What changed in this filing

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Item 1. Financial Statements

2021-12-08 compared with 2021-06-09 · 230 added, 522 removed, 463 unchanged (62% of the section changed)

1 unchanged sentence

UNITED NATURAL FOODS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In thousands, except for per share data)

2021 August 1,

(in millions, except for par amounts)

2021 July 31,

Cash and cash equivalents $ 46 $ 41

25 unchanged sentences

Other long-term liabilities 274 299

Long-term liabilities of discontinued operations 15 1,738

Total liabilities 6,412 6,011

4 unchanged sentences

Common stock, $ 0.01 par value, authorized 100.0 shares;

56,956 shares issued and 56,341 shares outstanding at May 1, 2021;

55,306 shares issued and 54,691 shares outstanding at August 1, 2020

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

Additional paid-in capital 582 599

9 unchanged sentences

UNITED NATURAL FOODS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(In thousands, except for per share data)

13-Week Period Ended 39-Week Period Ended

(in millions, except for per share data)

13-Week Period Ended

2021 October 31,

Net sales $ 6,997 $ 6,684

2 unchanged sentences

Operating expenses 932 904

Goodwill and asset impairment charges — — — 425,405

Restructuring, acquisition and integration related expenses 3 16

(Gain) loss on sale of assets ( 25 ) 351 144 785

Operating income (loss) 90,494 124,317 245,130 ( 274,600 )

Other expense (income):

Operating income 107 50

Net periodic benefit income, excluding service cost ( 10 ) ( 17 )

1 unchanged sentence

Other, net 1 ( 1 )

Total other expense, net 25,383 32,669 108,828 114,933

Income (loss) from continuing operations before income taxes 76 ( 1 )

Provision (benefit) for income taxes 16,812 ( 2,799 ) 32,213 ( 82,562 )

Net income (loss) from continuing operations 48,299 94,447 104,089 ( 306,971 )

Income (loss) from discontinued operations, net of tax 1,653 ( 4,078 ) 6,752 ( 16,128 )

Net income (loss) including noncontrolling interests 49,952 90,369 110,841 ( 323,099 )

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.

$ 48,558 $ 88,131 $ 106,475 $ ( 326,506 )

Basic earnings (loss) per share:

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UNITED NATURAL FOODS, INC.

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

(In thousands)

13-Week Period Ended 39-Week Period Ended

Net income (loss) including noncontrolling interests $ 49,952 $ 90,369 $ 110,841 $ ( 323,099 )

Other comprehensive income (loss):

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in millions)

13-Week Period Ended

2021 October 31,

Net income including noncontrolling interests $ 77 $ —

Other comprehensive income:

Recognition of pension and other postretirement benefit obligations, net of tax 1 —

( 301 ) ( 574 ) ( 807 ) 7,368

Recognition of interest rate swap cash flow hedges, net of tax (1)

14,127 ( 39,066 ) 35,838 ( 46,499 )

Foreign currency translation adjustments — —

Recognition of other cash flow derivatives, net of tax 1 —

( 296 ) — ( 341 ) —

Total other comprehensive income (loss) 16,437 ( 43,225 ) 40,854 ( 42,692 )

Total other comprehensive income 15 12

Less comprehensive income attributable to noncontrolling interests ( 1 ) ( 1 )

Total comprehensive income (loss) attributable to United Natural Foods, Inc.

$ 64,995 $ 44,906 $ 147,329 $ ( 369,198 )

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

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

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

Total comprehensive income attributable to United Natural Foods, Inc.

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

See accompanying Notes to Condensed Consolidated Financial Statements.

UNITED NATURAL FOODS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the 13-week periods ended May 1, 2021 and May 2, 2020

(In thousands)

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

(in millions)

Common Stock Treasury Stock Additional

3 unchanged sentences

Shares Amount Shares Amount

Balances at January 30, 2021 56,763 $ 568 615 $ ( 24,231 ) $ 581,096 $ ( 213,529 ) $ 886,313 $ 1,230,217 $ ( 1,151 ) $ 1,229,066

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

Restricted stock vestings 1.7 — — — ( 33 ) — — ( 33 ) — ( 33 )

3 unchanged sentences

Proceeds from issuance of common stock, net — — — — 5 — — 5 — 5

Acquisition of noncontrolling interests — — — — ( 150 ) — — ( 150 ) ( 1 ) ( 151 )

Net income — — — — — — 76 76 1 77

Balances at May 1, 2021 56,956 $ 570 615 $ ( 24,231 ) $ 588,324 $ ( 197,092 ) $ 934,871 $ 1,302,442 $ ( 1,380 ) $ 1,301,062

Balances at February 1, 2020 54,175 $ 542 615 $ ( 24,231 ) $ 535,900 $ ( 108,420 ) $ 691,640 $ 1,095,431 $ ( 2,966 ) $ 1,092,465

Restricted stock vestings 21 — — — ( 143 ) — — ( 143 ) — ( 143 )

Share-based compensation — — — — 11,137 — — 11,137 — 11,137

Other comprehensive loss — — — — — ( 43,225 ) — ( 43,225 ) — ( 43,225 )

Distributions to noncontrolling interests — — — — — — — — ( 1,127 ) ( 1,127 )

Proceeds from issuance of common stock, net 1,096 11 — — 11,844 — — 11,855 — 11,855

Net income — — — — — — 88,131 88,131 2,238 90,369

Balances at May 2, 2020 55,292 $ 553 615 $ ( 24,231 ) $ 558,738 $ ( 151,645 ) $ 779,771 $ 1,163,186 $ ( 1,855 ) $ 1,161,331

See accompanying Notes to Condensed Consolidated Financial Statements

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the 39-week periods ended May 1, 2021 and May 2, 2020

Common Stock Treasury Stock Additional

Paid-in Capital Accumulated

Comprehensive Loss Retained Earnings Total United Natural Foods, Inc.

Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity

Shares Amount Shares Amount

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

3 unchanged sentences

Other comprehensive income — — — — — 12 — 12 — 12

Distributions to noncontrolling interests — — — — — — — — ( 3,082 ) ( 3,082 )

Proceeds from issuance of common stock, net 44 — — — 721 — — 721 — 721

Acquisition of noncontrolling interests — — — — ( 514 ) — — ( 514 ) ( 177 ) ( 691 )

Net income — — — — — — 106,475 106,475 4,366 110,841

Balances at May 1, 2021 56,956 $ 570 615 $ ( 24,231 ) $ 588,324 $ ( 197,092 ) $ 934,871 $ 1,302,442 $ ( 1,380 ) $ 1,301,062

Balances at August 3, 2019 53,501 535 615 ( 24,231 ) 530,801 ( 108,953 ) 1,108,890 1,507,042 ( 2,737 ) 1,504,305

Cumulative effect of change in accounting principle — — — — — — ( 2,613 ) ( 2,613 ) — ( 2,613 )

Restricted stock vestings 464 5 — — ( 1,020 ) — — ( 1,015 ) — ( 1,015 )

Share-based compensation — — — — 15,088 — — 15,088 — 15,088

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

Distributions to noncontrolling interests — — — — — — — — ( 2,525 ) ( 2,525 )

Proceeds from issuance of common stock, net 1,327 13 — — 13,869 — — 13,882 — 13,882

Net (loss) income — — — — — — ( 1 ) ( 1 ) 1 —

Balances at May 2, 2020 55,292 $ 553 615 $ ( 24,231 ) $ 558,738 $ ( 151,645 ) $ 779,771 $ 1,163,186 $ ( 1,855 ) $ 1,161,331

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.

