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 sheets 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 acquisitions 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.

Fells Point

On August 25, 2017, the Company entered into an asset purchase agreement to acquire substantially all of the assets of Fells Point, a specialty protein manufacturer and distributor based in the metro Baltimore and Washington DC area. The aggregate purchase price for the transaction at acquisition date was approximately $33,022, including the impact of an initial net working capital adjustment which is subject to a post-closing working capital adjustment true up. Approximately $29,722 was paid in cash at closing and the remaining $3,300 consisted of 185,442 shares of the Company's common stock.

The Company will also pay additional contingent consideration, if earned, in the form of an earn-out amount which could total approximately $12,000. The payment of the earn-out liability is subject to the successful achievement of annual Adjusted EBITDA targets for the Fells Point business over a period of four years following closing. At December 29, 2017 and August 25, 2017, the Company estimated the fair value of this contingent earn-out liability to be $4,579 and $4,445, respectively. The Company is in the process of finalizing a valuation of the tangible and intangible assets of Fells Point as of the acquisition date. These assets will be valued at fair value using Level 3 inputs. Customer lists, trademarks, and non-compete agreements are expected to be amortized over 15, 20 and 6 years, respectively. Goodwill for the Fells Point acquisition will be amortized over 15 years for tax purposes. The goodwill recorded primarily reflects the value of acquiring an established meat processor to grow the Company's protein business in the Northeast and Mid Atlantic regions, as well as any intangible assets that do not qualify for separate recognition. During the fiscal year ended December 29, 2017, the Company recognized professional fees of $168 in operating expenses related to the Fells Point acquisition.

On August 25, 2017, the Company entered into a five-year lease for a warehouse facility located in Baltimore, MD that is owned by the former owners of Fells Point, some of whom are current employees. The Company paid rent of $86 during the year ended December 29, 2017. For the year ended December 29, 2017, the Company reflected net sales and income before taxes of $22,583 and $1,604, respectively, for Fells Point in its consolidated statement of operations.

The table below presents unaudited pro forma consolidated income statement information of the Company for the year ended December 29, 2017 and December 30, 2016 as if Fells Point acquisition had occurred at December 26, 2015. The pro forma results were prepared from financial information obtained from the sellers of the business, as well as information obtained during the due diligence process associated with the acquisition. The pro forma information is not necessarily indicative of the Company’s results of operations had the Fells Point acquisition been completed on the above date, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the Fells Point acquisition, any incremental costs for Fells Point transitioning to become a public company, and also does not reflect additional revenue opportunities following the acquisition. The pro forma information reflects amortization and depreciation of the Fells Point acquisition at their respective fair values based on available information and the estimated change in the fair value of the earn-out liability due to accretion.



	Fiscal Year Ended (unaudited)
	December 29, 2017		December 30, 2016
Net sales	$	1,340,820	$	1,252,293
Income before income taxes	20,130		9,492

MT Food

On June 27, 2016, the Company acquired substantially all of the assets of MT Food, based in Chicago, Illinois. Founded in the mid 1990's, MT Food is a wholesale distributor of dairy, produce, specialty and grocery items in the metro Chicago area. The purchase price for the transaction was $21,500, of which, $21,000 was paid in cash at closing with an additional $500 payable eighteen months after the closing date. The aggregate purchase price paid by the Company was paid through cash-on-hand and the proceeds from a draw down on its delayed draw term loan facility. During the second quarter of fiscal 2017, the Company paid an earn-out of $500 to the former owners.

During the second quarter of 2017, the Company obtained additional information related to the fair value of intangible assets, deferred taxes, inventories, accounts receivable acquired and liabilities owed. As a result, the Company recorded a measurement period adjustment resulting in a net increase in goodwill of $3,418 and a decrease in customer relationships of $2,700. The Company has finalized a valuation of the tangible and intangible assets of MT Food as of the acquisition date. These assets are valued at fair value using Level 3 inputs. Customer relationships are being amortized over 15 years. Goodwill for the MT Food acquisition will be amortized over 15 years for tax purposes. The goodwill recorded primarily reflects the value of acquiring an established distributor to leverage the Company’s existing products and distribution center in the markets served by MT Food, as well as any intangible assets that do not qualify for separate recognition.

The table below sets forth the purchase price allocation of the Fells Point and MT Food acquisitions:



	Fells Point			MT Food
Current assets (includes cash acquired)	$	6,971		$	6,132
Customer relationships	15,100			7,600
Trademarks	8,100			—
Non-compete agreement	400			—
Goodwill	5,732			11,976
Fixed assets	2,459			261
Current liabilities	(1,295		)	(3,969		)
Earn-out liability	(4,445		)	(500		)
Total consideration	$	33,022		$	21,500

The Company occasionally makes small tuck-in acquisitions that are immaterial, both individually and in the aggregate. Therefore, the gross increases in goodwill and intangible assets per the above table may not agree to the gross increases of these assets as shown in Note 8 “Goodwill and Other Intangible Assets.”