UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~January 30,~~May 1, 2021

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

For the transition period from to

Commission File Number: 001-15723

UNITED NATURAL FOODS, INC.

(Exact name of registrant as specified in its charter)


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

313 Iron Horse Way, Providence, RI 02908
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (401) 528-8634

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $0.01	UNFI	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~March 5,~~June 4, 2021 there were ~~56,296,036~~56,349,864 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

Table of Contents

TABLE OF CONTENTS


Part I.	Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (unaudited)	3

	Condensed Consolidated Statements of Operations (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6

	Condensed Consolidated Statements of Cash Flows (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5149

Item 4.	Controls and Procedures	5150

Part II.	Other Information

Item 1.	Legal Proceedings	5150

Item 1A.	Risk Factors	5150

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5250





Item 5.	Other Information	5250

Item 6.	Exhibits	5452

	Signatures	5553

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In thousands, except for per share data)


		January 30, 2021		August 1, 2020			May 1, 2021		August 1, 2020
ASSETS	ASSETS					ASSETS

Cash and cash equivalents	Cash and cash equivalents	$	40,496	$	46,993	Cash and cash equivalents	$	39,495	$	46,993

Accounts receivable, net	Accounts receivable, net	1,136,135		1,120,199		Accounts receivable, net	1,106,578		1,120,199
Inventories, net	Inventories, net	2,228,772		2,280,767		Inventories, net	2,293,877		2,280,767
Prepaid expenses and other current assets	Prepaid expenses and other current assets	238,572		251,891		Prepaid expenses and other current assets	140,948		251,891
Current assets of discontinued operations	Current assets of discontinued operations	4,716		5,067		Current assets of discontinued operations	4,899		5,067
Total current assets	Total current assets	3,648,691		3,704,917		Total current assets	3,585,797		3,704,917
Property and equipment, net	Property and equipment, net	1,671,755		1,701,216		Property and equipment, net	1,715,034		1,701,216
Operating lease assets	Operating lease assets	1,016,836		982,808		Operating lease assets	1,088,058		982,808
Goodwill	Goodwill	20,084		19,607		Goodwill	20,495		19,607
Intangible assets, net	Intangible assets, net	928,053		969,600		Intangible assets, net	909,590		969,600
Deferred income taxes	Deferred income taxes	107,779		107,624		Deferred income taxes	105,332		107,624
Other long-term assets	Other long-term assets	95,551		97,285		Other long-term assets	95,088		97,285
Long-term assets of discontinued operations	Long-term assets of discontinued operations	1,391		3,915		Long-term assets of discontinued operations	1,430		3,915
Total assets	Total assets	$	7,490,140	$	7,586,972	Total assets	$	7,520,824	$	7,586,972
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable	Accounts payable	$	1,618,288	$	1,633,448	Accounts payable	$	1,599,995	$	1,633,448
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	273,520		281,956		Accrued expenses and other current liabilities	259,702		281,956
Accrued compensation and benefits	Accrued compensation and benefits	220,318		228,832		Accrued compensation and benefits	235,677		228,832
Current portion of operating lease liabilities	Current portion of operating lease liabilities	148,359		131,022		Current portion of operating lease liabilities	138,844		131,022
Current portion of long-term debt and finance lease liabilities	Current portion of long-term debt and finance lease liabilities	24,840		83,378		Current portion of long-term debt and finance lease liabilities	23,700		83,378
Current liabilities of discontinued operations	Current liabilities of discontinued operations	8,313		11,438		Current liabilities of discontinued operations	6,996		11,438
Total current liabilities	Total current liabilities	2,293,638		2,370,074		Total current liabilities	2,264,914		2,370,074
Long-term debt	Long-term debt	2,374,250		2,426,994		Long-term debt	2,314,215		2,426,994
Long-term operating lease liabilities	Long-term operating lease liabilities	894,831		873,990		Long-term operating lease liabilities	976,691		873,990
Long-term finance lease liabilities	Long-term finance lease liabilities	134,554		143,303		Long-term finance lease liabilities	132,975		143,303
Pension and other postretirement benefit obligations	Pension and other postretirement benefit obligations	255,071		292,128		Pension and other postretirement benefit obligations	236,927		292,128

Other long-term liabilities	Other long-term liabilities	308,715		336,487		Other long-term liabilities	294,025		336,487
Long-term liabilities of discontinued operations	Long-term liabilities of discontinued operations	15		1,738		Long-term liabilities of discontinued operations	15		1,738
Total liabilities	Total liabilities	6,261,074		6,444,714		Total liabilities	6,219,762		6,444,714
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 5,000 shares; NaN issued or outstanding	Preferred stock, $0.01 par value, authorized 5,000 shares; NaN issued or outstanding	0		0		Preferred stock, $0.01 par value, authorized 5,000 shares; NaN issued or outstanding	0		0
Common stock, $0.01 par value, authorized 100,000 shares; 56,763 shares issued and 56,148 shares outstanding at January 30, 2021; 55,306 shares issued and 54,691 shares outstanding at August 1, 2020		568		553
Common stock, $0.01 par value, authorized 100,000 shares; 56,956 shares issued and 56,341 shares outstanding at May 1, 2021; 55,306 shares issued and 54,691 shares outstanding at August 1, 2020						Common stock, $0.01 par value, authorized 100,000 shares; 56,956 shares issued and 56,341 shares outstanding at May 1, 2021; 55,306 shares issued and 54,691 shares outstanding at August 1, 2020	570		553
Additional paid-in capital	Additional paid-in capital	581,096		568,736		Additional paid-in capital	588,324		568,736
Treasury stock at cost	Treasury stock at cost	(24,231)		(24,231)		Treasury stock at cost	(24,231)		(24,231)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(213,529)		(237,946)		Accumulated other comprehensive loss	(197,092)		(237,946)
Retained earnings	Retained earnings	886,313		837,633		Retained earnings	934,871		837,633
Total United Natural Foods, Inc. stockholders’ equity	Total United Natural Foods, Inc. stockholders’ equity	1,230,217		1,144,745		Total United Natural Foods, Inc. stockholders’ equity	1,302,442		1,144,745
Noncontrolling interests	Noncontrolling interests	(1,151)		(2,487)		Noncontrolling interests	(1,380)		(2,487)
Total stockholders’ equity	Total stockholders’ equity	1,229,066		1,142,258		Total stockholders’ equity	1,301,062		1,142,258
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	7,490,140	$	7,586,972	Total liabilities and stockholders’ equity	$	7,520,824	$	7,586,972

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(In thousands, except for per share data)


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
		January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020			May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net sales	Net sales	$	6,888,133	$	6,431,382	$	13,560,740	$	12,727,994	Net sales	$	6,619,842	$	7,031,718	$	20,180,582	$	19,759,712
Cost of sales	Cost of sales	5,897,774		5,514,057		11,603,882		10,903,458		Cost of sales	5,653,043		5,981,486		17,256,925		16,884,944
Gross profit	Gross profit	990,359		917,325		1,956,858		1,824,536		Gross profit	966,799		1,050,232		2,923,657		2,874,768
Operating expenses	Operating expenses	866,880		862,732		1,767,842		1,746,420		Operating expenses	866,463		911,007		2,634,305		2,657,427
Goodwill and asset impairment charges	Goodwill and asset impairment charges	0		0		0		425,405		Goodwill and asset impairment charges	0		0		0		425,405
Restructuring, acquisition and integration related expenses	Restructuring, acquisition and integration related expenses	17,783		36,522		34,211		51,194		Restructuring, acquisition and integration related expenses	9,867		14,557		44,078		65,751
Loss on sale of assets		399		524		169		434
(Gain) loss on sale of assets										(Gain) loss on sale of assets	(25)		351		144		785
Operating income (loss)	Operating income (loss)	105,297		17,547		154,636		(398,917)		Operating income (loss)	90,494		124,317		245,130		(274,600)
Other expense (income):	Other expense (income):									Other expense (income):
Net periodic benefit income, excluding service cost	Net periodic benefit income, excluding service cost	(17,127)		(3,277)		(34,160)		(14,661)		Net periodic benefit income, excluding service cost	(17,128)		(12,758)		(51,288)		(27,419)
Interest expense, net	Interest expense, net	50,944		48,836		120,077		98,545		Interest expense, net	43,500		47,269		163,577		145,814
Other, net	Other, net	(1,674)		(1,220)		(2,472)		(1,620)		Other, net	(989)		(1,842)		(3,461)		(3,462)
Total other expense, net	Total other expense, net	32,143		44,339		83,445		82,264		Total other expense, net	25,383		32,669		108,828		114,933
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	73,154		(26,792)		71,191		(481,181)		Income (loss) from continuing operations before income taxes	65,111		91,648		136,302		(389,533)
Provision (benefit) for income taxes	Provision (benefit) for income taxes	16,392		(12,808)		15,401		(79,763)		Provision (benefit) for income taxes	16,812		(2,799)		32,213		(82,562)
Net income (loss) from continuing operations	Net income (loss) from continuing operations	56,762		(13,984)		55,790		(401,418)		Net income (loss) from continuing operations	48,299		94,447		104,089		(306,971)
Income (loss) from discontinued operations, net of tax	Income (loss) from discontinued operations, net of tax	3,803		(16,076)		5,099		(12,050)		Income (loss) from discontinued operations, net of tax	1,653		(4,078)		6,752		(16,128)
Net income (loss) including noncontrolling interests	Net income (loss) including noncontrolling interests	60,565		(30,060)		60,889		(413,468)		Net income (loss) including noncontrolling interests	49,952		90,369		110,841		(323,099)
Less net income attributable to noncontrolling interests	Less net income attributable to noncontrolling interests	(1,605)		(650)		(2,972)		(1,169)		Less net income attributable to noncontrolling interests	(1,394)		(2,238)		(4,366)		(3,407)
Net income (loss) attributable to United Natural Foods, Inc.	Net income (loss) attributable to United Natural Foods, Inc.	$	58,960	$	(30,710)	$	57,917	$	(414,637)	Net income (loss) attributable to United Natural Foods, Inc.	$	48,558	$	88,131	$	106,475	$	(326,506)

Basic earnings (loss) per share:	Basic earnings (loss) per share:									Basic earnings (loss) per share:
Continuing operations	Continuing operations	$	0.98	$	(0.27)	$	0.95	$	(7.54)	Continuing operations	$	0.83	$	1.72	$	1.78	$	(5.80)
Discontinued operations	Discontinued operations	$	0.07	$	(0.30)	$	0.09	$	(0.23)	Discontinued operations	$	0.03	$	(0.08)	$	0.12	$	(0.30)
Basic earnings (loss) per share	Basic earnings (loss) per share	$	1.05	$	(0.57)	$	1.04	$	(7.77)	Basic earnings (loss) per share	$	0.86	$	1.64	$	1.90	$	(6.10)
Diluted earnings (loss) per share:	Diluted earnings (loss) per share:									Diluted earnings (loss) per share:
Continuing operations	Continuing operations	$	0.93	$	(0.27)	$	0.89	$	(7.54)	Continuing operations	$	0.77	$	1.67	$	1.67	$	(5.80)
Discontinued operations	Discontinued operations	$	0.06	$	(0.30)	$	0.09	$	(0.23)	Discontinued operations	$	0.03	$	(0.08)	$	0.11	$	(0.30)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	1.00	$	(0.57)	$	0.98	$	(7.77)	Diluted earnings (loss) per share	$	0.80	$	1.60	$	1.78	$	(6.10)
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	56,138		53,523		55,717		53,368		Basic	56,458		53,718		56,028		53,485
Diluted	Diluted	59,205		53,523		59,119		53,368		Diluted	60,539		55,217		59,676		53,485

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(In thousands)


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
		January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020			May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net income (loss) including noncontrolling interests	Net income (loss) including noncontrolling interests	$	60,565	$	(30,060)	$	60,889	$	(413,468)	Net income (loss) including noncontrolling interests	$	49,952	$	90,369	$	110,841	$	(323,099)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Recognition of pension and other postretirement benefit obligations, net of tax(1)	Recognition of pension and other postretirement benefit obligations, net of tax(1)	(300)		7,370		(506)		7,942		Recognition of pension and other postretirement benefit obligations, net of tax(1)	(301)		(574)		(807)		7,368
Recognition of interest rate swap cash flow hedges, net of tax(2)	Recognition of interest rate swap cash flow hedges, net of tax(2)	9,253		(3,752)		21,711		(7,433)		Recognition of interest rate swap cash flow hedges, net of tax(2)	14,127		(39,066)		35,838		(46,499)
Foreign currency translation adjustments	Foreign currency translation adjustments	2,852		(347)		3,257		24		Foreign currency translation adjustments	2,907		(3,585)		6,164		(3,561)
Recognition of other cash flow derivatives, net of tax(3)	Recognition of other cash flow derivatives, net of tax(3)	388		0		(45)		0		Recognition of other cash flow derivatives, net of tax(3)	(296)		0		(341)		0
Total other comprehensive income		12,193		3,271		24,417		533
Total other comprehensive income (loss)										Total other comprehensive income (loss)	16,437		(43,225)		40,854		(42,692)
Less comprehensive income attributable to noncontrolling interests	Less comprehensive income attributable to noncontrolling interests	(1,605)		(650)		(2,972)		(1,169)		Less comprehensive income attributable to noncontrolling interests	(1,394)		(2,238)		(4,366)		(3,407)
Total comprehensive income (loss) attributable to United Natural Foods, Inc.	Total comprehensive income (loss) attributable to United Natural Foods, Inc.	$	71,153	$	(27,439)	$	82,334	$	(414,104)	Total comprehensive income (loss) attributable to United Natural Foods, Inc.	$	64,995	$	44,906	$	147,329	$	(369,198)

(1)Amounts are net of tax (benefit) expense of $(0.1) million, ~~$2.4 million,~~ $(0.2) million, $(0.3) million and ~~$2.6~~$2.4 million, respectively.

(2)Amounts are net of tax expense (benefit) of ~~$3.2~~$4.8 million, ~~$(1.3)~~$(13.4) million, ~~$7.4~~$12.3 million and ~~$(2.5)~~$(15.9) million, respectively.

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

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the 13-week periods ended ~~January 30,~~May 1, 2021 and ~~February 1,~~May 2, 2020

(In thousands)


		Common Stock			Treasury Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Retained Earnings					Total United Natural Foods, Inc. Stockholders’ Equity			Noncontrolling Interests				Total Stockholders’ Equity			Common Stock				Treasury Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss				Retained Earnings				Total United Natural Foods, Inc. Stockholders’ Equity				Noncontrolling Interests				Total Stockholders’ Equity
		Shares	Amount		Shares	Amount												Shares						Amount						Shares		Amount
Balances at October 31, 2020		56,749	$	568	615	$	(24,231)			$	572,170					$	(225,722)				$	827,353			$	1,150,138			$	(2,279)	$	1,147,859
Balances at January 30, 2021																												Balances at January 30, 2021	56,763		$	568	615	$	(24,231)			$	581,096			$	(213,529)			$	886,313			$	1,230,217			$	(1,151)			$	1,229,066

Restricted stock vestings	Restricted stock vestings	5	—		—	—		(1,533)				—		—					(1,533)			—				(1,533)		Restricted stock vestings	163		2		—	—		(3,054)				—				—				(3,052)				—				(3,052)
Share-based compensation	Share-based compensation	—	—		—	—		10,687				—		—					10,687			—				10,687		Share-based compensation	—		—		—	—		9,918				—				—				9,918				—				9,918
Other comprehensive income	Other comprehensive income	—	—		—	—		—				12,193		—					12,193			—				12,193		Other comprehensive income	—		—		—	—		—				16,437				—				16,437				—				16,437
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—	—		—				—		—					—			(301)				(301)		Distributions to noncontrolling interests	—		—		—	—		—				—				—				—				(1,622)				(1,622)
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	9	—		—	—		136				—		—					136			—				136		Proceeds from issuance of common stock, net	30		—		—	—		514				—				—				514				—				514
Acquisition of noncontrolling interests	Acquisition of noncontrolling interests	—	—		—	—		(364)				—		—					(364)			(176)				(540)		Acquisition of noncontrolling interests	—		—		—	—		(150)				—				—				(150)				(1)				(151)
Net income	Net income	—	—		—	—		—				—		58,960					58,960			1,605				60,565		Net income	—		—		—	—		—				—				48,558				48,558				1,394				49,952
Balances at January 30, 2021		56,763	$	568	615	$	(24,231)	$	581,096			$	(213,529)	$	886,313				$	1,230,217		$	(1,151)			$	1,229,066
Balances at May 1, 2021																												Balances at May 1, 2021	56,956		$	570	615	$	(24,231)	$	588,324			$	(197,092)			$	934,871			$	1,302,442			$	(1,380)			$	1,301,062

Balances at November 2, 2019		54,121	$	541	615	$	(24,231)	$	532,958			$	(111,691)	$	722,350				$	1,119,927		$	(3,316)			$	1,116,611
Balances at February 1, 2020																												Balances at February 1, 2020	54,175		$	542	615	$	(24,231)	$	535,900			$	(108,420)			$	691,640			$	1,095,431			$	(2,966)			$	1,092,465

Restricted stock vestings	Restricted stock vestings	19	1		—	—		(54)				—		—					(53)			—				(53)		Restricted stock vestings	21		—		—	—		(143)				—				—				(143)				—				(143)
Share-based compensation	Share-based compensation	—	—		—	—		2,704				—		—					2,704			—				2,704		Share-based compensation	—		—		—	—		11,137				—				—				11,137				—				11,137
Other comprehensive income		—	—		—	—		—				3,271		—					3,271			—				3,271
Other comprehensive loss																												Other comprehensive loss	—		—		—	—		—				(43,225)				—				(43,225)				—				(43,225)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—	—		—				—		—					—			(300)				(300)		Distributions to noncontrolling interests	—		—		—	—		—				—				—				—				(1,127)				(1,127)
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	35	—		—	—		292				—		—					292			—				292		Proceeds from issuance of common stock, net	1,096		11		—	—		11,844				—				—				11,855				—				11,855
Net (loss) income		—	—		—	—		—				—		(30,710)					(30,710)			650				(30,060)
Balances at February 1, 2020		54,175	$	542	615	$	(24,231)	$	535,900			$	(108,420)	$	691,640				$	1,095,431		$	(2,966)			$	1,092,465
Net income																												Net income	—		—		—	—		—				—				88,131				88,131				2,238				90,369
Balances at May 2, 2020																												Balances at May 2, 2020	55,292		$	553	615	$	(24,231)	$	558,738			$	(151,645)			$	779,771			$	1,163,186			$	(1,855)			$	1,161,331

See accompanying Notes to Condensed Consolidated Financial Statements

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UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the ~~26-week~~39-week periods ended ~~January 30,~~May 1, 2021 and ~~February 1,~~May 2, 2020


		Common Stock			Treasury Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Retained Earnings					Total United Natural Foods, Inc. Stockholders’ Equity			Noncontrolling Interests				Total Stockholders’ Equity			Common Stock						Treasury Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings			Total United Natural Foods, Inc. Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity
		Shares	Amount		Shares	Amount												Shares						Amount						Shares		Amount
Balances at August 1, 2020	Balances at August 1, 2020	55,306	$	553	615	$	(24,231)			$	568,736					$	(237,946)				$	837,633			$	1,144,745			$	(2,487)	$	1,142,258	Balances at August 1, 2020	55,306		$	553		615				$	(24,231)		$	568,736		$	(237,946)		$	837,633		$	1,144,745	$	(2,487)	$	1,142,258
Cumulative effect of change in accounting principle	Cumulative effect of change in accounting principle	—	—		—	—		—				—		(9,237)					(9,237)			—				(9,237)		Cumulative effect of change in accounting principle	—		—				—		—				—		—			(9,237)			(9,237)			—			(9,237)
Restricted stock vestings	Restricted stock vestings	1,443	15		—	—		(10,412)				—		—					(10,397)			—				(10,397)		Restricted stock vestings	1,606		17				—		—			(13,466)		—			—			(13,449)			—			(13,449)
Share-based compensation	Share-based compensation	—	—		—	—		22,929				—		—					22,929			—				22,929		Share-based compensation	—		—				—		—			32,847		—			—			32,847			—			32,847
Other comprehensive income	Other comprehensive income	—	—		—	—		—				24,417		—					24,417			—				24,417		Other comprehensive income	—		—				—		—			—		40,854			—			40,854			—			40,854
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—	—		—				—		—					—			(1,460)				(1,460)		Distributions to noncontrolling interests	—		—				—		—			—		—			—			—			(3,082)			(3,082)
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	14	—		—	—		207				—		—					207			—				207		Proceeds from issuance of common stock, net	44		—				—		—			721		—			—			721			—			721
Acquisition of noncontrolling interests	Acquisition of noncontrolling interests	—	—		—	—		(364)				—		—					(364)			(176)				(540)		Acquisition of noncontrolling interests	—		—				—		—			(514)		—			—			(514)			(177)			(691)
Net income	Net income	—	—		—	—		—				—		57,917					57,917			2,972				60,889		Net income	—		—				—		—			—		—			106,475			106,475			4,366			110,841
Balances at January 30, 2021		56,763	$	568	615	$	(24,231)	$	581,096			$	(213,529)	$	886,313				$	1,230,217		$	(1,151)			$	1,229,066
Balances at May 1, 2021																												Balances at May 1, 2021	56,956		$	570			615		$	(24,231)		$	588,324	$	(197,092)		$	934,871		$	1,302,442		$	(1,380)		$	1,301,062

Balances at August 3, 2019	Balances at August 3, 2019	53,501	535		615	(24,231)		530,801				(108,953)		1,108,890					1,507,042			(2,737)				1,504,305		Balances at August 3, 2019	53,501		535				615		(24,231)			530,801		(108,953)			1,108,890			1,507,042			(2,737)			1,504,305
Cumulative effect of change in accounting principle	Cumulative effect of change in accounting principle	—	—		—	—		—				—		(2,613)					(2,613)			—				(2,613)		Cumulative effect of change in accounting principle	—		—				—		—			—		—			(2,613)			(2,613)			—			(2,613)
Restricted stock vestings	Restricted stock vestings	443	5		—	—		(877)				—		—					(872)			—				(872)		Restricted stock vestings	464		5				—		—			(1,020)		—			—			(1,015)			—			(1,015)
Share-based compensation	Share-based compensation	—	—		—	—		3,951				—		—					3,951			—				3,951		Share-based compensation	—		—				—		—			15,088		—			—			15,088			—			15,088

Other comprehensive income		—	—		—	—		—				533		—					533			—				533
Other comprehensive loss																												Other comprehensive loss	—		—				—		—			—		(42,692)			—			(42,692)			—			(42,692)

Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—	—		—				—		—					—			(1,398)				(1,398)		Distributions to noncontrolling interests	—		—				—		—			—		—			—			—			(2,525)			(2,525)
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	231	2		—	—		2,025				—		—					2,027			—				2,027		Proceeds from issuance of common stock, net	1,327		13				—		—			13,869		—			—			13,882			—			13,882
Net (loss) income	Net (loss) income	—	—		—	—		—				—		(414,637)					(414,637)			1,169				(413,468)		Net (loss) income	—		—				—		—			—		—			(326,506)			(326,506)			3,407			(323,099)
Balances at February 1, 2020		54,175	$	542	615	$	(24,231)	$	535,900			$	(108,420)	$	691,640				$	1,095,431		$	(2,966)			$	1,092,465
Balances at May 2, 2020																												Balances at May 2, 2020	55,292		$	553			615		$	(24,231)		$	558,738	$	(151,645)		$	779,771		$	1,163,186		$	(1,855)		$	1,161,331

