<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 QUARTERLY PERIOD ENDED JULY 1, 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
-------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3352497
------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1400 TOASTMASTER DRIVE, ELGIN, ILLINOIS 60120
--------------------------------------- ---------
(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 July l, 1995, there were 8,387,163 shares of the registrant's
common stock outstanding.
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
-----------------------------------------
QUARTER ENDED JULY 1, 1995
--------------------------
INDEX
-----
DESCRIPTION PAGE
----------- ----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BALANCE SHEETS 1
July 1, 1995 and December 31, 1994
STATEMENTS OF EARNINGS 2
July 1, 1995 and July 2, 1994
STATEMENTS OF CASH FLOWS 3
July 1, 1995 and July 2, 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
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
ASSETS July 1, 1995 Dec. 31, 1994
-------------------------------------- ------------- -------------
<S> <C> <C>
Cash and Cash Equivalents............. $ 1,687,000 $ 667,000
Accounts Receivable, net.............. 18,386,000 18,064,000
Inventories, net...................... 25,424,000 21,116,000
Prepaid Expenses and Other............ 900,000 1,394,000
------------ ------------
Total Current Assets............. 46,397,000 41,241,000
Property, Plant and Equipment, net of
accumulated depreciation of
$13,400,000 and $12,310,000.......... 23,303,000 23,260,000
Excess Purchase Price Over Net Assets
Acquired, net of accumulated
amortization of $3,202,000 and
$3,063,000.......................... 7,916,000 8,055,000
Other Assets.......................... 4,685,000 2,818,000
Investment in Affiliated Companies.... - 1,248,000
------------ ------------
Total Assets.............. $ 82,301,000 $ 76,622,000
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Maturities of Long-Term Debt.. $ 1,971,000 $ 1,822,000
Accounts Payable...................... 14,100,000 11,252,000
Accrued Expenses...................... 9,987,000 11,079,000
------------ ------------
Total Current Liabilities........ 26,058,000 24,153,000
Long-Term Debt........................ 44,034,000 42,650,000
Minority Interest and Other
Non current Liabilities............. 1,890,000 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;
8,387,000 and 8,341,000 issued
and outstanding in 1995 and
1994, respectively................ 83,000 83,000
Paid-in Capital..................... 25,098,000 24,154,000
Cumulative Translation Adjustment... (483,000) (384,000)
Accumulated Deficit................. (14,379,000) (15,816,000)
------------ ------------
Total Shareholders' Equity........ 10,319,000 8,037,000
------------ ------------
Total Liabilities and
Shareholders' Equity.... $ 82,301,000 $ 76,622,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes
- 1 -
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
July 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . . . . $34,559,000 $34,634,000 $69,553,000 $65,654,000
Cost of Sales. . . . . . . . . . . . . 25,092,000 25,221,000 50,368,000 48,244,000
----------- ----------- ----------- -----------
Gross Margin . . . . . . . . . 9,467,000 9,413,000 19,185,000 17,410,000
Selling and Distribution Expenses. . . 4,936,000 4,804,000 9,787,000 9,301,000
General and Administrative Expenses. . 2,355,000 2,288,000 4,708,000 4,508,000
----------- ----------- ----------- -----------
Income from Operations . . . . 2,176,000 2,321,000 4,690,000 3,601,000
Interest Expense . . . . . . . . . . . 1,271,000 1,047,000 2,455,000 1,951,000
Other (Income) Expense, Net. . . . . . (127,000) 143,000 71,000 320,000
----------- ----------- ----------- -----------
Income Before Income Taxes . . 1,032,000 1,131,000 2,164,000 1,330,000
Provision for Income Taxes
(See Note 2) . . . . . . . . . . . . 338,000 325,000 727,000 391,000
----------- ----------- ----------- -----------
Net Earnings . . . . . . . . . $ 694,000 $ 806,000 $ 1,437,000 $ 939,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per Common and Common
Equivalent Share . . . . . . . . . . $ .08 $ .10 $ .17 $ .11
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes
- 2 -
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
July 1, 1995 July 2, 1994
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities-
Net earnings........................... $ 1,437,000 $ 939,000
Adjustments to reconcile net
earnings to cash provided by
operating activities-
Depreciation and amortization........ 1,464,000 1,278,000
Utilization of Subsidiary NOL's
credited to paid-in capital
(See Note 2)....................... 580,000 327,000
Changes in assets and liabilities-
Accounts receivable.................. (322,000) (3,957,000)
Inventories.......................... (4,308,000) 1,243,000
Prepaid expenses and other assets.... 393,000 31,000
Accounts payable and other
liabilities........................ 1,756,000 909,000
----------- -----------
Net Cash Provided by Operating
Activities........................... 1,000,000 770,000