UNITED NATURAL FOODS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

13-Week Period Ended

(In thousands) May 1,

(in millions) October 30,

2021 October 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) including noncontrolling interests $ 110,841 $ ( 323,099 )

Income (loss) from discontinued operations, net of tax 6,752 ( 16,128 )

Net income (loss) from continuing operations 104,089 ( 306,971 )

Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:

Net income including noncontrolling interests $ 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:

Depreciation and amortization 69 77

Share-based compensation 11 12

Loss on sale of assets 144 785

Closed property and other restructuring charges 1 —

Goodwill and asset impairment charges — 425,405

Net pension and other postretirement benefit income ( 10 ) ( 17 )

1 unchanged sentence

LIFO charge 11 7

(Recoveries) provision for losses on receivables, net ( 2,672 ) 44,238

Loss on debt extinguishment 30,373 73

Provision for losses on receivables 1 —

Non-cash interest expense and other adjustments 5 28

Changes in operating assets and liabilities ( 246 ) ( 164 )

Net cash provided by operating activities of continuing operations

Net cash used in operating activities of continuing operations

( 81 ) ( 55 )

Net cash provided by operating activities of discontinued operations

Net cash provided by operating activities

Net cash used in operating activities of discontinued operations

Net cash used in operating activities

( 81 ) ( 58 )

2 unchanged sentences

Proceeds from dispositions of assets 1 4

Other ( 4,111 ) ( 2,380 )

Payments for investments ( 26 ) —

Net cash used in investing activities of continuing operations

6 unchanged sentences

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

Proceeds from issuance of other loans — 6,266

Repayments of borrowings under revolving credit line ( 1,028 ) ( 1,339 )

5 unchanged sentences

Repayments of other loans — ( 1 )

Other ( 691 ) —

Net cash used in financing activities

( 233,657 ) ( 365,485 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH 443 ( 290 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 7,486 ) 13,474

Net cash provided by financing activities

EFFECT OF EXCHANGE RATE ON CASH — —

NET INCREASE IN CASH AND CASH EQUIVALENTS 5 2

Cash and cash equivalents, at beginning of period 41 47

Cash and cash equivalents, at end of period $ 46 $ 49

cash and cash equivalents of discontinued operations ( 136 ) ( 120 )

Cash and cash equivalents $ 39,495 $ 58,617

Supplemental disclosures of cash flow information:

Cash paid for interest $ 46 $ 44

Cash (refunds) for federal and state income taxes, net ( 21,847 ) ( 24,236 )

Cash (refunds) payments for federal, state, and foreign income taxes, net $ ( 1 ) $ 6

Leased assets obtained in exchange for new operating lease liabilities $ 71 $ 71

Leased assets obtained in exchange for new finance lease liabilities 468 92,843

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

1 unchanged sentence

UNITED NATURAL FOODS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

4 unchanged sentences

The Company sells its products primarily throughout the United States and Canada.

The Company’s fiscal year ends on the Saturday closest to July 31 and contain either 52 or 53 weeks.

References to the third quarter of fiscal 2021 and 2020 relate to the 13-week fiscal quarters ended May 1, 2021 and May 2, 2020, respectively.

References to fiscal 2021 and 2020 year-to-date relate to the 39-week fiscal periods ended May 1, 2021 and May 2, 2020, respectively.

The Company’s fiscal years end on the Saturday closest to July 31 and contain either 52 or 53 weeks.

References to the first quarters of fiscal 2022 and 2021 relate to the 13-week fiscal quarters ended October 30, 2021 and October 31, 2020, respectively.

Basis of Presentation

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All significant intercompany transactions and balances have been eliminated in consolidation.

Unless otherwise indicated, references to the Condensed Consolidated Statements of Operations, the Condensed Consolidated Balance Sheets and the Notes to the Condensed Consolidated Financial Statements exclude all amounts related to discontinued operations.

Refer to Note 16—Discontinued Operations for additional information about the Company’s discontinued operations.

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.

2 unchanged sentences

However, the results of operations for interim periods may not be indicative of the results that may be expected for a full year.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2020 (the “Annual Report”).

There were no material changes in significant accounting policies from those described in the Company’s Annual Report.

There were no material changes in significant accounting policies from those described in the Annual Report.

Discontinued Operations

In the fourth quarter of fiscal 2020, the Company determined it no longer met the held for sale criterion for a probable sale to be completed within 12 months for the Cub Foods business and the majority of the remaining Shoppers locations excluding Shoppers locations that are held for sale within discontinued operations (collectively “Retail”).

As a result, the Company revised its Condensed Consolidated Financial Statements to reclassify Retail from discontinued operations to continuing operations.

This change in financial statement presentation resulted in the inclusion of Retail’s results of operations, financial position, cash flows and related disclosures within continuing operations.

Prior periods presented in these Condensed Consolidated Financial Statements have been conformed to the current period presentation, resulting in Retail being presented in continuing operations for all periods.

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

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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 May 1, 2021 and August 1, 2020, the Company had net book overdrafts of $ 243.4 million and $ 267.8 million, respectively.

As of October 30, 2021 and July 31, 2021, the Company had net book overdrafts of $ 280 million and $ 268 million, respectively.

Reclassifications

Within the Condensed Consolidated Statements of Cash Flows certain immaterial amounts have been reclassified to conform with current year presentation.

Within the Condensed Consolidated Financial Statements certain immaterial amounts have been reclassified to conform with current year presentation.

These reclassifications had no impact on reported net income, cash flows, or total assets and liabilities.

Inventories, Net

Inventories are valued at the lower of cost or market.

Substantially all of the Company’s inventories consist of finished goods and a substantial portion of its inventories have a last-in, first-out (“LIFO”) reserve applied.

Interim LIFO calculations are based on the Company’s estimates of expected year end inventory levels and costs, as the actual valuation of inventory under the LIFO method is computed at the end of each fiscal year based on the inventory levels and costs at that time.

If the first-in, first-out method had been used, Inventories, net would have been higher by approximately $ 62.0 million and $ 43.3 million at May 1, 2021 and August 1, 2020, respectively.

Substantially all of the Company’s inventories consist of finished goods.

To value discrete inventory items at lower of cost or market 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 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 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, Inventories, net would have been higher by approximately $ 78 million and $ 67 million at October 30, 2021 and July 31, 2021, respectively.

NOTE 2—RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2016‐13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance:

ASU 2018‐19, ASU 2019‐04, ASU 2019‐05, and ASU 2019‐11 (collectively, “Topic 326”).

Topic 326 changed the impairment model for most financial assets and certain other instruments.

For trade and other receivables, guarantees and other instruments, entities are required to use a new forward‐looking expected loss model that replaces the previous incurred loss model and generally results in earlier recognition of credit losses.

The Company adopted this standard in the first quarter of fiscal 2021 on August 2, 2020, the effective and initial application date, using a modified‐retrospective basis as required by the standard by means of a cumulative‐effect adjustment to the opening balance of Retained earnings in the Company’s Condensed Consolidated Statement of Stockholders’ Equity.

The difference between reserves and allowances recorded under the former incurred loss model and the amount determined under the current expected loss model, net of the deferred tax impact, was recorded as an adjustment to Retained earnings.

Adoption of this standard did not have a material impact to the Company’s Condensed Consolidated Financial Statements.

In April 2019, the FASB issued ASU No.

2019-04, Codification Improvements to Topic 326 Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 .

This ASU clarifies the accounting treatment for the measurement of credit losses under ASC 326 and provides further clarification on previously issued updates including ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities and ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities.

Since the Company adopted ASU 2017-12 in the fourth quarter of fiscal 2018, the amendments in ASU 2019-04 related to clarifications on Accounting for Hedging Activities, which were adopted by the Company in the first quarter of fiscal 2020, with no impact to Accumulated other comprehensive loss or Retained earnings for fiscal 2020, as the Company did not have separately measured ineffectiveness related to its cash flow hedges.

The remaining amendments within ASU 2019-04 were adopted in the first quarter of fiscal 2021 with the adoption of Topic 326.

Adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software:

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.

ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements (i.e.

hosting arrangements) to be capitalized under the same premises as authoritative guidance for internal-use software, and deferred over the noncancellable term of the cloud computing arrangements plus any optional renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider.

The Company adopted this standard on a prospective basis in the first quarter of fiscal 2021.

The Company expects to incur immaterial implementation costs in fiscal 2021.

Under this standard, the Company is required to defer these costs and recognize these costs as a service expense over future periods.

Adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20):

Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans .

ASU 2018-14 requires entities to disclose the weighted-average interest crediting rates used, reasons for significant gains and losses affecting benefit obligations, and an explanation of any other significant changes in the benefit obligation or plan assets.

The amendment also removed certain required disclosures.

The Company adopted this guidance in the first quarter of fiscal 2021.

The provisions of the new standard do not have any effect on other disclosures in these Condensed Consolidated Financial Statements but will require disclosure updates in the Company’s annual audited consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

1 unchanged sentence

ASU 2019-12 eliminates certain exceptions to Topic 740’s general principles.

The amendments also improve consistent application and simplifies its application.

The Company is required to adopt this guidance in the first quarter of fiscal 2022.

The Company is currently reviewing the provisions of the new standard and evaluating its impact on the Company’s consolidated financial statements.

The amendments also improve consistency in and simplify its application.

The Company adopted this standard in the first quarter of fiscal 2022.

The adoption of this standard did not have a material impact on the Company’s Condensed 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.

