The Middleby Corporation (MIDD) Q4 2019 earnings summary

Executive summary

• FY19 net sales rose 8.7% to $2.959B, primarily from acquisitions; excluding acquisitions, FX and a non-core business closure, sales increased 0.1%.

• Net earnings grew to $352.2M from $317.2M; diluted EPS reached $6.33 from $5.70.

• Commercial Foodservice grew, while organic sales weakened in Food Processing and Residential Kitchen; management cited delayed large projects and softer European demand.

Financial highlights

• Gross profit rose to $1.103B from $1.004B; gross margin improved to 37.3% from 36.9%, or 37.9% excluding acquisitions and FX.

• Operating income increased to $514.0M from $446.0M; adjusted for restructuring, litigation settlement gain and CEO transition costs, it was $519.8M versus $465.3M.

• SG&A increased $55.0M to $593.8M, driven by acquired businesses, $10.0M of CEO transition costs and higher share-based compensation; restructuring costs fell to $10.5M from $19.3M.

• Operating cash flow was $377.4M, up from $368.9M; cash and equivalents ended FY19 at $94.5M, versus $71.7M.

Outlook and guidance

• Commercial backlog was $128.7M and Food Processing backlog $137.8M at year-end; nearly all and all, respectively, were expected to ship in 2020.

• Residential Kitchen backlog was $41.0M at year-end, all expected to ship in 2020; backlog is not necessarily indicative of annual business levels.

• Commercial restructuring initiatives were expected to generate $10M–$15M of annual savings beginning FY20; Residential Kitchen initiatives were expected to add $3M in annual savings.

• Management expected operating cash flows and borrowing availability to cover working capital, capital spending and debt amortization for the foreseeable future.