Middleby : Reports Second Quarter Results - Form 8-K

The Middleby Corporation Reports Second Quarter Results

ELGIN, Ill,--(BUSINESS WIRE)--August 4, 2022--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 2022 second quarter of $113.2 million or $2.07 diluted earnings per share on net sales of $1,013.6 million. Adjusted net earnings were $120.8 million or $2.23 adjusted diluted earnings per share. A full reconciliation between GAAP and non-GAAP measures is provided at the end of the press release.

"We posted record quarterly sales and earnings, while facing continued supply chain disruptions impacting production. Our profitability remained strong, despite inflationary pressures that accelerated following the attack on Ukraine. We continued to invest in our manufacturing capabilities to increase throughput and efficiencies, while focusing on raising profitability through evolving our sales mix to favor our more advanced technologies and solutions," said Tim FitzGerald, CEO of The Middleby Corporation.

"We continue to build upon our three industry leading foodservice businesses with several strategic acquisitions. We added Proxaut, CP Packaging and Colussi Ermes to our Food Processing Group. These companies bring innovative technologies that complement our existing brands and expand our automated and integrated full-line solutions portfolio. In Commercial Foodservice, the addition of South Korean based Icetro further extended our product lineup in frozen beverage and ice making equipment, providing meaningful sales opportunities and operational synergies," Mr. FitzGerald continues.

"While markets continue to present disruption and uncertainty, we continue to make strategic investments across all three of our business segments and execute on our strategic sales, operating and technology initiatives as we position for long-term profitable growth," concluded Mr. FitzGerald.

2022 Second Quarter Financial Results

• Net sales increased 25.3% in the second quarter over the comparative prior year period. Excluding the impacts of acquisitions and foreign exchange rates, sales increased 13.3% in the second quarter over the comparative prior year period, reflecting higher shipments as we realize benefits of investments to increase our production throughput.
• Organic net sales (a non-GAAP measure) increases were reported for the Commercial Foodservice and Residential Kitchen segments due to improvements in market conditions and consumer demand in the second quarter of 2022. A reconciliation of reported net sales by segment is as follows:

	Commercial Foodservice		Residential Kitchen		Food Processing		Total Company
Reported Net Sales Growth	19.8	%		64.7	%		(4.7	) %		25.3	%
Acquisitions	4.0	%		56.8	%		-	%		14.4	%
Foreign Exchange Rates	(1.9	) %		(3.5	) %		(3.4	) %		(2.5	) %
Organic Net Sales Growth (1) (2)	17.7	%		11.4	%		(1.4	) %		13.3	%
(1) Organic net sales growth defined as total sales growth excluding impact of acquisitions and foreign exchange rates
(2) Totals may be impacted by rounding

• Foreign exchange losses were approximately $5.7 million in the second quarter, which negatively impacted adjusted earnings per share by $0.08. For the six months period, foreign exchange losses were approximately $9.6 million, which negatively impacted adjusted earnings per share by $0.13.
• Adjusted EBITDA (a non-GAAP measure) was $210.2 million, in the second quarter of 2022 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 Foodservice		Residential Kitchen		Food Processing		Total Company
Adjusted EBITDA	25.4	%		18.6	%		19.5	%		20.7	%
Acquisitions	0.2	%		(4.7	) %		-	%		(1.0	) %
Foreign Exchange Rates	-	%		(0.1	) %		(0.1	) %		(0.1	) %
Organic Adjusted EBITDA (1) (2)	25.2	%		23.3	%		19.6	%		21.8	%
(1) Organic Adjusted EBITDA defined as Adjusted EBITDA excluding impact of acquisitions and foreign exchange rates.
(2) Totals may be impacted by rounding

• Operating cash flows during the second quarter amounted to $104.8 million in comparison to $112.7 million in the prior year period. The total leverage ratio per our credit agreements was 3.1x. The trailing twelve month bank agreement pro-forma EBITDA was $830.4 million.
• During the second quarter, $69 million of common stock was repurchased and debt increased $92 million related to recent business acquisitions.
• Cash balances at the end of the quarter were $166.6 million. Net debt, defined as debt excluding the unamortized discount associated with the Convertible Notes less cash, at the end of the 2022 fiscal second quarter amounted to $2.5 billion as compared to $2.3 billion at the end of fiscal 2021. Additionally, our borrowing availability at quarter end was approximately $2.0 billion.

Conference Call

The company has scheduled a conference call to discuss the second quarter results at 11 a.m. Eastern/10 a.m. Central Time on August 4. The conference call is accessible through the Investor Relations section of the company website at www.middleby.com. If website access is not available, attendees can join the conference by dialing [phone] or [phone] and entering conference code #40393296. The conference call will be available for replay from the company's website.

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 industry. The company develops and manufactures a broad line of solutions used in commercial foodservice, food processing, and residential kitchens. Supporting the company's pursuit of the most sophisticated innovation, the state-of-the-art Middleby Innovation Kitchens showcases and demonstrates the most advanced Middleby solutions. In 2022 Middleby was named a World's Best Employer by Forbes and is a proud philanthropic partner to organizations addressing food insecurity.

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, 2022		2nd Qtr, 2021		2nd Qtr, 2022		2nd Qtr, 2021
Net sales	$	1,013,601			$	808,773			$	2,008,277			$	1,566,831
Cost of sales		652,859				505,047				1,317,025				987,231
Gross profit		360,742				303,726				691,252				579,600
Selling, general and administrative expenses		189,486				165,711				395,557				320,668
Restructuring expenses		4,029				1,011				5,904				1,805
Loss/(gain) on sale of plant		-				287				-				(763	)
Income from operations		167,227				136,717				289,791				257,890
Interest expense and deferred financing amortization, net		20,842				14,222				38,496				30,289
Net periodic pension benefit (other than service costs & curtailment)		(10,784	)			(11,532	)			(22,300	)			(22,905	)
Other expense (income), net		5,888				(469	)			9,949				(2,160	)
Earnings before income taxes		151,281				134,496				263,646				252,666
Provision for income taxes		38,033				13,911				64,643				42,818
Net earnings	$	113,248			$	120,585			$	199,003			$	209,848
Net earnings per share:
Basic	$	2.10			$	2.18			$	3.66			$	3.80
Diluted	$	2.07			$	2.13			$	3.59			$	3.73
Weighted average number of shares
Basic		54,033				55,230				54,351				55,222
Diluted		54,654				56,673				55,509				56,320

THE MIDDLEBY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in 000's) (Unaudited)
	Jul 2, 2022		Jan 1, 2022
ASSETS
Cash and cash equivalents	$	166,589		$	180,362
Accounts receivable, net		627,276			577,142
Inventories, net		1,008,920			837,418
Prepaid expenses and other		109,932			92,269
Prepaid taxes		22,543			19,894
Total current assets		1,935,260			1,707,085
Property, plant and equipment, net		417,688			380,980
Goodwill		2,221,120			2,243,469
Other intangibles, net		1,805,036			1,875,377
Long-term deferred tax assets		26,306			33,194
Other assets		173,963			143,493
Total assets	$	6,579,373		$	6,383,598
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt	$	49,076		$	27,293
Accounts payable		323,155			304,740
Accrued expenses		604,183			582,855
Total current liabilities		976,414			914,888
Long-term debt		2,647,313			2,387,001
Long-term deferred tax liability		199,367			186,935
Accrued pension benefits		176,960			219,680
Other non-current liabilities		161,349			180,818
Stockholders' equity		2,417,970			2,494,276
Total liabilities and stockholders' equity	$	6,579,373		$	6,383,598

THE MIDDLEBY CORPORATION
NON-GAAP SEGMENT INFORMATION (UNAUDITED)
(Amounts in 000's, Except Percentages)
	Commercial Foodservice		Residential Kitchen		Food Processing		Total Company (1)
Three Months Ended July 2, 2022
Net sales	$	609,679			$	280,009			$	123,913			$	1,013,601
Segment Operating Income	$	137,344			$	46,077			$	18,548			$	167,227
Operating Income % of net sales		22.5	%			16.5	%			15.0	%			16.5	%
Depreciation		5,850				3,425				1,299				10,757
Amortization		13,712				1,030				1,746				16,488
Restructuring expenses		820				611				2,598				4,029
Acquisition related adjustments		(3,112	)			832				-				(2,280	)
Charitable support to Ukraine		-				-				-				798
Stock compensation		-				-				-				13,157
Segment adjusted EBITDA	$	154,614			$	51,975			$	24,191			$	210,176
Adjusted EBITDA % of net sales		25.4	%			18.6	%			19.5	%			20.7	%
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 sales		21.6	%			19.9	%			20.7	%			16.9	%
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 adjustments		302				-				-				302
Acquisition deal costs		-				-				-				10,481
Stock compensation		-				-				-				9,329
Loss/(gain) on sale of plant		372				(85	)			-				287
Segment adjusted EBITDA	$	131,347			$	38,695			$	30,305			$	186,158
Adjusted EBITDA % of net sales		25.8	%			22.8	%			23.3	%			23.0	%
(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $20.6 million and $14.2 million for the three months ended July 2, 2022 and July 3, 2021, respectively.

THE MIDDLEBY CORPORATION
NON-GAAP SEGMENT INFORMATION (UNAUDITED)
(Amounts in 000's, Except Percentages)
	Commercial Foodservice		Residential Kitchen		Food Processing		Total Company (1)
Six Months Ended July 2, 2022
Net sales	$	1,153,332			$	611,089			$	243,856			$	2,008,277
Segment Operating Income	$	247,062			$	71,023			$	38,660			$	289,791
Operating Income % of net sales		21.4	%			11.6	%			15.9	%			14.4	%
Depreciation		11,722				7,410				2,624				22,129
Amortization		27,361				19,159				3,533				50,053
Restructuring expenses		2,271				998				2,635				5,904
Acquisition related adjustments		(3,092	)			15,062				-				11,970
Charitable support to Ukraine		-				-				-				798
Stock compensation		-				-				-				26,880
Segment adjusted EBITDA	$	285,324			$	113,652			$	47,452			$	407,525
Adjusted EBITDA % of net sales		24.7	%			18.6	%			19.5	%			20.3	%
Six Months Ended July 3, 2021
Net sales	$	989,933			$	334,396			$	242,502			$	1,566,831
Segment Operating Income	$	206,260			$	63,766			$	46,623			$	257,890
Operating Income % of net sales		20.8	%			19.1	%			19.2	%			16.5	%
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 related expenses		993				-				-				993
Acquisition related adjustments		737				-				-				737
Stock compensation		-				-				-				16,938
Gain on sale of plant		(678	)			(85	)					(763	)
Acquisition deal costs		-				-				-				12,821
Segment adjusted EBITDA	$	249,461			$	73,305			$	53,288			$	347,408
Adjusted EBITDA % of net sales		25.2	%			21.9	%			22.0	%			22.2	%
(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $38.9 million and $28.6 million for the six months ended July 2, 2022 and July 3, 2021, respectively.

THE MIDDLEBY CORPORATION NON-GAAP INFORMATION (UNAUDITED) (Amounts in 000's, Except Percentages)
	Three Months Ended
	2nd Qtr, 2022		2nd Qtr, 2021
	$		Diluted per share		$		Diluted per share
Net earnings	$	113,248			$	2.07			$	120,585			$	2.13
Amortization (1)		18,279				0.33				19,443				0.34
Restructuring expenses		4,029				0.07				1,011				0.02
Acquisition related costs		(2,280	)			(0.04	)			302				0.01
Net periodic pension benefit (other than service costs & curtailment)		(10,784	)			(0.20	)			(11,532	)			(0.20	)
Loss on sale of plant		-				-				287				0.01
Charitable support to Ukraine		798				0.01				-				-
Acquisition deal costs		-				-				10,481				0.18
Discrete tax adjustments				-				(18,900	)			(0.33	)
Income tax effect of pre-tax adjustments		(2,521	)			(0.05	)			(4,898	)			(0.09	)
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings (2)		-				0.04				-				0.04
Adjusted net earnings	$	120,769			$	2.23			$	116,779			$	2.11
Diluted weighted average number of shares		54,654						56,673
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings (2)		(613	)					(1,430	)
Adjusted diluted weighted average number of shares		54,041						55,243
	Six Months Ended
	2nd Qtr, 2022		2nd Qtr, 2021
	$		Diluted per share		$		Diluted per share
Net earnings	$	199,003			$	3.59			$	209,848			$	3.73
Amortization (1)		53,649				0.97				39,738				0.71
Restructuring expenses		5,904				0.11				1,805				0.03
Acquisition related costs		11,970				0.22				737				0.01
Acquisition deal costs		-				-				12,821				0.23
Facility consolidation related expenses		-				-				993				0.02
Net periodic pension benefit (other than service costs & curtailment)		(22,300	)			(0.40	)			(22,905	)			(0.41	)
Gain on sale of plant		-				-				(763	)			(0.01	)
Charitable support to Ukraine		798				0.01				-				-
Discrete tax adjustments		-				-				(18,900	)			(0.34	)
Income tax effect of pre-tax adjustments		(12,255	)			(0.22	)			(7,944	)			(0.14	)
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings (2)		-				0.08				-				0.07
Adjusted net earnings	$	236,769			$	4.36			$	215,430			$	3.90
Diluted weighted average number of shares		55,509						56,320
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings (2)		(1,151	)					(1,087	)
Adjusted diluted weighted average number of shares		54,358						55,233

⁽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.

	Three Months Ended		Six Months Ended
	2nd Qtr, 2022		2nd Qtr, 2021		2nd Qtr, 2022		2nd Qtr, 2021
Net Cash Flows Provided By (Used In):
Operating activities	$	104,802			$	112,686			$	89,458			$	172,381
Investing activities		(83,133	)			(17,184	)			(107,259	)			(24,222	)
Financing activities		9,017				(10,446	)			17,738				(18,731	)
Free Cash Flow
Cash flow from operating activities	$	104,802			$	112,686			$	89,458			$	172,381
Less: Capital expenditures, net of sale proceeds		(17,636	)			(7,992	)			(32,133	)			(13,363	)
Free cash flow	$	87,166			$	104,694			$	57,325			$	159,018

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.

Contacts

Darcy Bretz, Investor and Public Relations, [phone]
Bryan Mittelman, Chief Financial Officer, [phone]