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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 001-35249
THE CHEFS’ WAREHOUSE, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-3031526
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
100 East Ridge Road
Ridgefield, Connecticut 06877
(Address of principal executive offices)

Registrant’s telephone number, including area code: (203) 894-1345

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01CHEFThe NASDAQ Stock Market LLC
Preferred Stock Purchase RightsCHEFThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
Number of shares of common stock, par value $.01 per share, outstanding at July 26, 2021: 37,958,563
1


THE CHEFS’ WAREHOUSE, INC.
FORM 10-Q
Table of Contents
  Page
PART I. FINANCIAL INFORMATION 
   
Item 1.
   
 
   
 
   
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
PART II. OTHER INFORMATION 
   
Item 1.
   
Item 1A.
   
Item 2.
   
Item 3.
   
Item 4.
   
Item 5.
   
Item 6.
   
 
 

2


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Statements in this report regarding the business of The Chefs’ Warehouse, Inc. (the “Company”) that are not historical facts are “forward-looking statements” that involve risks and uncertainties and are based on current expectations and management estimates; actual results may differ materially. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The risks and uncertainties which could impact these statements include, but are not limited to the following: our sensitivity to general economic conditions, including disposable income levels and changes in consumer discretionary spending; our ability to expand our operations in our existing markets and to penetrate new markets through acquisitions; we may not achieve the benefits expected from our acquisitions, which could adversely impact our business and operating results; we may have difficulty managing and facilitating our future growth; conditions beyond our control could materially affect the cost and/or availability of our specialty food products or center-of-the-plate products and/or interrupt our distribution network; our increased distribution of center-of-the-plate products, like meat, poultry and seafood, involves increased exposure to price volatility experienced by those products; our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures; because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, including adverse weather conditions, in these areas; fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations; our ability to raise capital in the future may be limited; we may be unable to obtain debt or other financing, including financing necessary to execute on our acquisition strategy, on favorable terms or at all; interest charged on our outstanding debt may be adversely affected by changes in the method of determining London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with an alternative rate; our business operations and future development could be significantly disrupted if we lose key members of our management team; and significant public health epidemics or pandemics, including the COVID-19 pandemic, may adversely affect our business, results of operations and financial condition. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, speak only as of the date made. A more detailed description of these and other risk factors is contained in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2021 and other reports, including this Quarterly Report on Form 10-Q, filed by the Company with the SEC since that date. The Company is not undertaking to update any information in the foregoing report until the effective date of its future reports required by applicable laws.


3


PART I FINANCIAL INFORMATION

ITEM 1.            CONSOLIDATED FINANCIAL STATEMENTS

THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED BALANCE SHEETS 
(Amounts in thousands, except share data)
June 25, 2021 (unaudited)December 25, 2020
ASSETS  
Current assets:  
Cash and cash equivalents$146,920 $193,281 
Accounts receivable, net of allowance of $22,015 in 2021 and $24,027 in 2020
136,072 96,383 
Inventories, net122,936 82,519 
Prepaid expenses and other current assets33,654 33,479 
Total current assets439,582 405,662 
Equipment, leasehold improvements and software, net114,982 115,448 
Operating lease right-of-use assets107,736 115,224 
Goodwill220,575 214,864 
Intangible assets, net108,799 111,717 
Deferred taxes, net15,290 7,535 
Other assets3,634 3,875 
Total assets$1,010,598 $974,325 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$107,918 $57,515 
Accrued liabilities29,949 27,924 
Short-term operating lease liabilities17,121 17,167 
Accrued compensation15,051 9,401 
Current portion of long-term debt5,844 6,095 
Total current liabilities175,883 118,102 
Long-term debt, net of current portion395,543 398,084 
Operating lease liabilities101,906 109,133 
Other liabilities and deferred credits4,217 4,416 
Total liabilities677,549 629,735 
Commitments and contingencies
Stockholders’ equity:  
Preferred Stock - $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding at June 25, 2021 and December 25, 2020
  
Common Stock, - $0.01 par value, 100,000,000 shares authorized, 37,961,863 and 37,274,768 shares issued and outstanding at June 25, 2021 and December 25, 2020, respectively
380 373 
Additional paid in capital308,852 303,734 
Accumulated other comprehensive loss(1,894)(2,051)
Retained earnings25,711 42,534 
Total stockholders’ equity333,049 344,590 
Total liabilities and stockholders’ equity$1,010,598 $974,325 
 
See accompanying notes to the consolidated financial statements.
4


THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Amounts in thousands, except share and per share amounts)
Thirteen Weeks EndedTwenty-Six Weeks Ended
June 25,
2021
June 26,
2020
June 25,
2021
June 26,
2020
Net sales$422,968 $200,496 $703,185 $575,927 
Cost of sales327,094 157,070 548,364 447,013 
Gross profit95,874 43,426 154,821 128,914 
Selling, general and administrative expenses90,358 68,165 170,603 177,047 
Other operating (income) expenses, net857 670 (313)(5,666)
Operating income (loss)4,659 (25,409)(15,469)(42,467)
Interest expense4,408 5,772 9,171 10,896 
Income (loss) before income taxes251 (31,181)(24,640)(53,363)
Provision for income tax benefit(847)(10,847)(7,817)(18,944)
Net income (loss)$1,098 $(20,334)$(16,823)$(34,419)
Other comprehensive income (loss):  
Foreign currency translation adjustments76 117 157 (261)
Comprehensive income (loss)$1,174 $(20,217)$(16,666)$(34,680)
Net income (loss) per share:   
Basic$0.03 $(0.62)$(0.46)$(1.10)
Diluted$0.03 $(0.62)$(0.46)$(1.10)
Weighted average common shares outstanding:  
Basic36,831,054 32,698,295 36,615,463 31,150,883 
Diluted37,081,186 32,698,295 36,615,463 31,150,883 
 
See accompanying notes to the consolidated financial statements.
5


THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(Amounts in thousands, except share amounts)
 Common StockAdditional
Paid in
Capital
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
Total
 SharesAmount
Balance December 25, 202037,274,768 $373 $303,734 $(2,051)$42,534 $344,590 
Net loss— — — — (17,921)(17,921)
Stock compensation673,430 6 2,452 — — 2,458 
Cumulative translation adjustment— — — 81 — 81 
Shares surrendered to pay tax withholding(38,503)— (1,192)— — (1,192)
Balance March 26, 202137,909,695 $379 $304,994 $(1,970)$24,613 $328,016 
Net income— — — — 1,098 1,098 
Stock compensation69,245 1 3,279 — — 3,280 
Warrants issued for acquisitions— — 1,120 — — 1,120 
Cumulative translation adjustment— — — 76 — 76 
Shares surrendered to pay tax withholding(17,077)— (541)— — (541)
Balance June 25, 202137,961,863 $380 $308,852 $(1,894)$25,711 $333,049 

Balance December 27, 201930,341,941 $304 $212,240 $(2,048)$125,437 $335,933 
Net loss— — — — (14,085)(14,085)
Stock compensation807,433 8 843 — — 851 
Cumulative translation adjustment— — — (378)— (378)
Shares surrendered to pay tax withholding(159,632)(2)(2,702)— — (2,704)
Balance March 27, 202030,989,742 $310 $210,381 $(2,426)$111,352 $319,617 
Net loss— — — — (20,334)(20,334)
Stock compensation176,037 2 1,997 — — 1,999 
Public offering of common stock6,634,615 66 85,875 — — 85,941 
Cumulative translation adjustment— — — 117 — 117 
Shares surrendered to pay tax withholding(1,846)— (23)— — (23)
Balance June 26, 202037,798,548 $378 $298,230 $(2,309)$91,018 $387,317 

See accompanying notes to the consolidated financial statements.
6


THE CHEFS’ WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Twenty-Six Weeks Ended
June 25, 2021June 26, 2020
Cash flows from operating activities:  
Net loss$(16,823)$(34,419)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:  
Depreciation and amortization10,660 9,675 
Amortization of intangible assets6,643 6,720 
Provision for allowance for doubtful accounts488 19,611 
Non-cash operating lease expense209 463 
Benefit for deferred income taxes(7,755)(5,814)
Amortization of deferred financing fees1,364 1,478 
Stock compensation5,738 2,850 
Change in fair value of contingent earn-out liabilities(1,420)(6,649)
Intangible asset impairment597  
Loss on asset disposal224 43 
Changes in assets and liabilities, net of acquisitions:  
Accounts receivable(37,107)70,483 
Inventories(39,347)34,877 
Prepaid expenses and other current assets(101)(9,460)
Accounts payable, accrued liabilities and accrued compensation52,541 (43,398)
Other assets and liabilities167 1,119 
Net cash (used in) provided by operating activities(23,922)47,579 
Cash flows from investing activities:  
Capital expenditures(9,574)(4,400)
Cash paid for acquisitions, net of cash received(7,165)(63,450)
Net cash used in investing activities(16,739)(67,850)
Cash flows from financing activities:  
Payment of debt, finance lease and other financing obligations(34,372)(37,439)
Proceeds from the issuance of common stock, net of issuance costs 85,941 
Proceeds from debt issuance51,750  
Payment of deferred financing fees(1,450)(856)
Surrender of shares to pay withholding taxes(1,487)(2,727)
Cash paid for contingent earn-out liability(83)(2,927)
Borrowings under asset-based loan facility 100,000 
Payments under asset-based loan facility(20,000)(60,000)
Net cash (used in) provided by financing activities(5,642)81,992 
Effect of foreign currency on cash and cash equivalents(58)(130)
Net change in cash and cash equivalents(46,361)61,591 
Cash and cash equivalents-beginning of period193,281 140,233 
Cash and cash equivalents-end of period$146,920 $201,824 

See accompanying notes to the consolidated financial statements.
7


THE CHEFS’ WAREHOUSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except share and per share amounts)

Note 1 - Operations and Basis of Presentation
 
Description of Business and Basis of Presentation
 
The financial statements include the consolidated accounts of The Chefs’ Warehouse, Inc. (the “Company”), and its wholly-owned subsidiaries. The Company’s quarterly periods end on the thirteenth Friday of each quarter. 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 Company’s business consists of three operating segments: East Coast, Midwest and West Coast that aggregate into one reportable segment, foodservice 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, specialty food stores, grocers and warehouse clubs.

The COVID-19 Pandemic

Many of the Company’s customers continue to be adversely impacted by the COVID-19 pandemic (the “Pandemic”), however there has been sequential improvement in the Company’s business throughout the second quarter of fiscal 2021 which has contributed to organic sales growth of $212,610 compared to the prior year quarter.

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 of the disease, the extent of outbreaks, federal, state and local government responses, trends in infection rates, development of effective medical treatments for the disease, the pace of vaccination programs and future consumer spending behavior, among others.

Consolidation

The consolidated financial statements include all the accounts of the Company and its direct and indirect wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Unaudited Interim Financial Statements

The accompanying unaudited consolidated financial statements and the related interim information contained within the notes to such unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the applicable rules of the Securities and Exchange Commission (“SEC”) for interim information and quarterly reports on Form 10-Q. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended December 25, 2020 filed as part of the Company’s Annual Report on Form 10-K, as filed with the SEC on February 23, 2021.

The unaudited consolidated financial statements appearing in this Form 10-Q have been prepared on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 23, 2021, and in the opinion of management, include all normal recurring adjustments that are necessary for the fair statement of the Company’s interim period results. The year-end consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by GAAP. Due to seasonal fluctuations, the Pandemic and other factors, the results of operations for the thirteen and twenty-six weeks ended June 25, 2021 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management’s estimates.



8


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.

Note 2 – Summary of Significant Accounting Policies

Revenue Recognition
 
Revenues from product sales are recognized at the point at which control of each product is transferred to the customer. 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. Shipping and handling activities are costs to fulfill the Company’s performance obligations. These costs are expensed as incurred and presented within selling, general and administrative expenses on the consolidated statements of operations. The Company offers certain sales incentives to customers in the form of rebates or discounts. These sales incentives are accounted as variable consideration. The Company estimates these amounts based on the expected amount to be provided to customers and records a corresponding reduction in revenue. The Company does not expect a significant reversal in the amount of cumulative revenue recognized. Sales tax billed to customers is not included in revenue but rather recorded as a liability owed to the respective taxing authorities at the time the sale is recognized.

The following table presents the Company’s net sales disaggregated by principal product category:
Thirteen Weeks EndedTwenty-Six Weeks Ended
June 25, 2021June 26, 2020June 25, 2021June 26, 2020
Center-of-the-Plate$215,089 50.9 %$115,834 57.8 %$354,934 50.5 %$279,654 48.6 %
Dry Goods57,117 13.5 %24,099 12.0 %96,897 13.8 %81,985 14.2 %
Pastry41,312 9.8 %15,548 7.8 %70,110 10.0 %64,809 11.3 %
Cheese and Charcuterie34,303 8.1 %15,594 7.8 %57,402 8.2 %50,667 8.8 %
Produce30,558 7.2 %12,048 6.0 %51,149 7.3 %36,068 6.3 %
Dairy and Eggs18,902 4.5 %7,495 3.7 %31,483 4.5 %29,641 5.1 %
Oils and Vinegars16,881 4.0 %5,436 2.7 %26,355 3.7 %21,595 3.7 %
Kitchen Supplies8,806 2.0 %4,442 2.2 %14,855 2.0 %11,508 2.0 %
Total$422,968 100 %$200,496 100 %$703,185 100 %$575,927 100 %

The Company determines its product category classification based on how the Company currently markets its products to its customers. The Company’s definition of its principal product categories may differ from the way in which other companies present similar information.

Food Processing Costs

Food processing costs include but are not limited to direct labor and benefits, applicable overhead and depreciation of equipment and facilities used in food processing activities. Food processing costs included in cost of sales were $6,679 and $4,013 for the thirteen weeks ended June 25, 2021 and June 26, 2020, respectively, and $12,075 and $9,426 for the twenty-six weeks ended June 25, 2021 and June 26, 2020, respectively.


9



Note 3 – Net Income (Loss) per Share
 
The following table sets forth the computation of basic and diluted net income (loss) per common share:
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 June 25, 2021June 26, 2020June 25, 2021June 26, 2020
Net income (loss) per share:   
Basic$0.03 $(0.62)$(0.46)$(1.10)
Diluted$0.03 $(0.62)$(0.46)$(1.10)
Weighted average common shares:   
Basic36,831,054 32,698,295 36,615,463 31,150,883 
Diluted37,081,186 32,698,295 36,615,463 31,150,883 

Reconciliation of net income (loss) per common share:
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 June 25, 2021June 26, 2020June 25, 2021June 26, 2020
Numerator:   
Net income (loss)$1,098 $(20,334)$(16,823)$(34,419)
Denominator:   
Weighted average basic common shares outstanding36,831,054 32,698,295 36,615,463 31,150,883 
Dilutive effect of stock options and unvested common shares250,132    
Weighted average diluted common shares outstanding37,081,186 32,698,295 36,615,463 31,150,883 
 
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:
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 June 25, 2021June 26, 2020June 25, 2021June 26, 2020
Restricted share awards (“RSAs”) 773,988 349,389 613,905 
Stock options 115,639 39,320 9,538 
Warrants103,226  52,459  
Convertible notes4,616,033 3,484,788 4,205,246 3,484,788 

Note 4 – Fair Value Measurements
 
Assets and Liabilities Measured at Fair Value
 
The Company’s contingent earn-out liabilities are measured at fair value. These liabilities were estimated using Level 3 inputs. Long-term earn-out liabilities were $2,278 and $2,556 as of June 25, 2021 and December 25, 2020, respectively, and are reflected as other liabilities and deferred credits on the consolidated balance sheets. The remaining short-term earn-out liabilities are reflected as accrued liabilities on the consolidated balance sheets. 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. Changes in the fair value of contingent earn-out liabilities are reflected in other operating (income)expenses, net on the consolidated statements of operations.



10


The following table presents the changes in Level 3 contingent earn-out liabilities:
Fells PointBassianSid WainerOther AcquisitionsTotal
Balance December 27, 2019$4,544 $7,957 $ $2,197 $14,698 
Acquisition value  2,081 1,383 3,464 
Cash payments (2,250) (1,677)(3,927)
Changes in fair value(4,544)(4,631)(1,570)(734)(11,479)
Balance December 25, 2020$ $1,076 $511 $1,169 $2,756 
Acquisition value   3,400 3,400 
Cash payments   (83)(83)
Changes in fair value 22 (511)(931)(1,420)
Balance June 25, 2021$ $1,098 $ $3,555 $4,653 

Fair Value of Financial Instruments

 The following table presents the carrying value and fair value of the Company’s convertible notes. In estimating the fair value of the 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 option. 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 estimate.
 June 25, 2021December 25, 2020
Carrying ValueFair ValueCarrying ValueFair Value
Convertible Senior Notes$200,000 $203,115 $150,000 $163,204 
Convertible Unsecured Note$4,000 $4,063 $4,000 $4,290 
 
Note 5 – Acquisitions
 
During the second quarter of fiscal 2021, the Company completed two acquisitions for an aggregate purchase price of approximately $8,285, consisting of $7,165 paid in cash at closing, 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 $3,400 in aggregate. The Company is in the process of finalizing a valuation of the earn-out liabilities, and tangible and intangible assets as of the acquisition date. 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 of $9,038 and $94, respectively, during the thirteen and twenty-six weeks ended June 25, 2021 for these acquisitions in its consolidated statement of operations.

The table below sets forth the purchase price allocation of these acquisitions:
Current assets$4,240 
Customer relationships2,110 
Trademarks2,140 
Goodwill5,663 
Fixed assets586 
Right-of-use assets761 
Lease liabilities(761)
Current liabilities(3,054)
Earn-out liability(3,400)
Issuance of warrants(1,120)
Total consideration$7,165 
The Company recognized professional fees of $75 in operating expenses related to acquisitions in the second quarter of fiscal 2021.

11


Note 6 – Inventories
 
Inventories consist primarily of finished product and are reflected net of adjustments for shrinkage, excess and obsolescence totaling $8,297 and $9,013 at June 25, 2021 and December 25, 2020, respectively.

Note 7 – Equipment, Leasehold Improvements and Software
 
Equipment, leasehold improvements and software as of June 25, 2021 and December 25, 2020 consisted of the following:
 Useful LivesJune 25, 2021December 25, 2020
LandIndefinite$5,020 $5,020 
Buildings20 years15,685 15,685 
Machinery and equipment
5 - 10 years
24,931 24,900 
Computers, data processing and other equipment
3 - 7 years
14,483 14,207 
Software
3 - 7 years
39,657 33,063 
Leasehold improvements
1 - 40 years
68,790 68,747 
Furniture and fixtures7 years3,442 3,412 
Vehicles
5 - 7 years
21,826 21,873 
Other7 years88 88 
Construction-in-process 10,892 8,115 
  204,814 195,110 
Less: accumulated depreciation and amortization (89,832)(79,662)
Equipment, leasehold improvements and software, net $114,982 $115,448 

Construction-in-process at June 25, 2021 related primarily to the build-outs of the Company’s Los Angeles and New England distribution facilities. Construction-in-process at December 25, 2020 related primarily to the implementation of the Company’s Enterprise Resource Planning system. The net book value of equipment financed under finance leases at June 25, 2021 and December 25, 2020 was $13,267 and $14,705, respectively.

The components of depreciation and amortization expense were as follows:
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 June 25, 2021June 26, 2020June 25, 2021June 26, 2020
Depreciation expense$3,841 $3,663 $7,776 $7,231 
Software amortization$1,712 $1,250 $2,884 $2,444 
$5,553 $4,913 $10,660 $9,675 

Note 8 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill are presented as follows:
Carrying amount as of December 25, 2020$214,864 
Acquisitions5,663 
Foreign currency translation48 
Carrying amount as of June 25, 2021$220,575 
Other intangible assets as of June 25, 2021 and December 25, 2020 consisted of the following:
June 25, 2021Weighted-Average
Remaining
Amortization Period
Gross Carrying AmountAccumulated AmortizationNet Amount
Customer relationships124 months$143,821 $(60,095)$83,726 
Non-compete agreements32 months8,579 (7,885)694 
Trademarks182 months46,103 (21,724)24,379 
Total$198,503 $(89,704)$108,799 
12


December 25, 2020Weighted-Average
Remaining
Amortization Period
Gross Carrying AmountAccumulated AmortizationNet Amount
Customer relationships128 months$141,679 $(55,135)$86,544 
Non-compete agreements37 months8,579 (7,752)827 
Trademarks209 months44,520 (20,174)24,346 
Total$194,778 $(83,061)$111,717 

The Company occasionally makes small, tuck-in acquisitions that are immaterial, both individually and in the aggregate. Therefore, increases in goodwill and gross intangible assets per the above tables may not agree to the increases of these assets as shown for specific acquisitions in Note 5 “Acquisitions.”

Amortization expense for other intangibles was $3,104 and $3,422 for the thirteen weeks ended June 25, 2021 and June 26, 2020, respectively, and $6,643 and $6,720 for the twenty-six weeks ended June 25, 2021 and June 26, 2020, respectively.

During the second quarter of fiscal 2021, the Company committed to a plan to shift its brand strategy to leverage its Allen Brothers brand in its New England region and determined its Cambridge trademark did not fit the Company’s long-term strategic objectives. As a result, the Company recognized a $597 impairment charge to fully write-down the net book value of its Cambridge trademark.

Estimated amortization expense for other intangible assets for the remainder of the fiscal year ending December 24, 2021 and each of the next four fiscal years and thereafter is as follows:
2021$6,280 
202211,778 
202310,748 
20249,884 
20259,465 
Thereafter60,644 
Total$108,799 

Note 9 – Debt Obligations
 
Debt obligations as of June 25, 2021 and December 25, 2020 consisted of the following:
June 25, 2021December 25, 2020
Senior secured term loans$169,531 $201,553 
Convertible senior notes200,000 150,000 
Asset-based loan facility20,000 40,000 
Finance lease and other financing obligations11,732 15,798 
Convertible unsecured note4,000 4,000 
Deferred finance fees and original issue premium (discount)(3,876)(7,172)
Total debt obligations401,387 404,179 
Less: current installment