What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-02-28 compared with 2022-02-22 · 251 added, 231 removed, 703 unchanged (41% of the section changed)

9 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

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Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Stockholders and Board of Directors

The Chefs’ Warehouse, Inc.

Ridgefield, CT

Ridgefield, Connecticut

Opinion on the Consolidated Financial Statements

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

(the “Company”) and subsidiaries as of December 24, 2021 and December 25, 2020, the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended December 24, 2021, and the related notes.

and subsidiaries (the “Company”) as of December 30, 2022 and December 24, 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 30, 2022 and December 24, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 28, 2023, expressed an unqualified opinion thereon.

Basis for Opinions

Basis for Opinion

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

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

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

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 communication of 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Debt Transactions

As described in Notes 2 and 9 to the consolidated financial statements, the Company entered into the following debt transactions during the year ended December 30, 2022:

On August 23, 2022, the Company entered into an eighth amendment to its senior secured term loan credit agreement, dated June 22, 2016 (the "Eighth Amendment").

The Company borrowed $300 million maturing on August 23, 2029, comprising of a refinancing of the then existing term loans balance under the Term Credit Agreement of $167.4 million and an incremental borrowing of $132.6 million.

The Eighth Amendment involved multiple members of a loan syndicate.

On December 13, 2022, the Company issued $287.5 million aggregate principal amount of 2.375% Convertible Senior Notes due 2028 (the “Convertible Notes”).

Concurrently, the Company entered into separate, privately negotiated transactions (the “Exchange Transactions”) with a limited number of holders of its 1.875% Convertible Senior Notes due 2024 (the “Existing Convertible Notes”) to exchange or repurchase $158.4 million principal amount of Existing Convertible Notes for aggregate consideration consisting of $159.8 million in cash, and approximately 324,066 shares of the Company’s common stock.

We identified the accounting for these transactions, including the evaluation of the debt transactions 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.

(i) the evaluation of the accounting for the Eighth Amendment and the Exchange Transactions as to whether these agreements resulted in a debt modification or extinguishment based on the analysis of cash flows on a lender-by-lender basis, and (ii) the evaluation of the potential derivatives that may require bifurcation from the Convertible Notes 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:

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

(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 .

• Reviewing and analyzing (i) the terms of the agreements associated with each transaction, (ii) the completeness and accuracy of the Company’s technical accounting analysis including cash flows for each lender, and (iii) the application of the relevant accounting literature.

• Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in:

(i) evaluating relevant contract terms of the debt transactions in relation to the appropriate accounting literature, and (ii) assessing the appropriateness of conclusions reached by the Company.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2006.

Stamford, Connecticut

February 28, 2023

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Total current assets 720,860 469,960

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

Property and equipment, net 185,728 133,622

Operating lease right-of-use assets 156,629 130,701

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Operating lease liabilities 151,406 127,296

Deferred taxes, net 6,098 —

Other liabilities and deferred credits 13,034 5,110

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THE CHEFS’ WAREHOUSE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

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

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Interest expense 43,849 17,587 20,946

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

Provision for income tax (benefit) expense ( 1,853 ) ( 40,703 ) 8,210

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

Other comprehensive income (loss):

Income (loss) before income taxes 41,889 ( 6,776 ) ( 123,606 )

Provision for income tax expense (benefit) 14,139 ( 1,853 ) ( 40,703 )

Net income (loss) $ 27,750 $ ( 4,923 ) $ ( 82,903 )

Other comprehensive (loss) income:

Foreign currency translation adjustments ( 163 ) 29 ( 3 )

Comprehensive (loss) income $ ( 4,894 ) $ ( 82,906 ) $ 24,366

Net (loss) income per share:

Comprehensive income (loss) $ 27,587 $ ( 4,894 ) $ ( 82,906 )

Net income (loss) per share:

Basic $ 0.75 $ ( 0.13 ) $ ( 2.46 )

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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 — — — — 24,193 24,193

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

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

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

Public offering of common stock 6,634,615 66 85,875 — — 85,941

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

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Balance December 25, 2020 37,274,768 $ 373 $ 303,734 $ ( 2,051 ) $ 42,534 $ 344,590

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

Net loss — — — — ( 4,923 ) ( 4,923 )

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

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

Shares issued for acquisition — — 1,120 — — 1,120

Cumulative translation adjustment — — — 29 — 29

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Balance December 24, 2021 37,887,675 $ 380 $ 314,242 $ ( 2,022 ) $ 37,611 $ 350,211

Net loss — — — — ( 4,923 ) ( 4,923 )

Net income — — — — 27,750 27,750

Stock compensation 466,820 4 13,236 — — 13,240

Conversion of debt to common stock 324,066 3 11,372 — — 11,375

Warrants issued for acquisition — — 1,701 — — 1,701

Option exercises 3,407 — 69 — — 69

Cumulative translation adjustment — — — ( 163 ) — ( 163 )

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Cash flows from operating activities:

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

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

Net income (loss) $ 27,750 $ ( 4,923 ) $ ( 82,903 )

