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 October ~~30, 2021~~29, 2022

☐ 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 December ~~3, 2021~~2, 2022 there were ~~58,085,036~~59,831,508 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

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TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions, except for par ~~amounts)~~values)


		October 30, 2021		July 31, 2021			October 29, 2022		July 30, 2022
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	46	$	41	Cash and cash equivalents	$	39	$	44
Accounts receivable, net	Accounts receivable, net	1,249		1,103		Accounts receivable, net	1,351		1,214
Inventories, net	Inventories, net	2,537		2,247		Inventories, net	2,756		2,355
Prepaid expenses and other current assets	Prepaid expenses and other current assets	187		157		Prepaid expenses and other current assets	214		184
Current assets of discontinued operations		—		2
Total current assets	Total current assets	4,019		3,550		Total current assets	4,360		3,797
Property and equipment, net	Property and equipment, net	1,769		1,784		Property and equipment, net	1,684		1,690
Operating lease assets	Operating lease assets	1,095		1,064		Operating lease assets	1,187		1,176
Goodwill	Goodwill	20		20		Goodwill	20		20
Intangible assets, net	Intangible assets, net	873		891		Intangible assets, net	801		819
Deferred income taxes		49		57
Other long-term assets	Other long-term assets	174		157		Other long-term assets	147		126
Long-term assets of discontinued operations		—		2
Total assets	Total assets	$	7,999	$	7,525	Total assets	$	8,199	$	7,628
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	Accounts payable	$	1,896	$	1,644	Accounts payable	$	1,924	$	1,742
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	326		341		Accrued expenses and other current liabilities	258		260
Accrued compensation and benefits	Accrued compensation and benefits	206		243		Accrued compensation and benefits	199		232
Current portion of operating lease liabilities	Current portion of operating lease liabilities	142		135		Current portion of operating lease liabilities	157		156
Current portion of long-term debt and finance lease liabilities	Current portion of long-term debt and finance lease liabilities	121		120		Current portion of long-term debt and finance lease liabilities	27		27
Current liabilities of discontinued operations		—		4
Total current liabilities	Total current liabilities	2,691		2,487		Total current liabilities	2,565		2,417
Long-term debt	Long-term debt	2,376		2,175		Long-term debt	2,485		2,109
Long-term operating lease liabilities	Long-term operating lease liabilities	988		962		Long-term operating lease liabilities	1,078		1,067
Long-term finance lease liabilities	Long-term finance lease liabilities	32		35		Long-term finance lease liabilities	20		23
Pension and other postretirement benefit obligations	Pension and other postretirement benefit obligations	51		53		Pension and other postretirement benefit obligations	18		18

Deferred income taxes						Deferred income taxes	17		8
Other long-term liabilities	Other long-term liabilities	274		299		Other long-term liabilities	181		194
Total liabilities	Total liabilities	6,412		6,011		Total liabilities	6,364		5,836
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 5.0 shares; none issued or outstanding	Preferred stock, $0.01 par value, authorized 5.0 shares; none issued or outstanding	—		—		Preferred stock, $0.01 par value, authorized 5.0 shares; none issued or outstanding	—		—
Common stock, $0.01 par value, authorized 100.0 shares; 58.7 shares issued and 58.1 shares outstanding at October 30, 2021; 57.0 shares issued and 56.4 shares outstanding at July 31, 2021		1		1
Common stock, $0.01 par value, authorized 100.0 shares; 60.9 shares issued and 59.9 shares outstanding at October 29, 2022; 58.9 shares issued and 58.3 shares outstanding at July 30, 2022						Common stock, $0.01 par value, authorized 100.0 shares; 60.9 shares issued and 59.9 shares outstanding at October 29, 2022; 58.9 shares issued and 58.3 shares outstanding at July 30, 2022	1		1
Additional paid-in capital	Additional paid-in capital	582		599		Additional paid-in capital	583		608
Treasury stock at cost	Treasury stock at cost	(24)		(24)		Treasury stock at cost	(36)		(24)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(24)		(39)		Accumulated other comprehensive loss	(5)		(20)
Retained earnings	Retained earnings	1,054		978		Retained earnings	1,292		1,226
Total United Natural Foods, Inc. stockholders’ equity	Total United Natural Foods, Inc. stockholders’ equity	1,589		1,515		Total United Natural Foods, Inc. stockholders’ equity	1,835		1,791
Noncontrolling interests	Noncontrolling interests	(2)		(1)		Noncontrolling interests	—		1
Total stockholders’ equity	Total stockholders’ equity	1,587		1,514		Total stockholders’ equity	1,835		1,792
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	7,999	$	7,525	Total liabilities and stockholders’ equity	$	8,199	$	7,628

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in millions, except for per share data)

13-Week Period Ended
October 30,
2021 October 31,
2020
Net sales $ 6,997 $ 6,684
Cost of sales 5,955 5,714
Gross profit 1,042 970
Operating expenses 932 904
Restructuring, acquisition and integration related expenses 3 16
Operating income 107 50
Net periodic benefit income, excluding service cost (10) (17)
Interest expense, net 40 69
Other, net 1 (1)
Income (loss) from continuing operations before income taxes 76 (1)
Benefit for income taxes (1) (1)
Net income from continuing operations 77 —
Income from discontinued operations, net of tax — —
Net income including noncontrolling interests 77 —
Less net income attributable to noncontrolling interests (1) (1)
Net income (loss) attributable to United Natural Foods, Inc. $ 76 $ (1)

Basic earnings (loss) per share:
Continuing operations $ 1.34 $ (0.03)
Discontinued operations $ — $ 0.01
Basic earnings (loss) per share $ 1.34 $ (0.02)
Diluted earnings (loss) per share:
Continuing operations $ 1.25 $ (0.03)
Discontinued operations $ — $ 0.01
Diluted earnings (loss) per share $ 1.25 $ (0.02)
Weighted average shares outstanding:
Basic 57.0 55.2
Diluted 61.1 55.2


	13-Week Period Ended
		October 29, 2022		October 30, 2021
Net sales		$	7,532	$	6,997
Cost of sales		6,436		5,955
Gross profit		1,096		1,042
Operating expenses		1,000		932
Restructuring, acquisition and integration related expenses		2		3
Gain on sale of assets		(5)		—
Operating income		99		107
Net periodic benefit income, excluding service cost		(7)		(10)
Interest expense, net		35		40
Other (income) expense, net		(1)		1
Income before income taxes		72		76
Provision (benefit) for income taxes		5		(1)
Net income including noncontrolling interests		67		77
Less net income attributable to noncontrolling interests		(1)		(1)
Net income attributable to United Natural Foods, Inc.		$	66	$	76

Basic earnings per share		$	1.12	$	1.34
Diluted earnings per share		$	1.07	$	1.25

Weighted average shares outstanding:
Basic		58.8		57.0
Diluted		61.6		61.1

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in millions)


		13-Week Period Ended					13-Week Period Ended
		October 30, 2021		October 31, 2020				October 29, 2022		October 30, 2021
Net income including noncontrolling interests	Net income including noncontrolling interests	$	77	$	—	Net income including noncontrolling interests		$	67	$	77
Other comprehensive income:
Other comprehensive income (loss):						Other comprehensive income (loss):
Recognition of pension and other postretirement benefit obligations, net of tax	Recognition of pension and other postretirement benefit obligations, net of tax	1		—		Recognition of pension and other postretirement benefit obligations, net of tax		—		1
Recognition of interest rate swap cash flow hedges, net of tax(1)	Recognition of interest rate swap cash flow hedges, net of tax(1)	13		12		Recognition of interest rate swap cash flow hedges, net of tax(1)		18		13
Foreign currency translation adjustments	Foreign currency translation adjustments	—		—		Foreign currency translation adjustments		(3)		—
Recognition of other cash flow derivatives, net of tax	Recognition of other cash flow derivatives, net of tax	1		—		Recognition of other cash flow derivatives, net of tax		—		1
Total other comprehensive income	Total other comprehensive income	15		12		Total other comprehensive income		15		15
Less comprehensive income attributable to noncontrolling interests	Less comprehensive income attributable to noncontrolling interests	(1)		(1)		Less comprehensive income attributable to noncontrolling interests		(1)		(1)
Total comprehensive income attributable to United Natural Foods, Inc.	Total comprehensive income attributable to United Natural Foods, Inc.	$	91	$	11	Total comprehensive income attributable to United Natural Foods, Inc.		$	81	$	91

(1)Amounts are net of tax expense of $6 million and $4 million for the first quarters of fiscal ~~2022~~2023 and fiscal ~~2021.~~2022, respectively.

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the 13-week periods ended October ~~30, 2021~~29, 2022 and October ~~31, 2020~~30, 2021

(in millions)


		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 July 30, 2022																												Balances at July 30, 2022	58.9		$	1			0.6		$	(24)				$	608				$	(20)				$	1,226				$	1,791				$	1				$	1,792

Restricted stock vestings																												Restricted stock vestings	2.0		—				—		—			(37)					—					—					(37)					—					(37)
Share-based compensation																												Share-based compensation	—		—				—		—			12					—					—					12					—					12
Repurchases of common stock																												Repurchases of common stock	—		—				0.4		(12)			—					—					—					(12)					—					(12)
Other comprehensive income																												Other comprehensive income	—		—				—		—			—					15					—					15					—					15
Distributions to noncontrolling interests																												Distributions to noncontrolling interests	—		—				—		—			—					—					—					—					(2)					(2)

Net income																												Net income	—		—				—		—			—					—					66					66					1					67
Balances at October 29, 2022																												Balances at October 29, 2022	60.9		$	1			1.0		$	(36)		$	583				$	(5)				$	1,292				$	1,835				$	—				$	1,835

Balances at July 31, 2021	Balances at July 31, 2021	57.0	$	1	0.6	$	(24)			$	599					$	(39)				$	978			$	1,515			$	(1)	$	1,514	Balances at July 31, 2021	57.0		$	1		0.6					$	(24)				$	599				$	(39)				$	978				$	1,515				$	(1)	$	1,514

Restricted stock vestings	Restricted stock vestings	1.7	—		—	—		(33)				—		—					(33)			—				(33)		Restricted stock vestings	1.7		—				—		—			(33)					—					—					(33)					—					(33)
Share-based compensation	Share-based compensation	—	—		—	—		11				—		—					11			—				11		Share-based compensation	—		—				—		—			11					—					—					11					—					11
Other comprehensive income	Other comprehensive income	—	—		—	—		—				15		—					15			—				15		Other comprehensive income	—		—				—		—			—					15					—					15					—					15
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—	—		—				—		—					—			(2)				(2)		Distributions to noncontrolling interests	—		—				—		—			—					—					—					—					(2)					(2)
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	—	—		—	—		5				—		—					5			—				5		Proceeds from issuance of common stock, net	—		—				—		—			5					—					—					5					—					5

Net income	Net income	—	—		—	—		—				—		76					76			1				77		Net income	—		—				—		—			—					—					76					76					1					77
Balances at October 30, 2021	Balances at October 30, 2021	58.7	$	1	0.6	$	(24)	$	582			$	(24)	$	1,054				$	1,589		$	(2)			$	1,587	Balances at October 30, 2021	58.7		$	1			0.6		$	(24)		$	582				$	(24)				$	1,054				$	1,589				$	(2)				$	1,587

Balances at August 1, 2020		55.3	$	1	0.6	$	(24)	$	569			$	(239)	$	838				$	1,145		$	(3)			$	1,142
Cumulative effect of change in accounting principle		—	—		—	—		—				—		(9)					(9)			—				(9)
Restricted stock vestings		1.4	—		—	—		(9)				—		—					(9)			—				(9)
Share-based compensation		—	—		—	—		12				—		—					12			—				12
Other comprehensive income		—	—		—	—		—				12		—					12			—				12

Net (loss) income		—	—		—	—		—				—		(1)					(1)			1				—
Balances at October 31, 2020		56.7	$	1	0.6	$	(24)	$	572			$	(227)	$	828				$	1,150		$	(2)			$	1,148

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


		13-Week Period Ended					13-Week Period Ended
(in millions)	(in millions)	October 30, 2021		October 31, 2020		(in millions)	October 29, 2022		October 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interests	Net income including noncontrolling interests	$	77	$	—	Net income including noncontrolling interests	$	67	$	77
Income from discontinued operations, net of tax		—		—
Net income from continuing operations		77		—
Adjustments to reconcile net income to net cash used in operating activities:	Adjustments to reconcile net income to net cash used in operating activities:					Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	69		77		Depreciation and amortization	74		69
Share-based compensation	Share-based compensation	11		12		Share-based compensation	12		11

Gain on sale of assets						Gain on sale of assets	(5)		—
Closed property and other restructuring charges	Closed property and other restructuring charges	1		—		Closed property and other restructuring charges	—		1
Net pension and other postretirement benefit income	Net pension and other postretirement benefit income	(10)		(17)		Net pension and other postretirement benefit income	(7)		(10)
Deferred income tax benefit		—		2
Deferred income tax expense						Deferred income tax expense	2		—
LIFO charge	LIFO charge	11		7		LIFO charge	21		11
Provision for losses on receivables	Provision for losses on receivables	1		—		Provision for losses on receivables	—		1
Non-cash interest expense and other adjustments	Non-cash interest expense and other adjustments	5		28		Non-cash interest expense and other adjustments	3		5
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(246)		(164)		Changes in operating assets and liabilities	(429)		(246)
Net cash used in operating activities of continuing operations		(81)		(55)
Net cash used in operating activities of discontinued operations		—		(3)
Net cash used in operating activities	Net cash used in operating activities	(81)		(58)		Net cash used in operating activities	(262)		(81)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for capital expenditures	Payments for capital expenditures	(56)		(41)		Payments for capital expenditures	(67)		(56)
Proceeds from dispositions of assets	Proceeds from dispositions of assets	1		4		Proceeds from dispositions of assets	7		1
Payments for investments	Payments for investments	(26)		—		Payments for investments	(1)		(26)
Net cash used in investing activities of continuing operations		(81)		(37)
Net cash provided by investing activities of discontinued operations		—		2
Net cash used in investing activities	Net cash used in investing activities	(81)		(35)		Net cash used in investing activities	(61)		(81)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings of long-term debt		—		500

Proceeds from borrowings under revolving credit line	Proceeds from borrowings under revolving credit line	1,238		1,569		Proceeds from borrowings under revolving credit line	1,206		1,238

Repayments of borrowings under revolving credit line	Repayments of borrowings under revolving credit line	(1,028)		(1,339)		Repayments of borrowings under revolving credit line	(829)		(1,028)
Repayments of long-term debt and finance leases	Repayments of long-term debt and finance leases	(13)		(614)		Repayments of long-term debt and finance leases	(6)		(13)
Repurchases of common stock						Repurchases of common stock	(12)		—
Proceeds from the issuance of common stock and exercise of stock options	Proceeds from the issuance of common stock and exercise of stock options	5		—		Proceeds from the issuance of common stock and exercise of stock options	—		5
Payment of employee restricted stock tax withholdings		(33)		(9)
Payments for debt issuance costs		—		(11)
Payments of employee restricted stock tax withholdings						Payments of employee restricted stock tax withholdings	(37)		(33)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(2)		—		Distributions to noncontrolling interests	(2)		(2)
Repayments of other loans	Repayments of other loans	—		(1)		Repayments of other loans	(1)		—

Net cash provided by financing activities	Net cash provided by financing activities	167		95		Net cash provided by financing activities	319		167
EFFECT OF EXCHANGE RATE ON CASH	EFFECT OF EXCHANGE RATE ON CASH	—		—		EFFECT OF EXCHANGE RATE ON CASH	(1)		—
NET INCREASE IN CASH AND CASH EQUIVALENTS		5		2
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS						NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(5)		5
Cash and cash equivalents, at beginning of period	Cash and cash equivalents, at beginning of period	41		47		Cash and cash equivalents, at beginning of period	44		41
Cash and cash equivalents, at end of period	Cash and cash equivalents, at end of period	$	46	$	49	Cash and cash equivalents, at end of period	$	39	$	46
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	$	46	$	44	Cash paid for interest	$	40	$	46
Cash (refunds) payments for federal, state, and foreign income taxes, net		$	(1)	$	6
Cash (refunds) for federal, state, and foreign income taxes, net						Cash (refunds) for federal, state, and foreign income taxes, net	$	(1)	$	(1)
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	$	71	$	71	Leased assets obtained in exchange for new operating lease liabilities	$	57	$	71

Additions of property and equipment included in Accounts payable	Additions of property and equipment included in Accounts payable	$	17	$	21	Additions of property and equipment included in Accounts payable	$	26	$	17

See accompanying Notes to Condensed Consolidated Financial Statements.

