What changed in this filing

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Item 1. Financial Statements

2022-06-07 compared with 2022-03-09 · 156 added, 128 removed, 666 unchanged (30% of the section changed)

38 unchanged sentences

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

58.8 shares issued and 58.2 shares outstanding at January 29, 2022;

59.0 shares issued and 58.4 shares outstanding at April 30, 2022;

57.0 shares issued and 56.4 shares outstanding at July 31, 2021

1 unchanged sentence

Treasury stock at cost ( 24 ) ( 24 )

Accumulated other comprehensive loss ( 9 ) ( 39 )

Accumulated other comprehensive income (loss) 22 ( 39 )

Retained earnings 1,187 978

10 unchanged sentences

13-Week Period Ended 39-Week Period Ended

2022 January 30,

2021 January 29,

2022 January 30,

2021 April 30,

Net sales $ 7,242 $ 6,631 $ 21,655 $ 20,215

3 unchanged sentences

Restructuring, acquisition and integration related expenses 8 10 16 44

Loss on sale of assets 1 — 1 —

Gain on sale of assets ( 88 ) — ( 87 ) —

Operating income 123 92 355 249

27 unchanged sentences

13-Week Period Ended 39-Week Period Ended

2022 January 30,

2021 January 29,

2022 January 30,

2021 April 30,

Net income including noncontrolling interests $ 68 $ 50 $ 213 $ 111

14 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the 13-week periods ended January 29, 2022 and January 30, 2021

For the 13-week periods ended April 30, 2022 and May 1, 2021

(in millions)

1 unchanged sentence

Paid-in Capital Accumulated

Comprehensive Loss Retained Earnings Total United Natural Foods, Inc.

Comprehensive Income (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 January 29, 2022 58.8 $ 1 0.6 $ ( 24 ) $ 596 $ ( 9 ) $ 1,120 $ 1,684 $ ( 1 ) $ 1,683

Restricted stock vestings 0.2 — — — ( 7 ) — — ( 7 ) — ( 7 )

2 unchanged sentences

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

Proceeds from issuance of common stock, net — — — — 4 — — 4 — 4

Net income — — — — — — 67 67 1 68

Balances at April 30, 2022 59.0 $ 1 0.6 $ ( 24 ) $ 599 $ 22 $ 1,187 $ 1,785 $ ( 1 ) $ 1,784

Balances at January 30, 2021 56.8 $ 1 0.6 $ ( 24 ) $ 581 $ ( 215 ) $ 887 $ 1,230 $ ( 1 ) $ 1,229

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

Restricted stock vestings 0.2 — — — ( 2 ) — — ( 2 ) — ( 2 )

2 unchanged sentences

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

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

Net income — — — — — — 48 48 2 50

Balances at January 30, 2021 56.8 $ 1 0.6 $ ( 24 ) $ 581 $ ( 215 ) $ 887 $ 1,230 $ ( 1 ) $ 1,229

Balances at May 1, 2021 57.0 $ 1 0.6 $ ( 24 ) $ 588 $ ( 198 ) $ 935 $ 1,302 $ ( 1 ) $ 1,301

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the 26-week periods ended January 29, 2022 and January 30, 2021

For the 39-week periods ended April 30, 2022 and May 1, 2021

(in millions)

1 unchanged sentence

Paid-in Capital Accumulated

Comprehensive Loss Retained Earnings Total United Natural Foods, Inc.

Comprehensive Income (Loss) Retained Earnings Total United Natural Foods, Inc.

Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity

7 unchanged sentences

Net income — — — — — — 209 209 4 213

Balances at January 29, 2022 58.8 $ 1 0.6 $ ( 24 ) $ 596 $ ( 9 ) $ 1,120 $ 1,684 $ ( 1 ) $ 1,683

Balances at April 30, 2022 59.0 $ 1 0.6 $ ( 24 ) $ 599 $ 22 $ 1,187 $ 1,785 $ ( 1 ) $ 1,784

Balances at August 1, 2020 55.3 $ 1 0.6 $ ( 24 ) $ 569 $ ( 239 ) $ 838 $ 1,145 $ ( 3 ) $ 1,142

4 unchanged sentences

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

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

Net income — — — — — — 106 106 5 111

Balances at January 30, 2021 56.8 $ 1 0.6 $ ( 24 ) $ 581 $ ( 215 ) $ 887 $ 1,230 $ ( 1 ) $ 1,229

Balances at May 1, 2021 57.0 $ 1 0.6 $ ( 24 ) $ 588 $ ( 198 ) $ 935 $ 1,302 $ ( 1 ) $ 1,301

See accompanying Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

39-Week Period Ended

(in millions) January 29,

2022 January 30,

(in millions) April 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Net income from continuing operations 213 108

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization 210 210

Share-based compensation 33 33

Loss on sale of assets 1 —

Gain on sale of assets ( 87 ) —

Closed property and other restructuring charges 1 3

5 unchanged sentences

Changes in operating assets and liabilities ( 497 ) ( 24 )

Net cash provided by operating activities

Net cash (used in) provided by operating activities of continuing operations

Net cash used in operating activities of discontinued operations

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Payments for investments ( 28 ) ( 4 )

Net cash used in investing activities of continuing operations

( 129 ) ( 51 )

Net cash provided by (used in) investing activities of continuing operations

Net cash provided by investing activities of discontinued operations

Net cash used in investing activities

( 129 ) ( 50 )

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

7 unchanged sentences

Distributions to noncontrolling interests ( 4 ) ( 3 )

Other — ( 1 )

Net cash provided by (used in) financing activities

Net cash used in financing activities

( 7 ) ( 232 )

EFFECT OF EXCHANGE RATE ON CASH — —

4 unchanged sentences

Cash paid for interest $ 110 $ 118

Cash payments for federal, state, and foreign income taxes, net $ — $ 43

Cash payments (receipts) for federal, state, and foreign income taxes, net $ — $ ( 22 )

Leased assets obtained in exchange for new operating lease liabilities $ 260 $ 227

11 unchanged sentences

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

References to the second quarter of fiscal 2022 and 2021 relate to the 13-week fiscal quarters ended January 29, 2022 and January 30, 2021, respectively.

References to fiscal 2022 and 2021 year-to-date relate to the 26-week fiscal periods ended January 29, 2022 and January 30, 2021, respectively.

References to the third quarter of fiscal 2022 and 2021 relate to the 13-week fiscal quarters ended April 30, 2022 and May 1, 2021, respectively.

References to fiscal 2022 and 2021 year-to-date relate to the 39-week fiscal periods ended April 30, 2022 and May 1, 2021, respectively.

Basis of Presentation

11 unchanged sentences

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.

Prior periods 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 in the second quarter of fiscal 2022.

7 unchanged sentences

Checks outstanding in excess of bank balances create book overdrafts, which are recorded in Accounts payable in the Condensed Consolidated Balance Sheets and are reflected as an operating activity in the Condensed Consolidated Statements of Cash Flows.

As of January 29, 2022 and July 31, 2021, the Company had net book overdrafts of $ 292 million and $ 268 million, respectively.

As of April 30, 2022 and July 31, 2021, the Company had net book overdrafts of $ 271 million and $ 268 million, respectively.

Reclassifications

7 unchanged sentences

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 $ 97 million and $ 67 million at January 29, 2022 and July 31, 2021, respectively.

If the first-in, first-out method had been used, Inventories, net would have been higher by approximately $ 169 million and $ 67 million at April 30, 2022 and July 31, 2021, respectively.

NOTE 2—RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

12 unchanged sentences

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.

In fiscal 2020, the Company elected the initial expedient to assert probability of its hedged interest rate transactions.

The Company expects to adopt the remaining applicable practical expedients of the standard in the fourth quarter of fiscal 2022 when it converts its LIBOR based contracts to Secured Overnight Financing Rate (“SOFR”) and does not expect a material impact on the Company’s Condensed Consolidated Financial Statements.

