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

FORM 10-K


(Mark One)

 

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



For the fiscal year ended August 2, 2008
orJuly 30, 2011
o


or

o


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

 

 

For the transition period from                                    to                                   
Commission File Number: 0-21531

Commission File Number: 0-21531

UNITED NATURAL FOODS, INC.

(Exact name of registrant as specified in its charter)


Delaware

 


05-0376157
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

260 Lake Road Dayville, CT 06241313 Iron Horse Way, Providence, RI 02908
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code:
(860) 779-2800(401) 528-8634

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(b)Title of the Act:
each class
Name of exchange on which registered
Common Stock, par value $0.01 per share
Securities registered pursuant to Section 12(g) of the Act:
None
NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

          Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þý No o

          Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þý

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

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

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o

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

Large Accelerated Filerþý Accelerated Filero
Non-accelerated Filero (Do not check if a smaller reporting company) Smaller Reporting Companyo

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

          The aggregate market value of the common stock held by non-affiliates of the registrant was $1,028,862,216$1,779,987,744 based upon the closing price of the registrant's common stock on the Nasdaq Global Select Market® on January 25, 2008.28, 2011. The number of shares of the registrant's common stock, par value $0.01 per share, outstanding as of September 25, 20089, 2011 was 42,902,697.48,494,565.


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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on December 4, 200813, 2011 are incorporated herein by reference into Part III of this Annual Report on Form 10-K.


UNITED NATURAL FOODS, INC.

FORM 10-K

TABLE OF CONTENTS

Section  
 Page

Part I

    

Item 1.

 

Business

 
1

Item 1A.

Risk Factors


12

Item 1B.

Unresolved Staff Comments


16

Item 2.

Properties


17

Item 3.

Legal Proceedings


17

Item 4.

Submission of Matters to a Vote of Security Holders


18

 

Executive Officers of the Registrant

 
1814

Item 1A.

Risk Factors


16

Item 1B.

Unresolved Staff Comments


24

Item 2.

Properties


24

Item 3.

Legal Proceedings


26

Item 4.

(Removed and Reserved)


26

Part II

    

Item 5.

 

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


20

Item 6.

Selected Consolidated Financial Data

 
2227

Item 7.6.

 

Selected Financial Data


29

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

 
2330

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 
3745

Item 8.

 

Financial Statements and Supplementary Data

 
3847

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 
6779

Item 9A.

 

Controls and Procedures

 
6779

Item 9B.

 

Other Information

 
6980

Part III

    

Item 10.

 

Directors, Executive Officers and Corporate Governance

 
7082

Item 11.

 

Executive Compensation

 
7082

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 
7082

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 
7083

Item 14.

 

Principal Accounting Fees and Services

 
7083

Part IV

    

Item 15.

 

Exhibits, Financial Statement Schedules

 
7184

 

Signatures

 
7285

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PART I.

ITEM 1.    BUSINESS

Overview

        We believe we are athe leading national distributor based on sales of natural, organic and specialty foods and non-food products in the United States.States and Canada, and that our twenty-eight distribution centers, representing approximately 7.6 million square feet of warehouse space, provide us with the largest capacity of any North American-based distributor in the natural, organic and specialty products industry. We carry more than 60,000 high-quality natural, organic and specialty foods and non-food products, consisting of national, brand, regional brand,and private label and master distribution products,brands in six product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements and sports nutrition, bulk and food servicefoodservice products and personal care items. We serve more than 17,000 customers23,000 customer locations primarily located across the United States the majority ofand Canada which can be classified into one of the following categories: as follows:

        We were the first organic food distribution network in the United States designated as a "Certified Organic Distributor" by Quality Assurance International, Inc. ("QAI"), an organic certifying agency accredited by the United States Department of Agriculture ("USDA"). This process involved a comprehensive review by QAI of our operating and purchasing systems and procedures. This certification covers all of our broadline distribution centers in the United States, except for our primarily specialty product distribution centers.

        We have beencenters in Harrison, Arkansas and Leicester, Massachusetts. Four of our Canadian distribution centers are certified by either QAI or Ecocert Canada, while the primary distributor to Whole Foods Market, for more than 10 years. Our relationship with Whole Foods Market was expanded to cover the former Wild Oats Markets, Inc. ("Wild Oats Market") stores retained by Whole Foods Market following Whole Foods Market's merger with Wild Oats Markets in August 2007. We had served as the primary distributor of natural and organicremaining Canadian distribution center sells only Kosher foods and non-food products to Wild Oats Market prior tois therefore not certified organic.

        Since the merger. The Henry's and Sun Harvest stores divested by Whole Foods Market, and acquired by a subsidiary of Smart & Final, Inc., remain our customers.

        On November 2, 2007, we acquired Distribution Holdings, Inc. ("DHI") and its wholly-owned subsidiary Millbrook Distribution Services, Inc. ("Millbrook"), which we now refer to as UNFI Specialty Distribution. Through UNFI Specialty Distribution, we distribute specialty food items (including ethnic, kosher, gourmet, organic and natural foods), health and beauty care items and other non-food items to more than 9,000 retail locations. We believe that the acquisition of DHI and Millbrook accomplishes certainformation of our strategic objectives, including acceleratingpredecessor in 1976, we have grown our expansion intobusiness both organically and through acquisitions which have expanded our distribution network, product selection and customer base. Since fiscal 2001, our net sales have increased at a numbercompounded annual growth rate ("CAGR") of high-growth business segments and establishing immediate market share in the fast-growing specialty foods market. We believe that UNFI Specialty Distribution's customer base enhances our conventional supermarket business channel and that the organizations' complementary product lines present opportunities for cross-selling. See "—Our Operating Structure—Wholesale Division" for further information regarding this acquisition and our new specialty distribution business.

16.1%. In recent years, our sales to existing and new customers have increased through the continued growth of the natural products industry in general, increased market share as a result of our high-quality service and broader product selection, the acquisition of, or merger with, natural and specialty products distributors, the expansion of our existing distribution centers, the construction of new distribution centers and the development of our own line of natural and organic branded products. Through these efforts, we believe that we have been able to broadenbroadened our geographic penetration, expandexpanded our customer base, enhanceenhanced and diversifydiversified our product selectionsselection and increaseincreased our market share.

        We also ownhave been the primary distributor to Whole Foods Market, for more than 13 years. Effective June 2010, we amended our distribution agreement with Whole Foods Market to extend the term of the agreement for an additional seven years. Under the terms of the amended agreement, we will continue to serve as the primary wholesale natural grocery distributor to Whole Foods Market in its United States regions where we were serving as the primary distributor at the time of the amendment. The amendment extended the expiration date of the agreement from September 25, 2013 to September 25, 2020. On July 28, 2010, we announced that we had entered into an asset purchase agreement under which we agreed to acquire certain assets of Whole Foods Distribution, Inc. previously used for their self-distribution of non-perishables in their Rocky Mountain and Southwest regions, and to become the primary distributor in these regions. We closed this transaction in late September 2010 in the case of the Southwest region and early October 2010 in the case of the Rocky Mountain region. We now serve as the primary distributor to Whole Foods Market in all of its regions


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in the United States, and have amended our distribution agreement with Whole Foods Market effective October 11, 2010 to include these regions.

        In June 2010, we acquired certain Canadian food distribution assets (the "SDG assets") of the SunOpta Distribution Group business ("SDG") of SunOpta Inc. ("SunOpta"), through our wholly-owned subsidiary, UNFI Canada, Inc. ("UNFI Canada"). With the acquisition, we became the largest distributor of natural, organic and specialty foods, including kosher foods, in Canada. This was a strategic acquisition as UNFI Canada provides us with an immediate platform for growth in the Canadian market.

        The ability to distribute specialty food items (including ethnic, kosher and gourmet) has accelerated our expansion into a number of high-growth business segments and provided immediate market share in the fast-growing specialty foods market. Due to our expansion into specialty foods, during fiscal 2010 and 2011 we gained new business with a number of conventional supermarkets that previously had not done business with us because we did not distribute specialty products, including our recently announced distribution agreement with Safeway, Inc. ("Safeway"). We believe that the distribution of these products enhances our conventional supermarket business channel and that our complementary product lines present opportunities for cross-selling.

        On June 9, 2011, we entered into an asset purchase agreement with L&R Distributors, Inc. ("L&R") pursuant to which we have agreed to sell our conventional non-foods and general merchandise lines of business, including certain inventory related to these product lines. This divestiture will allow us to concentrate on our core business of the distribution of natural, organic, and specialty foods and products, which have now been fully transitioned throughout our national distribution footprint. We expect this divestiture and related closure of the Harrison, Arkansas facility will be accretive to net income, excluding the restructuring and impairment charges that were incurred in fiscal 2011 and that we expect to incur in fiscal 2012 as described below in more detail, by approximately $1.5 to $2.0 million annually. See "Our Operating Structure—Wholesale Division" for further information regarding our distribution business.

        We operate 1312 natural products retail stores within the United States, located primarily in Florida (with two locations in Maryland and one in Massachusetts), through our subsidiary Natural Retail Group, Inc.doing business as Earth Origins Market ("NRG"EOM"). We also operate one natural product retail store, Drive Organics, in Vancouver, British Columbia. We believe that our retail business serves as a natural complement to our distribution business because it enables us to develop new marketing programs and improve customer service. In


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addition, our subsidiary Hershey Imports Company, Inc. ("Hershey Imports")doing business as Woodstock Farms Manufacturing specializes in the international importation, roasting, packaging and packagingdistribution of nuts, dried fruit, seeds, dried fruitstrail mixes, granola, natural and organic snack items.items and confections.

        We are a Delaware corporation based in Dayville, ConnecticutProvidence, Rhode Island and we conduct business through our various wholly owned subsidiaries. We operated twentytwenty-eight distribution centers at 20082011 fiscal year end.end, including our Harrison, Arkansas facility which we will be closing following the completion of the divestiture of our conventional non-foods and general merchandise lines of business. We believe that our distribution centers provide us with the largest capacity of any distributor in theof natural, organic and specialty products industry.in the United States or Canada. In September 2010, our distribution center located in Lancaster, Texas commenced operations. In October 2010 we assumed the past six years,operations at a distribution center located in Aurora, Colorado in connection with our asset purchase agreement with Whole Foods Distribution. With the opening of these two facilities and following our acquisition in Canada in June 2010, we have invested over $175 million in distribution capacity and infrastructure improvements. We have increased our distribution capacity to approximately 5.87.6 million square feet.

Unless otherwise specified, references to "United Natural Foods," "we," "us," "our" or "the Company" in this Annual Report on Form 10-K include our consolidated subsidiaries. We operate in one reportable segment, the wholesale segment. See the financial statements and notes thereto included in "Item 8. Financial Statements and Supplementary Data" of this Report for information regarding our financial performance.


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The Natural Products Industry

        The natural products industry encompasses a wide range of products in addition to food products (includingincluding organic foods). These other product categories includeand non-organic foods, nutritional, herbal and sports supplements;supplements, toiletries and personal care items;items, naturally-based cosmetics;cosmetics, natural/homeopathic medicines;medicines, pet products and cleaning agents. According to the June 2008 issue ofThe Natural Foods Merchandiser, a leading trade publication for the natural products industry trade publication, sales revenues for all types of natural products rose to $62.4were $81 billion in 2007, an increase2010, a growth of $5 billion or approximately 9.8% over 2006. According toThe Natural Foods Merchandiser, this increase in sales,7% from a total dollar perspective, was driven primarily by2009. We believe the growth in the following categories:

        The fastest growing categories, although not necessarily the largest dollar volume categories, inrate of the natural products industry were pet products, housewares, books, fresh meat/seafood and beer/wine.

        According toThe Natural Foods Merchandiser,has outpaced the continuing growth trend is drivenof the overall food-at-home industry as a result of the increasing demand by consumer demandconsumers for a healthy lifestyle, food safety concerns and concerns aboutenvironmental sustainability. More than half of American households represent "mid-level" organic customers; that is, they regularly purchase organic and natural products and want to learn more about nutrition as concerns about health claims, food safety, irradiation and genetically modified organisms continue to mount.

Our Operating Structure

        Our operations are comprised of three principal operating divisions. These operating divisions are:


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        Our broadline distribution business is organized into twothree regions—our Eastern Region, our Western Region and our Western Region.Canadian region. We distribute natural, organic and organicspecialty products in all of our product categories to customers in the Eastern and Midwestern portions of the United States through our Eastern Region and to customers in the westernWestern and centralCentral portions of the United States through our Western Region. SevenOur Canadian Region distributes natural, organic and specialty products in all of our twenty distribution centers at 2008product categories to all of our customers in Canada. As of our 2011 fiscal year end, our Eastern Region operated nine distribution centers, which provideprovided approximately 2.63.1 million square feet of warehouse space, wereour Western Region operated in our Eastern Region, and five of ournine distribution centers, which provideprovided approximately 1.52.7 million square feet of warehouse space wereand our Canadian Region operated in our Western Region.

        We acquired our specialty distribution business through our acquisition of DHI and Millbrook on November 2, 2007. Our UNFI Specialty Distribution division operates distribution centers located in Massachusetts, New Jersey, and Arkansas, with customers throughout the United States. Through our specialty distribution division's threefive distribution centers, which provideprovided approximately 1.60.3 million square feet of warehouse space, we distribute specialty food items (including ethnic, kosher, gourmet, organic and natural foods), health and beauty care items and other non-food items.space.

        Through Albert's, we distribute organically grown produce and non-produce perishables, such as organic milk, dressings, eggs, juices, poultry and various other refrigerated specialty items. Albert's operates out of sixseven distribution centers providing approximately 0.2 million square feet of warehouse space, strategically located in all regions of the United States, and is designated as a "Certified Organic Distributor" by QAI.

        Through Select Nutrition, we distribute more than 14,000 health and beauty aids, vitamins, minerals and supplements from distribution centers in CaliforniaPennsylvania and Pennsylvania.California.

        Certain of our distribution centers are shared by multiple operations inwithin our wholesale division.


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        We own and operate 1312 natural products retail stores through EOM within the United States, nine of which are located primarily in Florida, (with two locations in Maryland and one in Massachusetts), through NRG.Massachusetts. We also operate a retail store in Vancouver, British Columbia that is reflected within our wholesale division. We believe that our retail business serves as a natural complement to our distribution business because it enables us to develop new marketing programs and improve customer service.

        We believe our retail stores have a number of advantages over their competitors, including our financial strength and marketing expertise, the purchasing power resulting from group purchasing by stores within NRGEOM and the breadth of our product selection.

        We believe that we benefit from certain advantages in acting as a distributor to our retail stores, including our ability to:

        Additionally, as the primary natural products distributor to our retail locations, we realize significant economies of scale and operating and buying efficiencies. As an operator of retail stores, we


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also have the ability to test market select products prior to offering them nationally. We can then evaluate consumer reaction to the product without incurring significant inventory risk. We also are able to test new marketing and promotional programs within our stores prior to offering them to our broaderwholesale customer base.

        Our subsidiary Hershey ImportsWoodstock Farms Manufacturing specializes in the international importation, roasting, packaging and packagingdistribution of nuts, dried fruit, seeds, dried fruitstrail mixes, granola, natural and organic snack items.items and confections. We sell these items in bulk in our own packaged snack lines, EXPRESSnacks, Woodfield Farms and Woodstock Farms, and through private label packaging arrangements we have established with large health food, supermarket and convenience store chains.chains and independent owners. We operate our manufacturing operations out ofan organic (USDA and QAI) and kosher (Circle K) certified packaging, roasting, and processing facilitiesfacility in New Jersey and a warehouse in Los Angeles, California.Jersey.

        Our brandedBlue Marble Brands product lines address certain needs or preferences of customers of our wholesale division, which are not otherwise being met by other suppliers. We carry over 2015 brand names, representing over 700600 unique products. Our Blue Marble products are sold through our wholesale division, through third-party distributors in the natural, organic and specialty industry and directly to retailers. Our Field Day® brand is only sold to customers in our independent channel, and is meant to serve as a private label brand for independent retailers to allow them to compete with conventional supermarkets which often have their own private label store brands.

Our Competitive AdvantagesStrengths

        We believe we distinguish ourselves from our competitors through the following strengths:

        We believe that we benefit from a numberare the largest distributor of significant competitive advantages, includingnatural, organic and specialty products by sales in the following.

        We areUnited States and Canada, and one of the few distributors capable of servingmeeting the natural, organic and specialty product needs of local and regional customers, as well assupermarket chains, and the rapidly


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growing national supernatural and supermarket chains.chain. We completed the build-out of our distribution system in September 2010 with the opening of our facility in Lancaster, Texas. We believe we havethat our network of twenty-eight distribution centers (including five in Canada) creates significant advantages over smaller and regional natural, organicdistributors. Our nationwide presence across the United States and specialty products distributors as a result of our ability to:

same day or next day on-time deliveries.

        In addition toWe believe that our scale affords us significant benefits within a highly fragmented industry including volume purchasing opportunities a critical component of being an efficient distributor is our management ofand warehouse and distribution costs.efficiencies. Our continued growth has created the needallowed us to expand our existing facilities and open new facilities as we seek to achieve maximum operating efficiencies, including by reducingreduced fuel and other transportation costs, and to assure adequate spacehas created sufficient capacity for future needs.growth. Recent efficiency improvements include the centralization of general and administrative functions, the consolidation of systems applications among physical locations and regions and the optimization of customer distribution routes, all of which reduced expenses. We have made significant capital expendituresinvestments in our people, facilities, equipment and have incurred considerable expenses in connection withtechnology to broaden our footprint and enhance the opening and expansionefficiency of distribution facilities, and we expect to continue to do so. In August 2005, we expanded our Midwest operations by opening a 311,000 square foot distribution center in Greenwood, Indiana, which serves as a distribution hub for our customers in Illinois, Indiana, Ohio and other Midwest states. In October 2005, we opened our Rocklin, California distribution center and moved our Auburn, California operations to this facility. The Rocklin distribution center is 487,000 square feet in size and serves as a distribution hub for customers in California and surrounding states. operations. Key examples include the following:

        We serve more than 17,000 customers primarily located acrossThroughout the United States. We35 years of our, and our predecessors' operations, we have developed long-standing customer relationships, which we believe are among the strongest in our industry. In particular, we have been the primary supplier of natural and organic products to the largest supernatural chain in the United States, Whole Foods Market, for more than ten13 years.

A key driver of our strong customer loyalty is our superior service levels, which include accurate fulfillment of orders, timely product delivery, competitive prices and a high level of product marketing support. Our average


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distribution in-stock service level for fiscal 2008 was approximately 97%, which we believe is the highest in our industry. Distribution service levels refer to2011, measured as the percentage of items ordered by customers that are delivered by the requested delivery date excluding manufacturers' "out of stocks."(excluding manufacturer out-of-stocks and discontinued items), was approximately 98%. We believe that our high distribution service levels are attributable to our experienced purchasing departments and sophisticated warehousing, inventory control and distribution systems. WeFurthermore, we offer next-day delivery service to a majority of our active customers and offer multiple deliveries each week to our largest customers. Wecustomers, which we believe that customer loyalty is dependent upon excellent customer service, including accurate fulfillmentdifferentiates us from many of orders, timely product delivery, low prices and a high level of product marketing support.our competitors.

        Our management team has extensive experience in the retail and distribution business, including the natural and specialty product industries. On average, our ten executive officers have over eighteen years of experience in the retail, natural products industries and has been successful in identifying, consummating and integrating multiple acquisitions. Since 2000, we have successfully completed seven acquisitions of distributors, manufacturers and suppliers, two acquisitions of retail stores and eight acquisitions of branded product lines.or food distribution industry. In addition, we believe our executive officers and directors, andemployee base is highly motivated as our Employee Stock Ownership Trust beneficially own in the aggregateowns approximately 6.7%4.5% of our common stock. Accordingly,stock outstanding. Furthermore, a significant portion of our senior managementemployees' compensation is equity based or performance based, and, employees havetherefore, there is a significantsubstantial incentive to continue to generate strong growth in operating results in the future.

Our Growth Strategy

        Our growth strategy isWe seek to maintain and enhance our position as a leading national distributor towithin the natural and organic industry in the United States and Canada and to increase our market share in the specialty products industry. Since our formation, we have grown our business through the acquisition of a number of distributors and suppliers, which has expanded our distribution network, product selection and customer base. For example, we acquired our Albert's, NRGEOM, Woodstock Farms Manufacturing, and Hershey Importsspecialty businesses and, during fiscal 2008,2010, we acquired DHI and Millbrook, whichthe assets that comprise our specialty distribution business, and three branded product lines.UNFI Canada.

        To implement our growth strategy, we intend to continue to increaseincreasing our leading market share of the growing natural and organic products industry by expanding our customer base, increasing our share of existing customers' business and continuing to expand and further penetrate new distribution territories, particularly in the Mid-Atlantic Southern Pennsylvania and South CentralSouthwestern United States markets and Canadian markets. We plan to expand outour presence within the specialty industry by offering new and existing


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customers a single wholesale distributor capable of meeting their specialty and natural and organic product needs on a national or regional basis. Key elements of our strategy include:

        As of August 2, 2008,July 30, 2011, we served more than 17,000 customers23,000 customer locations primarily located throughoutin the United States.States and Canada. We plan to continue expandingexpand our coverage of the highly fragmented natural and organic and specialty products industry by cultivating new customer relationships within the industry and by further developing otherour existing channels of distribution, such as traditionalindependent natural products retailers, conventional supermarkets, mass market outlets, institutional food servicefoodservice providers, international, buying clubs hotels and gourmet stores. With the coordinated distribution of our specialty products with our natural and organic products, which commenced with the integration of our York, Pennsylvania facility in April 2009, we believe that we have the opportunity to continue gaining market share in the conventional supermarket channel as the result of our ability to offer an integrated and efficient distribution solution for our customers. In fiscal 2010 we gained new business from a number of conventional supermarket customers, including Giant-Landover, Shop-Rite and Kings, partially as a result of our complementary product selection. In part as a result of our product breadth, in fiscal 2011 we were awarded new business from several other supermarket customers, including Giant Eagle and Safeway. We expect to begin shipping to Safeway nationally in October 2011.


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        We believe that we are the primary distributor of natural and organic products to the majority of our natural products customer base, including to Whole Foods Market, our largest customer. We intend to maintain our position as the primary supplier for a majority of our customers, and to add to the number of customers tofor which we serve as primary supplier by offering the broadest product selection in our industry at competitive prices. With the acquisitionexpansion of UNFI Specialty Distribution,specialty product offerings, we further believe that we have the ability to further meet our existing customers' needs for specialty foods and products, as well as certain general merchandise. We believe this representsrepresenting an opportunity to accelerate our sales growth within the conventional supermarket, channel and potentially our supernatural and independent channels.

        We have launched a number of private label or branded product linesinvested approximately $226 million in order to provide our customers with a broader selection of product offerings. Indistribution network and infrastructure over the past five fiscal 2008, our branded product revenues were approximately 3.3%years. We completed the build-out of our overall net sales. Wenationwide distribution system in September 2010 with the opening of our facility in Lancaster, Texas. Our Lancaster facility is the first facility to use our national supply chain platform and warehouse management system which we plan to increaseimplement throughout our branded product business through organic growthnetwork by the end of fiscal 2013 and through brand acquisitions. Wewhich we believe this initiative differentiates us from other distributors withinwill further enhance the efficiency of our industry, enables usnetwork. Although our distribution network services all markets in the United States and Canada, we will continue to selectively evaluate opportunities to build long-term brand equity for the Companyor lease new facilities or to acquire distributors to better serve existing markets. Further, we will maintain our focus on realizing efficiencies and allows useconomies of scale in purchasing, warehousing, transportation and general and administrative functions, which, combined with incremental fixed cost leverage, should lead to generate higher gross margins, as branded product revenues generally yield higher margins than do third party branded product revenues.continued improvements in our operating margin.

        We believe that we will be successful in expanding into the food servicefoodservice channel as well as further enhancing our presence inoutside of the international channel.United States and Canada. We will continue to seek to develop regional relationships and alliances with companies such as Aramark Corporation, the Compass Group North America, and Sodexho Inc. in the food servicefoodservice channel and seek other alliances inoutside the international channel.United States and Canada.

        As discussed under "—Our Competitive Advantages" above,Throughout our history, we have made significant capital expendituressuccessfully identified, consummated and incurred considerable expenses in connection with the constructionintegrated multiple acquisitions. Since 2000, we have successfully completed nine acquisitions of new or the expansiondistributors, manufacturers and suppliers, two acquisitions of existing distribution facilities.retail stores and eleven acquisitions of branded product lines. We willintend to continue to selectively evaluate opportunitiespursue opportunistic acquisitions to build new facilities or to acquire distributors to better serve existing markets and expand into new markets. Further, we will maintainthe breadth of our focus on integrating these new or acquired facilities into our nationwide distribution network, in order to improveincrease our economies of scale in purchasing, warehousing, transportationefficiency or add additional products and general and administrative functions, which we believe will lead to continued improvements in our operating margin.


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        We believe that we provide the leading distribution solution to the natural, organic and specialty products industry through our national presence, regional responsiveness,preferences, focus on customer service and breadth of product offerings. Our service levels, which we believe to be the highest in our industry, are attributable to our experienced purchasing departments and our sophisticated warehousing, inventory control and distribution systems. See "—Our Focus on Technology" below for more information regarding our use of technology in our warehousing, inventory control and distribution systems.

        Among the benefits we provide to our customers is access, at preferred rates and terms, to the suite of products developed by Living Naturally, LLC, a leading provider of marketing promotion and electronic ordering systems to the natural and organic products industry. We have maintained a strategic alliance with Living Naturally since 2002. The products provided by Living Naturally include an intelligent electronic ordering system and turnkey retailer website services, which create new opportunities for our retailers to increase their inventory turns, reduce their costs and enhance their profits. We also offer our customers a selection of inventory management, merchandising, marketing, promotional and event management services designed to increase sales and enhance customer satisfaction. These marketing services, which primarily are utilized by customers in our independently


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owned natural products retailers channel and many of which are co-sponsored with suppliers, include monthly and thematic circular programs, in-store signage and assistance in product display.

Our Customers

        We maintain long-standing customer relationships with independently-owned natural products retailers, supernatural chains and supermarket chains. In addition, we emphasize our relationships with new customers, such as national conventional supermarkets, mass market outlets and gourmet stores, which are continually increasing their natural product offerings. The following were included among our wholesale customers for fiscal 2008:
2011:

        On a combined basis and excluding sales to Henry's and Sun Harvest store locations (which remain our customers), Whole Foods Market and Wild Oats Markets accounted for approximately 31.0%is our only customer that represented more than 10% of ourtotal net sales in fiscal 2008.2011, and accounted for approximately 36% of our net sales. In October 2006, we announced a seven-year distribution agreement with Whole Foods Market, which commenced on September 26, 2006, under which2006. In June 2010 we amended our distribution agreement with Whole Foods Market to extend the term of the agreement for an additional seven years. Under the terms of the amended agreement, we will continue to serve as the primary U.S.wholesale natural grocery distributor to Whole Foods Market in theits United States regions where we currently serve as the primary distributor. The amendment extended the expiration date of the agreement from September 25, 2013 to September 25, 2020.

        On July 28, 2010, we announced that we had entered into an asset purchase agreement under which we agreed to acquire certain assets of Whole Foods Distribution, Inc. previously served. In January 2007, we expanded ourused for their self-distribution of non-perishables in their Rocky Mountain and Southwest regions, and to become the primary distributor in these regions. We closed this transaction in late September 2010 in the case of the Southwest region and early October 2010 in the case of the Rocky Mountain region. We now serve as the primary distributor to Whole Foods Market relationshipin all of its regions in the Southern Pacific region of the United States. Our relationshipStates, and have amended our distribution agreement with Whole Foods Market was further expanded in August 2007, when Whole Foods Market completed its merger with Wild Oats Markets. We had served as the primary distributor of natural and organic foods and non-food productseffective October 11, 2010 to Wild Oats Markets prior to the merger, and we continue to serve the former Wild Oats Markets stores retained by Whole Foods Market under our distribution arrangement with Whole Foods Market. We also continue to serve as a primary distributor to the Henry's and Sun Harvest store locations previously owned by Wild Oats Markets and sold by Whole Foods Market to a subsidiary of Smart & Final Inc. on September 30, 2007.


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        The following table lists the percentage of sales by customer type for the fiscal years ended July 30, 2011, July 31, 2010 and August 2, 2008 and July 28, 2007:1, 2009:

 
 Percentage of Net Sales 
Customer Type
 2008 2007 

Independently owned natural products retailers

  42% 45%

Supernatural chains

  31% 35%

Conventional supermarkets

  23% 16%

Other

  4% 4%

        Sales to Henry's and Sun Harvest store locations have been reclassified from our supernatural channel into our supermarket channel in both fiscal years 2008 and 2007 and will continue in this classification going forward. This reclassification resulted in an increase in sales in the supermarket channel of 1.7% and a decrease in sales in the supernatural channel of 1.7% for the year ended July 28, 2007. In addition, sales by channel have been adjusted to reflect changes in customer types resulting from a review of our customer lists. As a result of this adjustment, sales to the independents sales channel increased 0.9% for the year ended July 28, 2007 and sales to the supermarket sales channel decreased 0.9% for the year ended July 28, 2007.

 
 Percentage of Net Sales 
Customer Type
 2011 2010 2009 

Independently owned natural products retailers

  37% 40% 42%

Supernatural chains

  36% 35% 33%

Conventional supermarkets and mass market chains

  22% 21% 20%

Other

  5% 4% 5%

        We distribute natural, organic and specialty foods and non-food products to customers internationally,located in the United States and Canada, as well as to customers located in other foreign countries. Our total international sales, including those by UNFI Canada, represented approximately five percent and one percent of our business in fiscal 2011 and 2010, respectfully. We believe that our sales outside the United States. Our sales to international customers representStates, as a de minimis portionpercentage of our business.total sales, will expand as we seek to grow our Canadian operations.


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Our Marketing Services

        We have developedoffer a variety of supplier-sponsored marketing services designed to increase sales for our customers and suppliers, including consumer and trade marketing programs, as well as programs to support suppliers in understanding our markets. Trade and consumer marketing programs are supplier-sponsored programs which cater to a broad range of retail formats. These programs are designed to educate consumers, profile suppliers and increase sales for retailers, many of which do not have the resources necessary to conduct such marketing programs independentlyindependently.

        Our consumer marketing programs include:

        Our trade marketing programs include:

        Our supplier marketing programs include:


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        We keep current with the latest trends in the industry. Periodically, we conduct focus group sessions with certain key retailers and suppliers in order to ascertain their needs and allow us to better service them. We also:


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Our Products

        Our extensive selection of high-quality natural, organic and specialty products enables us to provide a primary source of supply to a diverse base of customers whose product needs vary significantly. We carry more than 60,000 high-quality natural, organic and specialty products, consisting of national brand, regional brand, private label and master distribution products, in six product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements, bulk and food service products and personal care items. Our branded product lines address certain needs or preferences of our customers, which are not otherwise being met by other suppliers.

        We continuously evaluate potential new private branded and other products based on both existing and anticipated trends in consumer preferences and buying patterns. Our buyers regularly attend regional and national natural, organic, specialty, ethnic and gourmet product shows to review the latest products that are likely to be of interest to retailers and consumers. We also actively solicit suggestions for new products from our customers. We make the majority of our new product decisions at the regional level. We believe that our decentralized purchasing practices allow our regional buyers to react quickly to changing consumer preferences and to evaluate new products and new product categories regionally. Additionally, many of the new products that we offer are marketed on a regional basis or in our own retail stores prior to being offered nationally, which enablesenable us to evaluate local consumer reaction to the products without incurring significant inventory risk. Furthermore, by exchanging regional product sales information between our regions, we are able to make more informed and timely new product decisions in each region.

        We maintain a comprehensive quality assurance program. All of the products we sell that are represented as "organic" are required to be certified as such by an independent third-party agency. We maintain current certification affidavits on all organic commodities and produce in order to verify the authenticity of the product. All potential suppliers of organic products are required to provide such third-party certifications to us before they are approved as suppliers.

Our Suppliers

        We purchase our products from approximately 4,3004,600 suppliers. The majority of our suppliers are based in the United States and Canada, but we also source products from suppliers throughout Europe, Asia, Central America, South America, Africa and Australia. We believe the reason suppliers of natural and organic products seek to distribute their products through us is because we provide access to a large and growing national customer base across the United States and Canada, distribute the majority of the suppliers' products and offer a wide variety of marketing programs to our customers to help sell the suppliers' products. Substantially all product categories that


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we distribute are available from a number of suppliers and, therefore, we are not dependent on any single source of supply for any product category.


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Our largest supplier, Hain Celestial Group, Inc. ("Hain"), accounted for approximately 7.5%6% of our total purchases in fiscal 2008.2011. However, the product categories we purchase from Hain can be purchased from a number of other suppliers. In addition, although we have exclusive distribution arrangements and vendor support programs with several suppliers, none of theseour suppliers accountsaccount for more than 10% of our total purchases.

        We have positioned ourselves as the largest purchaser of organically grown bulk products in the natural and organic products industry by centralizing our purchase of nuts, seeds, grains, flours and dried foods. As a result, we are able to negotiate purchases from suppliers on the basis of volume and other considerations that may include discounted pricing or prompt payment discounts. Furthermore, many of our purchase arrangements include the right of return to the supplier with respect to products that we aredo not able to sell in a certain period of time. As described under "—Our"Our Products" above, each region is responsible for placing its own orders and can select the products that it believes will most appeal to its customers, although each region is able to participate in our company-wide purchasing programs. Our outstanding commitments for the purchase of inventory were approximately $31.8$17.2 million as of August 2, 2008.July 30, 2011.

Our Distribution System

        We have carefully chosen the sites for our distribution centers to provide direct access to our regional markets. This proximity allows us to reduce our transportation costs relative to those of our competitors that seek to service these customers from locations that are often several hundreds of miles away. The opening of our Lancaster, Texas distribution center has significantly reduced the miles driven associated with servicing the customers of that facility as many of those customers were previously serviced from our Denver, Colorado facility. We believe that we incur lower inbound freight expense than our regional competitors, because our national presencescale allows us to buy full and partial truckloads of products. Whenever possible,When financially advantageous, we backhaul between our distribution centers and satellite, staging facilities using our own trucks. Additionally, we generally can redistribute overstocks and inventory imbalances between distribution centers if needed, which helps us ensure products are sold prior to their expiration date and more appropriately balance inventories.date.

        Products are delivered to our distribution centers primarily by our fleet of leased trucks, contract carriers and the suppliers themselves. We lease our trucks from national leasing companies such as Ryder Truck Leasing and Penske Truck Leasing, which in some cases maintain facilities on our premises for the maintenance and service of these vehicles. Other trucks are leased from regional firms that offer competitive services.

        We ship certain orders for supplements or for items that are destined for areas outside of regular delivery routes through United Parcel Service and other independent carriers. Deliveries to areas outside the continental United States and Canada are typically shipped by ocean-going containers on a weekly basis.

Our Focus on Technology

        We have made a significant investment in distribution, financial, information and warehouse management systems. We continually evaluate and upgrade our management information systems at our regional operations based on the best practices in the distribution industry in order to make the systems more efficient, cost-effective and responsive to customer needs. These systems include functionality in radio frequency inventory control, pick-to-voice systems, pick-to-light systems, computer-assisted order processing and slot locator/retrieval assignment systems. At our receiving docks, warehouse associates attach computer-generated, preprinted locator tags to inbound products. These tags contain the expiration date, locations, quantity, lot number and other information about the products in bar code format. Customer returns are processed by scanning the UPC bar codes. We also employ a


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management information system that enables us to lower our inbound transportation costs by making optimum use of our own fleet of trucks or by consolidating deliveries into full truckloads.


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Orders from multiple suppliers and multiple distribution centers are consolidated into single truckloads for efficient use of available vehicle capacity and return-haul trips. In addition, we utilize route efficiency software that assists us in developing the most efficient routes for our trucks. During fiscal 2012 and 2013, we will continue the roll-out of our new national supply chain platform and warehouse management system, which was launched in our new Lancaster, Texas facility and is now being implemented distribution center by distribution center.

Intellectual Property

        We do not own or have the right to use any patent, trademark, tradename, license, franchise, or concession which upon loss would have a material adverse effect on our results of operations or financial condition.

