UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One) | |
|X| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period ended APRIL 3, 2004 | |
or | |
|_| | 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) |
(Registrant's telephone number, including area code) (847) 741-3300 |
QUARTER ENDED APRIL 3, 2004
INDEX
DESCRIPTION | PAGE | ||
PART I. FINANCIAL INFORMATION | |||
Item 1. Condensed Consolidated Financial Statements (unaudited) | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | 1 | ||
April 3, 2004 and January 3. 2004 | |||
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS | |||
April 3, 2004 (as restated) and March 29, 2003 (as restated) | 2 | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
April 3, 2004 and March 29, 2003 | 3 | ||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 4 | ||
Item 2. Management's Discussion and Analysis of Financial Condition | |||
and Results of Operations (unaudited) | 14 | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 23 | ||
Item 4. Controls and Procedures | 27 | ||
PART II. OTHER INFORMATION | |||
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 28 | ||
Item 6. Exhibits and Reports on Form 8-K | 28 | ||
Apr. 3, 2004 | Jan. 3, 2004 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 3,073 | $ | 3,652 | |||
Accounts receivable, net of reservefor doubtful accounts of$3,172 and $3,146 | 25,446 | 23,318 | |||||
Inventories, net | 28,904 | 25,382 | |||||
Prepaid expenses and other | 1,220 | 1,776 | |||||
Current deferred taxes | 12,907 | 12,839 | |||||
Total current assets | 71,550 | 66,967 | |||||
Property, plant and equipment, net ofaccumulated depreciation of $29,886 and $29,146 | 24,132 | 24,921 | |||||
Goodwill | 74,761 | 74,761 | |||||
Other intangibles | 26,300 | 26,300 | |||||
Other assets | 1,430 | 1,671 | |||||
Total assets | $ | 198,173 | $ | 194,620 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current maturities of long-term debt | $ | 15,975 | $ | 14,500 | |||
Accounts payable | 15,455 | 11,901 | |||||
Accrued expenses | 34,899 | 37,076 | |||||
Total current liabilities | 66,329 | 63,477 | |||||
Long-term debt | 37,675 | 42,000 | |||||
Long-term deferred tax liability | 8,264 | 8,264 | |||||
Other non-current liabilities | 18,042 | 18,789 | |||||
Stockholders' equity: | |||||||
Preferred stock, $.01 par value;nonvoting; 2,000,000 sharesauthorized; none issued | — | — | |||||
Common stock, $.01 par value;20,000,000 shares authorized;11,269,521 and 11,257,021 issued | |||||||
in 2004 and 2003, respectively | 113 | 113 | |||||
Paid-in capital | 55,365 | 55,279 | |||||
Treasury stock at cost; 2,047,271shares in 2004 and 2003 | (12,463 | ) | (12,463 | ) | |||
Retained earnings | 27,061 | 21,470 | |||||
Accumulated other comprehensive loss | (2,213 | ) | (2,309 | ) | |||
Total stockholders’ equity | 67,863 | 62,090 | |||||
Total liabilities andstockholders' equity | $ | 198,173 | $ | 194,620 | |||
-1- | ||
(as restated1) | |||||||
Three Months Ended | |||||||
Apr. 3, 2004 | Mar. 29, 2003 | ||||||
Net sales | $ | 62,463 | $ | 56,393 | |||
Cost of sales | 39,287 | 37,341 | |||||
Gross profit | 23,176 | 19,052 | |||||
Selling and distribution expenses | 7,376 | 7,162 | |||||
General and administrative expenses | 5,696 | 5,483 | |||||
Income from operations | 10,104 | 6,407 | |||||
Net interest expense and deferred financing amortization | 897 | 1,714 | |||||
Gain on acquisition financing derivatives | (2 | ) | (69 | ) | |||
Other expense, net | 194 | 135 | |||||
Earnings before income taxes | 9,015 | 4,627 | |||||
Provision for income taxes | 3,424 | 2,018 | |||||
Net earnings | $ | 5,591 | $ | 2,609 | |||
Net earnings per share: | |||||||
Basic | $ | 0.61 | $ | 0.29 | |||
Diluted | $ | 0.56 | $ | 0.28 | |||
Weighted average number of shares: | |||||||
Basic | 9,219 | 9,028 | |||||
Dilutive stock options | 749 | 276 | |||||
Diluted | 9,968 | 9,304 |
1See Note 2.
-2- | ||
Three Months Ended | |||||||
Apr. 3, 2004 | Mar. 29, 2003 | ||||||
Cash flows from operating activities- | |||||||
Net earnings | $ | 5,591 | $ | 2,609 | |||
Adjustments to reconcile net earnings to cash provided by operating activities: | |||||||
Depreciation and amortization | 966 | 1,021 | |||||
Deferred taxes | (68 | ) | 1,826 | ||||
Unrealized gain on derivative financial instruments | (2 | ) | (69 | ) | |||
Unpaid interest on seller notes(1) | — | 240 | |||||
Changes in assets and liabilities- | |||||||
Accounts receivable, net | (2,128 | ) | (415 | ) | |||
Inventories, net | (3,522 | ) | (2,598 | ) | |||
Prepaid expenses and other assets | 691 | 71 | |||||
Accounts payable | 3,554 | (526 | ) | ||||
Accrued expenses and other liabilities | (2,826 | ) | 502 | ||||
Net cash provided by operating activities | 2,256 | 2,661 | |||||
Cash flows from investing activities- | |||||||
Net additions to property and equipment | (71 | ) | (182 | ) | |||
Acquisition of Blodgett | (1,000 | ) | — | ||||
Net cash (used in) investing activities.. | (1,071 | ) | (182 | ) | |||
Cash flows from financing activities- | |||||||
Proceeds under revolving credit facilities, net | 1,400 | - | |||||
Net repayments under senior secured bank notes | (3,250 | ) | (3,000 | ) | |||
Repayments of foreign bank loan | — | (600 | ) | ||||
Other financing activities, net | 86 | 9 | |||||
Net cash (used in) financing activities | (1,764 | ) | (3,591 | ) | |||
Effect of exchange rates on cash and cash equivalents | — | (1 | ) | ||||
Changes in cash and cash equivalents- | |||||||
Net (decrease) increase in cash and cash equivalents | (579 | ) | (1,113 | ) | |||
Cash and cash equivalents at beginning of year | 3,652 | 8,378 | |||||
Cash and cash equivalents at end of quarter | $ | 3,073 | $ | 7,265 | |||
Supplemental disclosure of cash flow information: | |||||||
Interest paid | $ | 885 | $ | 904 | |||
Income taxes paid | $ | 649 | $ | 10 | |||
-3- | ||
Three Months Ended April 3, 2004 | Three Months Ended March 29, 2003 | |||||||||
As Previously Reported | As Restated | As Previously Reported | As Restated | |||||||
Sales | $ | 60,732 | $ | 62,463 | 54,767 | 56,393 | ||||
Cost of Sales | 37,556 | 39,287 | 35,715 | 37,341 |
-4- | ||
Three Months Ended | ||||||
Apr. 3, 2004 | Mar. 29, 2003 | |||||
Net earnings | $ | 5,591 | $ | 2,609 | ||
Cumulative translation adjustment | (21 | ) | 33 | |||
Unrealized loss on interest rate swap | 65 | (98 | ||||
Comprehensive income | $ | 5,635 | $ | 2,544 | ||
-5- | ||
Apr. 3, 2004 | Jan. 3, 2004 | ||||||
(In thousands) | |||||||
Raw materials and parts | $ | 5,120 | $ | 3,798 | |||
Work-in-process | 4,619 | 5,288 | |||||
Finished goods | 18,686 | 15,667 | |||||
LIFO adjustment | 28,425 | 24,753 | |||||
479 | 629 | ||||||
$ | 28,904 | $ | 25,382 | ||||
Apr. 3. 2004 | Jan. 3, 2004 | ||||||
(In thousands) | |||||||
Accrued warranty | $ | 11,519 | $ | 11,563 | |||
Accrued payroll and related expenses | 5,724 | 7,094 | |||||
Accrued customer rebates | 3,467 | 6,935 | |||||
Accrued product liability and workers comp | 3,968 | 3,398 | |||||
Accrued income taxes | 2,319 | 524 | |||||
Accrued commissions | 1,505 | 1,466 | |||||
Accrued severance and plant closures | 892 | 1,092 | |||||
Other accrued expenses | 5,505 | 5,004 | |||||
$ | 34,899 | $ | 37,076 | ||||
-6- | ||
A rollforward of the warranty reserve is as follows:
Apr. 3. 2004 | Mar. 29, 2003 | ||||||
(In thousands) | |||||||
Beginning balance | $ | 11,563 | $ | 10,447 | |||
Warranty expense | 2,113 | 2,844 | |||||
Warranty claims | (2,157 | ) | (2,317 | ) | |||
Ending balance | $ | 11,519 | $ | 10,974 | |||
-7- | ||
A summary of the reserve balance activity is as follows (in thousands):
Balance | Cash | Balance | |||||||
Jan. 3, 2004 | Payments | Apr. 3, 2004 | |||||||
Severance obligations | $ | 15 | $ | (4 | ) | $ | 11 | ||
Facility closure and lease obligations | 8,649 | (363 | ) | 8,286 | |||||
Total | $ | 8,664 | $ | (367 | ) | $ | 8,297 | ||
-8- | ||
-9- | ||
Apr. 3, 2004 | Mar. 29, 2003 | ||||||
(in thousands, except per share data) | |||||||
Net income – as reported | $ | 5,591 | $ | 2,609 | |||
Less: Stock-based employee compensation expense, net of taxes | (282 | ) | (95 | ) | |||
Net income – pro forma | $ | 5,309 | $ | 2,514 | |||
Earnings per share – as reported: | |||||||
Basic | $ | 0.61 | $ | 0.29 | |||
Diluted | 0.56 | 0.28 | |||||
Earnings per share – pro forma: | |||||||
Basic | $ | 0.58 | $ | 0.28 | |||
Diluted | 0.53 | 0.27 |
-10- | ||
-11- | ||
Cooking | Corporate | ||||||||||||||
Systems | International | and | |||||||||||||
Group | Distribution | Other(2) | Eliminations(3) | Total | |||||||||||
Three months ended April 3, 2004 | |||||||||||||||
Net sales | $ | 60,155 | $ | 9,972 | $ | — | $ | (7,664 | ) | $ | 62,463 | ||||
Operating income (loss) | 11,768 | 416 | (1,930 | ) | (150 | ) | 10,104 | ||||||||
Depreciation expense | 891 | 33 | (65 | ) | — | 859 | |||||||||
Capital expenditures | 14 | 48 | 9 | — | 71 | ||||||||||
Total assets | 174,652 | 20,558 | 13,945 | (10,982 | ) | 198,173 | |||||||||
Long-lived assets(4) | 123,032 | 390 | 3,201 | — | 126,623 | ||||||||||
Three months ended March 29, 2003 | |||||||||||||||
Net sales | $ | 55,059 | $ | 9,038 | $ | — | $ | (7,704 | ) | $ | 56,393 | ||||
Operating income (loss) | 8,255 | 284 | (1,682 | ) | (450 | ) | 6,407 | ||||||||
Depreciation expense | 950 | 39 | (79 | ) | — | 910 | |||||||||
Capital expenditures | 225 | (43 | ) | — | — | 182 | |||||||||
Total assets | 185,605 | 22,144 | 10,359 | (10,982 | ) | 207,126 | |||||||||
Long-lived assets(4) | 126,001 | 375 | 3,145 | — | 129,521 | ||||||||||
Three Months Ended | |||||||
Apr. 3, 2004 | Mar. 29, 2003 | ||||||
United States and Canada | $ | 51,212 | $ | 46,225 | |||
Asia | 4,068 | 3,819 | |||||
Europe and Middle East | 5,638 | 5,164 | |||||
Latin America | 1,545 | 1,185 | |||||
Net Sales | $ | 62,463 | $ | 56,393 | |||
-12- | ||
Union | Directors | ||||||
Plan | Plans | ||||||
Service cost | $ | — | $ | 71,697 | |||
Interest on benefit obligations | 60,816 | 85,129 | |||||
Return on assets | (70,158 | ) | — | ||||
Net amortization and deferral | 32,956 | 100,148 | |||||
Net pension expense | $ | 23,614 | $ | 256,974 | |||
-13- | ||
-14- | ||
Three Months Ended | |||||||||||
Apr. 3, 2004 | Mar. 29, 2003 | ||||||||||
Sales | Percent | Sales | Percent | ||||||||
Business Divisions | |||||||||||
Cooking Systems Group: | |||||||||||
Core cooking equipment | $ 43,934 | 70.3 | $ | 39,209 | 69.5 | ||||||
Conveyor oven equipment | 11,918 | 19.1 | 11,402 | 20.2 | |||||||
Counterline cooking equipment | 2,618 | 4.2 | 2,395 | 4.2 | |||||||
International specialty equipment | 1,685 | 2.7 | 2,053 | 3.7 | |||||||
Total Cooking Systems Group | 60,155 | 96.3 | 55,059 | 97.6 | |||||||
International Distribution(1) | 9,972 | 16.0 | 9,038 | 16.0 | |||||||
Intercompany sales(2) | (7,664 | ) | (12.3 | ) | (7,704 | ) | (13.6 | ) | |||
Total | $ 62,463 | 100.0 | $ | 56,393 | 100.0 | ||||||
Three months ended | ||||||
Apr. 3, 2004 | Mar. 29, 2003 | |||||
Net sales | 100.0 | % | 100.0 | % | ||
Cost of sales | 62.9 | 66.2 | ||||
Gross profit | 37.1 | 33.8 | ||||
Selling, general and administrative expenses | 20.9 | 22.4 | ||||
Income from operations | 16.2 | 11.4 | ||||
Net interest expense and deferred financing amortization, net | 1.4 | 3.0 | ||||
Gain on acquisition financing derivatives | - | - | ||||
Other expense, net | 0.3 | 0.2 | ||||
Earnings before income taxes | 14.5 | 8.2 | ||||
Provision for income taxes | 5.5 | 3.6 | ||||
Net earnings | 9.0 | % | 4.6 | % | ||
-15- | ||
-16- | ||
-17- | ||
-18- | ||
-19- | ||
-20- | ||
Total | |||||||||||||
Idle | Contractual | ||||||||||||
Long-term | Operating | Facility | Cash | ||||||||||
Debt | Leases | Leases | Obligations | ||||||||||
Less than 1 year | $ | 15,975 | $ | 724 | $ | 1,123 | $ | 17,822 | |||||
1-3 years | 27,625 | 1,063 | 2,184 | 30,872 | |||||||||
4-5 years | 10,050 | 473 | 2,281 | 12,804 | |||||||||
After 5 years | — | 88 | 6,483 | 6,571 | |||||||||
$ | 53,650 | $ | 2,348 | $ | 12,071 | $ | 68,069 | ||||||
Idle facility leases consist of obligations for two manufacturing locations that were exited in conjunction with the company's manufacturing consolidation efforts. The lease obligations continue through December 2014. The obligations presented above do not reflect any anticipated sublease income from the facilities.
The company maintains a non-contributory defined benefit plan for its union employees at the Elgin, Illinois facility. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 2002 and no further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 30, 2002 upon reaching retirement age. The employees participating in the defined benefit plan were enrolled in a newly established 401K savings plan on July 1, 2002. As of January 3, 2004, the unfunded benefit obligation under the pension plan was $0.7 million. The defined benefit plan continues to be funded in accordance with provisions of the Employee Retirement Income Security Act of 1974. Company funding contributions amounted to $280, 000 in fiscal 2003 and $377,000 in fiscal 2002. The anticipated minimum funding requirement for fiscal 2004 is approximately $284,545 of which $54,127 was funded during the first quarter of 2004.
-21- | ||
-22- | ||
FixedRate | VariableRate | ||||||
Twelve MonthPeriod Ending | Debt | Debt | |||||
(In thousands) | |||||||
March 31, 2005 | $ | — | $ | 15,975 | |||
March 31, 2006 | — | 13,300 | |||||
March 31, 2007 | 1,000 | 13,325 | |||||
March 31, 2008 | — | 10,050 | |||||
March 31, 2009 | — | — | |||||
$ | 1,000 | $ | 52,650 | ||||
-23- | ||
-24- | ||
-25- | ||
Sell | Purchase | Maturity |
750,000 Euro | $916,300 U.S. Dollars | April 19, 2004 |
1,000,000 British Pounds | $1,804,600 U.S. Dollars | April 19, 2004 |
11,250,000 Mexican Pesos | $1,019,700 U.S. Dollars | April 19, 2004 |
17,250,000 Taiwan Dollars | $518,100 U.S. Dollars | May 3, 2004 |
1,000,000,000 Korean Won | $846,300 U.S. Dollars | May 3, 2004 |
-26- | ||
-27- | ||
-28- | ||
On April 27, 2004 (date of earliest event reported was April 27, 2004), the company furnished a report on Form 8-K, in response to Item 7, Financial Statements and Exhibits and Item 9, Regulation FD Disclosure, announcing the company's fiscal first quarter 2004 results.
-29- | ||
THE MIDDLEBY CORPORATION | |||
(Registrant) | |||
| | | |
Date: | August 16, 2004 | By: | /s/ Timothy J. FitzGerald |
Timothy J. FitzGerald Vice President, Chief Financial Officer |
-30- | ||