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


		26-Week Period Ended					39-Week Period Ended
(In thousands)	(In thousands)	January 30, 2021		February 1, 2020		(In thousands)	May 1, 2021		May 2, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) including noncontrolling interests	Net income (loss) including noncontrolling interests	$	60,889	$	(413,468)	Net income (loss) including noncontrolling interests	$	110,841	$	(323,099)
Income (loss) from discontinued operations, net of tax	Income (loss) from discontinued operations, net of tax	5,099		(12,050)		Income (loss) from discontinued operations, net of tax	6,752		(16,128)
Net income (loss) from continuing operations	Net income (loss) from continuing operations	55,790		(401,418)		Net income (loss) from continuing operations	104,089		(306,971)
Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities:
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:						Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	143,723		144,360		Depreciation and amortization	210,088		214,002
Share-based compensation	Share-based compensation	22,929		3,951		Share-based compensation	32,847		15,088
Loss on sale of assets	Loss on sale of assets	169		434		Loss on sale of assets	144		785

Closed property and other restructuring charges	Closed property and other restructuring charges	3,496		23,586		Closed property and other restructuring charges	3,399		36,662
Goodwill and asset impairment charges	Goodwill and asset impairment charges	0		425,405		Goodwill and asset impairment charges	0		425,405
Net pension and other postretirement benefit income	Net pension and other postretirement benefit income	(34,136)		(14,633)		Net pension and other postretirement benefit income	(51,252)		(27,419)
Deferred income tax benefit	Deferred income tax benefit	(841)		(60,260)		Deferred income tax benefit	(2,076)		(17,381)
LIFO charge	LIFO charge	13,343		13,879		LIFO charge	18,741		20,463
(Recoveries) provision for losses on receivables, net	(Recoveries) provision for losses on receivables, net	(3,860)		45,503		(Recoveries) provision for losses on receivables, net	(2,672)		44,238
Loss on debt extinguishment	Loss on debt extinguishment	29,494		73		Loss on debt extinguishment	30,373		73
Non-cash interest expense and other adjustments	Non-cash interest expense and other adjustments	9,562		7,393		Non-cash interest expense and other adjustments	15,127		10,993
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(33,994)		(153,543)		Changes in operating assets and liabilities	(24,438)		33,290

Net cash provided by operating activities of continuing operations	Net cash provided by operating activities of continuing operations	205,675		34,730		Net cash provided by operating activities of continuing operations	334,370		449,228
Net cash provided by operating activities of discontinued operations	Net cash provided by operating activities of discontinued operations	1,324		4,352		Net cash provided by operating activities of discontinued operations	2,074		3,051
Net cash provided by operating activities	Net cash provided by operating activities	206,999		39,082		Net cash provided by operating activities	336,444		452,279
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(91,516)		(91,128)

Payments for capital expenditures						Payments for capital expenditures	(165,457)		(126,803)
Proceeds from dispositions of assets	Proceeds from dispositions of assets	39,908		12,330		Proceeds from dispositions of assets	57,329		29,650

Other	Other	(97)		(1,472)		Other	(4,111)		(2,380)
Net cash used in investing activities of continuing operations	Net cash used in investing activities of continuing operations	(51,705)		(80,270)		Net cash used in investing activities of continuing operations	(112,239)		(99,533)
Net cash provided by investing activities of discontinued operations	Net cash provided by investing activities of discontinued operations	1,467		22,585		Net cash provided by investing activities of discontinued operations	1,523		26,503
Net cash used in investing activities	Net cash used in investing activities	(50,238)		(57,685)		Net cash used in investing activities	(110,716)		(73,030)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings of long-term debt	Proceeds from borrowings of long-term debt	500,000		2,050		Proceeds from borrowings of long-term debt	500,000		2,050
Proceeds from borrowings under revolving credit line	Proceeds from borrowings under revolving credit line	2,666,239		2,269,989		Proceeds from borrowings under revolving credit line	3,451,529		3,244,573

Proceeds from issuance of other loans						Proceeds from issuance of other loans	0		6,266
Repayments of borrowings under revolving credit line	Repayments of borrowings under revolving credit line	(2,537,951)		(2,162,821)		Repayments of borrowings under revolving credit line	(3,368,951)		(3,508,573)
Repayments of long-term debt and finance leases	Repayments of long-term debt and finance leases	(768,983)		(93,326)		Repayments of long-term debt and finance leases	(787,232)		(111,923)

Proceeds from the issuance of common stock and exercise of stock options	Proceeds from the issuance of common stock and exercise of stock options	207		2,027		Proceeds from the issuance of common stock and exercise of stock options	721		5,662
Payment of employee restricted stock tax withholdings	Payment of employee restricted stock tax withholdings	(10,397)		(872)		Payment of employee restricted stock tax withholdings	(13,449)		(1,015)

Payments for debt issuance costs	Payments for debt issuance costs	(10,444)		0		Payments for debt issuance costs	(12,339)		0
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(1,460)		(1,398)		Distributions to noncontrolling interests	(3,082)		(2,525)
Repayments of other loans	Repayments of other loans	(163)		0		Repayments of other loans	(163)		0
Other	Other	(540)		0		Other	(691)		0

Net cash (used in) provided by financing activities		(163,492)		15,649
Net cash used in financing activities						Net cash used in financing activities	(233,657)		(365,485)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	EFFECT OF EXCHANGE RATE CHANGES ON CASH	265		19		EFFECT OF EXCHANGE RATE CHANGES ON CASH	443		(290)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(6,466)		(2,935)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS						NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(7,486)		13,474
Cash and cash equivalents, at beginning of period	Cash and cash equivalents, at beginning of period	47,117		45,263		Cash and cash equivalents, at beginning of period	47,117		45,263
Cash and cash equivalents, at end of period	Cash and cash equivalents, at end of period	40,651		42,328		Cash and cash equivalents, at end of period	39,631		58,737
Less: cash and cash equivalents of discontinued operations	Less: cash and cash equivalents of discontinued operations	(155)		(133)		Less: cash and cash equivalents of discontinued operations	(136)		(120)
Cash and cash equivalents	Cash and cash equivalents	$	40,496	$	42,195	Cash and cash equivalents	$	39,495	$	58,617
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid for interest	Cash paid for interest	$	74,734	$	94,010	Cash paid for interest	$	118,441	$	139,040
Cash payments (refunds) for federal and state income taxes, net		42,990		(24,376)
Cash (refunds) for federal and state income taxes, net						Cash (refunds) for federal and state income taxes, net	(21,847)		(24,236)
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	116,725		121,455		Leased assets obtained in exchange for new operating lease liabilities	226,570		154,888
Leased assets obtained in exchange for new finance lease liabilities	Leased assets obtained in exchange for new finance lease liabilities	468		0		Leased assets obtained in exchange for new finance lease liabilities	468		92,843
Capital expenditures included in accounts payable		$	31,309	$	20,193
Additions of property and equipment included in accounts payable						Additions of property and equipment included in accounts payable	$	49,182	$	20,547

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1—SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

United Natural Foods, Inc. and its subsidiaries (the “Company”, “we”, ”us”, “UNFI”, or “our”) is a leading distributor of natural, organic, specialty, produce and 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.

Fiscal Year

The Company’s fiscal year ends on the Saturday closest to July 31 and contain either 52 or 53 weeks. References to the ~~second~~third quarter of fiscal 2021 and 2020 relate to the 13-week fiscal quarters ended ~~January 30,~~May 1, 2021 and ~~February 1,~~May 2, 2020, respectively. References to fiscal 2021 and 2020 year-to-date relate to the ~~26-week~~39-week fiscal periods ended ~~January 30,~~May 1, 2021 and ~~February 1,~~May 2, 2020, respectively.

Basis of Presentation

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

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

Discontinued Operations

In the fourth quarter of fiscal 2020, the Company determined it no longer met the held for sale criterion for a probable sale to be completed within 12 months for the Cub Foods business and the majority of the remaining Shoppers locations excluding Shoppers locations that are held for sale within discontinued operations (collectively “Retail”). As a result, the Company revised its Condensed Consolidated Financial Statements to reclassify Retail from discontinued operations to continuing operations. This change in financial statement presentation resulted in the inclusion of Retail’s results of operations, financial position, cash flows and related disclosures within continuing operations. Prior periods presented in these Condensed Consolidated Financial Statements have been conformed to the current period presentation, resulting in Retail being presented in continuing operations for all periods. ~~Retail was acquired as part of the SUPERVALU INC. (“Supervalu”) acquisition in the first quarter of fiscal 2019 on October 22, 2018.~~

Use of Estimates

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

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Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with original maturities of three months or less. The Company’s banking arrangements allow it to fund outstanding checks when presented to the financial institution for payment. The Company funds all intraday bank balance overdrafts during the same business day. Checks outstanding in excess of bank balances create book overdrafts, which are recorded in Accounts payable in the Condensed Consolidated Balance Sheets and are reflected as an operating activity in the Condensed Consolidated Statements of Cash Flows. As of ~~January 30,~~May 1, 2021 and August 1, 2020, the Company had net book overdrafts of ~~$268.6~~$243.4 million and $267.8 million, respectively.

Reclassifications

Within the Condensed Consolidated Statements of Cash Flows certain immaterial amounts have been reclassified to conform with current year presentation. These reclassifications had no impact on reported net income, cash flows, or total assets and liabilities.

Inventories, Net

Inventories are valued at the lower of cost or market. Substantially all of the Company’s inventories consist of finished goods and a substantial portion of its inventories have a last-in, first-out (“LIFO”) reserve applied. Interim LIFO calculations are based on the Company’s estimates of expected year end inventory levels and costs, as the actual valuation of inventory under the LIFO method is computed at the end of each fiscal year based on the inventory levels and costs at that time. If the first-in, first-out method had been used, Inventories, net would have been higher by approximately ~~$56.6~~$62.0 million and $43.3 million at ~~January 30,~~May 1, 2021 and August 1, 2020, respectively.

NOTE 2—RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

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

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326 Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825. This ASU clarifies the accounting treatment for the measurement of credit losses under ASC 326 and provides further clarification on previously issued updates including ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities and ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Since the Company adopted ASU 2017-12 in the fourth quarter of fiscal 2018, the amendments in ASU 2019-04 related to clarifications on Accounting for Hedging Activities, which were adopted by the Company in the first quarter of fiscal 2020, with no impact to Accumulated other comprehensive loss or Retained earnings for fiscal 2020, as the Company did not have separately measured ineffectiveness related to its cash flow hedges. The remaining amendments within ASU 2019-04 were adopted in the first quarter of fiscal 2021 with the adoption of Topic 326. Adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

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

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 ~~eliminates requirements~~requires entities to disclose the weighted-average interest crediting rates used, reasons for significant gains and losses affecting benefit obligations, and an explanation of any other significant changes in the benefit obligation or plan assets. The amendment also removed certain ~~disclosures and requires additional disclosures under defined benefit pension plans and other postretirement plans.~~required disclosures. The Company adopted this guidance in the first quarter of fiscal 2021. The provisions of the new standard do not have any effect on ~~the Company’s interim financial statements~~other disclosures in these Condensed Consolidated Financial Statements but will require ~~additional disclosures~~disclosure updates in ~~its~~the Company’s annual audited consolidated financial statements.

Recently Issued Accounting Pronouncements

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

NOTE 3—REVENUE RECOGNITION

Disaggregation of Revenues

The Company records revenue to 5 customer channels within Net sales, which are described below:

•Chains, which consists of customer accounts that typically have more than 10 operating stores and exclude stores included within the Supernatural and Other channels defined below;

•Independent retailers, which include smaller size accounts and include single store and multiple store locations, but are not classified within Chains above or Other discussed below;

•Supernatural, which consists of chain accounts that are national in scope and carry primarily natural products, and currently consists solely of Whole Foods Market;

•Retail, which reflects our Retail segment, including the Cub Foods business and the remaining Shoppers locations, excluding Shoppers locations that are held for sale within discontinued operations; and

•Other, which includes international customers outside of Canada, foodservice, eCommerce, conventional military business and other sales.

The following tables detail the Company’s net sales for the periods presented by customer channel for each of its segments. The Company does not record its revenues within its Wholesale reportable segment for financial reporting purposes by product group, and it is therefore impracticable for it to report them accordingly.

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		Net Sales for the 13-Week Period Ended											Net Sales for the 13-Week Period Ended
(in millions)		January 30, 2021
(in millions)(1)												(in millions)(1)	May 1, 2021
Customer Channel	Customer Channel	Wholesale		Retail		Other		Eliminations(2)		Consolidated		Customer Channel	Wholesale		Retail		Other		Eliminations(3)		Consolidated
Chains	Chains	$	3,097	$	0	$	0	$	—	$	3,097	Chains	$	2,949	$	0	$	0	$	—	$	2,949
Independent retailers	Independent retailers	1,701		0		0		—		1,701		Independent retailers	1,599		0		0		—		1,599
Supernatural	Supernatural	1,298		0		0		—		1,298		Supernatural	1,287		0		0		—		1,287
Retail	Retail	0		621		0		—		621		Retail	0		578		0		—		578
Other	Other	513		0		55		—		568		Other	525		0		55		—		580
Eliminations	Eliminations	—		—		—		(397)		(397)		Eliminations	—		—		—		(373)		(373)
Total	Total	$	6,609	$	621	$	55	$	(397)	$	6,888	Total	$	6,360	$	578	$	55	$	(373)	$	6,620

		Net Sales for the 13-Week Period Ended											Net Sales for the 13-Week Period Ended
(in millions)		February 1, 2020(1)
(in millions)(1)												(in millions)(1)	May 2, 2020(2)
Customer Channel	Customer Channel	Wholesale		Retail		Other		Eliminations(2)		Consolidated		Customer Channel	Wholesale		Retail		Other		Eliminations(3)		Consolidated
Chains	Chains	$	2,909	$	0	$	0	$	—	$	2,909	Chains	$	3,125	$	0	$	0	$	—	$	3,125
Independent retailers	Independent retailers	1,561		0		0		—		1,561		Independent retailers	1,805		0		0		—		1,805
Supernatural	Supernatural	1,211		0		0		—		1,211		Supernatural	1,279		0		0		—		1,279
Retail	Retail	0		539		0		—		539		Retail	0		637		0		—		637
Other	Other	525		0		41		—		566		Other	541		0		58		—		599
Eliminations	Eliminations	—		—		—		(355)		(355)		Eliminations	—		—		—		(414)		(414)
Total	Total	$	6,206	$	539	$	41	$	(355)	$	6,431	Total	$	6,750	$	637	$	58	$	(414)	$	7,032

		Net Sales for the 26-Week Period Ended											Net Sales for the 39-Week Period Ended
(in millions)		January 30, 2021
(in millions)(1)												(in millions)(1)	May 1, 2021
Customer Channel	Customer Channel	Wholesale		Retail		Other		Eliminations(2)		Consolidated		Customer Channel	Wholesale		Retail		Other		Eliminations(3)		Consolidated
Chains	Chains	$	6,117	$	0	$	0	$	—	$	6,117	Chains	$	9,066	$	0	$	0	$	—	$	9,066
Independent retailers	Independent retailers	3,373		0		0		—		3,373		Independent retailers	4,972		0		0		—		4,972
Supernatural	Supernatural	2,512		0		0		—		2,512		Supernatural	3,799		0		0		—		3,799
Retail	Retail	0		1,216		0		—		1,216		Retail	0		1,794		0		—		1,794
Other	Other	1,038		0		111		—		1,149		Other	1,563		0		166		—		1,729
Eliminations	Eliminations	—		—		—		(806)		(806)		Eliminations	—		—		—		(1,179)		(1,179)
Total	Total	$	13,040	$	1,216	$	111	$	(806)	$	13,561	Total	$	19,400	$	1,794	$	166	$	(1,179)	$	20,181

		Net Sales for the 26-Week Period Ended											Net Sales for the 39-Week Period Ended
(in millions)		February 1, 2020(1)
(in millions)(1)												(in millions)(1)	May 2, 2020(2)
Customer Channel	Customer Channel	Wholesale		Retail		Other		Eliminations(2)		Consolidated		Customer Channel	Wholesale		Retail		Other		Eliminations(3)		Consolidated
Chains	Chains	$	5,784	$	0	$	0	$	—	$	5,784	Chains	$	8,909	$	0	$	0	$	—	$	8,909
Independent retailers	Independent retailers	3,118		0		0		—		3,118		Independent retailers	4,923		0		0		—		4,923
Supernatural	Supernatural	2,322		0		0		—		2,322		Supernatural	3,601		0		0		—		3,601
Retail	Retail	0		1,054		0		—		1,054		Retail	0		1,691		0		—		1,691
Other	Other	1,050		0		106		—		1,156		Other	1,591		0		164		—		1,755
Eliminations	Eliminations	—		—		—		(706)		(706)		Eliminations	—		—		—		(1,120)		(1,120)
Total	Total	$	12,274	$	1,054	$	106	$	(706)	$	12,728	Total	$	19,024	$	1,691	$	164	$	(1,120)	$	19,760

(1)As a result of displaying amounts in millions, totals may not sum due to rounding.

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~~(1)~~(2)In the first quarter of fiscal 2021, the presentation of net sales by customer channel was recast to present the Chains and Other channel exclusive of the intercompany eliminations and present total eliminations separately. There was no impact to the Condensed Consolidated Statements of Operations. The Company believes this modified basis better reflects its channel presentation, as it further aligns with segment presentation and how sales channel information would appear following the potential disposition of Retail, assuming all banners retain a supply agreement. In addition, during the fourth quarter of fiscal 2020, the presentation of net sales by customer channel was recast to be presented on a basis consistent with customer size. International customers other than Canada, and alternative format sales continue to be classified within Other. The main effect of the change was to re-categorize the former Supermarkets and Independents channels, previously classified by the majority of product carried by those customers between conventional and natural products, respectively, to classify those stores by the number of customer locations we supply. There was no impact to the Condensed Consolidated Statements of Operations as a result of the reclassification of customer types. The Company believes this modified basis better reflects the nature and economic risks of cash flows from customers.

~~(2)~~(3)Eliminations primarily includes the net sales elimination of Wholesale’s sales to the Retail segment and the elimination of sales from segments included within Other to Wholesale.

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

No net sales were recorded within continuing operations for retail stores within discontinued operations that the Company disposed of and expects to dispose of without a supply agreement. These net sales have been eliminated upon consolidation within the Wholesale segment of continuing operations and amounted to ~~$13.4~~$12.4 million and ~~$36.1~~$16.8 million in the ~~second~~third quarters of fiscal 2021 and 2020, respectively, and ~~$27.8~~$40.2 million and ~~$92.1~~$108.9 million in fiscal 2021 and 2020 year-to-date, respectively.

Accounts and Notes Receivable Balances

Accounts and notes receivable are as follows:


(in thousands)	(in thousands)	January 30, 2021		August 1, 2020		(in thousands)	May 1, 2021		August 1, 2020
Customer accounts receivable	Customer accounts receivable	$	1,176,126	$	1,156,694	Customer accounts receivable	$	1,143,399	$	1,156,694
Allowance for uncollectible receivables	Allowance for uncollectible receivables	(56,356)		(55,928)		Allowance for uncollectible receivables	(51,502)		(55,928)
Other receivables, net	Other receivables, net	16,365		19,433		Other receivables, net	14,681		19,433
Accounts receivable, net	Accounts receivable, net	$	1,136,135	$	1,120,199	Accounts receivable, net	$	1,106,578	$	1,120,199

Notes receivable, net, included within Prepaid expenses and other current assets	Notes receivable, net, included within Prepaid expenses and other current assets	$	13,023	$	49,268	Notes receivable, net, included within Prepaid expenses and other current assets	$	10,317	$	49,268
Long-term notes receivable, net, included within Other assets	Long-term notes receivable, net, included within Other assets	$	19,101	$	25,800	Long-term notes receivable, net, included within Other assets	$	17,219	$	25,800

NOTE 4—RESTRUCTURING, ACQUISITION AND INTEGRATION RELATED EXPENSES

Restructuring, acquisition and integration related expenses incurred were as follows:


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(in thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
2019 SUPERVALU INC. restructuring expenses	2019 SUPERVALU INC. restructuring expenses	$	0	$	664	$	0	$	2,501	2019 SUPERVALU INC. restructuring expenses	$	0	$	1,492	$	0	$	3,993

Restructuring and integration costs	Restructuring and integration costs	14,682		15,411		29,442		24,705		Restructuring and integration costs	12,047		552		41,489		25,257
Closed property charges and costs		3,101		20,447		4,769		23,988
Closed property (recoveries) charges and costs										Closed property (recoveries) charges and costs	(2,180)		12,513		2,589		36,501

Total	Total	$	17,783	$	36,522	$	34,211	$	51,194	Total	$	9,867	$	14,557	$	44,078	$	65,751

NOTE 5—GOODWILL AND INTANGIBLE ASSETS, NET

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

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Fiscal 2020 Goodwill Impairment Review

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

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

Goodwill and Intangible Assets Changes

Changes in the carrying value of Goodwill by reportable segment that have goodwill consisted of the following:


(in thousands)	(in thousands)	Wholesale			Other			Total		(in thousands)	Wholesale			Other			Total
Goodwill as of August 1, 2020	Goodwill as of August 1, 2020	$	9,747	(1)	$	9,860	(2)	$	19,607	Goodwill as of August 1, 2020	$	9,747	(1)	$	9,860	(2)	$	19,607

Change in foreign exchange rates	Change in foreign exchange rates	477			0			477		Change in foreign exchange rates	888			0			888
Goodwill as of January 30, 2021		$	10,224	(1)	$	9,860	(2)	$	20,084
Goodwill as of May 1, 2021										Goodwill as of May 1, 2021	$	10,635	(1)	$	9,860	(2)	$	20,495

(1)Amounts are net of accumulated goodwill impairment charges of $716.5 million as of August 1, 2020 and ~~January 30,~~May 1, 2021.

(2)Amounts are net of accumulated goodwill impairment charges of $9.6 million as of August 1, 2020 and ~~January 30,~~May 1, 2021.

Identifiable intangible assets, net consisted of the following:


		January 30, 2021						August 1, 2020							May 1, 2021						August 1, 2020
(in thousands)	(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net		(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortizing intangible assets:	Amortizing intangible assets:													Amortizing intangible assets:
Customer relationships	Customer relationships	$	1,007,695	$	203,748	$	803,947	$	1,007,118	$	172,832	$	834,286	Customer relationships	$	1,008,194	$	219,508	$	788,686	$	1,007,118	$	172,832	$	834,286
Pharmacy prescription files	Pharmacy prescription files	32,900		10,597		22,303		32,900		7,964		24,936		Pharmacy prescription files	32,900		11,772		21,128		32,900		7,964		24,936
Non-compete agreements	Non-compete agreements	1,200		1,145		55		12,900		11,500		1,400		Non-compete agreements	0		0		0		12,900		11,500		1,400
Operating lease intangibles	Operating lease intangibles	8,193		4,818		3,375		8,193		4,020		4,173		Operating lease intangibles	7,763		4,721		3,042		8,193		4,020		4,173
Trademarks and tradenames	Trademarks and tradenames	83,700		41,140		42,560		83,700		34,708		48,992		Trademarks and tradenames	83,700		42,779		40,921		83,700		34,708		48,992
Total amortizing intangible assets	Total amortizing intangible assets	1,133,688		261,448		872,240		1,144,811		231,024		913,787		Total amortizing intangible assets	1,132,557		278,780		853,777		1,144,811		231,024		913,787
Indefinite lived intangible assets:	Indefinite lived intangible assets:													Indefinite lived intangible assets:
Trademarks and tradenames	Trademarks and tradenames	55,813		0		55,813		55,813		0		55,813		Trademarks and tradenames	55,813		0		55,813		55,813		0		55,813
Intangible assets, net	Intangible assets, net	$	1,189,501	$	261,448	$	928,053	$	1,200,624	$	231,024	$	969,600	Intangible assets, net	$	1,188,370	$	278,780	$	909,590	$	1,200,624	$	231,024	$	969,600

Amortization expense was ~~$18.6~~$18.4 million and ~~$21.5~~$21.9 million for the ~~second~~third quarters of fiscal 2021 and 2020, respectively, and ~~$41.6~~$60.0 million and ~~$43.6~~$65.5 million for fiscal 2021 and 2020 year-to-date, respectively. The estimated future amortization expense

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for each of the next five fiscal years and thereafter on definite lived intangible assets existing as of ~~January 30,~~May 1, 2021 is shown below:


Fiscal Year:	Fiscal Year:	(In thousands)		Fiscal Year:	(In thousands)
Remaining fiscal 2021	Remaining fiscal 2021	$	36,650	Remaining fiscal 2021	$	18,192
2022	2022	72,170		2022	72,170
2023	2023	71,950		2023	71,950
2024	2024	72,404		2024	72,399
2025	2025	70,308		2025	70,308
2026 and thereafter	2026 and thereafter	548,758		2026 and thereafter	548,758
		$	872,240		$	853,777

NOTE 6—FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

Recurring Fair Value Measurements

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


		Condensed Consolidated Balance Sheets Location		Fair Value at January 30, 2021										Condensed Consolidated Balance Sheets Location		Fair Value at May 1, 2021
(in thousands)	(in thousands)		Level 1			Level 2			Level 3	(in thousands)					Level 1			Level 2			Level 3
Assets:	Assets:												Assets:
Foreign currency derivatives not designated as hedging instruments												Foreign currency derivatives not designated as hedging instruments		Prepaid expenses and other current assets		$	0		$	2		$	0
Fuel derivatives designated as hedging instruments												Fuel derivatives designated as hedging instruments		Prepaid expenses and other current assets		$	0		$	1,101		$	0

Foreign currency derivatives designated as hedging instruments		Prepaid expenses and other current assets		$	0		$	63		$	0
Fuel derivatives designated as hedging instruments		Prepaid expenses and other current assets		$	0		$	680		$	0
Mutual funds	Mutual funds	Other long-term assets		$	1,592		$	0		$	0	Mutual funds		Other long-term assets		$	1,550		$	0		$	0

Liabilities:	Liabilities:											Liabilities:
Foreign currency derivatives not designated as hedging instruments		Accrued expenses and other current liabilities		$	0		$	3		$	0
Fuel derivatives designated as hedging instruments		Accrued expenses and other current liabilities		$	0		$	1		$	0

Foreign currency derivatives designated as hedging instruments	Foreign currency derivatives designated as hedging instruments	Accrued expenses and other current liabilities		$	0		$	774		$	0	Foreign currency derivatives designated as hedging instruments		Accrued expenses and other current liabilities		$	0		$	1,904		$	0
Interest rate swaps designated as hedging instruments	Interest rate swaps designated as hedging instruments	Accrued expenses and other current liabilities		$	0		$	34,779		$	0	Interest rate swaps designated as hedging instruments		Accrued expenses and other current liabilities		$	0		$	32,156		$	0
Interest rate swaps designated as hedging instruments	Interest rate swaps designated as hedging instruments	Other long-term liabilities		$	0		$	66,374		$	0	Interest rate swaps designated as hedging instruments		Other long-term liabilities		$	0		$	47,541		$	0

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	Condensed Consolidated Balance Sheets Location	Fair Value at August 1, 2020
(in thousands)		Level 1		Level 2		Level 3
Assets:
Foreign currency derivatives not designated as hedging instruments	Prepaid expenses and other current assets	$	0	$	26	$	0
Fuel derivatives designated as hedging instruments	Prepaid expenses and other current assets	$	0	$	36	$	0
Foreign currency derivatives designated as hedging instruments	Prepaid expenses and other current assets	$	0	$	94	$	0
Fuel derivatives designated as hedging instruments	Other long-term assets	$	0	$	23	$	0
Mutual funds	Other long-term assets	$	1,678	$	0	$	0

Liabilities:
Fuel derivatives designated as hedging instruments	Accrued expenses and other current liabilities	$	0	$	197	$	0
Foreign currency derivatives designated as hedging instruments	Accrued expenses and other current liabilities	$	0	$	357	$	0
Interest rate swaps designated as hedging instruments	Accrued expenses and other current liabilities	$	0	$	46,743	$	0
Interest rate swaps designated as hedging instruments	Other long-term liabilities	$	0	$	91,994	$	0

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, LIBOR swap rates and credit default swap rates. As of ~~January 30,~~May 1, 2021, a 100 basis point increase in forward LIBOR interest rates would increase the fair value of the interest rate swaps by approximately $34.0 million; a 100 basis point decrease in forward LIBOR interest rates would decrease the fair value of the interest rate ~~swap liabilities~~swaps by approximately ~~$40.6 million; a 100 basis point decrease in forward LIBOR interest rates would increase the fair value of the interest rate swap liabilities by approximately $42.2~~$35.3 million. Refer to Note 7—Derivatives for further information on interest rate swap contracts.

Mutual Funds

Mutual fund assets consist of balances held in investments to fund certain deferred compensation plans. The fair values of mutual fund assets are based on quoted market prices of the mutual funds held by the plan at each reporting period. Mutual funds traded in active markets are classified within Level 1 of the fair value hierarchy.

Fuel Supply Agreements and Derivatives

To reduce diesel price risk, the Company has entered into derivative financial instruments and/or forward purchase commitments for a portion of our projected monthly diesel fuel requirements at fixed prices. The fair values of fuel derivative agreements are measured using Level 2 inputs.

Foreign Exchange Derivatives

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

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Fair Value Estimates

For certain of the Company’s financial instruments including cash and cash equivalents, receivables, accounts payable, accrued vacation, compensation and benefits, and other current assets and 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.


		January 30, 2021				August 1, 2020					May 1, 2021				August 1, 2020
(In thousands)	(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value		(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Notes receivable, including current portion	Notes receivable, including current portion	$	41,264	$	40,655	$	77,598	$	78,877	Notes receivable, including current portion	$	35,445	$	33,127	$	77,598	$	78,877
Long-term debt, including current portion	Long-term debt, including current portion	$	2,387,241	$	2,474,902	$	2,497,626	$	2,535,851	Long-term debt, including current portion	$	2,327,397	$	2,417,797	$	2,497,626	$	2,535,851

NOTE 7—DERIVATIVES

Management of Interest Rate Risk

The Company enters into interest rate swap 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. Interest rate swap contracts 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 contracts are designated as cash flow hedges at ~~January 30,~~May 1, 2021. Interest rate swap contracts are reflected at their fair values in the Condensed Consolidated Balance 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 ~~January 30,~~May 1, 2021, which are all pay fixed and receive floating, are as follows:

Effective Date

Swap Maturity

Notional Value (in millions)

Pay Fixed Rate

Receive Floating Rate(2)

Floating Rate Reset Terms

Effective Date

Swap Maturity

Notional Value (in millions)

Pay Fixed Rate

Receive Floating Rate(2)

Floating Rate Reset Terms

March 21, 2019

April 15, 2022

100.0

2.3645

One-Month LIBOR

Monthly

April 2, 2019

June 30, 2022

100.0

2.2170

One-Month LIBOR

Monthly

June 28, 2019

June 30, 2022

50.0

2.1840

One-Month LIBOR

Monthly

August 3, 2015(1)

August 15, 2022

35.0

1.7950

One-Month LIBOR

Monthly

August 3, 2015(1)

August 15, 2022

34.0

1.7950

One-Month LIBOR

Monthly

October 26, 2018

October 31, 2022

100.0

2.8915

One-Month LIBOR

Monthly

October 26, 2018

October 31, 2022

100.0

2.8915

One-Month LIBOR

Monthly

January 11, 2019

October 31, 2022

50.0

2.4678

One-Month LIBOR

Monthly

January 11, 2019

October 31, 2022

50.0

2.4678

One-Month LIBOR

Monthly

January 23, 2019

October 31, 2022

50.0

2.5255

One-Month LIBOR

Monthly

January 23, 2019

October 31, 2022

50.0

2.5255

One-Month LIBOR

Monthly

November 16, 2018

March 31, 2023

150.0

2.8950

One-Month LIBOR

Monthly

November 16, 2018

March 31, 2023

150.0

2.8950

One-Month LIBOR

Monthly

January 23, 2019

March 31, 2023

50.0

2.5292

One-Month LIBOR

Monthly

January 23, 2019

March 31, 2023

50.0

2.5292

One-Month LIBOR

Monthly

November 30, 2018

September 30, 2023

50.0

2.8315

One-Month LIBOR

Monthly

November 30, 2018

September 30, 2023

50.0

2.8315

One-Month LIBOR

Monthly

October 26, 2018

October 31, 2023

100.0

2.9210

One-Month LIBOR

Monthly

October 26, 2018

October 31, 2023

100.0

2.9210

One-Month LIBOR

Monthly

January 11, 2019

March 28, 2024

100.0

2.4770

One-Month LIBOR

Monthly

January 11, 2019

March 28, 2024

100.0

2.4770

One-Month LIBOR

Monthly

January 23, 2019

March 28, 2024

100.0

2.5420

One-Month LIBOR

Monthly

January 23, 2019

March 28, 2024

100.0

2.5420

One-Month LIBOR

Monthly

November 30, 2018

October 31, 2024

100.0

2.8480

One-Month LIBOR

Monthly

November 30, 2018

October 31, 2024

100.0

2.8480

One-Month LIBOR

Monthly

January 11, 2019

October 31, 2024

100.0

2.5010

One-Month LIBOR

Monthly

January 11, 2019

October 31, 2024

100.0

2.5010

One-Month LIBOR

Monthly

January 24, 2019

October 31, 2024

50.0

2.5210

One-Month LIBOR

Monthly

January 24, 2019

October 31, 2024

50.0

2.5210

One-Month LIBOR

Monthly

October 26, 2018

October 22, 2025

50.0

2.9550

One-Month LIBOR

Monthly

October 26, 2018

October 22, 2025

50.0

2.9550

One-Month LIBOR

Monthly

November 16, 2018

October 22, 2025

50.0

2.9590

One-Month LIBOR

Monthly

November 16, 2018

October 22, 2025

50.0

2.9590

One-Month LIBOR

Monthly

November 16, 2018

October 22, 2025

50.0

2.9580

One-Month LIBOR

Monthly

November 16, 2018

October 22, 2025

50.0

2.9580

One-Month LIBOR

Monthly

January 24, 2019

October 22, 2025

50.0

2.5558

One-Month LIBOR

Monthly

January 24, 2019

October 22, 2025

50.0

2.5558

One-Month LIBOR

Monthly

1,485.0

1,234.0

(1)The swap contract has an amortizing notional principal amount which is reduced by $1.0 million on a quarterly basis.

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(2)For these swap contracts that are indexed to LIBOR, the Company is monitoring and evaluating risks related to the expected future cessation of LIBOR.

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In the third quarter of fiscal 2021, in order to reduce its exposure to pay fixed and receive floating interest rate swap contracts due to lower levels of debt balances with floating interest rates, the Company paid $6.3 million to terminate certain outstanding interest rate swaps with a notional amount of $250.0 million. In the first quarter of fiscal 2021, in conjunction with the $500.0 million fixed rate senior unsecured notes offering described below in Note 8—Long-Term Debt, the Company paid $11.3 million to terminate or novate certain outstanding interest rate swaps with a notional amount of $504.0 million and certain forward starting interest rate swaps with a notional amount of $450.0 million. The payments equaled the fair value of the interest rate swaps at the time of their termination or novation. NaN gain or loss was recorded as a result of the swap termination and novations. Since the hedged interest payments remain probable of occurring, the unrecognized gains and losses resulting from the early termination ~~and~~or novation of these interest rate swap agreements will be amortized out of Accumulated other comprehensive income and into to Interest expense, net over the remaining period of the original terminated or novated interest rate swap agreements. If any of the hedged interest payments were not probable of occurring, then a charge representing an accelerated amortization of the unrecognized gains and losses would be recorded. Cash payments resulting from the termination ~~and~~or novation of interest rate swaps are classified as operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.

The Company performs an initial quantitative assessment of hedge effectiveness using the “Hypothetical Derivative Method” in 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. In future reporting periods, the Company performs a qualitative analysis for quarterly prospective and retrospective assessments of hedge 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 Income (Loss) 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 pretax basis, are as follows:


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
		January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020			May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
(In thousands)	(In thousands)	Interest expense, net				Interest expense, net				(In thousands)	Interest expense, net				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	Total amounts of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	50,944	$	48,836	$	120,077	$	98,545	Total amounts of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	43,500	$	47,269	$	163,577	$	145,814
Loss on cash flow hedging relationships:	Loss on cash flow hedging relationships:									Loss on cash flow hedging relationships:
Loss reclassified from comprehensive income into earnings	Loss reclassified from comprehensive income into earnings	$	(9,303)	$	(4,251)	$	(20,563)	$	(6,621)	Loss reclassified from comprehensive income into earnings	$	(14,623)	$	(6,191)	$	(35,186)	$	(12,812)
Loss on interest rate swap contracts not designated as hedging instruments:
Loss recognized in earnings		$	(2,195)	$	0	$	(2,971)	$	0
Gain (loss) on interest rate swap contracts not designated as hedging instruments:										Gain (loss) on interest rate swap contracts not designated as hedging instruments:
Gain (loss) recognized in earnings										Gain (loss) recognized in earnings	$	2,969	$	0	$	(2)	$	0

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NOTE 8—LONG-TERM DEBT

The Company’s long-term debt consisted of the following:


(in thousands)	(in thousands)	Average Interest Rate at January 30, 2021	Fiscal Maturity Year	January 30, 2021		August 1, 2020		(in thousands)	Average Interest Rate at May 1, 2021	Fiscal Maturity Year	May 1, 2021		August 1, 2020
Term Loan Facility	Term Loan Facility	4.37%	2026	$	1,015,000	$	1,773,000	Term Loan Facility	3.61%	2026	$	1,002,253	$	1,773,000
ABL Credit Facility	ABL Credit Facility	1.52%	2024	885,000		756,712		ABL Credit Facility	1.50%	2024	839,290		756,712
Senior Notes	Senior Notes	6.75%	2029	500,000		0		Senior Notes	6.75%	2029	500,000		0
Other secured loans	Other secured loans	5.18%	2024-2025	42,966		49,268		Other secured loans	5.17%	2024-2025	39,751		49,268
Debt issuance costs, net	Debt issuance costs, net			(37,128)		(45,846)		Debt issuance costs, net			(36,374)		(45,846)
Original issue discount on debt	Original issue discount on debt			(18,597)		(35,508)		Original issue discount on debt			(17,523)		(35,508)
Long-term debt, including current portion	Long-term debt, including current portion			2,387,241		2,497,626		Long-term debt, including current portion			2,327,397		2,497,626
Less: current portion of long-term debt	Less: current portion of long-term debt			(12,991)		(70,632)		Less: current portion of long-term debt			(13,182)		(70,632)
Long-term debt	Long-term debt			$	2,374,250	$	2,426,994	Long-term debt			$	2,314,215	$	2,426,994

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Refinancing Activities

~~Subsequent to~~During the ~~end of the second~~third quarter of fiscal ~~2021, on February 11,~~ 2021, the Company entered into an amendment agreement (the “First Term Loan Amendment”) amending the Term Loan Agreement (as defined below). The amendment provides for, among other things, (i) the reduction of the applicable margin for LIBOR loans from 4.25% to 3.50% and the applicable margin for base rate loans from 3.25% to 2.50%, (ii) the appointment of a replacement administrative and collateral agent, and (iii) other administrative changes. The amendment did not change the aggregate amount or maturity date of the Term Loan Facility.

During the third quarter of fiscal 2021, the Company made a voluntary prepayment of $9.9 million and a mandatory prepayment of $2.8 million under the Term Loan Facility with asset sale proceeds.

During the second quarter of fiscal 2021, the Company made a voluntary prepayment of $150.0 million on the Term ~~Loan~~Lo an Facility (as defined below) funded with incremental borrowings under the ABL Credit Facility (as defined below) that reduces its interest costs. This prepayment will count towards any requirement from Excess Cash Flow (as defined in the Term Loan Agreement) generated during fiscal 2021, which would be due in fiscal 2022. In connection with this prepayment, the Company incurred a loss on debt extinguishment of $5.7 million related to unamortized debt issuance costs and a loss on unamortized original issue discount, which were recorded within Interest expense, net in the Condensed Consolidated ~~Statements~~Statement of Operations in the second quarter of fiscal 2021.

During the first quarter of fiscal 2021, the Company repaid $500.0 million of outstanding borrowings under the Term Loan Facility funded primarily by the net proceeds from the issuance of new eight-year senior unsecured notes (as described below). This refinancing transaction extended the maturity of a significant portion of the Company’s outstanding debt by approximately three years. Also during the first quarter, the Company made $108.0 million of additional repayments under the Term Loan Facility, including $72.0 million related to the material cash flow generation in fiscal 2020, as required under the Term Loan Agreement (as described below) and a voluntary prepayment of $36.0 million with incremental borrowings under the ABL Credit Facility (as described below). In connection with the prepayments, the Company incurred a loss on debt extinguishment related to unamortized debt issuance costs and a loss on unamortized original issue discount of $12.0 million and $11.8 million, respectively, which were recorded within Interest expense, net in the Condensed Consolidated Statements of Operations in the first quarter of fiscal 2021. The Company also executed a third amendment to the ABL Loan Agreement (as defined below) during the first quarter of fiscal 2021, which added certain assets to the Borrowing Base (as defined below) and increased the Company’s capacity to issue letters of credit under the facility, in addition to other administrative changes. The amendment did not change the aggregate amount or maturity date of the ABL Credit Facility.

Senior Notes

On October 22, 2020, the Company issued $500.0 million of unsecured 6.750% Senior Notes due October 15, 2028 (the “Senior Notes”). The Senior Notes are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the ABL Credit Facility or the Term Loan Facility. The net proceeds from the offering of the Senior Notes, together with borrowings under the ABL Credit Facility, were used to repay $500.0 million of the amounts outstanding under the Term B Tranche of the Term Loan Facility and for the payment of all financing costs related to the offering of the Senior Notes. Financing costs of $8.9 million were paid and capitalized in fiscal 2021 year-to-date.

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

ABL Credit Facility

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

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During the first quarter of fiscal 2021, on August 14, 2020, the Company entered into the Third Amendment to Loan Agreement, which provides for, among other things, (i) the addition of certain perishable inventory to the calculation of the Borrowing Base (as defined in the ABL Loan Agreement), (ii) the addition of income attributable to the business associated with the Cub Foods banner and the Shoppers banner accounted for within discontinued operations (if any) to the definition of Consolidated Net Income (as defined in the ABL Loan Agreement), (iii) an increase of the sublimit of availability for letters of credit to $300 million which includes an increased further sublimit for the Canadian Borrower of $25 million, and (iv) other administrative changes.

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

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

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

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

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As of ~~January 30,~~May 1, 2021, the U.S. Borrowers’ Borrowing Base, net of ~~$208.0~~$173.0 million of reserves, was ~~$2,216.1~~$2,252.5 million, which is above the $2,050.0 million limit of availability to the U.S. Borrowers under the ABL Credit Facility. As of ~~January 30,~~May 1, 2021, the Canadian Borrower’s Borrowing Base, net of ~~$4.2~~$4.6 million of reserves, was ~~$48.6~~$49.6 million, which is below the $50.0 million limit of availability to the Canadian Borrower under the ABL Credit facility, resulting in total availability of ~~$2,098.6~~$2,099.6 million for ABL Loans and letters of credit under the ABL Credit Facility. As of ~~January 30,~~May 1, 2021, the U.S. Borrowers had ~~$885.0~~$839.3 million of ABL Loans outstanding and the Canadian Borrower had no ABL Loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of ~~$9.7~~$8.8 million and are included in Long-term debt in the Condensed Consolidated Balance Sheets. As of ~~January 30,~~May 1, 2021, the U.S. Borrowers had ~~$95.8~~$117.5 million in letters of credit and the Canadian Borrower had 0 letters of credit outstanding under the ABL Credit Facility. The Company’s resulting remaining availability under the ABL Credit Facility was ~~$1,117.8~~$1,142.8 million as of ~~January 30,~~May 1, 2021.

The ABL Loans of the U.S. Borrowers under the ABL Credit Facility bear interest at rates that, at the U.S. Borrowers’ option, can be either: (i) a base rate and an applicable margin or (ii) a LIBOR rate and an applicable margin. As of ~~January 30,~~May 1, 2021, the applicable margin for base rate loans was 0.25% and the applicable margin for LIBOR loans was 1.25%. The ABL Loan Agreement contains provisions for the establishment of an alternative rate of interest in the event that LIBOR is no longer available. The ABL Loans of the Canadian Borrower under the ABL Credit Facility bear interest at rates that, at the Canadian Borrower’s option, can be either: (i) prime rate and an applicable margin or (ii) a Canadian dollar bankers’ acceptance equivalent rate and an applicable margin. As of ~~January 30,~~May 1, 2021, the applicable margin for prime rate loans was 0.25%, and the applicable margin for Canadian dollar bankers’ acceptance equivalent rate loans was 1.25%. Commencing on the first day of the calendar month following the ABL Administrative Agent’s receipt of the Company’s aggregate availability calculation for the prior fiscal quarter, the applicable margins for borrowings by the U.S. Borrowers and Canadian Borrower will be subject to adjustment based upon the aggregate availability under the ABL Credit Facility. Unutilized commitments under the ABL Credit

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Facility are subject to a per annum fee of (i) 0.375% if the average daily total outstandings were less than 25% of the aggregate commitments during the preceding fiscal quarter or (ii) 0.25% if such average daily total outstandings were 25% or more of the aggregate commitments during the preceding fiscal quarter. As of ~~January 30,~~May 1, 2021, the unutilized commitment fee was 0.25% per annum. The Borrowers are also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum of the amount available to be drawn under each such letter of credit, as well as a fee to all lenders equal to the applicable margin for LIBOR or Canadian dollar bankers’ acceptance equivalent rate loans, as applicable, times the average daily amount available to be drawn under all outstanding letters of credit.

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

The assets included in the Condensed Consolidated Balance Sheets securing the outstanding obligations under the ABL Credit Facility on a first-priority basis, and the unused credit and fees under the ABL Credit Facility, were as follows:


Assets securing the ABL Credit Facility (in thousands)(1):	Assets securing the ABL Credit Facility (in thousands)(1):	January 30, 2021		August 1, 2020		Assets securing the ABL Credit Facility (in thousands)(1):	May 1, 2021		August 1, 2020
Certain inventory assets included in Inventories, net and Current assets of discontinued operations	Certain inventory assets included in Inventories, net and Current assets of discontinued operations	$	2,261,209	$	2,270,892	Certain inventory assets included in Inventories, net and Current assets of discontinued operations	$	2,352,755	$	2,270,892
Certain receivables included in Accounts receivable, net and Current assets of discontinued operations	Certain receivables included in Accounts receivable, net and Current assets of discontinued operations	$	1,104,388	$	1,077,682	Certain receivables included in Accounts receivable, net and Current assets of discontinued operations	$	1,064,392	$	1,077,682

(1)The ABL Credit Facility is also secured by all of the Company’s pharmacy scripts, which are included in Intangibles, net in the Condensed Consolidated Balance Sheets as of ~~January 30,~~May 1, 2021 and August 1, 2020.


Unused credit and fees under the ABL Credit Facility (in thousands, except percentages):	~~January 30,~~May 1, 2021
Outstanding letters of credit	$	~~95,789~~117,501
Letter of credit fees	1.375		%
Unused credit	$	~~1,117,774~~1,142,800
Unused facility fees	0.25		%

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

Term Loan Facility

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

The loans under the Term B Tranche will be payable in full on October 22, 2025; provided that, if on or prior to December 31, 2024, that certain Agreement for Distribution of Products, dated as of October 30, 2015, by and between Whole Foods Market Distribution, Inc., a Delaware corporation, and the Company (the “Whole Foods Supply Agreement”) has not been extended until at least October 23, 2025 on terms not materially less favorable, taken as a whole, to the Company and its subsidiaries than those in effect on the Closing Date, then the loans under the Term B Tranche will be payable in full on December 31, 2024. On March 3, 2021, wethe Company entered into an amendment to the Whole Foods Supply Agreement, which extended the term of

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the agreement from September 28, 2025 to September 27, 2027, and which satisfies the extension requirement in the Term Loan Agreement.

In fiscal 2021 year-to-date, the Company made prepayments on the Term B Tranche of ~~$758.0~~$770.7 million as described above.

The loans under the 364-day Tranche were paid in full on October 21, 2019. The Company funded the scheduled maturity of the $52.8 million outstanding borrowings under the 364-day Tranche with incremental borrowings under the ABL Credit Facility on October 21, 2019.

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

The Term Borrowers’ obligations under the Term Loan Facility are guaranteed by most of the Company’s wholly-owned domestic subsidiaries who are not also Term Borrowers (collectively, the “Term Guarantors”), subject to customary exceptions and limitations, including an exception for immaterial subsidiaries designated by the Company from time to time. The Term Borrowers’ obligations under the Term Loan Facility and the Term Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Term Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the Term Guarantors’ ABL Assets, in each case, subject to customary exceptions and limitations, including an exception for owned real property with net book values of less than $10.0 million. As of ~~January 30,~~May 1, 2021, there was ~~$587.1~~$570.5 million of owned real property pledged as collateral that was included in Property and equipment, net ~~and Prepaid expenses and Other current assets~~ in the Condensed Consolidated Balance Sheets. Subsequent to May 1, 2021, the Company pledged an additional $123.7 million of owned real property as collateral, which includes 8 additional distribution centers.

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The loans under the Term Loan Facility may be voluntarily prepaid, subject to certain minimum payment thresholds and the payment of breakage or other similar costs. Under the Term Loan Facility, the Company is required, subject to certain exceptions and customary reinvestment rights, to apply 100 percent of Net Cash Proceeds (as defined in the Term Loan Agreement) from certain types of asset sales to prepay the loans outstanding under the Term Loan Facility. Commencing with the fiscal year ending August 1, 2020, the Company must also prepay loans outstanding under the Term Loan Facility no later than 130 days after the fiscal year end in an aggregate principal amount equal to a specified percentage (which percentage ranges from 0 to 75 percent depending on the Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) as of the last day of such fiscal year) of Excess Cash Flow (as defined in the Term Loan Agreement) in excess of ~~$10~~$10.0 million for the fiscal year then ended, minus any voluntary prepayments of the loans under the Term Loan Facility, the ABL Credit Facility (to the extent they permanently reduce commitments under the ABL Facility) and certain other indebtedness made during such fiscal year. Based on the Company’s Excess Cash Flow in fiscal 2020, a $72.0 million prepayment was required and paid in the quarter ending October 31, 2020. The potential amount of prepayment from Excess Cash Flow in fiscal 2021 that may be required in fiscal 2022 is not reasonably estimable as of ~~January 30,~~May 1, 2021.

As of ~~January 30,~~May 1, 2021, the borrowings under the Term B Tranche of the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either: (i) a base rate and a margin of ~~3.25%~~2.50% or (ii) a LIBOR rate and a margin of ~~4.25%~~3.50%; provided that the LIBOR rate shall never be less than 0.0%. The Term Loan Agreement contains provisions for the establishment of an alternative rate of interest in the event that LIBOR is no longer available.

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

As of ~~January 30,~~May 1, 2021, the Company had borrowings of ~~$1,015.0~~$1,002.3 million outstanding under the Term B Tranche, which are presented net of debt issuance costs of ~~$18.8~~$19.2 million and an original issue discount on debt of ~~$18.4~~$17.3 million. As of ~~January 30,~~May 1, 2021, 0 amount of the Term B Tranche was classified as current.

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

Changes in Accumulated other comprehensive loss by component, net of tax, for fiscal 2021 year-to-date are as follows:


(in thousands)	(in thousands)	Other Cash Flow Derivatives		Benefit Plans		Foreign Currency Translation		Swap Agreements		Total		(in thousands)	Other Cash Flow Derivatives		Benefit Plans		Foreign Currency Translation		Swap Agreements		Total
Accumulated other comprehensive loss at August 1, 2020	Accumulated other comprehensive loss at August 1, 2020	$	(67)	$	(115,296)	$	(21,419)	$	(101,164)	$	(237,946)	Accumulated other comprehensive loss at August 1, 2020	$	(67)	$	(115,296)	$	(21,419)	$	(101,164)	$	(237,946)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(165)		0		3,257		4,494		7,586		Other comprehensive (loss) income before reclassifications	(13)		0		6,164		10,096		16,247
Reclassification of amounts included in net periodic benefit income	Reclassification of amounts included in net periodic benefit income	—		(506)		—		—		(506)		Reclassification of amounts included in net periodic benefit income	—		(807)		—		—		(807)
Reclassification of cash flow hedges	Reclassification of cash flow hedges	120		—		—		17,217		17,337		Reclassification of cash flow hedges	(328)		—		—		25,742		25,414

Net current period Other comprehensive (loss) income	Net current period Other comprehensive (loss) income	(45)		(506)		3,257		21,711		24,417		Net current period Other comprehensive (loss) income	(341)		(807)		6,164		35,838		40,854
Accumulated other comprehensive loss at January 30, 2021		$	(112)	$	(115,802)	$	(18,162)	$	(79,453)	$	(213,529)
Accumulated other comprehensive loss at May 1, 2021												Accumulated other comprehensive loss at May 1, 2021	$	(408)	$	(116,103)	$	(15,255)	$	(65,326)	$	(197,092)

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Changes in Accumulated other comprehensive loss by component, net of tax, for fiscal 2020 year-to-date are as follows:


(in thousands)	(in thousands)	Benefit Plans		Foreign Currency Translation		Swap Agreements		Total		(in thousands)	Benefit Plans		Foreign Currency Translation		Swap Agreements		Total
Accumulated other comprehensive loss at August 3, 2019	Accumulated other comprehensive loss at August 3, 2019	$	(32,458)	$	(20,082)	$	(56,413)	$	(108,953)	Accumulated other comprehensive loss at August 3, 2019	$	(32,458)	$	(20,082)	$	(56,413)	$	(108,953)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	1,480		24		(2,588)		(1,084)		Other comprehensive income (loss) before reclassifications	1,480		(3,561)		(55,874)		(57,955)
Reclassification of amounts included in net periodic benefit income	Reclassification of amounts included in net periodic benefit income	(1,148)		—		—		(1,148)		Reclassification of amounts included in net periodic benefit income	(1,722)		—		—		(1,722)
Reclassification of cash flow hedges	Reclassification of cash flow hedges	—		—		(4,845)		(4,845)		Reclassification of cash flow hedges	—		—		9,375		9,375
Pension settlement charge	Pension settlement charge	7,610		—		—		7,610		Pension settlement charge	7,610		—		—		7,610
Net current period Other comprehensive income (loss)	Net current period Other comprehensive income (loss)	7,942		24		(7,433)		533		Net current period Other comprehensive income (loss)	7,368		(3,561)		(46,499)		(42,692)
Accumulated other comprehensive loss at February 1, 2020		$	(24,516)	$	(20,058)	$	(63,846)	$	(108,420)
Accumulated other comprehensive loss at May 2, 2020										Accumulated other comprehensive loss at May 2, 2020	$	(25,090)	$	(23,643)	$	(102,912)	$	(151,645)

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Items reclassified out of Accumulated other comprehensive loss had the following impact on the Condensed Consolidated Statements of Operations:


		13-Week Period Ended				26-Week Period Ended				Affected Line Item on the Condensed Consolidated Statements of Operations		13-Week Period Ended				39-Week Period Ended				Affected Line Item on the Condensed Consolidated Statements of Operations
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020			(in thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Pension and postretirement benefit plan obligations:	Pension and postretirement benefit plan obligations:										Pension and postretirement benefit plan obligations:
Reclassification of amounts included in net periodic benefit income(1)	Reclassification of amounts included in net periodic benefit income(1)	$	(404)	$	(777)	$	(713)	$	(1,551)	Net periodic benefit income, excluding service cost	Reclassification of amounts included in net periodic benefit income(1)	$	(404)	$	(777)	$	(1,117)	$	(2,328)	Net periodic benefit income, excluding service cost
Pension settlement charge	Pension settlement charge	0		10,303		0		10,303		Net periodic benefit income, excluding service cost	Pension settlement charge	0		0		0		10,303		Net periodic benefit income, excluding service cost
Total reclassifications	Total reclassifications	(404)		9,526		(713)		8,752			Total reclassifications	(404)		(777)		(1,117)		7,975
Income tax expense (benefit)	Income tax expense (benefit)	104		(2,492)		207		(2,290)		Provision (benefit) for income taxes	Income tax expense (benefit)	103		203		310		(2,087)		Provision (benefit) for income taxes
Total reclassifications, net of tax	Total reclassifications, net of tax	$	(300)	$	7,034	$	(506)	$	6,462		Total reclassifications, net of tax	$	(301)	$	(574)	$	(807)	$	5,888

Swap agreements:	Swap agreements:										Swap agreements:
Reclassification of cash flow hedge	Reclassification of cash flow hedge	$	11,498	$	(4,251)	$	23,534	$	(6,621)	Interest expense, net	Reclassification of cash flow hedge	$	11,652	$	6,191	$	35,186	$	12,812	Interest expense, net
Income tax benefit	Income tax benefit	(3,087)		(1,348)		(6,317)		(1,776)		Provision (benefit) for income taxes	Income tax benefit	(3,127)		(1,661)		(9,444)		(3,437)		Provision (benefit) for income taxes
Total reclassifications, net of tax	Total reclassifications, net of tax	$	8,411	$	(2,903)	$	17,217	$	(4,845)		Total reclassifications, net of tax	$	8,525	$	4,530	$	25,742	$	9,375

Other cash flow hedges:	Other cash flow hedges:										Other cash flow hedges:
Reclassification of cash flow hedge	Reclassification of cash flow hedge	$	(5)	$	0	$	164	$	0	Cost of sales	Reclassification of cash flow hedge	$	(612)	$	0	$	(448)	$	0	Cost of sales
Income tax expense (benefit)		1		0		(44)		0		Provision (benefit) for income taxes
Income tax expense											Income tax expense	164		0		120		0		Provision (benefit) for income taxes
Total reclassifications, net of tax	Total reclassifications, net of tax	$	(4)	$	0	$	120	$	0		Total reclassifications, net of tax	$	(448)	$	0	$	(328)	$	0

(1)Reclassification of amounts included in net periodic benefit income include reclassification of prior service benefit and reclassification of net actuarial loss as reflected in Note 11—Benefit Plans.

As of ~~January 30,~~May 1, 2021, the Company expects to reclassify ~~$44.1~~$43.1 million out of Accumulated other comprehensive loss and primarily into Interest expense, net during the following twelve-month period.

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NOTE 10—SHARE-BASED AWARDS

During the second quarter of fiscal 2021, the Company authorized for issuance and registered an additional 3.6 million shares of common stock under the Amended and Restated 2020 Equity Incentive Plan. In fiscal 2021 year-to-date, the Company granted restricted stock units and performance share units to its directors, executive officers, and certain employees representing a right to receive an aggregate of ~~2.6~~2.7 million shares. As of ~~January 30,~~May 1, 2021, there were 3.9 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan.

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NOTE 11—BENEFIT PLANS

Net periodic benefit income ~~(cost)~~ and contributions to defined benefit pension and other post-retirement benefit plans consisted of the following:


		13-Week Period Ended									13-Week Period Ended
		Pension Benefits				Other Postretirement Benefits					Pension Benefits				Other Postretirement Benefits
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(in thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net Periodic Benefit (Income) Cost	Net Periodic Benefit (Income) Cost									Net Periodic Benefit (Income) Cost
Service cost	Service cost	$	0	$	0	$	12	$	14	Service cost	$	0	$	0	$	12	$	14
Interest cost	Interest cost	9,164		13,602		103		236		Interest cost	9,164		13,602		103		236
Expected return on plan assets	Expected return on plan assets	(25,964)		(26,587)		(26)		(54)		Expected return on plan assets	(25,965)		(25,765)		(26)		(54)
Amortization of prior service credit	Amortization of prior service credit	0		0		(350)		(350)		Amortization of prior service credit	0		0		(350)		(350)
Amortization of net actuarial loss (gain)	Amortization of net actuarial loss (gain)	261		3		(315)		(430)		Amortization of net actuarial loss (gain)	261		3		(315)		(430)
Pension settlement charge		0		10,303		0		0

Net periodic benefit income	Net periodic benefit income	$	(16,539)	$	(2,679)	$	(576)	$	(584)	Net periodic benefit income	$	(16,540)	$	(12,160)	$	(576)	$	(584)

Contributions to benefit plans	Contributions to benefit plans	$	(375)	$	(1,150)	$	(950)	$	(60)	Contributions to benefit plans	$	(375)	$	(1,500)	$	(950)	$	(175)


		26-Week Period Ended									39-Week Period Ended
		Pension Benefits				Other Postretirement Benefits					Pension Benefits				Other Postretirement Benefits
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(in thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net Periodic Benefit (Income) Cost	Net Periodic Benefit (Income) Cost									Net Periodic Benefit (Income) Cost
Service cost	Service cost	$	0	$	0	$	24	$	28	Service cost	$	0	$	0	$	36	$	42
Interest cost	Interest cost	18,328		30,292		206		472		Interest cost	27,492		43,894		309		708
Expected return on plan assets	Expected return on plan assets	(51,929)		(54,069)		(52)		(108)		Expected return on plan assets	(77,894)		(79,834)		(78)		(162)
Amortization of prior service credit	Amortization of prior service credit	0		0		(700)		(700)		Amortization of prior service credit	0		0		(1,050)		(1,050)
Amortization of net actuarial loss (gain)	Amortization of net actuarial loss (gain)	617		6		(630)		(857)		Amortization of net actuarial loss (gain)	878		9		(945)		(1,287)
Pension settlement charge	Pension settlement charge	0		10,303		0		0		Pension settlement charge	0		10,303		0		0
Net periodic benefit income	Net periodic benefit income	$	(32,984)	$	(13,468)	$	(1,152)	$	(1,165)	Net periodic benefit income	$	(49,524)	$	(25,628)	$	(1,728)	$	(1,749)

Contributions to benefit plans	Contributions to benefit plans	$	(750)	$	(5,250)	$	(1,900)	$	(160)	Contributions to benefit plans	$	(1,125)	$	(6,750)	$	(2,850)	$	(335)

Pension Contributions

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

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Multiemployer Pension Plans

The Company contributed ~~$11.8~~$12.2 million and ~~$12.6~~$12.3 million in the ~~second~~third quarters of fiscal 2021 and 2020, respectively, and ~~$23.7~~$35.9 million and ~~$26.1~~$38.4 million in fiscal 2021 and 2020 year-to-date, respectively, to continuing and discontinued operations multiemployer pension plans.

In connection with the Company’s consolidation of distribution centers in the Pacific Northwest, during the second quarter of fiscal 2020, the Company recorded a $10.6 million multiemployer pension plan withdrawal liability, under which payments will be made over a one-year period ~~beginning in fiscal 2022.~~the timing of which is dependent upon the plan’s assessment. The withdrawal liability is included in Other long-term liabilities and the withdrawal charge was recorded within Restructuring, acquisition and integration related expenses.

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Lump Sum Pension Settlement

On August 1, 2019, the Company amended the SUPERVALU Retirement Plan to provide for a lump sum settlement window. On August 2, 2019, the Company sent plan participants lump sum settlement election offerings that committed the plan to pay certain deferred vested pension plan participants and retirees, who make such an election, a lump sum payment in exchange for their rights to receive ongoing payments from the plan. The lump sum payment amounts are equal to the present value of the participant’s pension benefits, and were made to certain ~~former~~ (i) retired associates and beneficiaries who are receiving their monthly pension benefit payment and (ii) terminated associates who are deferred vested in the plan, had not yet begun receiving monthly pension benefit payments and who are not eligible for any prior lump sum offerings under the plan. Benefit obligations associated with the lump sum offering have been incorporated into the funded status utilizing the actuarially determined lump sum payments based on estimated offer acceptances. The plan made aggregate lump sum settlement payments of $664.0 million to plan participants during the second quarter of fiscal 2020. The lump sum settlement payments resulted in a non-cash pension settlement charge of $10.3 million in the second quarter of fiscal 2020 from the acceleration of a portion of the accumulated unrecognized actuarial loss, which was based on the fair value of SUPERVALU Retirement Plan assets and remeasured liabilities. As a result of the settlement payments, the SUPERVALU Retirement Plan obligations were remeasured using a discount rate of 3.1 percent and the MP-2019 mortality improvement scale. This remeasurement resulted in a $1.5 million decrease to Accumulated other comprehensive loss.

NOTE 12—INCOME TAXES

The effective income tax rate for continuing operations was an expense of ~~22.4% on pre-tax income~~25.8% compared to a benefit of ~~47.8%~~3.1% on pre-tax ~~losses~~income for the ~~second~~third quarters of fiscal 2021 and 2020, respectively. The change in the ~~effective income tax~~ rate for the ~~second~~ quarter ~~of fiscal 2021~~ was primarily driven by the impact of a ~~pre-tax~~tax benefit from the revaluation of net operating loss ~~of approximately $26.8 million~~deferred tax assets in the ~~second~~third quarter of fiscal 2020 ~~compared~~due to ~~pre-tax income~~passage of ~~approximately $73.2 million in~~ the second quarter of fiscal 2021. In addition, the change in the rate is partially driven by a discrete tax benefit of approximately $2.8 million in the second quarter of fiscal 2021 related to the release of unrecognized tax positions versus a discrete tax benefit of approximately $0.5 million for this item in the second quarter of fiscal 2020. The tax provision had $3.1 million and $0.1 million of discrete tax benefits, including those mentioned above, for the second quarters of fiscal 2021 and fiscal 2020, respectively.CARES Act.

The effective income tax rate for continuing operations was an expense of ~~21.6%~~23.6% on pre-tax income compared to a benefit of ~~16.6%~~21.2% on pre-tax losses for fiscal 2021 year-to-date and fiscal 2020 year-to-date, respectively. The change in the ~~effective income tax~~year-to-date rate was primarily driven by ~~a discrete tax benefit in fiscal 2021 year-to-date for employee stock vestings versus a discrete tax expense for this item~~the impact of the goodwill impairment charge recorded in fiscal 2020, ~~year-to-date, as well as~~partially offset by the impact of a ~~discrete~~ tax benefit ~~for~~from the ~~release~~revaluation of ~~unrecognized~~net operating loss deferred tax ~~positions~~assets in ~~fiscal 2021 year-to-date versus a discrete tax expense for this item in~~the third quarter of fiscal 2020 ~~year-to-date. In addition, fiscal 2020 year-to-date was impacted by a goodwill impairment charge that did not repeat in fiscal 2021 year-to-date. The tax provision had $3.5 million and $64.4 million~~due to passage of ~~discrete tax benefits for fiscal 2021 and fiscal 2020 year-to-date, respectively.~~the CARES Act.

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NOTE 13—EARNINGS (LOSS) PER SHARE

The following is a reconciliation of the basic and diluted number of shares used in computing earnings (loss) per share:


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
(in thousands, except per share data)	(in thousands, except per share data)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(in thousands, except per share data)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Basic weighted average shares outstanding	Basic weighted average shares outstanding	56,138		53,523		55,717		53,368		Basic weighted average shares outstanding	56,458		53,718		56,028		53,485
Net effect of dilutive stock awards based upon the treasury stock method	Net effect of dilutive stock awards based upon the treasury stock method	3,067		0		3,402		0		Net effect of dilutive stock awards based upon the treasury stock method	4,081		1,499		3,648		0
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	59,205		53,523		59,119		53,368		Diluted weighted average shares outstanding	60,539		55,217		59,676		53,485

Basic earnings (loss) per share:	Basic earnings (loss) per share:									Basic earnings (loss) per share:
Continuing operations	Continuing operations	$	0.98	$	(0.27)	$	0.95	$	(7.54)	Continuing operations	$	0.83	$	1.72	$	1.78	$	(5.80)
Discontinued operations	Discontinued operations	$	0.07	$	(0.30)	$	0.09	$	(0.23)	Discontinued operations	$	0.03	$	(0.08)	$	0.12	$	(0.30)
Basic earnings (loss) per share	Basic earnings (loss) per share	$	1.05	$	(0.57)	$	1.04	$	(7.77)	Basic earnings (loss) per share	$	0.86	$	1.64	$	1.90	$	(6.10)
Diluted earnings (loss) per share:	Diluted earnings (loss) per share:									Diluted earnings (loss) per share:
Continuing operations	Continuing operations	$	0.93	$	(0.27)	$	0.89	$	(7.54)	Continuing operations	$	0.77	$	1.67	$	1.67	$	(5.80)
Discontinued operations		$	0.06	$	(0.30)	$	0.09	$	(0.23)
Discontinued operations(1)										Discontinued operations(1)	$	0.03	$	(0.08)	$	0.11	$	(0.30)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	1.00	$	(0.57)	$	0.98	$	(7.77)	Diluted earnings (loss) per share	$	0.80	$	1.60	$	1.78	$	(6.10)

Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share	Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share	1,140		7,413		1,214		7,834		Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share	790		1,771		1,152		1,868

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(1)The computation of diluted earnings per share from discontinued operations excludes the net effect of dilutive stock awards based on the treasury stock method of approximately 1.5 million shares for the third quarter of fiscal 2020.

NOTE 14—BUSINESS SEGMENTS

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

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

Segment earnings include revenues and costs attributable to each of the respective business segments and allocated corporate overhead, based on the segment’s estimated consumption of corporately managed resources. The Company allocates certain corporate capital expenditures and identifiable assets to its business segments and retains certain depreciation expense related to those assets within Other. Non-operating expenses that are not allocated to the operating segments are included in the Other segment. In the fourth quarter of fiscal 2020, the Company updated its segment profit measure to Adjusted EBITDA. Prior period amounts have been recast to reflect this change in segment profit measure.