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UNITED NATURAL FOODS, INC. AND SUBSIDIARIES

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”,~~ or “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 years end on the Saturday closest to July 31 and contain either 52 or 53 weeks. References to the first ~~quarters~~quarter of fiscal ~~2022~~2023 and ~~2021~~2022 relate to the 13-week fiscal quarters ended October ~~30, 2021~~29, 2022 and October ~~31, 2020,~~30, 2021, 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 in these Condensed Consolidated Financial Statements, 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.

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 July ~~31, 2021~~30, 2022 (the “Annual Report”). There were no material changes in significant accounting policies from those described in the Annual Report.

~~Discontinued Operations~~

In the fourth quarter of fiscal 2021, the Company determined it no longer met the held for sale criterion for a probable sale to be completed within 12 months for two of the four stores that were previously included within discontinued operations. As a result, the Company revised its Condensed Consolidated Financial Statements to reclassify two Shoppers stores from discontinued operations to continuing operations. The prior period presented in the Condensed Consolidated Financial Statements have been conformed to the current period presentation. The remaining two stores included in discontinued operations were sold subsequent to the end of the first quarter of fiscal 2022.

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 October ~~30, 2021~~29, 2022 and July ~~31, 2021,~~30, 2022, the Company had net book overdrafts of ~~$280~~$305 million and ~~$268~~$266 million, respectively.

Reclassifications

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

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Inventories, Net

Substantially all of the Company’s inventories consist of finished goods. To value discrete inventory items at lower of cost or ~~market~~net realizable value before application of any last-in, first-out (“LIFO”) reserve, the Company utilizes the weighted average cost method, perpetual cost method, the retail inventory method and the replacement cost method. Allowances for vendor funds and cash discounts received from suppliers are recorded as a reduction to Inventories, net and subsequently within Cost of sales upon the sale of the related products. Inventory quantities are evaluated throughout each fiscal year based on actual physical counts in ~~our~~the Company’s distribution facilities and stores. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the end of each fiscal year. ~~If the first-in, first-out method had been used,~~The LIFO reserve was approximately $246 million and $225 million as of October 29, 2022 and July 30, 2022, respectively, which is recorded within Inventories, net ~~would have been higher by approximately $78 million and $67 million at October 30, 2021 and July 31, 2021, respectively.~~on the Condensed Consolidated Balance Sheets.

NOTE 2—RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently ~~Adopted~~Issued Accounting Pronouncements

In ~~December 2019,~~June 2022, the FASB issued ASU ~~2019-12,~~ ~~Income Taxes~~2022-03, Fair Value Measurement (Topic ~~740)~~820): ~~Simplifying~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 clarifies that a contractual restriction on the ~~Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions to Topic 740’s general principles.~~sale of an equity security is not part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments in this update also ~~improve consistency in and simplify its application.~~require additional disclosures for equity securities subject to contractual sale restrictions. The Company ~~adopted~~is required to adopt this ~~standard~~guidance in the first quarter of fiscal ~~2022.~~2025. The Company is in the process of reviewing the provisions of the new standard but does not expect the adoption ~~of this standard did not~~to have a material impact on the Company’s ~~Condensed Consolidated Financial Statements.~~consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

~~In March 2020, the FASB issued ASU No. 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~. The temporary guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 is effective from March 12, 2020 and may be applied prospectively through December 31, 2022. In fiscal 2020, the Company elected the initial expedient to assert probability of its hedged interest rate transactions and is currently evaluating the impact the remaining elements of the standard will have on the future cessation of LIBOR rates applicable to the Company.

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NOTE 3—REVENUE RECOGNITION

Disaggregation of Revenues

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

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

•Independent retailers, which includes smaller size accounts, including single store and multiple store locations, and group purchasing entities that 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;~~one customer;

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

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

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The following tables detail the Company’s ~~net~~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.


		Net Sales for the 13-Week Period Ended											Net Sales for the 13-Week Period Ended
(in millions)	(in millions)	October 30, 2021										(in millions)	October 29, 2022
Customer Channel	Customer Channel	Wholesale		Retail		Other		Eliminations(1)		Consolidated		Customer Channel	Wholesale		Retail		Other		Eliminations(1)		Consolidated
Chains	Chains	$	3,082	$	—	$	—	$	—	$	3,082	Chains	$	3,224	$	—	$	—	$	—	$	3,224
Independent retailers	Independent retailers	1,750		—		—		—		1,750		Independent retailers	1,947		—		—		—		1,947
Supernatural	Supernatural	1,378		—		—		—		1,378		Supernatural	1,513		—		—		—		1,513
Retail	Retail	—		602		—		—		602		Retail	—		613		—		—		613
Other	Other	524		—		56		—		580		Other	575		—		60		—		635
Eliminations	Eliminations	—		—		—		(395)		(395)		Eliminations	—		—		—		(400)		(400)
Total	Total	$	6,734	$	602	$	56	$	(395)	$	6,997	Total	$	7,259	$	613	$	60	$	(400)	$	7,532

		Net Sales for the 13-Week Period Ended											Net Sales for the 13-Week Period Ended
(in millions)	(in millions)	October 31, 2020										(in millions)	October 30, 2021
Customer Channel	Customer Channel	Wholesale		Retail		Other		Eliminations(1)		Consolidated		Customer Channel	Wholesale		Retail		Other		Eliminations(1)		Consolidated
Chains	Chains	$	3,027	$	—	$	—	$	—	$	3,027	Chains	$	3,082	$	—	$	—	$	—	$	3,082
Independent retailers	Independent retailers	1,672		—		—		—		1,672		Independent retailers	1,750		—		—		—		1,750
Supernatural	Supernatural	1,214		—		—		—		1,214		Supernatural	1,378		—		—		—		1,378
Retail	Retail	—		606		—		—		606		Retail	—		602		—		—		602
Other	Other	525		—		56		—		581		Other	524		—		56		—		580
Eliminations	Eliminations	—		—		—		(416)		(416)		Eliminations	—		—		—		(395)		(395)
Total	Total	$	6,438	$	606	$	56	$	(416)	$	6,684	Total	$	6,734	$	602	$	56	$	(395)	$	6,997

(1)Eliminations primarily includes the net sales elimination of ~~Wholesale’s~~Wholesale to Retail 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 United States 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.

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Accounts and Notes Receivable Balances

Accounts and notes receivable are as follows:


(in millions)	(in millions)	October 30, 2021		July 31, 2021		(in millions)	October 29, 2022		July 30, 2022
Customer accounts receivable	Customer accounts receivable	$	1,264	$	1,115	Customer accounts receivable	$	1,340	$	1,213
Allowance for uncollectible receivables	Allowance for uncollectible receivables	(30)		(28)		Allowance for uncollectible receivables	(15)		(18)
Other receivables, net	Other receivables, net	15		16		Other receivables, net	26		19
Accounts receivable, net	Accounts receivable, net	$	1,249	$	1,103	Accounts receivable, net	$	1,351	$	1,214

Notes receivable, net, included within Prepaid expenses and other current assets	Notes receivable, net, included within Prepaid expenses and other current assets	$	6	$	7	Notes receivable, net, included within Prepaid expenses and other current assets	$	5	$	6
Long-term notes receivable, net, included within Other long-term assets	Long-term notes receivable, net, included within Other long-term assets	$	15	$	15	Long-term notes receivable, net, included within Other long-term assets	$	11	$	12

~~NOTE 4—RESTRUCTURING, ACQUISITION AND INTEGRATION RELATED EXPENSES~~

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~~Restructuring, acquisition and integration related expenses were~~Subsequent to the end of the first quarter of fiscal 2023, the Company entered into a purchase agreement with a third-party financial institution for the sale of certain accounts receivable up to $300 million, subject to eligibility criteria established by the financial institution. The Company initially sold $253 million of accounts receivable under this agreement without recourse, in exchange for cash less a discount, as ~~follows:~~

13-Week Period Ended
(in millions) October 30, 2021 October 31, 2020
Restructuring and integration costs $ 3 $ 15
Closed property charges and costs — 1
Total $ 3 $ 16
specified in the agreement. After the initial sale, the Company does not retain any interest in the receivables. The Company’s continuing involvement in transferred receivables is limited to servicing the receivables. Pursuant to the terms of the agreement, certain receivables are sold to the third-party financial institution on a revolving basis, subject to certain limitations.

NOTE 5—4—GOODWILL AND INTANGIBLE ASSETS, NET

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


(in millions)	(in millions)	Wholesale			Other			Total		(in millions)	Wholesale			Other			Total
Goodwill as of July 31, 2021		$	10	(1)	$	10	(2)	$	20
Goodwill as of July 30, 2022										Goodwill as of July 30, 2022	$	10	(1)	$	10	(2)	$	20

Change in foreign exchange rates	Change in foreign exchange rates	—			—			—		Change in foreign exchange rates	—			—			—
Goodwill as of October 30, 2021		$	10	(1)	$	10	(2)	$	20
Goodwill as of October 29, 2022										Goodwill as of October 29, 2022	$	10	(1)	$	10	(2)	$	20

(1)Wholesale amounts are net of accumulated goodwill impairment charges of $717 million as of July ~~31, 2021~~30, 2022 and October ~~30, 2021.~~29, 2022.

(2)Other amounts are net of accumulated goodwill impairment charges of $10 million as of July ~~31, 2021~~30, 2022 and October ~~30, 2021.~~29, 2022.

Identifiable intangible assets, net consisted of the following:

October 30, 2021 July 31, 2021
(in millions) Gross Carrying
Amount Accumulated
Amortization Net Gross Carrying
Amount Accumulated
Amortization Net
Amortizing intangible assets:
Customer relationships $ 1,007 $ 249 $ 758 $ 1,007 $ 234 $ 773
Pharmacy prescription files 33 14 19 33 13 20
Operating lease intangibles 7 5 2 7 4 3
Trademarks and tradenames 84 46 38 84 45 39
Total amortizing intangible assets 1,131 314 817 1,131 296 835
Indefinite lived intangible assets:
Trademarks and tradenames 56 — 56 56 — 56
Intangibles assets, net $ 1,187 $ 314 $ 873 $ 1,187 $ 296 $ 891

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	October 29, 2022						July 30, 2022
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Amortizing intangible assets:
Customer relationships	$	1,007	$	309	$	698	$	1,007	$	294	$	713
Pharmacy prescription files	33		19		14		33		18		15
Operating lease intangibles	6		4		2		6		4		2
Trademarks and tradenames	84		53		31		84		51		33
Total amortizing intangible assets	1,130		385		745		1,130		367		763
Indefinite lived intangible assets:
Trademarks and tradenames	56		—		56		56		—		56
Intangibles assets, net	$	1,186	$	385	$	801	$	1,186	$	367	$	819

Amortization expense was $18 million and ~~$23~~$18 million for the first quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively. The estimated future amortization expense for each of the next five fiscal years and thereafter on ~~definite lived~~amortizing intangible assets existing as of October ~~30, 2021~~29, 2022 is as ~~follows:~~shown below:


Fiscal Year:	Fiscal Year:	(in millions)		Fiscal Year:	(in millions)
Remaining fiscal 2022		$	54
2023		72
Remaining fiscal 2023				Remaining fiscal 2023	$	54
2024	2024	72		2024	72
2025	2025	70		2025	70
2026	2026	66		2026	66
2027				2027	63
Thereafter	Thereafter	483		Thereafter	420
		$	817		$	745

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NOTE 6—5—FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

Recurring Fair Value Measurements

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


	Condensed Consolidated Balance Sheets Location	Fair Value at October ~~30, 2021~~29, 2022
(in millions)		Level 1		Level 2		Level 3
Assets:
Fuel derivatives designated as hedging instruments	Prepaid expenses and other current assets	$	—	$	12	$	—
~~Mutual funds~~Foreign currency derivatices designated as hedging instruments	~~Other long-term~~Prepaid expenses and other current assets	$	1—	$	2	$	—
Interest rate swaps designated as hedging instruments	Prepaid expenses and other current assets	$	—	$	16	$	—
Interest rate swaps designated as hedging instruments	Other long-term assets	$	—	$	11	$	—

Liabilities:
~~Foreign currency~~Fuel derivatives designated as hedging instruments	Accrued expenses and other current liabilities	$	—	$	1	$	—
~~Interest rate swaps designated as hedging instruments~~	~~Accrued expenses and other current liabilities~~	$	—	$	28	$	—
~~Interest rate swaps designated as hedging instruments~~	~~Other long-term liabilities~~	$	—	$	28	$	—


	Condensed Consolidated Balance Sheets Location	Fair Value at July ~~31, 2021~~30, 2022
(in millions)		Level 1		Level 2		Level 3
Assets:
Fuel derivatives designated as hedging instruments	Prepaid expenses and other current assets	$	—	$	3	$	—
Interest rate swaps designated as hedging instruments	Prepaid expenses and other current assets	$	—	$	3	$	—
Interest rate swaps designated as hedging instruments	Other long-term assets	$	—	$	1	$	—
~~Mutual funds~~	~~Other long-term assets~~	$	2	$	—	$	—

Liabilities:
~~Foreign currency derivatives~~Interest rate swaps designated as hedging instruments	~~Accrued expenses and other current~~Other long-term liabilities	$	—	$	1	$	—
~~Interest rate swaps designated as hedging instruments~~	~~Accrued expenses and other current liabilities~~	$	—	$	33	$	—
~~Interest rate swaps designated as hedging instruments~~	~~Other long-term liabilities~~	$	—	$	422	$	—

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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~~SOFR swap rates and credit default swap rates. As of October ~~30, 2021,~~29, 2022, a ~~100 basis~~100-basis point increase in forward ~~LIBOR~~SOFR interest rates would increase the fair value of the interest rate swaps by approximately ~~$27~~$14 million; a ~~100 basis~~100-basis point decrease in forward ~~LIBOR~~SOFR interest rates would decrease the fair value of the interest rate swaps by approximately ~~$28~~$14 million. Refer to Note 7—6—Derivatives for further information on interest rate swap contracts.

