What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-22 compared with 2021-02-23 · 139 added, 228 removed, 795 unchanged (32% of the section changed)

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Index to the Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (BDO USA, LLP, Stamford, Connecticut, PCAOB ID# 243 )

Consolidated Balance Sheets

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

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

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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.

Convertible Notes

As described in Notes 2 and 9 to the consolidated financial statements, the Company issued $50.0 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 that were no potential derivatives that should be accounted for separately.

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 conditions in accordance with the appropriate existing and recently adopted accounting literature, and (ii) the evaluation of the potential derivatives that may require bifurcation 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 skills or knowledge needed.

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

• 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.

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

/s/ BDO USA, LLP

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Operating lease liabilities 127,296 109,133

Deferred taxes, net — 10,883

Other liabilities and deferred credits 5,110 4,416

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Selling, general and administrative expenses 379,252 336,394 329,542

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

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

Other operating expenses, net 422 14,417 6,359

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

Interest expense 17,587 20,946 18,264

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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 notes 1,246,272 13 37,002 — — 37,015

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 — — — — ( 2,027 ) ( 2,027 )

Net income — — — — ( 82,903 ) ( 82,903 )

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

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

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

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

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Stock compensation 679,330 7 11,472 — — 11,479

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

Warrants issued for acquisition — — 1,120 — — 1,120

Cumulative translation adjustment — — — 29 — 29

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

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

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

Depreciation and amortization 21,998 19,774 13,328

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Other assets and liabilities ( 108 ) 1,317 ( 6,121 )

Net cash provided by operating activities 42,881 45,007 45,082

Net cash (used in) provided by operating activities ( 19,899 ) 42,881 45,007

Cash flows from investing activities:

Capital expenditures ( 38,801 ) ( 7,036 ) ( 16,077 )

Cash paid for acquisitions, net of cash received ( 60,932 ) ( 28,077 ) ( 13,901 )

Proceeds from asset disposals — — 30

Cash paid for acquisitions ( 10,190 ) ( 60,932 ) ( 28,077 )

Net cash used in investing activities ( 48,991 ) ( 67,968 ) ( 44,154 )

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Payments under asset based loan facility ( 20,000 ) ( 60,000 ) ( 44,184 )

Net cash provided by (used in ) financing activities 78,056 96,947 ( 10,442 )

Net cash (used in ) provided by financing activities ( 9,222 ) 78,056 96,947

Effect of foreign currency on cash and cash equivalents ( 14 ) 79 23

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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.

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

The future impact of the Pandemic on the Company’s 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 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.

Consolidation

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Guidance Adopted in Fiscal 2021

Measurement of Credit Losses on Financial Instruments:

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

Early adoption is permitted.

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.

In December 2019, the Financial Accounting Standards Board (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.

As a result of the new guidance, 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.

This guidance was adopted on December 26, 2020 and adoption had an immaterial impact on the Company’s consolidated financial statements.

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

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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.

This guidance was adopted on December 26, 2020 and adoption did not impact the Company’s consolidated financial statements.

Guidance Not Yet Adopted

There is no recent accounting guidance not yet adopted that is expected to have a material impact on the Company’s financial statements when adopted.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles requires it to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities.

Estimates are used in determining, among other items, the allowance for doubtful accounts, inventory valuation adjustments, self-insurance reserves for group medical insurance, workers’ compensation insurance and automobile liability insurance, future cash flows associated with impairment testing for intangible assets (including goodwill) and long-lived assets, useful lives for intangible assets, stock-based compensation, contingent earn-out liabilities and tax reserves.

assets (including goodwill) and long-lived assets, useful lives for intangible assets, stock-based compensation, contingent earn-out liabilities and tax reserves.

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 2 – 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, 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.

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

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

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

Fiscal Year Ended

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

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Refund liabilities are reflected as accrued liabilities on the Company’s consolidated balance sheets.

The Company recognized a corresponding asset of $ 107 and $ 194 as of December 25, 2020 and December 27, 2019, respectively, for its right to recover products from customers on settling its refund liabilities.

The Company recognized a

corresponding asset of $ 238 and $ 107 as of December 24, 2021 and December 25, 2020, respectively, for its right to recover products from customers on settling its refund liabilities.

