaurant customers, which generally have higher margins, to continue to be an increasing proportion of our sales mix. Favorable customer mix, additional volume from acquisitions and other sourcing initiatives should also continue to contribute to our ability to expand our margins. Further, we believe our differentiated strategy will enable us to reach more customers and create deeper relationships with existing ones, particularly within our targeted customer types for which we generate higher margins, and to drive increased penetration of our private brands.


24




Results of Operations
The following table presents selected consolidated results of operations of our business for fiscal years 2019 and 2018:
 
Fiscal Year
 
2019
 
2018
 
(in millions)
Consolidated Statements of Operations:
 
 
 
Net sales
$
25,939

 
$
24,175

Cost of goods sold
21,352

 
19,869

Gross profit
4,587

 
4,306

Operating expenses:
 
 
 
Distribution, selling and administrative costs
3,888

 
3,647

Restructuring costs

 
1

Total operating expenses
3,888

 
3,648

Operating income
699

 
658

Other expense (income) net
4

 
(13
)
Interest expense—net
184

 
175

Income before income taxes
511

 
496

Income tax provision
126

 
89

Net income
$
385

 
$
407

Percentage of Net Sales:
 
 
 
Gross profit
17.7
%
 
17.8
%
Distribution, selling and administrative costs
15.0
%
 
15.1
%
Operating expenses
15.0
%
 
15.1
%
Operating income
2.7
%
 
2.7
%
Net income
1.5
%
 
1.7
%
Adjusted EBITDA(1)
4.6
%
 
4.6
%
Other Data:
 
 
 
Cash flows—operating activities
$
760

 
$
609

Cash flows—investing activities
(1,987
)
 
(232
)
Cash flows—financing activities
1,220

 
(391
)
Capital expenditures
258

 
235

EBITDA(1)
1,057

 
1,011

Adjusted EBITDA(1)
1,194

 
1,103

Adjusted net income(1)
523

 
472

Free cash flow(2)
502

 
374

(1)
EBITDA, Adjusted EBITDA, and Adjusted net income as presented in this Annual Report are 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. Effective as of fiscal year 2019, we revised the definition of Adjusted net income to also exclude the effect of intangible asset amortization expense. Prior year amounts have been revised to conform with the current year presentation.
(2)
Free cash flow as presented in this Annual Report is a supplemental measure of our liquidity that is not required by, or presented in accordance with, GAAP. It is not a measure of our liquidity under GAAP and should not be considered as an alternative to cash flows provided by operating activities, or any other liquidity measures derived in accordance with GAAP.

See additional information including the reconciliation of these measures to their most comparable GAAP financial measures, in “Non-GAAP Reconciliations” in Item 6 of Part II, “Selected Financial Data.”