Competition

        Our largest competition comes from direct distribution, whereby a customer reaches a product volume level that justifies distribution directly from the manufacturer. Our major nationalwholesale distribution competitor in both the United States and Canada is KeHE Distributors, LLC ("Kehe"), which acquired Tree of Life Distribution, Inc. (a subsidiary of Koninklijke Wessanen N.V.) ("Tree of Life"). in January 2010. In addition to its natural and organic products, Tree of LifeKehe distributes specialty food products, thereby diversifying its product selection, and markets its own private label program. Kehe's subsidiary, Tree of Life has also earned QAI certification and has a European presence.certification. We also compete in the United States with over 200 smaller regional and local distributors of natural, ethnic, kosher, gourmet and other specialty foods that focus on niche or regional markets, and with national, regional and local distributors of conventional groceries and companies that distribute to their own retail facilities.

        We believe that distributors in the natural and specialty products industries primarily compete on distribution service levels, product quality, depth of inventory selection, price and quality of customer service. We believe that we currently compete effectively with respect to each of these factors.

        Our retail stores compete against other natural products outlets, conventional supermarkets and specialty stores. We believe that retailers of natural products compete principally on product quality and selection, price, customer service, knowledge of personnel and convenience of location. We believe that we currently compete effectively with respect to each of these factors.

Government Regulation

        Our operations and many of the products that we distribute in the United States are subject to regulation by state and local health departments, the U.S. Department of AgricultureUSDA and the United States Food and Drug Administration, which generally impose standards for product quality and sanitation and are responsible for the administration of recent bioterrorism legislation. OurIn the United States, our facilities generally are inspected at least once annually by state or federal authorities.

        The Surface Transportation Board and the Federal Highway Administration regulate our trucking operations. In addition, interstate motor carrier operations are subject to safety requirements prescribed by the U.S.United States Department of Transportation and other relevant federal and state agencies. Such matters as weight and dimension of equipment are also subject to federal and state regulations.

        WeOur operations do not generally are not subject us to many of the federal, provincial, state and local environmental laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment.regulations. However, certain of our distribution facilities have above-ground storage tanks for


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hydrogen fuel, diesel fuel and other petroleum products, which are subject to laws regulating such storage tanks.

        We believe that we are in material compliance with all federal, provincial, state and local laws applicable to our operations.

Employees

        As of August 2, 2008,July 30, 2011, we had approximately 6,3006,900 full and part-time employees. An aggregateemployees, 390 of approximately 6.6% of our total employees, or approximately 415 of the employees at our Auburn, Washington, East Brunswick, New Jersey, Edison, New Jersey, Iowa City, Iowa and Leicester, Massachusetts facilities,whom (approximately 5.9%) are covered by collective bargaining agreements.agreements at our Edison, New Jersey, Auburn, Washington, Leicester, Massachusetts and Iowa City, Iowa facilities. The Edison, New Jersey, Auburn, Washington, East Brunswick, New Jersey, Leicester, Massachusetts and Iowa City, Iowa agreements expire in June 2011,2014, February 2009, June 2009,2012, March 2013 and June 2014, respectively. On June 8, 2010, the National Labor Relations Board issued a certification of representative notice to us with respect to our Dayville, Connecticut drivers, resulting from an election there in May 2010. Subsequently, we entered into negotiations with Teamsters' representatives to reach a collective bargaining agreement. On June 14, 2011, with no collective bargaining agreement having been reached, the Dayville facility drivers petitioned for decertification of union representation. A decertification election took place on July 2009, respectively.14 – 15, 2011, and the petition failed to achieve decertification by one vote. We reached agreement on a collective bargaining agreement for those workers on August 1, 2011. In September of 2010, we received a petition for union representation of our Iowa City, Iowa distribution center's drivers and dispatchers by the Teamsters. An election was held in October of 2010, which was favorable to management, the results of which were certified in October 2010. On October 18, 2010, the National Labor Relations Board issued a petition for union representation of the warehouse associates at our Greenwood, Indiana distribution center by the Teamsters. An election was held in November 2010, and the National Labor Relations Board issued its certification of results of election in favor of management on December 1, 2010. We have never experienced a work stoppage by our unionized employees and we believe that our relations with our employees are good.


Seasonality

Table of Contents        Generally, we do not experience any material seasonality. However, our sales and operating results may vary significantly from quarter to quarter due to factors such as changes in our operating expenses, management's ability to execute our operating and growth strategies, personnel changes, demand for natural products, supply shortages and general economic conditions.

Available Information

        Our internet address is http://www.unfi.com. The contents of our website are not part of this Annual Report on Form 10-K, and our internet address is included in this document as an inactive textual reference only. We make our Annual ReportsReport on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge through our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the Securities and Exchange Commission.

        We have adopted a code of conduct and ethics for certain employees pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. A copy of our code of conduct and ethics is posted on our website, and is available free of charge by writing to United Natural Foods, Inc., 260 Lake Road, Dayville, Connecticut 06241,313 Iron Horse Way, Providence, Rhode Island, 02908, Attn: Investor Relations.


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Executive Officers of the Registrant

        Our executive officers are elected on an annual basis and serve at the discretion of our Board of Directors. Our executive officers and their ages as of September 15, 2011 are listed below:

Name
AgePosition
Steven L. Spinner51President and Chief Executive Officer
Mark E. Shamber42Senior Vice President, Chief Financial Officer and Treasurer
Joseph J. Traficanti60Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary
Sean Griffin52Senior Vice President, National Distribution
Eric A. Dorne50Senior Vice President and Chief Information Officer
Thomas A. Dziki50Senior Vice President, Chief Human Resource and Sustainability Officer
Kurt Luttecke44President of the Western Region
Craig H. Smith52President of the Eastern Region
David A. Matthews46President of UNFI International
Thomas Grillea55President of Woodstock Farms Manufacturing, Select Nutrition Distributors, and Earth Origins Market

Steven L. Spinner has served as our President and Chief Executive Officer and as a member of our Board of Directors since September 2008. Mr. Spinner served as the Interim President of our Eastern Region, after David Matthews became President of UNFI International in September 2010 and prior to the hiring of Craig H. Smith in December 2010. Prior to joining us in September 2008, Mr. Spinner served as a director and as Chief Executive Officer of Performance Food Group Company ("PFG") from October 2006 to May 2008, when PFG was acquired by affiliates of The Blackstone Group and Wellspring Capital Management. Mr. Spinner previously had served as PFG's President and Chief Operating Officer beginning in May 2005. Mr. Spinner served as PFG's Senior Vice President and Chief Executive Officer—Broadline Division from February 2002 to May 2005 and as PFG's Broadline Division President from August 2001 to February 2002.

Mark E. Shamber has served as Senior Vice President, Chief Financial Officer and Treasurer since October 2006. Mr. Shamber previously served as our Vice President, Chief Accounting Officer and Acting Chief Financial Officer and Treasurer from January 2006 until October 2006, as Vice President and Corporate Controller from August 2005 to October 2006 and as our Corporate Controller from June 2003 until August 2005. From February 1995 until June 2003, Mr. Shamber served in various positions of increasing responsibility up to and including senior manager within the assurance and advisory business systems practice at the international accounting firm of Ernst & Young LLP.

Joseph J. Traficanti has served as our Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary since April 2009. Prior to joining us, Mr. Traficanti served as Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary of PFG from November 2004 until April 2009.

Sean Griffin has served as our Senior Vice President, National Distribution since January 2010. Prior to joining us, Mr. Griffin was East Region Broadline President of PFG. In this role he managed over 10 divisions and $2 Billion in sales. Previously he served as President of PFG—Springfield, MA from 2003 until 2008. He began his career with Sysco Corporation in 1986 and has held various leadership positions in the foodservice distribution industry with U.S. Foodservice, Alliant Foodservice and Sysco Corporation.

Eric Dorne has served as our Senior Vice President and Chief Information Officer since September 2011. Prior to joining us, Mr. Dorne was Senior Vice President and Chief Information Officer for The


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Great Atlantic & Pacific Tea Company, Inc., the parent company of the A&P, Pathmark, SuperFresh, Food Emporium and Waldbaum's supermarket chains located in the Eastern United States from January 2011 to August 2011, and Vice President and Chief Information Officer from August 2005 to January 2011. In his more than 30 years at The Great Atlantic & Pacific Tea Company, Mr. Dorne held various executive positions including Vice President of Enterprise IT Application Management and Development, Vice President of Store Operations Systems and Director of Retail Support Services.

Thomas A. Dziki has served as our Senior Vice President, Chief Human Resource and Sustainability Officer since August 2010. Prior to August 2010, Mr. Dziki served as our Senior Vice President of Sustainable Development since January 2010, as our Vice President of Sustainable Development since June 2009, and as National Vice President of Real Estate and Construction since August 2006. Prior to that time, Mr. Dziki had served as President of Woodstock Farms Manufacturing and Select Nutrition from December 2004 until August 2006, Corporate Vice President of Special Projects from December 2003 to November 2004 and as our Manager of Special Projects from May 2002 to December 2003. Prior to joining us, Mr. Dziki served as a private consultant to our company, our subsidiaries, Woodstock Farms Manufacturing, EOM, Albert's, and our predecessor company, Cornucopia Natural Foods, Inc., from 1995 to May 2002.

Kurt Luttecke has served as our President of the Western Region since June 2009. Mr. Luttecke served as our President of Albert's Organics from June 2007 to June 2009. Prior to joining us, Mr. Luttecke spent 16 years at Wild Oats serving as its Vice President of Perishables from 2006 to June 2007, Vice President of Meat/Seafood & Food Service Supply Chain from 2004 to 2006, Director of Perishables from 2001 to 2004, and Director of Operations from 1995 to 2001.

Craig H. Smith has served as our President of the Eastern Region since December 2010. Prior to joining us, Mr. Smith was Atlantic Region President of U.S. Foodservice, a leading broadline foodservice distributor of national, private label, and signature brand items in the United States from May 2008 to December 2010. From April 2006 to May 2008, Mr. Smith was Senior Vice President of Street Sales of U.S. Foodservice. In his 17 years at U.S. Foodservice, Mr. Smith held various other executive positions including North Region Zone President, Detroit Market President and Boston Market President. Prior to U.S. Foodservice, Mr. Smith held several positions at food service industry manufacturer and distributor Rykoff-Sexton, Inc. from 1982 until 1993.

David A. Matthews has served as our President of UNFI International with responsibility for our Canadian and other international operations since September 2010. From June 2009 to September 2010 he was our President of the Eastern Region. Prior to joining us, Mr. Matthews served as President and CEO of Progressive Group Alliance ("ProGroup"), a wholly owned subsidiary of PFG from January 2007 to May 2009, as Chief Financial Officer of ProGroup from December 2004 to January 2007, and as Senior Vice President of Finance and Technology of ProGroup from July 2000 to December 2004.

Thomas Grillea has served as our President of Woodstock Farms Manufacturing since May 2009, President of Earth Origins Market since May 2008, and President of Select Nutrition Distributors since September 2007. Mr. Grillea served as our General Manager for Select Nutrition Distributors from September 2006 to September 2007. Prior to joining us, Mr. Grillea served in a management capacity for Whole Foods Market from 2004 through 2005, and in various management capacities for American Health and Diet Centers and the Vitamin Shoppe from 1998 through 2003.


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ITEM 1A.    RISK FACTORS

        Our business, financial condition and results of operations are subject to various risks and uncertainties, including those described below and elsewhere in this Annual Report on Form 10-K. This section discusses factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results. Our business, financial condition or results of operations could be materially adversely affected by any of these risks.

        We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties applicable to our business. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements."

        Whole Foods Market accounted for approximately 36% of our net sales in fiscal 2011. We serve as the primary distributor of natural, organic and specialty non-perishable products to Whole Foods Market in all of its regions in the United States under the terms of our amended distribution agreement which expires on September 25, 2020. Our ability to maintain a close mutually beneficial relationship with our largest customer, Whole Foods Market is an important element to our continued growth. In October 2006, we announced a seven-year distribution agreement with Whole Foods Market, which commenced on September 26, 2006, under which we serve as the primary U.S. distributor to Whole Foods Market in the regions where we previously served. In January 2007, we expanded our Whole Foods Market relationship in the Southern Pacific region of the United States. In August 2007, Whole Foods Market and Wild Oats Markets completed their merger, as a result of which, Wild Oats Markets became a wholly-owned subsidiary of Whole Foods Market. We service all of the stores previously owned by Wild Oats Markets and now owned by Whole Foods Market under the terms of our distribution agreement with Whole Foods Market. On a combined basis, and excluding sales to Wild Oats Markets' former Henry's and Sun Harvest store locations (which were sold by Whole Foods Market to a subsidiary of Smart & Final Inc. on September 30, 2007), Whole Foods Market and Wild Oats Markets accounted for approximately 31.0% of our net sales in fiscal 2008. As a result of this concentration of our customer base, the

        The loss or cancellation of business from Whole Foods Market, including from increased distribution to their own facilities or closures of stores, previously owned by Wild Oats Markets, could materially and adversely affect our business, financial condition or results of operations. Similarly, if Whole Foods Market is not able to grow its business, including as a result of a reduction in the level of discretionary spending by its customers, our business, financial condition or results of operations may be materially and adversely affected.

        The grocery industry is sensitive to national and regional economic conditions and the demand for the products that we distribute, particularly our specialty products, may be adversely affected from time to time by economic downturns that impact consumer spending, including discretionary spending. Future economic conditions such as employment levels, business conditions, interest rates, inflation rates, energy and fuel costs and tax rates could reduce consumer spending or change consumer purchasing habits. Among these changes could be a reduction in the number of natural and organic products that consumers purchase where there are non-organic, which we refer to as conventional, alternatives, given that many natural and organic products, and particularly natural and organic foods, often have higher retail prices than do their conventional counterparts.

        The grocery distribution industry generally is characterized by relatively high volume of sales with relatively low profit margins. The continuing consolidation of retailers in the natural products industry and the growth of supernatural chains may reduce our profit margins in the future as more customers qualify for greater volume discounts, and we experience pricing pressures from suppliers and retailers. Over the last two fiscal years, we have increased our sales to our supernatural chain and conventional supermarket customers in relation to our total sales. In the fourth quarter of fiscal 2011, we announced that we had entered into a three-year distribution arrangement to supply Safeway with nonproprietary natural, organic and specialty products, which will further increase the percentage of our total sales to conventional supermarkets. Sales to these customers within our supernatural chain and conventional


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supermarket channels generate a lower gross margin than do sales to our independent customers. Many of these customers, including our largest customer, have agreements with us that include volume discounts. As the amounts these customers purchase from us increase, the price that they pay for the products they purchase is reduced, putting downward pressure on our gross margins on these sales. To compensate for these lower gross margins, we must reduce the expenses we incur to service these customers. If we are unable to reduce our expenses, including our expenses related to servicing this lower gross margin business, our business, financial condition or results of operations could be adversely impacted.

        Many of our sales are at prices that are based on our product cost plus a percentage markup. As a result, volatile food costs have a direct impact upon our profitability. Prolonged periods of product cost inflation may have a negative impact on our profit margins and results of operations to the extent that we are unable to pass on all or a portion of such product cost increases to our customers. In addition, product cost inflation may negatively impact the consumer discretionary spending trends of our customers' customers, which could adversely affect our sales. Conversely, because many of our sales are at prices that are based upon product cost plus a percentage markup, our profit levels may be negatively impacted during periods of product cost deflation even though our gross profit as a percentage of net sales may remain relatively constant. To compensate for lower gross margins, we, in turn, must reduce expenses that we incur to service our customers.

        We generally sell productsMany of our customers buy from us under purchase orders, and we generally do not have agreements with or commitments from ourthese customers for the purchase of products. We cannot assure you that our customers will maintain or increase their sales volumes or orders for the products supplied by us or that we will be able to maintain or add to our existing customer base. Decreases in our customers' sales


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volumes or orders for products supplied by us may have an adverse affect on our business, financial condition or results of operations.

        The grocery distribution industry generally is characterized by relatively high volume with relatively low profit margins. The continuing consolidation of retailers in the natural products industry and the growth of supernatural chains may reduce our profit margins in the future as more customers qualify for greater volume discounts, and we experience pricing pressures from both ends of the supply chain.

        We continually evaluate opportunities to acquire other companies. To the extent that our future growth includes acquisitions, we cannot assure you that we will successfully identify suitable acquisition candidates, consummate such potential acquisitions, integrate any acquired entities or successfully expand into new markets as a result of our acquisitions. We believe that there are risks related to acquiring companies, including overpaying for acquisitions, losing key employees of acquired companies and failing to achieve potential synergies. Additionally, our business could be adversely affected if we are unable to integrate the companies acquired in our acquisitions and mergers.

        A significant portion of our past growth has been achieved through acquisitions of or mergers with other distributors of natural products. The successful integration of any acquired entity is critical to our future operating and financial performance. Integration requires, among other things:

        The integration process has diverted and could divert the attention of management and any difficulties or problems encountered in the transition process could have a material adverse effect on our business, financial condition or results of operations. In particular, the integration process may temporarily redirect resources previously focused on reducing product cost, resulting in lower gross profits in relation to sales. In addition, the process of combining companies has caused and could cause the interruption of, or a loss of momentum in, the activities of the respective businesses, which could have an adverse effect on their combined operations. For example, our acquisition of Millbrook has diverted the attention of management away from our core business, not yet produced the purchasing efficiencies and other synergies we expect to result from the acquisition and negatively affected our operating expenses. Although we expect to achieve efficiencies from this acquisition in future periods, we cannot assure you that we will realize any of the anticipated benefits of this or other mergers.

        The growth in the size of our business and operations has placed, and is expected to continue to place, a significant strain on our management. Our future growth may be limited by our inability to acquire new distribution facilities or expand our existing distribution facilities, make acquisitions, successfully integrate acquired entities, implement information systems or adequately manage our personnel. Our future growth is limited in part by the size and location of our distribution centers. We cannot assure you that we will be able to successfully expand our existing distribution facilities or open new distribution facilities in new or existing markets to facilitate growth. Even if we are able to expand our distribution network, our ability to compete effectively and to manage future growth, if any, will depend on our ability to continue to implement and improve operational, financial and management


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information systems on a timely basis and to expand, train, motivate and manage our work force. We cannot assure you that our existing personnel, systems, procedures and controls will be adequate to support the future growth of our operations. Our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.

        We operate in competitive markets and our future success will be largely dependent on our ability to provide quality products and services at competitive prices. Bidding for contracts or arrangements with customers, particularly within the supernatural chain and conventional supermarket channels, is highly competitive and distributors may market their services to a particular customer over a long period of time before they are invited to bid. Our competition comes from a variety of sources, including other distributors of natural products as well as specialty grocery and mass market grocery distributors.distributors and retail customers that have their own distribution channels. We cannot assure you that mass market grocery distributors will not increase their emphasis on natural products and more directly compete with us including through self-distribution of particular items or purchases of particular items directly from suppliers or that new competitors will not enter the market. These distributors may have been in business longer than we have, may have substantially greater financial and other resources than we have and may be better established in their markets. We cannot assure you that our current or potential competitors will not provide products or services comparable or superior to those provided by us or adapt more quickly than we do to evolving industry trends or changing market requirements. It is also possible that alliances among competitors may develop and rapidly acquire significant market share or that certain of our customers will increase distribution to their own retail facilities. Increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could materially adversely affect our business, financial condition or results of operations. We cannot assure you that we will be able to compete effectively against current and future competitors.


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        The grocery industryMuch of our sales growth is sensitiveoccurring in our lower gross margin supernatural and conventional supermarket channels. In our attempt to nationalreduce operating expenses and regional economic conditionsincrease operating efficiencies, we have aggressively invested in the development and implementation of new information technology. Due to start-up inefficiencies associated with the demandinitial implementation of our technological initiatives in our Lancaster, Texas distribution facility, we have revised the timeline for the broader implementation of our productsproposed technological developments. While we currently believe this revised timeline will be met, we may not be able to implement these technological changes in the time frame that we have planned and delays in implementation could negatively impact our business, financial condition or results of operations. In addition, the costs to make these changes may exceed our estimates and will exceed the benefits during the early stages of implementation. Even if we are able to implement the changes in accordance with our revised plans, and within our current cost estimates, we may not be able achieve the expected efficiencies and cost savings from this investment, which could have an adverse effect on our business, financial condition or results of operations.

        Our ability to decrease costs and increase profits, as well as our ability to serve customers most effectively, depends on the reliability of our technology platform. We use software and other technology systems, among other things, to generate and select orders, to load and route trucks and to monitor and manage our business on a day-to-day basis. Any disruption to these computer systems could adversely affectedimpact our customer service, decrease the volume of our business and result in increased costs negatively affecting our business, financial condition or results of operations.

        Certain of our customers have from time to time experienced bankruptcy, insolvency and/or an inability to pay their debts to us as they come due. If our customers suffer significant financial difficulty, they may be unable to pay their debts to us timely or at all, which could have a material adverse effect on our results of operations. It is possible that customers may reject their contractual obligations to us under bankruptcy laws or otherwise. Significant customer bankruptcies could further adversely affect our revenues and increase our operating expenses by requiring larger provisions for bad debt. In addition, even when our contracts with these customers are not rejected, if customers are unable to meet their obligations on a timely basis, it could adversely affect our ability to collect receivables. Further, we may have to negotiate significant discounts and/or extended financing terms with these customers in such a situation, each of which could have material adverse effect on our business, financial condition, results of operations or cash flows. During periods of economic downturns thatweakness like those we experienced during fiscal 2009 and the first half of fiscal 2010, small to medium-sized businesses, like many of our independently owned natural products retailer customers, may be impacted more severely and more quickly than larger businesses. Consequently, the ability of such businesses to repay their obligations to us may deteriorate, and in some cases this deterioration may occur quickly, which could adversely impact consumer spending, including discretionary spending. Future economic conditions such as employment levels,our business, conditions, interest rates, energyfinancial condition or results of operations.

        In addition, our operating results are particularly sensitiveJune 2010, we entered the Canadian market with UNFI Canada's acquisition of the SDG assets of SunOpta, which we refer to and may be materially adversely affected by:

SunOpta Transaction. We cannot assure you that oneour subsequent growth, if any, in the Canadian market will enhance our financial performance. Our ability to achieve


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the expected benefits of this acquisition will depend on, among other things, our ability to effectively translate our business strategies into a new geographic market with more rigid ingredient requirements for the products we distribute and an English and French dual labeling requirement that reduces the number of products we are likely to sell in comparison to the United States market, our ability to retain customers and suppliers, the adequacy of our implementation plans, our ability to maintain our financial and internal controls and systems as we expand within Canada, the ability of our management to oversee and operate effectively the combined operations and our ability to achieve desired operating efficiencies and sales goals. Failure to achieve these anticipated benefits could result in a reduction in the price of our common stock as well as in increased costs, decreases in the amount of expected revenues and diversion of management's time and energy and could materially and adversely impact our business, financial condition or moreresults of operations.

        A significant portion of our past growth has been achieved through acquisitions of, or mergers with, other distributors of natural, organic and specialty products. We also continually evaluate opportunities to acquire other companies. We believe that there are risks related to acquiring companies, including an inability to successfully identify suitable acquisition candidates or consummate such factorspotential acquisitions. To the extent that our future growth includes acquisitions, we cannot assure you that we will not materiallyoverpay for acquisitions, lose key employees of acquired companies, fail to achieve potential synergies or expansion into new markets as a result of our acquisitions. Therefore, future acquisitions, if any, may have a material adverse effect on our results of operations, particularly in periods immediately following the consummation of those transactions while the operations of the acquired business are being integrated with our operations. Achieving the benefits of acquisitions depends on timely, efficient and successful execution of a number of post-acquisition events, including, among other things:

        The integration process could divert the attention of management and any difficulties or problems encountered in the transition process could have a material adverse effect on our business, financial condition or results of operations. In particular, the integration process may temporarily redirect resources previously focused on reducing product cost, resulting in lower gross profits in relation to sales. In addition, the process of combining companies could cause the interruption of, or a loss of momentum in, the activities of the respective businesses, which could have an adverse effect on their combined operations.

        In connection with acquisitions of businesses in the future, if any, we may decide to consolidate the operations of any acquired business with our existing operations or make other changes with respect to the acquired business, which could result in special charges or other expenses. Our results of operations also may be adversely affected by expenses we incur in making acquisitions, by amortization of acquisition-related intangible assets with definite lives and by additional depreciation attributable to acquired assets. Any of the businesses we acquire may also have liabilities or adverse operating issues, including some that we fail to discover before the acquisition, and our indemnity for such liabilities may also be limited. Additionally, our ability to make any future acquisitions may depend upon obtaining additional financing. We may not be able to obtain additional financing on acceptable terms or at all. To the extent that we seek to acquire other businesses in exchange for our common stock, fluctuations in our stock price could have a material adverse effect on our ability to complete acquisitions.


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        The growth in the size of our business and operations has placed, and is expected to continue to place, a significant strain on our management. Our future growth may be limited by our inability to acquire new distribution facilities or expand our existing distribution facilities, make acquisitions, successfully integrate acquired entities or significant new customers, implement information systems initiatives or adequately manage our personnel. Our future growth is limited in part by the size and location of our distribution centers. As we near maximum utilization of a given facility or maximize our processing capacity, operations may be constrained and inefficiencies have been and may be created, which could adversely affect our results of operations unless the facility is expanded, volume is shifted to another facility or additional processing capacity is added. Conversely, as we add additional facilities or expand existing operations or facilities, excess capacity may be created. Any excess capacity may also create inefficiencies and adversely affect our results of operations. We cannot assure you that we will be able to successfully expand our existing distribution facilities or open new distribution facilities in new or existing markets as needed to accommodate or facilitate growth. Even if we are able to expand our distribution network, our ability to compete effectively and to manage future growth, if any, will depend on our ability to continue to implement and improve operational, financial and management information systems on a timely basis and to expand, train, motivate and manage our work force. We cannot assure you that our existing personnel, systems, procedures and controls will be adequate to support the future growth of our operations. Our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.

        Increased fuel costs may have a negative impact on our results of operations. The high cost of diesel fuel can increase the price we pay for products as well as the costs we incur to deliver products to our customers. These factors, in turn, may negatively impact our net sales, margins, operating expenses and operating results. To manage this risk, we have in the past periodically entered, and may in the future periodically enter, into heating oil derivative contracts to hedge a portion of our projected


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diesel fuel requirements. Heating crude oil prices have a highly correlated relationship to fuel prices, making these derivatives effective in offsetting changes in the cost of diesel fuel. We are not party to any commodity swap agreements and, as a result, our exposure to volatility in the price of diesel fuel has increased relative to our exposure to volatility in prior periods in which we had outstanding heating oil derivative contracts. We do not enter into fuel hedge contracts for speculative purposes. We have in the past, and may in the future, periodically enter into forward purchase commitments for a portion of our projected diesel fuel requirements. If fuel prices decrease significantly, these forward purchases may prove ineffective and result in us paying higher than the then market costs for a portion of our diesel fuel. As of July 30, 2011, there were no forward diesel fuel commitments in effect. We also have maintainedmaintain a fuel surcharge program since fiscal 2005 which allows us to pass some of our higher fuel costs through to our customers. We cannot guarantee that we will continue to be able to pass a comparable proportion or any of our higher fuel costs to our customers in the future.future, which may adversely affect our business, financial condition or results of operations.

        Damage or disruption to our distribution capabilities due to weather, natural disaster, fire, terrorism, pandemic, strikes, the financial and/or operational instability of key suppliers, or other reasons could impair our ability to distribute our products. To the extent that we are unable, or it is not financially feasible, to mitigate the likelihood or potential impact of such events, or to manage effectively such events if they occur, there could be an adverse effect on our business financial condition or results of operations.


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        We have a $400 million secured revolving credit facility, which matures on November 27, 2012, and under which borrowings accrue interest, at our option, at either (i) the base rate (the applicable prime lending rate of Bank of America Business Capital, as announced from time to time) plus, during the period from June 1, 2008 through the date on which we demonstrate compliance with the fixed charge coverage ratio covenant thereunder (the "Credit Facility Noncompliance Period"), 0.25%, or (ii) the one-month London Interbank Offered Rate ("LIBOR") plus 1.0% during the Credit Facility Noncompliance Period and one-month LIBOR plus 0.75% thereafter.. As of August 2, 2008,July 30, 2011, our borrowing base, based on accounts receivable and inventory levels and described more completely below under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Revenues", was $370.9$400.0 million, with remaining availability of $65.0$262.0 million. We have a term loan agreement in the principal amount of $75 million secured by certain real property. The term loan is repayable over seven years based on a fifteen-year amortization schedule. Interest on the term loan accrues at one-month LIBOR plus 1.25% during the period from June 1, 2008 through the date on which we demonstrate compliance with the fixed charge coverage ratio covenant under the term loan agreement and one-month LIBOR plus 1.0% thereafter.. As of August 2, 2008, $61.2July 30, 2011, $47.1 million was outstanding under the term loan agreement.

        In order to maintain our profit margins, we rely on strategic investment buying initiatives, such as discounted bulk purchases, which require spending significant amounts of working capital.capital up front to purchase products that we will sell over a multi-month time period. In the event that our cost of capital increases, such as during thea period in which we are not in compliance with the fixed charge coverage ratio covenants under our revolving credit facility and our term loan agreement, or our ability to borrow funds or raise equity capital is limited, we could suffer reduced profit margins and be unable to grow our business organically or through acquisitions, which could have a material adverse effect on our business, financial condition or results of operations.

        Our debt agreements contain financial covenants and other restrictions that limit our operating flexibility, limit our flexibility in planning for or reacting to changes in our business and make us more vulnerable to economic downturns and competitive pressures. Our indebtedness could have significant negative consequences, including:

        In addition, each of our credit facility and term loan requires that we comply with various financial tests and imposes certain restrictions on us, including among other things, restrictions on our ability to incur additional indebtedness, create liens on assets, make loans or investments or pay dividends. Failure to comply with these covenants could have an adverse effect on our business, financial condition or results of operations.

        Our operating results may vary significantly from period to period due to:



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        Due to the foregoing factors, we believe that period-to-period comparisons of our operating results may not necessarily be meaningful and that such comparisons cannot be relied upon as indicators of future performance.

        Our business is highly regulated at the federal, state and local levels and our products and distribution operations require various licenses, permits and approvals. In particular:

        Our Canadian operations are similarly subject to extensive regulation, including the English and French dual labeling requirements applicable to products that we distribute in Canada. The loss or revocation of any existing licenses, permits or approvals or the failure to obtain any additional licenses, permits or approvals in new jurisdictions where we intend to do business could have a material adverse effect on our business, financial condition or results of operations. In addition, as a distributor and manufacturer of natural, organic, and specialty foods, we are subject to increasing governmental scrutiny of and public awareness regarding food safety and the sale, packaging and marketing of natural and organic products. Compliance with these laws may impose a significant burden on our operations. If we were to manufacture or distribute foods that are or are perceived to be contaminated, any resulting product recalls, such as the peanut-related recall in January 2009 and egg recall in August 2010, could have an adverse effect on our business, financial condition or results of operations. Additionally, concern over climate change, including the impact of global warming, has led to significant United States and international legislative and regulatory efforts to limit greenhouse gas emissions. Increased regulation regarding greenhouse gas emissions, especially diesel engine emissions, could impose substantial costs on us. These costs include an increase in the cost of the fuel and other energy we purchase and capital costs associated with updating or replacing our vehicles prematurely. Until the timing, scope and extent of such regulation becomes known, we cannot predict its effect on our results of operations. It is reasonably possible, however, that it could impose material costs on us which we may be unable to pass on to our customers.


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        We face an inherent risk of exposure to product liability claims if the products we manufacture or sell cause injury or illness. We may be subject to liability, which could be substantial, because of actual or alleged contamination in products manufactured or sold by us, including products sold by companies before we acquired them. We have, and the companies we have acquired have had, liability insurance with respect to product liability claims. This insurance may not continue to be available at a reasonable cost or at all, and may not be adequate to cover product liability claims against us or against companies we have acquired. We generally seek contractual indemnification from manufacturers, but any such indemnification is limited, as a practical matter, to the creditworthiness of the indemnifying party. If we or any of our acquired companies do not have adequate insurance or contractual indemnification available, product liability claims and costs associated with product recalls, including a loss of business, could have a material adverse effect on our business, financial condition or results of operations.

        Management of our business is substantially dependent upon the services of certain key management employees. Loss of the services of any officers or any other key management employee could have a material adverse effect on our business, financial condition or results of operations.

        As of August 2, 2008,July 30, 2011 we had approximately 6,3006,900 full and part-time employees. An aggregateemployees, 390 of approximately 6.6% of our total employees, or approximately 415 of the employees at our Auburn, Washington, East Brunswick, New Jersey, Edison, New Jersey, Iowa City, Iowa and Leicester, Massachusetts facilities,whom (approximately 5.9%) are covered by collective bargaining agreements.agreements at our Edison, New Jersey, Auburn, Washington, Leicester, Massachusetts, and Iowa City, Iowa facilities. The Edison, New Jersey, Auburn, Washington, East Brunswick, New Jersey, Leicester, Massachusetts and Iowa City, Iowa agreements expire in June 2011,2014, February 2009, June 2009,2012, March 2013 and July 2009,June 2014, respectively. We have in the past been the focus of union-organizing efforts. On June 8, 2010, the National Labor Relations Board issued a certification of representative notice to us with respect to our Dayville, Connecticut drivers, resulting from an election there in May 2010. Subsequently, we entered into negotiations with Teamsters' representatives to reach a collective bargaining agreement. On June 14, 2011, with no collective bargaining agreement having been reached, the Dayville facility drivers petitioned for decertification of union representation. A decertification election took place on July 14 - 15, 2011, and the petition failed to achieve decertification by one vote. We reached agreement on a collective bargaining agreement for these workers on August 1, 2011. In September of 2010, we received a petition for union representation of our Iowa City, Iowa distribution center's drivers and dispatchers by the Teamsters. An election was held in October of 2010, which was favorable to management, the results of which were certified in October 2010. On October 18, 2010, the National Labor Relations Board issued a petition for union representation of the warehouse associates at our Greenwood, Indiana distribution center by the Teamsters. An election was held in November 2010, and the National Labor Relations Board issued its certification of results of election in favor of management on December 1, 2010.

        As we increase our employee base and broaden our distribution operations to new geographic markets, our increased visibility could result in increased or expanded union-organizing efforts. Although we have not experienced a work stoppage to date, if additional employees were to unionize or we are not successful in reaching agreement with these employees, we could be subject to work stoppages and increases in labor costs, either of which could materially adversely affecthave a material adverse effect on our business, financial condition or results of operations.


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        In recent periods, there has been significant volatility in the market price of our common stock. In addition, the market price of our common stock could fluctuate substantially in the future in response to a number of factors, including the following:

        industries generally;

        In addition, in recent years the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. These broad market fluctuations may materially adversely affect our stock price, regardless of our operating results.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        Not applicable.


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ITEM 2.    PROPERTIES

        We maintained twentytwenty-eight distribution centers at fiscal year endJuly 30, 2011 which were utilized by our wholesale division. These facilities, including offsite storage space, consisted of an aggregate of approximately 5.87.6 million square feet of storage space, which we believe represents the largest capacity of any distributor within the United States in the natural, organic and specialty products industry.

        Set forth below for each of our distribution facilities is its location and the date on which our lease will expireexpiration of leases as of July 30, 2011 for those distribution facilities that we do not own. We have granted the lenders under


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our term loan facility a mortgage on those of our facilities identified with an asterisk below, which have a combined appraised value of approximately $84.3 million.

Location
 Lease Expiration

Atlanta, Georgia

Georgia*
 Owned

Auburn, California

California*
 Owned

Auburn, Washington

 March 2009August 2019

Aurora, Colorado

 January 2013

Aurora, Colorado

July 2015
Bridgeport, New Jersey

Jersey*
 Owned

Burnaby, British Columbia

October 2013
Charlotte, North CarolinaSeptember 2019
Chesterfield, New Hampshire

Hampshire*
 Owned

Concord, Ontario

December 2014
Dayville, Connecticut

Connecticut*
 Owned

East Brunswick, New Jersey

Denver, Colorado
 March 2009October 2012

Fontana, California

 February 2012

Greenwood, Indiana

Indiana*
 Owned

Harrison, Arkansas

 Owned

Iowa City, Iowa

Iowa*
 Owned

Lancaster, Texas

July 2020
Leicester, Massachusetts

May 2013
Moreno Valley, CaliforniaJuly 2023
Mounds View, Minnesota November 20112015

Mounds View, Minnesota

November 2011

New Oxford, Pennsylvania

Pennsylvania*
 Owned

Philadelphia, Pennsylvania

 January 2014

Richmond, British Columbia

August 2022
Ridgefield, Washington

 Owned

Rocklin, California

California*
 Owned

Sarasota, Florida

 July 2017

Vernon, California

Scotstown, Quebec
 Owned
St. Laurent, QuebecAugust 2011
Vernon, CaliforniaOwned
York, PennsylvaniaMay 2020

        We lease facilities to operate thirteentwelve retail stores through our EOM division in Florida, Maryland and Massachusetts and one retail store through our UNFI Canada division, each with various lease expiration dates. We also lease a processing and manufacturing facility in Edison, New Jersey with a lease expiration date of March 31, 2010.2013.

