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What changed in Chefs' Warehouse, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Chefs' Warehouse, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+264 added−291 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Chefs' Warehouse, Inc.'s 2023 10-K

264 paragraphs added · 291 removed · 170 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

41 edited+12 added−7 removed103 unchanged
Biggest changeThe failure to comply with applicable regulatory requirements could result in civil or criminal fines or penalties, product recalls, closure of facilities or operations, the loss or revocation of existing licenses, permits or approvals or the failure to obtain additional licenses, permits or approvals in new jurisdictions where we intend to do business. 11 We are also subject to state and local regulation through such measures as the licensing of our facilities, enforcement by state and local health agencies of state and local standards for our products and facilities and regulation of our trade practices in connection with the sale of products.
Biggest changeThe failure to comply with applicable regulatory requirements could result in civil or criminal fines or penalties, product recalls, closure of facilities or operations, the loss or revocation of existing licenses, permits or approvals or the failure to obtain additional licenses, permits or approvals in new jurisdictions where we intend to do business.
Products are delivered to our distribution centers primarily by contract carriers, the suppliers themselves and our fleet of trucks. Out trucks are either owned or leased from national leasing companies and regional firms that offer competitive services. Customer orders are assembled in our distribution centers and then sorted, placed on pallets and loaded onto trucks and trailers in delivery sequence.
Products are delivered to our distribution centers primarily by contract carriers, the suppliers themselves and our fleet of trucks. Our trucks are either owned or leased from national leasing companies and regional firms that offer competitive services. Customer orders are assembled in our distribution centers and then sorted, placed on pallets and loaded onto trucks and trailers in delivery sequence.
Our Growth Strategies We believe substantial organic growth opportunities exist in our current markets through increased penetration of our existing customers and the addition of new customers, and we have identified new markets that we believe also present opportunities for future expansion. Key elements of our growth strategy include the following: 6 Increase Penetration with Existing Customers.
Our Growth Strategies We believe substantial organic growth opportunities exist in our current markets through increased penetration of our existing customers and the addition of new customers, and we have identified new markets that we believe also present opportunities for future expansion. Key elements of our growth strategy include the following: Increase Penetration with Existing Customers.
The USDA imposes standards for product quality and sanitation, including the inspection and labeling of meat and poultry products and the grading and commercial acceptance of produce shipments from vendors. The products we distribute in Canada are subject to regulation and inspection by Health Canada and the Canadian Food Inspection Agency.
The USDA imposes standards for product quality and sanitation, including the inspection and labeling of meat and poultry products and the grading and 11 commercial acceptance of produce shipments from vendors. The products we distribute in Canada are subject to regulation and inspection by Health Canada and the Canadian Food Inspection Agency.
We intend to sell more products to our existing customers by increasing the breadth and depth of our product selection and increasing the efficiency of our sales professionals, while at the same time continuing to provide excellent customer service.
We intend to sell more products to our existing customers by increasing the breadth and depth of our product selection and increasing the efficiency of our sales professionals, while at the same time 6 continuing to provide excellent customer service.
Our breadth and depth of product offerings coupled with our highly regarded customer service has allowed us to develop and retain a loyal customer base that is comprised of chefs who own or work at more than 40,000 of the nation’s leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores.
Our breadth and depth of product offerings coupled with our highly regarded customer service has allowed us to develop and retain a loyal customer base that is comprised of chefs who own or work at more than 44,000 of the nation’s leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores.
This scale enables us to maintain a portfolio of more than 55,000 SKUs, and through the operation of our sophisticated information technology, inventory management and logistics systems, we believe we provide our customers with some of the highest levels of customer service and responsiveness in our industry. Experienced and Proven Management Team.
This scale enables us to maintain a portfolio of more than 70,000 SKUs, and through the operation of our sophisticated information technology, inventory management and logistics systems, we believe we provide our customers with some of the highest levels of customer service and responsiveness in our industry. Experienced and Proven Management Team.
Our ability to successfully distribute a significant portion of the total production of smaller, regional and artisanal specialty food producers allows us the opportunity to be these producers’ primary route-to-market in our markets without, in most cases, requiring us to make contractual commitments regarding guaranteed volume.
Our ability to successfully distribute a significant portion of the total production of smaller, regional and artisanal specialty food producers allows us the opportunity to be these producers’ primary route-to-market in our markets without requiring us to make contractual commitments regarding guaranteed volume.
Timothy McCauley Chief Accounting Officer 58 Timothy McCauley has served as our Chief Accounting Officer, since his appointment on February 16, 2018 and previously served as our Controller since joining the Company in May 2015. Mr. McCauley has over 30 years of experience in accounting and finance roles across a variety of industries. Mr.
Timothy McCauley Chief Accounting Officer 59 Timothy McCauley has served as our Chief Accounting Officer, since his appointment on February 16, 2018 and previously served as our Controller since joining the Company in May 2015. Mr. McCauley has over 30 years of experience in accounting and finance roles across a variety of industries. Mr.
We maintain collaborative relationships with thousands of chefs while also acting as a critical marketing arm and route-to-market for many of our suppliers by leveraging an experienced and sophisticated sales force of approximately 720 sales and customer service professionals.
We maintain collaborative relationships with thousands of chefs while also acting as a critical marketing arm and route-to-market for many of our suppliers by leveraging an experienced and sophisticated sales force of approximately 960 sales and customer service professionals.
We carry more than 55,000 SKUs and we are fully committed to utilizing our sourcing relationships and industry insights to procure products that we do not regularly carry but that our customers specifically request as they seek to create unique and innovative menu offerings.
We carry more than 70,000 SKUs and we are fully committed to utilizing our sourcing relationships and industry insights to procure products that we do not regularly carry but that our customers specifically request as they seek to create unique and innovative menu offerings.
Our Operations and Distribution Centers Operating out of 44 distribution centers of varying size and providing service six days a week in many areas, we utilize our fleet of delivery trucks to fill customer orders, usually within 12-24 hours of order placement.
Our Operations and Distribution Centers Operating out of 52 distribution centers of varying size and providing service six days a week in many areas, we utilize our fleet of delivery trucks to fill customer orders, usually within 12-24 hours of order placement.
Information about our Executive Officers Name & Position Age Business Experience Christopher Pappas President, Chief Executive Officer and Chairman of the Board of Directors 63 Christopher Pappas is our founder and has served as our Chief Executive Officer since 1985 and has been our chairman since March 1, 2011.
Information about our Executive Officers Name & Position Age Business Experience Christopher Pappas President, Chief Executive Officer and Chairman of the Board of Directors 64 Christopher Pappas is our founder and has served as our Chief Executive Officer since 1985 and has been our chairman since March 1, 2011.
Our historical sales growth and our ability to manage through the material adverse impacts of the Pandemic on our business are the result of an increase in the breadth and depth of our product portfolio, our commitment to customer service, the efforts of our experienced and sophisticated sales professionals, the increased use of technology in the operations and management of our business and our ongoing consolidation of the fragmented specialty foodservice distribution industry.
Our historical sales growth and our ability to manage through the material adverse impacts of the Covid-19 Pandemic (“Pandemic”) on our business are the result of an increase in the breadth and depth of our product portfolio, our commitment to customer service, the efforts of our experienced and sophisticated sales professionals, the increased use of technology in the operations and management of our business and our ongoing consolidation of the fragmented specialty foodservice distribution industry.
Our Sophisticated and Experienced Sales Professionals We employ a sophisticated and experienced sales force of approximately 720 sales and customer service professionals focused on meeting our customers’ goals and objectives, while concurrently educating them regarding our latest products and broader culinary trends.
Our Sophisticated and Experienced Sales Professionals We employ a sophisticated and experienced sales force of approximately 960 sales and customer service professionals focused on meeting our customers’ goals and objectives, while concurrently educating them regarding our latest products and broader culinary trends.
Excluding our direct-to-consumer businesses, we currently serve more than 40,000 core customer locations in our twenty-three primary geographic markets across the United States, the Middle East, and Canada.
Excluding our direct-to-consumer businesses, we currently serve more than 44,000 core customer locations in our twenty-three primary geographic markets across the United States, the Middle East, and Canada.
We carry more than 55,000 SKUs and we constantly evaluate our portfolio and introduce new products to address regional trends and preferences and ensure that we are on the leading edge of broader culinary trends.
We carry more than 70,000 SKUs and we constantly evaluate our portfolio and introduce new products to address regional trends and preferences and ensure that we are on the leading edge of broader culinary trends.
We employ a sophisticated and experienced sales force of approximately 720 sales and customer service professionals, a significant number of whom have formal culinary training, degrees in the culinary arts or prior experience working in the culinary industry.
We employ a sophisticated and experienced sales force of approximately 960 sales and customer service professionals, a significant number of whom have formal culinary training, degrees in the culinary arts or prior experience working in the culinary industry.
Since our initial public offering (“IPO”), we have completed thirty-one acquisitions, which have increased our penetration in existing markets, expanded our footprint into new markets and enhanced our product capabilities.
Since our initial public offering (“IPO”), we have completed thirty-six acquisitions, which have increased our penetration in existing markets, expanded our footprint into new markets and enhanced our product capabilities.
We operate 44 distribution centers and provide service six days a week in many of our service areas, utilizing our fleet of delivery trucks to fill our customers’ orders.
We operate 52 distribution centers and provide service six days a week in many of our service areas, utilizing our fleet of delivery trucks to fill our customers’ orders.
With 44 distribution centers located throughout the United States, Middle East and Canada, we are able to leverage our geographic footprint and reduce our inbound freight costs.
With 52 distribution centers located throughout the United States, Middle East and Canada, we are able to leverage our geographic footprint and reduce our inbound freight costs.
We serve more than 40,000 core customer locations, excluding our direct-to-consumer business, in the United States, Middle East, and Canada.
We serve more than 44,000 Core Customer locations, excluding our direct-to-consumer business, in the United States, Middle East, and Canada.
Pappas's qualifications to serve on our board of directors include his extensive knowledge of our company and the specialty food products distribution industry and his years of leadership at the Company. James Leddy Chief Financial Officer 59 James“Jim” Leddy is our Chief Financial Officer and assistant secretary, positions he has held since his appointment as of November 11, 2017.
Pappas's qualifications to serve on our board of directors include his extensive knowledge of our company and the specialty food products distribution industry and his years of leadership at the Company. James Leddy Chief Financial Officer 60 James “Jim” Leddy is our Chief Financial Officer and assistant secretary, positions he has held since his appointment as of November 11, 2017.
Our Markets and the Customers that We Serve Excluding our direct-to-consumer business, we distribute our specialty food products to over 40,000 distinct core customer locations from distribution centers located in our primary markets, which include New York, Washington, D.C., Los Angeles, San Francisco, New England, Las Vegas, Miami, Portland, Columbus, Cincinnati, Chicago, Vancouver, Edmonton, Toronto, Seattle, Sacramento, Philadelphia, Texas, Denver, Dubai, Abu Dhabi, Oman and Qatar.
Our Markets and the Customers that We Serve We distribute our specialty food products to over 44,000 distinct Core Customer locations from distribution centers located in our primary markets, which include New York, Washington, D.C., Los Angeles, San Francisco, New England, Las Vegas, Miami, Portland, Columbus, Cincinnati, Chicago, Vancouver, Edmonton, Toronto, Seattle, Sacramento, Philadelphia, Texas, Denver, Dubai, Abu Dhabi, Oman and Qatar.
Our target customers include menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores. We have no meaningful customer concentration as our top ten customers who accounted for less than 6.5% of total net sales for our 2022 fiscal year.
Our target customers include menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores. We have no meaningful customer concentration as our top ten customers accounted for less than 6.1% of total net sales for our 2023 fiscal year.
Our product portfolio includes over 55,000 stock-keeping units (“SKUs”) from more than 2,500 different suppliers and is comprised primarily of imported and domestic specialty food products, such as artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate and pastry products.
Our product portfolio includes over 70,000 stock-keeping units (“SKUs”) from more than 3,000 different suppliers and is comprised primarily of imported and domestic specialty food products, such as artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate and pastry products.
Leddy holds an M.B.A. in Finance and Management of Technology from the University of Connecticut and a B.A. in Economics from Fordham University. 13 Alexandros Aldous General Counsel, Corporate Secretary & Chief Government Relations Officer 42 Alexandros Aldous is our General Counsel, Corporate Secretary, Chief Government Relations Officer & Chief Administrative Officer, positions he has held since joining us in March 2011, our IPO on July 27, 2011, March 8, 2017, and September 16, 2021, respectively.
Leddy holds an M.B.A. in Finance and Management of Technology from the University of Connecticut and a B.A. in Economics from Fordham University. 13 Name & Position Age Business Experience Alexandros Aldous General Counsel, Corporate Secretary & Chief Government Relations Officer 43 Alexandros Aldous is our General Counsel, Corporate Secretary, Chief Government Relations Officer & Chief Administrative Officer, positions he has held since joining us in March 2011, our IPO on July 27, 2011, March 8, 2017, and September 16, 2021, respectively.
We currently distribute products from more than 2,500 different suppliers. We carry multiple products and utilize multiple suppliers in all of our product categories, thereby eliminating our dependence upon any single supplier.
We currently distribute products from more than 3,000 different suppliers. We carry multiple products and utilize multiple suppliers in all of our product categories, thereby eliminating our dependence upon any single supplier.
The up-front cash purchase prices for these sixteen acquisitions resulted in aggregate up-front cash consideration of more than $294.5 million, which we funded with cash generated from our operations, borrowings under our then existing credit facilities and the proceeds of our common stock offerings.
The up-front cash purchase prices for these nineteen acquisitions resulted in aggregate up-front cash consideration of more than $387.2 million, which we funded with cash generated from our operations, borrowings under our then existing credit facilities and proceeds of our common stock offerings.
Since December 28, 2018, we have completed sixteen acquisitions which have increased our penetration in existing markets, expanded our footprint into new markets and/or enhanced our product capabilities.
Since December 27, 2019, we have completed nineteen acquisitions which have increased our penetration in existing markets, expanded our footprint into new markets and/or enhanced our product capabilities.
John Pappas Vice Chairman and Director 59 John Pappas is a founder of our company and currently serves as our Vice Chairman, a position he has held since March 1, 2011. From our founding in 1985 to March 1, 2011, he served as our Chief Operating Officer.
John Pappas Vice Chairman and Director 60 John Pappas is a founder of our company and currently serves as our Vice Chairman, a position he has held since March 1, 2011, and Chief Operating Officer, a position he held from our founding in 1985 to March 1, 2011, and again on February 24, 2022 to the present.
Our employees can readily choose to take courses in categories such as safety, leadership, management, sales and business acumen, and courses may also be assigned to our employees based on job function.
As an investment in the professional growth of our employees, professional learning and development courses are provided for all employees. Our employees can readily choose to take courses in categories such as safety, leadership, management, sales and business acumen, and courses may also be assigned to our employees based on job function.
Critical Route-to-Market for Specialty Food Suppliers. We currently distribute products from more than 2,500 different suppliers. Our suppliers are located throughout North America, Europe, Asia, Australia, and South America and include numerous small, family-owned entities and artisanal food producers. We are the largest customer for many of our suppliers.
Our suppliers are located throughout North America, Europe, Asia, Australia, and South America and include numerous small, family-owned entities and artisanal food producers. We are the largest customer for many of our suppliers.
Human Capital Management As of December 30, 2022, we had 4,124 full-time employees, 181 of whom (approximately 4%) are currently represented by unions and operate under collective bargaining agreements, which expire at various times between fiscal 2024 and 2025.
Human Capital Management As of December 29, 2023, we had 4,873 full-time employees, 207 of whom (approximately 4%) are currently represented by unions and operate under collective bargaining agreements, which expire at various times between fiscal 2024 and 2025. We offer attractive compensation and benefit packages, and we believe our relationship with our employees is satisfactory.
We offer attractive compensation and benefit packages, and we believe our relationship with our employees is satisfactory. 10 Environmental, Social and Governance We are committed to upholding ethical, socially responsible and environmentally conscious business practices, consistent with our corporate values, to promote long-term and sustainable change.
Environmental, Social and Governance We are committed to upholding ethical, socially responsible and environmentally conscious business practices, consistent with our corporate values, to promote long-term and sustainable change. In 2022, our board of directors formed an Environmental, Social and Governance Committee (the “ESG Committee”) to oversee our environmental, social and governance activities and 10 practices.
McCauley holds a Bachelor of Science degree in Business - Accounting from the University of Connecticut and is a registered certified public accountant in the state of Connecticut. 14
McCauley holds a Bachelor of Science degree in Business - Accounting from the University of Connecticut and is a registered certified public accountant in the state of Connecticut. Christina Polychroni Chief Human Resources Officer 44 Christina Polychroni is our Chief Human Resources Officer since December 31, 2022. Prior to this appointment, Ms.
We believe that the breadth and depth of our product portfolio facilitates our customers’ ability to distinguish and enhance their menu offerings and differentiates us from larger traditional broadline foodservice distributors. For example, we provide a selection of more than 200 different varieties of olive oil, while large broadline foodservice distributors only carry, on average, 5-10 types of olive oil.
We believe that the breadth and depth of our product portfolio facilitates our customers’ ability to distinguish and enhance their menu offerings and differentiates us from larger traditional broadline foodservice distributors. Critical Route-to-Market for Specialty Food Suppliers. We currently distribute products from more than 3,000 different suppliers.
Additionally, in response to the Pandemic, we expanded our direct-to-consumer product offerings by launching our “Shop Like a Chef” online home delivery platform in several of the markets we serve. 7 Set forth below is a breakdown of the primary geographic markets we serve and the year we entered each market: Market Name Geographies Served Year Entered New York New York to Atlantic City 1985 Washington, D.C.
Our Allen Brothers subsidiary markets certain of our center-of-the-plate proteins directly to consumers through a mail and e-commerce platform. 7 Set forth below is a breakdown of the primary geographic markets we serve and the year we entered each market: Market Name Geographies Served Year Entered New York New York to Atlantic City 1985 Washington, D.C.
Additionally, we market certain of our center-of-the-plate products directly to consumers through our Allen Brothers, Inc. (“Allen Brothers”) mail and e-commerce platform. We also market a broader variety of our products directly to consumers via our “Shop Like a Chef” online home delivery platform which operates in several of the markets we serve.
Additionally, we market certain of our center-of-the-plate products directly to consumers through our Allen Brothers, Inc. (“Allen Brothers”) mail and e-commerce platform. Since our formation in 1985, we have expanded our distribution network, product selection and customer base both organically and through acquisitions.
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.
Despite a significant portion of these sales occurring in the fourth quarter, there are operating expenses, principally advertising and promotional expenses, throughout the year. 12 Inflation Our profitability is dependent, among other things, on 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.
Since our formation in 1985, we have expanded our distribution network, product selection and customer base both organically and through acquisitions. Our net revenues have increased from approximately $1.3 billion for the fiscal year ended December 28, 2018 to $2.6 billion for the fiscal year ended December 30, 2022.
Our net revenues have increased from approximately $1.6 billion for the fiscal year ended December 27, 2019 to $3.4 billion for the fiscal year ended December 29, 2023.
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Our Allen Brothers subsidiary markets certain of our center-of-the-plate proteins directly to consumers through a mail and e-commerce platform.
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Intellectual Property We have registered and/or applied to register a variety of trademarks and serve marks used throughout our business, as well as domain names, and rely on a combination of copyrights, patents, trademarks, trade names, licenses, franchises and concessions. We are not aware of any facts that could materially impact the continuing use of any of our intellectual property.
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Intellectual Property Except for the Spoleto, Bel Aria, Grand Reserve, Provvista, Argonaut, Praml, Black Falls, Michael’s, Chocoa, Crescendo, Matisse, Qzina, Coccinelle, Allen Brothers, The Great Steakhouse Steaks, Del Monte, Fells Point, Bassian Farms, Sid Wainer & Son, Cambridge Packing, Foley Fish, Silver State Meats, Sid Wainer & Son, Alexis Foods, Chef Middle East, and The Chefs’ Warehouse trademarks, we do not own or have the right to use any patent, trademark, trade name, license, franchise or concession, the loss of which would have a material adverse effect on our business, financial condition or results of operations.
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Workforce Health and Safety The safety and health of our employees is a top priority for us. Our safety culture is maintained and strengthened by periodic trainings for employees and senior management, as well as labor, health, anti-discrimination and anti-harassment policies, and we are committed to maintaining a safe and healthy work environment in all aspects of our business.
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In 2022, our board of directors formed an Environmental, Social and Governance Committee (the “ESG Committee”) to oversee our environmental, social and governance activities and practices.
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In this effort, we provide and require various trainings to ensure a wide understanding of standards, expectations, and best practices. Additionally, all of our fleet drivers are taught the Smith System for road safety.
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Workforce Health and Safety The safety and health of our employees is a top priority for us. In response to the Pandemic, we implemented new procedures and protocols recommended by the Centers for Disease Control, federal and state governments, and other major health authorities.
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This system provides our drivers with tools and knowledge to make smart decisions behind the wheel, reducing the risk of accidents and injuries while ensuring timely deliveries to our customers. Managers who oversee drivers also complete safety leadership training through the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability program.
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This includes, but is not limited to, instructing our employees to practice social distancing on our premises and those of our customers, frequent sanitation of our work environments, truck fleet and equipment, supplying personal protective equipment to our workforce and allowing our administrative employees to work from home.
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By implementing such trainings at every level of our operations, we are able to provide our customers with the exceptional service they expect without compromising the safety and comfort of our employees. Professional Development Providing career development opportunities for our employees is a top priority.
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Professional Development Providing career development opportunities for our employees is a top priority. As an investment in the professional growth of our employees, professional learning and development courses are provided for all employees.
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Diversity, Equity and Inclusion We believe that a diverse workforce creates a healthier, stronger and more sustainable company. As a foundation of diversity and inclusion, we focus on increasing underrepresented populations across our business. In 2023, more than two-thirds of our employees, and more than 20% of our management, were diverse.
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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 temporary 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. 12 Inflation Our profitability is dependent, among other things, on 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.
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We have diversity equity & inclusion monthly programming that celebrates the wide variety of diverse employees and topics that impact our employees.
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Each year, we conduct mandatory training on diversity equity & inclusion topics and provide managers with practical tools to operate in today’s global environment and develop their skill sets, awareness and business acumen in this on-going matter of being diverse and inclusive.
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We are also subject to state and local regulation through such measures as the licensing of our facilities, enforcement by state and local health agencies of state and local standards for our products and facilities and regulation of our trade practices in connection with the sale of products.
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Polychroni served as the company’s Chief Talent Officer from November 1, 2021 through December 30, 2022. Ms. Polychroni is a management executive with a track record in multinational companies and a strong knowledge of the luxury and food industries in wholesale, retail and digital channels. Ms.
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Polychroni’s prior work experience includes her tenure as Chief Marketing and E-Commerce Officer at L’Occitane USA, Chief Marketing Officer at Jack Rogers USA, as well as senior marketing roles in KORRES USA and the Unilever Ice Cream and Nutrition divisions. Ms.
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Polychroni holds a B.A. in Marketing and MBA from the Athens University of Economics and Business, a Human Resources Management Certificate from Cornell University, and a PhD in Management from the School of Business at the Stevens Institute of Technology.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny damage or failure of our computer systems or network infrastructure that causes an interruption in our operations, due to theft, destruction, loss, misappropriation, or release of confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability, remediation costs, and competitive disadvantage, which in turn could adversely affect our business and results of operations.
Biggest changeAny damage or failure of our computer systems or network infrastructure that causes an interruption in our operations, due to theft, destruction, loss, corruption, misappropriation, or unauthorized release of sensitive and/or confidential information or intellectual property (including personal information in violation of one or more privacy laws), or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, disruption to our systems, loss of revenue, negative publicity, reputational and brand damage, violation of privacy laws, loss of customers, potential liability, (including litigation or other legal actions against us or the imposition by governmental authorities of penalties, fines, fees or liabilities, which, in turn, could cause us to incur significantly increased cybersecurity protection and remediation costs), and competitive disadvantage, which in turn could adversely affect our business and results of operations.
If these group purchasing organizations are able to add a significant number of our customers as members, we may be forced to lower the prices we charge these customers in order to retain the business, which would negatively affect our business, financial condition or results of operations.
If group purchasing organizations are able to add a significant number of our customers as members, we may be forced to lower the prices we charge these customers in order to retain the business, which would negatively affect our business, financial condition or results of operations.
For example our indebtedness: • requires us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity and other general corporate purposes; • increases our vulnerability to adverse general economic or industry conditions; • limits our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate; • makes us more vulnerable to increases in interest rates, as borrowings under our Term Loan and ABL (together the “Credit Facilities”) are at variable rates; • in the case of our convertible debt, could result in the issuance of additional shares of our common stock that would result in the dilution of our then-existing stockholders; • limits our ability to obtain additional financing in the future for working capital or other purposes, including to finance acquisitions; and • places us at a competitive disadvantage compared to our competitors with less indebtedness.
For example, our indebtedness: • requires us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity and other general corporate purposes; • increases our vulnerability to adverse general economic or industry conditions; • limits our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate; • makes us more vulnerable to increases in interest rates, as borrowings under our Term Loan and ABL (together the “Credit Facilities”) are at variable rates; • in the case of our convertible debt, could result in the issuance of additional shares of our common stock that would result in the dilution of our then-existing stockholders; 26 • limits our ability to obtain additional financing in the future for working capital or other purposes, including to finance acquisitions; and • places us at a competitive disadvantage compared to our competitors with less indebtedness.
Outbreaks of diseases, or the perception by the public that an outbreak has occurred, or other concerns regarding diseases, can lead to inadequate supply, cancellation of orders by customers and adverse publicity, any of which can 20 have a significant negative impact on consumer demand and, as a result, on our business, financial condition or results of operations.
Outbreaks of diseases, or the perception by the public that an outbreak has occurred, or other concerns regarding diseases, can lead to inadequate supply, cancellation of orders by customers and adverse publicity, any of which can have a significant negative impact on consumer demand and, as a result, on our business, financial condition or results of operations.
We cannot assure investors that we will be able to effectively respond to changes in consumer health perceptions or resulting new laws or regulations or to adapt our product offerings to trends in eating habits. Our business operations and future development could be significantly disrupted if we lose key members of our management team.
We cannot assure investors that we will be able to effectively respond to changes in consumer health perceptions or resulting new laws or regulations or to adapt our product offerings to trends in eating habits. 19 Our business operations and future development could be significantly disrupted if we lose key members of our management team.
Although our purchasing volume can provide leverage when dealing with 19 suppliers, particularly smaller suppliers for whom we may be their largest customer, suppliers may not provide or may be unable to provide the specialty food products, produce or center-of-the-plate products we need in the quantities and at the times and prices we request.
Although our purchasing volume can provide leverage when dealing with suppliers, particularly smaller suppliers for whom we may be their largest customer, suppliers may not provide or may be unable to provide the specialty food products, produce or center-of-the-plate products we need in the quantities and at the times and prices we request.
Significant decreases in the volume and/or number of our customers’ purchase orders or our inability to retain or grow our current customer base may have a material adverse effect on our business, financial condition or results of operations.
Significant decreases in the 18 volume and/or number of our customers’ purchase orders or our inability to retain or grow our current customer base may have a material adverse effect on our business, financial condition or results of operations.
In connection with our acquisition of businesses in the future, if any, we may decide to consolidate the operations of any acquired business with our existing operations or make other changes with respect to the acquired business, which could result in special charges or other expenses.
In connection with our acquisition of businesses in the future, if any, we may decide to consolidate the operations of any acquired business with our existing operations or make other changes with respect to the acquired business, which could result 17 in special charges or other expenses.
If we suffer a substantial loss that is not covered by our self- insurance reserves, the loss and attendant expenses could harm our business and operating results. We are self-insured for workers’ compensation and automobile liability to deductibles or self-insured retentions of $500 thousand per occurrence. The amounts in excess of our deductibles are fully insured by third party insurers.
If we suffer a substantial loss that is not covered by our self- insurance reserves, the loss and attendant expenses could harm our business and operating results. We are self-insured for workers’ compensation and automobile liability to deductibles or self-insured retentions of $500,000 per occurrence. The amounts in excess of our deductibles are fully insured by third party insurers.
We maintain a self-insured group medical program. The program contains individual stop loss thresholds of $300 thousand per incident and aggregate stop loss thresholds based upon the average number of employees enrolled in the program throughout the year. The amount in excess of the self-insured levels is fully insured by third party insurers.
We maintain a self-insured group medical program. The program contains individual stop loss thresholds of $300,000 per incident and aggregate stop loss thresholds based upon the average number of employees enrolled in the program throughout the year. The amount in excess of the self-insured levels is fully insured by third party insurers.
We are subject to the risk of employment-related litigation, which we believe increased as a result of our large workforce in California and New York, at both the state and federal levels, including claims styled as class action lawsuits, which are more costly to defend.
For example, we are subject to the risk of employment-related litigation, which we believe increased as a result of our large workforce in California and New York, at both the state and federal levels, including claims styled as class action lawsuits, which are more costly to defend.
Due to their prominence as, among other characteristics, densely-populated major metropolitan cities and as international hubs for intermodal transportation, a majority of our markets are known as targets for terrorist activity and other catastrophic events and could be subject to transportation disruption. Our markets outside the United States may also be impacted by political protests or instability.
Due to their prominence as, among other characteristics, densely-populated major metropolitan cities and as international hubs for intermodal transportation, a majority of our markets are potential targets for terrorist activity and are susceptible to other catastrophic events and could be subject to transportation disruption. 21 Our markets outside the United States may also be impacted by political protests or instability.
This insurance may not continue to be available at a reasonable cost or at all, and it may not be adequate to cover product liability claims against us or 24 against any of the companies we have acquired.
We have, and the companies we have acquired have had, liability insurance with respect to product liability claims. This insurance may not continue to be available at a reasonable cost or at all, and it may not be adequate to cover product liability claims against us or against any of the companies we have acquired.
Prolonged periods of product cost inflation may have a negative impact on our profit margins and results of operations to the extent we are unable to pass on all or a portion of such product cost increases to our customers.
Volatile food costs may have a direct impact upon our profitability. Prolonged periods of product cost inflation may have a negative impact on our profit margins and results of operations to the extent we are unable to pass on all or a portion of such product cost increases to our customers.
Our investments in information technology may not produce the benefits that we anticipate. In an attempt to reduce our operating expenses, increase our operational efficiencies, boost our operating margins and more closely track the movement of our inventory in our center-of-the-plate category, we have aggressively invested in the development and implementation of new information technology.
In an attempt to reduce our operating expenses, increase our operational efficiencies, boost our operating margins and more closely track the movement of our inventory in our center-of-the-plate category, we have aggressively invested in the development and implementation of new information technology.
Increases in our labor costs, including as a result of labor shortages, the unionization of some of our associates, the price or unavailability of insurance and changes in government regulation could slow our growth or harm our business. We are subject to a wide range of labor costs.
Increases in our labor costs, including as a result of labor shortages, the unionization of some of our associates, the price or unavailability of insurance and changes in government regulation could slow our growth or harm our business.
We intend to expand our presence in our existing markets by adding to our existing customer base through the expansion of our product portfolio and the increase in the volume and/or number of purchase orders from our existing customers.
We have expanded, and intend to continue expanding, our presence in our existing and new markets by adding to our customer base through the expansion of our product portfolio and the increase in the volume and/or number of purchase orders from our customers.
A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any of which could have a negative impact on our business, financial condition or results of operations and could harm our future prospects.
A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products or services, any of which could have a negative impact on our business, financial condition or results of operations and could harm our future prospects. 23 Legal and Regulatory Risk Product liability claims could have a material adverse effect on our business, financial condition or results of operations.
Accordingly, we cannot assure investors that we will be able to compete effectively against current and future competitors, and increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on our business, financial condition or results of operations. 17 Our customers are generally not obligated to continue purchasing products from us.
Accordingly, we cannot assure investors that we will be able to compete effectively against current and future competitors, and increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on our business, financial condition or results of operations.
We have no reason to believe that we will lose the services of these individuals in the foreseeable future; however, we currently have no effective replacement for these individuals due to their experience, reputation in the foodservice distribution industry and special role in our operations.
We have no reason to believe that we will lose the services of these individuals in the foreseeable future; however, we currently have no effective replacement for these individuals due to their experience, reputation in the foodservice distribution industry and special role in our operations. Our insurance policies and claims expenses could significantly reduce our profitability.
We cannot assure investors that our existing personnel, systems, procedures and controls will be adequate to support the future growth of our operations. Accordingly, our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.
We cannot assure investors that our existing personnel, systems, procedures and controls will be adequate to support the future growth of our operations. Accordingly, our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations. Our customers are generally not obligated to continue purchasing products from us.
As of December 30, 2022, we had 4,124 full-time employees, 181 of whom (approximately 4%) are represented by unions and are operating under collective bargaining agreements which expire at various times between fiscal 2024 and 2025.
As of December 29, 2023, we had 4,873 full-time employees, 207 of whom (approximately 4%) are represented by unions and are operating under collective bargaining agreements which expire at various times between fiscal 2024 and 2025.
In particular, Christopher Pappas, our president and chief executive officer, and John Pappas, our vice chairman, beneficially owned approximately 10.0% of our outstanding shares of common stock as of February 13, 2023.
In particular, Christopher Pappas, our president and chief executive officer, and John Pappas, our vice chairman and chief operating officer, beneficially owned approximately 10.8% of our outstanding shares of common stock as of February 12, 2024.
As a result of our global operations, we are required to comply with laws and regulations governing ethical, anti-bribery and similar business practices.
Our suppliers are also subject to similar regulatory requirements and oversight. 24 As a result of our global operations, we are required to comply with laws and regulations governing ethical, anti-bribery and similar business practices.
Moreover, if a prolonged downturn or uncertain outlook in the economy were to occur, consumers might ultimately make long-lasting changes to their discretionary spending behavior, including dining out less frequently on a permanent basis or purchasing less on our direct-to-consumer platforms.
Moreover, if a prolonged downturn or uncertain outlook in the economy were to occur, consumers might ultimately make long-lasting changes to their discretionary spending behavior, including dining out less frequently on a permanent basis or purchasing less on our direct-to-consumer platforms. Accordingly, any such effects could harm our business, financial condition or results of operations.
Our ability to comply with these ratios in the future may be affected by events beyond our control, and our inability to comply with the required financial ratios could result in a default under the Credit Facilities.
The agreements governing the Credit Facilities require us to maintain fixed charge coverage ratios and leverage ratios. Our ability to comply with these ratios in the future may be affected by events beyond our control, and our inability to comply with the required financial ratios could result in a default under the Credit Facilities.
We are subject to federal, state, provincial and local tax rules in the United States, Canada and Middle East. Although we believe that our tax estimates are reasonable, if the Internal Revenue Service (“IRS”) or any other taxing authority disagrees with the positions we have taken on our tax returns, we could face additional tax liability, including interest and penalties.
Although we believe that our tax estimates are reasonable, if the Internal Revenue Service (“IRS”) or any other taxing authority disagrees with the positions we have taken on our tax returns, we could face additional tax liability, including interest and penalties.
Consequently, the ability of such businesses to repay their obligations to us may deteriorate, and in some cases this deterioration may occur quickly, which could adversely impact our business, financial condition or results of operations.
Consequently, the ability of such businesses to repay their obligations to us may deteriorate, and in some cases this deterioration may occur quickly, which could adversely impact our business, financial condition or results of operations. Adverse publicity about us, lack of confidence in our products or services and other risks could negatively affect our reputation and our business.
While we have implemented cybersecurity solutions, conducted employee awareness campaigns, employed both internal resources and external consultants to conduct auditing and testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operational procedures to prevent such damage, breaches or other disruptive problems, we cannot assure investors that these security measures will either continue or be successful.
