What changed in this filing

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Item 1A. Risk Factors

2024-10-01 compared with 2023-09-26 · 78 added, 92 removed, 265 unchanged (39% of the section changed)

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The loss or cancellation of business from our principal customers, including due to the utilization of alternative sources of products, whether through other distributors or increased self-distribution, closures of stores, reductions in the amount of products that our customers sell to their customers, operational issues 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 21% of our Net sales in fiscal 2023.

We serve as the primary distributor of natural, organic, and specialty non-perishable products, and also distribute certain specialty protein, cheese, culinary items, 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.

For example, our largest customer accounted for approximately 23% of our Net sales in fiscal 2024.

We serve as the primary distributor of natural, organic and specialty non-perishable products, and also distribute certain specialty protein, cheese, culinary items, deli items and products from health, beauty and supplement categories to this customer under the terms of our distribution agreement, which expires on May 20, 2032.

A loss or significant decrease in volume with our largest customer could impact our ability to efficiently serve other, smaller customers in these categories who utilize these distribution centers.

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 the 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.

Similarly, if our largest customer diverts some or all of its purchases from us, 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.

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Consumers also have more choices for grocery and consumable purchases, including mass merchandisers, eCommerce providers, deep discount retailers, limited assortment stores, wholesale membership clubs and meal-delivery services, 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.

We may not be able to compete effectively against current and future competitors.

Our ability to compete successfully is 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, 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.

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, resulting in more direct competition 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.

Relatively low barriers to entry have led to the emergence of alternative business models and channels 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.

Further, club stores, commercial wholesale outlets, direct food wholesalers and online food retailers have developed lower cost structures, creating increased pressure on the industry’s profit margins.

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.

Our current or potential competitors may 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.

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

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

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 further decline.

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.

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

We have experienced volatile levels of inflation during the past few years, which has had varying impacts on our business.

For example, we experienced negative impacts on our profitability as inflation slowed in recent years and decreased the positive impact of inflation-related buying activities.

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, or to the extent our operating expenses increase.

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.

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

Conversely, our profit levels may be negatively impacted during periods of slowing inflation or 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.

We may not realize the anticipated benefits of our transformation initiatives.

Our long-term strategy includes transforming our business, particularly the areas of network automation and optimization, which is designed to make our distribution network more efficient and improve the customer experience;

commercial value creation, which is aimed at generating more profitable revenue growth through simplified pricing and procurement, as well as enhancing analytical insights for customers and suppliers;

digital offering enhancement, which is intended to enhance the functionality of our digital commercial platforms, including through the use of artificial intelligence and machine learning;

and infrastructure unification and modernization, which is intended to upgrade and simplify our digital infrastructure.

We may not realize the anticipated benefits of our strategic initiatives.

Our long-term strategy is centered on adding value to our customers and suppliers through our expansive assortment of products, services, programs and insights that help them grow and compete.

Simultaneously, we are working to improve free cash flow by focusing on what we can control around the areas of network optimization, reduced levels of capital intensity and optimization of our cost structure.

The successful design, implementation and management of these initiatives may present significant challenges, many of which are beyond our control.

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These shortages caused us to incur higher operating expenses due to the cost of moving products between our distribution facilities to maintain expected service levels, and we cannot anticipate whether this trend 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.

We are also subject to supply chain uncertainties 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, 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 of 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.

In addition, increased costs of imported goods, including due to tariffs, import restrictions, 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 and support a variety of promotional programs and services with our suppliers.

We manage these programs and services to increase sales while maintaining or improving our margins.

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, including decreased promotional forward-buying opportunities, and we may experience further reductions or changes in promotional spending (including as a result of the increasing attractiveness of alternative retail channels), 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 they sell to us or discontinue selling to us.

We have no assurances of continued supply, pricing or access to new products, and suppliers could change the terms upon which they sell to us, the services they request from us or discontinue selling to us altogether.

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.

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

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.

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, we may be more susceptible to labor shortages than our competitors.

We have incurred increased costs to retain and 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.

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

As of July 29, 2023, approximately 10,667 of our 29,455 employees (approximately 36%) were covered by 49 collective bargaining agreements, including agreements under negotiation, which expire through May 31, 2027.

As of August 3, 2024, approximately 10,704 of our 28,333 employees (approximately 38%) were covered by 48 collective bargaining agreements, including existing agreements under negotiation, which expire through June 1, 2029.

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.

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Depending on the length of time of any work stoppage or if we are required to employ replacement workers and implement 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.

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 those negotiated prior to such expanded union-organizing efforts.

We have engaged, and may continue to engage in, acquisitions and may encounter difficulties integrating acquired businesses and may not realize the anticipated benefits of our acquisitions.

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

Acquisitions present significant challenges and risks relating to the integration of acquired businesses.

Our ability to achieve the expected benefits of acquisitions will depend on, among other things, our ability to effectively execute on our business strategies, integrate and manage the combined operations, retain customers and suppliers on terms similar to those in place with the acquired businesses, achieve desired operating efficiencies and sales growth, optimize delivery routes, coordinate administrative and distribution functions, integrate management information systems, expand into new markets to include markets of the acquired business, retain and assimilate the acquired businesses’ employees, and maintain our financial and internal controls and systems as we expand our operations.

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.

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 businesses we acquire may also have liabilities or adverse operating issues, including some that are 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.

To the extent that we seek to acquire other businesses in exchange for our common stock, fluctuations in our stock price could have a material adverse effect on our ability to complete acquisitions.

If we are unable to integrate acquired businesses successfully or to realize anticipated economic, operational or other benefits and synergies in a timely manner, management’s resources could be diverted and our business, financial condition, or operating results could be materially and adversely affected, particularly in transition periods immediately following the consummation of those transactions.

We may have difficulty managing our growth, and our growth plans may not produce the results that we expect.

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 and automation initiatives, or adequately manage our personnel.

We have been the focus of union-organizing efforts, and we believe it is likely that similar efforts will continue in the future.

We are in the process of negotiating collective bargaining agreements with newly certified units.

New contracts could have substantially less favorable terms than our existing contracts.

We may fail to realize the expected benefits of strategic transactions or fail to effectively integrate the businesses we acquire, which may adversely affect our business, financial condition and results of operations.

We have engaged in, and could continue to pursue, strategic transactions.

Strategic transactions present significant challenges and risks relating to execution.

Our ability to achieve the expected benefits of strategic transactions will depend on, among other things, our ability to effectively execute on our business strategies, integrate and manage the combined operations for acquisitions, retain customers and suppliers on terms similar to those in place prior to the transaction, achieve desired operating efficiencies and sales growth, optimize delivery routes, coordinate administrative and distribution functions, integrate management information systems, expand into new markets to include markets of the acquired business, retain our associates and retain and assimilate the acquired businesses’ employees and maintain our financial and internal controls and systems as we evolve our operations.

Achieving the anticipated benefits of strategic transactions also depends on the adequacy of our implementation plans and the ability of management to oversee and operate effectively any changes to the operations.

Our growth plans may not produce the results that we expect.

Our future growth may be limited by our ability 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 and automation initiatives, or adequately manage our personnel.

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 not to have, operational challenges.

If we are unable 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 if our distribution centers have increased operational challenges it could have a material impact on our ability to grow.

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 existing personnel, systems, procedures and controls may not be adequate to support the future growth of our operations.

In addition, we have recently appointed 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 will differentiate us from our competitors and increase demand for our products.

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.

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.

Further, a key element of our current growth strategy is to increase the amount of differentiated products that we distribute and services that we offer.

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

If we are unable to increase these differentiated products and services, our business, financial condition or results of operations may be materially and adversely affected.

Our wholesale distribution and services businesses 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.

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.

If there were a rapid reduction in demand for the products we distribute or services we offer, 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.

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The magnitude of these risks increases as the size of our wholesale customers increases.

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.

Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, and responses thereto, have impacted our business directly and may in the future impact our business by, among other things, increasing our costs, impacting our supply chain and driving change in customer and consumer demand for our products, which could have an adverse effect on our business, financial condition or results of operations.

While our operations have generally stabilized since the peak of the pandemic, we cannot predict with certainty the extent that our operations may be impacted by any continuing effects of any pandemics, including COVID-19, on us or on our business partners, suppliers and customers, and each of their financial conditions;

however, any adverse effect on these parties could materially and adversely impact us.

To the extent that any pandemics, including COVID-19, continue to affect the U.S.

and global economy and our business, they may also heighten other risks described in this section, including but not limited to those related to consumer behavior and expectations, competition, implementation of strategic initiatives, cybersecurity threats, payment-related risks, supply chain disruptions, labor availability and cost, litigation and operational risk as a result of regulatory requirements.

Many of our customers are not obligated to continue purchasing products from us, and larger customers that have multiyear contracts with us may terminate these contracts early in certain situations or choose not to renew or extend these contracts at expiration.

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If these customers were to terminate or fail to perform under these contracts prior to their scheduled termination, or if we or the customer elected not to renew or extend the term of the contract at its expiration or not to renew or extend at historical purchase levels, it may have a material adverse effect on our business, financial condition or results of operations, including additional operational expenses to transition out of the business or to adjust our facilities and staffing costs to cover the reduction in Net sales.

The cost of the capital available to us and limitations on our ability to access additional capital may have a material adverse effect on our business, financial condition, or results of operations.

Historically, acquisitions and capital expenditures have been a large component of our growth.

We anticipate that capital expenditures will continue to be, and acquisitions may be, important to our growth in the future.

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 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.

Disruptions to our or third-party information technology systems, including cyber-attacks and security breaches, and the costs of maintaining secure and effective information technology systems could negatively affect our business and results of operations .

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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.

Additionally, we are subject to PCI DSS as a service provider, which is a business entity that is not a payment brand directly involved in the processing, storage or transmission of cardholder data.

PCI DSS contains compliance guidelines and standards with regard to our security surrounding the physical and electronic storage, processing and transmission of individual cardholder data.

By accepting debit cards for payment, we are also subject to compliance with American National Standards Institute data encryption standards and payment network security operating guidelines.

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 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 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.

If our customers suffer significant financial difficulty, they may be unable to pay their debts to us timely or at all, which could have a material adverse effect on our business, financial condition or results of operations.

It is possible that customers may reject their contractual obligations to us under bankruptcy laws or otherwise.

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

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.

Further, we may have to negotiate significant discounts and/or extended financing terms with these customers in such a situation, each of which could have a material adverse effect on our business, financial condition or results of operations.

During periods of economic weakness, small to medium-sized businesses, like many of our independent 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 macro-economic shifts or significant weather events.

Consequently, the ability of such businesses to make payments 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.

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

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.

These factors include governmental regulations such as The Patient Protection and Affordable Care Act, which has resulted in changes to the U.S.

These factors include governmental regulations such as The Patient Protection and Affordable Care Act, which resulted in changes to the U.S.

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

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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.

The cost of the capital available to us and limitations on our ability to access additional capital may have a material adverse effect on our business, financial condition or results of operations.

Historically, acquisitions and capital expenditures have been a large component of our growth.

We anticipate that capital expenditures will continue to be, and acquisitions may be, important to our growth in the future.

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 $2,600 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 6.750% 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 $2,730 million asset-based revolving credit facility (the “ABL Credit Facility”) entered into in June 2022, as amended, and the term loan agreement (the “Term Loan Agreement”) related to our $500 million term loan facility (the “Term Loan Facility”) entered into on October 22, 2018, as amended, and the indenture governing our unsecured 6.750% 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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Failure to comply with these covenants could 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.

It is possible that customers may reject their contractual obligations to us under bankruptcy laws or otherwise.

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

During periods of economic weakness, small to medium-sized businesses, like many of our independent 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 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.

Impairment charges for long-lived assets could adversely affect the Company’s financial condition and results of operations.

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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.

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

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

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

As of July 29, 2023, we had approximately $2.0 billion of long-term debt outstanding.

As of August 3, 2024, we had approximately $2.1 billion of long-term debt outstanding.

Our leverage, and any increase therein, could have important potential consequences, including, but not limited to:

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• 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, returning capital to stockholders through dividends or 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;

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

• restricting us from making desired strategic acquisitions in the future or causing us to make non-strategic divestitures;

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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.

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

Damage or disruption to our distribution capabilities due to weather, including extreme or prolonged weather conditions, natural disaster, fire, civil unrest, terrorism, pandemic, strikes, product recalls or safety concerns generally, crop conditions, availability of key commodities, regulatory actions, disruptions in technology, the financial and/or operational instability of key suppliers, performance by outsourced service providers, transportation interruptions, labor supply or stoppages or vendor defaults or disputes, or other reasons could impair our ability to distribute our products.

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.

Increased fuel costs may adversely affect our results of operations.

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If fuel costs continue to increase in the future, we may experience difficulties in passing all or a portion of these costs along to our customers, 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.

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

Legal and Regulatory Risks

We are subject to significant governmental regulation and failure to comply with such regulations may have a material adverse effect on our business, financial condition or results of operations.

Our business is highly regulated at the federal, state, and local levels, and our products and distribution operations require various licenses, permits and approvals, including:

Our business is highly regulated at the federal, state, and local levels, and our products and distribution operations require various licenses, permits and approvals.

• The products that we distribute in the United States are subject to inspection by the United States Food and Drug Administration.

• 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;

• 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, the Environmental Protection Agency and various state health and workplace safety authorities.

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

19 unchanged sentences

Failure to comply with existing or new laws or regulations could result in significant damages, penalties and/or litigation costs.

Information Security :

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.

Additionally, we are subject to PCI DSS as a service provider, which is a business entity that is not a payment brand directly involved in the processing, storage or transmission of cardholder data.

PCI DSS contains compliance guidelines and standards with regard to our security surrounding the physical and electronic storage, processing and transmission of individual cardholder data.

By accepting debit cards for payment, we are also subject to compliance with American National Standards Institute data encryption standards and payment network security operating guidelines.

Foreign Operations :

52 unchanged sentences

Any such claims can be time consuming and costly to defend and may distract management’s attention and resources, even if the claims are without merit, and may prevent us from using our trademarks in certain geographies or in connection with certain products and services, any of which could adversely affect our business.

UNRESOLVED STAFF COMMENTS

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