        We lease office space in Santa Cruz, California, Danielson, Connecticut, Chesterfield, New Hampshire, and Uniondale, New York.York, Richmond, Virginia, and Providence, Rhode Island, the site of our corporate headquarters. Our leases have been entered into upon terms that we believe to be reasonable and customary. We own office space in Dayville, Connecticut.

        We also lease a warehouse facility in Minneapolis, Minnesota. Our operations were moved to thisMinnesota that we acquired in connection with our acquisition of Roots & Fruits Produce Cooperative in 2005. This facility fromis currently being subleased under an agreement that expires concurrently with our Mounds View, Minnesota facility in October 2005. The lease for the Minneapolis facility will expiretermination in November 2016.

        We lease the Moreno Valley, California warehouse facility that opened in September 2008 and the warehouse facility in York, Pennsylvania that is expected to open in January 2009. These leases expire in July 2023 and May 2020, respectively. We also lease offsite storage space in Aurora, Colorado.


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ITEM 3.    LEGAL PROCEEDINGS

        From time to time, we are involved in routine litigation that arises in the ordinary course of our business. There are no pending material legal proceedings to which we are a party or to which our property is subject.


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ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS(REMOVED AND RESERVED)

        There were no matters submitted to a vote of the security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended August 2, 2008.


Executive Officers of the Registrant

        Our executive officers are elected on an annual basis and serve at the discretion of our Board of Directors. Our executive officers and their ages as of September 25, 2008 are listed below:

Name
AgePosition

Daniel V. Atwood

50Executive Vice President, Chief Marketing Officer, President of Blue Marble Brands and Secretary

Michael Beaudry

44President of the Eastern Region

Thomas A. Dziki

47Vice President of Sustainable Development

Carl F. Koch III

40Vice President of Human Resources

Randle Lindberg

57President of the Western Region

Mark E. Shamber

39Vice President, Chief Financial Officer and Treasurer

Steven L. Spinner

48President and Chief Executive Officer

John Stern

41Chief Information Officer

Daniel V. Atwood has served as our Executive Vice President, Chief Marketing Officer and President of Blue Marble Brands since December 2005 and as our Secretary since January 1998. Mr. Atwood served as our Senior Vice President of Marketing from October 2002 until December 2005 and National Vice President of Marketing from April 2001 until October 2002. Mr. Atwood served on our Board of Directors from November 1996 until December 1997 and served on the Board of Directors of our predecessor company, Cornucopia Natural Foods, Inc., from August 1988 until October 1996. Mr. Atwood served as President of our subsidiary, NRG, from August 1995 until March 2001.

Michael Beaudry has served as President of the Eastern Region since January 2006. Mr. Beaudry served as our Vice President of Distribution from August 2003 until January 2006, Vice President of Operations, Eastern Region, from December 2002 until August 2003, as our Director of Operations from December 2001 until December 2002 and as the Warehouse/Operations Manager of our Dayville, Connecticut facility from December 1999 until December 2001. Prior to joining us, Mr. Beaudry held various management positions at Target Corporation.

Thomas A. Dziki has served as Vice President of Sustainable Development since March 2007. Mr. Dziki served as our National Vice President of Real Estate and Construction from August 2006 until March 2007, President of Hershey Imports and Select Nutrition from December 2004 until August 2006, Corporate Vice President of Special Projects from December 2003 to November 2004 and as our Manager of Special Projects from May 2002 to December 2003. Prior to joining us, Mr. Dziki served as a private consultant to our company, our subsidiaries, Hershey Imports, NRG, and Albert's Organics, and our predecessor company, Cornucopia Natural Foods, Inc., from 1995 to May 2002.

Carl F. Koch III has served as our Vice President of Human Resources since December 2007. Mr. Koch previously served as Vice President of Risk and Compliance from August 2006 until December 2007, as Director of Risk Management from June 2004 until August 2006 and as the Corporate Risk Manager from June 2001 until May 2004. Prior to joining us, Mr. Koch held various management positions at Liberty Mutual Group.

Randle Lindberg has served as our President of the Western Region since January 2006. From 1972 through January 2006, Mr. Lindberg served in various positions of increasing responsibility up to and including President and Chief Executive Officer of Nature's Best, Inc.


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Mark E. Shamber has served as Vice President, Chief Financial Officer and Treasurer since October 2006. Mr. Shamber previously served as our Vice President, Chief Accounting Officer and Acting Chief Financial Officer and Treasurer from January 2006 until October 2006, as Vice President and Corporate Controller from August 2005 to October 2006 and as our Corporate Controller from June 2003 until August 2005. From February 1995 until June 2003, Mr. Shamber served in various positions of increasing responsibility up to and including senior manager within the assurance and advisory business systems practice at the international accounting firm of Ernst & Young LLP.

Steven L. Spinner has served as our President and Chief Executive Officer and as a member of our Board of Directors since September 2008. Prior to joining the Company in September 2008, Mr. Spinner served as a director and as Chief Executive Officer of Performance Food Group Company ("PFG") from October 2006 to May 2008, when PFG was acquired by affiliates of The Blackstone Group and Wellspring Capital Management. Mr. Spinner previously had served as PFG's President and Chief Operating Officer beginning in May 2005. Mr. Spinner served as PFG's Senior Vice President and Chief Executive Officer—Broadline Division from February 2002 to May 2005 and as PFG's Broadline Division President from August 2001 to February 2002.

John Stern has served as our Chief Information Officer since January 2008. Prior to joining us, Mr. Stern served in various positions of increasing responsibility up to and including Chief Information Officer at Take Two Interactive Software Inc. from October 2003 to September 2007 and Deloitte & Touche LLP from December 1999 to October 2003.


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PART II.

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Our common stock is traded on the Nasdaq Global Select Market® under the symbol "UNFI." Our common stock began trading on the Nasdaq Stock Market® on November 1, 1996.

        The following table sets forth, for the fiscal periods indicated, the high and low sale prices per share of our common stock on the Nasdaq Global Select Market®:

Fiscal 2007
 High Low 

First Quarter

 $34.91 $28.70 

Second Quarter

  38.40  31.17 

Third Quarter

  35.05  28.10 

Fourth Quarter

  31.87  26.10 

Fiscal 2008
  
  
 

First Quarter

 $33.33 $24.10 

Second Quarter

  31.87  23.16 

Third Quarter

  25.17  15.60 

Fourth Quarter

  22.25  17.09 
Fiscal 2009
  
  
 

First Quarter (through September 25, 2008)

 $28.70 $16.57 
Fiscal 2011
 High Low 

First Quarter

 $37.48 $32.65 

Second Quarter

  39.85  34.78 

Third Quarter

  46.05  36.71 

Fourth Quarter

  45.34  39.52 

Fiscal 2010

       

First Quarter

 $28.28 $23.03 

Second Quarter

  29.35  23.29 

Third Quarter

  31.35  24.71 

Fourth Quarter

  35.12  28.92 

        On September 25, 2008,July 30, 2011, we had approximately 9092 stockholders of record. The number of record holders may not be representative of the number of beneficial holders of our common stock because depositories, brokers or other nominees hold many shares.

        We have never declared or paid any cash dividends on our capital stock. We anticipate that all of our earnings in the foreseeable future will be retained to finance the continued growth and development of our business and we have no current intention to pay cash dividends. Our future dividend policy will depend on our earnings, capital requirements and financial condition, requirements of the financing agreements to which we are then a party and other factors considered relevant by our Board of Directors. OurAdditionally, the terms of our existing revolving credit facility prohibits the declaration or payment ofrestrict us from making any cash dividends to our stockholders withoutunless certain conditions and financial tests are met.

        The following table provides information on shares repurchased by the written consent of the administrative agent under the facilityCompany during the termfourth quarter ended July 30, 2011. For the periods presented, the shares repurchased were withheld to cover certain employee tax withholding obligations on the vesting of the credit agreement and until all of our obligations under the credit agreement have been met.restricted stock awards.

Period
 Total Number
of Shares
Repurchased
 Average Price
Paid per Share
 Total Number of
Shares Purchased
as part of
Publicly
Announced
Plans or Programs
 Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plan
or Programs
 

May 1, 2011—June 4, 2011

         

June 5, 2011—July 2, 2011

         

July 3, 2011—July 30, 2011

  187 $41.58     
          

Total

  187 $41.58     

Comparative Stock Performance

        The graph below compares the cumulative total stockholder return on our common stock for the last five fiscal years with the cumulative total return on (i) an index of Food Service Distributors and Grocery Wholesalers and (ii) The NASDAQ Composite Index. The comparison assumes the investment


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of $100 on July 31, 200329, 2006 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends. The stock price performance shown below is not necessarily indicative of future performance.

        The index of Food Service Distributors and Grocery Wholesalers (referred to below as the "Peer Group") includes Nash Finch Company, SuperValu, Inc. and SYSCO Corporation. Performance Food Group Co.PFG was removed from the peer groupPeer Group in 2008 as it was acquiredfollowing its acquisition by another company.


Table        This performance graph shall not be deemed "soliciting material" or be deemed to be "filed" for purposes of ContentsSection 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of United Natural Foods, Inc. under the Securities Act of 1933, as amended, or the Exchange Act.


COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among United Natural Foods, Inc., the NASDAQ Composite Index
and Index of Food Distributors and Wholesalers


*
$100 invested on 7/29/06 in 7/3/03 stock & index-includingor on 7/31/06 in index, including reinvestment of dividends. NasdaqIndex calculated on month-end basis.

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ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

        The selected consolidated financial data presented below are derived from our consolidated financial statements, which have been audited by KPMG LLP, our independent registered public accounting firm. Certain prior year amounts have been reclassified to conform to the current year's presentation. The historical results are not necessarily indicative of results to be expected for any future period. The following selected consolidated financial data should be read in conjunction with and is qualified by reference to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K.

Consolidated Statement of Income Data:
 August 2,
2008
 July 28,
2007
 July 29,
2006
 July 31,
2005
 July 31,
2004
 
 
 (In thousands, except per share data)
 

Net sales

 $3,365,857 $2,754,280 $2,433,594 $2,059,568 $1,669,952 

Cost of sales

  2,731,965  2,244,702  1,967,684  1,664,523  1,339,496 
            

Gross profit

  633,892  509,578  465,910  395,045  330,456 

Operating expenses

  541,413  415,337  385,982  322,345  271,972 

Impairment on assets held for sale

    756       

Restructuring and asset impairment charges

        170   
            

Total operating expenses

  541,413  416,093  385,982  322,515  271,972 
            

Operating income

  92,479  93,485  79,928  72,530  58,484 

Other expense (income):

                

Interest expense

  16,133  12,089  11,210  6,568  7,265 

Interest income

  (768) (975) (297) (243) (151)

Other, net

  (82) 156  (381) (847) (1,066)
            

Total other expense

  15,283  11,270  10,532  5,478  6,048 
            

Income before income taxes

  77,196  82,215  69,396  67,052  52,436 

Provision for income taxes

  28,717  32,062  26,119  25,480  20,450 
            

Net income

 $48,479 $50,153 $43,277 $41,572 $31,986 
            

Per share data—Basic:

                

Net income

 
$

1.14
 
$

1.18
 
$

1.04
 
$

1.02
 
$

0.81
 
            

Weighted average basic shares of common stock

  42,690  42,445  41,682  40,639  39,471 
            

Per share data—Diluted:

                

Net income

 
$

1.13
 
$

1.17
 
$

1.02
 
$

1.00
 
$

0.78
 
            

Weighted average diluted shares of common stock

  42,855  42,786  42,304  41,607  41,025 
            

Consolidated Balance Sheet Data:
 August 2,
2008
 July 28,
2007
 July 29,
2006
 July 31,
2005
 July 31,
2004
 
 
 (In thousands)
 

Working capital

 $110,897 $216,518 $182,931 $119,385 $109,225 

Total assets

 $1,084,483  800,898  704,551  651,258  508,767 

Total long term debt and capital leases, excluding current portion

 $58,485  65,067  59,716  64,871  44,115 

Total stockholders' equity

 $480,050  426,795  363,474  295,519  234,929 
Consolidated Statement of Income Data:(1)
 July 30,
2011
 July 31,
2010
 August 1,
2009
 August 2,
2008
 July 28,
2007
 
 
  
  
  
 (53 weeks)
  
 
 
 (In thousands, except per share data)
 

Net sales

 $4,530,015 $3,757,139 $3,454,900 $3,365,857 $2,754,280 

Cost of sales

  3,705,205  3,060,208  2,794,419  2,731,965  2,244,702 
            

Gross profit

  824,810  696,931  660,481  633,892  509,578 

Operating expenses

  688,859  582,029  550,560  541,413  415,337 

Restructuring and asset impairment expense

  6,270        756 
            

Total operating expenses

  695,129  582,029  550,560  541,413  416,093 
            

Operating income

  129,681  114,902  109,921  92,479  93,485 

Other expense (income):

                

Interest expense

  5,000  5,845  9,914  16,133  12,089 

Interest income

  (1,226) (247) (450) (768) (975)

Other, net

  (528) (2,698) 275  (82) 156 
            

Total other expense

  3,246  2,900  9,739  15,283  11,270 
            

Income before income taxes

  126,435  112,002  100,182  77,196  82,215 

Provision for income taxes

  49,762  43,681  40,998  28,717  32,062 
            

Net income

 $76,673 $68,321 $59,184 $48,479 $50,153 
            

Per share data—Basic:

                

Net income

 $1.62 $1.58 $1.38 $1.14 $1.18 
            

Weighted average basic shares of common stock

  47,459  43,184  42,849  42,690  42,445 
            

Per share data—Diluted:

                

Net income

 $1.60 $1.57 $1.38 $1.13 $1.17 
            

Weighted average diluted shares of common stock

  47,815  43,425  42,993  42,855  42,786 
            

Consolidated Balance Sheet Data:
 July 30,
2011
 July 31,
2010
 August 1,
2009
 August 2,
2008
 July 28,
2007
 
 
 (In thousands)
 

Working capital

 $381,071 $194,190 $169,053 $110,897 $216,518 

Total assets

  1,400,988  1,250,799  1,058,550  1,084,483  800,898 

Total long term debt and capital leases, excluding current portion

  986  48,433  53,858  58,485  65,067 

Total stockholders' equity

 $869,667 $630,447 $544,472 $480,050 $426,795 

(1)
Includes the effect of acquisitions from the date of acquisition.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K.

Forward-Looking Statements

        This Annual Report on Form 10-K and the documents incorporated by reference in this Annual Report on Form 10-K contain forward-looking statements that involve substantial risks and uncertainties. In some cases you can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plans," "seek," "should," "will," and "would," or similar words. You should read statements that contain these words carefully because they discuss future expectations, contain projections of future results of operations or of financial positionpositions or state other "forward-looking" information. The

        Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. You are cautioned not to place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to:

        This list of risks and uncertainties, however, is only a summary of some of the most important factors listedand is not intended to be exhaustive. You should carefully review the risks described under "Part I. Item 1A. Risk Factors," as well as any other cautionary language in this Annual Report on Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in these forward-looking statements. You should be aware thatas the occurrence of theany of these events described under "Risk Factors" and elsewhere in this Annual Report on Form 10-K could have an adverse effect on our business, results of operationsoperation and financial position.

        Any forward-looking statements in this Annual Report on Form 10-K and the documents incorporated by reference in this Annual Report on Form 10-K are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements, possibly materially. We do not undertake to update any information in the foregoing reports until the effective date of our future reports required by applicable laws. Any projections of future results of operations should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. We may from time to time update these publicly announced projections, but we are not obligated to do so.condition.

Overview

        We believe we are athe leading national distributor based on sales of natural, organic and specialty foods and non-food products in the United States.States and Canada and that our twenty-eight distribution centers, representing approximately 7.6 million square feet of warehouse space, provide us with the


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largest capacity of any North American-based distributor in the natural, organic and specialty products industry. We carry more than 60,000 high-quality natural, organic and specialty foods and non-food products, consisting of national brand,brands, regional brand,brands, private label and master distribution products, in six product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements and sports nutrition, bulk and food service products and personal care items. We serve more than 17,000 customers23,000 customer locations primarily located across the United States and Canada, the majority of which can be classified into one of the following categories: independently owned natural products retailers;retailers, which include buying clubs; supernatural chains, which are comprisedconsist solely of large chainsWhole Foods Market; conventional supermarkets, which include mass market chains; and other which includes foodservice and international customers outside of natural foods supermarkets; and conventional supermarkets. Our other distribution channels include food service, international and buying clubs.Canada.

        Our operations are comprised of three principal operating divisions. These operating divisions are:


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        In recent years, our sales to existing and new customers have increased through the continued growth of the naturalorganic and organicnatural products industry in general;general, increased market share throughas a result of our high quality service and a broader product selection, including specialty products, and the acquisition of, or merger with, natural and specialty products distributors;distributors, the expansion of our existing distribution centers; the construction of new distribution centers; and the development of our own line of natural and organic branded products. Through these efforts, we believe that we have been able to broaden our geographic penetration, expand our customer base, enhance and diversify our product selections and increase our market share.

        We have been the primary distributor to Whole Foods Market, our largest customer, for more than 1013 years. In August 2007,Effective June 2, 2010, we amended our distribution agreement with Whole Foods Market and Wild Oats Markets completed their merger,to extend the term of the agreement for an additional seven years. Under the terms of the amended agreement, we will continue to serve as a result of which, Wild Oats Markets became a wholly-owned subsidiary ofthe primary wholesale natural grocery distributor to Whole Foods Market. We had servedMarket in its United States regions where we were serving as the primary distributor at the time of natural and organic foods and non-food products for Wild Oats Markets priorthe amendment. The amendment extended the expiration date of the agreement from September 25, 2013 to the merger, and our relationship withSeptember 25, 2020. On July 28, 2010, we announced that we had entered into an asset purchase agreement under which we agreed to acquire certain assets of Whole Foods Market expandedDistribution, Inc. previously used in their self distribution of non-perishables, and have undertaken to coverbecome the former Wild Oats Markets stores retained byprimary distributor in their Rocky Mountain and Southwest regions. This transaction was completed in late September in the case of the Southwest region and early October 2010 in the case of the Rocky Mountain region. We paid approximately $21.9 million in cash consideration to acquire the purchased assets. Following the closing of this transaction, we now serve as the primary distributor to Whole Foods Market followingin all of its regions in the merger. On a combined basis, and excluding sales to Wild Oats Markets' former Henry's and Sun Harvest store locations (which were sold byUnited States. Whole Foods Market to a subsidiary of Smart & Final Inc. on September 30, 2007), Whole Foods Market and Wild Oats Markets accounted for approximately 31.0%36% and 34.7%35% of our net sales for the years ended August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, respectively.


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        OnIn June 2010, we acquired the SDG assets of SunOpta through our wholly-owned subsidiary, UNFI Canada for cash consideration of $65.8 million. With the acquisition, we became the largest distributor of natural, organic and specialty foods, including kosher foods, in Canada. This was a strategic acquisition as UNFI Canada provides us with an immediate platform for growth in the Canadian market.

        In November 2, 2007, we acquired DHI and Millbrook for total cash consideration of $85.5 million, consisting of the $84.0 million purchase price and $1.5 million of related transaction fees, subject to certain adjustments set forth in the merger agreement. Our UNFI Specialty Distribution division is comprised of DHI and Millbrook. Our specialty distribution division operatestwo distribution centers located in Massachusetts New Jersey, and Arkansas with customers throughout the United States. Through our specialty distribution division's three distribution centers, which provide approximately 1.61.4 million square feet of warehouse space, we distributespace. We have now integrated specialty food items (including ethnic, kosher, gourmet, organicproducts and natural foods), health and beauty careorganic specialty non-food items and other non-food items.

into our broadline distribution centers across the country. We believe that thethis acquisition of DHI and Millbrook accomplishes several of our strategic objectives, including acceleratingaccelerated our expansion into a number of high-growth business segments and establishingestablished immediate market share in the fast-growing specialty foods market. Due to our expansion into specialty foods, we were awarded new business with a number of conventional supermarkets during fiscal 2010 and 2011, including our recently announced relationship with Safeway. We believe that Millbrook's customer basedistribution of these products enhances our conventional supermarket business channel and that the organizations'our complementary product lines continue to present opportunities for cross-selling.

        In orderOn June 9, 2011, we entered into an asset purchase agreement with L&R pursuant to which we have agreed to sell our conventional non-foods and general merchandise lines of business, including certain inventory related to this business. This divestiture will allow us to concentrate on our core business of the distribution of natural, organic, and specialty foods and products.

        To maintain our market leadership and improve our operating efficiencies, we seek to continually:


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        Our continued growth has created the need for expansion ofallowed us to expand our existing facilities and open new facilities to achieve maximumincreasing operating efficiencies and to assure adequate space for future needs.efficiencies. We have made significant capital expenditures and incurred considerable expenses in connection with the opening and expansion of our facilities, and we expect to continue to do so. In the past six years, we have invested over $175 million in distribution capacity and infrastructure improvements.facilities. We have increased our distribution capacity to approximately 5.87.6 million square feet. In August 2005, we expanded our Midwest operations by opening a 311,000 square foot distribution center in Greenwood, Indiana, which serves as a distribution hub for our customers in Illinois, Indiana, Ohio and other Midwest states. In October 2005, we opened our Rocklin, California distribution center and moved our Auburn, California operations to this facility. The Rocklin distribution center is 487,000 square feet in size and serves as a distribution hub for customers in California and surrounding states. Our new 237,000 square foot distribution center in Ridgefield, Washington commenced operations in December 2007 and serves as a regional distribution hub for customers in Portland, Oregon and other Northwest markets. We opened our Sarasota, Florida warehouse in the first quarter of fiscal 2008 in order to reduce the geographic area served by our Atlanta, Georgia facility, which we believe will contribute to lower transportation costs. Our new, 613,000597,000 square foot distribution center in Moreno Valley, California commenced operations in September 2008 and serves our customers in Southern California, Arizona, Southern Nevada, Southern Utah, and Hawaii. Finally, in April 2008, we announced plans to lease a new 675,000Our newly leased, 654,000 square foot distribution center in York, Pennsylvania, to servecommenced operations in January 2009, and replaced our New Oxford, Pennsylvania facility serving customers in New York, New Jersey, Pennsylvania, Delaware, Maryland, Ohio, Virginia, and West Virginia. Operations are scheduledIn April 2009, we successfully relocated our former DHI specialty distribution facility in East Brunswick, New Jersey into the York, Pennsylvania distribution center, creating our first fully integrated facility offering a full assortment of natural, organic, and specialty foods. In September 2009, we commenced operations of a new facility in Charlotte, North Carolina serving Albert's customers in North Carolina, South Carolina, Georgia, Tennessee and Virginia. In connection with the acquisition of the SDG assets in June 2010, we


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acquired five distribution facilities which provided nationwide presence in Canada with approximately 286,000 square feet of distribution space and the ability to commenceserve all major markets in January 2009.Canada. In September 2010, we commenced operations at a new facility in Lancaster, Texas, shipping to customers throughout the Southwestern United States, including Texas, Oklahoma, New Mexico, Arkansas and Louisiana. Finally, in October 2010 we assumed the operations at the former Whole Foods Market Distribution facility in Aurora, Colorado.

        Our net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also consist of amounts charged by us to customers for shipping and handling and fuel surcharges. The principal components of our cost of sales include the amounts paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to our distribution facilities. Cost of sales also includes amounts incurred by us at our manufacturing subsidiary, Hershey Imports,Woodstock Farms Manufacturing, for inbound transportation costs and depreciation for manufacturing equipment, andoffset by consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Our gross margin may not be comparable to other similar companies within our industry that may include all costs related to their distribution network in their costs of sales rather than as operating expenses. We include purchasing and outbound transportation expenses within our operating expenses rather than in our cost of sales. Total operating expenses include salaries and wages, employee benefits (including payments under our Employee Stock Ownership Plan), warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation, depreciation and amortization expense. Other expenses (income) include interest on our outstanding indebtedness, interest income and miscellaneous income and expenses.

Critical Accounting Policies and Estimates

        The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Securities and Exchange Commission has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results and require our most difficult, complex or subjective judgments or estimates. Based on this definition, we believe our critical accounting policies are: (i) determining our allowance for doubtful accounts, (ii) determining our reserves for the self-insured portions of our workers' compensation and automobile liabilities and (iii) valuing goodwill and intangible assets. For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies.


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        We analyze customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of our allowance for doubtful accounts. In instances where a reserve has been recorded for a particular customer, future sales to the customer are conducted using either cash-on-delivery terms, or the account is closely monitored so that as agreed upon payments are received, orders are released; a failure to pay results in held or cancelled orders. Our accounts receivable balance was $179.1$257.5 million and $160.3$217.1 million, net of the allowance for doubtful accounts of $5.5$4.5 million and $4.4$6.3 million, as of August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, respectively. Our notes receivable balances were $3.8$5.0 million and $4.5$3.3 million, net of the allowance offor doubtful accounts of $1.6$1.3 million and $1.6$1.4 million, as of August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, respectively.

        It is our policy to record the self-insured portions of our workers' compensation and automobile liabilities based upon actuarial methods of estimating the future cost of claims and related expenses


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that have been reported but not settled, and that have been incurred but not yet reported. Any projection of losses concerning workers' compensation and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting litigation trends, benefit level changes and claim settlement patterns. If actual claims incurred are greater than those anticipated, our reserves may be insufficient and additional costs could be recorded in our consolidated financial statements. Accruals for workers' compensation and automobile liabilities totaled $12.5$17.5 million and $8.5$15.9 million as of August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, respectively.

        Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," requires that companiesWe are required to test goodwill for impairment at least annually, and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have elected to perform our annual tests for indications of goodwill impairment during the fourth quarter of each fiscal year. Impairment lossesBased on future expected cash flows, we test for goodwill impairment at the reporting unit level. Our reporting units are at or one level below the operating segment level. The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit's estimated fair value to its carrying value, including goodwill. Each reporting unit regularly prepares discrete operating forecasts and uses these forecasts as the basis for the assumptions used in the discounted cash flow analysis. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is considered not to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment. If required, the second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated potential impairment. The implied fair value of goodwill is determined based uponin a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of carrying amounts over discounted expected future cash flowsthe estimated fair value of the underlying business. For reporting units that indicate potential impairment, we determineunit, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of thatgoodwill exceeds the carrying value of goodwill assigned to the reporting unit, usingthere is no impairment. If the carrying value of goodwill assigned to a discountedreporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess.

        During the first quarter of the 2011 fiscal year, we performed a test for goodwill impairment as a result of the expected change in future cash flow analysisflows for certain of our branded product lines, and compare such values to the respective reporting units' carrying amounts.determined that no impairment existed. As of August 2, 2008,July 30, 2011, our annual assessment of each of our reporting units indicated that no impairment of goodwill existed.existed as the fair value of each reporting unit exceeded its carrying value. Approximately 91% of our goodwill is within our wholesale reporting unit. For the wholesale reporting unit, the fair value was more than 50% in excess of its carrying value. The fair value of our remaining reporting units, including Blue Marble Brands, Woodstock Farms Manufacturing and EOM were more than 10% in excess of their carrying values, and are not considered at risk of failing the first step of the goodwill impairment test. We feel that these projected results are achievable, though these assumptions are based upon our current business model and may be negatively affected if we attempt to dispose of any of our brands, stores or facilities or substantially change how we market and sell our products. For all of our assessments, the weighted average cost of capital used in calculating the present value of future cash flows was 14.0%. Total goodwill as of August 2, 2008July 30, 2011 and July 28, 200731, 2010 was $170.6$191.9 million and $79.9$186.9 million, respectively.

        Intangible assets with indefinite lives are tested for impairment at least annually and between annual tests if events occur or circumstances change that would indicate that the value of the asset may be impaired. Impairment is measured as the difference between the fair value of the asset and its carrying value. ThereAs of our most recent annual impairment test, the fair value of our indefinite lived


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intangible assets was no impairmentin excess of their carrying value. The fair value of our indefinite-lived intangible assets related to our indefinite livedbranded product lines was more than 100% in excess of its carrying value. The fair value of our indefinite-lived intangible assets during 2008.related to our wholesale distribution business was also more than 100% in excess of its carrying value. The projections used in the impairment assessment for the branded product line asset group assume sales growth of approximately 10% per year, with gross margin and operating expenses which on average approximate current levels as a percentage of sales. The projections used in the impairment assessment for intangibles within the Canadian wholesale distribution business asset group assume sales growth of approximately 12% per year, with gross margin and operating expenses which on average approximate current levels as a percentage of sales. Total indefinite lived intangible assets as of August 2, 2008July 30, 2011 and July 28, 200731, 2010 were $25.9$28.9 million and $8.3$28.8 million, respectively.

        Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset's useful life based on updated projections. If the evaluation indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow model. There werehave been no indicatorsevents or changes in circumstances indicating that the carrying value of impairmentour finite-lived intangibles are not recoverable during 2008.2011. Total finite-lived intangible assets as of August 2, 2008July 30, 2011 and July 28, 200731, 2010 were $7.8$29.5 million and $0.3$21.4 million, respectively.

        The assessment of the recoverability of goodwill and intangible assets will be impacted if estimated future cash flows are not achieved.


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Results of Operations

        The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of net sales:

 
 Year ended 
 
 August 2,
2008
 July 28,
2007
 July 29,
2006
 

Net sales

  100.0% 100.0% 100.0%

Cost of sales

  81.2% 81.5% 80.9%
        
  

Gross profit

  18.8% 18.5% 19.1%
        

Operating expenses

  16.1% 15.1% 15.9%

Impairment on assets held for sale

  0.0% 0.0% 0.0%
        
  

Total operating expenses

  16.1% 15.1% 15.9%
        
  

Operating income

  2.7% 3.4% 3.3%
        

Other expense (income):

          
 

Interest expense

  0.5% 0.4% 0.5%
 

Interest income

  0.0% 0.0% 0.0%
 

Other, net

  0.0% 0.0% 0.0%
        
 

Total other expense

  0.5% 0.4% 0.4%*
        
 

Income before income taxes

  2.3%* 3.0% 2.9%

Provision for income taxes

  0.9% 1.2% 1.1%
     ��  
  

Net income

  1.4% 1.8% 1.8%
        


 
 Year ended 
 
 July 30,
2011
 July 31,
2010
 August 1,
2009
 

Net sales

  100.0% 100.0% 100.0%

Cost of sales

  81.8% 81.5% 80.9%
        
  

Gross profit

  18.2% 18.5% 19.1%
        

Operating expenses

  15.2% 15.4% 15.9%

Restructuring and asset impairment expenses

  0.1% 0.0% 0.0%
        
  

Total operating expenses

  15.3% 15.4% 15.9%
        
  

Operating income

  2.9% 3.1% 3.2%
        

Other expense (income):

          
 

Interest expense

  0.1% 0.2% 0.3%
 

Interest income

  0.0% 0.0% 0.0%
 

Other, net

  0.0% (0.1%) 0.0%
        
 

Total other expense

  0.1% 0.1% 0.3%
        
 

Income before income taxes

  2.8% 3.0% 2.9%

Provision for income taxes

  1.1% 1.2% 1.2%
        
  

Net income

  1.7% 1.8% 1.7%
        

*

Total reflects rounding


        Note: Our 2008 fiscal year included 53 weeksTable of operations while our 2007 and 2006 fiscal years included 52 weeks of operations.Contents

Year ended August 2, 2008 compared toFiscal year ended July 28, 200730, 2011 compared to fiscal year ended July 31, 2010

        Our net sales for the fiscal year ended July 30, 2011 increased approximately 22.2%20.6%, or $611.6$772.9 million, to $3.4 billion for the year ended August 2, 2008, from $2.8a record $4.5 billion for the year ended July 28, 2007.30, 2011 from $3.8 billion for the year ended July 31, 2010. This increase was primarily due to sales from our newly acquired UNFI Specialty Distribution business of $211.4 million as well as organic growth (sales growth excluding the impact of acquisitions) in our wholesale segment of $774.3 million, which includes the growth resulting from our entrance into the Canadian market in June 2010 and the expansion of our primary distribution division of $389.1 million, or 14.4%. Further, approximately 2% of the increaseagreement with Whole Foods Market in net sales was attributable to the extra week included in fiscal 2008.October 2010. Our organic growth is due to the continued growth of the natural products industry in general, increased market share as a result of our focus on service and value added value services, and the openingbreadth of new, and expansionour product selection. In addition, we believe that the integration of existing, distribution centers, which allowour specialty business has allowed us to carryattract customers that we would not have been able to attract without that business as many customers seek a broader selection ofsingle source for their natural, organic and specialty products. Our net sales for the fiscal year ended July 30, 2011 were also favorably impacted by moderate price inflation.

        In addition to net sales growth attributable to UNFI Specialty Distribution and our organic growth, we also benefited from the inclusion of $200.7 million in sales from UNFI Canada, which includes the SDG assets acquired during the fourth quarter of products we acquired from Organic Brands, LLC ("Organic Brands")fiscal 2010, and acquisitions of and other branded product lines during fiscal 2007 and fiscal 2008. However, these acquisitions impacted our cost of sales and gross profit more than they impacted our net sales.

        On a combined basis, and excludingapproximately $131.6 million in incremental sales to Henry's and Sun Harvest store locations, which were divested by Whole Foods Market following its merger with Wild Oats Markets,due to the acquisition of Whole Foods Market's Southwest and Rocky Mountain distribution business in the first quarter of fiscal 2011 and our expanded distribution agreement in October 2010.

        Our net sales by customer type for the years ended July 30, 2011 and July 31, 2010 were as follows (in millions):

Customer Type
 2011
Net Sales
 % of Total
Net Sales
 2010
Net Sales
 % of Total
Net Sales
 

Independently owned natural products retailers

 $1,693  37%$1,506  40%

Supernatural chains

 $1,627  36%$1,317  35%

Conventional supermarkets

 $991  22%$771  21%

Other

 $219  5%$163  4%
          

Total

 $4,530  100%$3,757  100%

        Net sales to our independent retailer channel increased by approximately $187 million, or 12.4% during the year ended July 30, 2011 compared to the year ended July 31, 2010. While net sales in this channel have increased, they have grown at a slower rate than net sales in our supernatural and conventional supermarket channels, and therefore represent a lower percentage of our total net sales compared to the prior year.

        Whole Foods Market is our only supernatural chain customer, and Wild Oats Marketsnet sales to Whole Foods Market for the year ended July 30, 2011 increased by approximately $310 million or 23.6% over the prior year and accounted for approximately 31.0%36% and 34.7%35% of our total net sales for the years ended July 30, 2011 and July 31, 2010, respectively. The increase in sales to Whole Foods Market is primarily due to the increases in same-store sales, as well as the expanded primary distribution agreement noted above.

        Net sales to conventional supermarkets for the year ended July 30, 2011 increased by approximately $220 million, or 28.5% from fiscal 2010 and represented approximately 22% of total net sales in fiscal 2011 compared to 21% in fiscal 2010. The increase in net sales to conventional supermarkets is primarily due to several large new customers won during the year based on our consolidated market strategy of natural, organic and specialty from one supplier, as well as $92.5 million of net sales to conventional supermarkets by UNFI Canada. With the addition of the Safeway business that we anticipate we will begin servicing in the first quarter of fiscal 2012, we expect


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that our sales to conventional supermarkets in fiscal 2012 will be a larger percentage of our total net sales than in fiscal 2011.

        Other net sales, which include sales to foodservice and sales from the United States to countries other than Canada, increased by approximately $56 million or 34.3% during the fiscal year ended August 2, 2008July 30, 2011 over the prior fiscal year and accounted for approximately 5% of total net sales in fiscal 2011 compared to 4% of total net sales for the fiscal year ended July 28, 2007, respectively.31, 2010.

        The Henry's and Sun Harvest locations divested bydecrease in sales percentage to the independent channel is the result of the higher growth rate in our supernatural chain as a result of an increase in Whole Foods Market remainbusiness, and in our customers.conventional supermarkets.

