UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 3, 2021

OR

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

Commission File No. 001-37786

US FOODS HOLDING CORP.

(Exact name of registrant as specified in its charter)

Delaware	26-0347906
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

9399 W. Higgins Road, Suite 100

Rosemont, IL 60018

(847) 720-8000

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

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	USFD	New York Stock Exchange

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

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

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

Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

222,510,486 shares of the registrant's common stock were outstanding as of August 4, 2021.

Forward-Looking Statements

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

•    economic factors affecting consumer confidence and discretionary spending and reducing the consumption of food prepared away from home;

•    the extent and duration of the negative impact of the coronavirus ("COVID-19") pandemic on us;

•    cost inflation/deflation and commodity volatility;

•    competition;

•    reliance on third-party suppliers and interruption of product supply or increases in product costs;

•    changes in our relationships with customers and group purchasing organizations;

•    our ability to increase or maintain the highest margin portions of our business;

•    achievement of expected benefits from cost savings initiatives;

•    increases in fuel costs;

•    changes in consumer eating habits;

•    cost and pricing structures;

•    impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets;

•    environmental, health and safety and other governmental regulation, including actions taken by national, state and local governments to contain the COVID-19 pandemic, such as travel restrictions or bans, social distancing requirements, and required closures of non-essential businesses;

•    product recalls and product liability claims;

•    reputation in the industry;

•    indebtedness and restrictions under agreements governing indebtedness;

•    interest rate increases;

•    changes in the method of determining London Interbank Offered Rate ("LIBOR") or the replacement of LIBOR with an alternative reference rate;

•    labor relations and costs and continued access to qualified and diverse labor;

•    risks associated with intellectual property, including potential infringement;

•    disruption of existing technologies and implementation of new technologies;

•    cybersecurity incidents and other technology disruptions;

•    effective integration of acquired businesses;

•    changes in tax laws and regulations and resolution of tax disputes;

•

•    extreme weather conditions, natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses;

•    costs and risks associated with current and changing government laws and regulations, and potential changes as a result of a new administration in the United States; and

•    management of retirement benefits and pension obligations.

For a detailed discussion of these and other risks, uncertainties and factors, see Part I, Item 1A— “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “2020 Annual Report”).

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

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

	TABLE OF CONTENTS
		Page No.
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of July 3, 2021 and January 2, 2021	1
	Consolidated Statements of Comprehensive Income for the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020	2
	Consolidated Statements of Shareholders' Equity for the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020	3
	Consolidated Statements of Cash Flows for the 26 weeks ended July 3, 2021 and June 27, 2020	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
Part II. Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
Signatures		31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

US FOODS HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
	July 3, 2021		January 2, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	699	$	828
Accounts receivable, less allowances of $45 and $67	1,539		1,084
Vendor receivables, less allowances of $6 and $5	194		121
Inventories—net	1,560		1,273
Prepaid expenses	144		132
Assets held for sale	9		1
Other current assets	21		26
Total current assets	4,166		3,465
Property and equipment—net	1,976		2,021
Goodwill	5,625		5,637
Other intangibles—net	860		892
Deferred tax assets	18		1
Other assets	419		407
Total assets	$	13,064	$	12,423
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft liability	$	177	$	136
Accounts payable	1,904		1,218
Accrued expenses and other current liabilities	570		497
Current portion of long-term debt	117		131
Total current liabilities	2,768		1,982
Long-term debt	5,398		5,617
Deferred tax liabilities	281		270
Other long-term liabilities	510		505
Total liabilities	8,957		8,374
Commitments and contingencies (Note 18)
Mezzanine equity:
Series A convertible preferred stock, $0.01 par value—25 shares authorized;    0.5 issued and outstanding as of July 3, 2021 and    January 2, 2021	534		519
Shareholders’ equity:
Common stock, $0.01 par value—600 shares authorized; 222 and 221 issued and outstanding as of July 3, 2021 and January 2, 2021, respectively	2		2
Additional paid-in capital	2,933		2,901
Retained earnings	668		661
Accumulated other comprehensive loss	(30)		(34)
Total shareholders’ equity	3,573		3,530
Total liabilities, mezzanine equity and shareholders' equity	$	13,064	$	12,423

See Notes to Consolidated Financial Statements (Unaudited).

