The Chefs’ Warehouse, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 29, 2023 (52 weeks). The comparable year ended December 30, 2022 comprised 53 weeks, so reported growth comparisons include a longer prior-year period. This is an annual filing; the supplied text does not provide standalone fourth-quarter financial results.
Business context
Chefs’ Warehouse distributes specialty foods, produce, and center-of-the-plate products to foodservice customers in the United States, Canada, and the Middle East, and sells some protein products directly to consumers. It reported more than 44,000 core customer locations, over 70,000 SKUs, and 52 distribution centers. The company reports one segment: food product distribution.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $3,433.8 million | $2,613.4 million |
| Gross profit / margin | $814.5 million / 23.7% | $618.6 million / 23.7% |
| Operating income / margin | $100.9 million / 2.9% | $85.7 million / 3.3% |
| Net income | $34.6 million | $27.8 million |
| Basic / diluted EPS | $0.92 / $0.88 | $0.75 / $0.73 |
| Cash from operations | $61.6 million | $23.1 million |
| Capital expenditures | $57.4 million | $45.8 million |
Sales increased 31.4% year over year: $214.6 million, or 8.2%, was attributed to organic growth and $605.7 million, or 23.2%, to acquisitions. Specialty-category case count rose approximately 9.5%; center-of-the-plate pounds sold increased 6.3%. Estimated category inflation was 3.0% for specialty and 2.7% for center-of-the-plate. Gross margin was broadly stable, while SG&A rose to 20.5% of sales from 19.8%, reflecting compensation, facilities, depreciation and amortization, and acquisition-related investment. Net income growth was partly offset by higher interest and tax expense.
Cash used in investing was $179.3 million, including $121.9 million for acquisitions and $57.4 million in capital expenditures. Cash provided by financing was $9.0 million, primarily reflecting $60.0 million of additional ABL borrowings, partly offset by debt repayments and earn-out payments. Cash and cash equivalents fell to $49.9 million from $158.8 million.
Debt and liquidity
At year-end, the company reported $172.0 million available under its ABL facility, $49.9 million of cash, and $295.3 million of working capital excluding cash. ABL commitments were increased to $300 million in July 2023. Management stated that cash, working capital, and ABL availability should meet operating, capital expenditure, and debt-service needs for the next 12 months.
Debt obligations were substantial. The filing reports approximately $735.3 million of total indebtedness in its risk discussion; the debt table shows $713.4 million of principal maturities excluding finance leases. The table lists $39.7 million of 2024 convertible notes due December 2024, $287.5 million of 2028 convertible notes, and $276.3 million outstanding on the term loan. The term loan’s reported weighted-average effective rate was 10.96%; the 2028 notes bear a 2.375% coupon. The company had $376.3 million of floating-rate debt; management estimates a 100-basis-point rate increase would reduce annual after-tax earnings by approximately $2.7 million, all else equal. Substantially all assets secure the credit facilities.
Material changes, outlook, and notable items
- Acquisitions were a major growth driver. FY2023 transactions included GreenLeaf, Hardie’s, and three other acquisitions. GreenLeaf contributed $82.9 million of FY2023 sales and $7.0 million of pretax income; Hardie’s contributed $194.8 million of sales and a $1.1 million pretax loss. The company also acquired Chef Middle East in November 2022; its earn-out was paid in full in FY2023.
- Management expects FY2024 capital expenditures, excluding acquisitions, of approximately $35 million to $45 million. It did not provide specific revenue or earnings guidance in the supplied filing text. Its stated priorities include organic growth, operational efficiencies, technology and facility investment, and selective acquisitions.
- A $1.8 million customer-relationship intangible impairment followed the loss of a significant Hardie’s customer. The filing also records a $2.1 million FY2023 out-of-period tax adjustment related to errors identified in prior-year tax provisions; the company described the errors as immaterial to those prior periods.
- A $22.966 million federal income-tax refund receivable related to CARES Act carrybacks remains delayed in IRS processing. The company expected receipt within one year but said timing was difficult to predict.
- The company announced a share repurchase program of up to $100 million over two years, targeting $25 million to $100 million of repurchases by the end of FY2025, subject to debt-agreement restrictions. It has not historically paid cash dividends and does not anticipate doing so in the foreseeable future.
- Key risks include discretionary restaurant spending, low margins and food-cost volatility, labor and fuel costs, supplier and logistics disruptions, competition, acquisition integration, customer credit and collections, cybersecurity, and substantial debt and refinancing needs. The filing reports no material cybersecurity incident in FY2023 and no pending or threatened legal proceeding believed likely to have a material adverse effect.
Most important facts for investors to verify
- How the company will address the December 2024 convertible-note maturity and meet other debt obligations while preserving ABL availability and covenant compliance.
- Whether organic volume and customer growth can continue, and whether acquisitions deliver expected profitability and integration benefits—particularly given Hardie’s reported loss and customer-related impairment.
- Whether the higher SG&A burden moderates and operating margins recover as facility, technology, and acquisition investments mature.
- The timing and collectability of the $22.966 million tax refund receivable, and the effects of the FY2023 tax adjustment on reported comparability.
- Actual FY2024 capital spending, share repurchases, and cash generation versus management’s stated plans and liquidity expectations.
- Potential dilution from convertible notes: FY2023 diluted weighted-average shares were 45.6 million versus 37.6 million basic shares, reflecting the dilutive effect of convertible notes and other awards.
The independent auditor issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting. Management and the auditor excluded GreenLeaf and Hardie’s from the year-end internal-control assessment because of acquisition timing; the company said it was integrating those businesses into its control system.