What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-27 compared with 2023-02-28 · 242 added, 222 removed, 732 unchanged (39% of the section changed)

7 unchanged sentences

Index to the Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Firm (BDO USA, LLP, Stamford, Connecticut, PCAOB ID# 243 )

Report of Independent Registered Public Accounting Firm (BDO USA, P.C , Stamford, Connecticut, PCAOB ID# 243 )

Consolidated Balance Sheets

9 unchanged sentences

We have audited the accompanying consolidated balance sheets of The Chefs’ Warehouse, Inc.

and subsidiaries (the “Company”) as of December 30, 2022 and December 24, 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 30, 2022 and December 24, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 29, 2023 and December 30, 2022, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three fiscal years in the period ended December 29, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 29, 2023 and December 30, 2022, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 29, 2023 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 27, 2024 expressed an unqualified opinion thereon.

11 unchanged sentences

Critical Audit Matter

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Debt Transactions

As described in Notes 2 and 9 to the consolidated financial statements, the Company entered into the following debt transactions during the year ended December 30, 2022:

On August 23, 2022, the Company entered into an eighth amendment to its senior secured term loan credit agreement, dated June 22, 2016 (the "Eighth Amendment").

The Company borrowed $300 million maturing on August 23, 2029, comprising of a refinancing of the then existing term loans balance under the Term Credit Agreement of $167.4 million and an incremental borrowing of $132.6 million.

The Eighth Amendment involved multiple members of a loan syndicate.

On December 13, 2022, the Company issued $287.5 million aggregate principal amount of 2.375% Convertible Senior Notes due 2028 (the “Convertible Notes”).

Concurrently, the Company entered into separate, privately negotiated transactions (the “Exchange Transactions”) with a limited number of holders of its 1.875% Convertible Senior Notes due 2024 (the “Existing Convertible Notes”) to exchange or repurchase $158.4 million principal amount of Existing Convertible Notes for aggregate consideration consisting of $159.8 million in cash, and approximately 324,066 shares of the Company’s common stock.

We identified the accounting for these transactions, including the evaluation of the debt transactions as a critical audit matter.

The principal considerations for our determination were:

(i) the evaluation of the accounting for the Eighth Amendment and the Exchange Transactions as to whether these agreements resulted in a debt modification or extinguishment based on the analysis of cash flows on a lender-by-lender basis, and (ii) the evaluation of the potential derivatives that may require bifurcation from the Convertible Notes and evaluation of the appropriate accounting treatment.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skills or knowledge needed.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described in Note 2 to the consolidated financial statements, the Company recognizes revenue from product sales at the point at which control of each product is transferred to the customer.

The Company’s total net sales were $3.4 billion for the fiscal year ended December 29, 2023.

We identified the accuracy and existence of revenue transactions as a critical audit matter.

The principal consideration for our determination was the significant audit effort in performing procedures related to the accuracy and existence of revenue transactions given the significance of net sales and the large volume of transactions.

The primary procedures we performed to address this critical audit matter included:

• Reviewing and analyzing (i) the terms of the agreements associated with each transaction, (ii) the completeness and accuracy of the Company’s technical accounting analysis including cash flows for each lender, and (iii) the application of the relevant accounting literature.

• Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in:

(i) evaluating relevant contract terms of the debt transactions in relation to the appropriate accounting literature, and (ii) assessing the appropriateness of conclusions reached by the Company.

/s/ BDO USA, LLP

• Testing the operating effectiveness of controls, where applicable, relating to accuracy and existence of revenue transactions.

• Evaluating the accuracy and existence of revenue transactions, on a sample basis, by obtaining and inspecting invoices, customer purchase orders, shipping documents, and cash receipts from customers, where applicable.

• Recalculating sales prices on a sample basis, where applicable, based on the terms and conditions of underlying signed contracts.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2006.

9 unchanged sentences

334,015 260,167

Inventories, net 245,693 144,491

Inventories 284,528 245,693

Prepaid expenses and other current assets 62,522 56,200

4 unchanged sentences

Intangible assets, net 184,863 155,703

Deferred taxes, net — 9,380

Other assets 6,379 3,256

11 unchanged sentences

Deferred taxes, net 14,418 6,098

Other liabilities and deferred credits 13,034 5,110

Other liabilities 1,603 13,034

Total liabilities 1,250,634 1,107,787

Commitments and contingencies

Commitments and contingencies (Note 16)

Stockholders’ equity:

18 unchanged sentences

Other operating expenses, net 8,773 14,679 422

Operating income (loss) 85,738 10,811 ( 102,660 )

Operating income 100,943 85,738 10,811

Interest expense 45,474 43,849 17,587

2 unchanged sentences

Net income (loss) $ 34,590 $ 27,750 $ ( 4,923 )

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustments 353 ( 163 ) 29

20 unchanged sentences

Stock compensation 679,330 7 11,472 — — 11,479

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

Shares issued for acquisition — — 1,120 — — 1,120

Cumulative translation adjustment — — — 29 — 29

1 unchanged sentence

Balance December 24, 2021 37,887,675 $ 380 $ 314,242 $ ( 2,022 ) $ 37,611 $ 350,211

Net loss — — — — ( 4,923 ) ( 4,923 )

Net income — — — — 27,750 27,750

Stock compensation 466,820 4 13,236 — — 13,240

Shares issued for acquisition — — 1,120 — — 1,120

Conversion of debt to common stock 324,066 3 11,372 — — 11,375

Warrants issued for acquisition — — 1,701 — — 1,701

Option exercises 3,407 — 69 — — 69

Cumulative translation adjustment — — — ( 163 ) — ( 163 )

3 unchanged sentences

Stock compensation 1,053,256 10 17,813 — — 17,823

Conversion of debt to common stock 324,066 3 11,372 — — 11,375

Warrants issued for acquisition — — 1,701 — — 1,701

Shares issued for acquisitions 75,008 1 2,494 — — 2,495

Option exercises 2,705 — 55 — — 55

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 30, 2022, December 24, 2021, and December 25, 2020

(Amounts in thousands)

Fiscal Years Ended

2023 December 30,

6 unchanged sentences

Provision for allowance for doubtful accounts 8,078 6,048 ( 422 )

Non-cash operating lease expense 1,730 1,402 689

Provision (benefit) for deferred income taxes 8,114 9,601 ( 1,845 )

Amortization of deferred financing fees 1,290 2,299 3,426

Loss on debt extinguishment — 14,287 —

2 unchanged sentences

Intangible asset impairment 1,838 — 597

Loss on asset disposal 17 193 151

Non-cash interest and other operating activities 5,456 3,037 3,894

Changes in assets and liabilities, net of acquisitions:

7 unchanged sentences

Capital expenditures ( 57,427 ) ( 45,848 ) ( 38,801 )

Cash paid for acquisitions ( 186,175 ) ( 10,190 ) ( 60,932 )

Cash paid for acquisitions, net ( 121,884 ) ( 186,175 ) ( 10,190 )

Net cash used in investing activities ( 179,311 ) ( 232,023 ) ( 48,991 )

Cash flows from financing activities:

Payment of debt, finance lease and other financing obligations ( 331,073 ) ( 37,610 ) ( 40,432 )

Proceeds from the issuance of common stock, net of issuance costs — — 85,941

Payment of debt and other financing obligations ( 29,000 ) ( 327,741 ) ( 32,879 )

Payment of finance leases ( 4,327 ) ( 3,332 ) ( 4,731 )

Proceeds from debt issuance — 587,500 51,750

20 unchanged sentences

Every six to seven years the Company will add a fourteenth week to its fourth quarter to more closely align its year end to the calendar year.

The consolidated statement of operations for the fiscal year ended December 30, 2022 contained a 53rd week while all other years presented contained 52 weeks.

The consolidated statement of operations for the fiscal year ended December 30, 2022 contained a 53rd week while all other years presented contain 52 weeks.

The Company’s business consists of three operating segments:

5 unchanged sentences

Guidance Not Yet Adopted

There is no recent accounting guidance not yet adopted that is expected to have a material impact on the Company’s consolidated financial statements when adopted.

