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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended September 23, 2022
OR
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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)
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Delaware |
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20-3031526 |
(State or other jurisdiction of
incorporation or organization) |
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(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:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, par value $0.01 |
CHEF |
The NASDAQ Stock Market LLC |
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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.
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Large accelerated filer |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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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
THE CHEFS’ WAREHOUSE, INC.
FORM 10-Q
Table of Contents
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Page |
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PART I. FINANCIAL INFORMATION |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II. OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
Defaults Upon Senior Securities
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Item 4. |
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Item 5. |
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Item 6. |
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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 and other reports,
including this Quarterly Report on Form 10-Q, filed by the Company
with the SEC since that date. The Company is not undertaking to
update any information in the foregoing report until the effective
date of its future reports required by applicable
laws.
PART I FINANCIAL INFORMATION
ITEM
1. CONSOLIDATED
FINANCIAL STATEMENTS
THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
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September 23, 2022 (unaudited) |
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December 24, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
145,425 |
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$ |
115,155 |
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Accounts receivable, net of allowance of $21,147 in 2022 and
$20,260 in 2021
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208,939 |
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172,540 |
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Inventories, net |
190,668 |
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144,491 |
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Prepaid expenses and other current assets |
46,464 |
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37,774 |
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Total current assets |
591,496 |
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469,960 |
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Property, plant and equipment, net |
158,569 |
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133,622 |
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Operating lease right-of-use assets |
135,286 |
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130,701 |
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Goodwill |
245,428 |
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221,775 |
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Intangible assets, net |
116,112 |
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104,743 |
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Deferred taxes, net |
2,259 |
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9,380 |
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Other assets |
3,609 |
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3,614 |
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Total assets |
$ |
1,252,759 |
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$ |
1,073,795 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ |
142,963 |
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$ |
118,284 |
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Accrued liabilities |
48,751 |
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35,390 |
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Short-term operating lease liabilities |
17,180 |
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15,882 |
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Accrued compensation |
21,929 |
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22,321 |
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Current portion of long-term debt |
6,067 |
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5,141 |
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Total current liabilities |
236,890 |
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197,018 |
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Long-term debt, net of current portion |
493,148 |
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394,160 |
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Operating lease liabilities |
131,910 |
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127,296 |
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Other liabilities and deferred credits |
5,862 |
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5,110 |
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Total liabilities |
867,810 |
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723,584 |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no
shares issued and outstanding at September 23, 2022 and
December 24, 2021
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— |
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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
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383 |
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380 |
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Additional paid-in capital |
322,505 |
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314,242 |
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Accumulated other comprehensive loss |
(2,127) |
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(2,022) |
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Retained earnings |
64,188 |
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37,611 |
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Total stockholders’ equity |
384,949 |
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350,211 |
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Total liabilities and stockholders’ equity |
$ |
1,252,759 |
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$ |
1,073,795 |
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See accompanying notes to the consolidated financial
statements
THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(Unaudited)
(Amounts in thousands, except share and per share
amounts)
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Thirteen Weeks Ended |
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Thirty-Nine Weeks Ended |
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September 23,
2022 |
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September 24,
2021 |
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September 23,
2022 |
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September 24,
2021 |
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Net sales |
$ |
661,856 |
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$ |
484,321 |
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$ |
1,822,063 |
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$ |
1,187,506 |
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Cost of sales |
504,068 |
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374,346 |
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1,390,758 |
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922,710 |
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Gross profit |
157,788 |
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109,975 |
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431,305 |
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264,796 |
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Selling, general and administrative expenses |
130,255 |
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99,431 |
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364,828 |
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270,034 |
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Other operating expenses (income), net |
5,458 |
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105 |
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10,504 |
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(208) |
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Operating income (loss) |
22,075 |
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10,439 |
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55,973 |
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(5,030) |
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Interest expense |
10,737 |
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4,191 |
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19,567 |
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13,362 |
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Income (loss) before income taxes |
11,338 |
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6,248 |
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36,406 |
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(18,392) |
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Provision for income tax expense (benefit) |
3,061 |
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2,792 |
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9,829 |
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(5,025) |
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Net income (loss) |
$ |
8,277 |
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$ |
3,456 |
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$ |
26,577 |
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$ |
(13,367) |
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Other comprehensive (loss) income: |
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Foreign currency translation adjustments |
(156) |
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(90) |
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(105) |
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67 |
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Comprehensive income (loss) |
$ |
8,121 |
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$ |
3,366 |
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$ |
26,472 |
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$ |
(13,300) |
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Net income (loss) per share: |
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Basic |
$ |
0.22 |
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$ |
0.09 |
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$ |
0.72 |
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$ |
(0.36) |
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Diluted |
$ |
0.21 |
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$ |
0.09 |
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$ |
0.68 |
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$ |
(0.36) |
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Weighted average common shares outstanding: |
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Basic |
37,120,926 |
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36,875,784 |
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37,047,653 |
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36,701,927 |
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Diluted |
42,044,053 |
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37,105,746 |
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41,942,676 |
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36,701,927 |
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See accompanying notes to the consolidated financial
statements.
THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
(Amounts in thousands, except share amounts)
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Common Stock |
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Additional
Paid-in
Capital |
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Accumulated
Other
Comprehensive
Loss |
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Retained
Earnings
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Total |
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Shares |
|
Amount |
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Balance December 24, 2021 |
37,887,675 |
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|
$ |
380 |
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$ |
314,242 |
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$ |
(2,022) |
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$ |
37,611 |
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$ |
350,211 |
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Net income |
— |
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|
— |
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— |
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— |
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|
1,385 |
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|
1,385 |
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Stock compensation |
433,115 |
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4 |
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3,039 |
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— |
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— |
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|
3,043 |
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Warrants issued for acquisition |
— |
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— |
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|
1,701 |
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— |
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— |
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|
1,701 |
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Cumulative translation adjustment |
— |
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— |
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— |
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|
125 |
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— |
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|
125 |
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Shares surrendered to pay tax withholding |
(64,329) |
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(1) |
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(2,039) |
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— |
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— |
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(2,040) |
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Balance March 25, 2022 |
38,256,461 |
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$ |
383 |
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$ |
316,943 |
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$ |
(1,897) |
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$ |
38,996 |
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$ |
354,425 |
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Net income |
— |
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— |
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— |
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— |
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|
16,915 |
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16,915 |
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Stock compensation |
16,131 |
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— |
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|
2,939 |
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— |
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— |
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2,939 |
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Cumulative translation adjustment |
— |
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— |
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— |
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(74) |
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— |
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(74) |
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Shares surrendered to pay tax withholding |
(15,137) |
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|
— |
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(518) |
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— |
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— |
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(518) |
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Balance June 24, 2022 |
38,257,455 |
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$ |
383 |
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$ |
319,364 |
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$ |
(1,971) |
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$ |
55,911 |
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$ |
373,687 |
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Net income |
— |
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— |
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— |
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— |
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|
8,277 |
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|
8,277 |
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Stock compensation |
9,986 |
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— |
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|
3,099 |
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— |
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— |
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|
3,099 |
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Exercise of stock options |
3,407 |
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|
— |
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|
69 |
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|
— |
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|
— |
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|
69 |
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Cumulative translation adjustment |
— |
|
|
— |
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|
— |
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(156) |
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|
— |
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|
(156) |
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Shares surrendered to pay tax withholding |
(741) |
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|
— |
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|
(27) |
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|
— |
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|
— |
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(27) |
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Balance September 23, 2022 |
38,270,107 |
|
|
$ |
383 |
|
|
$ |
322,505 |
|
|
$ |
(2,127) |
|
|
$ |
64,188 |
|
|
$ |
384,949 |
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Balance December 25, 2020 |
37,274,768 |
|
|
$ |
373 |
|
|
$ |
303,734 |
|
|
$ |
(2,051) |
|
|
$ |
42,534 |
|
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$ |
344,590 |
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|
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Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17,921) |
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|
(17,921) |
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Stock compensation |
673,430 |
|
|
6 |
|
|
2,452 |
|
|
— |
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|
— |
|
|
2,458 |
|
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Cumulative translation adjustment |
— |
|
|
— |
|
|
— |
|
|
81 |
|
|
— |
|
|
81 |
|
|
Shares surrendered to pay tax withholding |
(38,503) |
|
|
— |
|
|
(1,192) |
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|
— |
|
|
— |
|
|
(1,192) |
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Balance March 26, 2021 |
37,909,695 |
|
|
$ |
379 |
|
|
$ |
304,994 |
|
|
$ |
(1,970) |
|
|
$ |
24,613 |
|
|
$ |
328,016 |
|
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Net income |
— |
|
|
— |
|
|
— |
|
|
— |
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|
1,098 |
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|
1,098 |
|
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Stock compensation |
69,245 |
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|
1 |
|
|
3,279 |
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|
— |
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|
— |
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|
3,280 |
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Warrants issued for acquisition |
— |
|
|
— |
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|
1,120 |
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|
— |
|
|
— |
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|
1,120 |
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Cumulative translation adjustment |
— |
|
|
— |
|
|
— |
|
|
76 |
|
|
— |
|
|
76 |
|
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Shares surrendered to pay tax withholding |
(17,077) |
|
|
— |
|
|
(541) |
|
|
— |
|
|
— |
|
|
(541) |
|
|
Balance June 25, 2021 |
37,961,863 |
|
|
$ |
380 |
|
|
$ |
308,852 |
|
|
$ |
(1,894) |
|
|
$ |
25,711 |
|
|
$ |
333,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,456 |
|
|
3,456 |
|
|
Stock compensation |
(75,597) |
|
|
— |
|
|
2,710 |
|
|
— |
|
|
— |
|
|
2,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment |
— |
|
|
— |
|
|
— |
|
|
(90) |
|
|
— |
|
|
(90) |
|
|
Shares surrendered to pay tax withholding |
(2,017) |
|
|
— |
|
|
(59) |
|
|
— |
|
|
— |
|
|
(59) |
|
|
Balance September 24, 2021 |
37,884,249 |
|
|
$ |
380 |
|
|
$ |
311,503 |
|
|
$ |
(1,984) |
|
|
$ |
29,167 |
|
|
$ |
339,066 |
|
See accompanying notes to the consolidated financial
statements.
THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
September 23, 2022 |
|
September 24, 2021 |
|
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: |
|
|
|
|
Depreciation and amortization |
17,667 |
|
|
16,270 |
|
|
Amortization of intangible assets |
10,289 |
|
|
9,778 |
|
|
Provision (benefit) for allowance for doubtful accounts |
3,138 |
|
|
(744) |
|
|
Non-cash operating lease expense |
1,329 |
|
|
505 |
|
|
Provision (benefit) for deferred income taxes |
7,121 |
|
|
(4,855) |
|
|
Amortization of deferred financing fees |
1,621 |
|
|
1,832 |
|
|
Loss on debt extinguishment |
142 |
|
|
— |
|
|
Stock compensation |
9,081 |
|
|
8,448 |
|
|
Change in fair value of contingent earn-out liabilities |
8,358 |
|
|
(1,359) |
|
|
Intangible asset impairment |
— |
|
|
597 |
|
|
Loss on asset disposal |
17 |
|
|
257 |
|
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
Accounts receivable |
(25,402) |
|
|
(51,582) |
|
|
Inventories |
(40,519) |
|
|
(49,148) |
|
|
Prepaid expenses and other current assets |
(9,848) |
|
|
(3,304) |
|
|
Accounts payable, accrued liabilities and accrued
compensation |
21,938 |
|
|
60,443 |
|
|
|
|
|
|
Other assets and liabilities |
238 |
|
|
(101) |
|
|
Net cash provided by (used in) operating activities |
31,747 |
|
|
(26,330) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Capital expenditures |
(31,666) |
|
|
(17,872) |
|
|
Cash paid for acquisitions, net of cash received |
(62,007) |
|
|
(7,280) |
|
|
|
|
|
|
Net cash used in investing activities |
(93,673) |
|
|
(25,152) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payment of debt, finance lease and other financing
obligations |
(171,434) |
|
|
(35,918) |
|
|
|
|
|
|
Proceeds from debt issuance |
300,000 |
|
|
51,750 |
|
|
|
|
|
|
Payment of deferred financing fees |
(11,258) |
|
|
(1,450) |
|
|
Proceeds from exercise of stock options |
69 |
|
|
— |
|
|
Surrender of shares to pay withholding taxes |
(2,584) |
|
|
(1,792) |
|
|
Cash paid for contingent earn-out liability |
(2,538) |
|
|
(83) |
|
|
|
|
|
|
Payments under asset-based loan facility |
(20,000) |
|
|
(20,000) |
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
92,255 |
|
|
(7,493) |
|
|
|
|
|
|
|
Effect of foreign currency on cash and cash equivalents |
(59) |
|
|
(89) |
|
|
Net change in cash and cash equivalents |
30,270 |
|
|
(59,064) |
|
|
Cash and cash equivalents-beginning of period |
115,155 |
|
|
193,281 |
|
|
Cash and cash equivalents-end of period |
$ |
145,425 |
|
|
$ |
134,217 |
|
See accompanying notes to the consolidated financial
statements.
THE CHEFS’ WAREHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share
amounts)
Note 1 - Operations and Basis of Presentation
Description of Business and Basis of Presentation
The financial statements include the consolidated accounts of The
Chefs’ Warehouse, Inc. (the “Company”), and its wholly-owned
subsidiaries. The Company’s quarterly periods end on the thirteenth
Friday of each quarter. Every six to seven years, the Company will
add a fourteenth week to its fourth quarter to more closely align
its year-end to the calendar year. Fiscal 2022 will include a
fourteenth week in the fourth quarter. The Company’s business
consists of 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 and thirty-nine
weeks ended September 23, 2022 are not necessarily indicative
of the results to be expected for the full year.
The preparation of financial statements in conformity with GAAP
requires management to make significant estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ
from management’s estimates.
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
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 |
|
September 23, 2022 |
|
September 24, 2021 |
|
September 23, 2022 |
|
September 24, 2021 |
|
Center-of-the-Plate |
$ |
280,272 |
|
|
42.3 |
% |
|
$ |
238,783 |
|
|
49.3 |
% |
|
$ |
803,334 |
|
|
44.1 |
% |
|
$ |
593,717 |
|
|
50.0 |
% |
|
Dry Goods |
108,908 |
|
|
16.5 |
% |
|
66,455 |
|
|
13.7 |
% |
|
291,020 |
|
|
16.0 |
% |
|
163,352 |
|
|
13.8 |
% |
|
Pastry |
79,899 |
|
|
12.1 |
% |
|
48,842 |
|
|
10.1 |
% |
|
213,970 |
|
|
11.7 |
% |
|
118,952 |
|
|
10.0 |
% |
|
Cheese and Charcuterie |
61,123 |
|
|
9.2 |
% |
|
40,403 |
|
|
8.3 |
% |
|
163,720 |
|
|
9.0 |
% |
|
97,805 |
|
|
8.2 |
% |
|
Produce |
39,302 |
|
|
5.9 |
% |
|
35,900 |
|
|
7.4 |
% |
|
104,413 |
|
|
5.7 |
% |
|
87,049 |
|
|
7.3 |
% |
|
Dairy and Eggs |
41,780 |
|
|
6.3 |
% |
|
21,922 |
|
|
4.5 |
% |
|
111,046 |
|
|
6.1 |
% |
|
53,405 |
|
|
4.5 |
% |
|
Oils and Vinegars |
33,437 |
|
|
5.1 |
% |
|
21,855 |
|
|
4.5 |
% |
|
89,041 |
|
|
4.9 |
% |
|
48,210 |
|
|
4.1 |
% |
|
Kitchen Supplies |
17,135 |
|
|
2.6 |
% |
|
10,161 |
|
|
2.2 |
% |
|
45,519 |
|
|
2.5 |
% |
|
25,016 |
|
|
2.1 |
% |
|
Total |
$ |
661,856 |
|
|
100 |
% |
|
$ |
484,321 |
|
|
100 |
% |
|
$ |
1,822,063 |
|
|
100 |
% |
|
$ |
1,187,506 |
|
|
100 |
% |
The Company determines its product category classification based on
how the Company currently markets its products to its customers.
The Company’s definition of its principal product categories may
differ from the way in which other companies present similar
information.
Food Processing Costs
Food processing costs include but are not limited to direct labor
and benefits, applicable overhead and depreciation of equipment and
facilities used in food processing activities. Food processing
costs included in cost of sales were $10,089 and $7,524 for the
thirteen weeks ended September 23, 2022 and September 24,
2021, respectively, and $28,523 and $19,599 for the thirty-nine
weeks ended September 23, 2022 and September 24, 2021,
respectively.
Note 3 – Net Income (Loss) per Share
The following table sets forth the computation of basic and diluted
net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
September 23, 2022 |
|
September 24, 2021 |
|
September 23, 2022 |
|
September 24, 2021 |
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.22 |
|
|
$ |
0.09 |
|
|
$ |
0.72 |
|
|
$ |
(0.36) |
|
|
Diluted |
$ |
0.21 |
|
|
$ |
0.09 |
|
|
$ |
0.68 |
|
|
$ |
(0.36) |
|
|
Weighted average common shares: |
|
|
|
|
|
|
|
|
Basic |
37,120,926 |
|
|
36,875,784 |
|
|
37,047,653 |
|
|
36,701,927 |
|
|
Diluted |
42,044,053 |
|
|
37,105,746 |
|
|
41,942,676 |
|
|
36,701,927 |
|
Reconciliation of net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
September 23, 2022 |
|
September 24, 2021 |
|
September 23, 2022 |
|
September 24, 2021 |
|
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
8,277 |
|
|
$ |
3,456 |
|
|
$ |
26,577 |
|
|
$ |
(13,367) |
|
|
Add effect of dilutive securities |
|
|
|
|
|
|
|
|
Interest on convertible notes, net of tax |
683 |
|
|
— |
|
|
2,048 |
|
|
— |
|
|
Net income (loss) available to common shareholders |
$ |
8,960 |
|
|
$ |
3,456 |
|
|
$ |
28,625 |
|
|
$ |
(13,367) |
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average basic common shares outstanding |
37,120,926 |
|
|
36,875,784 |
|
|
37,047,653 |
|
|
36,701,927 |
|
|
Dilutive effect of unvested common shares |
316,358 |
|
|
229,962 |
|
|
304,391 |
|
|
— |
|
|
Dilutive effect of stock options and warrants |
81,789 |
|
|
— |
|
|
65,652 |
|
|
— |
|
|
Dilutive effect of convertible notes |
4,524,980 |
|
|
— |
|
|
4,524,980 |
|
|
— |
|
|
Weighted average diluted common shares outstanding |
42,044,053 |
|
|
37,105,746 |
|
|
41,942,676 |
|
|
36,701,927 |
|
Potentially dilutive securities that have been excluded from the
calculation of diluted net income (loss) per common share because
the effect is anti-dilutive are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
September 23, 2022 |
|
September 24, 2021 |
|
September 23, 2022 |
|
September 24, 2021 |
|
Restricted share awards (“RSAs”) |
80,844 |
|
|
50,412 |
|
|
68,784 |
|
|
297,978 |
|
|
Stock options and warrants |
— |
|
|
126,359 |
|
|
— |
|
|
122,956 |
|
|
Convertible notes |
91,053 |
|
|
4,616,033 |
|
|
91,053 |
|
|
4,341,664 |
|
Note 4 – Fair Value Measurements
Assets and Liabilities Measured at Fair Value
The Company’s contingent earn-out liabilities are measured at fair
value. These liabilities were estimated using Level 3 inputs.
