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 ~~June~~March 25, ~~2021~~2022


☐			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
~~Preferred Stock Purchase Rights~~	~~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 ~~July 26, 2021: 37,958,563~~April 25, 2022: 38,232,118

THE CHEFS’ WAREHOUSE, INC.

FORM 10-Q

Table of Contents


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):	4

	Consolidated Balance Sheets	4

	Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)	5

	Consolidated Statements of Changes in Stockholders’ Equity	6

	Consolidated Statements of Cash Flows	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

Item 4.	Controls and Procedures	21

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2321

Item 1A.	Risk Factors	2321

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2321

Item 3.	Defaults Upon Senior Securities	2322

Item 4.	Mine Safety Disclosures	2322

Item 5.	Other Information	2322

Item 6.	Exhibits	2423

	Signatures	2524

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 Rate (LIBOR), or the replacement of LIBOR with an alternative rate; 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 ~~23, 2021~~22, 2022 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. CONSOLIDATED FINANCIAL STATEMENTS

THE CHEFS’ WAREHOUSE, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)


		June 25, 2021 (unaudited)		December 25, 2020			March 25, 2022 (unaudited)		December 24, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	146,920	$	193,281	Cash and cash equivalents	$	79,439	$	115,155
Accounts receivable, net of allowance of $22,015 in 2021 and $24,027 in 2020		136,072		96,383
Accounts receivable, net of allowance of $19,168 in 2022 and $20,260 in 2021						Accounts receivable, net of allowance of $19,168 in 2022 and $20,260 in 2021	169,792		172,540
Inventories, net	Inventories, net	122,936		82,519		Inventories, net	152,443		144,491

Prepaid expenses and other current assets	Prepaid expenses and other current assets	33,654		33,479		Prepaid expenses and other current assets	37,002		37,774
Total current assets	Total current assets	439,582		405,662		Total current assets	438,676		469,960

Equipment, leasehold improvements and software, net	Equipment, leasehold improvements and software, net	114,982		115,448		Equipment, leasehold improvements and software, net	151,751		133,622
Operating lease right-of-use assets	Operating lease right-of-use assets	107,736		115,224		Operating lease right-of-use assets	148,381		130,701
Goodwill	Goodwill	220,575		214,864		Goodwill	230,988		221,775
Intangible assets, net	Intangible assets, net	108,799		111,717		Intangible assets, net	108,832		104,743
Deferred taxes, net	Deferred taxes, net	15,290		7,535		Deferred taxes, net	8,876		9,380
Other assets	Other assets	3,634		3,875		Other assets	4,065		3,614
Total assets	Total assets	$	1,010,598	$	974,325	Total assets	$	1,091,569	$	1,073,795
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	107,918	$	57,515	Accounts payable	$	121,444	$	118,284
Accrued liabilities	Accrued liabilities	29,949		27,924		Accrued liabilities	34,852		35,390
Short-term operating lease liabilities	Short-term operating lease liabilities	17,121		17,167		Short-term operating lease liabilities	17,835		15,882
Accrued compensation	Accrued compensation	15,051		9,401		Accrued compensation	15,069		22,321
Current portion of long-term debt	Current portion of long-term debt	5,844		6,095		Current portion of long-term debt	4,971		5,141
Total current liabilities	Total current liabilities	175,883		118,102		Total current liabilities	194,171		197,018
Long-term debt, net of current portion	Long-term debt, net of current portion	395,543		398,084		Long-term debt, net of current portion	393,565		394,160
Operating lease liabilities	Operating lease liabilities	101,906		109,133		Operating lease liabilities	143,827		127,296

Other liabilities and deferred credits	Other liabilities and deferred credits	4,217		4,416		Other liabilities and deferred credits	5,581		5,110
Total liabilities	Total liabilities	677,549		629,735		Total liabilities	737,144		723,584
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at June 25, 2021 and December 25, 2020		0		0
Common Stock, - $0.01 par value, 100,000,000 shares authorized, 37,961,863 and 37,274,768 shares issued and outstanding at June 25, 2021 and December 25, 2020, respectively		380		373
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 25, 2022 and December 24, 2021						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						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	Additional paid in capital	308,852		303,734		Additional paid in capital	316,943		314,242
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,894)		(2,051)		Accumulated other comprehensive loss	(1,897)		(2,022)
Retained earnings	Retained earnings	25,711		42,534		Retained earnings	38,996		37,611
Total stockholders’ equity	Total stockholders’ equity	333,049		344,590		Total stockholders’ equity	354,425		350,211
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,010,598	$	974,325	Total liabilities and stockholders’ equity	$	1,091,569	$	1,073,795

See accompanying notes to the consolidated financial statements.

THE CHEFS’ WAREHOUSE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

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


		Thirteen Weeks Ended				Twenty-Six Weeks Ended					Thirteen Weeks Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020			March 25, 2022		March 26, 2021
Net sales	Net sales	$	422,968	$	200,496	$	703,185	$	575,927	Net sales	$	512,103	$	280,217
Cost of sales	Cost of sales	327,094		157,070		548,364		447,013		Cost of sales	394,590		221,270
Gross profit	Gross profit	95,874		43,426		154,821		128,914		Gross profit	117,513		58,947
Selling, general and administrative expenses	Selling, general and administrative expenses	90,358		68,165		170,603		177,047		Selling, general and administrative expenses	110,086		80,245
Other operating (income) expenses, net		857		670		(313)		(5,666)
Other operating expenses (income), net										Other operating expenses (income), net	1,163		(1,170)
Operating income (loss)	Operating income (loss)	4,659		(25,409)		(15,469)		(42,467)		Operating income (loss)	6,264		(20,128)
Interest expense	Interest expense	4,408		5,772		9,171		10,896		Interest expense	4,365		4,763

Income (loss) before income taxes	Income (loss) before income taxes	251		(31,181)		(24,640)		(53,363)		Income (loss) before income taxes	1,899		(24,891)
Provision for income tax benefit		(847)		(10,847)		(7,817)		(18,944)
Provision for income tax expense (benefit)										Provision for income tax expense (benefit)	514		(6,970)
Net income (loss)	Net income (loss)	$	1,098	$	(20,334)	$	(16,823)	$	(34,419)	Net income (loss)	$	1,385	$	(17,921)
Other comprehensive income (loss):
Other comprehensive income:										Other comprehensive income:
Foreign currency translation adjustments	Foreign currency translation adjustments	76		117		157		(261)		Foreign currency translation adjustments	125		81
Comprehensive income (loss)	Comprehensive income (loss)	$	1,174	$	(20,217)	$	(16,666)	$	(34,680)	Comprehensive income (loss)	$	1,510	$	(17,840)
Net income (loss) per share:	Net income (loss) per share:									Net income (loss) per share:
Basic	Basic	$	0.03	$	(0.62)	$	(0.46)	$	(1.10)	Basic	$	0.04	$	(0.49)
Diluted	Diluted	$	0.03	$	(0.62)	$	(0.46)	$	(1.10)	Diluted	$	0.04	$	(0.49)
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	36,831,054		32,698,295		36,615,463		31,150,883		Basic	36,935,717		36,401,748
Diluted	Diluted	37,081,186		32,698,295		36,615,463		31,150,883		Diluted	37,307,478		36,401,748

See accompanying notes to the consolidated financial statements.

THE CHEFS’ WAREHOUSE, INC.