Improvements to Income Tax Disclosures :

In December 2023, the FASB issued guidance designed to improve the transparency and usefulness of income tax disclosures.

The amendments include provisions to address the consistency of the income tax rate reconciliation and requirement to disaggregate income taxes paid by jurisdiction.

The guidance is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company expects to adopt this guidance when effective and is evaluating the impact of adoption on its consolidated financial statements, which is limited to financial statement disclosures.

Improvements to Reportable Segment Disclosures:

In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance which requires entities, including those with one reportable segment, to enhance reportable segment disclosures requirements particularly with respect to significant expenses.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

Early adoption is permitted.

The Company expects to adopt this guidance when effective and is evaluating the impact of adoption on its consolidated financial statements, which is limited to financial statement disclosures.

Use of Estimates

11 unchanged sentences

These sales incentives are accounted as variable consideration.

The Company estimates these amounts based on the expected amount to be provided to customers and records a corresponding reduction in revenue.

The Company estimates these amounts based on the expected amount to be provided to

customers and records a corresponding reduction in revenue.

The Company does not expect a significant reversal in the amount of cumulative revenue recognized.

1 unchanged sentence

The following table presents the Company’s net sales disaggregated by principal product category:

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

7 unchanged sentences

Kitchen supplies 69,610 1.8 % 59,345 2.3 % 36,899 2.1 %

Total $ 2,613,399 100 % $ 1,745,757 100 % $ 1,111,631 100 %

Total specialty $ 2,081,533 60.6 % $ 1,487,172 56.9 % $ 868,697 49.8 %

Total net sales $ 3,433,763 100 % $ 2,613,399 100 % $ 1,745,757 100 %

The Company determines its product category classification based on how the Company currently markets its products to its customers.

The Company’s definition of its principal product categories may differ from the way in which other companies present similar information.

Net sales by product category includes estimates of product mix for certain locations that are not yet fully integrated into the Company’s information technology systems as of the reporting date.

Deferred Revenue

6 unchanged sentences

Amounts recognized through breakage represent the portion of the gift card liability that is not subject to unclaimed property laws and for which the likelihood of redemption is remote.

The Company recorded deferred revenues, reflected as accrued liabilities on the Company’s consolidated balance sheets, of $ 2,206 and $ 2,294 as of December 30, 2022 and December 24, 2021, respectively.

The Company recorded deferred revenues, reflected within accrued liabilities on the Company’s consolidated balance sheets, of $ 2,459 and $ 2,206 as of December 29, 2023 and December 30, 2022, respectively.

Right of Return

2 unchanged sentences

The Company recorded a refund liability of $ 811 and $ 713 as of December 29, 2023 and December 30, 2022, respectively.

Refund liabilities are reflected as accrued liabilities on the Company’s consolidated balance sheets.

Refund liabilities are reflected within accrued liabilities on the Company’s consolidated balance sheets.

The Company recognized a corresponding asset of $ 493 and $ 442 as of December 29, 2023 and December 30, 2022, respectively, for its right to recover products from customers on settling its refund liabilities.

This asset is reflected as inventories, net on the Company’s consolidated balance sheets.

This asset is reflected within inventories on the Company’s consolidated balance sheets.

Contract Costs

17 unchanged sentences

The allowance for doubtful accounts is determined based upon a number of specific criteria, such as whether a customer has filed for or been placed into bankruptcy, has had accounts referred to outside parties for collections or has had accounts significantly past due.

The allowance also covers short paid invoices the Company deems to be uncollectible as well as a portion of trade accounts receivable balances projected to become uncollectible based upon historic patterns and macro-economic factors in existence as of the balance sheet date that may impact the food-away-from-home industry and/or its customers, and specifically, beginning in the first quarter of fiscal 2020, the impact of the Pandemic and the subsequent recovery.

Inventories consist primarily of finished goods, food and related food products held for resale and are valued at the lower of cost or market.

Inventories consist primarily of finished goods, food and related food products held for resale and are valued at the lower of cost or net realizable value.

Our different entities record inventory using a mixture of first-in, first-out and average cost, which we believe approximates first-in, first-out.

4 unchanged sentences

The purchase incentive is primarily in the form of a specified amount per pound or per case, or an amount for year-over-year growth.

For the fiscal years ended December 30, 2022, December 24, 2021 and December 25, 2020, the recorded purchase incentives totaled approximately $ 30,805 , $ 20,296 and $ 12,678 , respectively.

Recorded purchase incentives totaled approximately $ 48,026 , $ 30,805 and $ 20,296 for fiscal 2023, 2022 and 2021, respectively.

Concentrations of Credit Risks

4 unchanged sentences

The Company generally does not require collateral.

However, the Company, in certain instances, has obtained personal guarantees from certain customers.

However, the Company,

in certain instances, has obtained personal guarantees from certain customers.

There is no significant balance with any individual customer.

1 unchanged sentence

Property and equipment are recorded at cost and are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.

Property and equipment are reviewed for impairment in accordance with ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets ” which only requires testing whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Property and equipment are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) 360-10-35-15, “Impairment or Disposal of Long-Lived Assets ” which only requires testing whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

If any indicators are present, a recoverability test is performed by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset.

If the net undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), an additional step is performed that determines the fair value of the asset and the Company records an impairment, if any.

The adverse impact to the Company’s customer base and market capitalization at the onset of the Pandemic were considered triggering events during the first quarter of fiscal 2020, and accordingly, the Company performed a long-lived asset recoverability test as of March 27, 2020 the results of which indicated no impairment.

The Company has no t recorded any impairment of equipment and leasehold improvements in fiscal 2023, 2022 or 2021.

19 unchanged sentences

The Company capitalizes certain computer software licenses and software implementation costs that are included in software costs in its consolidated balance sheets.

These costs were incurred in connection with developing or obtaining computer software for internal use if it has a useful life in excess of one year, in accordance with Accounting Standards Codification (“ASC”) 350-40 “Internal-Use Software.” Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task that it previously did not perform.

These costs were incurred in connection with developing or obtaining computer software for internal use if it has a useful life in excess of one year, in accordance with ASC 350-40 “Internal-Use Software.” Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task that it previously did not perform.

Internal use software is amortized on a straight-line basis over a three to seven year period.

2 unchanged sentences

Convertible Debt

The Company evaluates debt instruments with embedded conversion features in accordance with ASC 815 “Derivatives and Hedging” and ASC 470 “Debt” both of which provide several criteria that determine whether a conversion feature must be bifurcated from its debt host and accounted as a separate financial instrument.

bifurcated from its debt host and accounted as a separate financial instrument.

An entity is not required to bifurcate if the conversion feature is indexed to its own stock, meets all equity classification criteria and does not contain a beneficial conversion feature.

6 unchanged sentences

These costs are amortized over the terms of the related debt instruments by the effective interest rate method.

Amortization of debt issuance costs was $ 1,290 for the fiscal year ended December 30, 2022, $ 2,299 for the fiscal year ended December 24, 2021 and $ 3,426 for the fiscal year ended December 25, 2020.

Amortization of debt issuance costs was $ 3,615 , $ 1,290 and $ 2,299 fiscal 2023, 2022 and 2021, respectively.

Business Combinations

9 unchanged sentences

If the evaluation indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow model.

The adverse impact to the Company’s customer base and market capitalization at the onset of the Pandemic were considered triggering events during the first quarter of fiscal 2020, and, accordingly, the Company performed a long-lived asset recoverability test as of March 27, 2020, the results of which indicated no impairment.

During the second quarter of fiscal 2021, the Company recorded a $ 597 impairment charge, $ 433 net of tax, to fully write-down the net book value of its Cambridge trademark.

During the fourth quarter of fiscal 2020, the Company recorded a $ 24,200 impairment charge, $ 17,545 net of tax, to write-down the value of its Del Monte and Bassian Farms trademarks.

