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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 2022
OR
☐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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01CHEFThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒ Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  ☒
Number of shares of common stock, par value $.01 per share, outstanding at April 25, 2022: 38,232,118
1

THE CHEFS’ WAREHOUSE, INC.
FORM 10-Q
Table of Contents
  Page
PART I. FINANCIAL INFORMATION 
   
Item 1.
   
 
   
 
   
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
PART II. OTHER INFORMATION 
   
Item 1.
   
Item 1A.
   
Item 2.
   
Item 3.
   
Item 4.
   
Item 5.
   
Item 6.
   
 
 

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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


3

PART I FINANCIAL INFORMATION

ITEM 1.            CONSOLIDATED FINANCIAL STATEMENTS

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED BALANCE SHEETS 
(Amounts in thousands, except share data)
March 25, 2022 (unaudited)December 24, 2021
ASSETS  
Current assets:  
Cash and cash equivalents$79,439 $115,155 
Accounts receivable, net of allowance of $19,168 in 2022 and $20,260 in 2021
169,792 172,540 
Inventories, net152,443 144,491 
Prepaid expenses and other current assets37,002 37,774 
Total current assets438,676 469,960 
Equipment, leasehold improvements and software, net151,751 133,622 
Operating lease right-of-use assets148,381 130,701 
Goodwill230,988 221,775 
Intangible assets, net108,832 104,743 
Deferred taxes, net8,876 9,380 
Other assets4,065 3,614 
Total assets$1,091,569 $1,073,795 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$121,444 $118,284 
Accrued liabilities34,852 35,390 
Short-term operating lease liabilities17,835 15,882 
Accrued compensation15,069 22,321 
Current portion of long-term debt4,971 5,141 
Total current liabilities194,171 197,018 
Long-term debt, net of current portion393,565 394,160 
Operating lease liabilities143,827 127,296 
Other liabilities and deferred credits5,581 5,110 
Total liabilities737,144 723,584 
Commitments and contingencies
Stockholders’ equity:  
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 25, 2022 and December 24, 2021
— — 
Common Stock, - $0.01 par value, 100,000,000 shares authorized, 38,256,461 and 37,887,675 shares issued and outstanding at March 25, 2022 and December 24, 2021, respectively
383 380 
Additional paid in capital316,943 314,242 
Accumulated other comprehensive loss(1,897)(2,022)
Retained earnings38,996 37,611 
Total stockholders’ equity354,425 350,211 
Total liabilities and stockholders’ equity$1,091,569 $1,073,795 
 
See accompanying notes to the consolidated financial statements.
4

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Amounts in thousands, except share and per share amounts)
Thirteen Weeks Ended
March 25, 2022March 26, 2021
Net sales$512,103 $280,217 
Cost of sales394,590 221,270 
Gross profit117,513 58,947 
Selling, general and administrative expenses110,086 80,245 
Other operating expenses (income), net1,163 (1,170)
Operating income (loss)6,264 (20,128)
Interest expense4,365 4,763 
Income (loss) before income taxes1,899 (24,891)
Provision for income tax expense (benefit)514 (6,970)
Net income (loss)$1,385 $(17,921)
Other comprehensive income:
Foreign currency translation adjustments125 81 
Comprehensive income (loss)$1,510 $(17,840)
Net income (loss) per share:  
Basic$0.04 $(0.49)
Diluted$0.04 $(0.49)
Weighted average common shares outstanding: 
Basic36,935,717 36,401,748 
Diluted37,307,478 36,401,748 
 
See accompanying notes to the consolidated financial statements.
5

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(Amounts in thousands, except share amounts)
 Common StockAdditional
Paid in
Capital		Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
Total
 SharesAmount
Balance December 24, 202137,887,675 $380 $314,242 $(2,022)$37,611 $350,211 
Net income— — — — 1,385 1,385 
Stock compensation433,115 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, 202238,256,461 $383 $316,943 $(1,897)$38,996 $354,425 

Balance December 25, 202037,274,768 $373 $303,734 $(2,051)$42,534 $344,590 
Net loss— — — — (17,921)(17,921)
Stock compensation673,430 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, 202137,909,695 $379 $304,994 $(1,970)$24,613 $328,016 

