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) |
Not Applicable |
Exhibit No. | Description | |
Earn-Out Agreement, dated August 25, 2017 by and among Fells Point, LLC, Fells Point Wholesale Meats, Inc., Erik M. Oosterwijk and Leendert H. Pruissen. (Incorporated by reference to Exhibit 2.1 to the registrants Current Report on Form 8-K filed on August 25, 2017) | ||
Asset Purchase Agreement dated as of August 25, 2017, by and among Fells Point, LLC, a Delaware limited liability company, Fells Point Wholesale Meats, Inc., a Maryland close corporation, Erik M. Oosterwijk, and Leendert H. Pruissen. (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed on August 25, 2017) | ||
Consent of BDO USA, LLP, Independent Auditors | ||
Audited consolidated financial statements of Fells Point Wholesale Meats, Inc. as of and for the year ended December 31, 2016, and the unaudited consolidated financial statements as of June 30, 2017 and for the six months ended June 30, 2017 and June 30, 2016. | ||
Unaudited pro forma condensed combined financial information reflecting the acquisition of Fells Point Wholesale Meats, Inc. into a wholly owned subsidiary of the Company as of and for the twenty-six weeks ended June 30, 2017, and for the fiscal year ended December 30, 2016. |
THE CHEFS’ WAREHOUSE, INC. | ||
By: | /s/ John D. Austin | |
Name: Title: | John D. Austin Chief Financial Officer |
Exhibit No. | Description | |
Earn-Out Agreement, dated August 25, 2017 by and among Fells Point, LLC, Fells Point Wholesale Meats, Inc., Erik M. Oosterwijk and Leendert H. Pruissen. (Incorporated by reference to Exhibit 2.1 to the registrants Current Report on Form 8-K filed on August 25, 2017) | ||
Asset Purchase Agreement dated as of August 25, 2017, by and among Fells Point, LLC, a Delaware limited liability company, Fells Point Wholesale Meats, Inc., a Maryland close corporation, Erik M. Oosterwijk, and Leendert H. Pruissen. (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be provided supplementally to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed on August 25, 2017) | ||
Consent of BDO USA, LLP, Independent Auditors | ||
Audited consolidated financial statements of Fells Point Wholesale Meats, Inc. as of and for the year ended December 31, 2016, and the unaudited consolidated financial statements as of June 30, 2017 and for the six months ended June 30, 2017 and June 30, 2016. | ||
Unaudited pro forma condensed combined financial information reflecting the acquisition of Fells Point Wholesale Meats, Inc. into a wholly owned subsidiary of the Company as of and for the twenty-six weeks ended June 30, 2017, and for the fiscal year ended December 30, 2016. |
Page | ||
Independent Auditor's Report | ||
Consolidated Financial Statements: | ||
/s/ BDO USA, LLP | |
Stamford, CT | |
November 7, 2017 |
June 30, 2017 (unaudited) | December 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,298 | $ | 712 | |||
Accounts receivable, net of allowance for doubtful accounts of $147 and $144, respectively | 4,748 | 4,657 | |||||
Inventories | 2,262 | 2,198 | |||||
Prepaid expenses and other current assets | 132 | 197 | |||||
Total current assets | 8,440 | 7,764 | |||||
Property, plant and equipment, net | 4,897 | 5,024 | |||||
Total assets | $ | 13,337 | $ | 12,788 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,822 | $ | 1,500 | |||
Accrued liabilities | 90 | 106 | |||||
Current portion of long-term debt | 201 | 201 | |||||
Total current liabilities | 2,113 | 1,807 | |||||
Long-term debt, net of current portion | 1,572 | 1,673 | |||||
Deferred taxes, net | 72 | 74 | |||||
Total liabilities | 3,757 | 3,554 | |||||
Commitments | — | — | |||||
Equity: | |||||||
Common stock (no par value, 1,000 shares authorized, 200 shares issued and outstanding at June 30, 2017 and December 31, 2016) | 20 | 20 | |||||
Retained earnings | 8,874 | 8,575 | |||||
Fells Point Wholesale Meats, Inc. shareholders' equity | 8,894 | 8,595 | |||||
Non-controlling interests | 686 | 639 | |||||
Equity | 9,580 | 9,234 | |||||
Total liabilities and equity | $ | 13,337 | $ | 12,788 |
Six Months Ended (Unaudited) | Year Ended | ||||||||||
June 30, 2017 | June 30, 2016 | December 31, 2016 | |||||||||
Net sales | $ | 30,369 | $ | 29,637 | $ | 59,427 | |||||
Cost of sales | 24,810 | 23,330 | 46,791 | ||||||||
Gross profit | 5,559 | 6,307 | 12,636 | ||||||||
Operating expenses | 3,226 | 2,980 | 6,230 | ||||||||
Operating income | 2,333 | 3,327 | 6,406 | ||||||||
Interest expense | 27 | 37 | 62 | ||||||||
Loss on asset disposal | — | — | 3 | ||||||||
Income before income taxes | 2,306 | 3,290 | 6,341 | ||||||||
Income tax expense | 92 | 94 | 193 | ||||||||
Net income | 2,214 | 3,196 | 6,148 | ||||||||
Net income attributable to non-controlling interests | 47 | 39 | 90 | ||||||||
Net income attributable to Fells Point Wholesale Meats, Inc. shareholders | $ | 2,167 | $ | 3,157 | $ | 6,058 |
Fells Point Wholesale Meats, Inc. Stock Shares | Fells Point Wholesale Meats, Inc. Stock Amount | Retained Earnings | Non-controlling Interest | Total Equity | ||||||||||||||
Balance, December 31, 2015 | 200 | $ | 20 | $ | 8,058 | $ | 549 | $ | 8,627 | |||||||||
Net income | — | — | 6,058 | 90 | 6,148 | |||||||||||||
Capital distributions | — | — | (5,541 | ) | — | (5,541 | ) | |||||||||||
Balance, December 31, 2016 | 200 | 20 | 8,575 | 639 | 9,234 | |||||||||||||
Net income (unaudited) | — | — | 2,167 | 47 | 2,214 | |||||||||||||
Capital distributions (unaudited) | — | — | (1,868 | ) | — | (1,868 | ) | |||||||||||
Balance, June 30, 2017 (unaudited) | 200 | $ | 20 | $ | 8,874 | $ | 686 | $ | 9,580 |
Six Months Ended (Unaudited) | Year Ended | ||||||||||
June 30, 2017 | June 30, 2016 | December 31, 2016 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 2,214 | $ | 3,196 | $ | 6,148 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation | 219 | 160 | 389 | ||||||||
Provision for allowance for doubtful accounts | — | 1 | 59 | ||||||||
Deferred taxes | (2 | ) | 15 | 21 | |||||||
Loss on sale of assets | — | — | (3 | ) | |||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | (92 | ) | 471 | 235 | |||||||
Inventories | (63 | ) | (190 | ) | (211 | ) | |||||
Prepaid expenses and other current assets | 65 | (78 | ) | (42 | ) | ||||||
Accounts payable and accrued liabilities | 306 | 117 | (132 | ) | |||||||
Net cash provided by operating activities | 2,647 | 3,692 | 6,464 | ||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (93 | ) | (145 | ) | (492 | ) | |||||
Net cash used in investing activities | (93 | ) | (145 | ) | (492 | ) | |||||
Cash flows from financing activities: | |||||||||||
Payment of debt | (100 | ) | (47 | ) | (174 | ) | |||||
Capital distributions | (1,868 | ) | (2,635 | ) | (5,541 | ) | |||||
Net cash used in financing activities | (1,968 | ) | (2,682 | ) | (5,715 | ) | |||||
Net increase in cash and cash equivalents | 586 | 865 | 257 | ||||||||
Cash and cash equivalents-beginning of period | 712 | 455 | 455 | ||||||||
Cash and cash equivalents-end of period | $ | 1,298 | $ | 1,320 | $ | 712 | |||||
Supplemental cash flow disclosures: | |||||||||||
Cash paid for income taxes | $ | 108 | $ | 206 | $ | 313 | |||||
Cash paid for interest | $ | 27 | $ | 31 | $ | 56 |
June 30, 2017 (unaudited) | December 31, 2016 | |||||||
Cash and cash equivalents | $ | 119 | $ | 113 | ||||
Property, plant and equipment, net | $ | 2,366 | $ | 2,400 | ||||
Current portion of long-term debt | $ | 201 | $ | 201 | ||||
Long-term debt, net of current portion | $ | 1,572 | $ | 1,673 |
Useful Lives | June 30, 2017 (unaudited) | December 31, 2016 | ||||||||
Land | Indefinite | $ | 189 | $ | 189 | |||||
Buildings | 39 years | 687 | 687 | |||||||
Machinery and equipment | 5-10 years | 2,161 | 2,077 | |||||||
Computers, data processing and other equipment | 3-7 years | 320 | 312 | |||||||
Leasehold improvements | 39 years | 4,310 | 4,310 | |||||||
Furniture and fixtures | 7 years | 16 | 16 | |||||||
7,683 | 7,591 | |||||||||
Less: accumulated depreciation | (2,786 | ) | (2,567 | ) | ||||||
Property, plant, and equipment, net | $ | 4,897 | $ | 5,024 |
June 30, 2017 (unaudited) | December 31, 2016 | ||||||
Mortgage note | $ | 1,773 | $ | 1,874 | |||
Less: current installments | (201 | ) | (201 | ) | |||
Total debt obligations excluding current installments | $ | 1,572 | $ | 1,673 |
December 31, 2016 | ||||
2017 | $ | 201 | ||
2018 | 201 | |||
2019 | 201 | |||
2020 | 201 | |||
2021 | 201 | |||
Thereafter | 869 | |||
Total | $ | 1,874 |
December 31, 2016 | ||||
2017 | $ | 389 | ||
2018 | 429 | |||
2019 | 391 | |||
2020 | 367 | |||
2021 | 304 | |||
Thereafter | 483 | |||
Total minimum lease payments | $ | 2,363 |
December 31, 2016 | |||
Current income tax expense | $ | 172 | |
Deferred income tax expense | 21 | ||
Total | $ | 193 |
December 31, 2016 | |||
Deferred tax assets: | |||
Bad debt reserve | $ | 13 | |
UNICAP | 5 | ||
Total deferred tax assets | 18 | ||
Deferred tax liabilities: | |||
Prepaid expenses | (6 | ) | |
Fixed assets | (86 | ) | |
Total deferred tax liabilities: | (92 | ) | |
Total net deferred tax liability | $ | (74 | ) |
Chefs' historical | Fells Point historical | Pro forma adjustments | Note | Pro forma combined | |||||||||||||
ASSETS | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash and cash equivalents | $ | 37,004 | $ | 1,298 | $ | (31,020 | ) | 4a | $ | 7,282 | |||||||
Accounts receivable, net | 129,194 | 4,748 | 133,942 | ||||||||||||||
Inventories, net | 96,247 | 2,262 | 98,509 | ||||||||||||||
Prepaid expenses and other current assets | 11,813 | 132 | 11,945 | ||||||||||||||
Total current assets | 274,258 | 8,440 | (31,020 | ) | 251,678 | ||||||||||||
Equipment and leasehold improvements, net | 64,860 | 4,897 | (2,366 | ) | 4b | 67,391 | |||||||||||
Software costs, net | 5,422 | — | 5,422 | ||||||||||||||
Goodwill | 167,227 | — | 6,133 | 4c | 173,360 | ||||||||||||
Intangible assets, net | 122,753 | — | 23,700 | 4d | 146,453 | ||||||||||||
Other assets | 3,120 | — | 3,120 | ||||||||||||||
Total assets | $ | 637,640 | $ | 13,337 | $ | (3,553 | ) | $ | 647,424 | ||||||||
LIABILITIES AND EQUITY | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable | $ | 78,267 | $ | 1,822 | $ | 80,089 | |||||||||||
Accrued liabilities | 17,279 | 90 | 17,369 | ||||||||||||||
Accrued compensation | 8,983 | — | 8,983 | ||||||||||||||
Current portion of long-term debt | 4,621 | 201 | (201 | ) | 4e | 4,621 | |||||||||||
Total current liabilities | 109,150 | 2,113 | (201 | ) | 111,062 | ||||||||||||
Long-term debt, net of current portion | 315,493 | 1,572 | (1,572 | ) | 4e | 315,493 | |||||||||||
Deferred taxes, net | 7,686 | 72 | 7,758 | ||||||||||||||
Other liabilities and deferred credits | 7,989 | — | 4,500 | 4f | 12,489 | ||||||||||||
Total liabilities | 440,318 | 3,757 | 2,727 | 446,802 | |||||||||||||
Equity: | |||||||||||||||||
Common stock | 264 | 20 | (18 | ) | 4g | 266 | |||||||||||
Additional paid-in capital | 128,473 | — | 3,298 | 4h | 131,771 | ||||||||||||
Accumulated other comprehensive loss | (1,950 | ) | — | (1,950 | ) | ||||||||||||
Retained earnings | 70,535 | 8,874 | (8,874 | ) | 4i | 70,535 | |||||||||||
Total stockholders' equity | 197,322 | 8,894 | (5,594 | ) | 200,622 | ||||||||||||
Non-controlling interests | — | 686 | (686 | ) | 4j | — | |||||||||||
Total equity | 197,322 | 9,580 | (6,280 | ) | 200,622 | ||||||||||||
Total liabilities and equity | $ | 637,640 | $ | 13,337 | $ | (3,553 | ) | $ | 647,424 |
Chefs' historical | Fells Point historical | Pro forma adjustments | Note | Pro forma combined | |||||||||||||
Net sales | $ | 619,346 | $ | 30,369 | $ | 649,715 | |||||||||||
Cost of sales | 462,846 | 24,810 | (1,623 | ) | 5a | 486,033 | |||||||||||
Gross profit | 156,500 | 5,559 | 1,623 | 163,682 | |||||||||||||
Operating expenses | 141,216 | 3,226 | 2,711 | 5b | 147,153 | ||||||||||||
Operating income | 15,284 | 2,333 | (1,088 | ) | 16,529 | ||||||||||||
Interest expense, net | 11,813 | 27 | 52 | 5c | 11,892 | ||||||||||||
Income before income taxes | 3,471 | 2,306 | (1,140 | ) | 4,637 | ||||||||||||
Provision for income tax expense | 1,439 | 92 | 393 | 5d | 1,924 | ||||||||||||
Net income | 2,032 | 2,214 | (1,533 | ) | 2,713 | ||||||||||||
Net income attributable to NCI | — | 47 | (47 | ) | 5e | — | |||||||||||
Net income attributable to shareholders | $ | 2,032 | $ | 2,167 | $ | (1,486 | ) | $ | 2,713 | ||||||||
Net income per share: | |||||||||||||||||
Basic | $ | 0.08 | $ | 0.10 | |||||||||||||
Diluted | $ | 0.08 | $ | 0.10 | |||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||
Basic | 25,971,490 | 185,442 | 5f | 26,156,932 | |||||||||||||
Diluted | 26,021,439 | 185,442 | 5f | 26,206,881 |
Chefs' historical | Fells Point historical | Pro forma adjustments | Note | Pro forma combined | |||||||||||||
Net sales | $ | 1,192,866 | $ | 59,427 | $ | 1,252,293 | |||||||||||
Cost of sales | 891,649 | 46,791 | (3,214 | ) | 5a | 935,226 | |||||||||||
Gross profit | 301,217 | 12,636 | 3,214 | 317,067 | |||||||||||||
Operating expenses | 253,978 | 6,230 | 5,391 | 5b | 265,599 | ||||||||||||
Operating income | 47,239 | 6,406 | (2,177 | ) | 51,468 | ||||||||||||
Interest expense, net | 41,632 | 62 | 348 | 5c | 42,042 | ||||||||||||
Loss on asset disposal | (69 | ) | 3 | (66 | ) | ||||||||||||
Income before income taxes | 5,676 | 6,341 | (2,525 | ) | 9,492 | ||||||||||||
Provision for income tax expense | 2,653 | 193 | 1,394 | 5d | 4,240 | ||||||||||||
Net income | 3,023 | 6,148 | (3,919 | ) | 5,252 | ||||||||||||
Net income attributable to NCI | — | 90 | (90 | ) | 5e | — | |||||||||||
Net income attributable to shareholders | $ | 3,023 | $ | 6,058 | $ | (3,829 | ) | $ | 5,252 | ||||||||
Net income per share: | |||||||||||||||||
Basic | $ | 0.12 | $ | 0.20 | |||||||||||||
Diluted | $ | 0.12 | $ | 0.20 | |||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||
Basic | 25,919,480 | 185,442 | 5f | 26,104,922 | |||||||||||||
Diluted | 26,029,609 | 185,442 | 5f | 26,215,051 |
Purchase consideration | $ | 33,022 | |
Assets: | |||
Accounts receivable, net | 4,748 | ||
Inventories, net | 2,262 | ||
Prepaid expenses and other current assets | 132 | ||
Equipment and leasehold improvements, net | 2,531 | ||
Intangible assets, net | 23,700 | ||
Liabilities: | |||
Accounts payable | 1,822 | ||
Accrued liabilities | 90 | ||
Deferred taxes, net | 72 | ||
Other liabilities and deferred credits | 4,500 | ||
Pro forma net assets acquired | 26,889 | ||
Pro forma goodwill | $ | 6,133 |