During fiscal 2023, the Company recognized a customer relationships intangible asset impairment charge of $ 1,838 , $ 1,333 net of tax, related to the loss of a significant customer post-acquisition.

During fiscal 2021, the Company recorded a $ 597 impairment charge, $ 433 net of tax, to fully write-down the net book value of a trademark.

These impairment charges are presented within other operating expense s on the consolidated statements of operations.

1 unchanged sentence

There have been no other events or changes in circumstances during fiscal 2023, 2022 or 2021, indicating that the carrying value of the Company’s finite-lived intangible assets are not recoverable.

Goodwill is the excess of the acquisition cost of businesses over the fair value of identifiable net assets acquired in accordance with ASC 350, “Intangibles-Goodwill and Other.” The Company’s maintains four reporting units.

The Company evaluates the recoverability of goodwill at each of its reporting units annually in the fourth quarter, or more frequently when circumstances indicate an impairment may have occurred.

A goodwill impairment loss, if any, would be recognized for the amount by which a

reporting unit’s carrying value exceeded its fair value.

A goodwill impairment loss, if any, would be recognized for the amount by which a reporting unit’s carrying value exceeded its fair value.

The Company has the option to evaluate goodwill impairment using a qualitative or quantitative analysis.

The adverse impact to the Company’s customer base and market capitalization at the onset of the Pandemic were considered triggering events during the first quarter of fiscal 2020, and accordingly, the Company performed an interim goodwill impairment test as of March 27, 2020, the results of which indicated no impairment.

For its annual goodwill impairment test performed during the fourth quarter of fiscal 2020, the Company tested goodwill for impairment using a quantitative analysis.

The Company estimated the fair value of its reporting units using an income approach and determined the fair value of its reporting units substantially exceeded their respective carry values.

The Company’s income approach incorporates the use of a discounted cash flow methodology that involves many management assumptions that are based upon future growth projections.

Assumptions include estimates of future revenue based upon budget projections and growth rates.

The Company develops estimates of future levels of gross and operating profits and projected capital expenditures.

This methodology includes the use of estimated discount rates based upon industry and competitor analysis as well as other factors.

The Company also performed a reconciliation of its market capitalization and the estimate of the aggregate fair value of its reporting units, including consideration of a control premium.

For the fiscal years 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, 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.

The qualitative analysis considered various factors including macroeconomic conditions, market conditions, industry trends, cost factors and financial performance, among others.

There have been no events or changes in circumstances, other than the onset of the Pandemic, during fiscal 2022, 2021 or 2020, indicating that goodwill may be impaired.

Employee Benefit Programs

The Company sponsors a defined contribution plan covering substantially all full-time employees (the “401(k) Plan”).

The Company recognized expense related to the 401(k) Plan totaling $ 1,714 , $ 683 and $ 720 , respectively, for fiscal 2022, 2021 and 2020.

There have been no events or changes in circumstances during fiscal 2023, 2022 or 2021, indicating that goodwill may be impaired.

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end.

13 unchanged sentences

The Company accounts for contingent consideration relating to business combinations as a liability and an increase to goodwill at the date of the acquisition and continually remeasures the liability at each balance sheet date by recording changes in the fair value through the consolidated statements of operations.

The Company determines the fair value of contingent consideration based on future operating projections under various potential scenarios, including the use of Monte Carlo simulations, and weighs the probability of these outcomes.

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 the Company’s results of operations.

Net Income per Share

Basic net income per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period.

Diluted net income per share adjusts basic net income per share for all the potentially dilutive shares outstanding during the period.

Potentially dilutive shares include unexercised stock options, unvested stock-based awards and shares related to warrants and convertible notes outstanding.

The dilutive potential common shares for the Company’s stock-based awards and warrants were determined using the treasury stock method.

The dilutive potential common shares for the Company’s convertible notes were determined using the if-converted method.

Stock-Based Compensation

5 unchanged sentences

Stock-based compensation expense is presented within selling, general and administrative expenses on the Company’s consolidated statements of operations.

Compensation expense on performance share units reflects the estimated probable outcome at the end of the performance period.

The fair value of stock options and RSAs with market conditions is determined based on a Monte Carlo simulation in order to simulate a range of possible future stock prices for the Company’s common stock.

Compensation expense on performance share units reflects the estimated

probable outcome at the end of the performance period.

The fair value of stock options and RSAs with market conditions is determined based on a Monte Carlo simulation model in order to simulate a range of possible future stock prices for the Company’s common stock.

For awards subject to graded vesting, the Company ensures that the compensation expense recognized is at least equal to the vested portion of the award.

11 unchanged sentences

The Company accounts for certain assets and liabilities at fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company categorizes each of its fair value measurements in one of the following three levels based on the lowest level input that is significant to the fair value measurement in its entirety:

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities include the following:

a) quoted prices for similar assets in active markets;

b) quoted prices for identical or similar assets in inactive markets;

c) inputs other than quoted prices that are observable for the asset;

d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset.

Level 3 - Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure.

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs to the valuation methodology are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, inputs other than quoted prices that are observable for the asset and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the underlying assets or liabilities.

Level 3 - Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure, generally using pricing models or other valuation techniques that reflect management’s judgment and estimates.

Note 3 – Net Income (Loss) per Share

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

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

6 unchanged sentences

Reconciliation of net income (loss) per common share:

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

9 unchanged sentences

Potentially dilutive securities that have been excluded from the calculation of diluted net income (loss) per common share because the effect is anti-dilutive are as follows:

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

7 unchanged sentences

The fair value of contingent consideration are predominantly determined based on a probability-based approach which includes projected results, percentage probability of occurrence and the application of a discount rate to present value the payments.

A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or

lower fair value measurement.

A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or lower fair value measurement.

Changes in the fair value of contingent earn-out liabilities are reflected in other operating expenses on the Company’s consolidated statements of operations.

9 unchanged sentences

Balance December 29, 2023 $ 9,765

The long-term portion of contingent earn-out liabilities was $ 10,483 and $ 3,252 as of December 30, 2022 and December 24, 2021, respectively, and are reflected as other liabilities and deferred credits on the Company’s consolidated balance sheets.

The long-term portion of contingent earn-out liabilities was $ 50 and $ 10,483 as of December 29, 2023 and December 30, 2022, respectively, and are reflected as other liabilities on the Company’s consolidated balance sheets.

The remaining short-term portion of earn-out liabilities are reflected as accrued liabilities on the Company’s consolidated balance sheets.

Contingent earn-out liability payments in excess of the acquisition date fair value of the underlying contingent earn-out liability are classified as operating activities on the Company’s consolidated statements of cash flows and all other such payments are classified as financing activities.

Contingent earn-out liability payments in excess of the acquisition date fair value of the underlying contingent earn-out liability are

classified as operating activities on the Company’s consolidated statements of cash flows and all other such payments are classified as financing activities.

Fair Value of Financial Instruments

The carrying amounts reported in the Company’s consolidated balance sheets for accounts receivable and accounts payable approximate fair value due to the immediate to short-term nature of these financial instruments.

The fair values of the asset based loan facility and term loan approximated their book values as of December 30, 2022 and December 24, 2021 as these instruments had variable interest rates that reflected current market rates available to the Company.

The following table presents the carrying value and fair value of the Company’s convertible notes (more fully described in Note 9).

The fair values of the asset-based loan facility and term loan approximated their book values as of December 29, 2023 and December 30, 2022 as these instruments had variable interest rates that reflected current market rates available to the Company and are classified as Level 2 fair value measurements.

The following table presents the carrying value and fair value of the Company’s convertible notes and GreenLeaf Note (more fully described in Note 9).

The fair value of the Company’s 2028 Convertible Senior Notes was based on Level 1 inputs.

In estimating the fair value of its 2024 Convertible Senior Notes and Convertible Unsecured Note, the Company utilized Level 3 inputs including prevailing market interest rates to estimate the debt portion of the instrument and a Black Scholes valuation model to estimate the fair value of the conversion options.