NOTE 3—REVENUE RECOGNITION

9 unchanged sentences

Net Sales for the 13-Week Period Ended

(in millions) January 29, 2022

(in millions) April 30, 2022

Customer Channel Wholesale Retail Other Eliminations (1)

7 unchanged sentences

Net Sales for the 13-Week Period Ended

(in millions) January 30, 2021

(in millions) May 1, 2021

Customer Channel Wholesale Retail Other Eliminations (1)

7 unchanged sentences

Net Sales for the 39-Week Period Ended

(in millions) January 29, 2022

(in millions) April 30, 2022

Customer Channel Wholesale Retail Other Eliminations (1)

7 unchanged sentences

Net Sales for the 39-Week Period Ended

(in millions) January 30, 2021

(in millions) May 1, 2021

Customer Channel Wholesale Retail Other Eliminations (1)

6 unchanged sentences

Total $ 19,423 $ 1,829 $ 166 $ ( 1,203 ) $ 20,215

(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.

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

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

3 unchanged sentences

Accounts and notes receivable are as follows:

(in millions) January 29, 2022 July 31, 2021

(in millions) April 30, 2022 July 31, 2021

Customer accounts receivable $ 1,240 $ 1,115

7 unchanged sentences

13-Week Period Ended 39-Week Period Ended

(in millions) January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

(in millions) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021

Restructuring and integration costs $ 8 $ 12 $ 15 $ 41

Closed property charges and costs 1 4 1 5

Closed property charges and costs, net — ( 2 ) 1 3

Total $ 8 $ 10 $ 16 $ 44

4 unchanged sentences

Change in foreign exchange rates — — —

Goodwill as of January 29, 2022

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

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

Goodwill as of April 30, 2022

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

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

Identifiable intangible assets, net consisted of the following:

January 29, 2022 July 31, 2021

April 30, 2022 July 31, 2021

(in millions) Gross Carrying

12 unchanged sentences

Intangibles assets, net $ 1,186 $ 349 $ 837 $ 1,187 $ 296 $ 891

Amortization expense was $ 18 million and $ 19 million for the second quarters of fiscal 2022 and 2021, respectively, and $ 36 million and $ 42 million for fiscal 2022 and 2021 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 January 29, 2022 is as follows:

Amortization expense was $ 18 million and $ 18 million for the third quarters of fiscal 2022 and 2021, respectively, and $ 54 million and $ 60 million for fiscal 2022 and 2021 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 April 30, 2022 is as follows:

(in millions)

4 unchanged sentences

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 January 29, 2022

Condensed Consolidated Balance Sheets Location Fair Value at April 30, 2022

(in millions) Level 1 Level 2 Level 3

1 unchanged sentence

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

Interest rate swaps designated as hedging instruments Other long-term assets

Mutual funds Other long-term assets

Interest rate swaps designated as hedging instruments Accrued expenses and other current liabilities

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

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

8 unchanged sentences

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

As of January 29, 2022, a 100 basis point increase in forward LIBOR interest rates would increase the fair value of the interest rate swaps by approximately $ 24 million;

As of April 30, 2022, a 100 basis point increase in forward LIBOR interest rates would increase the fair value of the interest rate swaps by approximately $ 20 million;

a 100 basis point decrease in forward LIBOR interest rates would decrease the fair value of the interest rate swaps by approximately $ 21 million.

5 unchanged sentences

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

January 29, 2022 July 31, 2021

April 30, 2022 July 31, 2021

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

5 unchanged sentences

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

The Company’s interest rate swap contracts are designated as cash flow hedges as of January 29, 2022.

The Company’s interest rate swap contracts are designated as cash flow hedges as of April 30, 2022.

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

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

Details of active swap contracts as of January 29, 2022, which are all pay fixed and receive floating, are as follows:

Details of active swap contracts as of April 30, 2022, which are all pay fixed and receive floating, are as follows:

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

19 unchanged sentences

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

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

In fiscal 2021 year-to-date, 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.

(2) Subsequent to the third quarter of fiscal 2022, the Company amended the reference rate in all of its outstanding interest rate swap contracts to replace One-Month LIBOR with One-Month Term SOFR and certain credit spread adjustments.

