Business Wire | May 6, 2021 07:00AM EDT

The Middleby Corporation Reports First Quarter Results

May 06, 2021

ELGIN, Ill.--(BUSINESS WIRE)--May 06, 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 2021 first quarter of $89.3 million or $1.59 diluted earnings per share on net sales of $758.1 million. Adjusted net earnings were $98.7 million or $1.79 adjusted diluted earnings per share. A full reconciliation between GAAP and non-GAAP measures is provided at the end the press release.

"We have positive momentum entering 2021 with strong orders and rising backlogs in all three business segments. Profitability across all three business segments increased as well, as we realized the benefits of our operating initiatives while also to moving forward our strategic initiatives with investments in sales, technology and service capabilities. We continue to proactively manage ongoing challenges due to COVID, particularly with supply chain disruption and rising costs, to minimize customer impact. Employee safety remains our top priority and we have kept the precautions at our facilities in place to best protect our workforce," said Tim FitzGerald, CEO of The Middleby Corporation.

2021 First Quarter Financial Results

* Net sales increased 11.9% in the first quarter over the comparative prior year period. Excluding the impacts of acquisitions, a disposition and foreign exchange rates, sales increased 8.4% in the first quarter over the comparative prior year period, reflecting improvements in market conditions and consumer demand since the initial impact of COVID-19.

* Organic net sales (a non-GAAP measure) increases were reported for all segments due to improvements in market conditions and consumer demand in the first quarter of 2021. A reconciliation of reported net sales by segment is as follows:

Commercial Residential Food Total Foodservice Kitchen Processing Company

Reported Net Sales Growth 8.6 % 26.4 % 7.9 % 11.9 %

Acquisitions/(Disposition) 4.2 % (5.8) % - % 1.8 %

Foreign Exchange Rates 1.2 % 3.5 % 1.3 % 1.6 %

Organic Net Sales Growth ^(1) 3.2 % 28.7 % 6.5 % 8.4 %(2)

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

(2) Totals may be impacted by rounding

* Total backlog at the end of the first quarter of 2021 amounted to a record level of $724.5 million as compared to $522.7 million at the end of the fiscal 2020. The increase was driven by order growth, primarily at the Commercial Foodservice Group and Residential Kitchen Group, amounting to backlog levels in excess of 40% over prior year end when excluding backlog from businesses acquired during the year.

* Adjusted EBITDA (a non-GAAP measure) was $161.3 million, in the first quarter of 2021 due to the impact of higher sales volumes and profitability initiatives. 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 24.5 % 21.1 % 20.4 % 21.3 %

Acquisitions (0.3) % - % - % - %

Foreign Exchange Rates (0.1) % - % - % - %

Organic Adjusted EBITDA ^(1) 24.8 % 21.1 % 20.4 % 21.3 %(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 first quarter amounted to $59.7 million in comparison to $87.1 million in the prior year period. The total leverage ratio per our credit agreements was below 2.9x. Our trailing twelve month bank agreement pro-forma EBITDA was $550.5 million.

* Cash balances at the end of the quarter were $309.3 million. Net debt, defined as debt excluding the unamortized discount associated with the Convertible Notes less cash, at the end of the 2021 fiscal first quarter amounted to $1.5 billion as compared to $1.6 billion at the end of fiscal 2020. Additionally, our current borrowing availability is approximately $1.4 billion.

"In Commercial Foodservice, orders continue to improve as our customers benefit from the pent-up demand for indoor dining as operators reopen their restaurants. Our chain customers are performing well with conditions becoming more positive for casual dining. We are seeing a slight rebound in the travel and leisure industries, which have been greatly challenged due to the pandemic. Restaurants continue to refine their procedures for delivery, carry out, drive-through and curbside pickup while chain restaurants who previously had these processes in place are upgrading their practices to shorten wait times, expand cooking throughput, and reduce labor needs. Global challenges remain with COVID still impacting many international markets including India and Latin America but overall, consumer demand has been constant and provides us with a growth opportunity for our exclusive solutions," said Mr. FitzGerald.

