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Item 1A. Risk Factors

2022-09-27 compared with 2021-09-28 · 142 added, 168 removed, 205 unchanged (60% of the section changed)

Our business, financial condition and results of operations are subject to various risks and uncertainties, including those described below and elsewhere in this Annual Report.

This section discusses factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results.

This section discusses factors that, individually or in the aggregate, we believe could cause our actual results to differ materially from expected and historical results.

If any of the events described below occurs, our business, financial condition or results of operations could be materially adversely affected and our stock price could decline.

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Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties applicable to our business.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements for more information on our business and the forward-looking statements included in this Annual Report.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements in Part II, Item 7 of this Annual Report for more information on our business and the forward-looking statements included in this Annual Report.

Strategic and Operational Risks

Pandemics or disease outbreaks, such as the COVID-19 pandemic and associated responses, may disrupt our business, including among other things, increasing our costs, impacting our supply chain, and driving change in customer and consumer demand for our products, and could have a material adverse impact on our business.

In connection with the outbreak of and measures implemented in an attempt to contain the COVID-19 pandemic (such as mandatory and voluntary closures and restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions), we experienced elevated demand for the products we distribute as consumption of food at home increased.

This trend has persisted with a resurgence of infection rates and new variants with higher transmissibility, and with some consumers opting to stay home due to the perceived risk associated with COVID-19.

While our independent customers have performed well through the COVID-19 pandemic, there is no assurance that increased volume at these customers will be sustained over the long-term.

The increased wholesale customer and end-consumer demand may decrease relative to current levels if and when the need for social distancing, quarantine or isolation measures decreases and consumers fully return to school and work.

We are unable to predict when and to what extent that may occur.

Although our business has benefited through increased demand, the impact of and associated responses to the COVID-19 pandemic has had and could continue to have an adverse effect on other aspects of our business and operations.

For example, we have incurred, and expect to continue to incur, increased costs, including:

labor costs resulting from overtime, paid sick leave, or leaves of absence;

costs associated with safety measures throughout our facilities, including symptom scanning, testing, enhanced sanitation, social distancing practices, such as partitions, decals, pre-shift temperature screenings, and the provision of personal protective equipment to our associates;

costs associated with evaluating and piloting additional safety measures;

and other increased operating costs.

In addition, we provided our associates with temporary state of emergency wage

increases and increased overtime to warehouse, driver, and in-store associates during the peak of the pandemic, and may decide to, or be required to, reinstitute that benefit in the future.

Our business could be negatively impacted by reduced workforces due to illness or other restrictions related to COVID-19;

a shortage of qualified labor to support increased demand;

any failure of third parties on which we rely, including our suppliers, contract manufacturers, third-party labor contractors and external business partners to meet their obligations to us, or significant disruptions in their ability to do so;

or diversion of management’s attention, including if key employees become ill.

We continue to experience higher than usual levels of out-of-stocks leading to reduced fill rates, which may result in higher costs, fees, or penalties to service our customers.

We have experienced temporary suspensions of operations at one facility due to an elevated number of COVID cases, and we may experience future facility closures due to outbreaks of COVID-19, reduced workforce availability or government mandates.

We could also experience disruptions to our supply chain through the shutdown of one or more of our distribution centers or warehouses, the inability to transport products to serve our customers or the inability of our vendors and contract manufacturers to supply products to us.

Our inventory and sales levels have stabilized to higher than pre-COVID-19 levels.

If there were a rapid reduction in demand for the products we distribute, our results and cash flows may be negatively impacted if we are unable to monetize working capital maintained to support these higher levels.

We experienced declines in certain of our sales channels as a result of changes in consumer purchasing habits related to COVID-19, including reductions in food service, bulk snacks, seeds and nuts, and international categories and we cannot be certain how consumer habits may continue to evolve.

Further, the pandemic has accelerated the consumer shift to eCommerce and new ways to purchase food, including increased restaurant and other delivery options, which may negatively impact demand at our retail grocery customers, and which trends may continue beyond the cessation of social distancing practices as the impact of the pandemic lessens.

Any of the foregoing factors, or other effects of the COVID-19 pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our sales and damage our financial condition, results of operations, cash flows and liquidity position, possibly to a significant degree.

Our efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts to a certain extent depends on factors beyond our control.

The ultimate impact of the COVID-19 pandemic on our business will depend on many factors, including, among others, the severity and duration of the pandemic and actions taken by governmental authorities and other third parties in response, the duration of social distancing, quarantine or isolation measures and whether additional waves of COVID-19 infections (as a result of mutations in COVID-19 virus or otherwise) will affect the United States and Canada, our ability and the ability of our suppliers to continue to operate manufacturing facilities and maintain the supply chain without material disruption, and the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating and purchasing habits.

Each of these factors involves uncertainty, and therefore, we cannot predict the duration and scope of any potential disruption or reasonably estimate the ultimate financial impact at this time.

We depend heavily on our principal customers and our success is heavily dependent on our principal customers’ ability to maintain and grow their businesses.

Whole Foods Market, a subsidiary of Amazon.com, Inc., accounted for approximately 19% of our net sales in fiscal 2021.

The loss or cancellation of business from our larger customers, including due to increased self-distribution, closures of stores, reductions in the amount of products that our customers sell to their customers, or our failure to comply with the terms of our distribution agreements, where applicable, could materially and adversely affect our business, financial condition, or results of operations.

For example, Whole Foods Market, a subsidiary of Amazon.com, Inc., accounted for approximately 20% of our Net sales in fiscal 2022.

We serve as the primary distributor of natural, organic, and specialty non-perishable products, and also distribute certain specialty protein, cheese, deli items, and products from health, beauty, and supplement categories to Whole Foods Market in all of its regions in the United States under the terms of our distribution agreement, which expires on September 27, 2027.

Our ability to maintain a close, mutually beneficial relationship with Whole Foods Market is an important element to our continued growth.

The loss or cancellation of business from our larger customers, including due to increased self-distribution, closures of stores, reductions in the amount of products that our customers sell to their customers, or our failure to comply with the terms of our distribution agreement, where applicable, could materially and adversely affect our business, financial condition, or results of operations.

Similarly, if Whole Foods Market diverts purchases from us beyond minimum amounts it is required to purchase under our distribution agreement, our business, financial condition, or results of operations may be materially and adversely affected.

Our ability to maintain a close, mutually beneficial relationship with our principal customers is an important element to our continued growth.

Similarly, if our largest customer diverts purchases from us beyond minimum amounts it is required to purchase under our distribution agreement, our business, financial condition or results of operations may be materially and adversely affected.

Our business is characterized by low margins, which are sensitive to inflationary and deflationary pressures, and intense competition and consolidation in the grocery industry, and our inability to maintain or increase our operating margins could adversely affect our results of operations.

The grocery industry is characterized by a relatively high volume of sales with relatively low profit margins, and as competition in certain areas intensifies and the industry continues to consolidate, our results of operations may be negatively impacted through a loss of sales and reductions in gross margins.

The grocery business is intensely competitive, and the ongoing consolidation and evolving competitive landscape within the grocery industry is expected to result in increased competition, including from some competitors that have greater financial and other resources than we do.

Consumers also have more choices for grocery purchases, including independent retailers that we do not supply and eCommerce solutions, which reduces the demand for products supplied by our wholesale customers.

The grocery business is intensely competitive and the evolving competitive landscape is dynamic and continues to evolve, including from some competitors that have greater financial and other resources than we do.

Consumers also have more choices for grocery and consumable purchases, including retailers we do not supply and eCommerce solutions, which may reduce the demand for products supplied by our wholesale customers.

The pandemic accelerated the consumer shift to eCommerce and new ways to purchase food, including increased restaurant and other delivery options.

We cannot provide assurance that we will be able to compete effectively against current and future competitors.

Our ability to compete successfully will be largely dependent on our ability to provide quality products and services at competitive prices.

Our competition comes from a variety of sources, including other distributors of natural and conventional products, as well as specialty or independent grocery and mass market grocery distributors and cooperatives, as well as customers that have their own distribution channels.

Mass market grocery distributors in recent years have increased their emphasis on natural and organic products and are now competing more directly with our natural and organic product offerings, and they may have substantially greater financial and other resources than we have and may be better established in their markets.

Natural and organic product offerings typically generate higher margins, but these margins could be affected by changes in the public’s perception of the benefits of natural and organic products compared to similar conventional products.

In addition, many supermarket chains have increased self-distribution or purchases directly from suppliers of certain items that we sell.

New competitors are also entering our markets as barriers to entry are relatively low.

For example, more natural and organic products are being sold in convenience stores and other mass market retailers and online through eCommerce than was the case a few years ago, and many of these customers are being serviced by other conventional distributors or are self-distributing.

We also face indirect competition as a result of the fact that our customers with physical locations face competition from online retailers and distributors that seek to sell certain of the type of products we sell to our customers directly to consumers.

We cannot assure you that our current or potential competitors will not provide products or services comparable or superior to those provided by us or adapt more quickly than we do to evolving industry trends or changing market requirements.

Our competition comes from a variety of sources, including other distributors, as well as specialty or independent grocery and mass market grocery distributors and cooperatives, and customers with their own distribution channels.

Mass market grocery distributors, many with substantially greater financial and other resources than us and that may be better established in their markets, continue to increase their offerings of natural and organic products, are competing more directly with our natural and organic product offerings.

While natural and organic products typically generate higher margins, these margins could be affected by changes in the public’s perception of the benefits of natural and organic products compared to similar conventional products.

In addition, many supermarket chains have increased self-distribution or purchases of items directly from suppliers.

Relatively low barriers to entry have resulted in new entrants in our markets.

We also encounter indirect competition as a result of the fact that our customers with physical locations compete with online retailers and distributors that seek to sell certain products directly to consumers.

We cannot assure you that our current or potential future competitors will not provide products or services comparable or superior to those provided by us or adapt more quickly than we do to evolving industry trends or changing market requirements.

It is also possible that alliances among competitors may develop and that competitors may rapidly acquire significant market share.

Increased competition may result in price reductions, reduced gross margins, lost business and loss of market share, any of which could materially and adversely affect our business, financial condition or results of operations.

The continuing consolidation of retailers, the growth of chains, and increased closures of grocery locations may reduce our profit margins in the future as more customers qualify for greater volume discounts, and as we experience pricing pressures from suppliers and retailers.

Sales to chain customers generate a lower gross margin than do sales to our independents channel customers.

Many of these customers, including our largest customer, have agreements with us that include volume discounts, which puts downward pressure on our gross margins as sales to these customers increase.

To compensate for these lower gross margins, we must increase the dollar value of products we sell or reduce the expenses we incur to service these customers.

If we are unable to reduce our expenses as a percentage of net sales, including our expenses related to servicing this lower gross margin business, our business, financial condition, or results of operations could be materially and adversely impacted.

The continuing consolidation of retailers, the growth of chains and closures of grocery locations may reduce our gross margins in the future should more customers qualify for greater volume discounts, and should we experience pricing pressure from suppliers and retailers.

Sales to some of our largest customers generate a lower gross margin than do sales to our smaller customers due to agreements that include volume discounts with many of these customers, including our largest customer.

Increased sales to these customers results in downward pressure on our gross margins, which may or may not be offset by increases in sales or a reduction in expenses incurred to service these customers.

If we are not able to continue to capture scale efficiencies and enhance our merchandise offerings, we may not be able to achieve our goals with respect to operating margins.

In addition, if we do not refine and improve our systems continually or if we are unable to effectively improve our systems without disruption, including any information technology migration to a cloud environment, we may not be able to reduce costs, increase sales and services, effectively manage inventory and procurement processes, or effectively manage customer pricing plans.

In addition, if we are not able to refine and improve our systems continually or effectively implement improvements to our systems without disruption, including any information technology migration to a cloud environment, we may not be able to reduce costs, increase sales and services, effectively manage inventory and procurement processes, or effectively manage customer pricing plans.

As a result, our operating margins may stagnate or decline.

Further, because many of our sales are at prices that are based on our product cost plus a percentage markup, volatile food costs have a direct impact upon our profitability.

Prolonged periods of product cost inflation and periods of rapidly increasing inflation may have a negative impact on our profit margins and results of operations to the extent that we are unable to pass on all or a portion of such product cost increases to our customers.

We have experienced elevated levels of inflation during the past year, which has had varying impacts on our business.

In addition, product cost inflation may negatively impact the consumer discretionary spending trends and reduce the demand for higher-margin natural and organic products, which could adversely affect profitability.

Conversely, because many of our sales are at prices that are based upon product cost plus a percentage markup, our profit levels may be negatively impacted during periods of product cost deflation even though our gross profit as a percentage of net sales may remain relatively constant.

To compensate for lower gross margins, we, in turn, must reduce expenses that we incur to service our customers.

If we are unable to reduce our expenses as a percentage of net sales, our business, financial condition, or results of operations could be materially and adversely impacted.

Failure by us to develop and operate a reliable technology platform and the costs of maintaining secure and effective information technology systems could negatively impact our business, and we may not realize the anticipated benefits of our recent investments in information technology.

Conversely, our profit levels may be negatively impacted during periods of product cost deflation even though our Gross profit as a percentage of Net sales may remain relatively constant.

If we are unable to reduce our expenses as a percentage of Net sales, including our expenses related to servicing this lower gross margin business, our business, financial condition, or results of operations could be materially and adversely impacted.

The COVID-19 pandemic and responses thereto continue to impact our business and cause uncertainty, including as infection rates and new variants continue to evolve.

While we experienced elevated demand for the products we distribute as consumption of food at home increased and our independent customers have performed well throughout the pandemic, there is no assurance that increased volume, including from these customers, will be sustained over the long-term.

The increased wholesale customer and end-consumer demand may decrease relative to current levels if consumers return to pre-pandemic consumption habits.

We are unable to predict when and to what extent that may occur.

The impact of and associated responses to the COVID-19 pandemic also has had and could continue to have an adverse effect on other aspects of our business and operations.

For example, we have incurred, and expect to continue to incur, increased costs, including:

increased labor costs, such as overtime, paid leave, and temporary state of emergency wage increases;

increased costs associated with safety measures throughout our facilities;

and other increased operating costs.

Our business has in the past been, and could in the future be, negatively impacted by reduced workforces due to illness or restrictions related to communicable disease;

a shortage of qualified labor to support increased demand;

or diversion of management’s attention, including if key employees become ill.

We have experienced higher than usual levels of out-of-stocks leading to reduced fill rates, the continuation of which may result in higher costs, fees, or penalties to service our customers.

We experienced temporary suspensions of operations at one facility due to an elevated number of COVID cases, and we may experience future facility closures due to outbreaks of COVID-19 or other illnesses, reduced workforce availability or government mandates.

Any of the foregoing factors, or other effects of the pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our sales and damage our financial condition, results of operations, cash flows and liquidity position.

Our efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts to a certain extent depends on factors beyond our control.

Our ability to decrease costs and increase profits, as well as our ability to serve customers most effectively, depends on the reliability of our technology platform.

We use software and other technology systems, among other things, to receive, generate and select orders, to load and route trucks and to monitor and manage our business on a day-to-day basis.

Failure to have adequate computer systems across the enterprise and any disruption to these computer systems could adversely impact our customer service, decrease the volume of our business, and result in increased costs negatively affecting our business, financial condition, or results of operations.

In our attempt to reduce operating expenses and increase operating efficiencies, we have invested in the development and implementation of new information technology.

We are in the process of rolling out a national warehouse management and procurement system to convert our existing facilities into a single warehouse management and supply chain platform.

In addition, we plan to remain focused on the automation of our new or expanded distribution centers that are at different stages of construction.

We may not be able to implement these technological changes in the time frame that we have planned and delays in implementation (including delays resulting from the integration of Supervalu) could negatively impact our business, financial condition or results of operations.

In addition, the costs to make these changes may exceed our estimates and will exceed the benefits during the early stages of implementation.

Even if we are able to implement the changes in accordance with our current plans, and within our current cost estimates, we may not be able to achieve the expected efficiencies and cost savings from this investment, which could have a material adverse effect on our business, financial condition, or results of operations.

We use software and other technology systems, among other things, to send, receive, generate and select orders, load and route trucks and monitor and manage our business on a day-to-day basis.

Failure to have adequate technology systems across the enterprise and any disruption to these systems could adversely impact our customer service, decrease the volume of our business, and result in increased costs negatively affecting our business, financial condition or results of operations.

In our attempt to reduce Operating expenses, increase operating efficiencies and better serve our customers and suppliers, we have invested in the development and implementation of new information technology.

We are in the process of converting our existing facilities into a single warehouse management and supply chain platform.

In addition, we remain focused on the automation of certain distribution centers and plan to develop further digital solutions for our customers, suppliers and associates.

We may not be able to implement these technological enhancements at all or in the anticipated time frame and delays in implementation could negatively impact our business, financial condition or results of operations.

In addition, the costs may exceed our estimates and are expected to exceed the benefits during the early stages of implementation.

Even if implementation progresses in accordance with our current plans, and within our current cost estimates, we may not achieve the expected efficiencies and cost savings from our investments.

Moreover, as we implement information technology enhancements, disruptions in our business may be created (including disruption with our customers), which may have a material adverse effect on our business, financial condition or results of operations.

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We have experienced, and may continue to experience, a shortage of qualified labor.

Recruiting and retention efforts, and actions to increase productivity, may not be successful, and we could encounter a shortage of qualified labor in the future.

Recruiting and retention efforts, and actions to increase productivity, may not be successful.

Such a shortage could potentially increase labor costs, reduce profitability or decrease our ability to effectively serve customers.

We are undertaking efforts to automate certain functions of our business.

If we are unable to realize the anticipated benefits of our efforts to improve labor efficiency through automation or to increase productivity and efficiency through other methods, including as a result of delays in executing our business transformation and integration efforts, we may be more susceptible to labor shortages than our competitors.

We have incurred increased costs to address a shortage of qualified labor in certain geographies, particularly with warehouse workers and drivers, including wage actions, sign-on bonus programs, and increased us of third-party labor.

We are subject to a wide range of labor costs.

If we are unable to realize the anticipated benefits of our efforts to improve labor efficiency, including through automation and other technology initiatives, or to increase productivity and efficiency through other methods, including as a result of delays in executing our business transformation and integration efforts, we may be more susceptible to labor shortages than our competitors.

We have incurred increased costs to address a shortage of qualified labor in certain geographies, particularly for warehouse workers and drivers, including wage actions, sign-on bonus programs, and increased use of third-party labor.

Because our labor costs are, as a percentage of Net sales, higher than in many other industries, we may be significantly harmed by labor cost increases.

In addition, labor is a significant cost of many of our wholesale customers.

Any increase in their labor costs, including any increases in costs as a result of increases in minimum wage requirements, could reduce the profitability of our customers and reduce demand for the products we supply.

Additionally, the terms of some legacy Supervalu collective bargaining agreements may limit our ability to increase efficiencies.

As of July 31, 2021, approximately 11,000 of our 28,300 employees (approximately 39%) were covered by 48 collective bargaining agreements, including agreements under negotiation, which expire through April 2027.

In the event we are unable to negotiate reasonable contract renewals with our union associates or are required to make significant changes to terms that are unfavorable to us, our relationship with employees may become fractured, and we could be subject to work stoppages or additional expenses, which could have a material adverse impact on our business, financial condition, or results of operations.

Any increase in their labor costs, including any increases in costs as a result of increases in minimum wage requirements or wage competition, could reduce the profitability of our customers and reduce demand for the products we supply.

Additionally, the terms of some of our collective bargaining agreements may limit our ability to increase efficiencies.

As of July 30, 2022, approximately 10,900 of our 30,300 employees (approximately 36%) were covered by 48 collective bargaining agreements, including agreements under negotiation, which expire through May 7, 2027.

In that event, it would be necessary for us to hire replacement workers or implement other business continuity contingency plans to continue to meet our obligations to our customers.

The costs to hire replacement workers, employ effective security measures, and, if necessary, serve customers from alternative facilities, could negatively impact the profitability of any affected facility.

Depending on the length of time that we are required to employ replacement workers and security measures these costs could be significant and could have a material adverse effect on our business, financial condition, or results of operations.

Depending on the length of time of any work stoppage or that we are required to employ replacement workers and security measures these costs could be significant and could have a material adverse effect on our business, financial condition or results of operations.

We have in the past been the focus of union-organizing efforts, and we believe it is likely that we will be the focus of similar efforts in the future, and as we increase our employee base and broaden our distribution operations to new geographic markets, our increased visibility could result in increased or expanded union-organizing efforts.

New contracts with existing unions could have substantially less favorable terms than prior to such expanded union-organizing efforts.

We are transforming our business and have engaged, and may continue to engage in, acquisitions and other strategic initiatives, and may encounter difficulties integrating acquired businesses and may not realize the anticipated benefits of our acquisitions, including, in particular, our acquisition of Supervalu.

New contracts with existing unions could have substantially less favorable terms than those negotiated prior to such expanded union-organizing efforts.

We have engaged in, and could continue to pursue, strategic transactions and initiatives as we transform our business.

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Achieving the anticipated benefits of acquisitions also depends on the adequacy of our implementation plans and the ability of management to oversee and operate effectively the combined operations.

To realize the anticipated benefits of the Supervalu acquisition, our business must be successfully combined with Supervalu.

We could fail to realize the anticipated benefits for a variety of reasons, including failure to leverage the increased scale of the combined company effectively, difficulties integrating information technology systems, failure to effectively coordinate sales, procurement, and marketing efforts to communicate the capabilities of the combined company, and failure to execute an efficient integrated distribution network incorporating our spectrum of product offerings.

The integration businesses that we acquire might also cause us to incur unforeseen costs, which would lower our future earnings and would prevent us from realizing the expected benefits of these acquisitions.

Any of the businesses we acquired may also have liabilities or adverse operating issues, including some that were not discovered before the acquisition, and our indemnity for such liabilities may also be limited or nonexistent.

The integration of businesses that we acquire might also cause us to incur unforeseen costs, which would lower our future earnings and would prevent us from realizing the expected benefits of these acquisitions.

Any of the businesses we acquired may also have liabilities or adverse operating issues, including some that were not known by us before the acquisition, and our indemnity for such liabilities may be limited or nonexistent.

Additionally, our ability to pursue any future acquisitions may depend upon obtaining additional financing, which may not be available on acceptable terms or at all.

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The growth in the size of our business and operations has placed, and is expected to continue to place, a significant strain on our management.

Our future growth may be limited by strong growth by certain of our largest customers or our inability to optimize our network of distribution centers to serve our customers, retain existing customers, successfully integrate acquired entities or significant new customers, implement information systems initiatives, or adequately manage our personnel.

We have substantially expanded our distribution center network through the acquisition of Supervalu.

If we fail to optimize the volume of supply operations in our distribution center network or do not retain existing business, excess capacity may be created.

Any excess capacity may create inefficiencies and adversely affect our business, financial condition, or results of operations, including as a result of incurring operating costs for these facilities without sufficient corresponding sales revenue to cover these costs.

We cannot assure you that we will be able to successfully optimize our distribution center network or open new distribution centers in new or existing markets if needed to accommodate or facilitate growth or that certain of our distribution centers will not have, or continue to have, operational challenges.

If we fail to optimize the volume of supply operations in our distribution center network, do not retain existing business or do not utilize added network capacity in line with our expectations, excess capacity may exist, which may lead to inefficiencies and adversely affect our business, financial condition or results of operations, including as a result of incurring operating costs for these facilities without sufficient corresponding sales revenue to cover these costs.

We cannot assure you that we will be able to successfully optimize our distribution center network or open additional distribution centers in new or existing markets if needed to accommodate or facilitate growth or that certain of our distribution centers will not have, or continue to have, operational challenges.

Our ability to compete effectively, maintain service levels and manage future growth, if any, will depend on our ability to maximize operational efficiencies across our distribution center network, to implement and improve on a timely basis operational, financial and management information systems, including our warehouse management systems, and to expand, train, motivate and manage our work force.

We cannot assure you that our existing personnel, systems, procedures and controls will be adequate to support the future growth of our operations.

In addition, we have recently appointed several new executive leaders, and these transitions may be disruptive.

Our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.

Further, a key element of our current growth strategy is to increase the amount of fresh, perishable products that we distribute.

We believe that the ability to distribute these products that are typically found in the perimeter of our customers’ stores, in addition to the products we have historically distributed, will differentiate us from our competitors and increase demand for our products.

We accelerated this fresh strategy with acquisitions.

If we are unable to grow this portion of our business and manage that growth effectively, our business, financial condition, or results of operations may be materially and adversely affected, or we may not be able to fully realize the benefits of those acquisition.

We believe that the ability to distribute these products will differentiate us from our competitors and increase demand for our products.

If we are unable to grow this portion of our business, including through acquisitions, and manage that growth effectively, our business, financial condition or results of operations may be materially and adversely affected, or we may not be able to fully realize the benefits of those acquisitions.

Our wholesale distribution business could be adversely affected if we are not able to attract new customers, increase sales to or retain existing customers, or if our customers are unable to grow their businesses.

The profitability of our wholesale segment is dependent upon sufficient volume to support our operating infrastructure, which is dependent on our ability to attract new customers and increase sales to and retain existing customers.

The profitability of our wholesale segment is dependent upon sufficient volume to support our operating infrastructure.

The inability to attract new customers or the loss of existing customers from a decision to use alternative sources of distribution, whether through a competing wholesaler or by converting to self-distribution, or due to retail closure or industry consolidation may negatively impact our sales and operating margins.

If there were a rapid reduction in demand for the products we distribute, our results and cash flows may be negatively impacted if we are unable to reduce working capital maintained to support current sales levels.

Our success also depends in part on the financial success and cooperation of our wholesale customers.

These wholesale customers manage their businesses independently and, therefore, are responsible for the day-to-day operation of their stores.

They may not experience an acceptable level of sales or profitability, and our revenues and gross margins could be negatively affected as a result.

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Changes in relationships with our suppliers may adversely affect our profitability, and conditions beyond our control can interrupt our supplies and alter our product costs.

We cooperatively engage in a variety of promotional programs with our suppliers.

We manage these programs to maintain or improve our margins and increase sales.

Recently, we have experienced a reduction in promotional spending and payment of slotting fees for new products by our suppliers as a result of the COVID-19 pandemic, and we may experience further reductions or changes in promotional spending (including as a result of increased demand for natural and organic products) which could have a significant impact on our profitability.

We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices.

We have no assurances of continued supply, pricing, or access to new products and any supplier could at any time change the terms upon which it sells to us or discontinue selling to us.

As a wholesaler, we are dependent upon the consistent supply of products from manufacturers.

We maintain supply contracts to fulfill product sales obligations to our customers.

Manufacturer’s disruptions in their ability to produce, maintain and supply product based on changing levels of demand, could result in an inability to fulfill our obligations to our customers.

The majority of our suppliers are based in the United States and Canada, but we also source products from suppliers throughout the world.

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For example, we have experienced, and continue to experience, higher than usual levels of out-of-stocks leading to reduced fill rates during the COVID-19 pandemic.

These shortages have caused us to incur higher Operating expenses due to the cost of moving products between our distribution facilities in order to attempt to maintain expected service levels.

We cannot be sure when this trend will end or whether it will recur in the future.

These shortages have caused us to incur higher Operating expenses due to the cost of moving products between our distribution facilities to maintain expected service levels.

We cannot anticipate when this trend will end or whether it will recur in the future.

We are also subject to delays caused by interruption in production and increases in product costs based on conditions outside of our control.

These conditions include work slowdowns, work interruptions, strikes, or other job actions by employees of suppliers, short-term weather conditions or more prolonged climate change, crop conditions, product recalls, water shortages, transportation interruptions, unavailability of fuel or increases in fuel costs, competitive demands, raw material shortages, and natural disasters or other catastrophic events (including, but not limited to food-borne illnesses).

As the consumer demand for natural and organic products has increased, certain retailers and other producers have entered the market and attempted to buy certain raw materials directly, limiting their availability to be used in certain supplier products.

In addition, increased tariffs on imported goods, and any retaliatory actions by affected countries, may result in an increase in our costs for goods imported into the United States, and may reduce customer demand for affected products if the parties having to pay those tariffs increase their prices.

Further, increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt our supply chain, or impact demand for our products.

For example, in the past, weather patterns have at times resulted in lower than normal levels of precipitation in key agricultural states, such as California, impacting the price of water and corresponding prices of food products grown in states facing drought conditions.

In addition, wildfires in the West have impacted certain of our suppliers in the past.

The impact of sustained extreme weather conditions is uncertain and could result in volatile input costs.

Input costs could increase at any point in time for a large portion of the products that we sell for a prolonged period.

Conversely, in years where rainfall levels are abundant, product costs, particularly in our perishable and produce businesses, may decline and the results of this product cost deflation could negatively impact our results of operations.

Our inability to obtain adequate products as a result of any of the foregoing factors or otherwise could prevent us from fulfilling our obligations to customers, and customers may turn to other distributors.

These conditions include work slowdowns, work interruptions, strikes, or other job actions by employees of suppliers, short-term weather conditions or more prolonged climate change, crop conditions, product recalls, water shortages, transportation interruptions, unavailability of fuel or increases in fuel costs, competitive demands, raw material shortages, geopolitical disruptions and natural disasters or other catastrophic events (including, but not limited to food-borne illnesses).

As the consumer demand for natural and organic products has increased, certain retailers and other producers have entered the market and attempted to buy certain raw materials directly, limiting availability for use in certain or our suppliers’ products.

In addition, increased costs of imported goods, including due to tariffs, global conflict or otherwise, may reduce customer demand for affected products if the parties experiencing those increased costs increase their prices.

We cooperatively engage in a variety of promotional programs with our suppliers.

We manage these programs to maintain or improve our margins and increase sales.

We experienced a reduction in promotional spending and payment of slotting fees for new products by our suppliers as a result of the COVID-19 pandemic, and we may experience further reductions or changes in promotional spending (including as a result of increased demand for natural and organic products), which could have a significant impact on our profitability.

We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices, and we benefit from our ability to purchase product in advance of price increases.

We have no assurances of continued supply, pricing or access to new products and suppliers could change the terms upon which it sells to us or discontinue selling to us.

Further, increased frequency or duration of extreme weather conditions, or other factors which may be the result of climate change, also could impair production capabilities, disrupt our supply chain, or impact demand for our products.

For example, in the past, weather patterns or events, such as lower than average levels of precipitation in key agricultural states or wildfires in the West, have affected prices of food products of certain of our suppliers.

Input costs could increase at any time for a large portion of the products that we sell for a prolonged period.

Conversely, weather patterns could lead to a decline in our product costs (for example, if rainfall levels are abundant), particularly in our perishable and produce businesses, and this product cost deflation could negatively impact our results of operations.

Our inability to obtain adequate products as a result of any of the foregoing factors or otherwise could prevent us from fulfilling our obligations to customers, and these customers may turn to other distributors.

In that case, our business, financial condition or results of operations could be materially and adversely affected.

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We also share information with vendors.

Information systems are vulnerable to not functioning as designed and to disruptions and security breaches by computer hackers and cyber terrorists, which risks may be more pronounced as associates continue to work from home.

Information technology systems are vulnerable to not functioning as designed and to disruptions and security breaches by computer hackers and cyber terrorists, which risks may be more pronounced as associates continue to work from home.

Although we continue to take actions to strengthen the security of our information technology systems, these measures and technology may not adequately anticipate or prevent security breaches in the future or we may not be able to timely implement these measures and technology.

Cyber-attacks are rapidly evolving and becoming increasingly frequent, sophisticated and difficult to detect.

The failure to promptly detect, determine the extent of, appropriately respond to, and contain a significant data security attack or breach of our systems or any third-party systems used by us could have a material adverse impact on our business, financial condition, or results of operations.

We could also lose credibility with our customers and suffer damage to our reputation and future sales, including through negative publicity and social media.

In addition, the unavailability of the information systems or failure of these systems or software to perform as anticipated for any reason, including a ransomware attack, and any inability to respond to, or recover from, such an event, could disrupt our business, impact our customers and could result in decreased performance, increased overhead costs and increased risk for liability, causing our business and results of operations to suffer.

The failure to promptly detect, determine the extent of, appropriately respond to, and contain a significant data security attack or breach of our systems or any third-party system used by us could have a material adverse impact on our business, financial condition or results of operations.

Any such failure also could result in the loss of credibility with our customers and damage to our reputation and future sales, including through negative publicity.

In addition, the unavailability of information technology systems or failure of these systems or software to perform as anticipated for any reason, including a ransomware attack, and any inability to respond to, or recover from, such an event, could disrupt our business, impact our customers and result in decreased performance, increased overhead costs and increased risk for liability, causing our business and results of operations to suffer.

As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), issued by the PCI Council.

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The cost of complying with stricter privacy and information security laws, standards and guidelines, including evolving PCI DSS standards, and developing, maintaining, and upgrading technology systems to address future advances in technology, could be significant and we could experience problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems.

Failure to comply with such laws, standards, and guidelines, or payment card industry standards such as accepting Europay, MasterCard and Visa (EMV) transactions, could have a material adverse impact on our business, financial condition, or results of operations.

Failure to comply with such laws, standards, and guidelines, or payment card industry standards such as those involving MasterCard, Visa and Europay (EMV) transactions, could have a material adverse impact on our business, financial condition, or results of operations.

Increases in healthcare, pension, and other costs under the Company’s and multiemployer benefit plans could adversely affect our financial condition and results of operations.

We provide single employer and multiemployer health, defined benefit pension, defined contribution benefits to many of our employees and, in some cases, former employees.

We provide single employer and multiemployer health, defined benefit pension and defined contribution benefits to many of our employees and, in some cases, former employees.

The costs of such benefits continue to increase, and the extent of any increase depends on a number of different factors, many of which are beyond our control.

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healthcare system and imposes mandatory types of coverage, reporting and other requirements;

return on assets held in plans;

return on plan assets;

changes in actuarial valuations, estimates, or assumptions used to determine our benefit obligations for certain benefit plans, which require the use of significant estimates, including the discount rate, expected long-term rate of return on plan assets, mortality rates and the rates of increase in compensation and healthcare costs;

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If we are unable to control these benefits and costs, we may experience increased Operating costs, which may adversely affect our financial condition and results of operations.

Additionally, certain multiemployer pension plans, and to a lesser extent, certain Company-sponsored plans, in which we participate are underfunded with the projected benefit obligations exceeding the fair value of those plans’ assets, in certain cases (for example, Central States Pension Plan), by a wide margin.

Withdrawal liabilities from multiemployer plans could be material, our efforts to mitigate these liabilities may not be successful, and potential exposure to withdrawal liabilities could cause us to forgo or negatively impact our ability to enter into other business opportunities.

Additionally, certain multiemployer pension plans in which we participate are underfunded with the projected benefit obligations exceeding the fair value of those plans’ assets, in certain cases (for example, Central States Pension Plan), by a wide margin.

If a withdrawal were to occur, the withdrawal liability from our multiemployer plans could be material, our efforts to mitigate these liabilities may not be successful, and potential exposure to withdrawal liabilities could cause us to forgo or negatively impact our ability to enter into other business opportunities.

Some of these plans have required rehabilitation plans or funding improvement plans, and we can give no assurances of the extent to which a rehabilitation plan or a funding improvement plan will improve the funded status of the plan.

We expect that increases of unfunded liabilities of these plans would result in increased future payments by us and the other participating employers over the next several years.

It is possible that increases of unfunded liabilities of these plans would result in increased future payments by us and the other participating employers over the next several years.

Any changes to our pension plans that would impact associates covered by collective bargaining agreements will be subject to negotiation, which may limit our ability to manage our exposure to these plans.

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If actual losses incurred are greater than those anticipated, our reserves may be insufficient and additional costs could be recorded in our consolidated financial statements.

If we suffer a

substantial loss that exceeds our self-insurance reserves and any excess insurance coverage, the loss and attendant expenses could harm our business, financial condition, or results of operations.

If we suffer a substantial loss that exceeds our self-insurance reserves and any excess insurance coverage, the loss and attendant expenses could harm our business, financial condition, or results of operations.

Our debt agreements contain restrictive covenants that may limit our operating flexibility.

Our debt agreements, including the loan agreement (the “ABL Loan Agreement”) related to our $2,100 million asset-based revolving credit facility (the “ABL Credit Facility”) entered into on August 30, 2018, as amended, and the term loan agreement (the “Term Loan Agreement”) related to our $1,950.0 million term loan facility (the “Term Loan Facility”) entered into in October 2018, as amended, and the indenture governing our unsecured 6.75% Senior Notes due October 15, 2028 (the “Senior Notes”) contain financial covenants and other restrictions that limit our operating flexibility and our flexibility in planning for or reacting to changes in our business.

Our debt agreements, including the loan agreement (the “ABL Loan Agreement”) related to our $2,600 million asset-based revolving credit facility (the “ABL Credit Facility”) entered into in June 2022, and the term loan agreement (the “Term Loan Agreement”) related to our $1,950 million term loan facility (the “Term Loan Facility”) entered into on October 22, 2018, as amended, and the indenture governing our unsecured 6.75% Senior Notes due October 15, 2028 (the “Senior Notes”) contain financial covenants and other restrictions that limit our operating flexibility and our flexibility in planning for or reacting to changes in our business.

These restrictions may prevent us from taking actions that we believe would be in the best interest of our business if we were not subject to these limitations and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted.

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As a result, increases in the cost of capital available to us, which could result from volatility in the credit markets, downgrades of our credit ratings, our not being in compliance with restrictive covenants under our debt agreements or our inability to access additional capital to finance acquisitions and capital expenditures through borrowed funds could restrict our ability to grow our business organically or through acquisitions, which could have a material adverse effect on our business, financial condition or results of operations.

In addition, our profit margins depend on strategic investment buying initiatives, such as discounted bulk purchases, which require spending significant amounts of working capital up-front to purchase products that we then sell over a multi-month time period.

Therefore, increases in the cost of capital available to us or our inability to access additional capital through borrowed funds at satisfactory economic terms could restrict our ability to engage in strategic investment buying initiatives, which could reduce our profit margins and have a material adverse effect on our business, financial condition, or results of operations.

We have experienced losses due to the uncollectibility of accounts and notes receivable in the past and could experience increases in such losses in the future if our customers are unable to timely pay their debts to us.

In addition, our profit margins depend on strategic buying initiatives, such as discounted bulk purchases, which require spending significant amounts of working capital up-front to purchase products that we then sell over a multi-month time period.

Increases in the cost of capital or our inability to access additional capital on satisfactory terms could restrict our ability to engage in strategic buying initiatives, which could reduce our profit margins and have a material adverse effect on our business, financial condition or results of operations.

We have experienced losses due to the uncollectibility of accounts in the past and could experience losses in the future if our customers are unable to timely pay their debts to us.

Certain of our customers have from time to time experienced bankruptcy, insolvency or an inability to pay their debts to us as they come due.

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Significant customer bankruptcies could further adversely affect our revenues and increase our Operating expenses by requiring larger provisions for bad debt.

For example, we incurred significant bad debt expense in the second quarter of fiscal 2020 as a result of three customer bankruptcies.

In addition, even when our contracts with these customers are not rejected in bankruptcy, if customers are unable to meet their obligations on a timely basis, it could adversely affect our ability to collect receivables.

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During periods of economic weakness, small to medium-sized businesses, like many of our independents channel customers, may be impacted more severely and more quickly than larger businesses.

Similarly, these smaller businesses may be more likely to be more severely impacted by events outside of their control, like significant weather events.

Similarly, these smaller businesses may be more likely to be more severely impacted by events outside of their control, like macro-economic shifts or significant weather events.

Consequently, the ability of such businesses to repay their obligations to us may deteriorate, and in some cases this deterioration may occur quickly, which could materially and adversely impact our business, financial condition or results of operations.

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If the review performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value and fair value of the long-lived assets, in the period the determination is made.

The testing of long-lived assets and goodwill for impairment requires us to make estimates that are subject to significant assumptions about our future revenue, profitability, cash flows, fair value of assets and liabilities, weighted average cost of capital, as well as other assumptions.

The testing of long-lived assets and Goodwill for impairment requires us to make estimates that are subject to significant assumptions about our future revenue, profitability, cash flows, fair value of assets and liabilities, and weighted average cost of capital, as well as other assumptions.

Changes in these estimates, or changes in actual performance compared with these estimates, may affect the fair value of long-lived assets, which may result in an impairment charge.

We cannot accurately predict the amount or timing of any impairment of assets.

We cannot accurately predict the amount or timing of any impairment.

Should the value of long-lived assets become impaired, our financial condition and results of operations may be adversely affected.

Changes in the military commissary system or decreases in governmental funding could negatively impact the sales and operating performance of our military business.

Our Wholesale segment sells and distributes grocery products to military commissaries and exchanges in the United States.

The commissary system has experienced material changes as the Defense Commissary Agency has looked to reduce the level of governmental funding required for the system, including to lower prices from suppliers and to offer its own private label products.

The military food distribution industry already has narrow operating margins making economies of scale critical for distributors.

These changes could have an adverse impact on the sales and operating performance of our military business.

Additionally, our military business faces competition from large national and regional food distributors, as well as smaller food distributors, and the military commissaries and exchanges face competition from low-cost retailers.

Economic Risks

Changes in consumer purchasing habits could materially and adversely affect our business, financial condition, or results of operations.

Changes in consumer purchasing habits may reduce demand for certain of the products we distribute.

Consumer habits could be affected by a number of factors, including changes in attitudes regarding benefits of natural and organic products when compared to similar lower margin conventional products, new information regarding the health effects of consuming certain foods or other macro trends.

For example, we experienced declines in certain of our sales channels as a result of changes in consumer purchasing habits related to the pandemic, including reductions in foodservice, bulk snacks, seeds and nuts, and international categories, and we cannot be certain how consumer habits may continue to evolve.

Further, in a sustained economic downturn, consumers may shift their purchases to lower-cost, lower-margin products.

Although there is a growing consumer preference for sustainable, organic and locally grown products, which are higher margin products, there can be no assurance that such trend will continue.

Changing consumer preferences also result from generational shifts, including younger generations seeking new and different foods, as well as more ethnic, menu options and menu innovation.

However, there can be no assurance that such trends will continue.

If consumer eating habits change significantly, we may be required to modify or discontinue sales of certain items in our product portfolio, and we may experience higher costs associated with the implementation of those changes.

Additionally, if we are not able to effectively respond to changes in consumer perceptions or adapt our product offerings to new or developing trends in eating habits, our business, financial condition, or results of operations could suffer.

Our leverage and debt service obligations increase our sensitivity to the effects of economic downturns and could adversely affect our business.

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• increasing our vulnerability to, and reducing our flexibility in planning for and responding to, adverse general economic and industry conditions and changes in our business and the competitive environment and placing us at a disadvantage to our competitors that are less leveraged;

• requiring us to use a substantial portion of operating cash flow to pay principal of, and interest on, indebtedness, instead of other purposes, such as funding working capital, capital expenditures, acquisitions, share repurchases, or other corporate purposes;

• increasing our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity, and access to capital markets;

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• increasing our exposure to the risk of increased interest rates insofar as current and future borrowings are subject to variable rates of interest;

• making it more difficult for us to repay, refinance, or satisfy our obligations with respect to our debt;

• making it more difficult for us to repay, refinance, or satisfy our obligations with respect to our indebtedness;

• limiting our ability to borrow additional funds and increasing the cost of any such borrowing;

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There is no assurance that we will generate sufficient cash flow from operations or that future debt or equity financing will be available to us to enable us to pay our indebtedness.

As a result, we may need to refinance all or a portion of our indebtedness on or before maturity, however, we may not be able to do on favorable terms, or at all.

As a result, we may need to refinance all or a portion of our indebtedness on or before maturity, however, we may not be able to do so on favorable terms, or at all.

Any inability to generate sufficient cash flow or refinance our indebtedness on favorable terms could have a material adverse effect on our business, financial condition or results of operations.

In addition, the upcoming transition away from the London Interbank Offered Rate (“LIBOR”), as a common reference rate in the global financial market, may adversely affect interest expense related to borrowings under our credit facilities and our interest rate swaps, which could potentially negatively impact our financial condition.

Changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations.

Changes in consumer eating habits away from natural, organic, or specialty products could reduce demand for our higher margin natural and organic products.

Consumer eating habits could be affected by a number of factors, including changes in attitudes regarding benefits of natural and organic products when compared to similar lower margin conventional products or new information regarding the health effects of consuming certain foods.

Although there is a growing consumer preference for sustainable, organic and locally grown products, there can be no assurance that such trend will continue.

Changing consumer eating habits also occur due to generational shifts, including younger generations seeking new and different foods, as well as more ethnic, menu options and menu innovation.

However, there can be no assurance that such trend will continue.

Additionally, if we are not able to effectively respond to changes in consumer perceptions or adapt our product offerings to trends in eating habits, our business, financial condition, or results of operations could suffer.

Increased fuel costs may adversely affect our results of operations.

Increased fuel costs may have a negative impact on our results of operations.

The high cost of diesel fuel can increase the price we pay for products as well as the costs we incur to deliver products to our customers, including costs of inbound goods from our suppliers.

Higher costs for diesel fuel can increase the price we pay for products as well as the costs we incur to deliver products to our customers, including costs of inbound goods from our suppliers.

These factors, in turn, may negatively impact our Net sales, margins, Operating expenses and operating results.

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To the extent we do not enter into commodity swap agreements, our exposure to volatility in the price of diesel fuel would increase relative to our exposure to volatility in periods in which we had outstanding commodity derivative contracts.

We do not enter into fuel hedge contracts for speculative purposes.

We periodically enter into forward purchase commitments for a portion of our projected monthly diesel fuel requirements at fixed prices.

We also maintain a fuel surcharge program with certain customers, which allows us to pass some of our higher fuel costs through to those customers.

We cannot guarantee that we will continue to be able to pass a comparable proportion or any of our higher fuel costs to our customers in the future, which may adversely affect our business, financial condition or results of operations.

We also maintain a fuel program with certain customers, which allows us to pass some of the changes in fuel costs through to those customers.

We cannot guarantee that we will continue to be able to pass a comparable proportion or any increase in fuel costs to our customers in the future, which may adversely affect our business, financial condition or results of operations.

Disruption of our distribution network or to the operations of our customers could adversely affect our business.

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For example, we have both distribution centers and retail stores in cities and states where civil unrest has led to extensive property damage.

Further civil unrest and damage to our real and personal property, or our customers’ locations, could have an adverse impact to our business.

To the extent that we are unable, or it is not financially feasible, to mitigate the likelihood or potential impact of such events, or to manage effectively such events if they occur, there could be an adverse effect on our business, financial condition or results of operations.

In addition, such disruptions may reduce the number of consumers who visit our customers’ facilities in any affected areas.

Furthermore, such disruption may interrupt or impede access to our customers’ facilities, all of which could have a material adverse effect on our business, financial condition, or results of operations.

To the extent that we are unable, or it is not financially feasible, to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, there could be an adverse effect on our business, financial condition or results of operations.

In addition, such disruption may interrupt or impede access to, or otherwise reduce the number of consumers who visit, our customers’ facilities, all of which could have a material adverse effect on our business, financial condition, or results of operations.

Legal and Regulatory Risks

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• our warehouse and distribution centers are subject to inspection by the United States Department of Agriculture, the United States Department of Labor Occupational and Health Administration, and various state health and workplace safety authorities;

• the United States Department of Transportation and the United States Federal Highway Administration regulate our United States trucking operations.

• our United States trucking operations are subject to regulation by the United States Department of Transportation and the United States Federal Highway Administration.

In addition, the various federal, state and local laws, regulations and administrative practices to which we are subject require us to comply with numerous provisions regulating areas such as environmental, health and sanitation standards, food safety, marketing of natural or organically produced food, facilities, pharmacies, equal employment opportunity, public accessibility, employee benefits, wages and hours worked and licensing for the sale of food, drugs, tobacco and alcoholic beverages, among others.

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Our operations are subject to extensive and increasingly stringent laws and regulations pertaining to the protection of the environment, including those relating to the discharge of materials into the environment, the disposal of food by-products, the handling, treatment, and disposal of wastes, maintenance of refrigeration systems, and remediation of soil and groundwater contamination.

Compliance with existing or changing environmental and safety requirements, including more stringent limitations imposed or expected to be imposed in recently renewed or soon-to-be renewed environmental permits, may require capital expenditures.

Compliance with existing or changing environmental and safety requirements, including more stringent limitations imposed or expected to be imposed in any recently renewed or soon-to-be renewed environmental permits, may require capital expenditures.

Additionally, concern over climate change, including the impact of global warming, has led to significant United States and international legislative and regulatory efforts to limit greenhouse gas emissions.

Increased regulation regarding greenhouse gas emissions, especially diesel engine emissions, could impose substantial costs on us.

These costs include an increase in the cost of the fuel and other energy we purchase and capital costs associated with updating or replacing our vehicles prematurely.

Increased regulation regarding greenhouse gas emissions, particularly with respect to diesel engine emissions, could result in substantial additional operating expenses.

These expenses may include an increase in the cost of the fuel and other energy we purchase and capital costs associated with updating or replacing our vehicles sooner than planned.

Until the timing, scope, and extent of such regulation becomes known, we cannot predict its effect on our results of operations.

It is reasonably possible, however, that it could impose material costs on us which we may be unable to pass on to our customers.

It is reasonably possible, however, that it could result in material costs, which we may be unable to pass on to our customers.

Further, our business may be subject to climate-related transition risks, which arise from society’s transition toward a low-carbon economy due to changes in laws or regulations, technological advancements, and investor and consumer sentiment.

We also have announced third-party validated emissions reduction targets covering our operations and value chain.

While many of our initiatives will create efficiencies and return on investment, the transition to a low-carbon economy generally and our own efforts to reduce emissions could lead to increased costs to transition to or invest in renewable energy sources, including electric vehicles, increased compliance costs, including tracking and reporting systems, and increased costs of products, commodities, and energy.

Food Safety and Marketing :

There is increasing governmental scrutiny, regulations and public awareness regarding food quality and food and drug safety.

There is significant governmental scrutiny, regulations and public awareness regarding food quality and food and drug safety.

We may be adversely affected if consumers lose confidence in the safety and quality of our food and drug products.

In addition, we are subject to increasing governmental scrutiny of and public awareness regarding food safety and the sale, packaging, and marketing of natural and organic products.

In addition, we are subject to governmental scrutiny of and public awareness regarding food safety and the sale, packaging, and marketing of natural and organic products.

Compliance with these laws may impose a significant burden on our operations.

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For example, in 2019, the Company settled with the Drug Enforcement Administration alleged violations of the Controlled Substances Act relating to an administrative subpoena received by Supervalu that requested, among other things, information on the Company’s pharmacy policies and procedures generally, as well as the production of documents that are required to be kept and maintained pursuant to the Controlled Substances Act and its accompanying regulations.

The failure to comply with applicable regulatory requirements or make capital expenditures required to maintain compliance with governmental laws and regulations, including those referred to above and in Item 1.

The failure to comply or maintain compliance with applicable governmental laws and regulations, including those referred to above and in Item 1.

Business - Government Regulation of this Annual Report, could result in, among other things, administrative, civil, or criminal penalties or fines;

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These laws and regulations may change in the future.

predict the nature of future laws, regulations, interpretations, or applications, nor can we determine the effect that additional governmental regulations or administrative orders, when and if promulgated, or disparate federal, state and local regulatory schemes would have on our future business.

We cannot predict the nature of future laws, regulations, interpretations or applications, nor can we determine the effect that additional governmental regulations or administrative orders, when and if promulgated, or disparate federal, state and local regulatory schemes would have on our future business.

We may incur material costs in our efforts to comply with current or future laws and regulations or due to any required product recalls.

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The cost of compliance or the consequences of non-compliance, including debarments, could have a material adverse effect on our business, financial condition, or results of operations.

In addition, governmental units may make changes in the regulatory frameworks within which we operate that may require either the corporation as a whole or individual businesses to incur substantial increases in costs in order to comply with such laws and regulations.

In addition, governmental units may make changes in the regulatory frameworks within which we operate that may require us to incur substantial increases in costs in order to comply with such laws and regulations.

Product liability claims could have an adverse effect on our business.

We face a risk of exposure to product liability claims if the products we manufacture or sell cause injury or illness.

We face a risk of exposure to product liability claims if the products we sell or manufacture cause injury or illness.

In addition, meat, seafood, cheese, poultry and other products that we distribute could be subject to recall because they are, or are alleged to be, contaminated, spoiled or inappropriately labeled.

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Any events that give rise to actual or potential food contamination, drug contamination or food-borne illness or injury, or events that give rise to claims that our products are not of the quality or composition claimed to be, may result in product liability claims from individuals, consumers and governmental agencies, penalties and enforcement actions from government agencies, a loss of consumer confidence, harm to our reputation and could cause production and delivery disruptions, which may adversely affect our financial condition or results of operations.

While we generally seek contractual indemnification and insurance coverage from our suppliers, we might not be able to recover these significant costs from our suppliers.

We may be subject to liability, which could be substantial, because of actual or alleged contamination in products manufactured or sold by us, including products sold by companies before we acquired them.

In addition, if we were to manufacture or distribute foods that are or are perceived to be unsafe, contaminated, or defective, it may be necessary for us to recall such products, or we may recall products that we determine do not satisfy our quality standards.

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This insurance may not continue to be available at a reasonable cost or at all and may not be adequate to cover product liability claims against us or against companies we have acquired.

We generally seek contractual indemnification from manufacturers, but any such indemnification is limited, as a practical matter, to the creditworthiness of the indemnifying party.

We generally seek contractual indemnification and insurance coverage from our suppliers and manufacturers, but any such indemnification is limited to the creditworthiness of the indemnifying party.

If we do not have adequate insurance or contractual indemnification available, product liability claims and costs associated with product recalls, including a loss of business, could have a material adverse effect on our business, financial condition or results of operations.

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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-K

Item 1A. Risk Factors