The following table provides continuing operations net sales and Adjusted EBITDA by reportable segment and reconciles that information to Income (loss) from continuing operations before income taxes:

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		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(in thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net sales:	Net sales:									Net sales:
Wholesale(1)	Wholesale(1)	$	6,608,775	$	6,206,918	$	13,040,058	$	12,274,225	Wholesale(1)	$	6,359,810	$	6,749,984	$	19,399,868	$	19,024,209
Retail	Retail	620,871		538,629		1,215,782		1,053,855		Retail	578,246		636,887		1,794,028		1,690,742
Other	Other	55,428		41,073		111,040		106,152		Other	54,808		58,359		165,848		164,511
Eliminations	Eliminations	(396,941)		(355,238)		(806,140)		(706,238)		Eliminations	(373,022)		(413,512)		(1,179,162)		(1,119,750)
Total Net sales	Total Net sales	$	6,888,133	$	6,431,382	$	13,560,740	$	12,727,994	Total Net sales	$	6,619,842	$	7,031,718	$	20,180,582	$	19,759,712
Continuing Operations Adjusted EBITDA:	Continuing Operations Adjusted EBITDA:									Continuing Operations Adjusted EBITDA:
Wholesale	Wholesale	$	186,768	$	102,454	$	309,729	$	208,766	Wholesale	$	161,073	$	199,884	$	470,802	$	408,650
Retail	Retail	25,330		11,428		49,612		21,990		Retail	21,547		36,931		71,159		58,921
Other	Other	(7,845)		14,425		(3,695)		12,828		Other	85		(17,247)		(3,610)		(4,419)
Eliminations	Eliminations	(1,778)		(665)		3,946		494		Eliminations	(5,375)		53		(1,429)		547
Adjustments:	Adjustments:									Adjustments:
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1,605		650		2,972		1,169		Net income attributable to noncontrolling interests	1,394		2,238		4,366		3,407
Total other expense, net	Total other expense, net	(32,143)		(44,339)		(83,445)		(82,264)		Total other expense, net	(25,383)		(32,669)		(108,828)		(114,933)
Depreciation and amortization	Depreciation and amortization	(66,534)		(69,219)		(143,723)		(144,360)		Depreciation and amortization	(66,365)		(69,642)		(210,088)		(214,002)
Share-based compensation	Share-based compensation	(12,673)		(5,134)		(26,822)		(9,059)		Share-based compensation	(11,668)		(12,992)		(38,490)		(22,051)
Restructuring, acquisition and integration related expenses	Restructuring, acquisition and integration related expenses	(17,783)		(36,522)		(34,211)		(51,194)		Restructuring, acquisition and integration related expenses	(9,867)		(14,557)		(44,078)		(65,751)
Goodwill and asset impairment charges	Goodwill and asset impairment charges	0		0		0		(425,405)		Goodwill and asset impairment charges	0		0		0		(425,405)
Loss on sale of assets		(399)		(524)		(169)		(434)
Gain (loss) on sale of assets										Gain (loss) on sale of assets	25		(351)		(144)		(785)
Notes receivable charges	Notes receivable charges	0		0		0		(12,516)		Notes receivable charges	0		0		0		(12,516)
Legal settlement income (reserve charge)		0		654		0		(1,196)
Legal reserve charge										Legal reserve charge	0		0		0		(1,196)
Other retail expense	Other retail expense	(1,394)		0		(3,003)		0		Other retail expense	(355)		0		(3,358)		0
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	$	73,154	$	(26,792)	$	71,191	$	(481,181)	Income (loss) from continuing operations before income taxes	$	65,111	$	91,648	$	136,302	$	(389,533)
Depreciation and amortization:	Depreciation and amortization:									Depreciation and amortization:
Wholesale	Wholesale	$	58,766	$	65,768	$	126,587	$	133,761	Wholesale	$	58,136	$	66,754	$	184,723	$	200,515
Retail	Retail	6,764		843		14,152		2,301		Retail	6,776		611		20,928		2,912
Other	Other	1,004		2,608		2,984		8,298		Other	1,453		2,277		4,437		10,575
Total depreciation and amortization	Total depreciation and amortization	$	66,534	$	69,219	$	143,723	$	144,360	Total depreciation and amortization	$	66,365	$	69,642	$	210,088	$	214,002
Capital expenditures:	Capital expenditures:									Capital expenditures:
Wholesale	Wholesale	$	45,882	$	43,370	$	83,873	$	85,629	Wholesale	$	66,282	$	33,456	$	150,155	$	119,085
Retail	Retail	4,109		2,619		7,310		5,295		Retail	7,512		2,131		14,822		7,426
Other	Other	145		91		333		204		Other	147		88		480		292
Total capital expenditures	Total capital expenditures	$	50,136	$	46,080	$	91,516	$	91,128	Total capital expenditures	$	73,941	$	35,675	$	165,457	$	126,803

(1)As presented in Note 3—Revenue Recognition, for the ~~second~~third quarters of fiscal 2021 and 2020, the Company recorded ~~$345.3~~$323.5 million and ~~$308.1~~$352.8 million, respectively, and ~~$702.9~~$1,026.4 million and ~~$605.8~~$958.6 million in fiscal 2021 and 2020 year-to-date, respectively, within Net sales in its Wholesale reportable segment attributable to Wholesale sales to its Retail segment that have been eliminated upon consolidation. Refer to Note 3—Revenue Recognition for additional information regarding Wholesale sales to discontinued operations.

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Total assets of continuing operations by reportable segment were as follows:


(in thousands)	(in thousands)	January 30, 2021		August 1, 2020		(in thousands)	May 1, 2021		August 1, 2020
Assets:	Assets:					Assets:
Wholesale	Wholesale	$	6,454,162	$	6,588,836	Wholesale	$	6,580,627	$	6,588,836
Retail	Retail	565,252		542,470		Retail	560,725		542,470
Other	Other	521,752		501,468		Other	436,251		501,468
Eliminations	Eliminations	(57,133)		(54,784)		Eliminations	(63,108)		(54,784)
Total assets of continuing operations	Total assets of continuing operations	$	7,484,033	$	7,577,990	Total assets of continuing operations	$	7,514,495	$	7,577,990

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 ~~January 30,~~May 1, 2021. These guarantees were generally made to support the business growth of wholesale customers. 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 nine years, with a weighted average remaining term of approximately five 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 ~~January 30,~~May 1, 2021, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was ~~$28.7~~$28.0 million ($~~25.0~~24.4 million on a discounted basis). Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, as of May 1, 2021, a total estimated loss of $1.0 million is recorded in the Condensed Consolidated Balance Sheets.

The Company is contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. The Company could be required to satisfy the obligations under the leases if any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of the Company’s lease assignments among third parties, and various other remedies available, the Company believes the likelihood that it will be required to assume a material amount of these obligations is remote. For leases that have been assigned, the Company has recorded the associated right of use operating lease assets and obligations within the Condensed Consolidated Balance Sheets. NaN associated lessor receivables are reflected on the Condensed Consolidated Balance Sheets; however, the Company expects its assignees to make lease payments to its landlords. For the Company’s lease guarantee arrangements, 0 amounts have been recorded within the Condensed Consolidated Balance Sheets as the fair value has been determined to be de minimis.

The Company is a party to a variety of contractual agreements under which it may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. These agreements primarily relate to the Company’s commercial contracts, service agreements, contracts entered into 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. NaN 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.

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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 is providing Save-A-Lot with various technical, human resources, finance and other operational services for a term of five years, subject to termination provisions that can be exercised by each party. The initial annual base charge under the Services Agreement is $30 million, subject to adjustments. ~~We expect~~The Company expects that services provided under the Services Agreement will wind down at or near the end of the initial term in December 2021. The Services Agreement generally requires each party to indemnify the other party against third-party claims arising out of the performance of or the provision or receipt of services under the Services Agreement. While the Company’s aggregate indemnification obligations to Save-A-Lot and Onex, the purchaser of Save-A-Lot, could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. The Company has recorded the fair value of the 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 ~~January 30,~~May 1, 2021, the Company had approximately ~~$305~~$243 million of non-cancelable future purchase obligations.

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

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 6 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. The Company believes these claims are without merit and intends to vigorously defend 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 pending in the U.S. District Court for the Central District of Illinois, the relators allege that defendants overcharged government healthcare programs by not providing the government, as a part of usual and customary prices, the benefit of discounts given to customers purchasing prescription

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medication who requested that defendants match competitor prices. The complaint was originally filed under seal and amended on November 30, 2015. The government previously investigated the relators’ allegations and declined to intervene. Violations of the FCA are subject to treble damages and penalties of up to a specified dollar amount per false claim. Relators elected to pursue the case on their own and have alleged FCA damages against Supervalu and New Albertson’s in excess of $100 million,

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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 claims that are currently pending and the Stock Purchase Agreement, Supervalu’s share of a potential award (at the currently claimed value by relators) would be approximately $24 million, not including trebling and statutory penalties. Both sides moved for summary judgment. On August 5, 2019, the Court granted one of the relators’ summary judgment motions finding that the defendants’ lower matched prices are the usual and customary prices and that Medicare Part D and Medicaid were entitled to those prices. On July 2, 2020 the Court granted the defendants’ summary judgment motion and denied the relators’ motion, dismissing the case. On July 9, 2020 the relators filed a notice of appeal with the 7th Circuit Court of Appeals, and on September 30, 2020 filed an appellate brief. On November 30, 2020, the Company filed its response. The hearing before the 7th Circuit Court of Appeals occurred on January 19, 2021.

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;~~law, including wage and hour; pension plans; labor union disputes, including unfair labor practices, such as claims for back-pay in the context of labor contract negotiations; supplier, customer and service provider contract terms and claims, including matters related to supplier or customer insolvency or general inability to pay obligations as they become due; product liability claims; real estate and environmental matters, including claims in connection with its ownership and lease of 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 ~~January 30,~~May 1, 2021, no material accrued obligations, individually or in the aggregate, have been recorded for 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 occurrence of any of the foregoing, could have a material adverse effect on our financial condition, results of operations or cash flows.

NOTE 16—DISCONTINUED OPERATIONS

In conjunction with the Supervalu acquisition, the Company announced its plan to sell the remaining acquired retail operations of Supervalu. Since the acquisition, the Company sold Hornbacher’s, and sold and exited the retail operations of certain Shoppers locations, Shop ‘n Save St. Louis and Shop ‘n Save East. As discussed further in Note 1—Significant Accounting Policies, in the fourth quarter of fiscal 2020, the Company determined Retail no longer qualified for held for sale presentation and the results of operations, financial position and cash flows of Retail have been revised in order to present Retail within continuing operations. Subsequent to the presentation changes in the fourth quarter of fiscal 2020, discontinued operations contains the historical results of operations, financial position and cash flows of Hornbacher’s, certain Shoppers locations, Shop ‘n Save St. Louis and Shop ‘n Save East. As of ~~January 30,~~May 1, 2021, only 4 Shoppers locations are contained in remaining disposal groups that continue to be classified as operations held for sale as discontinued operations.

In the second quarter of fiscal 2020, the Company entered into agreements to sell 13 Shoppers stores and decided to close 6 locations. During fiscal 2020 year-to-date, within discontinued operations the Company incurred approximately ~~$23.6~~$28.3 million in pre-tax aggregate costs and charges related to Shoppers stores that remain within discontinued operations, consisting of ~~$18.8~~$22.9 million of operating losses, severance costs and transaction costs during the period of wind-down and $5.5 million of property and equipment impairment charges related to impairment reviews.

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Operating results of discontinued operations are summarized below:


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
(In thousands)	(In thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(In thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net sales	Net sales	$	22,973	$	75,076	$	47,789	$	170,671	Net sales	$	20,009	$	30,115	$	67,798	$	200,786
Cost of sales	Cost of sales	15,748		56,553		32,520		121,639		Cost of sales	13,172		21,548		45,692		143,187
Gross profit	Gross profit	7,225		18,523		15,269		49,032		Gross profit	6,837		8,567		22,106		57,599
Operating expenses	Operating expenses	3,528		15,228		9,759		40,304		Operating expenses	4,658		6,046		14,417		46,350
Restructuring expenses and charges	Restructuring expenses and charges	792		24,009		783		24,184		Restructuring expenses and charges	(187)		6,686		596		30,870
Operating income (loss)	Operating income (loss)	2,905		(20,714)		4,727		(15,456)		Operating income (loss)	2,366		(4,165)		7,093		(19,621)

Other expense (income), net		0		(3)		0		(64)
Other income, net										Other income, net	0		(107)		0		(171)
Income (loss) from discontinued operations before income taxes	Income (loss) from discontinued operations before income taxes	2,905		(20,711)		4,727		(15,392)		Income (loss) from discontinued operations before income taxes	2,366		(4,058)		7,093		(19,450)
Benefit for income taxes		(898)		(4,635)		(372)		(3,342)
Provision (benefit) for income taxes										Provision (benefit) for income taxes	713		20		341		(3,322)
Income (loss) from discontinued operations, net of tax	Income (loss) from discontinued operations, net of tax	$	3,803	$	(16,076)	$	5,099	$	(12,050)	Income (loss) from discontinued operations, net of tax	$	1,653	$	(4,078)	$	6,752	$	(16,128)

The following table summarizes the carrying amounts of major classes of assets and liabilities that were classified as held-for-sale on the Condensed Consolidated Balance Sheets:


(In thousands)	(In thousands)	January 30, 2021		August 1, 2020		(In thousands)	May 1, 2021		August 1, 2020
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	155	$	119	Cash and cash equivalents	$	136	$	119
Accounts receivable, net	Accounts receivable, net	578		350		Accounts receivable, net	477		350
Inventories, net	Inventories, net	3,329		4,233		Inventories, net	3,876		4,233
Other current assets	Other current assets	654		365		Other current assets	410		365
Total current assets of discontinued operations	Total current assets of discontinued operations	4,716		5,067		Total current assets of discontinued operations	4,899		5,067
Long-term assets	Long-term assets					Long-term assets
Property and equipment	Property and equipment	927		3,450		Property and equipment	965		3,450

Other long-term assets	Other long-term assets	464		465		Other long-term assets	465		465
Total long-term assets of discontinued operations	Total long-term assets of discontinued operations	1,391		3,915		Total long-term assets of discontinued operations	1,430		3,915
Total assets of discontinued operations	Total assets of discontinued operations	$	6,107	$	8,982	Total assets of discontinued operations	$	6,329	$	8,982

Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	3,405	$	3,613	Accounts payable	$	2,757	$	3,613
Accrued compensation and benefits	Accrued compensation and benefits	2,575		4,501		Accrued compensation and benefits	2,332		4,501

Other current liabilities	Other current liabilities	2,333��		3,324		Other current liabilities	1,907		3,324
Total current liabilities of discontinued operations	Total current liabilities of discontinued operations	8,313		11,438		Total current liabilities of discontinued operations	6,996		11,438
Long-term liabilities	Long-term liabilities					Long-term liabilities

Other long-term liabilities	Other long-term liabilities	15		1,738		Other long-term liabilities	15		1,738
Total liabilities of discontinued operations	Total liabilities of discontinued operations	8,328		13,176		Total liabilities of discontinued operations	7,011		13,176
Net liabilities of discontinued operations	Net liabilities of discontinued operations	$	(2,221)	$	(4,194)	Net liabilities of discontinued operations	$	(682)	$	(4,194)

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

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

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

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

•the impact and duration of the COVID-19 pandemic;

•our dependence on principal customers;

•our sensitivity to general economic conditions including changes in disposable income levels and consumer spending trends;

•our ability to realize anticipated benefits of our acquisitions and dispositions, in particular, our acquisition of SUPERVALU INC. (“Supervalu”);

•our reliance on the continued growth in sales of our higher margin natural and organic foods and non-food products in comparison to lower margin conventional grocery products;

•increased competition in our industry as a result of increased distribution of natural, organic and specialty products, and direct distribution of those products by large retailers and online distributors;

•the possibility that restructuring, asset impairment, and other charges and costs we may incur in connection with the sale or closure of our retail operations will exceed our current expectations;

•increased competition as a result of continuing consolidation of retailers in the natural product industry and the growth of supernatural chains;

•the addition or loss of significant customers or material changes to our relationships with these customers;

•union-organizing activities that could cause labor relations difficulties and increased costs;

•our ability to operate, and rely on third-parties to operate, reliable and secure technology systems;

•the relatively low margins of our business;

•moderated supplier promotional activity, including decreased forward buying opportunities;

•our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts;

•the potential for additional asset impairment charges;

•our sensitivity to inflationary and deflationary pressures;

•the potential for disruptions in our supply chain or our distribution capabilities by circumstances beyond our control, including a health epidemic;

•the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise;

•volatility in fuel costs;

•volatility in foreign exchange rates; and

•our ability to identify and successfully complete asset or business acquisitions.

You should carefully review the risks described under “Part I. Item 1A Risk Factors” of our Annual Report on Form 10-K for the year ended August 1, 2020 as well as any other cautionary language in this Quarterly Report, 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.

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EXECUTIVE OVERVIEW

Business Overview

As a leading distributor of natural, organic, specialty, produce and conventional grocery and non-food products, and provider of support services to retailers in the United States and Canada, we believe we are uniquely positioned to provide the broadest array of products and services to customers throughout North America. We offer more than 275,000 products consisting of national, regional and private label brands grouped into 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. ~~Through~~Following our October 2018 acquisition of Supervalu, we believe we are ~~transforming into~~ North America’s premier wholesaler with 58 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division.

Growth Drivers

A key component of our business and growth strategy has been to acquire distribution companies differentiated by product offerings, service offerings and market area. In fiscal 2019, the acquisition of Supervalu accelerated our “build out the store” strategy, diversified our customer base, enabled cross-selling opportunities, expanded our market reach and scale, enhanced our technology, capacity and systems, and is expected to continue to deliver synergies and accelerate growth. We believe the Supervalu acquisition allows us to better serve our wholesale customers’ needs and compete in the current environment by providing additional warehouse and transportation capacity, which enabled us to provide a broader array of products to our customers. As one of the largest wholesale grocery distributors in North America, and in light of the continued expansion of our distribution network and “build out the store” strategy, we believe we are well positioned to leverage our infrastructure in the current economic and social environment to continue to serve our customers and the communities in which we operate, and are actively pursuing new customers.

We believe our significant scale and footprint will generate long-term shareholder value by positioning us to continue to grow sales of natural, organic, specialty, produce and conventional grocery and non-food products, including our Private Brands. We also believe we have an opportunity to sell additional services to our customers to help them more efficiently operate their business while leveraging the infrastructure investments we have made. Services we sell to our customers include coupon processing, consumer marketing, retail technology and payments and consumer services. We have realized significant cost and revenue synergies from the acquisition of Supervalu by leveraging the scale and resources of the combined company, cross-selling to our customers, integrating our merchandising offerings into existing warehouses, optimizing our network footprint to lower our cost structure and eliminating redundant administrative costs. We expect to realize additional cost and revenue synergies in the future.

We expect the benefits of our significant scale, product and service offerings and nationwide footprint to attract new ~~customers, such as Key Food Stores co-operative, Inc. (“Key Food”). On~~customers. For example, on October 6, 2020, we announced UNFI had been selected as the primary grocery wholesaler by Key Food Stores co-operative, Inc. (“Key Food”), a Co-Operative of ~~315 member-owned~~over 300 member-operated and corporate grocery stores located in the Northeast and Florida. UNFI’s supply agreement with Key Food has a term of 10 years with expected sales over that time period of approximately $10 billion. We have begun selling to a small group of Key Food stores in the South region; however, most of the supply is expected to commence shipping in the first quarter of fiscal 2022.

We have been the primary distributor to Whole Foods Market for more than 20 years. We continue to serve as the primary distributor to Whole Foods Market in all of its regions in the United States pursuant to an amended distribution agreement. On March 3, 2021, we entered into an amendment to our distribution agreement dated October 30, 2015. The ~~Amendment~~amendment extended the term of the distribution agreement from September 28, 2025 to September 27, 2027.

We currently operate 7172 continuing operations Retail grocery stores acquired in the Supervalu acquisition. We ~~intend to maximize the value of these assets while, over time, thoughtfully and economically divesting these stores. However, we~~ no longer expect to divest Retail within one year and, as a result, beginning in the fourth quarter of fiscal 2020, prior period information in our Condensed Consolidated Financial Statements included in this Quarterly Report has been revised to reclassify Retail from discontinued operations to continuing operations from information previously presented in our Quarterly Reports. This change in financial statement presentation resulted in the inclusion of Retail’s results of operations, financial position, cash flows and related disclosures within continuing operations. Prior periods presented in the Condensed Consolidated Financial Statements have been conformed to the current period presentation, resulting in Retail being presented in continuing operations for all periods.

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Trends and Other Factors Affecting our Business

Our results are impacted by macroeconomic and demographic trends, and changes in the food distribution market structure. Changes in trends in consumer behavior could impact our results. Over the past several decades, total food expenditures on a constant dollar basis within the United States has continued to increase, ~~in total,~~ and the focus in recent decades on natural, organic and specialty foods has benefited the Company; however, consumer spending in the food-away-from-home industry had increased steadily as a percentage of total food expenditures. This trend paused during the 2008 recession, and then continued to increase. In general, economic recessions usually result in higher food-at-home expenditures, which would be expected to continue to benefit our customers and result in higher sales.

In fiscal 2020, the COVID-19 pandemic, which we refer to as the pandemic, caused a significant increase in food-at-home expenditures as a percentage of total food expenditures. We experienced ~~year-over-year~~ increases in sales and gross profit due to higher Wholesale customer purchases. We expect that food-at-home expenditures as a percentage of total food expenditures will remain higher than recent years until consumer behaviors return to pre-pandemic patterns. We believe that changes in work being done outside of the traditional office setting will continue to contribute to more food being consumed at home. In addition, the elevated levels of unemployment and underemployment due to the pandemic are expected to persist for some time and even after the near-term impact of the pandemic has passed. In general, economic recessions usually result in higher food-at-home expenditures, which would be expected to continue to benefit our customers and result in higher sales. The pandemic also drove significant growth in eCommerce utilization by grocery consumers, and we expect that trend to continue. We expect to benefit from this trend through the growth of our traditional eCommerce customers, our EasyOptions, a business-verified buyer’s site for retailers, which directly services non-traditional customers, such as bakeries or yoga studios, and through customers adopting our turnkey eCommerce platform.

Beginning in the third quarter of fiscal 2020, ~~in response to the outbreak of the pandemic,~~ we took actions to respond to the pandemic, ~~support~~including supporting our associates’ safety and well-being, and ~~maximize~~maximizing our logistics network to serve the communities we supply. Our business model allows us to leverage sales increases, and provides growth in operating earnings margin. We have been able to leverage the fixed and variable costs of our supply chain network and administrative expenses. We have incurred incremental costs related to the pandemic, including additional costs for safety protocols and procedures at our distribution centers and retail stores. Despite incremental labor and operating costs, additional volume experienced by our distribution network and retail stores drove higher leverage on fixed facility costs, semi-variable costs and general and administrative expenses.

We expect to continue to benefit from elevated sales ~~and margin buying activity~~ as compared to historical periods prior to the pandemic while food-at-home expenditures as a percentage of total food expenditures remains higher than recent historical periods ~~and higher on a year-over-year basis.~~prior to the pandemic. Trends in increased sales and gross margin benefits have lessened since the initial onset of the pandemic. The ultimate impact on our results is dependent upon the severity and duration of the pandemic and any economic downturn, food-at-home purchasing levels and actions taken by governmental authorities and other third parties in response to the pandemic, each of which is uncertain and rapidly changing. Any of these disruptions could adversely impact our business and results of operations. Considerable uncertainty remains regarding the future impact of the pandemic on our business, which is discussed further in Part I. Item 1A Risk Factors of our Annual Report on Form 10-K for the year ended August 1, 2020.

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 competitive environment. We seek to obtain security interests and other credit support in connection with the financial accommodations we extend these customers; however, we may incur additional credit or inventory charges related to our customers, as we expect the competitive environment to continue to lead to financial stress on some customers. The magnitude of these risks increases as the size of our Wholesale customers increases.

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Distribution Center Network

Network Optimization and Construction

~~Within~~In the Pacific Northwest, we completed the consolidation of the volume of five distribution centers and their related supporting off-site storage facilities into two distribution centers during fiscal 2020. We expect to achieve synergies and cost savings through eliminating inefficiencies, including incurring lower operating, shrink and off-site storage expenses. We also expect that the optimization of the Pacific Northwest distribution network will help deliver meaningful synergies contemplated in the Supervalu acquisition. We expanded the Ridgefield, WA distribution center to enhance customer product offerings, create more efficient inventory management, streamline operations and incorporate greater technology to deliver a better customer experience. We are now supplying customers served by former Pacific Northwest locations from our Centralia, WA, Ridgefield, WA and Gilroy, CA distribution centers. In order to maintain service levels of these higher volume Pacific Northwest distribution centers, we incurred incremental operating costs in the first quarter of fiscal 2021 that we believe temporarily reduced the realization of synergy benefits from this network consolidation.

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To support our continued growth on the East coast, including supplying Key Food, we entered into a new lease agreement in Allentown, PA for a facility with approximately 1.3 million square ~~foot facility.~~feet. The lease agreement commenced in the third quarter of fiscal 2021 when we took control of the facility to make our tenant improvements. We ~~expect to recognize an operating lease~~recognized a right-of-use asset and an operating lease liability for this distribution center in the third quarter of fiscal ~~2021 and~~2021. We expect to begin distribution ~~out of~~from this facility in the ~~second~~first half of ~~calendar 2021.~~fiscal 2022.

