US Foods Holding (USFD) DEF 14ADefinitive proxy

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

US Foods Holding Corp.

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

THURSDAY, MAY 18, 2023
9 a.m. (Central Daylight Time)

In addition, the holders of our Series A Preferred Stock, voting as a separate class, will be asked to elect a 13th director nominee, designated by KKR Fresh Aggregator L.P. and KKR Fresh Holdings L.P. (collectively, “KKR”) under the terms of an Investment Agreement, dated as of April 21, 2020 (the “Investment Agreement”).

Stockholders of record at the close of business on March 21, 2023, are entitled to notice of, and to vote at, the Annual Meeting.

Beginning on or about April 5, 2023, a Notice of Internet Availability of Proxy Materials (“Notice”) was mailed to each of our stockholders of record as of March 21, 2023. In addition, the Proxy Statement and our 2022 Annual Report to Stockholders are available at www.proxyvote.com and accessible with the 16-digit control number found on the Notice. As more fully described in the Notice, all stockholders may choose to access these materials online or may request printed or emailed copies.

We encourage you to vote your shares as soon as possible. Specific instructions for voting over the internet or by telephone or mail are included in the Notice. If you attend the virtual Annual Meeting and vote electronically during the meeting, your vote will replace any earlier vote.

By Order of the Board of Directors,

ANDREW M. JOHNSTONE Interim General Counsel	STEPHANIE D. MILLER Corporate Secretary

Access The Proxy Statement And Vote In One of Four Ways:

Internet		Telephone		Mail		At the Meeting
Visit the website on your proxy or voting instruction form		Call the telephone number on your proxy or voting instruction card		Sign, date, and return your proxy or voting instruction card in the enclosed envelope		Attend the virtual Annual Meeting at www.virtualshareholdermeeting. com/USFD2023

Please refer to the Notice or the information forwarded by your bank, broker or other nominee to see which voting methods are available to you.

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This proxy statement (this “Proxy Statement”) is furnished in connection with the solicitation of proxies by our board of directors (the “Board”) of US Foods Holding Corp., a Delaware corporation (“US Foods,” the “Company,” “we,” “us” or “our”), for the Annual Meeting of Stockholders scheduled to be held on May 18, 2023 (including any adjournments, postponements or continuations thereof, the “Annual Meeting”) at 9 a.m., Central Daylight Time. You will be able to attend and participate in the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/USFD2023 where you will be able to listen to the meeting live, submit questions, and vote. This Proxy Statement and accompanying form of proxy card were first mailed to stockholders on or about April 5, 2023.

US Foods: At A Glance		4
Proxy Summary		5
Proposal 1: Election of Directors		12
Corporate Governance		22
Director Compensation		36
Proposal 2: Advisory Vote on Executive Compensation		38
Compensation Discussion and Analysis		39
Compensation and Human Capital Committee Report		56
Executive Compensation		57
Pay vs Performance		68
Proposal 3: Advisory Vote on the Frequency of Advisory Votes on Executive Compensation		71
Proposal 4: Amend our Restated Certificate of Incorporation to add a Federal Forum Selection Provision		72

Proposal 5: Amend our Restated Certificate of Incorporation to Reflect New Delaware Law Provisions regarding Officer Exculpation and to Remove Obsolete Provisions		74
Proposal 6: Ratification of Appointment of Independent Registered Public Accounting Firm		77
Audit Committee Report		78
Proposal 7: Stockholder Proposal		79
Security Ownership of Certain Beneficial Owners, Directors, and Officers		82
About the Meeting		85
About Voting		90
Other Matters		93
Appendix A		95
Appendix B		98

FORWARD-LOOKING STATEMENTS

Statements in this Proxy Statement which are not historical in nature are “forward-looking statements” within the meaning of the federal securities laws. These statements often include words such as “believe,” “expect,” “project,” “anticipate,” “intend,” “plan,” “outlook,” “estimate,” “target,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecast,” “mission,” “strive,” “more,” “goal,” or similar expressions (although not all forward-looking statements may contain such words) and are based upon various assumptions and our experience in the industry, as well as historical trends, current conditions, and expected future developments. However, you should understand that these statements are not guarantees of performance or results and there are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from those expressed in the forward-looking statements, including, among others: economic factors affecting consumer confidence and discretionary spending and reducing the consumption of food prepared away from home; cost inflation/deflation and commodity volatility; competition; reliance on third party suppliers and interruption of product supply or increases in product costs; changes in our relationships with customers and group purchasing organizations; our ability to increase or maintain the highest margin portions of our business; achievement of expected benefits from cost savings initiatives; increases in fuel costs; changes in consumer eating habits; cost and pricing structures; the impact of climate change or related legal, regulatory or market measures; impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets; the impact of governmental regulations; product recalls and product liability claims; our reputation in the industry; labor relations and increased labor costs and continued access to qualified and diverse labor; indebtedness and restrictions under agreements governing our indebtedness; interest rate increases; the replacement of the London Interbank Offered Rate (“LIBOR”) with an alternative reference rate; disruption of existing technologies and implementation of new technologies; cybersecurity incidents and other technology disruptions; risks associated with intellectual property, including potential infringement; effective integration of acquired businesses; misalignment of stockholder interests; potential costs associated with stockholder activism; changes in tax laws and regulations and resolution of tax disputes; certain provisions in our governing documents; health and safety risks to our associates and related losses; adverse judgments or settlements resulting from litigation; extreme weather conditions, natural disasters and other catastrophic events; and management of retirement benefits and pension obligations.

For a detailed discussion of these risks, uncertainties and other factors that could cause our results to differ materially from those anticipated or expressed in any forward-looking statements, see the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Additional risks and uncertainties are discussed from time to time in current, quarterly and annual reports filed by the Company with the SEC, which are available on the SEC’s website at www.sec.gov. Additionally, we operate in a highly competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time, and it is not possible to predict all risks nor identify all uncertainties. The forward-looking statements contained in this Proxy Statement speak only as of the date of this Proxy Statement and are based on information and estimates available to us at this time. We undertake no obligation to update or revise any forward-looking statements, except as may be required by law.

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US FOODS AT A GLANCE

US Foods Holding Corp. is one of America’s great food companies and a leading foodservice distributor, providing restaurants, healthcare, hospitality, governmental and educational institutions with a broad and innovative food offering, a comprehensive suite of e-commerce, technology and business solutions and omni-channel solutions that enable our customers to receive product in ways that best suit their needs. Our success is powered by our talented US Foods associates who come to work every day with one goal in mind: to help our customers Make It.

70	86	$34.1B	~6,500	~4,000
Distribution Facilities	CHEF’STORE® locations	in revenue	trucks in our fleet	sales associates
150+	~29,000	>400,000	~6,000	~250,000
years in business	associates	products	suppliers	customers

LEARN MORE ABOUT US
You can learn more about US Foods, by visiting our website, www.usfoods.com Learn about our CSR initiatives in our most recent CSR report at www.usfoods.com/csr
@usfoods	@usfoods	us_foods	US Foods	US Foods

Note: Information provided above is for fiscal 2022 or as of February 16, 2023.

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PROXY SUMMARY

INFORMATION ABOUT THE ANNUAL MEETING

You have received these proxy materials because the Board is soliciting your proxy to vote your shares during the Annual Meeting. This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider in deciding how to vote your shares, and you should read the entire Proxy Statement carefully before voting. Page references are supplied to help you find further information in this Proxy Statement.

MATTERS TO BE VOTED UPON

At the Annual Meeting, the holders of our Common Stock, par value $0.01 per share (“Common Stock”), and the holders of our Series A Convertible Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”), voting together as a single class, will be asked to vote upon the following matters:

	Board Recommendation			Page
Proposal 1 – Election of 12 Director Nominees		FOR EACH OF OUR BOARD NOMINEES		12
Proposal 2 – Advisory approval of the compensation paid to our named executive officers, as disclosed in the Proxy Statement		FOR		38
Proposal 3 – Advisory vote on the frequency of future advisory votes on executive compensation		ONE YEAR		71
Proposal 4 – Amendment to our Restated Certificate of Incorporation to add a federal forum selection provision		FOR		72
Proposal 5 – Amendment to our Restated Certificate of Incorporation to reflect new Delaware law provisions regarding officer exculpation and to remove obsolete provisions		FOR		74
Proposal 6 – Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2023		FOR		77
Proposal 7 – Stockholder Proposal on a policy regarding limitations on accelerated vesting of performance-based share awards of senior executive officers upon a change in control, if properly presented		AGAINST		79

In addition, the holders of our Series A Preferred Stock will be asked to vote as a separate class on a 13th director nominee designated by KKR Fresh Aggregator L.P. and KKR Fresh Holdings L.P. (collectively, “KKR”) under the terms of an Investment Agreement, dated as of April 21, 2020 (the “Investment Agreement”).

