US FOODS HOLDING CORP. The following discussion and analysis should be read together with the accompanying unaudited consolidated financial statements and the notes thereto included in this Quarterly Report and the audited consolidated financial statements and the notes thereto in the 2021 Annual Report. The following discussion and analysis contain certain financial measures that are not required by, or presented in accordance with GAAP. We believe these non-GAAP measures provide meaningful supplemental information about our operating performance and liquidity. Information regarding reconciliations of and the rationale for these measures is discussed under "Non-GAAP Reconciliations" below. Results of operations for the 13 weeks and 39 weeks endedOctober 1, 2022 are compared to the 13 weeks and 39 weeks endedOctober 2, 2021 , unless specifically noted otherwise.
Overview
AtUS 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 GREAT FOOD. MADE EASY.™, which is centered on providing customers with the innovative products, business support and technology solutions they need to operate their businesses profitably. We operate as one business with standardized business processes, shared systems infrastructure, and an organizational model that optimizes national scale with local execution, allowing us to manage our business as a single operating segment. We have centralized activities where scale matters and our local field structure focuses on customer-facing activities. We supply approximately 250,000 customer locations nationwide. These customer locations include independent restaurants, chain restaurants, healthcare, hospitality, education and other customers. We provide more than 400,000 fresh, frozen, and dry food stock-keeping units, or SKUs, as well as non-food items, sourced from approximately 6,000 suppliers. Approximately 4,000 sales associates manage customer relationships at local, regional, and national levels. Our sales associates are supported by sophisticated marketing and category management capabilities, as well as a sales support team that includes world-class chefs and restaurant operations consultants, new business development managers and others that help us provide more comprehensive service to our customers. Our extensive network of 70 distribution facilities and fleet of approximately 6,500 trucks, along with more than 80 cash and carry locations, allow us to operate efficiently and provide high levels of customer service. This operating model allows us to leverage our nationwide scale and footprint while executing locally. Our operations, our industry and theU.S. economy continue to be impacted by higher than normal inflation, supply chain disruptions, labor shortages, and the COVID-19 pandemic. These factors also influence the buying patterns of our customers and potentially impact consumer confidence and spending. We continue to actively monitor these risks to our business. Net sales increased, primarily due to continued inflation, and total case volumes increased 0.7% and 1.3% for the 13 weeks and 39 weeks endedOctober 1, 2022 compared to the prior year. We are unable to predict the extent these factors will continue to impact our results of operations.
Operating Metrics
Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time. Customers periodically are reclassified, based on changes in size or other characteristics, and when those changes occur, the respective customer's historical volume follows its new classification.
Highlights
For the 13 weeks and 39 weeks endedOctober 1, 2022 , compared to the same period a year ago, total case volume increased 0.7% and increased 1.3% respectively, and independent restaurant case volume increased 2.9% and 3.8%, respectively. Net sales increased$1,027 million , or 13.0%, and$3,694 million , or 16.9% for the 13 weeks and 39 weeks endedOctober 1, 2022 , driven primarily by food cost inflation of approximately 12.0% and 14.6% for the 13 weeks and 39 weeks endedOctober 1, 2022 , respectively. Gross profit increased$219 million , or 17.6%, to$1,460 million for the 13 weeks endedOctober 1, 2022 , and increased$625 million or 18.3% to$4,038 million for the 39 weeks endedOctober 1, 2022 primarily as a result of food cost inflation in multiple product categories, optimized pricing, increased freight income from improved inbound logistics, and cost of goods sold optimization. Gross profit was negatively impacted in all periods presented by LIFO expense which was$6 million and$143 million for the 13 weeks and 39 weeks endedOctober 1, 2022 , respectively, and$32 million and$150 million for the 13 weeks and 39 weeks endedOctober 2, 2021 , respectively. As a percentage of Net sales, gross profit was 16.4% for the 13 weeks endedOctober 1, 2022 , compared to 15.7% for the prior year period and was 15.8% for the 39 weeks endedOctober 1, 2022 , compared to 15.6% for the prior year period. Total operating expenses increased$140 million , or 12.7%, to$1,246 million for the 13 weeks endedOctober 1, 2022 , and increased$514 million , or 16.4%, to$3,640 million for the 39 weeks endedOctober 1, 2022 . The increase was primarily due to higher distribution costs, largely due to higher labor costs as a result of increased turnover and higher than normal wage inflation. These increases were partially offset by cost savings initiatives outlined in our long-range plan including: (1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements. 16 -------------------------------------------------------------------------------- As a percentage of Net sales, operating expenses were 14.0% for the 13 weeks endedOctober 1, 2022 , compared to 14.0% for the prior year period and was 14.3% for both the 39 weeks endedOctober 1, 2022 and the prior year period.
Results of Operations
The following table presents selected historical results of operations for the
periods indicated:
13 Weeks Ended 39 Weeks Ended
October 1, 2022 $ 8,917 $
7,890
7,457 6,649 21,504 18,435
Gross profit 1,460 1,241 4,038 3,413
Operating expenses:
Distribution, selling and administrative costs 1,246 1,099 3,640 3,115
Restructuring costs and asset impairment
charges - 7 - 11
Total operating expenses 1,246 1,106 3,640 3,126
Operating income 214 135 398 287
Other income-net (5) (6) (16) (19)
Interest expense-net 65 50 180 158
Loss on extinguishment of debt - - - 23
Income before income taxes 154 91 234 125
Income tax provision 45 27 62 30
Net income 109 64 172 95
Series A Preferred Stock Dividends (see Note
13) (9) (9) (27) (33)
Net income available to common shareholders $ 100 $
55 $ 145 $ 62
Percentage of Net Sales :
Gross profit 16.4 % 15.7 % 15.8 % 15.6 %
Operating expenses 14.0 % 14.0 % 14.3 % 14.3 %
Operating income 2.4 % 1.7 % 1.6 % 1.3 %
Net income 1.2 % 0.8 % 0.7 % 0.4 %
Adjusted EBITDA(1) 3.9 % 3.7 % 3.8 % 3.6 %
Other Data:
Cash flows-operating activities $ 354 $ 270 $ 613 $ 520 Cash flows-investing activities
(57) (65) (197) (166)
Cash flows-financing activities (128) (132) (198) (411)
Capital expenditures 58 66 201 173
EBITDA(1) 311 232 687 569
Adjusted EBITDA(1) 351 291 960 795
Adjusted net income(1) 151 119 400 292
Free cash flow(2) 296 204 412 347
(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 costs 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; and (6)
other gains, losses, or costs as specified in the agreements governing our
indebtedness. Adjusted net income is defined as net income excluding the items
used to calculate Adjusted EBITDA listed above and further adjusted for the tax
effect of the exclusions and discrete tax items. EBITDA, Adjusted EBITDA, and
Adjusted net income as presented 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
less cash capital expenditures. Free cash flow as presented 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.
17
--------------------------------------------------------------------------------Non-GAAP Reconciliations We provide EBITDA, Adjusted EBITDA, Adjusted net income and Free cash flow as supplemental measures to GAAP financial measures regarding our operating performance and liquidity. These non-GAAP financial measures, as defined above, exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.
We believe EBITDA and Adjusted EBITDA provide meaningful supplemental information about our operating performance because they exclude amounts that we do not consider part of our core operating results when assessing our performance.
We believe that Adjusted net income is a useful measure of operating performance
for both management and investors because it excludes items that are not
reflective of our core operating performance and provides an additional view of
our operating performance including depreciation, interest expense and income
taxes on a consistent basis from period to period. We believe that Adjusted net
income may be used by investors, analysts and other interested parties to
facilitate period-over-period comparisons and provides additional clarity as to
how factors and trends impact our operating performance.
Management uses these non-GAAP financial measures (1) to evaluate our historical
and prospective financial performance as well as our performance relative to our
competitors as they assist in highlighting trends, (2) to set internal sales
targets and spending budgets, (3) to measure operational profitability and the
accuracy of forecasting, (4) to assess financial discipline over operational
expenditures, and (5) as an important factor in determining variable
compensation for management and employees. EBITDA and Adjusted EBITDA are also
used in connection with certain covenants and activity restrictions under the
agreements governing our indebtedness. We also believe these and similar
non-GAAP financial measures are frequently used by securities analysts,
investors, and other interested parties to evaluate companies in our industry.
EBITDA, Adjusted EBITDA and Adjusted net income are not measurements of our
performance under GAAP and should not be considered as alternatives to net
income or any other performance measures derived in accordance with GAAP.
We use Free cash flow as a supplemental measure to GAAP financial measures
regarding the liquidity of our operations. We measure Free cash flow as cash
flows provided by operating activities less 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 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.
18
--------------------------------------------------------------------------------
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:
13 Weeks Ended 39 Weeks Ended
October 1, 2022
$ 55 $ 145 $ 62
Series A Preferred Stock Dividends (see Note
13) (9) (9) (27) (33)
Net income 109 64 172 95
Interest expense-net 65 50 180 158
Income tax provision 45 27 62 30
Depreciation expense 81 79 240 242
Amortization expense 11 12 33 44
EBITDA 311 232 687 569
Adjustments:
Restructuring costs and asset impairment
charges(1) - 7 - 11
Share-based compensation expense(2) 13 13 34 36
LIFO reserve adjustment(3) 6 32 143 150
Loss on extinguishment of debt(4) - - - 23
Business transformation costs(5) 12 3 41 17
COVID-19 bad debt benefit(6) - - - (15)
COVID-19 other related expenses(7) - - 2 1
Business acquisition and integration related
costs and other(8) 9 4 53 3
Adjusted EBITDA 351 291 960 795
Depreciation expense (81) (79) (240) (242)
Interest expense-net (65) (50) (180) (158)
Income tax provision, as adjusted(9) (54) (43) (140) (103)
Adjusted net income $ 151 $ 119 $ 400 $ 292
Cash flow
Cash flows from operating activities $ 354 $ 270 $ 613 $ 520
Capital expenditures (58) (66) (201) (173)
Free cash flow $ 296 $ 204 $ 412 $ 347
(1) Consists primarily of non-CEO severance and related costs, organizational
realignment costs 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.
(5) Consists primarily of costs related to significant process and systems
redesign across multiple functions.
(6) Includes the changes in the reserve for doubtful accounts expense
reflecting the collection risk associated with our customer base as a result of
the COVID-19 pandemic.
(7) Includes COVID-19 related costs that we are permitted to addback for
purposes of calculating Adjusted EBITDA under certain agreements governing our
indebtedness.
(8) Includes: (i) aggregate acquisition and integration related costs of $6
million and $4 million for the 13 weeks ended October 1, 2022 and October 2,
2021 , respectively, and $18 million and $16 million for the 39 weeks ended
October 1, 2022 and October 2, 2021 , respectively; (ii) contested proxy and
related legal and consulting costs of $21 million for the 39 weeks ended October
1, 2022 ; (iii) CEO severance of $5 million for the 39 weeks ended October 1,
2022 ; (iv) a favorable legal settlement recovery of $13 million for the 39 weeks
ended October 2, 2021 ; and (v) other gains, losses or costs that we are
permitted to addback for purposes of calculating Adjusted EBITDA under certain
agreements governing our indebtedness.
(9) 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.
19
--------------------------------------------------------------------------------A reconciliation between the GAAP income tax provision and the income tax provision, as adjusted, is as follows:
13 Weeks Ended 39 Weeks Ended
October 1, 2022 $ 45 $ 27$ 62 $ 30 Tax impact of pre-tax income adjustments 11 17 75 68 Discrete tax items (2) (1) 3 5 Income tax provision, as adjusted$ 54 $ 43$ 140 $ 103
Comparison of Results
13 Weeks Ended
Highlights
•Net income improved
•Adjusted EBITDA increased$60 million , or 20.6%, to$351 million in 2022. As a percentage of Net sales, Adjusted EBITDA was 3.9% in 2022, compared to 3.7% in 2021.
•Net sales increased
•Total case volume increased 0.7% and independent restaurant case volume increased 2.9%.
•Operating income increased
Net sales increased$1,027 million , or 13.0%, to$8,917 million in 2022 driven by food cost inflation of 12.0%. Total case volume increased 0.7%, and independent restaurant case volume grew 2.9%. Year-over-year total case growth for the third quarter was negatively impacted roughly 2.0% by the mid-2021 exit of the lower margin grocery retail business we temporarily added during the pandemic and the strategic exit of a small number of lower margin chain restaurant and education customers. The year-over-year increase in inflation, which was seen in multiple product categories including grocery, disposables, and pork, benefited Net sales since a significant portion of our Net sales is based on a pre-established markup over product cost. Sales of private brands represented approximately 34% of Net sales in both 2022 and 2021.
Gross Profit
Gross profit increased$219 million , or 17.6%, to$1,460 million in 2022 primarily as a result of food cost inflation in multiple product categories, optimized pricing, increased freight income from improved inbound logistics, cost of goods sold optimization, and a favorable year-over-year LIFO adjustment. Our LIFO method of inventory costing resulted in an expense of$6 million in 2022 compared to expense of$32 million in 2021 due to inflation in multiple product categories including grocery, disposables and pork. Gross profit as a percentage of Net sales was 16.4% in 2022, compared to 15.7% in 2021, due to the aforementioned factors. Operating Expenses Operating expenses, comprised of distribution, selling and administrative and restructuring costs and asset impairment charges, increased$140 million , or 12.7%, to$1,246 million in 2022. Operating expenses as a percentage of Net sales were 14.0% in 2022, compared to 14.0% in 2021. The increase in operating expenses was primarily due to higher distribution costs, largely due to higher labor costs as a result of increased turnover and higher than normal wage inflation. The increase was partially offset by cost savings initiatives outlined in our long-range plan including: (1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements.
Operating Income
Our operating income was$214 million in 2022, compared to operating income of$135 million in 2021. The increase in operating income was due to the factors discussed in the relevant sections above. 20 --------------------------------------------------------------------------------
Other Income-Net Other income-net includes components of net periodic pension benefit credits, exclusive of the service cost component associated with our defined benefit and other postretirement plans. We recognized other income-net of$5 million and$6 million in 2022 and 2021, respectively.
Interest Expense-Net
Interest expense-net increased$15 million to$65 million in 2022 primarily due to an increase in interest rates, partially offset by lower outstanding debt in 2022 compared to 2021. Income Taxes For the 13 weeks endedOctober 1, 2022 , our effective income tax rate of 29% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax expense of$2 million primarily related to a tax benefit shortfall associated with share-based compensation. For the 13 weeks endedOctober 2, 2021 , our effective income tax rate of 30% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. The discrete tax items were not material individually or in the aggregate; however, when compared to the pre-tax income of$91 million for the period on a percentage basis, these tax items had a significant impact on the effective tax rate.
Net Income
Our net income was$109 million in 2022, compared to net income of$64 million in 2021. The improvement in net income was due to the relevant factors discussed above.
39 Weeks Ended
Highlights
•Net income was
•Adjusted EBITDA increased$165 million , or 20.8%, to$960 million in 2022. As a percentage of Net sales, Adjusted EBITDA was 3.8% in 2022, compared to 3.6% in 2021.
•Net sales increased
•Total case volume increased 1.3% and independent restaurant case volume increased 3.8%.
