Document


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 9, 2017
 


 
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 9, 2017 (the “Press Release”), The Chefs’ Warehouse, Inc. (the “Company”) announced financial results for the Company’s thirteen and twenty-six weeks ended ended June 30, 2017. 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 9, 2017.
 
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 9, 2017
 
EXHIBIT INDEX
 
Exhibit No.
 
Description
 
Press Release of The Chefs’ Warehouse, Inc. dated August 9, 2017.
 
 



Exhibit


THE CHEFS' WAREHOUSE, INC. 8-K
 
Exhibit 99.1
 
 
The Chefs’ Warehouse Reports Second Quarter 2017 Financial Results
Net Sales Growth of 13.9%
Ridgefield, CT, August 9, 2017 - 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 30, 2017.

Financial highlights for the second quarter of 2017 compared to the second quarter of 2016:

Net sales increased 13.9% to $331.7 million for the second quarter of 2017 from $291.2 million for the second quarter of 2016.
GAAP net income was $3.7 million or $0.14 per diluted share, for the second quarter of 2017 compared to net loss of $(8.5) million, or $(0.33) per diluted share, in the second quarter of 2016.
Modified pro forma net income per diluted share was $0.14 for the second quarter of 2017 compared to modified pro forma earnings per diluted share $0.15 for the second quarter of 2016.
Adjusted EBITDA1 was $18.1 million for the second quarter of 2017 compared to $15.3 million for the second quarter of 2016.

“The positive momentum we experienced in the first quarter continued into the second quarter. Organic growth was up 10% in Q2 and reported sales growth was up approximately 14%. In addition, we are having success on the bottom line with gross margins up 24 basis points, including a 12 basis point increase in the protein division,” said Chris Pappas, chairman and chief executive officer of The Chefs' Warehouse, Inc. “The investments we made in our infrastructure - additional talent, technology and facilities - are bearing fruit and positioning us well for the future.”

Second Quarter Fiscal 2017 Results

Net sales for the quarter ended June 30, 2017 increased 13.9% to $331.7 million from $291.2 million for the quarter ended June 24, 2016. Organic growth contributed $29.1 million, or 10.0% to sales growth in the quarter. The remaining sales growth of $11.3 million, or 3.9% resulted from the acquisition of MT Food on June 27, 2016. Compared to the second quarter of 2016, organic case count grew approximately 6.4%, while the number of unique customers and placements grew 4.5% and 6.1%, respectively, in our specialty business in the second quarter of 2017. Pounds sold in our protein division increased 1.2% for the second quarter of 2017 compared to the prior year quarter. Internally calculated inflation increased sequentially from the first quarter of 2017 and was approximately 3.8% during the quarter, consisting of 4.3% inflation in our specialty division and 2.8% in our protein division.
 
Gross profit increased approximately 15.0% to $82.6 million for the second quarter of 2017 from $71.8 million for the second quarter of 2016. Gross profit margin increased approximately 24 basis points to 24.9% from 24.7%, due in part to an increased mix of business from our specialty division. Gross profit margins increased approximately 12 basis points in the Company’s specialty division and approximately 12 basis points in the protein division.
 
Total operating expenses increased by approximately 16.2% to $70.4 million for the second quarter of 2017 from $60.6 million for the second quarter of 2016. As a percentage of net sales, operating expenses were 21.2% in the second quarter of 2017 compared to 20.8% in the second quarter of 2016. The increase in the Company’s operating expense ratio is largely attributable to the impact of a prior year $1.5 million gain upon the reduction of the Company’s earn-out liabilities, increased warehouse labor costs, higher fleet

1Please 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.



related expenses, higher compensation costs related to the Company’s management infrastructure and increased bad debt expense, offset in part by leverage on the Company's workman’s comp, health insurance and facility costs.

Operating income for the second quarter of 2017 was $12.2 million compared to $11.2 million for the second quarter of 2016. 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 3.7% in the second quarter of 2017 compared to 3.9% in the second quarter of 2016.

Total interest expense decreased to $5.9 million for the second quarter of 2017 June 30, 2017 compared to $25.7 million for the second quarter of 2016 due primarily to the prior year $22.3 million prepayment penalty associated with the Company's debt refinancing in June 2016. Exclusive of the prepayment penalty, interest expense increased due to higher levles of debt associated with that refinancing.

Net income for the second quarter of 2017 was $3.7 million, or $0.14 per diluted share, compared to net loss of $(8.5) million, or $(0.33) per diluted share, for the second quarter of 2016.

Adjusted EBITDA1 was $18.1 million for the second quarter of 2017 compared to $15.3 million for the second quarter of 2016. For the second quarter of 2017, modified pro forma net income1 was $3.7 million and modified pro forma EPS1 was $0.14 compared to modified pro forma net income of $3.9 million and modified pro forma EPS of $0.15 for the second quarter of 2016.

Full Year 2017 Guidance
Based on current trends in the business, the Company is providing the following updated financial guidance for fiscal year 2017:

Net sales between $1.28 billion and $1.29 billion
Gross profit between $325.0 million and $330.0 million
Net income between $9.8 million and $10.8 million
Net income per diluted share between $0.37 and $0.41
Adjusted EBITDA between $64.0 million and $66.4 million
Modified pro forma net income per diluted share between $0.38 and $0.42

This guidance is based on an effective tax rate of approximately 41.5% and fully diluted shares of approximately 26.5 million shares. Note that the Company does not expect the outstanding convertible notes to be dilutive and accordingly those convertible shares are not included in the fully diluted share count.

Second Quarter 2017 Earnings Conference Call
The Company will host a conference call to discuss second quarter 2017 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 (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 13665417. The replay will be available until Wednesday, August 16, 2017, 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

2



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 10, 2017 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 43,000 products to more than 28,000 customer locations throughout the United States and Canada.

Contact:
Investor Relations
John Austin, CFO, (718) 684-8415




3



THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 30, 2017 AND JUNE 24, 2016
(unaudited, in thousands except share amounts and per share data)
 
Thirteen Weeks Ended
 
Twenty-six Weeks Ended
 
June 30, 2017
 
June 24, 2016
 
June 30, 2017
 
June 24, 2016
 
 
 
 
 
 
 
 
Net Sales
$
331,656

 
$
291,209

 
$
619,346

 
$
552,045

Cost of Sales
249,060

 
219,406

 
462,846

 
414,284

Gross Profit
82,596

 
71,803

 
156,500

 
137,761

 
 
 
 
 
 
 
 
Operating Expenses
70,433

 
60,615

 
141,216

 
121,213

Operating Income
12,163

 
11,188

 
15,284

 
16,548

 
 
 
 
 
 
 
 
Interest Expense
5,880

 
25,667

 
11,813

 
29,323

Loss on Asset Disposal

 

 

 
3

Income (Loss) Before Income Taxes
6,283

 
(14,479
)
 
3,471

 
(12,778
)
 
 
 
 
 
 
 
 
Provision for Income Tax Expense (Benefit)
2,609

 
(6,024
)
 
1,439

 
(5,316
)
 
 
 
 
 
 
 
 
Net Income (Loss)
$
3,674

 
$
(8,455
)
 
$
2,032

 
$
(7,462
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income (Loss) Per Share:
 

 
 

 
 

 
 

Basic
$
0.14

 
$
(0.33
)
 
$
0.08

 
$
(0.29
)
Diluted
$
0.14

 
$
(0.33
)
 
$
0.08

 
$
(0.29
)
 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding:
 

 
 

 
 

 
 

Basic
25,990,580

 
25,912,686

 
25,971,409

 
25,898,368

Diluted
27,276,575

 
25,912,686

 
26,021,439

 
25,898,368


4



THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2017 AND DECEMBER 30, 2016
(in thousands)
 
June 30, 2017
 
December 30, 2016
 
(unaudited)
 
 

Cash
$
37,004

 
$
32,862

Accounts receivable, net
129,194

 
128,030

Inventories, net
96,247

 
87,498

Prepaid expenses and other current assets
11,813

 
16,101

Total current assets
274,258

 
264,491

 
 
 
 
Equipment and leasehold improvements, net
64,860

 
62,183

Software costs, net
5,422

 
5,927

Goodwill
167,227

 
163,784

Intangible assets, net
122,753

 
131,131

Other assets
3,120

 
6,022

Total assets
$
637,640

 
$
633,538

 
 
 
 
 
 
 
 
Accounts payable
$
78,267

 
$
65,514

Accrued liabilities
17,279

 
17,546

Accrued compensation
8,983

 
9,519

Current portion of long-term debt
4,621

 
14,795

Total current liabilities
109,150

 
107,374

 
 
 
 
Long-term debt, net of current portion
315,493

 
317,725

Deferred taxes, net
7,686

 
6,958

Other liabilities
7,989

 
7,721

Total liabilities
440,318

 
439,778

 
 
 
 
Preferred stock

 

Common stock
264

 
263

Additional paid in capital
128,473

 
127,180

Cumulative foreign currency translation adjustment
(1,950
)
 
(2,186
)
Retained earnings
70,535

 
68,503

Stockholders' equity
197,322

 
193,760

 
 
 
 
Total liabilities and stockholders' equity
$
637,640

 
$
633,538



5



THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 30, 2017 AND JUNE 24, 2016
(unaudited, in thousands)
 
June 30, 2017
 
June 24, 2016
Cash flows from operating activities:
 
 
 
Net income (loss)
$
2,032

 
$
(7,462
)
 
 
 
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 

 
 

Depreciation
4,227

 
2,937

Amortization
5,731

 
5,567

Provision for allowance for doubtful accounts
1,747

 
1,552

Deferred credits
195

 
1,423

Deferred taxes
588

 
790

Amortization of deferred financing fees
1,064

 
675

Loss on debt extinguishment

 
22,310

Stock compensation
1,614

 
1,369

Loss on sale of assets

 
3

Change in fair value of contingent earn-out liability
48

 
(1,815
)
Changes in assets and liabilities, net of acquisitions:
 

 
 

Accounts receivable
(2,922
)
 
3,215

Inventories
(8,678
)
 
1,735

Prepaid expenses and other current assets
4,304

 
(11,799
)
Accounts payable and accrued liabilities
11,903

 
(16,559
)
Other liabilities
42

 
(177
)
Other assets
(219
)
 
(463
)
Net cash provided by operating activities
21,676

 
3,301

 
 
 
 
Cash flows from investing activities:
 

 
 

Capital expenditures
(6,370
)
 
(8,034
)
Net cash used in investing activities
(6,370
)
 
(8,034
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Payment of debt
(10,444
)
 
(130,474
)
Proceeds from issuance of debt

 
301,950

Net change in revolving credit facility

 
(93,382
)
Cash paid for deferred financing fees

 
(6,189
)
Debt prepayment penalty and other fees

 
(21,219
)
Cash paid for contingent earn-out liability
(500
)
 

Surrender of shares to pay withholding taxes
(319
)
 
(424
)
Net cash (used in) provided by financing activities
(11,263
)
 
50,262

 
 
 
 
Effect of foreign currency translation on cash and cash equivalents
99

 
268

 
 
 
 
Net increase in cash and cash equivalents
4,142

 
45,797

Cash and cash equivalents at beginning of period
32,862

 
2,454

Cash and cash equivalents at end of period
$
37,004

 
$
48,251


6



THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) PER COMMON SHARE
THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 30, 2017 AND JUNE 24, 2016
(unaudited; in thousands except share amounts and per share data)

 
Thirteen Weeks Ended
 
Twenty-six Weeks Ended
 
June 30, 2017

 
June 24, 2016

 
June 30, 2017

 
June 24, 2016

Numerator:
 
 
 
 
 
 
 
Net Income (Loss)
$
3,674

 
$
(8,455
)
 
$
2,032

 
$
(7,462
)
Add effect of dilutive securities:
 
 
 
 
 
 
 
Interest on convertible notes, net of tax
134

 

 

 

Adjusted Net Income (Loss)
$
3,808

 
$
(8,455
)
 
$
2,032

 
$
(7,462
)
Denominator:
 
 
 
 
 
 
 
Weighted average basic common shares outstanding
25,990,580

 
25,912,686

 
25,971,409

 
25,898,368

Dilutive effect of unvested common shares
48,621

 

 
50,030

 

Dilutive effect of convertible notes
1,237,374

 

 

 

Weighted average diluted common shares outstanding
27,276,575

 
25,912,686

 
26,021,439

 
25,898,368

 
 
 
 
 
 
 
 
Net Income (Loss) Per Share:
 
 
 
 
 
 
 
Basic
0.14

 
(0.33
)
 
0.08

 
(0.29
)
Diluted
0.14

 
(0.33
)
 
0.08

 
(0.29
)



7



THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET INCOME (LOSS)
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 30, 2017 AND JUNE 24, 2016
(unaudited; in thousands)
 
Thirteen Weeks Ended
 
Twenty-six Weeks Ended
 
June 30, 2017
 
June 24, 2016
 
June 30, 2017
 
June 24, 2016
Net Income (Loss)
$
3,674

 
$
(8,455
)
 
$
2,032

 
$
(7,462
)
Interest expense
5,880

 
25,667

 
11,813

 
29,323

Depreciation
2,105

 
1,731

 
4,227

 
2,937

Amortization
2,911

 
2,784

 
5,731

 
5,567

Provision for income tax (benefit) expense
2,609

 
(6,024
)
 
1,439

 
(5,316
)
EBITDA (1)
17,179

 
15,703

 
25,242

 
25,049

 
 
 
 
 
 
 
 
Adjustments:
 

 
 

 
 

 
 

Stock compensation (2)
870

 
809

 
1,614

 
1,369

Duplicate rent (3)

 
129

 
86

 
432

Integration and deal costs/third party transaction costs (4)

 
49

 

 
272

Change in fair value of earn-out obligation (5)
24

 
(1,470
)
 
48

 
(1,815
)
Moving expenses (6)
24

 
108

 
374

 
412

 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
$
18,097

 
$
15,328

 
$
27,364

 
$
25,719


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.
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.
3.
Represents duplicate rent expense for our Bronx, NY, Chicago, IL and San Francisco, CA distribution facilities.
4.
Represents transaction related costs incurred to complete and integrate acquisitions, including due diligence, legal, integration, and cash and non-cash stock transaction bonuses.
5.
Represents the non-cash change in fair value of contingent earn-out liabilities related to our acquisitions.
6.
Represents moving expenses for the consolidation of our Chicago, IL, San Francisco, CA, Los Angeles, CA and Miami, FL facilities.


8



THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF MODIFIED PRO FORMA NET INCOME TO NET INCOME (LOSS)
THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 30, 2017 AND JUNE 24, 2016
(unaudited; in thousands except share amounts and per share data)
 
Thirteen Weeks Ended
 
Twenty-six Weeks Ended
 
June 30, 2017
 
June 24, 2016
 
June 30, 2017
 
June 24, 2016
Net Income (Loss)
$
3,674

 
$
(8,455
)
 
$
2,032

 
$
(7,462
)
 
 
 
 
 
 
 
 
Adjustments to Reconcile Net Income (Loss) to Modified Pro Forma Net Income (1):
 

 
 

 
 
 
 

Duplicate rent (2)

 
129

 
86

 
432

Integration and deal costs/third party transaction costs (3)

 
49

 

 
272

Moving expenses (4)
24

 
108

 
374

 
412

Change in fair value of earn-out obligation (5)
24

 
(1,470
)
 
48

 
(1,815
)
Loss on early extinguishment of debt

 
22,310

 

 
22,310

Tax effect of adjustments (6)
(20
)
 
(8,788
)
 
(211
)
 
(8,990
)
 
 
 
 
 
 
 
 
Total Adjustments
28

 
12,338

 
297

 
12,621

 
 
 
 
 
 
 
 
Modified Pro Forma Net Income
$
3,702

 
$
3,883

 
$
2,329

 
$
5,159

 
 
 
 
 
 
 
 
Diluted Earnings per Share - Modified Pro Forma
$
0.14

 
$
0.15

 
$
0.09

 
$
0.20

 
 
 
 
 
 
 
 
Diluted Shares Outstanding - Modified Pro Forma
27,276,575

 
27,201,355

 
26,021,439

 
25,943,433


1.
We are presenting modified pro forma net income and modified pro forma earnings per 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 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, Chicago, IL 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 Chicago, IL, San Francisco, CA, Los Angeles, CA and Miami, FL facilities.

5.
Represents the non-cash change in fair value of contingent earn-out liabilities related to our acquisitions.

6.
Represents the tax effect of items 2 through 5 above.



9



THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF MODIFIED PRO FORMA NET INCOME PER COMMON SHARE
THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 30, 2017 AND JUNE 24, 2016
(unaudited; in thousands except share amounts and per share data)

 
Thirteen Weeks Ended
 
Twenty-six Weeks Ended
 
June 30, 2017

 
June 24, 2016

 
June 30, 2017

 
June 24, 2016

Numerator:
 
 
 
 
 
 
 
Modified Pro Forma Net Income
$
3,702

 
$
3,883

 
$
2,329

 
$
5,159

Add effect of dilutive securities:
 
 
 
 
 
 
 
Interest on convertible notes, net of tax
134

 
134

 

 

Adjusted Modified Pro Forma Net Income
$
3,836

 
$
4,017

 
$
2,329

 
$
5,159

Denominator:
 
 
 
 
 
 
 
Weighted average basic common shares outstanding
25,990,580

 
25,912,686

 
25,971,409

 
25,898,368

Dilutive effect of unvested common shares
48,621

 
51,295

 
50,030

 
45,065

Dilutive effect of convertible notes
1,237,374

 
1,237,374

 

 

Weighted average diluted common shares outstanding
27,276,575

 
27,201,355

 
26,021,439

 
25,943,433

 
 
 
 
 
 
 
 
Modified Pro Forma Net Income per share:
 
 
 
 
 
 
 
Diluted
$
0.14

 
$
0.15

 
$
0.09

 
$
0.20



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THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF ADJUSTED EBITDA GUIDANCE FOR FISCAL 2017
(unaudited; in thousands)

 
Low-End Guidance
 
High-End Guidance
Net Income:
$
9,800

 
$
10,800

Provision for income tax expense
7,000

 
7,700

Depreciation & amortization
21,000

 
21,000

Interest expense
22,400

 
23,000

EBITDA (1)
60,200

 
62,500

 
 
 
 
Adjustments:
 

 
 

Stock compensation (2)
3,300

 
3,400

Duplicate occupancy and moving costs (3)
500

 
500

 
 
 
 
Adjusted EBITDA (1)
$
64,000

 
$
66,400

 
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.
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 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.

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THE CHEFS' WAREHOUSE, INC.
2017 FULLY DILUTED EPS GUIDANCE RECONCILIATION TO 2017 MODIFIED
PRO FORMA FULLY DILUTED EPS GUIDANCE (1)(2)

 
Low-End
 
High-End
 
Guidance
 
Guidance
 
 
 
 
Net income per diluted share
$
0.37

 
$
0.41

 
 
 
 
Duplicate occupancy and moving costs (3)
0.01

 
0.01

 
 
 
 
Modified pro forma net income per diluted share
$
0.38

 
$
0.42

 
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 41.5% and an estimated fully diluted share count of approximately 26.5 million 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.



12