25



Comparison of Results
Fiscal Years Ended December 28, 2019 and December 29, 2018
Highlights
Total case volume increased 4.6% and independent restaurant case volume increased 7.1% in fiscal year 2019.
Net sales increased $1,764 million, or 7.3% to $25,939 million in fiscal year 2019.
Operating income increased $41 million, or 6.2%, to $699 million in fiscal year 2019. As a percentage of net sales, operating income was 2.7% in both fiscal years 2019 and 2018.
Net income was $385 million in fiscal year 2019, compared to $407 million in fiscal year 2018.
Adjusted EBITDA increased $91 million, or 8.3%, to $1,194 million in fiscal year 2019. As a percentage of net sales, Adjusted EBITDA was 4.6% in both fiscal years 2019 and 2018.
Net Sales
Total case volume increased 4.6% in fiscal year 2019. The increase reflects growth with independent restaurants of 7.1%. Organic case volume increased 1.1% and organic independent restaurant case volume increased 4.4%.
Net sales increased $1,764 million, or 7.3%, to $25,939 million in fiscal year 2019, comprised of a $1,107 million, or 4.6%, increase in case volume and a $657 million, or 2.7%, increase in the overall net sales rate per case. Sales of private brands increased approximately 70 bps and represented approximately 35% of net sales in both fiscal years 2019 and 2018. The Food Group contributed net sales of $843 million in fiscal year 2019.
The increase in the net sales rate per case of 2.7% primarily reflects year-over-year inflation. We experienced year-over-year inflation in multiple product categories, including grocery, poultry, beef and produce, which benefited net sales since a significant portion of our sales is based on markups over product cost.
Gross Profit
Gross profit increased $281 million, or 6.5%, to $4,587 million in fiscal year 2019, primarily as a result of the impact of margin expansion initiatives, contributions from the Food Group and an increase in organic case volume, which were partially offset by unfavorable year-over-year LIFO adjustments. Our LIFO method of inventory costing resulted in expense of $22 million in fiscal year 2019, compared to de minimis expense in fiscal year 2018, and was driven by higher product inflation in multiple product categories in fiscal year 2019 compared to fiscal year 2018. Gross profit as a percentage of net sales was 17.7% in fiscal year 2019, compared to 17.8% in fiscal year 2018.
Operating Expenses
Operating expenses, comprised of distribution, selling and administrative costs and restructuring costs, increased $240 million, or 6.6%, to $3,888 million in 2019. Operating expenses as a percentage of net sales were 15.0% in fiscal year 2019, compared to 15.1% in fiscal year 2018. The increase in operating expenses included $149 million of higher distribution-related wage and related costs driven by an increase in organic case volume, contributions from the Food Group, $23 million of higher acquisition-related costs, $23 million of higher self-insurance costs, and $22 million of higher other distribution-related costs, which were partially offset by the positive impact of expense control initiatives.
Operating Income
Operating income increased $41 million, or 6.2%, to $699 million in fiscal year 2019. Operating income as a percentage of net sales was 2.7% in fiscal year 2019, compared to 2.7% in fiscal year 2018. The change in operating income was due to the factors discussed in the relevant sections above.
Other Expense (Income)—Net
Other expense (income)—net includes components of net periodic benefit costs (credits), exclusive of the service cost component associated with our defined benefit and other postretirement plans. We recognized other expense—net of $4 million in fiscal year 2019, including $12 million of non-cash settlement charges resulting from payments to settle benefit obligations with former and current participants in our defined benefit pension plan. We recognized other income—net of $13 million in fiscal year 2018, primarily due to the improved funded status of our defined benefit and other postretirement retirement plans as of December 30, 2017.