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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.


		October 30, 2021				July 31, 2021					October 29, 2022				July 30, 2022
(in millions)	(in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		(in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Notes receivable, including current portion	Notes receivable, including current portion	$	27	$	24	$	29	$	26	Notes receivable, including current portion	$	21	$	14	$	23	$	17
Long-term debt, including current portion	Long-term debt, including current portion	$	2,390	$	2,480	$	2,188	$	2,278	Long-term debt, including current portion	$	2,499	$	2,507	$	2,123	$	2,153

NOTE 7—6—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 as of October ~~30, 2021.~~29, 2022. Interest rate swap contracts are reflected at their fair values in the Condensed Consolidated Balance Sheets. Refer to Note 6—5—Fair Value Measurements of Financial Instruments for further information on the fair value of interest rate swap contracts.

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Details of active swap contracts as of October ~~30, 2021,~~29, 2022, 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
August 3, 2015(1)
August 15, 2022 $ 32 1.7950 % One-Month LIBOR Monthly
October 26, 2018 October 31, 2022 100 2.8915 % One-Month LIBOR Monthly
January 11, 2019 October 31, 2022 50 2.4678 % One-Month LIBOR Monthly
January 23, 2019 October 31, 2022 50 2.5255 % One-Month LIBOR Monthly
November 16, 2018 March 31, 2023 150 2.8950 % One-Month LIBOR Monthly
January 23, 2019 March 31, 2023 50 2.5292 % One-Month LIBOR Monthly
November 30, 2018 September 30, 2023 50 2.8315 % One-Month LIBOR Monthly
October 26, 2018 October 31, 2023 100 2.9210 % One-Month LIBOR Monthly
January 11, 2019 March 28, 2024 100 2.4770 % One-Month LIBOR Monthly
January 23, 2019 March 28, 2024 100 2.5420 % One-Month LIBOR Monthly
November 30, 2018 October 31, 2024 100 2.8480 % One-Month LIBOR Monthly
January 11, 2019 October 31, 2024 100 2.5010 % One-Month LIBOR Monthly
January 24, 2019 October 31, 2024 50 2.5210 % One-Month LIBOR Monthly
October 26, 2018 October 22, 2025 50 2.9550 % One-Month LIBOR Monthly
November 16, 2018 October 22, 2025 50 2.9590 % One-Month LIBOR Monthly
November 16, 2018 October 22, 2025 50 2.9580 % One-Month LIBOR Monthly
January 24, 2019 October 22, 2025 50 2.5558 % One-Month LIBOR Monthly
$ 1,232

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

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

In the first quarter of fiscal 2021, in conjunction with the $500 million fixed rate senior unsecured notes offering described below in Note 8—Long-Term Debt, the Company paid $11 million to terminate or novate certain outstanding interest rate swaps with a notional amount of $504 million and certain forward starting interest rate swaps with a notional amount of $450 million. The payments equaled the fair value of the interest rate swaps at the time of their termination or novation. No gain or loss was recorded as a result of the swap terminations and novations. Since the hedged interest payments remain probable of occurring, the unrecognized gains and losses that existed as of the early termination or novation of these interest rate swap agreements will be amortized out of Accumulated other comprehensive loss and into 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 or novation of interest rate swaps are classified as operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.


Effective Date	Swap Maturity	Notional Value (in millions)		Pay Fixed Rate		Receive Floating Rate	Floating Rate Reset Terms
October 26, 2018	October 31, 2022	100		2.8170	%	One-Month Term SOFR	Monthly
January 11, 2019	October 31, 2022	50		2.3770	%	One-Month Term SOFR	Monthly
January 23, 2019	October 31, 2022	50		2.2740	%	One-Month Term SOFR	Monthly
November 16, 2018	March 31, 2023	150		2.7770	%	One-Month Term SOFR	Monthly
January 23, 2019	March 31, 2023	50		2.4245	%	One-Month Term SOFR	Monthly
November 30, 2018	September 30, 2023	50		2.6980	%	One-Month Term SOFR	Monthly
October 26, 2018	October 31, 2023	100		2.7880	%	One-Month Term SOFR	Monthly
January 11, 2019	March 28, 2024	100		2.3600	%	One-Month Term SOFR	Monthly
January 23, 2019	March 28, 2024	100		2.4250	%	One-Month Term SOFR	Monthly
November 30, 2018	October 31, 2024	100		2.7385	%	One-Month Term SOFR	Monthly
January 11, 2019	October 31, 2024	100		2.4025	%	One-Month Term SOFR	Monthly
January 24, 2019	October 31, 2024	50		2.4090	%	One-Month Term SOFR	Monthly
October 26, 2018	October 22, 2025	50		2.8725	%	One-Month Term SOFR	Monthly
November 16, 2018	October 22, 2025	50		2.8750	%	One-Month Term SOFR	Monthly
November 16, 2018	October 22, 2025	50		2.8380	%	One-Month Term SOFR	Monthly
January 24, 2019	October 22, 2025	50		2.4750	%	One-Month Term SOFR	Monthly
		$	1,200

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

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value of the derivative is initially reported in Other comprehensive income (outside of earnings) in the Condensed Consolidated Statements of Comprehensive Income and subsequently reclassified to earnings in Interest expense, net in the Condensed Consolidated Statements of Operations when the hedged transactions affect earnings.

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The location and 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~~pre-tax basis, are as follows:


		13-Week Period Ended						13-Week Period Ended
		October 30, 2021		October 31, 2020					October 29, 2022		October 30, 2021
(in millions)	(in millions)	Interest expense, net				(in millions)		Interest expense, net
Total amounts of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	Total amounts of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	40	$	69		Total amounts of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded		$	35	$	40
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	$	(11)	$	(12)		Loss reclassified from comprehensive income into earnings		$	—	$	(11)

NOTE 8—7—LONG-TERM DEBT

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


(in millions)	(in millions)	Average Interest Rate at October 30, 2021	Fiscal Maturity Year	October 30, 2021		July 31, 2021		(in millions)	Average Interest Rate at October 29, 2022	Fiscal Maturity Year	October 29, 2022		July 30, 2022
Term Loan Facility	Term Loan Facility	3.59%	2026	$	994	$	1,002	Term Loan Facility	6.40%	2026	$	800	$	800
ABL Credit Facility	ABL Credit Facility	1.46%	2024	910		701		ABL Credit Facility	4.64%	2027	1,217		840
Senior Notes	Senior Notes	6.75%	2029	500		500		Senior Notes	6.75%	2029	500		500
Other secured loans	Other secured loans	5.15%	2024-2025	34		37		Other secured loans	5.06%	2024-2025	20		23
Debt issuance costs, net	Debt issuance costs, net			(32)		(35)		Debt issuance costs, net			(28)		(29)
Original issue discount on debt	Original issue discount on debt			(16)		(17)		Original issue discount on debt			(10)		(11)
Long-term debt, including current portion	Long-term debt, including current portion			2,390		2,188		Long-term debt, including current portion			2,499		2,123
Less: current portion of long-term debt	Less: current portion of long-term debt			(14)		(13)		Less: current portion of long-term debt			(14)		(14)
Long-term debt	Long-term debt			$	2,376	$	2,175	Long-term debt			$	2,485	$	2,109

Senior Notes

On October 22, 2020, the Company issued $500 million of unsecured 6.750% ~~Senior Notes~~senior notes due October 15, 2028 (the “Senior Notes”). The Senior Notes, which are presented net of debt issuance costs of $7 million as of October 29, 2022 and July 30, 2022 in the Condensed Consolidated Balance Sheets, are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the ABL Credit Facility ~~(defined below)~~ or the Term Loan Facility (defined below).

ABL Credit Facility

The ~~ABL~~revolving credit agreement dated as of June 3, 2022 (the “ABL Loan ~~Agreement~~Agreement”), by and among the Company ~~and United Natural Foods West, Inc. (together with the Company, the~~(the “U.S. ~~Borrowers”~~Borrower”) ~~and~~, UNFI Canada ~~Inc.~~ (the “Canadian Borrower” and, together with the U.S. ~~Borrowers,~~Borrower, the “Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “ABL Lenders”), Wells Fargo Bank, ~~of America,~~ N.A. as administrative ~~agent for the ABL Lenders, Bank of America, N.A. (acting through its Canada branch), as Canadian~~ agent for the ABL Lenders, and the other parties thereto, 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~~$2,600 million is available to the Borrowers, including a U.S. ~~Borrowers and (ii) $50 million is available to the Canadian Borrower. The ABL Loan Agreement also provides for (i) a $300 million sublimit~~Dollar equivalent of ~~availability for letters of credit of which there is a further $25~~$100 million sublimit for ~~the~~borrowings in Canadian ~~Borrower.~~dollars. Under the ABL Loan Agreement, the Borrowers may, at their option, increase the aggregate amount of the ABL Credit Facility in an amount of up to ~~$600~~$750 million without the consent of any ABL Lenders not participating in such increase, subject to certain customary conditions and applicable lenders committing to provide the increase in funding. There is no assurance that additional funding would be available.

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The Borrowers’ obligations under the ABL Credit Facility are guaranteed by most of the Company’s ~~wholly-owned~~wholly owned subsidiaries (collectively, the “Guarantors”), subject to customary exceptions and limitations. The Borrowers’ obligations under the ABL Credit Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the Borrowers’ and 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 Guarantors’ assets that do not constitute ABL Assets, in each case, subject to customary exceptions and limitations.

~~Table of Contents~~

Availability under the ABL Credit Facility is subject to a borrowing base (the “Borrowing Base”), which is based on 90% of eligible accounts receivable, plus 90% of eligible credit card receivables, plus 90% to 92.5% of the net orderly liquidation value of eligible inventory, plus 90% of eligible pharmacy receivables, plus certain pharmacy prescription files availability ofto the Borrowers, after adjusting for customary reserves, but at no time shall exceed the lesser of the aggregate commitments under the ABL Credit Facility (currently ~~$2,100~~$2,600 million) or the Borrowing Base.

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

Assets securing the ABL Credit Facility (in millions)(1):
October 30,
2021 July 31,
2021
Certain inventory assets included in Inventories, net and Current assets of discontinued operations $ 2,538 $ 2,297
Certain receivables included in Accounts receivable, net and Current assets of discontinued operations $ 1,151 $ 1,041

~~(1)~~The ABL Credit Facility is also secured by all of the Company’s pharmacy prescription files, which are included in Intangibles, net in the Condensed Consolidated Balance Sheets. Refer to Note 5—Goodwill and Intangible Assets, Net for additional information.


Assets securing the ABL Credit Facility (in millions):	October 29, 2022		July 30, 2022
Certain inventory assets included in Inventories, net	$	2,153	$	1,789
Certain receivables included in Accounts receivable, net	783		878
Pharmacy prescription files included in Intangible assets, net	14		15
Total	$	2,950	$	2,682

As of October ~~30, 2021,~~29, 2022, the ~~U.S.~~ Borrowers’ Borrowing Base, net of ~~$193~~$110 million of reserves, was ~~$2,311~~$2,898 million, which is above the ~~$2,050~~$2,600 million limit of availability, to the U.S. Borrowers under the ABL Credit Facility. As of October 30, 2021, the Canadian Borrower’s Borrowing Base, net of $6 million of reserves, was $44 million, which is below the $50 million limit of availability to the Canadian Borrower under the ABL Credit facility, resulting in total availability of ~~$2,094~~$2,600 million for ~~ABL Loans~~loans and letters of credit under the ABL Credit Facility. As of October ~~30, 2021,~~29, 2022, the ~~U.S.~~ Borrowers had ~~$910~~$1,217 million of ~~ABL Loans and the Canadian Borrower had no ABL Loans~~loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of $7$10 million and are included in Long-term debt onin the Condensed Consolidated Balance Sheets. As of October ~~30, 2021,~~29, 2022, the U.S. Borrowers had ~~$118~~$133 million in ~~letters of credit and the Canadian Borrower had no~~ letters of credit outstanding under the ABL Credit Facility. The Company’s resulting remaining availability under the ABL Credit Facility was ~~$1,066~~$1,250 million as of October ~~30, 2021.~~29, 2022.


Availability under the ABL ~~availability~~Credit Facility (in millions):	October ~~30, 2021~~29, 2022
Total availability for ABL ~~Loans~~loans and letters of credit	$	~~2,094~~2,600
ABL ~~Loans~~loans	$	~~910~~1,217
Letters of credit	$	~~118~~133
Unused credit	$	~~1,066~~1,250

The applicable interest rates, unutilized commitment fees and letter of credit ~~fees and unutilized commitment~~ fees under the ABL Credit Facility are variable and are dependent upon the prior fiscal quarter’s daily Average Availability (as defined in the ABL Loan Agreement), and were as follows:

~~Interest rates and fees under the ABL Credit Facility:~~


Interest rates and fees under the ABL Credit Facility:	Range of Facility Rates and Fees (per annum)	October 29, 2022
Borrowers’ applicable margin for base rate loans	0.00% - 0.25%	0.00	%
Borrowers’ applicable margin for SOFR and BA loans(1)	1.00% - 1.25%	1.00	%
Unutilized commitment fees	0.20%	0.20	%
Letter of credit fees	1.125% - 1.375%	1.125	%

~~Range of Facility Rates and Fees (per annum)~~

~~October 30, 2021~~

~~U.S. and Canadian Borrowers’ applicable margin for base rate loans~~

~~—% - 0.50%~~

~~0.25~~

~~U.S. and Canadian Borrowers’ applicable margin for LIBOR and BA loans(1)~~

~~1.00% - 1.50%~~

~~1.25~~

~~Unutilized commitment fees~~

~~0.25% - 0.375%~~

~~0.25~~

~~Letter of credit fees~~

~~1.125% - 1.625%~~

~~1.375~~

(1) The U.S. ~~Borrowers utilize LIBOR-based~~Borrower utilizes SOFR-based loans and the Canadian Borrower utilizes bankers’ acceptance rate-based loans.

~~The ABL Loan Agreement contains provisions for the transition to an alternative rate~~

Table of ~~interest in the event that LIBOR is no longer available.~~Contents

Term Loan Facility

The ~~Term~~term loan agreement dated as of October 22, 2018 (as amended, the “Term Loan ~~Agreement,~~Agreement”), by and among the Company and ~~Supervalu (collectively,~~SUPERVALU INC. (“Supervalu” and, collectively with the Company, the “Term Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “Term Lenders”), Credit Suisse, as administrative agent for the Term Lenders, and the other parties thereto, provides for senior secured first lien term loans in an initial aggregate principal amount of $1,950 million, consisting of a $1,800 million ~~in a~~ seven-year tranche and a $150 million 364-day tranche that was repaid in fiscal 2020 (the “Term Loan Facility”). The ~~loans under~~net proceeds from the Term Loan Facility were used to finance the Supervalu acquisition and related transaction costs. Any amounts then outstanding will be payable in full on October 22, 2025.

~~Table of Contents~~

Under the Term Loan Agreement, the Company may, at its option, increase the amount of the Term Loan Facility, 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 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 obligations under the Term Loan Facility are guaranteed by the Guarantors, subject to customary exceptions and limitations. The Term Borrowers’ obligations under the Term Loan Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ ABL Assets, in each case, subject to customary exceptions and limitations, including an exception for owned real property with net book values of less than $10 million. As of October ~~30, 2021~~29, 2022 and July ~~31, 2021,~~30, 2022, there was ~~$672~~$623 million and ~~$676~~$629 million, respectively, of owned real property pledged as collateral that was included in Property and equipment, net in the Condensed Consolidated Balance Sheets.

The Company must prepay loans outstanding under the Term Loan Facility no later than 130 days after the fiscal year end in an aggregate principal amount equal to a specified percentage (which percentage ranges from 0 to 75 percent depending on the Consolidated First Lien Net Leverage Ratio as of the last day of such fiscal year) of Excess Cash Flow (as defined in the Term Loan Agreement), minus certain types of voluntary prepayments of indebtedness made during such fiscal year. ~~Based on the Company’s Consolidated First Lien Net Leverage Ratio at the end of fiscal 2021, no prepayment from Excess Cash Flow in fiscal 2021 is required to be made in fiscal 2022.~~ The potential amount of prepayment from Excess Cash Flow in fiscal ~~2022~~2023 that may be required in fiscal ~~2023~~2024 is not reasonably estimable as of October ~~30, 2021.~~29, 2022.

As of October ~~30, 2021,~~29, 2022, the Company had borrowings of ~~$994~~$800 million outstanding under the Term Loan Facility, which are presented in the Condensed Consolidated Balance Sheets net of debt issuance costs of ~~$17~~$11 million and an original issue discount on debt of ~~$16~~$10 million. As of October ~~30, 2021,~~29, 2022, no amount of the Term Loan Facility was classified as current.

As of October 30, 2021, the borrowings under the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either: (i) a base rate plus a margin of 2.50% or (ii) a LIBOR rate plus a margin of 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.

Subsequent to the end of the first quarter of fiscal 2022, on November 10, 2021, the Company entered into an amendment (the “Second Term Loan Amendment”) amending the Term Loan Agreement. The amendment provides for (i) the reduction of the applicable margin for LIBOR loans from 3.50% to 3.25% and the applicable margin for base rate loans from 2.50% to 2.25%, and (ii) other administrative changes. The amendment did not change the aggregate amount or maturity date of the Term Loan Facility. In conjunction with the Second Term Loan Amendment,2023, the Company made a $125 million voluntary prepayment ~~of $150 million~~ on the Term Loan Facility ~~funded~~ with ~~incremental borrowings under~~a portion of the ~~ABL Credit Facility that reduces its interest costs.~~proceeds received from monetizing certain receivables within Accounts receivable, net associated with the Company’s purchase agreement with a third-party financial institution as previously discussed within Note 3—Revenue Recognition. This voluntary prepayment will count towards any requirement to prepay the Term Loan Facility from Excess Cash Flow (as defined in the Term Loan Agreement) generated during fiscal ~~2022,~~2023, which would be due in fiscal 2023. In connection with this prepayment, the Company incurred a loss on debt extinguishment of $5 million related to unamortized debt issuance costs and a loss on unamortized original issue discount, which will be recorded within Interest expense, net in the second quarter of fiscal 2022.2024.

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NOTE 9—8—COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in Accumulated other comprehensive loss by component, net of tax, for the first quarter of fiscal ~~2022 are~~2023 were as follows:

(in millions) Other Cash Flow Derivatives Benefit Plans Foreign Currency Translation Swap Agreements Total
Accumulated other comprehensive income (loss) at July 31, 2021 $ — $ 37 $ (16) $ (60) $ (39)
Other comprehensive income before reclassifications 1 — — 5 6
Amortization of amounts included in net periodic benefit income — 1 — — 1
Amortization of cash flow hedges — — — 8 8
Net current period Other comprehensive income 1 1 — 13 15
Accumulated other comprehensive income (loss) at October 30, 2021 $ 1 $ 38 $ (16) $ (47) $ (24)


(in millions)	Other Cash Flow Derivatives		Benefit Plans		Foreign Currency Translation		Swap Agreements		Total
Accumulated other comprehensive income (loss) at July 30, 2022	$	2	$	(3)	$	(19)	$	—	$	(20)
Other comprehensive (loss) income before reclassifications	(1)		—		(3)		18		14

Amortization of cash flow hedges	1		—		—		—		1
Net current period Other comprehensive (loss) income	—		—		(3)		18		15
Accumulated other comprehensive income (loss) at October 29, 2022	$	2	$	(3)	$	(22)	$	18	$	(5)

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Changes in Accumulated other comprehensive loss by component, net of tax, for the first quarter of fiscal ~~2021 are~~2022 were as follows:


(in millions)	(in millions)	Benefit Plans		Foreign Currency Translation		Swap Agreements		Total		(in millions)	Other Cash Flow Derivatives		Benefit Plans		Foreign Currency Translation		Swap Agreements		Total
Accumulated other comprehensive loss at August 1, 2020		$	(116)	$	(21)	$	(102)	$	(239)
Accumulated other comprehensive income (loss) at July 31, 2021										Accumulated other comprehensive income (loss) at July 31, 2021	$	—	$	37	$	(16)	$	(60)	$	(39)
Other comprehensive income before reclassifications	Other comprehensive income before reclassifications	—		—		3		3		Other comprehensive income before reclassifications	1		—		—		5		6

Amortization of amounts included in net periodic benefit income										Amortization of amounts included in net periodic benefit income	—		1		—		—		1
Amortization of cash flow hedges	Amortization of cash flow hedges	—		—		9		9		Amortization of cash flow hedges	—		—		—		8		8

Net current period Other comprehensive income	Net current period Other comprehensive income	—		—		12		12		Net current period Other comprehensive income	1		1		—		13		15
Accumulated other comprehensive loss at October 31, 2020		$	(116)	$	(21)	$	(90)	$	(227)
Accumulated other comprehensive income (loss) at October 30, 2021										Accumulated other comprehensive income (loss) at October 30, 2021	$	1	$	38	$	(16)	$	(47)	$	(24)

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

13-Week Period Ended Affected Line Item on the Condensed Consolidated Statements of Operations
(in millions) October 30,
2021 October 31,
2020
Pension and postretirement benefit plan net assets:
Amortization of amounts included in net periodic benefit income(1)
$ 1 $ — Net periodic benefit income, excluding service cost
Income tax benefit — — Benefit for income taxes
Total reclassifications, net of tax $ 1 $ —
Swap agreements:
Reclassification of cash flow hedges $ 11 $ 12 Interest expense, net
Income tax benefit (3) (3) Benefit for income taxes
Total reclassifications, net of tax $ 8 $ 9


	13-Week Period Ended			Affected Line Item on the Condensed Consolidated Statements of Operations
(in millions)		October 29, 2022				October 30, 2021
Pension and postretirement benefit plan net assets:
Amortization of amounts included in net periodic benefit income(1)		$	—	$	1		Net periodic benefit income, excluding service cost
Income tax benefit		—		—			Benefit for income taxes
Total reclassifications, net of tax		$	—	$	1

Swap agreements:
Reclassification of cash flow hedges		$	—	$	11		Interest expense, net
Income tax benefit		—		(3)			Benefit for income taxes
Total reclassifications, net of tax		$	—	$	8

Other cash flow hedges:
Reclassification of cash flow hedge		$	1	$	—		Cost of sales
Income tax benefit		—		—			Benefit for income taxes
Total reclassifications, net of tax		$	1	$	—

(1)Reclassification of amounts included in net periodic benefit income include reclassification of prior service cost and reclassification of net actuarial loss as reflected in Note ~~11—~~10—Benefit Plans.

As of October ~~30, 2021,~~29, 2022, the Company expects to reclassify ~~$35~~$19 million related to unrealized derivative ~~losses~~gains on interest rate swap hedges out of Accumulated other comprehensive loss and primarily into Interest expense, net during the following twelve-month period.

NOTE ~~10—~~9—SHARE-BASED AWARDS

In the first quarter of fiscal ~~2022,~~2023, 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 ~~1.1~~1.5 million shares. As of October ~~30, 2021,~~29, 2022, there were ~~2.8~~1.6 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan.

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NOTE ~~11—~~10—BENEFIT PLANS

Net periodic benefit income and contributions to defined benefit pension and other ~~post-retirement~~postretirement 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 millions)	(in millions)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020		(in millions)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net Periodic Benefit (Income) Cost	Net Periodic Benefit (Income) Cost									Net Periodic Benefit (Income) Cost

Interest cost	Interest cost	$	10	$	9	$	—	$	—	Interest cost	$	17	$	10	$	—	$	—
Expected return on plan assets	Expected return on plan assets	(21)		(26)		—		—		Expected return on plan assets	(24)		(21)		—		—
Amortization of prior service credit		—		—		1		—
Amortization of prior service cost										Amortization of prior service cost	—		—		—		1

Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(11)	$	(17)	$	1	$	—	Net periodic benefit (income) cost	$	(7)	$	(11)	$	—	$	1

Contributions to benefit plans	Contributions to benefit plans	$	—	$	—	$	(1)	$	(1)	Contributions to benefit plans	$	—	$	—	$	—	$	(1)

~~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 ~~2022.~~2023. The Company expects to contribute approximately $2$1 million ~~and $3 million, respectively,~~ to its other ~~non-qualified~~defined benefit pension plans and $1 million to its postretirement benefit plans in fiscal ~~2022.~~2023.

Multiemployer Pension Plans

The Company contributed $11 million and ~~$12~~$11 million in the first quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, respectively, to ~~continuing and discontinued operations~~ multiemployer pension ~~plans.~~plans, which are included within Operating expenses.

NOTE ~~12—~~11—INCOME TAXES

The effective tax rate for the first quarter of fiscal ~~2022~~2023 was an expense rate of 6.9% compared to a benefit rate of 1.3% ~~on pre-tax income,~~for the first quarter of fiscal 2022. The effective tax rate for both periods was reduced by the impact of discrete tax benefits related to the vesting of employee stock awards. The change from the first quarter of fiscal 2022 was primarily driven by the reduction of these discrete tax benefits ~~from employee stock award vestings and~~during the ~~release~~first quarter of ~~uncertain tax positions that occurred in the quarter.~~fiscal 2023.

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NOTE ~~13—~~12—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
(in millions, except per share data) October 30,
2021 October 31,
2020
Basic weighted average shares outstanding 57.0 55.2
Net effect of dilutive stock awards based upon the treasury stock method 4.1 —
Diluted weighted average shares outstanding 61.1 55.2
Basic earnings (loss) per share:
Continuing operations $ 1.34 $ (0.03)
Discontinued operations $ — $ 0.01
Basic earnings (loss) per share $ 1.34 $ (0.02)
Diluted earnings (loss) per share:
Continuing operations $ 1.25 $ (0.03)
Discontinued operations(1)
$ — $ 0.01
Diluted earnings (loss) per share $ 1.25 $ (0.02)
Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share 0.9 5.2


	13-Week Period Ended
(in millions, except per share data)		October 29, 2022		October 30, 2021
Basic weighted average shares outstanding		58.8		57.0
Net effect of dilutive stock awards based upon the treasury stock method		2.8		4.1
Diluted weighted average shares outstanding		61.6		61.1

Basic earnings per share(1)		$	1.12	$	1.34
Diluted earnings per share(1)		$	1.07	$	1.25

Anti-dilutive share-based awards excluded from the calculation of diluted earnings per share		0.9		0.9

(1)~~The computation of diluted earnings~~Earnings per share ~~from discontinued operations is~~amounts are calculated using diluted weighted average shares outstanding, which includes the net effect of dilutive stock awards based on the treasury stock method of approximately 3.9 million shares for the first quarter of fiscal 2021.actual unrounded figures.

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NOTE ~~14—~~13—BUSINESS SEGMENTS

The Company has 2two reportable segments: Wholesale and Retail. These reportable segments are two distinct businesses, each with a different customer base, marketing strategy and management structure. The Company organizes and operates the Wholesale reportable segment through four U.S geographic regions: Atlantic; South; Central; and Pacific; and Canada Wholesale, which is operated separately from the ~~aggregation of 2 operating segments:~~ U.S. Wholesale ~~and Canada Wholesale.~~business. The U.S. Wholesale and Canada Wholesale operating segments have similar products and services, customer channels, distribution methods and economic ~~characteristics.~~characteristics, and therefore have been aggregated into a single reportable segment. Reportable segments are reviewed on an annual basis, or more frequently if events or circumstances indicate a change in reportable segments has occurred.

In fiscal 2022, the Company changed its measure of segment profit to exclude the impact of the non-cash LIFO charge or benefit from Adjusted EBITDA. Prior-period Adjusted EBITDA amounts and the reconciliation to Income before income taxes have been recast to reflect this change in the measure of segment profit.

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


		13-Week Period Ended					13-Week Period Ended
(in millions)	(in millions)	October 30, 2021		October 31, 2020		(in millions)		October 29, 2022		October 30, 2021
Net sales:	Net sales:					Net sales:
Wholesale(1)	Wholesale(1)	$	6,734	$	6,438	Wholesale(1)		$	7,259	$	6,734
Retail	Retail	602		606		Retail		613		602
Other	Other	56		56		Other		60		56
Eliminations	Eliminations	(395)		(416)		Eliminations		(400)		(395)
Total Net sales	Total Net sales	$	6,997	$	6,684	Total Net sales		$	7,532	$	6,997
Continuing Operations Adjusted EBITDA:
Wholesale		$	164	$	123
Retail		22		25
Adjusted EBITDA:						Adjusted EBITDA:
Wholesale(2)						Wholesale(2)		$	171	$	175
Retail(2)						Retail(2)		20		22
Other	Other	4		4		Other		19		4
Eliminations	Eliminations	(1)		6		Eliminations		(3)		(1)
Adjustments:	Adjustments:					Adjustments:
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1		1		Net income attributable to noncontrolling interests		1		1
Net periodic benefit income, excluding service cost	Net periodic benefit income, excluding service cost	10		17		Net periodic benefit income, excluding service cost		7		10
Interest expense, net	Interest expense, net	(40)		(69)		Interest expense, net		(35)		(40)
Other, net		(1)		1
Other (income) expense, net						Other (income) expense, net		1		(1)
Depreciation and amortization	Depreciation and amortization	(69)		(77)		Depreciation and amortization		(74)		(69)
Share-based compensation	Share-based compensation	(11)		(14)		Share-based compensation		(12)		(11)
LIFO charge(2)						LIFO charge(2)		(21)		(11)
Restructuring, acquisition and integration related expenses	Restructuring, acquisition and integration related expenses	(3)		(16)		Restructuring, acquisition and integration related expenses		(2)		(3)
Gain on sale of assets						Gain on sale of assets		5		—

Other retail expense		—		(2)
Income (loss) from continuing operations before income taxes		$	76	$	(1)
Other(3)						Other(3)		(5)		—
Income before income taxes						Income before income taxes		$	72	$	76
Depreciation and amortization:	Depreciation and amortization:					Depreciation and amortization:
Wholesale	Wholesale	$	61	$	68	Wholesale		$	64	$	61
Retail	Retail	7		7		Retail		8		7
Other	Other	1		2		Other		2		1
Total depreciation and amortization	Total depreciation and amortization	$	69	$	77	Total depreciation and amortization		$	74	$	69
Payments for capital expenditures:	Payments for capital expenditures:					Payments for capital expenditures:
Wholesale	Wholesale	$	52	$	38	Wholesale		$	57	$	52
Retail	Retail	4		3		Retail		10		4
Other		—		—

Total capital expenditures	Total capital expenditures	$	56	$	41	Total capital expenditures		$	67	$	56

(1)As presented in Note 3—Revenue Recognition, for the first quarters of fiscal ~~2022~~2023 and ~~2021,~~2022, the Company recorded ~~$339~~$334 million and ~~$365~~$339 million, respectively, within Net sales in its Wholesale reportable segment attributable to Wholesale ~~sales~~ to ~~its~~ Retail ~~segment~~sales that have been eliminated upon consolidation. ~~Refer~~

(2)As a result of the segment profit measurement revision discussed above, previously reported Adjusted EBITDA disclosures by segment and the reconciliation to ~~Note 3—Revenue Recognition~~Income before income taxes has been recast to exclude the impact of the non-cash LIFO charge.

(3)Includes costs for ~~additional information regarding Wholesale sales to discontinued operations.~~certain technology-related initiatives.

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


(in millions)	(in millions)	October 30, 2021		July 31, 2021		(in millions)	October 29, 2022		July 30, 2022
Assets:	Assets:					Assets:
Wholesale	Wholesale	$	7,006	$	6,536	Wholesale	$	7,261	$	6,733
Retail	Retail	589		566		Retail	631		599
Other	Other	451		462		Other	352		335
Eliminations	Eliminations	(47)		(43)		Eliminations	(45)		(39)
Total assets of continuing operations		$	7,999	$	7,521
Total assets						Total assets	$	8,199	$	7,628

NOTE ~~15—~~14—COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

Guarantees and Contingent Liabilities

The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of October ~~30, 2021.~~29, 2022. 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~~eight years, with a weighted average remaining term of approximately ~~five~~four years. For each guarantee issued, if the wholesale customer or other third-party defaults on a payment, the Company would be required to make payments under its guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees. The Company reviews performance risk related to its guarantee obligations based on internal measures of credit performance. As of October ~~30, 2021,~~29, 2022, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was ~~$27~~$17 million ($2315 million on a discounted basis). Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, as of October ~~30, 2021,~~29, 2022, a total estimated loss of $1 million is recorded in the Condensed Consolidated Balance Sheets.

The Company is a party to a variety of contractual agreements under which it may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise. These agreements primarily relate to the Company’s commercial contracts, service agreements, contracts entered into for the purchase and sale of stock or assets, operating leases and other real estate contracts, financial agreements, agreements to provide services to the Company and agreements to indemnify officers, directors and employees in the performance of their work. While the Company’s aggregate indemnification obligations could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. No amount has been recorded in the Condensed Consolidated Balance Sheets for these contingent obligations as the fair value has been determined to be de minimis.

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

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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~~provided 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.~~services. The ~~initial annual base charge~~Company primarily ceased providing services under the Services Agreement ~~is $30 million, subject to adjustments. The Company expects that services provided under the Services Agreement will wind down~~ in fiscal 2022. The Services Agreement generally requires each party to indemnify the other party against third-party claims arising out of the performance of or the provision or receipt of services under the Services Agreement. While the Company’s aggregate indemnification obligations to Save-A-Lot and Onex, the purchaser of Save-A-Lot, could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. The Company has recorded the de minimis fair value of the guarantee in the Condensed Consolidated Balance Sheets within Other long-term liabilities.

Other Contractual Commitments

In the ordinary course of business, the Company enters into supply contracts to purchase products for resale and service contracts for fixed asset and information technology systems. These contracts typically include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations. As of October ~~30, 2021,~~29, 2022, the Company had approximately ~~$243~~$582 million of non-cancelable future purchase obligations, most of which will be paid and utilized in the ordinary course within one year.

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 43 suits pending in the United States District Court for the Northern District of Ohio where ~~over 1,800~~thousands of cases have been consolidated as Multi-District Litigation (“MDL”). In accordance with the Stock Purchase Agreement dated January 10, 2013, between New Albertson’s Inc. (“New Albertson’s”) and 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. On October 7, 2022, the MDL Court issued an order directing the Company and numerous other “non-litigating” defendants to submit by November 1, 2022, a list of opioid cases where the Company is named and opioid dispensing and distribution data. The Company substantially complied with the order and is working to provide the remaining data. 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 6six causes of action against the defendants: common law fraud, fraudulent nondisclosure, negligent misrepresentation, unjust enrichment, violation of the Minnesota Uniform Deceptive Trade Practices Act and violation of the Minnesota Prevention of Consumer Fraud Act. The plaintiffs allege that between 2006 and 2016, Supervalu overcharged the health plans by not providing the health plans, as part of usual and customary prices, the benefit of discounts given to customers purchasing prescription medication who requested that Supervalu match competitor prices. Plaintiffs seek an unspecified amount of damages. Similar to the above case, for the majority of the relevant period Supervalu and Albertson’s operated as a combined company. In March 2013, Supervalu divested Albertson’s and pursuant to the Stock Purchase Agreement, Albertson’s is responsible for any claims regarding its pharmacies. On February 19, 2021, Albertson’s and Safeway removed the case to Minnesota Federal District Court and on March 22, 2021 plaintiffs’ filed a motion to remand to state court. On February 26, 2021, defendants filed a motion to dismiss. The hearing on the remand motion and motions to dismiss occurred on May 20, 2021. On September 21, 2021, the Federal District Court remanded the case to Minnesota state court and did not rule on the motion to dismiss, which ~~will be~~was refiled in state court. On February 1, 2022, the state court denied the motion to dismiss. The Company believes these claims are without merit and intends to vigorously defend this matter.

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UNFI is currently subject to a qui tam action alleging violations of the False Claims Act (“FCA”). In United States ex rel. Schutte and Yarberry v. Supervalu, New Albertson’s, Inc., et al, which is pending in the U.S. District Court for the Central District of Illinois, the relators allege that defendants overcharged government healthcare programs by not providing the government, as a part of usual and customary prices, the benefit of discounts given to customers purchasing prescription medication who requested that defendants match competitor prices. The complaint was originally filed under seal and amended on November 30, 2015. The government previously investigated the relators’ allegations and declined to intervene. Violations of the FCA are subject to treble damages and penalties of up to a specified dollar amount per false claim. Relators elected to pursue the case on their own and have alleged FCA damages against Supervalu and New Albertson’s in excess of $100 million, not including trebling and statutory penalties. For the majority of the relevant period Supervalu and New Albertson’s operated as a combined company. In March 2013, Supervalu divested New Albertson’s (and related assets) pursuant to the Stock Purchase Agreement. Based on the 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. On August 12, 2021, the 7th Circuit affirmed the District Court’s decision granting summary judgment in defendants’ favor. On September 23, 2021, the Relators filed a petition for rehearing and defendants filed a response on November 9, 2021. On December 3, 2021, the 7th Circuit denied the petition for rehearing. On April 1, 2022, the Relators filed a petition for a writ of certiorari with the United States Supreme Court. The Company filed its response on June 20, 2022. On August 22, 2022, the Supreme Court issued an order inviting the Solicitor General to file a brief setting forth the views of the government on the petition for a writ of certiorari. On December 6, 2022, the Solicitor General submitted its brief recommending that the Supreme Court grant the petition for certiorari.

From time to time, the Company receives notice of claims or potential claims or becomes involved in litigation, alternative dispute resolution, such as arbitration, or other legal and regulatory proceedings that arise in the ordinary course of its business, including investigations and claims regarding employment law, including wage and hour (including class actions); pension plans; labor union disputes, including unfair labor practices, such as claims for back-pay in the context of labor contract negotiations and other matters; supplier, customer and service provider contract terms and claims, including matters related to supplier or customer insolvency or general inability to pay obligations as they become due; product liability claims, including those where the supplier may be insolvent and customers or consumers are seeking recovery against the Company; real estate and environmental matters, including claims in connection with its ownership and lease 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 October ~~30, 2021,~~29, 2022, 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~~the Company’s financial condition, results of operations or cash flows.

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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,”~~“will” and “would,” or similar words. Statements that contain these words and other statements that are forward-looking in nature should be read carefully because they discuss future expectations, contain projections of future results of operations or of financial positions or state other “forward-looking” information.

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

•our dependence on principal customers;

•the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures;

•the impact and duration of ~~the COVID-19 pandemic;~~any pandemics or disease outbreaks;

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

•labor and other workforce shortages and challenges;

•our ~~dependence on principal customers;~~ability to realize anticipated benefits of our strategic initiatives, including any acquisitions;

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

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

•~~the relatively low margins~~our ability to continue to grow sales, including of our ~~business, which are sensitive~~higher margin natural and organic foods and non-food products, and to ~~inflationary and deflationary pressures;~~manage that growth;

•increased competition in our ~~ability to realize anticipated benefits~~industry, including as a result of ~~our acquisitions~~continuing consolidation of retailers and ~~strategic initiatives, including, our acquisition~~the growth of ~~Supervalu;~~chains, direct distribution by large retailers and the growth of online distributors;

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

•the potential for disruptions in our ~~ability~~supply chain or our distribution capabilities from circumstances beyond our control, including due to ~~continue to grow sales, including~~lack of ~~our higher margin natural and organic foods and non-food products, and to manage that growth;~~long-term contracts, severe weather, labor shortage or work stoppages or otherwise;

•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;

•~~increased competition in our industry,~~moderated supplier promotional activity, including ~~as a result of continuing consolidation of retailers and the growth of chains;~~decreased forward buying opportunities;

•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;~~

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

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

•the potential for additional asset impairment charges;

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

•our ability to maintain food quality and safety;

•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 July ~~31, 2021~~30, 2022 (the “Annual Report”) 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

This Management’s Discussion and Analysis of ~~financial condition~~Financial Condition and ~~results~~Results of ~~operations~~Operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto contained in this Quarterly Report on Form 10-Q, the information contained under the caption “Forward-Looking Statements,” and the information in the Annual Report.

Business Overview

AsUNFI is a leading distributor of ~~natural, organic, specialty, produce and conventional~~ grocery and non-food products, and ~~provider of~~ support services provider to retailers in the United States and ~~Canada, we~~Canada. We believe we are uniquely positioned to provide the broadest array of products and services to customers throughout North America. Our diversified customer base includes over 30,000 customer locations ranging from some of the largest grocers in the country to smaller independents. We offer ~~nearly 300,000~~approximately 260,000 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~~foodservice products; and personal care items. We believe we are North America’s premier wholesaler with 56 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all ~~fifty~~50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers. We believe our total product assortment and service offerings are unmatched by our wholesale competitors. We plan to ~~aggressively~~continue to pursue new business opportunities with independent retailers ~~who~~that operate diverse formats, regional and national chains, as well as international customers with wide-ranging needs. Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division.

We ~~introduced~~are committed to executing our Fuel the Future strategy with the mission of ~~making~~building a food ecosystem that is better for all by delivering great food, more choices and fresh thinking for our customers ~~stronger, our supply chain better~~ and ~~our food solutions more inspired.~~ suppliers. Our Fuel the Future ~~is composed~~ strategy consists of six ~~strategic~~ pillars and is underpinned by four focus areas, which are detailed in “Part I. Item 1. Business” of our Annual Report. Collectively, the actions and plans behind each ~~pillar~~focus area are meant to capitalize on what we believe is our unique position in the food distribution industry, including the number and location of distribution centers we operate, the array of services and the data driven insights that we are able to customize for each of our customers, our innovation platforms and the growth potential we see in each, our commitment to our people and the planet and the positioning of our retail ~~operations, and our focus on delivering returns for our shareholders.~~operations.

We ~~also introduced our ValuePath initiative early in fiscal 2021, pursuant~~expect to which we plan to improve operating performance through various initiatives to be implemented through the end of fiscal 2023. We intend to re-invest a portion of these operating savings in the business to drive market share gains, accelerate innovation, invest in automation and maintain competitive wage scales for our frontline workers.

~~We will~~ continue to use ~~free cash flow~~available capital to re-invest in our business to support our Fuel the Future initiatives and to reduce outstanding debt, and ~~are~~we remain committed to improving our financial leverage. The decline in our financial leverage in recent years offers us increased flexibility to invest in growing our business and selectively return cash to shareholders as appropriate.

~~Growth Drivers~~

We believe our Fuel the Future strategy will ~~further~~ accelerate our growth through increasing sales of products and services, providing tailored, data-driven solutions to help our ~~existing~~ customers run their ~~business~~businesses more efficiently and contributing to ~~new~~ customer acquisitions. We believe the key drivers for new customer growth ~~through new customers~~ will ~~come from~~be the benefits of our significant scale, product and service offerings and nationwide ~~footprint, which we believe were demonstrated by the following recent developments in our relationships with certain large customers.~~

We have recently begun delivering product to Key Food Stores co-operative, Inc. (“Key Food”), a Co-Operative of over 300 grocery stores, after being selected as Key Food’s primary wholesaler. Our supply agreement with Key Food has a term of 10 years with expected sales over that period of approximately $10 billion.

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 a distribution agreement that expires on September 27, 2027.

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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 and changes in ~~trends in~~ consumer behavior. We ~~expect that~~believe food-at-home expenditures as a percentage of total food expenditures ~~will remain elevated~~are subject to these trends, including changes in consumer behaviors in response to social and economic trends, such as levels of disposable income and the ~~near term compared~~health of the economy in which our customers and our stores operate.

The U.S. economy has experienced economic volatility in recent years due to uncertain economic conditions, which have had and we expect may continue to have an impact on consumer confidence. Consumer spending may be impacted by levels ~~prior~~of discretionary income and consumers trading down to a less expensive mix of products for grocery items. In addition, inflation has increased and continues to be unpredictable. For example, we experienced volatility in our energy operating costs, and commodity and labor input costs have impacted the prices of products we procured from manufacturers. We believe our product mix ranging from high-quality natural and organic products to national and local conventional brands, including cost conscious private label brands, positions us to serve a broad cross section of North American retailers and end customers, and may lessen the impact of any shifts in consumer and industry trends in grocery product mix.

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We continue to experience a tight labor market for our warehouse and driver associates, which has caused additional reliance on third-party resources, incremental hiring and increases in wages, all of which has led to higher labor expenses. We believe this operating environment has been impacted by labor force availability, in part as a result of the COVID-19 pandemic, which we refer to as the pandemic. We ~~believe that changes in work being done outside of the traditional office setting will~~ continue to ~~contribute~~take actions to ~~more food being consumed at home. The pandemic also drove significant growth in eCommerce utilization by grocery consumers,~~maintain existing employment levels, fill open roles and we expect that trend to continue. We expect to benefit from this trend through the growth of our traditional eCommerce customers, our Community Marketplace, an online marketplace connecting suppliers and retailers, and EasyOptions, which directly services non-traditional customers, such as bakeries or yoga studios, and through customers adopting our turnkey eCommerce platform.prepare for future employment needs.

Recently-enacted federal orders require certain employers, including us, to implement a vaccine mandate for employees or require periodic testing for employees who are not vaccinated. On November 4, 2021,Uncertainty remains regarding the Occupational Safety and Health Administration issued its related regulations for covered employers, including us, which set a January 4, 2022 deadline for compliance, which has subsequently been challenged in the courts and is currently stayed. Such vaccine mandates could result in disruptions to our current and potential future workforce and our vendors’ ability to deliver product and/or maintain pricing, and could impact our ability to supply products to our customers. We are currently evaluating methods of compliance with the mandates, and those efforts could result in increased costs and/or turnover in our workforce.

~~The future~~longer-term impact of the pandemic on our business as global economies, markets and supply chains respond to the ongoing effects. We continue to monitor guidelines released by the Centers for Disease Control and Prevention and the World Health Organization and, when appropriate, implement mitigation measures to protect our associates, including safety protocols and strongly encouraging vaccinations/boosters. Our results ~~from changes in the pandemic is uncertain and dependent upon future developments, including~~could be impacted by, among other factors, any resurgence of infection rates and new variants of COVID-19 with higher transmissibility, ~~any economic downturn,~~the availability and efficacy of vaccines and treatments, actions taken by governmental authorities and other third parties in response to the pandemic such as ~~social distancing~~health and safety orders ~~vaccine~~and mandates, or companies’ remote work policies, any economic downturn, the impact on capital and financial markets, food-at-home purchasing levels and other consumer trends, each of which is uncertain. 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.~~

We are experiencing a tighter operating labor market for our warehouse and driver associates, which has caused additional reliance on and higher costs from third-party resources, and incremental hiring and wage costs. We believe this operating environment has been impacted by labor force availability and the pandemic. We are working to implement actions to fill open roles and maintain existing and future employment levels.

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.

Wholesale Distribution Center Network

~~Network Optimization and Construction~~

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 for approximately $152 million. We entered into an agreement to monetize the real property of this location through a sale-leaseback transaction, which is contingent upon the acquisition of the facility that we expect will occur in the first half of calendar 2022.

In the first quarter of fiscal 2022, we started shipping from our Allentown, PA distribution center with a capacity of 1.3 million square feet that is being utilized to service customers in that geographical area. We incurred and expect to continue to incur initial start-up costs and operating losses in fiscal 2022 as the volume in this facility ramps up to match its expected full operating capacity.

~~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~~expansion or improvements. We are working to both minimize these potential future costs and obtain new business to further improve the efficiency of our transforming distribution network.

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In fiscal 2022, our Allentown, Pennsylvania distribution center began operations, with a capacity of 1.3 million square feet to service customers in the surrounding geographic area. We incurred start-up costs and operating losses, as the volume in this facility continues to ramp up to its operating capacity.

Retail Operations

We currently operate ~~74 continuing operations~~76 Retail grocery stores, including 5354 Cub Foods corporate stores and 2122 Shoppers Food Warehouse stores. In addition, we supply another 2726 Cub Foods stores operated by our Wholesale customers through franchise and equity ownership arrangements. We operate 81 pharmacies primarily within the stores we operate and the stores of our franchisees. In addition, we operate 23 “Cub Wine and Spirit” and “Cub Liquor” stores.

InWe plan to continue to invest in our Retail segment in areas such as customer-facing merchandising initiatives, physical facilities, technology and operational tools. Cub Foods and Shoppers Food Warehouse anticipate continued investment in improving the fourth quarter of fiscal 2021, we determined that the Company no longer met the held for sale criterion for a probable sale to be completed within 12 months for two of the four stores that were previously included within discontinued operations. As a result, we revised the Condensed Consolidated Financial Statements to reclassify two Shoppers stores from discontinued operations to continuing operations. The prior period presented in the Condensed Consolidated Financial Statements have been conformed to the current period presentation. The remaining two stores in discontinued operations were sold subsequent to the end of the first quarter of fiscal 2022.customer and associate experience through express remodels focused on customer facing elements.

Impact of Product Cost Inflation

We experienced a mix of inflation across product categories during the first quarter of fiscal ~~2022.~~2023. In the aggregate across our businesses, including the mix of products, management estimates our ~~business~~businesses experienced product cost inflation of approximately ~~four~~ten percent in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022. Cost inflation estimates are based on individual like items sold during the periods being compared. Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation on Net sales and Gross profit. Absent any changes in units sold or the mix of units sold, inflation generally has the effect of increasing sales. Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which has the effect of decreasing Gross profit and the carrying value of inventory during periods of inflation.

Our pricing to our customers is determined at the time of sale primarily based on the then prevailing vendor listed base cost, and includes discounts we offer to our customers. Generally in an inflationary environment as a wholesaler, rising vendor costs result in higher Net sales driven by higher vendor prices when other variables such as quantities sold and vendor promotions are constant.

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Composition of Condensed Consolidated Statements of Operations and Business Performance Assessment

Net sales

Our ~~net~~Net sales consist primarily of product sales of natural, organic, specialty, produce and conventional grocery and non-food products, and support services revenue from 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~~Cost of sales include the amounts paid to suppliers for product sold, plus transportation costs necessary to bring the product to, or move product between, our distribution centers and retail stores, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products. Our gross margin may not be comparable to other similar companies within our industry that may 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~~distribution expenses ~~include~~of warehousing, delivery, purchasing, receiving, selecting, and outbound transportation expenses, and selling and administrative expenses. These expenses include salaries and wages, employee benefits, occupancy, insurance, depreciation and amortization expense and share-based compensation expense.

Restructuring, acquisition and integration related expenses

Restructuring, acquisition and integration related expenses reflect expenses resulting from restructuring activities, including severance costs, ~~change-in-control related charges,~~ facility closure asset impairment charges and costs, ~~stock-based~~share-based compensation acceleration charges and acquisition and integration related expenses. Integration related 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.

~~Table of Contents~~Net periodic benefit income, excluding service cost

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

Interest expense, net

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

~~Net periodic benefit income, excluding service cost~~

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

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 ongoing business performance.

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We believe Adjusted EBITDA is useful to investors and financial institutions because it provides additional information regarding 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 because of its importance as a measure of underlying operating performance, as the primary compensation performance measure under certain compensation programs and plans. We believe Adjusted EBITDA is reflective of factors that affect our underlying operating performance and facilitate operating performance comparisons of our business on a consistent basis over time. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Certain adjustments to our GAAP financial measures reflected below exclude items that may be considered recurring in nature and may be reflected in our financial results for the foreseeable future. These measurements and items may be different from non-GAAP financial measures used by other companies. Adjusted EBITDA should be reviewed in conjunction with our results reported in accordance with GAAP in this Quarterly ~~Report.~~Report on Form 10-Q.

There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting the cost of cash expenditures for 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,~~including noncontrolling interests, less ~~net~~Net income attributable to noncontrolling interests, plus non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus Provision (benefit) for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, (Gain) loss on sale of assets, certain legal charges and gains, and certain other non-cash charges or other items, as determined by ~~management, plus Adjusted EBITDA of discontinued operations calculated in a manner consistent with the results of continuing operations, outlined above.~~management. The changes to the definition of Adjusted EBITDA from prior periods reflect changes to line item references in our Condensed Consolidated Financial Statements, which do not impact the calculation of Adjusted EBITDA.

During fiscal 2022, we revised our definition of Adjusted EBITDA to exclude the impact of the non-cash LIFO charge or benefit. We believe that this change provides a better indicator of our underlying operating performance and permits better comparability between periods. Refer to footnote one in the table below and Note 13—Business Segments in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding the impact of the change in definition of Adjusted EBITDA.

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Assessment of Our Business Results

The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated. We have revised the following ~~table~~tables for the ~~prior-period presentation of two discontinued operations stores moved to continuing operations~~change in segment profit measurement for Adjusted EBITDA as discussed in Note ~~1—Significant Accounting Policies~~13—Business Segments within Part ~~II,~~I, Item 81 of ~~the Annual Report.~~this Quarterly Report on Form 10-Q.


		13-Week Period Ended							13-Week Period Ended
(in millions)	(in millions)	October 30, 2021		October 31, 2020		Change		(in millions)		October 29, 2022		October 30, 2021		Change
Net sales	Net sales	$	6,997	$	6,684	$	313	Net sales		$	7,532	$	6,997	$	535
Cost of sales	Cost of sales	5,955		5,714		241		Cost of sales		6,436		5,955		481
Gross profit	Gross profit	1,042		970		72		Gross profit		1,096		1,042		54
Operating expenses	Operating expenses	932		904		28		Operating expenses		1,000		932		68
Restructuring, acquisition and integration related expenses	Restructuring, acquisition and integration related expenses	3		16		(13)		Restructuring, acquisition and integration related expenses		2		3		(1)

Gain on sale of assets								Gain on sale of assets		(5)		—		(5)
Operating income	Operating income	107		50		57		Operating income		99		107		(8)
Net periodic benefit income, excluding service cost	Net periodic benefit income, excluding service cost	(10)		(17)		7		Net periodic benefit income, excluding service cost		(7)		(10)		3
Interest expense, net	Interest expense, net	40		69		(29)		Interest expense, net		35		40		(5)
Other, net		1		(1)		2
Income (loss) from continuing operations before income taxes		76		(1)		77
Benefit for income taxes		(1)		(1)		—
Net income from continuing operations		77		—		77
Income from discontinued operations, net of tax		—		—		—
Other (income) expense, net								Other (income) expense, net		(1)		1		(2)
Income before income taxes								Income before income taxes		72		76		(4)
Provision (benefit) for income taxes								Provision (benefit) for income taxes		5		(1)		6
Net income including noncontrolling interests	Net income including noncontrolling interests	77		—		77		Net income including noncontrolling interests		67		77		(10)
Less net income attributable to noncontrolling interests	Less net income attributable to noncontrolling interests	(1)		(1)		—		Less net income attributable to noncontrolling interests		(1)		(1)		—
Net income (loss) attributable to United Natural Foods, Inc.		$	76	$	(1)	$	77
Net income attributable to United Natural Foods, Inc.								Net income attributable to United Natural Foods, Inc.		$	66	$	76	$	(10)

Adjusted EBITDA	Adjusted EBITDA	$	189	$	159	$	30	Adjusted EBITDA		$	207	$	200	$	7

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The following table reconciles Net income including noncontrolling interests to Adjusted EBITDA:


	13-Week Period Ended
(in millions)		October 29, 2022		October 30, 2021
Net income including noncontrolling interests		$	67	$	77
Adjustments to net income including noncontrolling interests:
Less net income attributable to noncontrolling interests		(1)		(1)
Net periodic benefit income, excluding service cost		(7)		(10)
Interest expense, net		35		40
Other (income) expense, net		(1)		1
Provision (benefit) for income taxes		5		(1)
Depreciation and amortization		74		69
Share-based compensation		12		11
LIFO charge(1)		21		11
Restructuring, acquisition and integration related expenses		2		3
Gain on sale of assets		(5)		—
Other(2)		5		—
Adjusted EBITDA		$	207	$	200

(1)During fiscal 2022, the Company revised its definition of Adjusted EBITDA to ~~Net income from continuing operations and~~exclude the impact of the non-cash LIFO charge or benefit. The following illustrates the impact of the revised definition on previously reported periods to ~~Income from discontinued operations, net of tax.~~

13-Week Period Ended
(in millions) October 30, 2021 October 31, 2020
Net income from continuing operations $ 77 $ —
Adjustments to continuing operations net income:
Less net income attributable to noncontrolling interests (1) (1)
Net periodic benefit income, excluding service cost (10) (17)
Interest expense, net 40 69
Other, net 1 (1)
Benefit for income taxes (1) (1)
Depreciation and amortization 69 77
Share-based compensation 11 14
Restructuring, acquisition and integration related expenses(1)
3 16
Other retail expense(2)
— 2
Adjusted EBITDA of continuing operations 189 158
Adjusted EBITDA of discontinued operations(3)
— 1
Adjusted EBITDA $ 189 $ 159

Income from discontinued operations, net of tax $ — $ —
Adjustments to discontinued operations net income:
Provision for income taxes — 1
Adjusted EBITDA of discontinued operations $ — $ 1

~~(1)Fiscal 2021 primarily reflects costs associated with advisory and transformational activities as we position our business for further value-creation following~~show the ~~Supervalu acquisition. Refer to Note 4—Restructuring, Acquisition and Integration Related Expenses in Part I, Item 1~~effect of this ~~Quarterly Report on Form 10-Q for additional information.~~change:


	13-Week Period Ended
(in millions)	October 30, 2021
Adjusted EBITDA (previously reported definition)	$	189
LIFO charge	11
Adjusted EBITDA (current definition)	$	200

(2)~~Reflects expenses associated with event-specific damages to~~Includes costs for certain ~~retail stores.~~

~~(3)The last two remaining retail stores of discontinued operations were sold subsequent to the end of the first quarter of fiscal 2022.~~technology-related initiatives.

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RESULTS OF OPERATIONS

Net Sales

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


		13-Week Period Ended				Increase (Decrease)				13-Week Period Ended		Increase (Decrease)
Customer Channel(1)	Customer Channel(1)	October 30, 2021		October 31, 2020		$		%			Customer Channel(1)		October 29, 2022		October 30, 2021		$		%
Chains	Chains	$	3,082	$	3,027	$	55	1.8	%		Chains		$	3,224	$	3,082	$	142	4.6	%
Independent retailers	Independent retailers	1,750		1,672		78		4.7	%		Independent retailers		1,947		1,750		197		11.3	%
Supernatural	Supernatural	1,378		1,214		164		13.5	%		Supernatural		1,513		1,378		135		9.8	%
Retail	Retail	602		606		(4)		(0.7)	%		Retail		613		602		11		1.8	%
Other	Other	580		581		(1)		(0.2)	%		Other		635		580		55		9.5	%
Eliminations	Eliminations	(395)		(416)		21		(5.0)	%		Eliminations		(400)		(395)		(5)		1.3	%
Total net sales	Total net sales	$	6,997	$	6,684	$	313	4.7	%		Total net sales		$	7,532	$	6,997	$	535	7.6	%

(1)Refer to Note 3—Revenue Recognition in Part 1, Item 1 of this Quarterly Report on Form 10-Q for our channel definitions and additional information.

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Our ~~net~~Net sales for the first quarter of fiscal ~~2022~~2023 increased approximately ~~4.7%~~7.6% from the first quarter of fiscal ~~2021.~~2022. The increase in ~~net~~Net sales was primarily driven by inflation and new business. This new business resulted from ~~both~~selling new or expanded categories to existing customers and adding new customers ~~including the benefit of cross selling,~~from our robust pipeline. These increases were partially offset by ~~supply chain challenges and~~an expected ~~modest market contraction.~~decrease in unit volume consistent with the overall industry.

Chains ~~net~~Net sales increased primarily due to growth in sales to existing and new customers, including an increase from higher product ~~costs.~~costs, which drove higher wholesale selling prices to our customers, partially offset by a decrease in units sold.

Independent retailers ~~net~~Net sales increased primarily due to ~~the beginning of~~sales under a ~~new~~ supply agreement with a new customer ~~for East Coast locations~~within the Atlantic region commencing in the first quarter of fiscal 2022 and growth in sales to existing ~~customers.~~customers, including an increase from higher product costs, which drove higher wholesale selling prices to our customers, partially offset by a decrease in units sold.

Supernatural ~~net~~Net sales increased primarily due to growth in existing store sales, including the supply of new ~~product~~fresh categories, ~~previously impacted by the pandemic, such as bulk and ingredients used for prepared foods,~~inflation, and increased sales to new stores.~~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 ~~net~~Net sales ~~decreased~~increased primarily due to a ~~1.0% decrease~~2.0% increase in identical store sales from higher average basket sizes driven by inflation, offset by lower ~~transaction counts as a result of cycling strong~~volume.

Other Net sales in the first quarter of 2021. 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 usedincreased primarily due to ~~understand the sales performance of retail stores as it removes the impact of new and closed stores.~~higher e-commerce sales.

Cost of Sales and Gross Profit

Our gross profit increased ~~$72~~$54 million, or ~~7.4%~~5.2%, to $1,096 million for the first quarter of fiscal 2023, from $1,042 million for the first quarter of fiscal ~~2022, from $970 million for the first quarter of fiscal 2021.~~2022. Our gross profit as a percentage of ~~net~~Net sales ~~increased~~decreased to ~~14.89%~~14.6% for the first quarter of fiscal ~~2022~~2023 compared to ~~14.51%~~14.9% for the first quarter of fiscal ~~2021.~~2022. The ~~increase~~LIFO charge was $21 million and $11 million in the first quarter of fiscal 2023 and 2022, respectively. Excluding the non-cash LIFO charge, gross profit rate was 14.8% of Net sales and 15.0% of Net sales for the first quarter of fiscal 2023 and 2022, respectively. The decrease in gross profit rate, excluding the LIFO charge, was ~~primarily~~ driven by ~~improvements~~changes in ~~the Wholesale segment margin rate, including the impact of inflation and the Company’s ValuePath initiative. Retail gross margin rate declined modestly compared~~customer mix as we continued to ~~last year.~~grow sales with larger customers.

Operating Expenses

Operating expenses increased ~~$28~~$68 million, or ~~3.1%~~7.3%, to ~~$932~~$1,000 million, or ~~13.32%~~13.3% of ~~net~~Net sales, for the first quarter of fiscal ~~2022~~2023 compared to ~~$904~~$932 million, or ~~13.52%~~13.3% of ~~net~~Net sales, for the first quarter of fiscal ~~2021. The decrease in operating~~2022. Operating expenses as a percent of ~~net~~Net sales was due to leveraging fixed operating and administrative expenses and lower year-over-year distribution center start-up and consolidation costs, partially offset by higher transportation expenses, the temporary, voluntary closure of a distribution center and the investment in distribution center labor to better support our customers.

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~~Restructuring, Acquisition and Integration Related Expenses~~

~~Restructuring, acquisition and integration related expenses were $3 million~~ for the first quarter of fiscal ~~2022. Expenses for~~2023 were approximately flat compared to the first quarter of fiscal ~~2021 were $16 million,~~2022, primarily driven by continued investments in servicing our customers, which ~~included $15 million~~led to higher transportation and distribution center labor costs in the first quarter of ~~restructuring~~fiscal 2023, and ~~integration~~higher occupancy costs, primarily reflecting costs associated with advisory and transformational activities as we position our business for further value-creation post-acquisition and $1 million of closed property charges and costs.partially offset by leveraging fixed expenses across higher sales.

Operating Income

Reflecting the factors described above, ~~operating~~Operating income ~~increased $57~~decreased $8 million to $99 million for the first quarter of fiscal 2023, compared to $107 million for the first quarter of fiscal ~~2022, compared to $50 million for the first quarter of fiscal 2021.~~2022. The decrease in operating income ~~increase~~ was primarily driven by an increase in ~~gross profit~~operating expenses in excess of an increase in ~~operating expenses~~gross profit as described above.

~~Net Periodic Benefit Income, Excluding Service Cost~~

Net periodic benefit income, excluding service cost decreased $7 million to $10 million for the first quarter of fiscal 2022, from $17 million for the first quarter of fiscal 2021. The decrease in Net periodic benefit income, excluding service cost was primarily driven by lower expected rates of return on plan assets.

Interest Expense, Net


		13-Week Period Ended					13-Week Period Ended
(in millions)	(in millions)	October 30, 2021		October 31, 2020		(in millions)		October 29, 2022		October 30, 2021
Interest expense on long-term debt, net of capitalized interest	Interest expense on long-term debt, net of capitalized interest	$	33	$	37	Interest expense on long-term debt, net of capitalized interest		$	32	$	33
Interest expense on finance lease obligations	Interest expense on finance lease obligations	4		5		Interest expense on finance lease obligations		1		4
Amortization of financing costs and discounts	Amortization of financing costs and discounts	3		4		Amortization of financing costs and discounts		2		3
Loss on debt extinguishment		—		24
Interest income		—		(1)

Interest expense, net	Interest expense, net	$	40	$	69	Interest expense, net		$	35	$	40

The decrease in interest expense, ~~on long-term debt,~~ net, ~~of capitalized interest,~~ in the first quarter of fiscal ~~2022~~2023 compared to the first quarter of fiscal ~~2021~~2022 was primarily driven by lower outstanding debt balances. In addition, our interest expense included the benefit of lower interest expense on our portfolio of interest rate swaps, partially offset by higher average floating interest rates on the company’s credit facilities.

~~The decrease in loss on debt extinguishment costs primarily reflects the acceleration~~

Table of unamortized debt issuance costs and original issue discounts related to mandatory and voluntary prepayments on the Term Loan Facility made and expensed financing costs related to the First Term Loan Amendment in the first quarter of fiscal 2021. Refer to Note 8—Long-Term Debt for further information.Contents

~~Benefit~~Provision (Benefit) for Income Taxes

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 $66 million, or $1.07 per diluted common share, for the first quarter of fiscal 2023, compared to $76 million, or $1.25 per diluted common share, for the first quarter of fiscal ~~2022, compared to a net loss of $1 million, or $0.02 per diluted common share, for the first quarter of fiscal 2021.~~2022.

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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—~~13—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							13-Week Period Ended
(in millions)	(in millions)	October 30, 2021		October 31, 2020		Change		(in millions)		October 29, 2022		October 30, 2021		Change
Net sales:	Net sales:							Net sales:
Wholesale	Wholesale	$	6,734	$	6,438	$	296	Wholesale		$	7,259	$	6,734	$	525
Retail	Retail	602		606		(4)		Retail		613		602		11
Other	Other	56		56		—		Other		60		56		4
Eliminations	Eliminations	(395)		(416)		21		Eliminations		(400)		(395)		(5)
Total Net sales	Total Net sales	$	6,997	$	6,684	$	313	Total Net sales		$	7,532	$	6,997	$	535
Continuing operations Adjusted EBITDA:
Wholesale		$	164	$	123	$	41
Retail		22		25		(3)
Adjusted EBITDA:								Adjusted EBITDA:
Wholesale(1)								Wholesale(1)		$	171	$	175	$	(4)
Retail(1)								Retail(1)		20		22		(2)
Other	Other	4		4		—		Other		19		4		15
Eliminations	Eliminations	(1)		6		(7)		Eliminations		(3)		(1)		(2)
Total continuing operations Adjusted EBITDA		$	189	$	158	$	31
Total Adjusted EBITDA								Total Adjusted EBITDA		$	207	$	200	$	7

(1)Adjusted EBITDA amounts as previously reported by segment have been recast to conform with the revised segment profit measure of Adjusted EBITDA, which excludes the non-cash LIFO charge recorded by segment. The effect of the revision increased Adjusted EBITDA for Wholesale by $11 million for the first quarter of fiscal 2022. The impact on Retail was insignificant.

Net Sales

Wholesale’s ~~net~~Net sales increased primarily due to growth in ~~the Supernatural,~~sales to new and existing customers, including an increase from higher product costs, in Independent retailers, Chains and ~~Chains channels. Refer to the~~Supernatural channels, as discussed in Results of Operations - Net Sales ~~discussion above for additional information.~~section above.

Retail’s ~~net~~Net sales ~~decreased~~increased primarily due to a ~~1.0% decrease~~2.0% increase in identical store sales from higher average basket sizes driven by inflation, offset by lower ~~transaction counts as a result of cycling strong sales in the first quarter of 2021.~~volume.

~~Adjusted EBITDA~~

~~Wholesale’s Adjusted EBITDA increased 33.3% for the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021.~~ The increase in eliminations Net sales was driven by gross margin rate expansion, partially offset by a slight increase in operating expenses. Wholesale’s gross profit dollar growth for the first quarter of fiscal 2022 was $82 million with a gross profit rate increase of approximately 68 basis points primarily driven by margin rate expansionhigher sales from the benefits of inflation and the Company’s ValuePath initiative. Wholesale’s operating expense increased $41 million, which excludes depreciation and amortization, stock-based compensation and other adjustments as outlined in Note 14—Business Segments. Wholesale’s operating expense rate increased 17 basis points driven by higher transportation expenses and the temporary, voluntary closure of a distribution center and the investment in distribution center laborOther to better support our customers, partially offset by lower year-over-year distribution center start-up and consolidation costs in fiscal 2021. Wholesale’s depreciation expense decreased $7 million compared to last year.

Retail’s Adjusted EBITDA decreased 12.0% for the first quarter of fiscal 2022 from the first quarter of fiscal 2021. The decrease was driven by a lower gross margin rate. Retail operating expenses, which excludes depreciation and amortization, stock-based compensation and other adjustments as outlined in Note 14—Business Segments, was approximately flat. Retail’s depreciation and amortization expense was approximately flat compared to last year.

Wholesale.

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Adjusted EBITDA

Wholesale’s Adjusted EBITDA decreased 2.3% for the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022. The decrease was driven by an increase in operating expenses in excess of gross profit growth excluding the LIFO charge. Wholesale’s Gross profit increase excluding the LIFO charge for the first quarter of fiscal 2023 was $65 million with a gross profit rate decrease of approximately 4 basis points primarily driven by changes in customer mix. Wholesale’s Operating expense increased $69 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 13—Business Segments. Wholesale’s operating expense rate increased 18 basis points primarily driven by continued investments in servicing our customers, which led to higher transportation and distribution labor costs in the first quarter of fiscal 2023, and higher occupancy costs. These increases were partially offset by leveraging fixed costs. Wholesale’s depreciation and amortization expense increased $3 million compared to the first quarter of fiscal 2022.

Retail’s Adjusted EBITDA decreased 9.1% for the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022. Retail’s gross profit rate was approximately flat compared to the first quarter of fiscal 2022 and operating expenses increased primarily due to higher employee-related costs. Retail’s Adjusted EBITDA excludes depreciation and amortization, share-based compensation, LIFO charge and other adjustments as outlined in Note 13—Business Segments. Retail’s depreciation and amortization expense increased $1 million compared to the first quarter of fiscal 2022.

LIQUIDITY AND CAPITAL RESOURCES

Highlights

•Total liquidity as of October ~~30, 2021~~29, 2022 was ~~$1,112~~$1,289 million and consisted of the following:

◦Unused credit under ~~our revolving line of credit~~the ABL Credit Facility was ~~$1,066~~$1,250 million, which decreased ~~$214~~$377 million from ~~$1,280~~$1,627 million as of July ~~31, 2021,~~30, 2022, primarily due to increased cash utilized to fund seasonal working capital increases.

◦Cash and cash equivalents was ~~$46~~$39 million, which ~~increased~~decreased $5 million from ~~$41~~$44 million as of July ~~31, 2021.~~30, 2022.

•Our total debt increased ~~$202~~$376 million to ~~$2,390~~$2,499 million as of October ~~30, 2021~~29, 2022 from ~~$2,188~~$2,123 million as of July ~~31, 2021,~~30, 2022, primarily related to additional borrowings under the ABL Credit Facility to fund seasonal working capital increases.

•In the remainder of fiscal 2022, scheduled debt maturities are expected to be $11 million. We are also obligated to make payments to reduce finance lease obligations, including a payment to acquire the Riverside, CA distribution center in fiscal 2022, which we expect to fund with the proceeds of a concurrent sale-leaseback transaction in fiscal 2022. Based on our Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) at the end of fiscal 2021, no prepayment from Excess Cash Flow (as defined in the Term Loan Agreement) in fiscal 2021 is required to be made in fiscal 2022.

•Subsequent to the end of the first quarter of fiscal 2022, we made a voluntary prepayment of $150 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 generated during fiscal 2022, if any, which would be due in fiscal 2023. In the second quarter of fiscal 2022, we expect to record an accelerated charge related to deferred financing fees and original issue discounts based on the proportionate amount of this prepayment to the Term Loan Facility balance. Also subsequent to the end of the first quarter of fiscal 2022, we amended our Term Loan Agreement to, reduce the applicable margin for LIBOR and base rate loans under the Term Loan Facility by 25 basis points.

•Working capital increased ~~$265~~$415 million to ~~$1,328~~$1,795 million as of October ~~30, 2021~~29, 2022 from ~~$1,063~~$1,380 million as of July ~~31, 2021,~~30, 2022, primarily due to seasonal increases in inventory and accounts receivable levels, partially offset by an increase in accounts payable related to inventories.

•Subsequent to the end of the first quarter of fiscal 2023, we monetized certain receivables within Accounts receivable, net, pursuant to a purchase agreement with a third-party financial institution for the sale of certain receivables up to $300 million, which generated net cash proceeds of $253 million. These proceeds were used to make a $125 million voluntary prepayment on the Term Loan Facility and reduce outstanding borrowings under the ABL Credit Facility.

Sources and Uses of Cash

We expect to continue to replenish operating assets and pay down debt obligations with internally generated ~~funds and proceeds from the sale of surplus and/or non-core assets.~~funds. 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. We expect to be able to fund debt maturities and finance lease liabilities through fiscal ~~2022~~2023 with internally generated funds ~~proceeds from asset sales or~~and borrowings under the ABL Credit Facility.

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

Primary uses of cash include debt service, capital expenditures, working capital maintenance 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.

