PART I. FINANCIAL INFORMATION This part presents the Company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income, changes in stockholders' equity, and cash flows, along with their accompanying notes, providing a detailed view of the Company's financial position and performance for the reported interim periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the Company's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and stockholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (Amounts in thousands) | Item | June 30, 2023 | December 30, 2022 | | :--------------------------------------------------- | :------------ | :---------------- | | **ASSETS** | | | | Cash and cash equivalents | $ 59,592 | $ 158,800 | | Accounts receivable, net | 301,375 | 260,167 | | Inventories, net | 291,917 | 245,693 | | Prepaid expenses and other current assets | 60,735 | 56,200 | | Total current assets | 713,619 | 720,860 | | Property and equipment, net | 205,535 | 185,728 | | Operating lease right-of-use assets | 182,215 | 156,629 | | Goodwill | 348,951 | 287,120 | | Intangible assets, net | 195,785 | 155,703 | | Other assets | 4,884 | 3,256 | | **Total assets** | **$ 1,650,989** | **$ 1,509,296** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $ 198,087 | $ 163,397 | | Accrued liabilities | 71,739 | 54,325 | | Short-term operating lease liabilities | 23,104 | 19,428 | | Accrued compensation | 28,486 | 34,167 | | Current portion of long-term debt | 12,017 | 12,428 | | Total current liabilities | 333,433 | 283,745 | | Long-term debt, net of current portion | 709,073 | 653,504 | | Operating lease liabilities | 175,142 | 151,406 | | Deferred taxes, net | 7,294 | 6,098 | | Other liabilities and deferred credits | 3,072 | 13,034 | | **Total liabilities** | **1,228,014** | **1,107,787** | | **Stockholders' equity** | | | | Common Stock | 396 | 386 | | Additional paid-in capital | 347,861 | 337,947 | | Accumulated other comprehensive loss | (1,911) | (2,185) | | Retained earnings | 76,629 | 65,361 | | **Total stockholders' equity** | **422,975** | **401,509** | | **Total liabilities and stockholders' equity** | **$ 1,650,989** | **$ 1,509,296** | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This section presents the Company's unaudited condensed consolidated statements of operations and comprehensive income, outlining revenues, expenses, and net income for the reported periods Condensed Consolidated Statements of Operations and Comprehensive Income (Amounts in thousands, except share and per share amounts) | Item | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------------------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Net sales | $ 881,820 | $ 648,104 | $ 1,601,465 | $ 1,160,207 | | Cost of sales | 673,376 | 492,100 | 1,223,313 | 886,690 | | Gross profit | 208,444 | 156,004 | 378,152 | 273,517 | | Selling, general and administrative expenses | 179,042 | 124,487 | 335,179 | 234,573 | | Other operating expenses, net | 4,062 | 3,883 | 5,734 | 5,046 | | Operating income | 25,340 | 27,634 | 37,239 | 33,898 | | Interest expense | 12,006 | 4,465 | 22,012 | 8,830 | | Income before income taxes | 13,334 | 23,169 | 15,227 | 25,068 | | Provision for income tax expense | 3,467 | 6,254 | 3,959 | 6,768 | | Net income | $ 9,867 | $ 16,915 | $ 11,268 | $ 18,300 | | Other comprehensive income: | | | | | | Foreign currency translation adjustments | 193 | (74) | 274 | 51 | | Comprehensive income | $ 10,060 | $ 16,841 | $ 11,542 | $ 18,351 | | Net income per share: | | | | | | Basic | $ 0.26 | $ 0.46 | $ 0.30 | $ 0.49 | | Diluted | $ 0.25 | $ 0.42 | $ 0.29 | $ 0.47 | | Weighted average common shares outstanding: | | | | | | Basic | 37,634,127 | 37,100,968 | 37,570,595 | 37,018,044 | | Diluted | 45,604,297 | 42,053,453 | 38,201,408 | 41,896,379 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section presents the Company's unaudited condensed consolidated statements of changes in stockholders' equity, detailing movements in common stock, additional paid-in capital, and retained earnings Condensed Consolidated Statements of Changes in Stockholders' Equity (Amounts in thousands, except share amounts) | Item | Common Shares | Common Stock Amount | Additional Paid-in Capital | Other Comprehensive Loss | Retained Earnings | Total | | :------------------------------------ | :------------ | :------------------ | :------------------------- | :----------------------- | :---------------- | :------ | | Balance December 30, 2022 | 38,599,390 | $ 386 | $ 337,947 | $ (2,185) | $ 65,361 | $ 401,509 | | Net income | — | — | — | — | 1,401 | 1,401 | | Stock compensation | 998,777 | 10 | 4,780 | — | — | 4,790 | | Cumulative translation adjustment | — | — | — | 81 | — | 81 | | Shares surrendered to pay tax withholding | (54,036) | (1) | (1,828) | — | — | (1,829) | | Balance March 31, 2023 | 39,544,131 | $ 395 | $ 340,899 | $ (2,104) | $ 66,762 | $ 405,952 | | Net income | — | — | — | — | 9,867 | 9,867 | | Stock compensation | 53,543 | — | 4,704 | — | — | 4,704 | | Shares issued for acquisitions | 75,008 | 1 | 2,495 | — | — | 2,496 | | Cumulative translation adjustment | — | — | — | 193 | — | 193 | | Shares surrendered to pay tax withholding | (6,991) | — | (237) | — | — | (237) | | Balance June 30, 2023 | 39,665,691 | $ 396 | $ 347,861 | $ (1,911) | $ 76,629 | $ 422,975 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the Company's unaudited condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Amounts in thousands) | Cash Flow Activity | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :---------------------------------------------------- | :----------------------------------- | :----------------------------------- | | Net income | $ 11,268 | $ 18,300 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | Depreciation and amortization | 15,682 | 11,755 | | Amortization of intangible assets | 10,456 | 6,819 | | Provision for allowance for doubtful accounts | 3,311 | 1,817 | | Non-cash operating lease expense | 1,812 | 1,076 | | Provision for deferred income taxes | 990 | 5,004 | | Amortization of deferred financing fees | 1,813 | 1,009 | | Stock compensation | 10,581 | 5,982 | | Change in fair value of contingent earn-out liabilities | 1,092 | 3,628 | | Intangible asset impairment | 1,838 | — | | Loss on asset disposal | 22 | 17 | | Changes in assets and liabilities, net of acquisitions: | | | | Accounts receivable | (9,854) | (24,659) | | Inventories | (35,450) | (30,569) | | Prepaid expenses and other current assets | (2,435) | 106 | | Accounts payable, accrued liabilities and accrued compensation | 453 | 19,733 | | Other assets and liabilities | (796) | (237) | | **Net cash provided by operating activities** | **$ 10,783** | **$ 19,781** | | **Cash flows from investing activities:** | | | | Capital expenditures | (23,155) | (23,490) | | Cash paid for acquisitions, net of cash acquired | (119,580) | (52,007) | | **Net cash used in investing activities** | **$ (142,735)** | **$ (75,497)** | | **Cash flows from financing activities:** | | | | Payment of debt, finance lease and other financing obligations | (11,680) | (2,769) | | Payment of deferred financing fees | — | (406) | | Surrender of shares to pay withholding taxes | (2,115) | (2,558) | | Cash paid for contingent earn-out liability | (3,210) | (2,000) | | Borrowings under asset-based loan facility | 50,000 | — | | **Net cash provided by (used in) financing activities** | **$ 32,995** | **$ (7,733)** | | Effect of foreign currency on cash and cash equivalents | (251) | 100 | | Net change in cash and cash equivalents | (99,208) | (63,349) | | Cash and cash equivalents-beginning of period | 158,800 | 115,155 | | **Cash and cash equivalents-end of period** | **$ 59,592** | **$ 51,806** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides explanatory notes to the unaudited condensed consolidated financial statements, detailing accounting policies, significant transactions, and other relevant financial information [Note 1 - Operations and Basis of Presentation](index=8&type=section&id=Note%201%20-%20Operations%20and%20Basis%20of%20Presentation) This note outlines the Company's business operations, including its segments and customer base, and confirms that the unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, with all significant intercompany accounts eliminated - The Company's business consists of three operating segments (East, Midwest, West) that aggregate into one reportable segment: foodservice distribution, primarily in the United States[202](index=202&type=chunk) - The financial statements are prepared in conformity with GAAP and SEC rules for interim information, including all normal recurring adjustments[39](index=39&type=chunk)[195](index=195&type=chunk) - Results for the thirteen and twenty-six weeks ended June 30, 2023, are not necessarily indicative of full-year results due to seasonal fluctuations and other factors[39](index=39&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=8&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note details the Company's significant accounting policies, including revenue recognition, product category classification, and the correction of immaterial errors in prior period disclosures related to intangible asset amortization and debt maturity schedules - Revenue from product sales is recognized when control of the product is transferred to the customer, typically within a day of order fulfillment[210](index=210&type=chunk) - Sales tax billed to customers is recorded as a liability, not included in revenue[41](index=41&type=chunk) - Immaterial errors in prior period disclosures regarding weighted average remaining amortization periods for intangible assets (customer relationships, non-compete agreements, trademarks) and the debt maturity schedule have been corrected[26](index=26&type=chunk)[70](index=70&type=chunk) [Note 3 – Net Income per Share](index=10&type=section&id=Note%203%20%E2%80%93%20Net%20Income%20per%20Share) This note provides the computation of basic and diluted net income per common share, along with a reconciliation of the numerator and denominator, and lists potentially dilutive securities excluded from the diluted EPS calculation due to their anti-dilutive effect Net Income Per Share (EPS) and Weighted Average Common Shares | Item | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------------------ | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Basic EPS | $ 0.26 | $ 0.46 | $ 0.30 | $ 0.49 | | Diluted EPS | $ 0.25 | $ 0.42 | $ 0.29 | $ 0.47 | | Basic Weighted Average Common Shares | 37,634,127 | 37,100,968 | 37,570,595 | 37,018,044 | | Diluted Weighted Average Common Shares | 45,604,297 | 42,053,453 | 38,201,408 | 41,896,379 | Potentially Dilutive Securities Excluded from Diluted EPS (Anti-Dilutive) | Item | Thirteen Weeks Ended June 30, 2023 | Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Weeks Ended June 24, 2022 | | :----------------------------------- | :--------------------------------- | :------------------------ | :----------------------------------- | :------------------------ | | Restricted share awards ("RSAs") | 46,746 | 106,571 | 29,717 | 83,001 | | Convertible notes | — | — | 7,392,817 | 91,053 | [Note 4 – Fair Value Measurements](index=11&type=section&id=Note%204%20%E2%80%93%20Fair%20Value%20Measurements) This note details the fair value measurements of the Company's financial instruments, including contingent earn-out liabilities and convertible notes, categorizing them by fair value hierarchy levels and explaining the valuation inputs used Changes in Level 3 Contingent Earn-Out Liabilities (Amounts in thousands) | Item | Total | | :---------------------- | :------ | | Balance December 30, 2022 | $ 17,294 | | Acquisition value | 5,835 | | Cash payments | (4,250) | | Changes in fair value | 1,092 | | Balance June 30, 2023 | $ 19,971 | - The fair values of the asset-based loan facility and term loan approximate their book values due to variable interest rates, classified as Level 2 fair value measurements[49](index=49&type=chunk) Carrying Value and Fair Value of Convertible Notes and GreenLeaf Note (Amounts in thousands) | Item | Fair Value Hierarchy | June 30, 2023 Carrying Value | June 30, 2023 Fair Value | December 30, 2022 Carrying Value | December 30, 2022 Fair Value | | :-------------------------- | :------------------- | :--------------------------- | :----------------------- | :--------------------------- | :----------------------- | | 2028 Convertible Senior Notes | Level 1 | $ 287,500 | $ 302,338 | $ 287,500 | $ 292,531 | | 2024 Convertible Senior Notes | Level 3 | $ 39,684 | $ 41,070 | $ 41,684 | $ 43,723 | | GreenLeaf Note | Level 2 | $ 10,000 | $ 9,706 | $ — | $ — | | Convertible Unsecured Note | Level 3 | $ — | $ — | $ 4,000 | $ 4,345 | [Note 5 – Acquisitions](index=12&type=section&id=Note%205%20%E2%80%93%20Acquisitions) This note details the Company's acquisition activities, including the GreenLeaf, Hardie's Fresh Foods, and Chef Middle East acquisitions, outlining purchase prices, funding, acquired assets, and preliminary purchase price allocations, along with pro forma financial information - On May 1, 2023, the Company acquired GreenLeaf for **$86.1 million**, funded by cash, an unsecured note, and common stock, including customer relationships (**$27.76 million**) and trademarks (**$2.9 million**) amortized over 10 years[76](index=76&type=chunk)[123](index=123&type=chunk) - On March 20, 2023, the Company acquired Hardie's Fresh Foods for approximately **$42.1 million**, consisting of cash and an earn-out liability, with acquired intangible assets including customer relationships (**$13.8 million**) and trademarks (**$3.6 million**)[100](index=100&type=chunk)[205](index=205&type=chunk) Pro Forma Financial Information (Amounts in thousands) | Item | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Net sales | $ 892,161 | $ 788,182 | $ 1,695,649 | $ 1,435,104 | | Income before income taxes | $ 13,617 | $ 28,513 | $ 16,752 | $ 39,144 | [Note 6 – Inventories](index=14&type=section&id=Note%206%20%E2%80%93%20Inventories) This note describes the Company's inventory valuation policy, stating that inventories primarily consist of finished products and are reported net of adjustments for shrinkage, excess, and obsolescence to approximate their net realizable value - Inventories are primarily finished products and are reflected net of adjustments for shrinkage, excess, and obsolescence to approximate their net realizable value[82](index=82&type=chunk) Inventory Adjustments (Amounts in thousands) | Date | Amount | | :---------------- | :------- | | June 30, 2023 | $ 10,187 | | December 30, 2022 | $ 9,198 | [Note 7 – Property and Equipment](index=14&type=section&id=Note%207%20%E2%80%93%20Property%20and%20Equipment) This note provides a detailed breakdown of the Company's property and equipment, net of accumulated depreciation and amortization, and outlines the components of depreciation and software amortization expense for the reported periods Property and Equipment, Net (Amounts in thousands) | Item | Useful Lives | June 30, 2023 | December 30, 2022 | | :----------------------------------------- | :----------- | :------------ | :---------------- | | Land | Indefinite | $ 5,542 | $ 5,542 | | Buildings | 20 years | 40,704 | 39,893 | | Machinery and equipment | 5 - 10 years | 34,722 | 32,107 | | Computers, data processing and other equipment | 3 - 7 years | 20,326 | 18,475 | | Software | 3 - 7 years | 48,544 | 42,609 | | Leasehold improvements | 1 - 40 years | 124,386 | 94,245 | | Furniture and fixtures | 7 years | 3,883 | 3,825 | | Vehicles | 5 - 10 years | 34,810 | 31,462 | | Construction-in-process | | 21,987 | 36,583 | | Total | | 334,904 | 304,741 | | Less: accumulated depreciation and amortization | | (129,369) | (119,013) | | **Property and equipment, net** | | **$ 205,535** | **$ 185,728** | Depreciation and Amortization Expense (Amounts in thousands) | Item | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :---------------- | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Depreciation expense | $ 7,132 | $ 4,385 | $ 12,674 | $ 8,800 | | Software amortization | $ 1,539 | $ 1,481 | $ 3,008 | $ 2,955 | | **Total** | **$ 8,671** | **$ 5,866** | **$ 15,682** | **$ 11,755** | [Note 8 – Goodwill and Other Intangible Assets](index=15&type=section&id=Note%208%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) This note details the changes in the carrying amount of goodwill and provides a breakdown of other intangible assets, including customer relationships, trademarks, and non-compete agreements, along with their amortization periods and estimated future amortization expense Changes in Carrying Amount of Goodwill (Amounts in thousands) | Item | Amount | | :------------------------------------ | :------- | | Carrying amount as of December 30, 2022 | $ 287,120 | | Goodwill adjustments | 1,859 | | Acquisitions | 59,936 | | Foreign currency translation | 36 | | **Carrying amount as of June 30, 2023** | **$ 348,951** | Other Intangible Assets, Net (Amounts in thousands) | Item | Weighted-Average Remaining Amortization Period | Gross Carrying Amount | Accumulated Amortization | Net Amount | | :--------------------------- | :------------------------------------------- | :-------------------- | :----------------------- | :--------- | | **June 30, 2023** | | | | | | Customer relationships | 111 months | $ 249,628 | $ (93,433) | $ 156,195 | | Trademarks | 148 months | 57,655 | (18,484) | 39,171 | | Non-compete agreements | 21 months | 8,899 | (8,480) | 419 | | **Total** | | **$ 316,182** | **$ (120,397)** | **$ 195,785** | | **December 30, 2022** | | | | | | Customer relationships | 117 months | $ 205,608 | $ (85,447) | $ 120,161 | | Trademarks | 165 months | 51,137 | (16,201) | 34,936 | | Non-compete agreements | 25 months | 8,899 | (8,293) | 606 | | **Total** | | **$ 265,644** | **$ (109,941)** | **$ 155,703** | - The Company recognized a customer relationships intangible asset impairment charge of **$1.838 million** related to the loss of a significant Hardie's Fresh Foods customer post-acquisition[111](index=111&type=chunk) [Note 9 – Debt Obligations](index=16&type=section&id=Note%209%20%E2%80%93%20Debt%20Obligations) This note details the Company's debt obligations, including senior secured term loans, convertible senior notes, asset-based loan facility, and finance leases, providing their effective interest rates, maturities, and a breakdown of interest expense Debt Obligations (Amounts in thousands) | Item | Weighted Average Effective Interest Rate at June 30, 2023 | Maturity | June 30, 2023 | December 30, 2022 | | :------------------------------------------ | :---------------------------------------------------------- | :--------- | :------------ | :---------------- | | Senior secured term loans | 10.61 % | August 2029 | $ 297,750 | $ 299,250 | | 2028 Convertible senior notes | 2.77 % | December 2028 | 287,500 | 287,500 | | 2024 Convertible senior notes | 2.34 % | December 2024 | 39,684 | 41,684 | | Asset-based loan facility | 6.80 % | March 2027 | 90,000 | 40,000 | | Finance leases and other financing obligations | 5.38 % | Various | 24,528 | 13,548 | | Convertible unsecured note | — % | June 2023 | — | 4,000 | | Unamortized deferred costs and premium | | | (18,372) | (20,050) | | **Total debt obligations** | | | **721,090** | **665,932** | | Less: current installments | | | (12,017) | (12,428) | | **Total debt obligations excluding current installments** | | | **$ 709,073** | **$ 653,504** | Components of Interest Expense on Convertible Notes (Amounts in thousands) | Item | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------------------------ | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Coupon interest | $ 1,893 | $ 938 | $ 3,792 | $ 1,875 | | Amortization of deferred costs and premium | 333 | 224 | 668 | 448 | | **Total interest** | **$ 2,226** | **$ 1,162** | **$ 4,460** | **$ 2,323** | - The convertible unsecured note matured on June 29, 2023, and was repaid in full for **$4.049 million** in cash[88](index=88&type=chunk)[161](index=161&type=chunk) [Note 10 – Stockholders' Equity](index=17&type=section&id=Note%2010%20%E2%80%93%20Stockholders'%20Equity) This note details the Company's equity awards, including Restricted Share Awards (RSAs) and stock options, outlining grants, vesting, compensation expense recognized, and shares available for future grants - The Company granted **1,055,320 RSAs** with a weighted average grant date fair value of **$32.71** during the twenty-six weeks ended June 30, 2023[91](index=91&type=chunk) Stock Compensation Expense for RSAs (Amounts in thousands) | Period | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------------------ | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | RSA Compensation Expense | $ 4,704 | $ 2,939 | $ 9,494 | $ 5,982 | - As of June 30, 2023, total unrecognized compensation cost for unvested RSAs was **$34.735 million**, with a weighted-average remaining period of approximately **1.3 years**[115](index=115&type=chunk) [Note 11 – Related Parties](index=18&type=section&id=Note%2011%20%E2%80%93%20Related%20Parties) This note discloses a related party transaction involving a lease agreement for a distribution facility owned by entities controlled by the Company's Chairman, President, CEO, and Vice Chairman - The Company leases a distribution facility from entities controlled by its Chairman, President, CEO, Christopher Pappas, and Vice Chairman, John Pappas[117](index=117&type=chunk) Expense Related to Related Party Lease (Amounts in thousands) | Period | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------------------ | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Lease Expense | $ 123 | $ 123 | $ 246 | $ 246 | [Note 12 – Income Taxes](index=18&type=section&id=Note%2012%20%E2%80%93%20Income%20Taxes) This note explains the Company's effective tax rate and the factors contributing to its variation from the statutory rate, primarily highlighting the impact of foreign earnings Effective Tax Rate | Period | Thirteen Weeks Ended June 30, 2023 | Thirteen Weeks Ended June 24, 2022 | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------------------ | :--------------------------------- | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Effective Tax Rate | 26.0 % | 27.0 % | 26.0 % | 27.0 % | - The lower effective tax rate for both the thirteen and twenty-six weeks ended June 30, 2023, was primarily due to a greater mix of foreign earnings subject to tax rates below the US statutory rate of **21%**[118](index=118&type=chunk)[155](index=155&type=chunk)[159](index=159&type=chunk) [Note 13 – Supplemental Disclosures of Cash Flow Information](index=18&type=section&id=Note%2013%20%E2%80%93%20Supplemental%20Disclosures%20of%20Cash%20Flow%20Information) This note provides supplemental cash flow information, including cash paid for income taxes and interest, and details non-cash investing and financing activities such as ROU assets obtained for lease liabilities and common stock/unsecured notes issued for acquisitions Supplemental Cash Flow Disclosures (Amounts in thousands) | Item | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :---------------------------------------------------- | :----------------------------------- | :----------------------------------- | | Cash paid (received) for income taxes | $ 10,673 | $ (239) | | Cash paid for interest, net of cash received | $ 20,266 | $ 7,718 | | Operating cash flows from operating leases | $ 18,591 | $ 13,837 | | Operating cash flows from finance leases | $ 336 | $ 223 | | ROU assets obtained in exchange for lease liabilities: Operating leases | $ 42,182 | $ 20,116 | | ROU assets obtained in exchange for lease liabilities: Finance leases | $ 3,684 | $ 411 | | Common stock issued for acquisitions | $ 2,496 | $ — | | Unsecured notes issued for acquisitions | $ 10,000 | $ — | | Contingent earn-out liabilities for acquisitions | $ 5,835 | $ 1,200 | [Note 14 – Subsequent Events](index=19&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) This note discloses a subsequent event where the Company amended its ABL Credit Agreement on July 7, 2023, increasing the aggregate commitments - On July 7, 2023, the Company entered into a sixth amendment to the ABL Credit Agreement, increasing aggregate commitments from **$200 million to $300 million**, maturing on March 11, 2027[97](index=97&type=chunk)[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition, changes in financial condition, and results of operations, discussing key performance indicators, recent acquisitions, and factors affecting liquidity and capital resources [Business Overview](index=20&type=section&id=Business%20Overview) The Company is a premier distributor of specialty foods in leading culinary markets, offering a wide range of SKUs to over 40,000 customer locations, primarily independent restaurants and fine dining establishments - The Company is a premier distributor of specialty foods in the United States and the Middle East, offering over **55,000 SKUs**[122](index=122&type=chunk) - It serves over **40,000 customer locations**, primarily independent restaurants and fine dining establishments, across **23 geographic markets**[122](index=122&type=chunk) [Recent Acquisitions](index=20&type=section&id=Recent%20Acquisitions) The Company completed several acquisitions, including GreenLeaf and Hardie's Fresh Foods, expanding its specialty produce distribution capabilities, and three other smaller acquisitions during the twenty-six weeks ended June 30, 2023 - On May 1, 2023, the Company acquired GreenLeaf, a leading produce and specialty food distributor in Northern California, for **$86.1 million**[123](index=123&type=chunk) - On March 20, 2023, the Company acquired Hardie's Fresh Foods, a specialty produce distributor in Texas, for approximately **$42.1 million**[100](index=100&type=chunk) - During the twenty-six weeks ended June 30, 2023, the Company completed three other acquisitions for an aggregate purchase price of approximately **$16.9 million**[124](index=124&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance for the thirteen and twenty-six weeks ended June 30, 2023, compared to the prior year periods, highlighting changes in net sales, gross profit, operating expenses, interest expense, and income taxes, driven by organic growth, acquisitions, and market conditions [Thirteen Weeks Ended June 30, 2023 Compared to Thirteen Weeks Ended June 24, 2022](index=21&type=section&id=Thirteen%20Weeks%20Ended%20June%2030%2C%202023%20Compared%20to%20Thirteen%20Weeks%20Ended%20June%2024%2C%202022) For the thirteen weeks ended June 30, 2023, net sales increased significantly due to acquisitions and organic growth, while gross profit margin decreased slightly. Operating expenses rose due to acquisitions and investments, leading to a decrease in operating income and net income, despite a lower effective tax rate Net Sales (Amounts in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :----- | :--- | :--- | :------- | :------- | | Net sales | $ 881,820 | $ 648,104 | $ 233,716 | 36.1 % | - Organic growth contributed **$52.6 million (8.1%)** to sales growth, and acquisitions contributed **$181.1 million (28.0%)**[125](index=125&type=chunk) Gross Profit (Amounts in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :----- | :--- | :--- | :------- | :------- | | Gross profit | $ 208,444 | $ 156,004 | $ 52,440 | 33.6 % | | Gross profit margin | 23.6 % | 24.1 % | | | - Selling, general and administrative expenses increased by **43.8%** to **$179.042 million**, primarily due to higher depreciation and amortization from acquisitions, and increased compensation, benefits, facilities, and distribution costs[105](index=105&type=chunk)[127](index=127&type=chunk) - Interest expense increased by **168.9%** to **$12.006 million**, driven by higher principal amounts of outstanding debt and increased rates on variable-rate debt[108](index=108&type=chunk)[154](index=154&type=chunk) - Provision for income tax expense decreased by **44.6%** to **$3.467 million**, with the effective tax rate decreasing to **26.0%** due to a greater mix of foreign earnings subject to lower tax rates[108](index=108&type=chunk)[155](index=155&type=chunk) [Twenty-Six Weeks Ended June 30, 2023 Compared to Twenty-Six Weeks Ended June 24, 2022](index=23&type=section&id=Twenty-Six%20Weeks%20Ended%20June%2030%2C%202023%20Compared%20to%20Twenty-Six%20Weeks%20Ended%20June%2024%2C%202022) For the twenty-six weeks ended June 30, 2023, net sales grew significantly, largely driven by acquisitions. Gross profit margin remained consistent, but increased selling, general, and administrative expenses and higher interest expense led to a decrease in net income, despite a lower effective tax rate Net Sales (Amounts in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :----- | :--- | :--- | :------- | :------- | | Net sales | $ 1,601,465 | $ 1,160,207 | $ 441,258 | 38.0 % | - Organic growth contributed **$140.5 million (12.1%)** to sales growth, and acquisitions contributed **$300.8 million (25.9%)**[108](index=108&type=chunk) Gross Profit (Amounts in thousands) | Period | 2023 | 2022 | $ Change | % Change | | :----- | :--- | :--- | :------- | :------- | | Gross profit | $ 378,152 | $ 273,517 | $ 104,635 | 38.3 % | | Gross profit margin | 23.6 % | 23.6 % | | | - Selling, general and administrative expenses increased by **42.9%** to **$335.179 million**, primarily due to higher depreciation and amortization, compensation, benefits, facilities, and fuel costs[110](index=110&type=chunk)[133](index=133&type=chunk)[158](index=158&type=chunk) - Interest expense increased by **149.3%** to **$22.012 million**, driven by higher principal amounts of outstanding debt from new convertible notes and term loan refinancing, and increased rates on variable-rate debt[134](index=134&type=chunk)[159](index=159&type=chunk) - Provision for income tax expense decreased by **41.5%** to **$3.959 million**, with the effective tax rate decreasing to **26.0%** due to a greater mix of foreign earnings subject to lower tax rates[135](index=135&type=chunk)[159](index=159&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's financial resources, including cash flows from operations, debt, and available liquidity, and outlines its capital expenditure plans and expectations for meeting future financial obligations [Indebtedness](index=24&type=section&id=Indebtedness) The Company's indebtedness primarily consists of floating- and fixed-rate debt instruments, with an aggregate principal amount of $714.9 million as of June 30, 2023, and an increased ABL Credit Agreement commitment - As of June 30, 2023, the Company had aggregate indebtedness outstanding of **$714.9 million**, comprising various floating- and fixed-rate debt instruments[138](index=138&type=chunk) - On July 7, 2023, the ABL Credit Agreement was amended to increase aggregate commitments from **$200.0 million to $300.0 million**, maturing on March 11, 2027[139](index=139&type=chunk) Selected Financial Information on Indebtedness (Amounts in thousands) | Item | June 30, 2023 | December 30, 2022 | | :------------------------------------------ | :------------ | :---------------- | | Senior secured term loan | $ 297,750 | $ 299,250 | | Total convertible debt | 327,184 | 333,184 | | Borrowings outstanding on asset-based loan facility | 90,000 | 40,000 | | Finance leases and other financing obligations | 24,528 | 13,548 | | **Total** | **$ 739,462** | **$ 685,982** | [Liquidity](index=24&type=section&id=Liquidity) The Company's liquidity is supported by cash and cash equivalents, working capital, and available funds under its asset-based loan facility, which are deemed sufficient to meet operational and growth needs for the next 12 months Selected Financial Information on Liquidity (Amounts in thousands) | Item | June 30, 2023 | December 30, 2022 | | :----------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $ 59,592 | $ 158,800 | | Working capital, excluding cash and cash equivalents | 320,594 | 278,315 | | Availability under asset-based loan facility | 85,830 | 135,827 | | **Total** | **$ 466,016** | **$ 572,942** | - The Company believes its existing cash, working capital, and ABL facility availability are sufficient to satisfy working capital needs, capital expenditures, debt service, and other liquidity requirements over the next **12 months**[140](index=140&type=chunk) - Capital expenditures, excluding cash paid for acquisitions, for fiscal 2023 are expected to be approximately **$50.0 million to $60.0 million**[140](index=140&type=chunk) [Cash Flows](index=24&type=section&id=Cash%20Flows) Net cash provided by operating activities decreased due to working capital growth, while net cash used in investing activities increased significantly due to acquisitions. Net cash provided by financing activities turned positive, driven by borrowings under the ABL facility Selected Financial Information on Cash Flows (Amounts in thousands) | Item | Twenty-Six Weeks Ended June 30, 2023 | Twenty-Six Weeks Ended June 24, 2022 | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | | Net income | $ 11,268 | $ 18,300 | | Non-cash charges | $ 47,597 | $ 37,107 | | Changes in working capital | $ (48,082) | $ (35,626) | | Net cash provided by operating activities | $ 10,783 | $ 19,781 | | Net cash used in investing activities | $ (142,735) | $ (75,497) | | Net cash provided by (used in) financing activities | $ 32,995 | $ (7,733) | - Net cash provided by operating activities decreased to **$10.8 million** for the twenty-six weeks ended June 30, 2023, from **$19.8 million** in the prior year, primarily due to **$12.5 million** in working capital growth driven by strategic inventory purchases[142](index=142&type=chunk) - Net cash used in investing activities increased to **$142.7 million**, primarily due to **$119.6 million** in cash paid for acquisitions and **$23.2 million** in capital expenditures[165](index=165&type=chunk) - Net cash provided by financing activities was **$33.0 million**, driven by **$50.0 million** of net borrowings on the ABL facility, partially offset by debt payments and earn-out payments[143](index=143&type=chunk) [Seasonality](index=25&type=section&id=Seasonality) The Company's direct-to-consumer business experiences seasonality, with higher sales during the fourth-quarter holiday season, while its core foodservice distribution business generally does not experience material seasonality - The direct-to-consumer business experiences seasonal fluctuations, with sales typically higher during the fourth-quarter holiday season[166](index=166&type=chunk) - Excluding the direct-to-consumer business, the Company generally does not experience any material seasonality[144](index=144&type=chunk) [Inflation](index=25&type=section&id=Inflation) The Company's profitability is sensitive to inflation and deflation in key operating resources, as substantial cost increases may not be fully passed on to customers - Profitability is dependent on the ability to anticipate and react to changes in costs of food, raw materials, labor, energy, and other supplies[167](index=167&type=chunk) - Substantial increases in costs could impact operating results if not passed along to customers[167](index=167&type=chunk) [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The Company's critical accounting policies and estimates involve significant management judgment and affect reported financial amounts, including allowance for doubtful accounts, inventory valuation, business combinations, goodwill and intangible asset valuation, self-insurance reserves, income taxes, and contingent earn-out liabilities - Critical accounting policies and estimates include: allowance for doubtful accounts, inventory valuation, business combinations, valuing goodwill and intangible assets, self-insurance reserves, accounting for income taxes, and contingent earn-out liabilities[168](index=168&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section addresses the Company's exposure to market risks, primarily focusing on interest rate risk associated with its variable-rate long-term debt [Interest Rate Risk](index=26&type=section&id=Interest%20Rate%20Risk) The Company's primary market risk exposure is to interest rate fluctuations on its variable-rate long-term debt, with a 100 basis point increase in rates estimated to decrease after-tax earnings by approximately $2.9 million annually - As of June 30, 2023, the Company had **$387.8 million** in outstanding indebtedness that bore interest at variable rates[169](index=169&type=chunk) - A **100 basis point increase** in market interest rates would decrease the Company's after-tax earnings by approximately **$2.9 million** per annum[169](index=169&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the Company's disclosure controls and procedures and any changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) The Company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective as of June 30, 2023 - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[170](index=170&type=chunk) [Changes in Internal Control over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There were no material changes to the Company's internal control over financial reporting during the quarter, though the Company is actively integrating recent acquisitions into its control system - No material changes in internal controls over financial reporting occurred during the quarter ended June 30, 2023[180](index=180&type=chunk) - The Company is currently integrating recent acquisitions (CME and fiscal 2023 acquisitions) into its overall system of internal control over financial reporting[180](index=180&type=chunk) PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings arising from its ordinary business conduct, but management believes these will not have a material adverse effect on its financial statements - Management believes that the outcome of current legal proceedings, individually or in aggregate, will not have a material adverse effect on the condensed consolidated financial statements[181](index=181&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the Company's previously disclosed risk factors as presented in its Annual Report on Form 10-K - No material changes to risk factors have occurred since the Annual Report on Form 10-K filed on February 28, 2023[150](index=150&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on shares of common stock withheld by the Company to satisfy tax withholding requirements related to restricted share awards Shares Withheld for Tax Withholding Requirements | Period | Total Number of Shares Repurchased (1) | Average Price Paid Per Share | | :-------------------------- | :----------------------------------- | :--------------------------- | | April 1, 2023 to April 28, 2023 | 1,914 | $ 34.05 | | April 29, 2023 to May 26, 2023 | 4,635 | $ 33.78 | | May 27, 2023 to June 30, 2023 | 442 | $ 33.71 | | **Total** | **6,991** | **$ 33.85** | - During the twenty-six weeks ended June 30, 2023, **6,991 shares** of common stock were withheld to satisfy tax withholding requirements related to restricted share awards[151](index=151&type=chunk)[173](index=173&type=chunk) [Item 3. Defaults Upon Senior Securities](index=28&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reports that there were no defaults upon senior securities during the period - None[184](index=184&type=chunk) [Item 4. Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The Company reports that there are no mine safety disclosures for the period - None[185](index=185&type=chunk) [Item 5. Other Information](index=28&type=section&id=Item%205.%20Other%20Information) This section discloses the adoption of a Rule 10b5-1 trading arrangement by the Chief Accounting Officer during the quarterly period Rule 10b5-1 Trading Arrangement | Name | Title | Type of Trading Arrangement | Security | Action | Date of Action | Duration of Trading Arrangement | Aggregate Number of Securities Covered | | :----------- | :----------------------- | :-------------------------- | :----------- | :------- | :------------- | :------------------------------ | :------------------------------------- | | Tim McCauley | Chief Accounting Officer | Rule 10b-5 Plan to Sell | Common Stock | Adoption | June 5, 2023 | Up to October 2, 2025 | 18,000 | [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the quarterly report, including certifications, amendments, and XBRL taxonomy documents - Exhibits include certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act), Amendment No. 6 to the ABL Facility, and various XBRL taxonomy extension documents[176](index=176&type=chunk)[188](index=188&type=chunk) [Signatures](index=28&type=section&id=Signatures) This section contains the required signatures for the quarterly report, confirming its submission on behalf of The Chefs' Warehouse, Inc - The report was duly caused to be signed on August 2, 2023, by James Leddy, Chief Financial Officer, and Timothy McCauley, Chief Accounting Officer[177](index=177&type=chunk)[178](index=178&type=chunk)[189](index=189&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 ...

The Chefs' Warehouse, Inc. (NASDAQ:CHEF) Q1 2023 Earnings Conference Call May 3, 2023 8:30 AM ET Company Participants Alex Aldous - General Counsel, Corporate Secretary & Chief Government Relations Officer Chris Pappas - Founder, Chairman & Chief Executive Officer Jim Leddy - Chief Financial Officer Conference Call Participants Alex Slagle - Jefferies Peter Saleh - BTIG Kelly Bania - BMO Capital Markets Andrew Wolf - C.L. King Todd Brooks - Benchmark Company Ben Klieve - Lake Street Operator Good day, and w ...

Part I [Business Overview](index=5&type=section&id=Item%201.%20BUSINESS) The company is a premier distributor of specialty food products to over 40,000 customer locations across the US, Middle East, and Canada, focusing on organic growth and strategic acquisitions - The company is a leading distributor of specialty food products, offering over **55,000 SKUs** from more than **2,500 suppliers** to over **40,000 customer locations**[11](index=11&type=chunk)[17](index=17&type=chunk) - Net revenues grew from approximately **$1.3 billion in fiscal 2018 to $2.6 billion in fiscal 2022**, supported by organic growth and **sixteen acquisitions** since December 2018 with an aggregate cash consideration of over **$294.5 million**[12](index=12&type=chunk) - The company's growth strategy focuses on four key pillars: increasing sales to existing customers, expanding the customer base in current markets, improving operating margins through efficiency gains, and pursuing selective strategic acquisitions[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - Operations are supported by a network of **44 distribution centers** and a sales force of approximately **720 professionals**, many with culinary backgrounds[48](index=48&type=chunk)[35](index=35&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20RISK%20FACTORS) The company faces diverse risks including macroeconomic factors, supply chain and labor issues, geographic concentration, IT and data security threats, regulatory compliance, and substantial indebtedness [Business and Macroeconomic Risk](index=16&type=section&id=Business%20and%20Macroeconomic%20Risk) Business success depends on consumer spending and successful acquisition integration, operating in a low-margin industry sensitive to inflation and intense competition - Business success is significantly tied to consumer discretionary spending, which affects the food-away-from-home industry[91](index=91&type=chunk) - Future growth is dependent on expanding operations and penetrating new markets, with a history of growth through acquisitions that present integration challenges and financial risks[67](index=67&type=chunk)[69](index=69&type=chunk)[93](index=93&type=chunk) - The foodservice distribution industry is a low-margin business, making profitability sensitive to inflationary pressures and volatile food costs[98](index=98&type=chunk)[129](index=129&type=chunk) [Supply Chain and Labor Risk](index=20&type=section&id=Supply%20Chain%20and%20Labor%20Risk) The company faces supply chain disruptions, volatile food costs, and rising labor expenses, including potential shortages and unionization risks, with 4% of employees unionized - Profitability is dependent on anticipating and reacting to interruptions in the distribution network and changes in food costs, with reliance on numerous third-party suppliers without long-term contracts[109](index=109&type=chunk)[141](index=141&type=chunk) - Center-of-the-plate products (meat, poultry, seafood) expose the company to significant price volatility due to factors like feed costs, weather, and livestock diseases[112](index=112&type=chunk)[144](index=144&type=chunk) - The company faces risks from rising labor costs, potential shortages of qualified personnel, and unionization efforts. As of December 30, 2022, **181 of 4,124 full-time employees (approx. 4%)** are represented by unions[181](index=181&type=chunk)[152](index=152&type=chunk) [Geographic and Global Risk](index=23&type=section&id=Geographic%20and%20Global%20Risk) Operations are concentrated in key culinary markets, with New York representing **18.8% of net sales in fiscal 2022**, making the company vulnerable to regional events and public health crises - Operations are concentrated in key culinary markets, with the New York market representing **18.8% of net sales in fiscal 2022**, creating exposure to regional economic conditions and events[122](index=122&type=chunk)[154](index=154&type=chunk) - Significant public health crises, like the COVID-19 pandemic, can adversely affect business by impacting customer demand, supply chains, and labor availability[184](index=184&type=chunk)[121](index=121&type=chunk) [Information Technology, Intellectual Property and Data Risk](index=24&type=section&id=Information%20Technology%2C%20Intellectual%20Property%20and%20Data%20Risk) Heavy reliance on IT systems exposes the company to failures and cyber threats, while new technology investments may not yield benefits, and intellectual property protection is crucial - The company relies on IT systems for business processes and is exposed to risks of system failures and cybersecurity incidents that could interrupt operations and cause data breaches[156](index=156&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - Significant investments in new information technology may not produce the anticipated benefits in operational efficiency and cost savings[158](index=158&type=chunk)[190](index=190&type=chunk) - The company's ability to protect its intellectual property, including trademarks and proprietary brands, is crucial, and failure to do so could harm brand value and business performance[159](index=159&type=chunk)[191](index=191&type=chunk) [Legal and Regulatory Risk](index=25&type=section&id=Legal%20and%20Regulatory%20Risk) As a food distributor, the company faces product liability claims and extensive governmental regulation from agencies like the FDA and USDA, with non-compliance risking penalties - The company faces inherent risk of product liability claims if its products cause injury or illness, which could result in substantial costs and reputational damage[161](index=161&type=chunk)[192](index=192&type=chunk) - The business is highly regulated by federal, state, and local authorities in the U.S., Canada, and the Middle East, including the FDA, USDA, and Health Canada. Non-compliance can lead to significant penalties[163](index=163&type=chunk)[194](index=194&type=chunk) [Financial Risk](index=28&type=section&id=Financial%20Risk) The company's substantial indebtedness of approximately **$686.0 million** as of December 30, 2022, limits investment, increases vulnerability to downturns, and restricts financial flexibility - As of December 30, 2022, the company had approximately **$686.0 million** in total indebtedness, which may limit its ability to invest in the business and increases financial vulnerability[199](index=199&type=chunk) - The substantial debt requires a significant portion of cash flow for service payments, limits flexibility, and makes the company more vulnerable to interest rate increases on its variable-rate borrowings[170](index=170&type=chunk)[200](index=200&type=chunk) [Risks Relating to Ownership of our Common Stock](index=29&type=section&id=Risks%20Relating%20to%20Ownership%20of%20our%20Common%20Stock) Common stock ownership risks include price volatility influenced by market conditions, significant ownership concentration by insiders (**11.9%** as of February 13, 2023), and no anticipated dividends - The market price of the company's common stock may be volatile due to factors like earnings performance, analyst recommendations, and general market conditions[174](index=174&type=chunk)[204](index=204&type=chunk) - As of February 13, 2023, executive officers, directors, and their affiliates beneficially owned approximately **11.9%** of outstanding common stock, enabling significant influence over corporate matters[206](index=206&type=chunk)[230](index=230&type=chunk) - The company does not anticipate paying cash dividends in the foreseeable future, meaning investment returns depend on potential stock price appreciation[177](index=177&type=chunk)[207](index=207&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[234](index=234&type=chunk) [Properties](index=33&type=section&id=Item%202.%20PROPERTIES) As of February 13, 2023, the company operates **44 distribution centers** totaling approximately **2.9 million square feet** across the US, Canada, and the Middle East, with most properties leased - The company operates **44 distribution centers** totaling approximately **2.9 million square feet** in the U.S., Canada, Qatar, Oman, and the United Arab Emirates[211](index=211&type=chunk) - The company owns **five facilities** and leases all other properties, including its corporate headquarters in Ridgefield, Connecticut[211](index=211&type=chunk)[212](index=212&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20LEGAL%20PROCEEDINGS) The company is not currently aware of any pending or threatened legal proceedings that would materially adversely affect its business or financial condition - The company is not currently aware of any pending legal proceedings that would have a material adverse effect on its financial condition or operations[236](index=236&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[237](index=237&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on NASDAQ under "CHEF", with **204 holders of record** as of December 31, 2022, and no cash dividends are anticipated due to credit facility restrictions - The company's common stock is traded on the NASDAQ under the symbol "CHEF", with **204 holders of record** as of December 31, 2022[215](index=215&type=chunk) - The company has never paid a cash dividend and does not plan to in the foreseeable future, a policy reinforced by restrictions in its credit facilities[238](index=238&type=chunk) 5-Year Cumulative Total Return Comparison | Index | Dec 2017 | Dec 2018 | Dec 2019 | Dec 2020 | Dec 2021 | Dec 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | The Chefs' Warehouse, Inc. | $100.00 | $152.83 | $185.22 | $116.54 | $158.88 | $162.34 | | NASDAQ Composite Index | $100.00 | $95.38 | $130.47 | $185.48 | $226.75 | $151.61 | | S&P Smallcap Food Distributor Index | $100.00 | $63.50 | $59.46 | $63.45 | $122.95 | $112.92 | [Reserved](index=35&type=section&id=Item%206.%20RESERVED) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial performance, including **$2.6 billion** in net sales for fiscal 2022, liquidity with **$686.0 million** in debt, and critical accounting estimates [Overview and Recent Developments](index=36&type=section&id=Overview%20and%20Recent%20Developments) The company, a premier specialty food distributor, returned to profitability in Q2 2021, driven by key acquisitions including Chef Middle East LLC for **$108.7 million** and Capital Seaboard for **$31.0 million** - On November 1, 2022, the company acquired Chef Middle East LLC (CME) for approximately **$108.7 million** in cash, expanding its presence to the United Arab Emirates, Qatar, and Oman[225](index=225&type=chunk) - On December 28, 2021, the company acquired Capital Seaboard, a specialty seafood and produce distributor in Maryland, for a purchase price of approximately **$31.0 million**[247](index=247&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Financial performance significantly improved in fiscal 2022, with net sales increasing **49.7%** to **$2.6 billion** and net income reaching **$27.8 million**, driven by pandemic recovery and acquisitions Consolidated Results of Operations (in thousands) | Metric | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net Sales | $2,613,399 | $1,745,757 | $1,111,631 | | Gross Profit | $618,636 | $390,485 | $248,151 | | Operating Income (Loss) | $85,738 | $10,811 | $(102,660) | | Net Income (Loss) | $27,750 | $(4,923) | $(82,903) | [Fiscal Year 2022 Compared to Fiscal Year 2021](index=42&type=section&id=Fiscal%20Year%202022%20Compared%20to%20Fiscal%20Year%202021) In fiscal 2022, net sales surged **49.7%** to **$2.61 billion**, driven by organic growth and acquisitions, leading to a **58.4%** increase in gross profit and a net income of **$27.8 million** FY 2022 vs. FY 2021 Performance | Metric | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,613,399 | $1,745,757 | $867,642 | 49.7% | | Gross Profit | $618,636 | $390,485 | $228,151 | 58.4% | | Gross Profit Margin | 23.7% | 22.4% | - | 1.3 ppt | | SG&A Expenses | $518,219 | $379,252 | $138,967 | 36.6% | - Organic growth contributed **$561.6 million (32.2%)** to sales growth, while acquisitions added **$306.1 million (17.5%)**. The 53rd week of the fiscal year contributed approximately **2.0%** to annual sales growth[283](index=283&type=chunk) [Fiscal Year 2021 Compared to Fiscal Year 2020](index=43&type=section&id=Fiscal%20Year%202021%20Compared%20to%20Fiscal%20Year%202020) Fiscal 2021 saw a significant recovery, with net sales increasing **57.0%** to **$1.75 billion**, and the net loss narrowing dramatically to **$4.9 million** from **$82.9 million** in fiscal 2020 FY 2021 vs. FY 2020 Performance | Metric | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,745,757 | $1,111,631 | $634,126 | 57.0% | | Gross Profit | $390,485 | $248,151 | $142,334 | 57.4% | | Gross Profit Margin | 22.4% | 22.3% | - | 0.1 ppt | | SG&A Expenses | $379,252 | $336,394 | $42,858 | 12.7% | - Organic growth contributed **$574.2 million (51.6%)** to sales growth, primarily driven by recovery from the COVID-19 pandemic[288](index=288&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 30, 2022, total debt was **$674.7 million**, with key financing activities including a **$300.0 million** term loan refinancing and **$287.5 million** in new convertible notes, resulting in **$23.1 million** cash from operations Indebtedness (in thousands) | Debt Instrument | Dec 30, 2022 | Dec 24, 2021 | | :--- | :--- | :--- | | Senior secured term loan | $299,250 | $168,675 | | Total convertible debt | $333,184 | $204,000 | | ABL and revolving credit | $42,217 | $20,000 | | Finance leases & other | $11,331 | $11,602 | Cash Flow Summary (in thousands) | Cash Flow Activity | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Operating Activities | $23,134 | $(19,899) | $42,881 | | Investing Activities | $(232,023) | $(48,991) | $(67,968) | | Financing Activities | $253,215 | $(9,222) | $78,056 | - Significant 2022 financing activities included refinancing the senior secured term loan for **$300.0 million** and issuing **$287.5 million** in 2.375% Convertible Senior Notes due 2028[322](index=322&type=chunk)[296](index=296&type=chunk) [Critical Accounting Estimates](index=47&type=section&id=Critical%20Accounting%20Estimates) The company's financial statements rely on critical accounting estimates for doubtful accounts, inventory, business combinations, goodwill, intangible assets, self-insurance, income taxes, and contingent earn-out liabilities - Key critical accounting policies requiring significant estimates include: allowance for doubtful accounts, inventory valuation, business combinations, goodwill and intangible asset valuation, self-insurance reserves, income taxes, and contingent earn-out liabilities[307](index=307&type=chunk) - The allowance for doubtful accounts was **$20.7 million** as of Dec 30, 2022, against an accounts receivable balance of **$260.2 million**[308](index=308&type=chunk) - Goodwill is tested for impairment annually in the fourth quarter. For fiscal 2022 and 2021, a qualitative assessment was performed, which concluded that the fair value of reporting units exceeded their carrying values[359](index=359&type=chunk)[338](index=338&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate exposure on its **$341.5 million** floating-rate debt as of December 30, 2022, where a **100 basis point** increase would reduce after-tax earnings by **$2.5 million** annually - The company's main market risk is interest rate risk from its debt. As of December 30, 2022, it had **$341.5 million** in floating-rate debt[343](index=343&type=chunk) - A **100 basis point** increase in interest rates would reduce after-tax earnings by approximately **$2.5 million** annually[343](index=343&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the company's audited consolidated financial statements for fiscal years 2020-2022, including balance sheets and cash flows, which received an unqualified opinion from BDO USA, LLP - The independent registered public accounting firm, BDO USA, LLP, issued an unqualified opinion on the consolidated financial statements[345](index=345&type=chunk)[370](index=370&type=chunk) Key Financial Statement Data (in thousands) | Metric | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Total Assets | $1,509,296 | $1,073,795 | | Total Liabilities | $1,107,787 | $723,584 | | Total Stockholders' Equity | $401,509 | $350,211 | [Notes to Consolidated Financial Statements](index=58&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, recent acquisitions like Chef Middle East and Capital Seaboard, goodwill and intangible assets, and debt obligations totaling **$665.9 million** as of December 30, 2022 - Note 5 details the acquisition of Chef Middle East for ~**$108.7 million** and Capital Seaboard for ~**$31.0 million**, including purchase price allocations[476](index=476&type=chunk)[452](index=452&type=chunk) - Note 9 provides a comprehensive breakdown of debt obligations, which totaled **$665.9 million** as of December 30, 2022, including senior secured term loans and convertible senior notes[485](index=485&type=chunk) - Note 8 shows that Goodwill increased to **$287.1 million** in 2022 from **$221.8 million** in 2021, primarily due to acquisitions. Net intangible assets also increased to **$155.7 million** from **$104.7 million**[507](index=507&type=chunk)[483](index=483&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=83&type=section&id=Item%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - There were no disagreements with accountants on accounting and financial disclosure[630](index=630&type=chunk) [Controls and Procedures](index=83&type=section&id=Item%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 30, 2022, a conclusion attested to by BDO USA, LLP with an unqualified opinion - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[662](index=662&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 30, 2022[632](index=632&type=chunk) - The independent registered public accounting firm, BDO USA, LLP, provided an unqualified attestation report on the company's internal control over financial reporting[623](index=623&type=chunk)[665](index=665&type=chunk) [Other Information](index=85&type=section&id=Item%209B.%20OTHER%20INFORMATION) The company reports no other information for this item - None[669](index=669&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=85&type=section&id=Item%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to the company - Not applicable[620](index=620&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=86&type=section&id=Item%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[640](index=640&type=chunk) [Executive Compensation](index=86&type=section&id=Item%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[671](index=671&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=86&type=section&id=Item%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information on security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[591](index=591&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=86&type=section&id=Item%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[672](index=672&type=chunk) [Principal Accounting Fees and Services](index=86&type=section&id=Item%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding principal accounting fees and services is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Required information is incorporated by reference from the company's Proxy Statement for the 2023 Annual Meeting of Stockholders[592](index=592&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=87&type=section&id=Item%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, with financial statements indexed under Item 8 - This section provides a list of all financial statements and exhibits filed with the Form 10-K[674](index=674&type=chunk) [Form 10-K Summary](index=87&type=section&id=Item%2016.%20FORM%2010-K%20SUMMARY) The company has chosen not to provide a summary for its Form 10-K - None provided[594](index=594&type=chunk)

The Chefs' Warehouse, Inc. (NASDAQ:CHEF) Q4 2022 Earnings Conference Call February 15, 2023 8:30 AM ET Company Participants Alex Aldous - General Counsel, Corporate Secretary & Chief Government Relations Officer Chris Pappas - Founder, Chairman & Chief Executive Officer Jim Leddy - Chief Financial Officer Conference Call Participants Kelly Bania - BMO Capital Alex Slagle - Jefferies Peter Saleh - BTIG Andrew Wolf - C.L. King Todd Brooks - Benchmark Company Operator Greetings and welcome to The Chefs' Wareho ...

➢ More targeted talent acquisition ➢ Improved benefit propositions ➢ Upgraded health coverage and 401k options ➢ Competitive pay ➢ Training and talent development The Chefs' Warehouse, Inc. 16 2019 — 2022* *Based on 2022 Full-Year Guidance Mid-Point 2019 2022* 2019 2022* $387 $594 Gross Profit Adjusted Operating Expenses $297 $442 *Based on 2022 Full-Year Guidance Mid-Point 1.0x since 2019 (1) Free Cash Flow defined as Adjusted EBITDA less Capital Expenditures. (2) Free Cash flow Conversion defined as Free ...

The Chefs' Warehouse, Inc. (NASDAQ:CHEF) Q3 2022 Earnings Conference Call October 26, 2022 8:30 AM ET Company Participants Alexandros Aldous - General Counsel, Corporate Secretary, Chief Government Relations Officer, and Chief Administrative Officer Christopher Pappas - Founder, Chairman, President and Chief Executive Officer James Leddy - Chief Financial Officer Conference Call Participants Alexander Slagle - Jefferies Peter Saleh - BTIG Andrew Wolf - C.L. King Todd Brooks - The Benchmark Company Operator ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 23, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number: 001-35249 THE CHEFS' WAREHOUSE, INC. (Exact name of registrant as specified in its charter) Delaware 20-3031526 (State ...

Financial Data and Key Metrics Changes - Net sales for Q2 2022 increased approximately 53.2% to $648.1 million from $423 million in Q2 2021, driven by a 36% increase in organic sales and a 17.2% contribution from acquisitions [12][16] - Gross profit increased 62.7% to $156 million, with gross profit margins rising approximately 140 basis points to 24.1% [13][16] - Adjusted EBITDA for Q2 2022 was $45.3 million, compared to $17.2 million for the prior year [17] - GAAP net income was $16.9 million or $0.42 per diluted share, compared to $1.1 million or $0.03 per diluted share in Q2 2021 [16] Business Line Data and Key Metrics Changes - Specialty sales grew 52.2% organically over the prior year, with unique customer growth of approximately 35.9% and placement growth of 54.6% [7] - Organic pounds in the center of the plate business were approximately 14.2% higher than the prior year [7] - Gross profit margins in the specialty category decreased 70 basis points, while margins in the center of the plate category increased 230 basis points year-over-year [8] Market Data and Key Metrics Changes - Net inflation was 13.6% in Q2 2022, with 16.4% inflation in the specialty category and 10.9% in the center of the plate category compared to the prior year [12] Company Strategy and Development Direction - The company completed three acquisitions to enhance its distribution capabilities and expand its market presence, including University Foods, Alexa Specialty Foods, and Master Purveyors [9][10] - The focus remains on integrating these acquisitions to create operating leverage and drive growth in key regions [10][35] - The company aims to maintain a strong balance sheet while pursuing further acquisitions and expanding its distribution capacity [24][54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to normal seasonality and the potential for continued growth as hospitality and event-related business improves [6][30] - There is cautious optimism regarding the macroeconomic environment, with management acknowledging potential challenges but also recognizing strong consumer demand [30][40] - The company anticipates that the reopening of the economy will benefit its business, particularly in the hospitality sector [30][42] Other Important Information - Total liquidity at the end of Q2 2022 was $210.8 million, consisting of $51.8 million in cash and $159 million available under the ABL facility [18] - The company raised its full-year financial guidance, estimating net sales for 2022 to be in the range of $2.375 billion to $2.475 billion [19] Q&A Session Summary Question: Guidance and seasonality - The guidance reflects acquisitions and a return to normal seasonality, with the second quarter typically being stronger than the third [21][23] Question: Trends throughout the quarter - The quarter was driven by firm pricing and a return to over 100% of volume from 2019, with Q3 expected to be seasonally weaker [26][27] Question: Pricing and deflation outlook - Management anticipates moderate deflation in center of the plate pricing, but overall pricing is expected to remain firm due to market dynamics [28][29] Question: Acquisitions and customer base - Acquisitions are aimed at expanding the customer base and leveraging synergies, with a focus on integrating new businesses effectively [35][44] Question: Future growth drivers - The company sees potential for growth as hospitality recovers, with a focus on high-end customers and strategic acquisitions [39][42] Question: Inflation/deflation impact - Management views deflation as a mixed bag, with high-end customers able to pass costs along while others adjust menus creatively [46][48] Question: M&A environment - The pace of acquisitions is expected to increase as the market normalizes, with a focus on synergistic deals [50][53] Question: Return on investment in talent - Investments in sales and operations are starting to yield results, contributing to strong organic growth [57][59]

[Filing Information](index=1&type=section&id=Filing%20Information) Details the Form 10-Q filing for The Chefs' Warehouse, Inc. for the quarter ended June 24, 2022 - The Chefs' Warehouse, Inc. filed a Form 10-Q for the quarterly period ended June 24, 2022[1](index=1&type=chunk)[2](index=2&type=chunk) Registrant Details | Detail | Value | | :--- | :--- | | **Registrant Name** | THE CHEFS' WAREHOUSE, INC. | | **State of Incorporation** | Delaware | | **IRS Employer Identification No.** | 20-3031526 | | **Principal Executive Offices** | 100 East Ridge Road, Ridgefield, Connecticut 06877 | | **Telephone Number** | (203) 894-1345 | | **Trading Symbol** | CHEF | | **Exchange** | The NASDAQ Stock Market LLC | | **Filer Status** | Large accelerated filer | | **Common Stock Outstanding (July 25, 2022)** | 38,260,862 shares | [Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) Highlights inherent risks and uncertainties in forward-looking statements, which may cause actual results to differ materially - The report contains forward-looking statements that involve risks and uncertainties, and actual results may differ materially from expectations. Key risks include sensitivity to economic conditions, ability to expand through acquisitions, managing future growth, supply chain disruptions, price volatility in center-of-the-plate products, low-margin business sensitivity to inflation/deflation, concentration in certain culinary markets, fuel cost volatility, limited future capital raising ability, interest rate changes (LIBOR), loss of key management, and the impact of public health epidemics like COVID-19[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents the company's unaudited consolidated financial statements and management's analysis for the reporting period [ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements, including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, fair value measurements, acquisitions, debt obligations, and other financial disclosures for the periods ended June 24, 2022 [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | June 24, 2022 | December 24, 2021 | Change (vs. Dec 2021) | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $477,952 | $469,960 | +$7,992 | | Cash and cash equivalents | $51,806 | $115,155 | -$63,349 | | Accounts receivable, net | $208,229 | $172,540 | +$35,689 | | Inventories, net | $181,594 | $144,491 | +$37,103 | | **Total Assets** | $1,136,878 | $1,073,795 | +$63,083 | | **Total Current Liabilities** | $230,929 | $197,018 | +$33,911 | | Accounts payable | $144,547 | $118,284 | +$26,263 | | **Total Liabilities** | $763,191 | $723,584 | +$39,607 | | **Total Stockholders' Equity** | $373,687 | $350,211 | +$23,476 | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) Reports the company's financial performance over specific periods, including net sales, gross profit, operating income, and net income Consolidated Statements of Operations Highlights (Amounts in thousands, except per share) | Metric | 13 Weeks Ended June 24, 2022 | 13 Weeks Ended June 25, 2021 | Change (YoY) | 26 Weeks Ended June 24, 2022 | 26 Weeks Ended June 25, 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $648,104 | $422,968 | +53.2% | $1,160,207 | $703,185 | +65.0% | | **Gross profit** | $156,004 | $95,874 | +62.7% | $273,517 | $154,821 | +76.7% | | **Operating income (loss)** | $27,634 | $4,659 | +493.1% | $33,898 | $(15,469) | N/A | | **Net income (loss)** | $16,915 | $1,098 | +1440.5% | $18,300 | $(16,823) | N/A | | **Basic EPS** | $0.46 | $0.03 | +1433.3% | $0.49 | $(0.46) | N/A | | **Diluted EPS** | $0.42 | $0.03 | +1300.0% | $0.47 | $(0.46) | N/A | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Details the changes in the company's equity accounts, including common stock, additional paid-in capital, and retained earnings Stockholders' Equity Changes (Amounts in thousands, except share amounts) | Item | Balance Dec 24, 2021 | 26 Weeks Ended June 24, 2022 | Balance June 24, 2022 | | :--- | :--- | :--- | :--- | | **Common Shares** | 37,887,675 | +369,780 | 38,257,455 | | **Common Stock Amount** | $380 | +$3 | $383 | | **Additional Paid-in Capital** | $314,242 | +$5,122 | $319,364 | | **Accumulated Other Comprehensive Loss** | $(2,022) | +$51 | $(1,971) | | **Retained Earnings** | $37,611 | +$18,300 | $55,911 | | **Total Stockholders' Equity** | $350,211 | +$23,476 | $373,687 | - Net income for the 26 weeks ended June 24, 2022, was **$18,300 thousand**, contributing to the increase in retained earnings. Stock compensation added **$5,982 thousand** to additional paid-in capital, while shares surrendered for tax withholding reduced it by **$2,557 thousand**[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Cash Flow Highlights (Amounts in thousands) | Cash Flow Activity | 26 Weeks Ended June 24, 2022 | 26 Weeks Ended June 25, 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $19,781 | $(23,922) | +$43,703 | | **Net cash used in investing activities** | $(75,497) | $(16,739) | -$58,758 | | **Net cash used in financing activities** | $(7,733) | $(5,642) | -$2,091 | | **Net change in cash and cash equivalents** | $(63,349) | $(46,361) | -$16,988 | | **Cash and cash equivalents - end of period** | $51,806 | $146,920 | -$95,114 | - Operating cash flows significantly improved, turning from a net use of **$23.9 million** in 2021 to a net provision of **$19.8 million** in 2022. This was driven by net income and non-cash charges, partially offset by investments in working capital. Investing activities saw a substantial increase in cash used, primarily due to higher capital expenditures and cash paid for acquisitions[18](index=18&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the consolidated financial statements, covering the company's operations, significant accounting policies, per-share calculations, fair value measurements, recent acquisitions, inventory, fixed assets, goodwill, debt, equity, related party transactions, and supplemental cash flow information [Note 1 - Operations and Basis of Presentation](index=9&type=section&id=Note%201%20-%20Operations%20and%20Basis%20of%20Presentation) Describes the company's business operations, reportable segments, customer base, and the basis for financial statement preparation - The Company operates as a foodservice distributor primarily in the United States, with three operating segments (East Coast, Midwest, West Coast) aggregated into one reportable segment. Its customer base includes independent restaurants, fine dining establishments, hotels, caterers, and specialty food stores. The financial statements are unaudited and prepared in accordance with GAAP for interim reporting, and results for the reported periods are not necessarily indicative of the full year due to seasonal fluctuations, the COVID-19 pandemic, and other factors[21](index=21&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=11&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition and cost of sales - Revenue from product sales is recognized when control is transferred to the customer, typically upon physical possession. Sales incentives (rebates/discounts) are treated as variable consideration and reduce revenue. Shipping and handling costs are expensed as incurred within SG&A[27](index=27&type=chunk) Net Sales by Principal Product Category (Amounts in thousands) | Product Category | 13 Weeks Ended June 24, 2022 | % of Total | 13 Weeks Ended June 25, 2021 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Center-of-the-Plate | $284,286 | 43.9% | $215,089 | 50.9% | | Dry Goods | $103,597 | 16.0% | $57,117 | 13.5% | | Pastry | $76,320 | 11.8% | $41,312 | 9.8% | | Cheese and Charcuterie | $59,109 | 9.1% | $34,303 | 8.1% | | Produce | $37,214 | 5.7% | $30,558 | 7.2% | | Dairy and Eggs | $39,846 | 6.1% | $18,902 | 4.5% | | Oils and Vinegars | $31,517 | 4.9% | $16,881 | 4.0% | | Kitchen Supplies | $16,215 | 2.5% | $8,806 | 2.0% | | **Total** | **$648,104** | **100%** | **$422,968** | **100%** | - Food processing costs included in cost of sales increased to **$9,398 thousand** for the thirteen weeks ended June 24, 2022, from **$6,679 thousand** in the prior year period[29](index=29&type=chunk) [Note 3 – Net Income (Loss) per Share](index=13&type=section&id=Note%203%20%E2%80%93%20Net%20Income%20%28Loss%29%20per%20Share) Details the calculation of basic and diluted earnings per share, including the impact of potentially dilutive securities Net Income (Loss) per Share (Amounts in thousands, except per share) | Metric | 13 Weeks Ended June 24, 2022 | 13 Weeks Ended June 25, 2021 | 26 Weeks Ended June 24, 2022 | 26 Weeks Ended June 25, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net income (loss)** | $16,915 | $1,098 | $18,300 | $(16,823) | | **Basic EPS** | $0.46 | $0.03 | $0.49 | $(0.46) | | **Diluted EPS** | $0.42 | $0.03 | $0.47 | $(0.46) | | **Weighted average basic common shares outstanding** | 37,100,968 | 36,831,054 | 37,018,044 | 36,615,463 | | **Weighted average diluted common shares outstanding** | 42,053,453 | 37,081,186 | 41,896,379 | 36,615,463 | - The diluted EPS calculation for the 26 weeks ended June 24, 2022, included dilutive effects from unvested common shares (**296,538**), stock options and warrants (**56,817**), and convertible notes (**4,524,980**)[32](index=32&type=chunk) [Note 4 – Fair Value