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

Depreciation and amortization 24,332 21,998 19,774

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Non-cash operating lease expense 1,730 1,402 689

(Benefit) provision for deferred income taxes ( 1,845 ) ( 18,418 ) 2,063

Provision (benefit) for deferred income taxes 9,601 ( 1,845 ) ( 18,418 )

Amortization of deferred financing fees 1,290 2,299 3,426

Loss on debt extinguishment 14,287 — —

Stock compensation 13,602 11,479 9,292

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Other assets and liabilities ( 1,341 ) ( 108 ) 1,317

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

Net cash provided by (used in) operating activities 23,134 ( 19,899 ) 42,881

Cash flows from investing activities:

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Cash paid for contingent earn-out liabilities ( 3,788 ) ( 83 ) ( 2,927 )

Borrowings under asset based loan facility — 100,000 —

Borrowings under asset based loan facility and revolving credit facilities 42,220 — 100,000

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

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

Net cash provided by (used in ) financing activities 253,215 ( 9,222 ) 78,056

Effect of foreign currency on cash and cash equivalents ( 681 ) ( 14 ) 79

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Every six to seven years the Company will add a fourteenth week to its fourth quarter to more closely align its year end to the calendar year.

The consolidated statement of operations for the fiscal year ended December 30, 2022 contained a 53rd week while all other years presented contained 52 weeks.

The Company’s business consists of three operating segments:

East Coast, Midwest and West Coast that aggregate into one reportable segment, food product distribution, which is concentrated in the United States.

East, Midwest and West that aggregate into one reportable segment, food product distribution, which is concentrated primarily in the United States.

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

The COVID-19 Pandemic

The COVID-19 pandemic (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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All significant intercompany accounts and transactions have been eliminated.

Guidance Adopted in Fiscal 2021

Simplifying the Accounting for Income Taxes :

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 :

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

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

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

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.

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

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

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.

Actual results could differ from estimates.

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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 $ 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.

The Company recognized a corresponding asset of $ 442 and $ 238 as of December 30, 2022 and December 24, 2021, 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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Other Operating Expenses

Other operating expenses includes expenses primarily related to changes in the fair value of the Company’s earn-out liabilities, gains and losses on asset disposals, asset impairments and certain third-party deal costs incurred in connection with business acquisitions or financing arrangements.

Other operating expenses includes expenses primarily related to changes in the fair value of the Company’s contingent earn-out liabilities, gains and losses on asset disposals, asset impairments, certain third-party deal costs incurred in connection with business acquisitions or financing arrangements and certain other costs.

Cash and Cash Equivalents

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

The allowance also covers short paid invoices the Company deems to be uncollectable as well as a portion of trade accounts receivable balances projected to become uncollectable based upon historic patterns and macro-economic factors in existence as of the balance sheet date that may impact the food-away-from-home industry and/or its customers, and specifically, beginning in the first quarter of fiscal 2020, the impact of the Pandemic.

The allowance also covers short paid invoices the Company deems to be uncollectible as well as a portion of trade accounts receivable balances projected to become uncollectible based upon historic patterns and macro-economic factors in existence as of the balance sheet date that may impact the food-away-from-home industry and/or its customers, and specifically, beginning in the first quarter of fiscal 2020, the impact of the Pandemic and the subsequent recovery.

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

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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 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.

For the fiscal years ended December 30, 2022, December 24, 2021 and December 25, 2020, the recorded purchase incentives totaled approximately $ 30,805 , $ 20,296 and $ 12,678 , respectively.

Concentrations of Credit Risks

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There is no significant balance with any individual customer.

Equipment and Leasehold Improvements

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.

Property and Equipment

Property and equipment 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.

Property and equipment 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.

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An arrangement is or contains a lease if the agreement identifies an asset, implicitly or explicitly, that the Company has the right to use over a period of time.

If an arrangement contains a lease, the Company classifies the lease as either an operating lease or as a finance lease based on the five criteria defined in ASC 842.

If an arrangement contains a lease, the Company classifies the lease as either an operating lease or as a finance lease based on the five criteria defined in ASC 842, “Leases”.

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

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

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

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

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

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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.

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

See Note 8 for more information.

There have been no other events or changes in circumstances during fiscal 2022, 2021 or 2020, indicating that the carrying value of the Company’s finite-lived intangible assets are not recoverable.

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

East Coast, Midwest and West Coast and these operating segments represent our reporting units.

The Company evaluates the recoverability of goodwill at each of its reporting units annually in the fourth quarter, or more frequently when circumstances indicate an impairment may have occurred.

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

A goodwill impairment loss, if any, would be recognized for the amount by which a

reporting unit’s carrying value exceeded its fair value.

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

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

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

The Company’s income approach incorporates the use of a discounted cash flow methodology that involves many management assumptions that are based upon future growth projections.

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

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As of December 30, 2022 and December 24, 2021, the Company had valuation allowances of $ 1,641 and $ 2,046 , 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.

ASC 740, “Income Taxes” 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.

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.

The Company records uncertain tax positions when it is estimable and probable that such liabilities have been incurred.

The Company records uncertain tax positions when it is more likely than not that such liabilities have been incurred.

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

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Stock-Based Compensation

The Company measures stock-based compensation at the grant date based on the fair value of the award.

The Company determines the accounting classification of stock awards as either a liability or equity in accordance with ASC 480 “Distinguishing Liabilities from Equity” and ASC 718 “Compensation - Stock Compensation.” Stock awards are classified as liabilities when, among other considerations, they require settlement by issuing a variable number of shares.

Stock-based compensation for stock awards classified as liabilities is initially measured at the grant date based on the estimated fair value of the ultimate award liability and remeasured each reporting period until settlement, considering the estimable probable outcome at the end of the performance period.

The Company measures stock-based compensation for stock awards classified as equity at the grant date based on the fair value of the award.

Restricted stock awards (“RSAs”) and performance share units are valued based on the fair value of the stock on the grant date.

The related compensation expense is recognized over the service period on a straight-line basis and reduced by forfeitures when they occur.

Stock-based compensation expense is presented within selling, general and administrative expenses on the Company’s consolidated statements of operations.

Compensation expense on performance share units reflects the estimated probable outcome at the end of the performance period.

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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 3 – Net (Loss) Income per Share

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

Note 3 – Net Income (Loss) per Share

The following table sets forth the computation of basic and diluted net income (loss) per common share:

Fiscal Year Ended

December 30, 2022 December 24, 2021 December 25, 2020

Net (loss) income per share:

Net income (loss) per share:

Basic $ 0.75 $ ( 0.13 ) $ ( 2.46 )

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Diluted 38,742,328 36,744,304 33,716,157

Reconciliation of net (loss) income per common share:

Reconciliation of net income (loss) per common share:

Fiscal Year Ended

December 30, 2022 December 24, 2021 December 25, 2020

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

Net income (loss) $ 27,750 $ ( 4,923 ) $ ( 82,903 )

Add effect of dilutive securities:

Interest on convertible notes, net of tax 580 — —

Adjusted net (loss) income $ ( 4,923 ) $ ( 82,903 ) $ 24,400

Adjusted net income (loss) $ 28,330 $ ( 4,923 ) $ ( 82,903 )

Weighted average basic common shares outstanding 37,094,220 36,744,304 33,716,157

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Weighted average diluted common shares outstanding 38,742,328 36,744,304 33,716,157

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:

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

Fiscal Year Ended

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These liabilities were estimated using Level 3 inputs.

The fair value of contingent consideration was determined based on a probability-based approach which includes projected results, percentage probability of occurrence and the application of a discount rate to present value the payments.

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

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 fair value of contingent consideration are predominantly determined based on a probability-based approach which includes projected results, percentage probability of occurrence and the application of a discount rate to present value the payments.

A significant change in projected results, discount rate, or probabilities of occurrence could result in a significantly higher or

lower fair value measurement.

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

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

Fells Point Bassian Sid Wainer Other Acquisitions Total

Balance December 25, 2020 $ 2,756

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The following table presents the carrying value and fair value of the Company’s convertible notes (more fully described in Note 9).

In estimating the fair value of its convertible notes, the Company utilized Level 3 inputs including prevailing market interest rates to estimate the debt portion of the instrument and a Black Scholes valuation model to estimate the fair value of the conversion options.

The fair value of the Company’s 2028 Convertible Senior Notes was based on Level 1 inputs.

In estimating the fair value of its 2024 Convertible Senior Notes and Convertible Unsecured Note, the Company utilized Level 3 inputs including prevailing market interest rates to estimate the debt portion of the instrument and a Black Scholes valuation model to estimate the fair value of the conversion options.

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

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2028 Convertible Senior Notes $ 287,500 $ 292,531 $ — $ —

2024 Convertible Senior Notes $ 41,684 $ 43,723 $ 200,000 $ 206,182

Convertible Unsecured Note $ 4,000 $ 4,345 $ 4,000 $ 4,102

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.

Chef Middle East

On November 1, 2022, pursuant to a share sale and purchase agreement, the Company acquired substantially all of the shares of Chef Middle East LLC (“CME”), a specialty food distributor with operations in the United Arab Emirates, Qatar and Oman.

The purchase price was approximately $ 108,749 , paid in cash at closing.

The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total $ 10,000 over a two-year period.

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

The Company estimated the fair value of this contingent earn-out liability to be $ 7,500 as of November 1, 2022 and December 30, 2022.

The Company is in the process of finalizing a valuation of tangible and intangible assets of CME as of the acquisition date.

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

The goodwill recorded primarily reflects the value of acquiring an established specialty seafood and produce distributor and any intangible assets that do not qualify for separate recognition.

Capital Seaboard

On December 28, 2021, pursuant to an asset purchase agreement, the Company acquired substantially all of the assets of CGC Holdings, Inc.

(“Capital Seaboard”), a specialty seafood and produce distributor in Maryland.

The purchase price was approximately $ 31,036 , consisting of $ 28,000 paid in cash at closing, common stock warrants valued at $ 1,701 , and $ 1,335 paid upon settlement of a net working capital true-up.

Customer relationships and trademarks were valued at fair value using Level 3 inputs and are being amortized over 15 and 5 years, respectively.

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

The goodwill recorded primarily reflects the value of acquiring an established specialty seafood and produce distributor to leverage the Company’s existing products in the markets served by Capital Seaboard, to supply Capital Seaboard’s product offerings to our East Coast markets and any intangible assets that do not qualify for separate recognition.

Other Acquisitions

During fiscal 2022, the Company completed six other acquisitions for an aggregate purchase price of approximately $ 55,300 , consisting of $ 55,300 paid in cash, subject to customary working capital adjustments.

The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $ 2,000 in the 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:

The Company recognized professional fees of $ 4,357 , $ 450 and $ 435 in other operating expenses related to acquisition activities in fiscal 2022, 2021 and 2020, respectively.

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

Fiscal Year Ended

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Loss before income taxes $ 15,377

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.

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

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

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

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

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

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

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

and certain affiliated entities (“Bassian”), a specialty center-of-the-plate distributor based in northern California.

The aggregate purchase price for the transaction was approximately $ 31,777 , including $ 27,990 paid in cash at closing and the issuance of a $ 4,000 unsecured convertible note, partially offset by the settlement of a net working capital true-up.

The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total $ 9,000 over a four-year period.

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

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

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

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

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

Sid Wainer Bassian Other Acquisitions

The table below presents unaudited pro forma consolidated income statement information of the Company as if the acquisitions completed during fiscal 2022 had occurred on December 26, 2020.

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 acquisitions.

The pro forma information is not necessarily indicative of the Company’s results of operations had the acquisitions 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 acquisitions, any incremental costs for transitioning to become a public company, and also does not reflect additional revenue opportunities following the acquisitions.

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

Fiscal Year Ended

December 30, 2022 December 24, 2021

Net sales $ 2,843,207 $ 2,211,208

Income before income taxes $ 56,293 $ 4,146

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

Chef Middle East Capital Seaboard Other Acquisitions

Current assets $ 84,811 $ 10,130 $ 14,743

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Other assets 941 122 17

Deferred tax liability ( 3,635 ) — ( 2,365 )

Right-of-use assets 5,321 16,427 1,491

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Earn-out liability ( 7,500 ) — ( 1,200 )

Other long-term liabilities — — ( 499 )

Issuance of warrants — — ( 1,120 )

Total consideration $ 108,749 $ 31,036 $ 55,300

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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Our entities record inventory using a mixture of first-in, first-out and average cost, which we believe approximates first-in, first-out.

Inventory is reflected net of adjustments for shrinkage, excess and obsolescence totaling $ 8,312 and $ 9,013 at December 24, 2021 and December 25, 2020, respectively.

Note 7 – Equipment, Leasehold Improvements and Software

Equipment, leasehold improvements and software as of December 24, 2021 and December 25, 2020 consisted of the following:

Inventory is reflected net of adjustments for shrinkage, excess and obsolescence to approximate their net realizable value totaling $ 9,198 and $ 8,312 at December 30, 2022 and December 24, 2021, respectively.

Note 7 – Property and Equipment

Property and equipment as of December 30, 2022 and December 24, 2021 consisted of the following:

Useful Lives December 30, 2022 December 24, 2021

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Equipment, leasehold improvements and software, net $ 185,728 $ 133,622

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.

Construction-in-process at December 30, 2022 related primarily to the build-out of the Company’s Miami, Dallas and Richmond, CA distribution facilities and the implementation of the Company’s Enterprise Resource Planning system.

Construction-in-process at December 24, 2021 related primarily related primarily to the build-outs of the Company’s Los Angeles and Miami distribution facilities.

The net book value of equipment financed under finance leases at December 30, 2022 and December 24, 2021 was $ 11,579 and $ 10,874 , respectively.

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

2020 and December 27, 2019.

No interest expense was capitalized during the fiscal years ended December 30, 2022, December 24, 2021 and December 25, 2020.

The components of depreciation and amortization expense were as follows:

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Carrying amount as of December 24, 2021 221,775

Goodwill adjustments ( 792 )

Acquisitions 66,249

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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.

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 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.

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Debt obligations as of December 30, 2022 and December 24, 2021 consisted of the following:

December 24, 2021 December 25, 2020

Senior secured term loan $ 168,675 $ 201,553

Convertible senior notes 200,000 150,000

Asset-based loan facility 20,000 40,000

Finance lease and other financing obligations 11,602 15,798

Convertible unsecured note 4,000 4,000

Deferred finance fees and original issue discount ( 4,976 ) ( 7,172 )

Weighted Average Effective Interest Rate at December 30, 2022 Maturity December 30, 2022 December 24, 2021

Senior secured term loan 7.93 % August 2029 $ 299,250 $ 168,675

2028 Convertible senior notes 2.78 % December 2028 287,500 —

2024 Convertible senior notes 2.32 % December 2024 41,684 200,000

Asset-based loan facility 4.50 % March 2027 40,000 20,000

Finance leases 4.63 % Various 11,331 11,602

Convertible unsecured note 5.00 % June 2023 4,000 4,000

Other revolving credit facilities 7.72 % April 2023 2,217 —

Unamortized deferred costs and premium ( 20,050 ) ( 4,976 )

Total debt obligations 665,932 399,301

current installments ( 12,428 ) ( 5,141 )

Total debt obligations excluding current installments $ 394,160 $ 398,084

Total long-term debt $ 653,504 $ 394,160

Maturities of the Company’s debt, excluding finance leases, for each of the next five years and thereafter at December 30, 2022 are as follows:

Thereafter 611,750

Total $ 674,651

Senior Secured Term Loan Credit Facility

On June 22, 2016, the Company refinanced its debt structure by entering into a credit agreement (the “Term Loan Credit Agreement”) with a group of lenders for which Jefferies Finance LLC acts as administrative agent and collateral agent.

The Term Loan Credit Agreement provides for a senior secured term loan B facility (the “Term Loan Facility”) in an aggregate amount of $ 305,000 (the loans outstanding under the Term Loan Facility, the “Term Loans”) maturing on June 22, 2022.

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.

On June 22, 2016, the Company entered into a credit agreement (the “Term Loan Credit Agreement”) with a group of lenders for which Jefferies Finance LLC acts as administrative agent and collateral agent.

The Term Loan Credit Agreement provides for a senior secured term loan B facility (the “Term Loan Facility”).

On August 23, 2022, the Company entered into an eight amendment (“Eighth Amendment”) in an aggregate principal amount of $ 300,000 maturing on August 23, 2029 (“2029 Term Loans”), comprising of a refinancing of the then existing term loans balance under the Term Loan Credit Agreement of $ 167,391 and an incremental borrowing of $ 132,609 .

The incremental funds are to be used for capital expenditures, permitted acquisitions, working capital, and general corporate purposes of the Company.

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.

Remaining funds were used for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company.

On December 13, 2017, the Company completed a repricing of the Term Loan Facility to reduce Applicable Rate (as defined in the Term Loan Credit Agreement) from 475 basis points to 400 basis points over the London Inter-bank Offered Rate (“LIBOR”).

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

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

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

In connection with the repricing, the Company paid debt financing costs of $ 626 which were capitalized as deferred financing charges.

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

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

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

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

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

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

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

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

The Sixth Amendment was accounted for as a debt modification.

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

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

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

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

The Company is required to make scheduled principal payments of 0.25 % of the original principal amount per quarter.

Additionally, the Term Credit Agreement includes an accordion which permits the Company to request that the lenders extend additional Term Loans based on certain performance, leverage ratio and other restrictions.

The Term Loan Credit Agreement includes a springing maturity of the earlier of August 23, 2029 and the date that is 181 days prior to the schedule maturity date of any individual trance of unsecured indebtedness of which a principal amount in excess of $ 40,000 remains outstanding on such date.

The interest charged on the 2029 Term Loans is equal to, at the Company’s option, either the Alternate Base Rate (as defined in the Eighth Agreement) plus 375 basis points or the secured overnight financing rate (“SOFR”) for one-, two-, three- or six -month interest periods chosen by the Company.

The Eight Amendment involved multiple members of a loan syndicate.

The Company performed an analysis for each lender in accordance with ASC 470 “Debt” to determine whether the Eighth Amendment resulted in a substantial change to the remaining cash flows which is defined as a change in present value of remaining cash flows of 10% or more.

As a result of the analysis, the Company incurred a loss on debt extinguishment of $ 142 which represents the portion of unamortized deferred financing fees attributable to lenders that exited the loan syndicate.

The transaction was accounted for as a modification for existing lenders that participated in the 2029 Term Loans.

The Company deferred lender and third-party fees of $ 10,852 as debt issuance costs to be amortized over the term of the loan.

Arrangement and third-party transaction costs of $ 4,498 were expensed as incurred.

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.

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 $ 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.

The Eight Amendment removed a minimum liquidity covenant which required the Company to maintain certain liquidity levels as of the last day of any fiscal quarter where EBITDA did not meet a predefined target.

Asset-Based Loan Facility

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The ABL Credit Agreement provides for an asset-based loan facility (the “ABL”) in the aggregate amount of up to $ 150,000 .

On March 11, 2022 the Company entered into a third amendment to the ABL Credit Agreement which increased the aggregate commitments to $ 200,000 maturing on March 11, 2027.

Borrowings under the ABL will be used, and are expected to be used, for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company.

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(i) the aggregate amount of commitments or (ii) the sum of specified percentages of eligible receivables and eligible inventory, minus certain availability reserves.

The co-borrowers under the ABL are entitled on one or more occasions, subject to the satisfaction of certain conditions, to request an increase in the commitments under the ABL in an aggregate principal amount of up to $ 25,000 .

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

The Company under the ABL is entitled on one or more occasions, subject to the satisfaction of certain conditions, to request an increase in the commitments under the ABL in an aggregate principal amount of up to $ 25,000 .

