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10-Q

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 June 30, 2001

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
Incorporation or Organization) 		(I.R.S. Employer Identification No.)

1400 Toastmaster Drive, Elgin, Illinois 60120
(Address of Principal Executive Offices) (Zip Code)

Registrant’s 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 August 10, 2001, there were 8,981,422 shares of the registrant’s common stock outstanding.



THE MIDDLEBY CORPORATION AND SUBSIDIARIES

QUARTER ENDED JUNE 30, 2001

INDEX


DESCRIPTION PAGE

PART I. FINANCIAL INFORMATION


Item 1.       Consolidated Financial Statements  
 
BALANCE SHEETS
     June 30, 2001 and December 30, 2000 		1
 
  STATEMENTS OF EARNINGS
     June 30, 2001 and July 1, 2000 		2
 
STATEMENTS OF CASH FLOWS
     June 30, 2001 and July 1, 2000 		3
 
NOTES TO FINANCIAL STATEMENTS 4
 
Item 2.       Management’s Discussion and Analysis
of Financial Condition and Results of
Operations 		8
 
Item 3.       Quantitative and Qualitative Disclosures
About Market Risk 		13

PART II. OTHER INFORMATION 15

PART I. FINANCIAL INFORMATION

THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)



(Unaudited)
Jun. 30, 2001
Dec. 30, 2000
ASSETS      
Cash and cash equivalents   $   4,580   $   2,094  
Accounts receivable, net   15,633   18,879  
Inventories, net   19,394   18,372  
Prepaid expenses and other   1,494   976  
Current deferred taxes   4,160   4,141  
     Total current assets   45,261   44,462  
Property, plant and equipment, net of  
  accumulated depreciation of  
  $21,546 and $20,189   17,866   18,968  
Excess purchase price over net assets  
  acquired, net of accumulated  
  amortization of $7,843 and $7,391   12,604   13,056  
Deferred taxes   —   1,224  
Other assets   1,218   600  
            Total assets   $ 76,949   $ 78,310  
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current maturities of long-term debt   13   $      249  
Accounts payable   5,738   7,211  
Accrued expenses   14,090   17,918  
     Total current liabilities   19,841   25,378  
Long-term debt   12,053   8,290  
Retirement benefits and other  
  non-current liabilities   6,082   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   53,667   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   (1,442 ) (2,665 )
  Accumulated other comprehensive  
    income   (1,412 ) (1,792 )
     Total shareholders’ equity   38,973   37,461  
            Total liabilities and  
              shareholders’ equity   $ 76,949   $ 78,310  

See accompanying notes

- 1 -



THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Amounts)
(Unaudited)


Three Months Ended
Six Months Ended
June 30, 2001
July 1, 2000
June 30, 2001
July 1, 2000
Net sales   $25,293   $32,375   $50,040   $64,849  
Cost of sales   17,059   22,350   33,634   43,610  
        Gross profit   8,234   10,025   16,406   21,239  
Selling and distribution expenses   3,561   4,227   7,178   8,256  
General and administrative expenses   2,425   3,513   5,143   8,054  
        Income from operations   2,248   2,285   4,085   4,929  
Interest expense and deferred  
  financing amortization   178   482   333   959  
Other expense, net   398   255   596   541  
        Earnings before income taxes   1,672   1,548   3,156   3,429  
Provision for income taxes   996   907   1,931   2,298  
        Net earnings   $     676   $     641   $  1,225   $  1,131  
   
   
Net earnings per share:  
              Basic   $    0.08   $    0.06   $    0.14   $    0.11  
              Diluted   $    0.08   $    0.06   $    0.14   $    0.11  
Weighted average number of shares:  
          Basic   8,981   10,177   8,987   10,181  
          Diluted   8,998   10,338   9,006   10,348  

See accompanying notes

- 2 -



THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)


Six Months Ended
Jun. 30, 2001
Jul. 1, 2000
Cash flows from operating activities-      
  Net earnings   $   1,225   $   1,131  
  Adjustments to reconcile net earnings  
    to cash provided by operating  
    activities:  
    Depreciation and amortization   1,855   1,888  
    Utilization of NOL’s   1,205   1,065  
  Changes in assets and liabilities-  
    Accounts receivable   3,147   2,881  
    Inventories   (1,254 ) 264  
    Prepaid expenses and other assets   (1,135 ) 15  
    Accounts payable   (1,412 ) (1,139 )
    Accrued expenses and other  
      liabilities   (4,331 ) 103  
  Net cash provided by (used in) operating  
    activities   (700 ) 6,208  
Cash flows from investing activities-  
Net additions to property and equipment   (271 ) (271 )
  Net cash (used in) investing activities   (271 ) (271 )
Cash flows from financing activities-  
  Proceeds (repayments) under  
    intellectual property lease   —   (1,931 )
  Increase (decrease) in revolving  
    credit line, net   3,717   (861 )
  Repurchase of treasury stock   (173 ) (122 )
  Other financing activities, net   9   —  
    Net cash provided by (used in)  
    financing activities   3,553   (2,914 )
Effect of exchange rates on cash   (96 ) 24  
Changes in cash and cash equivalents-  
  Net increase in cash and  
    cash equivalents   2,486   3,047  
  Cash and cash equivalents at  
    beginning of year   2,094   14,536  
  Cash and cash equivalents at end  
    of quarter   $   4,580   $ 17,583  
Interest paid   $      232   $   1,243  
Income taxes paid   $      325   $      256  

See accompanying notes

- 3 -



THE MIDDLEBY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 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 company’s 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 June 30, 2001 and December 30, 2000, and the results of operations for the six months ended June 30, 2001 and July 1, 2000 and cash flows for the six months ended June 30, 2001 and July 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 or second 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 Six Months Ended
June 30, 2001
July 1, 2000
June 30, 2001
July 1, 2000
  Net earnings   $      676   $      641   $   1,225   $   1,131  
  Cumulative translation adjustment   312   (316 ) 380   82  
    Comprehensive income   $      988   $      325   $   1,605   $   1,213  

4) Inventories

  Inventories are valued using the first-in, first-out method.

  Inventories consist of the following:

Jun. 30, 2001
Dec. 30, 2000
(In thousands)
  Raw materials and      
    Parts   $  5,515   $  5,515  
  Work-in-process   3,293   3,985  
  Finished goods   10,586   8,872  
      $19,394   $18,372  

5) Accrued Expenses

  Accrued expenses consist of the following:

Jun. 30, 2001
Dec. 30, 2000
(In thousands)
  Accrued payroll and      
    related expenses   $  3,383   $  6,253  
  Accrued customer rebates   1,865   3,479  
  Accrued commissions   896   925  
  Accrued warranty   1,270   1,449  
  Other accrued expenses   6,676   5,812  
      $14,090   $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 company’s business segments:

Cooking
Systems
Group
International
Distribution
Corporate
and
Other(1)
Eliminations(2)
Total
Three months ended June 30, 2001          
 
Net sales $23,787   $   4,820   $        —   $(3,314 ) $25,293  
Operating income (loss) 2,999   (337 ) (414 ) —   2,248  
Depreciation expense 615   43   50   —   708  
Capital expenditures 48   (24 ) —   —   24  
       
Six months ended June 30, 2001
       
Net sales $47,446   $ 10,184   $        —   $(7,590 ) $50,040  
Operating income (loss) 5,563   (532 ) (1,046 ) 100   4,085  
Depreciation expense 1,223   82   98   —   1,403  
Capital expenditures 122   6   143   —   271  
       
Total assets 55,941   16,977   15,013   (10,982 ) 76,949  
Long-lived assets 18,407   1,048   12,233   —   31,688  
       
Three months ended July 1, 2000
       
Net sales $29,450   $   7,910   $        —   $(4,985 ) $32,375  
Operating income (loss) 3,626   (30 ) (1,475 ) 164   2,285  
Depreciation expense 602   53   59   —   714  
Capital expenditures 124   24   —   —   148  
       
Six months ended July 1, 2000
 
Net sales $58,406   $ 16,685   $     (11 ) $(10,231 ) $64,849  
Operating income (loss) 8,112   58   (3,371 ) 130   4,929  
Depreciation expense 1,226   93   117   —   1,436  
Capital expenditures 227   39   5   —   271  
       
Total assets 56,366   16,746   34,183   (10,982 ) 96,313  
Long-lived assets 20,075   597   15,161   —   35,833  

(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.

- 6 -




  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
Six Months Ended
June 30, 2001
July 1, 2000
June 30, 2001
July 1, 2000
  United States   $18,028   $23,862   $34,623   $47,591  
  Asia   3,254   3,050   6,452   5,497  
  Europe and Middle East   1,935   2,435   4,542   5,319  
  Latin America   1,275   2,022   2,510   4,551  
  Canada   801   1,006   1,913   1,891  
    Total International   7,265   8,513   15,417   17,258  
  Net Sales   $25,293   $32,375   $50,040   $64,849  

- 7 -




  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited).

  Informational Note

  This report contains forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The company cautions readers that these projections are based upon future results or events and are highly dependent upon a variety of important factors which could cause such results or events to differ materially from any forward-looking statements which may be deemed to have been made in this report, or which are otherwise made by or on behalf of the company. Such factors include, but are not limited to, changing market conditions; the availability and cost of raw materials; the impact of competitive products and pricing; the timely development and market acceptance of the company’s products; foreign exchange and political risks affecting international sales; and other risks detailed herein and from time to time in the company’s Securities and Exchange Commission filings, including those discussed under “Risk Factors” in the company’s Registration Statement on Form S-2 (Reg. No. 333-35397). Any forward looking statements contained in this report speak only as of the date of this filing. The company undertakes no obligation to update publicly any forward looking information, whether as a result of new information, future events or otherwise.

Net Sales Summary
Three Months Ended
Six Months Ended
June 30, 2001
July 1, 2000
June 30, 2001
July 1, 2000
Sales
Percent
Sales
Percent
Sales
Percent
Sales
Percent
  Business Divisions                  
                   
  Conveyor oven equipment   $   9,882   39.1   $ 12,774   39.5   $ 19,060   38.1   $ 26,340   40.6  
  Counterline cooking equipment   2,931   11.6   3,053   9.4   5,746   11.4   6,217   9.6  
  Core cooking equipment   9,640   38.1   12,259   37.9   19,807   39.6   23,632   36.4  
  International specialty equipment   1,334   5.2   1,364   4.2   2,833   5.7   2,217   3.4  
  Total Cooking Systems Group   23,787   94.0   29,450   91.0   47,446   94.8   58,406   90.0  
                   
  International Distribution (1)   4,820   19.1   7,910   24.4   10,184   20.4   16,685   25.7  
                   
  Intercompany sales (2)   (3,314 ) (13.1 ) (4,985 ) (15.4 ) (7,590 ) (15.2 ) (10,231 ) (15.7 )
  Other   —   —   —   —   —   —   (11 ) —  
    Total   $ 25,293   100.0   $ 32,375   100.0   $ 50,040   100.0   $ 64,849   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 company’s International Distribution Division from Cooking Systems Group.

- 8 -



  Results of Operations

  The following table sets forth certain consolidated statements of earnings items as a percentage of net sales for the periods.

Three Months Ended
Six Months Ended
June 30, 2001
July 1, 2000
June 30, 2001
July 1, 2000
  Net sales   100.0 % 100.0 % 100.0 % 100.0 %
  Cost of sales   67.4 % 69.0 % 67.2 % 67.2 %
     Gross profit   32.6 % 31.0 % 32.8 % 32.8 %
  Selling, general and administrative expenses   23.7 % 23.9 % 24.6 % 25.2 %
     Income from operations   8.9 % 7.1 % 8.2 % 7.6 %
  Interest expense and deferred financing amortization, net   0.7 % 1.5 % 0.7 % 1.5 %
  Other (income) expense, net   1.6 % 0.8 % 1.2 % 0.8 %
     Earnings before income taxes   6.6 % 4.8 % 6.3 % 5.3 %
  Provision for income taxes   3.9 % 2.8 % 3.9 % 3.6 %
     Net earnings   2.7 % 2.0 % 2.4 % 1.7 %

- 9 -




  Three Months Ended June 30, 2001 Compared to Three Months Ended July 1, 2000

  NET SALES. Net sales in the three-month period ended June 30, 2001 decreased 22% to $25.3 million as compared to $32.4 million in the three-month period ended July 1, 2000.

  Sales of the Cooking Systems Group for the three-month period ended June 30, 2001 decreased 19% to $23.8 million from $29.5 million in the prior year. Within the Cooking Systems Group, sales of conveyor oven equipment declined by 23%, sales of core cooking equipment declined by 21% and sales of counterline equipment declined by 4%. 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 slowdown in store openings of certain major restaurant chain customers.

  Sales of the International Distribution Division decreased 39% to $4.8 million from $7.9 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 $10.0 million in the prior year period as a result of the reduced sales volumes. Gross margin rate increased to 32.6% in the quarter from 31.0% in the prior year quarter. The increase in the gross margin rate reflects significant improvement at the company’s manufacturing operation in the Philippines resulting from a more favorable cost structure and mix of higher margin product sales. Domestically, the company instituted pricing controls and programs in the second half of last year, which have favorably impacted the gross margin rate. These improvements were largely offset by lower manufacturing efficiencies at the U.S. operations that have resulted from the large decrease in production volumes.

  SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased 23% to $6.0 million as compared to $7.7 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. The company has also reduced employee headcount during 2001 as a result of the lower business volumes.

- 10 -




  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 $ 0.4 million in the current year and $0.3 million in the prior year. The increase from the prior year largely relates to exchange losses at the company’s operations in Asia and Europe, resulting from the strengthening of the U.S. Dollar.

  INCOME TAXES. A tax provision of $1.0 million, at an effective rate of 60%, was recorded during the quarter, primarily associated with taxable income reported at the company’s operations in the United States and Europe. No benefit was recognized for losses at international subsidiaries within Asia.

  Six Months Ended June 30, 2001 Compared to Six Months Ended July 1, 2000

  NET SALES. Net sales in the six-month period ended June 30, 2001 decreased 23% to $50.0 million as compared to $64.8 million in the six-month period ended July 1, 2000.

  Sales of the Cooking Systems Group for the six-month period ended June 30, 2001 decreased 19% to $47.4 million from $58.4 million in the prior year. Within the Cooking Systems Group, sales of conveyor oven equipment declined by 28%, sales of core cooking equipment declined by 16% and sales of counterline equipment declined by 8%. 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 28% due to increased sales to a new Philippines based restaurant chain customer and the development of new products for the Asian market.

  Sales of the International Distribution Division decreased 39% to $10.2 million from $16.7 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.

- 11 -




  GROSS PROFIT. Gross profit decreased to $16.4 million from $21.2 million in the prior year period due to the reduction in sales volumes. As a percentage of sales, the gross margin rate of 32.8% remained constant with the prior year period as the impact of a more favorable product mix and improved product pricing controls were offset by lower manufacturing efficiencies resulting from the reduced production volumes.

  SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased 24% to $12.3 million as compared to $16.3 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. Additionally, the company reduced headcount by 10% in the first half of the year in reaction to the lower sales levels.

  INTEREST AND DEFERRED FINANCING AMORTIZATION. Net financing costs decreased to $0.3 million from $1.0 million in the prior year as a result of reduced interest expense on lower outstanding debt.

  OTHER EXPENSE. Other expenses were $0.6 million in the current year and $0.5 million in the prior year. The expense largely relates to exchange losses at the company’s operations in Asia and Europe.

  INCOME TAXES. A tax provision of $1.9 million, at an effective rate of 61%, was recorded during the quarter, primarily associated with taxable income reported at the company’s operations in the United States and Europe. No benefit was recognized for losses at international subsidiaries within Asia.

  Financial Condition and Liquidity

  During the six months ended June 30, 2001, cash and cash equivalents increased by $2.5 million to $4.6 million at June 30, 2001 from $2.1 million at December 30, 2000. Net borrowings increased from $8.5 million at December 30, 2000 to $12.1 million at June 30, 2001.

  OPERATING ACTIVITIES. Net cash provided by operating activities before changes in assets and liabilities was $4.3 million in the six months ended June 30, 2001 as compared to $4.1 million in the prior year period. Net cash used by operating activities after changes in assets and liabilities was $0.7 million as compared to net cash provided of $6.2 million in the prior year period.

- 12 -




  During the six months ended June 30, 2001, accounts receivable decreased $3.1 million due to lower sales. Inventories increased $1.3 million due to the introduction of new products and higher inventory levels resulting from lower than expected sales. Prepaid expenses and other assets increased $1.1 million due in part to payments related to annual insurance programs which were renewed in the second quarter. Accounts payable decreased $1.4 million due to lower inventory purchases. Accrued expenses and other liabilities decreased $4.3 million primarily as a result of payments under annual customer rebate programs and the payment of annual incentive compensation obligations. Additionally, during the second quarter, the company settled its pension obligation to its retired President and Chief Executive Officer with a net payment of approximately $1.8 million.

  INVESTING ACTIVITIES. During the six months ending June 30, 2001, the company had capital expenditures of $0.3 million.

  FINANCING ACTIVITIES. Net borrowings under the revolving line of credit increased by $3.7 million during the six months ending June 30, 2001. The net borrowings during the first half of the year were used primarily to fund operating activities.

  At June 30, 2001, the company was in compliance with covenants pursuant to its revolving credit facility. Management believes that the company will have sufficient financial resources available to meet its anticipated requirements for working capital, growth strategies, capital expenditures and debt amortization for the foreseeable future.

  Item 3. Quantitative and Qualitative Disclosures About Market Risk

  International Exposure

  The company has manufacturing operations located in Asia and distribution operations in Asia, Europe and Latin America. The company’s operations are subject to the impact of economic downturns, political instability, and foreign trade restrictions, which may adversely affect the financial results. The company anticipates that international sales will continue to account for a significant portion of consolidated net sales in the foreseeable future. Some sales by the foreign operations are in local currency and an increase in the relative value of the U.S. dollar against such currencies would lead to the reduction in consolidated U.S. dollar sales and earnings. Additionally, foreign currency exposures are not fully hedged and there can be no assurances that the company’s future results of operations will not be adversely affected by currency fluctuations.

- 13 -




  Derivative Financial Instruments

  The company uses derivative financial instruments, principally foreign currency forward purchase and sale contracts with terms of less than one year, to hedge its exposure to changes in foreign currency exchange rates. The company’s primary exposure to changes in foreign currency rates results from intercompany loans made between Middleby affiliates to minimize the need for borrowings from third parties. The company does not currently enter into derivative financial instruments for speculative purposes. In managing its foreign currency exposures, the company identifies and aggregates naturally occurring offsetting positions and then hedges residual exposures. The following table summarizes the forward and option purchase contracts outstanding at June 30, 2001 entered into to hedge the aforementioned exposures:

Sell
Purchase
Maturity
  1,200,000 Euro   $999,240 U.S. Dollars             September 13, 2001  
  700,000 Euro   $595,157 U.S. Dollars             September 17, 2001  
  467,250,000 South Korean Won   $350,000 U.S. Dollars             July 16, 2001  
  600,000,000 South Korean Won   $455,927 U.S. Dollars             September 25, 2001  
  18,287,500 Taiwan Dollar   $550,000 U.S. Dollars             July 16, 2001  
  16,675,000 Taiwan Dollar   $500,000 U.S. Dollars             July 23, 2001  
  25,000,000 Taiwan Dollar   $709,421 U.S. Dollars             September 26, 2001  

  Interest Rate Risk

  The company is exposed to market risk related to changes in interest rates. The following table summarizes the maturity of the company’s debt obligations.

Twelve Month
Period Ending
Fixed
Rate
Debt
Variable
Rate
Debt
(In thousands)
  June 30, 2002   $       13   $       —  
  June 30, 2003   —   —  
  June 30, 2004   —   12,053  
      $       13   $12,053  

  Variable rate debt is comprised of borrowings under the company’s $20.0 million revolving credit line, which includes a $2.3 million Yen denominated loan and a $9.8 million U.S. dollar denominated loan. Interest under the unsecured revolving credit facility is assessed based upon the bank’s reference rate in each respective country. The interest rate assessed to the Yen and U.S. denominated loans at June 30, 2001 were 0.8% and 4.9%, respectively.

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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 the three months ended June 30, 2001, except as follows:

  Item 2. Changes in Securities

c) During the second quarter of fiscal 2001, the company issued 1,250 shares of the company’s common stock to a division executive, pursuant to the exercise of stock options, for $6,562.50. Such options were granted at an exercise price of $5.25 per share. As certificates for the shares were legended and stop 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.

