UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 2, 2016

THE CHEFS’ WAREHOUSE, INC.
(Exact Name of Registrant as Specified in Charter)

 

Delaware 001-35249 20-3031526

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(I.R.S. Employer Identification No.)

 

100 East Ridge Road, Ridgefield, CT 06877
(Address of Principal Executive Offices) (Zip Code)

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

 

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 

Item 2.02.  Results of Operations and Financial Condition.

The following information is intended to be furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

In a press release dated August 2, 2016 (the “Press Release”), The Chefs’ Warehouse, Inc. (the “Company”) announced financial results for the Company’s thirteen and twenty-six weeks ended June 24, 2016. The full text of the Press Release is furnished herewith as Exhibit 99.1 to this report.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits. The following exhibit is being furnished herewith to this Current Report on Form 8-K.

 

Exhibit No.   Description
99.1   Press Release of The Chefs’ Warehouse, Inc. dated August 2, 2016.

 

 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

THE CHEFS’ WAREHOUSE, INC.

   
  By:  /s/ John D. Austin
 

Name:

Title:

John D. Austin

Chief Financial Officer

 

Date: August 2, 2016

 

 
 

EXHIBIT INDEX

Exhibit No.   Description
99.1   Press Release of The Chefs’ Warehouse, Inc. dated August 2, 2016.

 

 

 

 

The Chefs’ Warehouse, Inc. 8-K 

Exhibit 99.1

The Chefs’ Warehouse Reports Second Quarter 2016 Financial Results

Specialty Organic Revenue Growth of 4.6%

Ridgefield, CT, August 2, 2016 – 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 second quarter ended June 24, 2016.

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

“Our core specialty business remained reasonably strong throughout the second quarter, despite a softening restaurant backdrop, with organic growth of 4.6%. Our customers have continued to navigate well through this challenging consumer environment,” said Chris Pappas, chairman and chief executive officer of The Chefs’ Warehouse, Inc. “The Del Monte system conversion proved more challenging than we originally anticipated, which significantly impacted margins during the quarter. However, the conversion of the Del Monte meat facilities is substantially complete and while it will take longer than originally expected to return protein margins to historic levels, we believe we have a great business that we are very excited about and a very solid infrastructure for continued growth.”

Second Quarter Fiscal 2016 Results

Net sales for the quarter ended June 24, 2016 increased 3.7% to $291.2 million from $280.9 million for the quarter ended June 26, 2015. Organic growth contributed $6.3 million, or 2.3% to sales growth in the quarter. The remaining sales growth of $4.0 million, or 1.4% represents one week of Del Monte sales and resulted from the acquisition of Del Monte during the second week of the quarter ended June 26, 2015.Compared to the second quarter of 2015, the Company’s case count grew approximately 5.9%, while the number of unique customers and placements grew 5.3% and 5.4%, respectively, in the core specialty business in the second quarter of 2016. Pound growth in our protein division was 3.3% for the second quarter of 2016 compared to the prior year quarter. Deflation was approximately 1.2% during the quarter, consisting of 0.9% deflation in our specialty division and deflation of 1.8% in our protein division.

Gross profit increased approximately 0.1% to $71.8 million for the second quarter of 2016 from $71.7 million for the second quarter of 2015. Gross profit margin decreased approximately 88 basis points to 24.7% from 25.5%. Gross profit margins decreased approximately 44 basis points in the Company’s specialty division compared to very strong margins in the second quarter of the prior year. Gross profit margins decreased approximately 175 basis points in the protein division due to challenges passing through beef prices as well as continued integration challenges at Del Monte.

______________________

1 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.

 

 
 

 

Total operating expenses decreased by approximately 2.8% to $60.6 million for the second quarter of 2016 from $62.4 million for the second quarter of 2015. As a percentage of net sales, operating expenses were 20.8% in the second quarter of 2016 compared to 22.2% in the second quarter of 2015. The decrease in the Company’s operating expense ratio is largely attributable to lower transaction costs related to the Company’s acquisition of Del Monte in 2015, a reduction in the estimated fair value of earn-out obligations, offset in part by higher warehouse labor and occupancy related costs associated with the Company’s new warehouse.

Operating income for the second quarter of 2016 was $11.2 million compared to $9.3 million for the second quarter of 2015. As a percentage of net sales, operating income was 3.8% in the second quarter of 2016 compared to 3.3% in the prior year’s second quarter. The increase in operating income as a percentage of net sales was driven primarily from the improvement in the Company’s operating expense ratio discussed above, partially offset by a decrease in gross profit margins.

Interest expense increased to $25.7 million for the second quarter of 2016 compared to $3.6 million in the second quarter of 2015 due to a $22.3 million loss on the extinguishment of debt as a result of the Company’s previously disclosed refinancing completed on June 22, 2016.

The net loss for the second quarter of 2016 was $8.5 million, or $0.33 per diluted share, compared to net income of $3.4 million, or $0.13 per diluted share, for the second quarter of 2015.

On a non-GAAP basis, adjusted EBITDA1 was $15.3 million for the second quarter of 2016 compared to $18.7 million for the second quarter of 2015. For the second quarter of 2016, modified pro forma net income1 was $3.9 million and modified pro forma EPS1 was $0.15 compared to modified pro forma net income of $5.7 million and modified pro forma EPS of $0.21 for the second quarter of 2015.

Full Year 2016 Guidance

Based on second quarter results as well as current trends in the business, the Company is updating its financial guidance for fiscal year 2016, which includes a 53rd week. The Company now expects the following:

This guidance is based on an effective tax rate of approximately 41.0% to 41.5% and fully diluted shares of approximately 27.25 million shares. For purposes of calculating the modified pro forma diluted EPS the Company has assumed that the convertible debt will be dilutive for the full year and as such the Company added back $537,000 of interest, after tax, to net loss and assumed conversion into 1,237,374 shares and included these in the diluted weighted average shares.

Second Quarter 2016 Earnings Conference Call

The Company will host a conference call to discuss second 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 13641662. The replay will be available until Tuesday, August 9, 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 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 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.

Contact:

Investor Relations

John Austin, (718) 684-8415

 
 

 

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 24, 2016 AND JUNE 26, 2015

(unaudited, in thousands except share amounts and per share data)

   Thirteen Weeks Ended  Twenty-six Weeks Ended
   June 24, 2016  June 26, 2015  June 24, 2016  June 26, 2015
             
Net Sales  $291,209   $280,851   $552,045   $477,623 
Cost of Sales   219,406    209,137    414,284    356,152 
Gross Profit   71,803    71,714    137,761    121,471 
                     
Operating Expenses   60,615    62,381    121,213    108,997 
Operating Income   11,188    9,333    16,548    12,474 
                     
Interest Expense   25,667    3,574    29,323    5,411 
Loss (Gain) on Disposal of Assets   —      —      3    (349)
                     
(Loss) Income Before Income Taxes   (14,479)   5,759    (12,778)   7,412 
                     
Provision for Income Tax (Benefit) Expense   (6,024)   2,396    (5,316)   3,081 
                     
Net (Loss) Income  $(8,455)  $3,363   $(7,462)  $4,331 
                     
                     
Net (Loss) Income Per Share:                    
Basic  $(0.33)  $0.13   $(0.29)  $0.17 
Diluted  $(0.33)  $0.13   $(0.29)  $0.17 
                     
Weighted Average Common Shares Outstanding:                    
Basic   25,912,686    25,726,851    25,898,368    25,196,704 
Diluted   25,912,686    26,884,238    25,898,368    25,246,749 

 

 
 

 

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 24, 2016 AND DECEMBER 25, 2015

(in thousands)

   June 24, 2016  December 25, 2015
   (unaudited)   
       
Cash  $48,251   $2,454 
Accounts receivable, net   119,491    124,139 
Inventories, net   91,257    92,758 
Deferred taxes, net   5,318    5,256 
Prepaid expenses and other current assets   21,865    9,164 
     Total current assets   286,182    233,771 
           
Equipment and leasehold improvements, net   57,158    54,283 
Software costs, net   6,757    4,511 
Goodwill   155,263    155,816 
Intangible assets, net   126,780    132,211 
Other assets   3,443    3,089 
     Total assets  $635,583   $583,681 
           
           
Accounts payable  $54,601   $64,888 
Accrued liabilities   20,643    24,258 
Accrued compensation   6,601    7,732 
Current portion of long-term debt   13,285    6,030 
     Total current liabilities   95,130    102,908 
           
Long-term debt, net of current portion   332,624    266,207 
Deferred taxes, net   9,629    9,316 
Other liabilities   15,645    17,286 
     Total liabilities   453,028    395,717 
           
Preferred stock   —      —   
Common stock   263    263 
Additional paid in capital   126,117    125,170 
Cumulative foreign currency translation adjustment   (1,843)   (2,949)
Retained earnings   58,018    65,480 
Stockholders’ equity   182,555    187,964 
           
Total liabilities and stockholders’ equity  $635,583   $583,681 

 

 
 

 

THE CHEFS’ WAREHOUSE, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE TWENTY-SIX WEEKS ENDED JUNE 24, 2016 AND JUNE 26, 2015

(unaudited; in thousands)

   June 24, 2016  June 26, 2015
       
Cash flows from operating activities:      
Net Income  $(7,462)  $4,331 
           
Adjustments to reconcile net income to net cash provided by operating activities:          
 Depreciation   2,937    2,594 
 Amortization   5,567    4,589 
 Provision for allowance for doubtful accounts   1,552    1,266 
 Deferred credits   1,423    313 
 Deferred taxes   790    (1,055)
 Amortization of deferred financing fees   675    565 
 Loss on debt extinguishment   22,310    —   
 Stock compensation   1,369    2,420 
 Loss (Gain) on disposal of assets   3    (349)
 Change in fair value of earn-out liability   (1,815)   248 
Changes in assets and liabilities, net of acquisitions:          
 Accounts receivable   3,215    (3,538)
 Inventories   1,735    (4,848)
 Prepaid expenses and other current assets   (11,799)   2,070 
 Accounts payable and accrued liabilities   (16,559)   (1,989)
 Other liabilities   (177)   202 
 Other assets   (463)   (307)
 Net cash provided by operating activities   3,301    6,512 
           
Cash flows from investing activities:          
 Capital expenditures   (8,034)   (15,156)
 Proceeds from asset disposals   —      1,516 
 Cash paid for acquisitions, net of cash received   —      (123,893)
 Net cash used in investing activities   (8,034)   (137,533)
           
Cash flows from financing activities:          
 Payment of debt   (130,474)   (5,448)
 Proceeds from term loan   301,950    —   
 Proceeds from senior secured notes   —      25,000 
 Net change in revolving credit facility   (93,382)   112,900 
 Cash paid for deferred financing fees   (6,189)   —   
 Debt prepayment penalty and other fees   (21,219)   —   
 Cash paid for contingent earnout obligation   —      (1,420)
 Surrender of shares to pay withholding taxes   (424)   (869)
 Net cash used in financing activities   50,262    130,163 
           
Effect of foreign currency translation adjustment on cash and cash equivalents   268    (99)
           
Net decrease in cash and cash equivalents   45,797    (957)
Cash and cash equivalents at beginning of period   2,454    3,328 
Cash and cash equivalents at end of period  $48,251   $2,371 

 

 
 

 

THE CHEFS’ WAREHOUSE, INC.

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET INCOME (1)

THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 24, 2016 AND JUNE 26, 2015

(unaudited; in thousands)

   Thirteen Weeks Ended  Twenty-six Weeks Ended
   June 24, 2016  June 26, 2015  June 24, 2016  June 26, 2015
             
Net (Loss) Income:  $(8,455)  $3,363   $(7,462)  $4,331 
 Interest expense (2)   25,667    3,574    29,323    5,411 
 Depreciation   1,731    1,707    2,937    2,594 
 Amortization   2,784    3,244    5,567    4,589 
 Provision for income tax (benefit) expense   (6,024)   2,396    (5,316)   3,081 
 EBITDA   15,703    14,284    25,049    20,006 
                     
Adjustments:                    
 Stock compensation (3)   809    446    1,369    770 
 Duplicate rent (4)   129    323    432    715 
 Integration and deal costs/third party transaction costs (5)   49    3,299    272    4,313 
 Change in fair value of earn-out obligation (6)   (1,470)   208    (1,815)   248 
 Moving expenses (7)   108    154    412    273 
                     
Adjusted EBITDA (1)  $15,328   $18,714   $25,719   $26,325 

 

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.Interest expense includes the write-off of deferred financing fees for the refinancing of our term loan and revolving credit facility and the prepayment penalties for the early extinguishment of our senior secured notes.

 

3.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.