•Operating income was
Net Sales Net sales increased$3,694 million , or 16.9%, to$25,542 million in 2022, comprised of a$3,400 million , or 15.6%, increase in the overall Net sales rate per case and a$294 million , or 1.3%, increase in case volume. The increase in Net sales rate per case primarily reflects a year-over-year average inflation increase of 14.6%. The year-over-year increase in inflation, which was seen in multiple product categories including grocery, disposables, and dairy benefited Net sales since a significant portion of our Net sales is based on a pre-established markup over product cost. Total case volume increased 1.3% in 2022 with independent restaurant case volume growth of 3.8%. The increase in case volume was primarily driven by increased leisure and business travel and increased restaurant traffic. Year-over-year total case growth for the first nine months of 2022 was negatively impacted roughly 3.5% by the mid-2021 exit of the lower margin grocery retail business we temporarily added during the pandemic and the strategic exit of a small number of lower margin chain restaurant and education customers. Sales of private brands represented approximately 34% of Net sales in both 2022 and 2021.
Gross Profit
Gross profit increased$625 million , or 18.3%, to$4,038 million in 2022 primarily as a result of food cost inflation in multiple product categories, an increase in total case volume, optimized pricing and increased freight income from improved inbound logistics, and a favorable year-over-year LIFO adjustment. Our LIFO method of inventory costing resulted in an expense of$143 million in 2022 compared to expense of$150 million in 2021 due to inflation in multiple product categories including grocery, disposables, and dairy. Gross profit as a percentage of Net sales was 15.8% in 2022, compared to 15.6% in 2021.
Operating Expenses
Operating expenses, comprised of distribution, selling and administrative and restructuring costs and asset impairment costs, increased$514 million or 16.4%, to$3,640 million in 2022. Operating expenses as a percentage of Net sales were 14.3% in both 2022 and 2021. 21 -------------------------------------------------------------------------------- The increase in operating expenses was primarily due to greater volume and higher distribution costs, largely due to higher labor costs as a result of increased turnover and higher than normal wage inflation, as well as contested proxy and related legal and consulting costs and CEO severance. The increase was partially offset by cost savings initiatives outlined in our long-range plan including: (1) further routing improvements, (2) completion of new warehouse selection technology implementation, and (3) the rollout of new warehouse process enhancements.
Operating Income
Our operating income was$398 million in 2022, compared to operating income of$287 million in 2021. The increase in operating income was due to the factors discussed in the relevant sections above.
Other Income-Net
Other income-net includes components of net periodic pension benefit credits, exclusive of the service cost component associated with our defined benefit and other postretirement plans. We recognized other income-net of$16 million and$19 million in 2022 and 2021, respectively.
Interest Expense-Net
Interest expense-net increased$22 million to$180 million in 2022 primarily due to an increase in interest rates, partially offset by lower outstanding debt in 2022 compared to 2021. Income Taxes For the 39 weeks endedOctober 1, 2022 , our effective income tax rate of 26% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of$3 million primarily related to excess tax benefits associated with share-based compensation. For the 39 weeks endedOctober 2, 2021 , our effective income tax rate of 24% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of$5 million , primarily related to excess tax benefits associated with share-based compensation.
Net Income
Our net income was$172 million in 2022, compared to net income of$95 million in 2021. The improvement in net income was due to the relevant factors discussed above.
Liquidity and Capital Resources
Our ongoing operations and strategic objectives require working capital and continuing capital investment. Our primary sources of liquidity include cash provided by operations, as well as access to capital from bank borrowings and other types of debt and financing arrangements. As ofOctober 1, 2022 , the Company had approximately$2.1 billion in cash and available liquidity.