----------- -----------
Cash Flows from Investing Activities-
Additions to property and equipment.... (1,133,000) (1,248,000)
Proceeds from sale of investment....... 1,337,000 -
----------- -----------
Net Cash Provided/(Used) by
Investing Activities................. 204,000 (1,248,000)
----------- -----------
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............. (1,573,000) (9,000)
Increase in revolving credit, net...... 1,161,000 500,000
Cost of financing activities........... (1,717,000) -
----------- -----------
Net Cash (Used)/Provided by Financing
Activities........................... (184,000) 491,000
----------- -----------
Changes in Cash and Cash Equivalents-
Net increase in cash and cash
equivalents.......................... 1,020,000 13,000
Cash and cash equivalents at
beginning of year.................... 667,000 425,000
----------- -----------
Cash and Cash Equivalents at End
of Quarter........................... $ 1,687,000 $ 438,000
----------- -----------
----------- -----------
Interest paid............................ $ 1,767,000 $ 1,901,000
----------- -----------
----------- -----------
Income taxes paid........................ $ 236,000 $ 80,000
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
- 3 -
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JULY 1, 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 July 1, 1995 and December 31, 1994, and the results of
operations for the three and six months ended July 1, 1995 and July 2,
1994, respectively, and cash flows for the six months ended July 1, 1995
and July 2, 1994, respectively.
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
- 4 -
<PAGE>
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. $580,000 of the fiscal year-to-date tax
provision has been credited to paid-in capital. The Company has recorded
income tax provisions of $338,000 and $727,000 for the fiscal three and six
months ended July 1, 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 8,693,000 and 8,396,000 for the fiscal
quarters ended July 1, 1995 and July 2, 1994, respectively, and 8,678,000
and 8,397,000 for the fiscal year-to-date periods ended July 1, 1995 and
July 2, 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.
- 5 -
<PAGE>
5) Inventories
Inventories are valued using the first-in, first-out method.
Inventories consist of the following:
<TABLE>
<CAPTION>
July 1, 1995 Dec. 31, 1994
------------ -------------
<S> <C> <C>
Raw Materials and Parts $12,214,000 $ 8,404,000
Work in Process 5,022,000 5,866,000
Finished Goods 8,188,000 6,846,000
----------- -----------
$25,424,000 $21,116,000
----------- -----------
----------- -----------
</TABLE>
6) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
July 1, 1995 Dec. 31, 1994
------------ -------------
<S> <C> <C>
Accrued payroll and
related expenses......... $ 3,523,000 $ 4,800,000
Accrued commissions........ 1,844,000 2,191,000
Accrued warranty........... 1,393,000 1,365,000
Accrued interest........... 750,000 62,000
Other...................... 2,477,000 2,661,000
----------- -----------
$ 9,987,000 $11,079,000
----------- -----------
----------- -----------
</TABLE>
7) Certain amounts have been reclassified in 1994 to be consistent with the
1995 presentation.
- 6 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Unaudited).
RESULTS OF OPERATIONS
Net sales for the fiscal three months ended July 1, 1995 decreased by $75,000
(0.2%) compared to the prior year's three month period ended July 2, 1994. Net
sales for the six month period ended July 1, 1995 increased $3,899,000 (5.9%)
compared to the prior year's six month period ended July 2, 1994. The slight
decline in sales for the fiscal second quarter compared to the prior year's
quarter resulted from a slowdown in some market segments, the timing of sales to
certain large customers and decreased sales in the Mexican and Latin American
markets due to the impact of the peso devaluation. The positive sales increase
for the six month period is due to strong conveyor oven sales and new product
introductions.
Gross margin increased $54,000 (0.6%) for the quarter compared to the prior
year's quarter. Gross margin for the six month period increased $1,775,000
(10.2%) compared to the prior year's six month period. As a percentage of net
sales, gross margin increased 0.2% to 27.4% for the quarter from the prior
year's quarter, while year-to-date gross margins have increased 1.1% to 27.6%.
Favorable product mix and continued operating efficiency improvement have
contributed to the increase.
Selling, general and administrative expenses increased $199,000 (2.8%) and
$686,000 (5.0%) for the three and six month periods, respectively. Increased
expenses reflect promotional expenses for new products and expansion of
international sales and service capabilities. As a percentage of sales,
selling, general and administrative expenses increased to 21.1% for the three
months ended July 1, 1995, compared to 20.5% for the prior year's three month
period, but declined to 20.8% for the six month period ended July 1, 1995
compared to 21.0% for the prior year's six month period.
Other income for the quarter included a gain from the sale of a discontinued
product line and proceeds from a value added tax settlement in Canada.
Interest expense for the fiscal quarter ended July 1, 1995 increased $224,000
(21.4%) compared to the prior year's fiscal quarter ended July 2, 1994, and
$504,000 (25.8%) year-to-date. The increase is primarily due to higher
prevailing interest rates during the first and second quarter of 1995 compared
to the first and second quarter of 1994.
The Company recorded net earnings of $694,000 for the fiscal quarter ended July
1, 1995 compared to net earnings of $806,000 for the prior year fiscal quarter.
Year-to-date earnings were $1,437,000 for the six month period ended July 1,
1995 compared to net earnings of
- 7 -
<PAGE>
$939,000 for the six months ended July 2, 1994. The second quarter results
reflect a slowdown in some segments of the Company's markets, the timing of
orders from certain large customers and decreased sales in the Mexican and Latin
American markets due to the impact of peso devaluation. The positive earnings
gain for the six month period is largely due to strong conveyor oven sales and
new product introductions.
FINANCIAL CONDITION AND LIQUIDITY
For the six months ended July 1, 1995, net cash provided by operating activities
before changes in assets and liabilities was $3,481,000, as compared to
$2,544,000 for the six months ended July 2, 1994. Net cash provided by
operating activities after changes in assets and liabilities was $1,000,000 as
compared to $770,000 in the prior year-to-date period. The increase in
inventories of $4,308,000 was due to the introduction of new products, expansion
of international manufacturing, and timing of orders with certain larger
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 $1,010,000 primarily by using the cash proceeds from the sale of
its investment in Seco Products Corporation ("Seco") (see Note 4). For the
fiscal year-to-date, the Company increased its borrowings by $1,533,000,
principally reflecting the net effect of the payment of the financing costs, the
proceeds of the sale of the Seco investment, and cash required for operating
activities and property and equipment additions. Also, the cash balance at July
1, 1995 increased $1,020,000 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.
- 8 -
<PAGE>
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 July 1,
1995, except as follows:
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 11, 1995, the Company held its 1995 Annual Meeting of Stockholders. The
following persons were elected as directors to hold office until the 1996 Annual
Meeting of Stockholders: Newell Garfield, Jr., A. Don Lummus, John R. Miller,
III, Philip G. Putnam, David P. Riley, Sabin C. Streeter and William F. Whitman,
Jr. The number of shares cast for, withheld and abstained with respect to each
of the nominees were as follows:
Nominee For Withheld Abstained
------- --------- -------- ---------
Garfield 7,060,929 27,325 0
Lummus 7,066,154 22,100 0
Miller 7,066,154 22,100 0
Putnam 7,065,054 23,200 0
Riley 7,066,154 22,100 0
Streeter 7,064,129 24,125 0
Whitman 7,066,129 22,125 0
The stockholders also voted to approve the ratification of the selection of
Arthur Andersen LLP as independent auditors for the Company for the fiscal year
ending December 30, 1995. 7,058,496 shares were cast for such selection, 17,053
shares were cast against such selection, and 12,705 shares abstained.
No broker nonvotes were received in connection with the 1995 Annual Meeting.
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) Reports on Form 8-K - No such reports were filed during the
quarter for which this report is filed.
- 9 -
<PAGE>
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 August 14, 1995 By: /s/ John J. Hastings
------------------------ -------------------------------
John J. Hastings, Executive
Vice President, Chief
Financial Officer and
Secretary
- 10 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 1,687,000
<SECURITIES> 0
<RECEIVABLES> 18,386,000
<ALLOWANCES> 0
<INVENTORY> 25,424,000
<CURRENT-ASSETS> 46,397,000
<PP&E> 36,703,000
<DEPRECIATION> 13,400,000
<TOTAL-ASSETS> 82,301,000
<CURRENT-LIABILITIES> 26,058,000
<BONDS> 44,034,000
<COMMON> 83,000
0
0
<OTHER-SE> 10,236,000
<TOTAL-LIABILITY-AND-EQUITY> 82,301,000
<SALES> 69,553,000
<TOTAL-REVENUES> 69,553,000
<CGS> 50,368,000
<TOTAL-COSTS> 50,368,000
<OTHER-EXPENSES> 14,495,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,455,000
<INCOME-PRETAX> 2,164,000
<INCOME-TAX> 727,000
<INCOME-CONTINUING> 1,437,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,437,000
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