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

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

Distribution Center Sales

In ~~the second quarter of~~ fiscal 2021 year-to-date, we received ~~$35.1~~$50.0 million of proceeds from the sales of surplus distribution centers related to network consolidation, including the collection of a short-term note receivable, representing the remaining proceeds related to the fiscal 2020 sale of a distribution center. As we consolidate our distribution network, we may sell additional owned facilities or exit leased facilities.

~~Operating~~Network Technology Efficiency

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

Divestiture of Retail Operations

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

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The revision of our Condensed Consolidated Statements of Operations to present Retail within continuing operations resulted in an increase in our consolidated net sales, gross profit and operating expenses, and an increase in consolidated gross profit as a percentage of net sales, which was partially offset by an increase in operating expenses as a percent of net sales. In order to present Retail’s results of operations within continuing operations, Wholesale sales to Retail have been eliminated upon consolidation. The Wholesale segment’s net sales to discontinued operations retail stores are eliminated within the Wholesale segment.

~~Our strategy remains unchanged and we expect~~

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We continue to ~~divest all of our Retail operations in the future. As part of that process we plan~~strive to maximize the value ~~as part~~ of ~~the~~Retail. Part of any Retail divestiture process ~~including limiting~~would include efforts to limit liabilities and stranded costs associated with these divestitures. We expect to obtain ongoing supply relationships with the purchasers of some of these retail operations in the event of a divestiture, but some reductions in supply volume may result from the divestiture of certain of these retail operations. Actions associated with retail divestitures and potential resulting adjustments to our core cost structure for our wholesale food distribution business, are expected to generate headcount reductions and other costs and charges. These costs and charges, which may be material, include multiemployer plan charges, severance costs, store closure charges, and related costs. A withdrawal from a multiemployer pension plan may result in an obligation to make material payments over an extended period of time, or one-time lump sum payments on a net present value basis. In addition, we are evaluating various options to address our off-balance sheet liability under certain of our multiemployer pension plans, irrespective of ~~the~~any retail divestiture process, which actions may result in significant costs or charges. The extent of these costs and charges will be determined based on outcomes achieved under the process undertaken to minimize or eliminate the liability for the respective multiemployer pension plan. At this time, however, we are unable to make an estimate with reasonable certainty of the amount or type of costs and charges expected to be incurred in connection with the foregoing actions.

Our discontinued operations as of the end of the ~~second~~third quarter of fiscal 2021 include four Shoppers stores, and for historical periods, results of discontinued operations include the Hornbacher’s and Shop ‘n Save and Shop ‘n Save East retail banners, which were divested in fiscal 2019, and Shoppers stores that were sold or closed in fiscal 2020 and fiscal 2021. In addition, cash flows from discontinued operations include real estate sales related to those historical retail operations. These retail assets have been classified as held for sale as of the Supervalu acquisition date, and the results of operations, financial position and cash flows directly attributable to these operations are reported within discontinued operations in our Condensed Consolidated Financial Statements for all periods presented. As of the Supervalu acquisition date, retail assets and liabilities were recorded at their estimated fair value less costs to sell, and subsequent to that date, we reviewed the fair value, less cost to sell, of these disposal groups.

We may incur additional costs and charges in the future related to the divestiture of Retail if these locations are subsequently sold, indicators exist that the business may be impaired, or if we incur employee-related charges or wind-down costs.

~~Professional~~ Services ~~Agreements~~Agreement

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

Impact of Inflation or Deflation

We monitor product cost inflation and deflation and evaluate whether to absorb cost increases or decreases, or pass on pricing changes to our customers. We experienced a mix of inflation and deflation across product categories during the ~~second~~third quarter of fiscal 2021. In the aggregate across ~~all of~~ our ~~legacy~~ businesses and taking into account the mix of products, management estimates our businesses experienced cost inflation of ~~less than one~~approximately two percent in the ~~second~~third quarter of fiscal 2021. Cost inflation and deflation 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 and deflation on Net sales and Gross profit. Absent any changes in units sold or the mix of units sold, deflation has the effect of decreasing sales. Under the LIFO method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year end inventory quantities and costs, which has the effect of decreasing Gross profit and the carrying value of ~~inventory.~~inventory during periods of inflation.

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Business Performance Assessment and Composition of Condensed Consolidated Statements of Operations

Net sales

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

Cost of sales and Gross profit

The principal components of our cost of sales include the amounts paid to suppliers for product sold, plus the cost of transportation necessary to bring the product to, or move product between, our various distribution centers, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products. Cost of sales also includes amounts incurred by us at our manufacturing subsidiary, Woodstock Farms Manufacturing, for inbound transportation costs. Our gross margin may not be comparable to other similar companies within our industry that may include all costs related to their distribution network in their costs of sales rather than as operating expenses.

Operating expenses

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

Restructuring, acquisition and integration expenses

Restructuring, acquisition and integration expenses reflect expenses resulting from restructuring activities, including severance costs, change-in-control related charges, facility closure asset impairment charges and costs, stock-based compensation acceleration charges, and acquisition and integration expenses. Integration expenses include certain professional consulting expenses related to business transformation and incremental expenses related to combining facilities required to optimize our distribution network as a result of acquisitions.

Interest expense, net

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

Net periodic benefit income, excluding service cost

Net periodic benefit income, excluding service cost reflects the recognition of expected returns on benefit plan assets in excess of interest costs.

Adjusted EBITDA

Our Condensed Consolidated Financial Statements are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). In addition to the GAAP results, we consider certain non-GAAP financial measures to assess the performance of our business and understand underlying operating performance and core business trends, which we use to facilitate operating performance comparisons of our business on a consistent basis over time. Adjusted EBITDA is provided as a supplement to our results of operations and related analysis, and should not be considered superior to, a substitute for or an alternative to any financial measure of performance prepared and presented in accordance with GAAP. Adjusted EBITDA excludes certain items because they are non-cash items or are items that do not reflect management’s assessment of on-going business performance.

We believe Adjusted EBITDA is useful to investors and financial institutions because it provides additional understanding of factors and trends affecting our business, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and 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 a consistent basis over time. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an

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analytical tool. Certain adjustments to our GAAP financial measures reflected below exclude items that may be considered recurring in nature and may be reflected in our financial results for the foreseeable future. These measurements and items may be different from non-GAAP financial measures used by other companies. Adjusted EBITDA should be reviewed in conjunction with our results reported in accordance with GAAP in this Quarterly Report.

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

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

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Assessment of Our Business Results

The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated. We have revised prior-year periods the following table for the presentation of Retail within continuing operations discussed in Note 1—Significant Accounting Policies in Part II, Item 8 of the Annual Report on Form 10-K.

13-Week Period Ended 26-Week Period Ended
(in thousands) January 30, 2021 February 1, 2020 Change January 30, 2021 February 1, 2020 Change
Net sales $ 6,888,133 $ 6,431,382 $ 456,751 $ 13,560,740 $ 12,727,994 $ 832,746
Cost of sales 5,897,774 5,514,057 383,717 11,603,882 10,903,458 700,424
Gross profit 990,359 917,325 73,034 1,956,858 1,824,536 132,322
Operating expenses 866,880 862,732 4,148 1,767,842 1,746,420 21,422
Goodwill and asset impairment charges — — — — 425,405 (425,405)
Restructuring, acquisition and integration related expenses 17,783 36,522 (18,739) 34,211 51,194 (16,983)
Loss on sale of assets 399 524 (125) 169 434 (265)
Operating income (loss) 105,297 17,547 87,750 154,636 (398,917) 553,553
Other expense (income):
Net periodic benefit income, excluding service cost (17,127) (3,277) (13,850) (34,160) (14,661) (19,499)
Interest expense, net 50,944 48,836 2,108 120,077 98,545 21,532
Other, net (1,674) (1,220) (454) (2,472) (1,620) (852)
Total other expense, net 32,143 44,339 (12,196) 83,445 82,264 1,181
Income (loss) from continuing operations before income taxes 73,154 (26,792) 99,946 71,191 (481,181) 552,372
Provision (benefit) for income taxes 16,392 (12,808) 29,200 15,401 (79,763) 95,164
Net income (loss) from continuing operations 56,762 (13,984) 70,746 55,790 (401,418) 457,208
Income (loss) from discontinued operations, net of tax 3,803 (16,076) 19,879 5,099 (12,050) 17,149
Net income (loss) including noncontrolling interests 60,565 (30,060) 90,625 60,889 (413,468) 474,357
Less net income attributable to noncontrolling interests (1,605) (650) (955) (2,972) (1,169) (1,803)
Net income (loss) attributable to United Natural Foods, Inc. $ 58,960 $ (30,710) $ 89,670 $ 57,917 $ (414,637) $ 472,554

Adjusted EBITDA $ 206,295 $ 131,110 $ 75,185 $ 365,252 $ 252,804 $ 112,448


	13-Week Period Ended						39-Week Period Ended
(in thousands)	May 1, 2021		May 2, 2020		Change		May 1, 2021		May 2, 2020		Change
Net sales	$	6,619,842	$	7,031,718	$	(411,876)	$	20,180,582	$	19,759,712	$	420,870
Cost of sales	5,653,043		5,981,486		(328,443)		17,256,925		16,884,944		371,981
Gross profit	966,799		1,050,232		(83,433)		2,923,657		2,874,768		48,889
Operating expenses	866,463		911,007		(44,544)		2,634,305		2,657,427		(23,122)
Goodwill and asset impairment charges	—		—		—		—		425,405		(425,405)
Restructuring, acquisition and integration related expenses	9,867		14,557		(4,690)		44,078		65,751		(21,673)
(Gain) loss on sale of assets	(25)		351		(376)		144		785		(641)
Operating income (loss)	90,494		124,317		(33,823)		245,130		(274,600)		519,730
Other expense (income):
Net periodic benefit income, excluding service cost	(17,128)		(12,758)		(4,370)		(51,288)		(27,419)		(23,869)
Interest expense, net	43,500		47,269		(3,769)		163,577		145,814		17,763
Other, net	(989)		(1,842)		853		(3,461)		(3,462)		1
Total other expense, net	25,383		32,669		(7,286)		108,828		114,933		(6,105)
Income (loss) from continuing operations before income taxes	65,111		91,648		(26,537)		136,302		(389,533)		525,835
Provision (benefit) for income taxes	16,812		(2,799)		19,611		32,213		(82,562)		114,775
Net income (loss) from continuing operations	48,299		94,447		(46,148)		104,089		(306,971)		411,060
Income (loss) from discontinued operations, net of tax	1,653		(4,078)		5,731		6,752		(16,128)		22,880
Net income (loss) including noncontrolling interests	49,952		90,369		(40,417)		110,841		(323,099)		433,940
Less net income attributable to noncontrolling interests	(1,394)		(2,238)		844		(4,366)		(3,407)		(959)
Net income (loss) attributable to United Natural Foods, Inc.	$	48,558	$	88,131	$	(39,573)	$	106,475	$	(326,506)	$	432,981

Adjusted EBITDA	$	179,498	$	222,208	$	(42,710)	$	544,750	$	475,012	$	69,738

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The following table reconciles Adjusted EBITDA to Net income (loss) from continuing operations and to Income (loss) from discontinued operations, net of tax.


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(in thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net income (loss) from continuing operations	Net income (loss) from continuing operations	$	56,762	$	(13,984)	$	55,790	$	(401,418)	Net income (loss) from continuing operations	$	48,299	$	94,447	$	104,089	$	(306,971)
Adjustments to continuing operations net income (loss):	Adjustments to continuing operations net income (loss):									Adjustments to continuing operations net income (loss):
Less net income attributable to noncontrolling interests	Less net income attributable to noncontrolling interests	(1,605)		(650)		(2,972)		(1,169)		Less net income attributable to noncontrolling interests	(1,394)		(2,238)		(4,366)		(3,407)
Total other expense, net	Total other expense, net	32,143		44,339		83,445		82,264		Total other expense, net	25,383		32,669		108,828		114,933
Provision (benefit) for income taxes	Provision (benefit) for income taxes	16,392		(12,808)		15,401		(79,763)		Provision (benefit) for income taxes	16,812		(2,799)		32,213		(82,562)
Depreciation and amortization	Depreciation and amortization	66,534		69,219		143,723		144,360		Depreciation and amortization	66,365		69,642		210,088		214,002
Share-based compensation	Share-based compensation	12,673		5,134		26,822		9,059		Share-based compensation	11,668		12,992		38,490		22,051
Goodwill and asset impairment charges(1)	Goodwill and asset impairment charges(1)	—		—		—		425,405		Goodwill and asset impairment charges(1)	—		—		—		425,405
Restructuring, acquisition and integration related expenses(2)	Restructuring, acquisition and integration related expenses(2)	17,783		36,522		34,211		51,194		Restructuring, acquisition and integration related expenses(2)	9,867		14,557		44,078		65,751
Loss on sale of assets		399		524		169		434
(Gain) loss on sale of assets										(Gain) loss on sale of assets	(25)		351		144		785
Note receivable charges(3)	Note receivable charges(3)	—		—		—		12,516		Note receivable charges(3)	—		—		—		12,516

Legal (settlement income) reserve charge(4)		—		(654)		—		1,196
Legal reserve charge(4)										Legal reserve charge(4)	—		—		—		1,196
Other retail expense(5)	Other retail expense(5)	1,394		—		3,003		—		Other retail expense(5)	355		—		3,358		—
Adjusted EBITDA of continuing operations	Adjusted EBITDA of continuing operations	202,475		127,642		359,592		244,078		Adjusted EBITDA of continuing operations	177,330		219,621		536,922		463,699
Adjusted EBITDA of discontinued operations(6)	Adjusted EBITDA of discontinued operations(6)	3,820		3,468		5,660		8,726		Adjusted EBITDA of discontinued operations(6)	2,168		2,587		7,828		11,313
Adjusted EBITDA	Adjusted EBITDA	$	206,295	$	131,110	$	365,252	$	252,804	Adjusted EBITDA	$	179,498	$	222,208	$	544,750	$	475,012

Income (loss) from discontinued operations, net of tax	Income (loss) from discontinued operations, net of tax	$	3,803	$	(16,076)	$	5,099	$	(12,050)	Income (loss) from discontinued operations, net of tax	$	1,653	$	(4,078)	$	6,752	$	(16,128)
Adjustments to discontinued operations net income:
Total other expense, net		—		(3)		—		(64)
Benefit for income taxes		(898)		(4,635)		(372)		(3,342)
Adjustments to discontinued operations net income (loss):										Adjustments to discontinued operations net income (loss):
Other income, net										Other income, net	—		(107)		—		(171)
Provision (benefit) for income taxes										Provision (benefit) for income taxes	713		20		341		(3,322)

Restructuring, store closure and other charges, net	Restructuring, store closure and other charges, net	915		24,182		933		24,182		Restructuring, store closure and other charges, net	(198)		6,752		735		30,934
Adjusted EBITDA of discontinued operations	Adjusted EBITDA of discontinued operations	$	3,820	$	3,468	$	5,660	$	8,726	Adjusted EBITDA of discontinued operations	$	2,168	$	2,587	$	7,828	$	11,313

(1)Fiscal 2020 reflects a goodwill impairment charge attributable to a reorganization of our reporting units and a sustained decrease in market capitalization and enterprise value of the Company, resulting in a decline in the estimated fair value of the U.S. Wholesale reporting unit. In addition, this charge includes a goodwill finalization charge attributable to the Supervalu acquisition and an asset impairment charge.

(2)Fiscal 2021 primarily reflects costs associated with advisory and transformational activities as we position our business for further value-creation post Supervalu ~~acquisition.~~acquisition, as well as costs associated with distribution center consolidations. Fiscal 2020 primarily reflects integration charges, closed property reserve charges and administrative and operational restructuring costs. Refer to Note 4—Restructuring, Acquisition and Integration Related Expenses in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

(3)Reflects reserves and charges for notes receivable issued by the Supervalu business prior to its acquisition to finance the purchase of stores by its customers.

(4)Reflects a charge to settle a legal proceeding, net of income received to settle a separate legal proceeding.

(5)Reflects expenses associated with event-specific damages to certain retail stores.

(6)We believe the inclusion of discontinued operations results within Adjusted EBITDA provides investors a meaningful measure of total performance.

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RESULTS OF OPERATIONS

Net Sales

Our net sales by customer channel was as follows (in millions except percentages):


		Net Sales for the 13-Week Period Ended				Increase (Decrease)				Net Sales for the 26-Week Period Ended				Increase (Decrease)				13-Week Period Ended				Increase (Decrease)				39-Week Period Ended				Increase (Decrease)
Customer Channel~~(1)~~(2)	Customer Channel~~(1)~~(2)	January 30, 2021		February 1, 2020		$		%		January 30, 2021		February 1, 2020		$		%			Customer Channel~~(1)~~(2)	May 1, 2021		May 2, 2020		$		%		May 1, 2021		May 2, 2020		$		%
Chains	Chains	$	3,097	$	2,909	$	188	6	%	$	6,117	$	5,784	$	333	6	%		Chains	$	2,949	$	3,125	$	(176)	(6)	%	$	9,066	$	8,909	$	157	2	%
Independent retailers	Independent retailers	1,701		1,561		140		9	%	3,373		3,118		255		8	%		Independent retailers	1,599		1,805		(206)		(11)	%	4,972		4,923		49		1	%
Supernatural	Supernatural	1,298		1,211		87		7	%	2,512		2,322		190		8	%		Supernatural	1,287		1,279		8		1	%	3,799		3,601		198		5	%
Retail	Retail	621		539		82		15	%	1,216		1,054		162		15	%		Retail	578		637		(59)		(9)	%	1,794		1,691		103		6	%
Other	Other	568		566		2		—	%	1,149		1,156		(7)		(1)	%		Other	580		599		(19)		(3)	%	1,729		1,755		(26)		(1)	%
Eliminations	Eliminations	(397)		(355)		(42)		12	%	(806)		(706)		(100)		14	%		Eliminations	(373)		(414)		41		(10)	%	(1,179)		(1,120)		(59)		5	%
Total net sales	Total net sales	$	6,888	$	6,431	$	457	7	%	$	13,561	$	12,728	$	833	7	%		Total net sales	$	6,620	$	7,032	$	(412)	(6)	%	$	20,181	$	19,760	$	421	2	%

(1)Refer to Note 3—Revenue Recognition in Part 1, Item 1 of this Quarterly Report on Form 10-Q for our channel definitions and for information regarding the recast of sales by customer channel to align with the current period presentation.

(2)As a result of displaying amounts in millions, rounding differences may exist in the table above.

~~Second~~Third Quarter

Our net sales for the ~~second~~third quarter of fiscal 2021 ~~increased~~decreased approximately ~~7.1%~~5.9% from the ~~second~~third quarter of fiscal 2020. The ~~increase~~decrease in net sales was primarily driven by ~~strong~~stronger customer demand in ~~response~~the third quarter of fiscal 2020 from the initial responses to the ~~pandemic~~pandemic. During the third quarter of fiscal 2020, we experienced a~~s well as the benefits from cross selling, which was partially offset by lower~~ surge in demand and sales ~~from previously lost customers and stores prior~~due to the ~~pandemic.~~effects of rapid changes in consumer purchasing habits that depleted our inventory levels at the end of the third quarter of fiscal 2020.

Chains ~~net sales increased~~ ~~primarily due to growth in sales to existing customers, including demand for center store~~ and ~~natural products driven by customers’ response to the pandemic, partially offset by lower sales from customers and stores lost prior to the pandemic.~~

Independent retailers net sales ~~increased~~decreased primarily ~~due to growth in sales to existing customers, including demand for center store and natural products~~ driven by ~~customers response~~stronger customer demand from the initial responses to the pandemic ~~partially offset by lower sales from previously lost customers and stores prior to~~experienced in the ~~pandemic.~~third quarter of fiscal 2020.

Supernatural net sales increased primarily due to ~~increased~~new store sales, ~~related~~partially offset by a decrease in sales due to the initial response to the pandemic ~~growth~~ in ~~existing and new product categories, and increased sales to existing and new stores, partially offset by~~ the ~~impact~~third quarter of ~~categories that have been adversely impacted by the pandemic, such as bulk and ingredients used for prepared foods~~fiscal 2020. . Net sales within our supernatural 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.

Retail’s net sales ~~increased~~decreased primarily due to a ~~15.3% increase~~9.0% decrease in identical store sales from ~~higher~~lower average basket sizes ~~related~~ compared

to the ~~pandemic.~~initial effects of the pandemic last year. Retail identical store sales are defined as net product sales from stores operating since the beginning of the prior-year period, including store expansions and excluding fuel costs and announced planned store dispositions. Identical store sales is a common metric used to understand the sales performance of retail stores as it removes the impact of new and closed stores. The increase in Retail sales included the benefit of a ~~187%~~27% increase in eCommerce sales at Cub Foods.

Other net sales ~~increased~~decreased primarily due to a decrease in military sales, partially offset by higher eCommerce sales.

Eliminations of net sales ~~which were~~decreased primarily ~~offset by a 41% (or $42 million) decline in~~due to lower Wholesale sales to ~~food service customers resulting from the lower purchases due to the pandemic.~~Retail.

Year-to-Date

Our net sales for fiscal 2021 year-to-date increased approximately ~~6.5%~~2.1% from fiscal 2020 year-to-date. The increase in net sales was primarily driven by strong customer demand in response to the pandemic as well as the benefits from cross selling, which was partially offset by lower sales from ~~previously lost~~ customers and stores lost prior to the pandemic.

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

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

Supernatural net sales increased primarily due to ~~increased~~growth in existing store sales related to the pandemic, including growth in ~~existing and new~~certain product categories, and increased sales to ~~existing and~~ new stores, partially offset by the impact of categories that have been adversely impacted by the pandemic, such as bulk and ingredients used for prepared foods.

Retail’s net sales increased primarily due to a ~~15.5%~~6.3% increase in identical store sales from higher average basket sizes related to the pandemic. The increase in Retail sales included the benefit of a ~~191%~~104% increase in eCommerce sales at Cub Foods.

Other net sales decreased primarily due to a ~~41%~~31% (or $90 million) decline in sales to food service customers resulting from the lower purchases due to the pandemic and a decrease in military sales, which were partially offset by higher eCommerce sales.

Eliminations of net sales increased primarily due to increased Wholesale sales to Retail.

Cost of Sales and Gross Profit

Our gross profit ~~increased $73.0~~decreased $83.4 million, or ~~8.0%~~7.9%, to ~~$990.4~~$966.8 million for the ~~second~~third quarter of fiscal 2021, from ~~$917.3~~$1,050.2 million for the ~~second~~third quarter of fiscal 2020. Our gross profit as a percentage of net sales ~~increased~~decreased to ~~14.38%~~14.60% for the ~~second~~third quarter of fiscal 2021 compared to ~~14.26%~~14.94% for the ~~second~~third quarter of fiscal 2020. The ~~increase~~decrease in gross profit dollar growth was primarily driven by ~~higher~~lower Wholesale and Retail sales volume. The 1234 basis point ~~increase~~decrease in gross profit rate was driven by ~~an increase from Retail, which contributed approximately 0.13% to the growth~~lower levels of supplier-related income in the ~~consolidated gross margin rate as a result of lower~~Wholesale segment. Retail ~~promotional spending and the Retail segment representing a greater percentage of total net sales. Wholesale and the remaining business’s~~ gross margin rate was approximately flat and included the benefits of lower shrink offset by lower levels of supplier-related income. Included in gross margin for the second quarter of fiscal 2020 was inventory shrink expense of approximately $4.2 million, or 0.07% of net sales, associated with customer bankruptcies.compared to last year.

Our gross profit increased ~~$132.3~~$48.9 million, or ~~7.3%~~1.7%, to ~~$1,956.9~~$2,923.7 million for fiscal 2021 year-to-date, from ~~$1,824.5~~$2,874.8 million for fiscal 2020 year-to-date. Our gross profit as a percentage of net sales ~~increased~~decreased to ~~14.43%~~14.49% for fiscal 2021 year-to-date compared to ~~14.33%~~14.55% for fiscal 2020 year-to-date. The increase in gross profit dollar growth for fiscal 2021 year-to-date when compared to fiscal 2020 year-to-date was primarily driven by higher Wholesale and Retail sales volume. The ~~increase~~decrease in gross profit rate was driven by a lower levels of vendor income in Wholesale, partially offset by an increase due to mix ~~increase~~ from ~~Retail resulting from lower promotional spending, and~~ the Retail segment representing a greater percentage of total net ~~sales. In addition, gross profit included~~sales and lower levels of ~~supplier-related income, partially offset by the benefits of lower shrink.~~promotional activity.

Operating Expenses

Operating expenses ~~increased $4.1~~decreased $44.5 million, or ~~0.5%~~4.9%, to ~~$866.9~~$866.5 million, or ~~12.59%~~13.09% of net sales, for the ~~second~~third quarter of fiscal 2021 compared to ~~$862.7~~$911.0 million, or ~~13.41%~~12.96% of net sales, for the ~~second~~third quarter of fiscal 2020. ~~Operating expenses in the second quarter of fiscal 2020 included $28.9 million of bad debt expense associated with customer bankruptcies.~~ The ~~remaining decrease~~increase in operating expenses as a percent of net sales resulted from ~~leveraging fixed operating expenses over higher net~~the deleveraging effect of lower sales, ~~and~~partially offset by lower ~~benefit~~pandemic-related costs. Total operating expenses also included share-based compensation expense of ~~$12.7~~$11.7 million and ~~$5.1~~$13.0 million for the ~~second~~third quarters of fiscal 2021 and 2020, respectively.

Operating expenses ~~increased $21.4~~decreased $23.1 million, or ~~1.2%~~0.9%, to ~~$1,767.8~~$2,634.3 million, or ~~13.04%~~13.05% of net sales, for fiscal 2021 year-to-date compared to ~~$1,746.4~~$2,657.4 million, or ~~13.72%~~13.45% of net sales, for fiscal 2020 year-to-date. Operating expenses in fiscal 2020 year-to-date included ~~$28.9~~$26.8 million of bad debt expense associated with customer bankruptcies, and ~~$18.8~~$20.3 million of charges and expenses, primarily related to customer notes receivable, surplus property depreciation and a legal reserve charge. The remaining decrease in operating expenses as a percent of net sales was driven by leveraging fixed operating expenses over higher net sales and lower benefit costs, which was partially offset by higher operating costs related to starting up three distribution centers. Total operating expenses also included share-based compensation expense of ~~$26.8~~$38.5 million and ~~$9.1~~$22.1 million for fiscal 2021 and 2020 year-to-date, respectively.

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Goodwill and Asset Impairment Charges

Goodwill and asset impairment charges of $425.4 million were recorded for fiscal 2020 year-to-date, which reflects $421.5 million from an impairment charge on the remaining goodwill attributable to the U.S. Wholesale goodwill reporting unit, $2.5 million related to purchase accounting adjustments to finalize the opening balance sheet goodwill and $1.4 million of other asset impairment charges. There were no goodwill impairment charges in fiscal 2021 year-to-date.

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Restructuring, Acquisition and Integration Related Expenses

Restructuring, acquisition and integration related expenses were ~~$17.8~~$9.9 million for the ~~second~~third quarter of fiscal 2021, which included ~~$14.7~~$12.0 million of ~~restructuring and integration~~ costs primarily ~~reflecting costs~~ associated with advisory and transformational activities as we position our business for further value creation post Supervalu acquisition, ~~and $3.1~~partially offset by $2.2 million of closed property ~~charges and costs.~~income. Expenses for the ~~second~~third quarter of fiscal 2020 were ~~$36.5~~$14.6 million, which included ~~$20.4~~$12.5 million of closed property charges and costs primarily related to lease asset impairments on Shoppers store and surplus properties exits, ~~$15.4~~$0.6 million of integration related costs ~~primarily related to a multiemployer pension plan withdrawal obligation resulting from distribution center consolidation~~ and ~~$0.7~~$1.5 million of restructuring costs.

Restructuring, acquisition and integration related expenses were ~~$34.2~~$44.1 million for fiscal 2021 year-to-date, which included ~~$29.4~~$41.5 million ~~of restructuring and integration costs primarily reflecting costs~~ associated with advisory and transformational activities as we position our business for further value creation post Supervalu acquisition and ~~$4.8~~$2.6 million of closed property charges and costs. Expenses for fiscal 2020 year-to-date were ~~$51.2~~$65.8 million, which included ~~$24.7~~$25.3 million of integration costs including a multiemployer pension plan withdrawal obligation resulting from distribution center consolidation, ~~and a charge for an off-site storage contract, $24.0~~$36.5 million closed property charges and costs primarily related to lease asset impairments on surplus properties and Shoppers store lease exits and ~~$2.5~~$4.0 million of restructuring costs.

We expect to incur additional costs associated with advisory and integration activities, and distribution center integration costs throughout fiscal 2021 related to our operational restructuring to achieve cost synergies and supply chain efficiencies within continuing operations.

Operating Income (Loss)

Reflecting the factors described above, operating income ~~increased $87.8~~decreased $33.8 million to ~~$105.3~~$90.5 million for the ~~second~~third quarter of fiscal 2021, compared to ~~$17.5~~$124.3 million for the ~~second~~third quarter of fiscal 2020. The operating income ~~increase~~decrease was primarily driven by ~~an increase~~a decrease in gross profit in excess of lower operating expenses and ~~lower~~ Restructuring, acquisition and integration related expenses discussed above.

Reflecting the factors described above, operating income increased ~~$553.6~~$519.7 million, to ~~$154.6~~$245.1 million for fiscal 2021 year-to-date, from an operating loss of ~~$398.9~~$274.6 million for fiscal 2020 year-to-date. The increase in operating income was primarily driven by the fiscal 2020 goodwill impairment charge, an increase in gross profit in excess of operating expenses and lower Restructuring, acquisition and integration related expenses discussed above.

Total Other Expense, Net


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				39-Week Period Ended
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		January 30, 2021		February 1, 2020		(in thousands)	May 1, 2021		May 2, 2020		May 1, 2021		May 2, 2020
Net periodic benefit income, excluding service cost	Net periodic benefit income, excluding service cost	$	(17,127)	$	(3,277)	$	(34,160)	$	(14,661)	Net periodic benefit income, excluding service cost	$	(17,128)	$	(12,758)	$	(51,288)	$	(27,419)
Interest expense on long-term debt, net of capitalized interest	Interest expense on long-term debt, net of capitalized interest	37,793		43,137		74,989		86,676		Interest expense on long-term debt, net of capitalized interest	35,194		41,053		110,183		127,729
Interest expense on finance lease obligations	Interest expense on finance lease obligations	4,678		2,020		9,546		4,263		Interest expense on finance lease obligations	4,619		2,974		14,165		7,237
Amortization of financing costs and discounts	Amortization of financing costs and discounts	3,010		3,790		7,009		7,733		Amortization of financing costs and discounts	3,019		3,837		10,028		11,570
Loss on debt extinguishment	Loss on debt extinguishment	5,744		—		29,494		73		Loss on debt extinguishment	879		—		30,373		73
Interest income	Interest income	(281)		(111)		(961)		(200)		Interest income	(211)		(595)		(1,172)		(795)
Interest expense, net	Interest expense, net	50,944		48,836		120,077		98,545		Interest expense, net	43,500		47,269		163,577		145,814
Other, net	Other, net	(1,674)		(1,220)		(2,472)		(1,620)		Other, net	(989)		(1,842)		(3,461)		(3,462)
Total other expense, net	Total other expense, net	$	32,143	$	44,339	$	83,445	$	82,264	Total other expense, net	$	25,383	$	32,669	$	108,828	$	114,933

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The increase in net periodic benefit income, excluding service costs in the ~~second~~third quarter of fiscal 2021 and year-to-date fiscal 2021 reflects the recognition of lower interest costs due to a lower discount rate utilized in the measurement of pension liabilities.

The decrease in interest expense on long-term debt, net of capitalized interest, in the ~~second~~third quarter of fiscal 2021 and year-to-date fiscal 2021 was driven by lower amounts of outstanding debt.

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The increase in loss on debt extinguishment costs primarily reflects the acceleration of unamortized debt issuance costs and original issue discounts related to mandatory and voluntary prepayments on the Term Loan Facility made inand financing costs expensed related to the ~~second quarter of fiscal 2021 and~~First Term Loan Amendment in fiscal 2021 year-to-date. Refer to Note 8—Long-Term Debt for further information.

The increase in interest expense on finance leases in the ~~second~~third quarter of fiscal 2021 and year-to-date fiscal 2021 primarily reflects interest related to a distribution center for which we executed a purchase option with a delayed purchase provision.

Provision (Benefit) for Income Taxes

The effective income tax rate for continuing operations was an expense of ~~22.4% on pre-tax income~~25.8% compared to a benefit of ~~47.8%~~3.1% on pre-tax ~~losses~~income for the ~~second quarters~~third quarter of fiscal 2021 and 2020, respectively. The change in the ~~effective income tax~~ rate for the ~~second~~ quarter ~~of fiscal 2021~~ was primarily driven by the impact of a ~~pre-tax~~tax benefit from the revaluation of net operating loss ~~of approximately $26.8 million~~deferred tax assets in the ~~second~~third quarter of fiscal 2020 ~~compared~~due to ~~pre-tax income~~passage of ~~approximately $73.2 million in~~ the second quarter of fiscal 2021. In addition, the change in the rate is partially driven by a discrete tax benefit of approximately $2.8 million in the second quarter of fiscal 2021 related to the release of unrecognized tax positions versus a discrete tax benefit of approximately $0.5 million for this item in the second quarter of fiscal 2020. The tax provision had $3.1 million and $0.1 million of discrete tax benefits, including those mentioned above, for the second quarters of fiscal 2021 and fiscal 2020, respectively.CARES Act.

Income (Loss) from Discontinued Operations, Net of Tax

The results of discontinued operations for the ~~second~~third quarter of fiscal 2021 reflect net sales of ~~$23.0~~$20.0 million for which we recognized ~~$7.2~~$6.8 million of gross profit and ~~Income (loss)~~income from discontinued operations, net of tax of ~~$3.8~~$1.7 million. Net sales and gross profit of discontinued operations decreased ~~$52.1~~$10.1 million and ~~$11.3~~$1.7 million, respectively, for the ~~second~~third quarter of fiscal 2021 as compared to the ~~second~~third quarter of fiscal 2020 primarily due to a lower operating store base due to closures and sales that occurred in fiscal ~~2020, which was partially offset by an increase in identical store sales results driven by the impacts of the pandemic.~~2020.

The results of discontinued operations for fiscal 2021 year-to-date reflect net sales of ~~$47.8~~$67.8 million for which we recognized ~~$15.3~~$22.1 million of gross profit and ~~Income (loss)~~income from discontinued operations, net of tax of ~~$5.1~~$6.8 million. Net sales and gross profit of discontinued operations decreased ~~$122.9~~$133.0 million and ~~$33.8~~$35.5 million, respectively, for the fiscal 2021 year-to-date as compared to fiscal 2020 year-to-date primarily due to a lower operating store base due to closures and sales that occurred in fiscal 2020 year-to-date, which was partially offset by an increase in identical store sales results driven by the impacts of the pandemic. Discontinued operations for fiscal 2020 year-to-date included ~~$24.2~~$30.9 million of charges and costs primarily related to store closures charges and expenses, and asset impairment charges related to exited locations.

Refer to the section above Executive Overview—Divestiture of Retail Operations and to Note 16—Discontinued Operations in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional financial information regarding these discontinued operations.

Net Income (Loss) Attributable to United Natural Foods, Inc.

Reflecting the factors described in more detail above, Net income attributable to United Natural Foods, Inc. was ~~$59.0~~$48.6 million, or ~~$1.00~~$0.80 per diluted common share, for the ~~second~~third quarter of fiscal 2021, compared to ~~a net loss of $30.7~~$88.1 million, or ~~$0.57 loss~~$1.60 per diluted common share, for the ~~second~~third quarter of fiscal 2020.

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Reflecting the factors described in more detail above, Net income attributable to United Natural Foods, Inc. was ~~$57.9~~$106.5 million, or ~~$0.98~~$1.78 per diluted common share, for fiscal 2021 year-to-date, compared to a net loss of ~~414.6~~326.5 million, or ~~$7.77~~$6.10 loss per diluted common share, for fiscal 2020 year-to-date, which was driven lower due to goodwill impairment charges.

As described in more detail in Note 10—Share-Based Awards in Part I, Item I of this Quarterly Report on Form 10-Q, in fiscal 2021 year-to-date, we granted restricted stock units and performance share units representing a right to receive an aggregate of ~~2.6~~2.7 million shares of common stock under our 2020 Equity Incentive Plan.

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LIQUIDITY AND CAPITAL RESOURCES

Highlights

•Total liquidity as of ~~January 30,~~May 1, 2021 was ~~$1.16 billion~~$1,182.3 million and consisted of the following:

◦Unused credit under our ABL Credit Facility was ~~$1,117.8~~$1,142.8 million, which decreased ~~$117.0~~$92.0 million from $1,234.8 million as of August 1, 2020, primarily due to an incremental borrowing under the ABL Credit Facility in the second quarter of fiscal 2021 to fund the voluntary prepayment of $150.0 million on the Term Loan Facility.

◦Cash and cash equivalents was ~~$40.5~~$39.5 million, which decreased ~~$6.5~~$7.5 million from $47.0 million as of August 1, 2020.

•Our total debt decreased ~~$110.4~~$170.2 million to ~~$2,387.2~~$2,327.4 million as of ~~January 30,~~May 1, 2021 from $2,497.6 million as of August 1, 2020, primarily driven by net positive cash flows from operating activities, partially offset by cash capital expenditures, during fiscal 2021 year-to-date.

•~~Subsequent to~~In the ~~end of the second~~third quarter of fiscal 2021, we amended our Term Loan Agreement ~~which,~~to, among other things, ~~reduced~~reduce the applicable margin for LIBOR and base rate loans under the Term Loan Facility by 75 basis points.

•In the second quarter of fiscal 2021, we made a voluntary prepayment of $150.0 million on the Term Loan Facility funded with incremental borrowings under the ABL Credit Facility that will reduce our interest costs. This prepayment will count towards satisfying any requirement to make a mandatory prepayment with Excess Cash Flow (as defined in the Term Loan Agreement) generated during fiscal 2021, if any, which would be due in fiscal 2022.

•In the first quarter of fiscal 2021, we issued $500.0 million of unsecured 6.750% Senior Notes due October 15, 2028 (the “Senior Notes”) and utilized the net proceeds and borrowings under the ABL Credit Facility to make a $500.0 million prepayment on our Term Loan Facility. In addition, during the first quarter of fiscal 2021, the Company made $108.0 million of additional repayments under the Term Loan Facility, including $72.0 million related to cash flow generated in fiscal 2020, as required under the Term Loan Agreement and a voluntary prepayment of $36.0 million with incremental borrowings under the ABL Credit Facility. Other debt maturities are expected to be $6.5 million in fiscal 2021. We are also obligated to make payments to reduce finance lease obligations. Proceeds from the sale of any properties mortgaged and encumbered under our Term Loan Facility are required to be used to make additional Term Loan Facility payments or to be reinvested in the business.

•We expect to be able to fund near-term debt maturities through fiscal 2023 with internally generated funds, proceeds from asset sales or borrowings under the ABL Credit Facility, which expires in fiscal 2024.

•Working capital ~~increased $20.2~~decreased $14.0 million to ~~$1,355.1~~$1,320.9 million as of ~~January 30,~~May 1, 2021 from $1,334.8 million as of August 1, 2020, primarily due to the collection of tax refunds related to prior year tax returns, partially offset by a reduction of the current portion of long-term debt resulting from the Term Loan Facility Excess Cash Flow prepayment described above.

Sources and Uses of Cash

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

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

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Primary uses of cash include debt service, capital expenditures, working capital maintenance and income tax 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, and have no current plans to do so. In addition, we are limited in the aggregate amount of dividends that we may pay under the terms of our Term Loan Facility, ABL Credit Facility, and Senior Notes. Subject to certain limitations contained in our debt agreements and as market conditions warrant, we may from time to time refinance indebtedness that we have 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 encumbered under our Term Loan Facility are required to be used to make additional Term Loan Facility payments or to be reinvested in the business.

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Long-Term Debt

During fiscal 2021 year-to-date, we borrowed a net ~~$128.3~~$82.6 million under the ABL Credit Facility, repaid ~~$758.0~~$770.7 million on the Term Loan Facility related to mandatory prepayments and voluntary prepayments, and issued $500.0 million of Senior Notes. Refer to Note 8—Long-Term Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements and additional information.

Our Term Loan Agreement and Senior Notes do not include any financial maintenance covenants. Our ABL Loan Agreement subjects us to a fixed charge coverage ratio (as defined in the ABL Loan Agreement) of at least 1.0 to 1.0 calculated at the end of each of our fiscal quarters on a rolling four quarter basis, if the adjusted aggregate availability (as defined in the ABL Loan Agreement) is ever less than the greater of (i) $235.0 million and (ii) 10% of the aggregate borrowing base. We have not been subject to the fixed charge coverage ratio covenant under the ABL Loan Agreement, including through the filing date of this Quarterly Report. The Term Loan Agreement, ABL Loan Agreement and Senior Notes contain certain operational and informational covenants customary for debt securities of these types that limit the ability of the Company and its restricted subsidiaries to, among other things, incur debt, declare or pay dividends or make other distributions to stockholders of the Company, transfer or sell assets, create liens on our assets, engage in transactions with affiliates, and merge, consolidate or sell all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis. We were in compliance with all such covenants for all periods ~~presented..~~presented. If we fail to comply with any of these covenants, we may be in default under the applicable loan 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 overall strategy to manage our debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates. Interest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures.

As of ~~January 30,~~May 1, 2021, we had an aggregate of ~~$1,485.0~~$1,234.0 million of floating rate notional debt subject to active interest rate swap contracts, which effectively hedge the LIBOR component of our interest rate payments through pay fixed and receive floating interest rate swap agreements. These fixed rates range from 1.795% to 2.959%, with maturities between ~~April~~August 2022 and October 2025. The fair value of these interest rate derivatives represents a total net liability of ~~$101.2~~$79.7 million and are subject to volatility based on changes in market interest rates. See Note 7—Derivatives in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

In the third quarter of fiscal 2021, we paid $6.3 million to terminate $250.0 million of notional value interest rate swaps. In the first quarter of fiscal 2021, we paid $11.3 million to terminate $954.0 million of notional value interest rate swaps, $504.0 million of which were effective interest swaps and $450.0 million of which were forward starting. The termination ~~payment~~payments reflects the amount of accumulated other comprehensive loss that will continue to be amortized into interest expense over the original interest rate swap contract terms as long as the hedged interest rate transactions are still probable of occurring.

From time to time, we enter into fixed price fuel supply agreements and foreign currency hedges. As of ~~January 30,~~May 1, 2021, we had fixed price fuel contracts outstanding and foreign currency forward agreements outstanding. Gains and losses and the outstanding net liability from these arrangements are insignificant.

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Capital Expenditures

Our capital expenditures for fiscal 2021 year-to-date were ~~$91.5~~$165.5 million, compared to ~~$91.1~~$126.8 million for fiscal 2020 year-to-date, an increase of ~~$0.4~~$38.7 million. In fiscal 2021 year-to-date, our capital expenditures principally included information technology and supply chain ~~expenditures.~~expenditures, including related to the new Allentown, PA distribution center. Fiscal 2021 capital spending is expected to be in the range of $250 million to $300 million and include projects that optimize and expand our distribution network and our technology platform. Longer term, capital spending is expected to be at or below 1.0% of net sales. We expect to finance requirements with cash generated from operations and borrowings under our ABL Credit Facility. Future investments may be financed through long-term debt or borrowings under our ABL Credit Facility.

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Cash Flow Information

The following summarizes our Condensed Consolidated Statements of Cash Flows:


		26-Week Period Ended							39-Week Period Ended
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		Change		(in thousands)	May 1, 2021		May 2, 2020		Change
Net cash provided by operating activities of continuing operations	Net cash provided by operating activities of continuing operations	$	205,675	$	34,730	$	170,945	Net cash provided by operating activities of continuing operations	$	334,370	$	449,228	$	(114,858)
Net cash used in investing activities of continuing operations	Net cash used in investing activities of continuing operations	(51,705)		(80,270)		28,565		Net cash used in investing activities of continuing operations	(112,239)		(99,533)		(12,706)
Net cash (used in) provided by financing activities of continuing operations		(163,492)		15,649		(179,141)
Net cash used in financing activities of continuing operations								Net cash used in financing activities of continuing operations	(233,657)		(365,485)		131,828
Net cash provided by discontinued operations	Net cash provided by discontinued operations	2,791		26,937		(24,146)		Net cash provided by discontinued operations	3,597		29,554		(25,957)
Effect of exchange rate on cash	Effect of exchange rate on cash	265		19		246		Effect of exchange rate on cash	443		(290)		733
Net decrease in cash and cash equivalents		(6,466)		(2,935)		(3,531)
Net (decrease) increase in cash and cash equivalents								Net (decrease) increase in cash and cash equivalents	(7,486)		13,474		(20,960)
Cash and cash equivalents, at beginning of period	Cash and cash equivalents, at beginning of period	47,117		45,263		1,854		Cash and cash equivalents, at beginning of period	47,117		45,263		1,854
Cash and cash equivalents, at end of period	Cash and cash equivalents, at end of period	$	40,651	$	42,328	$	(1,677)	Cash and cash equivalents, at end of period	$	39,631	$	58,737	$	(19,106)

The ~~increase~~decrease in net cash provided by operating activities of continuing operations for fiscal 2021 year-to-date compared to fiscal 2020 year-to-date was primarily due to ~~lower~~higher levels of cash utilized ~~to build inventories, and~~in working capital. In fiscal 2020 year-to-date, higher ~~earnings before taxes, depreciation and amortization, and impairments.~~levels of cash were realized on the sale of inventory at a faster rate than accounts payable were paid driven by the initial impacts of the pandemic.

The ~~decrease~~increase in net cash used in investing activities of continuing operations for fiscal 2021 year-to-date compared to fiscal 2020 year-to-date was primarily due to higher ~~cash~~capital expenditures, partially offset by higher proceeds ~~for the sale of property and equipment.~~from asset sales.

The ~~increase~~decrease in net cash used in financing activities of continuing operations for fiscal 2021 year-to-date compared to fiscal 2020 year-to-date was ~~primarily~~ due to ~~higher payments of long-term debt attributable~~less cash available to ~~the mandatory and voluntary prepayments on the Term Loan Facility, partially offset by new borrowings from the Senior Notes.~~be used in financing activities to reduce outstanding debt.

The decrease in cash flows from discontinued operations for fiscal 2021 year-to-date compared to fiscal 2020 year-to-date was primarily due to lower cash provided by investing activities ~~cash flow~~ from the sale of property.

Other

On October 6, 2017, we announced that our Board of Directors authorized a share repurchase program for up to $200.0 million of our outstanding common stock. The repurchase program is scheduled to expire upon our repurchase of shares of our common stock having an aggregate purchase price of $200.0 million. We did not purchase any shares of our common stock in fiscal 2021 and 2020 year-to-date pursuant to the share repurchase program. As of ~~January 30,~~May 1, 2021, we have $175.8 million remaining authorized under the share repurchase program. We do not expect to purchase shares under the share repurchase program during fiscal 2021. Additionally, our ABL Credit Facility, Term Loan Facility, and Senior Notes contain terms that limit our ability to repurchase shares of common stock above certain levels unless certain conditions and financial tests are met.

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Pension and Other Postretirement Benefit Obligations

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

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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						26-Week Period Ended							13-Week Period Ended						39-Week Period Ended
(in thousands)	(in thousands)	January 30, 2021		February 1, 2020		Change		January 30, 2021		February 1, 2020		Change		(in thousands)	May 1, 2021		May 2, 2020		Change		May 1, 2021		May 2, 2020		Change
Net sales:	Net sales:													Net sales:
Wholesale	Wholesale	$	6,608,775	$	6,206,918	$	401,857	$	13,040,058	$	12,274,225	$	765,833	Wholesale	$	6,359,810	$	6,749,984	$	(390,174)	$	19,399,868	$	19,024,209	$	375,659
Retail	Retail	620,871		538,629		82,242		1,215,782		1,053,855		161,927		Retail	578,246		636,887		(58,641)		1,794,028		1,690,742		103,286
Other	Other	55,428		41,073		14,355		111,040		106,152		4,888		Other	54,808		58,359		(3,551)		165,848		164,511		1,337
Eliminations	Eliminations	(396,941)		(355,238)		(41,703)		(806,140)		(706,238)		(99,902)		Eliminations	(373,022)		(413,512)		40,490		(1,179,162)		(1,119,750)		(59,412)
Total Net sales	Total Net sales	$	6,888,133	$	6,431,382	$	456,751	$	13,560,740	$	12,727,994	$	832,746	Total Net sales	$	6,619,842	$	7,031,718	$	(411,876)	$	20,180,582	$	19,759,712	$	420,870
Continuing operations Adjusted EBITDA:	Continuing operations Adjusted EBITDA:													Continuing operations Adjusted EBITDA:
Wholesale	Wholesale	$	186,768	$	102,454	$	84,314	$	309,729	$	208,766	$	100,963	Wholesale	$	161,073	$	199,884	$	(38,811)	$	470,802	$	408,650	$	62,152
Retail	Retail	25,330		11,428		13,902		49,612		21,990		27,622		Retail	21,547		36,931		(15,384)		71,159		58,921		12,238
Other	Other	(7,845)		14,425		(22,270)		(3,695)		12,828		(16,523)		Other	85		(17,247)		17,332		(3,610)		(4,419)		809
Eliminations	Eliminations	(1,778)		(665)		(1,113)		3,946		494		3,452		Eliminations	(5,375)		53		(5,428)		(1,429)		547		(1,976)
Total continuing operations Adjusted EBITDA	Total continuing operations Adjusted EBITDA	$	202,475	$	127,642	$	74,833	$	359,592	$	244,078	$	115,514	Total continuing operations Adjusted EBITDA	$	177,330	$	219,621	$	(42,291)	$	536,922	$	463,699	$	73,223

Net Sales

~~Second~~Third Quarter

Wholesale’s net sales ~~increased~~decreased primarily due to ~~growth in sales to existing customers in the Chains, Independent retailers and Supernatural channels. Sales growth was primarily driven by strong~~stronger customer demand ~~in response~~during the initial responses to the pandemic ~~as well as~~experienced in the ~~benefits from cross selling, which was partially offset by lower sales from previously lost customers and stores prior to the pandemic.~~third quarter of fiscal 2020.

Retail’s net sales ~~increased~~decreased primarily due to a ~~15.3% increase~~9.0% decrease in identical store sales from ~~higher~~lower average basket sizes ~~related~~ compared

to the ~~pandemic.~~initial effects of the pandemic last year.

The ~~increase~~decrease in eliminations net sales was driven by ~~higher~~lower Wholesale sales to Retail related to ~~support Retail’s continued sales growth.~~the pandemic.

Year-to-Date

Wholesale’s net sales increased primarily due to growth in sales to existing customers in the Chains, Independent retailers and Supernatural channels. Sales growth was primarily driven by strong customer demand in response to the pandemic, as well as the benefits from cross selling, which was partially offset by lower sales from ~~previously lost~~ customers and stores lost prior to the pandemic.

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Retail’s net sales increased primarily due to a ~~15.5%~~6.3% increase in identical store sales from higher average basket sizes related to the pandemic.

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

Adjusted EBITDA

~~Second~~Third Quarter

Wholesale’s Adjusted EBITDA ~~increased 82.3%~~decreased 19.4% for the ~~second~~third quarter of fiscal 2021 from the ~~second~~third quarter of fiscal 2020. The ~~increase~~decrease was driven by ~~leveraged~~lower sales ~~growth.~~volume. Wholesale’s gross profit dollar ~~growth~~decline for the ~~second~~third quarter of fiscal 2021 was ~~$49.5~~$62.0 million and gross profit rate decreased by 19 basis points driven by lower levels of suppler-related income. Wholesale’s operating expense decreased $23.2 million, which excludes depreciation and amortization, stock-based compensation and other adjustments as outlined in Note 14—Business Segments, driven by lower operating expenses from sales volume and lower pandemic-related costs. Wholesale’s operating expense rate increased 24 basis points primarily driven by the deleveraging effect from fixed and variable costs on lower sales volume, partially offset by lower pandemic-related costs. Wholesale depreciation expense decreased $8.6 million compared to last year.

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Retail’s Adjusted EBITDA decreased 41.7% for the third quarter of fiscal 2021 from the third quarter of fiscal 2020. The decrease was driven by lower sales volume. Retail’s gross profit dollar decline for the third quarter of fiscal 2021 was $15.9 million and gross profit rate was ~~flat to the second quarter of fiscal 2020; however, it included the benefits of lower shrink offset by lower levels of supplier-related income. Wholesale’s~~flat. Retail’s operating expense ~~excluding~~increased $0.3 million, which excludes depreciation and amortization, ~~and~~ stock-based compensation ~~decreased $34.8 million driven by $28.9 million of lower bad debt expense associated with customer bankruptcies. Wholesale’s~~and other adjustments as outlined in Note 14—Business Segments, and operating expense rate ~~decreased 117~~increased 222 basis points ~~primarily~~ driven by ~~leveraging~~the deleveraging effect from fixed and variable costs ~~and~~on lower ~~bad debt expense. Wholesale depreciation expense decreased $7.0 million compared to last year.~~

~~Retail’s Adjusted EBITDA increased 121.6% for the second quarter of fiscal 2021 from the second quarter of fiscal 2020. The increase was driven by leveraged~~ sales growth from increases in food-at-home purchases that drove sales at our stores. Wholesale’s gross profit dollar growth for the second quarter of fiscal 2021 was $26.3 million and gross profit rate increased 76 basis points from lower promotional activity. Retail’s operating expense increased $11.4 million, excluding depreciation and amortization and stock-based compensation, and operating expense rate decreased 133 basis points driven by fixed and variable cost leveraging.volume. Retail’s depreciation and amortization expense increased ~~$5.9~~$6.2 million primarily related to assets previously classified as held for sale that were moved to continuing operations in the fourth quarter of fiscal 2020 for which we are required to begin recording depreciation and amortization expense.

Other’s Adjusted EBITDA increase was primarily driven by higher incentive compensation expenses in the third quarter of fiscal 2020 resulting from the expected impacts of the pandemic.

Year-To-Date

Wholesale’s Adjusted EBITDA increased ~~48.4%~~15.2% for fiscal 2021 year-to-date from fiscal 2020 year-to-date. The increase was driven by leveraged sales growth, which was partially offset by higher operating costs related to starting up three distribution centers. Gross profit dollar growth for fiscal 2021 year-to-date was ~~$77.8~~$15.8 million and gross profit rate decreased 1316 basis points driven by lower supplier ~~income, partially offset by lower shrink.~~income. Wholesale’s operating expense ~~increased $23.2~~decreased $46.3 million, ~~excluding~~which excludes depreciation and amortization, stock-based compensation and ~~stock-based compensation.~~other adjustments as outlined in Note 14—Business Segments. Wholesale’s operating expense rate decreased 8044 basis points primarily driven by leveraging fixed and variable costs, and lower bad debt expense, which was partially offset by higher operating costs related to starting up three distribution centers. Wholesale depreciation expense decreased ~~$7.2~~$15.8 million.

Retail’s Adjusted EBITDA increased ~~125.6%~~20.8% for fiscal 2021 year-to-date from fiscal 2020 year-to-date. The increase was driven by leveraged sales growth from increases in food-at-home purchases that drove sales at our stores. Gross profit dollar growth for fiscal 2021 year-to-date was ~~$53.4~~$37.5 million and gross profit rate increased 8755 basis points from lower promotional activity. Retail’s operating expense increased ~~$23.9~~$24.3 million, ~~excluding~~which excludes depreciation and amortization, ~~and~~ stock-based compensation and other adjustments as outlined in Note 14—Business Segments, and operating expense rate ~~decreased 125~~increased 2 basis ~~points driven by fixed and variable cost leveraging.~~points. Retail’s depreciation and amortization expense increased ~~$11.9~~$18.0 million primarily related to assets previously classified as held for sale that were moved to continuing operations in the fourth quarter of fiscal 2020 for which we are required to begin recording depreciation and amortization expense.

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COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

Off-Balance Sheet Arrangements

Guarantees and Contingent Liabilities

We have outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of ~~January 30,~~May 1, 2021. We are contingently liable for leases that have been assigned to various parties in connection with facility closings and dispositions. We are also a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. Refer to Note 15—Commitments, Contingencies and Off-Balance Sheet Arrangements under the caption Guarantees and Contingent Liabilities in Part I, Item I of this Quarterly Report on Form 10-Q for further information regarding our outstanding guarantees and contingent liabilities.

Multiemployer Benefit Plans

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

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

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

Refer to Note 14—Benefit Plans in Part II, Item 8 of the Annual Report on Form 10-K for the fiscal year ended August 1, 2020 for additional information regarding the plans in which we participate.

Contractual Obligations

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

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Critical Accounting Policies and Estimates

There were no material changes to our critical accounting policies during the period covered by this Quarterly Report on Form 10-Q. Refer to the description of critical accounting policies included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended August 1, 2020.

Seasonality

Generally, we do not experience any material seasonality. However, our inventory levels and related demand for certain products of a seasonal nature may be influenced by holidays, changes in seasons or other annual events. In addition, our sales and operating results may vary significantly from quarter to quarter due to factors such as changes in our operating expenses, management’s ability to execute our operating and growth strategies, demand for our products, supply shortages and general economic conditions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk results primarily from fluctuations in interest rates on our borrowings and our interest rate swap agreements, and price increases in diesel fuel. Except as described in Note 7—Derivatives and Note 8—Long-Term Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q, which are incorporated herein, there have been no other material changes to our exposure to market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended August 1, 2020.

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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 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 ~~second~~third quarter of fiscal 2021 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, 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, products liability, real estate and antitrust. Other than as set forth ~~below and~~ in Note 15—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part I, Item I of this Quarterly Report on Form 10-Q, which is incorporated herein, there are no pending material legal proceedings to which we are a party or to which our property is subject.

In 2016, as part of a hazardous waste enforcement campaign by the California Attorney General’s Office and local district attorneys, Unified Grocers received a subpoena from the Yolo County District Attorney regarding hazardous waste management and storage at its Stockton and Commerce, California distribution centers. We have provided requested documents and cooperated fully with the investigation. On May 24, 2018, the District Attorney toured the Stockton distribution center and generally found the distribution center to be in compliance, and minor items noted regarding labeling have been addressed. In the second quarter of fiscal 2021, we negotiated a settlement with the District Attorney, which includes the payment of an immaterial amount for penalties and costs as well as certain agreed upon additional reporting and compliance obligations. The settlement is memorialized in a Stipulation for Entry of Final Judgment and Permanent Injunction signed by all parties. The Court entered the order approving the final judgment and injunction on December 10, 2020.

Item 1A. Risk Factors

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

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

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


(in millions, except shares and per share amounts)	(in millions, except shares and per share amounts)	Total Number of Shares Purchased(2)	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(3)		(in millions, except shares and per share amounts)	Total Number of Shares Purchased(2)	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(3)
Period(1):	Period(1):							Period(1):
November 1, 2020 to December 5, 2020		320	$	16.62	—	$	—
December 6, 2020 to January 2, 2021		1,655	15.63		—	—
January 3, 2021 to January 30, 2021		347	22.81		—	175.8
January 31, 2021 to March 6, 2021								January 31, 2021 to March 6, 2021	100,646	$	27.01	—	$	—
March 7, 2021 to April 3, 2021								March 7, 2021 to April 3, 2021	7,542	34.10		—	—
April 4, 2021 to May 1, 2021								April 4, 2021 to May 1, 2021	2,198	35.43		—	175.8
Total	Total	2,322	$	16.84	—	$	—	Total	110,386	$	27.67	—	$	—

(1)The reported periods conform to our fiscal calendar.

(2)These amounts represent the deemed surrender by participants in our compensatory stock plans of ~~2,322~~110,386 shares of our common stock to cover taxes from the vesting of restricted stock awards and restricted stock units granted under such plans.

(3)As of ~~January 30,~~May 1, 2021, there was approximately $175.8 million that may yet be purchased under the share repurchase program. There were no share repurchases under the share repurchase program in the ~~second~~third quarter of fiscal 2021.

~~Item 5. Other Information~~

On March 9, 2021, we entered into the Second Amendment to Mr. Spinner’s Amended and Restated Employment Agreement (“Employment Agreement”), which had been amended pursuant to the First Amendment entered into on February 6, 2020 (“First Amendment”). In the First Amendment, Mr. Spinner agreed to serve as the Company’s CEO until the earlier of July 31, 2021, or the appointment of a new CEO as his successor. The First Amendment set forth certain payments to Mr. Spinner in connection with his agreement to extend the Employment Agreement significantly beyond Mr. Spinner’s desired retirement date.

With the active continuation of the Company’s search for a CEO to replace Mr. Spinner, which, as previously announced, includes both internal and external candidates, the Board requested and Mr. Spinner has agreed, to extend the date of his services as either CEO, or after a new CEO is appointed, to provide consultancy services, as applicable, for an additional three months from the end of his current Employment Agreement (July 31, 2021), to October 31, 2021.

In particular, the Second Amendment provides that Mr. Spinner will continue to serve as CEO until his successor is appointed (the “Transition Date”), but no later than October 31, 2021; and, Mr. Spinner will, at the Company’s discretion, continue to serve as an executive management and board advisor for twelve months after the Transition Date. In exchange for Mr. Spinner agreeing to serve as the Company’s CEO until the Transition Date, and thereafter to provide consultancy services to the Company, if applicable, until at least October 31, 2021, and, at the Company’s discretion, for up to twelve months after the Transition Date, the Company has agreed, that:

a.with respect to the Company’s 2021 fiscal year, Mr. Spinner’s annual cash incentive compensation (short-term bonus) that otherwise would be prorated under the First Amendment if Mr. Spinner ceased being CEO prior to July 31, 2021, will not be prorated regardless of when the Transition Date occurs;

b.with respect to the Company’s 2022 fiscal year, provided that Mr. Spinner is serving as CEO on or after August 1, 2021, Mr. Spinner’s 2022 cash incentive compensation shall be prorated, on an annual basis based on the number of full calendar months elapsed in the fiscal year between August 1, 2021 and the Transition Date (three months maximum to October 31, 2021), based on Mr. Spinner’s cash incentive target of $1,800,000;

c.Mr. Spinner’s fiscal 2021 equity award under the long-term incentive plan, granted in October of 2020, that otherwise would be prorated under the First Amendment if Mr. Spinner ceased being CEO prior to October 12, 2021, will not be prorated regardless of when the Transition Date occurs; and

d.as of the Transition Date, when Mr. Spinner ceases to be CEO, and begins to provide consultant services, his compensation as CEO shall end, except as described above, and he will receive, on an annualized basis, $250,000 in consideration for the consultant services.

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~~The Second Amendment also expressly provides~~Item 5. Other Information

Following a review of our severance program, the Compensation Committee of our Board determined that ~~Mr. Spinner shall not be eligible for any additional equity grants under~~it was in the long-term incentive plan whatsoever, for fiscal year 2022 or otherwise, even if he remains the Company’s CEO after the fiscal year 2022 equity grant date on or about October 15, 2021. Except as described above, allbest interest of the Company to provide for prorated vesting upon certain specified severance events, excluding terminations for “Cause” or other ~~material terms of Mr. Spinner’s~~exclusions set forth in the Amended and Restated ~~Employment Agreement~~2020 Equity Incentive Plan (the “Plan”). After consultation with the Compensation Committee’s independent compensation consultant, the Committee determined that such modifications were consistent with market practice for equity plan participants. The Committee believed that the complete forfeiture of equity upon severance was overly punitive in light of the long-term performance required prior to termination, and for performance awards, continued performance, for vesting and settlement of such awards. Rather, the Committee believed that the recognition of continued employment during the respective multiyear vesting of such awards prior to termination was a more appropriate approach. Under the Committee’s disciplined approach, no more than one tranche scheduled to vest post termination would vest for time-based awards; and for performance-based awards, only pre-termination days of service would count toward prorated vesting.

The allowance for partial equity vesting upon termination also incentivizes equity participants to remain ~~substantially unchanged~~focused on driving the long-term performance of the Company, even when certain significant severance events may be occurring at the Company, such as structural reorganizations, leadership transitions, major transactions, or other events that may result in associate terminations. Given that the number of restricted stock units vesting upon separation is limited, with forfeiture of remaining equity awards linked to service period, and in ~~full force~~each instance the Company, and ~~effect.~~not the associate, determines eligibility, the Committee believes that such modifications were in the best interest of the Company and do not incentivize unnecessary or undue risk in the Company’s executive compensation programs.

At the Committee’s recommendation, on June 3, 2021, our Board of Directors approved an amendment to the Plan. The amendment provides for the prorated vesting of existing and future awards of time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) for all Plan participants, which includes the Company’s Section 16 officers and Named Executive Officers, upon a qualifying “Separation From Service Without Cause,” as defined in the Plan.

Upon a Separation from Service without Cause, any RSUs expected to vest within 365 days of the separation date would vest on an accelerated basis. If the separation date occurs within 365 days after the grant date of an RSU award, any outstanding RSUs scheduled to vest within 365 days of the separation date would be prorated for the time worked during the grant year. For performance-based awards, a prorated portion of any outstanding PSUs, determined by the number of days worked in the performance period for such awards to the date of termination, will remain outstanding (will not be forfeited) and would vest on the scheduled vesting date, subject to actual performance. The remainder of RSUs and PSUs not vesting in accordance with the Plan terms would be forfeited. Pursuant to the Plan, the Compensation Committee has authority to make determinations as to the timing, conditions, and acceleration of vesting of equity awards granted under the Plan, including in regard to any separation of service. As a result, the amendment to the Plan does not require stockholder approval under applicable law or rules of the New York Stock Exchange.

The foregoing is a summary of, and is subject to, the actual terms and conditions regarding the vesting of equity upon certain terminations, as set forth in the Plan, and is qualified in its entirety by reference to the Plan and award agreements. A copy of the ~~Second Amendment to~~ Amended and Restated ~~Employment Agreement~~2020 Equity Incentive Plan, as further amended, is filed herewith as Exhibit ~~10.11.~~

On March 8, 2021, in connection with the Company’s ongoing CEO search, we entered into a Retention Agreement with Christopher Testa, our President. Pursuant to the agreement, Mr. Testa will be entitled to a retention payment of $675,000, provided that he continues his service with the Company through February 1, 2022, or upon his earlier termination by the Company other than for Cause (as defined in the Retention Agreement). A copy10.1. Copies of the ~~Retention~~Form of RSU Award Agreement isand Form of PSU Award Agreement for equity awards granted under the Plan, as amended, are filed herewith as ~~Exhibit 10.10.~~Exhibits 10.2 and 10.3, respectively.

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Item 6. Exhibits

Exhibit Index


Exhibit No.			Description












2.1			Agreement and Plan of Merger, dated July 25, 2018, by and among SUPERVALU INC., SUPERVALU Enterprises, Inc., the Registrant and Jedi Merger Sub, Inc. (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on July 26, 2018 (File No. 001-15723)).
2.2			First Amendment to Agreement and Plan of Merger, dated as of October 10, 2018, by and among United Natural Foods, Inc., Jedi Merger Sub, Inc., SUPERVALU INC. and SUPERVALU Enterprises, Inc. (incorporated by reference to Registrant’s Current Report on Form 8-K, filed on October 10, 2018 (File No. 001-15723)).
3.1			Certificate of Incorporation of the Registrant, as amended (restated for SEC filing purposes only) (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2015 (File No. 001-15723)).
3.2			Fourth Amended and Restated Bylaws of the Registrant (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on October 19, 2018 (File No. 001-15723)).

10.1			~~Annual~~Amended and Restated 2020 Equity Incentive Plan, as amended ~~(incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report~~ on ~~Form 10-Q for the quarter ended October 31, 2020, filed on December 9, 2020 (File No. 001-15723)).~~June 3, 2021.
10.2* **			Form of ~~Inducement~~ RSU Award Agreement pursuant to the Registrant’s Amended and Restated 2020 Equity Incentive Plan.
10.3* **			Form of PSU Award Agreement pursuant to the Registrant’s Amended and Restated 2020 Equity Incentive Plan
10.4			Amendment No. 1 to Term Loan Agreement, dated as of ~~Februar~~yFebruary 11,, 2021, by and among the Registrant and SUPERVALU INC., Credit Suisse AG, Cayman Islands Branch , Goldman Sachs Bank USA and the other lender parties thereto ~~lender~~(incorporated by reference to the Registrant ’s Quarterly Report on Form 10-Q ~~parties thereto.~~for the quarter ended January 30, 2021, filed on March 10, 2021 (File No. 001-15723).
~~10.4~~10.5			First Amendment to Agreement for Distribution of Products, dated as of March 3, 2021, by and among the Registrant and Whole Foods Market Distribution, Inc. (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on March 4, 2021 (File No. 001-15723)).
10.5* **			~~Change of Control Severance Agreement, dated as of November 30, 2015, by and among SUPERVALU INC. and Michael Stigers.~~
10.6* **			~~Transition Agreement, dated as of October 22, 2018, by and among the Registrant, SUPERVALU INC. and Michael Stigers.~~
10.7* **			~~First Amendment to Transition Agreement, dated as of March 27, 2019, by and among the Registrant, SUPERVALU INC. and Michael Stigers.~~
10.8* **			~~Second Amendment to Transition Agreement, dated as of May 12, 2020, by and among the Registrant, SUPERVALU INC. and Michael Stigers.~~
10.9* ***			Third Amendment to Transition Agreement, dated as of March 9,, 2021, by and among the Registrant, SUPERVALU INC. and Michael ~~Stigers.~~Stigers (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 30, 2021, filed on March 10, 2021 (File No. 001-15723)).
10.10* 10.7			Retention Agreement, dated as March 8, 2021, by and between the Registrant and Christopher ~~Testa.~~Testa (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 30, 2021, filed on March 10, 2021 (File No. 001-15723)).
10.11* 10.8			Second Amendment to Amended and Restated Employment Agreement, dated as of March 9, 2021, by and between the Registrant and Steven L. ~~Spinner.~~Spinner (incorporated by reference to the Registrant ’s Quarterly Report on Form 10 -Q for the quarter ended January 30, 2021, filed on March 10, 2021 (File No. 001-15723).
31.1*			Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*			Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*			Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*			The following materials from the United Natural Foods, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~January 30,~~May 1, 2021, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements 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 ~~second~~third quarter of fiscal 2021, filed with the SEC on ~~March 10,~~June 9, 2021, formatted in Inline XBRL (included as Exhibit 101).

* Filed herewith.

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

* * *

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			UNITED NATURAL FOODS, INC.

			/s/ JOHN W. HOWARD
			John W. Howard
			Chief Financial Officer
			(Principal Financial Officer and duly authorized officer)

Dated: ~~March 10,~~June 9, 2021

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