The Middleby Corporation Reports Third Quarter Results

The Middleby Corporation (NASDAQ: MIDD), a leading worldwide manufacturer of equipment for the commercial foodservice, food processing and residential kitchen industries, today reported net sales and earnings for the third quarter ended October 1, 2016. Net earnings for the third quarter were $75,851,000 or $1.33 per share on net sales of $574,224,000 as compared to the prior year third quarter net earnings of $48,825,000 or $0.86 per share on net sales of $449,004,000.

2016 Third Quarter Financial Highlights
  • Net sales increased 27.9% compared to the prior year third quarter. Sales related to recent acquisitions added $124.6 million or 27.8%, in the third quarter. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars reduced net sales by approximately $5.4 million or 1.2%, during the third quarter. Excluding the impact of foreign exchange, organic sales growth increased 1.4% during the third quarter.
  • Net sales at the company's Commercial Foodservice Equipment Group increased by $40.7 million, or 14.0%, to $331.6 million in the third quarter as compared to $290.9 million in the prior year third quarter. Excluding the impact of the Follett acquisition completed in 2016, sales decreased 1.1% in the third quarter. Excluding the impact of the foreign exchange, organic net sales increased 0.6%.
  • Net sales at the company's Food Processing Equipment Group increased by $8.0 million, or 10.8%, to $82.2 million in the third quarter as compared to $74.2 million the prior year third quarter. Excluding the impact of foreign exchange, organic net sales increased 11.2% at the Food Processing Equipment Group.
  • Net sales at the company's Residential Kitchen Equipment Group increased by $76.6 million, or 91.3%, to $160.5 million in the third quarter as compared to $83.9 million in the prior year third quarter. During fiscal 2015, the company completed the acquisitions of AGA and Lynx. Excluding the impact of these acquisitions, sales decreased by 4.9% in the third quarter, or 4.8% excluding the impact of foreign exchange.
  • Gross profit in the third quarter increased to $231.7 million from $177.2 million, reflecting the impact of increased sales from acquisitions. The gross margin rate increased to 40.4% from 39.5%. Improved margins reflected efficiency gains, including benefits from integration initiatives.
  • Operating income increased 51.8% in the third quarter to $121.4 million from $80.0 million in the prior year quarter. Operating income during the 2016 third quarter included $1.1 million of restructuring charges related to acquisition integration initiatives associated with AGA, as compared to $5.7 million of charges associated with restructuring initiatives related to Viking. In addition, the prior year third quarter included $7.3 million in transaction expenses related to the acquisition of AGA.
  • Non-cash expenses included in operating income during the third quarter of 2016 amounted to $18.2 million, including $6.9 million of depreciation, $5.1 million of intangible amortization and $6.2 million of non-cash share based compensation.
  • Other expense in the quarter was $3.2 million compared to $1.9 million in the prior year quarter, consisting mainly of foreign exchange gains and losses.
  • The provision for income taxes during the third quarter amounted to $36.0 million, at an effective rate of 32.2%, as compared to a $25.0 million provision at a 33.9% effective rate in the prior year quarter.
  • Net earnings per share increased 54.7% to $1.33 in the third quarter as compared to $0.86 in the prior year quarter. Net earnings in the current and prior year third quarter were reduced by restructuring expenses and AGA transaction expenses. The impact of these items reduced earnings per share by $0.01 and $0.15 in the 2016 and 2015 third quarter periods, respectively.
  • Net debt at the end of the third quarter amounted to $771.5 million as compared to $710.5 million at the end of the fiscal 2015 and $842.3 million at the end of the 2016 second quarter. Net debt includes the funding of the Follett acquisition completed on May 31, 2016.

Selim A. Bassoul Chairman and Chief Executive Officer, commented, "At the Commercial Foodservice Equipment Group, continued strong sales increases in the international markets were offset by a decline in sales domestically, reflecting slower general market conditions in the U.S. and delayed purchases from several restaurant chains in comparison to a comparatively strong 2015. Despite the third quarter sales results, we continue to see strong development activity with our restaurant chain customers adopting our innovative equipment solutions and anticipate improved sales growth in the fourth quarter at this segment."

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