The Black Scholes model utilizes the market price of the Company’s common stock, estimates of the stock’s volatility and the prevailing risk free interest rate in calculating the fair value estimates.

The fair value of the GreenLeaf Note was determined based upon observable market prices of similar debt instruments.

The Convertible Unsecured Note matured in 2023 and was repaid in full.

December 29, 2023 December 30, 2022

Carrying Value Fair Value Carrying Value Fair Value

2028 Convertible Senior Notes $ 287,500 $ 292,531 $ — $ —

2024 Convertible Senior Notes $ 41,684 $ 43,723 $ 200,000 $ 206,182

Convertible Unsecured Note $ 4,000 $ 4,345 $ 4,000 $ 4,102

Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value

2028 Convertible Senior Notes Level 1 $ 287,500 $ 277,354 $ 287,500 $ 292,531

2024 Convertible Senior Notes Level 3 $ 39,684 $ 38,609 $ 41,684 $ 43,723

GreenLeaf Note Level 2 $ 10,000 $ 9,991 $ — $ —

Convertible Unsecured Note Level 3 $ — $ — $ 4,000 $ 4,345

Note 5 – Acquisitions

On May 1, 2023, the Company entered into a stock purchase agreement to acquire substantially all of the equity interests of Oakville Produce Partners, LLC (“GreenLeaf”), a leading produce and specialty food distributor in Northern California.

The final purchase price was $ 88,174 consisting of $ 72,157 paid in cash at closing, $ 3,521 paid upon settlement of a net working capital true-up, the issuance of a $ 10,000 unsecured note and 75,008 shares of the Company’s common stock with an approximate value of $ 2,496 based on the trading price of the Company’s common stock on the date of acquisition.

The acquisition was partially funded by a $ 40,000 incremental draw on the Company’s asset-based loan facility.

All of the goodwill recorded for the GreenLeaf acquisition is deductible for income tax purposes.

The goodwill recorded primarily reflects the value of acquiring an established specialty produce distributor to leverage the Company’s existing products in the markets served by GreenLeaf and any intangible assets that do not qualify for separate recognition, including assembled workforce.

The intangible assets acquired consisted of customer relationships, trademarks and non-compete agreements valued at $ 29,900 , $ 1,500 and $ 400 , respectively, as of the acquisition date.

The customer relationships, trademarks and non-compete agreements are being amortized over a weighted average of 7.2 years, 5 years and 2 years, respectively.

For the fiscal year ended December 29, 2023, the Company reflected net sales and income before income taxes of $ 82,917 and $ 7,039 , respectively, for GreenLeaf in its consolidated statement of operations.

Hardie’s Fresh Foods

On March 20, 2023, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of Hardie’s F&V, LLC (“Hardie’s”), a specialty produce distributor with operations in Texas.

The final purchase price was approximately $ 41,361 , consisting of $ 38,000 paid in cash at closing, $ 639 received upon settlement of a net working capital true-up and an earn-out liability valued at approximately $ 4,000 as of the acquisition date.

If earned, the earn-out liability could total up to $ 10,000 over a two-year period.

The payment of the earn-out liability is subject to the successful achievement of certain earnings before interest, taxes, depreciation and amortization (“EBITDA”) targets.

All of the goodwill recorded for the Hardie’s acquisition is deductible for income tax purposes.

The goodwill recorded primarily reflects the value of acquiring an established specialty produce distributor to leverage the Company’s existing products in the markets served by Hardie’s and any intangible assets that do not qualify for separate recognition, including assembled workforce.

The intangible assets acquired consisted of

customer relationships and trademarks valued at $ 14,000 and $ 3,600 , respectively, as of the acquisition date.

During fiscal 2023 the Company incurred a customer relationship impairment charge more fully described in Note 8 “Goodwill and Other Intangible Assets.” The remaining customer relationships and trademarks are being amortized over 10 and 5 years, respectively.

For the fiscal year ended December 29, 2023, the Company reflected net sales and loss before income taxes of $ 194,776 and $ 1,116 , respectively, for Hardie’s in its consolidated statement of operations.

Other Fiscal 2023 Acquisitions

During the fiscal year ended December 29, 2023, the Company completed three other acquisitions for an aggregate initial purchase price of approximately $ 17,744 , consisting of $ 12,971 paid in cash at closing, $ 893 paid upon settlement of a net working capital adjustment, earn-out liabilities valued at approximately of $ 1,665 as of the dates of acquisition, and $ 2,215 of deferred payments.

If earned, these earn-out liabilities could total up to $ 2,562 in the aggregate.

The Company’s aggregate purchase price allocations are preliminary and are subject to revision pending the valuations of some elements of the goodwill and intangible assets acquired.

These valuations are incomplete as of December 29, 2023 as the Company is currently in the process of completing its assessment of valuation inputs and assumptions as well as opening working capital.

When applicable, these valuations require the use of Level 3 inputs.

All of the goodwill recorded for these acquisitions of $ 8,218 is deductible for income tax purposes.

The intangible assets acquired consisted of customer relationships valued at $ 4,276 as of the acquisition dates.

The customer relationships are being amortized over 10 years.

For the fiscal year ended December 29, 2023, the Company reflected net sales of approximately $ 63,369 in its consolidated statement of operations.

The Company has determined that separate disclosure of income before income taxes is impracticable due to the integration of these businesses into the Company's existing operations.

Chef Middle East

On November 1, 2022, pursuant to a share sale and purchase agreement, the Company acquired substantially all of the shares of Chef Middle East LLC (“CME”), a specialty food distributor with operations in the United Arab Emirates, Qatar and Oman.

The purchase price was approximately $ 108,749 , paid in cash at closing.

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.

The payment of the earn-out liability is subject to the successful achievement of certain gross profit targets.

The Company estimated the fair value of this contingent earn-out liability to be $ 7,500 as of November 1, 2022 and December 30, 2022.

The Company is in the process of finalizing a valuation of tangible and intangible assets of CME as of the acquisition date.

When applicable, these valuations require the use of Level 3 inputs.

The final purchase price was approximately $ 116,515 , consisting of $ 108,749 paid in cash at closing, $ 166 paid upon settlement of a net working capital true-up, and an earn-out liability valued at $ 7,600 as of the date of acquisition.

The earn-out liability was earned and paid in full during the fourth quarter of fiscal 2023 for a total of $ 10,000 .

The measurement period adjustments recorded during fiscal 2023 resulted in a increase in goodwill of $ 734 , a decrease in inventories of $ 735 , decrease in accrued liabilities of $ 314 , a decrease in other assets of $ 82 , and a decrease in deferred tax liabilities of $ 35 .

The valuation of tangible and intangible assets acquired has been completed as of December 29, 2023.

The intangible assets acquired consisted of customer relationships, trademarks and non-compete agreements valued at $ 25,800 , $ 11,400 and $ 320 , respectively, as of the acquisition date.

The customer relationships, trademarks and non-compete agreements are being amortized over 10 , 15 and 3 years, respectively.

None of the goodwill recorded for the CME acquisition is deductible for income tax purposes.

The goodwill recorded primarily reflects the value of acquiring an established specialty seafood and produce distributor and any intangible assets that do not qualify for separate recognition.

Capital Seaboard

On December 28, 2021, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of CGC Holdings, Inc.

(“Capital Seaboard”), a specialty seafood and produce distributor in Maryland.

The purchase price was approximately $ 31,036 , consisting of $ 28,000 paid in cash at closing, common stock warrants valued at $ 1,701 , and $ 1,335 paid upon settlement of a net working capital true-up.

Customer relationships and trademarks were valued at fair value using Level 3 inputs and are being amortized over 15 and 5 years, respectively.

Goodwill for the Capital Seaboard acquisition will be amortized over 15 years for tax purposes.

The goodwill recorded primarily reflects the value of acquiring an established specialty seafood and produce distributor to leverage the Company’s existing products in the markets served by Capital Seaboard, to supply Capital Seaboard’s product offerings to our East Coast markets and any intangible assets that do not qualify for separate recognition.

Other Acquisitions

During fiscal 2022, the Company completed six other acquisitions for an aggregate purchase price of approximately $ 55,300 , consisting of $ 55,300 paid in cash, subject to customary working capital adjustments.

The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $ 2,000 in the aggregate.

The Company is in the process of finalizing valuations of tangible and intangible assets as of the acquisition dates.

When applicable, these valuations require the use of Level 3 inputs.

Goodwill for these acquisitions will be amortized over 15 years for tax purposes.

The Company recognized professional fees of $ 4,357 , $ 450 and $ 435 in other operating expenses related to acquisition activities in fiscal 2022, 2021 and 2020, respectively.

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

Fiscal Year Ended

December 30, 2022

Net sales $ 245,670

Loss before income taxes $ 15,377

The table below presents unaudited pro forma consolidated income statement information of the Company as if the acquisitions completed during fiscal 2022 had occurred on December 26, 2020.

The pro forma results were prepared from financial information obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the acquisitions.

The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisitions been completed on the above date, nor is it necessarily indicative of the Company’s future results.

The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisitions, any incremental costs for transitioning to become a public company, and also does not reflect additional revenue opportunities following the acquisitions.

The pro forma information reflects amortization and depreciation of the acquisitions at their respective fair values.

Fiscal Year Ended

December 30, 2022 December 24, 2021

Net sales $ 2,843,207 $ 2,211,208

Income before income taxes $ 56,293 $ 4,146

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

Chef Middle East Capital Seaboard Other Acquisitions

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

Chef Middle East Hardie’s GreenLeaf Other Fiscal 2023 Acquisitions

Current assets $ 84,076 $ 26,366 $ 16,069 $ 8,632

4 unchanged sentences

Fixed assets 16,953 4,986 2,231 326

Other assets 941 122 17

Deferred tax liability ( 3,635 ) — ( 2,365 )

Right-of-use assets 5,321 13,303 2,026 3,258

Other assets 859 146 109 34

Deferred tax liabilities ( 3,600 ) — — ( 236 )

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

Current liabilities ( 43,841 ) ( 19,253 ) ( 9,240 ) ( 3,506 )

Earn-out liability ( 7,500 ) — ( 1,200 )

Total consideration $ 108,749 $ 31,036 $ 55,300

Total $ 116,515 $ 41,361 $ 88,174 $ 17,744

The Company recognized professional fees related to acquisition activities of $ 3,481 , $ 4,357 and $ 450 for fiscal 2023, 2022 and 2021, respectively, presented within other operating expenses, net on the consolidated statements of operations.

Unaudited Pro forma Financial Information

The table below presents select unaudited pro forma consolidated income statement information of the Company as if the GreenLeaf and Hardie’s acquisitions had occurred on December 25, 2021, and the CME acquisition had occurred on December 26, 2020.

The pro forma information reflects amortization and depreciation of the acquisitions at their respective fair value.

The pro forma information also reflects additional interest expense that would have been incurred by the Company to finance the acquisitions.

Pro forma interest expense was estimated based on the prevailing interest rates charged on the Company’s senior secured term loan during fiscal 2022.

CME did not have a pro forma impact during the fiscal year ended December 29, 2023 as it was included in the consolidated results of operations for the entire period.

Fiscal Years Ended

December 29, 2023 December 30, 2022

Net sales $ 3,527,947 $ 3,150,426

Income before income taxes $ 58,041 $ 53,458

Note 6 – Inventories

Inventories consist primarily of finished product.

Our entities record inventory using a mixture of first-in, first-out and average cost, which we believe approximates first-in, first-out.

Inventory is reflected net of adjustments for shrinkage, excess and obsolescence to approximate their net realizable value totaling $ 11,205 and $ 9,198 at December 29, 2023 and December 30, 2022, respectively.

18 unchanged sentences

accumulated depreciation and amortization ( 137,008 ) ( 119,013 )

Equipment, leasehold improvements and software, net $ 185,728 $ 133,622

Construction-in-process at December 30, 2022 related primarily to the build-out of the Company’s Miami, Dallas and Richmond, CA distribution facilities and the implementation of the Company’s Enterprise Resource Planning system.

Construction-in-process at December 24, 2021 related primarily related primarily to the build-outs of the Company’s Los Angeles and Miami distribution facilities.

Property and equipment, net

$ 234,793 $ 185,728

Construction-in-process at December 29, 2023 related primarily to the build-out of the Company’s Richmond, CA and CME distribution facilities.

Construction-in-process at December 30, 2022 related primarily related primarily to the build-outs of the Company’s Miami, Dallas, and Richmond, CA distribution facilities and the implementation of the Company’s Enterprise Resource Planning System.

The net book value of equipment financed under finance leases at December 29, 2023 and December 30, 2022 was $ 20,161 and $ 11,579 , respectively.

1 unchanged sentence

The components of depreciation and amortization expense were as follows:

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

4 unchanged sentences

Carrying amount as of December 24, 2021 $ 221,775

Goodwill adjustments (1) ( 792 )

Acquisitions 66,249

5 unchanged sentences

Carrying amount as of December 29, 2023 $ 356,021

(1) Goodwill adjustments represent measurement period adjustments related to certain acquisitions completed in that fiscal year and prior years.

Other intangible assets as of December 29, 2023 and December 30, 2022 consisted of the following:

5 unchanged sentences

Customer relationships 100 months $ 251,967 $ ( 103,042 ) $ 148,925

Non-compete agreements 73 months 8,899 ( 8,293 ) 606

Trademarks 147 months 56,257 ( 20,857 ) 35,400

Non-compete agreements 18 months 9,299 ( 8,761 ) 538

Total $ 317,523 $ ( 132,660 ) $ 184,863

1 unchanged sentence

Customer relationships 117 months $ 205,608 $ ( 85,447 ) $ 120,161

Non-compete agreements 26 months 8,579 ( 8,018 ) 561

Trademarks 165 months 51,137 ( 16,201 ) 34,936

Non-compete agreements 25 months 8,899 ( 8,293 ) 606

Total $ 265,644 $ ( 109,941 ) $ 155,703

During the second quarter of fiscal 2021, the Company recorded a $ 597 impairment charge, $ 433 net of tax, to fully write-down the net book value of its Cambridge trademark.

During fourth quarter of fiscal 2020, the Company committed to a plan to shift its brand strategy, to commence in the second quarter of fiscal 2021, to leverage its Allen Brothers brand in its west region and determined its Del Monte, Ports Seafood and Bassian Farms trademarks did not fit the Company’s long-term strategic objectives.

The Company assessed these trademarks for impairment and used the relief of royalty method to determine fair value.

Significant assumptions used include future sales forecasts, royalty rates and discount rates.

As a result of the assessment, the Company recorded a $ 24,200 impairment charge, $ 17,545 net of tax, to write-down the value of its Del Monte and Bassian Farms trademarks.

This impairment charge is presented within other operating expense s on the consolidated statements of operations.

During fiscal 2023, the Company recognized a customer relationships intangible asset impairment charge of $ 1,838 , $ 1,333 net of tax, related to the loss of a significant Hardie’s customer post acquisition.

The Company’s valuation of the Hardie’s customer list intangible asset as of the acquisition date, a Level 3 measurement, was based on an income approach using the excess earnings method which requires significant assumptions including future sales forecasts and a discount rate.

The impairment charge was measured by reducing its assumption of future sales for the significant customer lost post-acquisition to zero.

During fiscal 2021, the Company recorded a $ 597 impairment charge, $ 433 net of tax, to fully write-down the net book value of its Cambridge trademark.

These impairment charges are presented within other operating expense s on the consolidated statements of operations.

Amortization expense for other intangibles was $ 22,719 , $ 13,913 and $ 12,967 for the fiscal years ended December 29, 2023, December 30, 2022 and December 24, 2021, respectively.

