RIDGEFIELD, Conn., Oct. 28, 2020 (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 third quarter ended September 25, 2020.

Financial highlights for the third quarter of 2020:

• Net sales decreased 36.0% to $254.0 million for the third quarter of 2020 from $396.9 million for the third quarter of 2019.
• GAAP net loss was $11.4 million, or $(0.31) per diluted share, for the third quarter of 2020 compared to net income of $4.4 million, or $0.15 per diluted share, in the third quarter of 2019.
• Adjusted EPS¹ was $(0.38) for the third quarter of 2020 compared to $0.23 for the third quarter of 2019.
• Adjusted EBITDA¹ was $(4.9) million for the third quarter of 2020 compared to $21.6 million for the third quarter of 2019.
• On a sequential quarter basis, net sales grew 26.7% or $53.5 million compared to the second quarter of fiscal 2020, while net loss and negative adjusted EBITDA improved by $8.9 million and $8.8 million, respectively.
• The Company had approximately $193.0 million of cash and cash equivalents on the balance sheet and $44.3 million of availability on its asset-based loan facility as of October 23, 2020.

“Business trends improved sequentially during the third quarter as COVID related restrictions eased in certain markets” said Chris Pappas, Chairman and Chief Executive Officer of the Company. “Pent-up demand for dining out was evident as more customers opened for both indoor and outdoor dining. Despite significant restrictions on indoor dining in our largest urban markets, September sales averaged approximately 69% of the same period in fiscal 2019 and certain days during the month experienced greater than 80% of prior year sales. During the quarter, we continued to add new customers across segments including restaurants, retail and hospitality. We continue to maintain a strong liquidity position and our team remains focused on supporting our customers, suppliers and each other with a view to building sustainable long-term growth in our critical and dynamic industry.”

Reclassifications

In response to an SEC comment letter, the Company has reclassified its food processing costs, previously included in operating expenses, to cost of sales and has split its historical presentation of operating expenses between selling, general and administrative expenses and other operating expenses. These reclassifications have no impact on the Company’s net income, cash flows or EBITDA.

Third Quarter Fiscal 2020 Results

Net sales for the quarter ended September 25, 2020 decreased 36.0% to $254.0 million from $396.9 million for the quarter ended September 27, 2019. Organic revenue declined $178.1 million, or 44.9% versus the prior year quarter. Sales growth of $35.3 million, or 8.9%, resulted from acquisitions. Organic case count declined approximately 49.3% in the Company’s specialty category with unique customers and placements declines at 32.2% and 46.7%, respectively, compared to the prior year quarter. Pounds sold in the Company’s center-of-the-plate category decreased approximately 45.4% compared to the prior year quarter. Estimated inflation was 1.6% in the Company’s specialty categories and was 2.7% in the center-of-the-plate categories compared to the prior year quarter.

Gross profit decreased approximately 37.6% to $60.6 million for the third quarter of 2020 from $97.2 million for the third quarter of 2019. Gross profit margin decreased approximately 63 basis points to 23.9% from 24.5%. Gross margins in the Company’s specialty category decreased 240 basis points and gross margins increased 142 basis points in the Company’s center-of-the-plate category compared to the prior year quarter. Shifts in product mix due to both customer mix and menu adjustment during the COVID period was the primary driver of these gross profit margin changes versus the prior year quarter.

Selling, general and administrative expenses decreased by approximately 8.6% to $76.7 million for the third quarter of 2020 from $84.0 million for the third quarter of 2019. As a percentage of net sales, operating expenses were 30.2% in the third quarter of 2020 compared to 21.2% in the third quarter of 2019. Lower costs associated with compensation and benefits and lower general and administrative related costs, partially offset by impacts of recent acquisitions were the primary drivers of the decrease in operating expenses in the quarter.

Other operating expenses decreased by approximately $6.8 million primarily due to non-cash credits of $4.6 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash charges of $2.5 million in the prior year quarter.

Operating loss for the third quarter of 2020 was $11.9 million compared to operating income of $10.6 million for the third quarter of 2019. The decrease in operating income was driven primarily by lower gross profit, offset in part by lower operating expenses, as discussed above. As a percentage of net sales, operating loss was 4.7% in the third quarter of 2020 as compared to operating income of 2.6% in the third quarter of 2019.

Total interest expense increased to $4.7 million for the third quarter of 2020 compared to $4.5 million for the third quarter of 2019. The increase was primarily due to higher average long-term debt balances offset by lower effective interest rates charged on our outstanding debt.

Net loss for the third quarter of 2020 was $11.4 million, or $(0.31) per diluted share, compared to net income of $4.4 million, or $0.15 per diluted share, for the third quarter of 2019.

Adjusted EBITDA¹ was $(4.9) million for the third quarter of 2020 compared to $21.6 million for the third quarter of 2019. For the third quarter of 2020, adjusted net loss¹ was $13.7 million, or $(0.38) per diluted share compared to adjusted net income of $6.8 million, or $0.23 per diluted share for the third quarter of 2019.

As of October 23, 2020, the Company had approximately $237.3 million of available liquidity comprised of $193.0 million in cash and cash equivalents and $44.3 million of availability under the Company’s ABL Credit Facility. Net debt as of October 23, 2020 was approximately $209.1 million, inclusive of cash and cash equivalents.

Full Year 2020 Guidance

Due to the continued uncertainty regarding the pace of economic recovery and the lifting of in-dining restrictions across our markets, the Company will not be providing guidance for 2020. The Company will look to provide guidance as it gains more clarity on the expected length of the economic downturn and the outlook for customer re-openings.

About The Chefs’ Warehouse

The Chefs’ Warehouse, Inc. (http://www.chefswarehouse.com) is a premier distributor of specialty food products in the United States and Canada focused on serving the specific needs of chefs who own and/or operate some of the nation’s leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores. The Chefs’ Warehouse, Inc. carries and distributes more than 55,000 products to more than 34,000 customer locations throughout the United States and Canada.