2020 Annual Report.Pdf

Barry Queen, Chairman David Ball Jim Brown John Clarke Victor Cosentino Kim Eskew Four B Corp. Doc’s Food Stores, Inc. County Fair, Inc. Cosentino Enterprises, Inc. Harp's Food Stores, Inc. Queen Enterprises, L.L.C. Kansas City, KS Bixby, OK Mitchell, SD Prairie Village, KS Springdale, AR Paola, KS

Don Woods, Jr., Vice-Chairman Alan Larsen Jay Lawrence Alan McKeever James Neumann Dave Nicholas Woods Super Market, Inc. Houchens Food Group, Inc. MAL Enterprises, Inc. McKeever Enterprises, Inc. Valu Discount, Inc. Nicholas Supermarkets, Inc. Bolivar, MO Bowling Green, KY Sweetwater, TX Independence, MO Mt. Washington, KY Tipton, MO

Pat Raybould Jeff Reasor Donny Rouse Randy Stepherson Erick Taylor Dale Trahan James Zyrowski B & R Stores, Inc. Reasor’s, L.L.C. Rouse’s Enterprises, L.L.C. Stepherson, Incorporated RPCS, Inc. Dale L. Trahan Ben's Supercenter, Inc. Lincoln, NE Tahlequah, OK Thibodaux, LA Memphis, TN Rogersville, MO Enterprises, Inc. Brown City, MI Rayne, LA March 23, 2021

Dear Shareholders,

Your Board of Directors and management are pleased to present the audited results for fiscal 2020. Consolidated company sales reached $10.6 billion, up 13.3% on a comparable basis. After retainage, total year-end patronage was $254.4 million, up $40.59 million, another record, or 2.79% of qualifying sales. Total distribution, including patronage, allowances, and interest back to members, was $615 million, an increase of 11.4%. Also, the trading value of AWG stock increased to $3,600 per share, an increase of $1,200 or 50%, thus allocating over $31.5 million in equity to existing shareholders. After this increase, the Board declared a 3-for-1 stock split, which provides two shares of “B” common stock for every “A” and “B” share currently held. The trading value is now $1,200 per share, reducing the investment required for new members to $18,000.

Net sales for the cooperative were $9.2 billion, up 8.24% from the prior year. Member equity increased to $538.1 million, an all- time high.

Beyond financial results, we can say that OVERCOMING OBSTACLES became the theme for AWG and our member-retailers in 2020. We all pivoted quickly to meet COVID-19 driven needs. Achieving the ideal was elusive as unprecedented consumer demand overwhelmed inventories, supply, personnel, and the time required to get the job done. By OVERCOMING OBSTACLES, we collectively achieved more than ever before, redefined our potential, and received appreciation for our role as America’s critical infrastructure. We are incredibly proud of our member companies, teammates, and all those that helped us as we helped others.

While keeping our teammates safe and maintaining supply to our members were top priorities, we also made significant progress on our strategic initiatives of Value Proposition, Health, Technology, and AWG Brands. These focus areas included a record investment by AWG, an increase of $40 million over 2019 into promotional allowances and discounts on numerous center store and fresh products.

AWG member stores outperformed other grocers with comparable year-over-year retail sales (reported by Nielsen), increasing 16.6% for the full year, 540 basis points or 48% more than all other grocery channels. For weeks 11 through 52, growth accelerated to 21.5% for AWG members, 820 basis points or 62% more than other grocery channels. We also received record-setting scores in AWG’s Member Satisfaction Survey, with significant improvements in all categories.

Our continuing mission is “to provide our member-retailers all the tools, products, and services they need to compete favorably in all markets served, all at the lowest possible cost.” We will accomplish this by effectively executing our four core strategies: accel- erate profitable member growth; attract, develop and retain top talent; strengthen core services and support; and leverage technology and organizational assets for sustainable member success. Be on the lookout for breaking news and updates throughout 2021 as we continue to make progress on these initiatives for you.

We are very thankful for our teammates’ contributions, our Board’s leadership, and our members’ and our vendor partners’ support. You have our commitment to continuous improvements and OVERCOMING OBSTACLES for you.

Sincerely,

Barry Queen David Smith Chairman of the Board President & CEO

Associated Wholesale Grocers - Retailer Owned. Retailer Led. Retailer Focused. Member OVERCOMING OBSTACLES retail sales increased an COVID-19 AWG’s vision for 2020 turned out in again the next day. AWG achieved • Regular communication to entirely different for our mem- record-setting numbers in the ware- the member-retailers to help incredible ber-retailers due to the impact houses. Many of the warehouses improve shelf conditions of COVID-19. Most retailers in our had 100% increases in daily sales The support teams also assisted trade areas were budgeting for a in the early days of the pandemic. member-retailers with providing a flat to 2.5% increase in sales, but Through ongoing communication, clean and safe shopping environ- 21.5% ended up with double-digit in- great collaboration with our mem- ment. Advertising, marketing, décor creases in many cases. ber-retailers, and hard work in the source group, store engineering, and facilities, AWG was able to support the field teams quickly assembled Weeks 11-52 of In early February, AWG assembled our stores and continued operating and shared information to our mem- 2020 vs 2019 a COVID-19 task force to enable all of our ten distribution centers. ber-retailers on Plexiglas shields, us to continue to ship groceries to COVID-19 decals and signage, sanita- our member-retailers and minimize As vendors began allocations, the tion stations, and other items related the impact of the pandemic on our teams put processes in place to help to the pandemic. AWG and VMC teammates and their our member-retailers “Get Right at communities. The team was victori- the Shelf.” Vendors were discontin- As we continue into 2021 and be- ous as every AWG and VMC facility uing items and the stores needed to yond, it will be essential to build has remained open throughout the adjust facings to give more holding upon the lessons learned in 2020: COVID-19 pandemic. power to the items in stock. Great the importance of strong commu- work from the buying teams included: nication, great collaboration, and Division teams prepared for the relationships built on trust. AWG massive spike in sales and alloca- • Sharing information to the division’s teams daily and VMC will continue to assist tions from the vendors, and worked our member-retailers with prod- closely with our member-retailers • Working closely with vendors uct, price, promotion, people, and to establish maximum order quan- to understand supply issues and allocations place to help compete in today’s ev- tities. All of this enabled employees er-changing environment. to accomplish their work within a • Communicating updates on reasonable shift and return to dive StoreFront

100%of AWG & VMC facilities remained open during COVID-19

02 Associated Wholesale Grocers, Inc. 2020 Annual Report 03 Member OVERCOMING OBSTACLES retail sales increased an COVID-19 AWG’s vision for 2020 turned out in again the next day. AWG achieved • Regular communication to entirely different for our mem- record-setting numbers in the ware- the member-retailers to help incredible ber-retailers due to the impact houses. Many of the warehouses improve shelf conditions of COVID-19. Most retailers in our had 100% increases in daily sales The support teams also assisted trade areas were budgeting for a in the early days of the pandemic. member-retailers with providing a flat to 2.5% increase in sales, but Through ongoing communication, clean and safe shopping environ- 21.5% ended up with double-digit in- great collaboration with our mem- ment. Advertising, marketing, décor creases in many cases. ber-retailers, and hard work in the source group, store engineering, and facilities, AWG was able to support the field teams quickly assembled Weeks 11-52 of In early February, AWG assembled our stores and continued operating and shared information to our mem- 2020 vs 2019 a COVID-19 task force to enable all of our ten distribution centers. ber-retailers on Plexiglas shields, us to continue to ship groceries to COVID-19 decals and signage, sanita- our member-retailers and minimize As vendors began allocations, the tion stations, and other items related the impact of the pandemic on our teams put processes in place to help to the pandemic. AWG and VMC teammates and their our member-retailers “Get Right at communities. The team was victori- the Shelf.” Vendors were discontin- As we continue into 2021 and be- ous as every AWG and VMC facility uing items and the stores needed to yond, it will be essential to build has remained open throughout the adjust facings to give more holding upon the lessons learned in 2020: COVID-19 pandemic. power to the items in stock. Great the importance of strong commu- work from the buying teams included: nication, great collaboration, and Division teams prepared for the relationships built on trust. AWG massive spike in sales and alloca- • Sharing information to the division’s teams daily and VMC will continue to assist tions from the vendors, and worked our member-retailers with prod- closely with our member-retailers • Working closely with vendors uct, price, promotion, people, and to establish maximum order quan- to understand supply issues and allocations place to help compete in today’s ev- tities. All of this enabled employees er-changing environment. to accomplish their work within a • Communicating updates on reasonable shift and return to dive StoreFront

