NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 1, 2017
(
Unaudited
)
|
|
1)
|
Summary of Significant Accounting Policies
|
The condensed consolidated financial statements have been prepared by The Middleby Corporation (the "company" or “Middleby”), 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
2016
Form 10-K. The company’s interim results are not necessarily indicative of future full year results for the fiscal year
2017
.
In the opinion of management, the financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of the company as of
April 1, 2017
and
December 31, 2016
, the results of operations for the
three months ended
April 1, 2017
and
April 2, 2016
and cash flows for the
three months ended
April 1, 2017
and
April 2, 2016
.
Certain prior year amounts have been reclassified to be consistent with current year presentation, including combining selling and distribution expenses with general and administrative expenses.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, warranty reserves, insurance reserves, income tax reserves and post-retirement obligations. Actual results could differ from the company's estimates.
|
|
B)
|
Non-Cash Share-Based Compensation
|
The company estimates the fair value of market-based stock awards and stock options at the time of grant and recognizes compensation cost over the vesting period of the awards and options. Non-cash share-based compensation expense was
$3.5 million
and
$5.0 million
for the
first
quarter periods ended
April 1, 2017
and
April 2, 2016
, respectively.
During the first quarter ended
April 1, 2017
, the company issued restricted shares under its 2011 Stock Incentive Plan. These amounts are contingent on the attainment of certain performance objectives. The aggregate grant-date fair value of these awards was
$9.6 million
, based on the closing share price of the company's stock at the date of the grant.
As of
December 31, 2016
, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately
$20.3 million
(of which
$20 million
would impact the effective tax rate if recognized) plus approximately
$2.7 million
of accrued interest and
$4.9 million
of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. As of
April 1, 2017
, the company recognized a tax expense of
$1.2 million
for unrecognized tax benefits related to current year tax exposures.
It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit. The company believes that it is reasonably possible that approximately
$2.0 million
of its remaining unrecognized tax benefits may be recognized over the next twelve months as a result of lapses of statutes of limitations.
The effective rate for the
three months period ended April 1, 2017
was
24.3%
as compared to
33.4%
three months period ended April 2, 2016
. The tax rate in the
three months period ended April 1, 2017
was favorably impacted by a tax benefit from the adoption of ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting," which resulted in the recognition of excess tax benefits from share-based payments to be recognized as income tax benefit in the condensed consolidated statement of comprehensive income.
A summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:
|
|
|
United States - federal
|
2012 – 2016
|
United States - states
|
2007 – 2016
|
Australia
|
2012 – 2016
|
Brazil
|
2012 – 2016
|
Canada
|
2007 – 2016
|
China
|
2007 – 2016
|
Czech Republic
|
2014 – 2016
|
Denmark
|
2013 – 2016
|
France
|
2014 – 2016
|
Germany
|
2014 – 2016
|
India
|
2013 – 2016
|
Ireland
|
2010 – 2016
|
Italy
|
2012 – 2016
|
Luxembourg
|
2012 – 2016
|
Mexico
|
2012 – 2016
|
Netherlands
|
2005 – 2016
|
Philippines
|
2013 – 2016
|
Poland
|
2011 – 2016
|
Romania
|
2007 – 2016
|
Spain
|
2012 – 2016
|
Sweden
|
2010 – 2016
|
Switzerland
|
2008 – 2016
|
Taiwan
|
2011 – 2012
|
United Kingdom
|
2015 – 2016
|
ASC 820 "Fair Value Measurements and Disclosures" defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following levels:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.
Level 3 – Unobservable inputs based on our own assumptions.
The company’s financial liabilities that are measured at fair value and are categorized using the fair value hierarchy are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Level 1
|
|
Fair Value
Level 2
|
|
Fair Value
Level 3
|
|
Total
|
As of April 1, 2017
|
|
|
|
|
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
9,585
|
|
|
$
|
—
|
|
|
$
|
9,585
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
16
|
|
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,797
|
|
|
$
|
4,797
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
8,842
|
|
|
$
|
—
|
|
|
$
|
8,842
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
100
|
|
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,612
|
|
|
$
|
6,612
|
|
The contingent consideration as of
April 1, 2017
relates to the earnout provisions recorded in conjunction with the acquisitions of Desmon, Goldstein Eswood and Induc.
The contingent consideration as of
December 31, 2016
relates to the earnout provisions recorded in conjunction with the acquisitions of PES, Desmon, Goldstein Eswood and Induc.
The earnout provisions associated with these acquisitions are based upon performance measurements related to sales and earnings, as defined in the respective purchase agreements. On a quarterly basis the company assesses the projected results for each of the acquired businesses in comparison to the earnout targets and adjusts the liability accordingly.
E) Consolidated Statements of Cash Flows
Cash paid for interest was
$5.8 million
and
$4.8 million
for the
three months ended
April 1, 2017
and
April 2, 2016
, respectively. Cash payments totaling
$6.2 million
and
$12.2 million
were made for income taxes for the
three months ended
April 1, 2017
and
April 2, 2016
, respectively.
|
|
2)
|
Acquisitions and Purchase Accounting
|
The company operates in a highly fragmented industry and has completed numerous acquisitions over the past several years as a component of its growth strategy. The company has acquired industry leading brands and technologies to position itself as a leader in the commercial foodservice equipment, food processing equipment and residential kitchen equipment industries.
The company has accounted for all business combinations using the acquisition method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The results of operations are reflected in the consolidated financial statements of the company from the dates of acquisition.
Emico
On May 20, 2016, the company completed its acquisition of certain assets of Emico Automated Bakery Equipment Solutions ("Emico"), manufacturer of high speed dough make-up bakery equipment located in Sante Fe Springs, California, for a purchase price of approximately
$1.0 million
. Additional deferred payments of approximately
$1.7 million
in aggregate are also due to the seller during the two year period subsequent to the acquisition.
The following estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as initially reported) May 20, 2016
|
|
Preliminary Measurement Period Adjustments
|
|
(as adjusted) May 20, 2016
|
Current assets
|
$
|
746
|
|
|
(65
|
)
|
|
681
|
|
Goodwill
|
1,816
|
|
|
183
|
|
|
1,999
|
|
Current liabilities
|
(934
|
)
|
|
(62
|
)
|
|
(996
|
)
|
Other non-current liabilities
|
(628
|
)
|
|
(56
|
)
|
|
(684
|
)
|
|
|
|
|
|
|
Consideration paid at closing
|
$
|
1,000
|
|
|
$
|
—
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
Deferred payments
|
1,559
|
|
|
118
|
|
|
1,677
|
|
|
|
|
|
|
|
Net assets acquired and liabilities assumed
|
$
|
2,559
|
|
|
$
|
118
|
|
|
$
|
2,677
|
|
The goodwill is subject to the non-amortization provisions of ASC 350 "Intangibles - Goodwill and Other" and is expected to be deductible for tax purposes.
The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed but the company is waiting for additional information necessary to finalize those fair values. Thus, the provisional measurements of fair value set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.
Follett
On May 31, 2016, the company completed its acquisition of substantially all of the assets of Follett Corporation ("Follett"), a leading manufacturer of ice machines, ice and water dispensing equipment, ice storage and transport products and medical grade refrigeration products for the foodservice and healthcare industries headquartered in Easton, Pennsylvania, for a purchase price of approximately
$208.4 million
, net of cash acquired. During the first quarter of 2017, the company finalized the working capital provision provided by the purchase agreement resulting in an additional payment to the seller of
$0.7 million
.
The following estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(as initially reported) May 31, 2016
|
|
Preliminary Measurement Period Adjustments
|
|
(as adjusted) May 31, 2016
|
Cash
|
$
|
22,620
|
|
|
$
|
1,359
|
|
|
$
|
23,979
|
|
Current assets
|
41,602
|
|
|
(72
|
)
|
|
41,530
|
|
Property, plant and equipment
|
19,868
|
|
|
—
|
|
|
19,868
|
|
Goodwill
|
76,220
|
|
|
1,448
|
|
|
77,668
|
|
Other intangibles
|
82,450
|
|
|
—
|
|
|
82,450
|
|
Other assets
|
1,358
|
|
|
—
|
|
|
1,358
|
|
Current liabilities
|
(11,779
|
)
|
|
(2,039
|
)
|
|
(13,818
|
)
|
Other non-current liabilities
|
(616
|
)
|
|
—
|
|
|
(616
|
)
|
|
|
|
|
|
|
Net assets acquired and liabilities assumed
|
$
|
231,723
|
|
|
$
|
696
|
|
|
$
|
232,419
|
|
The goodwill and
$55.0 million
of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350. Other intangibles also includes
$22.5 million
allocated to customer relationships,
$4.5 million
allocated to developed technology and
$0.5 million
allocated to backlog, which are to be amortized over periods of
6
years,
6
years, and
3
months, respectively. These assets are expected to be deductible for tax purposes.
The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed but the company is waiting for additional information necessary to finalize those fair values. Thus, the provisional measurements of fair value set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.
Pro Forma Financial Information
In accordance with ASC 805 “Business Combinations”, the following unaudited pro forma results of operations for the
three months ended
April 2, 2016
, assumes the 2016 acquisition of Follett was completed on January 3, 2016 (first day of fiscal year 2016). The following pro forma results include adjustments to reflect additional interest expense to fund the acquisitions, amortization of intangibles associated with the acquisitions, and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):
|
|
|
|
|
|
Three Months Ended
|
|
|
April 2, 2016
|
Net sales
|
$
|
552,578
|
|
Net earnings
|
57,459
|
|
|
|
Net earnings per share:
|
|
|
Basic
|
1.01
|
|
Diluted
|
1.01
|
|
The supplemental pro forma financial information presented above has been prepared for comparative purposes and is not necessarily indicative of either the results of operations that would have occurred had the acquisition of Follett been effective on January 3, 2016 nor are they indicative of any future results. Also, the pro forma financial information does not reflect the costs which the company has incurred or may incur to integrate Follett.
