TurboChef Technologies, Inc. (NASDAQ:OVEN) and The Middleby
Corporation (NASDAQ:MIDD) today announced they have entered into an
agreement of merger. In the proposed transaction, holders of common
stock of the Company will receive $3.67 cash per share and .0486
shares of Middleby common stock. Based on closing prices as of
August 11th, the consideration would equate to $6.47 per share, a
premium of 30.3% to TurboChef�s 20-day trading average price. The
acquisition is subject to the approval of the stockholders of the
Company and regulatory approval. Consummation of the transaction is
also subject to other customary closing conditions. The Company
anticipates closing the transaction in 2008. Richard Perlman,
Chairman, and Jim Price, President, commented, �We have long
admired and respected The Middleby Corporation and its management
team and believe this transaction is in the best long-term
interests of TurboChef shareholders. We believe Middleby�s
manufacturing and operational expertise, global reach and installed
customer base matches up extraordinarily well with TurboChef�s
leading edge speed cook technology, R&D capability and industry
leading customer service. We think this is a great transaction for
TurboChef employees and TurboChef shareholders as they now have the
opportunity to potentially benefit from holding Middleby stock.� In
addition, TurboChef last evening reported financial results for the
three and six months ended June 30, 2008. Significant Items: Second
quarter 2008 revenue was $21.2 million, an 8% decrease from the
year-ago quarter revenue of $23.0 million, reflecting a difficult
external economic environment. A number of customers have pushed
out their orders reflecting concerns about their own business
results, prospects and credit conditions which are slowing the
opening of new stores. The number of current customers and
potential new customers that are evaluating and testing the
Company�s new commercial ovens continues to grow with the Company
receiving very positive feedback from the ongoing evaluations to
date. The current quarter�s revenue included $499,000 attributable
to the Company�s Residential segment, a 53% increase over the first
quarter of 2008. In addition, overall gross margins were 41% for
the quarter, 180 basis points improved over the year-ago quarter.
Beyond the impact of current economic conditions, revenues were
somewhat less than anticipated because a portion of orders that had
been expected for the quarter came in with certain provisions that
precluded revenue recognition in the current quarter but which will
be recognized in subsequent quarters. Despite the current quarter
results, total revenues for the six months ended June 30, 2008 were
11% above the results for the year-ago period. The Commercial
segment posted operating income of $1.8 million or 8.7% for the
second quarter of 2008. For the year-ago quarter, the Commercial
segment operating income was $3.1 million or 13% on revenues that
were 11% greater. Commercial segment operating income in the
current quarter was negatively impacted by a $469,000 increase in
legal costs primarily related to patent litigation. Diversification
of the Commercial customer base continues as the Company�s two
largest contract customers accounted for only approximately 29% of
the quarter�s revenue, while the third most significant contract
customer added approximately 5%. One of the Company�s important
customers has recently announced it will continue its breakfast
sandwich program in the U.S. with a reformulated and expanded menu.
The Company views this as a positive development for continued and
expanded business with this customer. Approximately $14.0 million,
or 66% of the second quarter�s revenue, was from sales to other
than these three contract customers, an increase of 77% over the
year-ago quarter and, notably, an important indication of continued
broad adoption of speed cook technology. The Company�s role in the
successful rollout of Dunkin� Brands new Oven-Toasted menu powered
by the TurboChef� Tornado� oven was recognized when Dunkin� Brands
recently honored the Company as its 2007 Supplier of the Year,
citing �a technology that has revolutionized the Dunkin� Donuts
product offering...� and, �[t]he TurboChef group far exceeded our
expectations...� Management believes that the Company�s focus on
service and support enhances the value proposition for its
customers and is a major differentiator for TurboChef in the
marketplace. The Residential segment reported an operating loss of
$5.3 million for the quarter. Excluding the impact of the largely
non-cash costs recognized in the quarter related to the previously
announced realignment of the Residential business ($1.2 million)
and the wholly non-cash costs associated with accounting for the
equity consideration for the multi-year marketing services
agreement recently signed with Martha Stewart Living Omnimedia,
Inc. (MSLO) ($1.3 million), the segment�s operating loss would have
been $2.8 million on a non-GAAP basis, approximately $1.1 million,
or 28%, less than the year-ago quarter. This operating loss
comparison for the segment reflects only a partial benefit of the
Company�s previously announced cost-reduction initiatives to
realign its Residential business in light of current market
conditions. The Company�s Commercial segment continues to provide
ovens, service and consumables to its three major contract
customers around the globe and continues to experience impressive
growth in the non-contract portion of the Commercial business
including positive response to its recent release of new products,
floor model and countertop conveyor ovens and the i5 speed cook
batch oven. The Company believes there are a number of positive
factors regarding its Commercial business and remains relatively
optimistic regarding the Commercial business overall. Financial
Review For the three months ended June 30, 2008, total revenue was
$21.2 million compared with $23.0 million in the year-ago quarter.
