What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-02-23 compared with 2020-02-24 · 430 added, 268 removed, 593 unchanged (54% of the section changed)

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CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to the Consolidated Financial Statements

Index to the Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Changes in Stockholders’ Equity

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We have audited the accompanying consolidated balance sheets of The Chefs’ Warehouse, Inc.

(the “Company”) and subsidiaries as of December 27, 2019 and December 28, 2018, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 27, 2019, and the related notes.

(the “Company”) and subsidiaries as of December 25, 2020 and December 27, 2019, the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended December 25, 2020, and the related notes.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 25, 2020 and December 27, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2020 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 25, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 23, 2021 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, effective on December 29, 2018, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

Basis for Opinions

These consolidated financial statements are the responsibility of the Company’s management.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combinations

As described in Notes 2 and 5 to the Company’s consolidated financial statements, the Company completed the acquisition of Bassian Farms, Inc.

and certain affiliated entities (“Bassian”), for a net consideration of $31.8 million on February 25, 2019, which resulted in $34.2 million of intangible assets and $7.4 million of contingent earn-out liabilities being recorded.

Management applied significant judgment in estimating the fair value of the intangible assets acquired which involved the use of significant estimates

and assumptions with respect to expected future cash flows and discount rates.

We identified the valuation of the intangible assets and the contingent earn-out liabilities as a critical audit matter.

Changes to management's judgments and assumptions used in determining the fair values of the intangible assets and the contingent earn-out liabilities could have a material impact on the balance sheet.

Auditing management’s judgments and assumptions related to forecasts of expected future cash flows, discount rates, and the use of a Monte-Carlo simulator to calculate the contingent liability involved a high degree of auditor judgment and specialized skills and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

Assessing the reasonableness of significant underlying assumptions through:

(i) evaluating historical performance of the target entity and similar previously acquired entities, (ii) assessing performance against market trends, industry metrics, and guideline companies, and (iii) performing sensitivity analysis and evaluating potential effect of changes in certain assumptions.

Utilizing personnel with specialized knowledge and skill in valuation to assist in:

(i) assessing the appropriateness of the complex valuation models utilized by management to determine the fair values of certain intangible assets and the contingent earn-out liabilities, and (ii) assessing the reasonableness of certain complex assumptions incorporated into the valuation models.

Convertible Notes

As described in Note 2 and 9 to the consolidated financial statements, the Company issued $150.0 million aggregate principal amount of 1.875% Convertible Senior Notes (the “Notes”) due 2024 in a private placement.

In accounting for the issuance of the Notes, the Company concluded there were no potential derivatives that are to be separately accounted for.

We identified the accounting evaluation of the Notes as a critical audit matter.

The principal considerations for our determination were:

(i) the evaluation of the contract terms and the applicable accounting literature;

and (ii) the evaluation of the potential derivatives that may require separation from the debt instrument and evaluation of the appropriate accounting treatment.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, effective on December 29, 2018, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Codification Topic 842, Leases.

Emphasis of Matter

As more fully described in Note 1 to the consolidated financial statements, the Company has been negatively impacted by the ongoing effects of the outbreak of a novel coronavirus (COVID-19) on the Company’s operations.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment

As described in Note 3 to the consolidated financial statements, the Company’s consolidated goodwill balance was $214.9

million at December 25, 2020, which was allocated between three reporting units.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

Management assesses goodwill impairment annually in the fourth quarter, but identified a triggering event requiring an interim impairment assessment of goodwill at the end of the first quarter of 2020 due to the economic impact of the COVID-19 pandemic.

The Company prepared the valuations of the reporting units for the interim and annual assessments using an income approach, which requires management to make significant estimates and assumptions related to discount rates and forecasts of future revenue and earnings.

We identified the valuation of goodwill during the interim and annual impairment assessments as a critical audit matter.

The principal considerations for our determination are the inherent uncertainties related to the Company’s forecasts and how various other factors, including the projected impact from the COVID-19 pandemic, could affect the Company’s forecasted assumptions of revenue and earnings included in the income approach.

Auditing these significant assumptions and judgments involved especially challenging auditor judgment and an increased level of effort, including the extent of specialized skills or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

Utilizing personnel with specialized knowledge in complex debt and equity transactions to assist in:

(i) evaluating relevant contract terms and conditions of the Notes’ agreements in relation to the appropriate accounting literature, and (ii) assessing the appropriateness of conclusions reached by the Company with respect to the accounting for the Notes, bifurcation, and potential derivatives.

• Evaluating the reasonableness of assumptions used in the Company’s income approach, including the revenue growth rate, terminal value growth rate, and the economic impact that the COVID-19 pandemic is expected to have on the Company’s performance and its reporting units by:

(i) comparing to historical results and industry trends, (ii) understanding state and local restrictions on occupancy capacity for indoor establishments to evaluate management’s expected timing to return to historical revenue and profitability levels, (iii) comparing the actual results for the second and third quarters to the projections that management used for those quarters in the interim assessment, and (iv) performing a sensitivity analysis of significant assumptions and evaluating the impact of such on the fair value of each reporting unit that would result from changes in the assumptions.

• Testing the accuracy and completeness of the data used by management to develop its projections.

• Testing management’s market capitalization reconciliation and the reasonableness of the calculated control premium identified by management.

• Utilizing personnel with specialized skills and knowledge in valuation approach and methodologies to assist in:

(i) assessing the appropriateness of the fair value methodology, (ii) evaluating the reasonableness of certain assumptions used, including the discount rate.

/s/ BDO USA, LLP

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(Amounts in thousands, except share data)

2020 December 27,

Current assets:

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Accounts receivable, net of allowance of $ 24,027 in 2020 and $ 8,846 in 2019

96,383 175,044

Inventories, net 82,519 124,056

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Operating lease right-of-use assets 115,224 127,649

Goodwill 214,864 197,743

Intangible assets, net 111,717 138,751

Deferred taxes, net 7,535 —

Other assets 3,875 3,534

Total assets $ 974,325 $ 1,013,679

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Stockholders’ equity:

Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at December 27, 2019 and December 28, 2018

Preferred Stock - $ 0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at December 25, 2020 and December 27, 2019, respectively

Common Stock, - $ 0.01 par value, 100,000,000 shares authorized, 37,274,768 and 30,341,941 shares issued and outstanding at December 25, 2020 and December 27, 2019, respectively

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THE CHEFS’ WAREHOUSE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(Amounts in thousands, except share and per share amounts)

Fiscal Years Ended

2020 December 27,

2019 December 28,

Net sales $ 1,111,631 $ 1,591,834 $ 1,444,609

Cost of sales 863,480 1,205,266 1,095,693

Operating expenses

Operating income

Gross profit 248,151 386,568 348,916

Selling, general and administrative expenses 336,394 329,542 298,102

Other operating expenses 14,417 6,359 2,225

Operating (loss) income ( 102,660 ) 50,667 48,589

Interest expense 20,946 18,264 20,745

Loss on asset disposal

Income before income taxes

Provision for income taxes

(Loss) income before income taxes ( 123,606 ) 32,403 27,844

Provision for income tax (benefit) expense ( 40,703 ) 8,210 7,442

Net (loss) income $ ( 82,903 ) $ 24,193 $ 20,402

Other comprehensive income (loss):

Foreign currency translation adjustments ( 3 ) 173 ( 672 )

Comprehensive income

Net income per share:

Comprehensive (loss) income $ ( 82,906 ) $ 24,366 $ 19,730

Net (loss) income per share:

Basic $ ( 2.46 ) $ 0.82 $ 0.71

Diluted $ ( 2.46 ) $ 0.81 $ 0.70

Weighted average common shares outstanding:

Basic 33,716,157 29,532,342 28,703,265

Diluted 33,716,157 30,073,338 29,678,919

See accompanying notes to the consolidated financial statements.

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(Amounts in thousands, except share amounts)

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Total

Shares Amount

Balance December 29, 2017 28,442,208 $ 284 $ 166,997 $ ( 1,549 ) $ 82,869 $ 248,601

Net income — — — — 20,402 20,402

Stock compensation 310,451 3 4,091 — — 4,094

Public offering of common stock

Shares issued for Fells Point acquisition

Conversion of notes 1,246,272 13 37,002 — — 37,015

Cumulative translation adjustment — — — ( 672 ) — ( 672 )

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Balance December 28, 2018 29,968,483 $ 300 $ 207,326 $ ( 2,221 ) $ 103,271 $ 308,676

Cumulative effect adjustment — — — — ( 2,027 ) ( 2,027 )

Net income — — — — 24,193 24,193

Stock compensation 329,338 3 4,396 — — 4,399

Conversion of subordinated notes

Option exercises 76,169 1 1,540 — — 1,541

Cumulative translation adjustment — — — 173 — 173

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Balance December 27, 2019 30,341,941 $ 304 $ 212,240 $ ( 2,048 ) $ 125,437 $ 335,933

Cumulative effect adjustment, net of tax

Net loss — — — — ( 82,903 ) ( 82,903 )

Stock compensation 500,100 5 9,287 — — 9,292

Option exercises

Public offering 6,634,615 66 85,875 — — 85,941

Cumulative translation adjustment — — — ( 3 ) — ( 3 )

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(Amounts in thousands)

2020 December 27,

2019 December 28,

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net (loss) income $ ( 82,903 ) $ 24,193 $ 20,402

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 19,774 13,328 10,296

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Non-cash operating lease expense 689 2,043 770

Deferred taxes

(Benefit) provision for deferred income taxes ( 18,418 ) 2,063 2,554

Amortization of deferred financing fees 3,426 2,168 3,155

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Change in fair value of contingent earn-out liabilities ( 11,479 ) 5,879 1,448

Intangible asset impairment 24,200 — —

Loss on asset disposal 151 101 169

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Accounts receivable 77,590 ( 13,213 ) ( 19,466 )

Inventories 49,050 ( 9,439 ) ( 6,330 )

Prepaid expenses and other current assets ( 18,240 ) ( 1,813 ) 120

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Surrender of shares to pay withholding taxes ( 3,670 ) ( 1,022 ) ( 764 )

Cash paid for contingent earn-out liability

Cash paid for contingent earn-out liabilities ( 2,927 ) ( 2,412 ) ( 3,000 )

Borrowings under asset based loan facility 100,000 — 47,100

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The Company’s customer base consists primarily of menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores.

The COVID-19 Pandemic

The COVID-19 pandemic (“Pandemic”) has had a material impact on the Company’s business and operations and those of its customers.

In an effort to limit the spread of the virus, federal, state and local governments implemented measures that resulted in the temporary closure of non-essential businesses in many of the markets the Company serves, which has forced its customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations.

State and local governments began to ease these restrictions in mid-May, however, the severity of indoor and outdoor dining restrictions have varied throughout the year depending on the extent of outbreaks and actions taken by the federal, state and local governments.

The duration and extent of restrictions imposed on the Company’s customers by federal, state and local governments is dependent on future developments regarding the Pandemic including new information about the severity of the disease, trends in infection rates, and development of effective medical treatments for the disease, among others.

Due to the Pandemic’s adverse impact on our customers’ operations and purchasing behavior, the Company incurred estimated non-cash charges of approximately $ 15,800 related to incremental bad debt expense and approximately $ 14,600 related to incremental inventory obsolescence during the fifty-two weeks ended December 25, 2020.

The adverse impact to the Company’s customer base and market capitalization at the onset of the Pandemic were considered triggering events and, accordingly, the Company performed interim goodwill and long-lived asset quantitative impairment tests during the first quarter of 2020, as described in Note 9 to these financial statements, the results of which indicated that goodwill or long-lived assets were not impaired.

Consolidation

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Guidance Adopted in Fiscal 2020

In February 2016, the Financial Accounting Standard Board (“FASB”) issued guidance (“ASC 842”) to increase the transparency and comparability among organizations by recognizing right-of-use assets (“ROU assets”) and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

The Company adopted ASC 842 on December 29, 2018, using an optional transition method that allows entities to initially apply the new lease standard at the adoption date.

Under this approach, comparative periods are not restated.

The Company adopted a package of practical expedients that allowed the Company to:

apply hindsight in determining the lease term of its leases;

not reassess whether any expired or existing contracts are or contain leases;

not reassess the lease classification of any expired or existing leases;

not reassess initial direct costs for any existing leases.

The use of hindsight in assessing lease term resulted in a $ 2,027 cumulative effect adjustment, net of tax, to opening retained earnings.

Adoption had a material impact on the Company’s consolidated balance sheet as a result of recognizing ROU assets and lease liabilities for its operating leases of $ 118,031 and $ 126,309 , respectively, but it did not materially impact the Company’s consolidated statements of operations or debt covenants.

There has been no significant change to the accounting for finance leases.

Comprehensive Income:

In February 2018, the FASB issued guidance that permits a Company to reclassify the stranded tax effects in accumulated other comprehensive income resulting from the enactment of H.R.

1, originally known as the Tax Cuts and Jobs Act (the “Tax Act”), to retained earnings.

The Company elected to not reclassify such amounts to retained earnings.

The Company releases disproportionate tax effects from accumulated other comprehensive income as individual items are liquidated.

The Company adopted this guidance on December 29, 2018 and adoption did not have a material impact on the Company’s consolidated financial statements.

Implementation Costs Incurred in a Cloud Computing Arrangement Service Contract:

In August 2018, the FASB issued guidance that aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred to obtain or develop internal-use software.

The Company adopted this guidance prospectively on December 29, 2018 and adoption did not have a material impact on the Company’s consolidated financial statements.

Guidance Not Yet Adopted

Measurement of Credit Losses on Financial Instruments:

In June 2016 and as further amended in November 2018, the FASB issued guidance which requires entities to use a forward-looking expected loss model to estimate credit losses.

It also requires additional disclosure related to credit quality of trade and other receivables, including information related to management’s

estimate of credit allowances.

The Company adopted this guidance on December 28, 2019 and adoption did not have a material impact on its consolidated financial statements.

In June 2016 and as further amended in November 2018, the Financial Accounting Standards Board (the “FASB”) issued guidance which requires entities to use a forward-looking expected loss model to estimate credit losses.

It also requires additional disclosure related to credit quality of trade and other receivables, including information related to management’s estimate of credit allowances.

The Company adopted this guidance on December 28, 2019.

The Company analyzes customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of its allowance for doubtful accounts.

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.

A failure to pay results in held or cancelled orders.

The Company also estimates 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.

Adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

In April 2020, the FASB issued guidance describing approaches entities should follow when accounting for lease concessions negotiated due to the effects of the Pandemic.

The Company has negotiated rent deferrals with certain lessors that do not materially modify the amount of consideration due under the original contract terms.

Consistent with the guidance, the

Company elected to recognize such rent deferrals as accrued expenses.

The Company continues to recognize expense during the deferral period.

Guidance Not Yet Adopted

Simplifying the Accounting for Income Taxes:

In December 2019, the FASB issued guidance that eliminates certain exceptions related to the approach for intraperiod tax allocations, the methodology for calculating income taxes in an interim period and other simplifications and clarifications.

The guidance is effect for fiscal years beginning after December 15, 2020.

The guidance will be effective for fiscal years beginning after December 15, 2020.

Early adoption is permitted.

The Company expects to adopt this guidance when effective and is evaluating the impact of adoption on its consolidated financial statements.

The Company expects to adopt this guidance when effective.

Upon adoption, the Company may recognize additional income tax benefits during interim periods in which interim losses exceed full year projections due to provisions in the guidance that remove loss limitation rules.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity:

In August 2020, the FASB issued guidance that simplifies the accounting models for financial instruments with characteristics of debt and equity.

The amendments in the guidance result in fewer instances in which an embedded conversion feature must be accounted for separately from its host contract.

This guidance will be effective for fiscal years beginning after December 15, 2021.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

The Company expects to adopt this guidance on December 26, 2020.

The Company’s existing convertible debt instruments are not bifurcated and as such adoption will have no impact on ts consolidated financial statements.

Use of Estimates

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Actual results could differ from estimates.

Note 2 – Reclassifications

On September 1, 2020, the Company received a comment letter from the staff of the SEC’s Division of Corporation Finance (“SEC”) with respect to the Company’s annual report on Form 10-K for the year ended December 27, 2019, requesting information regarding the Company’s presentation of food processing costs and separate presentation of selling, general and administrative expenses from other operating expenses.

Food Processing Costs

The Company’s food processing costs represent the costs to cut and package products, primarily beef products, for sale to the Company’s customer base.

The costs associated with food processing are normally incurred immediately prior to shipment and thus, historically, the Company treated these costs as handling expenses and presented them within operating expenses on its consolidated statements of operations.

The Company has also separately disclosed its food processing costs, excluding depreciation expense, in the notes to its annual consolidated financial statements.

Upon further consideration and discussions with the SEC, the Company concluded that food processing costs are more fairly presented as cost of sales and such costs should include depreciation expense associated with equipment and facilities used in food processing activities.

Accordingly, the Company has reclassified its food processing costs from operating expenses to cost of sales.

In accordance with Staff Accounting Bulletin (“SAB”) No.

99 “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, the Company evaluated the impact of the reclassification and determined that the impact was not material to its consolidated financial statements for any prior annual or interim period.

See Note 3 “Summary of Significant Accounting Policies” for a full description of the components of costs of sales and food processing costs.

Selling, General and Administrative Expenses

In response to the SEC’s comment, the Company revised its presentation of total operating expenses such that selling, general and administrative expenses are presented separately from other operating expenses.

Furthermore, management has reclassified gain/loss from asset disposal, which was previously presented as a non-operating expense, to other operating expenses.

See Note 3 “Summary of Significant Accounting Policies” for a full description of the components of selling, general and

administrative expenses and other expenses .

The aggregate impact of the above reclassifications on prior periods are as follows:

Fiscal Years Ended

December 27, 2019 December 28, 2018

As Reported Reclass As Restated As Reported Reclass As Restated

Net sales $ 1,591,834 $ — $ 1,591,834 $ 1,444,609 $ — $ 1,444,609

Cost of sales 1,185,481 19,785 1,205,266 1,077,562 18,131 1,095,693

Gross profit 406,353 ( 19,785 ) 386,568 367,047 ( 18,131 ) 348,916

Operating expenses 355,585 ( 355,585 ) — 318,289 ( 318,289 ) —

Selling, general and administrative expenses — 329,542 329,542 — 298,102 298,102

Other operating expenses — 6,359 6,359 — 2,225 2,225

Operating income 50,768 ( 101 ) 50,667 48,758 ( 169 ) 48,589

Interest expense 18,264 — 18,264 20,745 — 20,745

Loss on asset disposal 101 ( 101 ) — 169 ( 169 ) —

Income before income taxes 32,403 — 32,403 27,844 — 27,844

Provision for income tax expense 8,210 — 8,210 7,442 — 7,442

Net income $ 24,193 $ — $ 24,193 $ 20,402 $ — $ 20,402

Note 3 – Summary of Significant Accounting Policies

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The Company’s contracts contain performance obligations which are satisfied when customers have physical possession of each product.

The majority of customer orders are fulfilled within a day and customer payment terms are typically 20 to 60 days from delivery.

The majority of customer orders are fulfilled within a day and customer payment terms are typically 20 to 60 days from delivery, although in response to the Pandemic our credit terms have been temporarily tightened to a maximum of 30 days for the majority of our customers.

Shipping and handling activities are costs to fulfill the Company’s performance obligations.

These costs are expensed as incurred and presented within operating expenses on the consolidated statements of operations.

These costs are expensed as incurred and presented within selling, general and administrative expenses on the consolidated statements of operations.

The Company offers certain sales incentives to customers in the form of rebates or discounts.

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The following table presents the Company’s net sales disaggregated by principal product category:

December 27, 2019

December 28, 2018

December 29, 2017

December 25, 2020 December 27, 2019 December 28, 2018

Center-of-the-Plate $ 533,813 48.0 % $ 711,980 44.7 % $ 629,038 43.5 %

Dry Goods 150,631 13.6 % 260,976 16.4 % 239,326 16.6 %

Pastry 135,913 12.2 % 221,041 13.9 % 199,990 13.8 %

Cheeses and Charcuterie 107,915 9.7 % 158,834 10.0 % 151,640 10.5 %

Produce 80,920 7.3 % 17,955 1.1 % 13,850 1.0 %

Dairy and Eggs 38,172 3.4 % 110,740 7.0 % 106,768 7.4 %

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Kitchen Supplies 23,878 2.2 % 30,153 1.9 % 27,684 1.9 %

Total $ 1,111,631 100 % $ 1,591,834 100 % $ 1,444,609 100 %

The Company determines its product category classification based on how the Company currently markets its products to its customers.

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Gift cards issued by the Company do not have expiration dates.

The Company records a liability for unredeemed gift cards at the time gift cards are sold and the liability is

reduced when the card is redeemed, the value of the card is escheated to the appropriate government agency, or through breakage.

The Company records a liability for unredeemed gift cards at the time gift cards are sold and the liability is reduced when the card is redeemed, the value of the card is escheated to the appropriate government agency, or through breakage.

Gift card breakage is estimated based on the Company’s historical redemption experience and expected trends in redemption patterns.

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Sales commissions are expensed when incurred because the amortization period is one year or less.

These costs are presented within operating expenses on the Company’s consolidated statements of operations.

These costs are presented within selling, general and administrative expenses on the Company’s consolidated statements of operations.

Cost of Sales

The Company records cost of sales based upon the net purchase price paid for a product, including applicable freight charges incurred to deliver the product to the Company’s warehouse.

Operating Expenses

Operating expenses include the costs of facilities, product shipping and handling costs, warehousing costs, protein processing costs, selling and general administrative activities.

Shipping and handling costs included in operating expenses were $ 85,620 , $ 79,143 and $ 70,108 for fiscal 2019 , 2018 and 2017 , respectively.

Protein processing costs included in operating expenses were $ 17,530 , $ 15,907 and $ 13,058 for fiscal 2019 , 2018 and 2017 , respectively.

The Company records cost of sales based upon the net purchase price paid for a product, including applicable freight charges incurred to deliver the product to the Company’s warehouse, and food processing costs.

Food processing costs include but are not limited to direct labor and benefits, applicable overhead and depreciation of equipment and facilities used in food processing activities.

Food processing costs included in cost of sales were $ 18,682 , $ 19,785 and $ 18,131 for fiscal 2020, 2019 and 2018, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include facilities costs, product shipping and handling costs, warehouse costs, and other selling, general and administrative costs.

Shipping and handling costs included in selling, general and administrative expenses were $ 78,152 , $ 85,620 and $ 79,143 for fiscal 2020, 2019 and 2018, respectively.

Other Operating Expenses

Other operating expenses includes expenses primarily related to changes in the fair value of the Company’s 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.

Cash and Cash Equivalents

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The allowance for doubtful accounts is determined based upon a number of specific criteria, such as whether a customer has filed for or been placed into bankruptcy, has had accounts referred to outside parties for collections or has had accounts significantly past due.

The allowance also covers short paid invoices the Company deems to be uncollectable as well as a portion of trade accounts receivable balances projected to become uncollectable based upon historic patterns and 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.

Inventories consist primarily of finished goods, food and related food products held for resale and are valued at the lower of cost or market.

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Lease liabilities are recognized at commencement date based on the present value of the remaining lease payments over the lease term.

The corresponding ROU asset is recognized for the same amount as the lease liability adjusted for any payments made at or before the commencement date, any lease incentives received, and any initial direct costs.

The corresponding right-of-use (“ROU”) asset is recognized for the same amount as the lease liability adjusted for any payments made at or before the commencement date, any lease incentives received, and any initial direct costs.

The Company’s lease agreements may include options to renew, extend or terminate the lease.

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The discount rate used is based on the Company’s incremental borrowing rate since the implicit rate in the Company’s leases is not readily determinable.

Operating lease expense is recognized on a straight-line basis over the lease term and presented within operating expenses on the Company’s consolidated statements of operations.

Operating lease expense is recognized on a straight-line basis over the lease term and presented within selling, general and administrative expenses on the Company’s consolidated statements of operations.

Finance lease ROU assets are amortized on a straight-line basis over the shorter of the useful life of the asset or the lease term.

Interest expense on the finance lease liability is recognized using the effective interest rate method and is presented within interest expense on the Company’s consolidated statements of operations.

Interest expense on the finance lease liability is recognized using the effective interest rate method and is presented within interest expense on the Company’s consolidated

statements of operations.

Variable rent payments related to both operating and finance leases are expensed as incurred.

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These costs were incurred in connection with developing or obtaining computer software for internal use if it has a useful life in excess of one year, in accordance with Accounting Standards Codification (“ASC”) 350-40 “Internal-Use Software.” Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task that it previously did not perform.

software is amortized on a straight-line basis over a three to seven year period.

Internal use software is amortized on a straight-line basis over a three to seven year period.

Capitalized costs include direct acquisitions as well as software and software development acquired under capitalized leases and internal labor where appropriate.

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If the net undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), an additional step is performed that determines the fair value of the asset and the Company records an impairment, if any.

The adverse impact to the Company’s customer base and market capitalization at the onset of the Pandemic were considered triggering events during the first quarter of fiscal 2020, and accordingly, the Company performed a long-lived asset recoverability test as of March 27, 2020 (more fully described in Note 9) the results of which indicated no impairment.

The Company has no t recorded any impairment of long-lived assets in fiscal 2020, 2019 or 2018.

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These costs are amortized over the terms of the related debt instruments by the effective interest rate method.

Amortization of debt issuance costs was $ 2,168 for the fiscal year ended December 27, 2019 , $ 3,155 for the fiscal year ended December 28, 2018 , inclusive of a $ 1,081 write-off of unamortized deferred financing fees as a result of the Company’s debt repricing (more fully described in Note 9 “Debt Obligations”) and $ 2,084 for the fiscal year ended December 29, 2017 .

Amortization of debt issuance costs was $ 3,426 for the fiscal year ended December 25, 2020, $ 2,168 for the fiscal year ended December 27, 2019 and $ 3,155 for the fiscal year ended December 28, 2018, inclusive of a $ 1,081 write-off of unamortized deferred financing fees as a result of the Company’s term loan debt repricing.

Business Combinations

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The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill.

Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred and presented in operating expenses in the Company’s consolidated results of operations.

Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred and presented in other operating expenses in the Company’s consolidated results of operations.

Results of operations are included in the Company’s financial statements from the date of acquisition.

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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.

There have been no events or changes in circumstances during fiscal 2019 , 2018 or 2017 , indicating that the carrying value of our finite-lived intangible assets are not recoverable.

During the fourth quarter of fiscal 2020, the Company recorded a $ 24,200 impairment charge, $ 17,545 net of tax, to write-down the value of its Del Monte and Bassian Farms trademarks.

See Note 9 for more information.

There have been no other events or changes in circumstances during fiscal 2020, 2019 or 2018, indicating that the carrying value of the Company’s finite-lived intangible assets are not recoverable.

Goodwill is the excess of the acquisition cost of businesses over the fair value of identifiable net assets acquired in accordance with ASC 350, “Intangibles-Goodwill and Other.” The Company’s business consists of three operating segments:

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The Company has the option to evaluate goodwill impairment using a qualitative or quantitative analysis.

For the fiscal year ended December 27, 2019 , 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.

The qualitative analysis considered various factors including macroeconomic conditions, market conditions, industry trends, cost factors and financial performance, among others.

For the fiscal year ended December 28, 2018 , the Company tested goodwill for impairment using a quantitative analysis.

The adverse impact to the Company’s customer base and market capitalization at the onset of the Pandemic were considered triggering events during the first quarter of fiscal 2020, and accordingly, the Company performed an interim goodwill impairment test as of March 27, 2020 (more fully described in Note 9) the results of which indicated no impairment.

For its annual goodwill impairment test performed during the fourth quarter of fiscal 2020, the Company tested goodwill for impairment using a quantitative analysis.

The Company estimated the fair value of its reporting units using an income approach and determined the fair value of its reporting units substantially exceeded their respective carry values.

The Company’s income approach incorporates the use of a discounted cash flow methodology 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 which take into account estimated inflation rates.

The Company’s income approach incorporates the use of a discounted cash flow methodology that involves many management assumptions that are based upon future growth projections which include estimates for the duration of the Pandemic’s impact on the Company’s customers.

Assumptions include estimates of future revenue based upon budget projections and growth rates.

The Company develops estimates of future levels of gross and operating profits and projected capital expenditures.

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The Company also performed a reconciliation of its market capitalization and the estimate of the aggregate fair value of its reporting units, including consideration of a control premium.

For the fiscal year ended December 27, 2019, 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.

The qualitative analysis considered various factors including macroeconomic conditions, market conditions, industry trends, cost factors and financial performance, among others.

There have been no events or changes in circumstances during fiscal 2020, 2019 or 2018, indicating that goodwill may be impaired.

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

As of December 25, 2020 and December 27, 2019, the Company had valuation allowances of $ 2,261 and $ 907 , 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.

The Company follows certain provisions of ASC 740, “Income Taxes” which established a single model to address accounting for uncertain tax positions and clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements.

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The Company, when required, will accrue interest and penalties related to income tax matters in income tax expense.

The Company releases disproportionate tax effects from accumulated other comprehensive income as individual items are liquidated.

Commitments and Contingencies

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Contingent Earn-out Liabilities

The Company accounts for contingent consideration relating to business combinations as a liability and an increase to goodwill at the date of the acquisition and continually remeasures the liability at each balance sheet date by recording changes in the fair

value through the consolidated statements of operations.

The Company determines the fair value of contingent consideration based on future operating projections under various potential scenarios, including the use of Monte Carlo simulations, and weighs the probability of these outcomes.

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Liabilities associated with this program are estimated in part by considering historical claims experience and medical cost trends.

Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

Projections of future loss expenses are inherently uncertain because of the random nature of insurance claims occurrences and

could be significantly affected if future occurrences and claims differ from these assumptions and historical trends.

The Company maintains an insurance program for its automobile liability and workers’ compensation insurance subject to deductibles or self-insured retentions of $ 500 per occurrence.

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Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities include the following:

quoted prices for similar assets in active markets;

quoted prices for identical or similar assets in inactive markets;

inputs other than quoted prices that are observable for the asset;

inputs that are derived principally from or corroborated by observable market data by correlation or other means.

a) quoted prices for similar assets in active markets;

b) quoted prices for identical or similar assets in inactive markets;

c) inputs other than quoted prices that are observable for the asset;

d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset.

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Fiscal Year Ended

December 27, 2019

December 28, 2018

December 29, 2017

Net income per share:

December 25, 2020 December 27, 2019 December 28, 2018

Net (loss) income per share:

Basic $ ( 2.46 ) $ 0.82 $ 0.71

Diluted $ ( 2.46 ) $ 0.81 $ 0.70

Weighted average common shares:

Basic 33,716,157 29,532,342 28,703,265

Diluted 33,716,157 30,073,338 29,678,919

Reconciliation of net income per common share:

Fiscal Year Ended

December 27, 2019

December 28, 2018

December 29, 2017

December 25, 2020 December 27, 2019 December 28, 2018

Net (loss) income $ ( 82,903 ) $ 24,193 $ 20,402

Add effect of dilutive securities:

Interest on convertible notes, net of tax — 207 362

Adjusted net income

Adjusted net (loss) income $ ( 82,903 ) $ 24,400 $ 20,764

Weighted average basic common shares outstanding 33,716,157 29,532,342 28,703,265

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Fiscal Year Ended

December 27, 2019

December 28, 2018

December 29, 2017

Restricted Share Awards (“RSAs”)

December 25, 2020 December 27, 2019 December 28, 2018

Restricted share awards 505,568 132,861 42

Stock options 115,639 — —

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A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or lower fair value measurement.

Changes in the fair value of contingent earn-out liabilities are reflected in operating expenses on the Company’s consolidated statements of operations.

The Pandemic’s impact on the Company’s revenue growth and profitability resulted in a significant reduction in the fair value of its contingent earn-out liabilities.

The Company the value of Changes in the fair value of contingent earn-out liabilities are reflected in other operating expenses on the Company’s consolidated statements of operations.

The following table presents the changes in Level 3 contingent earn-out liabilities:

Other Acquisitions

Del Monte Fells Point Bassian Sid Wainer Other Acquisitions Total

Balance December 28, 2018 $ — $ 3,649 $ — $ — $ 1,441 $ 5,090

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In May 2019, the Company fully settled its Del Monte earn-out liability for $ 200 .

The long-term portion of contingent earn-out liabilities was $ 7,957 and $ 2,792 as of December 27, 2019 and December 28, 2018 , respectively, and are reflected as other liabilities and deferred credits on the Company’s consolidated balance sheets.

The long-term portion of contingent earn-out liabilities was $ 2,556 and $ 7,957 as of December 25, 2020 and December 27, 2019, respectively, and are reflected as other

liabilities and deferred credits on the Company’s consolidated balance sheets.

The remaining short-term portion of earn-out liabilities are reflected as accrued liabilities on the Company’s consolidated balance sheets.

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The Black Scholes model utilizes the market price of the Company’s common stock, estimates of the stock’s volatility and the prevailing risk free interest rate in calculating the fair value estimates.

December 27, 2019

Carrying Value

December 25, 2020 December 27, 2019

Carrying Value Fair Value Carrying Value Fair Value

Convertible Senior Notes $ 150,000 $ 163,204 $ 150,000 $ 165,000

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Note 6 – Acquisitions

On January 27, 2020, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets, including certain real-estate assets, of Sid Wainer & Son (“Sid Wainer”), a specialty food and produce distributor in New England.

The final purchase price was approximately $ 44,081 , consisting of $ 46,450 paid in cash at closing, partially offset by a $ 2,369 net working capital true-up.

The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total $ 4,000 over a two-year period.

The payment of the earn-out liability is subject to the successful achievement of certain gross profit targets.

The Company estimated the fair value of this contingent earn-out liability to be $ 511 and $ 2,081 as of December 25, 2020 and January 27, 2020, respectively.

Trademarks were valued at fair value using Level 3 inputs and are being amortized over 15 years.

Goodwill for the Sid Wainer acquisition will be amortized over 15 years for tax purposes.

The goodwill recorded primarily reflects the value of acquiring an established specialty food and produce distributor to leverage the Company’s existing products in the markets served by Sid Wainer, to supply Sid Wainer’s produce offerings to the Company’s metro New York market and any intangible assets that do not qualify for separate recognition.

The Company reflected net sales of $ 89,638 and an operating loss of $ 9,598 for the fifty-two weeks ended December 25, 2020 in its consolidated statement of operations related to the Sid Wainer acquisition.

The table below presents unaudited pro forma consolidated income statement information of the Company as if the Sid Wainer acquisition had occurred on December 29, 2018.

The pro forma results were prepared from financial information obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the acquisition.

The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisition been completed on the above date, nor is it necessarily indicative of the Company’s future results.

The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the acquisition, any incremental costs for Sid Wainer transitioning to become a public company, and also does not reflect additional revenue opportunities following the acquisition.

The pro forma information reflects amortization and depreciation of the Sid Wainer acquisition at their respective fair values.

Fiscal Years Ended

December 25, 2020 December 27, 2019

Net sales $ 1,124,409 $ 1,814,304

(Loss) income before income taxes $ ( 124,611 ) $ 34,445

On February 25, 2019, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of Bassian Farms, Inc.

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The payment of the contingent earn-out liability is subject to the successful achievement of certain gross profit targets.

The Company estimated the fair value of this contingent earn-out liability to be $ 7,957 and $ 7,450 as of December 27, 2019 and February 25, 2019 , respectively.

Customer relationships, non-compete agreements and trademarks are valued at fair value using Level 3 inputs and are being amortized over 15 , 5 and 10 years, respectively.

Goodwill for the Bassian acquisition will be amortized over 15 years for tax purposes.

The goodwill recorded primarily reflects the value of acquiring an established center-of-the-plate distributor to grow the Company's center-of-the-plate product category in the West Coast region, as well as any intangible assets that do not qualify

for separate recognition.

The Company recognized professional fees of $ 235 in operating expenses related to the Bassian acquisition.

The table below sets forth the purchase price allocation of the Bassian acquisition:

Goodwill for the Bassian acquisition is being amortized over 15 years for tax purposes.

The table below sets forth the purchase price allocation of these and other acquisitions:

Sid Wainer Bassian Other Acquisitions

Current assets $ 22,960 $ 6,657 $ 6,795

Customer relationships — 15,530 6,638

Non-compete agreement

Trademarks 3,500 4,610 700

Non-compete agreements — 1,000 —

Goodwill 11,571 13,065 5,892

Fixed assets 19,425 856 308

Other assets — 10 —

Right-of-use assets 8,259 — 1,019

Lease liabilities ( 8,259 ) — ( 1,019 )

Current liabilities ( 11,294 ) ( 2,501 ) ( 1,300 )

Earn-out liability ( 2,081 ) ( 7,450 ) ( 1,383 )

Other long-term liabilities — — ( 499 )

Total consideration $ 44,081 $ 31,777 $ 17,151

The Company reflected net sales of $ 49,908 for Bassian in its consolidated statement of operations for the fifty-two weeks ended December 27, 2019 .

The Company has determined that separate disclosure of Bassian earnings is impracticable due to the integration of the Bassian business into the Company's operations in the San Francisco market.

During the years ended December 27, 2019 and December 28, 2018 , the Company also paid approximately $ 300 and $ 13,401 , respectively, on small strategic acquisitions.

The Company recognized professional fees of $ 435 and $ 235 in other operating expenses related to acquisitions in fiscal 2020 and 2019, respectively.

During the years ended December 25, 2020 and December 27, 2019, the Company also paid approximately $ 16,851 and $ 300 , respectively, on other strategic acquisitions.

Note 7 – Inventories

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Equipment, leasehold improvements and software as of December 25, 2020 and December 27, 2019 consisted of the following:

December 27, 2019

December 28, 2018

Machinery and equipment

Computers, data processing and other equipment

Leasehold improvements

Furniture and fixtures

Useful Lives December 25, 2020 December 27, 2019

Land Indefinite $ 5,020 $ 1,170

Buildings 20 years 15,685 1,360

Machinery and equipment 5 - 10 years

24,900 21,718

Computers, data processing and other equipment 3 - 7 years

14,207 12,686

Software 3 - 7 years

33,063 29,305

Leasehold improvements 1 - 40 years

68,747 70,903

Furniture and fixtures 7 years 3,412 3,309

Vehicles 5 - 7 years

Other 7 years 88 95

Construction-in-process 8,115 9,200

195,110 156,156

accumulated depreciation and amortization ( 79,662 ) ( 63,310 )

Equipment, leasehold improvements and software, net $ 115,448 $ 92,846

Construction-in-process at December 27, 2019 related primarily to the implementation of the Company’s Enterprise Resource Planning (“ERP”) system and at December 28, 2018 related primarily to the implementation of the Company’s ERP system and the buildout of the Company’s headquarters in Ridgefield, CT.

The buildout of the Company’s headquarters was completed during fiscal 2019.

Construction-in-process at December 25, 2020 and at December 27, 2019 related primarily to the implementation of the Company’s Enterprise Resource Planning (“ERP”) system.

The rollout of its ERP system will continue through fiscal 2021.

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Fiscal Year Ended

December 27, 2019

December 28, 2018

December 29, 2017

December 25, 2020 December 27, 2019 December 28, 2018

Depreciation expense $ 14,984 $ 9,535 $ 7,142

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Note 9 – Goodwill and Other Intangible Assets

The Pandemic has had a material impact on the Company’s customers.

In an effort to limit the spread of the virus, federal, state and local governments implemented measures that resulted in the temporary closure of non-essential businesses in many of the markets the Company serves, which forced its customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations.

Beginning in mid-March, these actions led to a significant decrease in demand for the Company’s products.

The adverse impact to the Company’s customer base and market capitalization at the onset of the Pandemic were considered triggering events during the first quarter of fiscal 2020, and accordingly, the Company performed interim goodwill and long-lived asset quantitative impairment tests as of March 27, 2020.

Interim Goodwill Impairment Test

The Company estimated the fair value of its 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 which include estimates of the Pandemic’s impact on our business.

Assumptions include estimates of future revenues, growth rates which include estimates for the duration of the Pandemic’s impact on the Company’s customers, estimates of future levels of gross profit and operating profit, projected capital expenditures and discount rates based upon industry and competitor analyses.

On the basis of these assumptions, the Company determined that the fair values of its reporting units exceeded the net carry values of their assets and liabilities.

As such, goodwill was no t impaired as of March 27, 2020.

Interim Long-lived Impairment Test

Long-lived assets, including other intangible assets, were tested for recoverability at the asset group level.

estimated the net undiscounted cash flows expected to be generated from the asset group over the expected useful of the asset group’s primary asset.

Key assumptions include future revenues, growth rates, estimates of future levels of gross profit and operating profit and projected capital expenditures necessary to maintain the operating capacity of each asset group.

On the basis of these assumptions, the Company determined that the undiscounted cash flows for each of the Company’s asset groups exceeded their respective carry values and therefore long-lived assets were not impaired as of March 27, 2020.

During the fourth quarter of fiscal 2020, the Company performed its annual goodwill impairment test, the results of which indicated that fair values of its reporting units exceeded their respective net carry values and as such goodwill was not impaired.

Also during the fourth quarter of fiscal 2020, the Company committed to a plan to shift its brand strategy to leverage its Allen Brothers brand in its west coast region and determined its Del Monte, Ports Seafood and Bassian Farms trademarks did not fit the Company’s long-term strategic objectives.

This brand transition is planned to begin in the second quarter of fiscal 2021.

The Company assessed these trademarks for impairment and used the relief of royalty method to determine fair value.

Significant assumptions used include future sales forecasts, royalty rates and discount rates.

As a result of the assessment, the Company recorded a $ 24,200 impairment charge, $ 17,545 net of tax, to write-down the value of its Del Monte and Bassian Farms trademarks.

There were no other triggering events during fiscal 2020 that would require the Company to test the recoverability of its long-lived assets.

The impacts of the Pandemic on the Company’s business are uncertain and will depend on future developments, and as such, it is possible that another triggering event could occur that under certain circumstances could cause the Company to recognize an impairment charge in the future.

The changes in the carrying amount of goodwill are presented as follows:

Carrying amount as of December 28, 2018 $ 184,280

Goodwill adjustments (1)

Acquisitions 13,424

Foreign currency translation 39

Carrying amount as of December 27, 2019 197,743

Acquisitions 17,104

Foreign currency translation 17

Carrying amount as of December 25, 2020 $ 214,864

The goodwill adjustments primarily relate to the Fells Point acquisition.

Other intangible assets consist of customer relationships being amortized over a period ranging from four to twenty years , trademarks being amortized over a period of one to forty years , and non-compete agreements being amortized over a period of two to six years .

Other intangible assets as of December 25, 2020 and December 27, 2019 consisted of the following:

Weighted Average

Remaining Amortization Period

Gross Carrying

Remaining Amortization Period Gross Carrying

Amount Accumulated

Amortization Net Amount

December 25, 2020

Customer relationships

Non-compete agreements

Customer relationships 128 months $ 141,679 $ ( 55,135 ) $ 86,544

Non-compete agreements 37 months 8,579 ( 7,752 ) 827

Trademarks 209 months 44,520 ( 20,174 ) 24,346

Total $ 194,778 $ ( 83,061 ) $ 111,717

December 27, 2019

Customer relationships

Non-compete agreements

Customer relationships 134 months $ 135,226 $ ( 45,454 ) $ 89,772

Non-compete agreements 49 months 8,579 ( 7,479 ) 1,100

Trademarks 193 months 64,505 ( 16,626 ) 47,879

Total $ 208,310 $ ( 69,559 ) $ 138,751

Amortization expense for other intangibles was $ 13,502 , $ 12,663 and $ 11,910 for the fiscal years ended December 25, 2020, December 27, 2019 and December 28, 2018, respectively.

As of December 25, 2020, estimated amortization expense for other intangible assets for each of the next five fiscal years and thereafter is as follows:

2021 $ 12,163

Thereafter 59,884

Total $ 111,717

Note 10 – Debt Obligations

Debt obligations as of December 25, 2020 and December 27, 2019 consisted of the following:

December 27, 2019

December 28, 2018

December 25, 2020 December 27, 2019

Senior secured term loan $ 201,553 $ 238,129

Convertible senior notes 150,000 150,000

Convertible unsecured note

Finance lease and other financing obligations

Asset-based loan facility 40,000 —

Finance lease and other financing obligations 15,798 3,905

Convertible unsecured note 4,000 4,000

Deferred finance fees and original issue discount ( 7,172 ) ( 9,207 )

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Maturities of the Company’s debt, excluding finance leases, for each of the next five years and thereafter at December 25, 2020 are as follows:

Total $ 395,553

Senior Secured Term Loan Credit Facility

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In connection with the repricing, the Company paid debt financing costs of $ 761 which were capitalized as deferred financing charges.

On July 6, 2018 , the Company made a $ 47,100 prepayment and is no longer required to make quarterly amortization payments on the Term Loans.

On July 6, 2018, the Company made a $ 47,100 prepayment and was no longer required to make quarterly amortization payments on the Term Loans.

On November 16, 2018, the Company completed a repricing of the Term Loan Facility to reduce the Applicable Rate from 400 basis points to 350 basis points over LIBOR.

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The Company wrote off unamortized deferred financing fees of $ 1,081 as a result of this repricing.

On June 8, 2020, the Company entered into a sixth amendment (the “Sixth Amendment”) to its Term Loan Credit Agreement.

Upon the consent of the lenders, the Sixth Amendment converted a portion of the term loans then outstanding of $ 238,129 (the “Term Loans”) into a new tranche of term loans (the “2025 Tranche”) which among other things extended the maturity date by three years and increased the fixed-rate portion of interest charged by 200 basis points.

The portion of the Term Loans that did not convert (the “2022 Tranche”) retained the maturity date and interest rate in effect prior to the Sixth Amendment.

The Company made a prepayment of $ 35,719 on the 2025 Tranche immediately after it was established.

The following table summarizes the key terms of the Term Loans as of December 25, 2020:

Term Loans Principal Outstanding Interest Rate Maturity Date Scheduled Principal Payments

2022 Tranche $ 31,166 LIBOR + 3.5 % June 22, 2022 none

2025 Tranche $ 170,387 LIBOR + 5.5 % June 22, 2025 0.25 % per quarter

The 2025 Tranche has a springing maturity date of June 22, 2024 if, as of that date, the Company’s 1.875 % convertible senior notes maturing on December 1, 2024 have not been repaid or refinanced by debt having a maturity date on or after December 23, 2025.

The Sixth Amendment was accounted for as a debt modification.

The Company incurred lender fees of $ 856 which were capitalized as debt issuance costs.

Third-party transaction costs of $ 1,233 were expensed as incurred.

The Sixth Amendment introduced a minimum liquidity covenant which requires the Company to maintain at least $ 35,000 of liquidity as of the last day of any fiscal quarter where EBITDA, as defined in the Credit Agreement, is less than $ 10,000 .

The Company had minimum liquidity, as defined in the Credit Agreement, of $ 248,852 as of December 25, 2020.

The interest charged on the Term Loans, will be equal to a spread plus, at the Company’s option, either the Base Rate (as defined in the Term Loan Credit Agreement) or LIBOR for one, two, three, six or (if consented to by the lenders) twelve-month interest periods chosen by the Company.

The interest rate on the Term Loans at December 27, 2019 was 5.2 % .

The Term Loan Facility contains customary affirmative covenants, negative covenants (including restrictions, subject to customary exceptions, on incurring debt or liens, paying dividends, repaying payment subordinated and junior lien debt,

disposing assets, and making investments and acquisitions), and events of default for a term loan B facility of this type, as more particularly described in the Term Loan Credit Agreement.

The weighted average interest rate on the Term Loans at December 25, 2020 was 5.3 %.

The Term Loan Facility contains affirmative covenants, negative covenants and events of default customary for a term loan B facility of this type, as more particularly described in the Term Loan Credit Agreement.

As of December 25, 2020, the Company was in compliance with all debt covenants under the Term Loan Credit Agreement.

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The ABL matures on the earlier of June 29, 2023 and 90 days prior to the maturity date of the Company’s Term Loan Facility.

The Company incurred transaction costs of $ 877 which were capitalized as deferred financing fees to be amortized over the term of the ABL.

The interest rate charged on borrowing under the ABL is equal to a spread plus, at the Company’s option, either the Base Rate (as defined in the ABL Credit Agreement) or LIBOR (except for swingline loans) for one, two, three, six or (if consented to by the lenders) twelve-month, interest periods chosen by the Company.

The Company will pay certain recurring fees with respect to the ABL, including fees on unused lender commitments.

The interest rate on the ABL at December 25, 2020 was 1.9 %.

The ABL Credit Agreement contains customary affirmative covenants, negative covenants and events of default as more particularly described in the ABL Credit Agreement.

The Company is required to comply with a minimum consolidated fixed charge coverage ratio of 1 :1 if the amount of availability under the ABL falls below $ 10,000 or 10 % of the borrowing base.

The Company incurred transaction costs of $ 877 which were capitalized as deferred financing fees to be amortized over the term of the ABL.

On July 6, 2018 , the Company borrowed $ 47,100 under the ABL and made an equivalent prepayment on its Term Loans.

On November 22, 2019 , the Company fully paid all borrowings outstanding under the ABL and there was no balance outstanding as of December 27, 2019 .

The weighted average interest rate on our ABL borrowings was approximately 3.7 % during fiscal 2019 .

As of December 25, 2020, the Company was in compliance with all debt covenants and the Company had reserved $ 20,141 of the ABL for the issuance of letters of credit.

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Approximately $ 43,225 of the net proceeds were used to repay all outstanding borrowings under the ABL and the Company intends to use the remainder for working capital and general corporate purposes, which may include future acquisitions.

The Company incurred transaction costs of approximately $ 5,082 which were capitalized as deferred financing fees to be amortized over the term of the Senior Notes.

The Senior Notes bear interest of 1.875 % per annum payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2020.

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In addition, if the Company undergoes a fundamental change, as described in the Indenture, holders may require the Company to repurchase for cash all or part of their Senior Notes at a repurchase price equal to 100% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the required repurchase date.

The Company incurred transaction costs of approximately $ 5,082 which were capitalized as deferred financing fees to be amortized over the term of the Senior Notes.

Convertible Unsecured Note

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Note 11 – Stockholders’ Equity

Preferred Stock Purchase Rights

On March 22, 2020, the Company’s board of directors approved a limited duration Preferred Stock Purchase Rights Agreement (the “Rights Agreement”).

Under the Rights Agreement, the board of directors approved a dividend of one preferred share purchase right (a “Right”) for each share outstanding share of the Company’s common stock to purchase one one-thousandth of a share of Series A Preferred Stock of the Company at a price of $ 40.00 per Unit of Preferred Stock, subject to adjustment as provided in the Rights Agreement.

The Rights will expire on March 21, 2021, unless the Rights are earlier redeemed or exchanged by the Company or upon the occurrence of certain transactions.

Public Common Stock Offering

On May 14, 2020, the Company completed a public offering of 5,769,231 shares of its common stock at a price of $ 13.00 per share to the underwriters, to be reoffered by the underwriters at variable prices per share, which resulted in net proceeds of approximately $ 74,691 after deducting underwriters’ fees, commissions and transaction expenses.

In addition, the Company granted a 30-day option to purchase up to an additional 865,384 shares of its common stock at a price of $ 13.00 per share to the underwriters, to be reoffered by the underwriters at variable prices per share.

The option was fully exercised on June 2, 2020 and resulted in additional proceeds of $ 11,250 .

Conversion of Convertible Subordinated Notes

On July 25, 2018, the holders of the $ 36,750 principal amount of convertible subordinated notes that were issued in connection with the Company’s acquisition of Del Monte Capitol Meat Company converted these notes and related accrued interest of $ 265 into 1,246,272 shares of the Company’s common stock.

On December 19, 2017 , the Company completed a public offering of 1,900,000 shares of its common stock which resulted in net proceeds of approximately $ 34,020 after deducting underwriters’ fees, commissions and transaction expenses.

Equity Incentive Plan

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The related tax benefit for stock-based compensation was $ 133 , $ 883 and $ 864 for the fiscal years ended December 25, 2020, December 27, 2019 and December 28, 2018, respectively.

The following table reflects the activity of RSAs during the fiscal years ended December 27, 2019 and December 28, 2018 :

Weighted Average

The following table reflects the activity of RSAs during the fiscal year ended December 25, 2020:

Time-based Performance-based Market-based

Shares Weighted Average

Grant Date Fair Value Shares Weighted Average

Grant Date Fair Value

Unvested at December 27, 2019 286,917 $ 29.94 426,740 $ 26.01 26,952 $ 30.16

Unvested at December 28, 2018

Granted 799,371 13.91 187,806 30.85 30,318 27.70

Vested ( 167,883 ) 27.88 ( 144,556 ) 20.36 — —

Forfeited ( 17,087 ) 28.73 ( 469,990 ) 30.35 ( 30,318 ) 27.70

Unvested at December 25, 2020 901,318 $ 16.14 — $ — 26,952 $ 30.16

The fair value of RSAs vested during the fiscal years ended December 25, 2020, December 27, 2019 and December 28, 2018, was $ 8,109 , $ 3,742 and $ 2,936 , respectively.

These awards are a mix of time-, market- and performance-based grants awarded to key employees and non-employee directors which vest over a range of periods of up to five -years.

The market- and performance-based RSAs cliff vest, if at all, after the conclusion of a three -year performance period and vesting is subject to the award recipient’s continued service to the Company as of the vesting date.

These awards are a mix of time-, market- and performance-based grants awarded to key employees and non-employee directors that generally vest over a range of periods up to four-years .

The market- and performance-based RSAs generally cliff vest, if at all, after the conclusion of a three-year performance period and vesting is subject to the award recipient’s continued service to the Company as of the vesting date.

The number of performance-based RSAs that ultimately vest is based on the Company’s attainment of certain profitability and return on invested capital targets.

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Key assumptions used included a risk-free interest rate of 2.2 % and expected volatility of 44.6 %.

At December 27, 2019 , the total unrecognized compensation cost for these unvested RSAs was $ 9,600 to be recognized over a weighted-average period of approximately 2.3 years .

Of this total, $ 6,150 related to RSAs with time-based vesting provisions to be recognized over a weighted average period of 2.6 years and $ 3,450 related to RSAs with performance-based vesting provisions to be recognized over a weighted average period of 1.9 years .

The following table summarizes stock option activity during the fiscal years ended December 27, 2019 and December 28, 2018 :

Exercise Price

Weighted Average

During the fourth quarter of fiscal 2020, the Company modified its 2018 performance-awards and certain 2018 time-based awards such that they vested on December 17, 2020.

The modifications affected seventeen employees and resulted in incremental stock compensation expense of $ 1,999 .

Concurrent with these modifications, the Company also cancelled its 2020 and 2019 performance-based awards and its 2020 market-based equity awards.

At December 25, 2020, the total unrecognized compensation cost for the Company’s unvested RSAs was $ 9,523 to be recognized over a weighted-average period of approximately 1.9 years.

Of this total, $ 9,180 related to RSAs with time-based vesting provisions to be recognized over a weighted average period of 1.9 years and $ 343 related to RSAs with performance- or market-based vesting provisions to be recognized over a weighted average period of 1.5 years.

The following table summarizes stock option activity during the fiscal year ended December 25, 2020:

Shares Weighted

Exercise Price Aggregate

Value Weighted Average

Remaining Contractual

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Outstanding December 27, 2019 115,639 $ 20.23 $ 2,051 6.2

Outstanding December 28, 2018

Exercised — —

Forfeited — —

Outstanding December 25, 2020 115,639 $ 20.23 $ 423 5.2

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The Company issues new shares upon the exercise of stock options.

The Company recognized expense of $ 114 , $ 601 and $ 557 on stock options during the fiscal years ended December 27, 2019 , December 28, 2018 and December 29, 2017 , respectively.

The Company recognized expense of zero , $ 114 and $ 601 on stock options during the fiscal years ended December 25, 2020, December 27, 2019 and December 28, 2018, respectively.

These awards fully vested during fiscal 2019.

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Note 12 – Leases

The components of net lease cost for the fiscal year ended December 27, 2019 were as follows:

The components of net lease cost for the fiscal year ended December 25, 2020 and December 27, 2019 were as follows:

Fiscal Year Ended

December 25, 2020 December 27, 2019

Operating lease cost $ 27,521 $ 27,415

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Total lease cost, net $ 36,608 $ 32,155

Total rent expense for operating leases for the fiscal years ended December 28, 2018 was $ 29,202 .

Total depreciation expense for finance leases for the fiscal years ended December 28, 2018 was $ 52 .

The maturities of the Company’s lease liabilities for each of the next five fiscal years and thereafter at December 25, 2020 were as follows:

Operating Leases

Finance Leases

Related Party Real Estate

Third Party Real Estate

Vehicles and Equipment

Operating Leases Finance Leases

Related Party Real Estate Third Party Real Estate Vehicles and Equipment Total Vehicles and Equipment

2021 $ 499 $ 14,118 $ 9,925 $ 24,542 $ 4,905

2022 509 13,518 8,160 22,187 3,814

2023 387 12,462 5,751 18,600 2,942

2024 — 11,418 2,190 13,608 2,411

2025 — 10,457 1,039 11,496 1,880

Thereafter — 87,307 — 87,307 1,307

Total $ 1,395 $ 149,280 $ 27,065 $ 177,740 $ 17,259

Less interest ( 51,440 ) ( 1,461 )

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Supplemental balance sheet information related to finance leases was as follows:

Balance Sheet Location

December 27, 2019

Short-term finance lease liabilities

Current portion of long-term debt

Long-term finance lease liabilities

Long-term debt, net of current portion

Balance Sheet Location December 25, 2020 December 27, 2019

Short-term finance lease liabilities Current portion of long-term debt $ 4,383 $ 721

Long-term finance lease liabilities Long-term debt, net of current portion $ 11,415 $ 3,184

At December 25, 2020, the weighted-average lease term for operating and finance leases was 10.3 years and 4.5 years, respectively.

At December 25, 2020, the weighted-average discount rate for operating and finance leases was 6.3 % and 3.7 %, respectively.

As of December 27, 2019 , the Company is contractually obligated to make payments of approximately $ 5,307 , related to long-term leases for several vehicles and a distribution and processing facility that have not commenced.

Accordingly, the Company has not recognized ROU assets or lease liabilities associated with these leases.

The Company’s future minimum lease payments as of December 28, 2018, in accordance with legacy lease accounting standards, under non-cancelable operating and finance lease agreements were as follows:

Operating Leases

Finance Leases

Total minimum lease payments

Less interest

Present value of capital lease obligations

Total rent expense for operating leases for the fiscal years ended December 28, 2018 and December 29, 2017 was $ 29,202 and $ 26,678 , respectively.

Total depreciation expense for finance leases for the fiscal years ended December 28, 2018 and December 29, 2017 was $ 52 and $ 64 , respectively

As of December 25, 2020, the Company is contractually obligated to make payments of approximately $ 30,174 , related to a distribution facility that has not commenced.

Accordingly, the Company has not recognized ROU assets or lease liabilities associated with this lease.

Note 13 – Income Taxes

The provision for income taxes consists of the following for the fiscal years ended December 27, 2019 , December 28, 2018 and December 29, 2017 :

December 27, 2019

December 28, 2018

December 29, 2017

Current income tax expense:

Total current income tax expense

Deferred income tax expense (benefit):

Total deferred income tax expense (benefit)

Total income tax expense

Income tax expense for the fiscal years ended December 27, 2019 , December 28, 2018 and December 29, 2017 differed from amounts computed using the statutory federal income tax rate due to the following reasons:

December 27, 2019

December 28, 2018

December 29, 2017

In response to the Pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020.

The legislation provides temporary changes to the extent to which companies can carryback net operating losses, changes to interest expense deduction limitations, raised the corporate charitable contribution deduction limitation to 25% of taxable income and other tax relief provisions.

In December 2020 the Consolidated Appropriations Act, 2021, was signed into law, however, its provisions did not have a material impact on the Company.

The Company’s effective income tax rate was 32.9 % and 25.3 % for the fifty-two weeks ended December 25, 2020 and December 27, 2019, respectively.

The higher effective tax rate in the current fiscal year is primarily related to the Company’s current net loss forecast for fiscal 2020 which, under the CARES Act, allows the Company to claim Federal tax refunds against prior year taxes paid, including taxes paid in fiscal 2015 and 2017, both of which were at statutory tax rates of 35%.

The Company’s income tax provision reflects the impact of an expected income tax refund receivable of $ 21,250 as of December 25, 2020 which is reflected in prepaid expenses and other current assets on the Company’s consolidated balance sheet.

The provision for income taxes consists of the following:

Fiscal Year Ended

December 25, 2020 December 27, 2019 December 28, 2018

Current income tax (benefit) expense:

Federal $ ( 21,877 ) $ 4,003 $ 2,945

State ( 408 ) 2,144 1,943

Total current income tax (benefit) expense ( 22,285 ) 6,147 4,888

Deferred income tax (benefit) expense:

Federal ( 10,740 ) 1,617 2,363

Foreign 50 17 ( 472 )

State ( 7,728 ) 429 663

Total deferred income tax (benefit) expense ( 18,418 ) 2,063 2,554

Total income tax (benefit) expense $ ( 40,703 ) $ 8,210 $ 7,442

Income tax (benefit) expense differed from amounts computed using the statutory federal income tax rate due to the following reasons:

Fiscal Year Ended

December 25, 2020 December 27, 2019 December 28, 2018

Statutory U.S.

Federal tax $ ( 25,957 ) $ 6,805 $ 5,847

Differences due to:

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Change in valuation allowance 1,354 95 523

Impact of the Tax Act

Changes in tax rates 24 ( 95 ) ( 432 )

Federal NOL rate differential ( 5,212 ) — —

Stock compensation ( 102 ) ( 676 ) ( 197 )

Income tax expense

Other ( 4,396 ) 3 ( 205 )

Income tax (benefit) expense $ ( 40,703 ) $ 8,210 $ 7,442

Deferred tax assets and liabilities at December 25, 2020 and December 27, 2019 consist of the following:

December 27, 2019

December 28, 2018

December 25, 2020 December 27, 2019

Deferred tax assets:

Receivables and inventory $ 10,944 $ 4,468

Accrued expenses

Self-insurance reserves 2,210 1,957

Net operating loss carryforwards 15,413 1,393

Debt discount and interest 3,093 —

Stock compensation 1,686 1,894

Charitable contribution carryforward 3,166 368

Operating lease liabilities 34,460 37,740

Other 1,307 414

Total deferred tax assets 72,279 48,234

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Property & equipment ( 11,289 ) ( 5,218 )

Intangible assets

Contingent earn-out liabilities

Goodwill and intangible assets ( 17,709 ) ( 15,192 )

Prepaid expenses and other ( 2,071 ) ( 2,905 )

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Valuation allowance ( 2,261 ) ( 907 )

Total net deferred tax liability

Total net deferred tax asset (liability) $ 7,535 $ ( 10,883 )

The deferred tax provision results from the effects of net changes during the year in deferred tax assets and liabilities arising from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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The Company records interest and penalties, if any, in income tax expense.

At December 27, 2019 , the Company had a valuation allowance of $ 907 which consisted of a full valuation allowance on the Company’s Canada net operating loss carryforward of $ 732 , offset by a $ 267 reduction in deferred tax liabilities related to indefinite-lived intangible assets acquired in 2013, and a valuation allowance of $ 442 against the Company’s state net operating loss carryforwards.

The valuation allowances on net operating loss carryforwards are necessary as they are not expected be be fully realizable in the future.

The Company’s Canada net operating loss carryforward expires at various dates between fiscal 2036 and 2038 and the Company’s state net operating loss carryforwards expire at various dates between fiscal 2019 and 2038.

For financial reporting purposes, the Company’s foreign subsidiaries had operating income before income taxes of $ 18 for the fiscal year ended December 27, 2019 and net operating losses before income taxes of $ 3,223 and $ 1,520 for the fiscal years ended December 28, 2018 and December 29, 2017 , respectively.

The Company is permanently reinvested in the earnings of it’s foreign operations which are disregarded for US tax purposes.

The Company considered all available positive and negative evidence to determine if based on the weight of such evidence, a valuation allowance is needed.

At December 25, 2020, the Company had a valuation allowance of $ 2,261 , which consisted of $ 892 and $ 1,369 against foreign and certain state net operating loss carryforwards, respectively, as they are not expected to be fully realizable in the future.

Despite the loss for the year ended December 25, 2020 as a direct impact of the Pandemic, the Company considered the substantial amount of taxable income available in carryback years under applicable tax law, strong history of earnings, no history of tax attributes expiring before utilization, reversing taxable temporary differences scheduled to reverse within the reversal period of the respective deferred tax assets, the long term and indefinite nature of tax attributes on hand, and forecasts of future taxable income in determining a valuation allowance is not needed on the remaining deferred tax assets.

However, the impacts of the Pandemic on the Company’s business are uncertain and will depend on future developments, and as such, it is possible that under certain circumstances the Company may be required to recognize a valuation allowance in the future.

The Company’s Canada net operating loss carryforward of $ 1,139 expires at various dates between fiscal 2038 and 2040.

The Company’s state net operating loss carryforwards of $ 7,082 expire at various dates, the earliest of which expire in fiscal 2023 while others are indefinite-lived.

The Company’s federal net operating loss carry forward of $ 7,192 is indefinite-lived and its charitable contributions carry forward expires in fiscal 2025.

The Company’s foreign subsidiaries had operating (loss) income before income taxes as follows:

Fiscal Year Ended

December 25, 2020 December 27, 2019 December 28, 2018

Foreign subsidiaries operating (loss) income before income taxes $ ( 4,231 ) $ 18 $ ( 3,223 )

The Company is permanently reinvesting the earnings of it’s foreign operations which are disregarded for US tax purposes.

In addition, the US tax consequences and foreign withholding taxes on any future remittances are immaterial.

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Note 14 – Supplemental Disclosures of Cash Flow Information

December 27, 2019

December 28, 2018

December 29, 2017

December 25, 2020 December 27, 2019 December 28, 2018

Cash paid for income taxes, net of cash received $ 308 $ 6,046 $ 4,825

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Non-cash investing and financing activities:

Sinking funds used to retire debt

Conversion of subordinated notes and accrued interest into common stock $ — $ — $ 37,015

Common stock issued for acquisitions

Contingent earn-out liabilities for acquisitions $ 3,464 $ 7,929 $ 1,414

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Employees may choose to make voluntary contributions of their annual compensation to the 401(k) Plan, limited to an annual maximum amount as set periodically by the Internal Revenue Service.

The Company provides discretionary matching contributions equal to 50 percent of the employee’s contribution amount, up to a maximum of six percent of the employee’s annual salary, capped at $ 2.5 per employee per year.

The Company provides discretionary matching contributions equal to 50 percent of the employee’s contribution amount, up to a maximum of six of the employee’s annual salary, capped at $ 2.5 per employee per year.

Matching contributions begin vesting after one year and are fully vested after five years .

Employee contributions are fully vested when made.

As a result of the Pandemic, the Company’s matching contributions were temporarily suspended as of March 31, 2020.

Under the 401(k) Plan there is no option available to the employee to receive or purchase the Company’s common stock.

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The Chefs’ Warehouse Mid-Atlantic, LLC, a subsidiary of the Company, leases a distribution facility that is 100 % owned by entities controlled by Christopher Pappas, the Company’s chairman, president and chief executive officer, and John Pappas, the Company’s vice chairman and one of its directors, and are deemed to be affiliates of these individuals.

Expense related to this facility was $ 433 for fiscal 2019 and $533 for fiscal 2018 and 2017 .

Expense related to this facility was $ 488 for fiscal 2020, $ 433 for fiscal 2019 and $ 533 for fiscal 2018.

This lease was amended during the first quarter of fiscal 2020 and expires on September 30, 2023.

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The Company purchased approximately $ 662 worth of products from ConAgra Foods, Inc.

through September 20, 2018 of fiscal 2018 and $ 701 during fiscal 2017 .

through September 20, 2018 of fiscal 2018.

John DeBenedetti was a prior owner of Del Monte and served on the Company’s board of directors through April 20, 2018 at which point he ceased to be a related party.

John DeBenedetti, indirectly through TJ Investments, LLC, owns an 8.33 % ownership interest in Old World Provisions, which has been supplying products to the Company since the Del Monte acquisition.

The Company purchased approximately $ 474 of products from Old World Provisions during the sixteen weeks ended April 20, 2018 and $ 1,713 during fiscal 2017 .

John DeBenedetti, indirectly through TJ Investments, LLC, owned an 8.33 % ownership interest in Old World Provisions, which supplied products to the Company after the Del Monte acquisition.

The Company purchased approximately $ 474 of products from Old World Provisions during the sixteen weeks ended April 20, 2018.

DeBenedetti was not involved in the day-to-day management of Old World Provisions.

With the acquisition of Del Monte, the Company leased two warehouse facilities from certain prior owners

of Del Monte, including John DeBenedetti.

The first property is located in American Canyon, CA and is owned by TJ Management Co.

LLC, an entity owned 50 % by John DeBenedetti.

The Company paid rent on this facility totaling $ 73 during the sixteen weeks ended April 20, 2018 and $ 219 during fiscal 2017 .

The second property is located in West Sacramento, CA and is owned by David DeBenedetti and Victoria DeBenedetti, the parents of John DeBenedetti.

The Company paid rent on this facility totaling $ 78 during the sixteen weeks ended April 20, 2018 and $ 234 during fiscal 2017 .

Note 17 – Commitments and Contingencies

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The Company’s self-insurance reserves for its automobile liability program totaled $ 3,450 and $ 2,818 at December 25, 2020 and December 27, 2019, respectively.

Self-insurance reserves for workers’ compensation totaled $ 7,082 and $ 8,812 at December 27, 2019 and December 28, 2018 , respectively.

Self-insurance reserves for workers’ compensation totaled $ 7,696 and $ 7,082 at

December 25, 2020 and December 27, 2019, respectively.

As of December 25, 2020, approximately 7 % of the Company’s employees are represented by unions, all of whom are operating under collective bargaining agreements which expire at various times between fiscal 2021 and 2025.

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The following tables summarize the activity in our valuation accounts during the fiscal years ended December 25, 2020, December 27, 2019 and December 28, 2018:

Balance at Beginning of Period

Additions Charged to Expense

Balance at End of Period

Balance at Beginning of Period Additions Charged to Expense Deductions Balance at End of Period

Allowance for doubtful accounts

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Note 19 – Quarterly Results (unaudited)

The quarterly results of the Company for the fiscal years ended December 27, 2019 and December 28, 2018 are as follows:

The quarterly results of the Company for the fiscal years ended December 25, 2020 and December 27, 2019, including the impacts of the reclassifications described in Note 2, are as follows:

Fiscal 2020 (1)

Net sales $ 375,431 $ 200,496 $ 254,030 $ 281,674

Gross profit 85,488 43,426 60,362 58,875

Operating loss ( 17,058 ) ( 25,409 ) ( 11,925 ) ( 48,268 )

Loss before income taxes ( 22,182 ) ( 31,181 ) ( 16,631 ) ( 53,612 )

Net loss ( 14,085 ) ( 20,334 ) ( 11,427 ) ( 37,057 )

Basic net loss per share ( 0.48 ) ( 0.62 ) ( 0.31 ) ( 1.02 )

Diluted net loss per share ( 0.48 ) ( 0.62 ) ( 0.31 ) ( 1.02 )

Net sales $ 357,027 $ 411,420 $ 396,880 $ 426,507

Gross profit 85,471 101,677 96,994 102,426

Operating profit 6,116 15,530 10,624 18,397

Income before income taxes 1,565 10,685 6,107 14,046

Net income 1,134 7,746 4,425 10,888

Basic net income per share 0.04 0.26 0.15 0.37

Diluted net income per share 0.04 0.26 0.15 0.36

Operating profit

Income (loss) before income taxes

Net income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

The Company began reflecting the results of the Bassian acquisition in the first quarter of 2019.

Note 19 – Subsequent Events

On February 3, 2020 , the Company entered into an asset purchase agreement to acquire substantially all of the assets of Cambridge Packing Co, Inc., a specialty center-of-plate producer and distributor in New England.

The purchase price was approximately $ 17,002 paid in cash at closing and is subject to a customary working capital true-up.

The Company is required to pay additional contingent consideration, if earned, of up to $ 3,000 over a two -year period upon successful attainment of certain gross profit targets.

On January 27, 2020 , the Company entered into an asset purchase agreement to acquire substantially all of the assets, including certain real-estate assets, of Sid Wainer & Son, a specialty food and produce distributor in New England.

The purchase price was approximately $ 46,450 paid in cash at closing and is subject to a customary working capital true-up.

The Company is required to pay additional contingent consideration, if earned, of up to $ 4,000 over a two -year period upon successful attainment of certain gross profit targets.

The Company has not provided the preliminary purchase price allocations for these acquisitions as the initial accounting for them is incomplete.

(1) The Company’s results for fiscal 2020 were materially adversely impacted due to the Pandemic.

(2) The Company began reflecting the results of the Sid Wainer acquisition in the first quarter of 2020.

(3) Includes $ 24,200 intangible asset impairment charge.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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 7A. Quantitative and Qualitative Disclosures About Market Risk