Stockholders of record at the close of business on March 21, 2023 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting.

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PROXY SUMMARY

DIRECTOR HIGHLIGHTS

Our Board currently has 14 members, 13 of whom are standing for election for a one-year term, expiring at the next annual meeting of stockholders and until their respective successors are duly elected and qualified or until their earlier death, resignation, retirement, disqualification, or removal. Twelve of the director nominees will be voted upon by our common stockholders and the holders of our Series A Preferred Stock, voting together as a single class. The 13th director nominee, who was designated by KKR under the terms of the Investment Agreement, will be voted upon only by the holders of the Series A Preferred Stock, voting as a separate class. The following table provides summary information about our current directors.

Name		Age		Director Since		Gender or Racial Diversity		Independent(1)		Compliance with Stock Ownership Guidelines(2)
Cheryl A. Bachelder		66		2018
James J. Barber, Jr.(3)		62		2022
Court D. Carruthers(4)		50		2016
Robert M. Dutkowsky Chair of the Board		68		2017
Scott D. Ferguson(3)		49		2022
David E. Flitman(5)		58		2023
Marla Gottschalk		62		2022
Sunil Gupta		64		2018
Carl Andrew Pforzheimer		61		2017
Quentin Roach		56		2022
Nathaniel H. Taylor(6)		46		2020						N/A
David M. Tehle		66		2016
David A. Toy(3)		56		2022
Ann E. Ziegler		64		2018

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PROXY SUMMARY

GOVERNANCE HIGHLIGHTS

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INDEPENDENCE, DIVERSITY, AGE AND TENURE

During the past five fiscal years, we have added nine new independent directors to our Board, adding five diverse directors such that the Board reflects a more diverse composition, with three of our directors being women and two of our directors being racially or ethnically diverse. In all, 13 of 14 current directors are independent and all members of our Audit Committee, Compensation and Human Capital Committee, and Nominating and Corporate Governance Committee are independent. We believe the composition of the Board strikes a balanced mix of experienced leaders with varying professional backgrounds and other differentiating personal characteristics who provide a broad spectrum of experience and expertise. The differing tenures of our directors allow the Board to benefit from fresh perspectives of newer directors while ensuring we retain the knowledge and experience of longer-serving directors.

Note: The illustrations above reflect the composition of the Board as of the date of this Proxy Statement.

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QUALIFICATIONS AND RELEVANT EXPERIENCE

The Board is comprised of individuals with experience in key areas relevant to US Foods. Each director nominee was nominated based on the unique experience, qualifications and skills that he or she brings to the Board. This blend of diverse backgrounds provides the Board with the benefit of a broad array of perspectives. The table below highlights some of the experience and skills embodied by our directors, as well as our director demographics. If an individual is not listed as having a particular attribute, it does not signify a director’s lack of ability to contribute in such area.

Bachelder

Barber

Carruthers**

Dutkowsky

Ferguson

Flitman

Gottschalk

Gupta

Pforzheimer

Roach

Taylor

Tehle

Toy

Ziegler

Director

Committee Membership*

Audit Committee

●

●

●

●

Compensation and Human Capital Committee

●

●

●

●

●

Executive Committee

●

●

●

●

●

Nominating and Corporate Governance Committee

●

●

●

●

Knowledge, Skills and Experience

Food Industry

Supply Chain and Logistics

CEO Leadership

Sustainability and Corporate Responsibility

Accounting/Finance

Risk Management

Technology

Marketing & Strategy

Human Capital Management

Other Public Company Board(s)

Demographics

GENDER

Male

Female

RACE/ETHNICITY

American Indian or Alaska Native

Asian

Black or African American

Hispanic or Latino

Native Hawaiian or Other Pacific Islander

White / Caucasian

	= director designated as an Audit Committee “financial expert” at US Foods.
*	Committee membership reflects membership information as of the date of this Proxy Statement.
**	Mr. Carruthers has not been nominated to stand for election in 2023.

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PROXY SUMMARY

WHAT THESE SKILLS BRING TO US FOODS:

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EXECUTIVE COMPENSATION HIGHLIGHTS

The Compensation and Human Capital Committee’s decisions regarding the design of our 2022 executive compensation program marked a return to traditional (pre-pandemic) plan designs in both our annual and long-term incentive plans, taking into account the need to address the CEO transition and the resulting uncertainties for the executive team. For 2022, our executive compensation program emphasized our strategic and operational priorities, focused on profitable market share growth, and optimized gross margins and operational efficiency to position us for long-term growth.

IMPORTANT DATES FOR 2024 ANNUAL MEETING

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ELECTION OF DIRECTORS

SKILLS, EXPERIENCE, AND COMMITMENT TO DIVERSITY

The Board seeks members with varying professional backgrounds and other differentiating personal characteristics who combine a broad spectrum of experience and expertise with a reputation for integrity. The Board believes that maintaining a diverse membership enhances the Board’s discussions and enables the Board to better represent all of the Company’s constituents. The Board is currently comprised of sitting chief executive officers, former chief executive officers, former chief financial officers, a former chief operating officer, a former chief procurement officer, private equity investors and a tenured business school professor. During the past five fiscal years, we refreshed nine of our board positions with independent directors, adding five diverse directors such that the Board reflects a more diverse composition, with three of our directors being women and two of our directors being racially or ethnically diverse.

Our Corporate Governance Guidelines provide that individuals will be considered for nomination to the Board based on their business and professional experience, judgment, gender, race and ethnicity, skills, background, and other unique characteristics as the Board deems appropriate. Accordingly, the Board is committed to actively seeking out highly qualified women and individuals from minority groups as well as candidates with diverse or non-traditional backgrounds, skills, and experiences as part of the director search process.

Director candidates should demonstrate a reputation for integrity, strong values, discipline, high ethical standards, a commitment to full participation on the Board and its committees, and relevant career experience, along with other skills and characteristics that meet the current needs of the Board. The Nominating and Corporate Governance Committee and the Board will also consider whether candidates meet applicable independence standards where appropriate and evaluate any potential conflicts of interest with respect to each candidate.

Each nominee has consented to stand for election, and the Board does not anticipate that any nominee will be unavailable to serve. If a director nominee, other than the KKR Designee or a director nominated in connection with the Cooperation Agreement, should become unavailable to serve at the time of the Annual Meeting, shares represented by proxy may be voted for the election of a substitute nominee to be designated by the Board. Alternatively, in lieu of designating a substitute, the Board may reduce the size of the Board.

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ELECTION OF DIRECTORS

BACKGROUND AND EXPERIENCE OF DIRECTORS

The professional background and experience of each of the Company’s director nominees is provided below. We believe that our director nominees collectively provide an appropriate mix of experience and skills relevant to the size and nature of our business.

12 Nominees for Election as Directors with a term expiring at the 2024 Annual Meeting, to be elected by the holders of our common stock and holders of series a preferred stock, voting together as a single class.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING 12 DIRECTOR NOMINEES.

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ELECTION OF DIRECTORS

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ELECTION OF DIRECTORS

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ELECTION OF DIRECTORS

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ELECTION OF DIRECTORS

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ELECTION OF DIRECTORS

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ELECTION OF DIRECTORS

Nominee for election as a director with a term expiring at the 2024 annual meeting, to be elected separately by the holders of our Series A Preferred Stock.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING DIRECTOR NOMINEE.

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ELECTION OF DIRECTORS

DIRECTOR NOMINATING PROCESS

The Nominating and Corporate Governance Committee recommends candidates to the Board it believes are qualified and suitable to become members of the Board. The Nominating and Corporate Governance Committee also considers the performance of incumbent directors in determining whether to recommend them for reelection. Recommendations may be received by the Nominating and Corporate Governance Committee from various sources, including current and former directors, a search firm retained by the Nominating and Corporate Governance Committee, stockholders, Company executives, and candidates themselves. Pursuant to the Investment Agreement, the Board has agreed to nominate, and recommend, the KKR Designee for election to the Board at the Annual Meeting. In connection with the Cooperation Agreement described below beginning on page 33, the Board has agreed to nominate, and recommend, Messrs. Ferguson, Barber and Toy for election to the Board at the Annual Meeting.