        The following table listsBeginning in the percentagesecond half of fiscal 2010, we began to see steady improvement in our net sales by customer typeand a reduction in the volatility of net sales, as compared to what we experienced throughout our 2009 fiscal year. As we continue to aggressively pursue new customers and as economic conditions continue to stabilize, we expect net sales for fiscal 2012 to further grow over fiscal 2011 in both our organic line and our specialty line. We believe that this projected sales growth will come from both sales to new customers and an increase in the years ended August 2, 2008number of products that we sell to existing customers. We also believe that food price inflation will contribute to our projected net sales growth in fiscal 2012. We expect that most of this sales growth will occur in our lower gross margin supernatural and July 28, 2007:

 
 Percentage of Net Sales 
Customer Type
 2008 2007 

Independently owned natural products retailers

  42% 45%

Supernatural chains

  31% 35%

Conventional supermarkets

  23% 16%

Other

  4% 4%

        Salesconventional supermarket channels. Although sales to Henry's and Sun Harvest store locationsthese customers typically generate lower gross margins than sales to customers within our independent retailer channel, they also typically carry a lower average cost to serve than sales to our independent customers. We believe that the integration of our specialty business into our national platform has allowed us to attract customers that we would not have been reclassified from our supernatural channel into our supermarket channel in both fiscal years 2008 and 2007able to attract without that business and will continue in this classification going forward. This reclassification resulted in an increase in sales in the supermarket channelto allow us to pursue a broader array of 1.7%customers as many customers seek a single source for their natural, organic and a decrease in sales in the supernatural channel of 1.7% for the year ended July 28, 2007. In addition, sales by channel have been adjusted to reflect changes in customer types resulting from a review of our customer lists. As a result of this adjustment, sales to the independents sales channel increased 0.9% for the year ended July 28, 2007 and sales to the supermarket sales channel decreased 0.9% for the year ended July 28, 2007. The overall decrease in sales to the independents and supernatural channels and the increase in sales to the supermarket channel was primarily due to the acquisition of Millbrook in November 2007, as our specialty distribution division primarily distributes to the supermarket channel.products.

        Our gross profit increased approximately 24.4%18.3%, or $124.3$127.9 million, to $633.9 million for the year ended August 2, 2008, from $509.6$824.8 million for the year ended July 28, 2007.30, 2011, from $696.9 million for the year ended July 31, 2010. Our gross profit as a percentage of net sales was 18.8%18.2% for the year ended August 2, 2008July 30, 2011 and 18.5% for the year ended July 28, 2007. Gross31, 2010. The change in gross profit as a percentage of net sales is primarily due to the change in the mix of net sales by channel that began during the second fiscal quarter of 2010 and start up costs related to inventory issues and incremental freight and service costs incurred during the first half of fiscal 2011 in connection with the initial period of operations of our new Lancaster, Texas distribution facility, partially offset by higher fuel surcharge revenue during the year ended August 2, 2008 was positively impacted byJuly 30, 2011.

        Our gross profits are generally higher on net sales fromto independently owned retailers and lower on net sales in the UNFI Specialty Distribution businessconventional supermarket and sales of our branded product lines. We worked to take advantage of forward buying opportunities duringthe supernatural channels. For the year ended August 2, 2008July 30, 2011 approximately $530 million of our total net sales growth was from increased net sales in orderthe conventional supermarket and supernatural channels, while net sales growth from the independent and other channels was approximately $243 million. As a result, approximately 58% of our total net sales in fiscal 2011 were to improve UNFI Specialty Distribution'sthe conventional supermarket and supernatural channels compared to approximately 56% in fiscal 2010. This change in sales mix from 2010 to 2011 resulted in lower gross margin.profits as a percentage of sales during fiscal 2011. We anticipate net sales growth in the conventional supermarket and supernatural channels will continue to outpace growth in the independent and other channels.

        We expect UNFI Specialty Distribution's full servicethat our expansion with Whole Foods Market, both as a result of organic growth and as a result of becoming their primary distributor in their Rocky Mountain and Southwest regions, and our opportunities in the conventional supermarket model,channel will continue to generate a higherlower gross margin overprofit percentages than our historical rates, particularly during the long-termtime period when we are on-boarding the new business and incurring costs of hiring and training additional associates and increasing inventory levels before the new customer has reached expected purchasing levels. We will seek to fully offset


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these reductions in gross profit percentages by reducing our core distribution business; however, we also expect to incur higher operating expenses in providing those services. Under this model, we provide services typically performed by supermarket employees to our customers, such as stocking shelves, placing sales orders and rotating out damaged and expired products. We continue to focus on increasing our branded product revenues, which we believe will allow us to generate higher gross margins over the long-term, as branded product revenues generally yield higher margins.

        Gross profit as a percentage of net sales during the year ended July 28, 2007 was negatively impacted by missed forward buying opportunities, the full year effect of new customer agreements, $0.5 million of spoilage issues related to certain inventory of Albert's, and $1.9 million of incremental inventory adjustmentsprimarily through improved efficiencies in our broadline distribution business; partially offset by increases in rates within our fuel surcharge program, which passessupply chain and improvements to our customers the increased fuel costs associated with distributing our products to customers.information technology infrastructure.

        Our total operating expenses increased approximately 30.1%19.4%, or $125.3$113.1 million, to $541.4 million for the year ended August 2, 2008, from $416.1$695.1 million for the year ended July 28, 2007.30, 2011, from $582.0 million for the year ended July 31, 2010. The increase


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in total operating expenses for the year ended August 2, 2008July 30, 2011 was primarily due to increases in infrastructure, fuelhigher sales volume including sales through our UNFI Canada subsidiary, $4.4 million of labor and other distribution expenses associated with the September 2010 opening of our Lancaster, Texas facility and incremental start up inefficiencies which continued through January 2011, $0.6 million for severance payments for former executives and $6.3 million in restructuring and asset impairment charges associated with our wholesale division to supportongoing divestiture of our sales growthconventional non-foods and general merchandise lines of approximately $31.2business.

        Unallocated corporate expenses have increased $2.0 million and a $60.1 million increase in operating expenses as a result of the Millbrook acquisition. We have been able to partially offset the effect of rising fuel prices by increasing delivery sizes, improving route design and by opening new facilities which reduce the total distance traveled to customers. We also incurred higher operating expenses during the year ended August 2, 2008 relatedJuly 30, 2011 compared to our branded product lines, as we have built our infrastructurethe year ended July 31, 2010, primarily due to support anticipated new business,the continued development of a national platform across many functional areas including warehouse management, inbound logistics and $6.3 million in labor and start-up expenses related to our new distribution facilities in Sarasota, Florida, Ridgefield, Washington, Moreno Valley, California and York, Pennsylvania.category management.

        Total operating expenses for the year ended July 28, 2007 included a loss of $1.5 million related to the sale of one of our Auburn, California facilities, $1.1 million of incremental and redundant costs incurred in connection with the start up of our Sarasota, Florida facility, $1.0 million of costs to transition our expanded relationship with Whole Foods Market in the Southern Pacific region of the United States to our facility located in Fontana, California, an impairment charge of $0.8 million related to the reclassification of the remaining Auburn, California facility to held-for-sale and $0.5 million of increased expense related to our fuel hedging program. The last of our fuel hedges expired in June 2007 and we have not entered into any fuel hedges in fiscal 2008. Total operating expenses for fiscal 2008 includes2011 include share-based compensation expense of $4.7$9.2 million, compared to $4.0$8.1 million in fiscal 2007.2010. Share-based compensation expense for the years ended July 30, 2011 and July 31, 2010 includes approximately $0.7 million and $1.0 million, respectively, in expense related to the vesting of performance share-based awards granted to our Chief Executive Officer related to certain financial goals for those various periods ended July 30, 2011 and July 31, 2010. See Note 3 "Stock Option"Equity Plans" to our Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

        As a percentage of net sales, total operating expenses increaseddecreased to approximately 16.1% for the year ended August 2, 2008, from approximately 15.1%15.3% for the year ended July 28, 2007.30, 2011, from approximately 15.5% for the year ended July 31, 2010. The increasedecrease in total operating expenses as a percentage of net sales was primarily attributable to our acquisition of Millbrook,the growth in the supernatural and conventional supermarket channels which has higherin general have lower operating expenses, due to the additional in store services provided to supermarket customers, $6.3 million in labor and start-up expenses related to our new distribution facilities in Sarasota, Florida, Ridgefield, Washington, Moreno Valley, California and York, Pennsylvania as well as expense control programs across all of our divisions. We were able to manage our fuel costs despite rising prices by locking in the price of a portion of our expected fuel usage, updating and revising existing routes to reduce miles traveled, reducing idle times and other similar measures. Our expansion into Lancaster, Texas, where our new leased facility began servicing customers in late September 2010, has helped to further reduce our fuel costs as a percentage of net sales as we are able to reduce the number of miles traveled to serve our customers in Texas, Oklahoma, New Mexico, Arkansas and Louisiana who were previously primarily served from our facility in Denver, Colorado. These improvements in our operating inefficiencies related toexpenses were offset in part by higher health insurance costs, higher workers' compensation costs and the recent opening of the Sarasota, Florida and Ridgefield, Washington facilities, and our investment in infrastructure for our branded product lines.above described higher incentive compensation costs. We expect that the opening of new facilitieswe will contribute efficiencies and lead to lower operating expenses related to sales over the long-term. As noted above, however, we expectbe able to continue to incurreduce our operating expenses higher thanas we historically have experienced ascontinue the roll out of our supply chain initiatives including a resultnational warehouse management and procurement system which was launched in the new Lancaster, Texas facility and is expected to be rolled out in all of UNFI Specialty Distribution's full service supermarket model.our distribution centers by the end of 2013.

        Operating income decreasedincreased approximately 1.1%12.9%, or $1.0$14.8 million, to $92.5 million for the year ended August 2, 2008, from $93.5$129.7 million for the year ended July 28, 2007.30, 2011, from $114.9 million for the year ended July 31, 2010. As a percentage of net sales, operating income was 2.7% for the year ended August 2, 2008 compared to 3.4%2.9% for the year ended July 28, 2007.30, 2011 compared to 3.1% for the year ended July 31, 2010. The decrease in operating income is primarily attributable to the increase in total


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operating expenses during fiscal 2011, including the $6.3 million recognized for restructuring and asset impairment expenses, compared to fiscal 2010.

        Other expense (income) increased $4.0$0.3 million to $15.3 million for the year ended August 2, 2008, from $11.3$3.2 million for the year ended July 28, 2007.30, 2011, from $2.9 million for the year ended July 31, 2010. Interest expense for the year ended August 2, 2008 increasedJuly 30, 2011 decreased to $16.1$5.0 million from $12.1$5.8 million in the year ended July 28, 2007.31, 2010. The increasedecrease in interest expense was due primarily to the increase inlower average debt levels required to fund our acquisitions of DHI and Millbrook and three branded product companies. Debt levels also increased forduring the year ended August 2, 2008 compared to the year ended July 28, 2007 as we used a result of UNFI Specialty Distribution's working capital needs and increased inventory levels in preparation for the openingportion of the Sarasota,


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Florida and Ridgefield, Washington facilities$138.3 million in proceeds from our secondary public offering completed in October 2010 to pay down our debt balances which had increased significantly in the first and second quartersfourth quarter of fiscal 2008, respectively, and capital expenditures related2010 as we financed our purchase of the SDG assets from SunOpta with borrowings under our revolving credit facility. In connection with the expected purchase of the SDG assets, we entered into a forward contract to swap United States dollars for Canadian dollars. During the future openingfourth quarter of our Moreno Valley, California and York, Pennsylvania facilities.fiscal 2010, we recognized a gain of $2.8 million, which was recorded in other income, upon settlement of the contract. Interest income for the year ended August 2, 2008 decreasedJuly 30, 2011 increased to $0.8$1.2 million from $1.0$0.2 million in the year ended July 28, 2007.31, 2010, primarily as a result of higher average cash balances during the year.

        Our effective income tax rate was 37.2%39.4% and 39.0% for the years ended August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, respectively. The decreaseincrease in the effective income tax rate for the year ended August 2, 2008 wasJuly 30, 2011 is primarily due to anticipatedincreases in effective state tax credits associated with the solar panel installation projects at our Rocklin, California and Dayville, Connecticut distribution facilities. This decrease was offset by an increase in ourrates. Our effective income tax rate due to the acquisition of DHI and Millbrook. Our effective income tax ratein both fiscal years was also affected by share-based compensation for incentive stock options and the timing of disqualifying dispositions of certain share-based compensation awards. Certain incentive stock option expenses are not deductible for tax purposes untilunless a disqualifying disposition occurs. A disqualifying disposition occurs when the option holder sells shares within one year of exercising an incentive stock option.option and within two years of original grant. We receive a tax benefit in the period that the disqualifying disposition occurs. Our effective income tax rate will continue to be effected by the tax impact related to incentive stock options and the timing of tax benefits related to disqualifying dispositions. In fiscal 20092012, we expect our effective tax rate to be in the range of 39.5%39.0% to 40.0%.

        NetReflecting the factors described in more detail above, net income decreased $1.7increased $8.4 million to $48.5$76.7 million, or $1.13 per diluted share, for the year ended August 2, 2008, compared to $50.2 million, or $1.17$1.60 per diluted share, for the year ended July 28, 2007.

Year ended July 28, 200730, 2011, compared to $68.3 million, or $1.57 per diluted share on a lower share base, for the year ended July 29, 200631, 2010.

Fiscal year ended July 31, 2010 compared to fiscal year ended August 1, 2009

        Our net sales for the fiscal year ended July 31, 2010 increased approximately 13.2%8.7%, or $320.7$302.2 million, to $2.75$3.8 billion for the year ended July 28, 2007,31, 2010 from $2.43$3.5 billion for the year ended July 29, 2006.August 1, 2009. This increase was primarily due to organic growth (growth(sales growth excluding the impact of acquisitions) in our wholesale distribution division of $317.5 million or 13.3%.$283.3 million. Our organic growth is due to the continued growth of the natural products industry in general, increased market share as a result of our focus on service and value added value services, and the opening of new, and expansion of existing, distribution centers, which allow us to carry a broader selection of products, and approximately 2.0%products. In addition to net sales growth as a result of our expanded relationship with Whole Foods Market in the Southern Pacific region of the United States. In additionattributable to our organic growth, we also benefited from the inclusion of $22.1 million in sales related tofrom our acquisition of certain assetsUNFI Canada during the fourth quarter of Organic Brandsfiscal 2010. Our improvement in April 2007 and our acquisitions of other branded product lines; however, these acquisitions impacted our cost of sales and gross profit more than they impacted our net sales.

        In the years ended July 28, 2007 and July 29, 2006, sales to Whole Foods Market and Wild Oats Markets were approximately 34.7% and 34.1% of net sales respectively.also reflected year over year improvement in sales of our specialty products, which had been negatively affected by the difficult economic environment present throughout our 2009 fiscal year.


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        The following table lists the percentage ofOur net sales by customer type for the years ended July 28, 200731, 2010 and July 29, 2006:August 1, 2009 were as follows (in millions):

 
 Percentage of Net Sales 
Customer Type
 2007 2006 

Independently owned natural products retailers

  45% 47%

Supernatural chains

  35% 34%

Conventional supermarkets

  16% 15%

Other

  4% 4%

Customer Type
 2010
Net Sales
 % of Total
Net Sales
 2009
Net Sales
 % of Total
Net Sales
 

Independently owned natural products retailers

 $1,506  40%$1,445  42%

Supernatural chains

 $1,317  35%$1,143  33%

Conventional supermarkets

 $771  21%$691  20%

Other

 $163  4%$176  5%
          

Total

 $3,757  100%$3,455  100%

        SalesNet sales to Henry's and Sun Harvest store locations have been reclassified from our supernatural channel into our supermarket channel in bothWhole Foods Market for the current and prior year and will continue in this classification going forward. This reclassification resulted in an increase in sales in the supermarket channel and a decrease in sales in the supernatural channel of 1.7% for each of the years ended July 28, 200731, 2010 increased by approximately $174 million or 15.2% and July 29, 2006. In addition, sales by channel have been adjusted to reflect changes in customer types resulting from a reviewaccounted for approximately 35% and 33% of our customer lists. As a result of this adjustment,total net sales to the independents sales channel increased and sales to the supermarket sales channel decreased 0.9% and 0.4% for the years ended July 28, 200731, 2010 and August 1, 2009, respectively. Whole Foods Market is our only supernatural chain customer following its acquisition of Wild Oats Markets in August 2007. The increase in sales to Whole Foods Market was primarily due to increases in same-store sales.

        Net sales to conventional supermarkets for the year ended July 29, 2006, respectively.31, 2010 increased by approximately $80 million, or 11.7% from fiscal 2009 and represented approximately 21% of total net sales in fiscal 2010 compared to 20% in fiscal 2009. The increase in net sales to conventional supermarkets was primarily due to several large new customers won during the year based on our consolidated market strategy of natural, organic and specialty from one supplier, as well as $10.2 million of net sales to conventional supermarkets by UNFI Canada.

        Net sales to our independent retailer channel increased by $61 million, or 4.2% during the year ended July 31, 2010 compared to the year ended August 1, 2009. While net sales in this channel has increased, they have grown at a slower rate than net sales in our supernatural and conventional supermarket channels, and therefore represent a lower percentage of our total net sales.

        Other net sales, which include sales to foodservice and countries other than Canada, decreased by approximately $13 million or 7.4% during the year ended July 31, 2010 and accounted for approximately 4% of total net sales compared to 5% of total net sales for the year ended August 1, 2009.

        The decrease in sales percentage to the independent channel was the result of the higher growth rate in our supernatural stores; as a result of an increase in Whole Foods Market business, and in our conventional supermarkets.

        Our gross profit increased approximately 9.4%5.5%, or $43.7$36.4 million, to $509.6$696.9 million for the year ended July 28, 2007,31, 2010, from $465.9$660.5 million for the year ended July 29, 2006.August 1, 2009. Our gross profit as a percentage of net sales was 18.5% for the year ended July 28, 200731, 2010 and 19.1% for the year ended July 29, 2006.August 1, 2009. The declinechange in gross profit as a percentage of net sales was driven by missed forward buying opportunities of approximately $1.9 millionprimarily due to our focus on our expanded Whole Foods Market relationshipthe change in the Southern Pacific regionmix of net sales by channel during 2010 compared to 2009. In addition, gross profit as a percentage of net sales during the United States, which we commencedyear ended August 1, 2009 was positively impacted by fuel surcharge revenues and sales of our branded product lines.

        Our gross profits are generally higher on net sales to independently owned retailers and lower on net sales in January 2007; the fullconventional supermarket and the supernatural channels. For the year effect of new customer agreements; $0.5ended July 31, 2010 approximately $255 million of spoilage issues relatedour total net sales growth was from increased net sales in the conventional supermarket and supernatural channels, while net sales growth from the independent and other channels was approximately $47 million. As a result, approximately 56% of our total net sales in


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fiscal 2010 were to certain inventory at our Albert's Organics division;the conventional supermarket and $1.9 millionsupernatural channels compared to approximately 53% in fiscal 2009. This change in sales mix from 2009 to 2010 resulted in lower gross profits as a percentage of incremental inventory adjustments within our broadline distribution business; partially offset by increases in rates within our fuel surcharge program, which passes to our customers the increased fuel costs associated with distributing our products to customers.sales during 2010.

        Our total operating expenses increased approximately 7.8%5.7%, or $30.1$31.4 million, to $416.1$582.0 million for the year ended July 28, 2007,31, 2010, from $386.0$550.6 million for the year ended July 29, 2006.August 1, 2009. The increase in total operating expenses for the year ended July 28, 200731, 2010 was primarily due to increaseshigher sales volume along with ramp-up costs for on-boarding of certain new customers. Our operating expenses in infrastructure and personnel costs within our wholesale divisionfiscal 2010 also include approximately $5.2 million in operating expenses for UNFI Canada since the date of $19.9 million to support our continued sales growth; a $3.2 million increaseacquisition as well as approximately $1.0 in fuel costs; increased health insurancetransaction expenses of approximately $4.9 million; increased depreciation expense of approximately $1.2 million; a loss of $1.5 milliondirectly related to the sale of one of our Auburn, California facilities; $1.1 million of incremental and redundant costs incurred in connection with the start up of our Sarasota, Florida facility; and $1.0 million of costs to transition the expanded relationship with Whole Foods Market in the Southern Pacific regionacquisition of the United States to our facility located in Fontana, California, all recorded during the year ended July 28, 2007. These increases were partially offset by reductions of $1.3 million in bad debt expense. TotalSDG assets from SunOpta. In addition, operating expenses for the year ended July 29, 2006 included $2.531, 2010 include severance charges of $0.7 million related to the departure of two former senior officers, expenses incurredof $1.3 million related to the closing of an underperforming retail location, an adjustment of $0.8 million to workers' compensation expense related to a prior year's acquisition, higher share-based compensation expenses, increases to health insurance expense and $1.8 million in connection withlabor and other start-up expenses related to our new distribution facility in Lancaster, Texas which became fully operational in fiscal 2011. These increases were partially offset by on-going cost control measures and lower bad debt expenses in the employment transition agreement entered intocurrent year of $1.1 million compared to $4.8 million for the prior year.

        Unallocated corporate expenses increased $15.4 million during the first quarteryear ended July 31, 2010 compared to the year ended August 1, 2009, primarily due to the continued development of fiscal 2006 with our former President and Chief Executive Officer, nota national platform across many functional areas including the effect of share-based compensation discussed below, and $0.9 million of incremental and redundant costs incurred in connection with the transition from our former warehouses and outside storage facility in Auburn, California into our new facility in Rocklin, California.warehouse management.

        Total operating expenses for the year ended July 28, 2007 includes share-


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basedfiscal 2010 include share-based compensation expense of $4.0$8.1 million, compared to $5.5 million in fiscal 2009. Share-based compensation expense for the year ended July 29, 2006. The $5.531, 2010 includes approximately $1.0 million of share-based compensationin expense recorded in the year ended July 29, 2006 included $1.0 million related to the accelerated vesting of certain stock options pursuanta performance share-based award granted to the employment transition agreement entered into during the first quarter of fiscal 2006 with our former President and Chief Executive Officer.Officer in November of 2008 related to certain financial goals for the period ended July 31, 2010. See Note 3 "Equity Plans" to our Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

        As a percentage of net sales, total operating expenses decreased to approximately 15.1%15.4% for the year ended July 28, 2007,31, 2010, from approximately 15.9% for the year ended July 29, 2006.August 1, 2009. The decrease in total operating expenses as a percentage of net sales was primarily attributable to further leveraging our fixed operating costs due to our increased sales, improved operationsthe growth in our Select Nutrition divisionthe supernatural and increased efficiencies due to our recent distribution facility openings, offset by operating losses related to the Albert's Organics Greenwood, Indiana location (which operations were transferred to the Albert's Organics Minneapolis, Minnesota facility effective October 31, 2006). We expect these efficiencies to continue toconventional supermarket channels which in general have lower operating expenses, relativeas well as expense control programs across all of our divisions. We were able to sales overmanage our fuel costs despite rising prices by locking in the long-term.price of a portion of our expected fuel usage, updating and revising existing routes to reduce miles traveled, reducing idle times and other similar measures. During the year ended August 1, 2009, we incurred $7.2 million in labor, lease termination, and start-up expenses related to our then new distribution facilities in Moreno Valley, California and York, Pennsylvania and the closing of our East Brunswick, New Jersey facility.

        Operating income increased approximately 17.0%4.5%, or $13.6$5.0 million, to $93.5$114.9 million for the year ended July 28, 2007,31, 2010, from $79.9$109.9 million for the year ended July 29, 2006.August 1, 2009. As a percentage of net sales, operating income was 3.4%3.1% for the year ended July 28, 200731, 2010 compared to 3.3%3.2% for the year ended July 29, 2006.August 1, 2009. The increase in operating income was attributable to the decrease in total operating expenses as a percentage of net sales during 2010 compared to 2009, offset by the decrease in gross profit as a percentage of net sales over the same period.


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        Other expense (income) increased $0.7decreased $6.8 million to $11.3$2.9 million for the year ended July 28, 2007,31, 2010, from $10.5$9.7 million for the year ended July 29, 2006.August 1, 2009. Interest expense for the year ended July 28, 2007 increased31, 2010 decreased to $12.1$5.8 million from $11.2$9.9 million in the year ended July 29, 2006.August 1, 2009. The increasedecrease in interest expense was due primarily due to an increaselower average debt levels during the year as we managed our inventory balances, as well as the decrease in interest rates in 2010 compared to 2009. While average debt levels were lower in fiscal 2010 when compared to fiscal 2009, our effective interest rate.debt level increased significantly in the fourth quarter of fiscal 2010 as we financed our purchase of the SDG assets from SunOpta with borrowings under our revolving credit facility. In connection with the expected purchase of the SDG assets, we entered into a forward contract to swap United States dollars for Canadian dollars. During the fourth quarter of the fiscal year ended July 31, 2010, we recognized a gain of $2.8 million, which was recorded in other income, upon settlement of the contract. Interest income for the year ended July 28, 2007 increased31, 2010 decreased to $1.0$0.2 million from $0.3$0.5 million in the year ended July 29, 2006. The increase in interest income was due to higher average cash levels during the year ended July 28, 2007 than during the year ended July 29, 2006.August 1, 2009.

        Our effective income tax rate was 39.0% and 37.6%40.9% for the years ended July 28, 200731, 2010 and August 1, 2009, respectively. The decrease in the effective income tax rate for the year ended July 29, 2006, respectively. This31, 2010 from the prior year was primarily due to tax credits associated with the installation of hydrogen powered lift trucks in our Sarasota, Florida facility. The increase in the effective income tax rate relatesfor the year ended August 1, 2009 was primarily due to our utilization of certain net operating loss carryforwards duringincreases in state taxes. Our effective income tax rate in both fiscal 2006 as well asyears was also affected by share-based compensation for incentive stock options becauseand the timing of disqualifying dispositions of certain share-based compensation awards. Certain incentive stock option expenses are not deductible for tax purposes untilunless a disqualifying disposition occurs. A disqualifying disposition occurs when the option holder sells shares within one year of exercising an incentive stock option.option and within two years of original grant. We receive a tax benefit in the period that the disqualifying disposition occurs. Our effective income tax rate will continue to be affected by the tax impact related to incentive stock options and the timing of tax benefits related to disqualifying dispositions.

        NetReflecting the factors described in more detail above, net income increased $6.9$9.1 million to $50.2$68.3 million, or $1.17$1.57 per diluted share, for the year ended July 28, 2007,31, 2010, compared to $43.3$59.2 million, or $1.02$1.38 per diluted share, for the year ended July 29, 2006.August 1, 2009.

Liquidity and Capital Resources

        In October 2010, we completed a secondary public offering of our common stock. As a result, 4,427,500 shares of common stock, including shares issued to cover the underwriters' overallotment option, were issued at a price of $33.00 per share. The net proceeds of approximately $138.3 million were used to repay a portion of our outstanding borrowings under our revolving credit facility.

We finance our day to day operations and growth primarily with cash flows from operations, borrowings under our credit facility, operating leases, trade payables and bank indebtedness. FromIn addition, from time to time,


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depending on our capital needs and market conditions, we may also sellissue equity and debt securities to finance our operations and growth.acquisitions. We believe that our cash on hand and available credit through our current revolving credit facility as discussed below is sufficient for our operations and planned capital expenditures over the next twelve months. We expect to generate an average of $75 million to $110 million in cash flow from operations per year for the 2012 and 2013 fiscal years. We intend to continue to utilize this cash generated from operations to pay down our debt levels, and fund working capital and capital expenditure needs. We intend to manage capital expenditures to no more than approximately 1% of net sales for the 2012 and 2013 fiscal years. We plan to assess our existing revolving credit facility and our financing needs once the facility draws closer to its November 2012 maturity date.


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        On April 30, 2004, we entered into an amended and restated four-year $250We are a party to a $400 million revolving credit facility, secured by, among other things, our accounts receivable, inventory and general intangibles, with a bank group that was led by Bank of America Business Capital as the administrative agent. The credit facility replaced an existing $150 million revolving credit facility. The terms and conditions of our amended and restated credit facility provide us with more financial and operational flexibility, reduced costs and increased liquidity than did our prior credit facility. We amended this facility effective as of January 1, 2006, reducing the rate at which interest accrues on LIBOR borrowings from one-month LIBOR plus 0.90% to one-month LIBOR plus 0.75%.

        On November 2, 2007, we amended our $250 million revolving credit facility to temporarily increase the maximum borrowing base under the credit facility from $250 million to $270 million. We used the funds available to us as a result of this amendment to fund a portion of the purchase price for our acquisition of DHI and Millbrook.

        On November 27, 2007, we amended our $270 million revolving credit facility to increase the maximum borrowing base under the credit facility from $270 million to $400 million. This amendment also provides the Company with a one-time option, subject to approval by the lenders under the revolving credit facility, to increase the borrowing base by up to an additional $50 million. Interest accrues on borrowings under the revolving credit facility, at our option, at either the base rate (the applicable prime lending rate of Bank of America Business Capital, as announced from time to time) or at one-month LIBOR plus 0.75%. The $400 million credit facility matures on November 27, 2012. The revolving credit facility supports our working capital requirements in the ordinary course of business and provides capital to grow our business organically or through acquisitions. Our borrowing base is determined as the lesser of (1) $400 million or (2) the fixed percentages of our previous fiscal month-end eligible accounts receivable and inventory levels. As of August 2, 2008,July 30, 2011, our borrowing base, which was calculated based on our eligible accounts receivable and inventory levels, was $370.9$400.0 million. As of July 30, 2011, we had $115.0 million withoutstanding under our revolving credit facility, $21.7 in letter of credit commitments and $1.3 million in reserves which reduces our available borrowing capacity under our revolving credit facility on a dollar for dollar basis. Our resulting remaining availability was $262.0 million as of $65.0 million.July 30, 2011.

        In April 2003, we executedWe are a party to a term loan agreement in the principal amount of $30$75 million secured by thecertain real property that was released from the lien under our former $150 million revolving credit facility in accordance with an amendment to the loan and security agreement related to that facility.property. The $30 million term loan is repayable over seven years based on a fifteen-year amortization schedule.schedule, maturing on July 28, 2012. Interest on the term loan accruedaccrues at one-month LIBOR plus 1.50%. In December 2003, we amended this term loan agreement by increasing the principal amount from $30 million to $40 million under the existing terms and conditions. On July 29, 2005, we entered into an amended term loan agreement which further increased the principal amount of this term loan from $40 million to up to $75 million and decreased the rate at which interest accrues to one-month LIBOR plus 1.00%. In connection with the amendments to our revolving credit facility described above, effective November 2, 2007 and November 27, 2007, we amended the term loan agreement to conform certain terms and conditions to the corresponding terms and conditions under our revolving credit facility. As of August 2, 2008, $61.2July 30, 2011, $47.1 million was outstanding under the term loan agreement.

        On June 4, 2008, we further amended our revolving credit facility and our term loan agreement, effective as of May 28, 2008, in order to (i) waive events of default as a result of our noncompliance at April 26, 2008 with the fixed charge coverage ratio covenants under the revolving credit facility and our term loan agreement (the "Fixed Charge Coverage Ratio Covenants"), (ii) increase the interest rate applicable to borrowings under each of our revolving credit facility and our term loan by 0.25% during the period from June 1, 2008 through the date on which we demonstrate compliance with the applicable Fixed Charge Coverage Ratio Covenant, and (iii) exclude non-cash share based compensation expense from the calculation of EBITDA (as defined in the applicable agreement) in connection with the calculation of the fixed charge coverage ratio under the revolving credit facility and the term loan agreement.        The revolving credit facility and our term loan agreement, as amended,


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each require us to maintain a minimum fixed charge coverage ratio (as defined in the applicable agreement) of 1.5 to 1.0 and 1.45 to 1.0, respectively, each calculated at the end of each of our fiscal quarters on a rolling four quarter basis. The principal reason for our noncompliance with the Fixed Charge Coverage Ratio Covenants was the high level of capital expenditures we made in the trailing twelve month period ended April 26, 2008. We were in compliance with the Fixed Charge Coverage Ratio Covenants as of the closefiscal year ended July 30, 2011.

        We are a party to an interest rate swap agreement entered into in July 2005, which expires in July 2012 concurrent with the maturity of our fourth quarterterm loan. This interest rate swap agreement has an initial notional amount of $50 million and provides for us to pay interest at a fixed rate of 4.70% while receiving interest for the same period at one-month LIBOR on the same notional principal amount. The interest rate swap agreement has an amortizing notional amount which adjusts down on the dates payments are due on the underlying term loan. The swap has been entered into as a hedge against LIBOR movements on current variable rate indebtedness totaling $51.8 million at one-month LIBOR plus 1.00%, thereby fixing our effective rate on the notional amount at 5.70%. One-month LIBOR was 0.19% as of July 30, 2011. The swap agreement qualifies as an "effective" hedge under Financial Accounting Standards Board Accounting Standards Codification ("ASC") 815,Derivatives and Hedging.

        Our capital expenditures for the 2011 fiscal 2008, and expectyear were $40.8 million, compared to be able to demonstrate this compliance in accordance with the terms of the revolving credit facility and the term loan agreement.

$55.1 million for fiscal 2010. We believe that our capital requirements for fiscal 20092012 will be between $55$47 and $62$51 million. We willexpect to finance these requirements with cash generated from operations and the use ofborrowings under our existingrevolving credit facilities.facility. Our planned capital projects will provide both expanded facilitiesadditional warehouse space and technology that we believe will provide us with increased efficiency and the capacity to continue to support the growth and expansion of our business.customer base. We believe that our future capital requirements after fiscal 2012 will be marginally lower than our anticipated fiscal 20092012 requirements, as a percentage of net sales, although we plan to continue to invest in technology and expand our facilities. Future investments and acquisitions will be financed through either equity or long-term debt negotiated at the time of the potential acquisition.

        Net cash provided by operations was $9.1$49.8 million for the year ended August 2, 2008,July 30, 2011, a decrease of $26.4$16.3 million from $35.5the $66.1 million inprovided by operations for the year ended July 28, 2007.31, 2010. The primary reasons for the decrease in cash flows from operations for the year ended July 30, 2011 were a decreasean increase in net incomeinventories of $66.3 million and an increase in accounts receivable of $39.8 million due to our sales growth during the year, and in the case of accounts receivable, in part due to the longer


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credit terms typically granted to conventional supermarket and Canadian customers. Net cash provided by operations of $108.3 million for the year ended August 2, 2008 compared to1, 2009 was primarily the year ended July 28, 2007,result of an increase in inventoriesnet income and a decrease in accounts payable. These cash outflows were partially offset by an increase in accrued expenses. The increase in inventory levels primarily relates to increased sales, restoring UNFI Specialty Distribution's inventory levels by taking advantage of forward buying opportunities to improve UNFI Specialty Distribution's gross profit and building inventory for the opening of our Sarasota, Florida, Ridgefield, Washington and Moreno Valley, California facilities in September 2007, December 2007 and September 2008, respectively. Net cash provided by operations was $35.5 million for the year ended July 28, 2007, as the result of net income of $50.2 million, the change in cash collected from customers net of cash paid to vendors and a $53.0 million investment in inventory.inventories. Days in inventory was 53 days at August 2, 2008 and 4951 days at July 28, 2007. This increase was due primarily30, 2011, compared to inventory purchased in anticipation of the opening of our Sarasota, Florida, Ridgefield, Washington and Moreno Valley, California distribution facilities while we worked to reduce inventory levels50 days at the Atlanta, Georgia and Auburn, Washington facilities.July 31, 2010. Days sales outstanding improved to 20 days at August 2, 2008, comparedincreased to 22 days at July 28, 2007.30, 2011, compared to 20 days at July 31, 2010. Working capital decreasedincreased by $105.6$186.9 million, or 48.8%96.2%, to $110.9$381.1 million at August 2, 2008,July 30, 2011, compared to working capital of $216.5$194.2 million at July 28, 2007.31, 2010, primarily as a result of the secondary equity offering completed in October 2010, a portion of which was utilized to repay borrowings on our revolving credit facility.

        Net cash used in investing activities increased $107.2decreased $56.0 million to $158.9$62.7 million for the year ended July 30, 2011, compared to $118.7 million for the year ended July 31, 2010. The decrease from the fiscal year ended July 31, 2010 was primarily due to the purchase of the SDG assets from SunOpta during the year ended July 31, 2010, as well as capital expenditures related to our then newly leased Lancaster, Texas facility including the supply chain initiatives related to warehouse management software which went live with that facility. Net cash used in investing activities was $36.8 million for the year ended August 2, 2008, compared to $51.7 million for the year ended July 28, 2007. This increase was primarily due to purchases of acquired businesses, net of cash.1, 2009.

        Net cash provided by financing activities was $158.1$16.3 million for the year ended August 2, 2008,July 30, 2011, primarily due to net proceeds from borrowings under notes payable related to our acquisitionsecondary equity offering of DHI and Millbrook,$138.3 million, partially offset by repayments on long-term debt.borrowings on notes payable of $127.6 million. Net cash provided by financing activities was $13.1$56.0 million for the year ended July 28, 2007,31, 2010, primarily due to $10.0borrowings on notes payable of $42.6 million. Net cash used in financing activities was $86.6 million in proceeds received fromfor the increase in borrowings under our term loan agreement, the increase in our bank overdraft and proceeds from, and the tax benefityear ended August 1, 2009, primarily due to the exercise of stock options, partially offset by repayments of long-term debt andon borrowings under notes payable.

