THE MIDDLEBY CORPORATION

 


1400 Toastmaster Drive, Elgin, Illinois 60120 · (847) 741-3300 · Fax (847) 741-9561

 

 

THE MIDDLEBY CORPORATION REPORTS

RECORD SECOND QUARTER RESULTS

 

 

Elgin, IL, July 28, 2003 - The Middleby Corporation (NASDAQ: MIDD), one of the world’s leading manufacturers and marketers of restaurant and foodservice cooking equipment, today reported record net earnings of $4,597,000 or $0.49 per share on net sales of $63,595,000 for the second quarter ended June 28, 2003 compared with net earnings of $2,814,000 or $0.31 per share on net sales of $62,478,000 in the prior year second quarter.   Earnings for the six months ended June 28, 2003 were $7,206,000 or $0.77 per share on sales of $118,362,000 as compared to net earnings of $3,854,000 or $0.43 per share on net sales of $116,969,000 in the prior year first half.

 

Net sales in the second quarter increased by 1.8% over net sales of the prior year quarter.  The net sales increase reflects the impact of market share gains and new product introductions offsetting difficult economic conditions during the second quarter affecting the foodservice equipment industry and generally lower purchases by large chain customers. 

 

Gross profit in the second quarter of 2003 was $22,650,000 as compared to $21,521,000 in the second quarter of the prior year.  The gross margin rate in the second quarter improved to 35.6% versus 34.4% for the prior year quarter.  Improvement in the gross margin resulted from cost reduction actions implemented in the second quarter of last year, which included the consolidation and closure of two manufacturing facilities.  Gross margin improvement also benefited from an improved sales mix with greater sales of higher margin product, driven in part by new product introduction.

 

Selling and distribution expense increased to $7,780,000 from $7,312,000 in the prior year quarter primarily due to higher spending on marketing and advertising programs associated with new product introductions and promotion of the company brands.  General and administrative expenses decreased to $5,226,000 from $6,013,000 in the prior year quarter as a result of prior year cost reduction actions related to the acquisition and integration of Blodgett.

 

Operating income in the second quarter of 2003 increased to $9,644,000 as compared to $8,196,000 in the second quarter of the prior year.  The operating income margin improved to 15.2% in the second quarter as compared with 13.1% for the prior year.  The improvement in operating income margin reflects the increase in gross margins and lower operating expenses.

 

Interest expense and other non-operating costs amounted to $1,729,000 in the second quarter of 2003 as compared with $3,292,000 in the prior year quarter.  Interest expense decreased from the prior year second quarter by $1,401,000 as a result of lower debt levels and lower interest rates resulting from the refinancing of debt in the fourth quarter of 2002.  Total debt was reduced during the first six months of 2003 by $6,922,000 to $81,040,000 from $87,962,000 at December 28, 2002.

 

Commenting on the company’s performance for the quarter, Selim A. Bassoul, President and Chief Executive Officer, said, “We were pleased with the second quarter net sales increase in a difficult economic environment.  The war in Iraq and the outbreak of SARS created uncertainty with our customers, which slowed the rate of store openings and orders from our customers during the first half of this year.  We have, however, experienced a rebound in our order rate in the later half of the second quarter.” 

 

Mr. Bassoul continued, “The increase in net sales during the quarter resulted largely from market share gains due in part to new product introductions, which include the Blodgett XCELŇ high performance convection oven, the new series of Pitco SolsticeŇ high efficiency fryers and Blodgett RangeŇ.  The Blodgett RangeŇ line is a completely new market for Blodgett, which had solely offered ovens in the past.  We continue to invest heavily on the development of innovative products and are working closely with our customers to introduce unique products focused on energy savings, labor savings and increased speed of cooking.  We expect to introduce additional products in the second half of 2003 that should benefit our sales efforts moving into 2004.  We have increased our training and advertising programs in an effort to bring these new product introductions to market quickly.”

 

William F. Whitman, Jr., Chairman of the Board, added, “Now that we have realized most of the benefit from the immediate cost reduction opportunities of the Blodgett acquisition, we are focusing greater efforts on the improvement of operating efficiencies to increase margins.  These efforts include standardization of product platforms and the reduction of material costs through greater leveraging of the supplier base.  In June, we were pleased to announce the appointments of Mr. Magdy Albert as Vice President of Operations of our Elgin manufacturing facility and Mr. Nestor Ibrahim as Vice President of Supply Chain Management to further these efforts.   Mr. Albert comes to Middleby from Vulcan Hart, a division of Illinois Tool Works, where he was General Manager of their steam equipment manufacturing facility.  Mr. Ibrahim comes from Franke where he was responsible for supply chain management.”

 

Mr. Whitman continued, “Moving into the second half of this year we anticipate further reduction of our debt.  We have the opportunity to begin to repay high interest notes due to Maytag Corporation related to the acquisition of Blodgett.  At the end of the second quarter these notes amounted to $21,040,000 and carried an average interest rate of 12.5%.  Our cash flow generation and debt reduction in the second half of the year should increase as compared to the first half as we move away from our peak working capital requirements driven by seasonal high sales in the second quarter.”

 

A conference call will be held on Tuesday morning at 10:30 a.m. Eastern Time on July 29, 2003. You are invited to listen to the call by calling 1 (800) 374-0538 and providing password 1960955.  Analysts and money managers who may participate in the question and answer portion of the conference call will be sent an invitation detailing their separate call-in number.  The conference call will also be webcast at mms://winaudio.mshow.com/120733.asf, which can be accessed via the Investor Services section of The Middleby Corporation website at www.middleby.com.  Digital replay of the call will be available approximately one half hour after the completion of the conference call. The replay may be accessed by calling 1(800) 642-1687 and providing password 1960955.  A transcript of the call will also be posted on the Company website.

 

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 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.

 

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 Blodgettâ, Blodgett Combiâ, CTXâ, MagiKitch’nâ, Middleby Marshallâ, Pitco Frialatorâ, Southbendâ, and Toastmasterâ.  Middleby’s international subsidiary, Middleby Worldwide, is a leading exporter and distributor of foodservice equipment in the global marketplace and its international manufacturing 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:            Selim A. Bassoul, Chief Executive Officer – 847- 429-7788

                        David B. Baker, Chief Administrative Officer – 847- 429-7915

                        Timothy J. FitzGerald, Chief Financial Officer – 847- 429-7744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE MIDDLEBY CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

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

(Unaudited)

 

Three Months Ended                      Six Months Ended                                                                                        

                                                                                                                                             

 

2nd Qtr, 2003  

2nd Qtr, 2002  

2nd Qtr, 2003  

2nd Qtr, 2002  

Net sales

$  63,595

$  62,478

$  118,362

$   116,969

Cost of sales

   40,945

    40,957

    76,660

     77,555

 

 

 

 

 

    Gross profit

 22,650

 21,521

41,702

39,414

 

 

 

 

 

Selling & distribution expense   

    7,780

    7,312

14,942

14,533

General & administrative expense

    5,226

     6,013

      10,709

     11,964

 

 

 

 

 

    Income from operations

    9,644

    8,196

16,051

12,917

 

 

 

 

 

Interest expense and deferred          

 

 

 

 

    financing amortization, net

   1,623

   3,024

3,337

6,122

Loss (gain) on acquisition financing

    derivatives

 

(42)

 

579

 

(111)

 

(14)

Other expense (income), net

        148

        (311)

          283

          (89)

 

 

 

 

 

    Earnings before income taxes

7,915

 4,904

12,542

6,898

 

 

 

 

 

Provision for income taxes

     3,318

      2,090

       5,336

       3,044

 

 

 

 

 

    Net earnings

$   4,597

$    2,814

$     7,206

$     3,854

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

    Basic

$    0.51

$     0.31

$       0.80

$       0.43

 

 

 

 

 

    Diluted

$    0.49

$     0.31

$       0.77

$       0.43

 

Weighted average number shares:

 

 

 

 

 

 

 

 

 

    Basic

      9,033

     8,974

      9,031

     8,973

 

 

 

 

 

    Diluted

      9,353

      9,082

      9,325

     9,031

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE MIDDLEBY CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(Amounts in 000’s)

(Unaudited)

 

                                                                                                                                            

 

 

 

 

 

 

June 28, 2003

 

Dec. 28, 2002

 ASSETS

 

 

 

 

 

Cash and cash equivalents

$      3,912

 

$      8,378

 

Accounts receivable, net

    31,837

 

    27,797

 

Inventories, net

27,815

 

27,206

 

Deferred tax assets

10,004

 

13,341

 

Other current assets

       1,365

 

        1,069

 

    Total current assets

74,933

 

77,791

 

 

 

 

 

 

Property, plant and equipment, net

26,304

 

27,500

 

 

 

 

 

 

Goodwill

74,761

 

74,761

 

Other intangibles

26,300

 

26,300

 

Other assets

        1,654

 

        1,610

 

 

 

 

 

 

    Total assets

$  203,952

 

$  207,962

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

$    13,500

 

$    14,400

 

Accounts payable

8,328

 

13,488

 

Accrued expenses

      36,934

 

      36,013

 

    Total current liabilities

58,762

 

63,901

 

 

 

 

 

 

Long-term debt

67,540

 

73,562

 

Long-term deferred tax liability

7,878

 

7,878

 

Other non-current liabilities

18,048

 

17,989

 

 

 

 

 

 

Shareholders’ equity

      51,724

 

      44,632

 

 

 

 

 

 

    Total liabilities and shareholders’

 

 

 

 

        equity

$  203,952

 

$  207,962