NOTE 3—REVENUE RECOGNITION

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

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

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

• 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;

4 unchanged sentences

Net Sales for the 13-Week Period Ended

(in millions) (1)

Customer Channel Wholesale Retail Other Eliminations (3)

Chains $ 2,949 $ — $ — $ — $ 2,949

Independent retailers 1,599 — — — 1,599

Supernatural 1,287 — — — 1,287

Retail — 578 — — 578

Other 525 — 55 — 580

Eliminations — — — ( 373 ) ( 373 )

Total $ 6,360 $ 578 $ 55 $ ( 373 ) $ 6,620

Net Sales for the 13-Week Period Ended

(in millions) (1)

May 2, 2020 (2)

Customer Channel Wholesale Retail Other Eliminations (3)

Chains $ 3,125 $ — $ — $ — $ 3,125

Independent retailers 1,805 — — — 1,805

Supernatural 1,279 — — — 1,279

Retail — 637 — — 637

Other 541 — 58 — 599

Eliminations — — — ( 414 ) ( 414 )

Total $ 6,750 $ 637 $ 58 $ ( 414 ) $ 7,032

Net Sales for the 39-Week Period Ended

(in millions) (1)

(in millions) October 30, 2021

Customer Channel Wholesale Retail Other Eliminations (1)

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Net Sales for the 13-Week Period Ended

(in millions) (1)

May 2, 2020 (2)

(in millions) October 31, 2020

Customer Channel Wholesale Retail Other Eliminations (1)

6 unchanged sentences

Total $ 6,438 $ 606 $ 56 $ ( 416 ) $ 6,684

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

(2) In the first quarter of fiscal 2021, the presentation of net sales by customer channel was recast to present the Chains and Other channel exclusive of the intercompany eliminations and present total eliminations separately.

There was no impact to the Condensed Consolidated Statements of Operations.

The Company believes this modified basis better reflects its channel presentation, as it further aligns with segment presentation and how sales channel information would appear following the potential disposition of Retail, assuming all banners retain a supply agreement.

In addition, during the fourth quarter of fiscal 2020, the presentation of net sales by customer channel was recast to be presented on a basis consistent with customer size.

International customers other than Canada, and alternative format sales continue to be classified within Other.

The main effect of the change was to re-categorize the former Supermarkets and Independents channels, previously classified by the majority of product carried by those customers between conventional and natural products, respectively, to classify those stores by the number of customer locations we supply.

There was no impact to the Condensed Consolidated Statements of Operations as a result of the reclassification of customer types.

The Company believes this modified basis better reflects the nature and economic risks of cash flows from customers.

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

The Company serves customers in the United States and Canada, as well as customers located in other countries.

However, all of the Company’s revenue is earned in the U.S.

and Canada, and international distribution occurs through freight-forwarders.

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.

No net sales were recorded within continuing operations for retail stores within discontinued operations that the Company disposed of and expects to dispose of without a supply agreement.

These net sales have been eliminated upon consolidation within the Wholesale segment of continuing operations and amounted to $ 12.4 million and $ 16.8 million in the third quarters of fiscal 2021 and 2020, respectively, and $ 40.2 million and $ 108.9 million in fiscal 2021 and 2020 year-to-date, respectively.

Accounts and Notes Receivable Balances

Accounts and notes receivable are as follows:

(in thousands) May 1, 2021 August 1, 2020

(in millions) October 30, 2021 July 31, 2021

Customer accounts receivable $ 1,264 $ 1,115

3 unchanged sentences

Notes receivable, net, included within Prepaid expenses and other current assets $ 6 $ 7

Long-term notes receivable, net, included within Other assets $ 17,219 $ 25,800

Long-term notes receivable, net, included within Other long-term assets

NOTE 4—RESTRUCTURING, ACQUISITION AND INTEGRATION RELATED EXPENSES

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

13-Week Period Ended 39-Week Period Ended

(in thousands) May 1, 2021 May 2, 2020 May 1, 2021 May 2, 2020

2019 SUPERVALU INC.

restructuring expenses

$ — $ 1,492 $ — $ 3,993

Restructuring, acquisition and integration related expenses were as follows:

13-Week Period Ended

(in millions) October 30, 2021 October 31, 2020

Restructuring and integration costs $ 3 $ 15

Closed property (recoveries) charges and costs ( 2,180 ) 12,513 2,589 36,501

Closed property charges and costs — 1

Total $ 3 $ 16

NOTE 5—GOODWILL AND INTANGIBLE ASSETS, NET

The Company has five goodwill reporting units:

two of which represent separate operating segments and are aggregated within the Wholesale reportable segment (U.S.

Wholesale and Canada Wholesale);

one separate Retail operating and reportable segment and two of which are separate operating segments (Woodstock Farms and Blue Marble Brands) that do not meet the criteria for being disclosed as separate reportable segments.

The Canada Wholesale operating segment, which is aggregated with U.S.

Wholesale, would not meet the quantitative thresholds for separate reporting if it did not meet the aggregation criteria.

Fiscal 2020 Goodwill Impairment Review

During the first quarter of fiscal 2020, the Company changed its management structure and internal financial reporting, which resulted in the requirement to combine the SUPERVALU INC.

(“Supervalu”) Wholesale reporting unit and the legacy Company Wholesale reporting unit into one U.S.

Wholesale reporting unit, and experienced a further sustained decline in market capitalization and enterprise value.

As a result of the change in reporting units and the sustained decline in market capitalization and enterprise value, the Company performed an interim quantitative impairment review of goodwill for the Wholesale reporting units, which included a determination of the fair value of all reporting units.

The Company estimated the fair values of all reporting units using both the market approach, applying a multiple of earnings based on observable multiples for guideline publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit.

The calculation of the impairment charge included substantial fact-based determinations and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.

The rates used to discount projected future cash flows under the income approach reflect a weighted average cost of capital of 8.5 %, which considered observable data about guideline publicly traded companies, an estimated market participant’s expectations about capital structure and risk premiums, including those reflected in the Company’s market capitalization.

The Company corroborated the reasonableness of the estimated reporting unit fair values by reconciling to its enterprise value and market capitalization.

Based on this analysis, the Company determined that the carrying value of its U.S.

Wholesale reporting unit exceeded its fair value by an amount that exceeded its assigned goodwill.

As a result, the Company recorded a goodwill impairment charge of $ 421.5 million in the first quarter of fiscal 2020.

The goodwill impairment charge is reflected in Goodwill and asset impairment charges in the Condensed Consolidated Statements of Operations.

The goodwill impairment charge reflected the impairment of all of the U.S.

Wholesale reporting unit’s goodwill.

Goodwill and Intangible Assets Changes

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

(in thousands) Wholesale Other Total

Goodwill as of August 1, 2020 $ 9,747 (1)

(in millions) Wholesale Other Total

Goodwill as of July 31, 2021 $ 10 (1)

Change in foreign exchange rates — — —

Goodwill as of May 1, 2021 $ 10,635 (1)

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

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

Goodwill as of October 30, 2021 $ 10 (1)

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

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

Identifiable intangible assets, net consisted of the following:

May 1, 2021 August 1, 2020

(in thousands) Gross Carrying

October 30, 2021 July 31, 2021

(in millions) Gross Carrying

Amount Accumulated

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Pharmacy prescription files 33 14 19 33 13 20

Non-compete agreements — — — 12,900 11,500 1,400

Operating lease intangibles 7 5 2 7 4 3

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Trademarks and tradenames 56 — 56 56 — 56

Intangible assets, net $ 1,188,370 $ 278,780 $ 909,590 $ 1,200,624 $ 231,024 $ 969,600

Amortization expense was $ 18.4 million and $ 21.9 million for the third quarters of fiscal 2021 and 2020, respectively, and $ 60.0 million and $ 65.5 million for fiscal 2021 and 2020 year-to-date, respectively.

The estimated future amortization expense

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

(In thousands)

Intangibles assets, net $ 1,187 $ 314 $ 873 $ 1,187 $ 296 $ 891

Amortization expense was $ 18 million and $ 23 million for the first quarters of fiscal 2022 and 2021, respectively.