  Item 4. Submission of Matters to a Vote of Security Holders

  On May 17, 2001, the company held its 2001 Annual Meeting of Stockholders. The following persons were elected as directors to hold office until the 2002 Annual Meeting of Stockholders: Selim A. Bassoul, Robert R. Henry, A. Don Lummus, John R. Miller III, Philip G. Putnam, David P. Riley, Sabin C. Streeter, William F. Whitman, Jr., Laura B. Whitman and Robert L. Yohe. The number of shares cast for, withheld and abstained with respect to each of the nominees were as follows:

Nominee
For
Withheld
Abstained
  Bassoul   6,722,230   9,659   0  
  Henry   6,706,084   25,805   0  
  Lummus   6,718,114   13,775   0  
  Miller   6,718,214   13,675   0  
  Putnam   6,718,484   13,405   0  
  Riley   6,662,545   69,344   0  
  Streeter   6,680,414   51,475   0  
  Whitman, W   6,718,514   13,375   0  
  Whitman, L   6,631,859   60,030   0  
  Yohe   6,705,984   25,905   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 29, 2001. 6,708,764 shares were cast for such election, 5,003 shares were cast against such election, and 18,122 shares abstained. Additionally, the stockholders voted to ratify The Middleby Corporation Management Incentive Plan. 4,670,685 shares were cast for ratification, 170,735 shares were cast against ratification and 11,448 shares abstained. There were no broker non-votes with respect to either of these proposals.

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  Item 6. Exhibits and Reports on Form 8-K

a) Exhibits – The following Exhibits are filed herewith:

   Exhibit 10(A) – Employment Agreement of Selim A. Bassoul, dated May 16, 2001.

   Exhibit 10(B) – Employment Agreement of David B. Baker, dated June 7, 2001.

   Exhibit 10(C) - - Executive compensation program agreement for Selim A. Bassoul, dated
   March 1, 2001.

   Exhibit 10(D) – Secured Promissory Note between Selim A. Bassoul and the company,
   dated March 1, 2001.

b) There were no reports filed on Form 8-K during the second quarter of 2001.

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SIGNATURE


  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, 2001 By:/s/ David B. Baker                                  
      David B. Baker
      Vice President,
      Chief Financial Officer and Secretary
      

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Exhibit 99.A

     Exhibit 10.A

CONFIDENTIAL

THE MIDDLEBY CORPORATION
SEVERANCE AGREEMENT

The Middleby Corporation (“Middleby”) and Selim A. Bassoul (“Employee”) enter into this severance agreement on this 16th day of May 2001. In recognition of the Employee’s past and continued service to The Middleby Corporation, Middleby agrees to provide the Employee with two years of base salary severance and two years of normal employer provided health insurance in the event of the Employee’s involuntary termination of employment from Middleby for any reason other than Cause. Cause shall mean gross negligence, willful misconduct, breach of fiduciary duty involving personal profit, substance abuse, or commission of a felony.

This two-year base salary severance and health insurance guarantee to the Employee will also be in effect in the event of a Change of Control of Middleby and shall be considered a liability of the successor owner of Middleby. In the event of a Change of Control of Middleby, Employee shall have the right at any time within the six-month period immediately following the Change of Control to terminate his employment by providing written notice to Middleby or its Successor. Upon providing such notice of termination Employee shall be entitled to receive two years of base salary severance and two years of normal employer provided health insurance. For purposes of this agreement a Change of Control shall mean any twenty-five percentage point increase in the percentage of outstanding voting securities of The Middleby Corporation hereafter held by any person or group of persons who agree to act together for the purpose of acquiring, holding, voting, or disposing of such voting securities as compared to the percentage of outstanding voting securities of The Middleby Corporation held by such person or group of persons on the date hereof.


Example: On May 16, 2001 individual A owns 2.42% of the total outstanding voting securities of The Middleby Corporation. Thereafter, individual A commences a series of open market and private purchases, and on September 16, 2001 for the first time his holdings exceed 27.42% of the outstanding voting securities of The Middleby Corporation. A Change of Control occurs on September 16, 2001.

This agreement expires three years from the date first above written.

_________________________________
Selim A. Bassoul

THE MIDDLEBY CORPORATION

By: ____________________________
William F. Whitman, Jr., Chairman


Exhibit 99.B

     Exhibit 10.B

CONFIDENTIAL

THE MIDDLEBY CORPORATION
SEVERANCE AGREEMENT

The Middleby Corporation (“Middleby”) and David B. Baker (“Employee”) enter into this severance agreement on this 7th day of June 2001. In recognition of the Employee’s past and continued service to The Middleby Corporation, Middleby agrees to provide the Employee with one year of base salary severance and one year of normal employer provided health insurance in the event of the Employee’s involuntary termination of employment from Middleby for any reason other than Cause. Cause shall mean gross negligence, willful misconduct, breach of fiduciary duty involving personal profit, substance abuse, or commission of a felony.

This one-year base salary severance and health insurance guarantee to the Employee will also be in effect in the event of a Change of Control of Middleby and shall be considered a liability of the successor owner of Middleby. In the event of a Change of Control of Middleby, Employee shall have the right at any time within the six-month period immediately following the Change of Control to terminate his employment by providing written notice to Middleby or its Successor. Upon providing such notice of termination Employee shall be entitled to receive one-year of base salary severance and one year of normal employer provided health insurance. For purposes of this agreement a Change of Control shall mean any twenty-five percentage point increase in the percentage of outstanding voting securities of The Middleby Corporation hereafter held by any person or group of persons who agree to act together for the purpose of acquiring, holding, voting, or disposing of such voting securities as compared to the percentage of outstanding voting securities of The Middleby Corporation held by such person or group of persons on the date hereof.


Example: On June 7, 2001 individual A owns 2.42% of the total outstanding voting securities of The Middleby Corporation. Thereafter, individual A commences a series of open market and private purchases, and on October 7, 2001 for the first time his holdings exceed 27.42% of the outstanding voting securities of The Middleby Corporation. A Change of Control occurs on October 7, 2001.

This agreement expires two years from the date first above written.

Agreed: _________________________________ David B. Baker, VP and Chief Financial Officer

For Middleby: ____________________________ Selim A. Bassoul, President and CEO


Exhibit 99.C

     Exhibit 10.C

Interoffice Memo

Date:     03/01/2001

To:        Selim Bassoul

CC:        WFW

From:     David B. Baker

Selim,

Below outlines the content of the special executive compensation program that is offered to you.


1. The term of this program is 3 years. Expiring with the end of fiscal year 2003.

2. The company will transfer to you, at $6.00 per share, 50,000 shares of TMC common stock.

3. The company will loan you the funds necessary to make the above purchase, secured by the stock and personally payable by you to the company subject to the provisions outlined below.

4. This stock will be owned by you, but held by the company.

5. This stock will be restricted and subject to rule 144 as you are an officer of the company and considered an insider. The holding period of this stock begins when and as the note is forgiven and the stock is released from the pledge.

6. Interest on your loan will be calculated at the higher of, the rates paid to those employees participating in the deferred compensation plan, or, the minimum IRS rate allowed by law.

7. Any sale of the stock will be for your account and subject to taxes paid which will be your responsibility.

8. The amount of your loan, plus interest, will be retired by the company (special bonus) if your performance meets or exceeds the “Earnings Before Taxes” targets listed below:

Confidential



Interoffice Memo


A: For fiscal year 2001, Earnings Before Taxes, for the corporation, must equal or exceed $ 1.20 per share.

B: For fiscal year 2002, Earnings Before Taxes, for the corporation, must equal or exceed $ 1.50 per share.

C: For fiscal year 2003, Earnings Before Taxes, for the corporation, must equal or exceed $ 1.75 per share

9. Your “special bonus” will be calculated and paid as follows:

a. If you meet or exceed your performance goals in a given year, the company will retire, 1/3 of the remaining balance of the principal and interest of your loan in year one, 50% of the remaining balance of your loan in year two, and the remaining balance of your loan in year three.

b. If you did not meet your objective, but your cumulative actual performance equaled or exceeded the cumulative objective, the company will retire the remaining balance of the principal and interest of your loan according to the schedule in “a” above. If you fail to meet either of these objectives, no payment will be made.

10. If you leave the company, voluntarily, for any reason, the balance of the loan becomes due and immediately payable.

11. If you leave the company due to termination (except for cause), the balance of the loan must be repaid in 24 months.

12. If during the term of the loan, William F. Whitman sells 20% or more of his personal stock holdings in the company, your loan will be forgiven.

Example:
 
Performance objective: Actual performance:
 
Year 2001 — EBT= $ 1.20/share Actual performance = $ 1.30/share
 
Year 2002 — EBT= $ 1.50/share Actual Performance = $ 1.45/share
 
Year 2003 – EBT= $ 1.75/share Actual Performance = $ 1.75/share
 
Stock price at purchase $ 6.00/share — Loan value = $ 300,000
 
Interest rate 6.00%

01/16/96 Confidential 2

Interoffice Memo

EXAMPLE (cont.):

January 2002 Loan balance = $300,000 + interest ($18,000) = Total $318,000.

As Actual performance exceeded objective, bonus payment = $106,000

January 2003 Loan balance = $212,000 + interest ($12,720) = Total $224,720

Actual performance did not meet objectives, however cumulative actual equaled cumulative objective, bonus payment = $112,360

January 2004 Loan balance = $112,360+ interest ($6,742)= Total Actual exceeded objective, bonus payment = $119,102

Agreed ________________________________________ Dated _________


Selim Bassoul

For the Company ________________________________ Dated __________

David B. Baker – Chief Financial Officer

01/16/96 Confidential 3
Exhibit 10.D

     Exhibit 10.D

SECURED PROMISSORY NOTE


$300,000 March 01, 2001

     FOR VALUE RECEIVED, the undersigned, SELIM BASSOUL (“Maker”), promises to pay to the order of MIDDLEBY MARSHALL, INC., a Delaware corporation (the “Company”), the principal sum of Three Hundred Thousand Dollars ($300,000) plus interest thereon at the rate of 6.00% per annum on the principal balance outstanding from time to time. All principal and interest, if not sooner paid, shall be and become due and payable on the Maturity Date. Unpaid interest shall compound annually on the last day of Maker’s fiscal year.

     Maturity Date shall mean the earliest to occur of (i) the date on which Maker voluntarily leaves the employ of the Company, (ii) the date the Company terminates Maker’s employment for Cause or (iii) February 28, 2004. Notwithstanding the foregoing, if prior to December 31, 2003 the Company terminates Maker’s employment without Cause, then the Maturity Date shall be the second anniversary of the date of such termination of employment. Cause shall mean personal dishonesty, gross negligence, willful misconduct, breach of fiduciary duty involving personal profit, substance abuse, or commission of a felony.

     This Note is issued to implement that certain special executive compensation program offered by the Company to Maker and described in memorandum dated 03/01/2001 from David B. Baker to Maker. Maker acknowledges and agrees that no special bonus will be awarded or paid under said program for any given year unless Maker is in the employ of the Company at all times during such year.

     1. Prepayment. This Note may be prepaid in whole or in part at any time or times without premium or penalty. All prepayments shall apply first to accrued but unpaid interest and the remainder to principal.

     2. Pledge. To secure the obligations of Maker under this Note, Maker hereby grants to the Company a continuing first security interest in the following property of Maker: 50,000 shares of common stock of The Middleby Corporation, a Delaware corporation (the “Pledged Shares”). This Note is a purchase money note and the security interest created hereof is a purchase money security interest. Maker represents and warrants that Maker is the sole owner of the Pledged Shares free and clear of all security interests, claims or encumbrances other than the security interest granted herein. If Maker fails or refuses to pay the sums due on this Note when the same becomes due, then the Company may, at its option, in addition to any and all other remedies available to the Company, enforce the security interest securing payment thereof. In the absence of a default by Maker under this Note, Maker retains the right to receive any and all dividends declared with respect to the Pledged Shares. Maker agrees to deliver to the Company all certificates evidencing the Pledged Shares together with an assignment, duly executed in blank by Maker. Maker further agrees to execute and deliver such documents (including but not limited to a financing statement), and take such further action, as the Company may request from time to time to perfect, protect and maintain its rights and interests hereunder.



     3. Enforcement. With respect to enforcement of the security interest granted herein, the Company shall be entitled to all the rights, remedies, powers, and privileges available to secured parties and creditors under the Illinois Commercial Code and other applicable law. Maker agrees to pay all expenses incurred by the Company in any attempt to collect sums due hereunder, including but not limited to reasonable attorney’s fees and expenses.

     4. Partial Release. Upon payment or forgiveness from time to time of any or all of the principal balance of this Note the Company shall release its security interest in that number of Pledged Shares which bears the same ratio to the total number of Pledged Shares immediately before such payment or forgiveness as the amount of principal so paid or forgiven bears to the total principal balance of this Note immediately before such payment or satisfaction.

     5. Miscellaneous. Maker hereby waives presentment and demand for payment, notice of intention to accelerate, protest and notice of protest and nonpayment. Maker’s liability on this Note shall not be affected by any renewal or extension in the time of payment hereof, by any release or change in any security for the payment of this Note, and Maker hereby consents to any such renewal, extension, release or change.

     6. Successors. This Note shall inure to the benefit of the Company, its successors and assigns, and shall be binding on Maker, his heirs, legatees, executors, administrators and personal representatives.



_______________________
               Selim Bassoul