RIDGEFIELD, Conn., Aug. 01, 2018 (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 second quarter ended June 29, 2018.
Financial highlights for the second quarter of 2018 compared to the second quarter of 2017:
- Net sales increased 11.7% to $370.4 million for the second quarter of 2018 from $331.7 million for the second quarter of 2017.
- GAAP net income was $6.8 million, or $0.24 per diluted share, for the second quarter of 2018 compared to $3.7 million, or $0.14 per diluted share, in the second quarter of 2017.
- Adjusted net income per diluted share was $0.24 for the second quarter of 2018 compared to $0.14 for the second quarter of 2017.
- Adjusted EBITDA1 was $21.5 million for the second quarter of 2018 compared to $18.1 million for the second quarter of 2017.
“Coming off a solid first quarter, we saw continued strength across our network in the second quarter with year over year revenue growth of 11.7%. We also delivered strong gross profit dollar growth and improved operating expense leverage across our expanding platform,” said Chris Pappas, chairman and chief executive officer of The Chefs’ Warehouse, Inc. “In addition, we made strategic investments in Texas and Pennsylvania, which we expect to contribute to the future growth of our brand and unique business model.”
Second Quarter Fiscal 2018 Results
Net sales for the quarter ended June 29, 2018 increased 11.7% to $370.4 million from $331.7 million for the quarter ended June 30, 2017. Organic growth contributed $14.2 million, or 4.3% to sales growth in the quarter. The remaining sales growth of $24.6 million, or 7.4% resulted from the acquisition of Fells Point Wholesale Meats Inc. and other specialty-related acquisitions. Organic case count grew approximately 7.5% in the Company’s specialty category and growth in unique customers and placements grew 5.1% and 4.6%, respectively, compared to the prior year quarter. Excluding the impact of the Fells Point acquisition, pounds sold in the Company’s center-of-the-plate category increased 0.6% compared to the prior year quarter. Estimated inflation was 2.2% in the Company’s specialty categories and estimated deflation was 2.3% in the center-of-the-plate categories compared to the prior year quarter.
Gross profit increased approximately 12.9% to $93.2 million for the second quarter of 2018 from $82.6 million for the second quarter of 2017. Gross profit margin increased approximately 27 basis points to 25.2% from 24.9%, due in large part to deflation in certain center-of-the-plate categories. Gross margins in the Company’s specialty category decreased 66 basis points and increased 129 basis points in the Company’s center-of-the-plate category compared to the prior year quarter.
Total operating expenses increased by approximately 11.2% to $78.3 million for the second quarter of 2018 from $70.4 million for the second quarter of 2017. As a percentage of net sales, operating expenses were 21.1% in the second quarter of 2018 compared to 21.2% in the second quarter of 2017. The increase in the Company’s operating expenses is driven by sales growth, partially offset by improved operating expense leverage.
Operating income for the second quarter of 2018 was $14.9 million compared to $12.2 million for the second quarter of 2017. The increase in operating income was driven primarily by increased gross profit, offset in part by higher operating expenses, as discussed above. As a percentage of net sales, operating income was 4.0% in the second quarter of 2018 compared to 3.7% in the second quarter of 2017.
Total interest expense decreased to $5.4 million for the second quarter of 2018 compared to $5.9 million for the second quarter of 2017 due to a reduction in interest rates charged on the Company’s outstanding debt.
Net income for the second quarter of 2018 was $6.8 million, or $0.24 per diluted share, compared to net income of $3.7 million, or $0.14 per diluted share, for the second quarter of 2017.
Adjusted EBITDA1 was $21.5 million for the second quarter of 2018 compared to $18.1 million for the second quarter of 2017. For the second quarter of 2018, adjusted net income1 was $7.0 million, or $0.24 per diluted share compared to adjusted net income of $3.7 million, or $0.14 per diluted share for the second quarter of 2017.
1Please see the Consolidated Statements of Operations at the end of this earnings release for a reconciliation of EBITDA, Adjusted EBITDA, adjusted net income and adjusted EPS to these measures’ most directly comparable GAAP measure.
Full Year 2018 Guidance
Based on current trends in the business, the Company is providing the following updated financial guidance for fiscal year 2018:
- Net sales between $1.41 billion and $1.45 billion
- Gross profit between $357.0 million and $367.0 million
- Net income between $20.0 million and $22.5 million
- Net income per diluted share between $0.69 and $0.78
- Adjusted EBITDA between $75.0 million and $78.5 million
- Adjusted net income per diluted share between $0.71 and $0.80
This guidance is based on an effective tax rate of approximately 28.5% and fully diluted shares of approximately 28.9 million shares.
Second Quarter 2018 Earnings Conference Call
The Company will host a conference call to discuss second quarter 2018 financial results today at 5:00 p.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/. 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 13681098. The replay will be available until Wednesday, August 8, 2018, and an online archive of the webcast will be available on the Company’s investor relations website for 30 days.
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 its acquisitions; the Company’s sensitivity to general economic conditions, 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 risks of loss of revenue or reductions in operating margins in the Company’s center-of-the-plate category 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; 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 9, 2018 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 48,000 products to more than 30,000 customer locations throughout the United States and Canada.
Jim Leddy, CFO, (718) 684-8415
THE CHEFS’ WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 29, 2018 AND JUNE 30, 2017
(unaudited, in thousands except share amounts and per share data)
|Thirteen Weeks Ended||Twenty-six Weeks Ended|
|June 29, 2018||June 30, 2017||June 29, 2018||June 30, 2017|
|Cost of Sales||277,202||249,060||516,295||462,846|
|Loss on Asset Disposal||30||—||30||—|
|Income Before Income Taxes||9,537||6,283||10,298||3,471|
|Provision for Income Tax Expense||2,718||2,609||2,935||1,439|
|Net Income Per Share:|
|Weighted Average Common Shares
THE CHEFS’ WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 29, 2018 AND DECEMBER 29, 2017
|June 29, 2018||December 29, 2017|
|Accounts receivable, net||143,766||142,170|
|Prepaid expenses and other current assets||9,686||11,083|
|Total current assets||308,947||296,840|
|Equipment and leasehold improvements, net||71,992||68,378|
|Software costs, net||5,104||6,034|
|Intangible assets, net||135,860||140,320|
|Current portion of long-term debt||3,219||3,827|
|Total current liabilities||119,403||108,273|
|Long-term debt, net of current portion||313,333||313,995|
|Deferred taxes, net||7,114||6,015|
|Additional paid in capital||168,332||166,997|
|Cumulative foreign currency translation adjustment||(2,752||)||(1,549||)|
|Total liabilities and stockholders’ equity||$||708,095||$||687,749|
THE CHEFS’ WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 29, 2018 AND JUNE 30, 2017
(unaudited, in thousands)
|June 29, 2018||June 30, 2017|
|Cash flows from operating activities:|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Provision for allowance for doubtful accounts||1,646||1,747|
|Amortization of deferred financing fees||1,102||1,064|
|Loss on sale of assets||30||—|
|Change in fair value of contingent earn-out liability||228||48|
|Changes in assets and liabilities, net of acquisitions:|
|Prepaid expenses and other current assets||1,524||4,304|
|Accounts payable and accrued liabilities||5,692||11,903|
|Net cash provided by operating activities||18,918||21,676|
|Cash flows from investing activities:|
|Proceeds from asset disposals||30||—|
|Cash paid for acquisitions, net of cash received||(11,899||)||—|
|Net cash used in investing activities||(17,414||)||(6,370||)|
|Cash flows from financing activities:|
|Payment of debt||(2,248||)||(10,444||)|
|Cash paid for deferred financing fees||(534||)||—|
|Cash paid for contingent earn-out liability||—|