What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-03-06 compared with 2023-12-06 · 125 added, 82 removed, 273 unchanged (43% of the section changed)

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and also includes a manufacturing division and a branded product line division.

We are focused on executing our transformation strategy, which we believe will position us for long-term profitable growth.

Our enterprise-wide business transformation strategy consists of four areas:

We are focused on becoming a more effective and efficient business partner to our customers, which we believe will position us for long-term profitable growth.

Our business transformation initiatives consist of four areas:

network automation and optimization;

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digital offering enhancement and infrastructure unification and modernization.

To enable this business transformation, we have engaged consultants and recruited leadership with transformation experience to upgrade and modernize our technology and platforms to better serve our customers.

To enable these efforts, we have engaged consultants and recruited leadership with the appropriate experience to upgrade and modernize our technology and platforms to better serve our customers.

We are also implementing near-term initiatives to help improve profitability while we execute our longer-term strategy.

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We expect to continue to use available capital to re-invest in our business and we remain committed to improving our financial leverage and reducing outstanding debt over the long term.

We believe we can enhance our profitability and accelerate our growth through our transformation efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions.

We believe we can optimize our performance and profitability through our improvement efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions.

We believe the key drivers for value creation will be improved efficiency through the automation and optimization of our supply chain, as well as new customer growth associated with the benefits of our significant scale, product and service offerings and nationwide footprint.

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We believe food-at-home expenditures as a percentage of total food expenditures are subject to these trends, including changes in consumer behaviors in response to social and economic trends, such as levels of disposable income and the health of the economy in which our customers and our stores operate.

economy has experienced economic volatility in recent years, which has had, and we expect may continue to have, an impact on consumer confidence.

economy has experienced economic volatility in recent years, which has had, and we expect may continue to have, an impact on consumer confidence and behavior.

Consumer spending may continue to be impacted by levels of discretionary income and consumers trading down to a less expensive mix of products for grocery items or buying fewer items.

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Wholesale Distribution Center Network

We evaluate our distribution center network to optimize performance and expect to incur incremental expenses related to any future network realignment, expansion or improvements, including initiatives under the network automation and optimization pillar of our transformation agenda.

We are working to both minimize these potential future costs and obtain new business to further improve the efficiency of our transforming distribution network.

In the second quarter of fiscal 2024, we began the development of a new distribution center in Manchester, Pennsylvania, which has approximately 1.3 million square feet.

We recognized a $205 million right-of-use asset and operating lease liability for this distribution center in the second quarter of fiscal 2024.

Retail Operations

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Cub Foods and Shoppers Food Warehouse anticipate continued investment in improving the customer and associate experience through express remodels focused on customer facing elements.

Impact of Product Cost Inflation

We experienced a mix of inflation across product categories during the first quarter of fiscal 2024.

In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately three percent in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

Cost inflation estimates are based on individual like items sold during the periods being compared.

Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation on Net sales and Gross profit.

Impact of Product Cost Changes

We experienced a mix of inflation and deflation across product categories during the second quarter of fiscal 2024.

In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately two percent in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023.

Cost inflation and deflation estimates are based on individual like items sold during the periods being compared.

Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation and deflation on Net sales and Gross profit.

Absent any changes in units sold or the mix of units sold, inflation generally has the effect of increasing sales.

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Generally, in an inflationary environment as a wholesaler, rising vendor costs result in higher Net sales driven by higher vendor prices when other variables such as quantities sold and vendor promotions are constant.

In the first quarter of fiscal 2024, we experienced fewer and less significant vendor product cost increases as compared to the first quarter of fiscal 2023.

These decreases negatively impacted our gross profit rate when comparing the first quarter of fiscal 2024 to the first quarter of fiscal 2023.

In the second quarter of fiscal 2024, we experienced fewer and less significant vendor product cost increases as compared to the second quarter of fiscal 2023.

These decreases negatively impacted our gross profit rate when comparing the second quarter of fiscal 2024 to the second quarter of fiscal 2023.

Composition of Condensed Consolidated Statements of Operations and Business Performance Assessment

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Adjusted EBITDA excludes certain items because they are non-cash items or items that do not reflect management’s assessment of ongoing business performance.

We believe Adjusted EBITDA is useful to investors and financial institutions because it provides additional information regarding factors and trends affecting our business, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and because of its importance as a measure of underlying operating performance, as the primary compensation performance measure under certain compensation programs and plans.

We believe Adjusted EBITDA is useful because it provides additional information regarding factors and trends affecting our business, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and because of its importance as a measure of underlying operating performance, as the primary compensation performance measure under certain compensation programs and plans.

We believe Adjusted EBITDA is reflective of factors that affect our underlying operating performance and facilitate operating performance comparisons of our business on a consistent basis over time.

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We define Adjusted EBITDA as a consolidated measure which we reconcile by adding Net (loss) income including noncontrolling interests, less Net income attributable to noncontrolling interests, plus Non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus (Benefit) provision for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, Loss (gain) on sale of assets and other asset charges, certain legal charges and gains, and certain other non-cash charges or other items, as determined by management.

The changes to the definition of Adjusted EBITDA from prior periods reflect changes to line item references in our Consolidated Financial Statements, which do not impact the calculation of Adjusted EBITDA.

The changes to the definition of Adjusted EBITDA in the fourth quarter of fiscal 2023 from prior periods reflect changes to line item references in our Consolidated Financial Statements, which do not impact the calculation of Adjusted EBITDA.

Assessment of Our Business Results

The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated.

13-Week Period Ended

(in millions) October 28, 2023 October 29, 2022 Change

13-Week Period Ended 26-Week Period Ended

(in millions) January 27, 2024 January 28, 2023 Change January 27, 2024 January 28, 2023 Change

Net sales $ 7,775 $ 7,816 $ (41) $ 15,327 $ 15,348 $ (21)

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Loss (gain) on sale of assets and other asset charges 5 1 4 24 (4) 28

Operating (loss) income (16) 99 (115)

Operating income 16 63 (47) — 162 (162)

Net periodic benefit income, excluding service cost (4) (7) 3 (7) (14) 7

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The following table reconciles Net (loss) income including noncontrolling interests to Adjusted EBITDA:

13-Week Period Ended

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

13-Week Period Ended 26-Week Period Ended

(in millions) January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Net (loss) income including noncontrolling interests $ (14) $ 22 $ (53) $ 89

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Net periodic benefit income, excluding service cost

(4) (7) (7) (14)

Interest expense, net 40 39 75 74

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Adjusted EBITDA $ 128 $ 181 $ 245 $ 388

(1) The first quarter of fiscal 2024 includes a $21 million non-cash asset impairment charge related to one of our corporate-owned office locations.

(1) Fiscal 2024 includes a $21 million non-cash asset impairment charge related to one of our corporate-owned office locations in the first quarter of fiscal 2024.

(2) Reflects costs associated with business transformation initiatives, primarily including third-party consulting costs and licensing costs, which are included within Operating expenses in the Condensed Consolidated Statements of Operations.

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13-Week Period Ended

Increase (Decrease) 26-Week Period Ended

Increase (Decrease)

Customer Channel (1)

2023 October 29,

2024 January 28,

2023 $ % January 27,

2024 January 28,

Chains $ 3,266 $ 3,322 $ (56) (1.7) % $ 6,450 $ 6,546 $ (96) (1.5) %

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(1) Refer to Note 3—Revenue Recognition in Part 1, Item 1 of this Quarterly Report on Form 10-Q for our channel definitions and additional information.

Our Net sales for the first quarter of fiscal 2024 increased approximately 0.3% from the first quarter of fiscal 2023.

The increase in Net sales was primarily driven by inflation and new business with existing customers, primarily resulting from growth in our Supernatural channel.

These increases were largely offset by a decrease in units sold.

Second Quarter

Our Net sales for the second quarter of fiscal 2024 decreased approximately 0.5% from the second quarter of fiscal 2023.

The decrease in Net sales was primarily driven by a decline in unit volumes, which was partially offset by inflation and new business with existing customers, primarily resulting from growth in our Supernatural channel.

Retail Net sales decreased primarily due to a 4.8% decrease in identical store sales from lower volume.

Our Net sales for fiscal 2024 year-to-date decreased approximately 0.1% from fiscal 2023 year-to-date.

The decrease in Net sales was primarily driven by a decline in unit volumes.

This decrease was largely offset by inflation and new business with existing customers, primarily resulting from growth in our Supernatural channel.

Retail Net sales decreased primarily due to a 4.0% decrease in identical store sales from lower volume.

Cost of Sales and Gross Profit

Our gross profit decreased $66 million, or 6.0%, to $1,030 million for the first quarter of fiscal 2024, from $1,096 million for the first quarter of fiscal 2023.

Our gross profit as a percentage of Net sales decreased to 13.6% for the first quarter of fiscal 2024 compared to 14.6% for the first quarter of fiscal 2023.

The LIFO charge was $7 million and $21 million in the first quarter of fiscal 2024 and 2023, respectively.

E xcluding the non-cash LIFO charge, gross profit rate was 13.7% of Net sales and 14.8% of Net sales for the first quarter of fiscal 2024 and 2023 , respectively.

Our Gross profit decreased $34 million, or 3.2%, to $1,035 million for the second quarter of fiscal 2024, from $1,069 million for the second quarter of fiscal 2023.

Our Gross profit as a percentage of Net sales decreased to 13.3% for the second quarter of fiscal 2024 compared to 13.7% for the second quarter of fiscal 2023.

The LIFO charge was $6 million and $29 million in the second quarters of fiscal 2024 and 2023, respectively.

E xcluding the non-cash LIFO charge, gross profit rate was 13.4% of Net sales and 14.0% of Net sales for the second quarter of fiscal 2024 and 2023 , respectively.

The decrease in gross profit rate, excluding the LIFO charge, was primarily driven by lower levels of procurement gains resulting from decelerating inflation.

Our Gross profit decreased $100 million, or 4.6%, to $2,065 million for fiscal 2024 year-to-date, from $2,165 million for fiscal 2023 year-to-date.

Our Gross profit as a percentage of Net sales decreased to 13.5% for fiscal 2024 year-to-date compared to 14.1% for fiscal 2023 year-to-date.

The LIFO charge was $13 million and $50 million for fiscal 2024 and 2023 year-to-date, respectively.

E xcluding the non-cash LIFO charge, gross profit rate was 13.6% of Net sales and 14.4% of Net sales for fiscal 2024 and fiscal 2023 year-to-date , respectively.

The decrease in gross profit rate, excluding the LIFO charge, was primarily driven by lower levels of procurement gains resulting from decelerating inflation.

Operating Expenses

Operating expenses increased $23 million, or 2.3%, to $1,023 million, or 13.5% of Net sales, for the first quarter of fiscal 2024 compared to $1,000 million, or 13.3% of Net sales, for the first quarter of fiscal 2023.

The increase in Operating expenses as a percentage of Net sales was primarily driven by investments in our transformation initiatives, partially offset by lower transportation and distribution center labor costs due to increased operational efficiencies across our supply chain and a decrease in volume.

Operating expenses increased $8 million, or 0.8%, to $1,010 million, or 13.0% of Net sales, for the second quarter of fiscal 2024 compared to $1,002 million, or 12.8% of Net sales, for the second quarter of fiscal 2023.

Operating expenses increased $31 million, or 1.5%, to $2,033 million, or 13.3% of Net sales, for fiscal 2024 year-to-date compared to $2,002 million, or 13.0% of Net sales, for fiscal 2023 year-to-date.

Loss (Gain) on Sale of Assets and Other Asset Charges

Loss on sale of assets and other asset charges was $19 million in the first quarter of fiscal 2024, compared to a gain on sale of assets of $5 million for the first quarter of fiscal 2023.

The first quarter of fiscal 2024 primarily includes a $21 million asset impairment charge related to one of our corporate-owned office locations.

There were no asset impairment charges in the first quarter of fiscal 2023.

Operating (Loss) Income

Reflecting the factors described above, Operating loss increased $115 million to $16 million for the first quarter of fiscal 2024, compared to operating income of $99 million for the first quarter of fiscal 2023.

The increase in operating loss was primarily driven by a decrease in Gross profit, a loss on sale of assets and other asset charges in the first quarter of fiscal 2024 compared to a gain in the first quarter of fiscal 2023, and an increase in Operating expenses, each as described above.

Loss on sale of assets and other asset charges increased $4 million to $5 million for the second quarter of fiscal 2024, from $1 million for the second quarter of fiscal 2023, driven by a gain on the sale of property and equipment during the second quarter of fiscal 2023, which partially offset losses on the sales of receivables under the accounts receivable monetization program incurred in both periods.

Loss on sale of assets and other asset charges was $24 million for fiscal 2024 year-to-date, compared to a gain on sale of assets of $4 million for fiscal 2023 year-to-date.

Fiscal 2024 year-to-date primarily includes a $21 million asset impairment charge related to one of our corporate-owned office locations.

Fiscal 2024 year-to-date also includes higher losses on the sales of receivables under the accounts receivable monetization program, which was entered into early in the second quarter of fiscal 2023.

Operating Income

Reflecting the factors described above, Operating income decreased $47 million to $16 million for the second quarter of fiscal 2024, compared to $63 million for the second quarter of fiscal 2023.

The decrease in Operating income was primarily driven by a decrease in Gross profit and an increase in Operating expenses, each as described above.

Reflecting the factors described above, Operating income decreased $162 million to $0 million for fiscal 2024 year-to-date, compared to operating income of $162 million for fiscal 2023 year-to-date.

The decrease in Operating income was primarily driven by a decrease in Gross profit, an increase in Operating expenses, and a loss on sale of assets and other asset charges in fiscal 2024 year-to-date compared to a gain in fiscal 2023 year-to-date, each as described above.

Interest Expense, Net

13-Week Period Ended

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

13-Week Period Ended 26-Week Period Ended

(in millions) January 27, 2024 January 28, 2023 January 27, 2024 January 28, 2023

Interest expense on long-term debt, net of capitalized interest $ 37 $ 33 $ 70 $ 65

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Amortization of financing costs and discounts 3 3 5 5

Loss on debt extinguishment — 3 — 3

Interest income — — (1) —

Interest expense, net $ 40 $ 39 $ 75 $ 74

Interest expense, net, in the first quarter of fiscal 2024 was unchanged from the first quarter of fiscal 2023 as higher average interest rates were offset by lower outstanding debt balances and higher interest income.

The increase in interest expense, net, in the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 was primarily driven by higher average interest rates, partially offset by lower loss on debt extinguishment.

The increase in interest expense, net, in fiscal 2024 year-to-date compared to fiscal 2023 year-to-date was primarily driven by higher average interest rates, partially offset by lower loss on debt extinguishment and lower outstanding debt balances.

(Benefit) Provision for Income Taxes

The effective tax rate for the first quarter of fiscal 2024 was a benefit rate of 18.8% on pre-tax loss compared to an expense rate of 6.9% on pre-tax income for the first quarter of fiscal 2023.

The change from the first quarter of fiscal 2023 is primarily driven by the reduction of discrete tax benefits related to employee stock award vestings in the first quarter of fiscal 2024.

The effective tax rate for the second quarter of fiscal 2024 was a benefit rate of 26.3% on pre-tax loss compared to an expense rate of 29.0% on pre-tax income for the second quarter of fiscal 2023.

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

The effective tax rate for fiscal 2024 year-to-date was a benefit rate of 20.9% on pre-tax loss compared to an expense rate of 13.6% on pre-tax income for fiscal 2023 year-to-date.

The change from fiscal 2023 year-to-date is primarily driven by the reduction of discrete tax benefits related to employee stock award vestings in the first quarter of fiscal 2024.

In addition, the first quarter of fiscal 2023 included a tax benefit from the release of reserves for unrecognized tax positions that did not recur in the first quarter of fiscal 2024.

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Reflecting the factors described in more detail above, Net loss attributable to United Natural Foods, Inc.

was $39 million, or $0.67 per diluted common share, for the first quarter of fiscal 2024, compared to Net income attributable to United Natural Foods, Inc.

of $66 million, or $1.07 per diluted common share, for the first quarter of fiscal 2023.

was $15 million, or $0.25 per diluted common share, for the second quarter of fiscal 2024, compared to Net income attributable to United Natural Foods, Inc.

of $19 million, or $0.31 per diluted common share, for the second quarter of fiscal 2023.

Reflecting the factors described in more detail above, Net loss attributable to United Natural Foods, Inc.

was $54 million, or $0.92 per diluted common share, for fiscal 2024 year-to-date, compared to Net income attributable to United Natural Foods, Inc.

of $85 million, or $1.38 per diluted common share, for fiscal 2023 year-to-date.

Segment Results of Operations

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The following tables set forth Net sales and Adjusted EBITDA by segment for the periods indicated.

13-Week Period Ended

(in millions) October 28, 2023 October 29, 2022 Change

13-Week Period Ended 26-Week Period Ended

(in millions) January 27, 2024 January 28, 2023 Change January 27, 2024 January 28, 2023 Change

Wholesale $ 7,487 $ 7,514 $ (27) $ 14,768 $ 14,773 $ (5)

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Total Adjusted EBITDA $ 128 $ 181 $ (53) $ 245 $ 388 $ (143)

Wholesale’s Net sales increased in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 primarily due to inflation and growth in the Supernatural channel, partially offset by a decrease in units sold and declines in the Independent retailers and Chains channels, as discussed in Results of Operations - Net Sales section above.

Retail’s Net sales decreased in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 primarily due to a 3.2% decrease in identical store sales from lower volume.

The decrease in eliminations Net sales in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 was primarily due to a decrease in Wholesale to Retail sales, which are eliminated upon consolidation.

Second Quarter

Wholesale’s Net sales decreased in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 primarily due to a decline in unit volumes and declines in the Independent retailers and Chains channels, partially offset by inflation and growth in the Supernatural channel, as discussed in Results of Operations - Net Sales section above.

Retail’s Net sales decreased in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 primarily due to a 4.8% decrease in identical store sales from lower volume.

Lower eliminations of Net sales in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 were primarily due to a decrease in Wholesale to Retail sales, which are eliminated upon consolidation.

Wholesale’s Net sales decreased for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date primarily due to a decline in unit volumes and declines in the Independent retailers and Chains channels, partially offset by inflation and growth in the Supernatural channel, as discussed in Results of Operations - Net Sales section above.

Retail’s Net sales decreased for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date primarily due to a 4.0% decrease in identical store sales from lower volume.

Lower eliminations of Net sales for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date were primarily due to a decrease in Wholesale to Retail sales, which are eliminated upon consolidation.

Adjusted EBITDA

Wholesale’s Adjusted EBITDA decreased 31.6% for the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

Second Quarter

Wholesale’s Adjusted EBITDA decreased 13.9% for the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023.

The decrease was driven by a decline in gross profit excluding the LIFO charge, partially offset by a decrease in operating expenses.

Wholesale’s Gross profit excluding the LIFO charge for the first quarter of fiscal 2024 decreased $62 million and gross profit rate decreased approximately 89 basis points driven by lower levels of procurement gains resulting from decelerating inflation.

Wholesale’s Gross profit excluding the LIFO charge for the second quarter of fiscal 2024 decreased $30 million and gross profit rate decreased approximately 36 basis points driven by lower levels of procurement gains resulting from decelerating inflation.

Wholesale’s Operating expense decreased $11 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 14—Business Segments.

Wholesale’s operating expense rate decreased 11 basis points primarily driven by lower transportation and distribution center labor costs due to a decrease in volume and increased operational efficiencies across our supply chain.

Wholesale’s depreciation and amortization expense increased $3 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

Retail’s Adjusted EBITDA decreased 105.0% for the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023.

The decrease was driven by a decline in gross profit, and higher operating expenses primarily due to increased costs associated with new stores.

Wholesale’s depreciation and amortization expense increased $4 million in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023.

Retail’s Adjusted EBITDA decreased 71.4% for the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023.

The decrease was driven by a decline in gross profit primarily due to lower volume.

Retail’s Adjusted EBITDA excludes depreciation and amortization, share-based compensation, LIFO charge and other adjustments as outlined in Note 14—Business Segments.

Retail’s depreciation and amortization expense was flat to the first quarter of fiscal 2023.

Other Adjusted EBITDA decreased $16 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 primarily due to an increase in operating expenses.

Retail’s depreciation and amortization expense decreased $2 million in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023.

Other Adjusted EBITDA decreased $11 million in the second quarter of fiscal 2024 as compared to the second quarter of fiscal 2023 primarily due to an increase in operating expenses.

Wholesale’s Adjusted EBITDA decreased 23.7% for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date.

The decrease was driven by a decline in gross profit excluding the LIFO charge, partially offset by a decrease in operating expenses.

Wholesale’s Gross profit excluding the LIFO charge for fiscal 2024 year-to-date decreased $92 million and gross profit rate decreased approximately 62 basis points driven by lower levels of procurement gains resulting from decelerating inflation.

Wholesale’s Operating expense decreased $19 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 14—Business Segments.

Wholesale’s operating expense rate decreased 13 basis points primarily driven by lower transportation and distribution center labor costs due to a decrease in volume and increased operational efficiencies across our supply chain.

Wholesale’s depreciation and amortization expense increased $7 million for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date.

Retail’s Adjusted EBITDA decreased 85.4% for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date.

The decrease was driven by a decline in gross profit primarily due to lower volume, and higher operating expenses primarily due to increased costs associated with new stores.

Retail’s Adjusted EBITDA excludes depreciation and amortization, share-based compensation, LIFO charge and other adjustments as outlined in Note 14—Business Segments.

Retail’s depreciation and amortization expense decreased $2 million for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date.

Other Adjusted EBITDA decreased $27 million for fiscal 2024 year-to-date as compared to fiscal 2023 year-to-date primarily due to an increase in operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

• Total liquidity as of October 28, 2023 was $1,285 million and consisted of the following:

◦ Unused credit under our $2,600 million asset-based revolving credit facility (the “ABL Credit Facility”) was $1,248 million as of October 28, 2023, which decreased $232 million from $1,480 million as of July 29, 2023, primarily due to increased cash utilized to fund seasonal working capital increases.

◦ Cash and cash equivalents was $37 million as of October 28, 2023, which was unchanged from July 29, 2023.

• Our total debt increased $338 million to $2,301 million as of October 28, 2023 from $1,963 million as of July 29, 2023, primarily related to additional borrowings under the ABL Credit Facility to fund seasonal working capital increases.

• Working capital increased $322 million to $1,380 million as of October 28, 2023 from $1,058 million as of July 29, 2023, primarily due to seasonal increases in inventory and accounts receivable levels, partially offset by an increase in accounts payable related to inventories.

• Total liquidity as of January 27, 2024 was $1,430 million and consisted of the following:

◦ Unused credit under our $2,600 million asset-based revolving credit facility (the “ABL Credit Facility”) was $1,396 million as of January 27, 2024, which decreased $84 million from $1,480 million as of July 29, 2023, primarily due to increased cash utilized to fund working capital increases.

◦ Cash and cash equivalents was $34 million as of January 27, 2024, which decreased $3 million from $37 million as of July 29, 2023.

• Our total debt increased $217 million to $2,180 million as of January 27, 2024 from $1,963 million as of July 29, 2023, primarily related to additional borrowings under the ABL Credit Facility to fund working capital increases.

• Working capital increased $187 million to $1,245 million as of January 27, 2024 from $1,058 million as of July 29, 2023, primarily due to increases in accounts receivable and inventory levels, combined with a decrease in accounts payable, accrued expenses and other current liabilities.

Sources and Uses of Cash

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Long-Term Debt

During the first quarter of fiscal 2024, we borrowed a net $340 million under the ABL Credit Facility.

During fiscal 2024 year-to-date, we borrowed a net $242 million under the ABL Credit Facility and made voluntary prepayments on the Term Loan Facility totaling $25 million.

Refer to Note 8—Long-Term Debt in Part I, Item 1 of this Quarterly Report on Form 10-Q for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements and additional information.

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

As of October 28, 2023, we had an aggregate of $750 million of floating rate notional debt subject to active interest rate swap contracts, which effectively fix the SOFR component of our floating interest payments through pay fixed and receive floating interest rate swap agreements.

These fixed rates range from 2.360% to 2.875%, with maturities between October 2023 and October 2025.

The fair values of these interest rate derivatives represent a total net asset of $19 million as of October 28, 2023, and are subject to volatility based on changes in market interest rates.

As of January 27, 2024, we had an aggregate of $850 million of floating rate notional debt subject to active interest rate swap contracts, which effectively fix the SOFR component of our floating interest payments through pay fixed and receive floating interest rate swap agreements.

These fixed rates range from 2.360% to 3.777%, with maturities between March 2024 and June 2027.

The fair values of these interest rate derivatives represent a total net asset of $13 million as of January 27, 2024, and are subject to volatility based on changes in market interest rates.

From time to time, we enter into fixed price fuel supply agreements and foreign currency hedges.

As of October 28, 2023, we had fixed price fuel contracts and foreign currency forward agreements outstanding.

As of January 27, 2024, we had fixed price fuel contracts and foreign currency forward agreements outstanding.

Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant.

Payments for Capital Expenditures

Our capital expenditures increased $7 million in the first quarter of fiscal 2024 to $74 million compared to $67 million for the first quarter of fiscal 2023, primarily due to automation investments in our supply chain.

Our capital spending for the first quarter of fiscal 2024 and 2023 principally included information technology and supply chain expenditures, including maintenance expenditures and investments in growth initiatives.

Fiscal 2024 capital spending is expected to be approximately $400 million and include projects that automate, optimize and expand our distribution network, as well as our technology platform investments.

We expect to finance fiscal 2024 capital expenditures requirements with cash generated from operations and borrowings under our ABL Credit Facility.

Payments for Capital Expenditures and Cloud Technology Implementation Expenditures

Our capital expenditures decreased $10 million for fiscal 2024 year-to-date to $141 million compared to $151 million for fiscal 2023 year-to-date, primarily due to lower retail expenditures.

Our capital spending for fiscal 2024 and 2023 year-to-date principally included supply chain and information technology expenditures, including investments in growth initiatives and maintenance expenditures.

Cloud technology implementation expenditures, which are included in operating activities in the Condensed Consolidated Statements of Cash Flows, were $17 million for fiscal 2024 year-to-date compared to $3 million for fiscal 2023 year-to-date.

Fiscal 2024 capital and cloud implementation spending is expected to be approximately $400 million and include projects that automate, optimize and expand our distribution network, as well as our technology platform investments.

We expect to finance fiscal 2024 capital and cloud implementation expenditures requirements with cash generated from operations and borrowings under our ABL Credit Facility.

Future investments may be financed through long-term debt or borrowings under our ABL Credit Facility and cash from operations.

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26-Week Period Ended

(in millions) October 28, 2023 October 29, 2022 Change

Net cash used in operating activities

(in millions) January 27, 2024 January 28, 2023 Change

Net cash (used in) provided by operating activities

$ (71) $ 270 $ (341)

1 unchanged sentence

(142) (143) 1

Net cash provided by financing activities

Net cash provided by (used in) financing activities

210 (131) 341

Effect of exchange rate on cash — — —

2 unchanged sentences

Cash and cash equivalents, at end of period $ 34 $ 40 $ (6)

The decrease in Net cash used in operating activities in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to lower levels of cash utilized in net working capital, partially offset by lower cash generated from net income in the first quarter of fiscal 2024.

The increase in net cash used in investing activities in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to an increase in payments for capital expenditures in the first quarter of fiscal 2024.

The increase in net cash provided by financing activities in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to a decrease in cash utilized for employee restricted stock tax withholdings and repurchasing common stock, partially offset by a net decrease in proceeds from borrowings under the revolving credit line.

The increase in net cash used in operating activities in fiscal 2024 year-to-date compared to fiscal 2023 year-to-date was primarily due to the monetization of certain receivables in fiscal 2023 year-to-date and lower cash generated from net income in fiscal 2024 year-to-date.

The decrease in net cash used in investing activities in fiscal 2024 year-to-date compared to fiscal 2023 year-to-date was primarily due to lower payments for capital expenditures, partially offset by increased payments for investments in fiscal 2024 year-to-date.

The increase in net cash provided by financing activities in fiscal 2024 year-to-date compared to fiscal 2023 year-to-date was primarily due to an increase in net borrowings under the revolving credit line resulting from increases in net cash used in operating activities, as described above.

Other Obligations and Commitments

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Pension and Other Postretirement Benefit Obligations

In fiscal 2024, no minimum pension contributions are required to be made under the SUPERVALU INC.

In fiscal 2024, no minimum pension contributions are required to be made to the SUPERVALU INC.

Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

16 unchanged sentences

Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP.

We made contributions to these plans, and recognized expense of $48 million in fiscal 2023.

In fiscal 2024, we expect to contribute approximately $50 million to multiemployer plans, subject to the outcome of collective bargaining and capital market conditions.

We expect required cash payments to fund multiemployer pension plans from which we have withdrawn to be insignificant in any one fiscal year, which would exclude any payments that may be agreed to on a lump sum basis to satisfy existing withdrawal liabilities.

7 unchanged sentences

In September 2022, our Board of Directors authorized a repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”).

We did not repurchase any shares of our common stock in the first quarter of fiscal 2024.

As of October 28, 2023, we had $138 million remaining authorized under the 2022 Repurchase Program.

We did not repurchase any shares of our common stock in fiscal 2024 year-to-date.

As of January 27, 2024, we had $138 million remaining authorized under the 2022 Repurchase Program.

We will manage the timing of any repurchases of our common stock in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes.

8 unchanged sentences

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 2. Management’s Discussion and Analysis