1

US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions, except per share data)
	13 Weeks Ended				26 Weeks Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Net sales	$	7,663	$	4,560	$	13,958	$	10,899
Cost of goods sold	6,494		3,889		11,786		9,162
Gross profit	1,169		671		2,172		1,737
Operating expenses:
Distribution, selling and administrative costs	1,044		714		2,016		1,906
Restructuring costs and asset impairment charges	1		16		4		16
Total operating expenses	1,045		730		2,020		1,922
Operating income (loss)	124		(59)		152		(185)
Other income—net	(6)		(4)		(13)		(10)
Interest expense—net	54		63		108		115
Loss on extinguishment of debt	—		—		23		—
Income (loss) before income taxes	76		(118)		34		(290)
Income tax provision (benefit)	21		(26)		3		(66)
Net income (loss)	55		(92)		31		(224)
Other comprehensive income (loss)—net of tax:
Changes in retirement benefit obligations	—		1		—		1
Unrecognized gain (loss) on interest rate swaps	2		—		4		(6)
Comprehensive income (loss)	$	57	$	(91)	$	35	$	(229)
Net income (loss)	$	55	$	(92)	$	31	$	(224)
Series A convertible preferred stock dividends	(9)		(5)		(24)		(5)
Net income (loss) available to common shareholders	$	46	$	(97)	$	7	$	(229)
Net income (loss) per share
Basic (Note 13)	$	0.21	$	(0.44)	$	0.03	$	(1.05)
Diluted (Note 13)	$	0.20	$	(0.44)	$	0.03	$	(1.05)
Weighted-average common shares outstanding
Basic (Note 13)	222		220		221		219
Diluted (Note 13)	225		220		225		219

See Notes to Consolidated Financial Statements (Unaudited).

2

US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions)
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount
BALANCE—January 2, 2021	221	$	2	$	2,901	$	661	$	(34)	$	3,530
Share-based compensation expense	—	—		10		—		—		10
Proceeds from employee stock purchase plan	—	—		5		—		—		5
Vested restricted stock units, net	1	—		—		—		—		—
Exercise of stock options	—	—		4		—		—		4
Tax withholding payments for net share-settled equity awards	—	—		(12)		—		—		(12)
Series A convertible preferred stock dividends	—	—		—		(15)		—		(15)
Unrecognized gain on interest rate swaps, net of income tax	—	—		—		—		2		2
Net loss	—	—		—		(24)		—		(24)
BALANCE—April 3, 2021	222	2		2,908		622		(32)		3,500
Share-based compensation expense	—	—		13		—		—		13
Proceeds from employee stock purchase plan	—	—		5		—		—		5
Exercise of stock options	—	—		8		—		—		8
Tax withholding payments for net share-settled equity awards	—	—		(1)		—		—		(1)
Series A convertible preferred stock dividends	—	—		—		(9)		—		(9)
Unrecognized gain on interest rate swaps, net of income tax	—	—		—		—		2		2
Net income	—	—		—		55		—		55
BALANCE—July 3, 2021	222	$	2	$	2,933	$	668	$	(30)	$	3,573

	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Shares	Amount
BALANCE—December 28, 2019	220	$	2	$	2,845	$	916	$	(54)	$	3,709
Share-based compensation expense	—	—		7		—		—		7
Proceeds from employee stock purchase plan	—	—		6		—		—		6
Exercise of stock options	—	—		1		—		—		1
Tax withholding payments for net share-settled equity awards	—	—		(2)		—		—		(2)
Unrecognized loss on interest rate swaps, net of income tax	—	—		—		—		(6)		(6)
Adoption of ASU 2016-13	—	—		—		(1)		—		(1)
Net loss	—	—		—		(132)		—		(132)
BALANCE—March 28, 2020	220	$	2	$	2,857	$	783	$	(60)	$	3,582
Share-based compensation expense	—	—		12		—		—		12
Proceeds from employee stock purchase plan	1	—		5		—		—		5
Tax withholding payments for net share-settled equity awards	—	—		(3)		—		—		(3)
Series A convertible preferred stock dividends	—	—		—		(5)		—		(5)
Changes in retirement benefit obligations, net of income tax	—	—		—		—		1		1
Net loss	—	—		—		(92)		—		(92)
BALANCE—June 27, 2020	221	$	2	$	2,871	$	686	$	(59)	$	3,500

See Notes to Consolidated Financial Statements (Unaudited).

3

US FOODS HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
	26 Weeks Ended
	July 3, 2021		June 27, 2020
Cash flows from operating activities:
Net income (loss)	$	31	$	(224)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	195		207
Loss on disposal of property and equipment—net	—		1
Loss on extinguishment of debt	23		—
Amortization of deferred financing costs	7		9
Deferred tax provision (benefit)	6		(44)
Share-based compensation expense	23		19
(Benefit) provision for doubtful accounts	(13)		106
Changes in operating assets and liabilities:
(Increase) decrease in receivables	(516)		257
(Increase) decrease in inventories—net	(286)		142
Increase in prepaid expenses and other assets	(24)		(12)
Increase in accounts payable and cash overdraft liability	721		375
Increase (decrease) in accrued expenses and other liabilities	83		(66)
Net cash provided by operating activities	250		770
Cash flows from investing activities:
Acquisition of businesses—net of cash	—		(973)
Proceeds from sales of divested assets	5		7
Proceeds from sales of property and equipment	1		1
Purchases of property and equipment	(107)		(131)
Net cash used in investing activities	(101)		(1,096)
Cash flows from financing activities:
Proceeds from debt borrowings	900		3,645
Principal payments on debt and financing leases	(1,161)		(2,206)
Net proceeds from issuance of Series A convertible preferred stock	—		491
Dividends paid on Series A convertible preferred stock	(9)		—
Debt financing costs and fees	(18)		(33)
Proceeds from employee stock purchase plan	10		11
Proceeds from exercise of stock options	12		1
Tax withholding payments for net share-settled equity awards	(13)		(5)
Net cash (used in) provided by financing activities	(279)		1,904
Net (decrease) increase in cash, cash equivalents and restricted cash	(130)		1,578
Cash, cash equivalents and restricted cash—beginning of period	829		98
Cash, cash equivalents and restricted cash—end of period	$	699	$	1,676
Supplemental disclosures of cash flow information:
Interest paid—net of amounts capitalized	$	88	$	89
Income taxes paid—net	—		2
Property and equipment purchases included in accounts payable	27		14
Property and equipment transferred to assets held for sale	9		19
Leased assets obtained in exchange for financing lease liabilities	14		60
Leased assets obtained in exchange for operating lease liabilities	20		13
Cashless exercise of stock options	1		—
Paid-in-kind Series A convertible preferred stock dividends	15		5

See Notes to Consolidated Financial Statements (Unaudited).

4

US FOODS HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

1.     OVERVIEW AND BASIS OF PRESENTATION

US Foods Holding Corp., a Delaware corporation, and its consolidated subsidiaries are referred to in these consolidated financial statements and notes as “we,” “our,” “us,” the “Company,” or “US Foods.” US Foods Holding Corp. conducts all of its operations through its wholly owned subsidiary US Foods, Inc. (“USF”) and its subsidiaries. All of the Company’s indebtedness, as further described in Note 10, Debt, is a direct obligation of USF and its subsidiaries.

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

Basis of Presentation—The Company operates on a 52- or 53-week fiscal year, with all periods ending on a Saturday. When a 53-week fiscal year occurs, the Company reports the additional week in the fiscal fourth quarter. Fiscal year 2021 is a 52-week fiscal year. Fiscal year 2020 was a 53-week fiscal year.

The consolidated financial statements included in this Quarterly Report have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements and notes prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures included in this Quarterly Report are adequate to make the information presented not misleading. These interim consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes included in the 2020 Annual Report.

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

2.    RECENT ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, convertible debt will be accounted for as a single liability measured at its amortized cost. Additionally, the new guidance requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. This guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impacts of the provision of the new standard on our financial position, results of operation and cash flows.

3.    REVENUE RECOGNITION

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

The Company did not have any material outstanding performance obligations, contract liabilities or capitalized contract acquisition costs as of July 3, 2021 and January 2, 2021. Customer receivables, which are included in accounts receivable, less allowances in the Company’s Consolidated Balance Sheets, were $1.5 billion and $1.1 billion as of July 3, 2021 and January 2, 2021, respectively.

5

The Company has certain customer contracts under which incentives are paid upfront to its customers. These payments have become industry practice and are not related to financing any customer’s business, nor are these payments associated with any distinct good or service to be received from any customer. These incentive payments are capitalized in prepaid expenses and other assets and amortized as a reduction of revenue over the life of the contract or as goods or services are transferred to the customer. The Company’s contract assets for these upfront payments were $28 million and $30 million included in prepaid expenses in the Company’s Consolidated Balance Sheets as of July 3, 2021 and January 2, 2021, respectively, and $29 million and $27 million included in other assets in the Company’s Consolidated Balance Sheets as of July 3, 2021 and January 2, 2021, respectively.

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

	13 Weeks Ended				26 Weeks Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Meats and seafood	$	2,951	$	1,694	$	5,213	$	3,920
Dry grocery products	1,272		782		2,365		1,874
Refrigerated and frozen grocery products	1,141		688		2,135		1,735
Dairy	737		454		1,359		1,102
Equipment, disposables and supplies	797		501		1,490		1,130
Beverage products	389		223		713		567
Produce	376		218		683		571
Net sales	$	7,663	$	4,560	$	13,958	$	10,899

4.    BUSINESS ACQUISITIONS

Smart Foodservice Acquisition—On April 24, 2020, USF completed the acquisition of Smart Stores Holding Corp., a Delaware corporation (“Smart Foodservice”), from funds managed by affiliates of Apollo Global Management, Inc. Total consideration paid at the closing of the acquisition (net of cash acquired) was $972 million. At the time of the acquisition, Smart Foodservice operated 70 small-format cash and carry stores across California, Idaho, Montana, Nevada, Oregon, Utah, and Washington serving small and mid-sized restaurants and other food business customers. The acquisition of Smart Foodservice expanded the Company’s cash and carry business in the West and Northwest parts of the U.S.

USF financed the Smart Foodservice acquisition with a new $700 million incremental senior secured term loan facility under its existing term loan credit agreement, as further described in Note 10, Debt, and with cash on hand. The assets, liabilities and results of operations of Smart Foodservice have been included in the Company’s consolidated financial statements since the date the acquisition was completed.

The following table summarizes the final purchase price allocation recognized for the Smart Foodservice acquisition as of April 24, 2020. The decrease in goodwill from January 2, 2021 to July 3, 2021 was due to the finalization of deferred income taxes associated with the acquisition in the first quarter of 2021.

	Purchase Price Allocation
Accounts receivable	$	5
Inventories	43
Other current assets	24
Property and equipment	84
Goodwill(1)	895
Other intangibles(2)	14
Other assets	145
Accounts payable	(38)
Accrued expenses and other current liabilities	(32)
Deferred income taxes	(8)
Other long-term liabilities, including financing leases	(160)
Cash paid for acquisition	$	972

6

(1)    Goodwill recognized is primarily attributable to intangible assets that do not qualify for separate recognition, as well as expected synergies from the combined company. The acquired goodwill is not deductible for U.S. federal income tax purposes.

(2)    Other intangibles consist of a trade name of $14 million with an estimated useful life of approximately 1 year.

Smart Foodservice acquisition and integration related costs included in distribution, selling and administrative costs in the Company’s Consolidated Statements of Comprehensive Income were $5 million and $10 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $9 million and $20 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

Pro Forma Financial Information—The following table presents the Company’s unaudited pro forma consolidated net sales, net income and earnings per share (“EPS”) for the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020. The unaudited pro forma financial information presents the combined results of operations as if the acquisition and related financing of Smart Foodservice had occurred as of December 30, 2018, which date represents the first day of the Company’s fiscal year prior to the Smart Foodservice acquisition date.

	13 Weeks Ended				26 Weeks Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Pro forma net sales	$	7,663	$	4,647	$	13,958	$	11,272
Pro forma net income (loss) available to common shareholders	$	46	$	(95)	$	7	$	(202)
Pro forma net income (loss) per share:
Basic	$	0.21	$	(0.43)	$	0.03	$	(0.92)
Diluted	$	0.20	$	(0.43)	$	0.03	$	(0.92)

The unaudited pro forma financial information above includes adjustments for: (1) incremental depreciation expense related to fair value increases of certain acquired property and equipment, (2) amortization expense related to the fair value of amortizable intangible assets acquired, (3) interest expense related to the incremental senior secured term loan facility used to finance the acquisition, (4) the elimination of acquisition-related costs that were included in the Company’s historical results, and (5) adjustments to the income tax provision based on pro forma results of operations. No effect has been given to potential synergies, operating efficiencies or costs arising from the integration of Smart Foodservice with our previously existing operations or the standalone cost estimates and estimated costs that were incurred by the former parent company. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the date indicated. Further, the pro forma financial information does not purport to project the Company’s future consolidated results of operations following the acquisition.

5.    INVENTORIES

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

The Company records inventories at the lower of cost or market primarily using the last-in, first-out (“LIFO”) method, except for Smart Foodservice, as further described in Note 4, Business Acquisitions, which uses the retail method of inventory accounting. For our LIFO based inventories, the base year values of beginning and ending inventories are determined using the inventory price index computation method. This "links" current costs to original costs in the base year when the Company adopted LIFO. LIFO reserves in the Company’s Consolidated Balance Sheets were $295 million and $177 million as of July 3, 2021 and January 2, 2021, respectively. As a result of changes in LIFO reserves, cost of goods sold increased $97 million and $19 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and increased $118 million and $6 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

6.    ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

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

Since mid-March 2020, our business has been significantly impacted by the COVID-19 pandemic. Starting in March 2020, in order to reduce the spread of COVID-19 and its variants, many countries, including the United States, took steps to restrict travel, temporarily close or enforce capacity restrictions on businesses, schools and other public gathering spaces, including restaurants and recreational, sporting and other similar venues. Since December 2020, three vaccines for COVID-19 have been authorized by the United States Food and Drug Administration ("FDA") for emergency use and beginning in May 2021, all individuals 12 years old and older in the United States became eligible to receive a vaccine. During the 13 weeks ended July 3, 2021, the Center for Disease Control and Prevention ("CDC") and most states have significantly relaxed restrictions and safety measures, such as capacity limits, physical distancing and face mask protocols, as a result of significant progress made in vaccinating the U.S. public and the resulting decline in COVID-19 cases. Due to the impact that the COVID-19 pandemic was expected to have on our customers, particularly our restaurant and hospitality customers, and to reflect the increased collection risk associated with our customers, we significantly increased our allowance for doubtful accounts during the 13 weeks ended March 28, 2020. In each subsequent quarter of fiscal year 2020 and during the 13 weeks ended April 3, 2021, due to more favorable than anticipated collections on our pre-COVID-19 accounts receivable, we reduced our allowance for doubtful accounts while leaving the remaining pre-COVID-19 accounts receivable fully reserved. During the 13 weeks ended July 3, 2021, amounts expensed for the period were more consistent with pre-pandemic activity.

A summary of the activity in the allowance for doubtful accounts for the 26 weeks ended July 3, 2021 was as follows:

Balance as of January 2, 2021	$	67
Reversed from costs and expenses	(13)
Customer accounts written off—net of recoveries	(9)
Balance as of July 3, 2021	$	45

This table excludes the vendor receivable related allowance for doubtful accounts of $6 million and $5 million as of July 3, 2021 and January 2, 2021, respectively.

7.    PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from 3 to 40 years. Property and equipment under financing leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining terms of the related leases or the estimated useful lives of the assets, if reasonably assured the Company will purchase the assets at the end of the lease terms. As of July 3, 2021 and January 2, 2021, property and equipment-net included accumulated depreciation of $2,717 million and $2,566 million, respectively. Depreciation expense was $81 million and $87 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $163 million and $169 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

8.    GOODWILL AND OTHER INTANGIBLES

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

Customer relationships, amortizable trade names and noncompete agreements are intangible assets with definite lives, and are carried at the acquired fair value less accumulated amortization. Customer relationships, amortizable trade names and noncompete agreements are amortized over their estimated useful lives (which range from approximately 3 to 15 years). Amortization expense was $13 million and $19 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $32 million and $38 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

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Goodwill and other intangibles—net consisted of the following:  

	July 3, 2021		January 2, 2021
Goodwill	$	5,625	$	5,637
Other intangibles—net
Customer relationships—amortizable:
Gross carrying amount	$	676	$	725
Accumulated amortization	(99)		(119)
Net carrying value	577		606
Trade names—amortizable:
Gross carrying amount	1		15
Accumulated amortization	—		(11)
Net carrying value	1		4
Noncompete agreements—amortizable:
Gross carrying amount	3		3
Accumulated amortization	(2)		(2)
Net carrying value	1		1
Brand names and trademarks—not amortizing	281		281
Total other intangibles—net	$	860	$	892

The net decrease in the gross carrying amount of customer relationships as of July 3, 2021 is attributable to the write-off of fully amortized intangible assets related to certain 2016 and 2017 business acquisitions. The net decrease in the gross carrying amount of amortizable trade names is attributable to the write-off of the fully amortized trade name related to the Smart Foodservice acquisition, when Smart Foodservice® warehouse stores were rebranded to CHEF'STORE® in March 2021.

The Company assesses for impairment of intangible assets with definite lives only if events occur that indicate that the carrying amount of an intangible asset may not be recoverable. The Company assesses goodwill and other intangible assets with indefinite lives for impairment annually, or more frequently if events occur that indicate an asset may be impaired. For goodwill and indefinite-lived intangible assets, the Company’s policy is to assess for impairment as of the beginning of each fiscal third quarter. In the third quarter of fiscal year 2020, the Company performed a quantitative assessment in testing goodwill and indefinite-lived intangible assets for impairment, which resulted in the carrying value of two trade names acquired as part of the Food Group acquisition exceeding their fair value by $9 million, and impairment charges of this amount were recognized. No other impairments were noted as part of the annual impairment assessment.

9.    FAIR VALUE MEASUREMENTS

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

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

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

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

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

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The Company’s assets and liabilities measured at fair value on a recurring basis as of July 3, 2021 and January 2, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:

	July 3, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	580	$	—	$	—	$	580
Liabilities
Interest rate swaps	$	—	$	1	$	—	$	1
	January 2, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	696	$	—	$	—	$	696
Liabilities
Interest rate swaps	$	—	$	5	$	—	$	5

There were no significant assets or liabilities on the Company's Consolidated Balance Sheets measured at fair value on a nonrecurring basis for the periods presented above, except as further disclosed in Note 8, Goodwill and Other Intangibles.

Recurring Fair Value Measurements

Money Market Funds

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

Derivative Financial Instruments

The Company uses interest rate swaps, designated as cash flow hedges, to manage its exposure to interest rate movements in connection with its variable-rate Initial Term Loan Facility (as defined in Note 10, Debt).

USF previously entered into four-year interest rate swap agreements, which collectively had a notional value of $550 million, which was reduced from $733 million on July 31, 2020. The interest rate swap agreements expired on July 31, 2021. Through the term of the swap agreements, the Company paid an aggregate effective rate of 3.45% on the notional amount of the Initial Term Loan Facility covered by the interest rate swap agreements, comprised of a rate of 1.70% plus a spread of 1.75% (see Note 10, Debt).

The Company records its interest rate swaps in its Consolidated Balance Sheets at fair value, based on projections of cash flows and future interest rates. The determination of fair value includes the consideration of any credit valuation adjustments necessary, giving consideration to the creditworthiness of the respective counterparties and the Company. The following table presents the balance sheet location and fair value of the interest rate swaps as of July 3, 2021 and January 2, 2021:

		Fair Value
	Balance Sheet Location	July 3, 2021		January 2, 2021
Derivatives designated as hedging instruments
Interest rate swaps	Accrued expenses and    other current liabilities	$	1	$	5
	Total liabilities	$	1	$	5

Gains and losses on the interest rate swaps are initially recorded in accumulated other comprehensive loss and reclassified to interest expense during the period in which the hedged transaction affects income. The following table presents the effect of the Company’s interest rate swaps in its Consolidated Statements of Comprehensive Income for the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020:

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Derivatives in Cash Flow Hedging Relationships	Amount of Loss Recognized in Accumulated Other Comprehensive Loss, net of tax		Location of Amounts Reclassified from Accumulated Other Comprehensive Loss	Amount of Loss Reclassified from Accumulated Other Comprehensive Loss to Income, net of tax
For the 13 weeks ended July 3, 2021
Interest rate swaps	$	—	Interest expense—net	$	2
For the 13 weeks ended June 27, 2020
Interest rate swaps	$	(2)	Interest expense—net	$	2
For the 26 weeks ended July 3, 2021
Interest rate swaps	$	—	Interest expense—net	$	4
For the 26 weeks ended June 27, 2020
Interest rate swaps	$	(8)	Interest expense—net	$	2

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

Other Fair Value Measurements

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

The fair value of the Company’s total debt approximated $5.6 billion, compared to its carrying value of $5.5 billion as of July 3, 2021. The fair value of the Company’s total debt approximated $5.8 billion, compared to its carrying value of $5.7 billion as of January 2, 2021.

The fair value of the Company's 4.75% unsecured senior notes due February 15, 2029 (the "Unsecured Senior Notes due 2029") was $0.9 billion as of July 3, 2021. As discussed in Note 10, Debt, the proceeds from the Unsecured Senior Notes due 2029 were used to redeem the Company's 5.875% unsecured senior notes due 2024 (the "Unsecured Senior Notes due 2024") and other outstanding Company debt. The fair value of the Unsecured Senior Notes due 2024 was $0.6 billion as of January 2, 2021. The fair value of the Company’s 6.25% senior secured notes due April 15, 2025 (the “Secured Notes”) was $1.1 billion as of both July 3, 2021 and January 2, 2021. Fair value of the Secured Notes, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2024 is based upon their closing market prices on the respective dates. The fair value of the Secured Notes, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2024 is classified under Level 2 of the fair value hierarchy. The fair value of the balance of the Company’s debt is primarily classified under Level 3 of the fair value hierarchy, with fair value estimated based upon a combination of the cash outflows expected under these debt facilities, interest rates that are currently available to the Company for debt with similar terms, and estimates of the Company’s overall credit risk.

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10.    DEBT

Total debt consisted of the following:

Debt Description	Maturity	Interest Rate as of July 3, 2021	Carrying Value as of July 3, 2021		Carrying Value as of January 2, 2021
ABL Facility	May 31, 2024	—%	$	—	$	—
Initial Term Loan Facility (net of $2 and $3 of unamortized deferred financing costs, respectively)	June 27, 2023	1.85%	1,888		2,098
2019 Incremental Term Loan Facility (net of $27       and $30 of unamortized deferred financing       costs, respectively)	September 13, 2026	2.10%	1,447		1,451
2020 Incremental Term Loan Facility (net of $11       of unamortized deferred financing costs)(1)	April 24, 2025	—%	—		284
Secured Notes (net of $11 and $13 of       unamortized deferred financing costs)	April 15, 2025	6.25%	989		987
Unsecured Senior Notes due 2024 (net of $3 of       unamortized deferred financing costs)(1)	June 15, 2024	—%	—		597
Unsecured Senior Notes due 2029 (net of $9 of       unamortized deferred financing costs)	February 15, 2029	4.75%	891		—
Obligations under financing leases	2021–2031	1.63% - 8.63%	292		323
Other debt	2021–2031	5.75% - 9.00%	8		8
Total debt			5,515		5,748
Current portion of long-term debt			(117)		(131)
Long-term debt			$	5,398	$	5,617

(1)    The 2020 Incremental Term Loan Facility and Unsecured Senior Notes due 2024 were paid in full on February 4, 2021 with the issuance of the Unsecured Senior Notes due 2029 and subsequently terminated as further discussed below. The related unamortized deferred financing costs were written off in connection with the terminations.

As of July 3, 2021, after considering interest rate swaps that fixed the interest rate on $550 million of principal of the Initial Term Loan Facility described below, approximately 51% of the Company’s total debt bears interest at a floating rate.

ABL Facility

USF's asset based senior secured revolving credit facility (the “ABL Facility”) provides USF with loan commitments having a maximum aggregate principal amount of $1,990 million. The ABL Facility is scheduled to mature on May 31, 2024.

Borrowings under the ABL Facility bear interest, at USF's periodic election, at a rate equal to the sum of an alternative base rate (“ABR”), as described under the ABL Facility, plus a margin ranging from 0.00% to 0.50%, or the sum of LIBOR plus a margin ranging from 1.00% to 1.50%, in each case based on USF’s excess availability under the ABL Facility. The margin under the ABL Facility as of July 3, 2021 was 0.00% for ABR loans and 1.00% for LIBOR loans.

USF had no outstanding borrowings, and had issued letters of credit totaling $253 million, under the ABL Facility as of July 3, 2021. The outstanding letters of credit primarily relate to securing USF's obligations with respect to its insurance program and certain real estate leases. There was available capacity of $1,737 million under the ABL Facility as of July 3, 2021.

Term Loan Facilities

Under its term loan credit agreement, USF has entered into an initial senior secured term loan facility (the "Initial Term Loan Facility") and an incremental senior secured term loan facility (the "2019 Incremental Term Loan Facility"). The Initial Term Loan Facility had a carrying value of $1.9 billion, net of $2 million of unamortized deferred financing costs as of July 3, 2021. During the 13 weeks ended July 3, 2021, the Company made voluntary prepayments of the Initial Term Loan Facility totaling $200 million. The table above reflects the interest rate on the unhedged portion of the Initial Term Loan Facility as of July 3, 2021. The effective interest rate of the portion of the Initial Term Loan Facility subject to interest rate hedging agreements was 3.45% as of July 3, 2021. The Initial Term Loan Facility is scheduled to mature on June 27, 2023.

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The 2019 Incremental Term Loan Facility had a carrying value of $1,447 million, net of $27 million of unamortized deferred financing costs as of July 3, 2021. Borrowings under the 2019 Incremental Term Loan Facility bear interest at a rate per annum equal to, at USF’s option, either the sum of LIBOR plus a margin of 2.00%, or the sum of an ABR, determined in accordance with the term loan credit agreement, plus a margin of 1.00%. The 2019 Incremental Term Loan Facility is scheduled to mature on September 13, 2026.

Secured Notes

The Secured Notes had a carrying value of $989 million, net of $11 million of unamortized deferred financing costs, as of July 3, 2021. The Secured Notes are scheduled to mature on April 15, 2025.

Unsecured Senior Notes due 2029

On February 4, 2021, USF completed a private offering of $900 million aggregate principal amount of Unsecured Senior Notes due 2029. USF used the proceeds of the Unsecured Senior Notes due 2029, together with cash on hand, to redeem all of the Company's then outstanding Unsecured Senior Notes due 2024, repay all of the then outstanding borrowings under the incremental senior secured term loan facility borrowed in April 2020 (the "2020 Incremental Term Loan Facility") and to pay related fees and expenses. In connection with the repayment of the Unsecured Senior Notes due 2024 and 2020 Incremental Term Loan Facility, the Company applied debt extinguishment accounting and recorded $23 million in loss on extinguishment of debt in the Company's Consolidated Statements of Comprehensive Income, consisting of a $14 million write-off of pre-existing unamortized deferred financing costs related to the redeemed facilities and a $9 million early redemption premium related to the Unsecured Senior Notes due 2024. Lender fees and third-party costs of $9 million associated with the issuance of the Unsecured Senior Notes due 2029 were capitalized as deferred financing costs. The Unsecured Senior Notes due 2029 had an outstanding balance of $891 million, net of $9 million of unamortized deferred financing costs, as of July 3, 2021. The Unsecured Senior Notes due 2029 bear interest at a rate of 4.75% per annum and will mature on February 15, 2029. On or after February 15, 2024, the Unsecured Senior Notes due 2029 are redeemable, at USF's option, in whole or in part at a price of 102.375% of the remaining principal, plus accrued and unpaid interest, if any, to the redemption date. On or after February 15, 2025 and February 15, 2026, the optional redemption price for the Unsecured Senior Notes due 2029 declines to 101.188% and 100.000%, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to the redemption date.

Debt Covenants

The agreements governing our indebtedness contain customary covenants. These include, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. USF had approximately $1.3 billion of restricted payment capacity under these covenants, and approximately $2.8 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 July 3, 2021.

11.    RESTRUCTURING LIABILITIES

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

During the 26 weeks ended July 3, 2021, the Company incurred net restructuring costs of $4 million for severance and related costs associated with the announced closure of an excess facility and initiatives to improve operational effectiveness. During the 26 weeks ended June 27, 2020, in order to reduce operating expenses in line with the decrease in sales volume caused by the COVID-19 pandemic, the Company reduced its sales force and incurred net restructuring costs of $16 million for severance and related costs. Net restructuring liabilities were $5 million and $2 million as of July 3, 2021 and January 2, 2021, respectively.

The following table summarizes the changes in the restructuring liabilities for the 26 weeks ended July 3, 2021:

	Severance and Related Costs		Facility Closing Costs		Total
Balance at January 2, 2021	$	1	$	1	$	2
Current period charges	4		—		4
Payments, net	(1)		—		(1)
Balance as of July 3, 2021	$	4	$	1	$	5

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12.    RETIREMENT PLANS

The Company sponsors a defined benefit pension plan and a 401(k) plan for eligible employees, and provides certain postretirement health and welfare benefits to eligible retirees and their dependents. During fiscal year 2020, in connection with the Smart Foodservice acquisition, the Company assumed a defined benefit pension plan with net liabilities of approximately $19 million. This defined benefit plan was merged into the US Foods Consolidated Defined Benefit Retirement Plan as of December 31, 2020.

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

	13 Weeks Ended				26 Weeks Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Components of net periodic pension benefit credits
Service cost	$	1	$	—	$	2	$	1
Interest cost	7		8		14		15
Expected return on plan assets	(13)		(13)		(27)		(26)
Amortization of net loss	—		1		—		1
Net periodic pension benefit credits	$	(5)	$	(4)	$	(11)	$	(9)

Other postretirement benefit costs were de minimis for both the 13 weeks and 26 weeks ended July 3, 2021 and June 27, 2020.

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

The Company does not expect to make significant contributions to its defined benefit pension plan in fiscal year 2021.

Certain employees are eligible to participate in the Company's 401(k) plan. The Company made employer matching contributions to the 401(k) plan of $13 million and $9 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $26 million and $23 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

The Company is also required to contribute to various multiemployer pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees. The Company’s contributions to these plans were $12 million and $10 million for the 13 weeks ended July 3, 2021 and June 27, 2020, respectively, and $22 million for the 26 weeks ended July 3, 2021 and June 27, 2020, respectively.

13.    EARNINGS PER SHARE

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

Diluted EPS is computed using the weighted average number of shares of common stock, plus the effect of potentially dilutive securities. The Company applies the treasury method to calculate the dilution impact of share-based awards—stock options, non-vested restricted shares with forfeitable dividend rights, restricted stock units, and employee stock purchase plan deferrals. The Company applies the if-converted method to calculate the dilution impact of the Series A convertible preferred stock, if dilutive in the period. For the 13 weeks ended July 3, 2021 and June 27, 2020, share-based awards representing 1 million and 9 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive. For the 26 weeks ended July 3, 2021 and June 27, 2020, share-based awards representing 2 million and 9 million underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive. For the 13 weeks ended July 3, 2021 and June 27, 2020, convertible preferred stock representing 25 million and 14 million of underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive. For the 26 weeks ended July 3, 2021 and June 27, 2020, convertible preferred stock representing 25 million and 7 million of underlying common shares, respectively, were not included in the computation because the effect would have been anti-dilutive.

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

	13 Weeks Ended				26 Weeks Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Numerator:
Net income (loss)	$	55	$	(92)	$	31	$	(224)
Less: Series A convertible preferred stock dividends (1)	(