The Chefs’ Warehouse Reports Third Quarter 2020 Financial Results
Sequential quarter sales grew
RIDGEFIELD, Conn., Oct. 28, 2020 (GLOBE NEWSWIRE) -- The Chefs’ Warehouse, Inc. (NASDAQ: CHEF) (the “Company” or “Chefs’”), a premier distributor of specialty food products in the United States and Canada, today reported financial results for its third quarter ended September 25, 2020.
Financial highlights for the third quarter of 2020:
- Net sales decreased
36.0% to$254.0 million for the third quarter of 2020 from$396.9 million for the third quarter of 2019. - GAAP net loss was
$11.4 million , or$(0.31) per diluted share, for the third quarter of 2020 compared to net income of$4.4 million , or$0.15 per diluted share, in the third quarter of 2019. - Adjusted EPS1 was
$(0.38) for the third quarter of 2020 compared to$0.23 for the third quarter of 2019. - Adjusted EBITDA1 was
$(4.9) million for the third quarter of 2020 compared to$21.6 million for the third quarter of 2019. - On a sequential quarter basis, net sales grew
26.7% or$53.5 million compared to the second quarter of fiscal 2020, while net loss and negative adjusted EBITDA improved by$8.9 million and$8.8 million , respectively. - The Company had approximately
$193.0 million of cash and cash equivalents on the balance sheet and$44.3 million of availability on its asset-based loan facility as of October 23, 2020.
“Business trends improved sequentially during the third quarter as COVID related restrictions eased in certain markets” said Chris Pappas, Chairman and Chief Executive Officer of the Company. “Pent-up demand for dining out was evident as more customers opened for both indoor and outdoor dining. Despite significant restrictions on indoor dining in our largest urban markets, September sales averaged approximately
Reclassifications
In response to an SEC comment letter, the Company has reclassified its food processing costs, previously included in operating expenses, to cost of sales and has split its historical presentation of operating expenses between selling, general and administrative expenses and other operating expenses. These reclassifications have no impact on the Company’s net income, cash flows or EBITDA.
Third Quarter Fiscal 2020 Results
Net sales for the quarter ended September 25, 2020 decreased
Gross profit decreased approximately
Selling, general and administrative expenses decreased by approximately
Other operating expenses decreased by approximately
Operating loss for the third quarter of 2020 was
Total interest expense increased to
Net loss for the third quarter of 2020 was
Adjusted EBITDA1 was
As of October 23, 2020, the Company had approximately
Full Year 2020 Guidance
Due to the continued uncertainty regarding the pace of economic recovery and the lifting of in-dining restrictions across our markets, the Company will not be providing guidance for 2020. The Company will look to provide guidance as it gains more clarity on the expected length of the economic downturn and the outlook for customer re-openings.
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1 EBITDA, Adjusted EBITDA, adjusted net income (loss) and adjusted EPS are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of EBITDA, Adjusted EBITDA, adjusted net income (loss) and adjusted EPS to these measures’ most directly comparable GAAP measure.
Third Quarter 2020 Earnings Conference Call
The Company will host a conference call to discuss third quarter 2020 financial results today at 8:30 a.m. EDT. Hosting the call will be Chris Pappas, chairman and chief executive officer, and Jim Leddy, chief financial officer. The conference call will be webcast live from the Company’s investor relations website at http://investors.chefswarehouse.com/. An online archive of the webcast will be available on the Company’s investor relations website for 30 days.
Forward-Looking Statements
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 following: our sensitivity to general economic conditions, including disposable income levels and changes in consumer discretionary spending; our ability to expand our operations in our existing markets and to penetrate new markets through acquisitions; we may not achieve the benefits expected from our acquisitions, which could adversely impact our business and operating results; we may have difficulty managing and facilitating our future growth; conditions beyond our control could materially affect the cost and/or availability of our specialty food products or center-of-the-plate products and/or interrupt our distribution network; our increased distribution of center-of-the-plate products, like meat, poultry and seafood, involves increased exposure to price volatility experienced by those products; our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures; because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, including adverse weather conditions, in these areas; fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations; our ability to raise capital in the future may be limited; we may be unable to obtain debt or other financing, including financing necessary to execute on our acquisition strategy, on favorable terms or at all; interest charged on our outstanding debt may be adversely affected by changes in the method of determining London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with an alternative rate; our business operations and future development could be significantly disrupted if we lose key members of our management team; and significant public health epidemics or pandemics, including COVID-19, may adversely affect our business, results of operations and financial condition. 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 SEC on February 24, 2020 and other reports filed by the Company with the SEC since that date. The Company is not undertaking to update any information until 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, chocolateries, cruise lines, casinos and specialty food stores. The Chefs’ Warehouse, Inc. carries and distributes more than 55,000 products to more than 34,000 customer locations throughout the United States and Canada.
Contact:
Investor Relations
Jim Leddy, CFO, (718) 684-8415
THE CHEFS’ WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share amounts and per share data)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
| September 25, 2020 | September 27, 2019 | September 25, 2020 | September 27, 2019 | ||||||||||||
| Net sales | $ | 254,030 | $ | 396,880 | $ | 829,957 | $ | 1,165,327 | |||||||
| Cost of sales | 193,393 | 299,660 | 639,687 | 880,359 | |||||||||||
| Gross profit | 60,637 | 97,220 | 190,270 | 284,968 | |||||||||||
| Selling, general and administrative expenses | 76,708 | 83,960 | 254,474 | 247,017 | |||||||||||
| Other operating (income) expenses | (4,146 | ) | 2,636 | (9,812 | ) | 5,681 | |||||||||
| Operating (loss) income | (11,925 | ) | 10,624 | (54,392 | ) | 32,270 | |||||||||
| Interest expense | 4,706 | 4,517 | 15,602 | 13,913 | |||||||||||
| (Loss) income before income taxes | (16,631 | ) | 6,107 | (69,994 | ) | 18,357 | |||||||||
| Provision for income tax (benefit) expense | (5,204 | ) | 1,682 | (24,148 | ) | 5,052 | |||||||||
| Net (loss) income | $ | (11,427 | ) | $ | 4,425 | $ | (45,846 | ) | $ | 13,305 | |||||
| Net (loss) income per share: | |||||||||||||||
| Basic | $ | (0.31 | ) | $ | 0.15 | $ | (1.39 | ) | $ | 0.45 | |||||
| Diluted | $ | (0.31 | ) | $ | 0.15 | $ | (1.39 | ) | $ | 0.45 | |||||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic | 36,283,883 | 29,549,308 | 32,868,162 | 29,511,143 | |||||||||||
| Diluted | 36,283,883 | 29,954,837 | 32,868,162 | 29,723,609 | |||||||||||
THE CHEFS’ WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 25, 2020 AND DECEMBER 27, 2019
(in thousands)
| September 25, 2020 | December 27, 2019 | ||||||
| (unaudited) | |||||||
| Cash and cash equivalents | $ | 208,545 | $ | 140,233 | |||
| Accounts receivable, net | 100,576 | 175,044 | |||||
| Inventories, net | 98,185 | 124,056 | |||||
| Prepaid expenses and other current assets | 31,466 | 13,823 | |||||
| Total current assets | 438,772 | 453,156 | |||||
| Equipment, leasehold improvements and software, net | 116,964 | 92,846 | |||||
| Operating lease right-of-use assets | 118,677 | 127,649 | |||||
| Goodwill | 214,581 | 197,743 | |||||
| Intangible assets, net | 138,993 | 138,751 | |||||
| Other assets | 3,789 | 3,534 | |||||
| Total assets | $ | 1,031,776 | $ | 1,013,679 | |||
| Accounts payable | $ | 73,969 | $ | 94,097 | |||
| Accrued liabilities | 26,891 | 29,847 | |||||
| Short-term operating lease liabilities | 17,472 | 17,453 | |||||
| Accrued compensation | 10,907 | 8,033 | |||||
| Current portion of long-term debt | 5,904 | 721 | |||||
| Total current liabilities | 135,143 | 150,151 | |||||
| Long-term debt, net of current portion | 396,636 | 386,106 | |||||
| Operating lease liabilities | 112,192 | 120,572 | |||||
| Deferred taxes, net | 4,357 | 10,883 | |||||
| Other liabilities | 5,440 | 10,034 | |||||
| Total liabilities | 653,768 | 677,746 | |||||
| Preferred stock | — | — | |||||
| Common stock | 378 | 304 | |||||
| Additional paid in capital | 300,255 | 212,240 | |||||
| Cumulative foreign currency translation adjustment | (2,216 | ) | (2,048 | ) | |||
| Retained earnings | 79,591 | 125,437 | |||||
| Stockholders’ equity | 378,008 | 335,933 | |||||
| Total liabilities and stockholders’ equity | $ | 1,031,776 | $ | 1,013,679 | |||
THE CHEFS’ WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 25, 2020 AND SEPTEMBER 27, 2019
(unaudited, in thousands)
| September 25, 2020 | September 27, 2019 | ||||||
| Cash flows from operating activities: | |||||||
| Net (loss) income | $ | (45,846 | ) | $ | 13,305 | ||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 14,714 | 9,539 | |||||
| Amortization of intangible assets | 10,111 | 9,485 | |||||
| Provision for allowance for doubtful accounts | 20,447 | 3,277 | |||||
| Non-cash operating lease expense | 604 | 1,790 | |||||
| (Benefit) provision for deferred income taxes | (6,527 | ) | 2,003 | ||||
| Amortization of deferred financing fees | 2,152 | 1,566 | |||||
| Stock compensation | 4,925 | 2,911 | |||||
| Change in fair value of contingent earn-out liabilities | (11,219 | ) | 5,331 | ||||
| Loss on asset disposal | 52 | 64 | |||||
| Changes in assets and liabilities, net of acquisitions: | |||||||
| Accounts receivable | 74,236 | (1,069 | ) | ||||
| Inventories | 33,285 | (7,588 | ) | ||||
| Prepaid expenses and other current assets | (16,227 | ) | (5,163 | ) | |||
| Accounts payable, accrued liabilities and accrued compensation | (29,455 | ) | (9,185 | ) | |||
| Other assets and liabilities | 2,617 | (2,721 | ) | ||||
| Net cash provided by operating activities | 53,869 | 23,545 | |||||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (5,409 | ) | (12,302 | ) | |||
| Cash paid for acquisitions, net of cash received | (60,437 | ) | (28,077 | ) | |||
| Net cash used in investing activities | (65,846 | ) | (40,379 | ) | |||
| Cash flows from financing activities: | |||||||
| Payment of debt, finance lease and other financing obligations | (38,924 | ) | (1,793 | ) | |||
| Proceeds from the issuance of common stock, net of issuance costs | 85,941 | — | |||||
| Payment of deferred financing fees | (856 | ) | — | ||||
| Proceeds from exercise of stock options | — | 635 | |||||
| Surrender of shares to pay withholding taxes | (2,777 | ) | (1,001 | ) | |||
| Cash paid for contingent earn-out liability | (2,927 | ) | (967 | ) | |||
| Borrowings under asset based loan facility | 100,000 | — | |||||
| Payments under asset based loan facility | (60,000 | ) | (960 | ) | |||
| Net cash provided by (used in) financing activities | 80,457 | (4,086 | ) | ||||
| Effect of foreign currency translation on cash and cash equivalents | (168 | ) | (11 | ) | |||
| Net increase in cash and cash equivalents | 68,312 | (20,931 | ) | ||||
| Cash and cash equivalents at beginning of period | 140,233 | 42,410 | |||||
| Cash and cash equivalents at end of period | $ | 208,545 | $ | 21,479 | |||
THE CHEFS’ WAREHOUSE, INC.
RECONCILIATION OF GAAP NET (LOSS) INCOME PER COMMON SHARE
(unaudited; in thousands except share amounts and per share data)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
| September 25, 2020 | September 27, 2019 | September 25, 2020 | September 27, 2019 | ||||||||||||
| Numerator: | |||||||||||||||
| Net (loss) income | $ | (11,427 | ) | $ | 4,425 | $ | (45,846 | ) | $ | 13,305 | |||||
| Denominator: | |||||||||||||||
| Weighted average basic common shares outstanding | 36,283,883 | 29,549,308 | 32,868,162 | 29,511,143 | |||||||||||
| Dilutive effect of unvested common shares | — | 405,529 | — | 212,466 | |||||||||||
| Weighted average diluted common shares outstanding | 36,283,883 | 29,954,837 | 32,868,162 | 29,723,609 | |||||||||||
| Net (loss) income per share: | |||||||||||||||
| Basic | $ | (0.31 | ) | $ | 0.15 | $ | (1.39 | ) | $ | 0.45 | |||||
| Diluted | $ | (0.31 | ) | $ | 0.15 | $ | (1.39 | ) | $ | 0.45 | |||||
THE CHEFS’ WAREHOUSE, INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET (LOSS) INCOME
(unaudited; in thousands)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
| September 25, 2020 | September 27, 2019 | September 25, 2020 | September 27, 2019 | ||||||||||||
| Net (loss) income | $ | (11,427 | ) | $ | 4,425 | $ | (45,846 | ) | $ | 13,305 | |||||
| Interest expense | 4,706 | 4,517 | 15,602 | 13,913 | |||||||||||
| Depreciation | 5,039 | 3,484 | 14,714 | 9,539 | |||||||||||
| Amortization | 3,391 | 3,301 | 10,111 | 9,485 | |||||||||||
| Provision for income tax (benefit) expense | (5,204 | ) | 1,682 | (24,148 | ) | 5,052 | |||||||||
| EBITDA (1) | (3,495 | ) | 17,409 | (29,567 | ) | 51,294 | |||||||||
| Adjustments: | |||||||||||||||
| Stock compensation (2) | 2,075 | 908 | 4,925 | 2,911 | |||||||||||
| Other operating (income) expenses (3) | (4,146 | ) | 2,636 | (9,812 | ) | 5,681 | |||||||||
| Duplicate rent (4) | 699 | 642 | 2,095 | 805 | |||||||||||
| Moving expenses (5) | — | — | — | 61 | |||||||||||
| Adjusted EBITDA (1) | $ | (4,867 | ) | $ | 21,595 | $ | (32,359 | ) | $ | 60,752 | |||||
- 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.
- 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.
- Represents non-cash changes in the fair value of contingent earn-out liabilities related to our acquisitions, non-cash charges related to asset disposals and certain third-party deal costs incurred in connection with our acquisitions or financing arrangements.
- Represents duplicate rent and occupancy costs for our Los Angeles, CA facility.
- Represents moving expenses for the consolidation and expansion of our Ridgefield, CT and Toronto, Canada facilities.
THE CHEFS’ WAREHOUSE, INC.
RECONCILIATION OF ADJUSTED NET (LOSS) INCOME TO NET (LOSS) INCOME
(unaudited; in thousands except share amounts and per share data)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
| September 25, 2020 | September 27, 2019 | September 25, 2020 | September 27, 2019 | ||||||||||||
| Net (loss) income | $ | (11,427 | ) | $ | 4,425 | $ | (45,846 | ) | $ | 13,305 | |||||
| Adjustments to Reconcile Net (Loss) Income to Adjusted Net (Loss) Income (1): | |||||||||||||||
| Other operating (income) expenses (2) | (4,146 | ) | 2,636 | (9,812 | ) | 5,681 | |||||||||
| Duplicate rent (3) | 699 | 642 | 2,095 | 805 | |||||||||||
| Moving expenses (4) | — | — | — | 61 | |||||||||||
| Third party debt modification fees (5) | — | — | 1,233 | — | |||||||||||
| Tax effect of adjustments (6) | 1,159 | (903 | ) | 2,237 | (1,802 | ) | |||||||||
| Total adjustments | (2,288 | ) | 2,375 | (4,247 | ) | 4,745 | |||||||||
| Adjusted net (loss) income | $ | (13,715 | ) | $ | 6,800 | $ | (50,093 | ) | $ | 18,050 | |||||
| Diluted adjusted earnings per common share | $ | (0.38 | ) | $ | 0.23 | $ | (1.52 | ) | $ | 0.61 | |||||
| Diluted shares outstanding - adjusted | 36,283,883 | 29,954,837 | 32,868,162 | 29,723,609 | |||||||||||
- We are presenting adjusted net income and adjusted earnings per common 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 adjusted net income available to common stockholders and adjusted 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 adjusted net income available to common stockholders and adjusted 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.
- Represents non-cash changes in the fair value of contingent earn-out liabilities related to our acquisitions, non-cash charges related to asset disposals and certain third-party deal costs incurred in connection with our acquisitions or financing arrangements.
- Represents duplicate rent and occupancy costs for our Los Angeles, CA facility.
- Represents moving expenses for the consolidation and expansion of our Ridgefield, CT and Toronto, Canada facilities.
- Represents interest expense related to investment banking fees paid in connection with the modification of our senior secured term loan.
- Represents the tax effect of items 2 through 5 above.
THE CHEFS’ WAREHOUSE, INC.
RECONCILIATION OF ADJUSTED EARNINGS PER COMMON SHARE
(unaudited; in thousands except share amounts and per share data)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
| September 25, 2020 | September 27, 2019 | September 25, 2020 | September 27, 2019 | ||||||||||||
| Numerator: | |||||||||||||||
| Adjusted net (loss) income | $ | (13,715 | ) | $ | 6,800 | $ | (50,093 | ) | $ | 18,050 | |||||
| Denominator: | |||||||||||||||
| Weighted average basic common shares outstanding | 36,283,883 | 29,549,308 | 32,868,162 | 29,511,143 | |||||||||||
| Dilutive effect of unvested common shares | — | 405,529 | — | 212,466 | |||||||||||
| Weighted average diluted common shares outstanding | 36,283,883 | 29,954,837 | 32,868,162 | 29,723,609 | |||||||||||
| Adjusted earnings per share: | |||||||||||||||
| Diluted | $ | (0.38 | ) | $ | 0.23 | $ | (1.52 | ) | $ | 0.61 | |||||