Unit sales to contract customers decreased in the second quarter
which had been expected as a result of last quarter�s completion of
the domestic portion of the oven roll-out to one major customer,
Dunkin� Brands. Sales to this customer will continue to
international locations and for new store expansion. The decrease
in unit sales to contract customers was partly offset by a
significant increase in unit sales to non-contract customers;
however, a portion of orders which had been expected from certain
of these customers for the quarter came in with certain provisions
that precluded their recognition in the current quarter. For the
six months ended June 30, 2008, total revenue was $45.7 million
compared with $41.3 million for the year-ago period. As a
percentage of total sales, cost of product sales for the second
quarter was 58.9% as compared with 60.7% for the year-ago quarter.
Selling, general and administrative (SG&A) expenses for the
quarter were $12.8 million, including approximately $1.3 million in
non-cash cost related to the MSLO marketing agreement and $1.2
million in costs related to the previously announced realignment of
the Residential business. Excluding these costs, aggregate SG&A
for the second quarter were $10.3 million on a non-GAAP basis.
SG&A for the year-ago quarter was $13.2 million or, on a
non-GAAP basis, $10.0 million excluding $3.2 million related to the
Company�s investigation of stock option practices ongoing at the
time. The Company implemented cost-reduction initiatives in the
second quarter 2008 which are anticipated to achieve annualized
savings of approximately $3.0 million commencing in the second half
of the year. The Company reported a net loss of $6.8 million or
$0.22 per share for the second quarter of 2008 compared with a net
loss of $6.5 million or $0.22 per share in the year-ago quarter.
Excluding the effects described in the preceding paragraph of the
costs incurred to realign the Residential business and the costs
associated with the MSLO agreement (both largely non-cash), on a
non-GAAP basis, the second quarter 2008 net loss would have been
$4.3 million or $0.14 per share. Non-GAAP Disclosure In addition to
the GAAP results provided in this release, the Company provides
information for non-GAAP operating loss, SG&A, net loss and
loss per share (non-GAAP EPS) for the second quarter of 2008 and
non-GAAP SG&A for the second quarter of 2007. These non-GAAP
financial measures are not in accordance with, or an alternative
for, generally accepted accounting principles in the United States.
The GAAP measures most directly comparable to non-GAAP operating
loss, SG&A, net loss and loss per share are operating loss,
SG&A, net loss and net loss per share. Non-GAAP operating loss,
SG&A, net loss and loss per share for the second quarter 2008
exclude costs associated with realigning the Residential business
and the cost associated with the MSLO agreement, both largely
non-cash. Management believes that providing these non-GAAP
financial measures better enables investors to understand and
evaluate the Company's current operating performance. More
specifically, management excludes the realignment costs because it
believes that these costs do not reflect expected future operating
expenses and do not contribute to a meaningful evaluation of the
Company's future operating performance or comparisons to the
Company's past operating performance. Management believes that
exclusion of the MSLO costs enables investors to better understand
the cash requirements for the Residential business and make a more
meaningful comparison to this business� past operating performance.
SG&A for the second quarter 2007 excludes costs related to the
Company�s investigation of stock option practices ongoing at the
time. Management believes that exclusion of the stock option
investigation costs facilitates a comparison of SG&A costs in
the periods presented. These non-GAAP financial measures may have
limitations as analytical tools, and should not be considered in
isolation or as a substitute for analysis of the Company's results
as reported under GAAP. Other companies may calculate non-GAAP EPS
differently than the Company does, limiting the usefulness of those
measures for comparative purposes. Commentary Richard Perlman,
Chairman, said, �Since we reported our first quarter results, we�ve
seen the economy have a dampening effect on our commercial
revenues. While our customer relationships remain very strong, our
customers are also being affected by the economy in this
challenging environment.� Jim Price, President, added, �In light of
the current housing situation and overall economic conditions, the
Company is scaling back its residential marketing and promotional
spend and will scale back the entire residential business in
keeping with the realities of current conditions. We were pleased
to have seen an increase in our residential oven sales particularly
in this environment. We are now shipping the Single Wall Oven, the
newest addition to our product line and continue development on
additional products to enhance the residential offerings. We are
confident that the business will be positioned to capture the
upturn when the residential market recovers.� About TurboChef
TurboChef Technologies, Inc. is a leading provider of equipment,
technology and services focused on the high-speed preparation of
food products for the worldwide commercial primary cooking
equipment market and offers equipment for residential markets
through the application of its high-speed cooking technologies, as
well. TurboChef�s user-friendly speed cook ovens employ proprietary
combinations of heating technologies to cook a variety of food
products at speeds faster than, and to quality standards that it
believes are comparable or superior to, that of conventional
heating methods. The address of TurboChef�s principal executive
offices is Six Concourse Parkway, Suite 1900, Atlanta, GA 30328.
Visit TurboChef at www.turbochef.com. The Company�s previously
announced conference call to discuss its second quarter results
rescheduled for Tuesday, August 12, 2008, at 8:00 a.m. EDT has now
been cancelled. Important Information In connection with the
proposed merger, the parties intend to file relevant materials with
the Securities Exchange Commission ("SEC"), including a joint proxy
statement/prospectus regarding the proposed transaction. Such
documents, however, are not currently available. INVESTORS ARE
URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE
PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain a
free copy of the joint proxy statement/prospectus, as well as other
filings containing information about TurboChef and Middleby without
charge, at the SEC�s website (http://www.sec.gov) once such
documents are filed with the SEC. Copies of the joint proxy
statement/prospectus can also be obtained, without charge, once
they are filed with the SEC, by directing a request to TurboChef
Technologies, Inc., Attention: Investor Relations, Six Concourse
Parkway, Suite 1900, Atlanta, GA 30328 (678) 987-1700. TurboChef
and its directors, executive officers and other employees may be
deemed to be participants in the solicitation of proxies from the
security holders of TurboChef in connection with the proposed
transaction. Information about TurboChef�s directors and executive
officers is available in TurboChef�s proxy statement, dated June
11, 2008, for its 2008 annual meeting of stockholders. Additional
information about the interests of potential participants will be
included in the joint proxy statement/prospectus and the other
relevant documents filed with the SEC when they become available.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended. Forward-Looking Statements Certain
statements in this release, and other written or oral statements
made by or on behalf of TurboChef, are �forward-looking statements�
within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements regarding future events and developments and
our future performance, as well as management�s expectations,
beliefs, plans, guidance, estimates or projections relating to the
future, are forward-looking statements within the meaning of these
laws. These forward-looking statements are subject to a number of
risks and uncertainties. These risks and uncertainties include, but
are not limited to, the following: the uncertainty of market
acceptance and demand for the Company�s products, the ability to
obtain additional financing necessary to expand operations, the
uncertainty of consumer acceptance of new products or technologies
that may be offered by TurboChef, the dependence on a limited
number of customers, relationships with and dependence on
third-party equipment manufacturers and suppliers, impact of
competitive products and pricing, and the results of government
inquiries and possible regulatory action or private litigation
regarding the Company�s stock option grants and practices. The
words �looking forward,� �believe,� �expect,� �likely,� �should�
and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only for the date the
statement was made. TurboChef Technologies, Inc. undertakes no
obligation to publicly update any forward-looking statements,
whether as a result of future events, new information or otherwise.
� � � � TURBOCHEF TECHNOLOGIES, INC. UNAUDITED CONSOLIDATED
STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA) � � Three Months Ended June 30, Six Months Ended June 30, �
2008 � � 2007 � � 2008 � � 2007 � Revenues: Product sales $ 20,970
$ 22,726 $ 45,152 $ 40,665 Royalties � 217 � � 242 � � 516 � � 634
� Total revenues 21,187 22,968 45,668 41,299 � Costs and expenses:
Cost of product sales 12,488 13,931 27,198 25,464 Research and
development expenses 1,326 1,379 2,799 2,866 Selling, general and
administrative expenses 12,750 13,236 23,974 22,578 Depreciation
and amortization � 1,254 � � 960 � � 2,432 � � 1,911 � Total costs
and expenses � 27,818 � � 29,506 � � 56,403 � � 52,819 � �
Operating loss (6,631 ) (6,538 ) (10,735 ) (11,520 ) � Other income
(expense): Interest income 24 180 97 401 Interest expense and other
� (152 ) � (160 ) � (464 ) � (316 ) � (128 ) � 20 � � (367 ) � 85 �
� Net loss $ (6,759 ) $ (6,518 ) $ (11,102 ) $ (11,435 ) � � Per
share data: Net loss per share: � Basic and diluted: $ (0.22 ) $
(0.22 ) $ (0.37 ) $ (0.39 ) � Weighted average number of common
shares outstanding: � Basic and diluted: � 30,264,211 � �
29,247,657 � � 30,197,174 � � 29,235,610 � � � TURBOCHEF
TECHNOLOGIES, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS (IN
THOUSANDS, EXCEPT SHARE DATA) � � � June 30 December 31 2008 2007
Assets: � Current assets: � Cash and cash equivalents $ 13,139 $
10,149 Accounts receivable, net 13,221 38,657 Other receivables
2,866 2,502 Inventory, net 17,955 11,883 Prepaid expenses � 10,533
� � 3,307 � � Total current assets 57,714 66,498 � Property and
equipment, net 7,480 6,728 � Developed technology, net 4,752 5,156
Goodwill 5,934 5,934 Covenants not-to-compete, net 4,034 4,314
Other assets � 144 � � 91 � � Total assets $ 80,058 � � $ 88,721 �
� Liabilities and Stockholders� Equity: � Current liabilities:
Accounts payable $ 21,333 $ 20,178 Accrued expenses 5,793 9,894
Future installments due on covenants not-to-compete and additional
consideration for assets acquired 3,941 3,801 Amounts outstanding
under credit facility 8,000 9,000 Deferred revenue 9,051 9,554
Accrued warranty 15 558 Deferred rent 247 247 Other current
liabilities � - � � 1,908 � � Total current liabilities 48,380
55,140 � Deferred rent, non-current 852 974 Other liabilities � 109
� � 100 � � Total liabilities 49,341 56,214 � Commitments and
contingencies � Stockholders� equity: � Preferred membership units
exchangeable for TurboChef common stock 380 380 Common stock, $.01
par value, authorized 100,000,000 shares, issued 30,402,918 and
29,568,325 shares at June 30, 2008 and December 31, 2007,
respectively 304 296 Additional paid-in capital 183,161 173,857
Accumulated deficit � (153,128 ) � (142,026 ) � Total stockholders�
equity � 30,717 � � 32,507 � � Total liabilities and stockholders�
equity $ 80,058 � � $ 88,721 � � � TURBOCHEF TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) � �
Six Months Ended June 30, � 2008 � � 2007 � � Cash flows from
operating activities: Net loss $ (11,102 ) $ (11,435 ) Adjustments
to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,432 1,911 Amortization of deferred
rent (122 ) (121 ) Amortization of deferred loan costs and non-cash
interest 259 298 Amortization of common stock and warrant issued in
exchange for marketing and related services 1,310 - Non-cash
compensation expense 2,077 689 Provision for doubtful accounts 110
272 Other 48 - Changes in operating assets and liabilities:
Accounts receivable 25,278 (4,286 ) Inventories (6,623 ) (375 )
Prepaid expenses and other assets (3,659 ) 1,968 Accounts payable
1,155 3,940 Accrued expenses and warranty (4,657 ) 3,006 Deferred
revenue � (503 ) � 829 � � Net cash provided by (used in) operating
activities � 6,003 � � (3,304 ) � Cash flows from investing
activities: Property and equipment expenditures � (1,945 ) � (421 )
� Net cash used in investing activities � (1,945 ) � (421 ) � Cash
flows from financing activities: Borrowings under credit facility
8,000 - Repayments of credit facility (9,000 ) - Proceeds from the
exercise of stock options and warrants 109 313 Payment of deferred
loan costs � (177 ) � (25 ) � Net cash used in (provided by)
financing activities � (1,068 ) � 288 � � Net change in cash and
cash equivalents 2,990 (3,437 ) Cash and cash equivalents at
beginning of period � 10,149 � � 19,675 � Cash and cash equivalents
at end of period $ 13,139 � $ 16,238 � � NONCASH OPERATING AND
FINANCING ACTIVITIES: � Noncash operating and financing activity -
issuance of common stock and warrant in exchange for marketing and
related services $ 5,240 $ - � SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION: Cash paid for income taxes $ - � $ - � Cash paid
for interest � 192 � � 16 � �
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