26



Interest Expense—Net
Interest expense—net increased $9 million in fiscal year 2019, primarily due to borrowings incurred to finance the acquisition of the Food Group, which were partially offset by lower average revolving credit facility borrowings.
Income Taxes
Our effective income tax rate for fiscal year 2019 of 25% varied from the 21% federal corporate income tax rate, primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $4 million primarily related to excess tax benefits associated with share-based compensation. Our effective income tax rate for fiscal year 2018 of 18% varied from the 21% federal corporate income tax rate, primarily as a result of state income taxes and the recognition of a tax benefit of $21 million. This tax benefit primarily related to (1) the reduction of an unrecognized tax benefit due to the receipt of an affirmative written consent from the IRS to change a method of accounting, (2) a tax benefit of $6 million, primarily related to excess tax benefits associated with share-based compensation and (3) a tax benefit of $8 million primarily related to the adjustments finalizing provisional amounts recorded as of December 30, 2017 in connection with the reduction of the federal corporate income tax rate under the Tax Act.
Net Income
Our net income was $385 million in fiscal year 2019, compared to $407 million in fiscal year 2018. The decrease in net income was due to the relevant factors discussed above.
Liquidity and Capital Resources
Our ongoing operations and strategic objectives require working capital and continuing capital investment. Our primary sources of liquidity include cash provided by operations, as well as access to capital from bank borrowings and other types of debt and financing arrangements.
Indebtedness
The aggregate carrying value of our indebtedness was $4,736 million, net of $43 million of unamortized deferred financing costs, as of December 28, 2019.
We completed a refinancing of our former asset based senior secured revolving credit facility with a new facility on May 31, 2019. The ABL Facility provides us with loan commitments having a maximum aggregate principal amount of $1,600 million, comprised of (1) $1,400 million of commitments that became effective on May 31, 2019 and (2) $200 million of commitments that became effective on November 22, 2019. The ABL Facility includes subfacilities for the issuance of up to $800 million of letters of credit and up to $170 million of swing line loans. We had no outstanding borrowings and had issued letters of credit totaling $314 million under the ABL Facility as of December 28, 2019. There was available capacity of $1,227 million under the ABL Facility based on our borrowing base as of December 28, 2019.
We amended the ABS Facility on September 20, 2019 to, among other things, lower the interest rate margin. The maximum borrowing capacity under the ABS Facility is $800 million. We had outstanding borrowings under the ABS Facility of $190 million as of December 28, 2019. There was available capacity of $552 million under the ABS Facility based on our borrowing base as of December 28, 2019.
We amended the Initial Term Loan Facility on November 26, 2019 to, among other things, lower the interest rate margins. The Initial Term Loan Facility had a carrying value of $2,125 million, net of $4 million of unamortized deferred financing costs, as of December 28, 2019.
We entered into the Incremental Term Loan Facility on September 13, 2019 to finance a portion of the purchase price for the acquisition of the Food Group. The Incremental Term Loan Facility had a carrying value of $1,465 million, net of $35 million of unamortized deferred financing costs, as of December 28, 2019.
Our unsecured senior notes (the “Senior Notes”) had a carrying value of $596 million, net of $4 million of unamortized deferred financing costs, as of December 28, 2019. The Senior Notes bear interest at 5.875%. As of June 15, 2019, the Senior Notes are redeemable, at our option, in whole or in part at a price of 102.938% of their remaining principal amount, 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 Senior Notes declines to 101.469% and 100.0%, respectively, of their remaining principal amount, plus accrued and unpaid interest, if any, to the redemption date.
We also had $352 million of obligations under financing leases for transportation equipment and building leases as of December 28, 2019.
The ABL Facility and the ABS Facility mature in 2024 and 2022, respectively. The Initial Term Loan Facility and the Incremental Term Loan Facility mature in 2023 and 2026, respectively. The Senior Notes mature in 2024. As economic conditions permit, we will consider opportunities to repurchase, refinance or otherwise reduce our debt obligations on favorable terms. Any potential debt reduction or refinancing could require significant use of our other available liquidity and capital resources.

27



We believe that the combination of cash generated from operations, together with availability under the agreements governing our indebtedness 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.
The agreements governing our indebtedness contain customary covenants. These include, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on our assets, pay dividends, or engage in mergers or consolidations. For additional information, see Item 1A of Part I, “Risk Factors-Risks Relating to Our Indebtedness.” USF had approximately $1.3 billion of restricted payment capacity under these covenants and approximately $2.4 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as of December 28, 2019.
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 leverage. 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.
See Note 13, Debt, in our consolidated financial statements for a further description of our indebtedness.

Cash Flows
The following table presents condensed highlights from our Consolidated Statements of Cash Flows for fiscal years 2019 and 2018:
 
Fiscal Year
 
2019
 
2018
 
(in millions)
Net income
$
385

 
$
407

Changes in operating assets and liabilities, net of business acquisitions
(54
)
 
(235
)
Other adjustments
429

 
437

Net cash provided by operating activities
760

 
609

Net cash used in investing activities
(1,987
)
 
(232
)
Net cash provided by (used in) financing activities
1,220

 
(391
)
Net decrease in cash, cash equivalents and restricted cash
(7
)
 