        On December 1, 2004, our Board of Directors authorized the repurchase of up to $50 million of common stock from time to time in the open market or in privately negotiated transactions. As part of the stock repurchase program, we purchased 228,800 shares of our common stock for our treasury during the year ended July 29, 2006 at an aggregate cost of approximately $6.1 million. All shares were purchased at prevailing market prices. No such purchases were made duringsubsequent to the years ended August 2,


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2008 or July 28, 2007. We may continue or, from time to time, suspend repurchases of shares under our stock repurchase program, depending on prevailing market conditions, alternate uses of capital and other factors. Whether and when to initiate and/or complete any purchase of common stock2006 fiscal year, and the amountauthorization to repurchase has expired. The Company, in an effort to reduce the treasury share balance, decided in the fourth quarter of commonfiscal 2010 to issue treasury shares to satisfy certain share requirements related to exercises of stock purchased will be determined in our complete discretion.

        In August 2005, we entered into an interest rate swap agreement effectiveoptions and vesting of restricted stock units and awards under its equity incentive plans. During the fiscal year ended July 29, 2005. This interest rate swap agreement has an initial notional amount31, 2010, the Company reissued 201,814 shares from treasury related to stock option exercises and the vesting of $50 millionrestricted stock units and provides for us to pay interest at a fixed rate of 4.70% while receiving interest forawards. During the same period at one-month LIBOR on the same notional principal amount. The interest rate swap agreement has a seven-year term with an amortizing notional amount which adjusts down on the dates payment are due on the underlying term loan. The swap has been entered into as a hedge against LIBOR movements on current variable rate indebtedness totaling $61.2 million at one-month LIBOR plus 1.00%, thereby fixing our effective rate on the notional amount at 5.70%. One-month LIBOR was 2.46% as of August 2, 2008. The swap agreement qualifies as an "effective" hedge under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").fiscal year ended July 30, 2011, no shares were reissued from treasury.

        We may from time to time enter into commodity swap agreements to reduce price risk associated with our anticipated purchases of diesel fuel. These commodity swap agreements hedge a portion of our expected fuel usage for the periods set forth in the agreements. We monitor the commodity (NYMEX #2 Heating oil) used in our swap agreements to determine that the correlation between the commodity and diesel fuel is deemed to be "highly effective." At August 2, 2008During the fiscal years ended July 30, 2011 and July 28, 2007,31, 2010, we had no outstanding commodity swap agreements.

        In addition to the previously discussed interest rate and commodity swap agreements, from time-to-time we enter into fixed price fuel supply agreements. As of July 30, 2011, we had not entered into any agreements requiring us to purchase diesel fuel. As of July 31, 2010, we had entered into agreements which required us to purchase a total of 200,000-242,000 gallons of diesel fuel per month at prices ranging from $2.20 to $2.84 per gallon through July 2011. These fixed price fuel agreements qualified for the "normal purchase" exception under ASC 815,Derivatives and Hedging as physical deliveries will occur rather than net settlements, therefore the fuel purchases under these contracts will be expensed as incurred and included within operating expenses.


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Commitments and Contingencies

        The following schedule summarizes our contractual obligations and commercial commitments as of August 2, 2008:July 30, 2011:

 
 Payments Due by Period 
 
 Total Less than
One Year
 1–3
Years
 3–5
Years
 Thereafter 
 
 (in thousands)
 

Inventory purchase commitments

 $31,848 $31,848 $ $ $ 

Notes payable

  288,050      288,050   

Long-term debt

  63,512  5,027  10,053  10,110  38,322 

Deferred compensation

  14,938  859  2,392  2,389  9,298 

Long-term non-capitalized leases

  178,758  29,622  52,139  34,771  62,226 
            

Total

 $577,106 $67,356 $64,584 $335,320 $109,846 
            

 
 Payments Due by Period 
 
 Total Less than
One Year
 1–3
Years
 3–5
Years
 Thereafter 
 
 (in thousands)
 

Inventory purchase commitments

 $99,362 $99,362       

Notes payable

  115,000   $115,000     

Long-term debt

  48,433  47,447  721 $265   

Deferred compensation

  12,805  1,247  2,476  2,439 $6,643 

Long-term non-capitalized leases

  272,850  43,246  76,740  64,062  88,802 
            

Total

 $548,450 $191,302 $194,937 $66,766 $95,445 
            

        The notes payable, long-term debt and non-capitalized lease obligations shown above exclude interest payments due. The notes payable obligations shown reflect the expiration of the credit facility, not necessarily the underlying individual borrowings. In addition, cash to be paid for income taxes is excluded from the table above.

        We had outstanding letters of credit of approximately $16.6$21.7 million at August 2, 2008.July 30, 2011.

        AssetsReal property owned by us that is mortgaged to secure borrowings under our term loan amounted to approximately $102.0$84.3 million at August 2, 2008.July 30, 2011.

Seasonality

        Generally, we do not experience any material seasonality. However, our sales and operating results may vary significantly from quarter to quarter due to factors such as changes in our operating expenses, management's ability to execute our operating and growth strategies, personnel changes, demand for natural products, supply shortages and general economic conditions.


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Recently Issued Financial Accounting Standards

        In March 2008,September 2011, the Financial Accounting Standards Board ("FASB") issued SFAS No. 161, "Disclosures about Derivative InstrumentsAccounting Standards Update 2011-08,Intangibles—Goodwill and Hedging Activities—an AmendmentOther (Topic 350): Testing Goodwill for Impairment ("ASU 2011-8"). ASU 2011-8 modifies the impairment test for goodwill and indefinite lived intangibles so that it is no longer required to calculate the fair value of SFAS No. 133" ("SFAS 161"). SFAS 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments, (b) derivative instruments and related hedged items are accounted for under SFAS 133, and (c) derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS 161a reporting unit unless the company believes, based on qualitative factors, it is more likely than not that the reporting unit's or indefinite lived intangible asset's fair value is less than the carrying value. ASU 2011-8 is effective for fiscal years and interim periods beginningthat begin after NovemberDecember 15, 2008 and2011, with early adoption is permitted.allowed. We intend to adopt ASU 2011-8 effective July 31, 2011, which we do not expect the adoption of SFAS 161 will have a material effect on the disclosures that accompany our consolidated financial statements.

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141(R)"), which is a revision of SFAS No. 141, "Business Combinations." SFAS 141(R) continues to require the purchase method of accounting for business combinations and the identification and recognition of intangible assets separately from goodwill. SFAS 141(R) requires, among other things, the buyer to: (1) fair value assets and liabilities acquired as of the acquisition date (i.e., a "fair value" model rather than a "cost allocation" model); (2) expense acquisition-related costs; (3) recognize assets or liabilities assumed arising from contractual contingencies at the acquisition date using acquisition-date fair values; (4) recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest over the acquisition-date fair value of net assets acquired; (5) recognize at acquisition any contingent consideration using acquisition-date fair values (i.e., fair value earn-outs in the initial accounting for the acquisition); and (6) eliminate the recognition of liabilities for restructuring costs expected to be incurred as a result of the business combination. SFAS 141(R) also defines a "bargain" purchase as a business combination where the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus the fair value of any noncontrolling interest. Under this circumstance, the buyer is required to recognize such excess (formerly referred to as "negative goodwill") in earnings as a gain. In addition, if the buyer determines that some or all of its previously booked deferred tax valuation allowance is no longer needed as a result of the business combination, SFAS 141(R) requires that the reduction or elimination of the valuation allowance be accounted as a reduction of income tax expense. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. The Company will apply SFAS 141(R) to any acquisitions that are made on or after August 2, 2009.

        In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51" ("SFAS 160"). This statement establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years beginning on or after December 15, 2008. We do not expect that our adoption of SFAS 160 will have a material effect on our consolidated financial statements.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The statement is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS 159 in fiscal 2009. We do not expect that our adoption of SFAS 159 will have a material effect on our consolidated financial statements.

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements under other accounting pronouncements, but does not change the existing guidance as to whether or not an instrument is carried at fair value. The statement


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is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS 157 in fiscal 2009. We do not expect that our adoption of SFAS 157 will have a material effect on our consolidated financial statements.

        In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109." FIN 48 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes." Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. We adopted FIN 48 on July 29, 2007 and there was no material effect on our consolidated financial statements. As a result, we did not record any cumulative effect adjustment related to adopting FIN 48. Our policy of including interest and penalties related to unrecognized tax benefits as a component of income tax expense did not change as a result of the adoption of FIN 48.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKRISK.

        We are exposed to interest rate fluctuations on our borrowings. As more fully described in Note 8 "Financial Instruments""Fair Value Measurements" to the Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K, we use interest rate swap agreements to modify variable rate obligations to fixed rate obligations.

        At August 2, 2008,July 30, 2011, we were a party to one interest rate swap agreement, which relates to our $75 million term loan agreement and which we entered into during August 2005 (the "2005 swap"). We account for the 2005 swap using hedge accounting treatment because the derivative has been


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determined to be highly effective in achieving offsetting changes in fair valuecash flows of the hedged items.item. The 2005 swap requires us to pay interest for a seven-year period at a fixed rate of 4.70% on an initial amortizing notional principal amount of $50 million, while receiving interest for the same period at one-month LIBOR on the same amortizing notional principal amount. The 2005 swap has been entered into as a hedge against LIBOR movements on current variable rate indebtedness totaling $61.2$47.1 million at LIBOR plus 1.00%, thereby fixing our effective rate on the notional amount at 5.70%. Under this method of accounting, at August 2, 2008,July 30, 2011, we had recorded a liability of $1.2$1.3 million representing the fair value of the 2005 swap. We do not enter into derivative agreements for trading purposes.

        At August 2, 2008,July 30, 2011, we had long-term floating rate debt of $61.2$47.1 million and long-term fixed rate debt of $2.3$1.3 million, representing 96%approximately 97% and 4%3%, respectively, of our long-term debt. At July 28, 2007,31, 2010, we had long-term floating rate debt of $66.3$51.8 million and long-term fixed rate debt of $5.7$1.6 million, representing 92%97% and 8%3%, respectively, of our long-term debt. Holding other swap terms and debt levels constant, a 25 basis point changedecrease in interest rates would change the unrealized fair market value of the fixed rate debt by approximately $19,000$6,000 and $29,000$9,000 at August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, respectively.


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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements listed below are filed as part of this Annual Report on Form 10-K.


INDEX TO FINANCIAL STATEMENTS

United Natural Foods, Inc. and Subsidiaries:
 Page

Report of Independent Registered Public Accounting Firm

 3948

Consolidated Balance Sheets

 
41
50

Consolidated Statements of Income

 
42
51

Consolidated Statements of Stockholders' Equity

 
43
52

Consolidated Statements of Cash Flows

 
44
53

Notes to Consolidated Financial Statements

 
45
54

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
United Natural Foods, Inc.:

        We have audited the accompanying consolidated balance sheets of United Natural Foods, Inc. and subsidiaries (the "Company") as of August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the fiscal years in the three-year period ended August 2, 2008.July 30, 2011. We also have audited the Company'sUnited Natural Foods, Inc.'s internal control over financial reporting as of August 2, 2008,July 30, 2011, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company'sUnited Natural Foods, Inc.'s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


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        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the CompanyUnited Natural Foods, Inc. and subsidiaries as of August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended August 2, 2008,July 30, 2011, in conformity with accounting principlesU.S. generally accepted in the United States of America.accounting principles. Also in our opinion, the CompanyUnited Natural Foods, Inc. maintained, in all material respects, effective internal control over financial reporting as of August 2, 2008,July 30, 2011, based on criteria established inInternal Control-


Control-Integrated FrameworkTable of Contents


Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        On November 2, 2007, the Company acquired Distribution Holdings, Inc. ("DHI") and its wholly-owned subsidiary, Millbrook Distribution Services, Inc. ("Millbrook"), and management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of August 2, 2008, DHI and Millbrook's internal control over financial reporting with associated assets of $171,090,000 (of which $95,016,000 represents goodwill and intangible assets included within the scope of the assessment) and total revenue of $211,385,000 generated by DHI and Millbrook that was included in the Company's consolidated financial statements as of and for the year ended August 2, 2008. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of DHI and Millbrook.

Providence, Rhode Island
September 29, 2008


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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 
 August 2,
2008
 July 28,
2007
 
 
 (In thousands, except per share data)
 

ASSETS

       

Current assets:

       

Cash and cash equivalents

 $25,333 $17,010 

Accounts receivable, net of allowance of $5,535 and $4,416, respectively

  179,063  160,329 

Notes receivable, trade, net of allowance of $130 and $44, respectively

  1,412  1,836 

Inventories

  394,364  312,377 

Prepaid expenses and other current assets

  13,307  8,199 

Assets held for sale

    5,935 

Deferred income taxes

  14,221  9,474 
      

Total current assets

  627,700  515,160 

Property & equipment, net

  
234,115
  
185,083
 

Goodwill

  
170,609
  
79,903
 

Intangible assets, net of accumulated amortization of $1,671 and $423, respectively

  33,689  8,552 

Notes receivable, trade, net of allowance of $1,423 and $1,521, respectively

  2,349  2,647 

Other

  16,021  9,553 
      

Total assets

 $1,084,483 $800,898 
      

LIABILITIES AND STOCKHOLDERS' EQUITY

       

Current liabilities:

       

Notes payable

  288,050  120,000 

Accounts payable

  160,418  134,576 

Accrued expenses and other current liabilities

  63,308  37,132 

Current portion of long-term debt

  5,027  6,934 
      

Total current liabilities

  516,803  298,642 

Long-term debt, excluding current portion

  
58,485
  
65,067
 

Deferred income taxes

  9,058  9,555 

Other long-term liabilities

  20,087  839 
      

Total liabilities

  604,433  374,103 
      

Commitments and contingencies

       

Stockholders' equity:

       

Preferred stock, $0.01 par value, authorized 5,000 shares; none issued or outstanding

     

Common stock, $0.01 par value, authorized 100,000 shares; 43,100 issued and 42,871 outstanding shares at August 2, 2008; 43,051 issued and 42,822 outstanding shares at July 28, 2007

  431  431 

Additional paid-in capital

  169,238  163,473 

Treasury stock

  (6,092) (6,092)

Unallocated shares of Employee Stock Ownership Plan

  (1,040) (1,203)

Accumulated other comprehensive (loss) income

  (753) 399 

Retained earnings

  318,266  269,787 
      

Total stockholders' equity

  480,050  426,795 
      

Total liabilities and stockholders' equity

 $1,084,483 $800,898 
      

See notes to consolidated financial statements.


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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 
 Fiscal year ended 
 
 August 2,
2008
 July 28,
2007
 July 29,
2006
 
 
 (In thousands, except per share data)
 

Net sales

 $3,365,857 $2,754,280 $2,433,594 

Cost of sales (Note 1)

  2,731,965  2,244,702  1,967,684 
        
  

Gross profit

  633,892  509,578  465,910 
        

Operating expenses

  
541,413
  
415,337
  
385,982
 

Impairment on assets held for sale

    756   
        
  

Total operating expenses

  541,413  416,093  385,982 
        
  

Operating income

  
92,479
  
93,485
  
79,928
 
        

Other expense (income):

          
 

Interest expense

  16,133  12,089  11,210 
 

Interest income

  (768) (975) (297)
 

Other, net

  (82) 156  (381)
        
  

Total other expense

  15,283  11,270  10,532 
        

Income before income taxes

  
77,196
  
82,215
  
69,396
 
 

Provision for income taxes

  28,717  32,062  26,119 
        

Net income

 $48,479 $50,153 $43,277 
        

Basic per share data:

          

Net income

 $1.14 $1.18 $1.04 
        

Weighted average basic shares of common stock

  42,690  42,445  41,682 
        

Diluted per share data:

          

Net income

 $1.13 $1.17 $1.02 
        

Weighted average diluted shares of common stock

  42,855  42,786  42,304 
        

See notes to consolidated financial statements.28, 2011


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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYBALANCE SHEETS

(In thousands, except per share data)

 
 Common Stock  
 Treasury Stock  
 Accumulated
Other
Comprehensive
(Loss) Income
  
  
 
 
 Additional
Paid in
Capital
 Unallocated
Shares of
ESOP
 Retained
Earnings
 Total
Stockholders'
Equity
 
 
 Shares Amount Shares Amount 
 
  
  
  
  
 (In thousands)
  
  
  
 

Balances at July 31, 2005

  41,287 $413 $120,354   $ $(1,605)$ $176,357 $295,519 
                    

Allocation of shares to ESOP

                 225        225 

Issuance of common stock and restricted stock, net

  1,190  12  18,667                 18,679 

Purchases of treasury stock

           229  (6,092)          (6,092)

Share-based compensation

        5,507                 5,507 

Tax benefit associated with stock plans

        5,312                 5,312 

Fair value of swap agreements, net of tax

                    1,047     1,047 

Net income

                       43,277  43,277 
                          

Total comprehensive income

                          44,324 
                    

Balances at July 29, 2006

  42,477 $425 $149,840  229 $(6,092)$(1,380)$1,047 $219,634 $363,474 
                    

Allocation of shares to ESOP

                 177        177 

Issuance of common stock and restricted stock, net

  574  6  7,121                 7,127 

Share-based compensation

        3,994                 3,994 

Tax benefit associated with stock plans

        2,518                 2,518 

Fair value of swap agreements, net of tax

                    (648)    (648)

Net income

                       50,153  50,153 
                          

Total comprehensive income

                          49,505 
                    

Balances at July 28, 2007

  43,051 $431 $163,473  229 $(6,092)$(1,203)$399 $269,787 $426,795 
                    

Allocation of shares to ESOP

                 163        163 

Issuance of common stock and restricted stock, net

  49    920                 920 

Share-based compensation

        4,674                 4,674 

Tax benefit associated with stock plans

        171                 171 

Fair value of swap agreement, net of tax

                    (1,152)    (1,152)

Net income

                       48,479  48,479 
                          

Total comprehensive income

                          47,327 
                    

Balances at August 2, 2008

  43,100 $431 $169,238  229 $(6,092)$(1,040)$(753)$318,266 $480,050 
                    

 
 July 30,
2011
 July 31,
2010
 

ASSETS

       

Current assets:

       

Cash and cash equivalents

 $16,867 $13,802 

Accounts receivable, net of allowance of $4,545 and $6,253, respectively

  257,482  217,097 

Notes receivable, trade, net of allowance of $72 and $135, respectively

  2,826  3,111 

Inventories

  514,506  439,702 

Prepaid expenses and other current assets

  30,788  21,793 

Deferred income taxes

  22,023  20,560 
      

Total current assets

  844,492  716,065 

Property & equipment, net

  285,151  279,255 

Goodwill

  191,943  186,925 

Intangible assets, net of accumulated amortization of $8,143 and $5,710, respectively

  58,336  50,201 

Notes receivable, trade, net of allowance of $1,237 and $1,304, respectively

  2,148  235 

Other long-term assets

  18,918  18,118 
      

Total assets

 $1,400,988 $1,250,799 
      

LIABILITIES AND STOCKHOLDERS' EQUITY

       

Current liabilities:

       

Notes payable

 $115,000 $242,570 

Accounts payable

  217,074  205,202 

Accrued expenses and other current liabilities

  83,900  69,070 

Current portion of long-term debt

  47,447  5,033 
      

Total current liabilities

  463,421  521,875 

Long-term debt, excluding current portion

  986  48,433 

Deferred income taxes

  38,551  20,598 

Other long-term liabilities

  28,363  29,446 
      

Total liabilities

  531,321  620,352 
      

Commitments and contingencies

       

Stockholders' equity:

       

Preferred stock, $0.01 par value, authorized 5,000 shares; none issued or outstanding

     

Common stock, $0.01 par value, authorized 100,000 shares; 48,520 issued and 48,493 outstanding shares at July 30, 2011; 43,558 issued and 43,531 outstanding shares at July 31, 2010

  485  435 

Additional paid-in capital

  345,036  188,727 

Treasury stock

  (708) (708)

Unallocated shares of Employee Stock Ownership Plan

  (542) (713)

Accumulated other comprehensive income (loss)

  4,862  (1,155)

Retained earnings

  520,534  443,861 
      

Total stockholders' equity

  869,667  630,447 
      

Total liabilities and stockholders' equity

 $1,400,988 $1,250,799 
      

See accompanying notes to consolidated financial statements.


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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

 
 Fiscal year ended 
 
 July 30,
2011
 July 31,
2010
 August 1,
2009
 

Net sales

 $4,530,015 $3,757,139 $3,454,900 

Cost of sales

  3,705,205  3,060,208  2,794,419 
        
  

Gross profit

  824,810  696,931  660,481 
        

Operating expenses

  
688,859
  
582,029
  
550,560
 

Restructuring and asset impairment expenses

  6,270     
        
  

Total operating expenses

  695,129  582,029  550,560 
        
  

Operating income

  
129,681
  
114,902
  
109,921
 
        

Other expense (income):

          
 

Interest expense

  5,000  5,845  9,914 
 

Interest income

  (1,226) (247) (450)
 

Other, net

  (528) (2,698) 275 
        
  

Total other expense

  3,246  2,900  9,739 
        

Income before income taxes

  
126,435
  
112,002
  
100,182
 
 

Provision for income taxes

  49,762  43,681  40,998 
        

Net income

 $76,673 $68,321 $59,184 
        

Basic per share data:

          

Net income

 $1.62 $1.58 $1.38 
        

Weighted average basic shares of common stock

  47,459  43,184  42,849 
        

Diluted per share data:

          

Net income

 $1.60 $1.57 $1.38 
        

Weighted average diluted shares of common stock

  47,815  43,425  42,993 
        

See accompanying notes to consolidated financial statements.


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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 
 Common Stock Treasury Stock  
  
 Accumulated
Other
Comprehensive
(Loss) Income
  
  
 
 
 Additional
Paid in
Capital
 Unallocated
Shares of
ESOP
 Retained
Earnings
 Total
Stockholders'
Equity
 
(In thousands)
 Shares Amount Shares Amount 

Balances at August 2, 2008

  43,100  431  229  (6,092) 169,238  (1,040) (753) 318,266  480,050 
                    

Allocation of shares to ESOP

                 163        163 

Issuance of common stock and restricted stock, net

  137  1        1,038           1,039 

Share-based compensation

              5,504           5,504 

Tax expense associated with stock plans

              (598)          (598)

Fair value of swap agreements, net of tax

                    (870)    (870)

Net income

                       59,184  59,184 
                          

Total comprehensive income

                          58,314 
                    

Balances at August 1, 2009

  43,237  432  229  (6,092) 175,182  (877) (1,623) 377,450  544,472 
                    

Allocation of shares to ESOP

                 164        164 

Issuance of common stock and restricted stock, net

  321  3  (202) 5,384  3,666        (1,910) 7,143 

Share-based compensation

              8,057           8,057 

Tax benefit associated with stock plans

              1,822           1,822 

Fair value of swap agreement, net of tax

                    128     128 

Foreign currency translation

                    340     340 

Net income

                       68,321  68,321 
                          

Total comprehensive income

                          68,789 
                    

Balances at July 31, 2010

  43,558 $435  27 $(708)$188,727 $(713)$(1,155)$443,861 $630,447 
                    

Allocation of shares to ESOP

                 171        171 

Issuance of common stock pursuant to secondary offering, net of direct offering costs

  4,428  44        138,257           138,301 

Stock option exercises and restricted stock vestings, net

  534  6        7,348           7,354 

Share-based compensation

   ��          9,159           9,159 

Tax benefit associated with stock plans

              1,545           1,545 

Fair value of swap agreements, net of tax

                    732     732 

Foreign currency translation

                    5,285     5,285 

Net income

                       76,673  76,673 
                          

Total comprehensive income

                          82,690 
                    

Balances at July 30, 2011

  48,520 $485  27 $(708)$345,036 $(542)$4,862 $520,534 $869,667 
                    

See accompanying notes to consolidated financial statements.


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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
 Years Ended 
 
 August 2,
2008
 July 28,
2007
 July 29,
2006
 
 
 (In thousands)
 

CASH FLOWS FROM OPERATING ACTIVITIES:

          

Net income

 $48,479 $50,153 $43,277 

Adjustments to reconcile net income to net cash provided by operating activites:

          
 

Depreciation and amortization

  22,544  18,376  17,099 
 

Loss (gain) on disposals of property and equipment

  158  1,997  (140)
 

Impairment on assets held for sale

    756   
 

Deferred income tax expense (benefit)

  2,257  1,707  (1,355)
 

Provision for doubtful accounts

  2,707  1,528  2,829 
 

Share-based compensation

  4,674  3,994  5,507 
 

Gain on forgiveness of loan

  (157)    

Changes in assets and liabilities, net of acquired companies:

          
 

Accounts receivable

  (8,339) (10,216) (17,934)
 

Inventories

  (58,112) (52,975) (21,242)
 

Prepaid expenses and other assets

  (6,434) (5,772) 4,349 
 

Notes receivable, trade

  713  (469) (1,335)
 

Accounts payable

  (8,319) 27,739  (8,936)
 

Accrued expenses

  8,958  (1,308) 3,069 
        

Net cash provided by operating activities

  9,129  35,510  25,188 
   ��    

CASH FLOWS FROM INVESTING ACTIVITIES:

          
 

Capital expenditures

  (51,083) (46,804) (19,290)
 

Purchases of acquired businesses, net of cash acquired

  (107,812) (9,303) (3,286)
 

Proceeds from disposals of property and equipment

    5,452  224 
 

Other investing activities

    (1,010)  
        
 

Net cash used in investing activities

  (158,895) (51,665) (22,352)
        

CASH FLOWS FROM FINANCING ACTIVITIES:

          
 

Net (repayments) borrowings under notes payable

  168,050  (5,005) 1,431 
 

Proceeds from borrowing of long-term debt

    10,000   
 

Proceeds from exercise of stock options

  920  7,127  18,679 
 

Repayments of long-term debt

  (8,332) (6,216) (5,854)
 

Tax benefit from exercise of stock options

  171  2,518  5,312 
 

Increase (decrease) in bank overdraft

  (1,435) 4,691  (8,300)
 

Principal payments of capital lease obligations

    (4) (573)
 

Purchases of treasury stock

      (6,092)
 

Capitalized debt issuance costs

  (1,285)    
        
 

Net cash provided by financing activities

  158,089  13,111  4,603 
        

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

  8,323  (3,044) 7,439 

Cash and cash equivalents at beginning of period

  17,010  20,054  12,615 
        

Cash and cash equivalents at end of period

 $25,333 $17,010 $20,054 
        

Supplemental disclosures of cash flow information:

          
 

Cash paid during the period for:

          
 

Interest, net of amounts capitalized

 $16,469 $11,877 $10,352 
        
 

Federal and state income taxes, net of refunds

 $27,618 $28,607 $21,485 
        

Supplemental disclosure of noncash investing and financing activities:

          
 

Fair value of assets acquired

 $ $8,498 $ 
 

Cash paid for assets

    (5,498)  
        
 

Liabilities incurred (see Note 2)

 $ $3,000 $ 
        

 
 Years Ended 
(In thousands)
 July 30,
2011
 July 31,
2010
 August 1,
2009
 

CASH FLOWS FROM OPERATING ACTIVITIES:

          

Net income

 $76,673 $68,321 $59,184 

Adjustments to reconcile net income to net cash provided by operating activites:

          
 

Depreciation and amortization

  35,296  27,483  27,029 
 

Deferred income tax expense

  15,520  5,061  239 
 

Share-based compensation

  9,159  8,057  5,504 
 

Excess tax benefits from share-based payment arrangements

  (1,545) (1,822) (234)
 

(Gain) loss on disposals of property and equipment

  (42) 229  262 
 

Impairment on long-term assets

  5,790     
 

Impairment on indefinite lived intangibles

  200     
 

Unrealized loss (gain) on foreign exchange

  318  (61)  
 

Realized gain on hedge related to Canadian acquisition

    (2,814)  
 

Provision for doubtful accounts

  635  1,149  4,759 

Changes in assets and liabilities, net of acquired companies:

          
 

Accounts receivable

  (39,791) (21,599) (3,950)
 

Inventories

  (66,283) (55,803) 30,398 
 

Prepaid expenses and other assets

  (10,820) (4,444) (2,729)
 

Notes receivable, trade

  (1,463) 1,160  (652)
 

Accounts payable

  9,583  32,491  (13,836)
 

Accrued expenses

  16,614  8,724  2,349 
        

Net cash provided by operating activities

  49,844  66,132  108,323 
        

CASH FLOWS FROM INVESTING ACTIVITIES:

          
 

Capital expenditures

  (40,778) (55,109) (32,353)
 

Purchases of acquired businesses, net of cash acquired

  (22,061) (66,556) (4,495)
 

Cash proceeds from hedge related to Canadian acquisition

    2,814   
 

Proceeds from disposals of property and equipment

  96  180  98 
        
 

Net cash used in investing activities

  (62,743) (118,671) (36,750)
        

CASH FLOWS FROM FINANCING ACTIVITIES:

          
 

Net proceeds from common stock issuance

  138,301     
 

Net (repayments) borrowings under notes payable

  (127,570) 42,570  (88,050)
 

Repayments of long-term debt

  (5,033) (5,412) (4,634)
 

Increase in bank overdraft

  1,739  9,982  8,494 
 

Proceeds from exercise of stock options

  10,162  8,481  1,573 
 

Payment of employee restricted stock tax withholdings

  (2,808) (1,338) (535)
 

Excess tax benefits from share-based payment arrangements

  1,545  1,822  234 
 

Payments on life insurance policy loans

      (3,072)
 

Capitalized debt issuance costs

    (68) (647)
        
 

Net cash provided by (used in) financing activities

  16,336  56,037  (86,637)
        
 

Effect of exchange rate changes on cash and cash equivalents

  (372) 35   
        

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

  3,065  3,533  (15,064)

Cash and cash equivalents at beginning of period

  13,802  10,269  25,333 
        

Cash and cash equivalents at end of period

 $16,867 $13,802 $10,269 
        

Supplemental disclosures of cash flow information:

          
 

Cash paid during the period for:

          
 

Interest, net of amounts capitalized

 $4,752 $4,465 $9,094 
        
 

Federal and state income taxes, net of refunds

 $42,018 $35,538 $43,978 
        

See accompanying notes to consolidated financial statements.


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UNITED NATURAL FOODS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   SIGNIFICANT ACCOUNTING POLICIES


        United Natural Foods, Inc. and subsidiaries (the "Company") is a leading distributor and retailer of natural, organic and specialty products. The Company sells its products primarily throughout the United States.States and Canada.

        The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation.

        The fiscal year of the Company ends on the Saturday closest to July 31. As such, fiscal 2008, fiscal 2007Fiscal 2011, 2010 and fiscal 20062009 ended on July 30, 2011, July 31, 2010, and August 2, 2008, July 28, 20071, 2009, respectively. Each of these fiscal years contained 52 weeks, and July 29, 2006, respectively. Fiscal 2008 is a 53 week year, and fiscal 2007 and 2006 are 52 week years. Oureach of the Company's interim quarters consistconsisted of 13 weeks, except for the fourth quarter of fiscal 2008, which consists of 14 weeks.

        Net sales consistconsists primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also consist ofincludes amounts charged by the Company to customers for shipping and handling, and fuel surcharges. The principal components of cost of sales include the amount paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to the Company's distribution facilities. Cost of sales also includes amounts incurred by the Company's manufacturing division, Hershey Import Company, Inc. ("Hershey Imports")subsidiary, United Natural Trading Co., which does business as Woodstock Farms Manufacturing, for inbound transportation costs and depreciation for manufacturing equipment andoffset by consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Operating expenses include salaries and wages, employee benefits (including payments under the Company's Employee Stock Ownership Plan), warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation and amortization expense. Operating expenses also includesinclude depreciation expense related to the wholesale and retail divisions. Other expensesexpense (income) includeincludes interest on outstanding indebtedness, interest income and miscellaneous income and expenses. In fiscal 2010, other expense (income) includes the gain recorded by the Company upon settlement of a forward contract entered into by the Company to swap United States dollars for Canadian dollars.

        Cash equivalents consist of highly liquid investments with original maturities of three months or less.

        Inventories consist primarily of finished goods and are stated at the lower of cost or market, with cost being determined using the first-in, first-out (FIFO) method. Allowances received from suppliers are recorded as reductions in cost of sales upon the sale of the related products.

        Property and equipment are stated at cost less accumulated depreciation and amortization. Equipment under capital leases is stated at the lower of the present value of minimum lease payments at the inception of the lease or the fair value of the asset. Depreciation and amortization of property and equipment is computed on a straight-line basis, over the estimated useful lives of the assets or, when applicable, the life of the lease, whichever is shorter. Applicable interest charges incurred during


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the construction of new facilities isare capitalized as one of the elements of cost and is amortized over the


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assets' estimated useful lives. There was no interest capitalized during the year ended July 30, 2011. Interest capitalized for each of the years ended July 31, 2010 and August 2, 2008, July 28, 2007 and July 29, 20061, 2009 was $0.7 million, $0.2less than $0.1 million and $0.5approximately $0.3 million, respectively.

        Property and equipment consisted of the following at August 2, 2008July 30, 2011 and July 28, 2007:31, 2010:

 
 Estimated
Useful Lives
(Years)
 2008 2007 
 
 (In thousands, except years)
 

Land

    $14,910 $12,304 

Buildings and improvements

  20-40  160,317  109,893 

Leasehold improvements

  5-20  22,681  15,432 

Warehouse equipment

  3-30  72,153  68,332 

Office equipment

  3-10  47,436  45,758 

Motor vehicles

  3-7  4,773  4,552 

Construction in progress

     27,807  28,186 
         

     350,077  284,457 

Less accumulated depreciation and amortization

     115,962  99,374 
         
 

Net property and equipment

    $234,115 $185,083 
         

 
 Original
Estimated
Useful Lives
(Years)
 2011 2010 
 
 (In thousands, except years)
 

Land

    $13,241 $14,944 

Buildings and improvements

  20-40  158,790  166,235 

Leasehold improvements

  5-20  77,605  58,740 

Warehouse equipment

  3-30  88,643  88,720 

Office equipment

  3-10  58,643  49,305 

Computer software

  3-7  40,986  18,104 

Motor vehicles

  3-7  4,182  4,602 

Construction in progress

     15,428  36,415 
         

     457,518  437,065 

Less accumulated depreciation and amortization

     172,367  157,810 
         
 

Net property and equipment

    $285,151 $279,255 
         

        Depreciation expense amounted to $31.1 million, $25.0 million and $24.1 million for the fiscal years ended July 30, 2011, July 31, 2010 and August 1, 2009, respectively.

        The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

        In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"),Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. FIN 48 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. The Company adopted the provisions of FIN 48 on July 29, 2007 and there was no material effect on the consolidated financial statements. As a result, the Company did not record any cumulative effect adjustment related to the adoption of FIN 48. The Company's policy of includingincludes interest and penalties related to unrecognized tax benefits as a component of income tax expense did not change as a result of the adoption of FIN 48.expense.

        Management reviews long-lived assets, including finite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the assets' useful lives based on updated projections. If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow model.


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        Goodwill represents the excess of cost over the fair value of net assets acquired in a business combination. Goodwill and other intangible assets with indefinite lives are not amortized. Intangible assets with definite lives are amortized on a straight-line basis over the following lives:

Customer relationships

 57-10 years

Non-compete agreements

 2-41-10 years

Trademarks and tradenames

 5-2726 years

        Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination. The recoverabilityWe are required to test goodwill for impairment at least annually, and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During the first quarter of the 2011 fiscal year, we performed a test for goodwill impairment as a result of the expected change in future cash flows for certain of our branded product lines, and determined that no impairment existed. We have elected to perform our annual tests for indications of goodwill impairment during the fourth quarter of each fiscal year. Based on future expected cash flows, we test for goodwill impairment at the reporting unit level. Our reporting units are at or one level below the operating segment level. Approximately 91% of our goodwill is within our wholesale reporting unit. The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit's estimated fair value to its carrying value, including goodwill. Each reporting unit regularly prepares discrete operating forecasts and indefinite-lived intangible assetsuses these forecasts as the basis for the assumptions used in the discounted cash flow analysis. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is assessed annually, or more frequentlyconsidered not to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment. If required, the second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated potential impairment. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit, as needed when events or changes have occurred that would suggest an impairment of carrying value. Goodwill is assessed by determining whetherdetermined in the first step, over the aggregate estimated fair values of the applicableindividual assets, liabilities and identifiable intangibles as if the reporting units exceed theirunit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying values. Forvalue of goodwill assigned to the reporting units that indicate potential impairment,unit, there is no impairment. If the carrying value of goodwill impairment is measured based onassigned to a reporting unit exceeds the implied fair value of the reporting unitgoodwill, an impairment charge is recorded for the excess. Intangible assets with indefinite lives are tested for impairment at least annually and related residual goodwill. Ifbetween annual tests if events occur or circumstances change that would indicate that the carrying value of the reporting unit goodwill exceeds the implied value, an impairment charged is recorded.asset may be impaired. Impairment of other indefinite lived intangible assets is measured as the difference between the fair value of the asset and its carrying value. The evaluation of fair value requires the use of projections, estimates and assumptions as to the future performance of the operations in performing a discounted cash flow analysis, as well as assumptions regarding sales and earnings multiples that would be applied in comparable acquisitions. As of August 2, 2008,July 30, 2011, the Company's annual assessment of goodwill for each of its reporting units and indefinite lived intangible assets indicated that no impairment existed.


