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 March ~~25, 2022~~31, 2023


☐			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 or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

100 East Ridge Road

Ridgefield, Connecticut 06877

(Address of principal executive offices)

Registrant’s telephone number, including area code: (203) 894-1345

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	CHEF	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock, par value $.01 per share, outstanding at ~~April 25, 2022: 38,232,118~~May 8, 2023: 39,542,217

THE CHEFS’ WAREHOUSE, INC.

FORM 10-Q

Table of Contents

Page

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (unaudited):

Condensed Consolidated Balance Sheets

~~Consolidated Statements of Operations and Comprehensive Income (Loss)~~

Condensed Consolidated Statements of Operations and Comprehensive Income

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1618

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

2123

Item 4.

Controls and Procedures

2123

PART II. OTHER INFORMATION

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2123

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Statements in this report regarding the business of The Chefs’ Warehouse, Inc. (the “Company”) that are not historical facts are “forward-looking statements” that involve risks and uncertainties and are based on current expectations and management estimates; actual results may differ materially. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The risks and uncertainties which could impact these statements include, but are not limited to the following: our sensitivity to general economic conditions, including disposable income levels and changes in consumer discretionary spending; our ability to expand our operations in our existing markets and to penetrate new markets through acquisitions; we may not achieve the benefits expected from our acquisitions, which could adversely impact our business and operating results; we may have difficulty managing and facilitating our future growth; conditions beyond our control could materially affect the cost and/or availability of our specialty food products or center-of-the-plate products and/or interrupt our distribution network; our increased distribution of center-of-the-plate products, like meat, poultry and seafood, involves increased exposure to price volatility experienced by those products; our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures; because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, including adverse weather conditions, in these areas; fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations; our ability to raise capital in the future may be limited; we may be unable to obtain debt or other financing, including financing necessary to execute on our acquisition strategy, on favorable terms or at all; interest charged on our outstanding debt may be adversely affected by changes in the method of determining ~~London Interbank Offered~~the Secured Overnight Financing Rate ~~(LIBOR), or the replacement of LIBOR with an alternative rate;~~(“SOFR”); our business operations and future development could be significantly disrupted if we lose key members of our management team; and significant public health epidemics or pandemics, including the COVID-19 pandemic, may adversely affect our business, results of operations and financial condition. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, speak only as of the date made. A more detailed description of these and other risk factors is contained in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February ~~22, 2022~~28, 2023 and other reports, including this Quarterly Report on Form 10-Q, filed by the Company with the SEC since that date. The Company is not undertaking to update any information in the foregoing report until the effective date of its future reports required by applicable laws.

PART I FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except share data)


		March 25, 2022 (unaudited)		December 24, 2021			March 31, 2023		December 30, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	79,439	$	115,155	Cash and cash equivalents	$	91,742	$	158,800
Accounts receivable, net of allowance of $19,168 in 2022 and $20,260 in 2021		169,792		172,540
Accounts receivable, net of allowance of $22,571 in 2023 and $20,260 in 2022						Accounts receivable, net of allowance of $22,571 in 2023 and $20,260 in 2022	274,598		260,167
Inventories, net	Inventories, net	152,443		144,491		Inventories, net	274,787		245,693

Prepaid expenses and other current assets	Prepaid expenses and other current assets	37,002		37,774		Prepaid expenses and other current assets	55,714		56,200
Total current assets	Total current assets	438,676		469,960		Total current assets	696,841		720,860

Equipment, leasehold improvements and software, net		151,751		133,622
Property and equipment, net						Property and equipment, net	196,256		185,728
Operating lease right-of-use assets	Operating lease right-of-use assets	148,381		130,701		Operating lease right-of-use assets	178,872		156,629
Goodwill	Goodwill	230,988		221,775		Goodwill	307,773		287,120
Intangible assets, net	Intangible assets, net	108,832		104,743		Intangible assets, net	167,823		155,703
Deferred taxes, net		8,876		9,380

Other assets	Other assets	4,065		3,614		Other assets	4,566		3,256
Total assets	Total assets	$	1,091,569	$	1,073,795	Total assets	$	1,552,131	$	1,509,296
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	121,444	$	118,284	Accounts payable	$	169,912	$	163,397
Accrued liabilities	Accrued liabilities	34,852		35,390		Accrued liabilities	72,057		54,325
Short-term operating lease liabilities	Short-term operating lease liabilities	17,835		15,882		Short-term operating lease liabilities	21,690		19,428
Accrued compensation	Accrued compensation	15,069		22,321		Accrued compensation	27,370		34,167
Current portion of long-term debt	Current portion of long-term debt	4,971		5,141		Current portion of long-term debt	13,199		12,428
Total current liabilities	Total current liabilities	194,171		197,018		Total current liabilities	304,228		283,745
Long-term debt, net of current portion	Long-term debt, net of current portion	393,565		394,160		Long-term debt, net of current portion	654,417		653,504
Operating lease liabilities	Operating lease liabilities	143,827		127,296		Operating lease liabilities	171,972		151,406
Deferred taxes, net						Deferred taxes, net	6,221		6,098

Other liabilities and deferred credits	Other liabilities and deferred credits	5,581		5,110		Other liabilities and deferred credits	9,341		13,034
Total liabilities	Total liabilities	737,144		723,584		Total liabilities	1,146,179		1,107,787
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 25, 2022 and December 24, 2021		—		—
Common Stock, - $0.01 par value, 100,000,000 shares authorized, 38,256,461 and 37,887,675 shares issued and outstanding at March 25, 2022 and December 24, 2021, respectively		383		380
Additional paid in capital		316,943		314,242
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2023 and December 30, 2022						Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2023 and December 30, 2022	—		—
Common Stock - $0.01 par value, 100,000,000 shares authorized, 39,544,131 and 38,599,390 shares issued and outstanding at March 31, 2023 and December 30, 2022, respectively						Common Stock - $0.01 par value, 100,000,000 shares authorized, 39,544,131 and 38,599,390 shares issued and outstanding at March 31, 2023 and December 30, 2022, respectively	395		386
Additional paid-in capital						Additional paid-in capital	340,899		337,947
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,897)		(2,022)		Accumulated other comprehensive loss	(2,104)		(2,185)
Retained earnings	Retained earnings	38,996		37,611		Retained earnings	66,762		65,361
Total stockholders’ equity	Total stockholders’ equity	354,425		350,211		Total stockholders’ equity	405,952		401,509
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,091,569	$	1,073,795	Total liabilities and stockholders’ equity	$	1,552,131	$	1,509,296

See accompanying notes to the condensed consolidated financial ~~statements.~~statements

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)

(Amounts in thousands, except share and per share amounts)


		Thirteen Weeks Ended				Thirteen Weeks Ended
		March 25, 2022		March 26, 2021				March 31, 2023		March 25, 2022
Net sales	Net sales	$	512,103	$	280,217		Net sales	$	719,645	$	512,103
Cost of sales	Cost of sales	394,590		221,270			Cost of sales	549,937		394,590
Gross profit	Gross profit	117,513		58,947			Gross profit	169,708		117,513
Selling, general and administrative expenses	Selling, general and administrative expenses	110,086		80,245			Selling, general and administrative expenses	156,137		110,086
Other operating expenses (income), net		1,163		(1,170)
Operating income (loss)		6,264		(20,128)
Other operating expenses, net							Other operating expenses, net	1,672		1,163
Operating income							Operating income	11,899		6,264
Interest expense	Interest expense	4,365		4,763			Interest expense	10,006		4,365

Income (loss) before income taxes		1,899		(24,891)
Provision for income tax expense (benefit)		514		(6,970)
Net income (loss)		$	1,385	$	(17,921)
Income before income taxes							Income before income taxes	1,893		1,899
Provision for income tax expense							Provision for income tax expense	492		514
Net income							Net income	$	1,401	$	1,385
Other comprehensive income:	Other comprehensive income:						Other comprehensive income:
Foreign currency translation adjustments	Foreign currency translation adjustments	125		81			Foreign currency translation adjustments	81		125
Comprehensive income (loss)		$	1,510	$	(17,840)
Net income (loss) per share:
Comprehensive income							Comprehensive income	$	1,482	$	1,510
Net income per share:							Net income per share:
Basic	Basic	$	0.04	$	(0.49)		Basic	$	0.04	$	0.04
Diluted	Diluted	$	0.04	$	(0.49)		Diluted	$	0.04	$	0.04
Weighted average common shares outstanding:	Weighted average common shares outstanding:						Weighted average common shares outstanding:
Basic	Basic	36,935,717		36,401,748			Basic	37,507,093		36,935,717
Diluted	Diluted	37,307,478		36,401,748			Diluted	38,161,269		37,307,478

See accompanying notes to the condensed consolidated financial ~~statements.~~statements

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(Amounts in thousands, except share amounts)


		Common Stock			Additional Paid in Capital				Accumulated Other Comprehensive Loss			Retained Earnings				Total				Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
		Shares	Amount								Shares								Amount
Balance December 24, 2021		37,887,675	$	380			$	314,242						$	(2,022)			$	37,611		$	350,211
Balance December 30, 2022																			Balance December 30, 2022	38,599,390			$	386		$	337,947		$	(2,185)		$	65,361		$	401,509

Net income	Net income	—	—		—				—			1,385				1,385			Net income	—			—		—			—			1,401			1,401
Stock compensation	Stock compensation	433,115	4		3,039				—			—				3,043			Stock compensation	998,777			10		4,780			—			—			4,790

Warrants issued for acquisition		—	—		1,701				—			—				1,701

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—				125			—				125			Cumulative translation adjustment	—			—		—			81			—			81
Shares surrendered to pay tax withholding	Shares surrendered to pay tax withholding	(64,329)	(1)		(2,039)				—			—				(2,040)			Shares surrendered to pay tax withholding	(54,036)			(1)		(1,828)			—			—			(1,829)
Balance March 25, 2022		38,256,461	$	383	$	316,943			$	(1,897)		$	38,996			$	354,425
Balance March 31, 2023																			Balance March 31, 2023	39,544,131			$	395	$	340,899		$	(2,104)		$	66,762		$	405,952


Balance December 25, 2020		37,274,768	$	373	$	303,734	$	(2,051)	$	42,534	$	344,590
Balance December 24, 2021													Balance December 24, 2021	37,887,675	$	380	$	314,242	$	(2,022)	$	37,611	$	350,211

Net loss		—	—		—		—		(17,921)		(17,921)
Net income													Net income	—	—		—		—		1,385		1,385
Stock compensation	Stock compensation	673,430	6		2,452		—		—		2,458		Stock compensation	433,115	4		3,039		—		—		3,043

Warrants issued for acquisitions													Warrants issued for acquisitions	—	—		1,701		—		—		1,701

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—		81		—		81		Cumulative translation adjustment	—	—		—		125		—		125
Shares surrendered to pay tax withholding	Shares surrendered to pay tax withholding	(38,503)	—		(1,192)		—		—		(1,192)		Shares surrendered to pay tax withholding	(64,329)	(1)		(2,039)		—		—		(2,040)
Balance March 26, 2021		37,909,695	$	379	$	304,994	$	(1,970)	$	24,613	$	328,016
Balance March 25, 2022													Balance March 25, 2022	38,256,461	$	383	$	316,943	$	(1,897)	$	38,996	$	354,425

See accompanying notes to the condensed consolidated financial ~~statements.~~statements

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)


		Thirteen Weeks Ended					Thirteen Weeks Ended
		March 25, 2022		March 26, 2021			March 31, 2023		March 25, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	1,385	$	(17,921)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income						Net income	$	1,401	$	1,385
Adjustments to reconcile net income to net cash (used in ) provided by operating activities:						Adjustments to reconcile net income to net cash (used in ) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	5,889		5,107		Depreciation and amortization	7,011		5,889
Amortization of intangible assets	Amortization of intangible assets	3,356		3,539		Amortization of intangible assets	4,697		3,356
Benefit for allowance for doubtful accounts		(178)		(451)
Provision (benefit) for allowance for doubtful accounts						Provision (benefit) for allowance for doubtful accounts	1,849		(178)
Non-cash operating lease expense	Non-cash operating lease expense	802		109		Non-cash operating lease expense	585		802
Provision (benefit) for deferred income taxes		504		(5,025)
Provision for deferred income taxes						Provision for deferred income taxes	123		504
Amortization of deferred financing fees	Amortization of deferred financing fees	539		864		Amortization of deferred financing fees	967		539

Stock compensation	Stock compensation	3,043		2,458		Stock compensation	5,334		3,043
Change in fair value of contingent earn-out liabilities	Change in fair value of contingent earn-out liabilities	299		(1,308)		Change in fair value of contingent earn-out liabilities	372		299

Loss on asset disposal	Loss on asset disposal	17		5		Loss on asset disposal	57		17
Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:					Changes in assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	10,084		(2,585)		Accounts receivable	9,860		10,084
Inventories	Inventories	(4,391)		(9,357)		Inventories	(20,075)		(4,391)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(1,080)		850		Prepaid expenses and other current assets	1,612		(1,080)
Accounts payable, accrued liabilities and accrued compensation	Accounts payable, accrued liabilities and accrued compensation	(9,830)		12,026		Accounts payable, accrued liabilities and accrued compensation	(15,044)		(9,830)

Other assets and liabilities	Other assets and liabilities	(156)		26		Other assets and liabilities	(1,010)		(156)
Net cash provided by (used in) operating activities		10,283		(11,663)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(2,261)		10,283

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(14,206)		(2,896)		Capital expenditures	(8,696)		(14,206)
Cash paid for acquisitions, net of cash received		(28,000)		—
Cash paid for acquisitions, net of cash acquired						Cash paid for acquisitions, net of cash acquired	(50,937)		(28,000)

Net cash used in investing activities	Net cash used in investing activities	(42,206)		(2,896)		Net cash used in investing activities	(59,633)		(42,206)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Payment of debt, finance lease and other financing obligations	Payment of debt, finance lease and other financing obligations	(1,405)		(32,834)		Payment of debt, finance lease and other financing obligations	(3,378)		(1,405)

Proceeds from debt issuance		—		51,750

Payment of deferred financing fees	Payment of deferred financing fees	(406)		(1,450)		Payment of deferred financing fees	—		(406)

Surrender of shares to pay withholding taxes	Surrender of shares to pay withholding taxes	(2,040)		(1,192)		Surrender of shares to pay withholding taxes	(1,763)		(2,040)

Payments under asset-based loan facility		—		(20,000)

Net cash used in financing activities	Net cash used in financing activities	(3,851)		(3,726)		Net cash used in financing activities	(5,141)		(3,851)

Effect of foreign currency on cash and cash equivalents	Effect of foreign currency on cash and cash equivalents	58		4		Effect of foreign currency on cash and cash equivalents	(23)		58
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(35,716)		(18,281)		Net change in cash and cash equivalents	(67,058)		(35,716)
Cash and cash equivalents-beginning of period	Cash and cash equivalents-beginning of period	115,155		193,281		Cash and cash equivalents-beginning of period	158,800		115,155
Cash and cash equivalents-end of period	Cash and cash equivalents-end of period	$	79,439	$	175,000	Cash and cash equivalents-end of period	$	91,742	$	79,439

See accompanying notes to the condensed consolidated financial ~~statements.~~statements

THE CHEFS’ WAREHOUSE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share amounts)

Note 1 - Operations and Basis of Presentation

Description of Business and Basis of Presentation

The financial statements include the condensed consolidated accounts of The Chefs’ Warehouse, Inc. (the “Company”), and its wholly-owned subsidiaries. The Company’s quarterly periods end on the thirteenth Friday of each quarter. Every six to seven years, the Company will add a fourteenth week to its fourth quarter to more closely align its year-end to the calendar year. Fiscal 2022 contained a fourteenth week in the fourth quarter. The Company’s business consists of 3three operating segments: East, ~~Coast,~~ Midwest and West ~~Coast~~ that aggregate into 1one reportable segment, foodservice distribution, which is concentrated primarily in the United States. The Company’s customer base consists primarily of menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos, specialty food stores, grocers and warehouse clubs.

Consolidation

The condensed consolidated financial statements include all the accounts of the Company and its direct and indirect wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Unaudited Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements and the related interim information contained within the notes to such unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the applicable rules of the Securities and Exchange Commission (“SEC”) for interim information and quarterly reports on Form 10-Q. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended December ~~24, 2021~~30, 2022 filed as part of the Company’s Annual Report on Form 10-K, as filed with the SEC on February ~~22, 2022.~~28, 2023.

The unaudited condensed consolidated financial statements appearing in this Form 10-Q have been prepared on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February ~~22, 2022,~~28, 2023, and in the opinion of management, include all normal recurring adjustments that are necessary for the fair statement of the Company’s interim period results. The year-end consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by GAAP. Due to seasonal fluctuations ~~the COVID-19 pandemic~~ and other factors, the results of operations for the thirteen weeks ended March ~~25, 2022~~31, 2023 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management’s estimates.

Note 2 – Summary of Significant Accounting Policies

Revenue Recognition

Revenues from product sales are recognized at the point at which control of each product is transferred to the customer. The Company’s contracts contain performance obligations which are satisfied when customers have physical possession of each product. The majority of customer orders are fulfilled within a day and customer payment terms are typically 14 to 60 days from delivery. Shipping and handling activities are costs to fulfill the Company’s performance obligations. These costs are expensed as incurred and presented within selling, general and administrative expenses on the condensed consolidated statements of operations. The Company offers certain sales incentives to customers in the form of rebates or discounts. These sales incentives are accounted as variable consideration. The Company estimates these amounts based on the expected amount to be provided to customers and records a corresponding reduction in revenue. The Company does not expect a significant ~~reversal in the amount~~

reversal in the amount of cumulative revenue recognized. Sales tax billed to customers is not included in revenue but rather recorded as a liability owed to the respective taxing authorities at the time the sale is recognized.

