UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
United Natural Foods, Inc. and its subsidiaries (the “Company” or “UNFI”) 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 to retailers. The Company sells its products primarily throughout the United States and Canada.
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| | 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 |
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Net effect of dilutive stock awards based upon the treasury stock method | | 292 |
| | 168 |
| | 216 |
| | 146 |
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Diluted weighted average shares outstanding | | 50,741 |
| | 50,755 |
| | 50,849 |
| | 50,677 |
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ForAmortization expense was $18 million for the secondfirst quarters of fiscal 20182024 and 2023. The estimated future amortization expense for each of the next five fiscal 2017, there were 292,703years and 36,986 anti-dilutive share-based awards outstanding, respectively. For the first 26 weeksthereafter on amortizing intangible assets existing as 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.October 28, 2023 is as shown below:
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Fiscal Year: | (in millions) |
Remaining fiscal 2024 | $ | 55 | |
2025 | 71 | |
2026 | 67 | |
2027 | 64 | |
2028 | 61 | |
Thereafter | 360 | |
| $ | 678 | |
6.
NOTE 6—FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS
HedgingRecurring Fair Value Measurements
The following tables provide the fair value hierarchy for financial assets and liabilities measured on a recurring basis:
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| | Condensed Consolidated Balance Sheets Location | | Fair Value at October 28, 2023 |
(in millions) | | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Fuel derivatives designated as hedging instruments | | Prepaid expenses and other current assets | | $ | — | | | $ | 1 | | | $ | — | |
Foreign currency derivatives designated as hedging instruments | | Prepaid expenses and other current assets | | $ | — | | | $ | 1 | | | $ | — | |
Interest rate swaps designated as hedging instruments | | Prepaid expenses and other current assets | | $ | — | | | $ | 15 | | | $ | — | |
Interest rate swaps designated as hedging instruments | | Other long-term assets | | $ | — | | | $ | 4 | | | $ | — | |
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| | Condensed Consolidated Balance Sheets Location | | Fair Value at July 29, 2023 |
(in millions) | | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Interest rate swaps designated as hedging instruments | | Prepaid expenses and other current assets | | $ | — | | | $ | 17 | | | $ | — | |
Interest rate swaps designated as hedging instruments | | Other long-term assets | | $ | — | | | $ | 5 | | | $ | — | |
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Liabilities: | | | | | | | | |
Fuel derivatives designated as hedging instruments | | Accrued expenses and other current liabilities | | $ | — | | | $ | 1 | | | $ | — | |
Interest Rate Swap Contracts
The fair values of interest rate swap contracts are measured using Level 2 inputs. The interest rate swap contracts are valued using an income approach interest rate swap valuation model incorporating observable market inputs including interest rates, SOFR swap rates and credit default swap rates. As of October 28, 2023, a 100-basis point increase in forward SOFR interest rates would increase the fair value of the interest rate swaps by approximately $6 million; a 100-basis point decrease in forward SOFR interest rates would decrease the fair value of the interest rate swaps by approximately $6 million. Refer to Note 7—Derivatives for further information on interest rate swap contracts.
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 liabilities the fair values approximate carrying amounts due to their short maturities. The fair value of notes receivable is estimated by using a discounted cash flow approach prior to consideration for uncollectible amounts and is 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 3 inputs. In the table below, the carrying value of the Company’s long-term debt is net of original issue discounts and debt issuance costs.
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| | October 28, 2023 | | July 29, 2023 |
(in millions) | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Notes receivable, including current portion | | $ | 15 | | | $ | 9 | | | $ | 15 | | | $ | 8 | |
Long-term debt, including current portion | | $ | 2,301 | | | $ | 2,214 | | | $ | 1,963 | | | $ | 1,903 | |
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NOTE 7—DERIVATIVES
Management 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:
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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 andas of October 28, 2023. 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.
Details of active swap contracts as of October 28, 2023, which are all pay fixed and receive floating, are as follows:
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Effective Date | | Swap Maturity | | Notional Value (in millions) | | Pay Fixed Rate | | Receive Floating Rate | | Floating Rate Reset Terms |
October 26, 2018 | | October 31, 2023 | | 100 | | | 2.7880 | % | | One-Month Term SOFR | | Monthly |
January 11, 2019 | | March 28, 2024 | | 100 | | | 2.3600 | % | | One-Month Term SOFR | | Monthly |
January 23, 2019 | | March 28, 2024 | | 100 | | | 2.4250 | % | | One-Month Term SOFR | | Monthly |
November 30, 2018 | | October 31, 2024 | | 100 | | | 2.7385 | % | | One-Month Term SOFR | | Monthly |
January 11, 2019 | | October 31, 2024 | | 100 | | | 2.4025 | % | | One-Month Term SOFR | | Monthly |
January 24, 2019 | | October 31, 2024 | | 50 | | | 2.4090 | % | | One-Month Term SOFR | | Monthly |
October 26, 2018 | | October 22, 2025 | | 50 | | | 2.8725 | % | | One-Month Term SOFR | | Monthly |
November 16, 2018 | | October 22, 2025 | | 50 | | | 2.8750 | % | | One-Month Term SOFR | | Monthly |
November 16, 2018 | | October 22, 2025 | | 50 | | | 2.8380 | % | | One-Month Term SOFR | | Monthly |
January 24, 2019 | | October 22, 2025 | | 50 | | | 2.4750 | % | | One-Month Term SOFR | | Monthly |
| | | | $ | 750 | | | | | | | |
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. The entire change in the fair value of the derivative is initially reported in Other comprehensive income (outside of earnings) in the Condensed Consolidated Statements of Comprehensive (Loss) Income and subsequently reclassified to earnings in Interest expense, net in the Condensed Consolidated Statements of Operations when the hedged transactions affect earnings.
The location and amount of gains or losses recognized in the Condensed Consolidated Statements of Operations for interest rate swap contracts for each of the periods, presented on a pre-tax basis, are as follows:
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| | | | 13-Week Period Ended |
| | | | | | October 28, 2023 | | October 29, 2022 |
(in millions) | | | | 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 | | | | | | $ | 35 | | | $ | 35 | |
Gain on cash flow hedging relationships: | | | | | | | | |
Gain reclassified from comprehensive income into earnings | | | | | | $ | 5 | | | $ | — | |
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NOTE 8—LONG-TERM DEBT
The Company’s long-term debt consisted of the following:
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(in millions) | Average Interest Rate at October 28, 2023 | | Fiscal Maturity Year | | October 28, 2023 | | July 29, 2023 |
Term Loan Facility | 8.68% | | 2026 | | $ | 670 | | | $ | 670 | |
ABL Credit Facility | 6.78% | | 2027 | | 1,152 | | | 812 | |
Senior Notes | 6.75% | | 2029 | | 500 | | | 500 | |
Other secured loans | 4.43% | | 2025 | | 5 | | | 9 | |
Debt issuance costs, net | | | | | (20) | | | (22) | |
Original issue discount on debt | | | | | (6) | | | (6) | |
Long-term debt, including current portion | | | | | 2,301 | | | 1,963 | |
Less: current portion of long-term debt | | | | | (5) | | | (7) | |
Long-term debt | | | | | $ | 2,296 | | | $ | 1,956 | |
Senior Notes
On October 22, 2020, the Company issued $500 million of unsecured 6.750% senior notes due October 15, 2028 (the “Senior Notes”). The Senior Notes, which are presented net of debt issuance costs of $6 million as of October 28, 2023 in the Condensed Consolidated Balance Sheets, are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the ABL Credit Facility or the Term Loan Facility (defined below).
ABL Credit Facility
The revolving credit agreement dated as of June 3, 2022 (the “ABL Loan Agreement”), by and among the Company (the “U.S. Borrower”) and UNFI Canada (the “Canadian Borrower” and, together with the U.S. Borrower, the “Borrowers”), and the financial institutions that are parties thereto as lenders (collectively, the “ABL Lenders”), Wells Fargo Bank, N.A. as administrative agent for the ABL Lenders, and the other parties thereto, provides for a secured asset-based revolving credit facility (the “ABL Credit Facility”), of which up to $2,600 million is available to the Borrowers, including a U.S. Dollar equivalent of $100 million sublimit for borrowings in Canadian dollars. 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 $750 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 (collectively, the “Guarantors”), subject to customary exceptions and limitations. The Borrowers’ obligations under the ABL Credit Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on certain accounts receivable, inventory and certain other assets arising therefrom or related thereto of the Borrowers and Guarantors (including substantially all of their deposit accounts, collectively, the “ABL Assets”) and (ii) a second-priority lien on all of the Borrowers’ and 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% to 92.5% of the net orderly liquidation value of eligible inventory, plus 90% of eligible pharmacy receivables, plus certain availability related to pharmacy prescription files, after adjusting for customary reserves, but at no time shall exceed the lesser of the aggregate commitments under the ABL Credit Facility (currently $2,600 million) or the Borrowing Base.
The assets included in the Condensed Consolidated Balance Sheets securing the outstanding obligations under the ABL Credit Facility on a first-priority basis were as follows:
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(in millions) | October 28, 2023 | | July 29, 2023 |
Certain inventory assets included in Inventories, net | $ | 2,173 | | | $ | 1,861 | |
Certain receivables included in Accounts receivable, net | 624 | | | 571 | |
Pharmacy prescription files included in Intangible assets, net | 9 | | | 11 | |
Total | $ | 2,806 | | | $ | 2,443 | |
As of October 28, 2023, the Borrowers’ Borrowing Base was $2,550 million, reflecting the advance rates described above and $101 million of reserves, which is below the $2,600 million limit of availability. This resulted in total availability of $2,550 million for loans and letters of credit under the ABL Credit Facility. The Company’s unused credit under the ABL Credit Facility was as follows:
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(in millions) | October 28, 2023 |
Total availability for ABL loans and letters of credit | $ | 2,550 | |
ABL loans outstanding | (1,152) | |
Letters of credit outstanding | (150) | |
Unused credit | $ | 1,248 | |
The applicable interest rates, unutilized commitment fees and letter of credit fees under the ABL Credit Facility are variable and are dependent upon the prior fiscal quarter’s daily Average Availability (as defined in the ABL Loan Agreement), and were as follows:
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| Range of Facility Rates and Fees (per annum) | October 28, 2023 |
Borrowers’ applicable margin for base rate loans | 0.00% - 0.25% | 0.00 | % |
Borrowers’ applicable margin for SOFR and BA loans(1) | 1.00% - 1.25% | 1.00 | % |
Unutilized commitment fees | 0.20% | 0.20 | % |
Letter of credit fees | 1.125% - 1.375% | 1.125 | % |
(1) The U.S. Borrower utilizes SOFR-based loans and the Canadian Borrower utilizes bankers’ acceptance rate-based loans.
