Press Releases

May 3, 2016

The Chefs' Warehouse Reports First Quarter 2016 Financial Results

RIDGEFIELD, Conn., May 03, 2016 (GLOBE NEWSWIRE) -- The Chefs' Warehouse, Inc. (NASDAQ:CHEF), a premier distributor of specialty food products in the United States and Canada, today reported financial results for its first quarter ended March 25, 2016.

Financial highlights for the first quarter of 2016 compared to the first quarter of 2015:

  • Net sales increased 32.6% to $262.4 million for the first quarter of 2016 from $197.9 million for the first quarter of 2015.
  • Net income increased 2.7% to $993,000 for the first quarter of 2016 compared to $967,000 in the first quarter of 2015.
  • Earnings per diluted share were $0.04 for the first quarter of 2016 compared to $0.04 for the first quarter of 2015.
  • Modified pro forma earnings per diluted share1 were $0.05 for the first quarter of 2016 compared to $0.08 for the first quarter of 2015.
  • Adjusted EBITDA1 increased 36.5% to $10.4 million for the first quarter of 2016 compared to $7.6 million for the first quarter of 2015.

"Our core specialty business is off to a strong start in 2016. During the quarter we reported organic growth of nearly 8% in our specialty division and case, unique customer and placement growth all in the mid to high single digits," said Chris Pappas, chairman and chief executive officer of The Chefs' Warehouse, Inc.  "Our protein division experienced very strong gross margin improvement compared to a year ago.  We still have improvements to realize in that part of the business, but we are pleased with our progress so far.  We see significant opportunity for much further improvement as we further integrate our protein operations with our specialty operations to promote cross selling, consolidate buying power, and leverage computer systems and management.  We also opened our new facility in San Francisco during the quarter.  This new facility will enable us to consolidate three facilities into one, allowing us to better leverage our distribution infrastructure."

First Quarter Fiscal 2016 Results
Net sales for the quarter ended March 25, 2016 increased 32.6% to $262.4 million from $197.9 million for the quarter ended March 27, 2015.  The increase in net sales was primarily the result of organic growth and the acquisition of Del Monte in April 2015, which accounted for approximately $52.1 million of net sales growth for the quarter.  Organic growth contributed approximately $12.4 million, or 6.3%, to quarter-over-quarter growth.  Compared to the first quarter of 2015, the Company's case count grew approximately 7.5%, while the number of unique customers and placements grew 5.1% and 6.1%, respectively, in the core specialty business in the first quarter of 2015.  Inflation was approximately 0.7% during the quarter, driven largely by inflation in the dairy, chocolate and baking categories offset in part by deflation in proteins.

Gross profit increased approximately 32.6% to $66.0 million for the first quarter of 2016 from $49.8 million for the first quarter of 2015. Gross profit margins were flat at 25.1% for both the first quarter of 2016 and the first quarter of 2015.  Gross profit margins decreased approximately 52 basis points in the Company's specialty division compared to very strong margins in the first quarter of the prior year.  Gross profit margins increased approximately 417 basis points in the protein division due to improved performance of the Company's Allen Brothers subsidiary and the mix contribution from Del Monte.

Total operating expenses increased by approximately 30.0% to $60.6 million for the first quarter of 2016 from $46.6 million for the first quarter of 2015. As a percentage of net sales, operating expenses were 23.1% in the first quarter of 2016 compared to 23.6% in the first quarter of 2015.  The decrease in the Company's operating expense ratio is largely attributable to favorable transportation related costs and prior year transaction costs related to the Company's acquisition of Del Monte, offset in part by higher occupancy related costs associated with the new warehouse facilities and higher amortization expense related to the Del Monte acquisition.

Operating income for the first quarter of 2016 was $5.4 million compared to $3.1 million for the first quarter of 2015.  As a percentage of net sales, operating income was 2.0% in the first quarter of 2016 compared to 1.6% in the prior year's first quarter.  The increase in operating income as a percentage of net sales was driven primarily from the improvement in operating expense leverage discussed above.

Net income was $1.0 million, or $0.04 per diluted share, for the first quarter of 2016 compared to $967,000, or $0.04 per diluted share, for the first quarter of 2015.  The first quarter of 2015 included a $204,000 after-tax gain on the sale of assets.  The diluted earnings per share for the first quarter of 2016 does not include the dilutive effect of the subordinated convertible notes issued as part of the Del Monte acquisition in April 2015 since they were anti-dilutive in the first quarter of 2016.