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        The changes in the carrying amount of goodwill and the amount allocated by reportable segment for the years presented are as follows (in thousands):

 
 Wholesale Other Total 

Goodwill as of July 29, 2006

 $64,032 $13,984 $78,016 

Goodwill arising from business combinations

    1,887  1,887 

Goodwill as of July 28, 2007

  64,032  15,871  79,903 

Goodwill arising from business combinations

  90,088  618  90,706 
        

Goodwill as of August 2, 2008

 $154,120 $16,489 $170,609 
        

 
 Wholesale Other Total 

Goodwill as of August 1, 2009

 $146,970 $17,363 $164,333 

Goodwill adjustment for DHI restructuring activities, net of tax of $633

  (987)   (987)

Goodwill adjustment for final opening balance sheet adjustments for 2009 acquisitions

    (32) (32)

Goodwill arising from business combinations

  23,485    23,485 

Change in foreign exchange rates

  126     126 
        

Goodwill as of July 31, 2010

 $169,594 $17,331 $186,925 

Goodwill adjustment for DHI restructuring activities, net of tax of $179

  (726)    (726)

Goodwill adjustment for final opening balance sheet adjustments for 2010 business combinations

  1,210     1,210 

Goodwill arising from 2011 business combinations

  2,743    2,743 

Change in foreign exchange rates

  1,791     1,791 
        

Goodwill as of July 30, 2011

 $174,612 $17,331 $191,943 
        

        The following table presents detailsthe detail of the Company's other intangible assets (in thousands):

 
 August 2, 2008 July 28, 2007 
 
 Gross Carrying
Amount
 Accumulated
Amortization
 Net Gross Carrying
Amount
 Accumulated
Amortization
 Net 

Amortized intangible assets:

                   

Customer relationships

 $5,070 $760 $4,310 $ $ $ 

Non-compete agreements

  2,132  863  1,269  700  423  277 

Trademarks and tradenames

  2,233  48  2,185       
              

Total amortized intangible assets

  9,435  1,671  7,764  700  423  277 

Unamortized intangible assets:

                   

Trademarks and tradenames

  25,925    25,925  8,275    8,275 
              

Total

 $35,360 $1,671 $33,689 $8,975 $423 $8,552 
              


 
 July 30, 2011 July 31, 2010 
 
 Gross Carrying
Amount
 Accumulated
Amortization
 Net Gross Carrying
Amount
 Accumulated
Amortization
 Net 

Amortizing intangible assets:

                   

Customer relationships

 $34,510 $6,976 $27,534 $23,079 $3,829 $19,250 

Non-compete agreements

        1,751  1,674  77 

Trademarks and tradenames

  2,233  287  1,946  2,233  207  2,026 
              

Total amortizing intangible assets

  37,623  8,143  29,480  27,063  5,710  21,353 

Indefinite lived intangible assets:

                   

Trademarks and tradenames

  28,856    28,856  28,848    28,848 
              

Total

 $66,479 $8,143 $58,336 $55,911 $5,710 $50,201 
              

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        Amortization expense was $1.5$3.5 million, $0.1$1.9 million and $0.6$2.4 million for the years ended July 30, 2011, July 31, 2010 and August 2, 2008, July 28, 2007, and July 29, 2006,1, 2009, respectively. The estimated future amortization expense for the next five fiscal years on finite lived intangible assets outstandingexisting as of August 2, 2008July 30, 2011 is shown below:

Fiscal Year:
 (In thousands) 

2009

 $1,903 

2010

  1,471 

2011

  1,177 

2012

  1,094 

2013

  334 
    

 $5,979 
    

Fiscal Year:
 (In thousands) 

2012

 $3,060 

2013

  3,117 

2014

  3,060 

2015

  3,060 

2016

  3,060 
    

 $15,357 
    

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        The Company records revenue upon delivery of products. Revenues are recorded net of applicable sales discounts and estimated sales returns. Sales incentives provided to customers are accounted for as reductions in revenue as the related revenue is recorded. The Company's sales are primarily withto customers located throughout the United States.States and Canada.

        Whole Foods Market, Inc. ("Whole Foods Market") and Wild Oats Markets, Inc. ("Wild Oats Markets") werewas the Company's largest two customerscustomer in each fiscal 2008, 2007 and 2006. In August 2007,year presented. Whole Foods Market and Wild Oats Markets completed their previously-announced merger, as a result of which, Wild Oats Markets became a wholly-owned subsidiary of Whole Foods Market. Whole Foods Market sold all thirty-five of Wild Oats Markets' Henry's and Sun Harvest store locations to a subsidiary of Smart & Final Inc. on September 30, 2007. On a combined basis and excluding sales to Henry's and Sun Harvest store locations, Whole Foods Market and Wild Oats Markets accounted for approximately 31.0%36%, 34.7%35%, and 34.1%33% of our net sales for the years ended July 30, 2011, July 31, 2010 and August 2, 2008, July 28, 2007 and July 29, 2006, respectively.1, 2009. There were no other customers that individually generated 10% or more of the Company's net sales.

        The Company analyzes customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of its allowance for doubtful accounts. In instances where a reserve has been recorded for a particular customer, future sales to the customer are conducted using either cash-on-delivery terms, or the account is closely monitored so that as agreed upon payments are received, orders are released; a failure to pay results in held or cancelled orders.

        The carrying amounts of the Company's financial instruments including cash, accounts receivable, accounts payable and certain accrued expenses approximate fair value due to the short-term nature of these instruments.

        The carryingfollowing estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. The fair value of notes receivablepayable and long-term debt are based on the instruments' interest rate, terms, maturity date and collateral, if any, in comparison to the Company's incremental borrowing rate for similar financial instruments.

        The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates


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presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

 
 August 2, 2008 July 28, 2007 
 
 Carrying Value Fair Value Carrying Value Fair Value 
 
 (In thousands)
 

Assets:

             

Cash and cash equivalents

 $25,333 $25,333 $17,010 $17,010 

Accounts receivable

  179,063  179,063  160,329  160,329 

Notes receivable

  3,761  3,761  4,483  4,483 

Liabilities:

             

Notes payable

  288,050  288,050  120,000  120,000 

Long term debt, including current portion

  63,512  63,765  72,001  72,092 

Swap agreements:

             
 

Interest rate swap

  (1,199) (1,199) 643  643 

 
 July 30, 2011 July 31, 2010 
 
 Carrying Value Fair Value Carrying Value Fair Value 
 
 (In thousands)
 

Assets:

             

Cash and cash equivalents

 $16,867 $16,867 $13,802 $13,802 

Accounts receivable

  257,482  257,482  217,097  217,097 

Notes receivable

  2,826  2,826  3,346  3,346 

Liabilities:

             

Accounts payable

  217,074  217,074  205,202  205,202 

Notes payable

  115,000  115,000  242,570  242,570 

Long term debt, including current portion

  48,433  48,424  53,466  53,456 

Swap agreements:

             
 

Interest rate swap

  (1,259) (1,259) (2,493) (2,493)

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based on amounts that differ from those estimates.


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        The Company issues trade notes receivable to certain customers under two basic circumstances; inventory purchases for initial store openings and overdue accounts receivable. Notes issued in connection with store openings are generally receivable over a period not to exceed twelve months. Notes issued in connection with overdue accounts receivable may extend for periods greater than one year. All notes are issued at a market interest rate and contain certain guarantees and collateral assignments in favor of the Company.

        The Company adopted Financial Accounting Standards Board (the "FASB") Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004),ASC 718,Share-Based PaymentStock Compensation ("SFAS 123(R)"ASC 718"), effective August 1, 2005. SFAS 123(R)ASC 718 requires the recognition of the fair value of share-based compensation in net income. The Company has three share-based employee compensation plans, which are described more fully in Note 3. Share-based compensation consists of stock options, restricted stock awards, and restricted stock units, performance shares and performance units. Stock options are granted to employees and directors at exercise prices equal to the fair market value of the Company's stock at the dates of grant. Generally, stock options, restricted stock awards and restricted stock units granted to employees vest ratably over four years from the grant date.date and grants to our Board of Directors vest ratably over two years with one third vesting immediately. The performance units granted to the Company's President and Chief Executive Officer upon hire during fiscal 2009 vested following the end of fiscal 2010, and those performance shares and performance units granted during March 2011 vested following the end of fiscal 2011, both in accordance with the terms of the related Performance Share and Performance Unit agreements. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period of the individual grants, which generally equals the vesting period.

        SFAS 123(R)ASC 718 also requires that compensation expense be recognized for only thatthe portion of stock basedshare-based awards that are expected to vest. Therefore, we apply estimated forfeiture rates that are derived from historical employee and director termination activity to reduce the amount of compensation expense recognized. If the actual forfeitures differ from the estimate, additional adjustments to compensation expense may be required in future periods.

        The Company receives an income tax deduction for grants of restricted stock grantsawards and restricted stock units when they vest and for stock options exercised by employees equal to the excess of the market value of our common stock on the date of exercise over the option price. Excess tax benefits


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(tax (tax benefits resulting from tax deductions in excess of compensation cost recognized) are classifiedpresented as a cash flow provided by financing activities with a corresponding cash flow used in operating activities in the accompanying Consolidated Statementconsolidated statement of Cash Flows in accordance with SFAS 123(R).cash flows.

        Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by adding the dilutive potential common shares to the weighted average number of common shares that were outstanding during the period. For purposes of the diluted earnings per share calculation, outstanding stock options, restricted stock awards and restricted stock units are considered common stock equivalents, using the treasury stock method. A reconciliation of the weighted average number of


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shares outstanding used in the computation of the basic and diluted earnings per share for all periods presented follows:

 
 Years ended 
 
 August 2, 2008 July 28, 2007 July 29, 2006 
 
 (In thousands)
 

Basic weighted average shares outstanding

  42,690  42,445  41,682 

Net effect of dilutive common stock equivalents based upon the treasury stock method

  165  341  622 
        

Diluted weighted average shares outstanding

  42,855  42,786  42,304 
        

Potential anti-dilutive common shares excluded from the computation above

  851  311  14 
        

 
 Fiscal years ended 
 
 July 30,
2011
 July 31,
2010
 August 1,
2009
 
 
 (In thousands)
 

Basic weighted average shares outstanding

  47,459  43,184  42,849 

Net effect of dilutive common stock equivalents based upon the treasury stock method

  356  241  144 
        

Diluted weighted average shares outstanding

  47,815  43,425  42,993 
        

Potential anti-dilutive share-based payment awards excluded from the computation above

  99  791  1,436 
        

        Comprehensive income (loss) is calculatedreported in accordance with SFAS No. 130,ASC 200,Reporting Comprehensive Income, and includes net income and the change in other comprehensive income (loss). Other comprehensive income (loss) is comprised of the net change in fair value of derivative instruments designated as cash flow hedges.hedges, as well as foreign currency translation related to the translation of UNFI Canada from the functional currency of Canadian dollars to our U.S. dollar reporting currency. For all periods presented, we display comprehensive income (loss) and its components as part of the consolidated statements of stockholders' equity.

        The Company is exposed to market risks arising from changes in interest rates, fuel costs, and fuel costs.with the creation and operation of UNFI Canada, exchange rates. The Company generally uses derivatives principally in the management of interest rate and fuel price exposure. However, during the fiscal year ended July 31, 2010, the Company entered into a forward contract to exchange United States dollars for Canadian dollars in anticipation of the Canadian dollars needed to fund the acquisition of the Canadian food distribution assets of SunOpta, Inc. The Company does not utilize derivatives that contain leverage features. OnFor derivative transactions accounted for as hedges, on the date on which the Company enters into athe derivative transaction, the derivativeexposure is designated as a hedge of the identified exposure.identified. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction. In this documentation, the Company specifically identifies the asset, liability, firm commitment, forecasted transaction, or net investment that has been designated as the hedged item and states how the hedging instrument is expected to reduce the risks related to the hedged item. The Company measures effectiveness of its hedging relationships both at hedge inception and on an ongoing basis as needed.

        The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are generally recorded in cost of sales, whereas shipping and handling costs for selecting, quality assurance, and outbound freighttransportation are recorded in operating expenses.


Table of Contents Outbound shipping and handling costs, which exclude employee benefit expenses which are not allocated, totaled $266.7 million, $222.0 million and $217.0 million for the fiscal years ended July 30, 2011, July 31, 2010 and August 1, 2009, respectively.

        The Company is primarily self-insured for workers' compensation, and general and automobile liability insurance. It is the Company's policy to record the self-insured portion of workers'


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compensation and automobile liabilities based upon actuarial methods to estimate the future cost of claims and related expenses that have been reported but not settled, and that have been incurred but not yet reported. Any projection of losses concerning workers' compensation and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting litigation trends, benefit level changes and claim settlement patterns.

        The Company records lease paymentsexpense via the straight-line method and, formethod. For leases with step rent provisions whereby the rental payments increase over the life of the lease, and for leases where the Company receives rent-free periods, the Company recognizes expense based on a straight-line basis based on the total minimum lease payments on a straight-line basisto be made over the expected lease term.

        In March 2008,September 2011, the FASBFinancial Accounting Standards Board ("FASB") issued SFAS No. 161,Accounting Standards Update ("ASU") 2011-08,Disclosures about Derivative InstrumentsIntangibles—Goodwill and Hedging Activities—an Amendment of SFAS No. 133Other (Topic 350): Testing Goodwill for Impairment ("SFAS 161"ASU 2011-8"). SFAS 161 enhancesASU 2011-8 modifies the impairment test for goodwill and indefinite lived intangibles so that it is no longer required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for under SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"); and (c) derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS 161to calculate the fair value of a reporting unit unless the Company believes, based on qualitative factors, it is more likely than not that the reporting unit's or indefinite lived intangible asset's fair value is less than the carrying value. ASU 2011-8 is effective for fiscal years and interim periods beginningthat begin after NovemberDecember 15, 2008 and2011, with early adoption is permitted.allowed. The Company doesintends to adopt ASU 2011-8 effective July 31, 2011, which is not expect the adoption of SFAS 161expected to have a material effect on the disclosures that accompany its consolidated financial statements.

        In December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations ("SFAS 141(R)"), which is a revision of SFAS No. 141,Business Combinations. SFAS 141(R) continues to require the purchase method of accounting for business combinations and the identification and recognition of intangible assets separately from goodwill. SFAS 141(R) requires, among other things, the buyer to: (1) fair value assets and liabilities acquired as of the acquisition date (i.e., a "fair value" model rather than a "cost allocation" model); (2) expense acquisition-related costs; (3) recognize assets or liabilities assumed arising from contractual contingencies at the acquisition date using acquisition-date fair values; (4) recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest over the acquisition-date fair value of net assets acquired; (5) recognize at acquisition any contingent consideration using acquisition-date fair values (i.e., fair value earn-outs in the initial accounting for the acquisition); and (6) eliminate the recognition of liabilities for restructuring costs expected to be incurred as a result of the business combination. SFAS 141(R) also defines a "bargain" purchase as a business combination where the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus the fair value of any noncontrolling interest. Under this circumstance, the buyer is required to recognize such excess (formerly referred to as "negative goodwill") in earnings as a gain. In addition, if the buyer determines that some or all of its previously booked deferred tax valuation allowance is no longer needed as a result of the business combination, SFAS 141(R) requires that the reduction or elimination of the valuation allowance be accounted as a reduction of income tax expense. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. The Company will apply SFAS 141(R) to any acquisitions that are made on or after August 2, 2009.

        In December 2007, the FASB issued SFAS No. 160,Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 ("SFAS 160"). This statement establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the


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deconsolidation of a subsidiary. This statement is effective for fiscal years beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS 160 to have a material effect on its consolidated financial statements.

        In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The statement is effective for fiscal years beginning after November 15, 2007. The Company will adopt SFAS 159 in fiscal 2009. The Company does not expect the adoption of SFAS 159 to have a material effect on its consolidated financial statements.

        In September 2006, the FASB issued SFAS 157,Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements under other accounting pronouncements, but does not change the existing guidance as to whether or not an instrument is carried at fair value. The statement is effective for fiscal years beginning after November 15, 2007. The Company will adopt SFAS 157 in fiscal 2009. The Company does not expect the adoption of SFAS 157 to have a material effect on itsCompany's consolidated financial statements.

(2)   ACQUISITIONS

        Whole Foods Distribution.    During the first quarter of fiscal 2011, the Company completed its acquisition of the Rocky Mountain and Southwest distribution business of Whole Foods Market Distribution, Inc. ("Whole Foods Distribution"), a wholly owned subsidiary of Whole Foods Market, Inc. ("Whole Foods Market"), whereby the Company (i) acquired inventory at Whole Foods Distribution's Aurora, Colorado and Austin, Texas distribution facilities; (ii) acquired substantially all of Whole Foods Distribution's assets, other than the inventory, at the Aurora, Colorado distribution facility; (iii) assumed Whole Foods Distribution's obligations under the existing lease agreement related to the Aurora, Colorado distribution facility; and (iv) hired substantially all of Whole Foods Distribution's employees working at the Aurora, Colorado distribution facility. Net sales resulting from the transaction totaled approximately $131.6 million for the year ended July 30, 2011. The Company does not record the expenses for this business separately from the rest of its broadline distribution business, and therefore it is impracticable for the Company to provide complete financial results for this business.

        The following table summarizes the consideration paid for the acquisition and the amounts of assets acquired and liabilities assumed recognized at the acquisition date:

 
 (In thousands) 

Inventory

 $6,911 

Property & equipment

  1,500 

Customer relationships and other intangible assets

  10,757 

Goodwill

  2,743 
    

Total assets

 $21,911 

Liabilities

   
    

Cash consideration paid

 $21,911 
    

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        SunOpta Distribution Group.    On June 11, 2010, the Company acquired the Canadian food distribution assets of the SunOpta Distribution Group business ("SDG") of SunOpta, through its wholly-owned subsidiary, UNFI Canada, Inc. ("UNFI Canada"). Total cash consideration paid in connection with the acquisition was $65.8 million. This acquisition was financed through borrowings under the Company's existing revolving credit facility.

        The following table summarizes the consideration paid for the acquisition and the amounts of assets acquired and liabilities assumed recognized at the acquisition date:

 
 (In thousands) 

Total current assets

 $35,106 

Property & equipment

  7,512 

Customer relationships and other intangible assets

  13,059 

Goodwill

  23,485 
    

Total assets

 $79,162 

Liabilities

  13,385 
    

Cash consideration paid

 $65,777 
    

        The translation of the consideration paid and the asset allocations above from the functional currency of Canadian dollars to US dollars were performed utilizing the June 11, 2010 spot rate of $0.9673. The fair value assigned to identifiable intangible assets acquired was determined primarily by using an income approach. Identifiable intangible assets include customer relationships of $12.3 million and the Aux Milles tradename of approximately $0.8 million. The customer relationships intangible asset is being amortized on a straight-line basis over an estimated useful life of 11.1 years, while the tradename is considered indefinite lived. Significant assumptions utilized in the income approach were based on company specific information and projections, which are not observable in the market and are therefore considered Level 3 measurements as defined by authoritative guidance. With this acquisition, the Company became the largest distributor of natural, organic and specialty foods, including kosher foods, in Canada and has an immediate platform for further growth in the Canadian market. The goodwill of $23.5 million represents the future economic benefits expected to arise that could not be individually identified and separately recognized, including expansion of the Company's sales into the Canadian market and expanded vendor relationships. Of the total amount of goodwill recorded, approximately $17.7 million is deductible for tax purposes.

        Acquisition costs related to the establishment of UNFI Canada and the subsequent purchase of SDG were approximately $1.0 million during fiscal 2010, and were expensed as incurred and are included within "Operating Expenses" in the Consolidated Statements of Income. Net sales from the acquisition totaled $200.7 million for the year ended July 30, 2011. Total assets of UNFI Canada were approximately $93.8 million as of July 30, 2011.

        On November 2, 2007, the Company acquired Distribution Holdings, Inc. ("DHI") and its wholly-owned subsidiary Millbrook Distribution Services, Inc. ("Millbrook"DHI"), a distributor of specialty food items (including ethnic, kosher, gourmet, organic and natural foods), health and beauty care items and other non-food items from dedicated distribution centers located in Massachusetts New Jersey, and Arkansas, as well as certain of our broadline distribution centers, to customers throughout the United States. TheStates and Canada. With its recent achievement of new business in the conventional supermarket channel, the Company believes that the acquisition of DHI and Millbrook accomplishesaccomplished certain strategic objectives, including accelerating the expansion into a number of historically high-growth business channels and establishing immediate market share in the fast-growing specialty foods market. The Company also believes that the acquisition of MillbrookDHI provides valuable strategic opportunities enabling the Company to further leverage its existing and future relationships in the supermarket business channel and that Millbrook'sDHI's complementary product lines present opportunities for cross-selling which will further grow the Company's wholesale distribution business. These factors contributed to the purchase price that resulted in goodwill, as


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further noted below. Of the total amount of goodwill recorded, approximately $8.4$9.3 million is deductible for tax purposes.

        Total cash consideration paid in connection with the mergeracquisition of DHI was $85.5 million, comprised of $84.0 million of purchase price and $1.5 million of related transaction fees incurred, subject to certain adjustments set forth in the merger agreement. Prior to the acquisition and during the three months ended October 27, 2007, the Company entered into a note receivable from DHI in the amount of $5.0 million, which was assumed by the Company as part of the purchase price. This acquisition was financed through borrowings under the Company's existing revolving credit facility, which was amended in November 2007 to increase the Company's maximum borrowing base thereunder. See Note 6 for a description of these amendments.

        TheDuring the year ended August 1, 2009, the Company is in the process of makingcompleted the final purchase price allocation for its acquisition of DHI with the Millbrook acquisition and has engagedassistance of a third-party valuation firm to independently appraisefirm's independent appraisal of the fair value of


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certain assets acquired. As a result of the final purchase price allocation, during the year ended August 1, 2009, goodwill decreased by approximately $7.2 million, primarily due to an adjustment of $5.6 million to the valuation of certain intangibles, as well as adjustments to certain deferred tax assets and liabilities. The following table presents the preliminaryfinal allocation of fair values of assets and liabilities recorded in connection with the MillbrookDHI acquisition, (in thousands):including adjustments recorded in fiscal 2010 and 2011 discussed below:

Total current assets

 $42,239 

Property & equipment

  12,516 

Customer relationships and other intangible assets

  6,060 

Goodwill

  90,088 

Other assets

  3,542 
    

  154,445 

Liabilities

  68,927 
    

Cash consideration paid

 $85,518 
    

 
 (In thousands) 

Total current assets

 $42,727 

Property & equipment

  12,516 

Customer relationships and other intangible assets

  11,610 

Goodwill

  81,224 

Other assets

  2,394 
    

  150,471 

Liabilities

  64,953 
    

Cash consideration paid

 $85,518 
    

        The Company has undertaken certain restructuring activities at Millbrook.DHI. These activities, which include reductions in staffing and the planned elimination of a facility, were accounted for in accordance with Emerging Issues Task Force (EITF) Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination"ASC 420,Exit or Disposal Cost Obligations. The cost of these actions was charged to the cost of the acquisition and a corresponding liability of $7.6 million was included in accrued expensesother long-term liabilities for the fiscal year ended August 1, 2009. This liability was reduced in fiscal 2010 by $1.7 million ($1.0 million net of tax) due to adjustments in the accompanying balance sheet. In accordance with EITF Issue No. 95-3, the Company will finalize its restructuring plans within one year from the datetimeline of the acquisition.planned restructuring activities. This liability was further reduced in fiscal 2011 by $1.8 million ($1.0 million net of tax) due to further adjustments in the timeline of the planned restructuring activities and a payment of $0.6 million.

        During the fiscal year ended July 30, 2011, the Company recorded an increase of $0.1 million to its intangible assets in recognition of ongoing contingent consideration payments in the form of royalties ranging between 2-4% of net sales (as defined in the applicable purchase agreement) related to two of its branded product company acquisitions. A third branded product company acquisition requires ongoing contingent consideration payments in the form of earn-outs over a period of five years from the acquisition date of November 2008. These earn-outs are based on tiers of net sales for the trailing twelve months, and no such amounts were earned or paid during the year ended July 30, 2011.

        During the fiscal year ended July 31, 2010, the Company made certain adjustments to the opening balance sheets recorded for the three branded product companies purchased during the fiscal year ended August 2, 2008,1, 2009, which the company includes in the "other" category. See Note 15 "Business


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Segments" for a description of the Company's reportable segment and the "other" category. Intangibles assets increased by approximately $0.6 million, primarily due to those final adjustments of certain current assets and accrued expenses as well as ongoing contingent consideration in the form of royalty payments.

        During the fiscal year ended August 1, 2009, the Company acquired substantially all of the assets and liabilities of three branded product companies, and one retail store outside ofwhich the wholesale segment.Company includes in the "other" category. The total cash consideration paid for these branded product companies and retail storelines was approximately $22.2$4.5 million. Approximately $0.9 million in addition to approximately $1.1 million of holdbacks recorded in accrued expenses in the consolidated balance sheets. No goodwill was recorded in connection with the branded product company acquisitions. Goodwill of $0.6 million was recorded in connection with the retail store acquisition. Other intangible assets acquired in the amount of $20.5 million, were acquired during the year ended August 2, 2008, which included $19.9 million in trademarks and tradenames and $0.6 million in non-compete agreements. The cash paid was financed by borrowings under the Company's existing revolving credit facility.

        On April 2, 2007, the Company acquired certain assets of Organic Brands, LLC ("Organic Brands") for cash consideration of approximately $5.5 million and notes payable totaling $3.0 million. The cash portion of the purchase price was financed by borrowings against the Company's line of credit. The operating results of Organic Brands have been included in the consolidated financial statements of the Company beginning with the acquisition date. The acquisition resulted in goodwill of $1.8 million, all of which is deductible for tax purposes. Such goodwill was assigned to the Company's manufacturing division. Other intangible assets acquired were $5.0 million.

        During the year ended July 28, 2007, the Company acquired certain assets related to additional product lines outside of the wholesale segment. The total cash consideration paid for these product lines was approximately $3.8 million in addition to approximately $0.2 million of holdbacks recorded in accrued expenses in the consolidated balance sheets. The cash paid was financed by borrowings against the Company's line of credit. The consolidated financial statements of the Company have included operating results of each of these product lines since the respective acquisition dates. Resulting goodwill of $0.1 million is deductible for tax purposes. Other intangible assets acquired were $3.4 million.


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        Results of operations of the acquired companies have been included in the Company's consolidated statements of income since the respective dates of acquisition. The following table presents the Company's unaudited pro forma results of operations assuming that the acquisitions discussed above had occurred as of the beginning of fiscal 2006 (in thousands). The following pro forma results do not include any cost savings that may result from the combination of the acquired companies and the Company.

 
 Years Ended 
 
 August 2,
2008
 July 28,
2007
 

Net Sales

 $3,438,903 $3,098,821 

Income before Income taxes

  68,070  74,085 

Net Income

  42,748  45,302 

Earnings per common share:

       
 

Basic

 $1.00 $1.06 
 

Diluted

 $1.00 $1.06 

(3)   STOCK OPTIONEQUITY PLANS

        Effective August 1, 2005, the Company adopted the fair value recognition provisions of SFAS 123(R), using the modified-prospective transition method. Under this transition method, compensation cost recognized in fiscal 2006 includes: (a) compensation cost for all share-based payments granted through August 1, 2005, but for which the requisite service period had not been completed as of August 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to August 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R).

        The Company recognized share-based compensation expense of $4.7$9.2 million or $0.07 per diluted share, for the fiscal year ended August 2, 2008. The Company recognizedJuly 30, 2011, compared to share-based compensation expense of $4.0$8.1 million or $0.06 per diluted share,and $4.7 million for the yearfiscal years ended July 28, 2007. The Company recognized share-based31, 2010 and August 1, 2009, respectively. Share-based compensation expense of $5.5for performance-based share awards was $0.7 million or $0.08 per diluted share,and $1.0 million for the yearfiscal years ended July 29, 2006, of which $1.0 million related to the accelerated vesting of certain options pursuant to the employment transition agreement the Company entered into during the first quarter of fiscal 2006 with its former President30, 2011 and Chief Executive Officer.July 31, 2010, respectively.

        As of August 2, 2008,July 30, 2011, there was $9.7$14.0 million of total unrecognized compensation cost related to outstanding share-based compensation arrangements (including stock optionoptions, restricted stock, and nonvested share awards)restricted stock units). This cost is expected to be recognized over a weighted-average period of 1.42.6 years.

        For stock options, the fair value of each grant was estimated at the date of grant using the Black-Scholes option pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and expected life. Expected volatilities utilized in the model are based on the historical volatility of the Company's stock price. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The model incorporates exercise and post-vesting forfeiture assumptions based on an analysis of historical data. The expected term is derived from historical information and other factors. The fair value of restricted stock andawards, restricted stock units, isand performance share units are determined based on the number of shares or units, as applicable, granted and the quoted price of the Company's common stock as of the grant date.


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        The following summary presents the weighted average assumptions used for stock options granted in fiscal 2008, 2007,2011, 2010 and 2006:2009:

 
 Year ended 
 
 August 2,
2008
 July 28,
2007
 July 29,
2006
 

Expected volatility

  32.7% 34.6% 36.6%

Dividend yield

  0.0% 0.0% 0.0%

Risk free interest rate

  3.1% 4.5% 4.4%

Expected term (in years)

  3.0  3.0  3.0 

 
 Year ended 
 
 July 30,
2011
 July 31,
2010
 August 1,
2009
 

Expected volatility

  44.7% 45.2% 39.0%

Dividend yield

  0.0% 0.0% 0.0%

Risk free interest rate

  0.9% 1.4% 2.1%

Expected term (in years)

  3.0  3.0  3.0 

        As of August 2, 2008,July 30, 2011, the Company had twothree equity incentive plans that provided for the issuance of stock option plans:options: the 2002 Stock Incentive Plan and(the "2002 Plan"), the 1996 Stock Option Plan (collectively,(the "1996 Plan") and effective with an amendment approved by the Company's stockholders during the 2010 Annual Meeting, the 2004 Equity Incentive Plan (the "2004 Plan")(collectively, the "Plans"). The Plans provide for grants of stock options to employees, officers, directors and others. TheseStock options granted are intended to either qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code or be "non-statutory stock options." Beginning with the Company's fiscal 2010 grants, non-qualified stock options are being granted in place of incentive stock options to decrease the variability in income taxes due to the timing of tax benefits from disqualifying dispositions. Vesting requirements for awards under the Plans are at the discretion of the Company's Board of Directors, and are typicallyor Compensation Committee of the Board of Directors. Typically options granted to


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employees vest ratably over four years, while options granted to non-employee directors vest one third immediately with gradedthe remainder vesting for employees andratably over two years with graded vesting for non-employee directors.years. The maximum term of all incentive stock options granted under the Plans and non-statutory stock options granted under the 2002 Stock Incentive Plan, is ten years. The maximum term for non-statutory stock options granted under the 1996 Stock Option Plan iswas at the discretion of the Company's Board of Directors, and all grants to date have had a term of ten years. There have been no stock option grants under the 2004 Plan. There were 7,800,000 shares authorized for grant under the Plans.1996 Plan and 2002 Plan. There were 1,054,267 shares authorized for grant under the 2004 Plan as of December 16, 2010, the effective date when the 2004 Plan was amended to allow for the award of stock options. These shares may be used to issue stock options, restricted stock, restricted stock units or performance based awards. As of August 2, 2008, 367,829July 30, 2011, 80,848 shares were available for grant under the 2002 Stock Incentive Plan. ThePlan and the authorization for new grants under the 1996 Plan has expired. During the fourth quarter of fiscal 2010, the Company has a policy ofissued shares from treasury in addition to issuing new shares to satisfy stock option exercises.exercises and restricted stock vestings.

        The following summary presents the weighted-average remaining contractual term of options outstanding at August 2, 2008July 30, 2011 by range of exercise prices.

Exercise Price Range
 Number of
Shares
Outstanding
 Weighted
Average
Exercise
Price
 Weighted
Average
Remaining
Contractual
Term
 Number of
Shares
Exercisable
 Weighted
Average
Exercise Price
 

$11.00 - $18.00

  223,172 $12.29  4.0  223,172 $12.29 

$18.01 - $24.00

  222,888 $18.67  5.3  222,888 $18.67 

$24.01 - $30.00

  573,065 $27.46  7.2  387,211 $27.60 

$30.01 - $37.00

  278,065 $36.23  8.3  78,264 $36.08 
               

  1,297,190 $25.22  6.5  911,535 $22.40 
               

Exercise Price Range
 Number of
Options
Outstanding
 Weighted
Average
Exercise
Price
 Weighted
Average
Remaining
Contractual
Term
 Number of
Shares
Exercisable
 Weighted
Average
Exercise Price
 

$10.00 - $18.00

  7,250 $13.26  3.0  6,250 $13.31 

$18.01 - $24.00

  29,750 $18.87  2.4  29,250 $18.79 

$24.01 - $30.00

  401,416 $25.48  6.9  207,873 $26.03 

$30.01 - $43.00

  225,632 $35.33  7.2  123,292 $36.21 
               

  664,048 $28.40  6.8  366,665 $28.66 
               

        The following summary presents information regarding outstanding stock options as of August 2, 2008July 30, 2011 and changes during the fiscal year then ended with regard to options under the Plans:

 
 Number
of Shares
 Weighted
Average
Exercise
Price
 Weighted
Average
Remaining
Contractual
Term
 Aggregate
Intrinsic
Value
 

Outstanding at beginning of year

  1,351,441 $25.13      

Granted

  116,100 $28.28      

Exercised

  (64,513)$19.93      

Forfeited

  (105,838)$30.67      
            

Outstanding at end of year

  1,297,190 $25.22 6.5 years $32,713,000 
          

Exercisable at end of year

  911,535 $22.40 5.7 years $20,417,000 
          


 
 Number
of Options
 Weighted
Average
Exercise
Price
 Weighted
Average
Remaining
Contractual
Term
 Aggregate
Intrinsic
Value
 

Outstanding at beginning of year

  961,307 $27.67      

Granted

  104,864 $34.31      

Exercised

  (363,326)$27.97      

Forfeited

  (19,922)$26.36      

Cancelled

  (18,875)$34.51      
            

Outstanding at end of year

  664,048 $28.40 6.8 years $8,865,988 
          

Exercisable at end of year

  366,665 $28.66 5.6 years $4,799,203 
          

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        The weighted average grant-date fair value of options granted during the fiscal years ended July 30, 2011, July 31, 2010, and August 2, 2008, July 28, 2007,1, 2009 was $10.64, $7.73 and July 29, 2006 was $7.34, $10.48 and $7.76,$7.05, respectively. The aggregate intrinsic value of options exercised during the fiscal years ended July 30, 2011, July 31, 2010, and August 2, 2008, July 28, 2007, and July 29, 20061, 2009, was $1.3$3.9 million, $7.7$4.6 million and $15.6$1.2 million, respectively.

        At August 2, 2008, the Company also had the 2004 Equity Incentive Plan (the "2004 Plan"). The 2004 Plan provideswas amended during fiscal 2009 to provide for the issuance of up to 1,000,0002,500,000 equity-based compensation awards, other thanand during fiscal 2011 was further amended to provide for the issuance of stock options such asin addition to restricted shares and units, performance shares and units, bonus shares and stock appreciation rights. Vesting requirements for restricted share and unitthe awards under the 2004 Plan are at the discretion of the Company's Board of Directors, or the Compensation Committee thereof, and are typically four years with graded vestingequal annual installments for employees and two yearsthree equal annual installments with gradedone


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third vesting immediately for non-employee directors. The performance units granted to the Company's President and Chief Executive Officer upon hire during fiscal 2009 vested as of July 31, 2010, and those granted during March 2011 vested as of July 30, 2011, both in accordance with the terms of the related Performance Unit and Performance Share agreements. At August 2, 2008, 495,059July 30, 2011, 1,023,847 shares were available for grant under the 2004 Plan.

        The following summary presents information regarding nonvested (restricted) sharerestricted stock awards, restricted stock units, performance shares and unit awardsperformance units under the 2004 Plan as of August 2, 2008July 30, 2011 and changes during the fiscal year then ended with regard to nonvested share and unit awards under the 2004 Plan:ended:

 
 Number
of Shares
 Weighted Average
Grant-Date
Fair Value
 

Nonvested at July 28, 2007

  216,648 $32.45 

Granted

  231,640 $27.95 

Vested

  (97,312)$30.87 

Forfeited

  (21,105)$29.73 
      

Nonvested at August 2, 2008

  329,871 $29.94 
      

 
 Number
of Shares
 Weighted Average
Grant-Date
Fair Value
 

Outstanding at July 31, 2010

  614,115 $25.51 

Granted

  363,302 $34.29 

Vested

  (218,177)$26.34 

Forfeited

  (57,097)$28.30 
      

Outstanding at July 30, 2011

  702,143 $29.57 
      

        The total fairintrinsic value of sharesrestricted stock awards and restricted stock units vested was $9.1 million, $6.2 million and $2.4 million during the fiscal years ended July 30, 2011, July 31, 2010 and August 1, 2009, respectively. The total intrinsic value of performance share awards and performance units vested was $0.7 million and $1.0 million during the fiscal years ended July 30, 2011 and July 31, 2010, respectively. No performance share awards or performance units vested during the fiscal year ended August 2, 2008 was $2.6 million. The total fair value of shares vested during1, 2009.

        During the year ended July 28, 200730, 2011, a total of 25,000 performance shares and 12,500 performance units were granted to the Company's President and CEO, the vesting of which was $1.3contingent on the attainment of specific levels of earnings before interest and taxes and return on invested capital. The per share grant-date fair value of these grants was $42.03. Effective July 30, 2011, 18,924 of the performance shares vested with a corresponding intrinsic value and fair value of $0.8 million. The remainder of the performance shares were forfeited, and no shares were issued for the performance units.

        During the year ended July 31, 2010, 175 units, in addition to the 50,000 units granted during fiscal 2009, were granted to the Company's President and CEO in connection with the related Performance Unit Agreement awarded on November 5, 2008. The grant-date fair value of these grants was $19.99. Effective July 31, 2010, 50,175 units vested, with a corresponding intrinsic value and fair value of $1.0 million and $1.7 million respectively.

(4)   ALLOWANCE FOR DOUBTFUL ACCOUNTS AND NOTES RECEIVABLE

        The allowance for doubtful accounts and notes receivable consists of the following:

 
 Fiscal year
ended
July 30, 2011
 Fiscal year
ended
July 31, 2010
 Fiscal year
ended
August 1, 2009
 
 
 (In thousands)
 

Balance at beginning of year

 $7,692 $8,876 $7,088 

Additions charged to costs and expenses

  635  1,149  4,759 

Deductions

  (2,473) (3,399) (2,971)

Charged to Other Accounts(a)

  0  1,066   
        

Balance at end of year

 $5,854 $7,692 $8,876 
        

(a)
Relates to acquisitions.

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        The Company analyzes the details of specific transactions, overall customer creditworthiness, current accounts receivable aging, payment history, and any available industry information when determining whether to charge off an account. In instances where a balance has been charged off, future sales to the customer are conducted using either cash-on-delivery terms, or the account is closely monitored so that as agreed-upon payments are received, orders are released; a failure to pay results in held or cancelled orders.

(5)   RESTRUCTURING ACTIVITIES

        During the year ended July 30, 2011, the Company entered into an asset purchase agreement with L&R Distributors, Inc. ("L&R Distributors"), a leading national distributor of non-food products and general merchandise, to divest the Company's conventional non-foods and general merchandise lines of business. This strategic transaction will allow the Company to concentrate on its core business of the distribution of natural, organic, and specialty foods and products. The Company entered the conventional non-foods and general merchandise businesses, which includes cosmetics, seasonal products, conventional health & beauty products and hard goods, as part of its acquisition of DHI in November 2007. In connection with this agreement, following the closing of the sale of its non-foods and general merchandise lines of business to L&R Distributors, the Company will cease operations at its Harrison, Arkansas facility. This facility and the related assets will be considered held-for-sale once the sale to L&R Distributors is consummated, which, subject to the satisfaction of customary closing conditions, is expected to occur in the Company's first quarter of fiscal 2012. All specialty food products from the Harrison, Arkansas facility will be transferred into the Company's other distribution centers across the United States.

        As a result of this transaction and the impending closure of the Harrison, Arkansas facility, the Company recognized a non-cash impairment charge on long-lived assets including land, building and equipment of $5.8 million during the fourth quarter of fiscal 2011. In addition, the Company incurred $0.5 million during the fourth quarter of fiscal 2011 for other non-recurring charges to transition the specialty food line of business into the Company's other facilities.

(6)   NOTES PAYABLE

        The Company has a revolving credit facility with a maximum borrowing base of $400 million, with a one-time option, subject to approval by the lenders under the credit facility, to increase the borrowing base by up to an additional $50 million. Interest accrues on borrowings under this facility, at the Company's option, at either the base rate (the applicable prime lending rate of Bank of America Business Capital, as announced from time to time) (3.25% at July 30, 2011 and July 31, 2010) or at the one-month London Interbank Offered Rate ("LIBOR") plus 0.75%. The revolving credit facility matures on November 27, 2012. The weighted average interest rate on the amended credit facility was 0.94% as of July 30, 2011. An annual commitment fee in the amount of 0.125% is payable monthly based on the average daily unused portion of the amended credit facility. The Company's borrowing base is determined as the lesser of (1) $400 million or (2) the fixed percentages of our previous fiscal month-end eligible accounts receivable and inventory levels. As of July 30, 2011, the Company's borrowing base, which was calculated based on the Company's eligible accounts receivable and inventory levels, was $400.0 million. As of July 30, 2011, the Company had $115.0 million outstanding under the credit facility, $21.7 million in letter of credit commitments and $1.3 million in reserves which generally reduces the Company's available borrowing capacity under the existing revolving credit facility on a dollar for dollar basis. The Company's resulting remaining availability was $262.0 million as of July 30, 2011.

        The revolving credit facility, as amended, requires the Company to maintain a minimum fixed charge coverage ratio (as defined in the agreement) of 1.5 to 1.0 calculated at the end of each of the Company's fiscal quarters on a rolling four quarter basis. The Company was in compliance with all


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restrictive covenants at July 30, 2011 and July 31, 2010. The credit facility also provides for the bank to syndicate the credit facility to other banks and lending institutions. The Company has pledged the majority of its U.S.-generated accounts receivable and inventory for its obligations under the amended credit facility.

(7)   LONG-TERM DEBT

        The Company has a term loan agreement with a financial institution which matures in July 2012. Interest accrues at 30 day LIBOR plus 1.0%. The Company has pledged certain real property as collateral for its obligations under the term loan agreement.

        As of July 30, 2011 and July 31, 2010, the Company's long-term debt consisted of the following:

 
 July 30,
2011
 July 31,
2010
 
 
 (In thousands)
 

Term loan payable to bank, secured by real estate, due monthly, and maturing in July 2012, at an interest rate of 30 day LIBOR plus 1.00% (1.19% at July 30, 2011 and 1.31% at July 31, 2010)

 $47,111 $51,822 

Real estate and equipment term loans payable to bank, secured by building and other assets, due monthly and maturing in June 2015, at an interest rate of 8.60%

  771  930 

Term loan for employee stock ownership plan, secured by common stock of the Company, due monthly and maturing in May 2015, at an interest rate of 1.33%

  551  713 
      

 $48,433 $53,466 
 

Less: current installments

  47,447  5,033 
      
 

Long-term debt, excluding current installments

 $986 $48,433 
      

        Certain of the Company's long-term debt agreements contain restrictive covenants. The term loan agreement, as amended, requires the Company to maintain a minimum fixed charge coverage ratio (as defined in the agreement) of 1.45 to 1.0, calculated at the end of each of the Company's fiscal quarters on a rolling four quarter basis. The Company was in compliance with all of its restrictive covenants at July 30, 2011 and July 31, 2010.

        Aggregate maturities of long-term debt for the next five years and thereafter are as follows at July 30, 2011:

Year
 (In thousands) 

2012

 $47,447 

2013

  352 

2014

  369 

2015

  265 

2016

  0 

2017 and thereafter

  0 
    

 $48,433 
    

(8)   FAIR VALUE MEASUREMENTS

        As of August 2, 2009, the Company had fully adopted ASC 820,Fair Value Measurements and Disclosures ("ASC 820"), for financial assets and liabilities and for non-financial assets and liabilities that are recognized or disclosed at fair value on at least an annual basis. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value


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measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:

        On August 1, 2005, the Company entered into an interest rate swap agreement effective July 29, 2005. The agreement provides for the Company to pay interest for a seven-year period at a fixed rate of 4.70% on an initial amortizing notional principal amount of $50.0 million while receiving interest for the same period at the one-month London Interbank Offered Rate ("LIBOR") on the same notional principal amount. The swap has been entered into as a hedge against LIBOR movements on current variable rate indebtedness at one-month LIBOR plus 1.00%, thereby fixing its effective rate on the notional amount at 5.70%. The swap agreement qualifies as an "effective" hedge under FASB ASC 815,Derivatives and Hedging ("ASC 815"). LIBOR was 0.19% and 0.31% as of July 30, 2011 and July 31, 2010, respectively.

        Interest rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company's interest rate swap agreement is designated as a cash flow hedge at July 30, 2011 and is reflected at fair value in the Company's consolidated balance sheet as a component of other long-term liabilities. The related gains or losses on this contract are generally deferred in stockholders' equity as a component of other comprehensive income. However, to the extent that the swap agreement is not considered to be effective in offsetting the change in the value of the item being hedged, any change in fair value relating to the ineffective portion of the swap agreement is immediately recognized in income. For the periods presented, the Company did not have any ineffectiveness requiring current income recognition.

        From time to time the Company is a party to fixed price fuel supply agreements. During the year ended July 30, 2011, the Company did not enter into any agreements to purchase a portion of its diesel fuel each month at fixed prices. During the year ended July 31, 2010, the Company entered into several agreements which required it to purchase a portion of its diesel fuel each month at fixed prices through July 2011. These fixed price fuel agreements also qualified for the "normal purchase" exception under ASC 815, therefore the fuel purchases under these contracts were expensed as incurred and included within operating expenses.


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        In anticipation of the Canadian dollars needed to fund the acquisition of the SDG assets of SunOpta, the Company entered into a forward contract to exchange United States dollars for Canadian dollars. Upon settlement of the contract in June 2010, the Company recorded a gain of $2.8 million in "other expense (income)" within the fiscal 2010 Consolidated Statement of Income.

        The following tables provide the fair values hierarchy for financial assets and liabilities measured on a recurring basis:

 
 Fair Value at July 30, 2011 
 
 Level 1 Level 2 Level 3 
 
 (In thousands)
 

Description

          

Liabilities

          
 

Interest Rate Swap

   $1,259   
        
  

Total

   $1,259   


 
 Fair Value at July 31, 2010 
 
 Level 1 Level 2 Level 3 
 
 (In thousands)
 

Description

          

Liabilities

          
 

Interest Rate Swap

   $2,493   
        
  

Total

   $2,493   

        The Company's determination of the fair value of its interest rate swap is calculated using a discounted cash flow analysis based on the terms of the swap contract and the observable interest rate curve. The Company does not enter into derivative agreements for trading purposes.

        The following table provides the fair value hierarchy for assets and liabilities measured on a nonrecurring basis:

 
 Fair Value at July 30, 2011 
 
 Level 1 Level 2 Level 3 Total
Losses
 
 
 (In thousands)
 

Description

             

Assets

             
 

Property and Equipment, net

   $285,151   $5,790 
 

Intangible Assets, net

     $58,336  200 
          
  

Total

   $285,151 $58,336 $5,990 

        In accordance with the provisions of the Impairment or Disposal of Long-Lived Assets Subsections of FASB ASC 360-10, long-lived assets held and used with a carrying amount of $290.9 million were written down to their fair value of $285.2 million, resulting in an impairment charge of $5.8 million included in earnings for the fiscal year ended July 30, 2011.

        In accordance with the provisions of the Intangibles—Goodwill and Other Subsections of FASB ASC 350-30, indefinite lived intangible assets with a carrying amount of $58.5 million were written down to their fair value of $58.3 million, resulting in an impairment charge of $0.2 million included in earnings for the fiscal year ended July 30, 2011.


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(9)   TREASURY STOCK

        On December 1, 2004, the Company's Board of Directors authorized the repurchase of up to $50 million of common stock from time to timethrough February 2008 in the open market or in privately negotiated transactions. As part of the stock repurchase program, the Company purchased 228,800 shares of its common stock for its treasury during the year ended July 29, 2006 at an aggregate cost of approximately $6.1 million. All shares were purchased at prevailing market prices. No suchThere were no other purchases were made during the years ended July 28, 2007 or August 2, 2008.

(5)   ASSETS HELD FOR SALEauthorization period.

        In November 2005,The Company, in an effort to reduce the Company transitioned all remaining operations at one of its two Auburn, California facilities to a new facility in Rocklin, California. As a result, the Company reclassified $7.4 million of long-lived assets related to the Auburn facility that were previously included in property and equipment as held for sale in the consolidatedtreasury share balance, sheet. In June 2006, the Company sold a portion of these long-lived assets for less than $0.1 million, resulting in a loss of $0.5 million, which was recorded in operating expensesdecided in the fourth quarter of fiscal 2006. In January 2007,2010 to issue treasury shares to satisfy certain share requirements related to exercises of stock options and vesting of restricted stock units and awards under its equity incentive plans. During the fiscal year ended July 31, 2010, the Company soldissued 201,814 treasury shares related to stock option exercises and the remaining long-lived assets for $5.4 million, resulting in a lossvesting of $1.5 million, which was recorded in operating expenses inrestricted stock units and awards. No shares were reissued from treasury during the secondfiscal year ended July 30, 2011.

(10) SECONDARY COMMON STOCK OFFERING

        During the first quarter of fiscal 2007.

        In the year ended July 28, 2007,2011, the Company transitioned its remaining Auburn, California operations to its Rocklin, California facility, determined to sell the second Auburn, California facility and related assets and recorded an impairment loss of $0.8 million with respect to that facility. The impairment loss was recognized based on management's estimate of fair value of the facility, less costs of disposal. Ascompleted a result, the Company reclassified, to assets held for sale, $5.9 million of long-lived


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assets, net of the $0.8 million impairment loss, that were previously included in property and equipment in accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-lived Assets. During the year ended August 2, 2008, the Company decided not to sell the second Auburn, California facility and related assets due to a need for additional warehouse space in northern California.secondary common stock offering. This offering resulted in an issuance of 4,427,500 shares of common stock, including shares issued to cover the recording of catch up depreciation of $0.2 million during the year ended August 2, 2008 and the reclassification of $5.9 million of assets held for sale to property and equipment, net.

(6)   NOTES PAYABLE

        On April 30, 2004, the Company entered into an amended and restated four-year $250 million revolving credit facility secured by, among other things, the Company's accounts receivable, inventory and general intangibles, with a bank group that was led by Bank of America Business Capital as the administrative agent (the "amended credit facility"). The amended credit facility increased the amount available for borrowing from $150 million to $250 million. On November 2, 2007, the Company amended the amended credit facility to temporarily increase the maximum borrowing base from $250 million to $270 million. On November 27, 2007, the Company again amended the amended credit facility to increase the maximum borrowing base under the credit facility from $270 million to $400 million. The November 27, 2007 amendment also provided the Company with a one-time option, subject to approval by the lenders under the credit facility, to increase the borrowing base by up to an additional $50 million. Interest accrues on borrowings under the amended credit facility, at the Company'sunderwriters' overallotment option, at either the base rate (the applicable prime lending ratea price of Bank$33.00 per share. The net proceeds of America Business Capital, as announced from timeapproximately $138.3 million were used to time) (5.00% at August 2, 2008 and 8.25% at July 28, 2007) or at the one-month London Interbank Offered Rate ("LIBOR") plus 0.75%. The amended credit facility matures on November 27, 2012. The weighted average interest rate on the amended credit facility was 3.46% as of August 2, 2008. An annual commitment fee in the amount of 0.125% is payable monthly based on the average daily unusedrepay a portion of the amended credit facility. As of August 2, 2008, the Company's outstanding borrowings under the amendedits revolving credit facility, totaled $288.1 million with an availabilitywhich had increased during the fourth quarter of $65.0 million.

        On June 4, 2008,fiscal 2010 as the Company entered into an amendment, which was effective as of May 28, 2008, to the amended credit facility in order to (i) waive events of default as a resultfinanced its purchase of the Company's noncompliance at April 26, 2008SDG assets with the fixed charge coverage ratio covenant under amended credit facility (the "Fixed Charge Coverage Ratio Covenant"), (ii) increase the interest rate applicable to borrowings under the amended credit facility by 0.25% during the period from June 1, 2008 through the date on which the Company demonstrates compliance with the Fixed Charge Coverage Ratio Covenant, and (iii) exclude non-cash share based compensation expense from the calculation of EBITDA (as defined under the amended credit facility) in connection with the calculation of the fixed charge coverage ratio under the amendedits revolving credit facility. The amended credit facility requires the Company to maintain a minimum fixed charge coverage ratio of 1.5 to 1.0 calculated at the end of each of the Company's fiscal quarters on a rolling four quarter basis. The principal reason for the Company's noncompliance with the Fixed Charge Coverage Ratio Covenant was the Company's high level of capital expenditures in the trailing twelve month period ending April 26, 2008.

        The Company was in compliance with all restrictive covenants at August 2, 2008 and July 28, 2007. The amended credit facility also provides for the bank to syndicate the credit facility to other banks and lending institutions. The Company has pledged the majority of its accounts receivable and inventory for its obligations under the amended credit facility.

(7)   LONG-TERM DEBT

        The Company entered into a $30 million term loan agreement with a financial institution effective April 30, 2003. The term loan was repayable over seven years based on a fifteen year amortization schedule. Interest accrued at 30 day LIBOR plus 1.50%. The Company has pledged certain real


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property as collateral for its obligations under the term loan agreement. In July 2005, the Company amended the term loan agreement with the financial institution, increasing the principal amount available up to $75 million, decreasing the interest rate to 30-day LIBOR plus 1.0%, and extending the maturity date to July 2012. In connection with the amendments to the amended credit facility described in Note 6, effective November 2, 2007 and November 27, 2007, the Company amended its term loan agreement to conform certain terms and conditions to the corresponding terms and conditions under the amended credit facility.

        On June 4, 2008, the Company entered into an amendment, which was effective as of May 28, 2008, to the term loan agreement in order to (i) waive events of default as a result of the Company's noncompliance at April 26, 2008 with the fixed charge coverage ratio covenant under the term loan agreement (the "Term Loan Fixed Charge Coverage Ratio Covenant"), (ii) increase the interest rate applicable to borrowings under the Company's term loan by 0.25% during the period from June 1, 2008 through the date on which the Company demonstrates compliance with the Term Loan Fixed Charge Coverage Ratio Covenant, and (iii) exclude non-cash share based compensation expense from the calculation of EBITDA (as defined in the term loan agreement) in connection with the calculation of the fixed charge coverage ratio under the term loan agreement. The term loan agreement, as amended, requires the Company to maintain a minimum fixed charge coverage ratio of 1.45 to 1.0, calculated at the end of each of the Company's fiscal quarters on a rolling four quarter basis. The principal reason for the Company's noncompliance with the Term Loan Fixed Charge Coverage Ratio Covenant was the Company's high level of capital expenditures in the trailing twelve month period ending April 26, 2008.

        As of August 2, 2008 and July 28, 2007, the Company's long-term debt consisted of the following:

 
 August 2,
2008
 July 28,
2007
 
 
 (In thousands)
 

Term loan payable to bank, secured by real estate, due
monthly, and maturing in July 2012, at an interest rate of 30 day LIBOR
plus 1.00% (3.46% at August 2, 2008 and 6.32% at July 28, 2007)

 $61,244 $66,348 

Real estate and equipment term loans payable to bank, secured by building and other assets, due monthly and maturing at June 1, 2015, at an interest rate of 8.60%

  1,208  1,330 

Term loan for employee stock ownership plan, secured by common stock of the Company, due monthly and maturing at May 1, 2015, at an interest rate of 10.00%

  1,040  1,203 

Notes payable relating to an acquisition, due quarterly and maturing at March 1, 2009, at an interest rate of 5.25%

    2,642 

Equipment financing loan payable to bank, secured by the underlying assets, due monthly and maturing in July 2008, at an interest rate of 6.49%

    254 

Other

  20  224 
      

 $63,512 $72,001 
 

Less: current installments

  5,027  6,934 
      
 

Long-term debt, excluding current installments

 $58,485 $65,067 
      

        Certain debt agreements contain restrictive covenants. The Company was in compliance with all of its restrictive covenants, including the Term Loan Fixed Charge Coverage Ratio Covenant, at August 2, 2008.


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        Aggregate maturities of long-term debt for the next five years and thereafter are as follows at August 2, 2008:

Year
 (In thousands) 

2009

 $5,027 

2010

  5,020 

2011

  5,033 

2012

  5,047 

2013

  5,063 

2014 and thereafter

  38,322 
    

 $63,512 
    

(8)   FINANCIAL INSTRUMENTS

        The Company's interest rate swap agreement at August 2, 2008 is designated as a cash flow hedge and is reflected at fair value in the Company's consolidated balance sheet and the related gains or losses on this contract are deferred in stockholders' equity as a component of other comprehensive income. However, to the extent that the swap agreement is not considered to be effective in offsetting the change in the value of the item being hedged, any changes in fair value relating to the ineffective portion of the swap agreement is immediately recognized in income. At August 2, 2008, the Company did not have any ineffectiveness requiring current income recognition.

        Interest rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. At August 2, 2008, the Company had one outstanding interest rate swap agreement with a fair value liability of $1.2 million. The interest rate swap agreement has an initial amortizing notional amount of $50 million and provides for the Company to pay interest at a fixed rate of 4.7% while receiving interest for the same period at LIBOR on the same notional principal amount. The interest rate swap agreement has a seven year term with an amortizing notional amount which adjusts down on the dates payments are due on the underlying term loan. The swap has been entered into as a hedge against LIBOR movements on current variable rate indebtedness totaling $61.2 million at LIBOR plus 1.00%, thereby fixing its effective rate on the notional amount at 5.7%. The swap agreement qualified as an "effective" hedge under SFAS 133. LIBOR was 2.46% and 5.32% as of August 2, 2008 and July 28, 2007, respectively.

        The Company has entered into commodity swap agreements to reduce price risk associated with anticipated purchases of diesel fuel. These swap agreements hedgeutilized a portion of the Company's expected fuel usage foradditional borrowing capacity under its revolving credit facility resulting from the periods set forth in the agreements. The agreements call for an exchange of payments with the Company making payments based on fixed price per gallon and receiving payments based on floating prices, without an exchangecommon stock offering to fund its acquisition of the underlying commodity amount upon which the payments are based. The Company monitors the commodity (NYMEX #2 Heating oil) used in its swap agreements to determine that the correlation between the commodityRocky Mountain and diesel fuel is deemed to be "highly effective." At August 2, 2008, the Company had no outstanding commodity swap agreements. During the year ended July 28, 2007, the Company was a party to two commodity swap agreements that commenced and expired on November 1, 2005 and October 31, 2006, respectively and July 1, 2006 and June 30, 2007, respectively.


TableSouthwest distribution businesses of ContentsWhole Foods Distribution.

(9)(11) COMMITMENTS AND CONTINGENCIES

        The Company leases various facilities and equipment under operating lease agreements with varying terms. Most of the leases contain renewal options and purchase options at several specific dates throughout the terms of the leases.

        Rent and other lease expense for the fiscal years ended July 30, 2011, July 31, 2010 and August 2, 2008, July 28, 2007, and July 29, 20061, 2009 totaled approximately $30.1$48.4 million, $23.2$45.2 million and $14.0$37.7 million, respectively.

        Future minimum annual fixed payments required under non-cancelable operating leases having an original term of more than one year as of August 2, 2008July 30, 2011 are as follows:

Fiscal Year:
 (In thousands) 

2009

 $29,622 

2010

  27,822 

2011

  24,317 

2012

  19,167 

2013

  15,604 

Thereafter

  62,226 
    

 $178,758 
    

Fiscal Year:
 (In thousands) 

2012

 $43,246 

2013

  40,375 

2014

  36,365 

2015

  33,455 

2016

  30,607 

2017 and thereafter

  88,802 
    

 $272,850 
    

        As of August 2, 2008,July 30, 2011, outstanding commitments for the purchase of inventory were approximately $31.8$99.4 million. The Company had outstanding letters of credit of approximately $16.6$21.7 million at August 2, 2008.July 30, 2011.

        As of July 30, 2011, the Company did not have any outstanding commitments for the purchase of diesel fuel.

        Assets mortgaged amounted to approximately $102.0$84.3 million at August 2, 2008.July 30, 2011.


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        The Company may from time to time be involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, amounts accrued, as well as the ultimate dispositiontotal amount of thesereasonably possible losses with respect to such matters, willindividually and in the aggregate, are not have adeemed to be material adverse effect onto the Company's consolidated financial position or results of operations. Legal expenses incurred in connection with claims and legal actions are expensed as incurred.

(10)(12) RETIREMENT PLANS

        The Company has a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code, the United Natural Foods, Inc. Retirement Plan (the "Plan""Retirement Plan"). In order to become a participant in the Retirement Plan, employees must meet certain eligibility requirements as described in the Retirement Plan document. In addition to amounts contributed to the Retirement Plan by employees, the Company makes contributions to the Retirement Plan on behalf of the employees. During fiscal 2008, the Company assumed the Millbrook Distribution Services Union Retirement Plan and Savingsthe Millbrook Distribution Services Retirement Plan following its acquisitionas part of DHI on November 2, 2007.an acquisition. During the fiscal year ended August 1, 2009, the Company merged the Millbrook Distributions Services Retirement Plan into the Retirement Plan. The Company's contributions to these Plansplans were approximately $2.7$3.9 million, $2.3$3.2 million and $2.1$3.0 million, for the fiscal years ended July 30, 2011, July 31, 2010 and August 2, 2008, July 28, 2007, and July 29, 2006,1, 2009, respectively.

        The Company's non-employee directors and certain of its employees are eligible to participate in the United Natural Foods, Inc. Deferred Compensation Plan and the United Natural Foods, Inc. Deferred Stock Plan (collectively the "Deferral Plans"). The Deferral Plans are nonqualified deferred compensation plans which are administered by the Company's Compensation Committee of the Board of Directors. The Deferral Plans were established to provide participants with the opportunity to defer the receipt of all or a portion of their compensation to a non-qualified retirement plan in amounts greater than the amount permitted to be deferred under the Company's 401(k) Plan. The Company believes that this is an appropriate benefit because (i) it operates to place employees and non-employee directors in the same position as other employees who are not affected by Internal Revenue Code limits placed on plans such as the Company's 401(k) Plan; (ii) does not substantially increase the Company's financial obligations to its employees and directors (there are no employer matching contributions, only a crediting of deemed earnings); and (iii) provides additional incentives to the Company's employees and directors, since amounts set aside by the employees and directors are subject to the claims of the Company's creditors until paid. Under the Deferral Plans, only the payment of the compensation earned by the participant is deferred and there is no deferral of the expense in the Company's financial statements related to the participants' earnings; the Company records the related compensation expense in the year in which the compensation is earned by the participants.

        Under the Deferred Stock Plan, which was frozen to new deferrals effective January 1, 2007, each eligible participant could elect to defer between 0% and 100% of restricted stock awards granted during the election calendar year. Effective January 1, 2007, each participant may elect to defer up to 100% of their restricted share unit awards, performance shares and performance units under the Deferred Compensation Plan. Under the Deferred Compensation Plan, each participant may also elect to defer a minimum of $1,000 and a maximum of 90% of base salary and 100% of director fees, employee bonuses and commissions, as applicable, earned by the participants for the calendar year. From January 1, 2009 to July 31, 2010, participants' cash-derived deferrals under the Deferred Compensation Plan earned interest at the 5-year certificate of deposit annual yield taken from the Wall Street Journal Market Data Center (as captured on the first and last business date of each calendar quarter and averaged) plus 3% credited and compounded quarterly. Beginning August 1, 2010, participants' cash-derived deferrals accrue earnings and appreciation based on the performance of mutual funds selected by the participant. The value of equity-based awards deferred under the Deferred Compensation and Deferred Stock Plans are based upon the performance of the Company's common stock.


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        The Millbrook Deferred Compensation Plan and the Millbrook Supplemental Retirement Plan were assumed by the Company as part of the purchase of DHI and Millbrook.an acquisition during fiscal 2008. Deferred compensation relates to a compensation arrangement implemented in 1984 by a predecessor of Millbrookthe acquired company in the form of a non-qualified defined benefit plan and a supplemental retirement plan which permitted former officers and certain management employees, at the time, to defer portions of their compensation to earn specified maximum benefits upon retirement. The future obligations, which are fixed in


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accordance with the plans, have been recorded at a discount rate of 5.7%. These plans do not allow new participants.participants, and there are no active employees subject to these plans.

        In an effort to provide for the benefits associated with these plans, Millbrook'sthe acquired company's predecessor purchased whole-life insurance contracts on the plan participants. The cash surrender value of these policies of approximately $4.7 million is included in Other Long Term Assets in the Consolidated Balance Sheet.Sheet was $9.5 million and $9.0 million at July 30, 2011 and July 31, 2010, respectively. At August 2, 2008,July 30, 2011, total future obligations including interest, assuming commencement of payments at an individual's retirement age, as defined under the deferred compensation arrangement, were as follows:

Year
 (In thousands) 

2009

 $859 

2010

  1,182 

2011

  1,210 

2012

  1,196 

2013

  1,193 

2014 and thereafter

  9,298 
    

 $14,938 
    

Year
 (In thousands) 

2012

 $1,247 

2013

  1,244 

2014

  1,232 

2015

  1,223 

2016

  1,216 

2017 and thereafter

  6,643 
    

 $12,805 
    

(11)(13) EMPLOYEE STOCK OWNERSHIP PLAN

        The Company adopted the UNFI Employee Stock Ownership Plan (the "ESOP Plan""ESOP") for the purpose of acquiring outstanding shares of the Company for the benefit of eligible employees. The ESOP Plan was effective as of November 1, 1988 and has received notice of qualification by the Internal Revenue Service.

        In connection with the adoption of the ESOP, Plan, a Trust was established to hold the shares acquired. On November 1, 1988, the Trust purchased 40% of the then outstanding common stock of the Company at a price of $4.1 million. The trustees funded this purchase by issuing promissory notes to the initial stockholders, with the Trust shares pledged as collateral. These notes bear interest at 10%1.33% as of July 30, 2011 and July 31, 2010, and are payable through May 2015. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt serviceprincipal and interest paid in the year.

        The Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 93-6,Employers' Accounting for Employee Stock Ownership Plans, ("SOP 93-6"), in November 1993. The statement provides guidance on employers' accounting for ESOPs and is required to be applied to shares purchased by ESOPs after December 31, 1992 that have not been committed to be released as of the beginning of the year of adoption. As allowed under SOP 93-6, the Company elected not to adopt the guidance in SOP 93-6 for the        All shares held by the ESOP all of which were purchased prior to December 31, 1992. As a result, the Company continues to follow the guidance of SOP 76-3,Accounting Practices for Certain Employee Stock Ownership Plans ("SOP 76-3"). Under SOP 76-3,considers unreleased shares of the ESOP are considered to be outstanding for purposes of calculating both basic and diluted earnings per share, whether or not the shares have been committed to be released. The debt of the ESOP is recorded as debt and the shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheets. During the fiscal years ended July 30, 2011, July 31, 2010, and August 2, 2008, July 28, 2007, and July 29, 2006,1, 2009, contributions totaling approximately $0.3$0.2 million, $0.3$0.2 million, and $0.4$0.3 million, respectively, were made to the Trust. Of these contributions, less than $0.1 million in fiscal 2011 and fiscal 2010 and approximately $0.1 million $0.2 million and $0.2 million represented interest in fiscal 2008, 2007 and 2006, respectively.2009 represented interest.


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        The ESOP shares were classified as follows:

 
 August 2,
2008
 July 28,
2007
 
 
 (In thousands)
 

Total ESOP shares—beginning of year

  2,757  2,905 
 

Shares distributed to employees

  (117) (148)
      
 

Total ESOP shares—end of year

  2,640  2,757 
      

Allocated shares

  1,519  1,460 

Unreleased shares

  1,121  1,297 
      
 

Total ESOP shares

  2,640  2,757 
      

 
 July 30, 2011 July 31, 2010 
 
 (In thousands)
 

Total ESOP shares—beginning of year

  2,419  2,552 
 

Shares distributed to employees

  (220) (133)
      
 

Total ESOP shares—end of year

  2,199  2,419 
      

Allocated shares

  1,657  1,711 

Unreleased shares

  542  708 
      
 

Total ESOP shares

  2,199  2,419 
      

        During each of the fiscal years ended August 2, 2008July 30, 2011 and July 28, 2007, 176,00031, 2010, 165,436 shares and 197,085 shares were released for allocation.allocation, respectively. The fair value of unreleased shares was approximately $21.0$22.6 million and $35.4$20.9 million at August 2, 2008July 30, 2011 and July 28, 2007,31, 2010, respectively.

(12)(14) INCOME TAXES

        For the fiscal year July 30, 2011, income before income taxes consisted of $118.5 million from U.S. operations and $7.9 million from foreign operations. For the fiscal year ended July 31, 2010, income (loss) before income taxes consists of $112.9 million from U.S. operations and ($0.9) million from foreign operations. All income before income taxes for the fiscal year ended August 1, 2009 is from U.S. operations.

        Total federal and state income tax (benefit) expense from continuing operations consists of the following:

 
 Current Deferred Total 
 
 (In thousands)
 

Fiscal year ended August 2, 2008:

          

U.S. Federal

 $22,106 $1,979 $24,085 

State and local

  4,354  278  4,632 
        

 $26,460 $2,257 $28,717 
        

Fiscal year ended July 28, 2007:

          

U.S. Federal

 $23,279 $1,003 $24,282 

State and local

  7,076  704  7,780 
        

 $30,355 $1,707 $32,062 
        

Fiscal year ended July 29, 2006:

          

U.S. Federal

 $25,025 $(710)$24,315 

State and local

  2,449  (645) 1,804 
        

 $27,474 $(1,355)$26,119 
        

 
 Current Deferred Total 
 
 (In thousands)
 

Fiscal year ended July 30, 2011:

          

U.S. Federal

 $24,971 $14,273 $39,244 

State & Local

  7,091  1,207  8,298 

Foreign

  2,180  40  2,220 
        

 $34,242 $15,520 $49,762 
        

Fiscal year ended July 31, 2010:

          

U.S. Federal

 $31,818 $5,488 $37,306 

State & Local

  7,147  (427) 6,720 

Foreign

  (345)   (345)
        

 $38,620 $5,061 $43,681 
        

Fiscal year ended August 1, 2009:

          

U.S. Federal

 $32,998 $(33)$32,965 

State & local

  7,761  272  8,033 
        

 $40,759 $239 $40,998 
        

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        Total income tax expense (benefit) was different than the amounts computed using the United States statutory income tax rate (35%) applied to income before income taxes as a result of the following:

 
 Years ended 
 
 August 2,
2008
 July 28,
2007
 July 29,
2006
 
 
 (In thousands)
 

Computed "expected" tax expense

 $27,019 $28,775 $24,288 

State and local income tax, net of Federal income tax benefit

  3,011  2,794  1,848 

Non-deductible expenses

  862  577  621 

Non-deductible share-based compensation

  464  383  508 

General Business Credits

  (3,825) (365) (208)

Decrease in valuation allowance

  (490)   (757)

Other, net

  1,676  (102) (181)
        

 $28,717 $32,062 $26,119 
        

 
 Fiscal year ended 
 
 July 30,
2011
 July 31,
2010
 August 1,
2009
 
 
 (In thousands)
 

Computed "expected" tax expense

 $44,252 $39,201 $35,064 

State and local income tax, net of Federal income tax benefit

  5,394  4,368  5,222 

Non-deductible expenses

  1,111  872  861 

Tax effect of share-based compensation

  (440) 78  (65)

General Business Credits

  (1,021) (215) (325)

Other, net

  466  (623) 241 
        

Total income tax expense

 $49,762 $43,681 $40,998 
        

        Total income tax expense (benefit) for the years ended July 30, 2011, July 31, 2010 and August 2, 2008 July 28, 2007, July 29, 2006,1, 2009 was allocated as follows:

 
 Aug 2,
2008
 July 28,
2007
 July 29,
2006
 
 
 (In thousands)
 

Income tax expense

 $28,717 $32,062 $26,119 

Stockholders' equity, for compensation expense for tax purposes in excess of amounts recognized for financial statement purposes

  (171) (2,518) (5,312)

Other comprehensive income

  (690) (407) 651 
        

 $27,856 $29,137 $21,458 
        

 
 July 30,
2011
 July 31,
2010
 August 1,
2009
 
 
 (In thousands)
 

Income tax expense

 $49,762 $43,681 $40,998 

Stockholders' equity, difference between compensation expense for tax purposes and amounts recognized for financial statement purposes

  (1,545) (1,822) 598 

Other comprehensive income (loss)

  502  97  (647)
        

 $48,719 $41,956 $40,949 
        

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        The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and deferred tax liabilities at August 2, 2008July 30, 2011 and July 28, 200731, 2010 are presented below:

 
 2008 2007 
 
 (In thousands)
 

Deferred tax assets:

       

Inventories, principally due to additional costs inventoried for tax purposes

 $4,384 $3,212 

Compensation and benefit related

  12,328  5,237 

Accounts receivable, principally due to allowances for uncollectible accounts

  2,740  2,359 

Accrued expenses

  4,223  1,060 

Other comprehensive income

  446   

Net operating loss carryforwards

  10,655  2,327 

Other deferred tax assets

  121  191 
      

Total gross deferred tax assets

  34,897  14,386 

Less valuation allowance

  
2,732
  
501
 
      

Net deferred tax assets

 $32,165 $13,885 
      

Deferred tax liabilities:

       

Plant and equipment, principally due to differences in depreciation

 $14,235 $7,100 

Intangible assets

  10,838  6,596 

Other comprehensive income

  0  244 

Other deferred tax liabilities

  1,929  26 
      

Total deferred tax liabilities

  27,002  13,966 
      

Net deferred tax (liabilities) assets

 $5,163 $(81)
      

Current deferred income tax assets

 $14,221 $9,474 

Non-current deferred income tax liabilities

  (9,058) (9,555)
      

 $5,163 $(81)
      

 
 2011 2010 
 
 (In thousands)
 

Deferred tax assets:

       

Inventories, principally due to additional costs inventoried for tax purposes

 $5,638 $4,906 

Compensation and benefits related

  16,701  14,725 

Accounts receivable, principally due to allowances for uncollectible accounts

  2,286  2,655 

Accrued expenses

  7,037  6,586 

Other comprehensive income

  495  997 

Net operating loss carryforwards

  7,381  9,298 

Other deferred tax assets

  71  23 
      

Total gross deferred tax assets

  39,609  39,190 

Less valuation allowance

  5,071  5,052 
      

Net deferred tax assets

 $34,538 $34,138 
      

Deferred tax liabilities:

       

Plant and equipment, principally due to differences in depreciation

 $30,333 $15,546 

Intangible assets

  20,530  18,495 

Other

  203  135 
      

Total deferred tax liabilities

  51,066  34,176 
      

Net deferred tax liabilities

 $(16,528)$(38)
      

Current deferred income tax assets

 $22,023 $20,560 

Non-current deferred income tax liabilities

  (38,551) (20,598)
      

 $(16,528)$(38)
      

        The net increase (decrease) in total valuation in fiscal year 2011, 2010, and 2009 was $19, ($86), and $2,406 respectively.

        At August 2, 2008,July 30, 2011, the Company had net operating loss carryforwards of approximately $22.6$5.1 million for federal income tax purposes. The federal carryforwards are subject to an annual limitation of approximately $4.4$0.4 million under Internal Revenue Code Section 382. The carryforwards expire at various times between 20202012 and 2027.2024. In addition, the companyCompany had net operating loss carryforwards of approximately $45.1$64.1 million for state income tax purposes that expire in years 2013 through 2020. At July 30, 2011, through 2025.the Company also had state tax credit carryforwards of approximately $0.8 million, which will expire by fiscal 2012.

        In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due to the fact that the Company has sufficient taxable income in the federal carryback period and anticipates sufficient future taxable income over the periods which the deferred tax assets are deductible, the ultimate realization of deferred tax assets for federal and state tax purposes appears more likely than not at August 2, 2008,July 30, 2011, with the exception of certain state deferred tax assets.

Valuation allowances were established against approximately $2.7$5.1 million of state deferred tax assets in connection with the acquisition of Millbrook.related to a previous stock-based business combination and certain state tax credit carryforwards. The subsequent release of this valuation allowance, will reduce goodwill, if such release occurs, prior to fiscal year 2010 and will reduce income tax expense thereafter.expense.


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        As ofFor the fiscal years ended July 29, 200730, 2011 and for the year ended August 2, 2008,July 31, 2010, the Company did not have any material unrecognized tax benefits and thus, no significant interest and penalties related to unrecognized tax benefits were recognized. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. In addition, the Company does not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months.

        The Company and its subsidiaries file income tax returns in the United States federal jurisdiction and in various state jurisdictions. Following the acquisition of the SDG assets from SunOpta, UNFI Canada files income tax returns in Canada and certain of its provinces. The Company is no longer subject to U.S. federal tax examinations for years before the Company's fiscal 2004.2008. The tax years that remain subject to examination by state jurisdictions range from the Company's fiscal 20032008 to 2007.fiscal 2011.

(13)(15) BUSINESS SEGMENTS

        The Company has several operating divisions aggregated under the wholesale segment, which is the Company's only reportable segment. These operating divisions have similar products and services, customer channels, distribution methods and historical margins. The wholesale segment is engaged in national distribution of natural, organic and specialty foods, produce and related products in the United States.States and Canada. The Company has additional operating divisions that do not meet the quantitative thresholds for reportable segments. Therefore, these operating divisionssegments and are therefore aggregated under the caption of "Other" with corporate operating expenses that are not allocated to operating divisions. Non-operating expenses that are not allocated to the operating divisions are under the caption of "Unallocated Expenses.". "Other" includes a retail division, which engages in the sale of natural foods and related products to the general public through retail storefronts on the east coast of the United States, a manufacturing division, which engages in importing, roasting and packaging of nuts, seeds, dried fruit and snack items, and the Company's branded product lines. "Other" also includes certain corporate operating expenses that are not allocated to operating divisions, which consist of depreciation, salaries, retainers, and other related expenses of officers, directors, corporate finance (including professional services), information technology, governance, legal, human resources and internal audit that are necessary to operate the Company's headquarters located in Providence, Rhode Island, and formerly, in Dayville, Connecticut. As the Company continues to expand its business and serve its customers through a new national platform, these corporate expense amounts have increased, which is the primary driver behind the increasing operating losses within the "Other" category below. Non-operating expenses that are not allocated to the operating divisions are under the caption of "Unallocated Expenses". The Company does not record its revenues for financial reporting purposes by product group, and it is therefore impracticable for the Company to report them accordingly.


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        Following is business segment information for the periods indicated:

 
 Wholesale Other Eliminations Unallocated
Expenses
 Consolidated 
 
 (In thousands)
 

Year ended August 2, 2008

                

Net sales

 $3,310,104 $139,941 $(84,188)   $3,365,857 

Operating income (loss)

  99,616  (6,046) (1,091)    92,479 

Interest expense

          $16,133  16,133 

Interest income

           (768) (768)

Other, net

           (82) (82)

Income before income taxes

              77,196 

Depreciation and amortization

  21,306  1,238        22,544 

Capital expenditures

  48,168  2,915        51,083 

Goodwill

  154,120  16,489        170,609 

Assets

  969,630  123,673  (8,820)    1,084,483 

Year ended July 28, 2007

                

Net sales

 $2,709,656 $114,843 $(70,219)   $2,754,280 

Operating income (loss)

  95,269  987  (2,771)    93,485 

Interest expense

          $12,089  12,089 

Interest income

           (975) (975)

Other, net

           156  156 

Income before income taxes

              82,215 

Depreciation and amortization

  17,334  1,042        18,376 

Capital expenditures

  42,423  4,381        46,804 

Goodwill

  64,032  15,871        79,903 

Assets

  718,490  90,482  (8,074)    800,898 

Year ended July 29, 2006

                

Net sales

 $2,392,126 $77,285 $(35,817)   $2,433,594 

Operating income (loss)

  96,432  (16,048) (456)    79,928 

Interest expense

          $11,210  11,210 

Interest income

           (297) (297)

Other, net

           (381) (381)

Income before income taxes

              69,396 

Depreciation and amortization

  16,075  1,024        17,099 

Capital expenditures

  18,824  466        19,290 

Goodwill

  64,032  13,984        78,016 

Assets

  640,888  66,889  (3,226)    704,551 

 
 Wholesale Other Eliminations Unallocated
Expenses
 Consolidated 
 
 (In thousands)
 

Fiscal year ended July 30, 2011

                

Net sales

 $4,472,694 $162,731 $(105,410)   $4,530,015 

Operating income (loss)

  161,952  (31,305) (966)    129,681 

Interest expense

          $5,000  5,000 

Interest income

           (1,226) (1,226)

Other, net

           (528) (528)

Income before income taxes

              126,435 

Depreciation and amortization

  33,520  1,776        35,296 

Capital expenditures

  38,035  2,743        40,778 

Goodwill

  174,612  17,331        191,943 

Total assets

  1,258,783  150,151  (7,946)    1,400,988 

Fiscal year ended July 31, 2010

                

Net sales

 $3,698,349 $171,841 $(113,051)   $3,757,139 

Operating income (loss)

  152,364  (38,108) 646     114,902 

Interest expense

          $5,845  5,845 

Interest income

           (247) (247)

Other, net

           (2,698) (2,698)

Income before income taxes

              112,002 

Depreciation and amortization

  24,744  2,739        27,483 

Capital expenditures

  51,495  3,614        55,109 

Goodwill

  169,594  17,331        186,925 

Total assets

  1,099,962  159,814  (8,977)    1,250,799 

Fiscal year ended August 1, 2009

                

Net sales

 $3,392,984 $142,769 $(80,853)   $3,454,900 

Operating income (loss)

  128,998  (20,639) 1,562     109,921 

Interest expense

          $9,914  9,914 

Interest income

           (450) (450)

Other, net

           275  275 

Income before income taxes

              100,182 

Depreciation and amortization

  23,333  3,696        27,029 

Capital expenditures

  27,342  5,011        32,353 

Goodwill

  146,970  17,363        164,333 

Total assets

  942,845  123,908  (8,203)    1,058,550 

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(14)(16) QUARTERLY FINANCIAL DATA (UNAUDITED)

        The following table sets forth certain key interim financial information for the years ended August 2, 2008July 30, 2011 and July 28, 2007:31, 2010:

 
 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 Full Year 
 
 (In thousands except per share data)
 

2008

                

Net sales

 $736,389 $830,656 $886,962 $911,850 $3,365,857 

Gross profit

  135,471  154,672  165,843  177,906  633,892 

Income before income taxes

  21,424  14,660  20,699  20,413  77,196 

Net income

  13,561  9,099  12,999  12,820  48,479 

Per common share income

                

Basic:

 $0.32 $0.21 $0.30 $0.30 $1.14 

Diluted:

 $0.32 $0.21 $0.30 $0.30 $1.13 

Weighted average basic

                
 

Shares outstanding

  42,610  42,676  42,727  42,737  42,690 

Weighted average diluted

                
 

Shares outstanding

  42,829  42,884  42,847  42,860  42,855 

Market Price

                
 

High

 $33.33 $31.87 $25.17 $22.25 $33.33 
 

Low

 $24.10 $23.16 $15.60 $17.09 $15.60 

 
 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 Full Year 
 
 (In thousands except per share data)
 

2011

                

Net sales

 $1,052,967 $1,114,449 $1,203,983 $1,158,616 $4,530,015 

Gross profit

  192,332  198,632  218,544  215,302  824,810 

Income before income taxes

  28,531  30,703  38,937  28,264  126,435 

Net income

  17,404  18,729  23,362  17,178  76,673 

Per common share income

                

Basic:

 $0.39 $0.39 $0.48 $0.36 $1.62 

Diluted:

 $0.39 $0.39 $0.48 $0.34 $1.60 

Weighted average basic

                
 

Shares outstanding

  44,771  48,232  48,406  48,484  47,459 

Weighted average diluted

                
 

Shares outstanding

  45,101  48,538  48,793  48,888  47,815 

Market Price

                
 

High

 $37.48 $39.85 $46.05 $45.34 $46.05 
 

Low

 $32.65 $34.78 $37.06 $39.52 $32.65 

 

 
 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 Full Year 
 
 (In thousands except per share data)
 

2007

                

Net sales

 $646,433 $668,545 $732,516 $706,786 $2,754,280 

Gross profit

  123,572  124,068  129,943  131,995  509,578 

Income before income taxes

  20,371  17,866  22,467  21,511  82,215 

Net income

  12,426  10,898  13,705  13,124  50,153 

Per common share income

                

Basic:

 $0.29 $0.26 $0.32 $0.31 $1.18 

Diluted:

 $0.29 $0.25 $0.32 $0.31 $1.17 

Weighted average basic

                
 

Shares outstanding

  42,147  42,438  42,595  42,602  42,445 

Weighted average diluted

                
 

Shares outstanding

  42,599  42,848  42,884  42,847  42,786 

Market Price

                
 

High

 $34.91 $38.40 $35.05 $31.87 $38.40 
 

Low

 $28.70 $31.17 $28.10 $26.10 $26.10 

 
 First
Quarter
 Second
Quarter
 Third
Quarter
 Fourth
Quarter
 Full Year 
 
 (In thousands except per share data)
 

2010

                

Net sales

 $884,768 $898,217 $985,694 $988,460 $3,757,139 

Gross profit

  164,601  166,606  182,407  183,317  696,931 

Income before income taxes

  25,888  26,099  32,480  27,535  112,002 

Net income

  15,533  15,660  19,488  17,640  68,321 

Per common share income

                

Basic:

 $0.36 $0.36 $0.45 $0.41 $1.58 

Diluted:

 $0.36 $0.36 $0.45 $0.40 $1.57 

Weighted average basic

                
 

Shares outstanding

  42,982  43,024  43,245  43,483  43,184 

Weighted average diluted

                
 

Shares outstanding

  43,211  43,315  43,536  43,813  43,425 

Market Price

                
 

High

 $28.28 $29.35 $31.35 $35.12 $35.12 
 

Low

 $23.03 $23.29 $24.71 $28.92 $23.03 

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        Not applicable.

ITEM 9A.    CONTROLS AND PROCEDURES

        We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our


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disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities


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Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Annual Report on Form 10-K (the "Evaluation Date"). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of August 2, 2008.July 30, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. On November 2, 2007, the Company acquired DHI and Millbrook, and management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of August 2, 2008, DHI and Millbrook's internal control over financial reporting with associated assets of $171,090,000 (of which $95,016,000 represents goodwill and intangible assets included within the scope of the assessment) and total revenue of $211,385,000 generated by DHI and Millbrook that was included in the Company's consolidated financial statements as of and for the year ended August 2, 2008.

Based on its assessment, our management concluded that, as of August 2, 2008,July 30, 2011, our internal control over financial reporting was effective based on those criteria at the reasonable assurance level.

        The effectiveness of our internal control over financial reporting as of August 2, 2008July 30, 2011 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report which is included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.


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        See the report of KPMG LLP included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

        No change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)or 15d-15(f)) occurred during the fiscal quarter ended August 2, 2008July 30, 2011 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

        None.Effective September 22, 2011, we entered into an Employment Separation Agreement and Release (the "Separation Agreement"), with John Stern, our former senior vice president and chief information officer. Pursuant to the Separation Agreement, Mr. Stern is entitled to receive a severance payment in


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the amount of approximately $272,000 as well as continued medical benefits for a period of eleven months (collectively, the "Separation Payments"). The cash portion of the Separation Payments will not commence until six months and one day following Mr. Stern's separation from service on September 30, 2011, at which time a cash payment of approximately $149,000 will be made. Thereafter, the remaining unpaid cash portion of the Separation Payments will be paid in pro rata amounts for the five months thereafter in accordance with our normal payroll practices. The Separation Payments are contingent on Mr. Stern's agreement to a general release of claims, which generally provides that Mr. Stern voluntarily releases us, our present and former directors, officers, shareholders and certain other persons or entities affiliated with us of claims related to his employment with us. The Separation Agreement also provides for mutual non-disparagement obligations and provides that the Separation Payments are contingent on Mr. Stern's compliance, during the eleven month period following his separation from service, with the non-competition and non-solicitation obligations set out in the Separation Agreement.

        The foregoing summary of the material terms of the Separation Agreement is qualified in its entirety by reference to the actual agreement, a copy of which is filed herewith as Exhibit 10.72.


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PART III.

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

        The information required by this item iswill be contained, in part, in our Definitive Proxy Statement on Schedule 14A for our Annual Meeting of Stockholders to be held on December 4, 200813, 2011 (the "2008"2011 Proxy Statement") under the captions "PROPOSAL 1—ELECTION OF DIRECTORS""Directors and "SECTIONNominees for Director," "Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE"Beneficial Ownership Reporting Compliance," and "Committees of the Board of Directors—Audit Committee" and is incorporated herein by this reference. Pursuant to Item 401(b) of Regulation S-K, our executive officers are reported under the caption "Executive Officers of the Registrant" in Part I, Item I of this Annual Report on Form 10-K.

        We have adopted a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, and otheremployees within our finance, organization employees.purchasing, operations, and sales departments. Our code of ethics is publicly available on our website at www.unfi.com. If we make any substantive amendments to our code of ethics or grant any waiver, including any implicit waiver, from a provision of the code of ethics to our Chief Executive Officer, Chief Financial Officer or Corporate Controller, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.

ITEM 11.    EXECUTIVE COMPENSATION

        The information required by this item iswill be contained in the 20082011 Proxy Statement under the captions "Non-employee Director Compensation," "Executive Compensation", "Compensation Discussion and Analysis" and, "Compensation Committee Interlocks and Insider Participation" and "Report of the Compensation Committee" and is incorporated herein by this reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information required by this item iswill be contained, in part, in the 20082011 Proxy Statement under the captionscaption "Stock Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Table,", and is incorporated herein by this reference.

        The following table provides certain information with respect to equity awards under the Company's 2004 Equity Incentive Plan, 2002 Stock Incentive Plan and 1996 Stock Option Plan as of July 30, 2011.

Plan Category
 Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
 Weighted-average
exercise price of
outstanding options,
warrants and rights
 Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in the second column)
 

Plans approved by stockholders

  1,365,891(1)$28.40  1,092,543 

Plans not approved by stockholders

       
        

Total

  1,365,891(1)$28.40  1,092,543 

(1)
Does not include 89,184 shares of our common stock issuable to participants in the United Natural Foods, Inc. Deferred Compensation Plan and the United Natural Foods, Inc. Deferred Stock Plan as a result of deferrals of shares that were issuable upon the vesting of restricted stock awards and restricted stock units under our equity incentive plans approved by our stockholders.

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ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

        The information required by this item iswill be contained in the 20082011 Proxy Statement under the caption "Certain Relationships and Related Transactions" and "Director Independence" and is incorporated herein by this reference.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

        The information required by this item iswill be contained in the 20082011 Proxy Statement under the caption "Fees Paid to KPMG LLP" and is incorporated herein by this reference.


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PART IV.

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES


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SIGNATURES

        Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 

 

UNITED NATURAL FOODS, INC.

 

 


/s/
MARK E. SHAMBER

Mark E. Shamber
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

 

 

Dated: October 1, 2008September 28, 2011

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name
 
Title
 
Date
/s/STEVEN L. SPINNER

Steven L. Spinner
 President, Chief Executive Officer and Director (Principal Executive Officer) October 1, 2008September 28, 2011



/s/
MICHAEL S. FUNK

Michael S. Funk


 


Chair of the Board




October 1, 2008

/s/
THOMAS B. SIMONE

Thomas B. Simone

 

Vice-Chair of the Board and Lead Independent DirectorSeptember 28, 2011

/s/ MARK E. SHAMBER

Mark E. Shamber

 

October 1, 2008

/s/
MARK E. SHAMBER

Mark E. Shamber


Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

 

October 1, 2008September 28, 2011


/s/ GORDON D. BARKER

Gordon D. Barker

 

Vice Chair of the Board and Lead Independent Director

 

October 1, 2008September 28, 2011


/s/
JOSEPH M. CIANCIOLO MARY ELIZABETH BURTON

Joseph M. CiancioloMary Elizabeth Burton

 

Director

 

October 1, 2008September 28, 2011


/s/
GAIL A. GRAHAM JOSEPH M. CIANCIOLO

Gail A. GrahamJoseph M. Cianciolo

 

Director

 

October 1, 2008September 28, 2011


/s/
JAMES P. HEFFERNAN GAIL A. GRAHAM

James P. HeffernanGail A. Graham

 

Director

 

October 1, 2008September 28, 2011


/s/
PETER ROY JAMES P. HEFFERNAN

Peter RoyJames P. Heffernan

 

Director

 

October 1, 2008September 28, 2011

/s/ PETER ROY

Peter Roy


Director


September 28, 2011

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SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

Accounts Receivable and Notes Receivable Allowance for Doubtful Accounts

 
 Balance at
beginning of
period
 Additions
charged to costs
and expenses
 Deductions Charged to Other
Accounts(a)
 Balance at
end of period
 

Year ended August 2, 2008

 $5,981 $2,707 $2,765 $1,165 $7,088 

Year ended July 28, 2007

 
$

8,433
 
$

1,528
 
$

3,980
  
 
$

5,981
 

Year ended July 29, 2006

 
$

9,472
 
$

2,829
 
$

3,868
  
 
$

8,433
 

(a)
Relates to acquisitions

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EXHIBIT INDEX

Exhibit No.
 Description
   3.1(14)2.1(20) Merger Agreement, dated October 5, 2007, by and among the Registrant, UNFI Merger Sub, Inc., Distribution Holdings, Inc. and Millbrook Distribution Services Inc. (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits have been omitted from this filing.)


  2.2(30)


Asset Purchase Agreement, dated May 10, 2010, by and among UNFI Canada, Inc., a subsidiary of the Registrant, with SunOpta Inc. and its wholly owned subsidiary, Drive Organics Corp. (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits have been omitted from this filing.)


  2.3(31)


Amendment No 1., dated June 4, 2010, to the Asset Purchase Agreement dated May 10, 2010, by and among UNFI Canada, Inc., a subsidiary of the Registrant, with SunOpta Inc. and its wholly owned subsidiary, Drive Organics Corp.


  3.1(11)


Amended and Restated Certificate of Incorporation of the Registrant.




  3.2(14)




Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant.

 

  3.3(18)  3.2(11)

 

Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant.

 

  3.4(22)  3.3(14)

 

Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant.


  3.4(18)


Amended and Restated Bylaws of the Registrant, as amended on September 13, 2007.

 

  4.1(12)  4.1(26)

 

Specimen Certificate for shares of Common Stock, $0.01 par value, of the Registrant.

 

10.1(1)**

 

1996 Employee Stock Ownership Plan, effective November 1, 1988.

 

10.2(12)10.2(9)**

 

Amended and Restated Employee Stock Ownership Plan.

 

10.3(1)

 

Employee Stock Ownership Trust Loan Agreement among Norman Cloutier, Steven Townsend, Daniel Atwood, Theodore Cloutier and the Employee Stock Ownership Plan and Trust, dated November 1, 1988.

 

10.4(1)

 

Stock Pledge Agreement between the Employee Stock Ownership Trust and Steven Townsend, Trustee for Norman Cloutier, Steven Townsend, Daniel Atwood and Theodore Cloutier, dated November 1, 1988.

 

10.5(1)

 

Trust Agreement among Norman Cloutier, Steven Townsend, Daniel Atwood, Theodore Cloutier and Steven Townsend as Trustee, dated November 1, 1988.

 

10.6(1)

 

Guaranty Agreement between the Registrant and Steven Townsend as Trustee for Norman Cloutier, Steven Townsend, Daniel Atwood and Theodore Cloutier, dated November 1, 1988.

 

10.7(2)**

 

Amended and Restated 1996 Stock Option Plan.

 

10.8(2)**

 

Amendment No. 1 to Amended and Restated 1996 Stock Option Plan.

 

10.9(2)**

 

Amendment No. 2 to Amended and Restated 1996 Stock Option Plan.

 

10.10(3)**

 

2002 Stock Incentive Plan.

 

10.11(4)

 

Amended and Restated Loan and Security Agreement, dated April 30, 2004, with Bank of America Business Capital (formerly Fleet Capital Corporation).

 

10.12(5)

 

Term Loan Agreement with Fleet Capital Corporation dated April 30, 2003.

 

10.13(6)

 

Second Amendment to Term Loan Agreement with Fleet Capital Corporation, dated December 18, 2003.

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Exhibit No.
Description

 

10.14(7)

 

Real Estate Term Notes between the Registrant and City National Bank, dated April 28, 2000.

 

10.15(8)

 

Lease between Valley Centre I, L.L.C. and the Registrant, dated August 3, 1998.


10.16(9)


Lease between AmberJack, Ltd. and the Registrant, dated July 11, 1997.

 

10.17(10)10.16(9)

 

Lease between Metropolitan Life Insurance Company and the Registrant, dated July 31, 2001.


10.19(11)**


Employment Agreement between the Registrant and Steven H. Townsend, dated December 5, 2002.


10.20(3)+


Distribution Agreement between the Registrant and Whole Foods Market, Inc., dated August 1, 1998.

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10.21(14)+


Distribution Agreement between the Registrant and Whole Foods Market Distribution, Inc., dated January 1, 2005.


10.22(6)+


Distribution Agreement between the Registrant and Wild Oats Market, Inc., dated January 9, 2004.


10.23(12)


First Amendment to Term Loan Agreement with Fleet Capital Corporation, dated August 26, 2003.

 

10.24(13)10.17(10)**

 

2004 Equity Incentive Plan.

 

10.25(14)10.18(11)

 

First Amendment to Amended and Restated Loan and Security Agreement, dated December 30, 2004.

 

10.26(15)10.19(12)**

 

Form of Restricted Stock Agreement pursuant to United Natural Foods, Inc. 2004 Equity Incentive Plan.

 

10.27(16)10.20(13)

 

Fifth Amendment to Term Loan Agreement with Fleet Capital Corporation, dated July 28, 2005.

 

10.28(17)**10.21(15)

 

Employment Transition Agreement and Mutual Release for Steven H. Townsend, dated October 23, 2005.


10.29(19)


Second Amendment to Amended and Restated Loan and Security Agreement dated January 31, 2006.

 

10.30(20)10.22(16)+

 

Distribution Agreement between the Registrant and Whole Foods Market Distribution, Inc., effective September 26, 2006.

 

10.31(21)10.23(17)

 

Lease between the Registrant and Meridian-Hudson McIntosh, LLC, dated March 16, 2007.

 

10.32(23)10.24(18)

 

Third Amendment to Term Loan Agreement with Fleet Capital Corporation, dated April 30, 2004.

 

10.33(23)10.25(19)

 

Fourth Amendment to Term Loan Agreement with Fleet Capital Corporation dated June 15, 2005.

 

10.34(24)10.27(21)

 

Merger Agreement, dated October 5, 2007, by and among the Registrant, UNFI Merger Sub, Inc., Distribution Holdings, Inc. and Millbrook Distribution Services Inc.


10.35(25)


Lease between Cactus Commerce, LLC, and the Registrant, dated December 3, 2007.

 

10.36(25)10.28(21)

 

Third Amendment to Amended and Restated Loan and Security Agreement, dated November 2, 2007.

 

10.37(25)10.29(21)

 

Fourth Amendment to Amended and Restated Loan and Security Agreement, dated November 27, 2007.

 

10.38(25)10.30(21)

 

Sixth Amendment to Term Loan Agreement with Bank of America, N.A. as successor to Fleet Capital Corporation, dated November 2, 2007.

 

10.39(25)10.31(21)

 

Seventh Amendment to Term Loan Agreement with Bank of America, N.A. as successor to Fleet Capital Corporation, dated November 27, 2007.

 

10.40(25)10.32(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Richard Antonelli.


10.41(25)**


Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Daniel V. Atwood.


10.42(25)**


Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Thomas A. Dziki.

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10.43(25)10.33(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Michael Funk.

 

10.44(25)10.34(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Carl Koch.


10.45(25)**


Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Mark Shamber.

 

10.46(25)10.35(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Gordon Barker.

 

10.47(25)10.36(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Joseph Cianciolo.

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Exhibit No.
Description

 

10.48(25)10.37(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Gail Graham.

 

10.49(25)10.38(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and James Heffernan.

 

10.50(25)10.39(21)**

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Peter Roy.

 

10.51(25)**10.40(22)

 

Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Thomas Simone.


10.52(25)**


Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Michael Beaudry.


10.53(25)**


Restricted Unit Agreement, dated as of December 6, 2007, between the Registrant and Randle Lindberg.


10.54(25)**


Severance Agreement by and between the Registrant and Robert Sigel, effective December 5, 2007.


10.55(26)


Lease between FR York Property Holding, LP, and the Registrant, dated March 14, 2008.


10.56*


Fifth Amendment to Amended and Restated Loan and Security Agreement as of June 4, 2008.

 

10.57*10.41(22)

 

Eighth Amendment to Term Loan Agreement with Bank of America, N.A. as successor to Fleet Capital Corporation, dated June 4, 2008.

 

21*10.42(23)**

 

Subsidiaries ofOffer Letter between Steven L. Spinner, President and CEO, and the Registrant.Registrant, dated September 16, 2008.

 

23.1*10.43(23)**

 

Severance Agreement between Steven L. Spinner, President and CEO, and the Registrant, dated September 16, 2008. (Included within Exhibit 10.47)


10.44(23)**


Form of Performance Unit Agreement under the 2004 Equity Incentive Plan.


10.45(24)**


Performance Unit Agreement between Steven L. Spinner and the Registrant, effective November 5, 2008.


10.46(25)


Form Indemnification Agreement for Directors and Officers.


10.47(27)**


Amendment to the 2004 Equity Incentive Plan.


10.48(28)


Amendment to Offer Letter between Steven L. Spinner, President and CEO, and the Registrant, dated September 16, 2008 to include application of Incentive Compensation Recoupment Policy of UNFI.


10.49(28)


Lease between ProLogis, and the Registrant, dated September 30, 2009.


10.50(29)


Lease between Valley Centre I, L.L.C. and the Registrant, dated August 3, 1998.


10.51(29)


Lease between Metropolitan Life Insurance Company and the Registrant, dated July 31, 2001.


10.52(29)


Lease between FR York Property Holding, LP, and the Registrant, dated March 14, 2008.


10.53(29)


Lease between ALCO Cityside Federal LLC, and the Registrant, dated October 14, 2008.


10.54(29)


Amendment to Lease between Principal Life Insurance Company, and the Registrant, dated April 23, 2008.


10.55(29)


Amendment to Lease between ALCO Cityside Federal LLC, and the Registrant, dated May 12, 2009.


10.56(32)


Sixth Amendment to Amended and Restated Loan and Security Agreement as of February 25, 2009.


10.57(32)


Ninth Amendment to Term Loan Agreement with Bank of America, N.A. as successor to Fleet Capital Corporation, dated February 25, 2009.


10.58(32)+


Amendment to Distribution Agreement between the Registrant and Whole Foods Market Distribution, Inc., effective June 2, 2010.


10.59(32)**


Change in Control Agreement between the Registrant and each of Mark Shamber and Joseph J. Traficanti.

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Exhibit No.
Description
10.60(32)**Change in Control Agreement between the Registrant and each of Thomas Dziki, Sean Griffin, Thomas Grillea, Kurt Luttecke and David Matthews.


10.61(32)**


Severance Agreement between the Registrant and each of Michael Funk, Thomas Dziki, Sean Griffin, Thomas Grillea, Kurt Luttecke, David Matthews, Mark Shamber and Joseph J. Traficanti.


10.62(32)**


Form of Restricted Unit Award Agreement.


10.63(32)**


Form of Non-Statutory Stock Option Award Agreement.


10.64(33)**


Employment Separation Agreement and Release between the Registrant and Carl Koch III, dated September 23, 2010.


10.65(33)+


Amendment to Distribution Agreement between the Registrant and Whole Foods Distribution effective October 11, 2010.


10.66(34)**


United Natural Foods, Inc. Amended and Restated 2004 Equity Incentive Plan.


10.67(35)**


Fiscal 2011 Senior Management Cash Incentive Plan.


10.68(36)**


Form of Performance Share Agreement to United Natural Foods, Inc. Amended and Restated 2004 Equity Incentive Plan.


10.69** *


Form of Performance Share Award Agreement to United Natural Foods, Inc. Amended and Restated 2004 Equity Incentive Plan.


10.70** *


Form of Performance Unit Award Agreement to United Natural Foods, Inc. Amended and Restated 2004 Equity Incentive Plan.


10.71** *


Fiscal 2012 Senior Management Cash Incentive Plan.


10.72** *


Employment Separation Agreement and Release between the Registrant and John Stern, dated September 22, 2011.


10.73** *


United Natural Foods, Inc. Deferred Compensation Plan.


10.74** *


United Natural Foods, Inc. Deferred Stock Plan.


12.1*


Computation of Ratio of Earnings to Fixed Charges.


21*


Subsidiaries of the Registrant.


23.1*


Consent of Independent Registered Public Accounting Firm.

 

23.2*31.1*

 

ReportCertification of Independent Registered Public Accounting Firm.




Schedule II—Valuation and Qualifying Accounts


31.1*


Certification pursuant to 18 U.S.C. Section 1350, as adoptedCEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—CEO.2002.

 

31.2*

 

Certification pursuant to 18 U.S.C. Section 1350, as adoptedof CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—CFO.2002.

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32.1*

 

Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002—CEO.2002.

 

32.2*

 

Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002—CFO.2002.


101†*


The following materials from United Natural Foods, Inc. Annual Report on Form 10-K for the fiscal year ended July 30, 2011 formatted in XBRL (eXtensible Business Reporting Language):
(i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Stockholders' Equity; (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.

*
Filed herewith.

**
Denotes a management contract or compensatory plan or arrangement.


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+
Certain confidential portions of this exhibit were omitted by means of redacting a portion of the text. This exhibit has been filed separately with the Securities and Exchange Commission accompanied by a confidential treatment request pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

(1)
Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-11349).

(2)
Incorporated by reference to the Registrant's Definitive Proxy Statement for the year ended July 31, 2000.

(3)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 2003.

(4)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 30, 2004.

(5)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 30, 2003.

(6)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 2004.

(7)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 2000.

(8)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 1999.1997.

(9)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 1997.2004.

(10)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 2001.

(11)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 2002.

(12)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 2004.

(13)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 2004.

(14)(11)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 2005.

(15)(12)
Incorporated by reference to the Registrant's Registration Statement on Form S-8 POS (File No. 333-123462).

(16)(13)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 2005.

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(17)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 29, 2005.

(18)(14)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended January 28, 2006.

(19)(15)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 29, 2006.

(20)(16)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 28, 2006.

(21)(17)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 28, 2007.

(22)(18)
Incorporated by reference to the Registrant's Current Report on Form 8-K, filed on September 19, 2007.


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(23)(19)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 28, 2007.

(24)(20)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 27, 2007.

(25)(21)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended January 26, 2008.

(26)(22)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended August 1, 2009.

(23)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the year ended November 1, 2008.

(24)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 26,January 31, 2009. (25) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 2, 2009.

(26)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 2010.

(27)
Incorporated by reference to the Registrant's Definitive Proxy Statement on Form DEF 14A, Appendix B, filed on October 30, 2008.

(28)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 2009.

(29)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 1, 2010.

(30)
Incorporated by reference to the Registrant's Current Report on Form 8-K, filed on May 11, 2010.

(31)
Incorporated by reference to the Registrant's Current Report on Form 8-K, filed on June 10, 2010.

(32)
Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended July 31, 2010.

(33)
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 30, 2010.

(34)
Incorporated by reference to the Registrant's Periodic Report on Form 8-K, filed on December 21, 2010.

(35)
Incorporated by reference to the Registrant's Periodic Report on Form 8-K, filed on November 5, 2010.

(36)
Incorporated by reference to the Registrant's Periodic Report on Form 8-K, filed on March 18, 2011.