The Middleby Corporation Reports Third Quarter Results
Middleby Corporation (NASDAQ: MIDD) reported Q3 adjusted EBITDA of $224 million, a $11 million increase year over year. Record LTM adjusted EBITDA of $896 million, an $83 million increase over the prior year. Key acquisitions of Terry Water Solutions and Trade-Wind. Despite market challenges, net sales decreased by 1.2% and organic net sales decreased by 4.4% in Q3 2023. The company's CEO, Tim FitzGerald, expressed confidence in long-term growth initiatives and profitability goals.
Positive
Record Q3 and LTM adjusted EBITDA, strategic acquisitions, organic net sales growth in Commercial Foodservice and Food Processing segments, strong operating cash flows, reduced net leverage, and CEO's positive outlook on long-term growth initiatives and profitability goals.
Negative
Decrease in net sales and organic net sales growth, negative impact of foreign exchange losses on adjusted earnings per share, and increasing headwinds from rising interest rates affecting near-term demand.
11/08/2023 - 07:00 AM
Record Q3 Adjusted EBITDA of $224 million , an $11 million increase year over year
Record LTM Adjusted EBITDA of $896 million , an $83 million over the prior year LTM
Record operating cash flows of $219 million for the quarter and $532 million for the Q3 LTM
Profitability grew to an organic adjusted EBITDA margin of 23.0% compared to 21.4% in the prior year
Diluted Earnings per share of $2.01 and adjusted net earnings per share of $2.35 for the third quarter, an increase of 8% year over year
Net leverage reduced to 2.75x
Completed strategic acquisitions of Terry Water Solutions and Trade-Wind
ELGIN, Ill. --(BUSINESS WIRE)--
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 third quarter of 2023.
“We achieved solid results with growth in earnings, profits margins and cash flows. We are navigating the expected impact of inventory de-stocking at our Commercial Foodservice and Residential Kitchen segments, along with increasing headwinds from rising interest rate affecting near-term demand. Despite the challenging market conditions, we are successfully realizing the benefits from our long-term profitability goals. We continue to make significant progress executing on our long-term growth initiatives, focused on the launch of industry leading product innovations and establishment of differentiated go-to-market sales capabilities that we are confident will provide us with a growing competitive advantage,” said Tim FitzGerald, CEO of The Middleby Corporation.
2023 Third Quarter Financial Results
Net sales decreased 1.2% in the third quarter over the comparative prior year period. Excluding the impacts of acquisitions and foreign exchange rates, sales decreased 4.4% in the third quarter over the comparative prior year period.
Organic net sales (a non-GAAP measure) increases were reported for the Commercial Foodservice and Food Processing segments in the third quarter of 2023. A reconciliation of reported net sales by segment is as follows:
Commercial
Foodservice
Residential
Kitchen
Food
Processing
Total
Company
Reported Net Sales Growth
2.3
%
(18.6
)%
9.5
%
(1.2
)%
Acquisitions
1.3
%
0.4
%
6.0
%
1.8
%
Foreign Exchange Rates
0.9
%
2.1
%
2.2
%
1.3
%
Organic Net Sales Growth (1) (2)
0.2
%
(21.0
)%
1.2
%
(4.4
)%
(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
Adjusted EBITDA (a non-GAAP measure) was $223.7 million in the third quarter compared to $212.3 million in the prior year. 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
28.4
%
10.8
%
25.8
%
22.8
%
Acquisitions
(0.2
)%
0.4
%
(0.7
)%
(0.1
)%
Foreign Exchange Rates
(0.1
)%
0.2
%
—
%
(0.1
)%
Organic Adjusted EBITDA (1) (2)
28.7
%
10.2
%
26.6
%
23.0
%
(1) Organic Adjusted EBITDA defined as Adjusted EBITDA excluding impact of acquisitions and foreign exchange rates.
(2) Totals may be impacted by rounding
Foreign exchange losses were approximately $1.2 million in the third quarter, which negatively impacted adjusted earnings per share by $0.02 .
Operating cash flows during the third quarter amounted to $219.2 million in comparison to $84.0 million in the prior year period. The total leverage ratio per our credit agreements was 2.75x. The trailing twelve month bank agreement pro-forma EBITDA was $909.4 million .
Net debt, defined as debt excluding the unamortized discount associated with the Convertible Notes less cash, at the end of the 2023 fiscal third quarter amounted to $2.4 billion as compared to $2.6 billion at the end of fiscal 2022. Our borrowing availability at the end of the third quarter was approximately $2.5 billion .
“We continue to further strengthen our three industry-leading foodservice platforms through organic growth initiatives and strategic acquisitions. We are excited to have completed this quarter the acquisitions of Trade-Wind and Terry Water Solutions, further extending our complementary product offerings, and providing synergistic growth opportunities for our Commercial Foodservice and Residential Kitchen platforms.”
“Trade-Wind has experienced rapid growth as a technology leader in residential ventilation recognized for their spectacular designs. The Trade-Wind ventilation line-up perfectly complements our indoor and outdoor residential cooking brands, including Viking, Lynx, LaCornue and Aga and provides for an exciting combined cooking and ventilation offering in demand by our customers.”
Mr. FitzGerald continued, “Terry products allows us to incorporate water treatment solutions to a broad array of products across our Commercial Foodservice equipment portfolio including ice machines, beverage dispense equipment, espresso machines and coffee makers, combi-ovens and steam cooking equipment. The combination of the Terry products across the Middleby family of products allows for an enhanced level of equipment performance with reduced scale build-up, lower maintenance costs, and a greater consistency and quality of food, ice and beverage. Utilizing a patented and environmentally friendly formulation of Citryne®, Terry products are food grade, biodegradable and treat water without the use of hazardous chemicals. Terry’s water filtration solutions last 20% longer than other competitive solutions, also providing an operating cost savings to our customers,” concluded Mr. FitzGerald.
Conference Call
The company has scheduled a conference call to discuss the third quarter results at 11 a.m. Eastern/10 a.m. Central Time on November 8th. 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 (833) 630-1956, or (412) 317-1837 for international access, and ask to join the Middleby conference call. 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, state-of-the-art Middleby Innovation Kitchens and Residential Showrooms showcase and demonstrate 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
Nine Months Ended
3rd Qtr,
2023
3rd Qtr,
2022
3rd Qtr,
2023
3rd Qtr,
2022
Net sales
$
980,651
$
992,871
$
3,028,029
$
3,001,148
Cost of sales
605,329
627,639
1,880,736
1,944,664
Gross profit
375,322
365,232
1,147,293
1,056,484
Selling, general and administrative expenses
196,433
201,200
615,361
596,757
Restructuring expenses
4,448
2,327
11,698
8,231
Income from operations
174,441
161,705
520,234
451,496
Interest expense and deferred financing amortization, net
31,080
24,067
92,071
62,563
Net periodic pension benefit (other than service costs & curtailment)
(2,103
)
(9,944
)
(6,929
)
(32,244
)
Other expense, net
1,072
8,529
2,642
18,478
Earnings before income taxes
144,392
139,053
432,450
402,699
Provision for income taxes
35,742
34,684
107,861
99,327
Net earnings
$
108,650
$
104,369
$
324,589
$
303,372
Net earnings per share:
Basic
$
2.03
$
1.94
$
6.06
$
5.60
Diluted
$
2.01
$
1.92
$
5.99
$
5.50
Weighted average number of shares
Basic
53,588
53,867
53,569
54,190
Diluted
54,157
54,384
54,192
55,134
THE MIDDLEBY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in 000’s)
(Unaudited)
Sep 30, 2023
Dec 31, 2022
ASSETS
Cash and cash equivalents
$
167,189
$
162,001
Accounts receivable, net
633,169
631,134
Inventories, net
1,015,047
1,077,729
Prepaid expenses and other
131,287
125,640
Prepaid taxes
14,165
9,492
Total current assets
1,960,857
2,005,996
Property, plant and equipment, net
498,871
443,528
Goodwill
2,452,419
2,411,834
Other intangibles, net
1,775,546
1,794,232
Long-term deferred tax assets
8,877
6,738
Other assets
226,038
212,538
Total assets
$
6,922,608
$
6,874,866
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt
$
44,330
$
45,583
Accounts payable
224,375
271,374
Accrued expenses
595,542
671,327
Total current liabilities
864,247
988,284
Long-term debt
2,535,896
2,676,741
Long-term deferred tax liability
214,021
220,204
Accrued pension benefits
5,420
14,948
Other non-current liabilities
207,809
176,942
Stockholders' equity
3,095,215
2,797,747
Total liabilities and stockholders' equity
$
6,922,608
$
6,874,866
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 September 30, 2023
Net sales
$
634,009
$
179,975
$
166,667
$
980,651
Segment Operating Income
$
158,582
$
10,915
$
37,472
$
174,441
Operating Income % of net sales
25.0
%
6.1
%
22.5
%
17.8
%
Depreciation
6,957
3,304
1,924
12,588
Amortization
13,959
2,280
2,677
18,916
Restructuring expenses
636
2,873
939
4,448
Acquisition related adjustments
—
44
(51
)
(7
)
Charitable support
—
—
—
118
Stock compensation
—
—
—
13,175
Segment adjusted EBITDA (2)
$
180,134
$
19,416
$
42,961
$
223,679
Adjusted EBITDA % of net sales
28.4
%
10.8
%
25.8
%
22.8
%
Three Months Ended October 1, 2022
Net sales
$
619,557
$
220,965
$
152,349
$
992,871
Segment Operating Income
$
142,999
$
29,788
$
27,661
$
161,705
Operating Income % of net sales
23.1
%
13.5
%
18.2
%
16.3
%
Depreciation
5,822
1,861
1,591
9,479
Amortization
14,124
1,289
4,470
19,883
Restructuring expenses
663
1,894
(230
)
2,327
Acquisition related adjustments
1,836
—
303
3,189
Stock compensation
—
—
—
15,761
Segment adjusted EBITDA
$
165,444
$
34,832
$
33,795
$
212,344
Adjusted EBITDA % of net sales
26.7
%
15.8
%
22.2
%
21.4
%
(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $18.8 million and $21.7 million for the three months ended September 30, 2023 and October 1, 2022, respectively.
(2) Foreign exchange rates favorably impacted Segment Adjusted EBITDA by approximately $2.5 million for the three months ended September 30, 2023.
THE MIDDLEBY CORPORATION
NON-GAAP SEGMENT INFORMATION (UNAUDITED)
(Amounts in 000’s, Except Percentages)
Commercial
Foodservice
Residential
Kitchen
Food
Processing
Total
Company (1)
Nine Months Ended September 30, 2023
Net sales
$
1,893,607
$
605,504
$
528,918
$
3,028,029
Segment Operating Income
$
452,113
$
51,197
$
111,483
$
520,234
Operating Income % of net sales
23.9
%
8.5
%
21.1
%
17.2
%
Depreciation
20,134
10,070
5,910
37,088
Amortization
42,905
6,768
6,946
56,619
Restructuring expenses
2,658
8,184
856
11,698
Acquisition related adjustments
797
44
—
841
Charitable support
—
—
—
607
Stock compensation
—
—
—
35,305
Segment adjusted EBITDA (2)
$
518,607
$
76,263
$
125,195
$
662,392
Adjusted EBITDA % of net sales
27.4
%
12.6
%
23.7
%
21.9
%
Nine Months Ended October 1, 2022
Net sales
$
1,765,849
$
832,054
$
403,245
$
3,001,148
Segment Operating Income
$
390,218
$
100,811
$
66,164
$
451,496
Operating Income % of net sales
22.1
%
12.1
%
16.4
%
15.0
%
Depreciation
17,478
9,271
4,281
31,608
Amortization
41,169
20,448
8,319
69,936
Restructuring expenses
2,934
2,892
2,405
8,231
Acquisition related adjustments
(1,256
)
15,062
303
15,159
Charitable support
—
—
—
798
Stock compensation
—
—
—
42,641
Segment adjusted EBITDA
$
450,543
$
148,484
$
81,472
$
619,869
Adjusted EBITDA % of net sales
25.5
%
17.8
%
20.2
%
20.7
%
(1) Includes corporate and other general company expenses, which impact Segment Adjusted EBITDA, and amounted to $57.7 million and $60.6 million for the nine months ended September 30, 2023 and October 1, 2022, respectively.
