What changed in this filing

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Item 1. Financial Statements

2023-03-08 compared with 2022-12-07 · 189 added, 108 removed, 539 unchanged (36% of the section changed)

35 unchanged sentences

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

60.9 shares issued and 59.9 shares outstanding at October 29, 2022;

60.9 shares issued and 59.6 shares outstanding at January 28, 2023;

58.9 shares issued and 58.3 shares outstanding at July 30, 2022

13 unchanged sentences

(in millions, except for per share data)

13-Week Period Ended

2022 October 30,

13-Week Period Ended 26-Week Period Ended

2023 January 29,

2022 January 28,

2023 January 29,

Net sales $ 7,816 $ 7,416 $ 15,348 $ 14,413

3 unchanged sentences

Restructuring, acquisition and integration related expenses 3 5 5 8

Gain on sale of assets ( 5 ) —

Loss (gain) on sale of assets 1 1 ( 4 ) 1

Operating income 63 125 162 232

1 unchanged sentence

Interest expense, net 39 44 74 84

Other (income) expense, net ( 1 ) 1

Other income, net — ( 2 ) ( 1 ) ( 1 )

Income before income taxes 31 93 103 169

Provision (benefit) for income taxes 5 ( 1 )

Provision for income taxes 9 25 14 24

Net income including noncontrolling interests 22 68 89 145

1 unchanged sentence

Net income attributable to United Natural Foods, Inc.

$ 19 $ 66 $ 85 $ 142

Basic earnings per share

10 unchanged sentences

(in millions)

13-Week Period Ended

2022 October 30,

13-Week Period Ended 26-Week Period Ended

2023 January 29,

2022 January 28,

2023 January 29,

Net income including noncontrolling interests $ 22 $ 68 $ 89 $ 145

Other comprehensive income (loss):

Other comprehensive (loss) income:

Recognition of pension and other postretirement benefit obligations, net of tax 1 1 1 2

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

( 4 ) 15 14 28

Foreign currency translation adjustments 1 ( 2 ) ( 2 ) ( 2 )

Recognition of other cash flow derivatives, net of tax (2)

Total other comprehensive income 15 15

( 2 ) 1 ( 2 ) 2

Total other comprehensive (loss) income ( 4 ) 15 11 30

Less comprehensive income attributable to noncontrolling interests ( 3 ) ( 2 ) ( 4 ) ( 3 )

Total comprehensive income attributable to United Natural Foods, Inc.

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

$ 15 $ 81 $ 96 $ 172

(1) Amounts are net of tax (benefit) expense of $( 1 ) million and $ 6 million for the second quarters of fiscal 2023 and 2022, respectively, and $ 5 million and $ 10 million for fiscal 2023 and 2022 year-to-date, respectively.

(2) Amounts are net of tax (benefit) expense of $( 1 ) million and $ 1 million for the second quarters of fiscal 2023 and 2022, respectively, and $( 1 ) million and $ 1 million for fiscal 2023 and 2022 year-to-date, respectively.

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

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

For the 13-week periods ended January 28, 2023 and January 29, 2022

(in millions)

4 unchanged sentences

Shares Amount Shares Amount

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

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

Share-based compensation — — — — 11 — — 11 — 11

Repurchases of common stock — — 0.3 ( 17 ) — — — ( 17 ) — ( 17 )

Other comprehensive loss — — — — — ( 4 ) — ( 4 ) — ( 4 )

Net income — — — — — — 19 19 3 22

Balances at January 28, 2023 60.9 $ 1 1.3 $ ( 53 ) $ 592 $ ( 9 ) $ 1,311 $ 1,842 $ 3 $ 1,845

Balances at October 30, 2021 58.7 $ 1 0.6 $ ( 24 ) $ 582 $ ( 24 ) $ 1,054 $ 1,589 $ ( 2 ) $ 1,587

Restricted stock vestings 0.1 — — — ( 2 ) — — ( 2 ) — ( 2 )

Share-based compensation — — — — 12 — — 12 — 12

Other comprehensive income — — — — — 15 — 15 — 15

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

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

Net income — — — — — — 66 66 2 68

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

See accompanying Notes to Condensed Consolidated Financial Statements.

UNITED NATURAL FOODS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

For the 26-week periods ended January 28, 2023 and January 29, 2022

(in millions)

Common Stock Treasury Stock Additional

Paid-in Capital Accumulated

Comprehensive Loss Retained Earnings Total United Natural Foods, Inc.

Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity

Shares Amount Shares Amount

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

5 unchanged sentences

Net income — — — — — — 85 85 4 89

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

Balances at January 28, 2023 60.9 $ 1 1.3 $ ( 53 ) $ 592 $ ( 9 ) $ 1,311 $ 1,842 $ 3 $ 1,845

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

5 unchanged sentences

Net income — — — — — — 142 142 3 145

Balances at October 30, 2021 58.7 $ 1 0.6 $ ( 24 ) $ 582 $ ( 24 ) $ 1,054 $ 1,589 $ ( 2 ) $ 1,587

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

See accompanying Notes to Condensed Consolidated Financial Statements.

3 unchanged sentences

26-Week Period Ended

(in millions) October 29,

2022 October 30,

(in millions) January 28,

2023 January 29,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income including noncontrolling interests $ 89 $ 145

Adjustments to reconcile net income to net cash used in operating activities:

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

Depreciation and amortization 147 138

Share-based compensation 23 23

Gain on sale of assets ( 5 ) —

(Gain) loss on sale of property and equipment ( 9 ) 1

Closed property and other restructuring charges — 1

5 unchanged sentences

Changes in operating assets and liabilities ( 22 ) ( 291 )

Net cash used in operating activities

( 262 ) ( 81 )

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

11 unchanged sentences

Payments of employee restricted stock tax withholdings ( 39 ) ( 35 )

Payments for debt issuance costs — ( 1 )

Distributions to noncontrolling interests ( 2 ) ( 3 )

Repayments of other loans ( 1 ) —

Net cash provided by financing activities

Net cash (used in) provided by financing activities

EFFECT OF EXCHANGE RATE ON CASH — —

4 unchanged sentences

Cash paid for interest $ 65 $ 67

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

Cash payments for federal, state, and foreign income taxes, net $ 3 $ —

Leased assets obtained in exchange for new operating lease liabilities $ 133 $ 123

Leased assets obtained in exchange for new finance lease liabilities $ — $ 1

Additions of property and equipment included in Accounts payable $ 31 $ 16

9 unchanged sentences

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

References to the first quarter of fiscal 2023 and 2022 relate to the 13-week fiscal quarters ended October 29, 2022 and October 30, 2021, respectively.

References to the second quarter of fiscal 2023 and 2022 relate to the 13-week fiscal quarters ended January 28, 2023 and January 29, 2022, respectively.

References to fiscal 2023 and 2022 year-to-date relate to the 26-week fiscal periods ended January 28, 2023 and January 29, 2022, respectively.

Basis of Presentation

15 unchanged sentences

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

As of October 29, 2022 and July 30, 2022, the Company had net book overdrafts of $ 305 million and $ 266 million, respectively.

As of January 28, 2023 and July 30, 2022, the Company had net book overdrafts of $ 263 million and $ 266 million, respectively.

Reclassifications

6 unchanged sentences

Inventory quantities are evaluated throughout each fiscal year based on actual physical counts in the Company’s distribution facilities and stores.

Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the end of each fiscal year.

The LIFO reserve was approximately $ 246 million and $ 225 million as of October 29, 2022 and July 30, 2022, respectively, which is recorded within Inventories, net on the Condensed Consolidated Balance Sheets.

Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated variances as of the end of each fiscal year.

The LIFO reserve was approximately $ 275 million and $ 225 million as of January 28, 2023 and July 30, 2022, respectively, which is recorded within Inventories, net on the Condensed Consolidated Balance Sheets.

NOTE 2—RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

17 unchanged sentences

Net Sales for the 13-Week Period Ended

(in millions) October 29, 2022

(in millions) January 28, 2023

Customer Channel Wholesale Retail Other Eliminations (1)

7 unchanged sentences

Net Sales for the 13-Week Period Ended

(in millions) October 30, 2021

(in millions) January 29, 2022

Customer Channel Wholesale Retail Other Eliminations (1)

6 unchanged sentences

Total $ 7,132 $ 643 $ 50 $ ( 409 ) $ 7,416

Net Sales for the 26-Week Period Ended

(in millions) January 28, 2023

Customer Channel Wholesale Retail Other Eliminations (1)

Chains $ 6,546 $ — $ — $ — $ 6,546

Independent retailers 3,927 — — — 3,927

Supernatural 3,172 — — — 3,172

Retail — 1,273 — — 1,273

Other 1,128 — 116 — 1,244

Eliminations — — — ( 814 ) ( 814 )

Total $ 14,773 $ 1,273 $ 116 $ ( 814 ) $ 15,348

Net Sales for the 26-Week Period Ended

(in millions) January 29, 2022

Customer Channel Wholesale Retail Other Eliminations (1)

Chains $ 6,325 $ — $ — $ — $ 6,325

Independent retailers 3,655 — — — 3,655

Supernatural 2,831 — — — 2,831

Retail — 1,245 — — 1,245

Other 1,055 — 106 — 1,161

Eliminations — — — ( 804 ) ( 804 )

Total $ 13,866 $ 1,245 $ 106 $ ( 804 ) $ 14,413

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

4 unchanged sentences

Accounts and notes receivable are as follows:

(in millions) October 29, 2022 July 30, 2022

(in millions) January 28, 2023 July 30, 2022

Customer accounts receivable $ 989 $ 1,213

4 unchanged sentences

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

Subsequent to the end of the first quarter of fiscal 2023, the Company entered into a purchase agreement with a third-party financial institution for the sale of certain accounts receivable up to $ 300 million, subject to eligibility criteria established by the financial institution.

The Company initially sold $ 253 million of accounts receivable under this agreement without recourse, in exchange for cash less a discount, as specified in the agreement.

After the initial sale, the Company does not retain any interest in the receivables.

During the second quarter of fiscal 2023, the Company entered into a purchase agreement with a third-party financial institution for the sale of certain customer accounts receivable up to a maximum outstanding amount of $ 300 million, without recourse, subject to eligibility criteria established by the financial institution.

Pursuant to the terms of the agreement, certain customer receivables are sold to the third-party financial institution on a revolving basis, subject to certain limitations.

After these sales, the Company does not retain any interest in the receivables.

The Company’s continuing involvement in transferred receivables is limited to servicing the receivables.

Pursuant to the terms of the agreement, certain receivables are sold to the third-party financial institution on a revolving basis, subject to certain limitations.

Accounts receivable that the Company is servicing on behalf of the financial institution, which would have otherwise been outstanding as of January 28, 2023, was approximately $ 292 million.

Net proceeds received are included within net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows in the period of sale.

The loss on sale of receivables was $ 5 million during the second quarter of fiscal 2023 and is recorded within Loss (gain) on sale of assets in the Condensed Consolidated Statements of Operations.

NOTE 4—GOODWILL AND INTANGIBLE ASSETS, NET

3 unchanged sentences

Change in foreign exchange rates — — —

Goodwill as of October 29, 2022

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

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

Goodwill as of January 28, 2023

(1) Wholesale amounts are net of accumulated goodwill impairment charges of $ 717 million as of July 30, 2022 and January 28, 2023.

(2) Other amounts are net of accumulated goodwill impairment charges of $ 10 million as of July 30, 2022 and January 28, 2023.

Identifiable intangible assets, net consisted of the following:

October 29, 2022 July 30, 2022

January 28, 2023 July 30, 2022

(in millions) Gross Carrying

12 unchanged sentences

Intangibles assets, net $ 1,186 $ 403 $ 783 $ 1,186 $ 367 $ 819

Amortization expense was $ 18 million and $ 18 million for the first quarters of fiscal 2023 and 2022, respectively.

The estimated future amortization expense for each of the next five fiscal years and thereafter on amortizing intangible assets existing as of October 29, 2022 is as shown below:

Amortization expense was $ 18 million and $ 18 million for the second quarters of fiscal 2023 and 2022, respectively, and $ 36 million and $ 36 million for fiscal 2023 and 2022 year-to-date, respectively.

The estimated future amortization expense for each of the next five fiscal years and thereafter on amortizing intangible assets existing as of January 28, 2023 is as shown below:

(in millions)

4 unchanged sentences

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

Condensed Consolidated Balance Sheets Location Fair Value at October 29, 2022

Condensed Consolidated Balance Sheets Location Fair Value at January 28, 2023

(in millions) Level 1 Level 2 Level 3

Fuel derivatives designated as hedging instruments Prepaid expenses and other current assets $ — $ 2 $ —

Foreign currency derivatices designated as hedging instruments Prepaid expenses and other current assets $ — $ 2 $ —

Interest rate swaps designated as hedging instruments Prepaid expenses and other current assets $ — $ 17 $ —

10 unchanged sentences

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

As of October 29, 2022, a 100-basis point increase in forward SOFR interest rates would increase the fair value of the interest rate swaps by approximately $ 14 million;

As of January 28, 2023, a 100-basis point increase in forward SOFR interest rates would increase the fair value of the interest rate swaps by approximately $ 12 million;

a 100-basis point decrease in forward SOFR interest rates would decrease the fair value of the interest rate swaps by approximately $ 12 million.

5 unchanged sentences

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

October 29, 2022 July 30, 2022

January 28, 2023 July 30, 2022

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

5 unchanged sentences

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

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

The Company’s interest rate swap contracts are designated as cash flow hedges as of January 28, 2023.

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

Refer to Note 5—Fair Value Measurements of Financial Instruments for further information on the fair value of interest rate swap contracts.

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

Details of active swap contracts as of January 28, 2023, 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 Floating Rate Reset Terms

October 26, 2018 October 31, 2022 100 2.8170 % One-Month Term SOFR Monthly

January 11, 2019 October 31, 2022 50 2.3770 % One-Month Term SOFR Monthly

January 23, 2019 October 31, 2022 50 2.2740 % One-Month Term SOFR Monthly

November 16, 2018 March 31, 2023 150 2.7770 % One-Month Term SOFR Monthly

15 unchanged sentences

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.

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

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

13-Week Period Ended

October 29, 2022 October 30, 2021

(in millions) Interest expense, net

13-Week Period Ended 26-Week Period Ended

January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

(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

$ 39 $ 44 $ 74 $ 84

Loss on cash flow hedging relationships:

3 unchanged sentences

(in millions) Average Interest Rate at

October 29, 2022

Fiscal Maturity Year October 29,

January 28, 2023

Fiscal Maturity Year January 28,

2023 July 30,

9 unchanged sentences

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, which are presented net of debt issuance costs of $ 7 million as of October 29, 2022 and July 30, 2022 in the Condensed Consolidated Balance Sheets, are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the ABL Credit Facility or the Term Loan Facility (defined below).

The Senior Notes, which are presented net of debt issuance costs of $ 7 million as of January 28, 2023 and July 30, 2022 in the Condensed Consolidated Balance Sheets, are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the ABL Credit Facility or the Term Loan Facility (defined below).

ABL Credit Facility

7 unchanged sentences

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

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

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

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

6 unchanged sentences

Total $ 2,630 $ 2,682

As of October 29, 2022, the Borrowers’ Borrowing Base, net of $ 110 million of reserves, was $ 2,898 million, which is above the $ 2,600 million limit of availability, resulting in total availability of $ 2,600 million for loans and letters of credit under the ABL Credit Facility.

As of October 29, 2022, the Borrowers had $ 1,217 million of loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of $ 10 million and are included in Long-term debt in the Condensed Consolidated Balance Sheets.

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

As of January 28, 2023, the Borrowers’ Borrowing Base, net of $ 95 million of reserves, was $ 2,740 million, which is above the $ 2,600 million limit of availability, resulting in total availability of $ 2,600 million for loans and letters of credit under the ABL Credit Facility.

As of January 28, 2023, the Borrowers had $ 923 million of loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of $ 9 million and are included in Long-term debt in the Condensed Consolidated Balance Sheets.

As of January 28, 2023, the U.S.

Borrowers had $ 144 million in letters of credit outstanding under the ABL Credit Facility.

The Company’s resulting remaining availability under the ABL Credit Facility was $ 1,250 million as of October 29, 2022.

The Company’s resulting remaining availability under the ABL Credit Facility was $ 1,533 million as of January 28, 2023.

Availability under the ABL Credit Facility (in millions):

October 29, 2022

January 28, 2023

Total availability for ABL loans and letters of credit $ 2,600

4 unchanged sentences

Interest rates and fees under the ABL Credit Facility:

Range of Facility Rates and Fees (per annum) October 29, 2022

Range of Facility Rates and Fees (per annum) January 28, 2023

Borrowers’ applicable margin for base rate loans 0.00 % - 0.25 %

11 unchanged sentences

The Term Borrowers’ obligations under the Term Loan Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ ABL Assets, in each case, subject to customary exceptions and limitations, including an exception for owned real property with net book values of less than $ 10 million.

As of October 29, 2022 and July 30, 2022, there was $ 623 million and $ 629 million, respectively, of owned real property pledged as collateral that was included in Property and equipment, net in the Condensed Consolidated Balance Sheets.

As of January 28, 2023 and July 30, 2022, there was $ 618 million and $ 629 million, respectively, of owned real property pledged as collateral that was included in Property and equipment, net in the Condensed Consolidated Balance Sheets.

The Company must prepay loans outstanding under the Term Loan Facility no later than 130 days after the fiscal year end in an aggregate principal amount equal to a specified percentage (which percentage ranges from 0 to 75 percent depending on the Consolidated First Lien Net Leverage Ratio as of the last day of such fiscal year) of Excess Cash Flow (as defined in the Term Loan Agreement), minus certain types of voluntary prepayments of indebtedness made during such fiscal year.

The potential amount of prepayment from Excess Cash Flow in fiscal 2023 that may be required in fiscal 2024 is not reasonably estimable as of October 29, 2022.

As of October 29, 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 $ 11 million and an original issue discount on debt of $ 10 million.

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

Subsequent to the end of the first quarter of fiscal 2023, the Company made a $ 125 million voluntary prepayment on the Term Loan Facility with a portion of the proceeds received from monetizing certain receivables within Accounts receivable, net associated with the Company’s purchase agreement with a third-party financial institution as previously discussed within Note 3—Revenue Recognition.

As of January 28, 2023, there is no Excess Cash Flow payment expected to be required in fiscal 2024.

As of January 28, 2023, the Company had borrowings of $ 670 million outstanding under the Term Loan Facility, which are presented in the Condensed Consolidated Balance Sheets net of debt issuance costs of $ 9 million and an original issue discount on debt of $ 7 million.

As of January 28, 2023, no amount of the Term Loan Facility was classified as current.

In the second quarter of fiscal 2023, the Company made a $ 125 million voluntary prepayment on the Term Loan Facility with a portion of the proceeds received from monetizing certain receivables within Accounts receivable, net associated with the Company’s purchase agreement with a third-party financial institution as previously discussed within Note 3—Revenue Recognition.

This voluntary prepayment will count towards any requirement to prepay the Term Loan Facility from Excess Cash Flow (as defined in the Term Loan Agreement) generated during fiscal 2023, which would be due in fiscal 2024.

NOTE 8—COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Changes in Accumulated other comprehensive loss by component, net of tax, for fiscal 2023 year-to-date were as follows:

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

1 unchanged sentence

Other comprehensive (loss) income before reclassifications ( 3 ) — ( 2 ) 17 12

Amortization of amounts included in net periodic benefit income — 1 — — 1

Amortization of cash flow hedges 1 — — ( 3 ) ( 2 )

Net current period Other comprehensive (loss) income ( 2 ) 1 ( 2 ) 14 11

Accumulated other comprehensive income (loss) at October 29, 2022 $ 2 $ ( 3 ) $ ( 22 ) $ 18 $ ( 5 )

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

Accumulated other comprehensive income (loss) at January 28, 2023 $ — $ ( 2 ) $ ( 21 ) $ 14 $ ( 9 )

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

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

Accumulated other comprehensive income (loss) at July 31, 2021 $ — $ 37 $ ( 16 ) $ ( 60 ) $ ( 39 )

Other comprehensive income before reclassifications 1 — — 5 6

Other comprehensive income (loss) before reclassifications 1 — ( 2 ) 13 12

Amortization of amounts included in net periodic benefit income — 2 — — 2

Amortization of cash flow hedges 1 — — 15 16

Net current period Other comprehensive income 1 1 — 13 15

Accumulated other comprehensive income (loss) at October 30, 2021 $ 1 $ 38 $ ( 16 ) $ ( 47 ) $ ( 24 )

Net current period Other comprehensive income (loss) 2 2 ( 2 ) 28 30

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

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

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

(in millions) October 29,

2022 October 30,

13-Week Period Ended 26-Week Period Ended Affected Line Item on the Condensed Consolidated Statements of Operations

(in millions) January 28,

2023 January 29,

2022 January 28,

2023 January 29,

Pension and postretirement benefit plan net assets:

1 unchanged sentence

$ 1 $ 1 $ 1 $ 2 Net periodic benefit income, excluding service cost

Income tax benefit — — Benefit for income taxes

Income tax benefit — — — — Provision for income taxes

Total reclassifications, net of tax $ 1 $ 1 $ 1 $ 2

1 unchanged sentence

Reclassification of cash flow hedges $ ( 4 ) $ 10 $ ( 4 ) $ 21 Interest expense, net

Income tax benefit — ( 3 ) Benefit for income taxes

Income tax expense (benefit) 1 ( 3 ) 1 ( 6 ) Provision for income taxes

Total reclassifications, net of tax $ ( 3 ) $ 7 $ ( 3 ) $ 15

1 unchanged sentence

Reclassification of cash flow hedge $ 1 $ 2 $ 2 $ 2 Cost of sales

Income tax benefit — — Benefit for income taxes

Income tax benefit ( 1 ) ( 1 ) ( 1 ) ( 1 ) Provision for income taxes

Total reclassifications, net of tax $ — $ 1 $ 1 $ 1

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

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

As of January 28, 2023, the Company expects to reclassify $ 16 million related to unrealized derivative gains on interest rate swap hedges out of Accumulated other comprehensive loss and primarily into Interest expense, net during the following twelve-month period.

NOTE 9—SHARE-BASED AWARDS

In the first quarter of fiscal 2023, the Company granted restricted stock units and performance share units to its directors, executive officers and certain employees representing a right to receive an aggregate of 1.5 million shares.

As of October 29, 2022, there were 1.6 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan.

In fiscal 2023 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 1.6 million shares.

As of January 28, 2023, there were 1.6 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan.

NOTE 10—BENEFIT PLANS

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Pension Benefits Other Postretirement Benefits

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

(in millions) January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Net Periodic Benefit (Income) Cost

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

26-Week Period Ended

Pension Benefits Other Postretirement Benefits

(in millions) January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Net Periodic Benefit (Income) Cost

Interest cost $ 32 $ 19 $ — $ —

Expected return on plan assets ( 47 ) ( 41 ) — —

Amortization of prior service cost — — 1 2

Net periodic benefit (income) cost $ ( 15 ) $ ( 22 ) $ 1 $ 2

Contributions to benefit plans $ — $ — $ — $ ( 2 )

Contributions

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Multiemployer Pension Plans

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

The Company contributed $ 12 million and $ 11 million in the second quarters of fiscal 2023 and 2022, respectively, and $ 23 million and $ 22 million in fiscal 2023 and 2022 year-to-date, respectively, to multiemployer pension plans, which are included within Operating expenses.

NOTE 11—INCOME TAXES

The effective tax rate for the first quarter of fiscal 2023 was an expense rate of 6.9 % compared to a benefit rate of 1.3 % for the first quarter of fiscal 2022.

The effective tax rate for both periods was reduced by the impact of discrete tax benefits related to the vesting of employee stock awards.

The change from the first quarter of fiscal 2022 was primarily driven by the reduction of these discrete tax benefits during the first quarter of fiscal 2023.

The effective tax rate for the second quarter of fiscal 2023 was 29.0 % compared to 26.9 % for the second quarter of fiscal 2022.

The change was driven primarily by the reduction in pre-tax income during the second quarter of fiscal 2023.

The effective tax rate for fiscal 2023 year-to-date was 13.6 % compared to 14.2 % for fiscal 2022 year-to-date.

The effective tax rate for both fiscal 2023 and fiscal 2022 year-to-date was reduced by the impact of discrete tax benefits related to the vesting of employee stock awards.

NOTE 12—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

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

2022 October 30,

13-Week Period Ended 26-Week Period Ended

(in millions, except per share data) January 28,

2023 January 29,

2022 January 28,

2023 January 29,

Basic weighted average shares outstanding 59.8 58.3 59.3 57.6

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

1.2 2.7 2.0 3.4

Diluted weighted average shares outstanding 61.0 61.0 61.3 61.0

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The following table provides Net sales and Adjusted EBITDA by reportable segment and reconciles that information to consolidated Net sales and Income before income taxes, respectively:

13-Week Period Ended

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

13-Week Period Ended 26-Week Period Ended

(in millions) January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Wholesale (1)

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Retail 660 643 1,273 1,245

Other 56 50 116 106

Eliminations ( 414 ) ( 409 ) ( 814 ) ( 804 )

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Wholesale (2)

$ 137 $ 176 $ 308 $ 351

Other 15 12 34 16

Eliminations 1 — ( 2 ) ( 1 )

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Interest expense, net ( 39 ) ( 44 ) ( 74 ) ( 84 )

Other (income) expense, net 1 ( 1 )

Other income, net — 2 1 1

Depreciation and amortization ( 73 ) ( 69 ) ( 147 ) ( 138 )

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Restructuring, acquisition and integration related expenses ( 3 ) ( 5 ) ( 5 ) ( 8 )

Gain on sale of assets 5 —

(Loss) gain on sale of assets ( 1 ) ( 1 ) 4 ( 1 )

Multiemployer pension plan withdrawal benefit — 8 — 8

Other retail benefit — 1 — 1

Business transformation costs

( 4 ) — ( 9 ) —

Income before income taxes $ 31 $ 93 $ 103 $ 169

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Wholesale $ 62 $ 61 $ 126 $ 122

Retail 10 8 18 15

Other 1 — 3 1

Total depreciation and amortization $ 73 $ 69 $ 147 $ 138

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Wholesale $ 74 $ 46 $ 131 $ 98

Retail 10 4 20 8

Total capital expenditures $ 84 $ 50 $ 151 $ 106

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

(1) As presented in Note 3—Revenue Recognition, the Company recorded $ 353 million and $ 356 million for the second quarters of fiscal 2023 and 2022, respectively, and $ 687 million and $ 695 million in fiscal 2023 and 2022 year-to-date, respectively, within Net sales in its Wholesale reportable segment attributable to Wholesale to Retail sales 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 before income taxes has been recast to exclude the impact of the non-cash LIFO charge.

(3) Includes costs for certain technology-related initiatives.

Total assets by reportable segment were as follows:

(in millions) October 29,

(in millions) January 28,

2023 July 30,

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Guarantees and Contingent Liabilities

The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of October 29, 2022.

The Company has outstanding guarantees related to certain leases, fixture financing loans and other debt obligations of various retailers as of January 28, 2023.

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 four years .

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 seven years , with a weighted average remaining term of approximately four years .

For each guarantee issued, if the wholesale customer or other third-party defaults on a payment, the Company would be required to make payments under its guarantee.

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

As of October 29, 2022, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $ 17 million ($ 15 million on a discounted basis).

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

As of January 28, 2023, the maximum amount of undiscounted payments the Company would be required to make in the event of default of all guarantees was $ 16 million ($ 14 million on a discounted basis).

Based on the indemnification agreements, personal guarantees and results of the reviews of performance risk, as of January 28, 2023, a total estimated loss of $ 1 million is recorded in the Condensed Consolidated Balance Sheets.

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

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

As of October 29, 2022, the Company had approximately $ 582 million of non-cancelable future purchase obligations, most of which will be paid and utilized in the ordinary course within one year.

As of January 28, 2023, the Company had approximately $ 562 million of non-cancelable future purchase obligations, most of which will be paid and utilized in the ordinary course within one year.

As of January 28, 2023, the Company had commitments of $ 755 million for future undiscounted minimum lease payments on leases signed but not yet commenced with terms of up to 21 years from commencement date.

Legal Proceedings

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On October 7, 2022, the MDL Court issued an order directing the Company and numerous other “non-litigating” defendants to submit by November 1, 2022, a list of opioid cases where the Company is named and opioid dispensing and distribution data.

The Company substantially complied with the order and is working to provide the remaining data.

UNFI is vigorously defending these matters, which it believes are without merit.

The Company produced the data in compliance with the order.

The Company believes these claims are without merit and is vigorously defending this matter.

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.

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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.

The Company believes these claims are without merit and is vigorously defending this matter.

UNFI is currently subject to a qui tam action alleging violations of the False Claims Act (“FCA”).

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On December 6, 2022, the Solicitor General submitted its brief recommending that the Supreme Court grant the petition for certiorari.

On January 13, 2023, the Supreme Court granted the petition for certiorari and oral argument is set for April 18, 2023.

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);

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

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

As of January 28, 2023, 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.

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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-Q

Item 1. Financial Statements