<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/ X / Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended September 30, 1995
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 1-9973
THE MIDDLEBY CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3352497
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1400 Toastmaster Drive, Elgin, Illinois 60120
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone No., including Area Code (708) 741-3300
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES / X / NO / /
As of September 30, 1995, there were 8,388,363 shares of the registrant's
common stock outstanding.
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THE MIDDLEBY CORPORATION AND SUBSIDIARIES
QUARTER ENDED SEPTEMBER 30, 1995
INDEX
DESCRIPTION PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BALANCE SHEETS 1
September 30, 1995 and December 31, 1994
STATEMENTS OF EARNINGS 2
September 30, 1995 and October 1, 1994
STATEMENTS OF CASH FLOWS 3
September 30, 1995 and October 1, 1994
NOTES TO FINANCIAL STATEMENTS 4
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 9
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PART I. FINANCIAL INFORMATION
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS Sept. 30,1995 Dec. 31, 1994
Cash and Cash Equivalents............. $ 955,000 $ 667,000
Accounts Receivable, net.............. 18,981,000 18,064,000
Inventories, net...................... 24,849,000 21,116,000
Prepaid Expenses and Other............ 1,418,000 1,394,000
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Total Current Assets............. 46,203,000 41,241,000
Property, Plant and Equipment, net of
accumulated depreciation of
$13,973,000 and $12,310,000.......... 23,329,000 23,260,000
Excess Purchase Price Over Net Assets
Acquired, net of accumulated
amortization of $3,272,000 and
$3,063,000.......................... 7,846,000 8,055,000
Other Assets.......................... 4,705,000 2,818,000
Investment in Affiliated Companies.... - 1,248,000
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Total Assets.............. $ 82,083,000 $ 76,622,000
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----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Maturities of Long-Term Debt.. $ 2,046,000 $ 1,822,000
Accounts Payable...................... 12,391,000 11,252,000
Accrued Expenses...................... 11,227,000 11,079,000
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Total Current Liabilities........ 25,664,000 24,153,000
Long-Term Debt........................ 42,667,000 42,650,000
Minority Interest and Other
Non-current Liabilities............. 1,967,000 1,782,000
Shareholders' Equity:
Preferred Stock, $.01 par value;
nonvoting; 2,000,000 shares
authorized; none issued........... - -
Common Stock, $.01 par value;
20,000,000 shares authorized;
8,388,000 and 8,341,000 issued
and outstanding in 1995 and
1994, respectively................ 84,000 83,000
Paid-in Capital..................... 25,564,000 24,154,000
Cumulative Translation Adjustment... (444,000) (384,000)
Accumulated Deficit................. (13,419,000) (15,816,000)
----------- -----------
Total Shareholders' Equity........ 11,785,000 8,037,000
----------- -----------
Total Liabilities and
Shareholders' Equity.... $ 82,083,000 $ 76,622,000
----------- -----------
----------- -----------
See accompanying notes
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THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
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SEPT. 30, 1995 OCT. 1, 1994 SEPT. 30, 1995 OCT. 1, 1994
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<S> <C> <C> <C> <C>
Net Sales............................. $35,237,000 $32,349,000 $104,790,000 $98,003,000
Cost of Sales......................... 25,100,000 23,328,000 75,468,000 71,572,000
------------ ------------ ------------ ------------
Gross Profit.................. 10,137,000 9,021,000 29,322,000 26,431,000
Selling and Distribution Expenses..... 4,949,000 4,253,000 14,736,000 13,554,000
General and Administrative Expenses... 2,431,000 2,199,000 7,139,000 6,707,000
------------ ------------ ------------ ------------
Income from Operations........ 2,757,000 2,569,000 7,447,000 6,170,000
Interest Expense ..................... 1,173,000 1,075,000 3,628,000 3,026,000
Other Expense, Net.................... 192,000 174,000 263,000 494,000
------------ ------------ ------------ ------------
Income Before Income Taxes.... 1,392,000 1,320,000 3,556,000 2,650,000
Provision for Income Taxes
(See Note 2)........................ 432,000 411,000 1,159,000 802,000
------------ ------------ ------------ ------------
Net Earnings.................. $ 960,000 $ 909,000 $ 2,397,000 $ 1,848,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per Common and Common
Equivalent Share.................... $ .11 $ .11 $ .28 $ .22
------------ ------------ ------------ ------------
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</TABLE>
See accompanying notes
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THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
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Sept. 30, 1995 Oct. 1, 1994
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Cash Flows From Operating Activities-
Net earnings........................... $ 2,397,000 $ 1,848,000
Adjustments to reconcile net
earnings to cash provided by
operating activities-
Depreciation and amortization........ 2,216,000 1,921,000
Utilization of Subsidiary NOL's
credited to paid-in capital
(See Note 2)....................... 995,000 680,000
Changes in assets and liabilities-
Accounts receivable.................. (917,000) (2,141,000)
Inventories.......................... (3,733,000) 1,423,000
Prepaid expenses and other assets.... (299,000) 74,000
Accounts payable and other
liabilities........................ 1,287,000 (820,000)
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Net Cash Provided by Operating
Activities........................... 1,946,000 2,985,000
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Cash Flows From Investing Activities-
Additions to property and equipment.... (1,732,000) (1,272,000)
Proceeds from sale of investment....... 1,337,000 -
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Net Cash Used by Investing
Activities........................... (395,000) (1,272,000)
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Cash Flows From Financing Activities-
Proceeds from note..................... 15,000,000 -
Proceeds from bank debt................ 31,000,000 -
Repayment of debt...................... (44,055,000) -
Payments of long-term debt............. (2,027,000) (1,838,000)
Proceeds from mortgage term loan....... 293,000 457,000
Increase in revolving credit, net...... 243,000 -
Cost of financing activities........... (1,717,000) -
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Net Cash Used by Financing
Activities........................... (1,263,000) (1,381,000)
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Changes in Cash and Cash Equivalents-
Net increase in cash and cash
equivalents.......................... 288,000 332,000
Cash and cash equivalents at
beginning of year.................... 667,000 425,000
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Cash and Cash Equivalents at End
of Quarter........................... $ 955,000 $ 757,000
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Interest paid............................ $ 2,938,000 $ 3,034,000
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Income taxes paid........................ $ 286,000 $ 121,000
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See accompanying notes
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<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1) BASIS OF PRESENTATION
The financial statements have been prepared by The Middleby Corporation
(the "Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information not misleading. These
financial statements should be read in conjunction with the financial
statements and related notes contained in the Company's 1994 Annual Report.
Other than as indicated herein, there have been no significant changes from
the data presented in said Report.
In the opinion of management, the financial statements contain all
adjustments necessary to present fairly the financial position of the
Company as of September 30, 1995 and December 31, 1994, and the results of
operations for the three and nine months ended September 30, 1995 and
October 1, 1994, respectively, and cash flows for the nine months ended
September 30, 1995 and October 1, 1994.
2) INCOME TAXES
The Company files a consolidated Federal income tax return. In January,
1993, the Company adopted Statement of Financial Accounting Standards No.
109 ("SFAS 109"), Accounting for Income Taxes. SFAS 109 requires the
recognition of deferred tax assets and liabilities for expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. Adoption of SFAS 109 was effected through the
cumulative catch-up method.
The Company is not a Federal taxpayer due to its NOL carry-forwards,
although a tax provision is still required to be recorded. As a majority
of the NOL carry-forwards relate to an old quasi- reorganization, the
utilization of such NOL carry-forwards is not recorded as a credit to the
tax provision, but
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is directly credited to paid-in capital. The utilization of the net
operating loss carry-forwards depends on future taxable income during the
applicable carry-forward periods. In adopting SFAS 109 in 1993, the
Company recorded a valuation allowance equal to the net deferred tax assets
to reflect the inherent uncertainty in being able to predict future events.
A tax asset of $1,350,000 was established as of December 31, 1994 with a
credit to provision for income taxes of $339,000 and a credit directly to
paid-in capital of $1,011,000. $995,000 of the fiscal year-to-date tax
provision has been credited to paid-in capital. The Company has recorded
income tax provisions of $432,000 and $1,159,000 for the fiscal three and
nine months ended September 30, 1995, respectively. The reduction in the
valuation allowance and increase in shareholders' equity reflects
management's judgment as to the Company's ability to generate taxable
income during the carry-forward periods. The remaining net operating loss
and tax credit carry-forwards available to the Company will be recorded
into income and equity at a future date.
3) EARNINGS PER SHARE
Earnings per share of common stock are based upon the weighted average
number of outstanding shares of common stock and common stock equivalents.
The treasury stock method is used in computing common stock equivalents,
which included stock options and a warrant issued in conjunction with the
senior secured note. The terms of the warrant provide for the purchase of
250,000 shares at $3 per share, however, under certain conditions, the
warrant terms provide for the purchase of 200,000 shares at $.01 per share.
Earnings per share were computed based upon the weighted average number of
common shares outstanding of 8,680,000 and 8,441,000 for the fiscal
quarters ended September 30, 1995 and October 1, 1994, respectively, and
8,679,000 and 8,437,000 for the fiscal year-to-date periods ended September
30, 1995 and October 1, 1994, respectively.
4) SALE OF INVESTMENT IN AFFILIATED COMPANIES
On June 9, 1995, the Company sold its remaining 11.2% interest in the
Seco Products Corporation ( Seco ) for $1,447,000 net of expenses. $110,000
of the proceeds is being held in escrow for one year. $669,000 of the
proceeds of the sale were applied to the bank term loan and the remainder
reduced the revolving credit balance. No gain or loss was recorded on the
sale.
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5) INVENTORIES
Inventories are valued using the first-in, first-out method.
Inventories consist of the following:
SEPT. 30, 1995 DEC. 31,1994
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Raw Materials and Parts $11,919,000 $ 8,404,000
Work in Process 5,151,000 5,866,000
Finished Goods 7,779,000 6,846,000
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$24,849,000 $21,116,000
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6) ACCRUED EXPENSES
Accrued expenses consist of the following:
SEPT. 30, 1995 DEC. 31,1994
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Accrued payroll and
related expenses......... $ 4,219,000 $ 4,800,000
Accrued commissions........ 2,091,000 2,191,000
Accrued warranty........... 1,372,000 1,365,000
Accrued interest........... 752,000 62,000
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Other...................... 2,793,000 2,661,000
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$11,227,000 $11,079,000
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7) Certain amounts have been reclassified in 1994 to be consistent with
the 1995 presentation.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (UNAUDITED).
RESULTS OF OPERATIONS
Net sales for the fiscal quarter ended September 30, 1995 increased by
$2,888,000 (8.9%) compared to the prior year. Net sales for the nine month
period ended September 30, 1995 increased $6,787,000 (6.9%) compared to the
prior year. The increase in sales for the fiscal third quarter compared to
the prior year resulted from higher sales of conveyor cooking equipment in
global markets and increased penetration into traditional foodservice
outlets, as well as successful new product introductions. Cooking and
warming manufacturing divisions showed a sales increase of 12%, while the
refrigeration segment decreased 15%. Conveyor oven sales, which comprise
the Middleby Marshall and CTX lines, increased 25% during the quarter.
Counter line cooking and warming equipment increased 7% in the quarter.
Within the refrigeration segment, sales in the foodservice market increased
in line with the overall increase for the Company while products for the
beverage and bottling industry declined significantly. Sales in our core
cooking and steaming equipment line also declined in the quarter.
International sales increased 25% in the third quarter over the prior year s
quarter. International sales represented 28% of total sales for the quarter
as compared to 24% in the 1994 quarter.
Gross profit increased $1,116,000 (12.4%) for the quarter compared to the
prior year's quarter. Gross profit for the nine-month period increased
$2,891,000 (10.9%) compared to the prior year s nine-month period. As a
percentage of net sales, gross margin increased 0.9% to 28.8% for the
quarter from the prior year s quarter, while year-to-date gross margins have
increased 1.0% to 28.0%. Favorable product mix and continued operating
efficiency improvement contributed to the increase, along with favorable
workers compensation adjustments.
Selling, general and administrative expenses increased $928,000 (14.4%) and
$1,614,000 (8.0%) for the three- and nine-month periods, respectively.
Increased expenses reflected marketing expenses for new products, trade show
expense and expansion of international sales and service capabilities,
including the establishment of a sales distribution office in France. As a
percentage of sales, selling, general and administrative expenses increased
to 20.9% for the fiscal quarter ended September 30, 1995, compared to 19.9%
for the prior year's quarter, and increased to 20.9% for the nine-month
period ended September 30, 1995 compared to 20.7% for the prior year s nine
month period.
Interest expense for the fiscal quarter ended September 30, 1995 increased
$98,000 (9.1%) compared to the prior year fiscal quarter, and $602,000
(19.9%) year-to-date. The increase was primarily due to higher prevailing
interest rates during 1995 and the higher interest rate of the senior
secured note obtained in the January 1995 refinancing in comparison to the
then existing bank debt.
