HF Foods Group Inc

Previous wording

Gross profit was $50.4 million forthree months ended March 31, 2024 compared to $50.2 million in the same period in 2023, an increase of $0.2 million, or 0.5%. Gross profit margin for thethree months ended March 31, 2024 was flat at 17.1% in the same period in 2023.

Current wording

Gross profit was $52.5 million forthree months ended June 30, 2024 compared to $50.7 million in the same period in 2023, an increase of $1.8 million, or 3.6%. The increase was primarily attributable to increased net revenue. Gross profit margin for thethree months ended June 30, 2024 increased slightly to 17.4% compared to 17.3% in the same period in 2023.

Previous wording

Distribution, selling and administrative expenses decreased by $2.4 million, or 4.6%, for the three months ended March 31, 2024 primarily due to a decrease of $2.8 million in professional fees, partially offset by higher payroll and related labor costs. Distribution, selling and administrative expenses as a percentage of net revenue decreased to 17.1% for the three months ended March 31, 2024 from 18.0% in the same period in 2023, primarily due to lower professional fees and increased net revenue, partially offset by increased headcount.

Current wording

Distribution, selling and administrative expenses decreased by $2.4 million, or 4.6%, for the three months ended June 30, 2024 primarily due to a decrease of $5.5 million in professional fees, partially offset by higher payroll and related labor costs. Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.5% for the three months ended June 30, 2024 from 17.9% in the same period in 2023, primarily due to increased net revenue and lower professional fees, partially offset by increased headcount.

Previous wording

Interest expense for the three months ended March 31, 2024 of $2.8 million remained consistent compared to the three months ended March 31, 2023, having decreased slightly from $2.9 million. Average floating interest rates on our floating-rate debt for the three months ended March 31, 2024 increased by approximately 0.8% on our line of credit and 0.8% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2023. Our average daily line of credit balance increased by $2.0 million, or 4.8%, to $44.7 million for the three months ended March 31, 2024 from $42.6 million for the three months ended March 31, 2023, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5 million, or 4.6%, to $105.5 million for the three months ended March 31, 2024 from $110.5 million for the three months ended March 31, 2023.

Current wording

Interest expense for the three months ended June 30, 2024 of $3.1 million remained consistent compared to the three months ended June 30, 2023, having increased slightly from $2.8 million. Average floating interest rates on our floating-rate debt for the three months ended June 30, 2024 increased by approximately 0.4% on our line of credit and 0.3% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2023. Our average daily line of credit balance increased by $19.2 million, or 51.7%, to $56.4 million for the three months ended June 30, 2024 from $37.2 million for the three months ended June 30, 2023, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5 million, or 4.6%, to $104.2 million for the three months ended June 30, 2024 from $109.3 million for the three months ended June 30, 2023.

Previous wording

Net revenue for the three months ended March 31, 2024 increased by $1.8 million, or 0.6%, compared to the same period in 2023. This increase was primarily attributable to product cost inflation and improved pricing in certain categories, partially offset by the $2.7 million loss in revenue resulting from the exit of our chicken processing businesses.

Current wording

Net revenue for the six months ended June 30, 2024 increased by $11.8 million, or 2.0%, compared to the same period in 2023. This increase was primarily attributable to product cost inflation and improved pricing in certain categories, partially offset by the $5.8 million loss in revenue resulting from the exit of our chicken processing businesses in 2023.

Previous wording

As of March 31, 2024, we had cash of approximately $18.2 million, checks issued not presented for payment of $8.7 million and access to approximately $40.9 million in additional funds through our $100.0 million line of credit, subject to a borrowing base calculation. We have funded working capital and other capital requirements primarily by cash flow from operations and bank loans. Cash is required to pay purchase costs for inventory, salaries, fuel and trucking expenses, selling expenses, rental expenses, income taxes, other operating expenses and to service debts.

Current wording

As of June 30, 2024, we had cash of approximately $14.0 million, checks issued not presented for payment of $6.5 million and access to approximately $29.9 million in additional funds through our $100.0 million line of credit, subject to a borrowing base calculation. We have funded working capital and other capital requirements primarily by cash flow from operations and bank loans. Cash is required to pay purchase costs for inventory, salaries, fuel and trucking expenses, selling expenses, rental expenses, income taxes, other operating expenses and to service debts.

Previous wording

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, changes in deferred income taxes and others, and includes the effect of working capital changes. Net cash provided by operating activities decreased by $5.5 million, or 44%, primarily due to the timing of working capital outlays partially offset by improved operating loss.

Current wording

Net cash (used in) provided by operating activities consists primarily of net income, which includes a $3.9 million civil monetary penalty payment, adjusted for non-cash items, including depreciation and amortization, changes in deferred income taxes and others, and includes the effect of working capital changes. Net cash (used in) provided by operating activities decreased by $8.7 million primarily due to the timing of working capital outlays and the $3.9 million SEC settlement payment partially offset by improved operating income.

Previous wording

Net cash used in investing activities increased by $2.0 million, or 311%, primarily due to increased capital project spend in the three months ended March 31, 2024.

Current wording

Net cash used in investing activities increased by $4.8 million primarily due to increased capital project spend in the six months ended June 30, 2024.

Previous wording

Net cash used in financing activities decreased by $17.3 million to $1.5 million used in financing activities primarily due to checks issued not presented for payment activity for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, as well as net line of credit activity.

Current wording

Net cash provided by (used in) financing activities decreased by $21.6 million to $5.1 million provided by financing activities primarily due to net line of credit activity, as well as the checks issued not presented for payment activity for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Previous wording

We have prepared the financial information in this Quarterly Report in accordance with GAAP. Preparing our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Annual Report on Form 10-K includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenue, or expenses during the three months ended March 31, 2024. Additionally, see Note 6 - Goodwill and Acquired Intangible Assets of our unaudited condensed consolidated financial statements on this Form 10-Q for disclosure regarding the Company’s at risk single reporting unit.

Current wording

We have prepared the financial information in this Quarterly Report in accordance with GAAP. Preparing our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Annual Report on Form 10-K includes a summary of the critical accounting policies and estimates we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies and estimates that have had a material impact on our reported amounts of assets, liabilities, revenue, or expenses during the three months ended June 30, 2024. Additionally, see Note 6 - Goodwill and Acquired Intangible Assets of our condensed consolidated financial statements on this Form 10-Q for disclosure regarding the Company’s single reporting unit.

Previous wording

For a discussion of recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to the

Current wording

For a discussion of recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.