Term Loan Facility
The term loan agreement dated as of October 22, 2018 (as amended, the “Term Loan Agreement”), by and among the Company and SUPERVALU INC. (“Supervalu” and, collectively with the Company, the “Term Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “Term Lenders”), Credit Suisse, as administrative agent for the Term Lenders, and the other parties thereto, provides for a $1,800 million senior secured first lien term loan (the “Term Loan Facility”). The net proceeds from the Term Loan Facility were used to finance the Supervalu acquisition and related transaction costs. Any amounts then outstanding will be payable in full on October 22, 2025.
The obligations under the Term Loan Facility are guaranteed by the Guarantors, subject to customary exceptions and limitations. The Term Borrowers’ obligations under the Term Loan Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the 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 million. As of October 28, 2023 and July 29, 2023, there was $612 million and $617 million, respectively, of owned real property pledged as collateral that was included in Property and equipment, net in the Condensed Consolidated Balance Sheets.
The Company must 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 of the last day of such fiscal year) of Excess Cash Flow (as defined in the Term Loan Agreement), minus certain types of voluntary prepayments of indebtedness made during such fiscal year. The potential amount of prepayment from Excess Cash Flow in fiscal 2024 that may be required in fiscal 2025 is not reasonably estimable as
of October 28, 2023.
As of October 28, 2023, the Company had borrowings of $670 million outstanding under the Term Loan Facility, which are presented in the Condensed Consolidated Balance Sheets net of debt issuance costs of $7 million and an original issue discount on debt of $6 million. As of October 28, 2023, no amount of the Term Loan Facility was classified as current.
As of October 28, 2023, the borrowings under the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either: (i) a base rate plus a margin of 2.25% or (ii) a SOFR rate plus a margin of 3.25%, provided that the SOFR rate shall never be less than 0.0%.
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 2024 were as follows:
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(in millions) | | Other Cash Flow Derivatives | | Benefit Plans | | Foreign Currency Translation | | Swap Agreements | | Total |
Accumulated other comprehensive (loss) income at July 29, 2023 | | $ | — | | | $ | (21) | | | $ | (21) | | | $ | 14 | | | $ | (28) | |
Other comprehensive income (loss) before reclassifications | | 1 | | | — | | | (3) | | | 1 | | | (1) | |
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Amortization of cash flow hedges | | — | | | — | | | — | | | (4) | | | (4) | |
Net current period Other comprehensive income (loss) | | 1 | | | — | | | (3) | | | (3) | | | (5) | |
Accumulated other comprehensive income (loss) at October 28, 2023 | | $ | 1 | | | $ | (21) | | | $ | (24) | | | $ | 11 | | | $ | (33) | |
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Changes in Accumulated other comprehensive loss by component, net of tax, for the first quarter of fiscal 2023 were as follows:
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(in millions) | | Other Cash Flow Derivatives | | Benefit Plans | | Foreign Currency Translation | | Swap Agreements | | Total |
Accumulated other comprehensive income (loss) at July 30, 2022 | | $ | 2 | | | $ | (3) | | | $ | (19) | | | $ | — | | | $ | (20) | |
Other comprehensive (loss) income before reclassifications | | (1) | | | — | | | (3) | | | 18 | | | 14 | |
Amortization of cash flow hedges | | 1 | | | — | | | — | | | — | | | 1 | |
Net current period Other comprehensive (loss) income | | — | | | — | | | (3) | | | 18 | | | 15 | |
Accumulated other comprehensive income (loss) at October 29, 2022 | | $ | 2 | | | $ | (3) | | | $ | (22) | | | $ | 18 | | | $ | (5) | |
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Items reclassified out of Accumulated other comprehensive loss had the following impact on the Condensed Consolidated Statements of Operations:
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| | | | 13-Week Period Ended | | Affected Line Item on the Condensed Consolidated Statements of Operations |
(in millions) | | | | | | October 28, 2023 | | October 29, 2022 | |
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Swap agreements: | | | | | | | | | | |
Reclassification of cash flow hedges | | | | | | $ | (5) | | | $ | — | | | Interest expense, net |
Income tax expense (benefit) | | | | | | 1 | | | — | | | (Benefit) provision for income taxes |
Total reclassifications, net of tax | | | | | | $ | (4) | | | $ | — | | | |
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Other cash flow hedges: | | | | | | | | | | |
Reclassification of cash flow hedge | | | | | | $ | — | | | $ | 1 | | | Cost of sales |
Income tax expense (benefit) | | | | | | — | | | — | | | (Benefit) provision for income taxes |
Total reclassifications, net of tax | | | | | | $ | — | | | $ | 1 | | | |
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As of October 28, 2023, the Company expects to reclassify $15 million related to unrealized derivative gains out of Accumulated other comprehensive loss and primarily into Interest expense, net during the following twelve-month period.
NOTE 10—SHARE-BASED AWARDS
As of October 28, 2023, there were 2.2 million shares available for issuance under the Second Amended and Restated 2020 Equity Incentive Plan.
NOTE 11—BENEFIT PLANS
Net periodic benefit (income) cost and contributions to defined benefit pension and other postretirement benefit plans consisted of the following:
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| 13-Week Period Ended |
| Pension Benefits | | Other Postretirement Benefits |
(in millions) | October 28, 2023 | | October 29, 2022 | | October 28, 2023 | | October 29, 2022 |
Interest cost | $ | 19 | | | $ | 17 | | | $ | — | | | $ | — | |
Expected return on plan assets | (22) | | | (24) | | | — | | | — | |
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Net periodic benefit income | $ | (3) | | | $ | (7) | | | $ | — | | | $ | — | |
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Contributions to benefit plans | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Contributions
No minimum pension contributions are required to be made to the SUPERVALU INC. Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in fiscal 2024. The Company expects to contribute approximately $1 million to its other defined benefit pension plans and $1 million to its postretirement benefit plans in fiscal 2024.
Multiemployer Pension Plans
The Company contributed $13 million and $11 million in the first quarters of fiscal 2024 and 2023, respectively, to multiemployer pension plans, which contributions are included within Operating expenses.
NOTE 12—INCOME TAXES
The effective tax rate for the first quarter of fiscal 2024 was a benefit rate of 18.8% on pre-tax loss compared to an expense rate of 6.9% on pre-tax income for the first quarter of fiscal 2023. The change from the first quarter of fiscal 2023 is primarily driven by the reduction of discrete tax benefits related to employee stock award vestings in the first quarter of fiscal 2024. In addition, the first quarter of fiscal 2023 included a tax benefit from the release of reserves for unrecognized tax positions that did not recur in the first quarter of fiscal 2024. The primary driver for the variation between the Company’s statutory tax rate and its effective tax rate for the first quarters of fiscal 2024 and fiscal 2023 were discrete tax detriments and benefits, respectively, resulting from share award vestings.
NOTE 13—EARNINGS PER SHARE
The following table provides the fair value hierarchy for financial assets and liabilities measured onis a recurring basis as of January 27, 2018 and July 29, 2017:
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| | 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 |
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Liabilities: | | | | | | | | | | | | |
Interest Rate Swap | | — |
| | — |
| | — |
| | — |
| | (308 | ) | | — |
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The fair valuereconciliation of the Company's other financial instruments including accounts receivable, notes receivable, accounts payablebasic and certain accrued expenses are derived using Level 2 inputs 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 value as interest rates on the credit facility approximates current market rates (Level 2 criteria).
The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies taking into account the instruments' interest rate, terms, 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.
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| | January 27, 2018 | | July 29, 2017 |
(In thousands) | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Liabilities: | | |
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Long-term debt, including current portion | | $ | 156,118 |
| | $ | 162,406 |
| | $ | 161,991 |
| | $ | 169,058 |
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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 million of the Company’s outstanding common stock. The repurchase program is scheduled to expire upon the Company’s repurchasediluted number of shares of the Company’s common stock having an aggregate purchase price of $200.0 million. Repurchases will be madeused in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions, or otherwise. The Company 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.computing earnings per share:
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| | | | 13-Week Period Ended |
(in millions, except per share data) | | | | | | October 28, 2023 | | October 29, 2022 |
Basic weighted average shares outstanding | | | | | | 58.7 | | | 58.8 | |
Net effect of dilutive stock awards based upon the treasury stock method | | | | | | — | | | 2.8 | |
Diluted weighted average shares outstanding | | | | | | 58.7 | | | 61.6 | |
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Basic (loss) earnings per share(1) | | | | | | $ | (0.67) | | | $ | 1.12 | |
Diluted (loss) earnings per share(1) | | | | | | $ | (0.67) | | | $ | 1.07 | |
| | | | | | | | |
Anti-dilutive share-based awards excluded from the calculation of diluted (loss) earnings per share | | | | | | 2.3 | | | 0.9 | |
Under this program, the Company purchased 402,587 shares of the Company's common stock at an aggregate cost of $15.8 million in the second quarter of fiscal 2018 and 564,660 shares of the Company's common stock at an aggregate cost of $22.2 million in the 26-week period ended January 27, 2018. The Company records the repurchase of shares of common stock at cost based on the settlement date of the transaction. These shares(1)(Loss) earnings per share amounts are classified as treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares.calculated using actual unrounded figures.
8.INCOME TAXES
Effects of the Tax Cuts and Jobs Act
New tax legislation, commonly referred to as the Tax Cuts and Jobs Act ("TCJA"), was enacted 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 effects 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 second quarter of fiscal 2018 for the estimated impact of the TCJA based on information that is currently available to the Company. These provisional estimates are comprised of amounts (including the tax basis of assets 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.
