UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One) | |
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the period ended | SEPTEMBER 27, 2003 |
or | |
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: | 1-9973 |
THE MIDDLEBY CORPORATION | |
(Exact name of registrant as specified in its charter) | |
DELAWARE | 36-3352497 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1400 TOASTMASTER DRIVE, ELGIN, IL | 60120 |
(Address of principal executive offices) | (Zip Code) |
(847) 741-3300 | |
(Registrant's telephone number, including area code) | |
DESCRIPTION | PAGE | |||
PART I. FINANCIAL INFORMATION | ||||
Item 1. Condensed Consolidated Financial Statements (unaudited) | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | 1 | |||
September 27, 2003 and December 28, 2002 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS | ||||
September 27, 2003 (as restated) and September 28, 2002 (as restated) | 2 | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
September 27, 2003 and September 28, 2002 | 3 | |||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 4 | |||
Item 2.Management's Discussion and Analysis of Financial Condition | ||||
and Results of Operations | 15 | |||
Item 3.Quantitative and Qualitative Disclosures About Market Risk | 25 | |||
Item 4. Controls and Procedures | 28 | |||
PART II. OTHER INFORMATION | ||||
Item 2. Changes in Securities | 29 | |||
Item 6. Exhibits and Reports on Form 8-K | 29 | |||
Sep. 27, 2003 | Dec. 28, 2002 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 4,090 | $ | 8,378 | |||
Accounts receivable, net of reservefor 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 ofaccumulated 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 sharesauthorized; 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; 2,002,474shares 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 andstockholders' equity.... | $ | 197,134 | $ | 207,962 | |||
-1- | ||
(as restated1) | (as restated1) | ||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
Sep. 27, 2003 | Sep. 28, 2002 | Sep. 27, 2003 | Sep. 28, 2002 | ||||||||||
Net sales | $ | 60,894 | $ | 59,361 | $ | 182,695 | $ | 179,053 | |||||
Cost of sales | 38,261 | 38,897 | 118,360 | 119,175 | |||||||||
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 |
-2- | ||
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 | |||
-3- | ||
-4- | ||
September 27, 2003 | |||||||||||||
As Previously Reported | As Restated | ||||||||||||
Three Months | Nine Months | Three Months | Nine Months | ||||||||||
Sales | $ | 59,254 | $ | 177,616 | $ | 60,894 | $ | 182,695 | |||||
Cost of Sales | 36,621 | 113,281 | 38,261 | 118,360 |
September 28, 2002 | |||||||||||||
As Previously Reported | As Restated | ||||||||||||
Three Months | Nine Months | Three Months | Nine Months | ||||||||||
Sales | $ | 57,679 | $ | 174,648 | $ | 59,361 | $ | 179,053 | |||||
Cost of Sales | 37,215 | 114,770 | 38,897 | 119,175 |
-5- | ||
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 | (466 | ) | |||||||
Comprehensive income | $ | 6,055 | $ | 3,491 | $ | 13,127 | $ | 7,360 | |||||
-6- | ||
Sep. 27, 2003 | Dec. 28, 2002 | ||||||
(In thousands) | |||||||
Raw materials and parts | $ | 5,248 | $ | 6,178 | |||
Work-in-process | 4,211 | 5,849 | |||||
Finished goods | 16,018 | 15,179 | |||||
$ | 25,477 | $ | 27,206 | ||||
Sep. 27, 2003 | Dec. 28, 2002 | ||||||
(In thousands) | |||||||
Accrued warranty | $ | 11,538 | $ | 10,447 | |||
Accrued payroll and related expenses | 9,098 | 8,544 | |||||
Accrued customer rebates | 5,710 | 6,043 | |||||
Accrued commissions | 1,634 | 1,535 | |||||
Accrued severance and plant closures | 1,250 | 1,426 | |||||