The estimated future amortization expense for each of the next five fiscal years and thereafter on definite lived intangible assets existing as of October 30, 2021 is as follows:

(in millions)

Remaining fiscal 2022 $ 54

2026 and thereafter 548,758

Thereafter 483

NOTE 6—FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS

Recurring Fair Value Measurements

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

Condensed Consolidated Balance Sheets Location Fair Value at May 1, 2021

(in thousands) Level 1 Level 2 Level 3

Foreign currency derivatives not designated as hedging instruments Prepaid expenses and other current assets $ — $ 2 $ —

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

(in millions) Level 1 Level 2 Level 3

Fuel derivatives designated as hedging instruments Prepaid expenses and other current assets $ — $ 1 $ —

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Interest rate swaps designated as hedging instruments Other long-term liabilities $ — $ 28 $ —

Condensed Consolidated Balance Sheets Location Fair Value at August 1, 2020

(in thousands) Level 1 Level 2 Level 3

Foreign currency derivatives not designated as hedging instruments Prepaid expenses and other current assets $ — $ 26 $ —

Condensed Consolidated Balance Sheets Location Fair Value at July 31, 2021

(in millions) Level 1 Level 2 Level 3

Fuel derivatives designated as hedging instruments Prepaid expenses and other current assets $ — $ 1 $ —

Foreign currency derivatives designated as hedging instruments Prepaid expenses and other current assets $ — $ 94 $ —

Fuel derivatives designated as hedging instruments Other long-term assets $ — $ 23 $ —

Mutual funds Other long-term assets $ 2 $ — $ —

Fuel derivatives designated as hedging instruments Accrued expenses and other current liabilities $ — $ 197 $ —

Foreign currency derivatives designated as hedging instruments Accrued expenses and other current liabilities $ — $ 1 $ —

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The interest rate swap contracts are valued using an income approach interest rate swap valuation model incorporating observable market inputs including interest rates, LIBOR swap rates and credit default swap rates.

As of May 1, 2021, a 100 basis point increase in forward LIBOR interest rates would increase the fair value of the interest rate swaps by approximately $ 34.0 million;

As of October 30, 2021, a 100 basis point increase in forward LIBOR interest rates would increase the fair value of the interest rate swaps by approximately $ 27 million;

a 100 basis point decrease in forward LIBOR interest rates would decrease the fair value of the interest rate swaps by approximately $ 28 million.

Refer to Note 7—Derivatives for further information on interest rate swap contracts.

Mutual fund assets consist of balances held in investments to fund certain deferred compensation plans.

The fair values of mutual fund assets are based on quoted market prices of the mutual funds held by the plan at each reporting period.

Mutual funds traded in active markets are classified within Level 1 of the fair value hierarchy.

Fuel Supply Agreements and Derivatives

To reduce diesel price risk, the Company has entered into derivative financial instruments and/or forward purchase commitments for a portion of our projected monthly diesel fuel requirements at fixed prices.

The fair values of fuel derivative agreements are measured using Level 2 inputs.

Foreign Exchange Derivatives

To reduce foreign exchange risk, the Company has entered into derivative financial instruments for a portion of our projected monthly foreign currency requirements at fixed prices.

The fair values of foreign exchange derivatives are measured using Level 2 inputs.

Fair Value Estimates

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In the table below, the carrying value of the Company’s long-term debt is net of original issue discounts and debt issuance costs.

May 1, 2021 August 1, 2020

(In thousands) Carrying Value Fair Value Carrying Value Fair Value

October 30, 2021 July 31, 2021

(in millions) Carrying Value Fair Value Carrying Value Fair Value

Notes receivable, including current portion $ 27 $ 24 $ 29 $ 26

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Interest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures.

The Company’s interest rate swap contracts are designated as cash flow hedges at May 1, 2021.

The Company’s interest rate swap contracts are designated as cash flow hedges as of October 30, 2021.

Interest rate swap contracts are reflected at their fair values in the Condensed Consolidated Balance Sheets.

Refer to Note 6—Fair Value Measurements of Financial Instruments for further information on the fair value of interest rate swap contracts.

Details of active swap contracts as of May 1, 2021, which are all pay fixed and receive floating, are as follows:

Details of active swap contracts as of October 30, 2021, which are all pay fixed and receive floating, are as follows:

Effective Date Swap Maturity Notional Value (in millions) Pay Fixed Rate Receive Floating Rate (2)

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

In the third quarter of fiscal 2021, in order to reduce its exposure to pay fixed and receive floating interest rate swap contracts due to lower levels of debt balances with floating interest rates, the Company paid $ 6.3 million to terminate certain outstanding interest rate swaps with a notional amount of $ 250.0 million.

In the first quarter of fiscal 2021, in conjunction with the $ 500 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 termination and novations.

Since the hedged interest payments remain probable of occurring, the unrecognized gains and losses resulting from the early termination or novation of these interest rate swap agreements will be amortized out of Accumulated other comprehensive income and into Interest expense, net over the remaining period of the original terminated or novated interest rate swap agreements.

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.

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The Company also monitors the risk of counterparty default on an ongoing basis and noted that the counterparties are reputable financial institutions.

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

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

The location and amount of gains or losses recognized in the Condensed Consolidated Statements of Operations for interest rate swap contracts for each of the periods, presented on a pretax basis, are as follows:

13-Week Period Ended 39-Week Period Ended

May 1, 2021 May 2, 2020 May 1, 2021 May 2, 2020

(In thousands) Interest expense, net Interest expense, net

13-Week Period Ended

October 30, 2021 October 31, 2020

(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

$ 43,500 $ 47,269 $ 163,577 $ 145,814

Loss on cash flow hedging relationships:

Loss reclassified from comprehensive income into earnings $ ( 11 ) $ ( 12 )

Gain (loss) on interest rate swap contracts not designated as hedging instruments:

Gain (loss) recognized in earnings $ 2,969 $ — $ ( 2 ) $ —

NOTE 8—LONG-TERM DEBT

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

(in thousands) Average Interest Rate at

Fiscal Maturity Year May 1,

2021 August 1,

(in millions) Average Interest Rate at

October 30, 2021

Fiscal Maturity Year October 30,

2021 July 31,

Term Loan Facility 3.59 % 2026 $ 994 $ 1,002

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Long-term debt $ 2,376 $ 2,175

Refinancing Activities

During the third quarter of fiscal 2021, the Company entered into an amendment agreement (the “First Term Loan Amendment”) amending the Term Loan Agreement (as defined below).

The amendment provides for, among other things, (i) the reduction of the applicable margin for LIBOR loans from 4.25 % to 3.50 % and the applicable margin for base rate loans from 3.25 % to 2.50 %, (ii) the appointment of a replacement administrative and collateral agent, and (iii) other administrative changes.

The amendment did not change the aggregate amount or maturity date of the Term Loan Facility.

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

During the second quarter of fiscal 2021, the Company made a voluntary prepayment of $ 150.0 million on the Term Lo an Facility (as defined below) funded with incremental borrowings under the ABL Credit Facility (as defined below) that reduces its interest costs.

This prepayment will count towards any requirement from Excess Cash Flow (as defined in the Term Loan Agreement) generated during fiscal 2021, which would be due in fiscal 2022.

In connection with this prepayment, the Company incurred a loss on debt extinguishment of $ 5.7 million related to unamortized debt issuance costs and a loss on unamortized original issue discount, which were recorded within Interest expense, net in the Condensed Consolidated Statement of Operations in the second quarter of fiscal 2021.

During the first quarter of fiscal 2021, the Company repaid $ 500.0 million of outstanding borrowings under the Term Loan Facility funded primarily by the net proceeds from the issuance of new eight-year senior unsecured notes (as described below).

This refinancing transaction extended the maturity of a significant portion of the Company’s outstanding debt by approximately three years .

Also during the first quarter, the Company made $ 108.0 million of additional repayments under the Term Loan Facility, including $ 72.0 million related to the material cash flow generation in fiscal 2020, as required under the Term Loan Agreement (as described below) and a voluntary prepayment of $ 36.0 million with incremental borrowings under the ABL Credit Facility (as described below).

In connection with the prepayments, the Company incurred a loss on debt extinguishment related to unamortized debt issuance costs and a loss on unamortized original issue discount of $ 12.0 million and $ 11.8 million, respectively, which were recorded within Interest expense, net in the Condensed Consolidated Statements of Operations in the first quarter of fiscal 2021.

The Company also executed a third amendment to the ABL Loan Agreement (as defined below) during the first quarter of fiscal 2021, which added certain assets to the Borrowing Base (as defined below) and increased the Company’s capacity to issue letters of credit under the facility, in addition to other administrative changes.

The amendment did not change the aggregate amount or maturity date of the ABL Credit Facility.

On October 22, 2020, the Company issued $ 500 million of unsecured 6.750 % Senior Notes due October 15, 2028 (the “Senior Notes”).

The Senior Notes are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the ABL Credit Facility or the Term Loan Facility.

The net proceeds from the offering of the Senior Notes, together with borrowings under the ABL Credit Facility, were used to repay $ 500.0 million of the amounts outstanding under the Term B Tranche of the Term Loan Facility and for the payment of all financing costs related to the offering of the Senior Notes.

Financing costs of $ 8.9 million were paid and capitalized in fiscal 2021 year-to-date.

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

The Company was in compliance with all such covenants for all periods presented.

The Senior Notes 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

On August 30, 2018, the Company entered into a loan agreement (as amended from time to time, the “ABL Loan Agreement”), by and among the Company and United Natural Foods West, Inc.

The ABL Loan Agreement by and among the Company and United Natural Foods West, Inc.

(together with the Company, the “U.S.

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Borrowers, the “Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “ABL Lenders”), Bank of America, N.A.

as administrative agent for the ABL Lenders (the “ABL Administrative Agent”), Bank of America, N.A.

(acting through its Canada branch), as Canadian agent for the ABL Lenders, and the other parties thereto.

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

The ABL Loan Agreement provides for a secured asset-based revolving credit facility (the “ABL Credit Facility” and the loans thereunder, the “ABL Loans”), of which up to (i) $ 2,050.0 million is available to the U.S.

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 million is available to the U.S.

Borrowers and (ii) $ 50 million is available to the Canadian Borrower.

The ABL Loan Agreement also provides for (i) a $ 300.0 million sublimit of availability for letters of credit of which there is a further $ 25.0 million sublimit for the Canadian Borrower and (ii) a $ 100.0 million sublimit for short-term borrowings on a swingline basis of which there is a further $ 3.5 million sublimit for the Canadian Borrower.

The ABL Credit Facility replaced the Company’s $ 900.0 million prior asset-based revolving credit facility.

The ABL Loan Agreement also provides for (i) a $ 300 million sublimit of availability for letters of credit of which there is a further $ 25 million sublimit for the Canadian Borrower.

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 million without the consent of any ABL Lenders not participating in such increase, subject to certain customary conditions and applicable lenders committing to provide the increase in funding.

There is no assurance that additional funding would be available.

The Borrowers’ obligations under the ABL Credit Facility are guaranteed by most of the Company’s wholly-owned subsidiaries who are not also Borrowers (collectively, the “ABL Guarantors”), subject to customary exceptions and limitations.

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

Availability under the ABL Credit Facility is subject to a borrowing base (the “Borrowing Base”), which is based on 90 % of eligible accounts receivable, plus 90 % of eligible credit card receivables, plus 90 % of the net orderly liquidation value of eligible inventory, plus 90 % of eligible pharmacy receivables, plus certain pharmacy scripts availability of the Borrowers, after adjusting for customary reserves.

The aggregate amount of the ABL Loans made and letters of credit issued under the ABL Credit Facility shall at no time exceed the lesser of the aggregate commitments under the ABL Credit Facility (currently $ 2,100.0 million or, if increased at the Borrowers’ option as described above, up to $ 2,700.0 million) or the Borrowing Base.

To the extent that the Borrowers’ Borrowing Base declines, the availability under the ABL Credit Facility may decrease below $ 2,100.0 million.

As of May 1, 2021, the U.S.

Borrowers’ Borrowing Base, net of $ 173.0 million of reserves, was $ 2,252.5 million, which is above the $ 2,050.0 million limit of availability to the U.S.

Borrowers under the ABL Credit Facility.

As of May 1, 2021, the Canadian Borrower’s Borrowing Base, net of $ 4.6 million of reserves, was $ 49.6 million, which is below the $ 50.0 million limit of availability to the Canadian Borrower under the ABL Credit facility, resulting in total availability of $ 2,099.6 million for ABL Loans and letters of credit under the ABL Credit Facility.

As of May 1, 2021, the U.S.

Borrowers had $ 839.3 million of ABL Loans outstanding and the Canadian Borrower had no ABL Loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of $ 8.8 million and are included in Long-term debt in the Condensed Consolidated Balance Sheets.

As of May 1, 2021, the U.S.

Borrowers had $ 117.5 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 $ 1,142.8 million as of May 1, 2021.

The ABL Loans of the U.S.

Borrowers under the ABL Credit Facility bear interest at rates that, at the U.S.

Borrowers’ option, can be either:

(i) a base rate and an applicable margin or (ii) a LIBOR rate and an applicable margin.

As of May 1, 2021, the applicable margin for base rate loans was 0.25 % and the applicable margin for LIBOR loans was 1.25 %.

The ABL Loan Agreement contains provisions for the establishment of an alternative rate of interest in the event that LIBOR is no longer available.

The ABL Loans of the Canadian Borrower under the ABL Credit Facility bear interest at rates that, at the Canadian Borrower’s option, can be either:

(i) prime rate and an applicable margin or (ii) a Canadian dollar bankers’ acceptance equivalent rate and an applicable margin.

As of May 1, 2021, the applicable margin for prime rate loans was 0.25 %, and the applicable margin for Canadian dollar bankers’ acceptance equivalent rate loans was 1.25 %.

Commencing on the first day of the calendar month following the ABL Administrative Agent’s receipt of the Company’s aggregate availability calculation for the prior fiscal quarter, the applicable margins for borrowings by the U.S.

Borrowers and Canadian Borrower will be subject to adjustment based upon the aggregate availability under the ABL Credit Facility.

Unutilized commitments under the ABL Credit

Facility are subject to a per annum fee of (i) 0.375 % if the average daily total outstandings were less than 25 % of the aggregate commitments during the preceding fiscal quarter or (ii) 0.25 % if such average daily total outstandings were 25 % or more of the aggregate commitments during the preceding fiscal quarter.

As of May 1, 2021, the unutilized commitment fee was 0.25 % per annum.

The Borrowers are also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125 % per annum of the amount available to be drawn under each such letter of credit, as well as a fee to all lenders equal to the applicable margin for LIBOR or Canadian dollar bankers’ acceptance equivalent rate loans, as applicable, times the average daily amount available to be drawn under all outstanding letters of credit.

The ABL Loan Agreement subjects the Company to a fixed charge coverage ratio (as defined in the ABL Loan Agreement) of at least 1.0 to 1.0 calculated at the end of each fiscal quarter on a rolling four quarter basis when the adjusted aggregate availability (as defined in the ABL Loan Agreement) is less than the greater of (i) $ 235.0 million and (ii) 10 % of the aggregate borrowing base.

The Company has not been subject to the fixed charge coverage ratio covenant under the ABL Loan Agreement, including through the filing date of this Quarterly Report.

The Borrowers’ obligations under the ABL Credit Facility are guaranteed by most of the Company’s wholly-owned subsidiaries (collectively, the “Guarantors”), subject to customary exceptions and limitations.

The Borrowers’ obligations under the ABL Credit Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on 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.

Availability under the ABL Credit Facility is subject to a borrowing base (the “Borrowing Base”), which is based on 90 % of eligible accounts receivable, plus 90 % of eligible credit card receivables, plus 90 % of the net orderly liquidation value of eligible inventory, plus 90 % of eligible pharmacy receivables, plus certain pharmacy prescription files availability of 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 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 thousands) (1) :

2021 August 1,

Assets securing the ABL Credit Facility (in millions) (1) :

2021 July 31,

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 scripts, which are included in Intangibles, net in the Condensed Consolidated Balance Sheets as of May 1, 2021 and August 1, 2020.

Unused credit and fees under the ABL Credit Facility (in thousands, except percentages):

Outstanding letters of credit

Letter of credit fees

(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.

As of October 30, 2021, the U.S.

Borrowers’ Borrowing Base, net of $ 193 million of reserves, was $ 2,311 million, which is above the $ 2,050 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 million for ABL Loans and letters of credit under the ABL Credit Facility.

As of October 30, 2021, the U.S.

Borrowers had $ 910 million of ABL Loans and the Canadian Borrower had no ABL Loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of $ 7 million and are included in Long-term debt on the Condensed Consolidated Balance Sheets.

As of October 30, 2021, the U.S.

Borrowers had $ 118 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 million as of October 30, 2021.

ABL availability (in millions):

October 30, 2021

Total availability for ABL Loans and letters of credit $ 2,094

ABL Loans $ 910

Letters of credit $ 118

Unused credit $ 1,066

Unused facility fees

The ABL Loan Agreement contains other customary affirmative and negative covenants and customary representations and warranties that must be accurate in order for the Borrowers to borrow under the ABL Credit Facility.

The ABL Loan Agreement also contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the ABL Credit Facility to be in full force and effect, and a change of control.

If an event of default occurs and is continuing, the Borrowers may be required to immediately repay all amounts outstanding under the ABL Loan Agreement.

The applicable interest rates, 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 Agreement), and were as follows:

Interest rates and fees under the ABL Credit Facility:

Range of Facility Rates and Fees (per annum) October 30, 2021

and Canadian Borrowers’ applicable margin for base rate loans — % - 0.50 %

and Canadian Borrowers’ applicable margin for LIBOR and BA loans (1)

1.00 % - 1.50 %

Unutilized commitment fees 0.25 % - 0.375 %

Letter of credit fees 1.125 % - 1.625 %

Borrowers utilize LIBOR-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 of interest in the event that LIBOR is no longer available.

Term Loan Facility

On the Supervalu acquisition date (“Closing Date”), the Company entered into a new term loan agreement (the “Term Loan Agreement”), by and among the Company and Supervalu (collectively, the “Term Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “Term Lenders”), Goldman Sachs Bank USA, as administrative agent for the Lenders, and the other parties thereto.

The Term Loan Agreement provides for senior secured first lien term loans in an aggregate principal amount of $ 1,950.0 million, consisting of a $ 1,800.0 million seven-year tranche (the “Term B Tranche”) and a $ 150.0 million 364 -day tranche (the “364-day Tranche” and, together with the Term B Tranche, collectively, the “Term Loan Facility”).

The entire amount of the net proceeds from the Term Loan Facility was used to finance the Supervalu acquisition and related transaction costs.

The loans under the Term B Tranche will be payable in full on October 22, 2025;

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

On March 3, 2021, the Company entered into an amendment to the Whole Foods Supply Agreement, which extended the term of

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

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

The loans under the 364-day Tranche were paid in full on October 21, 2019.

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

Under the Term Loan Agreement, the Term Borrowers may, at their option, increase the amount of the Term B Tranche, add one or more additional tranches of term loans or add one or more additional tranches of revolving credit commitments, without the consent of any Term Lenders not participating in such additional borrowings, up to an aggregate amount of $ 656.3 million plus additional amounts based on satisfaction of certain leverage ratio tests, subject to certain customary conditions and applicable lenders committing to provide the additional funding.

The Term Loan Agreement, by and among the Company and Supervalu (collectively, the “Term Borrowers”), the financial institutions that are parties thereto as lenders, Credit Suisse, as administrative agent for the Lenders, and the other parties thereto, provides for senior secured first lien term loans in an aggregate principal amount of $ 1,800 million in a seven-year tranche (the “Term Loan Facility”).

The loans under the Term Loan Facility will be payable in full on October 22, 2025.

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 Term Borrowers’ obligations under the Term Loan Facility are guaranteed by most of the Company’s wholly-owned domestic subsidiaries who are not also Term Borrowers (collectively, the “Term Guarantors”), subject to customary exceptions and limitations, including an exception for immaterial subsidiaries designated by the Company from time to time.

The Term Borrowers’ obligations under the Term Loan Facility and the Term Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Term Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the Term Guarantors’ ABL Assets, in each case, subject to customary exceptions and limitations, including an exception for owned real property with net book values of less than $ 10.0 million.

As of May 1, 2021, there was $ 570.5 million of owned real property pledged as collateral that was included in Property and equipment, net in the Condensed Consolidated Balance Sheets.

Subsequent to May 1, 2021, the Company pledged an additional $ 123.7 million of owned real property as collateral, which includes eight additional distribution centers.

The loans under the Term Loan Facility may be voluntarily prepaid, subject to certain minimum payment thresholds and the payment of breakage or other similar costs.

Under the Term Loan Facility, the Company is required, subject to certain exceptions and customary reinvestment rights, to apply 100 percent of Net Cash Proceeds (as defined in the Term Loan Agreement) from certain types of asset sales to prepay the loans outstanding under the Term Loan Facility.

Commencing with the fiscal year ending August 1, 2020, the Company must also prepay loans outstanding under the Term Loan Facility no later than 130 days after the fiscal year end in an aggregate principal amount equal to a specified percentage (which percentage ranges from 0 to 75 percent depending on the Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) as of the last day of such fiscal year) of Excess Cash Flow (as defined in the Term Loan Agreement) in excess of $ 10.0 million for the fiscal year then ended, minus any voluntary prepayments of the loans under the Term Loan Facility, the ABL Credit Facility (to the extent they permanently reduce commitments under the ABL Facility) and certain other indebtedness made during such fiscal year.

Based on the Company’s Excess Cash Flow in fiscal 2020, a $ 72.0 million prepayment was required and paid in the quarter ending October 31, 2020.

The potential amount of prepayment from Excess Cash Flow in fiscal 2021 that may be required in fiscal 2022 is not reasonably estimable as of May 1, 2021.

As of May 1, 2021, the borrowings under the Term B Tranche of the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either:

(i) a base rate and a margin of 2.50 % or (ii) a LIBOR rate and a margin of 3.50 %;

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 and July 31, 2021, there was $ 672 million and $ 676 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 that may be required in fiscal 2023 is not reasonably estimable as of October 30, 2021.

As of October 30, 2021, the Company had borrowings of $ 994 million outstanding under the Term Loan Facility, which are presented in the Condensed Consolidated Balance Sheets net of debt issuance costs of $ 17 million and an original issue discount on debt of $ 16 million.

As of October 30, 2021, 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.

The Term Loan Agreement does not include any financial maintenance covenants but contains other customary affirmative and negative covenants and customary representations and warranties.

The Term Loan Agreement also contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the Term Loan Facility to be in full force and effect, and a change of control.

If an event of default occurs and is continuing, the Term Borrowers may be required to immediately repay all amounts outstanding under the Term Loan Agreement.

As of May 1, 2021, the Company had borrowings of $ 1,002.3 million outstanding under the Term B Tranche, which are presented net of debt issuance costs of $ 19.2 million and an original issue discount on debt of $ 17.3 million.

As of May 1, 2021, no amount of the Term B Tranche was classified as current.

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

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

(in thousands) Other Cash Flow Derivatives Benefit Plans Foreign Currency Translation Swap Agreements Total

Accumulated other comprehensive loss at August 1, 2020 $ ( 67 ) $ ( 115,296 ) $ ( 21,419 ) $ ( 101,164 ) $ ( 237,946 )

Other comprehensive (loss) income before reclassifications ( 13 ) — 6,164 10,096 16,247

Reclassification of amounts included in net periodic benefit income — ( 807 ) — — ( 807 )

Reclassification of cash flow hedges ( 328 ) — — 25,742 25,414

Net current period Other comprehensive (loss) income ( 341 ) ( 807 ) 6,164 35,838 40,854

Accumulated other comprehensive loss at May 1, 2021 $ ( 408 ) $ ( 116,103 ) $ ( 15,255 ) $ ( 65,326 ) $ ( 197,092 )

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

(in thousands) Benefit Plans Foreign Currency Translation Swap Agreements Total

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, the Company made a voluntary prepayment of $ 150 million on the Term Loan Facility funded with incremental borrowings under the ABL Credit Facility that reduces its interest costs.

This 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, 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.

NOTE 9—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 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 )

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

(in millions) Benefit Plans Foreign Currency Translation Swap Agreements Total

Accumulated other comprehensive loss at August 1, 2020 $ ( 116 ) $ ( 21 ) $ ( 102 ) $ ( 239 )

Other comprehensive income (loss) before reclassifications 1,480 ( 3,561 ) ( 55,874 ) ( 57,955 )

Reclassification of amounts included in net periodic benefit income ( 1,722 ) — — ( 1,722 )

Reclassification of cash flow hedges — — 9,375 9,375

Pension settlement charge 7,610 — — 7,610

Net current period Other comprehensive income (loss) 7,368 ( 3,561 ) ( 46,499 ) ( 42,692 )

Accumulated other comprehensive loss at May 2, 2020 $ ( 25,090 ) $ ( 23,643 ) $ ( 102,912 ) $ ( 151,645 )

Other comprehensive income before reclassifications — — 3 3

Amortization of cash flow hedges — — 9 9

Net current period Other comprehensive income — — 12 12

Accumulated other comprehensive loss at October 31, 2020 $ ( 116 ) $ ( 21 ) $ ( 90 ) $ ( 227 )

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

13-Week Period Ended 39-Week Period Ended Affected Line Item on the Condensed Consolidated Statements of Operations

(in thousands) May 1,

Pension and postretirement benefit plan obligations:

Reclassification of amounts included in net periodic benefit income (1)

13-Week Period Ended Affected Line Item on the Condensed Consolidated Statements of Operations

(in millions) October 30,

2021 October 31,

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

Pension settlement charge — — — 10,303 Net periodic benefit income, excluding service cost

Total reclassifications ( 404 ) ( 777 ) ( 1,117 ) 7,975

Income tax expense (benefit) 103 203 310 ( 2,087 ) Provision (benefit) for income taxes

Income tax benefit — — Benefit for income taxes

Total reclassifications, net of tax $ 1 $ —

Swap agreements:

Reclassification of cash flow hedge $ 11,652 $ 6,191 $ 35,186 $ 12,812 Interest expense, net

Income tax benefit ( 3,127 ) ( 1,661 ) ( 9,444 ) ( 3,437 ) Provision (benefit) for income taxes

Total reclassifications, net of tax $ 8,525 $ 4,530 $ 25,742 $ 9,375

Other cash flow hedges:

Reclassification of cash flow hedge $ ( 612 ) $ — $ ( 448 ) $ — Cost of sales

Income tax expense 164 — 120 — Provision (benefit) for income taxes

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

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

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

(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—Benefit Plans.

As of October 30, 2021, the Company expects to reclassify $ 35 million related to unrealized derivative losses out of Accumulated other comprehensive loss and primarily into Interest expense, net during the following twelve-month period.

NOTE 10—SHARE-BASED AWARDS

During the second quarter of fiscal 2021, the Company authorized for issuance and registered an additional 3.6 million shares of common stock under the Amended and Restated 2020 Equity Incentive Plan.

In fiscal 2021 year-to-date, the Company granted restricted stock units and performance share units to its directors, executive officers, and certain employees representing a right to receive an aggregate of 2.7 million shares.

As of May 1, 2021, there were 3.9 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan.

In the first quarter of fiscal 2022, 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 million shares.

As of October 30, 2021, there were 2.8 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan.

NOTE 11—BENEFIT PLANS

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Pension Benefits Other Postretirement Benefits

(in thousands) May 1, 2021 May 2, 2020 May 1, 2021 May 2, 2020

(in millions) October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020

Net Periodic Benefit (Income) Cost

Service cost $ — $ — $ 12 $ 14

Interest cost $ 10 $ 9 $ — $ —

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Amortization of prior service credit — — 1 —

Amortization of net actuarial loss (gain) 261 3 ( 315 ) ( 430 )

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

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

39-Week Period Ended

Pension Benefits Other Postretirement Benefits

(in thousands) May 1, 2021 May 2, 2020 May 1, 2021 May 2, 2020

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

Service cost $ — $ — $ 36 $ 42

Interest cost 27,492 43,894 309 708

Expected return on plan assets ( 77,894 ) ( 79,834 ) ( 78 ) ( 162 )

Amortization of prior service credit — — ( 1,050 ) ( 1,050 )

Amortization of net actuarial loss (gain) 878 9 ( 945 ) ( 1,287 )

Pension settlement charge — 10,303 — —

Net periodic benefit income $ ( 49,524 ) $ ( 25,628 ) $ ( 1,728 ) $ ( 1,749 )

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

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Cash Balance Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in fiscal 2022.

The Company expects to contribute approximately $ 5.3 million to its other non-qualified pension plans and postretirement benefit plans in fiscal 2021.

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

Multiemployer Pension Plans

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

In connection with the Company’s consolidation of distribution centers in the Pacific Northwest, during the second quarter of fiscal 2020, the Company recorded a $ 10.6 million multiemployer pension plan withdrawal liability, under which payments will be made over a one-year period the timing of which is dependent upon the plan’s assessment.

The withdrawal liability is included in Other long-term liabilities and the withdrawal charge was recorded within Restructuring, acquisition and integration related expenses.

Lump Sum Pension Settlement

On August 1, 2019, the Company amended the SUPERVALU Retirement Plan to provide for a lump sum settlement window.

On August 2, 2019, the Company sent plan participants lump sum settlement election offerings that committed the plan to pay certain deferred vested pension plan participants and retirees, who make such an election, a lump sum payment in exchange for their rights to receive ongoing payments from the plan.

The lump sum payment amounts are equal to the present value of the participant’s pension benefits, and were made to certain (i) retired associates and beneficiaries who are receiving their monthly pension benefit payment and (ii) terminated associates who are deferred vested in the plan, had not yet begun receiving monthly pension benefit payments and who are not eligible for any prior lump sum offerings under the plan.

Benefit obligations associated with the lump sum offering have been incorporated into the funded status utilizing the actuarially determined lump sum payments based on estimated offer acceptances.

The plan made aggregate lump sum settlement payments of $ 664.0 million to plan participants during the second quarter of fiscal 2020.

The lump sum settlement payments resulted in a non-cash pension settlement charge of $ 10.3 million in the second quarter of fiscal 2020 from the acceleration of a portion of the accumulated unrecognized actuarial loss, which was based on the fair value of SUPERVALU Retirement Plan assets and remeasured liabilities.

As a result of the settlement payments, the SUPERVALU Retirement Plan obligations were remeasured using a discount rate of 3.1 percent and the MP-2019 mortality improvement scale.

This remeasurement resulted in a $ 1.5 million decrease to Accumulated other comprehensive loss.

The Company contributed $ 11 million and $ 12 million in the first quarters of fiscal 2022 and 2021, respectively, to continuing and discontinued operations multiemployer pension plans.

NOTE 12—INCOME TAXES

The effective income tax rate for continuing operations was an expense of 25.8 % compared to a benefit of 3.1 % on pre-tax income for the third quarters of fiscal 2021 and 2020, respectively.

The change in the rate for the quarter was primarily driven by the impact of a tax benefit from the revaluation of net operating loss deferred tax assets in the third quarter of fiscal 2020 due to passage of the CARES Act.

The effective income tax rate for continuing operations was an expense of 23.6 % on pre-tax income compared to a benefit of 21.2 % on pre-tax losses for fiscal 2021 year-to-date and fiscal 2020 year-to-date, respectively.

The change in the year-to-date rate was primarily driven by the impact of the goodwill impairment charge recorded in fiscal 2020, partially offset by the impact of a tax benefit from the revaluation of net operating loss deferred tax assets in the third quarter of fiscal 2020 due to passage of the CARES Act.

The effective tax rate for the first quarter of fiscal 2022 was a benefit of 1.3 % on pre-tax income, primarily driven by discrete tax benefits from employee stock award vestings and the release of uncertain tax positions that occurred in the quarter.

NOTE 13—EARNINGS (LOSS) PER SHARE

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

13-Week Period Ended 39-Week Period Ended

(in thousands, except per share data) May 1,

13-Week Period Ended

(in millions, except per share data) October 30,

2021 October 31,

Basic weighted average shares outstanding 57.0 55.2

Net effect of dilutive stock awards based upon the treasury stock method

4,081 1,499 3,648 —

Diluted weighted average shares outstanding 61.1 55.2

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Discontinued operations (1)

$ 0.03 $ ( 0.08 ) $ 0.11 $ ( 0.30 )

Diluted earnings (loss) per share $ 1.25 $ ( 0.02 )

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

790 1,771 1,152 1,868

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

(1) The computation of diluted earnings per share from discontinued operations is 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.

NOTE 14—BUSINESS SEGMENTS

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Reportable segments are reviewed on an annual basis, or more frequently if events or circumstances indicate a change in reportable segments has occurred.

The Wholesale reportable segment is engaged in the national distribution of natural, organic, specialty, produce and conventional grocery and non-food products, and providing professional services in the United States and Canada.

The Retail reportable segment derives revenues from the sale of groceries and other products at retail locations operated by the Company.

The Company has additional operating segments that do not meet the quantitative thresholds for reportable segments and are therefore aggregated under the caption of Other.

Other includes a manufacturing division, which engages in the importing, roasting, packaging and distributing of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections, and the Company’s branded product lines.

Other also includes certain corporate operating expenses that are not allocated to operating segments, which include, among other expenses, restructuring, acquisition, and integration related expenses, share-based compensation and salaries, retainers, and other related expenses of certain officers and all directors.

Wholesale records revenues related to sales to Retail at gross margin rates consistent with sales to other similar wholesale customers of the acquired Supervalu business.

Segment earnings include revenues and costs attributable to each of the respective business segments and allocated corporate overhead, based on the segment’s estimated consumption of corporately managed resources.

The Company allocates certain corporate capital expenditures and identifiable assets to its business segments and retains certain depreciation expense related to those assets within Other.