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We currently do not pay a dividend on our common ~~stock, and have no plans to do so.~~stock. 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.

~~Table of Contents~~

Long-Term Debt

During the first quarter of fiscal ~~2022,~~2023, we borrowed a net ~~$209~~$377 million under the ABL Credit ~~Facility and repaid $8 million on the Term Loan Facility related to voluntary prepayments.~~Facility. Subsequent to the end of the first quarter of fiscal ~~2022,~~2023, we ~~repaid an additional $150~~made a $125 million ~~under~~voluntary prepayment on the Term Loan Facility with ~~borrowings under the ABL Credit Facility. We also entered into~~ a second amendment to the Term Loan Facility to, among other things, reduce the applicable margin by 0.25%. Refer to Note 8—Long-Term Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information, including a detailed discussionportion of the ~~provisions of our credit facilities and~~proceeds received from monetizing certain ~~long-term debt agreements.~~receivables within Accounts receivable, net.

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 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 is ever less than the greater of (i) ~~$235~~$210 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.~~Report on Form 10-Q. The Term Loan Agreement, Senior Notes and ABL Loan Agreement ~~and Senior Notes~~ contain certain operational and informational covenants customary for debt securities of these types that limit our and our restricted subsidiaries’ ability to, among other things, incur debt, declare or pay dividends or make other distributions to our stockholders, transfer or sell assets, create liens on our assets, engage in transactions with affiliates, and merge, consolidate or sell all or substantially all of our and our subsidiaries’ assets on a consolidated basis. We were in compliance with all such covenants for all periods presented. If we fail to comply with any of these covenants, we may be in default under the applicable debt agreement, and all amounts due thereunder may become immediately due and payable.

Derivatives and Hedging Activity

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

As of October ~~30, 2021,~~29, 2022, we had an aggregate of ~~$1,232~~$1,200 million of floating rate notional debt subject to active interest rate swap contracts, which effectively hedge the ~~LIBOR~~SOFR component of our interest rate payments through pay fixed and receive floating interest rate swap agreements. These fixed rates range from ~~1.795%~~2.274% to ~~2.959%~~2.875%, with maturities between ~~August~~October 2022 and October 2025. The fair value of these interest rate derivatives ~~represents~~represent a ~~total net liability~~current asset of ~~$56~~$16 million and a long-term asset of $11 million as of October 29, 2022, and are subject to volatility based on changes in market interest rates. In the first quarter of fiscal 2021, we paid $11 million to terminate or novate $954 million of interest rate swap contracts over our floating rate notional debt. The termination payments reflect 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. See Note 7—Derivatives in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

From time to time, we enter into fixed price fuel supply agreements and foreign currency hedges. As of October ~~30, 2021,~~29, 2022, we had fixed price fuel contracts ~~outstanding~~ and foreign currency forward agreements outstanding. Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant.

Payments for Capital Expenditures

Our capital expenditures for the first quarter of fiscal ~~2022~~2023 were ~~$56~~$67 million compared to ~~$41~~$56 million for the first quarter of fiscal ~~2021,~~ 2022, an increase of ~~$15 million primarily due to~~$11 million. Our capital spending for the first quarter of fiscal 2023 and 2022 principally included information technology and supply chain expenditures, including continued investment in the new Allentown, PAPennsylvania distribution center ~~investment in~~during the first quarter of fiscal 2022. Fiscal ~~2022~~2023 capital spending is expected to be approximately ~~$300~~$350 million and include projects that automate, optimize and expand our distribution network, and finance our technology platform investments and the remaining investments in the Allentown, PA distribution center. In addition to this fiscal 2022 capital spending, we expect to spend an incremental $152 million to acquire the real property of the Riverside, CA distribution center, which we expect to fund with the proceeds of a concurrent sale-leaseback transaction.investments. We expect to finance fiscal ~~2022~~2023 capital expenditures requirements with cash generated from operations and borrowings under our ABL Credit Facility. ~~Longer term, capital spending is expected to be at or below 1.0% of net sales.~~ Future investments may be financed through long-term debt or borrowings under our ABL Credit ~~Facility.~~Facility and cash from operations.

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Cash Flow Information

The following summarizes our Condensed Consolidated Statements of Cash Flows:

13-Week Period Ended
(in millions) October 30, 2021 October 31, 2020 Change
Net cash used in operating activities of continuing operations $ (81) $ (55) $ (26)
Net cash used in investing activities of continuing operations (81) (37) (44)
Net cash provided by financing activities of continuing operations 167 95 72
Net cash used in discontinued operations — (1) 1
Effect of exchange rate on cash — — —
Net increase in cash and cash equivalents 5 2 3
Cash and cash equivalents, at beginning of period 41 47 (6)
Cash and cash equivalents, at end of period $ 46 $ 49 $ (3)


	13-Week Period Ended
(in millions)	October 29, 2022		October 30, 2021		Change
Net cash used in operating activities	$	(262)	$	(81)	$	(181)
Net cash used in investing activities	(61)		(81)		20
Net cash provided by financing activities	319		167		152
Effect of exchange rate on cash	(1)		—		(1)
Net (decrease) increase in cash and cash equivalents	(5)		5		(10)
Cash and cash equivalents, at beginning of period	44		41		3
Cash and cash equivalents, at end of period	$	39	$	46	$	(7)

The increase in net cash used in operating activities ~~of continuing operations~~ in the first quarter of fiscal ~~2022~~2023 compared to the first quarter of fiscal ~~2021~~2022 was primarily due to higher levels of cash utilized to build inventories and ~~credit extended through accounts receivable from seasonal working capital changes and continued sales growth, partially offset by an increase~~a decrease in accounts payable ~~related~~relative to inventory ~~increases.~~increases, partly due to earlier seasonal inventory purchases in the first quarter of fiscal 2023.

The ~~increase~~decrease in net cash used in investing activities ~~of continuing operations~~ in the first quarter of fiscal ~~2022~~2023 compared to the first quarter of fiscal ~~2021~~2022 was primarily due to ~~increased~~a reduction in payments for ~~investments and capital expenditures.~~investments.

The increase in net cash provided by financing activities ~~of continuing operations~~ in the first quarter of fiscal ~~2022~~2023 compared to the first quarter of fiscal ~~2021~~2022 was primarily due to a larger increase in net borrowings under the ABL Credit Facility resulting from increases in net cash used in operating activities, ~~and~~net of cash used in investing activities, as described above.

Other Obligations and Commitments

~~Except as otherwise disclosed in Note 8—Long-Term Debt in Part I, Item 1~~Our principal contractual obligations and commitments consist of ~~this Quarterly Report~~obligations under our long-term debt, interest on ~~Form 10-Q, there~~long-term debt, operating and finance leases, purchase obligations, self-insurance liabilities and multiemployer plan withdrawal liabilities.

There have been no material changes in ~~the Company’s~~our contractual obligations since the end of fiscal ~~2021.~~2022. Refer to Item 7 of the Annual Report for additional information regarding ~~the Company’s~~our contractual obligations.

Pension and Other Postretirement Benefit Obligations

In fiscal ~~2022,~~2023, no minimum pension contributions are required to be made under ~~the Unified Grocers, Inc. Cash Balance Plan or~~ the SUPERVALU INC. Retirement Plan under Employee Retirement Income Security Act of 1974, as amended (“ERISA”). An insignificant amount of contributions are expected to be made to defined benefit pension plans and postretirement benefit plans in fiscal ~~2022.~~2023. 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.

Off-Balance Sheet Multiemployer Pension Arrangements

We contribute to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and unions that are parties to the relevant 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 could require us to record a withdrawal liability obligation and make withdrawal liability payments to the fund. Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. We made contributions to these plans, and recognized ~~continuing and discontinued operations~~ expense of ~~$48~~$45 million in fiscal ~~2021.~~2022. In fiscal ~~2022,~~2023, we expect to contribute approximately ~~$46~~$51 million to multiemployer plans, ~~related to continuing operations,~~ subject to the outcome of collective bargaining and capital market conditions. We expect required cash payments to fund multiemployer pension plans from which we have withdrawn to be ~~immaterial~~insignificant in any one fiscal year, which would exclude any payments that may be agreed to on a lump sum basis to satisfy existing withdrawal liabilities. Any future withdrawal liability would be recorded when it is probable that a liability exists and 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 13—Benefit Plans in Part II, Item 8 of the Annual Report for additional information regarding the plans in which we participate.

Share Repurchases

~~On October 6, 2017, we announced that~~In September 2022, our Board of Directors authorized a ~~share~~new repurchase program for up to $200 million of our ~~outstanding~~ common ~~stock. The~~stock over a term of four years (the “2022 Repurchase Program”). Upon approval of the 2022 Repurchase Program, our Board terminated the repurchase program ~~is scheduled to expire upon our repurchase~~authorized in October 2017 (the “2017 Repurchase Program”). In the first quarter of fiscal 2023, we repurchased approximately 0.4 million shares of our common stock ~~having an aggregate purchase price~~for a total cost of ~~$200 million.~~ $12 million under the 2022 Repurchase Program. As of October 29, 2022, we had $188 million remaining authorized under the 2022 Repurchase Program.

We ~~did not repurchase~~will manage the timing of any ~~shares~~repurchases of our common stock in ~~the first quarters of fiscal 2022~~response to market conditions and ~~fiscal 2021 pursuant~~other relevant factors, including any limitations on our ability to ~~the share repurchase program. As of October 30, 2021, we have $176 million remaining authorized~~make repurchases under the ~~share repurchase program. We do not expect to purchase shares under the share repurchase program during fiscal 2022. Additionally,~~terms of our ABL Credit Facility, Term Loan Facility and Senior ~~Notes contain terms that limit our ability~~Notes. We may implement the 2022 Repurchase Program pursuant to ~~repurchase common stock above certain levels unless certain~~a plan or plans meeting the conditions ~~and financial tests are met.~~of Rule 10b5-1 under the Exchange Act.

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.

Seasonality

~~Generally, we do not experience material seasonality. However, our~~Overall product sales ~~and operating results~~are fairly balanced throughout the year, although demand for certain products of a seasonal nature may ~~vary significantly from quarter to quarter due to factors such as~~be influenced by holidays, 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.~~seasons or other annual events. Our working capital needs are generally greater during the months of and leading up to high sales periods, such as the ~~build up~~buildup in inventory ~~during the time period~~ leading to the calendar year-end holidays. Our inventory, accounts payable and accounts receivable levels may be impacted by macroeconomic impacts and changes in food-at-home purchasing rates. These effects can result in normal operating fluctuations in working capital balances, which in turn can result in changes to ~~cash~~Cash flow from operations that are not necessarily indicative of long-term operating trends.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk results primarily from fluctuations in interest rates on our borrowings and our interest rate swap agreements, and price increases in diesel fuel. Except as described in Note 7—6—Derivatives and Note 8—7—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.~~Report.

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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 first quarter of fiscal ~~2022~~2023 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 in Note ~~15—~~14—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part I, Item I of this Quarterly Report on Form 10-Q, which is incorporated herein, there are no pending material legal proceedings to which we are a party or to which our property is subject.

Item 1A. Risk Factors

There have been no material changes to our risk factors contained in Part I, Item 1A. Risk Factors, of our Annual Report.

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

~~On October 6, 2017, we announced that~~In September 2022, our Board of Directors authorized a ~~share~~new repurchase program for up to $200 million of our ~~outstanding~~ common ~~stock. The~~stock over a term of four years (the “2022 Repurchase Program”). Upon approval of the 2022 Repurchase Program, our Board terminated the repurchase program ~~is scheduled to expire upon our repurchase of shares of our common stock having an aggregate purchase price of $200 million.~~authorized in October 2017 (the “2017 Repurchase Program”). 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 2022. We~~ may also implement ~~all or part of~~ the repurchase program pursuant to a plan or plans meeting the conditions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

(in millions, except shares and per share amounts)
Total Number of Shares Purchased(2)
Average Price Paid Per 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):
August 1, 2021 to September 4, 2021 3,647 $ 35.52 — $ —
September 5, 2021 to October 2, 2021 77,793 37.17 — —
October 3, 2021 to October 30, 2021 640,380 47.16 — 176
Total 721,820 $ 46.03 — $ —

The following table presents purchases of our common stock and related information for each of the months in the quarter ended October 29, 2022.


(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):
July 31, 2022 to September 3, 2022	613	$	42.50	—	$	176

September 4, 2022 to October 1, 2022	252,727	35.16		73,995	197


October 2, 2022 to October 29, 2022	1,137,722	35.76		264,966	188


Total	1,391,062	35.65		338,961	188

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

(2)These amounts represent the deemed surrender by participants in our compensatory stock plans of ~~721,820~~1,052,101 shares of our common stock to cover withholding taxes from the vesting of restricted stock ~~awards and restricted stock~~ units granted under such ~~plans.~~plans and the repurchase of 338,961 shares of our common stock under the 2022 Repurchase Program.

(3)AsThe amounts shown in this column represent the amount remaining under the 2017 Repurchase Program as of September 3, 2022 prior to its termination, and the amount remaining under the 2022 Repurchase Program as of October 30, 2021, there was approximately $176 million that may yet be purchased under the share repurchase program. There were no share repurchases under the share repurchase program in the first quarter of fiscal1, 2022 and October 29, 2022.

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Item 6. Exhibits


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)~~2 0 1 5 ).
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* ***			United Natural Foods, Inc. Annual Incentive Plan, as further amended, effective as of September 22, 2022 (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended July 30, 2022).
10.2**			Form of ~~RSU Award~~Amended and Restated Severance Agreement, ~~(CEO) pursuant~~effective as of October 23, 2022 (incorporated by reference to the Registrant’s ~~Amended and Restated 2020 Equity Incentive Plan.~~
10.2* **			Annual Report on Form ~~of PSUAward Agreement (CEO) pursuant to~~10-K for the ~~Registrant’s Amended and Restated 2020 Equity Incentive Plan.~~year ended July 30, 2022).
10.3* ***			~~Form of Inducement RSU Award~~Consulting Agreement, ~~(CEO).~~
10.4* **			~~Form of Inducement PSU Award Agreement (CEO).~~
10.5*			~~Amendment No.~~ 2 ~~to Term Loan Agreement, dated~~effective as of No ~~vember~~ ~~10, 2021~~,October 31, 2022, by and among the Registrant and ~~SUPERVALU INC.,Credit Suisse AG, Cayman Islands Branchand~~Eric Dorne (incorporated by reference to the ~~other lender parties thereto~~Registrant’s Annual Report on Form 10-K for the year ended July 30, 2022).
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 October ~~30, 2021,~~29, 2022, 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, (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 first quarter of fiscal ~~2022,~~2023, filed with the SEC on December ~~8, 2021,~~7, 2022, 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: December ~~8, 2021~~7, 2022

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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 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6

	Condensed Consolidated Statements of Cash Flows (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2524

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3836

Item 4.	Controls and Procedures	3937

Part II.	Other Information

Item 1.	Legal Proceedings	3937

Item 1A.	Risk Factors	3937

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3937







Item 6.	Exhibits	4038

	Signatures	4139