WeTable are also exposed to risk due to fluctuations in the price and availability of diesel fuel. Increases in the cost of diesel fuel can negatively affect consumer spending, raise the price we pay for products, and increase the costs we incur to deliver products to our customers. To minimize fuel cost risk, we enter into forward purchase commitments for a portion of our projected diesel fuel requirements. As of September 26, 2015, we had diesel fuel forward purchase commitments totaling $162 million through June 2017. These locked in approximately 65% of our projected diesel fuel purchase needs for the contracted periods. A 10% change in diesel prices would cause our uncommitted diesel fuel costs through December 2016 to change by approximately $12 million. Contents

†Table Furnishedof with this Report.Contents

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

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†Table Furnishedof with this Report.Contents

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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 26~~April 2, ~~2015~~2016

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

Commission File No. 333-185732

LOGO

US Foods, Inc.

(Exact name of registrant as specified in its charter)

Delaware

36-3642294

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

9399 W. Higgins Road, Suite 500

Rosemont, IL 60018

(847) 720-8000

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

Not Applicable

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

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

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

The registrant is a privately held corporation and its equity shares are not publicly traded. At ~~November~~May 96, ~~2015~~2016, 1,000 shares of the registrant’s common stock were outstanding, all of which were owned by ~~USF~~US Foods Holding Corp.

TABLE OF CONTENTS

	Page No.		~~Page No.~~
Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
Item 1. Financial Statements (Unaudited)
	Consolidated Balance Sheets as of September 26, 2015 and December 27, 2014			1
Consolidated Balance Sheets as of April 2, 2016 and January 2, 2016		1
	Consolidated Statements of Comprehensive Income (Loss) for the 13-weeks and 39-weeks ended September 26, 2015 and September 27, 2014			2
Consolidated Statements of Comprehensive Income for the 13-weeks ended April 2, 2016 and March 28, 2015		2
	Consolidated Statements of Cash Flows for the 39-weeks ended September 26, 2015 and September 27, 2014			3
Consolidated Statements of Cash Flows for the 13-weeks ended April 2, 2016 and March 28, 2015		3
Notes to Consolidated Financial Statements	~~Notes to Consolidated Financial Statements~~	4		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			37
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4.	Controls and Procedures			37
Item 4. Controls and Procedures		30
Part II. Other Information
Item 1.	Legal Proceedings			38
Item 1. Legal Proceedings		30
Item 1A.	Risk Factors			38
Item 1A. Risk Factors		30
Item 6.	Exhibits			38
Item 6. Exhibits		30
Signatures		32		39

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

US FOODS, INC.

CONSOLIDATED BALANCE SHEETS ~~(Unaudited)~~

(inIn thousands, except for share data)

	September 26,2015			December 27,2014
	April 2,			January 2,
	2016			2016
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	~~398~~131,~~410~~017		$	~~343~~217,~~659~~561
Accounts receivable, less allowances of $21,617 and $24,989		1,308,889			1,252,738
Accounts receivable, less allowances of $24,308 and $22,623		1,278,110			1,233,978
Vendor receivables, less allowances of $2,294 and $2,802		136,581			97,668
Vendor receivables, less allowances of $2,166 and $1,566		144,580			101,449
Inventories — net		1,151,474			1,050,898
Inventories		1,168,109			1,112,967
Prepaid expenses		6775,~~173~~199			6773,~~791~~787
Deferred income taxes		9,978			—
Due from US Foods Holding Corp.		7,272			7,193
Due from USF Holding Corp.		7,600			—
Assets held for sale		5,459			5,459
Assets held for sale		5,556			5,360
Other current assets		20,456			14,991
Other current assets		6,305			11,799
Total current assets		2,830,202			2,767,385
Total current assets		3,091,966			2,829,913
PROPERTY AND EQUIPMENT — Net		1,776,780			1,768,885
PROPERTY AND EQUIPMENT — Net		1,708,110			1,726,583
GOODWILL		3,885,887			3,875,719
GOODWILL		3,835,477			3,835,477
OTHER INTANGIBLES — Net		462,004			477,601
OTHER INTANGIBLES — Net		492,529			602,827
OTHER ASSETS		64,891			56,721
DEFERRED FINANCING COSTS		19,512			26,144
TOTAL ASSETS	$	9,019,764		$	8,946,311
OTHER ASSETS		54,627			36,170
LIABILITIES AND EQUITY
TOTAL ASSETS	$	9,202,221		$	9,057,114
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES:
Bank checks outstanding	$	~~185~~177,~~928~~432		$	~~178~~191,~~912~~314
Accounts payable		1,~~314~~337,~~594~~599			1,~~159~~078,~~160~~865
Accrued expenses and other current liabilities		~~467~~374,~~230~~551			~~435~~469,~~638~~386
Current portion of long-term debt		6069,~~377~~164			5162,~~877~~639
Total current liabilities		21,~~028~~958,~~129~~746			1,~~825~~802,~~587~~204
LONG-TERM DEBT		4,~~676~~960,~~576~~837			4,~~696~~682,~~273~~149
DEFERRED TAX LIABILITIES		~~471~~460,~~583~~996			~~420~~461,~~319~~194
OTHER LONG-TERM LIABILITIES		~~372~~382,~~955~~347			~~450~~386,~~219~~913
Total liabilities		7,~~549~~762,~~243~~926			7,~~392~~332,~~398~~460
COMMITMENTS AND CONTINGENCIES (Note 16)
SHAREHOLDER’S EQUITY:
Common stock, $1.00 par value — authorized, issued, and outstanding, 1,000 shares		1			1
Common stock, $1.00 par value — 1,000 shares authorized, issued, and outstanding		1			1
Additional paid-in capital		21,~~340~~959,~~115~~662			2,~~336~~332,~~528~~868
Accumulated deficit		(~~597~~598,~~884~~595	)		(~~513~~612,~~772~~155	)
Accumulated other comprehensive loss		(89104,~~254~~230	)		(~~158~~106,~~041~~863	)
Total shareholder’s equity		1,~~652~~256,~~978~~838			1,~~664~~613,~~716~~851
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY	$	9,~~202~~019,~~221~~764		$	98,~~057~~946,~~114~~311

See Notes to Consolidated Financial Statements (Unaudited).

US FOODS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (~~LOSS) (~~Unaudited)

(In thousands)

	13-Weeks Ended						~~39-Weeks Ended~~
	September 26,2015			September 27,2014			September 26,2015			September 27,2014
	April 2,			March 28,
NET SALES	$	5,796,066		$	5,911,490		$	17,192,251		$	17,266,069
	2016			2015
COST OF GOODS SOLD		4,782,971			4,950,661			14,257,407			14,446,306
NET SALES	$	5,593,149		$	5,553,638
Gross profit		1,013,095			960,829			2,934,844			2,819,763
COST OF GOODS SOLD		4,633,381			4,624,574
OPERATING EXPENSES:
Gross profit		959,768			929,064
Distribution, selling and administrative costs		910,740			903,618			2,728,102			2,681,216
OPERATING EXPENSES:
Restructuring and asset impairment charges (credits)		29,104			22			81,697			(80	)
Distribution, selling and administrative costs		864,314			885,575
Total operating expenses		939,844			903,640			2,809,799			2,681,136
Restructuring and tangible asset impairment charges		10,777			1,154
OPERATING INCOME		73,251			57,189			125,045			138,627
Total operating expenses		875,091			886,729
INTEREST EXPENSE – Net		70,027			71,432			210,921			218,236
OPERATING INCOME		84,677			42,335
Income (loss) before income taxes		3,224			(14,243	)		(85,876	)		(79,609	)
INTEREST EXPENSE – Net		70,585			70,913
INCOME TAX (BENEFIT) PROVISION		(32,456	)		22,628			(1,764	)		41,151
Income (loss) before income taxes		14,092			(28,578	)
NET INCOME (LOSS)		35,680			(36,871	)		(84,112	)		(120,760	)
INCOME TAX PROVISION (BENEFIT)		532			(35,693	)
OTHER COMPREHENSIVE INCOME (LOSS) – Net of tax:
NET INCOME		13,560			7,115
Changes in retirement benefit obligations, net of income tax		63,649			(172	)		68,787			1,869
OTHER COMPREHENSIVE INCOME – Net of tax:
COMPREHENSIVE INCOME (LOSS)	$	99,329		$	(37,043	)	$	(15,325	)	$	(118,891	)
Changes in retirement benefit obligations, net of income tax		2,633			4,200
COMPREHENSIVE INCOME	$	16,193		$	11,315

See Notes to Consolidated Financial Statements (Unaudited).

US FOODS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	39-Weeks Ended
	13-Weeks Ended
	September 26,2015			September 27,2014
	April 2,			March 28,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(84,112	)	$	(120,760	)
Net income	$	13,560		$	7,115
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		~~298~~102,~~701~~808			~~310~~99,~~058~~449
Gain on disposal of property and equipment—net		(1,455	)		(6,009	)
Gain on disposal of property and equipment		(1,306	)		(312	)
Asset impairment charges		6,293			1,580
Tangible asset impairment charge		—			1,118
Amortization of deferred financing costs		102,~~325~~433			134,~~547~~467
Amortization of Senior Notes issue premium		(2,497	)		(2,497	)
Insurance proceeds relating to operating activities		2,479			10,112
Insurance proceeds		22,150			—
Insurance benefit in net income		(7,083	)		(10,063	)
Insurance recovery gain		(20,083	)		—
Amortization of Senior Notes original issue premium		(832	)		(832	)
Deferred tax (benefit) provision		(2,403	)		40,755
Deferred tax benefit		(80	)		(34,992	)
Share-based compensation expense		74,~~888~~786			92,~~173~~466
Provision for doubtful accounts		73,~~152~~781			133,~~035~~701
Changes in operating assets and liabilities:
Changes in operating assets and liabilities, net of business acquisitions:
Increase in receivables		(~~102~~84,~~217~~681	)		(~~187~~78,~~254~~822	)
(Increase) decrease in inventories		(100,576	)		33,271
Increase in inventories		(49,987	)		(16,377	)
Increase in prepaid expenses and other assets		(54,~~464~~998	)		(15,~~208~~271	)
Increase in accounts payable and bank checks outstanding		~~183~~257,~~671~~938			~~241~~178,~~946~~603
Increase (decrease) in accrued expenses and other liabilities		68,247			(42,106	)
Decrease in accrued expenses and other liabilities		(101,353	)		(58,669	)
Net cash provided by operating activities		~~285~~137,~~620~~465			~~303~~101,~~531~~693
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment		3,438			19,600
Acquisition of businesses–net of cash		(38,318	)		—
Purchases of property and equipment		(142,422	)		(105,497	)
Proceeds from sales of property and equipment		1,923			1,576
Insurance proceeds related to property and equipment		2,771			4,000
Purchases of property and equipment		(36,884	)		(57,191	)
Purchase of industrial revenue bonds		(21,914	)		—
Investment in noncontrolling interest		(7,658	)		—
Net cash used in investing activities		(158,127	)		(81,897	)
Insurance proceeds related to investing activities		—			2,771
Purchase of industrial revenue bonds		—			(12,376	)
Net cash used in investing activities		(80,937	)		(65,220	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt borrowings		21538,~~914~~000			~~898~~12,~~450~~376
Principal payments on debt and capital leases		(89303,~~704~~081	)		(~~954~~13,~~157~~778	)
Payment for debt financing costs and fees		(651	)		(421	)
Cash distribution to parent company		(374,332	)		—
Proceeds from parent company common stock sales		500			197
Parent company common stock repurchased		(3,659	)		(1,201	)
Parent company common stock repurchased		(4,801	)		(603	)
Net cash used in financing activities		(143,072	)		(2,603	)
Net cash used in financing activities		(72,742	)		(56,534	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(86,544	)		33,870
NET INCREASE IN CASH AND CASH EQUIVALENTS		54,751			165,100
CASH AND CASH EQUIVALENTS—Beginning of period		217,561			343,659
CASH AND CASH EQUIVALENTS—Beginning of period		343,659			179,744
CASH AND CASH EQUIVALENTS—End of period	$	131,017		$	377,529
CASH AND CASH EQUIVALENTS—End of period	$	398,410		$	344,844
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Cash paid during the period for:
Interest (net of amounts capitalized)	$	~~234~~39,~~631~~839		$	~~238~~96,~~900~~823
Income taxes paid (refunded)—net		5,181			(14	)
Income taxes paid—net		40			1
Property and equipment purchases included in accounts payable		511,~~399~~379			1224,~~935~~279
Capital lease additions		5748,~~619~~299			~~96,730~~—
Receivable for insurance recoveries related to property and equipment		—			1,209
Contingent consideration payable for business acquisition		5,000			—

See Notes to Consolidated Financial Statements (Unaudited).

US FOODS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1)

1.	OVERVIEW AND BASIS OF PRESENTATION

US Foods, Inc. and its consolidated subsidiaries ~~are~~is referred to ~~here~~herein as “we,” “our,” “us,” “the “Company,” or “~~US Foods~~USF.” USUSF ~~Foods~~ is a wholly owned subsidiary of ~~USF~~US Foods Holding Corp. (“~~USF~~US ~~Holding~~Foods” or “parent”), a Delaware corporation formed and controlled by investment funds associated with ~~or designated by~~ Clayton, Dubilier & Rice, ~~Inc.~~LLC (“CD&R”), and Kohlberg Kravis Roberts & Co. L.P. (“KKR” ~~and CD&R~~), collectively, (the “Sponsors”).

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

On February 2, 2015, ~~USF Holding,~~ US Foods, USF and certain of its subsidiaries, and Sysco entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Performance Food Group, Inc. (“PFG”), through which PFG agreed to purchase, subject to the terms and conditions of the Asset Purchase Agreement, 11eleven USUSF ~~Foods~~ distribution centers and related assets ~~and~~ and liabilities, in connection with– (and subject to–) the closing of the Acquisition.

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

On June 26, 2015, ~~USF~~US ~~Holding~~Foods, Sysco, Merger Sub One and Merger Sub Two entered into an agreement to terminate the ~~Merger~~Acquisition Agreement. ~~Upon the termination of the Merger Agreement, the Asset Purchase Agreement automatically terminated~~ and ~~the indenture (the “Senior Notes Indenture”) with respect to the 8.5% unsecured Senior Notes due June 30, 2019 (the “Senior~~ ~~Notes”) reverted to its prior form as if the amendments that modified certain definitions in such indenture had never become operative.~~ Sysco paid a termination fee of $300 million to ~~USF~~US ~~Holding~~Foods. inUpon ~~connection with~~ the termination of the ~~Merger~~ Acquisition Agreement., ~~The~~the ~~Company~~Asset Purchase Agreement automatically terminated and USF paid a termination fee of $12.5 million to PFG pursuant to the terms of the Asset Purchase Agreement.

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

Basis of Presentation—The Company operates on a 52-53 week fiscal year with all periods ending on a Saturday. When a 53-week fiscal year occurs, the Company reports the additional week in the ~~fiscal~~ fourth quarter. The Company’s fiscal year 2015 iswas a 53-week ~~fiscal~~ year. The accompanying ~~unaudited~~consolidated ~~Consolidated~~financial ~~Financial~~statements ~~Statements~~ include the accounts of USUSF ~~Foods~~ and its wholly owned subsidiaries. All intercompany transactions have been eliminated.

The accompanying ~~unaudited~~consolidated ~~Consolidated~~financial ~~Financial Statements~~statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and disclosures required by GAAP for annual financial statements. These ~~unaudited~~consolidated ~~Consolidated~~financial ~~Financial~~statements ~~Statements~~ should be read in conjunction with the audited ~~Consolidated~~ ~~Financial~~consolidated ~~Statements~~financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~December 27~~January 2, ~~2014~~2016 (the “~~2014~~2015 Annual Report”). Certain footnote disclosures included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.

The ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~statements have been prepared by the Company, without audit, with the exception of the ~~December 27~~January 2, ~~2014~~ 2016 Consolidated Balance Sheet which was included in the ~~2014~~2015 Annual Report. The preparation of the ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The ~~unaudited~~ ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~statements reflect all adjustments which are of a normal and recurring nature that are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for interim periods are not necessarily indicative of the results that might be achieved for the full year.

~~Public~~Restructuring ~~Filer~~and ~~Status—During~~tangible ~~the~~asset ~~fiscal~~impairment ~~second~~charges ~~quarter~~ of ~~2013, the Company completed the registration of~~ $1~~,350~~ million ~~aggregate~~in ~~principal~~2015 ~~amount~~have ofbeen ~~the~~reclassified from ~~Senior Notes and became subject to rules and regulations of the SEC~~Distribution, ~~including~~selling ~~periodic~~ and ~~current~~administrative ~~reporting~~costs ~~requirements~~in ~~under~~ the ~~Securities~~Consolidated ~~Exchange~~Statement ~~Act~~ of ~~1934,~~Comprehensive ~~as amended. The~~Income ~~Company did not receive any proceeds from the registration of the Senior Notes. The Company files periodic reports as a voluntary filer pursuant~~ to ~~contractual~~conform ~~obligations~~with in the ~~Senior~~current ~~Notes~~period ~~Indenture~~presentation.

Public Filer Status—During the fiscal second quarter 2013, the Company completed the registration of $1,350 million aggregate principal amount of its 8.5% unsecured Senior Notes due June 30, 2019 (the “Senior Notes”) and became subject to rules and regulations of the SEC, including periodic and current reporting requirements under the Securities Exchange Act of 1934, as amended. The Company did not receive any proceeds from the registration of the Senior Notes. Presently, the Company files periodic reports as a voluntary filer pursuant to contractual obligations in the indenture governing the Senior Notes.

US Foods Holding Corp. Initial Public Offering – In February 2016, our parent, US Foods filed a registration statement on Form S-1 with the SEC relating to a proposed initial public offering (“IPO”) of its common stock. The number of shares to be offered and the price range for the offering have not been determined. US Foods intends to use a portion of the net proceeds from the proposed offering to repay certain of the Company’s outstanding debt and use the remaining proceeds, if any, received from the offering for general corporate purposes.

2.	RECENT ACCOUNTING PRONOUNCEMENTS

In ~~August~~March ~~2015~~2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2015~~2016-1509, ~~Interest~~Compensation -—Stock ~~Imputation~~Compensation ~~of Interest~~ (~~Subtopic~~Topic ~~835-30~~718): ~~Presentation~~Improvements ~~and~~to ~~Subsequent~~Employee ~~Measurement of Debt Issuance Costs Associated with Line~~Share-~~of-Credit~~Based ~~Arrangements.~~Payment ~~This~~Accounting, ~~ASU~~which ~~permits~~is ~~entities~~intended to ~~present~~simplify ~~debt issuance~~several ~~costs~~aspects asof anthe ~~asset~~accounting ~~and~~for ~~subsequently~~share-based ~~amortize~~payment transactions, ~~them~~including ~~ratably over~~ the ~~term~~income oftax ~~the line-of-credit arrangement~~consequences, ~~regardless~~classification of ~~whether~~awards ~~there~~as ~~are~~either ~~any~~equity ~~outstanding~~or ~~borrowings~~liabilities, and classification on the ~~line-~~statement of~~-credit~~ ~~arrangement~~cash flows. This guidance ~~was~~is effective ~~upon issuance.~~for ~~The~~fiscal ~~Company~~years—and ~~presents~~interim ~~debt~~periods ~~issuance~~within ~~costs~~those fiscal ~~related~~years—beginning toafter ~~its~~December 15, ~~line-of-credit~~2016, ~~arrangements~~with asearly anadoption ~~asset and amortizes them ratably over the term of the related facilities~~permitted. ~~Accordingly,~~The ~~the~~Company ~~adoption~~is ofcurrently ~~this~~reviewing ~~guidance in~~ the ~~fiscal~~provisions ~~third quarter~~ of ~~2015~~ ~~had no impact on~~ the ~~Company’s~~new ~~financial position, results of operations or cash flows~~standard.

In ~~April~~February ~~2015~~2016, the FASB issued ASU No. ~~2015~~2016-0502, ~~Intangibles~~Leases ~~—Goodwill~~(Topic 842), which supersedes ASC 840, Leases. This ASU, based on the principle that entities should recognize assets and ~~Other~~liabilities ~~—Internal-Use~~arising ~~Software~~from ~~(Subtopic~~leases, ~~350-40):~~does ~~Customer~~not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. Leases are classified as finance or operating. The ASU’s ~~Accounting~~primary change is the requirement for ~~Fees~~entities ~~Paid~~to inrecognize a ~~Cloud~~lease ~~Computing~~liability ~~Arrangement.~~for ~~This~~payments ~~ASU~~and ~~amends~~a right of use asset representing the ~~FASB’s~~right ~~Accounting~~to ~~Standards~~use ~~Codification~~the leased asset during the term of ~~Subtopic~~operating ~~350-40,~~lease ~~Intangibles—Goodwill~~arrangements. ~~and~~Lessees ~~Other—Internal-Use~~are ~~Software~~permitted to ~~provide~~make ~~customers~~an ~~with~~accounting ~~guidance~~policy onelection ~~determining~~to ~~whether~~not arecognize ~~cloud~~the ~~computing~~asset ~~arrangement~~and ~~contains~~liability for leases with a ~~software~~term ~~license~~of ~~that~~twelve ~~should~~months beor ~~accounted~~less. ~~for~~Lessors’ asaccounting ~~internal-use~~is largely unchanged from the previous ~~software~~accounting standard. ~~The~~In addition, the ASU ~~cites~~expands ~~“software~~the asdisclosure arequirements ~~service,~~of ~~platform~~lease asarrangements. aLessees ~~service,~~and ~~infrastructure~~lessors aswill use a ~~service,~~modified ~~and~~retrospective ~~other~~transition ~~similar~~approach, ~~hosting~~which ~~arrangements”~~includes asa ~~examples~~number of ~~cloud~~practical ~~computing arrangements~~expedients. This guidance is effective for fiscal years—and interim periods within those fiscal years—beginning after December 15, ~~2015~~2018, with early adoption permitted. The ~~adoption~~Company ofis ~~this~~currently ~~guidance~~reviewing in the ~~fiscal~~provisions ~~third quarter~~ of ~~2015 had no impact on~~ the ~~Company’s~~new ~~financial position, results of operations or cash flows~~standard.

In ~~April~~May ~~2015~~2014, the FASB issued ASU No. ~~2015~~2014-0409 Revenue from Contracts with Customers, ~~Compensation~~which ~~—Retirement~~will ~~Benefits~~be ~~(Topic~~introduced ~~715):~~into the ~~Practical~~FASB’s ~~Expedient~~Accounting ~~for~~Standards Codification as Topic 606. Topic 606 replaces Topic 605, the ~~Measurement~~previous ~~Date~~revenue ofrecognition anguidance. ~~Employer~~The new standard’s ~~Defined~~core ~~Benefit~~principle ~~Obligation~~is ~~and~~for ~~Plan~~companies ~~Assets.~~to ~~This~~recognize ~~ASU~~revenue ~~gives~~to andepict ~~employer~~the ~~whose~~transfer ~~fiscal~~of ~~year-end~~goods ~~does~~or services ~~not~~to ~~coincide~~customers ~~with~~in aamounts ~~calendar~~that ~~month-end~~reflect ~~—e.g.~~the consideration (that is, anpayment) ~~entity~~to ~~that~~which ~~has~~the acompany ~~52-week~~ expects to be entitled in exchange for those goods or ~~53-week~~services. ~~fiscal~~The ~~year—~~new ~~the~~standard ~~ability,~~also aswill aresult ~~practical~~in ~~expedient~~enhanced disclosures about revenue, provide toguidance ~~measure~~for ~~defined~~transactions ~~benefit~~that ~~retirement~~were ~~obligations~~not ~~and~~previously ~~related~~addressed ~~plan~~comprehensively ~~assets~~(for asexample, ofservice ~~the~~revenue ~~month-end~~and ~~that~~contract ismodifications) ~~closest~~and toimprove ~~its~~guidance ~~fiscal~~for ~~year~~multiple-~~end~~element arrangements. ~~This~~The ~~guidance~~new isstandard will be effective for ~~fiscal~~the Company ~~years—and~~in ~~interim~~the ~~periods~~first ~~within~~quarter ~~those~~of fiscal ~~years—beginning after December 15~~2018, ~~2015,~~ with early adoption permitted in the first quarter of fiscal 2017. The ~~adoption~~new ofstandard ~~this~~permits ~~guidance~~two inimplementation ~~connection~~approaches, ~~with~~one requiring retrospective application of the ~~remeasurement~~new standard with restatement of prior years, and ~~curtailment~~one ~~accounting~~requiring inprospective application of the ~~fiscal~~new ~~third quarter~~standard ofwith ~~2015~~disclosure ~~did~~of ~~not~~results ~~materially~~under ~~affect~~old ~~the~~standards. The Company’s ~~financial~~is ~~position,~~currently ~~results~~evaluating the impact of ~~operations~~this orASU ~~cash~~and ~~flows~~has not yet selected an implementation approach.

