The Chefs' Warehouse(CHEF) - 2022 Q2 - Quarterly Report

Filing Information 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][2] 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 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] PART I. FINANCIAL INFORMATION Presents the company's unaudited consolidated financial statements and management's analysis for the reporting period ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS 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 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) 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 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] Consolidated Statements of Cash Flows 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] Notes to Consolidated Financial Statements 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 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][23][24] Note 2 – Summary of Significant Accounting Policies 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] 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] Note 3 – Net Income (Loss) per Share 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] Note 4 – Fair Value Measurements 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][36] 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 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] - 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][41] 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 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] Note 7 – Equipment, Leasehold Improvements and Software 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][48] Note 8 – Goodwill and Other Intangible Assets 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] Note 9 – Debt Obligations 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][59] - 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] Note 10 – Stockholders' Equity 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] - 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][61] Note 11 – Related Parties 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] Note 12 – Supplemental Disclosures of Cash Flow Information 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 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] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial 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 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] Effect of the COVID-19 Pandemic on our Business and Operations 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] - 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] Recent Acquisitions 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][73] Results of Operations 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 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][78] - 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] Twenty-Six Weeks Ended June 24, 2022 Compared to Twenty-Six Weeks Ended June 25, 2021 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][85] - 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] Liquidity and Capital Resources 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 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][96] 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] Cash Flows 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][100][101] 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] - 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] 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] Off-Balance Sheet Arrangements 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] Critical Accounting Policies and Estimates 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] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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 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] ITEM 4. CONTROLS AND PROCEDURES 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 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] Changes in Internal Control over Financial Reporting 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] PART II. OTHER INFORMATION Provides additional disclosures not covered in the financial information section, including legal proceedings, risk factors, equity sales, and exhibits ITEM 1. LEGAL PROCEEDINGS 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] ITEM 1A. RISK FACTORS 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] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section confirms no defaults on senior securities - There were no defaults upon senior securities[116] ITEM 4. MINE SAFETY DISCLOSURES This section confirms no mine safety disclosures - There are no mine safety disclosures[117] ITEM 5. OTHER INFORMATION This section indicates no other information to report - There is no other information to report[118] ITEM 6. EXHIBITS 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] 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]