The Company does not expect to record any gains or losses upon the conversion of the reference rates in these interest rate swap contracts, and the Company believes these amendments will not have a material impact on its Condensed Consolidated Financial Statements.

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 million to terminate certain outstanding interest rate swaps with a notional amount of $ 250 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.

8 unchanged sentences

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

January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021

(in millions) Interest expense, net Interest expense, net

6 unchanged sentences

(in millions) Average Interest Rate at

January 29, 2022

Fiscal Maturity Year January 29,

April 30, 2022

Fiscal Maturity Year April 30,

2022 July 31,

8 unchanged sentences

Long-term debt $ 2,377 $ 2,175

Refinancing Activities

Subsequent to the end of the third quarter of fiscal 2022, on June 3, 2022, the Company entered into a new loan agreement (the “2022 ABL Loan Agreement”), by and among the Company (the “2022 U.S.

Borrower”) and UNFI Canada, Inc.

(the “2022 Canadian Borrower” and, together with the 2022 U.S.

Borrower, the “2022 Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “2022 ABL Lenders”), Wells Fargo Bank, N.A.

as administrative agent for the 2022 ABL Lenders, and the other parties thereto, which provides for a secured asset-based revolving credit facility (the “2022 ABL Credit Facility”), of which up to $ 2,600 million is available to the 2022 Borrowers, including a U.S.

Dollar equivalent of $ 100 million sublimit for borrowings in Canadian dollars.

The 2022 ABL Credit Facility replaced the Company’s existing $ 2,100 million ABL Credit Facility (defined below).

Under the 2022 ABL Loan Agreement, the 2022 Borrowers may, at their option, increase the aggregate amount of the 2022 ABL Credit Facility in an amount of up to $ 750 million without the consent of any 2022 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.

Effective June 3, 2022, the Company used borrowings under the 2022 ABL Loan Agreement to repay all amounts outstanding under the ABL Loan Agreement and terminated the ABL Credit Facility.

The 2022 ABL Loan Agreement utilizes Term SOFR and Prime rates as the benchmark interest rates.

Borrowings under the 2022 ABL Credit Facility bear interest at rates that, at the 2022 Borrowers’ option, can be either:

(i) a base rate plus a 0.00 % - 0.25 % margin or (ii) a Term SOFR rate plus a 1.00 % - 1.25 % margin.

Unutilized commitments under the 2022 ABL Credit Facility are subject to a per annum fee of 0.20 %.

The 2022 ABL Credit Facility will expire at the earlier of (i) June 3, 2027, and (ii) the date that is ninety days prior to the maturity date of the Term Loan Facility (defined below) if on such date more than $ 100 million of borrowings under the Term Loan Facility remain outstanding and matures prior to June 3, 2027.

The 2022 ABL Loan Agreement subjects the Company to a fixed charge coverage ratio of at least 1.0 to 1.0 calculated at the end of each of the Company’s fiscal quarters on a rolling four quarter basis, if the adjusted aggregate availability is ever less than the greater of (i) $ 210 million and (ii) 10 % of the aggregate borrowing base.

The 2022 ABL Loan Agreement contains certain operational and informational covenants customary for this type of secured revolving credit facility, which limit the Company’s restricted subsidiaries’ ability to, among other things, incur debt, declare or pay dividends or make other distributions to its stockholders, transfer or sell assets, create liens on our assets, engage in transactions with affiliates and merge, consolidate or sell all or substantially all of the Company’s and its subsidiaries’ assets on a consolidated basis.

If the Company fails to comply with any of these covenants, it may be in default under the applicable debt agreement, and all amounts due thereunder may become immediately due and payable.

The 2022 Borrowers’ obligations under the 2022 ABL Credit Facility are guaranteed by most of the Company’s wholly-owned subsidiaries (collectively, the “Guarantors”), subject to customary exceptions and limitations.

The 2022 Borrowers’ obligations under the 2022 ABL Credit Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the 2022 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 2022 Borrowers’ and Guarantors’ assets that do not constitute ABL Assets, in each case, subject to customary exceptions and limitations.