(2) Foreign exchange rates negatively impacted Segment Adjusted EBITDA by approximately $0.4 million for the nine months ended September 30, 2023.
THE MIDDLEBY CORPORATION
NON-GAAP INFORMATION (UNAUDITED)
(Amounts in 000’s, Except Percentages)
Three Months Ended
3rd Qtr, 2023
3rd Qtr, 2022
$
Diluted per
share
$
Diluted per
share
Net earnings
$
108,650
$
2.01
$
104,369
$
1.92
Amortization(1)
20,693
0.38
21,661
0.40
Restructuring expenses
4,448
0.08
2,327
0.04
Acquisition related adjustments
(7
)
—
3,189
0.06
Net periodic pension benefit (other than service costs & curtailment)
(2,103
)
(0.04
)
(9,944
)
(0.18
)
Charitable support
118
—
—
—
Income tax effect of pre-tax adjustments
(5,741
)
(0.11
)
(4,291
)
(0.08
)
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings(2)
—
0.03
—
0.02
Adjusted net earnings
$
126,058
$
2.35
$
117,311
$
2.18
Diluted weighted average number of shares
54,157
54,384
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings(2)
(550
)
(494
)
Adjusted diluted weighted average number of shares
53,607
53,890
Nine Months Ended
3rd Qtr, 2023
3rd Qtr, 2022
$
Diluted per
share
$
Diluted per
share
Net earnings
$
324,589
$
5.99
$
303,372
$
5.50
Amortization(1)
61,970
1.14
75,309
1.37
Restructuring expenses
11,698
0.22
8,231
0.15
Acquisition related adjustments
841
0.02
15,159
0.27
Net periodic pension benefit (other than service costs & curtailment)
(6,929
)
(0.13
)
(32,244
)
(0.58
)
Charitable support
607
0.01
798
0.01
Income tax effect of pre-tax adjustments
(16,979
)
(0.31
)
(16,611
)
(0.30
)
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings(2)
—
0.07
—
0.11
Adjusted net earnings
$
375,797
$
7.01
$
354,014
$
6.53
Diluted weighted average number of shares
54,192
55,134
Adjustment for shares excluded due to anti-dilution effect on GAAP net earnings(2)
(614
)
(932
)
Adjusted diluted weighted average number of shares
53,578
54,202
(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
Nine Months Ended
3rd Qtr, 2023
3rd Qtr, 2022
3rd Qtr, 2023
3rd Qtr, 2022
Net Cash Flows Provided By (Used In):
Operating activities
$
219,153
$
83,991
$
373,103
$
173,449
Investing activities
(53,958
)
(150,609
)
(139,224
)
(257,868
)
Financing activities
(150,533
)
54,856
(225,768
)
72,594
Free Cash Flow
Cash flow from operating activities
$
219,153
$
83,991
$
373,103
$
173,449
Less: Capital expenditures
(21,330
)
(18,781
)
(69,645
)
(50,914
)
Free cash flow
$
197,823
$
65,210
$
303,458
$
122,535
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231108410534/en/
John Joyner, VP of Investor Relations, jjoyner@middleby.com
Source: The Middleby Corporation
What is Middleby Corporation's (NASDAQ: MIDD) Q3 adjusted EBITDA?
Middleby Corporation reported Q3 adjusted EBITDA of $224 million, a $11 million increase year over year.
What are the key acquisitions made by Middleby Corporation?
Middleby Corporation made strategic acquisitions of Terry Water Solutions and Trade-Wind.
What are the challenges faced by Middleby Corporation in Q3 2023?
Middleby Corporation faced challenges including a decrease in net sales and organic net sales growth, negative impact of foreign exchange losses on adjusted earnings per share, and increasing headwinds from rising interest rates affecting near-term demand.
What is the outlook of Middleby Corporation's CEO, Tim FitzGerald, on the company's growth initiatives?
CEO Tim FitzGerald expressed confidence in the company's long-term growth initiatives and profitability goals despite market challenges.