 

4.Represents duplicate rent expense for our Bronx, NY and San Francisco, CA distribution facilities.

 

5.Represents transaction related costs incurred to complete and integrate acquisitions, including due diligence, legal, integration and cash and non-cash stock transaction bonuses.

 

6.Represents the non-cash change in fair value of contingent earn-out liabilities related to our acquisitions.

 

7.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 AND TWENTY-SIX WEEKS ENDED JUNE 24, 2016 AND JUNE 26, 2015

(unaudited; in thousands except share amounts and per share data)

   Thirteen Weeks Ended  Twenty-six Weeks Ended
   June 24, 2016  June 26, 2015  June 24, 2016  June 26, 2015
             
Net (Loss) Income  $(8,455)  $3,363   $(7,462)  $4,331 
                     
Adjustments to Reconcile Modified Pro Forma Net Income to Net Income (1):                    
 Duplicate rent (2)   129    323    432    715 
 Integration and deal costs/third party transaction costs (3)   49    3,299    272    4,313 
 Moving expenses (4)   108    154    412    273 
 Change in fair value of earnout obligation (5)   (1,470)   208    (1,815)   248 
 Loss on early extinguishment of debt (6)   22,310    —      22,310    —   
 Tax effect of adjustments (7)   (8,788)   (1,653)   (8,990)   (2,303)
                     
Total Adjustments   12,338    2,331    12,621    3,246 
                     
Modified Pro Forma Net Income  $3,883   $5,694   $5,159   $7,577 
                     
Diluted Earnings per Share - Modified Pro Forma  $0.15   $0.21   $0.20   $0.30 
                     
Diluted Shares Outstanding - Modified Pro Forma   27,201,355    26,884,238    25,943,433    25,246,749 

 

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 liabilites related to our acquisitions.

 

6.Represents the write-off of deferred financing fees for the refinancing of our term loan and revolving credit facility and the prepayment penalties for the early extinguishment of our senior secured notes.

 

7.Represents the tax effect of items 2 through 6 above.

 

 
 

 

THE CHEFS’ WAREHOUSE, INC.

RECONCILIATION OF ADJUSTED EBITDA GUIDANCE FOR FISCAL 2016 (1)

(unaudited; in thousands)

   Low-End
Guidance
  High-End
Guidance
       
Net Loss:  $(3,000)  $(1,000)
 Provision for income tax benefit   (2,100)   (700)
 Depreciation & amortization   17,000    18,000 
 Interest expense (2)   39,000    40,000 
 EBITDA   50,900    56,300 
           
Adjustments:          
 Stock compensation (3)   2,500    2,600 
 Duplicate occupancy and moving costs (4)   800    800 
 Integration and deal costs/third party transaction costs (5)   300    400 
 Change in fair value of earn-out obligations (6)   (1,500)   (1,600)
           
Adjusted EBITDA  $53,000   $58,500 

 

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.Interest expense includes the write-off of deferred financing fees for the refinancing of our term loan and revolving credit facility and the prepayment penalties for the early extinguishment of our senior secured notes.

 

3.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.

 

4.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.

 

5.Represents transaction related costs incurred to complete and integrate acquisitions, including due diligence, legal and integration costs.

 

6.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 loss per diluted share  $(0.09)  $(0.01)
           
Duplicate occupancy and moving costs (3)   0.02    0.02 
Integration and deal costs (4)   0.01    0.01 
Change in fair-value of earn-out obligation (5)   (0.03)   (0.03)
Loss on early extinguishment of debt (6)   0.47    0.47 
           
Modified pro forma net income per diluted share  $0.38   $0.46 

 

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 41.0% to 41.5% and an estimated fully diluted share count of approximately 27.25 million shares. For purposes of calculating the modified pro forma diluted EPS the Company has assumed that the convertible debt will be dilutive for the full year and as such the Company added back $537,000 of interest, after tax, to net loss and assumed conversion into 1,237,374 shares and included these in the diluted weighted average 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 transaction related costs incurred to complete and integrate acquisitions, including due diligence, legal and integration expenses.

 

5.

Represents the non-cash change in fair value of contingent earn-out liabilites related to the Company’s acquisitions.

 

6.

Represents the write-off of deferred financing fees for the refinancing of our term loan and revolving credit facility and the prepayment penalties for the early extinguishment of our senior notes.