Transcript The Middleby Corporation

The Middleby Corporation
1
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
$0.09
2001
2002
2003
2004
2005
2006
2007
2001
2002
2003
2004
2005
2006
2007
2
Free Cash Flow
($ 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
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Diverse and Stable Revenue Base
Food Processing 10%
International
Food Service 20%
New Store
Openings
33%
Majority in
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
4
Value Added Offering
Customer Need
Revenue
Protection
Competitive
Dynamics
Cost
Pressures
Middleby Offering
 Quality/Reliability
 Service
 Premier brands in industry
 Longest warranties/industry leading service
 Test kitchens throughout world
 Cooking speed
 Adaptability to menu changes
 Products offer fastest speed available
 Dominant position in fast casual equipment
 Food input costs
 Labor & safety costs
 Energy costs
 Products extend life of expensive input costs
 Many products are self-cleaning, reducing
labor costs
 Numerous products reduce energy costs by
over 30%
The opportunity cost of a bad product can
cripple a restaurant’s revenue. Equipment is
used to compete effectively and lower
customers’ most pressing costs.
Middleby provides leading service with the
industry’s best known brands. Middleby works
with customers to introduce products that best
meet their needs.
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Value Added Offering (cont’d)
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:
 Yearly Savings
– FoodLife:
– Labor
– EnergyDeprecation Per Year:
 Other Savings
– SafetyDeprecation/Sales:
– Speed
– Less Downtime
 IRR3
 Payback period
$1,428
$10,000
7 Years
$800
$1,200
$1,428
$3,600
$1,428
$5,400
0.06%
50%
< 2 years
Product represents 0.1% of cost structure, is immediately P&L accretive and provides
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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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
 12 manufacturing facilities
throughout the world
 Focus on working capital
management
 Combined 200 years in industry
 Strong performance culture
 Equity ownership of >10%
Sales & Marketing
Acquisition Capability
 Focus on leading brands
 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 service
 “No-quibble” 10-year warranty
 Test kitchens throughout world
Global operating platform provides significant barriers to entry
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New Product Pipeline – Foodservice
2008 Introductions
2007 Introductions

Mini WOW! Oven

High H Oven

Rethermalizer

Hydrovection Oven

Solstice Supreme Fryer

Rocket Fryer

Redesigned Combi-Ovens

Ventless Hood

500 Series Range

Pressure Fryer

Tanduri Oven

Visual Cooking Combi-Ovens

Revolving Tapinyaki Griddle

Samooza Fryer
New products represent more than 20% of net sales
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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
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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 provides significant barriers to entry

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

Long-term annual EPS growth target of 20%, consistent with historical
performance

Proven senior management team with decades of industry experience
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