The Middleby Corporation Reports Fourth Quarter and Full Year Results

ELGIN, Ill.--()--The Middleby Corporation (NASDAQ: MIDD), a leading worldwide manufacturer of equipment for the commercial foodservice, food processing, and residential kitchen industries, today reported net sales and earnings for the fourth quarter and full fiscal year ended January 2, 2016. Net earnings for the fourth quarter were $50,287,000 or $0.88 diluted earnings per share on net sales of $534,707,000 as compared to the prior year fourth quarter net earnings of $51,749,000 or $0.91 diluted earnings per share on net sales of $434,995,000. Net earnings for the fiscal year ended January 2, 2016 were $191,610,000 or $3.36 diluted earnings per share on net sales of $1,826,598,000 as compared to net earnings of $193,312,000 or $3.40 diluted earnings per share on net sales of $1,636,538,000 in the prior year.

2015 Fourth Quarter and Full Year Financial Highlights

  • Net sales increased 22.9% in the fourth quarter and 11.6% for the full fiscal year of 2015 over the comparative prior year periods. Sales related to recent acquisitions added 28.5% in the fourth quarter and 14.1% for the year offset by the impact of foreign exchange rates on foreign sales translated into U.S. Dollars, which reduced net sales by approximately 2.8% during the fourth quarter and 3.0% during the full fiscal year of 2015. Excluding the impact of acquisitions and foreign exchange, sales decreased 2.8% during the fourth quarter and 0.4% for the full year.
  • Net sales at the company’s Commercial Foodservice Equipment Group decreased 0.5% in the fourth quarter and increased 7.7% for the full fiscal year of 2015 over the comparative 2014 periods. During fiscal 2014, the company completed the acquisition of Concordia. During fiscal 2015, the company completed the acquisitions of Desmon, Goldstein Eswood, Marsal and Induc. Excluding the impact of these acquisitions, sales decreased 4.4% in the fourth quarter, or 1.6% on a constant currency basis and increased 3.6%, or 6.3% on a constant currency basis for the full year. The fourth quarter of 2015 was comprised of a thirteen week period in comparison to fourteen weeks in the prior year quarter, resulting in comparatively lower sales.
  • Net sales at the company’s Food Processing Equipment Group decreased 0.3% in the fourth quarter and 7.8% for the full fiscal year of 2015 as compared to 2014. During fiscal 2014, the company completed the acquisition of PES. During fiscal 2015, the company completed the acquisition of Thurne. Excluding the impact of these acquisitions, sales decreased by 4.0% in the fourth quarter, or increased 0.5% on a constant currency basis and decreased 13.7% for the full year, or 8.3% on a constant currency basis. Despite the decline in sales, the backlog at this segment increased from $67.7 million at the end of 2014 to $108.5 million at the end of 2015.
  • Net sales at the company’s Residential Kitchen Equipment Group increased 139.8% in the fourth quarter and 49.7% for the full fiscal year of 2015 as compared to 2014. During fiscal 2014, the company completed the acquisition of U-Line. During fiscal 2015, the company completed the acquisitions of AGA and Lynx. Excluding the impact of these acquisitions, sales decreased by 11.9% in the fourth quarter, or 10.9% on a constant currency basis and decreased 12.7% for the full year, or 11.6% on a constant currency basis. The decline in revenues reflects lower sales at Viking due in part to disruption from recent product recalls.
  • Gross profit in the fourth quarter increased to $198.9 million from $169.1 million, reflecting the impact of higher sales volumes, offset by the impact of foreign exchange rates. The gross margin rate decreased from 38.9% to 37.2%. For the full fiscal year of 2015, gross profit increased to $706.5 million from $640.6 million and the gross margin rate decreased from 39.1% to 38.7%. The gross margin rate for both the quarter and year were impacted by lower gross margins at the recent acquisition of AGA. Excluding the impact of AGA the gross margin rate would have increased to 39.9% for the 2015 fourth quarter and 39.5% for the year, reflecting improved margins at the Food Processing Equipment Group and Residential Kitchen Equipment Group associated with the benefit of continued integration initiatives.
  • Operating income decreased to $72.6 million from $82.3 million in the prior year quarter and increased for the full fiscal year of 2015 to $302.6 million from $300.4 million in the prior year. Operating income included $16.9 million of restructuring costs in the fourth quarter and $28.8 million for the full year primarily associated with cost reduction initiatives related to AGA and integration of the Viking Distributors acquired in 2013 and 2014. Additionally, the prior year operating income included a $6.5 million gain from a settlement related to a patent infringement litigation.
  • Non-cash expenses during the fourth quarter of 2015 amounted to $24.0 million, including $11.7 million of depreciation, $8.1 million of intangible amortization and $4.2 million of share based compensation. Non-cash expenses for the full fiscal year of 2015 amounted to $68.8 million including $25.5 million of depreciation, $27.4 million of intangible amortization and $15.9 million of share based compensation.
  • The provision for income taxes in the fourth quarter amounted to $19.1 million at a 27.5% effective rate in comparison to $25.0 million at a 32.6% effective rate in the prior year quarter. For the full fiscal year of 2015, the provision for income taxes amounted to $89.6 million at a 31.9% effective rate in comparison to $87.5 million at a 31.2% effective rate in the prior year.
  • Net earnings per share amounted to $0.88 in the fourth quarter as compared to $0.91 in the prior year quarter and $3.36 for the full year in 2015 as compared to $3.40 in 2014. The AGA acquisition, inclusive of restructuring charges, was dilutive to earnings per share by $(0.28) in the fourth quarter and $(0.27) for the full year.
  • Operating cash flows amounted to $82.0 million during the fourth quarter and $249.6 million for the full fiscal year of 2015. In comparison, operating cash flows for the full year increased from $233.9 million in the prior year.
  • Total debt at the end of 2015 fiscal fourth quarter amounted to $766.1 million as compared to $754.9 million at the end of the third quarter and $598.2 million at the end of fiscal 2014. The increase in debt from the prior year reflects funding of $348.6 million of acquisition investments during 2015.

Selim A. Bassoul Chairman and Chief Executive Officer, commented, “We realized solid sales growth at the Commercial Foodservice Equipment Group in 2015 as we continued to increase our business with chain restaurant customers adopting our new and innovative technologies. We also continued to realize growth in international markets despite challenging market and currency conditions. Profitability within this segment continued to remain strong, while integrating four businesses acquired in 2015. These acquisitions of Desmon, Marsal, Goldstein and Induc, further added to our portfolio of leading brands, our lineup of innovative technologies, and our global footprint.”

“We realized strong order rates at the Food Processing Equipment Group during the year and the backlog increased by approximately 60% in comparison to the prior year end. We continue to see strong demand for our innovative equipment solutions and a continued pipeline of projects moving into 2016. We made significant improvement in profitability at this segment over the past two years with EBITDA margin exceeding 25% in 2015 and now comparable to those of the foodservice segment,” said Mr. Bassoul.

Mr. Bassoul added, “At our Residential Kitchen Equipment Group, we continue to face the impact of a recent product recall that was inherited from the previous ownership of Viking. Despite this continuing impact, we remain excited about the prospects of the new product introductions we have launched in 2014 and 2015. We have redesigned every product line, including the development of a complete new offering of refrigeration, and have made significant investments to enhance product quality and service. We are starting to regain the confidence of builders and Viking is again being specified into new construction projects. We received excellent response to the new Viking product lineup at the recent Kitchen and Bath Industry Show (“KBIS”) and received the People’s Choice Award. We also continued to implement profit improvements within this segment, including the integration efforts related to the residential distribution operations acquired in 2013 and 2014.”

Mr. Bassoul, concluded “The recent acquisition of AGA Rangemaster Group plc and its related portfolio of premium residential brands, including AGA, Rangemaster, La Cornue, Marvel, Mercury, Falcon, Rayburn, Stanley, Grange and Fired Earth has been very positive. This acquisition significantly expands the scope of our Residential Kitchen Equipment Group. We are pleased with the initial progress of integration efforts in connection with AGA. Fourth quarter restructuring charges reflect the costs associated with initiatives to reduce expenses and improve efficiencies at this acquired business. We expect these costs savings to largely benefit the second half of 2016 and are anticipated to exceed $20 million annually.”

Conference Call

A conference call will be held at 10:00 a.m. Central time on March 2, 2016 and can be accessed by dialing (888) 391-6937 and providing conference code 58225073# or through the investor relations section of The Middleby Corporation website at www.middleby.com. An audio replay of the call will be available approximately one half hour after its completion and can be accessed by calling (855) 859-2056 and providing code 58225073#.

Statements in this press release or otherwise attributable to the company regarding the company's business which are not historical fact 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.

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®, Beech®, Blodgett®, Blodgett Combi®, Blodgett Range®, Bloomfield®, Britannia®, Carter-Hoffmann®, Celfrost®, Concordia®, CookTek®, CTX®, Desmon®, Doyon®, Eswood®, FriFri®, Giga®, Goldstein®, Holman®, Houno®, IMC®, Induc®, Jade®, Lang®, Lincat®, MagiKitch'n®, Market Forge®, Marsal®, Middleby Marshall®, MPC©, Nieco®, Nu-Vu®, PerfectFry®, Pitco Frialator®, Southbend®, Star®, Toastmaster®, TurboChef®, Wells® and Wunder-Bar®. The company’s leading equipment brands serving the food processing industry include Alkar®, Armor Inox®, Auto-Bake®, Baker Thermal Solutions®, Cozzini®, Danfotech®, Drake®, Maurer-Atmos®, MP Equipment®, RapidPak®, Spooner Vicars®, Stewart Systems® and Thurne®. The company’s leading equipment brands serving the residential kitchen industry include AGA®, AGA Cookshop®, Brigade®, Divertimenti®, Falcon®, Fired Earth®, Grange®, Heartland®, La Cornue®, Leisure Sinks®, Lynx®, Marvel®, Mercury®, Rangemaster®, Rayburn®, Redfyre®, Sedona®, Stanley®, Turbochef®, U-Line® and Viking®.

The Middleby Corporation was named a Fortune Magazine’s Fastest Growing Company in 2014 and 2015. For more information about The Middleby Corporation and the company brands, please visit www.middleby.com.

 

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, 2015

    4th Qtr, 2014 4th Qtr, 2015     4th Qtr, 2014
Net sales $ 534,707 $ 434,995 $ 1,826,598 $ 1,636,538
Cost of sales   335,835   265,940   1,120,093   995,953
 
Gross profit 198,872 169,055 706,505 640,585
 
Selling & distribution expenses 56,435 45,500 193,353 182,578
General & administrative expenses 52,873 38,292 181,795 157,016
Restructuring expenses 16,931 2,968 28,754 7,078
Gain on litigation settlement   -   -   -   (6,519)
 
Income from operations 72,634 82,295 302,603 300,432
 
Interest expense and deferred
financing amortization, net 4,946 3,541 16,967 15,592
Other (income) expense, net   (1,666)   1,997   4,469   4,050
 
Earnings before income taxes 69,354 76,757 281,167 280,790
 
Provision for income taxes   19,067   25,008   89,557   87,478
 
Net earnings $ 50,287 $ 51,749 $ 191,610 $ 193,312
 
 
Net earnings per share:
 
Basic $ 0.88 $ 0.91 $ 3.36 $ 3.41
 
Diluted $ 0.88 $ 0.91 $ 3.36 $ 3.40

Weighted average number shares:

 
Basic   56,963   56,866   56,951   56,764
 
Diluted   57,047   56,935   56,973   56,784
 

THE MIDDLEBY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in 000’s)

(Unaudited)

 
    Jan 2, 2016     Jan 3, 2015
ASSETS
 
Cash and cash equivalents $ 55,528 $ 43,945
Accounts receivable, net 282,534 229,875
Inventories, net 354,150 255,776
Prepaid expenses and other 39,801 27,980
Prepaid taxes 11,426 5,538
Current deferred tax assets   51,723   51,017
Total current assets 795,162 614,131
 
Property, plant and equipment, net 199,750 129,697
 
Goodwill 983,339 808,491
Other intangibles, net 749,430 492,031
Long-term deferred tax assets 11,438 2,925
Other assets   22,032   18,856
 
Total assets $ 2,761,151 $ 2,066,131
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current maturities of long-term debt $ 32,059 $ 9,402
Accounts payable 157,758 98,327
Accrued expenses   320,154  

220,585

Total current liabilities 509,971 328,314
 
Long-term debt 734,002 588,765
Long-term deferred tax liability 113,010 88,800
Accrued pension benefits 207,564 21,140
Other non-current liabilities 29,774 32,352
 
Stockholders’ equity   1,166,830   1,006,760
 
Total liabilities and stockholders’ equity $ 2,761,151 $ 2,066,131
 

Contacts

The Middleby Corporation
Darcy Bretz, (847) 429-7756
Investor and Public Relations
or
Tim FitzGerald, (847) 429-7744
Chief Financial Officer

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The Middleby Corporation Reports Fourth Quarter and Full Year Results

The Middleby Corporation