Middleby: Third Quarter Earnings News Release THE MIDDLEBY CORPORATION REPORTS THIRD QUARTER RESULTS International Economic Factors Continue to Affect Results and Non-recurring Charges Result in a Net Loss Rolling Meadows, IL, October 30 1998 - The Middleby Corporation (NASDAQ: MIDD) today reported lower net sales and earnings for the fiscal third quarter ended October 3, 1998 compared to the third quarter of fiscal 1997. For the third quarter, net sales decreased 5% to $33,891,000 from $35,850,000 for the prior year period. The Company reported a net loss of $888,000, or 8 cents per diluted share, including non- recurring pre-tax charges of $1,525,000, compared to net earnings of $1,231,000, or 14 cents per share, in the fiscal 1997 third quarter. The non-recurring charges included costs to restructure the Company’s international distribution business and a write-down of assets due to the impairment and planned abandonment of an enterprise-wide resource planning system, as a result of its failure to meet performance specifications. The Company is currently considering its legal rights with respect to the planned abandonment. Excluding the non- recurring charges, the Company’s net earnings were $58,000 or 1 cent per share. The Company had previously announced expected earnings at break-even for the quarter. For the nine fiscal months of 1998, net sales decreased 11% to $98,633,000 from $110,630,000 for the same period last year, and income from operations declined to $3,570,000 from $9,740,000 in the prior year period. Net earnings from continuing operations were $423,000, or 4 cents per share, compared to $4,204,000, or 48 cents per share, for the same period in 1997. David P. Riley, President and Chief Executive Officer, said, "Economic conditions in Asia and other parts of the world remained unsettled in the third quarter and negatively impacted sales and margins. Also, orders from certain major restaurant chain customers remained low during the quarter." Riley added, "Our core cooking equipment division, under the Southbend brand name, reported another strong sales performance of an increase of 14% compared to the third quarter of 1997 due to continued market penetration in the U.S. The conveyor oven equipment division reported a sales decline of 1% compared with third quarter of 1997. The division experienced a significant decline of sales into Asia, which was largely offset by increased sales in Europe and Canada. However, the mix of sales was unfavorable with increased sales of lower- margined small ovens. The counterline cooking equipment division reported net sales 2% below the year ago quarter due primarily to less international sales." Mr. Riley also noted, "Net sales of our Philippines-based specialty equipment subsidiary were 21% lower than last year due to decreased restaurant development by major chains and less hotel and resort project business in the Asian region. Net sales of the international distribution business declined by 20%, as lower sales in Asia and the Middle East were partly offset by increased sales in Europe." "Gross margins of 27.8% in the third quarter were lower than the 30.7% reported in the third quarter of 1997 due primarily to an unfavorable sales mix in this quarter, inefficiencies caused by erratic production flow, and the impact of currency fluctuations on international pricing," stated Mr. Riley. Mr. Riley continued, "While we have been directing our export sales efforts to the international markets less affected by the continued fluctuations in currencies, restaurant development plans by major chains have slowed considerably in many markets. Our management has taken further steps to reduce costs in our international sales and distribution organization. We have begun a restructuring of our international distribution business by decentralizing operations to regional centers, resulting in a lower cost structure and a more efficient order fulfillment process. Further, we are significantly reducing overhead and improving processes at manufacturing locations impacted by reduced unit demand from international customers. We do not believe there are any fundamental problems with our business model and we remain committed to developing our capabilities within international markets. We believe major restaurant chains will refocus on the opportunities within the international markets as soon as they see some economic stability." The Company has repurchased 534,000 shares in open market purchases under the 800,000 share repurchase authorization approved by the Company’s Board of Directors during the third quarter. Middleby currently has 10,448,000 shares outstanding. Statements in this press release or otherwise attributable to the Company regarding the Company’s business which are not historical fact 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, but are not limited to, quarterly variations in operating results; dependence on key customers; international exposure; foreign exchange 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, including those discussed under the heading entitled "Risk Factors" in the Company’s Registration Statement on Form S-2 (No. 333-35397) filed with the Securities and Exchange Commission. The Middleby Corporation is a leader in the design, manufacture, marketing and service of a broad line of equipment used for cooking and preparation of food in commercial and institutional kitchens and restaurants throughout the world. The Company’s leading equipment brands include Middleby Marshall(R) (conveyor cooking equipment), Southbend(R) (core cooking and steam cooking equipment), and Toastmaster(R) (counterline cooking and warming equipment). Middleby’s international subsidiary, Asbury Associates, Inc., is a leading exporter and distributor of foodservice equipment in the global marketplace and its international fabrication subsidiary, Middleby Philippines Corporation, is a leading supplier of specialty equipment in the Asian markets. For further information about Middleby, visit the Company’s World Wide Web site, http://www.middleby.com. Contact: John J. Hastings, The Middleby Corporation 847-758-3885 THE MIDDLEBY CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in 000’s, Except Per Share Information) (Unaudited) Three Months Ended Nine Months Ended Oct 3, Sept 27, Oct 3, Sept 27, 1998 1997 1998 1997 ------ -------- ------ -------- Net sales $ 33,891 $ 35,850 $ 98,633 $ 110,630 Cost of sales 24,471 24,848 69,103 76,340 --------- --------- --------- --------- Gross profit 9,420 11,002 29,530 34,290 Selling & distribution expense 5,016 5,450 15,534 16,166 General & administrative Expense 4,517 2,665 10,426 8,384 -------- --------- --------- --------- (Loss) income from operations (113) 2,887 3,570 9,740 Interest expense and deferred financing amortization, net 665 1,030 2,161 3,368 Other expense (income), net 160 7 413 (13) -------- --------- -------- --------- (Loss) earnings before income taxes (938) 1,850 996 6,385 Provision for income taxes (a) (50) 619 573 2,181 -------- --------- -------- --------- (Loss) earnings from continuing operations $ (888) $ 1,231 $ 423 $ 4,204 Loss from discontinued operations, net of tax 0 0 0 (564) -------- --------- -------- --------- Net (loss) earnings $ (888) $ 1,231 $ 423 $ 3,640 ======== ========= ======== ========= Basic earnings per share ------------------------ (Loss) earnings from continuing operations $ (0.08) $ 0.14 $ 0.04 $ 0.48 Loss from discontinued operations, net of tax 0.00 0.00 0.00 (0.06) -------- --------- -------- --------- Net (loss) earnings per share $ (0.08) $ 0.14 $ 0.04 $ 0.42 ======== ========= ======== ========= Weighted average shares outstanding 10,824 8,792 11,053 8,742 Diluted earnings per share -------------------------- (Loss) earnings from continuing operations $ (0.08) $ 0.14 $ 0.04 $ 0.48 Loss from discontinued operations, net of tax 0.00 0.00 0.00 (0.06) -------- --------- -------- --------- Net (loss) earnings per share $ (0.08) $ 0.14 $ 0.04 $ 0.42 ======== ========= ======== ========= Weighted average shares outstanding 10,864 8,800 11,053 8,769 Notes: (a) The Company has federal tax loss carryforwards. No payments of federal taxes other than AMT tax are made due to the utilization of tax NOL’s. Cash payments totaling $623 and $245 were made for AMT, foreign and state income taxes for year-to-date 1998 and 1997, respectively. THE MIDDLEBY CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in 000’s) (Unaudited) As of As of Oct 3, Jan. 3, 1998 1998 ------ ------- ASSETS Cash and cash equivalents $ 3,035 $ 12,321 Accounts receivable, net 25,354 22,251 Inventories, net 26,616 24,072 Other current assets 4,335 4,248 --------- --------- Total current assets 59,340 62,892 Property, plant and equipment, net 22,043 21,790 Excess purchase price over net assets acquired, net 13,632 12,882 Other assets 6,374 5,914 --------- --------- Total assets $ 101,389 $ 103,478 ========= ========= LIABILITIES AND SHAREHOLDERS’ EQUITY Current maturities of long-term debt $ 4,606 $ 3,595 Accounts payable 9,450 11,600 Accrued expenses 9,643 9,255 --------- --------- Total current liabilities 23,699 24,450 Long-term debt 24,463 24,318 Minority interest & other non-current liabilities 2,027 2,109 Shareholders’ equity 51,200 52,601 --------- --------- Total liabilities and shareholders’ equity $ 101,389 $ 103,478 ========= ========= Ends.