In the case of a vacancy on the Board, including a vacancy created by an increase in the size of the Board, the Nominating and Corporate Governance Committee will recommend to the Board an individual to fill the vacancy (except for a vacancy created by the death, resignation or removal of the KKR Designee or a director nominated in connection with the Cooperation Agreement).

STOCKHOLDER NOMINATIONS

Stockholders who wish to identify director candidates for consideration by the Nominating and Corporate Governance Committee should write to the address provided in the section entitled “Communications with Our Directors” on page 31. Stockholders may also nominate directors for election to the Board as described in the section entitled “Stockholder Proposals For the 2024 Annual Meeting” on page 93. All submissions should comply with the requirements set forth in our Bylaws.

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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE PRINCIPLES

Governance Highlights
		Declassified Board - all directors elected annually
		Independent Chair
		Majority vote standard in uncontested director elections
		Shareholders can amend bylaws without a supermajority vote
		No shareholder rights plan (poison pill)
		Annual Board and committee self-evaluations
		Annual say-on-pay vote with more than 80% support since 2018

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CORPORATE GOVERNANCE

SEPARATE CEO AND CHAIR ROLES

The Board separates the roles of Chief Executive Officer and Chair of the Board. On January 5, 2023, Mr. Flitman commenced his role as our Chief Executive Officer and as a director. Concurrently, Mr. Dutkowsky resumed his position as our Non-Executive Chair of the Board.

David E. Flitman				Robert M. Dutkowsky
Chief Executive Officer				Chair of the Board
As Chief Executive Officer, Mr. Flitman:				As Chair of the Board, Mr. Dutkowsky:
■    Sets strategic direction for the Company ■    Leads the development of the Company’s short and long-term plans ■    Sets meaningful and measurable operating and strategic goals for the Company ■    Focuses on execution of the Company’s goals ■    Establishes a strong performance culture ■    Responsible for organizational structure, operating model and management succession ■    Provides day-to-day leadership over operations ■    Provides regular updates to the Board on key issues, status of operations and business developments ■    Sets the “tone at the top”				■    Confers with the CEO on the Company’s strategy and long-term plan ■    Serves as a liaison between management and the Board ■    Presides over Board meetings and facilitates leadership ■    Sets the Board’s schedule and prioritizes topics of focus ■    Directs stockholder engagement and leads governance matters ■    Provides management with feedback regarding information that is necessary for the independent directors to effectively perform their duties ■    Leads the Board’s annual review of the CEO’s performance ■    Serves as Chair of Executive Committee

The Board believes this allocation of responsibilities provides a clear and efficient leadership structure for the Company.

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CORPORATE GOVERNANCE

MEETINGS OF THE BOARD AND ITS COMMITTEES

Committee Membership*		Audit		Compensation and Human Capital		Nominating and Corporate Governance		Executive		CEO Search Committee
Cheryl A. Bachelder
James J. Barber, Jr.
Court D. Carruthers
Robert M. Dutkowsky
Scott D. Ferguson
David E. Flitman
Marla Gottschalk
Sunil Gupta
Carl Andrew Pforzheimer
Quentin Roach
Nathaniel H. Taylor
David M. Tehle
David A. Toy
Ann E. Ziegler

	Denotes Committee Chair
*	Reflects committee membership as of the date of this Proxy Statement, other than the CEO Search Committee which did not continue in existence beyond the appointment of Mr. Flitman as the Company’s new Chief Executive Officer.

The Audit Committee assists the Board in overseeing and monitoring: (1) the quality and integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications, independence, and performance, (4) the performance of our internal audit function, and (5) our risk management policies and procedures including with regard to cybersecurity.

The Board has determined that Messrs. Pforzheimer, Tehle, and Toy and Ms. Gottschalk each qualifies as an independent director under the corporate governance standards of the NYSE and the additional audit committee independence requirements under the rules of the SEC. The Board has also determined that Messrs. Tehle and Toy and Ms. Gottschalk each qualify as an “audit committee financial expert,” as defined by SEC rules. All members of the Audit Committee are familiar with finance and accounting practices and principles and are financially literate.

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CORPORATE GOVERNANCE

The Compensation and Human Capital Committee assists the Board in discharging its responsibilities relating to: (1) establishing our compensation program and setting the compensation of our executive officers, (2) overseeing our incentive and equity-based compensation plans, and (3) overseeing management of human capital. The Compensation and Human Capital Committee may delegate to management the authority to approve awards of shares, share options or other forms of award pursuant to the Company’s equity-based plans to participants who are not officers.

The Board has determined that Ms. Bachelder and Messrs. Barber, Roach, and Tehle each qualifies as an independent director under the corporate governance standards of the NYSE, including the additional compensation committee independence requirements.

The Nominating and Corporate Governance Committee (1) assists the Board by identifying individuals qualified for membership on the Board and its committees, (2) recommends individuals to the Board for nomination as members of the Board and its committees, (3) oversees the Company’s environmental and CSR efforts, and (4) advises and makes recommendations to the Board on corporate governance matters and the overall governance structure of our Company and Board. The Nominating and Corporate Governance Committee also oversees the annual self-evaluation process for the Board and each of its committees, as well as the progress of the Company’s CSR strategies.

The Board has determined that Mmes. Gottschalk and Ziegler and Messrs. Ferguson and Gupta each qualifies as an independent director under the corporate governance standards of the NYSE.

The Executive Committee meets and may exercise certain powers of the Board as may be delegated from time to time, except as limited by law, between regularly scheduled meetings of the Board when it is not practical or feasible for the Board to meet or as otherwise directed by the Board.

The Executive Committee consists of our Chair of the Board, the chairs of each of the Audit Committee, Compensation and Human Capital Committee, and Nominating and Corporate Governance Committee, and any other director as may be appointed by the Board upon recommendation of the Nominating and Corporate Governance Committee.

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CORPORATE GOVERNANCE

The CEO Search Committee was formed in May 2022, pursuant to the Cooperation Agreement with Sachem Head (described further beginning on page 33), for the purpose of conducting a search for a new chief executive officer of the Company. This Committee did not continue in existence beyond the appointment of Mr. Flitman as the Company’s new Chief Executive Officer.

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CORPORATE GOVERNANCE

BOARD ATTENDANCE AT THE ANNUAL MEETING

Although the Company does not have a written policy concerning Board attendance at annual meetings of the Company’s stockholders, it is our expectation that all directors attend the annual meetings of our stockholders. All of our directors then in office attended the 2022 annual meeting of stockholders.

DIRECTOR EDUCATION AND ORIENTATION

In order to ensure each director’s engagement with and understanding of our strategy, each director participates in an extensive orientation program upon joining the Board, including meeting with members of our executive leadership team and other key management team members to gain a deeper understanding of the Company’s businesses and operations. We also hold committee-specific orientation sessions when a director joins a committee for the first time. Directors make onsite market visits, join in supply chain discussions, engage in driver ride-alongs and participate in immersive warehouse and process education. Companywide discussions (e.g. “fireside chats”) are also scheduled with new directors, affording our directors the opportunity to interact with our associates and gain perspective on our company and culture.

At the Board level, periodic briefing sessions are provided to directors on subjects that would assist them in discharging their duties both at the full Board and Board committee levels. Access to director resources are provided to our Board members at the Company’s expense.

ANNUAL BOARD AND COMMITTEE SELF-EVALUATIONS

The Nominating and Corporate Governance Committee oversees the annual self-evaluation process for the Board and each of its committees. These self-evaluations are generally designed to assess whether the Board or the respective committee is functioning effectively and to provide a mechanism for the Board or the respective committee to identify potential areas for improvement. For example, in a typical year, in furtherance of the Board’s commitment to maintaining a diverse Board membership, the Board self-evaluation specifically asks directors to assess the Board’s progress against that commitment. When completed in a typical year, the results of the self-evaluations and any appropriate recommendations or action plans are discussed among the members of the Board and each of its committees.

The Nominating and Corporate Governance Committee undertook an abbreviated self-evaluation process for 2022 due to the fact that the Board added five new directors during the year and would be adding a new director and CEO in early 2023. The Board expects to return to its typical annual self-evaluation process in 2023.

RISK OVERSIGHT

Our approach to enterprise risk management is designed to effectively identify, assess, prioritize, mitigate, and monitor the Company’s principal risks. Management is responsible for the Company’s day-to-day risk management activities. The Board’s role is to exercise informed risk oversight, which is done both directly and indirectly through its committees. For each of the Company’s top risks, the Board and/or its applicable committee receives periodic updates from a senior member of management. The Board’s effectiveness in risk oversight is bolstered through open dialogue with management, established monitoring and reporting processes, and the collective knowledge and experience of its members.

Oversight of Certain Key Risks: Certain of the Company’s key risks are specifically allocated to the Board and its committees as part of the Company’s overall enterprise risk management process as follows:

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CORPORATE GOVERNANCE

General Oversight: There are several ways the Board and its committees undertake their risk oversight responsibilities, including:

BOARD OF DIRECTORS OVERSIGHT

◼   Receives updates on our business operations, financial results, and long-range plan at its regularly scheduled meetings ◼   Monitors overall culture and risk management environment ◼   Advises management on shaping corporate purpose, values and strategy ◼   Receives an annual enterprise risk management report, which includes probability and potential economic and reputational impact assessments, as well as mitigation actions and monitoring plans ◼   Receives periodic (at least annual) updates from management regarding each identified top enterprise risk as well as an annual cybersecurity report

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STOCKHOLDER ENGAGEMENT

We recognize the value of listening to our stockholders and considering their perspectives. Throughout the year, we maintain an ongoing dialogue with our stockholders to discuss their areas of focus and to provide updates on our corporate governance, executive compensation, sustainability and human capital management programs. The feedback we receive from our stockholders informs our boardroom agenda.

COMMUNICATE				ENGAGE
We communicate with our stockholders through: ◼   Quarterly earnings presentations ◼   Securities and Exchange Commission (“SEC”) filings including our annual report and proxy statement ◼   Our annual CSR report ◼   Investor meetings, conferences, press releases and our website				We engage with our stockholders through our Investor Relations team and our ESG team, along with select members of our executive leadership team, to increase their understanding of our business and industry and to listen to their feedback and perspectives. A director participates in these discussions when requested.
REPORT				RESPOND
We share stockholder feedback with the Board and its committees through periodic updates including reports on public statements and voting policies released by our stockholders and proxy advisory firms.				Since going public, we have enhanced our public disclosure and strengthened our practices relating to corporate governance, pay-for-performance, board diversity, product sustainability, greenhouse gas emissions, human capital management and workforce demographics in response to stockholder feedback.

HIGHLIGHTS OF SPRING 2022 ENGAGEMENT

In the spring of 2022, we conducted a stockholder outreach directed at our largest stockholders as part of the activities that led to the Cooperation Agreement with Sachem Head (described further beginning on page 33).

These calls were generally led by our Board Chair, often with other directors participating as well as executive leadership. Through these individual engagements with our stockholders, we gained further insight into their views. We highlighted recent progress on these topics, including the following:

In addition to these discussions, we met with shareholder advisory firms during our spring engagement efforts.

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RESPONSIVENESS TO SHAREHOLDER PROPOSAL

At our 2022 annual meeting in May, 68% of our stockholders voted to approve a proposal asking us to adopt science-based greenhouse gas (“GHG”) emissions reduction targets. We responded in July 2022 by announcing our submission of formal GHG reduction targets to the Science Based Targets initiative (“SBTi”) for approval, and in December 2022, the following goals were approved by SBTi:

As part of our responsiveness to this proposal, we took the affirmative step to report our scopes 1 and 2 emissions for 2021 and baseline scope 3 emissions for 2019, and we integrated these targets into our business strategy and financial planning under the US Foods Long-Range Plan. We also committed to report progress against these targets in US Foods’ annual Corporate Social Responsibility Report and via the Climate Disclosure Project’s (“CDP”) annual Climate Change questionnaire.

To reach these goals in the timeframe that we have committed to, we have already taken a number of demonstrated steps to reduce GHG emissions across our fleet and our facilities. Specifically, as to scope 1, we have begun to optimize our truck routing to reduce miles driven, we have deployed new vehicle technologies including the first battery-electric trucks at our La Mirada, CA, distribution center, and we continue to utilize alternative fuels including compressed natural gas, renewable natural gas and renewable diesel fuel. Our scope 2 GHG reduction initiatives include investing in renewable energy such as solar array installations and improving energy efficiency by accelerating the adoption of energy-efficient equipment and technologies. Finally, as one of the largest foodservice distributors in the U.S., the bulk of our scope 3 GHG emissions come from our suppliers, so we are actively collaborating with our suppliers to encourage them to set science-based targets by 2027 and to support them in their own climate change journeys.

HIGHLIGHTS OF FALL 2022 ENGAGEMENT

In the fall of 2022, we conducted a stockholder outreach directed at our largest stockholders to discuss ESG-related topics including corporate governance, executive compensation, diversity and inclusion and sustainability matters.

These calls were led by our General Counsel and our Corporate Secretary and included the participation of directors when appropriate. Through these individual engagements with our stockholders, we gained further insight into their views on our governance and compensation practices, our ESG program and our related disclosures. Overall, our stockholders provided positive feedback with regard to our progress in 2022 across all three components of ESG, and they expressed their support for the following:

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COMMUNICATIONS WITH OUR DIRECTORS

All interested parties, including our stockholders, who wish to contact the Company’s directors may send written correspondence, to the attention of the Corporate Secretary, at the following address:

US Foods Holding Corp.
9399 W. Higgins Road, Suite 100
Rosemont, IL 60018
generalcounsel@usfoods.com

Communications may be addressed to an individual director (including our Chair of the Board), or to the non-management directors. Stockholders who wish to communicate with us may also contact our Corporate Secretary.

CORPORATE SOCIAL RESPONSIBILITY

Our Nominating and Corporate Governance Committee, pursuant to its charter, oversees our CSR program, including program strategy, areas of focus, goals and progress. The Nominating and Corporate Governance Committee receives quarterly reports from management regarding our CSR initiatives and accomplishments.

Our General Counsel and Corporate Secretary, together, lead a cross-functional CSR working group to advance our CSR objectives. This working group is comprised of leaders and subject matter experts from across the enterprise, including Supply Chain, Real Estate, Merchandising, Human Resources, Investor Relations, Legal and Communications. The General Counsel reports directly to our Chief Executive Officer, and the CSR Working Group regularly works with members from our executive leadership team to plan for, and assess progress against, environment, social and governance commitments and priorities.

OUR CSR STRATEGY

Our CSR strategy is organized around our commitments in three key focus areas:

PRODUCTS Support an ethical, sustainable and resilient supply chain: Prioritize supplier diversity, uphold responsible sourcing practices and offer customers a best-in-class portfolio of products that are local, sustainable and support well-being.

PEOPLE Prioritize associates & community: Make a positive difference in the lives of our associates and the communities we serve.

PLANET Reduce GHG emissions and environmental footprint: Reduce energy intensity and waste in our facilities, improve transportation efficiency and prioritize alternative fuels in our fleet, and engage suppliers in our value chain.

Key Initiatives in these areas in 2022 and beyond include:

For further information about our commitments, our most recent CSR Report and additional information regarding our CSR strategy, efforts, initiatives, and accomplishments can be found at http://www.usfoods.com/csr.

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CODE OF CONDUCT

Our Code of Conduct is guided by our values and expectations which we believe are important to delivering exceptional service with the highest degree of honesty and integrity. We require all of our directors, officers and associates, including our principal executive officer, principal financial officer, principal accounting officer and controller, to understand and abide by the Code of Conduct, as it sets out expectations for how we work with each other, and with customers, suppliers, communities and government officials, representing our commitment to continuously deliver excellence with honesty and integrity.

Our Code of Conduct addresses the following, among other topics:

Our Code of Conduct, which is reviewed periodically by our Audit Committee, requires strict adherence to all laws and regulations applicable to our business and requires employees to report any violations or suspected violations of the Code of Conduct. We have published the Code of Conduct on our website at www.usfoods.com under the heading “About US Foods—Code of Conduct.”.

Reporting a Concern or Violation

Our Code of Conduct explains that there are a variety of ways for an employee to get help or report a concern, including through an employee’s manager, any other US Foods manager, Human Resources, an associate’s local Legal team member or any other member of the Law Department (including any member of the Ethics & Compliance team), or anonymously through the Check-In Line. Our Check-In Line is an externally hosted hotline, which is available 24 hours a day, seven days a week, with translation services if needed. Our Check-In Line contact information can be found on our website at www.usfoods.com under the heading “About US Foods—Code of Conduct.”

Any report to any one of our multiple channels for reporting concerns that relates to our accounting, internal controls or other financial or audit matters is forwarded to our Vice President, Internal Audit who is then responsible for reporting such matters to the Chair of our Audit Committee. All such matters are investigated and responded to in accordance with the procedures established by the Audit Committee to ensure compliance with the Sarbanes-Oxley Act of 2002.

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CORPORATE GOVERNANCE MATERIALS

The Board has adopted Corporate Governance Guidelines in furtherance of its commitment to the principles of good corporate governance. The Board and the Nominating and Corporate Governance Committee review the Corporate Governance Guidelines annually and make amendments, as they deem necessary or appropriate, based on stockholder feedback, changes in the rules of the SEC or the corporate governance standards of the NYSE, or best practices.

As described above, the Board has also adopted a Code of Conduct that applies to all of our directors, officers, and associates, including our principal executive officer, principal financial officer, principal accounting officer and controller. Our directors agree to comply with the Code of Conduct annually. We intend to make available any legally required disclosures regarding amendments to, or waivers of, provisions of our Code of Conduct on our investor relations website.

Copies of our Corporate Governance Guidelines; the charters of each of the Audit Committee, the Compensation and Human Capital Committee, and the Nominating and Corporate Governance Committee; and our Code of Conduct are publicly available and may be found by visiting the “Corporate Governance—Governance Documents” page of our investor relations website at https://ir.usfoods.com/investors/corporate-governance/governance-documents/.

ANTI-HEDGING AND ANTI-PLEDGING POLICY

Under the terms of the Company’s insider trading policy, our directors and executive officers are prohibited from engaging in transactions that involve short-term trades, short sales, exchange traded options, hedging, margin loans, or pledging of or relating to our Common Stock. The Company’s insider trading policy does not currently prevent our associates, other than executive officers, from engaging in hedging, pledging or other speculative transactions, but it allows management to consider whether to prohibit our associates from engaging in these transactions.

RELATED PARTY TRANSACTIONS

The Audit Committee has adopted a written policy related to the review and approval of related party transactions. Under the policy, the Audit Committee evaluates, and if appropriate, approves any proposed transactions involving the Company and in which any of our directors, nominees for director, executive officers or significant stockholders (or persons related to any of them) has a direct or indirect interest. Under the policy, certain related party transactions are deemed to be pre-approved, for example, those transactions where the aggregate amount will not exceed $120,000 or where the rates or charges involved are determined by competitive bids. In determining whether to approve a proposed related party transaction, the Audit Committee considers, among other things, whether: the terms of the transaction are fair to the Company and would apply if the transaction did not involve a related party; there are compelling business reasons for the Company to enter into the related party transaction and the nature of any available alternative transactions; the transaction would impair the independence of an otherwise independent director; or the transaction would create an improper conflict of interest for any director or executive officer of the Company, taking into account the size of the transaction, the overall financial position of the related party, the direct or indirect nature of the related party’s interest in the transaction and the ongoing nature of any proposed relationship.

TRANSACTION WITH SACHEM HEAD

On May 10, 2022, the Company entered into a cooperation agreement (the “Cooperation Agreement”) with Sachem Head Capital Management LP, a Delaware limited partnership, and certain of its affiliates (collectively, “Sachem Head”).

Pursuant to the Cooperation Agreement, Sachem Head agreed to withdraw its notice of stockholder nomination of its five director candidates and its demand to inspect books and records, pursuant to Section 220 of the General Corporation Law of the State of Delaware, and the Company agreed to, among other things, (i) increase the size of the Board to 13 directors immediately following the Company’s 2022 annual meeting of shareholders held on May 18, 2022 (the “2022 Annual Meeting”), (ii) immediately following the 2022 Annual Meeting, (A) appoint Scott Ferguson, David Toy and James Barber, Jr. to the Board (collectively, the “New Directors”); (B) establish the CEO Search Committee as a new committee of the Board, consisting of five directors, which was charged with conducting a nationwide search run by a nationally recognized search firm for a new CEO of the Company among internal and external candidates; (C) appoint Mr. Ferguson and Mr. Toy to the CEO Search Committee; and (D) appoint at least one New Director to each standing committee of the Board; and (iii) following the Company’s hiring of a new permanent CEO, increase the size of the Board to fourteen (14) directors and appoint the new CEO to the Board.

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Under the terms of the Cooperation Agreement, following their appointments to the Board, Mr. Barber was appointed as a member of the Compensation and Human Capital Committee, Mr. Ferguson was appointed as a member of the Executive Committee and the Nominating and Corporate Governance Committee, and Mr. Toy was appointed as a member of the Audit Committee.

The Cooperation Agreement further provided, among other things, that:

KKR INVESTMENT

On May 6, 2020 (the “Issuance Date”), the Company issued 500,000 shares of its Series A Preferred Stock to KKR for an aggregate purchase price of $500 million, or $1,000 per share, pursuant to the Investment Agreement. In connection with the investment, under a registration rights agreement, dated May 6, 2020, the Company agreed to provide KKR with certain customary registration rights with respect to shares of the Company’s Common Stock issued in connection with any future conversion of the Series A Preferred Stock.

The Series A Preferred Stock ranks senior to the shares of Common Stock, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Series A Preferred Stock has a liquidation preference of $1,000 per share. Holders of the Series A Convertible Stock are entitled to a cumulative dividend at the rate of 7.0% per annum, payable quarterly in arrears. If the Company does not declare and pay a dividend on the Series A Preferred Stock, the dividend rate will increase by 3.0% to 10.0% per annum until all accrued but unpaid dividends have been paid in full.

Dividends on the Series A were payable in kind, through the issuance of additional shares of Series A Preferred Stock, for the first four dividend payment dates, through March 31, 2021, and subsequently are payable in cash or in kind (or a combination of both) at the option of the Company. From the Issuance Date through March 31, 2021, we paid dividends in-kind to KKR of 32,281 shares of Series A Preferred Stock, and as of the Record Date, KKR held 371,044 shares of Series A Preferred Stock, which represented approximately 7% of the Company’s Common Stock on an as-converted basis.

The Series A Preferred Stock is convertible at the option of the holders at any time into shares of Common Stock at an initial conversion price of $21.50 per share and an initial conversion rate of 46.5116 shares of Common Stock per share of Series A Preferred Stock, subject to certain anti-dilution adjustments. At any time after May 6, 2023, if the volume weighted average price

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of Common Stock exceeds the mandatory conversion price of $43.00 per share, as may be adjusted, for at least twenty trading days in any period of thirty consecutive trading days, the Company has the option to convert all of the outstanding shares of Series A Preferred Stock into Common Stock.

At any time after May 6, 2025, the Company may redeem some or all of the Series A Preferred Stock for a per share amount in cash equal to: (i) the sum of 100% of the liquidation preference thereof, plus all accrued and unpaid dividends, multiplied by (ii) (A) 105% if the redemption occurs at any time after May 6, 2025 and prior to May 6, 2026, (B) 103% if the redemption occurs at any time after May 6, 2026 and prior to May 6, 2027, and (C) 100% if the redemption occurs at any time after May 6, 2027.

Upon certain change in control events involving the Company, on or before the fifth business day prior to the effective date of such change in control event, the holders of the Series A Preferred Stock must either (i) convert their shares of Series A Preferred Stock into Common Stock at the then-current conversion price or (ii) cause the Company to redeem their shares of Series A Preferred Stock for an amount in cash equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends. In the case of either clause (i) or (ii) above, if such change in control occurs on or before May 6, 2025, the Company will also be required to pay the holders of the Series A Preferred Stock a “make-whole” premium.

The holders of our Series A Preferred Stock are entitled to vote with our common stockholders on an as-converted basis, voting together as a single class. Holders of the Series A Preferred Stock are also entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series A Preferred Stock, authorizations or issuances by the Company of securities that are senior to, or equal in priority with, the Series A Preferred Stock, increases or decreases in the number of authorized shares of Series A Preferred Stock and issuances of shares of Series A Preferred Stock after the Issuance Date, other than shares issued as in kind dividends with respect to shares of Series A Preferred Stock issued on the Issuance Date. So long as KKR or its affiliates beneficially own shares of Series A Preferred Stock and/or shares of Common Stock that represent, in the aggregate and on an as-converted basis, at least 50% of the shares of Common Stock beneficially owned by KKR, on an as-converted basis, as of the Issuance Date, KKR has the right to designate one director to be nominated by the Board for election to the Board.

Until KKR no longer has the right to designate a director for election to the Board, it and its affiliates have committed to vote all of their shares of Series A Preferred Stock and/or Common Stock (i) in favor of each director nominated and recommended for election by the Board, (ii) against any stockholder nominations for director which are not approved and recommended for election by the Board, (iii) in favor of the Company’s proposal for ratification of the appointment of the Company’s independent registered public accounting firm and (iv) for any proposal approved by the KKR-designated director. With regard to all other matters submitted to the vote of stockholders, KKR and its affiliates are under no obligation to vote in the same manner as recommended by the Board or otherwise.

In February 2021, KKR Capital Markets, LLC (“KCM”), an affiliate of KKR, acted as a joint bookrunning manager in the private offering by our direct, wholly-owned subsidiary, US Foods, Inc., of $900 million aggregate principal amount of its 4.750% Senior Notes due 2029 and realized $1,113,750 in fees in the form of a discount to the purchase price which was equivalent to the fees realized by the other lead joint bookrunning manager for the offering. In addition, in November 2021, KCM (i) received $540,000 for debt advisory fees for services rendered in connection with the Company’s $900 million new incremental senior secured loan facility and (ii) acted as a joint bookrunning manager in the private offering by our direct, wholly-owned subsidiary, US Foods, Inc., of $500 million aggregate principal amount of its 4.625% Senior Notes due 2030 and realized $450,000 in fees in the form of a discount to the purchase price which was equivalent to the fees realized by the other lead joint bookrunning manager for the offering.

Additionally, as of December 31, 2022, investment funds managed by an affiliate of KKR held approximately $15 million in aggregate principal amount of our incremental senior term loan facility due 2026, as reported by the administrative agent.

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DIRECTOR COMPENSATION

For 2022, our director compensation program provided for the following retainer payments. Non-employee directors serving on the Board each receive an annual cash retainer of $100,000. Our Chair of the Board receives an additional annual cash retainer of $175,000, the Chair of the Audit Committee receives an additional annual cash retainer of $25,000, and the Chair of the Compensation and Human Capital Committee and the Chair of the Nominating and Corporate Governance Committee each receive an additional annual cash retainer of $20,000. Directors who serve on standing committees (other than the Executive Committee) receive an additional annual payment of $5,000 for each standing committee beyond their first committee (excluding the Executive Committee). All cash retainers are paid quarterly, in arrears. In addition, each non-employee director receives an annual equity grant consisting of $160,000 in restricted stock units (“RSUs”), which will vest on the earlier of the first anniversary of the grant date and our first annual meeting of stockholders that occurs after the grant date. Mr. Flitman, who is also an employee, does not receive additional compensation for serving on the Board. Mr. Dutkowsky did not receive Board retainer payments during the period that he served as our Executive Chairman on an interim basis. Mr. Taylor has elected to waive his right to receive compensation for serving on the Board, including any annual cash retainer or RSU grant.

In completing its review, the Nominating and Corporate Governance Committee receives assistance from an independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”). The Board reviews the recommendations of the Nominating and Corporate Governance Committee and determines the form and amount of director compensation.

The Nominating and Corporate Governance Committee is responsible for reviewing and making recommendations to the Board regarding our director compensation. During 2022, the Nominating and Corporate Governance Committee recommended, and the Board approved, the following changes to our Board retainer payments: (i) an increase in the value of the annual equity grant for our non-employee directors from $150,000 to $160,000, and (ii) a cash retainer in the amount of $175,000 for our Chair of the Board following separation of the Chair of the Board and Chief Executive Officer roles. In addition to the above- described retainer payments, the Board approved a one-time additional cash payment to each Executive Committee member in the amount of $20,000 to recognize work undertaken during our 2022 proxy contest. The Board also approved a quarterly cash retainer in the amount of $15,000 to be paid to the Chair of the CEO Search Committee and a quarterly cash retainer in the amount of $10,000 to be paid to each other member of the CEO Search Committee. The CEO Search Committee did not continue in existence beyond the appointment of Mr. Flitman as the Company’s new Chief Executive Officer. Other than as described above, the Board made no changes to our director compensation for 2022.

Our stock ownership guidelines that apply to each of our non-employee directors provide that each non-employee director is expected to own and retain shares of our Common Stock with a value of at least five times the annual cash retainer, or $500,000, within five years of the date the director joins the Board. Our stock ownership guidelines do not apply to Mr. Taylor since he has waived his right to receive compensation for serving on the Board. All applicable non-employee directors were in compliance with (or were on track to be in compliance with) the guidelines at the end of 2022.

The following table reflects the fees earned by our non-employee directors who were compensated for their service in fiscal 2022. As further detailed in the footnotes to the table, Mr. Dutkowsky’s compensation reflects a combination of amounts paid to Mr. Dutkowsky (1) as compensation for Board service under our director compensation program from January 2, 2022 through May 8, 2022 and (2) as compensation for serving as our Executive Chairman from May 9, 2022 through December 31, 2022.

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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation and Human Capital Committee determines and approves the compensation of our named executive officers (“NEO”). Our NEOs for fiscal 2022 and their positions were as follows:

EXECUTIVE SUMMARY

COMPENSATION PHILOSOPHY

Our executive compensation program is designed to attract, motivate, develop, and retain the right talent, in the right places, at the right time. The following guiding principles form the basis of our executive compensation philosophy:

FISCAL 2022 HIGHLIGHTS

Despite the challenges resulting from a CEO transition related to the Cooperation Agreement with Sachem Head, the strong performance of our 29,000 associates helped drive net sales of $34.1 billion, an increase of 16% over fiscal 2021. Further, we exceeded the high end of our fiscal 2022 guidance with Adjusted EBITDA of $1.31 billion in 2022, a 24% increase over the prior year and a record achievement for the Company. We also achieved Diluted Earnings per Share (“EPS”) of $1.01, as well as Adjusted Diluted EPS of $2.14 per share which was an increase of 38% over fiscal 2021. These strong results demonstrate that we are delivering on our promises and effecting solid execution against our long-range plan.

For the majority of the year, Mr. Iacobucci served as interim CEO and led the business to a strong finish in 2022, driving strong market share growth and margin expansion which, in turn, achieved significant earnings growth despite the challenging macro environment. Under the leadership of Dave Flitman, we will remain focused on executing against our long-range strategy to profitably grow market share, further optimize our gross margins, and improve our operational efficiencies. Notable achievements during fiscal 2022 include:

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COMPENSATION DISCUSSION AND ANALYSIS

Note: All reconciliations to non-GAAP financial measures can be found in Appendix A.

LOOKING AHEAD TO 2023

By leveraging the momentum of 2022, the Company expects continued increases in volume and earnings in 2023 through the execution against the three pillars of our long-range plan to grow market share, expand gross margins and improve operational efficiencies. We expect to deliver $1.45 to $1.51 billion of Adjusted EBITDA and $2.45 to $2.65 Adjusted Diluted EPS in fiscal 2023. We also expect continued EBITDA margin expansion in 2023 as we increase gross profit per case above 2022 and achieve more operational efficiencies through improved turnover and initiatives. Further, as we continue to increase earnings and reduce total debt in 2023, we expect our Net Leverage Ratio to be below 3.0x by year end, inclusive of any share repurchases.

Note: We are not providing a reconciliation of certain forward-looking non-GAAP financial measures, including Adjusted EBITDA, Adjusted Diluted EPS and Net Leverage Ratio, because we are unable to predict with reasonable certainty the financial impact of certain significant items, including restructuring costs and asset impairment charges, share-based compensation expenses, non-cash impacts of Last In First Out reserve adjustments, losses on extinguishments of debt, and business transformation costs, other gains and losses, business acquisition and integration related costs. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance periods. For the same reasons, we are unable to address the significance of the unavailable information, which could be material to future results.

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2022 COMPENSATION DESIGN

The Compensation and Human Capital Committee’s decisions regarding the design of our 2022 executive compensation program marked a return to traditional (pre-pandemic) plan designs in both our annual and long-term incentive plans, taking into account the need to address the CEO transition and the resulting uncertainties for the executive team. For 2022, our executive compensation program emphasized our strategic and operational priorities, focused on profitable market share growth, and optimized gross margins and operational efficiency to position us for long-term growth.

2022 Base Salary (page 50)

No annual merit-based salary increases were provided to our NEOs in 2022, except an increase for Mr. Hancock consistent with market benchmarking. Mr. Iacobucci’s salary was increased in May 2022 upon his appointment as our Interim Chief Executive Officer. Mr. Locascio’s salary was increased in May 2022 to align to market practices and for retention purposes.

2022 Annual Incentive Plan (“AIP”) Awards (page 50)

We returned to our pre-pandemic practice of setting annual (instead of two half-year) performance targets based on Adjusted EBITDA and market share improvement, selecting performance goals aligned with our long-term growth strategy. Our 2022 performance goals utilized the following performance metrics:

No increases in annual target bonus percentages were provided to our NEOs in 2022, except an increase for Mr. Hancock consistent with market benchmarking. The Compensation and Human Capital Committee retained discretion to reduce or eliminate AIP bonus payments if, regardless of achievement against the performance metrics, the Company’s financial performance did not warrant such payments.

2022 Long-Term Equity Incentive Plan (“LTIP”) Awards (page 52)

Based on stockholder feedback and market practice, we re-introduced performance-based RSUs (“PRSUs”) to our annual LTIP program. As a result, our 2022 equity grants consisted of a mix of time-based restricted stock units (“RSUs”) (50%) and PRSUs (50%). The 2022 PRSUs are subject to performance goals related to Adjusted EBITDA growth rate (70%) and Return on Invested Capital (“ROIC”) (30%). These performance metrics are directly linked to our long-term growth strategy, which we believe will drive shareholder value. Due to difficulty in establishing a single target annual growth rate for Adjusted EBITDA and ROIC for the 2022-2024 performance period, the 2022 PRSUs consist of different growth targets for each year in the three-year performance period (2022, 2023, and 2024). The ultimate vesting and payout at the end of the 2022-2024 performance period will be determined by a simple average of each year’s payout percentages.

Leadership Transition / Special Retention Awards (page 53)

In connection with our leadership transition that occurred in May 2022, we modified Messrs. Iacobucci and Locascio’s compensation and made various equity grants and severance agreement amendments for our executive team, including our NEOs, to ensure short- and medium-term stability across the Company’s leadership.

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COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE COMPENSATION PRACTICES

The Compensation and Human Capital Committee evaluates whether our executive compensation program is consistent with both our pay-for-performance philosophy and best practices among our peer group and the overall market. The following table reflects the features of our executive compensation program that the Compensation and Human Capital Committee believes reinforce our pay-for-performance philosophy and best practices.

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PAY-FOR-PERFORMANCE ALIGNMENT

Annual Cash Incentive Plan

As a result of our fiscal 2022 financial performance, as described in more detail under “Fiscal 2022 Annual Incentive Plan Awards” starting on page 50, cash awards approximately equal to 120.54% of target were paid to our NEOs under our fiscal 2022 AIP as follows:

Vesting of Prior Performance-Based Awards

There were no prior year performance awards that vested based on financial performance during the three-year performance period ended December 31, 2022. In 2020, the Compensation Committee determined that it was not possible to determine meaningful performance goals for a three-year period after recognizing the significant impact of the COVID-19 pandemic on the Company’s business, as well as then-current uncertainty of the ongoing nature and duration of such impact.

Emphasis on Performance Based Equity

For 2022, the Compensation and Human Capital Committee, wishing to incentivize financial performance, determined that one-half of the grant date LTIP value should be awarded in the form of PRSUs and one-half of the grant date LTIP value should be awarded in the form of time-based RSUs. The Compensation and Human Capital Committee did not approve any additional types of equity awards to our NEOs in connection with the 2022 annual LTIP grant. The change in LTIP mix over time from pre-pandemic to recovery is illustrated in the below graph:

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PHILOSOPHY OF OUR EXECUTIVE COMPENSATION PROGRAM

Our executive compensation program is designed to attract, motivate, develop, and retain the right talent, in the right places, at the right time. We strive to provide a total compensation package to our executive officers that is competitive with employers who compete with us for talent and is equitable among our workforce, balancing pay-for-performance alignment with retention considerations. This means that even during temporary downturns in either the foodservice distribution industry or the general economy, our program is designed to appropriately incentivize our executive officers to stay committed to executing our long-range plan and increasing long-term stockholder value. The guiding principles described in the section entitled “Executive Summary” above form the basis of our executive compensation philosophy.

OBJECTIVES OF OUR EXECUTIVE COMPENSATION PROGRAM

Our executive compensation program for fiscal 2022 was built upon the following framework:

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COMPENSATION DISCUSSION AND ANALYSIS

HOW WE MAKE COMPENSATION DECISIONS

The Compensation and Human Capital Committee, in consultation with management and its independent compensation consultant, regularly evaluates whether our executive compensation program reinforces our pay-for-performance philosophy and enhances long-term stockholder value creation.

COMPENSATION AND HUMAN CAPITAL COMMITTEE OVERSIGHT

The Compensation and Human Capital Committee is responsible for overseeing our executive compensation program. The Compensation and Human Capital Committee determines and approves all compensation for our NEOs, including the framework and components of our executive compensation program. When setting compensation levels, the Compensation and Human Capital Committee is assisted by our CEO, who evaluates the performance of and presents an annual compensation recommendation for each of our other executive officers.

For fiscal 2022, this annual process was led by our former CEO, Pietro Satriano, during the first quarter of 2022, prior to his May 2022 departure. Our Chair of the Board, working closely with the Chair of the Nominating and Governance Committee and the Chair of the Compensation and Human Capital Committee, together evaluate our CEO’s performance. For fiscal 2022, our Chair of the Board consulted with our CEO in setting his annual goals, and our CEO provided a self-assessment of his performance. Our Chair of the Board solicited feedback from the full Board in executive session on the CEO’s performance which was shared with him, and this feedback was also shared with the Compensation and Human Capital Committee to inform its decisions regarding CEO compensation.

The Compensation and Human Capital Committee, with the assistance of its independent compensation consultant and inputs from the members of our human resources, legal, and finance organizations, annually assesses whether our compensation plans, policies, and practices encourage excessive or inappropriate risk taking by our associates. As a result of the assessment, the Compensation and Human Capital Committee has concluded that our compensation plans, policies, and practices do not encourage excessive or inappropriate risk taking and are not reasonably likely to have a material adverse effect on the Company.

The Compensation and Human Capital Committee uses several resources and analytical tools when making decisions related to executive compensation. These resources and tools are described below.

INDEPENDENT COMPENSATION CONSULTANT

Meridian Compensation Partners provides independent advice to the Compensation and Human Capital Committee in connection with matters pertaining to executive compensation. The scope of services Meridian provides includes:

Meridian is engaged directly by the Compensation and Human Capital Committee to provide these services. In fiscal 2022, Meridian did not provide any services to management that were unrelated to executive compensation. In addition, as described in the section entitled “Director Compensation” on page 36, Meridian assists the Nominating and Corporate Governance Committee in the review of our non-employee director compensation program.

After evaluating information presented in accordance with the independence rules of the NYSE, the Compensation and Human Capital Committee concluded that Meridian was independent.

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COMPENSATION DISCUSSION AND ANALYSIS

HUMAN RESOURCES DEPARTMENT

Our Human Resources Department (“HR”) also works with Meridian to compile benchmarking data (consisting of peer group analysis and supplemental external compensation survey data analysis) and provide recommendations with respect to annual base salary, AIP, and LTIP compensation decisions to the Compensation and Human Capital Committee.

As requested by the Compensation and Human Capital Committee, HR works with Meridian to gather and analyze relevant competitive market data and to identify and evaluate various alternatives for features of our executive compensation program.

ROLE OF CEO IN DETERMINING EXECUTIVE COMPENSATION

Our CEO assists the Compensation and Human Capital Committee by evaluating the performance of our other executive officers and recommending compensation levels. Our CEO also consults with management with respect to recommendations for the Company’s performance goals used in the AIP and LTIP. In preparing recommendations to the Compensation and Human Capital Committee, our CEO consults benchmarking data and other market surveys from Meridian and HR. Our CEO structures his recommendations to adhere to the principles and objectives described in the section entitled “Philosophy of Our Executive Compensation Program” above. For fiscal 2022, our annual executive compensation process was led by our former CEO, Pietro Satriano, during the first quarter of 2022, prior to his May 2022 departure.

Our CEO is not involved in, or present during, discussions of the Compensation and Human Capital Committee or Board related to his own compensation.

USE OF COMPETITIVE MARKET DATA

We believe our executive compensation program should be competitive with the external market for executive talent. For our executive officers, we generally construct external market comparisons by examining peer group proxy statement data and compensation market survey data. We generally target base salary, annual cash incentive target, and long-term equity incentive target opportunity to be within a competitive range of median for similar executive positions in our peer group. Although the elements of our compensation packages are structured with market practice as a guide, the Compensation and Human Capital Committee believes in the importance of retaining flexibility in structuring our compensation programs and adjusting compensation for the evolving business environment.

Periodically, the Compensation and Human Capital Committee and Meridian review our peer group to evaluate whether it continues to reflect companies that are similar to us in business, size, and complexity and with which we compete for top executive talent. In selecting our peer group:

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COMPENSATION DISCUSSION AND ANALYSIS

PEER GROUP

The Compensation and Human Capital Committee approved the following peer group of companies for executive pay and program comparison purposes for fiscal 2022, which was the same peer group that the Company used for fiscal 2021.

INTERNAL ANALYSIS IN SETTING COMPENSATION ELEMENTS

With respect to annual base salary, AIP awards, and LTIP awards, the Compensation and Human Capital Committee also considers the internal equity of the compensation awarded by using comparisons within the Company based on, among other factors, role, title, tenure, and relative responsibilities.

CONSIDERATION OF 2022 SAY-ON-PAY VOTE

At our 2022 annual meeting, stockholders continued to show strong support for our executive compensation program, with approximately 82% of the votes cast approving, on an advisory basis, the compensation paid to our NEOs. The Compensation and Human Capital Committee considered this result and the support received in the past (more than 90% of the votes cast approving our executive compensation program each year since 2018). In response to stockholder feedback and market practice, the Compensation and Human Capital Committee reinstated our pre-pandemic practice of awarding PRSUs as part of the 2022 LTIP design (with PRSUs comprising 50% of the long-term awards). Similar to the prior year, our executive compensation program for fiscal 2022 continued to emphasize performance and retention-based compensation opportunities designed to incentivize our executive officers to execute our long-range plan and increase long-term stockholder value.

We value the perspectives of our stockholders, and the Compensation and Human Capital Committee will continue to consider the outcomes of say-on-pay votes when making future executive compensation decisions.

OVERVIEW OF 2022 ANNUAL INCENTIVE PLAN DESIGN

Our AIP is designed to offer cash compensation opportunities for eligible associates, including our executive officers, based upon the Company’s annual financial performance. Payments under our AIP are generally made in the first quarter of the fiscal year following the plan year completion. Our executive officers are not eligible to receive an AIP award unless they were employed by the Company at the end of the plan year.

The Compensation and Human Capital Committee retained discretion to reduce or eliminate payouts under the 2022 AIP if it was determined that, despite achievement against the AIP performance goals, the Company’s performance did not warrant such payments.

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COMPENSATION DISCUSSION AND ANALYSIS

In February 2022, the Compensation and Human Capital Committee approved the 2022 AIP design framework, the metrics for the performance goals, the Company’s 2022 performance goals and annual target awards for our NEOs. The framework for the 2022 AIP for our NEOs was based on the following:

Potential cash bonus awards under the 2022 AIP ranged from 0% to 150% of the NEO’s target award. The Compensation and Human Capital Committee believes that our executive officers’ annual cash bonuses should be based on the Company’s achievement of its performance goals. For this reason, the 2022 AIP did not include any individual performance component. However, the Compensation and Human Capital Committee retained the ability to use negative discretion to reduce or eliminate an AIP award based on individual performance.

OVERVIEW OF 2022 LONG-TERM EQUITY INCENTIVE PLAN AWARDS

ANNUAL LONG-TERM EQUITY AWARD STRUCTURE

LTIP awards are made pursuant to the Company’s 2019 Long-Term Incentive Plan (the “2019 Plan”) which is designed to align our NEOs’ interests with our long-term performance and provide the Company with an important means to recruit, retain, and motivate key personnel. LTIP awards are designed to compensate our NEOs for their long-term commitment to the Company, while motivating sustained increases in our financial performance and stockholder value. Moreover, the LTIP creates long-term incentive opportunities that are competitive with the opportunities offered by the companies with which we compete for talent.

In 2022, based on stockholder feedback, proxy advisor expectations and market practice, we returned to our pre-pandemic practice of including PRSUs as one of the components of the 2022 LTIP, with a mix of one-half PRSUs and one-half RSUs. The below chart illustrates the 2022 LTIP mix:

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COMPENSATION DISCUSSION AND ANALYSIS

Our equity awards are granted with a per share price equal to the closing price of one share of our Common Stock on the date of grant. The Compensation and Human Capital Committee set each NEO’s individual LTIP grant date target value based on competitive market data. The time-based RSUs vest ratably on an annual basis over three years, subject to the NEO’s continued employment through the applicable vesting date. The PRSUs vest on the third anniversary of the grant date if, and only to the extent that, certain performance goals are achieved during the three-year performance period ending on the last day of the Company’s 2024 fiscal year, subject to the executive’s continued employment with the Company.

The performance goals set for the PRSUs are based on a mix of Adjusted EBITDA growth rate and ROIC. Due to difficulty in establishing a single target annual growth rate for Adjusted EBITDA and ROIC for the 2022-2024 performance period, the 2022 PRSUs consist of different growth targets that are set for each year in the three-year performance period (2022, 2023, and 2024). The ultimate payout and vesting at the end of the three-year performance period will be determined by the simple average of the resulting payout percentages based on each year’s performance against that year’s growth rate. PRSUs are earned at between 0% to 200% of the target award amount based on the achievement of the performance goal(s) at the end of the performance period.

SPECIAL RETENTION AWARDS

In connection with our leadership transition that occurred in May 2022 and for the purpose of mitigating retention risk and ensuring short- and medium-term stability across the Company’s leadership, the Compensation and Human Capital Committee approved special retention awards for our executive leadership team, including our NEOs, in the form of time-based RSUs. The size of these awards were determined by the Compensation and Human Capital Committee based on market data. For Messrs. Iacobucci, Locascio and Guberman this special retention award will vest on March 29, 2024, subject to earlier vesting upon the occurrence of certain events. For each of Messrs. Hancock and Tonnison, half of the special retention award granted will vest on March 29, 2024, and the remaining half will vest on March 31, 2025, subject to earlier vesting upon the occurrence of certain events.

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COMPENSATION DISCUSSION AND ANALYSIS

COMPONENTS OF 2022 EXECUTIVE COMPENSATION PROGRAM

For fiscal 2022, except as otherwise noted below, our NEOs’ compensation primarily consisted of a base salary, an AIP award, LTIP awards, and a Special Retention Award. Mr. Locascio also received the retention cash bonuses described below.

BASE SALARY

No annual merit-based salary increases were provided to our NEOs in 2022, except an increase for Mr. Hancock consistent with market practice. Mr. Iacobucci’s salary was increased in May 2022 upon commencement of his position as our Interim Chief Executive Officer. Mr. Locascio’s salary was increased in May 2022 to align to market practices and for retention purposes.

The following table shows the annual base salary rates that were in effect for fiscal 2022, as approved by the Compensation and Human Capital Committee:

DISCRETIONARY CASH BONUS AND RETENTION

In May 2022, the Compensation and Human Capital Committee approved the payment of a $250,000 discretionary cash bonus to Mr. Locascio in recognition of his outstanding performance. The Compensation and Human Capital Committee also approved a cash retention award in the amount of $1,750,000 to be paid to Mr. Locascio if he remained as the Company’s Chief Financial Officer through March 31, 2023.

FISCAL 2022 ANNUAL INCENTIVE PLAN AWARDS

Eligible Earnings, the AIP Target Percentages, and AIP Target Awards for our NEOs under our fiscal 2022 AIP were as follows:

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COMPENSATION DISCUSSION AND ANALYSIS

Business Performance Factors and Potential Payouts

The Compensation and Human Capital Committee returned to its pre-pandemic practice of setting performance targets based on annual goals to align with our long-range plan (instead of two half-year goals). The threshold, target, and maximum goals and unweighted payout percentages for 2022 under the fiscal 2022 AIP are set forth in the following table:

The Compensation and Human Capital Committee believes the threshold and target levels of performance represented challenging but attainable performance, while the maximum level represented extremely challenging and exemplary performance. Prior to application of the relative weightings, the threshold payout percentage for each goal was 25% and the maximum payout percentage was 150%.

Fiscal 2022 AIP Actual Awards

Based on the Company’s actual performance against the goals described below, the business performance factor for the fiscal 2022 AIP was determined by the Compensation and Human Capital Committee as follows:

				FISCAL 2022 AIP						BUSINESS
WEIGHTING				THRESHOLD (25% Payout)		TARGET (100% Payout)		MAXIMUM (150% Payout)		PERFORMANCE FACTOR PAYOUT
60%		Adjusted EBITDA(1)								100.9%
20%		Improvement in Local Sales Market Share(2)								150%
20%		Improvement in National Sales Market Share(2)								150%
			2022 AIP BUSINESS PERFORMANCE FACTOR PAYOUT							120.54%