"At our recently-opened Middleby Innovation Kitchens we continue to have heavy customer activity and rave reviews of our state-of-the-art facility and experienced chefs on staff. This one-of-a-kind customer experience has been a successful new avenue to promote our latest advanced technologies. The timing has been ideal for opening the Middleby Innovation Kitchens earlier this year and the Dallas-area location is easy to access. We are finding customers want a hands-on experience as they look to transform their current operations," commented Mr. FitzGerald.

"At our Residential Kitchen businesses, there is an ongoing, high demand for new and existing homes which is driving strong sales and a favorable market dynamic for residential appliances. Remodeling projects in existing kitchens remains very popular, as it was in 2020. Recently debuted product innovations have been well-received across our portfolio of premium brands. The residential virtual sales experience has gained momentum, while in-person tours of our showrooms are now also available. We look forward to the completion and opening of our Dallas showroom this summer, while continuing other investments in targeted digital marketing initiatives and cultivating new and longstanding relationships with the designer community."

"At the Food Processing Group, we are pleased to have high interest and good order activity on our newest technologies such as the Alkar TurboChef oven and the Mauer accelerated drying room technology. Both innovations provide value to customers through substantially greater capacity and faster cycle times in a smaller footprint. Through these types of new products, we are able to expand our offerings in new and targeted markets including cured meats, alternative proteins and pet food. Given customer operating challenges, we anticipate growing interest for our automation solutions to address labor availability and employee safety concerns," Mr. FitzGerald concluded.

Conference Call

A conference call will be held at 11 a.m. Central Time on Thursday, May 6 and can be accessed through the Investor Relations section of middleby.com. If online access is not available, participants can join the call by dialing (888) 391-6937 or (315) 625-3077 and providing conference code 1355164#. 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 1355164#. To access the supplemental presentation, visit the Investor Relations page at 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), Meheen(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

1st Qtr, 2021 1st Qtr, 2020

Net sales $ 758,058 $ 677,459

Cost of sales 482,184 427,269



Gross profit 275,874 250,190



Selling, general and administrative expenses 154,957 143,942

Restructuring expenses 794 834

Gain on sale of plant (1,050 ) -

Income from operations 121,173 105,414



Interest expense and deferred financing 16,067 15,713 amortization, net

Net periodic pension benefit (other than service (11,373 ) (10,089 ) costs & curtailment)

Other (income) expense, net (1,691 ) 3,326



Earnings before income taxes 118,170 96,464



Provision for income taxes 28,907 22,685



Net earnings $ 89,263 $ 73,779



Net earnings per share:



Basic $ 1.62 $ 1.33



Diluted $ 1.59 $ 1.33



Weighted average number of shares



Basic 55,213 55,396



Diluted 55,966 55,398

THE MIDDLEBY CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

Apr 3, 2021 Jan 2, 2021

ASSETS



Cash and cash equivalents $ 309,331 $ 268,103

Accounts receivable, net 427,935 363,361

Inventories, net 574,277 540,198

Prepaid expenses and other 73,933 81,049

Prepaid taxes 7,634 17,782

Total current assets 1,393,110 1,270,493



Property, plant and equipment, net 336,257 344,482

Goodwill 1,928,644 1,934,261

Other intangibles, net 1,428,294 1,450,381

Long-term deferred tax assets 74,159 76,052

Other assets 129,449 126,805



Total assets $ 5,289,913 $ 5,202,474





LIABILITIES AND STOCKHOLDERS' EQUITY



Current maturities of long-term debt $ 21,093 $ 22,944

Accounts payable 213,431 182,773

Accrued expenses 479,913 494,541

Total current liabilities 714,437 700,258



Long-term debt 1,801,040 1,706,652

Long-term deferred tax liability 126,068 147,224

Accrued pension benefits 462,869 469,500

Other non-current liabilities 190,287 202,191



Stockholders' equity 1,995,212 1,976,649



Total liabilities and stockholders' equity $ 5,289,913 $ 5,202,474

THE MIDDLEBY CORPORATIONNON-GAAP SEGMENT INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)

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

Three Months Ended April 3, 2021

Net sales $ 481,155 $ 164,409 $ 112,494 $ 758,058

Segment Operating $ 96,316 $ 29,856 $ 19,662 $ 121,173 Income

Operating Income % of 20.0 % 18.2 % 17.5 % 16.0 %net sales



Depreciation 5,793 2,774 1,315 10,137

Amortization 15,204 1,772 1,843 18,819

Restructuring 423 208 163 794 expenses

Facilityconsolidation related 993 - - 993 expenses

Acquisition relatedinventory step-up 435 - - 435 charge

Acquisition deal - - - 2,340 costs

Stock compensation - - - 7,609

Gain on sale of plant (1,050 ) - - (1,050 )

Segment adjusted $ 118,114 $ 34,610 $ 22,983 $ 161,250 EBITDA

Adjusted EBITDA % of 24.5 % 21.1 % 20.4 % 21.3 %net sales



Three Months Ended March 28, 2020

Net sales $ 443,124 $ 130,069 $ 104,266 $ 677,459

Segment Operating $ 88,607 $ 12,708 $ 15,358 $ 105,414 Income

Operating Income % of 20.0 % 9.8 % 14.7 % 15.6 %net sales



Depreciation 4,900 2,983 1,336 9,230

Amortization 12,440 2,720 1,700 16,860

Restructuring 531 303 - 834 expenses

Facilityconsolidation related 274 - - 274 expenses

Acquisition relatedinventory step-up 1,032 - - 1,032 charge

Stock compensation - - - 4,159

Segment adjusted $ 107,784 $ 18,714 $ 18,394 $ 137,803 EBITDA

Adjusted EBITDA % of 24.3 % 14.4 % 17.6 % 20.3 %net sales

(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $14.5 million and $7.1 million for the three months ended April 3, 2021 and March 28, 2020, respectively.

^(1) Includes corporate and other general company expenses, which impactSegment Adjusted EBITDA, and amounted to $14.5 million and $7.1 million for thethree months ended April 3, 2021 and March 28, 2020, respectively.

THE MIDDLEBY CORPORATIONNON-GAAP INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)

Three Months Ended

1st Qtr, 2021 1st Qtr, 2020

Diluted Diluted $ per $ per share share

Net earnings $ 89,263 $ 1.59 $ 73,779 $ 1.33

Amortization ^(1) 20,295 0.36 17,369 0.31

Restructuring expenses 794 0.01 834 0.02

Acquisition related 435 0.01 1,032 0.02 inventory step-up charge

Acquisition deal costs 2,340 0.04 - -

Facility consolidation 993 0.02 274 - related expenses

Net periodic pensionbenefit (other than (11,373 ) (0.20 ) (10,089 ) (0.18 ) service costs &curtailment)

Gain on sale of plant (1,050 ) (0.02 ) - -

Income tax effect of (3,046 ) (0.05 ) (2,214 ) (0.04 ) pre-tax adjustments

Adjustment for sharesexcluded due to - 0.03 - - anti-dilution effect onGAAP net earnings ^(2)

Adjusted net earnings $ 98,651 $ 1.79 $ 80,985 $ 1.46



Diluted weighted average 55,966 55,398 number of shares

Adjustment for sharesexcluded due to (744 ) - anti-dilution effect onGAAP net earnings ^(2)

Adjusted diluted weighted 55,222 55,398 average number of shares



(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.

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

^(2) Adjusted diluted weighted average number of shares was calculated based onexcluding the dilutive effect of shares to be issued upon conversion of thenotes to satisfy the amount in excess of the principal since the company'scapped call offsets the dilutive impact of the shares underlying theconvertible notes. The calculation of adjusted diluted earnings per shareexcludes the principal portion of the convertible notes as this will always besettled in cash.

Three Months Ended

1st Qtr, 2021

1st Qtr, 2020

Net Cash Flows Provided By (Used In):

Operating activities

$

59,695

$

87,137

Investing activities

(7,038

)

(39,222

)

Financing activities

(8,285

)

245,098

Free Cash Flow

Cash flow from operating activities

$

59,695

$

87,137

Less: Capital expenditures, net

(5,371

)

(9,181

)

Free cash flow

$

54,324

$

77,956

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.

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