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The Middleby Corporation Reports Second Quarter Results | Business Wire

ELGIN, Ill.–(BUSINESS WIRE)–The Middleby Corporation (NASDAQ: MIDD), a leading worldwide

manufacturer of equipment for the commercial foodservice, food

processing and residential kitchen industries, today reported net sales

and earnings for the second quarter ended July 1, 2017. Net earnings for

the second quarter were $77,569,000 or $1.35 per share on net sales of

$579,343,000 as compared to the prior year second quarter net earnings

of $72,891,000 or $1.28 per share on net sales of $580,456,000.

2017 Second Quarter Financial Highlights

  • Net sales decreased 0.2% compared to the prior year second quarter.

    Sales related to recent acquisitions added $29.2 million or 5.0%, in

    the second quarter. The impact of foreign exchange rates on foreign

    sales translated into U.S. Dollars reduced net sales by approximately

    $10.7 million, or 1.8%, during the second quarter. Excluding the

    impact of foreign exchange and acquisitions, sales decreased 3.4%

    during the second quarter.

  • Net sales at the company’s Commercial Foodservice Equipment Group

    increased by $12.8 million, or 4.0%, to $333.8 million in the second

    quarter as compared to $321.0 million the prior year second quarter.

    During fiscal 2016, the company completed the acquisition of Follett.

    Excluding the impact of this acquisition, sales decreased 4.4% in the

    second quarter, or 3.3% excluding the impact of foreign exchange.

  • Net sales at the company’s Food Processing Equipment Group increased

    by $8.9 million, or 10.7%, to $92.4 million in the second quarter as

    compared to $83.5 million the prior year second quarter. During fiscal

    2017, the company completed the acquisition of Burford. Excluding the

    impact of this acquisition, sales increased 8.0% in the second

    quarter, or 8.5% excluding the impact of foreign exchange.

  • Net sales at the company’s Residential Kitchen Equipment Group

    decreased by $22.8 million, or 13.0%, to $153.2 million in the second

    quarter as compared to $176.0 million in the prior year second

    quarter. Excluding the impact of foreign exchange, sales decreased

    9.1%.

  • Gross profit in the second quarter increased to $234.6 million from

    $233.5 million. The gross margin rate increased to 40.5% from 40.2%

    for the second quarter, reflecting improvement in profitability for

    both the Food Processing Equipment Group and the Residential Kitchen

    Equipment Group, due to the favorable impact of restructuring

    initiatives at the AGA group. This increase was offset in part by

    lower gross margins at the Commercial Foodservice Group reflecting the

    impact from the acquisition of Follett.

  • Operating income increased 9.1% in the second quarter to $122.1

    million from $111.9 million in the prior year quarter. Operating

    income during the second quarter of 2017 included $11.5 million of

    restructuring charges related to cost reduction initiatives associated

    primarily with AGA, as compared to $6.4 million in charges in the

    second quarter of 2017 related to acquisition integration initiatives

    at AGA. Additionally, the company realized a $12.0 million gain on the

    sale of a manufacturing facility in connection with relocation to an

    upgraded facility which will allow for improvement in production

    efficiencies and consolidation of certain operations. Operating income

    also included the impact of $3.4 million in non-cash expenses

    associated with the finalization of purchase accounting adjustments

    during the quarter for the Follett acquisition completed in 2016.

  • Non-cash expenses included in operating income during the second

    quarter of 2017 amounted to $20.9 million, including $7.4 million of

    depreciation, $10.5 million of intangible amortization and $3.0

    million of non-cash share based compensation.

  • Other expense in the quarter was $0.3 million compared to $3.8 million

    of other income in the prior year quarter, consisting mainly of

    foreign exchange gains and losses.

  • The provision for income taxes during the second quarter amounted to

    $38.6 million, at an effective rate of 33.2%, as compared to a $36.8

    million provision at a 33.5% effective rate in the prior year quarter.

  • Net earnings per share increased 5.5% to $1.35 in the second quarter

    as compared to $1.28 in the prior year quarter. Net earnings in the

    current second quarter were reduced by restructuring expenses,

    non-cash expenses associated with the finalization of purchase

    accounting adjustments for Follett, offset by the gain on sale of a

    manufacturing facility. The impact of these items reduced earnings per

    share by $0.04 in the 2017 second quarter period.

  • Net debt, defined as debt less cash, at the end of the second quarter

    amounted to $738.4 million as compared to $663.6 million at the end of

    the fiscal 2016. Second quarter debt reflected the funding of the

    Burford, CVP Systems and Sveba Dahlen acquisitions completed in the

    current period.

Selim A. Bassoul Chairman and Chief Executive Officer, commented, “At

the Commercial Foodservice Equipment Group, sales continued to be slower

due to timing of purchases from our major restaurant chain customers. We

have an exciting pipeline of new product opportunities with existing and

new major restaurant chain customers. These new equipment solutions have

a quick and proven payback to the restaurant operator. We have a high

level of confidence these opportunities will translate into revenues and

future growth, although longer periods of time to finalize programs

associated with larger capital investments at those customers has

impacted our revenues with those customers during the quarter.”

“At the Food Processing Equipment Group, we realized a solid quarter and

continue to see development of new food processing facilities in

emerging markets and with customers in existing facilities looking to

expand production capacities. We have invested heavily in the operations

of our industrial bakery brands, including the opening of our world

class industrial baking center in Plano, Texas which provides a resource

and expertise to our customers.”

Mr. Bassoul continued, “At our Residential Kitchen Equipment Group, the

second quarter sales decline reflects the impact of lower revenues at

the AGA Group due to acquisition integration initiatives. In an effort

to simplify those businesses and significantly reduce costs, we have

eliminated unprofitable products and reduced price discounting for

non-core business within that group. At Viking we continued to realize

sales declines reflecting the impact of the prior year product recall

and legacy issues related to products manufactured during the previous

ownership. We continue to have a positive outlook for this brand as the

benefit of the comprehensive new product lineup, improved customer

service, and significant investments in after-sales service take hold in

the marketplace. Since the acquisition by Middleby, Viking has released

more award winning products than any time in its history. As a result of

these investments, Viking is now leading in consumer product ratings

across its product categories.”

Mr. Bassoul added, “We continue to expand our industry leading profit

margins at all three business segments. Through our continued focus on

product innovation, pricing discipline and operational excellence we

realized record EBITDA margins despite short-term revenue declines. We

have ongoing initiatives to integrate recently acquired businesses and

remain in the early stages of leveraging synergies in our newly

developed residential platform. We remain confident in our commitment

and progress toward our longer-term margin expansion goals for the

company.

Mr. Bassoul further commented, “We were also very pleased to announce

three acquisitions during the quarter including, Burford, CVP Systems

and Sveba Dahlen. Burford is a leading brand in a broad line of seeding,

topping and slicing equipment for the industrial baking industry

complementing our existing baking systems offering. CVP Systems is a

leader in high speed modified atmosphere packaging systems,

complementing both our Food Processing Equipment Group product offerings

in meat and bakery equipment. Sveba Dahlen adds two leading brands to

our portfolio, which included the Bear Varimixer and Sveba Dahlen

brands. Bear Varimixer is a leading brand and innovator in mixing

equipment utilized primarily in the foodservice industry. Sveba Dahlen

is a long standing and highly respected manufacturer of ovens for the

baking industry, significantly expanding Middleby’s offering in this

product category and providing increased opportunities to expand and

accelerate growth into the retail supermarket customer segment.”

Conference Call

A conference call will be held at 10:00 a.m. Central time on August 10,

2017 and can be accessed by dialing (888) 391-6937 or (315) 625-3077 and

entering conference code 65321198#. The conference call is also

accessible through the Investor Relations section of the company website

at www.middleby.com.

A replay of the conference call will be available two hours after the

conclusion of the call by dialing (855) 859-2056 and entering conference

code 65321198#.

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 global leader in the foodservice equipment

industry. The company develops, manufactures, markets and services a

broad line of equipment used in the commercial foodservice, food

processing, and residential kitchen equipment industries. The company’s

leading equipment brands serving the commercial foodservice industry

include Anets®, Bear Varimixer®, Beech®, Blodgett®, Blodgett Combi®,

Blodgett Range®, Bloomfield®, Britannia®, Carter-Hoffmann®, Celfrost®,

Concordia®, CookTek®, CTX®, Desmon®, Doyon®, Eswood®, frifri®, Follett®,

Giga®, Goldstein® , Holman®, Houno®, IMC®, Induc®, Jade®, Lang®,

Lincat®, MagiKitch’n®, Market Forge®, Marsal®, Middleby Marshall®, MPC®,

Nieco®, Nu-Vu®, PerfectFry®, Pitco Frialator®, Southbend®, Star®, Sveba

Dahlen®, Toastmaster®, TurboChef® and Wells® and Wunder-Bar®. The

company’s leading equipment brands serving the food processing industry

include Alkar®, Armor Inox®, Auto-Bake®, Baker® Thermal Solutions®,

Burford®, Cozzini®, CVP Systems®, Danfotech®, Drake®, Maurer-Atmos®, MP

Equipment®, RapidPak®, Spooner Vicars®, Stewart Systems® and Thurne®.

The company’s leading equipment brands serving the residential kitchen

industry include AGA®, AGA Cookshop®, Brigade®, Falcon®, Fired Earth®,

Grange®, Heartland®, La Cornue®, Leisure Sinks®, Lynx®, Marvel®,

Mercury®, Rangemaster®, Rayburn®, Redfyre®, Sedona®, Stanley®,

TurboChef®, U-Line® and Viking®.

For more information about The Middleby Corporation and the company

brands, please visit www.middleby.com

 

 

 

 

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

EARNINGS

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

(Unaudited)

 

 

Three Months Ended

Six Months Ended

 

2nd Qtr, 2017

2nd Qtr, 2016

2nd Qtr, 2017

2nd Qtr, 2016

Net sales

$

579,343

$

580,456

$

1,109,640

$

1,096,811

Cost of sales

 

344,735

 

346,954

 

665,582

 

666,536

 

Gross profit

234,608

233,502

444,058

430,275

 

Selling, general & administrative

113,020

115,199

219,666

224,991

Restructuring expenses

11,494

6,390

13,219

6,996

Gain on sale of plant

 

(12,042)

 

 

(12,042)

 

 

Income from operations

122,136

111,913

223,215

198,288

 

Interest expense and deferred

financing amortization, net

5,702

6,059

11,507

11,335

Other expense (income), net

 

302

 

(3,838)

 

2,169

 

(4,638)

 

Earnings before income taxes

116,132

109,692

209,539

191,591

 

Provision for income taxes

 

38,563

 

36,801

 

61,268

 

64,162

 

Net earnings

$

77,569

$

72,891

$

148,271

$

127,429

 

 

Net earnings per share:

 

Basic

$

1.35

$

1.28

$

2.59

$

2.23

 

Diluted

$

1.35

$

1.28

$

2.59

$

2.23

 

Weighted average number shares:

 

Basic

 

57,299

 

57,022

 

57,201

 

57,037

 

Diluted

 

57,299

 

57,022

 

57,201

 

57,037

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