The Chefs’ Warehouse, Inc., a premier distributor of specialty food products in the United States and Canada, today reported financial results for its fourth quarter ended December 25, 2020.
Financial highlights for the fourth quarter of 2020:
“October and November sales trends remained relatively steady at approximately 70% of prior year, on a fiscal comparison basis, as sequential growth in certain markets was offset by declining outdoor dining in the Northeast and colder-weather regions.” said Chris Pappas, Chairman and Chief Executive Officer of the Company. “Post-Thanksgiving, sales trended lower as in-door dining restrictions were re-instated in a number of key markets. December sales remained above 60% of 2019 as customers pivoted to more take-out and delivery and limited outdoor dining continued despite the change in season. Pent-up demand was evident in markets with more favorable weather and restaurant capacity allowances such as Florida and Texas and we continue to be encouraged by our customer acquisition trends. Our balance sheet and liquidity positions us for future growth as COVID-related conditions improve.”
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.
Transition of Trademarks
During the fourth quarter of fiscal 2020, the Company committed to a plan to shift its brand strategy to leverage its Allen Brothers brand in the west coast region and determined that its Del Monte, Ports Seafood and Bassian Farms trademarks did not fit its long-term strategic objectives. As a result, the Company recorded a $24.2 million non-cash charge to write-down the value of its Del Monte and Bassian Farms trademarks.
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.
Fourth Quarter Fiscal 2020 Results
Net sales for the quarter ended December 25, 2020 decreased 34.0% to $281.7 million from $426.5 million for the quarter ended December 27, 2019. Organic sales declined $177.4 million, or 41.7% versus the prior year quarter. Sales growth of $32.6 million, or 7.7%, resulted from acquisitions. Organic case count declined approximately 47.4% in the Company’s specialty category with unique customers and placements declines at 29.2% and 45.8%, respectively, compared to the prior year quarter. Pounds sold in the Company’s center-of-the-plate category decreased approximately 41.4% compared to the prior year quarter. Estimated deflation was 0.4% in the Company’s specialty categories and estimated inflation was 1.6% in the center-of-the-plate categories compared to the prior year quarter.
Gross profit decreased approximately 42.5% to $58.9 million for the fourth quarter of 2020 from $102.4 million for the fourth quarter of 2019. Gross profit margin decreased approximately 311 basis points to 20.9% from 24.0%. Gross margins in the Company’s specialty category decreased 648 basis points and gross margins increased 87 basis points in the Company’s center-of-the-plate category compared to the prior year quarter. Gross profit results include a charge of approximately $4.8 million related to estimated inventory losses from obsolescence due to impacts of the COVID-19 pandemic.
Selling, general and administrative expenses decreased by approximately 0.5% to $82.9 million for the fourth quarter of 2020 from $83.4 million for the fourth quarter of 2019. As a percentage of net sales, operating expenses were 29.4% in the fourth quarter of 2020 compared to 19.5% in the fourth 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 increased by approximately $23.6 million primarily due to a $24.2 million impairment of Del Monte and Bassian trademarks.
Operating loss for the fourth quarter of 2020 was $48.3 million compared to operating income of $18.4 million for the fourth quarter of 2019. The decrease in operating income was driven primarily by lower gross profit and higher other operating expenses, as discussed above. As a percentage of net sales, operating loss was 17.1% in the fourth quarter of 2020 as compared to operating income of 4.3% in the fourth quarter of 2019.
Total interest expense increased to $5.3 million for the fourth quarter of 2020 compared to $4.4 million for the fourth quarter of 2019. The increase was primarily due to higher average long-term debt balances, partially offset by lower effective interest rates charged on the Company’s outstanding debt.
Net loss for the fourth quarter of 2020 was $37.1 million, or $(1.02) per diluted share, compared to net income of $10.9 million, or $0.36 per diluted share, for the fourth quarter of 2019.
Adjusted EBITDA1 was $(10.5) million for the fourth quarter of 2020 compared to $28.2 million for the fourth quarter of 2019. For the fourth quarter of 2020, adjusted net loss1 was $19.0 million, or $(0.52) per diluted share compared to adjusted net income of $12.1 million, or $0.39 per diluted share for the fourth quarter of 2019.
As of February 5, 2021, the Company had approximately $232.2 million of available liquidity comprised of $193.6 million in cash and cash equivalents and $38.6 million of availability under the Company’s ABL Credit Facility. Net debt as of January 29, 2021 was approximately $210.2 million, inclusive of cash and cash equivalents.
Full Year 2021 Guidance
Due to the continued uncertainty regarding the pace of economic recovery and the lifting of in-door dining restrictions across our markets, the Company will not be providing guidance for 2021 at this time. 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.
Fourth Quarter 2020 Earnings Conference Call
The Company will host a conference call to discuss fourth quarter 2020 financial results today at 8:30 a.m. EST. 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/. An online archive of the webcast will be available on the Company’s investor relations website.
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 50,000 products to more than 34,000 customer locations throughout the United States and Canada.
Jim Leddy, CFO, (718) 684-8415