GlobeNewswire Inc | Oct 27, 2021 07:00AM EDT

October 27, 2021

RIDGEFIELD, Conn., Oct. 27, 2021 (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 September24, 2021.

Financial highlights for the third quarter of 2021:

-- Net sales increased 90.7% to $484.3 million for the third quarter of 2021 from $254.0 million for the third quarter of 2020. -- GAAP net income was $3.5 million, or $0.09 per diluted share, for the third quarter of 2021 compared to net loss of $11.4 million, or $(0.31) per diluted share, in the third quarter of 2020. -- Adjusted EPS1 was $0.12 for the third quarter of 2021 compared to $(0.38) for the third quarter of 2020. -- Adjusted EBITDA1 was $23.4 million for the third quarter of 2021 compared to negative adjusted EBITDA $(4.9) million for the third quarter of 2020.

Revenue trends remained strong as momentum from second quarter customer and consumer demand continued into the third quarter, said Chris Pappas, Chairman and Chief Executive Officer of the Company. Moderate growth in market segments and business activity related to return to offices, travel and hospitality contributed to a steady increase in weekly sales as the quarter progressed. We exited the quarter at approximately 103% of 2019 sales, inclusive of acquisitions completed in 2020 and 2021.

Third Quarter Fiscal 2021 Results

Net sales for the quarter ended September24, 2021 increased 90.7% to $484.3 million from $254.0 million for the quarter ended September25, 2020. Organic sales increased$213.7 million, or84.2%versus the prior year quarter. Sales growthof$16.6 million, or6.5%, resulted from acquisitions. Organic case count increased approximately 57.5% in the Companys specialty category with unique customers and placements increases at36.9%and50.4%, respectively, compared to the prior year quarter. Organic pounds sold in the Companys center-of-the-plate category increasedapproximately 56.9%compared to the prior year quarter. Estimated inflation was 10.9%in the Companys specialty categories and28.0% in the center-of-the-plate categories compared to the prior year quarter.

Gross profit increased approximately 82.2% to $110.0 million for the third quarter of 2021 from $60.4 million for the third quarter of 2020. Gross profit margin decreased approximately 105 basis points to 22.7% from 23.8%. Gross margins in the Companys specialty category increased 301 basis points and gross margins decreased 488 basis points in the Companys center-of-the-plate category compared to the prior year quarter.

Selling, general and administrative expenses increased by approximately 30.1% to $99.4 million for the third quarter of 2021 from $76.4 million for the third quarter of 2020. These increases were primarily volume-based increases to support our sales growth for the quarter ended September 24, 2021. As a percentage of net sales, operating expenses were 20.5% in the third quarter of 2021 compared to 30.1% in the third quarter of 2020.

Other operating expense increased by approximately $4.3 million primarily due to changes in the fair value of our contingent earn-out liabilities which caused a non-cash charge of $0.1 million in the current period compared to non-cash credits of $4.6 million in the prior year period.

Operating income for the third quarter of 2021 was $10.4 million compared to operating loss of $11.9 million for the third quarter of 2020. The increase in operating income was driven primarily by higher gross profit, partially offset by higher selling, general and administrative, as discussed above. As a percentage of net sales, operating income was 2.2% in the third quarter of 2021 as compared to operating loss of 4.7% in the third quarter of 2020.

Total interest expense decreased to $4.2 million for the third quarter of 2021 compared to $4.7 million for the third quarter of 2020. The decrease in interest expense is the result of lower effective interest rates charged on the Companys outstanding debt.

Net income for the third quarter of 2021 was $3.5 million, or $0.09 per diluted share, compared to net loss of $11.4 million, or $(0.31) per diluted share, for the third quarter of 2020.

Adjusted EBITDA1 was $23.4 million for the third quarter of 2021 compared to negative adjusted EBITDA of $(4.9) million for the third quarter of 2020. For the third quarter of 2021, adjusted net income1 was $4.5 million, or $0.12 per diluted share compared to adjusted net loss of $13.7 million, or $(0.38) per diluted share for the third quarter of 2020.

Full Year 2021 Guidance

Due to the continued uncertainty regarding the pace of broader economic recovery and the timing of event and travel related business activity, the Company will not be providing guidance for 2021 at this time. The Company will look to provide guidance as it gains more clarity as to the pace of recovery, outlook and the broader post-pandemic related environment.

Third Quarter 2021 Earnings Conference Call

The Company will host a conference call to discuss third quarter 2021 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 Companys investor relations website at http://investors.chefswarehouse.com/. An online archive of the webcast will be available on the Companys investor relations website.

Forward-Looking Statements

Statements in this press release regarding the Companys 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, includingCOVID-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 Companys most recent annual report on Form 10-K filed with the SEC on February23, 2021 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 Companys 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 nations 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 50,000 products to more than 34,000 customer locations throughout the United States and Canada.

Contact:Investor Relations Jim Leddy, CFO, (718) 684-8415

__________________1EBITDA, 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.

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 September September 24, September 24, 25, 2021 25, 2021 2020 2020Net sales $ 484,321 $ 254,030 $ 1,187,506 $ 829,957 Cost of sales 374,346 193,668 922,710 640,681 Gross profit 109,975 60,362 264,796 189,276 Selling, general andadministrative 99,431 76,433 270,034 253,480 expensesOther operating(income) expenses, 105 (4,146 ) (208 ) (9,812 )netOperating income 10,439 (11,925 ) (5,030 ) (54,392 )(loss) Interest expense 4,191 4,706 13,362 15,602 Income (loss) before 6,248 (16,631 ) (18,392 ) (69,994 )income taxes Provision for incometax expense 2,792 (5,204 ) (5,025 ) (24,148 )(benefit) Net income (loss) $ 3,456 $ (11,427 ) $ (13,367 ) $ (45,846 ) Net income (loss) per share:Basic $ 0.09 $ (0.31 ) $ (0.36 ) $ (1.39 )Diluted $ 0.09 $ (0.31 ) $ (0.36 ) $ (1.39 ) Weighted averagecommon shares outstanding:Basic 36,875,784 36,283,883 36,701,927 32,868,162 Diluted 37,105,746 36,283,883 36,701,927 32,868,162

THE CHEFS? WAREHOUSE, INC.CONDENSED CONSOLIDATED BALANCE SHEETSAS OF SEPTEMBER24, 2021 AND DECEMBER25, 2020(in thousands)

September 24, December 25, 2021 2020 (unaudited) Cash and cash equivalents $ 134,217 $ 193,281 Accounts receivable, net 151,720 96,383 Inventories, net 132,802 82,519 Prepaid expenses and other current assets 37,759 33,479 Total current assets 456,498 405,662 Equipment, leasehold improvements and 118,143 115,448 software, netOperating lease right-of-use assets 115,182 115,224 Goodwill 220,376 214,864 Intangible assets, net 105,696 111,717 Deferred taxes, net 12,390 7,535 Other assets 3,727 3,875 Total assets $ 1,032,012 $ 974,325 Accounts payable $ 108,972 $ 57,515 Accrued liabilities 33,746 27,924 Short-term operating lease liabilities 16,936 17,167 Accrued compensation 18,624 9,401 Current portion of long-term debt 5,624 6,095 Total current liabilities 183,902 118,102 Long-term debt, net of current portion 394,979 398,084 Operating lease liabilities 109,827 109,133 Other liabilities 4,238 4,416 Total liabilities 692,946 629,735 Preferred stock ? ? Common stock 380 373 Additional paid in capital 311,503 303,734 Cumulative foreign currency translation (1,984 ) (2,051 )adjustmentRetained earnings 29,167 42,534 Stockholders? equity 339,066 344,590 Total liabilities and stockholders? equity $ 1,032,012 $ 974,325

THE CHEFS? WAREHOUSE, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER24, 2021 AND SEPTEMBER25, 2020(unaudited, in thousands)

September September 24, 25, 2021 2020Cash flows from operating activities: Net loss $ (13,367 ) $ (45,846 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Depreciation and amortization 16,270 14,714 Amortization of intangible assets 9,778 10,111 (Benefit) provision for allowance for doubtful (744 ) 20,447 accountsNon-cash operating lease expense 505 604 Benefit for deferred income taxes (4,855 ) (6,527 )Amortization of deferred financing fees 1,832 2,152 Stock compensation 8,448 4,925 Change in fair value of contingent earn-out (1,359 ) (11,219 )liabilitiesIntangible asset impairment 597 ? Loss on asset disposal 257 52 Changes in assets and liabilities, net of acquisitions:Accounts receivable (51,582 ) 74,236 Inventories (49,148 ) 33,285 Prepaid expenses and other current assets (3,304 ) (16,227 )Accounts payable, accrued liabilities and accrued 60,443 (29,455 )compensationOther assets and liabilities (101 ) 2,617 Net cash (used in) provided by operating activities (26,330 ) 53,869 Cash flows from investing activities: Capital expenditures (17,872 ) (5,409 )Cash paid for acquisitions, net of cash received (7,280 ) (60,437 )Net cash used in investing activities (25,152 ) (65,846 ) Cash flows from financing activities: Payment of debt, finance lease and other financing (35,918 ) (38,924 )obligationsProceeds from the issuance of common stock, net of ? 85,941 issuance costsProceeds from debt issuance 51,750 ? Payment of deferred financing fees (1,450 ) (856 )Surrender of shares to pay withholding taxes (1,792 ) (2,777 )Cash paid for contingent earn-out liabilities (83 ) (2,927 )Borrowings under asset based loan facility ? 100,000 Payments under asset based loan facility (20,000 ) (60,000 )Net cash (used in) provided by financing activities (7,493 ) 80,457 Effect of foreign currency translation on cash and (89 ) (168 )cash equivalents Net (decrease) increase in cash and cash equivalents (59,064 ) 68,312 Cash and cash equivalents at beginning of period 193,281 140,233 Cash and cash equivalents at end of period $ 134,217 $ 208,545

THE CHEFS? WAREHOUSE, INC.RECONCILIATION OF GAAP NET INCOME (LOSS) PER COMMON SHARE(unaudited; in thousands except share amounts and per share data)

Thirteen Weeks Ended Thirty-Nine Weeks Ended September September September September 24, 25, 24, 25, 2021 2020 2021 2020Numerator: Net income (loss) $ 3,456 $ (11,427 ) $ (13,367 ) $ (45,846 )Denominator: Weighted averagebasic common shares 36,875,784 36,283,883 36,701,927 32,868,162 outstandingDilutive effect ofunvested common 229,962 ? ? ? sharesWeighted averagediluted common shares 37,105,746 36,283,883 36,701,927 32,868,162 outstanding Net income (loss) per share:Basic $ 0.09 $ (0.31 ) $ (0.36 ) $ (1.39 )Diluted $ 0.09 $ (0.31 ) $ (0.36 ) $ (1.39 )

THE CHEFS? WAREHOUSE, INC.RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET INCOME (LOSS)(unaudited; in thousands)

Thirteen Weeks Ended Thirty-Nine Weeks Ended September September September September 24, 25, 24, 25, 2021 2020 2021 2020Net income (loss) $ 3,456 $ (11,427 ) $ (13,367 ) $ (45,846 )Interest expense 4,191 4,706 13,362 15,602 Depreciation 5,610 5,039 16,270 14,714 Amortization 3,135 3,391 9,778 10,111 Provision for income tax 2,792 (5,204 ) (5,025 ) (24,148 )expense (benefit)EBITDA (1) 19,184 (3,495 ) 21,018 (29,567 ) Adjustments: Stock compensation (2) 2,710 2,075 8,448 4,925 Other operating income (3) 105 (4,146 ) (208 ) (9,812 )Duplicate rent (4) 935 699 2,324 2,095 Payroll tax credit (5) ? ? (1,418 ) ? Moving expenses (6) 452 ? 890 ? Adjusted EBITDA (1) $ 23,386 $ (4,867 ) $ 31,054 $ (32,359 )

-- 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, asset impairments, including intangible asset impairment charges, 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 and Richmond, CA facilities. -- Represents a payroll tax credit earned in accordance with the Employee Retention Credit under the CARES Act. -- Represents moving expenses for the consolidation of certain facilities in New England.

THE CHEFS? WAREHOUSE, INC.RECONCILIATION OF ADJUSTED NET INCOME (LOSS) TO NET INCOME (LOSS)(unaudited; in thousands except share amounts and per share data)

Thirteen Weeks Ended Thirty-Nine Weeks Ended September September September September 24, 25, 24, 25, 2021 2020 2021 2020Net income (loss) $ 3,456 $ (11,427 ) $ (13,367 ) $ (45,846 ) Adjustments toReconcile Net Income(Loss) to Adjusted Net Income (Loss)(1):Other operating 105 (4,146 ) (208 ) (9,812 )expenses (2)Duplicate rent (3) 935 699 2,324 2,095 Moving expenses (4) 452 ? 890 ? Third party debt ? ? ? 1,233 modification fees (5)Payroll tax credit ? ? (1,418 ) ? (6)Tax effect of (418 ) 1,159 (445 ) 2,237 adjustments (7) Total adjustments 1,074 (2,288 ) 1,143 (4,247 ) Adjusted net income $ 4,530 $ (13,715 ) $ (12,224 ) $ (50,093 )(loss) Diluted adjustedincome (loss) per $ 0.12 $ (0.38 ) $ (0.33 ) $ (1.52 )common share Diluted sharesoutstanding - 37,105,746 36,283,883 36,701,927 32,868,162 adjusted

-- 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, asset impairments, including intangible asset impairments, 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 and Richmond, CA facilities. -- Represents moving expenses for the consolidation of certain facilities in New England. -- Represents interest expense related to investment banking fees paid in connection with the modification of our senior secured term loan. -- Represents a payroll tax credit earned in accordance with the Employee Retention Credit under the CARES Act. -- Represents the tax effect of items 2 through 6 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 September September September 24, 25, 24, 25, 2021 2020 2021 2020Numerator: Adjusted net income $ 4,530 $ (13,715 ) $ (12,224 ) $ (50,093 )(loss)Denominator: Weighted averagebasic common shares 36,875,784 36,283,883 36,701,927 32,868,162 outstandingDilutive effect ofunvested common 229,962 ? ? ? sharesWeighted averagediluted common shares 37,105,746 36,283,883 36,701,927 32,868,162 outstanding Adjusted earnings per share:Diluted $ 0.12 $ (0.38 ) $ (0.33 ) $ (1.52 )