The ABL includes a springing maturity date that occurs 90 days prior to the earliest maturity under the Company’s senior secured term loan facility and the date that is 181 days prior to the scheduled maturity date of any individual tranche of unsecured indebtedness of which a principal amount in excess of $ 40,000 remains outstanding on such date and March 11, 2027.

The third amendment of the ABL was accounted for as a debt modification.

The Company incurred transaction costs of $ 406 which were capitalized as deferred financing fees to be amortized over the term of the ABL.

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

The interest rate charged on borrowings under the ABL is equal to a spread plus, at the Company’s option, either the Base Rate (as defined in the ABL Credit Agreement) or a forward-looking term rate based on SOFR for one-, three-, or six-month interest periods chosen by the Company.

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

The interest rate on the ABL at December 24, 2021 was 1.4 %.

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

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

If the amount of availability under the ABL falls below $ 14,000 or 10 % of the borrowing base,the Company is required to comply with a minimum consolidated fixed charge coverage ratio of 1 :1.

The Company had reserved $ 24,173 of the ABL for the issuance of letters of credit.

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2028 Convertible Senior Notes

On November 22, 2019, the Company issued $ 150,000 aggregate principal amount of 1.875 % Convertible Senior Notes (the “Senior Notes”).

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.

On December 13, 2022, the Company issued $ 287,500 aggregate principal amount of 2.375 % Convertible Senior Notes (the “2028 Convertible Notes”).

The 2028 Senior Notes were issued pursuant to an indenture, dated as of December 13, 2022 (the

“2028 Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee.

Concurrently with the issuance of the 2028 Convertible Notes, the Company entered into separate, privately negotiated transactions (the “Exchange Transactions”) with a limited number of holders of its 1.875 % Convertible Senior Notes ( the “2024 Convertible Notes) to exchange or repurchase approximately $ 158,316 principal amount of 2024 Convertible Notes for an aggregate consideration consisting of approximately $ 159,709 in cash, which includes accrued interest on the 2024 Convertible Notes, and approximately 324,066 shares of the Company’s common stock.

Net proceeds are are expected to be used for capital expenditures, permitted acquisitions, working capital and general corporate purposes of the Company.

The Company performed an analysis for each lender in accordance with ASC 470 “Debt” to determine whether the Exchange Transactions resulted in a substantial change to the remaining cash flows which is defined as a change in present value of remaining cash flows or a change in the fair value of the conversion option of more than 10%.

As a result of the analysis, the Exchange Transaction was recorded as an extinguishment and the Company incurred a loss on debt extinguishment of $ 14,145 which is reflected in interest expense on the Company’s consolidated statements of operations.

The Company incurred third party transaction costs of approximately $ 6,971 which were capitalized as deferred financing fees to be amortized over the term of the 2028 Senior Notes.

The 2028 Convertible Notes bear interest of 2.375 % per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023.

The initial conversion price is approximately $ 44.27 per share together with cash in lieu of any fractional share.

The conversion price is subject to adjustments upon the occurrence of certain events.

The 2028 Convertible Notes will mature on December 15, 2028, unless earlier converted or repurchased in accordance with their terms.

Before September 15, 2028, holders of the 2028 Convertible Notes will have the right to convert only upon the occurrence of certain events.

From and after September 15, 2028, holders may convert at any time at their election until the close of business on the scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

In addition, if the Company undergoes a fundamental change, as described in the 2028 Indenture, holders may require the Company to repurchase for cash all or part of their 2028 Convertible Notes at a repurchase price equal to 100 % of the principal amount of the 2028 Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the required repurchase date.

2024 Convertible Senior Notes

On November 22, 2019, the Company issued $ 150,000 aggregate principal amount of 2024 Convertible Notes pursuant to an indenture, dated as of November 22, 2019 (the “2024 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 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.

The Company incurred transaction costs of approximately $ 5,082 which were capitalized as deferred financing fees to be amortized over the term of the 2024 Convertible Notes.

On March 1, 2021, the Company issued $ 50,000 aggregate principal amount of 2024 Convertible Notes at a premium which were offered as an additional issuance and under the same terms as the 2024 Convertible 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.

At any time before the close of business on the scheduled trading day immediately before the maturity date, the Senior Notes will be convertible at the option of holders into shares of the Company’s common stock, together with cash in lieu of any fractional share, at an initial conversion price of approximately $ 44.20 per share.

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

The 2024 Convertible 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.

At any time before the close of business on the scheduled trading day immediately before the maturity date, the 2024 Convertible Notes will be convertible at the option of holders into shares of the Company’s common stock, together with cash in lieu of any fractional share, at an initial conversion price of approximately $ 44.20 per share.

The conversion price is subject to adjustments upon the occurrence of certain events.

The Senior Notes will mature on December 1, 2024, unless earlier converted or repurchased in accordance with their terms.

The Company may not redeem the Senior Notes at its option prior to maturity.

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

The 2024 Convertible Notes will mature on December 1, 2024, unless earlier converted or repurchased in accordance with their terms.

The Company may not redeem the 2024 Convertible Notes at its option prior to maturity.

In addition, if the Company undergoes a fundamental change, as described in the 2024 Indenture, holders may require the Company to repurchase for cash all or part of their 2024 Convertible Notes at a repurchase price equal to 100 % of the principal amount of the 2024 Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the required repurchase date.

Convertible Unsecured Note

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(the “Holder”) as partial consideration in the Bassian acquisition.

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.

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.

The interest rate charged on the Unsecured Note was 4.5 % per annum and increased 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.

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.

Upon a change of control event, the Holder may convert the Unsecured Note into shares of the Company’s common stock at the conversion price or redeem the Unsecured Note for cash.

The net carry value of the Company’s convertible notes as of December 30, 2022 and December 24, 2021 was:

December 30, 2022 December 24, 2021

Principal Amount Unamortized Deferred Costs and Premium Net Amount Principal Amount Unamortized Deferred Costs and Premium Net Amount

2028 Convertible Senior Notes $ 287,500 $ ( 6,876 ) $ 280,624 $ — $ — $ —

2024 Convertible Senior Notes 41,684 ( 373 ) 41,311 200,000 ( 2,686 ) 197,314

Convertible Unsecured Note 4,000 — 4,000 4,000 — 4,000

Total $ 333,184 $ ( 7,249 ) $ 325,935 $ 204,000 $ ( 2,686 ) $ 201,314

The components of interest expense on the Company’convertible notes were as follows:

Fiscal Year Ended

December 30, 2022 December 24, 2021 December 25, 2020

Coupon interest $ 4,272 $ 3,763 $ 2,993

Amortization of deferred costs and premium 932 913 1,000

Loss on extinguishment of debt 14,145 — —

Total interest $ 19,349 $ 4,676 $ 3,993

Note 10 – Stockholders’ Equity

1 unchanged sentence

These warrants expire on April 22, 2024.

Preferred Stock Purchase Rights

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

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

The Rights expired on March 21, 2021.

In connection with the acquisition of Capital Seaboard during the first quarter of fiscal 2022, the Company issued warrants with a fair value of $ 1,701 to purchase up to 150,000 shares of the Company’s common stock at an exercise price of $ 31.55 per share.

These warrants expire on December 26, 2025.

Public Common Stock Offering

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The fair value of RSAs vested during the fiscal years ended December 30, 2022, December 24, 2021 and December 25, 2020, was $ 8,719 , $ 7,848 and $ 8,109 , 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 five-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 four-years .

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

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

During fiscal 2019, the Company awarded market-based RSAs that vest based on the Company’s attainment of an average closing trade price of the Company’s common stock of $ 39.86 per share, based on an average of 20 consecutive trading days.

The grant date fair value of these market-based performance awards was determined using a Monte Carlo simulation in order to simulate a range of possible future stock prices.

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

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

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Outstanding December 24, 2021 115,639 $ 20.23 $ 2,051 6.2

Exercised ( 3,407 ) 20.23

Outstanding December 30, 2022 112,232 $ 20.23 $ 1,465 3.2

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No stock option expense was recognized during the fiscal years ended December 30, 2022 and December 24, 2021.

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.

In connection with the CME acquisition, the Company issued stock awards to certain members of the CME management team which were classified as liabilities.

These awards vest over a period of up to four years .

Stock-based compensation expense for these awards was $ 362 during the fiscal year ended December 30, 2022.

As of December 30, 2022, the fair value of these awards was $ 362 and is presented within Other liabilities and deferred credits on the Company’s consolidated balance sheets.

Note 11 – Leases

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Total $ 387 $ 229,964 $ 18,724 $ 249,075 $ 12,140

Less interest ( 73,245 ) ( 1,146 )

Present value $ 143,178 $ 11,602

Less imputed interest ( 78,241 ) ( 809 )

Present value of lease obligations $ 170,834 $ 11,331

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

4 unchanged sentences

At December 30, 2022, the weighted-average discount rate for operating and finance leases was 6.7 % and 4.6 %, respectively.

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.

As of December 30, 2022, the Company is contractually obligated to make payments over the next 14 years of approximately $ 44,593 related to long-term leases for a distribution facility, vehicles and material handling equipment 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 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 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 components of the Company’s operating income (loss) before income taxes consist of the following:

Fiscal Year Ended

December 30, 2022 December 24, 2021 December 25, 2020

Domestic $ 40,428 $ ( 4,356 ) $ ( 119,375 )

Foreign 1,461 ( 2,420 ) ( 4,231 )

Total $ 41,889 $ ( 6,776 ) $ ( 123,606 )

The provision for income taxes consists of the following:

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December 30, 2022 December 24, 2021 December 25, 2020

Current income tax (benefit) expense:

Current income tax expense (benefit):

Federal $ 1,665 $ ( 285 ) $ ( 21,877 )

Foreign 208 — —

State 2,665 277 ( 408 )

Total current income tax (benefit) expense ( 8 ) ( 22,285 ) 6,147

Deferred income tax (benefit) expense:

Total current income tax expense (benefit) 4,538 ( 8 ) ( 22,285 )

Deferred income tax expense (benefit):

Federal 9,571 ( 2,002 ) ( 10,740 )

1 unchanged sentence

State 34 179 ( 7,728 )

Total deferred income tax (benefit) expense ( 1,845 ) ( 18,418 ) 2,063

Total income tax (benefit) expense $ ( 1,853 ) $ ( 40,703 ) $ 8,210

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

Total deferred income tax expense (benefit) 9,601 ( 1,845 ) ( 18,418 )

Total income tax expense (benefit) $ 14,139 $ ( 1,853 ) $ ( 40,703 )

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

Among other provisions it allows for the carryback of federal net operating losses generated in 2020 to five preceding years and a refundable Employee Retention Tax Credit (“ERTC”) to eligible employers.

During the 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 IRS is experiencing significant processing delays driven by an increase in net operating loss carryback requests as a result of the CARES Act, along with other factors.

As a result, the processing and expected receipt of the federal income tax refund receivable and ERTC receivable have been significantly delayed.

The Company is currently working with IRS Taxpayer’s

Advocate Services and consultants to resolve the processing issue.

While progress has been made with the IRS and the Company expects to receive the refunds within one year, the exact timing of receipt is difficult to predict.

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

Fiscal Year Ended

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Change in valuation allowance ( 405 ) ( 215 ) 1,354

Changes in tax rates ( 55 ) 24 ( 95 )

Foreign rate differential ( 560 ) — —

Loss on debt extinguishment 2,982 — —

Acquisition costs 472 — —

Federal NOL rate differential — — ( 5,212 )

1 unchanged sentence

Other ( 228 ) 542 ( 4,372 )

Income tax (benefit) expense $ ( 1,853 ) $ ( 40,703 ) $ 8,210

Income tax expense (benefit) $ 14,139 $ ( 1,853 ) $ ( 40,703 )

Deferred tax assets and liabilities at December 30, 2022 and December 24, 2021 consist of the following:

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Net operating loss carryforwards 5,374 15,177

Debt discount and interest 2,526 3,093

Interest expense carryforward 7,671 —

Stock compensation 4,629 3,246

Intangible assets 2,796 5,210

Charitable contribution carryforward 2,569 3,865

4 unchanged sentences

Property & equipment ( 15,602 ) ( 7,808 )

Goodwill and intangible assets ( 20,648 ) ( 17,709 )

Goodwill ( 25,539 ) ( 24,529 )

Intangible assets ( 3,439 ) —

Prepaid expenses and other ( 907 ) ( 1,916 )

2 unchanged sentences

Valuation allowance ( 1,641 ) ( 2,046 )

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

Total net deferred tax (liability) asset $ ( 6,098 ) $ 9,380

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.

2 unchanged sentences

For Federal income tax purposes, the 2019 through 2022 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations and the fact that we have not yet filed our tax return for 2022.

For state tax purposes, the 2017 through 2021 tax years remain open for examination by the tax authorities under a four-year statute of limitations.

For state tax purposes, the 2018 through 2022 tax years remain open for

examination by the tax authorities under a four-year statute of limitations.

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

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

At December 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 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.

At December 30, 2022, the Company had a valuation allowance of $ 1,641 , which consisted of foreign net operating loss carryforwards as it is not expected to be fully realizable in the future.

The Company’s Canada net operating loss carryforward of $ 1,770 expires at various dates between fiscal 2038 and 2040.

The Company’s state net operating loss carryforwards of $ 3,604 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 $ 7,391 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:

Fiscal Year Ended

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

Foreign subsidiaries operating (loss) income before income taxes $ ( 2,420 ) $ ( 4,231 ) $ 18

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

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

The Company’s charitable contributions carry forward of $ 2,569 expire between fiscal 2025 and 2027.

The Company is permanently reinvesting the earnings of it’s foreign operations.

The accumulated undistributed earnings of its foreign subsidiaries are immaterial, as a majority of such earnings have been taxed in the U.S.

As of December 30, 2022 and December 24, 2021, the Company did not have any material uncertain tax positions.

11 unchanged sentences

Warrants issued for acquisition $ 1,701 $ 1,120 $ —

Conversion of debt into common stock $ 11,375 $ — $ —

Contingent earn-out liabilities for acquisitions $ 8,700 $ 5,500 $ 3,464

Convertible notes issued for acquisitions $ — $ — $ 4,000

Note 14 – Employee Benefit Plans

19 unchanged sentences

The Company recognizes legal fees related to any ongoing legal proceeding as incurred.

The Company is involved in various tax matters, with respect to some of which the outcome is uncertain.

These audits may result in the assessment of additional taxes that are subsequently resolved with authorities or potentially through the courts.

The Company is involved in various matters, with respect to some of which the outcome is uncertain.

These audits may result in the assessment of additional taxes or other costs that are subsequently resolved with authorities or potentially through the courts.

Risk Management Programs

16 unchanged sentences

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.

On January 23, 2023, the Company entered into an asset purchase agreement to acquire substantially all of the assets of a specialty food and produce distributor in California.

The purchase price was $ 10,000 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 .

The Company will also pay additional contingent consideration, if earned, in the form of earn-out amounts which could total $ 2,000 .

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

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk