What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-22 compared with 2021-02-23 · 90 added, 109 removed, 266 unchanged (43% of the section changed)

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Overview and Recent Developments

We are a premier distributor of specialty foods in nine of the leading culinary markets in the United States.

We are a premier distributor of specialty foods in the leading culinary markets in the United States.

We offer more than 50,000 SKUs, ranging from high-quality specialty foods and ingredients to basic ingredients and staples, produce and center-of-the-plate proteins.

We serve more than 34,000 customer locations, primarily located in our sixteen geographic markets across the United States and Canada, and the majority of our customers are independent restaurants and fine dining establishments.

We serve more than 35,000 core customer locations, primarily located in our nineteen geographic markets across the United States and Canada, and the majority of our customers are independent restaurants and fine dining establishments.

Our Allen Brothers subsidiary sells certain of our center-of-the-plate products directly to consumers.

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Effect of the COVID-19 Pandemic on our Business and Operations

The COVID-19 pandemic (“Pandemic”) has had a material impact on our business and operations and those of our customers.

In an effort to limit the spread of the virus, federal, state and local governments began implementing various restrictions beginning in late March that resulted in the closure of non-essential businesses in many of the markets we serve, which forced our 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, restrictions in certain of our key markets were not eased until early June.

As of December 25, 2020, the majority of state and local governments with jurisdiction over markets in which the Company operates allow the Company’s customers to operate outdoor dining and indoor dining service while adhering to specified social distancing and capacity restrictions.

The duration and extent of restrictions imposed on our 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.

The adverse impact of the Pandemic on our customers during the fifty-two weeks ended December 25, 2020 resulted in a $616.7 million decline in our organic sales compared to the prior year.

Due to the Pandemic, we incurred estimated non-cash charges of $15.8 million related to incremental bad debt expense and approximately $14.6 million related to estimated inventory obsolescence during the fifty-two weeks ended December 25, 2020.

Our management team is responding rapidly to the changing landscape and pursuing alternate sources of revenue to mitigate the extent of sales declines in our core customer base.

Our sales force is working closely with our core customers and developing solutions to help them fulfill the demand in their communities while complying with health and safety restrictions.

We are actively entering into new business relationships which include retail food outlets as they have experienced increases in consumer demand and shortages in their traditional supply chains due to the Pandemic.

As we develop these new sales channels, we are negotiating favorable credit terms given the nature of the underlying customer base and the current market

In addition, our purchasing teams have worked diligently to shift our product purchases to SKUs that are in high demand.

Thus far, we have not experienced difficulties in procuring products from our suppliers.

In response to the Pandemic, we expanded our direct-to-consumer product offerings by launching our “Shop Like a Chef” online home delivery platform in several of the markets we serve.

We now offer products directly to consumers through both our Allen Brothers and “Shop Like a Chef” online platforms.

We have implemented cost control measures during this time of demand volatility.

Our variable cost structure naturally decreases as our sales decrease, however, we are also reducing our fixed cost structure.

Among other actions, we have postponed planned capital expenditures, returned certain equipment on short-term rental agreements, and reduced compensation expense through salary reductions, furloughs and lay-offs as we right-size our organization to current levels of demand.

Management determined the Pandemic’s adverse impact on our operations and our market capitalization were triggering events that required us to test goodwill and long-lived assets for impairment as of March 27, 2020.

No impairments were identified as a result of these tests.

Although there were no additional triggering events during the remainder of fiscal 2020, the impacts of the Pandemic on our 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 us to recognize an impairment charge in the future.

We closed the fiscal year with total cash and cash equivalents of $193.3 million, and approximately $50.3 million of remaining availability under our asset-based loan facility as of December 25, 2020.

The future impact of the Pandemic on our business, operations and liquidity is difficult to predict at this time and is highly dependent on future developments including new information that may emerge on the severity of the disease, the extent of the outbreak, federal, state and local government responses, trends in infection rates, development of effective medical treatments for the disease, and future consumer spending behavior, among others.

The COVID-19 pandemic (“Pandemic”) has had and continues to have an adverse impact on numerous aspects of our business and those of our customers including, but not limited to, demand for our products, cost inflation and labor shortages.

Despite these challenges, we continued to provide our core customers with high touch service, executed on our cost control measures and returned to profitability during the second quarter of fiscal 2021.

Furthermore, as of December 24, 2021, we had $157.8 million of working capital, including $115.2 million of cash and cash equivalents, on our balance sheet and $109.5 million of availability on our asset-based loan facility.

Our liquidity position, puts us in a strategic position to invest in growth and take advantage of business development opportunities as we continue to recover from the Pandemic.

The extent to which the Pandemic will impact our financial condition or results of operations is uncertain and will depend on future developments including new information that may emerge on the severity or transmissibility of the disease, new variants, government responses, trends in infection rates, development and distribution of effective medical treatments and vaccines, and future consumer spending behavior, among others.

Recent Significant Acquisitions

On February 3, 2020, we entered into an asset purchase agreement to acquire substantially all of the assets of Cambridge Packing Co, Inc.

(“Cambridge”), a specialty center-of-the-plate producer and distributor in New England.

The cash purchase price was approximately $16.4 million, inclusive of a $0.6 million working capital true-up.

We are required to pay additional contingent consideration, if earned, of up to $3.0 million over a two-year period upon successful attainment of certain gross profit targets.

On January 27, 2020, we entered into an asset purchase agreement to acquire 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.

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We are required to pay additional contingent consideration, if earned, of up to $4.0 million over a two-year period upon successful attainment of certain gross profit targets.

On February 3, 2020, we entered into an asset purchase agreement to acquire substantially all of the assets of Cambridge Packing Co, Inc.

(“Cambridge”), a specialty center-of-the-plate producer and distributor in New England.

The cash purchase price was approximately $16.4 million, inclusive of a $0.6 million working capital true-up.

We are required to pay additional

contingent consideration, if earned, of up to $3.0 million over a two-year period upon successful attainment of certain gross profit targets.

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

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Transition of Trademarks

During the second quarter of fiscal 2021, we committed to a plan to shift our brand strategy to leverage our Allen Brothers brand in our New England market and determined our Cambridge trademark did not fit our long-term strategic objectives.

As a result, we recognized a $0.6 million impairment charge, $0.4 million net of tax, to fully write-down the net book value of our Cambridge trademark.

During the fourth quarter of fiscal 2020, we committed to a plan to shift our brand strategy to leverage our Allen Brothers brand in our west coast region and determined that our Del Monte, Ports Seafood and Bassian Farms trademarks did not fit our long-term strategic objectives.

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

This brand transition began in the second quarter of fiscal 2021.

As a result, we recorded a $24.2 million impairment charge, $17.5 million net of tax, to write-down the value of our Del Monte and Bassian Farms trademarks.

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

Given our wide selection of product categories, as well as the continuous introduction of new products, we can experience

shifts in product sales mix that have an impact on net sales and gross profit margins.

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

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

Key Financial Definitions

Net sales consist primarily of sales of specialty products, center-of-the-plate proteins and other food products to independently-owned restaurants and other high-end foodservice customers, which we report net of certain group discounts and customer sales incentives.

Net sales consist primarily of sales of specialty products, produce, center-of-the-plate proteins and other food products to independently-owned restaurants and other high-end foodservice customers, which we report net of certain group discounts and customer sales incentives.

Net sales also include direct-to-consumer sales on our e-commerce platforms.

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Interest and other expense consists primarily of interest on our outstanding indebtedness and, as applicable, the amortization or write-off of deferred financing fees.

Reclassifications

In response to a comment letter from the staff of the SEC’s Division of Corporation Finance, we have reclassified our food processing costs, previously included in operating expenses, to cost of sales and have split our historical presentation of operating expenses between selling, general and administrative expenses and other operating expenses .

These reclassifications have no impact on the Company’s operating income, net income or cash flows.

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

See Note 2 “Reclassifications” to our consolidated financial statements for a full description of these reclassifications.

Results of Operations

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Other operating expenses 422 14,417 6,359

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

Interest expense 20,946 18,264 20,745

Operating income (loss) 10,811 (102,660) 50,667

Interest and other expense, net 17,587 20,946 18,264

(Loss) income before income taxes (6,776) (123,606) 32,403

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Net sales $ 1,745,757 $ 1,111,631 $ 634,126 57.0 %

Sales growth from acquisitions contributed $136.5 million, or 8.6%, to sales growth.

Organic sales declined $616.7 million, or 38.8%, versus the prior year primarily due to impacts of the Pandemic.

Organic case count declined approximately 43.5% in our specialty category.

In addition, specialty unique customers and placements declined 30.4% and 43.6%, respectively, compared to the prior year.

Pounds sold in our center-of-the-plate category decreased 38.0% compared to the prior year.

Estimated deflation was 0.3% in our specialty category and inflation of 3.5% in our center-of-the-plate category compared to fiscal 2019.

Organic growth contributed $574.2 million, or 51.6%, to sales growth in the year primarily driven by our recovery from the Pandemic.

The remaining growth of $59.9 million, or 5.4%, resulted from acquisitions.

Organic case count increased approximately 33.8% in our specialty category.

In addition, specialty unique customers and placements increased 26.1% and 31.6%, respectively, compared to the prior year.

Pounds sold in our center-of-the-plate category increased 28.2% compared to the prior year.

Estimated inflation was 9.6% in our specialty category and 18.1% in our center-of-the-plate category compared to fiscal 2020.

2021 2020 $ Change % Change

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Gross profit margin 22.4 % 22.3 %

Gross profit decreased primarily due to decreased sales volumes.

Gross profit margin decreased approximately 196 basis points.

Gross profit margins decreased 441 basis points in the Company’s specialty category and increased 117 basis points in the Company’s center-of-the-plate category compared to the prior year period.

Our gross profit results include a charge of approximately $14.6 million related to estimated inventory losses from obsolescence due to the Pandemic’s impact on our customers’ purchasing behavior.

Gross profit increased primarily due to increased sales volumes.

Gross profit margin increased approximately 4 basis points.

Gross profit margins increased 379 basis points in the Company’s specialty category and decreased 350 basis points in the Company’s center-of-the-plate category compared to the prior year period.

Our prior year gross profit results include a charge of approximately $14.6 million related to estimated inventory losses from obsolescence due to the Pandemic’s impact on our customers’ purchasing behavior.

Selling, General and Administrative Expenses

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Percentage of net sales 21.7 % 30.3 %

The increase in selling, general and administrative expense relates primarily to our recent acquisitions and an estimated non-cash charge of approximately $15.8 million to bad debt expense incurred during the first quarter of fiscal 2020 at the onset of the Pandemic, partially offset by cost measures implemented during the year in response to the Pandemic’s adverse impact on demand for our products.

Our ratio of selling, general and administrative expenses to net sales was higher as a result of the Pandemic’s adverse impacts on our sales growth and a 161 basis point increase in non-cash charges related to bad debt expense.

Other Operating Expenses

The increase in selling, general and administrative expense relates primarily to increased sales volumes and acquisitions.

Our prior year results include an estimated non-cash charge of approximately $15.8 million to bad debt expense incurred during the first quarter of fiscal 2020 at the onset of the Pandemic.

Our ratio of selling, general and administrative expenses to net sales was lower as a result of sales growth.

Other Operating Expenses, Net

2021 2020 $ Change % Change

Other operating expenses 422 14,417 (13,995) (97.1) %

The increase in other operating expenses relates primarily to a $24.2 million impairment charge on Del Monte and Bassian trademarks and non-cash credits of $11.5 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash charges of $5.9 million in the prior year period.

The decrease in net other operating expenses relates primarily to a $24.2 million impairment charge for Del Monte and Bassian trademarks as a result of a shift in brand strategy to leverage our Allen Brothers brand in our west coast region during the fourth quarter of fiscal 2020 and non-cash credits of $1.3 million for changes in the fair value of our contingent earn-out liabilities in the fiscal 2021 period compared to non-cash credits of $11.5 million in the prior year period.

Interest Expense

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Interest expense 17,587 20,946 $ (3,359) (16.0) %

Interest and other expense increased primarily due to $1.2 million in one-time third-party costs incurred during the second quarter of 2020 in connection with the extension of a majority of our senior secured term loans and the full year impact of interest charged on our Convertible Senior Notes issued on November 22, 2019.

Provision for Income Taxes

Interest expense decreased primarily due to $1.2 million in one-time third-party costs incurred during the second quarter of 2020 in connection with the extension of a majority of our senior secured term loans and lower effective interest rates charged on our outstanding debt as a result of the $50.0 million aggregate principal amount of Convertible Senior Notes issued on March 1, 2021 which were used to repay higher interest rate debt.

Provision for Income Tax Benefit

2021 2020 $ Change % Change

Provision for taxes (40,703) 8,210 $ (48,913) (595.8) %

Provision for income tax benefit (1,853) (40,703) $ 38,850 (95.4) %

Effective tax rate 27.3 % 32.9 %

The higher effective tax rate is primarily related to our net loss for fiscal 2020 which allows us to claim tax refunds against taxes paid in fiscal 2015 and 2017, both of which were at statutory tax rates of 35%.

The higher effective tax rate in the prior period is primarily related to the carryback of a portion of our fiscal 2020 net taxable loss which allowed us to claim tax refunds against taxes paid in fiscal 2015 and 2017, both of which were at statutory tax rates of 35%.

Fiscal Year Ended December 25, 2020 Compared to Fiscal Year Ended December 27, 2019

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Net sales $ 1,111,631 $ 1,591,834 $ (480,203) (30.2) %

Organic growth contributed $65.0 million, or 4.5%, to sales growth in the year.

The remaining sales growth of $82.2 million, or 5.7%, resulted from acquisitions.

Organic case count grew approximately 5.2% in our specialty category.

In addition, growth in specialty unique customers and placements grew 4.5% and 3.0%, respectively, compared to the prior year.

Pounds sold in our center-of-the-plate category increased 0.7% compared to the prior year.

Estimated inflation was 2.4% in our specialty category and 2.6% in our center-of-the-plate category compared to fiscal 2018.

Sales growth from acquisitions contributed $136.5 million, or 8.6%, to sales growth.

Organic sales declined $616.7 million, or 38.8%, versus the prior year primarily due to impacts of the Pandemic.

Organic case count declined approximately 43.5% in our specialty category.

In addition, specialty unique customers and placements declined 30.4% and 43.6%, respectively, compared to the prior year.

Pounds sold in our center-of-the-plate category decreased 38.0% compared to the prior year.

Estimated deflation was 0.3% in our specialty category and inflation of 3.5% in our center-of-the-plate category compared to fiscal 2019.

2020 2019 $ Change % Change

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Gross profit margin 22.3 % 24.3 %

Gross profit increased primarily due to increased sales volumes.

Gross profit margin increased approximately 13 basis points.

Gross profit margins increased 19 basis points in the Company’s specialty category and increased 27 basis points in the Company’s center-of-the-plate category compared to the prior year period

Gross profit decreased primarily due to decreased sales volumes.

Gross profit margin decreased approximately 196 basis points.

Gross profit margins decreased 441 basis points in the Company’s specialty category and increased 117 basis points in the Company’s center-of-the-plate category compared to the prior year period.

Our gross profit results include a charge of approximately $14.6 million related to estimated inventory losses from obsolescence due to the Pandemic’s impact on our customers’ purchasing behavior.

Selling, General and Administrative Expenses

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Percentage of net sales 30.3 % 20.7 %

The increase in selling, general and administrative expenses relates primarily to increased sales volumes.

Selling, general and administrative expenses as a percentage of net sales increased 7 basis points.

The primary drivers of the increase in the ratio of selling, general and administrative expenses to sales were a 27 basis point increase in warehouse costs, primarily related to our investments in Texas and our new facility in Los Angeles, partially offset by a 22 basis point reduction in general and administrative compensation costs as a percentage of sales.

Other Operating Expenses

Other Operating Expenses, Net

2020 2019 $ Change % Change

Other operating expenses 14,417 6,359 8,058 126.7 %

The increase in other operating expenses relates primarily to non-cash charges of $5.9 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash charges of $1.4 million in the prior year period.

Interest Expense

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Interest expense 20,946 18,264 $ 2,682 14.7 %

Interest and other expense decreased primarily due to a $1.1 million write-off of deferred financing fees in fiscal 2018 associated with the re-pricing of our Term Loan and lower effective interest charged on our outstanding debt in fiscal 2019.

Provision for Income Taxes

Provision for Income Tax (Benefit) Expense

2020 2019 $ Change % Change

Provision for taxes 8,210 7,442 $ 768 10.3 %

Provision for income tax (benefit) expense (40,703) 8,210 $ (48,913) (595.8) %

Effective tax rate 32.9 % 25.3 %

The lower effective tax rate in fiscal 2019 is due to certain permanent tax differences related to stock compensation.

The higher effective tax rate is primarily related to our net taxable loss for fiscal 2020 which allows us to claim tax refunds against taxes paid in fiscal 2015 and 2017, both of which were at statutory tax rates of 35%.

Liquidity and Capital Resources

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See Note 9 “Debt Obligations” to our consolidated financial statements for a full description of our debt instruments.

On March 1, 2021, the we issued $50.0 million aggregate principal amount of 1.875% Convertible Senior Notes at a premium which were offered as an additional issuance of our $150.0 million Convertible Senior Notes due 2024 issued on November 22, 2019.

Net proceeds were used to repay all outstanding borrowings under the our 2022 tranche of senior secured term loans of $31.2 million and repay a portion of borrowings outstanding under our asset-based loan facility.

We incurred transaction costs of approximately $1.4 million which were capitalized as deferred financing fees to be amortized over the term of the underlying debt.

On June 8, 2020, we amended our senior secured credit agreement which converted $238.1 million of the term loans then outstanding 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.

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On November 22, 2019, we issued $150.0 million aggregate principal amount of 1.875% Convertible Senior Notes (the “Senior Notes”).

Approximately $43.2 million of the net proceeds were used to repay all borrowings then outstanding under our ABL and we intend to use the remainder for working capital and general corporate purposes, which may include future acquisitions.

On July 25, 2018, the holders of the $36.8 million principal amount of convertible subordinated notes, issued in connection with our acquisition of Del Monte, converted these notes and related accrued interest of $0.3 million into 1,246,272 shares of the Company’s common stock.

On June 29, 2018, we entered into a new asset-based loan facility (“ABL”) that increased our borrowing capacity from $75.0 million to $150.0 million.

Additionally, we reduced the fixed-rate portion of interest charged on our senior secured term loan (“Term Loan”) from 475 basis points to 350 basis points over Adjusted LIBOR as a result of repricings executed on December 14, 2017 and November 16, 2018.

Approximately $43.2 million of the net proceeds were used to repay all borrowings then outstanding under our ABL and the remainder was used for working capital, general corporate purposes and acquisitions.

A portion of the interest rate charged on our Term Loan is currently based on LIBOR and, at our option, a component of the interest charged on the borrowings outstanding on our ABL, if any, may bear interest rates based on LIBOR.

LIBOR has been the subject of reform and was expected to phase out by the end of fiscal 2021, however, on November 30, 2020, the ICE Benchmark Administration Limited (“ICE”) announced plans to delay the phase out of LIBOR to June 30, 2023.

The consequences of the discontinuation of LIBOR cannot be entirely predicted but could impact the interest expense we incur on

these debt instruments.

The consequences of the discontinuation of LIBOR cannot be entirely predicted but could impact the interest expense we incur on these debt instruments.

We will negotiate alternatives to LIBOR with our lenders before LIBOR ceases to be a widely available reference rate.

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(1) We define working capital as current assets less current liabilities.

The fiscal 2020 and 2019 balances include the impact of recognizing operating lease right-of-use assets and liabilities as a result of our adoption of Accounting Standards Codification Topic 842, “Leases,” as of December 29, 2018.

We believe our existing balances of cash and cash equivalents, working capital and the availability under our asset-based loan facility, are sufficient to satisfy our working capital needs, capital expenditures, debt service and other liquidity requirements associated with our current operations over the next twelve months.

Our capital expenditures, excluding cash paid for acquisitions, were approximately $38.8 million for fiscal 2021.

We are not providing guidance on our capital expenditures for fiscal 2021 due to the continued uncertainty with regards to the pace of the economic recovery and the duration of the Pandemic related restrictions on our customers.

We believe our capital expenditures, excluding cash paid for acquisitions, for fiscal 2022 will be approximately $35.0 million to $45.0 million.

Fiscal Year Ended

December 24, 2021 December 25, 2020 December 27, 2019

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

Net (loss) income $ (4,923) $ (82,903) $ 24,193

Non-cash charges $ 47,372 $ 62,509 $ 47,625

Changes in working capital $ (62,348) $ 63,275 $ (26,811)

Cash provided by operating activities $ 42,881 $ 45,007 $ 45,082

Cash (used in) provided by operating activities $ (19,899) $ 42,881 $ 45,007

Cash used in investing activities $ (48,991) $ (67,968) $ (44,154)

Cash provided by (used in) financing activities $ 78,056 $ 96,947 $ (10,442)

Cash (used in) provided by financing activities $ (9,222) $ 78,056 $ 96,947

Fiscal Year 2021 Cash Flows

Net cash used in operations was $19.9 million for fiscal 2021 consisting of a $4.9 million net loss and and investments in working capital of $62.3 million, partially offset by $47.4 million of non-cash charges.

Non-cash charges decreased predominately due to the $24.2 million write down of Del Monte and Bassian trademarks in fiscal 2020.

The cash used in working capital of $62.3 million is primarily driven by reinvestment in working capital to support growth.

Net cash used in investing activities was $49.0 million in fiscal 2021 driven by $38.8 million in capital expenditures which included the build-outs of our Los Angeles, New England and Miami distribution facilities.

We used $10.2 million in cash to fund several acquisitions.

Net cash used in financing activities was $9.2 million for fiscal 2021 driven by $37.6 million of payments made on senior term loans and finance lease obligations and a $20.0 million payment on our asset-based loan facility, partially offset by $51.8 million of proceeds from the issuance of additional convertible senior notes.

Fiscal Year 2020 Cash Flows

Net cash provided by operations was $42.9 million for fiscal 2020 consisting of a $82.9 million net loss, offset by $62.5 million of non-cash charges and an increase in working capital of $63.3 million.

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Net cash used in investing activities was $68.0 million in fiscal 2020 driven by $7.0 million in capital expenditures which included implementations of our Enterprise Resource Planning (“ERP”) system.

The Company used $60.9 million in cash to fund acquisitions, the most significant of which were Sid Wainer and Cambridge.

We used $60.9 million in cash to fund acquisitions, the most significant of which were Sid Wainer and Cambridge.

Net cash provided by financing activities was $78.1 million for fiscal 2020 driven by $85.9 million net proceeds from our common stock offering and $40.0 million of net draws on our asset-based loan facility, partially offset by payments of debt and finance lease obligations of $40.4 million.

Fiscal Year 2019 Cash Flows

Net cash provided by operations was $45.0 million for fiscal 2019 consisting of $24.2 million of net income and $47.6 million of non-cash charges, partially offset by an increase in working capital of $26.8 million.

The increase in non-cash charges of $9.4 million is primarily driven by changes in the fair value of earn-out liabilities of $4.4 million and higher depreciation and amortization expense.

The increase in working capital of $26.8 million is a result of organic growth and acquisitions and includes $1.8 million of earn-out liability payments classified as operating activities.

Net cash used in investing activities was $44.2 million in fiscal 2019 driven by $16.1 million in capital expenditures which included implementations of our ERP system and the buildouts of our headquarters in Ridgefield, CT and distribution center in Dallas, Texas.

The Company used $28.1 million in cash to fund acquisitions, the most significant of which was Bassian.

Net cash provided by financing activities was $96.9 million for fiscal 2019 driven by $145.0 million of net proceeds received from the issuance of our Senior Notes, partially offset by $44.2 million to settle all borrowings outstanding on our ABL and $2.4 million of earn-out liability payments classified as financing activities.

Excluding our Allen Brothers direct-to-consumer business, we generally do not experience any material seasonality.

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The Pandemic has had a material impact on our business and operations and those of our customers.

Our net sales were most significantly impacted during the second quarter of fiscal 2020 when, in an effort to limit the spread of the virus, federal, state and local governments began implementing various restrictions that resulted in the closure of non-essential businesses in many of the markets we serve, which forced our customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations.

Our net sales were most significantly impacted during the second quarter of fiscal 2020 when, in an effort to limit the spread of the virus, federal, state

and local governments began implementing various restrictions that resulted in the closure of non-essential businesses in many of the markets we serve, which forced our customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations.

Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and other raw materials, labor, energy and other supplies and services.

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At December 24, 2021, we had borrowings of $168.7 million under our Term Loans and $20.0 million under our ABL.

During the fiscal year ended December 25, 2020, the weighted average interest rate on our Term Loan and ABL borrowings were approximately 4.4% and 1.7%, respectively.

See Note 9 “Debt Obligations” to our consolidated financial statements for further information on our debt instruments.

(2) The table above excludes $2.8 million of total contingent earn-out liabilities related to certain acquisitions as of December 25, 2020 and approximately $30.2 million of lease payments related to a distribution facility that does not commence until fiscal 2021.

(3) The table above excludes our supplier purchase obligations as we do not have any material unconditional contractual obligations to purchase fixed or minimum quantities of goods or services from our suppliers.

(2) The table above excludes $6.9 million of total contingent earn-out liabilities related to certain acquisitions as of December 24, 2021 and approximately $10.0 million of lease payments related leases for distribution facilities that do not commence until fiscal 2022.

We had outstanding letters of credit of approximately $20.5 million and $20.1 million at December 24, 2021 and December 25, 2020, respectively.

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Allowance for Doubtful Accounts

We analyze customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of our allowance for doubtful accounts.

We analyze customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt

levels when evaluating the adequacy of our 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.

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We account for acquisitions in accordance with Accounting Standards Codification Topic 805 “Business Combinations.” Assets acquired and liabilities assumed are recorded at their estimated fair values, as of the acquisition date .

The judgments made in determining the estimated fair value of assets acquired and liabilities assumed, including estimated useful life, may

have a material impact on our consolidated balance sheet and may materially impact the amount of depreciation and amortization expense recognized in periods subsequent to the acquisition.

The judgments made in determining the estimated fair value of assets acquired and liabilities assumed, including estimated useful life, may have a material impact on our consolidated balance sheet and may materially impact the amount of depreciation and amortization expense recognized in periods subsequent to the acquisition.

We determine the fair value of intangible assets using an income approach and, when appropriate, we engage a third party valuation firm.

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We develop estimates of future levels of gross and operating profits and projected capital expenditures.

This methodology includes the use of estimated discount rates based upon industry and competitor analysis as well as other factors.

This methodology includes the use of estimated discount rates

based upon industry and competitor analysis as well as other factors.

A goodwill impairment loss, if any, would be recognized for the amount by which a reporting unit’s carrying value exceeds its fair value.

Due to the Pandemic’s adverse impact on our business, we performed an interim quantitative goodwill impairment test as of March 27, 2020 and concluded that goodwill was not impaired.

As required, we performed our annual goodwill impairment test during the fourth quarter of fiscal 2020 the results of which indicated that goodwill was not impaired.

For the fiscal year ended December 24, 2021, 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.

Due to the Pandemic’s adverse impact on our business in fiscal 2020, we performed an interim quantitative goodwill impairment test as of March 27, 2020 and concluded that goodwill was not impaired.

We performed our annual goodwill impairment test during the fourth quarter of fiscal 2020 using a quantitative analysis, the results of which indicated that goodwill was not impaired.

Total goodwill as of December 24, 2021 and December 25, 2020 was $221.8 million and $214.9 million, respectively.

2 unchanged sentences

If the evaluation indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow model.

During the second quarter of fiscal 2021, we committed to a plan to shift our brand strategy to leverage the Allen Brothers brand in our New England region and determined the Cambridge trademark did not fit our long-term strategic objectives.

As a result, we recognized a $0.6 million impairment charge, $0.4 million net of tax, to fully write-down the net book value of our Cambridge trademark

During the fourth quarter of fiscal 2020, we committed to a plan to shift our brand strategy to leverage our Allen Brothers brand in our west coast region and determined our Del Monte, Ports Seafood and Bassian Farms trademarks did no fit our long-term strategic objectives.

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

This brand transition began 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.

4 unchanged sentences

The assessment of the recoverability of goodwill and intangible assets contain uncertainties requiring management to make assumptions and to apply judgment to estimate economic factors and the profitability of future operations.

Actual results could

differ from these assumptions and projections, resulting in us revising our assumptions and, if required, recognizing an impairment loss.

Actual results could differ from these assumptions and projections, resulting in us revising our assumptions and, if required, recognizing an impairment loss.

Self-Insurance Reserves

11 unchanged sentences

federal and state jurisdictions.

Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

Jurisdictional tax law changes, increases or decreases in permanent

differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

We estimate our ability to recover deferred tax assets within the jurisdiction from which they arise.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis