MIDDLEBY Corp - Quarter Report: 2005 October (Form 10-Q)
FORM
10-Q
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
(Mark
One)
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|
For
the quarterly period ended
October 1, 2005
|
|
|
or
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| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|
Commission
File No.
1-9973
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|
|
THE
MIDDLEBY CORPORATION
|
|
|
(Exact
Name of Registrant as Specified in its
Charter)
|
|
|
Delaware
|
|
36-3352497
|
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer Identification
No.)
|
|
|
Incorporation
or
Organization)
|
||
|
1400
Toastmaster Drive, Elgin,
Illinois
|
60120
|
|
|
(Address
of Principal Executive
Offices)
|
(Zip
Code)
|
|
|
Registrant's
Telephone No., including Area
Code
|
(847)
741-3300
|
|
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding twelve (12) months (or for such shorter period that the Registrant
was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES x
NO o
Indicate
by check mark whether the registrant is an accelerated filer (as defined
by Rule
12b-2 of the Exchange Act).
Yes x
No o
As
of
November 5, 2005, there were 7,881,950 shares of the registrant's common
stock
outstanding.
THE
MIDDLEBY CORPORATION AND SUBSIDIARIES
QUARTER
ENDED OCTOBER 1, 2005
INDEX
|
DESCRIPTION
|
PAGE
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PART
I. FINANCIAL INFORMATION
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||
|
Item
1.
|
Condensed
Consolidated Financial Statements (unaudited)
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
1
|
|
|
October
1, 2005 and January 1, 2005
|
||
|
CONDENSED
CONSOLIDATED STATEMENT OF
EARNINGS
|
2
|
|
|
October
1, 2005 and October 2, 2004
|
||
|
CONDENSED
CONSOLIDATED STATEMENT OF
CASH FLOWS
|
3
|
|
|
October
1, 2005 and October 2, 2004
|
||
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
|
4
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition
|
|
|
and
Results of Operations
|
16
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
24
|
|
Item
4.
|
Controls
and Procedures
|
26
|
|
PART
II. OTHER INFORMATION
|
||
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
27
|
|
Item
6.
|
Exhibits
|
27
|
PART
I. FINANCIAL INFORMATION
Item
1. Condensed Consolidated Financial Statements
THE
MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
Thousands, Except Share Amounts)
(Unaudited)
|
ASSETS
|
Oct.
1, 2005
|
Jan.
1, 2005
|
|||||
|
Current
assets:
|
|||||||
|
Cash
and cash
equivalents
|
$
|
3,273
|
$
|
3,803
|
|||
|
Accounts
receivable, net of
reserve for doubtful
accounts of $3,541 and $3,382
|
35,752
|
26,612
|
|||||
|
Inventories,
net
|
31,981
|
32,772
|
|||||
|
Prepaid
expenses and
other
|
1,134
|
2,008
|
|||||
|
Prepaid
taxes
|
70
|
9,952
|
|||||
|
Current
deferred
taxes
|
10,593
|
8,865
|
|||||
|
Total
current assets
|
82,803
|
84,012
|
|||||
|
Property,
plant and equipment, net of accumulated
depreciation of $32,916 and $31,191
|
22,824
|
22,980
|
|||||
|
Goodwill
|
78,970
|
74,761
|
|||||
|
Other
intangibles
|
28,488
|
26,300
|
|||||
|
Other
assets
|
2,555
|
1,622
|
|||||
|
Total
assets
|
$
|
215,640
|
$
|
209,675
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Current
maturities of long-term
debt
|
$
|
12,355
|
$
|
10,480
|
|||
|
Accounts
payable
|
14,039
|
11,298
|
|||||
|
Accrued
expenses
|
48,166
|
51,311
|
|||||
|
Total
current liabilities
|
74,560
|
73,089
|
|||||
|
Long-term
debt
|
91,744
|
113,243
|
|||||
|
Long-term
deferred tax liability
|
5,978
|
11,434
|
|||||
|
Other
non-current liabilities
|
4,924
|
4,694
|
|||||
|
Stockholders'
equity:
|
|||||||
|
Preferred
stock, $0.01 par value;
nonvoting; 2,000,000 shares authorized; none issued
|
—
|
—
|
|||||
|
Common
stock, $0.01 par value;
20,000,000 shares authorized;
11,731,594
and 11,402,044 shares issued in 2005 and 2004,
respectively
|
117
|
114
|
|||||
|
Restricted
stock
|
(15,032
|
)
|
(4,700
|
)
|
|||
|
Paid-in
capital
|
77,070
|
60,446
|
|||||
|
Treasury
stock at cost; 3,856,344
shares
in 2005 and 2004, respectively
|
(89,650
|
)
|
(89,650
|
)
|
|||
|
Retained
earnings
|
66,306
|
41,362
|
|||||
|
Accumulated
other comprehensive loss
|
(377
|
)
|
(357
|
)
|
|||
|
Total
stockholders'
equity
|
38,434
|
7,215
|
|||||
|
Total
liabilities and stockholders'
equity
|
$
|
215,640
|
$
|
209,675
|
|||
1
THE
MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
(In
Thousands, Except Per Share Amounts)
(Unaudited)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
Oct.
1, 2005
|
Oct.
2, 2004
|
Oct.
1, 2005
|
Oct.
2, 2004
|
||||||||||
|
Net
sales
|
$
|
80,937
|
$
|
70,620
|
$
|
239,738
|
$
|
205,996
|
|||||
|
Cost
of sales
|
48,461
|
44,226
|
147,604
|
127,633
|
|||||||||
|
Gross
profit
|
32,476
|
26,394
|
92,134
|
78,363
|
|||||||||
|
Selling
expenses
|
8,710
|
7,637
|
25,663
|
23,340
|
|||||||||
|
General
and administrative expenses
|
7,482
|
6,175
|
21,847
|
17,684
|
|||||||||
|
Income
from operations
|
16,284
|
12,582
|
44,624
|
37,339
|
|||||||||
|
Net
interest expense and deferred financing amortization
|
1,579
|
643
|
5,063
|
2,334
|
|||||||||
|
(Gain)
on acquisition financing derivatives
|
—
|
(96
|
)
|
—
|
(96
|
)
|
|||||||
|
Other
expense, net
|
312
|
45
|
47
|
317
|
|||||||||
|
Earnings
before income taxes
|
14,393
|
11,990
|
39,514
|
34,784
|
|||||||||
|
Provision
for income taxes
|
4,765
|
1,622
|
14,569
|
10,536
|
|||||||||
|
Net
earnings
|
$
|
9,628
|
$
|
10,368
|
$
|
24,945
|
$
|
24,248
|
|||||
|
Net
earnings per share:
|
|||||||||||||
|
Basic
|
$
|
1.28
|
$
|
1.12
|
$
|
3.33
|
$
|
2.63
|
|||||
|
Diluted
|
$
|
1.19
|
$
|
1.03
|
$
|
3.09
|
$
|
2.42
|
|||||
|
Weighted
average number of shares
|
|||||||||||||
|
Basic
|
7,516
|
9,241
|
7,499
|
9,232
|
|||||||||
|
Dilutive
stock options1
|
594
|
799
|
561
|
787
|
|||||||||
|
Diluted
|
8,110
|
10,040
|
8,060
|
10,019
|
|||||||||
See
accompanying notes
2
THE
MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
Thousands)
(Unaudited)
|
Nine
Months Ended
|
|||||||
|
|
Oct.
1,
2005
|
Oct.