Non-operating expenses that are not allocated to the operating segments are included in the Other segment.

In the fourth quarter of fiscal 2020, the Company updated its segment profit measure to Adjusted EBITDA.

Prior period amounts have been recast to reflect this change in segment profit measure.

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

13-Week Period Ended 39-Week Period Ended

(in thousands) May 1, 2021 May 2, 2020 May 1, 2021 May 2, 2020

13-Week Period Ended

(in millions) October 30, 2021 October 31, 2020

Wholesale (1)

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Retail 602 606

Other 54,808 58,359 165,848 164,511

Eliminations ( 395 ) ( 416 )

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Wholesale $ 164 $ 123

Retail 21,547 36,931 71,159 58,921

Other 85 ( 17,247 ) ( 3,610 ) ( 4,419 )

Eliminations ( 1 ) 6

Net income attributable to noncontrolling interests 1 1

Total other expense, net ( 25,383 ) ( 32,669 ) ( 108,828 ) ( 114,933 )

Net periodic benefit income, excluding service cost 10 17

Interest expense, net ( 40 ) ( 69 )

Other, net ( 1 ) 1

Depreciation and amortization ( 69 ) ( 77 )

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Restructuring, acquisition and integration related expenses ( 3 ) ( 16 )

Goodwill and asset impairment charges — — — ( 425,405 )

Gain (loss) on sale of assets 25 ( 351 ) ( 144 ) ( 785 )

Notes receivable charges — — — ( 12,516 )

Legal reserve charge — — — ( 1,196 )

Other retail expense — ( 2 )

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Wholesale $ 61 $ 68

Retail 6,776 611 20,928 2,912

Other 1,453 2,277 4,437 10,575

Total depreciation and amortization $ 69 $ 77

Capital expenditures:

Payments for capital expenditures:

Wholesale $ 52 $ 38

Retail 7,512 2,131 14,822 7,426

Other 147 88 480 292

Total capital expenditures $ 56 $ 41

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

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

Refer to Note 3—Revenue Recognition for additional information regarding Wholesale sales to discontinued operations.

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

(in thousands) May 1,

2021 August 1,

(in millions) October 30,

2021 July 31,

Wholesale $ 7,006 $ 6,536

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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 May 1, 2021.

The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of October 30, 2021.

These guarantees were generally made to support the business growth of wholesale customers.

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The Company reviews performance risk related to its guarantee obligations based on internal measures of credit performance.

As of May 1, 2021, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $ 28.0 million ($ 24.4 million on a discounted basis).

Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, as of May 1, 2021, a total estimated loss of $ 1.0 million is recorded in the Condensed Consolidated Balance Sheets.

The Company is contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions.

The Company could be required to satisfy the obligations under the leases if any of the assignees are unable to fulfill their lease obligations.

Due to the wide distribution of the Company’s lease assignments among third parties, and various other remedies available, the Company believes the likelihood that it will be required to assume a material amount of these obligations is remote.

For leases that have been assigned, the Company has recorded the associated right of use operating lease assets and obligations within the Condensed Consolidated Balance Sheets.

No associated lessor receivables are reflected on the Condensed Consolidated Balance Sheets;

however, the Company expects its assignees to make lease payments to its landlords.

For the Company’s lease guarantee arrangements, no amounts have been recorded within the Condensed Consolidated Balance Sheets as the fair value has been determined to be de minimis.

As of October 30, 2021, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $ 27 million ($ 23 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, 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.

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The initial annual base charge under the Services Agreement is $ 30 million, subject to adjustments.

The Company expects that services provided under the Services Agreement will wind down at or near the end of the initial term in December 2021.

The Company expects that services provided under the Services Agreement will wind down in 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.

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These contracts typically include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations.

As of May 1, 2021, the Company had approximately $ 243 million of non-cancelable future purchase obligations.

As of October 30, 2021, the Company had approximately $ 243 million of non-cancelable future purchase obligations, most of which will be paid and utilized in the ordinary course within one year.

Legal Proceedings

18 unchanged sentences

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 refiled in state court.

The Company believes these claims are without merit and intends to vigorously defend this matter.

3 unchanged sentences

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.

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The hearing before the 7th Circuit Court of Appeals occurred on January 19, 2021.

From time to time, the Company receives notice of claims or potential claims or becomes involved in litigation, alternative dispute resolution, such as arbitration, or other legal and regulatory proceedings that arise in the ordinary course of its business, including investigations and claims regarding employment law, including wage and hour;

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.

pension plans;

labor union disputes, including unfair labor practices, such as claims for back-pay in the context of labor contract negotiations;

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;

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;

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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 May 1, 2021, no material accrued obligations, individually or in the aggregate, have been recorded for these legal proceedings.

As of October 30, 2021, no material accrued obligations, individually or in the aggregate, have been recorded for these legal proceedings.

Although management believes it has made appropriate assessments of potential and contingent loss in each of these cases based on current facts and circumstances, and application of prevailing legal principles, there can be no assurance that material differences in actual outcomes from management’s current assessments, costs and exposures relative to current predictions and estimates, or material changes in such predictions or estimates will not occur.

The occurrence of any of the foregoing, could have a material adverse effect on our financial condition, results of operations or cash flows.

NOTE 16—DISCONTINUED OPERATIONS

In conjunction with the Supervalu acquisition, the Company announced its plan to sell the remaining acquired retail operations of Supervalu.

Since the acquisition, the Company sold Hornbacher’s, and sold and exited the retail operations of certain Shoppers locations, Shop ‘n Save St.

Louis and Shop ‘n Save East.

As discussed further in Note 1—Significant Accounting Policies, in the fourth quarter of fiscal 2020, the Company determined Retail no longer qualified for held for sale presentation and the results of operations, financial position and cash flows of Retail have been revised in order to present Retail within continuing operations.

Subsequent to the presentation changes in the fourth quarter of fiscal 2020, discontinued operations contains the historical results of operations, financial position and cash flows of Hornbacher’s, certain Shoppers locations, Shop ‘n Save St.

Louis and Shop ‘n Save East.

As of May 1, 2021, only four Shoppers locations are contained in remaining disposal groups that continue to be classified as operations held for sale as discontinued operations.

In the second quarter of fiscal 2020, the Company entered into agreements to sell 13 Shoppers stores and decided to close six locations.

During fiscal 2020 year-to-date, within discontinued operations the Company incurred approximately $ 28.3 million in pre-tax aggregate costs and charges related to Shoppers stores that remain within discontinued operations, consisting of $ 22.9 million of operating losses, severance costs and transaction costs during the period of wind-down and $ 5.5 million of property and equipment impairment charges related to impairment reviews.

Operating results of discontinued operations are summarized below:

13-Week Period Ended 39-Week Period Ended

(In thousands) May 1,

Net sales $ 20,009 $ 30,115 $ 67,798 $ 200,786

Cost of sales 13,172 21,548 45,692 143,187

Gross profit 6,837 8,567 22,106 57,599

Operating expenses 4,658 6,046 14,417 46,350

Restructuring expenses and charges ( 187 ) 6,686 596 30,870

Operating income (loss) 2,366 ( 4,165 ) 7,093 ( 19,621 )

Other income, net — ( 107 ) — ( 171 )

Income (loss) from discontinued operations before income taxes 2,366 ( 4,058 ) 7,093 ( 19,450 )

Provision (benefit) for income taxes 713 20 341 ( 3,322 )

Income (loss) from discontinued operations, net of tax $ 1,653 $ ( 4,078 ) $ 6,752 $ ( 16,128 )

No net sales were recorded within continuing operations for retail stores within discontinued operations that the Company disposed of and expects to dispose of without a supply agreement.

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

(In thousands) May 1, 2021 August 1, 2020

Current assets

Cash and cash equivalents $ 136 $ 119

Accounts receivable, net 477 350

Inventories, net 3,876 4,233

Other current assets 410 365

Total current assets of discontinued operations 4,899 5,067

Long-term assets

Property and equipment 965 3,450

Other long-term assets 465 465

Total long-term assets of discontinued operations 1,430 3,915

Total assets of discontinued operations $ 6,329 $ 8,982

Current liabilities

Accounts payable $ 2,757 $ 3,613

Accrued compensation and benefits 2,332 4,501

Other current liabilities 1,907 3,324

Total current liabilities of discontinued operations 6,996 11,438

Long-term liabilities

Other long-term liabilities 15 1,738

Total liabilities of discontinued operations 7,011 13,176

Net liabilities of discontinued operations $ ( 682 ) $ ( 4,194 )

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements