Transcript The Middleby Corporation

The Middleby Corporation
June 3, 2008
Sidoti Fifth Annual Boston Emerging Growth
Institutional Investor Forum
1
Forward Looking Statements
Statements made in this presentation or otherwise attributable to the
company regarding the company's business which are not historical fact are
forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The company cautions
investors that such statements are estimates of future performance and are
highly dependent upon a variety of important factors that could cause actual
results to differ materially from such statements. Such factors include, but
are not limited to variability in financing costs; quarterly variations in
operating results; dependence on key customers; international exposure;
foreign exchange and political risks affecting international sales; changing
market conditions; the impact of competitive products and pricing; the timely
development and market acceptance of the company's products; the
availability and cost of raw materials; and other risks detailed herein and
from time-to-time in the company's SEC filings.
2
Investment Highlights

Leading value-added manufacturer of hot commercial food service and
processing equipment (#1 or #2 market share in each product)

Products are critical to customers, represent small portion of their budgets,
and provide high ROIs

Unique global operating platform

U.S. restaurant sales have never declined

Diversified revenue base with exposure to high growth end markets

Focus on continued operational improvements and margin expansion

Successful track record of creating significant value through acquisitions

Proven senior management team
3
Company Snapshot

The Middleby Corporation is the worldwide leader in the manufacturing and
distribution of a broad line of cooking, warming and preparation equipment for
the commercial restaurant and food processing industries

Headquartered in United States (Chicago, Illinois)

Publicly traded on U.S. stock exchange (NASDAQ symbol: MIDD)

$500 million in annual revenue, 2007

1,200 employees worldwide

15 worldwide manufacturing facilities
– 12 U.S. Facilities
– 3 European Facilities
– 2 Asian Facilities
4
Financial Performance
Sales
Gross Profit
($ in millions)
($ in millions)
$500.5
$192.4
$403.1
$156.9
$316.7
$229.1
$242.2
$121.7
$271.1
$102.6
$101.6
2001
$78.5
$85.9
2002
2003
$32.4
2002
2003
2004
2005
2006
2007
2001
EBITDA
2004
2005
2006
2007
EPS
($ in millions)
$3.11
$99.3
$2.56
$81.8
$1.99
$63.1
$46.1
$39.0
$1.00
$28.7
$1.19
$0.33
$10.6
$0.09
2001
2002
2003
2004
2005
2006
2007
2001
2002
2003
2004
2005
2006
2007
5
Free Cash Flow
($ in millions)
Free Cash Flow1
$99.3
$81.8
$61.7
$44.9
$38.0
$27.6
$10.2
2001
2002
2003
2004
2005
2006
2007
Free Cash Flow
Significant free cash flow generation
1Free
Cash Flow = EBITDA - Capital Expenditures
6
Company Breakdown
7
Diverse and Stable Revenue Base
Food Processing 10%
International
Food Service 20%
New Store
Openings
33%
Growing
international
markets
Institutional 10%
Independent 10%
Casual 10%
Domestic
Food
Service
Menu
Changes
33%
Allows
restaurants to
differentiate
themselves in
a competitive
market
Pizza 10%
QSR 10%
Replacement
& Maintenance
34%
Fast Casual 20%
End Market
Installed base
of aged
equipment in
850,000
establishments
Product Use
Stable, diversified revenue base with exposure to high growth end markets and limited
exposure to new U.S. restaurant openings
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Industry Leading Brands - Foodservice

#1 in Pizza Chains

#1 in Convenience Stores

#1 in Fast Casual

#1 in Deli and Sandwich Shops

#1 in Steakhouses and Seafood

#1 in Chicken Outlets

#1 in Pan-Asian Cuisine

#2 in QSR

#2 in Casual Dining
9
Industry Leading Brands – Food Processing

#1 in Sausages, Hot Dogs and Ham

#1 in Chicken Preparation

#2 in Bacon

#2 in Burger Patties

#2 in Meat Packaging
10
Disruptive Technologies
Wow Oven
Hydrovection Oven
Visual Cooking
KI AWARD
 Automated oven with energy
management system
500 Series Range
 Combination steam and
Solstice Fryer
KI AWARD
 Most energy efficient oven
 Self cleaning burner
convection in one cavity
Ventless Hoods
Enduraheat
Rhapsody Oven
KI AWARD
KI AWARD
 Non-clog burner and water
proof controls
 Used by the best
steakhouses in the world
 Utilizing induction to hold
food for extended periods
 V-air technology cooks bread
in less than 15 minutes
We focus on the development of innovative foodservice equipment
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Value Added Offering
Limited Service Restaurant Unit Economics
% Sales
Sales
Cost of Food & Beverage
29.0%
1,562,000
71.0%
Salaries, Wages, Benefits
667,000
30.3%
Direct Operating Expenses
106,000
4.8%
Marketing
46,000
2.1%
Utilities
68,000
3.1%
163,000
7.4%
Repairs and maintenance
37,000
1.7%
Depreciation
42,000
1.9%
G&A
55,000
2.5%
130,000
5.9%
249,000
11.0%
Occupancy
Other/Corporate Overhead
Operating Profit
 Investment
$10,000
$2,200,000 100.0%
638,000
Gross Profit
Illustrative Middleby Product Economics
1,2
 Yearly Depreciation
Pitco Fryer:
$1,428
$10,000
 Yearly Savings
Life:
– Labor
– EnergyDeprecation Per Year:
 Other Savings
– SafetyDeprecation/Sales:
– Speed
– Less Downtime
7 Years
$1,200
$1,428
$4,200
$1,428
$5,400
0.06%
 IRR3
 Payback period
50%
< 2 years
Product represents a small investment and provides an attractive ROI/payback
Source: National Restaurant Association; Deloitte & Touch; Management Estimates
1 Assumes straight-line depreciation over 7-years. Yearly annual depreciation is less than 0.1% of cost structure.
2 Minimal maintenance spend in first 2-3 years, $500 per year thereafter
3 Pre-tax and financing
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Premier Customers

Blue-chip customer base

Long standing relationships

Limited customer concentration

Large installed base

Serve all food segments
13
Global Reach
Mississauga,
Ontario, Canada
# of Employees: 2
Bilbao, Spain
# of Employees: 11
Manchester, UK
# of Employees: 20
Delhi, India
# of Employees: 5
Seoul, South Korea
# of Employees: 11
Shanghai, China
# of Employees: 14
Taipei, Taiwan
# of Employees: 7
Manila, Philippines
# of Employees:
- Manufacturing: 95
- Sales & Dist.: 16
Mexico City, Mexico
# of Employees: 26
Manufacturing facility, sales office and test kitchen
Sales office with test kitchen
Sales office only
Key Advantages
 Test kitchens throughout the world allow Middleby to educate customers on the benefits of its equipment



through hands-on experience and training
Worldwide service is critical and highly valued by U.S. chains expanding into international markets
Worldwide sales infrastructure allows direct contact with key decision makers, especially in high-growth
markets
Philippines and China manufacturing capabilities provides regional presence in high-growth Asian markets
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Competitive Advantage
Research & Development
Management Team
 Industry leading innovation process
(“customer driving”)
 Emphasis on quality
 6-8 new products each year
 Ability to measure customer savings
Manufacturing
 Efficient operations & use of capital
allows for 80%+ ROTIC
 15 manufacturing facilities
throughout the world
 Focus on working capital
management
 Experienced and proven to deliver results
 Strong performance culture
 Equity ownership of >10%
Sales & Marketing
Acquisition Capability
 Focus on leading brands
 Proven ability to transform acquired
companies
 Preferred purchaser
Service
 Strong relationships with dealers
 Key partnerships w/leading chains
 Only viable choice for many product
categories
 Emphasis on cross-selling
 Industry leading customer service
 “No-quibble” warranty
 Test kitchens throughout world
A differentiated business model
15
New Product Pipeline - Foodservice
2008 Introductions
2007 Introductions

Mini WOW! Oven

High H Oven

Rethermalizer

Hydrovection Oven

Solstice Supreme Fryer

Rocket Fryer

Plancha and Satay Ovens

Ventless Hood

500 Series Range

Rhapsody Oven

Tanduri Oven

Visual Cooking Combi-Ovens

Endura Heat

Wall Oven Residential line
New Products Represent more than 20% of Net Sales
16
New Product Pipeline – Food Processing
2007 Introductions
2008 Introductions

Cyclone Belt Oven

Conveyor Fryer

Flash Pasteurization

Co-Extrusion

Mid-Size J-Con Oven

Forming Equipment

Wireless Controls

Intellijet Water Cutter
New products typically carry profit margins >5% higher than existing products
17
Financial Performance
Sales
Gross Profit
($ in millions)
($ in millions)
$500.5
$192.4
$403.1
$156.9
$316.7
$229.1
$242.2
$121.7
$271.1
$102.6
$101.6
2001
$78.5
$85.9
2002
2003
$32.4
2002
2003
2004
2005
2006
2007
2001
EBITDA
2004
2005
2006
2007
EPS
($ in millions)
$3.11
$99.3
$2.56
$81.8
$1.99
$63.1
$46.1
$39.0
$1.00
$28.7
$1.19
$0.33
$10.6
$0.09
2001
2002
2003
2004
2005
2006
2007
2001
2002
2003
2004
2005
2006
2007
18
Favorable Industry Dynamics
Favorable Demographics
New Restaurant /
Store Openings
Menu Changes
Replacement of
Existing Equipment
Expansion of
International Markets
Rising Foodservice
Operator Costs



Dual income families continue to eat out, even in challenging economic times


Growth in fast casual dining and breakfast



Expansion of new menu items driving purchases of new foodservice equipment



Average lifespan of foodservice equipment is ~8 years
Percentage of household income spent on food prepared outside the home is increasing
Baby boomer generation approaching retirement
Emergence of co-branding process is gaining steam
On-premise baking more prevalent
Growing awareness of nutrition implemented through low carb diets and increased
presence of salads with grilled meat and fish
Large installed base (over 850,000 establishments in U.S.)
Replacement represents approximately one-third of the market
 Trend in eating out gaining momentum
 Rapid growth in developing nations such as China and India
 U.S. chain concepts expanding internationally



Foodservice operators demanding greater productivity through automation
Need for equipment with greater energy cost savings
Increased cost of trans-fat free oil
Many factors support growing demand for foodservice equipment
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