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

FORM 10-Q
(Mark One)
X☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 27, 2018October 31, 2020
ORor
_ ☐ 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: 000-21531001-15723
unfilogoa10.jpgunfi-20201031_g1.jpg
UNITED NATURAL FOODS, INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)
its charter)
Delaware05-0376157
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization)
Delaware05-0376157
(State or Other Jurisdiction of313 Iron Horse Way,Providence,(I.R.S. Employer Identification No.)Rhode Island02908
Incorporation or Organization)(Address of principal executive offices)(Zip Code)
 Registrant’s telephone number, including area code: (401) 528-8634
Securities registered pursuant to Section 12(b) of the Act:
313 Iron Horse Way, Providence, RITitle of each classTrading Symbol02908Name of each exchange on which registered
(Address of Principal Executive Offices)Common stock, par value $0.01UNFI(Zip Code)New York Stock Exchange
Registrant’s Telephone Number, Including Area Code: (401) 528-8634
Indicate by check mark whether the registrant: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 X☒ No _☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes X☒ No _☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerX
☐Accelerated filer _☒
Non-accelerated filer _ (Do not check if a smaller reporting company)☐Smaller reporting company _☐
Emerging growth company __
 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. __☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes _☐  No X
☒
As of March 5, 2018December 4, 2020 there were 50,409,08356,135,393 shares of the registrant’s common stock, $0.01 par value per share, outstanding.




Table of Contents
TABLE OF CONTENTS
 
Part I.Financial Information
Financial Information
Item 1.
3
4
5
6
7
8
1730
2847
2847
2947
2948
2948
2949
Mine Safety Disclosures50
29
Item 5.
Other Information
29
Item 6.
Exhibits
30
Signatures
31




2
Table of Contents
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except for per share data)
October 31,
2020		August 1,
2020
ASSETS  
Cash and cash equivalents$49,046 $46,993 
Accounts receivable, net1,165,946 1,120,199 
Inventories2,446,604 2,280,767 
Prepaid expenses and other current assets273,211 251,891 
Current assets of discontinued operations5,687 5,067 
Total current assets3,940,494 3,704,917 
Property and equipment, net1,662,659 1,701,216 
Operating lease assets1,010,744 982,808 
Goodwill19,671 19,607 
Intangible assets, net946,581 969,600 
Deferred income taxes106,931 107,624 
Other assets94,110 97,285 
Long-term assets of discontinued operations2,407 3,915 
Total assets$7,783,597 $7,586,972 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Accounts payable$1,729,786 $1,633,448 
Accrued expenses and other current liabilities278,790 281,956 
Accrued compensation and benefits184,752 228,832 
Current portion of operating lease liabilities145,295 131,022 
Current portion of long-term debt and finance lease liabilities25,712 83,378 
Current liabilities of discontinued operations9,889 11,438 
Total current liabilities2,374,224 2,370,074 
Long-term debt2,620,587 2,426,994 
Long-term operating lease liabilities888,979 873,990 
Long-term finance lease liabilities137,694 143,303 
Pension and other postretirement benefit obligations274,698 292,128 
Other long-term liabilities339,541 336,487 
Long-term liabilities of discontinued operations15 1,738 
Total liabilities6,635,738 6,444,714 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 5,000 shares; NaN issued or outstanding0 0 
Common stock, $0.01 par value, authorized 100,000 shares; 56,749 shares issued and 56,135 shares outstanding at October 31, 2020; 55,306 shares issued and 54,691 shares outstanding at August 1, 2020568 553 
Additional paid-in capital572,170 568,736 
Treasury stock at cost(24,231)(24,231)
Accumulated other comprehensive loss(225,722)(237,946)
Retained earnings827,353 837,633 
Total United Natural Foods, Inc. stockholders’ equity1,150,138 1,144,745 
Noncontrolling interests(2,279)(2,487)
Total stockholders’ equity1,147,859 1,142,258 
Total liabilities and stockholders’ equity$7,783,597 $7,586,972 
  January 27,
2018		 July 29,
2017
ASSETS  
  
Current assets:  
  
Cash and cash equivalents $25,401
 $15,414
Accounts receivable, less allowances of $19,784 and $13,939 629,362
 525,636
Inventories 1,140,928
 1,031,690
Deferred income taxes —
 40,635
Prepaid expenses and other current assets 61,481
 49,295
Total current assets 1,857,172
 1,662,670
Property & equipment, net 578,053
 602,090
Goodwill 363,841
 371,259
Intangible assets, less accumulated amortization of $59,712 and $49,926 200,831
 208,289
Other assets 49,783
 42,255
Total assets $3,049,680
 $2,886,563
     
LIABILITIES AND STOCKHOLDERS’ EQUITY  
  
Current liabilities:  
  
Accounts payable $627,085
 $534,616
Accrued expenses and other current liabilities 159,301
 157,243
Current portion of long-term debt 12,322
 12,128
Total current liabilities 798,708
 703,987
Notes payable 287,039
 223,612
Deferred income taxes 36,257
 98,833
Other long-term liabilities 29,140
 28,347
Long-term debt, excluding current portion 143,796
 149,863
Total liabilities 1,294,940
 1,204,642
Commitments and contingencies 

 

Stockholders’ equity:    
Preferred stock, par value $0.01 per share, authorized 5,000 shares; issued none —
 —
Common stock, par value $0.01 per share, authorized 100,000 shares; 50,972 shares issued and 50,408 shares outstanding at January 27, 2018, 50,622 shares issued and outstanding at July 29, 2017 510
 506
Additional paid-in capital 471,118
 460,011
Treasury stock at cost (22,237) —
Accumulated other comprehensive loss (10,204) (13,963)
Retained earnings 1,315,553
 1,235,367
Total stockholders’ equity 1,754,740
 1,681,921
Total liabilities and stockholders’ equity $3,049,680
 $2,886,563

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS (unaudited)
(In thousands, except for per share data)
 13-Week Period Ended
 October 31,
2020		November 2,
2019
Net sales$6,672,607 $6,296,612 
Cost of sales5,706,108 5,389,401 
Gross profit966,499 907,211 
Operating expenses900,962 883,688 
Goodwill and asset impairment charges0 425,405 
Restructuring, acquisition and integration related expenses16,428 14,672 
Gain on sale of assets(230)(90)
Operating income (loss)49,339 (416,464)
Other expense (income):  
Net periodic benefit income, excluding service cost(17,033)(11,384)
Interest expense, net69,133 49,709 
Other, net(798)(400)
Total other expense, net51,302 37,925 
Loss from continuing operations before income taxes(1,963)(454,389)
Benefit for income taxes(991)(66,955)
Net loss from continuing operations(972)(387,434)
Income from discontinued operations, net of tax1,296 4,026 
Net income (loss) including noncontrolling interests324 (383,408)
Less net income attributable to noncontrolling interests(1,367)(519)
Net loss attributable to United Natural Foods, Inc.$(1,043)$(383,927)
  
Basic (loss) earnings per share:
Continuing operations$(0.04)$(7.29)
Discontinued operations$0.02 $0.08 
Basic loss per share$(0.02)$(7.21)
Diluted (loss) earnings per share:
Continuing operations$(0.04)$(7.29)
Discontinued operations$0.02 $0.08 
Diluted loss per share$(0.02)$(7.21)
Weighted average shares outstanding:
Basic55,171 53,213 
Diluted55,171 53,213 
 
13-Week Period Ended
26-Week Period Ended
 
January 27,
2018
January 28,
2017
January 27,
2018
January 28,
2017
Net sales
$2,528,011

$2,285,518

$4,985,556

$4,563,882
Cost of sales
2,156,489

1,940,573

4,246,818

3,869,921
Gross profit
371,522

344,945

738,738
 693,961
Operating expenses
320,076

298,674

632,185

594,351
Restructuring and asset impairment expenses
11,242

—

11,242

—
Total operating expenses
331,318

298,674

643,427
 594,351
Operating income
40,204

46,271

95,311
 99,610
Other expense (income):
 

 

   
Interest expense
4,233

4,441

7,900

8,963
Interest income
(96)
(97)
(187)
(196)
Other expense (income), net
(418)
(101)
(1,281)
282
Total other expense, net
3,719

4,243

6,432
 9,049
Income before income taxes
36,485

42,028

88,879
 90,561
Provision for income taxes (benefit)
(14,001)
16,546

7,888

35,862
Net income
$50,486

$25,482

$80,991

$54,699
Basic per share data:
 

 

   
Net income
$1.00

$0.50

$1.60

$1.08
Weighted average basic shares of common stock outstanding
50,449

50,587

50,633

50,531
Diluted per share data:
 

 

   
Net income
$0.99

$0.50

$1.59

$1.08
Weighted average diluted shares of common stock outstanding
50,741

50,755

50,849

50,677

See accompanying Notes to Condensed Consolidated Financial Statements.
4


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UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(In thousands)
13-Week Period Ended
October 31,
2020		November 2,
2019
Net income (loss) including noncontrolling interests$324 $(383,408)
Other comprehensive income (loss):  
Recognition of pension and other postretirement benefit obligations, net of tax(1)
(206)572 
Recognition of interest rate swap cash flow hedges, net of tax(2)
12,458 (3,681)
Foreign currency translation adjustments405 371 
Recognition of other cash flow derivatives, net of tax(3)
(433)0 
Total other comprehensive income (loss)12,224 (2,738)
Less comprehensive income attributable to noncontrolling interests(1,367)(519)
Total comprehensive income (loss) attributable to United Natural Foods, Inc.$11,181 $(386,665)

(1)Amounts are net of tax (benefit) expense of $(0.1) million and $0.2 million, respectively.
  13-Week Period Ended 26-Week Period Ended
  January 27,
2018		 January 28,
2017		 January 27,
2018		 January 28,
2017
Net income $50,486
 $25,482
 $80,991
 $54,699
Other comprehensive income (loss):  
  
  
  
Change in fair value of swap agreements, net of tax 2,256
 3,483
 2,920
 5,078
Foreign currency translation adjustments 3,045
 1,281
 839
 (620)
Total other comprehensive income 5,301
 4,764
 3,759
 4,458
Total comprehensive income $55,787
 $30,246
 $84,750
 $59,157
(2)Amounts are net of tax expense (benefit) of $4.3 million and $(1.3) million, respectively.

(3)Amounts are net of tax (benefit) expense of $(0.1) million and $0.0 million, respectively.


See accompanying Notes to Condensed Consolidated Financial Statements.



UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (unaudited)
(In thousands)

5
 Common Stock Treasury Stock 
Additional
Paid-in Capital
 
Accumulated
Other
Comprehensive (Loss) Income
 Retained Earnings 
Total
Stockholders’ Equity
 Shares Amount Shares Amount    
Balances at July 29, 201750,622
 $506
 —
 $—
 $460,011
 $(13,963) $1,235,367
 $1,681,921
Cumulative effect of change in accounting principle 
  
     1,314
  
 (805) 509
Stock option exercises and restricted stock vestings, net of tax350
 4
     (4,160)  
  
 (4,156)
Share-based compensation

  
     13,846
  
  
 13,846
Repurchase of common stock    565
 (22,237) 

     (22,237)
Other 
  
     107
  
  
 107
Fair value of swap agreements, net of tax          2,920
   2,920
Foreign currency translation 
  
      
 839
  
 839
Net income 
  
      
  
 80,991
 80,991
Balances at January 27, 201850,972
 $510
 565
 $(22,237) $471,118
 $(10,204) $1,315,553
 $1,754,740
Table of Contents
See Notes to Condensed Consolidated Financial Statements.



UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY (unaudited)
For the 13-week periods ended October 31, 2020 and November 2, 2019
(In thousands)
 Common StockTreasury StockAdditional
Paid-in Capital		Accumulated
Other
Comprehensive Loss		Retained EarningsTotal United Natural Foods, Inc.
Stockholders’ Equity		Noncontrolling InterestsTotal Stockholders’ Equity
SharesAmountSharesAmount
Balances at August 1, 202055,306 $553 615 $(24,231)$568,736 $(237,946)$837,633 $1,144,745 $(2,487)$1,142,258 
Cumulative effect of change in accounting principle— — — — — — (9,237)(9,237)— (9,237)
Restricted stock vestings and stock option exercises1,438 15 — — (8,879)— — (8,864)— (8,864)
Share-based compensation— — — — 12,242 — — 12,242 — 12,242 
Other comprehensive income— — — — — 12,224 — 12,224 — 12,224 
Distributions to noncontrolling interests— — — — — — — — (1,159)(1,159)
Proceeds from issuance of common stock, net5 — — — 71 — — 71 — 71 
Net (loss) income— — — — — — (1,043)(1,043)1,367 324 
Balances at October 31, 202056,749 $568 615 $(24,231)$572,170 $(225,722)$827,353 $1,150,138 $(2,279)$1,147,859 
Balances at August 3, 201953,501 $535 615 $(24,231)$530,801 $(108,953)$1,108,890 $1,507,042 $(2,737)$1,504,305 
Cumulative effect of change in accounting principle— — — — — — (2,613)(2,613)— (2,613)
Restricted stock vestings and stock option exercises424 4 — — (823)— — (819)— (819)
Share-based compensation— — — — 1,247 — — 1,247 — 1,247 
Other comprehensive loss— — — — — (2,738)— (2,738)— (2,738)
Distributions to noncontrolling interests— — — — — — — — (1,098)(1,098)
Proceeds from issuance of common stock, net196 2 — — 1,733 — — 1,735 — 1,735 
Net (loss) income— — — — — — (383,927)(383,927)519 (383,408)
Balances at November 2, 201954,121 $541 615 $(24,231)$532,958 $(111,691)$722,350 $1,119,927 $(3,316)$1,116,611 
  26-Week Period Ended
  January 27,
2018		 January 28,
2017
CASH FLOWS FROM OPERATING ACTIVITIES:  
  
Net income $80,991
 $54,699
Adjustments to reconcile net income to net cash (used in) provided by operating activities:  
  
Depreciation and amortization 44,249
 42,458
Share-based compensation 13,846
 14,011
Loss on disposals of property and equipment 100
 395
Gain associated with disposal of investments
(699)
—
Excess tax deficit from share-based payment arrangements —
 1,413
Restructuring and asset impairment 3,370
 —
Goodwill impairment 7,872
 —
Deferred income taxes (22,733) —
Provision for doubtful accounts 5,569
 3,217
Non-cash interest expense (income) 956
 (24)
Changes in assets and liabilities, net of acquired businesses:  
  
Accounts receivable (109,097) (26,140)
Inventories (108,979) 30,759
  Prepaid expenses and other assets (13,508) (20,514)
Accounts payable 60,636
 9,363
Accrued expenses and other liabilities 2,308
 (12,728)
Net cash (used in) provided by operating activities (35,119) 96,909
CASH FLOWS FROM INVESTING ACTIVITIES:  
  
Capital expenditures (15,535) (22,674)
Purchase of businesses, net of cash acquired (19) (9,982)
Proceeds from disposals of property and equipment 36
 18
Proceeds from disposal of investments
756

—
Long-term investment (3,010) (2,000)
Net cash used in investing activities (17,772) (34,638)
CASH FLOWS FROM FINANCING ACTIVITIES:  
  
Repayments of long-term debt (6,054) (5,658)
Repurchase of common stock (22,237) —
Proceeds from borrowings under revolving credit line 311,061
 136,787
Repayments of borrowings under revolving credit line (247,632)
(169,618)
Increase (decrease) in bank overdraft 31,708
 (9,076)
Proceeds from exercise of stock options 268
 165
Payment of employee restricted stock tax withholdings (4,424) (1,191)
Excess tax deficit from share-based payment arrangements —
 (1,413)
Capitalized debt issuance costs —
 (180)
Net cash provided by (used in) financing activities 62,690
 (50,184)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 188
 (22)
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,987
 12,065
Cash and cash equivalents at beginning of period 15,414
 18,593
Cash and cash equivalents at end of period $25,401
 $30,658
     
Supplemental disclosures of cash flow information:    
Cash paid for interest $7,900
 $8,963
Cash paid for federal and state income taxes, net of refunds $36,929
 $45,944


See accompanying Notes to Condensed Consolidated Financial Statements.

Statements


6
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UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 13-Week Period Ended
(In thousands)October 31,
2020		November 2,
2019
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss) including noncontrolling interests$324 $(383,408)
Income from discontinued operations, net of tax1,296 4,026 
Net loss from continuing operations(972)(387,434)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:  
Depreciation and amortization77,189 75,141 
Share-based compensation12,242 1,247 
Gain on sale of assets(230)(90)
Closed property and other restructuring charges497 3,108 
Goodwill and asset impairment charges0 425,405 
Net pension and other postretirement benefit income(17,021)(11,370)
Deferred income tax benefit2,254 (61,762)
LIFO charge6,670 6,873 
Provision for losses on receivables, net(278)13,098 
Loss on debt extinguishment23,750 73 
Non-cash interest expense and other adjustments3,750 3,833 
Changes in operating assets and liabilities(163,033)(202,503)
Net cash used in operating activities of continuing operations(55,182)(134,381)
Net cash used in operating activities of discontinued operations(2,484)(488)
Net cash used in operating activities(57,666)(134,869)
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(41,380)(45,048)
Proceeds from dispositions of assets4,446 1,669 
Other(58)(1,366)
Net cash used in investing activities of continuing operations(36,992)(44,745)
Net cash provided by investing activities of discontinued operations1,486 20,864 
Net cash used in investing activities(35,506)(23,881)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Proceeds from borrowings of long-term debt500,000 2,050 
Proceeds from borrowings under revolving credit line1,569,088 1,338,446 
Repayments of borrowings under revolving credit line(1,339,100)(1,100,746)
Repayments of long-term debt and finance leases(614,010)(83,510)
Proceeds from the issuance of common stock and exercise of stock options71 1,735 
Payment of employee restricted stock tax withholdings(8,879)(819)
Payments for debt issuance costs(10,582)0 
Distributions to noncontrolling interests(1,159)(1,060)
Repayments of other loans(164)0 
Net provided by financing activities95,265 156,096 
EFFECT OF EXCHANGE RATE CHANGES ON CASH56 (10)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS2,149 (2,664)
Cash and cash equivalents, at beginning of period47,070 45,267 
Cash and cash equivalents at end of period49,219 42,603 
Less: cash and cash equivalents of discontinued operations(173)(726)
Cash and cash equivalents$49,046 $41,877 
Supplemental disclosures of cash flow information:
Cash paid for interest$44,120 $49,296 
Cash payments (refunds) for federal and state income taxes, net5,728 (28,874)
Leased assets obtained in exchange for new operating lease liabilities70,833 37,020 
Leased assets obtained in exchange for new finance lease liabilities346 0 
Capital expenditures included in accounts payable$21,399 $33,605 
 See accompanying Notes to Condensed Consolidated Financial Statements.
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UNITED NATURAL FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
January 27, 2018 (unaudited)

NOTE 1—SIGNIFICANT ACCOUNTING POLICIES
 
1.SIGNIFICANT ACCOUNTING POLICIES
(a)  Nature of Business

United Natural Foods, Inc. and its subsidiaries (the “Company”, “we”, ”us”, “UNFI”, or “our”) is a leading distributor and retailer of natural, organic, specialty, produce and specialty products.conventional grocery and non-food products, and provider of support services. The Company sells its products primarily throughout the United States and Canada.


(b)  Fiscal Year

The Company’s fiscal years end on the Saturday closest to July 31 and contain either 52 or 53 weeks. References to the first quarters of fiscal 2021 and 2020 relate to the 13-week fiscal quarters ended October 31, 2020 and November 2, 2019, respectively.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statementsCondensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Unless otherwise indicated, references to the Condensed Consolidated Statements of Operations, the Condensed Consolidated Balance Sheets and the Notes to the Condensed Consolidated Financial Statements exclude all amounts related to discontinued operations. Refer to Note 16—Discontinued Operations for additional information about the Company’s discontinued operations.

The accompanying unaudited condensed consolidated financial statementsCondensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"“SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statementsCondensed Consolidated Financial Statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. TheHowever, the results of operations for interim periods however, may not be indicative of the results that may be expected for a full year. These condensed consolidated financial statementsCondensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statementsConsolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 29, 2017.August 1, 2020 (the “Annual Report”). There were no material changes in significant accounting policies from those described in the Company’s Annual Report.

Net sales consist primarilyDiscontinued Operations

In the fourth quarter of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns, and allowances. Net sales also include amounts charged byfiscal 2020, the Company determined it no longer met the held for sale criterion for a probable sale to customersbe completed within 12 months for shippingthe Cub Foods business and handlingthe majority of the remaining Shoppers locations excluding five Shoppers locations that are held for sale (collectively “Retail”). As a result, the Company revised its Condensed Consolidated Financial Statements to reclassify Retail from discontinued operations to continuing operations. This change in financial statement presentation resulted in the inclusion of Retail’s results of operations, financial position, cash flows and fuel surcharges. The principal components of cost of sales include the amounts paid to suppliers for product sold, plus the cost of transportation necessary to bring the productrelated disclosures within continuing operations. Prior periods presented in these Condensed Consolidated Financial Statements have been conformed to the Company’s distribution facilities, offset by consideration received from supplierscurrent period presentation, resulting in connection with the purchase or promotionRetail being presented in continuing operations for all periods. Retail was acquired as part of the suppliers' products. CostSUPERVALU INC. (“Supervalu”) acquisition in the first quarter of sales also includes amounts incurred by the Company’s manufacturing subsidiary, United Natural Trading LLC, which does business as Woodstock Farms Manufacturing, for inbound transportation costs offset by consideration received from suppliers in connection with the purchase or promotionfiscal 2019 on October 22, 2018.

Use of Estimates

The preparation of the suppliers’ products. OperatingCondensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses include salariesduring the reporting period. Actual results could differ from those estimates.

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Table of Contents
Cash and wages, employee benefits, warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation and amortization expense. Operating expenses also include depreciation expense relatedCash Equivalents

Cash equivalents consist of highly liquid investments with original maturities of three months or less. The Company’s banking arrangements allow it to fund outstanding checks when presented to the wholesale and retail divisions. Other expense (income) includes interest onfinancial institution for payment. The Company funds all intraday bank balance overdrafts during the same business day. Checks outstanding indebtedness, including the financing obligation related to our Aurora, Colorado distribution center and the lease for office space for our corporate headquarters in Providence, Rhode Island, interest income and miscellaneous income and expenses.
As noted above, 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 costexcess of sales, whereas shipping and handling costs for selecting, quality assurance, and outbound transportationbank balances create book overdrafts, which are recorded in Accounts payable in the Condensed Consolidated Balance Sheets and are reflected as an operating expenses. Outbound shippingactivity in the Condensed Consolidated Statements of Cash Flows. As of October 31, 2020 and handling costs, including allocated employee benefit expenses, totaled $146.4August 1, 2020, the Company had net book overdrafts of $275.8 million and $129.0$267.8 million, respectively.

Reclassifications

Within the Condensed Consolidated Statements of Cash Flows certain immaterial amounts have been reclassified to conform with current year presentation: prior year amounts for Proceeds from disposal of investments have been combined into a line titled Proceeds from dispositions of assets; and prior year amounts for Payments for long-term investment and Payment of company owned life insurance premiums have been combined into a line titled Other. These reclassifications had no impact on reported net income, cash flows, or total assets and liabilities.

Inventories, Net

Inventories are valued at the second quarterlower of cost or market. Substantially all of the Company’s inventories consist of finished goods and a substantial portion of its inventories have a last-in, first-out (“LIFO”) reserve applied. Interim LIFO calculations are based on the Company’s estimates of expected year end inventory levels and costs, as the actual valuation of inventory under the LIFO method is computed at the end of each fiscal 2018year based on the inventory levels and 2017, respectively. Outbound shipping and handling costs including allocated employee benefit expenses, totaled $284.4at that time. If the first-in, first-out method had been used, Inventories, net would have been higher by approximately $49.9 million and $255.9$43.3 million for the first 26 weeks of fiscal 2018at October 31, 2020 and 2017,August 1, 2020, respectively.


2.NOTE 2—RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS


Recently Adopted Accounting Pronouncements

In December 2017, the United States ("U.S.") government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA”). The SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act ("SAB 118"), which provides guidance on accounting for the tax effects of the TCJA. Refer to Note 8, Income Taxes, for disclosure regarding the Company’s implementation of SAB 118.