The Company recorded net earnings of $960,000 for the fiscal quarter ended
September 30, 1995 compared to net earnings of $909,000 for the prior year
fiscal quarter. Year-to-date net earnings were
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$2,397,000 for the nine-month period ended September 30, 1995 compared to
net earnings of $1,848,000 for the nine months ended October 1, 1994.
The third quarter results reflect the increased sales of conveyor cooking
equipment and new product introductions, offset in part by higher marketing
expenses associated with new product introductions, higher interest expenses
and deferred financing cost amortization.
FINANCIAL CONDITION AND LIQUIDITY
For the nine months ended September 30, 1995, net cash provided by operating
activities before changes in assets and liabilities was $5,608,000, as
compared to $4,449,000 for the nine months ended October 1, 1994. Net cash
provided by operating activities after changes in assets and liabilities was
$1,946,000 as compared to $2,985,000 in the prior year-to-date period. The
increase in inventories of $3,733,000 was due to the introduction of new
products, expansion of international manufacturing, and timing of orders
with certain large customers. This increase was partly offset by increased
accounts payable.
On January 10, 1995, the Company's subsidiaries consummated a $57,500,000
financing package to replace existing bank debt of $44,000,000 and provide
working capital for future growth. The financing includes a $42,500,000
senior secured credit facility from a group of lenders led by an affiliate
of a major international bank and a $15,000,000 senior secured note
placement with a major insurance company. The credit facility includes a
$15,000,000 five-year term loan, a $2,500,000 capital expenditure facility,
and a $25,000,000 revolving credit line. The senior secured notes have an
eight-year term with payments beginning in the sixth year and bear interest
at 10.99%. A warrant for the purchase of 250,000 shares of common stock at
an exercise price of $3 per share was issued in conjunction with the notes;
however, under certain conditions, the terms of the warrant provide for the
purchase of 200,000 shares at $.01 per share. The Company incurred
financing costs of $1,717,000 which will be amortized over the average life
of the note and bank debt's term.
During the fiscal quarter, the Company decreased its borrowings under its
credit agreements by $1,292,000 primarily by using cash provided by
operations. For the fiscal year-to-date, the Company increased its
borrowings under the revolving credit facility by $243,000, principally
reflecting the net effect of the payment of the financing costs, the
proceeds of the sale of the Seco investment (see Note 4), and cash required
for operating activities and property and equipment additions. Also, the
cash balance at September 30, 1995 increased $288,000 from the beginning of
the year.
Management believes the Company has sufficient financial resources available
to meet its anticipated requirements for funds for operations in the current
fiscal year and can satisfy the obligations under its credit and note
agreements.
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PART II. OTHER INFORMATION
The Company was not required to report the information pursuant to Items 1
through 6 of Part II of Form 10-Q for any of the three months ended
September 30, 1995, except as follows:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits - The following Exhibits are filed herewith:
Exhibit (27) - Financial Data Schedules (EDGAR only)
b) One report on Form 8-K dated September 1, 1995 was filed reporting
under Item 5 thereto describing and including certain Pro Forma
Financial Information under Item 7 thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE MIDDLEBY CORPORATION
(Registrant)
Date November 10, 1995 By: /s/ John J. Hastings
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John J. Hastings, Executive
Vice President, Chief
Financial Officer and
Secretary
(Principal Financial and
Accounting Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 955,000
<SECURITIES> 0
<RECEIVABLES> 18,981,000
<ALLOWANCES> 0
<INVENTORY> 24,849,000
<CURRENT-ASSETS> 46,203,000
<PP&E> 37,302,000
<DEPRECIATION> 13,973,000
<TOTAL-ASSETS> 82,083,000
<CURRENT-LIABILITIES> 25,664,000
<BONDS> 42,667,000
<COMMON> 84,000
0
0
<OTHER-SE> 11,701,000
<TOTAL-LIABILITY-AND-EQUITY> 82,083,000
<SALES> 104,790,000
<TOTAL-REVENUES> 104,790,000
<CGS> 75,468,000
<TOTAL-COSTS> 75,468,000
<OTHER-EXPENSES> 21,875,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,628,000
<INCOME-PRETAX> 3,556,000
<INCOME-TAX> 1,159,000
<INCOME-CONTINUING> 2,397,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,397,000
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