The following table presents the Company’s net sales disaggregated by principal product category:


		Thirteen Weeks Ended								Thirteen Weeks Ended
		March 25, 2022				March 26, 2021					March 31, 2023		March 25, 2022
Center-of-the-Plate	Center-of-the-Plate	$	238,776	46.6	%	$	139,845	49.9	%			Center-of-the-Plate	$	306,305	42.6	%	$	238,776	46.6	%
Dry Goods	Dry Goods	78,515		15.3	%	39,780		14.2	%			Dry Goods	122,934		17.1	%	68,796		13.4	%
Pastry	Pastry	57,751		11.3	%	28,798		10.3	%			Pastry	89,162		12.4	%	50,395		9.8	%
Cheese and Charcuterie	Cheese and Charcuterie	43,488		8.5	%	23,099		8.2	%			Cheese and Charcuterie	55,141		7.7	%	38,388		7.5	%
Produce	Produce	27,897		5.4	%	20,591		7.3	%			Produce	52,999		7.4	%	57,154		11.2	%
Dairy and Eggs	Dairy and Eggs	29,420		5.7	%	12,581		4.5	%			Dairy and Eggs	49,078		6.8	%	26,951		5.3	%
Oils and Vinegars	Oils and Vinegars	24,087		4.7	%	9,474		3.4	%			Oils and Vinegars	28,878		4.0	%	21,025		4.1	%
Kitchen Supplies	Kitchen Supplies	12,169		2.5	%	6,049		2.2	%			Kitchen Supplies	15,148		2.0	%	10,618		2.1	%
Total	Total	$	512,103	100	%	$	280,217	100	%			Total	$	719,645	100	%	$	512,103	100	%

The Company determines its product category classification based on how the Company currently markets its products to its customers. The Company’s definition of its principal product categories may differ from the way in which other companies present similar information.

Food Processing Costs

Food processing costs include but are not limited to direct labor and benefits, applicable overhead and depreciation of equipment and facilities used in food processing activities. Food processing costs included in cost of sales were ~~$9,036~~$11,674 and ~~$5,396~~$9,036 for the thirteen weeks ended March 31, 2023 and March 25, 2022, respectively.

Immaterial Correction of Prior Period Disclosures

Subsequent to the issuance of the fiscal year 2022 consolidated financial statements, immaterial errors were identified in the weighted average remaining amortization period of intangible assets, the intangible asset amortization schedule and ~~March 26, 2021,~~the debt maturity schedule.The weighted average remaining amortization period for customer relationships, non-compete agreements and trademarks were previously disclosed as 232 months, 73 months and 250 months instead of 117 months, 25 months and 165 months, respectively. This had a corresponding immaterial impact on the intangible asset amortization schedule.

In addition, the debt maturity schedule previously included the $40,000 due upon maturity of the asset-based loan facility in the thereafter total instead of in the 2027 total. Further, the Company omitted that the asset-based loan facility and term loan are classified as Level 2 within the fair value hierarchy. These immaterial errors and omissions have been corrected in Note 4 “Fair Value Measurements”, Note 8 “Goodwill and Other Intangible Assets” and Note 9 “Debt Obligations”, within these condensed consolidated financial statements.

Note 3 – Net Income ~~(Loss)~~ per Share

The following table sets forth the computation of basic and diluted net income ~~(loss)~~ per common share:


		Thirteen Weeks Ended				Thirteen Weeks Ended
		March 25, 2022		March 26, 2021				March 31, 2023		March 25, 2022
Net income (loss) per share:
Net income per share:							Net income per share:
Basic	Basic	$	0.04	$	(0.49)		Basic	$	0.04	$	0.04
Diluted	Diluted	$	0.04	$	(0.49)		Diluted	$	0.04	$	0.04
Weighted average common shares:	Weighted average common shares:						Weighted average common shares:
Basic	Basic	36,935,717		36,401,748			Basic	37,507,093		36,935,717
Diluted	Diluted	37,307,478		36,401,748			Diluted	38,161,269		37,307,478

~~Reconciliation of net income (loss) per common share:~~

Thirteen Weeks Ended
March 25, 2022 March 26, 2021
Numerator:
Net income (loss) $ 1,385 $ (17,921)
Denominator:
Weighted average basic common shares outstanding 36,935,717 36,401,748
Dilutive effect of unvested common shares 330,415 —
Dilutive effect of stock options and warrants 41,346 —
Weighted average diluted common shares outstanding 37,307,478 36,401,748

Reconciliation of net income per common share:


	Thirteen Weeks Ended
	March 31, 2023		March 25, 2022
Numerator:
Net income	$	1,401	$	1,385



Denominator:
Weighted average basic common shares outstanding	37,507,093		36,935,717
Dilutive effect of unvested common shares	577,557		330,415
Dilutive effect of stock options and warrants	76,619		41,346

Weighted average diluted common shares outstanding	38,161,269		37,307,478

Potentially dilutive securities that have been excluded from the calculation of diluted net income ~~(loss)~~ per common share because the effect is anti-dilutive are as follows:


		Thirteen Weeks Ended		Thirteen Weeks Ended
		March 25, 2022	March 26, 2021			March 31, 2023	March 25, 2022
Restricted share awards (“RSAs”)	Restricted share awards (“RSAs”)	113,061	779,968		Restricted share awards (“RSAs”)	—	113,061
Stock options and warrants	Stock options and warrants	293,407	115,639		Stock options and warrants	—	293,407
Convertible notes	Convertible notes	4,616,033	3,795,570		Convertible notes	7,483,870	4,616,033

Note 4 – Fair Value Measurements

Assets and Liabilities Measured at Fair Value

The Company’s contingent earn-out liabilities are measured at fair value. These liabilities were estimated using Level 3 inputs. Long-term earn-out liabilities were ~~$3,551~~$6,790 and ~~$3,252~~$10,483 as of March ~~25, 2022~~31, 2023 and December ~~24, 2021,~~30, 2022, respectively, and are reflected as other liabilities and deferred credits on the condensed consolidated balance sheets. The remaining short-term earn-out liabilities are reflected as accrued liabilities on the condensed consolidated balance sheets. The fair value of contingent consideration was determined based on a probability-based approach which includes projected results, percentage probability of occurrence and the application of a discount rate to present value the payments. A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or lower fair value measurement. Changes in the fair value of contingent earn-out liabilities are reflected in other operating ~~(income)~~expenses, net on the condensed consolidated statements of operations.

The following table presents the changes in Level 3 contingent earn-out liabilities:

Bassian Sid Wainer Other Acquisitions Total
Balance December 24, 2021 $ 1,133 $ — $ 5,744 $ 6,877
Changes in fair value 232 — 67 299
Balance March 25, 2022 $ 1,365 $ — $ 5,811 $ 7,176


	Total





Balance December 30, 2022	$	17,294
Acquisition value	7,800

Cash payments	—
Changes in fair value	372
Balance March 31, 2023	$	25,466

Fair Value of Financial Instruments

The carrying amounts reported in the Company’s condensed consolidated balance sheets for accounts receivable and accounts payable approximate fair value due to the immediate to short-term nature of these financial instruments. The fair values of the asset based loan facility and term loan approximated their book values as of March 31, 2023 and December 30, 2022 as these instruments had variable interest rates that reflected current market rates available to the Company and are classified as Level 2 fair value measurements.

The following table presents the carrying value and fair value of the Company’s convertible notes. The fair value of the Company’s 2029 Convertible Senior Notes was based on Level 1 inputs. In estimating the fair value of ~~the convertible notes,~~its 2024 Convertible Senior Notes and Convertible Unsecured Note, the Company utilized Level 3 inputs including prevailing market interest rates to estimate the debt portion of the instrument and a Black Scholes valuation model to estimate the fair value of the conversion option. The Black Scholes model utilizes the market price of the Company’s common stock, estimates of the stock’s volatility and the prevailing risk-free interest rate in calculating the fair value estimate.

March 25, 2022 December 24, 2021
Carrying Value Fair Value Carrying Value Fair Value
Convertible Senior Notes $ 200,000 $ 208,722 $ 200,000 $ 206,182
Convertible Unsecured Note $ 4,000 $ 4,172 $ 4,000 $ 4,102


		March 31, 2023				December 30, 2022
	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
2028 Convertible Senior Notes	Level 1	$	287,500	$	291,813	$	287,500	$	292,531
2024 Convertible Senior Notes	Level 3	$	39,684	$	40,695	$	41,684	$	43,723
Convertible Unsecured Note	Level 3	$	4,000	$	4,120	$	4,000	$	4,345

Note 5 – Acquisitions

Hardie’s Fresh Foods

On ~~December 28, 2021,~~March 20, 2023, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of ~~CGC Holdings, Inc.~~Hardie’s F&V, LLC (“~~Capital Seaboard”~~Hardie’s Fresh Foods”), a specialty ~~seafood and~~ produce distributor with operations in ~~Maryland.~~Texas. The purchase price was approximately ~~$29,701 consisting of $28,000~~$38,000, paid in cash at ~~closing,~~closing. The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total $10,000 over a two-year period. The payment of the earn-out liability is subject to ~~a customary working capital adjustment,~~the successful achievement of certain gross profit targets. The Company estimated the fair value of this contingent earn-out liability to be $6,500 as of March 20, 2023 and ~~common stock warrants of $1,701.~~March 31, 2023. The Company is in the process of finalizing a valuation of tangible and intangible assets of ~~Capital Seaboard~~Hardie’s Fresh Foods as of the acquisition date. When applicable, these valuations require the use of Level 3 inputs. Goodwill for the ~~Capital Seaboard~~Hardie’s Fresh Foods acquisition will be amortized over 15 years for tax purposes. The goodwill recorded primarily reflects the value of acquiring an established specialty ~~seafood and~~ produce distributor to leverage the Company’s existing products in the markets served by ~~Capital Seaboard, to supply Capital Seaboard’s product offerings to our East Coast markets~~Hardie’s Fresh Foods and any intangible assets that do not qualify for separate recognition.

10Other Fiscal 2023 Acquisitions

During the thirteen weeks ended March 31, 2023, the Company completed two other acquisitions for an aggregate purchase price of approximately $14,436, consisting of $12,221 paid in cash at closing, subject to customary working capital adjustments, and $2,215 of deferred payments. The Company will also pay additional contingent consideration, if earned, in the form of earn-out amount which could total $2,000 in the aggregate. The Company estimated the fair value of the contingent earn-out liability to be $1,300 as of March 31, 2023. The Company is in the process of finalizing a valuation of the tangible and intangible assets as of the acquisition date. When applicable, these valuations require the use of Level 3 inputs. Goodwill of $4,596 will be amortized over 15 years for tax purposes.

The Company reflected net sales and income before income taxes in its condensed consolidated statement of operations related to the fiscal 2023 acquisitions as follows:

Thirteen Weeks Ended

March ~~25, 2022~~31, 2023

Net sales

~~31,682~~20,207

Income before income taxes

~~1,133~~1,760

Chef Middle East

On November 1, 2022, pursuant to a share sale and purchase agreement, the Company acquired substantially all of the shares of Chef Middle East LLC (“CME”), a specialty food distributor with operations in the United Arab Emirates, Qatar and Oman. The purchase price was approximately $108,915, consisting of $108,749 paid in cash at closing and $166 paid upon settlement of a net working capital true-up. The measurement period adjustments recorded during the first quarter of fiscal 2023 resulted in a goodwill increase of $866, a decrease in inventories of $735 and a decrease in deferred tax liabilities of $35. The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total $10,000 over

a two-year period. The payment of the earn-out liability is subject to the successful achievement of certain gross profit targets. The Company estimated the fair value of this contingent earn-out liability to be $7,500 as of March 31, 2023 and December 30, 2022. The Company is in the process of finalizing a valuation of tangible and intangible assets of CME as of the acquisition date. When applicable, these valuations require the use of Level 3 inputs. The goodwill recorded primarily reflects the value of acquiring an established specialty seafood and produce distributor and any intangible assets that do not qualify for separate recognition.

The table below presents unaudited pro forma condensed consolidated income statement information of the Company as if the ~~Capital Seaboard acquisition~~Hardie’s Fresh Foods and CME acquisitions had occurred on December ~~26, 2020.~~25, 2021. The pro forma results were prepared from financial information obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the ~~acquisition.~~acquisitions. The pro forma information is not necessarily indicative of the Company’s results of operations had the ~~acquisition~~acquisitions been completed on the above date, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the ~~acquisition,~~acquisitions, any incremental costs for ~~Capital Seaboard~~ transitioning to become a public company, and also does not reflect additional revenue opportunities following the ~~acquisition.~~acquisitions. The pro forma information reflects amortization and depreciation of the ~~Capital Seaboard acquisition~~acquisitions at their respective fair ~~values.~~value. CME did not have a proforma impact during the thirteen weeks ended March 31, 2023 as it was included in the condensed consolidated results of operations for the entire period.


		Thirteen Weeks Ended				Thirteen Weeks Ended
		March 25, 2022		March 26, 2021				March 31, 2023		March 25, 2022
Net sales	Net sales	$	512,103	$	306,712		Net sales	$	773,547	$	621,761
Income (loss) before income taxes		$	1,899	$	(25,716)
Income before income taxes							Income before income taxes	$	1,159	$	7,139

The table below sets forth the preliminary purchase price allocation ~~of this acquisition:~~for the Company’s acquisitions:

~~Capital Seaboard~~


	Chef Middle East		Hardie’s Fresh Foods		Other Acquisitions
Current assets	$	84,076	$	27,479	$	9,787
Customer relationships	25,800		11,200		1,531
Trademarks	11,400		1,900		2,600
Non-compete agreements	320		—		—
Goodwill	24,680		14,720		4,596
Fixed assets	16,953		5,582		117
Other assets	941		854		15
Deferred tax liability	(3,600)		—		—
Right-of-use assets	5,321		13,303		3,258

Lease liabilities	(5,321)		(13,303)		(3,258)

Current liabilities	(44,155)		(17,235)		(2,880)
Earn-out liability	(7,500)		(6,500)		(1,300)



Total consideration	$	108,915	$	38,000	$	14,436

~~Current assets~~

~~10,130~~

~~Customer relationships~~

~~4,500~~

~~Trademarks~~

~~2,900~~

~~Goodwill~~

~~9,129~~

~~Fixed assets~~

~~9,552~~

~~Other assets~~

~~122~~

~~Right-of-use assets~~

~~16,427~~

~~Lease liabilities~~

~~(16,427)~~

~~Current liabilities~~

~~(6,632)~~

~~Issuance of warrants~~

~~(1,701)~~

~~Total cash consideration~~

~~28,000~~

The Company recognized professional fees of $1,243 and $659 in operating expenses related to acquisition related activities induring the ~~first quarter of fiscal 2022.~~thirteen weeks ended weeks ended March 31, 2023 and March 25, 2022, respectively.

Note 6 – Inventories

Inventories consist primarily of finished product and are reflected net of adjustments for shrinkage, excess and obsolescence to approximate their net realizable value totaling ~~$9,273~~$10,127 and ~~$8,312~~$9,198 at March ~~25, 2022~~31, 2023 and December ~~24, 2021,~~30, 2022, respectively.

Note 7 – ~~Equipment, Leasehold Improvements~~Property and ~~Software~~Equipment

~~Equipment, leasehold improvements~~Property and ~~software~~equipment as of March ~~25, 2022~~31, 2023 and December ~~24, 2021~~30, 2022 consisted of the following:


		Useful Lives	March 25, 2022		December 24, 2021			Useful Lives	March 31, 2023		December 30, 2022
Land	Land	Indefinite	$	5,542	$	5,020	Land	Indefinite	$	5,542	$	5,542
Buildings	Buildings	20 years	23,436		18,406		Buildings	20 years	40,591		39,893
Machinery and equipment	Machinery and equipment	5 - 10 years	29,013		28,099		Machinery and equipment	5 - 10 years	38,214		32,107
Computers, data processing and other equipment	Computers, data processing and other equipment	3 - 7 years	15,811		15,480		Computers, data processing and other equipment	3 - 7 years	19,667		18,475
Software	Software	3 - 7 years	39,988		39,799		Software	3 - 7 years	48,541		42,609
Leasehold improvements	Leasehold improvements	1 - 40 years	77,326		69,105		Leasehold improvements	1 - 40 years	119,213		94,245
Furniture and fixtures	Furniture and fixtures	7 years	3,648		3,582		Furniture and fixtures	7 years	2,949		3,825
Vehicles	Vehicles	5 - 10 years	29,412		29,632		Vehicles	5 - 10 years	31,421		31,462

Construction-in-process	Construction-in-process		31,461		24,335		Construction-in-process		11,333		36,583
			255,637		233,458				317,471		304,741
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization		(103,886)		(99,836)		Less: accumulated depreciation and amortization		(121,215)		(119,013)
Equipment, leasehold improvements and software, net			$	151,751	$	133,622
Property and equipment, net							Property and equipment, net		$	196,256	$	185,728

Construction-in-process at March ~~25, 2022 and December 24, 2021~~31, 2023 related primarily to the ~~build-outs~~build-out of the Company’s ~~Los Angeles~~Miami, Richmond, CA and Gibbstown, NJ distribution facilities and at December 30, 2022 related primarily to the build-out of the Company’s Miami, Dallas and Richmond, CA distribution ~~facilities.~~facilities and the implementation of the Company’s Enterprise Resource Planning system. The net book value of equipment financed under finance leases at March ~~25, 2022~~31, 2023 and December ~~24, 2021~~30, 2022 was ~~$10,450~~$10,036 and ~~$10,874,~~$11,579, respectively.

The components of depreciation and amortization expense were as follows:


		Thirteen Weeks Ended				Thirteen Weeks Ended
		March 25, 2022		March 26, 2021				March 31, 2023		March 25, 2022
Depreciation expense	Depreciation expense	$	4,415	$	3,935		Depreciation expense	$	5,542	$	4,415
Software amortization	Software amortization	$	1,474	$	1,172		Software amortization	$	1,469	$	1,474
		$	5,889	$	5,107			$	7,011	$	5,889

Note 8 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are presented as follows:






Carrying amount as of December ~~24, 2021~~30, 2022	$	~~221,775~~287,120
Goodwill adjustments(1)	581,342
Acquisitions	~~9,129~~19,316
Foreign currency translation	26 (5)
Carrying amount as of March ~~25, 2022~~31, 2023	$	~~230,988~~307,773

(1) Reflect measurement period adjustments primarily related to net working capital true-ups of prior year acquisitions.

Other intangible assets as of March ~~25, 2022~~31, 2023 and December ~~24, 2021~~30, 2022 consisted of the following:


March 25, 2022		Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
March 31, 2023									March 31, 2023	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	Customer relationships	120 months	$	160,201	$	(77,180)	$	83,021	Customer relationships	113 months	$	220,531	$	(89,038)	$	131,493
Trademarks									Trademarks	159 months	53,031		(17,213)		35,818
Non-compete agreements	Non-compete agreements	23 months	8,579		(8,085)		494		Non-compete agreements	23 months	8,899		(8,387)		512
Trademarks		165 months	39,436		(14,119)		25,317
Total	Total		$	208,216	$	(99,384)	$	108,832	Total		$	282,461	$	(114,638)	$	167,823


December 24, 2021		Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
December 30, 2022									December 30, 2022	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	Customer relationships	120 months	$	155,678	$	(74,644)	$	81,034	Customer relationships	117 months	$	205,608	$	(85,447)	$	120,161
Trademarks									Trademarks	165 months	51,137		(16,201)		34,936
Non-compete agreements	Non-compete agreements	26 months	8,579		(8,018)		561		Non-compete agreements	25 months	8,899		(8,293)		606
Trademarks		179 months	36,514		(13,366)		23,148
Total	Total		$	200,771	$	(96,028)	$	104,743	Total		$	265,644	$	(109,941)	$	155,703

Amortization expense for other intangibles was ~~$3,356~~$4,697 and ~~$3,539~~$3,356 for the thirteen weeks ended March ~~25, 2022~~31, 2023 and March ~~26, 2021,~~25, 2022, respectively.

Estimated amortization expense for other intangible assets for the remainder of the fiscal year ending December ~~30, 2022~~29, 2023 and each of the next four fiscal years and thereafter is as follows:


2022		$	9,523
2023	2023	11,841		2023	$	18,713
2024	2024	10,980		2024	18,045
2025	2025	10,561		2025	17,901
2026	2026	10,561		2026	17,701
2027				2027	17,196
Thereafter	Thereafter	55,366		Thereafter	78,267
Total	Total	$	108,832	Total	$	167,823

Note 9 – Debt Obligations

Debt obligations as of March ~~25, 2022~~31, 2023 and December ~~24, 2021~~30, 2022 consisted of the following:


		March 25, 2022		December 24, 2021			Weighted Average Effective Interest Rate at March 31, 2023		Maturity	March 31, 2023		December 30, 2022
Senior secured term loans	Senior secured term loans	$	168,247	$	168,675	Senior secured term loans	10.32	%	August 2029	$	298,500	$	299,250
Convertible senior notes		200,000		200,000
2028 Convertible senior notes						2028 Convertible senior notes	2.77	%	December 2028	287,500		287,500
2024 Convertible senior notes						2024 Convertible senior notes	2.34	%	December 2024	39,684		41,684
Asset-based loan facility	Asset-based loan facility	20,000		20,000		Asset-based loan facility	7.12	%	March 2027	40,000		40,000
Finance lease and other financing obligations		10,875		11,602
Finance leases						Finance leases	5.61	%	Various	14,913		11,331
Convertible unsecured note	Convertible unsecured note	4,000		4,000		Convertible unsecured note	5.00	%	June 2023	4,000		4,000
Other revolving credit facilities						Other revolving credit facilities	7.72	%	April 2023	2,217		2,217

Deferred finance fees and original issue premium (discount)		(4,586)		(4,976)
Unamortized deferred costs and premium						Unamortized deferred costs and premium				(19,198)		(20,050)
Total debt obligations	Total debt obligations	398,536		399,301		Total debt obligations				667,616		665,932
Less: current installments	Less: current installments	(4,971)		(5,141)		Less: current installments				(13,199)		(12,428)
Total debt obligations excluding current installments	Total debt obligations excluding current installments	$	393,565	$	394,160	Total debt obligations excluding current installments				$	654,417	$	653,504

On March 11, 2022, the Company entered into a third amendment to its asset-based loan facility (“ABL Facility”) which increased the aggregate commitments from $150,000 to $200,000. The interest rate charged on borrowings under the ABL Facility is equal to a spread plus, at the Company’s option, either the Base Rate (as defined in the ABL Credit Agreement) or a forward-looking term rate based on the secured overnight financing rate term (except for swingline loans) for one-, three-, or six-month interest periods chosen by the Company. The ABL Facility matures on March 11, 2027 subject to a springing maturity date of March 24, 2025 should the Company’s term loan not have been been extended to at least March 11, 2027 or March 24, 2024 if the Company’s 1.875% Convertible Senior Notes due 2024 in an aggregate principal amount in excess of $40,000 remain outstanding having a maturity date not earlier than six months after March 11, 2027.

The ABL Credit Agreement contains customary affirmative covenants, negative covenants and events of default as more particularly described in the ABL Credit Agreement. The Company is required to comply with a minimum consolidated fixed charge coverage ratio of 1:1 if the amount of availability under the ABL Facility falls below $14,000 or 10% of the lesser of the aggregate commitments and the borrowing base then in effect.

~~The Company incurred transaction costs of $406 which were capitalized as deferred financing fees, presented in other assets~~ ~~on the Company’s consolidated balance sheets~~, ~~to be amortized over the term of the ABL Facility.~~

1314

Maturities of the Company’s debt, excluding finance leases, for the remainder of the fiscal year ending December 29, 2023 and each of the next four fiscal years and thereafter is as follows:


2023	$	8,467
2024	42,684
2025	3,000
2026	3,000
2027	43,000
Thereafter	571,750
Total	$	671,901

The net carry value of the Company’s ~~Convertible Senior Notes~~convertible notes as of March ~~25, 2022~~31, 2023 and December ~~24, 2021~~30, 2022 was:

March 25, 2022 December 24, 2021
Principal amount outstanding $ 200,000 $ 200,000
Unamortized deferred financing fees and premium (2,462) (2,686)
Net carry value $ 197,538 $ 197,314


	March 31, 2023						December 30, 2022
	Principal Amount		Unamortized Deferred Costs and Premium		Net Amount		Principal Amount		Unamortized Deferred Costs and Premium		Net Amount
2028 Convertible Senior Notes	$	287,500	$	(6,589)	$	280,911	$	287,500	$	(6,876)	$	280,624
2024 Convertible Senior Notes	39,684		(325)		39,359		41,684		(373)		41,311
Convertible Unsecured Note	4,000		—		4,000		4,000		—		4,000
Total	$	331,184	$	(6,914)	$	324,270	$	333,184	$	(7,249)	$	325,935

The components of interest expense on the Company’s ~~Convertible Senior Notes~~convertible notes were as follows:

Thirteen Weeks Ended
March 25, 2022 March 26, 2021
Coupon interest $ 938 $ 781
Amortization of deferred financing fees and premium $ 224 $ 241
Total interest $ 1,162 $ 1,022

The Company’s senior secured term loan credit agreement requires the Company to maintain at least $35,000 of liquidity as of the last day of any fiscal quarter where EBITDA, as defined in the Credit Agreement, is less than $10,000. The Company had minimum liquidity, as defined in the Credit Agreement, of $210,831 as of March 25, 2022.


	Thirteen Weeks Ended
	March 31, 2023		March 25, 2022
Coupon interest	$	1,899	$	938
Amortization of deferred costs and premium	335		224

Total interest	$	2,234	$	1,162

As of March ~~25, 2022,~~31, 2023, the Company had reserved ~~$20,541~~$24,170 of the ~~ABL Facility~~asset-based loan facility for the issuance of letters of ~~credit. As of March 25, 2022,~~credit and funds totaling ~~$126,240~~$135,830 were available for borrowing under the ABL Facility. At March 25, 2022, the interest rate charged on the Company’s senior secured term loan was approximately 5.7% and the interest rate charged on the Company’s ABL Facility was approximately 1.8%.borrowing.

Note 10 – Stockholders’ Equity

Equity Awards

The following table reflects the activity of RSAs during the thirteen weeks ended March ~~25, 2022:~~

Time-based Performance-based Market-based
Shares Weighted Average
Grant Date Fair Value Shares Weighted Average
Grant Date Fair Value Shares Weighted Average
Grant Date Fair Value
Unvested at December 24, 2021 617,996 $ 28.33 187,437 $ 32.04 185,129 $ 31.44
Granted 115,695 32.44 167,261 32.44 167,261 29.12
Vested (240,112) 27.50 — — — —
Forfeited (7,615) 27.32 (4,743) 32.13 (4,744) 30.85
Unvested at March 25, 2022 485,964 $ 29.73 349,955 $ 32.23 347,646 $ 30.33
31, 2023:


	Time-based			Performance-based			Market-based
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value




Unvested at December 30, 2022	464,972	$	31.74	335,425	$	32.25	333,114	$	30.30
Granted	197,345	32.55		713,490	33.16		87,942	28.84
Vested	(161,555)	31.82		—	—		—	—
Forfeited	—	—		—	—		—	—
Unvested at March 31, 2023	500,762	$	32.03	1,048,915	$	32.87	421,056	$	30.00

The Company granted ~~450,217~~998,777 RSAs to its employees at a weighted average grant date fair value of ~~$31.21~~$32.66 during the thirteen weeks ended March ~~25, 2022.~~31, 2023. These awards are a mix of time-, market- and performance-based grants that generally vest over a range of periods up to ~~four~~five years. The Company recognized expense totaling ~~$3,043~~$4,790 and ~~$2,458~~$3,043 on its RSAs during the thirteen weeks ended March ~~25, 2022~~31, 2023 and March ~~26, 2021,~~25, 2022, respectively.

At March ~~25, 2022,~~31, 2023, the total unrecognized compensation cost for unvested RSAs was ~~$26,685~~$37,653 and the weighted-average remaining period was approximately ~~2.4~~2.9 years. Of this total, ~~$12,445~~$13,865 related to RSAs with time-based vesting provisions and ~~$14,240~~$23,788 related to RSAs with performance- and market-based vesting provisions. At March ~~25, 2022,~~31, 2023, the weighted-average remaining period for time-based vesting and performance-based vesting RSAs were approximately ~~2.4~~2.6 years and ~~2.5~~3.0 years, respectively.

No share-based compensation expense related to the Company’s RSAs or stock options has been capitalized. As of March ~~25, 2022,~~31, 2023, there were ~~449,957~~1,542,375 shares available for grant under the 2019 Omnibus Equity Incentive Plan.

The following table summarizes stock option activity during the thirteen weeks ended March 31, 2023:


	Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)




Outstanding December 30, 2022	112,232	$	20.23	$	1,465	3.2

Exercised	—	—

Outstanding March 31, 2023	112,232	$	20.23	$	1,551	2.9
Exercisable at March 31, 2023	112,232	20.23		$	1,551	2.9

In connection with the CME acquisition, the Company issued stock awards to certain members of the CME management team

which were classified as liabilities. These awards vest over a period of up to four years. Stock-based compensation expense for

these awards was $544 and $0 during the thirteen weeks ended March 31, 2023 and March 25, 2022, respectively. The fair value of these awards was $906 and $362 as of March 31, 2023 and December 30, 2022, respectively, and is presented within Other liabilities and deferred credits on the Company’s condensed consolidated balance sheets.

Note 11 – Related Parties

The Chefs’ Warehouse Mid-Atlantic, LLC, a subsidiary of the Company, leases a distribution facility that is 100% owned by entities controlled by Christopher Pappas, the Company’s Chairman, President and Chief Executive Officer, and John Pappas, the Company’s Vice Chairman and Chief Operating Officer, and are deemed to be affiliates of these individuals. Expense related to this facility totaled $123 during the thirteen weeks ended March ~~25, 2022~~31, 2023 and March ~~26, 2021.~~25, 2022.

Note 12 – Income Taxes

The Company’s effective tax rate was 26.0% and 27.1% thirteen weeks ended March 31, 2023 and March 25, 2022. The effective tax rate varies from the 21% statutory rate primarily due to state taxes. The lower effective tax rate for the thirteen weeks ended March 31, 2023 was primarily driven by a greater mix of foreign earnings that are subject to tax rates below the US statutory rate of 21%.

Note 1213 – Supplemental Disclosures of Cash Flow Information


		Thirteen Weeks Ended					Thirteen Weeks Ended
		March 25, 2022		March 26, 2021			March 31, 2023		March 25, 2022
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:					Supplemental cash flow disclosures:
Cash received for income taxes		$	(282)	$	(237)
Cash paid (received) for income taxes						Cash paid (received) for income taxes	$	2,539	$	(282)
Cash paid for interest, net of cash received	Cash paid for interest, net of cash received	$	3,011	$	2,929	Cash paid for interest, net of cash received	$	7,366	$	3,011
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	6,766	$	6,369	Operating cash flows from operating leases	$	9,001	$	6,766
Operating cash flows from finance leases	Operating cash flows from finance leases	$	1,028	$	145	Operating cash flows from finance leases	$	914	$	1,028
Other non-cash investing and financing activities						Other non-cash investing and financing activities
ROU assets obtained in exchange for lease liabilities:	ROU assets obtained in exchange for lease liabilities:					ROU assets obtained in exchange for lease liabilities:
Operating leases	Operating leases	$	8,589	$	14	Operating leases	$	32,615	$	8,589
Finance leases	Finance leases	$	—	$	162	Finance leases	$	2,697	$	—
Other non-cash investing and financing activities:

Warrants issued for acquisitions	Warrants issued for acquisitions	$	1,701	$	—	Warrants issued for acquisitions	$	—	$	1,701

Contingent earn-out liabilities for acquisitions						Contingent earn-out liabilities for acquisitions	$	7,800	$	—

Note 14 – Subsequent Events

On May 1, 2023, the Company entered into a stock purchase agreement to acquire substantially all of the assets of Greenleaf Produce and Specialty Foods, a leading produce and specialty food distributor in Northern California. The initial purchase price was $80,000 consisting of $70,000 paid in cash at closing, subject to a customary working capital true-up, and the issuance of a $10,000 unsecured note. The unsecured note matures on April 30, 2025 and bears interest of 4.47%. The Company has not provided preliminary purchase price allocation for this acquisition as the initial accounting is incomplete. The acquisition was partially funded by a $40,000 incremental draw on the Company’s asset-based loan facility.

1517

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to the accompanying condensed consolidated financial statements and footnotes to help provide an understanding of our financial condition, changes in our financial condition and results of operations. The following discussion should be read in conjunction with information included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February ~~22, 2022.~~28, 2023. Unless otherwise indicated, the terms “Company”, “Chefs’ Warehouse”, “we”, “us” and “our” refer to The Chefs’ Warehouse, Inc. and its subsidiaries.

Business Overview

We are a premier distributor of specialty foods in ~~nine of~~ the leading culinary markets in the United ~~States.~~States and the Middle East. We offer more than ~~50,000~~55,000 stock-keeping units (“SKUs”), ranging from high-quality specialty foods and ingredients to basic ingredients and staples and center-of-the-plate proteins. We serve more than ~~35,000~~40,000 customer locations, primarily located in our ~~nineteen~~23 geographic markets across the United States, Middle East and Canada, and the majority of our customers are independent restaurants and fine dining establishments. We also sell certain of our products directly to consumers through our Allen Brothers and “Shop Like a Chef” retail channels.

~~Effect of the COVID-19 Pandemic on our Business and Operations~~

The COVID-19 pandemic (“Pandemic”) has had and continues to have an adverse impact on numerous aspects of our business and those of our customers including, but not limited to, demand for our products, cost inflation and labor shortages. Despite these challenges, we’ve continued to provide our core customers with high touch service, executed on our cost control measures and have returned to profitability since the second quarter of fiscal 2021. We continue to experience sequential improvement in our business which has contributed to organic sales growth of $176.3 million compared to the prior year quarter.

The extent to which the Pandemic will impact our financial condition or results of operations is uncertain and will depend on future developments including new information that may emerge on the severity or transmissibility of the disease, new variants, government responses, trends in infection rates, development and distribution of effective medical treatments and vaccines, and future consumer spending behavior, among others.

Recent Acquisitions

On ~~December 28, 2021,~~March 20, 2023, pursuant to an asset purchase agreement, we acquired substantially all of the assets of ~~CGC Holdings, Inc.~~Hardie’s F&V, LLC (“~~Capital Seaboard”~~Hardie’s Fresh Foods”), a specialty ~~seafood and~~ produce distributor with operations in ~~Maryland.~~Texas. The initial purchase price was approximately ~~$29.7~~$38.0 million, paid in cash at closing and is subject to customary working capital adjustments. We will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total $10.0 million over a two-year period.