9. NOTE 14—BUSINESS SEGMENTS
The Company has several operating divisions aggregated undertwo reportable segments: Wholesale and Retail. These reportable segments are two distinct businesses, each with a different customer base, marketing strategy and management structure. The Company organizes and operates the wholesaleWholesale reportable segment through three U.S geographic regions: East, Central and West, and Canada Wholesale, which is operated separately from the Company’s only reportable segment. TheseU.S. Wholesale business. The U.S. Wholesale and Canada Wholesale operating divisionssegments have similar products and services, customer channels, distribution methods and historical margins. economic characteristics, and therefore have been aggregated into a single reportable segment. Reportable segments are reviewed on an annual basis, or more frequently if events or circumstances indicate a change in reportable segments has occurred.
The following table provides information by reportable segment, including Net sales, Adjusted EBITDA, with a reconciliation to (Loss) income before income taxes, depreciation and amortization, and payments for capital expenditures:
| | | | | | | | | | | | | | | | | | |
| | | | 13-Week Period Ended |
(in millions) | | | | | | October 28, 2023 | | October 29, 2022 |
Net sales: | | | | | | | | |
Wholesale(1) | | | | | | $ | 7,281 | | | $ | 7,259 | |
Retail | | | | | | 606 | | | 613 | |
Other | | | | | | 60 | | | 60 | |
Eliminations | | | | | | (395) | | | (400) | |
Total Net sales | | | | | | $ | 7,552 | | | $ | 7,532 | |
Adjusted EBITDA: | | | | | | | | |
Wholesale | | | | | | $ | 117 | | | $ | 171 | |
Retail | | | | | | (1) | | | 20 | |
Other | | | | | | 3 | | | 19 | |
Eliminations | | | | | | (2) | | | (3) | |
Adjustments: | | | | | | | | |
Net income attributable to noncontrolling interests | | | | | | — | | | 1 | |
Net periodic benefit income, excluding service cost | | | | | | 3 | | | 7 | |
Interest expense, net | | | | | | (35) | | | (35) | |
Other income, net | | | | | | — | | | 1 | |
Depreciation and amortization | | | | | | (78) | | | (74) | |
Share-based compensation | | | | | | (6) | | | (12) | |
LIFO charge | | | | | | (7) | | | (21) | |
Restructuring, acquisition and integration related expenses | | | | | | (4) | | | (2) | |
(Loss) gain on sale of assets and other asset charges | | | | | | (19) | | | 5 | |
| | | | | | | | |
| | | | | | | | |
Business transformation costs | | | | | | (15) | | | (5) | |
Other adjustments | | | | | | (4) | | | — | |
(Loss) income before income taxes | | | | | | $ | (48) | | | $ | 72 | |
Depreciation and amortization: | | | | | | | | |
Wholesale | | | | | | $ | 67 | | | $ | 64 | |
Retail | | | | | | 8 | | | 8 | |
Other | | | | | | 3 | | | 2 | |
Total depreciation and amortization | | | | | | $ | 78 | | | $ | 74 | |
Payments for capital expenditures: | | | | | | | | |
Wholesale | | | | | | $ | 71 | | | $ | 57 | |
Retail | | | | | | 3 | | | 10 | |
Total capital expenditures | | | | | | $ | 74 | | | $ | 67 | |
(1)As presented in Note 3—Revenue Recognition, the Company recorded $321 million and $334 million for the first quarters of fiscal 2024 and 2023, respectively, within Net sales in its Wholesale reportable segment attributable to Wholesale to Retail sales that have been eliminated upon consolidation.
Total assets by reportable segment were as follows:
| | | | | | | | | | | | | | |
(in millions) | | October 28, 2023 | | July 29, 2023 |
Assets: | | | | |
Wholesale | | $ | 6,858 | | | $ | 6,405 | |
Retail | | 649 | | | 648 | |
Other | | 380 | | | 377 | |
Eliminations | | (39) | | | (36) | |
Total assets | | $ | 7,848 | | | $ | 7,394 | |
NOTE 15—COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
Guarantees and Contingent Liabilities
The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of October 28, 2023. These guarantees were generally made to support the business growth of wholesale segment is engagedcustomers. The guarantees are generally for the entire terms of the leases, fixture financing loans or other debt obligations with remaining terms that range from less than one year to seven years, with a weighted average remaining term of approximately four years. For each guarantee issued, if the wholesale customer or other third-party defaults on a payment, the Company would be required to make payments under its guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees. The Company reviews performance risk related to its guarantee obligations based on internal measures of credit performance. As of October 28, 2023, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $14 million ($11 million on a discounted basis). Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, as of October 28, 2023, a total estimated loss of $1 million is recorded in the Condensed Consolidated Balance Sheets.
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 for the purchase and sale of stock or assets, operating leases and other real estate contracts, financial agreements, agreements to provide services to the Company and agreements to indemnify officers, directors and employees in the performance 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. No amount has been recorded in the Condensed Consolidated Balance Sheets for these contingent obligations as the fair value has been determined to be de minimis.
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 Agreement and Plan of Merger pursuant to 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 terms 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 provided Save-A-Lot with various technical, human resources, finance and other operational services. The Company primarily ceased providing services under the Services Agreement in fiscal 2022. 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 de minimis fair value of the guarantee 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 28, 2023, the Company had approximately $606 million of non-cancelable future purchase obligations, most of which will be paid and utilized in the ordinary course within one year.
As of October 28, 2023, the Company had commitments of $778 million for future undiscounted minimum lease payments on leases signed but not yet commenced with terms of up to 21 years from commencement date.
Legal Proceedings
The Company is one of dozens of companies that have been named in various lawsuits alleging that drug manufacturers, retailers and distributors contributed to the national distribution of natural, organic and specialty foods, produce and related productsopioid epidemic. Currently, UNFI, primarily through its subsidiary, Advantage Logistics, is named in approximately 43 suits pending in the United States District Court for the Northern District of Ohio where thousands of 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 Canada. Thethe Company has additional operating divisions that do not meet the quantitative thresholds for reportable segments(the “Stock Purchase Agreement”), New Albertson’s is defending and are therefore aggregated under the caption of “Other.” “Other” includesindemnifying UNFI in a retail division, which engages in the sale of natural foods and related products to the general public through retail storefronts on the east coastmajority of the United States,cases under a manufacturing division, which engages in the importing, roasting, packaging, and distributingreservation of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections, the Company’s branded product lines, and the Company's brokerage business, which markets various products on behalf of food vendors directly and exclusivelyrights as those cases relate to the Company's customers. “Other” also includes certain corporate operating expenses that are not allocated to operating divisions, which include, among other expenses, stock based compensation, and salaries, retainers, and other related expenses of certain officers and all directors. Non-operating expenses that are not allocated to the operating divisions are under the caption of “Unallocated (Income)/Expenses.” The Company does not record its revenues for financial reporting purposes by product group, and it is therefore impracticable for the Company to report them accordingly.
The following table reflects business segment information for the periods indicated (in thousands): |
| | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of January 27, 2018 and July 29, 2017 consistedNew Albertson’s pharmacies. In one of the following (in thousands):
|
| | | | | | | |
| January 27, 2018 | | July 29, 2017 |
Accrued salaries and employee benefits | $ | 61,040 |
| | $ | 63,937 |
|
Workers' compensation and automobile liabilities | 23,613 |
| | 22,774 |
|
Interest rate swap liability | — |
| | 308 |
|
Other | 74,648 |
| | 70,224 |
|
Total accrued expenses and other current liabilities | $ | 159,301 |
| | $ | 157,243 |
|
11.NOTES PAYABLE
On April 29, 2016, the Company 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 its revolving credit facility which increased the maximum borrowings under the amended and restated revolving credit facility and extended the maturity date to April 29, 2021. Up to $850.0 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 commitmentsMDL cases, MDL No. 2804 filed by up to an additional $600.0 million 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.
The borrowingsBlackfeet Tribe of the U.S. portionBlackfeet 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 amended and restated revolving credit facility, after giving effect toactions. On October 7, 2022, the Third A&R Credit Agreement, accrued interest at the base rate plusMDL Court issued 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 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 amended and restated revolving credit facility.
12.LONG-TERM DEBT
On August 14, 2014,order directing the Company and certainnumerous other “non-litigating” defendants to submit by November 1, 2022, a list of its subsidiaries entered into a real estate backed term loan agreement (the "Term Loan Agreement"). The total initial borrowings underopioid cases where the Term Loan Agreement were $150.0 million.Company is named and opioid dispensing and distribution data. The Company is required to make $2.5 million principal payments quarterly, which began on November 1, 2014. Underproduced 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 Company will be required to make quarterly principal payments on 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, the Company entered into a First Amendment Agreement (the “Term Loan Amendment”) to the Term Loan Agreement which amends 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 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 wasdata in compliance with the financial covenants of its Term Loan Agreement.
As of January 27, 2018,order. On March 8, 2023, the Company had borrowingsreceived a subpoena from the Consumer Protection Division of $113.7 million under the Term LoanMaryland Attorney General’s Office seeking records related to the distribution and dispensing of opioids. On May 19, 2023, the Company provided an initial production in response to the subpoena and is in the process of gathering additional responsive documents. The Company believes these claims are without merit and intends to vigorously defend this matter.
On January 21, 2021, various health plans filed a complaint in Minnesota state court against the Company, Albertson’s Companies, LLC (“Albertson’s”) and Safeway, Inc. alleging the defendants committed fraud by improperly reporting inflated prices for prescription drugs for members of health plans. The Plaintiffs assert six causes of action against the defendants: common law fraud, fraudulent nondisclosure, negligent misrepresentation, unjust enrichment, violation of the Minnesota Uniform Deceptive Trade Practices Act and violation of the Minnesota Prevention of Consumer Fraud Act. The plaintiffs allege that between 2006 and 2016, Supervalu overcharged the health plans by not providing the health plans, as part of usual and customary prices, the benefit of discounts given to customers purchasing prescription medication who requested that Supervalu match competitor prices. Plaintiffs seek an unspecified amount of damages. Similar to the above case, for the majority of the relevant period Supervalu and Albertson’s operated as a combined company. In March 2013, Supervalu divested Albertson’s and pursuant to the Stock Purchase Agreement, Albertson’s is responsible for any claims regarding its pharmacies. On February 19, 2021, Albertson’s and Safeway removed the case to Minnesota Federal District Court, and on March 22, 2021, plaintiffs filed a motion to remand to state court. On February 26, 2021, defendants filed a motion to dismiss. The hearing on the remand motion and motions to dismiss occurred on May 20, 2021. On September 21, 2021, the Federal District Court remanded the case to Minnesota state court and did not rule on the motion to dismiss, which was refiled in state court. On February 1, 2022, the state court denied the motion to dismiss. On November 27, 2023, the court held a scheduling conference and will enter a scheduling order setting various discovery and expert deadlines. The Company anticipates the trial date will be set for July 21, 2025. The Company believes these claims are without merit and is vigorously defending this matter.
