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What changed in UNITED NATURAL FOODS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of UNITED NATURAL FOODS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+351 added−372 removedSource: 10-K (2023-09-26) vs 10-K (2022-09-27)

Top changes in UNITED NATURAL FOODS INC's 2023 10-K

351 paragraphs added · 372 removed · 260 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

56 edited+32 added−32 removed39 unchanged
Biggest changeOur Better for All Report and the contents of our Better For All webpage are not incorporated by reference into or considered to be part of this Annual Report. 1 Table of Contents Better for Our World We continue to focus on reducing our environmental impact, conserving natural resources and promoting sustainability across our value chain and in our operations.
Biggest changeThe report is available on our website at www.betterforall.unfi.com and highlights progress toward goals including waste reduction, supplier diversity, food donations, and food safety. Our Better for All report and the contents of our Better for All webpage are not incorporated by reference into or considered to be part of this Annual Report.
ESSENTIAL EVERYDAY® is our leading national brand equivalent private label solution with 2,500+ items for departments throughout the store. It is complemented by SHOPPERS VALUE®, which offers the budget conscious consumer quality alternatives to national brands. Our WILD HARVEST® brand offers a full range of products made with simple, wholesome ingredients across multiple categories, including pet foods.
ESSENTIAL EVERYDAY® is our leading national brand equivalent private label solution with nearly 2,500 items for departments throughout the store. It is complemented by SHOPPERS VALUE®, which offers the budget conscious consumer quality alternatives to national brands. Our WILD HARVEST® brand offers a full range of products made with simple, wholesome ingredients across multiple categories, including pet foods.
Acquisitions A key component of our historical growth has been to acquire distribution companies differentiated by product offerings, service offerings and market area. We believe the expanded product and service offerings from these acquisitions has enhanced and will continue to support our ability to acquire new customers and present opportunities for cross-selling complementary product lines.
Acquisitions A key component of our historical growth has been to acquire distribution companies differentiated by product offerings, service offerings and market area. We believe the expanded product and service offerings from these acquisitions have enhanced and will continue to support our ability to acquire new customers and present opportunities for cross-selling complementary product lines.
Net sales to customers are determined at the time of sale based on the then prevailing vendor listed base cost, and include discounts we offer to our customers. The differential between the procured cost, including vendor funds and inbound freight, as compared to the net sales price of these products, generates our gross margin.
Net sales to customers are determined at the time of sale based on the then prevailing vendor listed base cost, and include discounts we offer to our customers. The differential between the procured cost, including vendor funds and inbound freight, as compared to the net sales price of these products, primarily generates our gross margin.
Our Board of Directors is diverse in gender and ethnic background, as well as having a broad range of experience, with four out of 11 directors identifying as female, two members identifying as African American, one member identifying as Asian American and one member identifying as LGBTQ+.
Our Board of Directors is diverse in gender and ethnic background, as well as having a broad range of experience, with four out of 11 directors identifying as female, two members identifying as African American, one member identifying as Asian American, one member identifying as LGBTQ+ and two members identifying as veterans.
We also provide our customers with: • trends reports in the natural and organic industry: • product data information such as best seller lists, store usage reports and catalogs; • assistance with store layout designs, new store design and equipment procurement; • planogramming, shelf and category management support; • in-store signage and promotional materials, and assistance with product display planning and set up; • shelf tags for products; and • a robust retailer portal with product information, search and ordering capabilities, reports and publications.
We also offer our customers: • trends reports in the natural and organic industry: • product data information such as best seller lists, store usage reports and catalogs; • assistance with store layout designs, new store design and equipment procurement; • planogramming, shelf and category management support; • in-store signage and promotional materials, and assistance with product display planning and set up; • shelf tags for products; and • a robust retailer portal with product information, search and ordering capabilities, reports and publications.
Substantially all product categories that we distribute are available from a number of suppliers and, therefore, we are not dependent on any single supply source for any product category. In addition, although we have exclusive distribution arrangements and support programs with several suppliers, none of our suppliers accounted for more than 5% of our total purchases in fiscal 2022.
Substantially all product categories that we distribute are available from a number of suppliers and, therefore, we are not dependent on any single supply source for any product category. In addition, although we have exclusive distribution arrangements and support programs with several suppliers, none of our suppliers accounted for more than 5% of our total purchases in fiscal 2023.
We make our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) available free of charge through our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the Securities and Exchange Commission. 9 Table of Contents
We make our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) available free of charge through our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the Securities and Exchange Commission.
We believe we are North America’s premier wholesaler with 56 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
We believe we are North America’s premier grocery wholesaler with 55 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
In addition, interstate motor carrier operations are subject to safety requirements prescribed by the United States Department of Transportation and other relevant federal and state agencies. Such matters as weight and dimension of equipment are also subject to federal and state regulations. 7 Table of Contents Our facilities are subject to regulations issued pursuant to the U.S.
In addition, interstate motor carrier operations are subject to safety requirements prescribed by the United States Department of Transportation and other relevant federal and state agencies. Such matters as weight and dimension of equipment are also subject to federal and state regulations. Our facilities are subject to regulations issued pursuant to the U.S.
We have implemented and continue to develop import/export and anti-corruption compliance programs and processes to comply with applicable laws and regulations governing our international business activities. Human Capital Management Our employees are critical to supporting our values and achieving our strategic vision. Through our UNFI Pride strategic pillar, we are striving to be an employer of choice.
We have implemented and continue to develop import/export and anti-corruption compliance programs and processes to comply with applicable laws and regulations governing our international business activities. Human Capital Management Our employees are critical to supporting our values and achieving our strategic vision, and we are striving to be an employer of choice.
A typical retail store carries approximately 17,000 to 21,000 core stock-keeping units (“SKUs”) and ranges in size from approximately 50,000 to 70,000 square feet. We believe our retail banners have strong local and regional brand recognition in the markets in which they operate. Our Retail operations are principally supplied by five of our Wholesale distribution centers.
A typical retail store carries approximately 17,000 to 21,000 core SKUs and ranges in size from approximately 50,000 to 70,000 square feet. We believe our retail banners have strong local and regional brand recognition in the markets in which they operate. Our Retail operations are principally supplied by five of our Wholesale distribution centers.
In addition, our four Canadian distribution centers in British Columbia and Ontario each hold an organic distributor certification from either QAI or ProCert Canada. We maintain a comprehensive quality assurance program. All of the products we sell that are represented as “organic” are required to be certified as such by an independent third-party agency.
In addition, our two Canadian distribution centers in British Columbia and Ontario each hold an organic distributor certification from QAI. We maintain a comprehensive quality assurance program. All of the products we sell that are represented as “organic” are required to be certified as such by an independent third-party agency.
To maintain our market position and improve our operating efficiencies, we seek to continually: • expand our marketing and customer service programs across regions; • expand our national purchasing opportunities; • offer a broader product and value add service selection than our competitors; • offer operational excellence with high service levels and a higher percentage of on-time deliveries and fill rates than our competitors; • centralize and streamline general and administrative functions to reduce expenses; • consolidate systems applications among physical locations and regions; and • invest in our people, facilities, equipment and technology.
To maintain our market position and improve our operating efficiencies, we seek to continually: • expand our marketing and customer service programs across regions; • expand our national purchasing opportunities; • offer a broader product and value add service selection than our competitors; • offer operational excellence with high service levels and a higher percentage of on-time deliveries and fill rates than our competitors; • centralize and streamline general and administrative functions to reduce expenses; • consolidate systems applications among physical locations and regions; and • invest in our people, facilities, equipment and technology. 3 Table of Contents Procurement We maintain contracts with suppliers to procure their products.
Our food distribution business competes with many traditional and specialty grocery wholesalers and retailers that maintain or develop self-distribution systems for the business of independent grocery retailers. We also increasingly compete with deep discount retailers, limited assortment stores and wholesale membership clubs.
Our food distribution business competes with many traditional and specialty grocery wholesalers and retailers that maintain or develop self-distribution systems for the business of independent grocery retailers. We also increasingly compete with deep discount retailers, limited assortment stores, wholesale membership clubs, and eCommerce and other internet-based businesses.
Additionally, we provide to eligible associates a leading edge, no-cost wellness program, paid time off programs including paid parental leave, an employee assistance program, 401(k) plan, a back-up childcare program, and a recently enhanced education assistance program. Diversity and Inclusion We pledge to promote equity, celebrate diversity, dismantle systemic racism and support justice and inclusion for all.
Additionally, we provide to eligible associates a leading edge, no-cost wellness program, paid time off programs including paid parental leave, an employee assistance program, 401(k) plan, a back-up childcare program, and a recently enhanced education assistance program. 8 Table of Contents Diversity, Equity and Inclusion We pledge to promote equity, celebrate diversity and support justice and inclusion for all.
Our retail stores provide an extensive grocery offering and, depending on size, a variety of additional products, including general merchandise, home, health and beauty care, and pharmacy. We offer national and local brands, as well as our own private label products.
Retail Our Retail segment includes 78 Cub Foods and Shoppers retail grocery stores. Our retail stores provide an extensive grocery offering and, depending on size, a variety of additional products, including general merchandise, home, health and beauty care, and pharmacy. We offer national and local brands, as well as our own private label products.
Wholesale business. Product and service categories include grocery, fresh, wellness, private brands, eCommerce, foodservice and multi-cultural. This operating structure includes regional sales organizations and distribution center networks, which offer a combination of conventional and natural products to our customers as a consolidated supply solution.
Product and service categories include grocery, fresh, private brands, wellness and personal care items, eCommerce, and foodservice. This operating structure includes regional sales organizations and distribution center networks, which offer a combination of conventional and natural products to our customers as a consolidated supply solution.
Our Field Day® brand is primarily sold to natural store / co-op retailers as a private label solution. Our category-specific brands, EQUALINE®, CULINARY CIRCLE®, ARCTIC SHORES SEAFOOD COMPANY®, STONE RIDGE CREAMERY® and SUPER CHILL®, also provide national brand equivalent products at a competitive price.
Our Field Day® brand is primarily sold to natural store / co-op retailers as a private label solution. Our category-specific brands, primarily including STONE RIDGE CREAMERY®, EQUALINE®, and CULINARY CIRCLE®, also provide national brand equivalent products at a competitive price.
We optimize our facilities to implement leading warehouse technology, ranging from radio-frequency devices guiding selectors to mechanized facilities with completely automated order selection for dry groceries that help us deliver aisle-ready pallets to Wholesale customers.
We are in the process of optimizing our facilities to implement leading warehouse technology, ranging from radio-frequency devices guiding selectors to mechanized facilities with completely automated order selection for dry groceries that help us deliver aisle-ready pallets to Wholesale customers.
We offer six main product categories: grocery and general merchandise; produce; perishables and frozen foods; nutritional supplements and sports nutrition; bulk and foodservice products; and personal care items. Our owned brands portfolio is a collection of brands that offer high quality solutions for private label to our customers.
We offer the following main product categories: grocery and general merchandise; perishables; frozen foods; wellness and personal care items; and bulk and foodservice products. Our owned brands portfolio is a collection of brands that offer high quality solutions for private label to our customers.
Our services include retail store support, pricing strategy, shelf and planogram management, advertising, couponing, eCommerce, consumer convenience services, store design, equipment sourcing, electronic payments processing, network and data hosting solutions, point-of-sale hardware and software, automation tools, sustainability services and administrative back-office solutions.
Our services include shelf and planogram management, retail store support, pricing strategy, electronic payments processing, advertising, couponing, store design, equipment sourcing, point-of-sale hardware and software, network and data hosting solutions, consumer convenience services, eCommerce, automation tools, sustainability services and administrative back-office solutions. The sales and operating results for these services are included within Wholesale.
Our Blue Marble Brands portfolio is a collection of national brands that offer USDA organic, non-GMO Project Verified, and specialty food and non-food items. The WOODSTOCK® brand has been pioneering organic/non-GMO products for over 35 years and continues to launch innovative products. TUMARO’S is our better for you wrap brand.
Our Blue Marble Brands portfolio is a collection of national brands that offer United States Department of Agriculture (“USDA”) organic, non-GMO Project Verified, and specialty food and non-food items. The WOODSTOCK® brand has been pioneering organic / non-GMO products for over 35 years and continues to launch innovative products.
Procurement We maintain contracts with suppliers to procure their products. Our procurement process includes assessments of demand planning, pricing, seasonality and other factors. Inventory costs are determined when products are procured, and include vendor funds received and inbound freight, among other items.
Our procurement process includes assessments of demand planning, pricing, seasonality and other factors. Inventory costs are determined when products are procured, and include vendor funds received and inbound freight, among other items.
We also have invested in several initiatives, including the development and implementation of a new safety brand and pledge, Every Moment Matters, that is designed to foster a caring culture, the implementation of interactive and proven training programs, which were rolled out across our network, and enhanced safety auditing.
We also continue to invest in our safety brand and pledge, Every Moment Matters, which is designed to foster a caring culture, the implementation of interactive and proven training programs, which were rolled out across our network, and enhanced safety auditing.
Trade and consumer marketing programs are supplier-sponsored programs that cater to a broad range of retail formats. All of our programs and services are designed to educate consumers, profile suppliers and increase sales for retailers, many of which do not have the resources necessary to conduct such marketing programs independently. Our goal is to provide support to ensure long-term success.
All of our programs and services are designed to educate consumers, profile suppliers and increase sales for retailers, many of which do not have the resources necessary to conduct such marketing programs independently. Our goal is to provide support to ensure collective long-term success.
This includes sales to eCommerce companies as well as business-to-business sales to non-traditional customers. In fiscal 2021, we launched Community Marketplace by UNFI, a business-to-business digital eCommerce solution for emerging brands looking to expand distribution with UNFI customers.
In fiscal 2021, we launched Marketplace by UNFI, a business-to-business digital eCommerce solution for emerging brands looking to expand distribution with UNFI customers.
We offer approximately 260,000 products consisting of national, regional and private label brands grouped into six product categories: grocery and general merchandise; produce; perishables and frozen foods; nutritional supplements and sports nutrition; bulk and foodservice products; and personal care items.
We offer approximately 250,000 products consisting of national, regional and private label brands grouped into the following main product categories: grocery and general merchandise; perishables; frozen foods; wellness and personal care items; and bulk and foodservice products.
In fiscal 2022, we created a new role and hired a new Senior Vice President, Occupational and Food Safety. Seasonality Overall product sales are fairly balanced throughout the year, although demand for certain products of a seasonal nature may be influenced by holidays, changes in seasons or other annual events.
Seasonality Overall product sales are fairly balanced throughout the year, although demand for certain products of a seasonal nature may be influenced by holidays, changes in seasons or other annual events.
We maintain current certification affidavits on most organic commodities and produce in order to verify the authenticity of the product. Most potential suppliers of organic products are required to provide such third-party certifications to us before they are approved as suppliers. Our Suppliers We purchase our products from nearly 12,000 suppliers.
We maintain current certification affidavits on most organic commodities and produce in order to verify the authenticity of the product. Most potential suppliers of organic products are required to provide such third-party certifications to us before they are approved as suppliers. Our Technology Investments We continue to make significant investments in distribution, financial, information and warehouse management systems.
The Elevate program for Director-level and above associates, as well as the Operations Leadership Academy for leaders in our distribution centers, work to solidify our talent pipeline and promote the success of the organization’s future leaders. Key groups, such as Sales and Risk & Safety, develop role-based training to drive greater productivity and safety.
The Elevate program for Director-level and above associates works to solidify our talent pipeline and promote the success of the organization’s future leaders. Our Learning & Development teams partner with key groups such as Sales, Operations, Transportation and Environmental Health & Safety to develop role-based training to drive greater productivity and safety.
When financially advantageous, we pick up products from suppliers or satellite staging facilities and return them to our distribution centers using our own trucks.
Products are delivered to our distribution centers primarily by our fleet of leased and owned trucks, contract carriers and the suppliers themselves. When financially advantageous, we pick up products from suppliers or satellite staging facilities and return them to our distribution centers using our own trucks.
We have been the primary distributor to Whole Foods Market for more than 20 years. We continue to serve as the primary distributor to Whole Foods Market in all of its regions in the United States pursuant to an amended distribution agreement with a term through September 27, 2027.
We continue to serve as the primary distributor to Whole Foods Market in all of its regions in the United States pursuant to an amended distribution agreement with a term through September 27, 2027. Whole Foods Market is our only customer that represented more than 10% of total Net sales in fiscal 2023.
The Company expects to selectively and strategically engage in acquisitions to enhance our capabilities and geographic footprint. Since our strategic $2.3 billion acquisition of conventional distributor, Supervalu, the Company has prioritized the integration of Supervalu and debt reduction and has not undertaken any additional material acquisitions.
Since our strategic $2.3 billion acquisition of conventional distributor, Supervalu, the Company has prioritized the integration of Supervalu and debt reduction and has not undertaken any additional material acquisitions. We may consider strategic acquisitions to enhance our capabilities and geographic footprint, when we determine that to be the most efficient use of capital.
We are focused on associate engagement, empowerment and safety to foster innovation and bring best-in-class solutions to our customers and suppliers in an ever-changing retail landscape, including new ways of work scheduling and productivity investments. In fiscal 2021, we created Compensation Committee oversight for human capital management matters with a focus on associate wellbeing across a variety of measures.
We are focused on associate engagement, empowerment and safety to foster innovation and bring best-in-class solutions to our customers and suppliers in an ever-changing retail landscape, including new ways of work scheduling and productivity investments.
Our retail stores have continued to respond to growing competition from online and non-traditional retailers by adding options and services such as online ordering, curbside pick-up and home delivery.
Competitive strategies vary based on many factors, such as the competitor’s format, strengths, weaknesses, pricing, and sales focus. Our retail stores have continued to respond to growing competition from online and non-traditional retailers by adding options and services such as online ordering, curbside pick-up and home delivery.
We serve over 30,000 unique customer locations, primarily located across the United States and Canada, which we classify into five customer types: Chains; Independent retailers; Supernatural; Retail; and Other. Refer to Note 3—Revenue Recognition in Part II, Item 8 of this Annual Report for additional information.
We serve over 30,000 unique customer locations, primarily located across the United States and Canada, which we classify into five customer types: Chains; Independent retailers; Supernatural; Retail; and Other.
The sales and operating results for these services are included within Wholesale. 4 Table of Contents Our Marketing Services We offer a variety of marketing services designed to increase sales for our customers and suppliers, including consumer and trade marketing programs, as well as programs to support suppliers in understanding our markets.
Our Marketing Services We offer a variety of marketing services designed to increase sales for our customers and suppliers, including consumer and trade marketing programs, as well as programs to support suppliers in understanding our markets. Trade and consumer marketing programs are supplier-sponsored programs that cater to a broad range of retail formats.
We built a diversity and inclusion team, and our diversity and inclusion strategy is built on a foundation of research, best practices and leadership commitment.
We built a Diversity, Equity and Inclusion (“DEI”) team, and our DEI strategy is built on a foundation of research, best practices and leadership commitment. Our Vice President of Diversity, Inclusion, Equity and Wellbeing oversees our DEI efforts, inclusive procurement initiatives and wellbeing programs.
Each region is responsible for placing its own orders and can select the products that it believes will most appeal to its customers, although each region is able to participate in our company-wide purchasing programs.
Each region is responsible for placing its own orders and can select the products that it believes will most appeal to its customers, although each region is able to participate in our company-wide purchasing programs. 5 Table of Contents Our Distribution Network Logistics We select the sites for our distribution centers to provide direct access to the markets we serve and configure them to minimize total operating costs.
The majority of our suppliers are based in the United States and Canada, but we also source products from suppliers throughout Europe, Asia, North America, South America, Australia and New Zealand.
Our Suppliers We purchase our products from nearly 11,000 suppliers. The majority of our suppliers are based in the United States and Canada, but we also source products from suppliers throughout the world.
Customer returns are processed by scanning the UPC bar codes. We also employ a management information system that enables us to lower inbound transportation costs by making optimum use of our own fleet of trucks and/or by consolidating deliveries to achieve full truckloads.
These investments are intended to unlock our supply chain capabilities, improve customer experience and enable growth. We continue to leverage a management information system that enables us to lower inbound transportation costs by making optimum use of our own fleet of trucks and/or by consolidating deliveries to achieve full truckloads.
International business excludes sales transacted in U.S. dollars and shipped internationally, which is an even smaller component of our business. We also continue to invest in technology and systems with the intent of improving the efficiency of our operations, enhancing the customer experience and growing our services platform, including our eCommerce and innovation businesses.
We also continue to invest in technology and systems with the intent of improving the efficiency of our operations, enhancing the customer experience and growing our services platform, including our eCommerce and innovation businesses. This includes sales to eCommerce companies as well as business-to-business sales to non-traditional customers.
Designed to enhance the leadership capabilities of our people, the Emerge program for front-line leaders and the Evolve program for our mid-level managers invite participants from all departments to come together to learn and practice their management skills and identify opportunities to lead more effectively.
Designed to enhance the leadership capabilities of our people, we design and deliver optional programs to leaders across all departments to come together to learn and practice their management skills as well as identify opportunities to lead more effectively.
We also offer associates additional learning and career development opportunities that extend from skills-based training deployed electronically through our BetterU learning system, to mentorship programs and career development discussions and beyond. 8 Table of Contents Compensation and Benefits Our compensation and benefits programs are designed to promote a culture of wellbeing and recognize our associates for their outstanding achievements and dedication to serving our customers and keeping them safe during even the most challenging of times.
Compensation and Benefits Our compensation and benefits programs are designed to promote a culture of wellbeing and recognize our associates for their outstanding achievements and dedication to serving our customers and keeping them safe during even the most challenging of times.
Through this virtual marketplace, suppliers gain immediate access to UNFI’s digital infrastructure to promote and sell their products to UNFI’s broad customer base while UNFI customers gain access to an even broader assortment of unique and local items with flexible order sizes and the convenience of ordering from multiple sources online in one place. 2 Table of Contents Wholesale We organize and operate our Wholesale reportable segment through four U.S. geographic regions: Atlantic; South; Central and Pacific, each of which is led by a separate regional president responsible for product and service strategy, execution and financial results; and Canada Wholesale, which is operated separately from the U.S.
Through this virtual marketplace, suppliers gain immediate access to UNFI’s digital infrastructure to promote and sell their products to UNFI’s broad customer base while UNFI customers gain access to an even broader assortment of unique and local items with flexible order sizes and the convenience of ordering from multiple sources online in one place.
We operate an organic (United States Department of Agriculture (“USDA”) and Quality Assurance International (“QAI”)) and kosher (Circle K) certified packaging, roasting, and processing facility in New Jersey that is SQF (Safety Quality Food) level 2 certified. Our Service Offerings We offer a broad array of professional services that provide Wholesale customers with cost-effective and scalable solutions.
We operate an organic (USDA and Quality Assurance International (“QAI”)) and kosher (Circle K) certified packaging, roasting, and processing facility in New Jersey that is SQF (Safety Quality Food) level 2 certified.
Woodstock Farms Manufacturing sells items manufactured in bulk and through private label packaging arrangements with large health food, supermarket and convenience store chains and independent retailers.
Woodstock Farms Manufacturing sells items manufactured in bulk and through private label packaging arrangements with large health food, supermarket and convenience store chains and independent retailers. 4 Table of Contents Our Service Offerings Our Professional Services We offer a broad array of professional services that provide Wholesale customers with cost-effective and scalable solutions.
Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division. Our Strategic Priorities We are committed to executing our Fuel the Future strategy.
Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division. Our Strategic Priorities We are continually striving to better serve our stakeholders, including our customers, suppliers, associates and communities, while driving profitable growth and sustainable shareholder value creation.
We are also subject to the National Labor Relations Act, which provides employees the right to organize and bargain collectively with their employer and to engage in other protected concerted activity.
We are also subject to the National Labor Relations Act, which provides employees the right to organize and bargain collectively with their employer and to engage in other protected concerted activity; and the Fair Labor Standards Act, which establishes minimum wages and overtime standards, among other requirements. 7 Table of Contents Our facilities in the United States and in Canada are subject to various environmental protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater.
As of July 30, 2022, we had approximately 30,300 full and part-time employees within continuing operations, 10,900 of whom (approximately 36%) are covered by 48 collective bargaining agreements, including agreements under renegotiation.
The Compensation Committee of our Board of Directors has oversight of human capital management matters with a focus on associate wellbeing across a variety of measures. As of July 29, 2023, we had approximately 29,455 full and part-time employees within continuing operations, 10,667 of whom (approximately 36%) are covered by 49 collective bargaining agreements, including agreements under renegotiation.
We believe that we incur lower inbound freight expense than our regional competitors because our scale allows us to buy full and partial truckloads of products. Products are delivered to our distribution centers primarily by our fleet of leased and owned trucks, contract carriers and the suppliers themselves.
This proximity allows us to reduce our transportation costs relative to those of our competitors that seek to service these customers from locations that are often further away. We believe that we incur lower inbound freight expense than our regional competitors because our scale allows us to buy full and partial truckloads of products.
We ship certain orders for supplements or for items that are destined for areas outside of regular delivery routes through independent carriers.
We ship certain orders for supplements or for items that are destined for areas outside of regular delivery routes through independent carriers. Deliveries to areas outside the continental United States and Canada are typically shipped by freight-forwarders through ocean-going containers. Organic Certification Our “Certified Organic Distributor” certification covers 26 of our distribution centers in the United States.
Whole Foods Market is our only customer that represented more than 10% of total Net sales in fiscal 2022. Our international Net sales primarily reflect UNFI Canada, Inc. (“UNFI Canada”), which represented approximately 1% of our Net sales in fiscal 2022.
Our international Net sales primarily reflect UNFI Canada, Inc. (“UNFI Canada”), which represented approximately 1% of our Net sales in fiscal 2023. International business excludes sales transacted in U.S. dollars and shipped internationally, which is an even smaller component of our business.
The principal competitive factors in grocery retail include the location and image of the store; the price, quality, and variety of the fresh offering; and the quality, convenience, and consistency of service. Competitive strategies vary based on many factors, such as the competitor’s format, strengths, weaknesses, pricing, and sales focus.
Our retail banners compete with traditional grocery stores, supercenters, deep discounters, mass merchandisers, limited assortment stores and eCommerce providers. The principal competitive factors in grocery retail include the location and image of the store; the price, quality, and variety of the fresh offering; and the quality, convenience, and consistency of service.
Our key focus areas include Diversity & Inclusion, Responsible Procurement, Community Development, Governance, Associate Safety & Well-Being, Climate Action, Waste Reduction, Customer Health & Safety, and Energy Efficiency.
In fiscal 2023, we published our 12th annual Better for All report, which offers a summary of our social, environmental, and governance impacts during the fiscal year, and the second update to this plan, which prioritizes nine areas of focus: Associate Safety & Well-being, Climate Action, Community Development, Customer Health & Safety, Diversity, Equity, and Inclusion, Energy Efficiency, Governance, Responsible Procurement, and Waste Reduction.
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Through this strategy, UNFI is building a food ecosystem that is better for all by delivering great food, more choices and fresh thinking for our customers and suppliers. Our Fuel the Future strategy consists of six pillars: Fulfill Power in Scale, Unlock the Customer Experience, Taste the Future, UNFI Pride, Retail Optimized, and Earn Results.
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We have recently introduced our transformation strategy designed to accomplish this. Our enterprise-wide business transformation strategy, which we believe will position us for customer service and cost structure improvement, consists of four areas: 1. Network Automation and Optimization: Enhancing our distribution network to drive efficiency and improve the customer experience, which we expect to increase network capacity and scalability. 2.
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We are executing our strategy through four focus areas: 1) Customers: Utilizing our scale, insights and innovative offerings to develop a differentiated value proposition that helps our customers grow and gain share. 2) Suppliers: Strengthening our capabilities, especially those driven by technology, to deliver value creating programs to our suppliers. 3) Associates: Building a culture that inspires pride and enables associates to do their best work. 4) Communities: Supporting our communities and the planet through our wide-ranging and ambitious environment, social and governance (ESG) initiatives.
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Commercial Value Creation: Generating more profitable revenue growth through simplified pricing and procurement, and enhancing analytical insights for our customers and suppliers, making it easier to do business with UNFI. 3. Digital Offering Enhancement: Integrating and enhancing the functionality of the digital platforms we offer and expanding the actionable intelligence we provide through these platforms. 4.
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We believe that we have been able to broaden our geographic penetration, expand our customer base, enhance and diversify our product selections, increase our market share, increase operating efficiencies in existing facilities and open new facilities in part through our 2018 acquisition of SUPERVALU INC. (“Supervalu”).
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Infrastructure Unification and Modernization: Addressing legacy integration issues and continuing investments to upgrade and simplify our digital infrastructure, which we expect will streamline operations, provide greater visibility and enhance our scale. We are also working on near-term initiatives to help improve profitability while we execute our longer-term strategy.
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Our Commitment to Social and Environmental Responsibility We Believe in Better for All We are committed to being good stewards of our planet, our communities and our people through tangible action.
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These include actioning administrative structure efficiencies, reprioritizing our selling and administrative spending, optimizing our stock-keeping unit (“SKU”) assortment as well as reviewing commercial contracts in collaboration with our customers and suppliers.
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In fiscal 2022, we published our 11 th annual environmental, social and governance report, which we refer to as our Better For All report and the first update to our Better for All plan, which seeks to build a food system that is better for our people, our communities and our world.
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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. Since the close of our 2018 acquisition of SUPERVALU INC. (“Supervalu”), we have reduced net debt by $1.4 billion.
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The report is available on our website at www.betterforall.unfi.com and expands the six impact focus areas to provide a more in-depth look at the direct and indirect impacts at multiple points along the value chain.
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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.
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We invest in the efficiency of our transportation fleet and warehouses, generate on-site solar power for operations use and focus on diverting waste from landfills. In fiscal 2022, we announced a new set of climate targets covering Scope 1, 2 and 3 emissions, which have been validated by the Science Based Targets initiative.
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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. 1 Table of Contents Our Commitment to Social and Environmental Responsibility Building a Food System That’s Better for All As North America’s premier grocery wholesaler, we are using our scale to drive progress across the food industry, focusing on the areas where we can affect the greatest change.
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To help address value chain emissions, we created the UNFI Climate Action Hub, which provides tools and resources to our suppliers to help innovate and scale climate solutions across the food system.
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Now in the third year since unveiling our Better for All plan, we continue to evaluate the impacts we have along our value chain, focusing on proactively engaging with the people making and moving the products we distribute.
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Better for Our Communities We believe that freedom of food choice matters and we play a vital role in delivering safe, quality and nutritious food options to more tables across North America.
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Upstream Our impact begins with the decisions made by our partners and suppliers, well before products reach our distribution centers. We are investing in programs and partnerships that will help build a more equitable system and carry our values further upstream. In fiscal 2023, we launched the UNFI Climate Action Partnership, encouraging suppliers to set credible climate goals.
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We are working to increase access to better food, particularly for people in low-income and rural communities or vulnerable situations, through monetary and in-kind donations and operating retail stores in underserved areas. The UNFI Foundation, a 501(c)(3) organization, provides grants to nonprofit organizations working to build better food systems and nurture everyday health.
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The program builds on UNFI’s Climate Action Hub, which offers suppliers a variety of tools and resources to innovate and scale climate solutions across the food system. We also published a new Deforestation Policy, an updated Animal Welfare Position Statement, and an updated Supplier and Vendor Code of Conduct, clearly outlining expectations of suppliers on responsible procurement topics.
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In fiscal 2022, the UNFI Foundation announced the UNFI Food Equity Project, which aims to invest in community-led solutions that create more equitable access to fresh, healthy food. We also encourage our associates to make a difference by volunteering in their communities, including through paid volunteer time off.
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Operations We remain focused on operating efficiently and sustainably, which includes managing the social and environmental impacts within our direct control. Our associates’ safety and well-being are of utmost importance to us. Our primary goal is to cultivate a culture that values care and safety for all.
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Better for Our People The safety and wellbeing of our associates is a top priority. We are focused on fostering a culture of caring and safety; we are continuously striving toward zero injuries and accidents.
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Through continuous efforts we are dedicated to achieving zero injuries and accidents, ensuring a safe and thriving environment for everyone. In fiscal 2023, we received a score of 100 on the Human Rights Campaign Foundation’s 2022 Corporate Equality Index and a score of 100 on the Disability Equality Index.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDisruptions 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. The efficient operation of our businesses is highly dependent on computer hardware and software systems, including customized information technology systems.
Biggest changeIncreases 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. 15 Table of Contents 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 .
We have in the past been the focus of union-organizing efforts, and we believe it is likely that we will be the focus of similar efforts in the future, and as we increase our employee base and broaden our distribution operations to new geographic markets, our increased visibility could result in increased or expanded union-organizing efforts.
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.
Decreases in our volumes or orders for products supplied by us for these customers with whom we do not have a long-term contract may have a material adverse effect on our business, financial condition or results of operations.
Decreases in volumes or orders for products supplied by us for these customers with whom we do not have a long-term contract may have a material adverse effect on our business, financial condition or results of operations.
Our ability to maintain a close, mutually beneficial relationship with our principal customers is an important element to our continued growth. Similarly, if our largest customer diverts purchases from us beyond minimum amounts it is required to purchase under our distribution agreement, our business, financial condition or results of operations may be materially and adversely affected.
Our 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.
We serve as the primary distributor of natural, organic, and specialty non-perishable products, and also distribute certain specialty protein, cheese, deli items, and products from health, beauty, and supplement categories to Whole Foods Market in all of its regions in the United States under the terms of our distribution agreement, which expires on September 27, 2027.
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.
Our debt agreements, including the loan agreement (the “ABL Loan Agreement”) related to our $2,600 million asset-based revolving credit facility (the “ABL Credit Facility”) entered into in June 2022, and the term loan agreement (the “Term Loan Agreement”) related to our $1,950 million term loan facility (the “Term Loan Facility”) entered into on October 22, 2018, as amended, and the indenture governing our unsecured 6.75% Senior Notes due October 15, 2028 (the “Senior Notes”) contain financial covenants and other restrictions that limit our operating flexibility and our flexibility in planning for or reacting to changes in our business.
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.
We have engaged in, and could continue to pursue, strategic transactions and initiatives as we transform our business. Acquisitions present significant challenges and risks relating to the integration of acquired businesses.
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.
The grocery business is intensely competitive and the evolving competitive landscape is dynamic and continues to evolve, including from some competitors that have greater financial and other resources than we do.
The grocery business is intensely competitive and the landscape is dynamic and continues to evolve, including from some competitors that have greater financial and other resources than we do.
In addition, product cost inflation may negatively impact the consumer discretionary spending trends and reduce the demand for higher-margin natural and organic products, which could adversely affect profitability. Conversely, our profit levels may be negatively impacted during periods of product cost deflation even though our Gross profit as a percentage of Net sales may remain relatively constant.
In addition, product cost inflation may negatively impact the consumer discretionary spending trends and reduce the demand for higher-margin natural and organic products, which could adversely affect profitability. Conversely, 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 not able to continue to capture scale efficiencies and enhance our merchandise offerings, we may not be able to achieve our goals with respect to operating margins.
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.
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.
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. ITEM 1B.
During periods of economic weakness, small to medium-sized businesses, like many of our independents channel customers, may be impacted more severely and more quickly than larger businesses. Similarly, these smaller businesses may be more likely to be more severely impacted by events outside of their control, like macro-economic shifts or significant weather events.
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.
For example, we experienced declines in certain of our sales channels as a result of changes in consumer purchasing habits related to the pandemic, including reductions in foodservice, bulk snacks, seeds and nuts, and international categories, and we cannot be certain how consumer habits may continue to evolve.
For example, we experienced declines in certain of our sales channels as a result of changes in consumer purchasing habits related to the COVID-19 pandemic, including reductions in foodservice, bulk snacks, seeds and nuts, and international categories, and we cannot be certain how consumer habits may continue to evolve.
In our attempt to reduce Operating expenses, increase operating efficiencies and better serve our customers and suppliers, we have invested in the development and implementation of new information technology. We are in the process of converting our existing facilities into a single warehouse management and supply chain platform.
In our attempt to reduce operating expenses, increase operating efficiencies and better serve our customers and suppliers, we have invested and continue to invest in the development and implementation of new information technology. We are in the process of converting our existing facilities into a single warehouse management and supply chain platform.
Even in this case, the contracts may not require the customer to purchase a minimum amount of products from us or the contracts may afford the customer better pricing in the event that the volume of the customer’s purchases exceeds certain levels.
Even in this case, the contracts may not require the customer to purchase a minimum number of products from us or the contracts may afford the customer better pricing in the event that the volume of the customer’s purchases exceeds certain levels.
As the consumer demand for natural and organic products has increased, certain retailers and other producers have entered the market and attempted to buy certain raw materials directly, limiting availability for use in certain or our suppliers’ products.
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.
If we do not have adequate insurance or contractual indemnification available, product liability claims and costs associated with product recalls, including a loss of business, could have a material adverse effect on our business, financial condition or results of operations. We may be unable to adequately protect our intellectual property rights, which could harm our business.
If we do not have adequate insurance or contractual indemnification available, product liability claims and costs associated with product recalls, including a loss of business, could have a material adverse effect on our business, financial condition or results of operations. 22 Table of Contents We may be unable to adequately protect our intellectual property rights, which could harm our business.
If any of the events described below occurs, our business, financial condition or results of operations could be materially adversely affected and our stock price could decline. We provide these factors for investors as permitted by and to obtain the rights and protections under the Private Securities Litigation Reform Act of 1995.
If any of the events described below occurs, our business, financial condition or results of operations could be materially adversely affected and our stock price could decline. 9 Table of Contents We provide these factors for investors as permitted by and to obtain the rights and protections under the Private Securities Litigation Reform Act of 1995.
Moreover, as we implement information technology enhancements, disruptions in our business may be created (including disruption with our customers), which may have a material adverse effect on our business, financial condition or results of operations. We face risks related to the availability of qualified labor, labor costs and labor relations.
Moreover, as we implement information technology enhancements, disruptions in our business may be created (including disruption with our customers), which may have a material adverse effect on our business, financial condition or results of operations. 12 Table of Contents We face risks related to the availability of qualified labor, labor costs and labor relations.
For example: Environmental, Health and Safety : Our operations are subject to extensive and increasingly stringent laws and regulations pertaining to the protection of the environment, including those relating to the discharge of materials into the environment, the disposal of food by-products, the handling, treatment, and disposal of wastes, maintenance of refrigeration systems, and remediation of soil and groundwater contamination.
For example: 20 Table of Contents Environmental, Health and Safety : Our operations are subject to extensive and increasingly stringent laws and regulations pertaining to the protection of the environment, including those relating to the discharge of materials into the environment, the disposal of food by-products, the handling, treatment, and disposal of wastes, maintenance of refrigeration systems, and remediation of soil and groundwater contamination.
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. 10 Table of Contents In addition, many supermarket chains have increased self-distribution or purchases of items directly from suppliers.
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.
Depending on the length of time of any work stoppage or that we are required to employ replacement workers and security measures these costs could be significant and could have a material adverse effect on our business, financial condition or results of operations.
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.
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. Increased fuel costs may adversely affect our results of operations. Increased fuel costs may have a negative impact on our results of operations.
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. 19 Table of Contents Increased fuel costs may adversely affect our results of operations. Increased fuel costs may have a negative impact on our results of operations.
We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices, and we benefit from our ability to purchase product in advance of price increases. We have no assurances of continued supply, pricing or access to new products and suppliers could change the terms upon which it sells to us or discontinue selling to us.
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.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements in Part II, Item 7 of this Annual Report for more information on our business and the forward-looking statements included in this Annual Report.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Note Regarding Forward-Looking Statements in Part II, Item 7 of this Annual Report for more information on our business and the forward-looking statements included in this Annual Report.
It is possible that increases of unfunded liabilities of these plans would result in increased future payments by us and the other participating employers over the next several years.
It is possible that increases of unfunded liabilities of the multiemployer pension plans would result in increased future payments by us and the other participating employers over the next several years.
Many of our customers are not obligated to continue purchasing products from us and larger customers that do have multiyear contracts with us may terminate these contracts early in certain situations or choose not to renew or extend the contract at its expiration.
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.
Food Safety and Marketing : There is significant governmental scrutiny, regulations and public awareness regarding food quality and food and drug safety. We may be adversely affected if consumers lose confidence in the safety and quality of our food and drug products.
Food Safety and Marketing : There is significant governmental scrutiny, regulations and public awareness regarding food quality and food and drug safety. We may be adversely affected if consumers lose confidence in the safety and quality of the food we manufacture or the food and drug products we distribute.
New contracts with existing unions could have substantially less favorable terms than those negotiated prior to such expanded union-organizing efforts. We are transforming our business and have engaged, and may continue to engage in, acquisitions and other strategic initiatives, and may encounter difficulties integrating acquired businesses and may not realize the anticipated benefits of our acquisitions.
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 experienced, and may continue to experience, a shortage of qualified labor. Recruiting and retention efforts, and actions to increase productivity, may not be successful. Such a shortage could potentially increase labor costs, reduce profitability or decrease our ability to effectively serve customers.
In the past, we have experienced a shortage of qualified labor. Recruiting and retention efforts, and actions to increase productivity, may not be successful. Such a shortage could potentially increase labor costs, reduce profitability or decrease our ability to effectively serve customers.
For example, Whole Foods Market, a subsidiary of Amazon.com, Inc., accounted for approximately 20% of our Net sales in fiscal 2022.
For example, Whole Foods Market, a subsidiary of Amazon.com, Inc., accounted for approximately 21% of our Net sales in fiscal 2023.
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.
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.
Cyber-attacks are rapidly evolving and becoming increasingly frequent, sophisticated and difficult to detect. The failure to promptly detect, determine the extent of, appropriately respond to, and contain a significant data security attack or breach of our systems or any third-party system used by us could have a material adverse impact on our business, financial condition or results of operations.
The failure to promptly detect, determine the extent of, appropriately respond to, and contain a significant data security attack or breach of our systems or any third-party system used by us could have a material adverse impact on our business, financial condition or results of operations.
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.
The magnitude of these risks increases as the size of our wholesale customers increases. 14 Table of Contents 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.
The loss or cancellation of business from our larger customers, including due to increased self-distribution, closures of stores, reductions in the amount of products that our customers sell to their customers, or our failure to comply with the terms of our distribution agreements, where applicable, could materially and adversely affect our business, financial condition, or results of operations.
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.
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. 14 Table of Contents Changes in relationships with our suppliers may adversely affect our profitability, and conditions beyond our control can interrupt our supplies and alter our product costs.
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.
In this regard, our wholesale customers are affected by the same economic conditions, including food inflation and deflation, and competition that our retail segment faces. The magnitude of these risks increases as the size of our wholesale customers increases.
In this regard, our wholesale customers are affected by the same economic conditions, including food inflation and deflation, and competition that our retail segment faces.
For example, in 2019, the Company settled with the Drug Enforcement Administration alleged violations of the Controlled Substances Act relating to an administrative subpoena received by Supervalu that requested, among other things, information on the Company’s pharmacy policies and procedures generally, as well as the production of documents that are required to be kept and maintained pursuant to the Controlled Substances Act and its accompanying regulations.
For example, in 2019, the Company settled with the Drug Enforcement Administration alleged violations of the Controlled Substances Act relating to an administrative subpoena received by Supervalu that requested, among other things, information on the Company’s pharmacy policies and procedures generally, as well as the production of documents that are required to be kept and maintained pursuant to the Controlled Substances Act and its accompanying regulations. 21 Table of Contents The failure to comply or maintain compliance with applicable governmental laws and regulations, including those referred to above and in Item 1.
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. 19 Table of Contents Legal and Regulatory Risks We are subject to significant governmental regulation.
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.
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.
We anticipate that capital expenditures will continue to be, and acquisitions may be, important to our growth in the future.
Wage Rates and Paid Leave : Changes in federal, state or local minimum wage and overtime laws or employee paid leave laws could cause us to incur additional wage costs, which could adversely affect our operating margins.
Wage Rates and Paid Leave : Changes in federal, state or local minimum wage and overtime laws or employee paid leave laws could cause us to incur additional wage costs, which could adversely affect our operating margins. Failure to comply with existing or new laws or regulations could result in significant damages, penalties and/or litigation costs.
Changes in these estimates, or changes in actual performance compared with these estimates, may affect the fair value of long-lived assets, which may result in an impairment charge. We cannot accurately predict the amount or timing of any impairment. Should the value of long-lived assets become impaired, our financial condition and results of operations may be adversely affected.
Changes in these estimates, or changes in actual performance compared with these estimates, may affect the fair value of long-lived assets, which may result in an impairment charge. We cannot accurately predict the amount or timing of any impairment.
Any events that give rise to actual or potential food contamination, drug contamination or food-borne illness or injury, or events that give rise to claims that our products are not of the quality or composition claimed to be, may result in product liability claims from individuals, consumers and governmental agencies, penalties and enforcement actions from government agencies, a loss of consumer confidence, harm to our reputation and could cause production and delivery disruptions, which may adversely affect our financial condition or results of operations. 21 Table of Contents In addition, if we were to manufacture or distribute foods that are or are perceived to be unsafe, contaminated, or defective, it may be necessary for us to recall such products, or we may recall products that we determine do not satisfy our quality standards.
Any events that give rise to actual or potential food contamination, drug contamination or food-borne illness or injury, or events that give rise to claims that our products are not of the quality or composition claimed to be, may result in product liability claims from individuals, consumers and governmental agencies, penalties and enforcement actions from government agencies, a loss of consumer confidence, harm to our reputation and could cause production and delivery disruptions, which may adversely affect our financial condition or results of operations.
Economic Risks Changes in consumer purchasing habits could materially and adversely affect our business, financial condition, or results of operations. Changes in consumer purchasing habits may reduce demand for certain of the products we distribute.
Should the value of long-lived assets become impaired, our financial condition and results of operations may be adversely affected. 18 Table of Contents Economic Risks Changes in consumer purchasing habits could materially and adversely affect our business, financial condition, or results of operations. Changes in consumer purchasing habits may reduce demand for certain of the products we distribute.
Additionally, if we are not able to effectively respond to changes in consumer perceptions or adapt our product offerings to new or developing trends in eating habits, our business, financial condition, or results of operations could suffer.
Additionally, if we are not able to effectively respond to changes in consumer perceptions or adapt our product offerings to new or developing trends in eating habits, our business, financial condition, or results of operations could suffer. Our leverage and debt service obligations increase our sensitivity to the effects of economic downturns and could adversely affect our business.
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 year, which has had varying impacts on our business.
As a result, our operating margins may stagnate or further 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.
Consumers also have more choices for grocery and consumable purchases, including retailers we do not supply and eCommerce solutions, which may reduce the demand for products supplied by our wholesale customers. The pandemic accelerated the consumer shift to eCommerce and new ways to purchase food, including increased restaurant and other delivery options.
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.
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. 13 Table of Contents We cannot assure you that we will be able to successfully optimize our distribution center network or open additional distribution centers in new or existing markets if needed to accommodate or facilitate growth or that certain of our distribution centers will not have, or continue to have, operational challenges.
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.
Additionally, our businesses increasingly involve the receipt, storage and transmission of sensitive data, including personal information about our customers, employees, and vendors and our proprietary business information. We also share information with vendors.
The efficient operation of our businesses is highly dependent on computer hardware and software systems, including customized information technology systems. Additionally, our businesses increasingly involve the receipt, storage and transmission of sensitive data, including personal information about our customers, employees, and vendors and our proprietary business information. We also share information with vendors.
However, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. These losses, should they occur, could have a material adverse effect on our business, financial condition or results of operations. In addition, the cost of insurance fluctuates based upon our historical trends, market conditions, and availability.
We believe that our insurance coverage is customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. These losses, should they occur, could have a material adverse effect on our business, financial condition or results of operations.
To the extent we do not enter into commodity swap agreements, our exposure to volatility in the price of diesel fuel would increase relative to our exposure to volatility in periods in which we had outstanding commodity derivative contracts. We periodically enter into forward purchase commitments for a portion of our projected monthly diesel fuel requirements at fixed prices.
To the extent we do not enter into commodity derivative contracts to hedge a portion of our projected diesel fuel requirements, our exposure to volatility in the price of diesel fuel would increase relative to our exposure to volatility in periods in which we have outstanding commodity derivative contracts.
Additionally, the terms of some of our collective bargaining agreements may limit our ability to increase efficiencies. 12 Table of Contents As of July 30, 2022, approximately 10,900 of our 30,300 employees (approximately 36%) were covered by 48 collective bargaining agreements, including agreements under negotiation, which expire through May 7, 2027.
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.
Failure to comply with these covenants could have a material adverse effect on 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.
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.
Accordingly, laws and regulations affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws and regulations could adversely impact our financial condition and results of operations.
Foreign Operations : Our supplier base includes domestic and foreign suppliers. In addition, we have customers located outside the United States. Accordingly, laws and regulations affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws and regulations could adversely impact our financial condition and results of operations.
We use a combination of insurance and self-insurance to provide for potential liabilities, including workers’ compensation, general and auto liability, director and officer liability, property risk, cyber and privacy risks and employee healthcare benefits. We believe that our insurance coverage is customary for businesses of our size and type.
Our insurance and self-insurance programs may not be adequate to cover future claims. We use a combination of insurance and self-insurance to provide for potential liabilities, including workers’ compensation, general and auto liability, director and officer liability, property risk, cyber and privacy risks and employee healthcare benefits.
Consumer habits could be affected by a number of factors, including changes in attitudes regarding benefits of natural and organic products when compared to similar lower margin conventional products, new information regarding the health effects of consuming certain foods or other macro trends.
Consumer habits could be affected by a number of factors, including an increase in food-away-from home options, changes in attitudes regarding benefits of natural and organic products when compared to similar lower margin conventional products, new information regarding the health effects of consuming certain foods, changes in disposable income levels, which may be impacted by a reduction in the level of government spending that supports grocery purchases, or other macro trends.
In response to the current market, we have also increased deductibles and increased percentages of loss retention above the deductible for certain of our policies, which could expose us to higher costs in the event of a claim. We estimate the liabilities and required reserves associated with the risks we retain.
In addition, the cost of insurance fluctuates based upon our historical trends, market conditions, and availability. In response to the current market, we have also increased deductibles and increased percentages of loss retention above the deductible for certain of our policies, which could expose us to higher costs in the event of a claim.
Strategic and Operational Risks We depend heavily on our principal customers and our success is heavily dependent on our principal customers’ ability to maintain and grow their businesses.
Strategic and Operational Risks A significant portion of our revenues are from our principal customers, and our success is heavily dependent on retaining this business and on our principal customers’ ability to maintain and grow their businesses.
These shortages have caused us to incur higher Operating expenses due to the cost of moving products between our distribution facilities to maintain expected service levels. We cannot anticipate when this trend will end or whether it will recur in the future.
For example, we experienced higher than usual levels of out-of-stocks leading to reduced fill rates during the COVID-19 pandemic. 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 have incurred increased costs to address a shortage of qualified labor in certain geographies, particularly for warehouse workers and drivers, including wage actions, sign-on bonus programs, and increased use of third-party labor. Because our labor costs are, as a percentage of Net sales, higher than in many other industries, we may be significantly harmed by labor cost increases.
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.
Any such estimates and actuarial projection of losses is subject to a considerable degree of variability.
We estimate the liabilities and required reserves associated with the risks we retain. Any such estimates and actuarial projection of losses is subject to a considerable degree of variability.
We cannot guarantee that we will continue to be able to pass a comparable proportion or any increase in fuel costs to our customers in the future, which may adversely affect our business, financial condition or results of operations. Disruption of our distribution network or to the operations of our customers could adversely affect our business.
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.
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. 17 Table of Contents 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.
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.
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.
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.
The financial condition of these pension plans may also negatively impact our debt ratings, which may increase the cost of borrowing or adversely affect our ability to access financial markets. 16 Table of Contents Our insurance and self-insurance programs may not be adequate to cover future claims.
The financial condition of these pension plans may also negatively impact our debt ratings, which may increase the cost of borrowing or adversely affect our ability to access financial markets. Activist investors could negatively impact our business and cause disruptions to our operations.
The continuing consolidation of retailers, the growth of chains and closures of grocery locations may reduce our gross margins in the future should more customers qualify for greater volume discounts, and should we experience pricing pressure from suppliers and retailers.
Increased competition may result in price reductions, reduced gross margins, lost business and loss of market share, any of which could materially and adversely affect our business, financial condition or results of operations. 10 Table of Contents The continuing consolidation of retailers, the growth of chains and closures of grocery locations may reduce our gross margins in the future should more customers qualify for greater volume discounts, and should we experience pricing pressure from suppliers and retailers.
If we are unable to grow this portion of our business, including through acquisitions, and manage that growth effectively, our business, financial condition or results of operations may be materially and adversely affected, or we may not be able to fully realize the benefits of those acquisitions.
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.
As a wholesaler, we are dependent upon the consistent supply of products from manufacturers. We maintain supply contracts to fulfill product sales obligations to our customers. Manufacturer’s disruptions in their ability to produce, maintain and supply product based on changing levels of demand, could result in an inability to fulfill our obligations to our customers.
Manufacturers’ disruptions in their ability to produce, maintain and supply product based on changing levels of demand could result in an inability to fulfill our obligations to our customers. 11 Table of Contents The majority of our suppliers are based in the United States and Canada, but we also source products from suppliers throughout the world.
Any of the businesses we acquired may also have liabilities or adverse operating issues, including some that were not known by us before the acquisition, and our indemnity for such liabilities may be limited or nonexistent.
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. 13 Table of Contents 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.
Information technology systems are vulnerable to not functioning as designed and to disruptions and security breaches by computer hackers and cyber terrorists, which risks may be more pronounced as associates continue to work from home. 15 Table of Contents Although we continue to take actions to strengthen the security of our information technology systems, these measures and technology may not adequately anticipate or prevent security breaches in the future or we may not be able to timely implement these measures and technology.
Information technology systems are vulnerable to not functioning as designed and to disruptions and security breaches by computer hackers and cyber terrorists, which risks may be more pronounced as associates continue to work remotely.
If actual losses incurred are greater than those anticipated, our reserves may be insufficient and additional costs could be recorded in our consolidated financial statements. If we suffer a substantial loss that exceeds our self-insurance reserves and any excess insurance coverage, the loss and attendant expenses could harm our business, financial condition, or results of operations.
If we suffer a substantial loss that exceeds our self-insurance reserves and any excess insurance coverage, the loss and attendant expenses could harm our business, financial condition, or results of operations. 17 Table of Contents Our debt agreements contain restrictive covenants that may limit our operating flexibility.
Additionally, certain multiemployer pension plans in which we participate are underfunded with the projected benefit obligations exceeding the fair value of those plans’ assets, in certain cases (for example, Central States Pension Plan), by a wide margin.
If we are unable to control these benefits and costs, we may experience increased operating costs, which may adversely affect our financial condition and results of operations. 16 Table of Contents Additionally, certain multiemployer pension plans in which we participate are underfunded with the projected benefit obligations exceeding the fair value of those plans’ assets, in certain cases, by a wide margin.
Although our purchasing volume can provide benefits, suppliers may not provide the products needed by us in the quantities or at the prices requested. For example, we have experienced, and continue to experience, higher than usual levels of out-of-stocks leading to reduced fill rates during the COVID-19 pandemic.
For the most part, we do not have long-term contracts with our suppliers committing them to provide products to us. Although our purchasing volume can provide benefits, suppliers may not provide the products needed by us in the quantities or at the prices requested.
Removed
Increased competition may result in price reductions, reduced gross margins, lost business and loss of market share, any of which could materially and adversely affect our business, financial condition or results of operations.
Added
A significant portion of our revenues is from our principal customers, and our success is heavily dependent on retaining this business and on our principal customers’ ability to maintain and grow their businesses.
Removed
The COVID-19 pandemic and responses thereto continue to impact our business and cause uncertainty, including as infection rates and new variants continue to evolve.
Added
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.
Removed
While we experienced elevated demand for the products we distribute as consumption of food at home increased and our independent customers have performed well throughout the pandemic, there is no assurance that increased volume, including from these customers, will be sustained over the long-term.
Added
We have experienced elevated levels of inflation during the past few years, which has had varying impacts on our business.
Removed
The increased wholesale customer and end-consumer demand may decrease relative to current levels if consumers return to pre-pandemic consumption habits. We are unable to predict when and to what extent that may occur.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table shows our dry and cold storage distribution and warehouse facilities and their associated owned and leased square footage occupied as of July 30, 2022: Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) Hopkins, Minnesota (2) 1,866 — 1,866 Allentown, Pennsylvania — 1,327 1,327 Stockton, California — 1,290 1,290 Mechanicsville, Virginia (2) 1,249 — 1,249 Riverside, California — 1,171 1,171 Centralia, Washington — 1,155 1,155 York, Pennsylvania — 1,039 1,039 Joliet, Illinois — 988 988 Green Bay, Wisconsin — 980 980 Champaign, Illinois — 910 910 Harrisburg, Pennsylvania — 883 883 Fort Wayne, Indiana (2) 871 — 871 Commerce, California — 858 858 Pompano Beach, Florida — 779 779 Ridgefield, Washington (2) 779 — 779 Quincy, Florida (2) 758 — 758 Sarasota, Florida — 743 743 Montgomery, New York (2) 500 180 680 Pittsburgh, Pennsylvania 679 — 679 Atlanta, Georgia (2) 389 259 648 Moreno Valley, California — 613 613 Lancaster, Texas — 590 590 Anniston, Alabama 465 105 570 Indianola, Mississippi 543 — 543 Aurora, Colorado — 529 529 Rocklin, California (2) 469 — 469 Stevens Point, Wisconsin (2) 314 146 460 Gilroy, California (2) 447 — 447 Sturtevant, Wisconsin (2) 442 — 442 Carlisle, Pennsylvania — 423 423 Howell Township, New Jersey (2) 397 — 397 Chesterfield, New Hampshire (2) 300 69 369 Richburg, South Carolina (2) 342 — 342 Fargo, North Dakota (2) 336 — 336 Oglesby, Illinois — 325 325 Dayville, Connecticut (2) 317 — 317 Greenwood, Indiana (2) 308 — 308 Prescott, Wisconsin (2) 307 — 307 Santa Fe Springs, California — 298 298 Iowa City, Iowa 271 20 291 23 Table of Contents Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) West Sacramento, California (2) 251 — 251 Bismarck, North Dakota (2) 244 — 244 Anniston, Alabama — 231 231 Billings, Montana (2) 220 — 220 Vaughan, Ontario — 180 180 Edison, New Jersey — 178 178 West Newell, Illinois 155 — 155 Philadelphia, Pennsylvania — 100 100 Richmond, British Columbia — 96 96 Roseville, California — 86 86 West Sacramento, California (2) 85 — 85 Logan Township, New Jersey — 70 70 Burnaby, British Columbia — 41 41 Fife, Washington — 39 39 Montreal, Quebec — 31 31 Truckee, California — 8 8 Total 13,304 16,740 30,044 (1) Distribution centers and warehouses as presented here reflect the location of the main distribution center campus and warehouse combined with their related offsite storage used to supply customers out of these locations.
Biggest changeThe following table shows our dry and cold storage distribution and warehouse facilities and their associated owned and leased square footage occupied as of July 29, 2023: Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) Hopkins, Minnesota (2) 1,866 — 1,866 Allentown, Pennsylvania — 1,327 1,327 Stockton, California — 1,290 1,290 Mechanicsville, Virginia (2) 1,249 — 1,249 Riverside, California — 1,171 1,171 Centralia, Washington — 1,155 1,155 Green Bay, Wisconsin — 1,080 1,080 York, Pennsylvania — 1,039 1,039 Joliet, Illinois — 988 988 Champaign, Illinois — 910 910 Pompano Beach, Florida — 903 903 Harrisburg, Pennsylvania — 883 883 Fort Wayne, Indiana (2) 871 — 871 Commerce, California — 858 858 Ridgefield, Washington (2) 779 — 779 Quincy, Florida (2) 758 — 758 Sarasota, Florida — 743 743 Montgomery, New York (2) 500 180 680 Pittsburgh, Pennsylvania 679 — 679 Atlanta, Georgia (2) 389 259 648 Lancaster, Texas — 590 590 Anniston, Alabama 465 105 570 Indianola, Mississippi 543 — 543 Aurora, Colorado — 529 529 Rocklin, California (2) 469 — 469 Stevens Point, Wisconsin (2) 314 146 460 Gilroy, California (2) 447 — 447 Sturtevant, Wisconsin (2) 442 — 442 Moreno Valley, California — 434 434 Carlisle, Pennsylvania — 423 423 Howell Township, New Jersey (2) 397 — 397 Chesterfield, New Hampshire (2) 300 69 369 Richburg, South Carolina (2) 342 — 342 Fargo, North Dakota (2) 336 — 336 Oglesby, Illinois — 325 325 Dayville, Connecticut (2) 317 — 317 Greenwood, Indiana (2) 308 — 308 Prescott, Wisconsin (2) 307 — 307 Santa Fe Springs, California — 298 298 Iowa City, Iowa 271 — 271 24 Table of Contents Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) West Sacramento, California (2) 251 — 251 Bismarck, North Dakota (2) 244 — 244 Anniston, Alabama — 231 231 Billings, Montana (2) 220 — 220 Vaughan, Ontario — 180 180 Edison, New Jersey — 178 178 West Newell, Illinois 155 — 155 Richmond, British Columbia — 126 126 Londonderry, New Hampshire — 124 124 Philadelphia, Pennsylvania — 100 100 West Sacramento, California (2) 85 — 85 Logan Township, New Jersey — 70 70 Fife, Washington — 39 39 Montreal, Quebec — 31 31 Truckee, California — 8 8 Total 13,304 16,792 30,096 (1) Distribution centers and warehouses as presented here reflect the location of the main distribution center campus and warehouse combined with their related offsite storage used to supply customers from these locations.
As of July 30, 2022, we utilized approximately 471 thousand square feet of corporate office space primarily related to our executive offices located in Providence, Rhode Island and Eden Prairie, Minnesota, as well as other smaller administrative offices across the United States.
As of July 29, 2023, we utilized approximately 454 thousand square feet of office space primarily related to our corporate offices located in Providence, Rhode Island and Eden Prairie, Minnesota, as well as other smaller administrative offices across the United States.
We own approximately 240 thousand square feet and lease the remaining 231 thousand square feet of our corporate office space. 24 Table of Contents
We own approximately 240 thousand square feet and lease the remaining 214 thousand square feet of our corporate office space. 25 Table of Contents
Corporate As of July 30, 2022, we had approximately 600 thousand square feet, 84% of which was leased, of surplus retail stores and warehouses, excluding assigned leases.
Corporate As of July 29, 2023, we had approximately 600 thousand square feet, 86% of which was leased, of surplus retail stores and warehouses, excluding assigned leases.
ITEM 2. PROPERTIES Distribution Centers We maintained 56 distribution centers and warehouses at July 30, 2022, which were utilized by our Wholesale segment and our other operating segments.
ITEM 2. PROPERTIES Distribution Centers We maintained 55 distribution centers and warehouses at July 29, 2023, which were utilized by our Wholesale segment and our other operating segments.
Retail Stores The following table summarizes continuing operations retail stores utilized by our Retail segment as of July 30, 2022: Retail Banner Number of Stores Owned Square Footage Leased Square Footage Total Square Footage (square footage in thousands) Cub Foods (1) 54 1,194 2,517 3,711 Shoppers 19 — 1,165 1,165 Total 73 1,194 3,682 4,876 (1) Cub Foods stores include stores in which we have a controlling ownership interest, and excludes 32 franchised Cub Foods full-line and separate liquor stores in which we have no ownership interest or a minority interest.
Retail Stores The following table summarizes continuing operations retail stores utilized by our Retail segment as of July 29, 2023: Retail Banner Number of Stores Owned Square Footage Leased Square Footage Total Square Footage (square footage in thousands) Cub Foods (1) 54 1,194 2,517 3,711 Shoppers 24 — 1,355 1,355 Total 78 1,194 3,872 5,066 (1) Cub Foods stores include stores in which we have a controlling ownership interest and excludes 32 franchised Cub Foods full-line and separate liquor stores in which we have no ownership interest or a minority interest.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in routine litigation or other legal proceedings that arise in the ordinary course of our business, including investigations and claims regarding employment law, pension plans, unfair labor practices, labor union disputes, supplier, customer and service provider contract terms, real estate and antitrust.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in routine litigation or other legal proceedings that arise in the ordinary course of our business, including investigations and claims regarding employment law including wage and hour, pension plans, unfair labor practices, labor union disputes, supplier, customer and service provider contract terms, product liability, real estate and antitrust.
Other than as described in Note 17—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report, which is incorporated by reference herein, there are no pending material legal proceedings to which we are a party or to which our property is subject. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.
Other than as set forth in Note 17—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report, which is incorporated herein, there are no pending material legal proceedings to which we are a party or to which our property is subject. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe may implement all or part of the repurchase program pursuant to a plan or plans meeting the conditions of Rule 10b5-1 under the Exchange Act. 26 Table of Contents The following table contains the deemed surrender of shares to us by participants in our compensatory stock plans: (in millions, except shares and per share amounts) Total Number of Shares Purchased (2) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3) Period (1) : May 1, 2022 to June 4, 2022 — $ — — $ — June 5, 2022 to July 2, 2022 2,615 41.87 — — July 3, 2022 to July 30, 2022 977 41.49 — 176 Total 3,592 $ 41.77 — $ — (1) The reported periods conform to our fiscal calendar.
Biggest changeWe manage the timing of any repurchases 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. 27 Table of Contents The following table presents purchases of our common stock and related information for each of the months in the quarter ended July 29, 2023: (in millions, except shares and per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2) Period (1) : April 30, 2023 to June 3, 2023 599,506 $ 27.09 599,506 $ 143 June 4, 2023 to July 1, 2023 191,115 $ 24.59 191,115 $ 138 July 2, 2023 to July 29, 2023 — $ — — $ 138 Total 790,621 $ 26.49 790,621 $ 138 (1) The reported periods conform to our fiscal calendar.
The stock price performance shown below is not necessarily indicative of future performance. 25 Table of Contents This performance graph shall not be deemed “soliciting material” or be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
The stock price performance shown below is not necessarily indicative of future performance. 26 Table of Contents This performance graph shall not be deemed “soliciting material” or be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information, Holders and Dividends Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “UNFI”. On July 30, 2022, we had 79 stockholders of record.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information, Holders and Dividends Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “UNFI”. On September 21, 2023, we had 79 stockholders of record.
The comparison assumes the investment of $100 on July 29, 2017 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends.
The comparison assumes the investment of $100 on July 28, 2018 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends.
July 29, 2017 July 28, 2018 August 3, 2019 August 1, 2020 July 31, 2021 July 30, 2022 United Natural Foods, Inc. $ 100.00 $ 85.82 $ 22.23 $ 52.40 $ 87.43 $ 112.22 S&P SmallCap 600 Index $ 100.00 $ 122.02 $ 111.63 $ 104.68 $ 164.29 $ 154.04 S&P SmallCap 600 Food Distributors Index $ 100.00 $ 95.85 $ 54.44 $ 55.76 $ 91.61 $ 123.92 Issuer Purchases of Equity Securities In September 2022, our Board of Directors authorized a new repurchase program for up to $200 million of our Common stock over a term of four years (the “2022 Repurchase Program”).
July 28, 2018 August 3, 2019 August 1, 2020 July 31, 2021 July 30, 2022 July 29, 2023 United Natural Foods, Inc. $ 100.00 $ 25.90 $ 61.06 $ 101.88 $ 130.76 $ 63.73 S&P SmallCap 600 Index $ 100.00 $ 91.48 $ 85.79 $ 134.64 $ 126.24 $ 131.70 S&P SmallCap 600 Food Distributors Index $ 100.00 $ 56.80 $ 58.18 $ 95.58 $ 129.29 $ 104.97 Issuer Purchases of Equity Securities On September 21, 2022, our Board of Directors authorized a new repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”).
Upon approval of the 2022 Repurchase Program, our Board terminated the repurchase program authorized in October 2017, which provided for the purchase of up to $200 million of our outstanding Common stock (the "2017 Repurchase Program"). We did not repurchase any shares of our Common stock in fiscal 2022, 2021 or 2020 pursuant to the 2017 Repurchase Program.
Under the 2022 Repurchase Program, we repurchased approximately 1,888,000 shares of our common stock for a total cost of $62 million in fiscal 2023. We did not repurchase any shares of our common stock in fiscal 2022 or 2021. As of July 29, 2023, we had $138 million remaining authorized under the 2022 Repurchase Program.
Removed
As of July 30, 2022, we had $176 million remaining authorized under the 2017 Repurchase Program. We will manage the pacing of any repurchases in response to market conditions and other relevant factors, including any limitations on our ability to conduct repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes.
Added
Any repurchases are intended to be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise.
Removed
(2) These amounts represent the deemed surrender by participants in our compensatory stock plans of 3,592 shares of our Common stock to cover taxes from the vesting of restricted stock awards and restricted stock units granted under such plans. (3) As of July 30, 2022, there was approximately $176 million that may yet be purchased under the share repurchase program.
Added
With respect to open market purchases, we may use a plan or plans meeting the conditions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which allows us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed blackout periods.
Removed
There were no share repurchases under the share repurchase program in the fourth quarter of fiscal 2022. ITEM 6. RESERVED
Added
(2) The amounts shown in this column represent the amount remaining under the 2022 Repurchase Program as of June 3, 2023, July 1, 2023 and July 29, 2023. ITEM 6. RESERVED

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: • our dependence on principal customers; • the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures; • the impact and duration of the COVID-19 pandemic; • our ability to operate, and rely on third parties to operate, reliable and secure technology systems; • labor and other workforce shortages and challenges; • our ability to realize anticipated benefits of our strategic initiatives, including any acquisitions; • the addition or loss of significant customers or material changes to our relationships with these customers; • our sensitivity to general economic conditions including inflation, changes in disposable income levels and consumer spending trends; • our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products, and to manage that growth; • increased competition in our industry, including as a result of continuing consolidation of retailers and the growth of chains, direct distribution by large retailers and the growth of online distributors; • our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts; 27 Table of Contents • the potential for disruptions in our supply chain or our distribution capabilities from circumstances beyond our control, including due to lack of long-term contracts, severe weather, labor shortage or work stoppages or otherwise; • moderated supplier promotional activity, including decreased forward buying opportunities; • union-organizing activities that could cause labor relations difficulties and increased costs; • the potential for additional asset impairment charges; • our ability to maintain food quality and safety; • volatility in fuel costs; • volatility in foreign exchange rates; and • our ability to identify and successfully complete asset or business acquisitions.
Biggest changeOur actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: • our dependence on principal customers; • the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures and intense competition, including as a result of the continuing consolidation of retailers and the growth of consumer choices for grocery and consumable purchases; • our ability to realize the anticipated benefits of our transformation initiatives; • changes in relationships with our suppliers; • our ability to operate, and rely on third parties to operate, reliable and secure technology systems; • labor and other workforce shortages and challenges; • the addition or loss of significant customers or material changes to our relationships with these customers; • our ability to realize anticipated benefits of our acquisitions; • our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products, and to manage that growth; • our ability to maintain sufficient volume in our wholesale segment to support our operating infrastructure; • the impact and duration of any pandemics or disease outbreaks; • our ability to access additional capital; • increases in healthcare, pension and other costs under our and multiemployer benefit plans; • the potential for additional asset impairment charges; 28 Table of Contents • our sensitivity to general economic conditions including inflation, changes in disposable income levels and consumer purchasing habits; • our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts; • the potential for disruptions in our supply chain or our distribution capabilities from circumstances beyond our control, including due to lack of long-term contracts, severe weather, labor shortages or work stoppages or otherwise; • moderated supplier promotional activity, including decreased forward buying opportunities; • union-organizing activities that could cause labor relations difficulties and increased costs; • our ability to maintain food quality and safety; and • volatility in fuel costs.
We evaluate inventory shortages (shrink) throughout each fiscal year based on actual physical counts in our facilities. The majority of our inventory is valued under the LIFO method, which allows for matching of costs and revenues, as the current acquisition cost to is used to value cost of goods sold as inventory is sold in an inflationary environment.
We evaluate inventory shortages (shrink) throughout each fiscal year based on actual physical counts in our facilities. The majority of our inventory is valued under the LIFO method, which allows for matching of costs and revenues, as the current acquisition cost is used to value cost of goods sold as inventory is sold in an inflationary environment.
Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which has the effect of decreasing Gross profit and the carrying value of inventory during periods of inflation.
Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which generally has the effect of decreasing Gross profit and the carrying value of inventory during periods of inflation.
As described in further detail in Note 13—Benefit Plans in Part II, Item 8 of this Annual Report, in fiscal 2022, we merged the Unified Grocers, Inc. Cash Balance Plan into the SUPERVALU INC. Retirement Plan. In fiscal 2023, no minimum pension contributions are required to be made under the SUPERVALU INC.
As described in further detail in Note 13—Benefit Plans in Part II, Item 8 of this Annual Report, in fiscal 2022, we merged the Unified Grocers, Inc. Cash Balance Plan into the SUPERVALU INC. Retirement Plan. In fiscal 2024, no minimum pension contributions are required to be made under the SUPERVALU INC.
Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and unions that are parties to the relevant collective bargaining agreement.
Plan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and unions that are parties to the relevant collective bargaining agreements.
Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for more information relating to our participation in these multiemployer pension plans and to the actuarial assumptions used in determining pension and other postretirement liabilities and expenses. 45 Table of Contents Self-insurance liabilities We are primarily self-insured for workers’ compensation, general and automobile liability insurance.
Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for more information relating to our participation in these multiemployer pension plans and to the actuarial assumptions used in determining pension and other postretirement liabilities and expenses. Self-insurance liabilities We are primarily self-insured for workers’ compensation, general and automobile liability insurance.
We believe we are North America’s premier wholesaler with 56 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
We believe we are North America’s premier grocery wholesaler with 55 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
Interest expense, net Interest expense, net includes primarily interest expense on long-term debt, net of capitalized interest, loss on debt extinguishment, interest expense on finance lease obligations, amortization of financing costs and discounts, and interest income. 30 Table of Contents Adjusted EBITDA Our Consolidated Financial Statements are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”).
Interest expense, net Interest expense, net includes primarily interest expense on long-term debt, net of capitalized interest, loss on debt extinguishment, interest expense on finance lease obligations, amortization of financing costs and discounts, and interest income. Adjusted EBITDA Our Consolidated Financial Statements are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”).
We fund our defined benefit pension plans based on the minimum contribution required under ERISA, the Pension Protection Act of 2006 and other applicable laws and additional contributions made at our discretion.
We fund our defined benefit pension plan based on the minimum contribution required under ERISA, the Pension Protection Act of 2006 and other applicable laws and additional contributions made at our discretion.
Composition of Consolidated Statements of Operations and Business Performance Assessment Net sales Our Net sales consist primarily of product sales of natural, organic, specialty, produce and conventional grocery and non-food products, and support services revenue from retailers, adjusted for customer volume discounts, vendor incentives when applicable, returns and allowances, and professional services revenue.
Composition of Consolidated Statements of Operations and Business Performance Assessment Net sales Our Net sales consist primarily of product sales of natural, organic, specialty, produce, and conventional grocery and non-food products, adjusted for customer volume discounts, vendor incentives when applicable, returns and allowances, and professional services revenue.
Other Obligations and Commitments Our principal contractual obligations and commitments consist of obligations under our long-term debt, interest on long-term debt, operating and finance leases, purchase obligations, self-insurance liabilities and multiemployer plan withdrawals.
Other Obligations and Commitments Our principal contractual obligations and commitments consist of obligations under our long-term debt, interest on long-term debt, operating and finance leases, purchase obligations, self-insurance liabilities and multiemployer plan withdrawal liabilities.
When holding inventory levels and mix constant, as of July 30, 2022, we estimate a 50 basis point increase in the inflation rate on our ending LIFO-based inventory would result in an $8 million increase in the LIFO charge on an annualized basis. Vendor funds We receive funds from many of the vendors whose products we buy for resale.
When holding inventory levels and mix constant, as of July 29, 2023, we estimate a 50 basis point increase in the inflation rate on our ending LIFO-based inventory would result in an $8 million increase in the LIFO charge on an annualized basis. Vendor funds We receive funds from many of the vendors whose products we buy for resale.
See Note 8—Derivatives in Part II, Item 8 and —Interest Rate Risk in Part II, Item 7A of this Annual Report for additional information. From time-to-time, we enter into fixed price fuel supply agreements and foreign currency hedges . As of July 30, 2022, we had fixed price fuel contracts and foreign currency forward agreements outstanding.
See Note 8—Derivatives in Part II, Item 8 and —Interest Rate Risk in Part II, Item 7A of this Annual Report for additional information. From time-to-time, we enter into fixed price fuel supply agreements and foreign currency hedges . As of July 29, 2023, we had fixed price fuel contracts and foreign currency forward agreements outstanding.
Management believes the following critical accounting policies reflect our more subjective or complex judgments and estimates used in the preparation of our Consolidated Financial Statements. 43 Table of Contents Inventories Inventories are valued at the lower of cost or market. Substantially all of our inventories consist of finished goods. Inventories are recorded net of vendor allowances and cash discounts.
Management believes the following critical accounting estimates reflect our more subjective or complex judgments and estimates used in the preparation of our Consolidated Financial Statements. Inventories Inventories are valued at the lower of cost or market. Substantially all of our inventories consist of finished goods. Inventories are recorded net of vendor allowances and cash discounts.
Retirement Plan under Employee Retirement Income Security Act of 1974, as amended (“ERISA”). An insignificant amount of contributions are expected to be made to defined benefit pension plans and postretirement benefit plans in fiscal 2023.
Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). An insignificant amount of contributions are expected to be made to defined benefit pension plans and postretirement benefit plans in fiscal 2024.
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. 28 Table of Contents The U.S. economy has experienced economic volatility in recent years due to uncertain economic conditions, which have had and we expect may continue to have an impact on consumer confidence in the future.
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. 29 Table of Contents The U.S. economy has experienced economic volatility in recent years, which has had, and we expect may continue to have, an impact on consumer confidence.
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 $45 million, $48 million and $52 million in fiscal 2022, 2021 and 2020, respectively.
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, $45 million and $48 million in fiscal 2023, 2022 and 2021, respectively.
Recently Issued Financial Accounting Standards For a discussion of recently issued financial accounting standards, refer to Note 2—Recently Adopted and Issued Accounting Pronouncements in Part II, Item 8 of this Annual Report. 46 Table of Contents
Recently Issued Financial Accounting Standards For a discussion of recently issued financial accounting standards, refer to Note 2—Recently Adopted and Issued Accounting Pronouncements in Part II, Item 8 of this Annual Report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto, “Risk Factors” included in Part I, Item IA, “Forward-looking Statements” and other risks described elsewhere in this Annual Report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto, “Risk Factors” included in Part I, Item IA, “Cautionary Note Regarding Forward-Looking Statements” and other risks described elsewhere in this Annual Report.
The future amount and timing of interest expense payments are expected to vary with the amount and then prevailing contractual interest rates over our debt as discussed in Interest Rate Risk in Part II, Item 7A of this Annual Report Pension and Other Postretirement Benefit Obligations We contributed $1 million and $2 million to our defined benefit pension and other postretirement benefit plans, respectively, in fiscal 2022.
The future amount and timing of interest expense payments are expected to vary with the amount and then prevailing contractual interest rates over our debt as discussed in Interest Rate Risk in Part II, Item 7A of this Annual Report. 39 Table of Contents Pension and Other Postretirement Benefit Obligations We contributed $1 million and $1 million to our defined benefit pension and other postretirement benefit plans, respectively, in fiscal 2023.
For a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2021 and 2020, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021, filed with the Securities and Exchange Commission on September 28, 2021.
For a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2022 and 2021, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the fiscal year ended July 30, 2022, filed with the Securities and Exchange Commission on September 27, 2022.
Our continued access to short-term and long-term financing through credit markets depends on numerous factors, including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings. Primary uses of cash include debt service, capital expenditures, working capital maintenance and income tax payments.
Our continued access to short-term and long-term financing through credit markets depends on numerous factors, including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings. 37 Table of Contents Primary uses of cash include debt service, capital expenditures, working capital maintenance, investments in cloud technologies and income tax payments.
We believe our product mix ranging from high-quality natural and organic products to national and local conventional brands, including cost conscious private label brands, positions us to serve a broad cross section of North American retailers and end customers, and lessens any impact of shifts in consumer and industry trends in grocery product mix.
We believe our product mix, which ranges from high-quality natural and organic products to national and local conventional brands, including cost conscious private label brands, positions us to serve a broad cross section of North American retailers and end customers, and may lessen the impact of any further shifts in consumer and industry trends in grocery product mix.
As of July 30, 2022, we had an aggregate of $1,229 million of floating rate notional debt subject to active interest rate swap contracts, which effectively hedge the SOFR component of our interest rate payments through pay fixed and receive floating interest rate swap agreements.
As of July 29, 2023, we had an aggregate of $800 million of floating rate notional debt subject to active interest rate swap contracts, which effectively hedge the SOFR component of our interest rate payments through pay fixed and receive floating interest rate swap agreements.
If the first-in, first-out (“FIFO”) method had been used, Inventories, net, would have been higher by approximately $225 million and $67 million at July 30, 2022 and July 31, 2021, respectively.
If the first-in, first-out (“FIFO”) method had been used, Inventories, net, would have been higher by approximately $344 million and $225 million at July 29, 2023 and July 30, 2022, respectively.
For fiscal 2022, the effective tax rate was reduced by the impact of discrete tax benefits related to employee stock awards and the release of unrecognized tax positions, partially offset by non-deductible executive compensation.
For fiscal 2022, the effective tax rate was reduced by the impact of discrete tax benefits related to employee stock awards and the release of unrecognized tax positions, partially offset by non-deductible executive compensation. Net Income Attributable to United Natural Foods, Inc.
In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately six percent in fiscal 2022. Cost inflation estimates are based on individual like items sold during the periods being compared.
Impact of Product Cost Inflation We experienced a mix of inflation across product categories during fiscal 2023. In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately nine percent in fiscal 2023. Cost inflation estimates are based on individual like items sold during the periods being compared.
Cost of sales and Gross profit The principal components of our Cost of sales include the amounts paid to suppliers for product sold, plus transportation costs necessary to bring the product to, or move product between, our distribution centers and retail stores, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products.
Net sales also include amounts charged by us to customers for shipping and handling and fuel surcharges. 30 Table of Contents Cost of sales and Gross profit The principal components of our Cost of sales include the amounts paid to suppliers for product sold, plus transportation costs necessary to bring the product to, or move product between, our distribution centers and retail stores, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements. Our Term Loan Agreement and the indenture governing our unsecured 6.75% Senior Notes due October 15, 2028 (the “Senior Notes”) do not include any financial maintenance covenants.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements. Our Term Loan Agreement and Senior Notes do not include any financial maintenance covenants.
Each 25-basis point reduction in the discount rate would increase our projected pension benefit obligation by $44 million, as of July 30, 2022, and for fiscal 2022 would increase Net periodic benefit income by approximately $4 million.
Each 25-basis point reduction in the discount rate would increase our projected pension benefit obligation by $37 million, as of July 29, 2023, and for fiscal 2023 would increase Net periodic benefit income by approximately $3 million.
The decrease in Net cash used in investing activities of continuing operations was primarily due to proceeds received from the sale of the Riverside, California distribution center in fiscal 2022 discussed above and a reduction in payments for capital expenditures.
The increase in Net cash used in investing activities of continuing operations was primarily due to lower proceeds from asset sales, primarily due to cash received from the sale of the Riverside, California distribution center in fiscal 2022 discussed above, and an increase in payments for capital expenditures in fiscal 2023.
As of July 30, 2022, approximately $1.9 billion or 74% of inventory was valued under the LIFO method, before the application of any LIFO reserve, and primarily included grocery, frozen food and general merchandise products, with the remaining inventory valued under the first-in, first-out method and primarily included meat, dairy and deli products.
As of July 29, 2023, approximately 2.0 billion or 81% of inventory was valued under the LIFO method, before the application of any LIFO reserve, and primarily included grocery, frozen food and general merchandise products, with the remaining inventory valued under the first-in, first-out method and primarily included meat, dairy and deli products.
Expected rate of return on plan assets Our expected long-term rate of return on plan assets assumption is determined based on the portfolio’s actual and target composition, current market conditions, forward-looking return and risk assumptions by asset class, and historical long-term investment performance. The assumed long-term rate of return on pension assets ranged from 4.25% to 4.50% for fiscal 2022.
Expected rate of return on plan assets Our expected long-term rate of return on plan assets assumption is determined based on the portfolio’s actual and target composition, current market conditions, forward-looking return and risk assumptions by asset class, and historical long-term investment performance. The assumed long-term rate of return on pension assets was 6.00% for fiscal 2023.
We expect to be able to fund debt maturities and finance lease liabilities through fiscal 2023 with internally generated funds and borrowings under the ABL Credit Facility. Our primary sources of liquidity are from internally generated funds and from borrowing capacity under the ABL Credit Facility.
Our credit facilities are secured by a substantial portion of our total assets. We expect to be able to fund debt maturities and finance lease liabilities through fiscal 2024 with internally generated funds and borrowings under the ABL Credit Facility. Our primary sources of liquidity are from internally generated funds and from borrowing capacity under the ABL Credit Facility.
We define Adjusted EBITDA as a consolidated measure inclusive of continuing and discontinued operations results, which we reconcile by adding Net income (loss) from continuing operations, 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, net, plus Provision (benefit) 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, (Gain) loss on sale of assets, certain legal charges and gains, certain other non-cash charges or other items, as determined by management, plus Adjusted EBITDA of discontinued operations calculated in a manner consistent with the results of continuing operations, outlined above.
There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting the cost of cash expenditures for capital assets or certain other contractual commitments, finance lease obligation and debt service expenses, income taxes and any impacts from changes in working capital. 31 Table of Contents We define Adjusted EBITDA as a consolidated measure inclusive of continuing and discontinued operations results, which we reconcile by adding Net income (loss) from continuing operations, 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 Provision (benefit) 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, certain other non-cash charges or other items, as determined by management, plus Adjusted EBITDA of discontinued operations calculated in a manner consistent with the results of continuing operations, outlined above.
The LIFO charge was $158 million and $24 million in fiscal 2022 and fiscal 2021, respectively. Excluding the non-cash LIFO charge, Gross profit rate was 15.0% of Net sales and 14.7% of Net sales for fiscal 2022 and fiscal 2021, respectively.
Excluding the non-cash LIFO charge, gross profit rate was 14.0% of Net sales and 15.0% of Net sales for fiscal 2023 and fiscal 2022, respectively.
In fiscal 2023, we expect to contribute approximately $51 million to multiemployer plans related to continuing operations, subject to the outcome of collective bargaining and capital market conditions.
In fiscal 2024, we expect to contribute approximately $50 million to multiemployer plans, subject to the outcome of collective bargaining and capital market conditions.
Accruals for workers’ compensation, general and automobile liabilities totaled $98 million and $103 million as of July 30, 2022 and July 31, 2021, respectively.
Accruals for workers’ compensation, general and automobile liabilities totaled $97 million and $98 million as of July 29, 2023 and July 30, 2022, respectively.
Chains Net sales increased primarily due to growth in sales to existing customers, including an increase from higher product costs, which drove higher wholesale selling prices to our customers, partially offset by supply chain challenges and reduced unit sales growth.
Chains Net sales increased primarily due to growth in sales to existing and new customers, including an increase from higher product costs, which drove higher wholesale selling prices to our customers, partially offset by a decrease in units sold.
(in millions) 2022 (52 weeks) 2021 (52 weeks) 2020 (52 weeks) Net income (loss) from continuing operations $ 254 $ 149 $ (251) Adjustments to continuing operations net income (loss): Less net income attributable to noncontrolling interests (6) (6) (5) Net periodic benefit income, excluding service cost (1) (40) (85) (39) Interest expense, net 155 204 192 Other, net (2) (8) (4) Provision (benefit) for income taxes (2) 56 34 (91) Depreciation and amortization 285 285 282 Share-based compensation 43 49 34 Goodwill impairment charges (3) — — 425 LIFO charge (4) 158 24 18 Restructuring, acquisition and integration related expenses (5) 21 56 87 (Gain) loss on sale of assets (6) (87) (4) 18 Multiemployer pension plan withdrawal (benefit) charges (7) (8) 63 — Notes receivable charges (8) — — 13 Legal reserve charge, net of settlement income (9) — — 1 Other retail expense (10) — 5 1 Adjusted EBITDA of continuing operations 829 766 681 Adjusted EBITDA of discontinued operations (11) — 4 10 Adjusted EBITDA $ 829 $ 770 $ 691 Income (loss) from discontinued operations, net of tax (11) $ — $ 6 $ (18) Adjustments to discontinued operations net income (loss): Benefit for income taxes — (1) (5) Restructuring, store closure and other charges, net (12) — (1) 33 Adjusted EBITDA of discontinued operations (11) $ — $ 4 $ 10 (1) Fiscal 2021 includes a postretirement settlement gain of $17 million associated with the termination of remaining corporate plans.
(in millions) 2023 (52 weeks) 2022 (52 weeks) 2021 (52 weeks) Net income from continuing operations $ 30 $ 254 $ 149 Adjustments to continuing operations net income: Less net income attributable to noncontrolling interests (6) (6) (6) Net periodic benefit income, excluding service cost (1) (29) (40) (85) Interest expense, net 144 155 204 Other income, net (2) (2) (8) (Benefit) provision for income taxes (23) 56 34 Depreciation and amortization 304 285 285 Share-based compensation 38 43 49 LIFO charge 119 158 24 Restructuring, acquisition and integration related expenses (2) 8 21 56 Loss (gain) on sale of assets and other asset charges (3) 30 (87) (4) Multiemployer pension plan withdrawal charges (benefit) (4) 1 (8) 63 Other retail expense (5) 1 — 5 Business transformation costs (6) 25 — — Adjusted EBITDA of continuing operations 640 829 766 Adjusted EBITDA of discontinued operations (7) — — 4 Adjusted EBITDA $ 640 $ 829 $ 770 Income from discontinued operations, net of tax (7) $ — $ — $ 6 Adjustments to discontinued operations net income: Benefit for income taxes — — (1) Restructuring, store closure and other charges, net (8) — — (1) Adjusted EBITDA of discontinued operations (7) $ — $ — $ 4 (1) Fiscal 2021 includes a postretirement settlement gain of $17 million associated with the termination of remaining corporate plans.
These fixed rates range from 1.795% to 2.875%, with maturities between August 2022 and October 2025. The fair value of these interest rate derivatives represents a total net asset of $2 million and are subject to volatility based on changes in market interest rates.
These fixed rates range from 2.360% to 2.875%, with maturities between September 2023 and October 2025. The fair values of these interest rate derivatives represent a total net asset of $22 million and are subject to volatility based on changes in market interest rates.
As of July 30, 2022, we had $176 million remaining authorized under the 2017 Repurchase Program. We will manage the pacing of any repurchases in response to market conditions and other relevant factors, including any limitations on our ability to conduct repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes.
As of July 29, 2023, we had $138 million remaining authorized under the 2022 Repurchase Program. 40 Table of Contents 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.
While we believe the valuation methods used to determine the fair value of plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Our defined benefit pension plan and certain supplemental executive retirement plans are closed to new participants and service crediting. 41 Table of Contents While we believe the valuation methods used to determine the fair value of plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Net Periodic Benefit Income, Excluding Service Cost Net periodic benefit income, excluding service cost decreased $45 million to $40 million in fiscal 2022, from $85 million in fiscal 2021.
Net Periodic Benefit Income, Excluding Service Cost Net periodic benefit income, excluding service cost decreased $11 million to $29 million in fiscal 2023, from $40 million in fiscal 2022.
The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. We set our rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits.
We set our rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits.
We offer approximately 260,000 products consisting of national, regional and private label brands grouped into six product categories: grocery and general merchandise; produce; perishables and frozen foods; nutritional supplements and sports nutrition; bulk and foodservice products; and personal care items.
We offer approximately 250,000 products consisting of national, regional and private label brands grouped into the following main product categories: grocery and general merchandise; perishables; frozen foods; wellness and personal care items; and bulk and foodservice products.
RESULTS OF OPERATIONS Fiscal year ended July 30, 2022 (fiscal 2022) compared to fiscal year ended July 31, 2021 (fiscal 2021) Net Sales Our Net sales by customer channel was as follows (in millions except percentages): 2022 (52 weeks) 2021 (52 weeks) Increase (Decrease) Customer Channel (1) $ % Chains $ 12,562 $ 12,104 $ 458 3.8 % Independent retailers 7,360 6,638 722 10.9 % Supernatural 5,719 5,050 669 13.2 % Retail 2,468 2,442 26 1.1 % Other 2,402 2,300 102 4.4 % Eliminations (1,583) (1,584) 1 (0.1) % Total net sales $ 28,928 $ 26,950 $ 1,978 7.3 % (1) Refer to Note 3—Revenue Recognition in Part II, Item 8 of this Annual Report for our channel definitions and additional information.
RESULTS OF OPERATIONS Fiscal year ended July 29, 2023 (fiscal 2023) compared to fiscal year ended July 30, 2022 (fiscal 2022) Net Sales Our Net sales by customer channel was as follows (in millions except percentages): 2023 (52 weeks) 2022 (52 weeks) Increase (Decrease) Customer Channel (1) $ % Chains $ 12,816 $ 12,562 $ 254 2.0 % Independent retailers 7,699 7,360 339 4.6 % Supernatural 6,374 5,719 655 11.5 % Retail 2,480 2,468 12 0.5 % Other 2,477 2,402 75 3.1 % Eliminations (1,574) (1,583) 9 (0.6) % Total net sales $ 30,272 $ 28,928 $ 1,344 4.6 % (1) Refer to Note 3—Revenue Recognition in Part II, Item 8 of this Annual Report for our channel definitions and additional information.
In addition, we are limited in the aggregate amount of dividends that we may pay under the terms of our Term Loan Facility, ABL Credit Facility and Senior Notes.
In addition, we are limited in the aggregate amount of dividends that we may pay under the terms of our Term Loan Facility, ABL Credit Facility and our $500 million of unsecured 6.750% senior notes due October 15, 2028 (the “Senior Notes”).
Share Repurchases In September 2022, our Board of Directors authorized a new repurchase program for up to $200 million of our Common stock over a term of four years (the “2022 Repurchase Program”).
Share Repurchases In September 2022, our Board of Directors authorized a new repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”). Under the 2022 Repurchase Program, we repurchased approximately 1,888,000 shares of our common stock for a total cost of $62 million in fiscal 2023.
As we continue to work to find solutions to underfunded multiemployer pension plans, it is possible we could incur withdrawal liabilities for certain additional multiemployer pension plan obligations in the future as we actively negotiate new collective bargaining agreements with a number of our unions in due course. We continue to evaluate our exposure to underfunded multiemployer pension plans.
As we continue to work to find solutions to underfunded multiemployer pension plans, it is possible we could incur withdrawal liabilities for certain additional multiemployer pension plan obligations in the future as we actively negotiate new collective bargaining agreements with a number of our unions in due course. 42 Table of Contents The American Rescue Plan Act (“ARPA”) established the Special Financial Assistance (“SFA”) Program for financially troubled multi-employer pension plans.
Increase (Decrease) (in millions) 2022 (52 weeks) 2021 (52 weeks) 2020 (52 weeks) 2022 2021 Net sales $ 28,928 $ 26,950 $ 26,559 $ 1,978 $ 391 Cost of sales 24,746 23,011 22,670 1,735 341 Gross profit 4,182 3,939 3,889 243 50 Operating expenses 3,825 3,593 3,552 232 41 Goodwill impairment charges — — 425 — (425) Restructuring, acquisition and integration related expenses 21 56 87 (35) (31) (Gain) loss on sale of assets (87) (4) 18 (83) (22) Operating income (loss) 423 294 (193) 129 487 Net periodic benefit income, excluding service cost (40) (85) (39) 45 (46) Interest expense, net 155 204 192 (49) 12 Other, net (2) (8) (4) 6 (4) Income (loss) from continuing operations before income taxes 310 183 (342) 127 525 Provision (benefit) for income taxes 56 34 (91) 22 125 Net income (loss) from continuing operations 254 149 (251) 105 400 Income (loss) from discontinued operations, net of tax — 6 (18) (6) 24 Net income (loss) including noncontrolling interests 254 155 (269) 99 424 Less net income attributable to noncontrolling interests (6) (6) (5) — (1) Net income (loss) attributable to United Natural Foods, Inc. $ 248 $ 149 $ (274) $ 99 $ 423 Adjusted EBITDA $ 829 $ 770 $ 691 $ 59 $ 79 32 Table of Contents The following table reconciles Adjusted EBITDA to Net income (loss) from continuing operations and to Income (loss) from discontinued operations, net of tax.
Increase (Decrease) (in millions) 2023 (52 weeks) 2022 (52 weeks) 2021 (52 weeks) 2023 Compared to 2022 2022 Compared to 2021 Net sales $ 30,272 $ 28,928 $ 26,950 $ 1,344 $ 1,978 Cost of sales 26,141 24,746 23,011 1,395 1,735 Gross profit 4,131 4,182 3,939 (51) 243 Operating expenses 3,973 3,825 3,593 148 232 Restructuring, acquisition and integration related expenses 8 21 56 (13) (35) Loss (gain) on sale of assets and other asset charges 30 (87) (4) 117 (83) Operating income 120 423 294 (303) 129 Net periodic benefit income, excluding service cost (29) (40) (85) 11 45 Interest expense, net 144 155 204 (11) (49) Other income, net (2) (2) (8) — 6 Income from continuing operations before income taxes 7 310 183 (303) 127 (Benefit) provision for income taxes (23) 56 34 (79) 22 Net income from continuing operations 30 254 149 (224) 105 Income from discontinued operations, net of tax — — 6 — (6) Net income including noncontrolling interests 30 254 155 (224) 99 Less net income attributable to noncontrolling interests (6) (6) (6) — — Net income attributable to United Natural Foods, Inc. $ 24 $ 248 $ 149 $ (224) $ 99 Adjusted EBITDA $ 640 $ 829 $ 770 $ (189) $ 59 32 Table of Contents The following table reconciles Net income from continuing operations and Income from discontinued operations, net of tax to Adjusted EBITDA.
These expenses include salaries and wages, employee benefits, occupancy, insurance, depreciation and amortization expense, and share-based compensation expense. Restructuring, acquisition and integration related expenses Restructuring, acquisition and integration related expenses reflect expenses resulting from restructuring activities, including severance costs, facility closure asset impairment charges and costs, share-based compensation acceleration charges and acquisition and integration related expenses.
Restructuring, acquisition and integration related expenses Restructuring, acquisition and integration related expenses reflect expenses resulting from restructuring activities, including severance costs, facility closure asset impairment charges and costs, share-based compensation acceleration charges and acquisition and integration related expenses.
The increase in Operating income was primarily driven by an increase in Gross profit, Gain on sale of assets and lower Restructuring, acquisition and integration related expenses, partially offset by an increase in Operating expenses.
The decrease in Operating income was primarily driven by an increase in Operating expenses, a loss on sale of assets and other asset charges in fiscal 2023 compared to a gain in fiscal 2022 as described above, and a decrease in Gross profit, partially offset by lower Restructuring, acquisition and integration related expenses.
Wholesale’s Operating expense increased $366 million, which excludes depreciation and amortization, share-based compensation, LIFO charge and other adjustments as outlined in Note 16—Business Segments.
Wholesale’s Operating expense increased $75 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report.
The calculation of the Company’s tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized within the provision for income tax in the period that includes the enactment date. 43 Table of Contents The calculation of the Company’s tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant. 40 Table of Contents Payments for Capital Expenditures Our capital expenditures decreased $59 million in fiscal 2022 to $251 million compared to $310 million for fiscal 2021.
Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant. 38 Table of Contents Payments for Capital Expenditures Our capital expenditures increased $72 million in fiscal 2023 to $323 million compared to $251 million for fiscal 2022, primarily due to automation investments in our supply chain.
Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for information related to the actuarial assumptions used in determining pension and postretirement healthcare liabilities and expenses. 44 Table of Contents Discount rates We review and select the discount rate to be used in connection with our pension and other postretirement obligations annually.
We measure our defined benefit pension and other postretirement plan obligations as of the nearest calendar month end. Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for information related to the actuarial assumptions used in determining pension and postretirement healthcare liabilities and expenses.
Retail Operations We currently operate 73 continuing operations Retail grocery stores, including 54 Cub Foods corporate stores and 19 Shoppers Food Warehouse stores. In addition, we supply another 26 Cub Foods stores operated by our Wholesale customers through franchise and equity ownership arrangements. We operate 81 pharmacies primarily within our stores we operate and the stores of our franchisees.
In addition, we supply another 26 Cub Foods stores operated by our Wholesale customers through franchise and equity ownership arrangements. We operate 81 pharmacies primarily within the stores we operate and the stores of our franchisees. In addition, we operate 25 “Cub Wine and Spirit” and “Cub Liquor” stores.
A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned. Our credit facilities are secured by a substantial portion of our total assets.
Sources and Uses of Cash We expect to continue to replenish operating assets and pay down debt obligations with internally generated funds. A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned.
Cash Flow Information The following summarizes our Consolidated Statements of Cash Flows: Increase (Decrease) (in millions) 2022 (52 weeks) 2021 (52 weeks) 2020 (52 weeks) 2022 2021 Net cash provided by operating activities of continuing operations $ 331 $ 614 $ 457 $ (283) $ 157 Net cash used in investing activities of continuing operations (49) (239) (28) 190 (211) Net cash used in financing activities (279) (384) (453) 105 69 Net cash flows from discontinued operations — 2 27 (2) (25) Effect of exchange rate on cash — 1 (1) (1) 2 Net increase (decrease) in cash and cash equivalents 3 (6) 2 9 (8) Cash and cash equivalents, at beginning of period 41 47 45 (6) 2 Cash and cash equivalents at end of period, including discontinued operations $ 44 $ 41 $ 47 $ 3 $ (6) 41 Table of Contents Fiscal 2022 compared to Fiscal 2021 The decrease in Net cash provided by operating activities of continuing operations was primarily due to higher levels of cash invested in net working capital due to higher costs of inventory on hand in excess of Accounts payable increases, and credit extended on continued sales growth, partially offset by higher amounts of cash provided from higher earnings in fiscal 2022.
Cash Flow Information The following summarizes our Consolidated Statements of Cash Flows: Increase (Decrease) (in millions) 2023 (52 weeks) 2022 (52 weeks) 2021 (52 weeks) 2023 2022 Net cash provided by operating activities of continuing operations $ 624 $ 331 $ 614 $ 293 $ (283) Net cash used in investing activities of continuing operations (339) (49) (239) (290) 190 Net cash used in financing activities (292) (279) (384) (13) 105 Net cash flows from discontinued operations — — 2 — (2) Effect of exchange rate on cash — — 1 — (1) Net (decrease) increase in cash and cash equivalents (7) 3 (6) (10) 9 Cash and cash equivalents, at beginning of period 44 41 47 3 (6) Cash and cash equivalents at end of period, including discontinued operations $ 37 $ 44 $ 41 $ (7) $ 3 Fiscal 2023 compared to Fiscal 2022 The increase in Net cash provided by operating activities of continuing operations was primarily due to lower levels of cash utilized in net working capital, including the monetization of certain receivables discussed above, partially offset by lower cash generated from net income in fiscal 2023.
The following chart outlines our scheduled debt maturities by fiscal year, which excludes debt prepayments that may be required from Excess Cash Flow (as defined in the Term Loan Agreement) generated or sales of mortgaged properties in fiscal 2023 or beyond.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for further detail of our scheduled debt maturities by fiscal year and by debt instrument, which excludes debt prepayments that may be required from Excess Cash Flow (as defined in the Term Loan Agreement) generated or sales of mortgaged properties in fiscal 2024 or beyond.
Independent retailers Net sales increased primarily due to sales under a supply agreement with a new customer for East Coast locations commencing in the first quarter of fiscal 2022 and growth in sales to existing customers, including an increase from higher product costs, which drove higher wholesale selling prices to our customers, partially offset by supply chain challenges and reduced unit sales growth. 34 Table of Contents Supernatural Net sales increased primarily due to growth in existing store sales, including the supply of new product categories previously impacted by the pandemic and new fresh categories, such as bulk and ingredients used for prepared foods, inflation, and increased sales to new stores.
Independent retailers Net sales increased primarily due to increased sales under a supply agreement with a new customer within the East region commencing in the first quarter of fiscal 2022 and growth in sales to existing customers, including an increase from higher product costs, which drove higher wholesale selling prices to our customers, partially offset by a decrease in units sold.
FORWARD-LOOKING STATEMENTS This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, that involve substantial risks and uncertainties. In some cases you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “should,” “will,” and “would,” or similar words.
In some cases you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “should,” “will” and “would,” or similar words.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities.
We may implement the 2022 Repurchase Program pursuant to a plan or plans meeting the conditions of Rule 10b5-1 under the Exchange Act. CRITICAL ACCOUNTING ESTIMATES The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities.
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 addition, as discussed above, we have experienced higher costs of services from labor, transportation and other services expenses.
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 latter half of fiscal 2023, we experienced fewer and less significant vendor product cost increases as compared to fiscal 2022.
Consumer spending may be impacted by levels of discretionary income and consumers trading down to a less expensive mix of products for grocery items. In addition, inflation has increased and continues to be unpredictable. For example, we experienced volatility in our energy operating costs and commodity input costs of our manufacturers impacted prices of products we procured.
Consumer spending may 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. In addition, inflation remains at elevated levels and continues to be unpredictable.
Based on our Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) at the end of fiscal 2022, no prepayment from Excess Cash Flow in fiscal 2022 is required to be made in fiscal 2023. 39 Table of Contents Derivatives and Hedging Activity We enter into interest rate swap contracts from time to time to mitigate our exposure to changes in market interest rates as part of our strategy to manage our debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates.
Derivatives and Hedging Activity We enter into interest rate swap contracts from time to time to mitigate our exposure to changes in market interest rates as part of our strategy to manage our debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates.
Reflecting the factors described in more detail above, Net income attributable to United Natural Foods, Inc. was $248 million, or $4.07 per diluted common share, in fiscal 2022, compared to $149 million, or $2.48 per diluted common share, in fiscal 2021. 36 Table of Contents Segment Results of Operations In evaluating financial performance in each business segment, management primarily uses Net sales and Adjusted EBITDA of its business segments as discussed and reconciled within Note 16—Business Segments within Part II, Item 8 of this Annual Report and the above table within the Executive Overview section.
Segment Results of Operations In evaluating financial performance in each business segment, management primarily uses Net sales and Adjusted EBITDA of its business segments as discussed and reconciled within Note 16—Business Segments within Part II, Item 8 of this Annual Report and the above table within the Executive Overview section.
Based on the assessment of the most recent information available from the multiemployer plans, we believe that most of the plans to which we contribute are underfunded.
Based on the assessment of the most recent information available from the multiemployer plans, we believe that most of the plans to which we contribute are underfunded. We are only one of a number of employers contributing to these plans and the underfunding is not a direct obligation or liability to us.
We believe the key drivers for new customer growth will be the benefits of our significant scale, product and service offerings and nationwide footprint. Trends and Other Factors Affecting our Business Our results are impacted by macroeconomic and demographic trends, changes in the food distribution market structure and changes in consumer behavior.
Trends and Other Factors Affecting our Business Our results are impacted by macroeconomic and demographic trends, changes in the food distribution market structure and changes in consumer behavior.
Interest Expense, Net (in millions) 2022 (52 weeks) 2021 (52 weeks) Increase (Decrease) Interest expense on long-term debt, net of capitalized interest $ 126 $ 143 $ (17) Interest expense on finance lease obligations 11 19 (8) Amortization of financing costs and discounts 12 13 (1) Loss on debt extinguishment 7 30 (23) Interest income (1) (1) — Interest expense, net $ 155 $ 204 $ (49) The decrease in interest expense on long-term debt, net of capitalized interest, for fiscal 2022 compared to fiscal 2021 was primarily driven by lower outstanding debt balances and lower net interest expense related to our portfolio of interest rate swaps.
Interest Expense, Net (in millions) 2023 (52 weeks) 2022 (52 weeks) Increase (Decrease) Interest expense on long-term debt, net of capitalized interest $ 130 $ 126 $ 4 Interest expense on finance lease obligations 3 11 (8) Amortization of financing costs and discounts 10 12 (2) Loss on debt extinguishment 3 7 (4) Interest income (2) (1) (1) Interest expense, net $ 144 $ 155 $ (11) The decrease in Interest expense, net for fiscal 2023 compared to fiscal 2022 was primarily driven by lower outstanding debt balances and finance leases, partially offset by higher average interest rates. 35 Table of Contents (Benefit) Provision for Income Taxes The effective income tax rate for continuing operations was a benefit rate of 328.6% in fiscal 2023 compared to an expense rate of 18.1% in fiscal 2022.
We believe our Fuel the Future strategy will further accelerate our growth through increasing sales of products and services, providing tailored, data-driven solutions to help our customers run their businesses more efficiently and contributing to customer acquisitions.
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.
In fiscal 2022, our Allentown, Pennsylvania distribution center began operations, with a capacity of 1.3 million square feet to service customers in the surrounding geographic area. We incurred start-up costs and operating losses, as the volume in this facility ramped up to its operating capacity.
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 fiscal 2022, our Allentown, Pennsylvania distribution center began operations, with a capacity of 1.3 million square feet to service customers in the surrounding geographic area.
Integration related expenses include certain professional consulting expenses related to business transformation and incremental expenses related to combining facilities required to optimize our distribution network as a result of acquisitions. Net periodic benefit income, excluding service cost Net periodic benefit income, excluding service cost reflects the recognition of expected returns on benefit plan assets and interest costs on plan liabilities.
Integration related expenses include certain professional consulting expenses and incremental expenses related to combining facilities required to optimize our distribution network as a result of acquisitions.
Fiscal 2021 also reflects income related to a severance benefit. The following includes a comparison of our consolidated results of operations, our segment results and financial position for fiscal years 2022 and 2021.
(8) Amounts represent store closure charges and costs, operational wind-down and inventory charges, asset impairment charges related to discontinued operations and income related to a severance benefit. 33 Table of Contents The following includes a comparison of our consolidated results of operations, our segment results and financial position for fiscal years 2023 and 2022.
Wholesale Distribution Center Network We evaluate our distribution center network to optimize its performance and expect to incur incremental expenses related to any future network realignment, expansion or improvements and are working to both minimize these costs and obtain new business to further improve the efficiency of our transforming distribution network.
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.
Restructuring, Acquisition and Integration Related Expenses Restructuring, acquisition and integration related expenses were $21 million for fiscal 2022, which primarily included integration costs associated with transformational and advisory activities to position our business for further value creation.
(2) Fiscal 2023 primarily reflects severance costs. Fiscal 2022 and fiscal 2021 primarily reflects costs associated with advisory and transformational activities to position our business for further value-creation related to integration. In addition, fiscal 2021 includes costs associated with distribution center consolidations.
Cost of Sales and Gross Profit Our Gross profit increased $243 million, or 6.2%, to $4,182 million in fiscal 2022, from $3,939 million in fiscal 2021. Our Gross profit as a percentage of Net sales decreased slightly to 14.5% in fiscal 2022 compared to 14.6% in fiscal 2021.
Our Gross profit as a percentage of Net sales decreased to 13.6% in fiscal 2023 compared to 14.5% in fiscal 2022. The LIFO charge was $119 million and $158 million in fiscal 2023 and fiscal 2022, respectively.
We expect to finance fiscal 2023 capital 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. The following chart outlines our capital expenditures by type over the last three fiscal years.
Future investments may be financed through long-term debt or borrowings under our ABL Credit Facility and cash from operations.
Our Fuel the Future strategy consists of six pillars and is underpinned by four focus areas, which are detailed in Business in Part I. Item 1 of this Annual Report.
Our enterprise-wide business transformation strategy consists of four areas, detailed under “Business” included in Part I, Item 1 of this Annual Report, which represent the next evolution of our business strategy.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeJuly 30, 2022 Expected Fiscal Year of Maturity Fair Value Total 2023 2024 2025 2026 2027 Thereafter (in millions, except interest rates) Long-term Debt: Variable rate—principal payments $ 1,628 $ 1,640 $ — $ — $ — $ 800 $ 840 $ — Weighted average interest rate (1) 4.6 % — % — % — % 5.7 % 3.6 % — % Fixed rate—principal payments $ 525 $ 523 $ 14 $ 8 $ 1 $ — $ — $ 500 Weighted average interest rate 6.7 % 5.3 % 4.8 % 4.4 % — % — % 6.8 % Interest Rate Swaps (2) : Notional amounts hedged under pay fixed, receive variable swaps $ 3 $ 1,229 $ 429 $ 350 $ 250 $ 200 $ — $ — Weighted average pay rate 2.6 % 2.6 % 2.5 % 2.5 % 2.8 % — % — % Weighted average receive rate 3.1 % 3.1 % 3.3 % 3.1 % 2.9 % — % — % (1) Excludes the effect of interest rate swaps effectively converting certain of our variable rate obligations to fixed rate obligations.
Biggest changeJuly 29, 2023 Expected Fiscal Year of Maturity Fair Value Total 2024 2025 2026 2027 2028 Thereafter (in millions, except interest rates) Long-term Debt: Variable rate—principal payments $ 1,483 $ 1,482 $ — $ — $ 670 $ 812 $ — $ — Weighted average interest rate (1) 7.3 % — % — % 8.5 % 6.3 % — % — % Fixed rate—principal payments $ 421 $ 509 $ 8 $ 1 $ — $ — $ — $ 500 Weighted average interest rate 6.7 % 4.8 % 4.4 % — % — % — % 6.8 % Interest Rate Swaps (2) : Notional amounts hedged under pay fixed, receive variable swaps $ 21 $ 800 $ 350 $ 250 $ 200 $ — $ — $ — Weighted average pay rate 2.6 % 2.5 % 2.5 % 2.8 % — % — % — % Weighted average receive rate 4.8 % 5.3 % 5.1 % 4.5 % — % — % — % (1) Excludes the effect of interest rate swaps effectively converting certain of our variable rate obligations to fixed rate obligations.
Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. The table below provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations, interest rate swaps and notes receivable.
Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. 44 Table of Contents The table below provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations and interest rate swaps.
For debt obligations, the table presents principal amounts due and related weighted average interest rates by expected maturity dates using interest rates as of July 30, 2022, excluding any original issue and purchase accounting discounts and deferred financing costs. For interest rate swaps, the table presents the notional amounts and related weighted average interest rates by maturity.
For debt obligations, the table presents principal amounts due and related weighted average interest rates by expected maturity dates using interest rates as of July 29, 2023, excluding any original issue and purchase accounting discounts and deferred financing costs. For interest rate swaps, the table presents the notional amounts and related weighted average interest rates by maturity.
(2) Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. 47 Table of Contents Investment Risk The SUPERVALU INC.
(2) Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. Investment Risk The SUPERVALU INC.
Retirement Plan (entirely within the return-seeking portion of the plan assets) would not have had an impact on our minimum contributions required under ERISA for fiscal 2022, but would have resulted in an unfavorable change in net periodic pension income for fiscal 2023 of $2 million and would have reduced Stockholders’ equity by $172 million on a pre-tax basis as of July 30, 2022.
Retirement Plan (entirely within the return-seeking portion of the plan assets) would not have had an impact on our minimum contributions required under ERISA for fiscal 2023, but would have resulted in an unfavorable change in net periodic pension income for fiscal 2024 of $2 million and would have reduced Stockholders’ equity by $156 million on a pre-tax basis as of July 29, 2023.
As of July 30, 2022, we estimate that a 100-basis point increase in the interest rates related to our variable rate borrowings would increase our annualized Interest expense by approximately $4 million, net of the floating interest rate receivable on our interest rate swaps.
As of July 29, 2023, we estimate that a 100-basis point increase in the interest rates related to our variable rate borrowings would increase our annualized Interest expense by approximately $7 million, net of the floating interest rate receivable on our interest rate swaps.
As of July 30, 2022, a 10% unfavorable change in the total value of investments held by the SUPERVALU INC.
As of July 29, 2023, a 10% unfavorable change in the total value of investments held by the SUPERVALU INC.
As of July 30, 2022, a 100-basis point increase in forward SOFR interest rates would increase the fair value of the interest rate swaps by approximately $17 million; while a 100-basis point decrease in forward SOFR interest rates would decrease the fair value of the interest rate swaps by approximately $18 million.
As of July 29, 2023, a 100-basis point increase in forward SOFR interest rates would increase the fair value of the interest rate swaps by approximately $8 million; while a 100-basis point decrease in forward SOFR interest rates would decrease the fair value of the interest rate swaps by approximately $8 million.
As of July 30, 2022, the fair value and expected exposure risk based on aggregate notional values are insignificant. 48 Table of Contents
As of July 29, 2023, the fair value and expected exposure risk based on aggregate notional values are insignificant. 45 Table of Contents
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For notes receivable, the table presents the expected collection of principal cash flows and weighted average interest rates by expected year of maturity.

Other UNFI 10-K year-over-year comparisons