During the thirteen weeks ended March 31, 2023 , the Company completed two other acquisitions for an aggregate purchase price of approximately $14.4 million, consisting of ~~$28.0~~$12.2 million paid in cash at closing, subject to ~~a customary~~customer working capital ~~adjustment,~~adjustments, and ~~common stock warrants~~$2.2 million of ~~$1.7 million.~~deferred payments. The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $2.0 million in the aggregate.

1618

RESULTS OF OPERATIONS


		Thirteen Weeks Ended				Thirteen Weeks Ended
		March 25, 2022		March 26, 2021				March 31, 2023		March 25, 2022
Net sales	Net sales	$	512,103	$	280,217		Net sales	$	719,645	$	512,103
Cost of sales	Cost of sales	394,590		221,270			Cost of sales	549,937		394,590
Gross profit	Gross profit	117,513		58,947			Gross profit	169,708		117,513
Selling, general and administrative expenses	Selling, general and administrative expenses	110,086		80,245			Selling, general and administrative expenses	156,137		110,086
Other operating expenses (income), net		1,163		(1,170)
Operating income (loss)		6,264		(20,128)
Other operating expenses, net							Other operating expenses, net	1,672		1,163
Operating income							Operating income	11,899		6,264

Interest expense	Interest expense	4,365		4,763			Interest expense	10,006		4,365
Income (loss) before income taxes		1,899		(24,891)
Provision for income tax expense (benefit)		514		(6,970)
Net income (loss)		$	1,385	$	(17,921)
Income before income taxes							Income before income taxes	1,893		1,899
Provision for income tax expense							Provision for income tax expense	492		514
Net income							Net income	$	1,401	$	1,385

Management evaluates the results of operations and cash flows using a variety of key performance indicators, including net sales compared to prior periods and internal forecasts, costs of our products and results of our cost-control initiatives, and use of operating cash. These indicators are discussed throughout the “Results of Operations” and “Liquidity and Capital Resources” sections of this MD&A.

Thirteen Weeks Ended March ~~25, 2022~~31, 2023 Compared to Thirteen Weeks Ended March ~~26, 2021~~25, 2022

Net Sales

2022 2021 $ Change % Change
Net sales $ 512,103 $ 280,217 $ 231,886 82.8 %


	2023		2022		$ Change		% Change
Net sales	$	719,645	$	512,103	$	207,542	40.5	%

Organic growth contributed ~~$176.3~~$87.9 million, or ~~62.9%~~17.1%, to sales growth and the remaining sales growth of ~~$55.6~~$119.7 million, or ~~19.9%~~23.4%, resulted from acquisitions. Organic case count increased approximately ~~47.3%~~16.8% in our specialty category. In addition, specialty unique customers and placements increased ~~29.4%~~21.2% and ~~41.6%~~18.7%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased ~~26.0%~~14.4% compared to the prior year. Estimated inflation was ~~14.9%~~5.5% in our specialty category and ~~28.5%~~3.2% in our center-of-the-plate category compared to the prior year period.

Gross Profit


		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change
Gross profit	Gross profit	$	117,513		$	58,947		$	58,566	99.4	%	Gross profit	$	169,708		$	117,513		$	52,195	44.4	%
Gross profit margin	Gross profit margin	22.9		%	21.0		%					Gross profit margin	23.6		%	22.9		%

Gross profit dollars increased primarily as a result of increased sales and price inflation. Gross profit margin increased approximately ~~191~~64 basis ~~points due to favorable sales mix towards higher margin specialty products.~~points. Gross profit margins increased ~~213~~65 basis points in the Company’s specialty category and ~~increased 111~~decreased 68 basis points in the Company’s center-of-the-plate category. Estimated inflation was 5.5% in the Company’s specialty category and 3.2% in the center-of-the-plate category compared to the prior year period. Specialty margins increased primarily due to changes in product mix. Margin rates in the center-of-the-plate category decreased due to higher inflationary impacts of certain products during the first quarter of fiscal 2023.

Selling, General and Administrative Expenses


		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change
Selling, general and administrative expenses	Selling, general and administrative expenses	$	110,086		$	80,245		$	29,841	37.2	%	Selling, general and administrative expenses	$	156,137		$	110,086		$	46,051	41.8	%
Percentage of net sales	Percentage of net sales	21.5		%	28.6		%					Percentage of net sales	21.7		%	21.5		%

The increase in selling, general and administrative expenses was primarily due to higher costs associated with compensation and benefits, facilities costs, and distribution costs to support sales growth. Our ratio of selling, general and administrative expenses to net sales ~~decreased predominately due to sales growth which contributing to improved fixed cost leverage in~~was relatively consistent with the prior year quarter.

1719

Other Operating Expenses, ~~(Income),~~ Net

2022 2021 $ Change % Change
Other operating expenses (income), net $ 1,163 $ (1,170) $ 2,333 (199.4) %


	2023		2022		$ Change		% Change
Other operating expenses, net	$	1,672	$	1,163	$	509	43.8	%

The increase in net other operating expenses was primarily due to ~~non-cash charges of $0.3 million for changes~~higher third-party deal costs incurred in ~~the fair value of our contingent earn-out liabilities compared to non-cash credits of $1.3 million in the prior year period.~~connection with business acquisitions.

Interest Expense

2022 2021 $ Change % Change
Interest expense $ 4,365 $ 4,763 $ (398) (8.4) %


	2023		2022		$ Change		% Change
Interest expense	$	10,006	$	4,365	$	5,641	129.2	%

Interest expense ~~decreased~~increased primarily driven by higher principal amounts of outstanding debt due to ~~lower effective interest rates~~our 2028 convertible notes issued on December 13, 2022, our term loan refinancing on August 23, 2022, an increase in amounts drawn on our ~~outstanding debt as a result~~asset-based loan facility and higher rates of interest charged on the ~~$50.0 million aggregate principal amount~~variable rate portion of ~~Convertible Senior Notes issued on March 1, 2021 which were used to repay higher interest rate~~our outstanding debt.

Provision for Income Taxes


		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change
Provision for income tax expense (benefit)		$	514		$	(6,970)		$	7,484	(107.4)	%
Provision for income tax expense												Provision for income tax expense	$	492		$	514		$	(22)	(4.3)	%
Effective tax rate	Effective tax rate	27.1		%	28.0		%					Effective tax rate	26.0		%	27.1		%

The ~~increase in income tax expense is due to pre-tax income in the current period compared to a pre-tax loss in the prior year quarter. The~~lower effective tax rate infor the ~~current period is lower due~~thirteen weeks ended March 31, 2023 was primarily driven by a greater mix of foreign earnings that are subject to ~~insignificant changes in certain permanent~~ tax ~~differences.~~rates below the US statutory rate of 21%.

1820

LIQUIDITY AND CAPITAL RESOURCES

We finance our day-to-day operations and growth primarily with cash flows from operations, borrowings under our senior secured credit facilities and other indebtedness, operating leases, trade payables and equity financing.

Indebtedness

The following table presents selected financial information on our indebtedness (in thousands):


		March 25, 2022		December 24, 2021			March 31, 2023		December 30, 2022
Senior secured term loan	Senior secured term loan	$	168,247	$	168,675	Senior secured term loan	$	298,500	$	299,250
Total convertible debt	Total convertible debt	204,000		204,000		Total convertible debt	331,184		333,184
Borrowings outstanding on asset-based loan facility		20,000		20,000
Borrowings outstanding on asset-based loan facility and revolving credit facilities						Borrowings outstanding on asset-based loan facility and revolving credit facilities	42,217		42,217
Finance leases and other financing obligations	Finance leases and other financing obligations	10,875		11,602		Finance leases and other financing obligations	14,913		11,331
Total	Total	$	403,122	$	404,277	Total	$	686,814	$	685,982

As of March ~~25, 2022,~~31, 2023, we have various floating- and fixed-rate debt instruments with varying maturities for an aggregate principal amount of ~~$392.2~~$671.9 million.

On March 11, 2022, we entered into a third amendment to our asset-based loan facility ABL Facility which increased the aggregate commitments from $150.0 million to $200.0 million. See Note 9 “Debt Obligations” to our consolidated financial statements for a full description.

Liquidity

The following table presents selected financial information on liquidity (in thousands):


		March 25, 2022		December 24, 2021			March 31, 2023		December 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	79,439	$	115,155	Cash and cash equivalents	$	91,742	$	158,800
Working capital, excluding cash and cash equivalents	Working capital, excluding cash and cash equivalents	165,066		157,787		Working capital, excluding cash and cash equivalents	300,871		278,315
Availability under asset-based loan facility	Availability under asset-based loan facility	126,240		109,459		Availability under asset-based loan facility	135,830		135,827
Total	Total	$	370,745	$	382,401	Total	$	528,443	$	572,942

We expect our capital expenditures, excluding cash paid for acquisitions, for fiscal ~~2022~~2023 will be approximately ~~$36.0~~$50.0 million to ~~$45.0~~$60.0 million. We believe our existing balances of cash and cash equivalents, working capital and the availability under our asset-based loan facility, are sufficient to satisfy our working capital needs, capital expenditures, debt service and other liquidity requirements associated with our current operations over the next 12 months.

Cash Flows

The following table presents selected financial information on cash flows (in thousands):


		Thirteen Weeks Ended					Thirteen Weeks Ended
		March 25, 2022		March 26, 2021			March 31, 2023		March 25, 2022
Net income (loss)		$	1,385	$	(17,921)
Net income						Net income	$	1,401	$	1,385
Non-cash charges	Non-cash charges	$	14,271	$	5,298	Non-cash charges	$	20,995	$	14,271
Changes in working capital	Changes in working capital	$	(5,373)	$	960	Changes in working capital	$	(24,657)	$	(5,373)
Net cash provided by (used in) operating activities		$	10,283	$	(11,663)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	$	(2,261)	$	10,283
Net cash used in investing activities	Net cash used in investing activities	$	(42,206)	$	(2,896)	Net cash used in investing activities	$	(59,633)	$	(42,206)
Net cash used in financing activities	Net cash used in financing activities	$	(3,851)	$	(3,726)	Net cash used in financing activities	$	(5,141)	$	(3,851)

Net cash used in operations was $2.3 million for the thirteen weeks ended March 31, 2023 compared to net cash provided by operating activities of $10.3 million for the thirteen weeks ended March 25, ~~2022 consisting of a net income of $1.4 million and $14.3 million of non-cash charges, partially offset~~2022. The decrease in cash provided by ~~investments in~~operating activities was primarily due to the working capital growth of ~~$5.4 million. Non-cash charges decreased $9.0~~$19.3 million ~~primarily due~~versus the prior year period which was driven by a strategic decision to ~~a $5.5 million~~pull forward inventory purchases of certain product categories during the first quarter of fiscal 2023. We expect our inventory levels to normalize during the remainder of the year. The increase in ~~deferred tax~~cash used for working capital growth was partially offset by increased net income, net of non-cash charges, in the current year of $22.4 million compared to $15.7 million in the prior year period. This increase is driven by higher depreciation and amortization expenses, ~~and a $1.6 million~~stock-based

1921

~~increase~~compensation expenses and a release in ~~changes~~our provision for doubtful accounts in the ~~fair value of earn-out liabilities. The cash used for working capital growth of $6.3 million is primarily driven by~~prior year quarter related to the ~~Company’s reinvestment~~pandemic recovery which did not recur in ~~working capital to support sales growth.~~the current period.

Net cash used in investing activities was ~~$42.2~~$59.6 million for the thirteen weeks ended March ~~25, 2022,~~31, 2023, driven by capital expenditures of ~~$14.2~~$8.7 million ~~which includes the purchase of our distribution facility in Columbus, Ohio~~ and ~~$28.0~~$50.9 million in cash paid for ~~the Capital Seaboard acquisition.~~acquisitions.

Net cash used in financing activities was ~~$3.9~~$5.1 million for the thirteen weeks ended March ~~25, 2022,~~31, 2023 driven by ~~$2.0~~$3.4 million of payments of debt and other financing obligations, including finance leases, and $1.8 million paid for shares surrendered to pay tax withholding related to the vesting of equity incentive plan ~~awards and $1.4 million of payments made on senior term loans and finance lease obligations..~~awards.

Seasonality

Excluding our direct-to-consumer business, we generally do not experience any material seasonality. However, our sales and operating results may vary from quarter to quarter due to factors such as changes in our operating expenses, management’s ability to execute our operating and growth strategies, personnel changes, demand for our products, supply shortages, weather patterns and general economic conditions.

Our direct-to-consumer business is subject to seasonal fluctuations, with direct-to-consumer center-of-the-plate protein sales typically higher during the holiday season in our fourth quarter; accordingly, a disproportionate amount of operating cash flows from this portion of our business is generated by our direct-to-consumer business in the fourth quarter of our fiscal year. Despite a significant portion of these sales occurring in the fourth quarter, there are operating expenses, principally advertising and promotional expenses, throughout the year.

The Pandemic has had a material impact on our business and operations and those of our customers. Our net sales were most significantly impacted during the second quarter of fiscal 2020 when, in an effort to limit the spread of the virus, federal, state and local governments began implementing various restrictions that resulted in the closure of non-essential businesses in many of the markets we serve, which forced our customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations.

Inflation

Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our customers. The impact of inflation and deflation on food, labor, energy and occupancy costs can significantly affect the profitability of our operations.

~~Off-Balance Sheet Arrangements~~

~~As of March 25, 2022, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.~~

Critical Accounting Policies and Estimates

The preparation of the Company’s condensed consolidated financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The SEC has defined critical accounting policies and estimates as those that are both most important to the portrayal of the Company’s financial condition and results and require its most difficult, complex or subjective judgments or estimates. Based on this definition, we believe our critical accounting policies and estimates include the following: (i) determining our allowance for doubtful accounts, (ii) inventory valuation, with regard to determining inventory balance adjustments for excess and obsolete inventory, (iii) business combinations, (iv) valuing goodwill and intangible assets, (v) self-insurance reserves, (vi) accounting for income taxes and (vii) contingent earn-out liabilities. Our critical accounting policies and estimates are described in the Form 10-K filed with the SEC on February ~~22, 2022.~~28, 2023.

2022

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to interest rate market risk relates primarily to our long-term debt. As of March ~~25, 2022,~~31, 2023, we had an aggregate ~~$188.2 million of~~ indebtedness outstanding ~~under the Term Loan and ABL Facility~~of $340.7 million that bore interest at variable rates. A 100 basis point increase in market interest rates would decrease our after tax earnings by approximately ~~$1.4~~$2.5 million per annum, holding other variables constant.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March ~~25, 2022.~~31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March ~~25, 2022~~31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in legal proceedings, claims and litigation arising out of the ordinary conduct of our business. Although we cannot assure the outcome, management presently believes that the result of such legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our condensed consolidated financial statements, and no material amounts have been accrued in our condensed consolidated financial statements with respect to these matters.

ITEM 1A. RISK FACTORS

There have been no material changes to our risk factors as previously disclosed in Part I, Item 1A. included in our Annual Report on Form 10-K for the year ended December ~~24, 2021~~30, 2022 filed with the SEC on February ~~22, 2022.~~28, 2023. In addition to the information contained herein, you should consider the risk factors disclosed in our Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Total Number
of Shares
Repurchased(1)
Average
Price
Paid Per Share Total
Number of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs Maximum
Number (or
Approximate
Dollar Value) of
Shares That May
Yet Be Purchased
Under the Plans
or Programs
December 25, 2021 to January 21, 2022 — $ — — —
January 22, 2022 to February 18, 2022 — �� — —
February 19, 2022 to March 25, 2022 64,329 31.67 — —
Total 64,329 $ 31.67 — —


	Total Number of Shares Repurchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
December 31, 2022 to January 27, 2023	—	$	—	—	—
January 28, 2023 to February 24, 2023	52,632	33.84		—	—
February 25, 2023 to March 31, 2023	1,404	33.05		—	—
Total	54,036	$	33.82	—	—

(1)During the thirteen weeks ended March ~~25, 2022,~~31, 2023, we withheld ~~64,329~~54,036 shares of our common stock to satisfy tax withholding requirements related to restricted shares of our common stock awarded to our officers and key employees resulting from either elections under 83(b) of the Internal Revenue Code of 1986, as amended, or upon vesting of such awards.

2123

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

2224

ITEM 6.7. EXHIBITS


Exhibit No.						Description

~~10.1†~~						~~Amendment No. 3, dated as of March 11, 2022, to the ABL Facility.~~









31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document – the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.



			†			~~Filed herewith~~

2325

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~April 27, 2022.~~May 10, 2023.


									THE CHEFS’ WAREHOUSE, INC.
									(Registrant)

Date: ~~April 27, 2022~~May 10, 2023									/s/ James Leddy
									James Leddy
									Chief Financial Officer
									(Principal Financial Officer)

Date: ~~April 27, 2022~~May 10, 2023									/s/ Timothy McCauley
									Timothy McCauley
									Chief Accounting Officer
									(Principal Accounting Officer)

2426


	Bassian		Sid Wainer		Other Acquisitions		Total





Balance December 24, 2021	$	1,133	$	—	$	5,744	$	6,877



Changes in fair value	232		—		67		299
Balance March 25, 2022	$	1,365	$	—	$	5,811	$	7,176


	March 25, 2022		December 24, 2021
Principal amount outstanding	$	200,000	$	200,000
Unamortized deferred financing fees and premium	(2,462)		(2,686)
Net carry value	$	197,538	$	197,314