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 25, 2020		37,274,768	$	373			$	303,734						$	(2,051)			$	42,534		$	344,590

Net loss		—	—		—				—			(17,921)				(17,921)
Stock compensation		673,430	6		2,452				—			—				2,458

Cumulative translation adjustment		—	—		—				81			—				81
Shares surrendered to pay tax withholding		(38,503)	—		(1,192)				—			—				(1,192)
Balance March 26, 2021		37,909,695	$	379	$	304,994			$	(1,970)		$	24,613			$	328,016
Balance December 24, 2021																			Balance December 24, 2021	37,887,675			$	380		$	314,242		$	(2,022)		$	37,611		$	350,211

Net income	Net income	—	—		—				—			1,098				1,098			Net income	—			—		—			—			1,385			1,385
Stock compensation	Stock compensation	69,245	1		3,279				—			—				3,280			Stock compensation	433,115			4		3,039			—			—			3,043

Warrants issued for acquisitions		—	—		1,120				—			—				1,120
Warrants issued for acquisition																			Warrants issued for acquisition	—			—		1,701			—			—			1,701

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—				76			—				76			Cumulative translation adjustment	—			—		—			125			—			125
Shares surrendered to pay tax withholding	Shares surrendered to pay tax withholding	(17,077)	—		(541)				—			—				(541)			Shares surrendered to pay tax withholding	(64,329)			(1)		(2,039)			—			—			(2,040)
Balance June 25, 2021		37,961,863	$	380	$	308,852			$	(1,894)		$	25,711			$	333,049
Balance March 25, 2022																			Balance March 25, 2022	38,256,461			$	383	$	316,943		$	(1,897)		$	38,996		$	354,425


Balance December 27, 2019		30,341,941	$	304	$	212,240	$	(2,048)	$	125,437	$	335,933
Balance December 25, 2020													Balance December 25, 2020	37,274,768	$	373	$	303,734	$	(2,051)	$	42,534	$	344,590

Net loss	Net loss	—	—		—		—		(14,085)		(14,085)		Net loss	—	—		—		—		(17,921)		(17,921)
Stock compensation	Stock compensation	807,433	8		843		—		—		851		Stock compensation	673,430	6		2,452		—		—		2,458

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—		(378)		—		(378)		Cumulative translation adjustment	—	—		—		81		—		81
Shares surrendered to pay tax withholding	Shares surrendered to pay tax withholding	(159,632)	(2)		(2,702)		—		—		(2,704)		Shares surrendered to pay tax withholding	(38,503)	—		(1,192)		—		—		(1,192)
Balance March 27, 2020		30,989,742	$	310	$	210,381	$	(2,426)	$	111,352	$	319,617

Net loss		—	—		—		—		(20,334)		(20,334)
Stock compensation		176,037	2		1,997		—		—		1,999

Public offering of common stock		6,634,615	66		85,875		—		—		85,941

Cumulative translation adjustment		—	—		—		117		—		117
Shares surrendered to pay tax withholding		(1,846)	—		(23)		—		—		(23)
Balance June 26, 2020		37,798,548	$	378	$	298,230	$	(2,309)	$	91,018	$	387,317
Balance March 26, 2021													Balance March 26, 2021	37,909,695	$	379	$	304,994	$	(1,970)	$	24,613	$	328,016

See accompanying notes to the consolidated financial statements.

THE CHEFS’ WAREHOUSE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)


		Twenty-Six Weeks Ended					Thirteen Weeks Ended
		June 25, 2021		June 26, 2020			March 25, 2022		March 26, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss		$	(16,823)	$	(34,419)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Net income (loss)						Net income (loss)	$	1,385	$	(17,921)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	10,660		9,675		Depreciation and amortization	5,889		5,107
Amortization of intangible assets	Amortization of intangible assets	6,643		6,720		Amortization of intangible assets	3,356		3,539
Provision for allowance for doubtful accounts		488		19,611
Benefit for allowance for doubtful accounts						Benefit for allowance for doubtful accounts	(178)		(451)
Non-cash operating lease expense	Non-cash operating lease expense	209		463		Non-cash operating lease expense	802		109
Benefit for deferred income taxes		(7,755)		(5,814)
Provision (benefit) for deferred income taxes						Provision (benefit) for deferred income taxes	504		(5,025)
Amortization of deferred financing fees	Amortization of deferred financing fees	1,364		1,478		Amortization of deferred financing fees	539		864

Stock compensation	Stock compensation	5,738		2,850		Stock compensation	3,043		2,458
Change in fair value of contingent earn-out liabilities	Change in fair value of contingent earn-out liabilities	(1,420)		(6,649)		Change in fair value of contingent earn-out liabilities	299		(1,308)
Intangible asset impairment		597		0

Loss on asset disposal	Loss on asset disposal	224		43		Loss on asset disposal	17		5
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	(37,107)		70,483		Accounts receivable	10,084		(2,585)
Inventories	Inventories	(39,347)		34,877		Inventories	(4,391)		(9,357)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(101)		(9,460)		Prepaid expenses and other current assets	(1,080)		850
Accounts payable, accrued liabilities and accrued compensation	Accounts payable, accrued liabilities and accrued compensation	52,541		(43,398)		Accounts payable, accrued liabilities and accrued compensation	(9,830)		12,026

Other assets and liabilities	Other assets and liabilities	167		1,119		Other assets and liabilities	(156)		26
Net cash (used in) provided by operating activities		(23,922)		47,579
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	10,283		(11,663)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(9,574)		(4,400)		Capital expenditures	(14,206)		(2,896)
Cash paid for acquisitions, net of cash received	Cash paid for acquisitions, net of cash received	(7,165)		(63,450)		Cash paid for acquisitions, net of cash received	(28,000)		—

Net cash used in investing activities	Net cash used in investing activities	(16,739)		(67,850)		Net cash used in investing activities	(42,206)		(2,896)

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	(34,372)		(37,439)		Payment of debt, finance lease and other financing obligations	(1,405)		(32,834)
Proceeds from the issuance of common stock, net of issuance costs		0		85,941

Proceeds from debt issuance	Proceeds from debt issuance	51,750		0		Proceeds from debt issuance	—		51,750

Payment of deferred financing fees	Payment of deferred financing fees	(1,450)		(856)		Payment of deferred financing fees	(406)		(1,450)

Surrender of shares to pay withholding taxes	Surrender of shares to pay withholding taxes	(1,487)		(2,727)		Surrender of shares to pay withholding taxes	(2,040)		(1,192)
Cash paid for contingent earn-out liability		(83)		(2,927)
Borrowings under asset-based loan facility		0		100,000

Payments under asset-based loan facility	Payments under asset-based loan facility	(20,000)		(60,000)		Payments under asset-based loan facility	—		(20,000)

Net cash (used in) provided by financing activities		(5,642)		81,992
Net cash used in financing activities						Net cash used in financing activities	(3,851)		(3,726)

Effect of foreign currency on cash and cash equivalents	Effect of foreign currency on cash and cash equivalents	(58)		(130)		Effect of foreign currency on cash and cash equivalents	58		4
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(46,361)		61,591		Net change in cash and cash equivalents	(35,716)		(18,281)
Cash and cash equivalents-beginning of period	Cash and cash equivalents-beginning of period	193,281		140,233		Cash and cash equivalents-beginning of period	115,155		193,281
Cash and cash equivalents-end of period	Cash and cash equivalents-end of period	$	146,920	$	201,824	Cash and cash equivalents-end of period	$	79,439	$	175,000

See accompanying notes to the consolidated financial statements.

THE CHEFS’ WAREHOUSE, INC.

NOTES TO 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 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. The Company’s business consists of 3 operating segments: East Coast, Midwest and West Coast that aggregate into 1 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.

~~The COVID-19 Pandemic~~

Many of the Company’s customers continue to be adversely impacted by the COVID-19 pandemic (the “Pandemic”), however there has been sequential improvement in the Company’s business throughout the second quarter of fiscal 2021 which has contributed to organic sales growth of $212,610 compared to the prior year quarter.

The future impact of the Pandemic on the Company’s business, operations and liquidity is difficult to predict at this time and is highly dependent on future developments including new information that may emerge on the severity of the disease, the extent of outbreaks, federal, state and local government responses, trends in infection rates, development of effective medical treatments for the disease, the pace of vaccination programs and future consumer spending behavior, among others.

Consolidation

The 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 consolidated financial statements and the related interim information contained within the notes to such unaudited 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 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 ~~25, 2020~~24, 2021 filed as part of the Company’s Annual Report on Form 10-K, as filed with the SEC on February ~~23, 2021.~~22, 2022.

The unaudited 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 ~~23, 2021,~~22, 2022, 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 ~~Pandemic~~COVID-19 pandemic and other factors, the results of operations for the thirteen ~~and twenty-six~~ weeks ended ~~June~~March 25, ~~2021~~2022 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.

~~Guidance Adopted in Fiscal 2021~~

~~Simplifying the Accounting for Income Taxes:~~ In December 2019, the Financial Accounting Standards Board (the “FASB”) issued guidance that eliminates certain exceptions related to the approach for intraperiod tax allocations, the methodology for calculating income taxes in an interim period and other simplifications and clarifications. As a result of the new guidance, the Company may recognize additional income tax benefits during interim periods in which interim losses exceed full year projections due to provisions in the guidance that remove loss limitation rules. This guidance was adopted on December 26, 2020 and adoption had an immaterial impact on the Company’s consolidated financial statements.

~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity:~~ In August 2020, the FASB issued guidance that simplifies the accounting models for financial instruments with characteristics of debt and equity. The amendments in the guidance result in fewer instances in which an embedded conversion feature must be accounted for separately from its host contract. This guidance will be effective for fiscal years beginning after December 15, 2021. This guidance was adopted on December 26, 2020 and adoption did not impact the Company’s consolidated financial statements.

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 2014 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 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

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								Twenty-Six Weeks Ended									Thirteen Weeks Ended
		June 25, 2021				June 26, 2020				June 25, 2021				June 26, 2020					March 25, 2022				March 26, 2021
Center-of-the-Plate	Center-of-the-Plate	$	215,089	50.9	%	$	115,834	57.8	%	$	354,934	50.5	%	$	279,654	48.6	%	Center-of-the-Plate	$	238,776	46.6	%	$	139,845	49.9	%
Dry Goods	Dry Goods	57,117		13.5	%	24,099		12.0	%	96,897		13.8	%	81,985		14.2	%	Dry Goods	78,515		15.3	%	39,780		14.2	%
Pastry	Pastry	41,312		9.8	%	15,548		7.8	%	70,110		10.0	%	64,809		11.3	%	Pastry	57,751		11.3	%	28,798		10.3	%
Cheese and Charcuterie	Cheese and Charcuterie	34,303		8.1	%	15,594		7.8	%	57,402		8.2	%	50,667		8.8	%	Cheese and Charcuterie	43,488		8.5	%	23,099		8.2	%
Produce	Produce	30,558		7.2	%	12,048		6.0	%	51,149		7.3	%	36,068		6.3	%	Produce	27,897		5.4	%	20,591		7.3	%
Dairy and Eggs	Dairy and Eggs	18,902		4.5	%	7,495		3.7	%	31,483		4.5	%	29,641		5.1	%	Dairy and Eggs	29,420		5.7	%	12,581		4.5	%
Oils and Vinegars	Oils and Vinegars	16,881		4.0	%	5,436		2.7	%	26,355		3.7	%	21,595		3.7	%	Oils and Vinegars	24,087		4.7	%	9,474		3.4	%
Kitchen Supplies	Kitchen Supplies	8,806		2.0	%	4,442		2.2	%	14,855		2.0	%	11,508		2.0	%	Kitchen Supplies	12,169		2.5	%	6,049		2.2	%
Total	Total	$	422,968	100	%	$	200,496	100	%	$	703,185	100	%	$	575,927	100	%	Total	$	512,103	100	%	$	280,217	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 ~~$6,679~~$9,036 and ~~$4,013~~$5,396 for the thirteen weeks ended ~~June~~March 25, ~~2021~~2022 and ~~June~~March 26, ~~2020, respectively, and $12,075 and $9,426 for the twenty-six weeks ended June 25,~~ 2021, ~~and June 26, 2020,~~ respectively.

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				Twenty-Six Weeks Ended					Thirteen Weeks Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020			March 25, 2022		March 26, 2021
Net income (loss) per share:	Net income (loss) per share:									Net income (loss) per share:
Basic	Basic	$	0.03	$	(0.62)	$	(0.46)	$	(1.10)	Basic	$	0.04	$	(0.49)
Diluted	Diluted	$	0.03	$	(0.62)	$	(0.46)	$	(1.10)	Diluted	$	0.04	$	(0.49)
Weighted average common shares:	Weighted average common shares:									Weighted average common shares:
Basic	Basic	36,831,054		32,698,295		36,615,463		31,150,883		Basic	36,935,717		36,401,748
Diluted	Diluted	37,081,186		32,698,295		36,615,463		31,150,883		Diluted	37,307,478		36,401,748

Reconciliation of net income (loss) per common share:


		Thirteen Weeks Ended				Twenty-Six Weeks Ended					Thirteen Weeks Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020			March 25, 2022		March 26, 2021
Numerator:	Numerator:									Numerator:
Net income (loss)	Net income (loss)	$	1,098	$	(20,334)	$	(16,823)	$	(34,419)	Net income (loss)	$	1,385	$	(17,921)

Denominator:	Denominator:									Denominator:
Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	36,831,054		32,698,295		36,615,463		31,150,883		Weighted average basic common shares outstanding	36,935,717		36,401,748
Dilutive effect of stock options and unvested common shares		250,132		0		0		0
Dilutive effect of unvested common shares										Dilutive effect of unvested common shares	330,415		—
Dilutive effect of stock options and warrants										Dilutive effect of stock options and warrants	41,346		—

Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	37,081,186		32,698,295		36,615,463		31,150,883		Weighted average diluted common shares outstanding	37,307,478		36,401,748

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		Twenty-Six Weeks Ended			Thirteen Weeks Ended
		June 25, 2021	June 26, 2020	June 25, 2021	June 26, 2020		March 25, 2022	March 26, 2021
Restricted share awards (“RSAs”)	Restricted share awards (“RSAs”)	0	773,988	349,389	613,905	Restricted share awards (“RSAs”)	113,061	779,968
Stock options		0	115,639	39,320	9,538
Warrants		103,226	0	52,459	0
Stock options and warrants						Stock options and warrants	293,407	115,639
Convertible notes	Convertible notes	4,616,033	3,484,788	4,205,246	3,484,788	Convertible notes	4,616,033	3,795,570

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 ~~$2,278~~$3,551 and ~~$2,556~~$3,252 as of ~~June~~March 25, ~~2021~~2022 and December ~~25, 2020,~~24, 2021, respectively, and are reflected as other liabilities and deferred credits on the consolidated balance sheets. The remaining short-term earn-out liabilities are reflected as accrued liabilities on the 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 consolidated statements of operations.

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

Fells Point Bassian Sid Wainer Other Acquisitions Total
Balance December 27, 2019 $ 4,544 $ 7,957 $ 0 $ 2,197 $ 14,698
Acquisition value 0 0 2,081 1,383 3,464
Cash payments 0 (2,250) 0 (1,677) (3,927)
Changes in fair value (4,544) (4,631) (1,570) (734) (11,479)
Balance December 25, 2020 $ 0 $ 1,076 $ 511 $ 1,169 $ 2,756
Acquisition value 0 0 0 3,400 3,400
Cash payments 0 0 0 (83) (83)
Changes in fair value 0 22 (511) (931) (1,420)
Balance June 25, 2021 $ 0 $ 1,098 $ 0 $ 3,555 $ 4,653


	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

Fair Value of Financial Instruments

The following table presents the carrying value and fair value of the Company’s convertible notes. In estimating the fair value of the convertible notes, 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.


		June 25, 2021				December 25, 2020					March 25, 2022				December 24, 2021
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value
Convertible Senior Notes	Convertible Senior Notes	$	200,000	$	203,115	$	150,000	$	163,204	Convertible Senior Notes	$	200,000	$	208,722	$	200,000	$	206,182
Convertible Unsecured Note	Convertible Unsecured Note	$	4,000	$	4,063	$	4,000	$	4,290	Convertible Unsecured Note	$	4,000	$	4,172	$	4,000	$	4,102

Note 5 – Acquisitions

~~During the second quarter of fiscal~~On December 28, 2021, pursuant to an asset purchase agreement, the Company ~~completed 2 acquisitions for an aggregate~~acquired substantially all of the assets of CGC Holdings, Inc. (“Capital Seaboard”), a specialty seafood and produce distributor in Maryland. The purchase price ofwas approximately ~~$8,285,~~$29,701 consisting of ~~$7,165~~$28,000 paid in cash at closing, subject to a customary working capital ~~adjustments,~~adjustment, and common stock warrants of ~~$1,120. The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $3,400 in aggregate.~~$1,701. The Company is in the process of finalizing a valuation of ~~the earn-out liabilities, and~~ tangible and intangible assets of Capital Seaboard as of the acquisition date. When applicable, these valuations require the use of Level 3 inputs. Goodwill for ~~these acquisitions~~the Capital Seaboard 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 and any intangible assets that do not qualify for separate recognition.

The Company reflected net sales and ~~loss~~income before taxes ~~of $9,038 and $94, respectively, during the thirteen and twenty-six weeks ended June 25, 2021 for these acquisitions~~ in its consolidated statement of ~~operations.~~operations related to the acquisitions as follows:


	Thirteen Weeks Ended
	March 25, 2022
Net sales	$	31,682
Income before income taxes	$	1,133

The table below presents unaudited pro forma consolidated income statement information of the Company as if the Capital Seaboard acquisition had occurred on December 26, 2020. 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. The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisition 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, any incremental costs for Capital Seaboard transitioning to become a public company, and also does not reflect additional revenue opportunities following the acquisition. The pro forma information reflects amortization and depreciation of the Capital Seaboard acquisition at their respective fair values.


	Thirteen Weeks Ended
	March 25, 2022		March 26, 2021
Net sales	$	512,103	$	306,712
Income (loss) before income taxes	$	1,899	$	(25,716)

The table below sets forth the preliminary purchase price allocation of ~~these acquisitions:~~this acquisition:

Capital Seaboard

Current assets

~~4,240~~10,130

Customer relationships

~~2,110~~4,500

Trademarks

~~2,140~~2,900

Goodwill

~~5,663~~9,129

Fixed assets

~~586~~9,552

Other assets

122

Right-of-use assets

~~761~~16,427

Lease liabilities

~~(761)~~(16,427)

Current liabilities

~~(3,054)~~(6,632)

~~Earn-out liability~~

~~(3,400)~~

Issuance of warrants

~~(1,120)~~(1,701)

Total cash consideration

~~7,165~~28,000

The Company recognized professional fees of ~~$75~~$659 in operating expenses related to ~~acquisitions~~acquisition related activities in the ~~second~~first quarter of fiscal ~~2021.~~2022.

Note 6 – Inventories

Inventories consist primarily of finished product and are reflected net of adjustments for shrinkage, excess and obsolescence totaling ~~$8,297~~$9,273 and ~~$9,013~~$8,312 at ~~June~~March 25, ~~2021~~2022 and December ~~25, 2020,~~24, 2021, respectively.

Note 7 – Equipment, Leasehold Improvements and Software

Equipment, leasehold improvements and software as of ~~June~~March 25, ~~2021~~2022 and December ~~25, 2020~~24, 2021 consisted of the following:


		Useful Lives	June 25, 2021		December 25, 2020			Useful Lives	March 25, 2022		December 24, 2021
Land	Land	Indefinite	$	5,020	$	5,020	Land	Indefinite	$	5,542	$	5,020
Buildings	Buildings	20 years	15,685		15,685		Buildings	20 years	23,436		18,406
Machinery and equipment	Machinery and equipment	5 - 10 years	24,931		24,900		Machinery and equipment	5 - 10 years	29,013		28,099
Computers, data processing and other equipment	Computers, data processing and other equipment	3 - 7 years	14,483		14,207		Computers, data processing and other equipment	3 - 7 years	15,811		15,480
Software	Software	3 - 7 years	39,657		33,063		Software	3 - 7 years	39,988		39,799
Leasehold improvements	Leasehold improvements	1 - 40 years	68,790		68,747		Leasehold improvements	1 - 40 years	77,326		69,105
Furniture and fixtures	Furniture and fixtures	7 years	3,442		3,412		Furniture and fixtures	7 years	3,648		3,582
Vehicles	Vehicles	5 - 7 years	21,826		21,873		Vehicles	5 - 10 years	29,412		29,632
Other		7 years	88		88

Construction-in-process	Construction-in-process		10,892		8,115		Construction-in-process		31,461		24,335
			204,814		195,110				255,637		233,458
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization		(89,832)		(79,662)		Less: accumulated depreciation and amortization		(103,886)		(99,836)
Equipment, leasehold improvements and software, net	Equipment, leasehold improvements and software, net		$	114,982	$	115,448	Equipment, leasehold improvements and software, net		$	151,751	$	133,622

Construction-in-process at ~~June~~March 25, 2022 and December 24, 2021 related primarily to the build-outs of the Company’s Los Angeles and ~~New England~~Miami distribution facilities. ~~Construction-in-process at December 25, 2020 related primarily to the implementation of the Company’s Enterprise Resource Planning system.~~ The net book value of equipment financed under finance leases at ~~June~~March 25, ~~2021~~2022 and December ~~25, 2020~~24, 2021 was ~~$13,267~~$10,450 and ~~$14,705,~~$10,874, respectively.

The components of depreciation and amortization expense were as follows:


		Thirteen Weeks Ended				Twenty-Six Weeks Ended					Thirteen Weeks Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020			March 25, 2022		March 26, 2021
Depreciation expense	Depreciation expense	$	3,841	$	3,663	$	7,776	$	7,231	Depreciation expense	$	4,415	$	3,935
Software amortization	Software amortization	$	1,712	$	1,250	$	2,884	$	2,444	Software amortization	$	1,474	$	1,172
		$	5,553	$	4,913	$	10,660	$	9,675		$	5,889	$	5,107

Note 8 – Goodwill and Other Intangible Assets

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






Carrying amount as of December ~~25, 2020~~24, 2021	$	~~214,864~~221,775
Goodwill adjustments	58
Acquisitions	~~5,663~~9,129
Foreign currency translation	4826
Carrying amount as of ~~June~~March 25, ~~2021~~2022	$	~~220,575~~230,988

Other intangible assets as of ~~June~~March 25, ~~2021~~2022 and December ~~25, 2020~~24, 2021 consisted of the following:
June 25, 2021 Weighted-Average
Remaining
Amortization Period Gross Carrying Amount Accumulated Amortization Net Amount
Customer relationships 124 months $ 143,821 $ (60,095) $ 83,726
Non-compete agreements 32 months 8,579 (7,885) 694
Trademarks 182 months 46,103 (21,724) 24,379
Total $ 198,503 $ (89,704) $ 108,799


March 25, 2022	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	120 months	$	160,201	$	(77,180)	$	83,021
Non-compete agreements	23 months	8,579		(8,085)		494
Trademarks	165 months	39,436		(14,119)		25,317
Total		$	208,216	$	(99,384)	$	108,832

December 25, 2020 Weighted-Average
Remaining
Amortization Period Gross Carrying Amount Accumulated Amortization Net Amount
Customer relationships 128 months $ 141,679 $ (55,135) $ 86,544
Non-compete agreements 37 months 8,579 (7,752) 827
Trademarks 209 months 44,520 (20,174) 24,346
Total $ 194,778 $ (83,061) $ 111,717

The Company occasionally makes small, tuck-in acquisitions that are immaterial, both individually and in the aggregate. Therefore, increases in goodwill and gross intangible assets per the above tables may not agree to the increases of these assets as shown for specific acquisitions in Note 5 “Acquisitions.”


December 24, 2021	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	120 months	$	155,678	$	(74,644)	$	81,034
Non-compete agreements	26 months	8,579		(8,018)		561
Trademarks	179 months	36,514		(13,366)		23,148
Total		$	200,771	$	(96,028)	$	104,743

Amortization expense for other intangibles was ~~$3,104~~$3,356 and ~~$3,422~~$3,539 for the thirteen weeks ended ~~June~~March 25, 2022 and March 26, 2021, ~~and June 26, 2020, respectively, and $6,643 and $6,720 for the twenty-six weeks ended June 25, 2021 and June 26, 2020,~~ respectively.

During the second quarter of fiscal 2021, the Company committed to a plan to shift its brand strategy to leverage its Allen Brothers brand in its New England region and determined its Cambridge trademark did not fit the Company’s long-term strategic objectives. As a result, the Company recognized a $597 impairment charge to fully write-down the net book value of its Cambridge trademark.

Estimated amortization expense for other intangible assets for the remainder of the fiscal year ending December ~~24, 2021~~30, 2022 and each of the next four fiscal years and thereafter is as follows:


2021		$	6,280
2022	2022	11,778		2022	$	9,523
2023	2023	10,748		2023	11,841
2024	2024	9,884		2024	10,980
2025	2025	9,465		2025	10,561
2026				2026	10,561
Thereafter	Thereafter	60,644		Thereafter	55,366
Total	Total	$	108,799	Total	$	108,832

Note 9 – Debt Obligations

Debt obligations as of ~~June~~March 25, ~~2021~~2022 and December ~~25, 2020~~24, 2021 consisted of the following:


		June 25, 2021		December 25, 2020			March 25, 2022		December 24, 2021
Senior secured term loans	Senior secured term loans	$	169,531	$	201,553	Senior secured term loans	$	168,247	$	168,675
Convertible senior notes	Convertible senior notes	200,000		150,000		Convertible senior notes	200,000		200,000
Asset-based loan facility	Asset-based loan facility	20,000		40,000		Asset-based loan facility	20,000		20,000
Finance lease and other financing obligations	Finance lease and other financing obligations	11,732		15,798		Finance lease and other financing obligations	10,875		11,602
Convertible unsecured note	Convertible unsecured note	4,000		4,000		Convertible unsecured note	4,000		4,000

Deferred finance fees and original issue premium (discount)	Deferred finance fees and original issue premium (discount)	(3,876)		(7,172)		Deferred finance fees and original issue premium (discount)	(4,586)		(4,976)
Total debt obligations	Total debt obligations	401,387		404,179		Total debt obligations	398,536		399,301
Less: current installments	Less: current installments	(5,844)		(6,095)		Less: current installments	(4,971)		(5,141)
Total debt obligations excluding current installments	Total debt obligations excluding current installments	$	395,543	$	398,084	Total debt obligations excluding current installments	$	393,565	$	394,160

On March ~~1, 2021,~~11, 2022, the Company ~~issued $50,000~~entered into a third amendment to its asset-based loan facility (“ABL Facility”) which increased the aggregate ~~principal amount of 1.875% Convertible Senior Notes at a premium which were offered as an additional issuance and~~commitments from $150,000 to $200,000. The interest rate charged on borrowings under the ~~same terms of~~ABL Facility is equal to a spread plus, at the Company’s ~~$150,000~~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 ~~initially issued on November 22, 2019. Net proceeds were used~~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 ~~repay all outstanding borrowings~~comply with a minimum consolidated fixed charge coverage ratio of 1:1 if the amount of availability under the ~~Company's 2022 tranche~~ABL Facility falls below $14,000 or 10% of ~~senior secured term loans~~the lesser of ~~$31,166~~the aggregate commitments and ~~repay a portion of borrowings outstanding under~~ the ~~Company’s asset-based loan facility (“ABL Facility”).~~ borrowing base then in effect.

The Company incurred transaction costs of ~~approximately $1,350~~$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 ~~Convertible Senior Notes due 2024. At June 25, 2021, the effective interest rate charged on the Company’s Convertible Senior Notes was approximately 2.3%.~~ABL Facility.

The net carry value of the Company’s Convertible Senior Notes as of ~~June~~March 25, ~~2021~~2022 and December ~~25, 2020~~24, 2021 was:


		June 25, 2021		December 25, 2020			March 25, 2022		December 24, 2021
Principal amount outstanding	Principal amount outstanding	$	200,000	$	150,000	Principal amount outstanding	$	200,000	$	200,000
Unamortized deferred financing fees and premium	Unamortized deferred financing fees and premium	(3,590)		(4,999)		Unamortized deferred financing fees and premium	(2,462)		(2,686)
Net carry value	Net carry value	$	203,590	$	154,999	Net carry value	$	197,538	$	197,314

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


		Thirteen Weeks Ended				Twenty-Six Weeks Ended					Thirteen Weeks Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020			March 25, 2022		March 26, 2021
Coupon interest	Coupon interest	$	938	$	703	$	1,719	$	1,406	Coupon interest	$	938	$	781
Amortization of deferred financing fees and premium	Amortization of deferred financing fees and premium	$	224	$	250	$	465	$	500	Amortization of deferred financing fees and premium	$	224	$	241
Total interest	Total interest	$	1,162	$	953	$	2,184	$	1,906	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 ~~$253,386~~$210,831 as of ~~June~~March 25, ~~2021.~~2022.

As of ~~June~~March 25, ~~2021, the Company was in compliance with all debt covenants and~~2022, the Company had reserved ~~$20,141~~$20,541 of the ABL Facility for the issuance of letters of credit. As of ~~June~~March 25, ~~2021,~~2022, funds totaling ~~$100,805~~$126,240 were available for borrowing under the ABL Facility. At ~~June~~March 25, ~~2021,~~2022, the interest rate charged on the Company’s senior secured term loan was approximately ~~5.6%~~5.7% and the interest rate charged on the Company’s ABL Facility was approximately ~~1.6%~~1.8%.

Note 10 – Stockholders’ Equity

Equity Awards

The following table reflects the activity of RSAs during the ~~twenty-six~~thirteen weeks ended ~~June~~March 25, ~~2021:~~2022:


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

Unvested at December 25, 2020		901,318	$	16.14	0	$	0	26,952	$	30.16
Unvested at December 24, 2021											Unvested at December 24, 2021	617,996	$	28.33	187,437	$	32.04	185,129	$	31.44
Granted	Granted	351,562	31.78		199,231	32.00		199,241	31.44		Granted	115,695	32.44		167,261	32.44		167,261	29.12
Vested	Vested	(582,804)	12.01		0	0		0	0		Vested	(240,112)	27.50		—	—		—	—
Forfeited	Forfeited	(7,359)	20.09		0	0		0	0		Forfeited	(7,615)	27.32		(4,743)	32.13		(4,744)	30.85
Unvested at June 25, 2021		662,717	$	28.00	199,231	$	32.00	226,193	$	31.28
Unvested at March 25, 2022											Unvested at March 25, 2022	485,964	$	29.73	349,955	$	32.23	347,646	$	30.33

The Company granted ~~750,034~~450,217 RSAs to its employees ~~and directors~~ at a weighted average grant date fair value of ~~$31.74~~$31.21 during the ~~twenty-six~~thirteen weeks ended ~~June~~March 25, ~~2021.~~2022. These awards are a mix of time-, market- and performance-based grants that generally vest over a range of periods up to ~~five~~four years. The Company recognized expense totaling ~~$3,280~~$3,043 and ~~$1,999~~$2,458 on its RSAs during the thirteen weeks ended ~~June~~March 25, ~~2021~~2022 and ~~June~~March 26, ~~2020, respectively, and $5,738 and $2,850 during the twenty-six weeks ended June 25,~~ 2021, ~~and June 26, 2020,~~ respectively.

At ~~June~~March 25, ~~2021,~~2022, the total unrecognized compensation cost for unvested RSAs was ~~$25,655~~$26,685 and the weighted-average remaining period was approximately 2.4 years. Of this total, ~~$15,828~~$12,445 related to RSAs with time-based vesting provisions and ~~$9,827~~$14,240 related to RSAs with ~~performance-based~~performance- and market-based vesting provisions. At ~~June~~March 25, ~~2021,~~2022, the weighted-average remaining period for time-based vesting and performance-based vesting RSAs were approximately ~~2.2~~2.4 years and ~~2.6~~2.5 years, respectively.

~~NaN~~No share-based compensation expense related to the Company’s RSAs or stock options has been capitalized. As of ~~June~~March 25, ~~2021,~~2022, there were ~~820,049~~449,957 shares available for grant under the 2019 Omnibus Equity Incentive Plan.

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~~Chairman, President and ~~chief executive officer,~~Chief Executive Officer, and John Pappas, the Company’s ~~vice chairman~~Vice Chairman and ~~one of its directors,~~Chief Operating Officer, and are deemed to be affiliates of these individuals. Expense related to this facility totaled $123 ~~and $123~~ during the thirteen weeks ended ~~June~~March 25, ~~2021~~2022 and ~~June~~March 26, ~~2020, respectively, and $246 and $241 during the twenty-six weeks ended June 25, 2021 and June 26, 2020, respectively.~~2021.

Note 12 – Supplemental Disclosures of Cash Flow Information

Twenty-Six Weeks Ended
June 25, 2021 June 26, 2020
Supplemental cash flow disclosures:
Cash paid for income taxes, net of cash received $ (208) $ 334
Cash paid for interest, net of cash received $ 7,766 $ 9,730
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 12,752 $ 13,476
Operating cash flows from finance leases $ 282 $ 264
ROU assets obtained in exchange for lease liabilities:
Operating leases $ 1,625 $ 5,744
Finance leases $ 162 $ 13,980
Other non-cash investing and financing activities:
Warrants issued for acquisitions $ 1,200 $ 0
Net working capital adjustment receivable $ 0 $ 3,013
Contingent earn-out liabilities for acquisitions $ 3,400 $ 3,464

~~Note 13 – Coronavirus Aid, Relief, and Economic Security Act~~

In response to the Pandemic, the Coronavirus Aid, Relief, and Economic Security Act was signed into law on March 27, 2020. Among other provisions it allows for a refundable Employee Retention Tax Credit (“ETRC”) to eligible employers equal to 50% of qualified wages paid to employees from March 12, 2020 to December 31, 2020, capped at $10 per employee. In December 2020, the Consolidated Appropriations Act of 2021 was passed, which expands the ETRC by increasing the credit to 70% of qualified wages paid from January 1, 2021 through June 30, 2021, capped at $10 per employee per quarter. During the second quarter of fiscal 2021, the Company recognized a receivable of $1,418 related to the ETRC which is presented within ~~prepaid expenses and other current assets~~ ~~on the consolidated balance sheet and the related expense reduction is presented within~~ ~~selling, general and administrative expenses~~ ~~on the consolidated statements of operations~~


	Thirteen Weeks Ended
	March 25, 2022		March 26, 2021
Supplemental cash flow disclosures:
Cash received for income taxes	$	(282)	$	(237)
Cash paid for interest, net of cash received	$	3,011	$	2,929
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,766	$	6,369
Operating cash flows from finance leases	$	1,028	$	145
ROU assets obtained in exchange for lease liabilities:
Operating leases	$	8,589	$	14
Finance leases	$	—	$	162
Other non-cash investing and financing activities:
Warrants issued for acquisitions	$	1,701	$	—

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 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 ~~23, 2021.~~22, 2022. 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. We offer more than 50,000 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 ~~34,000~~35,000 customer locations, primarily located in our ~~sixteen~~nineteen geographic markets across the United States and Canada, and the majority of our customers are independent restaurants and fine dining establishments. ~~As a result of our acquisition of Allen Brothers, Inc. (“Allen Brothers”) and our “Shop Like a Chef” online platform, we~~We also sell certain of our products directly to ~~consumers.~~consumers through our Allen Brothers and “Shop Like a Chef” retail channels.

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

~~Many~~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 ~~be adversely impacted by the COVID-19 pandemic (the “Pandemic”), however we have seen~~experience sequential improvement in our business ~~throughout the second quarter of fiscal 2021~~ which has contributed to organic sales growth of ~~$212.6~~$176.3 million compared to the prior year quarter. ~~As a reminder, the Pandemic’s impact on our net sales was the most significant at the inception of the Pandemic in the United States and Canada during the second quarter of 2020.~~

~~We closed the quarter with total cash and cash equivalents of $146.9 million, and approximately $100.8 million of remaining availability under our asset-based loan facility as of June 25, 2021.~~

The ~~future impact of~~extent to which the Pandemic onwill impact our ~~business,~~financial condition or results of operations is uncertain and ~~liquidity is difficult to predict at this time and is highly dependent~~will depend on future developments including new information that may emerge on the severity or transmissibility of the disease, ~~the extent of outbreaks, federal, state and local~~new variants, government responses, trends in infection rates, development and distribution of effective medical treatments ~~for the disease, the pace of vaccination programs~~and vaccines, and future consumer spending behavior, among others.

Recent Acquisitions

~~During~~On December 28, 2021, pursuant to an asset purchase agreement, we acquired substantially all of the ~~second quarter~~assets of ~~fiscal 2021, we completed two acquisitions for an aggregate~~CGC Holdings, Inc. (“Capital Seaboard”), a specialty seafood and produce distributor in Maryland. The purchase price ofwas approximately ~~$8.3~~$29.7 million consisting of ~~$7.2~~$28.0 million paid in cash at closing, subject to a customary working capital ~~adjustments,~~adjustment, and common stock warrants ~~valued at approximately $1.1~~of $1.7 million. ~~We will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $3.4 million in aggregate.~~

RESULTS OF OPERATIONS


		Thirteen Weeks Ended				Twenty-Six Weeks Ended					Thirteen Weeks Ended
		June 25, 2021		June 26, 2020		June 25, 2021		June 26, 2020			March 25, 2022		March 26, 2021
Net sales	Net sales	$	422,968	$	200,496	$	703,185	$	575,927	Net sales	$	512,103	$	280,217
Cost of sales	Cost of sales	327,094		157,070		548,364		447,013		Cost of sales	394,590		221,270
Gross profit	Gross profit	95,874		43,426		154,821		128,914		Gross profit	117,513		58,947
Selling, general and administrative expenses	Selling, general and administrative expenses	90,358		68,165		170,603		177,047		Selling, general and administrative expenses	110,086		80,245
Other operating (income) expenses, net		857		670		(313)		(5,666)
Other operating expenses (income), net										Other operating expenses (income), net	1,163		(1,170)
Operating income (loss)	Operating income (loss)	4,659		(25,409)		(15,469)		(42,467)		Operating income (loss)	6,264		(20,128)

Interest expense	Interest expense	4,408		5,772		9,171		10,896		Interest expense	4,365		4,763
Income (loss) before income taxes	Income (loss) before income taxes	251		(31,181)		(24,640)		(53,363)		Income (loss) before income taxes	1,899		(24,891)
Provision for income tax benefit		(847)		(10,847)		(7,817)		(18,944)
Provision for income tax expense (benefit)										Provision for income tax expense (benefit)	514		(6,970)
Net income (loss)	Net income (loss)	$	1,098	$	(20,334)	$	(16,823)	$	(34,419)	Net income (loss)	$	1,385	$	(17,921)

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 ~~June~~March 25, ~~2021~~2022 Compared to Thirteen Weeks Ended ~~June~~March 26, ~~2020~~2021

Net Sales

2021 2020 $ Change % Change
Net sales $ 422,968 $ 200,496 $ 222,472 111.0 %


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

Organic growth contributed ~~$212.6~~$176.3 million, or ~~106.1%~~62.9%, to sales growth and the remaining sales growth of ~~$9.9~~$55.6 million, or ~~4.9%~~19.9%, resulted from acquisitions. Organic case count increased approximately ~~122.9%~~47.3% in our specialty category. In addition, specialty unique customers and placements increased ~~94.6%~~29.4% and ~~127.5%~~41.6%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased ~~66.5%~~26.0% compared to the prior year. Estimated inflation was ~~10.6%~~14.9% in our specialty category and ~~12.1%~~28.5% in our center-of-the-plate category compared to the prior year period.

Gross Profit


		2021		2020		$ Change	% Change			2022			2021			$ Change		% Change
Gross profit	Gross profit	95,874		43,426		52,448	120.8	%	Gross profit	$	117,513		$	58,947		$	58,566	99.4	%
Gross profit margin	Gross profit margin	22.7	%	21.7	%				Gross profit margin	22.9		%	21.0		%

Gross profit increased primarily as a result of increased ~~sales.~~sales and price inflation. Gross profit margin increased approximately ~~101~~191 basis ~~points.~~points due to favorable sales mix towards higher margin specialty products. Gross profit margins increased ~~629~~213 basis points in the Company’s specialty category and ~~decreased 421~~increased 111 basis points in the Company’s center-of-the-plate category. ~~Prior period results include a charge of approximately $5.5 million related to estimated inventory losses from obsolescence at the onset of the Pandemic.~~

Selling, General and Administrative Expenses


		2021		2020		$ Change	% Change			2022			2021			$ Change		% Change
Selling, general and administrative expenses	Selling, general and administrative expenses	90,358		68,165		22,193	32.6	%	Selling, general and administrative expenses	$	110,086		$	80,245		$	29,841	37.2	%
Percentage of net sales	Percentage of net sales	21.4	%	34.0	%				Percentage of net sales	21.5		%	28.6		%

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

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

2021 2020 $ Change % Change
Other operating expenses, net 857 670 187 27.9 %


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

The increase in net other operating expenses was primarily due to a $0.6 million impairment of Cambridge trademarks as a result of a shift in brand strategy to leverage our Allen Brothers brand in our New England region during the second quarter of fiscal 2021, partially offset by non-cash credits of $0.1 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash charges of ~~$0.2 million in the prior year period.~~

~~Interest Expense~~

2021 2020 $ Change % Change
Interest expense 4,408 5,772 (1,364) (23.6) %

Interest expense decreased primarily due to $1.2 million one-time third-party costs incurred during the second quarter of 2020 in connection with the extension of a majority of our senior secured term loans.

~~Provision for Income Taxes~~

2021 2020 $ Change % Change
Provision for income tax benefit (847) (10,847) 10,000 (92.2) %
Effective tax rate (337.5) % 34.8 %

The negative effective tax rate in the current period is driven by a $1.5 million discrete permanent difference related to stock compensation expense. The higher effective tax rate in fiscal 2020 is primarily related to our net loss forecast for fiscal 2020 which allowed us to claim tax refunds against taxes paid in fiscal 2015 and 2017, both of which were at statutory tax rates of 35%.

~~Twenty-Six Weeks Ended June 25, 2021 Compared to Twenty-Six Weeks Ended June 26, 2020~~

~~Net Sales~~

2021 2020 $ Change % Change
Net sales $ 703,185 $ 575,927 $ 127,258 22.1 %

Organic growth contributed $108.4 million, or 18.8%, to sales growth and the remaining sales growth of $18.9 million, or 3.3%, resulted from acquisitions. Organic case count increased approximately 7.1% in our specialty category. In addition, specialty unique customers and placements increased 16.0% and 11.6%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased 7.1% compared to the prior year. Estimated inflation was 7.6% in our specialty category and inflation was 11.0% in our center-of-the-plate category compared to the prior year period.

~~Gross Profit~~

2021 2020 $ Change % Change
Gross profit 154,821 128,914 25,907 20.1 %
Gross profit margin 22.0 % 22.4 %

Gross profit increased primarily as a result of sales growth. Gross profit margin decreased approximately 37 basis points. Gross profit margins increased 261 basis points in the Company’s specialty category and decreased 316 basis points in the Company’s center-of-the-plate category. Our prior year gross profit results include a charge of approximately $8.8 million related to estimated inventory losses from obsolescence at the onset of the Pandemic.

~~Selling, General and Administrative Expenses~~

2021 2020 $ Change % Change
Selling, general and administrative expenses 170,603 177,047 (6,444) (3.6) %
Percentage of net sales 24.3 % 30.7 %

The decrease in selling, general and administrative expense relates primarily to an estimated non-cash charge of approximately $15.8 million recorded in the prior year related to incremental bad debt expense at the onset of the Pandemic, partially offset by higher operating expenses to support sales growth. Our ratio of selling, general and administrative expenses to net sales was lower as a result sales growth and of the Pandemic’s adverse impacts to our sales growth and a 98 basis point decrease in non-cash charges related to bad debt expense.

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

2021 2020 $ Change % Change
Other operating income, net (313) (5,666) 5,353 (94.5) %

~~The decrease in net other operating income relates primarily to non-cash credits of $1.4~~$0.3 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash credits of ~~$6.6~~$1.3 million in the prior year period and a $0.6 million impairment of Cambridge trademarks as a result of a shift in brand strategy to leverage our Allen Brothers brand in our New England region during the second quarter of fiscal 2021.period.

Interest Expense

2021 2020 $ Change % Change
Interest expense 9,171 10,896 (1,725) (15.8) %


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

Interest expense decreased primarily due to ~~$1.2~~lower effective interest rates on our outstanding debt as a result of the $50.0 million ~~in one-time third-party costs incurred during the second quarter~~aggregate principal amount of ~~2020 in connection with the extension of a majority of our senior secured term loans.~~Convertible Senior Notes issued on March 1, 2021 which were used to repay higher interest rate debt.

Provision for Income Taxes


		2021		2020		$ Change	% Change			2022			2021			$ Change		% Change
Provision for income tax benefit		(7,817)		(18,944)		11,127	(58.7)	%
Provision for income tax expense (benefit)									Provision for income tax expense (benefit)	$	514		$	(6,970)		$	7,484	(107.4)	%
Effective tax rate	Effective tax rate	31.7	%	35.5	%				Effective tax rate	27.1		%	28.0		%

The increase in income tax expense is due to pre-tax income in the current period ~~effective tax rate includes~~compared to a pre-tax loss in the ~~impact of a $1.5 million discrete permanent difference related to stock compensation expense.~~prior year quarter. The ~~higher~~ effective tax rate in the ~~prior~~current period is ~~primarily related~~lower due to ~~our net loss forecast for fiscal 2020 which allowed us to claim~~insignificant changes in certain permanent tax ~~refunds against taxes paid in fiscal 2015 and 2017, both of which were at statutory tax rates of 35%.~~differences.

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):


		June 25, 2021		December 25, 2020			March 25, 2022		December 24, 2021
Senior secured term loan	Senior secured term loan	$	169,531	$	201,553	Senior secured term loan	$	168,247	$	168,675
Total convertible debt	Total convertible debt	204,000		154,000		Total convertible debt	204,000		204,000
Borrowings outstanding on asset-based loan facility	Borrowings outstanding on asset-based loan facility	20,000		40,000		Borrowings outstanding on asset-based loan facility	20,000		20,000
Finance leases and other financing obligations	Finance leases and other financing obligations	11,732		15,798		Finance leases and other financing obligations	10,875		11,602
Total	Total	$	405,263	$	411,351	Total	$	403,122	$	404,277

As of ~~June~~March 25, ~~2021,~~2022, we have various floating- and fixed-rate debt instruments with varying maturities for an aggregate principal amount of ~~$393.5~~$392.2 million.

On March ~~1, 2021, the~~11, 2022, we ~~issued $50.0 million aggregate principal amount of 1.875% Convertible Senior Notes at~~entered into a ~~premium which were offered as an additional issuance of our $150.0 million Convertible Senior Notes due 2024 issued on November 22, 2019. Net proceeds were used~~third amendment to ~~repay all outstanding borrowings under the our 2022 tranche of senior secured term loans of $31.2 million and repay a portion of borrowings outstanding under~~ our asset-based loan ~~facility. We incurred transaction costs of approximately $1.4~~facility ABL Facility which increased the aggregate commitments from $150.0 million ~~which were capitalized as deferred financing fees~~ to ~~be amortized over the term of the underlying debt.~~$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):


		June 25, 2021		December 25, 2020			March 25, 2022		December 24, 2021
Cash and cash equivalents	Cash and cash equivalents	$	146,920	$	193,281	Cash and cash equivalents	$	79,439	$	115,155
Working capital, excluding cash and cash equivalents	Working capital, excluding cash and cash equivalents	116,779		94,279		Working capital, excluding cash and cash equivalents	165,066		157,787
Availability under asset-based loan facility	Availability under asset-based loan facility	100,805		50,282		Availability under asset-based loan facility	126,240		109,459
Total	Total	$	364,504	$	337,842	Total	$	370,745	$	382,401

We ~~are not providing guidance on~~expect our capital expenditures, excluding cash paid for acquisitions, for fiscal ~~2021 due~~2022 will be approximately $36.0 million to ~~the continued uncertainty with regards to the pace of the economic recovery and the duration of the Pandemic related restrictions on our customers.~~$45.0 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):

Twenty-Six Weeks Ended
June 25, 2021 June 26, 2020
Net loss $ (16,823) $ (34,419)
Non-cash charges $ 16,748 $ 28,377
Changes in working capital $ (23,847) $ 53,621
Cash (used in) provided by operating activities $ (23,922) $ 47,579
Cash used in investing activities $ (16,739) $ (67,850)
Cash (used in) provided by financing activities $ (5,642) $ 81,992


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

Net cash used in operations was ~~$23.9~~$10.3 million for the ~~twenty-six~~thirteen weeks ended ~~June~~March 25, ~~2021~~2022 consisting of a net ~~loss~~income of ~~$16.8~~$1.4 million ~~offset by $16.7~~and $14.3 million of non-cash charges, ~~and cash generated from~~partially offset by investments in working capital growth of ~~$23.8~~$5.4 million. Non-cash charges decreased ~~$11.6~~$9.0 million primarily due to a ~~$15.8~~$5.5 million ~~charge incurred~~increase in deferred tax expenses and a $1.6 million

increase in changes in the ~~prior year quarter related to incremental bad debt expense due to the onset~~fair value of ~~the Pandemic.~~earn-out liabilities. The cash ~~generated from~~used for working capital ~~decrease~~growth of ~~$77.5~~$6.3 million is primarily driven by the Company’s reinvestment in working capital to support sales growth.

Net cash used in investing activities was ~~$16.7~~$42.2 million for the ~~twenty-six~~thirteen weeks ended ~~June~~March 25, ~~2021,~~2022, driven by capital expenditures of ~~$9.6~~$14.2 million which ~~included~~includes the ~~build-outs~~purchase of our ~~Los Angeles~~distribution facility in Columbus, Ohio and ~~New England distribution facilities and $7.2~~$28.0 million in cash paid for ~~acquisitions.~~the Capital Seaboard acquisition.

Net cash used in financing activities was ~~$5.6~~$3.9 million for the ~~twenty-six~~thirteen weeks ended ~~June~~March 25, ~~2021,~~2022, driven by ~~$34.4~~$2.0 million of 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 and a $20.0 million payment on our asset-based loan facility, partially offset by $51.8 million of proceeds from the issuance of additional convertible senior notes.~~obligations..

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 ~~June~~March 25, ~~2021,~~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 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 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 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 ~~23, 2021.~~22, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of ~~June~~March 25, ~~2021,~~2022, we had an aggregate ~~$189.5~~$188.2 million of indebtedness outstanding under the Term Loan and ABL Facility that bore interest at variable rates. A 100 basis point increase in market interest rates would decrease our after tax earnings by approximately ~~$2.4~~$1.4 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 ~~June~~March 25, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June~~March 25, ~~2021~~2022 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 consolidated financial statements, and no material amounts have been accrued in our consolidated financial statements with respect to these matters.

ITEM 1A. RISK FACTORS

~~Except as stated below, there~~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 ~~25, 2020~~24, 2021 filed with the SEC on February ~~23, 2021.~~22, 2022. 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
March 27, 2021 to April 23, 2021 8,006 $ 30.80 — —
April 24, 2021 to May 21, 2021 1,735 30.92 — —
May 22, 2021 to June 25, 2021 7,336 32.41 — —
Total 17,077 $ 31.50 — —


	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	—	—

(1)During the thirteen weeks ended ~~June~~March 25, ~~2021,~~2022, we withheld ~~17,077~~64,329 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

2322

ITEM 6. EXHIBITS


Exhibit No.						Description















~~10.1~~10.1†*						~~2021 Form~~Amendment No. 3, dated as of ~~Restricted Share Award Agreement (Directors)~~

~~10.2~~*						~~2021 Non-Employee Director Deferral Plan~~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.

* Management Contract or Compensatory Plan or Arrangement



			†			Filed herewith

2423

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 ~~July 28, 2021.~~April 27, 2022.


									THE CHEFS’ WAREHOUSE, INC.
									(Registrant)

Date: ~~July 28, 2021~~April 27, 2022									/s/ James Leddy
									James Leddy
									Chief Financial Officer
									(Principal Financial Officer)

Date: ~~July 28, 2021~~April 27, 2022									/s/ Timothy McCauley
									Timothy McCauley
									Chief Accounting Officer
									(Principal Accounting Officer)

2524


	Fells Point		Bassian		Sid Wainer		Other Acquisitions		Total
Balance December 27, 2019	$	4,544	$	7,957	$	0	$	2,197	$	14,698
Acquisition value	0		0		2,081		1,383		3,464

Cash payments	0		(2,250)		0		(1,677)		(3,927)
Changes in fair value	(4,544)		(4,631)		(1,570)		(734)		(11,479)
Balance December 25, 2020	$	0	$	1,076	$	511	$	1,169	$	2,756
Acquisition value	0		0		0		3,400		3,400

Cash payments	0		0		0		(83)		(83)
Changes in fair value	0		22		(511)		(931)		(1,420)
Balance June 25, 2021	$	0	$	1,098	$	0	$	3,555	$	4,653