In August 2017,June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updateaccounting standards update (“ASU”) 2016‐13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance: ASU 2018‐19, ASU 2019‐04, ASU 2019‐05, and ASU 2019‐11 (collectively, “Topic 326”). Topic 326 changed the impairment model for most financial assets and certain other instruments. For trade and other receivables, guarantees and other instruments, entities are required to use a new forward‐looking expected loss model that replaces the previous incurred loss model and generally results in earlier recognition of credit losses. The Company adopted this standard in the first quarter of fiscal 2021 on August 2, 2020, the effective and initial application date, using a modified‐retrospective basis as required by the standard by means of a cumulative‐effect adjustment to the opening balance of Retained earnings in the Company’s Condensed Consolidated Statement of Stockholders’ Equity. The difference between reserves and allowances recorded under the former incurred loss model and the amount determined under the current expected loss model, net of the deferred tax impact, was recorded as an adjustment to Retained earnings. Adoption of this standard did not have a material impact to the Company’s Condensed Consolidated Financial Statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326 Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825. This ASU clarifies the accounting treatment for the measurement of credit losses under ASC 236 and provides further clarification on previously issued updates including ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities which changesand ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Since the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness and presenting all items that affect earningsCompany adopted ASU 2017-12 in the same income statement line item asfourth quarter of fiscal 2018, the hedged item. Theamendments in ASU also provides new alternatives2019-04 related to clarifications on Accounting for applying hedge accounting to additional hedging strategies, measuring the hedged item in fair value hedges of interest rate risk, reducing the cost and complexity of applying hedge accountingHedging Activities were adopted by easing the requirements for effectiveness testing, hedge documentation and application of the critical terms match method and reducing the risk of a material error correction if a company applies the shortcut method inappropriately. This ASU is effective for public companies in fiscal years beginning after December 15, 2018, which for the Company will bein the first quarter of the fiscal year ending August 1, 2020, with earlyno impact to Accumulated other comprehensive loss or Retained earnings for fiscal 2020, as the Company did not have separately measured ineffectiveness related to its cash flow hedges. The remaining amendments within ASU 2019-04 were adopted in the first quarter of fiscal 2021 with the adoption permitted. Weof Topic 326. Adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. ASU 2018-05 requires implementation costs incurred by customers in cloud computing arrangements (i.e. hosting arrangements) to be capitalized under the same premises as authoritative guidance for internal-use software, and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The Company adopted this standard on a prospective basis in the first quarter of fiscal 2021. The Company expects to incur immaterial implementation costs in fiscal 2021. Under this standard, the Company is required to defer these costs and recognize these costs as a service expense over future periods. Adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-14,Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other postretirement plans. The Company adopted this guidance in the first quarter of fiscal 2021. The provisions of the new standard do not have any effect on the Company’s interim financial statements but will require additional disclosures in its annual consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions to Topic 740’s general principles. The amendments also improve consistent application and simplifies its application. The Company is required to adopt this guidance in the first quarter of fiscal 2022. The Company is currently reviewing the provisions of the new standard and evaluating its impact on the Company'sCompany’s consolidated financial statements.


In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements
NOTE 3—REVENUE RECOGNITION

Disaggregation of Revenues

The Company records revenue to Employee Share-Based Payment Accounting6 customer channels, which are described below:

•Chains, which is intended to improveconsists of customer accounts that typically have more than 10 operating stores and exclude stores included within the accounting for share-based payment transactions as partSupernatural and Other channels defined below;
•Independent retailers, which include smaller size accounts and include single store and multiple store locations, but are not classified within Chains above or Other discussed below;
•Supernatural, which consists of chain accounts that are national in scope and carry primarily natural products, and currently consists solely of Whole Foods Market;
•Retail, which includes our Retail segment, including the Cub Foods business and the majority of the FASB's simplification initiative. This ASU has changed aspectsremaining Shoppers locations, excluding 5 Shoppers locations that are held for sale; and
•Other, which includes international customers outside of accounting for share-based payment award transactions including accounting for income taxes,Canada, foodservice, eCommerce, conventional military business and other sales.
•Eliminations, which primarily includes the classificationelimination of excess tax benefitsWholesale sales to the Retail segment and the classificationelimination of employee taxes paid when shares are withheldsales from segments included within Other to Wholesale.

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The following tables detail the Company’s net sales for tax-withholdingthe periods presented by customer channel for each of its segments. The Company does not record its revenues within its Wholesale reportable segment for financial reporting purposes by product group, and it is therefore impracticable for it to report them accordingly.
 Net Sales for the 13-Week Period Ended
(in millions)October 31, 2020
Customer ChannelWholesaleRetailOtherEliminationsConsolidated
Chains$3,020 $0 $0 $— $3,020 
Independent retailers1,672 0 0 — 1,672 
Supernatural1,214 0 0 — 1,214 
Retail0 595 0 — 595 
Other525 0 56 — 581 
Eliminations— — — (409)(409)
Total$6,431 $595 $56 $(409)$6,673 
Net Sales for the 13-Week Period Ended
(in millions)
November 2, 2019(1)
Customer ChannelWholesaleRetailOtherEliminationsConsolidated
Chains$2,875 $0 $0 $— $2,875 
Independent retailers1,557 0 0 — 1,557 
Supernatural1,111 0 0 — 1,111 
Retail0 515 0 — 515 
Other525 0 65 — 590 
Eliminations— — — (351)(351)
Total$6,068 $515 $65 $(351)$6,297 
(1)In first quarter of fiscal 2021, the presentation of net sales by customer channel has been recast to present the Chains and Other channel exclusive of the intercompany eliminations and present total eliminations as a separate sales channel. There was no impact to the Condensed Consolidated Statements of Operations. UNFI believes this new basis better reflects its channel presentation, as it further aligns with segment presentation and how sales channel information would appear following disposition of Retail, assuming all banners retain a supply agreement. In addition, during the fourth quarter of fiscal 2020, the presentation of net sales by customer channel was recast to be presented on a basis consistent with customer size. International customers other than Canada, and alternative format sales continue to be classified within Other. The main effect of the statementchange was to re-categorize the former Supermarkets and Independents channels, previously classified by the majority of product carried by those customers between conventional and natural products, respectively, to classify those stores by the number of customer locations we supply. There was no impact to the Condensed Consolidated Statements of Operations as a result of the reclassification of customer types. We believe this new basis better reflects the nature and economic risks of cash flows forfeitures, and minimum statutory tax withholding requirements. from customers.

The Company adoptedserves customers in the new standardUnited States and Canada, as well as customers located in other countries. However, all of the Company’s revenue is earned in the U.S. and Canada, and international distribution occurs through freight-forwarders. The Company does not have any performance obligations on international shipments subsequent to delivery to the domestic port.

No net sales were recorded within continuing operations for retail stores within discontinued operations that the Company disposed of and expects to dispose of without a supply agreement. These net sales have been eliminated upon consolidation within the Wholesale segment of continuing operations and amounted to $14.4 million and $56.0 million in the first quarters of fiscal 2021 and 2020, respectively.

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Contract Balances

Accounts and notes receivable are as follows:
(in thousands)October 31, 2020August 1, 2020
Customer accounts receivable$1,207,609 $1,156,694 
Allowance for uncollectible receivables(57,987)(55,928)
Other receivables, net16,324 19,433 
Accounts receivable, net$1,165,946 $1,120,199 
Customer notes receivable, net, included within Prepaid expenses and other current assets$45,264 $49,268 
Long-term notes receivable, net, included within Other assets$19,497 $25,800 

NOTE 4—RESTRUCTURING, ACQUISITION AND INTEGRATION RELATED EXPENSES

Restructuring, acquisition and integration related expenses incurred were as follows:
13-Week Period Ended
(in thousands)October 31, 2020November 2, 2019
2019 SUPERVALU INC. restructuring expenses$0 $1,837 
Restructuring and integration costs14,760 9,294 
Closed property charges and costs1,668 3,541 
Total$16,428 $14,672 

NOTE 5—GOODWILL AND INTANGIBLE ASSETS

The Company has 5 goodwill reporting units: 2 of which represent separate operating segments and are aggregated within the Wholesale reportable segment (U.S. Wholesale and Canada Wholesale); 1 separate Retail operating and reportable segment and 2 of which are separate operating segments (Woodstock Farms and Blue Marble Brands) that do not meet the criteria for being disclosed as separate reportable segments. The Canada Wholesale operating segment, which is aggregated with U.S. Wholesale, would not meet the quantitative thresholds for separate reporting if it did not meet the aggregation criteria.

Fiscal 2020 Goodwill Impairment Review

During the first quarter of fiscal 2020, the Company changed its management structure and internal financial reporting, which resulted in the requirement to combine the Supervalu Wholesale reporting unit and the legacy Company Wholesale reporting unit into one U.S. Wholesale reporting unit, and experienced a further sustained decline in market capitalization and enterprise value. As a result of the change in reporting units and the sustained decline in market capitalization and enterprise value, the Company performed an interim quantitative impairment review of goodwill for the Wholesale reporting unit, which included a determination of the fair value of all reporting units.

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The Company estimated the fair values of all reporting units using both the market approach, applying a multiple of earnings based on observable multiples for guideline publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit. The calculation of the impairment charge includes substantial fact-based determinations and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities. The rates used to discount projected future cash flows under the income approach reflect a weighted average cost of capital of 8.5%, which considered observable data about guideline publicly traded companies, an estimated market participant’s expectations about capital structure and risk premiums, including those reflected in the Company’s market capitalization. The Company corroborated the reasonableness of the estimated reporting unit fair values by reconciling to its enterprise value and market capitalization. Based on this analysis, the Company determined that the carrying value of its U.S. Wholesale reporting unit exceeded its fair value by an amount that exceeded its assigned goodwill. As a result, the Company recorded a goodwill impairment charge of $421.5 million in the first quarter of fiscal 2018. Accordingly,2020. The goodwill impairment charge is reflected in Goodwill and asset impairment charges in the Company will account for excess tax benefits or tax deficiencies related to share-based paymentsCondensed Consolidated Statements of Operations. The goodwill impairment charge reflects the impairment of all of the U.S. Wholesale reporting unit’s goodwill.

Goodwill and Intangible Assets Changes

Changes in its provision for income taxes as opposed to additional paid-in capital. The Company recognized a de minimis amount of income tax expense related to tax deficiencies for share-based payments for the 13-week period ended January 27, 2018 and $0.9 million of income tax expense related to tax deficiencies for share-based payments for the 26-week period ended January 27, 2018. In addition, the Company elected to account for forfeitures as they occur and recorded a cumulative adjustment to retained earnings and additional paid-in capital as of July 30, 2017, the first day of fiscal 2018, of approximately $0.8 million and $1.3 million, respectively.

In February 2016, the FASB issued ASU No. 2016-2, Leases(Topic 842). The objective of this ASU is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. In addition, this ASU expands the disclosure requirements of lease arrangements. This ASU will require the Company to recognize most current operating lease obligations as right-of-use assets with a corresponding liability based on the presentcarrying value of future operating leases, which the Company believes will result in a significant impact to its consolidated balance sheets. Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients. The ASU is effective for public companies with interim and annual periods in fiscal years beginning after December 15, 2018, which for the Company will be the first quarterGoodwill by reportable segment that have goodwill consisted of the fiscal year endingfollowing:
(in thousands)WholesaleOtherTotal
Goodwill as of August 1, 2020$9,747 (1)$9,860 (2)$19,607 
Change in foreign exchange rates64 0 64 
Goodwill as of October 31, 2020$9,811 (1)$9,860 (2)$19,671 
(1)Amounts are net of accumulated goodwill impairment charges of $716.5 million as of August 1, 2020 with early adoption permitted. The Company expects to adopt this standard inand October 31, 2020.
(2)Amounts are net of accumulated goodwill impairment charges of $9.6 million as of August 1, 2020 and October 31, 2020.

Identifiable intangible assets consisted of the following:
October 31, 2020August 1, 2020
(in thousands)Gross Carrying
Amount		Accumulated
Amortization		NetGross Carrying
Amount		Accumulated
Amortization		Net
Amortizing intangible assets:
Customer relationships$1,007,195 $188,006 $819,189 $1,007,118 $172,832 $834,286 
Pharmacy prescription files32,900 9,422 23,478 32,900 7,964 24,936 
Non-compete agreements12,900 12,786 114 12,900 11,500 1,400 
Operating lease intangibles8,193 4,420 3,773 8,193 4,020 4,173 
Trademarks and tradenames83,700 39,486 44,214 83,700 34,708 48,992 
Total amortizing intangible assets1,144,888 254,120 890,768 1,144,811 231,024 913,787 
Indefinite lived intangible assets:      
Trademarks and tradenames55,813 0 55,813 55,813 0 55,813 
Intangible assets, net$1,200,701 $254,120 $946,581 $1,200,624 $231,024 $969,600 
Amortization expense was $23.0 million and $22.1 million for the first quarterquarters of fiscal 2021 and 2020, respectively. The estimated future amortization expense for each of the next five fiscal years and has begun an initial assessment plan to determinethereafter on definite lived intangible assets existing as of October 31, 2020 is shown below:
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Fiscal Year:(In thousands)
Remaining fiscal 2021$55,173 
202272,170 
202371,950 
202472,412 
202570,305 
2026 and thereafter548,758 
$890,768 

NOTE 6—FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

Recurring Fair Value Measurements

The following table provides the impacts of this ASU on the Company's consolidatedfair value hierarchy for financial statements and any necessary changes to our accounting policies, processes and controls, and, if required, our systems.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The new pronouncement is effective for public companies with annual periods, and interim periods within those annual periods, beginning after December 15, 2016, which for the Company was the first quarter of fiscal 2018. The Company adopted this guidancemeasured on a prospective basis in the first quarterrecurring basis:
Condensed Consolidated Balance Sheets LocationFair Value at October 31, 2020
(in thousands)Level 1Level 2Level 3
Assets:
Foreign currency derivatives designated as hedging instrumentsPrepaid expenses and other current assets$0 $70 $0 
Mutual fundsOther assets$1,635 $0 $0 
Liabilities:
Foreign currency derivatives not designated as hedging instrumentsAccrued expenses and other current liabilities$0 $15 $0 
Fuel derivatives designated as hedging instrumentsAccrued expenses and other current liabilities$0 $699 $0 
Foreign currency derivatives designated as hedging instrumentsAccrued expenses and other current liabilities$0 $311 $0 
Interest rate swaps designated as hedging instrumentsAccrued expenses and other current liabilities$0 $37,526 $0 
Interest rate swaps designated as hedging instrumentsOther long-term liabilities$0 $73,714 $0 

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Table of fiscal 2018 and it resulted in a reclassification from current deferred income tax assets to noncurrent deferred income tax liabilities of $40.6 million. All future adjustments will be reported as noncurrent.Contents
Condensed Consolidated Balance Sheets LocationFair Value at August 1, 2020
(in thousands)Level 1Level 2Level 3
Assets:
Foreign currency derivatives not designated as hedging instrumentsPrepaid expenses and other current assets$0 $26 $0 
Fuel derivatives designated as hedging instrumentsPrepaid expenses and other current assets$0 $36 $0 
Foreign currency derivatives designated as hedging instrumentsPrepaid expenses and other current assets$0 $94 $0 
Fuel derivatives designated as hedging instrumentsOther assets$0 $23 $0 
Mutual fundsOther assets$1,678 $0 $0 
Liabilities:
Fuel derivatives designated as hedging instrumentsAccrued expenses and other current liabilities$0 $197 $0 
Foreign currency derivatives designated as hedging instrumentsAccrued expenses and other current liabilities$0 $357 $0 
Interest rate swaps designated as hedging instrumentsAccrued expenses and other current liabilities$0 $46,743 $0 
Interest rate swaps designated as hedging instrumentsOther long-term liabilities$0 $91,994 $0 
In May 2014, the FASB issued ASU No. 2014-09, Revenue from
Interest Rate Swap Contracts with Customers, (Topic 606), which has been updated by multiple amending ASUs and supersedes existing revenue recognition requirements. The core principle of the new guidance is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the ASU requires new, enhanced quantitative and qualitative disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The collective guidance is effective for public companies with annual periods, and interim periods within those periods, beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. The new standard permits either of the following adoption methods: (i) a full retrospective application with restatement of each period presented in the financial statements with the option to elect certain practical expedients, or (ii) a retrospective application with the cumulative effect of adopting the guidance recognized as of the date of initial application (“modified retrospective method”).

The Company will adopt this new guidance in the first quarterfair values of fiscal 2019 and preliminarily expects to use the modified retrospective method.interest rate swap contracts are measured using Level 2 inputs. The Company's evaluation of the impact of the adoption of the ASU on the consolidated financial statements, footnote disclosures and accounting policies is ongoing and the impact cannot be reasonably estimated at this time. The Company continues to progress through its implementation plan and expects to complete its impact assessment in the third quarter of fiscal 2018. As part of our assessment work to-date, we have completed our scoping of revenue streams, began reviewinginterest rate swap contracts with customers and began documenting the impacts of the ASU on our wholesale distribution and other segments. After we have finalized our assessment, we will implement new policies, processes and controls to support revenue recognition under the new standard throughout the remainder of fiscal 2018.

3.ACQUISITIONS

Wholesale Segment - Wholesale Distribution Acquisition

Gourmet Guru, Inc. On August 10, 2016, the Company acquired all of the outstanding equity securities of Gourmet Guru, Inc. ("Gourmet Guru"). Gourmet Guru is a distributor and merchandiser of fresh and organic food focusing on new and emerging brands. Total cash consideration related to this acquisition was approximately $10.0 million. The fair value of identifiable intangible assets acquired was determined byare valued using an income approach. The identifiable intangible asset recorded based onapproach interest rate swap valuation model incorporating observable market inputs including interest rates, LIBOR swap rates and credit default swap rates. As of October 31, 2020, a provisional valuation consisted of customer lists of $1.0 million, which are being amortized on a straight-line100 basis over an estimated useful life of approximately two years. During the first quarter of fiscal 2018, the Company recorded anpoint increase to goodwill of approximately $0.2 million with ain forward LIBOR interest rates would decrease to prepaid expenses. The goodwill of $10.3 million represents the future economic benefits expected to arise that could not be individually identified and separately recognized. During the first quarter of fiscal 2018, the Company finalized its purchase accounting related to the Gourmet Guru acquisition. Operations have been combined with the Company's existing wholesale distribution business and therefore results are not separable from the rest of the wholesale distribution business. The Company has not furnished pro forma financial information relating to this acquisition as such information is not material to the Company's financial results.

4.RESTRUCTURING ACTIVITIES AND ASSET IMPAIRMENTS

2018 Earth Origins Market. During the second quarter of fiscal 2018, the Company recorded restructuring and asset impairment expenses of $11.4 million related to the Company's Earth Origins Market retail business. The Company made the decision in the second quarter of fiscal 2018 to close three non-core, under-performing stores of its total twelve stores which resulted in restructuring costs of $0.2 million related to severance and closure costs.

Based on the decision to close these stores, coupled with the decline in results in the first half of fiscal 2018 and the future outlook as a result of competitive pressure, the Company determined that both a test for recoverability of long-lived assets and a goodwill impairment analysis should be performed. The determination of the need for a goodwill analysis was based on the assertion that it was more likely than not that the fair value of the interest rate swap liabilities by approximately $44.3 million; a 100 basis point decrease in forward LIBOR interest rates would increase the fair value of the interest rate swap liabilities by approximately $46.1 million. Refer to Note 7—Derivatives for further information on interest rate swap contracts.

Mutual Funds

Mutual fund assets consist of balances held in investments to fund certain deferred compensation plans. The fair values of mutual fund assets are based on quoted market prices of the mutual funds held by the plan at each reporting unit was below its carrying amount. As a resultperiod. Mutual funds traded in active markets are classified within Level 1 of both these analyses,the fair value hierarchy.

Fuel Supply Agreements and Derivatives

To reduce diesel price risk, the Company recordedhas entered into derivative financial instruments and/or forward purchase commitments for a total impairment chargeportion of $3.3 million on long-livedour projected monthly diesel fuel requirements at fixed prices. The fair values of fuel derivative agreements are measured using Level 2 inputs.

Foreign Exchange Derivatives

To reduce foreign exchange risk, the Company has entered into derivative financial instruments for a portion of our projected monthly foreign currency requirements at fixed prices. The fair values of foreign exchange derivatives are measured using Level 2 inputs.
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Fair Value Estimates

For certain of the Company’s financial instruments including cash and cash equivalents, receivables, accounts payable, accrued vacation, compensation and benefits, and other current assets and $7.9 million to goodwill, respectively. Both of these charges are recorded inliabilities the Company's "Other" segment. The Company expects to incur additional restructuring charges primarily related to future exit costs of approximately $2.6 million during the second half of fiscal 2018.

2017 Cost Saving and Efficiency Initiatives. During fiscal 2017, the Company announced a restructuring program in conjunction with various cost saving and efficiency initiatives, including the planned opening of a shared services center. The Company recorded total restructuring costs of $6.9 million during the fiscal year ended July 29, 2017, all of which was recorded in the second half of fiscal 2017. Of the total restructuring costs recorded, $6.6 million was primarily related to severance and other employee separation and transition costs and $0.3 million wasfair values approximate carrying amounts due to an early lease terminationtheir short maturities. The fair value of notes receivable is estimated by using a discounted cash flow approach calculated by applying a market rate for similar instruments using Level 3 inputs. The fair value of debt is estimated based on market quotes, where available, or market values for similar instruments, using Level 2 and facility closing costs for the Company's Gourmet Guru facility in Bronx, New York. During the second quarter of fiscal 2018 the Company performed an analysis on the remaining restructuring cost liability and as a result, recorded a benefit of $0.2 million. This is included in "payments and other adjustments" in3 inputs. In the table below.

The following is a summarybelow, the carrying value of the restructuring costs the Company recorded in fiscal 2017, as well as the remaining liability asCompany’s long-term debt is net of January 27, 2018 (in thousands):original issue discounts and debt issuance costs.
 October 31, 2020August 1, 2020
(In thousands)Carrying ValueFair ValueCarrying ValueFair Value
Notes receivable, including current portion$74,581 $75,627 $77,598 $78,877 
Long-term debt, including current portion$2,633,400 $2,688,668 $2,497,626 $2,535,851 

NOTE 7—DERIVATIVES
  Restructuring Costs Recorded in Fiscal 2017 Payments and Other Adjustments Restructuring Cost Liability as of January 27, 2018
Severance and other employee separation and transition costs $6,606
 $(5,428) $1,178
Early lease termination and facility closing costs 258
 (258) —
Total $6,864
 $(5,686) $1,178




5.EARNINGS PER SHARE
The following is a reconciliation of the basic and diluted number of shares used in computing earnings per share (in thousands):
  13-Week Period Ended 26-Week Period Ended
  January 27,
2018		 January 28,
2017		 January 27,
2018		 January 28,
2017
Basic weighted average shares outstanding 50,449
 50,587
 50,633
 50,531
Net effect of dilutive stock awards based upon the treasury stock method 292
 168
 216
 146
Diluted weighted average shares outstanding 50,741
 50,755
 50,849
 50,677

For the second quarters of fiscal 2018 and fiscal 2017, there were 292,703 and 36,986 anti-dilutive share-based awards outstanding, respectively. For the first 26 weeks of fiscal 2018 and 2017, there were 581,618 and 40,862 anti-dilutive share-based awards outstanding, respectively. These anti-dilutive share-based awards were excluded from the calculation of diluted earnings per share.

6.FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
HedgingManagement of Interest Rate Risk


The Company manages its debt portfolio withenters into interest rate swapsswap contracts from time to time to mitigate its exposure to changes in market interest rates as part of its overall strategy to manage its debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates. Details of outstanding swap agreements as of January 27, 2018, which are all pay fixed and receive floating, are as follows:
Swap Maturity Notional Value (in millions) Pay Fixed Rate Receive Floating Rate Floating Rate Reset Terms
June 9, 2019 $50.0
 0.8725% One-Month LIBOR Monthly
June 24, 2019 $50.0
 0.7265% One-Month LIBOR Monthly
April 29, 2021 $25.0
 1.0650% One-Month LIBOR Monthly
April 29, 2021 $25.0
 0.9260% One-Month LIBOR Monthly
August 3, 2022 $117.5
 1.7950% One-Month LIBOR Monthly

Interest rate swap agreementscontracts 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 agreementscontracts are designated as cash flow hedges at January 27, 2018 andOctober 31, 2020. Interest rate swap contracts are reflected at their fair value of $6.4 million included in "Other Assets"values in the Condensed Consolidated Balance Sheet.Sheets. Refer to Note 6—Fair Value Measurements of Financial Instruments for further information on the fair value of interest rate swap contracts.


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Details of outstanding swap contracts as of October 31, 2020, which are all pay fixed and receive floating, are as follows:
Effective DateSwap MaturityOutstanding Notional Value (in millions)Pay Fixed Rate
Receive Floating Rate(2)
Floating Rate Reset Terms
March 21, 2019April 15, 2022100.0 2.3645 %One-Month LIBORMonthly
April 2, 2019June 30, 2022100.0 2.2170 %One-Month LIBORMonthly
June 28, 2019June 30, 202250.0 2.1840 %One-Month LIBORMonthly
August 3, 2015(1)
August 15, 202236.0 1.7950 %One-Month LIBORMonthly
October 26, 2018October 31, 2022100.0 2.8915 %One-Month LIBORMonthly
January 11, 2019October 31, 202250.0 2.4678 %One-Month LIBORMonthly
January 23, 2019October 31, 202250.0 2.5255 %One-Month LIBORMonthly
November 16, 2018March 31, 2023150.0 2.8950 %One-Month LIBORMonthly
January 23, 2019March 31, 202350.0 2.5292 %One-Month LIBORMonthly
November 30, 2018September 30, 202350.0 2.8315 %One-Month LIBORMonthly
October 26, 2018October 31, 2023100.0 2.9210 %One-Month LIBORMonthly
January 11, 2019March 28, 2024100.0 2.4770 %One-Month LIBORMonthly
January 23, 2019March 28, 2024100.0 2.5420 %One-Month LIBORMonthly
November 30, 2018October 31, 2024100.0 2.8480 %One-Month LIBORMonthly
January 11, 2019October 31, 2024100.0 2.5010 %One-Month LIBORMonthly
January 24, 2019October 31, 202450.0 2.5210 %One-Month LIBORMonthly
October 26, 2018October 22, 202550.0 2.9550 %One-Month LIBORMonthly
November 16, 2018October 22, 202550.0 2.9590 %One-Month LIBORMonthly
November 16, 2018October 22, 202550.0 2.9580 %One-Month LIBORMonthly
January 24, 2019October 22, 202550.0 2.5558 %One-Month LIBORMonthly
$1,486.0 
(1)The swap contract has an amortizing notional principal amount which is reduced by $1.0 million on a quarterly basis.
(2)For these swap contracts that are indexed to LIBOR, the Company is monitoring and evaluating risks related to the expected future cessation of LIBOR.

In the first quarter of fiscal 2021, in conjunction with the $500.0 million fixed senior unsecured notes offering described below in Note 8—Long-Term Debt, the Company paid $11.3 million to terminate or novate certain outstanding interest rate swaps with a notional amount of $504.0 million and certain forward starting interest rate swaps with a notional amount of $450.0 million. The payments equaled the fair value of the interest rate swaps at the time of their termination or novation. NaN gain or loss was recorded as a result of the swap termination and novations. Since the hedged interest payments remain probable of occurring, the unrecognized gains and losses resulting from the early termination and novation of these interest rate swap agreements will be amortized out of Accumulated other comprehensive income and into to Interest expense, net over the remaining period of the original terminated or novated interest rate swap agreements. Cash payments resulting from the termination and novation of interest rate swaps are classified as operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.

The Company usesperforms an initial quantitative assessment of hedge effectiveness using the “Hypothetical Derivative Method” described in Accounting Standards Codification ("ASC") 815 for quarterly prospective and retrospective assessments of hedge effectiveness, as well as for measurements of hedge ineffectiveness.the period in which the hedging transaction is entered. Under this method, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The effective portionIn future reporting periods, the Company performs a qualitative analysis for quarterly prospective and retrospective assessments of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings in interest income when the hedged transactions affect earnings. Ineffectiveness resulting from the hedge is recorded as a gain or loss in the condensed consolidated statement of income as part of other income. The Company did not have any hedge ineffectiveness recognized in earnings during the second quarter and first 26 weeks of fiscal 2018.effectiveness. The Company also monitors the risk of counterparty default on an ongoing basis and noted that the counterparties are reputable financial institutions.

Financial Instruments
The following table providesentire change in the fair value hierarchy for financial assets and liabilities measured on a recurring basis as of January 27, 2018 and July 29, 2017:



  Fair Value at January 27, 2018 Fair Value at July 29, 2017
(In thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets:            
Interest Rate Swap —
 $6,394
 —
 —
 $2,491
 —
Liabilities:            
Interest Rate Swap —
 —
 —
 —
 (308) —

The fair value of the Company's other financial instruments including accounts receivable, notes receivable, accounts payablederivative is initially reported in Other comprehensive income (outside of earnings) in the Condensed Consolidated Statements of Comprehensive Income and certain accrued expenses are derived using Level 2 inputssubsequently reclassified to earnings in Interest expense, net in the Condensed Consolidated Statements of Operations when the hedged transactions affect earnings.

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The location and approximate carrying amounts due to the short-term nature of these instruments. The fair value of notes payable approximate carrying amounts as they are variable rate instruments. The carrying amount of notes payable approximates fair valuegains or losses recognized in the Condensed Consolidated Statements of Operations for interest rate swap contracts for each of the periods, presented on a pretax basis, are as interest rates on the credit facility approximates current market rates (Level 2 criteria).follows:
13-Week Period Ended
October 31, 2020November 2, 2019
(In thousands)Interest expense, net
Total amounts of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded$69,133 $49,709 
Loss on cash flow hedging relationships:
Loss reclassified from comprehensive income into income$(12,036)$(2,370)

NOTE 8—LONG-TERM DEBT

The following estimated fair value amounts have been determinedCompany’s long-term debt consisted of the following:
(in thousands)Average Interest Rate at
October 31, 2020		Fiscal Maturity YearOctober 31,
2020		August 1,
2020
Term Loan Facility4.40%2026$1,165,000 $1,773,000 
ABL Credit Facility1.60%2024986,700 756,712 
Senior Notes6.75%2029500,000 0 
Other secured loans5.19%2024-202546,138 49,268 
Debt issuance costs, net(42,122)(45,846)
Original issue discount on debt(22,316)(35,508)
Long-term debt, including current portion2,633,400 2,497,626 
Less: current portion of long-term debt(12,813)(70,632)
Long-term debt$2,620,587 $2,426,994 

Refinancing Activities

During the first quarter of fiscal 2021, the Company repaid $500.0 million of outstanding borrowings under the Term Loan Facility (defined below) funded primarily by the Company using available market information and appropriate valuation methodologies taking into accountnet proceeds from the instruments' interest rate, terms,issuance of new eight-year senior unsecured notes (as described below). This refinancing transaction extended the maturity date and collateral, if any, in comparison to the Company's incremental borrowing rate for similar financial instruments and are therefore deemed Level 2 inputs. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
  January 27, 2018 July 29, 2017
(In thousands) Carrying Value Fair Value Carrying Value Fair Value
Liabilities:  
  
  
  
Long-term debt, including current portion $156,118
 $162,406
 $161,991
 $169,058

7.TREASURY STOCK

On October 6, 2017, the Company announced that its Board of Directors authorized a share repurchase program for up to $200.0 millionsignificant portion of the Company’s outstanding common stock.debt by approximately three years. Also during the quarter, the Company made $108.0 million of additional repayments under the Term Loan Facility, including $72.0 million related to the material cash flow generation in fiscal 2020, as required under the Term Loan Agreement (as described below) and a voluntary prepayment of $36.0 million with incremental borrowings under the ABL Credit Facility (as described below). The repurchase program is scheduledCompany also executed a third amendment to expire uponthe ABL Loan Agreement (as described below) during the first quarter of fiscal 2021, which added certain assets to the Borrowing Base (defined below) and increased the Company’s repurchasecapacity to issue letters of sharescredit under the facility, in addition to other administrative changes. The amendment did not change the aggregate amount or maturity date of the ABL Credit Facility. In connection with the prepayments, the Company incurred a loss on debt extinguishment related to unamortized debt issuance costs and a loss on unamortized original issue discount of $12.0 million and $11.8 million, respectively, which were recorded within Interest expense, net in the Condensed Consolidated Statements of Operations for the first quarter of fiscal 2021.

Senior Notes

On October 22, 2020, the Company issued $500.0 million of unsecured 6.750% Senior Notes due October 15, 2028 (the “Senior Notes”). The Senior Notes are guaranteed by each of the Company’s common stock having an aggregate purchase pricesubsidiaries that are borrowers under or that guarantee the ABL Credit Facility or the Term Loan Facility. The net proceeds from the offering of $200.0 million. Repurchases will be madethe Senior Notes, together with borrowings under the ABL Credit Facility (defined below), were used to repay $500.0 million of the amounts outstanding under the Term B Tranche of the Term Loan Facility (defined below) and for the payment of all financing costs related to the offering of the Senior Notes. Financing costs of approximately $9.0 million were paid and capitalized in accordancethe first quarter ending October 31, 2020.

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The Senior Notes contain covenants customary for debt securities of this type that limit the ability of the Company and its restricted subsidiaries to, among other things, incur debt, declare or pay dividends or make other distributions to stockholders of the Company, transfer or sell assets, create liens on our assets, engage in transactions with applicable securities lawsaffiliates, and merge, consolidate or sell all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis. The Company is in compliance with all such covenants for all periods presented.

ABL Credit Facility

On August 30, 2018, the Company entered into a loan agreement (as amended from time to time, the “ABL Loan Agreement”), by and among the Company and United Natural Foods West, Inc. (together with the Company, the “U.S. Borrowers”) and UNFI Canada, Inc. (the “Canadian Borrower” and, together with the U.S. Borrowers, the “Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “ABL Lenders”), Bank of America, N.A. as administrative agent for the ABL Lenders (the “ABL Administrative Agent”), Bank of America, N.A. (acting through its Canada branch), as Canadian agent for the ABL Lenders, and the other parties thereto.

On August 14, 2020, the Company entered into the Third Amendment to Loan Agreement, which provides for, among other things, (i) the addition of certain perishable inventory to the calculation of the Borrowing Base (as defined in the open market, through privately negotiated transactions,ABL Loan Agreement), (ii) the addition of income attributable to the business associated with the Cub Foods banner and the Shoppers banner accounted for within discontinued operations (if any) to the definition of Consolidated Net Income (as defined in the ABL Loan Agreement), (iii) an increase of the sublimit of availability for letters of credit to $300 million which includes an increased further sublimit for the Canadian Borrower of $25 million, and (iv) other administrative changes.

The ABL Loan Agreement provides for a secured asset-based revolving credit facility (the “ABL Credit Facility” and the loans thereunder, the “ABL Loans”), of which up to (i) $2,050.0 million is available to the U.S. Borrowers and (ii) $50.0 million is available to the Canadian Borrower. The ABL Loan Agreement also provides for (i) a $300.0 million sublimit of availability for letters of credit of which there is a further $25.0 million sublimit for the Canadian Borrower and (ii) a $100.0 million sublimit for short-term borrowings on a swingline basis of which there is a further $3.5 million sublimit for the Canadian Borrower. The ABL Credit Facility replaced the Company’s $900.0 million prior asset-based revolving credit facility.

Under the ABL Loan Agreement, the Borrowers may, at their option, increase the aggregate amount of the ABL Credit Facility in an amount of up to $600.0 million without the consent of any ABL Lenders not participating in such increase, subject to certain customary conditions and applicable lenders committing to provide the increase in funding. There is no assurance that additional funding would be available.

The Borrowers’ obligations under the ABL Credit Facility are guaranteed by most of the Company’s wholly-owned subsidiaries who are not also Borrowers (collectively, the “ABL Guarantors”), subject to customary exceptions and limitations. The Borrowers’ obligations under the ABL Credit Facility and the ABL Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the Borrowers’ and ABL Guarantors’ accounts receivable, inventory and certain other assets arising therefrom or otherwise.related thereto (including substantially all of their deposit accounts, collectively, the “ABL Assets”) and (ii) a second-priority lien on all of the Borrowers’ and ABL Guarantors’ assets that do not constitute ABL Assets, in each case, subject to customary exceptions and limitations.

Availability under the ABL Credit Facility is subject to a borrowing base (the “Borrowing Base”), which is based on 90% of eligible accounts receivable, plus 90% of eligible credit card receivables, plus 90% of the net orderly liquidation value of eligible inventory, plus 90% of eligible pharmacy receivables, plus certain pharmacy scripts availability of the Borrowers, after adjusting for customary reserves. The aggregate amount of the ABL Loans made and letters of credit issued under the ABL Credit Facility shall at no time exceed the lesser of the aggregate commitments under the ABL Credit Facility (currently $2,100.0 million or, if increased at the Borrowers’ option as described above, up to $2,700.0 million) or the Borrowing Base. To the extent that the Borrowers’ Borrowing Base declines, the availability under the ABL Credit Facility may decrease below $2,100.0 million.

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As of October 31, 2020, the U.S. Borrowers’ Borrowing Base, net of $231.9 million of reserves, was $2,185.8 million, which is above the $2,050.0 million limit of availability to the U.S. Borrowers under the ABL Credit Facility. As of October 31, 2020, the Canadian Borrower’s Borrowing Base, net of $4.1 million of reserves, was $42.2 million, which is below the $50.0 million limit of availability to the Canadian Borrower under the ABL Credit facility, resulting in total availability of $2,092.2 million for ABL Loans and letters of credit under the ABL Credit Facility. As of October 31, 2020, the U.S. Borrowers had $986.7 million of ABL Loans outstanding, which are presented net of debt issuance costs of $10.6 million and are included in Long-term debt in the Condensed Consolidated Balance Sheets, and the Canadian Borrower had no ABL Loans outstanding under the ABL Credit Facility. As of October 31, 2020, the U.S. Borrowers had $97.2 million in letters of credit and the Canadian Borrower had 0 letters of credit outstanding under the ABL Credit Facility. The Company’s resulting remaining availability under the ABL Credit Facility was $1,008.3 million as of October 31, 2020.

The ABL Loans of the U.S. Borrowers under the ABL Credit Facility bear interest at rates that, at the U.S. Borrowers’ option, can be either: (i) a base rate and an applicable margin or (ii) a LIBOR rate and an applicable margin. As of October 31, 2020, the applicable margin for base rate loans was 0.25% and the applicable margin for LIBOR loans was 1.25%. The ABL Loan Agreement contains provisions for the establishment of an alternative rate of interest in the event that LIBOR is no longer available. The ABL Loans of the Canadian Borrower under the ABL Credit Facility bear interest at rates that, at the Canadian Borrower’s option, can be either: (i) prime rate and an applicable margin or (ii) a Canadian dollar bankers’ acceptance equivalent rate and an applicable margin. As of October 31, 2020, the applicable margin for prime rate loans was 0.25%, and the applicable margin for Canadian dollar bankers’ acceptance equivalent rate loans was 1.25%. Commencing on the first day of the calendar month following the ABL Administrative Agent’s receipt of the Company’s aggregate availability calculation for the prior fiscal quarter, the applicable margins for borrowings by the U.S. Borrowers and Canadian Borrower will be subject to adjustment based upon the aggregate availability under the ABL Credit Facility. Unutilized commitments under the ABL Credit Facility are subject to a per annum fee of (i) 0.375% if the average daily total outstandings were less than 25% of the aggregate commitments during the preceding fiscal quarter or (ii) 0.25% if such average daily total outstandings were 25% or more of the aggregate commitments during the preceding fiscal quarter. As of October 31, 2020, the unutilized commitment fee was 0.25% per annum. The Borrowers are also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum of the amount available to be drawn under each such letter of credit, as well as a fee to all lenders equal to the applicable margin for LIBOR or Canadian dollar bankers’ acceptance equivalent rate loans, as applicable, times the average daily amount available to be drawn under all outstanding letters of credit.

The ABL Loan Agreement subjects the Company to a fixed charge coverage ratio (as defined in the ABL Loan Agreement) of at least 1.0 to 1.0 calculated at the end of each fiscal quarter on a rolling four quarter basis when the adjusted aggregate availability (as defined in the ABL Loan Agreement) is less than the greater of (i) $235.0 million and (ii) 10% of the aggregate borrowing base. The Company mayhas not been subject to the fixed charge coverage ratio covenant under the ABL Loan Agreement, including through the filing date of this Quarterly Report.

The assets included in the Condensed Consolidated Balance Sheets securing the outstanding obligations under the ABL Credit Facility on a first-priority basis, and the unused credit and fees under the ABL Credit Facility, were as follows:
Assets securing the ABL Credit Facility (in thousands)(1):
October 31,
2020		August 1,
2020
Certain inventory assets included in Inventories and Current assets of discontinued operations$2,476,391 $2,270,892 
Certain receivables included in Accounts receivable, net and Current assets of discontinued operations$1,123,306 $1,077,682 
(1)The ABL Credit Facility is also implementsecured by all or part of the repurchase program pursuantCompany’s pharmacy scripts, which are included in Intangibles, net in the Condensed Consolidated Balance Sheets as of October 31, 2020 and August 1, 2020.

Unused credit and fees under the ABL Credit Facility (in thousands, except percentages):October 31, 2020
Outstanding letters of credit$97,207 
Letter of credit fees1.375 %
Unused credit$1,008,288 
Unused facility fees0.25 %
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The ABL Loan Agreement contains other customary affirmative and negative covenants and customary representations and warranties that must be accurate in order for the Borrowers to a plan or plans meeting the conditions of Rule 10b5-1borrow under the Securities Exchange ActABL Credit Facility. The ABL Loan Agreement also contains customary events of 1934, as amended.default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the ABL Credit Facility to be in full force and effect, and a change of control. If an event of default occurs and is continuing, the Borrowers may be required to immediately repay all amounts outstanding under the ABL Loan Agreement.


Under this program,Term Loan Facility

On the Supervalu acquisition date (“Closing Date”), the Company purchased 402,587 sharesentered into a new term loan agreement (the “Term Loan Agreement”), by and among the Company and Supervalu (collectively, the “Term Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “Term Lenders”), Goldman Sachs Bank USA, as administrative agent for the Lenders, and the other parties thereto. The Term Loan Agreement provides for senior secured first lien term loans in an aggregate principal amount of $1,950.0 million, consisting of a $1,800.0 million seven-year tranche (the “Term B Tranche”) and a $150.0 million 364-day tranche (the “364-day Tranche” and, together with the Term B Tranche, collectively, the “Term Loan Facility”). The entire amount of the Company's common stocknet proceeds from the Term Loan Facility was used to finance the Supervalu acquisition and related transaction costs.

The loans under the Term B Tranche will be payable in full on October 22, 2025; provided that, if on or prior to December 31, 2024, that certain Agreement for Distribution of Products, dated as of October 30, 2015, by and between Whole Foods Market Distribution, Inc., a Delaware corporation, and the Company has not been extended until at an aggregate costleast October 23, 2025 on terms not materially less favorable, taken as a whole, to the Company and its subsidiaries than those in effect on the Closing Date, then the loans under the Term B Tranche will be payable in full on December 31, 2024.

In the first quarter ending October 31, 2020, the Company made prepayments on the Term B Tranche of $15.8$608.0 million as described above.

Subsequent to the end of the first quarter of fiscal 2021, the Company made a voluntary prepayment of $150.0 million on the Term Loan funded with incremental borrowings under the ABL Credit Facility that reduces its interest costs. This prepayment will count towards any requirement from Excess Cash Flow (as defined in the Term Loan Agreement) generated during fiscal 2021, which would be due in fiscal 2022. In the second quarter of fiscal 20182021, the Company expects to record an accelerated charge related to deferred financing fees and 564,660 sharesoriginal issue discounts based on the proportionate payment amount to the Term Loan Facility balance.
The loans under the 364-day Tranche were paid in full on October 21, 2019. The Company funded the scheduled maturity of the Company's common stock$52.8 million outstanding borrowings under the 364-day Tranche with incremental borrowings under the ABL Credit Facility on October 21, 2019.

Under the Term Loan Agreement, the Term Borrowers may, at their option, increase the amount of the Term B Tranche, add one or more additional tranches of term loans or add one or more additional tranches of revolving credit commitments, without the consent of any Term Lenders not participating in such additional borrowings, up to an aggregate costamount of $22.2$656.3 million plus additional amounts based on satisfaction of certain leverage ratio tests, subject to certain customary conditions and applicable lenders committing to provide the additional funding. There can be no assurance that additional funding would be available.

The Term Borrowers’ obligations under the Term Loan Facility are guaranteed by most of the Company’s wholly-owned domestic subsidiaries who are not also Term Borrowers (collectively, the “Term Guarantors”), subject to customary exceptions and limitations, including an exception for immaterial subsidiaries designated by the Company from time to time. The Term Borrowers’ obligations under the Term Loan Facility and the Term Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Term Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the Term Guarantors’ ABL Assets, in each case, subject to customary exceptions and limitations, including an exception for owned real property with net book values of less than $10.0 million. As of October 31, 2020, there was $594.9 million of owned real property pledged as collateral that was included in Property and equipment, net and Prepaid expenses and Other current assets in the Condensed Consolidated Balance Sheets.

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The loans under the Term Loan Facility may be voluntarily prepaid, subject to certain minimum payment thresholds and the payment of breakage or other similar costs. Under the Term Loan Facility, the Company is required, subject to certain exceptions and customary reinvestment rights, to apply 100 percent of Net Cash Proceeds (as defined in the Term Loan Agreement) from certain types of asset sales to prepay the loans outstanding under the Term Loan Facility. Commencing with the fiscal year ending August 1, 2020, the Company must also prepay loans outstanding under the Term Loan Facility no later than 130 days after the fiscal year end in an aggregate principal amount equal to a specified percentage (which percentage ranges from 0 to 75 percent depending on the Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) as of the last day of such fiscal year) of Excess Cash Flow (as defined in the Term Loan Agreement) in excess of $10 million for the fiscal year then ended, minus any voluntary prepayments of the loans under the Term Loan Facility, the ABL Credit Facility (to the extent they permanently reduce commitments under the ABL Facility) and certain other indebtedness made during such fiscal year. Based on the Company’s Excess Cash Flow in fiscal 2020, a $72.0 million prepayment was required and paid in the quarter ending October 31, 2020. The potential amount of prepayment from Excess Cash Flow in fiscal 2021 that may be required in fiscal 2022 is not reasonably estimable as of October 31, 2020.

The borrowings under the Term B Tranche of the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either: (i) a base rate and a margin of 3.25% or (ii) a LIBOR rate and a margin of 4.25%; provided that the LIBOR rate shall never be less than 0.0%. The Term Loan Agreement contains provisions for the establishment of an alternative rate of interest in the event that LIBOR is no longer available.

The Term Loan Agreement does not include any financial maintenance covenants but contains other customary affirmative and negative covenants and customary representations and warranties. The Term Loan Agreement also contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the Term Loan Facility to be in full force and effect, and a change of control. If an event of default occurs and is continuing, the Term Borrowers may be required to immediately repay all amounts outstanding under the Term Loan Agreement.

As of October 31, 2020, the Company had borrowings of $1,165.0 million outstanding under the Term B Tranche, which are presented net of debt issuance costs of $22.5 million and an original issue discount on debt of $22.1 million. As of October 31, 2020, 0 amount of the Term B Tranche was classified as current.

NOTE 9—COMPREHENSIVE (LOSS) INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in Accumulated other comprehensive loss by component net of tax for the first quarter of fiscal 2021 are as follows:
(in thousands)Other Cash Flow DerivativesBenefit PlansForeign CurrencySwap AgreementsTotal
Accumulated other comprehensive loss at August 1, 2020$(67)$(115,296)$(21,419)$(101,164)$(237,946)
Other comprehensive (loss) gain before reclassifications(557)0 405 3,652 3,500 
Reclassification of amounts included in net periodic benefit income— (206)— — (206)
Reclassification of cash flow hedges124 — — 8,806 8,930 
Net current period Other comprehensive (loss) income(433)(206)405 12,458 12,224 
Accumulated other comprehensive loss at October 31, 2020$(500)$(115,502)$(21,014)$(88,706)$(225,722)

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Changes in Accumulated other comprehensive loss by component net of tax for the first quarter of fiscal 2020 are as follows:
(in thousands)Benefit PlansForeign CurrencySwap AgreementsTotal
Accumulated other comprehensive loss at August 3, 2019$(32,458)$(20,082)$(56,413)$(108,953)
Other comprehensive income (loss) before reclassifications0 371 (5,623)(5,252)
Reclassification of amounts included in net periodic benefit income572 — — 572 
Reclassification of cash flow hedge— — 1,942 1,942 
Net current period Other comprehensive income (loss)572 371 (3,681)(2,738)
Accumulated other comprehensive loss at November 2, 2019$(31,886)$(19,711)$(60,094)$(111,691)

Items reclassified out of Accumulated other comprehensive loss had the following impact on the Condensed Consolidated Statements of Operations:
13-Week Period Ended
Affected Line Item on the Condensed Consolidated Statements of Operations
(in thousands)October 31,
2020		November 2,
2019
Pension and postretirement benefit plan obligations:
Reclassification of amounts included in net periodic benefit income(1)
$(309)$774 Net periodic benefit income, excluding service cost
Income tax expense (benefit)103 (202)Benefit for income taxes
Total reclassifications, net of tax$(206)$572 
Swap agreements:
Reclassification of cash flow hedge$12,036 $2,370 Interest expense, net
Income tax expense (benefit)(3,230)(428)Benefit for income taxes
Total reclassifications, net of tax$8,806 $1,942 
Other cash flow hedges:
Reclassification of cash flow hedge$169 $0 Cost of sales
Income tax expense (benefit)(45)0 Benefit for income taxes
Total reclassifications, net of tax$124 $0 
(1)Reclassification of amounts included in net periodic benefit income include reclassification of prior service benefit and reclassification of net actuarial loss as reflected in Note 11—Benefit Plans.

As of October 31, 2020, the Company expects to reclassify $45.2 million out of Accumulated other comprehensive loss into Interest expense, net during the following twelve-month period.

NOTE 10—SHARE-BASED AWARDS

In the first quarter of fiscal 2021, the Company granted restricted stock units and performance share units to its directors, executive officers, and certain employees representing a right to receive an aggregate of 2.6 million. As of October 31, 2020, there were 113 thousand shares available for issuance under the 2020 Equity Incentive Plan.

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NOTE 11—BENEFIT PLANS

Net periodic benefit income and contributions to defined benefit pension and other post-retirement benefit plans consisted of the following:
13-Week Period Ended
Pension BenefitsOther Postretirement Benefits
(in thousands)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Net Periodic Benefit (Income) Cost
Service cost$0 $0 $12 $14 
Interest cost9,164 16,690 103 236 
Expected return on plan assets(25,965)(27,482)(26)(54)
Amortization of prior service credit0 0 (350)(350)
Amortization of net actuarial loss (gain)356 3 (315)(427)
Net periodic benefit income$(16,445)$(10,789)$(576)$(581)
Contributions to benefit plans$(375)$(4,100)$(950)$(100)

Pension Contributions

No minimum pension contributions are required to be made under either the SUPERVALU Inc. Retirement Plan or the Unified Grocers, Inc. Cash Balance Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in fiscal 2021. The Company expects to contribute approximately $5.3 million to its other non-qualified pension plans and postretirement benefit plans in fiscal 2021.

Multiemployer Pension Plans

The Company contributed $11.9 million and $13.5 million in the 26-week period ended January 27, 2018. The Company records the repurchasefirst quarters of shares of common stock at cost based on the settlement date of the transaction. These shares are classified as treasury stock, which is a reductionfiscal 2021 and 2020, respectively, to stockholders’ equity. Treasury stock is included in authorizedcontinuing and issued shares but excluded from outstanding shares.discontinued operations multiemployer pension plans.


8.NOTE 12—INCOME TAXES


EffectsThe effective income tax rate for continuing operations was a benefit of the Tax Cuts and Jobs Act

New tax legislation, commonly referred50.5% compared to as the Tax Cuts and Jobs Act ("TCJA"), was enacteda benefit of 14.7% on December 22, 2017. ASC 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most TCJA provisions is for tax years beginning after December 31, 2017. Though certain key aspects of the new law are effective January 1, 2018 and have an immediate accounting effect, other significant provisions are not effective or may not result in accounting effectspre-tax income for the Company until our fiscal year beginning August 2018.

Given the significance of the legislation, the SEC staff issued SAB 118, which allows registrants to record provisional amounts concerning TCJA impacts during a one year “measurement period” similar to that used when accounting for business combinations. The measurement period is deemed to have ended earlier when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed.



SAB 118 summarizes a process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the TCJA.

Provisional estimates have been recorded during the secondfirst quarter of fiscal 20182021 and 2020, respectively. The change in the effective income tax rate for the estimated impactfirst quarter of fiscal 2021 was primarily driven by a discrete tax benefit in the first quarter of fiscal 2021 related to employee stock awards compared to a discrete tax expense for this item in the first quarter of fiscal 2020. In addition, the first quarter of fiscal 2020 was impacted by a goodwill impairment charge. The tax provision included $0.5 million and $64.2 million of discrete tax benefit for the first quarter of fiscal 2021 and fiscal 2020, respectively.

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NOTE 13—EARNINGS PER SHARE
The following is a reconciliation of the TCJA based on information thatbasic and diluted number of shares used in computing earnings per share:
 13-Week Period Ended
(in thousands, except per share data)October 31,
2020		November 2,
2019
Basic weighted average shares outstanding55,171 53,213 
Net effect of dilutive stock awards based upon the treasury stock method0 0 
Diluted weighted average shares outstanding55,171 53,213 
Basic (loss) earnings per share:
Continuing operations$(0.04)$(7.29)
Discontinued operations$0.02 $0.08 
Basic loss per share$(0.02)$(7.21)
Diluted (loss) earnings per share:
Continuing operations$(0.04)$(7.29)
Discontinued operations(1)
$0.02 $0.08 
Diluted loss per share$(0.02)$(7.21)
Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share5,247 8,272 
(1)The computation of diluted earnings per share from discontinued operations is currently available tocalculated using diluted weighted average shares outstanding, which includes the Company. These provisional estimates are comprisednet effect of amounts (includingdilutive stock awards, of approximately 3.95 million and 63 thousand for the tax basisfirst quarters of assetsfiscal 2021 and liabilities) that will be finalized in connection with the Company's July 2017 tax returns, a rate reduction for fiscal 2018 to a 27% blended federal tax rate, a re-measurement of deferred tax balances to the new statutory 21% rate and the one-time mandatory repatriation transition tax. The Company estimates that the re-measurement of deferred taxes resulted in a provisional $21.9 million net benefit and the repatriation transition tax has an immaterial impact because of foreign tax credits available to the Company. As the Company completes its analysis of the TCJA, changes may be made to provisional estimates, and such changes will be reflected in the period in which the related adjustments are made.2020, respectively.


9.         NOTE 14—BUSINESS SEGMENTS

The Company has several operating divisions aggregated under the wholesaletwo reportable segments: Wholesale and Retail. These reportable segments are two distinct businesses, each with a different customer base, marketing strategy and management structure. The Wholesale reportable segment which is the Company’s only reportable segment. Theseaggregation of 2 operating divisionssegments: U.S. Wholesale and Canada Wholesale. The U.S. Wholesale and Canada Wholesale operating segments have similar products and services, customer channels, distribution methods and historical margins. economic characteristics. Reportable segments are reviewed on an annual basis, or more frequently if events or circumstances indicate a change in reportable segments has occurred.

The wholesaleWholesale reportable segment is engaged in the national distribution of natural, organic, and specialty, foods, produce and relatedconventional grocery and non-food products, and providing retail services in the United States and Canada. The Retail reportable segment derives revenues from the sale of groceries and other products at retail locations operated by the Company. The Company has additional operating divisionssegments that do not meet the quantitative thresholds for reportable segments and are therefore aggregated under the caption of “Other.” “Other”Other. 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 the importing, roasting, packaging and distributing of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections, and the Company’s branded product lines, and the Company's brokerage business, which markets various products on behalf of food vendors directly and exclusively to the Company's customers. “Other”lines. Other also includes certain corporate operating expenses that are not allocated to operating divisions,segments, which include, among other expenses, stock basedrestructuring, acquisition, and integration related expenses, share-based compensation and salaries, retainers, and other related expenses of certain officers and all directors. Wholesale records revenues related to sales to Retail at gross margin rates consistent with sales to other similar wholesale customers of the acquired Supervalu business.

Segment earnings include revenues and costs attributable to each of the respective business segments and allocated corporate overhead, based on the segment’s estimated consumption of corporately managed resources. The Company allocates certain corporate capital expenditures and identifiable assets to its business segments and retains certain depreciation expense related to those assets within Other. Non-operating expenses that are not allocated to the operating divisionssegments are underincluded in the captionOther segment. In the fourth quarter of “Unallocated (Income)/Expenses.” The Company does not record its revenues for financial reporting purposes by product group, and it is therefore impracticable forfiscal 2020, the Company updated its segment profit measure to report them accordingly.Adjusted EBITDA. Prior period amounts have been recast to reflect this change in segment profit measure.



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The following table reflects businessprovides continuing operations net sales and Adjusted EBITDA by reportable segment and reconciles that information to Loss from continuing operations before income taxes:
13-Week Period Ended
 (in thousands)October 31, 2020November 2, 2019
Net sales:
Wholesale(1)
$6,431,283 $6,067,307 
Retail594,911 515,226 
Other55,612 65,079 
Eliminations(409,199)(351,000)
Total Net sales$6,672,607 $6,296,612 
Continuing Operations Adjusted EBITDA:
Wholesale$122,961 $106,312 
Retail24,282 10,562 
Other4,150 (1,597)
Eliminations5,724 1,159 
Adjustments:
Net income attributable to noncontrolling interests1,367 519 
Total other expense, net(51,302)(37,925)
Depreciation and amortization(77,189)(75,141)
Share-based compensation(14,149)(3,925)
Restructuring, acquisition and integration related expenses(16,428)(14,672)
Goodwill and asset impairment charges0 (425,405)
Gain on sale of assets230 90 
Notes receivable charges0 (12,516)
Legal reserve charge0 (1,850)
Other retail expense(1,609)0 
Loss from continuing operations before income taxes$(1,963)$(454,389)
Depreciation and amortization:
Wholesale$67,821 $67,993 
Retail7,388 1,458 
Other1,980 5,690 
Total depreciation and amortization$77,189 $75,141 
Capital expenditures:
Wholesale$37,991 $42,259 
Retail3,201 2,676 
Other188 113 
Total capital expenditures$41,380 $45,048 
(1)As presented in Note 3—Revenue Recognition, for the periods indicated (in thousands):first quarters of fiscal 2021 and 2020, the Company recorded $357.6 million and $297.7 million, respectively, within Net sales in its Wholesale reportable segment attributable to Wholesale sales to its Retail segment that have been eliminated upon consolidation. Refer to Note 3—Revenue Recognition for additional information regarding Wholesale sales to discontinued operations.

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  Wholesale Other Eliminations Unallocated (Income)/Expenses Consolidated
13-Week Period Ended January 27, 2018:  
  
  
  
  
Net sales $2,514,670
 $55,493
 $(42,152) $—
 $2,528,011
Restructuring and asset impairment expenses 67
 11,175
 —
 —
 11,242
Operating income (loss) 53,941
 (16,549) 2,812
 —
 40,204
Interest expense —
 —
 —
 4,233
 4,233
Interest income —
 —
 —
 (96) (96)
Other, net —
 —
 —
 (418) (418)
Income before income taxes  
  
  
  
 36,485
Depreciation and amortization 21,437
 370
 —
 —
 21,807
Capital expenditures 9,426
 852
 —
 —
 10,278
Goodwill 353,688
 10,153
 —
 —
 363,841
Total assets 2,909,175
 183,180
 (42,675) —
 3,049,680
           
13-Week Period Ended January 28, 2017:  
  
  
  
  
Net sales $2,271,289
 $51,377
 $(37,148) $—
 $2,285,518
Operating income (loss) 52,562
 (6,518) 227
 —
 46,271
Interest expense —
 —
 —
 4,441
 4,441
Interest income —
 —
 —
 (97) (97)
Other, net —
 —
 —
 (101) (101)
Income before income taxes  
  
  
  
 42,028
Depreciation and amortization 20,587
 656
 —
 —
 21,243
Capital expenditures 12,374
 1,102
 —
 —
 13,476
Goodwill 352,369
 18,024
 —
 —
 370,393
Total assets 2,677,578
 220,598
 (28,173) —
 2,870,003
Total assets of continuing operations by reportable segment were as follows:



(in thousands)October 31,
2020		August 1,
2020
Assets:
Wholesale$6,758,322 $6,588,836 
Retail553,198 542,470 
Other516,952 501,468 
Eliminations(52,969)(54,784)
Total assets of continuing operations$7,775,503 $7,577,990 

NOTE 15—COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
  Wholesale Other Eliminations Unallocated (Income)/Expenses Consolidated
26-Week Period Ended January 27, 2018:  
  
  
  
  
Net sales $4,959,328
 $112,925
 $(86,697) $—
 $4,985,556
Restructuring and asset impairment expenses 67
 11,175
 —
 —
 11,242
Operating income (loss) 113,897
 (21,140) 2,554
 —
 95,311
Interest expense —
 —
 —
 7,900
 7,900
Interest income —
 —
 —
 (187) (187)
Other, net —
 —
 —
 (1,281) (1,281)
Income before income taxes    
  
  
 88,879
Depreciation and amortization 42,976
 1,273
 —
 —
 44,249
Capital expenditures 13,607
 1,928
 —
 —
 15,535
Goodwill 353,688
 10,153
 —
 —
 363,841
Total assets 2,909,175
 183,180
 (42,675) —
 3,049,680
           
26-Week Period Ended January 28, 2017:  
    
  
  
Net sales $4,532,189
 $109,117
 $(77,424) $—
 $4,563,882
Operating income (loss) 111,225
 (11,686) 71
 —
 99,610
Interest expense —
 —
 —
 8,963
 8,963
Interest income —
 —
 —
 (196) (196)
Other, net —
 —
 —
 282
 282
Income before income taxes  
  
  
  
 90,561
Depreciation and amortization 41,278
 1,180
 —
 —
 42,458
Capital expenditures 20,729
 1,945
 —
 —
 22,674
Goodwill 352,369
 18,024
 —
 —
 370,393
Total assets 2,677,578
 220,598
 (28,173) —
 2,870,003


Guarantees and Contingent Liabilities

10.        ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expensesThe Company has outstanding guarantees related to certain leases, fixture financing loans and other current liabilitiesdebt obligations of various retailers as of January 27, 2018 and July 29, 2017 consistedOctober 31, 2020. These guarantees were generally made to support the business growth of wholesale customers. The guarantees are generally for the entire terms of the following (in thousands):
 January 27,
2018		 July 29,
2017
Accrued salaries and employee benefits$61,040
 $63,937
Workers' compensation and automobile liabilities23,613
 22,774
Interest rate swap liability—
 308
Other74,648
 70,224
Total accrued expenses and other current liabilities$159,301
 $157,243

11.NOTES PAYABLE

On April 29, 2016,leases, fixture financing loans or other debt obligations with remaining terms that range from less than one year to ten years, with a weighted average remaining term of approximately six years. For each guarantee issued, if the wholesale customer or other third-party defaults on a payment, the Company entered intowould be required to make payments under its guarantee. Generally, the Third Amended and Restated Loan and Security Agreement (the "Third A&R Credit Agreement") amending and restating certain terms and provisionsguarantees are secured by indemnification agreements or personal guarantees.

The Company reviews performance risk related to its guarantee obligations based on internal measures of its revolving credit facility which increasedperformance. As of October 31, 2020, the maximum borrowings underamount of undiscounted payments the amendedCompany would be required to make in the event of default of all guarantees was $31.3 million ($26.2 million on a discounted basis). Based on the indemnification agreements, personal guarantees and restated revolving credit facility and extendedresults of the maturity date to April 29, 2021. Up to $850.0reviews of performance risk, a total estimated loss of $1.0 million is available to the Company's U.S. subsidiaries and up to $50.0 million is available to UNFI Canada. After giving effect to the Third A&R Credit Agreement, the amended and restated revolving credit facility provides an option to increase the U.S. or Canadian revolving commitments by up to an additional $600.0 millionrecorded in the aggregate (but in not less than $10.0 million increments) subject to certain customary conditions and the lenders committing to provide the increase in funding.Condensed Consolidated Balance Sheets.


The borrowings of the U.S. portion of the amended and restated revolving credit facility, after giving effect to the Third A&R Credit Agreement, accrued interest at the base rate plus an applicable margin of 0.25% or LIBOR rate plus an applicable margin of 1.25% for the twelve-month period ended April 29, 2017. After this period, the interest on the U.S. borrowings is accrued at


the Company's option, at either (i) a base rate (generally defined as the highest of (x) the Bank of America Business Capital prime rate, (y) the average overnight federal funds effective rate plus one-half percent (0.50%) per annum and (z) one-month LIBOR plus one percent (1%) per annum) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) the LIBOR rate plus an applicable margin that varies depending on daily average aggregate availability. The borrowings on the Canadian portion of the credit facility accrued interest at the Canadian prime rate plus an applicable margin of 0.25% or a bankers' acceptance equivalent rate plus an applicable margin of 1.25% for the twelve-month period ended April 29, 2017. After this period, the borrowings on the Canadian portion of the credit facility accrue interest, at the Company's option, at either (i) a Canadian prime rate (generally defined as the highest of (x) 0.50% over 30-day Reuters Canadian Deposit Offering Rate ("CDOR") for bankers' acceptances, (y) the prime rate of Bank of America, N.A.'s Canada branch, and (z) a bankers' acceptance equivalent rate for a one month interest period plus 1.00%) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) a bankers' acceptance equivalent rate of the rate of interest per annum equal to the annual rates applicable to Canadian Dollar bankers' acceptances on the "CDOR Page" of Reuter Monitor Money Rates Service, plus five basis points, and an applicable margin that varies depending on daily average aggregate availability. Unutilized commitments are subject to an annual fee in the amount of 0.30% if the total outstanding borrowings are less than 25% of the aggregate commitments, or a per annum fee of 0.25% if such total outstanding borrowings are 25% or more of the aggregate commitments. The Company is alsocontingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. The Company could be required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum ofsatisfy the stated amount of each such letter of credit (or such other amount as may be mutually agreed by the borrowers under the facility and the applicable letter of credit issuer), as well as a fee to all lenders equal to the applicable margin for LIBOR or bankers’ acceptance equivalent rate loans, as applicable, times the average daily stated amount of all outstanding letters of credit.

As of January 27, 2018, the Company's borrowing base, which is calculated based on eligible accounts receivable and inventory levels, net of $4.2 million of reserves, was $882.4 million. As of January 27, 2018, the Company had $287.0 million of borrowings outstanding under the Company's amended and restated revolving credit facility and $30.3 million in letter of credit commitments which reduced the Company's available borrowing capacity under its revolving credit facility on a dollar for dollar basis. The Company's resulting remaining availability was $565.0 million as of January 27, 2018.

The revolving credit facility, as amended and restated, subjects the Company to a springing minimum fixed charge coverage ratio (as defined in the Third A&R Credit Agreement) of 1.0 to 1.0 calculated at the end of each of our fiscal quarters on a rolling four quarter basis when the adjusted aggregate availability (as defined in the Third A&R Credit Agreement) is less than the greater of (i) $60.0 million and (ii) 10% of the aggregate borrowing base. The Company was not subject to the fixed charge coverage ratio covenant under the Third A&R Credit Agreement during the second quarter of fiscal 2018.
The revolving credit facility also allows for the lenders thereunder to syndicate the credit facility to other banks and lending institutions. The Company has pledged the majority of its and its subsidiaries' accounts receivable and inventory for its obligations under the amendedleases if any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of the Company’s lease assignments among third parties, and restated revolving credit facility.

12.LONG-TERM DEBT

On August 14, 2014,various other remedies available, the Company and certain of its subsidiaries entered into a real estate backed term loan agreement (the "Term Loan Agreement"). The total initial borrowings underbelieves the Term Loan Agreement were $150.0 million. The Company is required to make $2.5 million principal payments quarterly, which began on November 1, 2014. Under the Term Loan Agreement, the Company at its option may request the establishment of one or more new term loan commitments in increments of at least $10.0 million, but not to exceed $50.0 million in total, subject to the approval of the lenders electing to participate in such incremental loans and the satisfaction of the conditions required by the Term Loan Agreement. The Companylikelihood that it will be required to make quarterly principal payments onassume a material amount of these incremental borrowings in accordance with the terms of the Term Loan Agreement. Proceeds from this Term Loan Agreement were used to pay down borrowings on the Company's amended and restated revolving credit facility.

On April 29, 2016,obligations is remote. For leases that have been assigned, the Company entered into a First Amendment Agreement (the “Term Loan Amendment”) tohas recorded the Term Loan Agreement which amendsassociated right of use operating lease assets and obligations within the Term Loan Agreement. The Term Loan Amendment was entered into to reflect the changes to the amended and restated revolving credit facilityCondensed Consolidated Balance Sheets. NaN associated lessor receivables are reflected in the Third A&R Credit Agreement. The Term Loan Agreement will terminate on the earlier of (a) August 14, 2022 and (b) the date that is ninety days prior to the termination date of the Company’s amended and restated revolving credit agreement, as amended.

On September 1, 2016, the Company entered into a Second Amendment Agreement (the "Second Amendment") to the Term Loan Agreement which amends the Term Loan Agreement. The Second Amendment was entered into to adjust the applicable margin charged to borrowings under the Term Loan Agreement. As amended by the Second Amendment, borrowings under the Term Loan Agreement bear interest at rates that, at the Company's option, can be either: (1) a base rate generally defined as the sum of (i) the highest of (x) the administrative agent's prime rate, (y) the average overnight federal funds effective rate plus 0.50% and (z) one-month LIBOR plus one percent (1%) per annum and (ii) a margin of 0.75%; or, (2) a LIBOR rate generally defined as the


sum of (i) LIBOR (as published by Reuters or other commercially available sources) for one, two, three or six months or, if approved by all affected lenders, nine months (all as selected by the Company), and (ii) a margin of 1.75%. Interest accrued on borrowings under the Term Loan Agreement is payable in arrears. Interest accrued on any LIBOR loan is payable on the last day of the interest period applicable to the loan and, with respect to any LIBOR loan of more than three (3) months, on the last day of every three (3) months of such interest period. Interest accrued on base rate loans is payable on the first day of every month. The Company is also required to pay certain customary fees to the administrative agent. The borrowers' obligations under the Term Loan Agreement are secured by certain parcels of the borrowers' real property.

The Term Loan Agreement includes financial covenants that require (i) the ratio of the Company’s consolidated EBITDA (as defined in the Term Loan Agreement) minus the unfinanced portion of Capital Expenditures (as defined in the Term Loan Agreement) to the Company’s consolidated Fixed Charges (as defined in the Term Loan Agreement) to be at least 1.20 to 1.00 as of the end of any period of four fiscal quarters, (ii) the ratio of the Company’s Consolidated Funded Debt (as defined in the Term Loan Agreement) to the Company’s EBITDA for the four fiscal quarters most recently ended to be not more than 3.00 to 1.00 as of the end of any fiscal quarter and (iii) the ratio, expressed as a percentage, of the Company’s outstanding principal balance under the Loans (as defined in the Term Loan Agreement), divided by the Mortgaged Property Value (as defined in the Term Loan Agreement) to be not more than 75% at any time. As of January 27, 2018, the Company was in compliance with the financial covenants of its Term Loan Agreement.

As of January 27, 2018, the Company had borrowings of $113.7 million under the Term Loan Agreement which is included in "Long-term debt" on the Condensed Consolidated Balance Sheet.

During the fiscal year ended August 1, 2015,Sheets; however, the Company expects its assignees to make lease payments to its landlords. For the Company’s lease guarantee arrangements, 0 amounts have been recorded within the Condensed Consolidated Balance Sheets as the fair value has been determined to be de minimis.

The Company is a party to a variety of contractual agreements under which it may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. These agreements primarily relate to the Company’s commercial contracts, service agreements, contracts entered into an amendment to an existing lease agreement for the office space utilized as the Company's corporate headquarters in Providence, Rhode Island. The amendment provides for additional office spacepurchase and sale of stock or assets, operating leases and other real estate contracts, financial agreements, agreements to be utilized byprovide services to the Company and extendsagreements to indemnify officers, directors and employees in the lease termperformance of their work. While the Company’s aggregate indemnification obligations could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. NaN amount has been recorded in the Condensed Consolidated Balance Sheets for an additional 10 years. these contingent obligations as the fair value has been determined to be de minimis.

26
In connection with Supervalu’s sale of New Albertson’s, Inc. (“NAI”) on March 21, 2013, the Company remains contingently liable with respect to certain self-insurance commitments and other guarantees as a result of parental guarantees issued by Supervalu with respect to the obligations of NAI that were incurred while NAI was Supervalu’s subsidiary. Based on the expected settlement of the self-insurance claims that underlie the Company’s commitments, the Company believes that such contingent liabilities will continue to decline. Subsequent to the sale of NAI, NAI collateralized most of these obligations with letters of credit and surety bonds to numerous state governmental authorities. Because NAI remains a primary obligor on these self-insurance and other obligations and has collateralized most of the self-insurance obligations for which the Company remains contingently liable, the Company believes that the likelihood that it will be required to assume a material amount of these obligations is remote. Accordingly, no amount has been recorded in the Condensed Consolidated Balance Sheets for these guarantees, as the fair value has been determined to be de minimis.

Agreements with Save-A-Lot and Onex

The lease qualifies for capital lease treatmentAgreement and Plan of Merger pursuant to ASC 840, Leases,which Supervalu sold the Save-A-Lot business in 2016 (the “SAL Merger Agreement”) contains customary indemnification obligations of each party with respect to breaches of their respective representations, warranties and covenants, and certain other specified matters, on the estimatedterms and subject to the limitations set forth in the SAL Merger Agreement. Similarly, Supervalu entered into a Separation Agreement (the “Separation Agreement”) with Moran Foods, LLC d/b/a Save-A-Lot (“Moran Foods”), which contains indemnification obligations and covenants related to the separation of the assets and liabilities of the Save-A-Lot business from the Company. The Company also entered into a Services Agreement with Moran Foods (the “Services Agreement”), pursuant to which the Company is providing Save-A-Lot with various technical, human resources, finance and other operational services for a term of five years, subject to termination provisions that can be exercised by each party. The initial annual base charge under the Services Agreement is $30 million, subject to adjustments. The Services Agreement generally requires each party to indemnify the other party against third-party claims arising out of the performance of or the provision or receipt of services under the Services Agreement. While the Company’s aggregate indemnification obligations to Save-A-Lot and Onex, the purchaser of Save-A-Lot, could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. The Company has recorded the fair value of the buildingguarantee in the Condensed Consolidated Balance Sheets within Other long-term liabilities.

Other Contractual Commitments

In the ordinary course of business, the Company enters into supply contracts to purchase products for resale, and service contracts for fixed asset and information technology systems. These contracts typically include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations. As of October 31, 2020, the Company had approximately $203 million of non-cancelable future purchase obligations.

Legal Proceedings

The Company is recordedone of dozens of companies that have been named in various lawsuits alleging that drug manufacturers, retailers and distributors contributed to the national opioid epidemic. Currently, UNFI, primarily through its subsidiary, Advantage Logistics, is named in approximately 42 suits pending in the United States District Court for the Northern District of Ohio where over 1,800 cases have been consolidated as Multi-District Litigation (“MDL”). In accordance with the Stock Purchase Agreement dated January 10, 2013, between New Albertson’s Inc. (“New Albertson’s”) and the Company (the “Stock Purchase Agreement”), New Albertson’s is defending and indemnifying UNFI in a majority of the cases under a reservation of rights as those cases relate to New Albertson’s pharmacies. In one of the MDL cases, MDL No. 2804 filed by The Blackfeet Tribe of the Blackfeet Indian Reservation, all defendants were ordered to Answer the Complaint, which UNFI did on July 26, 2019. To date, no discovery has been conducted against UNFI in any of the actions. UNFI is vigorously defending these matters, which it believes are without merit.

UNFI is currently subject to a qui tam action alleging violations of the False Claims Act (“FCA”). In United States ex rel. Schutte and Yarberry v. Supervalu, New Albertson’s, Inc., et al, which is pending in the U.S. District Court for the Central District of Illinois, the relators allege that defendants overcharged government healthcare programs by not providing the government, as a part of usual and customary prices, the benefit of discounts given to customers purchasing prescription medication who requested that defendants match competitor prices. The complaint was originally filed under seal and amended on November 30, 2015. The government previously investigated the relators’ allegations and declined to intervene. Violations of the FCA are subject to treble damages and penalties of up to a specified dollar amount per false claim. Relators elected to pursue the case on their own and have alleged FCA damages against Supervalu and New Albertson’s in excess of $100 million, not including trebling and statutory penalties. For the majority of the relevant period Supervalu and New Albertson’s operated as a combined company. In March 2013, Supervalu divested New Albertson’s (and related assets) pursuant to the Stock Purchase Agreement. Based on the balance sheetclaims that are currently pending and the Stock Purchase Agreement, Supervalu’s share of a
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potential award (at the currently claimed value by relators) would be approximately $24 million, not including trebling and statutory penalties. Both sides moved for summary judgment. On August 5, 2019, the Court granted one of the relators’ summary judgment motions finding that the defendants’ lower matched prices are the usual and customary prices and that Medicare Part D and Medicaid were entitled to those prices. On July 2, 2020 the Court granted the defendants’ summary judgment motion and denied the relators’ motion, dismissing the case. On July 9, 2020 the relators filed a notice of appeal with the capital7th Circuit Court of Appeals, and on September 30, 2020 filed an appellate brief. On November 30, 2020, the Company filed its response.

In November 2018, a putative nationwide class action was filed in Rhode Island state court, which the Company removed to U.S. District Court for the District of Rhode Island. In North Country Store v. United Natural Foods, Inc., plaintiff asserts that the Company made false representations about the nature of fuel surcharges charged to customers and asserts claims for alleged violations of Connecticut’s Unfair Trade Practices Act, breach of contract, unjust enrichment and breach of the covenant of good faith and fair dealing arising out of the Company’s fuel surcharge practices. On March 5, 2019, the Company answered the complaint denying the allegations. At a court-ordered mediation on October 15, 2019, the Company reached an agreement, which is immaterial in amount, to avoid costs and uncertainty of litigation. On August 10, 2020, the Court granted final approval of the settlement, and this matter is now closed.

From time to time, the Company receives notice of claims or potential claims or becomes involved in litigation, alternative dispute resolution, such as arbitration, or other legal and regulatory proceedings that arise in the ordinary course of its business, including investigations and claims regarding employment law; pension plans; labor union disputes, including unfair labor practices, such as claims for back-pay in the context of labor contract negotiations; supplier, customer and service provider contract terms and claims, including matters related to supplier or customer insolvency or general inability to pay obligations as they become due; real estate and environmental matters, including claims in connection with its ownership and lease obligation included in long-term debt. A portion of each lease payment reduces thea substantial amount of real property, both retail and warehouse properties; and antitrust. Other than as described above, there are no pending material legal proceedings to which the lease obligation,Company is a party or to which its property is subject.

Predicting the outcomes of claims and a portion islitigation and estimating related costs and exposures involves substantial uncertainties that could cause actual outcomes, costs and exposures to vary materially from current expectations. Management regularly monitors the Company’s exposure to the loss contingencies associated with these matters and may from time to time change its predictions with respect to outcomes and estimates with respect to related costs and exposures. As of October 31, 2020, no material accrued obligations, individually or in the aggregate, have been recorded as interest expense at an effective ratefor these legal proceedings.

Although management believes it has made appropriate assessments of approximately 12.05%. The capital lease obligation as of January 27, 2018 was $12.7 million. The Company recorded $0.4 million of interest expense duringpotential and contingent loss in each of the second quartersthese cases based on current facts and circumstances, and application of fiscal 2018prevailing legal principles, there can be no assurance that material differences in actual outcomes from management’s current assessments, costs and 2017exposures relative to current predictions and $0.8 million during eachestimates, or material changes in such predictions or estimates will not occur. The occurrence of any of the first 26 weeksforegoing, could have a material adverse effect on our financial condition, results of fiscal 2018 and 2017.operations or cash flows.


During
NOTE 16—DISCONTINUED OPERATIONS

In conjunction with the fiscal year ended July 28, 2012,Supervalu acquisition, the Company entered into a lease agreement for a new distribution facility in Aurora, Colorado. Atannounced its plan to sell the conclusionremaining acquired retail operations of Supervalu. Since the fiscal year ended August 3, 2013, actual construction costs exceeded the construction allowance as defined by the lease agreement, and therefore,acquisition, the Company determined it metsold Hornbacher’s, and sold and exited the criteria for continuing involvement pursuant to FASB ASC 840, Leases,retail operations of certain Shoppers locations, Shop ‘n Save St. Louis and applied the financing method to account for this transaction duringShop ‘n Save East. As discussed further in Note 1—Significant Accounting Policies, in the fourth quarter of fiscal 2013. Under2020, the financing method,Company determined Retail no longer qualified for held for sale presentation and the book valueresults of operations, financial position and cash flows of Retail have been revised in order to present Retail within continuing operations. Subsequent to the distribution facilitypresentation changes in the fourth quarter of fiscal 2020, discontinued operations contains the historical results of operations, financial position and related accumulated depreciation remainscash flows of Hornbacher’s, certain Shoppers locations, Shop ‘n Save St. Louis and Shop ‘n Save East. As of October 31, 2020, only 5 Shoppers locations are contained in remaining disposal groups that continue to be classified as operations held for sale as discontinued operations.

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Operating results of discontinued operations are summarized below:
13-Week Period Ended
(In thousands)October 31, 2020November 2,
2019
Net sales$24,816 $95,595 
Cost of sales16,772 65,086 
Gross profit8,044 30,509 
Operating expenses6,231 25,076 
Restructuring expenses and charges(9)175 
Operating income1,822 5,258 
Other expense (income), net0 (61)
Income from discontinued operations before income taxes1,822 5,319 
Income tax provision526 1,293 
Income from discontinued operations, net of tax$1,296 $4,026 
No net sales were recorded within continuing operations for retail stores within discontinued operations that the Company disposed of and expects to dispose of without a supply agreement. These net sales have been eliminated upon consolidation within the Wholesale segment of continuing operations and amounted to $14.4 million and $56.0 million in the first quarters of fiscal 2021 and 2020, respectively.

The carrying amounts of major classes of assets and liabilities that were classified as held-for-sale on the Condensed Consolidated Balance Sheet. The construction allowance is recorded as a financing obligationSheets follows in "Long-term debt." A portionthe table below.
(In thousands)October 31, 2020August 1, 2020
Current assets
Cash and cash equivalents$173 $119 
Receivables, net532 350 
Inventories4,348 4,233 
Other current assets634 365 
Total current assets of discontinued operations5,687 5,067 
Long-term assets
Property and equipment1,965 3,450 
Other assets442 465 
Total long-term assets of discontinued operations2,407 3,915 
Total assets of discontinued operations$8,094 $8,982 
Current liabilities
Accounts payable$3,505 $3,613 
Accrued compensation and benefits2,744 4,501 
Other current liabilities3,640 3,324 
Total current liabilities of discontinued operations9,889 11,438 
Long-term liabilities
Other long-term liabilities15 1,738 
Total liabilities of discontinued operations9,904 13,176 
Net liabilities of discontinued operations$(1,810)$(4,194)

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Table of each lease payment reduces the amount of the financing obligation, and a portion is recorded as interest expense at an effective rate of approximately 7.32%. The financing obligation as of January 27, 2018 was $29.8 million. The Company recorded $0.5 million and $0.6 million of interest expense related to this lease during the second quarters of fiscal 2018 and 2017, respectively. During each of the first 26 weeks of fiscal 2018 and 2017, the Company recorded $1.1 million of interest expense related to this lease.Contents



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

CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act, of 1933, as amended, and Section 21E of the Securities Exchange Act, of 1934, as amended, 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,” “planned,“plan,” “seek,” “should,” “will,” and “would,” or similar words. Statements that contain these words and other statements that are forward-looking in nature should be read carefully because they discuss future expectations, contain projections of future results of operations or of financial positions or state other “forward-looking” information.

Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. These statements are based on our management’s beliefs and assumptions, which are based on currently available information. These assumptions could prove inaccurate. 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:

•the impact and duration of the COVID-19 outbreak;
•our dependence on principal customers;
•our sensitivity to general economic conditions including the current economic environment;
changes in disposable income levels and consumer spending trends;
•our ability to reducerealize anticipated benefits of our expensesacquisitions and dispositions, in amounts sufficient to offsetparticular, our increased focus on sales to conventional supermarkets and supermarket chains and the resulting lower gross margins on those sales;acquisition of SUPERVALU INC. (“Supervalu”);
•our reliance on the continued growth in sales of our higher margin natural and organic foods and non-food products in comparison to lower margin conventional grocery products;
•increased competition in our industry as a result of increased distribution of natural, organic and specialty products, by conventional grocery distributors and direct distribution of those products by large retailers and online distributors;
•the possibility that restructuring, asset impairment, and other charges and costs we may incur in connection with the sale or closure of our retail operations will exceed our current expectations;
•increased competition as a result of continuing consolidation of retailers in the natural product industry and the growth of supernatural chains;
•the addition or loss of significant customers or material changes to our relationships with these customers;
•union-organizing activities that could cause labor relations difficulties and increased costs;
•our ability to operate, and rely on third-parties to operate, reliable and secure technology systems;
•the relatively low margins of our business;
•moderated supplier promotional activity, including decreased forward buying opportunities;
•our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company;Company and to achieve efficiencies and cost savings from these efforts;
•the addition or loss of significant customers or material changes to our relationships with these customers;potential for additional asset impairment charges;
volatility in fuel costs;
volatility in foreign exchange rates;
•our sensitivity to inflationary and deflationary pressures;
the relatively low margins and economic sensitivity of our business;
•the potential for disruptions in our supply chain or our distribution capabilities by circumstances beyond our control;control, including a health epidemic;
•the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise;
consumer demand for natural•volatility in fuel costs;
•volatility in foreign exchange rates; and organic products outpacing suppliers' ability to produce those products and challenges we may experience in obtaining sufficient amounts of products to meet our customers' demands;
moderated supplier promotional activity, including decreased forward buying opportunities;
union-organizing activities that could cause labor relations difficulties and increased costs;
the•our ability to identify and successfully complete acquisitions of other natural, organic and specialty food and non-food products distributors;asset or business acquisitions.
management’s allocation of capital and the timing of capital expenditures;
our ability to realize the anticipated benefits from our decision to close certain of our Earth Origins Market (“Earth Origins”) stores and for the restructuring costs related to Earth Origins to be within our current estimates;
the possibility that we may recognize restructuring charges with respect to our Earth Origins business in excess of those estimated for the second half of fiscal 2018;
changes in interpretations, assumptions and expectations regarding the Tax Cuts and Jobs Act ("TCJA"), including additional guidance that may be issued by federal and state taxing authorities.

This list of risks and uncertainties, however, is only a summary of some of the most important factors and is not intended to be exhaustive. You should carefully review the risks described under “Part I. Item 1A.1A Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended July 29, 2017, andAugust 1, 2020 as well as any other cautionary language in this Quarterly Report, on Form 10-Q or our other reports filed with the Securities and Exchange Commission (the "SEC") from time to time, as the occurrence of any of these events could have an adverse effect, which may be material, on our business, results of operations, and financial condition.condition or cash flows.



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EXECUTIVE OVERVIEW

Business Overview


We believe we areAs a leading distributor based on sales of natural, organic, specialty, produce, and specialty foodsconventional grocery and non-food products, and provider of retailer services in the United States and Canada, we believe we are uniquely positioned to provide the broadest array of products and that our thirty-three distribution centers, representing approximately 8.7 million square feet of warehouse space, provide us with the largest capacity of anyservices to customers throughout North American-based distributor focused primarily on the natural, organic and specialty products industry.America. We offer more than 110,000 high-quality natural, organic and specialty foods and non-food275,000 products consisting of national, brands, regional brands,and private label and master distribution products, inbrands grouped into six product categories: grocery and general merchandise, produce,merchandise; produce; perishables and frozen foods,foods; nutritional supplements and sports nutrition,nutrition; bulk and food service productsproducts; and personal care items. We serve more than 43,000 customer locations primarily located across the United StatesThrough our October 2018 acquisition of Supervalu, we are transforming into North America’s premier wholesaler with 55 distribution centers and Canada, the majoritywarehouses representing approximately 29 million square feet of which can bewarehouse space. Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division.

Growth Drivers

A key component of our business and growth strategy has been to acquire wholesalers differentiated by product offerings, service offerings and market area. In fiscal 2019, the acquisition of Supervalu accelerated our “build out the store” strategy, diversified our customer base, enabled cross-selling opportunities, expanded our market reach and scale, enhanced our technology, capacity and systems, and is expected to continue to deliver significant synergies and accelerate potential growth. We believe the Supervalu acquisition allowed us to better serve our wholesale customers’ needs and compete in the current environment by providing additional warehouse and transportation capacity, and enabled us to provide a broader array of products to our customers. As one of the following categories: independently owned natural products retailers, which include buying clubs; supernatural chains, which consist solelylargest wholesale grocery distributors in North America, and in light of Whole Foods Market Inc. ("Whole Foods Market"); conventional supermarkets, which include mass market chains; and other which includes e-commerce, foodservice and international customers outside of Canada.
Our operations are generally comprised of three principal operating divisions. These operating divisions are:
our wholesale division, which includes:
◦our broadline natural, organic and specialty distribution business in the United States, which includes our recent acquisitions of Haddon House Food Products, Inc. ("Haddon") and Gourmet Guru, Inc. ("Gourmet Guru");
◦Tony's Fine Foods ("Tony's"), which is a leading distributor of a wide array of specialty protein, cheese, deli, foodservice and bakery goods, principally throughout the Western United States;
◦Albert's Organics, Inc. ("Albert's"), which is a leading distributor of organically grown produce and non-produce perishable items within the United States, which includes the operations of Global Organic/Specialty Source, Inc. ("Global Organic") and Nor-Cal Produce, Inc. ("Nor-Cal"), a distributor of organic and conventional produce and non-produce perishable items principally in Northern California;
◦UNFI Canada, Inc. ("UNFI Canada"), which is our natural, organic and specialty distribution business in Canada; and
◦Select Nutrition, which distributes vitamins, minerals and supplements.

our retail division, consisting of Earth Origins, which operates our twelve natural products retail stores within the United States; and
our manufacturing and branded products divisions, consisting of:
◦Woodstock Farms Manufacturing, which specializes in the importing, roasting, packaging and the distribution of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections; and
◦our Blue Marble Brands branded product lines.
In recent years, our sales to existing and new customers have increased through the continued growth of the natural and organic products industry in general, increased market share as a resultexpansion of our high quality servicedistribution network and a broader product selection,“build out the store” strategy, we believe we are well positioned to leverage our infrastructure in the current economic and social environment to continue to serve our customers and the communities in which we operate, and are actively pursuing new customers.

We believe our significant scale and footprint will generate long-term shareholder value by positioning us to continue to grow sales of natural, organic, specialty, produce and conventional grocery and non-food products, including specialty products,our Private Brands. We also believe we have an opportunity to sell additional services to our customers to help them more efficiently operate their business while leveraging the infrastructure investments we’ve made. Services often sold to our customers include coupon processing, consumer marketing, retail technology and payments and consumer services. We have realized and expect to continue to realize significant cost and revenue synergies from the acquisition of or merger with, naturalSupervalu by leveraging the scale and specialty products distributors;resources of the expansion of our existing distribution centers; the construction of new distribution centers; the introduction of new products 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. Our strategic plan is focused on increasing the type of products we distributecombined company, cross-selling to our customers, including perishable productsintegrating our merchandising offerings into existing warehouses, optimizing our network footprint to lower our cost structure and conventional produce. As parteliminating redundant administrative costs.

We expect the benefits of our “one company” approach,significant scale, product and service offerings and nationwide footprint to attract new customers, such as Key Food Stores co-operative, Inc. (“Key Food”). On October 6, 2020, we areannounced UNFI had been selected as the primary grocery wholesaler by Key Food, a Co-Operative of 315 member-owned and corporate grocery stores located in the processNortheast and Florida. UNFI’s supply agreement with Key Food has a term of rolling out a national warehouse management and procurement system to convert our existing facilities into a single warehouse management and supply chain platform ("WMS"). We have successfully implemented the WMS system at fifteen10 years with expected sales over that time period of our facilities including most recently in Chesterfield, New Hampshire, Iowa City, Iowa, Greenwood, Indiana, Dayville, Connecticut, Gilroy, California, Richburg, South Carolina, Howell, New Jersey, and Atlanta, Georgia. We expect to complete the roll-out to all of our existing U.S. broadline facilities by the end of fiscal 2019. These steps and others are intended to promote operational efficiencies and improve operating expenses as a percentage of net sales as we attempt to offset the lower gross margins we expect to generate by increased sales to the supernatural and conventional supermarket channels and as a result of additional competition in our business.approximately $10 billion.

We have been the primary distributor to Whole Foods Market for more than nineteen20 years. We continue to serve as the primary distributor to Whole Foods Market in all of its regions in the United States pursuant to a distribution agreement that expires on September 28, 2025. Whole Foods Market accounted for approximately 37%

We currently operate 72 Retail grocery stores acquired in the Supervalu acquisition. We intend to maximize the value of these assets while, over time, thoughtfully and 34% of our net sales foreconomically divesting these stores. However, we no longer expect to divest Retail within one year and, as a result, beginning in the secondfourth quarter of fiscal 20182020, prior period information in our Condensed Consolidated Financial Statements included in this Quarterly Report has been revised to reclassify Retail from discontinued operations to continuing operations from information previously presented in its Quarterly Reports. This change in financial statement presentation resulted in the inclusion of Retail’s results of operations, financial position, cash flows and 2017, respectively. Forrelated disclosures within continuing operations. Prior periods presented in the first 26 weeks of fiscal 2018 and 2017, Whole Foods Market accounted for approximately 36% and 33% of our net sales, respectively.



In March 2016, the Company acquired certain assets of Global Organic through its wholly owned subsidiary Albert's, in a cash transaction for approximately $20.6 million. Global Organic is located in Sarasota, Florida serving customer locations (many of which are independent retailers) across the Southeastern United States. Global Organic's operationsCondensed Consolidated Financial Statements have been fully integrated intoconformed to the existing Albert's businesscurrent period presentation, resulting in Retail being presented in continuing operations for all periods.

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Other Factors Affecting our Business

Our results are impacted by macroeconomic and demographic trends, and changes in the Southeasternfood distribution market structure. Over the past several decades, total food expenditures on a constant dollar basis within the United States.

In March 2016,States has continued to increase in total, and the Company acquired all of the outstanding equity securities of Nor-Cal and an affiliated entity as well as certain real estate,focus in a cash transaction for approximately $67.8 million. Nor-Cal is a distributor with its primary operations located in West Sacramento, California. Our acquisition of Nor-Cal has aided us in our efforts to expand our fresh offering, particularly within conventional produce. Nor-Cal's operations have been combined with the existing Albert's business.

In May 2016, the Company acquired all outstanding equity securities of Haddon and certain affiliated entities and real estate for total cash consideration of approximately $217.5 million. Haddon is a distributor and merchandiser of natural and organic and gourmet ethnic products primarily throughout the Eastern United States. Haddon has a history of providing quality high-touch merchandising services to its customers. Haddon has a diverse, multi-channel customer base including conventional supermarkets, gourmet food stores and independently owned product retailers. Our acquisition of Haddon has expanded the product and service offering that we expect to play an important role in our ongoing strategy to build out our gourmet and ethnic product categories. Haddon's operations have been combined with the Company's existing broadlinerecent decades on natural, organic and specialty distribution businessfoods has benefited the Company; however, consumer spending in the United States.

food-away-from-home industry had increased steadily as a percentage of total food expenditures. This trend paused during the 2008 recession, and then continued to increase. In August 2016,fiscal 2020, the Company acquired allCOVID-19 pandemic caused a significant increase in food-at-home expenditures as a percentage of the outstanding equity securitiestotal food expenditures. We expect that food-at-home expenditures as a percentage of Gourmet Guru in a cash transaction for approximately $10.0 million. Gourmet Guru is a distributor and merchandiser of fresh and organictotal food focusing on new and emerging brands.expenditures will remain higher than recent years until consumer behaviors return to pre-pandemic patterns. We believe that changes in work being done outside of the traditional office setting will contribute to more food being consumed at home. Many large corporations have announced long-term or permanent changes that allow their workforce to work from home. In addition, the elevated levels of unemployment and underemployment due to the pandemic are expected to persist for some time and even after the near-term impact of COVID-19 has passed. In general, economic recessions usually result in higher food-at home expenditures, which would be expected to continue to benefit our acquisitioncustomers and result in higher sales. The COVID-19 pandemic also drove significant growth in e-commerce utilization by grocery consumers, and we expect that trend to continue. We expect to benefit from this trend through the growth of Gourmet Guru enhances our strengthtraditional eCommerce customers, our EasyOptions, a business-verified buyer’s site for retailers, which directly services non-traditional customers, such as bakeries or yoga studios, and through customers adopting our turnkey e-commerce platform.

We are also impacted by changes in findingfood distribution trends affecting our Wholesale customers, such as direct store deliveries and cultivating emerging freshother methods of distribution. Our Wholesale customers manage their businesses independently and organic brandsoperate in a competitive environment. We seek to obtain security interests and further expandsother credit support in connection with the financial accommodations we extend these customers; however, we may incur additional credit or inventory charges related to our presencecustomers, as we expect the competitive environment to continue to lead to financial stress on some customers. The magnitude of these risks increases as the size of our Wholesale customers increases.

COVID-19 Impact

Beginning in key urban markets. Gourmet Guru's operationsthe third quarter of fiscal 2020, we took actions to respond to the pandemic, support our associates’ safety and well-being and maximize our logistics network to serve the communities we supply. In fiscal 2020, and continuing into fiscal 2021, we experienced a year-over-year increase in sales and gross profit due to higher Wholesale customer purchases driven by higher food-at-home expenditures, as a result of the economic and social responses to the COVID-19 pandemic. We have been combined withable to leverage fixed operating and administrative expenses, which were partially offset by incremental costs related to COVID-19, including additional costs for safety protocols and procedures at our distribution centers and retail stores. Our business model allows us to leverage sales increases, and provided growth in operating earnings margin, as we leveraged the Company's existing broadline natural, organicfixed and specialtyvariable costs of our supply chain network and administrative expenses. Despite incremental labor and operating costs, additional volume experienced by our distribution businessnetwork and retail stores drove higher leverage on fixed facility costs, semi-variable costs and general and administrative expenses.

We expect to continue to benefit from sales and margin growth as compared to historical periods while food-at-home expenditures as a percentage of total food expenditures remains higher than recent historical precedent, and higher on a year-over-year basis. Trends in increased sales and gross margin benefits have lessened since the initial onset of the COVID-19 pandemic. In addition, as discussed below in the United States.section “Impact of Inflation or Deflation” and above in the section “Other Factors Affecting our Business,” we could also be affected by changes in product mix and product category inflation changes, especially if customers change their purchasing habits as a result of sustained downturns in the U.S. and Canadian economies. The ultimate impact on our results is dependent upon the severity and duration of the COVID-19 pandemic and any economic downturn, food-at-home purchasing levels and actions taken by governmental authorities and other third parties in response to the pandemic, each of which is uncertain and rapidly changing. Any of these disruptions could adversely impact our business and results of operations. Considerable uncertainty remains regarding the future impact of the COVID-19 pandemic on our business, which is discussed further in Part I. Item 1A Risk Factors of our Annual Report on Form 10-K for the year ended August 1, 2020.

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Distribution Center Network

Network Optimization and Construction

Within the Pacific Northwest, we completed the consolidation of the volume of five distribution centers and their related supporting off-site storage facilities into two distribution centers during fiscal 2020. We expect to achieve synergies and cost savings through eliminating inefficiencies, including incurring lower operating, shrink and off-site storage expenses. We also expect that the optimization of the Pacific Northwest distribution network will help deliver meaningful synergies contemplated in the Supervalu acquisition. We expanded the Ridgefield, WA distribution center to enhance customer product offerings, create more efficient inventory management, streamline operations and incorporate greater technology to deliver a better customer experience. The Ridgefield distribution center will deploy a warehouse automation solution that supports our slow-moving SKU portfolio. The operational start-up of the Centralia, WA distribution center began in the fourth quarter of fiscal 2019 and was completed in the fourth quarter of fiscal 2020. We ceased operations in our Tacoma, WA, Auburn, WA, Auburn, CA and Milwaukie, OR (Portland) distribution centers and have transitioned to supplying customers served by these locations to our Centralia, WA, Ridgefield, WA and Gilroy, CA distribution centers. In order to maintain service levels of these higher volume pacific northwest distribution centers, we incurred incremental operating costs in the first quarter of fiscal 2021 that we believe temporarily reduced the realization of synergy benefits from this network consolidation.

To support our continued growth on the East coast, we entered into a new lease agreement that has not yet commenced for an approximately 1.3 million square foot facility that is currently under construction. We expect to recognize a lease liability for this distribution center when we begin making our tenant improvements in fiscal 2021. We expect to begin distribution out of this facility in the second half of calendar 2021.

To support our continued growth within southern California, we began operating a newly leased facility with approximately 1.2 million square feet upon completion of its construction in the fourth quarter of fiscal 2020. This facility provides significant capacity to service our customers in this market. On February 24, 2020, we executed a purchase option to acquire the real property of this distribution center, agreeing to pay approximately $151.9 million for the facility, subject to finalization. We expect to engage a real estate partner to monetize the real property of this location, including through a sale-leaseback transaction that would ultimately reduce rents paid for this property compared to current levels, which we expect would occur on or before June 2022.

We continue to evaluate our distribution center network to optimize its performance and expect to incur incremental expenses related to any future network realignment and are working to both minimize these costs and obtain new business to further improve the efficiency of our transforming distribution network.

Distribution Center Sales

Subsequent to the end of the first quarter of fiscal 2021, we received $35.1 million from the collection of a short-term note receivable, representing the remaining proceeds related to the fiscal 2020 sale of a distribution center. As we consolidate our distribution network, we may sell additional owned facilities or exit leased facilities.

Operating Efficiency

As part of our “one company” approach, we are in the process of converting to a single national warehouse management and procurement system to integrate our existing facilities, including acquired Supervalu facilities, onto one nationalized platform across the organization. We continue to focus on the automation of our new or expanded distribution centers that are at different stages of construction and implementation. These steps and others are intended to promote operational efficiencies and improve operating expenses as a percentage of net sales.

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Divestiture of Retail Operations

We have announced our intention to thoughtfully and economically divest our retail businesses acquired as part of the Supervalu acquisition in an efficient and economic manner in order to focus on our core wholesale distribution business. During the fourth quarter of fiscal 2020, we determined we no longer met the held for sale criterion for a probable sale to be completed within 12 months for the Cub Foods business and the majority of the remaining Shoppers locations, collectively referred to as the Retail segment. The Retail segment excludes retail banners and stores previously sold or closed. We reviewed our reportable segments and determined we were required to report Retail as a separate segment. As a result, we revised our Condensed Consolidated Financial Statements to reclassify Retail from discontinued operations to continuing operations. This change in financial statement presentation resulted in the inclusion of Retail’s results of operations, financial position, cash flows and related disclosures within continuing operations. Prior periods presented in the Condensed Consolidated Financial Statements have been conformed to the current period presentation, resulting in Retail being presented in continuing operations for all periods.

The abilityrevision of our Condensed Consolidated Statements of Operations to distribute specialty food items (including ethnic, kosherpresent Retail within continuing operations resulted in an increase in our consolidated net sales, gross profit and gourmet products) has accelerated our expansion intooperating expenses, and an increase in consolidated gross profit as a numberpercentage of high-growth business marketsnet sales, which was partially offset by an increase in operating expenses as a percent of net sales. In order to present Retail’s results of operations within continuing operations, Wholesale sales to Retail have been eliminated upon consolidation. The Wholesale segment’s net sales to discontinued operations retail stores are eliminated within the Wholesale segment.

Our strategy remains unchanged and allowed uswe expect to establish immediate market share in the fast-growing specialty foods market. We have now integrated specialty food products and natural and organic specialty non-food products intodivest all of our broadline distribution centers acrossRetail operation in the United Statesfuture. As part of that process we plan to maximize value as part of the divestiture process, including limiting liabilities and Canada. Duestranded costs associated with these divestitures. We expect to obtain ongoing supply relationships with the purchasers of some of these retail operations, but some reductions in supply volume may result from the divestiture of certain of these retail operations. Actions associated with retail divestitures and adjustments to our expansion into specialty foods,core cost structure for our wholesale food distribution business are expected to result in headcount reductions and other costs and charges. These costs and charges, which may be material, include multiemployer plan charges, severance costs, store closure charges, and related costs. A withdrawal from a multiemployer pension plan may result in an obligation to make material payments over an extended period of time. The extent of these costs and charges will be determined based on outcomes achieved under the past severaldivestiture process. At this time, however, we are unable to make an estimate with reasonable certainty of the amount or type of costs and charges expected to be incurred in connection with the foregoing actions.

Our discontinued operations as of the end of the first quarter of fiscal years we2021 include five Shoppers stores, and for historical periods, results of discontinued operations include the Hornbacher’s and Shop ‘n Save and Shop ‘n Save East retail banners, which were divested in fiscal 2019, and Shoppers stores that were sold or closed in fiscal 2020. In addition, cash flows from discontinued operations include real estate sales related to those historical retail operations. These retail assets have been awarded new business with a numberclassified as held for sale as of conventional supermarketsthe Supervalu acquisition date, and the results of operations, financial position and cash flows directly attributable to these operations are reported within discontinued operations in our Condensed Consolidated Financial Statements for all periods presented. As of the Supervalu acquisition date, retail assets and liabilities were recorded at their estimated fair value less costs to sell, and subsequent to that date, we previously had not done business with because we did not distribute specialty products. reviewed the fair value, less cost to sell, of these disposal groups.

We believe our acquisition of Haddon has expanded our capabilitiesmay incur additional costs and charges in the specialty categoryfuture related to the divestiture of Retail if these locations are subsequently sold, indicators exist that the business may be impaired, or if we incur employee-related charges or wind-down costs.

Professional Services Agreements

In connection with the sale of Save-A-Lot on December 5, 2016, Supervalu entered into a services agreement (the “Services Agreement”) with Moran Foods, LLC, the entity that operates the Save-A-Lot business. Pursuant to the Services Agreement, we provide certain technical, human resources, finance and other operational services to Save-A-Lot for a term of five years, on the terms and subject to the conditions set forth therein. The initial annual base charge under the Services Agreement is $30 million, subject to adjustments. During fiscal 2021, we have expanded our offeringsexpect to earn less than $20 million under this agreement. We expect that services provided under the Services Agreement will wind down at or near the end of specialty productsthe initial term. At that time, we would lose the revenue associated with this agreement, and if we are not able to include those products distributed by Haddon thateliminate fixed or variable costs associated with servicing this agreement concurrent with the decline in revenue, we did not previously distributewould incur a decrease in operating profit.

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Impact of Inflation or Deflation

We monitor product cost inflation and deflation and evaluate whether to absorb cost increases or decreases, or pass on pricing changes to our customers. We believe that distributionexperienced a mix of these products enhances our conventional supermarket business channelinflation and that our complementarydeflation across product lines continue to present opportunities for cross-selling.
To maintain our market position and improve our operating efficiencies, we seek to continually:
expand our marketing and customer service programs across regions;
expand our national purchasing opportunities;
offer a broader product selection than our competitors;
offer operational excellence with high service levels and a higher percentage of on-time deliveries than our competitors;
centralize general and administrative functions to reduce expenses;
consolidate systems applications among physical locations and regions;
increase our investment in people, facilities, equipment and technology;
integrate administrative and accounting functions; and
reducecategories during the geographic overlap between regions.
Our continued growth has allowed us to expand our existing facilities and open new facilities in an effort to achieve increasing operating efficiencies. We have made significant capital expenditures and incurred considerable expenses in connection with the opening and expansion of our facilities. As of January 27, 2018, our distribution capacity totaled approximately 8.7 million square feet. We have completed our multi-year expansion plan, which included new distribution centers in Racine, Wisconsin, Hudson Valley, New York, Prescott, Wisconsin, and Gilroy, California from which we began operations in June 2014, September 2014, April 2015 and February 2016, respectively. Based on our current operations, sales trends, customers and estimates of future sales growth, we believe that we are likely to commence construction and open new distribution center capacity in fiscal 2019.

During the secondfirst quarter of fiscal 2018,2021. In the Company recorded restructuringaggregate across all of our legacy businesses and asset impairment expensestaking into account the mix of $11.2 million which was primarily driven by charges related toproducts, management estimates our Earth Origins retail businessbusinesses experienced cost inflation of approximately $11.4 million, offset by a benefit of $0.2 million related to an adjustment for our fiscal 2017 restructuring program.



Duringless than one percent in the secondfirst quarter of fiscal 2018,2021. Cost inflation and deflation estimates are based on individual like items sold during the Company madeperiods being compared. Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the decision to close three non-core, under-performing Earth Origins storesimpact of its total twelve storesinflation and deflation on Net sales and Gross profit. Absent any changes in units sold or the mix of units sold, deflation has the effect of decreasing sales. Under the LIFO method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year end inventory quantities and costs, which resulted in restructuring costshas the effect of $0.2 million related to severance and closure costs.

Based on the decision to close these stores, coupled with the decline in results in the first half of fiscal 2018decreasing Gross profit and the future outlook as a result of competitive pressure, the Company determined that both a test for recoverability of long-lived assets and a goodwill impairment analysis should be performed. The determination of the need for a goodwill analysis was based on the assertion that it was more likely than not that the faircarrying value of the reporting unit was below its carrying amount. As a resultinventory.

Business Performance Assessment and Composition of both these analyses, the Company recorded a total impairment chargeCondensed Consolidated Statements of $3.3 million on long-lived assets and $7.9 million to goodwill, respectively. Both of these charges are recorded in the Company's "Other" segment. The Company expects to incur additional restructuring charges primarily related to future exit costs of approximately $2.6 million during the second half of fiscal 2018.Operations


Net sales

Our net sales consist primarily of sales of natural, organic, specialty, produce and specialtyconventional grocery and non-food products, and support services to retailers, adjusted for customer volume discounts, vendor incentives when applicable, returns and allowances.allowances, and professional services revenue. Net sales also consist ofinclude amounts charged by us to customers for shipping and handling and fuel surcharges.

Cost of sales and Gross profit

The principal components of our cost of sales include the amounts paid to suppliers for product sold, plus the cost of transportation necessary to bring the product to, or move product between, our various distribution centers, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers'suppliers’ products. Cost of sales also includes amounts incurred by us at our manufacturing subsidiary, Woodstock Farms Manufacturing, for inbound transportation costs offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products.costs. 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, receiving, selecting and outbound transportation

Operating expenses within our operating expenses rather than in our cost of sales. Total operating

Operating expenses include salaries and wages, employee benefits, warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation, depreciation, and amortization expense. OtherThese expenses (income)relate to warehousing and delivery expenses including purchasing, receiving, selecting and outbound transportation expenses.

Restructuring, acquisition and integration expenses

Restructuring, acquisition and integration expenses reflect expenses resulting from restructuring activities, including severance costs, change-in-control related charges, facility closure asset impairment charges and costs, stock-based compensation acceleration charges, and acquisition and integration expenses. Integration expenses include interest on our outstanding indebtedness, including the financing obligationincremental expenses related to combining facilities required to optimize our Aurora, Colorado distribution centernetwork as a result of acquisitions.

Interest expense, net

Interest expense, net includes primarily interest expense on long-term debt, net of capitalized interest, interest expense on finance and direct finance lease obligations, and amortization of financing costs and discounts.

Net periodic benefit income, excluding service cost

Net periodic benefit income, excluding service cost reflects the lease for office space for our corporate headquartersrecognition of expected returns on benefit plan assets in Providence, Rhode Island,excess of interest incomecosts.

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Adjusted EBITDA

Our Condensed Consolidated Financial Statements are prepared and miscellaneous income and expenses.

Critical Accounting Policies
The preparationpresented in accordance with generally accepted accounting principles in the United States (“GAAP”). In addition to the GAAP results, we consider certain non-GAAP financial measures to assess the performance of our condensed consolidated financial statements requires usbusiness and understand underlying operating performance and core business trends, which we use 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 SEC has defined critical accounting policies as those that are both most important to the portrayalfacilitate operating performance comparisons of our financial condition andbusiness on a consistent basis over time. Adjusted EBITDA is provided as a supplement to our results of operations and requirerelated analysis, and should not be considered superior to, a substitute for or an alternative to any financial measure of performance prepared and presented in accordance with GAAP. Adjusted EBITDA excludes certain items because they are non-cash items or are items that do not reflect management’s assessment of on-going business performance.

We believe Adjusted EBITDA is useful to investors and financial institutions because it provides additional understanding of factors and trends affecting our most difficult, complex or subjective judgments or estimates. Based on this definitionbusiness, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and as further describedthe primary compensation performance measure under certain compensation programs and plans. We believe Adjusted EBITDA is reflective of factors that affect our underlying operating performance and facilitate operating performance comparisons of our business on a consistent basis over time. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Certain adjustments to our GAAP financial measures reflected below exclude items that may be considered recurring in nature and may be reflected in our financial results for the foreseeable future. These measurements and items may be different from non-GAAP financial measures used by other companies. Adjusted EBITDA should be reviewed in conjunction with our results reported in accordance with GAAP in this Quarterly Report.

There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting the cost of cash expenditures for capital assets or certain other contractual commitments, finance lease obligation and debt service expenses, income taxes, and any impacts from changes in working capital.

We define Adjusted EBITDA as a consolidated measure inclusive of continuing and discontinued operations results, which we reconcile by adding Net (loss) income from continuing operations, plus Total other expense, net and (Benefit) provision for income taxes, plus Depreciation and amortization calculated in accordance with GAAP, plus non-GAAP adjustments for Share-based compensation, Restructuring, acquisition and integration related expenses, Goodwill and asset impairment charges, Loss (gain) on sale of assets, certain legal charges and gains, certain other non-cash charges or items, as determined by management, plus Adjusted EBITDA of discontinued operations calculated in manner consistent with the results of continuing operations, outlined above.

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Assessment of Our Business Results

The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated. We have revised the following table for the presentation of Retail within continuing operations discussed in Note 1—Significant Accounting Policies in Part II, Item 8 of the Annual Report on Form 10-K for the fiscal year ended July 29, 2017, we believe our critical accounting policies include the following: (i) determining our reserves for the self-insured portions10-K.
13-Week Period Ended
(in thousands)October 31, 2020November 2, 2019Change
Net sales$6,672,607 $6,296,612 $375,995 
Cost of sales5,706,108 5,389,401 316,707 
Gross profit966,499 907,211 59,288 
Operating expenses900,962 883,688 17,274 
Goodwill and asset impairment charges— 425,405 (425,405)
Restructuring, acquisition and integration related expenses16,428 14,672 1,756 
Gain on sale of assets(230)(90)(140)
Operating income (loss)49,339 (416,464)465,803 
Other expense (income):
Net periodic benefit income, excluding service cost(17,033)(11,384)(5,649)
Interest expense, net69,133 49,709 19,424 
Other, net(798)(400)(398)
Total other expense, net51,302 37,925 13,377 
Loss from continuing operations before income taxes(1,963)(454,389)452,426 
Benefit for income taxes(991)(66,955)65,964 
Net loss from continuing operations(972)(387,434)386,462 
Income from discontinued operations, net of tax1,296 4,026 (2,730)
Net income (loss) including noncontrolling interests324 (383,408)383,732 
Less net income attributable to noncontrolling interests(1,367)(519)(848)
Net loss attributable to United Natural Foods, Inc.$(1,043)$(383,927)$382,884 
 
Adjusted EBITDA$158,957 $121,694 $37,263 

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Table of our workers’ compensation and automobile liabilities, (ii) valuation of assets and liabilities acquired in business combinations, (iii) valuation of goodwill and intangible assets, and (iv) income taxes. For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies or estimates since our most recently filed Annual Report on Form 10-K.Contents

Results of Operations
The following table presents,reconciles Adjusted EBITDA to Net loss from continuing operations and to Income from discontinued operations, net of tax.
13-Week Period Ended
(in thousands)October 31, 2020November 2, 2019
Net loss from continuing operations$(972)$(387,434)
Adjustments to continuing operations net loss:
Less net income attributable to noncontrolling interests(1,367)(519)
Total other expense, net51,302 37,925 
Benefit for income taxes(991)(66,955)
Depreciation and amortization77,189 75,141 
Share-based compensation14,149 3,925 
Goodwill and asset impairment charges(1)
— 425,405 
Restructuring, acquisition and integration related expenses(2)
16,428 14,672 
Gain on sale of assets(230)(90)
Note receivable charges(3)
— 12,516 
Legal reserve charge(4)
— 1,850 
Other retail expense(5)
1,609 — 
Adjusted EBITDA of continuing operations157,117 116,436 
Adjusted EBITDA of discontinued operations(6)
1,840 5,258 
Adjusted EBITDA$158,957 $121,694 
 
Income from discontinued operations, net of tax$1,296 $4,026 
Adjustments to discontinued operations net income:
Total other expense, net— (61)
Provision for income taxes526 1,293 
Restructuring, store closure and other charges, net18 — 
Adjusted EBITDA of discontinued operations$1,840 $5,258 
(1)Fiscal 2020 reflects a goodwill impairment charge attributable to a reorganization of our reporting units and a sustained decrease in market capitalization and enterprise value of the Company, resulting in a decline in the estimated fair value of the U.S. Wholesale reporting unit. In addition, this charge includes a goodwill finalization charge attributable to the Supervalu acquisition and an asset impairment charge.
(2)Fiscal 2021 primarily reflects costs associated with advisory and transformational activities as we position our business for further value-creation post-acquisition. Fiscal 2020 primarily reflects closed property reserve charges and administrative and operational restructuring costs. Refer to Note 4—Restructuring, Acquisition and Integration Related Expenses in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
(3)Reflects reserves and charges for notes receivable issued by the periods indicated,Supervalu business prior to its acquisition to finance the purchase of stores by its customers.
(4)Reflects a charge to settle a legal proceeding.
(5)Reflects expenses associated with event-specific damages to certain income and expense items expressed asretail stores.
(6)We believe the inclusion of discontinued operations results within Adjusted EBITDA provides investors a percentagemeaningful measure of net sales:total performance.



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  13-Week Period Ended 26-Week Period Ended 
  January 27,
2018		 January 28,
2017		 January 27,
2018		 January 28,
2017		 
Net sales 100.0 %
100.0 %
100.0 %
100.0 %
Cost of sales 85.3 %
84.9 %
85.2 %
84.8 %
Gross profit 14.7 %
15.1 %
14.8 %
15.2 %
Operating expenses 12.7 % 13.1 % 12.7 % 13.0 % 
Restructuring and asset impairment expenses 0.4 % — % 0.2 % — % 
Total operating expenses 13.1 %
13.1 %
12.9 %
13.0 %
Operating income 1.6 %
2.0 %
1.9 %
2.2 %
Other expense (income):  
  
     
Interest expense 0.2 %
0.2 %
0.2 %
0.2 %
Interest income — %
— %
— %
— %
Other, net — %
— %
— %
— %
Total other expense, net 0.1 %*0.2 %
0.1 %*0.2 %
Income before income taxes 1.4 %*1.8 %
1.8 %
2.0 %
Provision for income taxes (benefit) (0.6)%
0.7 %
0.2 %
0.8 %
Net income 2.0 %
1.1 %
1.6 %
1.2 %
* Total reflects roundingRESULTS OF OPERATIONS

Second Quarter of Fiscal 2018 Compared To Second Quarter of Fiscal 2017

Net Sales

Our net sales by customer channel was as follows (in millions):
 Net Sales for the 13-Week Period EndedIncrease (Decrease)
Customer Channel(1)
October 31,
2020		% of
Net Sales		November 2,
2019		% of
Net Sales		$%
Chains$3,020 45 %$2,875 46 %$145 5 %
Independent retailers1,672 25 %1,557 25 %115 7 %
Supernatural1,214 18 %1,111 18 %103 9 %
Retail595 9 %515 8 %80 16 %
Other581 9 %590 9 %(9)(2)%
Eliminations(409)(6)%(351)(6)%(58)17 %
Total net sales$6,673 100 %$6,297 100 %$376 6 %
(1)Refer to Note 3—Revenue Recognition in Part 1, Item 1 of this Quarterly Report on Form 10-Q for our channel definitions and for information regarding the recast of sales by customer channel to align with the current period presentation.

Our net sales for the secondfirst quarter of fiscal 20182021 increased approximately 10.6%, or $242.5 million, to $2.53 billion6.0% from $2.29 billion for the second quarter of fiscal 2017. Our net sales by customer channels for the second quarter of fiscal 2018 and 2017 were as follows (in millions):
  Net Sales for the 13-Week Period Ended
Customer Channel January 27,
2018		 
% of
Net Sales
 January 28,
2017		 
% of
Net Sales
Supernatural chains $931
 37%
$781
 34%
Independently owned natural products retailers 619
 24%
586
 26%
Conventional supermarkets 728
 29%
684
 30%
Other 250
 10%
235
 10%
Total $2,528
 100% $2,286
 100%

During fiscal 2017, our net sales by channel were adjusted to reflect changes in the classification of customer types from acquisitions we consummated in the third and fourth quarters of fiscal 2016 and the first quarter of fiscal 2017. There was no financial statement impact as a result of revising the classification of customer types. As a result of this adjustment, net sales to our conventional supermarket channel for the second quarter of fiscal 2017 increased approximately $18 million, compared to the previously reported amounts, while net sales to the independent retailer channel for the second quarter of fiscal 2017 decreased approximately $18 million compared to the previously reported amounts.

Whole Foods Market is our only supernatural chain customer, and net sales to Whole Foods Market for the second quarter of fiscal 2018 increased by approximately $150 million, or 19%, as compared to the second quarter of fiscal 2017, and accounted for approximately 37% and 34% of our total net sales for the second quarter of fiscal 2018 and 2017, respectively.2020. The increase in net sales was primarily driven by strong customer demand in response to Whole Foods Market is the COVID-19 pandemic as well as the benefits from cross selling, which was partially offset by lower sales from previously lost customers and stores prior to the pandemic.

Chains net sales increased primarily due to an increasegrowth in samesales to existing customers, including demand for center store and natural products driven by customers’ response to the COVID-19 pandemic, partially offset by lower sales from previously lost customers and stores prior to the pandemic.

Independent retailers net sales increased primarily due to growth in sales to existing customers, including demand for center store and natural products driven by customers response to the COVID-19 pandemic, partially offset by lower sales from previously lost customers and stores prior to the pandemic.

Supernatural net sales increased primarily due to increased sales related to the COVID-19 pandemic, growth in existing and new product categories, and increased sales to existing and new stores, partially offset by the impact of categories that Whole Foods Market experienced following its acquisitionhave been adversely impacted by Amazon.com, Inc. in August 2017.COVID, such as bulk and ingredients used for prepared foods. Net sales within our supernatural chain channel do not include net sales to Amazon.com, Inc. in either the current period or the prior period, as these net sales are reported in our other channel.channel.


Retail’s net sales increased primarily due to a 15.7% increase in identical store sales from higher average basket sizes related to the COVID-19 pandemic. Retail identical store sales are defined as net product sales from stores operating since the beginning of the prior-year period, including store expansions and excluding fuel costs and announced planned store dispositions. Identical store sales is a common metric used to understand the sales performance of retail stores as it removes the impact of new and closed stores. The increase in Retail sales included the benefit of an approximately 200 percent increase in eCommerce sales at Cub Foods.


NetOther net sales decreased primarily due to a 41% (or $48 million) decline in sales to food service customers resulting from the lower purchases due to the COVID-19 pandemic, which were partially offset by higher e-commerce sales. We also expect sales to our independent retailer channel increased by approximately $33 million, or 6%, duringfood service customers in the second quarter of fiscal 20182021 to decrease as compared to the second quarter of fiscal 2017, and accounted for approximately 24% and 26% of our total net sales for the second quarter of fiscal 2018 and 2017, respectively. The increase in net sales in this channel is primarily due to growth in our wholesale division, which includes our broadline distribution business.
Net sales to conventional supermarkets for the second quarter of fiscal 2018 increased by approximately $44 million, or 6%, compared to the second quarter of fiscal 2017, and represented approximately 29% and 30% of our total net sales for the second quarter of fiscal 2018 and 2017, respectively. The increase in net sales to conventional supermarkets was primarily driven by growth in our wholesale division, which includes our broadline distribution business.
Other net sales, which include sales to foodservice customers and sales from the United States to other countries,2020 as well as sales through our e-commerce division, branded product lines, retail division, manufacturing division, and our brokerage business, increased by approximately $15 million, or 6%, for the second quarter of fiscal 2018 compared to the second quarter of fiscal 2017, and accounted for approximately 10% of our total net sales for eacha result of the second quartersCOVID-19 pandemic.

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Cost of Sales and 2017. The increase in other net sales was primarily driven by growth in our e-commerce business.
As we continue to aggressively pursue new customers, expand relationships with existing customers and pursue opportunistic acquisitions, we expect net sales for fiscal 2018 to grow over fiscal 2017 levels. 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 able to attract without that business and will continue to allow us to pursue a broader array of customers as many customers seek a single source for their natural, organic and specialty products. We believe that our acquisitions of Haddon, Nor-Cal, Global Organic and Gourmet Guru have also enhanced our ability to offer our customers a more comprehensive set of products than many of our competitors. We believe that our projected net sales growth will come from both sales to new customers and sales to existing customers. We expect that most of this net sales growth will occur in our lower gross margin supernatural and conventional supermarket channels. Although sales to these 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.

Gross Profit

Our gross profit increased approximately 7.7%$59.3 million, or 6.5%, or $26.6 million, to $371.5$966.5 million for the secondfirst quarter of fiscal 2018,2021, from $344.9$907.2 million for the secondfirst quarter of fiscal 2017.2020. Our gross profit as a percentage of net sales was 14.70%increased to 14.48% for the secondfirst quarter of fiscal 20182021 compared to 15.09%14.41% for the secondfirst quarter of fiscal 2017.2020. The declineincrease in gross profit dollar growth was primarily driven by higher Wholesale and Retail sales volume. The 7 basis point increase in gross profit rate was driven by an increase from Retail, which contributed approximately 17 basis points to the growth in the consolidated gross margin rate as a result of lower promotional spending and the Retail segment representing a greater percentage of total net sales. Wholesale and the remaining business reduced the growth in the consolidated gross margin rate by approximately 10 basis points driven by lower levels of supplier-related income.

Operating Expenses

Operating expenses increased $17.3 million, or 2.0%, to $901.0 million, or 13.50% of net sales, infor the secondfirst quarter of fiscal 2018 was primarily due2021 compared to a shift in customer mix where$883.7 million, or 14.03% of net sales, growth with lower margin customers outpaced growth with other customers coupled with an increase in inbound freight costs.

Operating Expenses
Our total operating expenses increased approximately 10.9%, or $32.6 million, to $331.3 million for the secondfirst quarter of fiscal 2018, from $298.7 million for2020. Operating expenses in the secondfirst quarter of fiscal 2017. As2020 included $18.0 million of charges and expenses, primarily related to customer notes receivable and surplus property depreciation. The remaining decrease in operating expenses as a percentagepercent of net sales total operating expenses were 13.11% for the second quarter of fiscal 2018 compared to 13.07% for the second quarter of fiscal 2017. The increase in operating expenses in the second quarter of fiscal 2018 was driven by increasedlower administrative costs incurred to fulfill the increased demand for our products and restructuring and impairment charges of $11.2 million primarilyleveraging fixed operating expenses over higher net sales, which was partially offset by higher operating costs related to our Earth Origins retail business.starting up three distribution centers. Total operating expenses also included share-based compensation expense of $6.6$14.1 million and $7.4$3.9 million for the secondfirst quarter of fiscal 20182021 and 2017,2020, respectively. This decrease

Goodwill and Asset Impairment Charges

A goodwill impairment adjustment of $425.4 million was recorded in the first quarter of fiscal 2020, which was attributable to changes in the preliminary fair value of net assets, which affected the initial goodwill resulting from the Supervalu acquisition.

As discussed further in Note 5—Goodwill and Intangible Assets in Part I, Item 1 of this Quarterly Report, we recorded a goodwill impairment charge of $421.5 million in the first quarter of fiscal 2020. The goodwill impairment charge is reflected in Goodwill and asset impairment charges in the Condensed Consolidated Statements of Operations. The goodwill impairment charge reflects the impairment of all of the U.S. Wholesale’s reporting unit goodwill.

Restructuring, Acquisition and Integration Related Expenses

Restructuring, acquisition and integration related expenses were $16.4 million for the first quarter of fiscal 2021, which included $14.8 million of restructuring and integration costs primarily duereflecting costs associated with advisory and transformational activities as we position our business for further value-creation post-acquisition and $1.7 million of closed property charges and costs. Expenses incurred were $14.7 million for the first quarter of fiscal 2020, which included $9.3 million of integration related costs, including a charge for an off-site storage contract, $3.5 million of closed property reserve charges and costs, and $1.8 million of restructuring costs.

We expect to a decrease in performance-based compensation expenseincur additional costs associated with advisory and integration activities, and distribution center integration costs throughout fiscal 2021 related to our long-term incentive plan for members of our executive leadership team.operational restructuring to achieve cost synergies and supply chain efficiencies within continuing operations.

Operating Income (Loss)

Reflecting the factors described above, operating income decreased approximately 13.1%, or $6.1increased $465.8 million to $40.2$49.3 million for the secondfirst quarter of fiscal 2018,2021, from $46.3an operating loss of $416.5 million for the secondfirst quarter of fiscal 2017. As a percentage of net sales,2020. The operating income increase was 1.59% forprimarily driven by the second quarterfiscal 2020 goodwill impairment charge and an increase in gross profit in excess of fiscal 2018 compared to 2.02% for the second quarteroperating expenses discussed above.

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Total Other Expense, Net
13-Week Period Ended
(in thousands)October 31, 2020November 2, 2019Increase (Decrease)
Net periodic benefit income, excluding service cost$(17,033)$(11,384)$(5,649)
Interest expense on long-term debt, net of capitalized interest37,196 43,539 (6,343)
Interest expense on finance lease obligations4,868 2,243 2,625 
Amortization of financing costs and discounts3,999 3,943 56 
Loss on debt extinguishment23,750 73 23,677 
Interest income(680)(89)(591)
Interest expense, net69,133 49,709 19,424 
Other, net(798)(400)(398)
Total other expense, net$51,302 $37,925 $13,377 
 

The increase in net periodic benefit income, excluding service costs reflects the recognition of lower interest costs due to a lower discount rate utilized in the measurement of pension liabilities.


Other Expense (Income)
Other expense, net decreased approximately $0.5 million to $3.7 million for the second quarter of fiscal 2018 compared to $4.2 million for the second quarter of fiscal 2017. Interest expense was $4.2 million for the second quarter of fiscal 2018 compared to $4.4 million for the second quarter of fiscal 2017. The decrease in interest expense on long-term debt, net of capitalized interest was due to a reduction indriven by lower amounts of outstanding debt and lower average interest rates.

The increase in loss on debt extinguishment costs primarily reflects the acceleration of unamortized debt issuance costs and original issue discounts related to mandatory and voluntary prepayments on the Term Loan Facility made in the secondfirst quarter of fiscal 2018 compared2021. Refer to the second quarter of fiscal 2017. Interest income was $0.1 millionNote 8—Long-Term Debt for further information.

The increase in each of the second quarters of fiscal 2018 and 2017. Other income was $0.4 millioninterest expense on finance leases primarily reflects interest related to a distribution center for the second quarter of fiscal 2018, compared to $0.1 million of other income for the second quarter of fiscal 2017.which we executed a purchase option with a delayed purchase provision.

ProvisionBenefit for Income Taxes

OurThe effective income tax rate for continuing operations was a benefit of 38.4%50.5% compared to a benefit of 14.7% on pre-tax income for the second quarterfirst quarters of fiscal 2018, compared to an expense of 39.4% for the second quarter of fiscal 2017.2021 and 2020, respectively. The decreasechange in the effective income tax rate for the first quarter of fiscal 2021 was primarily driven by a $6.5 milliondiscrete tax benefit in the first quarter of fiscal 2021 related to employee stock awards compared to a discrete tax expense for this item in the first quarter of fiscal 2020. In addition, the first quarter of fiscal 2020 was impacted by a goodwill impairment charge.

Income from Discontinued Operations, Net of Tax

The results of operations for the first quarter of fiscal 2021 reflect net sales of $24.8 million for which we recognized $8.0 million of gross profit and Income from discontinued operations, net of tax of $1.3 million. Net sales and gross profit of discontinued operations decreased $70.8 million and $22.5 million, respectively, for the first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020 primarily due to a lower operating store base due to closures and sales that occurred in fiscal 2020, which was recorded as resultpartially offset by an increase in identical store sales results driven by the impacts of the new lower federal tax rate, as well as a net tax benefitCOVID-19 pandemic.

Refer to the section above Executive Overview—Divestiture of approximately $21.9 million as a resultRetail Operations and to Note 16—Discontinued Operations in Part I, Item 1 of the impact of the re-measurement of U.S. net deferred tax liabilities at the new lower corporate income tax rate.this Quarterly Report on Form 10-Q for additional financial information regarding these discontinued operations.


Net IncomeLoss Attributable to United Natural Foods, Inc.

Reflecting the factors described in more detail above, we incurred a net income increased $25.0 millionloss attributable to $50.5United Natural Foods, Inc. of $1.0 million, or $0.99$0.02 per diluted common share, for the secondfirst quarter of fiscal 2018,2021, compared to $25.5$383.9 million, or $0.50$7.21 per diluted common share, for the secondfirst quarter of fiscal 2017.2020.
26-Week Period Ended January 27, 2018 Compared To 26-Week Period Ended January 28, 2017

Net Sales

Our net sales increased approximately 9.2%, or $421.7 million, to $4.99 billion for the 26-week period ended January 27, 2018, from $4.56 billion for the 26-week period ended January 28, 2017. Our net sales by customer channel for the 26-week period ended January 27, 2018 and January 28, 2017 were as follows (in millions):


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  Net Sales for the 26-Week Period Ended
Customer Channel January 27,
2018		 
% of
Net Sales
 January 28,
2017		 
% of
Net Sales
Supernatural chains $1,784
 36%
$1,528
 33%
Independently owned natural products retailers 1,258
 25%
1,185
 26%
Conventional supermarket 1,432
 29%
1,356
 30%
Other 512
 10%
495
 11%
Total $4,986
 100% $4,564
 100%

During fiscal 2017, our net sales by channel were adjusted to reflect changesAs described in the classificationmore detail in Note 10—Share-Based Awards in Part I, Item I of customer types from acquisitions we consummatedthis Quarterly Report on Form 10-Q, in the third and fourth quarters of fiscal 2016 and the first quarter of fiscal 2017. There was no financial statement impact as2021, we granted restricted stock units and performance share units representing a resultright to receive an aggregate of revising2.6 million shares of common stock under our 2020 Equity Incentive Plan.

As described in more detail within Note 13—Share-Based Awards in Part II, Item 8 of the classificationAnnual Report on Form 10-K, in fiscal 2020 we issued approximately 1.3 million shares of customer types. Ascommon stock to fund the settlement of time-vesting replacement award obligations from the Supervalu acquisition, which has had a result of this adjustment, net sales todilutive effect on our conventional supermarket channel and other channel for the 26-week period ended January 28, 2017 increased approximately $38 million and $3 million, respectively, compared to the previously reported amounts, while net sales to the independent retailer channel for the 26-week period ended January 28, 2017 decreased approximately $41 million compared to the previously reported amounts.
Net sales to the supernatural chain channel for the 26-week period ended January 27, 2018 increased by approximately $256 million, or 17%,weighted average earnings per share as compared to last year.

Segment Results of Operations

In evaluating financial performance in each business segment, management primarily uses Net sales and Adjusted EBITDA of its business segments as discussed and reconciled within Note 14—Business Segments within Part I, Item 1 of this Quarterly Report on Form 10-Q and the prior fiscal year's comparable period,above table within the Executive Overview section. The following tables set forth Net sales and accountedAdjusted EBITDA by segment for approximately 36% of our totalthe periods indicated.
13-Week Period Ended
(in thousands)October 31, 2020November 2, 2019Increase (Decrease)
Net sales:
Wholesale$6,431,283 $6,067,307 $363,976 
Retail594,911 515,226 79,685 
Other55,612 65,079 (9,467)
Eliminations(409,199)(351,000)(58,199)
Total Net sales$6,672,607 $6,296,612 $375,995 
Continuing operations Adjusted EBITDA:
Wholesale$122,961 $106,312 $16,649 
Retail24,282 10,562 13,720 
Other4,150 (1,597)5,747 
Eliminations5,724 1,159 4,565 
Total continuing operations Adjusted EBITDA$157,117 $116,436 $40,681 

Net Sales

Wholesale net sales for the 26-week period ended January 27, 2018 compared to 33% for the 26-week period ended January 28, 2017. The increase in net sales to Whole Foods Market is primarily due to an increase in same store sales that Whole Foods Market experienced following its acquisition by Amazon.com, Inc. in August 2017. Net sales within our supernatural chain channel do not include net sales to Amazon.com, Inc. in either the current period or the prior period, as these net sales are reported in our other channel.

Net sales to our independent retailer channel increased by approximately $73 million, or 6%, during the 26-week period ended January 27, 2018 compared to the 26-week period ended January 28, 2017, and accounted for 25% and 26% of our total net sales for the first 26 weeks of fiscal 2018 and 2017, respectively. The increase in net sales in this channel is primarily due to growth in our wholesale division, which includes our broadline distribution business.



Net sales to conventional supermarkets forexisting customers in the 26-week period ended January 27, 2018 increased by approximately $76 million, or 6%, from the 26-week period ended January 28, 2017,Chains, Independent retailers and represented approximately 29% and 30% of total net sales for the 26-week period ended January 27, 2018 and January 28, 2017, respectively. The increase in net sales in this channel is primarily due toSupernatural channels. Sales growth in our wholesale division, which includes our broadline distribution business.

Other net sales, which include sales to foodservice customers and sales from the United States to other countries, as well as sales through our e-commerce division, branded product lines, retail division, manufacturing division, and our brokerage business, increased by approximately $17 million, or 3%, during the 26-week period ended January 27, 2018 compared to the 26-week period ended January 28, 2017 and accounted for approximately 10% and 11% of total net sales for the first 26 weeks of fiscal 2018 and 2017, respectively. The increase in other net sales was primarily driven by growth strong customer demand in our e-commerce business.response to the COVID-19 pandemic as well as the benefits from cross selling, which was partially offset by lower sales from previously lost customers and stores prior to the pandemic.


Gross Profit

Our gross profit increased approximately 6.5%, or $44.8 million, to $738.7 million for the 26-week period ended January 27, 2018, from $694.0 million for the 26-week period ended January 28, 2017. Our gross profit as a percentage ofRetail net sales decreased to 14.82% for the 26-week period ended January 27, 2018 compared to 15.21% for the 26-week period ended January 28, 2017. The decline in gross profit as a percentage of net sales in fiscal 2018 wasincreased primarily due to a shift15.7% increase in customer mix whereidentical store sales from higher average basket sizes related to the COVID-19 pandemic.

The increase in eliminations net sales was driven by higher Wholesale sales to Retail to support Retail’s continued sales growth.

Adjusted EBITDA

Wholesale’s Adjusted EBITDA increased 16% for the first quarter of fiscal 2021 from the first quarter of fiscal 2020. The increase was driven by leveraged sales growth, which was partially offset by higher operating costs related to starting up three distribution centers. Gross profit dollar growth for the first quarter of fiscal 2021 was $28.3 million with a gross profit rate decrease of 26 basis points driven by lower margin customerssupplier income, which outpaced operating expense increases, excluding depreciation and amortization and stock-based compensation, of $11.6 million. Operating expense rate decreased 42 basis points primarily driven by leveraging fixed and variable costs, which was partially offset by higher operating costs related to starting up three distribution centers. Wholesale depreciation expense was approximately flat to last year.

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Retail’s Adjusted EBITDA increased 130% for the first quarter of fiscal 2021 from the first quarter of fiscal 2020. The increase was driven by leveraged sales growth from increases in food-at-home purchases that drove sales at our stores. Gross profit dollar growth for the first quarter of fiscal 2021 was $27.1 million with other customers coupledgross profit rate increasing 99 basis points from lower promotional activity, which outpaced operating expense growth of $12.5 million with an increaseoperating expense rate decrease of 117 basis points driven by fixed and variable cost leveraging. Retail depreciation and amortization expense increased $5.9 million primarily related to assets previously classified as held for sale that were moved to continuing operations in inbound freight costs.the fourth quarter of fiscal 2020 for which we are required to begin recording depreciation and amortization expense.


Operating Expenses

LIQUIDITY AND CAPITAL RESOURCES

Highlights

•Total liquidity as of October 31, 2020 was $1.06 billion and consisted of the following:
◦Unused credit under our ABL Credit Facility was $1,008.3 million, which decreased $226.5 million from $1,234.8 million as of August 1, 2020, primarily due to increased cash utilized to fund seasonal working capital increases and prepayments on the Term Loan Facility.
◦Cash and cash equivalents was $49.0 million, which increased $2.1 million from $47.0 million as of August 1, 2020.
•Our total operating expensesdebt increased approximately 8.3%, or $49.1$135.8 million to $643.4$2,633.4 million foras of October 31, 2020 from $2,497.6 million as of August 1, 2020, primarily related to additional borrowings under the 26-week period ended January 27, 2018,ABL Credit Facility to fund seasonal inventory build in excess of accounts payable and increases in accounts receivable.
•In the first quarter of fiscal 2021, we issued $500.0 million of unsecured 6.750% Senior Notes due October 15, 2028 (the “Senior Notes”) and utilized the net proceeds and borrowings under the ABL Credit Facility to make a $500.0 million prepayment on our Term Loan Facility. In addition, during the quarter, the Company made $108.0 million of additional repayments under the Term Loan Facility, including $72.0 million related to cash flow generated in fiscal 2020, as required under the Term Loan Agreement and a voluntary prepayment of $36.0 million with incremental borrowings under the ABL Credit Facility. Other debt maturities are expected to be $9.6 million in fiscal 2021. We are also obligated to make payments to reduce finance lease obligations. Proceeds from $594.4the sale of any properties mortgaged and encumbered under our Term Loan Facility are required to make additional Term Loan Facility payments or be reinvested in the business.
•Subsequent to the end of the first quarter of fiscal 2021, we made a voluntary prepayment of $150.0 million foron the 26-week period ended January 28, 2017. AsTerm Loan Facility funded with incremental borrowings under the ABL Credit Facility that will reduce our interest costs. This prepayment will count towards satisfying any requirement to make a percentage of net sales, total operating expenses decreased to approximately 12.91% formandatory prepayment with Excess Cash Flow (as defined in the 26-week period ended January 27, 2018, from approximately 13.02% for the 26-week period ended January 28, 2017. DuringTerm Loan Agreement) generated during fiscal 2021, if any, which would be due in fiscal 2022. In the second quarter of fiscal 2018, the Company recorded restructuring and impairment charges of $11.2 million primarily2021, we expect to record an accelerated charge related to charges recorded for our Earth Origins retail business. The year-over-year decrease in operating expenses as a percentagedeferred financing fees and original issue discounts based on the proportionate amount of netthis prepayment to the Term Loan Facility balance.
•We expect to be able to fund near-term debt maturities through fiscal 2023 with internally generated funds, proceeds from asset sales was primarily driven by leveraging of fixed costs onor borrowings under the ABL Credit Facility.
•Working capital increased net sales. This was partially offset by restructuring and impairment charges and increased costs incurred to fulfill the increased demand for our products.Total operating expenses for the 26-week period ended January 27, 2018 also included share-based compensation expense of $13.8 million compared to $14.0 million in the 26-week period ended January 28, 2017.

Operating Income

Reflecting the factors described above, operating income decreased approximately 4.3%, or $4.3$231.4 million to $95.3$1,566.3 million for the 26-week period ended January 27, 2018,as of October 31, 2020 from $99.6$1,334.8 million for the 26-week period ended January 28, 2017. As a percentageas of net sales, operating income was 1.91% for the 26-week period ended January 27, 2018 as compared to 2.18% for the 26-week period ended January 28, 2017.

Other Expense (Income)

Other expense, net was $6.4 million and $9.0 million for the 26-week periods ended January 27, 2018 and January 28, 2017, respectively. Interest expense was $7.9 million for the 26-week period ended January 27, 2018 compared to $9.0 million for the 26-week period ended January 28, 2017. The decrease in interest expense wasAugust 1, 2020, primarily due to seasonal inventory build in excess of accounts payable increases, an increase in accounts payable, a reduction in outstanding debt in year-over-year. Interest income was $0.2 million for each of the first 26 weekscurrent portion of fiscal 2018long-term debt resulting from the Term Loan Facility Excess Cash Flow prepayment described above, and 2017. Other income was $1.3 million for the 26-week period ended January 27, 2018 compared to other expense of $0.3 million for the 26-week period ended January 28, 2017. Thisan increase to other income wasin accounts receivable driven by positive returnscredit extended to higher sales growth customers.

Sources and Uses of Cash

We expect to continue to replenish operating assets and pay down debt obligations with internally generated funds and sale of surplus and/or non-core assets. A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on the Company's company owned life insurance and equity method investment.our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned. Our credit facilities are secured by a substantial portion of our total assets.

Provision for Income Taxes


Our effectiveprimary sources of liquidity are from internally generated funds and from borrowing capacity under our credit facilities. Our short-term and long-term financing abilities are believed to be adequate as a supplement to internally generated cash flows to satisfy debt obligations and fund capital expenditures as opportunities arise. Our continued access to short-term and long-term financing through credit markets depends on numerous factors, including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings.

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Primary uses of cash include debt service, capital expenditures, working capital maintenance and income tax rate was 8.9%payments. We typically finance working capital needs with cash provided from operating activities and 39.6% for the 26-week periods ended January 27, 2018short-term borrowings. Inventories are managed primarily through demand forecasting and January 28, 2017, respectively. The decreasereplenishing depleted inventories.

We currently do not pay a dividend on our common stock, and have no current plans to do so. In addition, we are limited in the effective income tax rate was driven by a $6.5 million tax benefit which was recordedaggregate amount of dividends that we may pay under the terms of our Term Loan Facility, ABL Credit Facility, and Senior Notes. Subject to certain limitations contained in our debt agreements and as result of the new lower federal tax rate, as well as a net tax benefit of approximately $21.9 million as a result of the impact of the re-measurement of U.S. net deferred tax liabilities at the new lower corporate income tax rate.



Net Income

Reflecting the factors described in more detail above, net income increased approximately $26.3 million to $81.0 million, or $1.59 per diluted common share, for the 26-week period ended January 27, 2018, compared to $54.7 million, or $1.08 per diluted common share, for the 26-week period ended January 28, 2017.

Liquidity and Capital Resources
We finance our day to day operations and growth primarily with cash flows from operations, borrowings under our amended and restated revolving credit facility, operating leases, a capital lease, a finance lease, trade payables and bank indebtedness. In addition,market conditions warrant, we may from time to time refinance indebtedness that we may issue equity andhave incurred, including through the incurrence or repayment of loans under existing or new credit facilities or the issuance or repayment of debt securities to finance our operations and acquisitions. We believe that our cash on hand and available credit through our amended and restated revolving credit facility as discussed below is sufficient for our operations and planned capital expenditures over the next twelve months. We intend to continue to utilize cash generated from operations to fund acquisitions, fund investment in working capital and capital expenditure needs and reduce our debt levels. securities.

Long-Term Debt

During the first quarter ended October 28, 2017,of fiscal 2021, we announced our intentborrowed a net $230.0 million under the ABL Credit Facility, repaid $608.0 million on the Term Loan Facility related to repurchase up to $200.0mandatory prepayments and voluntary prepayments, and issued $500.0 million of sharesSenior Notes. Refer to Note 8—Long-Term Debt in Part I, Item 1 of our common stock. Purchases under this program will be financed with cash generated from our operations and borrowings under our amended and restated revolving credit facility. To the extent that we borrow funds to purchase these shares, our debt levels and interest expense will rise. We intend to manage capital expenditures to approximately 0.6% to 0.7% of net salesQuarterly Report on Form 10-Q for fiscal 2018. We expect to finance requirements with cash generated from operations and borrowings under our amended and restated revolving credit facility. Our planned capital projects for fiscal 2018 will be focused on continuing the implementation of our information technology projects across the Company that we believe will provide us with increased efficiency and the capacity to continue to support the growth of our customer base. Future investments and acquisitions may be financed through equity issuances, long-term debt or borrowings under our amended and restated revolving credit facility.
The Company has estimated an immaterial impacta detailed discussion of the repatriation provision on earnings due to the foreign tax credits available to the Company. The Company has not recorded a tax provision for U.S. tax purposes on UNFI Canada's profits as it has no assessable profits arising in or derived from the United States and still intends to indefinitely reinvest accumulated earnings in the UNFI Canada operations.

On April 29, 2016, we entered into the Third Amended and Restated Loan and Security Agreement (the “Third A&R Credit Agreement”) amending and restating certain terms and provisions of our revolving credit facility, which increased the maximum borrowings under the amendedfacilities and restated revolving credit facilitycertain long-term debt agreements and extended the maturity date to April 29, 2021. Up to $850.0 million is available to our U.S. subsidiaries and up to $50.0 million is available to UNFI Canada. After giving effect to the Third A&R Creditadditional information.

Our Term Loan Agreement the amended and restated revolving credit facility provides an option to increase the U.S. or Canadian revolving commitments by up to an additional $600.0 million in the aggregate (but indoes not less than $10.0 million increments) subject to certain customary conditions and the lenders committing to provide the increase in funding.

The borrowings of the U.S. portion of the amended and restated revolving credit facility, after giving effect to the Third A&R Creditinclude any financial maintenance covenants. Our ABL Loan Agreement accrued interest, at the base rate plus an applicable margin of 0.25% or LIBOR rate plus an applicable margin of 1.25% for the twelve month period ended April 29, 2017. After this period, the interest on the U.S. borrowings is accrued at the Company's option, at either (i) a base rate (generally defined as the highest of (x) the Bank of America Business Capital prime rate, (y) the average overnight federal funds effective rate plus one-half percent (0.50%) per annum and (z) one-month LIBOR plus one percent (1%) per annum) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) the LIBOR rate plus an applicable margin that varies depending on daily average aggregate availability. The borrowings on the Canadian portion of the credit facility accrued interest at the Canadian prime rate plus an applicable margin of 0.25% or a bankers' acceptance equivalent rate plus an applicable margin of 1.25% for the twelve month period ended April 29, 2017. After this period, the borrowings on the Canadian portion of the credit facility accrue interest, at the Company's option, at either (i) a Canadian prime rate (generally defined as the highest of (x) 0.50% over 30-day Reuters Canadian Deposit Offering Rate ("CDOR") for bankers' acceptances, (y) the prime rate of Bank of America, N.A.'s Canada branch, and (z) a bankers' acceptance equivalent rate for a one month interest period plus 1.00%) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) a bankers' acceptance equivalent rate of the rate of interest per annum equal to the annual rates applicable to Canadian Dollar bankers' acceptances on the "CDOR Page" of Reuter Monitor Money Rates Service, plus five basis points, and an applicable margin that varies depending on daily average aggregate availability. Unutilized commitments are subject to an annual fee in the amount of 0.30% if the total outstanding borrowings are less than 25% of the aggregate commitments, or a per annum fee of 0.25% if such total outstanding borrowings are 25% or more of the aggregate commitments. The Company is also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum of the stated amount of each such letter of credit (or such other amount as may be mutually agreed by the borrowers under the facility and the applicable letter of credit issuer), as well as a fee to all lenders equal to the applicable margin for LIBOR or bankers’ acceptance equivalent rate loans, as applicable, times the average daily stated amount of all outstanding letters of credit.



As of January 27, 2018, the Company's borrowing base, which is calculated based on eligible accounts receivable and inventory levels, net of $4.2 million of reserves, was $882.4 million. As of January 27, 2018, the Company had $287.0 million of borrowings outstanding under the Company's amended and restated revolving credit facility and $30.3 million in letter of credit commitments which reduced the Company's available borrowing capacity under the facility on a dollar for dollar basis. The Company's resulting remaining availability was $565.0 million as of January 27, 2018.

The revolving credit facility, as amended and restated, subjects us to a springing minimum fixed charge coverage ratio (as defined in the Third A&R CreditABL Loan Agreement) of at least 1.0 to 1.0 calculated at the end of each of our fiscal quarters on a rolling four quarter basis, whenif the adjusted aggregate availability (as defined in the Third A&R CreditABL Loan Agreement) is ever less than the greater of (i) $60.0$235.0 million and (ii) 10% of the aggregate borrowing base. We werehave not been subject to the fixed charge coverage ratio covenant under the Third A&R CreditABL Loan Agreement, duringincluding through the second quarterfiling date of fiscal 2018.

this Quarterly Report. The revolving credit facility also allows for the lenders thereunder to syndicate the credit facility to other banksABL Loan Agreement and lending institutions. The Company has pledged the majority of its and its subsidiaries’ accounts receivable and inventory for its obligations under the amended and restated revolving credit facility.

On August 14, 2014, we and certain of our subsidiaries entered into a real estate backed term loan agreement (the "Term Loan Agreement"). The total initial borrowings under our term loan facility were $150.0 million. We are required to make $2.5 million principal payments quarterly. Under the Term Loan Agreement contain certain customary operational and informational covenants. If we at our optionfail to comply with any of these covenants, we may requestbe in default under the establishmentapplicable loan agreement, and all amounts due thereunder may become immediately due and payable.

The Senior Notes contain covenants customary for debt securities of one or more new term loan commitments in increments of at least $10.0 million, but not to exceed $50.0 million in total, subject tothis type that limit the approvalability of the Lenders electingCompany and its restricted subsidiaries to, participate in such incremental loans and the satisfactionamong other things, incur debt, declare or pay dividends or make other distributions to stockholders of the conditions required by the Term Loan Agreement. We will be required to make quarterly principal paymentsCompany, transfer or sell assets, create liens on these incremental borrowingsour assets, engage in accordancetransactions with the termsaffiliates, and merge, consolidate or sell all or substantially all of the Term Loan Agreement. Proceeds from this Term Loan Agreement were used to pay down borrowings on our amended and restated revolving credit facility.

On April 29, 2016,assets of the Company entered intoand its subsidiaries on a First Amendment Agreement (the “Term Loan Amendment”) to the Term Loan Agreement. The Term Loan Amendment was entered into to reflect the changes to the amended and restated revolving credit facility reflected in the Third A&R Credit Agreement. The Term Loan Agreement will terminate on the earlier of (a) August 14, 2022 and (b) the date that is ninety days prior to the termination date of our amended and restated revolving credit facility.

On September 1, 2016, the Company entered into a Second Amendment Agreement (the "Second Amendment") to the Term Loan Agreement which amended the Term Loan Agreement to adjust the applicable margin charged to borrowings thereunder. As amended by the Second Amendment, borrowings under the Term Loan Agreement bear interest at rates that, at the Company's option, can be either: (1) a base rate generally defined as the sum of (i) the highest of (x) the Administrative Agent's prime rate, (y) the average overnight federal funds effective rate plus 0.50% and (z) one-month LIBOR plus one percent (1%) per annum and (ii) a margin of 0.75%; or, (2) a LIBOR rate generally defined as the sum of (i) LIBOR (as published by Reuters or other commercially available source) for one, two, three or six months or, if approved by all affected lenders, nine months (all as selected by the Company), and (ii) a margin of 1.75%. Interest accrued on borrowings under the Term Loan Agreement is payable in arrears. Interest accrued on any LIBOR loan is payable on the last day of the interest period applicable to the loan and, with respect to any LIBOR loan of more than three (3) months, on the last day of every three (3) months of such interest period. Interest accrued on base rate loans is payable on the first day of every month. The Company is also required to pay certain customary fees to the Administrative Agent. The borrowers’ obligations under the Term Loan Agreement are secured by certain parcels of the borrowers’ real property.

The Term Loan Agreement includes financial covenants that require (i) the ratio of our consolidated EBITDA (as defined in the Term Loan Agreement) minus the unfinanced portion of Capital Expenditures (as defined in the Term Loan Agreement) to our consolidated Fixed Charges (as defined in the Term Loan Agreement) to be at least 1.20 to 1.00 as of the end of any period of four fiscal quarters, (ii) the ratio of our Consolidated Funded Debt (as defined in the Term Loan Agreement) to our EBITDA for the four fiscal quarters most recently ended to be not more than 3.00 to 1.00 as of the end of any fiscal quarter and (iii) the ratio, expressed as a percentage, of our outstanding principal balance under the Loans (as defined in the Term Loan Agreement), divided by the Mortgaged Property Value (as defined in the Term Loan Agreement) to be not more than 75% at any time. As of January 27, 2018, the Company wasbasis. We were in compliance with the financialall such covenants for all periods presented.

Derivatives and Hedging Activity

We enter into interest rate swap contracts from time to time to mitigate our exposure to changes in market interest rates as part of the Term Loan Agreement.our overall strategy to manage our debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates. Interest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures.


As of January 27, 2018, the CompanyOctober 31, 2020, we had borrowingsan aggregate of $113.7 million under the Term Loan Agreement which is included in “Long-term debt” in the Condensed Consolidated Balance Sheet.

On January 23, 2015, the Company entered into a forward starting interest rate swap agreement with an effective date$1.49 billion of August 3, 2015, which expires in August 2022 concurrent with the scheduled maturity of our Term Loan Agreement. This interest rate


swap agreement has a notional amount of $117.5 million and provides for the Company to pay interest for a seven-year period at a fixed rate of 1.795% while receiving interest for the same period at the 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 interest rate swap has been entered into as a hedge against LIBOR movements on $117.5 million of the variable rate indebtedness under the Term Loan Agreement at one-month LIBOR plus 1.00% and a margin of 1.50%, thereby fixing our effective rate on the notional amount at 4.295%. The swap agreement qualifies as an “effective” hedge under Accounting Standard Codification ("ASC") 815, Derivatives and Hedging.

On June 7, 2016, the Company entered into twodebt hedged through pay fixed and receive floating interest rate swap agreementscontracts to effectively fix the underlying variableLIBOR component of our floating LIBOR based debt at fixed rates ranging from 1.795% to 2.959%, with maturities between April 2022 and October 2025. The fair value of these interest rate debtderivatives represents a total net liability of $111 million and are subject to volatility based on changes in market interest rates. See Note 7—Derivatives in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

In the Company’s amendedfirst quarter of fiscal 2021, we paid $11.3 million to terminate $954 million of notional value interest rate swaps, $504 million of which were effective interest swaps and restated revolving credit facility.$450 million of which were forward starting. The first agreement has an effective datetermination payment reflects the amount of June 9, 2016 and expires in June of 2019. Thisaccumulated other comprehensive loss that will continue to be amortized into interest expense over the original interest rate swap agreement has a notional principal amount of $50.0 million and provides forcontract terms as long as the Company to pay interest for a three-year period at a fixed annual rate of 0.8725% while receiving interest for the same period at one-month LIBOR on the same notional principal amount. This swap, in conjunction with the amended and restated revolving credit facility, effectively fixes thehedged interest rate ontransactions are still probable of occurring.

From time to time, we enter into fixed price fuel supply agreements and foreign currency hedges. As of October 31, 2020, we had fixed price fuel contracts outstanding and foreign currency forward agreements outstanding. Gains and losses and the $50.0 million notional amount. The second agreement has an effective dateoutstanding net asset from these arrangements are insignificant.

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Capital Expenditures
On June 24, 2016, the Company entered into two additional pay fixed and receive floating interest rate swap agreements to effectively fix the underlying variable rate debt on the Company’s amended and restated revolving credit facility. The first agreement has an effective date of July 24, 2016 and expires in June of 2019. This interest rate swap agreement has a notional principal amount of $50.0 million and provides for the Company to pay interest for a three year period at a fixed annual rate of 0.7265% while receiving interest for the same period at one-month LIBOR on the same notional principal amount. This swap, in conjunction with the amended and restated revolving credit facility, effectively fixes the interest rate on the $50.0 million notional amount. The second agreement has an effective date of July 24, 2016 and expires concurrent with the scheduled maturity of our amended and restated revolving credit facility in April of 2021. This interest rate swap agreement has a notional principal amount of $25.0 million and provides for the Company to pay interest for a five year period at a fixed rate of 0.926% while receiving interest for the same period at one-month LIBOR on the same notional principal amount. This swap, in conjunction with the amended and restated revolving credit facility, effectively fixes the interest rate on the $25.0 million notional amount.

Our capital expenditures for the 26-week period ended January 27, 2018first quarter of fiscal 2021 were $15.5$41.4 million, compared to $22.7$45.0 million for the 26-week period ended January 28, 2017, first of fiscal 2020, a decrease of $7.1$3.6 million. We believe thatIn the first quarter of fiscal 2021, our capital requirements for fiscal 2018 willexpenditures principally included information technology and equipment expenditures. Fiscal 2021 capital spending is expected to be between 0.6%in the range of $250 million to $300 million and 0.7%include projects that optimize and expand our distribution network and our technology platform. Longer term, capital spending is expected to be at or below 1.0% of net sales. We expect to finance these requirements with cash generated from operations and borrowings under our amended and restated revolving credit facility. Our planned capital projects will provide technology that we believe will provide us with increased efficiency and the capacity to continue to support the growth of our customer base and also relate to the buildout of our shared services center. Based on our current operations and customers and estimates of future demand for our products, we believe that we are likely to commence construction and open new distribution center capacity after fiscal 2018, which would increase our capital requirements when compared to fiscal 2018 estimates. We anticipate that futureABL Credit Facility. Future investments and acquisitions willmay be financed through our amended and restated revolving credit facility, or with the issuance of equity or long-term debt negotiated at the timeor borrowings under our ABL Credit Facility.

Cash Flow Information

The following summarizes our Condensed Consolidated Statements of the potential acquisition.Cash Flows:

13-Week Period Ended
(in thousands)October 31, 2020November 2, 2019Change
Net cash used in operating activities of continuing operations$(55,182)$(134,381)$79,199 
Net cash used in investing activities of continuing operations(36,992)(44,745)7,753 
Net cash provided by financing activities of continuing operations95,265 156,096 (60,831)
Net cash (used in) provided by discontinued operations(998)20,376 (21,374)
Effect of exchange rate on cash56 (10)66 
Net increase (decrease) in cash and cash equivalents2,149 (2,664)4,813 
Cash and cash equivalents, at beginning of period47,070 45,267 1,803 
Cash and cash equivalents at end of period$49,219 $42,603 $6,616 
Net cash used
The decrease in operations was $35.1 million for the 26-week period ended January 27, 2018, a change of $132.0 million from the $96.9 million provided by operations for the 26-week period ended January 28, 2017. The primary reasons for the net cash used in operating activities of continuing operations forin the 26-week period ended January 27, 2018 were an increase in accounts receivablefirst quarter of $109.1 millionfiscal 2021 compared to the first quarter of fiscal 2020 was primarily due lower cash utilized to an increase in net salesbuild inventories, and the timing of collections and an increase in inventories of $109.0 million, offset by an increase in accounts payable of $60.6 million, net income of $81.0 million andhigher earnings before taxes, depreciation and amortization, of $44.2 million.and impairments.


The primary reasons for the net cash provided by operations for the 26-week period ended January 28, 2017 were net income of $54.7 million, depreciation and amortization of $42.5 million, share-based compensation expense of $14.0 million, and a decrease in inventories of $30.8 million, offset by an increase in accounts receivable of $26.1 million, and an increase in prepaid expenses and other assets of $20.5 million.

Days in inventory was 49 days as of January 27, 2018 compared to 48 days as of July 29, 2017. Days sales outstanding increased to 22 days as of January 27, 2018 from 21 days at July 29, 2017. Working capital increased by $99.8 million, or 10.4%, from $958.7 million at July 29, 2017 to $1.06 billion at January 27, 2018.



Netnet cash used in investing activities decreased $16.9 million to $17.8 million forof continuing operations in the 26-week period ended January 27, 2018,first quarter of fiscal 2021 compared to $34.6 million for the 26-week period ended January 28, 2017. This changefirst quarter of fiscal 2020 was primarily due to alower cash payments for capital expenditures and higher cash proceeds for the sale of property and equipment.

The decrease in cash paid for acquisitions in the 26-week period ended January 27, 2018 compared to the 26-week period ended January 28, 2017 and a $7.1 million decrease in capital spending between periods.

Net cash provided by financing activities was $62.7 million for the 26-week period ended January 27, 2018. The net cash provided by financing activities of continuing operations in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020 was primarily due to borrowingshigher payments of long-term debt attributable to the mandatory and voluntary prepayments on our amended and restated revolving credit facility of $311.1 million and increases in checks outstanding in excess of deposits of $31.7 million,the Term Loan Facility, partially offset by gross repayments on our amended and restated revolving credit facilitynew borrowings from the Senior Notes.

The decrease in cash flows from discontinued operations in the first quarter of $247.6 million, share repurchasesfiscal 2021 compared to the first quarter of $22.2 million and repayments of long term debt of $6.1 million. Net cash used in financing activitiesfiscal 2020 was $50.2 million for the 26-week period ended January 28, 2017, primarily due to repayments on our amended and restated revolving credit facility and long-term debtlower investing activities cash flow from the sale of $169.6 million and $5.7 million, respectively, and decreases in bank overdrafts of $9.1 million, offset by gross borrowings under our amended and restated revolving credit facility of $136.8 million.property.


Other

On October 6, 2017, the Companywe announced that itsour Board of Directors authorized a share repurchase program for up to $200.0 million of the Company’sour outstanding common stock. The repurchase program is scheduled to expire upon the Company’sour repurchase of shares of the Company’sour common stock having an aggregate purchase price of $200.0 million. During the 26-week period ended January 27, 2018, the Company has repurchased 564,660We did not purchase any shares of the Company'sour common stock in the first quarters of fiscal 2020 and 2021 pursuant to the share repurchase program. As of October 31, 2020, we have $175.8 million remaining authorized under the share repurchase program. We do not expect to purchase shares under the share repurchase program during fiscal 2021. Additionally, our ABL Credit Facility, Term Loan Facility, and Senior Notes contain terms that limit our ability to repurchase of common stock above certain levels unless certain conditions and financial tests are met.

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Pension and Other Postretirement Benefit Obligations

In fiscal 2021, no pension contributions are required to be made under either the SUPERVALU Inc. Retirement Plan or the Unified Grocers, Inc. Cash Balance Plan under Employee Retirement Income Security Act of 1974, as amended (“ERISA”). We anticipate fiscal 2021 non-qualified pension contributions and other postretirement benefit plan contributions to be approximately $5.3 million. We fund our defined benefit pension plans based on the minimum contribution amount required under ERISA, the Pension Protection Act of 2006 and other applicable laws, as determined by us, including our external actuarial consultant, and additional contributions made at an aggregateour discretion. We may accelerate contributions or undertake contributions in excess of the minimum requirements from time to time subject to the availability of cash in excess of operating and financing needs or other factors as may be applicable. We assess the relative attractiveness of the use of cash to accelerate contributions considering such factors as expected return on assets, discount rates, cost of $22.2 million.debt, reducing or eliminating required Pension Benefit Guaranty Corporation variable rate premiums, or in order to achieve exemption from participant notices of underfunding.


From time-to-time, we enter into fixed price fuel supply agreements. As
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

Off-Balance Sheet Arrangements

Guarantees and Contingent Liabilities

We have outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of January 27, 2018various retailers as of October 31, 2020. We are contingently liable for leases that have been assigned to various parties in connection with facility closings and January 28, 2017, we were notdispositions. We are also a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. Refer to Note 15—Commitments, Contingencies and Off-Balance Sheet Arrangements under the caption Guarantees and Contingent Liabilities in Part I, Item I of this Quarterly Report on Form 10-Q for further information regarding our outstanding guarantees and contingent liabilities.

Multiemployer Benefit Plans

We contribute to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and unions that are parties to the collective bargaining agreement. Based on the assessment of the most recent information available from the multiemployer plans, we believe that most of the plans to which we contribute are underfunded. We are only one of a number of employers contributing to these plans and the underfunding is not a direct obligation or liability to us.

Our contributions can fluctuate from year to year due to store closures, employer participation within the respective plans and reductions in headcount. Our contributions to these plans could increase in the near term. However, the amount of any such agreements. Weincrease or decrease in contributions will depend on a variety of factors, including the results of our collective bargaining efforts, investment returns on the assets held in the plans, actions taken by the trustees who manage the plans and requirements under the Pension Protection Act of 2006, the Multiemployer Pension Reform Act and Section 412(e) of the Internal Revenue Code. Furthermore, if we were party to significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, we could trigger a contract during fiscal 2017, which requiredpartial or complete withdrawal that would require us to purchaserecord a totalwithdrawal liability. Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. We made contributions to these plans, and recognized continuing and discontinued operations expense, of $52 million in fiscal 2020. In fiscal 2021, we expect to contribute approximately 6.1$45 million gallonsrelated to continuing and discontinued operations contributions to the multiemployer pension plans, subject to the outcome of diesel fuel at prices ranging from $1.76collective bargaining and capital market conditions. Any withdrawal liability would be recorded when it is probable that a liability exists and can be reasonably estimated, in accordance with GAAP. Any triggered withdrawal obligation could result in a material charge and payment obligations that would be required to $3.18 per gallon through December 31, 2016. Allbe made over an extended period of time.

We also make contributions to multiemployer health and welfare plans in amounts set forth in the related collective bargaining agreements. A small minority of collective bargaining agreements contain reserve requirements that may trigger unanticipated contributions resulting in increased healthcare expenses. If these fixed price fuel agreements qualified and were accountedhealthcare provisions cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Operating expenses could increase in the future.

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Refer to Note 14—Benefit Plans in Part II, Item 8 of the Annual Report on Form 10-K for using the “normal purchase” exception under ASC 815, Derivatives and Hedging, as physical deliveries occurred rather than net settlements, and thereforefiscal year ended August 1, 2020 for additional information regarding the fuel purchases under these contracts have been expensed as incurred and included within operating expenses.plans in which we participate.

Contractual Obligations

ThereExcept as otherwise disclosed in Note 8—Long-Term Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q, there have been no material changes in the Company’s contractual obligations since the end of fiscal 2020. Refer to Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2020 for additional information regarding the Company’s contractual obligations.

Critical Accounting Policies and Estimates

There were no material changes to our contractual obligations and commercial commitments from those disclosedcritical accounting policies during the period covered by this Quarterly Report on Form 10-Q. Refer to the description of critical accounting policies included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 29, 2017.August 1, 2020.

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'smanagement’s ability to execute our operating and growth strategies, personnel changes, demand for naturalour products, supply shortages and general economic conditions.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
 
Our exposure to market risk results primarily from fluctuations in interest rates on our borrowings and our interest rate swap agreements, and price increases in diesel fuel. As discussed in more detailExcept as described in Note 67—Derivatives and Note 8—Long-Term Debt in Part I, Item 1 of the condensed consolidated financial statements, we have entered into interest rate swap agreements to fix our effective interest rate for a portion of the borrowings under our term loan. Therethis Quarterly Report on Form 10-Q, which are incorporated herein, there have been no other material changes to our exposure to market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended July 29, 2017.August 1, 2020.
 
Item 4. Controls and Procedures


(a)Evaluation of disclosure 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 disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly reportQuarterly Report on Form 10-Q (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 were effective.
 
(b)Changes in internal controls.There has been no change in our internal control over financial reporting that occurred during the secondfirst quarter of fiscal 20182021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II.  OTHER INFORMATION



Item 1. Legal Proceedings

From time to time, we are involved in routine litigation or other legal proceedings that arise in the ordinary course of our business. Therebusiness, including investigations and claims regarding employment law, pension plans, unfair labor practices, labor union disputes, supplier, customer and service provider contract terms, real estate and antitrust. Other than as set forth below and in Note 15—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part I, Item I of this Quarterly Report on Form 10-Q, which is incorporated herein, there are no pending material legal proceedings to which we are a party or to which our property is subject.


In 2016, as part of a hazardous waste enforcement campaign by the California Attorney General’s Office and local district attorneys, Unified Grocers received a subpoena from the Yolo County District Attorney regarding hazardous waste management and storage at its Stockton and Commerce, California distribution centers. We have provided requested documents and cooperated fully with the investigation. On May 24, 2018, the District Attorney toured the Stockton distribution center and generally found the distribution center to be in compliance, and minor items noted regarding labeling have been addressed.
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Subsequent to the end of the first quarter, we negotiated a settlement with the District Attorney, which includes the payment of an immaterial amount for penalties and costs as well as certain agreed upon additional reporting and compliance obligations.


Item 1A. Risk Factors

There have been no material changes to our risk factors contained in Part I, Item 1A, “Risk1A. Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended July 29, 2017.August 1, 2020.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 6, 2017, the Companywe announced that itsour Board of Directors had authorized a share repurchase program for up to $200.0 million of the Company’sour outstanding common stock. The repurchase program is scheduled to expire upon the Company’sour repurchase of shares of the Company’sour common stock having an aggregate purchase price of $200.0 million. RepurchasesAny repurchases will be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions, or otherwise. The CompanyWe do not expect to purchase shares under the share repurchase program during fiscal 2021. We may also implement all or part of the repurchase program pursuant to a plan or plans meeting the conditions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

(in millions, except shares and per share amounts)
Total Number of Shares Purchased(2)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(3)
Period(1):
August 2, 2020 to September 5, 2020— $— — $— 
September 6, 2020 to October 3, 2020149,479 17.08 — — 
October 4, 2020 to October 31, 2020459,811 16.79 — 175.8 
Total609,290 $16.86 — $— 

(1)The following table presents purchasesreported periods conform to our fiscal calendar.
(2)These amounts represent the deemed surrender by participants in our compensatory stock plans of 609,290 shares of our common stock to cover taxes from the vesting of restricted stock awards and related information for eachrestricted stock units granted under such plans.
(3)As of October 31, 2020, there was approximately $175.8 million that may yet be purchased under the monthsshare repurchase program. There were no share repurchases under the share repurchase program in the first quarter of fiscal quarter ended January 27, 2018:2021.
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(In thousands, except share and per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
Period:        
October 29, 2017 to December 2, 2017 402,587
 $39.21
 402,587
 $177,763
December 3, 2017 to December 30, 2017 —
 —
 —
 177,763
December 31, 2017 to January 27, 2018 —
 —
 —
 177,763
Total 402,587
 $39.21
 402,587
 $177,763

Table of Contents
Item 3.Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.



Item 6.  Exhibits


Exhibit Index

Exhibit No.Description
10.1**
2.1
United Natural Foods, Inc. Second AmendedAgreement and Restated 2012 Equity Incentive Plan of Merger, dated July 25, 2018, by and among SUPERVALU INC., SUPERVALU Enterprises, Inc., the Registrant and Jedi Merger Sub, Inc. (incorporated by reference to Appendix Athe Registrant’s Current Report on Form 8-K, filed on July 26, 2018 (File No. 001-15723)).
2.2
First Amendment to Agreement and Plan of Merger, dated as of October 10, 2018, by and among United Natural Foods, Inc., Jedi Merger Sub, Inc., SUPERVALU INC. and SUPERVALU Enterprises, Inc. (incorporated by reference to Registrant’s Current Report on Form 8-K, filed on October 10, 2018 (File No. 001-15723)).
3.1
Certificate of Incorporation of the Registrant, as amended (restated for SEC filing purposes only) (incorporated by reference to the Registrant’s SupplementQuarterly Report on Form 10-Q for the quarter ended January 31, 2015 (File No. 001-15723)).
3.2
Fourth Amended and Restated Bylaws of the Registrant (incorporated by reference to Proxy Statementthe Registrant’s Current Report on Schedule 14A forForm 8-K, filed on October 19, 2018 (File No. 001-15723)).
10.1**
Form of RSU Award Agreement (Employee) pursuant to the Registrant’s 2020 Equity Incentive Plan (for grants made beginning September 2020) (incorporated by reference to the Registrant’s Annual MeetingReport on Form 10-K for the year ended August 1, 2020 (File No. 001-15723)).
10.2**
Form of Stockholders heldPSU Award Agreement pursuant to the Registrant’s 2020 Equity Incentive Plan (for grants made beginning September 2020) (incorporated by reference to the Registrant’s Annual Report on December 13, 2017,Form 10-K for the year ended August 1, 2020 (File No. 001-15723)).
10.3
Third Amendment to Loan Agreement, dated August 14, 2020, by and among the Registrant and United Natural Foods West, Inc., UNFI Canada, Inc., the financial institutions that are parties thereto as lenders, Bank of America, N.A., Bank of America, N.A. (acting through its Canada branch), and the other parties thereto (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended August 1, 2020 (File No. 001-15723)).
10.4
Indenture, dated October 22, 2020, among United Natural Foods, Inc., the subsidiary guarantors named therein and U.S. Bank National Association, as trustee (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on December 5, 2017October 26, 2020 (File No. 1-15723)001-15723)).

31.1*10.5* **
Annual Incentive Plan, as amended.
31.1*
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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.
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.
101*The following materials from the United Natural Foods, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended January 27, 2018,October 31, 2020, formatted in Inline XBRL (eXtensible(Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income,Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated StatementStatements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
104The cover page from our Quarterly Report on Form 10-Q for the first quarter of fiscal 2021, filed with the SEC on December 9, 2020, formatted in Inline XBRL (included as Exhibit 101).

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


*                 *                 *

We would be pleased to furnish a copy of this Form 10-Q to any stockholder who requests it by writing to:
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United Natural Foods, Inc.
Investor Relations
313 Iron Horse Way
Providence, RI 02908



SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
UNITED NATURAL FOODS, INC.
/s/ Michael P. ZechmeisterJOHN W. HOWARD
Michael P. ZechmeisterJohn W. Howard
Chief Financial Officer
(Principal Financial Officer and Accounting Officer)duly authorized officer)
 
Dated:  March 8, 2018December 9, 2020




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