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 MARCH 30, 1996
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 (847) 741-3300
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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
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As of March 30, 1996, there were 8,399,488 shares of the registrant's common
stock outstanding.
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
QUARTER ENDED MARCH 30, 1996
INDEX
DESCRIPTION PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BALANCE SHEETS 1
March 30, 1996 and December 30, 1995
STATEMENTS OF EARNINGS 2
March 30, 1996 and April 1, 1995
STATEMENTS OF CASH FLOWS 3
March 30, 1996 and April 1, 1995
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
PART I. FINANCIAL INFORMATION
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
MARCH 30, 1996 DEC. 30, 1995
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ASSETS
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Cash and Cash Equivalents............. $ 1,216 $ 981
Accounts Receivable, net.............. 21,231 16,236
Inventories, net...................... 26,112 26,584
Prepaid Expenses and Other............ 1,593 980
Current Deferred Taxes................ 2,086 2,086
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Total Current Assets............. 52,238 46,867
Property, Plant and Equipment, net of
accumulated depreciation of
$14,776,000 and $14,475,000......... 24,945 24,273
Excess Purchase Price Over Net Assets
Acquired, net of accumulated
amortization of $3,411,000 and
$3,341,000.......................... 7,707 7,777
Deferred Taxes........................ 2,930 2,930
Other Assets.......................... 2,283 2,193
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Total Assets.............. $90,103 $84,040
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Maturities of Long-Term Debt.. $ 2,407 $ 1,710
Accounts Payable...................... 14,120 14,026
Accrued Expenses...................... 9,214 9,756
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Total Current Liabilities........ 25,741 25,492
Long-Term Debt........................ 46,026 41,318
Minority Interest and Other
Non-current Liabilities............. 1,897 1,782
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;
8,399,000 and 8,388,000 issued
and outstanding in 1996 and
1995, respectively................ 84 84
Paid-in Capital..................... 28,293 27,934
Cumulative Translation Adjustment... (353) (228)
Accumulated Deficit................. (11,585) (12,342)
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Total Shareholders' Equity....... 16,439 15,448
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Total Liabilities and
Shareholders' Equity.... $90,103 $84,040
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See accompanying notes
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THE MIDDLEBY CORPORATION AND SUBSIDIARIES
STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
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MARCH 30, 1996 APRIL 1, 1995
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Net Sales............................ $38,323 $34,994
Cost of Sales........................ 28,141 25,276
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Gross Margin.................... 10,182 9,718
Selling and Distribution Expenses.... 5,077 4,851
General and Administrative Expenses.. 2,542 2,353
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Income from Operations.......... 2,563 2,514
Interest Expense and Deferred
Financing Costs.................... 1,296 1,267
Other Expense, Net................... 103 115
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Earnings before Income
Taxes......................... 1,164 1,132
Provision for Income Taxes........... 407 389
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Net Earnings.................... $757 $743
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Earnings Per Common and Common
Equivalent Share.................... $.09 $.09
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See accompanying notes
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THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
-----------------------------
MARCH 30, 1996 APRIL 1,1995
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Cash Flows From Operating Activities-
Net earnings........................... $ 757 $ 743
Adjustments to reconcile net
earnings to cash provided by
operating activities-
Depreciation and amortization........ 714 724
Utilization of Subsidiary NOL's
credited to paid-in capital
(See Note 2)....................... 338 320
Changes in assets and liabilities-
Accounts receivable.................. (4,995) (348)
Inventories.......................... 472 (3,902)
Prepaid expenses and other assets.... (700) 814
Accounts payable and other
liabilities........................ (448) 2,281
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Net Cash (Used in) Provided by
Operating Activities................. (3,862) 632
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Cash Flows From Investing Activities-
Additions to property and equipment.... (1,302) (569)
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Net Cash Used in Investing
Activities........................... (1,302) (569)
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Cash Flows From Financing Activities-
Proceeds from senior secured note...... - 15,000
Proceeds from credit facility.......... - 31,000
Extinguishment of bank debt............ - (44,055)
Increase in revolving credit line, net 3,139 603
Proceeds from capital expenditure loan. 500 -
Cost of financing activities........... - (1,717)
Other financing activities, net........ 1,760 (5)
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Net Cash Provided by Financing
Activities........................... 5,399 826
Changes in Cash and Cash Equivalents-
Net increase in cash and cash
equivalents.......................... 235 889
Cash and cash equivalents at
beginning of year.................... 981 667
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Cash and Cash Equivalents at End
of Quarter........................... $1,216 $1,556
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Interest paid............................ $1,111 $527
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Income taxes paid........................ $5 $128
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See accompanying notes
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THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(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 1995 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 March 30, 1996 and December 30, 1995, and the results of
operations for the three months ended March 30, 1996 and April 1, 1995,
respectively, and cash flows for the three months ended March 30, 1996
and April 1, 1995.
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 has recorded an income tax provision of $407,000 for the
fiscal three months ended March 30, 1996. Although the Company is not
a Federal taxpayer due to its NOL carry-forwards, a tax provision is
still required to be recorded. The majority of the NOL carry-forwards
relate to an old quasi-reorganization and are not recorded as a credit
to the tax provision, but are directly credited to paid-in-capital.
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The utilization of the net operating loss and credit carry-forwards
depend on future taxable income during the applicable carry-forward
periods. Management evaluates and adjusts the valuation allowance,
based on the Company's expected taxable income as part of the annual
budgeting process. These adjustments reflect management's judgment as
to the Company's ability to generate taxable income which will, more
likely than not, be sufficient to recognize these tax assets.
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
8,700,000 and 8,661,000 for the fiscal quarters ended March 30, 1996
and April 1, 1995, respectively.
4) INVENTORIES
Inventories are valued using the first-in, first-out method.
Inventories consist of the following:
(In Thousands)
March 30, 1996 Dec. 30, 1995
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Raw Materials and Parts $10,106 $10,356
Work-in-Process 6,646 6,688
Finished Goods 9,360 9,540
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$26,112 $26,584
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5) ACCRUED EXPENSES
Accrued expenses consist of the following:
(In Thousands)
March 30, 1996 Dec. 30, 1995
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Accrued payroll and
related expenses......... $3,266 $3,838
Accrued commissions........ 1,863 1,567
Accrued warranty........... 1,443 1,382
Other accrued expenses..... 2,642 2,969
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$9,214 $9,756
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6) Certain amounts have been reclassified in 1995 to be consistent with
the 1996 presentation.
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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 March 30, 1996 of $38,323,000
increased by $3,329,000 (9.5%) compared to the prior year. The increase
in sales for the fiscal first quarter compared to the prior year was led
by strong international sales which increased 26% over the same period
in 1995. The overall sales increase was largely due to unit volume
increases. Cooking and warming manufacturing divisions showed a sales
increase of 7%, while the refrigeration segment decreased 4%. Conveyor
oven sales, which comprise the Middleby Marshall and CTX lines,
decreased 6% during the quarter, primarily due to the timing of orders
from large customers. Counter line cooking and warming equipment
increased 59% in the quarter primarily due to increased toaster sales
to a major chain and a large international order to a major customer.
Sales in the core cooking and steaming equipment line increased 13% 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 of the Company's international-based fabricated
equipment division increased by 81%. International sales represented
29% of total sales for the quarter as compared to 21% in the 1995 fiscal
first quarter.
Gross margin increased $464,000 (4.8%) for the quarter compared to the
prior year's quarter. As a percentage of net sales, gross margin
decreased 1.2% to 26.6% for the quarter from 27.8% in the prior year=s
quarter. The decline in gross margin percent was primarily related to
product mix, start-up costs for new products in the foodservice
refrigeration and beverage segments, and production start-up costs
associated with a new Philippine production facility.
Selling, general and administrative expenses increased $415,000 (5.8%)
to $7,619,000 compared to $7,204,000 in the first quarter of 1995.
Increased selling expenses related to the higher sales base and the
expansion of the Company's international sales and service capabilities,
including the establishment of a sales distribution office in France,
which occurred in the second quarter of 1995. As a percentage of sales,
selling, general and administrative expenses decreased to 19.9% for the
fiscal quarter ended March 30, 1996, compared to 20.6% for the prior
year's quarter.
Interest expense and deferred financing costs for the fiscal quarter
ended March 30, 1996 increased $29,000 (2.3%) to $1,296,000 compared to
$1,267,000 in the prior year fiscal quarter. The increase was due to
increased deferred financing amortization in the first quarter of 1996
as compared to the first quarter of 1995. During the fourth quarter of
1995, the Company shortened the period over which the deferred financing
costs associated with its January 10, 1995 refinancing will be
amortized. The increased deferred financing costs were partially offset
by lower interest rates on the company's senior secured credit facility.
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The Company recorded net earnings of $757,000 for the fiscal quarter
ended March 30, 1996 compared to net earnings of $743,000 for the prior
year fiscal quarter.
FINANCIAL CONDITION AND LIQUIDITY
For the three months ended March 30, 1996, net cash provided by
operating activities before changes in assets and liabilities was
$1,809,000, as compared to $1,787,000 for the three months ended April
1, 1995. Net cash used by operating activities after changes in assets
and liabilities was $3,862,000 as compared to net cash provided of
$632,000 in the prior year-to-date period. Accounts receivable
increased $4,995,000, which principally accounts for the cash usage in
the first quarter 1996. The increase in accounts receivable is directly
related to the sales increase and timing of shipments to international
and certain large domestic customers.
During the fiscal first quarter 1996, the Company increased its overall
outstanding debt by $5,399,000 under various facilities. During this
period the Company increased its borrowings on its revolving credit line
by $3,139,000, borrowed $500,000 on its capital expenditure line, repaid
$209,000 on its term loan and a foreign subsidiary of the Company
increased its borrowings with a foreign lending institution by
$1,969,000 primarily to finance the construction of a new facility in
the Philippines. There was $24,159,000 available to borrow under the
revolving credit facility, of which $18,139,000 was outstanding at March
30, 1996.
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
March 30, 1996, 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) Reports on Form 8-K - No such reports were filed during the quarter
for which this report is filed.
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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
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(Registrant)
Date May 14, 1996 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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5
1,000
3-MOS
DEC-28-1996
MAR-30-1996
1,216
0
21,231
0
26,112
52,238
39,721
14,776
90,103
25,741
46,026
0
0
84
16,355
90,103
38,323
38,323
28,141
28,141
7,619
0
1,296
1,164
407
1,164
0
0
0
757
.09
.09
