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Acquisitions
 6 Months Ended
Jun. 24, 2016
Business Combinations [Abstract]  
Acquisitions
Note 4 Acquisitions

  

The Company accounts for acquisitions in accordance with ASC 805 Business Combinations. Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheet at their estimated fair values as of the acquisition date. Results of operations are included in the Company’s financial statements from the date of acquisition. For the acquisition noted below, the Company used the income approach to determine the fair value of the customer relationships, the relief from royalty method to determine the fair value of trademarks and the comparison of economic income using the with/without approach to determine the fair value of non-compete agreements. The Company used Level 3 inputs to determine the fair value of all these intangible assets. 

 

On April 6, 2015, the Company acquired substantially all the equity interests of Del Monte Capitol Meat Co. and substantially all the assets of certain of its affiliated companies (collectively “Del Monte”). Del Monte supplies high quality USDA inspected beef, pork, lamb, veal, poultry and seafood products to Northern California. The aggregate purchase price paid by the Company was approximately $184,074. Approximately $123,893 was paid in cash initially, through cash-on-hand, the proceeds from the issuance of additional senior secured notes and additional borrowings under the revolving portion of the Amended and Restated Credit Agreement (as defined below). During the second quarter of fiscal 2016, the Company finalized the net working capital adjustment as included in the initial purchase agreement. In July 2016, the Company received $1,258 out of escrow (see Note 12), in final settlement of the net working capital true-up. The remaining approximately $61,439 consisted of (i) approximately 1.1 million shares of the Company’s common stock totaling approximately $24,689 and (ii) $36,750 in aggregate principal amounts of convertible subordinated notes with a six-year maturity bearing interest at 2.5% with a conversion price of $29.70 per share issued to certain of the Del Monte entities. The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total approximately $24,500 to certain of the Del Monte entities; the payment of the earn-out liability is subject to certain conditions, including the successful achievement of Adjusted EBITDA targets for the Del Monte entities and improvements in certain operating metrics for the Company’s existing protein business and the business of any protein companies subsequently acquired by the Company over the six years following the closing of the Del Monte acquisition. At April 6, 2015, the Company estimated the fair value of this contingent earn-out liability to be $13,139. This contingent liability is adjusted to fair value on a quarterly basis and is estimated to be $13,661 at June 24, 2016. The Company expensed $1,546 of professional fees and $3,000 of transaction bonuses in operating expenses related to the Del Monte acquisition during the fiscal year ended December 25, 2015. The Company has finalized a valuation of the tangible and intangible assets of Del Monte as of the acquisition date. These assets are being valued at fair value using Level 3 inputs. Customer lists are being amortized over 15 years and trademarks are being amortized over 20 years. Goodwill for the Del Monte acquisition will be amortized over 15 years for tax purposes. For the thirteen weeks ended June 24, 2016, the Company reflected net sales and income before taxes and amortization of intangibles of $56,542 and $3,056, respectively, for Del Monte in its condensed consolidated statement of operations. For the twenty-six weeks ended June 24, 2016, the Company reflected net sales and income before taxes and amortization of intangibles of $108,671 and $7,131, respectively, for Del Monte in its condensed consolidated statement of operations.

 

   Del Monte
Current assets (includes cash acquired)  $31,509 
Customer Relationships   62,246 
Trademarks   29,261 
Goodwill   76,892 
Fixed assets   5,652 
Other assets   137 
Earn-out liability   (13,139)
Deferred tax liability   (361)
Convertible subordinated notes   (36,750)
Issuance of common shares   (24,689)
Current liabilities   (8,123)
Cash purchase price  $122,635