See accompanying notes to the consolidated financial statements.
6

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Thirteen Weeks Ended
March 25, 2022March 26, 2021
Cash flows from operating activities:  
Net income (loss)$1,385 $(17,921)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization5,889 5,107 
Amortization of intangible assets3,356 3,539 
Benefit for allowance for doubtful accounts(178)(451)
Non-cash operating lease expense802 109 
Provision (benefit) for deferred income taxes504 (5,025)
Amortization of deferred financing fees539 864 
Stock compensation3,043 2,458 
Change in fair value of contingent earn-out liabilities299 (1,308)
Loss on asset disposal17 5 
Changes in assets and liabilities, net of acquisitions:  
Accounts receivable10,084 (2,585)
Inventories(4,391)(9,357)
Prepaid expenses and other current assets(1,080)850 
Accounts payable, accrued liabilities and accrued compensation(9,830)12,026 
Other assets and liabilities(156)26 
Net cash provided by (used in) operating activities10,283 (11,663)
Cash flows from investing activities:  
Capital expenditures(14,206)(2,896)
Cash paid for acquisitions, net of cash received(28,000)— 
Net cash used in investing activities(42,206)(2,896)
Cash flows from financing activities:  
Payment of debt, finance lease and other financing obligations(1,405)(32,834)
Proceeds from debt issuance— 51,750 
Payment of deferred financing fees(406)(1,450)
Surrender of shares to pay withholding taxes(2,040)(1,192)
Payments under asset-based loan facility— (20,000)
Net cash used in financing activities(3,851)(3,726)
Effect of foreign currency on cash and cash equivalents58 4 
Net change in cash and cash equivalents(35,716)(18,281)
Cash and cash equivalents-beginning of period115,155 193,281 
Cash and cash equivalents-end of period$79,439 $175,000 

See accompanying notes to the consolidated financial statements.
7

THE CHEFS’ WAREHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share amounts)

Note 1 - Operations and Basis of Presentation
 
Description of Business and Basis of Presentation
 
The financial statements include the consolidated accounts of The Chefs’ Warehouse, Inc. (the “Company”), and its wholly-owned subsidiaries. The Company’s quarterly periods end on the thirteenth Friday of each quarter. Every six to seven years, the Company will add a fourteenth week to its fourth quarter to more closely align its year-end to the calendar year. The Company’s business consists of 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 consolidated financial statements include all the accounts of the Company and its direct and indirect wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Unaudited Interim Financial Statements

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

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

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

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 consolidated statements of operations. The Company offers certain sales incentives to customers in the form of rebates or discounts. These sales incentives are accounted as variable consideration. The Company estimates these amounts based on the expected amount to be provided to customers and records a corresponding reduction in revenue. The Company does not expect a significant reversal in the amount
8

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
March 25, 2022March 26, 2021
Center-of-the-Plate$238,776 46.6 %$139,845 49.9 %
Dry Goods78,515 15.3 %39,780 14.2 %
Pastry57,751 11.3 %28,798 10.3 %
Cheese and Charcuterie43,488 8.5 %23,099 8.2 %
Produce27,897 5.4 %20,591 7.3 %
Dairy and Eggs29,420 5.7 %12,581 4.5 %
Oils and Vinegars24,087 4.7 %9,474 3.4 %
Kitchen Supplies12,169 2.5 %6,049 2.2 %
Total$512,103 100 %$280,217 100 %

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

Food Processing Costs

Food processing costs include but are not limited to direct labor and benefits, applicable overhead and depreciation of equipment and facilities used in food processing activities. Food processing costs included in cost of sales were $9,036 and $5,396 for the thirteen weeks ended March 25, 2022 and March 26, 2021, respectively.

Note 3 – Net Income (Loss) per Share
 
The following table sets forth the computation of basic and diluted net income (loss) per common share:
 Thirteen Weeks Ended
 March 25, 2022March 26, 2021
Net income (loss) per share:  
Basic$0.04 $(0.49)
Diluted$0.04 $(0.49)
Weighted average common shares:  
Basic36,935,717 36,401,748 
Diluted37,307,478 36,401,748 

Reconciliation of net income (loss) per common share:
 Thirteen Weeks Ended
 March 25, 2022March 26, 2021
Numerator:  
Net income (loss)$1,385 $(17,921)
Denominator:  
Weighted average basic common shares outstanding36,935,717 36,401,748 
Dilutive effect of unvested common shares330,415 — 
Dilutive effect of stock options and warrants41,346 — 
Weighted average diluted common shares outstanding37,307,478 36,401,748 
 
9

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
 March 25, 2022March 26, 2021
Restricted share awards (“RSAs”)113,061 779,968 
Stock options and warrants293,407 115,639 
Convertible notes4,616,033 3,795,570 

Note 4 – Fair Value Measurements
 
Assets and Liabilities Measured at Fair Value
 
The Company’s contingent earn-out liabilities are measured at fair value. These liabilities were estimated using Level 3 inputs. Long-term earn-out liabilities were $3,551 and $3,252 as of March 25, 2022 and December 24, 2021, respectively, and are reflected as other liabilities and deferred credits on the consolidated balance sheets. The remaining short-term earn-out liabilities are reflected as accrued liabilities on the consolidated balance sheets. The fair value of contingent consideration was determined based on a probability-based approach which includes projected results, percentage probability of occurrence and the application of a discount rate to present value the payments. A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or lower fair value measurement. Changes in the fair value of contingent earn-out liabilities are reflected in other operating (income)expenses, net on the consolidated statements of operations.

The following table presents the changes in Level 3 contingent earn-out liabilities:
BassianSid WainerOther AcquisitionsTotal
Balance December 24, 2021$1,133 $— $5,744 $6,877 
Changes in fair value232 — 67 299 
Balance March 25, 2022$1,365 $— $5,811 $7,176 

Fair Value of Financial Instruments

 The following table presents the carrying value and fair value of the Company’s convertible notes. In estimating the fair value of the convertible notes, the Company utilized Level 3 inputs including prevailing market interest rates to estimate the debt portion of the instrument and a Black Scholes valuation model to estimate the fair value of the conversion option. The Black Scholes model utilizes the market price of the Company’s common stock, estimates of the stock’s volatility and the prevailing risk-free interest rate in calculating the fair value estimate.
 March 25, 2022December 24, 2021
Carrying ValueFair ValueCarrying ValueFair Value
Convertible Senior Notes$200,000 $208,722 $200,000 $206,182 
Convertible Unsecured Note$4,000 $4,172 $4,000 $4,102 
 
Note 5 – Acquisitions
 
On December 28, 2021, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of CGC Holdings, Inc. (“Capital Seaboard”), a specialty seafood and produce distributor in Maryland. The purchase price was approximately $29,701 consisting of $28,000 paid in cash at closing, subject to a customary working capital adjustment, and common stock warrants of $1,701. The Company is in the process of finalizing a valuation of tangible and intangible assets of Capital Seaboard as of the acquisition date. When applicable, these valuations require the use of Level 3 inputs. Goodwill for the Capital Seaboard acquisition will be amortized over 15 years for tax purposes. The goodwill recorded primarily reflects the value of acquiring an established specialty seafood and produce distributor to leverage the Company’s existing products in the markets served by Capital Seaboard, to supply Capital Seaboard’s product offerings to our East Coast markets and any intangible assets that do not qualify for separate recognition.

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The Company reflected net sales and income before taxes in its consolidated statement of operations related to the acquisitions as follows:
 Thirteen Weeks Ended
 March 25, 2022
Net sales$31,682 
Income before income taxes$1,133 


The table below presents unaudited pro forma consolidated income statement information of the Company as if the Capital Seaboard acquisition had occurred on December 26, 2020. The pro forma results were prepared from financial information obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the acquisition. The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisition been completed on the above date, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition, any incremental costs for Capital Seaboard transitioning to become a public company, and also does not reflect additional revenue opportunities following the acquisition. The pro forma information reflects amortization and depreciation of the Capital Seaboard acquisition at their respective fair values.

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

The table below sets forth the preliminary purchase price allocation of this acquisition:
Capital Seaboard
Current assets$10,130 
Customer relationships4,500 
Trademarks2,900 
Goodwill9,129 
Fixed assets9,552 
Other assets122 
Right-of-use assets16,427 
Lease liabilities(16,427)
Current liabilities(6,632)
Issuance of warrants(1,701)
Total cash consideration$28,000 
The Company recognized professional fees of $659 in operating expenses related to acquisition related activities in the first quarter of fiscal 2022.

Note 6 – Inventories
 
Inventories consist primarily of finished product and are reflected net of adjustments for shrinkage, excess and obsolescence totaling $9,273 and $8,312 at March 25, 2022 and December 24, 2021, respectively.

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Note 7 – Equipment, Leasehold Improvements and Software
 
Equipment, leasehold improvements and software as of March 25, 2022 and December 24, 2021 consisted of the following:
 Useful LivesMarch 25, 2022December 24, 2021
LandIndefinite$5,542 $5,020 
Buildings20 years23,436 18,406 
Machinery and equipment
5 - 10 years
29,013 28,099 
Computers, data processing and other equipment
3 - 7 years
15,811 15,480 
Software
3 - 7 years
39,988 39,799 
Leasehold improvements
1 - 40 years
77,326 69,105 
Furniture and fixtures7 years3,648 3,582 
Vehicles
5 - 10 years
29,412 29,632 
Construction-in-process 31,461 24,335 
  255,637 233,458 
Less: accumulated depreciation and amortization (103,886)(99,836)
Equipment, leasehold improvements and software, net $151,751 $133,622 

Construction-in-process at March 25, 2022 and December 24, 2021 related primarily to the build-outs of the Company’s Los Angeles and Miami distribution facilities. The net book value of equipment financed under finance leases at March 25, 2022 and December 24, 2021 was $10,450 and $10,874, respectively.

The components of depreciation and amortization expense were as follows:
 Thirteen Weeks Ended
 March 25, 2022March 26, 2021
Depreciation expense$4,415 $3,935 
Software amortization$1,474 $1,172 
$5,889 $5,107 

Note 8 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are presented as follows:
Carrying amount as of December 24, 2021$221,775 
Goodwill adjustments58 
Acquisitions9,129 
Foreign currency translation26 
Carrying amount as of March 25, 2022$230,988 

Other intangible assets as of March 25, 2022 and December 24, 2021 consisted of the following:
March 25, 2022Weighted-Average
Remaining
Amortization Period		Gross Carrying AmountAccumulated AmortizationNet Amount
Customer relationships120 months$160,201 $(77,180)$83,021 
Non-compete agreements23 months8,579 (8,085)494 
Trademarks165 months39,436 (14,119)25,317 
Total$208,216 $(99,384)$108,832 
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December 24, 2021Weighted-Average
Remaining
Amortization Period		Gross Carrying AmountAccumulated AmortizationNet Amount
Customer relationships120 months$155,678 $(74,644)$81,034 
Non-compete agreements26 months8,579 (8,018)561 
Trademarks179 months36,514 (13,366)23,148 
Total$200,771 $(96,028)$104,743 

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

Estimated amortization expense for other intangible assets for the remainder of the fiscal year ending December 30, 2022 and each of the next four fiscal years and thereafter is as follows:
2022$9,523 
202311,841 
202410,980 
202510,561 
202610,561 
Thereafter55,366 
Total$108,832 

Note 9 – Debt Obligations
 
Debt obligations as of March 25, 2022 and December 24, 2021 consisted of the following:
March 25, 2022December 24, 2021
Senior secured term loans$168,247 $168,675 
Convertible senior notes200,000 200,000 
Asset-based loan facility20,000 20,000 
Finance lease and other financing obligations10,875 11,602 
Convertible unsecured note4,000 4,000 
Deferred finance fees and original issue premium (discount)(4,586)(4,976)
Total debt obligations398,536 399,301 
Less: current installments(4,971)(5,141)
Total debt obligations excluding current installments$393,565 $394,160 

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

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

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

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

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

The components of interest expense on the Company’s Convertible Senior Notes were as follows:
 Thirteen Weeks Ended
 March 25, 2022March 26, 2021
Coupon interest$938 $781 
Amortization of deferred financing fees and premium$224 $241 
Total interest$1,162 $1,022 

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

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

Note 10 – Stockholders’ Equity

Equity Awards

The following table reflects the activity of RSAs during the thirteen weeks ended March 25, 2022:
Time-basedPerformance-basedMarket-based
SharesWeighted Average
Grant Date Fair Value		SharesWeighted Average
Grant Date Fair Value		SharesWeighted Average
Grant Date Fair Value
Unvested at December 24, 2021617,996 $28.33 187,437 $32.04 185,129 $31.44 
Granted115,695 32.44 167,261 32.44 167,261 29.12 
Vested(240,112)27.50 — — — — 
Forfeited(7,615)27.32 (4,743)32.13 (4,744)30.85 
Unvested at March 25, 2022485,964 $29.73 349,955 $32.23 347,646 $30.33 

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

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

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

14

Note 11 – Related Parties
 
The Chefs’ Warehouse Mid-Atlantic, LLC, a subsidiary of the Company, leases a distribution facility that is 100% owned by entities controlled by Christopher Pappas, the Company’s Chairman, President and Chief Executive Officer, and John Pappas, the Company’s Vice Chairman and Chief Operating Officer, and are deemed to be affiliates of these individuals. Expense related to this facility totaled $123 during the thirteen weeks ended March 25, 2022 and March 26, 2021.

Note 12 – Supplemental Disclosures of Cash Flow Information
Thirteen Weeks Ended
March 25, 2022March 26, 2021
Supplemental cash flow disclosures:
Cash received for income taxes$(282)$(237)
Cash paid for interest, net of cash received$3,011 $2,929 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$6,766 $6,369 
Operating cash flows from finance leases$1,028 $145 
ROU assets obtained in exchange for lease liabilities:
Operating leases$8,589 $14 
Finance leases$— $162 
Other non-cash investing and financing activities:
Warrants issued for acquisitions$1,701 $— 

15

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

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

Business Overview

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

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

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

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

Recent Acquisitions

On December 28, 2021, pursuant to an asset purchase agreement, we acquired substantially all of the assets of CGC Holdings, Inc. (“Capital Seaboard”), a specialty seafood and produce distributor in Maryland. The purchase price was approximately $29.7 million consisting of $28.0 million paid in cash at closing, subject to a customary working capital adjustment, and common stock warrants of $1.7 million.

16

RESULTS OF OPERATIONS
Thirteen Weeks Ended
March 25, 2022March 26, 2021
Net sales$512,103 $280,217 
Cost of sales394,590 221,270 
Gross profit117,513 58,947 
Selling, general and administrative expenses110,086 80,245 
Other operating expenses (income), net1,163 (1,170)
Operating income (loss)6,264 (20,128)
Interest expense4,365 4,763 
Income (loss) before income taxes1,899 (24,891)
Provision for income tax expense (benefit)514 (6,970)
Net income (loss)$1,385 $(17,921)

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

Thirteen Weeks Ended March 25, 2022 Compared to Thirteen Weeks Ended March 26, 2021

Net Sales
20222021$ Change% Change
Net sales$512,103 $280,217 $231,886 82.8 %

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

Gross Profit
20222021$ Change% Change
Gross profit$117,513 $58,947 $58,566 99.4 %
Gross profit margin22.9 %21.0 %

Gross profit increased primarily as a result of increased sales and price inflation. Gross profit margin increased approximately 191 basis points due to favorable sales mix towards higher margin specialty products. Gross profit margins increased 213 basis points in the Company’s specialty category and increased 111 basis points in the Company’s center-of-the-plate category.

