Business Wire | Aug 12, 2021 07:00AM EDT

The Middleby Corporation Reports Second Quarter Results

Aug. 12, 2021

ELGIN, Ill.--(BUSINESS WIRE)--Aug. 12, 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 second quarter of $120.6 million or $2.13 diluted earnings per share on net sales of $808.8 million. Adjusted net earnings were $116.8 million or $2.11 adjusted diluted earnings per share. A full reconciliation between GAAP and non-GAAP measures is provided at the end of the press release.

"Our strong second quarter results reflect the ongoing recovery in our foodservice businesses with measurable progress toward our long-term growth initiatives and realized profitability improvements at all three of our business segments," said Tim FitzGerald, CEO of The Middleby Corporation. "We continued to make investments in technology solutions to capture rapidly-evolving market trends and execute upon our strategic sales initiatives as we position for the future."

2021 Second Quarter Financial Results

* Net sales increased 71.4% in the second quarter over the comparative prior year period. Excluding the impacts of acquisitions, a disposition and foreign exchange rates, sales increased 64.8% in the second 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 second 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 90.2 % 65.2 % 28.0 % 71.4 %

Acquisitions/(Disposition) 5.8 % (5.0) % - % 2.2 %

Foreign Exchange Rates 3.9 % 7.1 % 2.9 % 4.4 %

Organic Net Sales Growth ^(1) 80.4 % 63.1 % 25.1 % 64.8 %(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 second quarter of 2021 amounted to a record level of $994.2 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 90% over the prior year end when excluding backlog from businesses acquired during the year.

* Adjusted EBITDA (a non-GAAP measure) was $186.2 million, in the second 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 25.8 % 22.8 % 23.3 % 23.0 %

Acquisitions (0.1) % - % - % - %

Foreign Exchange Rates (0.1) % (0.1) % 0.2 % - %

Organic Adjusted EBITDA ^(1) 25.9 % 22.9 % 23.1 % 23.0 %(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 second quarter amounted to $112.7 million in comparison to $77.6 million in the prior year period. The total leverage ratio per our credit agreements was below 2.3x. The trailing twelve month bank agreement pro-forma EBITDA was $666.0 million.

* Cash balances at the end of the quarter were $395.6 million. Net debt, defined as debt excluding the unamortized discount associated with the Convertible Notes less cash, at the end of the 2021 fiscal second quarter amounted to $1.4 billion as compared to $1.6 billion at the end of fiscal 2020. Additionally, our current borrowing availability is approximately $2.1 billion.

"Across all three of our business segments we experienced strong incoming orders and have continued to add to our record backlog. We are gaining momentum as we benefit from market trends in all businesses and we have developed industry leading solutions for our customers to effectively navigate this evolution. In the near-term we are impacted by increasing supply chain disruptions that may adversely impact shipments, service levels and production. We are also experiencing record material cost increases. While these challenges will continue in the second half, we are confident in our ability to manage through this disruption as we position Middleby for 2022," Mr. FitzGerald added.

"In Commercial Foodservice, our foodservice customers continue to address changing needs in a new business environment. Our solutions focus on the latest industry trends, such as automation to ease issues around labor availability and cost, the use of IoT for data capture and monitoring, and ventless technology that is used in non-traditional venues, such as ghost kitchens. Our equipment options for delivery, pick up and carry out are growing in popularity. We see our many strategic investments coming to fruition. While many of our customers are still facing the continued challenges from the pandemic, the demand for foodservice has proven resilient and the emerging trends will provide long-term growth opportunities."

"We continue to have consistent positive feedback from visitors to the Middleby Innovation Kitchens since opening earlier this year. Guests have a hands-on experience with our world-class team of chefs. The Middleby Innovation Kitchens allows our customers the opportunity to access all Middleby innovation as they evolve of their foodservice operations. In July, we debuted our new residential showroom attached to the Innovation Kitchens, bringing to life our shared commercial and residential product innovations in one state-of-the-art facility," commented Mr. FitzGerald.

"At our Residential Kitchen businesses, high demand for our portfolio of premium appliances continues as remodeling projects and new home builds remain strong. We are excited about the addition of Novy to this growing platform of premium brands as they are highly complementary to our current offerings. Novy products are focused on the built-in segment of the residential market which is growing internationally. The brand has meaningful synergies with our current portfolio leading to sales growth opportunities in our established U.S. and U.K. markets and further expansion into the European market."

"At the Food Processing Group, we are securing orders in new markets including cured meats, alternative proteins, and pet food. Our most recent innovations have been well-received in the marketplace, including the Alkar TurboChef oven and the Maurer-Atmos accelerated drying room technology, which allow us to expand our product offerings in new and targeted markets. There is significant interest in automation solutions which directly addresses labor issues and employee safety concerns," concluded Mr. FitzGerald.

Conference Call

A conference call will be held at 10 a.m. Central Time on Thursday, August 12 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 8960508#. 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 8960508#. 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), Novy(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 Six Months Ended

2nd Qtr, 2nd Qtr, 2nd Qtr, 2nd Qtr, 2021 2020 2021 2020

Net sales $ 808,773 $ 471,977 $ 1,566,831 $ 1,149,436

Cost of sales 505,047 318,851 987,231 746,120



Gross profit 303,726 153,126 579,600 403,316



Selling, general andadministrative 165,711 111,824 320,668 255,766 expenses

Restructuring 1,011 2,184 1,805 3,018 expenses

Loss (gain) on sale 287 - (763) - of plant

Income from 136,717 39,118 257,890 144,532 operations



Interest expense anddeferred financing 14,222 21,750 30,289 37,463 amortization, net

Net periodic pensionbenefit (other than (11,532) (9,766) (22,905) (19,855) service costs &curtailment)

Other (income) (469) 382 (2,160) 3,708 expense, net



Earnings before 134,496 26,752 252,666 123,216 income taxes



Provision for income 13,911 5,590 42,818 28,275 taxes



Net earnings $ 120,585 $ 21,162 $ 209,848 $ 94,941



Net earnings per share:



Basic $ 2.18 $ 0.39 $ 3.80 $ 1.72



Diluted $ 2.13 $ 0.39 $ 3.73 $ 1.72



Weighted average number of shares



Basic 55,230 54,935 55,222 55,165



Diluted 56,673 54,957 56,320 55,177

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in 000's)

(Unaudited)

Jul 3, 2021 Jan 2, 2021

ASSETS



Cash and cash equivalents $ 395,562 $ 268,103

Accounts receivable, net 422,409 363,361

Inventories, net 608,570 540,198

Prepaid expenses and other 82,908 81,049

Prepaid taxes 16,476 17,782

Total current assets 1,525,925 1,270,493



Property, plant and equipment, net 336,924 344,482

Goodwill 1,932,172 1,934,261

Other intangibles, net 1,406,629 1,450,381

Long-term deferred tax assets 86,910 76,052

Other assets 134,223 126,805



Total assets $ 5,422,783 $ 5,202,474





LIABILITIES AND STOCKHOLDERS' EQUITY



Current maturities of long-term debt $ 23,260 $ 22,944

Accounts payable 223,425 182,773

Accrued expenses 485,152 494,541

Total current liabilities 731,837 700,258



Long-term debt 1,795,593 1,706,652

Long-term deferred tax liability 131,658 147,224

Accrued pension benefits 450,298 469,500

Other non-current liabilities 187,521 202,191



Stockholders' equity 2,125,876 1,976,649



Total liabilities and stockholders' equity $ 5,422,783 $ 5,202,474

THE MIDDLEBY CORPORATION

NON-GAAP SEGMENT INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)

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

Three Months Ended July 3, 2021

Net sales $ 508,778 $ 169,987 $ 130,008 $ 808,773

Segment Operating Income $ 109,944 $ 33,910 $ 26,961 $ 136,717

Operating Income % of net 21.6 % 19.9 % 20.7 % 16.9 %sales



Depreciation 5,993 2,738 1,337 10,167

Amortization 14,246 1,784 1,834 17,864

Restructuring expenses 490 348 173 1,011

Acquisition related 302 - - 302 inventory step-up charge

Acquisition deal costs - - - 10,481

Stock compensation - - - 9,329

Loss (gain) on sale of 372 (85) - 287 plant

Segment adjusted EBITDA $ 131,347 $ 38,695 $ 30,305 $ 186,158

Adjusted EBITDA % of net 25.8 % 22.8 % 23.3 % 23.0 %sales



Three Months Ended June 27, 2020

Net sales $ 267,500 $ 102,914 $ 101,563 $ 471,977

Segment Operating Income $ 26,974 $ 6,526 $ 19,583 $ 39,118

Operating Income % of net 10.1 % 6.3 % 19.3 % 8.3 %sales



Depreciation 5,307 2,794 1,363 9,468

Amortization 12,894 2,737 2,000 17,631

Restructuring expenses 1,615 532 37 2,184

Acquisition related 1,074 - - 1,074 inventory step-up charge

Stock compensation - - - 4,963

Segment adjusted EBITDA $ 47,864 $ 12,589 $ 22,983 $ 74,438

Adjusted EBITDA % of net 17.9 % 12.2 % 22.6 % 15.8 %sales

^(1) Includes corporate and other general company expenses, which impactSegment Adjusted EBITDA, and amounted to $14.2 million and $9.0 million for thethree months ended July 3, 2021 and June 27, 2020, respectively.



THE MIDDLEBY CORPORATION

NON-GAAP SEGMENT INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)



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

Six Months Ended July 3, 2021

Net sales $ 989,933 $ 334,396 $ 242,502 $ 1,566,831

Segment Operating $ 206,260 $ 63,766 $ 46,623 $ 257,890 Income

Operating Income % of 20.8 % 19.1 % 19.2 % 16.5 %net sales



Depreciation 11,786 5,512 2,652 20,304

Amortization 29,450 3,556 3,677 36,683

Restructuring expenses 913 556 336 1,805

Facility consolidation 993 - - 993 related expenses

Acquisition relatedinventory step-up 737 - - 737 charge

Acquisition deal costs - - - 12,821

Stock compensation - - - 16,938

Gain on sale of plant (678) (85) - (763)

Segment adjusted EBITDA $ 249,461 $ 73,305 $ 53,288 $ 347,408

Adjusted EBITDA % of 25.2 % 21.9 % 22.0 % 22.2 %net sales



Six Months Ended June 27, 2020

Net sales $ 710,624 $ 232,983 $ 205,829 $ 1,149,436

Segment Operating $ 115,581 $ 19,234 $ 34,941 $ 144,532 Income

Operating Income % of 16.3 % 8.3 % 17.0 % 12.6 %net sales



Depreciation 10,207 5,777 2,699 18,698

Amortization 25,334 5,457 3,700 34,491

Restructuring expenses 2,146 835 37 3,018

Facility consolidation 274 - - 274 related expenses

Acquisition relatedinventory step-up 2,106 - - 2,106 charge

Stock compensation - - - 9,122

Segment adjusted EBITDA $ 155,648 $ 31,303 $ 41,377 $ 212,241

Adjusted EBITDA % of 21.9 % 13.4 % 20.1 % 18.5 %net sales

^(1) Includes corporate and other general company expenses, which impactSegment Adjusted EBITDA, and amounted to $28.6 million and $16.1 million forthe six months ended July 3, 2021 and June 27, 2020, respectively.

THE MIDDLEBY CORPORATION

NON-GAAP INFORMATION (UNAUDITED)

(Amounts in 000's, Except Percentages)

Three Months Ended

2nd Qtr, 2021 2nd Qtr, 2020

Diluted Diluted $ per $ per share share

Net earnings $ 120,585 $ 2.13 $ 21,162 $ 0.39

Amortization ^(1) 19,443 0.34 18,143 0.33

Restructuring expenses 1,011 0.02 2,184 0.04

Acquisition related inventory 302 0.01 1,074 0.02 step-up charge

Net periodic pension benefit(other than service costs & (11,532) (0.20) (9,766) (0.18) curtailment)

Loss on sale of plant 287 0.01 - -

Acquisition deal costs 10,481 0.18 - -

Discrete tax adjustments (18,900) (0.33) - -

Income tax effect of pre-tax (4,898) (0.09) (2,432) (0.04) adjustments

Adjustment for shares excludeddue to anti-dilution effect on - 0.04 - - GAAP net earnings ^(2)

Adjusted net earnings $ 116,779 $ 2.11 $ 30,365 $ 0.55



Diluted weighted average number 56,673 54,957 of shares

Adjustment for shares excludeddue to anti-dilution effect on (1,430) - GAAP net earnings ^(2)

Adjusted diluted weighted 55,243 54,957 average number of shares



Six Months Ended

2nd Qtr, 2021 2nd Qtr, 2020

Diluted Diluted $ per $ per share share

Net earnings $ 209,848 $ 3.73 $ 94,941 $ 1.72

Amortization ^(1) 39,738 0.71 35,512 0.64

Restructuring expenses 1,805 0.03 3,018 0.05

Acquisition related inventory 737 0.01 2,106 0.04 step-up charge

Acquisition deal costs 12,821 0.23 - -

Facility consolidation related 993 0.02 274 - expenses

Net periodic pension benefit(other than service costs & (22,905) (0.41) (19,855) (0.36) curtailment)

Gain on sale of plant (763) (0.01) - -

Discrete tax adjustments (18,900) (0.34) - -

Income tax effect of pre-tax (7,944) (0.14) (4,822) (0.08) adjustments

Adjustment for shares excludeddue to anti-dilution effect on - 0.07 - - GAAP net earnings ^(2)

Adjusted net earnings $ 215,430 $ 3.90 $ 111,174 $ 2.01



Diluted weighted average number 56,320 55,177 of shares

Adjustment for shares excludeddue to anti-dilution effect on (1,087) - GAAP net earnings ^(2)

Adjusted diluted weighted 55,233 55,177 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 Six Months Ended

2nd Qtr, 2nd Qtr, 2nd Qtr, 2nd Qtr, 2021 2020 2021 2020

Net Cash Flows Provided By (Used In):

Operating activities $ 112,686 $ 77,623 $ 172,381 $ 164,760

Investing activities (17,184) (3,959) (24,222) (43,181)

Financing activities (10,446) 193,233 (18,731) 438,331



Free Cash Flow

Cash flow from operating $ 112,686 $ 77,623 $ 172,381 $ 164,760 activities

Less: Capital expenditures, (7,992) (4,150) (13,363) (13,331) net of sale proceeds

Free cash flow $ 104,694 $ 73,473 $ 159,018 $ 151,429



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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210812005199/en/

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

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