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The Middleby Corporation Reports Record First Quarter Results

  • Revenue of $1,007 million, a 1% increase year over year
  • Diluted Earnings per share of $1.82 and adjusted net earnings per share of $2.19, an increase of 3% year over year
  • Adjusted EBITDA of $210 million, a 6% increase year over year
  • Profitability grew to an organic adjusted EBITDA margin of 21.1% compared to 19.8% in the prior year
  • Completed the acquisition of Flavor Burst, expanding Middleby’s beverage platform

The Middleby Corporation (NASDAQ: MIDD), a leading worldwide manufacturer of equipment for the commercial foodservice, food processing, and residential kitchen industries, today reported net earnings for the first quarter of 2023.

“We began the year posting solid results at our Commercial Foodservice and Food Processing segments, while our Residential business faced the expected challenges of current market conditions and the impact of inventory destocking at retailers. While these conditions persist for our residential business, we anticipate improvement as the year progresses and inventory levels normalize. Our investments in manufacturing capacities along with improvements in supply chain have returned lead times to normalized levels across most of our businesses and position us to serve our customers in 2023. We continue to have meaningful engagement with customers across all three of our business segments and are excited for the opportunities developing around our latest product innovations addressing labor, energy, speed and sustainability. We continue to invest in our innovation centers in the US and Europe. These centers have proven to be a strategic for demonstrating our new product solutions and driving our long-term growth objectives,” said Tim FitzGerald, CEO of The Middleby Corporation.

2023 First Quarter Financial Results

  • Net sales increased 1.3% in the first quarter over the comparative prior year period. Excluding the impacts of acquisitions and foreign exchange rates, sales decreased 1.4% in the first quarter over the comparative prior year period.
  • Organic net sales (a non-GAAP measure) increases were reported for the Commercial Foodservice and Food Processing segments due to improvements in market conditions and consumer demand in the first quarter of 2023. A reconciliation of reported net sales by segment is as follows:

 

Commercial

Foodservice

 

Residential

Kitchen

 

Food

Processing

 

Total

Company

Reported Net Sales Growth

13.7

%

 

(33.6

) %

 

40.4

%

 

1.3

%

Acquisitions

3.3

%

 

%

 

17.3

%

 

4.0

%

Foreign Exchange Rates

(1.2

)%

 

(1.6

)%

 

(1.2

)%

 

(1.3

)%

Organic Net Sales Growth (1) (2)

11.5

%

 

(32.1

)%

 

24.3

%

 

(1.4

)%

(1) Organic net sales growth defined as total sales growth excluding impact of acquisitions and foreign exchange rates

(2) Totals may be impacted by rounding

  • Foreign exchange losses were approximately $2.2 million in the first quarter, which negatively impacted adjusted earnings per share by $0.03.
  • Adjusted EBITDA (a non-GAAP measure) was $210.0 million, in the first quarter, which includes $2.8 million of unfavorable translation impacts from changes in foreign exchange rates.

A reconciliation of organic adjusted EBITDA (a non-GAAP measure) by segment is as follows:

 

Commercial

Foodservice

 

Residential

Kitchen

 

Food

Processing

 

Total

Company

Adjusted EBITDA

26.0

%

 

12.9

%

 

23.6

%

 

20.8

%

Acquisitions

(0.5

) %

 

%

 

(0.4

) %

 

(0.3

) %

Foreign Exchange Rates

%

 

%

 

%

 

(0.1

) %

Organic Adjusted EBITDA (1) (2)

26.5

%

 

12.9

%

 

24.1

%

 

21.1

%

(1) Organic Adjusted EBITDA defined as Adjusted EBITDA excluding impact of acquisitions and foreign exchange rates.

(2) Totals may be impacted by rounding

  • Operating cash flows during the first quarter amounted to $92.0 million in comparison to $15.3 million in the prior year period. The total leverage ratio per our credit agreements was 3.0x. The trailing twelve month bank agreement pro-forma EBITDA was $894.5 million.
  • Repurchased 348,980 Middleby shares in the open market during the first quarter for $48.3 million.
  • Cash balances at the end of the quarter were $156.5 million. Net debt, defined as debt excluding the unamortized discount associated with the Convertible Notes less cash, at the end of the 2023 fiscal first quarter amounted to $2.6 billion as compared to $2.6 billion at the end of fiscal 2022. Additionally, our borrowing availability at the end of the first quarter was approximately $2.3 billion.

“We are excited to have completed the acquisitions of Flavor Burst and Blue Sparq to begin the year. Flavor Burst is a terrific complement to our soft-serve and slush beverage systems, providing our foodservice customers with an expanded menu of flavorful offerings to enhance their customers’ experience,” said Tim FitzGerald. “Blue Sparq extends our software and controls development capabilities, supporting our accelerated new product innovation across our portfolio of commercial and residential brands,” concluded Mr. FitzGerald.

Conference Call

The company has scheduled a conference call to discuss the first quarter results at 11 a.m. Eastern/10 a.m. Central Time on May 10th. The conference call is accessible through the Investor Relations section of the company website at www.middleby.com. If website access is not available, attendees can join the conference by dialing (833) 630-1956 or (412) 317-1837 and ask to join the Middleby conference call. The conference call will be available for replay from the company’s website.

Statements in this press release or otherwise attributable to the company regarding the company's business which are not historical facts 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. Any forward-looking statement speaks only as of the date hereof, and the company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

The Middleby Corporation is a global leader in the foodservice industry. The company develops and manufactures a broad line of solutions used in commercial foodservice, food processing, and residential kitchens. Supporting the company’s pursuit of the most sophisticated innovation, the state-of-the-art Middleby Innovation Kitchens showcases and demonstrates the most advanced Middleby solutions. In 2022 Middleby was named a World’s Best Employer by Forbes and is a proud philanthropic partner to organizations addressing food insecurity.

 

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

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

(Unaudited)

 

 

Three Months Ended

 

1st Qtr,

2023

 

1st Qtr,

2022

Net sales

$

1,007,396

 

 

$

994,676

 

Cost of sales

 

628,661

 

 

 

664,166

 

 

 

 

 

Gross profit

 

378,735

 

 

 

330,510

 

 

 

 

 

Selling, general and administrative expenses

 

215,407

 

 

 

206,071

 

Restructuring expenses

 

2,306

 

 

 

1,875

 

Income from operations

 

161,022

 

 

 

122,564

 

 

 

 

 

Interest expense and deferred financing amortization, net

 

29,462

 

 

 

17,654

 

Net periodic pension benefit (other than service costs & curtailment)

 

(2,251

)

 

 

(11,516

)

Other expense, net

 

1,896

 

 

 

4,061

 

 

 

 

 

Earnings before income taxes

 

131,915

 

 

 

112,365

 

 

 

 

 

Provision for income taxes

 

32,826

 

 

 

26,610

 

 

 

 

 

Net earnings

$

99,089

 

 

$

85,755

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

Basic

$

1.85

 

 

$

1.57

 

 

 

 

 

Diluted

$

1.82

 

 

$

1.52

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

Basic

 

53,594

 

 

 

54,669

 

 

 

 

 

Diluted

 

54,377

 

 

 

56,363

 

 

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in 000’s)

(Unaudited)

 

 

Apr 1, 2023

 

Dec 31, 2022

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

$

156,524

 

$

162,001

Accounts receivable, net

 

652,949

 

 

631,134

Inventories, net

 

1,116,364

 

 

1,077,729

Prepaid expenses and other

 

123,808

 

 

125,640

Prepaid taxes

 

10,874

 

 

9,492

Total current assets

 

2,060,519

 

 

2,005,996

 

 

 

 

Property, plant and equipment, net

 

461,728

 

 

443,528

Goodwill

 

2,429,167

 

 

2,411,834

Other intangibles, net

 

1,791,062

 

 

1,794,232

Long-term deferred tax assets

 

7,042

 

 

6,738

Other assets

 

206,619

 

 

212,538

 

 

 

 

Total assets

$

6,956,137

 

$

6,874,866

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current maturities of long-term debt

$

44,247

 

$

45,583

Accounts payable

 

282,032

 

 

271,374

Accrued expenses

 

664,030

 

 

671,327

Total current liabilities

 

990,309

 

 

988,284

 

 

 

 

Long-term debt

 

2,688,417

 

 

2,676,741

Long-term deferred tax liability

 

218,377

 

 

220,204

Accrued pension benefits

 

11,789

 

 

14,948

Other non-current liabilities

 

185,046

 

 

176,942

 

 

 

 

Stockholders' equity

 

2,862,199

 

 

2,797,747

 

 

 

 

Total liabilities and stockholders' equity

$

6,956,137

 

$

6,874,866

THE MIDDLEBY CORPORATION

NON-GAAP SEGMENT INFORMATION (UNAUDITED)

(Amounts in 000’s, Except Percentages)

 

 

 

 

 

 

 

 

 

Commercial

Foodservice

 

Residential

Kitchen

 

Food

Processing

 

Total

Company (1)

Three Months Ended April 1, 2023

 

 

 

 

 

 

 

Net sales

$

613,935

 

 

$

219,958

 

 

$

173,503

 

 

$

1,007,396

 

Segment Operating Income

$

136,562

 

 

$

21,186

 

 

$

34,687

 

 

$

161,022

 

Operating Income % of net sales

 

22.2

%

 

 

9.6

%

 

 

20.0

%

 

 

16.0

%

 

 

 

 

 

 

 

 

Depreciation

 

6,166

 

 

 

3,447

 

 

 

2,097

 

 

 

11,977

 

Amortization

 

14,808

 

 

 

2,238

 

 

 

4,137

 

 

 

21,183

 

Restructuring expenses

 

893

 

 

 

1,454

 

 

 

(41

)

 

 

2,306

 

Acquisition related adjustments

 

1,124

 

 

 

 

 

 

 

 

 

1,124

 

Charitable support to Ukraine

 

 

 

 

 

 

 

 

 

 

180

 

Stock compensation

 

 

 

 

 

 

 

 

 

 

12,232

 

Segment adjusted EBITDA (2)

$

159,553

 

 

$

28,325

 

 

$

40,880

 

 

$

210,024

 

Adjusted EBITDA % of net sales

 

26.0

%

 

 

12.9

%

 

 

23.6

%

 

 

20.8

%

 

 

 

 

 

 

 

 

Three Months Ended April 2, 2022

 

 

 

 

 

 

 

Net sales

$

540,018

 

 

$

331,080

 

 

$

123,578

 

 

$

994,676

 

Segment Operating Income

$

109,635

 

 

$

24,946

 

 

$

20,195

 

 

$

122,564

 

Operating Income % of net sales

 

20.3

%

 

 

7.5

%

 

 

16.3

%

 

 

12.3

%

 

 

 

 

 

 

 

 

Depreciation

 

5,839

 

 

 

3,985

 

 

 

1,358

 

 

 

11,372

 

Amortization

 

13,491

 

 

 

18,129

 

 

 

1,945

 

 

 

33,565

 

Restructuring expenses

 

1,451

 

 

 

387

 

 

 

37

 

 

 

1,875

 

Acquisition related adjustments

 

20

 

 

 

14,230

 

 

 

 

 

 

14,250

 

Stock compensation

 

 

 

 

 

 

 

 

 

 

13,723

 

Segment adjusted EBITDA

$

130,436

 

 

$

61,677

 

 

$

23,535

 

 

$

197,349

 

Adjusted EBITDA % of net sales

 

24.2

%

 

 

18.6

%

 

 

19.0

%

 

 

19.8

%

 

 

 

 

 

 

 

 

(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $18.7 million and $18.3 million for the three months ended April 1, 2023 and April 2, 2022, respectively.

(2) Foreign exchange rates negatively impacted Segment Adjusted EBITDA by approximately $2.8 million for the three months ended April 1, 2023.

 

THE MIDDLEBY CORPORATION

NON-GAAP INFORMATION (UNAUDITED)

(Amounts in 000’s, Except Percentages)

 

 

Three Months Ended

 

1st Qtr, 2023

 

1st Qtr, 2022

 

$

 

Diluted per

share

 

$

 

Diluted per

share

Net earnings

$

99,089

 

 

$

1.82

 

 

$

85,755

 

 

$

1.52

 

Amortization (1)

 

22,970

 

 

 

0.42

 

 

 

35,370

 

 

 

0.63

 

Restructuring expenses

 

2,306

 

 

 

0.04

 

 

 

1,875

 

 

 

0.03

 

Acquisition related adjustments

 

1,124

 

 

 

0.02

 

 

 

14,250

 

 

 

0.25

 

Net periodic pension benefit (other than service costs & curtailment)

 

(2,251

)

 

 

(0.04

)

 

 

(11,516

)

 

 

(0.20

)

Charitable support to Ukraine

 

180

 

 

 

 

 

 

 

 

 

 

Income tax effect of pre-tax adjustments

 

(6,058

)

 

 

(0.11

)

 

 

(9,475

)

 

 

(0.17

)

Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings (2)

 

 

 

 

0.04

 

 

 

 

 

 

0.07

 

Adjusted net earnings

$

117,360

 

 

$

2.19

 

 

$

116,259

 

 

$

2.13

 

 

 

 

 

 

 

 

 

Diluted weighted average number of shares

 

54,377

 

 

 

 

 

56,363

 

 

 

Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings (2)

 

(781

)

 

 

 

 

(1,688

)

 

 

Adjusted diluted weighted average number of shares

 

53,596

 

 

 

 

 

54,675

 

 

 

 

(1) Includes amortization of deferred financing costs and convertible notes issuance costs.

(2) Adjusted diluted weighted average number of shares was calculated based on excluding the dilutive effect of shares to be issued upon conversion of the notes to satisfy the amount in excess of the principal since the company's capped call offsets the dilutive impact of the shares underlying the convertible notes. The calculation of adjusted diluted earnings per share excludes the principal portion of the convertible notes as this will always be settled in cash.

 

Three Months Ended

 

1st Qtr, 2023

 

1st Qtr, 2022

Net Cash Flows Provided By (Used In):

 

 

 

Operating activities

$

92,002

 

 

$

(15,344

)

Investing activities

 

(36,450

)

 

 

(24,126

)

Financing activities

 

(63,377

)

 

 

8,721

 

 

 

 

 

Free Cash Flow

 

 

 

Cash flow from operating activities

$

92,002

 

 

$

(15,344

)

Less: Capital expenditures

 

(25,485

)

 

 

(14,497

)

Free cash flow

$

66,517

 

 

$

(29,841

)

 

 

 

 

NON-GAAP FINANCIAL MEASURES

The company supplements its consolidated financial statements presented on a GAAP basis with this non-GAAP financial information to provide investors with greater insight, increase transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. In addition, the non-GAAP financial measures included in this press release do not have standard meanings and may vary from similarly titled non-GAAP financial measures used by other companies.

The company believes that organic net sales growth, non-GAAP adjusted segment EBITDA, adjusted net earnings and adjusted diluted per share measures are useful as supplements to its GAAP results of operations to evaluate certain aspects of its operations and financial performance, and its management team primarily focuses on non-GAAP items in evaluating performance for business planning purposes. The company also believes that these measures assist it with comparing its performance between various reporting periods on a consistent basis, as these measures remove from operating results the impact of items that, in its opinion, do not reflect its core operating performance including, for example, intangibles amortization expense, impairment charges, restructuring expenses, and other charges which management considers to be outside core operating results.

The company believes that free cash flow is an important measure of operating performance because it provides management and investors a measure of cash generated from operations that is available for mandatory payment obligations and investment opportunities, such as funding acquisitions, repaying debt and repurchasing our common stock.

The company believes that its presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts with the same information that Middleby uses internally for purposes of assessing its core operating performance.

Contacts

Darcy Bretz, Investor and Public Relations, (847) 429-7756

Bryan Mittelman, Chief Financial Officer, (847) 429-7715

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