Chefs Warehouse : The Chefs' Warehouse Reports Fourth Quarter 2016 Financial Results

February 21, 2017

RIDGEFIELD, Conn., Feb. 21, 2017 (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 fourth quarter and year ended December 30, 2016.

Net sales increased 17.0% to $342.9 million for the fourth quarter of 2016 from $293.1 million for the fourth quarter of 2015.

GAAP net income was $9.1 million or $0.34 per diluted share, for the fourth quarter of 2016 compared to $6.7 million, or $0.25 per diluted share, in the fourth quarter of 2015.

Modified pro forma earnings per diluted share1 was $0.18 for the fourth quarter of 2016 compared to $0.26 for the fourth quarter of 2015.

Adjusted EBITDA1 was $19.9 million for the fourth quarter of 2016 compared to $20.8 million for the fourth quarter of 2015.

"We continued to show very strong and consistent growth in our business during the fourth quarter. We also continued to make great progress in our protein businesses as margins improved in line with expectations," said Chris Pappas, chairman and chief executive officer of The Chefs' Warehouse, Inc. "In 2017 we will continue to focus on building our specialty business, improving margins and processes in our protein companies and facilitating cross sell opportunities between our specialty and protein business units. We are excited to have the consolidation of our MT Food Service acquisition into our Chicago operation completed. We are also continuing to invest in our technology platform as we accelerate the rollout of our ecommerce platform, which will enable a much more seamless online customer experience."

Net sales for the quarter ended December 30, 2016 increased 17.0% to $342.9 million from $293.1 million for the quarter ended December 25, 2015. Organic growth contributed $33.8 million, or 11.5% to sales growth in the quarter, which included an extra week in the fiscal fourth quarter of 2016. The Company estimates that extra week contributed approximately $24.1 million of net sales to the fourth quarter. The remaining sales growth of $16.0 million, or 5.5% resulted from the acquisition of M.T. Food Service, Inc. on June 27, 2016. Compared to the fourth quarter of 2015, case counts in the Company's specialty division grew approximately 7.3%, adjusted for the impact of the extra week in the fiscal quarter, while the number of unique customers and placements grew 6.6% and 6.1%, respectively, in the core specialty business in the fourth quarter of 2016. Pounds sold in the Company's protein division decreased 2.3% for the fourth quarter of 2016 compared to the prior year quarter, adjusted for the estimated impact of the extra week in the fiscal quarter of 2016.

Deflation was approximately 1.8% during the quarter, consisting of 1.6% deflation in the specialty division and deflation of 2.1% in the protein division.

Gross profit increased approximately 15.6% to $89.1 million for the fourth quarter of 2016 from $77.1 million for the fourth quarter of 2015. Gross profit margin decreased approximately 33 basis points to 26.0% from 26.3%. Gross profit margins decreased approximately 106 basis points in the Company's specialty division, due in part to the acquisition of MT Food Service, compared to a very strong prior year comparison. Gross profit margins increased approximately 84 basis points in the protein division as performance in each of the Company's protein business units continues to improve.

Total operating expenses increased by approximately 7.5% to $66.7 million for the fourth quarter of 2016 from $62.0 million for the fourth quarter of 2015. As a percentage of net sales, operating expenses were 19.4% in the fourth quarter of 2016 compared to 21.2% in the fourth quarter of 2015. The decrease in the Company's operating expense ratio is largely attributable to the gain from the reduction of the Company's estimated earn-out liability related to the Del Monte acquisition, offset in part by increased warehouse and delivery labor costs, higher occupancy expense related to the Company's increased warehouse capacity and investments in management personnel.

Operating income for the fourth quarter of 2016 was $22.4 million compared to $15.1 million for the fourth quarter of 2015. The increase in operating income was driven primarily by higher gross profit offset in part by higher operating expenses, as discussed above. As a percentage of net sales, operating income was 6.5% in the fourth quarter of 2016 compared to

5.1% in the fourth quarter of 2015.

Interest expense increased to $6.4 million for the fourth quarter of 2016 compared to $3.7 million in the fourth quarter of 2015 due to higher levels of debt and financing costs as a result of the Company's previously disclosed refinancing completed on June 22, 2016.

Net income for the fourth quarter of 2016 was $9.1 million, or $0.34 per diluted share, compared to net income of $6.7 million, or $0.25 per diluted share, for the fourth quarter of 2015.

Adjusted EBITDA1 was $19.9 million for the fourth quarter of 2016 compared to $20.8 million for the fourth quarter of 2015. For the fourth quarter of 2016, modified pro forma net income1 was $4.7 million and modified pro forma EPS1 was $0.18 compared to modified pro forma net income of $7.0 million and modified pro forma EPS of $0.26 for the fourth quarter of 2015.

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

Net sales between $1.25 billion and $1.28 billion Gross profit between $320.0 million and $330.0 million Net income between $9.0 million and $10.5 million

Net income per diluted share between $0.34 and $0.40 Adjusted EBITDA between $62.0 million and $66.0 million

Modified pro forma net income per diluted share between $0.34 and $0.41

This guidance is based on an effective tax rate of approximately 41.5% to 42.0% 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.

The Company will host a conference call to discuss fourth quarter 2016 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 13654351. The replay will be available until Tuesday, February 28, 2017, 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 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 4, 2016 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.

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.

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 and modified pro forma EPS to these measures' most directly comparable GAAP measure.

Provision for Income Tax Expense 7,013 4,701 2,653 11,502 Net Income $ 9,142 $ 6,655 $ 3,023 $ 16,209

Cash $ 32,862 $ 2,454

Accounts receivable, net 128,030 124,139

Inventories, net 87,498 92,758

Prepaid expenses and other current assets 16,101 9,164 Total current assets 264,491 228,515

Other assets 6,022 4,467

Total assets $ 633,538 $ 579,803