Availability under the 2022 ABL Credit Facility is subject to a borrowing base (the “2022 Borrowing Base”), which is based on 90 % of eligible accounts receivable, plus 90 % of eligible credit card receivables, plus 90.0 % - 92.5 % of the net orderly liquidation value of eligible inventory, plus 90 % of eligible pharmacy receivables, plus certain pharmacy prescription files availability of the 2022 Borrowers, after adjusting for customary reserves, but at no time shall exceed the lesser of the aggregate commitments under the 2022 ABL Credit Facility (currently $ 2,600 million) or the 2022 Borrowing Base.

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 (defined below) or the Term Loan Facility (defined below).

The Senior Notes are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the 2022 ABL Credit Facility or the Term Loan Facility (defined below).

ABL Credit Facility

10 unchanged sentences

There is no assurance that additional funding would be available.

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

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

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:

5 unchanged sentences

Refer to Note 5—Goodwill and Intangible Assets, Net for additional information.

As of January 29, 2022, the U.S.

As of April 30, 2022, the U.S.

Borrowers’ Borrowing Base, net of $ 135 million of reserves, was $ 2,649 million, which is above the $ 2,050 million limit of availability to the U.S.

Borrowers under the ABL Credit Facility.

As of January 29, 2022, the Canadian Borrower’s Borrowing Base, net of $ 5 million of reserves, was $ 46 million, which is below the $ 50 million limit of availability to the Canadian Borrower under the ABL Credit facility, resulting in total availability of $ 2,096 million for ABL Loans and letters of credit under the ABL Credit Facility.

As of January 29, 2022, the U.S.

As of April 30, 2022, the Canadian Borrower’s Borrowing Base, net of $ 6 million of reserves, was $ 46 million, which is below the $ 50 million limit of availability to the Canadian Borrower under the ABL Credit facility, resulting in total availability of $ 2,096 million for ABL Loans and letters of credit under the ABL Credit Facility.

As of April 30, 2022, the U.S.

Borrowers had $ 1,101 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 $ 5 million and are included in Long-term debt on the Condensed Consolidated Balance Sheets.

As of January 29, 2022, the U.S.

As of April 30, 2022, the U.S.

Borrowers had $ 134 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 $ 991 million as of January 29, 2022.

The Company’s resulting remaining availability under the ABL Credit Facility was $ 861 million as of April 30, 2022.

ABL availability (in millions):

January 29, 2022

April 30, 2022

Total availability for ABL Loans and letters of credit $ 2,096

2 unchanged sentences

Unused credit $ 861

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) January 29, 2022

Range of Facility Rates and Fees (per annum) April 30, 2022

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

4 unchanged sentences

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

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 initial aggregate principal amount of $ 1,800 million in a seven-year tranche (the “Term Loan Facility”).

The term loan agreement (“Term Loan Agreement”), by and among the Company and SUPERVALU INC.

(“Supervalu” and collectively with the Company, the “Term Borrowers”), the financial institutions that are parties thereto as lenders, Credit Suisse, as administrative agent for the Lenders, and the other parties thereto, provides for senior secured first lien term loans in an initial 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.

3 unchanged sentences

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 January 29, 2022 and July 31, 2021, there was $ 668 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.

As of April 30, 2022 and July 31, 2021, there was $ 627 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 January 29, 2022.

As of January 29, 2022, the Company had borrowings of $ 844 million outstanding under the Term Loan Facility, which are presented in the Condensed Consolidated Balance Sheets net of debt issuance costs of $ 15 million and an original issue discount on debt of $ 12 million.

As of January 29, 2022, no amount of the Term Loan Facility was classified as current.

As of January 29, 2022, the borrowings under the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either:

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 April 30, 2022.

As of April 30, 2022, the Company had borrowings of $ 800 million outstanding under the Term Loan Facility, which are presented in the Condensed Consolidated Balance Sheets net of debt issuance costs of $ 13 million and an original issue discount on debt of $ 11 million.

As of April 30, 2022, no amount of the Term Loan Facility was classified as current.

As of April 30, 2022, the borrowings under the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either:

(i) a base rate plus a margin of 2.25 % or (ii) a LIBOR rate plus a margin of 3.25 %;

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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 was recorded within Interest expense, net in the second quarter of fiscal 2022.

Subsequent to the end of the second quarter of fiscal 2022, in March 2022, the Company made a $ 44 million voluntary prepayment on the Term Loan Facility from the majority of the anticipated after-tax net proceeds from the transactions described further in Note 16—Subsequent Events.

NOTE 9—COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in Accumulated other comprehensive loss by component, net of tax, for fiscal 2022 year-to-date are as follows:

On March 1, 2022, the Company made a $ 44 million voluntary prepayment on the Term Loan Facility from the majority of the after-tax net proceeds from the sale-leaseback of an acquired distribution center that was previously leased.

These voluntary prepayments 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.

Subsequent to the end of the third quarter of fiscal 2022, on June 3, 2022, the Company entered into an amendment (the “Third Term Loan Amendment”) to the Term Loan Agreement to amend the reference rate thereunder from LIBOR to Term SOFR.

There were no other changes to the Term Loan Agreement as a result of the Third Loan Amendment.

The Company does not expect to record any gains or losses on the conversion of these interest rate swap contracts from LIBOR to SOFR.

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

Changes in Accumulated other comprehensive income (loss) by component, net of tax, for fiscal 2022 year-to-date are as follows:

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

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Net current period Other comprehensive income (loss) 4 2 ( 3 ) 58 61

Accumulated other comprehensive income (loss) at January 29, 2022 $ 2 $ 39 $ ( 18 ) $ ( 32 ) $ ( 9 )

Accumulated other comprehensive income (loss) at April 30, 2022 $ 4 $ 39 $ ( 19 ) $ ( 2 ) $ 22

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

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Net current period Other comprehensive (loss) income ( 1 ) 6 36 41

Accumulated other comprehensive loss at January 30, 2021 $ ( 117 ) $ ( 18 ) $ ( 80 ) $ ( 215 )

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

Accumulated other comprehensive loss at May 1, 2021 $ ( 117 ) $ ( 15 ) $ ( 66 ) $ ( 198 )

Items reclassified out of Accumulated other comprehensive income (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 millions) January 29,

2022 January 30,

2021 January 29,

2022 January 30,

(in millions) April 30,

2021 April 30,

Pension and postretirement benefit plan net assets:

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$ — $ — $ 2 $ ( 1 ) Net periodic benefit income, excluding service cost

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

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

Total reclassifications, net of tax $ — $ — $ 2 $ ( 1 )

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(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 January 29, 2022, the Company expects to reclassify $ 24 million related to unrealized derivative losses out of Accumulated other comprehensive loss and primarily into Interest expense, net during the following twelve-month period.

As of April 30, 2022, the Company expects to reclassify $ 2 million related to unrealized derivative gains out of Accumulated other comprehensive income (loss) and primarily into Interest expense, net during the following twelve-month period.

NOTE 10—SHARE-BASED AWARDS

In fiscal 2022 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 1.2 million shares.

As of January 29, 2022, there were 2.9 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan.

As of April 30, 2022, there were 2.9 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 millions) January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

(in millions) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021

Net Periodic Benefit (Income) Cost

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Expected return on plan assets ( 20 ) ( 26 ) — —

Amortization of prior service cost (credit) — — 1 ( 1 )

Amortization of net actuarial loss (gain) — 1 — ( 1 )

Net periodic benefit (income) cost $ ( 11 ) $ ( 16 ) $ 1 $ ( 1 )

Amortization of net actuarial gain — — — —

Net periodic benefit income $ ( 10 ) $ ( 16 ) $ — $ ( 1 )

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

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Pension Benefits Other Postretirement Benefits

(in thousands) January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

(in millions) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021

Net Periodic Benefit (Income) Cost

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Multiemployer Pension Plans

The Company contributed $ 11 million and $ 12 million in the second quarters of fiscal 2022 and 2021, respectively, and $ 22 million and $ 24 million in fiscal 2022 and 2021 year-to-date, respectively, to multiemployer pension plans.