(14
)
Cash, cash equivalents and restricted cash—beginning of year
105

 
119

Cash, cash equivalents and restricted cash—end of year
$
98

 
$
105

Operating Activities
Cash flows provided by operating activities increased $151 million to $760 million in fiscal year 2019. The year-over-year increase was primarily driven by $70 million of contributions to our defined benefit pension plan in fiscal year 2018, which did not reoccur during fiscal year 2019, along with improved business performance and improved working capital performance.
Investing Activities
Cash flows used in investing activities in fiscal year 2019 included the $1.8 billion cash purchase price for the acquisition of the Food Group. Cash flows used in investing activities in fiscal year 2019 also included cash expenditures of $258 million on property and equipment for fleet replacement and investments in information technology, as well as new construction and/or expansion of distribution facilities. We sold certain Food Group assets for aggregate closing proceeds of $94 million and sold certain excess properties for aggregate proceeds of $6 million during fiscal year 2019.
Cash flows used in investing activities in fiscal year 2018 included cash expenditures of $235 million on property and equipment for fleet replacement and investments in information technology, as well as new construction and expansion of distribution facilities.
We expect total capital additions in fiscal year 2020 to be between $325 million and $335 million, inclusive of approximately $80 million in fleet financing leases. We expect to fund our capital expenditures with available cash or cash generated from operations and through fleet financing.
Financing Activities
Cash flows provided by financing activities in fiscal year 2019 included aggregate borrowings of $1.5 billion under the Incremental Term Loan Facility and approximately $330 million in borrowings under the ABL Facility and ABS Facility, which were used to finance the

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acquisition of the Food Group. Cash flows used in financing activities in fiscal year 2019 included net payments of $166 million under our revolving credit facilities and $116 million of scheduled payments under our non-revolving debt and financing leases. We incurred approximately $44 million of lender fees and third party costs in connection with the Incremental Term Loan Facility and other debt refinancings. Financing activities in fiscal year 2019 also included $19 million of proceeds received from stock purchases under our employee stock purchase plan and $19 million of proceeds from the exercise of employee stock options, which were partially offset by $5 million of employee tax withholdings paid in connection with the vesting of equity awards.
Cash flows used in financing activities of $391 million in fiscal year 2018 included $304 million of net payments under our revolving credit facilities and $113 million of scheduled payments on non-revolving debt and financing leases. Financing activities in fiscal year 2018 also included $19 million of proceeds from the exercise of employee stock options and $19 million of proceeds from share purchases under our employee stock purchase plan, which were partially offset by the remittance of $6 million of employee tax withholdings paid in connection with vested equity awards.
Retirement Plans
We sponsor a defined benefit retirement plan that pays benefits to eligible employees at retirement. In addition, we provide certain postretirement health and welfare benefits to eligible retirees and their dependents. We did not make a significant contribution to the Company sponsored defined benefit and other postretirement plans in fiscal year 2019. We contributed $71 million to the Company sponsored defined benefit and other postretirement plans in fiscal year 2018. As described in Note 18, Retirement Plans, in our consolidated financial statements, in the fourth quarter of fiscal year 2019, we completed a voluntary lump sum settlement offer to certain terminated defined benefit plan participants. In addition, in the fourth quarter of fiscal year 2019, we also completed a spin-off of certain active participants with small accrued benefits and retirees into a separate plan and immediately terminated that plan. Those participants were able to elect to receive immediate lump sum payouts, with any remaining liabilities transferred to an insurance company through the purchase of an annuity contract. Pension obligation settlement payments of $66 million related to these transactions, consisting of lump sum payments and purchased annuities, were paid from pension plan assets.
Certain employees are eligible to participate in our 401(k) savings plan. We made employer matching contributions to the 401(k) plan of $51 million and $47 million in fiscal years 2019 and 2018, respectively.
We also are required to contribute to various multiemployer pension plans under the terms of certain of our CBAs. Our contributions to these plans were $38 million and $35 million in fiscal years 2019 and 2018, respectively.
Contractual Obligations
The following table includes information about our significant contractual obligations as of December 28, 2019 that affect our liquidity and capital needs. The table includes information about payments due under specified contractual obligations and the maturity profile of our consolidated debt, operating leases and other long-term liabilities.
 
Payments Due by Period