UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September ~~23, 2022~~29, 2023


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

For the transition period from _________ to _________

Commission file number: 001-35249

THE CHEFS’ WAREHOUSE, INC.

(Exact name of registrant as specified in its charter)

Delaware

20-3031526

(State or other jurisdiction of
incorporation or organization)

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

100 East Ridge Road

Ridgefield, Connecticut 06877

(Address of principal executive offices)

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

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


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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Number of shares of common stock, par value $.01 per share, outstanding at ~~October 24, 2022: 38,270,107~~November 1, 2023: 39,665,229

THE CHEFS’ WAREHOUSE, INC.

FORM 10-Q

Table of Contents

Page

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements (unaudited):

Condensed Consolidated Balance Sheets

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

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

Item 2.

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

1820

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

2527

Item 4.

Controls and Procedures

2527

PART II. OTHER INFORMATION

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2527

Item 3.

Defaults Upon Senior Securities

2628

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 the Secured Overnight Financing Rate (“SOFR”); our business operations and future development could be significantly disrupted if we lose key members of our management team; and significant public health epidemics or pandemics, including the COVID-19 pandemic, may adversely affect our business, results of operations and financial condition. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, speak only as of the date made. A more detailed description of these and other risk factors is contained in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February ~~22, 2022~~28, 2023 and other reports, including this Quarterly Report on Form 10-Q, filed by the Company with the SEC since that date. The Company is not undertaking to update any information in the foregoing report until the effective date of its future reports required by applicable laws.

PART I FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except share data)


		September 23, 2022 (unaudited)		December 24, 2021			September 29, 2023		December 30, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	145,425	$	115,155	Cash and cash equivalents	$	33,058	$	158,800
Accounts receivable, net of allowance of $21,147 in 2022 and $20,260 in 2021		208,939		172,540
Accounts receivable, net of allowance of $24,792 in 2023 and $20,733 in 2022						Accounts receivable, net of allowance of $24,792 in 2023 and $20,733 in 2022	316,138		260,167
Inventories, net	Inventories, net	190,668		144,491		Inventories, net	312,222		245,693

Prepaid expenses and other current assets	Prepaid expenses and other current assets	46,464		37,774		Prepaid expenses and other current assets	60,199		56,200
Total current assets	Total current assets	591,496		469,960		Total current assets	721,617		720,860

Property, plant and equipment, net		158,569		133,622
Property and equipment, net						Property and equipment, net	208,927		185,728
Operating lease right-of-use assets	Operating lease right-of-use assets	135,286		130,701		Operating lease right-of-use assets	177,092		156,629
Goodwill	Goodwill	245,428		221,775		Goodwill	344,526		287,120
Intangible assets, net	Intangible assets, net	116,112		104,743		Intangible assets, net	199,618		155,703
Deferred taxes, net		2,259		9,380

Other assets	Other assets	3,609		3,614		Other assets	6,262		3,256
Total assets	Total assets	$	1,252,759	$	1,073,795	Total assets	$	1,658,042	$	1,509,296
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	142,963	$	118,284	Accounts payable	$	209,299	$	163,397
Accrued liabilities	Accrued liabilities	48,751		35,390		Accrued liabilities	75,437		54,325
Short-term operating lease liabilities	Short-term operating lease liabilities	17,180		15,882		Short-term operating lease liabilities	22,765		19,428
Accrued compensation	Accrued compensation	21,929		22,321		Accrued compensation	30,747		34,167
Current portion of long-term debt	Current portion of long-term debt	6,067		5,141		Current portion of long-term debt	11,970		12,428
Total current liabilities	Total current liabilities	236,890		197,018		Total current liabilities	350,218		283,745
Long-term debt, net of current portion	Long-term debt, net of current portion	493,148		394,160		Long-term debt, net of current portion	689,207		653,504
Operating lease liabilities	Operating lease liabilities	131,910		127,296		Operating lease liabilities	171,207		151,406

Deferred taxes, net						Deferred taxes, net	9,317		6,098

Other liabilities and deferred credits	Other liabilities and deferred credits	5,862		5,110		Other liabilities and deferred credits	3,311		13,034
Total liabilities	Total liabilities	867,810		723,584		Total liabilities	1,223,260		1,107,787
Commitments and contingencies	Commitments and contingencies					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 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		383		380
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 29, 2023 and December 30, 2022						Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 29, 2023 and December 30, 2022	—		—
Common Stock - $0.01 par value, 100,000,000 shares authorized, 39,667,165 and 38,599,390 shares issued and outstanding at September 29, 2023 and December 30, 2022, respectively						Common Stock - $0.01 par value, 100,000,000 shares authorized, 39,667,165 and 38,599,390 shares issued and outstanding at September 29, 2023 and December 30, 2022, respectively	397		386
Additional paid-in capital	Additional paid-in capital	322,505		314,242		Additional paid-in capital	352,576		337,947
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,127)		(2,022)		Accumulated other comprehensive loss	(2,142)		(2,185)
Retained earnings	Retained earnings	64,188		37,611		Retained earnings	83,951		65,361
Total stockholders’ equity	Total stockholders’ equity	384,949		350,211		Total stockholders’ equity	434,782		401,509
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,252,759	$	1,073,795	Total liabilities and stockholders’ equity	$	1,658,042	$	1,509,296

See accompanying notes to the condensed consolidated financial statements

THE CHEFS’ WAREHOUSE, INC.

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

(Unaudited)

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


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022		September 29, 2023		September 23, 2022
Net sales	Net sales	$	661,856	$	484,321	$	1,822,063	$	1,187,506	Net sales	$	881,825	$	661,856	$	2,483,290	$	1,822,063
Cost of sales	Cost of sales	504,068		374,346		1,390,758		922,710		Cost of sales	674,127		504,068		1,897,440		1,390,758
Gross profit	Gross profit	157,788		109,975		431,305		264,796		Gross profit	207,698		157,788		585,850		431,305
Selling, general and administrative expenses	Selling, general and administrative expenses	130,255		99,431		364,828		270,034		Selling, general and administrative expenses	179,614		130,255		514,793		364,828
Other operating expenses (income), net		5,458		105		10,504		(208)
Operating income (loss)		22,075		10,439		55,973		(5,030)
Other operating expenses, net										Other operating expenses, net	2,535		5,458		8,269		10,504
Operating income										Operating income	25,549		22,075		62,788		55,973
Interest expense	Interest expense	10,737		4,191		19,567		13,362		Interest expense	11,379		10,737		33,391		19,567

Income (loss) before income taxes		11,338		6,248		36,406		(18,392)
Provision for income tax expense (benefit)		3,061		2,792		9,829		(5,025)
Net income (loss)		$	8,277	$	3,456	$	26,577	$	(13,367)
Income before income taxes										Income before income taxes	14,170		11,338		29,397		36,406
Provision for income tax expense										Provision for income tax expense	6,848		3,061		10,807		9,829
Net income										Net income	$	7,322	$	8,277	$	18,590	$	26,577
Other comprehensive (loss) income:	Other comprehensive (loss) income:									Other comprehensive (loss) income:
Foreign currency translation adjustments	Foreign currency translation adjustments	(156)		(90)		(105)		67		Foreign currency translation adjustments	(231)		(156)		43		(105)
Comprehensive income (loss)		$	8,121	$	3,366	$	26,472	$	(13,300)
Net income (loss) per share:
Comprehensive income										Comprehensive income	$	7,091	$	8,121	$	18,633	$	26,472
Net income per share:										Net income per share:
Basic	Basic	$	0.22	$	0.09	$	0.72	$	(0.36)	Basic	$	0.19	$	0.22	$	0.49	$	0.72
Diluted	Diluted	$	0.21	$	0.09	$	0.68	$	(0.36)	Diluted	$	0.19	$	0.21	$	0.49	$	0.68
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	37,120,926		36,875,784		37,047,653		36,701,927		Basic	37,692,588		37,120,926		37,611,179		37,047,653
Diluted	Diluted	42,044,053		37,105,746		41,942,676		36,701,927		Diluted	45,717,496		42,044,053		39,143,774		41,942,676

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

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(Amounts in thousands, except share amounts)

Common Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Loss

Retained
Earnings
Total
Shares Amount
Balance December 24, 2021 37,887,675 $ 380 $ 314,242 $ (2,022) $ 37,611 $ 350,211
Net income — — — — 1,385 1,385
Stock compensation 433,115 4 3,039 — — 3,043
Warrants issued for acquisition — — 1,701 — — 1,701
Cumulative translation adjustment — — — 125 — 125
Shares surrendered to pay tax withholding (64,329) (1) (2,039) — — (2,040)
Balance March 25, 2022 38,256,461 $ 383 $ 316,943 $ (1,897) $ 38,996 $ 354,425
Net income — — — — 16,915 16,915
Stock compensation 16,131 — 2,939 — — 2,939
Cumulative translation adjustment — — — (74) — (74)
Shares surrendered to pay tax withholding (15,137) — (518) — — (518)
Balance June 24, 2022 38,257,455 $ 383 $ 319,364 $ (1,971) $ 55,911 $ 373,687
Net income — — — — 8,277 8,277
Stock compensation 9,986 — 3,099 — — 3,099
Exercise of stock options 3,407 — 69 — — 69
Cumulative translation adjustment — — — (156) — (156)
Shares surrendered to pay tax withholding (741) — (27) — — (27)
Balance September 23, 2022 38,270,107 $ 383 $ 322,505 $ (2,127) $ 64,188 $ 384,949


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Shares	Amount
Balance December 30, 2022	38,599,390	$	386	$	337,947	$	(2,185)	$	65,361	$	401,509

Net income	—	—		—		—		1,401		1,401
Stock compensation	998,777	10		4,780		—		—		4,790




Cumulative translation adjustment	—	—		—		81		—		81
Shares surrendered to pay tax withholding	(54,036)	(1)		(1,828)		—		—		(1,829)
Balance March 31, 2023	39,544,131	$	395	$	340,899	$	(2,104)	$	66,762	$	405,952

Net income	—	—		—		—		9,867		9,867
Stock compensation	53,543	—		4,704		—		—		4,704


Shares issued for acquisitions	75,008	1		2,495		—		—		2,496

Cumulative translation adjustment	—	—		—		193		—		193
Shares surrendered to pay tax withholding	(6,991)	—		(237)		—		—		(237)
Balance June 30, 2023	39,665,691	$	396	$	347,861	$	(1,911)	$	76,629	$	422,975

Net income	—	—		—		—		7,322		7,322
Stock compensation	936	1		4,729		—		—		4,730



Exercise of stock options	2,705	—		55		—		—		55
Cumulative translation adjustment	—	—		—		(231)		—		(231)
Shares surrendered to pay tax withholding	(2,167)	—		(69)		—		—		(69)
Balance September 29, 2023	39,667,165	$	397	$	352,576	$	(2,142)	$	83,951	$	434,782


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

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

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)


		Thirty-Nine Weeks Ended					Thirty-Nine Weeks Ended
		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	26,577	$	(13,367)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income						Net income	$	18,590	$	26,577
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	17,667		16,270		Depreciation and amortization	24,167		17,667
Amortization of intangible assets	Amortization of intangible assets	10,289		9,778		Amortization of intangible assets	16,924		10,289
Provision (benefit) for allowance for doubtful accounts		3,138		(744)
Provision for allowance for doubtful accounts						Provision for allowance for doubtful accounts	5,216		3,138
Non-cash operating lease expense	Non-cash operating lease expense	1,329		505		Non-cash operating lease expense	2,663		1,329
Provision (benefit) for deferred income taxes		7,121		(4,855)
Provision for deferred income taxes						Provision for deferred income taxes	3,018		7,121
Amortization of deferred financing fees	Amortization of deferred financing fees	1,621		1,832		Amortization of deferred financing fees	3,421		1,621
Loss on debt extinguishment	Loss on debt extinguishment	142		—		Loss on debt extinguishment	—		142
Stock compensation	Stock compensation	9,081		8,448		Stock compensation	15,855		9,081
Change in fair value of contingent earn-out liabilities	Change in fair value of contingent earn-out liabilities	8,358		(1,359)		Change in fair value of contingent earn-out liabilities	2,850		8,358
Intangible asset impairment	Intangible asset impairment	—		597		Intangible asset impairment	1,838		—
Loss on asset disposal		17		257
(Gain) loss on asset disposal						(Gain) loss on asset disposal	(44)		17
Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:					Changes in assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	(25,402)		(51,582)		Accounts receivable	(27,387)		(25,402)
Inventories	Inventories	(40,519)		(49,148)		Inventories	(56,350)		(40,519)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(9,848)		(3,304)		Prepaid expenses and other current assets	(3,460)		(9,848)
Accounts payable, accrued liabilities and accrued compensation	Accounts payable, accrued liabilities and accrued compensation	21,938		60,443		Accounts payable, accrued liabilities and accrued compensation	18,740		21,938

Other assets and liabilities	Other assets and liabilities	238		(101)		Other assets and liabilities	(5,996)		238
Net cash provided by (used in) operating activities		31,747		(26,330)
Net cash provided by operating activities						Net cash provided by operating activities	20,045		31,747

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(31,666)		(17,872)		Capital expenditures	(35,130)		(31,666)
Cash paid for acquisitions, net of cash received		(62,007)		(7,280)
Cash paid for acquisitions, net of cash acquired						Cash paid for acquisitions, net of cash acquired	(120,600)		(62,007)

Net cash used in investing activities	Net cash used in investing activities	(93,673)		(25,152)		Net cash used in investing activities	(155,730)		(93,673)

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	(171,434)		(35,918)		Payment of debt, finance lease and other financing obligations	(33,444)		(171,434)

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

Payment of deferred financing fees	Payment of deferred financing fees	(11,258)		(1,450)		Payment of deferred financing fees	(354)		(11,258)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	69		—		Proceeds from exercise of stock options	55		69
Surrender of shares to pay withholding taxes	Surrender of shares to pay withholding taxes	(2,584)		(1,792)		Surrender of shares to pay withholding taxes	(2,134)		(2,584)
Cash paid for contingent earn-out liability	Cash paid for contingent earn-out liability	(2,538)		(83)		Cash paid for contingent earn-out liability	(3,650)		(2,538)

Borrowings under asset-based loan facility						Borrowings under asset-based loan facility	50,000		—
Payments under asset-based loan facility	Payments under asset-based loan facility	(20,000)		(20,000)		Payments under asset-based loan facility	—		(20,000)

Net cash provided by (used in) financing activities		92,255		(7,493)
Net cash provided by financing activities						Net cash provided by financing activities	10,473		92,255

Effect of foreign currency on cash and cash equivalents	Effect of foreign currency on cash and cash equivalents	(59)		(89)		Effect of foreign currency on cash and cash equivalents	(530)		(59)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	30,270		(59,064)		Net change in cash and cash equivalents	(125,742)		30,270
Cash and cash equivalents-beginning of period	Cash and cash equivalents-beginning of period	115,155		193,281		Cash and cash equivalents-beginning of period	158,800		115,155
Cash and cash equivalents-end of period	Cash and cash equivalents-end of period	$	145,425	$	134,217	Cash and cash equivalents-end of period	$	33,058	$	145,425

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

THE CHEFS’ WAREHOUSE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 1 - Operations and Basis of Presentation

Description of Business and Basis of Presentation

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

Consolidation

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

Unaudited Interim Financial Statements

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

The unaudited condensed consolidated financial statements appearing in this Form 10-Q have been prepared on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February ~~22, 2022,~~28, 2023, and in the opinion of management, include all normal recurring adjustments that are necessary for the fair statement of the Company’s interim period results. The year-end consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by GAAP. Due to seasonal fluctuations ~~the COVID-19 pandemic~~ and other factors, the results of operations for the thirteen and thirty-nine weeks ended September ~~23, 2022~~29, 2023 are not necessarily indicative of the results to be expected for the full year.

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

Note 2 – Summary of Significant Accounting Policies

Revenue Recognition

Revenues from product sales are recognized at the point at which control of each product is transferred to the customer. The Company’s contracts contain performance obligations which are satisfied when customers have physical possession of each product. The majority of customer orders are fulfilled within a day and customer payment terms are typically 14 to 60 days from delivery. Shipping and handling activities are costs to fulfill the Company’s performance obligations. These costs are expensed as incurred and presented within selling, general and administrative expenses on the condensed consolidated statements of operations. The Company offers certain sales incentives to customers in the form of rebates or discounts. These sales incentives are accounted for 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~~

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 23, 2022				September 24, 2021				September 23, 2022				September 24, 2021					September 29, 2023				September 23, 2022				September 29, 2023				September 23, 2022
Center-of-the-Plate	Center-of-the-Plate	$	280,272	42.3	%	$	238,783	49.3	%	$	803,334	44.1	%	$	593,717	50.0	%	Center-of-the-Plate	$	333,809	37.9	%	$	280,272	42.3	%	$	980,120	39.5	%	$	803,334	44.1	%
Specialty:																		Specialty:
Dry Goods	Dry Goods	108,908		16.5	%	66,455		13.7	%	291,020		16.0	%	163,352		13.8	%	Dry Goods	134,398		15.2	%	97,323		14.7	%	395,723		15.9	%	257,971		14.2	%
Pastry	Pastry	79,899		12.1	%	48,842		10.1	%	213,970		11.7	%	118,952		10.0	%	Pastry	102,562		11.6	%	71,145		10.7	%	300,814		12.1	%	188,948		10.4	%
Cheese and Charcuterie	Cheese and Charcuterie	61,123		9.2	%	40,403		8.3	%	163,720		9.0	%	97,805		8.2	%	Cheese and Charcuterie	64,639		7.3	%	54,989		8.3	%	185,303		7.5	%	146,155		8.0	%
Produce	Produce	39,302		5.9	%	35,900		7.4	%	104,413		5.7	%	87,049		7.3	%	Produce	137,760		15.6	%	74,379		11.2	%	310,313		12.5	%	204,422		11.2	%
Dairy and Eggs	Dairy and Eggs	41,780		6.3	%	21,922		4.5	%	111,046		6.1	%	53,405		4.5	%	Dairy and Eggs	56,849		6.4	%	38,719		5.9	%	163,600		6.6	%	102,405		5.6	%
Oils and Vinegars	Oils and Vinegars	33,437		5.1	%	21,855		4.5	%	89,041		4.9	%	48,210		4.1	%	Oils and Vinegars	34,097		3.9	%	29,778		4.5	%	96,607		3.9	%	78,645		4.3	%
Kitchen Supplies	Kitchen Supplies	17,135		2.6	%	10,161		2.2	%	45,519		2.5	%	25,016		2.1	%	Kitchen Supplies	17,711		2.1	%	15,251		2.4	%	50,810		2.0	%	40,183		2.2	%
Total		$	661,856	100	%	$	484,321	100	%	$	1,822,063	100	%	$	1,187,506	100	%
Total Specialty																		Total Specialty	$	548,016	62.1	%	$	381,584	57.7	%	$	1,503,170	60.5	%	$	1,018,729	55.9	%
Total net sales																		Total net sales	$	881,825	100	%	$	661,856	100	%	$	2,483,290	100	%	$	1,822,063	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. Net sales by product category includes estimates of product mix for certain locations that are not yet fully integrated into the Company’s information technology systems as of the reporting date. The table above includes the correction of an immaterial error to revise the Specialty principal product category revenue for the thirteen weeks ended September 23, 2022 and the thirty-nine weeks ended September 23, 2022 related to its Capital Seaboard acquisition. Total Specialty revenue was not impacted but aggregate revenue of $35,077 and $100,009 was adjusted from other Specialty product categories to Produce for the thirteen weeks ended September 23, 2022 and the thirty-nine weeks ended September 23, 2022, respectively.

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 ~~$10,089~~$19,081 and ~~$7,524~~$10,089 for the thirteen weeks ended September 29, 2023 and September 23, 2022, ~~and September 24, 2021,~~ respectively, and ~~$28,523~~$47,370 and ~~$19,599~~$28,523 for the thirty-nine weeks ended September ~~23, 2022~~29, 2023 and September ~~24, 2021,~~23, 2022, respectively.

Immaterial Correction of Prior Period Errors and Disclosures

During the third quarter of fiscal 2023, immaterial errors were identified in the calculation of the provision for income tax expense (benefit) for fiscal 2022, 2021 and 2020. The Company recorded an out of period adjustment of $2,135 to the provision for income tax expense during the thirteen and thirty-nine weeks ended September 29, 2023. The impact of these errors on prior periods would be to increase the provision for income tax expense by $1,308 for fiscal 2022 and to reduce the provision for income tax benefit by $719 and $108 for fiscal 2021 and 2020, respectively.

During the first quarter of fiscal 2023 and subsequent to the issuance of the fiscal year 2022 consolidated financial statements, immaterial errors were identified in the weighted average remaining amortization period of intangible assets, the intangible asset amortization schedule and the debt maturity schedule.The weighted average remaining amortization period for customer relationships, non-compete agreements and trademarks were previously disclosed as 232 months, 73 months and 250 months instead of 117 months, 25 months and 165 months, respectively. This had a corresponding immaterial impact on the intangible asset amortization schedule.

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

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

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


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022		September 29, 2023		September 23, 2022
Net income (loss) per share:
Net income per share:										Net income per share:
Basic	Basic	$	0.22	$	0.09	$	0.72	$	(0.36)	Basic	$	0.19	$	0.22	$	0.49	$	0.72
Diluted	Diluted	$	0.21	$	0.09	$	0.68	$	(0.36)	Diluted	$	0.19	$	0.21	$	0.49	$	0.68
Weighted average common shares:	Weighted average common shares:									Weighted average common shares:
Basic	Basic	37,120,926		36,875,784		37,047,653		36,701,927		Basic	37,692,588		37,120,926		37,611,179		37,047,653
Diluted	Diluted	42,044,053		37,105,746		41,942,676		36,701,927		Diluted	45,717,496		42,044,053		39,143,774		41,942,676

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


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022		September 29, 2023		September 23, 2022
Numerator:	Numerator:									Numerator:
Net income (loss)		$	8,277	$	3,456	$	26,577	$	(13,367)
Net income										Net income	$	7,322	$	8,277	$	18,590	$	26,577
Add effect of dilutive securities	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		—		Interest on convertible notes, net of tax	1,369		683		403		2,048
Net income (loss) available to common shareholders		$	8,960	$	3,456	$	28,625	$	(13,367)
Net income available to common shareholders										Net income available to common shareholders	$	8,691	$	8,960	$	18,993	$	28,625
Denominator:	Denominator:									Denominator:
Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	37,120,926		36,875,784		37,047,653		36,701,927		Weighted average basic common shares outstanding	37,692,588		37,120,926		37,611,179		37,047,653
Dilutive effect of unvested common shares	Dilutive effect of unvested common shares	316,358		229,962		304,391		—		Dilutive effect of unvested common shares	594,416		316,358		580,675		304,391
Dilutive effect of stock options and warrants	Dilutive effect of stock options and warrants	81,789		—		65,652		—		Dilutive effect of stock options and warrants	37,675		81,789		54,073		65,652
Dilutive effect of convertible notes	Dilutive effect of convertible notes	4,524,980		—		4,524,980		—		Dilutive effect of convertible notes	7,392,817		4,524,980		897,847		4,524,980
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	42,044,053		37,105,746		41,942,676		36,701,927		Weighted average diluted common shares outstanding	45,717,496		42,044,053		39,143,774		41,942,676

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 23, 2022	September 24, 2021	September 23, 2022	September 24, 2021		September 29, 2023	September 23, 2022	September 29, 2023	September 23, 2022
Restricted share awards (“RSAs”)	Restricted share awards (“RSAs”)	80,844	50,412	68,784	297,978	Restricted share awards (“RSAs”)	292,778	80,844	37,236	68,784
Stock options and warrants	Stock options and warrants	—	126,359	—	122,956	Stock options and warrants	300,000	—	—	—
Convertible notes	Convertible notes	91,053	4,616,033	91,053	4,341,664	Convertible notes	—	91,053	6,494,970	91,053

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 ~~$4,130~~$1,757 and ~~$3,252~~$10,483 as of September ~~23, 2022~~29, 2023 and December ~~24, 2021,~~30, 2022, respectively, and are reflected as other liabilities and deferred credits on the condensed consolidated balance sheets. The remaining short-term earn-out liabilities are reflected as accrued liabilities on the condensed consolidated balance sheets. The fair value of contingent consideration was determined based on a probability-based approach which includes projected results, percentage probability of

occurrence and the application of a discount rate to present value the payments. A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or lower fair value measurement. Changes in the fair value of contingent earn-out liabilities are reflected in other operating expenses, ~~(income),~~ net on the condensed consolidated statements of operations.

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

Total

Balance December ~~24, 2021~~30, 2022

~~6,877~~17,294

Acquisition value

~~1,200~~5,765

Cash payments

~~(2,538)~~(4,625)

Changes in fair value

~~8,358~~2,850

Balance September ~~23, 2022~~29, 2023

~~13,897~~21,284

Fair Value of Financial Instruments

The carrying amounts reported in the Company’s condensed consolidated balance sheets for accounts receivable and accounts payable approximate fair value due to the immediate to short-term nature of these financial instruments. The fair values of the asset-based loan facility and term loan approximated their book values as of September 29, 2023 and December 30, 2022 as these instruments had variable interest rates that reflected current market rates available to the Company and are classified as Level 2 fair value measurements.

The following table presents the carrying value and fair value of the Company’s convertible ~~notes.~~notes and GreenLeaf Note. The fair value of the Company’s 2028 Convertible Senior Notes was based on Level 1 inputs. In estimating the fair value of ~~the convertible notes,~~its 2024 Convertible Senior Notes and Convertible Unsecured Note, the Company utilized Level 3 inputs including prevailing market interest rates to estimate the debt portion of the instrument and a Black Scholes valuation model to estimate the fair value of the conversion option. The Black Scholes model utilizes the market price of the Company’s common stock, estimates of the stock’s volatility and the prevailing risk-free interest rate in calculating the fair value estimate. The fair value of the GreenLeaf Note was determined based upon observable market prices of similar debt instruments. The Convertible Unsecured Note matured on June 29, 2023 and was repaid in full.

September 23, 2022 December 24, 2021
Carrying Value Fair Value Carrying Value Fair Value
Convertible Senior Notes $ 200,000 $ 204,340 $ 200,000 $ 206,182
Convertible Unsecured Note $ 4,000 $ 4,221 $ 4,000 $ 4,102


		September 29, 2023				December 30, 2022
	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
2028 Convertible Senior Notes	Level 1	$	287,500	$	233,421	$	287,500	$	292,531
2024 Convertible Senior Notes	Level 3	$	39,684	$	37,270	$	41,684	$	43,723
GreenLeaf Note	Level 2	$	10,000	$	9,821	$	—	$	—
Convertible Unsecured Note	Level 3	$	—	$	—	$	4,000	$	4,345

Note 5 – Acquisitions

~~Capital Seaboard~~GreenLeaf

On ~~December 28, 2021, pursuant to an asset~~May 1, 2023, the Company entered into a stock purchase agreement ~~the Company acquired~~to acquire substantially all of the ~~assets~~equity interests of ~~CGC Holdings, Inc.~~Oakville Produce Partners, LLC (“~~Capital Seaboard”~~GreenLeaf”), a leading produce and specialty ~~seafood and produce~~food distributor in ~~Maryland.~~Northern California. The final purchase price was ~~approximately $31,036,~~$86,124 consisting of ~~$28,000~~$72,157 paid in cash at closing, ~~common stock warrants valued at $1,701, and $1,335~~$1,471 paid upon settlement of a net working capital ~~true-up.~~true-up, the issuance of a $10,000 unsecured note and 75,008 shares of the Company’s common stock with an approximate value of $2,496 based on the trading price of the Company’s common stock on the date of acquisition. The acquisition was partially funded by a $40,000 incremental draw on the Company’s asset-based loan facility. The Company’s purchase price allocation is preliminary and is subject to revision pending the valuation of goodwill and intangible assets acquired. This valuation is incomplete as of September 29, 2023 as the Company is currently in the process of ~~finalizing a~~completing its assessment of valuation ~~of tangible~~inputs and ~~intangible assets of Capital Seaboard as of the acquisition date.~~assumptions. When applicable, these valuations require the use of Level 3 inputs. ~~Goodwill~~All goodwill for the ~~Capital Seaboard~~GreenLeaf 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~~GreenLeaf and any intangible assets that do not qualify for separate ~~recognition.~~recognition, including assembled

workforce. The intangible assets acquired consisted of customer relationships, trademarks and non-compete agreements valued at $38,900, $1,500, and $400 respectively, as of the acquisition date. The customer relationships are being amortized over an average of 7.5 years, the trademarks are being amortized over 5 years and the non-compete agreements are being amortized over 2 years.

Hardie’s Fresh Foods

On March 20, 2023, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of Hardie’s F&V, LLC (“Hardie’s Fresh Foods”), a specialty produce distributor with operations in Texas. The final purchase price was approximately $42,000, consisting of $38,000 paid in cash at closing, subject to customary net working capital adjustments, and an earn-out liability valued at approximately $4,000 as of the acquisition date. If earned, the earn-out liability could total up to $10,000 over a two-year period. The payment of the earn-out liability is subject to the successful achievement of certain EBITDA targets. The Company’s purchase price allocation is preliminary and is subject to revision pending the valuation of goodwill and intangible assets acquired. The valuation of tangible and intangible assets acquired is incomplete as of September 29, 2023. All goodwill for the Hardie’s Fresh Foods acquisition will be amortized over 15 years for tax purposes. The goodwill recorded primarily reflects the value of acquiring an established specialty produce distributor to leverage the Company’s existing products in the markets served by Hardie’s Fresh Foods and any intangible assets that do not qualify for separate recognition, including assembled workforce. The intangible assets acquired consisted of customer relationships and trademarks valued at $14,000 and $3,600, respectively, as of the acquisition date. The customer relationships and trademarks are being amortized over 10 years and 5 years, respectively.

Other Fiscal 2023 Acquisitions

During the thirty-nine weeks ended September ~~23, 2022 ,~~29, 2023, the Company completed three other acquisitions for an aggregate initial purchase price of approximately ~~$32,500,~~$17,744, consisting of $12,971 paid in cash ~~subject to customary~~at closing, $893 paid upon settlement of a net working capital ~~adjustments. The Company will also pay additional contingent consideration, if~~adjustment, earn-out liabilities valued at approximately of $1,665 as of the dates of acquisition, and $2,215 of deferred payments. If earned, ~~in the form of~~these earn-out ~~amounts which~~liabilities could total ~~$2,000~~up to $2,562 in the aggregate. The Company’s aggregate purchase price allocations are preliminary and is subject to revision pending the valuations of goodwill and intangible assets acquired. This valuation is incomplete as of September 29, 2023 as the Company is currently in the process of ~~finalizing a~~completing its assessment of valuation ~~of the tangible~~inputs and ~~intangible assets~~assumptions as ~~of the acquisition date.~~well as opening working capital. When applicable, these valuations require the use of Level 3 inputs. ~~Goodwill~~All goodwill of ~~$16,252~~$6,933 will be amortized over 15 years for tax purposes. The intangible assets acquired consisted of customer relationships valued at $4,276 as of the acquisition dates. The customer relationships are being amortized over 10 years.

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


		Thirteen Weeks Ended		Thirty-Nine Weeks Ended			Thirteen Weeks Ended	Thirty-Nine Weeks Ended
		September 23, 2022			September 23, 2022					September 29, 2023		September 29, 2023
Net sales	Net sales	$	58,466		$	135,260			Net sales	$	109,973	$	230,376
Income before income taxes	Income before income taxes	$	4,970		$	8,892			Income before income taxes	$	4,164	$	10,528

Chef Middle East

On November 1, 2022, pursuant to a share sale and purchase agreement, the Company acquired substantially all of the shares of Chef Middle East LLC (“CME”), a specialty food distributor with operations in the United Arab Emirates, Qatar and Oman. The final purchase price was approximately $116,515, consisting of $108,749 paid in cash at closing, $166 paid upon settlement of a net working capital true-up, and an earn-out liability valued at $7,600 as of the date of acquisition. If earned, the earn-out liability could total up to $10,000 over a two-year period. The measurement period adjustments recorded through the second quarter of fiscal 2023 resulted in a goodwill increase of $735, a decrease in inventories of $735, an increase in the earn-out liability of $100, an increase in accrued liabilities of $313, a decrease in other assets of $82, and a decrease in deferred tax liabilities of $35. The valuation of tangible and intangible assets acquired has been completed as of September 29, 2023. The intangible assets acquired consisted of customer relationships, trademarks and non-compete agreements valued at $25,800, $11,400, and $320, respectively, as of the acquisition date. The customer relationships, trademarks and non-compete agreements are being amortized over 10, 15 and 3 years, respectively.

The table below sets forth the total assets acquired and liabilities assumed:


	Chef Middle East		Hardie’s Fresh Foods		GreenLeaf		Other Acquisitions
Current assets	$	84,076	$	26,475	$	16,069	$	9,697
Customer relationships	25,800		14,000		38,900		4,276
Trademarks	11,400		3,600		1,500		—
Non-compete agreements	320		—		400		—
Goodwill	24,548		12,346		36,155		6,933
Fixed assets	16,953		4,986		2,231		434
Other assets	859		146		109		—
Deferred tax liability	(3,600)		—		—		(241)
Right-of-use assets	5,321		13,303		2,026		3,258

Lease liabilities	(5,321)		(13,303)		(2,026)		(3,258)

Current liabilities	(43,841)		(19,553)		(9,240)		(3,336)

Other long-term liabilities	—		—		—		(19)


Total	$	116,515	$	42,000	$	86,124	$	17,744

The Company recognized professional fees related to acquisition activities of $710 and $728 during the thirteen weeks ended September 29, 2023 and September 23, 2022, respectively, and $3,338 and $1,747 during the thirty-nine weeks ended September 29, 2023 and September 23, 2022, respectively, presented within otheroperating expenses, net on the condensed consolidated statements of operations.

Unaudited Pro forma Financial Information

The table below presents unaudited pro forma condensed consolidated income statement information of the Company as if the GreenLeaf and Hardie’s Fresh Foods acquisitions had occurred on December 25, 2021, and the CME acquisition had occurred on December 26, 2020. The pro forma results were prepared from financial information obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the acquisitions. The pro forma information is not necessarily indicative of the Company’s results of 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)

value. The ~~table below sets forth~~pro forma information also reflects additional interest expense that would have been incurred by the ~~preliminary purchase price allocation for these acquisitions:~~

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 $728 and $1,747 in operating expenses related~~ to ~~acquisition related activities~~finance the acquisitions. Pro forma interest expense was estimated based on the prevailing interest rates charged on the Company’s senior secured term loan during fiscal 2022. CME did not have a pro forma impact during the thirteen and thirty-nine weeks ended September ~~23, 2022, respectively.~~29, 2023 as it was included in the condensed consolidated results of operations for the entire period.


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 29, 2023		September 23, 2022		September 29, 2023		September 23, 2022
Net sales	$	881,825	$	800,158	$	2,577,474	$	2,238,390
Income before income taxes	$	14,170	$	12,752	$	30,479	$	45,836

Note 6 – Inventories

Inventories consist primarily of finished product and are reflected net of adjustments for shrinkage, excess and obsolescence to approximate their net realizable value totaling ~~$9,616~~$10,415 and ~~$8,312~~$9,198 at September ~~23, 2022~~29, 2023 and December ~~24, 2021,~~30, 2022, respectively.

Note 7 – Property ~~Plant~~ and Equipment

~~Equipment, leasehold improvements~~Property and ~~software~~equipment as of September ~~23, 2022~~29, 2023 and December ~~24, 2021~~30, 2022 consisted of the following:


		Useful Lives	September 23, 2022		December 24, 2021			Useful Lives	September 29, 2023		December 30, 2022
Land	Land	Indefinite	$	5,542	$	5,020	Land	Indefinite	$	5,542	$	5,542
Buildings	Buildings	20 years	23,552		18,406		Buildings	20 years	40,695		39,893
Machinery and equipment	Machinery and equipment	5 - 10 years	30,845		28,099		Machinery and equipment	5 - 10 years	36,655		32,107
Computers, data processing and other equipment	Computers, data processing and other equipment	3 - 7 years	16,986		15,480		Computers, data processing and other equipment	3 - 7 years	21,547		18,475
Software	Software	3 - 7 years	42,399		39,799		Software	3 - 7 years	48,814		42,609
Leasehold improvements	Leasehold improvements	1 - 40 years	92,517		69,105		Leasehold improvements	1 - 40 years	129,845		94,245
Furniture and fixtures	Furniture and fixtures	7 years	3,671		3,582		Furniture and fixtures	7 years	4,097		3,825
Vehicles	Vehicles	5 - 10 years	28,395		29,632		Vehicles	5 - 10 years	34,665		31,462

Construction-in-process	Construction-in-process		27,870		24,355		Construction-in-process		24,050		36,583
			271,777		233,478				345,910		304,741
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization		(113,208)		(99,856)		Less: accumulated depreciation and amortization		(136,983)		(119,013)
Equipment, leasehold improvements and software, net			$	158,569	$	133,622
Property and equipment, net							Property and equipment, net		$	208,927	$	185,728

Construction-in-process at September ~~23,~~29, 2023 related primarily to the build-out of the Company’s Richmond, CA and Miami, FL distribution facilities and at December 30, 2022 related primarily to the build-out of the Company’s Miami, Dallas and Richmond, CA distribution facilities and the implementation of the Company’s Enterprise Resource Planning (“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.system. The net book value of equipment financed under finance leases at September ~~23, 2022~~29, 2023 and December ~~24, 2021~~30, 2022 was ~~$9,302~~$11,821 and ~~$10,874,~~$11,579, 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 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022		September 29, 2023		September 23, 2022
Depreciation expense	Depreciation expense	$	4,455	$	3,903	$	13,255	$	11,679	Depreciation expense	$	7,017	$	4,455	$	19,691	$	13,255
Software amortization	Software amortization	$	1,457	$	1,707	$	4,412	$	4,591	Software amortization	$	1,468	$	1,457	$	4,476	$	4,412
		$	5,912	$	5,610	$	17,667	$	16,270		$	8,485	$	5,912	$	24,167	$	17,667

Note 8 – Goodwill and Other Intangible Assets

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






Carrying amount as of December ~~24, 2021~~30, 2022	$	~~221,775~~287,120
Goodwill adjustments (1)	~~(792)~~1,986
Acquisitions	~~24,586~~55,434
Foreign currency translation	~~(141)~~(14)
Carrying amount as of September ~~23, 2022~~29, 2023	$	~~245,428~~344,526

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

Other intangible assets as of September ~~23, 2022~~29, 2023 and December ~~24, 2021~~30, 2022 consisted of the following:


September 23, 2022		Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
September 29, 2023									September 29, 2023	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Amount
Customer relationships	Customer relationships	120 months	$	174,105	$	(82,688)	$	91,417	Customer relationships	103 months	$	260,948	$	(98,590)	$	162,358

Trademarks									Trademarks	148 months	56,236		(19,640)		36,596
Non-compete agreements	Non-compete agreements	17 months	8,579		(8,218)		361		Non-compete agreements	20 months	9,299		(8,635)		664
Trademarks		144 months	39,745		(15,411)		24,334
Total	Total		$	222,429	$	(106,317)	$	116,112	Total		$	326,483	$	(126,865)	$	199,618


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

Amortization expense for other intangibles was ~~$3,470~~$6,468 and ~~$3,135~~$3,470 for the thirteen weeks ended September 29, 2023 and September 23, 2022, ~~and September 24, 2021,~~ respectively, and ~~$10,289~~$16,924 and ~~$9,778~~$10,289 for the thirty-nine weeks ended September 29, 2023 and September 23, 2022, respectively.

The Company recognized a customer relationships intangible asset impairment charge of $1,838 related to the loss of a significant Hardie’s Fresh Foods customer post acquisition. The Company’s valuation of the Hardie’s Fresh Foods’ customer list intangible asset as of the acquisition date, a Level 3 measurement, was based on an income approach using the excess earnings method which requires significant assumptions including future sales forecasts and ~~September 24, 2021, respectively.~~a discount rate. The impairment charge was measured by reducing its assumption of future sales for the significant customer lost post-acquisition to zero.The impairment charge is presented within other operating expenses, net on the condensed consolidated statements of operations.

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


2022		$	3,274
2023	2023	12,796		2023	$	6,289
2024	2024	11,943		2024	24,939
2025	2025	11,529		2025	24,400
2026	2026	11,529		2026	24,204
2027				2027	23,635
Thereafter	Thereafter	65,041		Thereafter	96,151
Total	Total	$	116,112	Total	$	199,618

1315

Note 9 – Debt Obligations

Debt obligations as of September ~~23, 2022~~29, 2023 and December ~~24, 2021~~30, 2022 consisted of the following:


		September 23, 2022		December 24, 2021			Weighted Average Effective Interest Rate at September 29, 2023		Maturity	September 29, 2023		December 30, 2022
Senior secured term loans	Senior secured term loans	$	300,000	$	168,675	Senior secured term loans	10.83	%	August 2029	$	277,000	$	299,250
Convertible senior notes		200,000		200,000
2028 Convertible senior notes						2028 Convertible senior notes	2.77	%	December 2028	287,500		287,500
2024 Convertible senior notes						2024 Convertible senior notes	2.34	%	December 2024	39,684		41,684
Asset-based loan facility	Asset-based loan facility	—		20,000		Asset-based loan facility	7.25	%	March 2027	90,000		40,000
Finance lease and other financing obligations		9,732		11,602

Finance leases and other financing obligations						Finance leases and other financing obligations	5.44	%	Various	23,779		13,548
Convertible unsecured note	Convertible unsecured note	4,000		4,000		Convertible unsecured note	—	%	June 2023	—		4,000

Deferred finance fees and original issue premium (discount)		(14,517)		(4,976)
Unamortized deferred costs and premium						Unamortized deferred costs and premium				(16,786)		(20,050)
Total debt obligations	Total debt obligations	499,215		399,301		Total debt obligations				701,177		665,932
Less: current installments	Less: current installments	(6,067)		(5,141)		Less: current installments				(11,970)		(12,428)
Total debt obligations excluding current installments	Total debt obligations excluding current installments	$	493,148	$	394,160	Total debt obligations excluding current installments				$	689,207	$	653,504

~~On August 23, 2022,~~In connection with the GreenLeaf acquisition, the Company ~~entered into an eighth amendment (“Eight Amendment”) to its senior secured term loan credit agreement (“Term Credit Agreement”)~~issued a $10,000 unsecured note bearing interest of 4.47%. The ~~Company borrowed $300,000 maturing~~principal on ~~August 23, 2029 (“2029 Term Loans”), comprising of a refinancing of~~ the ~~then existing term loans balance~~unsecured note is due in two equal installments on April 30, 2024 and 2025 and is presented 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 ratiocaption “Finance leases and other ~~restrictions.~~financing obligations” in the table above. The ~~Eight Amendment includes a springing maturity of~~convertible unsecured note matured on June ~~22, 2024 if, by June 22, 2024, more than $40,000~~29, 2023 and was repaid in principal 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.full, including all accrued interest, for $4,049 in cash.

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 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 is defined as a change in present value of remaining cash flows of 10% or more. As a result of the analysis, the Company incurred a loss on debt extinguishment of $142 which represents the portion of 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 consolidated balance sheet, to be amortized over the term of the term loan. Arrangement and third-party transaction costs of $4,498 were expensed as incurred.

The Eight Amendment removed the 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, was 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,~~July 7, 2023, the Company entered into a ~~third~~sixth amendment to ~~its asset-based loan facility (“~~the ABL ~~Facility”)~~Credit Agreement which increased the aggregate commitments to $300,000, up from $150,000 to $200,000. The interest rate charged on borrowings under the ABL Facility is equal to a spread plus, at the Company’s option, either the Base Rate (as defined in the ABL Credit Agreement) or a forward-looking term rate based on the secured overnight financing rate term (except for swingline loans) for one-, three-, or six-month interest periods chosen by the Company. The ABL Facility matures$200,000, maturing on March 11, ~~2027 subject to a springing maturity date that occurs 90 days prior~~2027. The sixth amendment 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~~$354 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.~~presented in other non-current assets in the Company’s consolidated balance sheet.

On ~~September 23, 2022,~~August 31, 2023, the Company ~~fully paid all borrowings outstanding under~~made a voluntary prepayment of $20,000 towards the ~~ABL and had reserved $23,181~~senior secured term loan. In connection with the prepayment the Company wrote off unamortized deferred financing fees of $770 which are included in interest expense within the ~~ABL Facility for the issuance~~statement of ~~letters of credit. As of September 23, 2022, funds totaling $176,820 were available for borrowing under the ABL Facility.~~operations.

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


2023	$	750
2024	47,684
2025	8,000
2026	3,000
2027	93,000
Thereafter	551,750
Total	$	704,184

The net ~~carry~~carrying value of the Company’s ~~Convertible Senior Notes~~convertible notes as of September ~~23, 2022~~29, 2023 and December ~~24, 2021~~30, 2022 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


	September 29, 2023						December 30, 2022
	Principal Amount		Unamortized Deferred Costs and Premium		Net Amount		Principal Amount		Unamortized Deferred Costs and Premium		Net Amount
2028 Convertible Senior Notes	$	287,500	$	(6,016)	$	281,484	$	287,500	$	(6,876)	$	280,624
2024 Convertible Senior Notes	39,684		(232)		39,452		41,684		(373)		41,311
Convertible Unsecured Note	—		—		—		4,000		—		4,000
Total	$	327,184	$	(6,248)	$	320,936	$	333,184	$	(7,249)	$	325,935

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

Thirteen Weeks Ended 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


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 29, 2023		September 23, 2022		September 29, 2023		September 23, 2022
Coupon interest	$	1,893	$	938	$	5,685	$	2,813
Amortization of deferred costs and premium	333		224		1,001		672

Total interest	$	2,226	$	1,162	$	6,686	$	3,485

As of September 29, 2023, the Company had reserved $27,970 of the asset-based loan facility for the issuance of letters of credit and funds totaling $149,757 were available for borrowing.

Note 10 – Stockholders’ Equity

Equity Awards

The following table reflects the activity of RSAs during the thirty-nine weeks ended September ~~23, 2022:~~29, 2023:


		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 24, 2021		617,996	$	28.33	187,437	$	32.04	185,129	$	31.44
Unvested at December 30, 2022											Unvested at December 30, 2022	464,972	$	31.74	335,425	$	32.25	333,114	$	30.30
Granted	Granted	183,244	33.60		167,261	32.44		167,261	29.12		Granted	234,070	32.23		742,744	33.17		87,942	28.84
Vested	Vested	(315,722)	26.43		—	—		—	—		Vested	(215,726)	31.84		—	—		—	—
Forfeited	Forfeited	(15,691)	29.83		(21,420)	32.14		(21,423)	30.82		Forfeited	(11,500)	34.31		—	—		—	—
Unvested at September 23, 2022		469,827	$	31.61	333,278	$	32.23	330,967	$	30.31
Unvested at September 29, 2023											Unvested at September 29, 2023	471,816	$	31.87	1,078,169	$	32.88	421,056	$	30.00

The Company granted ~~517,766~~1,064,756 RSAs to its employees at a weighted average grant date fair value of ~~$31.41~~$32.60 during the thirty-nine weeks ended September ~~23, 2022.~~29, 2023. These awards are a mix of time-, market- and performance-based grants that generally vest over a range of periods up to ~~four~~five years. The Company recognized expense totaling ~~$3,099~~$4,730 and ~~$2,710~~$3,099 on its RSAs during the thirteen weeks ended September 29, 2023 and September 23, 2022, ~~and September 24, 2021,~~ respectively, and ~~$9,081~~$14,224 and ~~$8,448~~$9,081 during the thirty-nine weeks ended September 29, 2023 and September 23, 2022, ~~and September 24, 2021,~~ respectively.

At September ~~23, 2022,~~29, 2023, the total unrecognized compensation cost for unvested RSAs was ~~$21,353~~$30,006 and the weighted-average remaining period was approximately ~~2.1~~2.5 years. Of this total, ~~$11,051~~$10,915 related to RSAs with time-based vesting provisions and ~~$10,302~~$19,091 related to RSAs with performance- and market-based vesting provisions. At September ~~23, 2022,~~29, 2023, the weighted-average remaining period for time-based vesting and performance-based vesting RSAs were approximately 2.2 years and ~~2.0~~2.7 years, respectively.

No share-based compensation expense related to the Company’s RSAs or stock options has been capitalized. As of September ~~23, 2022,~~29, 2023, there were ~~2,053,840~~1,087,180 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 29, 2023:


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




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

Exercised	(2,705)	20.23

Outstanding September 29, 2023	109,527	$	20.23	$	104	2.4
Exercisable at September 29, 2023	109,527	20.23		$	104	2.4

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

which were classified as liabilities. These awards vest over a period of up to 4 years. Stock-based compensation expense for

these awards was $544 and $0 during the thirteen weeks ended September 29, 2023 and 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
2022, respectively, and $1,631 and $0 during the thirty-nine weeks ended September 29, 2023 and September 23, 2022, respectively. The fair value of these awards was $1,994 and $362 as of September 29, 2023 and December 30, 2022, respectively, and is presented within Other liabilities and deferred credits on the Company’s condensed consolidated balance sheets.

Note 11 – Related Parties

The Chefs’ Warehouse Mid-Atlantic, LLC, a subsidiary of the Company, leases a distribution facility that is 100% owned by entities controlled by Christopher Pappas, the Company’s ~~chairman, president~~Chairman, President and ~~chief executive officer,~~Chief Executive Officer, and John Pappas, the Company’s ~~vice chairman~~Vice Chairman and one of its directors, and are deemed to be affiliates of these individuals. Expense related to this facility totaled $123 during the thirteen weeks ended September ~~23, 2022~~29, 2023 and September ~~24, 2021,~~23, 2022, and $369 during the thirty-nine weeks ended September ~~23, 2022~~29, 2023 and September ~~24, 2021.~~23, 2022.

Note 12 – Income Taxes

The Company’s effective tax rate was 48.3% and 27.0% ~~and 44.7%~~for the thirteen weeks ended September 29, 2023 and September 23, 2022, respectively, and 36.8% and 27.0% for the thirty-nine weeks-ended September 29, 2023 and September ~~24, 2021 and 27.0% and 27.3%~~23, 2022, respectively. The higher effective tax rate for the thirteen and thirty-nine weeks ended September ~~23,~~29, 2023 is primarily due to a discrete $2,135 charge in the current period for return-to-provision adjustments related to certain nondeductible costs identified in the completion of the Company’s fiscal 2022 tax return and ~~September 24, 2021.~~the impact of those adjustments on the fiscal 2023 estimated annual effective tax rate. The effective tax rate otherwise 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~~The Company’s income tax provision reflects the impact of ~~the Coronavirus Aid, Relief, and Economic Security Act (“Cares Act”), the Company had carried back federal net operating losses resulting in a federal~~an expected income tax refund receivable of ~~$21,250,~~$22,475 as of September 29, 2023 which is ~~classified within~~reflected in prepaid expenses and other current assets on the Company’s consolidated balance sheets as of September 23, 2022 and 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 expected receipt of the federal income tax refund receivable has been significantly delayed. The Company is currently working with IRS Taxpayer’s Advocate Services and 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.sheet.

1618

Note 13 – Supplemental Disclosures of Cash Flow Information


		Thirty-Nine Weeks Ended					Thirty-Nine Weeks Ended
		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:					Supplemental cash flow disclosures:
Cash paid (received) for income taxes		$	3,483	$	(194)
Cash paid for income taxes						Cash paid for income taxes	$	17,574	$	3,483
Cash paid for interest, net of cash received	Cash paid for interest, net of cash received	$	17,636	$	10,690	Cash paid for interest, net of cash received	$	28,339	$	17,636
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	$	20,835	$	18,965	Operating cash flows from operating leases	$	28,203	$	20,835
Operating cash flows from finance leases	Operating cash flows from finance leases	$	325	$	422	Operating cash flows from finance leases	$	524	$	325
Other non-cash investing and financing activities						Other non-cash investing and financing activities
ROU assets obtained in exchange for lease liabilities:	ROU assets obtained in exchange for lease liabilities:					ROU assets obtained in exchange for lease liabilities:
Operating leases	Operating leases	$	21,779	$	13,308	Operating leases	$	42,991	$	21,779
Finance leases	Finance leases	$	791	$	536	Finance leases	$	3,963	$	791
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	$	1,701	$	1,120	Warrants issued for acquisitions	$	—	$	1,701

Common stock issued for acquisitions						Common stock issued for acquisitions	$	2,496	$	—

Unsecured notes issued for acquisitions						Unsecured notes issued for acquisitions	$	10,000	$	—
Contingent earn-out liabilities for acquisitions	Contingent earn-out liabilities for acquisitions	$	1,200	$	3,400	Contingent earn-out liabilities for acquisitions	$	5,765	$	1,200

1719

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

RESULTS OF OPERATIONS

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

Business Overview

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

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

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

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

Recent Acquisitions

On ~~December 28, 2021,~~May 1, 2023, the Company entered into a stock purchase agreement to acquire substantially all of the equity interests of Oakville Produce Partners, LLC (“GreenLeaf”), a leading produce and specialty food distributor in Northern California. The final purchase price was $86.1 million consisting of $72.2 million paid in cash at closing, $1.5 million paid upon settlement of a net working capital true-up, the issuance of a $10.0 million unsecured note, and 75,008 shares of the Company’s common stock with an approximate value of $2.5 million.

On March 20, 2023, pursuant to an asset purchase agreement, we acquired substantially all of the assets of ~~CGC Holdings, Inc.~~Hardie’s F&V, LLC (“~~Capital Seaboard”~~Hardie’s Fresh Foods”), a specialty ~~seafood and~~ produce distributor with operations in ~~Maryland.~~Texas. The final purchase price was approximately ~~$31.0~~$42.0 million, consisting of ~~$28.0~~$38.0 million paid in cash at closing, ~~common stock warrants of $1.7 million , and $1.3 million paid upon settlement of a net~~subject to customary working capital ~~true-up.~~adjustments, and an earn-out liability valued at approximately $4.0 million as of the acquisition date. If earned, the earn-out liability could total up to $10.0 million over a two-year period.

During the thirty-nine weeks ended September ~~23, 2022,~~29, 2023 , the Company completed three other acquisitions for an aggregate purchase price of approximately ~~$32.5~~$17.7 million, consisting of $13.0 million paid in cash ~~subject to customary~~at closing, $0.9 million paid upon settlement of a net working capital ~~adjustments. The Company will also pay additional contingent consideration, if~~adjustment, earn-out liabilities valued at approximately of $1.7 million as of the dates of acquisition, and $2.2 million of deferred payments. If earned, in the ~~form of~~ earn-out ~~amounts which~~liabilities could total ~~$2.0~~up to $2.6 million in the aggregate.

RESULTS OF OPERATIONS


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 23, 2022		September 24, 2021		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022		September 29, 2023		September 23, 2022
Net sales	Net sales	$	661,856	$	484,321	$	1,822,063	$	1,187,506	Net sales	$	881,825	$	661,856	$	2,483,290	$	1,822,063
Cost of sales	Cost of sales	504,068		374,346		1,390,758		922,710		Cost of sales	674,127		504,068		1,897,440		1,390,758
Gross profit	Gross profit	157,788		109,975		431,305		264,796		Gross profit	207,698		157,788		585,850		431,305
Selling, general and administrative expenses	Selling, general and administrative expenses	130,255		99,431		364,828		270,034		Selling, general and administrative expenses	179,614		130,255		514,793		364,828
Other operating expenses (income), net		5,458		105		10,504		(208)
Operating income (loss)		22,075		10,439		55,973		(5,030)
Other operating expenses, net										Other operating expenses, net	2,535		5,458		8,269		10,504
Operating income										Operating income	25,549		22,075		62,788		55,973

Interest expense	Interest expense	10,737		4,191		19,567		13,362		Interest expense	11,379		10,737		33,391		19,567
Income (loss) before income taxes		11,338		6,248		36,406		(18,392)
Provision for income tax expense (benefit)		3,061		2,792		9,829		(5,025)
Net income (loss)		$	8,277	$	3,456	$	26,577	$	(13,367)
Income before income taxes										Income before income taxes	14,170		11,338		29,397		36,406
Provision for income tax expense										Provision for income tax expense	6,848		3,061		10,807		9,829
Net income										Net income	$	7,322	$	8,277	$	18,590	$	26,577

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 ~~23, 2022~~29, 2023 Compared to Thirteen Weeks Ended September ~~24, 2021~~23, 2022

Net Sales

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


	2023		2022		$ Change		% Change
Net sales	$	881,825	$	661,856	$	219,969	33.2	%

Organic growth contributed ~~$107.2~~$46.9 million, or ~~22.2%~~7.1%, to sales growth and the remaining sales growth of ~~$70.3~~$172.9 million, or ~~14.5%~~26.1%, resulted from acquisitions. Organic case count increased approximately ~~18.3%~~9.1% in our specialty category. In addition, specialty unique customers and placements increased ~~25.9%~~10.8% and ~~42.1%~~14.2%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased ~~11.6%~~6.6% compared to the prior year. Estimated inflation was ~~15.0%~~1.6% in our specialty category and ~~2.2%~~3.1% in our center-of-the-plate category compared to the prior year period.

Gross Profit


		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change
Gross profit	Gross profit	$	157,788		$	109,975		$	47,813	43.5	%	Gross profit	$	207,698		$	157,788		$	49,910	31.6	%
Gross profit margin	Gross profit margin	23.8		%	22.7		%					Gross profit margin	23.6		%	23.8		%

Gross profit dollars increased primarily as a result of increased sales and price inflation. Gross profit margin ~~increased~~decreased approximately ~~113~~29 basis points. Gross profit margins decreased ~~133~~84 basis points in the Company’s specialty category and ~~increased 238~~decreased 104 basis points in the Company’s center-of-the-plate category. Estimated inflation was ~~15.0%~~1.6% in the Company’s specialty category and ~~2.2%~~3.1% in the center-of-the-plate category compared to the prior year period. ~~Specialty~~Gross profit margins ~~decreased primarily~~were slightly lower due to ~~significant year-over-year product cost inflation. Margin rates~~a softer summer season in ~~the center-of-the-plate category increased as a result of the reopening of favorable margin markets~~2023 versus ~~the same period in 2021 and year-over-year deflation in certain protein categories.~~2022.

Selling, General and Administrative Expenses


		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change
Selling, general and administrative expenses	Selling, general and administrative expenses	$	130,255		$	99,431		$	30,824	31.0	%	Selling, general and administrative expenses	$	179,614		$	130,255		$	49,359	37.9	%
Percentage of net sales	Percentage of net sales	19.7		%	20.5		%					Percentage of net sales	20.4		%	19.7		%

The increase in selling, general and administrative expenses was primarily due to higher depreciation and amortization driven primarily by acquisitions and higher costs associated with compensation and benefits, facilities costs and ~~fuel~~distribution costs to

support sales growth. Our ratio of selling, general and administrative expenses to net sales ~~decreased predominately~~increased 70 basis points due to ~~sales growth which contributed to improved fixed cost leverage~~increased near-term costs associated with our investments in ~~the quarter.~~facilities and acquisitions.

Other Operating Expenses, Net

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


	2023		2022		$ Change		% Change
Other operating expenses, net	$	2,535	$	5,458	$	(2,923)	(53.6)	%

~~The increase in net other~~Other operating expenses ~~was~~decreased by approximately $2.9 million primarily due to non-cash charges of ~~$4.7~~$1.8 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash ~~credits~~charges of ~~$0.1~~$4.7 million in the prior year period.

Interest Expense

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


	2023		2022		$ Change		% Change
Interest expense	$	11,379	$	10,737	$	642	6.0	%

Interest expense increased primarily driven by higher principal amounts of outstanding debt due to ~~incurred arrangement and third-party transaction fees of $4.5 million and a $0.1 million loss~~our 2028 convertible notes issued on ~~debit extinguishment from the refinancing of~~December 13, 2022, our term ~~loan. Additionally, we had~~loan refinancing on August 23, 2022, an increase in amounts drawn on our asset-based loan facility and higher ~~amounts~~rates of ~~debt outstanding as a result our $300.0 million term loan issuance in August 2022 and increases in~~interest charged on the variable rate portion of ~~interest rates charged on~~ our outstanding debt.

Provision for Income Taxes


		2022			2021			$ Change		% Change			2023			2022			$ Change		% Change
Provision for income tax expense (benefit)		$	3,061		$	2,792		$	269	9.6	%
Provision for income tax expense												Provision for income tax expense	$	6,848		$	3,061		$	3,787	123.7	%
Effective tax rate	Effective tax rate	27.0		%	44.7		%					Effective tax rate	48.3		%	27.0		%

The higher effective tax rate for the thirteen weeks ended September 29, 2023 was primarily driven by a $2.1 million charge in the ~~prior~~current period ~~was driven by various discrete items. The Company’s~~for return-to-provision adjustments identified in the completion of our fiscal 2022 tax return and the impact of those adjustments on the fiscal 2023 estimated annual effective tax ~~rate excluding these discrete items was approximately 29.2%.~~rate.

Thirty-Nine Weeks Ended September ~~23, 2022~~29, 2023 Compared to Thirty-Nine Weeks Ended September ~~24, 2021~~23, 2022

Net Sales

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


	2023		2022		$ Change		% Change
Net sales	$	2,483,290	$	1,822,063	$	661,227	36.3	%

Organic growth contributed ~~$435.8~~$187.5 million, or ~~36.7%~~10.3%, to sales growth and the remaining sales growth of ~~$198.8~~$473.7 million, or ~~16.7%~~26.0%, resulted from acquisitions. Organic case count increased approximately ~~31.3%~~11.6% in our specialty category. In addition, specialty unique customers and placements increased ~~30.3%~~13.1% and ~~46.4%~~14.3%, respectively, compared to the prior year period. Organic pounds sold in our center-of-the-plate category increased ~~16.4%~~8.7% compared to the prior year. Estimated inflation was ~~15.5%~~4.1% in our specialty category and ~~11.6%~~2.4% in our center-of-the-plate category compared to the prior year period.

Gross Profit


		2022		2021		$ Change	% Change			2023		2022		$ Change	% Change
Gross profit	Gross profit	431,305		264,796		166,509	62.9	%	Gross profit	585,850		431,305		154,545	35.8	%
Gross profit margin	Gross profit margin	23.7	%	22.3	%				Gross profit margin	23.6	%	23.7	%

Gross profit dollars increased primarily as a result of sales growth and price inflation. Gross profit margin ~~increased~~decreased approximately ~~137~~8 basis points. Gross profit margins decreased 3139 basis points in the Company’s specialty category and ~~increased 202~~decreased 118 basis points in the Company’s center-of-the-plate category. Estimated inflation was ~~15.5%~~4.1% in our specialty category and ~~11.6%~~2.4% in our center-of-the-plate category compared to the prior year period. ~~Higher inflation compressed margin rates in~~Our gross margins were relatively consistent with 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~~prior year period.

Selling, General and Administrative Expenses


		2022		2021		$ Change	% Change			2023		2022		$ Change	% Change
Selling, general and administrative expenses	Selling, general and administrative expenses	364,828		270,034		94,794	35.1	%	Selling, general and administrative expenses	514,793		364,828		149,965	41.1	%
Percentage of net sales	Percentage of net sales	20.0	%	22.7	%				Percentage of net sales	20.7	%	20.0	%

The increase in selling, general and administrative expenses was primarily due to higher depreciation and amortization and higher costs associated with compensation and benefits ~~facilities costs,~~ and ~~fuel~~facilities costs to support sales growth. Our ratio of selling, general and administrative expenses to net sales ~~decreased predominately~~increased by 70 basis points due to ~~sales growth which contributing to improved fixed cost leverage~~increased near-term costs associated with our investments in ~~the quarter.~~facilities and acquisitions.

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

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


	2023	2022	$ Change	% Change
Other operating expenses, net	8,269	10,504	(2,235)	(21.3)	%

The ~~increase~~decrease in net other operating expense relates primarily to non-cash charges of ~~$8.4~~$2.9 million for changes in the fair value of our contingent earn-out liabilities in the ~~fiscal 2022~~current period compared to non-cash ~~credits~~charges of ~~$1.4~~$8.4 million in the prior year ~~period. The prior year~~ period, ~~also includes a $0.6~~partially offset by an impairment on customer relationship intangible assets of $1.8 million ~~impairment of Cambridge trademarks as a result~~related to the loss of a ~~shift~~significant Hardie’s Fresh Foods customer post acquisition and a $1.5 million increase in ~~brand strategy to leverage our Allen Brothers brand~~third-party deal costs incurred in ~~our New England region during the second quarter of fiscal 2021.~~connection with business acquisitions and financing arrangements.

Interest Expense

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


	2023	2022	$ Change	% Change
Interest expense	33,391	19,567	13,824	70.6	%

Provision for Income Taxes


		2022		2021		$ Change	% Change			2023		2022		$ Change	% Change
Provision for income tax expense (benefit)		9,829		(5,025)		14,854	(295.6)	%
Provision for income tax expense									Provision for income tax expense	10,807		9,829		978	10.0	%
Effective tax rate	Effective tax rate	27.0	%	27.3	%				Effective tax rate	36.8	%	27.0	%

The ~~increase in income~~higher effective tax ~~expense is due to pre-tax income~~rate for the thirty-nine weeks ended September 29, 2023 was primarily driven by a $2.1 million charge in the current period ~~compared to a pre-tax loss~~for return-to-provision adjustments identified in the ~~prior year period.~~completion of our fiscal 2022 tax return and the impact of those adjustments on the fiscal 2023 estimated annual effective tax rate.

2123

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 23, 2022		December 24, 2021			September 29, 2023		December 30, 2022
Senior secured term loan	Senior secured term loan	$	300,000	$	168,675	Senior secured term loan	$	277,000	$	299,250
Total convertible debt	Total convertible debt	204,000		204,000		Total convertible debt	327,184		333,184
Borrowings outstanding on asset-based loan facility	Borrowings outstanding on asset-based loan facility	—		20,000		Borrowings outstanding on asset-based loan facility	90,000		40,000
Finance leases and other financing obligations	Finance leases and other financing obligations	9,732		11,602		Finance leases and other financing obligations	23,779		13,548
Total	Total	$	513,732	$	404,277	Total	$	717,963	$	685,982

As of September ~~23, 2022,~~29, 2023, we have various floating- and fixed-rate debt instruments with varying maturities for an aggregate principal amount of ~~$504.0~~$704.2 million.

In connection with the GreenLeaf acquisition, we issued a $10.0 million unsecured note which bears interest of 4.47%. The principal on the unsecured note is due in two equal installments on April 30, 2024 and 2025.

On June 29, 2023, the Company’s convertible unsecured note matured and was repaid in full, including all accrued interest, for $4.0 million in cash.

On July 7, 2023 we entered into a sixth amendment to the ABL Credit Agreement which increased the aggregate commitments to $300.0 million, up from $200.0 million, maturing on March 11, 2027. The sixth amendment to the ABL was accounted for as a debt modification. The Company incurred transaction costs of $0.4 million which were capitalized as deferred financing fees to be amortized over the term of the ABL.

On August ~~23, 2022, we entered into an eighth amendment to its~~31, 2023, the Company made a voluntary prepayment of $20.0 million towards the senior secured term ~~loan credit agreement in which we borrowed $300.0 million maturing on August 23, 2029. See Note 9 “Debt Obligations” to our consolidated financial statements for a full description.~~

~~On March 11, 2022, we entered into a third amendment to our asset-based loan facility ABL Facility which increased~~loan. In connection with the ~~aggregate commitments from $150.0 million to $200.0~~prepayment the Company wrote off unamortized deferred financing fees of $0.8 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 23, 2022		December 24, 2021			September 29, 2023		December 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	145,425	$	115,155	Cash and cash equivalents	$	33,058	$	158,800
Working capital, excluding cash and cash equivalents	Working capital, excluding cash and cash equivalents	209,181		157,787		Working capital, excluding cash and cash equivalents	338,341		278,315
Availability under asset-based loan facility	Availability under asset-based loan facility	176,820		109,459		Availability under asset-based loan facility	149,757		135,827
Total	Total	$	531,426	$	382,401	Total	$	521,156	$	572,942

We expect our capital expenditures, excluding cash paid for acquisitions, for fiscal ~~2022~~2023 will be approximately ~~$36.0~~$45.0 million to ~~$45.0~~$55.0 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					Thirty-Nine Weeks Ended
		September 23, 2022		September 24, 2021			September 29, 2023		September 23, 2022
Net income (loss)		$	26,577	$	(13,367)
Net income						Net income	$	18,590	$	26,577
Non-cash charges	Non-cash charges	$	58,763	$	30,729	Non-cash charges	$	75,908	$	58,763
Changes in working capital	Changes in working capital	$	(53,593)	$	(43,692)	Changes in working capital	$	(74,453)	$	(53,593)
Net cash provided by (used in) operating activities		$	31,747	$	(26,330)
Net cash provided by operating activities						Net cash provided by operating activities	$	20,045	$	31,747
Net cash used in investing activities	Net cash used in investing activities	$	(93,673)	$	(25,152)	Net cash used in investing activities	$	(155,730)	$	(93,673)
Net cash provided by (used in) financing activities		$	92,255	$	(7,493)
Net cash provided by financing activities						Net cash provided by financing activities	$	10,473	$	92,255

Net cash provided by operations was $20.0 million for the thirty-nine weeks ended September 29, 2023 compared to net cash provided by operating activities of $31.7 million for the thirty-nine weeks ended September 23, ~~2022 compared to net cash used in operating activities of consisting of $13.4 million for the thirty-nine weeks ended September 24, 2021.~~2022. The ~~increase~~decrease in cash provided by operating activities was primarily due to the working capital growth of $20.9 million versus the prior year period which was driven by a strategic decision to pull forward inventory purchases of certain product categories during the first half of fiscal 2023. We expect our inventory levels to normalize during the remainder of the year. The increase in cash used for working capital growth was partially offset by increased net income, net of non-cash charges, in the current year of ~~$85.3~~$94.5 million compared to ~~$17.4~~$85.3 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 inventory partially offset by higher accounts payable). The working capital growth of $9.9 million versus the prior year period partially offset the favorable impact of increased cash-based profitability. The Company’s increased working capital investment in the current year is the result of rapid sales growth driven by our recovery from the pandemic. We expect working capital growth to moderate in the future as sales growth normalizes.

Net cash used in investing activities was ~~$93.7~~$155.7 million for the thirty-nine weeks ended September ~~23, 2022,~~29, 2023, driven by ~~capital expenditures of $31.7 million which includes the purchase of our distribution facility in Columbus, Ohio and $62.0~~$120.6 million in cash paid for ~~acquisitions.~~acquisitions and capital expenditures of $35.1 million.

Net cash provided by financing activities was ~~$92.3~~$10.5 million for the thirty-nine weeks ended September ~~23, 2022~~29, 2023 driven by ~~the $300.0~~$50.0 million ~~issuance~~ of ~~senior secured term loans maturing in 2029 (“2029 Term Loans”). This was~~net borrowings on our ABL facility, partially offset by ~~$171.4~~$33.4 million of ~~principal~~ payments ~~predominately driven by the pay off our 2025 tranche~~ of ~~senior secured term loans~~debt and ~~$11.3~~other financing obligations, including finance leases, $3.7 million of ~~deferred~~earn-out payments classified as financing ~~fees~~activities and $2.1 million paid ~~in connection with the 2029 Term Loans. We paid $20.0 million to pay down all borrowings outstanding on our asset based loan 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 earn-out liability payments classified as financing activities.~~awards.

Seasonality

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

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

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

Inflation

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

Critical Accounting Policies and Estimates

The preparation of the Company’s condensed consolidated financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The SEC has defined critical accounting policies and estimates as those that are both most important to the portrayal of the Company’s financial condition and results and require its most difficult, complex or subjective judgments or estimates. Based on this definition, we believe our critical accounting policies and estimates include the following: (i) determining our allowance for doubtful accounts, (ii) inventory valuation, with regard to determining inventory balance adjustments for excess

and obsolete inventory, (iii) business combinations, (iv) valuing goodwill and intangible assets, (v) self-insurance reserves, (vi) accounting for income taxes and (vii)

contingent earn-out liabilities. Our critical accounting policies and estimates are described in the Form 10-K filed with the SEC on February ~~22, 2022.~~28, 2023.

2426

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to interest rate market risk relates primarily to our long-term debt. As of September ~~23, 2022,~~29, 2023, we had an aggregate ~~$300.0 million of~~ indebtedness outstanding ~~under the Term Loan~~of $367.0 million that bore interest at variable rates. A 100 basis point increase in market interest rates would decrease our after tax earnings by approximately ~~$2.2~~$2.7 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 ~~23, 2022.~~29, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal ~~control~~controls over financial reporting that occurred during the quarter ended September ~~23, 2022~~29, 2023 that ~~have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The Company is currently integrating CME and fiscal 2023 acquisitions into its overall system of internal control over financial reporting and, if necessary, will make appropriate changes as it integrates CME and fiscal 2023 acquisitions into the Company's overall internal control over financial reporting process.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

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

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

Total Number
of Shares
Repurchased(1)
Average
Price
Paid Per Share Total
Number of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs Maximum
Number (or
Approximate
Dollar Value) of
Shares That May
Yet Be Purchased
Under the Plans
or Programs
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 — —


	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
July 1, 2023 to July 28, 2023	—	$	—	—	—
July 29, 2023 to August 25, 2023	—	—		—	—
August 26, 2023 to September 29, 2023	2,167	30.01		—	—
Total	2,167	$	30.01	—	—

(1)During the thirty-nine weeks ended September ~~23, 2022,~~29, 2023, we withheld ~~741~~2,167 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.

Shares Issued for Acquisitions

On May 1, 2023, the Company issued 75,008 shares of their common stock in connection with the GreenLeaf acquisition, with an approximate value of $2,496 based on the trading price of the Company’s common stock on the date of acquisition. The shares were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, to the sellers as partial consideration for the Company’s acquisition of GreenLeaf.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

2628

ITEM 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.



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101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

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



			†			~~Filed herewith~~

2729

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 26, 2022.~~November 3, 2023.


									THE CHEFS’ WAREHOUSE, INC.
									(Registrant)

Date: ~~October 26, 2022~~November 3, 2023									/s/ James Leddy
									James Leddy
									Chief Financial Officer
									(Principal Financial Officer)

Date: ~~October 26, 2022~~November 3, 2023									/s/ Timothy McCauley
									Timothy McCauley
									Chief Accounting Officer
									(Principal Accounting Officer)

2830


	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


	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