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The Middleby Corporation Reports Third Quarter Results

November 6, 2019

ELGIN, Ill.--(BUSINESS WIRE)--Nov 6, 2019--

The Middleby Corporation (NASDAQ: MIDD), a leading worldwide manufacturer of equipment for the commercial foodservice, food processing, and residential kitchen industries, today reported net sales and earnings for the third quarter ended September 28, 2019. Net earnings for the third quarter were $82.0 million or $1.47 diluted earnings per share on net sales of $724.0 million as compared to the prior year third quarter net earnings of $72.9 million or $1.31 diluted earnings per share on net sales of $713.3 million. Net earnings in the current and prior year third quarter were negatively impacted by restructuring expenses, acquisition related inventory step-up charges and facility consolidation related expenses. Excluding these items, as well as other non-cash items, adjusted net earnings per share were $1.72 and $1.65 in the 2019 and 2018 third quarter periods. A full reconciliation between GAAP and adjusted non-GAAP measures are provided at the end of the press release.

2019 Third Quarter Financial Highlights

Timothy FitzGerald, Chief Executive Officer, commented, “Third quarter market conditions proved to be challenging across the business segments. We continued, however, to invest in our long-term growth, as we re-invent our selling processes, introduce new technology-based customer solutions, launch several new product innovations, and target growing market trends and segments. We successfully implemented a number of profitability initiatives during the quarter, which are reflected in the third quarter EBITDA margin expansion and will carry into next year. We were also pleased to report a record quarterly operating cash flow.”

“At the Commercial Foodservice Equipment Group, we reported growth across all our international regions, although the impact of Brexit and generally slower conditions continue to affect Europe. Domestically, lower spending by restaurant chains is a headwind, specifically against strong comparisons of roll-out activity in the second half of the prior year.”

“We were excited to bring a revolutionary technology solution to the market last month at the Host Milan trade show. We introduced the propriety Open Kitchen IoT solution powered by our recently acquired Powerhouse Dynamics IoT division, a leader in kitchen intelligence and connectivity technology. This new platform connects virtually all equipment in the restaurant and captures critical information, allowing our customers the ability to make real time, data-driven performance decisions to improve kitchen efficiency. We have enabled the remote control and monitoring of a variety of restaurant operations, allowing our customers to achieve the best possible efficiencies in labor utilization, energy conservation, food costs and enhanced meal safety. Open Kitchen brings together the Powerhouse SiteSage IoT platform, successfully operating in thousands of restaurants, and the existing Middleby Connect IoT solution. This new and unique combined platform results in the most comprehensive solution available in the foodservice industry, enabling our customers to transform the management and profitability of their restaurant operations.”

“Open Kitchen is an example of one of many investments in technology we are making to strengthen our leadership position and support growth. We also continue to deliver exciting new products as we strive to be the most innovative partner to our customers. Great examples are the Joe Tap Nitro Brew system, the Lincat Cibo oven, and the TurboChef Bandito. We are adding to our industry-leading solutions addressing growing industry trends of ventless kitchens, food delivery and ghost kitchen concepts. Our capabilities and leading-edge technologies strongly position Middleby to address our customers’ most important needs.”

“As part of our plan to build upon the successful efforts of the past year to consolidate our sales representative partners, we recently launched several digital sales and communication tools to better enable our sales teams. This has enhanced our ability to present comprehensive solutions based on the unparalleled breadth of Middleby’s capabilities. These initiatives ensure the Middleby sales channel has access to the best in class sales support across our portfolio of brands. With these improvements, we expect to capitalize on market opportunities more quickly and efficiently.”

“We have been able to offset pressures from increasing material costs and tariffs with cost reduction initiatives, acquisition integration activities, and targeted pricing actions,” Mr. FitzGerald continued. “We are executing further margin improvement through several manufacturing facility consolidations that are currently underway. Additionally, we have expanded efforts in strategically leveraging our supply chain and realizing operating synergies across the business units. We continue making these improvements, while at the same time investing in marketing and new technology innovation.”

“Within the Residential Kitchen Equipment Group, declines in consumer spending in the appliance market led to reduced demand across many of our brands,” Mr. FitzGerald said. “Although Viking did realize a decline in the quarter, the brand is continuing to outperform the broader market. We are seeing consistent market share gains with our dealer partners. We have added new dealers to support our portfolio of premium brands and also continued to increase the number of displays on showroom floors. We are making ongoing investments for growth by further strengthening our sales organization and enhancing our award-winning new product offerings. During the third quarter, we further extended our line-up of built-in refrigeration under the Viking brand, which presents a significant market opportunity. We also continue to invest in our residential showrooms, which feature all of the Middleby premium brands.”

“At the Food Processing Equipment Group, the absence of large projects in our core meat processing business resulted in a disappointing quarter,” said Mr. FitzGerald. “However, we are seeing improving order trends and anticipate we will enter 2020 with a much improved backlog. We have made significant R&D investments over the past year resulting in a record number of new product launches. These introductions are being well received by customers and have gained initial traction across multiple customer segments, including alternative protein, bacon, cured-meats and the pet food categories. We believe these products add diversification to our end market concentration and will contribute to our sales in 2020.”

“We are very excited to have just opened our protein innovation center in Chicago supporting the broad array of brands and solutions in one state of the art facility. This investment also provides a central location to support our global customers and demonstrate the capabilities of our integrated solutions.”

Conference Call

A conference call will be held at 10 a.m. Central Time on Wednesday, November 6, 2019 and can be accessed by dialing (888) 391-6937 or (315) 625-3077 and providing conference code 3096679#. The conference call is also accessible through the Investor Relations section of the company website at www.middleby.com. A replay of the conference call will be available two hours after the conclusion of the call by dialing (855) 859-2056 and entering conference code 3096679#.

Statements in this press release or otherwise attributable to the company regarding the company’s business which are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The company cautions investors that such statements are estimates of future performance and are highly dependent upon a variety of important factors that could cause actual results to differ materially from such statements. Such factors include variability in financing costs; quarterly variations in operating results; dependence on key customers; international exposure; foreign exchange and political risks affecting international sales; changing market conditions; the impact of competitive products and pricing; the timely development and market acceptance of the company’s products; the availability and cost of raw materials; and other risks detailed herein and from time-to-time in the company’s SEC filings. Any forward-looking statement speaks only as of the date hereof, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

The Middleby Corporation is a global leader in the foodservice equipment industry. The company develops, manufactures, markets and services a broad line of equipment used in the commercial foodservice, food processing, and residential kitchen equipment industries. The company’s leading equipment brands serving the commercial foodservice industry include Anets®, APW Wyott®, Bakers Pride®, Beech®, BKI®, Blodgett®, Blodgett Combi®, Blodgett Range®, Bloomfield®, Britannia®, Carter-Hoffmann®, Celfrost®, Concordia®, CookTek®, Crown Food Equipment®, CTX®, Desmon®, Doyon®, Eswood®, EVO®, frifri®, Firex®, Follett®, Giga®, Globe®, Goldstein®, Holman®, Houno®, IMC®, Induc®, Jade®, JoeTap®, Josper®, L2F®, Lang®, Lincat®, MagiKitch’n®, Market Forge®, Marsal®, Middleby Marshall®, MPC®, Nieco®, Nu-Vu®, PerfectFry®, Pitco Frialator®, QualServ®, SiteSage®, Southbend®, Ss Brewtech®, Star®, Sveba Dahlen®, Taylor®, Toastmaster®, TurboChef®, Ultrafryer®, Varimixer®, Wells® and Wunder-Bar®. The company’s leading equipment brands serving the food processing industry include Alkar®, Armor Inox®, Auto-Bake®, Baker Thermal Solutions®, Burford®, Cozzini®, CVP Systems®, Danfotech®, Drake®, Emico®, Glimek®, Hinds-Bock®, Maurer-Atmos®, MP Equipment®, M-TEK®, Pacproinc®, RapidPak®, Scanico®, Spooner Vicars®, Stewart Systems®, Thurne® and Ve.Ma.C.®. The company’s leading equipment brands serving the residential kitchen industry include AGA® AGA Cookshop®, Fired Earth®, EVO®, Heartland®, La Cornue®, Leisure Sinks®, Lynx®, Marvel®, Mercury®, Rangemaster®, Rayburn®, Redfyre®, Sedona®, Stanley®, TurboChef®, U-Line® and Viking®.

For more information about The Middleby Corporation and the company brands, please visit www.middleby.com.

 

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in 000’s, Except Per Share Information)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

3rd Qtr, 2019

 

3rd Qtr, 2018

 

3rd Qtr, 2019

 

3rd Qtr, 2018

Net sales

$

724,014

 

 

$

713,331

 

 

$

2,171,820

 

 

$

1,966,259

 

Cost of sales

453,986

 

 

452,171

 

 

1,358,001

 

 

1,242,707

 

 

 

 

 

 

 

 

 

Gross profit

270,028

 

 

261,160

 

 

813,819

 

 

723,552

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

144,460

 

 

141,372

 

 

434,884

 

 

399,328

 

Former Chairman and CEO transition costs

 

 

 

 

10,116

 

 

 

Restructuring expenses

4,223

 

 

12,111

 

 

6,806

 

 

18,245

 

Income from operations

121,345

 

 

107,677

 

 

362,013

 

 

305,979

 

 

 

 

 

 

 

 

 

Interest expense and deferred financing amortization, net

20,846

 

 

19,143

 

 

63,334

 

 

38,370

 

Net periodic pension benefit (other than service costs)

(7,175

)

 

(9,225

)

 

(22,233

)

 

(28,046

)

Other (income) expense, net

1,444

 

 

(260

)

 

(489

)

 

371

 

 

 

 

 

 

 

 

 

Earnings before income taxes

106,230

 

 

98,019

 

 

321,401

 

 

295,284

 

 

 

 

 

 

 

 

 

Provision for income taxes

24,210

 

 

25,114

 

 

78,158

 

 

72,971

 

 

 

 

 

 

 

 

 

Net earnings

$

82,020

 

 

$

72,905

 

 

$

243,243

 

 

$

222,313

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.47

 

 

$

1.31

 

 

$

4.37

 

 

$

4.00

 

 

 

 

 

 

 

 

 

Diluted

$

1.47

 

 

$

1.31

 

 

$

4.37

 

 

$

4.00

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

55,663

 

 

55,577

 

 

55,641

 

 

55,575

 

 

 

 

 

 

 

 

 

Diluted

55,663

 

 

55,577

 

 

55,641

 

 

55,575

 

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in 000’s, Except Per Share Information)

(Unaudited)

 

 

Sep 28, 2019

 

Dec 29, 2018

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

$

87,181

 

 

$

71,701

 

Accounts receivable, net

417,622

 

 

398,660

 

Inventories, net

614,102

 

 

521,810

 

Prepaid expenses and other

63,344

 

 

50,940

 

Prepaid taxes

18,198

 

 

18,483

 

Total current assets

1,200,447

 

 

1,061,594

 

 

 

 

 

Property, plant and equipment, net

342,971

 

 

314,569

 

Goodwill

1,809,359

 

 

1,743,175

 

Other intangibles, net

1,440,421

 

 

1,361,024

 

Long-term deferred tax assets

26,541

 

 

32,188

 

Other assets

108,789

 

 

37,231

 

 

 

 

 

Total assets

$

4,928,528

 

 

$

4,549,781

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current maturities of long-term debt

$

3,331

 

 

$

3,207

 

Accounts payable

181,171

 

 

188,299

 

Accrued expenses

400,742

 

 

367,446

 

Total current liabilities

585,244

 

 

558,952

 

 

 

 

 

Long-term debt

1,955,900

 

 

1,888,898

 

Long-term deferred tax liability

124,071

 

 

113,896

 

Accrued pension benefits

226,074

 

 

253,119

 

Other non-current liabilities

181,208

 

 

69,713

 

 

 

 

 

Stockholders' equity

1,856,031

 

 

1,665,203

 

 

 

 

 

Total liabilities and stockholders' equity

$

4,928,528

 

 

$

4,549,781

 

THE MIDDLEBY CORPORATION

NON-GAAP INFORMATION (UNAUDITED)

(Amounts in 000’s, Except Percentages)

 

 

Commercial
Foodservice

 

Residential
Kitchen

 

Food
Processing

Three Months Ended September 28, 2019

 

 

 

 

 

Net sales

$

500,990

 

 

$

133,877

 

 

$

89,147

 

Segment Operating Income

$

105,099

 

 

$

17,850

 

 

$

13,349

 

Operating Income % of net sales

21.0

%

 

13.3

%

 

15.0

%

 

 

 

 

 

 

Depreciation

5,413

 

 

2,897

 

 

1,158

 

Amortization

12,230

 

 

2,413

 

 

2,616

 

Restructuring expenses

2,126

 

 

2,017

 

 

80

 

Acquisition related inventory step-up charge

1,258

 

 

 

 

186

 

Segment adjusted EBITDA

$

126,126

 

 

$

25,177

 

 

$

17,389

 

Adjusted EBITDA % of net sales

25.2

%

 

18.8

%

 

19.5

%

 

 

 

 

 

 

Three Months Ended September 29, 2018

 

 

 

 

 

Net sales

$

471,598

 

 

$

153,476

 

 

$

88,257

 

Segment Operating Income

$

102,091

 

 

$

9,489

 

 

$

13,831

 

Operating Income % of net sales

21.6

%

 

6.2

%

 

15.7

%

 

 

 

 

 

 

Depreciation

5,309

 

 

3,318

 

 

1,182

 

Amortization

12,249

 

 

4,288

 

 

1,027

 

Restructuring expenses

1,224

 

 

10,655

 

 

232

 

Acquisition related inventory step-up charge

4,556

 

 

 

 

 

Segment adjusted EBITDA

$

125,429

 

 

$

27,750

 

 

$

16,272

 

Adjusted EBITDA % of net sales

26.6

%

 

18.1

%

 

18.4

%

 

Three Months Ended

 

3rd Qtr, 2019

 

3rd Qtr, 2018

 

$

 

Diluted per
share

 

$

 

Diluted per
share

Net earnings

$

82,020

 

 

$

1.47

 

 

$

72,905

 

 

$

1.31

 

Amortization (1)

17,662

 

 

0.32

 

 

17,934

 

 

0.32

 

Restructuring expenses

4,223

 

 

0.08

 

 

12,111

 

 

0.22

 

Acquisition related inventory step-up charge

1,444

 

 

0.03

 

 

4,556

 

 

0.08

 

Facility consolidation related expenses

1,333

 

 

0.02

 

 

 

 

 

Net periodic pension benefit (other than service costs)

(7,175

)

 

(0.13

)

 

(9,225

)

 

(0.16

)

Income tax effect of pre-tax adjustments

(3,987

)

 

(0.07

)

 

(6,496

)

 

(0.12

)

Adjusted net earnings

$

95,520

 

 

$

1.72

 

 

$

91,785

 

 

$

1.65

 

 

(1) Includes amortization of deferred financing costs.

NON-GAAP FINANCIAL MEASURES

The company supplements its consolidated financial statements presented on a GAAP basis with this non-GAAP financial information to provide investors with greater insight, increase transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. In addition, the non-GAAP financial measures included in this press release do not have standard meanings and may vary from similarly titled non-GAAP financial measures used by other companies.

The company believes that the non-GAAP adjusted segment EBITDA and adjusted net earnings measures are useful as supplements to its GAAP results of operations to evaluate certain aspects of its operations and financial performance, and its management team primarily focuses on non-GAAP items in evaluating performance for business planning purposes. The Company also believes that these measures assist it with comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in its opinion, do not reflect its core operating performance including, for example, intangibles amortization expense, impairment charges, restructuring expenses, and other charges which management considers to be outside core operating results. The Company believes that its presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Middleby uses internally for purposes of assessing its core operating performance.

View source version on businesswire.com:https://www.businesswire.com/news/home/20191106005468/en/

CONTACT: Darcy Bretz, Investor and Public Relations, (847) 429-7756

Bryan Mittelman, Chief Financial Officer, (847) 429-7715

KEYWORD: UNITED STATES NORTH AMERICA ILLINOIS

INDUSTRY KEYWORD: ENGINEERING RETAIL RESTAURANT/BAR HOME GOODS MANUFACTURING OTHER MANUFACTURING FOOD/BEVERAGE

SOURCE: The Middleby Corporation

Copyright Business Wire 2019.

PUB: 11/06/2019 07:30 AM/DISC: 11/06/2019 07:30 AM

http://www.businesswire.com/news/home/20191106005468/en