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): May 1, 2014

 

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 May 1, 2014 (the “Press Release”), The Chefs’ Warehouse, Inc. (the “Company”) announced financial results for the Company’s thirteen weeks ended March 28, 2014. 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 May 1, 2014.

 

 

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: May 1, 2014

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press Release of The Chefs’ Warehouse, Inc. dated May 1, 2014.

 

 

The Chef’s Warehouse 8-K

 

Exhibit 99.1 

 

The Chefs’ Warehouse Reports First Quarter 2014 Financial Results

 

Net Sales Increased 34.3% in the First Quarter of 2014

 

The Company Updates Guidance Based on Chicago Market Build-Out

 

 

Ridgefield, CT, May 1, 2014 – The Chefs’ Warehouse, Inc. (NASDAQ: CHEF), a premier distributor of specialty food products in the United States, today reported financial results for its first quarter ended March 28, 2014.

 

Financial highlights for the first quarter of 2014 compared to the first quarter of 2013:

 

	•	Net sales increased 34.3% to $187.2 million for the first quarter of 2014 from $139.4 million for the first quarter of 2013.
	•	Net income available to common stockholders was $1.4 million for the first quarter of 2014 compared to $2.6 million for the first quarter of 2013.
	•	Earnings per diluted share available to common stockholders was $0.06 for the first quarter of 2014 compared to $0.13 for the first quarter of 2013.
	•	Modified pro forma earnings per diluted share available to common stockholders1 was $0.08 per diluted share for the first quarter of 2014 compared to $0.14 per diluted share for the first quarter of 2013.
	•	Adjusted EBITDA1 decreased 3.2% to $8.0 million for the first quarter of 2014 from $8.3 million for the first quarter of 2013.

 

“As we expected, the first quarter continued to be negatively impacted by the severe weather that affected many of our core markets; however, we are optimistic that near term weather challenges are behind us as April weather has moderated,” said Chris Pappas, chairman and chief executive officer of The Chefs’ Warehouse, Inc. “In 2014 we will continue to focus on building out the Chicago market that we recently entered, growing our existing markets, and pursuing additional acquisition opportunities, both within existing markets and in new geographies.”

 

First Quarter Fiscal 2014 Results

 

Net sales for the quarter ended March 28, 2014 increased approximately 34.3% to $187.2 million from $139.4 million for the quarter ended March 29, 2013. The increase in net sales was the result of the acquisitions of Qzina Specialty Foods and Allen Brothers Meats during 2013, as well as organic sales growth. These acquisitions accounted for approximately $36.4 million of our year-over-year sales growth for the quarter. We estimate that severe weather in the Northeast and mid-Atlantic during the first quarter of 2014 negatively impacted net sales by approximately $2.0 million for the quarter. Inflation increased meaningfully during the quarter, particularly in the dairy and cheese categories, and was approximately 5.3% for the quarter.

 

Gross profit increased approximately 33.5% to $46.9 million for the first quarter of 2014 from $35.2 million for the first quarter of 2013. Gross profit margin decreased approximately 14 basis points to 25.1% from 25.2%. This decrease was due in large part to the shift in product mix related to the acquisition of Allen Brothers Meats, offset in part by the contribution from Qzina.

 

Total operating expenses increased by approximately 44.9% to $42.4 million for the first quarter of 2014 from $29.3 million for the first quarter of 2013. As a percentage of net sales, operating expenses were 22.7% in the first quarter of 2014 compared to 21.0% in the first quarter of 2013. The increase in our operating expense ratio is primarily attributable to higher net shipping costs and catalog promotion costs related to the Company’s recently acquired Allen Brothers Meats subsidiary, higher delivery labor costs, increased investments in management infrastructure, and investigation costs related to the previously disclosed accounting issue at the Company’s Michael’s Finer Meats subsidiary.

_________________________

 

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 available to common stockholders and modified pro forma EPS to these measures’ most directly comparable GAAP measure.

 

Operating income for the first quarter of 2014 was $4.5 million compared to $5.9 million for the first quarter of 2013, reflecting the increase in operating expenses discussed above. As a percentage of net sales, operating income was 2.4% in the first quarter of 2014 compared to 4.2% in the prior year’s first quarter.

 

Interest expense was $2.1 million in the first quarter of 2014 compared to $1.4 million in the first quarter of 2013. The increase is attributable to higher levels of debt related to the Company’s acquisitions coupled with higher interest rates on the Company’s senior secured notes issued in early 2013.

 

Net income available to common stockholders was $1.4 million, or $0.06 per diluted share, for the first quarter of 2014 compared to $2.6 million, or $0.13 per diluted share, for the first quarter of 2013. The weighted average shares outstanding for the first quarter of 2014 reflects the impact of the Company’s common stock offering completed in September 2013.

 

On a non-GAAP basis, adjusted EBITDA decreased approximately 3.2% to $8.0 million in the first quarter of 2014 compared to $8.3 million in the first quarter of 2013. Modified pro forma net income available to common stockholders¹ was $2.0 million and modified pro forma EPS was $0.08 for the first quarter of 2014 compared to modified pro forma net income available to common stockholders of $2.9 million and modified pro forma EPS of $0.14 for the first quarter of 2013.

 

2014 Guidance

 

The Company is announcing today that it has identified a market president and a distribution facility to launch its entry in the Chicago market for specialty distribution. Accordingly, the Company is updating its financial guidance for fiscal year 2014 to incorporate the build-out of the Chicago market. As such, the Company currently expects the following:

 

	•	Revenue between $810.0 million and $840.0 million.
	•	Adjusted EBITDA between $47.0 million and $52.5 million.
	•	Net income between $14.3 million and $16.8 million.
	•	Net income per diluted share between $0.57 and $0.67.
	•	Modified pro forma net income per diluted share between $0.63 and $0.73.

 

The above guidance is based upon an estimated effective tax rate of approximately 41.0% and an estimated fully diluted share count of 25.0 million shares.

 

Conference Call

 

The Company will host a conference call to discuss first quarter 2014 financial results today at 5:00 p.m. ET. Hosting the call will be Chris Pappas, chairman and chief executive officer and John Austin, chief financial officer. The conference call can be accessed live over the phone by dialing (877) 705-6003 or for international callers (201) 493-6725. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or for international callers (858) 384-5517; the conference ID is 13580777. The replay will be available until Thursday, May 8, 2014. The call will also be webcast live from the Company’s investor relations website (http://investors.chefswarehouse.com). A replay of the webcast will be available at this location 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 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 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; 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 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 deploy the remaining net proceeds from its September 2013 common stock offering within the timeframe contemplated; the Company’s ability to open, and begin servicing customers from, a new Chicago distribution center and the expenses associated therewith; increased fuel costs 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; the strain on the Company’s infrastructure and resources caused by its growth; the Company’s ability to recover its losses related to the accounting issue at its Michael’s Finer Meats subsidiary from the former owners of that business; and the results of the Company’s continuing investigation into the accounting issue involving its Michael’s Finer Meats subsidiary. 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 on March 12, 2014. 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 in the United States and Canada. The Chefs’ Warehouse, Inc. carries and distributes more than 23,200 products to more than 17,500 customer locations throughout the United States and Canada.

 

Contact: 

Investor Relations

John Austin, (718) 684-8415

 

 

THE CHEFS' WAREHOUSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 28, 2014 AND MARCH 29, 2013
(unaudited; in thousands except share amounts and per share data)
		Thirteen Weeks Ended
		March 28, 2014				March 29, 2013
Net Sales		$	187,183			$	139,419
Cost of Sales			140,256				104,265
Gross Profit			46,927				35,154
Operating Expenses			42,390				29,257
Operating Income			4,537				5,897
Interest Expense			2,059				1,367
Income Before Income Taxes			2,478				4,530
Provision for Income Tax Expense			1,029				1,883
Net Income Available to Common Stockholders		$	1,449			$	2,647
Net Income Per Share Available to Common Stockholders:
Basic		$	0.06			$	0.13
Diluted		$	0.06			$	0.13
Weighted Average Common Shares Outstanding:
Basic			24,618,054				20,747,734
Diluted			24,839,563				20,993,918

 

THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 28, 2014 AND DECEMBER 27, 2013
(in thousands)
			March 28, 2014				December 27, 2013
			(unaudited)
Cash and cash equivalents		$	26,055			$	20,014
Accounts receivable, net			74,208				76,413
Inventories, net			64,399				64,710
Deferred taxes, net			3,282				2,708
Prepaid expenses and other current assets			5,349				16,250
Total current assets			173,293				180,095
Restricted cash			2,071				5,578
Equipment and leasehold improvements, net			33,876				27,589
Software costs, net			2,115				2,265
Goodwill			78,814				78,026
Intangible assets, net			55,886				57,450
Other assets			3,754				3,755
Total assets			349,809				354,758
Accounts payable			30,088				33,925
Accrued liabilities			17,697				15,803
Accrued compensation			5,070				5,996
Current portion of long-term debt			7,091				6,867
Total current liabilities			59,946				62,591
Long-term debt, net of current portion			139,990				140,847
Deferred taxes, net			8,261				8,338
Other liabilities			8,284				10,917
Total liabilities			216,481				222,693
Preferred stock			—				—
Common stock			250				250
Additional paid in capital			97,095				96,973
Cumulative translation adjustment			(521	)			(215	)
Retained earnings			36,504				35,057
Stockholders' equity			133,328				132,065
Total liabilities and stockholders' equity		$	349,809			$	354,758

 

THE CHEFS' WAREHOUSE, INC.
CONDENSED CASH FLOW STATEMENT
FOR THE THIRTEEN WEEKS ENDED  MARCH 28, 2014 AND MARCH 29, 2013
(unaudited; in thousands)
			March 28, 2014				March 29, 2013
Cash flows from operating activities:
Net Income		$	1,449			$	2,647
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			797				668
Amortization			1,468				1,076
Provision for allowance for doubtful accounts			130				192
Deferred credits			37				119
Deferred taxes			(929	)			1,515
Amortization of deferred financing fees			216				143
Stock compensation			355				289
Change in fair value of earnouts			195				—
Changes in assets and liabilities, net of acquisitions:
Accounts receivable			2,246				5,439
Inventories			52				2,740
Prepaid expenses and other current assets			10,894				677
Accounts payable and accrued liabilities			(3,645	)			(2,018	)
Other liabilities			(2,720	)			30
Other assets			(155	)			(59	)
Net cash provided by operating activities			10,390				13,458
Cash flows from investing activities:
Capital expenditures			(5,817	)			(1,380	)
Cash paid for acquisitions			—				(21,885	)
Net cash used in investing activities			(5,817	)			(23,265	)
Cash flows from financing activities:
Change in restricted cash			3,507				2,575
Payment of debt			(1,758	)			(2,043	)
Payment of deferred financing fees			(17	)			(45	)
Borrowings under revolving credit line			—				24,400
Payments under revolving credit line			—				(13,900	)
Surrender of shares to pay withholding taxes			(233	)			(63	)
Net cash provided by financing activities			1,499				10,924
Effect of foreign currency translation on cash and cash equivalents			(31	)			—
Net increase in cash and cash equivalents			6,041				1,117
Cash and cash equivalents at beginning of period			20,014				118
Cash and cash equivalents at end of period		$	26,055			$	1,235

 

THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET INCOME
THIRTEEN WEEKS ENDED MARCH 28, 2014 AND MARCH 29, 2013
(unaudited; in thousands)
		Thirteen Weeks Ended
		March 28, 2014				March 29, 2013
Net Income:		$	1,449			$	2,647
Interest expense			2,059				1,367
Depreciation			797				668
Amortization			1,468				1,076
Provision for income tax expense			1,029				1,883
EBITDA (1)			6,802				7,641
Adjustments:
Stock compensation (2)			355				289
Duplicate rent (3)			462				347
Investigation costs (4)			395				—
Adjusted EBITDA (1)		$	8,014			$	8,277

 

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 peformance 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 to our key employees and our independent directors.
3.	Represents rent expense and other facility costs, including utilities and insurance, incurred on the renovation and expansion of our Bronx, NY distribution facility while we are unable to use the facility.
4.	Represents the costs incurred in our previously disclosed investigation of the accounting issue at Michael's Finer Meats.

 

 

THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF MODIFIED PRO FORMA NET INCOME TO NET INCOME
THIRTEEN WEEKS ENDED MARCH 28, 2014 AND MARCH 29, 2013
(unaudited; in thousands except share amounts and per share data)
Adjustments to Reconcile Modified Pro Forma Net Income to Net Income (1)
		Thirteen Weeks Ended
		March 28, 2014				March 29, 2013
Net Income Available to Common Stockholders		$	1,449			$	2,647
Duplicate rent (2)			462				347
Investigation costs (3)			395				—
Tax effect adjustments (4)			(356	)			(144	)
Total Adjustments			501				203
Modified Pro Forma Net Income Available to Common Stockholders		$	1,950			$	2,850
Diluted Earnings per Share - Modified Pro Forma		$	0.08			$	0.14
Diluted Shares Outstanding - Modified Pro Forma (5)			24,839,563				20,993,918

  

1.	We are presenting modified pro forma net income available to common stockholders 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 rent expense and other facility costs, including utilities and insurance, incurred on the renovation and expansion of our Bronx, NY distribution facility while we are unable to use the facility.
3.	Represents the costs incurred in our previously disclosed investigation of the accounting issue at Michael's Finer meats.
4.	Represents the tax effect of items 2 and 3 above.
5.	Represents diluted shares outstanding of our common stock.

 

 

THE CHEFS' WAREHOUSE, INC.
2014 FULLY DILUTED EPS GUIDANCE RECONCILIATION TO
2014 MODIFIED PRO FORMA FULLY DILUTED EPS GUIDANCE(1)
(unaudited)

 

		Low-End				High-End
			Guidance				Guidance
Net income per diluted share		$	0.57			$	0.67
Duplicate rent (2)			0.03				0.03
Investigation costs (3)			0.02				0.02
Integration costs (4)			0.01				0.01
Modified pro forma net income per diluted share (5)		$	0.63			$	0.73

 

1.	Guidance is based upon an estimated effective tax rate of 41.0% and an estimated fully diluted share count of 25.0 million shares.
2.	Represents rent and occupancy expense expected to be incurred in connection with the renovation and expansion of our Bronx, NY facility while we are unable to utilize the facility during construction.
3.	Represents the costs expected to be incurred in our investigation of the accounting issue at Michael's Finer Meats
4.	Represents costs expected to be incurred to integrate and standardize Allen Brothers' and Michael's Finer Meats' information technology, operations and financial systems.
5.	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 projected 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.

  

 

 

THE CHEFS' WAREHOUSE, INC.

RECONCILIATION OF ADJUSTED EBITDA GUIDANCE FOR FISCAL 2014

(unaudited; in thousands)

 

			Low-End Guidance				High-End Guidance
Net Income:		$	14,300			$	16,800
Provision for income tax expense			10,000				11,700
Depreciation & amortization			10,000				10,500
Interest expense			9,000				9,500
EBITDA (1)			43,300				48,500
Adjustments:
Stock compensation (2)			1,300				1,400
Duplicate rent (3)			1,500				1,600
Investigation costs (4)			600				700
Integration costs (5)			300				300
Adjusted EBITDA (1)		$	47,000			$	52,500

 

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 projected results and which we believe, when considered with both our GAAP results and the reconciliation to estimated net income, provide a more complete understanding of our expectations for 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 expectation regarding our operating performance relative to our estimated 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 rent and occupancy expense expected to be incurred on the renovation and expansion of our Bronx, NY distribution facility while we are unable to use the facility.
4.	Represents the costs expected to be incurred in our investigation of the accounting issue at Michael's Finer Meats.
5.	Represents costs expected to be incurred to integrate and standardize Allen Brothers' and Michael's Finer Meats' information technology, operations and financial systems.