The Chefs' Warehouse, Inc.

Greetings and welcome to the Chefs' Warehouse second quarter 2020 earnings conference call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Aldous, General Counsel, Corporate Secretary, and Chief Government Relations Officer. Please go ahead, sir.

Thank you, Operator. Good afternoon, everyone. With me on today's call are Chris Pappas, Founder, Chairman, and CEO, and Jim Leddy, our CFO. By now, you should have access to our second quarter 2020 earnings press release. It can also be found at www.chefswarehouse.com under the investor relations section. Throughout this conference call, we will be presenting non-GAAP financial measures, including, among others, historical and estimated EBITDA and adjusted EBITDA, as well as both historical and estimated adjusted net income and adjusted earnings per share. These measurements are not calculated in accordance with GAAP, and may be calculated differently and similarly titled non-GAAP financial measures used by other companies. Quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements, including statements regarding our estimated financial performance. Such forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's release. Others are discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q, which are available on the SEC website. Today, we are going to provide a business update and go over our second quarter results in detail. and we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

Thank you, Alex, and thank you all for joining our second quarter 2020 earnings call. The second quarter was one of the most challenging quarters in our company's history. Our team's focus was centered on supporting our customers and supplier partners during the very fluid and gradual transition from limited service, takeout and curbside operations, as well as developing and enhancing our direct-to-consumer Shop Like a Chef platform. In addition, we took a number of important steps to strengthen our balance sheet and right-size our cost structure to ensure chefs will eventually get back on the path to growth and improving profitability that we were on prior to this period of volatility and uncertainty driven by the COVID-19 pandemic. During the quarter, we saw gradual improvement from April activity. averaging approximately 40% of prior year's revenues to June averaging approximately 60% of prior year revenue. While re-openings and stages were different for each market, our largest markets in the Northeast, Mid-Atlantic, and West Coast were delayed by a number of weeks due to the widespread social protest activity in early June. Later in June, delays in full opening in these key markets continued due to the observed resurgence of COVID cases in certain states. During the quarter, organic med sales were 57.8% lower versus the prior year quarter. Specialty sales were down 68.2% organically over the prior year, which was driven by a reduction in unique customers of approximately 56.3% and lower placements of approximately 69.1%. A reduction in specialty cases by 68.3%. Organic pounds in the center of the plate were approximately 51.3% lower than the prior year quarter. Gross profit margins decreased approximately 222 basis points during the quarter. Gross margin in the specialty category decreased 641 basis points as compared to the second quarter of 2019, while gross margin in the center of the plate category increased 212 basis points year over year. Excluding the impact of COVID-19 related inventory reserves, total gross profit margins increased approximately 52 basis points versus the prior year quarter. Jim will provide more detail to margins in a few moments. Now to move on on an update on recent business activity. Sales in July are trending at approximately 60% of prior year. While more customers open for outdoor dining, our largest markets continue to delay indoor dining or experienced seat capacity decreases due to recent surges in COVID-19 cases in certain markets. Throughout the quarter, our team focused on growing, marketing and developing our direct-to-consumer businesses, comprised of our Allen Brothers Great American Steakhouse Steaks online store and our Shop Like a Chef home delivery platform. In addition, we continue to add to our specialty retail grocery portfolio and expect to grow this segment to complement our core restaurant and hospitality business lines going forward. In terms of technology and operations, during the second quarter, we commenced the phase integration of Sid Wehner and Cambridge Meats with our specialty and center of the plate operations in the Northeast. In July, we started the process of our Northeast sales team selling Sid Wehner produce from our Bronx facility offering our New York metropolitan customers the high-quality Sid Wehner portfolio products to complement our specialty and protein categories. In addition, we started the planning process of moving Cambridge Meats into our Sid Wehner operations, which we expect to complete in the first half of 2021. With this move, we are excited to build on the growing cross-selling opportunities we have started to generate between these two great companies and brands in the New England markets. Moving to the West Coast in Texas, we completed the consolidation of three Domani meat processing facilities, moving from six processing facilities to three, while utilizing cross-stocks in the near term as we consolidate routes. Additionally, we are close to completing the consolidation of our Houston and San Antonio facilities into our Dallas hub. These moves contribute to right-sizing our cost structure in these regions and will facilitate improved efficiency in customer services going forward. During the quarter, we signed the lease for a 150,000-square-foot building in Miami-Dade County. This facility will incorporate specialty meat and seafood processing as well as produce and is expected to be completed in the fourth quarter of 2021 with a planned move-in during the first quarter of 2022. In addition to developing and deploying Shop Like a Chef direct-to-consumer early in the second quarter, Our team continues the deployment of our ERP to our Philadelphia business, which we expect to go live during the third quarter. West Coast implementation is expected to begin in October with the first quarter of 2021 target completion. Before I turn it over to Jim, I would like to thank the entire Chef Warehouse team for their passion and energy in supporting our customers during their varied phases of opening, partnering with our suppliers during this trying time and executing new business activity over the past several months. The dedication to their craft and each other is what has allowed chefs to become the premier specialty food purveyor to chef-driven restaurants and establishments during our 35 years of operation. With that, I'll turn it over to Jim to discuss more detailed financial information for the quarter and an update on our liquidity and cost-related actions.