On a non-GAAP basis, adjusted EBITDA1 was $10.4 million for the first quarter of 2016 compared to $7.6 million for the first quarter of 2015.  For the first quarter of 2016, modified pro forma net income1 was $1.3 million and modified pro forma EPS1 was $0.05 compared to modified pro forma net income of $1.9 million and modified pro forma EPS of $0.08 for the first quarter of 2015. The modified pro forma EPS for the first quarter of 2016 does not include the dilutive effect of the subordinated convertible notes issued as part of the Del Monte acquisition in April 2015 since they were anti-dilutive in the first quarter of 2016.

Full Year 2016 Guidance

Based on current trends in the business, the Company is updating its financial guidance for fiscal year 2016, which includes a 53rd week:

  • Net sales between $1.15 billion and $1.18 billion
  • Adjusted EBITDA between $68.0 million and $73.0 million
  • Net income between $20.5 million and $22.0 million
  • Net income per diluted share between $0.75 and $0.80
  • Modified pro forma net income per diluted share between $0.77 and $0.83

This guidance is based on an effective tax rate of approximately 41.5% to 42.0% and fully diluted shares of approximately 27.25 million shares.

First Quarter 2015 Earnings Conference Call

The Company will host a conference call to discuss first quarter 2016 financial results today at 5:00 p.m. EST. Hosting the call will be Chris Pappas, chairman and chief executive officer, and John Austin, chief financial officer. The conference call will be webcast live from the Company's investor relations website at http://investors.chefswarehouse.com/. The call can also be accessed live over the phone by dialing (877) 407-4018, or for international callers (201) 689-8471. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 13634657. The replay will be available until Tuesday, May 10, 2016, and an online archive of the webcast will be available on the Company's investor relations website for 30 days.

Forward-Looking Statements

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding the Company's business 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. The risks and uncertainties which could impact these statements include, but are not limited to, the Company's ability to successfully deploy its operational initiatives to achieve synergies from the acquisition of the Del Monte entities; the Company's sensitivity to general economic conditions, including the current economic environment, changes in disposable income levels and consumer discretionary spending on food-away-from-home purchases; the Company's vulnerability to economic and other developments in the geographic markets in which it operates; the risks of supply chain interruptions due to a lack of long-term contracts, severe weather or more prolonged climate change, work stoppages or otherwise; the risk of loss of customers due to the fact that the Company does not customarily have long-term contracts with its customers; the risks of loss of revenue or reductions in operating margins in the Company's protein business as a result of competitive pressures within this segment of the Company's business; changes in the availability or cost of the Company's specialty food products; the ability to effectively price the Company's specialty food products and reduce the Company's expenses; the relatively low margins of the foodservice distribution industry and the Company's and its customers' sensitivity to inflationary and deflationary pressures; the Company's ability to successfully identify, obtain financing for and complete acquisitions of other foodservice distributors and to integrate and realize expected synergies from those acquisitions; the Company's ability to begin servicing customers from its new Chicago, San Francisco and Las Vegas distribution centers and the expenses associated therewith; increased fuel cost volatility and expectations regarding the use of fuel surcharges; fluctuations in the wholesale prices of beef, poultry and seafood, including increases in these prices as a result of increases in the cost of feeding and caring for livestock; the loss of key members of the Company's management team and the Company's ability to replace such personnel; and the strain on the Company's infrastructure and resources caused by its growth. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 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 March 4, 2016 and other reports 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. Any projections of future results of operations are based on a number of assumptions, many of which are outside the Company's control and should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. The Company may from time to time update these publicly announced projections, but it is not obligated to do so.

About The Chefs' Warehouse

The Chefs' Warehouse, Inc. (http://www.chefswarehouse.com) is a premier distributor of specialty food products in the United States and Canada focused on serving the specific needs of chefs who own and/or operate some of the nation's leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos and specialty food stores. The Chefs' Warehouse, Inc. carries and distributes more than 34,000 products to more than 26,000 customer locations throughout the United States and Canada.

Please see the Consolidated Statements of Operations at the end of this earnings release for a reconciliation of EBITDA, Adjusted EBITDA, modified pro forma net income and modified pro forma EPS to these measures' most directly comparable GAAP measure.

THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 25, 2016 AND MARCH 27, 2015
(in thousands except share amounts and per share data)
    
  Thirteen Weeks Ended 
  
 March 25, 2016 March 27, 2015
 (unaudited) (unaudited)
    
Net Sales$  262,401   $  197,891 
Cost of Sales 196,443   148,135 
Gross Profit 65,958   49,756 
    
Operating Expenses 60,598    46,616 
Operating Income 5,360   3,140 
    
Interest Expense 3,656    1,836 
Loss (Gain) on Disposal of Assets   3     (349)
    
Income Before Income Taxes 1,701   1,653 
    
Provision for Income Tax Expense 708     686 
    
Net Income$  993  $  967 
        
    
Net Income Per Share:   
Basic$  0.04  $  0.04 
Diluted$  0.04  $  0.04 
    
Weighted Average Common Shares Outstanding:     
Basic   25,884,051     24,666,557 
Diluted   25,917,350     24,722,275 
    

 

     
THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 25, 2016 AND DECEMBER 25, 2015
(in thousands)
     
   December 25, 
 March 25, 2016 2015 
 (unaudited)   
     
Cash$  2,745   $  2,454  
Accounts receivable, net 113,333   124,139  
Inventories, net 91,266   92,758  
Deferred taxes, net 5,022   5,256  
Prepaid expenses and other current assets   8,791     9,164  
Total current assets   221,157     233,771  
     
Equipment and leasehold improvements, net   56,023     54,283  
Software costs, net   4,725     4,511  
Goodwill   155,848     155,816  
Intangible assets, net   129,500     132,211  
Other assets   3,286     3,089  
Total assets$  570,539  $  583,681  
     
     
Accounts payable$  57,920  $  64,888  
Accrued liabilities   23,554   24,258  
Accrued compensation   5,807   7,732  
Current portion of long-term debt   4,701   6,030  
Total current liabilities   91,982   102,908  
     
Long-term debt, net of current portion   262,615   266,207  
Deferred taxes, net   9,954   9,316  
Other liabilities   16,183   17,286  
Total liabilities 380,734   395,717  
     
Preferred stock   -      -   
Common stock   263   263  
Additional paid in capital   125,433   125,170  
Cumulative foreign currency translation adjustment   (2,364)  (2,949) 
Retained earnings   66,473   65,480  
Stockholders' equity   189,805   187,964  
     
Total liabilities and stockholders' equity$  570,539  $  583,681  
     

 

THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED  MARCH 25, 2016 AND MARCH 27, 2015
(unaudited; in thousands)
  
  March 25, 2016 March 27, 2015
    
Cash flows from operating activities:   
Net Income$  993  $  967 
    
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation   1,206     887 
Amortization   2,783     1,345 
Provision for allowance for doubtful accounts   1,034     662 
Deferred credits   869      (15)
Deferred taxes   1,159     (722)
Amortization of deferred financing fees   358     284 
Stock compensation   560     324 
Loss (Gain) on disposal of assets   3     (349)
Change in fair value of earn-out liability   (345)    40 
Changes in assets and liabilities, net of acquisitions:   
Accounts receivable   9,855     3,272 
Inventories   1,626     4,249 
Prepaid expenses and other current assets   377     2,268 
Accounts payable and accrued liabilities   (10,773)    (5,762)
Other liabilities   (271)    (156)
Other assets   (519)    (87)
Net cash provided by operating activities   8,915     7,207 
    
Cash flows from investing activities:   
Capital expenditures   (3,161)    (9,053)
Proceeds from asset disposals   -      1,516 
Net cash used in investing activities   (3,161)    (7,537)
    
Cash flows from financing activities:   
Payment of debt   (1,897)    (1,884)
Net change in revolving credit facility    (3,382)    2,600 
Cash paid for contingent earnout obligation   -       (1,420)
Surrender of shares to pay withholding taxes   (297)    (222)
Net cash used in financing activities   (5,576)    (926)
    
Effect of foreign currency translation adjustment on cash and cash equivalents   113     (112)
    
Net decrease in cash and cash equivalents   291     (1,368)
Cash and cash equivalents at beginning of period   2,454     3,328 
Cash and cash equivalents at end of period$  2,745  $  1,960 
    

 

THE CHEFS' WAREHOUSE, INC.  
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET INCOME  
THIRTEEN WEEKS ENDED MARCH 25, 2016 AND MARCH 27, 2015  
(unaudited; in thousands)  
     
 Thirteen Weeks Ended  
 March 25, 2016 March 27, 2015 
         
Net Income:$993  $967  
Interest expense 3,656   1,836  
Depreciation 1,206   887  
Amortization 2,783   1,345  
Provision for income tax expense 708   686  
EBITDA (1) 9,346   5,721  
         
Adjustments:        
Stock compensation (2) 560   324  
Duplicate rent (3) 303   392  
Integration and deal costs/third party transaction costs (4) 223   1,014  
Change in fair value of earn-out obligation (5) (345)  40  
Moving expenses (6) 304   119  
         
Adjusted EBITDA (1)$10,391  $7,610  
         
1.  We are presenting EBITDA and Adjusted EBITDA, which are not measurements determined in  
  accordance with the U.S. generally accepted accounting principles, or GAAP, because we believe  
  these measures provide additional metrics to evaluate our operations and which we believe, when  
  considered with both our GAAP results and the reconciliation to net income, provide a more  
  complete understanding of our business than could be obtained absent this disclosure.  We use  
  EBITDA and Adjusted EBITDA, together with financial measures prepared in accordance with  
  GAAP, such as revenue and cash flows from operations, to assess our historical and prospective  
  operating performance and to enhance our understanding of our core operating performance.  
  The use of EBITDA and Adjusted EBITDA as performance measures permits a comparative  
  assessment of our operating performance relative to our performance based upon GAAP results  
  while isolating the effects of some items that vary from period to period without any correlation  
  to core operating performance or that vary widely among similar companies. 
 
2.  Represents non-cash stock compensation expense associated with awards of restricted  
  shares of our common stock and stock options to our key employees and our independent directors.
 
3.  Represents duplicate rent expense for our Bronx, NY and San Francisco, CA distribution facilities. 
 
4.  Represents transaction related costs incurred to complete and integrate acquisitions, including due
  diligence, legal, integration and cash and non-cash stock transaction bonuses. 
 
5.  Represents the non-cash change in fair value of contingent earn-out liabilities related to our acquisitions.
 
6.  Represents moving expenses for the consolidation of our San Francisco, CA and Los Angeles, CA facilities.
 

 

THE CHEFS' WAREHOUSE, INC. 
 
RECONCILIATION OF MODIFIED PRO FORMA NET INCOME TO NET INCOME
 
THIRTEEN WEEKS ENDED MARCH 25, 2016 AND MARCH 27, 2015
 
(unaudited; in thousands except share amounts and per share data) 
 
     
  Thirteen Weeks Ended
 
 March 25, 2016 March 27, 2015 
     
Net Income$  993  $  967  
     
Adjustments to Reconcile Modified Pro Forma Net Income to Net Income (1): 
Duplicate rent (2)   303     392  
Integration and deal costs/third party transaction costs (3)   223     1,014  
Moving expenses (4)   304     119  
Change in fair value of earnout obligation (5)   (345)    40  
Tax effect of adjustments (6)   (202)    (649)  
     
Total Adjustments   283     916  
     
Modified Pro Forma Net Income$  1,276  $  1,883  
         
Diluted Earnings per Share - Modified Pro Forma$  0.05  $  0.08  
     
Diluted Shares Outstanding - Modified Pro Forma   25,917,350     24,722,275  
     
1.  We are presenting modified pro forma net income and modified pro forma 
  EPS, which are not measurements determined in accordance with U.S. generally accepted accounting principles,  
  or GAAP, because we believe these measures provide additional metrics to evaluate our operations and which 
  we believe, when considered with both our GAAP results and the reconciliation to net income available to common 
  stockholders, provide a more complete understanding of our business than could be obtained absent this  
  disclosure.  We use modified pro forma net income available to common stockholders and modified pro forma  
  EPS, together with financial measures prepared in accordance with GAAP, such as revenue and cash flows from   
  operations, to assess our historical and prospective operating performance and to enhance our understanding of  
  our core operating performance.  The use of modified pro forma net income available to common stockholders  
  and modified pro forma EPS as performance measures permits a comparative assessment of our operating  
  performance relative to our performance based upon our GAAP results while isolating the effects of some items 
  that vary from period to period without any correlation to core operating performance or that vary widely among 
  similar companies.    
     
2.  Represents duplicate rent expense for our Bronx, NY and San Francisco, CA distribution facilities.
     
3.  Represents transaction related costs incurred to complete and integrate acquisitions, including due  
  diligence, legal, integration and cash and non-cash stock transaction bonuses.  
     
4.  Represents moving expenses for the consolidation of our San Francisco, CA and Los Angeles, CA facilities.
     
5.  Represents the non-cash change in fair value of contingent earn-out liabilities related to our acquisitions. 
 
6.  Represents the tax effect of items 2 through 5 above. 
  

 

THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF ADJUSTED EBITDA GUIDANCE FOR FISCAL 2016
(unaudited; in thousands)
 
 Low-End  High-End  
 Guidance Guidance 
     
Net Income:$  20,500  $  22,000  
Provision for income tax expense 14,500   16,000  
Depreciation & amortization 16,000    17,000  
Interest expense   14,000     14,500  
EBITDA (1)   65,000     69,500  
         
Adjustments:        
Stock compensation (2)   2,100   2,300  
Duplicate occupancy and moving costs (3)   700   800  
Change in fair value of earn-out obligations (4)   200   400  
         
Adjusted EBITDA (1)$  68,000  $  73,000  
     
     
1.  We are presenting estimated EBITDA and Adjusted EBITDA, which are not measurements determined in accordance
  with the U.S. generally accepted accounting principles, or GAAP, because we believe these measures provide 
  additional metrics to evaluate our currently estimated results  and which we believe, when considered with both 
  our estimated GAAP results and the reconciliation to our estimated net income, provide a more complete 
  understanding of our business than could be obtained absent this disclosure.  We use EBITDA and Adjusted EBITDA, 
  together with financial measures prepared in accordance with GAAP, such as revenue and cash flows from operations,
  to assess our historical and prospective operating performance and to enhance our understanding of our performance 
  relative to our performance based upon GAAP results while isolating the effects of some items that vary from 
  period to period without any correlation to core operating performance or that vary widely among similar companies.
     
2.  Represents non-cash stock compensation expense expected to be associated with awards of restricted shares 
  of our common stock to our key employees and our independent directors.  
     
3.  Represents occupancy costs, including rent, utilities and insurance, and moving costs expected to be incurred in 
  connection with the Company's facility consolidations while we are unable to use those facilities. 
     
4.  Represents the non-cash change in fair value of earn-out liabilities related to the Company's acquisitions.  
  

 

THE CHEFS' WAREHOUSE, INC.
2016 FULLY DILUTED EPS GUIDANCE RECONCILIATION TO 2016 MODIFIED 
PRO FORMA FULLY DILUTED EPS GUIDANCE (1)(2)
    
 Low-End High-End
 Guidance Guidance
    
Net income per diluted share$  0.75  $  0.80 
        
Duplicate occupancy and moving costs (3)   0.02     0.02 
Change in fair-value of earn-out obligation (4)   -      0.01 
        
Modified pro forma net income per diluted share$  0.77  $  0.83 
    
    
1. We are presenting estimated modified pro forma EPS, which is not a measurement determined in 
  accordance with U.S. generally accepted accounting principles, or GAAP, because we believe this 
  measure provides an additional metric to evaluate our currently estimated results and which we 
  believe, when considered with both our estimated GAAP results and the reconciliation to estimated 
  net income per diluted share, provides a more complete understanding of our expectations for our 
  business than could be obtained absent this disclosure. We use modified pro forma EPS, together 
  with financial measures prepared in accordance with GAAP, such as revenue and cash flows from 
  operations, to assess our historical and prospective operating performance and to enhance our 
  understanding of our core operating performance. The use of modified pro forma EPS as a 
  performance measure permits a comparative assessment of our expectations regarding our 
  estimated operating performance relative to our estimated operating performance based on our 
  GAAP results while isolating the effects of some items that vary from period to period without any 
  correlation to core operating performance or that vary widely among similar companies.
    
2.  Guidance is based upon an estimated effective tax rate of 41.5% to 42.0% and an estimated fully 
  diluted share count of approximately 27.25 million shares.  
    
3.  Represents occupancy costs, including rent, utilities and insurance, and moving costs expected to be 
  incurred in connection with the Company's facility consolidations while we are unable to use those facilities.
    
4.  Represents the non-cash change in fair value of contingent earn-out liabilities related to the Company's 
  acquisitions. 


Contact:

Investor Relations

John Austin, (718) 684-8415

Source: The Chefs' Warehouse

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