Measurements](index=13&type=section&id=Note%204%20%E2%80%93%20Fair%20Value%20Measurements) Explains the valuation methodologies and inputs used for assets and liabilities measured at fair value, such as contingent earn-out liabilities and convertible notes - Contingent earn-out liabilities are measured at fair value using Level 3 inputs, based on projected results, probability of occurrence, and a discount rate. The total contingent earn-out liabilities increased from **$6,877 thousand** at December 24, 2021, to **$9,705 thousand** at June 24, 2022, primarily due to a **$3,628 thousand** change in fair value and **$1,200 thousand** from new acquisitions, partially offset by **$2,000 thousand** in cash payments[33](index=33&type=chunk)[36](index=36&type=chunk) Fair Value of Convertible Notes (Amounts in thousands) | Instrument | Carrying Value (June 24, 2022) | Fair Value (June 24, 2022) | Carrying Value (Dec 24, 2021) | Fair Value (Dec 24, 2021) | | :--- | :--- | :--- | :--- | :--- | | Convertible Senior Notes | $200,000 | $223,854 | $200,000 | $206,182 | | Convertible Unsecured Note | $4,000 | $4,474 | $4,000 | $4,102 | [Note 5 – Acquisitions](index=14&type=section&id=Note%205%20%E2%80%93%20Acquisitions) Provides details on recent business acquisitions, including purchase prices, consideration, and preliminary allocation of assets and liabilities - During Q2 2022, the Company completed two acquisitions for an aggregate purchase price of approximately **$22,500 thousand** in cash, with potential additional contingent consideration of **$2,000 thousand**. Goodwill of **$3,947 thousand** was recorded for these acquisitions[39](index=39&type=chunk) - On December 28, 2021, the Company acquired Capital Seaboard, a specialty seafood and produce distributor, for approximately **$31,036 thousand**, including **$28,000 thousand** cash, **$1,701 thousand** in common stock warrants, and **$1,335 thousand** for working capital true-up. This acquisition contributed **$70,353 thousand** in net sales and **$2,892 thousand** in income before income taxes for the twenty-six weeks ended June 24, 2022[40](index=40&type=chunk)[41](index=41&type=chunk) Preliminary Purchase Price Allocation for Acquisitions (Amounts in thousands) | Asset/Liability | Capital Seaboard | Other Acquisitions | | :--- | :--- | :--- | | Current assets | $10,130 | $8,834 | | Customer relationships | $7,250 | $10,410 | | Trademarks | $2,280 | $620 | | Goodwill | $8,334 | $8,537 | | Fixed assets | $9,552 | $197 | | Other assets | $122 | $17 | | Current liabilities | $(6,632) | $(4,915) | | Earn-out liability | — | $(1,200) | | Issuance of warrants | $(1,701) | — | | **Total cash consideration** | **$29,335** | **$22,500** | [Note 6 – Inventories](index=15&type=section&id=Note%206%20%E2%80%93%20Inventories) Describes the company's inventory valuation policies and adjustments for shrinkage, excess, and obsolescence - Inventories, primarily finished product, are reported net of adjustments for shrinkage, excess, and obsolescence. These adjustments totaled **$9,315 thousand** at June 24, 2022, an increase from **$8,312 thousand** at December 24, 2021[45](index=45&type=chunk) [Note 7 – Equipment, Leasehold Improvements and Software](index=16&type=section&id=Note%207%20%E2%80%93%20Equipment%2C%20Leasehold%20Improvements%20and%20Software) Presents the net book value of property, plant, and equipment, including depreciation and amortization expenses Equipment, Leasehold Improvements and Software, Net (Amounts in thousands) | Asset Category | June 24, 2022 | December 24, 2021 | | :--- | :--- | :--- | | Land | $5,542 | $5,020 | | Buildings | $23,443 | $18,406 | | Machinery and equipment | $30,067 | $28,099 | | Computers, data processing and other equipment | $16,386 | $15,480 | | Software | $40,098 | $39,799 | | Leasehold improvements | $92,552 | $69,105 | | Furniture and fixtures | $3,671 | $3,582 | | Vehicles | $28,007 | $29,632 | | Construction-in-process | $23,870 | $24,355 | | **Total Gross** | **$263,636** | **$233,478** | | Less: accumulated depreciation and amortization | $(108,072) | $(99,856) | | **Net Amount** | **$155,564** | **$133,622** | - Construction-in-process at June 24, 2022, primarily related to the implementation of the Company's ERP system and the build-out of its Miami distribution facility. Total depreciation and amortization expense for the twenty-six weeks ended June 24, 2022, was **$11,755 thousand**, up from **$10,660 thousand** in the prior year[47](index=47&type=chunk)[48](index=48&type=chunk) [Note 8 – Goodwill and Other Intangible Assets](index=16&type=section&id=Note%208%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) Details the carrying amounts of goodwill and other intangible assets, along with related amortization expenses Goodwill Carrying Amount (Amounts in thousands) | Item | Amount | | :--- | :--- | | Carrying amount as of December 24, 2021 | $221,775 | | Goodwill adjustments | $(792) | | Acquisitions | $16,871 | | Foreign currency translation | $(66) | | **Carrying amount as of June 24, 2022** | **$237,788** | Other Intangible Assets, Net (Amounts in thousands) | Intangible Asset | Gross Carrying Amount (June 24, 2022) | Accumulated Amortization (June 24, 2022) | Net Amount (June 24, 2022) | | :--- | :--- | :--- | :--- | | Customer relationships | $173,387 | $(79,952) | $93,435 | | Non-compete agreements | $8,579 | $(8,151) | $428 | | Trademarks | $39,407 | $(14,744) | $24,663 | | **Total** | **$221,373** | **$(102,847)** | **$118,526** | - Amortization expense for other intangibles was **$6,819 thousand** for the twenty-six weeks ended June 24, 2022, compared to **$6,643 thousand** in the prior year period[52](index=52&type=chunk) [Note 9 – Debt Obligations](index=17&type=section&id=Note%209%20%E2%80%93%20Debt%20Obligations) Summarizes the company's various debt instruments, including term loans, convertible notes, and asset-based loan facilities Debt Obligations (Amounts in thousands) | Debt Type | June 24, 2022 | December 24, 2021 | | :--- | :--- | :--- | | Senior secured term loans | $167,819 | $168,675 | | Convertible senior notes | $200,000 | $200,000 | | Asset-based loan facility | $20,000 | $20,000 | | Finance lease and other financing obligations | $10,201 | $11,602 | | Convertible unsecured note | $4,000 | $4,000 | | Deferred finance fees and original issue premium (discount) | $(4,197) | $(4,976) | | **Total debt obligations** | **$397,823** | **$399,301** | | Less: current installments | $(4,843) | $(5,141) | | **Total debt obligations excluding current installments** | **$392,980** | **$394,160** | - On March 11, 2022, the Company amended its asset-based loan (ABL) facility, increasing aggregate commitments from **$150,000 thousand** to **$200,000 thousand**. The ABL Facility matures on March 11, 2027, with certain springing maturity dates. As of June 24, 2022, **$159,460 thousand** was available for borrowing under the ABL Facility[54](index=54&type=chunk)[59](index=59&type=chunk) - Interest expense on Convertible Senior Notes for the twenty-six weeks ended June 24, 2022, was **$2,323 thousand**, including **$1,875 thousand** in coupon interest and **$448 thousand** in amortization of deferred financing fees and premium[58](index=58&type=chunk) [Note 10 – Stockholders' Equity](index=18&type=section&id=Note%2010%20%E2%80%93%20Stockholders%27%20Equity) Discusses changes in stockholders' equity, including restricted share awards and related compensation expenses - During the twenty-six weeks ended June 24, 2022, the Company granted **489,344 Restricted Share Awards (RSAs)** with a weighted average grant date fair value of **$30.50**. These awards are a mix of time-, market-, and performance-based grants, generally vesting over up to four years[60](index=60&type=chunk) - Total unrecognized compensation cost for unvested RSAs was **$23,850 thousand** at June 24, 2022, with a weighted-average remaining period of approximately **2.2 years**. The Company recognized **$5,982 thousand** in stock compensation expense for RSAs during the twenty-six weeks ended June 24, 2022[60](index=60&type=chunk)[61](index=61&type=chunk) [Note 11 – Related Parties](index=19&type=section&id=Note%2011%20%E2%80%93%20Related%20Parties) Discloses transactions and arrangements with related parties, such as lease agreements with company executives - The Company leases a distribution facility from entities controlled by its Chairman, President, CEO, and Vice Chairman. Expense related to this facility totaled **$246 thousand** for the twenty-six weeks ended June 24, 2022[64](index=64&type=chunk) [Note 12 – Supplemental Disclosures of Cash Flow Information](index=19&type=section&id=Note%2012%20%E2%80%93%20Supplemental%20Disclosures%20of%20Cash%20Flow%20Information) Provides additional details on non-cash investing and financing activities and other cash flow items Supplemental Cash Flow Disclosures (Amounts in thousands) | Item | 26 Weeks Ended June 24, 2022 | 26 Weeks Ended June 25, 2021 | | :--- | :--- | :--- | | Cash paid for interest, net of cash received | $7,718 | $7,766 | | Operating cash flows from operating leases | $13,837 | $12,752 | | ROU assets obtained in exchange for lease liabilities (Operating leases) | $20,116 | $1,625 | | Warrants issued for acquisitions | $1,701 | $1,120 | | Contingent earn-out liabilities for acquisitions | $1,200 | $3,400 | [Note 13 – Subsequent Events](index=19&type=section&id=Note%2013%20%E2%80%93%20Subsequent%20Events) Reports significant events occurring after the balance sheet date but before the financial statements were issued - On July 25, 2022, subsequent to the reporting period, the Company entered into a stock purchase agreement to acquire a center-of-the-plate distributor in Florida for **$10,000 thousand** in cash, subject to working capital adjustments. The initial accounting for this acquisition is incomplete[66](index=66&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=20&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition, changes in financial condition, and results of operations, highlighting business overview, the impact of COVID-19, recent acquisitions, detailed analysis of operating results for the thirteen and twenty-six weeks ended June 24, 2022, liquidity and capital resources, seasonality, inflation, off-balance sheet arrangements, and critical accounting policies [Business Overview](index=20&type=section&id=Business%20Overview) Describes the company's core business as a specialty food distributor, its product offerings, and customer base - The Chefs' Warehouse, Inc. is a premier distributor of specialty foods in nine leading culinary markets in the U.S., offering over **50,000 SKUs**, including high-quality specialty foods, basic ingredients, and center-of-the-plate proteins. It serves over **35,000 customer locations**, primarily independent restaurants and fine dining establishments, across **19 geographic markets** in the U.S. and Canada, and also sells directly to consumers through Allen Brothers and 'Shop Like a Chef' retail channels[69](index=69&type=chunk) [Effect of the COVID-19 Pandemic on our Business and Operations](index=20&type=section&id=Effect%20of%20the%20COVID-19%20Pandemic%20on%20our%20Business%20and%20Operations) Discusses the pandemic's impact on demand, costs, labor, and the company's recovery, while acknowledging future uncertainties - The COVID-19 pandemic adversely impacted demand, caused cost inflation, and led to labor shortages. Despite these challenges, the Company returned to profitability in Q2 fiscal 2021 and experienced sequential business improvement, contributing **$152.3 million** in organic sales growth compared to the prior year quarter[70](index=70&type=chunk) - The future impact of the pandemic remains uncertain, depending on factors such as disease severity, new variants, government responses, infection rates, medical treatments, and consumer spending behavior[71](index=71&type=chunk) [Recent Acquisitions](index=20&type=section&id=Recent%20Acquisitions) Summarizes the company's recent acquisition activities, including purchase prices and strategic rationale - In Q2 fiscal 2022, the Company completed two acquisitions for approximately **$22.5 million** in cash, with potential earn-out payments of **$2 million**. Additionally, on December 28, 2021, it acquired Capital Seaboard, a specialty seafood and produce distributor, for approximately **$31.0 million**[72](index=72&type=chunk)[73](index=73&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) The Company experienced significant sales and gross profit growth for both the thirteen and twenty-six weeks ended June 24, 2022, compared to the prior year periods, driven by organic growth, acquisitions, and price inflation. Operating income and net income also saw substantial improvements, reflecting better fixed cost leverage despite increased operating expenses [Thirteen Weeks Ended June 24, 2022 Compared to Thirteen Weeks Ended June 25, 2021](index=21&type=section&id=Thirteen%20Weeks%20Ended%20June%24%2C%202022%20Compared%20to%20Thirteen%20Weeks%20Ended%20June%24%2C%202021) Analyzes the company's financial performance for the most recent quarter, highlighting key revenue, profit, and expense trends Key Financial Performance (13 Weeks Ended) | Metric | 2022 (in thousands) | 2021 (in thousands) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $648,104 | $422,968 | $225,136 | 53.2% | | **Gross Profit** | $156,004 | $95,874 | $60,130 | 62.7% | | Gross Profit Margin | 24.1% | 22.7% | +1.4 pp | | | **Selling, General and Administrative Expenses** | $124,487 | $90,358 | $34,129 | 37.8% | | SG&A as % of Net Sales | 19.2% | 21.4% | -2.2 pp | | | **Other Operating Expenses, Net** | $3,883 | $857 | $3,026 | 353.1% | | **Interest Expense** | $4,465 | $4,408 | $57 | 1.3% | | **Provision for Income Tax Expense (Benefit)** | $6,254 | $(847) | $7,101 | (838.4)% | | Effective Tax Rate | 27.0% | (337.5)% | | | - Net sales growth was driven by **$152.3 million (36.0%) organic growth** and **$72.9 million (17.2%) from acquisitions**. Organic case count in specialty increased by **34.8%**, and organic pounds sold in center-of-the-plate increased by **14.2%**. Estimated inflation was **16.4% in specialty** and **10.9% in center-of-the-plate**. Gross profit margin increased due to higher sales and price inflation, with center-of-the-plate margins increasing by **230 basis points**[76](index=76&type=chunk)[78](index=78&type=chunk) - The increase in other operating expenses was primarily due to **$3.3 million** in non-cash charges for changes in the fair value of contingent earn-out liabilities, compared to non-cash credits in the prior year. The prior year also included a **$0.6 million** impairment of Cambridge trademarks[81](index=81&type=chunk) [Twenty-Six Weeks Ended June 24, 2022 Compared to Twenty-Six Weeks Ended June 25, 2021](index=22&type=section&id=Twenty-Six%20Weeks%20Ended%20June%24%2C%202022%20Compared%20to%20Twenty-Six%20Weeks%20Ended%20June%24%2C%202021) Analyzes the company's financial performance for the year-to-date period, detailing revenue, profit, and expense changes Key Financial Performance (26 Weeks Ended) | Metric | 2022 (in thousands) | 2021 (in thousands) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $1,160,207 | $703,185 | $457,022 | 65.0% | | **Gross Profit** | $273,517 | $154,821 | $118,696 | 76.7% | | Gross Profit Margin | 23.6% | 22.0% | +1.6 pp | | | **Selling, General and Administrative Expenses** | $234,573 | $170,603 | $63,970 | 37.5% | | SG&A as % of Net Sales | 20.2% | 24.3% | -4.1 pp | | | **Other Operating Expenses (Income), Net** | $5,046 | $(313) | $5,359 | (1,712.1)% | | **Interest Expense** | $8,830 | $9,171 | $(341) | (3.7)% | | **Provision for Income Tax Expense (Benefit)** | $6,768 | $(7,817) | $14,585 | (186.6)% | | Effective Tax Rate | 27.0% | 31.7% | | | - Net sales growth was driven by **$328.5 million (46.7%) organic growth** and **$128.5 million (18.3%) from acquisitions**. Organic case count in specialty increased by **40.0%**, and organic pounds sold in center-of-the-plate increased by **19.3%**. Estimated inflation was **15.8% in specialty** and **17.8% in center-of-the-plate**. Gross profit margin increased by **156 basis points**, with specialty margins up **42 basis points** and center-of-the-plate margins up **175 basis points**[84](index=84&type=chunk)[85](index=85&type=chunk) - Interest expense decreased due to lower effective interest rates from the issuance of **$50.0 million Convertible Senior Notes** in March 2021, used to repay higher interest rate debt[90](index=90&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The Company finances its operations and growth through cash flows, debt, operating leases, and equity. It maintains sufficient liquidity, with an increased ABL facility, to meet its short-term needs, despite a decrease in cash and cash equivalents due to significant investing activities, particularly acquisitions and capital expenditures [Indebtedness](index=24&type=section&id=Indebtedness) Details the company's outstanding debt obligations, including term loans, convertible debt, and asset-based loan facilities Selected Indebtedness Information (Amounts in thousands) | Debt Type | June 24, 2022 | December 24, 2021 | | :--- | :--- | :--- | | Senior secured term loan | $167,819 | $168,675 | | Total convertible debt | $204,000 | $204,000 | | Borrowings outstanding on asset-based loan facility | $20,000 | $20,000 | | Finance leases and other financing obligations | $10,201 | $11,602 | | **Total** | **$402,020** | **$404,277** | - As of June 24, 2022, the Company had **$391.8 million** in aggregate principal amount of various floating- and fixed-rate debt instruments. The ABL Facility was increased from **$150.0 million** to **$200.0 million** on March 11, 2022[95](index=95&type=chunk)[96](index=96&type=chunk) [Liquidity](index=24&type=section&id=Liquidity) Assesses the company's ability to meet short-term obligations using cash, working capital, and available credit facilities Selected Liquidity Information (Amounts in thousands) | Metric | June 24, 2022 | December 24, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $51,806 | $115,155 | | Working capital, excluding cash and cash equivalents | $195,217 | $157,787 | | Availability under asset-based loan facility | $159,460 | $109,459 | | **Total** | **$406,483** | **$382,401** | - The Company expects capital expenditures for fiscal 2022 to be approximately **$36.0 million to $45.0 million**. Management believes existing cash, working capital, and ABL facility availability are sufficient to meet liquidity requirements for the next 12 months[97](index=97&type=chunk) [Cash Flows](index=24&type=section&id=Cash%20Flows) Provides a detailed breakdown of cash generated and used across operating, investing, and financing activities Selected Cash Flow Information (Amounts in thousands) | Cash Flow Activity | 26 Weeks Ended June 24, 2022 | 26 Weeks Ended June 25, 2021 | | :--- | :--- | :--- | | Net income (loss) | $18,300 | $(16,823) | | Non-cash charges | $37,107 | $16,748 | | Changes in working capital | $(35,626) | $(23,847) | | **Net cash provided by (used in) operating activities** | **$19,781** | **$(23,922)** | | **Net cash used in investing activities** | **$(75,497)** | **$(16,739)** | | **Net cash used in financing activities** | **$(7,733)** | **$(5,642)** | - Net cash provided by operating activities significantly improved to **$19.8 million**, driven by net income and increased non-cash charges, partially offset by working capital investments. Net cash used in investing activities increased to **$75.5 million**, primarily due to **$23.5 million** in capital expenditures and **$52.0 million** for acquisitions. Net cash used in financing activities was **$7.7 million**, mainly for debt payments, tax withholding related to equity awards, and earn-out liability payments[98](index=98&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) [Seasonality](index=25&type=section&id=Seasonality) Discusses the impact of seasonal fluctuations on the company's sales and operating results, particularly for its direct-to-consumer business - Excluding its direct-to-consumer business, the Company generally does not experience material seasonality. However, sales and operating results can vary due to factors like operating expenses, growth strategies, personnel changes, product demand, supply shortages, weather, and economic conditions[102](index=102&type=chunk) - The direct-to-consumer business is seasonal, with center-of-the-plate protein sales typically higher during the fourth-quarter holiday season, generating a disproportionate amount of operating cash flows in that quarter, despite year-round advertising and promotional expenses[103](index=103&type=chunk) [Inflation](index=25&type=section&id=Inflation) Addresses the company's exposure to cost inflation and its ability to manage and pass on increased costs to customers - Profitability depends on the Company's ability to anticipate and react to changes in costs of key operating resources, including food, raw materials, labor, energy, and other supplies. Substantial cost increases, if not passed on to customers, could adversely impact operating results[105](index=105&type=chunk) [Off-Balance Sheet Arrangements](index=25&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of any material off-balance sheet arrangements that could impact the company's financial position - As of June 24, 2022, the Company did not have any off-balance sheet arrangements[106](index=106&type=chunk) [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Identifies the accounting policies and estimates that require significant management judgment and could materially affect financial reporting - Critical accounting policies and estimates include determining the allowance for doubtful accounts, inventory valuation (excess and obsolete inventory), business combinations, valuing goodwill and intangible assets, self-insurance reserves, accounting for income taxes, and contingent earn-out liabilities. These policies require significant management judgment and estimates[107](index=107&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=26&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the Company's exposure to market risks, specifically interest rate risk, and quantifies the potential impact of changes in market interest rates on its financial performance [Interest Rate Risk](index=26&type=section&id=Interest%20Rate%20Risk) Quantifies the potential financial impact of changes in market interest rates on the company's variable-rate debt obligations - As of June 24, 2022, the Company had **$187.8 million** of indebtedness outstanding under its Term Loan and ABL Facility that bore interest at variable rates. A **100 basis point increase** in market interest rates would decrease the Company's after-tax earnings by approximately **$1.4 million** per annum, assuming other variables remain constant[109](index=109&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=26&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Reports on the effectiveness of the company's disclosure controls and procedures as assessed by senior management - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 24, 2022[110](index=110&type=chunk) [Changes in Internal Control over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Confirms whether any material changes occurred in the company's internal control over financial reporting during the quarter - There were no material changes in the Company's internal control over financial reporting during the quarter ended June 24, 2022[111](index=111&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) Provides additional disclosures not covered in the financial information section, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=26&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section addresses the Company's involvement in legal proceedings and management's assessment of their potential impact - The Company is involved in ordinary course legal proceedings, claims, and litigation. Management believes the outcome of these matters, individually or in aggregate, will not have a material adverse effect on its consolidated financial statements, and no material amounts have been accrued[112](index=112&type=chunk) [ITEM 1A. RISK FACTORS](index=26&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to the Company's previously disclosed risk factors and confirms no material changes - There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 24, 2021[113](index=113&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=26&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section provides information on shares repurchased to satisfy tax withholding requirements related to equity awards Shares Repurchased for Tax Withholding | Period | Total Number of Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 26, 2021 to April 22, 2022 | 4,877 | $33.14 | | April 23, 2022 to May 20, 2022 | 3,941 | $36.97 | | May 21, 2022 to June 24, 2022 | 6,319 | $33.24 | | **Total (26 Weeks Ended June 24, 2022)** | **15,137** | **$34.18** | - During the twenty-six weeks ended June 24, 2022, the Company withheld **15,137 shares** of common stock to satisfy tax withholding requirements for restricted shares awarded to officers and key employees[114](index=114&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=28&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms no defaults on senior securities - There were no defaults upon senior securities[116](index=116&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=28&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section confirms no mine safety disclosures - There are no mine safety disclosures[117](index=117&type=chunk) [ITEM 5. OTHER INFORMATION](index=28&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates no other information to report - There is no other information to report[118](index=118&type=chunk) [ITEM 6. EXHIBITS](index=29&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the Form 10-Q, including certifications and XBRL-related documents - Exhibits include certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act of 2002) and various XBRL taxonomy extension documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File)[120](index=120&type=chunk) [SIGNATURES](index=30&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q filing - The report was signed on July 27, 2022, by James Leddy, Chief Financial Officer, and Timothy McCauley, Chief Accounting Officer[122](index=122&type=chunk)