KBCM Virtual Industrials and Basic Materials Conference
May 28, 2020
COVID-19 Implemented Action
COVID-19 UPDATE
In response to the COVID-19 pandemic, we implemented swift actions to protect our employees, ensure uninterrupted service to our customers and aggressively adjust our business and cost structure for an expected revenue decline. Our businesses in all three segments support an essential daily requirement, food, and thus have been designated as essential in most global locations. We are proud to continue to support our customers, while adhering to strict employee safety standards at all worldwide operations.
www.middleby.com
We have implemented the following in response to COVID-19:
- Employee Safety- Implemented companywide procedures including enhanced workplace sanitation, travel discontinuation, social distancing, staggered shifts and work-at-home protocols for most non-production employees.
- Customer Support-Ensured continued access to customer support, technical service and uninterrupted shipping of service parts and finished goods. Production continued to meet customer demand.
- Cost Initiatives-Initiated an aggressive reduction of all controllable and discretionary costs. This included the adjustment of global office and production workforces in response to near-term reduced demand levels and reduced cash compensation to executives.
- Supply Chain-Established a task force to identify and mitigate supply chain disruption and ensure continuity of business operations and customer support.
- Liquidity and Cash Flow-Reduced capital expenditures for the remainder of year, enhanced working capital reduction initiatives, deferred near-term acquisition and business development related investments, and discontinued the Middleby share repurchase program.
- COVID-19Product Introductions-Developed and launched products addressing COVID-19 needs, including sterilization units for N95 masks, mobile and touchless handwashing stations, plexiglass safety shields for restaurants and retail locations, mobile foodservice stations and hand and cleaning sanitizer produced at our most recent acquired company Deutsche.
2
Financial Results
Q1 2020 FINANCIAL RESULTS
1Q20 | 1Q19 | Change | |
Net Sales | $677.5 | $686.8 | -1.4% |
Gross Profit | 250.2 | 257.3 | -2.8% |
% of Sales | 36.9% | 37.5% | |
Operating Income | 105.4 | 101.1 | 4.3% |
Net Earnings | 73.8 | 69.0 | 7.0% |
Adjusted EBITDA | 137.8 | 137.8 | 0.0% |
% of Sales | 20.3% | 20.1% | |
LTM Bank EBITDA | 682.6 | 659.7 | 3.5% |
as defined in credit | |||
agreement | |||
Operating Cash Flow | 87.1 | 33.9 | 156.9% |
RESULTS COMMENTARY
- Revenue decline of 5.9% organically
- Organic growth at Food Processing of 6.1% offset by declines in Commercial Foodservice (8.7%) and Residential Kitchen (5.0%)
- Commercial Foodservice impacted byCOVID-19, initially on our business in China, but also in North America late in the quarter
- Residential Kitchen reflects weakness in the UK market associated with Brexit andCovid-19 impacts globally
- Strong EBITDA generation and cash flows
- EBITDA margin expansion to 21.3% excluding recent acquisitions
- In spite of challenging market conditions, profitability improvements from integration benefits, cost control, and pricing actions, while continuing to invest in R&D across all segments
www.middleby.com | 3 |
Debt and Liquidity
BANK FACILITY OVERVIEW
- New credit facility established in January 2020
- 5-yearterm
- $19M annual principal payments in years1-4
- $3.5 billion total availability
- $2.75B revolver
- $0.75B term loan
- As of Q1 2020
- Average interest rate 3.3%
- $845M of availability
- $430.6M LTM operating cash flow
- Record operating cash flow for a first quarter at $87.1M
- Expected cash flow positive in Q2 2020
www.middleby.com
Q1 2020 LEVERAGE RATIO (IN $000S)
Cash* | 314.0 |
Debt | 2,199.1 |
Net Debt | 1,885.1 |
LTM EBITDA* | 682.1 |
Leverage | 2.76x |
Covenant Limit | 4.00x |
* As defined in the credit agreement
10-YEAR FREE CASH FLOW GROWTH (in 000s)
4
Middleby Segment Summary
- Threeindustry-leading foodservice platforms
- 100+highly-respected, leading brands
- Global business infrastructure
- Highly synergistic business segments
- Technology and innovation leader
- Strong track record of profitability and cash flow
SEGMENT REVENUES
Food
Processing
13.5%
Commercial
67.1%
Residential
19.4%
SALES BY GEOGRAPHIC REGION
Asia | ||
8.7% | ||
United | ||
States | Europe and | |
and Canada | ||
Middle East | ||
65.7% | ||
21.9% | ||
Latin America | ||
3.7% | 5 | |
Near-term Business Conditions
Q2 ORDER TRENDS
AprilMay
▼65% ▼55%
Commercial Food Service
Our foodservice customers are currently focused on delivery, drive-through and carry-out business and the safety of employees and customers. We are able to support these needs with our existing innovative products and new technology solutions to address workplace safety and continued operating essentials. The strategic investments we have made in the past have well-positioned us for current industry trends. We anticipate new restaurant openings will be impacted, but historically the majority of our sales in this segment are equipment replacement and upgrades.
AprilMay
▼53% ▼35%
Residential Kitchen
At our residential businesses, in both the US and UK markets, the impact of COVID-19 included the widespread closure of our residential dealers' retail sales locations and reduction in traffic due to shelter-in-place restrictions. Although demand will continue to be adversely impacted and uncertain, we have seen a positive benefit as dealer retail locations began to re-open in May.
AprilMay
▼28% ▼1%
Food Processing
We entered the year with a record backlog of approximately $138 million, which grew to approximately $152 million. In April, customers focused on immediate risks to their business and employees thus pulling focus away from new equipment specifications. End-user demand for our food processing customers has shifted from restaurants to retail grocery stores, impacting sales mix. Sales of hot dogs and other meat products in our core equipment markets have experienced recent increased demand. We are well-positioned to support the demand shift and to support large-scale solutions in this industry.
www.middleby.com
6
COVID-19 Restaurant Impacts
Restaurant sales are sequentially improving week over week since March according to multiple restaurant data resources.
Restaurants are rapidly adapting to the new the new norm by:
MILLERPULSE WEEKLY INDUSTRY SAME STORE SALES, 2020
10 | 2.5 | 3.5 | 4.2 | 5.5 | 6.2 | 2.6 | 3.4 | 2.9 | 2.7 | 3.1 |
0 | ||||||||||
-7.9 | ||||||||||
•Expanding delivery options, including |
Decline
-10
-19-17.2
• | expanding curbside pick-up |
Adding or improving mobile ordering | |
• | capabilities |
Rapidly adapting menus to support | |
limited staffing, dining, and/or carryout | |
• | options |
Restaurants are reopening for dine in | |
• | 36 states dine in partially or planned |
reopening |
%
-20 | -27.8-25.5 | -23.4 | ||||||||||||||||||
-30 | -33.3 | |||||||||||||||||||
-41.9 | -41 | -38.5 | ||||||||||||||||||
-40 | ||||||||||||||||||||
-50 | ||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | |
Source: MillerPulse | Week Number | |||||||||||||||||||
www.middleby.com | 7 |
Middleby Revenue Composition - Commercial Foodservice
SEGMENT IMPACT
REVENUE BY DEMAND REQUIREMENT
•Quick serve and fast casual fare better as |
delivery, drive through and carry out support |
their business |
•Pizza performs well as delivery is core - large |
chains to hire 50,000 additional employees |
•Retail and c-store customers continue to see |
demand as customers seek alternative |
foodservice and avoid dine-in |
•Institutional Healthcare sectors less impacted |
TRAVEL & LEISURE
INDEPENDENT6%11%
CASUAL DINING
5%
PARTS
17%
REVENUE BY DEMAND REQUIREMENT
• | Casual and fine-dining heavily impacted |
• | Travel and leisure significantly impacted |
OPERATOR SPENDING
•Near-term focus on replacement, capacity and |
maintenance of equipment |
INSTITUTIONAL
7%
HEALTHCARE
4%
C-STORE
MENU DRIVEN
QSR8%20%
PARTS
17%
•Better performing sectors continuing with |
menu and operational initiatives |
•Anticipated spending on employee and |
customer safety modifications |
•Contract and project activity showing early |
signs of recovery as expected re-openings |
occur |
www.middleby.com
7%
RETAIL
8%
PIZZA | FAST CASUAL |
7% | 8% |
REPLACEMENT & UPGRADE
49%
NEW BUILD
26%
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Trends in the Foodservice Industry | Click on logo or image to view more information. |
ACCELERATING TRENDS
- Added focus onoff-premise (delivery, carryout and drive- through)
- Focus on menu simplification, throughput and space utilization
- Growth innon-traditional foodservice including retail and c- store
- Labor will continue to be a primary challenge
- New foodservice models will continue including modular, ghost and cloud kitchens
- Remote monitoring and automation
- Safety protocols for employees and customers
- Continued demand trends in healthcare and assisted living
MIDDLEBY SOLUTIONS
- Middleby ventless kitchens fornon-traditional and space savings
- Development and launch of Open Kitchen
- Middleby modular and ghost kitchens
- Data intelligence and automation solutions
- Middleby advanced controls
- Middleby touchless and automatedPick-Up Cabinets (PUC)
- Focus on integrated solutions for targeted segments including retail,c-stores, healthcare, and emerging chains
www.middleby.com
M I D D L E B Y V E N T L E S SM O D U L A R A U T O M A T E DI O T C O N N E C T E D
S O L U T I O N SP I C K U P C A B I N E T SK I T C H E N
M I D D L E B Y M O D U L A R | I N D U C T I O N - H E A T E D | M I D D L E B Y ' S N E W H I G H - |
A N D G H O S T K I T C H E N S | ||
D E L I V E R Y S Y S T E M S | L E V E L U S E R I N T E R F A C E | |
Over the past year Middleby has made significant dedicated investments in R&D to focus on | ||
technology initiatives, solutions for industry trends and invested in targeted growth segments. As a | ||
result we are well positioned with solutions to address these needs that will accelerate as a result of | 9 | |
COVID-19. |
COVID-19 Products
We developed and introduced products addressing needs of the COVID-19 pandemic.
- UV Sterilizer
- Safety Shields
- Sanitizer
- Mobile Hand Washing
Click to view
www.middleby.com
N95 MASK UV
STERILIZER
(more sizes available soon)
Click on logo or image to view more information.
HAND SANITIZER
(one, two, and five gallon and up to truckload quantities available)
SAFETY SHIELDS
(four off-the-shelf versions and custom options readily available)
QUALSERV MOBILE
SANITARY SINK
10
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Disclaimer
The Middleby Corporation published this content on 28 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 May 2020 13:20:01 UTC