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 includedpending in "Long-term debt"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. The 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 Condensed Consolidated Balance Sheet.
Duringclaims that are currently pending and the fiscal year endedStock Purchase Agreement, Supervalu’s share of a potential award (at the currently claimed value by the 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 Seventh Circuit Court of Appeals. On August 12, 2021, the Seventh Circuit affirmed the District Court’s decision granting summary judgment in defendants’ favor. On September 23, 2021, the relators filed a petition for rehearing. On December 3, 2021, the Seventh Circuit denied the petition for rehearing. On April 1, 2015,2022, the Company entered into an amendmentrelators filed a petition for a writ of certiorari with the United States Supreme Court which was granted on January 13, 2023. Oral argument took place in the Supreme Court on April 18, 2023. On June 1, 2023, the Supreme Court reversed and vacated the lower court’s judgment and remanded the case to an existing lease agreementthe Seventh Circuit for further proceedings. On July 27, 2023, the office space utilized asSeventh Circuit vacated the Company's corporate headquarters in Providence, Rhode Island. The amendment providessummary judgment order and remanded the case to the District Court. On August 22, 2023, the District Court set the trial date for additional office space to be utilized byApril 29, 2024. On October 11, 2023, each of the Company and extends the relators filed a motion for summary judgment. Responses to the motions were filed on October 21, 2023, and replies are due December 15, 2023.
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, including wage and hour (including class actions); pension plans; labor union disputes, including unfair labor practices, such as claims for back-pay in the context of labor contract negotiations and other matters; 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; product liability claims, including those where the supplier may be insolvent and customers or consumers are seeking recovery against the Company; real estate and environmental matters, including claims in connection with its ownership and lease termof a 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 Company is a party or to which its property is subject.
Predicting the outcomes of claims and litigation 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 28, 2023, no material accrued obligations, individually or in the aggregate, have been recorded for an additional 10 years.these legal proceedings.
Although management believes it has made appropriate assessments of potential and contingent loss in each of these cases based on current facts and circumstances, and application of prevailing legal principles, there can be no assurance that material differences in actual outcomes from management’s current assessments, costs and exposures relative to current predictions and estimates, or material changes in such predictions or estimates will not occur. The lease qualifies for capital lease treatment pursuant to ASC 840, Leases, and the estimated fair valueoccurrence of any of the building is recordedforegoing could have a material adverse effect on the balance sheet with the capital lease obligation included in long-term debt. A portionCompany’s financial condition, results of each lease payment reduces the amountoperations or cash flows.
During the fiscal year ended July 28, 2012, the Company entered into a lease agreement for a new distribution facility in Aurora, Colorado. At the conclusion of the fiscal year ended August 3, 2013, actual construction costs exceeded the construction allowance as defined by the lease agreement, and therefore, the Company determined it met the criteria for continuing involvement pursuant to FASB ASC 840, Leases, and applied the financing method to account for this transaction during the fourth quarter of fiscal 2013. Under the financing method, the book value of the distribution facility and related accumulated depreciation remains on the Condensed Consolidated Balance Sheet. The construction allowance is recorded as a financing obligation in "Long-term debt." A portion 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.
Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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,”“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.incorrect. 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:
•our dependence on principal customers;
•the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures and intense competition, including as a result of the continuing consolidation of retailers and the growth of consumer choices for grocery and consumable purchases;
•our ability to realize the anticipated benefits of our transformation initiatives;
•changes in relationships with our suppliers;
•our ability to operate, and rely on third parties to operate, reliable and secure technology systems;
•labor and other workforce shortages and challenges;
•the addition or loss of significant customers or material changes to our relationships with these customers;
•our ability to realize anticipated benefits of our acquisitions;
•our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products, and to manage that growth;
•our ability to maintain sufficient volume in our wholesale segment to support our operating infrastructure;
•the impact and duration of any pandemics or disease outbreaks;
•our ability to access additional capital;
•increases in healthcare, pension and other costs under our and multiemployer benefit plans;
•the potential for additional asset impairment charges;
•our sensitivity to general economic conditions including the current economic environment;
inflation, changes in disposable income levels and consumer spending trends;purchasing habits;
our ability to reduce our expenses in amounts sufficient to offset our increased focus on sales to conventional supermarkets and supermarket chains and the resulting lower gross margins on those sales;
our reliance on the continued growth in sales of natural and organic foods and non-food products in comparison to conventional 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;
•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;
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 byor our distribution capabilities from circumstances beyond our control;
the risk of interruption of suppliescontrol, including due to lack of long-term contracts, severe weather, labor shortages or work stoppages or otherwise;
consumer demand for natural 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 ability to identify and successfully complete acquisitions of other natural, organic and specialty food and non-food products distributors;
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”) storesmaintain food quality and for the restructuring costs related to Earth Origins to be within our current estimates;safety; and
the possibility that we may recognize restructuring charges with respect to our Earth Origins business•volatility in excess of those estimated for the second half of fiscal 2018;fuel costs;
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.“Risk Factors” included in Part I, Item 1A. Risk Factors”1A of our Annual Report on Form 10-K for the fiscal year ended July 29, 2017, and2023 (the “Annual Report”), 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, financial condition or cash flows.
EXECUTIVE OVERVIEW
This Management’s Discussion and financial condition.Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto contained in this Quarterly Report on Form 10-Q, the information contained under the caption “Cautionary Note Regarding Forward-Looking Statements,” and the information in the Annual Report.
Business Overview
We believe we areUNFI is a leading distributor based on sales of natural, organic and specialty foodsgrocery and non-food products, and support services provider to retailers in the United States and CanadaCanada. We believe we are uniquely positioned to provide the broadest array of products and that our thirty-threeservices to customers throughout North America. Our diversified customer base includes over 30,000 customer locations ranging from some of the largest grocers in the country to smaller independents as well. We offer approximately 250,000 products consisting of national, regional and private label brands grouped into the following main product categories: grocery and general merchandise; perishables; frozen foods; wellness and personal care items; and bulk and foodservice products. We believe we are North America’s premier grocery wholesaler with 54 distribution centers and warehouses representing approximately 8.730 million square feet of warehouse space,space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers. We believe our total product assortment and service offerings are unmatched by our wholesale competitors. We plan to continue to pursue new business opportunities with independent retailers that operate diverse formats, regional and national chains, as well as international customers with wide-ranging needs. Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division.
We are focused on executing our transformation strategy, which we believe will position us for long-term profitable growth. Our enterprise-wide business transformation strategy consists of four areas: network automation and optimization; commercial value creation; digital offering enhancement and infrastructure unification and modernization. To enable this business transformation, we have engaged consultants and recruited leadership with transformation experience to upgrade and modernize our technology and platforms to better serve our customers.
We are also implementing near-term initiatives to help improve profitability while we execute our longer-term strategy. These include actioning administrative structure efficiencies, reprioritizing our selling and administrative spending, optimizing our stock-keeping unit (“SKU”) assortment as well as reviewing commercial contracts in collaboration with our customers and suppliers.
We expect to continue to use available capital to re-invest in our business and we remain committed to improving our financial leverage and reducing outstanding debt over the long term.
We believe we can enhance our profitability and accelerate our growth through our transformation efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide ustailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions. We believe the key drivers for value creation will be improved efficiency through the automation and optimization of our supply chain, as well as new customer growth associated with the largest capacitybenefits of any North American-based distributor focused primarily onour significant scale, product and service offerings and nationwide footprint.
Trends and Other Factors Affecting our Business
Our results are impacted by macroeconomic and demographic trends, changes in the natural, organicfood distribution market structure and specialty products industry.changes in consumer behavior. We offer more than 110,000 high-quality natural, organicbelieve food-at-home expenditures as a percentage of total food expenditures are subject to these trends, including changes in consumer behaviors in response to social and specialty foodseconomic trends, such as levels of disposable income and non-food products, consisting of national brands, regional brands, private label and master distribution products, in six product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements and sports nutrition, bulk and food service products and personal care items. We serve more than 43,000 customer locations primarily located across the United States and Canada, the majority of which can be classified into onehealth of the following categories: independently owned natural products retailers,economy in which include buying clubs; supernatural chains, which consist solely of Whole Foods Market Inc. ("Whole Foods Market"); conventional supermarkets, which include mass market chains;our customers and other which includes e-commerce, foodservice and international customers outside of Canada.our stores operate.
Our operations are generally comprised of three principal operating divisions. These operating divisions are:
our wholesale division, which includes:
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◦ | our broadline natural, organic and specialty distribution businessThe U.S. economy has experienced economic volatility in the United States, which includes our recent acquisitions of Haddon House Food Products, Inc. ("Haddon") and Gourmet Guru, Inc. ("Gourmet Guru"); |
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◦ | 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; |
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◦ | 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; |
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◦ | UNFI Canada, Inc. ("UNFI Canada"), which is our natural, organic and specialty distribution business in Canada; and |
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◦ | 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:
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◦ | 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 |
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◦ | our Blue Marble Brands branded product lines. |
In recent years, which has had, and we expect may continue to have, an impact on consumer confidence. Consumer spending may continue to be impacted by levels of discretionary income and consumers trading down to a less expensive mix of products for grocery items or buying fewer items. In addition, inflation continues to affect our salesbusiness, and fluctuating commodity and labor input costs may continue to existing and new customers have increased throughimpact the continued growthprices of theproducts we procure from manufacturers. We believe our product mix, which ranges from high-quality natural and organic products to national and local conventional brands, including cost conscious private label brands, positions us to serve a broad cross section of North American retailers and end customers, and may lessen the impact of any further shifts in consumer and industry trends in general, increased market sharegrocery product mix.
We are also impacted by changes in food distribution trends affecting our Wholesale customers, such as direct store deliveries and other methods of distribution. Our Wholesale customers manage their businesses independently and operate in a resultcompetitive environment.