100%of AWG & VMC facilities remained open during COVID-19

02 Associated Wholesale Grocers, Inc. 2020 Annual Report 03 Online grocery OVERCOMING OBSTACLES sales will grow to an estimated OMNICHANNEL E-commerce had a breakout year digital coupons – allowing mem- member-retailers to have ongoing and became the primary way to shop ber-retailers to more effectively communication with their customers 21.5% of the for many customers. For 2020, online compete against national and re- and kept them abreast of important grocery’s percentage of the $1.04 gional competitors. supply information, sales, and ways to trillion grocery market is pegged at Over 1,000 member-retailer stores shop online during a time when many total U.S. 10.2%, or about $106 billion, up from utilized AWG’s website providers, tried it for the first time. 3.4%. By 2025, online grocery’s dol- including Media Solutions Corpora- The digital revolution certainly hit lar share stands to climb to $250.26 tion, an AWG subsidiary. Additional- the grocery industry full force in grocery billion of the estimated $1.16 trillion ly, nearly 80% of these member-re- 2020. We expect customers to con- overall grocery market. AWG mem- tailers had an accompanying app, tinue to choose to shop online, mak- ber-retailer stores recorded over 86% an essential element to engage ing digital offerings no longer nice- market by growth when utilizing AWG’s online shoppers who now spend even to-haves, but must-haves in order to shopping platforms in 2020, with more of their online time on mobile operate today’s grocery store. Online more increases expected in 2021. devices. grocery will swell to 21.5% of total 2025. The preference for digital also ex- Finally, direct communication with U.S. grocery sales by 2025, more than tended beyond e-commerce with consumers was incredibly import- doubling its current share of the shoppers becoming more comfort- ant, keeping them updated on the overall grocery market, according to able with the new technology. Shop- best ways to provide meals at home a new study by grocery e-commerce pers utilized loyalty platforms, digital and keep their families fed and safe specialist Mercatus and research coupons, store websites, email, and in these uncertain times. Over 500 firm Incisiv. They note the five-year social media to find the best value as member-retailers utilized AWG’s email growth forecast marks a more than the economy struggled. services, with hundreds also partici- 60% increase over pre-pandemic Nearly 500 AWG stores utilized ei- pating in social media and text mes- dollar sales estimates for the online ther a full loyalty program or a digi- sage services. These services allow for grocery space. tal coupons-only program by participating in our Shopper Engagement Platform (SEP). Supported by strong offers from AWG Brands and exclusive AWG coupons, consumers 3.8 MILLION redeemed $358,000 in exclusive Digital Coupons Clipped , AWG Digital375 Coupons000 Redeemed member-retailers recorded over $358,000 Digital Coupon Redeemed Value

86%growth when utilizing AWG’s online shopping platforms in 2020

04 Associated Wholesale Grocers, Inc. 2020 Annual Report 05 Online grocery OVERCOMING OBSTACLES sales will grow to an estimated OMNICHANNEL E-commerce had a breakout year digital coupons – allowing mem- member-retailers to have ongoing and became the primary way to shop ber-retailers to more effectively communication with their customers 21.5% of the for many customers. For 2020, online compete against national and re- and kept them abreast of important grocery’s percentage of the $1.04 gional competitors. supply information, sales, and ways to trillion grocery market is pegged at Over 1,000 member-retailer stores shop online during a time when many total U.S. 10.2%, or about $106 billion, up from utilized AWG’s website providers, tried it for the first time. 3.4%. By 2025, online grocery’s dol- including Media Solutions Corpora- The digital revolution certainly hit lar share stands to climb to $250.26 tion, an AWG subsidiary. Additional- the grocery industry full force in grocery billion of the estimated $1.16 trillion ly, nearly 80% of these member-re- 2020. We expect customers to con- overall grocery market. AWG mem- tailers had an accompanying app, tinue to choose to shop online, mak- ber-retailer stores recorded over 86% an essential element to engage ing digital offerings no longer nice- market by growth when utilizing AWG’s online shoppers who now spend even to-haves, but must-haves in order to shopping platforms in 2020, with more of their online time on mobile operate today’s grocery store. Online more increases expected in 2021. devices. grocery will swell to 21.5% of total 2025. The preference for digital also ex- Finally, direct communication with U.S. grocery sales by 2025, more than tended beyond e-commerce with consumers was incredibly import- doubling its current share of the shoppers becoming more comfort- ant, keeping them updated on the overall grocery market, according to able with the new technology. Shop- best ways to provide meals at home a new study by grocery e-commerce pers utilized loyalty platforms, digital and keep their families fed and safe specialist Mercatus and research coupons, store websites, email, and in these uncertain times. Over 500 firm Incisiv. They note the five-year social media to find the best value as member-retailers utilized AWG’s email growth forecast marks a more than the economy struggled. services, with hundreds also partici- 60% increase over pre-pandemic Nearly 500 AWG stores utilized ei- pating in social media and text mes- dollar sales estimates for the online ther a full loyalty program or a digi- sage services. These services allow for grocery space. tal coupons-only program by participating in our Shopper Engagement Platform (SEP). Supported by strong offers from AWG Brands and exclusive AWG coupons, consumers 3.8 MILLION redeemed $358,000 in exclusive Digital Coupons Clipped , AWG Digital375 Coupons000 Redeemed member-retailers recorded over $358,000 Digital Coupon Redeemed Value

86%growth when utilizing AWG’s online shopping platforms in 2020

04 Associated Wholesale Grocers, Inc. 2020 Annual Report 05 Hernando, OVERCOMING OBSTACLES Great Lakes & Nashville MOVING UP As part of our network distribution in 2023. The AIO will allow AWG dock doors, 14% increase in freez- Expansions strategy, AWG is continually en- member-retailer stores to obtain a er capacity, and improved employ- hancing our supply chain to posi- significantly expanded variety of ee facilities. These enhancements tion your company for the future, products, eliminate costly third-par- will increase efficiency resulting in providing all the goods and ser- ty suppliers, add a supply-chain annual savings of over $600,000, vices you need at the lowest pos - buffer, and help AWG attract, de- offer greater product variety, and sible cost to compete favorably. velop, and retain a high-performing allow future growth at the facility. This philosophy led to the invest- workforce. This new facility will dis- Additionally, we added on-site fuel ment of three significant initiatives tribute expanded variety to all AWG stations to capitalize on wholesale across the country in 2020. facilities and directly supply mem- pricing, enabling AWG to pass these HERNANDO ber-retailer stores in the region. savings on to our member-retailers. This investment in the future will In June, AWG announced the launch NASHVILLE strengthen AWG’s overall operation, of our new all-in-one (AIO) distri- The Nashville Division in Good- reduce the cost of goods for mem- bution hub in Hernando, Missis- lettsville, Tennessee expanded its ber-retailer stores, and improve sippi. This state-of-the-art distribu- freezer space by 40,000 square the durability and resilience of our tion facility will feature automation feet, leading to 1,300 addition- supply chain for both our mem- technology to optimize productiv- al pick slots. This accommodates ber-retailers and vendor partners. ity and accuracy, while supporting more products and significantly long-term, sustainable growth and GREAT LAKES increases storage capacity, elimi- success for all AWG member-retail- The Great Lakes Division in Keno- nating the need for outside stor- ers. Construction has begun and sha, Wisconsin expanded its freez- age trailers and third-party storage the facility is scheduled to open er warehouse by 50,000 square facilities, saving $1 million in oper- feet, resulting in the addition of 15 ating expenses annually.

$600,000 GREAT LAKES’ $ ANNUAL Savings in operating SAVINGS expenses due to 1 MILLION Nashville expansion

Hernando2023 Opening 2023

06 Associated Wholesale Grocers, Inc. 2020 Annual Report 07 Hernando, OVERCOMING OBSTACLES Great Lakes & Nashville MOVING UP As part of our network distribution in 2023. The AIO will allow AWG dock doors, 14% increase in freez- Expansions strategy, AWG is continually en- member-retailer stores to obtain a er capacity, and improved employ- hancing our supply chain to posi- significantly expanded variety of ee facilities. These enhancements tion your company for the future, products, eliminate costly third-par- will increase efficiency resulting in providing all the goods and ser- ty suppliers, add a supply-chain annual savings of over $600,000, vices you need at the lowest pos - buffer, and help AWG attract, de- offer greater product variety, and sible cost to compete favorably. velop, and retain a high-performing allow future growth at the facility. This philosophy led to the invest- workforce. This new facility will dis- Additionally, we added on-site fuel ment of three significant initiatives tribute expanded variety to all AWG stations to capitalize on wholesale across the country in 2020. facilities and directly supply mem- pricing, enabling AWG to pass these HERNANDO ber-retailer stores in the region. savings on to our member-retailers. This investment in the future will In June, AWG announced the launch NASHVILLE strengthen AWG’s overall operation, of our new all-in-one (AIO) distri- The Nashville Division in Good- reduce the cost of goods for mem- bution hub in Hernando, Missis- lettsville, Tennessee expanded its ber-retailer stores, and improve sippi. This state-of-the-art distribu- freezer space by 40,000 square the durability and resilience of our tion facility will feature automation feet, leading to 1,300 addition- supply chain for both our mem- technology to optimize productiv- al pick slots. This accommodates ber-retailers and vendor partners. ity and accuracy, while supporting more products and significantly long-term, sustainable growth and GREAT LAKES increases storage capacity, elimi- success for all AWG member-retail- The Great Lakes Division in Keno- nating the need for outside stor- ers. Construction has begun and sha, Wisconsin expanded its freez- age trailers and third-party storage the facility is scheduled to open er warehouse by 50,000 square facilities, saving $1 million in oper- feet, resulting in the addition of 15 ating expenses annually.

$600,000 GREAT LAKES’ $ ANNUAL Savings in operating SAVINGS expenses due to 1 MILLION Nashville expansion

Hernando2023 Opening 2023

06 Associated Wholesale Grocers, Inc. 2020 Annual Report 07 OVERCOMING OBSTACLES AWG BRANDS

In 2020, AWG Brands set a record the pandemic. Most notably, the two-pound bags of onions and ap - of selling over $1.3 billion (whole - launch of Best Choice® Superior ples brought sales growth of 150% sale) of products, further providing Selections® enhanced the custom- and 200%, respectively, compared member-retailers a competitive ers’ at-home meals and gave mem- to 2019. advantage while helping to drive ber-retailers a new way to attract The use of digital coupons grew their profitability. customers with unique products as with a 15% increase over 2019. On - The 4,400 products across multiple seasonal baking mixes, fry sauce, line offerings have resulted in more brands – Always Save®, Best Choice®, wildflower and orange blossom cash flow for member-retailers, as IGA®, Best Choice® Superior Selec- honey, simmer sauces, and season- customers have larger cart sizes tions®, and Clearly by Best Choice® al sandwich cookies. when buying online, bolstered by – reside in all major center store cat- AWG Brands proved they could their view of increased safety and egories. In 2020, AWG Brands found drive customer-spend for mem- convenience. tremendous success by introducing ber-retailers with the renewed AWG’s focus on the quality of its Always Save® to the bakery depart- focus on bakery, frozen, and pro - products strengthened as well, set- ment with $1, $3, and $5 options for duce. These categories, in addition ting a new mark with a 96.6% pass thaw-and-sell items as part of their to meat and self-serve options, rate on its control audits. value program and with the unveil- continue to play a critical role in ing of Best Choice® shrimp offerings, highlighting the reputation of the Finally, the brands’ Save-A-Label further expanding the brand’s reach store, garnering repeat business. program amassed $205,000 in into frozen seafood. donations to support the Promotional markdowns and mod- communities in which Overall, AWG introduced over 150 ern signage kits extended savings AWG member-retailers items across all brands, an amazing for cost-conscious customers and serve. achievement given manufacturing boosted sales for member-retail- and logistical headwinds during ers. A case-in-point: Always Save®

AWG Brands now Exceed $ BILLION in Retail AWG Brands has grown 2 Sales at twice the rate of Copy pulling out stats from the The number150 of new products above copy introduced in 2020 across national brands. 0 all AWG Brands.

08 Associated Wholesale Grocers, Inc. 2020 Annual Report 09 OVERCOMING OBSTACLES AWG BRANDS

08 Associated Wholesale Grocers, Inc. 2020 Annual Report 09 OVERCOMING OBSTACLES BATTLING MOTHER NATURE The Gulf Coast experienced a his- the Food Industry Association (FMI) ways, neighborhood streets, and OKLAHOMA ICE STORM toric number of tropical storms and online service SABER to provide major roadways, making it difficult making landfall in 2020, the most important information updates to for anyone to travel. Oct. 27, 2020 storms on record in 104 years. AWG the public during emergency events Due to some quick, forward think- division teams activated their com- regarding the operational status of ing on the part of AWG’s corporate prehensive emergency plans to aid retailers’ stores. team working collaboratively with member-retailers during this con- In addition, AWG’s ordering system the Oklahoma City Division team, tinued crisis. allowed member-retailers’ orders power generators were sent in the The Gulf Coast Division and VMC to be fulfilled by another AWG di - event the outage extended for more deployed their stock of over 160 vision distribution center, helping than a few hours. Just one day after storm-related items, with retailers relieve their home-division during the ice storm hit, backup generators activating their special, pre-set the emergencies. were in place, and the distribution storm orders as conditions wors- Just when the southeast was near- center was operating at full capac- ened. This process saved time and ly finished with their historic hur- ity. It remained operational on gen- enabled retailers to return to serv- ricane season, a rare autumn ice erator power for the next 10 days, ing their customers and assisting storm blanketed Oklahoma on Oct. making certain our member-retail- HURRICANE TROPICAL STORM their communities. ers’ stores, and our operations re- CRISTOBAL 27, 2020, causing chaos on the LAURA Division operational continuity plans roadways and leaving more than mained on schedule. Jun. 1-11, 2020 Aug. 20-28, 2020 included arrangements with local 300,000 residents without power. While so many unforeseen events hotels to reserve blocks of rooms to A declared state of emergency as occurred in 2020, one aspect re - HURRICANE house employees temporarily dis- a result of the storm affected 47 of mained: everyone pulled togeth- SALLY placed due to the emergency. Ex- Oklahoma’s 77 counties. er, found solutions to address the Sept. 11-17, 2020 tra fuel, transportation equipment AWG’s Oklahoma City Division lost challenges, and focused on what and staff were arranged to service power, along with most of the city. was best for our member-retailers high-demand during and after the Fallen powerlines blocked drive- and their customers. event. AWG has also partnered with HURRICANE DELTA TROPICAL STORM Oct. 5-10, 2020 MARCO HURRICANE Grants provided by AWG Cares in 2020, assisted local ZETA Aug. 21-Sept. 5, 2020 charities as they provided: Oct. 24-30, 2020 Nutritious meals through COVID-19 30,000 Disaster Relief Projects Meals & snacks to those impacted 991,000 by Hurricane Laura Overnight shelters & hotel stays to 377,900 those impacted by Hurricane Laura Meals & snacks to those impacted 5,000 by Hurricane Sally

10 Associated Wholesale Grocers, Inc. 2020 Annual Report 11 0 OVERCOMING OBSTACLES BATTLING MOTHER NATURE The Gulf Coast experienced a his- the Food Industry Association (FMI) ways, neighborhood streets, and OKLAHOMA ICE STORM toric number of tropical storms and online service SABER to provide major roadways, making it difficult making landfall in 2020, the most important information updates to for anyone to travel. Oct. 27, 2020 storms on record in 104 years. AWG the public during emergency events Due to some quick, forward think- division teams activated their com- regarding the operational status of ing on the part of AWG’s corporate prehensive emergency plans to aid retailers’ stores. team working collaboratively with member-retailers during this con- In addition, AWG’s ordering system the Oklahoma City Division team, tinued crisis. allowed member-retailers’ orders power generators were sent in the The Gulf Coast Division and VMC to be fulfilled by another AWG di - event the outage extended for more deployed their stock of over 160 vision distribution center, helping than a few hours. Just one day after storm-related items, with retailers relieve their home-division during the ice storm hit, backup generators activating their special, pre-set the emergencies. were in place, and the distribution storm orders as conditions wors- Just when the southeast was near- center was operating at full capac- ened. This process saved time and ly finished with their historic hur- ity. It remained operational on gen- enabled retailers to return to serv- ricane season, a rare autumn ice erator power for the next 10 days, ing their customers and assisting storm blanketed Oklahoma on Oct. making certain our member-retail- HURRICANE TROPICAL STORM their communities. ers’ stores, and our operations re- CRISTOBAL 27, 2020, causing chaos on the LAURA Division operational continuity plans roadways and leaving more than mained on schedule. Jun. 1-11, 2020 Aug. 20-28, 2020 included arrangements with local 300,000 residents without power. While so many unforeseen events hotels to reserve blocks of rooms to A declared state of emergency as occurred in 2020, one aspect re - HURRICANE house employees temporarily dis- a result of the storm affected 47 of mained: everyone pulled togeth- SALLY placed due to the emergency. Ex- Oklahoma’s 77 counties. er, found solutions to address the Sept. 11-17, 2020 tra fuel, transportation equipment AWG’s Oklahoma City Division lost challenges, and focused on what and staff were arranged to service power, along with most of the city. was best for our member-retailers high-demand during and after the Fallen powerlines blocked drive- and their customers. event. AWG has also partnered with HURRICANE DELTA TROPICAL STORM Oct. 5-10, 2020 MARCO HURRICANE Grants provided by AWG Cares in 2020, assisted local ZETA Aug. 21-Sept. 5, 2020 charities as they provided: Oct. 24-30, 2020 Nutritious meals through COVID-19 30,000 Disaster Relief Projects Meals & snacks to those impacted 991,000 by Hurricane Laura Overnight shelters & hotel stays to 377,900 those impacted by Hurricane Laura Meals & snacks to those impacted 5,000 by Hurricane Sally

10 Associated Wholesale Grocers, Inc. 2020 Annual Report 11 0 OVERCOMING OBSTACLES FRESH “Fresh Excellence” was cited as the No. PRODUCE CONTINUES Deli continued to deliver on conve - 2 factor in growing sales, only slight- TO FLOURISH nient food options with the follow- ly behind “Lower Cost of Goods,” ac- Even during a pandemic, over 70% ing increases: cording to our most recent member of customers report fresh produce • 41%: Pre-packed, surveys. AWG continued to focus on is a primary reason for where they grab-and-go lunch meats its fresh departments this past year, shop. We supported our mem- delivering improved results in quali- ber-retailers with expanded citrus • 17%: Specialty cheese ty and cost for our membership. varieties and berries and realized • 13%: Packaged traditional MEAT & SEAFOOD DRIVES double-digit growth in proprietary deli salads grapes and club apples. CENTER OF THE PLATE • 6%: Dips and spreads The Nielsen report for processed AWG also enhanced our healthy meat shows AWG member-retailers snacking lineup and utilized iTrade Prepared foods finished the year gained share with a 23.4% increase Fresh, a tracking technology that down 6% due to the closing of in sales versus the rest of the mar - follows the product from shipping many self-service and full-service ket. Despite limited allocations, point to distribution center depar- hot bars. AWG member-retailers supply constraints, plant closures, ture, ensuring correct supply levels still finished the year 3.6% bet- and threats of labor shortages, for our member-retailers. ter than national averages, led by the AWG meat team proactively packaged protein salads (+14%), reached out to other channels and BAKERY IS BACK & DELI refrigerated entrées (+23%), and distributors for fresh and frozen IS IN DEMAND grab-and-go snacks (+41%). Bakery saw double-digit sales meat to counter the interruption Going forward, it will be crucial to regular supply chains. growth in the second half of the year, led by the bread catego - for all member-retailers to high- Seafood swam to incredible new ry, with increases of over 20%. light online ordering with pick-up heights in 2020, achieving sales Pre-packaged products took over and delivery options. Since the growth of over 35% vs. 2019. All with donuts up 26% and Always pandemic began, 83% of consum- three categories – fresh, frozen, and Save® items selling more than ers have used a third-party deliv- shelf-stable – grew over 20%, led by 200,000 cases in 10 months. ery service and 54% favor using a frozen seafood including the launch grocery app to add foodservice to of the Best Choice® shrimp program. their online shopping list.

Consumers reporting fresh produce as a SEAFOOD ACHIEVED A primary reason for 70% where they shop WHOPPING

4.4% . Above the 23 4% market Record increase in meat sales for AWG member-retailers 35%INCREASE IN 2020

12 Associated Wholesale Grocers, Inc. 2020 Annual Report 13 OVERCOMING OBSTACLES FRESH “Fresh Excellence” was cited as the No. PRODUCE CONTINUES Deli continued to deliver on conve - 2 factor in growing sales, only slight- TO FLOURISH nient food options with the follow- ly behind “Lower Cost of Goods,” ac- Even during a pandemic, over 70% ing increases: cording to our most recent member of customers report fresh produce • 41%: Pre-packed, surveys. AWG continued to focus on is a primary reason for where they grab-and-go lunch meats its fresh departments this past year, shop. We supported our mem- delivering improved results in quali- ber-retailers with expanded citrus • 17%: Specialty cheese ty and cost for our membership. varieties and berries and realized • 13%: Packaged traditional MEAT & SEAFOOD DRIVES double-digit growth in proprietary deli salads grapes and club apples. CENTER OF THE PLATE • 6%: Dips and spreads The Nielsen report for processed AWG also enhanced our healthy meat shows AWG member-retailers snacking lineup and utilized iTrade Prepared foods finished the year gained share with a 23.4% increase Fresh, a tracking technology that down 6% due to the closing of in sales versus the rest of the mar - follows the product from shipping many self-service and full-service ket. Despite limited allocations, point to distribution center depar- hot bars. AWG member-retailers supply constraints, plant closures, ture, ensuring correct supply levels still finished the year 3.6% bet- and threats of labor shortages, for our member-retailers. ter than national averages, led by the AWG meat team proactively packaged protein salads (+14%), reached out to other channels and BAKERY IS BACK & DELI refrigerated entrées (+23%), and distributors for fresh and frozen IS IN DEMAND grab-and-go snacks (+41%). Bakery saw double-digit sales meat to counter the interruption Going forward, it will be crucial to regular supply chains. growth in the second half of the year, led by the bread catego - for all member-retailers to high- Seafood swam to incredible new ry, with increases of over 20%. light online ordering with pick-up heights in 2020, achieving sales Pre-packaged products took over and delivery options. Since the growth of over 35% vs. 2019. All with donuts up 26% and Always pandemic began, 83% of consum- three categories – fresh, frozen, and Save® items selling more than ers have used a third-party deliv- shelf-stable – grew over 20%, led by 200,000 cases in 10 months. ery service and 54% favor using a frozen seafood including the launch grocery app to add foodservice to of the Best Choice® shrimp program. their online shopping list.

Consumers reporting fresh produce as a SEAFOOD ACHIEVED A primary reason for 70% where they shop WHOPPING

4.4% . Above the 23 4% market Record increase in meat sales for AWG member-retailers 35%INCREASE IN 2020

12 Associated Wholesale Grocers, Inc. 2020 Annual Report 13 OVERCOMING OBSTACLES 55 member-retailers’ companies obtained TRISP loans for TRISP In facing the prolonged pandem- going forward. However, the path improve the customer experience, technology and ic, unemployment spike, eco- toward meeting the new needs this short-term program provided nomic recession, and changing of the customer, requires a will - fast-tracked loans to credit-worthy consumer behaviors, many of our ingness to adapt and change by member-retailers in good stand- remodeling projects. member-retailers were at a pivotal making significant investments in ing, with the first year being in - crossroads of their business at the their business. terest-free. Member-retailers used start of 2020. The sudden spike in the loans for technology and re - To facilitate funding for mem- sales starting in March and con - modeling projects up to $500,000 ber-retailers choosing this new tinuing throughout the year saw a per location and up to $2.5 million path, AWG introduced the Technol- positive impact on current profit- per member-retailer equity. Our ogy & Remodel Investment Stim- ability and cash flow. member-retailers will expect to ulus Program (TRISP), a unique, save millions of dollars in first-year This turning point created a diffi- limited-time financing offering. interest costs and stimulate a high cult choice for our member-retail- Qualifying investments included return on their investments. ers: which course would sustain retail equipment and technology momentum and maximize future purchases and upgrades, store re - Overall, 55 member-retailers chose success potential? Do they take the models, and other costs directly to participate in the TRISP loan of - known path and attempt to main- related to these investments. fer, with AWG disbursing approx- tain the status quo before the pan - imately $15 million to help its AWG’s Finance Committee allocat- demic, or do they take the unchart - member-retailers grow their busi- ed up to $50 million of funds to be ed path that will better capitalize ness. AWG will continue to look for available for approved loans on a on consumers’ new preferences? opportunities in the future to pro - first-come, first-served basis. vide unique financing and growth The easy choice of staying with As the intent was to allow mem - options for its member-retailers. the status quo does not assure ber-retailers to move quickly to prior success will be maintained $15 MILLION The value of funds received by 55 AWG member-retailers to help grow their business.

14 Associated Wholesale Grocers, Inc. 2020 Annual Report 15 OVERCOMING OBSTACLES 55 member-retailers’ companies obtained TRISP loans for TRISP In facing the prolonged pandem- going forward. However, the path improve the customer experience, technology and ic, unemployment spike, eco- toward meeting the new needs this short-term program provided nomic recession, and changing of the customer, requires a will - fast-tracked loans to credit-worthy consumer behaviors, many of our ingness to adapt and change by member-retailers in good stand- remodeling projects. member-retailers were at a pivotal making significant investments in ing, with the first year being in - crossroads of their business at the their business. terest-free. Member-retailers used start of 2020. The sudden spike in the loans for technology and re - To facilitate funding for mem- sales starting in March and con - modeling projects up to $500,000 ber-retailers choosing this new tinuing throughout the year saw a per location and up to $2.5 million path, AWG introduced the Technol- positive impact on current profit- per member-retailer equity. Our ogy & Remodel Investment Stim- ability and cash flow. member-retailers will expect to ulus Program (TRISP), a unique, save millions of dollars in first-year This turning point created a diffi- limited-time financing offering. interest costs and stimulate a high cult choice for our member-retail- Qualifying investments included return on their investments. ers: which course would sustain retail equipment and technology momentum and maximize future purchases and upgrades, store re - Overall, 55 member-retailers chose success potential? Do they take the models, and other costs directly to participate in the TRISP loan of - known path and attempt to main- related to these investments. fer, with AWG disbursing approx- tain the status quo before the pan - imately $15 million to help its AWG’s Finance Committee allocat- demic, or do they take the unchart - member-retailers grow their busi- ed up to $50 million of funds to be ed path that will better capitalize ness. AWG will continue to look for available for approved loans on a on consumers’ new preferences? opportunities in the future to pro - first-come, first-served basis. vide unique financing and growth The easy choice of staying with As the intent was to allow mem - options for its member-retailers. the status quo does not assure ber-retailers to move quickly to prior success will be maintained $15 MILLION The value of funds received by 55 AWG member-retailers to help grow their business.

14 Associated Wholesale Grocers, Inc. 2020 Annual Report 15 PRICE CUTTER® Today’s shoppers seek a combi- curated assortment and focus on cility, and other unique branding nation of safety, value, speed, and everyday low pricing helps keep components reinforce the image convenience as they choose where labor and advertising costs low so of quality and value. Price Cutter® to shop. Smaller format stores are customers can get “quality prod- leverages a proprietary assortment serving this need with a simplified ucts at bargain prices.” The use of of store brands and value-priced assortment of the right items at the dump bins, floor displays, and pal- items from national brands, all right prices and are demonstrating let drops of special buys further competitively priced every day. strong sales comps compared to improve the price image. The enhanced store brand mix cre- larger superstores and supercen- Price Cutter’s® streamlined advertis- ates an opportunity to increase pen- ters. To proactively meet this market ing and marketing strategy reduces ny profit while saving the consumer need, in 2020, AWG introduced a member-retailers’ expenses while 15% or more versus the national licensed banner for a small format, increasing their competitive advan- brand. Currently, Price Cutter® stores curated assortment, value concept tage. Website and app platforms are achieving more than 60% store called Price Cutter®. This concept save costs by reducing print ads brand penetration. On a market bas- was designed for AWG member-re- and allow real-time pricing flexibil- ket comparison, Price Cutter® is up to tailers to capitalize on this trend ity to remain ahead of competitors. 22% lower than the suggested retails within the markets they serve. AWG Weekly ads break on Friday, coun- in our competitive city pricing zone, licensed five stores for the beta-test tering “like item” ad prices that reg- further demonstrating the advan- in 2020, and those member-retailers ularly hit the market on Wednesday tage of the program. have been working with us to refine to seize the higher traffic on week- The Price Cutter® program will help the concept and achieve the goal of ends. A long-term price lockdown creating a turn-key solution. meet our AWG member-retailers’ approach is used in the center store and their customers’ needs in 2021 The ideal Price Cutter® stores are and featured in the digital ads along and beyond, and is designed to be approximately 20,000 square feet, with digital coupons. a new growth engine for market use warehouse shelving, and stock The store décor and point-of-pur- competitiveness and profitability. no more than 6,000 items. This chase materials modernize the fa-

LOWER THAN Saving the customer COMPETITORS’ 15%+ RETAIL PRICING 60% 22% Store Brand Penetration

16 Associated Wholesale Grocers, Inc. LOU FOX AWARD STEVE & LAURA EDWARDS OWNERS - GES, INC. / EDWARDS FOOD GIANT

Community involvement has been a very con- sas Gov. Asa Hutchison recently appointed Steve sistent practice for the Edwards family. Steve, to the Arkansas State Police Commission. and his late father, Oral, have always been com- Steve has a strong commitment to educa- mitted to the communities in which they oper- tion and has personally invested a great deal ate supermarkets. of time and money in the Teach for America Steve and his wife, Laura have been married for program in the Arkansas Delta. They have 29 years and in these years have invested much personally helped numerous area students of their time trying to make life better for oth- pursue higher education, with Steve serving ers. They are dedicated to family as they work on the Foundation Board of Directors at Arkan- to improve the lives of all Arkansans. sas State University. The couple are members They have a shared history serving others on of First Baptist Church in Marianna, Arkansas AWG BRANDS boards and committees at the local, regional, where Steve is a member of the Executive OVERALL WINNER - OKLAHOMA state, and national levels. Committee and Chairman of the House and Delbert’s Supermarket #4473 Comanche, OK Grounds, while Laura is Chairman of the Stew- PRODUCE Together, they established an endowment to ardship and Personnel Committees. There is no AWG OVERALL WINNER #1 - NEBRASKA help underprivileged families of those seeking doubt that the Edwards have made a signifi- B&R Super Saver #9652 Lincoln, NE treatment at Baptist Memorial Hospital-Mem- cant impact on their communities, company, AWG OVERALL WINNER #2 - OKLAHOMA phis as Steve served multiple terms on the and team members through strong leadership Pruett’s Foods #4337 McAlester, OK Board of Trustees. over the past 30 years. BAKERY AWG OVERALL WINNER - GREAT LAKES Steve served multiple terms on the Board of Laura served as president and member of the Wiseway Super Food Center #8351 Crown Point, IN Directors of the Crossroads Coalition and the Marianna-Lee County Chamber Board, Treasurer MARKETING CAMPAIGN regional economic development partnership of the Arkansas Governor’s Mansion Association, AWG OVERALL WINNER - MEMPHIS working to enhance development and job School Board Member and Booster Club Mem- Mac’s Fresh Markets (All Stores) AR, MS & LA growth across eight counties in the Arkansas ber for Lee Academy, once taking a mission trip FOOD SERVICE Delta. Steve served eight years as a Commission- to Ukraine to help underprivileged children. AWG OVERALL WINNER - KANSAS CITY er on the Arkansas Aeronautics Commission, Cosentino’s Price Chopper #117 Gardner, KS Steve and Laura are truly servant leaders who and 12 years as a Commissioner for the Arkansas put the needs of others ahead of their own. FLORAL Department of Economic Development. Arkan- AWG OVERALL WINNER - NASHVILLE Food World #5792 Statesboro, GA SEAFOOD AWG OVERALL WINNER - OKLAHOMA Crest Foods #4004 Edmond, OK STORE MANAGER of the YEAR CENTER STORE AWG OVERALL WINNER - GREAT LAKES GINA STENNETT PYRAMID FOODS Strack & Van Til Market #1963 Crown Point, IN MEAT AWG OVERALL WINNER - GREAT LAKES Gina Stennett has an amazing story of grow- ship golf tourna- Tadych’s #1481 Marquette, MI ing up in the grocery business. She started ment has helped MERCHANDISING EVENT with the Ramey’s (now Pyramid Foods) group raise more than AWG OVERALL WINNER - GULF COAST of stores in 1986, holding numerous positions $16 million dollars Rouses #6781 New Orleans, LA throughout the stores, including working in a for local children’s OMNI-CHANNEL supervisory capacity over store operations, loss charities. Gina AWG OVERALL WINNER - MEMPHIS prevention, and IT. In 2005, she was named to also partnered Hays Supermarkets (All Stores) AR & MO the Board of Directors and in 2017 she became with the local VMC the store director at the Price Cutter® located food banks, Ozark AWG OVERALL WINNER - BEST OVERALL 50K+ on East Battlefield in Springfield, Missouri, the Food Harvest and Crosslines, and has been in- Great Lakes, Tony’s Fresh Market #1867 Burbank, IL company’s flagship store. Gina has a passion strumental in helping local schools. for outstanding store conditions and more im- FOLLOW Gina leads by example and lives by the saying: portantly, for outstanding customer service. “The buck starts and stops with me.” Gina has THIS LINK As Gina implemented her management style, high expectations for herself and her team, sales exploded and during the past three years, and the results are outstanding! TO VIEW ALL the store has shown a 20% sales increase. 2020 AWARD Gina has been serving the customers of Pyra- Gina and her team are proud of the numerous mid Foods for 40 years. WINNERS community and charity events supported by her store. The Price Cutter® Charity Champion- 2020 Annual Report 17 NET SALES $ 254.43 2020 CONSOLIDATED NET MILLION SALES FOR CONTINUING OPERATIONS 10.63 Billion

$ . 213.84 2019 . 938 MILLION 936 Billion Billion 9.28 Billion

$ 210.52 2018 MILLION

$ 203.44 2017 2017 2018 2019 2020 MILLION PATRONAGE PATRONAGE DOLLARS

6.27% GROSS 2020 NEW BUSINESS PROFIT FROM WHOLESALE NEW MEMBER . 6.09% 394% . OPERATIONS STORES 6.00% 606%

3.72% . 173 370% 3.61% SG&A $ ANNUALIZED EXPENSES PURCHASES FROM WHOLESALE 479 20172017 2018 2018 2019 2019 2020 2020 OPERATIONS MILLION

18 Associated Wholesale Grocers, Inc. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 26, 2020 and December 28, 2019 (dollars in thousands)

ASSETS 2020 2019

Current Assets: Cash and cash equivalents ...... $ 173,867 $ 152,960 Receivables, net of allowance for doubtful accounts of $5,343 in 2020 and $5,373 in 2019 ...... 345,914 307,208 Notes receivable from members, current maturities, net of allowance for doubtful accounts of $0 in 2020 and $0 in 2019 ...... 25,174 10,394 Inventories ...... 580,956 541,174 Prepaid and other current assets ...... 46,509 33,923 Total current assets ...... 1,172,420 1,045,659 Notes receivable from members, maturing after one year, net of allowance for doubtful accounts of $2,716 in 2020 and $2,774 in 2019 ...... 94,389 37,290 Property and equipment, net (note 6) ...... 507,898 449,639 Intangible assets, including goodwill, net of accumulated amortization of $0 in 2020 and $23,958 in 2019 (note 3) ...... 200 10,460 Deferred income taxes (note 10) ...... 21,021 38,094 Prepaid and other assets ...... 40,648 43,485 Total assets ...... $ 1,836,576 $ 1,624,627

LIABILITIES AND EQUITY

Current Liabilities: Accounts payable ...... $ 742,979 $ 605,887 Cash portion of current year patronage ...... 157,580 123,355 Member deposits ...... 42,057 30,406 Accrued expenses and other current liabilities ...... 108,390 119,099 Total current liabilities ...... 1,051,006 878,747 Long-term debt maturing after one year (note 7) ...... 178,341 151,959 Deferred income and other liabilities ...... 76,821 76,095 Total liabilities ...... 1,306,168 1,106,801

Commitments and contingent liabilities (note 12)

Equity: Common stock, $100 par value: Class A, voting; 35,000 shares authorized; 16,710 and 16,470 shares issued at 2020 and 2019 ...... 1,671 1,647 Class B, nonvoting; 150,000 shares authorized; 9,654 and 10,261 shares issued at 2020 and 2019 ...... 965 1,026 Additional paid-in capital (note 9) ...... 28,645 27,434 Retained earnings ...... 555,396 497,676 Accumulated other comprehensive loss (notes 9 and 11) ...... (56,269) (45,531) Total members’ equity ...... 530,408 482,252 Noncontrolling interest ...... — 35,574 Total equity ...... 530,408 517,826 Total liabilities and equity ...... $ 1,836,576 $ 1,624,627

See accompanying notes to these consolidated financial statements. 19 ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018 (dollars in thousands)

et sales ost o oos sol ross roit eeral a amiistratie eeses erati iome ter iome eeses terest iome ote terest eese ote ter et ome beore iome taes ome taes ote et iome

ter omreesie loss ae i ue status o esio la et o taes ote omreesie iome

mouts attributable to ootrolli iterest

omreesie iome omreesie iome attributable to ootrolli iterest — omreesie iome attributable to a subsiiaries

et iome et iome attributable to ootrolli iterest — et iome attributable to a subsiiaries

20 See accompanying notes to these consolidated financial statements. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Fiscal years ended December 26, 2020 and December 28, 2019 (dollars in thousands)

— — —

— — — —

See accompanying notes to these consolidated financial statements. 21 ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018 (dollars in thousands)

— — — — — — — Redemption of prior year’s patronage refund certificates — — )

22 See accompanying notes to these consolidated financial statements. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (dollars in thousands unless otherwise indicated)

(1) Summary of Significant Accounting Policies General ssociated oesae rocers nc predominatey operates on a cooperatie asis see atronage procuring grocery mercandise for distribution to its retailer/shareholders (“Members”) throughout the midestern soutestern and souteastern nited tates onooperatie usinesses incude nonfood distriution centers and retai supermarets tat operate under te anners of as aer and rice opper e cooperatie represents approimatey of total net sales. “AWG” and “Company” refer to Associated Wholesale Grocers, Inc. and its susidiaries

Principles of Consolidation and Use of Estimates e consoidated financia statements incude te accounts of its susidiaries and ariae interest entities ere te ompany ad een prior to considered te primary eneficiary ntercompany transactions ae een eiminated e financia statements ae een prepared in conformity it generay accepted accounting principes in te nited tates of merica n preparing financia statements management maes informed udgments and estimates tat affect te reported amounts of assets and iaiities as of te date of te statements and affects te reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Company’s fisca year consists of or ees ending on te ast aturday in ecemer isca and ere eac ee fisca years references to years in tese notes to consoidated financia statements represent fisca years uness oterise noted

Variable Interest Entity n accordance it Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810, “Consolidations” (“ASC 810”), the Company consolidates any variable interest entity (“VIE”) in which the Company has a controlling financial interest and, therefore, is the VIE’s primary eneficiary states tat a controing financia interest in an entity is present en an enterprise as te poer to direct te activities of a VIE that most significantly affect the VIE’s economic performance and te oigation to asor osses of te tat coud potentiay e significant to te or te rigt to receie enefits from te tat coud potentiay e significant to te e ompany as determined tat nc mpoyee Stock Ownership Plan and Trust (“ESOP”) is a VIE pursuant to certain financing provided by the Company in the sales of its retai grocery operation or te fisca years ended ecemer and ecemer te ompany concuded it as te primary beneficiary of HAC, Inc. (“HAC”) and has included HAC, Inc. (“HAC”) in the Company’s consolidated financial statements for te fisca years ended ecemer and ecemer ffectie ecemer te ompany concuded it as no onger deemed to e te primary eneficiary of as it no onger met te poer criterion rior to ecemer te ompany determined tat it met te poer criteria it regard to y irtue of te financing reationsip eteen and ic did not ae te practica aiity to refinance te financing proided y te ompany it a tird party on commerciay iae terms. However, as a result of HAC’s improved financial condition during 2020, as ae to demonstrate te capacity to otain tird party financing at maret terms demonstrating tat as no onger reiant on te ompany for future financing erefore te ompany deconsoidated as of ecemer and te consoidated financia statements for te fisca year ended ecemer no onger refect te consoidation of e ompany recorded a gain on deconsoidation of miion ic is recorded in genera and administratie epenses for te fisca year ended ecemer n addition te ompany recorded a deferred ta epense reated to te deconsoidation of miion ic is recorded in income taes for te fisca year ended ecemer

Business and Credit Concentrations The majority of the Company’s sales are to Members located in issouri aoma ouisiana ransas inois ansas ennessee ississippi erasa ndiana entucy and aama o singe customer accounted for more tan of saes in any year presented nentory and euipment financing is aaiae to uaified retaiers for acuisitionsepansion improements and opening inentory purcases oans to Members are generally collateralized by the Member’s inventory, property and equipment, and the Members’ AWG equity. The Company’s lending rate is generay one percent oer te prime rate it orroing terms up to years or te fisca years and te ompany earned interest income on oans of miion miion and miion respectiey nterest is recorded en earned

ccounts receiae primariy consist of trade receiaes from emers and are stated at te amount te ompany epects to coect net of aoance rade receiaes are generay secured y patronage certificates see note

The Company establishes an allowance for doubtful accounts based on collectability, which reflects management’s best estimate of proae osses determined principay on te asis of istorica eperience financia anaysis of te retai customer and oan guarantors and eauation of te oan coatera

2020 Annual Report 23 ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(1) Summary of Significant Accounting Policies (continued) Changes in accounts receivable allowance for doubtful accounts are as follows 2020 201 Beginning balance ...... , ,012 Provision for doubtful accounts ...... 1, 1, econsolidation of VIE………………………………………………………… (21) — Writeoffs / ecoveries ...... (1,20) (8) Ending balance ...... , ,

Changes in notes receivable allowance for doubtful accounts are as follows 2020 201 Beginning balance ...... 2, ,22 Provision for doubtful accounts ...... (8) (202) Writeoffs / ecoveries ...... — (2) Ending balance ...... 2,1 2,

Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Proceeds due from credit and debit card transactions with settlement terms of less than five days are also included. The Company maintains cash balances at major financial institutions. At times such cash balances may be in excess of the Federal eposit Insurance Corporation coverage limit. Management believes the financial institutions are financially sound and risk of loss is minimal. The Company does not fund its disbursement accounts for checks it has written until the checks are presented to the bank for payment. The amount of outstanding checks is recorded in accounts payable. The change in outstanding checks is included in the change in accounts payable, accrued expenses, and other liabilities on the consolidated statements of cash flows.

Inventories Merchandise is valued at the lower of cost or market. Cost for 82 and of inventories in 2020 and 201, respectively, is determined using the lastin, firstout (IFO) method. Cost for perishables, general merchandise, health care and retail store inventories is determined using the first in, firstout (FIFO) method. Had all products been valued at FIFO, inventories would have increased by 1. million at ecember 2, 2020 and 1.1 million at ecember 28, 201.

Property and Equipment Property and equipment are stated at cost. Expenditures for improvements, which significantly increase property lives, are capitalized. Interest costs incurred during the construction of facilities are included in the cost of such properties. epreciation and amortization are calculated using the straightline method over the assets estimated useful lives, which range from 1 to 0 years for buildings, to 10 years for equipment, and to years for vehicles. easehold improvements are amortized over the shorter of the respective lease terms or life of the asset.

Patronage Income from cooperative operations, less a nominal amount authorized by the Board of irectors to be retained, is returned to the Members in the form of yearend patronage. At each year end, a percentage of net income to be distributed is paid in cash with the remainder paid in the form of patronage certificates (see notes and 8). Such amounts are apportioned to the Members based on qualifying warehouse purchases. Patronage source income derived from an extraordinary event of significant magnitude may be distributed to Members separately based on the quantity of the business done proportionately with a Member, which may span multiple years or a combination of years, as provided in the bylaws, as needed.

Sales and Cost of Goods Sold The Company recognizes revenues when the performance obligation is satisfied, which is the point at which control of the promised goods or services are transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Control transfers to customers at a pointintime when goods have been delivered, as that is generally when legal title, physical possession and risks and rewards of goods/services transfers to the customer. The timing of satisfaction of the performance obligation is not subject to significant judgment. Amounts billed and due from customers are short term in nature and are classified as receivables since payments are unconditional and only the passage of time is required before payments are due. Additionally, the Company does not grant payment financing terms greater than one year. Customer credits and returns are included as a reduction of revenue traditionally within 10 days of the initial transfer of goods. Promotional allowances related to selling products to customers are recorded as a reduction in sales. Any volume rebates paid in

24 Associated Wholesale Grocers, Inc. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(1) Summary of Significant Accounting Policies (continued)

Shipping and Handling Costs

Advertising Expense

Self-Insurance insurer, the Company covers the worker’s compensation claims utilizing a insurance and excess worker’s compensat

Income Taxes

Recently Issued Authoritative Accounting Standards Accounting Standards Update (“”) (Topic 842) ompany’s consoli balance sheets but does not expect a material impact to the Company’s statements of operations and cash flows. The Company p

2020 Annual Report 25 ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(2) Fair Value Measurements air value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels directly related to the amount of subectivity associated with the inputs to fair value measurements as follows

evel uoted prices in active markets for identical assets or liabilities evel nputs other than uoted prices included within evel that are either directly or indirectly observable evel Unobservable inputs in which little or no market activity exists, reuiring an entity to develop its own assumptions about the assumptions that market participants would use in valuation. For certain of the Company’s financial instruments, including cash and cash equivalents, accounts and shortterm notes receivables and accounts payable, the fair values approximate book values due to their shortterm maturities.

Since there is no market for long term notes receivables, it is impractical to assess whether the carrying amounts, which are reported on the consolidated balance sheets for these items, approximate fair value.

roperty and euipment and intangible assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. ecoverability of assets held and used is assessed based on the undiscounted future cash flows. Assets to be disposed of are presented at the lower of cost or fair value less costs of disposal. uring the fiscal years ended ecember , , ecember , , and ecember , , the Company recorded (in millions) ., ., and ., respectively, for impairment charges on realpersonal property and ongoing lease liabilities, which were measured at fair value using evel inputs. The impairment charges are a component of the general and administrative expenses in the consolidated statements of operations.

The carrying amounts of the Company’s longterm debt reported on the consolidated balance sheets approximate fair value since their interest rates are periodically adusted to reflect market conditions.

(3) Intangible Assets n , the Company had intangible assets subect to amortization that included wholesale volume agreements and noncompete agreements of . million, which were being amortized over years and had accumulated amortization of . million. The Company’s VIE recorded goodwill of . million for which was being amortized over a useful life of years and accumulated amortization of . million. Amortization expense for intangible assets was . million in and . million in . ith the deconsolidation of the , the Company no longer has amortizable intangible assets.

(4) Acquisitions, Divestitures and Certain Transactions with Members n ctober , AC, nc. purchased euipment and inventory for supermarkets located in klahoma from CS, nc. our stores were operating under the banner of ood yramid, two in onca City, one in Stillwater and one in artlesville, klahoma with the fifth operating as onca City iscount oods. The aggregate cash purchase price for all five stores was . million.

n ay , idwest eal state oldings, C, a wholly owned subsidiary of the Company, purchased real estate located in issouri, Arkansas and Tennessee from Town Country rocers of redericktown, issouri, nc. The aggregate cash purchase price for the real estate was . million. Simultaneously, . million of that real estate was sold to another A member.

(5) Patronage Refunds and Deposits atronage efund Certificates are issued to embers as part of annual distributions of net income from cooperative operations.

ember deposits represent interestbearing accounts that may be reuired to collateralize weekly purchases of products. nterest expense incurred on member deposits and member savings in , , and were ., ., and . million respectively. Since there is no market for atronage efund Certificates and ember eposits, it is impractical to assess whether the carrying amounts, which are reported on the consolidated balance sheets for these items, approximate fair value.

26 Associated Wholesale Grocers, Inc. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(6) Property and Equipment roperty and equipment are summaried as follos

and , , uildings and leasehold improvements , , Equipment , , Construction in progress and other , , , , ess accumulated depreciation , , roperty and equipment, net , ,

epreciation epense incurred in , , and as in millions , , and , respectively In , , and , the Company capitalied an aggregate total of in millions , , and , respectively, of capitalied construction period interest

(7) Long-term Debt In ay , the Company entered into a fiveyear revolving Credit greement ith a maturity date of ay , , hich provided a million revolving credit facility and a million taeempt ond facility Total orroings and outstanding letters of credit, including a million taeempt ond loan ere million on ecemer , Variale interest rates are ased on the ondon Interan orroing ate and ranged from to during hich included a ase rate marup charged y the lenders aily orroings during averaged million and overall annual orroings and repayments ere approimately illion The Company had an additional million availale for orroing under this agreement

In ecemer , the Company entered into to fiveyear Credit greements, hich provided a million revolving credit facility ith an incremental increase on ctoer , to million and a million taeempt ond facility Total orroings and outstanding letters of credit, including a million taeempt ond loan, ere million and million, at ecemer , and ecemer , , respectively Variale interest rates are ased on the ondon Interan orroing ate and ranged from to during and to during aily orroings averaged million and million in and , respectively, and overall annual orroings and repayments ere approimately illion and illion in and , respectively The Company had an additional million and million availale for orroing under the revolving credit facility agreement at ecemer , and ecemer , , respectively

The Company’s revolving credit facility agreement contains certain financial covenants related to cash flo leverage and minimum tangile net orth The Company is in compliance ith all covenants as of ecemer ,

(8) Allocated Earnings t ecemer , and ecemer , , and million of the current year nonmaturing patronage has een allocated ithin retained earnings The pertinent provision of these patronage certificates are as follos a the certificates are not transferrale has the right to offset, ut the certificate holder does not c no interest is accrued on outstanding certificates d the certificates have no stated maturity date, and e the certificates are suordinate to the claims of all creditors of

In July 2005, the Board of Directors created another form of patronage certificate (“Class B Certificates”) for Members who are delinquent ith their oligations oed to the Company The Class Certificates are noninterest earing and have no maturity date These certificates are only redeemed upon the dissolution of the Company and the redemption of all other patronage certificates The oard of irectors may in its sole and asolute discretion cause a Class Certificate to e converted into a atronage efund Certificate if a memer as deemed as delinquent ceases to e deemed as a delinquent emer The Class Certificates are included in retained earnings and amounted to million and million as of ecemer , and ecemer , , respectively

(9) Equity ll emers of the cooperative are required to hold shares of Class Common toc The ylas of contain restrictions concerning the transfer of common stock, which serves as collateral to secure Members’ indebtedness. Each Member holding Class A Common Stoc is entitled to one vote in shareholder matters ll issuances and redemptions since arch , have een made at , per share Issuances and redemptions eteen arch , and arch , ere made at , per share Issuances redemptions eteen arch , and arch , ere made at , per share

2020 Annual Report 27 ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(9) Equity (continued) The following table describes the number of authoried and outstanding shares of A Class A and Class B stock at December 2, 2020 and December 2, 20

TSTADI AT CASS ATIED 2020 20 Class A Stock, 00 par value 5,000 ,0 ,0 Class B Stock, 00 par value 50,000 ,5 0,2

The changes in common stock for the fiscal years ended December 2, 2020 and December 2, 20 were as follows

Total Common Class A Class B Stock Members Balances at December 2, 20 Shares...... ,055 , 2,25 , Dollar alue ...... ,05 ,20 2,25 Issued Shares...... ,05 — ,05 Dollar alue ...... 0 — 0 edeemed Shares...... (,0) () (2,) (2) Dollar alue ...... () () (22) Balances at December 2, 20 Shares...... ,0 0,2 2, ,00 ) Dollar alue ...... , ,02 2, Issued Shares...... ,50 25 ,5 5 Dollar alue ...... 5 2 edeemed Shares...... (,0) (2) (,2) (0) Dollar alue ...... () () () Balances at December 2, 2020 Shares...... ,0 ,5 2, ,5 Dollar alue ...... , 5 2,

Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss attributable to the Company for the fiscal years ended December 2, 2020 and December 2, 20 were as follows

2020 20 Balances, beginning of year ...... (5,5) (5,0) Change in funded status of pension plan, net of ,2 in ta in 2020 and , in ta in 20 ...... (0,) (0,0) Balances, end of year ...... (5,2) (5,5)

28 Associated Wholesale Grocers, Inc. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(9) Equity (continued)

Additional Paid in Capital

Noncontrolling Interest

— — —

(10) Income Taxes

—

2020 Annual Report 29 ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(10) Income Taxes (continued)

(11) Employee Benefit Plans qualified (“the DB Plan”) and several defined contribution pension plans. The DB Plan covers ber 1, 2012, the Company’s DB Plan was closed to new employees and replaced with an enhanced contribution to the existing

ojected benefit obligation “PBO”), fair value of plan assets, and funded status of the Company’s DB Plan is

Change in benefit obligation (PBO)

Change in plan assets

Funded status, end of year

Benefit calculations for the Company’s sponsored DB Plan for primarily non ’ The Company’s accumulated

30 Associated Wholesale Grocers, Inc.

ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(11) Employee Benefit Plans (continued) The amounts recognized for the DB Plan in the Company’s accumulated other comprehensive loss consisted of the following

2020 201 Total recognied in OC, before tax ...... (,1) (1,) Total recognied in OC, net of tax ...... (,2) (,1)

Fiscal Year DB Plan Benefits 2021 ...... 2,2 2022 ...... 2, 202 ...... 2, 202 ...... 2,0 202 ...... 2,1 ears 202200 ...... ,21

et periodic benefit expense for the DB Plan is reflected in the expense section of the ncome tatement and consisted of the following

2020 201 201 ervice cost – benefits earned during the period ...... 10,1 10,0 10,21 nterest cost on projected benefit obligations ...... ,12 , ,1 xpected return on plan assets ...... (10,1) (,2) (10,1) mortiation of prior service cost ...... — — — mortiation of net actuarial loss...... ,122 ,1 , ettlement loss ...... ,2 1,00 ,22 et periodic benefit expense ...... 22, 1,1 1,

The estimated prior service cost and net actuarial loss that will be amortied from accumulated other comprehensive loss into net periodic benefit cost for the DB Plan over the next fiscal year are 0 and 11,10, respectively. The majority of the unfunded nonqualified portion of the DB Plan has been expensed.

eighted average assumptions used for the DB Plan are as follows

2020 201 201 eighted average assumptions used to determine benefit obligations Discount rate...... 2. . . ate of compensation increase ...... 2. 2. 2.

eighted average assumptions used to determine net periodic benefit cost Discount rate...... . . .0 ate of compensation increase ...... 2.0, .00 2.0, .00 2. xpected return on plan assets ...... . . .

2020 Annual Report 31

ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(11) Employee Benefit Plans (continued) The fair value of the Company’s DB Plan assets at the end of the calendar year y asset category are as follos

sset Category otal eel eel eel

uity ecurities — — ied ncome oernment ecurities — utual unds — — — — Corporate or gency ecurities — — imited Partnerships — — otals

The fair value of the Company’s DB Plan assets at the end of the calendar year y asset category are as follos

sset Category otal eel eel eel

uity ecurities — — ied ncome oernment ecurities — — utual unds — — Corporate or gency ecurities — — imited Partnerships — — otals

he folloing is a description of the aluation methodologies used for assets measured at fair alue at Decemer and Decemer

uity ecurities oney aret unds and utual unds are alued at the closing price reported on the actie maret on hich the indiidual securities are traded

oernment ecurities traded on a highly liuid secondary maret are stated at the last reported sales price on the day of aluation o the etent these securities are actiely traded and aluation adustments are not applied they are classified ithin eel

Corporate or gency ecurities are determined through ealuated id prices ased on recent trading actiity and other releant information including maret interest rate cures and reference credit spreads and estimated prepayment rates here applicale are used for aluation purposes proided y thirdparty pricing serices here uoted maret alues are not aailale

imited Partnerships that are hedge funds are alued ased on estimates for the fair alue of inestment funds held y the partnership that hae calculated net asset alue per share as a practical epedient in accordance ith the specialized accounting guidance for inestment companies nother limited partnership is alued ased on the contriutions paid into the fund through year end hich approimates fair alue he maority of imited Partnerships held as inestments are suect to redemption restrictions of a uarterly freuency ith day notice periods and a minimum inestment period of one year

he folloing tale presents purchases and other adustments of financial assets measured at fair alue on a recurring asis using significant unoserale inputs eel during the fiscal year ended Decemer and Decemer is as follos ransfers — — Purchases ssues

32 Associated Wholesale Grocers, Inc. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(11) Employee Benefit Plans (continued) The Company’s investment policy reflects the nature of the DB Plan’s funding obligations. The assets are invested to provide the opportunity for oth inome and roth of prinipal This oetive is pursued as a oal desined to provide reuired enefits for partiipants ithout undue ris t is epeted that this oetive an e ahieved throuh a elldiversified asset portfolio nvestment manaers are direted to maintain euity portfolios at a ris level approimately euivalent to that of the speifi enhmar estalished for the portfolio The epeted rate of return on DB Plan assets was determined based on expectations of future returns for the DB Plan’s investments based on the target asset alloation of the DB Plan’s investments.

The Company epets to ontriute approimately million to the DB Plan durin The Company also maes ontriutions to its defined ontriution plans The total epense for these plans amounted to in millions and in and respetively The onualified Deferred Compensation Plan is availale for offiers of the Company to elet y the reuired deadlines in the preedin year to have a desinated portion of their aes set aside for their on personal ta plannin purposes in a trust held y Ban of meria t the time of eletion the date for future distriution of aes to the partiipant is estalished aordin to alloale parameters ithin the plan douments The asset is reported as a nonurrent asset ith the offsettin liaility as a nonurrent liaility on the onsolidated alane sheet and ere million and million for Deemer and Deemer respetively

The fair value of the Company’s Deferred Compensation plan assets at the end of and alendar year y asset ateory are as follos

sset Cateory Total evel evel evel

oney aret unds — — Corporate Bonds — — Common tos — — utual unds — — Totals —

sset Cateory Total evel evel evel

oney aret unds — — Corporate Bonds — — Common tos — — utual unds — — Totals —

(12) Commitments and Contingent Liabilities The Company is oliated as lessee under various nonanelale lonterm supermaret property leases ith minimum annual rentals of approimately These leases have an averae remainin life of years t is epeted in the ordinary ourse of usiness that these leases ill e reneed or replaed The Company has suleased the maority of its supermaret properties to emers eept for properties operated y the Company’s subsidiaries) for substantially the same lease terms and rental amounts. Rental expense related to these properties ere in millions and in and respetively ental inome reeived as in millions and in and respetively uture minimum lease payments epeted to e inurred over the net five fisal years and thereafter is estimated as follos in millions and thereafter ffsettin rental inome epeted to e reeived over the net five fisal year and thereafter is estimated as follos in millions and thereafter ents hared to eneral and administrative epenses for operatin leases other than supermaret properties ere in millions and in and respetively peratin lease rent epense epeted to e inurred over the net five fisal years is estimated as follos in millions

2020 Annual Report 33 ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(12) Commitments and Contingent Liabilities (continued) The Company is a guarantor of loans issued to members in the amount of . and . million for December and December respectively.

n December the Company entered into a limited guaranty with Ban of merica on behalf of C nc. mended in this limited guaranty allows C nc. to issue standby letters of credit in amounts up to . million without reuiring C to maintain a cash collateral account with Ban of merica. The Company is able to revoe the limited guaranty at any time in respect to future transactions. The Company will however be at ris for existing indebtedness at the time of revocation.

n pril and arch the Company entered into limited guaranties with reat outhern Ban on behalf of one of its embers. These guaranties of payment were limited to million and . million respectively of outstanding debt of the ember with reat outhern Ban. mended in une these guaranties were combined into one guaranty limited to . million of outstanding debt of the ember with reat outhern Ban.

n ctober the Company entered into a limited guaranty with B Ban .. on behalf of one of its embers. This guaranty of payment was limited to . million of outstanding debt of the ember with B Ban .. This guarantee ended in eptember .

n eptember the Company entered into a limited guaranty with Central Ban of the ars on behalf of one of its embers. This guaranty of payment was limited to . million of outstanding debt of the ember with Central Ban of the ars.

The Company has entered into surety bond agreements with government entities which bind the Company to repay the government entity if the Company is unable to successfully perform on its contractual obligations to the government entity. s of December and December the Company had . million and . million respectively of outstanding surety bonds.

The Company is involved in various claims and litigation arising in the normal course of business. n the opinion of management the ultimate resolution of these actions will not have a material adverse effect on the Company’s consolidated financial statements.

(13) Multi-employer Plans The Company contributes to a single multiemployer defined benefit pension plan under the terms of the collectivebargaining agreements that cover its unionrepresented employees. The riss of participating in a multiemployer plan are different from singleemployer plans in the following aspects

a. ssets contributed to the multiemployer plan by one employer are used to provide benefits to employees of other participating employers.

b. f a participating employer stops contributing to the plan the unfunded obligations of the plan are borne by the remaining participating employers.

c. f the Company chooses to stop participating in its multiemployer plan then it is reuired to pay that plan an amount based on the underfunded status of the plan referred to as a withdrawal liability.

The Company’s participation in this plan for the fiscal year ended December is outlined in the table below. The “EIN and Pension Plan Number” column provides the Employee Identification Number (“EIN”) and the threedigit plan number. nless otherwise noted the most recent Pension Protection Act (“PPA”) zone status available in and is for the plan’s fiscal year end at December and December respectively. The one status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among other factors plans in the red one are generally less than percent funded plans in the yellow one are more than but less than percent funded and plans in the green zone are at least 80 percent funded. Based on its projection insolvency, the plan has been deemed to be in “critical and declining” status for and . The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or rehabilitation plan (“RP”) is either pending or has been implemented. The last column lists the expiration date of the collectivebargaining agreements to which the plan is subect. inally there have been no significant changes that affect the comparability of and contributions.

34 Associated Wholesale Grocers, Inc. ASSOCIATED WHOLESALE GROCERS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements—(Continued) (dollars in thousands unless otherwise indicated)

(13) Multi-employer Plans (continued) Expiration EIN and ate f Pension Pension Protection FIP/RP Collective Pension Plan Act one Status Status Company Contributions Surcharge Bargaining Fund Number 0 08 Implemented 00 0 08 Imposed Agreements Central States, 0 Red Red es , , , No April , 08 Southeast and Plan 00 Southwest Areas Pension Fund

The Company was not listed in the plan’s Form 5500 as providing more than 5% of the total contributions for the plan years ending in 0 and 08. At the date the Company’s consolidated financial statements were issued, the plan’s Form 5500 was not available for the plan year ending in 00.

(14) Derivative Contracts ith the commencement of the AllInne istribution ub Project, which is the automated warehouse under construction in ississippi, the Company has become exposed to certain financial and maret riss. The Company has currency exchange rate ris exposure related to transactions related to purchases of services and euipment denominated in foreign currency, (Euro). The Company’s financial ris management activities may at times involve the use of derivative financial instruments to hedge the impact of maret price ris exposures.

The Company has entered into short term foreign currency forward derivative contracts with P organ Chase as part of a program designed to mitigate the currency exchange rate ris exposure on transactions with a foreign vendor. As of ecember , 00, the Company had no open foreign currency derivative contracts.

nder this program, the Company may enter into similar derivative contracts from time to time. Although contracts pursuant to this program will serve as an economic hedge of the cash flow of our currency exchange ris exposure, they are not formally designated as hedge contracts or ualify for hedge accounting treatment. Accordingly, any change in the fair value of these derivative instruments during a period will be included in the determination of earnings for that period. The change in fair value is recorded in SA.

(15) Antitrust Settlement In 08, the Company filed a lawsuit against a group of suppliers of commodity goods and related affiliates for antitrust and unlawful price fixing activities. The Company entered into a confidential settlement agreement with several defendants pursuant to which the Company received proceeds in 00 that the Company believes ualify for distribution as a patronage dividend. Because the proceeds relate to multiple years, the Board believes that the patronage dividend should be allocated among the impacted members. The Company will be distributing this patronage dividend separately from the current year distribution.

(16) Subsequent Events Subseuent events have been evaluated through arch , 0, which is the date the financial statements were available to be issued. ther than events noted below, there were no other material events reuiring recognition or disclosure.

n February , 0, the Board of irectors of the Company declared a for stoc dividend effective arch , 0 for shareholders of record. Every shareholder of A and B stoc will receive additional shares in the form of B stoc.

2020 Annual Report 35

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors Associate Wholesale Grocers, Inc.

We have audited the accompanying consolidated financial statements of Associated Wholesale Grocers, Inc. (a Kansas corporation) and subsidiaries, which comprise the consolidated balance sheets and consolidated statements of retained earnings as of December 26, 2020 and December 28, 2019, and the related consolidated statements of operations and comprehensive income and cash flows for each of the three years in the period ended December 26, 2020, and the related notes to the consolidated financial statements.

Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Associated Wholesale Grocers, Inc. and subsidiaries as of December 26, 2020 and December 28, 2019, and the results of their operations and their cash flows for each of the three years in the period ended December 26, 2020, in accordance with accounting principles generally accepted in the United States of America.

Kansas City, Missouri March 2, 2021

36 Associated Wholesale Grocers, Inc. Tye Anthony Stephanie Becker Randy Berry Stacy Bowen Emile Breaux David Carl Jim DeStefano Bob Durand Jim Fitterer Sr. Vice President, Sr. Vice President, Sr. Vice President, Vice President, Sr. Vice President, Sr. Vice President, Vice President, Vice President, Vice President, Merchandising General Counsel & Chief Chief Information Officer Sales, Support Operations & Real Estate Finance & Treasurer Corporate Distribution Division Manager Center Store Legal Officer & Solutions Nebraska Category Management

Dan Funk David Gates Bo Hawkins Robert Henry Aaron Holland Richard Kearns Dan Koch Gary Koch Danny Lane Chief Operating Officer Sr. Vice President, Vice President, Sr. Vice President, Vice President, Executive Vice President, Vice President, Chief Financial Officer Sr. Vice President, Regional Manager - Meat Chief Administrative Information Technology Distribution & Logistics Bakery & Deli Regional Manager - Northern Officer Southern

Jennifer Leetz Sonny Leon John Likens James Lukens Charlie Lynn Anna Mancini Paula Nepote Greg Oldright Jeff Olson Vice President, Vice President, Sr. Vice President, Vice President, Vice President, Vice President, Vice President, Vice President, Vice President, Corporate Controller Member Services Regional Manager - Media Solutions Division Manager Sales, VMC Human Resources Merchandising, VMC Real Estate Great Lakes Eastern Corporation Springfield

Jeff Pedersen Bob Pessel Patrick Reeves Brian Rehagen Terry Roberts Robert Rothove Frank Schmitt Mike Schumacher Reade Sievert Executive Vice President, Vice President, Sr. Vice President, Vice President, Vice President, Vice President, Vice President, Vice President, Vice President, Chief Sales & Support Pharmacy, VMC Chief Human Resources Member Services Division Manager Division Manager Division Manager Division Manager Produce Officer Officer Springfield Nashville Great Lakes Memphis Gulf Coast

David Smith Louis Stinebaugh Dave Sutton James Vaughan Scott Welman Mark Wilson President & Vice President, President, Vice President, Executive Vice President, Vice President, Chief Executive Officer Division Manager VMC Division Manager Chief Development Corporate Distribution Oklahoma City Kansas City Officer