Indebtedness
The aggregate outstanding balance of our indebtedness was
We had no outstanding borrowings and had issued letters of credit totaling
The 2019 Incremental Term Loan Facility had an outstanding balance of
The 2021 Incremental Term Loan Facility had an outstanding balance of
The Secured Senior Notes due 2025 had an outstanding balance of
As ofOctober 1, 2022 , the Unsecured Senior Notes due 2029 had an outstanding balance of$892 million , net of$8 million of unamortized deferred financing costs. As ofOctober 1, 2022 , the Unsecured Senior Notes due 2030 had an outstanding balance of$496 million , net of$4 million of unamortized deferred financing costs. 22 --------------------------------------------------------------------------------
We also had
The ABL Facility will mature in 2024. The 2019 Incremental Term Loan Facility and the 2021 Incremental Term Loan Facility will mature in 2026 and 2028, respectively. The Secured Senior Notes due 2025 will mature in 2025. The Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2030 will mature in 2029 and 2030, respectively. 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. USF had approximately$1.6 billion of restricted payment capacity under these covenants and approximately$2.9 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as ofOctober 1, 2022 . 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. 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 the periods presented:
39 Weeks Ended
October 1, 2022 October 2, 2021
Net income $ 172 $ 95
Changes in operating assets and liabilities 124 62
Other adjustments 317 363
Net cash provided by operating activities 613 520
Net cash used in investing activities (197) (166)
Net cash used in financing activities (198) (411)
Net increase (decrease) in cash, and cash equivalents and restricted cash
218 (57)
Cash, cash equivalents and restricted cash-beginning of period 148 829
Cash, cash equivalents and restricted cash-end of period
$ 772
Operating Activities
Cash flows provided by operating activities was $613 million for the 39 weeks
ended October 1, 2022 , representing an increase of $93 million as compared to
cash flows provided by operating activities of $520 million for the 39 weeks
ended October 2, 2021 driven by higher net income and changes in operating
assets and liabilities, partially offset by lower depreciation and amortization
for the 39 weeks ended October 1, 2022 .
Investing Activities
Cash flows used in investing activities in the 39 weeks endedOctober 1, 2022 andOctober 2, 2021 included cash expenditures of$201 million and$173 million , respectively, on investments in information technology, new construction and expansion of certain existing distribution facilities, and property and equipment for fleet replacement. 23 -------------------------------------------------------------------------------- We expect total cash capital expenditures in fiscal year 2022 to be between$270 million and$280 million , exclusive of approximately$125 million of capital expenditures under our fleet financing leases. We expect to fund our capital expenditures with available cash or cash generated from operations and through fleet financing. Financing Activities Cash flows used by financing activities in the 39 weeks endedOctober 1, 2022 included$80 million of scheduled payments under our Term Loan Facilities and financing leases,$100 million of voluntary prepayments of our 2021 Incremental Term Loan Facility,$27 million of dividends on our Series A Preferred Stock and no net payments under the ABL Facility. Financing activities in the 39 weeks endedOctober 1, 2022 also included$17 million of proceeds received from stock purchases under our employee stock purchase plan and$12 million of proceeds from the exercise of employee stock options, which were offset by$16 million of employee tax withholdings paid in connection with the vesting of stock awards. Cash flows used by financing activities for the 39 weeks endedOctober 2, 2021 included aggregate borrowings of$900 million under the Unsecured Senior Notes due 2029. We used the proceeds from the issuance of the Unsecured Senior Notes due 2029, together with cash on hand, to redeem all of the then outstanding 5.875% unsecured senior notes due 2024 and repay all of the then outstanding borrowings under the incremental senior secured term loan facility borrowed inApril 2020 . Financing activities for the 39 weeks endedOctober 2, 2021 also included$16 million of proceeds received from stock purchases under our employee stock purchase plan and$13 million of proceeds from the exercise of employee stock options, which were offset by$13 million of employee tax withholdings paid in connection with the vesting of stock awards.
Other Obligations and Commitments
There have been no material changes in the Company's cash obligations and commitments since the end of fiscal year 2021. Refer to Item 7 of our 2021 Annual Report for additional information regarding the Company's cash obligations and commitments as of the end of fiscal year 2021.
Retirement Plans
See Note 11, Retirement Plans, in our consolidated financial statements for a description of our retirement plans.
Off-Balance Sheet Arrangements
We had
Except as disclosed above, we have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
We have prepared the financial information in this Quarterly Report in accordance with GAAP. Preparing the Company's 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 at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Part II, Item 7-"Management's Discussion and Analysis of Financial Condition and Results of Operations" of the 2021 Annual Report includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenue, or expenses during the 39 weeks endedOctober 1, 2022 .
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 2, Recent Accounting Pronouncements, in our consolidated financial statements.
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