Wholesale Distribution Center Network
We evaluate our distribution center network to optimize performance and expect to incur incremental expenses related to any future network realignment, expansion or improvements, including initiatives under the network automation and optimization pillar of our high quality servicetransformation agenda. We are working to both minimize these potential future costs and a broader product selection,obtain new business to further improve the efficiency of our transforming distribution network.
Retail Operations
We currently operate 79 retail grocery stores, including specialty products,54 Cub Foods corporate stores and 25 Shoppers Food Warehouse stores. In addition, we supply another 26 Cub Foods stores operated by our Wholesale customers through franchise and equity ownership arrangements. We operate 81 pharmacies primarily within the stores we operate and the acquisition of, or merger with, natural and specialty products distributors; the expansionstores of our existing distribution centers;franchisees. In addition, we operate 25 “Cub Wine and Spirit” and “Cub Liquor” stores.
We plan to continue to invest in our Retail segment in areas such as customer-facing merchandising initiatives, physical facilities, technology and operational tools. Cub Foods and Shoppers Food Warehouse anticipate continued investment in improving the constructioncustomer and associate experience through express remodels focused on customer facing elements.
Impact of new distribution centers;Product Cost Inflation
We experienced a mix of inflation across product categories during the introductionfirst quarter of newfiscal 2024. In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately three percent in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. Cost inflation estimates are based on individual like items sold during the periods being compared. Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation on Net sales and Gross profit. Absent any changes in units sold or the mix of units sold, inflation generally has the effect of increasing sales. Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which generally has the effect of decreasing Gross profit and the developmentcarrying value of our own lineinventory during periods 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. inflation.
Our strategic plan is focused on increasing the type of products we distributepricing to our customers including perishable productsis determined at the time of sale primarily based on the then prevailing vendor listed base cost, and conventional produce. As part ofincludes discounts we offer to our “one company” approach, we arecustomers. Generally, in the process 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 fifteen 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 expensesan inflationary environment as a percentage of netwholesaler, rising vendor costs result in higher Net sales driven by higher vendor prices when other variables such as we attempt to offsetquantities sold and vendor promotions are constant. In 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.
We have been the primary distributor to Whole Foods Market for more than nineteen 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% and 34% of our net sales for the secondfirst quarter of fiscal 20182024, we experienced fewer and 2017, respectively. Forless significant vendor product cost increases as compared to 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 operations have been fully integrated into the existing Albert's business in the Southeastern United States.
In March 2016, the Company acquired all of the outstanding equity securities of Nor-Cal and an affiliated entity as well as certain real estate, 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 broadline natural, organic and specialty distribution business in the United States.
In August 2016, the Company acquired all of the outstanding equity securities of Gourmet Guru in a cash transaction for approximately $10.0 million. Gourmet Guru is a distributor and merchandiser of fresh and organic food focusing on new and emerging brands. We believe that our acquisition of Gourmet Guru enhances our strength in finding and cultivating emerging fresh and organic brands and further expands our presence in key urban markets. Gourmet Guru's operations have been combined with the Company's existing broadline natural, organic and specialty distribution business in the United States.
The ability to distribute specialty food items (including ethnic, kosher and gourmet products) has accelerated our expansion into a number of high-growth business markets and allowed us 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 into all of our broadline distribution centers across the United States and Canada. Due to our expansion into specialty foods, over the past several fiscal years we have been awarded new business with a number of conventional supermarkets that we previously had not done business with because we did not distribute specialty products. We believe our acquisition of Haddon has expanded our capabilities in the specialty category and we have expanded our offerings of specialty products to include those products distributed by Haddon that we did not previously distribute to our customers. We believe that distribution of these products enhances our conventional supermarket business channel and that our complementary 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
reduce 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 second quarter of fiscal 2018,2023. These decreases negatively impacted our gross profit rate when comparing the Company recorded restructuring and asset impairment expenses of $11.2 million which was primarily driven by charges related to our Earth Origins retail business of approximately $11.4 million, offset by a benefit of $0.2 million related to an adjustment for our fiscal 2017 restructuring program.
During the secondfirst quarter of fiscal 2018, the Company made the decision2024 to close three non-core, under-performing Earth Origins 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 halfquarter of fiscal 20182023.
Composition of Condensed Consolidated Statements of Operations 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 reporting unit was below its carrying amount. As a result of both these analyses, the Company recorded a total impairment charge 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.Business Performance Assessment
Net Sales
Our netNet sales consist primarily of product sales of natural, organic, specialty, produce, and specialtyconventional grocery and non-food products, 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 costCost of sales include the amounts paid to suppliers for product sold, plus the cost of transportation costs necessary to bring the product to, or move product between, our various distribution centers offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Cost of sales also includes amounts incurred by us at our manufacturing subsidiary, Woodstock Farms Manufacturing, for inbound transportation costsand retail stores, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products. Our gross margin may not be comparable to other similar companies within our industry that may
Operating Expenses
Operating expenses include all costs related to their distribution network in their costsexpenses of sales rather than as operating expenses. We includewarehousing, delivery, purchasing, receiving, selecting, and outbound transportation expenses, within our operating expenses rather than in our cost of sales. Total operatingand selling and administrative expenses. These expenses include salaries and wages, employee benefits, warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation, depreciation and amortization expense and share-based compensation expense. Other
Restructuring, Acquisition and Integration Related Expenses
Restructuring, acquisition and integration related expenses (income)reflect expenses resulting from restructuring activities, including severance costs, facility closure asset impairment charges and costs, share-based compensation acceleration charges and acquisition and integration related expenses. Integration related expenses include interest on our outstanding indebtedness, including the financing obligationcertain professional consulting expenses and incremental expenses related to combining facilities required to optimize our Aurora, Colorado distribution centernetwork as a result of acquisitions.
Loss (Gain) on Sale of Assets and Other Asset Charges
Loss (gain) on sale of assets and other asset charges primarily includes losses (gains) on sales of assets, losses on sales of financial assets, and asset impairments.
Net Periodic Benefit Income, Excluding Service Cost
Net periodic benefit income, excluding service cost reflects the recognition of expected returns on benefit plan assets and interest costs on plan liabilities.
Interest Expense, Net
Interest expense, net includes primarily interest expense on long-term debt, net of capitalized interest, loss on debt extinguishment, interest expense on finance lease for office space for our corporate headquartersobligations, amortization of financing costs and discounts, and interest income.
Adjusted EBITDA
Our Condensed Consolidated Financial Statements are prepared and presented in Providence, Rhode Island, interest income and miscellaneous income and expenses.
Critical Accounting Policies
The preparationaccordance 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 items that do not reflect management’s assessment of ongoing business performance.
We believe Adjusted EBITDA is useful to investors and financial institutions because it provides additional information regarding factors and trends affecting our most difficult, complex or subjective judgments or estimates. Basedbusiness, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and because of its importance as a measure of underlying operating performance, as the 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 this definitiona 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 as further describedmay be reflected in our Annualfinancial 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 on Form 10-K10-Q.
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 the fiscal year ended July 29, 2017,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 which we believe our critical accounting policies include the following: (i) determining our reservesreconcile by adding Net (loss) income including noncontrolling interests, less Net income attributable to noncontrolling interests, plus Non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus (Benefit) provision for the self-insured portions of our workers’income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and automobile liabilities, (ii) valuationintegration related expenses, Goodwill impairment charges, Loss (gain) on sale of assets and liabilities acquired in business combinations, (iii) valuation of goodwillother asset charges, certain legal charges and intangible assets,gains, and (iv) income taxes. For all financial statement periods presented, there have been no material modificationscertain other non-cash charges or other items, as determined by management. The changes to the applicationdefinition of these critical accounting policies or estimates sinceAdjusted EBITDA from prior periods reflect changes to line item references in our most recently filed Annual Report on Form 10-K.Consolidated Financial Statements, which do not impact the calculation of Adjusted EBITDA.
Assessment of Our Business Results Results of Operations
The following table presents,sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated, certainindicated.
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 13-Week Period Ended | | |
(in millions) | | | | | | | October 28, 2023 | | October 29, 2022 | | Change |
Net sales | | | | | | | $ | 7,552 | | | $ | 7,532 | | | $ | 20 | |
Cost of sales | | | | | | | 6,522 | | | 6,436 | | | 86 | |
Gross profit | | | | | | | 1,030 | | | 1,096 | | | (66) | |
Operating expenses | | | | | | | 1,023 | | | 1,000 | | | 23 | |
Restructuring, acquisition and integration related expenses | | | | | | | 4 | | | 2 | | | 2 | |
Loss (gain) on sale of assets and other asset charges | | | | | | | 19 | | | (5) | | | 24 | |
Operating (loss) income | | | | | | | (16) | | | 99 | | | (115) | |
Net periodic benefit income, excluding service cost | | | | | | | (3) | | | (7) | | | 4 | |
Interest expense, net | | | | | | | 35 | | | 35 | | | — | |
Other income, net | | | | | | | — | | | (1) | | | 1 | |
(Loss) income before income taxes | | | | | | | (48) | | | 72 | | | (120) | |
(Benefit) provision for income taxes | | | | | | | (9) | | | 5 | | | (14) | |
Net (loss) income including noncontrolling interests | | | | | | | (39) | | | 67 | | | (106) | |
Less net income attributable to noncontrolling interests | | | | | | | — | | | (1) | | | 1 | |
Net (loss) income attributable to United Natural Foods, Inc. | | | | | | | $ | (39) | | | $ | 66 | | | $ | (105) | |
| | | | | | | | | | | |
Adjusted EBITDA | | | | | | | $ | 117 | | | $ | 207 | | | $ | (90) | |
The following table reconciles Net (loss) income including noncontrolling interests to Adjusted EBITDA:
| | | | | | | | | | | | | | | |
| | | 13-Week Period Ended |
(in millions) | | | | | October 28, 2023 | | October 29, 2022 |
Net (loss) income including noncontrolling interests | | | | | $ | (39) | | | $ | 67 | |
Adjustments to net (loss) income including noncontrolling interests: | | | | | | | |
Less net income attributable to noncontrolling interests | | | | | — | | | (1) | |
Net periodic benefit income, excluding service cost | | | | | (3) | | | (7) | |
Interest expense, net | | | | | 35 | | | 35 | |
Other income, net | | | | | — | | | (1) | |
(Benefit) provision for income taxes | | | | | (9) | | | 5 | |
Depreciation and amortization | | | | | 78 | | | 74 | |
Share-based compensation | | | | | 6 | | | 12 | |
LIFO charge | | | | | 7 | | | 21 | |
Restructuring, acquisition and integration related expenses | | | | | 4 | | | 2 | |
Loss (gain) on sale of assets and other asset charges (1) | | | | | 19 | | | (5) | |
Business transformation costs (2) | | | | | 15 | | | 5 | |
Other adjustments (3) | | | | | 4 | | | — | |
Adjusted EBITDA | | | | | $ | 117 | | | $ | 207 | |
(1)The first quarter of fiscal 2024 includes a $21 million non-cash asset impairment charge related to one of our corporate-owned office locations.
(2)Reflects costs associated with business transformation initiatives, primarily including third-party consulting costs and expense items expressed as a percentagelicensing costs, which are included within Operating expenses in the Condensed Consolidated Statements of net sales:Operations.
(3)Primarily reflects third-party professional service fees related to shareholder negotiations.
|
| | | | | | | | | | | | | |
| | 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 rounding
Second Quarter of Fiscal 2018 Compared To Second Quarter of Fiscal 2017
Net Sales
Our net sales for the second quarter of fiscal 2018 increased approximately 10.6%, or $242.5 million, to $2.53 billion from $2.29 billion for the second quarter of fiscal 2017. Our netNet sales by customer channels for the second quarter of fiscal 2018 and 2017 werechannel was as follows (in millions)millions except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 13-Week Period Ended | | Increase (Decrease) | | |
Customer Channel(1) | | | | | | | | | | October 28, 2023 | | October 29, 2022 | | $ | | % | | | | |
Chains | | | | | | | | | | $ | 3,184 | | | $ | 3,224 | | | $ | (40) | | | (1.2) | % | | | | |
Independent retailers | | | | | | | | | | 1,899 | | | 1,947 | | | (48) | | | (2.5) | % | | | | |
Supernatural | | | | | | | | | | 1,612 | | | 1,513 | | | 99 | | | 6.5 | % | | | | |
Retail | | | | | | | | | | 606 | | | 613 | | | (7) | | | (1.1) | % | | | | |
Other | | | | | | | | | | 646 | | | 635 | | | 11 | | | 1.7 | % | | | | |
Eliminations | | | | | | | | | | (395) | | | (400) | | | 5 | | | (1.3) | % | | | | |
Total net sales | | | | | | | | | | $ | 7,552 | | | $ | 7,532 | | | $ | 20 | | | 0.3 | % | | | | |
(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 additional information. |
| | | | | | | | | | | | | | |
| | 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 netOur 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 andfor the first quarter of fiscal 2017. There was no financial statement impact as a result of revising2024 increased approximately 0.3% from the classification of customer types. As a result of this adjustment, net sales to our conventional supermarket channel for the secondfirst 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.2023. 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 $33 million, or 6%, during the second quarter of fiscal 2018 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, 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 each of the second quarters of fiscal 2018 and 2017. The increase in other net sales was primarily driven by inflation and new business with existing customers, primarily resulting from growth in our e-commerce business.Supernatural channel. These increases were largely offset by a decrease in units sold.
As we continueRetail Net sales decreased primarily due to aggressively pursue new customers, expand relationships with existing customersa 3.2% decrease in identical store sales from lower volume.
Cost of Sales 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%decreased $66 million, or 6.0%, or $26.6 million, to $371.5$1,030 million for the secondfirst quarter of fiscal 2018,2024, from $344.9$1,096 million for the secondfirst quarter of fiscal 2017.2023. Our gross profit as a percentage of netNet sales was 14.70%decreased to 13.6% for the secondfirst quarter of fiscal 20182024 compared to 15.09%14.6% for the secondfirst quarter of fiscal 2017.2023. The declineLIFO charge was $7 million and $21 million in the first quarter of fiscal 2024 and 2023, respectively. Excluding the non-cash LIFO charge, gross profit rate was 13.7% of Net sales and 14.8% of Net sales for the first quarter of fiscal 2024 and 2023, respectively. The decrease in gross profit rate, excluding the LIFO charge, was primarily driven by lower levels of procurement gains resulting from decelerating inflation.
Operating Expenses
Operating expenses increased $23 million, or 2.3%, to $1,023 million, or 13.5% of Net sales, for the first quarter of fiscal 2024 compared to $1,000 million, or 13.3% of Net sales, for the first quarter of fiscal 2023. The increase in Operating expenses as a percentage of netNet sales was primarily driven by investments in our transformation initiatives, partially offset by lower transportation and distribution center labor costs due to increased operational efficiencies across our supply chain and a decrease in volume.
Loss (Gain) on Sale of Assets and Other Asset Charges
Loss on sale of assets and other asset charges was $19 million in the secondfirst quarter of fiscal 2018 was primarily due2024, compared to a shift in customer mix where 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 $331.3gain on sale of assets of $5 million for the secondfirst quarter of fiscal 2018, from $298.7 million for the second2023. The first quarter of fiscal 2017. As2024 primarily includes a percentage$21 million asset impairment charge related to one of net sales, total operating expensesour corporate-owned office locations. There were 13.11% forno asset impairment charges in the secondfirst 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 increased costs incurred to fulfill the increased demand for our products and restructuring and impairment charges of $11.2 million primarily related to our Earth Origins retail business. Total operating expenses also included share-based compensation expense of $6.6 million and $7.4 million for the second quarter of fiscal 2018 and 2017, respectively. This decrease is primarily due to a decrease in performance-based compensation expense related to our long-term incentive plan for members of our executive leadership team.2023.
Operating (Loss) Income
Reflecting the factors described above, operating income decreased approximately 13.1%, or $6.1Operating loss increased $115 million to $40.2$16 million for the secondfirst quarter of fiscal 2018, from $46.32024, compared to operating income of $99 million for the secondfirst quarter of fiscal 2017. As2023. The increase in operating loss was primarily driven by a percentagedecrease in Gross profit, a loss on sale of net sales, operating income was 1.59% forassets and other asset charges in the secondfirst quarter of fiscal 20182024 compared to 2.02% fora gain in the secondfirst quarter of fiscal 2017.2023, and an increase in Operating expenses, each as described above.
Interest Expense, Net
| | | | | | | | | | | | | | | | | | | |
| | | | | 13-Week Period Ended |
(in millions) | | | | | | | October 28, 2023 | | October 29, 2022 |
Interest expense on long-term debt, net of capitalized interest | | | | | | | $ | 33 | | | $ | 32 | |
Interest expense on finance lease obligations | | | | | | | 1 | | | 1 | |
Amortization of financing costs and discounts | | | | | | | 2 | | | 2 | |
| | | | | | | | | |
Interest income | | | | | | | (1) | | | — | |
Interest expense, net | | | | | | | $ | 35 | | | $ | 35 | |
Other Expense (Income)
OtherInterest expense, net, decreased approximately $0.5 million to $3.7 million forin the secondfirst quarter of fiscal 2018 compared to $4.2 million for2024 was unchanged from the secondfirst 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 in2023 as higher average interest expense was due to a reduction inrates were offset by lower outstanding debt in the second quarter of fiscal 2018 compared to the second quarter of fiscal 2017. Interest income was $0.1 million in each of the second quarters of fiscal 2018balances and 2017. Other income was $0.4 million for the second quarter of fiscal 2018, compared to $0.1 million of other income for the second quarter of fiscal 2017.higher interest income.
(Benefit) Provision for Income Taxes
OurThe effective income tax rate for the first quarter of fiscal 2024 was a benefit rate of 38.4% for the second quarter of fiscal 2018,18.8% on pre-tax loss compared to an expense rate of 39.4%6.9% on pre-tax income for the secondfirst quarter of fiscal 2017.2023. The decreasechange from the first quarter of fiscal 2023 is primarily driven by the reduction of discrete tax benefits related to employee stock award vestings in the effective income tax rate was driven byfirst quarter of fiscal 2024. In addition, the first quarter of fiscal 2023 included a $6.5 million tax benefit which was recorded as resultfrom the release of reserves for unrecognized tax positions that did not recur in the new lower federal tax rate, as well as a net tax benefitfirst quarter 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.fiscal 2024.
Net (Loss) Income Attributable to United Natural Foods, Inc.
Reflecting the factors described in more detail above, net income increased $25.0 millionNet loss attributable to $50.5United Natural Foods, Inc. was $39 million, or $0.99$0.67 per diluted common share, for the secondfirst quarter of fiscal 2018,2024, compared to $25.5Net income attributable to United Natural Foods, Inc. of $66 million, or $0.50$1.07 per diluted common share, for the secondfirst quarter of fiscal 2017.2023.
26-Week Period Ended January 27, 2018 Compared To 26-Week Period Ended January 28, 2017
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 above table within the Executive Overview section. The following tables set forth Net sales and Adjusted EBITDA by segment for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 13-Week Period Ended | | |
(in millions) | | | | | | | | October 28, 2023 | | October 29, 2022 | | Change |
Net sales: | | | | | | | | | | | | |
Wholesale | | | | | | | | $ | 7,281 | | | $ | 7,259 | | | $ | 22 | |
Retail | | | | | | | | 606 | | | 613 | | | (7) | |
Other | | | | | | | | 60 | | | 60 | | | — | |
Eliminations | | | | | | | | (395) | | | (400) | | | 5 | |
Total Net sales | | | | | | | | $ | 7,552 | | | $ | 7,532 | | | $ | 20 | |
Adjusted EBITDA: | | | | | | | | | | | | |
Wholesale | | | | | | | | $ | 117 | | | $ | 171 | | | $ | (54) | |
Retail | | | | | | | | (1) | | | 20 | | | (21) | |
Other | | | | | | | | 3 | | | 19 | | | (16) | |
Eliminations | | | | | | | | (2) | | | (3) | | | 1 | |
Total Adjusted EBITDA | | | | | | | | $ | 117 | | | $ | 207 | | | $ | (90) | |
Net Sales
Our netWholesale’s 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):
|
| | | | | | | | | | | | | | |
| | 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 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 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%,2024 as compared to the priorfirst quarter of fiscal year's comparable period,2023 primarily due to inflation and accounted for approximately 36%growth in the Supernatural channel, partially offset by a decrease in units sold and declines in the Independent retailers and Chains channels, as discussed in Results of our total netOperations - Net Sales section above.
Retail’s Net sales decreased in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 primarily due to a 3.2% decrease in identical store sales from lower volume.
The decrease in eliminations Net sales in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 was primarily due to a decrease in Wholesale to Retail sales, which are eliminated upon consolidation.
Adjusted EBITDA
Wholesale’s Adjusted EBITDA decreased 31.6% for the 26-week period ended January 27, 2018first quarter of fiscal 2024 as compared to 33%the first quarter of fiscal 2023. The decrease was driven by a decline in gross profit excluding the LIFO charge, partially offset by a decrease in operating expenses. Wholesale’s Gross profit excluding the LIFO charge for the 26-week period ended January 28, 2017.first quarter of fiscal 2024 decreased $62 million and gross profit rate decreased approximately 89 basis points driven by lower levels of procurement gains resulting from decelerating inflation. Wholesale’s Operating expense decreased $8 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 14—Business Segments. Wholesale’s operating expense rate decreased 14 basis points primarily driven by lower transportation and distribution center labor costs due to a decrease in volume and increased operational efficiencies across our supply chain. Wholesale’s depreciation and amortization expense increased $3 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.
Retail’s Adjusted EBITDA decreased 105.0% for the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. The increasedecrease was driven by a decline in net salesgross profit, and higher operating expenses primarily due to Whole Foods Market isincreased costs associated with new stores. Retail’s Adjusted EBITDA excludes depreciation and amortization, share-based compensation, LIFO charge and other adjustments as outlined in Note 14—Business Segments. Retail’s depreciation and amortization expense was flat to the first quarter of fiscal 2023.
Other Adjusted EBITDA decreased $16 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 primarily due to an increase in same store sales that Whole Foods Market experienced following its acquisitionoperating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Highlights
•Total liquidity as of October 28, 2023 was $1,285 million and consisted of the following:
◦Unused credit under our $2,600 million asset-based revolving credit facility (the “ABL Credit Facility”) was $1,248 million as of October 28, 2023, which decreased $232 million from $1,480 million as of July 29, 2023, primarily due to increased cash utilized to fund seasonal working capital increases.
◦Cash and cash equivalents was $37 million as of October 28, 2023, which was unchanged from July 29, 2023.
•Our total debt increased $338 million to $2,301 million as of October 28, 2023 from $1,963 million as of July 29, 2023, primarily related to additional borrowings under the ABL Credit Facility to fund seasonal working capital increases.
•Working capital increased $322 million to $1,380 million as of October 28, 2023 from $1,058 million as of July 29, 2023, primarily due to seasonal increases in inventory and accounts receivable levels, partially offset by Amazon.com, Inc.an increase in August 2017. Net sales within our supernatural chain channel do not include net salesaccounts payable related to Amazon.com, Inc.inventories.
Sources and Uses of Cash
We expect to continue to replenish operating assets and pay down debt obligations with internally generated funds. A significant reduction in either the current periodoperating earnings or the prior period,incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as these net salesplanned. Our credit facilities are reported in our other channel.
Net sales to our independent retailer channel increasedsecured 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%a substantial portion of our total net sales forassets. We expect to be able to fund debt maturities and finance lease liabilities through fiscal 2024 with internally generated funds and borrowings under the first 26 weeksABL Credit Facility.
Our primary sources of fiscal 2018liquidity are from internally generated funds and 2017, respectively. The increasefrom borrowing capacity under the ABL Credit Facility. We believe our short-term and long-term financing abilities are 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.
Primary uses of cash include debt service, capital expenditures, working capital maintenance, investments in net salescloud technologies and income tax payments. We typically finance working capital needs with cash provided from operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories.
We currently do not pay a dividend on our common stock. In addition, we are limited in this channel is primarilythe aggregate amount of dividends that we may pay under the terms of our Term Loan Facility, ABL Credit Facility and our $500 million of unsecured 6.750% senior notes due October 15, 2028 (the “Senior Notes”). Subject to growthcertain limitations contained in our wholesale division, which includes our broadline distribution business.
Net sales to conventional supermarkets for the 26-week period ended January 27, 2018 increased by approximately $76 million, or 6%, from the 26-week period ended January 28, 2017,debt agreements 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 to 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 in our e-commerce business.
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 of 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 was primarily due to a shift in customer mix where 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 8.3%, or $49.1 million, to $643.4 million for the 26-week period ended January 27, 2018, from $594.4 million for the 26-week period ended January 28, 2017. As a percentage of net sales, total operating expenses decreased to approximately 12.91% for the 26-week period ended January 27, 2018, from approximately 13.02% for the 26-week period ended January 28, 2017. During the second quarter of fiscal 2018, the Company recorded restructuring and impairment charges of $11.2 million primarily related to charges recorded for our Earth Origins retail business. The year-over-year decrease in operating expenses as a percentage of net sales was primarily driven by leveraging of fixed costs on 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 million, to $95.3 million for the 26-week period ended January 27, 2018, from $99.6 million for the 26-week period ended January 28, 2017. As a percentage 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 was primarily due to a reduction in outstanding debt in year-over-year. Interest income was $0.2 million for each of the first 26 weeks of fiscal 2018 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. This increase to other income was driven by positive returns on the Company's company owned life insurance and equity method investment.
Provision for Income Taxes
Our effective income tax rate was 8.9% and 39.6% for the 26-week periods ended January 27, 2018 and January 28, 2017, respectively. The decrease in the effective income tax rate was driven by a $6.5 million tax benefit which was recorded 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 equityhave incurred, including through the incurrence or repayment of loans under existing or new credit facilities or the issuance or repayment of debt securities. Proceeds from the sale of any properties mortgaged and debt securitiesencumbered under our Term Loan Facility are required 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 overbe used to make additional Term Loan Facility payments or to be reinvested in 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. business.
Long-Term Debt
During the first quarter ended October 28, 2017,of fiscal 2024, we announced our intentborrowed a net $340 million under the ABL Credit Facility. Refer to repurchase up to $200.0 millionNote 8—Long-Term Debt in Part I, Item 1 of shares 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. subsidiariesadditional information.
Our Term Loan Agreement and up to $50.0 million is available to UNFI Canada. After giving effect to the Third A&R CreditSenior Notes do not include any financial maintenance covenants. Our ABL 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 in 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 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 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 Credit 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 Credit Agreement) is ever less than the greater of (i) $60.0$210 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 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 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 TermABL Loan Agreement, we at our option may requestincluding through the establishmentfiling date 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. We will be required to make quarterly principal paymentsthis Quarterly Report on 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 our amended and restated revolving credit facility.
On April 29, 2016, the Company entered into 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.Form 10-Q. The Term Loan Agreement, will terminateSenior Notes and ABL Loan Agreement contain certain operational and informational covenants customary for debt securities of these types that limit our and our restricted subsidiaries’ ability to, among other things, incur debt, declare or pay dividends or make other distributions to our stockholders, transfer or sell assets, create liens on the earlier of (a) August 14, 2022our assets, engage in transactions with affiliates, and (b) the date that is ninety days prior to the termination datemerge, consolidate or sell all or substantially all of our amended and restated revolving credit facility.
On September 1, 2016, the Company entered intoour subsidiaries’ assets on 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 all such covenants for all periods presented. If we fail to comply with any of these covenants, we may be in default under the financial covenantsapplicable debt agreement, and all amounts due thereunder may become immediately due and payable.
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 our 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 28, 2023, we had borrowingsan aggregate of $113.7$750 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 startingof floating rate notional debt subject to active interest rate swap agreement with an effective date of August 3, 2015,contracts, which expires in August 2022 concurrent witheffectively fix the scheduled maturitySOFR component of our Term Loan Agreement. Thisfloating 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 twothrough pay fixed and receive floating interest rate swap agreementsagreements. These fixed rates range from 2.360% to effectively fix the underlying variable rate debt on the Company’s amended2.875%, with maturities between October 2023 and restated revolving credit facility.October 2025. The first agreement has an effective datefair values of June 9, 2016 and expires in June of 2019. Thisthese interest rate swap agreement hasderivatives represent a notional principal amounttotal net asset of $50.0$19 million as of October 28, 2023, and providesare subject to volatility based on changes in market interest rates.
From time-to-time, we enter into fixed price fuel supply agreements and foreign currency hedges. As of October 28, 2023, we had fixed price fuel contracts and foreign currency forward agreements outstanding. Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant.
Payments for 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 the interest rate on the $50.0 million notional amount. The second agreement has an effective date of June 9, 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 1.065% 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.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 forincreased $7 million in the 26-week period ended January 27, 2018 were $15.5first quarter of fiscal 2024 to $74 million compared to $22.7$67 million for the 26-week period ended January 28, 2017, a decreasefirst quarter of $7.1 million. We believefiscal 2023, primarily due to automation investments in our supply chain. Our capital spending for the first quarter of fiscal 2024 and 2023 principally included information technology and supply chain expenditures, including maintenance expenditures and investments in growth initiatives. Fiscal 2024 capital spending is expected to be approximately $400 million and include projects that automate, optimize and expand our capital requirements for fiscal 2018 will be between 0.6% and 0.7% of net sales.distribution network, as well as our technology platform investments. We expect to finance thesefiscal 2024 capital expenditures 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 and cash from operations.
Cash Flow Information
The following summarizes our Condensed Consolidated Statements of the potential acquisition.Cash Flows:
| | | | | | | | | | | | | | | | | |
| 13-Week Period Ended | | |
(in millions) | October 28, 2023 | | October 29, 2022 | | Change |
Net cash used in operating activities | $ | (254) | | | $ | (262) | | | $ | 8 | |
Net cash used in investing activities | (72) | | | (61) | | | (11) | |
Net cash provided by financing activities | 326 | | | 319 | | | 7 | |
Effect of exchange rate on cash | — | | | (1) | | | 1 | |
| | | | | |
Net decrease in cash and cash equivalents | — | | | (5) | | | 5 | |
Cash and cash equivalents, at beginning of period | 37 | | | 44 | | | (7) | |
Cash and cash equivalents, at end of period | $ | 37 | | | $ | 39 | | | $ | (2) | |
The decrease in Net cash used in operationsoperating activities in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was $35.1 million forprimarily due to lower levels of cash utilized in net working capital, partially offset by lower cash generated from net income in the 26-week period ended January 27, 2018, a changefirst quarter of $132.0 million from the $96.9 million provided by operations for the 26-week period ended January 28, 2017. fiscal 2024.
The primary reasons for theincrease in net cash used in operations forinvesting activities in the 26-week period ended January 27, 2018 were an increase in accounts receivablefirst quarter of $109.1 millionfiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to an increase in net sales andpayments for capital expenditures in the timingfirst quarter 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 and depreciation and amortization of $44.2 million.fiscal 2024.
The primary reasons for theincrease in net cash provided by operations forfinancing activities in the 26-week period ended January 28, 2017 were net incomefirst quarter 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, 2018fiscal 2024 compared to 48 days asthe first quarter 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.
Net cash used in investing activities decreased $16.9 million to $17.8 million for the 26-week period ended January 27, 2018, compared to $34.6 million for the 26-week period ended January 28, 2017. This changefiscal 2023 was primarily due to a decrease in cash paidutilized for acquisitions in the 26-week period ended January 27, 2018 compared to the 26-week period ended January 28, 2017employee restricted stock tax withholdings and repurchasing common stock, partially offset by a $7.1 millionnet decrease in capital spending between periods.
Net cash provided by financing activities was $62.7 million forproceeds from borrowings under the 26-week period ended January 27, 2018. The net cash provided by financing activities was primarily due to borrowings on our amended and restated revolving credit facilityline.
Other Obligations and increasesCommitments
Our principal contractual obligations and commitments consist of obligations under our long-term debt, interest on long-term debt, operating and finance leases, purchase obligations, self-insurance liabilities and multiemployer plan withdrawal liabilities.
Except as otherwise disclosed in checks outstandingNote 15—Commitments, Contingencies and Off-Balance Sheet Arrangements and Note 8—Long-Term Debt, there have been no material changes in our contractual obligations since the end of fiscal 2023. Refer to Item 7 of the Annual Report for additional information regarding our contractual obligations.
Pension and Other Postretirement Benefit Obligations
In fiscal 2024, no minimum pension contributions are required to be made under the SUPERVALU INC. Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). An insignificant amount of contributions are expected to be made to defined benefit pension plans and postretirement benefit plans in fiscal 2024. We fund our defined benefit pension plan based on the minimum contribution required under ERISA, the Pension Protection Act of 2006 and other applicable laws and additional contributions made at our discretion. We may accelerate contributions or undertake contributions in excess of depositsthe minimum requirements from time to time subject to the availability of $31.7 million, offsetcash 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 debt, reducing or eliminating required Pension Benefit Guaranty Corporation variable rate premiums or in order to achieve exemption from participant notices of underfunding.
Off-Balance Sheet Multiemployer Pension Arrangements
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 gross repaymentsemployers and unions that are parties to the relevant collective bargaining agreements. Based on our amendedthe 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 restated revolving credit facility of $247.6 million, share repurchases of $22.2 million and repayments of long term debt of $6.1 million. Net cash used in financing activities was $50.2 million for the 26-week period ended January 28, 2017, primarilyunderfunding is not a direct obligation or liability to us.
Our contributions can fluctuate from year to year due to repaymentsstore 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 increase or decrease in contributions will depend on a variety of factors, including the results of our amendedcollective bargaining efforts, investment returns on the assets held in the plans, actions taken by the trustees who manage the plans and restated revolving credit facilityrequirements under the Pension Protection Act of 2006, the Multiemployer Pension Reform Act and long-term debtSection 412(e) of $169.6the Internal Revenue Code. Furthermore, if we were to significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, we could trigger a partial or complete withdrawal that could require us to record a withdrawal liability obligation and make withdrawal liability payments to the fund. Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. We made contributions to these plans, and recognized expense of $48 million in fiscal 2023. In fiscal 2024, we expect to contribute approximately $50 million to multiemployer plans, subject to the outcome of collective bargaining and $5.7 million, respectively,capital market conditions. We expect required cash payments to fund multiemployer pension plans from which we have withdrawn to be insignificant in any one fiscal year, which would exclude any payments that may be agreed to on a lump sum basis to satisfy existing withdrawal liabilities. Any future withdrawal liability would be recorded when it is probable that a liability exists and decreasescan be reasonably estimated, in bank overdraftsaccordance with GAAP. Any triggered withdrawal obligation could result in a material charge and payment obligations that would be required to be made over an extended period of $9.1 million, offset by gross borrowings undertime.
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 healthcare provisions cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our amended and restated revolving credit facilityOperating expenses could increase in the future.
Refer to Note 13—Benefit Plans in Part II, Item 8 of $136.8 million.the Annual Report for additional information regarding the plans in which we participate.
On October 6, 2017, the Company announced that its
Share Repurchases
In September 2022, our Board of Directors authorized a share repurchase program for up to $200.0$200 million of the Company’s outstandingour common stock. Thestock over a term of four years (the “2022 Repurchase Program”). We did not repurchase program is scheduled to expire upon the Company’s repurchase ofany shares of the Company’sour common stock having an aggregate purchase pricein the first quarter of $200.0 million. Duringfiscal 2024. As of October 28, 2023, we had $138 million remaining authorized under the 26-week period ended January 27, 2018,2022 Repurchase Program.
We will manage the Company has repurchased 564,660 sharestiming of the Company'sany repurchases of our common stock at an aggregate costin response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of $22.2 million.
From time-to-time, we enter into fixed price fuel supply agreements. As of January 27, 2018our ABL Credit Facility, Term Loan Facility and January 28, 2017, we were not a party to any such agreements.Senior Notes. We were partymay implement the 2022 Repurchase Program pursuant to a contract during fiscal 2017, which required us to purchase a totalplan or plans meeting the conditions of approximately 6.1 million gallons of diesel fuel at prices ranging from $1.76 to $3.18 per gallon through December 31, 2016. All of these fixed price fuel agreements qualified and were accounted for usingRule 10b5-1 under the “normal purchase” exception under ASC 815, Derivatives and Hedging, as physical deliveries occurred rather than net settlements, and therefore the fuel purchases under these contracts have been expensed as incurred and included within operating expenses.Exchange Act.
Contractual ObligationsCritical Accounting Estimates
There have beenwere no material changes to our contractual obligations and commercial commitments from those disclosed in our Annualcritical accounting estimates during the period covered by this Quarterly Report on Form 10-K for10-Q. Refer to the year ended July 29, 2017.description of critical accounting estimates included in Item 7 of our Annual Report.
Seasonality
Generally, we do not experience any material seasonality. However, ourOverall product sales are fairly balanced throughout the year, although demand for certain products of a seasonal nature may be influenced by holidays, changes in seasons or other annual events. Our working capital needs are generally greater during the months of and operating results may vary significantly from quarterleading up to quarter due to factorshigh sales periods, such as the buildup in inventory leading to the calendar year-end holidays. Our inventory, accounts payable and accounts receivable levels may be impacted by macroeconomic impacts and changes in ourfood-at-home purchasing rates. These effects can result in normal operating expenses, management's abilityfluctuations in working capital balances, which in turn can result in changes to execute ourcash flow from operations that are not necessarily indicative of long-term operating and growth strategies, personnel changes, demand for natural products, supply shortages and general economic conditions.trends.
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 year ended July 29, 2017.Report.
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 20182024 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 including wage and hour, pension plans, unfair labor practices, labor union disputes, supplier, customer and service provider contract terms, product liability, real estate and antitrust. Other than as set forth 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.
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.Report.
Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds, and Issuer Purchases of Equity Securities
On October 6, 2017 the Company announced that itsSeptember 21, 2022, our Board of Directors had authorized a share repurchase programthe 2022 Repurchase Program for up to $200.0$200 million of our common stock over a term of four years. Under the Company’s outstanding common stock. The repurchase program is scheduled to expire upon the Company’s repurchase of2022 Repurchase Program, we have repurchased approximately 1,888,000 shares of the Company’sour common stock having an aggregate purchase pricefor a total cost of $200.0$62 million. Repurchases willWe did not repurchase any shares of our common stock in the first quarter of fiscal 2024. As of October 28, 2023, we had $138 million remaining authorized under the 2022 Repurchase Program.
Any repurchases are intended to be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise. The CompanyWith respect to open market purchases, we may also implement all or part of the repurchase program pursuant touse a plan or plans meeting the conditions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
The following table presents purchasesamended, which allows us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed blackout periods. We manage the timing of any repurchases in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our common stockABL Credit Facility, Term Loan Facility and related information for each of the monthsSenior Notes.
Dividends. We are limited in the fiscal quarter ended January 27, 2018:aggregate amount of dividends that we may pay under the terms of our Term Loan Facility, ABL Credit Facility and Senior Notes.
|
| | | | | | | | | | | | | | |
(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 |
|
Item 3.Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Index
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| | | | |
Exhibit No. | | Description |
10.1** | 2.1 | |
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). |
3.1 | |
3.2 | |
10.1** | |
10.2** | |
10.3** | |
10.4** | |
10.5** | |
10.6** | |
10.7** | |
10.8 | Cooperation Agreement, dated as of September 25, 2023, by and among JCP Investment Partnership, LP, a Texas limited partnership, JCP Investment Partners, LP, a Texas limited partnership, JCP Investment Holdings, LLC, a Texas limited liability company, JCP Investment Management, LLC, a Texas limited liability company, and James C. Pappas, and United Natural Foods, Inc., a Delaware corporation (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on December 5, 2017 (File No. 1-15723))September 26, 2023).
|
31.1* | | |
31.2* | | |
32.1* | | |
32.2* | | |
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 28, 2023, 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 (Loss) Income, (iv) Condensed Consolidated StatementStatements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements. |
104 | The cover page from our Quarterly Report on Form 10-Q for the first quarter of fiscal 2024, filed with the SEC on December 6, 2023, formatted in Inline XBRL (included as Exhibit 101). |
*Filed herewith.
** Denotes a management contract or compensatory plan or arrangement.
* * *
37
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.
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| | | | |
| 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 6, 2023