While we have implemented cybersecurity solutions, conducted employee awareness campaigns, employed both internal resources and external consultants to conduct auditing and testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade our security technology and operational procedures to prevent such damage, breaches, attacks, or other disruptive problems, such efforts may be unsuccessful which in turn could.
Additionally, changes in consumer eating habits may result in the enactment of laws and regulations that impact the ingredients and nutritional content of our products or require us to disclose the nutritional content of products.
Additionally, changes in consumer eating habits may result in the enactment of laws and regulations that impact the ingredients and nutritional content of our products or require us to disclose the nutritional content of products. Compliance with these laws and regulations, as well as others regarding the ingredients and nutritional content of our products, may be costly and time consuming.
Our continued success will depend in part upon our ability to anticipate, identify and respond to changing economic and other conditions and the impact that those conditions may have on discretionary consumer spending.
Our continued success will depend in part upon our ability to anticipate, identify and respond to changing economic and other conditions and the impact that those conditions may have on discretionary consumer spending. Our business is a low-margin business, and our profit margins may be sensitive to inflationary and deflationary pressures.
If we are unable to obtain these products, our customers may seek a different supplier for these or other products which could negatively impact our business, financial condition or results of operations. We do not currently use financial instruments to hedge our risk exposure to market fluctuations in the price of food products.
If we are unable to obtain these products, our customers may seek a different supplier for these or other products which could negatively impact our business, financial condition or results of operations.
The extent to which the Pandemic impacts 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. 22 Because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, or events, including adverse weather conditions, in these areas.
The extent to which any public health epidemic or 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.
Our inability to anticipate and react to changing food costs through our sourcing and purchasing practices in the future could therefore negatively impact our business, financial condition or results of operations. We may also be subject to material supply chain interruptions based upon conditions outside of our control.
Our inability to anticipate and react to changing food costs through our sourcing and purchasing practices in the future could therefore negatively impact our business, financial condition or results of operations.
Moreover, sales in our New York market, which we define as our operations spanning from New York to Atlantic City, accounted for approximately 18.8% of our net sales for fiscal year 2022. We are therefore particularly exposed to downturns in this regional economy.
In recent years, certain of these markets have been more resilient to economic downturns than others. Moreover, sales in our New York market, which we define as our operations spanning from New York to Atlantic City, accounted for approximately 16.6% of our net sales for fiscal year 2023. We are therefore particularly exposed to downturns in this regional economy.
As of December 30, 2022, we had approximately $686.0 million of total indebtedness, consisting of $299.3 million of loans outstanding on our senior secured term loan facility (“Term Loan”), $333.2 million of convertible debt, $11.3 million of finance leases, and other revolving credit facilities of $2.2 million . We had $40.0 million borrowings outstanding under our asset-based loan facility (“ABL”).
As of December 29, 2023, we had approximately $735.3 million of total indebtedness, consisting of $276.3 million of loans outstanding on our senior secured term loan facility (“Term Loan”), $327.2 million of convertible debt, $100.0 million of borrowings outstanding under our asset-based loan facility (“ABL”) and $31.9 million of finance leases and other financing obligations.
These interruptions could include work slowdowns, work interruptions, strikes or other adverse employment actions taken by employees of ours or our suppliers, short-term weather conditions or more prolonged climate change, crop conditions, product recalls, water shortages, transportation interruptions within our distribution channels, unavailability of fuel or increases in fuel costs, competitive demands and natural disasters or other catastrophic events, such as food-borne illnesses, pandemics or bioterrorism.
These conditions include labor shortages, work slowdowns, work interruptions, strikes or other adverse employment actions by employees of ours or our suppliers, government shutdowns, weather conditions or more prolonged climate change, crop conditions, product recalls, product or raw material scarcity, water shortages, transportation interruptions within our distribution channels, unavailability of fuel or increases in fuel costs, competitive demands, contamination with mold, bacteria or other contaminants, pandemics (such as the Pandemic), natural disasters or other catastrophic events, including the outbreak of e. coli or similar food borne illnesses or bioterrorism in the United States, international hostilities, civil insurrection, and social unrest.
Additionally, if we were unable or unwilling to lower the prices we charge for our products to a level that was satisfactory to the group purchasing organization, we may lose the business of those of our customers that are members of these organizations, which could have a material adverse impact on our business, financial condition or results of operations.
Additionally, if we were unable or unwilling to lower the prices we charge for our products to a level that was satisfactory to the group purchasing organization, we may lose the business of those of our customers that are members of these organizations, which could have a material adverse impact on our business, financial condition or results of operations. 15 Our future success will be largely dependent upon our ability to profitably meet our customers’ needs for certain gourmet foods and ingredients, varying drop sizes, high service levels and timely delivery.
Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business can be arranged. Such measures could include deferring capital expenditures (including our entry into new markets, including through acquisitions) and reducing or eliminating other discretionary uses of cash.
Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business can be arranged.
We are subject to significant governmental regulation, and failure to comply could subject us to enforcement actions, recalls or other penalties, which could have a material adverse effect on our business, financial condition or results of operations.
If there is any future product withdrawal that results in substantial and unexpected expenditures, destruction of product inventory, damage to our reputation, or lost sales because of the unavailability of the product We are subject to significant governmental regulation, and failure to comply could subject us to enforcement actions, recalls or other penalties, which could have a material adverse effect on our business, financial condition or results of operations.
If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our business, financial condition or results of operations. 25 Many jurisdictions and intergovernmental organizations have been discussing or are in the process of implementing proposals that may change various aspects of the existing framework under which our tax obligations are determined in future periods.
Many jurisdictions and intergovernmental organizations have been discussing or are in the process of implementing proposals that may change various aspects of the existing framework under which our tax obligations are determined in future periods.
Qualified individuals have historically been in short supply and an inability to attract and retain them may limit our ability to expand our operations in existing markets, as well as our ability to penetrate new markets. We cannot assure investors that we will be able to attract and retain qualified individuals in the future.
Qualified individuals have historically been in short supply and an inability to attract and retain them may limit our ability to expand our operations in existing markets, as well as our ability to penetrate new markets. Additionally, the cost of attracting and retaining qualified individuals may be higher than we currently anticipate, and as a result, our profitability could decline.
Any default under our indebtedness requiring the repayment of outstanding borrowings would have a material adverse effect on our business, financial condition and results of operations.
Any default under our indebtedness requiring the repayment of outstanding borrowings would have a material adverse effect on our business, financial condition and results of operations. If we are unable to refinance or repay our indebtedness as it becomes due, we may become insolvent and be unable to continue operations.
We may be subject to liability, which could be substantial, because of actual or alleged contamination in products sold by us, including products sold by companies before we acquired them. We have, and the companies we have acquired have had, liability insurance with respect to product liability claims.
Like any other distributor of food products, we face an inherent risk of exposure to product liability claims if the products we sell cause injury or illness. We may be subject to liability, which could be substantial, because of actual or alleged contamination in products sold by us, including products sold by companies before we acquired them.
Our business involves the storage and transmission of many types of sensitive or confidential information, including customers’ and suppliers’ personal information, private information about employees, and financial and strategic information about us and our operations.
Our business involves the storage and transmission of many types of sensitive or confidential information, including customers’ and suppliers’ personal information, private information about employees, and financial and strategic information about us and our operations. We leverage a suite of integrated hardware and software that relies on the availability of private and public networks to facilitate collaboration among all stakeholders.
The failure to comply with applicable regulatory requirements could result in civil or criminal fines or penalties, product recalls, closure of facilities or operations, the loss or revocation of any existing licenses, permits or approvals or the failure to obtain additional licenses, permits or approvals in new jurisdictions where we intend to do business, any of which could have a material adverse effect on our business, financial condition or results of operations.
The failure to comply with applicable legal and regulatory requirements could result in investigations, litigation or other legal proceedings, administrative, civil or criminal fines or penalties, mandatory or voluntary product recalls, cease and desist orders against operations that are in non compliance, closure of facilities or operations, the loss, modification or revocation of any existing licenses, permits or approvals or the failure to obtain additional licenses, permits or approvals in new jurisdictions where we intend to do business.
We generally do not enter into long-term contracts with our suppliers, whereby they would be committed to provide products to us for any appreciable duration of time.
Our profitability and operating margins are dependent upon, among other things, our ability to anticipate and react to any interruptions in our distribution network and changes to food costs and availability. We generally do not enter into long-term contracts with our suppliers, whereby they would be committed to provide products to us for any appreciable duration of time.
A significant portion of our future growth is dependent upon our ability to expand our operations in our existing markets and to penetrate new markets either through organic growth or through acquisitions.
These factors, if occurring over an extended period of time, could have a material adverse effect on our sales, margins, operating expenses, or results of operations. A significant portion of our future growth is dependent upon our ability to expand our operations in our existing markets and to penetrate new markets either through organic growth or through acquisitions.
Additionally, we may seek to distribute a different set of products than the business that we acquire, which may cause a loss of customers of those businesses if we can no longer carry the products they desire or charge more for those products than was charged before we acquired the business. 16 Our failure to realize the benefits expected from our acquisitions could result in a reduction in the price of our common stock as well as in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely impact our business, financial condition or results of operations.
Our failure to realize the benefits expected from our acquisitions could result in a reduction in the price of our common stock as well as in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely impact our business, financial condition or results of operations.
Also, some employment-related claims in the area of wage and hour disputes are not insurable risks. Despite our efforts to control costs while still providing competitive healthcare benefits to our staff members, significant increases in healthcare costs continue to occur, and we can provide no assurance that our cost containment efforts in this area will be effective.
Despite our efforts to control costs while still providing competitive healthcare benefits to our staff members, significant increases in healthcare costs continue to occur, and we can provide no assurance that our cost containment efforts in this area will be effective. Fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations.
Such events could significantly impact the food-away-from-home industry and other industries that are sensitive to changes in consumer discretionary spending habits. In addition, our operations could be disrupted if we were required to quarantine employees that work at our various distribution centers and processing facilities.
In addition, our operations could be disrupted if we were required to quarantine employees that work at our various distribution centers and processing facilities.
Our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures. We operate within a segment of the foodservice distribution industry, which is an industry characterized by a high volume of sales with relatively low profit margins.
We operate within a segment of the foodservice distribution industry, which is an industry characterized by a high volume of sales with relatively low profit margins. Although our profit margins are typically higher than more traditional broadline foodservice distributors, they are still relatively low compared to other industries’ profit margins.
Our financial condition and results of operations are highly dependent upon the local economies of the culinary markets in which we distribute our products. In recent years, certain of these markets have been more resilient to economic downturns than others.
Because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, or events, including adverse weather conditions, in these areas. Our financial condition and results of operations are highly dependent upon the local economies of the culinary markets in which we distribute our products.
If we are unable to refinance or repay our indebtedness as it becomes due, we may become insolvent and be unable to continue operations. 26 Although the agreements governing the Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
Although the agreements governing the Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Also, these restrictions do not prevent us from incurring obligations that do not constitute indebtedness.
A significant portion of our past growth has been achieved through acquisitions of, or mergers with, other distributors of specialty food products and center-of-the-plate protein items.
Competitive circumstances and consumer characteristics in new segments of existing markets may differ substantially from those in the segments in which we have substantial experience. We also regularly evaluate opportunities to acquire other companies. A significant portion of our past growth has been achieved through acquisitions of, or mergers with, other distributors of specialty food products and center-of-the-plate protein items.
Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions. As of February 13, 2023, our executive officers, directors and their affiliates beneficially owned, in the aggregate, approximately 11.9% of our outstanding shares of common stock.
As of February 12, 2024, our executive officers, directors and their affiliates beneficially owned, in the aggregate, approximately 12.6% of our outstanding shares of common stock.
In addition, the cost of workers’ compensation insurance, auto liability insurance, general liability insurance and directors’ and officers’ liability insurance fluctuates based upon our historical trends, market conditions and availability. Because our operations principally are centered in large, metropolitan areas, our insurance costs are higher than if our operations and facilities were based in more rural markets.
Because our operations principally are centered in large, metropolitan areas, our insurance costs are higher than if our operations and facilities were based in more rural markets. Additionally, health insurance costs in general have risen significantly over the past few years.