2, 2004
|
|||||
|
Cash
flows from operating activities-
|
|||||||
|
Net
earnings
|
$
|
24,945
|
$
|
24,248
|
|||
|
Adjustments
to reconcile net earnings to cash
|
|||||||
|
provided
by operating activities:
|
|||||||
|
Depreciation
and amortization
|
2,597
|
2,758
|
|||||
|
Deferred
taxes
|
(1,088
|
)
|
1,029
|
||||
|
Unrealized
gain on derivative financial instruments
|
—
|
(96
|
)
|
||||
|
Equity
compensation
|
2,482
|
—
|
|||||
|
Cash
effects of changes in -
|
|||||||
|
Accounts
receivable, net
|
(8,218
|
)
|
(6,202
|
)
|
|||
|
Inventories,
net
|
1,761
|
(5,705
|
)
|
||||
|
Prepaid
expenses and other assets
|
10,632
|
(55
|
)
|
||||
|
Accounts
payable
|
1,137
|
3,141
|
|||||
|
Accrued
expenses and other liabilities
|
(3,466
|
)
|
(145
|
)
|
|||
|
Net
cash provided by operating activities
|
30,782
|
18,973
|
|||||
|
Cash
flows from investing activities-
|
|||||||
|
Net
additions to property and equipment
|
(1,085
|
)
|
(600
|
)
|
|||
|
Acquisition
of Blodgett
|
—
|
(2,000
|
)
|
||||
|
Acquisition
of Nu-Vu
|
(11,450
|
)
|
—
|
||||
|
Net
cash (used in) investing activities
|
(12,535
|
)
|
(2,600
|
)
|
|||
|
Cash
flows from financing activities-
|
|||||||
|
Net
proceeds(repayments) under revolving credit
facilities
|
(11,915
|
)
|
39,115
|
||||
|
(Repayments)
under senior secured bank notes
|
(7,500
|
)
|
(53,000
|
)
|
|||
|
Payment
of special dividend
|
—
|
(3,696
|
)
|
||||
|
Net
proceeds from stock issuances
|
717
|
189
|
|||||
|
Net
cash (used in) financing activities
|
(18,698
|
)
|
(17,392
|
)
|
|||
|
Effect
of exchange rates on cash
|
|||||||
|
and
cash equivalents
|
(79
|
)
|
—
|
||||
|
Changes
in cash and cash equivalents-
|
|||||||
|
Net
(decrease) in cash and cash equivalents
|
(530
|
)
|
(1,019
|
)
|
|||
|
Cash
and cash equivalents at beginning of year
|
3,803
|
3,652
|
|||||
|
Cash
and cash equivalents at end of quarter
|
$
|
3,273
|
$
|
2,633
|
|||
|
Supplemental
disclosure of cash flow information:
|
|||||||
|
Interest
paid
|
$
|
4,530
|
$
|
2,195
|
|||
|
Income
tax (refunds) payments
|
$
|
4,535
|
$
|
11,428
|
|||
See
accompanying notes
3
THE
MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October
1, 2005
(Unaudited)
|
1)
|
Summary
of Significant Accounting
Policies
|
A) Basis
of Presentation
The
condensed consolidated financial statements have been prepared by The Middleby
Corporation (the "company"), pursuant to the rules and regulations of the
Securities and Exchange Commission. The financial statements are unaudited
and
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to
such
rules and regulations, although the company believes that the disclosures
are
adequate to make the information not misleading. These financial statements
should be read in conjunction with the financial statements and related notes
contained in the company's 2004 Form 10-K.
In
the
opinion of management, the financial statements contain all adjustments
necessary to present fairly the financial position of the company as of October
1, 2005 and January 1, 2005, and the results of operations for the three
and
nine months ended October 1, 2005 and October 2, 2004 and cash flows for
the
nine months ended October 1, 2005 and October 2, 2004.
B) Stock-Based
Compensation
The
company maintains a 1998 Stock Incentive Plan (the "Plan"), as amended on
May
11, 2005, under which the Company's Board of Directors issues stock grants
and
stock options to key employees.
Stock
Grants: Stock grants issued are issued under the plan to key employees and
are transferable upon certain vesting requirements being met. As of the third
quarter ended October 1, 2005, a total of 350,000 restricted stock grants
were
issued, all of which were unvested.
As
permitted under Statement of Financial Accounting Standards ("SFAS") No 123:
"Accounting for Stock Based Compensation", the company has elected to follow
APB
Opinion No. 25: "Accounting for Stock Issued to Employees" ("APB No. 25")
in
accounting for stock-based awards to employees and directors. In accordance
with
APB No. 25, the company establishes the value of restricted stock grants
based
upon the market value of the stock at the time of issuance. The value of
the
restricted stock grant is reflected as a separate component reducing
shareholders' equity with an offsetting increase to Paid-in Capital. The
value
of the stock grant is amortized and recorded as compensation expense over
the
applicable vesting period. During the nine month period ended October 1,
2005,
the restricted stock grants issued amounted to $12.8 million. Additionally,
the
company recorded compensation expense associated with stock grants amounting
to
$0.8 million and $2.5 million for the three months and nine months ended
October
1, 2005, respectively.
4
Stock
Options: Stock options issued under the plan provide key employees with
rights to purchase shares of common stock at specified exercise prices. Options
may be exercised upon certain vesting requirements being met, but expire
to the
extent unexercised within a maximum of ten years from the date of grant.
In
accordance with APB No. 25, the company has not recorded compensation expense
related to issued stock options in the financial statements for all periods
presented because the exercise price of the stock options is equal to or
greater
than the market price of the underlying stock on the date of grant. Pro forma
information regarding net earnings and earnings per share is required by
SFAS
No. 123. This information is required to be determined as if the company
had
accounted for its employee and director stock options granted subsequent
to
December 31, 1994 under the fair value method of that statement.
The
company has utilized Black-Scholes and binomial option valuation models to
estimate the fair value of issued stock options. These option valuation models
require the input of highly subjective assumptions, including the expected
stock
price volatility. Because the company’s options have characteristics
significantly different from those of traded options and because changes
in the
subjective input assumptions can materially affect the fair value estimate,
in
the opinion of management, the existing models do not necessarily provide
a
reliable single measure of the fair value of its options.
For
purposes of these interim pro forma disclosures, the estimated fair value
of the
options is amortized to expense over the options’ vesting periods. The
stock-based employee compensation expense, net of taxes, for the three and
nine
months ended October 2, 2004, previously disclosed as $276,000 and $841,000,
respectively, have been corrected to reflect the impact of stock option
forfeitures. The company’s pro forma net earnings and per share data utilizing a
fair value based method is as follows:
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
Oct.
1, 2005
|
Oct. 2,
2004
|
Oct.
1, 2005
|
Oct.
2, 2004
|
||||||||||
|
(in
thousands, except per share data)
|
|||||||||||||
|
Net
income - as reported
|
$
|
9,628
|
$
|
10,368
|
$
|
24,945
|
$
|
24,248
|
|||||
|
Less:
Stock-based employee
|
|||||||||||||
|
compensation
expense, net
|
|||||||||||||
|
of
taxes
|
(184
|
)
|
(109
|
)
|
(500
|
)
|
(333
|
)
|
|||||
|
Net
income - pro forma
|
$
|
9,444
|
$
|
10,259
|
$
|
24,445
|
$
|
23,915
|
|||||
|
Earnings
per share - as reported:
|
|||||||||||||
|
Basic
|
$
|
1.28
|
$
|
1.12
|
$
|
3.33
|
$
|
2.63
|
|||||
|
Diluted
|
1.19
|
1.03
|
3.09
|
2.42
|
|||||||||
|
Earnings
per share - pro forma:
|
|||||||||||||
|
Basic
|
$
|
1.26
|
$
|
1.11
|
$
|
3.26
|
$
|
2.59
|
|||||
|
Diluted
|
1.16
|
1.02
|
3.03
|
2.39
|
|||||||||
5
| 2) |
Acquisition
|
|
On
January 7, 2005, Middleby Marshall Holdings, LLC, a wholly-owned
subsidiary of the company, completed its acquisition of the assets
of
Nu-Vu Foodservice Systems ("Nu-Vu"), a leading manufacturer of
baking
ovens, from Win-Holt Equipment Corporation ("Win-Holt").
|
|
The
company has accounted for this business combination using the purchase
method to record a new cost basis for the assets acquired and liabilities
assumed. The difference between the purchase price and the preliminary
estimate of the fair value of the assets acquired and liabilities
assumed
has been recorded as goodwill in the October 1, 2005 financial
statements.
The allocation of the purchase price to the assets, liabilities
and
intangible assets is under review and is subject to change based
upon the
results of further evaluation. Under Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets,"
goodwill and certain other intangible assets in conjunction with
the Nu-Vu
acquisition are subject to the nonamortization provisions of SFAS
No. 142
from the date of acquisition.
|
|
The
allocation of net cash paid for the Nu-Vu acquisition as of October
1,
2005 is summarized as follows (in
thousands):
|
|
|
Jan.
7, 2005
|
Adjustments
|
Oct.
1, 2005
|
|||||||
|
Current
assets
|
$
|
2,556
|
—
|
$
|
2,556
|
|||||
|
Property,
plant and equipment
|
1,178
|
—
|
1,178
|
|||||||
|
Deferred
taxes
|
3,637
|
(193
|
)
|
3,444
|
||||||
|
Goodwill/Other
intangibles
|
6,754
|
(357
|
)
|
6,397
|
||||||
|
Liabilities
|
(2,125
|
)
|
—
|
(2,125
|
)
|
|||||
|
Total
purchase price
|
$
|
12,000
|
$
|
(550
|
)
|
$
|
11,450
|
|||
|
The
goodwill and other intangible assets associated with the Nu-Vu
acquisition, which are comprised of the tradename, are subject
to the
non-amortization provisions of SFAS No. 142 and are allocable to
the
company's Cooking Systems Group for purposes of segment reporting
(see
footnote 12 for further discussion). Goodwill and other intangible
assets
associated with this transaction are anticipated to be deductible
for
income taxes.
|
In
September 2005, the company reached final settlement with Win-Holt on
post-closing adjustments pertaining to the acquisition of Nu-Vu. As a result,
the final purchase price was reduced by $550,000.
|
3)
|
Litigation
Matters
|
From
time
to time, the company is subject to proceedings, lawsuits and other claims
related to products, suppliers, employees, customers and competitors. The
company maintains insurance to cover product liability, workers compensation,
property and casualty, and general liability matters. The company
is
required to assess the likelihood of any adverse judgments or outcomes to
these
matters as well as potential ranges of probable losses. A determination
of
the amount of accrual required, if any, for these contingencies is made after
assessment of each matter and the related insurance coverage. The
required
accrual may change in the future due to new developments or changes in approach
such as a change in settlement strategy in dealing with these matters.