10 unchanged sentences

Asset-based loan facility 7.51 % March 2027 100,000 40,000

Finance leases 4.63 % Various 11,331 11,602

Finance leases and other financing obligations 6.51 % Various 31,892 13,548

Convertible unsecured note — % June 2023 — 4,000

Other revolving credit facilities 7.72 % April 2023 2,217 —

Unamortized deferred costs and premium ( 17,339 ) ( 20,050 )

3 unchanged sentences

Maturities of the Company’s debt, excluding finance leases, for each of the next five years and thereafter at December 29, 2023 are as follows:

2024 $ 47,684

Thereafter 261,250

3 unchanged sentences

The Term Loan Credit Agreement provides for a senior secured term loan B facility (the “Term Loan Facility”).

On August 23, 2022, the Company entered into an eight amendment (“Eighth Amendment”) in an aggregate principal amount of $ 300,000 maturing on August 23, 2029 (“2029 Term Loans”), comprising of a refinancing of the then existing term loans balance under the Term Loan Credit Agreement of $ 167,391 and an incremental borrowing of $ 132,609 .

On August 23, 2022, the Company entered into an eighth amendment (“Eighth Amendment”) in an aggregate principal amount of $ 300,000 maturing on August 23, 2029 (“2029 Term Loans”), comprising of a refinancing of the then existing term loans balance under the Term Loan Credit Agreement of $ 167,391 and an incremental borrowing of $ 132,609 .

The incremental funds are to be used for capital expenditures, permitted acquisitions, working capital, and general corporate purposes of the Company.

Substantially all of the Company’s assets are pledged as collateral.

The Company is required to make scheduled principal payments of 0.25 % of the original principal amount per quarter.

On August 31, 2023, the Company made a voluntary prepayment of $ 20,000 towards the 2029 Term Loans.

In connection with the prepayment, the Company wrote-off unamortized deferred financing fees of $ 770 , which were

included in interest expense within the Company’s consolidated statements of operations.

On November 6, 2023, the Company entered into a tenth amendment (“Tenth Amendment”) to the Term Loan Credit Agreement which added a provision to allow share repurchases of the Company’s common stock subject to certain restrictive covenants.

Additionally, the Term Credit Agreement includes an accordion which permits the Company to request that the lenders extend additional Term Loans based on certain performance, leverage ratio and other restrictions.

The Term Loan Credit Agreement includes a springing maturity of the earlier of August 23, 2029 and the date that is 181 days prior to the schedule maturity date of any individual trance of unsecured indebtedness of which a principal amount in excess of $ 40,000 remains outstanding on such date.

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

The Eight Amendment involved multiple members of a loan syndicate.

The interest charged on the 2029 Term Loans is equal to a spread plus, at the Company’s option, either the Alternate Base Rate or the secured overnight financing rate (“SOFR”) for one-, two-, three- or six -month interest periods chosen by the Company.

The Company is required to make scheduled principal payments of 0.25 % of the original principal amount per quarter.

The Eighth Amendment involved multiple members of a loan syndicate.

The Company performed an analysis for each lender in accordance with ASC 470 “Debt” to determine whether the Eighth Amendment resulted in a substantial change to the remaining cash flows which is defined as a change in present value of remaining cash flows of 10% or more.

3 unchanged sentences

Arrangement and third-party transaction costs of $ 4,498 were expensed as incurred.

The Term Loan Facility contains affirmative covenants, negative covenants and events of default customary for a term loan B facility of this type, as more particularly described in the Term Loan Credit Agreement.

The Eight Amendment removed a minimum liquidity covenant which required the Company to maintain certain liquidity levels as of the last day of any fiscal quarter where EBITDA did not meet a predefined target.

A similar analysis was performed on the Tenth Amendment and as a result, the Company accounted for it as a modification and deferred lender fees of $ 1,385 as debt issuance costs to be amortized over the term of the loan and expensed third-party transaction costs of approximately $ 319 .

The Term Loan Facility contains affirmative covenants, negative covenants and events of default customary for a term loan B facility of this type.

Additionally, the Term Loan Facility includes covenants that restrict the Company’s ability to pay dividends subject to compliance with certain baskets and leverage ratio tests.

Asset-Based Loan Facility

3 unchanged sentences

On March 11, 2022, the Company entered into a third amendment to the ABL Credit Agreement which increased the aggregate commitments to $ 200,000 maturing on March 11, 2027.

Borrowings under the ABL will be used, and are expected to be used, for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company.

On July 7, 2023, the Company entered into a sixth amendment to the ABL Credit Agreement which increased the aggregate commitments to $ 300,000 maturing on March 11, 2027.

The sixth amendment to the ABL was accounted for as a debt modification.

The Company incurred transaction costs of $ 354 which were capitalized as deferred financing fees to be amortized over the term of the ABL, presented in other non-current assets in the Company’s consolidated balance sheet.

Borrowings under the ABL have been used, and are expected to be used, for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company.

Availability under the ABL will be limited to a borrowing base equal to the lesser of:

2 unchanged sentences

The ABL includes a springing maturity date that occurs 90 days prior to the earliest maturity under the Company’s senior secured term loan facility and the date that is 181 days prior to the scheduled maturity date of any individual tranche of unsecured indebtedness of which a principal amount in excess of $ 40,000 remains outstanding on such date and March 11, 2027.

The third amendment of the ABL was accounted for as a debt modification.

The Company incurred transaction costs of $ 406 which were capitalized as deferred financing fees to be amortized over the term of the ABL.

The interest rate charged on borrowings under the ABL is equal to a spread plus, at the Company’s option, either the Base Rate (as defined in the ABL Credit Agreement) or a forward-looking term rate based on SOFR for one-, three-, or six-month interest periods chosen by the Company.

The interest rate charged on borrowings under the ABL is equal to a spread plus, at the Company’s option, either the Base Rate or a forward-looking term rate based on SOFR for one-, three-, or six-month interest periods chosen by the Company.

The Company will pay certain recurring fees with respect to the ABL, including fees on unused lender commitments.

The ABL Credit Agreement contains customary affirmative covenants, negative covenants and events of default as more particularly described in the ABL Credit Agreement.

If the amount of availability under the ABL falls below $ 14,000 or 10 % of the borrowing base,the Company is required to comply with a minimum consolidated fixed charge coverage ratio of 1 :1.

The Company had reserved $ 24,173 of the ABL for the issuance of letters of credit.

As of December 30, 2022, funds totaling $ 135,827 were available for borrowing under the ABL.

If the amount of availability under the ABL falls below $ 21,000 or 10 % of the Line Cap, as defined as the lessor of the aggregate commitment and the borrowing base, the Company is required to comply with a minimum consolidated fixed charge coverage ratio of 1 :1.

As of December 29, 2023, the Company had reserved $ 27,970 of the ABL for the issuance of letters of credit and funds totaling $ 172,030 were available for borrowing under the ABL.

2028 Convertible Senior Notes

On December 13, 2022, the Company issued $ 287,500 aggregate principal amount of 2.375 % Convertible Senior Notes (the “2028 Convertible Notes”).

The 2028 Senior Notes were issued pursuant to an indenture, dated as of December 13, 2022 (the

“2028 Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee.

The 2028 Senior Notes were issued pursuant to an indenture, dated as of December 13, 2022 (the “2028 Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee.

Concurrently with the issuance of the 2028 Convertible Notes, the Company entered into separate, privately negotiated transactions (the “Exchange Transactions”) with a limited number of holders of its 1.875 % Convertible Senior Notes ( the “2024 Convertible Notes) to exchange or repurchase approximately $ 158,316 principal amount of 2024 Convertible Notes for an aggregate consideration consisting of approximately $ 159,709 in cash, which includes accrued interest on the 2024 Convertible Notes, and approximately 324,066 shares of the Company’s common stock.

Net proceeds are are expected to be used for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company.

Net proceeds were used for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company.

The Company performed an analysis for each lender in accordance with ASC 470 “Debt” to determine whether the Exchange Transactions resulted in a substantial change to the remaining cash flows which is defined as a change in present value of remaining cash flows or a change in the fair value of the conversion option of more than 10%.