~~In April 2015, the FASB issued ASU No~~3. ~~2015-03,~~ ~~Interest—Imputation~~BUSINESS of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. This guidance is effective for fiscal years—and interim periods within those fiscal years—beginning after December 15, 2015, with early adoption permitted. The Company is currently reviewing the provisions of this ASU. ACQUISITIONS

InOn ~~May~~March ~~2014~~4, ~~the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers~~2016, ~~which will be introduced into~~ the ~~FASB’s~~ ~~Accounting~~Company ~~Standards~~acquired ~~Codification~~a asbroadline ~~Topic~~distributor ~~606.~~for ~~Topic~~cash ~~606~~of ~~replaces~~approximately ~~Topic~~$39 ~~605,~~million ~~the~~plus ~~previous~~$5 ~~revenue~~million ~~recognition guidance. The new standard core principle is~~ for ~~companies to recognize revenue to depict~~ the estimated ~~transfer~~value of ~~goods~~contingent orconsideration ~~services~~payable to ~~customers~~ inthe ~~amounts~~former ~~that~~owners. ~~reflect~~On ~~the~~December ~~consideration—that~~31, is2015, ~~payment—to which~~ the ~~company~~Company ~~expects~~purchased toa bebroadline ~~entitled~~distributor ~~in exchange~~ for ~~those~~cash ~~goods~~of or$69 ~~services~~million. The ~~new~~acquisitions, ~~standard~~made ~~also~~in ~~will~~order ~~result~~to inexpand ~~enhanced~~the ~~disclosures~~Company’s ~~about~~presence ~~revenue, provide~~in ~~guidance~~certain ~~for~~geographic ~~transactions that were not previously addressed comprehensively (for example~~areas, ~~service~~are ~~revenue~~integrated ~~and~~into ~~contract modifications) and improve guidance for multiple-element arrangements. The new standard will be effective for~~ the Company’s infoodservice ~~the fiscal~~distribution ~~first~~network ~~quarter~~and ofwere ~~2018,~~funded with ~~early~~cash ~~adoption~~from ~~permitted in the fiscal first quarter of 2017~~operations. ~~The~~In ~~new~~March ~~standard permits two implementation approaches~~2016, ~~one~~approximately ~~requiring~~$1 ~~retrospective~~million ~~application~~was ofreceived ~~the~~as ~~new~~a ~~standard~~purchase ~~with~~price ~~restatement~~adjustment ofrelated ~~prior~~to ~~years,~~the ~~and~~2015 ~~one~~business ~~requiring~~acquisition ~~prospective~~resulting ~~application~~in ofminimal ~~the~~decreases ~~new~~to ~~standard~~Property ~~with~~and ~~disclosure~~equipment- ofnet ~~results under old standards. The Company is currently evaluating the impact of this ASU~~ and ~~has not yet selected an implementation approach~~Goodwill.

3. INVENTORIES

The Company’s inventories—consisting mainly of food and other foodservice-related products—are considered finished goods. Inventory costs include the purchase price of the product and freight charges to deliver it to the Company’s

~~warehouses, and are net of certain cash or non-cash vendor considerations.~~ The ~~Company~~following ~~assesses~~table summarizes the ~~need~~purchase ~~for~~price ~~valuation~~allocations ~~allowances~~ for ~~slow-moving,~~the ~~excess~~2016 and ~~obsolete~~2015 ~~inventories by estimating~~business ~~the~~acquisitions ~~net~~(in ~~recoverable~~thousands): ~~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, using the last-in, first-out (“LIFO”) method. The base year values of beginning and ending inventories are determined using the inventory price index computation method. This “links” current costs to original costs in the base year when the Company adopted LIFO. At September 26, 2015, and December 27, 2014, the LIFO balance sheet reserves were $166 million and $208 million, respectively. As a result of net changes in LIFO reserves, Cost of goods sold decreased $20 million and increased $21 million for the 13-weeks ended September 26, 2015 and September 27, 2014, respectively, and decreased $42 million and increased $69 million for the 39-weeks ended September 26, 2015 and September 27, 2014, respectively.


	2016			2015
Accounts receivable	$	4,607		$	6,724
Inventories		5,156			7,022
Other current assets		129			702
Property and equipment		4,161			7,200
Goodwill		10,525			40,242
Other intangible assets		22,300			21,200
Accounts payable		(2,420	)		(3,290	)
Accrued expenses and other current liabilities		(5,422	)		(1,554	)
Deferred income taxes		—			(8,765	)

Cash paid for acquisitions	$	39,036		$	69,481

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

Under its accounts receivable financing program and the related financing facility (the “2012 ABS Facility”), the Company sells—on a revolving basis—its eligible receivables to a wholly owned, special purpose, bankruptcy remote subsidiary (the “Receivables Company”)4. The Receivables Company, in turn, grants a continuing security interest in all of its rights, title and interest in the eligible receivables to the administrative agent for the benefit of the lenders —as defined in the 2012 ABS Facility. The Company consolidates the Receivables Company and, consequently, the sale of the receivables is a transaction internal to the Company and the receivables have not been derecognized from the Company’s unaudited Consolidated Balance Sheets. On a daily basis, cash from accounts receivable collections is remitted to the Company as additional eligible receivables are sold to the Receivables Company. If, on a weekly settlement basis, there are not sufficient eligible receivables available as collateral, the Company is required to either provide cash collateral or, in lieu of providing cash collateral, it can pay down its borrowings on the 2012 ABS Facility to cover the shortfall. Due to sufficient eligible receivables available as collateral, no cash collateral was held at September 26, 2015 or December 27, 2014. Included in the Company’s Accounts receivable balance as of September 26, 2015 and December 27, 2014 was $994 million and $941 million, respectively, of receivables held as collateral in support of the 2012 ABS Facility. See Note 10—Debt for a further description of the 2012 ABS Facility. INVENTORIES

5The Company’s inventories—consisting mainly of food and other foodservice-related products—are considered finished goods. ~~ASSETS~~Inventory ~~HELD~~costs ~~FOR~~include ~~SALE~~the purchase price of the product and freight charges to deliver it to the Company’s warehouses, as well as depreciation and labor related to processing facilities and equipment, and are net of certain cash or non-cash considerations received from vendors. The Company assesses the need for valuation allowances for slow-moving, excess and obsolete inventories by estimating the net recoverable value of such goods based upon inventory category, inventory age, specifically identified items, and overall economic conditions.

The Company ~~classifies~~records ~~its~~inventories ~~closed~~at ~~facilities~~the aslower ~~Assets~~of ~~held~~cost ~~for~~or market, ~~sale~~using at the ~~time~~last-in, ~~management~~first-out ~~commits~~(“LIFO”) tomethod. aThe ~~plan~~base toyear ~~sell~~values ~~the facility~~of beginning and itending isinventories ~~unlikely~~are determined using the ~~plan~~inventory ~~will~~price beindex ~~changed,~~computation method. This “links” current costs to original costs in the base ~~facility~~year iswhen ~~actively~~the ~~marketed~~Company ~~and~~adopted ~~available~~LIFO. ~~for~~At ~~immediate~~April ~~sale~~2, 2016, and January 2, 2016, the ~~sale~~LIFO isbalance ~~expected~~sheet toreserves bewere ~~completed~~$123 ~~within~~million ~~one~~and ~~year~~$134 million, respectively. ~~Due~~As toa ~~market~~result ~~conditions,~~of ~~certain~~net ~~facilities~~changes ~~may~~in beLIFO ~~classified~~reserves, ~~as Assets~~Cost ~~held~~of ~~for~~goods ~~sale~~sold ~~for~~decreased ~~more~~$11 ~~than~~million and ~~one~~$24 ~~year~~million asfor the ~~Company~~13-weeks ~~continues~~ended toApril ~~actively~~2, ~~market~~2016 ~~the~~and ~~facilities~~March at28, ~~reasonable~~2015, ~~prices~~respectively.

~~The~~5. ~~change~~ACCOUNTS ~~in Assets~~RECEIVABLE ~~held~~FINANCING ~~for sale for the 39-weeks ended September 26, 2015 was as follows (in thousands):~~ PROGRAM

Balance at December 27, 2014	$	5,360
Transfers in		2,281
Asset impairment charges		(1,118	)
Assets sold		(967	)
Balance at September 26, 2015	$	5,556

Under its accounts receivable financing program under the 2012 ABS Facility (the “2012 ABS Facility”), the Company, and from time to time its subsidiaries, sells—on a revolving basis—its eligible receivables to a wholly owned, special purpose, bankruptcy remote subsidiary (the “Receivables Company”). The Receivables Company, in turn, grants a continuing security interest in all of its rights, title and interest in the eligible receivables to the administrative agent for the benefit of the lenders as defined by the 2012 ABS Facility. The Company consolidates the Receivables Company and, consequently, the transfer of the receivables is a transaction internal to the Company and the receivables have not been derecognized from the Company’s Consolidated Balance Sheets. On a daily basis, cash from accounts receivable collections is remitted to the Company as additional eligible receivables are sold to the Receivables Company. If, on a weekly settlement basis, there are not sufficient eligible receivables available as collateral, the Company is required to either provide cash collateral or, in lieu of providing cash collateral, it can pay down its borrowings on the 2012 ABS Facility to cover the shortfall. Due to sufficient eligible receivables available as collateral, no cash collateral was held at April 2, 2016 or January 2, 2016. Included in the Company’s accounts receivable balance as of April 2, 2016 and January 2, 2016 was $964 million and $933 million, respectively, of receivables held as collateral in support of the 2012 ABS Facility. See Note 10, Debt for a further description of the 2012 ABS Facility.

~~During fiscal third quarter of 2015, the Company closed its Lakeland, Florida distribution facility and reclassified it to Assets held for sale~~6. ~~During~~ASSETS ~~the~~HELD ~~fiscal~~FOR first quarter of 2015, certain Assets held for sale were adjusted to equal their estimated fair value, less cost to sell, resulting in an asset impairment charge of $1 million. See Note 8—Fair Value Measurements. Two facilities classified as Assets held for sale were sold during fiscal year 2015 for proceeds of $2 million. SALE

6The Company classifies its closed facilities as Assets held for sale at the time management commits to a plan to sell the facility, the facility is actively marketed and available for immediate sale, and the sale is expected to be completed within one year. ~~PROPERTY~~Due ~~AND~~to ~~EQUIPMENT~~market conditions, certain facilities may be classified as Assets held for sale for more than one year as the Company continues to actively market the facilities at reasonable prices. The Company had $5 million of Assets held for sale at April 2, 2016 and January 2, 2016.

Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to 40 years. Property and equipment under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining term of the respective leases or the estimated useful lives of the assets. At September 26, 2015 and December 27, 2014, Property and equipment-net included accumulated depreciation of $1,476 million and $1,313 million, respectively. Depreciation expense was $66 million and $67 million for the 13-weeks ended September 26, 2015 and September 27, 2014, respectively, and $189 million and $197 million for the 39-weeks ended September 26, 2015 and September 27, 2014, respectively. Due to the termination of the Merger Agreement, in the fiscal second quarter of 2015, the Company incurred an asset impairment charge of $5 million to write off technology related integration assets.

7. ~~GOODWILL~~PROPERTY AND ~~OTHER INTANGIBLES~~EQUIPMENT

~~Goodwill~~Property and ~~Other~~equipment ~~intangible~~are ~~assets~~stated ~~include~~at ~~the~~ cost. Depreciation of ~~acquired~~property ~~businesses~~and inequipment ~~excess~~is calculated using the straight-line method over the estimated useful lives of the ~~fair~~assets, ~~value~~which range from three to 40 years. Property and equipment under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the ~~tangible~~remaining ~~net~~terms of the ~~assets~~respective ~~recorded~~lease inor ~~connection~~the ~~with~~estimated ~~acquisitions.~~useful ~~Other~~lives ~~intangible~~of the assets. ~~include~~At ~~customer~~April ~~relationships~~2, ~~noncompete~~2016 ~~agreements,~~and ~~the~~January ~~brand~~2, ~~names~~2016, Property and ~~trademarks~~equipment-net ~~comprising~~included ~~the~~accumulated ~~Company’s~~depreciation ~~portfolio~~ of ~~exclusive~~$1,571 ~~brands~~million and ~~trademarks~~$1,517 million, respectively. ~~Brand~~Depreciation ~~names~~expense was $65 million and ~~trademarks~~$62 ~~are~~million ~~indefinite~~for the 13-~~lived~~weeks ~~intangible~~ended ~~assets~~April ~~and~~2, ~~accordingly,~~2016 ~~are~~and ~~not~~March ~~subject~~28, to2015, ~~amortization~~respectively.

~~Customer relationship intangible assets have definite lives and are carried at the acquired fair value less accumulated amortization~~8. ~~Customer~~GOODWILL ~~relationship~~AND ~~intangible~~OTHER assets are amortized over the estimated useful lives—four to ten years. Amortization expense was $36 million and $38 million for the 13-weeks ended September 26, 2015 and September 27, 2014, respectively, and $110 million and $113 million for the 39-weeks ended September 26, 2015 and September 27, 2014, respectively. INTANGIBLES

Goodwill and Other intangible assets include the cost of acquired businesses in excess of the fair value of the tangible net assets acquired. Other intangible assets include Customer relationships, Noncompete agreements, and the Brand names and trademarks comprising the Company’s portfolio of exclusive brands and trademarks. Brand names and trademarks are indefinite-lived intangible assets, and accordingly, are not subject to amortization.

Customer relationship and noncompete intangible assets have definite lives, and are carried at the acquired fair value less accumulated amortization. Customer relationship and noncompete intangible assets are amortized over the estimated useful lives (four to ten years). Amortization expense was $38 million and $37 million for the 13-weeks ended April 2, 2016 and March 28, 2015, respectively.

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

	September 26,2015			December 27,2014
	April 2, 2016			January 2, 2016
Goodwill	$	3,~~835~~885,~~477~~887		$	3,~~835~~875,~~477~~719
Other intangibles—net
Customer relationships—amortizable:
Gross carrying amount	$	1,~~352~~396,~~720~~220		$	1,~~376~~373,~~094~~920
Accumulated amortization		(1,~~113~~187,~~484~~429	)		(1,~~026~~149,~~680~~572	)
Net carrying value		~~239~~208,~~236~~791			~~349~~224,~~414~~348
Noncompete agreement—amortizable:
Noncompete agreements—amortizable:
Gross carrying amount		800			800
Accumulated amortization		(~~307~~387	)		(~~187~~347	)
Net carrying value		~~493~~413			~~613~~453
Brand names and trademarks—not amortizing		252,800			252,800
Total Other intangibles—net	$	~~492~~462,~~529~~004		$	~~602~~477,~~827~~601

The 2016 increase in Goodwill reflects the 2016 broadline distributor acquisition, partially offset by a purchase price adjustment related to the 2015 ~~decrease~~acquisition. The 2016 increase in the ~~Gross~~gross carrying amount of ~~customer~~Customer relationships is attributable to ~~the~~a ~~write-off~~2016 ~~of fully~~broadline ~~amortized~~distributor ~~Customer~~acquisition. ~~relationships~~See ~~intangible~~Note ~~assets~~3, Business Acquisitions.

AsThe ~~required, the~~ Company assesses Goodwill and Other intangible assets with indefinite lives for impairment annually, or more frequently, if events occur that indicate an asset may be impaired. For Goodwill and indefinite-lived intangible assets, the Company’s policy is to assess for impairment at the beginning of each fiscal third quarter. For Other intangible assets with definite lives, the Company assesses impairment only if events occur that indicate that the carrying amount of an asset may not be recoverable. All ~~Goodwill~~goodwill is assigned to the consolidated Company as the reporting unit. The Company completed its most recent annual impairment assessment for Goodwill and its indefinite-lived intangible assets as of June 28, 2015—the first day of fiscal 2015 third quarter—with no impairments noted.

The Company completed its most recent annual impairment assessment for Goodwill and indefinite-lived intangible assets as of June 28, 2015—the first day of the fiscal third quarter of 2015—with no impairments noted.

For Goodwill, the reporting unit used in assessing impairment is the Company’s one business segment as described in Note 18—Business Segment Information. The Company’s assessment for impairment of goodwill utilized a combination of discounted cash flow analysis, comparative market multiples, and comparative market transaction multiples, and were weighted 50%, 35% and 15% respectively, to determine the fair value of the reporting unit for comparison to the corresponding carrying value. If the carrying value of the reporting unit exceeds its fair value, the Company must then perform a comparison of the implied fair value of Goodwill with its carrying value. If the carrying value of the Goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to the excess. Based upon the Company’s fiscal 2015 annual Goodwill impairment analysis, the Company concluded the fair value of its reporting unit exceeded its carrying value.

The Company’s fair value estimates of the Brand names and trademarks indefinite-lived intangible assets are based on a relief from royalty method. The fair value of these intangible assets is determined for comparison to the corresponding carrying value. If the carrying value of these assets exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. Based upon the Company’s fiscal 2015 annual impairment analysis, the Company concluded the fair value of the Company’s Brand names and trademarks exceeded its carrying value.

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

89. FAIR VALUE MEASUREMENTS

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

•

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

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

•

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

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

The Company’s assets and liabilities measured at fair value on a recurring and nonrecurring basis as of ~~September 26~~April 2, ~~2015~~2016 and ~~December~~ January 272, ~~2014~~ 2016, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):

Description	Level 1		Level 2		Level 3		Total
Recurring fair value measurements:
Money market funds	$	~~287~~41,~~100~~300	$	—	$	—	$	~~287~~41,~~100~~300
Balance at September 26, 2015	$	287,100	$	—	$	—	$	287,100
Balance at April 2, 2016	$	41,300	$	—	$	—	$	41,300
Recurring fair value measurements:
Money market funds	$	~~231~~113,~~600~~700	$	—	$	—	$	~~231~~113,~~600~~700
Balance at December 27, 2014	$	231,600	$	—	$	—	$	231,600
Balance at January 2, 2016	$	113,700	$	—	$	—	$	113,700
Nonrecurring fair value measurements:
Assets held for sale	$	—	$	—	$	2,600	$	2,600
Balance at September 26, 2015	$	—	$	—	$	2,600	$	2,600
Balance at January 2, 2016	$	—	$	—	$	2,600	$	2,600
Nonrecurring fair value measurements:
Assets held for sale	$	—	$	—	$	4,800	$	4,800
Balance at December 27, 2014	$	—	$	—	$	4,800	$	4,800

Recurring Fair Value Measurements

Money Market Funds

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

Nonrecurring Fair Value Measurements

Assets Held for Sale

The Company isrecords ~~required to record~~ Assets held for sale at the lesser of the carrying amount or estimated fair value less cost to sell. Certain Assets held for sale were adjusted to equal their estimated fair value, less cost to sell, resulting in a Tangible asset impairment ~~charges~~charge of $1 million ~~and $2 million~~ during the ~~39-weeks~~first ~~ended~~quarter ~~September 26,~~of 2015. ~~and~~There ~~September 27,~~were ~~2014,~~no impairments on Assets held for sale during the first quarter ~~respectively~~of 2016. Fair value was estimated by the Company based on information received from real estate brokers. The amounts included in the tables above, classified under Level 3 within the fair value hierarchy, represent the estimated fair values of those Assets held for sale that became the new carrying amounts at the time the impairments were recorded.

~~The~~Other ~~amounts~~Fair ~~included~~Value ~~in the~~Measurements tables above, classified under Level 3 within the fair value hierarchy, represent the estimated fair values of those Assets held for sale that became the new carrying amounts at the time the impairments were recorded.

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

~~Other~~The ~~Fair~~fair ~~Value~~value ~~Measurements~~of the Company’s total debt approximated $5.1 billion and $4.8 billion, as compared to its aggregate carrying value of $5.0 billion and $4.7 billion as of April 2, 2016 and January 2, 2016, respectively. At April 2, 2016 and January 2, 2016, the fair value, estimated at $1.4 billion, of the Company’s 8.5% Senior Notes was classified under Level 2 of the fair value hierarchy, with fair value based upon the closing market price at the end of the reporting period. The fair value of the balance of 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. See Note 10, Debt for further description of the Company’s debt.

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

Excluding the above noted industrial bonds, the fair value of the Company’s total debt approximated $4.8 billion at September 26, 2015 and December 27, 2014, as compared to its aggregate carrying value of $4.7 billion as of September 26, 2015 and December 27, 2014, respectively. At September 26, 2015 and December 27, 2014, the fair value, estimated at $1.4 billion, of the Senior Notes was classified under Level 2 of the fair value hierarchy, with fair valued based upon the closing market price at the end of the reporting period. The fair value of the balance of the Company’s debt is 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. See Note 10—Debt for further description of the Company’s debt.

9. VARIABLE INTEREST ENTITY

In April 2014, the Company entered into a sublease and future purchase of a distribution facility. Under these agreements, the facility will be purchased in May 2018, commensurate with the sublease termination date. The facility is the only asset owned by an investment trust, the landlord to the original lease. The Company determined the investment trust is a variable interest entity (“VIE”) for which the Company is the primary beneficiary.

Despite ongoing efforts, the Company was unable to obtain the information necessary to include the accounts and activities of the investment trust in its unaudited Consolidated Financial Statements. As such, the Company opted to invoke the scope exception available under VIE accounting guidance and will not consolidate the VIE. Since the Company was not be able to consolidate the investment trust under VIE guidance, applicable lease guidance was applied to the transaction itself. The Company concluded that the sublease and purchase agreements, together, qualify for capital lease treatment. Accordingly at September 26, 2015, a capital asset and related lease and purchase obligation totaling $27 million and $22 million, respectively, are recorded in the Company’s unaudited Consolidated Balance Sheet. The Company depreciates the asset balance over its estimated useful life and reduces the capital lease and purchase obligation as payments are made.

10.

DEBT

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

	Contractual Maturity	Interest Rate atSeptember 26,2015				OutstandingPrincipal atSeptember 26,2015				OutstandingPrincipal atDecember 27,2014
		Interest Rate at
Debt Description
		April 2,		April 2,				January 2,
ABL Facility	December 31, 2018		—			$	—			$	—
	Maturity	2016		2016				2016
2012 ABS Facility	September 30, 2018		1.28	%			586,000				636,000
Debt Description
Amended 2011 Term Loan	March 31, 2019		4.50				2,058,000				2,073,750
ABL Facility	December 31, 2018	2.46%		$	177,026			$	—
Senior Notes	June 30, 2019		8.50				1,348,276				1,350,000
2012 ABS Facility	September 30, 2018	1.57			661,000				586,000
CMBS Fixed Facility	August 1, 2017		6.38				472,391				472,391
Amended 2011 Term Loan (net of $9,091 and $9,848 of unamortized deferred financing costs, respectively)	March 31, 2019	4.50			2,033,159				2,037,652
Obligations under capital leases	2018–2025		3.14 - 6.18				226,609				189,232
Senior Notes (net of $12,504 and $13,441 of unamortized deferred financing costs, respectively)	June 30, 2019	8.50			1,335,772				1,334,835
Other debt	2018–2031		5.75 - 9.00				33,192				11,795
CMBS Fixed Facility (net of $1,241 and $1,473 of unamortized deferred financing costs, respectively)	August 1, 2017	6.38			471,150				470,918
Total debt							4,724,468				4,733,168
Obligations under capital leases	2018–2025	2.67 - 6.18			307,844				270,406
Add: Unamortized premium							12,485				14,982
Other debt	2018–2031	5.75 - 9.00			33,230				33,325
Less: Current portion of long-term debt							(60,377	)			(51,877	)
Total debt					5,019,181				4,733,136
Long-term debt						$	4,676,576			$	4,696,273
Add unamortized premium					10,820				11,652
Less current portion of long-term debt					(69,164	)			(62,639	)
Long-term debt				$	4,960,837			$	4,682,149

At ~~September 26~~April 2, ~~2015~~2016, $2~~,080~~.1 ~~million~~billion of the ~~Total~~total debt was at a fixed rate and $2.9 billion was at a floating rate.

Revolving Credit Agreement

The Company’s asset backed senior secured revolving loan facility (the “ABL Facility”) provides for loans upunder toits $two tranches: ABL Tranche A-1~~,100~~ ~~million~~and ABL Tranche A, with its capacity limited by a borrowing base ~~calculations~~. AsThe ofmaximum ~~September 26,~~borrowing ~~2015,~~available ~~the~~is ~~ABL~~$1,300 ~~Facility~~million ~~consists~~with ~~of two tranches:~~ ABL Tranche A-1 ~~provided~~at ~~for loans up to~~ $75100 million, and ABL Tranche A ~~provided~~at ~~for loans in excess of~~ $~~75 million up to $~~1,~~025~~200 million. AsThe ofmaturity ~~September 26,~~date ~~2015,~~is the ~~Company had no outstanding borrowings, but had issued letters~~ earlier of ~~credit totaling $387 million under the ABL Facility. Outstanding letters of credit included:~~ (1) ~~$78~~October 20, ~~million~~2020, ~~issued to secure~~ the ~~Company’s~~amended ~~obligations~~ABL ~~related~~Facility tomaturity ~~certain~~date; ~~facility leases,~~ (2) ~~$298~~April 1, ~~million~~2019 ~~issued~~if ~~in favor of certain commercial insurers securing~~ the Company’s ~~obligations~~Senior ~~related~~Notes tohave ~~its~~more ~~self-insurance program, and (3)~~than $11300 million ~~for~~ ~~other obligations~~ of ~~the~~principal ~~Company.~~outstanding ~~There~~at ~~was~~that ~~available~~date ~~capacity~~and on the ~~ABL~~maturity ~~Facility~~date of ~~$713~~the ~~million~~Senior Notes athas ~~September 26,~~not ~~2015.~~been Asextended ofto ~~September 26,~~later ~~2015,~~than ~~on Tranche A-1 borrowings~~October 20, ~~the~~2020; ~~Company can periodically elect to pay interest at Prime plus 1.75%~~ or ~~the London Inter Bank Offered Rate~~ (~~“LIBOR”~~3) December 31, ~~plus~~2018 ~~2.75%.~~if Onthe ~~Tranche~~Amended A2011 ~~borrowings,~~Term ~~the~~Loan ~~Company~~has ~~can~~more ~~periodically~~than $300 ~~elect~~million toof ~~pay~~principal ~~interest~~outstanding at ~~Prime~~that ~~plus~~date ~~0.50%~~and orits ~~LIBOR~~maturity ~~plus~~date ~~1.50%.~~has ~~The~~not ~~ABL~~been ~~Facility~~extended ~~also carries letter of credit fees~~to oflater ~~1.50%~~than ~~and~~October 20, ~~an unused commitment fee of 0~~2020.~~25%.~~

OnAs ~~June 19~~of April 2, ~~2015~~2016, the Company had $177 million outstanding borrowings and had issued letters of credit totaling $378 million under the ABL Facility. ~~was~~Outstanding ~~amended~~letters ~~whereby~~of ~~the~~credit ~~maturity~~included: ~~date~~(1) $71 ~~was~~million ~~extended one~~issued ~~year~~to secure the Company’s obligations with respect to ~~May 11~~certain facility leases, ~~2017~~(2) $304 ~~and~~million issued in favor of certain commercial insurers securing the ~~interest~~Company’s ~~rate~~obligations onwith ~~outstanding~~respect ~~borrowings~~to its self-insurance program, and ~~letter~~(3) $3 million in letters of credit ~~fees~~for ~~were~~other ~~each~~obligations. ~~reduced~~There 50was ~~basis~~available ~~points.~~capacity ~~The~~on ~~Company~~the ~~incurred~~ABL Facility of $~~0.7~~741 million at April 2, 2016. As of ~~lender~~April ~~fees~~2, ~~and~~2016, ~~third~~on ~~party~~Tranche ~~costs~~A-1 ~~related~~borrowings, the Company can periodically elect to pay interest at an alternative base rate (“ABR”), as defined in the Company’s credit agreements, plus 1.50% or the London Inter Bank Offered Rate (“LIBOR”) plus 2.50%. On Tranche A borrowings, the Company can periodically elect to pay interest at ABR plus 0.25% or LIBOR plus 1.25%. The ABL Facility ~~amendment~~also carries letter of credit fees of 1.25% and an unused commitment fee of 0.25%.