Because our labor costs (particularly those in our center-of-the-plate category) are, as a percentage of revenues, higher than other industries, we may be significantly harmed by labor cost increases. 21 Our operations are dependent upon our experienced and sophisticated sales professionals, warehouse personnel and drivers, and, in our center-of-the plate facilities, on the experienced butchers we employ.
Our operations are dependent upon our experienced and sophisticated sales professionals, warehouse personnel and drivers, and, in our center-of-the plate facilities, the experienced butchers we employ.
Business and Macroeconomic Risk Our success depends to a significant extent upon general economic conditions, including disposable income levels and changes in consumer discretionary spending. Our business is exposed to reductions in consumer discretionary spending because our target customers operate in the food-away-from-home industry.
Our business is exposed to reductions in consumer discretionary spending because our target customers operate in the food-away-from-home industry. Consumer discretionary spending may be affected by many factors outside of our control, including general economic conditions, inflation, disposable income levels, consumer confidence levels, heightened volatility in the financial markets, and uncertain political environment and supply chain disruptions.
Failure to identify an alternate source of supply for these items or comparable products that meet our customers’ expectations may result in significant cost increases. Additionally, weather, governmental regulation, water shortages, availability and seasonality may affect our food costs or cause a disruption in the quantity of our supply.
Failure to identify an alternate source of supply for these items or comparable products that meet our customers’ expectations may result in significant cost increases. Moreover, we do not currently use financial instruments to hedge our risk exposure to market fluctuations in the price of food products.
As we increase our employee base and broaden our distribution operations to new geographic markets, including as a result of acquisitions, our increased visibility could result in increased or expanded union-organizing efforts or we may acquire businesses with unionized workforces.
Further, potential changes in labor 16 legislation and case law could result in current non-union portions of our workforce, including warehouse and delivery personnel, being subjected to greater organized labor influence. As we increase our employee base and broaden our distribution operations to new geographic markets, our increased visibility could result in increased or expanded union-organizing efforts.
These risks may be controlled, although not eliminated, by adherence to good manufacturing practices and finished product testing. We have little, if any, control over proper handling before we receive the product or once the product has been shipped to our customers. Illness and death may result if the pathogens are not eliminated before these products are sold to customers.
We have little, if any, control over proper handling before we receive the product or once the product has been shipped to our customers.
We are continuously improving our information technology solutions, resulting in a larger technological presence and corresponding increase in exposure to cybersecurity risk.
We are continuously improving our information technology solutions, resulting in a larger technological presence and corresponding increase in exposure to cybersecurity risk. We and our third-party suppliers may experience cybersecurity incidents of varying degrees from time-to-time, such as ransomware and phishing attacks, as well as distributed denial of service attacks and the theft of data.
We leverage a suite of integrated hardware and software that relies on the availability of private and public networks to facilitate collaboration among all stakeholders. 23 Likewise, we use mobile networks, web social media and other online applications to conduct business with suppliers and customers.
Likewise, we use mobile networks, web social media and other online applications to conduct business with suppliers and customers.
Our profitability and operating margins are dependent upon, among other things, our ability to anticipate and react to any interruptions in our distribution network and changes to food costs and availability. We obtain a significant portion of our specialty food products, produce and center-of-the-plate products from local, regional, national and international third-party suppliers.
We rely on third-party suppliers, and our business may be affected by interruption of supplies or increases in product costs. We obtain a significant portion of our specialty food products, produce and center-of-the-plate products from local, regional, national and international third-party suppliers.
These pathogens are generally found in the environment, and, as a result, there is a risk that they, as a result of food processing, could be present in the meat, poultry and seafood products that we distribute. These pathogens can also be introduced as a result of improper handling in our facilities or at the consumer level.
These pathogens are generally found in the environment and can be introduced as a result of improper handling in our facilities or at the consumer level. These risks may be controlled, although not eliminated, by adherence to good manufacturing practices and finished product testing.
Geographic and Global Risk Significant public health epidemics or pandemics, including COVID-19, may adversely affect our business, results of operations and financial condition. A public health epidemic or pandemic can significantly impact our business or those of our core customers or suppliers, particularly if located in geographies in which we have significant operations.
A public health epidemic or pandemic, such as the Pandemic, can significantly impact our business or those of our Core Customers or suppliers, particularly if located in geographies in which we have significant operations. Such events could significantly impact the food-away-from-home industry and other industries that are sensitive to changes in consumer discretionary spending habits.
Fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations. Fuel cost volatility may have a negative impact on our business, financial condition or results of operations.
If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our business, financial condition or results of operations.
It is reasonably possible, however, that such regulation could impose material costs on us that we may be unable to pass on to our customers. Federal, state, provincial and local tax rules in the United States, Canada and the Middle East may adversely impact our business, financial condition or results of operations.
Further, we may incur costs related to claims for which we have appropriate third-party indemnity, but such third parties may fail to fulfill their contractual obligations. 25 Changes in applicable federal, state, provincial and local tax laws and regulations in the United States, Canada and the Middle East, and the resolution of tax disputes, may adversely impact our business, financial condition or results of operations.
Although we have not experienced a work stoppage to date, if we are unable to successfully negotiate union contracts, or renewals of existing contracts, if additional employees were to unionize or if we acquire additional businesses with unionized employees, we could be subject to work stoppages and increases in labor costs, either of which could have a material adverse effect on our business, financial condition or results of operations.
Although we have not experienced any significant labor disputes or work stoppages in recent history, and we believe we have satisfactory relationships with our employees, including those who are union members, increased unionization or a work stoppage because of our inability to renegotiate union contracts could have a material adverse effect on us.
In addition, if we fail to establish proper reserves and adequately estimate future expenses, the costs associated with our self-insured group medical, workers’ compensation liability and auto liability plans may adversely affect our business, financial condition or results of operations. We believe that our insurance coverage is customary for businesses of our size and type.
We believe that our insurance coverage is customary for businesses of our size and type. In addition, the cost of workers’ compensation insurance, auto liability insurance, general liability insurance and directors’ and officers’ liability insurance fluctuates based upon our historical trends, market conditions and availability.
Removed
Risk factors are organized in categories where they primarily apply, but other categories may also apply. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995.
Added
Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes contained in this report.
Removed
Consumer discretionary spending may be affected by many factors outside of our control, including general economic conditions, inflation, disposable income levels and consumer confidence levels.
Added
The following discussion of risks is not all inclusive, but is designed to highlight what we believe are the most significant factors to consider when evaluating our business. 14 Business and Macroeconomic Risk Our success depends to a significant extent upon general economic conditions, including disposable income levels and changes in consumer discretionary spending.
Removed
Accordingly, adverse changes to consumer preferences or consumer discretionary spending, each of which could be affected by many different factors which are out of our control, could harm our business, financial condition or results of operations.
Added
The foodservice distribution industry is highly fragmented and competitive, with national, multi-regional, regional and local distributors and specialty competitors. Regional and local companies may align themselves with other smaller distributors through group purchasing organizations, with the goal of enhancing their geographic reach, private label offerings, overall purchasing power, cost efficiencies, and ability to meet customer distribution requirements.
Removed
We cannot assure investors, however, that we will be able to continue to successfully expand or acquire critical market presence in our existing markets, as we may not successfully market our specialty food and center-of-the-plate products and brands or may encounter larger and/or more well-established competitors with substantially greater financial resources.
Added
These distributors may also rely on local presence as a source of competitive advantage, and they may have a lower cost to serve and other competitive advantages due to geographic proximity. Additionally, adjacent competition, such as other cash-and-carry operations, commercial wholesale outlets, warehouse clubs and grocery stores, continue to serve the commercial foodservice market.
Removed
Moreover, competitive circumstances and consumer characteristics in new segments of existing markets may differ substantially from those in the segments in which we have substantial experience. If we are unable to expand in existing markets, our ability to increase our revenues and profitability may be affected in a material and adverse manner.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeState / Country Number of Facilities Total Square Footage California 10 701,400 Maryland 4 324,500 United Arab Emirates 2 299,300 Massachusetts 6 287,300 Florida (2) 6 273,700 New York 2 246,100 Texas 4 234,700 Oregon 3 211,300 New Jersey 2 206,900 Illinois 3 144,200 Ohio 2 120,400 Nevada 3 117,600 Canada 4 94,300 Qatar 1 43,200 Connecticut (1) 1 29,200 Arizona 1 14,500 Oman 2 11,800 Washington 1 10,500 Colorado 1 3,600 Total 58 3,374,500 (1) Represents our corporate headquarters in Ridgefield, Connecticut.
Biggest changeState / Country Number of Facilities Total Square Footage California 12 922,400 Texas 6 370,900 Maryland 4 324,500 United Arab Emirates 2 299,300 Massachusetts 5 287,300 New York 2 246,100 Florida (2) 4 235,000 Oregon 3 211,300 New Jersey 2 206,900 Illinois 3 144,200 Ohio 2 120,400 Nevada 3 117,600 Canada 4 99,400 Washington 2 94,000 Arizona 2 60,800 Qatar 1 43,200 Tennessee 1 32,800 Connecticut (1) 1 29,200 Michigan 1 14,900 Oman 3 11,800 Colorado 1 3,600 Total 64 3,875,600 (1) Represents our corporate headquarters in Ridgefield, Connecticut.
The following table sets forth our significant distribution, protein processing, corporate and other support facilities by state or country and their approximate aggregate square footage as of February 13, 2023.
The following table sets forth our significant distribution, protein processing, corporate and other support facilities by state or country and their approximate aggregate square footage as of February 14, 2024.
Item 2. PROPERTIES We operate 44 distributions centers located in the United States, Canada, Qatar, Oman, and United Arab Emirates, totaling approximately 2.9 million square feet.
Item 2. PROPERTIES We operate 52 distributions centers located in the United States, Canada, Qatar, Oman, and United Arab Emirates, totaling approximately 3.0 million square feet.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNASDAQ COMPOSITE INDEX AND THE S&P SMALLCAP FOOD DISTRIBUTOR INDEX ASSUMES $100 INVESTED ON DECEMBER 29, 2017 December 29, 2017 December 28, 2018 December 27, 2019 December 25, 2020 December 24, 2021 December 30, 2022 The Chefs’ Warehouse, Inc. $ 100.00 $ 152.83 $ 185.22 $ 116.54 $ 158.88 $ 162.34 NASDAQ Composite Index $ 100.00 $ 95.38 $ 130.47 $ 185.48 $ 226.75 $ 151.61 S&P Smallcap Food Distributor Index $ 100.00 $ 63.50 $ 59.46 $ 63.45 $ 122.95 $ 112.92 31 ISSUER PURCHASES OF EQUITY SECURITIES Total Number of Shares Repurchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs September 24, 2022 to October 21, 2022 — $ — — — October 22, 2022 to November 18, 2022 2,371 37.21 — — November 19, 2022 to December 30, 2022 — — — — Total 2,371 $ 37.21 — — (1) During the fourteen weeks ended December 30, 2022, we withheld 2,371 shares of our common stock to satisfy tax withholding requirements upon the vesting of restricted shares of our common stock awarded to certain of our officers and key employees.
Biggest changeNASDAQ COMPOSITE INDEX AND THE S&P SMALLCAP FOOD DISTRIBUTOR INDEX ASSUMES $100 INVESTED ON DECEMBER 28, 2018 31 December 28, 2018 December 27, 2019 December 25, 2020 December 24, 2021 December 30, 2022 December 29, 2023 The Chefs’ Warehouse, Inc. $ 100.00 $ 121.19 $ 76.25 $ 103.96 $ 106.22 $ 93.94 NASDAQ Composite Index $ 100.00 $ 136.78 $ 194.47 $ 237.73 $ 158.96 $ 227.98 S&P Smallcap Food Distributor Index $ 100.00 $ 93.64 $ 99.92 $ 193.62 $ 177.82 $ 145.61 ISSUER PURCHASES OF EQUITY SECURITIES Total Number of Shares Repurchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs September 30, 2023 to October 29, 2023 — $ — — — October 30, 2023 to November 24, 2023 1,025 23.46 — — November 25, 2023 to December 29, 2023 344 28.70 — — Total 1,369 $ 24.77 — — (1) During the thirteen weeks ended December 29, 2023, we withheld 1,369 shares of our common stock to satisfy tax withholding requirements upon the vesting of restricted shares of our common stock awarded to certain of our officers and key employees.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Chefs’ Warehouse, Inc. Common Stock Our common stock is publicly traded under the symbol “CHEF” on the NASDAQ Global Select Market. As of December 31, 2022, there were 204 holders of record of our common stock.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Chefs’ Warehouse, Inc. Common Stock Our common stock is publicly traded under the symbol “CHEF” on the NASDAQ Global Select Market. As of December 29, 2023, there were 213 holders of record of our common stock.
The comparison assumes that $100 was invested on December 29, 2017 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.
The comparison assumes that $100 was invested on December 28, 2018 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.
Performance Graph The following graph compares the cumulative total stockholder return on our common stock during the period from December 29, 2017 through December 30, 2022 with the cumulative total return on the NASDAQ Composite and the S&P Smallcap Food Distributor Index.
Performance Graph The following graph compares the cumulative total stockholder return on our common stock during the period from December 28, 2018 through December 29, 2023 with the cumulative total return on the NASDAQ Composite and the S&P Smallcap Food Distributor Index.
Equity Compensation Plan Information See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans.
The shares were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, to the sellers as partial consideration. Equity Compensation Plan Information See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans.
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Furthermore, we are prohibited from paying cash dividends under the terms of our senior secured credit facilities without the consent of the lenders thereunder.
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Further, our ability to pay dividends is limited by the terms and conditions of our senior secured credit agreements, which require compliance with certain baskets and ratio tests and certain excess availability tests.
Added
Share Repurchase Program On November 1, 2023, we announced a two-year share repurchase program in an amount up to $100.0 million targeting $25.0 million to $100.0 million of share repurchases by the end of fiscal 2025.
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Shares Issued for Acquisitions On May 1, 2023, the Company issued 75,008 shares of their common stock in connection with an acquisition, with an approximate value of $2,496 based on the trading price of the Company’s common stock on the date of acquisition.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur cost of sales may not be comparable to other similar companies within our industry. • Selling, general and administrative expenses: Selling, general and administrative expenses include facilities costs, product shipping and handling costs, warehouse costs, and other selling, general and administrative costs. • Other operating expenses: Other operating expenses includes expenses primarily related to changes in the fair value of the Company’s contingent earn-out liabilities, gains and losses on asset disposals, asset impairments and certain third-party deal costs incurred in connection with business acquisitions or financing arrangements. • Interest expense: Interest and other expense consists primarily of interest on our outstanding indebtedness and, as applicable, the amortization or write-off of deferred financing fees. 35 Results of Operations Fiscal Years Ended December 30, 2022 December 24, 2021 December 25, 2020 Net sales $ 2,613,399 $ 1,745,757 $ 1,111,631 Cost of sales 1,994,763 1,355,272 863,480 Gross profit 618,636 390,485 248,151 Selling, general and administrative expenses 518,219 379,252 336,394 Other operating expenses 14,679 422 14,417 Operating income (loss) 85,738 10,811 (102,660) Interest and other expense, net 43,849 17,587 20,946 Income (loss) before income taxes 41,889 (6,776) (123,606) Provision for income tax expense (benefit) 14,139 (1,853) (40,703) Net income (loss) $ 27,750 $ (4,923) $ (82,903) Fiscal Year Ended December 30, 2022 Compared to Fiscal Year Ended December 24, 2021 The fiscal year ended December 30, 2022 consisted of 53 weeks as compared to the fiscal year ended December 24, 2021, which consisted of 52 weeks.
Biggest changeFiscal Years Ended (in thousands) December 29, 2023 December 30, 2022 December 24, 2021 Net sales $ 3,433,763 $ 2,613,399 $ 1,745,757 Cost of sales 2,619,289 1,994,763 1,355,272 Gross profit 814,474 618,636 390,485 Selling, general and administrative expenses 704,758 518,219 379,252 Other operating expenses 8,773 14,679 422 Operating income 100,943 85,738 10,811 Interest and other expense, net 45,474 43,849 17,587 Income (loss) before income taxes 55,469 41,889 (6,776) Provision for income tax expense (benefit) 20,879 14,139 (1,853) Net income (loss) $ 34,590 $ 27,750 $ (4,923) Fiscal Year Ended December 29, 2023 Compared to Fiscal Year Ended December 30, 2022 The fiscal year ended December 29, 2023 consisted of 52 weeks as compared to the fiscal year ended December 30, 2022, which consisted of 53 weeks.
Net proceeds were used to repay all outstanding borrowings under the our 2022 tranche of senior secured term loans of $31.2 million and repay a portion of borrowings outstanding under our asset-based loan facility. We incurred transaction costs of approximately $1.4 million which were capitalized as deferred financing fees to be amortized over the term of the underlying debt.
Net proceeds were used to repay all outstanding borrowings under our 2022 tranche of senior secured term loans of $31.2 million and repay a portion of borrowings outstanding under our asset-based loan facility. We incurred transaction costs of approximately $1.4 million which were capitalized as deferred financing fees to be amortized over the term of the underlying debt.
Our Growth Strategies and Outlook We continue to invest in our people, facilities and technology in an effort to achieve the following objectives and maintain our premier position within the specialty foodservice distribution market: • sales and service territory expansion; • operational excellence and high customer service levels; • expanded purchasing programs and improved buying power; • product innovation and new product category introduction; • operational efficiencies through system enhancements; and • operating expense reduction through the centralization of general and administrative functions.
Our Growth Strategies and Outlook We continue to invest in our people, facilities and technology in an effort to achieve the following objectives and maintain our premier position within the specialty foodservice distribution market: • sales and service territory expansion; • operational excellence and high customer service levels; 33 • expanded purchasing programs and improved buying power; • product innovation and new product category introduction; • operational efficiencies through system enhancements; and • operating expense reduction through the centralization of general and administrative functions.
This mix shift is most significantly impacted by the introduction of new categories of products in markets that we have more recently entered, impact of product mix from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.
This mix shift is most significantly impacted by the introduction of new categories of products in markets that we have more recently entered, impact of 34 product mix from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.
Claims in excess of certain levels are insured by external parties. See Note 16 “Commitments and Contingencies” to our consolidated financial statements for further detail. 39 • Contingent earn-out liabilities: Certain acquisitions involve contingent consideration, typically payable if certain financial performance targets are obtained.
Claims in excess of certain levels are insured by external parties. See Note 16 “Commitments and Contingencies” to our consolidated financial statements for further detail. • Contingent earn-out liabilities: Certain acquisitions involve contingent consideration, typically payable if certain financial performance targets are obtained.
As a result, we recognized a $0.6 million impairment charge, $0.4 million net of tax, to fully write-down the net book value of our Cambridge trademark There have been no other events or changes in circumstances during fiscal 2022 or 2021 indicating that the carrying value of our finite-lived intangible assets are not recoverable.
As a result, we recognized a $0.6 million impairment charge, $0.4 million net of tax, to fully write-down the net book value of our Cambridge trademark. There have been no other events or changes in circumstances during fiscal 2023 or 2022 indicating that the carrying value of our finite-lived intangible assets are not recoverable.
We serve more than 40,000 core customer locations, primarily located in our twenty-three geographic markets across the United States, Middle East and Canada, and the majority of our customers are independent restaurants and fine dining establishments. Our Allen Brothers subsidiary sells certain of our center-of-the-plate products directly to consumers.
We serve more than 44,000 Core Customer locations, primarily located in our twenty-three geographic markets across the United States, the Middle East and Canada, and the majority of our customers are independent restaurants and fine dining establishments. Our Allen Brothers subsidiary sells certain of our center-of-the-plate products directly to consumers.
Overview and Recent Developments Overview We are a premier distributor of specialty foods in the leading culinary markets in the United States and the Middle East. We offer more than 55,000 SKUs, ranging from high-quality specialty foods and ingredients to basic ingredients and staples, produce and center-of-the-plate proteins.
Overview and Recent Developments Overview We are a premier distributor of specialty foods in the leading culinary markets in the United States, the Middle East and Canada. We offer more than 70,000 SKUs, ranging from high-quality specialty foods and ingredients to basic ingredients and staples, produce and center-of-the-plate proteins.
Contingent Earn-out Liabilities We account for contingent consideration relating to business combinations as a liability and an increase to goodwill at the date of the acquisition and continually remeasure the liability at each balance sheet date by recording changes in the fair value through our consolidated statements of operations.
We account for contingent consideration relating to business combinations as a liability and an increase to goodwill at the date of the acquisition and continually remeasure the liability at each balance sheet date by recording changes in the fair value through our consolidated statements of operations.
During the second quarter of fiscal 2021, we committed to a plan to shift our brand strategy to leverage the Allen Brothers brand in our New England region and determined the Cambridge trademark did not fit our long-term strategic objectives.
During fiscal 2021, we committed to a plan to shift our brand strategy to leverage the Allen Brothers brand in our New England region and determined the Cambridge trademark did not fit our long-term strategic objectives.
Off-Balance Sheet Arrangements As of December 30, 2022, we did not have any off-balance sheet arrangements. Critical Accounting Estimates The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
Off-Balance Sheet Arrangements As of December 29, 2023, we did not have any off-balance sheet arrangements. Critical Accounting Estimates The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
We determine the fair value of contingent consideration based on future operating projections under various potential scenarios, including the use of Monte Carlo simulations, and weight the probability of these outcomes.
We determine the fair value of contingent consideration based on future operating projections under various potential scenarios, including the use of Monte Carlo simulation models, and weight the probability of these outcomes.
We determine the fair value of intangible assets using an income approach and, when appropriate, we engage a third party valuation firm. Generally, we utilize the multi-period excess earnings method to determine the fair value of customer relationships and the relief from royalty method to determine 41 the fair value of tradenames.
We determine the fair value of intangible assets using an income approach and, when appropriate, we engage a third party valuation firm. Generally, we utilize the multi-period excess earnings method to determine the fair value of customer relationships and the relief from royalty method to determine the fair value of trade names.
As of December 30, 2022 and December 24, 2021, we had valuation allowances of $1.6 million and $2.0 million, respectively, relating to certain net operating losses that may not be realizable in the future based on taxable income forecasts and certain state net operating loss limitations.
As of December 29, 2023 and December 30, 2022, we had valuation allowances of $2.1 million and $1.6 million, respectively, relating to certain net operating losses that may not be realizable in the future based on taxable income forecasts and certain state net operating loss limitations.
We had outstanding letters of credit of approximately $25.8 million and $20.5 million at December 30, 2022 and December 24, 2021, respectively. Substantially all of our assets are pledged as collateral to secure our borrowings under our credit facilities. See Note 9 “Debt Obligations” to our consolidated financial statements for a full description of our debt instruments.
We had outstanding letters of credit of approximately $30.1 million and $25.8 million at December 29, 2023 and December 30, 2022, respectively. Substantially all of our assets are pledged as collateral to secure our borrowings under our credit facilities. See Note 9 “Debt Obligations” to our consolidated financial statements for a full description of our debt instruments.
For the fiscal year ended December 30, 2022 and December 24, 2021, the Company assessed the recoverability of goodwill using a qualitative analysis and determined that it is more likely than not that the fair value of its reporting units exceeded their respective carry values.
For the fiscal years ended December 29, 2023 and December 30, 2022, the Company assessed the recoverability of goodwill using a qualitative analysis and determined that it is more likely than not that the fair value of its reporting units exceeded their respective carry values.
See Note 4 “Fair Value Measurements” to our consolidated financial statements for details on our contingent earn-out liabilities outstanding as of December 30, 2022.
See Note 4 “Fair Value Measurements” to our consolidated financial statements for details on our contingent earn-out liabilities outstanding as of December 29, 2023.
Recent Significant Financing Transactions On December 13, 2022, we issued $287.5 million aggregate principal amount of 2.375% Convertible Senior Notes (the “2028 Convertible Notes”).
On December 13, 2022, we issued $287.5 million aggregate principal amount of 2.375% Convertible Senior Notes (the “2028 Convertible Notes”).
Total finite-lived intangible assets as of December 30, 2022 and December 24, 2021 were $155.7 million and $104.7 million, respectively. The assessment of the recoverability of goodwill and intangible assets contain uncertainties requiring management to make assumptions and to apply judgment to estimate economic factors and the profitability of future operations.
Total finite-lived intangible assets as of December 29, 2023 and December 30, 2022 were $184.9 million and $155.7 million, respectively. The assessment of the recoverability of goodwill and intangible assets contain uncertainties requiring management to make assumptions and to apply judgment to estimate economic factors and the profitability of future operations.
Total goodwill as of December 30, 2022 and December 24, 2021 was $287.1 million and $221.8 million, respectively. Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Total goodwill as of December 29, 2023 and December 30, 2022 was $356.0 million and $287.1 million, respectively. Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
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.
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 38 goodwill and intangible assets and (v) accounting for income taxes.
We have evaluated the economic characteristics of our different geographic markets, including our recently acquired businesses, along with the similarity of the operations and margins, nature of the products, type of customer and methods of distribution of products and the regulatory environment in which we operate. As of December 30, 2022 we maintain four reporting units.
We have evaluated the economic characteristics of our different geographic markets, including our recently acquired businesses, along with the similarity of the operations and margins, nature of the products, type of customer and methods of distribution of products and the regulatory environment in which we operate.
Our growth has allowed us to improve upon our organization’s infrastructure, open new distribution facilities and pursue selective acquisitions. Over the last several years, we have increased our distribution capacity to approximately 2.9 million square feet in 44 distribution facilities as of February 13, 2023.
Our growth has allowed us to improve upon our organization’s infrastructure, open new distribution facilities and pursue selective acquisitions. Over the last several years, we have increased our distribution capacity to approximately 3.0 million square feet in 52 distribution facilities as of February 14, 2024.
Our accounts receivable balance was $260.2 million and $172.5 million, net of the allowance for doubtful accounts of $20.7 million and $20.3 million, as of December 30, 2022 and December 24, 2021, respectively. Inventory Valuation We adjust our inventory balances for excess and obsolete inventories.
Our accounts receivable balance was $334.0 million and $260.2 million, net of the allowance for doubtful accounts of $21.4 million and $20.7 million, as of December 29, 2023 and December 30, 2022, respectively. Inventory Valuation We adjust our inventory balances for excess and obsolete inventories.
Our capital expenditures, excluding cash paid for acquisitions, were approximately $45.8 million for fiscal 2022. We believe our capital expenditures, excluding cash paid for acquisitions, for fiscal 2023 will be approximately $50.0 million to $60.0 million.
Our capital expenditures, excluding cash paid for acquisitions, were approximately $57.4 million for fiscal 2023. We believe our capital expenditures, excluding cash paid for acquisitions, for fiscal 2024 will be approximately $35.0 million to $45.0 million.
Indebtedness The following table presents selected financial information on our indebtedness (in thousands): December 30, 2022 December 24, 2021 December 25, 2020 Senior secured term loan $ 299,250 $ 168,675 $ 201,553 Total convertible debt $ 333,184 $ 204,000 $ 154,000 Borrowings outstanding on asset-based loan facility and revolving credit facilities $ 42,217 $ 20,000 $ 40,000 Finance leases and other financing obligations $ 11,331 $ 11,602 $ 15,798 38 As of December 30, 2022, we have various floating- and fixed-rate debt instruments with varying maturities for an aggregate principal amount of $674.7 million.
Indebtedness The following table presents selected financial information on our indebtedness (in thousands): December 29, 2023 December 30, 2022 December 24, 2021 Senior secured term loan $ 276,250 $ 299,250 $ 168,675 Total convertible debt $ 327,184 $ 333,184 $ 204,000 Borrowings outstanding on asset-based loan facility $ 100,000 $ 40,000 $ 20,000 Finance leases and other financing obligations $ 31,892 $ 13,548 $ 11,602 As of December 29, 2023, we have various floating- and fixed-rate debt instruments with varying maturities for an aggregate principal amount of $713.4 million.
Recent Accounting Pronouncements See Note 1 “Operations and Basis of Presentation” to our consolidated financial statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our consolidated financial statements.
Changes in estimates and assumptions used in these and other items could have an effect on our consolidated financial statements. 40 Recent Accounting Pronouncements See Note 1 “Operations and Basis of Presentation” to our consolidated financial statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on our consolidated financial statements.
Gross profit margins increased 379 basis points in the Company’s specialty category and decreased 350 basis points in the Company’s center-of-the-plate category compared to the prior year period.
Gross profit margins decreased 57 basis points in the Company’s specialty category and decreased 57 basis points in the Company’s center-of-the-plate category compared to the prior year period. Overall, our gross margins were relatively consistent with the prior year period.
The ultimate settlement of contingent earn-out liabilities relating to business combinations may be for amounts which are materially different from the amounts initially recorded and may cause volatility in our results of operations. Management has discussed the development and selection of these critical accounting policies with our board of directors, and the board of directors has reviewed the above disclosure.
The ultimate settlement of contingent earn-out liabilities relating to business combinations may be for amounts which are materially different from the amounts initially recorded and may cause volatility in our results of operations.
In testing goodwill for impairment, we may elect to perform a qualitative assessment to evaluate whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount. The qualitative analysis considers various factors including macroeconomic conditions, market conditions, industry trends, cost factors and financial performance, among others.
The qualitative analysis considers various factors including macroeconomic conditions, market conditions, industry trends, cost factors and financial performance, among others. If our qualitative assessment indicates that goodwill impairment is more likely than not, we proceed to perform a quantitative assessment to determine the fair value of the reporting unit.
We believe that the consolidation trends in the foodservice distribution industry will continue to present acquisition opportunities for us, which may allow us to grow our business at a faster pace than we would otherwise be able to grow the business organically. 34 Performance Indicators In addition to evaluating our income from operations, our management team analyzes our performance based on net sales growth, gross profit and gross profit margin. • Net sales growth.
We believe that the consolidation trends in the foodservice distribution industry will continue to present acquisition opportunities for us, which may allow us to grow our business at a faster pace than we would otherwise be able to grow the business organically.
Our ratio of selling, general and administrative expenses to net sales decreased predominately due to sales growth which contributing to improved fixed cost leverage. 36 Other Operating Expenses, Net 2022 2021 $ Change % Change Other operating expenses 14,679 422 14,257 3,378.4 % The increase in net other operating expenses relates primarily to non-cash charges of $8.5 million for changes in the fair value of our contingent earn-out liabilities in fiscal 2022 compared to non-cash credits of $1.3 million in the prior year period and a year over year increase of $5.7 million primarily related to third-party deal costs incurred in connection with business acquisitions and financing arrangements.
Other Operating Expenses, Net 2023 2022 $ Change % Change Other operating expenses $ 8,773 $ 14,679 $ (5,906) (40.2) % The decrease in other operating expenses relates primarily to non-cash charges of $3.1 million for changes in the fair value of our contingent earn-out liabilities in fiscal 2023 compared to non-cash charges of $8.5 million in the prior year period and a year over year decrease of $2.3 million primarily related to third-party deal costs incurred in connection with business acquisitions and financing arrangements.
On November 1, 2022, pursuant to a share sale and purchase agreement, the Company acquired substantially all of the shares of Chef Middle East LLC (“CME”), a specialty food distributor with operations in the United Arab Emirates, Qatar and Oman. The purchase price was approximately $108,749, paid in cash at closing.
On November 1, 2022, we acquired substantially all of the shares of Chef Middle East LLC (“CME”), a specialty food distributor with operations in the United Arab Emirates, Qatar and Oman.
From fiscal 2020 through the end of fiscal 2022, we have invested significantly in acquisitions, infrastructure and management.
Over the period from fiscal 2021 through fiscal 2023, we have invested significantly in acquisitions, infrastructure and management.
Selling, General and Administrative Expenses 2022 2021 $ Change % Change Selling, general and administrative expenses 518,219 379,252 138,967 36.6 % Percentage of net sales 19.8 % 21.7 % 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.
Selling, General and Administrative Expenses 2023 2022 $ Change % Change Selling, general and administrative expenses $ 704,758 $ 518,219 $ 186,539 36.0 % Percentage of net sales 20.5 % 19.8 % The increase in selling, general and administrative expenses was primarily due to higher depreciation and amortization and higher costs associated with compensation, including benefits and facilities costs to support sales growth.
The incremental 53rd week of the fiscal year ended December 30, 2022 contributed approximately 2.0% to the annual sales growth. Organic case count increased approximately 27.6% in our specialty category. In addition, specialty unique customers and placements increased 26.8% and 35.7%, respectively, compared to the prior year. Pounds sold in our center-of-the-plate category increased 16.1% compared to the prior year.
Organic case count increased approximately 9.5% in our specialty category. In addition, specialty unique customers and placements increased 12.9% and 12.1%, respectively, compared to the prior year. Pounds sold in our center-of- 35 the-plate category increased 6.3% compared to the prior year. Estimated inflation was 3.0% in our specialty category and 2.7% in our center-of-the-plate category compared to fiscal 2022.
Liquidity The following table presents selected financial information on liquidity (in thousands): December 30, 2022 December 24, 2021 December 25, 2020 Cash and cash equivalents $ 158,800 $ 115,155 $ 193,281 Working capital, (1) excluding cash and cash equivalents $ 278,315 $ 157,787 $ 94,279 Availability under asset-based loan facility $ 135,827 $ 109,459 $ 50,282 (1) We define working capital as current assets less current liabilities.
Liquidity The following table presents selected financial information on liquidity (in thousands): December 29, 2023 December 30, 2022 December 24, 2021 Cash and cash equivalents $ 49,878 $ 158,800 $ 115,155 Working capital, (1) excluding cash and cash equivalents $ 295,288 $ 278,315 $ 157,787 Availability under asset-based loan facility $ 172,030 $ 135,827 $ 109,459 (1) We define working capital as current assets less current liabilities. 37 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 twelve months.
Our consolidated financial statements contain other items that require estimation, but are not as critical as those discussed above. These other items include our calculations for bonus accruals, depreciation and amortization. Changes in estimates and assumptions used in these and other items could have an effect on our consolidated financial statements.
Management has discussed the development and selection of these critical accounting policies with our board of directors, and the board of directors has reviewed the above disclosure. Our consolidated financial statements contain other items that require estimation, but are not as critical as those discussed above. These other items include our calculations for bonus accruals, depreciation and amortization.
We expanded our direct-to-consumer product offerings in fiscal 2020 by launching our “Shop Like a Chef” online home delivery platform in several of the markets we serve. We believe several key differentiating factors of our business model have enabled us to execute our strategy consistently and profitably across our expanding customer base.
We believe several key differentiating factors of our business model have enabled us to execute our strategy consistently and profitably across our expanding customer base.
Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends. Income Taxes The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws.
Actual results could differ from these assumptions and projections, resulting in us revising our assumptions and, if required, recognizing an impairment loss. Income Taxes The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws.
Net cash provided by financing activities was $253.2 million for fiscal 2022 driven primarily by $587.5 million of proceeds from debt issuances and $20.2 million of incremental borrowings under our asset-based loan facility and other revolving credit facilities, partially offset by payments made on debt obligations of $331.1 million and $19.0 million of deferred financing costs.
Net cash provided by financing activities was $9.0 million for fiscal 2023 driven primarily by $60.0 million of incremental borrowing on our asset-based loan facility, partially offset by payments made on debt obligations of $31.2 million, earn-out payments of $11.6 million, finance lease payments of $4.3 million, $2.1 million of shares surrendered to pay withholding taxes and $1.7 million of deferred financing costs.
Estimated inflation was 15.0% in our specialty category and 8.0% in our center-of-the-plate category compared to fiscal 2021. Gross Profit 2022 2021 $ Change % Change Gross profit $ 618,636 $ 390,485 $ 228,151 58.4 % Gross profit margin 23.7 % 22.4 % Gross profit increased primarily due to increased sales volumes. Gross profit margin increased approximately 130 basis points.
Gross Profit 2023 2022 $ Change % Change Gross profit $ 814,474 $ 618,636 $ 195,838 31.7 % Gross profit margin 23.7 % 23.7 % Gross profit increased primarily due to increased sales volumes. Gross profit margin increased approximately 7 basis points based on the volume mix between specialty and center-of-the-plate category sales.
If our qualitative assessment indicates that goodwill impairment is more likely than not, we proceed to perform a quantitative assessment to determine the fair value of the reporting unit.
As of December 29, 2023 we maintain four reporting units. 39 In testing goodwill for impairment, we may elect to perform a qualitative assessment to evaluate whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount.
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.
Provision for Income Tax Expense 2023 2022 $ Change % Change Provision for income tax expense $ 20,879 $ 14,139 $ 6,740 47.7 % Effective tax rate 37.6 % 33.8 % The effective tax rate in the current period increased primarily driven by current period for return-to-provision adjustments of approximately $2.1 million identified in the completion of our fiscal 2022 tax return and the impact of those adjustments on the fiscal 2023 annual effective tax rate. 36 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.
(“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 final purchase price was approximately $116.5 million, consisting of $108.7 million paid in cash at closing, $0.2 million paid upon settlement of a net working capital true-up, and an earn-out liability valued at $7.6 million as of the date of acquisition.
Net cash used in investing activities was $232.0 million in fiscal 2022 driven by $186.2 million in cash to fund acquisitions and $45.8 million in capital expenditures which includes the purchase of our distribution facility in Columbus, Ohio.
Fiscal 2022 working capital investment was unusually high due to the rapid recovery from the pandemic. Net cash used in investing activities was $179.3 million in fiscal 2023 driven by $121.9 million in cash to fund acquisitions and $57.4 million in capital expenditures.
Cash Flows Fiscal Year Ended December 30, 2022 December 24, 2021 December 25, 2020 Net income (loss) $ 27,750 $ (4,923) $ (82,903) Non-cash charges $ 93,325 $ 47,372 $ 62,509 Changes in working capital $ (97,941) $ (62,348) $ 63,275 Cash provided by (used in) operating activities $ 23,134 $ (19,899) $ 42,881 Cash used in investing activities $ (232,023) $ (48,991) $ (67,968) Cash provided by (used in) financing activities $ 253,215 $ (9,222) $ 78,056 Fiscal Year 2022 Cash Flows Net cash provided by operations was $23.1 million for the fiscal year ended December 30, 2022 compared to net cash used in operating activities of $19.9 million for the fiscal year ended December 24, 2021.
Cash Flows Fiscal Years Ended (in thousands) December 29, 2023 December 30, 2022 December 24, 2021 Cash provided by (used in) operating activities $ 61,639 $ 23,134 $ (19,899) Cash used in investing activities $ (179,311) $ (232,023) $ (48,991) Cash provided by (used in) financing activities $ 9,010 $ 253,215 $ (9,222) Our cash provided by operating activities is predominately driven by net sales to our customers.
Net Sales 2022 2021 $ Change % Change Net sales $ 2,613,399 $ 1,745,757 $ 867,642 49.7 % Organic growth contributed $561.6 million, or 32.2%, to sales growth in the year primarily driven by our recovery from the Pandemic. The remaining growth of $306.1 million, or 17.5%, resulted from acquisitions.
Net Sales 2023 2022 $ Change % Change Net sales $ 3,433,763 $ 2,613,399 $ 820,364 31.4 % Organic growth contributed $214.6 million, or 8.2%, to sales growth. The remaining growth of $605.7 million, or 23.2%, resulted from acquisitions. The incremental 53rd week of the fiscal year ended December 30, 2022 contributed approximately 2.0% to fiscal 2022.
Removed
Effect of the COVID-19 Pandemic on our Business and Operations The Pandemic had and could again have an adverse impact on numerous aspects of our business and those of our customers including, but not limited to, demand for our products, cost inflation and labor shortages.
Added
Recent Major Acquisitions On May 1, 2023, we acquired substantially all of the equity interests of Oakville Produce Partners, LLC (“GreenLeaf”), a leading produce and specialty food distributor in Northern California.
Removed
Despite these challenges, we continued to provide our core customers with high touch service, executed on our cost control measures and returned to profitability during the second quarter of fiscal 2021. Recent Major Acquisitions On December 28, 2021, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of CGC Holdings, Inc.
Added
The final purchase price was $88.2 million consisting of $72.2 million paid in cash at closing, $3.5 million paid upon settlement of a net working capital true-up, the issuance of a $10.0 million unsecured note and 75,008 shares of the Company’s common stock with an approximate value of $2.5 million based on the trading price of the Company’s common stock on the date of acquisition.
Removed
The Company is in the process of finalizing a valuation of tangible and intangible assets of CME as of the acquisition date.
Added
On March 20, 2023, we acquired substantially all of the assets of Hardie’s F&V, LLC (“Hardie’s”), a specialty produce distributor with operations in Texas.
Removed
The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total $10,000 over a two-year period upon successful attainment of certain gross profit targets. 33 Transition of Trademarks During the second quarter of fiscal 2021, we committed to a plan to shift our brand strategy to leverage our Allen Brothers brand in our New England market and determined our Cambridge trademark did not fit our long-term strategic objectives.
Added
The final purchase price was approximately $41.4 million, consisting of $38.0 million paid in cash at closing, $0.6 million received upon settlement of a net working capital true-up and an earn-out liability valued at approximately $4.0 million as of the acquisition date. If earned, the earn-out liability could total up to $10.0 million over a two-year period.
Removed
As a result, we recognized a $0.6 million impairment charge, $0.4 million net of tax, to fully write-down the net book value of our Cambridge trademark.
Added
The earn-out liability was earned and paid in full during the fourth quarter of fiscal 2023 for a total of $10.0 million.
Removed
During the fourth quarter of fiscal 2020, we committed to a plan to shift our brand strategy to leverage our Allen Brothers brand in our west coast region and determined that our Del Monte, Ports Seafood and Bassian Farms trademarks did not fit our long-term strategic objectives. This brand transition began in the second quarter of fiscal 2021.
Added
Performance Indicators In addition to evaluating our income from operations, our management team analyzes our performance based on net sales growth, gross profit and gross profit margin. • Net sales growth.
Removed
As a result, we recorded a $24.2 million impairment charge, $17.5 million net of tax, to write-down the value of our Del Monte and Bassian Farms trademarks.
Added
Our cost of sales may not be comparable to other similar companies within our industry. • Selling, general and administrative expenses: Selling, general and administrative expenses include facilities costs, product shipping and handling costs, warehouse costs, and other selling, general and administrative costs. • Other operating expenses: Other operating expenses includes expenses primarily related to changes in the fair value of the Company’s contingent earn-out liabilities, gains and losses on asset disposals, asset impairments and certain third-party deal costs incurred in connection with business acquisitions or financing arrangements. • Interest expense: Interest and other expense consists primarily of interest on our outstanding indebtedness and, as applicable, the amortization or write-off of deferred financing fees.
Removed
Gross profit margins decreased 50 basis points in the Company’s specialty category and increased 181 basis points in the Company’s 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 benefited from the reopening of favorable margin markets in fiscal 2022.
Added
Results of Operations This discussion focuses on our fiscal 2023 results, compared with fiscal 2022 results.
Removed
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.
Added
The discussion of our fiscal 2022 results, compared with fiscal 2021 results, can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 30, 2022.
Removed
Interest Expense 2022 2021 $ Change % Change Interest expense 43,849 17,587 $ 26,262 149.3 % Interest expense increased primarily due to the $14.3 million loss on debt extinguishment from the refinancing of our senior convertible debt and term loan and certain third-party transaction fees of $4.5 million.
Added
Our ratio of selling, general and administrative expenses to net sales increased by 70 basis points due to increased near-term costs associated with our investments in facilities and acquisitions.
Removed
Additionally, we had higher amounts of debt outstanding and increases in the variable portion of interest rates charged on our outstanding debt during fiscal 2022.
Added
The decrease was partially offset by an impairment on customer relationship intangible assets of $1.8 million related to the loss of a significant Hardie’s customer post acquisition.
Removed
Provision for Income Tax Expense (Benefit) 2022 2021 $ Change % Change Provision for income tax expense (benefit) 14,139 (1,853) $ 15,992 (863.0) % Effective tax rate 33.8 % 27.3 % The effective tax rate in the current period increased primarily due to the $14.1 million loss on debt extinguishment from the refinancing of our senior convertible debt, which was not tax deductible.
Added
Interest Expense 2023 2022 $ Change % Change Interest expense $ 45,474 $ 43,849 $ 1,625 3.7 % Interest expense increased primarily due to higher principal amounts of outstanding debt due to our 2028 convertible notes issued on December 13, 2022, our term loan refinancing on August 23, 2022, an increase in amounts drawn on our asset-based loan facility and higher rates of interest charged on the variable rate portion of our outstanding debt.
Removed
Fiscal Year Ended December 24, 2021 Compared to Fiscal Year Ended December 25, 2020 Net Sales 2021 2020 $ Change % Change Net sales $ 1,745,757 $ 1,111,631 $ 634,126 57.0 % Organic growth contributed $574.2 million, or 51.6%, to sales growth in the year primarily driven by our recovery from the Pandemic.
Added
Recent Significant Financing Transactions On November 1, 2023, we announced a two-year share repurchase program in an amount up to $100.0 million targeting $25.0 million to $100.0 million of share repurchases by the end of fiscal 2025. On July 7, 2023, we increased the aggregate commitments on our asset-based loan facility to $300.0 million.
Removed
The remaining growth of $59.9 million, or 5.4%, resulted from acquisitions. Organic case count increased approximately 33.8% in our specialty category. In addition, specialty unique customers and placements increased 26.1% and 31.6%, respectively, compared to the prior year. Pounds sold in our center-of-the-plate category increased 28.2% compared to the prior year.
Added
Our cash used in operating activities is primarily driven by our payments to suppliers for our inventory, employee compensation, payments to support our facilities, our distribution network, interest on our indebtedness, payments to tax authorities and other general corporate expenditures.
Removed
Estimated inflation was 9.6% in our specialty category and 18.1% in our center-of-the-plate category compared to fiscal 2020. Gross Profit 2021 2020 $ Change % Change Gross profit 390,485 248,151 $ 142,334 57.4 % Gross profit margin 22.4 % 22.3 % Gross profit increased primarily due to increased sales volumes. Gross profit margin increased approximately 4 basis points.
Added
Net cash provided by operations was $61.6 million for the fiscal year ended December 29, 2023 compared to $23.1 million for the fiscal year ended December 30, 2022. The increase in cash provided by operating activities was primarily due to a reduction in working capital requirements as we returned to more moderate growth in fiscal 2023 compared to fiscal 2022.
Removed
Our prior year gross profit results include a charge of approximately $14.6 million related to estimated inventory losses from obsolescence due to the Pandemic’s impact on our customers’ purchasing behavior. 37 Selling, General and Administrative Expenses 2021 2020 $ Change % Change Selling, general and administrative expenses 379,252 336,394 42,858 12.7 % Percentage of net sales 21.7 % 30.3 % The increase in selling, general and administrative expense relates primarily to increased sales volumes and acquisitions.
Added
During fiscal 2023, we incurred a customer relationships intangible asset impairment charge of $1.8 million, $1.3 million net of tax, related to the loss of a significant Hardie’s Fresh Foods customer post acquisition.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our exposure to interest rate market risk relates primarily to our long-term debt. The Company has various floating- and fixed-rate debt instruments as described in Note 9 “Debt Obligations” to our consolidated financial statements. As of December 30, 2022, we had an aggregate $341.5 million of floating-rate indebtedness.
Biggest changeItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our exposure to interest rate market risk relates primarily to our long-term debt. The Company has various floating- and fixed-rate debt instruments as described in Note 9 “Debt Obligations” to our consolidated financial statements. As of December 29, 2023, we had an aggregate $376.3 million of floating-rate indebtedness.
A 100 basis point increase in market interest rates would decrease our after tax earnings by approximately $2.5 million per annum, holding other variables constant. 43
A 100 basis point increase in market interest rates would decrease our after tax earnings by approximately $2.7 million per annum, holding other variables constant. 41

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