As a result of the analysis, the Exchange Transaction was recorded as an extinguishment and the Company incurred a loss on debt extinguishment of $ 14,145 which is reflected in interest expense on the Company’s consolidated statements of operations.

The Company incurred third party transaction costs of approximately $ 6,971 which were capitalized as deferred financing fees to be amortized over the term of the 2028 Senior Notes.

16 unchanged sentences

At any time before the close of business on the scheduled trading day immediately before the maturity date, the 2024 Convertible Notes will be convertible at the option of holders into shares of the Company’s common stock, together with cash in lieu of any fractional share, at an initial conversion price of approximately $ 44.20 per share.

The conversion price is subject to adjustments upon the occurrence of certain events.

conversion price is subject to adjustments upon the occurrence of certain events.

The 2024 Convertible Notes will mature on December 1, 2024, unless earlier converted or repurchased in accordance with their terms.

1 unchanged sentence

In addition, if the Company undergoes a fundamental change, as described in the 2024 Indenture, holders may require the Company to repurchase for cash all or part of their 2024 Convertible Notes at a repurchase price equal to 100 % of the principal amount of the 2024 Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the required repurchase date.

GreenLeaf Unsecured Note

In connection with the GreenLeaf acquisition, the Company issued a $ 10,000 unsecured note bearing interest of 4.5 %.

The principal on the unsecured note is due in two equal installments on April 30, 2024 and 2025 and is presented under the caption “Finance leases and other financing obligations” in the table above.

Convertible Unsecured Note

2 unchanged sentences

The interest rate charged on the Unsecured Note was 4.5 % per annum and increased to 5.0 % after the two-year anniversary of the closing date.

The Company may, in certain instances beginning eighteen months after issuance of the Unsecured Note, redeem the Unsecured Note in whole or in part for cash or convert the Unsecured Note into shares of the Company’s common stock at the conversion price of $ 43.93 per share.

After the two-year anniversary of the closing date, the Holder may convert the Unsecured Note into shares of the Company’s common stock at the conversion price.

Upon a change of control event, the Holder may convert the Unsecured Note into shares of the Company’s common stock at the conversion price or redeem the Unsecured Note for cash.

The Unsecured Note matured on June 29, 2023 and was repaid in full, including all accrued interest, for $ 4,049 in cash.

The net carry value of the Company’s convertible notes as of December 29, 2023 and December 30, 2022 was:

5 unchanged sentences

Total $ 327,184 $ ( 5,915 ) $ 321,269 $ 333,184 $ ( 7,249 ) $ 325,935

The components of interest expense on the Company’convertible notes were as follows:

Fiscal Year Ended

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

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

4 unchanged sentences

Note 10 – Stockholders’ Equity

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

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

These warrants expire on April 22, 2024.

In connection with the acquisition of Capital Seaboard during the first quarter of fiscal 2022, the Company issued warrants with a fair value of $ 1,701 to purchase up to 150,000 shares of the Company’s common stock at an exercise price of $ 31.55 per share.

In connection with an acquisition during fiscal 2022, the Company issued warrants with a fair value of $ 1,701 to purchase up to 150,000 shares of the Company’s common stock at an exercise price of $ 31.55 per share.

These warrants expire on December 26, 2025.

Public Common Stock Offering

On May 14, 2020, the Company completed a public offering of 5,769,231 shares of its common stock at a price of $ 13.00 per share to the underwriters, to be reoffered by the underwriters at variable prices per share, which resulted in net proceeds of approximately $ 74,691 after deducting underwriters’ fees, commissions and transaction expenses.

In addition, the Company granted a 30-day option to purchase up to an additional 865,384 shares of its common stock at a price of $ 13.00 per share to the underwriters, to be reoffered by the underwriters at variable prices per share.

The option was fully exercised on June 2, 2020 and resulted in additional proceeds of $ 11,250 .

2023 Employee Stock Purchase Plan

On May 12, 2023, the Company’s stockholders adopted the Company’s Employee Stock Purchase Plan (the “ESPP”), which permits participants to purchase a total of 793,402 shares of the Company’s common stock through payroll deductions of up to 10 % of eligible compensation.

The purchase price of the shares will be 85 % of the fair market value of the common stock on the date of purchase.

The plan does not include any look-back or reset provisions.

The first offering period is October 16, 2023 to December 31, 2023.

Subsequent offering periods will run bi-annually from January 1st to June 30th and July 1st to December 31st.

At December 29, 2023, there were 793,402 shares of common stock available for issuance under the ESPP.

The ESPP did not have a material impact on the Company’s consolidated financial statements in fiscal year 2023.

Equity Incentive Plan

13 unchanged sentences

Stock compensation expense was $ 20,042 , $ 13,602 and $ 11,479 for the fiscal years ended December 29, 2023, December 30, 2022 and December 24, 2021, respectively.

The related tax benefit for stock-based compensation was $ 22 , $ 49 and $ 133 for the fiscal years ended December 30, 2022, December 24, 2021 and December 25, 2020, respectively.

The related tax expense (benefit) for stock-based compensation was $ 580 , $( 22 ) and $( 49 ) for the fiscal years ended December 29, 2023, December 30, 2022 and December 24, 2021, respectively.

The following table reflects the activity of RSAs during the fiscal year ended December 29, 2023:

10 unchanged sentences

The fair value of RSAs vested during the fiscal years ended December 29, 2023, December 30, 2022 and December 24, 2021, was $ 7,170 , $ 8,719 and $ 7,848 , respectively.

These awards are a mix of time-, market- and performance-based grants awarded to key employees and non-employee directors that generally vest over a range of periods up to four-years .

These awards are a mix of time-, market- and performance-based grants awarded to key employees and non-employee directors that generally vest over a range of periods up to five-years .

The market- and performance-based RSAs generally cliff vest, if at all, after the conclusion of a three-year performance period and vesting is subject to the award recipient’s continued service to the Company as of the vesting date.

The number of performance-based RSAs that ultimately vest is based on the Company’s attainment of certain profitability and return on invested capital targets.

During the fourth quarter of fiscal 2020, the Company modified its 2018 performance-awards and certain 2018 time-based awards such that they vested on December 17, 2020.

The modifications affected seventeen employees and resulted in incremental stock compensation expense of $ 1,999 .

Concurrent with these modifications, the Company also cancelled its 2020 and 2019 performance-based awards and its 2020 market-based equity awards.

At December 29, 2023, the total unrecognized compensation cost for the Company’s unvested RSAs was $ 18,895 to be recognized over a weighted-average period of approximately 1.6 years.

Of this total, $ 9,281 related to RSAs with time-based vesting provisions to be recognized over a weighted average period of 2.0 years and $ 10,799 related to RSAs with performance- or market-based vesting provisions to be recognized over a weighted average period of 1.8 years.

Of this total, $ 9,016 related to RSAs with time-based

vesting provisions to be recognized over a weighted average period of 1.5 years and $ 9,879 related to RSAs with performance- or market-based vesting provisions to be recognized over a weighted average period of 1.6 years.

The following table summarizes stock option activity during the fiscal year ended December 29, 2023:

8 unchanged sentences

Exercisable at December 29, 2023 109,527 20.23 $ 1,008 2.2

The total intrinsic value of options exercised during fiscal 2023 and 2022 was $ 22 and $ 63 , respectively.

There were no options exercised in fiscal 2021.

The Company issues new shares upon the exercise of stock options.

3 unchanged sentences

These awards vest over a period of up to four years .

Stock-based compensation expense for these awards was $ 362 during the fiscal year ended December 30, 2022.

As of December 30, 2022, the fair value of these awards was $ 362 and is presented within Other liabilities and deferred credits on the Company’s consolidated balance sheets.

Stock-based compensation expense for these awards was $ 2,175 and $ 362 during the fiscal years ended December 29, 2023 and December 30, 2022, respectively.

As of December 29, 2023 and December 30, 2022, the fair value of these awards was $ 2,537 and $ 362 , respectively, and they are presented within accrued liabilities on the Company’s consolidated balance sheets.