As9 discussed in Note 19—Subsequent Events, on October 20, 2015, the ABL Facility was again amended. The maximum borrowing available was increased $200 million to $1,300 million – ABL Tranche A-1 increased from $75 million to $100 million, and the maximum borrowing available under the ABL Tranche A increased $175 million to $1,200 million. Additionally, under this amendment, the interest rate on outstanding borrowings and letter of credit fees was reduced by 25 basis points. The maturity date was extended from May 11, 2017 to the earlier of (1) October 20, 2020, the amended ABL Facility maturity date; (2) April 1, 2019 if the Company’s Senior Notes have more than $300 million of principal outstanding at that date and the maturity date of the Senior Notes has not been extended to later than October 20, 2020; or (3) December 31, 2018 if the Company’s senior secured term loan (the “Amended 2011 Term Loan”) has more than $300 million of principal outstanding at that date and the maturity date of the Amended 2011 Term Loan has not been extended to later than October 20, 2020. The Company incurred $2 million of lender fees and third party costs related to this ABL Facility amendment, which will be capitalized as Deferred financing fees and amortized to the ABL Facility maturity date.

Accounts Receivable Financing Facility

Under the 2012 ABS Facility, the Company sells—on a revolving basis—its eligible receivables to the Receivables Company. The Receivables Company, in turn, grants a continuing security interest in all of its rights, title and interest in the eligible receivables to the administrative agent for the benefit of the lenders as defined in the 2012 ABS Facility.

The maximum capacity under the 2012 ABS Facility is $800 million. Borrowings under the 2012 ABS Facility were $586 million and $636 million at September 26, 2015 and December 27, 2014, respectively. The Company, at its option, can

request additional borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $141 million at September 26, 2015 based on eligible receivables as collateral. The portion of the 2012 ABS Facility held by the lenders who fund the 2012 ABS Facility with commercial paper bears interest at the lender’s commercial paper rate, plus any other costs associated with the issuance of commercial paper, plus 1.00%, and an unused commitment fee of 0.35%. The portion of the 2012 ABS Facility held by lenders that do not fund the 2012 ABS Facility with commercial paper bears interest at LIBOR plus 1.00%, and an unused commitment fee of 0.35%. See Note 4—Accounts Receivable Financing Program.

~~As discussed~~Under ~~in Note 19—Subsequent Events, on October 19, 2015,~~ the 2012 ABS Facility, ~~was amended whereby~~ the ~~maturity~~Company, ~~date~~and ~~was extended~~ from ~~August 5,~~time ~~2016~~ to ~~September 30,~~time ~~2018.~~its ~~There~~subsidiaries, ~~were~~sells—on noa ~~other~~revolving ~~significant~~basis—its ~~changes~~eligible receivables to the ~~2012~~ ~~ABS~~Receivables ~~Facility~~Company. The Receivables Company, ~~incurred~~in $1turn, ~~million~~grants ofa ~~lender~~continuing ~~fees~~security ~~and~~interest ~~third~~in ~~party~~all ~~costs~~of ~~related~~its torights, ~~the~~title ~~2012~~and ~~ABS~~interest ~~Facility~~in ~~amendment.~~the ~~Due~~eligible receivables to the ~~amendment,~~administrative ~~borrowings~~agent ~~outstanding~~for ~~under~~ the ~~2012~~benefit ~~ABS~~of ~~Facility~~the ~~are~~lenders ~~classified~~ (as ~~Long-term~~defined ~~debt~~by in the ~~Company’s~~2012 ~~unaudited~~ABS ~~Consolidated~~Facility). ~~Balance~~See ~~Sheet~~Note ~~at September 26~~5, ~~2015~~Accounts Receivable Financing Program.

The maximum capacity under the 2012 ABS Facility is $800 million. Borrowings under the 2012 ABS Facility were $661 million and $586 million at April 2, 2016 and January 2, 2016, respectively. The Company, at its option, can request additional borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $57 million at April 2, 2016 based on eligible receivables as collateral. The portion of the 2012 ABS Facility held by the lenders who fund the 2012 ABS Facility with commercial paper bears interest at the lender’s commercial paper rate, plus any other costs associated with the issuance of commercial paper plus 1.00%, and an unused commitment fee of 0.35%. The portion of the 2012 ABS Facility held by lenders that do not fund the 2012 ABS Facility with commercial paper bears interest at LIBOR plus 1.00%, and an unused commitment fee of 0.35%.

Term Loan Agreement

The ~~Company’s~~ Amended 2011 Term Loan, consisted of a senior secured term loan with outstanding borrowings of $2,~~058~~033 million and $2,038 million, net of $9 million and $10 million of unamortized deferred financing costs at ~~September 26~~April 2, ~~2015~~2016 and January 2, 2016, respectively. The Amended 2011 Term Loan bears interest equal to ~~Prime~~ ABR plus 2.50%, with an ABR floor of 2.00%, or LIBOR plus 3.50%, with a LIBOR floor of 1.00%, based on a periodic election of the interest rate by the Company. Principal repayments of $5 million are payable quarterly with the balance at maturity. The Amended 2011 Term Loan may require mandatory repayments if certain assets are sold, or based on excess cash flow generated by the Company, as defined in the ~~debt~~ agreement. The interest rate for all borrowings on the Amended 2011 Term Loan was 4.50%—the LIBOR floor of 1.00% plus 3.50%— at ~~September 26,~~April ~~2015. At September 26~~2, ~~2015, entities affiliated with KKR held $236 million of the Company’s Amended 2011 Term Loan debt~~2016. ~~See Note 12 – Related Party Transactions.~~

Senior Notes

The Senior Notes, with outstanding principal of $1,~~348~~336 million and $1,335 million at ~~September 26~~April 2, ~~2015~~2016 and January 2, 2016, net of $13 million of unamortized deferred financing costs for both periods, bear interest at 8.50%. ~~There~~Prior ~~was~~to ~~unamortized~~June ~~issue~~30, ~~premium~~2016, ~~costs~~the ~~associated~~Senior Notes ~~with~~are redeemable, at the ~~Senior~~Company’s ~~Notes~~option, ~~issuances~~in ofwhole ~~$12~~or ~~million~~in part at ~~September 26,~~a ~~2015~~price of 104.25% ~~The~~of ~~premium~~their ~~is amortized~~principal, asplus aaccrued ~~decrease~~and unpaid interest, if any, to ~~Interest~~the ~~expense-net~~relevant ~~over~~redemption date. On or after June 30, 2016 and 2017, the ~~remaining~~optional ~~life~~redemption price offor the ~~debt~~Senior ~~facility~~Notes declines to 102.13% Inand ~~February~~100.0%, ~~2015~~respectively, of their principal amount, plus accrued and unpaid interest, if any, to the ~~Company~~relevant ~~repurchased~~redemption ~~all~~date. ofThere was unamortized issue premium associated with the Senior Notes issuances ~~held~~of by$11 ~~the~~million ~~entities~~and ~~affiliated~~$12 ~~with~~million ~~KKR~~at April 2, 2016 and January 2, 2016, respectively. The premium is amortized as ~~further~~a ~~discussed~~decrease into ~~Note~~Interest ~~12—Related Party~~expense-net ~~Transactions~~over the remaining life of the Senior Notes.

CMBS Fixed Facility

The CMBS Fixed Facility, ~~provides~~with ~~financing~~an outstanding balance of $~~472~~471 million, ~~and~~net isof ~~currently~~$1 ~~secured~~million byof ~~mortgages~~unamortized ondeferred 34financing ~~properties,~~costs ~~consisting~~as of ~~distribution facilities.~~April ~~The~~2, ~~CMBS~~2016 ~~Fixed~~and ~~Facility~~January 2, 2016, bears interest at 6.38%. The CMBS Fixed Facility is secured by mortgages on 34 properties, consisting of distribution centers. Security deposits and escrow amounts related to certain properties collateralizing the CMBS Fixed Facility of $6 million at ~~September 26~~both April 2, ~~2015~~2016 and ~~December 27~~January 2, ~~2014~~2016 are included in the ~~Company’s unaudited~~ Consolidated Balance Sheets in Other assets.

Other Debt

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

Other debt of $33 million and $12 million at September 26, 2015 and December 27, 2014, respectively, consists primarily of various state industrial revenue bonds.

To obtain certain tax incentives related to the construction of a new distribution facility, in January 2015, the Company and a wholly owned subsidiary entered into an industrial revenue bond agreement with a state for the issuance of a maximum of $40 million in Taxable Demand Revenue Bonds (the “TRB’s”). The TRB’s are self-funded as the Company’s wholly owned subsidiary purchases the TRB’s, and the state loans the proceeds back to the Company. The TRB’s, which mature January 1, 2030, can be prepaid without penalty one year after issuance. Interest on the TRB’s and the loan is 6.25%. At September 26, 2015, $22 million has been drawn on TRBs and recorded as a $22 million long-term asset and a corresponding long-term liability in the Company’s unaudited Consolidated Balance Sheet.

Security Interests

Substantially all of the Company’s assets are pledged under the various debt agreements. Debt under the 2012 ABS Facility is secured by certain designated receivables and, in certain circumstances, by restricted cash. The ABL Facility is secured by certain other designated receivables not pledged under the 2012 ABS Facility, inventories, and tractors and trailers owned by the Company. The CMBS Fixed Facility is collateralized by mortgages on 34 related properties. The Company’s obligations under the Amended 2011 Term Loan are secured by all of the capital stock of its subsidiaries, each of the direct and indirect wholly owned domestic subsidiaries—as defined in the agreements—and are secured by substantially all assets of the

1110

certain other designated receivables not pledged under the 2012 ABS Facility, inventories and tractors and trailers owned by the Company. The CMBS Fixed Facility is collateralized by mortgages on 34 related properties. The Company’s obligations under the Amended 2011 Term Loan are secured by all of the capital stock of its subsidiaries, each of the direct and indirect wholly owned domestic subsidiaries –as defined in the agreements– and are secured by substantially all assets of the Company and its subsidiaries not pledged under the 2012 ABS Facility or the CMBS Fixed Facility. The Amended 2011 Term Loan has priority over certain collateral securing the ABL Facility, and it has second priority to collateral securing the ABL Facility. As of ~~September 26~~April 2, ~~2015~~2016, nine properties remain in a special purpose, bankruptcy remote subsidiary, and are not pledged as collateral under any of the Company’s debt agreements.

Restrictive Covenants

The Company’s credit facilities, loan agreements and indentures contain customary covenants. These include, among other things, covenants that restrict the Company’s ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. ~~Certain~~As ~~debt agreements also contain various and customary events~~ of ~~default. Those~~April ~~include~~2, ~~without limitation~~2016, the ~~failure~~Company tohad ~~pay~~$151 ~~interest~~million ~~or principal when it is due under the agreements, cross default provisions, the failure~~ of ~~representations~~restricted ~~and warranties contained in the agreements to be true, and certain insolvency~~payment ~~events. If a default event occurs and continues~~capacity, ~~the principal amounts outstanding—together with all accrued unpaid interest~~ and ~~other amounts owed—may be declared immediately due and payable by the lenders. Were such an event to occur~~$1, ~~the~~106 ~~Company~~million would be forced to seek new financing that may not be on as favorable terms as its current facilities. The Company’s ability to refinance its indebtedness on favorable terms—or at all—is directly affected by the current economic and financial conditions. In addition, the Company’s ability to incur secured indebtedness (which may enable it to achieve more favorable terms than the incurrence of ~~unsecured indebtedness) depends in part on the value of~~ its net assets~~. This,~~ inthat ~~turn,~~were ~~relies~~restricted onunder ~~the~~these ~~strength of its cash flows, results of operations, economic and market conditions and other factors~~covenants.

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

11.

RESTRUCTURING LIABILITIES

The following table summarizes the changes in the restructuring liabilities for the 3913-weeks ended ~~September 26~~April 2, ~~2015~~ 2016 (in thousands):

	Severanceand RelatedCosts			FacilityClosingCosts			Total
	Severance andRelated Costs			Facility ClosingCosts			Total
Balance at December 27, 2014	$	56,450		$	431		$	56,881
Balance at January 2, 2016	$	118,634		$	210		$	118,844
Current period charges		8010,~~543~~200			—2,563			8012,~~543~~763
Change in estimate		—(1,986	)		36—			36(1,986	)
Payments and usage—net of accretion		(514,~~333~~075	)		(~~224~~1,971	)		(516,~~557~~046	)
Balance at September 26, 2015	$	131,660		$	243		$	131,903
Balance at April 2, 2016	$	112,773		$	802		$	113,575

~~During~~The ~~the~~Company ~~fiscal~~periodically ~~third~~closes ~~quarter~~or ofconsolidates ~~2015,~~distribution ~~the~~facilities ~~Company~~and ~~announced~~implements ~~its~~initiatives ~~plan~~in ~~to streamline~~ its ~~field operational~~ ~~model~~ongoing ~~that~~efforts ~~is intended~~ to ~~make~~reduce ~~the~~costs ~~operations~~and ~~more~~improve ~~effective~~operating effectiveness. In ~~The~~connection ~~Company~~with ~~anticipates~~these activities, the ~~reorganization~~Company ~~will~~incurs bevarious ~~completed~~costs inincluding ~~fiscal~~multiemployer ~~year~~pension ~~2016.~~withdrawal Anliabilities, ~~initial~~severance ~~restructuring~~and ~~charge~~other ofemployee ~~$29~~separation ~~million~~costs that ~~was~~are ~~recorded~~included in the ~~fiscal~~above ~~third quarter of 2015 and consisted primarily of employee separation related costs~~table.

During the ~~fiscal~~first ~~third~~ quarter of ~~2015~~2016, the Company ~~completed~~incurred ~~the~~additional ~~closing~~Severance and Related Costs of $10 million associated with its ~~Lakeland,~~plan ~~Florida~~to ~~distribution~~streamline ~~facility,~~its ~~resulting~~field inorganization amodel ~~restructuring~~and ~~charge~~its ofdecision ~~approximately~~to $1close ~~million~~its ~~for~~Baltimore, ~~severance~~Maryland ~~costs~~distribution facility. ~~Its~~Additionally, ~~business~~the ~~activities~~Company ~~were~~incurred ~~transferred~~$3 million related to ~~other~~an ~~Company~~unused ~~distribution~~facility ~~facilities~~lease settlement.

~~During~~At ~~the~~April ~~fiscal second quarter of 2015~~2, ~~the Company announced its tentative decision to close the Baltimore~~2016, ~~Maryland~~Severance ~~distribution~~and ~~facility. The~~Related ~~Company~~Costs isconsisted ~~currently~~of ~~engaged~~$86 inmillion ~~discussions~~of ~~with~~multiemployer ~~unions~~pension ~~representing~~withdrawal ~~certain~~liabilities ~~employees~~of ~~regarding~~which ~~this~~$36 ~~tentative~~million related ~~decision.~~to Adistribution ~~final~~facilities ~~decision~~closed ~~regarding~~prior ~~the~~to ~~Baltimore~~2015 ~~facility~~and ~~will~~payable bethrough ~~made~~2031 ~~once~~at ~~negotiations~~interest ~~with~~rates ~~the~~ranging ~~unions~~from ~~are concluded~~5.9% ~~In anticipation~~to of6.5%. aAlso ~~potential~~included ~~closure~~was ~~of the Baltimore facility, the Company accrued a restructuring charge estimated at~~ $5150 million, ~~including $46 million~~ of estimated ~~multiemployer~~withdrawal ~~pension~~liability ~~withdrawal~~related ~~liabilities,~~to ~~and~~the $5closure ~~million~~of ~~related~~the toBaltimore, ~~estimated~~Maryland ~~employee~~distribution ~~separation related costs~~facility. The ~~estimated~~calendar ~~multiemployer~~2015 pension ~~liability~~withdrawal estimate was based on the latest available information received from the respective plans’ administrator. ~~and~~Actual ~~represents~~results ancould ~~estimate~~materially ~~for~~differ afrom ~~calendar~~initial ~~year~~estimates ~~2014 withdrawal. Due~~due to ~~the lack of current information, including~~ changes in market conditions, and changes in the funded status of the related multiemployer pension plans,. ~~the~~The ~~settlement~~balance of ~~these~~Severance ~~multiemployer~~and ~~pension~~Related ~~withdrawal~~Costs ~~liabilities~~of ~~could~~$25 ~~materially differ~~million ~~from~~is ~~this~~primarily ~~estimate~~related to the Company’s initiative to reorganize its field operations model.

~~The~~11 $132 million Severance and Related Costs balance as of September 26, 2015, also includes $47 million of multiemployer pension withdrawal liabilities relating to facilities closed prior to 2015. These are payable in monthly installments through 2031 at effective interest rates ranging from 5.90% to 6.70%.

12.

RELATED PARTY TRANSACTIONS

The Company ~~pays~~is aparty ~~quarterly management fee~~ to ~~investment~~consulting ~~funds~~agreements ~~associated~~ with oreach ~~designated~~of by the Sponsors. ~~For~~pursuant to which each ~~of the~~Sponsor ~~13-weeks~~provides ~~ended~~the ~~September 26,~~Company with ~~2015~~ongoing consulting and ~~September 27,~~management ~~2014,~~advisory ~~the~~services ~~Company~~and ~~recorded~~receives ~~management~~ fees and reimbursements of related ~~expenses~~out of $3pocket ~~million~~expenses. For each of the 3913-weeks ended ~~September 26~~April 2, ~~2015~~2016 and ~~September 27~~March 28, ~~2014~~2015, the Company recorded ~~management~~ ~~fees~~$3 ~~and~~million ~~related~~in ~~expenses~~consulting fees, ofin $8the ~~million.~~aggregate, ~~These were~~ reported asin Distribution, selling and administrative costs in the ~~unaudited~~ Consolidated Statements of Comprehensive Income. ~~(Loss)~~Investment funds or accounts managed or advised by an affiliate of KKR held less than 5% of the Company’s outstanding debt as of April 2, 2016.

~~During~~On January 8, 2016, the ~~fiscal~~Company ~~third~~paid ~~quarter~~a of$374 ~~2015~~million one-time special cash distribution to its parent, US Foods. The distribution was funded with cash on hand and $314 million of additional borrowings under the Company’s ~~received~~credit ~~financial~~facilities. ~~advisory~~US ~~and~~Foods ~~management~~used ~~services~~the proceeds from anthis ~~affiliate~~distribution, ofalong with cash on hand to fund a $666 million one-time special cash distribution to its shareholders of ~~the Sponsors~~record ~~and~~as ~~incurred~~of ~~fees~~January 4, 2016, of which $~~0.3~~657 million was paid to the Sponsors.

AsThe ~~discussed~~Company infiles ~~Note~~a ~~10—Debt,~~consolidated ~~entities~~federal ~~affiliated~~income tax return together with ~~the~~US ~~Sponsors~~Foods. ~~hold~~US ~~various positions~~Foods’ infederal ~~certain~~and ofstate income taxes are paid by the Company’s ~~debt~~and settled with US Foods pursuant to a tax sharing agreement. AtAs ~~September 26~~of April 2, ~~2015~~2016, ~~entities~~$7 ~~affiliated~~million ~~with~~receivable ~~KKR~~from ~~held~~US ~~$236~~Foods ~~million~~remains inoutstanding ~~aggregate~~related ~~principal~~to ofits ~~the~~tax ~~Company’s~~sharing ~~debt~~agreement. See ~~facilities~~Note 15, Income Taxes.

In February 2015, the Company repurchased all of the $2 million of Senior Notes held by the entities affiliated with KKR at market, for a cost of $2 million, including accrued interest.

The Company files a consolidated federal income tax return together with USF Holding. USF Holding’s federal and state income taxes incurred are paid by the Company and settled with USF Holding pursuant to a tax sharing agreement. The Company recorded an $8 million receivable from USF Holding related to its tax sharing agreement. See Note 15—Income Taxes.

13.

RETIREMENT PLANS

The Company ~~has~~sponsors defined benefit and defined contribution ~~retirement~~ plans for its employees. ~~Also,~~and ~~the~~provides ~~Company~~certain ~~contributes~~health care benefits to ~~various~~eligible ~~multiemployer~~retirees ~~plans~~and ~~under~~their ~~collective~~dependents. ~~bargaining~~The ~~agreements~~components of net pension and ~~provides~~other ~~certain~~postretirement ~~health~~benefit ~~care~~costs ~~benefits~~for toCompany ~~eligible~~sponsored ~~retirees~~plans ~~and~~for ~~their~~the ~~dependents.~~periods presented were (in thousands):

The components of net pension and other postretirement benefit costs for Company sponsored plans for the periods presented were as follows (in thousands):


	13-Weeks Ended
	Pension Benefits						Other Postretirement Plans
	April 2, 2016			March 28, 2015			April 2, 2016			March 28, 2015

Components of net periodic benefit costs
Service cost	$	966		$	10,134		$	9		$	9
Interest cost		9,817			10,150			74			66
Expected return on plan assets		(12,221	)		(13,298	)		—			—
Amortization of prior service cost (credit)		39			49			2			(16	)
Amortization of net loss (gain)		1,860			3,513			(18	)		4
Settlements		750			650			—			—


Net periodic benefit costs	$	1,211		$	11,198		$	67		$	63

	13- Weeks Ended
	Pension Benefits						Other Postretirement Plans
	September 26,			September 27,			September 26,			September 27,
	2015			2014			2015			2014
Service cost	$	11,349		$	6,830		$	9		$	19
Interest cost		9,716			9,324			66			80
Expected return on plan assets		(14,208	)		(11,849	)		—			—
Amortization of prior service cost (credit)		48			50			(16	)		(84	)
Amortization of net loss (gain)		2,027			574			4			(18	)
Settlements		650			500			—			—
Net periodic benefit costs (credits)	$	9,582		$	5,429		$	63		$	(3	)
	39-weeks Ended
	Pension Benefits						Other Postretirement Plans
	September 26,			September 27,			September 26,			September 27,
	2015			2014			2015			2014
Service cost	$	31,617		$	20,490		$	28		$	59
Interest cost		30,016			27,974			198			239
Expected return on plan assets		(40,805	)		(35,547	)		—			—
Amortization of prior service cost (credit)		146			149			(47	)		(251	)
Amortization of net loss (gain)		9,053			1,721			11			(56	)
Settlements		1,950			1,500			—			—
Net periodic benefit costs (credits)	$	31,977		$	16,287		$	190		$	(9	)

The Company contributed $10 million to its defined benefit and other postretirement plans during both 13-week periods ended April 2, 2016 and March 28, 2015. The Company plans to contribute a total of $36 million to the Company-sponsored pension plans and other postretirement plans in fiscal year 2016.

The Company’s ~~contributed~~employees ~~$48~~are ~~million~~eligible ~~and~~to ~~$39~~participate ~~million~~in toa ~~its~~Company sponsored defined ~~benefit~~contribution ~~and~~401(k) Plan ~~other~~which ~~postretirement~~provides ~~plans~~for ~~during~~Company matching on the ~~39-weeks~~participant’s ~~ended~~contributions ~~September 26,~~of ~~2015~~up to 100% of the first 3% of participant’s compensation and ~~September 27~~50% of the next 2% of a participant’s compensation, ~~2014~~for a maximum Company matching contribution of 4%. During 2015, Company ~~respectively~~matching on the participant’s contributions were 50% of the first 6% of a participant’s compensation. The Company’s ~~plans~~contributions to ~~contribute~~this aplan ~~total~~were of $4912 million toand ~~its~~$8 ~~pension~~million ~~plans~~for ~~and~~the ~~other~~13-weeks ~~postretirement~~ended ~~plans~~April in2, ~~fiscal~~2016 ~~year~~and March 28, 2015, respectively.