Selling, General and Administrative Expenses
20222021$ Change% Change
Selling, general and administrative expenses$110,086 $80,245 $29,841 37.2 %
Percentage of net sales21.5 %28.6 %

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



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Other Operating Expenses (Income), Net
20222021$ Change% Change
Other operating expenses (income), net$1,163 $(1,170)$2,333 (199.4)%

The increase in net other operating expenses was primarily due to non-cash charges of $0.3 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash credits of $1.3 million in the prior year period.

Interest Expense
20222021$ Change% Change
Interest expense$4,365 $4,763 $(398)(8.4)%

Interest expense decreased primarily due to lower effective interest rates on our outstanding debt as a result of the $50.0 million aggregate principal amount of Convertible Senior Notes issued on March 1, 2021 which were used to repay higher interest rate debt.

Provision for Income Taxes
20222021$ Change% Change
Provision for income tax expense (benefit)$514 $(6,970)$7,484 (107.4)%
Effective tax rate27.1 %28.0 %

The increase in income tax expense is due to pre-tax income in the current period compared to a pre-tax loss in the prior year quarter. The effective tax rate in the current period is lower due to insignificant changes in certain permanent tax differences.
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LIQUIDITY AND CAPITAL RESOURCES

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

Indebtedness

The following table presents selected financial information on our indebtedness (in thousands):
March 25, 2022December 24, 2021
Senior secured term loan$168,247 $168,675 
Total convertible debt204,000 204,000 
Borrowings outstanding on asset-based loan facility20,000 20,000 
Finance leases and other financing obligations10,875 11,602 
Total$403,122 $404,277 

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

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


Liquidity

The following table presents selected financial information on liquidity (in thousands):
March 25, 2022December 24, 2021
Cash and cash equivalents$79,439 $115,155 
Working capital, excluding cash and cash equivalents
165,066 157,787 
Availability under asset-based loan facility126,240 109,459 
Total$370,745 $382,401 

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

Cash Flows

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

Net cash used in operations was $10.3 million for the thirteen weeks ended March 25, 2022 consisting of a net income of $1.4 million and $14.3 million of non-cash charges, partially offset by investments in working capital growth of $5.4 million. Non-cash charges decreased $9.0 million primarily due to a $5.5 million increase in deferred tax expenses and a $1.6 million
19

increase in changes in the fair value of earn-out liabilities. The cash used for working capital growth of $6.3 million is primarily driven by the Company’s reinvestment in working capital to support sales growth.

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

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

Seasonality

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

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

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

Inflation

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

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

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

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ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

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

ITEM 4.         CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

PART II. OTHER INFORMATION

ITEM 1.         LEGAL PROCEEDINGS

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

ITEM 1A.         RISK FACTORS

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 filed with the SEC on February 22, 2022. In addition to the information contained herein, you should consider the risk factors disclosed in our Annual Report on Form 10-K.

ITEM 2.         UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Total Number
of Shares
Repurchased(1)
Average
Price
Paid Per Share		Total
Number of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs		Maximum
Number (or
Approximate
Dollar Value) of
Shares That May
Yet Be Purchased
Under the Plans
or Programs
December 25, 2021 to January 21, 2022— $— — — 
January 22, 2022 to February 18, 2022— — — — 
February 19, 2022 to March 25, 202264,329 31.67 — — 
Total64,329 $31.67 — — 

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


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ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.         MINE SAFETY DISCLOSURES

None.

ITEM 5.         OTHER INFORMATION

None.

22

ITEM 6.         EXHIBITS
Exhibit No. Description
Amendment No. 3, dated as of March 11, 2022, to the ABL Facility.
 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document – the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
  
101.SCH XBRL Taxonomy Extension Schema Document
  
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
  
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
  
101.LAB XBRL Taxonomy Extension Label Linkbase Document
  
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

 †Filed herewith
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on April 27, 2022.
 THE CHEFS’ WAREHOUSE, INC.
 (Registrant)
  
Date: April 27, 2022  /s/ James Leddy
James Leddy
 Chief Financial Officer
 (Principal Financial Officer)
 
Date: April 27, 2022  /s/ Timothy McCauley
Timothy McCauley
 Chief Accounting Officer
 (Principal Accounting Officer)

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