The Middleby Corporation Reports Second Quarter Results
ROLLING MEADOWS, Ill.--(BUSINESS WIRE)--July 29, 1999--The Middleby Corporation (NASDAQ: MIDD - news), a global supplier of equipment to the foodservice industry, today reported its results for the fiscal second quarter ended July 3, 1999.
The Company reported net earnings for the second quarter of $401,000, or 4 cents per share on a diluted basis, compared to net earnings of $789,000, or 7 cents per share, in the 1998 fiscal second quarter. Net sales increased 9% to $36,527,000 from $33,641,000 for the same period a year ago. Income from operations increased 8% to $2,236,000 from $2,062,000 in the prior year quarter, and earnings before taxes of $1,446,000 rose 24% from $1,162,000 a year ago.
For the first six months of 1999, net earnings were $52,000, or 1 cent per share on a diluted basis, versus $1,310,000, or 12 cents per share, for the same six-month period in 1998. Net sales increased 7% to $68,965,000 from $64,742,000 for the same period last year. Income from operations declined 12% to $3,223,000 from $3,683,000 in the prior year period, and earnings before taxes of $1,484,000 were 23% below the year ago results of $1,933,000.
No tax benefit was recognized for losses at international subsidiaries during the current quarter and year-to-date periods. Accordingly, the reported tax provisions of $1,046,000, or an effective rate of 72%, and $1,432,000, or an effective tax rate of 96%, recorded in the quarter and year-to-date periods, respectively, were principally for U.S. taxable income. However, no payments of federal taxes other than AMT taxes are expected to be made in 1999 due to the utilization of tax loss carryforwards. The current year quarter and year-to-date results included pre-tax charges of $210,000 and $960,000, respectively, principally for severance payments related to restructuring efforts.
Commenting on the Company's performance, David P. Riley, President and Chief Executive Officer, said, ``Our second quarter results reflect significant improvements in operating and financial results at our U.S.-based operations. Our international operations posted mixed results as growth within certain markets, including Canada and Latin America, were offset by continued low demand levels within Asia and the Middle East. During the quarter, the Company continued to execute initiatives to reduce costs and realign the organizational structure, which are expected to yield increasing benefits throughout the second half of 1999. The Cooking Systems Group also continued with its strategic initiatives to improve sales and operating performance by expanding product offerings and enhancing the sales channel capabilities of the Middleby Marshall, Southbend and Toastmaster product lines.''
Further, Riley added, ``The Cooking Systems Group reported a sales increase of 5% from the same period last year, excluding the impact of discontinued product lines, due to increased sales of conveyor oven and core cooking equipment products. Sales of counterline equipment declined slightly due to the replacement of certain product and model offerings, as we continue to strengthen the Toastmaster brand.''
``Net sales of the international distribution business increased by 8% with increased sales into Canada and Latin America offset in part by reduced sales into Japan, the Philippines and certain other Asian markets. However, the international distribution division again operated at a loss. Net sales of Middleby Philippines Corporation, a leading specialty manufacturer for the Asian markets, declined 6% reflecting continued sluggishness of restaurant, hotel and resort development within the region. Further, it reported greater-than-expected losses in the quarter due to lower orders from its major customers and inefficiencies and costs incurred for the start-up of new products,'' Mr. Riley also noted.
Mr. Riley continued, ``Gross margins of 29.4% in the second quarter were lower than the 31.7% reported in the prior year second quarter principally due to lower margins at our Philippines operation resulting from lower volume and less favorable sales mix. Also, margins for the international distribution business were slightly lower due to costs associated with inventory reduction programs, which have resulted in a 25% decrease in inventory levels within Asia and Europe since year-end. Further, provisions for inventory increased for potential exposures resulting from our pruning of the Toastmaster product line. Operating expenses decreased $120,000 from the prior year's second quarter. The initial benefit of cost reduction efforts was offset in part by second quarter charges of $210,000 for severance and other costs related to changes within the organizational structure. Commission expenses and bad debt provisions were also increased as a result of the increased volume levels.''
Mr. Riley noted, ``We believe our management team made meaningful progress during the first half of the year towards realizing our operating and financial goals after the challenges of the 1998 fiscal year. Once again, our international units were impacted by low demand levels in Asia and other markets affected by the past years' currency crises. However, we should see benefits in markets where we have maintained local presence as those markets rebound and attract renewed restaurant and hotel development. Our marketing and engineering groups are excited about several new and innovative products recently introduced to the industry. And, we expect our restructuring initiatives to provide a lower cost base and more focused strategy from which to capitalize on the growth opportunities in the global foodservice markets and achieve our financial goals.''
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. Any forward looking statements made herein speak as of the date of this release, and the Company undertakes no obligation to update such statements in light of future events or otherwise.
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® (conveyor cooking equipment), Southbend® (core cooking and steam cooking equipment), and Toastmaster® (counterline cooking and warming equipment). Middleby's international subsidiary, Middleby Worldwide, 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.
THE MIDDLEBY CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in 000's, Except Per Share Information) (Unaudited)
Three Months Ended Six Months Ended July 3, July 4, July 3, July 4, 1999 1998 1999 1998 ------ ------ ------ ------ Net sales $ 36,527 $ 33,641 $ 68,965 $ 64,742 Cost of sales 25,801 22,969 48,616 44,632 ------ ------ ------ ------ Gross profit 10,726 10,672 20,349 20,110 Selling & distribution expense 4,675 5,417 9,341 10,518 General & administrative expense 3,605 3,193 6,825 5,909 Non-recurring expense 210 - 960 - ------ ------ ------ ------ Income from operations 2,236 2,062 3,223 3,683 Interest expense and deferred financing amortization, net 696 759 1,387 1,496 Other expense (income), net 93 141 352 253 ------ ------ ------ ------ Earnings before income taxes 1,447 1,162 1,484 1,934 Provision for income taxes 1,046 371 1,432 623 ------ ------ ------ ------ Net earnings $ 401 $ 791 $ 52 $ 1,311 ======== ======== ======= ======= Basic earnings per share Earnings per share $ 0.04 $ 0.07 $ 0.01 $ 0.12 Weighted average shares outstanding 10,158 11,007 10,158 10,972 Diluted earnings per share Net earnings per share $ 0.04 $ 0.07 $ 0.01 $ 0.12 Weighted average shares outstanding 10,258 11,202 10,251 11,170 THE MIDDLEBY CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in 000's) (Unaudited) As of As of July 3, Jan. 2, 1999 1999 --------- --------- ASSETS Cash and cash equivalents $ 4,411 $ 6,768 Accounts receivable, net 27,156 24,330 Inventories, net 18,153 20,456 Other current assets 3,677 3,836 --------- --------- Total current assets 53,397 55,390 Property, plant and equipment, net 21,910 22,596 Excess purchase price over net assets acquired, net 13,347 13,617 Other assets 9,450 8,076 --------- --------- Total assets $ 98,104 $ 99,679 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current maturities of long-term debt $ 2,166 $ 1,893 Accounts payable 8,848 10,945 Accrued expenses 13,819 11,943 --------- --------- Total current liabilities 24,833 24,781 Long-term debt 24,644 25,932 Retirement benefits & other non-current liabilities 3,989 4,232 Shareholders' equity 44,638 44,734 --------- --------- Total liabilities and shareholders' equity $ 98,104 $ 99,679 ========= =========
The Middleby Corporation John J. Hastings, 847/758-3885