OnThe ~~August 5, 2015, the~~ Company ~~announced~~also acontributes ~~plan~~ to ~~freeze~~numerous ~~non-union~~multiemployer ~~participants’ benefits of a Company sponsored defined benefit~~ pension ~~plan~~plans ~~effective~~under ~~September 30, 2015. The freeze and related plan remeasurement resulted in a reduction in~~ the ~~benefit~~terms ~~obligation~~of ~~included~~certain ~~in Other long term liabilities~~ of ~~approximately~~its ~~$91~~collective bargaining ~~million,~~agreements ~~with~~that acover ~~corresponding~~its ~~decrease~~union-represented ~~to Accumulated other comprehensive loss~~employees. AtThe ~~the~~Company ~~remeasurement~~does ~~date,~~not ~~the~~administer ~~plan’s~~these ~~net~~multiemployer ~~loss~~pension ~~included~~plans. inThe ~~Accumulated other comprehensive loss exceeded the reduction in the plan~~Company’s ~~benefit~~contributions ~~obligation~~to ~~and,~~these ~~accordingly,~~plans nowere ~~net~~$8 ~~curtailment~~million ~~gain~~for orboth ~~loss was~~13-week ~~incurred.~~periods Asended aApril ~~result of the plan freeze~~2, ~~actuarial~~2016 ~~gains~~ and ~~losses will be amortized over the average remaining life expectancy of inactive participants rather than the average remaining service lives of active participants. In regards to the~~ ~~settlements~~March ~~shown in the tables above which impact net periodic pension costs~~28, ~~those settlements result from lump-sum payments to former employees participating in several Company sponsored pension plans~~2015.

1412

14. ~~RECLASSIFICATIONS~~CHANGES ~~OUT~~IN OF ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents ~~amounts~~changes ~~reclassified~~in ~~out of~~ Accumulated other comprehensive loss by component for the periods presented ~~as follows~~ (in thousands):

	13-Weeks Ended						~~39-weeks Ended~~
Accumulated Other Comprehensive Loss Components	September 26,2015			September 27,2014			September 26,2015			September 27,2014
	April 2,2016			March 28,2015
Defined benefit retirement plans:
Accumulated Other Comprehensive Loss Components
Accumulated Other Comprehensive Loss beginning of period (1)	$	(152,903	)	$	(638	)	$	(158,041	)	$	(2,679	)
Defined benefit pension and other postretirement plans:
Reclassifications:
Balance at beginning of period(1)	$	(106,863	)	$	(158,041	)
Amortization of prior service cost (credit)(2)(3)		32			(34	)		99			(102	)
Reclassification adjustments:
Amortization of net loss (3)(4)		2,031			556			9,064			1,665
Amortization of prior service cost		41			33
Settlements(3)(4)		650			500			1,950			1,500
Amortization of net loss		1,842			3,517
Pension remeasurement and curtailment(4)		90,649			—			90,649			—
Settlements		750			650
Total before income tax		93,362			1,022			101,762			3,063
Total before income tax(2) (3)		2,633			4,200
Income tax provision		29,713			1,194			32,975			1,194
Income tax provision(4)		—			—
Current period Comprehensive Income (Loss), net of tax		63,649			(172	)		68,787			1,869
Current period Comprehensive income, net of tax		2,633			4,200
Accumulated Other Comprehensive Loss end of period (1)	$	(89,254	)	$	(810	)	$	(89,254	)	$	(810	)
Accumulated Other Comprehensive Loss end of period(1)	$	(104,230	)	$	(153,841	)

(1) Amounts are presented net of tax. ~~See Note 15—Income Taxes.~~

(2) Included in the computation of Net periodic benefit costs. See Note—, 13 Retirement Plans for additional information.

(3) Included in Distribution, selling and administrative costs in the ~~unaudited~~ Consolidated Statements of Comprehensive Income ~~(Loss)~~.

(4) ~~Due~~No toimpact ~~freeze~~due ofto ~~non-union participants’ benefits of a Company sponsored defined benefit pension plan in~~ the ~~fiscal third quarter of 2015; also recorded as a reduction of the pension benefit obligation included in Other long-term liabilities in the~~ Company’s ~~unaudited~~full ~~Consolidated~~valuation ~~Balance Sheet~~allowance. See Note~~—13~~ ~~Retirement~~15, ~~Plans.~~Income Taxes

15.

INCOME TAXES

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

The Company estimated its annual effective tax rate for the full fiscal year and applied the annual effective tax rate to to the results of the 3913-weeks ended ~~September 26~~April 2, ~~2015~~2016 and ~~September 27~~March 28, ~~2014~~2015 for purposes of determining its year-to-date tax expense (benefit).

The valuation allowance against the net deferred tax assets was $~~232~~260 million at ~~December 27~~January 2, ~~2014~~2016. The ~~net~~valuation ~~deferred~~allowance ~~tax~~against ~~assets~~the ~~related to federal and state~~ net ~~operating~~deferred ~~losses~~tax ~~increased~~assets decreased $247 million during the 3913-weeks ended ~~September 26~~April 2, ~~2015~~2016, which resulted in a $~~256~~253 million total valuation allowance at ~~September 26~~April 2, ~~2015~~2016. A full valuation allowance on the net deferred tax assets will be maintained until sufficient positive evidence related to sources of future taxable income exists to support a reversal of the valuation allowance.

The effective tax rate for the 3913-weeks ended ~~September 26~~April 2, 2016 and March 28, 2015 of 24% and 125%, respectively varied from the 35% federal statutory rate primarily due to a change in the valuation allowance. ~~and~~During ~~deferred~~the ~~tax liabilities related to indefinite~~13-~~lived~~weeks ~~intangibles~~ended ~~which~~April ~~are~~2, ~~generally~~2016 ~~not~~and ~~considered~~March a28, ~~source of support for realization of the net deferred tax asset~~2015, ~~offset by~~ the ~~tax~~valuation ~~benefit~~allowance ~~recognized~~decreased ~~in continuing~~$6 ~~operations~~million ~~due~~and to$22 ~~the~~million, ~~year-to-date~~respectively, ~~gain~~as ina ~~Other~~result ~~comprehensive income associated with the non-union benefits freeze~~ of a ~~Company~~change ~~sponsored defined benefit plan. The gain~~ in ~~Other comprehensive income provides sufficient evidence of~~deferred ~~current period taxable income to recognize continuing operating income~~ tax ~~benefit~~assets tonot ~~the~~covered ~~extent of the taxable income generated~~ by ~~current~~future ~~year~~reversals ~~Other~~of ~~comprehensive~~deferred ~~income~~tax liabilities.

~~Generally,~~USF ~~the~~is ~~amount~~a member of ~~tax~~US ~~expense~~Foods’ orconsolidated ~~benefit~~group, ~~allocated~~and toas ~~continuing~~a result ~~operations~~the isCompany’s ~~determined~~operations ~~without~~are ~~regard~~included toin the consolidated income tax ~~effects~~return of ~~income~~US ~~or loss~~Foods. ~~from~~The ~~Other~~Company ~~comprehensive~~has ~~income.~~computed ~~However,~~the ancomponents ~~exception~~of toits tax provision under the ~~general~~“separate ~~rule~~return” isapproach. ~~provided~~Under ~~when~~this approach, in the ~~presence~~Company’s financial ofstatements arecognize ~~valuation~~the ~~allowance~~current ~~against~~and deferred income tax ~~assets,~~consequences ~~there~~that isresult from the Company’s activities as if the Company were a ~~pretax~~separate ~~loss~~taxpayer ~~from~~rather ~~continuing~~than ~~operations~~a ~~and~~ member of US Food’s consolidated group.

15Under the “separate return” approach, the Company had tax affected federal and state net operating loss (“NOL”) carryforwards of approximately $136 million and $87 million, respectively as of April 2, 2016. These NOLs do not reflect the tax position of the US Foods consolidated tax return.

US Foods federal and state income taxes incurred are paid by the Company and settled with US Foods pursuant to a tax sharing agreement. The agreement further states that the Company shall pay on behalf of US Foods the federal and state return taxes. If the consolidated federal and state return taxes for US Foods exceed the federal and state taxes calculated for the Company as a

~~pretax~~separate ~~income~~filing ~~from Other comprehensive income. In such instances~~group, ~~taxable~~US ~~income~~Foods ~~from~~is ~~Other~~required ~~comprehensive~~to ~~income~~make ~~provides~~a ~~sufficient~~payment ~~support~~ to ~~recognize~~the ~~current~~Company ~~year~~equal ~~tax~~to ~~benefit~~such ~~created by continuing operations~~excess. Likewise, ~~The~~if ~~tax~~the ~~benefit~~federal ~~recognized~~and instate ~~continuing~~taxes ~~operations~~calculated isat ~~limited~~the toseparate ~~the~~return ~~lower~~level offor the Company ~~tax~~exceed ~~impact~~the ~~from~~US ~~Other~~Foods ~~comprehensive~~consolidated ~~income~~taxes, or the ~~tax~~Company ~~impact~~is ~~from~~required ~~continuing~~to ~~operations.~~make As a ~~consequence,~~payment ~~the~~to ~~Company~~US ~~recognized~~Foods aequal ~~continuing operation~~to ~~income~~such excess. The tax ~~benefit~~sharing inagreement ~~the~~does ~~39-weeks~~not ~~ended~~commit ~~September 26,~~US ~~2015~~Foods into compensate the ~~amount~~Company offor ~~$33~~the ~~million.~~use ~~The~~of ~~Other~~its ~~comprehensive~~NOLs ~~income~~nor ~~tax~~does ~~provision~~US ~~expense~~Foods currently ~~supports~~intend ~~realization~~to ofcompensate the ~~$33~~Company ~~million benefit in continuing operations~~ for the ~~39-weeks ended~~use ~~September 26,~~of ~~2015~~its NOLs. ~~During~~The ~~the~~$7 ~~39-weeks~~million ~~ended~~intercompany ~~September 26,~~receivable ~~2015,~~reflects the ~~valuation~~2015 ~~allowance~~federal ~~increased~~Alternative ~~$24~~Minimum ~~million,~~Tax as(“AMT”) aand ~~result~~state ofincome ataxes ~~change~~that inUS ~~deferred~~Foods ~~tax~~estimates ~~assets~~for ~~associated~~the ~~with~~consolidated ~~net~~income tax ~~operating~~returns ~~losses~~that ~~and~~USF ~~not~~will ~~covered~~pay byon ~~future~~behalf ~~reversals~~ of ~~deferred~~US Foods per the tax ~~liabilities~~sharing agreement.

The effective tax rate for the 39-weeks ended September 27, 2014 of 52% varied from the 35% federal statutory rate primarily due to a change in the valuation allowance. During the 39-weeks ended September 27, 2014, the valuation allowance increased $66 million as a result of a change in deferred tax assets associated with net operating losses and not covered by future reversals of deferred tax liabilities.

The effective tax rate for the 13-weeks ended September 26, 2015 of 1007% varied from the 35% federal statutory rate primarily due to a change in the valuation allowance, the aforementioned tax benefit effects of the benefit plan freeze on continuing operations, and changes in other estimates of annual results as of the end of third quarter compared to those estimates at the end of the second quarter. The effective tax rate for the 13-weeks ended September 27, 2014 of 159% varied from the 35% federal statutory rate primarily due to a change in the valuation allowance and changes in other estimates of annual results as of the end of third quarter compared to those estimates at the end of the second quarter.

US Foods is a member of USF Holding’s consolidated group, and as a result the Company’s operations are included in the consolidated income tax return of USF Holding. The Company has computed the components of its tax provision under the “separate return” approach. Under this approach, the Company’s financial statements recognize the current and deferred income tax consequences that result from the Company’s activities as if the Company were a separate taxpayer rather than a member of USF Holding’s consolidated group.

Under the “separate return” approach, the Company had gross federal and state NOL carryforwards of approximately $366 million and $2 billion, respectively as of September 26, 2015. These NOLs do not reflect the tax position of the USF Holding consolidated tax return. USF Holding estimates to generate federal taxable income on its consolidated return in the amount of $310 million for its fiscal year 2015, which is primarily caused by the $300 million merger termination fee received from Sysco. Therefore, USF Holding will utilize NOLs available at the consolidated level to offset its regular tax liability. These NOLs were generated by US Foods. Despite the use of NOLs, USF Holding will be subject to federal Alternative Minimum Tax (“AMT”) and state income tax expense for its fiscal year 2015, which are estimated at $5.4 million and $2.2 million, respectively.

USF Holding’s federal and state income taxes incurred are paid by the Company and settled with USF Holding pursuant to a tax sharing agreement. The agreement further states that the Company shall pay on behalf of USF Holding the federal and state return taxes. If the consolidated federal and state return taxes for USF Holding exceed the federal and state taxes calculated for the Company as a separate filing group, USF Holding is required to make a payment to the Company equal to such excess. Likewise, if the federal and state taxes calculated at the separate return level for the Company exceed the consolidated taxes, the Company is required to make a payment to USF Holding equal to such excess. As the tax sharing agreement does not commit USF Holding to compensate the Company for the use of its NOLs nor does USF Holding currently intend to compensate the Company for the NOLs used, the Company has not recorded an intercompany receivable for these NOLs. US Foods has recorded an intercompany receivable totaling $7.6 million for the AMT and state income taxes USF Holding is estimating for the 2015 consolidated income tax returns, since US Foods will pay this on behalf of USF Holding per its tax sharing agreement.

16.

COMMITMENTS AND CONTINGENCIES

Purchase Commitments—The Company enters into purchase orders with vendors and other parties in the ordinary course of business. ~~Additionally,~~and ~~the Company~~ has a limited number of purchase contracts with certain vendors that require it to buy a predetermined volume of products,. ~~which~~As ~~are~~of ~~not~~April ~~recorded~~2, in2016, the ~~unaudited~~Company ~~Consolidated~~has ~~Balance~~$899 ~~Sheets.~~million As of ~~September 26,~~ ~~2015, the Company’s~~ purchase orders and purchase ~~contracts~~contract ~~that~~commitments, of ~~require~~which a$672 ~~predetermined volume~~million, ~~all~~$130 million and $97 million pertain to products to be ~~delivered~~purchased in fiscal ~~year~~years ~~2015~~2016, ~~were~~2017, ~~$645~~and ~~million~~2018, respectively, and are not recorded in the Consolidated Balance Sheets.

To minimize fuel cost risk, the Company enters into forward purchase commitments for a portion of its projected diesel fuel requirements. At ~~September 26~~April 2, ~~2015~~2016, the Company had diesel fuel forward purchase commitments totaling $~~162~~124 million through ~~June~~September 2017. The Company also enters into forward purchase agreements for electricity. At ~~September 26~~April 2, ~~2015~~2016, the Company had electricity forward purchase commitments totaling $1610 million through March 2018. The Company does not measure its forward purchase commitments for ~~diesel~~ fuel and electricity at fair value, as the amounts under contract meet the physical delivery criteria in the normal purchase exception under GAAP guidance.

16Legal Proceedings–The Company and its subsidiaries are parties to a number of legal proceedings arising from the normal course of business. These legal proceedings—whether pending, threatened or unasserted, if decided adversely to or settled by the Company—may result in liabilities material to its financial position, results of operations, or cash flows. The Company recognizes provisions with respect to the proceedings where appropriate. These are reflected in the Consolidated Balance Sheets. It is possible that the Company could be required to make expenditures, in excess of the established provisions, in amounts that cannot be reasonably estimated. However, the Company believes that the ultimate resolution of these proceedings will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows. It is the Company’s policy to expense attorney fees as incurred.

Florida State Pricing Subpoena–In May 2011, the State of Florida Department of Financial Services issued a subpoena to the Company requesting a broad range of information regarding vendors, logistics/freight as well as pricing, allowances, and rebates that the Company obtained from the sale of products and services for the term of the contract. The subpoena focused on all pricing and rebates earned during this period relative to the Florida Department of Corrections. In 2011, the Company learned of two qui tam suits, filed in Florida state court, against the Company, one of which was filed by a former official in the Florida Department of Corrections. In April 2015, the Company and the State of Florida agreed in principle to a settlement under which the Company would pay $16 million, and the State of Florida would dismiss all complaints, including the two qui tam suits. In June 2015, the parties finalized the settlement agreement and payment was made to the Florida Department of Financial Services.

Eagan Labor Dispute–In 2008, the Company closed its Eagan, Minnesota and Fairfield, Ohio distribution centers, and recorded a liability of approximately $40 million for the related multiemployer pension withdrawal liability. In 2010, the Company received formal notice and demand for payment of a $40 million withdrawal liability, which is payable in monthly installments through November 2023. During the fiscal third quarter of 2011, the Company was assessed an additional $17 million multiemployer pension withdrawal liability for the Eagan facility, the final payment of which was made on April 1, 2015. The parties agreed to arbitrate this matter, and discovery began during the fiscal third quarter of 2012. In March 2015, the arbitrator issued an award confirming the second assessment of $17 million, after previously denying the Company’s request to reopen the first assessment. The pension fund sought enforcement of the arbitrator’s award and shortly thereafter the Company filed a counterclaim seeking to vacate the arbitrator’s award in the Federal District Court for the Northern District of Illinois. The standard of review in the district court is de novo on the legal issues because arbitration was compelled by statute and there are no factual disputes as to which the court should give deference to the arbitrator. The Company believes it has meritorious defenses against the assessment for the additional $17 million of pension withdrawal liability. The Company does not believe, at this time, that a loss from such obligation is probable and, accordingly, no liability has been recorded. However, it is reasonably possible the Company may ultimately lose the dispute related to this additional $17 million assessment.

Other Legal Proceedings– In addition to those described above, the Company and its subsidiaries are parties to a number of other legal proceedings arising from the normal course of business. These legal proceedings—whether pending, threatened or unasserted, if decided adversely to or settled by the Company—may result in liabilities material to its financial position, results of operations, or cash flows. The Company recognized provisions with respect to the proceedings where appropriate. These are reflected in the unaudited Consolidated Balance Sheets. It is possible that the Company could be required to make expenditures, in excess of the established provisions, in amounts that cannot be reasonably estimated. However, the Company believes that the ultimate resolution of these proceedings will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows. It is the Company’s policy to expense attorney fees as incurred.

Insurance Recoveries—Tornado Loss—On April 28, 2014, a tornado damaged a distribution facility and its contents, including building improvements, equipment and inventory. Business from the damaged facility was reassigned to other Company distribution facilities until July 2015, when the new distribution facility became operational. The Company has insurance coverage on the distribution facility and its contents, as well as business interruption insurance.

As of September 26, 2015, the Company’s insurance carriers approved $40 million of losses incurred, of which $25 million was received in fiscal year 2015, $14 million was received in fiscal year 2014, and $1 million is recorded as a receivable in Other current assets as of September 26, 2015. For the 13-weeks and 26-weeks ended September 26, 2015, the Company recognized net gains of $9 million and $11 million, respectively, as a result of the insurance proceeds. The Company expects to reach a final settlement with its insurance carriers in early 2016; the timing of and amounts of ultimate insurance recoveries is not known at this time.

Of the $25 million of insurance recoveries received in 2015, the Company classified $3 million related to the damaged distribution facility as Cash Flows from Investing Activities, and the remaining $22 million related to damaged inventory and business interruption costs as Cash Flows from Operating Activities in its unaudited Consolidated Statements of Cash Flows.

17.

GUARANTOR AND NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The following consolidating schedules present condensed financial information of: (1) the Company; (2) certain of its subsidiaries (the “Guarantors”) that guarantee certain Company obligations, including the Senior Notes, the ABL Facility and the Amended 2011 Term Loan; and (3) its other subsidiaries (the “Non-Guarantors”). The Guarantors under the Senior Notes are identical to the Guarantors under the ABL Facility and the Amended 2011 Term Loan. Separate financial statements and other disclosures with respect to the Guarantors have not been provided because the Company believes the following information is sufficient, as the Guarantors are wholly owned by the Company, and all guarantees under the Senior Notes are full and unconditional and joint and several, subject to certain release provisions that the Company has concluded are customary and, therefore, consistent with the Company’s ability to present condensed financial information of the Guarantors. Under the Senior Notes, a Guarantor’s guarantee may be released when any of the following occur: (1) the sale of the Guarantor or all of its assets, (2) a merger or consolidation of the Guarantor with and into the Company or another Guarantor, (3) upon the liquidation of the Guarantor following the transfer of all of its assets to the Company or another Guarantor, (4) the rating on the securities is changed to investment grade, (5) the requirements for legal defeasance or covenant defeasance or discharge of the obligation have been satisfied, (6) the Guarantor is declared unrestricted for covenant purposes, or (7) the Guarantor’s guarantee of other indebtedness is terminated or released.

Notwithstanding these customary release provisions under the Senior Notes, (1) each subsidiary guarantee is in place throughout the life of the Senior Notes, and no Guarantor may elect to opt out or cancel its guarantee solely at its option; (2) there are no restrictions, limitations or caps on the guarantees; and (3) there are no provisions that would delay the payments that would be required of the Guarantors under the guarantees.

1814

	Condensed Consolidating Balance Sheet (Unaudited)
	Condensed Consolidating Balance Sheet
	September 26, 2015
	April 2, 2016
	(in thousands)
	(In thousands)
	US Foods, Inc.		Guarantors		Non-Guarantors		Eliminations			Consolidated
	USF		Guarantors		Non-Guarantors		Eliminations			USF Consolidated
Accounts receivable-net	$	294,570	$	34,273	$	980,046	$	—		$	1,308,889
Accounts receivable—net	$	294,771	$	35,050	$	948,289	$	—		$	1,278,110
Inventories-net		1,093,796		57,678		—		—			1,151,474
Inventories		1,109,254		58,855		—		—			1,168,109
Other current assets		~~534~~288,~~624~~795		76,~~076~~956		8280,~~303~~960		—			~~624~~376,~~003~~711
Property and equipment-net		918,533		85,712		703,865		—			1,708,110
Property and equipment—net		973,457		111,820		691,503		—			1,776,780
Goodwill		3,~~835~~885,~~477~~887		—		—		—			3,~~835~~885,~~477~~887
Other intangibles-net		492,529		—		—		—			492,529
Other intangibles—net		462,004		—		—		—			462,004
Investments in subsidiaries		1,~~419~~445,~~767~~543		—		—		(1,~~419~~445,~~767~~543	)		—
Intercompany receivables		—		~~692~~720,~~808~~089		—13,364		(~~685~~726,~~208~~181	)		7,~~600~~272
Other assets		4535,~~695~~865		1110		5152,~~633~~216		(23,200	)		7464,~~139~~891
Total assets	$	8,~~634~~495,~~991~~576	$	~~877~~932,~~558~~780	$	1,~~817~~786,~~847~~332	$	(2,~~128~~194,~~175~~924	)	$	9,~~202~~019,~~221~~764
Accounts payable	$	1,~~266~~289,~~875~~838	$	47,~~719~~761	$	—	$	—		$	1,~~314~~337,~~594~~599
Other current liabilities		~~690~~596,~~102~~293		2023,~~163~~305		31,~~270~~549		—			~~713~~621,~~535~~147
Long-term debt		3,~~582~~766,~~329~~037		3562,~~856~~649		1,~~058~~132,~~391~~151		—			4,~~676~~960,~~576~~837
Intercompany payables		~~580~~726,~~713~~181		—		~~104,495~~—		(~~685~~726,~~208~~181	)		—
Other liabilities		~~861~~860,~~994~~389		—		56,~~744~~154		(23,200	)		~~844~~843,~~538~~343
Shareholder’s equity		1,~~652~~256,~~978~~838		~~773~~799,~~820~~065		~~645~~646,~~947~~478		(1,~~419~~445,~~767~~543	)		1,~~652~~256,~~978~~838
Total liabilities and shareholder’s equity	$	8,~~634~~495,~~991~~576	$	~~877~~932,~~558~~780	$	1,~~817~~786,~~847~~332	$	(2,~~128~~194,~~175~~924	)	$	9,~~202~~019,~~221~~764

	Condensed Consolidating Balance Sheet (Unaudited)
	Condensed Consolidating Balance Sheet
	December 27, 2014
	January 2, 2016
	(in thousands)
	(In thousands)
	US Foods, Inc.		Guarantors		Non-Guarantors		Eliminations			Consolidated
	USF		Guarantors		Non-Guarantors		Eliminations			USF Consolidated
Accounts receivable—net	$	~~295~~279,~~467~~067	$	3234,~~047~~879	$	~~925~~920,~~224~~032	$	—		$	1,~~252~~233,~~738~~978
Inventories—net		995,175		55,723		—		—			1,050,898
Inventories		1,056,438		56,529		—		—			1,112,967
Other current assets		~~441~~327,~~681~~283		7,~~680~~018		7678,~~916~~946		—			~~526~~413,~~277~~247
Property and equipment—net		~~913~~970,~~109~~387		8598,~~790~~396		~~727~~700,~~684~~102		—			1,~~726~~768,~~583~~885
Goodwill		3,~~835~~875,~~477~~719		—		—		—			3,~~835~~875,~~477~~719
Other intangibles—net		~~602~~477,~~827~~601		—		—		—			~~602~~477,~~827~~601
Investments in subsidiaries		1,~~360~~443,~~497~~599		—		—		(1,~~360~~443,~~497~~599	)		—
Intercompany receivables		—		~~647~~697,~~466~~188		—		(~~647~~689,~~466~~995	)		—7,193
Other assets		5427,~~317~~589		10		3152,~~187~~322		(23,200	)		6256,~~314~~721
Total assets	$	8,~~498~~457,~~550~~683	$	~~828~~894,~~716~~020	$	1,~~761~~751,~~011~~402	$	(2,~~031~~156,~~163~~794	)	$	98,~~057~~946,~~114~~311
Accounts payable	$	1,~~118~~042,~~298~~483	$	4036,~~862~~382	$	—	$	—		$	1,~~159~~078,~~160~~865
Other current liabilities		~~645~~699,~~659~~525		1722,~~594~~435		31,~~174~~379					~~666~~723,~~427~~339
Long-term debt		3,~~557~~576,~~470~~719		3048,~~412~~511		1,~~108~~056,~~391~~919		—			4,~~696~~682,~~273~~149
Intercompany payables		~~624~~659,~~413~~953		—		2330,~~053~~042		(~~647~~689,~~466~~995	)		—
Other liabilities		~~887~~865,~~994~~152		—		56,~~744~~155		(23,200	)		~~870~~848,~~538~~107
Shareholder’s equity		1,~~664~~613,~~716~~851		~~739~~786,~~848~~692		~~620~~656,~~649~~907		(1,~~360~~443,~~497~~599	)		1,~~664~~613,~~716~~851
Total liabilities and shareholder’s equity	$	8,~~498~~457,~~550~~683	$	~~828~~894,~~716~~020	$	1,~~761~~751,~~011~~402	$	(2,~~031~~156,~~163~~794	)	$	98,~~057~~946,~~114~~311

1915

	Condensed Consolidating Statement of Comprehensive Income (Loss) (Unaudited)
	Condensed Consolidating Statement of Comprehensive Income (Loss)
	13-Weeks Ended September 26, 2015
	13-Weeks Ended April 2, 2016
	(in thousands)
	(In thousands)
	US Foods, Inc.			Guarantors			Non-Guarantors			Eliminations			Consolidated
	USF			Guarantors			Non-Guarantors			Eliminations			USFConsolidated
Net sales	$	5,~~644~~446,~~789~~984		$	~~151~~146,~~277~~165		$	23,~~598~~582		$	(23,~~598~~582	)	$	5,~~796~~593,~~066~~149
Cost of goods sold		4,~~664~~519,~~391~~772			~~118~~113,~~580~~609			—			—			4,~~782~~633,~~971~~381
Gross profit		~~980~~927,~~398~~212			32,~~697~~556			23,~~598~~582			(23,~~598~~582	)		1959,~~013,095~~768
Operating expenses:
Distribution, selling and administrative costs		~~901~~856,~~278~~264			23,~~606~~435			13,~~887~~287			(28,~~031~~672	)		~~910~~864,~~740~~314
Restructuring and asset impairment charges		29,104			—			—			—			29,104
Restructuring and tangible asset impairment charges		10,777			—			—			—			10,777
Total operating expenses		~~930~~867,~~382~~041			23,~~606~~435			13,~~887~~287			(28,~~031~~672	)		~~939~~875,~~844~~091
Operating income		5060,~~016~~171			9,~~091~~121			910,~~711~~295			45,~~433~~090			7384,~~251~~677
Interest expense - net		59,565			465			9,997			—			70,027
Interest expense—net		60,348			661			9,576			—			70,585
Other expense (income) - net		25,971			(4,433	)		(25,971	)		4,433			—
Other expense (income)—net		15,073			(5,090	)		(15,073	)		5,090			—
(Loss) income before income taxes		(3515,~~520~~250	)		13,~~059~~550			2515,~~685~~792			—			314,~~224~~092
Income tax (benefit) provision		(403,~~297~~648	)		—			74,~~841~~180			—			~~(32,456~~532	)
Equity in earnings of subsidiaries		3025,~~903~~162			—			—			(3025,~~903~~162	)		—
Net income		3513,~~680~~560			13,~~059~~550			1711,~~844~~612			(3025,~~903~~162	)		3513,~~680~~560
Other comprehensive income		632,~~649~~633			—			—			—			632,~~649~~633
Comprehensive income	$	9916,~~329~~193		$	13,~~059~~550		$	1711,~~844~~612		$	(3025,~~903~~162	)	$	9916,~~329~~193

	Condensed Consolidating Statement of Comprehensive Income (Loss) (Unaudited)
	Condensed Consolidating Statement of Comprehensive Income (Loss)
	13-Weeks Ended September 27, 2014
	13-Weeks Ended March 28, 2015
	(in thousands)
	(In thousands)
	US Foods, Inc.			Guarantors			Non-Guarantors			Eliminations			Consolidated
	USF			Guarantors			Non-Guarantors			Eliminations			USFConsolidated
Net sales	$	5,~~757~~402,~~603~~885		$	~~153~~150,~~887~~753		$	23,~~749~~638		$	(23,~~749~~638	)	$	5,~~911~~553,~~490~~638
Cost of goods sold		4,~~827~~504,~~173~~370			~~123~~120,~~488~~204			—			—			4,~~950~~624,~~661~~574
Gross profit		~~930~~898,~~430~~515			30,~~399~~549			23,~~749~~638			(23,~~749~~638	)		~~960~~929,~~829~~064
Operating expenses:
Distribution, selling and administrative		897,438			23,991			10,935			(28,746	)		903,618
Distribution, selling and administrative costs		875,731			24,156			13,886			(28,198	)		885,575
Restructuring and asset impairment charges		22			—			—			—			22
Restructuring and tangible asset impairment charges		1,154			—			—			—			1,154
Total operating expenses		~~897~~876,~~460~~885			2324,~~991~~156			1013,~~935~~886			(28,~~746~~198	)		~~903~~886,~~640~~729
Operating income		3221,~~970~~630			6,~~408~~393			129,~~814~~752			4,~~997~~560			5742,~~189~~335
Interest expense—net		5960,~~965~~049			~~449~~418			1110,~~018~~446			—			7170,~~432~~913
Other expense (income)—net		2725,~~758~~766			(4,~~997~~560	)		(2725,~~758~~766	)		4,~~997~~560			—
(Loss) income before income taxes		(5464,~~753~~185	)		10,~~956~~535			2925,~~554~~072			—			(1428,~~243~~578	)
Income tax provision		14,441			—			8,187			—			22,628
Income tax (benefit) provision		(43,339	)		—			7,646			—			(35,693	)
Equity in earnings of subsidiaries		3227,~~323~~961			—			—			(3227,~~323~~961	)		—
Net (loss) income		(36,871	)		10,956			21,367			(32,323	)		(36,871	)
Net income (loss)		7,115			10,535			17,426			(27,961	)		7,115
Other comprehensive loss		(172	)		—			—			—			(172	)
Other comprehensive income, net of tax		4,200			—			—			—			4,200
Comprehensive (loss) income	$	(37,043	)	$	10,956		$	21,367		$	(32,323	)	$	(37,043	)
Comprehensive income (loss)	$	11,315		$	10,535		$	17,426		$	(27,961	)	$	11,315

2016

	Condensed Consolidating Statement of Comprehensive Income (Loss) (Unaudited)
	Condensed Consolidating Statement of Cash Flows
	39-Weeks Ended September 26, 2015
	13-weeks Ended April 2, 2016
	(in thousands)
	(In thousands)
	US Foods, Inc.			Guarantors			Non-Guarantors			Eliminations			Consolidated
	USF			Guarantors			Non-Guarantors			Consolidated
Net sales	$	16,736,106		$	456,145		$	70,593		$	(70,593	)	$	17,192,251
Net cash provided by operating activities	$	126,564		$	4,170		$	6,731		$	137,465
Cost of goods sold		13,897,870			359,537			—			—			14,257,407
Cash flows from investing activities:
Gross profit		2,838,236			96,608			70,593			(70,593	)		2,934,844
Acquisition of businesses—net of cash		(38,318	)		—			—			(38,318	)
Operating expenses:
Proceeds from sales of property and equipment		1,923			—			—			1,923
Distribution, selling and administrative costs		2,699,900			71,005			41,217			(84,020	)		2,728,102
Purchases of property and equipment		(35,922	)		(962	)		—			(36,884	)
Restructuring and asset impairment charges		81,697			—			—			—			81,697
Purchase of noncontrolling interest		(7,658	)		—			—			(7,658	)
Total operating expenses		2,781,597			71,005			41,217			(84,020	)		2,809,799
Net cash used in investing activities		(79,975	)		(962	)		—			(80,937	)
Operating income		56,639			25,603			29,376			13,427			125,045
Cash flows from financing activities:
Interest expense - net		178,768			1,311			30,842			—			210,921
Proceeds from debt borrowings		463,000			—			75,000			538,000
Other expense (income) - net		78,584			(13,427	)		(78,584	)		13,427			—
Principal payments on debt and capital leases		(300,135	)		(2,946	)					(303,081	)
(Loss) income before income taxes		(200,713	)		37,719			77,118			—			(85,876	)
Cash distribution to parent company		(374,332	)		—			—			(374,332	)
Income tax (benefit) provision		(25,297	)		—			23,533			—			(1,764	)
Capital contributions (distributions)		81,733			—			(81,733	)		—
Equity in earnings of subsidiaries		91,304			—			—			(91,304	)		—
Parent company common stock repurchased		(3,659	)		—			—			(3,659	)
Net (loss) income		(84,112	)		37,719			53,585			(91,304	)		(84,112	)
Net cash used in financing activities		(133,393	)		(2,946	)		(6,733	)		(143,072	)
Other comprehensive income		68,787			—			—			—			68,787
Net increase (decrease) in cash and cash equivalents		(86,804	)		262			(2	)		(86,544	)
Comprehensive income	$	(15,325	)	$	37,719		$	53,585		$	(91,304	)	$	(15,325	)
Cash and cash equivalents—beginning of period		216,400			1,158			3			217,561
Cash and cash equivalents—end of period	$	129,596		$	1,420		$	1		$	131,017

	Condensed Consolidating Statement of Comprehensive Income (Loss) (Unaudited)
	Condensed Consolidating Statement of Cash Flows
	39-Weeks Ended September 27, 2014
	13-Weeks Ended March 28, 2015
	(in thousands)
	(In thousands)
	US Foods, Inc.			Guarantors			Non-Guarantors			Eliminations			Consolidated
	USF			Guarantors			Non-Guarantors			USFConsolidated
Net sales	$	16,807,339		$	458,730		$	71,813		$	(71,813	)	$	17,266,069
Net cash provided by operating activities	$	92,859		$	2,227		$	6,607		$	101,693
Cost of goods sold		14,080,902			365,404			—			—			14,446,306
Cash flows from investing activities:
Gross profit		2,726,437			93,326			71,813			(71,813	)		2,819,763
Proceeds from sales of property and equipment		1,576			—			—			1,576
Operating expenses:
Purchases of property and equipment		(56,617	)		(574	)					(57,191	)
Distribution, selling and administrative		2,659,179			71,523			36,887			(86,373	)		2,681,216
Insurance proceeds related to investing activities		2,771			—			—			2,771
Restructuring and asset impairment (credits) charges		(160	)		—			80			—			(80	)
Purchase of industrial revenue bonds		(12,376	)		—			—			(12,376	)
Total operating expenses		2,659,019			71,523			36,967			(86,373	)		2,681,136
Net cash used in investing activities		(64,646	)		(574	)		—			(65,220	)
Operating income		67,418			21,803			34,846			14,560			138,627
Cash flows from financing activities:
Interest expense—net		182,812			1,220			34,204			—			218,236
Proceeds from debt borrowings		12,376			—			—			12,376
Other expense (income)—net		81,328			(14,560	)		(81,328	)		14,560			—
Principal payments on debt and capital leases		(12,339	)		(1,439	)		—			(13,778	)
(Loss) income before income taxes		(196,722	)		35,143			81,970			—			(79,609	)
Capital contributions (distributions)		6,606			—			(6,606	)		—
Income tax provision		17,565			—			23,586			—			41,151
Parent company common stock repurchased		(1,201	)		—			—			(1,201	)
Equity in earnings of subsidiaries		93,527			—			—			(93,527	)		—
Net cash provided by (used in) financing activities		5,442			(1,439	)		(6,606	)		(2,603	)
Net (loss) income		(120,760	)		35,143			58,384			(93,527	)		(120,760	)
Net increase in cash and cash equivalents		33,655			214			1			33,870
Other comprehensive income		1,869			—			—			—			1,869
Cash and cash equivalents—beginning of period		342,583			1,074			2			343,659
Comprehensive (loss) income	$	(118,891	)	$	35,143		$	58,384		$	(93,527	)	$	(118,891	)
Cash and cash equivalents—end of period	$	376,238		$	1,288		$	3		$	377,529

2117

	Condensed Consolidating Statement of Cash Flows (Unaudited)
	39-weeks Ended September 26, 2015
	US Foods, Inc.			Guarantors			Non-Guarantors			Consolidated
Net cash provided by operating activities	$	181,474		$	12,370		$	91,776		$	285,620
Cash flows from investing activities:
Proceeds from sales of property and equipment		3,438			—			—			3,438
Purchases of property and equipment		(134,560	)		(7,862	)		—			(142,422	)
Insurance proceeds related to property and equipment		2,771			—			—			2,771
Purchase of industrial revenue bonds		—			—			(21,914	)		(21,914	)
Net cash used in investing activities		(128,351	)		(7,862	)		(21,914	)		(158,127	)
Cash flows from financing activities:
Proceeds from debt borrowings		21,914			—			—			21,914
Principal payments on debt and capital leases		(34,949	)		(4,755	)		(50,000	)		(89,704	)
Payment for debt financing costs and fees		(651	)		—			—			(651	)
Capital contributions (distributions)		19,864			—			(19,864	)		—
Proceeds from parent company common stock sales		500			—			—			500
Parent company common stock repurchased		(4,801	)		—			—			(4,801	)
Net cash provided by (used in) financing activities		1,877			(4,755	)		(69,864	)		(72,742	)
Net increase (decrease) in cash and cash equivalents		55,000			(247	)		(2	)		54,751
Cash and cash equivalents—beginning of period		342,583			1,074			2			343,659
Cash and cash equivalents—end of period	$	397,583		$	827		$	—		$	398,410

	Condensed Consolidating Statement of Cash Flows (Unaudited)
	39-Weeks Ended September 27, 2014
	(in thousands)
	US Foods, Inc.			Guarantors			Non-Guarantors			Consolidated
Net cash provided by operating activities	$	272,905		$	10,978		$	19,648		$	303,531
Cash flows from investing activities:
Proceeds from sales of property and equipment		7,934			—			11,666			19,600
Purchases of property and equipment		(98,631	)		(6,845	)		(21	)		(105,497	)
Insurance recovery		4,000			—			—			4,000
Net cash (used in) provided by investing activities		(86,697	)		(6,845	)		11,645			(81,897	)
Cash flows from financing activities:
Proceeds from debt borrowings		898,410			—			40			898,450
Payment for debt financing costs		—			—			(421	)		(421	)
Principal payments on debt and capital leases		(950,505	)		(3,612	)		(40	)		(954,157	)
Capital contributions (distributions)		30,872			—			(30,872	)		—
Proceeds from parent company common stock sales		197			—			—			197
Parent company common stock repurchased		(603	)		—			—			(603	)
Net cash used in financing activities		(21,629	)		(3,612	)		(31,293	)		(56,534	)
Net increase in cash and cash equivalents		164,579			521			—			165,100
Cash and cash equivalents—beginning of period		178,872			872			—			179,744
Cash and cash equivalents—end of period	$	343,451		$	1,393		$	—		$	344,844

18.

BUSINESS SEGMENT INFORMATION

The Company operates in one business segment based on how the Company’s chief operating decision maker—the ~~Chief~~ ~~Executive Officer (the “~~CEO”) — views the business for purposes of evaluating performance and making operating decisions.

The Company markets and distributes fresh, frozen and dry food and non-food products to foodservice customers throughout the United States. The Company uses a centralized management structure, and its strategies and initiatives are implemented and executed consistently across the organization to maximize value to the organization as a whole. The Company uses shared resources for sales, procurement, and general and administrative activities across each of its distribution centers. The Company’s distribution centers form a single network to reach its customers; it is common for a single customer to make purchases from several different distribution centers. Capital projects—whether for cost savings or generating incremental revenue—are evaluated based on estimated economic returns to the organization as a whole– (e.g., net present value, return on investment).

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

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

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

	13-Weeks Ended						~~39-Weeks Ended~~
	September 26,			September 27,			September 26,			September 27,
	April 2,2016			March 28,2015
	2015			2014			2015			2014
Adjusted EBITDA	$	202,654		$	158,258
Adjusted EBITDA	$	225,433		$	219,572		$	620,090		$	626,166
Adjustments:
Adjustments:
Sponsor fees(1)		(2,477	)		(2,531	)
Sponsor fees (1)		(2,527	)		(2,514	)		(7,571	)		(7,911	)
Restructuring and tangible asset impairment charges(2)(8)		(10,777	)		(1,154	)
Restructuring and asset impairment (charges) credits(2)		(29,104	)		(22	)		(81,697	)		80
Share-based compensation expense(3)		(4,786	)		(2,466	)
Share-based compensation expense (3)		(2,575	)		(2,975	)		(7,888	)		(9,173	)
Net LIFO reserve change(4)		11,059			24,498
Net LIFO reserve change		20,145			(20,567	)		41,999			(69,245	)
Business transformation costs(5)		(9,236	)		(9,472	)
Business transformation costs (4)		(10,976	)		(13,776	)		(30,969	)		(40,439	)
Acquisition related costs(6)		(671	)		(15,122	)
Acquisition related costs(5)		(22,631	)		(7,315	)		(91,116	)		(27,037	)
Other(7)(8)		1,719			(10,227	)
Other(6)		(3,045	)		(10,205	)		(19,102	)		(23,756	)
EBITDA		187,485			141,784
EBITDA		174,720			162,198			423,746			448,685
Interest expense—net		(70,585	)		(70,913	)
Interest expense, net		(70,027	)		(71,432	)		(210,921	)		(218,236	)
Income tax (provision) benefit		(532	)		35,693
Income tax benefit (provision)		32,456			(22,628	)		1,764			(41,151	)
Depreciation and amortization expense		(102,808	)		(99,449	)
Depreciation and amortization expense		(101,469	)		(105,009	)		(298,701	)		(310,058	)
Net income	$	13,560		$	7,115
Net income (loss)	$	35,680		$	(36,871	)	$	(84,112	)	$	(120,760	)

(1)	Consists of management fees paid to the Sponsors.

(2) Consists primarily of facility related closing costs, including severance and related costs, tangible asset impairment charges, and organizational realignment costs~~, and estimated multiemployer pension withdrawal liabilities~~.

(3) Share-based compensation expense ~~represents costs recorded~~ for vesting of ~~USF~~US ~~Holding~~Foods stock ~~option~~ awards~~, restricted stock and restricted stock units~~.

(4) ~~Consists~~Represents ~~primarily~~the ofnon-cash ~~costs~~impact ~~related~~of tonet ~~significant~~LIFO ~~process~~reserve ~~and systems redesign~~adjustments.

(5) Consists primarily of ~~direct and incremental~~ costs related to ~~the~~significant ~~Acquisition~~process and systems redesign, across multiple functions.

~~(6)~~18 Other includes gains, losses or charges as specified under the Company’s debt agreements. The 13-weeks ended September 26, 2015 balance consists primarily of $9 million of brand re-launch and marketing costs, offset by a net insurance recovery gain of $9 million. The 39-weeks ended September 26, 2015 balance consists primarily of a $16 million litigation settlement cost, and $9 million of brand re-launch and marketing costs, offset by a net insurance recovery gain of $11 million.

~~19.~~(6) ~~SUBSEQUENT~~Consists ~~EVENTS~~of costs related to the Acquisition, including certain 2016 employee retention costs.

On(7) ~~October 19,~~Other ~~2015~~includes gains, ~~the~~losses ~~2012~~or ~~ABS~~charges ~~Facility~~as ~~was~~specified ~~amended~~under ~~whereby~~ the ~~maturity~~Company’s ~~date~~debt ~~was~~agreements. ~~extended~~The ~~from~~2016 ~~August 5,~~balance ~~2016 to~~includes ~~September 30~~a $7 million insurance benefit, ~~2018.~~primarily ~~There~~offset ~~were~~by noUS ~~other~~Foods ~~significant~~IPO ~~changes~~readiness tocosts ~~the~~and ~~2012~~brand ~~ABS~~re-launch ~~Facility~~and marketing costs. The 2015 balance primarily includes a $16 million legal settlement charge and a $10 million insurance benefit.

On(8) ~~October 20,~~For ~~2015,~~ the ~~ABL~~first ~~Facility was~~quarter ~~amended.~~of ~~The maximum borrowing available was increased $200 million to $1~~2015,~~300~~ ~~million~~Restructuring ~~– ABL Tranche A-1 increased from $75 million to $100 million,~~ and ~~the~~tangible ~~maximum~~asset ~~borrowing~~impairment ~~available~~charges ~~under~~of ~~the ABL Tranche A increased~~ $~~175~~1 million towere ~~$1,200 million.~~reclassified ~~Additionally, under this amendment, the interest rate on outstanding borrowings and letter of credit fees was reduced by 25 basis points. The maturity date was extended~~ from ~~May 11~~Other, ~~2017~~ to ~~the~~conform ~~earlier~~with ~~of (1) October 20, 2020,~~ the ~~amended~~current ~~ABL~~period Facility maturity date; (2) April 1, 2019, if the Company’s Senior Notes have more than $300 million of principal outstanding at that date and the maturity date of the Senior Notes has not been extended to later than October 20, 2020; or (3) December 31, 2018, if the Company’s Amended 2011 Term Loan has more than $300 million of principal outstanding at that date and the maturity date of the Amended 2011 Term Loan has not been extended to later than October 20, 2020presentation.

~~The~~19 ~~Company incurred $3 million of lender and third party costs related to above noted amendments.~~

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

This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying unaudited ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~statements and the notes thereto for the quarter ended ~~September 26~~April 2, ~~2015~~2016 and the ~~Audited~~audited ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended ~~December~~January 272, ~~2014~~2016 (the “~~2014~~2015 Annual Report”), as filed with the Securities and Exchange Commission (“SEC”). This discussion of our results includes certain financial measures that are not in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We believe these non-GAAP measures provide meaningful supplemental information about our operating performance, because they exclude amounts that our management and board of directors do not consider part of core operating results when assessing our performance and underlying trends. More information on the rationale for these measures is discussed in the Non-GAAP Reconciliations below.

Overview

We are a leading foodservice distributor in the United States, with about $23 billion in Net sales in fiscal ~~year 2014~~2015. We ~~provide~~supply anapproximately ~~important~~250,000 ~~link~~customer ~~between~~locations ~~over~~nationwide 5consisting of independently owned single and multi-unit restaurants,~~000~~ ~~suppliers~~regional restaurant concepts, national restaurant chains, hospitals, nursing homes, hotels and ~~our~~motels, ~~200~~country clubs,~~000~~ ~~foodservice~~government ~~customers~~and ~~nationwide.~~military Weorganizations, ~~offer~~colleges anand ~~innovative~~universities, ~~array~~and ofretail locations. We provide over 400,000 fresh, frozen and dry food, ~~and~~SKUs and non-food ~~products~~items, ~~with~~including ~~over~~our ~~350,000~~extensive ~~stock-keeping~~and ~~units~~growing ~~(“SKUs”).~~assortment Weof ~~provide~~private ~~value-added~~brands ~~services~~ that ~~meet~~offer ~~specific~~uncompromised ~~customer~~quality ~~needs~~and ingredients, sourced from approximately 5,000 suppliers. We ~~believe~~strive weto ~~have~~bring ~~one~~labor ofsavings and waste reduction to the ~~most~~chef ~~extensive~~without sacrificing ~~private~~quality, ~~label~~all ~~product~~at ~~portfolios~~price ~~in foodservice~~points ~~distribution~~that support our customer competitiveness while offering menu ideas that satisfy changing consumer trends and preferences. InWe ~~fiscal~~employ ~~year~~over ~~2014~~4,000 ~~this~~sales ~~represented~~associates, ~~about~~that 30leverage a team-based selling approach,~~000~~ supported ~~SKUs~~by marketing, category management and ~~approximately~~merchandising $7professionals ~~billion~~as inwell ~~Net~~as a sales support team of experienced, world-class chefs and restaurant operations consultants. Additionally, ~~Many~~our e-commerce and analytical tools enable our customers ~~benefit~~to ~~from~~more easily transact with us and facilitate more consultative and value-added relationships between our ~~support~~customers ~~services,~~and ~~such~~the assales ~~product~~associates. ~~selection,~~We ~~menu~~operate ~~preparation~~a network of 62 distribution facilities and ~~costing~~a ~~strategies~~fleet of approximately 6,000 trucks with an efficient, functionalized operating model that retains the flexibility to execute locally across our nationwide presence.

ATermination ~~sales force~~ of ~~approximately 4,000 associates market our food products to a diverse customer base. Our principal customers include independently owned~~ ~~single~~Sysco ~~and~~Acquisition ~~multi-location~~Agreement restaurants, regional concepts, national chains, hospitals, nursing homes, hotels and motels, country clubs, fitness centers, government and military organizations, colleges and universities, and retail locations. We support our business with one of the largest private refrigerated fleets in the U.S., with roughly 6,000 trucks traveling an average of 200 million miles each year. We have standardized our operations across the country. That allows us to manage the business as a single operating segment with 60 distribution centers nationwide.

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

Outlook

~~The~~General ~~foodservice~~economic ~~market~~trends isand ~~affected~~conditions, byincluding ~~general~~demographic ~~economic~~changes, ~~conditions~~inflation, deflation, consumer confidence, and ~~consumer~~ disposable income., ~~During~~coupled ~~fiscal~~with ~~year~~changing tastes ~~2015~~and preferences, weinfluence ~~experienced cost~~the ~~deflation~~amount that consumers spend on food-away-from-home, which can affect our customers and in ~~several~~turn ~~product~~our ~~categories~~sales. ~~Rapid~~Additionally, ~~declines~~given inthat ~~inflation~~a orlarge ~~periods~~portion of ~~cost~~our ~~deflation~~business ~~can~~is ~~make~~based iton ~~challenging~~markups toover ~~leverage~~cost, ~~our~~sudden ~~fixed~~inflation or ~~costs~~prolonged ~~and~~deflation ~~may~~can negatively ~~affect~~impact our ~~relative~~sales ~~profit~~and ~~levels~~gross margin. ~~Periods~~Despite these economic conditions, and the period of ~~prolonged~~uncertainty ~~product~~related ~~cost inflation~~to ~~may~~the Acquisition noted above, our sales and case volume have aremained ~~negative~~strong, ~~impact~~with onincreasing growth to our ~~profit~~independently ~~margins~~owned single and ~~earnings~~multi-unit torestaurant ~~the~~customers. ~~extent~~Our ~~such~~investments ~~product~~in ~~cost~~a ~~increases~~common ~~are~~technology ~~not~~platform, ~~able~~efficient totransactional beand ~~passed~~operational onmodel, toe-commerce ~~customers~~and ~~due~~analytic totools ~~resistance~~that tosupport ~~higher~~our ~~prices~~team-based orselling ~~such~~approach, coupled ~~cost~~with ~~increases~~merchandising ~~having~~and aproduct ~~negative~~innovation, ~~impact~~have ~~on consumer~~helped ~~spending~~us leverage our costs, maintain our sales, and differentiate us from our competitors.

~~The~~During ~~foodservice~~fiscal ~~market is highly competitive and fragmented~~2016, ~~with~~we ~~intense~~expect ~~competition~~positive ~~and modest demand~~ growth. ~~During~~in ~~fiscal~~foodservice ~~year 2015~~industry todemand; ~~date~~however, we ~~have~~expect ~~seen~~competitive ~~some~~pressures ~~improvement~~to inremain ~~general~~high. Sales ~~economic~~to ~~conditions,~~our independent ~~consumer~~restaurant ~~confidence~~customers, ~~and~~which ~~consumer~~generally ~~disposable~~have ~~income;~~higher ~~however~~gross wemargins, ~~have~~are ~~not~~accounting ~~seen~~for ~~consumers~~an ~~use~~increasing aproportion ~~significant portion~~ of ~~this~~our ~~additional~~sales ~~discretionary~~mix. ~~income~~Sales onof ~~the food-away-from-home~~our ~~category.~~private ~~Because~~brands, wewhich dogenerally ~~not~~have ~~anticipate~~higher ~~any~~gross ~~material~~margins ~~improvement~~compared into ~~the~~similar manufacturer-branded ~~demand for foodservice~~offerings, weare ~~will~~also ~~likely~~increasing ~~see~~as ~~modest~~compared ~~demand~~to ~~growth for~~ the ~~remainder~~prior of fiscal year. ~~2015~~In ~~and~~addition ~~into~~to ~~2016.~~our Wefocus ~~will~~on ~~remain~~sales ~~focused~~growth, we oncontinue ~~executing~~to focus on our ~~growth~~ ~~strategies~~operating costs, ~~adding~~including ~~value~~consolidating ~~for~~ and ~~differentiating~~optimizing ~~ourselves with~~ our ~~customers~~distribution ~~and~~facilities, changes ~~driving~~to ~~continued~~our field operational ~~improvement~~model, inand ~~the~~our ~~business~~benefit programs.

~~Termination~~As of April 2, ~~Merger~~2016, ~~Agreement~~approximately one-third of our facilities have collective bargaining agreements. In fiscal year 2016, fourteen collective bargaining agreements covering approximately 1,600 employees are subject to renegotiation. While we believe we generally have good relations with our employees, including those represented by unions, from time to time we experience work stoppages or strikes. In April 2016, we provided notice to our employees that we were shutting down our Baltimore, Maryland distribution center in June 2016. The employees represented by Teamster Locals 570 and 355 went on strike. In May 2016 employees represented by Teamster local unions at our Cleveland, Ohio and Buffalo, New York distribution centers engaged in sympathy strikes in support of the Baltimore unions. We intend to transfer our Baltimore business to our other distribution centers, but in the interim, we continue to serve our customers using temporary labor. In May 2016, employees represented by the Teamsters local union at our Corona distribution center went on strike over an unfair labor practice charge that was filed in February 2016. Employees represented by Teamster local unions at our Phoenix, Arizona, San Diego and La Mirada, California distribution centers engaged in sympathy strikes in support for the Corona unfair labor practice strike. While we do not believe these labor disruptions will have a material impact on our business because of our contingency plans to mitigate any adverse effects of such labor disputes and work stoppages, customer deliveries could be delayed. Additionally, our warehouse and delivery costs can increase as a result of such strikes and actions taken to ensure customer deliveries. We continue to evaluate the impact of these recent union actions on our results of operations. We will remain focused on executing our growth strategies, adding value for and differentiating ourselves with our customers, and driving continued operational improvement in the business.

On20 December 8, 2013, our parent company, USF Holding Corp. (“USF Holding”) entered into an agreement and plan of merger (the “Merger Agreement”) with Sysco Corporation (“Sysco”); Scorpion Corporation I, Inc., a wholly owned subsidiary of Sysco (“Merger Sub One”); and Scorpion Company II, LLC, a wholly owned subsidiary of Sysco (“Merger Sub Two”), through which Sysco would have acquired USF Holding (the “Acquisition”) on the terms and subject to the conditions set forth in the Merger Agreement. The closing of the Acquisition was subject to customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

On February 2, 2015, USF Holding, US Foods and certain of its subsidiaries, and Sysco entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Performance Food Group, Inc. (“PFG”), through which PFG agreed to purchase, subject to the terms and conditions of the Asset Purchase Agreement, 11 US Foods distribution centers and related assets and liabilities, in connection with–and subject to–the closing of the Acquisition.

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

On June 26, 2015, USF Holding, Sysco, Merger Sub One and Merger Sub Two entered into an agreement to terminate the Merger Agreement. Upon the termination of the Merger Agreement, the Asset Purchase Agreement automatically terminated and the indenture (the “Senior Notes Indenture”) with respect to the 8.5% unsecured Senior Notes due June 30, 2019 (the “Senior Notes”) reverted to its prior form as if the amendments that modified certain definitions in such indenture had never become operative. See Note 10—Debt for a further description of the Senior Notes Indenture. Sysco paid a termination fee of $300 million to USF Holding in connection with the termination of the Merger Agreement. The Company paid a termination fee of $12.5 million to PFG pursuant to the terms of the Asset Purchase Agreement.

Strategy

On June 29, 2015, we made a bold statement with our “Just Taking Off” campaign which officially marked the re-launch of our brand and our strategic transformation initiatives to become an even stronger force in the foodservice industry. Our focus is stronger than ever, as we continue to change the way operators across the country view foodservice distributors through our differentiated strategy and unrivaled innovation. We will fulfill our mission to be “First in Food” through our strategy of “Great Food. Made Easy.” We will win in the industry by selling innovative and exclusive products, and providing expert advice; we will differentiate with the best and easiest customer experience and we will compete with flawless fundamentals. We will bring this strategy to life through our community of food people, new technology, fleet and facilities, increased teamwork, and becoming more effective.

As part of the implementation of our strategic direction, in August 2015, we announced changes to our field organizational model that will allow us to operate more effectively. In this new structure, we will be moving from eight regions to five. There will be 26 areas, comprised of one to three distribution centers. There will be no changes in operations and minimal changes in sales so as not to disrupt customers. The new field organizational model is expected to be implemented during fiscal year 2016.

Results of Operations

Accounting Periods

We operate on a 52-53 week fiscal year with all periods ending on a Saturday. When a 53-week fiscal year occurs, we report the additional week in the ~~fiscal~~ fourth quarter. Fiscal year ~~2015~~2016 is a 5352-week fiscal year.

Selected Historical Results of Operations

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

	13-Weeks Ended						39-Weeks Ended
	13-Weeks Ended*
	September 26,2015			September 27,2014			September 26,2015			September 27,2014
	April 2, 2016			March 28, 2015
	(in millions)						~~(in millions)~~
Net sales	$	5,~~796~~593		$	5,~~911~~554		$	~~17,192~~		$	~~17,266~~
Cost of goods sold		4,~~783~~633			4,~~950~~625			~~14,257~~			~~14,446~~
Gross profit		~~1,013~~960			~~961~~929			~~2,935~~			~~2,820~~
Operating expenses:
Distribution, selling and administrative costs		~~911~~864			~~904~~886			~~2,728~~			~~2,681~~
Restructuring and asset impairment charges		29			—			82			—
Restructuring and tangible asset impairment charges		11			1
Total operating expenses		~~940~~875			~~904~~887			~~2,810~~			~~2,681~~
Operating income		7385			5742			~~125~~			~~139~~
Interest expense, net		70			71			211			219
Interest expense—net		71			71
Income (loss) before income taxes		314			(1429	)		~~(86~~	)		~~(80~~	)
Income tax (benefit) provision		(33	)		23			(2	)		41
Income tax provision (benefit)		—			(36	)
Net income (loss)	$	36		$	(37	)	$	(84	)	$	(121	)
Net income	$	14		$	7
Percentage of Net Sales:
Gross profit		17.52	%		16.37	%		~~17.1~~	%		~~16.3~~	%
Distribution, selling and administrative costs		15.74	%		1516.30	%		~~15.9~~	%		~~15.5~~	%
Operating income		1.3	%		1.0	%		0.7	%		0.8	%
Operating expenses		15.6	%		16.0	%
Net income (loss)		0.6	%		(0.6	)%		(0.5	)%		(0.7	)%
Operating income		1.5	%		0.8	%
Adjusted EBITDA (1)		3.9	%		3.7	%		3.6	%		3.6	%
Net income		0.3	%		0.1	%
Other Data:
Adjusted EBITDA		3.6	%		2.8	%
EBITDA (1)	$	175		$	162		$	424		$	449
Other Data:
Adjusted EBITDA (1)	$	225		$	220		$	620		$	626
Cash flows—operating activities	$	137		$	102
Cash flows—investing activities		(81	)		(65	)
Cash flows—financing activities		(143	)		(3	)
Capital expenditures		37			57
EBITDA(1)		187			142
Adjusted EBITDA(1)		203			158

(1*) ~~EBITDA~~Amounts ~~and~~may Adjusted EBITDA are measures used by management to measure operating performance. EBITDA is defined as Net income (loss), plus Interest expense – net, Income tax (benefit) provision, and Depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for: (1) Sponsor fees; (2) Restructuring and asset impairment charges; (3) Share-based compensation expense; (4) the non-cash impact of net LIFO adjustments; (5) Business transformation costs; (6) Acquisition related costs; and (7) Other, consisting of gains, losses, or charges as specified under our debt agreements. EBITDA and Adjusted EBITDA, as presented in this Quarterly Report on Form 10-Q, are supplemental measures of our performance that are not ~~required~~add ~~by—or~~due ~~presented in accordance with—GAAP. They are not measurements of our performance under GAAP and should not be considered as alternatives~~ to ~~Net income (loss) or any other performance measures derived in accordance with GAAP, or as alternatives to Cash Flows from Operating Activities as measures of our liquidity~~rounding.

~~For~~(1) ~~additional~~EBITDA ~~information~~and ~~see~~Adjusted ~~Non~~EBITDA are measures used by management to measure operating performance. EBITDA is defined as Net income (loss), plus Interest expense – net, Income tax provision (benefit) and Depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for: (1) Sponsor fees; (2) Restructuring and tangible asset impairment charges; (3) Share-~~GAAP~~based ~~reconciliations~~compensation ~~below~~expense; (4) the non-cash impact of net LIFO adjustments; (5) Business transformation costs; (6) Acquisition related costs; and (7) Other gains, losses, or charges as specified under our debt agreements. EBITDA and Adjusted EBITDA, as presented in this Quarterly Report on Form 10-Q, are supplemental measures of our performance that are not required by—or presented in accordance with—GAAP. They are not measurements of our performance under GAAP and should not be considered as alternatives to Net income (loss) or any other performance measures derived in accordance with GAAP.

For additional information, see non-GAAP reconciliations below.

Non-GAAP Reconciliations

We ~~believe these non-GAAP financial measures~~ provide anEBITDA ~~important supplemental measure of our operating performance. This is because they exclude amounts that our management~~ and ~~board~~Adjusted EBITDA ofas ~~directors~~supplemental domeasures ~~not~~to ~~consider~~GAAP ~~part~~regarding ofthe ~~core~~Company’s ~~operating~~operational ~~results when assessing our~~ performance. ~~Our~~ ~~management~~These ~~uses these non-GAAP~~ financial measures toexclude ~~evaluate~~the ~~our~~impact ~~historical~~of ~~financial~~certain ~~performance,~~items ~~establish future operating~~ and ~~capital budgets~~, ~~and determine variable compensation for management and employees. Accordingly~~therefore, ~~our~~have ~~management includes~~not ~~these~~been ~~adjustments~~calculated ~~when~~in ~~assessing~~accordance ~~the~~with ~~business’s operating performance~~GAAP.

27We 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. Examples of items excluded from Adjusted EBITDA include Restructuring and tangible asset impairment charges, Sponsor fees, Share-based compensation expense, Business transformation costs (costs associated with the redesign of systems and processes), Acquisition-related costs, and other items as specified in our debt agreements.

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

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

The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable GAAP financial performance measure for the periods indicated:


	13-Weeks Ended*
	April 2, 2016			March 28, 2015
	(In millions)

Net income	$	14		$	7
Interest expense—net		71			71
Income tax provision (benefit)		—			(36	)
Depreciation and amortization expense		103			99


EBITDA		187			142
Adjustments:
Sponsor fees⁽¹⁾		2			3
Restructuring and tangible asset impairment charges⁽²⁾⁽⁸⁾		11			1
Share-based compensation expense⁽³⁾		5			2
Net LIFO reserve change⁽⁴⁾		(11	)		(24	)
Business transformation costs⁽⁵⁾		9			9
Acquisition related costs⁽⁶⁾		1			15
Other⁽⁷⁾		(2	)		10


Adjusted EBITDA	$	203		$	158

(*)	Amounts may not add due to rounding.

(1)	Consists of management fees paid to Clayton, Dubilier & Rice, LLC (“CD&R”) and Kohlberg Kravis Roberts & Co. L.P. (“KKR”), collectively, (the “Sponsors”).

(2)	Consists primarily of facility closing costs, including severance and related costs, tangible asset impairment charges and organizational realignment costs.

(3)	Share-based compensation expense for vesting of US Foods stock awards.

(4)	Represents the non-cash impact of net LIFO reserve adjustments.

(5)	Consists primarily of costs related to significant process and systems redesign across multiple functions.

(6)	Consists of costs related to the Acquisition, including certain 2016 employee retention costs.

(7)	Other includes gains, losses or charges as specified under our debt agreements.

(8)	For the first quarter of 2015, Restructuring and tangible asset impairment charges of $1 million were reclassified from Other, to conform with the current period presentation.

Our debt agreements specify items to be added to EBITDA in arriving at Adjusted EBITDA. These include, among other things, Sponsor fees, Share-based compensation expense, Restructuring and asset impairment charges, the non-cash impact of net LIFO adjustments, and gains and losses on debt transactions. Where there are other small, specified costs to add to EBITDA to arrive at Adjusted EBITDA, we combine those items under Other.

The charges resulting from lump-sum payment settlements to former employees participating in several of our Company sponsored pension plans were also added to EBITDA in arriving at Adjusted EBITDA. Costs to optimize our business were also added back to EBITDA to arrive at Adjusted EBITDA. These business transformation costs included third party and duplicate or incremental internal costs. Those items are related to significant process and systems redesign in our replenishment and category management functions; cash & carry retail store strategy; and process and system redesign related to our sales model.

All of the items just mentioned are specified as additions to EBITDA to arrive at Adjusted EBITDA, in our debt agreements. We caution readers that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be the same as similar measures used by other companies. Not all companies and analysts calculate EBITDA or Adjusted EBITDA in the same manner.

We present EBITDA because it is an important supplemental measure of our performance. We also know that it is frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry. We present Adjusted EBITDA as it is the key operating performance metric used by our chief executive officer and board of directors to assess operating performance.

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

	13-Weeks Ended						39-Weeks Ended
	September 26,2015			September 27,2014			September 26,2015			September 27,2014
	(in millions)						(in millions)
Net income (loss)	$	36		$	(37	)	$	(84	)	$	(121	)
Interest expense, net		70			71			211			219
Income tax (benefit) provision		(33	)		23			(2	)		41
Depreciation and amortization expense		102			105			299			310
EBITDA		175			162			424			449
Adjustments:
Sponsor fees(1)		3			3			8			8
Restructuring and asset impairment charges(2)		29			—			82			—
Share-based compensation expense(3)		3			3			8			9
Net LIFO reserve change		(20	)		21			(42	)		69
Business transformation costs(4)		11			14			31			40
Acquisition related costs(5)		22			7			91			27
Other(6)		2			10			18			24
Adjusted EBITDA	$	225		$	220		$	620		$	626

(1) Consists of management fees paid to Clayton, Dubilier & Rice, Inc. and Kohlberg Kravis Roberts & Co. (collectively, the “Sponsors”).

(2) Consists primarily of facility related closing costs, including severance and related costs, asset impairment charges, organizational realignment costs, and estimated multiemployer pension withdrawal liabilities.

(3) Share-based compensation expense represents costs recorded for vesting of USF Holding stock option awards, restricted stock and restricted stock units.

(4) Consists primarily of costs related to significant process and systems redesign.

(5) Consists of direct and incremental costs related to the Acquisition.

(6) Other includes gains, losses or charges as specified under our debt agreements. The 13-weeks ended September 26, 2015 balance consists primarily of $9 million of brand re-launch and marketing costs, offset by a net insurance recovery gain of $9 million. The 39-weeks ended September 26, 2015 balance consists primarily of a $16 million litigation settlement cost, and $9 million of brand re-launch and marketing costs, offset by a net insurance recovery gain of $11 million.

Comparison of Results

13-Weeks Ended ~~September 26~~April 2, ~~2015~~2016 and ~~September~~March 2728, ~~2014~~2015

Highlights

•The ~~Net~~comparison ~~sales~~of results ~~decreased~~between ~~$115~~the ~~million,~~13-weeks orended ~~1.9%,~~April ~~to $5~~2,~~796~~ ~~million,~~2016 ~~primarily due to decreased sales to national chain,~~ and ~~healthcare and hospitality customers~~March 28, ~~partially~~2015 ~~offset~~is byas ~~increased~~follows: ~~sales to independent restaurants.~~

• ~~Operating income, as a percentage of~~ Net sales, ~~was~~increased ~~1.3%~~$39 inmillion, ~~2015~~or ~~compared to 1.~~0~~% in 2014~~. ~~Fiscal third quarter of 2015 Operating income included Acquisition related costs of $22 million~~7%, ~~employee separation costs of $29 million attributable~~ to ~~our new field organizational model and~~ $95,593 million ~~of brand re-launch and marketing costs~~. ~~This~~Case ~~was~~growth ~~offset~~increased ~~by favorable diesel fuel costs, product deflation versus prior year and a net insurance recovery gain of $9 million~~2.4%.

• ~~Adjusted~~Independent ~~EBITDA,~~restaurant ascase avolume ~~percentage~~grew ~~of Net sales, was 3~~8.90% ~~in 2015 compared to 3~~.~~7% in 2014.~~

•

Operating income increased $43 million, or 102%, to $85 million in 2016. As a percentage of Net sales, Operating income increased to 1.5% in 2016, as compared to 0.8% in 2015.

•

Adjusted EBITDA increased to $203 million in 2016 from $158 million in 2015. As a percentage of Net sales, Adjusted EBITDA increased to 3.6% in 2016 compared to 2.8% in 2015.

Net Sales

Net sales ~~decreased $115~~increased $39 million, or 10.97%, to $5,~~796~~593 million in ~~2015.~~2016, ~~The~~which ~~decrease~~is ~~was~~comprised ~~primarily~~of ~~due~~a to2.4% ~~decreased~~increase ~~sales~~in tocase ~~national~~volume ~~chain,~~ and ~~healthcare~~a ~~and~~1.7% ~~hospitality~~reduction ~~customers,~~in ~~partially~~the ~~offset~~overall byrate ~~increased~~per ~~sales to independent restaurants~~case. ~~Lower~~The ~~product~~increase ~~cost~~in ~~also unfavorably~~case ~~impacted~~volume improved Net sales inby ~~2015~~approximately ~~since~~$133 amillion, ~~significant~~while ~~portion~~the ofrate ~~our~~per case ~~business~~reduced isNet ~~based~~sales onby ~~percentage~~approximately ~~markups over actual cost. Case volume decreased 0.6% or~~ $3594 million ~~from the prior year period~~.

Restaurant case volume increased 0.2%; however, within restaurants we experienced strength in independent restaurant customer growth as merger uncertainty lifted, which was offset by declines in national restaurant chain customers as a result of our exit from serving certain national restaurant chain customers in 2015. Independent restaurant customer case growth was 8.0%. We also experienced case growth with hospitality customers. Sales of private brand products represented approximately 32% of total sales in 2016, increasing approximately 80 bps as compared to the first quarter of 2015.

Excluding the impact of acquisitions, Net sales increased $5 million, or 0.1%, and case volume increased 1.8%. The increase in case volume improved Net sales by approximately $99 million, while the rate per case reduced sales by approximately $94 million. Excluding the effect of acquisitions, restaurant case volume decreased 0.6%, and Independent restaurant customer case volume increased 6.6%.

The overall price per case decline of 1.7% as compared to the first quarter of 2015, reflects the deflationary environment. Deflation experienced during a significant portion of 2015 moderated but continued into the first quarter of 2016. Changes in product cost impact Net sales since a significant portion of our business is based on markups over cost.

Gross Profit

Gross profit increased $5231 million, or 53.43%, to $~~1,013~~960 million. ~~Gross~~in ~~profit,~~the asfirst quarter of 2016. As a percentage of Net sales, Gross profit increased by 10.25% to 17.52% in 2016 from 16.7% in 2015. Higher sales volume, including the impact of acquisitions, increased Gross profit ~~was~~by ~~favorably~~2.5%, ~~impacted~~compared ~~versus~~to ~~last~~2015. Additionally, ~~year~~merchandising ~~due~~initiatives, including efforts to ~~last~~reduce inproduct ~~first~~costs ~~out~~through ~~(“LIFO”)~~vendor ~~inventory~~management ~~costing~~and other margin improvement initiatives, increased Gross profit by 2. ~~Fiscal~~2% ~~third~~over ~~quarter~~the first quarter of 2015. Our ~~had~~LIFO ainventory ~~LIFO~~costing ~~benefit~~decreased ofGross profit by $2013 million ~~versus~~or 1.4% as compared to the prior year. Deflationary trends resulted in a LIFO ~~charge~~benefit of $2111 million incompared ~~the~~to ~~fiscal~~a ~~third~~benefit ~~quarter~~ of ~~2014,~~$24 ~~due~~million ~~to changes~~ in ~~product~~2015. While deflation moderated ~~during~~year over year, the ~~quarter.~~Company ~~This~~continued ~~favorable~~to ~~impact~~see ~~was~~deflation ~~partially~~in ~~offset~~center-of-plate byitems ~~continued competitive~~such ~~market~~as ~~conditions~~beef and ~~lower volumes~~seafood.

Distribution, Selling and Administrative Costs

Distribution, selling and administrative costs ~~increased~~decreased $722 million, or 02.84%, to $~~911~~864 million in ~~2015~~2016. As a percentage of Net sales, Distribution, selling and administrative costs ~~increased~~decreased 0.46% to 15.74% in 2016 from 1516.30% ~~last~~in ~~year~~2015. ~~Increases~~The indecrease ~~Distribution,~~was ~~selling and administrative costs were~~ due ~~primarily~~ to $1513 million of ~~higher~~lower Acquisition -related costs, $96 million of ~~brand~~lower ~~re-launch~~fuel ~~and~~expenses, ~~marketing~~driven ~~costs,~~by ~~and~~declining fuel prices, a $56 million ~~increase~~decrease in our pension ~~costs–which~~and ~~were~~other ~~impacted~~postretirement bybenefit ~~lower~~costs ~~discount~~and ~~rates~~a ~~and~~$15 ~~the~~million ~~2014~~decrease ~~year~~in ~~end~~legal ~~mortality~~settlement ~~table~~costs. ~~updates~~These ~~related~~were topartially ~~our~~offset ~~Company~~by ~~sponsored~~an ~~benefit~~$8 ~~plans.~~million ~~These~~increase ~~increases~~in ~~were~~wages ~~partially~~and ~~offset~~other byemployee-related expenses, a $63 million ~~lower fuel~~increase ~~expenses~~in ~~driven~~professional byservice ~~declining~~fees ~~fuel~~due ~~prices~~to initiatives including US Foods IPO readiness costs, a $3 million ~~decrease~~increase in depreciation and amortization expense, primarily related to fleet assets, and a lower net insurance benefit ~~recovery gain~~ of $93 million related to a facility tornado loss. in 2014.

Restructuring and Tangible Asset Impairment Charges

During ~~the fiscal third quarter of~~ 2015, ~~the~~we ~~Company~~ announced ~~its~~plans ~~plan~~ to streamline ~~its~~our field operational model ~~that~~and isa ~~intended~~tentative decision to ~~make~~close ~~the~~our ~~operations~~distribution ~~more~~facility in Baltimore, ~~effective~~Maryland. During ~~The Company anticipates~~ the ~~reorganization~~first ~~will~~quarter beof ~~completed in fiscal year~~ 2016. Anwe ~~initial~~incurred ~~restructuring~~an ~~charge~~additional of $29 10 million ~~was recorded~~ in ~~the~~charges ~~fiscal~~related ~~third~~to ~~quarter~~the offield ~~2015~~restructuring and ~~consisted~~the ~~primarily~~Baltimore offacility ~~employee separation related costs~~closure. WeRestructuring ~~expect~~and totangible ~~incur~~asset ~~additional~~impairment ~~restructuring~~ charges ~~during~~were ~~the~~immaterial ~~fiscal~~in ~~fourth~~the first quarter of 2015 ~~and in fiscal year 2016 related to this organizational realignment~~.

~~Operating~~23 ~~Income~~

Operating income increased $16 million, or 28.1%, to $73 million in the fiscal third quarter of 2015. Operating income as a percent of Net sales increased 0.3% to 1.3% for the quarter, up from 1.0% in the fiscal third quarter of 2014. The change was primarily due to the factors discussed above.

Interest Expense—Net

Interest expense—net decreased $1 million to $70 million in the fiscal third quarter of 2015, as certain Deferred finance fees associated with our 2007 acquisition were fully amortized during the fiscal second quarter of 2015.

Income Taxes

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

We estimated our annual effective tax rate for the full fiscal year and applied the annual effective tax rate to the results of the 13-weeks ended September 26, 2015 and September 27, 2014 for purposes of determining our year-to-date tax expense.

US Foods is a member of USF Holding’s consolidated group, and as a result the US Food’s operations are included in the consolidated income tax return of USF Holding. US Foods computed the components of its tax provision under the “separate return” approach. For further information, see additional discussion under “Income Taxes” in the 39-weeks Ended September 26, 2015 and September 27, 2014 below.

Net Income (Loss)

Our Net income was $36 million in the fiscal third quarter of 2015 as compared with a Net loss of $37 million in the fiscal third quarter of 2014. The increase in Net income was primarily due to the factors discussed above.

39-weeks Ended September 26, 2015 and September 27, 2014

Highlights

• Net sales decreased $74 million, or 0.4%, to $17,192 million, primarily due to decreased sales to national chain, and healthcare and hospitality customers, partially offset by increased sales to independent restaurants.

• Operating income, as a percentage of Net sales, was 0.7% in 2015 compared to 0.8% in 2014. Fiscal 2015 Operating income included $91 million of Acquisition related costs, $82 million of employee separation costs for facility closures and implementation of our new field organizational model, $16 million in legal settlement costs and $9 million of brand re-launch and marketing costs. This was offset by favorable diesel fuel costs, product deflation versus prior year and a net insurance recovery gain of $11 million.

• Adjusted EBITDA, as a percentage of Net sales, was 3.6% in 2015 and 2014.

Net Sales

Net sales decreased $74 million, or 0.4%, to $17,192 million in 2015. The decrease was primarily due to decreased sales to national chain, and healthcare and hospitality customers, partially offset by increased sales to independent restaurants. Lower product cost also unfavorably impacted Net sales in 2015 since a significant portion of our business is based on percentage markups over actual cost. Case volume decreased 0.4% or $75 million from the prior year.

Gross Profit

Gross profit increased $115 million, or 4.1%, to $2,935 million. Gross profit, as a percentage of Net sales, increased by 0.8% to 17.1% in 2015. Gross profit was favorably impacted versus last year due to LIFO inventory costing. Fiscal year 2015 had a LIFO benefit of $42 million versus a LIFO charge of $69 million in fiscal year 2014, due to changes in product deflation during 2015. This favorable impact was partially offset by continued competitive market conditions and lower volumes.

Distribution, Selling and Administrative Costs

Distribution, selling and administrative costs increased $47 million, or 1.8%, to $2,728 million in 2015. As a percentage of Net sales, Distribution, selling and administrative costs increased 0.4% to 15.9% from 15.5% last year. Increases in Distribution, selling and administrative costs were due primarily to $64 million of higher Acquisition related costs, a $17 million increase in our pension costs–which were impacted by lower discount rates and 2014 year end mortality table updates related to our Company sponsored benefit plans– $16 million in legal settlement costs, and $9 million of brand re-launch and marketing costs. These increases were offset by $22 million lower fuel expenses driven by declining fuel prices, an $11 million decrease in depreciation expense, primarily related to information technology and fleet assets, and a net insurance recovery gain of $11 million related to a tornado loss.

Restructuring and Asset Impairment Charges

During the fiscal third quarter of 2015, the Company announced its plan to streamline its field operational model that is intended to make the operations more effective. The Company anticipates the reorganization will be completed in fiscal year 2016. An initial restructuring charge of $29 million was recorded in the fiscal third quarter of 2015 and consisted primarily of employee separation related costs. We expect to incur additional restructuring charges during the fiscal fourth quarter of 2015 and in fiscal year 2016 related to this organizational realignment.

During the fiscal third quarter of 2015, we completed the closing of our Lakeland, Florida distribution facility, resulting in a restructuring charge of approximately $1 million for severance costs. During the fiscal second quarter of 2015, we announced our tentative decision to close the Baltimore, Maryland distribution facility. We are currently engaged in discussions with unions representing certain employees regarding this tentative decision. A final decision regarding the Baltimore facility will be made once negotiations with the unions are concluded. In anticipation of a potential closure of the Baltimore facility, we accrued a restructuring charge estimated at $51 million, including $46 million of estimated multiemployer pension withdrawal liabilities, and $5 million related to estimated employee separation related costs. The estimated multiemployer pension liability was based on the latest available information received from the respective plans’ administrator and represents an estimate for a calendar year 2014 withdrawal. Due to the lack of current information, including changes in market conditions, and funded status of the related multiemployer pension plans, the settlement of these multiemployer pension withdrawal liabilities could materially differ from this estimate.

During the fiscal first quarter of 2015 certain Assets held for sale were adjusted to equal their estimated fair value, less cost to sell, resulting in an asset impairment charge of $1 million.

Operating Income

Operating income ~~decreased~~increased $1443 million, or ~~10.1~~102%, to $~~125~~85 million in ~~2015~~2016. Operating income as a percent of Net sales ~~decreased~~increased 0.17% to 01.75% ~~down~~for the quarter, up from 0.8% in ~~2014~~ 2015. The change was primarily due to the factors discussed above.

Interest Expense—Net

Interest expense—net ~~decreased~~was $871 million tofor ~~$211~~the ~~million~~first inquarter ~~fiscal~~of ~~year~~2016 and 2015. ~~The~~An ~~decrease~~increase ~~related~~in ~~to lower~~ borrowings on our ~~accounts~~revolving ~~receivable~~credit facilities was offset by ~~financing~~the ~~facility,~~effect ~~and~~of certain ~~Deferred~~deferred finance fees associated with our 2007 acquisition ~~were~~being fully amortized during the ~~fiscal~~ second quarter of 2015.

Income Taxes

We estimated our annual effective tax rate for the full fiscal year and applied the annual effective tax rate to the results of the 3913-weeks ended ~~September 26~~April 2, ~~2015~~2016 and ~~September 27~~March 28, ~~2014~~2015 for purposes of determining our year-to-date tax expense.

The valuation allowance against the net deferred tax assets was $~~232~~260 million at ~~December 27~~January 2, ~~2014~~2016. The ~~net~~valuation ~~deferred~~allowance ~~tax~~against ~~assets~~the ~~related~~net todeferred ~~federal~~tax ~~and~~assets ~~state~~decreased ~~net operating losses increased~~ $247 million during the 3913-weeks ended ~~September 26~~April 2, ~~2015~~2016, which resulted in a $~~256~~253 million total valuation allowance at ~~September 26~~April 2, ~~2015~~2016. A full valuation allowance on the net deferred tax assets will be maintained until sufficient positive evidence related to sources of future taxable income exists to support a reversal of the valuation allowance.

The effective tax rate for the 3913-weeks ended ~~September 26~~April 2, 2016 and March 28, 2015 of 24 % and 125%, respectively varied from the 35% federal statutory rate primarily due to a change in the valuation allowance. ~~and~~During ~~deferred~~the ~~tax liabilities related to indefinite~~13-~~lived~~weeks ~~intangibles~~ended ~~which~~April ~~are generally~~2, ~~not~~2016 ~~considered~~and aMarch ~~source~~28, ~~of support for realization of the net deferred tax asset~~2015, ~~offset by~~ the ~~tax~~valuation ~~benefit~~allowance decreased ~~recognized~~$6 inmillion ~~continuing~~and ~~operations~~$22 ~~due~~million, torespectively, ~~the~~as ~~year-to-date~~a ~~gain~~result ~~in Other comprehensive income associated with the non-union benefits freeze~~ of a ~~Company~~change ~~sponsored defined benefit plan. The gain~~ in ~~Other~~deferred ~~comprehensive income provides sufficient evidence of current period taxable income to recognize continuing operating income~~ tax ~~benefit~~assets tonot ~~the~~covered ~~extent of the taxable income generated~~ by ~~current~~future ~~year~~reversals ~~Other~~of ~~comprehensive~~deferred ~~income~~tax liabilities.

~~Generally,~~USF ~~the~~is ~~amount~~a member of ~~tax~~US ~~expense~~Foods’ orconsolidated ~~benefit~~group, ~~allocated~~and toas ~~continuing~~a ~~operations~~result ~~is determined~~our ~~without~~operations ~~regard~~are toincluded in the ~~tax~~consolidated ~~effects of~~ income ortax ~~loss~~return ~~from~~of ~~Other~~US ~~comprehensive income~~Foods. ~~However,~~We computed ~~an exception to~~ the ~~general~~components ~~rule~~of isour ~~provided~~tax ~~when,~~provision inunder the ~~presence~~“separate ofreturn” aapproach. ~~valuation~~Under ~~allowance~~this ~~against~~approach, ~~deferred~~our ~~tax~~financial ~~assets,~~statements ~~there~~recognize isthe acurrent ~~pretax~~and ~~loss from~~deferred ~~continuing~~income ~~operations~~tax ~~and~~consequences ~~pretax~~that ~~income~~result from ~~Other~~our ~~comprehensive~~activities ~~income.~~as Inif ~~such~~we ~~instances,~~were ~~taxable~~a separate ~~income~~taxpayer ~~from~~rather ~~Other~~than ~~comprehensive~~a ~~income~~member ~~provides~~of ~~sufficient~~US ~~support~~Foods’ toconsolidated group.

31Under the “separate return” approach, we had tax affected federal and state net operating loss (“NOL”) carryforwards of approximately $136 million and $87 million, respectively as of April 2, 2016. These NOLs do not reflect the tax position of the US Foods consolidated tax return.

US Food’s federal and state income taxes incurred are paid by us and settled with US Foods pursuant to a tax sharing agreement. The agreement further states that we shall pay on behalf of US Foods the federal and state return taxes. If the consolidated federal and state return taxes for US Foods exceed the federal and state taxes calculated for us as a separate filing group, US Foods is required to make a payment to us equal to such excess. Likewise, if the federal and state taxes calculated at the separate return level for us exceed the consolidated taxes, we are required to make a payment to US Foods equal to such excess. The tax sharing agreement does not commit US Foods to compensate us for the use of its NOLs nor does US Foods currently intend to compensate us for the use of its NOLs. As of April 2, 2016, USF has an intercompany receivable of $7 million which reflects the federal Alternative Minimum Tax (“AMT”) and state income taxes that US Foods is estimating for the 2015 consolidated income tax returns, that USF will pay on behalf of US Foods per its tax sharing agreement.

Net Income

Our Net income was $14 million in 2016 as compared with a Net income of $7 million in 2015. The increase in Net income was primarily due to the factors discussed above.

recognize current year tax benefit created by continuing operations. The tax benefit recognized in continuing operations is limited to the lower of the tax impact from Other comprehensive income or the tax impact from continuing operations. As a consequence, the Company recognized a continuing operation income tax benefit in the 39-weeks ended September 26, 2015 in the amount of $33 million. The Other comprehensive income tax provision expense supports realization of the $33 million benefit in continuing operations for the 39-weeks ended September 26, 2015. During the 39-weeks ended September 26, 2015, the valuation allowance increased $24 million, as a result of a change in deferred tax assets associated with net operating losses and not covered by future reversals of deferred tax liabilities.

US Foods is a member of USF Holding’s consolidated group, and as a result the Company’s operations are included in the consolidated income tax return of USF Holding. The Company computed the components of its tax provision under the “separate return” approach. Under this approach, the Company’s financial statements recognize the current and deferred income tax consequences that result from the Company’s activities as if the Company were a separate taxpayer rather than a member of USF Holding’s consolidated group.

Under the “separate return” approach, the Company had gross federal and state NOL carryforwards of approximately $366 million and $2 billion, respectively as of September 26, 2015. These NOLs do not reflect the tax position of the USF Holding consolidated tax return. USF Holding estimates that it will generate federal taxable income on its consolidated return in the amount of $310 million for its fiscal year 2015, which is primarily caused by the $300 million merger termination fee received from Sysco. Therefore, USF Holding will utilize NOLs available at the consolidated level to offset its regular tax liability. These NOLs were generated by US Foods. Despite the use of NOLs, USF Holding will be subject to federal Alternative Minimum Tax (“AMT”) and state income tax expense for its fiscal year 2015, which are estimated at $5.4 million and $2.2 million, respectively.

USF Holding’s federal and state income taxes incurred are paid by the Company and settled with USF Holding pursuant to a tax sharing agreement. The agreement further states that the Company shall pay on behalf of USF Holding the federal and state return taxes. If the consolidated federal and state return taxes for USF Holding exceed the federal and state taxes calculated for the Company as a separate filing group, USF Holding is required to make a payment to the Company equal to such excess. Likewise, if the federal and state taxes calculated at the separate return level for the Company exceed the consolidated taxes, the Company is required to make a payment to USF Holding equal to such excess. As neither the tax sharing agreement commits USF Holding to compensate the Company for the use of its NOLs nor does USF Holding currently intend to compensate the Company for the NOLs used, the Company has not recorded an intercompany receivable for these NOLs. US Foods has recorded an intercompany receivable totaling $7.6 million for the AMT and state income taxes USF Holding is estimating for the 2015 consolidated income tax returns, since US Foods will pay this on behalf of USF Holding per its tax sharing agreement.

Net Loss

Our Net loss was $84 million in fiscal 2015 as compared with a Net loss of $121 million in fiscal 2014. The decrease in Net loss was primarily due to the factors discussed above.

Liquidity and Capital Resources

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

Indebtedness

We are highly leveraged, with significant scheduled debt maturities during the next five years. A substantial portion of our liquidity needs arise from debt service requirements, and from the ongoing costs of operations, working capital and capital expenditures. As of ~~September 26~~April 2, ~~2015~~2016, we had $45,~~724~~019 million in aggregate indebtedness outstanding., ~~Our~~net primary financing sources for working capital and capital expenditures are our asset-based senior secured revolving loan ABL Facility (the “ABL Facility”) and our accounts receivable financing facility (the “2012 ABS Facility”). We had aggregate commitments for additional borrowings under the ABL Facility and the 2012 ABS Facility of $~~927~~23 million~~–of~~ ~~which $854 million was available based on our borrowing base–all~~ of ~~which~~unamortized ~~was~~deferred ~~secured.~~financing costs.

~~The~~Our ~~ABL~~primary ~~Facility~~financing ~~currently~~sources ~~provides~~ for ~~loans~~working ofcapital upand tocapital ~~$1,300~~expenditures ~~million,~~are ~~with~~our ~~its~~asset-based ~~capacity~~senior ~~limited~~secured byrevolving ~~borrowing~~loan ~~base~~ABL ~~calculations.~~Facility As(the ~~of September 26,~~“ABL ~~2015,~~Facility”) weand ~~had~~our noaccounts ~~outstanding~~receivable ~~borrowings,~~financing ~~but~~facility ~~had~~(the ~~issued~~“2012 ~~letters~~ABS ofFacility”). ~~credit~~As ~~totaling~~of ~~$387~~April ~~million~~2, ~~under~~2016, ~~the~~we ~~ABL~~had ~~Facility.~~aggregate ~~There~~commitments ~~was~~for ~~available~~additional ~~capacity~~borrowings onunder the ABL Facility and the 2012 ABS Facility of $~~713~~884 million, atof which ~~September~~$798 ~~26,~~million ~~2015,~~was available based on ~~the~~our borrowing base ~~calculation~~, all of which was secured.

32The ABL Facility provides for loans of up to $1,300 million, with its capacity limited by borrowing base calculations. As of April 2, 2016, we had $177 million of outstanding borrowings and had issued letters of credit totaling $378 million under the ABL Facility. There was available capacity on the ABL Facility of $741 million at April 2, 2016, based on the borrowing base calculation.

Under the 2012 ABS Facility, we and from time to time our subsidiaries, sell, on a revolving basis, our eligible receivables to a wholly owned, special purpose, bankruptcy remote subsidiary of ours. This subsidiary, in turn, grants to the administrative agent for the benefit of the lenders a continuing security interest in all of its rights, title and interest in the eligible receivables (as defined by the 2012 ABS Facility). See Note 5, Accounts Receivable Financing Program in our consolidated financial statements. The maximum capacity under the 2012 ABS Facility is $800 million, with its capacity limited by borrowing base calculations. Borrowings under the 2012 ABS Facility were $661 million at April 2, 2016. At our option, we can request additional 2012 ABS Facility borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $57 million at April 2, 2016, based on the borrowing base calculation.

Our Amended 2011 Term Loan had outstanding borrowings, as of April 2, 2016 of $2,033 million, net of $9 million of unamortized deferred financing costs. The Amended 2011 Term Loan bears interest of 4.50%, the London Inter Bank Offered Rate (“LIBOR”) floor plus 3.50%, at April 2, 2016 and matures on March 31, 2019.

As of April 2, 2016, we had $1,336 million outstanding of unsecured Senior Notes (the “Senior Notes), net of $13 million of unamortized deferred financing costs. The Senior Notes bear interest of 8.50% and mature on June 30, 2019. Prior to June 30, 2016, the Senior Notes are redeemable, at our option, in whole or in part, at a price of 104.250% of their principal amount, plus accrued and unpaid interest, if any, to the relevant redemption date. On or after June 30, 2016 and 2017, the optional redemption price for the Senior Notes declines to 102.125% and 100.000%, respectively, of the principal amount, plus accrued and unpaid interest, if any, to the relevant redemption date.

As of April 2, 2016, our commercial mortgage-backed securities loan facility (the “CMBS Fixed Facility”) has an outstanding balance of $471 million, net of $1 million of unamortized deferred financing costs and is secured by mortgages on 34 properties, consisting of distribution centers. The CMBS Fixed Facility bears interest of 6.38% and matures on August 1, 2017.

In January 2015, we entered into a self-funded industrial revenue bond agreement providing for the issuance of a maximum of $40 million in Taxable Demand Revenue Bonds (the “TRBs”) that provide certain tax incentives related to the construction of a new distribution facility. As of April 2, 2016, $22 million of the TRBs remained outstanding. The TRBs bear interest of 6.25% and mature on January 1, 2030.

As of April 2, 2016, we also had $308 million of obligations under capital leases for transportation equipment and building leases.

Our largest debt facilities mature at various dates, including $500 million in 2017, $700 million in 2018 and $3,400 million in 2019. As economic conditions permit, we will consider further opportunities to repurchase, refinance or otherwise reduce our debt obligations on favorable terms. Any further potential debt reduction or refinancing could require significant use of our liquidity and capital resources. For a detailed description of our indebtedness, see Note 10, Debt, in our consolidated financial statements.

In January 2016, we paid a $374 million one-time special cash distribution to our parent, US Foods. The distribution was funded with cash on hand and approximately $314 million of additional borrowings under our credit facilities. US Foods used the proceeds from this distribution, along with cash on hand to fund a $666 million one-time special cash distribution to its shareholders of record as of January 4, 2016.

~~Under~~We ~~the~~believe ~~2012~~that ~~ABS Facility, we sell–on a revolving basis–our eligible receivables to a wholly owned, special purpose, bankruptcy remote subsidiary. This subsidiary, in turn, grants to~~ the ~~administrative~~combination ~~agent for the benefit~~ of ~~the~~cash ~~lenders~~generated afrom ~~continuing~~operations—together ~~security~~with ~~interest~~availability inunder ~~all~~our ofdebt agreements ~~its rights, title~~ and ~~interest~~other infinancing ~~the eligible receivables–as defined by the 2012 ABS Facility. See Note 4~~arrangements—~~Accounts~~will ~~Receivable~~be ~~Financing~~adequate ~~Program~~to inpermit ~~the~~us ~~Notes~~ to ~~the~~meet ~~unaudited~~our ~~Consolidated~~debt ~~Financial~~service ~~Statements. The maximum capacity under the 2012 ABS Facility is $800 million~~obligations, ~~with~~ongoing ~~its~~costs ~~capacity~~of ~~limited by borrowing base calculations. Borrowings under the 2012 ABS Facility were $586 million at September 26~~operations, ~~2015.~~working Atcapital ~~our option~~needs, weand ~~can~~capital ~~request~~expenditure ~~additional~~requirements ~~2012~~for ~~ABS Facility borrowings up to~~ the ~~maximum~~next ~~commitment,~~12 ~~provided sufficient eligible receivables are available as collateral~~months. ~~There was available capacity under the 2012 ABS Facility of $141 million at September 26, 2015, based on the borrowing base calculation.~~

WeOur ~~have~~future ~~$1,348~~financial ~~million~~and ofoperating ~~Senior~~performance, ~~Notes~~ability ~~outstanding~~to asservice ofor ~~September 26,~~refinance ~~2015.~~our ~~On December 19~~debt, ~~2013,~~and ~~the~~ability ~~Senior~~to ~~Note~~comply ~~Indenture~~with ~~was~~covenants ~~amended~~and sorestrictions ~~that~~contained ~~the~~in ~~Acquisition~~our ~~would~~debt ~~not~~agreements ~~constitute~~will abe ~~“Change~~subject ofto: ~~Control”~~(1) future ~~under~~economic ~~the~~conditions, ~~terms of~~ (2) the ~~Senior~~financial ~~Note~~health ~~Indenture. This was authorized through the consent~~ of ~~the holders of~~ our ~~Senior~~customers ~~Notes.~~and ~~Due~~suppliers, toand ~~the termination of the Merger Agreement on June~~(3) 26financial, ~~2015~~business ~~the~~and ~~Senior~~other ~~Notes Indenture reverted to its original terms. See Note 1~~ factors—many ~~Overview and Basis~~ of ~~Presentation,~~which ~~Terminated~~are ~~Acquisition~~beyond byour ~~Sysco in the Notes to the unaudited Consolidated Financial Statements for more information~~control.

AsEvery ~~of September 26~~quarter, ~~2015,~~ we ~~had~~review ~~$227~~rating ~~million~~agency changes for all of ~~obligations~~the ~~under~~lenders ~~capital~~that ~~leases~~have ~~for~~a ~~transportation~~continuing ~~equipment~~obligation ~~and~~to ~~building~~provide ~~leases~~us with funding. We ~~expect~~are tonot aware of any ~~enter~~facts ~~into~~that ~~$100~~indicate ~~million~~our oflender ~~fleet~~banks ~~capital~~will ~~lease~~not ~~obligations~~be ~~during~~able ~~2015,~~to comply with the contractual terms of ~~which~~their ~~$58~~agreements ~~million~~with ~~was~~us. ~~incurred~~We ~~through~~continue ~~September 26,~~to ~~2015~~monitor the credit markets generally and the strength of our lender counterparties.

~~Our~~From ~~ABL Facility was again amended on October 20, 2015. The maximum borrowing available was increased $200 million~~ time-to $1-time,~~300~~ ~~million~~we –repurchase ~~ABL~~or ~~Tranche~~otherwise ~~A-1~~retire ~~increased~~our ~~from~~debt ~~$75 million to $100 million,~~ and ~~the~~take ~~maximum~~other ~~borrowing~~steps ~~available under the ABL Tranche A increased $175 million~~ to ~~$1,200~~reduce ~~million.~~our ~~Additionally,~~debt ~~under~~or ~~this~~otherwise ~~amendment,~~improve ~~the~~our ~~interest~~balance ~~rate on outstanding borrowings and letter of credit fees was reduced by 25 basis points~~sheet. ~~The~~These ~~maturity date was extended from May 11, 2017 to~~actions ~~the~~may ~~earlier~~include ofopen ~~(1) October 20,~~market ~~2020~~repurchases, ~~the~~negotiated ~~amended ABL Facility maturity date; (2) April 1~~repurchases, ~~2019~~and ifother ~~the~~retirements ~~Company’s Senior Notes have more than $300 million~~ of ~~principal~~ outstanding atdebt. ~~that~~The ~~date~~amount ~~and the maturity date~~ of ~~the Senior~~debt ~~Notes~~that ~~has~~may ~~not~~be ~~been~~repurchased ~~extended~~or tootherwise ~~later than October 20~~retired, ~~2020; or (3) December 31, 2018~~ if the Company’s Amended 2011 Term Loan has more than $300 million of principal outstanding at that date and the maturity date of the Amended 2011 Term Loan has not been extended to later than October 20any, ~~2020.~~will ~~Our~~depend ~~2012 ABS Facility, with aggregate borrowings of $586 million at September 26, 2015, was amended~~ on ~~October 19,~~market ~~2015~~conditions, toour ~~extend its maturity date to September 30, 2018. Our remaining~~ debt ~~facilities~~trading ~~mature at various dates~~levels, ~~including~~our ~~$500 million in 2017~~cash position, ~~$600 million in 2018~~ and ~~$3.4~~other ~~billion in 2019~~considerations. AsThe ~~economic~~Sponsors ~~conditions~~or ~~permit,~~their weaffiliates ~~will~~may ~~consider~~also ~~further~~purchase ~~opportunities to repurchase, refinance or otherwise reduce~~ our debt ~~obligations~~from ontime ~~favorable~~to ~~terms.~~time, ~~Any~~through ~~further~~open ~~potential~~market ~~debt~~purchases ~~reduction~~ or ~~refinancing~~other ~~could~~transactions. ~~require~~In ~~significant~~these ~~use~~cases, of our ~~liquidity~~debt ~~and~~is ~~capital~~not ~~resources.~~retired, ~~For~~and awe ~~detailed~~would ~~description~~continue ofto ~~our~~pay ~~indebtedness,~~interest ~~see Note~~in ~~10—Debt~~accordance inwith the ~~Notes~~terms toof the ~~unaudited~~related ~~Consolidated~~debt ~~Financial Statements~~agreements.

WeOur ~~believe~~credit ~~that~~facilities, ~~the~~loan ~~combination~~agreements ofand ~~cash~~indentures ~~generated~~contain ~~from~~customary ~~operations~~covenants. ~~together~~These ~~with~~include, ~~availability~~among ~~under our debt agreements and~~ other ~~financing~~things, ~~arrangements~~covenants ~~will~~that berestrict ~~adequate~~our toability ~~permit us~~ to ~~meet~~incur ~~our~~certain ~~debt~~additional ~~service obligations~~indebtedness, ~~ongoing~~create ~~costs~~or ofpermit ~~operations,~~liens ~~working~~on ~~capital needs~~assets, ~~and~~pay ~~capital~~dividends, ~~expenditure~~or ~~requirements~~engage ~~for~~in ~~the~~mergers ~~next~~or ~~12 months~~consolidations. ~~Our~~As ~~future~~of ~~financial~~April ~~and~~2, ~~operating performance~~2016, ~~ability~~we tohad ~~service~~$151 ormillion ~~refinance~~of restricted ~~our~~payment ~~debt~~capacity, and ~~ability to comply with covenants and restrictions contained in our debt agreements will be subject to: (~~$1~~) future economic conditions~~, ~~(2) the~~106 ~~financial~~million ~~health~~ of our ~~customers~~net ~~and~~assets ~~suppliers,~~that ~~and~~were ~~(3) financial,~~restricted ~~business~~under ~~and~~these ~~other factors, many of which are beyond our control~~covenants.

~~Every~~Certain ~~quarter~~debt agreements also contain customary events of default. Those include, wewithout ~~review~~limitation, ~~rating~~the ~~agency~~failure ~~changes~~to ~~for~~pay ~~all~~interest or principal when it is due under the agreements, cross default provisions, the failure of representations and warranties contained in the ~~lenders~~agreements ~~that~~to ~~have~~be true, and certain insolvency events. If a ~~continuing~~default ~~obligation~~event tooccurs ~~provide~~and uscontinues, the principal amounts outstanding, together with ~~funding.~~all Weaccrued ~~are~~unpaid ~~not~~interest ~~aware~~and ofother ~~any~~amounts owed, may be declared immediately due and payable by the lenders. Were such ~~facts~~an ~~that~~event ~~indicate~~to ~~our~~occur, ~~lender~~we ~~banks~~would ~~will~~be forced to seek new financing that may not be ~~able~~on as favorable terms as our current facilities. Our ability to ~~comply~~refinance ~~with~~our ~~the~~indebtedness ~~contractual~~on favorable terms, ofor ~~their~~at ~~agreements~~all, ~~with~~is usdirectly affected by the current economic and financial conditions. WeIn ~~continue~~addition, our ability to ~~monitor~~incur secured indebtedness (which may enable us to achieve more favorable terms than the ~~credit~~incurrence ~~markets~~of ~~and~~unsecured indebtedness) depends on the strength of our ~~lender~~cash ~~counterparties~~flows, results of operations, economic and market conditions and other factors. As of April 2, 2016, we were in compliance with all of our debt agreements.

~~From~~On ~~time-to-time~~February 9, we2016, ~~repurchase or otherwise retire~~ our parent, ~~debt~~US ~~and~~Foods ~~take~~Holding ~~other~~Corp., ~~steps~~filed toa ~~reduce~~registration ~~our~~statement ~~debt~~with orthe ~~otherwise~~SEC, ~~improve~~registering ~~our~~the ~~balance~~offer ~~sheet.~~and ~~These~~sale ~~actions may~~of ~~include~~common ~~open~~stock ~~market~~by ~~repurchases,~~our ~~negotiated~~parent. ~~repurchases,~~The ~~and~~proceeds ~~other retirements~~ of ~~outstanding~~the ~~debt.~~sale ~~The amount~~ of ~~debt~~the ~~that~~common stock may be ~~repurchased~~used orto ~~otherwise~~repay ~~retired,~~outstanding ~~if any, will depend on market conditions, trading levels of our~~ debt~~, our cash position, and other considerations~~. Our ~~Sponsors~~ability orto ~~their~~complete the ~~affiliates~~sale ~~may~~and ~~also~~access ~~purchase~~the ~~our~~market ~~debt~~as ~~from~~a ~~time-to-time,~~source ~~through~~of ~~open~~liquidity ~~market~~is ~~purchases~~dependent oron ~~other~~investor ~~transactions. In these cases~~demand, ~~our~~market ~~debt~~conditions ~~is not retired,~~ and weother ~~would continue to pay interest in accordance with the terms of the related debt agreements~~factors.

~~Our~~26 credit facilities, loan agreements and indentures 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. Certain debt agreements also contain various and customary events of default with respect to the loans. Those include, without limitation, the failure to pay interest or principal when due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true, and certain insolvency events. If a default event occurs and continues, the principal amounts outstanding—plus unpaid interest and other amounts owed—may be declared immediately due and payable to the lenders. If this happened, we would be forced to seek new financing that may not be as

favorable as our current facilities. Our ability to refinance indebtedness on favorable terms, or at all, is directly affected by the current economic and financial conditions. In addition, our ability to incur secured indebtedness—which may enable us to achieve more favorable terms than the incurrence of unsecured indebtedness—depends on the strength of our cash flows, results of operations, economic and market conditions and other factors. As of September 26, 2015, we were in compliance with all of our debt agreements.

Cash Flows

For the periods presented, the following table presents condensed highlights from ~~our~~the ~~unaudited~~cash ~~Consolidated~~flow ~~Statements of Cash Flows~~statements:

	39-weeks Ended
	13-Weeks Ended
	September 26, 2015			September 27, 2014
	April 2, 2016			March 28, 2015
	(in millions)
Net loss	$	(84	)	$	(121	)
Net income	$	14		$	7
Changes in operating assets and liabilities		44			45
Changes in operating assets and liabilities, net of business acquisitions		17			20
Other adjustments		~~325~~106			~~380~~75
Net cash provided by operating activities		~~285~~137			~~304~~102
Net cash used in investing activities		(~~158~~81	)		(8265	)
Net cash used in financing activities		(73	)		(57	)
Net used in financing activities		(143	)		(3	)
Net increase in cash and cash equivalents		54			165
Net increase (decrease) in cash and cash equivalents		(87	)		34
Cash and cash equivalents, beginning of period		~~344~~218			~~180~~344
Cash and cash equivalents, end of period	$	~~398~~131		$	~~345~~378

Operating Activities

Cash flows provided by operating activities were $~~285~~137 million and $~~304~~102 million for the 3913-weeks ended ~~September 26~~April 2, ~~2015~~2016 and ~~September 27~~March 28, ~~2014~~2015, respectively. Cash flows provided by operating activities ~~decreased~~increased $1935 million in ~~2015~~the ~~from~~13-week ~~2014.~~2016 Aperiod ~~year~~from ~~over~~the ~~year~~13-week ~~increase~~2015 inperiod ~~Inventories~~primarily ~~and~~due ato ~~decrease~~improved inoperating ~~Accounts payable were partially offset by a decrease in Accounts receivable and an increase in Accrued expenses and other liabilities~~results.

Cash flows provided by operating activities in 2015 were favorably affected by changes in operating assets and liabilities—including increases in Accounts payable and Accrued expenses and other liabilities—but were partially offset by increases in Accounts receivable and Inventories. Cash flows provided by operating activities in 2014 were favorably affected by changes in operating assets and liabilities—including a decrease in Inventories and an increase in Accounts payable—but were partially offset an increase in Accounts receivable and a decrease in Accrued expenses and other liabilities.

Investing Activities

Cash flows used in investing activities ~~for~~in ~~the~~2016 ~~39-weeks~~reflect ~~ended~~our ~~September 26,~~strategy ~~2015~~to ~~included~~selectively ~~purchases~~pursue ofacquisitions ~~property~~to ~~and~~accelerate ~~equipment~~our ofgrowth. During ~~$142~~the ~~million~~13-weeks ended April 2, ~~Proceeds~~2016, ~~from~~we ~~sales~~purchased ofa ~~property~~broadline ~~and~~distributor ~~equipment~~for ofapproximately $339 million,. We ~~and~~also ~~Insurance~~purchased ~~recoveries~~a noncontrolling interest of approximately $38 million ~~related~~in ~~to property~~a ~~damaged~~technology bycompany athat ~~tornado.~~provides Wepoint-of-sale ~~also~~business ~~purchased~~intelligence to restaurants. Approximately $2237 million of ~~self-funded~~purchases ~~industrial~~were ~~revenue~~made ~~bonds–see~~on ~~Financing~~property ~~Activities~~and ~~below~~equipment. Cash ~~for~~spending ~~offsetting~~on ~~cash~~property and ~~inflow,~~equipment ~~and~~was asdown ~~further~~from ~~discussed~~the inprior ~~Note~~year ~~10-Debt~~due into ~~the~~2015 ~~Notes~~spending toof ~~the~~approximately ~~unaudited~~$14 ~~Consolidated Financial~~million ~~Statements.~~for two distribution facility construction/expansion projects.

~~Last~~Cash ~~year’s cash flows~~ used in investing activities ~~included~~in ~~purchases~~2015 ofreflects ~~property~~the ~~and~~pending ~~equipment~~status of ~~$105~~the ~~million,~~Acquisition. ~~and~~During ~~Proceeds from~~the ~~sales~~13-weeks ofended ~~property~~March ~~and~~28, ~~equipment~~2015, ofwe spent $2057 million replenishing property and equipment and purchased $412 million of ~~insurance~~self-funded ~~recoveries~~industrial ~~related~~revenue tobonds. aSee ~~facility~~– ~~damaged~~“Financing byActivities” abelow ~~tornado~~for the offsetting cash inflow and further discussion in Note 10, Debt, in our consolidated financial statements.

~~Capital expenditures~~We expect total capital additions in ~~2015~~2016 ~~and~~to ~~2014~~be ~~included~~approximately ~~fleet~~$300 ~~replacement~~million, ~~and~~inclusive ~~investments~~of inapproximately ~~information~~$80 ~~technology~~million toin ~~improve~~fleet ~~our~~capital leases. We ~~business,~~expect asto ~~well~~fund asour ~~new~~capital ~~construction~~expenditures orwith ~~expansion~~available ofcash ~~distribution~~generated ~~facilities.~~from operations.

Additionally, we entered into $58 million and $97 million of capital lease obligations during the 39-weeks ended September 27, 2015 and September 26, 2014, respectively. The 2015 capital lease obligations were for fleet replacement. The 2014 capital lease obligations included $70 million for fleet replacement and $27 million for a distribution facility addition.

We expect cash capital expenditures in 2015 to be approximately $200 million. The expenditures will focus on information technology, warehouse equipment and new construction or expansion of distribution facilities. We expect to enter into a total of $100 million of fleet capital leases in 2015. We expect to fund our remaining fiscal year 2015 capital expenditures with available cash or cash generated from operations.

Financing Activities

Cash flows used in financing activities of $73143 million ~~for~~in ~~the 39~~the13-weeks ended ~~September 26~~April 2, ~~2015~~2016 included a $90374 million ofone-time ~~payments~~special oncash ~~debt~~distribution ~~and~~to ~~capital~~our ~~leases~~parent, ~~including~~US Foods. The distribution was funded with cash on hand and approximately $2 314 million of ~~Senior~~additional ~~Notes~~borrowings ~~repurchased~~under ~~from~~our ~~entities~~credit ~~affiliated~~facilities. ~~with~~We ~~one~~made $79 million of ~~our~~net ~~Sponsors~~payments on debt and capital leases. Additionally, we repurchased $5 4 million of ~~our~~US ~~parent~~Foods ~~company~~ common stock from ~~certain~~terminated ~~former~~ employees. ~~after~~The ~~they~~shares ~~ceased~~were ~~employment~~acquired pursuant to the management stockholder’s agreement associated with our stock incentive plan.

InCash ~~January~~flows ~~2015,~~used wein ~~entered~~financing ~~into~~activities aof ~~self~~$3 ~~funded~~million ~~industrial~~in ~~revenue~~2015 ~~bond~~included ~~agreement~~$14 ~~providing~~million ~~for~~of ~~the~~payments ~~issuance~~on ofdebt aand ~~maximum~~capital ofleases, ~~$40~~including $2 million inof ~~Taxable Demand~~Senior ~~Revenue~~Notes ~~Bonds~~repurchased ~~(the~~from ~~“TRB’s”) that provide~~ certain ~~tax~~entities ~~incentives~~associated ~~related~~with ~~to the construction of a new distribution facility~~KKR. ~~As of September 26~~Additionally, ~~2015,~~ we ~~borrowed~~repurchased $221 million of ~~the~~US ~~TRB’s.~~Foods ~~See~~common ~~Investing~~stock ~~Activities~~from ~~above~~terminated ~~for offsetting cash outflow~~employees.

~~For~~In ~~the~~January ~~same~~2015, ~~time~~we inentered ~~2014,~~into ~~cash~~a ~~flows~~self-funded ~~used~~industrial byrevenue ~~financing~~bond ~~activities~~agreement providing for the issuance of ~~$57~~a ~~million~~maximum ~~included~~of $2040 million in “TRBs that provide certain tax incentives related to the construction of ~~net~~a ~~payments~~new ondistribution ~~our ABL~~facility. ~~Facility,~~We ~~and~~borrowed $3612 million of ~~scheduled~~the ~~payments~~TRBs onin ~~other~~the ~~debt~~first ~~facilities~~quarter ~~and~~of ~~capital lease obligations~~2015.

~~Retirement~~27 ~~Plans~~

We maintain several qualified retirement plans (the “Retirement Plans”) that pay benefits to certain employees at retirement, using formulas based on a participant’s years of service and compensation. We contributed $48 million and $39 million to the Retirement Plans in the 39-weeks ended September 26, 2015 and September 27, 2014, respectively. We expect to make $49 million total contributions to the Retirement Plans in fiscal year 2015.

On August 5, 2015, we announced a plan to freeze non-union participants’ benefits of a Company sponsored defined benefit pension plan effective September 30, 2015. The freeze and related plan remeasurement resulted in a reduction in the benefit obligation included in Other long term liabilities of approximately $91 million, with a corresponding decrease to Accumulated other comprehensive loss. At the remeasurement date, the plan’s net loss included in Accumulated other comprehensive loss exceeded the reduction in the plan’s benefit obligation and, accordingly, no net curtailment gain or loss was incurred. As a result of the plan freeze, actuarial gains and losses will be amortized over the average remaining life expectancy of inactive participants rather than the average remaining service lives of active participants.

We also contribute to various multiemployer benefit plans under collective bargaining agreements. We contributed $25 million and $24 million during fiscal years 2015 and 2014, respectively. At September 26, 2015, we had $47 million of multiemployer pension withdrawal liabilities relating to facilities closed prior to 2015, payable in monthly installments through 2031, at effective interest rates ranging from 5.9% to 6.7%. As discussed in Note 16—Commitments and Contingencies in the Notes to the unaudited Consolidated Financial Statements, we were assessed an additional $17 million multiemployer pension withdrawal liability for a facility closed in 2008. We believe we have meritorious defenses against this assessment and intend to vigorously defend ourselves against the claim. At this time, we do not believe that paying this obligation is probable and, accordingly, have recorded no related liability. However, it is reasonably possible we may ultimately be required to pay an amount up to $17 million.

Florida State Pricing Subpoena

As described in Note 16—Commitments and Contingencies in the Notes to the unaudited Consolidated Financial Statements, in May 2011, the State of Florida Department of Financial Services issued a subpoena to the Company requesting a broad range of information regarding vendors, logistics/freight as well as pricing, allowances, and rebates that we obtained from the sale of products and services for the term of the contract. The subpoena focused on all pricing and rebates earned during this period relative to the Florida Department of Corrections. In 2011, we learned of two qui tam suits, filed in Florida state court, against us, one of which was filed by a former official in the Florida Department of Corrections. In April 2015, we and the State of Florida agreed in principle to a settlement under which we would pay $16 million, and the State of Florida would dismiss all complaints, including the two qui tam suits. In June 2015, the parties finalized the settlement agreement and payment was made to the Florida Department of Financial Services.

Insurance Recoveries—Tornado Loss

As described in Note 16—Commitments and Contingencies in the Notes to the unaudited Consolidated Financial Statements, on April 28, 2014, a tornado damaged a distribution facility and its contents, including building improvements, equipment and inventory. In order to service customers, business from the damaged facility was reassigned to other Company distribution facilities until July 2015, when the new distribution facility became operational. We have insurance coverage on the distribution facility and its contents, as well as business interruption insurance.

As of September 26, 2015, our insurance carriers have approved $40 million of losses incurred, of which $25 million was received in fiscal year 2015, $14 million was received in fiscal year 2014 and $1 million is recorded as a receivable in Other current assets as of September 26, 2015. For the 13-weeks and 26-weeks ended September 26, 2015, we recognized net gains of $9 million and $11 million, respectively, as a result of the insurance proceeds. We expect to reach a final settlement with our insurance carriers in 2016; the timing of and amounts of ultimate insurance recoveries is not known at this time.

OfRetirement ~~the~~Plans $25 million of insurance recoveries received in 2015, we classified $3 million related to the damaged distribution facility as Cash Flows from Investing Activities, and the remaining $22 million related to damaged inventory and business interruption costs as Cash Flows from Operating Activities in our unaudited Consolidated Statements of Cash Flows.

We sponsor several qualified retirement plans and a nonqualified retirement plan (“Retirement Plans”) that pay benefits to certain employees at retirement, generally using formulas based on a participant’s years of service and compensation. In addition, we maintain several postretirement health and welfare plans for certain employees. We contributed $10 million to the Retirement plans during both13-week periods ended April 2, 2016 and March 28, 2015. We expect to contribute a total of $36 million to the Retirement Plans in fiscal year 2016.

We also contribute to various multiemployer benefit plans under certain collective bargaining agreements. At April 2, 2016, we had $36 million of multiemployer pension withdrawal liabilities relating to closed facilities, payable in monthly installments through 2031, at effective interest rates ranging from 5.9% to 6.5%. Additionally, $50 million remains recognized for our estimates of withdrawal liabilities for the planned closure of the Baltimore, Maryland distribution facility.

Off-Balance Sheet Arrangements

We entered into a $7871 million letter of credit to secure our obligations with respect to certain facility leases. Additionally, we entered into $~~298~~304 million in letters of credit in favor of certain commercial insurers securing our obligations with respect to our self-insurance programs, and $113 million in letters of credit for other obligations.

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

Critical Accounting Policies and Estimates

We have prepared the financial information in this report in accordance with GAAP. Preparing these unaudited ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Part II, Item 7 of our ~~2014~~2015 Annual ~~Report~~ 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~~ reported amounts of assets, liabilities, revenue or expenses during quarter ended ~~September 26~~April 2, ~~2015~~2016.

Recent Accounting Pronouncements

See Note 2—, Recent Accounting Pronouncements in ~~the~~our consolidated ~~Notes~~financial tostatements ~~the unaudited Consolidated Financial Statements~~ in Part I Item 1 of this Quarterly Report on Form 10-Q for information related to new accounting standards.

Forward-Looking Statements

This report ~~includes~~contains “forward-looking statements” ~~made~~within ~~under~~ the ~~safe~~meaning ~~harbor provisions~~ of the ~~Private~~federal ~~Securities~~securities ~~Litigation Reform Act of 1995, as amended~~laws. Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” “mission,” “strive,” “more,” “goal,” or similar expressions. ~~These~~The statements are based on ~~certain~~ assumptions that we have made, inbased ~~light~~on of our ~~industry~~ experience, in the industry as well as our perceptions of historical trends, current conditions, expected future developments, and other factors we ~~believe~~think are appropriate ~~in these circumstances~~. We believe these judgments are reasonable. However, you should understand that these statements are not guarantees of performance or results. Our actual results could differ materially from those expressed in the forward-looking statements ~~due to a variety of important factors, positive and negative~~.

Here are some important factors, among others, that could affect our actual results:

•

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

•

Industry competition and our ability to successfully compete

•

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

•

Any change in our relationships with GPOs

•

Any change in our relationships with long-term customers

•

Our ability to increase sales to independent customers

•

Our ability to successfully consummate and integrate future acquisitions

•

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

•

Shortages of fuel and increases or volatility in fuel costs

•

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

•

Liability claims related to products we distribute

•

Our ability to maintain a good reputation

•

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

• Any change in our relationships with Group Purchasing Organizations

• Our ability to increase sales to independent customers

•

Changes in industry pricing practices

•

Changes in competitors’ cost structures

•

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

•

Environmental, health and safety costs

•

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

•

Technology disruptions and our ability to implement new technologies

• ~~Liability~~Costs ~~claims~~and ~~related~~risks toassociated ~~products~~with wea ~~distribute~~potential cybersecurity incident

• Our ability to maintain a good reputation

• Costs and risks associated with litigation

•

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

• ~~Our~~Disruptions ~~ability~~ to ~~successfully~~our ~~integrate~~business ~~future~~caused ~~acquisitions~~by extreme weather conditions

• ~~Our~~Costs ~~ability to achieve the benefits that we expect from our cost savings programs~~ and ~~our~~risks ~~strategic~~associated ~~initiatives~~with litigation

•

Changes in consumer eating habits

•

Costs and risks associated with our intellectual property protections

•

Risks associated with potential infringements of the intellectual property of others

•

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

• Other factors discussed in this report, including our future operations, financial condition and prospects, and business strategies

In light of these risks, uncertainties and assumptions, the forward-looking statements in this report might not prove to be accurate, and you should not place undue reliance on them. All forward-looking statements attributable to us—or people 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.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

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

Interest Rate Risk

Market risk is the possibility of loss from adverse changes in market rates and prices, such as interest rates and commodity prices. A substantial portion of our debt facilities bear interest at floating rates, based on London Inter Bank Offered Rate (“LIBOR”) or the prime rate. Accordingly, we will be exposed to fluctuations in interest rates. A 1% change in LIBOR and the prime rate would cause the interest expense on our $2.69 billion of floating rate debt facilities to change by approximately $2629 million per year. This change does not consider the LIBOR floor of 1.0% on $2 billion in principal of our variable rate term ~~loan~~loans.

~~Commodity~~29 ~~Price Risk~~

~~Item~~Commodity 4.Price ~~Controls~~Risk ~~and Procedures~~

~~Evaluation~~We are also exposed to risk due to fluctuations in the price and availability of ~~Disclosure~~diesel ~~Controls~~fuel. Increases in the cost of diesel fuel can negatively affect consumer spending, raise the price we pay for products, and ~~Procedures~~increase the costs we incur to deliver products to our customers. To minimize fuel cost risk, we enter into forward purchase commitments for a portion of our projected diesel fuel requirements. As of April 2, 2016, we had diesel fuel forward purchase commitments totaling $124 million through September 2017. These locked in approximately 62% of our projected diesel fuel purchase needs for the contracted periods. Our remaining fuel purchase needs will occur at market rates. Using published market price projections for diesel and estimated fuel consumption needs, a 10% unfavorable change in diesel prices from the projected market prices could result in approximately $10 million in additional fuel cost on such uncommitted volumes.

WeItem maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated and communicated to Company management—including our Chief Executive Officer and Chief Financial Officer—as appropriate, to allow for timely decisions regarding required disclosure4. InControls ~~designing~~ and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Procedures

37Evaluation of Disclosure Controls and Procedures

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

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September 26~~April 2, ~~2015~~2016.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~September 26~~April 2, ~~2015~~2016 that have materially affected, or are ~~reasonably~~ reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER ~~INFORMATION~~ INFORMATION

Item 1.

Legal Proceedings

For information relating to legal proceedings, see Note 16—,Commitments and Contingencies in the ~~Notes~~consolidated tofinancial ~~the~~statements ~~unaudited Consolidated Financial Statements~~ contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A.

Risk Factors

See “Risk Factors” in our ~~2014~~2015 Annual Report. InThere ~~our~~have ~~2014~~been Annual Report, we discuss risks and uncertainties that may adversely affect our financial performance, business or operations. In this Item 1A of Part II, we update any material changes from risk factors previously disclosed in our 2014 Annual Report. Other than related to the termination of the Merger Agreement and the Asset Purchase Agreement, there are no material changes ~~of the risk factors previously disclosed~~ in ~~our~~this ~~2014 Annual Report~~information.

Item 6.

Exhibits

Exhibit Number		Document Description
10.56		Amendment No. 5, dated as of June 19, 2015 to the ABL Credit Agreement, among US Foods, Inc., certain subsidiaries of US Foods, Inc., the several lenders from time to time party thereto, Citicorp North America, Inc., as administrative agent, collateral agent, and issuing lender, Deutsche Bank Securities Inc., as syndication agent, and Natixis, as senior managing agent, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K (Commission File No. 333-185732) of US Foods, Inc. filed October 26, 2015.
31.1*		Section 302 Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Section 302 Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2†		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive Data File.

*30 ~~Filed herewith.~~

38* Filed herewith.

~~Table~~† ofFurnished ~~Contents~~with this Report.

~~SIGNATURES~~31

	US FOODS, INC.
	(Registrant)
Date: November 9, 2015	By:	/s/ PIETRO SATRIANO
		Pietro Satriano
		President and Chief Executive Officer
Date: November 9, 2015	By:	/s/ FAREED KHAN
		Fareed Khan
		Chief Financial Officer

SIGNATURES

39Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	US FOODS, INC.
	(Registrant)

Date: May 6, 2016	By:	/s/ PIETRO SATRIANO
		Pietro Satriano
		President and Chief Executive Officer

Date: May 6, 2016	By:	/s/ FAREED KHAN
		Fareed Khan
		Chief Financial Officer

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