UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September ~~24, 2021~~23, 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 October ~~25, 2021: 37,884,249~~24, 2022: 38,270,107

THE CHEFS’ WAREHOUSE, INC.

FORM 10-Q

Table of Contents

Page

PART I. FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (unaudited):

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Item 2.

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

1718

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

2325

Item 4.

Controls and Procedures

2325

PART II. OTHER INFORMATION

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2425

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 ~~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)


		September 24, 2021 (unaudited)		December 25, 2020			September 23, 2022 (unaudited)		December 24, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	134,217	$	193,281	Cash and cash equivalents	$	145,425	$	115,155
Accounts receivable, net of allowance of $20,322 in 2021 and $24,027 in 2020		151,720		96,383
Accounts receivable, net of allowance of $21,147 in 2022 and $20,260 in 2021						Accounts receivable, net of allowance of $21,147 in 2022 and $20,260 in 2021	208,939		172,540
Inventories, net	Inventories, net	132,802		82,519		Inventories, net	190,668		144,491

Prepaid expenses and other current assets	Prepaid expenses and other current assets	37,759		33,479		Prepaid expenses and other current assets	46,464		37,774
Total current assets	Total current assets	456,498		405,662		Total current assets	591,496		469,960

Equipment, leasehold improvements and software, net		118,143		115,448
Property, plant and equipment, net						Property, plant and equipment, net	158,569		133,622
Operating lease right-of-use assets	Operating lease right-of-use assets	115,182		115,224		Operating lease right-of-use assets	135,286		130,701
Goodwill	Goodwill	220,376		214,864		Goodwill	245,428		221,775
Intangible assets, net	Intangible assets, net	105,696		111,717		Intangible assets, net	116,112		104,743
Deferred taxes, net	Deferred taxes, net	12,390		7,535		Deferred taxes, net	2,259		9,380
Other assets	Other assets	3,727		3,875		Other assets	3,609		3,614
Total assets	Total assets	$	1,032,012	$	974,325	Total assets	$	1,252,759	$	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	$	108,972	$	57,515	Accounts payable	$	142,963	$	118,284
Accrued liabilities	Accrued liabilities	33,746		27,924		Accrued liabilities	48,751		35,390
Short-term operating lease liabilities	Short-term operating lease liabilities	16,936		17,167		Short-term operating lease liabilities	17,180		15,882
Accrued compensation	Accrued compensation	18,624		9,401		Accrued compensation	21,929		22,321
Current portion of long-term debt	Current portion of long-term debt	5,624		6,095		Current portion of long-term debt	6,067		5,141
Total current liabilities	Total current liabilities	183,902		118,102		Total current liabilities	236,890		197,018
Long-term debt, net of current portion	Long-term debt, net of current portion	394,979		398,084		Long-term debt, net of current portion	493,148		394,160
Operating lease liabilities	Operating lease liabilities	109,827		109,133		Operating lease liabilities	131,910		127,296

Other liabilities and deferred credits	Other liabilities and deferred credits	4,238		4,416		Other liabilities and deferred credits	5,862		5,110
Total liabilities	Total liabilities	692,946		629,735		Total liabilities	867,810		723,584
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 September 24, 2021 and December 25, 2020		—		—
Common Stock, - $0.01 par value, 100,000,000 shares authorized, 37,884,249 and 37,274,768 shares issued and outstanding at September 24, 2021 and December 25, 2020, respectively		380		373
Additional paid in capital		311,503		303,734
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 23, 2022 and December 24, 2021						Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 23, 2022 and December 24, 2021	—		—
Common Stock - $0.01 par value, 100,000,000 shares authorized, 38,270,107 and 37,887,675 shares issued and outstanding at September 23, 2022 and December 24, 2021, respectively						Common Stock - $0.01 par value, 100,000,000 shares authorized, 38,270,107 and 37,887,675 shares issued and outstanding at September 23, 2022 and December 24, 2021, respectively	383		380
Additional paid-in capital						Additional paid-in capital	322,505		314,242
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,984)		(2,051)		Accumulated other comprehensive loss	(2,127)		(2,022)
Retained earnings	Retained earnings	29,167		42,534		Retained earnings	64,188		37,611
Total stockholders’ equity	Total stockholders’ equity	339,066		344,590		Total stockholders’ equity	384,949		350,211
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,032,012	$	974,325	Total liabilities and stockholders’ equity	$	1,252,759	$	1,073,795

See accompanying notes to the consolidated financial ~~statements.~~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				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021
Net sales	Net sales	$	484,321	$	254,030	$	1,187,506	$	829,957	Net sales	$	661,856	$	484,321	$	1,822,063	$	1,187,506
Cost of sales	Cost of sales	374,346		193,668		922,710		640,681		Cost of sales	504,068		374,346		1,390,758		922,710
Gross profit	Gross profit	109,975		60,362		264,796		189,276		Gross profit	157,788		109,975		431,305		264,796
Selling, general and administrative expenses	Selling, general and administrative expenses	99,431		76,433		270,034		253,480		Selling, general and administrative expenses	130,255		99,431		364,828		270,034
Other operating (income) expenses, net		105		(4,146)		(208)		(9,812)
Other operating expenses (income), net										Other operating expenses (income), net	5,458		105		10,504		(208)
Operating income (loss)	Operating income (loss)	10,439		(11,925)		(5,030)		(54,392)		Operating income (loss)	22,075		10,439		55,973		(5,030)
Interest expense	Interest expense	4,191		4,706		13,362		15,602		Interest expense	10,737		4,191		19,567		13,362

Income (loss) before income taxes	Income (loss) before income taxes	6,248		(16,631)		(18,392)		(69,994)		Income (loss) before income taxes	11,338		6,248		36,406		(18,392)
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	2,792		(5,204)		(5,025)		(24,148)		Provision for income tax expense (benefit)	3,061		2,792		9,829		(5,025)
Net income (loss)	Net income (loss)	$	3,456	$	(11,427)	$	(13,367)	$	(45,846)	Net income (loss)	$	8,277	$	3,456	$	26,577	$	(13,367)
Other comprehensive income (loss):
Other comprehensive (loss) income:										Other comprehensive (loss) income:
Foreign currency translation adjustments	Foreign currency translation adjustments	(90)		93		67		(168)		Foreign currency translation adjustments	(156)		(90)		(105)		67
Comprehensive income (loss)	Comprehensive income (loss)	$	3,366	$	(11,334)	$	(13,300)	$	(46,014)	Comprehensive income (loss)	$	8,121	$	3,366	$	26,472	$	(13,300)
Net income (loss) per share:	Net income (loss) per share:									Net income (loss) per share:
Basic	Basic	$	0.09	$	(0.31)	$	(0.36)	$	(1.39)	Basic	$	0.22	$	0.09	$	0.72	$	(0.36)
Diluted	Diluted	$	0.09	$	(0.31)	$	(0.36)	$	(1.39)	Diluted	$	0.21	$	0.09	$	0.68	$	(0.36)
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	36,875,784		36,283,883		36,701,927		32,868,162		Basic	37,120,926		36,875,784		37,047,653		36,701,927
Diluted	Diluted	37,105,746		36,283,883		36,701,927		32,868,162		Diluted	42,044,053		37,105,746		41,942,676		36,701,927

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

Net income	Net income	—	—		—				—			3,456				3,456			Net income	—			—		—			—			16,915			16,915
Stock compensation	Stock compensation	(75,597)	—		2,710				—			—				2,710			Stock compensation	16,131			—		2,939			—			—			2,939

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—				(90)			—				(90)			Cumulative translation adjustment	—			—		—			(74)			—			(74)
Shares surrendered to pay tax withholding	Shares surrendered to pay tax withholding	(2,017)	—		(59)				—			—				(59)			Shares surrendered to pay tax withholding	(15,137)			—		(518)			—			—			(518)
Balance September 24, 2021		37,884,249	$	380	$	311,503			$	(1,984)		$	29,167			$	339,066
Balance June 24, 2022																			Balance June 24, 2022	38,257,455			$	383	$	319,364		$	(1,971)		$	55,911		$	373,687

Net income																			Net income	—			—		—			—			8,277			8,277
Stock compensation																			Stock compensation	9,986			—		3,099			—			—			3,099

Exercise of stock options																			Exercise of stock options	3,407			—		69			—			—			69
Cumulative translation adjustment																			Cumulative translation adjustment	—			—		—			(156)			—			(156)
Shares surrendered to pay tax withholding																			Shares surrendered to pay tax withholding	(741)			—		(27)			—			—			(27)
Balance September 23, 2022																			Balance September 23, 2022	38,270,107			$	383	$	322,505		$	(2,127)		$	64,188		$	384,949


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
Balance March 26, 2021													Balance March 26, 2021	37,909,695	$	379	$	304,994	$	(1,970)	$	24,613	$	328,016

Net loss		—	—		—		—		(20,334)		(20,334)
Net income													Net income	—	—		—		—		1,098		1,098
Stock compensation	Stock compensation	176,037	2		1,997		—		—		1,999		Stock compensation	69,245	1		3,279		—		—		3,280

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

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

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—		117		—		117		Cumulative translation adjustment	—	—		—		76		—		76
Shares surrendered to pay tax withholding	Shares surrendered to pay tax withholding	(1,846)	—		(23)		—		—		(23)		Shares surrendered to pay tax withholding	(17,077)	—		(541)		—		—		(541)
Balance June 26, 2020		37,798,548	$	378	$	298,230	$	(2,309)	$	91,018	$	387,317
Balance June 25, 2021													Balance June 25, 2021	37,961,863	$	380	$	308,852	$	(1,894)	$	25,711	$	333,049

Net loss		—	—		—		—		(11,427)		(11,427)
Net income													Net income	—	—		—		—		3,456		3,456
Stock compensation	Stock compensation	(22,477)	—		2,075		—		—		2,075		Stock compensation	(75,597)	—		2,710		—		—		2,710

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—		93		—		93		Cumulative translation adjustment	—	—		—		(90)		—		(90)
Shares surrendered to pay tax withholding	Shares surrendered to pay tax withholding	(3,431)	—		(50)		—		—		(50)		Shares surrendered to pay tax withholding	(2,017)	—		(59)		—		—		(59)
Balance September 25, 2020		37,772,640	$	378	$	300,255	$	(2,216)	$	79,591	$	378,008
Balance September 24, 2021													Balance September 24, 2021	37,884,249	$	380	$	311,503	$	(1,984)	$	29,167	$	339,066

See accompanying notes to the consolidated financial statements.

THE CHEFS’ WAREHOUSE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)


		Thirty-Nine Weeks Ended					Thirty-Nine Weeks Ended
		September 24, 2021		September 25, 2020			September 23, 2022		September 24, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss		$	(13,367)	$	(45,846)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Net income (loss)						Net income (loss)	$	26,577	$	(13,367)
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	16,270		14,714		Depreciation and amortization	17,667		16,270
Amortization of intangible assets	Amortization of intangible assets	9,778		10,111		Amortization of intangible assets	10,289		9,778
(Benefit) provision for allowance for doubtful accounts		(744)		20,447
Provision (benefit) for allowance for doubtful accounts						Provision (benefit) for allowance for doubtful accounts	3,138		(744)
Non-cash operating lease expense	Non-cash operating lease expense	505		604		Non-cash operating lease expense	1,329		505
Benefit for deferred income taxes		(4,855)		(6,527)
Provision (benefit) for deferred income taxes						Provision (benefit) for deferred income taxes	7,121		(4,855)
Amortization of deferred financing fees	Amortization of deferred financing fees	1,832		2,152		Amortization of deferred financing fees	1,621		1,832

Loss on debt extinguishment						Loss on debt extinguishment	142		—
Stock compensation	Stock compensation	8,448		4,925		Stock compensation	9,081		8,448
Change in fair value of contingent earn-out liabilities	Change in fair value of contingent earn-out liabilities	(1,359)		(11,219)		Change in fair value of contingent earn-out liabilities	8,358		(1,359)
Intangible asset impairment	Intangible asset impairment	597		—		Intangible asset impairment	—		597
Loss on asset disposal	Loss on asset disposal	257		52		Loss on asset disposal	17		257
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	(51,582)		74,236		Accounts receivable	(25,402)		(51,582)
Inventories	Inventories	(49,148)		33,285		Inventories	(40,519)		(49,148)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(3,304)		(16,227)		Prepaid expenses and other current assets	(9,848)		(3,304)
Accounts payable, accrued liabilities and accrued compensation	Accounts payable, accrued liabilities and accrued compensation	60,443		(29,455)		Accounts payable, accrued liabilities and accrued compensation	21,938		60,443

Other assets and liabilities	Other assets and liabilities	(101)		2,617		Other assets and liabilities	238		(101)
Net cash (used in) provided by operating activities		(26,330)		53,869
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	31,747		(26,330)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(17,872)		(5,409)		Capital expenditures	(31,666)		(17,872)
Cash paid for acquisitions, net of cash received	Cash paid for acquisitions, net of cash received	(7,280)		(60,437)		Cash paid for acquisitions, net of cash received	(62,007)		(7,280)

Net cash used in investing activities	Net cash used in investing activities	(25,152)		(65,846)		Net cash used in investing activities	(93,673)		(25,152)

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	(35,918)		(38,924)		Payment of debt, finance lease and other financing obligations	(171,434)		(35,918)
Proceeds from the issuance of common stock, net of issuance costs		—		85,941

Proceeds from debt issuance	Proceeds from debt issuance	51,750		—		Proceeds from debt issuance	300,000		51,750

Payment of deferred financing fees	Payment of deferred financing fees	(1,450)		(856)		Payment of deferred financing fees	(11,258)		(1,450)

Proceeds from exercise of stock options						Proceeds from exercise of stock options	69		—
Surrender of shares to pay withholding taxes	Surrender of shares to pay withholding taxes	(1,792)		(2,777)		Surrender of shares to pay withholding taxes	(2,584)		(1,792)
Cash paid for contingent earn-out liability	Cash paid for contingent earn-out liability	(83)		(2,927)		Cash paid for contingent earn-out liability	(2,538)		(83)
Borrowings under asset-based loan facility		—		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)		(20,000)

Net cash (used in) provided by financing activities		(7,493)		80,457
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	92,255		(7,493)

Effect of foreign currency on cash and cash equivalents	Effect of foreign currency on cash and cash equivalents	(89)		(168)		Effect of foreign currency on cash and cash equivalents	(59)		(89)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(59,064)		68,312		Net change in cash and cash equivalents	30,270		(59,064)
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	$	134,217	$	208,545	Cash and cash equivalents-end of period	$	145,425	$	134,217

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. Fiscal 2022 will include 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.

~~The COVID-19 Pandemic~~

Many of the Company’s customers have been adversely impacted by the COVID-19 pandemic (the “Pandemic”), however there has been sequential improvement in the Company’s business starting in the second quarter of fiscal 2021 and continuing throughout the third quarter of fiscal 2021 which has contributed to organic sales growth of $213,719 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 thirty-nine weeks ended September ~~24, 2021~~23, 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								Thirty-Nine Weeks Ended									Thirteen Weeks Ended								Thirty-Nine Weeks Ended
		September 24, 2021				September 25, 2020				September 24, 2021				September 25, 2020					September 23, 2022				September 24, 2021				September 23, 2022				September 24, 2021
Center-of-the-Plate	Center-of-the-Plate	$	238,783	49.3	%	$	115,570	45.5	%	$	593,717	50.0	%	$	395,224	47.6	%	Center-of-the-Plate	$	280,272	42.3	%	$	238,783	49.3	%	$	803,334	44.1	%	$	593,717	50.0	%
Dry Goods	Dry Goods	66,455		13.7	%	31,495		12.4	%	163,352		13.8	%	113,480		13.7	%	Dry Goods	108,908		16.5	%	66,455		13.7	%	291,020		16.0	%	163,352		13.8	%
Pastry	Pastry	48,842		10.1	%	27,618		10.9	%	118,952		10.0	%	92,427		11.1	%	Pastry	79,899		12.1	%	48,842		10.1	%	213,970		11.7	%	118,952		10.0	%
Cheese and Charcuterie	Cheese and Charcuterie	40,403		8.3	%	33,329		13.1	%	97,805		8.2	%	83,996		10.1	%	Cheese and Charcuterie	61,123		9.2	%	40,403		8.3	%	163,720		9.0	%	97,805		8.2	%
Produce	Produce	35,900		7.4	%	24,172		9.5	%	87,049		7.3	%	60,240		7.3	%	Produce	39,302		5.9	%	35,900		7.4	%	104,413		5.7	%	87,049		7.3	%
Dairy and Eggs	Dairy and Eggs	21,922		4.5	%	6,301		2.5	%	53,405		4.5	%	35,942		4.3	%	Dairy and Eggs	41,780		6.3	%	21,922		4.5	%	111,046		6.1	%	53,405		4.5	%
Oils and Vinegars	Oils and Vinegars	21,855		4.5	%	9,487		3.7	%	48,210		4.1	%	31,082		3.7	%	Oils and Vinegars	33,437		5.1	%	21,855		4.5	%	89,041		4.9	%	48,210		4.1	%
Kitchen Supplies	Kitchen Supplies	10,161		2.2	%	6,058		2.4	%	25,016		2.1	%	17,566		2.2	%	Kitchen Supplies	17,135		2.6	%	10,161		2.2	%	45,519		2.5	%	25,016		2.1	%
Total	Total	$	484,321	100	%	$	254,030	100	%	$	1,187,506	100	%	$	829,957	100	%	Total	$	661,856	100	%	$	484,321	100	%	$	1,822,063	100	%	$	1,187,506	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 ~~$7,524~~$10,089 and ~~$4,276~~$7,524 for the thirteen weeks ended September 23, 2022 and September 24, 2021, ~~and September 25, 2020,~~ respectively, and ~~$19,599~~$28,523 and ~~$13,702~~$19,599 for the thirty-nine weeks ended September ~~24, 2021~~23, 2022 and September ~~25, 2020,~~24, 2021, 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				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021
Net income (loss) per share:	Net income (loss) per share:									Net income (loss) per share:
Basic	Basic	$	0.09	$	(0.31)	$	(0.36)	$	(1.39)	Basic	$	0.22	$	0.09	$	0.72	$	(0.36)
Diluted	Diluted	$	0.09	$	(0.31)	$	(0.36)	$	(1.39)	Diluted	$	0.21	$	0.09	$	0.68	$	(0.36)
Weighted average common shares:	Weighted average common shares:									Weighted average common shares:
Basic	Basic	36,875,784		36,283,883		36,701,927		32,868,162		Basic	37,120,926		36,875,784		37,047,653		36,701,927
Diluted	Diluted	37,105,746		36,283,883		36,701,927		32,868,162		Diluted	42,044,053		37,105,746		41,942,676		36,701,927

Reconciliation of net income (loss) per common share:


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021
Numerator:	Numerator:									Numerator:
Net income (loss)	Net income (loss)	$	3,456	$	(11,427)	$	(13,367)	$	(45,846)	Net income (loss)	$	8,277	$	3,456	$	26,577	$	(13,367)

Add effect of dilutive securities										Add effect of dilutive securities
Interest on convertible notes, net of tax										Interest on convertible notes, net of tax	683		—		2,048		—
Net income (loss) available to common shareholders										Net income (loss) available to common shareholders	$	8,960	$	3,456	$	28,625	$	(13,367)
Denominator:	Denominator:									Denominator:
Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	36,875,784		36,283,883		36,701,927		32,868,162		Weighted average basic common shares outstanding	37,120,926		36,875,784		37,047,653		36,701,927
Dilutive effect of stock options and unvested common shares		229,962		—		—		—

Dilutive effect of unvested common shares										Dilutive effect of unvested common shares	316,358		229,962		304,391		—
Dilutive effect of stock options and warrants										Dilutive effect of stock options and warrants	81,789		—		65,652		—
Dilutive effect of convertible notes										Dilutive effect of convertible notes	4,524,980		—		4,524,980		—
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	37,105,746		36,283,883		36,701,927		32,868,162		Weighted average diluted common shares outstanding	42,044,053		37,105,746		41,942,676		36,701,927

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		Thirty-Nine Weeks Ended			Thirteen Weeks Ended		Thirty-Nine Weeks Ended
		September 24, 2021	September 25, 2020	September 24, 2021	September 25, 2020		September 23, 2022	September 24, 2021	September 23, 2022	September 24, 2021
Restricted share awards (“RSAs”)	Restricted share awards (“RSAs”)	50,412	742,692	297,978	689,907	Restricted share awards (“RSAs”)	80,844	50,412	68,784	297,978
Stock options		—	115,639	38,102	115,639
Warrants		126,359	—	84,854	—
Stock options and warrants						Stock options and warrants	—	126,359	—	122,956
Convertible notes	Convertible notes	4,616,033	3,484,788	4,341,664	3,484,788	Convertible notes	91,053	4,616,033	91,053	4,341,664

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 ~~$2,339~~$4,130 and ~~$2,556~~$3,252 as of September ~~24, 2021~~23, 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 expenses (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 $ — $ 2,197 $ 14,698
Acquisition value — — 2,081 1,383 3,464
Cash payments — (2,250) — (1,677) (3,927)
Changes in fair value (4,544) (4,631) (1,570) (734) (11,479)
Balance December 25, 2020 $ — $ 1,076 $ 511 $ 1,169 $ 2,756
Acquisition value — — — 3,400 3,400
Cash payments — — — (83) (83)
Changes in fair value — 39 (511) (887) (1,359)
Balance September 24, 2021 $ — $ 1,115 $ — $ 3,599 $ 4,714


	Total





Balance December 24, 2021	$	6,877
Acquisition value	1,200

Cash payments	(2,538)
Changes in fair value	8,358
Balance September 23, 2022	$	13,897

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.


		September 24, 2021				December 25, 2020					September 23, 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	$	199,592	$	150,000	$	163,204	Convertible Senior Notes	$	200,000	$	204,340	$	200,000	$	206,182
Convertible Unsecured Note	Convertible Unsecured Note	$	4,000	$	3,901	$	4,000	$	4,290	Convertible Unsecured Note	$	4,000	$	4,221	$	4,000	$	4,102

Note 5 – Acquisitions

Capital Seaboard

On December 28, 2021, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of CGC Holdings, Inc. (“Capital Seaboard”), a specialty seafood and produce distributor in Maryland. The purchase price was approximately $31,036, consisting of $28,000 paid in cash at closing, common stock warrants valued at $1,701, and $1,335 paid upon settlement of a net working capital true-up. The Company is in the process of finalizing a valuation of 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 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.

Other Acquisitions

During the ~~second quarter of fiscal 2021,~~thirty-nine weeks ended September 23, 2022 , the Company completed 2three other acquisitions for an aggregate purchase price of approximately ~~$8,400, consisting of $7,280~~$32,500, paid in cash, subject to customary working capital ~~adjustments, and common stock warrants of $1,120.~~adjustments. The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total ~~$4,230~~$2,000 in the aggregate. The Company is in the process of finalizing a valuation of the ~~earn-out liabilities, and~~ tangible and intangible assets as of the acquisition date. When applicable, these valuations require the use of Level 3 inputs. Goodwill ~~for these acquisitions~~of $16,252 will be amortized over 15 years for tax purposes.

The Company reflected net sales and ~~loss~~income before income taxes in its consolidated statement of operations related to the ~~fiscal 2021~~ acquisitions as follows:


		Thirteen Weeks Ended		Thirty-Nine Weeks Ended	Thirteen Weeks Ended			Thirty-Nine Weeks Ended
		September 24, 2021				September 24, 2021				September 23, 2022		September 23, 2022
Net sales	Net sales	$	16,052			$	25,090		Net sales	$	58,466	$	135,260
Loss before income taxes		$	(285)			$	(379)
Income before income taxes									Income before income taxes	$	4,970	$	8,892

~~Pro~~The table below presents unaudited pro forma consolidated income statement information of the Company as if the acquisitions had occurred on December 26, 2020. The pro forma results were prepared from financial information ~~for these acquisitions are~~obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the acquisitions. The pro forma information is not ~~presented because the effect~~necessarily indicative of ~~these acquisition are not material to~~ the Company’s results of ~~operations.~~

operations had the 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 acquisitions, any incremental costs for transitioning to become a public company, and also does not reflect additional revenue opportunities following the acquisitions. The pro forma information reflects amortization and depreciation of the acquisitions at their respective fair values.


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021
Net sales	$	698,650	$	544,562	$	1,871,994	$	1,357,312
Income (loss) before income taxes	$	11,699	$	7,875	$	37,152	$	(16,040)

The table below sets forth the preliminary purchase price allocation offor these acquisitions:



~~Current assets~~	$	~~4,240~~
~~Customer relationships~~	~~2,431~~
~~Trademarks~~	~~1,890~~

~~Goodwill~~	~~5,496~~
~~Fixed assets~~	~~707~~


~~Right-of-use assets~~	~~761~~
~~Lease liabilities~~	~~(761)~~


~~Current liabilities~~	~~(2,964)~~
~~Earn-out liability~~	~~(3,400)~~

~~Issuance of warrants~~	~~(1,120)~~

~~Total cash consideration~~	$	~~7,280~~


	Capital Seaboard		Other Acquisitions
Current assets	$	10,130	$	11,498
Customer relationships	7,250		11,100
Trademarks	2,280		1,000

Goodwill	8,334		16,252
Fixed assets	9,552		633
Other assets	122		18





Current liabilities	(6,632)		(6,801)
Earn-out liability	—		(1,200)



Total consideration	$	31,036	$	32,500

The Company recognized professional fees of ~~$86~~$728 and $1,747 in operating expenses related to ~~acquisitions in~~acquisition related activities during the ~~second quarter of fiscal 2021.~~thirteen and thirty-nine weeks ended September 23, 2022, respectively.

Note 6 – Inventories

Inventories consist primarily of finished product and are reflected net of adjustments for shrinkage, excess and obsolescence totaling ~~$8,070~~$9,616 and ~~$9,013~~$8,312 at September ~~24, 2021~~23, 2022 and December ~~25, 2020,~~24, 2021, respectively.

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

Equipment, leasehold improvements and software as of September ~~24, 2021~~23, 2022 and December ~~25, 2020~~24, 2021 consisted of the following:


		Useful Lives	September 24, 2021		December 25, 2020			Useful Lives	September 23, 2022		December 24, 2021
Land	Land	Indefinite	$	5,020	$	5,020	Land	Indefinite	$	5,542	$	5,020
Buildings	Buildings	20 years	15,778		15,685		Buildings	20 years	23,552		18,406
Machinery and equipment	Machinery and equipment	5 - 10 years	25,969		24,900		Machinery and equipment	5 - 10 years	30,845		28,099
Computers, data processing and other equipment	Computers, data processing and other equipment	3 - 7 years	14,856		14,207		Computers, data processing and other equipment	3 - 7 years	16,986		15,480
Software	Software	3 - 7 years	39,834		33,063		Software	3 - 7 years	42,399		39,799
Leasehold improvements	Leasehold improvements	1 - 40 years	68,754		68,747		Leasehold improvements	1 - 40 years	92,517		69,105
Furniture and fixtures	Furniture and fixtures	7 years	3,497		3,412		Furniture and fixtures	7 years	3,671		3,582
Vehicles	Vehicles	5 - 7 years	22,619		21,873		Vehicles	5 - 10 years	28,395		29,632
Other		7 years	88		88

Construction-in-process	Construction-in-process		16,837		8,115		Construction-in-process		27,870		24,355
			213,252		195,110				271,777		233,478
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization		(95,109)		(79,662)		Less: accumulated depreciation and amortization		(113,208)		(99,856)
Equipment, leasehold improvements and software, net	Equipment, leasehold improvements and software, net		$	118,143	$	115,448	Equipment, leasehold improvements and software, net		$	158,569	$	133,622

Construction-in-process at September ~~24, 2021 related primarily to the build-outs of the Company’s Los Angeles and Miami distribution facilities. Construction-in-process at December 25, 2020~~23, 2022 related primarily to the implementation of the Company’s Enterprise Resource Planning ~~system.~~(“ERP”) system and the build-out of the Company’s Miami distribution facility and at December 24, 2021 related primarily to the build-outs of the Company’s Miami and Los Angeles distribution facilities. The net book value of equipment financed under finance leases at September 23, 2022 and December 24, 2021 was $9,302 and ~~December 25, 2020 was $12,489 and $14,705,~~$10,874, respectively.

The components of depreciation and amortization expense were as follows:


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021
Depreciation expense	Depreciation expense	$	3,903	$	3,792	$	11,679	$	11,023	Depreciation expense	$	4,455	$	3,903	$	13,255	$	11,679
Software amortization	Software amortization	$	1,707	$	1,247	$	4,591	$	3,691	Software amortization	$	1,457	$	1,707	$	4,412	$	4,591
		$	5,610	$	5,039	$	16,270	$	14,714		$	5,912	$	5,610	$	17,667	$	16,270

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 (1)	(792)
Acquisitions	~~5,496~~24,586
Foreign currency translation	16 (141)
Carrying amount as of September ~~24, 2021~~23, 2022	$	~~220,376~~245,428

(1) The goodwill adjustments represent measurement period adjustments related to certain acquisitions completed in the prior year.

Other intangible assets as of September ~~24, 2021~~23, 2022 and December ~~25, 2020~~24, 2021 consisted of the following:
September 24, 2021 Weighted-Average
Remaining
Amortization Period Gross Carrying Amount Accumulated Amortization Net Amount
Customer relationships 122 months $ 144,130 $ (62,570) $ 81,560
Non-compete agreements 29 months 8,579 (7,952) 627
Trademarks 181 months 45,826 (22,317) 23,509
Total $ 198,535 $ (92,839) $ 105,696

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.”


September 23, 2022	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	120 months	$	174,105	$	(82,688)	$	91,417
Non-compete agreements	17 months	8,579		(8,218)		361
Trademarks	144 months	39,745		(15,411)		24,334
Total		$	222,429	$	(106,317)	$	116,112


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 ~~$3,135~~$3,470 and ~~$3,391~~$3,135 for the thirteen weeks ended September 23, 2022 and September 24, 2021, ~~and September 25, 2020,~~ respectively, and ~~$9,778~~$10,289 and ~~$10,111~~$9,778 for the thirty-nine weeks ended September ~~24, 2021~~23, 2022 and September ~~25, 2020,~~24, 2021, 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		$	3,136
2022	2022	11,765		2022	$	3,274
2023	2023	10,736		2023	12,796
2024	2024	9,876		2024	11,943
2025	2025	9,459		2025	11,529
2026				2026	11,529
Thereafter	Thereafter	60,724		Thereafter	65,041
Total	Total	$	105,696	Total	$	116,112

Note 9 – Debt Obligations

Debt obligations as of September ~~24, 2021~~23, 2022 and December ~~25, 2020~~24, 2021 consisted of the following:


		September 24, 2021		December 25, 2020			September 23, 2022		December 24, 2021
Senior secured term loans	Senior secured term loans	$	169,103	$	201,553	Senior secured term loans	$	300,000	$	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
Finance lease and other financing obligations	Finance lease and other financing obligations	14,350		15,798		Finance lease and other financing obligations	9,732		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)	(6,850)		(7,172)		Deferred finance fees and original issue premium (discount)	(14,517)		(4,976)
Total debt obligations	Total debt obligations	400,603		404,179		Total debt obligations	499,215		399,301
Less: current installments	Less: current installments	(5,624)		(6,095)		Less: current installments	(6,067)		(5,141)
Total debt obligations excluding current installments	Total debt obligations excluding current installments	$	394,979	$	398,084	Total debt obligations excluding current installments	$	493,148	$	394,160

On ~~March 1, 2021,~~August 23, 2022, the Company ~~issued $50,000 aggregate~~entered into an eighth amendment (“Eight Amendment”) to its senior secured term loan credit agreement (“Term Credit Agreement”). The Company borrowed $300,000 maturing on August 23, 2029 (“2029 Term Loans”), comprising of a refinancing of the then existing term loans balance under the Term Credit Agreement of $167,391 and an incremental borrowing of $132,609. The incremental funds are to be used for capital expenditures, permitted acquisitions, working capital, and general corporate purposes of the Company. Additionally, the Term Credit Agreement includes an accordion which permits the Company to request that the lenders extend additional Term Loans based on certain performance, leverage ratio and other restrictions. The Eight Amendment includes a springing maturity of June 22, 2024 if, by June 22, 2024, more than $40,000 in principal ~~amount of 1.875%~~remains outstanding on the Company’s Convertible Senior Notes has not been repaid, repurchased, redeemed or refinanced with permitted indebtedness having a maturity date not earlier than six months after August 23, 2029.

The interest charged on the 2029 Term Loans is equal to, at the Company’s option, either the Alternate Base Rate (as defined in the Eight Amendment) plus 375 basis points or the secured overnight financing rate (“SOFR”) for one, two, three or six-month interest periods chosen by the Company plus 475 basis points. The interest rate on the 2029 Term Loans at September 23, 2022 was 7.9%.

The Eight Amendment involved multiple members of a ~~premium~~loan syndicate. The Company performed an analysis for each lender in accordance with ASC 470 “Debt” to determine whether the Eighth Amendment resulted in a substantial change to the remaining cash flows which ~~were offered~~is defined as ~~an additional issuance and under the same terms~~a change in present value of remaining cash flows of 10% or more. As a result of the ~~Company’s $150,000 Convertible Senior Notes due 2024 initially issued~~analysis, the Company incurred a loss on ~~November 22, 2019. Net proceeds were used to repay all outstanding borrowings under~~debt extinguishment of $142 which represents the ~~Company's 2022 tranche of senior secured term loans of $31,166 and repay a~~ portion of ~~borrowings outstanding under~~unamortized deferred financing fees attributable to lenders that exited the loan syndicate. The transaction was accounted for as a modification for existing lenders that participated in the 2029 Term Loans. The Company deferred lender and third-party fees of $10,852 as debt issuance costs, presented in other assets in the Company’s ~~asset-based loan facility (“ABL Facility”). The Company incurred transaction costs of approximately $1,350 which were capitalized as deferred financing fees~~consolidated balance sheet, to be amortized over the term of the ~~Convertible Senior Notes due 2024. At September 24, 2021, the effective interest rate charged on the Company’s Convertible Senior Notes was approximately 2.3%.~~term loan. Arrangement and third-party transaction costs of $4,498 were expensed as incurred.

The ~~net carry value of~~Eight Amendment removed the ~~Company’s Convertible Senior Notes as of September 24, 2021 and December 25, 2020 was:~~

September 24, 2021 December 25, 2020
Principal amount outstanding $ 200,000 $ 150,000
Unamortized deferred financing fees and premium 3,366 4,999
Net carry value $ 203,366 $ 154,999

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

Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 24, 2021 September 25, 2020 September 24, 2021 September 25, 2020
Coupon interest $ 937 $ 703 $ 2,656 $ 2,109
Amortization of deferred financing fees and premium $ 224 $ 250 $ 689 $ 750
Total interest $ 1,161 $ 953 $ 3,345 $ 2,859

~~The Company’s senior secured term loan credit agreement requires~~minimum liquidity covenant which required 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 Term Credit Agreement, iswas less than $10,000.

The following table summarizes the key terms as of the Term Loans as of September 23, 2022:

Term Loans

Principal Outstanding

Interest Rate

Maturity Date

Scheduled Principal Payments

2029 Term Loans

300,000

SOFR + 4.75%

August 23, 2029

0.25% per quarter

On March 11, 2022, the Company ~~had minimum liquidity, as~~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, of $250,638 as of September 24, 2021.~~

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 that occurs 90 days prior to the earliest maturity date under the Company’s senior secured term loan facility 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 that have not been repaid, repurchased, redeemed or refinanced 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 the greater of $14,000 and 10%, of the lesser of the aggregate commitments and the borrowing base then in effect.

The third amendment was accounted for as a debt modification. 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.

On September ~~24, 2021,~~23, 2022, the Company ~~was in compliance with~~fully paid all ~~debt covenants~~borrowings outstanding under the ABL and ~~the Company~~ had reserved ~~$20,541~~$23,181 of the ABL Facility for the issuance of letters of credit. As of September ~~24, 2021,~~23, 2022, funds totaling ~~$109,459~~$176,820 were available for borrowing under the ABL Facility. At

The net carry value of the Company’s Convertible Senior Notes as of September 23, 2022 and December 24, 2021 ~~the~~was:


	September 23, 2022		December 24, 2021
Principal amount outstanding	$	200,000	$	200,000
Unamortized deferred financing fees and premium	(2,014)		(2,686)
Net carry value	$	197,986	$	197,314

The components of interest ~~rate charged~~expense on the Company’s ~~senior secured term loan was approximately 5.6% and the interest rate charged on the Company’s ABL Facility was approximately 1.3%.~~Convertible Senior Notes were as follows:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021
Coupon interest	$	938	$	938	$	2,813	$	2,656
Amortization of deferred financing fees and premium	$	224	$	224	$	672	$	689
Total interest	$	1,162	$	1,162	$	3,485	$	3,345

Note 10 – Stockholders’ Equity

~~Warrants~~

In connection with an acquisition during the second quarter of fiscal 2021, the Company issued warrants with a fair value of $1,120 to purchase up to 150,000 shares of the Company’s common stock at an exercise price of $31.96 per share. These warrants expire on April 22, 2024.

Equity Awards

The following table reflects the activity of RSAs during the thirty-nine weeks ended September ~~24, 2021:~~23, 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	—	$	—	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	356,956	31.72		199,231	32.00		199,241	31.44		Granted	183,244	33.60		167,261	32.44		167,261	29.12
Vested	Vested	(588,535)	12.09		—	—		—	—		Vested	(315,722)	26.43		—	—		—	—
Forfeited	Forfeited	(61,306)	27.41		(12,536)	32.00		(14,508)	31.24		Forfeited	(15,691)	29.83		(21,420)	32.14		(21,423)	30.82
Unvested at September 24, 2021		608,433	$	28.04	186,695	$	32.00	211,685	$	31.29
Unvested at September 23, 2022											Unvested at September 23, 2022	469,827	$	31.61	333,278	$	32.23	330,967	$	30.31

The Company granted ~~755,428~~517,766 RSAs to its employees ~~and directors~~ at a weighted average grant date fair value of ~~$31.72~~$31.41 during the thirty-nine weeks ended September ~~24, 2021.~~23, 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 ~~$2,710~~$3,099 and ~~$2,075~~$2,710 on its RSAs during the thirteen weeks ended September 23, 2022 and September 24, 2021, ~~and September 25, 2020,~~ respectively and ~~$8,448~~$9,081 and ~~$4,925~~$8,448 during the thirty-nine weeks ended September 23, 2022 and September 24, 2021, ~~and September 25, 2020,~~ respectively.

At September ~~24, 2021,~~23, 2022, the total unrecognized compensation cost for unvested RSAs was ~~$20,830~~$21,353 and the weighted-average remaining period was approximately ~~2.2~~2.1 years. Of this total, ~~$12,531~~$11,051 related to RSAs with time-based vesting provisions and ~~$8,299~~$10,302 related to RSAs with ~~performance-based~~performance- and market-based vesting provisions. At September ~~24, 2021,~~23, 2022, the weighted-average remaining period for time-based vesting and performance-based vesting RSAs were approximately ~~2.1~~2.2 years and ~~2.4~~2.0 years, respectively.

No share-based compensation expense related to the Company’s RSAs or stock options has been capitalized. As of September ~~24, 2021,~~23, 2022, there were ~~895,646~~2,053,840 shares available for grant under the 2019 Omnibus Equity Incentive Plan.

The following table summarizes stock option activity during the thirty-nine weeks ended September 23, 2022:


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




Outstanding December 24, 2021	115,639	$	20.23	$	2,051	6.2

Exercised	(3,407)	20.23

Outstanding September 23, 2022	112,232	$	20.23	$	1,127	3.5
Exercisable at September 23, 2022	112,232	20.23		$	1,127	3.5

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 one of its directors, and are deemed to be affiliates of these individuals. Expense related to this facility totaled ~~$124~~$123 during the thirteen weeks ended September 23, 2022 and ~~$124~~September 24, 2021, and $369 during the thirty-nine weeks ended September 23, 2022 and September 24, 2021.

Note 12 – Income Taxes

The Company’s effective tax rate was 27.0% and 44.7% thirteen weeks ended September 23, 2022 and September 24, 2021 and 27.0% and 27.3% for the thirty-nine weeks ended September 23, 2022 and September 24, 2021. The effective tax rate varies from the 21% statutory rate primarily due to state taxes. The high effective tax rate for the thirteen weeks ended September 24, 2021 was driven by various discrete items.

As a result of the Coronavirus Aid, Relief, and Economic Security Act (“Cares Act”), the Company had carried back federal net operating losses resulting in a federal income tax refund receivable of $21,250, which is classified within prepaid expenses and other current assets on the Company’s consolidated balance sheets as of September ~~25, 2020, respectively,~~23, 2022 and ~~$370~~December 24, 2021. The IRS is experiencing significant processing delays driven by an increase in net operating loss carryback requests as a result of the CARES Act, along with other factors. As a result, the processing and ~~$365 during~~expected receipt of the ~~thirty-nine weeks ended September 24, 2021~~federal income tax refund receivable has been significantly delayed. The Company is currently working with IRS Taxpayer’s Advocate Services and ~~September 25, 2020, respectively.~~consultants to resolve the processing issue. While progress has been made with the IRS and the Company expects to receive the refund within one year, the exact timing of the receipt is difficult to predict.

1516

Note 1213 – Supplemental Disclosures of Cash Flow Information


		Thirty-Nine Weeks Ended					Thirty-Nine Weeks Ended
		September 24, 2021		September 25, 2020			September 23, 2022		September 24, 2021
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:					Supplemental cash flow disclosures:
Cash paid for income taxes, net of cash received		$	(194)	$	308
Cash paid (received) for income taxes						Cash paid (received) for income taxes	$	3,483	$	(194)
Cash paid for interest, net of cash received	Cash paid for interest, net of cash received	$	10,690	$	12,741	Cash paid for interest, net of cash received	$	17,636	$	10,690
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	$	18,965	$	20,206	Operating cash flows from operating leases	$	20,835	$	18,965
Operating cash flows from finance leases	Operating cash flows from finance leases	$	411	$	411	Operating cash flows from finance leases	$	325	$	422
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	$	13,308	$	5,800	Operating leases	$	21,779	$	13,308
Finance leases	Finance leases	$	536	$	14,017	Finance leases	$	791	$	536
Other non-cash investing and financing activities:	Other non-cash investing and financing activities:					Other non-cash investing and financing activities:
Warrants issued for acquisitions	Warrants issued for acquisitions	$	1,120	$	—	Warrants issued for acquisitions	$	1,701	$	1,120

Contingent earn-out liabilities for acquisitions	Contingent earn-out liabilities for acquisitions	$	3,400	$	3,464	Contingent earn-out liabilities for acquisitions	$	1,200	$	3,400

~~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~~

~~Note 14 – Subsequent Events~~

On October 5, 2021, the Company acquired substantially all of the assets of a specialty center-of-plate producer and distributor in Las Vegas, Nevada. The purchase price was approximately $3,025 paid in cash at closing and is subject to a customary working capital true-up. The Company is required to pay additional contingent consideration, if earned, of up to $5,000 over a four-year period upon successful attainment of certain performance targets.

1617

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”) had an adverse impact on numerous aspects of our business and those of our customers ~~have been adversely impacted by~~including, but not limited to, demand for our products, cost inflation and labor shortages. Despite these challenges, we continued to provide our core customers with high touch service, executed on our cost control measures and returned to profitability beginning in the ~~COVID-19 pandemic (the “Pandemic”), however we have seen~~second quarter of fiscal 2021. We continue to experience sequential improvement in our business ~~throughout fiscal 2021~~ which has contributed to organic sales growth of ~~$213.7~~$107.2 million ~~during the third quarter of fiscal 2021~~ compared to the prior year quarter.

~~We closed the quarter with total cash and cash equivalents of $134.2 million, and approximately $109.5 million of remaining availability under our asset-based loan facility as of September 24, 2021.~~

The ~~future impact of~~extent to which the Pandemic onmay 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

On December 28, 2021, pursuant to an asset purchase agreement, we acquired substantially all of the assets of CGC Holdings, Inc. (“Capital Seaboard”), a specialty seafood and produce distributor in Maryland. The purchase price was approximately $31.0 million consisting of $28.0 million paid in cash at closing, common stock warrants of $1.7 million , and $1.3 million paid upon settlement of a net working capital true-up.

During the ~~second quarter of fiscal 2021, we~~thirty-nine weeks ended September 23, 2022, the Company completed ~~two~~three other acquisitions for an aggregate purchase price of approximately ~~$8.4 million, consisting of $7.3~~$32.5 million, paid in cash, ~~at closing,~~ subject to customary working capital ~~adjustments, and common stock warrants valued at approximately $1.1 million. We~~adjustments. The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total ~~$4.2~~$2.0 million in the aggregate.

RESULTS OF OPERATIONS


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021
Net sales	Net sales	$	484,321	$	254,030	$	1,187,506	$	829,957	Net sales	$	661,856	$	484,321	$	1,822,063	$	1,187,506
Cost of sales	Cost of sales	374,346		193,668		922,710		640,681		Cost of sales	504,068		374,346		1,390,758		922,710
Gross profit	Gross profit	109,975		60,362		264,796		189,276		Gross profit	157,788		109,975		431,305		264,796
Selling, general and administrative expenses	Selling, general and administrative expenses	99,431		76,433		270,034		253,480		Selling, general and administrative expenses	130,255		99,431		364,828		270,034
Other operating (income) expenses, net		105		(4,146)		(208)		(9,812)
Other operating expenses (income), net										Other operating expenses (income), net	5,458		105		10,504		(208)
Operating income (loss)	Operating income (loss)	10,439		(11,925)		(5,030)		(54,392)		Operating income (loss)	22,075		10,439		55,973		(5,030)

Interest expense	Interest expense	4,191		4,706		13,362		15,602		Interest expense	10,737		4,191		19,567		13,362
Income (loss) before income taxes	Income (loss) before income taxes	6,248		(16,631)		(18,392)		(69,994)		Income (loss) before income taxes	11,338		6,248		36,406		(18,392)
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	2,792		(5,204)		(5,025)		(24,148)		Provision for income tax expense (benefit)	3,061		2,792		9,829		(5,025)
Net income (loss)	Net income (loss)	$	3,456	$	(11,427)	$	(13,367)	$	(45,846)	Net income (loss)	$	8,277	$	3,456	$	26,577	$	(13,367)

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 September ~~24, 2021~~23, 2022 Compared to Thirteen Weeks Ended September ~~25, 2020~~24, 2021

Net Sales

2021 2020 $ Change % Change
Net sales $ 484,321 $ 254,030 $ 230,291 90.7 %


	2022		2021		$ Change		% Change
Net sales	$	661,856	$	484,321	$	177,535	36.7	%

Organic growth contributed ~~$213.7~~$107.2 million, or ~~84.2%~~22.2%, to sales growth and the remaining sales growth of ~~$16.6~~$70.3 million, or ~~6.5%~~14.5%, resulted from acquisitions. Organic case count increased approximately ~~57.5%~~18.3% in our specialty category. In addition, specialty unique customers and placements increased ~~36.9%~~25.9% and ~~50.4%~~42.1%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased ~~56.9%~~11.6% compared to the prior year. Estimated inflation was ~~10.9%~~15.0% in our specialty category and ~~28.0%~~2.2% 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	109,975		60,362		49,613	82.2	%	Gross profit	$	157,788		$	109,975		$	47,813	43.5	%
Gross profit margin	Gross profit margin	22.7	%	23.8	%				Gross profit margin	23.8		%	22.7		%

Gross profit dollars increased primarily as a result of increased ~~sales.~~sales and price inflation. Gross profit margin ~~decreased~~increased approximately ~~105~~113 basis points. Gross profit margins ~~increased 301~~decreased 133 basis points in the Company’s specialty category ~~due to higher estimated inventory losses due to the impacts of COVID-19 in the prior year quarter, partially offset by inflation. Gross profit margins decreased 488~~and increased 238 basis points in the Company’s center-of-the-plate category. Estimated inflation was 15.0% in the Company’s specialty category ~~due~~and 2.2% in the center-of-the-plate category compared to ~~inflation and higher retail sales in~~ the prior year ~~quarter.~~period. Specialty margins decreased primarily due to significant year-over-year product cost inflation. Margin rates in the center-of-the-plate category increased as a result of the reopening of favorable margin markets versus the same period in 2021 and year-over-year deflation in certain protein categories.

Selling, General and Administrative Expenses


		2021		2020		$ Change	% Change			2022			2021			$ Change		% Change
Selling, general and administrative expenses	Selling, general and administrative expenses	99,431		76,433		22,998	30.1	%	Selling, general and administrative expenses	$	130,255		$	99,431		$	30,824	31.0	%
Percentage of net sales	Percentage of net sales	20.5	%	30.1	%				Percentage of net sales	19.7		%	20.5		%

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

Other Operating Expenses, Net


	2022		2021		$ Change		% Change
Other operating expenses, net	$	5,458	$	105	$	5,353	5,098.1	%

The increase in net other operating expenses was primarily due to non-cash charges of $4.7 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash credits of $0.1 million in the prior year period.

Interest Expense


	2022		2021		$ Change		% Change
Interest expense	$	10,737	$	4,191	$	6,546	156.2	%

Interest expense increased primarily due to incurred arrangement and third-party transaction fees of $4.5 million and a $0.1 million loss on debit extinguishment from the refinancing of our term loan. Additionally, we had higher amounts of debt outstanding as a result our $300.0 million term loan issuance in August 2022 and increases in the variable portion of interest rates charged on our outstanding debt.

Provision for Income Taxes


	2022			2021			$ Change		% Change
Provision for income tax expense (benefit)	$	3,061		$	2,792		$	269	9.6	%
Effective tax rate	27.0		%	44.7		%

The effective tax rate in the prior period was driven by various discrete items. The Company’s effective tax rate excluding these discrete items was approximately 29.2%.

Thirty-Nine Weeks Ended September 23, 2022 Compared to Thirty-Nine Weeks Ended September 24, 2021

Net Sales


	2022		2021		$ Change		% Change
Net sales	$	1,822,063	$	1,187,506	$	634,557	53.4	%

Organic growth contributed $435.8 million, or 36.7%, to sales growth and the remaining sales growth of $198.8 million, or 16.7%, resulted from acquisitions. Organic case count increased approximately 31.3% in our specialty category. In addition, specialty unique customers and placements increased 30.3% and 46.4%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased 16.4% compared to the prior year. Estimated inflation was 15.5% in our specialty category and 11.6% in our center-of-the-plate category compared to the prior year period.

Gross Profit


	2022		2021		$ Change	% Change
Gross profit	431,305		264,796		166,509	62.9	%
Gross profit margin	23.7	%	22.3	%

Gross profit dollars increased primarily as a result of sales growth and price inflation. Gross profit margin increased approximately 137 basis points. Gross profit margins decreased 31 basis points in the Company’s specialty category and increased 202 basis points in the Company’s center-of-the-plate category. Estimated inflation was 15.5% in our specialty category and 11.6% in our center-of-the-plate category compared to the prior year period. Higher inflation compressed margin rates in the specialty categories, while margin rates in the center-of-the-plate category were buoyed primarily by the reopening of favorable margin markets in the 2022 period.

Selling, General and Administrative Expenses


	2022		2021		$ Change	% Change
Selling, general and administrative expenses	364,828		270,034		94,794	35.1	%
Percentage of net sales	20.0	%	22.7	%

The increase in selling, general and administrative expenses was primarily due to higher costs associated with compensation and benefits, facilities costs, and fuel costs 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 ~~(Income)~~ Expenses (Income ), Net

2021 2020 $ Change % Change
Other operating (income) expenses, net 105 (4,146) 4,251 (102.5) %


	2022	2021	$ Change	% Change
Other operating expenses (income), net	10,504	(208)	10,712	(5,150.0)	%

The increase in net other operating ~~expenses was~~expense relates primarily ~~due~~ to non-cash charges of ~~$0.1 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash credits of $4.6 million in the prior year period.~~

~~Interest Expense~~

2021 2020 $ Change % Change
Interest expense 4,191 4,706 (515) (10.9) %

Interest expense decreased primarily due to lower effective interest rates on our outstanding debt as a result of the $50.0 million aggregate principal amount of 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
Provision for income tax expense (benefit) 2,792 (5,204) 7,996 (153.7) %
Effective tax rate 44.7 % 31.3 %

The effective tax rate in the current period is driven by various discrete items. The Company’s effective tax rate excluding these discrete items was approximately 29.2%. 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%.

~~Thirty-Nine Weeks Ended September 24, 2021 Compared to Thirty-Nine Weeks Ended September 25, 2020~~

~~Net Sales~~

2021 2020 $ Change % Change
Net sales $ 1,187,506 $ 829,957 $ 357,549 43.1 %

Organic growth contributed $322.1 million, or 38.8%, to sales growth and the remaining sales growth of $35.5 million, or 4.3%, resulted from acquisitions. Organic case count increased approximately 22.9% in our specialty category. In addition, specialty unique customers and placements increased 23.0% and 23.8%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased 21.2% compared to the prior year. Estimated inflation was 8.7% in our specialty category and 14.2% in our center-of-the-plate category compared to the prior year period.

~~Gross Profit~~

2021 2020 $ Change % Change
Gross profit 264,796 189,276 75,520 39.9 %
Gross profit margin 22.3 % 22.8 %

Gross profit increased primarily as a result of sales growth. Gross profit margin decreased approximately 51 basis points. Gross profit margins increased 292 basis points in the Company’s specialty category due to higher estimated inventory losses due to the impacts of COVID-19 in the prior year quarter, partially offset by inflation. Gross profit margins decreased 376 basis points in the Company’s center-of-the-plate category due to inflation. Our prior year gross profit results include a charge of approximately $9.8 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 270,034 253,480 16,554 6.5 %
Percentage of net sales 22.7 % 30.5 %

The increase in selling, general and administrative expense relates primarily to higher operating expenses in fiscal 2021 to support sales growth, partially offset by an estimated non-cash charge of approximately $15.8 million recorded in the prior year related to incremental bad debt expense. Our ratio of selling, general and administrative expenses to net sales was lower as a result of sales growth and of the Pandemic’s adverse impacts to our sales growth and a 104 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 (208) (9,812) 9,604 (97.9) %

~~The decrease in net other operating income relates primarily to non-cash credits of $1.4~~$8.4 million for changes in the fair value of our contingent earn-out liabilities in the fiscal ~~2021~~2022 period compared to non-cash credits of ~~$11.2~~$1.4 million in the prior year period. The prior year period ~~and~~also includes 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.

Interest Expense

2021 2020 $ Change % Change
Interest expense 13,362 15,602 (2,240) (14.4) %


	2022	2021	$ Change	% Change
Interest expense	19,567	13,362	6,205	46.4	%

Interest expense ~~decreased~~increased primarily due to ~~$1.2~~incurred arrangement and third-party transaction fees of $4.5 million ~~in one-time third-party costs incurred during~~and a $0.1 million loss on debit extinguishment from the ~~second quarter of 2020 in connection with the extension of a majority~~refinancing of our ~~senior secured~~ term ~~loans~~loan. Additionally, we had higher amounts of debt outstanding as a result our $300.0 million term loan issuance in August 2022 and ~~lower effective~~increases in the variable portion of interest rates charged on our outstanding ~~debt as a result of the $50.0 million aggregate principal amount of 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		(5,025)		(24,148)		19,123	(79.2)	%
Provision for income tax expense (benefit)									Provision for income tax expense (benefit)	9,829		(5,025)		14,854	(295.6)	%
Effective tax rate	Effective tax rate	27.3	%	34.5	%				Effective tax rate	27.0	%	27.3	%

The ~~higher effective~~increase in income tax ~~rate~~expense is due to pre-tax income in the current period compared to a pre-tax loss in the prior period is primarily related to the carryback of a portion of our fiscal 2020 net loss 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%.year period.

2021

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):


		September 24, 2021		December 25, 2020			September 23, 2022		December 24, 2021
Senior secured term loan	Senior secured term loan	$	169,103	$	201,553	Senior secured term loan	$	300,000	$	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
Finance leases and other financing obligations	Finance leases and other financing obligations	14,350		15,798		Finance leases and other financing obligations	9,732		11,602
Total	Total	$	407,453	$	411,351	Total	$	513,732	$	404,277

As of September ~~24, 2021,~~23, 2022, we have various floating- and fixed-rate debt instruments with varying maturities for an aggregate principal amount of ~~$393.1~~$504.0 million.

On ~~March 1, 2021, the~~August 23, 2022, we ~~issued $50.0 million aggregate principal amount of 1.875% Convertible Senior Notes at a premium which were offered as~~entered into an ~~additional issuance of our $150.0 million Convertible Senior Notes due 2024 issued on November 22, 2019. Net proceeds were used~~eighth amendment to ~~repay all outstanding borrowings under the our 2022 tranche of~~its senior secured term ~~loans of $31.2~~loan credit agreement in which we borrowed $300.0 million ~~and repay~~maturing on August 23, 2029. See Note 9 “Debt Obligations” to our consolidated financial statements for a ~~portion of borrowings outstanding under~~full description.

On March 11, 2022, we entered into a third amendment to 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):


		September 24, 2021		December 25, 2020			September 23, 2022		December 24, 2021
Cash and cash equivalents	Cash and cash equivalents	$	134,217	$	193,281	Cash and cash equivalents	$	145,425	$	115,155
Working capital, excluding cash and cash equivalents	Working capital, excluding cash and cash equivalents	138,379		94,279		Working capital, excluding cash and cash equivalents	209,181		157,787
Availability under asset-based loan facility	Availability under asset-based loan facility	109,459		50,282		Availability under asset-based loan facility	176,820		109,459
Total	Total	$	382,055	$	337,842	Total	$	531,426	$	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):

Thirty-Nine Weeks Ended
September 24, 2021 September 25, 2020
Net loss $ (13,367) $ (45,846)
Non-cash charges $ 30,729 $ 35,259
Changes in working capital $ (43,692) $ 64,456
Cash (used in) provided by operating activities $ (26,330) $ 53,869
Cash used in investing activities $ (25,152) $ (65,846)
Cash (used in) provided by financing activities $ (7,493) $ 80,457


	Thirty-Nine Weeks Ended
	September 23, 2022		September 24, 2021
Net income (loss)	$	26,577	$	(13,367)
Non-cash charges	$	58,763	$	30,729
Changes in working capital	$	(53,593)	$	(43,692)
Net cash provided by (used in) operating activities	$	31,747	$	(26,330)
Net cash used in investing activities	$	(93,673)	$	(25,152)
Net cash provided by (used in) financing activities	$	92,255	$	(7,493)

2122

Net cash provided by operations was $31.7 million for the thirty-nine weeks ended September 23, 2022 compared to net cash used in ~~operations was $26.3~~operating activities of consisting of $13.4 million for the thirty-nine weeks ended September 24, ~~2021 consisting of a~~2021. The increase in cash provided by operating activities was primarily due to the increased net ~~loss of $13.4 million offset by $30.7 million~~income, net of non-cash charges, in the current year of $85.3 million compared to $17.4 million in the prior year period. This improvement in cash-based profitability is primarily due to a 53.4% increase in sales compared to the prior year period. The sales growth also resulted in higher working capital (increased accounts receivable and ~~investments in~~inventory partially offset by higher accounts payable). The working capital growth of ~~$43.7 million. Non-cash charges decreased $4.5~~$9.9 million ~~primarily due to a $15.8 million charge incurred in~~versus the prior year ~~related to incremental bad debt expense due to the onset of the Pandemic,~~period partially offset ~~by changes~~the favorable impact of increased cash-based profitability. The Company’s increased working capital investment in the ~~fair value~~current year is the result of ~~earn-out liabilities. The cash used for~~rapid sales growth driven by our recovery from the pandemic. We expect working capital growth ~~of $108.1 million is primarily driven by~~to moderate in the ~~Company’s reinvestment in working capital to support~~future as sales ~~growth.~~growth normalizes.

Net cash used in investing activities was ~~$25.2~~$93.7 million for the thirty-nine weeks ended September ~~24, 2021,~~23, 2022, driven by capital expenditures of ~~$17.9~~$31.7 million which ~~included~~includes the ~~build-outs~~purchase of our ~~Los Angeles, New England~~distribution facility in Columbus, Ohio and ~~Miami distribution facilities and $7.3~~$62.0 million in cash paid for acquisitions.

Net cash ~~used in~~provided financing activities was ~~$7.5~~$92.3 million for the thirty-nine weeks ended September ~~24, 2021,~~23, 2022 driven by ~~$35.9~~the $300.0 million issuance of senior secured term loans maturing in 2029 (“2029 Term Loans”). This was partially offset by $171.4 million of principal payments ~~made on~~predominately driven by the pay off our 2025 tranche of senior secured term loans and ~~finance lease obligations and a~~$11.3 million of deferred financing fees paid in connection with the 2029 Term Loans. We paid $20.0 million ~~payment~~to pay down all borrowings outstanding on our ~~asset-based~~asset based loan ~~facility, partially offset by $51.8~~facility. We also paid $2.6 million for shares surrendered to pay tax withholding related to the vesting of equity incentive plan awards and $2.5 million of ~~proceeds from the issuance of additional convertible senior notes.~~earn-out liability payments classified as financing activities.

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 September 24, 2021, 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.

2224

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of September ~~24, 2021,~~23, 2022, we had an aggregate ~~$189.1~~$300.0 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~~$2.2 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 September ~~24, 2021.~~23, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September ~~24, 2021~~23, 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
June 26, 2021 to July 23, 2021 — $ — — —
July 24, 2021 to August 20, 2021 1,732 29.62 — —
August 21, 2021 to September 24, 2021 285 27.42 — —
Total 2,017 $ 29.31 — —


	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
June 25, 2022 to July 22, 2022	—	$	—	—	—
July 23, 2022 to August 19, 2022	741	35.01		—	—
August 20, 2022 to September 23, 2022	—	—		—	—
Total	741	$	35.01	—	—

(1)During the ~~thirteen~~thirty-nine weeks ended September ~~24, 2021,~~23, 2022, we withheld ~~2,017~~741 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.

2426

ITEM 6.7. EXHIBITS


Exhibit No.						Description



10.1†						Amendment No. 4, dated as of August 23, 2022, to the ABL Facility.

10.2†						Redlined Amended ABL Credit Agreement, dated as of August 23, 2022.

10.3†						Amendment No. 8, dated as of August 23, 2022, to the Term Loan Credit Agreement.

10.4†







						Redlined Amended Term Loan Credit Agreement, dated as of August 23, 2022.

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

2527

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 October ~~27, 2021.~~26, 2022.


									THE CHEFS’ WAREHOUSE, INC.
									(Registrant)

Date: October ~~27, 2021~~26, 2022									/s/ James Leddy
									James Leddy
									Chief Financial Officer
									(Principal Financial Officer)

Date: October ~~27, 2021~~26, 2022									/s/ Timothy McCauley
									Timothy McCauley
									Chief Accounting Officer
									(Principal Accounting Officer)

2628


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

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

Cash payments	—		—		—		(83)		(83)
Changes in fair value	—		39		(511)		(887)		(1,359)
Balance September 24, 2021	$	—	$	1,115	$	—	$	3,599	$	4,714