Press Releases

May 9, 2017

The Chefs' Warehouse Reports First Quarter 2017 Financial Results

RIDGEFIELD, Conn., May 09, 2017 (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 31, 2017.

Financial highlights for the first quarter of 2017 compared to the first quarter of 2016:

  • Net sales increased 10.3% to $287.7 million for the first quarter of 2017 from $260.8 million for the first quarter of 2016.
  • GAAP net loss was $(1.6) million or $(0.06) per diluted share, for the first quarter of 2017 compared to net income of $1.0 million, or $0.04 per diluted share, in the first quarter of 2016.
  • Modified pro forma loss per diluted share[1] was $(0.05) for the first quarter of 2017 compared to modified pro forma earnings per diluted share $0.05 for the first quarter of 2016.
  • Adjusted EBITDA1 was $9.3 million for the first quarter of 2017 compared to $10.4 million for the first quarter of 2016.

"We are very pleased with our first quarter results, which included strong organic case and placement growth in our core specialty business, as well as growth in pounds in our protein division.  We also experienced strong organic growth in the number of unique customers, which is a significant driver of future growth in our business.  Despite the poor weather and Easter calendar shift during the first quarter, we executed very well and were able to meet our internal targets," said Chris Pappas, chairman and chief executive officer of The Chefs' Warehouse, Inc. "We continue to invest in additional talent and improving our technology to make us a leaner and more nimble company.  We are certain these initiatives will strengthen CW's ability to scale and will allow us to be the distributor of choice for independent chef driven restaurants in North America."

First Quarter Fiscal 2017 Results
Net sales for the quarter ended March 31, 2017 increased 10.3% to $287.7 million from $260.8 million for the quarter ended March 25, 2016.  Organic growth contributed $15.0 million, or 5.7% to sales growth in the quarter. The remaining sales growth of $11.9 million, or 4.6% resulted from the acquisition of M.T. Food Service, Inc. on June 27, 2016. Compared to the first quarter of 2016, case counts in the Company's specialty division grew approximately 6.0%, while the number of unique customers and placements grew 4.7% and 5.8%, respectively, in the core specialty business in the first quarter of 2017. Pounds sold in the Company's protein division increased 1.3% for the first quarter of 2017 compared to the prior year quarter.  Inflation was approximately 0.5% during the quarter, consisting of 1.1% inflation in the specialty division and deflation of 0.6% in the protein division.

Gross profit increased approximately 12.0% to $73.9 million for the first quarter of 2017 from $66.0 million for the first quarter of 2016. Gross profit margin increased approximately 40 basis points to 25.7% from 25.3%.  Gross profit margins increased approximately 26 basis points in the Company's specialty division, despite the slightly lower margin contribution from MT Food Service.  Gross profit margins increased approximately 42 basis points in the protein division as performance in each of the Company's protein business units continues to improve.

Total operating expenses increased by approximately 16.8% to $70.8 million for the first quarter of 2017 from $60.6 million for the first quarter of 2016. As a percentage of net sales, operating expenses were 24.6% in the first quarter of 2017 compared to 23.2% in the first quarter of 2016.  The increase in the Company's operating expense ratio is largely attributable to increased warehouse labor and occupancy costs related to the Company's expanded warehouse capacity, higher delivery labor and fleet related expenses and higher compensation costs related to additional management infrastructure.

Operating income for the first quarter of 2017 was $3.1 million compared to $5.4 million for the first quarter of 2016.  The decrease in operating income was driven primarily by higher operating expenses offset in part by higher gross profit, as discussed above.  As a percentage of net sales, operating income was 1.1% in the first quarter of 2017 compared to 2.1% in the first quarter of 2016. 

Interest expense increased to $5.9 million for the first quarter of 2017 compared to $3.7 million in the first quarter of 2016 due to higher levels of debt and financing costs as a result of the Company's previously disclosed refinancing completed in June, 2016.

Net loss for the first quarter of 2017 was $(1.6) million, or $(0.06) per diluted share, compared to net income of $1.0 million, or $0.04 per diluted share, for the first quarter of 2016.  

Adjusted EBITDA1 was $9.3 million for the first quarter of 2017 compared to $10.4 million for the first quarter of 2016.  For the first quarter of 2017, modified pro forma net loss1 was $(1.4) million and modified pro forma loss per share1 was $(0.05) compared to modified pro forma net income of $1.3 million and modified pro forma EPS of $0.05 for the first quarter of 2016.

Full Year 2017 Guidance
Based on current trends in the business, the Company is providing the following updated financial guidance for fiscal year 2017:  

  • Net sales between $1.27 billion and $1.29 billion
  • Gross profit between $323.0 million and $330.0 million
  • Net income between $9.3 million and $10.5 million
  • Net income per diluted share between $0.35 and $0.40
  • Adjusted EBITDA between $63.0 million and $66.0 million
  • Modified pro forma net income per diluted share between $0.36 and $0.41

This guidance is based on an effective tax rate of approximately 41.5% to 42.0% and fully diluted shares of approximately 26.5 million shares.  Note that the Company does not expect the outstanding convertible notes to be dilutive and accordingly those convertible shares are not included in the fully diluted share count.

First Quarter 2017 Earnings Conference Call
The Company will host a conference call to discuss first quarter 2017 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 (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 13658180. The replay will be available until Tuesday, May 16, 2017, 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 service 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 10, 2017 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 43,000 products to more than 28,000 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  
FOR THE THIRTEEN WEEKS ENDED MARCH 31, 2017 AND MARCH 25, 2016  
(unaudited, in thousands except share amounts and per share data)  
       
  Thirteen Weeks Ended    
 March 31, 2017 March 25, 2016   
       
Net Sales$  287,690  $  260,836   
Cost of Sales   213,786     194,878   
Gross Profit   73,904     65,958   
       
Operating Expenses   70,783     60,598   
Operating Income    3,121     5,360   
       
Interest Expense   5,933     3,656   
Loss on Disposal of Assets   -      3   
       
(Loss) Income Before Income Taxes   (2,812)    1,701   
       
Provision for Income Tax (Benefit) Expense                           (1,170)    708   
       
Net (Loss) Income$  (1,642) $  993   
       
       
Net (Loss) Income Per Share:       
Basic$  (0.06) $   0.04   
Diluted$  (0.06) $  0.04   
       
Weighted Average Common Shares Outstanding:       
Basic   25,952,222     25,884,051   
Diluted   25,952,222     25,917,350   
       

 

      
THE CHEFS' WAREHOUSE, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
AS OF MARCH 31, 2017 AND DECEMBER 30, 2016 
(in thousands) 
      
    
 March 31, 2017 December 30,
2016
  
 (unaudited)    
      
Cash$  35,806  $  32,862   
Accounts receivable, net 121,886   128,030   
Inventories, net 91,152   87,498   
Prepaid expenses and other current assets   12,184     16,101   
  Total current assets   261,028     264,491   
       
Equipment and leasehold improvements, net   63,916     62,183   
Software costs, net   5,842     5,927    
Goodwill   166,625     163,784   
Intangible assets, net   125,623     131,131   
Other assets   6,054     6,022   
  Total assets$  629,088  $  633,538   
      
       
Accounts payable$  64,048  $  65,514   
Accrued liabilities   17,521   17,546   
Accrued compensation   7,034   9,519   
Current portion of long-term debt   15,764   14,795   
  Total current liabilities   104,367   107,374   
      
Long-term debt, net of current portion   316,112   317,725   
Deferred taxes, net   8,260    6,958   
Other liabilities   7,726   7,721   
  Total liabilities 436,465   439,778   
      
Preferred stock   -      -    
Common stock   264   263   
Additional paid in capital   127,683   127,180   
Cumulative foreign currency translation adjustment                   (2,185)  (2,186)  
Retained earnings    66,861   68,503   
Stockholders' equity   192,623   193,760   
      
Total liabilities and stockholders' equity$  629,088  $  633,538   
      


    
THE CHEFS' WAREHOUSE, INC.   
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS   
FOR THE THIRTEEN WEEKS ENDED MARCH 31, 2017 AND MARCH 25, 2016   
(unaudited; in thousands)   
       
     
 March 31, 2017 March 25, 2016   
       
Cash flows from operating activities:      
Net (Loss) Income$  (1,642)  $  993    
       
Adjustments to reconcile net (loss) income to net cash provided by operating activities:                  
  Depreciation   2,122     1,206    
  Amortization   2,820     2,783    
  Provision for allowance for doubtful accounts   667     1,034    
  Deferred rent   45     869    
  Deferred taxes   1,163     1,159    
  Amortization of deferred financing fees   543     358    
  Stock compensation   744     560    
  Loss on disposal of assets   -      3    
  Change in fair value of earn-out liability   24     (345)   
Changes in assets and liabilities, net of acquisitions:      
  Accounts receivable   5,412     9,855    
  Inventories   (3,427)    1,626    
  Prepaid expenses and other current assets   4,053     377    
  Accounts payable and accrued liabilities   (4,081)    (10,773)   
  Other liabilities   (56)    (271)   
  Other assets   (264)    (519)   
  Net cash provided by operating activities   8,123     8,915    
       
Cash flows from investing activities:      
  Capital expenditures   (3,764)    (3,161)   
  Net cash used in investing activities   (3,764)    (3,161)    
       
Cash flows from financing activities:      
  Payment of debt   (1,191)    (1,897)   
  Net change in revolving credit facility   -      (3,382)   
  Surrender of shares to pay withholding taxes   (240)    (297)   
  Net cash used in financing activities   (1,431)    (5,576)   
       
Effect of foreign currency translation adjustment on cash and cash equivalents   16     113    
        
Net increase in cash and cash equivalents   2,944     291    
Cash and cash equivalents at beginning of period   32,862     2,454    
Cash and cash equivalents at end of period$  35,806  $  2,745    
       


       
THE CHEFS' WAREHOUSE, INC.  
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET (LOSS) INCOME  
THIRTEEN WEEKS ENDED MARCH 31, 2017 AND MARCH 25, 2016  
(unaudited; in thousands)  
       
 Thirteen Weeks Ended   
 March 31, 2017 March 25, 2016   
Net (Loss) Income:$  (1,642) $  993    
  Interest expense   5,933     3,656    
  Depreciation   2,122     1,206    
  Amortization   2,820     2,783    
  Provision for income tax (benefit) expense   (1,170)    708    
  EBITDA (1)   8,063     9,346    
       
Adjustments:      
  Stock compensation (2)   744     560    
  Duplicate rent (3)   86     303    
  Integration and deal costs/third party transaction costs (4)   -     223    
  Change in fair value of earn-out obligation (5)   24     (345)   
  Moving expenses (6)   350     304    
       
Adjusted EBITDA (1)$  9,267  $  10,391    
        
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, Chicago, IL 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 Chicago, IL, San Francisco, CA and Los Angeles,   
  CA facilities.      
       


 
THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF MODIFIED PRO FORMA NET (LOSS) INCOME TO NET (LOSS) INCOME
THIRTEEN WEEKS ENDED MARCH 31, 2017 AND MARCH 25, 2016
(unaudited; in thousands except share amounts and per share data)
     
 Thirteen Weeks Ended 
 March 31, 2017 March 25, 2016 
     
Net (Loss) Income$  (1,642) $  993  
     
Adjustments to Reconcile Net (Loss) Income to Modified Pro Forma Net (Loss) Income (1):              
  Duplicate rent (2)   86     303  
  Integration and deal costs/third party transaction costs (3)   -      223  
  Moving expenses (4)   350     304  
  Change in fair value of earnout obligation (5)   24     (345) 
  Tax effect of adjustments (6)   (191)    (202) 
     
Total Adjustments   269     283  
     
Modified Pro Forma Net (Loss) Income$  (1,373) $  1,276   
      
Diluted Earnings per Share - Modified Pro Forma$  (0.05) $  0.05  
     
Diluted Shares Outstanding - Modified Pro Forma   25,952,222     25,917,350  
     
1.  We are presenting modified pro forma net (loss) income and modified pro forma earnings per share (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, Chicago, IL 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 Chicago, IL, 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 2017
(unaudited; in thousands)
     
 Low-End
Guidance
 High-End
Guidance
 
     
Net Income:$  9,300 $  10,500 
  Provision for income tax expense 6,700  7,500 
  Depreciation & amortization 21,000  21,000 
  Interest expense   22,200    23,000 
  EBITDA (1)   59,200    62,000 
     
Adjustments:    
  Stock compensation (2)   3,400  3,500 
  Duplicate occupancy and moving costs (3)   400  500 
     
Adjusted EBITDA (1)$  63,000  $  66,000 
     
     
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.  
     

 

 
THE CHEFS' WAREHOUSE, INC.
2017 FULLY DILUTED EPS GUIDANCE RECONCILIATION TO 2017 MODIFIED 
PRO FORMA FULLY DILUTED EPS GUIDANCE (1)(2)
(Unaudited)
    
 Low-End High-End
 Guidance Guidance
    
Net income per diluted share$  0.35  $  0.40
    
Duplicate occupancy and moving costs (3)   0.01    0.01
    
Modified pro forma net income per diluted share$  0.36  $  0.41
    
    
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 26.5 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.
    
Contact:

Investor Relations

John Austin, CFO, (718) 684-8415 

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Source: The Chefs' Warehouse

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