The Company contributed $ 12 million and $ 12 million in the third quarters of fiscal 2022 and 2021, respectively, and $ 34 million and $ 36 million in fiscal 2022 and 2021 year-to-date, respectively, to multiemployer pension plans, which are included within Operating expenses.

NOTE 12—INCOME TAXES

The effective tax rate for the second quarter of fiscal 2022 was 26.9 % compared to 22.7 % for the second quarter of fiscal 2021.

The change in the effective tax rate was primarily driven by a tax benefit in the second quarter of fiscal 2021 from the release of reserves for unrecognized tax positions.

The effective tax rate for fiscal 2022 year-to-date was 14.2 % compared to 21.6 % for fiscal 2021 year-to-date primarily driven by discrete tax benefits from employee stock award vestings that occurred in fiscal 2022 year-to-date.

The effective tax rate for the third quarter of fiscal 2022 was 29.9 % compared to 24.2 % for the third quarter of fiscal 2021.

The change in the effective tax rate was primarily driven by limitations on the deductibility of certain share-based compensation expenses in the third quarter of fiscal 2022 and a discrete benefit for the vesting of employee stock awards in the third quarter of fiscal 2021 that was not material to the effective tax rate in the third quarter of fiscal 2022.

The effective tax rate for fiscal 2022 year-to-date was 19.9 % compared to 22.9 % for fiscal 2021 year-to-date.

The change in the effective tax rate was primarily driven by discrete tax benefits from employee stock award vestings that occurred in fiscal 2022 year-to-date.

The impacts from the release of unrecognized tax positions in fiscal 2022 year-to-date were comparable to fiscal 2021 year-to-date.

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13-Week Period Ended 39-Week Period Ended

(in millions, except per share data) January 29,

2022 January 30,

2021 January 29,

2022 January 30,

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

2021 April 30,

Basic weighted average shares outstanding 58.4 56.5 57.9 56.0

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Diluted earnings per share $ 1.10 $ 0.80 $ 3.44 $ 1.78

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

0.4 1.1 0.9 1.2

Anti-dilutive share-based awards excluded from the calculation of diluted earnings per share 0.5 0.8 0.5 1.2

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.

In the third quarter of fiscal 2022, the Company changed its measure of segment profit to exclude the non-cash LIFO charge or benefit from Adjusted EBITDA.

Prior period Adjusted EBITDA amounts and the reconciliation to Income from continuing operations before income taxes have been recast to reflect this change in the measure of segment profit.

The following table provides continuing operations information by reportable segment, including Net sales, Adjusted EBITDA with a reconciliation to Income from continuing operations before income taxes, depreciation and amortization, and payments for capital expenditures:

13-Week Period Ended 39-Week Period Ended

(in millions) January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021

(in millions) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021

Wholesale (1)

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Wholesale (2)

Retail 30 26 52 51

$ 171 $ 166 $ 522 $ 490

Other 11 — 27 ( 4 )

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Share-based compensation ( 10 ) ( 11 ) ( 33 ) ( 38 )

LIFO charge (2)

( 72 ) ( 5 ) ( 102 ) ( 19 )

Restructuring, acquisition and integration related expenses ( 8 ) ( 10 ) ( 16 ) ( 44 )

Loss on sale of assets ( 1 ) — ( 1 ) —

Gain on sale of assets 88 — 87 —

Multi-employer pension plan withdrawal benefit — — 8 —

Other retail benefit (expense) 1 ( 1 ) 1 ( 3 )

Other retail expense — ( 2 ) 1 ( 5 )

Income from continuing operations before income taxes $ 97 $ 66 $ 266 $ 140

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Total capital expenditures $ 52 $ 73 $ 158 $ 165

(1) As presented in Note 3—Revenue Recognition, for the second quarters of fiscal 2022 and 2021, the Company recorded $ 356 million and $ 354 million, respectively, and $ 695 million and $ 719 million in fiscal 2022 and 2021 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 third quarters of fiscal 2022 and 2021, the Company recorded $ 337 million and $ 331 million, respectively, and $ 1,032 million and $ 1,050 million in fiscal 2022 and 2021 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.

