United Natural Foods(UNFI) - 2023 Q2 - Quarterly Report

Filing Information Registrant Information This section provides the essential identification details for United Natural Foods, Inc., including its legal and operational specifics, stock exchange listing, and regulatory filing status - Registrant Name: UNITED NATURAL FOODS, INC.[1] - Jurisdiction of Incorporation: Delaware[1] - Principal Executive Offices: 313 Iron Horse Way, Providence, RI 02908[2] Securities Registered | Title of each class | Trading Symbol | Name of each exchange on which registered | | :------------------ | :------------- | :---------------------------------------- | | Common stock, par value $0.01 | UNFI | New York Stock Exchange | - Filer Status: Large accelerated filer (☒), not a shell company (No ☒)[3] - Common Stock Outstanding (as of March 3, 2023): 59,397,933 shares, $0.01 par value per share[3] Part I. Financial Information Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, goodwill, debt, and other financial instruments Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in millions) | Metric | January 28, 2023 | July 30, 2022 | | :-------------------------- | :--------------- | :------------ | | Cash and cash equivalents | $40 | $44 | | Accounts receivable, net | $992 | $1,214 | | Inventories, net | $2,512 | $2,355 | | Total current assets | $3,741 | $3,797 | | Total assets | $7,635 | $7,628 | | Accounts payable | $1,797 | $1,742 | | Total current liabilities | $2,396 | $2,417 | | Long-term debt | $2,065 | $2,109 | | Total liabilities | $5,790 | $5,836 | | Total stockholders' equity | $1,845 | $1,792 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | 13-Week Period Ended Jan 28, 2023 | 13-Week Period Ended Jan 29, 2022 | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $7,816 | $7,416 | $15,348 | $14,413 | | Gross profit | $1,069 | $1,075 | $2,165 | $2,117 | | Operating income | $63 | $125 | $162 | $232 | | Income before income taxes | $31 | $93 | $103 | $169 | | Net income attributable to UNFI | $19 | $66 | $85 | $142 | | Basic earnings per share | $0.32 | $1.13 | $1.43 | $2.47 | | Diluted earnings per share | $0.31 | $1.08 | $1.38 | $2.33 | Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Comprehensive Income (in millions) | Metric | 13-Week Period Ended Jan 28, 2023 | 13-Week Period Ended Jan 29, 2022 | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income including noncontrolling interests | $22 | $68 | $89 | $145 | | Total other comprehensive (loss) income | $(4) | $15 | $11 | $30 | | Total comprehensive income attributable to UNFI | $15 | $81 | $96 | $172 | Condensed Consolidated Statements of Stockholders' Equity Total United Natural Foods, Inc. stockholders' equity increased from $1,791 million at July 30, 2022, to $1,842 million at January 28, 2023, primarily driven by net income of $85 million and share-based compensation of $23 million, partially offset by restricted stock vestings of $39 million and common stock repurchases of $29 million[22] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $270 | $43 | | Net cash used in investing activities | $(143) | $(129) | | Net cash (used in) provided by financing activities | $(131) | $91 | | Net (decrease) increase in cash and cash equivalents | $(4) | $5 | | Cash and cash equivalents, at end of period | $40 | $45 | Notes to Condensed Consolidated Financial Statements Significant Accounting Policies - United Natural Foods, Inc. (UNFI) is a leading distributor of natural, organic, specialty, produce, and conventional grocery and non-food products, and a provider of support services to retailers primarily throughout the United States and Canada[25] - The Company's fiscal years end on the Saturday closest to July 31, with the second quarter of fiscal 2023 and 2022 relating to the 13-week periods ended January 28, 2023, and January 29, 2022, respectively[26] - Net book overdrafts were $263 million as of January 28, 2023, and $266 million as of July 30, 2022, recorded in Accounts payable[30] - The LIFO reserve was approximately $275 million as of January 28, 2023, and $225 million as of July 30, 2022[32] Recently Adopted and Issued Accounting Pronouncements - ASU 2022-03 (Fair Value Measurement) clarifies that contractual sale restrictions on equity securities are not considered in measuring fair value, with no expected material impact on consolidated financial statements upon adoption in the first quarter of fiscal 2025[33] Revenue Recognition - The Company records revenue across five customer channels: Chains, Independent retailers, Supernatural, Retail, and Other[34] Net Sales by Customer Channel (13-Week Period Ended) | Customer Channel | January 28, 2023 (in millions) | January 29, 2022 (in millions) | | :------------------ | :----------------------------- | :----------------------------- | | Chains | $3,322 | $3,243 | | Independent retailers | $1,980 | $1,905 | | Supernatural | $1,659 | $1,453 | | Retail | $660 | $643 | | Other | $609 | $581 | | Eliminations | $(414) | $(409) | | Total | $7,816 | $7,416 | Net Sales by Customer Channel (26-Week Period Ended) | Customer Channel | January 28, 2023 (in millions) | January 29, 2022 (in millions) | | :------------------ | :----------------------------- | :----------------------------- | | Chains | $6,546 | $6,325 | | Independent retailers | $3,927 | $3,655 | | Supernatural | $3,172 | $2,831 | | Retail | $1,273 | $1,245 | | Other | $1,244 | $1,161 | | Eliminations | $(814) | $(804) | | Total | $15,348 | $14,413 | - During the second quarter of fiscal 2023, the Company entered into a purchase agreement for the sale of certain customer accounts receivable up to a maximum of $300 million, generating approximately $292 million in serviced receivables as of January 28, 2023, and recording a loss on sale of $5 million[38][39] Goodwill and Intangible Assets, Net - Total goodwill remained at $20 million as of January 28, 2023, and July 30, 2022, with accumulated impairment charges of $717 million for Wholesale and $10 million for Other segments[40][41] Identifiable Intangible Assets, Net (in millions) | Asset Type | January 28, 2023 Net | July 30, 2022 Net | | :-------------------------- | :------------------- | :---------------- | | Customer relationships | $683 | $713 | | Pharmacy prescription files | $13 | $15 | | Operating lease intangables | $2 | $2 | | Trademarks and tradenames | $29 | $33 | | Indefinite lived trademarks and tradenames | $56 | $56 | | Total Intangible assets, net | $783 | $819 | - Amortization Expense: $18 million for the second quarter of fiscal 2023 and $36 million for fiscal 2023 year-to-date[43] Estimated Future Amortization Expense (in millions) | Fiscal Year | Amount | | :---------------- | :----- | | Remaining fiscal 2023 | $36 | | 2024 | $72 | | 2025 | $70 | | 2026 | $66 | | 2027 | $63 | | Thereafter | $420 | | Total | $727 | Fair Value Measurements of Financial Instruments Fair Value of Financial Instruments (in millions) - January 28, 2023 | Asset/Liability | Location | Level 2 Fair Value | | :-------------------------------------------- | :-------------------------------- | :----------------- | | Interest rate swaps (current assets) | Prepaid expenses and other current assets | $17 | | Interest rate swaps (long-term assets) | Other long-term assets | $5 | | Fuel derivatives (current liabilities) | Accrued expenses and other current liabilities | $1 | Debt Fair Value (in millions) | Debt Type | January 28, 2023 Carrying Value | January 28, 2023 Fair Value | | :-------------------------------------- | :------------------------------ | :-------------------------- | | Long-term debt, including current portion | $2,077 | $2,091 | Derivatives - The Company uses interest rate swap contracts, designated as cash flow hedges, to mitigate exposure to changes in market interest rates, with active swap contracts totaling a notional value of $1,000 million as of January 28, 2023, paying fixed rates (2.360% to 2.875%) and receiving floating rates (One-Month Term SOFR), maturing between March 2023 and October 2025[49][50] Loss on Cash Flow Hedging Relationships Reclassified from OCI to Earnings (in millions) | Period | Interest expense, net | | :------------------------ | :-------------------- | | 13-Week Period Ended Jan 28, 2023 | $4 | | 26-Week Period Ended Jan 28, 2023 | $4 | Long-Term Debt Long-Term Debt (in millions) | Debt Type | Average Interest Rate (Jan 28, 2023) | Fiscal Maturity Year | January 28, 2023 | July 30, 2022 | | :------------------ | :----------------------------------- | :------------------- | :--------------- | :------------ | | Term Loan Facility | 7.69% | 2026 | $670 | $800 | | ABL Credit Facility | 5.46% | 2027 | $923 | $840 | | Senior Notes | 6.75% | 2029 | $500 | $500 | | Other secured loans | 5.01% | 2024-2025 | $16 | $23 | | Total (net) | | | $2,077 | $2,123 | - As of January 28, 2023, the Company had $923 million of loans outstanding and $144 million in letters of credit under the ABL Credit Facility, with a remaining availability of $1,533 million[58][59] - The Company had $670 million outstanding under the Term Loan Facility as of January 28, 2023, maturing on October 22, 2025, following a $125 million voluntary prepayment in Q2 FY2023 using proceeds from monetized receivables[63][64] Comprehensive Income and Accumulated Other Comprehensive Loss - Accumulated Other Comprehensive Loss decreased to $(9) million as of January 28, 2023, from $(20) million as of July 30, 2022[65] - The Company expects to reclassify $16 million related to unrealized derivative gains on interest rate swap hedges out of Accumulated other comprehensive loss and primarily into Interest expense, net during the following twelve-month period[67] Share-Based Awards - In fiscal 2023 year-to-date, the Company granted restricted stock units and performance share units representing a right to receive an aggregate of 1.6 million shares[68] - As of January 28, 2023, there were 1.6 million shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan[68] Benefit Plans Net Periodic Benefit (Income) Cost (in millions) | Benefit Type | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Pension Benefits | $(15) | $(22) | | Other Postretirement Benefits | $1 | $2 | - The Company contributed $23 million in fiscal 2023 year-to-date and $22 million in fiscal 2022 year-to-date to multiemployer pension plans[72] - The Company expects to contribute approximately $1 million to its other defined benefit pension plans and $1 million to its postretirement benefit plans in fiscal 2023[71] Income Taxes - The effective tax rate for Q2 FY2023 was 29.0%, up from 26.9% in Q2 FY2022, primarily due to the reduction in pre-tax income[73] - The effective tax rate for YTD FY2023 was 13.6%, down from 14.2% in YTD FY2022, with both periods reduced by discrete tax benefits related to the vesting of employee stock awards[74] Earnings Per Share Earnings Per Share (in millions, except per share data) | Metric | 13-Week Period Ended Jan 28, 2023 | 13-Week Period Ended Jan 29, 2022 | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Basic weighted average shares outstanding | 59.8 | 58.3 | 59.3 | 57.6 | | Diluted weighted average shares outstanding | 61.0 | 61.0 | 61.3 | 61.0 | | Basic earnings per share | $0.32 | $1.13 | $1.43 | $2.47 | | Diluted earnings per share | $0.31 | $1.08 | $1.38 | $2.33 | Business Segments - The Company has two reportable segments: Wholesale and Retail, along with a manufacturing division and a branded product line division[76][99] - In fiscal 2022, the Company revised its definition of Adjusted EBITDA to exclude the impact of the non-cash LIFO charge or benefit for better comparability[77][123] Net Sales by Reportable Segment (in millions) | Segment | 13-Week Period Ended Jan 28, 2023 | 13-Week Period Ended Jan 29, 2022 | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :----------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Wholesale | $7,514 | $7,132 | $14,773 | $13,866 | | Retail | $660 | $643 | $1,273 | $1,245 | | Other | $56 | $50 | $116 | $106 | | Eliminations | $(414) | $(409) | $(814) | $(804) | | Total | $7,816 | $7,416 | $15,348 | $14,413 | Adjusted EBITDA by Reportable Segment (in millions) | Segment | 13-Week Period Ended Jan 28, 2023 | 13-Week Period Ended Jan 29, 2022 | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :----------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Wholesale | $137 | $176 | $308 | $351 | | Retail | $28 | $32 | $48 | $54 | | Other | $15 | $12 | $34 | $16 | | Eliminations | $1 | $0 | $(2) | $(1) | | Total | $181 | $220 | $388 | $420 | Total Assets by Reportable Segment (in millions) | Segment | January 28, 2023 | July 30, 2022 | | :----------- | :--------------- | :------------ | | Wholesale | $6,684 | $6,733 | | Retail | $637 | $599 | | Other | $352 | $335 | | Eliminations | $(38) | $(39) | | Total | $7,635 | $7,628 | Commitments, Contingencies and Off-Balance Sheet Arrangements - The maximum undiscounted payment for guarantees related to retailer leases, fixture financing loans, and other debt obligations was $16 million ($14 million on a discounted basis) as of January 28, 2023, with an estimated loss of $1 million recorded[82] - As of January 28, 2023, the Company had approximately $562 million of non-cancelable future purchase obligations (mostly within one year) and $755 million for future undiscounted minimum lease payments on leases signed but not yet commenced[87][88] - The Company is involved in approximately 43 Multi-District Litigation (MDL) cases related to the national opioid epidemic, a Minnesota state court complaint alleging fraud in prescription drug pricing, and a False Claims Act (FCA) qui tam action where the Supreme Court granted certiorari[89][90][91] - Relators allege FCA damages against Supervalu and New Albertson's in excess of $100 million, with Supervalu's potential share of an award approximately $24 million (excluding trebling and statutory penalties), and oral argument set for April 18, 2023[91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting key business trends, operational strategies, and a detailed analysis of net sales, gross profit, operating expenses, and segment results, also discussing liquidity, capital resources, and market risks Cautionary Statements - This report contains forward-looking statements subject to substantial risks and uncertainties, based on management's beliefs and assumptions, which may prove inaccurate[95][96] - Actual results could differ materially due to various factors, including dependence on principal customers, low margins, technology system reliability, strategic initiative benefits, labor shortages, increased competition, supply chain disruptions, and volatility in fuel costs[97] Executive Overview - UNFI is a leading distributor of grocery and non-food products and support services in North America, serving over 30,000 customer locations with approximately 260,000 products across six categories, operating 56 distribution centers[99] - The Company is focused on executing a transformation strategy for long-term profitable growth, encompassing network automation and optimization, commercial value creation, digital offering enhancement, and infrastructure unification and modernization[100] - UNFI expects to reinvest in its business, reduce outstanding debt, and improve financial leverage, providing increased flexibility to invest and selectively return cash to shareholders[101] - The U.S. economy has experienced volatility, with consumer spending impacted by discretionary income and trading down, and product cost inflation was approximately ten percent in the second quarter of fiscal 2023[103][104][111] - The Company operates 76 Retail grocery stores (54 Cub Foods, 22 Shoppers Food Warehouse), 81 pharmacies, and 23 Cub Wine and Spirit/Liquor stores, with plans for continued investment in customer-facing initiatives, facilities, and technology[109][110] Composition of Condensed Consolidated Statements of Operations and Business Performance Assessment - Net Sales comprise product sales, support services revenue, adjusted for customer volume discounts, vendor incentives, returns, allowances, and professional services revenue, including shipping, handling, and fuel surcharges[113] - Cost of Sales primarily includes amounts paid to suppliers for products sold, plus transportation costs, partially offset by consideration received from suppliers[114] - Operating Expenses include distribution expenses (warehousing, delivery, purchasing, etc.) and selling and administrative expenses (salaries, benefits, occupancy, depreciation, share-based compensation)[115] - Adjusted EBITDA (Non-GAAP) is defined as Net income (loss) including noncontrolling interests, less Net income attributable to noncontrolling interests, plus non-operating income and expenses, taxes, depreciation and amortization, share-based compensation, non-cash LIFO charge or benefit, restructuring, acquisition and integration related expenses, (gain) loss on sale of assets, certain legal charges and gains, and certain other non-cash charges or other items[122] - During fiscal 2022, the definition of Adjusted EBITDA was revised to exclude the impact of the non-cash LIFO charge or benefit to provide a better indicator of underlying operating performance and comparability[123] Assessment of Our Business Results Summary of Financial Results (13-Week Period Ended, in millions) | Metric | January 28, 2023 | January 29, 2022 | Change ($) | Change (%) | | :---------------------------------------- | :--------------- | :--------------- | :--------- | :--------- | | Net sales | $7,816 | $7,416 | $400 | 5.4% | | Gross profit | $1,069 | $1,075 | $(6) | (0.6%) | | Operating expenses | $1,002 | $944 | $58 | 6.1% | | Operating income | $63 | $125 | $(62) | (49.6%) | | Net income attributable to United Natural Foods, Inc. | $19 | $66 | $(47) | (71.2%) | | Adjusted EBITDA | $181 | $220 | $(39) | (17.7%) | Summary of Financial Results (26-Week Period Ended, in millions) | Metric | January 28, 2023 | January 29, 2022 | Change ($) | Change (%) | | :---------------------------------------- | :--------------- | :--------------- | :--------- | :--------- | | Net sales | $15,348 | $14,413 | $935 | 6.5% | | Gross profit | $2,165 | $2,117 | $48 | 2.3% | | Operating expenses | $2,002 | $1,876 | $126 | 6.7% | | Operating income | $162 | $232 | $(70) | (30.2%) | | Net income attributable to United Natural Foods, Inc. | $85 | $142 | $(57) | (40.1%) | | Adjusted EBITDA | $388 | $420 | $(32) | (7.6%) | Net Sales Analysis - Q2 FY2023 Net Sales increased 5.4% to $7,816 million, primarily driven by inflation and new business, partially offset by a decrease in units sold[130][132] - YTD FY2023 Net Sales increased 6.5% to $15,348 million, primarily driven by inflation and new business, partially offset by a decrease in units sold[130][136] - Supernatural Channel net sales increased 14.2% in Q2 FY2023 and 12.0% in YTD FY2023, driven by growth in existing store sales (including new fresh categories and inflation) and increased sales to new stores[130][133][139] - Retail Identical Store Sales increased 0.9% in Q2 FY2023 and 1.4% in YTD FY2023, primarily from higher average basket sizes driven by inflation, offset by lower volume[130][134][140] Cost of Sales and Gross Profit Analysis - Q2 FY2023 Gross Profit decreased $6 million (0.6%) to $1,069 million, with the gross profit rate decreasing to 13.7% from 14.5% year-over-year, primarily due to lower current period procurement gains from decelerating inflation and lower inventory gains (excluding the non-cash LIFO charge, the rate decreased to 14.0% from 14.8%)[142] - YTD FY2023 Gross Profit increased $48 million (2.3%) to $2,165 million, with the gross profit rate decreasing to 14.1% from 14.7% year-over-year, primarily due to lower current period procurement gains from decelerating inflation, lower inventory gains, and customer mix changes (excluding the non-cash LIFO charge, the rate decreased to 14.4% from 14.9%)[143] - LIFO Charge: $29 million in Q2 FY2023 (vs $19 million in Q2 FY2022) and $50 million in YTD FY2023 (vs $30 million in YTD FY2022)[142][143] Operating Expenses Analysis - Q2 FY2023 Operating Expenses increased $58 million (6.1%) to $1,002 million (12.8% of Net sales), with the operating expense rate approximately flat year-over-year, excluding an $8 million multiemployer pension plan withdrawal charge estimate benefit in Q2 FY2022[144] - YTD FY2023 Operating Expenses increased $126 million (6.7%) to $2,002 million (13.0% of Net sales), with the operating expense rate approximately flat year-over-year, due to higher occupancy costs offset by leveraging fixed expenses across higher sales[145] Operating Income Analysis - Q2 FY2023 Operating Income decreased $62 million to $63 million, primarily driven by a decrease in gross profit and an increase in operating expenses[146] - YTD FY2023 Operating Income decreased $70 million to $162 million, primarily driven by an increase in operating expenses in excess of an increase in gross profit[147] Interest Expense, Net Analysis Interest Expense, Net (in millions) | Metric | 13-Week Period Ended Jan 28, 2023 | 13-Week Period Ended Jan 29, 2022 | 26-Week Period Ended Jan 28, 2023 | 26-Week Period Ended Jan 29, 2022 | | :------------------------ | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Interest expense, net | $39 | $44 | $74 | $84 | - The decrease in interest expense, net, for both the quarter and year-to-date periods was primarily driven by lower outstanding debt balances and finance leases, partially offset by higher average interest rates[149] Provision for Income Taxes Analysis - The effective tax rate for Q2 FY2023 was 29.0%, compared to 26.9% for Q2 FY2022, primarily due to the reduction in pre-tax income[150] - The effective tax rate for YTD FY2023 was 13.6%, compared to 14.2% for YTD FY2022, with both periods benefiting from discrete tax benefits related to the vesting of employee stock awards[151] Net Income Attributable to United Natural Foods, Inc. Analysis - Q2 FY2023 Net Income Attributable to UNFI was $19 million, or $0.31 per diluted common share, compared to $66 million, or $1.08 per diluted common share, for Q2 FY2022[152] - YTD FY2023 Net Income Attributable to UNFI was $85 million, or $1.38 per diluted common share, compared to $142 million, or $2.33 per diluted common share, for YTD FY2022[153] Segment Results of Operations Discussion - Wholesale Net Sales in Q2 FY2023 increased primarily due to growth in sales to new and existing customers, including higher product costs, across Supernatural, Chains, and Independent retailers channels[156] - Retail Net Sales in Q2 FY2023 increased primarily due to a 0.9% increase in identical store sales from higher average basket sizes driven by inflation, offset by lower volume[158] - Wholesale Adjusted EBITDA in Q2 FY2023 decreased 22.2%, driven by an increase in operating expenses combined with a slight gross profit decline (excluding LIFO charge) due to lower procurement and inventory gains[162] - Retail Adjusted EBITDA in Q2 FY2023 decreased 12.5%, driven by higher operating expenses (primarily new store start-up costs) and a slightly lower gross profit rate[163] - Wholesale Adjusted EBITDA in YTD FY2023 decreased 12.3%, driven by an increase in operating expenses exceeding gross profit growth (excluding LIFO charge), impacted by lower procurement/inventory gains and customer mix changes[164] Liquidity and Capital Resources - Total Liquidity as of January 28, 2023, was $1,573 million, consisting of $1,533 million unused credit under the ABL Credit Facility and $40 million in cash and cash equivalents[171] - Total Debt as of January 28, 2023, decreased $46 million to $2,077 million from July 30, 2022, primarily due to debt repayments from operating activities, partially offset by capital expenditures and common stock repurchases[171] - In Q2 FY2023, the Company monetized certain receivables, generating $282 million in net cash proceeds, which were used to make a $125 million voluntary prepayment on the Term Loan Facility and reduce ABL Credit Facility borrowings[171] - Capital Expenditures in YTD FY2023 increased $45 million to $151 million (from $106 million year-over-year), primarily due to investments in automation, information technology, and supply chain[176] - Expected FY2023 Capital Spending is approximately $350 million, focused on automating, optimizing, and expanding the distribution network, and financing technology platform investments[176] - Net Cash Provided by Operating Activities in YTD FY2023 increased $227 million to $270 million (from $43 million year-over-year), primarily due to the monetization of certain receivables[177] - Under the $200 million 2022 Repurchase Program, the Company repurchased approximately 390,000 shares for $17 million in Q2 FY2023 and approximately 729,000 shares for $29 million in FY2023 YTD, with $171 million remaining authorized as of January 28, 2023[187][199] Critical Accounting Policies and Estimates - There were no material changes to the Company's critical accounting policies during the period covered by this Quarterly Report on Form 10-Q[189] Seasonality - Overall product sales are fairly balanced throughout the year, though demand for certain seasonal products is influenced by holidays or other annual events[190] - Working capital needs are generally greater during months leading up to high sales periods, such as the calendar year-end holidays, due to inventory buildup[190] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure primarily stems from fluctuations in interest rates on borrowings and swap agreements, and changes in diesel fuel prices, with no material changes reported from the Annual Report beyond what is detailed in the notes on derivatives and long-term debt - Exposure to market risk primarily results from fluctuations in interest rates on borrowings and interest rate swap agreements, and price increases in diesel fuel[191] - There have been no other material changes to the Company's exposure to market risks from those disclosed in its Annual Report[191] Item 4. Controls and Procedures The CEO and CFO evaluated the effectiveness of disclosure controls and procedures as of January 28, 2023, concluding they were effective, with no material changes in internal control over financial reporting occurring during the second quarter of fiscal 2023 - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of January 28, 2023[192] - There has been no change in the Company's internal control over financial reporting during the second quarter of fiscal 2023 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting[193] Part II. Other Information Item 1. Legal Proceedings The company is involved in routine litigation and other legal proceedings in the ordinary course of business, including employment law, pension plans, labor disputes, contract terms, product liability, real estate, and antitrust, with no material legal proceedings pending beyond those detailed in Note 14 of the financial statements - The Company is involved in routine litigation and other legal proceedings that arise in the ordinary course of its business, including claims regarding employment law, pension plans, labor union disputes, supplier/customer contract terms, product liability, real estate, and antitrust[195] - Other than as set forth in Note 14—Commitments, Contingencies and Off-Balance Sheet Arrangements, there are no pending material legal proceedings to which the Company is a party or to which its property is subject[195] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the Company's risk factors contained in Part I, Item 1A. Risk Factors, of its Annual Report[196] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Board authorized a new $200 million share repurchase program in September 2022, under which the company repurchased approximately 390,000 shares for $17 million in Q2 FY2023, with $171 million remaining authorized as of January 28, 2023 - In September 2022, the Board of Directors authorized a new repurchase program for up to $200 million of common stock over a four-year term[197] Common Stock Repurchases (Quarter Ended January 28, 2023) | Period | 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 | | :------------------------------------ | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | October 30, 2022 to December 3, 2022 | 115,252 | $45.66 | 104,742 | $183 | | December 4, 2022 to December 31, 2022 | 159,776 | $39.71 | 152,800 | $177 | | January 1, 2023 to January 28, 2023 | 150,388 | $39.76 | 132,686 | $171 | | Total | 425,416 | $41.34 | 390,228 | $171 | - As of January 28, 2023, $171 million remained authorized under the 2022 Repurchase Program[199][200] Item 5. Other Information The Board of Directors approved the Second Amended and Restated 2020 Equity Incentive Plan on March 3, 2023, clarifying severance provisions, requiring releases for certain vesting, and moving restrictive covenants to award agreements for increased flexibility - On March 3, 2023, the Board of Directors approved the Second Amended and Restated 2020 Equity Incentive Plan[201] - The amendments clarify severance intent for performance issues, require the execution of a release for vesting due to 'Separation from Service without Cause,' and move restrictive covenant provisions from the Plan to applicable award agreements for increased flexibility and enforceability[202] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including merger agreements, corporate bylaws, the Second Amended and Restated 2020 Equity Incentive Plan, related award agreements, the Annual Incentive Plan, CEO/CFO certifications, and XBRL financial data - Key Exhibits include merger agreements (2.1, 2.2), corporate bylaws (3.2), the Second Amended and Restated 2020 Equity Incentive Plan (10.1), Form of RSU Award Agreement (10.2), Form of PSU Award Agreement (10.3), Annual Incentive Plan (10.4), CEO/CFO certifications (31.1, 31.2, 32.1, 32.2), and Inline XBRL financial data (101, 104)[204] Signatures The report is duly signed on behalf of United Natural Foods, Inc. by John W. Howard, Chief Financial Officer, on March 8, 2023 - Signatory: John W. Howard, Chief Financial Officer[210] - Date: March 8, 2023[210]