FORM 10-QSECURITIES AND EXCHANGE COMMISSIONWashington, 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 31, 2001 |
[_] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File No. 1-9973 THE MIDDLEBY CORPORATION |
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) | ||
Registrants Telephone No., including Area Code | (847) 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 May 8, 2001, there were 8,980,000 shares of the registrants common stock outstanding. |
THE MIDDLEBY CORPORATION AND SUBSIDIARIESQUARTER ENDED MARCH 31, 2001INDEX |
DESCRIPTION |
PAGE | ||
---|---|---|---|
PART I. FINANCIAL INFORMATION | |||
Item 1. Consolidated Financial Statements | |||
BALANCE SHEETS | 1 | ||
March 31, 2001 and December 30, 2000 | |||
STATEMENTS OF EARNINGS | 2 | ||
March 31, 2001 and April 1, 2000 | |||
STATEMENTS OF CASH FLOWS | 3 | ||
March 31, 2001 and April 1, 2000 | |||
NOTES TO FINANCIAL STATEMENTS | 4 | ||
Item 2. Managements Discussion and Analysis | 7 | ||
of Financial Condition and Results of | |||
Operations | |||
Item 3. Quantitative and Qualitative Disclosures | |||
About Market Risk | 11 | ||
PART II. OTHER INFORMATION | 12 |
PART I. FINANCIAL INFORMATION THE MIDDLEBY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In Thousands, Except Share Amounts) |
(Unaudited) Mar. 31, 2001 |
Dec. 30, 2000 | ||||
---|---|---|---|---|---|
ASSETS | |||||
Cash and cash equivalents | $ 2,328 | $ 2,094 | |||
Accounts receivable, net | 16,758 | 18,879 | |||
Inventories, net | 19,108 | 18,372 | |||
Prepaid expenses and other | 1,227 | 976 | |||
Current deferred taxes | 4,117 | 4,141 | |||
Total current assets | 43,538 | 44,462 | |||
Property, plant and equipment, net of | |||||
accumulated depreciation of | |||||
$20,849 and $20,189 | 18,528 | 18,968 | |||
Excess purchase price over net assets | |||||
acquired, net of accumulated | |||||
amortization of $7,617 and $7,391 | 12,830 | 13,056 | |||
Deferred taxes | 809 | 1,224 | |||
Other assets | 532 | 600 | |||
Total assets | $ 76,237 | $ 78,310 | |||
LIABILITIES AND SHAREHOLDERS EQUITY | |||||
Current maturities of long-term debt | 11 | $ 249 | |||
Accounts payable | 4,964 | 7,211 | |||
Accrued expenses | 12,967 | 17,918 | |||
Total current liabilities | 17,942 | 25,378 | |||
Long-term debt | 13,081 | 8,290 | |||
Retirement benefits and other | |||||
non-current liabilities | 7,308 | 7,181 | |||
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; | |||||
11,021,896 issued in 2001 and | |||||
2000 | 110 | 110 | |||
Paid-in capital | 53,588 | 53,585 | |||
Treasury stock at cost; 2,042,974 | |||||
and 2,015,409 shares in 2001 and | |||||
2000, respectively | (11,950 | ) | (11,777 | ) | |
Accumulated deficit | (2,118 | ) | (2,665 | ) | |
Accumulated other comprehensive | |||||
income | (1,724 | ) | (1,792 | ) | |
Total shareholders equity | 37,906 | 37,461 | |||
Total liabilities and | |||||
shareholders equity | $ 76,237 | $ 78,310 | |||
See accompanying notes 1 |
THE MIDDLEBY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EARNINGS(In Thousands, Except Per Share Amounts)(Unaudited) |
Three Months Ended |
|||||
---|---|---|---|---|---|
Mar. 31, 2001 |
Apr. 1, 2000 | ||||
Net sales | $24,747 | $32,474 | |||
Cost of sales | 16,576 | 21,260 | |||
Gross profit | 8,171 | 11,214 | |||
Selling and distribution expenses | 3,617 | 4,029 | |||
General and administrative expenses | 2,717 | 4,541 | |||
Income from operations | 1,837 | 2,644 | |||
Interest expense and deferred | |||||
financing amortization | 155 | 477 | |||
Other expense, net | 198 | 286 | |||
Earnings before income taxes | 1,484 | 1,881 | |||
Provision for income taxes | 935 | 1,391 | |||
Net earnings | $ 549 | $ 490 | |||
Net earnings per share: | |||||
Basic | $ 0.06 | $ 0.05 | |||
Diluted | $ 0.06 | $ 0.05 | |||
Weighted average number of shares: | |||||
Basic | 8,996 | 10,184 | |||
Diluted | 9,036 | 10,350 |
See accompanying notes 2 |
THE MIDDLEBY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)(Unaudited) |
Three Months Ended |
|||||
---|---|---|---|---|---|
Mar. 31, 2001 |
Apr. 1, 2000 | ||||
Cash flows from operating activities- | |||||
Net earnings | $ 549 | $ 490 | |||
Adjustments to reconcile net earnings | |||||
to cash provided by operating | |||||
activities: | |||||
Depreciation and amortization | 886 | 948 | |||
Utilization of NOLs | 439 | 820 | |||
Changes in assets and liabilities- | |||||
Accounts receivable | 1,996 | 226 | |||
Inventories | (918 | ) | (123 | ) | |
Prepaid expenses and other assets | (183 | ) | 63 | ||
Accounts payable | (2,196 | ) | (126 | ) | |
Accrued expenses and other | |||||
liabilities | (4,645 | ) | (2,690 | ) | |
Net cash (used in) operating | |||||
activities | (4,072 | ) | (392 | ) | |
Cash flows from investing activities- | |||||
Net additions to property and equipment | (220 | ) | (123 | ) | |
Net cash (used in) investing activities | (220 | ) | (123 | ) | |
Cash flows from financing activities- | |||||
Proceeds (repayments) under | |||||
intellectual property lease | | (1,953 | ) | ||
Increase (decrease) in revolving | |||||
credit line, net | 4,772 | (445 | ) | ||
Repurchase of treasury stock | (170 | ) | 70 | ||
Net cash provided by (used in) | |||||
financing activities | 4,602 | (2,328 | ) | ||
Effect of exchange rates on cash | (76 | ) | 400 | ||
Changes in cash and cash equivalents- | |||||
Net increase (decrease) in cash and | |||||
cash equivalents | 234 | (2,443 | ) | ||
Cash and cash equivalents at | |||||
beginning of year | 2,094 | 14,536 | |||
Cash and cash equivalents at end | |||||
of quarter | $ 2,328 | $ 12,093 | |||
Interest paid | $ 107 | $ 647 | |||
Income taxes paid | $ 264 | $ 91 | |||
See accompanying notes 3 |
THE MIDDLEBY CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31, 2001(Unaudited) |
1) | Summary of Significant Accounting Policies |
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 companys 2000 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 31, 2001 and December 30, 2000, and the results of operations for the three months ended March 31, 2001 and April 1, 2000 and cash flows for the three months ended March 31, 2001 and April 1, 2000. |
2) | New Accounting Pronouncements |
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133 Accounting for Deriative Instruments and Hedging Activities. This standard requires that an entity recognize deriatives as either assets or liabilities on its balance sheet and measure those instruments at fair value. SFAS No. 137 amended the effective date of SFAS No. 133 to being effective for fiscal years beginning after June 15, 2000. As a result, the company has adopted the requirements of SFAS No. 133 in the first quarter of the fiscal year 2001. Based on current circumstances, the adoption of SFAS No. 133 did not have a material effect on the financial position or results of operations for the company in the first quarter of 2001. |
4 |
3) | Comprehensive Income |
The company reports changes in equity during a period, except those resulting from investment by owners and distribution to owners, in accordance with Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No. 130). |
Components of comprehensive income were as follows (in thousands): |
Three Months Ended |
|||||
---|---|---|---|---|---|
Mar. 31, 2001 |
Apr. 1, 2000 | ||||
Net earnings | $549 | $490 | |||
Cumulative translation adjustment | 68 | 398 | |||
Comprehensive income | $617 | $888 | |||
4) | Inventories |
Inventories are valued using the first-in, first-out method. |
Inventories consist of the following: |
Mar. 31, 2001 |
Dec. 30, 2000 | ||||
---|---|---|---|---|---|
(In thousands) | |||||
Raw materials and Parts | $ 5,138 | $ 5,515 | |||
Work-in-process | 3,144 | 3,985 | |||
Finished goods | 10,826 | 8,872 | |||
$19,108 | $18,372 | ||||
5) | Accrued Expenses |
Accrued expenses consist of the following: |
Mar. 31, 2001 |
Dec. 30, 2000 | ||||
---|---|---|---|---|---|
(In thousands) | |||||
Accrued payroll and related expenses | $ 2,754 | $ 6,253 | |||
Accrued customer rebates | 1,625 | 3,479 | |||
Accrued commissions | 854 | 925 | |||
Accrued warranty | 1,127 | 1,449 | |||
Other accrued expenses | 6,607 | 5,812 | |||
$12,967 | $17,918 | ||||
5 |
6) | Segment Information |
The company operates in two reportable business segments defined by management reporting structure and operating activities. |
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The company evaluates individual segment performance based on operating income. Intersegment sales are made at established arms-length transfer prices. |
The following table summarizes the results of operations for the companys business segments: |
Cooking Systems Group |
International Distribution |
Corporate and Other(1) |
Eliminations(2) |
Total | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Three months ended March 31, 2001 | |||||||||||
Net sales | $24,412 | $ 5,365 | $ | $(5,030 | ) | $24,747 | |||||
Operating income (loss) | 2,564 | (195 | ) | (632 | ) | 100 | 1,837 | ||||
Depreciation expense | 608 | 39 | 48 | | 695 | ||||||
Capital expenditures | 69 | 8 | 143 | | 220 | ||||||
Total assets | 56,259 | 15,851 | 15,109 | (10,982 | ) | 76,237 | |||||
Long-lived assets | 18,797 | 584 | 13,318 | | 32,699 | ||||||
Three months ended April 1, 2000 | |||||||||||
Net sales | $28,945 | $ 8,775 | $ | $(5,246 | ) | $32,474 | |||||
Operating income (loss) | 4,486 | 88 | (1,664 | ) | (266 | ) | 2,644 | ||||
Depreciation expense | 624 | 40 | 58 | | 722 | ||||||
Capital expenditures | 103 | 15 | 5 | | 123 | ||||||
Total assets | 59,369 | 18,263 | 28,144 | (10,982 | ) | 94,794 | |||||
Long-lived assets | 20,564 | 627 | 15,744 | | 36,935 |
(1) | Includes corporate and other general company assets and operations |
(2) | Includes elimination of intercompany sales, profit in inventory and intercompany receivables. Intercompany sale transactions are predominantly from the Cooking Systems Group to the International Distribution Division. |
Net sales by major geographic region including those sales from the Cooking Systems Group direct to international customers, were as follows (in thousands): |
Three Months Ended |
|||||
---|---|---|---|---|---|
Mar. 31, 2001 |
Apr. 1, 2000 | ||||
United States | $15,961 | $22,846 | |||
Asia | 3,951 | 2,229 | |||
Europe and Middle East | 2,537 | 3,661 | |||
Latin America | 1,187 | 2,853 | |||
Canada | 1,111 | 885 | |||
Total International | 8,786 | 9,628 | |||
Net Sales | $24,747 | $32,474 | |||
6 |
Three Months Ended |
|||||||||
---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2001 |
Apr. 1, 2000 |
||||||||
Sales |
Percent |
Sales |
Percent | ||||||
Business Divisions | |||||||||
Conveyor oven | |||||||||
equipment | $ 9,178 | 37.1 | $ 13,444 | 41.4 | |||||
Counterline cooking | |||||||||
equipment | 2,815 | 11.3 | 3,275 | 10.1 | |||||
Core cooking | |||||||||
equipment | 10,167 | 41.1 | 11,373 | 35.0 | |||||
International specialty | |||||||||
equipment | 2,252 | 9.1 | 853 | 2.7 | |||||
Total Cooking Systems | |||||||||
Group | 24,412 | 98.6 | 28,945 | 89.2 | |||||
International | |||||||||
Distribution (1) | 5,365 | 21.7 | 8,775 | 27.0 | |||||
Intercompany | |||||||||
sales (2) | (5,030 | ) | (20.3 | ) | (5,246 | ) | (16.2 | ) | |
Total | $ 24,747 | 100.0 | $ 32,474 | 100.0 | |||||
(1) | Consists of sales of products manufactured by Middleby and products manufactured by third parties. |
(2) | Consists primarily of the elimination of sales to the companys International Distribution Division from Cooking Systems Group. |
7 |
Results of OperationsThe following table sets forth certain consolidated statements of earnings items as a percentage of net sales for the periods. |
Three Months Ended |
|||||
---|---|---|---|---|---|
Mar. 31, 2001 |
Apr. 1, 2000 | ||||
Net sales | 100.0 | % | 100.0 | % | |
Cost of sales | 67.0 | % | 65.5 | % | |
Gross profit | 33.0 | % | 34.5 | % | |
Selling, general and administrative | |||||
expenses | 25.6 | % | 26.4 | % | |
Income from operations | 7.4 | % | 8.1 | % | |
Interest expense and deferred | |||||
financing amortization, net | 0.6 | % | 1.4 | % | |
Other expense, net | 0.8 | % | 0.9 | % | |
Earnings before income taxes | 6.0 | % | 5.8 | % | |
Provision for income taxes | 3.8 | % | 4.3 | % | |
Net earnings | 2.2 | % | 1.5 | % | |
8 |
Three Months Ended March 31, 2001 Compared to Three Months Ended April 1, 2000NET SALES. Net sales in the three-month period ended March 31, 2001 decreased 24% to $24.7 million as compared to $32.5 million in the three-month period ended April 1, 2000. Sales of the Cooking Systems Group for the three-month period ended March 31, 2001 decreased 16% to $24.4 million from $28.9 million in the prior year. Within the Cooking Systems Group, sales of conveyor oven equipment declined by 32%, sales of core cooking equipment declined by 11% and sales of counterline equipment declined by 14%. Sales of all product lines were impacted by the slowdown in the U.S. and international economies. Additionally, sales of conveyor oven equipment were adversely impacted by the temporary slowdown in store openings of certain major restaurant chain customers. Sales of international specialty equipment increased 164% due to increased sales to a new major restaurant chain customer and the development of new products for the Asian market. Sales of the International Distribution Division decreased 39% to $5.4 million from $8.8 million in the previous year period. The lower sales level reflects the slowdown of international expansion of major restaurant chains, the strengthening of the U.S. dollar and the slowdown of certain international economies affected by the U.S. market. GROSS PROFIT. Gross profit decreased to $8.2 million from $11.2 million in the prior year period. As a percentage of sales, gross margins decreased from 34.5% in the prior year to 33.0 due to the net sales decline resulting in lower production efficiencies. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased 26% to $6.3 million as compared to $8.6 million in the prior year period. The reduction in expenses reflects a combination of savings from a lower cost structure resulting from prior year restructuring efforts, tightened controls on discretionary spending implemented during the slowdown, and lower variable expenses related to sales such as commissions and incentive compensation. INTEREST AND DEFERRED FINANCING AMORTIZATION. Net financing costs decreased to $0.2 million from $0.5 million in the prior year as a result of reduced interest expense on lower outstanding debt. OTHER EXPENSE. Other expenses were $0.2 million in the current year and $0.3 million in the prior year. The decrease from the prior year largely relates to reduced exchange losses at the companys operations in Asia and Europe. 9 |
Sell |
Purchase |
Maturity | |||
---|---|---|---|---|---|
1,300,000 Euro | $1,185,210 U.S. Dollars | June 15, 2001 | |||
1,200,000 Euro | $1,106,640 U.S. Dollars | June 12, 2001 | |||
600,000,000 South Korean Won | $459,242 U.S. Dollars | June 22, 2001 | |||
25,000,000 Taiwan Dollar | $750,525 U.S. Dollars | June 22, 2001 |
11 |
Interest Rate RiskThe company is exposed to market risk related to changes in interest rates. The following table summarizes the maturity of the companys debt obligations. |
Twelve Month Period Ending |
Fixed Rate Debt |
Variable Rate Debt | |||
---|---|---|---|---|---|
(In thousands) | |||||
March 31, 2002 | $ 11 | $ | |||
March 31, 2003 | 6 | | |||
March 31, 2004 | | 13,075 | |||
$ 17 | $13,075 | ||||
c) | During the first quarter of fiscal 2001, the company issued 1,250 shares of the companys common stock to division executives, pursuant to the exercise of stock options, for $5,625.00. Such options were granted at an exercise price of $4.50 per share. As certificates for the shares were legended and stock transfer instructions were given to the transfer agent, the issuance of such shares was exempt under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof, as transactions by an issuer not involving a public offering. |
b) | There were no reports filed on Form 8-K during the first quarter of 2001. |
12 |
SIGNATUREPursuant 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 May 11, 2001 | By:/s/ David B. Baker |
||
David B. Baker | |||
Vice President, | |||
Chief Financial Officer | |||
and Secretary |
13 |