(2) As a result of the segment profit measurement revision discussed above, previously reported Adjusted EBITDA disclosures by segment and the reconciliation to Income from continuing operations before income taxes has been recast to exclude the impact of the non-cash LIFO charge or benefit.

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

(in millions) January 29,

(in millions) April 30,

2022 July 31,

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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 January 29, 2022.

The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of April 30, 2022.

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 January 29, 2022, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $ 25 million ($ 22 million on a discounted basis).

Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, as of January 29, 2022, a total estimated loss of $ 1 million is recorded in the Condensed Consolidated Balance Sheets.

As of April 30, 2022, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $ 23 million ($ 20 million on a discounted basis).

Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, as of April 30, 2022, a total estimated loss of $ 1 million is recorded in the Condensed Consolidated Balance Sheets.

The Company is a party to a variety of contractual agreements under which it may be obligated to indemnify the other party for certain matters in the ordinary course of business, which indemnities may be secured by operation of law or otherwise.

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Accordingly, no amount has been recorded in the Condensed Consolidated Balance Sheets for these guarantees, as the fair value has been determined to be de minimis.

Sale-Leaseback Arrangement

During the third quarter of fiscal 2022, the Company acquired the real property of a previously leased distribution center for approximately $ 153 million.

Immediately following this acquisition, the Company monetized this property through a sale-leaseback transaction, pursuant to which the Company received $ 225 million in aggregate proceeds for the sale of the property, which reflected the fair value of the property.

Under the terms of the sale-leaseback agreement, the Company entered into a lease for the distribution center for a term of 15 years.

The Company recorded a pre-tax gain on sale of approximately $ 87 million in the third quarter of fiscal 2022 as a result of the transactions, which primarily represented the pre-tax net proceeds.

Agreements with Save-A-Lot and Onex

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

As of January 29, 2022, the Company had approximately $ 225 million of non-cancelable future purchase obligations, most of which will be paid and utilized in the ordinary course within one year.

As of April 30, 2022, the Company had approximately $ 300 million of non-cancelable future purchase obligations, most of which will be paid and utilized in the ordinary course within one year.

Legal Proceedings

42 unchanged sentences

On December 3, 2021, the 7th Circuit denied the petition for rehearing.

On April 1, 2022, the Relators filed a petition for a writ of certiorari with the United States Supreme Court.

The Company’s response is due June 20, 2022.

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

8 unchanged sentences

Management regularly monitors the Company’s exposure to the loss contingencies associated with these matters and may from time to time change its predictions with respect to outcomes and estimates with respect to related costs and exposures.

As of January 29, 2022, no material accrued obligations, individually or in the aggregate, have been recorded for these legal proceedings.

As of April 30, 2022, no material accrued obligations, individually or in the aggregate, have been recorded for these legal proceedings.

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

1 unchanged sentence

NOTE 16—SUBSEQUENT EVENTS

Subsequent to the end of the second quarter of fiscal 2022, in February 2022, the Company acquired the real property of a previously leased distribution center for approximately $ 153 million.

Under the terms of the sale-leaseback agreement, the Company entered into a lease for the distribution center for a term of 15 years.

The Company expects to record a pre-tax gain on sale in the third quarter of fiscal 2022 currently estimated to be approximately $ 85 million as a result of the transactions, which primarily reflects the pre-tax net proceeds of the transactions.

Refer to Note 8—Long-Term Debt for discussion on a voluntary prepayment made under the Term Loan Facility subsequent to the end of the second quarter of fiscal 2022.

Refer to Note 8—Long-Term Debt for disclosure of the ABL Credit Facility’s refinancing and Term Loan Facility’s amendment.

Refer to Note 7—Derivatives for disclosure of the outstanding interest rate swap contract amendments from LIBOR to SOFR.

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