Long-term earn-out liabilities
were $4,130 and $3,252 as
of September 23, 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 expenses (income), net on
the consolidated statements of operations.
The following table presents the changes in Level 3 contingent
earn-out liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 24, 2021 |
|
|
|
|
|
|
|
|
|
|
$ |
6,877 |
|
|
Acquisition value |
|
|
|
|
|
|
|
|
|
|
1,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments |
|
|
|
|
|
|
|
|
|
|
(2,538) |
|
|
Changes in fair value |
|
|
|
|
|
|
|
|
|
|
8,358 |
|
|
Balance September 23, 2022 |
|
|
|
|
|
|
|
|
|
|
$ |
13,897 |
|
Fair Value of Financial Instruments
The following table presents the carrying value and fair value of
the Company’s convertible notes. In estimating the fair value of
the convertible notes, the Company utilized Level 3 inputs
including prevailing market interest rates to estimate the debt
portion of the instrument and a Black Scholes valuation model to
estimate the fair value of the conversion option. The Black Scholes
model utilizes the market price of the Company’s common stock,
estimates of the stock’s volatility and the prevailing risk-free
interest rate in calculating the fair value estimate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 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 |
|
Note 5 – Acquisitions
Capital Seaboard
On December 28, 2021, pursuant to an asset purchase agreement,
the Company acquired substantially all of the assets of CGC
Holdings, Inc. (“Capital Seaboard”), a specialty seafood and
produce distributor in Maryland. The purchase price was
approximately $31,036, consisting of $28,000 paid in cash at
closing, common stock warrants valued at $1,701, and $1,335 paid
upon settlement of a net working capital true-up. The Company is in
the process of finalizing a valuation of tangible and intangible
assets of Capital Seaboard as of the acquisition date. When
applicable, these valuations require the use of Level 3 inputs.
Goodwill for the Capital Seaboard acquisition will be amortized
over 15 years for tax purposes. The goodwill recorded primarily
reflects the value of acquiring an established specialty seafood
and produce distributor to leverage the Company’s existing products
in the markets served by Capital Seaboard, to supply Capital
Seaboard’s product offerings to our East Coast markets and any
intangible assets that do not qualify for separate
recognition.
Other Acquisitions
During the thirty-nine weeks ended September 23, 2022 , the
Company completed three other acquisitions for an aggregate
purchase price of approximately $32,500, paid in cash, subject to
customary working capital adjustments. The Company will also pay
additional contingent consideration, if earned, in the form of
earn-out amounts which could total $2,000 in the aggregate. The
Company is in the process of finalizing a valuation of the tangible
and intangible assets as of the acquisition date. When applicable,
these valuations require the use of Level 3 inputs. Goodwill of
$16,252 will be amortized over 15 years for tax
purposes.
The Company reflected net sales and income before income taxes in
its consolidated statement of operations related to the
acquisitions follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
September 23, 2022 |
|
|
|
September 23, 2022 |
|
|
|
Net sales |
$ |
58,466 |
|
|
|
|
$ |
135,260 |
|
|
|
|
Income before income taxes |
$ |
4,970 |
|
|
|
|
$ |
8,892 |
|
|
|
The table below presents unaudited pro forma consolidated income
statement information of the Company as if the acquisitions had
occurred on December 26, 2020. The pro forma results were prepared
from financial information 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) |
|
The table below sets forth 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 during
the thirteen and thirty-nine weeks ended September 23, 2022,
respectively.
Note 6 – Inventories
Inventories consist primarily of finished product and are reflected
net of adjustments for shrinkage, excess and obsolescence totaling
$9,616 and $8,312 at September 23, 2022 and December 24,
2021, respectively.
Note 7 – Property, Plant and Equipment
Equipment, leasehold improvements and software as of
September 23, 2022 and December 24, 2021 consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Lives |
|
September 23, 2022 |
|
December 24, 2021 |
|
Land |
|
Indefinite |
|
$ |
5,542 |
|
|
$ |
5,020 |
|
|
Buildings |
|
20 years |
|
23,552 |
|
|
18,406 |
|
|
Machinery and equipment |
|
5 - 10 years
|
|
30,845 |
|
|
28,099 |
|
|
Computers, data processing and other equipment |
|
3 - 7 years
|
|
16,986 |
|
|
15,480 |
|
|
Software |
|
3 - 7 years
|
|
42,399 |
|
|
39,799 |
|
|
Leasehold improvements |
|
1 - 40 years
|
|
92,517 |
|
|
69,105 |
|
|
Furniture and fixtures |
|
7 years |
|
3,671 |
|
|
3,582 |
|
|
Vehicles |
|
5 - 10 years
|
|
28,395 |
|
|
29,632 |
|
|
|
|
|
|
|
|
|
Construction-in-process |
|
|
|
27,870 |
|
|
24,355 |
|
|
|
|
|
|
271,777 |
|
|
233,478 |
|
|
Less: accumulated depreciation and amortization |
|
|
|
(113,208) |
|
|
(99,856) |
|
|
Equipment, leasehold improvements and software, net |
|
|
|
$ |
158,569 |
|
|
$ |
133,622 |
|
Construction-in-process at September 23, 2022 related
primarily to 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. The net book value of equipment financed
under finance leases at September 23, 2022 and
December 24, 2021 was $9,302 and $10,874,
respectively.
The components of depreciation and amortization expense were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
September 23, 2022 |
|
September 24, 2021 |
|
September 23, 2022 |
|
September 24, 2021 |
|
Depreciation expense |
$ |
4,455 |
|
|
$ |
3,903 |
|
|
$ |
13,255 |
|
|
$ |
11,679 |
|
|
Software amortization |
$ |
1,457 |
|
|
$ |
1,707 |
|
|
$ |
4,412 |
|
|
$ |
4,591 |
|
|
|
$ |
5,912 |
|
|
$ |
5,610 |
|
|
$ |
17,667 |
|
|
$ |
16,270 |
|
Note 8 – Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill are presented as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount as of December 24, 2021 |
$ |
221,775 |
|
|
Goodwill adjustments
(1)
|
(792) |
|
|
Acquisitions |
24,586 |
|
|
Foreign currency translation |
(141) |
|
|
Carrying amount as of September 23, 2022 |
$ |
245,428 |
|
(1) The goodwill adjustments represent measurement period
adjustments related to certain acquisitions completed in the prior
year.
Other intangible assets as of September 23, 2022 and
December 24, 2021 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 23, 2022 |
|
Weighted-Average
Remaining
Amortization Period |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Amount |
|
Customer relationships |
|
120 months |
|
$ |
174,105 |
|
|
$ |
(82,688) |
|
|
$ |
91,417 |
|
|
Non-compete agreements |
|
17 months |
|
8,579 |
|
|
(8,218) |
|
|
361 |
|
|
Trademarks |
|
144 months |
|
39,745 |
|
|
(15,411) |
|
|
24,334 |
|
|
Total |
|
|
|
$ |
222,429 |
|
|
$ |
(106,317) |
|
|
$ |
116,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 24, 2021 |
|
Weighted-Average
Remaining
Amortization Period |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Amount |
|
Customer relationships |
|
120 months |
|
$ |
155,678 |
|
|
$ |
(74,644) |
|
|
$ |
81,034 |
|
|
Non-compete agreements |
|
26 months |
|
8,579 |
|
|
(8,018) |
|
|
561 |
|
|
Trademarks |
|
179 months |
|
36,514 |
|
|
(13,366) |
|
|
23,148 |
|
|
Total |
|
|
|
$ |
200,771 |
|
|
$ |
(96,028) |
|
|
$ |
104,743 |
|
Amortization expense for other intangibles was $3,470 and $3,135
for the thirteen weeks ended September 23, 2022 and
September 24, 2021, respectively, and $10,289 and $9,778 for
the thirty-nine weeks ended September 23, 2022 and
September 24, 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 |
$ |
3,274 |
|
|
2023 |
12,796 |
|
|
2024 |
11,943 |
|
|
2025 |
11,529 |
|
|
2026 |
11,529 |
|
|
Thereafter |
65,041 |
|
|
Total |
$ |
116,112 |
|
Note 9 – Debt Obligations
Debt obligations as of September 23, 2022 and
December 24, 2021 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 23, 2022 |
|
December 24, 2021 |
|
Senior secured term loans |
|
$ |
300,000 |
|
|
$ |
168,675 |
|
|
Convertible senior notes |
|
200,000 |
|
|
200,000 |
|
|
Asset-based loan facility |
|
— |
|
|
20,000 |
|
|
Finance lease and other financing obligations |
|
9,732 |
|
|
11,602 |
|
|
Convertible unsecured note |
|
4,000 |
|
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred finance fees and original issue premium
(discount) |
|
(14,517) |
|
|
(4,976) |
|
|
Total debt obligations |
|
499,215 |
|
|
399,301 |
|
|
Less: current installments |
|
(6,067) |
|
|
(5,141) |
|
|
Total debt obligations excluding current installments |
|
$ |
493,148 |
|
|
$ |
394,160 |
|
On August 23, 2022, the Company entered into an eighth
amendment (“Eight Amendment”) to its senior secured term loan
credit agreement (“Term Credit Agreement”). The Company borrowed
$300,000 maturing on August 23, 2029 (“2029 Term Loans”),
comprising of a refinancing of the then existing term loans balance
under the Term Credit Agreement of $167,391 and an incremental
borrowing of $132,609. The incremental funds are to be used for
capital expenditures, permitted acquisitions, working capital, and
general corporate purposes of the Company. Additionally, the Term
Credit Agreement includes an accordion which permits the Company to
request that the lenders extend additional Term Loans based on
certain performance, leverage ratio and other restrictions. The
Eight Amendment includes a springing maturity of June 22, 2024
if, by June 22, 2024, more than $40,000 in principal remains
outstanding on the Company’s Convertible Senior Notes has not been
repaid, repurchased, redeemed or refinanced with permitted
indebtedness having a maturity date not earlier than six months
after August 23, 2029.
The interest charged on the 2029 Term Loans is equal to, at the
Company’s option, either the Alternate Base Rate (as defined in the
Eight Amendment) plus 375 basis points or the secured overnight
financing rate (“SOFR”) for one, two, three or six-month interest
periods chosen by the Company plus 475 basis points. The interest
rate on the 2029 Term Loans at September 23, 2022 was
7.9%.
The Eight Amendment involved multiple members of a 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, 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 that occurs 90 days prior
to the earliest maturity date under the Company’s senior secured
term loan facility or
March 24, 2024 if the Company’s 1.875% Convertible Senior
Notes due 2024 in an aggregate principal amount in excess of
$40,000 remain outstanding that have not been repaid, repurchased,
redeemed or refinanced having a maturity date not earlier than six
months after March 11, 2027.
The ABL Credit Agreement contains customary affirmative covenants,
negative covenants and events of default as more particularly
described in the ABL Credit Agreement. The Company is required to
comply with a minimum consolidated fixed charge coverage ratio of
1:1 if the amount of availability under the ABL Facility falls
below the greater of $14,000 and 10%, of the lesser of the
aggregate commitments and the borrowing base then in
effect.
The third amendment was accounted for as a debt modification. The
Company incurred transaction costs of $406 which were capitalized
as deferred financing fees, presented in other
assets
on the Company’s consolidated balance sheets,
to be amortized over the term of the ABL Facility.
On September 23, 2022, the Company fully paid all borrowings
outstanding under the ABL and had reserved $23,181 of the ABL
Facility for the issuance of letters of credit. As of
September 23, 2022, funds totaling $176,820 were available for
borrowing under the ABL Facility.
The net carry value of the Company’s Convertible Senior Notes as of
September 23, 2022 and December 24, 2021
was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 23, 2022 |
|
December 24, 2021 |
|
Principal amount outstanding |
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
Unamortized deferred financing fees and premium |
|
(2,014) |
|
|
(2,686) |
|
|
Net carry value |
|
$ |
197,986 |
|
|
$ |
197,314 |
|
The components of interest expense on the Company’s Convertible
Senior Notes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
|
September 23, 2022 |
|
September 24, 2021 |
|
September 23, 2022 |
|
September 24, 2021 |
|
Coupon interest |
$ |
938 |
|
|
$ |
938 |
|
|
$ |
2,813 |
|
|
$ |
2,656 |
|
|
Amortization of deferred financing fees and premium |
$ |
224 |
|
|
$ |
224 |
|
|
$ |
672 |
|
|
$ |
689 |
|
|
Total interest |
$ |
1,162 |
|
|
$ |
1,162 |
|
|
$ |
3,485 |
|
|
$ |
3,345 |
|
Note 10 – Stockholders’ Equity
Equity Awards
The following table reflects the activity of RSAs during the
thirty-nine weeks ended September 23, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-based |
|
Performance-based |
|
Market-based |
|
|
Shares |
|
Weighted Average
Grant Date Fair Value |
|
Shares |
|
Weighted Average
Grant Date Fair Value |
|
Shares |
|
Weighted Average
Grant Date Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 24, 2021 |
|
617,996 |
|
|
$ |
28.33 |
|
|
187,437 |
|
|
$ |
32.04 |
|
|
185,129 |
|
|
$ |
31.44 |
|
|
Granted |
|
183,244 |
|
|
33.60 |
|
|
167,261 |
|
|
32.44 |
|
|
167,261 |
|
|
29.12 |
|
|
Vested |
|
(315,722) |
|
|
26.43 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Forfeited |
|
(15,691) |
|
|
29.83 |
|
|
(21,420) |
|
|
32.14 |
|
|
(21,423) |
|
|
30.82 |
|
|
Unvested at September 23, 2022 |
|
469,827 |
|
|
$ |
31.61 |
|
|
333,278 |
|
|
$ |
32.23 |
|
|
330,967 |
|
|
$ |
30.31 |
|
The Company granted 517,766 RSAs to its employees at a
weighted average grant date fair value of $31.41 during
the thirty-nine weeks ended September 23, 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 $3,099 and $2,710 on
its RSAs during the thirteen weeks ended September 23, 2022
and September 24, 2021, respectively and $9,081 and $8,448
during the thirty-nine weeks ended September 23, 2022 and
September 24, 2021, respectively.
At September 23, 2022, the total unrecognized compensation
cost for unvested RSAs was $21,353 and the weighted-average
remaining period was approximately 2.1 years. Of this total,
$11,051 related to RSAs with time-based vesting provisions and
$10,302 related to RSAs with performance- and market-based vesting
provisions. At September 23, 2022, the weighted-average
remaining period for time-based vesting and performance-based
vesting RSAs were approximately 2.2 years and 2.0 years,
respectively.
No share-based compensation expense related to the Company’s RSAs
or stock options has been capitalized. As of September 23,
2022, there were 2,053,840 shares available for grant under the
2019 Omnibus Equity Incentive Plan.
The following table summarizes stock option activity during the
thirty-nine weeks ended September 23, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Weighted
Average
Exercise Price |
|
Aggregate
Intrinsic
Value |
|
Weighted Average
Remaining Contractual
Term (in years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 24, 2021 |
|
115,639 |
|
|
$ |
20.23 |
|
|
$ |
2,051 |
|
|
6.2 |
|
|
|
|
|
|
|
|
|
|
Exercised |
|
(3,407) |
|
|
20.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding September 23, 2022 |
|
112,232 |
|
|
$ |
20.23 |
|
|
$ |
1,127 |
|
|
3.5 |
|
Exercisable at September 23, 2022 |
|
112,232 |
|
|
20.23 |
|
|
$ |
1,127 |
|
|
3.5 |
Note 11 – Related Parties
The Chefs’ Warehouse Mid-Atlantic, LLC, a subsidiary of the
Company, leases a distribution facility that
is 100% owned by entities controlled by Christopher
Pappas, the Company’s chairman, president and chief executive
officer, and John Pappas, the Company’s vice chairman and one of
its directors, and are deemed to be affiliates of these
individuals. Expense related to this facility
totaled $123 during the thirteen weeks
ended September 23, 2022 and September 24,
2021, and $369 during the thirty-nine weeks ended
September 23, 2022 and September 24, 2021.
Note 12 – Income Taxes
The Company’s effective tax rate was 27.0% and 44.7% thirteen weeks
ended September 23, 2022 and September 24,
2021 and 27.0% and 27.3% for the thirty-nine weeks ended
September 23, 2022 and September 24, 2021. The effective
tax rate varies from the 21% statutory rate primarily due to state
taxes. The high effective tax rate for the thirteen weeks ended
September 24, 2021 was driven by various discrete
items.
As a result of the Coronavirus Aid, Relief, and Economic Security
Act (“Cares Act”), the Company had carried back federal net
operating losses resulting in a federal income tax refund
receivable of $21,250, which is classified within
prepaid expenses and other current assets
on the Company’s consolidated balance sheets as of
September 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.
Note 13 – Supplemental Disclosures of Cash Flow
Information
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
September 23, 2022 |
|
September 24, 2021 |
|
Supplemental cash flow disclosures: |
|
|
|
|
Cash paid (received) for income taxes |
$ |
3,483 |
|
|
$ |
(194) |
|
|
Cash paid for interest, net of cash received |
$ |
17,636 |
|
|
$ |
10,690 |
|
|
Cash paid for amounts included in the measurement of lease
liabilities: |
|
|
|
|
Operating cash flows from operating leases |
$ |
20,835 |
|
|
$ |
18,965 |
|
|
Operating cash flows from finance leases |
$ |
325 |
|
|
$ |
422 |
|
|
ROU assets obtained in exchange for lease liabilities: |
|
|
|
|
Operating leases |
$ |
21,779 |
|
|
$ |
13,308 |
|
|
Finance leases |
$ |
791 |
|
|
$ |
536 |
|
|
Other non-cash investing and financing activities: |
|
|
|
|
Warrants issued for acquisitions |
$ |
1,701 |
|
|
$ |
1,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent earn-out liabilities for acquisitions |
$ |
1,200 |
|
|
$ |
3,400 |
|
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”) 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, pursuant to an asset purchase agreement,
we acquired substantially all of the assets of CGC Holdings, Inc.
(“Capital Seaboard”), a specialty seafood and produce distributor
in Maryland. The purchase price was approximately $31.0 million
consisting of $28.0 million paid in cash at closing, common stock
warrants of $1.7 million , and $1.3 million paid upon settlement of
a net working capital true-up.
During the thirty-nine weeks ended September 23, 2022, the Company
completed three other acquisitions for an aggregate purchase price
of approximately $32.5 million, paid in cash, subject to customary
working capital adjustments. The Company will also pay additional
contingent consideration, if earned, in the form of earn-out
amounts which could total $2.0 million in the
aggregate.