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 partially 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 pending litigation will have a material effect on its financial condition, results of operations or cash flows.
|
|
4)
|
Recently Issued Accounting Standards
|
In May 2014, the Financial Accounts Standards Board ("FASB") issued ASU No. 2014-09, “Revenue from Contracts with Customers”. This update amends the current guidance on revenue recognition related to contracts with customers. Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In early 2016, the FASB issued additional updates: ASU No. 2016-10, 2016-11 and 2016-12. These updates provide further guidance and clarification on specific items within the previously issued update. In July 2015, the FASB decided to delay the effective date of the new revenue standard to be effective for interim and annual periods beginning on or after December 15, 2017 for public companies. Companies may elect to adopt the standard at the original effective date which, for the company is, for interim and annual periods beginning on or after December 15, 2016, but not earlier. The guidance can be applied using one of two retrospective application methods. The company will adopt this standard, as required, for fiscal year 2018 and expects to use the modified retrospective approach, with the cumulative effect, if any, recognized in the opening balance of retained earnings. The company is continuing to evaluate the impact the application of these ASU's will have, if any, on the company's financial position, results of operations or cash flows.
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” which is intended to simplify the subsequent measurement of inventories by replacing the current lower of cost or market test with a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in first-out and the retail inventory method. Application of the standard, which should be applied prospectively, is required for the annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The adoption of this guidance did not have an impact on the company's financial position, results of operations or cash flows.
In November 2015, the FASB issued ASU 2015-17 "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes". The amendments in ASU 2015-17 simplify the accounting for, and presentation of, deferred taxes by eliminating the need to separately classify the current amount of deferred tax assets or liabilities. Instead, aggregated deferred tax assets and liabilities are classified and reported as non-current assets or liabilities. The update is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2016. The company early adopted ASU 2015-17 effective April 3, 2016 on a prospective basis. Adoption of this ASU resulted in a reclassification of the company's net current deferred tax asset to the net non-current deferred tax liability in the company's Consolidated Balance Sheet as of July 2, 2016. No prior periods were retrospectively adjusted.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)". The amendments under this pronouncement will change the way all leases with a duration of one year of more are treated. Under this guidance, lessees will be required to capitalize virtually all leases on the balance sheet as a right-of-use asset and an associated financing lease liability or capital lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing leases or operating leases. Financing lease liabilities, those that contain provisions similar to capitalized leases, are amortized like capital leases are under current accounting, as amortization expense and interest expense in the statement of operations. Operating lease liabilities are amortized on a straight-line basis over the life of the lease as lease expense in the statement of operations. This update is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2018. The company is currently evaluating the impact this standard will have on its policies and procedures pertaining to its existing and future lease arrangements, disclosure requirements and on the company's financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU No. 2016-05, "Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships". The amendments in ASU 2016-05 clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require dedesignation of the hedging relationship provided that all other hedge accounting criteria continue to be met. The amendments in this update may be applied on either a prospective basis or a modified retrospective basis. This ASU is effective for annual reporting periods, and interim periods with those reporting periods, beginning after December 15, 2016. We adopted this guidance on January 1, 2017 and it did not have an impact on the company's financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting". The amendments in ASU-09 simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for annual reporting periods, and interim periods with those reporting periods, beginning after December 15, 2016. The company adopted ASU No. 2016-09 effective January 1, 2017 on a prospective basis. The adoption of this guidance resulted in the recognition of excess tax benefits in the company's provision for income taxes within the Condensed Consolidated Statements of Comprehensive Income rather than paid-in-capital of approximately
$7.9 million
for the
three months period ended April 1, 2017
. Additionally, the company's Condensed Consolidated Statement of Cash Flows now presents excess tax benefits as an operating activity rather than a financing activity.
In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments". The amendments in ASU-15 address eight specific cash flow classification issues to reduce current and potential future diversity in practice. This ASU is effective for annual reporting periods, and interim periods with those reporting periods, beginning after December 15, 2017. The company is evaluating the impact the application of this ASU will have, if any, on the company's cash flows.
In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory". The amendments in ASU-16 prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer other than inventory until the asset has been sold to an outside party. This ASU is effective for annual reporting periods, and interim periods with those reporting periods, beginning after December 15, 2017. The company is evaluating the impact the application of this ASU will have, if any, on the company's financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". The amendments in ASU-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. This ASU is effective for annual reporting periods, and interim periods with those reporting periods, beginning after December 15, 2017. The company is evaluating the impact the application of this ASU. The company does not expect the adoption of this ASU to have a material impact on its financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". The amendments in ASU-04 simplify the subsequent measurement of goodwill, by removing the second step of the goodwill impairment test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This ASU is effective for annual reporting periods, and interim reporting periods, beginning after December 15, 2019. Early adoption is permitted for testing dates after January 1, 2017. The company is evaluating the application of this ASU on the company's annual impairment test. The company does not expect the adoption of this ASU to have a material impact on its financial position, results of operations or cash flows.
In March 2017, the FASB issued ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost". The amendments in ASU-07 require that an employer report the service costs component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. This ASU is effective for annual reporting periods, and interim periods with those reporting periods, beginning after December 15, 2017. Early adoption is permitted. Net income will not change as a result of the adoption of this standard. The company is currently evaluating the remaining impacts the ASU will have on its condensed consolidated financial statements.
|
|
5)
|
Other Comprehensive Income
|
The company reports changes in equity during a period, except those resulting from investments by owners and distributions to owners, in accordance with ASC 220, "Comprehensive Income".
Changes in accumulated other comprehensive income(1) were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Translation Adjustment
|
|
Pension Benefit Costs
|
|
Unrealized Gain/(Loss) Interest Rate Swap
|
|
Total
|
Balance as of December 31, 2016
|
$
|
(116,411
|
)
|
|
$
|
(173,394
|
)
|
|
$
|
5,482
|
|
|
$
|
(284,323
|
)
|
Other comprehensive income before reclassification
|
10,835
|
|
|
(2,527
|
)
|
|
1,022
|
|
|
9,330
|
|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
—
|
|
|
(522
|
)
|
|
(522
|
)
|
Net current-period other comprehensive income
|
$
|
10,835
|
|
|
$
|
(2,527
|
)
|
|
$
|
500
|
|
|
$
|
8,808
|
|
Balance as of April 1, 2017
|
$
|
(105,576
|
)
|
|
$
|
(175,921
|
)
|
|
$
|
5,982
|
|
|
$
|
(275,515
|
)
|
(1) As of
April 1, 2017
pension and interest rate swap amounts are net of tax of
$(38.5) million
and
$4.0 million
, respectively.
Components of other comprehensive income were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Apr 1, 2017
|
|
Apr 2, 2016
|
Net earnings
|
$
|
70,702
|
|
|
$
|
54,538
|
|
Currency translation adjustment
|
10,835
|
|
|
(396
|
)
|
Pension liability adjustment, net of tax
|
(2,527
|
)
|
|
3,778
|
|
Unrealized gain on interest rate swaps, net of tax
|
500
|
|
|
(121
|
)
|
Comprehensive income
|
$
|
79,510
|
|
|
$
|
57,799
|
|
Inventories are composed of material, labor and overhead and are stated at the lower of cost or market. Costs for 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
April 1, 2017
and
December 31, 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
Apr 1, 2017
|
|
Dec 31, 2016
|
|
(in thousands)
|
Raw materials and parts
|
$
|
161,662
|
|
|
$
|
154,647
|
|
Work-in-process
|
40,524
|
|
|
35,975
|
|
Finished goods
|
194,008
|
|
|
177,621
|
|
|
$
|
396,194
|
|
|
$
|
368,243
|
|
Changes in the carrying amount of goodwill for the
three months ended
April 1, 2017
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Foodservice
|
|
Food
Processing
|
|
Residential Kitchen
|
|
Total
|
Balance as of December 31, 2016
|
$
|
542,090
|
|
|
$
|
134,680
|
|
|
$
|
415,952
|
|
|
$
|
1,092,722
|
|
Measurement period adjustments to goodwill acquired in prior year
|
$
|
696
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
737
|
|
Exchange effect
|
1,498
|
|
|
944
|
|
|
2,942
|
|
|
5,384
|
|
Balance as of April 1, 2017
|
$
|
544,284
|
|
|
$
|
135,665
|
|
|
$
|
418,894
|
|
|
$
|
1,098,843
|
|
Intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2017
|
|
December 31, 2016
|
|
Estimated
Weighted Avg
Remaining
Life
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
|
Estimated
Weighted Avg
Remaining
Life
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists
|
5.4
|
|
$
|
251,025
|
|
|
$
|
(143,577
|
)
|
|
5.5
|
|
$
|
251,025
|
|
|
$
|
(136,895
|
)
|
Backlog
|
0.0
|
|
13,550
|
|
|
(13,550
|
)
|
|
0.0
|
|
13,550
|
|
|
(13,550
|
)
|
Developed technology
|
4.6
|
|
24,874
|
|
|
(18,288
|
)
|
|
4.8
|
|
24,874
|
|
|
(17,924
|
)
|
|
|
|
$
|
289,449
|
|
|
$
|
(175,415
|
)
|
|
|
|
$
|
289,449
|
|
|
$
|
(168,369
|
)
|
Indefinite-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and tradenames
|
|
|
$
|
577,456
|
|
|
|
|
|
|
|
$
|
575,091
|
|
|
|
|
The aggregate intangible amortization expense was
$6.8 million
and
$8.6 million
for the first quarter periods ended
April 1, 2017
and
April 2, 2016
, respectively. The estimated future amortization expense of intangible assets is as follows (in thousands):
|
|
|
|
|
2017
|
$
|
27,352
|
|
2018
|
24,558
|
|
2019
|
18,427
|
|
2020
|
16,732
|
|
2021
|
13,714
|
|
Thereafter
|
13,251
|
|
|
$
|
114,034
|
|
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
Apr 1, 2017
|
|
Dec 31, 2016
|
|
(in thousands)
|
Accrued payroll and related expenses
|
$
|
64,941
|
|
|
$
|
74,505
|
|
Advanced customer deposits
|
44,909
|
|
|
41,735
|
|
Accrued warranty
|
41,383
|
|
|
40,851
|
|
Accrued customer rebates
|
23,472
|
|
|
49,923
|
|
Accrued professional fees
|
13,852
|
|
|
16,605
|
|
Accrued agent commission
|
11,191
|
|
|
12,834
|
|
Accrued product liability and workers compensation
|
11,110
|
|
|
11,417
|
|
Accrued sales and other tax
|
10,824
|
|
|
13,565
|
|
Product recall
|
6,641
|
|
|
7,003
|
|
Restructuring
|
3,269
|
|
|
2,295
|
|
Other accrued expenses
|
67,593
|
|
|
64,872
|
|
|
|
|
|
|
$
|
299,185
|
|
|
$
|
335,605
|
|
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, actual 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:
|
|
|
|
|
|
Three Months Ended
|
|
Apr 1, 2017
|
|
(in thousands)
|
Balance as of December 31, 2016
|
$
|
40,851
|
|
Warranty expense
|
13,443
|
|
Warranty claims
|
(12,911
|
)
|
Balance as of April 1, 2017
|
$
|
41,383
|
|
|
|
11)
|
Financing Arrangements
|
|
|
|
|
|
|
|
|
|
|
Apr 1, 2017
|
|
Dec 31, 2016
|
|
(in thousands)
|
Credit Facility
|
$
|
722,987
|
|
|
$
|
725,500
|
|
Other international credit facilities
|
5,413
|
|
|
6,413
|
|
Other debt arrangement
|
205
|
|
|
213
|
|
Total debt
|
$
|
728,605
|
|
|
$
|
732,126
|
|
Less: Current maturities of long-term debt
|
4,860
|
|
|
5,883
|
|
Long-term debt
|
$
|
723,745
|
|
|
$
|
726,243
|
|
On July 28, 2016, the company entered into an amended and restated five-year
$2.5 billion
multi-currency senior secured revolving credit agreement (the "Credit Facility"), with the potential under certain circumstances to increase the amount of the Credit Facility to
$3.0 billion
. As of
April 1, 2017
, the company had
$723.0 million
of borrowings outstanding under the Credit Facility, including
$681.0 million
of borrowings in U.S. Dollars and
$42.0 million
of borrowings denominated in British Pounds. The company also had
$10.2 million
in outstanding letters of credit as of
April 1, 2017
, which reduces the borrowing availability under the Credit Facility. Remaining borrowing availability under this facility was
$1.8 billion
at
April 1, 2017
.
At
April 1, 2017
, borrowings under the Credit Facility accrued interest at a rate of
1.25%
above LIBOR per annum or
0.25%
above the highest of the prime rate, the federal funds rate plus
0.50%
and one month LIBOR plus
1.00%
. The average interest rate per annum on the debt under the Credit Facility was equal to
2.15%
for the period. The interest rates on borrowings under the Credit Facility may be adjusted quarterly based on the company’s funded debtless unrestricted cash to pro forma EBITDA (the “Leverage Ratio”) on a rolling four-quarter basis. Additionally, a commitment fee based upon the Leverage Ratio is charged on the unused portion of the commitments under the Credit Facility. This variable commitment fee was equal to
0.200%
per annum as of
April 1, 2017
.
In addition, the company has other international credit facilities to fund working capital needs outside the United States and the United Kingdom. At
April 1, 2017
, these foreign credit facilities amounted to
$5.4 million
in U.S. dollars with a weighted average per annum interest rate of approximately
9.50%
.
The company’s debt is reflected on the balance sheet at cost. The company believes its interest rate margins on its existing debt are consistent with current market conditions and therefore the carrying value of debt reflects the fair value. The interest rate margin is based on the company's Leverage Ratio.
The company estimated the fair value of its loans by calculating the upfront cash payment a market participant would require to assume the company’s obligations. The upfront cash payment is the amount that a market participant would be able to lend to achieve sufficient cash inflows to cover the cash outflows under the company’s senior secured revolving credit facility assuming the facility was outstanding in its entirety until maturity. Since the company maintains its borrowings under a revolving credit facility and there is no predetermined borrowing or repayment schedule, for purposes of this calculation the company calculated the fair value of its obligations assuming the current amount of debt at the end of the period was outstanding until the maturity of the company’s Credit Facility in July 2021. Although borrowings could be materially greater or less than the current amount of borrowings outstanding at the end of the period, it is not practical to estimate the amounts that may be outstanding during future periods. The carrying value and estimated aggregate fair value, a level 2 measurement, based primarily on market prices, of debt is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apr 1, 2017
|
|
Dec 31, 2016
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
Total debt
|
$
|
728,605
|
|
|
$
|
728,605
|
|
|
$
|
732,126
|
|
|
$
|
732,126
|
|
The company uses floating-to-fixed interest rate swap agreements to hedge variable interest rate risk associated with the Credit Facility. At
April 1, 2017
, the company had outstanding floating-to-fixed interest rate swaps totaling
$110.0 million
notional amount carrying an average interest rate of
0.94%
maturing in less than 12 months and
$324.0 million
notional amount carrying an average interest rate of
1.30%
that mature in more than 12 months but less than 84 months.
.
The company believes that its current capital resources, including cash and cash equivalents, cash expected to be generated from operations, funds available from its current lenders and access to the credit and capital markets will be sufficient to finance its operations, debt service obligations, capital expenditures, product development and expenditures for the foreseeable future.
The terms of the Credit Facility limit the ability of the company and its subsidiaries to, with certain exceptions: incur indebtedness; grant liens; engage in certain mergers, consolidations, acquisitions and dispositions; make restricted payments; enter into certain transactions with affiliates; and requires, among other things, the company to satisfy certain financial covenants: (i) a minimum Interest Coverage Ratio (as defined in the Credit Facility) of
3.00
to
1.00
and (ii) a maximum Leverage Ratio of Funded Debtless Unrestricted Cash to Pro Forma EBIDTA (each as defined in the Credit Facility) of
3.50
to
1.00
, which may be adjusted to
4.00
to
1.00
for a four consecutive fiscal quarter period in connection with certain qualified acquisitions, subject to the terms and conditions contained in the Credit Facility. The Credit Facility is secured by substantially all of the assets of Middleby Marshall, the company and the company's domestic subsidiaries and is unconditionally guaranteed by, subject to certain exceptions, the company and certain of the company's direct and indirect material foreign and domestic subsidiaries. The Credit Facility contains certain customary events of default, including, but not limited to, the failure to make required payments; bankruptcy and other insolvency events; the failure to perform certain covenants; the material breach of a representation or warranty; non-payment of certain other indebtedness; the entry of undischarged judgments against the company or any subsidiary for the payment of material uninsured amounts; the invalidity of the company guarantee or any subsidiary guaranty; and a change of control of the company. At
April 1, 2017
, the company was in compliance with all covenants pursuant to its borrowing agreements.
|
|
12)
|
Financial Instruments
|
ASC 815 “Derivatives and Hedging” 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 a derivative does qualify as a hedge under ASC 815, changes in the fair value will either be offset against the change in the 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 uses foreign currency forward and option purchase and sales 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 fair value of the forward and option contracts was a
loss
of
$2.0 million
at the end of the
first
quarter of
2017
.
Interest Rate:
The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swap one-month LIBOR for fixed rates. The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income. As of
April 1, 2017
, the fair value of these instruments was an
asset
of
$9.6 million
. The change in fair value of these swap agreements in the first
three
months of
2017
was a
gain
of
$0.5 million
, net of taxes.
The following table summarizes the company’s fair value of interest rate swaps (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated
Balance Sheet Presentation
|
|
Apr 1, 2017
|
|
|
Dec 31, 2016
|
|
Fair value
|
Other assets
|
|
$
|
9,585
|
|
|
$
|
8,842
|
|
Fair value
|
Accrued expenses
|
|
$
|
(16
|
)
|
|
$
|
(100
|
)
|
The impact on earnings from interest rate swaps was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Presentation of Gain/(loss)
|
|
Apr 1, 2017
|
|
Apr 2, 2016
|
|
Gain/(loss) recognized in accumulated other comprehensive income
|
Other comprehensive income
|
|
$
|
312
|
|
|
$
|
(519
|
)
|
Gain/(loss) reclassified from accumulated other comprehensive income (effective portion)
|
Interest expense
|
|
$
|
(522
|
)
|
|
$
|
(317
|
)
|
Gain/(loss) recognized in income (ineffective portion)
|
Other expense
|
|
$
|
(7
|
)
|
|
$
|
11
|
|
Interest rate swaps are subject to default risk to the extent the counterparties are unable to satisfy their settlement obligations under the interest rate swap agreements. The company reviews the credit profile of the financial institutions that are counterparties to such swap agreements and assesses their creditworthiness prior to entering into the interest rate swap agreements and throughout the term. The interest rate swap agreements typically contain provisions that allow the counterparty to require early settlement in the event that the company becomes insolvent or is unable to maintain compliance with its covenants under its existing debt agreements.
The company operates in three reportable operating segments defined by management reporting structure and operating activities.
The Commercial Foodservice Equipment Group manufactures, sells, and distributes cooking equipment for the restaurant and institutional kitchen industry. This business segment has manufacturing facilities in California, Illinois, Michigan, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, Vermont, Washington, Australia, China, Denmark, Italy, the Philippines, Poland and the United Kingdom. Principal product lines of this group include conveyor ovens, ranges, steamers, convection ovens, combi-ovens, broilers and steam cooking equipment, induction cooking systems, baking and proofing ovens, charbroilers, catering equipment, fryers, toasters, hot food servers, food warming equipment, griddles, coffee and beverage dispensing equipment, professional refrigerators, coldrooms, ice machines, freezers and kitchen processing and ventilation equipment. These products are sold and marketed under the brand names: Anets, Beech, Blodgett, Blodgett Combi, Blodgett Range, Bloomfield, Britannia, CTX, Carter-Hoffmann, Celfrost, Concordia, CookTek, Desmon, Doyon, Eswood, Follett, Frifri, Giga, Goldstein, Holman, Houno, IMC, Induc, Jade, Lang, Lincat, MagiKitch’n, Market Forge, Marsal, Middleby Marshall, MPC, Nieco, Nu-Vu, PerfectFry, Pitco, Southbend, Star, Toastmaster, TurboChef, Wells and Wunder-Bar.
The Food Processing Equipment Group manufactures preparation, cooking, packaging, food handling and food safety equipment for the food processing industry. This business segment has manufacturing operations in Georgia, Illinois, Iowa, North Carolina, Texas, Virginia, Wisconsin, France, Germany and the United Kingdom. Principal product lines of this group include batch ovens, belt ovens, continuous processing ovens, frying systems, automated thermal processing systems, automated loading and unloading systems, meat presses, breading, battering, mixing, water cutting systems, forming, grinding and slicing equipment, food suspension, reduction and emulsion systems, defrosting equipment, packaging and food safety equipment. These products are sold and marketed under the brand names: Alkar, Armor Inox, Auto-Bake, Baker Thermal Solutions, Cozzini, Danfotech, Drake, Maurer-Atmos, MP Equipment, RapidPak, Spooner Vicars, Stewart Systems and Thurne.
The Residential Kitchen Equipment Group manufactures, sells and distributes kitchen equipment for the residential market. This business segment has manufacturing facilities in California, Michigan, Mississippi, Wisconsin, France, Ireland, Romania, and the United Kingdom. Principal product lines of this group include ranges, cookers, ovens, refrigerators, dishwashers, microwaves, cooktops and outdoor equipment. These products are sold and marketed under the brand names of AGA, AGA Cookshop, Brigade, Fired Earth, Grange, Heartland, La Cornue, Leisure Sinks, Lynx, Marvel, Mercury, Rangemaster, Rayburn, Redfyre, Sedona, Stanley, TurboChef, U-Line and Viking.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The chief operating decision maker evaluates individual segment performance based on operating income.
Net Sales Summary
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Apr 1, 2017
|
|
Apr 2, 2016
|
|
Sales
|
|
Percent
|
|
Sales
|
|
Percent
|
Business Segments:
|
|
|
|
|
|
|
|
Commercial Foodservice
|
$
|
312,249
|
|
|
58.9
|
%
|
|
$
|
278,986
|
|
|
54.0
|
%
|
Food Processing
|
77,276
|
|
|
14.6
|
|
|
78,636
|
|
|
15.2
|
|
Residential Kitchen
|
140,772
|
|
|
26.5
|
|
|
158,733
|
|
|
30.8
|
|
Total
|
$
|
530,297
|
|
|
100.0
|
%
|
|
$
|
516,355
|
|
|
100.0
|
%
|
The following table summarizes the results of operations for the company's business segments
(1)
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Foodservice
|
|
|
Food Processing
|
|
|
Residential Kitchen
|
|
|
Corporate
and Other
(2)
|
|
|
Total
|
|
Three Months Ended April 1, 2017
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
312,249
|
|
|
$
|
77,276
|
|
|
$
|
140,772
|
|
|
$
|
—
|
|
|
$
|
530,297
|
|
Income (loss) from operations
|
80,541
|
|
|
17,989
|
|
|
18,912
|
|
|
(16,363
|
)
|
|
101,079
|
|
Depreciation and amortization expense
|
4,982
|
|
|
1,387
|
|
|
7,207
|
|
|
481
|
|
|
14,057
|
|
Net capital expenditures
|
5,985
|
|
|
638
|
|
|
1,282
|
|
|
371
|
|
|
8,276
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
1,359,869
|
|
|
$
|
344,307
|
|
|
$
|
1,200,241
|
|
|
$
|
38,614
|
|
|
$
|
2,943,031
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 2, 2016
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
278,986
|
|
|
$
|
78,636
|
|
|
$
|
158,733
|
|
|
$
|
—
|
|
|
$
|
516,355
|
|
Income (loss) from operations
|
76,569
|
|
|
17,863
|
|
|
9,851
|
|
|
(17,908
|
)
|
|
86,375
|
|
Depreciation and amortization expense
|
4,371
|
|
|
1,438
|
|
|
8,704
|
|
|
417
|
|
|
14,930
|
|
Net capital expenditures
|
4,184
|
|
|
1,798
|
|
|
1,711
|
|
|
—
|
|
|
7,693
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
1,132,939
|
|
|
$
|
325,373
|
|
|
$
|
1,235,772
|
|
|
$
|
83,860
|
|
|
$
|
2,777,944
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Non-operating expenses are not allocated to the operating segments. Non-operating expenses consist of interest expense and deferred financing amortization, foreign exchange gains and losses and other income and expense items outside of income from operations.
(2)
Includes corporate and other general company assets and operations.
Geographic Information
Long-lived assets, not including goodwill and other intangibles (in thousands):
|
|
|
|
|
|
|
|
|
|
Apr 1, 2017
|
|
Apr 2, 2016
|
United States and Canada
|
$
|
178,363
|
|
|
$
|
153,284
|
|
Asia
|
15,357
|
|
|
18,011
|
|
Europe and Middle East
|
120,505
|
|
|
60,795
|
|
Latin America
|
1,050
|
|
|
1,114
|
|
Total international
|
$
|
136,912
|
|
|
$
|
79,920
|
|
|
$
|
315,275
|
|
|
$
|
233,204
|
|
Net sales (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Apr 1, 2017
|
|
|
Apr 2, 2016
|
|
United States and Canada
|
$
|
360,101
|
|
|
$
|
325,941
|
|
Asia
|
42,692
|
|
|
37,794
|
|
Europe and Middle East
|
108,704
|
|
|
136,604
|
|
Latin America
|
18,800
|
|
|
16,016
|
|
Total international
|
$
|
170,196
|
|
|
$
|
190,414
|
|
|
$
|
530,297
|
|
|
$
|
516,355
|
|
|
|
14)
|
Employee Retirement Plans
|
U.S. 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 company maintains a non-contributory defined benefit plan for its employees at the Smithville, Tennessee facility, which was acquired as part of the Star acquisition. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 1, 2008, 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 1, 2008 upon reaching retirement age.
The company also maintains a retirement benefit agreement with its Chairman ("Chairman Plan"). The retirement benefits are based upon a percentage of the Chairman’s final base salary.
Non-U.S. Plans:
The company maintains a defined benefit plan for its employees at the Wrexham, the United Kingdom facility, which was acquired as part of the Lincat acquisition. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 2010 prior to Middleby’s acquisition of the company. 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, 2010 upon reaching retirement age.
The company maintains several pension plans related to AGA and its subsidiaries (collectively, the "AGA Group"), the most significant being the Aga Rangemaster Group Pension Scheme, which covers the majority of employees in the United Kingdom. Membership in the plan on a defined benefit basis of pension provision was closed to new entrants in 2001. The plan became open to new entrants on a defined contribution basis of pension provision in 2002, but was generally closed to new entrants on this basis during 2014.
The other, much smaller, defined benefit pension plans operating within the AGA Group cover employees in France, Ireland and the United Kingdom. All pension plan assets are held in separate trust funds although the net defined benefit pension obligations are included in the company's consolidated balance sheet.
The following table summarizes the company's net periodic pension benefit related to the AGA Group pension plans (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
April 1, 2017
|
|
April 2, 2016
|
Net Periodic Pension Benefit:
|
|
|
|
|
|
|
Service cost
|
|
$
|
964
|
|
|
$
|
889
|
|
Interest cost
|
|
7,764
|
|
|
10,670
|
|
Expected return on assets
|
|
(16,774
|
)
|
|
(17,670
|
)
|
Amortization of net loss (gain)
|
|
720
|
|
|
—
|
|
Pension settlement
|
|
(48
|
)
|
|
—
|
|
|
|
$
|
(7,374
|
)
|
|
$
|
(6,111
|
)
|
The pension costs for all other plans of the company were not material during the period.
|
|
(b)
|
Defined Contribution Plans
|
The company maintains
two
separate defined contribution 401K savings plans covering all employees in the United States. These two plans separately cover the union employees at the Elgin, Illinois facility and all other remaining union and non-union employees in the United States. The company also maintains defined contribution plans for its U.K. based employees.
Residential Kitchen Equipment Group:
During fiscal years 2015 and 2016, the company undertook acquisition integration initiatives related to the AGA Group within the Residential Kitchen Equipment Group. These initiatives included organizational restructuring and headcount reductions, consolidation and disposition of certain facilities and business operations. The company recorded additional expense of
$1.7 million
in the
three months period ended April 1, 2017
. This expense is reflected in restructuring expenses in the consolidated statements of comprehensive income. The cumulative expenses incurred to date for these initiatives is approximately
$29.4 million
. The company estimated that these restructuring initiatives will result in future cost savings of approximately
$24.1 million
annually, beginning in fiscal year 2016, primarily related to compensation and facility costs. The company anticipates that all severance obligations for the Residential Kitchen Equipment Group will be satisfied by the end of fiscal of 2017. The lease obligations extend through November 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance/Benefits
|
|
Facilities/Operations
|
|
Other
|
|
Total
|
Balance as of December 31, 2016
|
|
$
|
5,145
|
|
|
$
|
2,032
|
|
|
$
|
69
|
|
|
$
|
7,246
|
|
Expenses
|
|
183
|
|
|
1,445
|
|
|
97
|
|
|
1,725
|
|
Exchange
|
|
70
|
|
|
31
|
|
|
2
|
|
|
103
|
|
Payments
|
|
(1,050
|
)
|
|
(393
|
)
|
|
(14
|
)
|
|
(1,457
|
)
|
Balance as of April 1, 2017
|
|
$
|
4,348
|
|
|
$
|
3,115
|
|
|
$
|
154
|
|
|
$
|
7,617
|
|
On May 1, 2017, subsequent to the end of the first quarter, the company completed its acquisition of all of the capital stock of Burford Corporation ("Burford"). Burford is a leading manufacturer of industrial baking equipment for the food processing industry based in Maysville, Oklahoma, with annual revenues of approximately
$15.0
million.