This asset is reflected as inventories, net on the Company’s consolidated balance sheets.

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The purchase incentive is primarily in the form of a specified amount per pound or per case, or an amount for year-over-year growth.

For the years ended December 25, 2020, December 27, 2019 and December 28, 2018, the recorded purchase incentives totaled approximately $ 12,678 , $ 21,769 and $ 19,731 , respectively.

For the fiscal years

ended December 24, 2021, December 25, 2020 and December 27, 2019, the recorded purchase incentives totaled approximately $ 20,296 , $ 12,678 and $ 21,769 , respectively.

Concentrations of Credit Risks

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Equipment and leasehold improvements are recorded at cost and are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.

Equipment and leasehold improvements are reviewed for impairment in accordance with ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets ” which only requires testing whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

If any indicators are present, a recoverability test is performed by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset.

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 the results of which indicated no impairment.

The Company has no t recorded any impairment of equipment and leasehold improvements in fiscal 2021, 2020 or 2019.

The Company leases various distribution centers, office facilities, vehicles and equipment.

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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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Capitalized software purchases and related development costs, net of accumulated amortization, were $ 14,780 at December 24, 2021 and $ 14,087 at December 25, 2020.

Impairment of Long-Lived Assets

Long-lived assets, other than goodwill, are reviewed for impairment in accordance with ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets ” which only requires testing whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

If any indicators are present, a recoverability test is performed by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset.

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

Convertible Debt

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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 $ 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.

Amortization of debt issuance costs was $ 2,299 for the fiscal year ended December 24, 2021, $ 3,426 for the fiscal year ended December 25, 2020 and $ 2,168 for the fiscal year ended December 27, 2019.

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 other 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 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.

During the second quarter of fiscal 2021, the Company recorded a $ 597 impairment charge, $ 433 net of tax, to fully write-down the net book value of its Cambridge trademark.

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.

impairment charges are presented within other operating expense s on the consolidated statements of operations.

See Note 8 for more information.

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

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, 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.

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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.

For the fiscal years ended December 24, 2021 and 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.

There have been no events or changes in circumstances, other than the onset of the Pandemic, during fiscal 2021, 2020 or 2019, indicating that goodwill may be impaired.

Employee Benefit Programs

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As of December 24, 2021 and December 25, 2020, the Company had valuation allowances of $ 2,046 and $ 2,261 , 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.

tax position is required to meet before being recognized in the financial statements.

The Company evaluates uncertain tax positions, if any, by determining if it is more likely than not to be sustained upon examination by the tax authorities.

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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 3 - Inputs to the valuation methodology are unobservable (i.e., supported by little or no market activity) and significant to the fair value measure.

Note 4 – Net Income per Share

Note 3 – Net (Loss) Income per Share

The following table sets forth the computation of basic and diluted earnings per share:

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Diluted 36,744,304 33,716,157 30,073,338

Reconciliation of net income per common share:

Reconciliation of net (loss) income per common share:

Fiscal Year Ended

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Weighted average basic common shares outstanding 36,744,304 33,716,157 29,532,342

Dilutive effect of stock options and unvested common shares — 211,050 270,520

Dilutive effect of unvested common shares — — 144,311

Dilutive effect of stock options and warrants — — 66,739

Dilutive effect of convertible notes — — 329,946

Weighted average diluted common shares outstanding 36,744,304 33,716,157 30,073,338

Potentially dilutive securities that have been excluded from the calculation of diluted net income per common share because the effect is anti-dilutive are as follows:

Potentially dilutive securities that have been excluded from the calculation of diluted net (loss) income per common share because the effect is anti-dilutive are as follows:

Fiscal Year Ended

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Restricted share awards 306,084 505,568 132,861

Stock options 115,639 — —

Stock options and warrants 139,198 115,639 —

Convertible notes 4,410,639 3,484,788 76,384

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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.

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:

Del Monte Fells Point Bassian Sid Wainer Other Acquisitions Total

Fells Point Bassian Sid Wainer Other Acquisitions Total

Balance December 27, 2019 $ 4,544 $ 7,957 $ — $ 2,197 $ 14,698

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Balance December 24, 2021 $ — $ 1,133 $ — $ 5,744 $ 6,877

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 $ 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 long-term portion of contingent earn-out liabilities was $ 3,252 and $ 2,556 as of December 24, 2021 and December 25, 2020, 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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Note 5 – Acquisitions

During fiscal 2021, the Company completed three acquisitions for an aggregate purchase price of approximately $ 11,310 , consisting of $ 10,190 paid in cash, subject to customary working capital adjustments, and common stock warrants of $ 1,120 .

The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $ 9,750 in aggregate.

The Company is in the process of finalizing valuations of tangible and intangible assets as of the

acquisition dates.

When applicable, these valuations require the use of Level 3 inputs.

Goodwill for these acquisitions will be amortized over 15 years for tax purposes.

The Company reflected net sales and loss before taxes in its consolidated statement of operations related to the fiscal 2021 acquisitions as follows:

Fiscal Year Ended

December 24, 2021

Net sales $ 49,485

Loss before income taxes $ ( 44 )

Pro forma financial information for these acquisitions are not presented because the effect of these acquisition are not material to the Company’s results of operations.

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.

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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.

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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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Other long-term liabilities — — ( 499 )

Issuance of warrants — — ( 1,120 )

Total consideration $ 44,081 $ 31,777 $ 27,341

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.

The Company recognized professional fees of $ 450 , $ 435 and $ 235 in other operating expenses related to acquisition activities in fiscal 2021, 2020 and 2019, respectively.

During the years ended December 24, 2021, December 25, 2020, and December 27, 2019, the Company also paid approximately $ 10,190 , $ 16,851 , and $ 300 respectively, on other strategic acquisitions.

Note 6 – Inventories

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Vehicles 5 - 10 years

Other 7 years 88 95

29,632 21,873

Construction-in-process 24,355 8,115

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Equipment, leasehold improvements and software, net $ 133,622 $ 115,448

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.

Construction-in-process at December 24, 2021 related primarily to the build-outs of the Company’s Los Angeles and Miami distribution facilities which are expected to be completed in fiscal 2022 for approximately $ 20,000 .

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

The net book value of equipment financed under finance leases at December 24, 2021 and December 25, 2020 was $ 10,874 and $ 14,705 , respectively.

No interest expense was capitalized during the fiscal years ended December 25, 2020, December 27, 2019 and December 28, 2018.

No interest expense was capitalized during the fiscal years ended December 24, 2021, December 25,

2020 and December 27, 2019.

The components of depreciation and amortization expense were as follows:

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Note 8 – 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:

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

During the second quarter of fiscal 2021, the Company recorded a $ 597 impairment charge, $ 433 net of tax, to fully write-down the net book value of its Cambridge trademark.

During fourth quarter of fiscal 2020, the Company committed to a plan to shift its brand strategy, to commence in the second quarter of fiscal 2021, 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.

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.

This impairment charge is presented within other operating expense s on the consolidated statements of operations.

Amortization expense for other intangibles was $ 12,967 , $ 13,502 and $ 12,663 for the fiscal years ended December 24, 2021, December 25, 2020 and December 27, 2019, respectively.

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Additionally, the Term Loan Facility includes an accordion which permits the Company to request that the lenders extend additional Term Loans in an aggregate principal amount of up to $ 50,000 (less the aggregate amount of certain indebtedness incurred to finance acquisitions) plus an unlimited amount subject to the Company’s Total Leverage Ratio not exceeding 4.90 :1.00 on a pro forma basis.

Substantially all of the Company’s assets are pledged as collateral.

Borrowings were used to repay the Company’s senior secured notes, as well as the prior term loan and revolving credit facility.

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

On March 1, 2021, the Company repaid all outstanding borrowings under the 2022 tranche of senior secured term loans.

The following table summarizes the key terms of the Term Loans as of December 24, 2021:

Term Loans Principal Outstanding Interest Rate Maturity Date Scheduled Principal Payments

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

2025 Tranche $ 168,675 LIBOR + 5.5 % June 22, 2025 0.25 % per quarter

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

The interest rate on the Term Loans at December 24, 2021 was 5.6 %.

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.

The Company had minimum liquidity, as defined in the Credit Agreement, of $ 225,886 as of December 24, 2021.

On February 16, 2022, the Company obtained unconditional waivers from its Term Loan and ABL lenders in connection with noncompliance with certain negative covenants under the Company’s Term Loan Credit Agreement.

Asset-Based Loan Facility

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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.

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.

The Company had reserved $ 20,541 of the ABL for the issuance of letters of credit.

As of December 24, 2021, funds totaling $ 109,459 were available for borrowing under the ABL.

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The Senior Notes were issued pursuant to an indenture, dated as of November 22, 2019 (the “Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee.

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.

Approximately $ 43,225 of the net proceeds were used to repay all borrowings then outstanding under the ABL and the remainder was used for working capital, general corporate purposes and 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.

On March 1, 2021, the Company issued $ 50,000 aggregate principal amount of Senior Notes at a premium which were offered as an additional issuance and under the same terms as the Senior Notes initially issued on November 22, 2019.

Net proceeds were used to repay all outstanding borrowings under the Company's 2022 tranche of senior secured term loans of $ 31,166 and repay a portion of borrowings outstanding under the Company’s ABL.

The Company incurred transaction costs of approximately $ 1,350 which were capitalized as deferred financing fees to be amortized over the term of the Convertible Senior Notes due 2024.

At December 24, 2021, the effective interest rate charged on the Company’s Convertible Senior Notes was approximately 2.3 %.

The net carry value of the Company’s Convertible Senior Notes as of December 24, 2021 and December 25, 2020 was:

December 24, 2021 December 25, 2020

Principal amount outstanding $ 200,000 $ 150,000

Unamortized deferred financing fees and premium ( 2,686 ) ( 3,999 )

Net carry value $ 197,314 $ 146,001

The components of interest expense on the Company’s Convertible Senior Notes were as follows:

Fiscal Year Ended

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

Coupon interest $ 3,594 $ 2,813 $ 234

Amortization of deferred financing fees and premium $ 913 $ 1,000 $ 83

Total interest $ 4,507 $ 3,813 $ 317

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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The interest rate charged on the Unsecured Note is 4.5 % per annum and increases to 5.0 % after the two-year anniversary of the closing date.

The Company may, in certain instances beginning eighteen months after issuance of the Unsecured Note, redeem the Unsecured Note in whole or in part for cash or convert the Unsecured Note into shares of the Company’s common stock at the conversion price of $ 43.93 per share.

may, in certain instances beginning eighteen months after issuance of the Unsecured Note, redeem the Unsecured Note in whole or in part for cash or convert the Unsecured Note into shares of the Company’s common stock at the conversion price of $ 43.93 per share.

After the two-year anniversary of the closing date, the Holder may convert the Unsecured Note into shares of the Company’s common stock at the conversion price.

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Note 10 – Stockholders’ Equity

In connection with an acquisition during the second quarter of fiscal 2021, the Company issued warrants with a fair value of $ 1,120 to purchase up to 150,000 shares of the Company’s common stock at an exercise price of $ 31.96 per share.

These warrants expire on April 22, 2024.

Preferred Stock Purchase Rights

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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.

The Rights expired on March 21, 2021.

Public Common Stock Offering

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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.

Equity Incentive Plan

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The fair value of RSAs vested during the fiscal years ended December 24, 2021, December 25, 2020 and December 27, 2019, was $ 7,848 , $ 8,109 and $ 3,742 , respectively.

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 .

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 five-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.

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Outstanding December 25, 2020 115,639 $ 20.23 $ 2,051 6.2

Exercised — —

Forfeited — —

Outstanding December 24, 2021 115,639 $ 20.23 $ 1,427 5.2

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

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.

No stock option expense was recognized during the fiscal years ended December 24, 2021 and December 25, 2020.

The Company recognized expense on stock options of $ 114 during the fiscal year ended December 27, 2019, the year in which all options outstanding were fully vested.

No compensation expense related to the Company’s RSAs or stock options has been capitalized.

Note 11 – Leases

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

The components of net lease cost were as follows:

Fiscal Year Ended

December 25, 2020 December 27, 2019

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

Operating lease cost $ 26,531 $ 27,521 $ 27,415

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Total lease cost, net $ 38,145 $ 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 24, 2021 were as follows:

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At December 24, 2021, the weighted-average discount rate for operating and finance leases was 6.8 % and 4.1 %, 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.

As of December 24, 2021, the Company is contractually obligated to make payments of approximately $ 9,983 related to leases for distribution facilities that have not commenced.

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

Note 12 – Income Taxes

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.

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

Among other provisions it allows for a refundable Employee Retention Tax Credit (“ERTC”) to eligible employers equal to 50% of qualified wages paid to employees from March 12, 2020 to December 31, 2020, capped at $10 per employee.

In December 2020, the Consolidated Appropriations Act of 2021 was passed, which expands the ERTC by increasing the credit to 70% of qualified wages paid from January 1, 2021 through June 30, 2021, capped at $10 per employee per quarter.

second quarter of fiscal 2021, the Company recognized a receivable of $ 1,418 related to the ERTC which is presented within prepaid expenses and other current assets on the consolidated balance sheet and the related expense reduction is presented within selling, general and administrative expenses on the consolidated statements of operations

The Company’s effective income tax rate was 27.3 % and 32.9 % for the fifty-two weeks ended December 24, 2021 and December 25, 2020, 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 higher effective tax rate in the prior fiscal year is primarily related to the carryback of a portion of the Company’s fiscal 2020 net loss 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 fiscal 2020 income tax provision reflects the impact of an expected income tax refund receivable of $ 21,250 which is reflected in prepaid expenses and other current assets on the Company’s consolidated balance sheets as of December 24, 2021 and December 25, 2020.

The provision for income taxes consists of the following:

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Valuation allowance ( 2,046 ) ( 2,261 )

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

Total net deferred tax asset $ 9,380 $ 7,535

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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At December 24, 2021, the Company had a valuation allowance of $ 2,046 , which consisted of $ 1,235 and $ 811 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.

Despite the loss for fiscal year ended December 24, 2021 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.

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The Company’s state net operating loss carryforwards of $ 6,328 expire at various dates, the earliest of which expire in fiscal 2026 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 federal net operating loss carry forward of $ 7,391 is indefinite-lived and its charitable contributions carry forward of $ 3,865 expire between fiscal 2024 and 2026.

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

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Non-cash investing and financing activities:

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

Warrants issued for acquisition $ 1,120 $ — $ —

Contingent earn-out liabilities for acquisitions $ 5,500 $ 3,464 $ 7,929

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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.

As a result of the Pandemic, the Company’s matching contributions were temporarily suspended from March 31, 2020 through August 31, 2021.

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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Note 15 – Related Parties

The Company follows the guidance in ASC 850, “Related Party Disclosure”, which requires the disclosure of material related party transactions other than compensation arrangements, expense allowances, or other similar items that occur in the ordinary course of business.

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.

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

The Company purchases products from ConAgra Foods, Inc.

of which Steve Goldstone, a Director of the Company, was a member of the board of directors through September 20, 2018.

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

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, 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.

Note 16 – Commitments and Contingencies

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The Company’s self-insurance reserves for its automobile liability program totaled $ 3,980 and $ 3,450 at December 24, 2021 and December 25, 2020, respectively.

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

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

Self-insurance reserves for workers’ compensation totaled $ 7,053 and $ 7,696 at December 24, 2021 and December 25, 2020, respectively.

As of December 24, 2021, approximately 9 % 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 2022 and 2025.

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The following tables summarize the activity in our valuation accounts during the fiscal years ended December 24, 2021, December 25, 2020 and December 27, 2019:

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

Balance at Beginning of Period Additions (Recoveries) Charged to Expense Deductions Balance at End of Period

Allowance for doubtful accounts

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December 27, 2019 812 95 — 907

Note 19 – Quarterly Results (unaudited)

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

(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.

Note 18 – Subsequent Events

On December 28, 2021, the Company entered into an asset purchase agreement to acquire substantially all of the assets of CGC Holdings, Inc., a specialty seafood and produce distributor in Maryland.

The purchase price was $ 28,000 paid in cash at closing and is subject to a customary working capital true-up.

The Company has not provided the preliminary purchase price allocations for this acquisition as the initial accounting is incomplete .

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk