-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ab5g/DoUn14gs+Xs4cH5Fx/zT5iGuQwEfOYhVnh8T5f7q96IkdSkdxFcBXCdDtgj T+tFbYLqY0ZHGPyw9JmPFQ== 0000912057-97-017113.txt : 19970514 0000912057-97-017113.hdr.sgml : 19970514 ACCESSION NUMBER: 0000912057-97-017113 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960529 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDDLEBY CORP CENTRAL INDEX KEY: 0000769520 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 363352497 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09973 FILM NUMBER: 97601829 BUSINESS ADDRESS: STREET 1: 1400 TOASTMASTER DR CITY: ELGIN STATE: IL ZIP: 60120 BUSINESS PHONE: 7087413300 MAIL ADDRESS: STREET 1: 1400 TOASTMASTER DRIVE CITY: ELGIN STATE: IL ZIP: 60120 10-Q 1 FORM 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 MARCH 29, 1997 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 (I.R.S. Employer Identification No.) Incorporation or Organization) 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 March 29, 1997, there were 8,470,938 shares of the registrant's common stock outstanding. THE MIDDLEBY CORPORATION AND SUBSIDIARIES QUARTER ENDED MARCH 29, 1997 INDEX ------- DESCRIPTION PAGE - ----------- ---- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements BALANCE SHEETS 1 March 29, 1997 and December 28, 1996 STATEMENTS OF EARNINGS 2 March 29, 1997 and March 30, 1996 STATEMENTS OF CASH FLOWS 3 March 29, 1997 and March 30, 1996 NOTES TO FINANCIAL STATEMENTS 4 Item 2. Management's Discussion and Analysis 8 of Financial Condition and Results of Operations PART II. OTHER INFORMATION 10 PART I. FINANCIAL INFORMATION THE MIDDLEBY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) ASSETS MARCH 29, 1997 DEC. 28, 1996 - ------------------------------- -------------- ------------- Cash and Cash Equivalents............. $ 1,685 $ 1,410 Accounts Receivable, net.............. 22,665 19,859 Inventories, net...................... 23,997 20,956 Prepaid Expenses and Other............ 922 939 Net Assets of Discontinued Operations. 2,291 4,082 Current Deferred Taxes................ 2,099 2,086 ------- ------- Total Current Assets............. 53,659 49,332 Property, Plant and Equipment, net of accumulated depreciation of $12,221,000 and $11,741,000......... 19,059 18,843 Excess Purchase Price Over Net Assets Acquired, net of accumulated amortization of $4,328,000 and $4,216,000.......................... 13,227 13,339 Deferred Taxes........................ 2,318 2,950 Other Assets.......................... 1,541 1,504 ------- ------- Total Assets.............. $89,804 $85,968 ------- ------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY - -------------------------------------- Current Maturities of Long-Term Debt.. $ 2,805 $ 3,916 Accounts Payable...................... 13,142 10,369 Accrued Expenses...................... 9,775 10,001 ------- ------- Total Current Liabilities........ 25,722 24,286 Long-Term Debt........................ 38,051 37,352 Minority Interest and Other Non-current Liabilities............. 2,297 1,880 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; 8,471,000 and 8,468,000 issued and outstanding in 1997 and 1996, respectively................ 85 85 Paid-in Capital..................... 28,157 28,108 Cumulative Translation Adjustment... (335) (184) Accumulated Deficit................. (4,173) (5,559) ------- ------- Total Shareholders' Equity....... 23,734 22,450 ------- ------- Total Liabilities and Shareholders' Equity.... $89,804 $85,968 ------- ------- ------- ------- See accompanying notes - 1 - THE MIDDLEBY CORPORATION AND SUBSIDIARIES STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) THREE MONTHS ENDED -------------------------------- RESTATED MARCH 29, 1997 MARCH 30, 1996 -------------- -------------- Net Sales............................ $32,698 $29,510 Cost of Sales........................ 22,224 20,943 ------- ------- Gross Margin.................... 10,474 8,567 Selling and Distribution Expenses.... 4,681 4,010 General and Administrative Expenses.. 2,675 2,269 ------- ------- Income from Operations.......... 3,118 2,288 Interest Expense and Deferred Financing Amortization............. 1,081 1,057 Other (Income) Expense, net.......... (38) 18 ------- ------- Earnings Before Income Taxes......................... 2,075 1,213 Provision for Income Taxes........... 689 447 ------- ------- Earnings from Continuing Operations................. $ 1,386 $ 766 ------- ------- Loss from Discontinued Operations, Net of Tax...................... - (80) ------- ------- Net Earnings......................... $ 1,386 $ 686 ------- ------- ------- ------- Earnings Per Share from Continuing Operations...................... $ .16 $ .09 Loss Per Share from Discontinued Operations...................... - (.01) ------- ------- Net Earnings Per Share............... $ .16 $ .08 ------- ------- ------- ------- See accompanying notes - 2 - THE MIDDLEBY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED -------------------------- RESTATED MARCH 29, 1997 MARCH 30,1996 -------------- ------------- Cash Flows From Operating Activities- Net Earnings........................... $ 1,386 $ 686 Adjustments to reconcile Net Earnings to cash provided by continuing operating activities- Depreciation and amortization........ 656 623 Utilization of NOL's................. 620 338 Discontinued operations.............. - 80 Changes in assets and liabilities- Accounts receivable.................. (2,806) (2,883) Inventories.......................... (3,041) (639) Prepaid expenses and other assets.... 231 (808) Accounts payable and other liabilities........................ 2,547 (169) -------- ------ Net Cash Used in Continuing Operating Activities................. (407) (2,772) Net Cash Used in Discontinued Operations........................... (3,290) (1,086) -------- ------ Net Cash Used in Operating Activities........................... (3,697) (3,858) -------- ------ Cash Flows From Investing Activities- Proceeds from Sale of Discontinued Operations........................... $ 5,081 $ - Additions to Property and Equipment.... (697) (1,302) -------- ------ Net Cash Provided By (Used in) Investing Activities................. 4,384 (1,302) -------- ------ Cash Flows From Financing Activities- Increase in revolving credit line, net. $ 307 $ 3,139 Reduction in term loans................ (2,020) - Proceeds from capital expenditure loan. - 500 Increase in foreign bank debt.......... 1,304 - Other financing activities, net........ (3) 1,760 -------- ------ Net Cash (Used in) Provided by Financing Activities................. (412) 5,399 -------- ------ Changes in Cash and Cash Equivalents- Net increase in cash and cash equivalents.......................... 275 239 Cash and cash equivalents at beginning of year.................... 1,410 972 -------- ------ Cash and Cash Equivalents at end of quarter........................... $ 1,685 $ 1,211 -------- ------ -------- ------ Interest paid............................ $ 964 $ 1,111 -------- ------ -------- ------ Income taxes paid........................ $ 37 $ 5 -------- ------ -------- ------ See accompanying notes - 3 - THE MIDDLEBY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 29, 1997 (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 1996 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 29, 1997 and December 28, 1996, and the results of operations and cash flows for the three months ended March 29, 1997 and March 30, 1996. 2) DISCONTINUED OPERATION On January 23, 1997,the Company completed the sale of substantially all of the assets of its Victory Refrigeration Company ("Victory") subsidiary to an investor group led by local management at Victory. Gross proceeds from the sale are expected to amount to approximately $7,300,000, less amounts for retained liabilities and transaction costs aggregating approximately $2,600,000. The proceeds are subject to post-closing adjustments. The terms of the sale were the results of arms-length negotiations. This sale was announced on November 1, 1996, concluding the sale of all of the assets of Victory. The sale and leaseback of the Victory facility to an unrelated third party had previously been completed on December 27, 1996 for net proceeds of approximately $4,556,000. Proceeds from these transactions were used to pay down debt. The results of the Victory Refrigeration Company subsidiary have been reported separately as a discontinued operation in the consolidated financial statements for all periods presented. The results of the discontinued operations are - 4 - not necessarily indicative of the results which may have been obtained had the continuing and discontinuing operations been operating independently. Summarized results of the Victory Refrigeration Company for the quarter ended March 30, 1996 are as follows: (In Thousands) March 30, 1996 -------------- -------------- Net Sales $9,036 Operating Income 121 (Loss) Earnings Before Taxes (120) Provision for Taxes (40) ------------------------------------------ (Loss) Earnings from Discontinued Operations (80) ---- ---- Interest expense of $241,000 for the first quarter of 1996 has been allocated based upon the ratio of the net assets of the discontinued operations to the consolidated capitalization of the Company. Continuing operations and discontinued operations reflect the net tax expense or tax benefit generated by the respective operations, limited, however, by the income tax benefit recognized in the Company's historical financial statements. No general corporate expenses have been allocated to the discontinued operations. The net assets of discontinued operations included in the Consolidated Balance Sheets at March 29, 1997 and December 28, 1996 amounted to $2,291,000 and $4,082,000, respectively. The March 29, 1997 amount represents the remaining amount due from the buyers. The December 30, 1996 amount consists primarily of receivables, inventory and equipment related to the discontinued operations, net of accounts payable, accrued liabilities and closing costs associated with the sale. 3) INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income Taxes. The Company has recorded an income tax provision of $689,000 for the fiscal three months ended March 29, 1997. The Company has significant tax loss carry-forwards, and although a tax provision is recorded, the Company makes no payment of federal tax other than AMT amounts. - 5 - 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. 4) 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. Alternatively, under certain conditions, which have been met, 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 8,723,000 and 8,700,000 for the fiscal quarters ended March 29, 1997 and March 30, 1996, respectively. The Company is required to adopt "FAS 128: Earnings Per Share" during the fourth quarter of 1997. Under this method, average shares outstanding would have been 8,470,000 and 8,397,000 for the fiscal quarters ended March 29, 1997 and March 30, 1996, respectively. The adoption of this accounting method would not affect earnings per share for the quarters ended March 29, 1997 and March 30, 1996. 5) INVENTORIES Inventories are valued using the first-in, first-out method. Inventories consist of the following: (In Thousands) March 29, 1997 Dec. 28, 1996 -------------- ------------- Raw Materials and Parts $ 6,018 $ 6,492 Work-in-Process 3,843 4,621 Finished Goods 14,136 9,843 ------- ------- $23,997 $20,956 ------- ------- ------- ------- - 6 - 6) ACCRUED EXPENSES Accrued expenses consist of the following: (In Thousands) March 29, 1997 Dec. 28, 1996 -------------- ------------- Accrued payroll and related expenses......... $2,930 $ 3,567 Accrued commissions........ 1,405 1,392 Accrued warranty........... 1,277 1,252 Other accrued expenses..... 4,163 3,790 ------ ------- $9,775 $10,001 ------ ------- ------ ------- 7) RECLASSIFICATIONS AND RESTATEMENT Sale of Discontinued Operations: The financial statements exclude Victory Refrigeration Company which has been accounted for as a discontinued operation (see Note 2 to the Financial Statements). Litigation Settlement Accounting: During 1996, the Company restated its accounting for the proceeds from the September, 1993 litigation settlement with the Hussmann Corporation in accordance with generally accepted accounting principles (GAAP). The effect of this accounting change was to record a greater gain from the litigation settlement. Certain assets related to the 1989 acquisition that were written-off as a result of the Company's original accounting for the settlement in 1993, were restored in the historical financial statements or written-off in periods prior to 1993. The effect on the financial statements for the periods ended March 29, 1997 and March 30, 1996 was to increase non-cash amortization charges by $49,000 or $.01 per share and $69,000, or $.01 per share, respectively. - 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 statements 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 such statements. 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 risks affecting international sales; and other risks detailed herein and from time-to-time in the Company's Securities and Exchange commission filings. RESULTS OF OPERATIONS Net sales for the fiscal quarter ended March 29, 1997 were $32,698,000, an increase of $3,188,000 (10.8%) as compared to $29,510,000 in the prior fiscal quarter. The increase was primarily driven by strong conveyor oven sales which increased 18% over sales for the same period in 1996. The overall sales increase was largely due to unit volume increases. Cooking and warming equipment manufacturing divisions showed a sales increase of 14%. Sales in the core cooking and steaming equipment line increased 3% in the quarter. Sales of the Company's international-based fabricated equipment division increased by 28%. International sales represented 35% of total sales for the quarter as compared to 38% in the 1996 fiscal first quarter. Gross margin increased $1,907,000 (22.3%) for the quarter to $10,474,000, as compared to $8,567,000 in the prior year's quarter. As a percentage of net sales, gross margin increased 3.0% to 32% for the quarter from 29.0% in the prior year's quarter. The increase in gross margin percent was primarily due to higher capacity utilization, improved manufacturing efficiencies and favorable product mix. Selling, general and administrative expenses increased $1,077,000 (17.2%) to $7,356,000 as compared to $6,279,000 in the first quarter of 1996. Increased selling, general and administrative expenses were primarily due to the continued expansion of the Company's international sales and service capabilities, including the establishment of sales and distribution offices in Taiwan, Mexico, Japan and Korea during the past year, and variable costs associated with the higher sales volume during the quarter. As a percentage of sales, selling, general and administrative expenses increased to 22.5% for the fiscal quarter ended March 29, 1997, compared to 21.3% for the prior year's quarter. - 8 - Interest expense and deferred financing costs for the fiscal quarter ended March 29, 1997 increased $24,000 (2.3%) to $1,081,000 as compared to $1,057,000 in the prior year fiscal quarter. The Company recorded net earnings from continuing operations of $1,386,000 for the fiscal quarter ended March 29, 1997 compared to earnings from continuing operations of $766,000 for the prior year fiscal quarter. The Company recorded net earnings of $1,386,000 for the fiscal quarter ended March 29, 1997 as compared to net earnings of $686,000 for the prior year fiscal quarter. FINANCIAL CONDITION AND LIQUIDITY For the three months ended March 29, 1997, net cash provided by operating activities before changes in assets and liabilities was $2,662,000, as compared to $1,727,000 for the three months ended March 30, 1996. Net cash used by continuing operating activities after changes in assets and liabilities was $407,000 as compared to net cash used of $2,772,000 in the prior year's quarter. Accounts receivable increased $2,806,000, and inventories increased $3,041,000. These increases were partially offset by increased accounts payable and other liabilities. The increase in accounts receivable was largely due to the sales increase and timing of shipments to certain large domestic customers. Inventories increased due to increased international distribution centers and timing of orders and shipments. During the first quarter of 1997, the Company decreased its overall outstanding debt by $412,000 under various facilities. During this period the Company increased its borrowings on its revolving credit line by $307,000, repaid $2,020,000 on its term loans and increased its borrowings with a foreign lending institution by $1,304,000 primarily to finance the Company's international expansion. The Company maintains a revolving credit facility which, as of March 29, 1997, provided $22,617,000 of total borrowing availability. There was $14,882,000 outstanding under this facility at March 29, 1997. The Company has executed letters of credit of $991,000 against this facility, leaving an available line of credit of $6,744,000 at March 29, 1997. The Company believes that its cash flow from operations, together with available financing and cash on hand, will be sufficient to fund its working capital needs, capital expenditure program, and debt amortization. - 9 - 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 March 29, 1997, except as follows: ITEM 2. CHANGES IN SECURITIES c) During the first quarter of fiscal 1997, the Company issued 3,000 shares of the Company's common stock to a director, pursuant to the exercise of stock options, for $5,625. Such options were granted at an exercise price of $1.875 per share. 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 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 - On February 10, 1997, the Company filed a Form 8-K report to announce the completion of its sale of the Victory Refrigeration Company subsidiary. - 10 - 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 ------------------------ (Registrant) Date May 13, 1997 By: /s/ John J. Hastings -------------------- ----------------------------- John J. Hastings, Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) - 11 - EX-27 2 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-03-1998 MAR-29-1997 1,685 0 22,665 0 23,997 53,659 31,280 12,221 89,804 2,805 38,051 0 0 85 23,649 89,804 32,698 32,698 22,224 22,224 7,356 0 1,081 2,075 689 1,386 0 0 0 1,386 .16 .16
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