The
company does not believe that any such matter will have a material adverse
effect on its financial condition, results of operations or cash flows of
the
company.
6
|
4)
|
New
Accounting Pronouncements
|
In
November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
of
ARB No. 43, Chapter 4". This statement amends the guidance in ARB No. 43,
Chapter 4 to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs and wasted material. This statement requires
that these items be recognized as current period costs and also requires
that
allocation of fixed production overheads to the costs of conversion be based
on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15,
2005.
The company will apply this guidance prospectively. The company is continuing
its process of determining what impact the application of this guidance will
have on the company's financial position, results of operations or cash
flows.
In
December 2004, the FASB issued a revision to SFAS No. 123 "Accounting for
Stock
Based Compensation". This statement established standards for the accounting
for
transactions in which an entity exchanges its equity instruments for goods
or
services and addresses transactions in which an entity incurs liabilities
in
exchange for goods or services that are based on the fair value of the entity's
equity instruments or that may be settled by the issuance of those equity
instruments. This statement is effective for annual periods beginning after
June
15, 2005. The company will apply this guidance prospectively. The company
is
continuing its process of determining what impact the application of this
guidance will have on the company's financial position, results of operations
or
cash flows.
In
May
2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections
-
a replacement of APB Opinion No. 20 and FASB Statement No. 3". This statement
replaces ABP Opinion No. 20, Accounting Changes and FASB Statement No. 3,
Reporting Changes in Interim Financial Statements and changes the requirements
for the accounting for and reporting of a change in accounting principles.
This
statement applies to all voluntary changes in accounting principles. This
statement is effective for accounting changes and corrections of errors made
in
fiscal years beginning after December 15, 2005. The company will apply this
guidance prospectively.
|
5)
|
Other
Comprehensive Income
|
The
company reports changes in equity during a period, except those resulting
from
investment by owners and distribution to owners, in accordance with SFAS
No.
130, "Reporting Comprehensive Income."
Components
of other comprehensive income were as follows (in thousands):
|
Three
Months Ended
|
Nine Months
Ended
|
||||||||||||
|
Oct.
1, 2005
|
Oct. 2,
2004
|
Oct. 1,
2005
|
Oct. 2,
2004
|
||||||||||
|
Net
earnings
|
$
|
9,628
|
$
|
10,368
|
$
|
24,945
|
$
|
24,248
|
|||||
|
Cumulative
translation adjustment
|
72
|
(3
|
)
|
(611
|
)
|
(15
|
)
|
||||||
|
Minimum
pension liability
|
—
|
—
|
—
|
10
|
|||||||||
|
Unrealized
gain on
|
|||||||||||||
|
interest
rate swap
|
318
|
8
|
590
|
349
|
|||||||||
|
Comprehensive
income
|
$
|
10,018
|
$
|
10,373
|
$
|
24,924
|
$
|
24,592
|
|||||
Accumulated
other comprehensive loss is comprised of minimum pension liability of $(1.0)
million as of October 1, 2005 and January 1, 2005, foreign currency translation
adjustments of less than$(0.1) million as of October 1, 2005 and $0.6 million
as
of January 1, 2005, and an unrealized gain on a interest rate swap of $0.6
million, net of taxes of $0.4 million, as of October 1, 2005 and less than
$0.1
million as of January 1, 2005.
7
|
6)
|
Inventories
|
Inventories
are composed of material, labor and overhead and are stated at the lower
of cost
or market. Costs for inventory at two of the company's manufacturing facilities
have been determined using the last-in, first-out ("LIFO") method. These
inventories under the LIFO method amounted to $12.1 million at October 1,
2005
and $14.4 million at January 1, 2005 and represented approximately 38% and
44%
of the total inventory in each respective period. Costs for all other inventory
have been determined using the first-in, first-out ("FIFO") method. The company
estimates reserves for inventory obsolescence and shrinkage based on its
judgment of future realization. Inventories at October 1, 2005 and January
1,
2005 are as follows:
|
|
Oct.
1, 2005
|
Jan.
1, 2005
|
|||||
|
|
(in
thousands)
|
||||||
|
Raw
materials and parts
|
$
|
5,865
|
$
|
7,091
|
|||
|
Work-in-process
|
4605
|
5,492
|
|||||
|
Finished
goods
|
21,903
|
19,971
|
|||||
|
|
32,373
|
32,554
|
|||||
|
LIFO
adjustment
|
(392
|
)
|
218
|
||||
|
|
$
|
31,981
|
$
|
32,772
|
|||
|
7)
|
Accrued
Expenses
|
Accrued
expenses consist of the following:
|
Oct.
1, 2005
|
Jan.1,
2005
|
||||||
|
|
(in
thousands)
|
||||||
|
Accrued
payroll and related expenses
|
$
|
11,532
|
$
|
12,493
|
|||
|
Accrued
warranty
|
10,346
|
10,563
|
|||||
|
Accrued
customer rebates
|
9,017
|
9,350
|
|||||
|
Accrued
income taxes
|
4,916
|
4,321
|
|||||
|
Accrued
product liability and workers comp
|
1,124
|
1,828
|
|||||
|
Accrued
pension settlement
|
—
|
3,637
|
|||||
|
Other
accrued expenses
|
11,231
|
9,119
|
|||||
|
|
$
|
48,166
|
$
|
51,311
|
|||
8
|
8)
|
Warranty
Costs
|
In
the
normal course of business the company issues product warranties for specific
product lines and provides for the estimated future warranty cost in the
period
in which the sale is recorded. The estimate of warranty cost is based
on
contract terms and historical warranty loss experience that is periodically
adjusted for recent actual experience. Because warranty estimates are forecasts
that are based on the best available information, claims costs may differ
from
amounts provided. Adjustments to initial obligations for warranties are made
as
changes in the obligations become reasonably estimable.
A
rollforward of the warranty reserve is as follows:
|
|
||||
|
|
Nine
Months Ended
Oct. 1, 2005 |
|||
|
(in
thousands)
|
||||
|
|
||||
|
Beginning
balance
|
$
|
10,563
|
||
|
Warranty
expense
|
6,841
|
|||
|
Warranty
claims
|
(7,058
|
)
|
||
|
Ending
balance
|
$
|
10,346
|
||
|
9)
|
Financing
Arrangements
|
|
Oct.
1, 2005
|
Jan.1,
2005
|
||||||
|
|
(in
thousands)
|
||||||
|
Senior
secured revolving credit line
|
$
|
39,350
|
$
|
51,265
|
|||
|
Senior
secured bank term loans
|
62,500
|
70,000
|
|||||
|
Other
note
|
2,249
|
2,458
|
|||||
|
Total
debt
|
$
|
104,099
|
$
|
123,723
|
|||
|
Less:
Current maturities of long-term debt
|
12,355
|
10,480
|
|||||
|
Long-term
debt
|
$
|
91,744
|
$
|
113,243
|
|||
As
of
October 1, 2005, the company had $101.9 million outstanding under its senior
banking facility, including $62.5 million of a term loan and $39.4 million
of
borrowings under the revolving credit line. As of October 1, 2005, the company
had $46.6 million of availability under the revolving credit line. The company
also had $4.0 million in outstanding letters of credit.
Borrowings
under the senior secured credit facility are assessed at an interest rate
of
1.25% above LIBOR for long-term borrowings or at the higher of the Prime
rate
and the Federal Funds Rate plus 0.5% for short term borrowings. At October
1,
2005, the average interest rate on the senior debt amounted to 5.13%. The
interest rates on borrowings under the senior bank facility may be adjusted
quarterly based on the company’s defined indebtedness ratio on a rolling
four-quarter basis. Additionally, a commitment fee, based upon the indebtedness
ratio is charged on the unused portion of the revolving credit line. This
variable commitment fee amounted to 0.25% as of October 1, 2005.
9
The
company has historically entered into interest rate swap agreements to
effectively fix the interest rate on its outstanding debt. In February 2003,
the
company entered into an interest rate swap agreement for a notional amount
of
$10.0 million. This agreement swaps one-month LIBOR for a fixed rate of 2.36%
and remains in effect through December 2005. In January 2005, the company
entered into an interest rate swap agreement for a notional amount of $70.0
million. This agreement swaps one-month LIBOR for a fixed rate of 3.78%.
The
notional amount amortizes consistent with the repayment schedule of the
company's term loan maturing November 2009. The unamortized notational amount
of
this swap as of October 1, 2005 was $62.5 million.
In
2004,
the company entered into a promissory note in conjunction with the release
and
early termination of obligations under a lease agreement relative to a
manufacturing facility in Shelburne, Vermont. At October 1, 2005, the note
amounted to $2.2 million. The note is assessed interest at 4.0% above LIBOR
with
an interest rate cap of 9.0%. At October 1, 2005, the interest rate on the
note
was approximately 7.7%. The note amortizes monthly and matures in December
2009.
The
terms
of the senior secured credit facility limit the paying of dividends, capital
expenditures and leases, and require, among other things, certain ratios
of
indebtedness and fixed charge coverage. The credit agreement also provides
that
if a material adverse change in the company’s business operations or conditions
occurs, the lender could declare an event of default. Under terms of the
agreement a material adverse effect is defined as (a) a material adverse
change
in, or a material adverse effect upon, the operations, business properties,
condition (financial and otherwise) or prospects of the company and its
subsidiaries taken as a whole; (b) a material impairment of the ability of
the
company to perform under the loan agreements and to avoid any event of default;
or (c) a material adverse effect upon the legality, validity, binding effect
or
enforceability against the company of any loan document. A material adverse
effect is determined on a subjective basis by the company's creditors. At
October 1, 2005, the company was in compliance with all covenants pursuant
to
its borrowing agreements.
|
10)
|
Acquisition
Integration
|
On
December 21, 2001, the company established reserves through purchase accounting
associated with severance related obligations and facility exit costs related
to
the acquired Blodgett business operations.
Reserves
for facility closure costs predominately relate to a lease obligation for
a
manufacturing facility that was exited in 2001. During the second quarter
of
2001, prior to the acquisition, reserves were established for lease obligations
associated with a manufacturing facility in Quakertown, Pennsylvania that
was
exited when production at this facility was relocated to an existing facility
in
Bow, New Hampshire. The lease associated with the exited facility extends
through December 11, 2014. The facility is currently subleased for a portion
of
the lease term through April 2006. The remaining reserve balance is reflected
net of anticipated sublease income.
The
forecast of sublease income could differ from actual amounts, which are subject
to the occupancy by a subtenant and a negotiated sublease rental rate. If
the
company's estimates or underlying assumptions change in the future, the company
would be required to adjust the reserve amount accordingly.
All
actions pertaining to the company’s integration initiatives have been completed.
At this time, management believes the remaining reserve balance is adequate
to
cover the remaining costs identified at October 1, 2005.
10
A
summary
of the reserve balance activity related to facility closure and lease obligation
is as follows:
|
Nine
Months Ended
Oct. 1, 2005 |
||||
|
(in
thousands)
|
||||
|
Beginning
balance
|
$
|
2,788
|
||
|
Cash
payments
|
124
|
|||
|
Ending
balance
|
$
|
2,664
|
|
11)
|
Financial
Instruments
|
In
June
1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments
and
Hedging Activities". SFAS No. 133, as amended, establishes accounting and
reporting standards for derivative instruments. The statement requires
an entity
to recognize all derivatives as either assets or liabilities and measure
those
instruments at fair value. Derivatives that do not qualify as a hedge must
be
adjusted to fair value in earnings. If the derivative does qualify as a
hedge
under SFAS No. 133, changes in the fair value will either be offset against
the
change in fair value of the hedged assets, liabilities or firm commitments
or
recognized in other accumulated comprehensive income until the hedged item
is
recognized in earnings. The ineffective portion of a hedge's change in
fair
value will be immediately recognized in earnings.
Foreign
Exchange: The company has entered into derivative instruments, principally
forward contracts to reduce exposures pertaining to fluctuations in foreign
exchange rates. As of October 1, 2005 the company had forward contracts
to
purchase $5.4 million U.S. Dollars with various foreign currencies, all
of which
mature in the next fiscal quarter. The fair value of these forward contracts
was
$0.1 million at the end of the quarter.
Interest
Rate: In February 2003 in accordance with the senior bank agreement, the
company entered into an interest rate swap agreement with a notional amount
of
$10.0 million to fix the interest rate applicable to certain of its
variable-rate debt. The agreement swaps one-month LIBOR for a fixed rate
of
2.36% and is in effect through December 30, 2005. The company designated
the
swap as a cash flow hedge at its inception and all changes in the fair
value of
the swap are recognized in accumulated other comprehensive income. As of
October
1, 2005, the fair value of this instrument was $0.1 million. There was
no change
in the fair value of this swap agreement in the first nine months of
2005.
In
January 2005, the company entered into another interest rate swap with
a
notional amount of $70.0 million to fix the interest rate applicable to
certain
of its variable-rate debt. The notional amount of the swap amortizes consistent
with the repayment schedule of the company's senior term loan maturing
in
November 2009. As of October 1, 2005, the unamortized balance of the interest
rate swap was $62.5 million. The agreement swaps one-month LIBOR for a
fixed
rate of 3.78% and is in effect through November 2009. The company designated
the
swap as a cash flow hedge at its inception and all changes in the fair
value of
the swap are recognized in accumulated other comprehensive income. As of
October
1, 2005, the fair value of this instrument was $1.0 million. The change
in fair
value of this swap agreement in the first nine months of 2005 was a gain
of $0.6
million, net of $0.4 million of taxes.
11
|
12)
|
Segment
Information
|
The
company operates in two reportable operating segments defined by management
reporting structure and operating activities.
The
worldwide manufacturing divisions operate through the Cooking Systems Group.
This business segment has manufacturing facilities in Illinois, Michigan,
New
Hampshire, North Carolina, Vermont and the Philippines. This business segment
supports four major product groups, including conveyor oven equipment,
core
cooking equipment, counterline cooking equipment, and international specialty
equipment.
Principal
product lines of the core cooking equipment product group include the Southbend
product lines of ranges, convection ovens, broilers and steam cooking equipment,
the Blodgett product lines of ranges, convection ovens, combi ovens and
steam
cooking equipment, MagiKitch'n charbroilers and catering equipment, the
Nu-Vu
product lines of proofing and baking ovens and the Pitco Frialator product
line
of fryers. Principal product lines of the conveyor oven product group include
Middleby Marshall ovens, Blodgett ovens and CTX ovens. The counterline
cooking
and warming equipment product group includes toasters, hot food servers,
foodwarmers and griddles distributed under the Toastmaster brand name.
The
international specialty equipment product group is primarily comprised
of food
preparation tables, undercounter refrigeration systems, ventilation systems
and
component parts for the U.S. manufacturing operations.
The
International Distribution Division provides integrated sales, export
management, distribution and installation services through its operations
in
Canada, China, India, South Korea, Mexico, the Philippines, Spain, Taiwan
and
the United Kingdom. The division sells the company’s product lines and certain
non-competing complementary product lines throughout the world. For a local
country distributor or dealer, the company is able to provide a centralized
source of foodservice equipment with complete export management and product
support services.
The
accounting policies of the segments are the same as those described in
the
summary of significant accounting policies. The chief decision maker evaluates
individual segment performance based on operating income. Management believes
that intersegment sales are made at established arms-length transfer
prices.
12
(dollars
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||||||||||||
|
Oct.
1, 2005
|
Oct.
2, 2004
|
Oct.
1, 2005
|
Oct.
2, 2004
|
||||||||||||||||||||||
|
Sales
|
Percent
|
Sales
|
Percent
|
Sales
|
Percent
|
Sales
|
Percent
|
||||||||||||||||||
|
Business
Divisions:
|
|||||||||||||||||||||||||
|
Cooking
Systems
Group:
|
|||||||||||||||||||||||||
|
Core
cooking equipment
|
$
|
57,192
|
70.7
|
$
|
48,208
|
68.3
|
$
|
172,050
|
71.8
|
$
|
144,175
|
70.0
|
|||||||||||||
|
Conveyor
oven equipment
|
13,755
|
17.0
|
13,657
|
19.3
|
41,124
|
17.1
|
40,504
|
19.7
|
|||||||||||||||||
|
Counterline
cooking equipment
|
3,036
|
3.8
|
2,576
|
3.6
|
9,377
|
3.9
|
7,655
|
3.7
|
|||||||||||||||||
|
International
specialty
equipment
|
1,898
|
2.3
|
1,953
|
2.8
|
6,769
|
2.8
|
5,413
|
2.6
|
|||||||||||||||||
|
Cooking
Systems Group
|
75,881
|
93.8
|
66,394
|
94.0
|
229,320
|
95.6
|
197,747
|
96.0
|
|||||||||||||||||
|
International
Distribution Division (1)
|
14,764
|
18.2
|
12,102
|
17.1
|
40,476
|
16.9
|
32,833
|
15.9
|
|||||||||||||||||
|
Intercompany
sales (2)
|
(9,708
|
)
|
(12.0
|
)
|
(7,876
|
)
|
(11.1
|
)
|
(30,058
|
)
|
(12.5
|
)
|
(24,584
|
)
|
(11.9
|
)
|
|||||||||
|
Total
|
$
|
80,937
|
100.0
|
%
|
$
|
70,620
|
100.0
|
%
|
$
|
239,738
|
100.0
|
%
|
$
|
205,996
|
100.0
|
%
|
|||||||||
(1) Consists
of sales of products manufactured by Middleby and products manufactured
by third parties.
(2) Represents
the elimination of sales amongst the Cooking Systems Group and from the
Cooking Systems Group to the International Distribution
Division.
13
The
following table summarizes the results of operations for the company's
business
segments(1)(in thousands):
|
Cooking
Systems Group
|
International
Distribution
|
Corporate
and Other(2)
|
Eliminations(3)
|
Total
|
||||||||||||
|
Three
months ended October 1, 2005
|
||||||||||||||||
|
Net
sales
|
$
|
75,881
|
$
|
14,764
|
$
|
—
|
$
|
(9,708
|
)
|
$
|
80,937
|
|||||
|
Operating
income
|
18,716
|
1,404
|
(4,180
|
)
|
344
|
16,284
|
||||||||||
|
Depreciation
expense
|
710
|
36
|
(10
|
)
|
—
|
736
|
||||||||||
|
Net
capital expenditures
|
406
|
87
|
(8
|
)
|
—
|
485
|
||||||||||
|
Nine
months ended October 1, 2005
|
||||||||||||||||
|
Net
sales
|
$
|
229,320
|
$
|
40,476
|
$
|
—
|
$
|
(30,058
|
)
|
$
|
239,738
|
|||||
|
Operating
income
|
53,136
|
2,873
|
(11,065
|
)
|
(320
|
)
|
44,624
|
|||||||||
|
Depreciation
expense
|
2,291
|
108
|
13
|
—
|
2,412
|
|||||||||||
|
Net
capital expenditures
|
956
|
114
|
15
|
—
|
1,085
|
|||||||||||
|
Total
assets
|
190,828
|
26,691
|
3,306
|
(5,185
|
)
|
215,640
|
||||||||||
|
Long-lived
assets (4)
|
127,771
|
431
|
4,635
|
—
|
132,837
|
|||||||||||
|
Three
months ended October 2, 2004
|
||||||||||||||||
|
Net
sales
|
$
|
66,394
|
$
|
12,102
|
$
|
—
|
$
|
(7,876
|
)
|
$
|
70,620
|
|||||
|
Operating
income
|
14,296
|
735
|
(2,268
|
)
|
(181
|
)
|
12,582
|
|||||||||
|
Depreciation
expense
|
719
|
46
|
(72
|
)
|
—
|
693
|
||||||||||
|
Net
capital expenditures
|
87
|
38
|
66
|
—
|
191
|
|||||||||||
|
Nine
months ended October 2, 2004
|
||||||||||||||||
|
Net
sales
|
$
|
197,747
|
$
|
32,833
|
$
|
—
|
$
|
(24,584
|
)
|
$
|
205,996
|
|||||
|
Operating
income
|
42,501
|
1,556
|
(5,937
|
)
|
(781
|
)
|
37,339
|
|||||||||
|
Depreciation
expense
|
2,498
|
117
|
(201
|
)
|
—
|
2,414
|
||||||||||
|
Net
capital expenditures
|
341
|
136
|
123
|
—
|
600
|
|||||||||||
|
Total
assets
|
178,044
|
23,141
|
12,172
|
(10,982
|
)
|
202,375
|
||||||||||
|
Long-lived
assets (4)
|
121,751
|
383
|
3,694
|
—
|
125,828
|
|||||||||||
| (1) |
Non-operating
expenses are not allocated to the operating segments. Non-operating
expenses consist of interest expense and deferred financing amortization,
gains and losses on acquisition financing derivatives, and other
income
and expenses items outside of income from
operations.
|
| (2) |
Includes
corporate and other general company assets and
operations.
|
| (3) |
Includes
elimination of intercompany sales, profit in inventory and intercompany
receivables. Intercompany sale transactions are predominantly from
the Cooking Systems Group to the International Distribution
Division.
|
| (4) |
Long-lived
assets of the Cooking Systems Group includes assets located in
the
Philippines which amounted to $2,138 and $2,232 in 2005 and 2004,
respectively.
|
Net
sales
by major geographic region, including those sales from the Cooking Systems
Group
direct to international customers, were as follows (in thousands):
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
Oct.
1, 2005
|
Oct.
2, 2004
|
Oct.
1, 2005
|
Oct.
2, 2004
|
||||||||||
|
United
States and Canada
|
$
|
64,870
|
$
|
57,060
|
$
|
195,338
|
$
|
169,316
|
|||||
|
Asia
|
6,377
|
5,637
|
17,005
|
14,225
|
|||||||||
|
Europe
and Middle East
|
7,277
|
5,898
|
20,223
|
16,853
|
|||||||||
|
Latin
America
|
2,413
|
2,025
|
7,172
|
5,602
|
|||||||||
|
Net
sales
|
$
|
80,937
|
$
|
70,620
|
$
|
239,738
|
$
|
205,996
|
|||||
14
|
13)
|
Employee
Retirement
Plans
|
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. 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
$216,000
in fiscal 2004 and $280,000 in fiscal 2003. The anticipated minimum funding
requirement for fiscal 2005 is approximately $274,000 of which $201,000
was
funded during the nine-month period ended October 1, 2005.
The
company also maintains a retirement benefit agreement with its Chairman.
The
retirement benefits are based upon a percentage of the Chairman’s final base
salary. Additionally, the company maintains a retirement plan for non-employee
directors. The plan provides for an annual benefit upon retirement from
the
Board of Directors at age 70, equal to 100% of the director’s last annual
retainer, payable for a number of years equal to the director’s years of service
up to a maximum of 10 years. Company funding contributions are made at
the
discretion of the board of directors in consideration of the plan requirements
and company's cash flows.
The
net
pension expense for the first nine months of 2005 for these plans was as
follows:
|
|
|
||||||
|
Union
Plan
|
Directors
Plans
|
||||||
|
Service
cost
|
$
|
—
|
$
|
830,924
|
|||
|
Interest
on benefit obligations
|
182,449
|
35,636
|
|||||
|
Return
on assets
|
(160,952
|
)
|
—
|
||||
|
Net
amortization and deferral
|
98,868
|
—
|
|||||
|
Net
pension expense
|
$
|
120,365
|
$
|
866,560
|
|||
15
Item
2. Management's Discussion and Analysis of Financial Condition and Results
of
Operations.
Informational
Note
This
report contains forward-looking statements subject to the safe harbor created
by
the Private Securities Litigation Reform Act of 1995. The company cautions
readers that these projections are based upon future results or events
and are
highly dependent upon a variety of important factors which could cause
such
results or events to differ materially from any forward-looking statements
which
may be deemed to have been made in this report, or which are otherwise
made by
or on behalf of the company. Such factors include, but are not limited
to,
volatility in earnings resulting from goodwill impairment losses which
may occur
irregularly and in varying amounts; 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 Securities and Exchange Commission filings,
including the 2004 report on Form 10-K.
16
Net
Sales Summary
(dollars
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||||||||||||
|
Oct.
1, 2005
|
Oct.
2, 2004
|
Oct.
1, 2005
|
Oct.
2, 2004
|
||||||||||||||||||||||
|
Sales
|
Percent
|
Sales
|
Percent
|
Sales
|
Percent
|
Sales
|
Percent
|
||||||||||||||||||
|
Business
Divisions:
|
|||||||||||||||||||||||||
|
Cooking
Systems
Group:
|
|||||||||||||||||||||||||
|
Core
cooking equipment
|
$
|
57,192
|
70.7
|
$
|
48,208
|
68.3
|
$
|
172,050
|
71.8
|
$
|
144,175
|
70.0
|
|||||||||||||
|
Conveyor
oven equipment
|
13,755
|
17.0
|
13,657
|
19.3
|
41,124
|
17.1
|
40,504
|
19.7
|
|||||||||||||||||
|
Counterline
cooking equipment
|
3,036
|
3.8
|
2,576
|
3.6
|
9,377
|
3.9
|
7,655
|
3.7
|
|||||||||||||||||
|
International
specialty
equipment
|
1,898
|
2.3
|
1,953
|
2.8
|
6,769
|
2.8
|
5,413
|
2.6
|
|||||||||||||||||
|
Cooking
Systems Group
|
75,881
|
93.8
|
66,394
|
94.0
|
229,320
|
95.6
|
197,747
|
96.0
|
|||||||||||||||||
|
International
Distribution Division (1)
|
14,764
|
18.2
|
12,102
|
17.1
|
40,476
|
16.9
|
32,833
|
15.9
|
|||||||||||||||||
|
Intercompany
sales (2)
|
(9,708
|
)
|
(12.0
|
)
|
(7,876
|
)
|
(11.1
|
)
|
(30,058
|
)
|
(12.5
|
)
|
(24,584
|
)
|
(11.9
|
)
|
|||||||||
|
Total
|
$
|
80,937
|
100.0
|
%
|
$
|
70,620
|
100.0
|
%
|
$
|
239,738
|
100.0
|
%
|
$
|
205,996
|
100.0
|
%
|
|||||||||
(1)
Consists of sales of products manufactured by Middleby and products
manufactured by third parties.
(2) Represents
the elimination of sales amongst the Cooking Systems Group and from the
Cooking Systems Group to the International Distribution Division.
Results
of Operations
The
following table sets forth certain consolidated statements of earnings
items as
a percentage of net sales for the periods.
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
Oct.
1, 2005
|
Oct.
2, 2004
|
Oct.
1, 2005
|
Oct.
2, 2004
|
||||||||||
|
Net
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||
|
Cost
of sales
|
59.9
|
62.6
|
61.6
|
62.0
|
|||||||||
|
Gross
profit
|
40.1
|
37.4
|
38.4
|
38.0
|
|||||||||
|
Selling,
general and administrative expenses
|
20.0
|
19.6
|
19.8
|
19.9
|
|||||||||
|
Income
from
operations
|
20.1
|
17.8
|
18.6
|
18.1
|
|||||||||
|
Interest
expense and deferred financing amortization, net
|
2.0
|
0.9
|
2.1
|
1.1
|
|||||||||
|
(Gain) on
acquisition financings derivatives
|
—
|
(0.1
|
)
|
—
|
—
|
||||||||
|
Other
expense, net
|
0.3
|
—
|
0.0
|
0.1
|
|||||||||
|
Earnings
before income
taxes
|
17.8
|
17.0
|
16.5
|
16.9
|
|||||||||
|
Provision
for income taxes
|
5.9
|
2.3
|
6.1
|
5.1
|
|||||||||
|
Net
earnings
|
11.9
|
%
|
14.7
|
%
|
10.4
|
%
|
11.8
|
%
|
|||||
17
Three
Months Ended October 1, 2005 Compared to Three Months Ended October 2,
2004
NET
SALES. Net sales for the third quarter
of fiscal 2005 were $80.9 million as compared to $70.6 million in the third
quarter of 2004.
Net
sales
at the Cooking Systems Group amounted to $75.9 million in the third quarter
of
2005 as compared to $66.4 million in the prior year quarter.
| · |
Core
cooking equipment sales increased by $9.0 million to $57.2
million from
$48.2 million, primarily due to increased fryer, convection
oven, and
cooking range sales. The increase in sales includes $4.9 million
of sales
associated with the Nu-Vu product lines, which were acquired
on January 7,
2005.
|
| · |
Conveyor
oven equipment sales increased $0.1 million to $13.8 million
from $13.7
million in the prior year quarter.
|
| · |
Counterline
cooking equipment sales increased to $3.0 million from $2.6 million
in the
prior year quarter due to increased sales of a new series of
counter
griddles and charbroilers introduced in the third quarter of
2004.
|
| · |
International
specialty equipment sales decreased to $1.9 million compared
to $2.0
million in the prior year quarter.
|
Net
sales
at the International Distribution Division increased by $2.7 million to
$14.8
million, reflecting higher sales in Asia, Latin America and Europe.
International sales benefited from expansion of the U.S. chains overseas
and
increased business with local and regional restaurant chains in developing
markets.
GROSS
PROFIT. Gross profit increased to
$32.5
million from $26.4 million in the prior year period, reflecting the impact
of
higher sales volumes. The gross margin rate was 40.1% in the quarter as
compared
to 37.4% in the prior year quarter. The net increase in the gross margin
rate
reflects:
| · |
Increased
sales volumes that benefited manufacturing efficiencies and provided
for
greater leverage of fixed manufacturing
costs.
|
| · |
Favorable
sales mix with increased international sales, which typically
carry a
higher margin.
|
| · |
Lower
warranty expense due in part to reduced warranty rates on new
products.
|
18
SELLING,
GENERAL AND ADMINISTRATIVE
EXPENSES. Combined selling, general,
and
administrative expenses increased from $13.8 million in the third quarter
of
2004 to $16.2 million in the third quarter of 2005. As a percentage of
net
sales, operating expenses amounted to 20.0% in the third quarter of 2005
as
compared to 19.6% in the third quarter of 2004. Selling expenses increased
from
$7.6 million to $8.7 million, reflecting $0.3 million of higher commission
costs
associated with the increased sales volumes, $0.2 million of increased
costs
associated with the newly acquired Nu-Vu operations and increased marketing
costs associated with an industry trade show which did not occur in the
prior
year. General and administrative expenses increased from $6.2 million to
$7.5
million includes an increase of $0.8 million in non-cash equity based
compensation and an increased costs of $0.2 million associated with the
newly
acquired Nu-Vu operations.
NON-OPERATING
EXPENSES. Interest and deferred financing amortization costs increased
to $1.6 million from $0.6 million in the prior year as a result of higher
debt
balances resulting from the December 2004 share repurchase transaction.
Other
expense was $0.3 million in the current year as compared to $0.1 million
in the
prior year and primarily related to foreign exchange losses.
INCOME
TAXES. A tax provision of $4.8 million,
at an effective rate of 33%, was recorded during the quarter as compared
to a
$1.6 million provision at a 14% effective rate in the prior year quarter.
The
2005 and 2004 third quarter included tax benefits for reserve adjustments
associated with closed tax years of $1.0 million and $3.2 million,
respectively.
Nine
Months Ended October 1, 2005 Compared to Nine Months Ended October 2,
2004
NET
SALES. Net sales for the nine-month
period ended October 1, 2005 were $239.7 million as compared to $206.0
million
in the nine-month period ended October 2, 2004.
Net
sales
at the Cooking Systems Group amounted to $229.3 million in the nine-month
period
ended October 1, 2005 as compared to $197.7 million in the nine-month period
ended October 2, 2004.
| · |
Core
cooking equipment sales increased by $27.9 million to $172.1
million from
$144.2 million, primarily due to increased fryer, convection
oven, and
cooking range sales resulting from new product introductions
and increased
purchases from major and regional restaurant chain customers
due to new
store openings and increased replacement business. The
increase in sales
includes $12.2 million of sales associated with the Nu-Vu
product lines,
which were acquired on January 7,
2005.
|
| · |
Conveyor
oven equipment sales increased $0.6 million to $41.1 million
from $40.5
million in the prior year period.
|
| · |
Counterline
cooking equipment sales increased to $9.4 million from $7.7 million
in the
prior year quarter due to the introduction of a new series of
counter
griddles and charbroilers.
|
| · |
International
specialty equipment sales increased to $6.8 million compared
to $5.4
million in the prior year quarter due to the introduction of
a new product
line of counter griddles and
charbroilers.
|
19
Net
sales
at the International Distribution Division increased by $7.7 million to
$40.5
million, reflecting higher sales in Asia, Latin America and Europe.
International sales benefited from expansion of the U.S. chains overseas
and
increased business with local and regional restaurant chains in developing
markets.
GROSS
PROFIT. Gross profit increased to
$92.1
million from $78.4 million in the prior year period, reflecting the impact
of
higher sales volumes. The gross margin rate was 38.4% in the first nine
months
as compared to 38.0% in the prior year comparative period. The net increase
in
the gross margin rate reflects:
| · |
Increased
sales volumes that benefited manufacturing efficiencies and provided
for
greater leverage of fixed manufacturing
costs.
|
| · |
Favorable
mix of product with higher sales of new product and international
sales
carrying a higher margin.
|
| · |
The
adverse impact from higher steel
prices.
|
| · |
Lower
gross margins in the first half of 2005 associated with the newly
acquired
Nu-Vu product lines.
|
SELLING,
GENERAL AND ADMINISTRATIVE
EXPENSES. Combined selling, general,
and
administrative expenses increased from $41.0 million in the nine-month
period
ended October 2, 2004 to $47.5 million in the nine-month period ended October
1,
2005. As a percentage of net sales, operating expenses amounted to 19.8%
in the
nine-month period ended October 1, 2005 versus 19.9% in the nine-month
period
ended October 2, 2004. Selling expenses increased from $23.3 million to
$25.7
million, reflecting $0.9 million of higher commission costs associated
with the
increased sales volumes and $0.5 million of additional costs associated
with the
newly acquired Nu-Vu operations. General and administrative expenses increased
from $17.7 million to $21.8 million due to an increase of $2.5 million
in
non-cash equity based compensation and increased costs of $0.6 million
associated with the newly acquired Nu-Vu operations.
NON-OPERATING
EXPENSES. Interest and deferred financing amortization costs increased
to $5.1 million from $2.3 million in the prior year as a result of higher
debt
balances resulting from the December 2004 share repurchase transaction.
Other
expense was less than $0.1 million in the current year as compared to $0.3
million in the prior year, and primarily consisted of foreign exchange
losses.
INCOME
TAXES. A tax provision of $14.6 million,
at an effective rate of 37%, was recorded for the first nine months of
2005 as
compared to a $10.5 million provision at a 30% effective rate in the prior
year
period. The 2005 and 2004 tax provisions included tax benefits for reserve
adjustments associated with closed tax years of $1.0 million and $3.2 million,
respectively.
Financial
Condition and Liquidity
During
the nine months ended October 1, 2005, cash and cash equivalents decreased
by
$0.5 million to $3.3 million at October 1, 2005 from $3.8 million at January
1,
2005. Net borrowings decreased from $123.7 million at January 1, 2005 to
$104.1
million at October 1, 2005.
20
OPERATING
ACTIVITIES. Net cash provided by
operating activities after changes in assets and liabilities was $30.8
million
as compared to $19.0 million in the prior year period.
During
the nine months ended October 1, 2005, working capital levels increased
due to
the higher sales volumes and increased seasonal working capital needs,
which
historically peak in the third quarter. The changes in working capital
included
a $8.2 million increase in accounts receivable, a $1.8 million decrease
in
inventory and a $1.1 million increase in accounts payable. The reduction
in
prepaid expenses of $10.6 million reflects the utilization and refund of
year-end prepaid tax balances, which benefited cash flows in the first
nine
months of 2005. Accrued expenses and other liabilities decreased by $3.5
million
primarily as a result of the payment of pension liabilities associated
with the
settlement of the company's retirement obligations to its former
Chairman.
INVESTING
ACTIVITIES. During the nine months
ending October 1, 2005, net cash used in investing activities was $12.5
million.
This included $11.4 million associated with the acquisition of the assets
of
Nu-Vu and $1.1 million of property additions.
FINANCING
ACTIVITIES. Net cash flows used in financing activities were $18.7
million during the nine months ending October 1, 2005. The net reduction
in debt
reflects $11.9 million in repayments under the revolving credit facility
and
$7.5 million of repayments of the term loan. The net change in debt during
the
first nine months of 2005 reflects repayments utilizing cash generated
from
operating activities net of borrowings to fund the $11.4 acquisition of
Nu-Vu.
At
October 1, 2005, the company was in compliance with all covenants pursuant
to
its borrowing agreements. Management believes that future cash flows from
operating activities and borrowing availability under the revolving credit
facility will provide the company with sufficient financial resources to
meet
its anticipated requirements for working capital, capital expenditures
and debt
amortization for the foreseeable future.
New
Accounting Pronouncements
In
November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
of
ARB No. 43, Chapter 4". This statement amends the guidance in ARB No. 43,
Chapter 4 to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs and wasted material. This statement requires
that these items be recognized as current period costs and also requires
that
allocation of fixed production overheads to the costs of conversion be
based on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15,
2005.
The company will apply this guidance prospectively. The company is continuing
its process of determining what impact the application of this guidance
will
have on the company's financial position, results of operations or cash
flows.
In
December 2004, the FASB issued a revision to SFAS No. 123 "Accounting for
Stock
Based Compensation". This statement established standards for the accounting
for
transactions in which an entity exchanges its equity instruments for goods
or
services and addresses transactions in which an entity incurs liabilities
in
exchange for goods or services that are based on the fair value of the
entity's
equity instruments or that may be settled by the issuance of those equity
instruments. This statement is effective for annual periods beginning after
June
15, 2005. The company will apply this guidance prospectively. The company
is
continuing its process of determining what impact the application of this
guidance will have on the company's financial position, results of operations
or
cash flows.
21
In
May
2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections
-
a replacement of APB Opinion No. 20 and FASB Statement No. 3". This statement
replaces ABP Opinion No. 20, Accounting Changes and FASB Statement No.
3,
Reporting Changes in Interim Financial Statements and changes the requirements
for the accounting for and reporting of a change in accounting principles.
This
statement applies to all voluntary changes in accounting principles. This
statement is effective for accounting changes and corrections of errors
made in
fiscal years beginning after December 15, 2005. The company will apply
this
guidance prospectively.
Critical
Accounting Policies and Estimates
Management's
discussion and analysis of financial condition and results of operations
are
based upon the company's consolidated financial statements, which have
been
prepared in accordance with accounting principles generally accepted in
the
United States. The preparation of these financial statements requires the
company to make estimates and judgments that affect the reported amounts
of
assets, liabilities, revenues and expenses as well as related disclosures.
On an
ongoing basis, the company evaluates its estimates and judgments based
on
historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.
Property
and equipment: Property and equipment are depreciated or amortized on
a straight-line basis over their useful lives based on management's estimates
of
the period over which the assets will be utilized to benefit the operations
of
the company. The useful lives are estimated based on historical experience
with
similar assets, taking into account anticipated technological or other
changes. The company periodically reviews these lives relative
to physical
factors, economic factors and industry trends. If there are changes in
the
planned use of property and equipment or if technological changes were
to occur
more rapidly than anticipated, the useful lives assigned to these assets
may
need to be shortened, resulting in the recognition of increased depreciation
and
amortization expense in future periods.
Long-lived
assets: Long-lived assets (including goodwill and other intangibles)
are reviewed for impairment annually and whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In assessing the recoverability of the company's long-lived
assets,
the company considers changes in economic conditions and makes assumptions
regarding estimated future cash flows and other factors. Estimates
of
future cash flows are judgments based on the company's experience and knowledge
of operations. These estimates can be significantly impacted by
many
factors including changes in global and local business and economic conditions,
operating costs, inflation, competition, and consumer and demographic
trends. If the company's estimates or the underlying assumptions
change in
the future, the company may be required to record impairment charges.
Warranty: In
the normal course of business the company issues product warranties for
specific
product lines and provides for the estimated future warranty cost in the
period
in which the sale is recorded. The estimate of warranty cost is
based on
contract terms and historical warranty loss experience that is periodically
adjusted for recent actual experience. Because warranty estimates are forecasts
that are based on the best available information, claims costs may differ
from
amounts provided. Adjustments to initial obligations for warranties are
made as
changes in the obligations become reasonably estimable.
22
Litigation: From
time to time, the company is subject to proceedings, lawsuits and other
claims
related to products, suppliers, employees, customers and competitors. The
company maintains insurance to cover product liability, workers compensation,
property and casualty, and general liability matters. The company
is
required to assess the likelihood of any adverse judgments or outcomes
to these
matters as well as potential ranges of probable losses. A determination
of
the amount of accrual required, if any, for these contingencies is made
after
assessment of each matter and the related insurance coverage. The
reserve
requirements may change in the future due to new developments or changes
in
approach such as a change in settlement strategy in dealing with these
matters. The company does not believe that any such matter will
have a
material adverse effect on its financial condition or results of operations.
Income
taxes: The company operates in numerous foreign and domestic taxing
jurisdictions where it is subject to various types of tax, including sales
tax
and income tax. The company's tax filings are subject to audits
and
adjustments. Because of the nature of the company’s operations, the nature of
the audit items can be complex, and the objectives of the government auditors
can result in a tax on the same transaction or income in more than one
state or
country. As part of the company's calculation of the provision
for taxes,
the company establishes reserves for the amount that it expects to incur
as a
result of audits. The reserves may change in the future due to new developments
related to the various tax matters.
Contractual
Obligations
The
company's contractual cash payment obligations are set forth below (in
thousands):
|
|
|
|
|
||||||||||
|
Long-term
Debt |
Operating
Leases
|
Idle
Facility Leases
|
Total
Contractual Cash Obligations
|
||||||||||
|
Less
than 1 year
|
$
|
12,355
|
$
|
717
|
$
|
369
|
$
|
13,441
|
|||||
|
1-3
years
|
30,335
|
692
|
696
|
31,723
|
|||||||||
|
4-5
years
|
61,409
|
523
|
752
|
62,684
|
|||||||||
|
After
5 years
|
—
|
62
|
1,764
|
1,826
|
|||||||||
|
|
$
|
104,099
|
$
|
1,994
|
$
|
3,581
|
$
|
109,674
|
|||||
Idle
facility lease consists of an obligation for a manufacturing location that
was
exited in conjunction with the company's manufacturing consolidation efforts.
This lease obligation continues through December 2014. This facility has
been
subleased. The obligation presented above does 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 1, 2005, the
unfunded benefit obligation under the pension plan was $1.0 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 $216,000 in fiscal 2004 and $280,000 in fiscal 2003. The anticipated
minimum funding requirement for fiscal 2005 is approximately $274,000 of
which
$201,000 was funded during the nine-month period ending October 1,
2005.
23
The
company also maintains a retirement benefit agreement with its Chairman.
The
retirement benefits are based upon a percentage of the Chairman’s final base
salary. Additionally, the company maintains a retirement plan for non-employee
directors. The plan provides for an annual benefit upon retirement from
the
Board of Directors at age 70, equal to 100% of the director’s last annual
retainer, payable for a number of years equal to the director’s years of service
up to a maximum of 10 years. As of January 1, 2005, the unfunded benefit
obligation under these plans amounted to $4.3 million, of which $3.6 million
was
funded in the first quarter of 2005 associated with the settlement and
payment
of pension obligations due to the former Chairman. The company will make
future
contributions to this plan as retirement obligations become due.
The
company has $4.0 million in outstanding letters of credit, which expire
on
October 1, 2006 with an automatic one-year renewal, to secure potential
obligations under insurance programs.
The
company places purchase orders with its suppliers in the ordinary course
of
business. These purchase orders are generally to fulfill short-term
manufacturing requirements of less than 90 days and most are cancelable
with a
restocking penalty. The company has no long-term purchase contracts or
minimum
purchase obligations with any supplier.
The
company has contractual obligations under its various debt agreements to
make
interest payments. These amounts are subject to the level of borrowings
in
future periods and the interest rate for the applicable periods, and therefore
the amounts of these payments is not determinable.
The
company has no activities, obligations or exposures associated with off-balance
sheet arrangements.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Interest
Rate Risk
The
company is exposed to market risk related to changes in interest rates.
The
following table summarizes the maturity of the company’s debt
obligations.
|
|
|
||||||
|
Twelve
Month Period Ending
|
Fixed
Rate Debt
|
Variable
Rate Debt
|
|||||
|
|
(in
thousands)
|
||||||
|
September
30, 2006
|
$
|
—
|
$
|
12,355
|
|||
|
September
30, 2007
|
—
|
14,855
|
|||||
|
September
30, 2008
|
—
|
15,480
|
|||||
|
September
30, 2009
|
—
|
17,355
|
|||||
|
September
30, 2010
|
—
|
44,054
|
|||||
|
|
$ | — |
$
|
104,099
|
|||
During
the fourth quarter of 2004, the company entered into a new $160.0 million
senior
secured credit facility in order to increase the company's borrowing
availability. Terms of the agreement provided for $70.0 million of term
loans
and $90.0 million of availability under a revolving credit line. As of
October
1, 2005, the company had $101.9 million outstanding under this facility,
including $62.5 million of a term loan and $39.4 million of borrowings
under the
revolving credit line.
24
Borrowings
under the senior secured credit facility are assessed at an interest rate
at
1.25% above LIBOR for long-term borrowings or at the higher of the Prime
rate
and the Federal Funds Rate plus 0.5% for short-term borrowings. At October
1,
2005, the average interest rate on the senior debt amounted to 5.13%. The
interest rates on borrowings under the senior bank facility may be adjusted
quarterly based on the company’s defined indebtedness ratio on a rolling
four-quarter basis. Additionally, a commitment fee, based upon the indebtedness
ratio is charged on the unused portion of the revolving credit line. This
variable commitment fee amounted to 0.25% as of October 1, 2005.
In
November 2004, the company entered into a promissory note in conjunction
with
the release and early termination of obligations under a lease agreement
relative to a manufacturing facility in Shelburne, Vermont. At October
1, 2005,
the balance due on the note amounted to $2.2 million. The note is assessed
interest at 4.0% above LIBOR with an interest rate cap of 9.0%. At October
1,
2005 the interest rate on the note was approximately 7.7%. The note amortizes
monthly and matures in December 2009.
The
company has historically entered into interest rate swap agreements to
effectively fix the interest rate on its outstanding debt. In February
2003, the
company entered into an interest rate swap agreement for a notional amount
of
$10.0 million. This agreement swaps one-month LIBOR for a fixed rate of
2.36%
and remains in effect through December 2005. In January 2005, the company
entered into an interest rate swap agreement for a notional amount of $70.0
million. This agreement swaps one-month LIBOR for a fixed rate of 3.78%.
The
notional amount amortizes consistent with the repayment schedule of the
company's term loan maturing November 2009. The unamortized notational
amount of
this swap as of October 1, 2005 was $62.5 million.
The
terms
of the senior secured credit facility limit the paying of dividends, capital
expenditures and leases, and require, among other things, certain ratios
of
indebtedness and fixed charge coverage. The credit agreement also provides
that
if a material adverse change in the company’s business operations or conditions
occurs, the lender could declare an event of default. Under terms of the
agreement a material adverse effect is defined as (a) a material adverse
change
in, or a material adverse effect upon, the operations, business properties,
condition (financial and otherwise) or prospects of the company and its
subsidiaries taken as a whole; (b) a material impairment of the ability
of the
company to perform under the loan agreements and to avoid any event of
default;
or (c) a material adverse effect upon the legality, validity, binding effect
or
enforceability against the company of any loan document. A material adverse
effect is determined on a subjective basis by the company's creditors.
At
October 1, 2005, the company was in compliance with all covenants pursuant
to
its borrowing agreements.
Financing
Derivative Instruments
In
February 2003, the company entered into an interest rate swap agreement
with a
notional amount of $10.0 million to fix the interest rate applicable to
certain
of its variable-rate debt. The agreement swaps one-month LIBOR for a fixed
rate
of 2.36% and is in effect through December 30, 2005. The company designated
the
swap as a cash flow hedge at its inception and all changes in the fair
value of
the swap are recognized in accumulated other comprehensive income. As of
October
1, 2005, the fair value of this instrument was $0.1 million. There was
no change
in the fair value of this swap agreement in the first nine months of
2005.
25
In
January 2005, the company entered into another interest rate swap with
a
notional amount of $70.0 million to fix the interest rate applicable to
certain
of its variable-rate debt. The notional amount of the swap amortizes consistent
with the repayment schedule of the company's senior term loan maturing
in
November 2009. The agreement swaps one-month LIBOR for a fixed rate of
3.78% and
is in effect through November 2009. The company designated the swap as
a cash
flow hedge at its inception and all changes in the fair value of the swap
are
recognized in accumulated other comprehensive income. As of October 1,
2005, the
fair value of this instrument was $1.0 million. The change in fair value
of this
swap agreement in the first nine months of 2005 was a gain of $0.6 million,
net
of $0.4 million of taxes.
Foreign
Exchange Derivative Financial Instruments
The
company uses foreign currency forward purchase and sale contracts with
terms of
less than one year, to hedge its exposure to changes in foreign currency
exchange rates. The company’s primary hedging activities are to mitigate its
exposure to changes in exchange rates on intercompany and third party trade
receivables and payables. The company does not currently enter into derivative
financial instruments for speculative purposes. In managing its foreign
currency
exposures, the company identifies and aggregates naturally occurring offsetting
positions and then hedges residual balance sheet exposures. The following
table
summarizes the forward and option purchase contracts outstanding at October
1,
2005, the fair value of these forward contracts was $0.1 million at the
end of
the quarter:
|
Sell
|
Purchase
|
Maturity
|
||||||||
|
1,000,000
|
Euro
|
$
|
1,228,000
|
U.S.
Dollars
|
October
17, 2005
|
|||||
|
1,000,000
|
British
Pounds
|
$
|
1,817,400
|
U.S.
Dollars
|
October
17, 2005
|
|||||
|
1,000,000,000
|
Korean
Won
|
$
|
969,900
|
U.S.
Dollars
|
October
18, 2005
|
|||||
|
15,000,000
|
Mexican
Pesos
|
$
|
1,393,800
|
U.S.
Dollars
|
October
18, 2005
|
|||||
Item
4. Controls and Procedures
The
company maintains disclosure controls and procedures that are designed
to ensure
that information required to be disclosed in the company's Exchange Act
reports
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
As
of
October 1, 2005, the company carried out an evaluation, under the supervision
and with the participation of the company's management, including the company's
Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the
design and operation of the company's disclosure controls and procedures.
Based
on the foregoing, the company's Chief Executive Officer and Chief Financial
Officer concluded that the company's disclosure controls and procedures
were effective as of the end of this period.
During
the quarter ended October 1, 2005, there has been no change in the company's
internal control over financial reporting that has materially affected,
or is
reasonably likely to materially affect, the company's internal control
over
financial reporting.
26
PART
II. OTHER INFORMATION
The
company was not required to report the information pursuant to Items 1
through 6
of Part II of Form 10-Q for the three months ended October 1, 2005, except
as
follows:
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
During
the third quarter of fiscal 2005, the company issued 16,800 shares of the
company's common stock to division executives, company directors and a
former
executive officer pursuant to the exercise of stock options. The following
summarizes those transactions:
Date
|
|
Class
of persons
|
|
Number
of Shares
|
|
Exercise
Price |
Amount
|
|||
|
July
11, 2005
|
former
company director
|
3,000
|
10.51
|
$
|
31,530.00
|
|||||
|
August
3, 2005
|
division
executive
|
1,250
|
5.25
|
$
|
6,562.50
|
|||||
|
September
14, 2005
|
company
director
|
10,000
|
7.50
|
$
|
75,000.00
|
|||||
|
September
19, 2005
|
division
executive
|
2,500
|
18.47
|
$
|
46,175.00
|
|||||
|
September
22, 2005
|
division
executive
|
50
|
10.51
|
$
|
525.50
|
|||||
The
issuance of such shares was exempt under the Securities Act of 1933, as
amended,
pursuant to Section 4(2) thereof, as transactions by an issuer not involving
a
public offering as such certificates for the shares were legended and stop
transfer instructions were given to the transfer agent.
Item
6. Exhibits
|
|
|
|
Exhibits –
|
The
following exhibits are filed herewith:
|
|
|
|
|
Exhibit
31.1 –
|
Rule
13a-14(a)/15d -14(a) Certification of the Chief Executive Officer
as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
Exhibit
31.2 –
|
Rule
13a-14(a)/15d -14(a) Certification of the Chief Financial Officer
as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
Exhibit
32.1 –
|
Certification
by the Principal Executive Officer of The Middleby Corporation
Pursuant to
Rule 13A-14(b) under the Exchange Act and Section 906 of the
Sarbanes-Oxley Act of 2002(18 U.S.C. 1350).
|
|
|
|
|
Exhibit
32.2 –
|
Certification
by the Principal Financial Officer of The Middleby Corporation
Pursuant to
Rule 13A-14(b) under the Exchange Act and Section 906 of the
Sarbanes-Oxley Act of 2002(18 U.S.C.
1350).
|
27
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| THE MIDDLEBY CORPORATION | ||
|
(Registrant)
|
||
| |
|
|
| Date: November 10, 2005 | By: | /s/ Timothy J. FitzGerald |
|
Timothy J. FitzGerald |
||
|
Vice
President,
Chief
Financial Officer
|
||
28