UNITED NATURAL FOODS INC 10-Q

Item 1. Financial Statements UNITED NATURAL FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in millions, except for par amounts) April 30, 2022 July 31, 2021 ASSETS Cash and cash equivalents $ 48 $ 41 Accounts receivable, net 1,228 1,103 Inventories, net 2,559 2,247 Prepaid expenses and other current assets 145 157 Current assets of discontinued operations — 2 Total current assets 3,980 3,550 Property and equipment, net 1,638 1,784 Operating lease assets 1,192 1,064 Goodwill 20 20 Intangible assets, net 837 891 Deferred income taxes 31 57 Other long-term assets 180 157 Long-term assets of discontinued operations — 2 Total assets $ 7,878 $ 7,525 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable $ 1,715 $ 1,644 Accrued expenses and other current liabilities 251 341 Accrued compensation and benefits 244 243 Current portion of operating lease liabilities 153 135 Current portion of long-term debt and finance lease liabilities 26 120 Current liabilities of discontinued operations — 4 Total current liabilities 2,389 2,487 Long-term debt 2,377 2,175 Long-term operating lease liabilities 1,084 962 Long-term finance lease liabilities 27 35 Pension and other postretirement benefit obligations 20 53 Other long-term liabilities 197 299 Total liabilities 6,094 6,011 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.01 par value, authorized 5.0 shares; none issued or outstanding — — Common stock, $ 0.01 par value, authorized 100.0 shares; 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 1 Additional paid-in capital 599 599 Treasury stock at cost ( 24 ) ( 24 ) Accumulated other comprehensive income (loss) 22 ( 39 ) Retained earnings 1,187 978 Total United Natural Foods, Inc. stockholders’ equity 1,785 1,515 Noncontrolling interests ( 1 ) ( 1 ) Total stockholders’ equity 1,784 1,514 Total liabilities and stockholders’ equity $ 7,878 $ 7,525 See accompanying Notes to Condensed Consolidated Financial Statements. 3 Table of Contents UNITED NATURAL FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in millions, except for per share data) 13-Week Period Ended 39-Week Period Ended April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 Net sales $ 7,242 $ 6,631 $ 21,655 $ 20,215 Cost of sales 6,230 5,661 18,526 17,280 Gross profit 1,012 970 3,129 2,935 Operating expenses 969 868 2,845 2,642 Restructuring, acquisition and integration related expenses 8 10 16 44 Gain on sale of assets ( 88 ) — ( 87 ) — Operating income 123 92 355 249 Net periodic benefit income, excluding service cost ( 10 ) ( 17 ) ( 30 ) ( 51 ) Interest expense, net 37 44 121 164 Other, net ( 1 ) ( 1 ) ( 2 ) ( 4 ) Income from continuing operations before income taxes 97 66 266 140 Provision for income taxes 29 16 53 32 Net income from continuing operations 68 50 213 108 Income from discontinued operations, net of tax — — — 3 Net income including noncontrolling interests 68 50 213 111 Less net income attributable to noncontrolling interests ( 1 ) ( 2 ) ( 4 ) ( 5 ) Net income attributable to United Natural Foods, Inc. $ 67 $ 48 $ 209 $ 106 Basic earnings per share: Continuing operations $ 1.15 $ 0.85 $ 3.62 $ 1.84 Discontinued operations $ — $ 0.01 $ — $ 0.06 Basic earnings per share $ 1.15 $ 0.86 $ 3.62 $ 1.90 Diluted earnings per share: Continuing operations $ 1.10 $ 0.79 $ 3.44 $ 1.73 Discontinued operations $ — $ 0.01 $ — $ 0.05 Diluted earnings per share $ 1.10 $ 0.80 $ 3.44 $ 1.78 Weighted average shares outstanding: Basic 58.4 56.5 57.9 56.0 Diluted 60.9 60.5 61.0 59.7 See accompanying Notes to Condensed Consolidated Financial Statements. 4 Table of Contents UNITED NATURAL FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) (in millions) 13-Week Period Ended 39-Week Period Ended April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 Net income including noncontrolling interests $ 68 $ 50 $ 213 $ 111 Other comprehensive income (loss): Recognition of pension and other postretirement benefit obligations, net of tax — — 2 ( 1 ) Recognition of interest rate swap cash flow hedges, net of tax (1) 30 14 58 36 Foreign currency translation adjustments ( 1 ) 3 ( 3 ) 6 Recognition of other cash flow derivatives, net of tax (2) 2 — 4 — Total other comprehensive income 31 17 61 41 Less comprehensive income attributable to noncontrolling interests ( 1 ) ( 2 ) ( 4 ) ( 5 ) Total comprehensive income attributable to United Natural Foods, Inc. $ 98 $ 65 $ 270 $ 147 (1) Amounts are net of tax expense of $ 11 million, $ 5 million, $ 21 million and $ 12 million, respectively. (2) Amounts are net of tax expense of $ 0 million , $ 0 million , $ 1 million and $ 0 million , respectively. See accompanying Notes to Condensed Consolidated Financial Statements. 5 Table of Contents UNITED NATURAL FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) For the 13-week periods ended April 30, 2022 and May 1, 2021 (in millions) Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total United Natural Foods, Inc. Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity Shares Amount Shares Amount 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 ) Share-based compensation — — — — 10 — — 10 — 10 Other comprehensive income — — — — — 31 — 31 — 31 Distributions to noncontrolling interests — — — — — — — — ( 1 ) ( 1 ) 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 Restricted stock vestings 0.2 — — — ( 2 ) — — ( 2 ) — ( 2 ) Share-based compensation — — — — 10 — — 10 — 10 Other comprehensive income — — — — — 17 — 17 — 17 Distributions to noncontrolling interests — — — — — — — — ( 2 ) ( 2 ) Acquisition of noncontrolling interests — — — — ( 1 ) — — ( 1 ) — ( 1 ) Net income — — — — — — 48 48 2 50 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. 6 Table of Contents UNITED NATURAL FOODS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) For the 39-week periods ended April 30, 2022 and May 1, 2021 (in millions) Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total United Natural Foods, Inc. Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity Shares Amount Shares Amount Balances at July 31, 2021 57.0 $ 1 0.6 $ ( 24 ) $ 599 $ ( 39 ) $ 978 $ 1,515 $ ( 1 ) $ 1,514 Restricted stock vestings 2.0 — — — ( 42 ) — — ( 42 ) — ( 42 ) Share-based compensation — — — — 33 — — 33 — 33 Other comprehensive income — — — — — 61 — 61 — 61 Distributions to noncontrolling interests — — — — — — — — ( 4 ) ( 4 ) Proceeds from issuance of common stock, net — — — — 9 — — 9 — 9 Net income — — — — — — 209 209 4 213 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 Cumulative effect of change in accounting principle — — — — — — ( 9 ) ( 9 ) — ( 9 ) Restricted stock vestings 1.7 — — — ( 13 ) — — ( 13 ) — ( 13 ) Share-based compensation — — — — 33 — — 33 — 33 Other comprehensive income — — — — — 41 — 41 — 41 Distributions to noncontrolling interests — — — — — — — — ( 3 ) ( 3 ) Acquisition of noncontrolling interests — — — — ( 1 ) — — ( 1 ) — ( 1 ) Net income — — — — — — 106 106 5 111 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. 7 Table of Contents UNITED NATURAL FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 39-Week Period Ended (in millions) April 30, 2022 May 1, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income including noncontrolling interests $ 213 $ 111 Income from discontinued operations, net of tax — 3 Net income from continuing operations 213 108 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 210 210 Share-based compensation 33 33 Gain on sale of assets ( 87 ) — Closed property and other restructuring charges 1 3 Net pension and other postretirement benefit income ( 30 ) ( 51 ) Deferred income tax benefit — ( 2 ) LIFO charge 102 19 Provision (recoveries) for losses on receivables 4 ( 3 ) Non-cash interest expense and other adjustments 20 45 Changes in operating assets and liabilities ( 497 ) ( 24 ) Net cash (used in) provided by operating activities of continuing operations ( 31 ) 338 Net cash used in operating activities of discontinued operations — ( 2 ) Net cash (used in) provided by operating activities ( 31 ) 336 CASH FLOWS FROM INVESTING ACTIVITIES: Payments for capital expenditures ( 158 ) ( 165 ) Proceeds from dispositions of assets 231 57 Payments for investments ( 28 ) ( 4 ) Net cash provided by (used in) investing activities of continuing operations 45 ( 112 ) Net cash provided by investing activities of discontinued operations — 1 Net cash provided by (used in) investing activities 45 ( 111 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings of long-term debt — 500 Proceeds from borrowings under revolving credit line 3,853 3,452 Repayments of borrowings under revolving credit line ( 3,453 ) ( 3,369 ) Repayments of long-term debt and finance leases ( 369 ) ( 787 ) Proceeds from the issuance of common stock and exercise of stock options 9 — Payment of employee restricted stock tax withholdings ( 42 ) ( 13 ) Payments for debt issuance costs ( 1 ) ( 12 ) Distributions to noncontrolling interests ( 4 ) ( 3 ) Net cash used in financing activities ( 7 ) ( 232 ) EFFECT OF EXCHANGE RATE ON CASH — — NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7 ( 7 ) Cash and cash equivalents, at beginning of period 41 47 Cash and cash equivalents, at end of period $ 48 $ 40 Supplemental disclosures of cash flow information: Cash paid for interest $ 110 $ 118 Cash payments (receipts) for federal, state, and foreign income taxes, net $ — $ ( 22 ) Leased assets obtained in exchange for new operating lease liabilities $ 260 $ 227 Leased assets obtained in exchange for new finance lease liabilities $ 1 $ — Additions of property and equipment included in Accounts payable $ 27 $ 49 See accompanying Notes to Condensed Consolidated Financial Statements. 8 Table of Contents UNITED NATURAL FOODS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1—SIGNIFICANT ACCOUNTING POLICIES Nature of Business United Natural Foods, Inc. and its subsidiaries (the “Company”, “we”, “us”, “UNFI”, or “our”) is a leading distributor of natural, organic, specialty, produce and conventional grocery and non-food products, and provider of support services to retailers. The Company sells its products primarily throughout the United States and Canada. Fiscal Year The Company’s fiscal years end on the Saturday closest to July 31 and contain either 52 or 53 weeks. References to the 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 The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Unless otherwise indicated in these Condensed Consolidated Financial Statements, references to the Condensed Consolidated Statements of Operations, the Condensed Consolidated Balance Sheets and the Notes to the Condensed Consolidated Financial Statements exclude all amounts related to discontinued operations. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. In the Company’s opinion, these Condensed Consolidated Financial Statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. However, the results of operations for interim periods may not be indicative of the results that may be expected for a full year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021 (the “Annual Report”). There were no material changes in significant accounting policies from those described in the Annual Report. Discontinued Operations In the fourth quarter of fiscal 2021, the Company determined it no longer met the held for sale criterion for a probable sale to be completed within 12 months for two of the four stores that were previously included within discontinued operations. As a result, the Company revised its Condensed Consolidated Financial Statements to reclassify two Shoppers stores from discontinued operations to continuing operations. 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. Use of Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 9 Table of Contents Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with original maturities of three months or less. The Company’s banking arrangements allow it to fund outstanding checks when presented to the financial institution for payment. The Company funds all intraday bank balance overdrafts during the same business day. Checks outstanding in excess of bank balances create book overdrafts, which are recorded in Accounts payable in the Condensed Consolidated Balance Sheets and are reflected as an operating activity in the Condensed Consolidated Statements of Cash Flows. As of April 30, 2022 and July 31, 2021, the Company had net book overdrafts of $ 271 million and $ 268 million, respectively. Reclassifications 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 Substantially all of the Company’s inventories consist of finished goods. To value discrete inventory items at lower of cost or net realizable value before application of any last-in, first-out (“LIFO”) reserve, the Company utilizes the weighted average cost method, perpetual cost method, the retail inventory method and the replacement cost method. Allowances for vendor funds 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 $ 169 million and $ 67 million at April 30, 2022 and July 31, 2021, respectively. NOTE 2—RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . ASU 2019-12 eliminates certain exceptions to Topic 740’s general principles. The amendments also improve 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. 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. 10 Table of Contents NOTE 3—REVENUE RECOGNITION Disaggregation of Revenues 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 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; • Retail , which reflects our Retail segment, including Cub Foods and Shoppers stores, excluding Shoppers stores that were held for sale within discontinued operations; and • Other , which includes international customers outside of Canada, foodservice, eCommerce, conventional military business and other sales. The following tables detail the Company’s net sales for the periods presented by customer channel for each of its segments. The Company does not record its revenues within its Wholesale reportable segment for financial reporting purposes by product group, and it is therefore impracticable for it to report them accordingly. 11 Table of Contents Net Sales for the 13-Week Period Ended (in millions) April 30, 2022 Customer Channel Wholesale Retail Other Eliminations (1) Consolidated Chains $ 3,111 $ — $ — $ — $ 3,111 Independent retailers 1,833 — — — 1,833 Supernatural 1,468 — — — 1,468 Retail — 602 — — 602 Other 565 — 60 — 625 Eliminations — — — ( 397 ) ( 397 ) Total $ 6,977 $ 602 $ 60 $ ( 397 ) $ 7,242 Net Sales for the 13-Week Period Ended (in millions) May 1, 2021 Customer Channel Wholesale Retail Other Eliminations (1) Consolidated Chains $ 2,957 $ — $ — $ — $ 2,957 Independent retailers 1,599 — — — 1,599 Supernatural 1,287 — — — 1,287 Retail — 590 — — 590 Other 524 — 55 — 579 Eliminations — — — ( 381 ) ( 381 ) Total $ 6,367 $ 590 $ 55 $ ( 381 ) $ 6,631 Net Sales for the 39-Week Period Ended (in millions) April 30, 2022 Customer Channel Wholesale Retail Other Eliminations (1) Consolidated Chains $ 9,436 $ — $ — $ — $ 9,436 Independent retailers 5,488 — — — 5,488 Supernatural 4,299 — — — 4,299 Retail — 1,847 — — 1,847 Other 1,620 — 166 — 1,786 Eliminations — — — ( 1,201 ) ( 1,201 ) Total $ 20,843 $ 1,847 $ 166 $ ( 1,201 ) $ 21,655 Net Sales for the 39-Week Period Ended (in millions) May 1, 2021 Customer Channel Wholesale Retail Other Eliminations (1) Consolidated Chains $ 9,090 $ — $ — $ — $ 9,090 Independent retailers 4,972 — — — 4,972 Supernatural 3,799 — — — 3,799 Retail — 1,829 — — 1,829 Other 1,562 — 166 — 1,728 Eliminations — — — ( 1,203 ) ( 1,203 ) Total $ 19,423 $ 1,829 $ 166 $ ( 1,203 ) $ 20,215 (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. 12 Table of Contents The Company serves customers in the United States and Canada, as well as customers located in other countries. However, all of the Company’s revenue is earned in the United States and Canada, and international distribution occurs through freight-forwarders. The Company does not have any performance obligations on international shipments subsequent to delivery to the domestic port. Accounts and Notes Receivable Balances Accounts and notes receivable are as follows: (in millions) April 30, 2022 July 31, 2021 Customer accounts receivable $ 1,240 $ 1,115 Allowance for uncollectible receivables ( 30 ) ( 28 ) Other receivables, net 18 16 Accounts receivable, net $ 1,228 $ 1,103 Notes receivable, net, included within Prepaid expenses and other current assets $ 7 $ 7 Long-term notes receivable, net, included within Other long-term assets $ 13 $ 15 NOTE 4—RESTRUCTURING, ACQUISITION AND INTEGRATION RELATED EXPENSES Restructuring, acquisition and integration related expenses were as follows: 13-Week Period Ended 39-Week Period Ended (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, net — ( 2 ) 1 3 Total $ 8 $ 10 $ 16 $ 44 NOTE 5—GOODWILL AND INTANGIBLE ASSETS, NET Changes in the carrying value of Goodwill by reportable segment that have goodwill consisted of the following: (in millions) Wholesale Other Total Goodwill as of July 31, 2021 $ 10 (1) $ 10 (2) $ 20 Change in foreign exchange rates — — — Goodwill as of April 30, 2022 $ 10 (1) $ 10 (2) $ 20 (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. 13 Table of Contents Identifiable intangible assets, net consisted of the following: April 30, 2022 July 31, 2021 (in millions) Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Amortizing intangible assets: Customer relationships $ 1,007 $ 279 $ 728 $ 1,007 $ 234 $ 773 Pharmacy prescription files 33 17 16 33 13 20 Operating lease intangibles 6 4 2 7 4 3 Trademarks and tradenames 84 49 35 84 45 39 Total amortizing intangible assets 1,130 349 781 1,131 296 835 Indefinite lived intangible assets: Trademarks and tradenames 56 — 56 56 — 56 Intangibles assets, net $ 1,186 $ 349 $ 837 $ 1,187 $ 296 $ 891 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: Fiscal Year: (in millions) Remaining fiscal 2022 $ 18 2023 72 2024 72 2025 70 2026 66 Thereafter 483 $ 781 NOTE 6—FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS Recurring Fair Value Measurements The following tables provide the fair value hierarchy for financial assets and liabilities measured on a recurring basis: Condensed Consolidated Balance Sheets Location Fair Value at April 30, 2022 (in millions) Level 1 Level 2 Level 3 Assets: Fuel derivatives designated as hedging instruments Prepaid expenses and other current assets $ — $ 5 $ — Foreign currency derivatives designated as hedging instruments Prepaid expenses and other current assets $ — $ 1 $ — Interest rate swaps designated as hedging instruments Other long-term assets $ — $ 5 $ — Mutual funds Other long-term assets $ 1 $ — $ — Liabilities: Interest rate swaps designated as hedging instruments Accrued expenses and other current liabilities $ — $ 5 $ — 14 Table of Contents Condensed Consolidated Balance Sheets Location Fair Value at July 31, 2021 (in millions) Level 1 Level 2 Level 3 Assets: Fuel derivatives designated as hedging instruments Prepaid expenses and other current assets $ — $ 1 $ — Mutual funds Other long-term assets $ 2 $ — $ — Liabilities: Foreign currency derivatives designated as hedging instruments Accrued expenses and other current liabilities $ — $ 1 $ — Interest rate swaps designated as hedging instruments Accrued expenses and other current liabilities $ — $ 33 $ — Interest rate swaps designated as hedging instruments Other long-term liabilities $ — $ 42 $ — Interest Rate Swap Contracts The fair values of interest rate swap contracts are measured using Level 2 inputs. The interest rate swap contracts are valued using an income approach interest rate swap valuation model incorporating observable market inputs including interest rates, LIBOR swap rates and credit default swap rates. As of 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. Refer to Note 7—Derivatives for further information on interest rate swap contracts. Fair Value Estimates For certain of the Company’s financial instruments including cash and cash equivalents, receivables, accounts payable, accrued vacation, compensation and benefits, and other current assets and liabilities the fair values approximate carrying amounts due to their short maturities. The fair value of notes receivable is estimated by using a discounted cash flow approach prior to consideration for uncollectible amounts and is calculated by applying a market rate for similar instruments using Level 3 inputs. The fair value of debt is estimated based on market quotes, where available, or market values for similar instruments, using Level 2 and 3 inputs. In the table below, the carrying value of the Company’s long-term debt is net of original issue discounts and debt issuance costs. April 30, 2022 July 31, 2021 (in millions) Carrying Value Fair Value Carrying Value Fair Value Notes receivable, including current portion $ 25 $ 21 $ 29 $ 26 Long-term debt, including current portion $ 2,391 $ 2,422 $ 2,188 $ 2,278 NOTE 7—DERIVATIVES Management of Interest Rate Risk The Company enters into interest rate swap contracts from time to time to mitigate its exposure to changes in market interest rates as part of its overall strategy to manage its debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates. Interest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company’s interest rate swap contracts are designated as cash flow hedges 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. 15 Table of Contents 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) Floating Rate Reset Terms August 3, 2015 (1) August 15, 2022 $ 30 1.7950 % One-Month LIBOR Monthly October 26, 2018 October 31, 2022 100 2.8915 % One-Month LIBOR Monthly January 11, 2019 October 31, 2022 50 2.4678 % One-Month LIBOR Monthly January 23, 2019 October 31, 2022 50 2.5255 % One-Month LIBOR Monthly November 16, 2018 March 31, 2023 150 2.8950 % One-Month LIBOR Monthly January 23, 2019 March 31, 2023 50 2.5292 % One-Month LIBOR Monthly November 30, 2018 September 30, 2023 50 2.8315 % One-Month LIBOR Monthly October 26, 2018 October 31, 2023 100 2.9210 % One-Month LIBOR Monthly January 11, 2019 March 28, 2024 100 2.4770 % One-Month LIBOR Monthly January 23, 2019 March 28, 2024 100 2.5420 % One-Month LIBOR Monthly November 30, 2018 October 31, 2024 100 2.8480 % One-Month LIBOR Monthly January 11, 2019 October 31, 2024 100 2.5010 % One-Month LIBOR Monthly January 24, 2019 October 31, 2024 50 2.5210 % One-Month LIBOR Monthly October 26, 2018 October 22, 2025 50 2.9550 % One-Month LIBOR Monthly November 16, 2018 October 22, 2025 50 2.9590 % One-Month LIBOR Monthly November 16, 2018 October 22, 2025 50 2.9580 % One-Month LIBOR Monthly January 24, 2019 October 22, 2025 50 2.5558 % One-Month LIBOR Monthly $ 1,230 (1) The swap contract has an amortizing notional principal amount which is reduced by $ 1 million on a quarterly basis. (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. No gain or loss was recorded as a result of the swap terminations and novations. Since the hedged interest payments remain probable of occurring, the unrecognized gains and losses that existed as of the early termination or novation of these interest rate swap agreements will be amortized out of Accumulated other comprehensive loss and into Interest expense, net over the remaining period of the original terminated or novated interest rate swap agreements. If any of the hedged interest payments were not probable of occurring, then a charge representing an accelerated amortization of the unrecognized gains and losses would be recorded. Cash payments resulting from the termination or novation of interest rate swaps are classified as operating activities in the Company’s Condensed Consolidated Statements of Cash Flows. The Company performs an initial quantitative assessment of hedge effectiveness using the “Hypothetical Derivative Method” in the period in which the hedging transaction is entered. Under this method, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. In future reporting periods, the Company performs a qualitative analysis for quarterly prospective and retrospective assessments of hedge effectiveness. The Company also monitors the risk of counterparty default on an ongoing basis and noted that the counterparties are reputable financial institutions. The entire change in the fair value of the derivative is initially reported in Other comprehensive income (outside of earnings) in the Condensed Consolidated Statements of Comprehensive Income and subsequently reclassified to earnings in Interest expense, net in the Condensed Consolidated Statements of Operations when the hedged transactions affect earnings. 16 Table of Contents The location and amount of gains or losses recognized in the Condensed Consolidated Statements of Operations for interest rate swap contracts for each of the periods, presented on a pre-tax basis, are as follows: 13-Week Period Ended 39-Week Period Ended April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 (in millions) Interest expense, net Interest expense, net Total amounts of expense line items presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 37 $ 44 $ 121 $ 164 Loss on cash flow hedging relationships: Loss reclassified from comprehensive income into earnings $ ( 9 ) $ ( 11 ) $ ( 30 ) $ ( 35 ) NOTE 8—LONG-TERM DEBT The Company’s long-term debt consisted of the following: (in millions) Average Interest Rate at April 30, 2022 Fiscal Maturity Year April 30, 2022 July 31, 2021 Term Loan Facility 4.01 % 2026 $ 800 $ 1,002 ABL Credit Facility 2.16 % 2024 1,101 701 Senior Notes 6.75 % 2029 500 500 Other secured loans 5.12 % 2024-2025 26 37 Debt issuance costs, net ( 25 ) ( 35 ) Original issue discount on debt ( 11 ) ( 17 ) Long-term debt, including current portion 2,391 2,188 Less: current portion of long-term debt ( 14 ) ( 13 ) 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. 17 Table of Contents 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. Senior Notes On October 22, 2020, the Company issued $ 500 million of unsecured 6.750 % Senior Notes due October 15, 2028 (the “Senior Notes”). The Senior Notes 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 The ABL Loan Agreement by and among the Company and United Natural Foods West, Inc. (together with the Company, the “U.S. Borrowers”) and UNFI Canada, Inc. (the “Canadian Borrower” and, together with the U.S. Borrowers, the “Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “ABL Lenders”), Bank of America, N.A. as administrative agent for the ABL Lenders, 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 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 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. 18 Table of Contents Availability under the ABL Credit Facility is subject to a borrowing base (the “Borrowing Base”), which is based on 90 % of eligible accounts receivable, plus 90 % of eligible credit card receivables, plus 90 % 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 ($ 2,100 million at April 30, 2022) or the Borrowing Base. The assets included in the Condensed Consolidated Balance Sheets securing the outstanding obligations under the ABL Credit Facility on a first-priority basis, and the unused credit and fees under the ABL Credit Facility, were as follows: Assets securing the ABL Credit Facility (in millions) (1) : April 30, 2022 July 31, 2021 Certain inventory assets included in Inventories, net and Current assets of discontinued operations $ 2,696 $ 2,297 Certain receivables included in Accounts receivable, net and Current assets of discontinued operations $ 1,134 $ 1,041 (1) The ABL Credit Facility is also secured by all of the Company’s pharmacy prescription files, which are included in Intangibles, net in the Condensed Consolidated Balance Sheets. Refer to Note 5—Goodwill and Intangible Assets, Net for additional information. 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 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 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 $ 861 million as of April 30, 2022. ABL availability (in millions): April 30, 2022 Total availability for ABL Loans and letters of credit $ 2,096 ABL Loans $ 1,101 Letters of credit $ 134 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 Loan Agreement), and were as follows: Interest rates and fees under the ABL Credit Facility: Range of Facility Rates and Fees (per annum) April 30, 2022 U.S. and Canadian Borrowers’ applicable margin for base rate loans — % - 0.50 % 0.25 % U.S. and Canadian Borrowers’ applicable margin for LIBOR and BA loans (1) 1.00 % - 1.50 % 1.25 % Unutilized commitment fees 0.25 % - 0.375 % 0.25 % Letter of credit fees 1.125 % - 1.625 % 1.375 % (1) The U.S. Borrowers utilize LIBOR-based loans and the Canadian Borrower utilizes bankers’ acceptance rate-based loans. 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. 19 Table of Contents Under the Term Loan Agreement, the Company may, at its option, increase the amount of the Term Loan Facility, add one or more additional tranches of term loans or add one or more additional tranches of revolving credit commitments, without the consent of any Term Lenders not participating in such additional borrowings, up to an aggregate amount of $ 656 million plus additional amounts based on satisfaction of certain leverage ratio tests, subject to certain customary conditions and applicable lenders committing to provide the additional funding. There can be no assurance that additional funding would be available. The obligations under the Term Loan Facility are guaranteed by the Guarantors, subject to customary exceptions and limitations. The Term Borrowers’ obligations under the Term Loan Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ ABL Assets, in each case, subject to customary exceptions and limitations, including an exception for owned real property with net book values of less than $ 10 million. As of 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 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 %; 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. 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 reduced its interest costs. 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. 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. 20 Table of Contents 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 Accumulated other comprehensive income (loss) at July 31, 2021 $ — $ 37 $ ( 16 ) $ ( 60 ) $ ( 39 ) Other comprehensive income (loss) before reclassifications 1 — ( 3 ) 36 34 Amortization of amounts included in net periodic benefit income — 2 — — 2 Amortization of cash flow hedges 3 — — 22 25 Net current period Other comprehensive income (loss) 4 2 ( 3 ) 58 61 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: (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 before reclassifications — 6 10 16 Amortization of amounts included in net periodic benefit income ( 1 ) — — ( 1 ) Amortization of cash flow hedges — — 26 26 Net current period Other comprehensive (loss) income ( 1 ) 6 36 41 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) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 Pension and postretirement benefit plan net assets: Amortization of amounts included in net periodic benefit income (1) $ — $ — $ 2 $ ( 1 ) Net periodic benefit income, excluding service cost Income tax expense (benefit) — — — — Provision for income taxes Total reclassifications, net of tax $ — $ — $ 2 $ ( 1 ) Swap agreements: Reclassification of cash flow hedges $ 9 $ 11 $ 30 $ 35 Interest expense, net Income tax benefit ( 2 ) ( 2 ) ( 8 ) ( 9 ) Provision for income taxes Total reclassifications, net of tax $ 7 $ 9 $ 22 $ 26 Other cash flow hedges: Reclassification of cash flow hedge $ 2 $ — $ 4 $ — Cost of sales Income tax benefit — — ( 1 ) — Provision for income taxes Total reclassification, net of tax $ 2 $ — $ 3 $ — 21 Table of Contents (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 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 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 Net periodic benefit income and contributions to defined benefit pension and other post-retirement benefit plans consisted of the following: 13-Week Period Ended Pension Benefits Other Postretirement Benefits (in millions) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 Net Periodic Benefit (Income) Cost Interest cost $ 10 $ 10 $ — $ ( 1 ) Expected return on plan assets ( 20 ) ( 26 ) — — Amortization of net actuarial gain — — — — Net periodic benefit income $ ( 10 ) $ ( 16 ) $ — $ ( 1 ) Contributions to benefit plans $ ( 1 ) $ — $ — $ ( 1 ) 39-Week Period Ended Pension Benefits Other Postretirement Benefits (in millions) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 Net Periodic Benefit (Income) Cost Interest cost $ 29 $ 28 $ — $ — Expected return on plan assets ( 61 ) ( 78 ) — — Amortization of prior service cost (credit) — — 2 ( 1 ) Amortization of net actuarial loss (gain) — 1 — ( 1 ) Net periodic benefit (income) cost $ ( 32 ) $ ( 49 ) $ 2 $ ( 2 ) Contributions to benefit plans $ ( 1 ) $ ( 1 ) $ ( 2 ) $ ( 3 ) Defined Benefit Plan Merger In the second quarter of fiscal 2022, the Company merged the Unified Grocers, Inc. Cash Balance Plan into the SUPERVALU INC. Retirement Plan. The merger did not impact the amount of plan assets and accumulated benefit plan obligations; however, as a result of the merger, former Unified Grocers, Inc. Cash Balance Plan participants will receive all benefits from the SUPERVALU INC. Retirement Plan. As such, the funded status of the remaining plan in the Condensed Consolidated Balance Sheets has been presented within a single asset balance within Other long-term assets. 22 Table of Contents Pension Contributions No minimum pension contributions are required to be made under the SUPERVALU INC. Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in fiscal 2022. 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 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 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. NOTE 13—EARNINGS PER SHARE The following is a reconciliation of the basic and diluted number of shares used in computing earnings per share: 13-Week Period Ended 39-Week Period Ended (in millions, except per share data) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 Basic weighted average shares outstanding 58.4 56.5 57.9 56.0 Net effect of dilutive stock awards based upon the treasury stock method 2.5 4.0 3.1 3.7 Diluted weighted average shares outstanding 60.9 60.5 61.0 59.7 Basic earnings per share: Continuing operations $ 1.15 $ 0.85 $ 3.62 $ 1.84 Discontinued operations $ — $ 0.01 $ — $ 0.06 Basic earnings per share $ 1.15 $ 0.86 $ 3.62 $ 1.90 Diluted earnings per share: Continuing operations $ 1.10 $ 0.79 $ 3.44 $ 1.73 Discontinued operations $ — $ 0.01 $ — $ 0.05 Diluted earnings per share $ 1.10 $ 0.80 $ 3.44 $ 1.78 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 The Company has two reportable segments: Wholesale and Retail. These reportable segments are two distinct businesses, each with a different customer base, marketing strategy and management structure. The Wholesale reportable segment is the aggregation of two operating segments: U.S. Wholesale and Canada Wholesale. The U.S. Wholesale and Canada Wholesale operating segments have similar products and services, customer channels, distribution methods and economic characteristics. Reportable segments are reviewed on an annual basis, or more frequently if events or circumstances indicate a change in reportable segments has occurred. 23 Table of Contents 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) April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021 Net sales: Wholesale (1) $ 6,977 $ 6,367 $ 20,843 $ 19,423 Retail 602 590 1,847 1,829 Other 60 55 166 166 Eliminations ( 397 ) ( 381 ) ( 1,201 ) ( 1,203 ) Total Net sales $ 7,242 $ 6,631 $ 21,655 $ 20,215 Continuing Operations Adjusted EBITDA: Wholesale (2) $ 171 $ 166 $ 522 $ 490 Retail (2) 14 23 68 75 Other 11 — 27 ( 4 ) Eliminations — ( 5 ) ( 1 ) ( 1 ) Adjustments: Net income attributable to noncontrolling interests 1 2 4 5 Net periodic benefit income, excluding service cost 10 17 30 51 Interest expense, net ( 37 ) ( 44 ) ( 121 ) ( 164 ) Other, net 1 1 2 4 Depreciation and amortization ( 72 ) ( 66 ) ( 210 ) ( 210 ) Share-based compensation ( 10 ) ( 11 ) ( 33 ) ( 38 ) LIFO charge (2) ( 72 ) ( 5 ) ( 102 ) ( 19 ) Restructuring, acquisition and integration related expenses ( 8 ) ( 10 ) ( 16 ) ( 44 ) Gain on sale of assets 88 — 87 — Multi-employer pension plan withdrawal benefit — — 8 — Other retail expense — ( 2 ) 1 ( 5 ) Income from continuing operations before income taxes $ 97 $ 66 $ 266 $ 140 Depreciation and amortization: Wholesale $ 64 $ 58 $ 186 $ 185 Retail 7 7 22 21 Other 1 1 2 4 Total depreciation and amortization $ 72 $ 66 $ 210 $ 210 Payments for capital expenditures: Wholesale $ 47 $ 66 $ 145 $ 150 Retail 5 7 13 15 Total capital expenditures $ 52 $ 73 $ 158 $ 165 (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. 24 Table of Contents Total assets of continuing operations by reportable segment were as follows: (in millions) April 30, 2022 July 31, 2021 Assets: Wholesale $ 6,962 $ 6,536 Retail 592 566 Other 368 462 Eliminations ( 44 ) ( 43 ) Total assets of continuing operations $ 7,878 $ 7,521 NOTE 15—COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS Guarantees and Contingent Liabilities The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of April 30, 2022. These guarantees were generally made to support the business growth of wholesale customers. The guarantees are generally for the entire terms of the leases, fixture financing loans or other debt obligations with remaining terms that range from less than one year to eight years , with a weighted average remaining term of approximately five years . For each guarantee issued, if the wholesale customer or other third-party defaults on a payment, the Company would be required to make payments under its guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees. The Company reviews performance risk related to its guarantee obligations based on internal measures of credit performance. As of 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. These agreements primarily relate to the Company’s commercial contracts, service agreements, contracts entered into for the purchase and sale of stock or assets, operating leases and other real estate contracts, financial agreements, agreements to provide services to the Company and agreements to indemnify officers, directors and employees in the performance of their work. While the Company’s aggregate indemnification obligations could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. No amount has been recorded in the Condensed Consolidated Balance Sheets for these contingent obligations as the fair value has been determined to be de minimis. In connection with Supervalu’s sale of New Albertson’s, Inc. (“NAI”) on March 21, 2013, the Company remains contingently liable with respect to certain self-insurance commitments and other guarantees as a result of parental guarantees issued by Supervalu with respect to the obligations of NAI that were incurred while NAI was Supervalu’s subsidiary. Based on the expected settlement of the self-insurance claims that underlie the Company’s commitments, the Company believes that such contingent liabilities will continue to decline. Subsequent to the sale of NAI, NAI collateralized most of these obligations with letters of credit and surety bonds to numerous state governmental authorities. Because NAI remains a primary obligor on these self-insurance and other obligations and has collateralized most of the self-insurance obligations for which the Company remains contingently liable, the Company believes that the likelihood that it will be required to assume a material amount of these obligations is remote. Accordingly, no amount has been recorded in the Condensed Consolidated Balance Sheets for these guarantees, as the fair value has been determined to be de minimis. 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. 25 Table of Contents Agreements with Save-A-Lot and Onex The Agreement and Plan of Merger pursuant to which Supervalu sold the Save-A-Lot business in 2016 (the “SAL Merger Agreement”) contains customary indemnification obligations of each party with respect to breaches of their respective representations, warranties and covenants, and certain other specified matters, on the terms and subject to the limitations set forth in the SAL Merger Agreement. Similarly, Supervalu entered into a Separation Agreement (the “Separation Agreement”) with Moran Foods, LLC d/b/a Save-A-Lot (“Moran Foods”), which contains indemnification obligations and covenants related to the separation of the assets and liabilities of the Save-A-Lot business from the Company. The Company also entered into a Services Agreement with Moran Foods (the “Services Agreement”), pursuant to which the Company is providing Save-A-Lot with various technical, human resources, finance and other operational services for a term of five years , subject to termination provisions that can be exercised by each party. The initial annual base charge under the Services Agreement is $ 30 million, subject to adjustments. 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. While the Company’s aggregate indemnification obligations to Save-A-Lot and Onex, the purchaser of Save-A-Lot, could result in a material liability, the Company is not aware of any matters that are expected to result in a material liability. The Company has recorded the fair value of the guarantee in the Condensed Consolidated Balance Sheets within Other long-term liabilities. Other Contractual Commitments In the ordinary course of business, the Company enters into supply contracts to purchase products for resale, and service contracts for fixed asset and information technology systems. These contracts typically include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations. As of 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 The Company is one of dozens of companies that have been named in various lawsuits alleging that drug manufacturers, retailers and distributors contributed to the national opioid epidemic. Currently, UNFI, primarily through its subsidiary, Advantage Logistics, is named in approximately 43 suits pending in the United States District Court for the Northern District of Ohio where over 1,800 cases have been consolidated as Multi-District Litigation (“MDL”). In accordance with the Stock Purchase Agreement dated January 10, 2013, between New Albertson’s Inc. (“New Albertson’s”) and the Company (the “Stock Purchase Agreement”), New Albertson’s is defending and indemnifying UNFI in a majority of the cases under a reservation of rights as those cases relate to New Albertson’s pharmacies. In one of the MDL cases, MDL No. 2804 filed by The Blackfeet Tribe of the Blackfeet Indian Reservation, all defendants were ordered to Answer the Complaint, which UNFI did on July 26, 2019. To date, no discovery has been conducted against UNFI in any of the actions. UNFI is vigorously defending these matters, which it believes are without merit. On January 21, 2021, various health plans filed a complaint in Minnesota state court against the Company, Albertson’s Companies, LLC (“Albertson’s”) and Safeway, Inc. alleging the defendants committed fraud by improperly reporting inflated prices for prescription drugs for members of health plans. The Plaintiffs assert six causes of action against the defendants: common law fraud, fraudulent nondisclosure, negligent misrepresentation, unjust enrichment, violation of the Minnesota Uniform Deceptive Trade Practices Act and violation of the Minnesota Prevention of Consumer Fraud Act. The plaintiffs allege that between 2006 and 2016, Supervalu overcharged the health plans by not providing the health plans, as part of usual and customary prices, the benefit of discounts given to customers purchasing prescription medication who requested that Supervalu match competitor prices. Plaintiffs seek an unspecified amount of damages. Similar to the above case, for the majority of the relevant period Supervalu and Albertson’s operated as a combined company. In March 2013, Supervalu divested Albertson’s and pursuant to the Stock Purchase Agreement, Albertson’s is responsible for any claims regarding its pharmacies. On February 19, 2021, Albertson’s and Safeway removed the case to Minnesota Federal District Court and on March 22, 2021 plaintiffs’ filed a motion to remand to state court. On February 26, 2021, defendants filed a motion to dismiss. The hearing on the remand motion and motions to dismiss occurred on May 20, 2021. On September 21, 2021, the Federal District Court remanded the case to Minnesota state court and did not rule on the motion to dismiss, which was refiled in state court. On February 1, 2022, the state court denied the motion to dismiss. The Company believes these claims are without merit and intends to vigorously defend this matter. 26 Table of Contents UNFI is currently subject to a qui tam action alleging violations of the False Claims Act (“FCA”). In United States ex rel. Schutte and Yarberry v. Supervalu, New Albertson’s, Inc., et al, which is pending in the U.S. District Court for the Central District of Illinois, the relators allege that defendants overcharged government healthcare programs by not providing the government, as a part of usual and customary prices, the benefit of discounts given to customers purchasing prescription medication who requested that defendants match competitor prices. The complaint was originally filed under seal and amended on November 30, 2015. The government previously investigated the relators’ allegations and declined to intervene. Violations of the FCA are subject to treble damages and penalties of up to a specified dollar amount per false claim. Relators elected to pursue the case on their own and have alleged FCA damages against Supervalu and New Albertson’s in excess of $ 100 million, not including trebling and statutory penalties. For the majority of the relevant period Supervalu and New Albertson’s operated as a combined company. In March 2013, Supervalu divested New Albertson’s (and related assets) pursuant to the Stock Purchase Agreement. Based on the claims that are currently pending and the Stock Purchase Agreement, Supervalu’s share of a potential award (at the currently claimed value by relators) would be approximately $ 24 million, not including trebling and statutory penalties. Both sides moved for summary judgment. On August 5, 2019, the Court granted one of the relators’ summary judgment motions finding that the defendants’ lower matched prices are the usual and customary prices and that Medicare Part D and Medicaid were entitled to those prices. On July 2, 2020 the Court granted the defendants’ summary judgment motion and denied the relators’ motion, dismissing the case. On July 9, 2020 the relators filed a notice of appeal with the 7th Circuit Court of Appeals, and on September 30, 2020 filed an appellate brief. On November 30, 2020, the Company filed its response. The hearing before the 7th Circuit Court of Appeals occurred on January 19, 2021. On August 12, 2021, the 7th Circuit affirmed the District Court’s decision granting summary judgment in defendants’ favor. On September 23, 2021, the Relators filed a petition for rehearing and defendants filed a response on November 9, 2021. On December 3, 2021, the 7th Circuit denied the petition for rehearing. On April 1, 2022, the Relators filed a petition for a writ of certiorari with the United States Supreme Court. The Company’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); pension plans; labor union disputes, including unfair labor practices, such as claims for back-pay in the context of labor contract negotiations and other matters; supplier, customer and service provider contract terms and claims, including matters related to supplier or customer insolvency or general inability to pay obligations as they become due; product liability claims, including those where the supplier may be insolvent and customers or consumers are seeking recovery against the Company; real estate and environmental matters, including claims in connection with its ownership and lease of a substantial amount of real property, both retail and warehouse properties; and antitrust. Other than as described above, there are no pending material legal proceedings to which the Company is a party or to which its property is subject. Predicting the outcomes of claims and litigation and estimating related costs and exposures involves substantial uncertainties that could cause actual outcomes, costs and exposures to vary materially from current expectations. Management regularly monitors the Company’s exposure to the loss contingencies associated with these matters and may from time to time change its predictions with respect to outcomes and estimates with respect to related costs and exposures. As of 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. 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—SUBSEQUENT EVENTS 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. 27 Table of Contents