What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-24 compared with 2025-02-25 · 74 added, 61 removed, 199 unchanged (40% of the section changed)

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We are a premier distributor of specialty foods in the leading culinary markets in the United States, the Middle East and Canada.

We offer more than 88,000 SKUs, ranging from high-quality specialty foods and ingredients to basic ingredients and staples, produce and center-of-the-plate proteins.

We offer more than 90,000 stock-keeping units (“SKUs”), ranging from high-quality specialty foods and ingredients to basic ingredients and staples, produce and center-of-the-plate proteins, such as beef, seafood and poultry.

We serve more than 55,000 Core Customer locations, primarily located in our twenty-three geographic markets across the United States, the Middle East and Canada, and the majority of our customers are independent restaurants and fine dining establishments.

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the expansion of our existing distribution centers;

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;

our entry into new distribution centers, including the construction of new distribution centers that serve our markets in Las Vegas, Oman, Denver, Portland, San Francisco, United Arab Emirates, Philadelphia 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.

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.

The final purchase price was $88.2 million consisting of $72.2 million paid in cash at closing, $3.6 million paid upon settlement of a net working capital true-up, the issuance of a $10.0 million unsecured note and 75,008 shares of the Company’s common stock with an approximate value of $2.5 million based on the trading price of the Company’s common stock on the date of acquisition.

On March 20, 2023, we acquired substantially all of the assets of Hardie’s F&V, LLC (“Hardie’s”), a specialty produce distributor with operations in Texas.

The final purchase price was approximately $41.4 million, consisting of $38.0 million paid in cash at closing, $0.6 million received upon settlement of a net working capital true-up and an earn-out liability valued at approximately $4.0 million as of the acquisition date.

If earned, the earn-out liability could total up to $10.0 million over a two-year period.

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

The final purchase price was approximately $116.5 million, consisting of $108.7 million paid in cash at closing, $0.2 million paid upon settlement of a net working capital true-up, and an earn-out liability valued at $7.6 million as of the date of acquisition.

The earn-out liability was earned and paid in full during the fourth quarter of fiscal 2023 for a total of $10.0 million.

Recent Acquisition

O n October 1, 2025, we entered into an asset purchase agreement to acquire substantially all of the assets of Italco Food Products (“Italco”), a specialty food distributor based in Denver, Colorado.

The purchase price was $16.5 million and is subject to customary working capital true-ups.

The assets acquired consist primarily of inventory, accounts receivable and goodwill and other intangibles and are not material to our consolidated financial statements.

Our Growth Strategies and Outlook

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• product innovation and new product category introduction;

• operational efficiencies through system enhancements;

• operational efficiencies through system enhancements and consolidation of truck routes and facilities;

• operating expense reduction through the centralization of general and administrative functions.

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When economic conditions deteriorate, our customers’ businesses are negatively impacted as fewer people eat away-from-home and those who do spend less money.

As economic conditions begin to improve, our customers’ businesses historically have likewise improved, which contributes to improvements in our business.

As economic conditions improve, our customers’ businesses historically have likewise improved, which contributes to improvements in our business.

Similarly, the direct-to-consumer business of our Allen Brothers subsidiary is significantly dependent on consumers’ discretionary spending habits, and weakness or uncertainty in the economy could lead to consumers buying less from Allen Brothers.

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Given our wide selection of product categories, as well as the continuous introduction of new products, we can experience shifts in product sales mix that have an impact on net sales and gross profit margins.

This mix shift is most significantly impacted by the introduction of new categories of products in markets that we have more recently entered, the shift in product mix resulting from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.

This mix shift is most significantly impacted by the introduction of new product categories in markets that we have more recently entered, the shift in product mix resulting from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.

The foodservice distribution industry is fragmented but consolidating, and we have supplemented our internal growth through selective strategic acquisitions.

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Performance Indicators

In addition to evaluating our income from operations, our management team analyzes our performance based on net sales growth, gross profit and gross profit margin.

In assessing the performance of our business, our management team considers a variety of performance and financial measures.

The key measures used by our management are discussed below.

• Net sales growth.

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Our gross profit and gross profit as a percentage of net sales, or gross profit margin, are driven principally by changes in volume and fluctuations in food and commodity prices and our ability to pass on any price increases to our customers in an inflationary environment and maintain or increase gross profit margin when our costs decline.

The majority of our pricing is set at the time of order and we typically pass cost increases or decreases to our customers.

Our ability to fully pass along cost changes and the timing of those changes can cause fluctuations in our gross profit margin.

Also, some of our pricing to customers is based on a cost-plus methodology, which impacts gross profit in periods of cost inflation or deflation.

Our gross profit margin is also a function of the product mix of our net sales in any period.

This mix shift is most significantly impacted by the introduction of new categories of products in markets that we have more recently entered, impact of

product mix from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.

Product mix is most significantly impacted by the introduction of new product categories in markets that we have more recently entered and from acquisitions, as well as the continued growth in item penetration on higher velocity items such as dairy products.

• Volume Measurements.

In assessing our results, we utilize both total and organic growth, which excludes growth from an acquired business until it has been reflected in our results of operations for at least 12 months.

We use case count as the volume measurement in our specialty product category and pounds sold as the volume measurement in our center-of-the-plate category.

Case count represents the volume of specialty products sold to customers during a given time period.

Case growth is calculated by dividing the change in case volumes sold by the number of cases sold in the prior period.

We define a case as the lowest level of packaged products as received from our suppliers, with one case containing several individually packaged units of the same product.

Where individual packaged units are sold separately, case volume is calculated using the case equivalent quantity sold.

Pounds represent the volume of center-of-the-plate products sold to customers during a given time period.

Pounds growth is calculated by dividing the change in pound volumes sold by the number of pounds sold in the prior period.

• Other Performance Indicators.

While case count is used for the volume measurement in the specialty category, we also disclose changes in specialty unique customers and specialty placements to provide additional context to our results and to the performance of our business.

We define unique customers as the number of customers who purchase product in a given week.

Each customer, regardless of the number of deliveries made during the week, is counted only once.

Placements is the sum of the unique SKUs sold per customer, also in a given week.

Our customer count and placements measures are subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and we present these measures for historical periods reflecting these adjustments.

Key Financial Definitions

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

Other operating expenses includes expenses primarily related to changes in the fair value of our 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:

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Net sales $ 4,149,537 $ 3,794,212 $ 355,325 9.4 %

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.

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.

Organic growth contributed $345.7 million, or 9.1%, to sales growth and the remaining growth of $9.6 million, or 0.3%, resulted from current year acquisitions.

Organic case count increased approximately 3.9% in our specialty category, representing an increase in net sales of $90.4 million.

In addition, unique customers and placements in our specialty category increased 2.9% and 6.4%, respectively, compared to the prior year.

Organic pounds sold in our center-of-the-plate category decreased 2.2% compared to the prior year, representing a decrease in net sales of $32.5 million, primarily due to our exit from a non-core commodity poultry program in fiscal 2025.

Estimated inflation increased sales by $102.2 million, or 4.4% in our specialty category and by $166.7 million, or 11.5% in our center-of-the-plate category compared to fiscal 2024.

2025 2024 $ Change % Change

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Gross profit margin 24.2 % 24.1 %

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.

Gross profit dollars increased $85.6 million as a result of year-over-year sales growth which includes inflation and acquisitions, with the remainder of the increase primarily due to improved gross profit margin rates.

Gross profit margin increased approximately 10 basis points due to improved inventory management and favorable production cost leverage.

Gross profit margins increased 43 basis points in our specialty category, or $10.9 million, and decreased 31 basis points in our center-of-the-plate category, or $5.0 million, compared to the prior year.

Selling, General and Administrative Expenses

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Percentage of net sales 20.5 % 20.7 %

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.

The increase in selling, general and administrative expenses was primarily due to higher costs associated with compensation and benefits to support sales growth, higher depreciation expense driven by facility and fleet investments and higher self-insurance expense.

Our ratio of selling, general and administrative expenses to net sales decreased 20 basis points due to sales growth combined with certain benefits derived from our investments in our facility and distribution operations.

Other Operating Expenses, Net

2025 2024 $ Change % Change

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

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.

Other operating expenses $ 9,195 $ 1,088 $ 8,107 NM

NM - Not meaningful

Other operating expenses, net in fiscal 2025 includes an impairment charge on customer relationship intangible assets of $8.0 million, related to the loss of non-core customers, post acquisition.

Other operating expenses, net in fiscal 2024 included charges associated with employee severance, partially offset by non-cash credits of $3.3 million for changes in the fair value of our contingent earn-out liabilities.

Interest Expense

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Interest expense $ 41,564 $ 48,675 $ (7,111) (14.6) %

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.

Interest expense decreased primarily due to lower aggregate principal amounts of debt outstanding (excluding finance leases), lower interest rates and lower losses on debt extinguishment in the current year compared to the prior year.

Provision for Income Tax Expense

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Effective tax rate 30.1 % 30.2 %

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.

The increase in the provision for income tax expense for fiscal 2025 was primarily driven by the higher income before income taxes, with the effective tax rates remaining consistent year-over-year.

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:

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Senior secured term loan $ 252,000 $ 260,000 $ 276,250

Total convertible debt $ 287,500 $ 327,184 $ 333,184

Convertible senior notes 287,500 287,500 327,184

Borrowings outstanding on asset-based loan facility 100,000 120,000 100,000

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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 October 2025, we issued an $11.0 million unsecured note at an original issue discount of $0.3 million in connection with the acquisition of substantially all of the assets of Italco (the “Italco Note”).

We also paid $5.5 million cash at closing.

The Italco Note is presented at December 26, 2025 under the caption “Finance leases and other financing obligations” in the table above.

In August 2025, we entered into an amendment to our asset-based loan (the “ABL”) credit agreement, which extended the maturity date to August 20, 2030, eliminated the credit spread adjustment to the interest rate charged on borrowings and increased the aggregate letters of credit.

There were no changes to the aggregate commitments of $300 million.

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

We incurred transaction costs of $0.7 million, which were capitalized as deferred financing fees to be amortized over the term of the ABL, and are presented in other non-current assets in our consolidated balance sheet.

In fiscal 2025 and 2024, we amended our senior secured term loan agreement to reduce the interest rate spread on our senior secured term loan facility.

Additionally, during fiscal 2025 and 2024, we made voluntary principal prepayments of $5.0 million and $14.0 million, respectively, towards the senior secured term loan.

In January 2026, we further amended our senior secured term loan agreement to reduce the interest rate spread on our senior secured term loan facility, as well as made voluntary principal prepayments of $5.0 million.

In December 2024, our 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 April 2025, the unsecured note issued in connection with our acquisition of Oakville Produce Partners, LLC (“GreenLeaf”) in fiscal 2023 (the “GreenLeaf Note”) matured and we made the final principal payment of $5.0 million.

Previously, we made a scheduled principal payment of $5.0 million towards the GreenLeaf Note during fiscal 2024.

The GreenLeaf Note is presented at December 27, 2024 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.

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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 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.

On August 23, 2022, we refinanced our senior secured term loans in an aggregate principal amount of $300.0 million maturing in August 2029, comprising of a refinancing of the then existing term loans balance of $167.4 million and an incremental borrowing of $132.6 million.

We deferred lender and third-party fees of $10.9 million as debt issuance costs to be amortized over the term of the term loan.

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

The share repurchase program ended in December 2025 with a total of 667,433 shares of our common stock repurchased for $32.4 million.

The following table presents selected financial information on liquidity:

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Net cash provided by operations was $129.2 million for the fiscal year ended December 26, 2025 compared to $153.1 million for the fiscal year ended December 27, 2024.

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.

The decrease in cash provided by operating activities was primarily due to timing of payments and a strategic pull-forward of certain inventory purchases, partially offset by sales growth.

Net cash used in investing activities was $46.8 million in fiscal 2025 driven by capital expenditures.

Net cash used in financing activities was $76.2 million for fiscal 2025 driven primarily by $20.0 million of payments under our asset-based loan and revolving credit facilities, $15.6 million of finance lease payments, $15.0 million used to repurchase our common stock, $13.0 million of payments of debt and other financing obligations and $12.0 million paid for shares surrendered to pay tax withholding related to the vesting of equity incentive plan awards.

Off-Balance Sheet Arrangements

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

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

We have evaluated the economic characteristics of our different geographic markets, including our recently acquired businesses, along with the similarity of the operations and margins, nature of the products, type of customer and methods of distribution of products and the regulatory environment in which we operate.

As of December 26, 2025, we maintain four reporting units.

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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 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.

For the fiscal year ended December 26, 2025, we assessed the recoverability of goodwill using a qualitative analysis and determined that it is more likely than not that the fair value of our reporting units exceeded their respective carry values.

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

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

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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.

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 2025 and 2023, we incurred customer relationships intangible asset impairment charges of $8.0 million and $1.8 million, respectively, related to the loss of non-core customers, post acquisition.

We did not incur any such impairment charges in fiscal 2024.

There have been no other events or changes in circumstances during fiscal 2025 or 2024 indicating that the carrying value of our finite-lived intangible assets are not recoverable.

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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 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.

As of December 26, 2025 and December 27, 2024, we did not have a valuation allowance.

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 inventory valuation, 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.

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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