Business Wire | Mar 1, 2021 07:00AM EST

The Middleby Corporation Reports Fourth Quarter Results

Mar. 01, 2021

ELGIN, Ill.--(BUSINESS WIRE)--Mar. 01, 2021--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 2020 fourth quarter of $51.8 million or $0.94 diluted earnings per share on net sales of $729.3 million. Adjusted net earnings were $89.0 million or $1.62 adjusted diluted earnings per share. A full reconciliation between GAAP and non-GAAP measures is provided at the end the press release.

"While 2020 was a challenging year for our industry and customers, we have been proactive during this time of uncertainty. Our actions in 2020 have positioned Middleby to lead emerging trends and realize growth across all our platforms. We advanced our technology initiatives, expanded our sales capabilities, secured strategic acquisitions, reinforced our supply chain, expanded our global infrastructure, introduced new, innovative products and opened our state-of-the-art Middleby Innovation Kitchens. We have always been an innovative company, but our investments in technology are rapidly accelerating in this changing market. I am proud of our team and the quick and decisive actions taken in 2020, as these contributed to our strong financial performance in the fourth quarter and will carry us into 2021 with momentum. While COVID-19 vaccines are now available to many, safety precautions at our facilities remain in place, as the health and protection of our employees will always be a top priority," said Tim FitzGerald, CEO of The Middleby Corporation.

2020 Fourth Quarter Financial Results

* Net sales decreased 7.4% in the fourth quarter over the comparative prior year period. Excluding the impacts of acquisitions and foreign exchange rates, sales decreased 9.3% in the fourth quarter over the comparative prior year period, reflecting the impact of COVID-19.

* Organic net sales (a non-GAAP measure) declines were reported at the Commercial Foodservice Group due to COVID-19 impacts and challenging market conditions in the fourth quarter of 2020. Residential sales growth in the fourth quarter of 2020 is primarily related to strong consumer demand. A reconciliation of reported net sales by segment is as follows:

Commercial Residential Food Total Foodservice Kitchen Processing Company

Reported Net Sales Growth (16.4 ) % 17.3 % (0.6 ) % (7.4 ) %

Acquisitions 1.7 % 1.0 % - % 1.3 %

Foreign Exchange Rates 0.5 % 1.4 % (0.2 ) % 0.6 %

Organic Net Sales Growth ^(1) (18.7 ) % 14.8 % (0.4 ) % (9.3 ) %(2)

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

(2) Totals may be impacted by rounding

* Total backlog at the end of the fiscal 2020 amounted to a record level of $522.7 million as compared to $307.5 million at the end of fiscal 2019. The increase was driven by growth in excess of 60% at the Commercial Foodservice Group and 270% at the Residential Kitchen Group over prior year end when excluding backlog from businesses acquired during the year.

* Adjusted EBITDA (a non-GAAP measure) was $145.2 million, in the fourth quarter of 2020 due to the impact of lower revenues as a result of COVID-19; however margins at all three segments were strong reflecting focus on cost control and profitability. A reconciliation of organic adjusted EBITDA (a non-GAAP measure) by segment is as follows:

Commercial Residential Food Total Foodservice Kitchen Processing Company

Adjusted EBITDA 22.0 % 19.4 % 24.3 % 19.9 %

Acquisitions (0.4 ) % (1.0 ) % - % (0.4 ) %

Foreign Exchange Rates - % 0.2 % 0.5 % 0.1 %

Organic Adjusted EBITDA ^(1) 22.4 % 20.2 % 23.8 % 20.3 %(2)



(1) Organic Adjusted EBITDA defined as Adjusted EBITDA excluding impact ofacquisitions and foreign exchange rates

(2) Totals may be impacted by rounding

* Operating cash inflows during the fourth quarter increased to $208.6 million in comparison to $147.7 million in the prior year period. Operating cash inflows for the twelve months period ended January 2, 2021 increased to $524.8 million in comparison to $377.4 million in the prior year period. The total leverage ratio per our credit agreements was below 3.1x. Our trailing twelve month bank agreement pro-forma EBITDA was $529.0 million.

* Cash balances at the end of the quarter were $268.1 million. Net debt, defined as debt excluding the unamortized discount associated with the Convertible Notes less cash, at the end of the 2021 fiscal fourth quarter amounted to $1.6 billion as compared to $1.8 billion at the end of fiscal 2019. Additionally, our current borrowing availability is approximately $1.4 billion.

"In Commercial Foodservice, orders have consistently improved since the initial impact of COVID-19. Restaurants continue to gain experience and proficiency as they perfect their procedures for delivery, carry out, drive-through and curbside pickup. Many chain restaurants who had fluid processes in place pre-pandemic have explored ways to shorten wait times, expand cooking throughput and reduce labor needs. Consumer demand has proven resilient and these operator needs continue to provide growth opportunities for our differentiated solutions. There is pent-up demand for indoor dining which has been consistently opening up across the country, as regulated by the states. This is benefiting our casual dining customers," said Mr. FitzGerald.

"Our focus on innovation is not just equipment -- we are retooling the entire customer experience. Last week we were pleased to announce the official debut of the Middleby Innovation Kitchens in the Dallas area, which will allow us to best serve our customers and partners. The 40,000 square-foot facility has 15 live vignettes and 150 pieces of active Middleby equipment including IoT, automation, an extensive beverage offering, a full brewery and space where our customer can design and test their kitchen equipment and workflow. We believe the timing is right for this type of facility as customers want a hands-on experience as they re-invent their foodservice operations," commented Mr. FitzGerald.

"At our Residential Kitchen businesses, we are seeing high interest in recently debuted product innovations across the portfolio of our premium brands. Favorable conditions continue in the housing market, with increased remodels and kitchen upgrades due to more time spent in the home. Our virtual sales experience and showroom tours have been in high demand. We plan to further the 2021 investments in this segment with the completion and opening of our Dallas showroom, targeted digital marketing initiatives and deeper engagement with the designer community."

"At the Food Processing Group, travel restrictions continue to be a significant challenge with customer demonstrations and installations. Despite this, backlog levels remain strong along with customer interest in recent product introductions and full-line solutions. We remain focused on increasing our presence in fast-growing segments, such as cured meats and alternative protein. We are also positioned to support our customers growing requirements for automation solutions to address labor availability and increased employee safety concerns," Mr. FitzGerald concluded.

Conference Call

A conference call will be held at 10 a.m. Central Time on Monday, March 1 and can be accessed by dialing (888) 391-6937 or (315) 625-3077 and providing conference code 9682787#. The conference call is also accessible through the Investor Relations section of the company website at www.middleby.com. A replay of the conference call will be available two hours after the conclusion of the call by dialing (855) 859-2056 and entering conference code 9682787#.

To access the supplemental presentation, visit the investors page at www.middleby.com.

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 equipment industry. The company develops, manufactures, markets and services a broad line of equipment used in the commercial foodservice, food processing, and residential kitchen equipment industries. The company's leading equipment brands serving the commercial foodservice industry include Anets(r), APW Wyott(r), Bakers Pride(r), Beech(r), BKI(r), Blodgett(r), Blodgett Combi(r), Bloomfield(r), Britannia(r), Carter-Hoffmann(r), Celfrost(r), Concordia(r), CookTek(r), Crown(r), CTX(r), Desmon(r), Deutsche Beverage(r), Doyon(r), Eswood(r), EVO(r), Firex(r), Follett(r), frifri(r), Giga(r), Globe(r), Goldstein(r), Holman(r), Houno(r), IMC(r), Induc(r), Ink Kegs(r), Inline Filling Systems(r), Jade(r), JoeTap(r), Josper(r), L2F(r), Lang(r), Lincat(r), MagiKitch'n(r), Market Forge(r), Marsal(r), Middleby Marshall(r), MPC(r), Nieco(r), Nu-Vu(r), PerfectFry(r), Pitco(r), QualServ(r), RAM(r), Southbend(r), Ss Brewtech(r), Star(r), Starline(r), Sveba Dahlen(r), Synesso(r), Tank(r), Taylor(r), Thor(r), Toastmaster(r), TurboChef(r), Ultrafryer(r), Varimixer(r), Wells(r), Wild Goose(r) and Wunder-Bar(r). The company's leading equipment brands serving the food processing industry include Alkar(r), Armor Inox(r), Auto-Bake(r), Baker Thermal Solutions(r), Burford(r), Cozzini(r), CV-Tek(r), Danfotech(r), Deutsche Process(r), Drake(r), Glimek(r), Hinds-Bock(r), Maurer-Atmos(r), MP Equipment(r), Pacproinc(r), RapidPak(r), Scanico(r), Spooner Vicars(r), Stewart Systems(r), Thurne(r) and Ve.Ma.C.(r). The company's leading equipment brands serving the residential kitchen industry include AGA(r) AGA Cookshop(r), Brava(r), EVO(r), La Cornue(r), Leisure Sinks(r), Lynx(r), Marvel(r), Mercury(r), Rangemaster(r), Rayburn(r), Redfyre(r), Sedona(r), Stanley(r), TurboChef(r), U-Line(r) and Viking(r).

