US Foods Holding Corp.

11/06/2025 | Press release | Distributed by Public on 11/06/2025 15:52

Quarterly Report for Quarter Ending September 27, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
(Dollar amounts in tables presented in millions, unless otherwise noted)
The following discussion and analysis should be read together with the accompanying unaudited consolidated financial statements and the notes thereto included in this Quarterly Report and the audited consolidated financial statements and the notes thereto in the 2024 Annual Report. The following discussion and analysis contain certain financial measures that are not required by or presented in accordance with GAAP. We believe these non-GAAP measures provide meaningful supplemental information about our operating performance and liquidity. Information regarding reconciliations of and the rationale for these measures is discussed under "Non-GAAP Reconciliations" below. Results of operations for the 13 weeks and 39 weeks ended September 27, 2025 are compared to the 13 weeks and 39 weeks ended September 28, 2024, unless specifically noted otherwise.
Overview
At US Foods, we strive to inspire and empower chefs and foodservice operators to bring great food experiences to consumers. This mission is supported by our brand promise of WE HELP YOU MAKE IT™. Our promise brings three key elements to the forefront for our customers; (1) more quality products, like our large and diverse Exclusive Brand portfolio that is based on consistency, freshness and innovation, (2) more tools, centering on our best-in-industry ecommerce platform, MOXē, and (3) more deliveries, with expanded options for on-time delivery enabled by our traditional broadline services and our convenient and flexible Pronto™ program. We operate as one business with standardized business processes, shared systems infrastructure, and an organizational model that optimizes national scale with local execution, allowing us to manage our business as a single operating segment. We have centralized activities where scale matters and our local field structure focuses on customer-facing activities.
We supply approximately 250,000 customer locations nationwide. These customer locations include independent restaurants, chain restaurants, healthcare, hospitality, education and other customers. We provide fresh, frozen, and dry food products, as well as non-food items, sourced from thousands of suppliers. Approximately 4,000 sales associates manage customer relationships at local, regional, and national levels. Our sales associates are supported by sophisticated marketing and category management capabilities, as well as world-class chefs, new business development managers and others that help us provide more comprehensive service to our customers. Our extensive network of over 70 distribution facilities and fleet of over 6,500 trucks, along with over 90 cash and carry locations, allow us to operate efficiently and provide high levels of customer service. This operating model allows us to leverage our nationwide scale and footprint while executing locally.
Operating Metrics
Case growth-Case growth, by customer type (e.g., independent restaurants) is reported as of a point in time. Customers periodically are reclassified, based on changes in size or other characteristics, and when those changes occur, the respective customer's historical volume is included within the new classification.
Organic growth-Organic growth includes growth from operating businesses that have been reflected in our results of operations for at least 12 months.
Highlights
For the 13 weeks ended September 27, 2025, compared to the same period a year ago, total case volume increased 1.1%, driven by a 3.9% increase in independent restaurant case volume, a 3.9% increase in healthcare volume and a 2.4% increase in hospitality volume, partially offset by a 2.4% decrease in chain volume.
For the 39 weeks ended September 27, 2025, compared to the same period a year ago, total case volume increased 1.0%, driven by a 3.0% increase in independent restaurant case volume, a 4.9% increase in healthcare volume and a 2.8% increase in hospitality volume, partially offset by a 3.6% decrease in chain volume.
For the 13 weeks and 39 weeks ended September 27, 2025, compared to the same period a year ago, total organic case volume increased 0.8% and 0.5%, respectively, which includes 3.5% and 2.4% organic independent restaurant case volume growth for the 13 weeks and 39 weeks ended September 27, 2025, respectively.
Net sales increased $463 million, or 4.8%, and $1,238 million, or 4.4%, for the 13 weeks and 39 weeks ended September 27, 2025, respectively, driven by case volume growth and food cost inflation of 3.0% and 2.8% for the 13 weeks and 39 weeks ended September 27, 2025, respectively.
Gross profit increased $86 million, or 5.2%, to $1,753 million for the 13 weeks ended September 27, 2025, and increased $276 million or 5.7%, to $5,144 million for the 39 weeks ended September 27, 2025. For the 13 weeks ended September 27, 2025 the increase was primarily a result of an increase in total case volume, improved cost of goods sold and inventory management, partially offset by an unfavorable year-over-year LIFO adjustment. For the 39 weeks ended September 27, 2025, the increase was primarily a result of an increase in total case volume, improved cost of goods sold, inventory management and a favorable year-over-year LIFO adjustment. Gross profit was negatively impacted by LIFO expense of $46 million and $65 million for the 13 weeks and 39 weeks ended September 27, 2025, respectively. Gross profit was negatively impacted by LIFO expense of $23 million and $68 million for the 13 weeks and 39 weeks ended September 28, 2024. As a percentage of net sales, gross profit was 17.2% and 17.1% for the 13 weeks ended September 27, 2025, and September 28, 2024, and 17.4% and 17.1% for the 39 weeks ended September 27, 2025, and September 28, 2024, respectively.
Total operating expenses increased $83 million, or 6.0%, to $1,471 million for the 13 weeks ended September 27, 2025, and increased $195 million, or 4.8%, to $4,266 million for the 39 weeks ended September 27, 2025. For the 13 weeks and 39 weeks ended September 27, 2025, the increase was primarily a result of an increase in total case volume and higher distribution, selling and administrative costs, partially offset by continued distribution productivity improvement as well as actions to streamline administrative processes and costs. As a percentage of net sales, operating expenses were 14.4% and 14.3% for the 13 weeks ended September 27, 2025 and September 28, 2024, respectively, and 14.4% and 14.3% for the 39 weeks ended September 27, 2025 and September 28, 2024, respectively.
Results of Operations
The following table presents selected historical results of operations for the periods indicated:
13 weeks ended 39 weeks ended
September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024
Consolidated Statements of Operations:
Net sales $ 10,191 $ 9,728 $ 29,624 $ 28,386
Cost of goods sold 8,438 8,061 24,480 23,518
Gross profit 1,753 1,667 5,144 4,868
Operating expenses:
Distribution, selling and administrative costs 1,458 1,379 4,246 4,050
Restructuring activity and asset impairment charges 13 9 20 21
Total operating expenses 1,471 1,388 4,266 4,071
Operating income 282 279 878 797
Other expense (income)-net - 3 (3) 5
Interest expense-net 76 75 227 235
Income before income taxes 206 201 654 557
Income tax provision 53 53 162 129
Net income 153 148 492 428
Percentage of Net Sales:
Gross profit
17.2 % 17.1 % 17.4 % 17.1 %
Operating expenses
14.4 % 14.3 % 14.4 % 14.3 %
Operating income
2.8 % 2.9 % 3.0 % 2.8 %
Net income
1.5 % 1.5 % 1.7 % 1.5 %
Adjusted EBITDA(1)
5.0 % 4.7 % 4.9 % 4.6 %
Other Data:
Cash flows-operating activities
$ 351 $ 270 $ 1,076 $ 891
Cash flows-investing activities
(114) (79) (319) (447)
Cash flows-financing activities
(242) (515) (760) (632)
Capital expenditures
115 80 276 236
EBITDA(1)
400 390 1,226 1,119
Adjusted EBITDA(1)
505 455 1,442 1,300
Adjusted Net Income(1)
245 208 681 573
Free Cash Flow(2)
237 191 806 658
(1) EBITDA is defined as net income, plus interest expense-net, income tax provision, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for: (1) restructuring activity and asset impairment charges; (2) share-based compensation expense; (3) the impact of LIFO reserve adjustments; (4) loss on extinguishment of debt; (5) business transformation costs; and (6) other gains, losses, or costs as specified in the agreements governing our indebtedness. Adjusted EBITDA Margin is Adjusted EBITDA divided by total net sales. Adjusted Net Income is defined as net income excluding the items used to calculate Adjusted EBITDA listed above and further adjusted for the tax effect of the exclusions and discrete tax items. EBITDA, Adjusted EBITDA, and Adjusted Net Income as presented are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. They are not measurements of our performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP. For additional information, see the discussion under the caption "Non-GAAP Reconciliations" below.
(2) Free Cash Flow is defined as cash flows provided by operating activities and proceeds from sales of property and equipment less cash capital expenditures. Free Cash Flow as presented is a supplemental measure of our liquidity that is not required by, or presented in accordance with, GAAP. It is not a measure of our liquidity under GAAP and should not be considered as an alternative to cash flows provided by operating activities or any other liquidity measures derived in accordance with GAAP. For additional information, see the discussion under the caption "Non-GAAP Reconciliations" below.
Non-GAAP Reconciliations
We provide EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Free Cash Flow as supplemental measures to GAAP financial measures regarding our operating performance and liquidity. These non-GAAP financial measures, as defined above, exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.
We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin provide meaningful supplemental information about our operating performance because they exclude amounts that we do not consider part of our core operating results when assessing our performance.
We believe that Adjusted Net Income is a useful measure of operating performance for both management and investors because it excludes items that are not reflective of our core operating performance and provides an additional view of our operating performance including depreciation, interest expense and income taxes on a consistent basis from period to period. We believe that Adjusted Net Income may be used by investors, analysts and other interested parties to facilitate period-over-period comparisons and provides additional clarity as to how factors and trends impact our operating performance.
Management uses these non-GAAP financial measures (1) to evaluate our historical and prospective financial performance as well as our performance relative to our competitors as they assist in highlighting trends, (2) to set internal sales targets and spending budgets, (3) to measure operational profitability and the accuracy of forecasting, (4) to assess financial discipline over operational expenditures, and (5) as an important factor in determining variable compensation for management and employees. EBITDA and Adjusted EBITDA are also used in connection with certain covenants and activity restrictions under the agreements governing our indebtedness. We also believe these and similar non-GAAP financial measures are frequently used by securities analysts, investors, and other interested parties to evaluate companies in our industry. EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income are not measurements of our performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP.
We use Free Cash Flow as a supplemental measure to GAAP financial measures regarding the liquidity of our operations. We measure Free Cash Flow as cash flows provided by operating activities and proceeds from sales of property and equipment less cash capital expenditures. We believe that Free Cash Flow is a useful financial metric to assess our ability to pursue business opportunities and investments. Free Cash Flow is not a measure of our liquidity under GAAP and should not be considered as an alternative to cash flows provided by operating activities or any other liquidity measures derived in accordance with GAAP.
We caution readers that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Free Cash Flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income or Free Cash Flow in the same manner. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
The following table reconciles EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Free Cash Flow to the most directly comparable GAAP financial performance and liquidity measures for the periods indicated:
13 weeks ended 39 weeks ended
September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024
Net income and Net income margin $ 153 1.5% $ 148 1.5% 492 1.7% 428 1.5%
Interest expense-net 76 75 227 235
Income tax provision 53 53 162 129
Depreciation expense 103 99 303 288
Amortization expense 15 15 42 39
EBITDA and EBITDA margin 400 3.9% 390 4.0% 1,226 4.1% 1,119 3.9%
Adjustments:
Restructuring activity and asset impairment charges(1)
13 10 20 22
Share-based compensation expense(2)
19 16 64 46
LIFO reserve adjustment(3)
46 23 65 68
Business transformation costs(4)
18 10 38 28
Business acquisition, integration related costs, divestitures and other(5)
9 6 29 17
Adjusted EBITDA and Adjusted EBITDA margin 505 5.0% 455 4.7% 1,442 4.9% 1,300 4.6%
Depreciation expense (103) (99) (303) (288)
Interest expense-net (76) (75) (227) (235)
Income tax provision, as adjusted(6)
(81) (73) (231) (204)
Adjusted Net Income $ 245 $ 208 $ 681 $ 573
Cash flow
Cash flows from operating activities $ 351 $ 270 $ 1,076 $ 891
Proceeds from sales of property and equipment 1 1 6 3
Capital expenditures (115) (80) (276) (236)
Free Cash Flow $ 237 $ 191 $ 806 $ 658
(1) Consists primarily of severance and related costs, organizational realignment costs and asset impairment charges.
(2) Share-based compensation expense for expected vesting of stock awards and employee stock purchase plan.
(3) Represents the impact of LIFO reserve adjustments.
(4) Transformational costs represent non-recurring expenses prior to formal launch of strategic projects with anticipated long-term benefits to the Company. These costs generally relate to third party consulting and non-capitalizable technology. For both the 13 weeks and 39 weeks ended September 27, 2025 and September 28, 2024, business transformation costs related to projects associated with information technology infrastructure initiatives and workforce efficiencies.
(5) Includes: (i) aggregate acquisition, integration related costs and divestiture costs of $6 million and $6 million for the 13 weeks and 39 weeks ended September 27, 2025 and September 28, 2024, respectively, and $24 million and $17 million for the 39 weeks ended September 27, 2025 and September 28, 2024, respectively; and (ii) other gains, losses or costs that we are permitted to addback for purposes of calculating Adjusted EBITDA under certain agreements governing our indebtedness.
(6) Represents our income tax provision adjusted for the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of applicable discrete tax items. Applicable discrete tax items include changes in tax laws or rates, changes related to prior year unrecognized tax benefits, discrete changes in valuation allowances, and excess tax benefits associated with share-based compensation. The tax effect of pre-tax items excluded from Adjusted Net Income is computed using a statutory tax rate after taking into account the impact of permanent differences and valuation allowances.
A reconciliation between the GAAP income tax provision and the income tax provision, as adjusted, is as follows:
13 weeks ended 39 weeks ended
September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024
GAAP income tax provision $ 53 $ 53 $ 162 $ 129
Tax impact of pre-tax income adjustments 28 18 61 51
Discrete tax items - 2 8 24
Income tax provision, as adjusted $ 81 $ 73 $ 231 $ 204
Comparison of Results
13 weeks ended September 27, 2025 and September 28, 2024
Highlights
•Net sales increased$463 million, or 4.8%, to $10,191 million in 2025.
•Total case volume increased1.1% and independent restaurant case volume increased3.9%.
•Total organic case volume increased 0.8% and organic independent restaurant case volume increased 3.5%.
•Operating income increased$3 million to $282 million in 2025.
•Net income increased$5 million to $153 million in 2025.
•Adjusted EBITDA increased$50 million, or 11.0%, to $505 million in 2025.
•Adjusted EBITDA as a percentage of net sales was 5.0% in 2025, compared to 4.7% in 2024.
Net Sales
Net sales increased$463 million or 4.8%, to $10,191 million in 2025, driven by case volume growth and food cost inflation of 3.0%. Total case volume increased1.1% driven by a 3.9% increasein independent restaurant case volume, a 3.9% increasein healthcare volume and a 2.4% increasein hospitality volume, partially offset by a 2.4% decreasein chain volume. Total organic case volume increased 0.8%and organic independent restaurant case volume increased 3.5%. Organic broadline cases of private brands represented approximately 35% of total cases in 2025 and 2024.
Gross Profit
Gross profit increased $86 million, or 5.2%, to $1,753 million in 2025, primarily as a result of an increase in total case volume, improved cost of goods sold and inventory management, partially offset by an unfavorable year-over-year LIFO adjustment.Our LIFO method of inventory costing resulted in an expense of $46 million in 2025 compared to $23 millionexpense in 2024, driven by inflation and an increase in inventory values in multiple categories. Gross profit as a percentage of net sales was 17.2% in 2025, compared to 17.1% in 2024.
Operating Expenses
Operating expenses, comprised of distribution, selling and administrative costs, increased$83 million, or 6.0%, to $1,471 million in 2025. Operating expenses increased primarily as a result of an increase in total case volume and higher distribution, selling and administrative costs, partially offset by continued distribution productivity improvement as well as actions to streamline administrative processes and costs. Operating expenses as a percentage of net sales were 14.4% in 2025, compared to 14.3%in 2024.
Operating Income
Our operating income was $282 million in 2025, compared to operating income of $279 million in 2024. The increase in operating income was due to the factors discussed in the relevant sections above.
Other Expense -Net
Other expense-net includes components of net periodic pension benefit credits, exclusive of the service cost component associated with our defined benefit and other postretirement plans. We did not recognize other expense (income)-net in 2025and recognized other expense-net of $3 millionin 2024.
Interest Expense-Net
Interest expense-net increased$1 million to $76 million in 2025 primarily due to higher borrowings under the ABL Facility revolver.
Income Taxes
For the 13 weeks ended September 27, 2025, the Company's effective income tax rate of 26% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. The discrete tax items were not material individually or in the aggregate. For the 13 weeks ended September 28, 2024, the Company's effective income tax rate of 26% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $1 million related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions and a tax benefit of $1 million, primarily related to excess tax benefits associated with share-based compensation.
Net Income
Our net income was $153 million in 2025, compared to a net income of $148 million in 2024. The improvement in net income was due to the relevant factors discussed above.
39 weeks ended September 27, 2025 and September 28, 2024
Highlights
•Net sales increased $1,238 million, or 4.4%, to $29,624 million in 2025.
•Total case volume increased 1.0% and independent restaurant case volume increased 3.0%.
•Total organic case volume increased 0.5% and organic independent restaurant case volume increased 2.4%.
•Operating income increased $81 million to $878 million in 2025.
•Net income increased $64 million to $492 million in 2025.
•Adjusted EBITDA increased $142 million, or 10.9%, to $1,442 million in 2025.
•Adjusted EBITDA as a percentage of net sales was 4.9% in 2025, compared to 4.6% in 2024.
Net Sales
Net sales increased $1,238 million, or 4.4%, to $29,624 million in 2025, driven by case volume growth and food cost inflation of 2.8%. Total case volume increased 1.0% driven by a 3.0% increase in independent restaurant case volume, a 4.9% increase in healthcare volume, a 2.8% increase in hospitality volume, partially offset by a 3.6% decrease in chain volume. Total organic case volume increased 0.5% and organic independent restaurant case volume increased 2.4%. Organic broadline cases of private brands represented approximately 35% and 34% of total cases in 2025 and 2024, respectively.
Gross Profit
Gross profit increased $276 million, or 5.7%, to $5,144 million in 2025, primarily as a result of an increase in total case volume, improved cost of goods sold, pricing optimization, and a favorable year-over-year LIFO adjustment. Our LIFO method of inventory costing resulted in an expense of $65 million in 2025 compared to an expense of $68 million in 2024 driven by inflation and an increase in inventory values in multiple categories. Gross profit as a percentage of net sales was 17.4% in 2025, compared to 17.1% in 2024.
Operating Expenses
Operating expenses, comprised of distribution, selling and administrative costs, increased $195 million or 4.8%, to $4,266 million in 2025. Operating expenses increased primarily as a result of an increase in total case volume and higher distribution, selling and administrative costs, partially offset by continued distribution productivity improvement as well as actions to streamline administrative processes and costs. Operating expenses as a percentage of net sales were 14.4% in 2025, compared to 14.3% in 2024.
Operating Income
Our operating income was $878 million in 2025, compared to operating income of $797 million in 2024. The increase in operating income was due to the factors discussed in the relevant sections above.
Other Expense (Income)-Net
Other expense (income)-net includes components of net periodic pension benefit credits, exclusive of the service cost component associated with our defined benefit and other postretirement plans. We recognized other income-net of $3 million in 2025 and other expense-net $5 million in 2024.
Interest Expense-Net
Interest expense-net decreased $8 million to $227 million in 2025 primarily due to lower interest rates and a favorable refinancing in the third quarter of fiscal 2024.
Income Taxes
For the 39 weeks ended September 27, 2025, the Company's effective income tax rate of 25% differed from the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $8 million primarily related to excess tax benefits associated with share-based compensation. For the 39 weeks ended September 28, 2024, our effective income tax rate of 23% was equivalent to the 21% federal corporate income tax rate primarily as a result of state income taxes and the recognition of various discrete tax items. These discrete tax items included a tax benefit of $17 million, primarily related to a decrease in an unrecognized tax benefit as a result of the expiration of the statute of limitations in several jurisdictions, a tax benefit of $8 million, primarily related to excess tax benefits associated with share-based compensation and a tax expense of $3 million, primarily related to adjustments to prior year tax provision estimates.
Net Income
Our net income was $492 million in 2025, compared to net income of $428 million in 2024. The improvement in net income was due to the relevant factors discussed above.
Liquidity and Capital Resources
Our ongoing operations and strategic objectives require working capital and continuing capital investment. Our primary sources of liquidity include cash provided by operations, as well as access to capital from bank borrowings and other types of debt and financing arrangements. As of September 27, 2025, the Company had approximately $1.9 billion in cash and available liquidity.
Indebtedness
Debt Description Maturity
Interest Rate as of September 27, 2025
Carrying Value as of September 27, 2025
Carrying Value as of December 28, 2024
ABL Facility December 7, 2027 6.33% $ 162 $ 223
2021 Incremental Term Loan Facility (net of $1 and $0 of unamortized deferred financing costs, respectively)
November 22, 2028 6.07% 609 610
2024 Incremental Term Loan Facility (net of $7 and $8 of unamortized deferred financing costs, respectively) October 3, 2031 6.07% 714 717
Senior Notes due 2028 (net of $3 and $4 of unamortized deferred financing costs, respectively) September 15, 2028 6.88% 497 496
Senior Notes due 2029 (net of $4 and $5 of unamortized deferred financing costs, respectively)
February 15, 2029 4.75% 896 895
Senior Notes due 2030 (net of $2 and $3 of unamortized deferred financing costs, respectively) June 1, 2030 4.63% 498 497
Senior Notes due 2032 (net of $4 and $4 of unamortized deferred financing costs, respectively) January 15, 2032 7.25% 496 496
Senior Notes due 2033 (net of $3 and $4 of unamortized deferred financing costs, respectively) April 15, 2033 5.75% 497 496
Obligations under financing leases 2025-2032
1.26%-8.31%
575 490
Other debt January 1, 2031 5.75% 8 8
Total debt 4,952 4,928
Current portion of long-term debt (120) (109)
Long-term debt $ 4,832 $ 4,819
We had outstanding borrowings totaling $162 million and had issued letters of credit totaling $315 million under the ABL Facility as of September 27, 2025. There was remaining capacity of $1,822 million under the ABL Facility as of September 27, 2025. During the 39 weeks ended September 27, 2025, outstanding letters of credit were reduced by approximately $254 million after additional surety bonds were issued in the first and second quarter of fiscal year 2025 to secure the Company's obligations with respect to its insurance program.
As economic conditions permit, we will consider opportunities to repurchase, refinance or otherwise reduce our debt obligations on favorable terms. Any potential debt reduction or refinancing could require significant use of our available liquidity and capital resources.
The agreements governing our indebtedness contain customary covenants. These include, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on our assets, pay dividends, or engage in mergers or consolidations. The Company had approximately $2.7 billion of restricted payment capacity under these covenants and approximately $1.7 billion of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation as of September 27, 2025.
We believe that the combination of cash generated from operations, together with borrowing capacity under the agreements governing our indebtedness and other financing arrangements, will be adequate to permit us to meet our debt service obligations, ongoing costs of operations, working capital needs, and capital expenditure requirements for the next 12 months.
Every quarter, we review rating agency changes for all of the lenders that have a continuing obligation to provide us with funding. We are not aware of any facts that indicate our lenders will not be able to comply with the contractual terms of their agreements with us. We continue to monitor the credit markets generally and the strength of our lender counterparties.
From time to time, we may repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our leverage. These actions may include open market repurchases, negotiated repurchases, and other retirements of outstanding debt. The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, our debt trading levels, our cash position, and other considerations. Any potential debt reduction or other debt retirement could require significant use of our other available liquidity and capital resources.
See Note 9, Debt, in our consolidated financial statements, for a further description of our indebtedness.
Cash Flows
The following table presents condensed highlights from our Consolidated Statements of Cash Flows for the periods presented:
39 weeks ended
September 27, 2025 September 28, 2024
Net income $ 492 $ 428
Changes in operating assets and liabilities 84 95
Other adjustments 500 368
Net cash provided by operating activities 1,076 891
Net cash used in investing activities (319) (447)
Net cash used in financing activities (760) (632)
Net increase in cash, cash equivalents and restricted cash (3) (188)
Cash, cash equivalents and restricted cash−beginning of period 59 269
Cash, cash equivalents and restricted cash−end of period $ 56 $ 81
Operating Activities
Cash flows provided by operating activities was $1,076 million for the 39 weeks ended September 27, 2025, representing an increase of $185 million as compared to cash flows provided by operating activities of $891 million for the 39 weeksended September 28, 2024, driven by higher net income and a reduction in tax payments for the 39 weeksended September 27, 2025 compared to the 39 weeksended September 28, 2024.
Investing Activities
During the 39 weeks ended September 27, 2025, the Company completed the asset acquisition of Jake's Finer Foods. Cash paid for the acquisition of Jake's Finer Foods consisted of cash of approximately $87 million. Investing activities for the 39 weeksended September 27, 2025, also included the cash proceeds from the sale of Freshway of $38 million. In addition, cash flows used in investing activities in the 39 weeks ended September 27, 2025 and September 28, 2024 included cash expenditures of $276 million and $236 million, respectively, related to investments in information technology, property and equipment and construction of and improvements to distribution facilities.
We expect total cash capital expenditures in fiscal year 2025 to be between$395 million and $410 million. We expect to fund our capital expenditures with available cash or cash generated from operations.
Financing Activities
Cash flows used in financing activities in the 39 weeks ended September 27, 2025 included $61 million in net payments under the ABL Facility and $86 million in scheduled payments under our financing leases. Financing activities in the 39 weeks ended September 27, 2025 also included $602 million common stock repurchased under the Original Share Repurchase Program and the New Share Repurchase Program, $22 million of proceeds received from stock purchases under our employee stock purchase plan, $6 million of proceeds from the exercise of employee stock options, which were offset by $35 million of employee tax withholdings paid in connection with the vesting of stock awards.
Cash flows used by financing activities in the 39 weeks ended September 28, 2024 included $91 million of scheduled payments under our Term Loan Facilities and financing leases, $75 million in net proceeds under the ABL Facility, $14 million for repricing of the 2021 Incremental Term Loan Facility, $1 million of financing fees related to the 2021 Incremental Term Loan Facility repricing and no net payments under the ABL Facility. Financing activities in the 39 weeks ended September 28, 2024 also included $628 million common stock repurchased under the Amended Share Repurchase Program, $19 million of proceeds received from stock purchases under our employee stock purchase plan, $14 million of proceeds from the exercise of employee stock options and $20 million of employee tax withholdings paid in connection with the vesting of stock awards.
Other Obligations and Commitments
There have been no material changes in the Company's cash obligations and commitments since the end of fiscal year 2024. Refer to Item 7 of our 2024 Annual Report for additional information regarding the Company's cash obligations and commitments as of the end of fiscal year 2024.
Retirement Plans
See Note 11, Retirement Plans, in our consolidated financial statements for a description of our retirement plans.
Off-Balance Sheet Arrangements
We had $315 million of letters of credit outstanding primarily securing the Company's obligations with respect to certain real estate leases, under the ABL Facility as of September 27, 2025.
We held approximately $327 million and $58 million of surety bonds, as of September 27, 2025 and year ended December 28, 2024, respectively, primarily in favor of certain commercial insurers to secure obligations with respect to our insurance programs . In certain cases, surety bonds may be used as an alternative to letters of credit. For the 39 weeks ended September 27, 2025, outstanding letters of credit were reduced by approximately $254 million after additional surety bonds were issued in the first and second quarter of 2025 to secure the Company's obligations with respect to its insurance program.
Except as disclosed above, we have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
We have prepared the financial information in this Quarterly Report in accordance with GAAP. Preparing the Company's consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Part II, Item 7-"Management's Discussion and Analysis of Financial Condition and Results of Operations" of the 2024 Annual Report includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenue, or expenses during the 39 weeks ended September 27, 2025.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 2, Recent Accounting Pronouncements, in our consolidated financial statements.
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