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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 |
|
or |
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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THE MIDDLEBY
CORPORATION |
| Delaware (State or Other Jurisdiction of Incorporation or Organization) |
36-3352497 (I.R.S. Employer Identification No.) |
| 1400 Toastmaster Drive, Elgin, Illinois (Address of Principal Executive Offices) |
60120 (Zip Code) |
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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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X As of November 3, 2003, there were 9,244,422 shares of the registrant’s common stock outstanding. |
THE MIDDLEBY CORPORATION AND SUBSIDIARIESQUARTER ENDED SEPTEMBER 27, 2003INDEX |
| DESCRIPTION | PAGE | ||
PART I. FINANCIAL INFORMATION |
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Item 1. Condensed Consolidated Financial Statements (unaudited) | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | 1 | ||
| September 27, 2003 | |||
| and December 28, 2002 | |||
CONDENSED CONSOLIDATED STATEMENTS | |||
| OF EARNINGS | 2 | ||
| September 27, 2003 and September 28, 2002 | |||
CONDENSED CONSOLIDATED STATEMENTS | |||
| OF CASH FLOWS | 3 | ||
| September 27, 2003 and September 28, 2002 | |||
NOTES TO CONDENSED CONSOLIDATED | |||
| FINANCIAL STATEMENTS | 4 | ||
Item 2. Management's Discussion and Analysis | |||
| of Financial Condition and Results of | |||
| Operations | 14 | ||
Item 3. Quantitative and Qualitative Disclosures | |||
| About Market Risk | 24 | ||
Item 4. Controls and Procedures | 27 | ||
PART II. OTHER INFORMATION | |||
Item 2. Changes in Securities | 28 | ||
Item 6. Exhibits and Reports on Form 8-K | 28 | ||
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PART I. FINANCIAL INFORMATION THE MIDDLEBY
CORPORATION AND SUBSIDIARIES
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| Sep. 27, 2003 | Dec. 28, 2002 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||
| Cash and cash equivalents | $ | 4,090 | $ | 8,378 | |||||
| Accounts receivable, net of reserve | |||||||||
| for doubtful accounts of | |||||||||
| $3,506 and $3,494 | 28,200 | 27,797 | |||||||
| Inventories, net | 25,477 | 27,206 | |||||||
| Prepaid expenses and other | 1,186 | 1,069 | |||||||
| Current deferred taxes | 9,849 | 13,341 | |||||||
| Total current assets | 68,802 | 77,791 | |||||||
| Property, plant and equipment, net of | |||||||||
| accumulated depreciation of | |||||||||
| $28,458 and $25,788 | 25,505 | 27,500 | |||||||
| Goodwill | 74,761 | 74,761 | |||||||
| Other intangibles | 26,300 | 26,300 | |||||||
| Other assets | 1,766 | 1,610 | |||||||
| Total assets | $ | 197,134 | $ | 207,962 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current maturities of long-term debt . | $ | 13,900 | $ | 14,400 | |||||
| Accounts payable | 13,625 | 13,488 | |||||||
| Accrued expenses | 37,614 | 36,013 | |||||||
| Total current liabilities | 65,139 | 63,901 | |||||||
| Long-term debt | 48,250 | 73,562 | |||||||
| Long-term deferred tax liability | 7,878 | 7,878 | |||||||
| Other non-current liabilities | 18,063 | 17,989 | |||||||
| Stockholders' equity: | |||||||||
| Preferred stock, $.01 par value; | |||||||||
| nonvoting; 2,000,000 shares | |||||||||
| authorized; none issued | -- | -- | |||||||
| Common stock, $.01 par value; | |||||||||
| 20,000,000 shares authorized; | |||||||||
| 11,040,521 and 11,028,396 issued | |||||||||
| in 2003 and 2002, respectively | 110 | 110 | |||||||
| Shareholder receivables | (200 | ) | (200 | ) | |||||
| Paid-in capital | 53,950 | 53,907 | |||||||
| Treasury stock at cost; 2,002,474 | |||||||||
| shares in 2003 and 2002 | (11,705 | ) | (11,705 | ) | |||||
| Retained earnings | 17,930 | 5,073 | |||||||
| Accumulated other comprehensive | |||||||||
| loss | (2,281 | ) | (2,553 | ) | |||||
| Total stockholders' equity | 57,804 | 44,632 | |||||||
| Total liabilities and | |||||||||
| stockholders' equity | $ | 197,134 | $ | 207,962 | |||||
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See accompanying notes —1— |
THE MIDDLEBY
CORPORATION AND SUBSIDIARIES
|
| Three Months Ended | Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sep. 27, 2003 | Sep. 28, 2002 | Sep. 27, 2003 | Sep. 28, 2002 | |||||||||||
| Net sales | $ | 59,254 | $ | 57,679 | $ | 177,616 | $ | 174,648 | ||||||
| Cost of sales | 36,621 | 37,215 | 113,281 | 114,770 | ||||||||||
| Gross profit | 22,633 | 20,464 | 64,335 | 59,878 | ||||||||||
| Selling and distribution expenses | 7,259 | 7,042 | 22,201 | 21,575 | ||||||||||
| General and administrative expenses | 5,388 | 4,475 | 16,097 | 16,439 | ||||||||||
| Income from operations | 9,986 | 8,947 | 26,037 | 21,864 | ||||||||||
| Interest expense and deferred | ||||||||||||||
| financing amortization | 1,410 | 2,661 | 4,747 | 8,783 | ||||||||||
| (Gain) loss on acquisition financing | ||||||||||||||
| derivatives | 32 | (95 | ) | (79 | ) | (109 | ) | |||||||
| Other (income) expense, net | (254 | ) | 484 | 29 | 395 | |||||||||
| Earnings before income taxes . | 8,798 | 5,897 | 21,340 | 12,795 | ||||||||||
| Provision for income taxes | 3,147 | 1,560 | 8,483 | 4,604 | ||||||||||
| Net earnings | $ | 5,651 | $ | 4,337 | $ | 12,857 | $ | 8,191 | ||||||
| Net earnings per share: | ||||||||||||||
| Basic | $ | 0.63 | $ | 0.48 | $ | 1.42 | $ | 0.91 | ||||||
| Diluted | $ | 0.59 | $ | 0.47 | $ | 1.37 | $ | 0.90 | ||||||
| Weighted average number of shares: | ||||||||||||||
| Basic | 9,036 | 8,991 | 9,032 | 8,979 | ||||||||||
| Dilutive stock options | 469 | 211 | 369 | 92 | ||||||||||
| Diluted | 9,505 | 9,202 | 9,401 | 9,071 | ||||||||||
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—2— |
THE MIDDLEBY
CORPORATION AND SUBSIDIARIES
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| Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| Sep. 27, 2003 | Sep. 28, 2002 | |||||||
| Cash flows from operating activities- | ||||||||
| Net earnings | $ | 12,857 | $ | 8,191 | ||||
| Adjustments to reconcile net earnings | ||||||||
| to cash provided by operating | ||||||||
| activities: | ||||||||
| Depreciation and amortization | 3,046 | 5,195 | ||||||
| Non-cash portion of tax provision | 3,492 | (425 | ) | |||||
| Unrealized gain on | ||||||||
| derivative financial instruments | (80 | ) | (109 | ) | ||||
| Unpaid interest on seller notes(1) | 567 | 1,737 | ||||||
| Unpaid interest on subordinated | ||||||||
| senior notes(1) | -- | 382 | ||||||
| Changes in assets and liabilities- | ||||||||
| Accounts receivable, net | (236 | ) | (3,189 | ) | ||||
| Inventories, net | 1,895 | 2,374 | ||||||
| Prepaid expenses and other assets | (586 | ) | (343 | ) | ||||
| Accounts payable | 137 | 3,173 | ||||||
| Accrued expenses and other | ||||||||
| liabilities | 1,695 | (1,512 | ) | |||||
| Net cash provided by operating | ||||||||
| activities | 22,787 | 15,474 | ||||||
| Cash flows from investing activities- | ||||||||
| Net additions to property and equipment | (739 | ) | (1,011 | ) | ||||
| Net cash (used in) investing activities . | (739 | ) | (1,011 | ) | ||||
| Cash flows from financing activities- | ||||||||
| Proceeds (repayments) under revolving | ||||||||
| credit facilities, net | 1,150 | (13,885 | ) | |||||
| Repayments of senior secured bank notes | (11,400 | ) | (3,500 | ) | ||||
| Repayments of subordinated senior note | (16,129 | ) | ||||||
| Other financing activities, net | 43 | (40 | ) | |||||
| Net cash (used in) | ||||||||
| financing activities | (26,336 | ) | (17,425 | ) | ||||
| Effect of exchange rates on cash | ||||||||
| and cash equivalents | -- | 62 | ||||||
| Changes in cash and cash equivalents- | ||||||||
| Net (decrease) increase in cash and | ||||||||
| cash equivalents | (4,288 | ) | (2,900 | ) | ||||
| Cash and cash equivalents at | ||||||||
| beginning of year | 8,378 | 5,997 | ||||||
| Cash and cash equivalents at end | ||||||||
| of quarter | $ | 4,090 | $ | 3,097 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | 3,444 | $ | 4,546 | ||||
| Income taxes paid | $ | 4,746 | $ | 3,768 | ||||
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(1) Represents an increase in principal balance
See accompanying notes —3— THE MIDDLEBY
CORPORATION AND SUBSIDIARIES
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| The consolidated financial statements have been prepared by The Middleby Corporation (the “company”), pursuant to the rules and regulations of the Securities and Exchange Commission, the financial statements are unaudited and certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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 2002 Form 10-K. |
| In the opinion of management, the financial statements contain all adjustments necessary to present fairly the financial position of the company as of September 27, 2003 and December 28, 2002, and the results of operations for the nine months ended September 27, 2003 and September 28, 2002 and cash flows for the nine months ended September 27, 2003 and September 28, 2002. |
2) New Accounting Pronouncements |
| In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143 “Accounting for Asset Retirement Obligations”. This statement addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, and requires that such costs be recognized as a liability in the period in which incurred. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The adoption of this statement did not have a material impact to the financial statements. |
| In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements SFAS No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” SFAS No. 145 eliminates the current requirement that gains and losses on debt extinguishment must be classified as extraordinary items in the income statement. Instead, such gains and losses will be classified as extraordinary items only if they are deemed to be unusual and infrequent. The changes related to debt extinguishment are effective for fiscal years beginning after May 15, 2002. The company will apply this guidance beginning in fiscal 2003. |
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—4— |
| In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan, which is generally before an actual liability has been incurred. This statement is effective for financial statements issued for fiscal years beginning after December 31, 2002. The adoption of this statement did not have a material impact to the financial statements. |
| In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement requires that contracts with comparable characteristics be accounted for similarly. This statement is effective for contracts entered into or modified after June 30, 2003. The adoption of this statement did not have a material impact to the financial statements. |
| In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this statement did not have a material impact to the financial statements. |
3) Other Comprehensive Income |
| The company reports changes in equity during a period, except those resulting from investment by owners and distribution to owners, in accordance with SFAS No. 130, “Reporting Comprehensive Income.” |
| Components of other comprehensive income were as follows (in thousands): |
| Three Months Ended | Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sep. 27, 2003 | Sep. 28, 2002 | Sep. 27, 2003 | Sep. 28, 2002 | |||||||||||
| Net earnings | $ | 5,651 | $ | 4,337 | $ | 12,857 | $ | 8,191 | ||||||
| Cumulative translation | ||||||||||||||
| adjustment | 119 | (380 | ) | 267 | (365 | ) | ||||||||
| Unrealized loss on | ||||||||||||||
| interest rate swap | 285 | (466 | ) | 3 | ||||||||||