Note 11 – Leases

The components of net lease cost were as follows:

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

26 unchanged sentences

At December 29, 2023, the weighted-average discount rate for operating and finance leases was 7.4 % and 7.1 %, respectively.

As of December 30, 2022, the Company is contractually obligated to make payments over the next 14 years of approximately $ 44,593 related to long-term leases for a distribution facility, vehicles and material handling equipment that have not commenced.

Accordingly, the Company has not recognized ROU assets or lease liabilities associated with these leases.

Note 12 – Income Taxes

The components of the Company’s operating income (loss) before income taxes consist of the following:

Fiscal Year Ended

The components of the Company’s income (loss) before income taxes consist of the following:

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

3 unchanged sentences

The provision for income taxes consists of the following:

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

10 unchanged sentences

Total income tax expense (benefit) $ 20,879 $ 14,139 $ ( 1,853 )

In response to the Pandemic, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.

Among other provisions it allows for the carryback of federal net operating losses generated in 2020 to five preceding years and a refundable Employee Retention Tax Credit (“ERTC”) to eligible employers.

The Company’s fiscal 2020 income tax provision reflects the impact of an expected income tax refund receivable of $ 21,250 which is reflected in prepaid expenses and other current assets on the Company’s consolidated balance sheets as of December 30, 2022 and December 24, 2021, as a result of the five year carryback allowed under the CARES Act.

During the second quarter of fiscal 2021, the Company recognized a receivable of $ 1,418 related to the ERTC which is presented within prepaid expenses and other current assets on the consolidated balance sheet and the related expense reduction is presented within selling, general and administrative expenses on the consolidated statements of operations.

The Company’s fiscal 2020 income tax provision reflects the impact of an expected income tax refund receivable of $ 22,966 and $ 21,250 which is reflected in prepaid expenses and other current assets on the Company’s consolidated balance sheets as

of December 29, 2023 and December 30, 2022, respectively, as a result of the five year carryback allowed under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The IRS is experiencing significant processing delays driven by an increase in net operating loss carryback requests as a result of the CARES Act, along with other factors.

As a result, the processing and expected receipt of the federal income tax refund receivable and ERTC receivable have been significantly delayed.

The Company is currently working with IRS Taxpayer’s

Advocate Services and consultants to resolve the processing issue.

As a result, the processing and expected receipt of the federal income tax refund receivable has been significantly delayed.

The Company is currently working with IRS Taxpayer’s Advocate Services and consultants to resolve the processing issue.

While progress has been made with the IRS and the Company expects to receive the refunds within one year, the exact timing of receipt is difficult to predict.

Income tax expense (benefit) differed from amounts computed using the statutory federal income tax rate due to the following reasons:

Fiscal Year Ended

Fiscal Years Ended

December 29, 2023 December 30, 2022 December 24, 2021

7 unchanged sentences

Acquisition costs 509 472 —

Federal NOL rate differential — — ( 5,212 )

Compensation limitation 4,504 — —

US tax on international operations 929 190 —

Stock compensation 913 ( 170 ) ( 361 )

1 unchanged sentence

Income tax expense (benefit) $ 20,879 $ 14,139 $ ( 1,853 )

During the third quarter of fiscal 2023, immaterial errors were identified in the calculation of the provision for income tax expense (benefit) for fiscal 2022, 2021 and 2020.

The Company recorded an out of period adjustment of $ 2,135 to the provision for income tax expense in fiscal 2023.

The impact of these errors on prior periods would be to increase the provision for income tax expense by $ 1,308 for fiscal 2022 and to reduce the provision for income tax benefit by $ 719 and $ 108 for fiscal 2021 and 2020, respectively.

Deferred tax assets and liabilities at December 29, 2023 and December 30, 2022 consist of the following:

19 unchanged sentences

Valuation allowance ( 2,119 ) ( 1,641 )

Total net deferred tax (liability) asset $ ( 6,098 ) $ 9,380

Total net deferred tax liability $ ( 14,418 ) $ ( 6,098 )

The deferred tax provision results from the effects of net changes during the year in deferred tax assets and liabilities arising from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

2 unchanged sentences

For Federal income tax purposes, the 2020 through 2023 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations and the fact that we have not yet filed our tax return for 2023.

For state tax purposes, the 2018 through 2022 tax years remain open for

examination by the tax authorities under a four-year statute of limitations.

For state tax purposes, the 2019 through 2023 tax years remain open for examination by the tax authorities under a four-year statute of limitations.

The Company records interest and penalties, if any, in income tax expense.

4 unchanged sentences

The Company’s charitable contributions carry forward of $ 2,271 expire between fiscal 2025 and 2027.

The Company is permanently reinvesting the earnings of it’s foreign operations.

The Company is permanently reinvesting the earnings of its foreign operations.

The accumulated undistributed earnings of its foreign subsidiaries are immaterial, as a majority of such earnings have been taxed in the U.S.

13 unchanged sentences

Conversion of debt into common stock $ — $ 11,375 $ —

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

Contingent earn-out liabilities for acquisitions $ 5,765 $ 8,700 $ 5,500

Unsecured notes issued for acquisitions $ 10,000 $ — $ —

Note 14 – Employee Benefit Plans

Employee Tax-Deferred Savings Plan

The Company offers a 401(k) Plan to eligible employees that provides for tax-deferred salary deductions for eligible employees.

Employees may choose to make voluntary contributions of their annual compensation to the 401(k) Plan, limited to an annual maximum amount as set periodically by the Internal Revenue Service.

The Company provides discretionary matching contributions equal to 50 percent of the employee’s contribution amount, up to a maximum of six of the employee’s annual salary, capped at $ 2.5 per employee per year.

The Company sponsors a defined contribution plan covering substantially all full-time employees (the “401(k) Plan”) that provides for tax-deferred salary deductions for eligible employees.

Employees choose to make voluntary contributions of their annual compensation to the 401(k) Plan, limited to an annual maximum amount as set periodically by the Internal Revenue Service.

The Company provides discretionary matching contributions equal to 50 percent of the employee’s contribution amount, up to a maximum of six percent of the employee’s annual salary, or the annual compensation limit set by the Internal Revenue Service, whichever is lower.

Matching contributions begin vesting after one year and are fully vested after five years .

5 unchanged sentences

The Chefs’ Warehouse Mid-Atlantic, LLC, a subsidiary of the Company, leases a distribution facility that is 100 % owned by entities controlled by Christopher Pappas, the Company’s chairman, president and chief executive officer, and John Pappas, the Company’s vice chairman and one of its directors, and are deemed to be affiliates of these individuals.

Expense related to this facility was $ 493 for fiscal 2022, $ 493 for fiscal 2021 and $ 488 for fiscal 2020.

This lease was amended during the first quarter of fiscal 2020 and expires on September 30, 2023.

Expense related to this facility was $ 617 for fiscal 2023 and $ 493 for fiscal 2022 and 2021.

This lease was amended during fiscal 2023 and expires on September 30, 2028.

Note 16 – Commitments and Contingencies

15 unchanged sentences

The following tables summarize the activity in our valuation accounts during the fiscal years ended December 29, 2023, December 30, 2022 and December 24, 2021:

Balance at Beginning of Period Additions (Recoveries) Charged to Expense Deductions Balance at End of Period

Balance at Beginning of Period Additions Charged to Expense Deductions (1) Balance at End of Period

Allowance for doubtful accounts

6 unchanged sentences

December 24, 2021 2,261 ( 215 ) — 2,046

Note 18 – Subsequent Events

On January 23, 2023, the Company entered into an asset purchase agreement to acquire substantially all of the assets of a specialty food and produce distributor in California.

The purchase price was $ 10,000 paid in cash at closing and is subject to a customary working capital true-up.

The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $ 2,000 .

The Company has not provided the preliminary purchase price allocation for this acquisition as the initial accounting is incomplete.

(1) With respect to the allowance for doubtful accounts, the deductions amount is primarily composed of write-offs, less recoveries which are not material.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk