What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-27 · 61 added, 61 removed, 199 unchanged (38% of the section changed)

3 unchanged sentences

and its subsidiaries.

All dollar amounts included in the tables in the following discussion are presented in thousands.

Overview and Recent Developments

8 unchanged sentences

the expansion of our existing distribution centers;

our entry into new distribution centers, including the construction of new distribution centers in San Francisco, Toronto, Dallas, Los Angeles and Miami;

our entry into new distribution centers, including the construction of new distribution centers in Portland, San Francisco, United Arab Emirates, Philadelphia, Los Angeles and Miami;

and the import and sale of our proprietary brands.

Through these efforts, we believe that we have been able to expand our customer base, enhance and diversify our product selections, broaden our geographic penetration and increase our market share.

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.

15 unchanged sentences

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.

Over the last several years, we have increased our distribution capacity to approximately 3.0 million square feet in 49 distribution facilities as of December 27, 2024.

Over the period from fiscal 2022 through fiscal 2024, we have invested significantly in acquisitions, infrastructure and management.

35 unchanged sentences

• 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.

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, certain third-party deal costs incurred in connection with business acquisitions or financing arrangements and certain other costs.

• 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.

Interest expense consists primarily of interest on our outstanding indebtedness and, as applicable, the amortization or write-off of deferred financing fees.

Results of Operations

2 unchanged sentences

Fiscal Years Ended

(in thousands) December 29, 2023 December 30, 2022 December 24, 2021

December 27, 2024 December 29, 2023 December 30, 2022

Net sales $ 3,794,212 $ 3,433,763 $ 2,613,399

4 unchanged sentences

Operating income 128,207 100,943 85,738

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)

Interest expense 48,675 45,474 43,849

Income before income taxes 79,532 55,469 41,889

Provision for income tax expense 24,053 20,879 14,139

Net income $ 55,479 $ 34,590 $ 27,750

Fiscal Year Ended December 27, 2024 Compared to Fiscal Year Ended December 29, 2023

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.

2024 2023 $ Change % Change

Net sales $ 3,794,212 $ 3,433,763 $ 360,449 10.5 %

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.

Organic growth contributed $258.9 million, or 7.5%, to sales growth and the remaining growth of $101.6 million, or 3.0%, resulted from prior year acquisitions.

Organic case count increased approximately 4.6% in our specialty category.

In addition, specialty unique customers and placements increased 6.6% and 11.6%, respectively, compared to the prior year.

Pounds sold in our center-of-

the-plate category increased 6.3% compared to the prior year.

Organic pounds sold in our center-of-the-plate category increased 3.3% compared to the prior year.

Estimated inflation was 3.5% in our specialty category and 3.0% in our center-of-the-plate category compared to fiscal 2023.

2 unchanged sentences

Gross profit margin 24.1 % 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.

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.

Gross profit dollars increased primarily as a result of sales growth and price inflation.

Gross profit margin increased approximately 37 basis points due to sales growth combined with improved pricing methods and inventory management, as well as changes in volume mix between specialty and center-of-the-plate category sales.

Gross profit margins increased 32 basis points in the Company’s specialty category and increased 12 basis points in the Company’s center-of-the-plate category compared to the prior year.

Selling, General and Administrative Expenses

2 unchanged sentences

Percentage of net sales 20.7 % 20.5 %

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.

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.

The increase in selling, general and administrative expenses was primarily due to higher depreciation and amortization expenses driven by acquisitions and facility investments, and higher costs associated with compensation and benefits, facilities and distribution to support sales growth.

Our ratio of selling, general and administrative expenses to net sales increased 20 basis points due to increased near-term costs associated with our investments in facilities and acquisitions.

Other Operating Expenses, Net

1 unchanged sentence

Other operating expenses $ 1,088 $ 8,773 $ (7,685) (87.6) %

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.

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.

The decrease in other operating expenses relates primarily to non-cash credits of $3.3 million for changes in the fair value of our contingent earn-out liabilities in fiscal 2024 compared to non-cash charges of $3.1 million in the prior year and a year over year decrease of $2.6 million primarily related to third-party deal costs incurred in connection with business acquisitions and financing arrangements, partially offset by charges associated with employee severance in fiscal 2024.

Additionally, fiscal 2023 reflected an impairment charge on customer relationship intangible assets of $1.8 million related to the loss of a significant Hardie’s customer post-acquisition.

Interest Expense

1 unchanged sentence

Interest expense $ 48,675 $ 45,474 $ 3,201 7.0 %

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.

Interest expense increased primarily due to higher average principal amounts of outstanding debt due to an increase in finance leases and amounts drawn on our revolving credit facility and higher rates of interest charged on the variable rate portion of our outstanding debt.

Provision for Income Tax Expense

2 unchanged sentences

Effective tax rate 30.2 % 37.6 %

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.

The lower effective tax rate for fiscal 2024 was primarily driven by a $2.1 million charge in fiscal 2023 for return-to-provision adjustments identified in the completion of our fiscal 2022 tax return and the impact of those adjustments on the fiscal 2023 estimated annual effective tax rate.

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.

The following table presents selected financial information on our indebtedness (in thousands):

The following table presents selected financial information on our indebtedness:

December 27, 2024 December 29, 2023 December 30, 2022

7 unchanged sentences

See Note 9 “Debt Obligations” to our consolidated financial statements for a full description of our debt instruments.

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.

Significant Financing Transactions

In December 2024, the 1.875% Convertible Senior Notes ( the “2024 Convertible Notes”) matured and we issued 858,360 shares of our common stock, in accordance with the exercise of conversion rights provisions of the 2024 Convertible Notes, and paid approximately $2.1 million, which included accrued interest on the 2024 Convertible Notes.

In March 2024, we amended our senior secured term loan agreement, which reduced the interest rate spread by 75 basis points on our senior secured term loan facility.

In October 2024, we further amended our senior secured term loan agreement, which reduced the interest rate spread by an additional 50 basis points.

Additionally, during fiscal 2024, we made voluntary principal prepayments of $14.0 million towards the senior secured term loan.

In April 2024, we made a scheduled principal payment of $5.0 million towards the unsecured note issued in connection with the GreenLeaf acquisition.

The note is presented under the caption “Finance leases and other financing obligations” in the table above.

In November 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.

During fiscal 2024, we repurchased and retired 426,235 shares of our common stock at an average purchase price of $40.78 per share.

The share repurchases were funded by our available cash.

The remaining share purchase authorization was $82.6 million at December 27, 2024.

We are not obligated to repurchase any specific number of shares and may suspend or discontinue the program at any time.

On July 7, 2023, we increased the aggregate commitments on our asset-based loan facility to $300.0 million.

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

Concurrently with the issuance of the 2028 Convertible Notes, we exchanged or repurchased approximately $158.3 million principal amount of 1.875% Convertible Senior Notes ( the“2024 Convertible Notes”) for an aggregate consideration consisting of approximately $159.7 million in cash, which includes accrued interest on the 2024 Convertible Notes, and approximately 324,066 shares of the Company’s common stock.

Concurrently with the issuance of the 2028 Convertible Notes, we exchanged or repurchased approximately $158.3 million principal amount of the 2024 Convertible Notes for an aggregate consideration consisting of approximately $159.7 million in cash, which includes accrued interest on the 2024 Convertible Notes, and approximately 324,066 shares of the Company’s common stock.

We incurred transaction costs of approximately $7.0 million which were capitalized as deferred financing fees to be amortized over the term of the 2028 Senior Notes.

2 unchanged sentences

Arrangement and third-party transaction costs of $4.5 million were expensed as incurred.

On March 1, 2021, we issued $50.0 million aggregate principal amount of our 2024 Convertible Senior Notes at a premium which were offered as an additional issuance of our $150.0 million Convertible Senior Notes due 2024 issued on November 22, 2019.

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.

The following table presents selected financial information on liquidity (in thousands):

The following table presents selected financial information on liquidity:

December 27, 2024 December 29, 2023 December 30, 2022

19 unchanged sentences

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)

December 27, 2024 December 29, 2023 December 30, 2022

Net cash provided by operating activities $ 153,061 $ 61,639 $ 23,134

Net cash used in investing activities $ (49,821) $ (179,311) $ (232,023)

Net cash (used in) provided by financing activities $ (38,482) $ 9,010 $ 253,215

Our cash provided by operating activities is predominately driven by net sales to our customers.

1 unchanged sentence

Net cash provided by operations was $153.1 million for the fiscal year ended December 27, 2024 compared to $61.6 million for the fiscal year ended December 29, 2023.

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.

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.

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.

The increase in cash provided by operating activities was primarily due to gross profit growth, favorable timing of supplier payments at fiscal year-end and higher accrued compensation compared to the prior year.

Net cash used in investing activities was $49.8 million in fiscal 2024 driven by $49.5 million in capital expenditures.

Net cash used by financing activities was $38.5 million for fiscal 2024 driven primarily by $23.0 million of payments of debt and other financing obligations, $26.4 million of payments under our asset-based loan and revolving credit facilities, $17.4 million used to repurchase our common stock, $7.4 million paid for shares surrendered to pay tax withholding related to the vesting of equity incentive plan awards, $7.1 million of finance lease payments and $3.8 million of earn-out payments, partially offset by $46.4 million of incremental borrowings on our asset-based loan and revolving credit facilities.

Off-Balance Sheet Arrangements

4 unchanged sentences

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 and (v) accounting for income taxes.

(i) determining our allowance for credit losses, (ii) business combinations, (iii) valuing goodwill and intangible assets and (iv) accounting for income taxes.

For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies.

Allowance for Doubtful Accounts

We analyze customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of our allowance for doubtful accounts.

Allowance for Credit Losses

We analyze customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of our allowance for credit losses.

In instances where a reserve has been recorded for a particular customer, future sales to the customer are either conducted using cash-on-delivery terms or the account is closely monitored so that agreed-upon payments are received prior to orders being released.

1 unchanged sentence

We also estimate receivables that will ultimately be uncollectible based upon historical write-off experience.

Management incorporates current 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.

We may be required to increase or decrease our allowance for doubtful accounts due to various factors, including the overall economic environment and particular circumstances of individual customers.

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.

These adjustments are primarily based upon customer demand, inventory age, specifically identified inventory items and overall economic conditions.

A sudden and unexpected change in consumer preferences or change in overall economic conditions could result in a significant change to these adjustments that could require a corresponding charge to earnings.

We actively manage our inventory levels as we seek to minimize the risk of loss and have consistently achieved a relatively high level of inventory turnover.

Management incorporates current macro-economic factors in existence as of the balance sheet date that may impact the food-away-from-home industry and/or its customers.

We may be required to increase or decrease our allowance for credit losses due to various factors, including the overall economic environment and particular circumstances of individual customers.

Our accounts receivable balance was $366.3 million and $334.0 million, net of the allowance for credit losses of $22.3 million and $21.4 million, as of December 27, 2024 and December 29, 2023, respectively.

Business Combinations

14 unchanged sentences

When analyzing whether to aggregate components into single reporting units, management considers whether each component has similar economic characteristics.

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.

customer and methods of distribution of products and the regulatory environment in which we operate.

As of December 27, 2024, we maintain four reporting units.

2 unchanged sentences

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.

When a quantitative analysis is required, we estimate the fair value of our reporting units using an income approach that incorporates the use of a discounted cash flow model that involves many management assumptions that are based upon future growth projections.

When a quantitative analysis is performed, we estimate the fair value of our reporting units using a combination of income and market approaches.

The income approach incorporates the use of a discounted cash flow model 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.

1 unchanged sentence

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

The market approach of determining fair value, which includes the guideline public company method, is based on comparable market multiples for companies engaged in similar businesses.

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

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.

For the fiscal year ended December 27, 2024, the Company assessed the recoverability of goodwill using a quantitative analysis and determined that the fair value of its reporting units substantially exceeded their respective carry values.

For the fiscal year ended December 29, 2023, 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.

As a result, no goodwill impairments were identified for those periods.

Total goodwill as of December 27, 2024 and December 29, 2023 was $356.3 million and $356.0 million, respectively.

3 unchanged sentences

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.

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.

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 2024 or 2023 indicating that the carrying value of our finite-lived intangible assets are not recoverable.

8 unchanged sentences

This evaluation considers several factors, including recent results of operations, scheduled reversal of deferred tax liabilities, future taxable income and tax planning strategies.

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.

As of December 27, 2024, we did not have a valuation allowance.

As of December 29, 2023, we had a valuation allowance of $2.1 million, 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.

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.

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.

2 unchanged sentences

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 7. Management’s Discussion and Analysis