Other accrued expenses | 8,384 | 8,018 | |||||
$ | 37,614 | $ | 36,013 | ||||
-7- | ||
Sep. 27, 2003 | Sep. 28, 2002 | ||||||
(dollars in thousands) | |||||||
Beginning balance | $ | 10,447 | $ | 9,179 | |||
Warranty expense | 7,767 | 7,081 | |||||
Warranty claims | (6,676 | ) | (5,908 | ) | |||
Ending balance | $ | 11,538 | $ | 10,352 | |||
-8- | ||
Balance Dec. 28, 2002 | Adjustments | Cash Payments | Balance Sep. 27, 2003 | ||||||||||
Severance obligations | $ | 271 | (87 | ) | $ | (118 | ) | $ | 66 | ||||
Facility closure and lease obligations | 9,493 | 287 | (822 | ) | 8,958 | ||||||||
Total | $ | 9,764 | $ | 200 | $ | (940 | ) | $ | 9,024 | ||||
-9- | ||
-10- | ||
-11- | ||
Three Months Ended | Nine Months Ended | ||||||||||||
Sep. 27, 2003 | Sep. 28, 2002 | Sep. 27, 2003 | Sep. 28, 2002 | ||||||||||
(in thousands, except per share data) | |||||||||||||
Net income – as reported | $ | 5,651 | $ | 4,337 | $ | 12,857 | $ | 8,191 | |||||
Less: Stock-based employee compensation | |||||||||||||
expense, net of taxes | (109 | ) | (77 | ) | (305 | ) | (220 | ) | |||||
Net income – pro forma | $ | 5,542 | $ | 4,260 | $ | 12,552 | $ | 7,971 | |||||
Earnings per share – as reported: | |||||||||||||
Basic | $ | 0.63 | $ | 0.48 | $ | 1.42 | $ | 0.91 | |||||
Diluted | 0.59 | 0.47 | 1.37 | 0.90 | |||||||||
Earnings per share – pro forma: | |||||||||||||
Basic | $ | 0.61 | $ | 0.47 | $ | 1.39 | $ | 0.89 | |||||
Diluted | 0.58 | 0.46 | 1.33 | 0.88 |
-12- | ||
-13- | ||
Cooking Systems Group | International Distribution | Corporate and Other(2) | Eliminations(3) | Total | ||||||||||||
Three months ended September 27, 2003 | ||||||||||||||||
Net sales | $ | 56,890 | $ | 10,782 | $ | — | $ | (6,778 | ) | $ | 60,894 | |||||
Operating income (loss) | 11,387 | 689 | (1,940 | ) | (150 | ) | 9,986 | |||||||||
Depreciation expense | 896 | 36 | (68 | ) | — | 864 | ||||||||||
Capital expenditures | 59 | 1 | 5 | — | 65 | |||||||||||
Nine months ended September 27, 2003 | ||||||||||||||||
Net sales | $ | 173,931 | $ | 31,017 | $ | - | $ | (22,253 | ) | $ | 182,695 | |||||
Operating income (loss) | 31,241 | 1,591 | (6,095 | ) | (700 | ) | 26,037 | |||||||||
Depreciation expense | 2,830 | 110 | (206 | ) | — | 2,734 | ||||||||||
Capital expenditures | 763 | (31 | ) | 7 | — | 739 | ||||||||||
Total assets | 177,409 | 21,126 | 9,581 | (10,982 | ) | 197,134 | ||||||||||
Long-lived assets(4) | 124,688 | 485 | 3,159 | — | 128,332 | |||||||||||
Three months ended September 28, 2002 | ||||||||||||||||
Net sales | $ | 56,837 | $ | 9,167 | $ | - | $ | (6,643 | ) | $ | 59,361 | |||||
Operating income (loss) | 9,166 | 218 | (512 | ) | 75 | 8,947 | ||||||||||
Depreciation expense | 1,068 | 41 | (241 | ) | — | 868 | ||||||||||
Capital expenditures | 129 | 81 | (23 | ) | — | 187 | ||||||||||
Nine months ended September 28, 2002 | ||||||||||||||||
Net sales | $ | 171,774 | $ | 25,500 | $ | 70 | $ | (18,291 | ) | $ | 179,053 | |||||
Operating income (loss) | 26,584 | 706 | (5,108 | ) | (318 | ) | 21,864 | |||||||||
Depreciation expense | 3,400 | 123 | (173 | ) | — | 3,350 | ||||||||||
Capital expenditures | 869 | 156 | (14 | ) | — | 1,011 | ||||||||||
Total assets | 181,885 | 17,388 | 18,564 | (10,982 | ) | 206,855 | ||||||||||
Long-lived assets(4) | 129,193 | 439 | 5,789 | — | 135,241 |
Three Months Ended | Nine Months Ended | ||||||||||||
Sep. 27, 2003 | Sep. 28, 2002 | Sep. 27, 2003 | Sep. 28, 2002 | ||||||||||
United States and Canada | $ | 48,648 | $ | 49,195 | $ | 147,890 | $ | 147,693 | |||||
Asia/Australia | 5,321 | 3,059 | 14,687 | 10,805 | |||||||||
Europe and Middle East | 5,176 | 5,027 | 15,721 | 15,320 | |||||||||
Latin America | 1,749 | 2,080 | 4,397 | 5,235 | |||||||||
Net Sales | $ | 60,894 | $ | 59,361 | $ | 182,695 | $ | 179,053 | |||||
-14- | ||
-15- | ||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
Sep. 27, 2003 | Sep. 28, 2002 | Sep. 27, 2003 | Sep. 28, 2002 | ||||||||||||||||||
Sales | Percent | Sales | Percent | Sales | Percent | Sales | Percent | ||||||||||||||
Business Divisions | |||||||||||||||||||||
Cooking Systems Group: | |||||||||||||||||||||
Core cooking equipment | $ | 41,412 | 67.8 | $ | 41,361 | 69.8 | $ | 125,242 | 68.4 | $ | 123,611 | 69.0 | |||||||||
Conveyor oven equipment | 11,598 | 19.2 | 11,690 | 19.9 | 35,787 | 19.8 | 36,344 | 20.4 | |||||||||||||
Counterline cooking equipment | 2,697 | 4.5 | 2,954 | 5.0 | 7,581 | 4.2 | 8,275 | 4.6 | |||||||||||||
International specialty equipment | 1,183 | 2.0 | 832 | 1.4 | 5,321 | 2.9 | 3,544 | 2.0 | |||||||||||||
Total Cooking Systems Group | 56,890 | 93.5 | 56,837 | 96.1 | 173,931 | 95.3 | 171,774 | 96.0 | |||||||||||||
International Distribution (1) | 10,782 | 17.9 | 9,167 | 15.4 | 31,017 | 17.2 | 25,500 | 14.4 | |||||||||||||
Intercompany sales (2) | (6,778) | (11.4) | (6,643) | (11.5) | (22,253) | (12.5) | (18,221) | (10.4) | |||||||||||||
Total | $ | 60,894 | 100.0 | $ | 59,361 | 100.0 | $ | 182,695 | 100.0 | $ | 179,053 | 100.0 | |||||||||
Three months ended | Nine months ended | ||||||||||||
Sep. 27, 2003 | Sep. 28, 2002 | Sep. 27, 2003 | Sep. 28, 2002 | ||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Cost of sales | 62.8 | 65.5 | 64.8 | 66.6 | |||||||||
Gross profit | 37.2 | 34.5 | 35.2 | 33.4 | |||||||||
Selling, general and administrativeexpenses | 20.8 | 19.4 | 21.0 | 21.1 | |||||||||
Income from operations | 16.4 | 15.1 | 14.2 | 12.3 | |||||||||
Interest expense and deferredfinancing amortization, net | 2.3 | 4.5 | 2.6 | 4.9 | |||||||||
Loss (gain) on acquisition financings derivatives | 0.1 | (0.1 | ) | - | - | ||||||||
Other expense, net | (0.4 | ) | 0.8 | - | 0.2 | ||||||||
Earnings before income taxes | 14.4 | 9.9 | 11.6 | 7.2 | |||||||||
Provision for income taxes | 5.2 | 2.6 | 4.6 | 2.6 | |||||||||
Net earnings | 9.3 | % | 7.3 | % | 7.0 | % | 4.6 | % | |||||
-16- | ||
-17- | ||
-18- | ||
-19- | ||
-20- | ||
-21- | ||
-22- | ||
-23- | ||
Long-term Debt | OperatingLeases | IdleFacilityLeases | TotalContractual CashObligations | ||||||||||
Less than 1 year | $ | 13,900 | $ | 593 | $ | 1,535 | $ | 16,028 | |||||
2-3 years | 26,525 | 837 | 2,479 | 29,841 | |||||||||
4-5 years | 21,725 | 553 | 2,225 | 24,503 | |||||||||
After 5 years | — | 104 | 7,099 | 7,203 | |||||||||
$ | 62,150 | $ | 2,087 | $ | 13,338 | $ | 77,575 | ||||||
-24- | ||
Twelve Month Period Ending | Fixed Rate Debt | Variable Rate Debt | |||||
(In thousands) | |||||||
September 30, 2004 | $ | — | $ | 13,900 | |||
September 30, 2005 | — | 13,225 | |||||
September 30, 2006 | — | 13,300 | |||||
September 30, 2007 | 5,000 | 13,375 | |||||
September 30, 2008 | — | 3,350 | |||||
$ | 5,000 | $ | 57,150 | ||||
-25- | ||
-26- | ||
Sell | Purchase | Maturity | |||
1,000,000 | Euro | $822,000 | U.S. Dollars | September 30, 2003 | |
1,000,000 | British Pounds | $1,599,000 | U.S. Dollars | October 14, 2003 | |
1,000,000 | British Pounds | $1,632,600 | U.S. Dollars | October 22, 2003 | |
5,170,000 | Mexican Pesos | $470,400 | U.S. Dollars | October 14, 2003 | |
6,161,400 | Mexican Pesos | $560,900 | U.S. Dollars | October 14, 2003 |
-27- | ||
-28- | ||
-29- | ||
THE MIDDLEBY CORPORATION | ||
| | |
Date: August 16, 2004 | By: | /s/ Timothy J. FitzGerald |
Timothy J. FitzGerald Vice President, Chief Financial Officer |
-30- | ||