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

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

(Unaudited)

Three Months Ended Twelve Months Ended

4th Qtr, 2020 4th Qtr, 2019 4th Qtr, 2020 4th Qtr, 2019

Net sales $ 729,296 $ 787,626 $ 2,513,257 $ 2,959,446

Cost of sales 473,313 497,948 1,631,209 1,855,949



Gross profit 255,983 289,678 882,048 1,103,497



Selling,general and 147,317 148,813 531,897 583,697 administrativeexpenses

FormerChairman and - - - 10,116 CEO transitioncosts

Restructuring 2,094 3,674 12,375 10,480 expenses

Gain onlitigation - (14,839 ) - (14,839 ) settlement

Gain on sale (1,982 ) - (1,982 ) - of plant

Impairments 15,327 - 15,327 -

Income from 93,227 152,030 324,431 514,043 operations



Interestexpense anddeferred 22,736 19,275 78,617 82,609 financingamortization,net

Net periodicpensionbenefit (other (9,992 ) (7,039 ) (39,996 ) (29,722 ) than servicecosts &curtailment)

Curtailment 14,682 415 14,682 865 loss

Other (income) (343 ) (1,839 ) 3,071 (2,328 ) expense, net



Earningsbefore income 66,144 141,218 268,057 462,619 taxes



Provision for 14,307 32,221 60,763 110,379 income taxes



Net earnings $ 51,837 $ 108,997 $ 207,294 $ 352,240



Net earnings per share:



Basic $ 0.94 $ 1.96 $ 3.76 $ 6.33



Diluted $ 0.94 $ 1.96 $ 3.76 $ 6.33



Weightedaverage number of shares



Basic 55,061 55,663 55,093 55,647



Diluted 55,087 55,700 55,136 55,656

THE MIDDLEBY CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

Jan 2, 2021 Dec 28, 2019

ASSETS



Cash and cash equivalents $ 268,103 $ 94,500

Accounts receivable, net 363,361 447,612

Inventories, net 540,198 585,699

Prepaid expenses and other 81,049 61,224

Prepaid taxes 17,782 20,161

Total current assets 1,270,493 1,209,196



Property, plant and equipment, net 344,482 352,145

Goodwill 1,934,261 1,849,747

Other intangibles, net 1,450,381 1,443,381

Long-term deferred tax assets 76,052 36,932

Other assets 126,805 110,742



Total assets $ 5,202,474 $ 5,002,143





LIABILITIES AND STOCKHOLDERS' EQUITY



Current maturities of long-term debt $ 22,944 $ 2,894

Accounts payable 182,773 173,693

Accrued expenses 494,541 416,550

Total current liabilities 700,258 593,137



Long-term debt 1,706,652 1,870,246

Long-term deferred tax liability 147,224 133,500

Accrued pension benefits 469,500 289,086

Other non-current liabilities 202,191 169,360



Stockholders' equity 1,976,649 1,946,814



Total liabilities and stockholders' equity $ 5,202,474 $ 5,002,143

THE MIDDLEBY CORPORATIONNON-GAAP SEGMENT INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)

Commercial Residential Food Total Foodservice Kitchen Processing Company ^(1)

Three MonthsEnded January 2, 2021

Net sales $ 428,432 $ 180,069 $ 120,795 $ 729,296

Segment Operating $ 66,561 $ 25,186 $ 20,207 $ 93,227 Income

Operating Income 15.5 % 14.0 % 16.7 % 12.8 %% of net sales



Depreciation 6,201 2,949 1,328 10,583

Amortization 13,728 2,030 1,825 17,583

Restructuring 1,008 833 253 2,094 expenses

Facilityconsolidation 2,332 - 350 2,682 related expenses

Acquisitionrelated inventory 446 - - 446 step-up charge

Stock - - - 5,191 compensation

Gain on sale of (1,982 ) - - (1,982 ) plant

Impairments^ (2) 6,103 3,881 5,343 15,327

Segment adjusted $ 94,397 $ 34,879 $ 29,306 $ 145,151 EBITDA

Adjusted EBITDA % 22.0 % 19.4 % 24.3 % 19.9 %of net sales



Three MonthsEnded December 28, 2019

Net sales $ 512,545 $ 153,604 $ 121,477 $ 787,626

Segment Operating $ 116,464 $ 32,092 $ 24,458 $ 152,030 Income

Operating Income 22.7 % 20.9 % 20.1 % 19.3 %% of net sales



Depreciation 5,340 3,045 1,446 9,839

Amortization 11,387 2,588 1,939 15,914

Restructuring 3,409 281 (16 ) 3,674 expenses

Facilityconsolidation 1,841 2,488 - 4,329 related expenses

Acquisitionrelated inventory 66 - 37 103 step-up charge

Stock - - - 4,876 compensation

Gain on - (14,839 ) - (14,839 ) litigation

Segment adjusted $ 138,507 $ 25,655 $ 27,864 $ 175,926 EBITDA

Adjusted EBITDA % 27.0 % 16.7 % 22.9 % 22.3 %of net sales

(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $13.4 million and $16.1 million for the three months ended January 2, 2021 and December 28, 2019, respectively.

(2) Includes impairment of intangible assets, fixed assets, and assets held for sale.

^(1) Includes corporate and other general company expenses, which impactSegment Adjusted EBITDA, and amounted to $13.4 million and $16.1 million forthe three months ended January 2, 2021 and December 28, 2019, respectively.

^(2) Includes impairment of intangible assets, fixed assets, and assets heldfor sale.

THE MIDDLEBY CORPORATIONNON-GAAP SEGMENT INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)



Commercial Residential Food Total Foodservice Kitchen Processing Company^ (1)

Twelve MonthsEnded January 2, 2021

Net sales $ 1,510,279 $ 565,706 $ 437,272 $ 2,513,257

SegmentOperating $ 239,625 $ 67,046 $ 78,008 $ 324,431 Income

OperatingIncome % of net 15.9 % 11.9 % 17.8 % 12.9 %sales



Depreciation 21,768 11,691 5,507 39,086

Amortization 51,985 9,657 7,319 68,961

Restructuring 10,123 1,806 446 12,375 expenses

Facilityconsolidation 3,180 - 350 3,530 relatedexpenses

Acquisitionrelated 2,552 - - 2,552 inventorystep-up charge

Stock - - - 19,613 compensation

Gain on sale of (1,982 ) - - (1,982 ) plant

Impairments ^ 6,103 3,881 5,343 15,327 (2)

Segment $ 333,354 $ 94,081 $ 96,973 $ 483,893 adjusted EBITDA

Adjusted EBITDA 22.1 % 16.6 % 22.2 % 19.3 %% of net sales



Twelve MonthsEnded December 28, 2019

Net sales $ 1,984,345 $ 574,150 $ 400,951 $ 2,959,446

SegmentOperating $ 429,946 $ 89,312 $ 68,935 $ 514,043 Income

OperatingIncome % of net 21.7 % 15.6 % 17.2 % 17.4 %sales



Depreciation 21,054 11,742 4,944 37,852

Amortization 45,906 9,896 8,162 63,964

Restructuring 6,386 3,974 120 10,480 expenses

Facilityconsolidation 2,222 3,440 - 5,662 relatedexpenses

Acquisitionrelated 2,560 - 223 2,783 inventorystep-up charge

Stock - - - 8,133 compensation

Gain on - (14,839 ) - (14,839 ) litigation

Former Chairmanand CEO - - - 10,116 transitioncosts

Segment $ 508,074 $ 103,525 $ 82,384 $ 638,194 adjusted EBITDA

Adjusted EBITDA 25.6 % 18.0 % 20.5 % 21.6 %% of net sales

(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $40.5 million and $55.8 million for the twelve months ended January 2, 2021 and December 28, 2019, respectively.

(2) Includes impairment of intangible assets, fixed assets, and assets held for sale.

^(1) Includes corporate and other general company expenses, which impactSegment Adjusted EBITDA, and amounted to $40.5 million and $55.8 million forthe twelve months ended January 2, 2021 and December 28, 2019, respectively.

^(2) Includes impairment of intangible assets, fixed assets, and assets heldfor sale.

THE MIDDLEBY CORPORATIONNON-GAAP SEGMENT INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)

Three Months Ended

4th Qtr, 2020 4th Qtr, 2019

Diluted Diluted $ per $ per share share

Net earnings $ 51,837 $ 0.94 $ 108,997 $ 1.96

Amortization ^(1) 19,127 0.35 16,317 0.29

Amortization of discount on 5,069 0.09 - - convertible notes

Restructuring expenses 2,094 0.04 3,674 0.07

Acquisition related 446 0.01 103 - inventory step-up charge

Facility consolidation 2,682 0.05 4,329 0.08 related expenses

Net periodic pensionbenefit (other than service (9,992 ) (0.18 ) (7,039 ) (0.13 )costs & curtailment)

Curtailment loss 14,682 0.27 415 0.01

Gain on sale of plant (1,982 ) (0.04 ) - -

Impairments 15,327 0.28 - -

Gain on litigation - - (14,839 ) (0.27 )settlement

Income tax effect of (10,250 ) (0.19 ) (675 ) (0.01 )pre-tax adjustments

Adjusted net earnings $ 89,040 $ 1.62 $ 111,282 $ 2.00



Twelve Months Ended

4th Qtr, 2020 4th Qtr, 2019

Diluted Diluted $ per $ per share share

Net earnings $ 207,294 $ 3.76 $ 352,240 $ 6.33

Amortization ^(1) 72,500 1.31 65,576 1.18

Amortization of discount on 6,917 0.13 - - convertible notes

Restructuring expenses 12,375 0.22 10,480 0.19

Acquisition related 2,552 0.05 2,783 0.05 inventory step-up charge

Facility consolidation 3,530 0.06 5,662 0.10 related expenses

Net periodic pensionbenefit (other than service (39,996 ) (0.73 ) (29,722 ) (0.54 )costs & curtailment)

Curtailment loss 14,682 0.27 865 0.02

Gain on sale of plant (1,982 ) (0.04 ) - -

Impairments 15,327 0.28 - -

Gain on litigation - - (14,839 ) (0.27 )settlement

Former Chairman & CEO - - 10,116 0.18 transition costs

Income tax effect of (19,500 ) (0.35 ) (12,170 ) (0.22 )pre-tax adjustments

Adjusted net earnings $ 273,699 $ 4.96 $ 390,991 $ 7.02

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

(2) Includes impairment of intangible assets, fixed assets, and assets held for sale.

^(1) Includes amortization of deferred financing costs and convertible notesissuance costs.

^(2) Includes impairment of intangible assets, fixed assets, and assets heldfor sale.

Three Months Ended Twelve Months Ended

4th Qtr, 2020 4th Qtr, 2019 4th Qtr, 2020 4th Qtr, 2019

Net Cash FlowsProvided By (Used In):

Operating $ 208,603 $ 147,681 $ 524,785 $ 377,425 activities

Investing (53,218 ) (54,874 ) (106,757 ) (327,667 ) activities

Financing (117,630 ) (87,060 ) (252,468 ) (25,445 ) activities



Free Cash Flow

Cash flow fromoperating $ 208,603 $ 147,681 $ 524,785 $ 377,425 activities

Less: Capital (307 ) (12,790 ) (20,702 ) (46,609 ) expenditures, net

Free cash flow $ 208,296 $ 134,891 $ 504,083 $ 330,816

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.

Under GAAP, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's nonconvertible debt borrowing rate. Accordingly, for GAAP purposes the company is required to recognize imputed interest expense on the company's $747.5 million of convertible senior notes due 2025 that were issued in a private placement in August 2020. The imputed interest rate is 4.7% for the convertible notes due 2025, while the actual coupon interest rate of the notes is 1.0%. The difference between the imputed interest expense and the coupon interest expense is excluded from management's assessment of the Company's operating performance because management believes that this non-cash expense is not indicative of its core, ongoing operating performance.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210301005287/en/

CONTACT: Darcy Bretz, Investor and Public Relations, (847) 429-7756 Bryan Mittelman, Chief Financial Officer, (847) 429-7715