US Foods : Annual Report for Fiscal Year Ending 12/27, 2025 (Form 10-K)

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 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, accounting principles generally accepted in the U.S. ("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" below.

The following includes a comparison of our consolidated results of operations for fiscal years 2025 and 2024. For a comparison of our consolidated results of operations for fiscal years 2024 and 2023, see Item 7 of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations", of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the SEC on February 13, 2025.

Overview

At US Foods, 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 WE HELP YOU MAKE IT®, which is centered on bringing three key elements to the forefront for our customers; (1) More Quality products, including our large portfolio of Exclusive Brands, (2) More Tools, centering on our MOXē®business platform, and lastly, (3) More Deliveries, enabled by our traditional broadline services, Pronto®program and convenient delivery options. 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 our business as a single operating segment. We have centralized activities where scale matters and our local field structure focuses on customer-facing activities.

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 is included within the new classification.

Organic growth-Organic growth includes growth from operating businesses that have been reflected in our results of operations for at least 12 months.

Fiscal Year 2025 Highlights

Financial Highlights-Total case volume increased 1.0% compared to the prior year driven by a 3.3% increase in independent restaurant case volume, a 4.4% increase in healthcare volume and a 2.9% increase in hospitality volume, partially offset by a 3.5% decrease in chain volume. Total organic case volume increased 0.4% in fiscal year 2025, which includes 2.7% organic independent restaurant case volume growth. Net sales increased $1,547 million, or 4.1%, in fiscal year 2025 driven primarily by case volume growth and food cost inflation of 2.6%.

Gross profit increased $330 million, or 5.1%, to $6,864 million in fiscal year 2025, primarily as a result of an increase in total case volume, improved cost of goods sold and inventory management. As a percentage of net sales, gross profit was 17.4% in fiscal year 2025 and 17.3% in fiscal year 2024.

Total operating expenses increased $230 million, or 4.2%, to $5,665 million in fiscal year 2025, primarily as a result of an increase in total case volume and higher distribution, selling and administrative costs, partially offset by continued distribution productivity improvement as well as actions to streamline administrative processes and costs. As a percentage of net sales, operating expenses were 14.4% in fiscal year 2025 and 14.3% in fiscal year 2024.

Results of Operations

The following table presents selected consolidated results of operations of our business for fiscal years 2025, 2024 and 2023:

			Fiscal Year
			2025						2024						2023
			(in millions)
Consolidated Statements of Operations:
Net sales			$	39,424					$	37,877					$	35,597
Cost of goods sold			32,560						31,343						29,449
Gross profit			6,864						6,534						6,148
Operating expenses:
Distribution, selling and administrative costs			5,632						5,412						5,117
Restructuring activity and asset impairment charges			33						23						14
Total operating expenses			5,665						5,435						5,131
Operating income			1,199						1,099						1,017
Other (income) expense-net			(4)						6						(6)
Interest expense-net			305						315						324
Loss on extinguishment of debt			-						10						21
Recognition of net actuarial loss for pension settlement			-						124						-
Income before income taxes			898						644						678
Income tax provision			222						150						172
Net income			676						494						506
Series A convertible preferred stock dividends			-						-						(7)
Net income available to common shareholders			$	676					$	494					$	499
Net income per share:
Basic			$	2.98					$	2.05					$	2.09
Diluted			$	2.94					$	2.02					$	2.02
Weighted-average number of shares used in per share amounts:
Basic			227						241						239
Diluted			230						244						250
Percentage of Net Sales:
Gross profit			17.4		%				17.3		%				17.3		%
Operating expenses			14.4		%				14.3		%				14.4		%
Operating income			3.0		%				2.9		%				2.9		%
Net income			1.7		%				1.3		%				1.4		%
Adjusted EBITDA(1)			4.9		%				4.6		%				4.4		%
Other Data:
Cash flows-operating activities			$	1,369					$	1,174					$	1,140
Cash flows-investing activities			(497)						(552)						(495)
Cash flows-financing activities			(890)						(831)						(587)
Capital expenditures			410						341						309
EBITDA(1)			1,665						1,397						1,397
Adjusted EBITDA(1)			1,932						1,741						1,559
Adjusted Net Income (1)			916						770						658
Free Cash Flow(2)			965						836						841

(1) EBITDA is defined as net income, plus interest expense-net, income tax provision, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (1) restructuring activity and asset impairment charges; (2) share-based compensation expense; (3) the impact of LIFO reserve adjustments; (4) loss on extinguishment of debt; (5) business transformation costs; (6) recognition of net actuarial loss; and (7) other gains, losses, or costs as specified in the agreements governing our indebtedness. Adjusted EBITDA margin is Adjusted EBITDA divided by total net sales. 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. 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 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 and proceeds from sales of property and equipment less cash 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 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. For additional information, see the discussion under the caption "Non-GAAP Reconciliations" below.

Non-GAAP Reconciliations

We provide EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, 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, Adjusted EBITDA and Adjusted EBITDA Margin 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, Adjusted EBITDA Margin 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 and proceeds from sales of property and equipment less cash 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 EBITDA Margin, Adjusted Net Income, and Free Cash Flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate EBITDA, Adjusted EBITDA, Adjusted Net Income or Free Cash Flow in the same manner. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

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
			2025									2024									2023
			(in millions)
Net income available to common shareholders and net income margin			$	676		1.7%						$	494		1.3%						$	499		1.4		%
Series A convertible preferred stock dividends			-									-									(7)
Net income and net income margin			676			1.7%						494			1.3%						506			1.4%
Interest expense-net			305									315									324
Income tax provision			222									150									172
Depreciation expense			406									384									349
Amortization expense			56									54									46
EBITDA and EBITDA margin			1,665			4.2%						1,397			3.7%						1,397			3.9		%
Adjustments:
Restructuring activity and asset impairment charges(1)			33									25									14
Share-based compensation expense(2)			83									63									56
LIFO reserve adjustments(3)			65									61									(1)
Loss on extinguishment of debt(4)			-									10									21
Recognition of net actuarial loss for pension settlement(5)			-									124									-
Business transformation costs(6)			48									39									28
Business acquisition, integration related costs, divestitures and other(7)			38									22									44
Adjusted EBITDA and Adjusted EBITDA margin			1,932			4.9%						1,741			4.6%						1,559			4.4		%
Depreciation expense			(406)									(384)									(349)
Interest expense-net			(305)									(315)									(324)
Income tax provision, as adjusted(8)			(305)									(272)									(228)
Adjusted Net Income			$	916								$	770								$	658
Cash flow
Cash flows from operating activities			$	1,369								$	1,174								$	1,140
Proceeds from sales of property and equipment			6									3									10
Capital expenditures			(410)									(341)									(309)
Free Cash Flow			$	965								$	836								$	841

(1) Consists primarily of severance and related costs, organizational realignment and asset impairment charges.

(2) Share-based compensation expense for expected vesting of stock awards and employee stock purchase plan.

(3) Represents the impact of LIFO reserve adjustments.

(4) Includes early redemption premium and the write-off of certain pre-existing debt issuance costs. See Note 9, Debt, in our consolidated financial statements for additional information.

(5) Recognition of net actuarial loss for pension settlement represents non-recurring expense for the termination of certain defined benefit plans.

(6) Transformational costs represent non-recurring expenses prior to formal launch of strategic projects with anticipated long-term benefits to the Company. These costs generally relate to third party consulting and non-capitalizable technology. For both fiscal years 2025 and 2024, business transformation costs related to projects associated with information technology infrastructure initiatives and related workforce efficiencies. For fiscal year 2023, business transformation costs related to projects associated with information technology infrastructure initiatives.

(7) Includes: (i) aggregate acquisition, integration related costs and divestiture costs of $32 million for fiscal year 2025, $22 million for fiscal year 2024 and $41 million for fiscal year 2023 (ii) CEO sign on bonus of $3 million for fiscal year 2023 and (iii) other gains, losses or costs that we are permitted to add back for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.

(8) 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, and excess tax benefits associated with share-based compensation. 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.

A reconciliation between the GAAP income tax provision and the income tax provision, as adjusted, is as follows:

			Fiscal Year
			2025						2024						2023
			(in millions)
GAAP income tax provision			$	222					$	150					$	172
Tax impact of pre-tax income adjustments			73						96						48
Discrete tax items			10						26						8
Income tax provision, as adjusted			$	305					$	272					$	228

Comparison of Results

Fiscal Years Ended December 27, 2025 and December 28, 2024

Highlights

•Net sales increased $1,547 million, or 4.1% to $39,424 million in fiscal year 2025.

•Total case volume increased 1.0% and independent restaurant case volume increased 3.3% in fiscal year 2025.

•Total organic case volume increased 0.4% and organic independent restaurant case volume increased 2.7%.

•Operating income increased $100 million to $1,199 million in fiscal year 2025.

•Net income increased $182 million to $676 million in fiscal year 2025.

•Adjusted EBITDA increased $191 million, or 11.0%, to $1,932 million in fiscal year 2025.

•Adjusted EBITDA as a percentage of net sales was 4.9% in fiscal year 2025, as compared to 4.6% in fiscal year 2024.

Net Sales

Net sales increased $1,547 million, or 4.1%, to $39,424 million in fiscal year 2025 driven by case volume growth and food cost inflation of 2.6%. Total case volume increased 1.0% driven by a 3.3% increase in independent restaurant case volume, a 4.4% increase in healthcare volume and a 2.9% increase in hospitality volume, partially offset by a 3.5% decrease in chain volume. Organic broadline sales of private brands represented approximately 35% and 34% of net sales in fiscal years 2025 and 2024, respectively.

Gross Profit

Gross profit increased $330 million, or 5.1%, to $6,864 million in fiscal year 2025, primarily a result of an increase in total case volume, improved cost of goods sold and inventory management. Our LIFO method of inventory costing resulted in an expense of $65 million in fiscal year 2025, compared to an expense of $61 million in fiscal year 2024. Gross profit as a percentage of net sales was 17.4% and 17.3% in fiscal years 2025 and 2024, respectively.

Operating Expenses

Operating expenses, comprised of distribution, selling and administrative costs and restructuring activity and asset impairment charges, increased $230 million, or 4.2%, to $5,665 million in fiscal year 2025. Operating expenses increased primarily as a result of an increase in total case volume and higher distribution, selling and administrative costs, partially offset by continued distribution productivity improvement as well as actions to streamline administrative processes and costs. Operating expenses as a percentage of net sales were 14.4% in fiscal year 2025, compared to 14.3% in fiscal year 2024.

Operating Income

Our operating income was $1,199 million in fiscal year 2025, compared to operating income of $1,099 million in fiscal year 2024. Operating income as a percentage of net sales was 3.0% in fiscal year 2025 and 2.9% in fiscal year 2024. The increase in operating income was due to the factors discussed in the relevant sections above.

Other (Income) Expense-Net

Other (income) expense-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 income-net of $4 million in fiscal year 2025 and other expense-net of $6 million in fiscal year 2024.

Interest Expense-Net

Interest expense-net decreased $10 million in fiscal year 2025, primarily due to lower rates in fiscal year 2025compared to fiscal year 2024.

Loss on Extinguishment of Debt

We did not recognize a loss on extinguishment of debt for fiscal year 2025. We recognized a loss on extinguishment of debt of $10 million in fiscal year 2024 due to the amendment of the Company's Incremental Term Loan Facility due September 13, 2026 (the "2024 Incremental Term Loan Facility") and repricing of the Company's Incremental Term Loan Facility due November 22, 2028 (the "2021 Incremental Term Loan Facility").

Recognition of Net Actuarial Loss for Pension Settlement

We recognized a net actuarial loss for pension settlement of $124 million in fiscal 2024 due to a termination of certain defined benefit plans. No activity was recognized in fiscal year 2025.

Income Taxes

Our effective income tax rate for fiscal year 2025 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 $10 million primarily related to excess tax benefits associated with share-based compensation.

Our effective income tax rate for fiscal year 2024 of 23%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 an aggregate tax benefit of $24 million consisting of a tax benefit of $17 million primarily related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, a tax benefit of $9 million primarily related to excess tax benefits associated with share-based compensation, and a tax benefit of $2 million, primarily related to adjustments to prior year tax provision estimates.

Net Income

Our net income was $676 million in fiscal year 2025, compared to a net income of $494 million in fiscal year 2024. The increase in net income was due to the 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. As of December 27, 2025, the Company had approximately $1.6 billion in cash and available liquidity.

Indebtedness

($ in millions)
Debt Description						Maturity						Interest Rate as of December 27, 2025						Carrying Value as of December 27, 2025						Carrying Value as of December 28, 2024
ABL Facility						December 7, 2027						5.41%						$	429					$	223
2021 Incremental Term Loan Facility (net of $1 and $0 of unamortized deferred financing costs, respectively)(1)						November 22, 2028						5.67%						609						610
2024 Incremental Term Loan Facility (net of $7 and $8 of unamortized deferred financing costs, respectively)						October 3, 2031						5.67%						712						717
Unsecured Senior Notes due 2028 (net of $3 and $4 unamortized deferred financing costs, respectively)						September 15, 2028						6.88%						497						496
Unsecured Senior Notes due 2029 (net of $4 and $5 of unamortized deferred financing costs, respectively)						February 15, 2029						4.75%						896						895
Unsecured Senior Notes due 2030 (net of $2 and $3 of unamortized deferred financing costs, respectively)						June 1, 2030						4.63%						498						497
Unsecured Senior Notes due 2032 (net of $4 and $4 of unamortized deferred financing costs, respectively)						January 15, 2032						7.25%						496						496
Unsecured Senior Notes due 2033 (net of $2 and $4 of unamortized deferred financing costs, respectively)						April 15, 2033						5.75%						498						496
Obligations under financing leases(2)						2026-2033						1.26% -8.31%						557						490
Other debt						January 1, 2031						5.75%						8						8
Total debt(2)																		5,200						4,928
Current portion of long-term debt																		(137)						(109)
Long-term debt																		$	5,063					$	4,819
(1) The 2021 Incremental Term Loan Facility was refinanced on October 3, 2024 as further discussed below.
(2) For the fiscal year ended 2024, obligations under financing leases excludes financing leases classified as held for sale in relation the Freshway divestiture. Refer to Note 5, Acquisitions and Divestitures, for additional information.

The Amended and Restated Term Loan Credit Agreement, dated as of June 27, 2016 (as amended and restated, the "Term Loan Credit Agreement") provides USF with the 2021 Incremental Term Loan Facility and the 2024 Incremental Term Loan Facility.

We also had $557 million of obligations under financing leases for transportation equipment and building leases as of December 27, 2025.

The ABL Facilitywill mature in 2027. The 2021 Incremental Term Loan Facility and the 2024 Incremental Term Loan Facility will mature in 2028 and 2031, respectively. 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 available liquidity and capital resources.

We had outstanding borrowings totaling $429 million and had issued letters of credit totaling $315 million under the ABL Facility as of December 27, 2025. There was remaining capacity of $1,556 million under the ABL Facility as of December 27, 2025. During the fiscal year ended December 27, 2025, outstanding letters of credit were reduced by approximately $254 million after surety bonds were issued to secure the Company's obligations with respect to its insurance program.

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." The Company had approximately $2.8 billion of restricted payment capacity under these covenants and approximately $1.6 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 27, 2025.

We believe that the combination of cash generated from operations, together with borrowing capacity 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 as well as beyond 12 months.

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 may 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. Any potential debt reduction or other debt retirement could require significant use of our other available liquidity and capital resources.

See Note 9, 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 2025 and 2024:

			Fiscal Year
			2025						2024
			(in millions)
Net income			$	676					$	494
Changes in operating assets and liabilities			5						18
Other adjustments			688						662
Net cash provided by operating activities			1,369						1,174
Net cash used in investing activities			(497)						(552)
Net cash used in financing activities			(890)						(831)
Net increase in cash, cash equivalents and restricted cash			(18)						(209)
Cash, cash equivalents and restricted cash-beginning of year			59						269
Cash, cash equivalents and restricted cash-end of year			$	41					$	60

Operating Activities

Cash flows provided by operating activities increased $195 million to $1,369 million in fiscal year 2025 driven by higher net income and a reduction in tax payments. Net cash provided by operating activities in fiscal year 2024 driven by changes in operating assets and liabilities.

Investing Activities

Cash flows used in investing activities in fiscal years 2025 and 2024 included cash expenditures of $410 million and $341 million, respectively, related to investments in information technology, property and equipment and construction of and improvements to distribution facilities. Cash flows used in investing activities in fiscal year 2025 also included approximately $87 million cash purchase price for the acquisition of Jake's Finer Foods and $44 million cash purchase price for the acquisition of Shetakis. Investing activities for the fiscal year ended 2025 also included the cash proceeds from the sale of Freshway of $38 million. Cash flows used in investing activities in fiscal year 2024 included $214 million cash purchase price for the acquisition of IWC Food Service.

We expect total cash capital expenditures in fiscal year 2026 to be between $400 million and $450 million. We expect to fund our capital expenditures with available cash or cash generated from operations and through fleet financing.

Financing Activities

Cash flows used in financing activities in fiscal year 2025 included $206 millionin net proceeds under the ABL facility and $110 million in scheduled payments under our financing leases. Financing activities in fiscal year 2025also included $926 millionof common stock repurchased, exclusive of approximately $8 million offees, commissions and the related 1% of excise tax under the Original Share Repurchase Program and the May 2025 Share Repurchase Program, $50 millionof unsettled accelerated share repurchases, $28 millionof proceeds received from stock purchases under our employee stock purchase plan and $6 millionof proceeds from the exercise of employee stock options, which were offset by $38 million of employee tax withholdings paid in connection with the vesting of stock awards.

Cash flows used in financing activities in fiscal year 2024 included $112 million of scheduled payments under our Term Loan Facilities and financing leases, $1,217 million for repayment of the 2019 Incremental Term Loan Facility and paydown of the 2021 Incremental Term Loan Facility, $14 million in principal payments for the repricing of the 2021 Incremental Term Loan Facility and $13 million of financing fees related to the repayment of the 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility repricing, $223 million in net proceeds under the ABL Facility, $725 million from the 2024 Incremental Term Loan Facility issuance and $500 million from the 2033 Unsecured Senior Note issuance. Financing activities in fiscal year 2024 also included $948 million of common stock repurchased, exclusive of approximately $8 million of fees, commissions and the related 1% of excise tax under the Original Share Repurchase Program, $28 million of proceeds received from stock purchases under our employee stock purchase plan and $15 million of proceeds from the exercise of employee stock options, which were offset by $21 million of employee tax withholdings paid in connection with the vesting of stock awards.

We incurred approximately $5 million of lender fees and third-party costs in connection with our issuance of the 2033 Unsecured Senior Notes, which were capitalized as deferred financing costs. We incurred approximately $8 million total of lender fees and third-party costs in connection with the repayment of the 2019 Incremental Term Loan Facility, consisting of a $2 million original issue discount fee related to the 2019 Incremental Term Loan Facility and $6 million of costs associated related to the issuance of the 2024 Incremental Term Loan Facility of which $5 million was capitalized as deferred financing costs. We incurred approximately $1 million total of lender fees and third-party costs in connection with the repricing of the 2021 Incremental Term Loan Facility, which were capitalized as deferred financing costs.

Other Obligations and Commitments

The Company's cash requirements within the next twelve months include the current portion of long-term debt, accounts payable and accrued liabilities, other current liabilities, and purchase commitments and other obligations. We expect the cash required to meet these obligations to be primarily generated through a combination of cash from operations and access to capital from financial markets. Our long-term cash requirements under our various contractual obligations and commitments include:

•Debt, including financing lease obligations - See Note 9, Debt, in our consolidated financial statements for further detail of our debt and the timing of expected future principal payments.

•Operating and finance lease obligations - See Note 14, Leases, in our consolidated financial statements for further detail of our obligations and the timing of expected future payments.

•Self-insured liabilities - We are primarily self-insured for general liability, fleet liability and workers' compensation claims. Claims in excess of certain levels are insured by external parties. See Note 10, Accrued Expenses and Other Long-Term Liabilities, in our consolidated financial statements for further detail of our obligations and the expected timing of expected future payments.

•Purchase and Other Obligations - The Company enters into purchase orders with vendors and other parties in the ordinary course of business and has a limited number of purchase contracts with certain vendors that require it to buy a predetermined volume of products. Purchase obligations also include amounts committed with various third-party service providers to provide information technology services for periods up to fiscal 2028. See Note 19, Commitments and Contingencies, in our consolidated financial statements for further detail of our obligations and the expected timing of expected future payments.

We believe the following sources will be sufficient to meet our anticipated cash requirements for at least the next twelve months, while maintaining sufficient liquidity for normal operating purposes:

•Our cash flow from operations;

•The availability of additional capital under our existing ABL Facility; and

•Our availability to access capital from financial markets.

Retirement Plans

We sponsor a defined benefit plan that pays benefits to eligible participants at retirement. Only certain union associates are eligible to participate and continue to accrue benefits under the plan per the collective bargaining agreements ("CBAs"). The plan is closed and frozen to all other employees. On October 31, 2024, the Company terminated and settled the majority of the defined benefit plan. In addition, we provide certain postretirement health and welfare benefits to eligible retirees and their dependents. See Note 15, Retirement Plans, in our consolidated financial statements for further detail on the plans. We did not make significant contributions to the Company-sponsored defined benefit and other postretirement plans in fiscal years 2025 and 2024 and do not expect to make any contributions in 2026.

Certain employees are eligible to participate in our 401(k) savings plan. We made employer matching contributions to the 401(k) plan of $86 million and $82 million in fiscal years 2025 and 2024, respectively.

We are required to contribute to various multi employer pension plans under the terms of certain of our CBAs. Our contributions to these plans were $60 million and $57 million in fiscal years 2025 and 2024, respectively.

Off-Balance Sheet Arrangements

We had entered into $315 million of letters of credit, primarily in favor of certain lenders to secure obligations primarily related to certain real estate leases, under the ABL Facility as of December 27, 2025 compared to $592 million as of December 28, 2024. We held approximately $362 million and $58 million of surety bonds as of December 27, 2025 and December 28, 2024, respectively, primarily in favor of certain commercial insurers to secure obligations with respect to our insurance programs. In certain cases, surety bonds may be used as an alternative to letters of credit. In fiscal year ended December 27, 2025, outstanding letters of credit were reduced by approximately $254 million after surety bonds were issued to secure the Company's obligations with respect to its insurance program.

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

Critical Accounting Policies and Estimates

Except as otherwise set forth herein, we have prepared the financial information in this Annual Report in accordance with GAAP. Preparing these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our most critical accounting policies and estimates pertain to the valuation of goodwill and other intangible assets, vendor consideration and income taxes.

Valuation of Goodwill and Other Intangible Assets

Goodwill and other intangible assets include the cost of the acquired business in excess of the fair value of the tangible net assets recorded in connection with each acquisition. Other intangible assets include customer relationships, amortizable trade names, noncompete agreements, the brand names comprising our portfolio of private brands, and trademarks. We assess goodwill and other intangible assets with indefinite lives for impairment each year, or more frequently if events or changes in circumstances indicate an asset may be impaired. For goodwill and indefinite-lived intangible assets, our policy is to assess for impairment as of the beginning of each fiscal third quarter. For other intangible assets with definite lives, we assess for impairment only if events occur that indicate that the carrying amount of an asset may not be recoverable.

For goodwill, the reporting unit used in assessing impairment is the Company's one business segment as described in Note 21, Business Information, in our consolidated financial statements. Our fiscal year 2025 assessment for impairment of goodwill was performed using a qualitative approach to determine, as of the date of the assessment, whether it was more likely than not that the fair value of goodwill was less than its carrying value. In performing the qualitative assessment, we identified and considered the significance of relevant key factors, events, and circumstances that affect the fair value of goodwill. These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned financial performance. Based on our qualitative fiscal year 2025 annual impairment analysis for goodwill, we concluded that it is more likely than not that the fair value of goodwill exceeded its carrying value.

Our fiscal year 2025 assessment for impairment of indefinite-lived intangible assets was performed using a qualitative approach to determine, as of the date of the assessment, whether it was more likely than not that the fair value of indefinite-lived intangible assets was less than its carrying value. In performing the qualitative assessment, we identified and considered the significance of relevant key factors, events, and circumstances that affect the fair value of indefinite-lived intangible assets. These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned financial performance. Based on our qualitative fiscal year 2025 annual impairment analysis for indefinite-lived intangible assets, we concluded that it is more likely than not that the fair value of our trademark indefinite-lived intangible assets and brand name indefinite-lived intangible assets exceeded their respective carrying values. As a part of this assessment, the Company determined that there were no future plans to utilize several acquired indefinite-lived intangible trademarks and brand names. This resulted in a $13 million impairment during the fiscal year ended December 27, 2025. The recoverability of our indefinite-lived intangible assets could be impacted if estimated future cash flows are not achieved.

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

Vendor Consideration

We participate in various rebate and promotional incentives with our suppliers, primarily through purchase-based programs. The amount and timing of recognition of consideration under these incentives requires management judgment and estimates. Consideration under these incentives is estimated during the year based on historical and forecasted purchasing activity, as our obligations under the programs are fulfilled primarily when products are purchased. Consideration is typically received in the form of invoice deductions, or less often in the form of cash payments. Changes in the estimated amount of incentives earned are treated as changes in estimates and are recognized in the period of change. Historically, adjustments to our estimates for vendor consideration or related allowances have not been significant, and we do not expect adjustments to our estimates for vendor consideration or related allowances to be significant in the next 12 months.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized.

An uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Uncertain tax positions are recorded at the largest amount that is more likely than not to be sustained. We adjust the amounts recorded for uncertain tax positions when our judgment changes as a result of the evaluation of new information not previously available. These differences are reflected as increases or decreases to income tax expense in the period in which they are determined. Our uncertain tax positions contain uncertainties because management is required to make assumptions and to apply judgment in estimating the exposures associated with our various filing positions. We believe that the judgments and estimates discussed herein are reasonable; however, actual results could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which an uncertain tax position has been established, or pay amounts in excess of recorded positions, our effective income tax rate could be materially affected. An unfavorable tax settlement would generally require use of our cash and may result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 3, Recent Accounting Pronouncements, in our consolidated financial statements.