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|
September 23, 2022 |
|
September 24, 2021 |
|
September 23, 2022 |
|
September 24, 2021 |
|
Net sales |
$ |
661,856 |
|
|
$ |
484,321 |
|
|
$ |
1,822,063 |
|
|
$ |
1,187,506 |
|
|
Cost of sales |
504,068 |
|
|
374,346 |
|
|
1,390,758 |
|
|
922,710 |
|
|
Gross profit |
157,788 |
|
|
109,975 |
|
|
431,305 |
|
|
264,796 |
|
|
Selling, general and administrative expenses |
130,255 |
|
|
99,431 |
|
|
364,828 |
|
|
270,034 |
|
|
Other operating expenses (income), net |
5,458 |
|
|
105 |
|
|
10,504 |
|
|
(208) |
|
|
Operating income (loss) |
22,075 |
|
|
10,439 |
|
|
55,973 |
|
|
(5,030) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
10,737 |
|
|
4,191 |
|
|
19,567 |
|
|
13,362 |
|
|
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) |
|
|
|
|
|
|
|
|
|
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 Compared to Thirteen
Weeks Ended September 24, 2021
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Net sales |
$ |
661,856 |
|
|
$ |
484,321 |
|
|
$ |
177,535 |
|
|
36.7 |
% |
Organic growth contributed $107.2 million, or 22.2%, to sales
growth and the remaining sales growth of $70.3 million, or 14.5%,
resulted from acquisitions. Organic case count increased
approximately 18.3% in our specialty category. In addition,
specialty unique customers and placements increased 25.9% and
42.1%, respectively, compared to the prior year period. Organic
pounds sold in our center-of-the-plate category increased 11.6%
compared to the prior year. Estimated inflation was 15.0% in our
specialty category and 2.2% in our center-of-the-plate category
compared to the prior year period.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Gross profit |
$ |
157,788 |
|
|
$ |
109,975 |
|
|
$ |
47,813 |
|
|
43.5 |
% |
|
Gross profit margin |
23.8 |
% |
|
22.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit dollars increased primarily as a result of increased
sales and price inflation. Gross profit margin increased
approximately 113 basis points. Gross profit margins decreased 133
basis points in the Company’s specialty category and increased 238
basis points in the Company’s center-of-the-plate category.
Estimated inflation was 15.0% in the Company’s specialty category
and 2.2% in the center-of-the-plate category compared to the prior
year period. Specialty margins decreased primarily due to
significant year-over-year product cost inflation. Margin rates in
the center-of-the-plate category increased as a result of the
reopening of favorable margin markets versus the same period in
2021 and year-over-year deflation in certain protein
categories.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Selling, general and administrative expenses |
$ |
130,255 |
|
|
$ |
99,431 |
|
|
$ |
30,824 |
|
|
31.0 |
% |
|
Percentage of net sales |
19.7 |
% |
|
20.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
The increase in selling, general and administrative expenses was
primarily due to higher costs associated with compensation and
benefits, facilities costs, and fuel costs to support sales growth.
Our ratio of selling, general and administrative expenses to net
sales decreased predominately due to sales growth which contributed
to improved fixed cost leverage in the quarter.
Other Operating Expenses, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Other operating expenses, net |
$ |
5,458 |
|
|
$ |
105 |
|
|
$ |
5,353 |
|
|
5,098.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in net other operating expenses was primarily due to
non-cash charges of $4.7 million for changes in the fair value of
our contingent earn-out liabilities compared to non-cash credits of
$0.1 million in the prior year period.
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Interest expense |
$ |
10,737 |
|
|
$ |
4,191 |
|
|
$ |
6,546 |
|
|
156.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense increased primarily due to incurred arrangement
and third-party transaction fees of $4.5 million and a $0.1 million
loss on debit extinguishment from the refinancing of our term loan.
Additionally, we had higher amounts of debt outstanding as a result
our $300.0 million term loan issuance in August 2022 and increases
in the variable portion of interest rates charged on our
outstanding debt.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Provision for income tax expense (benefit) |
$ |
3,061 |
|
|
$ |
2,792 |
|
|
$ |
269 |
|
|
9.6 |
% |
|
Effective tax rate |
27.0 |
% |
|
44.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate in the prior period was driven by various
discrete items. The Company’s effective tax rate excluding these
discrete items was approximately 29.2%.
Thirty-Nine Weeks Ended September 23, 2022 Compared to
Thirty-Nine Weeks Ended September 24, 2021
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Net sales |
$ |
1,822,063 |
|
|
$ |
1,187,506 |
|
|
$ |
634,557 |
|
|
53.4 |
% |
Organic growth contributed $435.8 million, or 36.7%, to sales
growth and the remaining sales growth of $198.8 million,
or 16.7%, resulted from acquisitions. Organic case count
increased approximately 31.3% in our specialty category. In
addition, specialty unique customers and placements increased 30.3%
and 46.4%, respectively, compared to the prior year period. Organic
pounds sold in our center-of-the-plate category increased 16.4%
compared to the prior year. Estimated inflation was 15.5% in our
specialty category and 11.6% in our center-of-the-plate category
compared to the prior year period.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Gross profit |
431,305 |
|
|
264,796 |
|
|
166,509 |
|
|
62.9 |
% |
|
Gross profit margin |
23.7 |
% |
|
22.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit dollars increased primarily as a result of sales
growth and price inflation. Gross profit margin increased
approximately 137 basis points. Gross profit margins decreased 31
basis points in the Company’s specialty category and increased 202
basis points in the Company’s center-of-the-plate category.
Estimated inflation was 15.5% in our specialty category and 11.6%
in our center-of-the-plate category compared to the prior year
period. Higher inflation compressed margin rates in the specialty
categories, while margin rates in the center-of-the-plate category
were buoyed primarily by the reopening of favorable margin markets
in the 2022 period.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Selling, general and administrative expenses |
364,828 |
|
|
270,034 |
|
|
94,794 |
|
|
35.1 |
% |
|
Percentage of net sales |
20.0 |
% |
|
22.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
The increase in selling, general and administrative expenses was
primarily due to higher costs associated with compensation and
benefits, facilities costs, and fuel costs to support sales growth.
Our ratio of selling, general and administrative expenses to net
sales decreased predominately due to sales growth which
contributing to improved fixed cost leverage in the
quarter.
Other Operating Expenses (Income ), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Other operating expenses (income), net |
10,504 |
|
|
(208) |
|
|
10,712 |
|
|
(5,150.0) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in net other operating expense relates primarily to
non-cash charges of $8.4 million for changes in the fair value of
our contingent earn-out liabilities in the fiscal 2022 period
compared to non-cash credits of $1.4 million in the prior year
period. The prior year period also includes a $0.6 million
impairment of Cambridge trademarks as a result of a shift in brand
strategy to leverage our Allen Brothers brand in our New England
region during the second quarter of fiscal 2021.
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Interest expense |
19,567 |
|
|
13,362 |
|
|
6,205 |
|
|
46.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense increased primarily due to incurred arrangement
and third-party transaction fees of $4.5 million and a $0.1 million
loss on debit extinguishment from the refinancing of our term loan.
Additionally, we had higher amounts of debt outstanding as a result
our $300.0 million term loan issuance in August 2022 and increases
in the variable portion of interest rates charged on our
outstanding debt.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
Provision for income tax expense (benefit) |
9,829 |
|
|
(5,025) |
|
|
14,854 |
|
|
(295.6) |
% |
|
Effective tax rate |
27.0 |
% |
|
27.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
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
period.
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 |
|
|
|
Senior secured term loan |
$ |
300,000 |
|
|
$ |
168,675 |
|
|
|
|
Total convertible debt |
204,000 |
|
|
204,000 |
|
|
|
|
Borrowings outstanding on asset-based loan facility |
— |
|
|
20,000 |
|
|
|
|
Finance leases and other financing obligations |
9,732 |
|
|
11,602 |
|
|
|
|
Total |
$ |
513,732 |
|
|
$ |
404,277 |
|
|
|
As of September 23, 2022, we have various floating- and
fixed-rate debt instruments with varying maturities for an
aggregate principal amount of $504.0 million.
On August 23, 2022, we entered into an eighth amendment to its
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 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 23, 2022 |
|
December 24, 2021 |
|
|
|
Cash and cash equivalents |
$ |
145,425 |
|
|
$ |
115,155 |
|
|
|
|
Working capital,
excluding cash and cash equivalents
|
209,181 |
|
|
157,787 |
|
|
|
|
Availability under asset-based loan facility |
176,820 |
|
|
109,459 |
|
|
|
|
Total |
$ |
531,426 |
|
|
$ |
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
|
September 23, 2022 |
|
September 24, 2021 |
|
|
|
Net income (loss) |
$ |
26,577 |
|
|
$ |
(13,367) |
|
|
|
|
Non-cash charges |
$ |
58,763 |
|
|
$ |
30,729 |
|
|
|
|
Changes in working capital |
$ |
(53,593) |
|
|
$ |
(43,692) |
|
|
|
|
Net cash provided by (used in) operating activities |
$ |
31,747 |
|
|
$ |
(26,330) |
|
|
|
|
Net cash used in investing activities |
$ |
(93,673) |
|
|
$ |
(25,152) |
|
|
|
|
Net cash provided by (used in) financing activities |
$ |
92,255 |
|
|
$ |
(7,493) |
|
|
|
Net cash provided by operations was $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. The
increase in cash provided by operating activities was primarily due
to the increased net income, net of non-cash charges, in the
current year of $85.3 million compared to $17.4 million in the
prior year period. This improvement in cash-based profitability is
primarily due to a 53.4% increase in sales compared to the prior
year period. The sales growth also resulted in higher working
capital (increased accounts receivable and 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 million for the
thirty-nine weeks ended September 23, 2022, driven by capital
expenditures of $31.7 million which includes the purchase of our
distribution facility in Columbus, Ohio and $62.0 million in cash
paid for acquisitions.
Net cash provided financing activities was $92.3 million for the
thirty-nine weeks ended September 23, 2022 driven by the
$300.0 million issuance of senior secured term loans maturing in
2029 (“2029 Term Loans”). This was partially offset by $171.4
million of principal payments predominately driven by the pay off
our 2025 tranche of senior secured term loans and $11.3 million of
deferred financing fees 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.
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 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.
ITEM 3.
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
As of September 23, 2022, we had an aggregate $300.0 million
of indebtedness outstanding under the Term Loan 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
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.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting during the quarter ended September 23,
2022 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
We are involved in legal proceedings, claims and litigation arising
out of the ordinary conduct of our business. Although we cannot
assure the outcome, management presently believes that the result
of such legal proceedings, either individually or in the aggregate,
will not have a material adverse effect on our consolidated
financial statements, and no material amounts have been accrued in
our consolidated financial statements with respect to these
matters.
ITEM 1A. RISK
FACTORS
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
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Total Number
of Shares
Repurchased(1)
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Average
Price
Paid Per Share |
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Total
Number of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs |
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Maximum
Number (or
Approximate
Dollar Value) of
Shares That May
Yet Be Purchased
Under the Plans
or Programs |
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June 25, 2022 to July 22, 2022 |
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— |
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$ |
— |
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— |
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— |
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July 23, 2022 to August 19, 2022 |
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741 |
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35.01 |
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— |
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— |
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August 20, 2022 to September 23, 2022 |
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— |
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— |
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— |
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— |
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Total |
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741 |
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$ |
35.01 |
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— |
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— |
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(1)During
the thirty-nine weeks ended September 23, 2022, we withheld
741 shares of our common stock to satisfy tax withholding
requirements related to restricted shares of our common stock
awarded to our officers and key employees resulting from either
elections under 83(b) of the Internal Revenue Code of 1986, as
amended, or upon vesting of such awards.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. MINE SAFETY
DISCLOSURES
None.
ITEM 5. OTHER
INFORMATION
None.
ITEM 7.
EXHIBITS
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Exhibit No. |
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Description |
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Amendment No. 4, dated as of August 23, 2022, to the ABL
Facility. |
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Redlined Amended ABL Credit Agreement, dated as of August 23,
2022. |
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Amendment No. 8, dated as of August 23, 2022, to the Term Loan
Credit Agreement. |
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Redlined Amended Term Loan Credit Agreement, dated as of August 23,
2022. |
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Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
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Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
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Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
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Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
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101.INS |
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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 |
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101.SCH |
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XBRL Taxonomy Extension Schema Document |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File - the cover page XBRL tags are
embedded within the Inline XBRL document. |
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.
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THE CHEFS’ WAREHOUSE, INC. |
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(Registrant) |
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Date: October 26, 2022 |
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/s/ James Leddy |
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James Leddy |
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Chief Financial Officer |
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(Principal Financial Officer) |
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Date: October 26, 2022 |
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/s/ Timothy McCauley |
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Timothy McCauley |
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Chief Accounting Officer |
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(Principal Accounting Officer) |
Chefs Warehouse (NASDAQ:CHEF)
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