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Item 1. Business

2025-03-17 compared with 2024-03-26 · 95 added, 77 removed, 173 unchanged (50% of the section changed)

HF Foods Group Inc., operating through our subsidiaries, is a leading foodservice distributor to Asian restaurants, primarily Chinese restaurants located throughout the United States.

HF Foods Group Inc., headquartered in Las Vegas, Nevada, operating through our subsidiaries (collectively “HF Foods” or the “Company”) is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to Asian restaurants, as well as other foodservice customers, throughout the United States.

HF Foods was formed through a merger between two complementary market leaders, HF Foods and B&R Global Holdings, Inc.

(“B&R Global”), on November 4, 2019.

With 18 distribution centers and cross-docks and a fleet of over 400 refrigerated vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.

Capitalizing on our deep understanding of the Chinese culture, with over 1,000 employees and subcontractors, and supported by two outsourced call centers in China, we have become a trusted partner serving approximately 15,000 Asian restaurants providing sales and service support to customers who mainly converse in Mandarin or Chinese dialects.

With sixteen distribution centers and three cross-docks and a fleet of over 400 vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.

Capitalizing on our deep understanding of Asian cultures, strong relationships with growers and suppliers of food products primarily in North America, South America and Asia, with over 1,000 employees, and supported by two outsourced call centers in China, we have become a trusted partner serving approximately 15,000 customer locations throughout the United States.

We are committed to providing excellent customer service by delivering a distinctive product portfolio built from an indelible partnership with both foreign and domestic suppliers.

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On December 30, 2021, HF Foods acquired substantially all of the assets of leading seafood suppliers Great Wall Seafood Supply, Inc., a Texas corporation, Great Wall Restaurant Supplier, Inc., an Ohio corporation, and First Mart Inc., an Illinois corporation (collectively the “Great Wall Group”).

On April 29, 2022, HF Foods acquired substantially all of the assets of Sealand Food, Inc., one of the largest frozen seafood suppliers servicing the Asian/Chinese restaurant market along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

On April 29, 2022, HF Foods acquired substantially all of the assets of Sealand Food, Inc., one of the largest frozen seafood suppliers servicing customers along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

Our Business and Products

Our business features eighteen strategically positioned distribution centers and cross-docks with over one million square feet of warehouse space and a fleet of over 400 vehicles to provide a wide variety of products with a strong focus on Asian specialty food ingredients essential for Asian cooking.

Our business features sixteen distribution centers and three cross-docks with a total of approximately 1.3 million square feet of warehouse space and a fleet of over 400 vehicles to provide a wide variety of products with a strong focus on specialty food

ingredients essential for Asian cuisine.

Supported by an extensive supplier network, we aim to provide a one-stop service with on-time delivery and high fulfillment rates, at competitive pricing.

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Meat and Poultry Beef, pork, chicken and duck 21%

Fresh Produce Fresh, seasonal fruits and vegetables, such as celery, Chinese cabbage and winter melon which are widely used in Chinese cuisines 11%

Fresh Produce Fresh, seasonal fruits and vegetables, such as celery, napa cabbage and winter melon which are widely used in Asian cuisines 11%

Packaging and Other Take-out accessories for customers, from bamboo chopsticks to takeout containers, plastic cups and sushi combo boxes 5%

Commodity General commodities including oil, flour, salt and sugar 5%

We have an extensive supplier network and established long-term relationships with our major suppliers.

Our long-term relationships and vast distribution network enable our increased negotiating power given the large quantities, thereby improving our inventory turnover and accounts payable, and reducing our operating costs.

Instead of going to fragmented direct store distributors to source their products, customers are consolidating their vendors into our full service, one-stop-shop for most of their purchasing needs.

Our extensive supplier network and long-standing relationships with key suppliers strengthen our negotiating power, allowing us to procure large quantities efficiently through our centralized inventory system.

This strategic approach enhances inventory turnover, optimizes accounts payable, and lowers operating costs.

This gives customers the ability to shift away from fragmented direct-stores and turn to us as their full-service, one-stop solution for the majority of their purchasing needs.

This initiative is made possible from order placement to delivery due to our warehouse operations, optimized fleet management, material handling equipment and techniques, and efficient administrative and operating staff.

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and Performance Food Group Company, through our strong understanding of Asian culture and cooking essentials, distinctive product portfolio, and resourceful supply chains.

We believe our wide range of Asian-centric product offerings is unmatched, as many of the items we offer are unique and specific to the Chinese and Asian restaurant industry.

We believe our wide range of Asian-centric product offerings is unmatched, as many of the items we offer are unique and specific to the Asian restaurant industry.

We believe that our scale and deep knowledge of our customers’ needs provide a competitive advantage over our direct competitors and have contributed greatly to our success, including the following:

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• Deep understanding of Asian culture:

As our customers are primarily Chinese and Asian restaurants, most of our employees can speak Mandarin as well as the native dialects of our customers.

We believe this is a key business strength and competitive advantage, as many of the restaurants’ owners/chefs are migrants who feel less comfortable conversing in English.

As our customers are primarily Asian restaurants, most of our employees can speak the primary language of our customers.

We believe this is a key business strength and competitive advantage, as many of the restaurants’ owners/chefs are more comfortable speaking in their primary language.

• Lower sales and administrative expenses:

We outsource our telephone-based sales and customer service to two call centers located in China with Mandarin and Chinese dialect speaking agents to better serve our customers.

We outsource our telephone-based sales and customer service to two call centers located in China to better serve our customers around the clock.

• Purchasing power:

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We continue to invest in technological advancements to develop state-of-the-art management information and operating systems, to further improve our operational efficiency, accuracy and customer satisfaction, and to cement our foothold as a leading foodservice distributor to Asian restaurants in the U.S.

Features of Chinese and Asian Restaurants

Set forth below are the principal characteristics of the Asian/Chinese restaurants we serve.

Primarily Serving Non-Chinese Americans .

There are tens of thousands of Chinese and Asian restaurants spread throughout the U.S., primarily serving non-Chinese American customers.

Although the dishes they serve cater to the preferences of American mainstream customers and are more simply and quickly prepared as compared to traditional full-service Chinese restaurant cuisine, they still require specialized and distinctive Chinese ingredients used in traditional Chinese cooking styles.

Operated by Chinese Individual Families .

Most Chinese restaurants serviced by HF Foods are generally family-owned with very few workers, who are usually immigrants from China or first generation Chinese Americans.

These restaurant owners, especially the founders, are generally less sophisticated, with limited education and resources and appreciate value-added services from suppliers to help them improve their operational efficiency.

The owners and workers in these Chinese restaurants usually speak Mandarin or other regional dialects of the Chinese language.

Features of Asian Restaurants

Set forth below are the principal characteristics of the Asian restaurants we serve.

Primarily Serving Mainstream Americans .

There are tens of thousands of Asian restaurants spread throughout the U.S., primarily serving American customers.

Although the dishes they serve are more simply and quickly prepared as compared to traditional full-service Asian restaurant cuisine, they still require specialized and distinctive Asian specialty ingredients used in traditional Asian cooking styles.

Operated by Individual Families .

Most restaurants serviced by HF Foods are generally family-owned with very few workers, who are often immigrants or first generation Americans.

These small restaurant owners, especially the founders, appreciate value-added services from suppliers to help them improve their operational efficiency.

The owners and workers in these Asian restaurants usually prefer to speak their primary language.

We believe that understanding their culture and language is paramount to facilitating efficient communications and building trust with customers.

Close-Knit Chinese American Community .

First or second generation Chinese Americans living in the U.S.

inherit their traditional cultural values, and ethnic languages, and our experience has been that people in these communities prefer to do business with Chinese Americans that speak their language and share their values.

Unique Cooking Style and Ingredients for Chinese Cuisines .

Chinese cuisine requires unique cooking techniques such as steaming and stir-frying in a Chinese wok, and requires specialty ingredients and vegetables such as bitter melons, Chinese yams, vine spinach, Chinese cabbage and winter melon.

It also requires Chinese and Asian seasonings and spices, including peanut oil, Chinese cooking wine, vinegar, dark soy source, black bean sauce, pepper oil and chili oil.

Most of the unique ingredients for Chinese cuisine are staple supplies of HF Foods that are not widely available from mainstream U.S.

Unique Cooking Style and Ingredients for Asian Cuisines .

Asian cuisine requires unique cooking techniques such as steaming and stir-frying in a wok, and requires specialty ingredients and vegetables such as bitter melons, Asian yams, vine spinach, napa cabbage and winter melon.

It also requires special seasonings and spices, including peanut oil, cooking wine, vinegar, dark soy source, black bean sauce, pepper oil and chili oil.

Most of the unique ingredients for Asian cuisine are staple supplies of HF Foods that are not widely available from mainstream U.S.

Current Industry Landscape and Opportunities

Growing Demand in Asian Cuisines .

The demand for Chinese and Asian cuisines continues to grow in the U.S.

The demand for Asian cuisines continues to grow in the U.S.

In addition, according to the Pew Research Center, the Asian population in the U.S.

is the fastest growing population group in the country.

We believe that these powerful trends will continue and result in expanded opportunities for Asian/Chinese restaurants.

As a leading foodservice distributor to Asian/Chinese restaurants in the U.S., these trends represent a significant growth opportunity for HF Foods.

We believe that these powerful trends will continue and result in expanded opportunities for Asian restaurants.

As a leading foodservice distributor to Asian restaurants in the U.S., these trends represent a significant growth opportunity for HF Foods.

Cultural Barriers to Entry .

Understanding Chinese cooking culture is important to running a Chinese restaurant, and, therefore, most Chinese restaurants are operated by Chinese Americans.

Understanding Asian cooking culture is important to running an Asian restaurant, and, therefore, most Asian restaurants are operated by Asian Americans.

We believe that it is very difficult for mainstream food distributors to serve these restaurants due to various cultural and language barriers.

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Demand for Value-Added Services .

Our customers are Asian/Chinese restaurants, primarily takeout restaurants.

Our customers are primarily Asian restaurants, and other foodservice customers.

These customers are price and quality sensitive with a high demand for great service and mutual trust.

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Continued Consumer Spending on Food Away From Home .

Prior to the onset of the COVID-19 pandemic, according to the U.S.

Department of Agriculture (“USDA”), the food away from home market grew to surpass spending on the food at home market.

The foodservice industry declined sharply when COVID-19 restrictions adversely impacted restaurants’ operations and foot traffic.

As COVID-19 restrictions eased in 2021 and into 2022, both full service and fast food/take out restaurants have rebounded, and we believe the long-term trend of increasing food away from home market consumption has resumed and continues to be a key driver of demand for Asian/Chinese restaurants.

Customer Service

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namely, the two outsourced call centers located in Fuzhou, China and the domestic sales team in the U.S.

Utilizing these outsourced call centers in China, customers embrace and appreciate our personal customer service conducted in their native Mandarin and other regional dialects such as Fuzhounese and Cantonese.

Utilizing these outsourced call centers in China, customers embrace and appreciate our personal customer service conducted in their primary language.

Full sales support from the beginning of a sales order to post-sales service is offered through these call centers.

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Upon receipt of ordered products, the delivery schedule is determined based on the needs of each location.

The lead-time for products is dependent on the product category and need.

The lead-time for products is dependent on the product

category and need.

For perishable goods, products are usually delivered by suppliers within seventy-two hours of placing the order.

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Human Capital

One of our primary areas of focus is to continue to strengthen our team by retaining, attracting, and hiring qualified top talent.

This includes implementing the right organizational structure with a focus on growing capabilities through training and development of our talent.

We believe one of the key factors of our success is the commitment and loyalty of our workforce.

All of our general managers and distribution level management team have been with the business since our inception.

Their deep understanding of the business and the strong relationships they maintain with front line employees enable us to be a union free workforce.

As of December 31, 2023, we have 1,049 total employees, which includes 925 permanent employees and 124 temporary employees.

Compensation and Benefits

We are committed to positively impacting the lives of our employees by offering competitive pay and affordable benefits.

In 2023, we rolled out new benefit plan offerings along with education on those benefits in several language options to the employees.

The overall impact was an increase in medical plan enrollment by 50%, dental plan enrollment by 135%, and vision plan enrollment by 103%, from the previous year.

One of our primary strategic priorities is to continue to enhance the strength of our workforce by retaining, developing, attracting, and recruiting highly qualified and top-performing talent.

This effort includes establishing an optimized organizational structure and prioritizing the development of our employees’ capabilities through targeted training and professional development initiatives.

We attribute a significant portion of our success to the dedication and loyalty of our workforce.

Notably, all general managers and distribution-level management personnel have been with the company since its inception.

Their comprehensive understanding of our business operations, coupled with the strong relationships they maintain with frontline employees, has contributed to our ability to operate as a union-free organization.

As of December 31, 2024, we had 1,015 full-time employees, 26 part-time employees and 33 temporary employees through staffing agencies.

We offer attractive compensation and benefit packages, and we believe our relationship with our employees is satisfactory.

Recruiting, Training and Development

Our ability to continue to retain, attract, and recruit top talent at all levels is key to our future success.

In 2023, we implemented learning modules which allow for the assignment of specific learning to employees based on role, compliance, and leadership development.

In 2024, we implemented a Learning Management System (LMS) to consolidate employee training in the areas of safety, security, and compliance.

We continue to transform our operations through new system and process improvements, training and development.

Diversity and Inclusion

HF Foods was founded by Asian Americans.

Building a successful business based on diversity and inclusion has been part of our DNA since our inception.

Throughout our history, we have continued to maintain diversity and inclusion as one of our top priorities.

99% of our total workforce is made up of Hispanic, Black or African American, and Asian employees.

In recent years, we have strengthened our commitment to diversity and inclusion.

Three out of five members of our Board of Directors are Asian and two out of five are women.

At the corporate level, nearly 50% of our director and above positions are held by women.

HF Foods was founded by Asian Americans, and throughout our history, we have continued to maintain inclusion as one of our top priorities by providing opportunities to all employees regardless of background.

Four out of five members of our Board of Directors are Asian and three out of five are women.

At the corporate level, over 50% of our director and above positions are held by women.

Recent Developments

CEO Transition

On October 24, 2024, the Board of Directors of the Company terminated Xiao Mou (Peter) Zhang as Chief Executive Officer of the Company, without cause, effective immediately.

In connection with Mr.

Zhang’s departure, the Company entered into a Severance Agreement and General Release (the “Severance Agreement”) with Mr.

Zhang on November 21, 2024.

Pursuant to the Severance Agreement, which includes a general release of claims by Mr.

Zhang against the Company, Mr.

Zhang will be entitled to receive standard severance benefits provided to a Chief Executive Officer under the Company’s Amended and Restated Severance Plan.

Zhang continues to serve as a Director on the Board of Directors.

On October 24, 2024, Xi (Felix) Lin was appointed to serve as Interim Chief Executive Officer, effective immediately, and continued to serve as the Company’s Chief Operating Officer and President.

On December 17, 2024, the Board of Directors of HF Foods appointed Felix Lin to serve as the Company’s Chief Executive Officer and President, effective January 1, 2025.

Credit Facility Amended

On February 12, 2025, the Company and certain of its subsidiaries (collectively with the Company, the “Borrowers”) entered into that certain Joinder and Amendment No.

4 to Third Amended and Restated Credit Agreement (the “Amendment”) with the lenders party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A., a national banking association, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

The Amendment amends the Third Amended and Restated Credit Agreement, dated as of March 31, 2022, by and among the Borrowers, the other loan parties thereto, the Lenders party thereto and the Administrative Agent (as amended, supplemented or otherwise modified, the “Credit Agreement”).

The Amendment amends certain terms and conditions of the Credit Agreement by, among other things, (i) increasing the Aggregate Revolving Commitment (as defined in the Credit Agreement) from $100,000,000 to $125,000,000, (ii) joining three new subsidiaries of the Company to the Credit Agreement, each as a “Borrower” thereunder, (iii) joining Wells Fargo Bank, N.A.

to the Credit Agreement as a “Lender” thereunder, (iv) amending certain affirmative covenants commensurate with the increase in the Aggregate Revolving Commitment, and (v) amending certain restrictions regarding incurring obligations under real property leases and equipment financings in the ordinary course of business.

Government Regulation

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Department of Labor, which sets employment practice standards for workers, and the U.S.

Department of Transportation, as well as its agencies, the Surface Transportation Board, the Federal Highway Administration, the Federal Motor Carrier Safety Administration, and the National Highway Traffic Safety Administration, which collectively regulate our trucking business through the regulation of operations, safety, insurance and hazardous materials.

We must comply with the safety and fitness regulations promulgated by the Federal Motor Carrier Safety Administration, including those relating to drug and alcohol testing and hours of service.

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Customs and Border Protection, which is a part of the Department of Homeland Security.

Information about our Executive Officers

Additionally, the new U.S.

administration has called for substantial changes to foreign trade policy.

Significant new restrictions and tariffs on foreign trade could have a negative impact on our business and could increase the cost of sourcing products and certain equipment and other materials used in our operations that we procure from outside the U.S.

Information about our Executive Officers as of December 31, 2024

Name Age Position

Xiao Mou Zhang 51 Chief Executive Officer

Xi Lin 35 President and Chief Operating Officer

Carlos Rodriguez 50 Chief Financial Officer

Xiao Mou Zhang 52 Former Chief Executive Officer

Xi Lin 36 Chief Executive Officer, President and Chief Operating Officer

Cindy Yao 57 Chief Financial Officer

Christine Chang 42 General Counsel and Chief Compliance Officer

Xiao Mou Zhang (aka Peter Zhang) has served as Co-Chief Executive Officer and director since November 4, 2019 following the merger between HF Foods and B&R Global Holdings Inc.

("B&R Global"), and was promoted to sole Chief Executive Officer on February 23, 2021.

Xiao Mou Zhang (aka Peter Zhang) served as Co-Chief Executive Officer and Director since November 4, 2019 following the merger between HF Foods and B&R Global Holdings Inc.

(“B&R Global”), and was promoted to sole Chief Executive Officer on February 23, 2021 until October 24, 2024.

From 2014 until the merger, he served as chairman of the board and a director of B&R Global that was co-founded by Mr.

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A large purchase volume and a centralized procurement process also allowed B&R Global favorable negotiating power with vendors that source high quality products at lower prices than many competitors.

Xi Lin (aka Felix Lin) was appointed to serve as President effective February 12, 2024 and has served as Chief Operating Officer since May 1, 2022.

On October 24, 2024, the Board of Directors of HF Foods terminated Xiao Mou (Peter) Zhang as chief executive officer of the Company, without cause, effective immediately.

Zhang’s termination was not due to any disagreement with the Company regarding its financial reporting, policies or practices.

Zhang continues to serve as a director on our Board of Directors.

Xi Lin (aka Felix Lin) was appointed to serve as Chief Executive Officer, effective January 1, 2025, and has served as President since February 12, 2024.

Mr Lin previously served as Chief Operating Officer of the Company from May 1, 2022 to January 1, 2025.

Lin also previously served as an independent director of HF Foods from November 2019 to April 2022.

Lin worked in a number of positions at Blue Bird Corporation from 2010 until his resignation on April 1, 2022.

Lin worked in a number of positions at Blue Bird Corporation (NASDAQ:

BLBD) from 2010 until his resignation on April 1, 2022.

Prior to his resignation, he was Vice President, with responsibility for compliance, human resources, government relations, corporate training, strategic relationships, and supply chain M&A.

He also held various other leadership positions within Blue Bird Corporation in the Manufacturing Operations and Supply Chain Departments from 2015 to 2016, the Finance and Accounting Department in 2011 and from 2013 to 2015, and the International Business Development and M&A Departments in 2012.

He also held various other leadership positions within Blue Bird Corporation in the Manufacturing Operations and Supply Chain Departments from 2015 to 2016, the Finance

and Accounting Department in 2011 and from 2013 to 2015, and the International Business Development and M&A Departments in 2012.

Lin received his B.A.

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Whitney Bunting College of Business at Georgia College and State University in Georgia, and a Master’s degree in Business Administration from the University of North Carolina at Chapel Hill.

Carlos Rodriguez has served as Chief Financial Officer since August 1, 2022.

Rodriguez brings more than 25 years of finance and accounting experience across various industries, including technology, entertainment, restaurants, and life science.

Most recently, Mr.

Rodriguez served as Chief Accounting Officer and Vice President Corporate Finance for Generate Life Sciences, Inc., a $300 million high growth company.

In that role, he led Accounting, Finance, Financial Reporting, Treasury/Cash Management, Strategic and Financial Planning, M&A Due Diligence, and other financial responsibilities.

Prior to Generate Life Sciences, Mr.

Rodriguez served as Vice President of Accounting and Corporate Finance for California Pizza Kitchen, Inc.

Rodriguez holds a Bachelor’s degree in Accounting and a Master’s of Business Administration degree from the University of Southern California and is also a Certified Public Accountant in the State of California.

Cindy Yao has served as Chief Financial Officer since May 1, 2024.

Yao joins HF Foods with over three decades of Finance and Accounting leadership experience.

For the past 10 years, Ms.

Yao served as Chief Financial Officer and Executive Vice President for Markel Food Group, a company providing high-quality, innovative automated process solutions, consulting services and technical support to food producers.

Prior to that, from 2002 to 2013, Ms.

Yao served as Vice President and Corporate Treasurer for Bausch + Lomb Corporation (NYSE:

BLCO), an eye health company with $4.8 billion in annual revenue.

Yao also served in various Finance and Accounting leadership roles with Corning Incorporated (NYSE:

GLW), Eastman Kodak Company (NYSE:

KODK), and Coopers & Lybrand LLP, (now part of PwC) prior to 2002.

Yao holds a Master’s degree in Accounting from the Virginia Polytechnic Institute and State University and an Executive Master’s degree in Business Administration from the Simon Business School of the University of Rochester.

Christine Chang has served as General Counsel and Chief Compliance Officer since September 8, 2021.

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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 1. Business