The Middleby Corporation (MIDD) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Middleby Corporation Q4 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call: Mr. Selim Bassoul, Chairman and CEO; and Tim FitzGerald, Chief Financial Officer. You may begin.

Okay. Thanks, Kevin. Good morning, everybody. I have some initial comments about company's fourth quarter results and then we'll open the conference to -- for questions and answers. Net sales in the 2013 fourth quarter of $377.4 million increased 29.4% from $291.6 million in the fourth quarter of 2012. The fourth quarter sales reflect the impact of acquisitions completed in 2013 and the fourth quarter of 2012, including Viking, Nieco, Stewart Systems, Celfrost and Wunder-Bar. These acquisitions were not fully reflected in the prior year comparative results and accounted for 20.8% of the sales growth in the quarter. Excluding the impact of these acquisitions, sales increased 8.6% over the prior year quarter. This increase reflects an organic sales growth of 12.6% in our Commercial Foodservice Group and a 2.2% reduction in sales at our Food Processing Group. At the Commercial Foodservice Group, we continue to realize growth, driven by increased sales to restaurant chains looking to upgrade equipment and adopt new technologies to improve the efficiency of store operations. Sales in international markets remained strong with overall growth of 15% for the quarter. We realized growth in all regions, although slower growth in China continue to somewhat impact the overall international growth rate due to temporary slower purchases by a major customer in that region. As expected, sales at the Food Processing Group declined slightly from the prior year quarter in comparison to prior year quarter, which grew 30% and included a large customer order. This order is also reflected in the first quarter sales of 2013, which grew at a rate of 18%. Accordingly, we anticipate the first quarter comparisons will similarly continue to reflect the impact of the stronger prior year. Although the first quarter comparisons will continue to be challenging, we have a positive outlook for the year as we continue to see strong demand by our Food Processing customers looking to modernize existing production operations and new customers developing operations in international markets. Sales at Viking amounted to $56.2 million during the fourth quarter and reflected the continuing improvement in industry conditions from the prior years. We expect the first quarter revenues in 2014 will be somewhat impacted by bad weather conditions and the adverse impact of disruption related to the acquisition of several large Viking distributors completed in the first quarter of 2014. However, we believe the impact of the new product introductions and the benefit of the Viking-owned sales and distribution organization will reflect in the second half of 2014. Gross profit for the fourth quarter increased to $150.7 million from $113.2 million in the prior year, and the gross margin rate was 39.9%. This compared to 38.8% in the prior year quarter. The gross margin rate reflects the impact of increased margins at the Commercial Foodservice Group and the Food Processing business segments. Additionally, the dilutive impact of Viking continued to lessen from the first half of the year. The gross margins improved to approximately 38% in the second half of the year as compared to 30% in the first half of 2013. The improvement in gross margin at Viking reflects the benefit of purchasing savings, SKU simplification actions, gains in production efficiencies and the restructuring of distribution channels. Selling and distribution expenses during the quarter increased $12.4 million to $39.1 million. $11 million of this increase was attributable to expense from the recent acquisitions with the remaining increase associated with direct costs and higher sales volumes. General and administrative expenses increased $9.3 million to $37.2 million. The increase in G&A expense for the quarter was primarily attributable to $7 million of incremental costs from the acquisitions. The G&A expense from -- for the quarter includes an increase of $3.1 million of noncash intangible amortization costs associated with these recent acquisitions. The tax provision amounted to $19.6 million at a 28.2% effective rate as compared to the prior year provision of $17.9 million at a 32.2% effective rate. The fourth quarter tax provision reflected favorable adjustments related to reduced state tax expenses, and we estimate that the effective rate will increase to a more normalized rate of 33% to 35% in future periods. Cash flows provided by operating activities amounted to $62.6 million in the quarter as compared to $43.5 million in the prior year quarter and reflected the growth in fourth quarter sales and profits, as well as the positive impact of working capital cycles, which typically results in stronger operating cash flows in the second half of the year. Noncash expenses added back in calculating operating cash flows amounted to $10.8 million for the quarter, including $6.9 million of intangible amortization, $0.6 million of depreciation and $3 million of noncash stock-based compensation. Depreciation was lower than normal in the fourth quarter due to purchase accounting adjustments to the fair market value Viking-related fixed assets. In future quarters, we expect the depreciation expense will return to a more normalized range of $2.5 million to $3 million per quarter. During the fourth quarter, the company utilized $3.6 million to fund capital expenditures. And for the full year, CapEx amounted to $14.7 million. CapEx is primarily related to the upgrade of manufacturing equipment and facilities expansions. Total debt at the end of the quarter amounted to $571.6 million as compared to $537.4 million at the end of the third quarter, reflecting borrowings to fund the recent acquisitions of Celfrost and Wunder-Bar, which occurred during the fourth quarter. The company's debt-to-EBITDA leverage ratio at the end of the year was just under 2x as compared to approximately 3x at the beginning of the year. We're pleased to announce the acquisition of the Celfrost and Wunder-Bar in the fourth quarter of 2013 and the acquisition of Market Forge to start 2014. These acquisitions, collectively, have revenues of approximately $65 million and provide 3 strategic investments to support continued growth. With the acquisition of Celfrost, we had a leading cold-side brand with significant sales, service and distribution capabilities in the fast-growing Indian market, complementing our hot-side brands and providing an expanded infrastructure to our -- to support our restaurant chain customers as they grow in this market. The acquisition of Wunder-Bar, a leading innovator in beverage dispensing solutions, significantly increases Middleby's capability to serve the beverage segment of the commercial food service industry. We think -- see significant growth opportunities in this area as our customers realize high levels of profitability in beverage offerings and continue to add new innovative beverage programs. So the most recent acquisition of Market Forge, we had a long-standing recognized brand in steam cooking for the restaurant industry. The steam cooking market is a large and growing market, and this acquisition provides us with a portfolio of innovative equipment solutions and a dedicated branded to serve this market. As it relates to the Viking acquisition, we're pleased with the progress we made throughout the year. We've made -- we've realized significant improvements in profitability, which we continue -- or which we expect to continue in 2014. We also made significant progress in the reorganization of the distribution channels with the acquisition of independent distributors. This process was completed in the first quarter of 2014. And now, all the distribution in North America is handled through Viking-owned distribution operations. We will focus on completing the integration of these various operations in the first half of this year and anticipate that will be completed in the second quarter. We are also very excited about the introduction of over 50 new products, including new ranges, ovens, refrigeration, cooktops and ventilation products, which were on display at the recent kitchen and bath show. And at the show, we were pleased to have received the top 3 People's Choice Awards for our new French door wall oven, new lineup of cooktops and new 7-Series range. Kevin, that's all for our prepared commentary. If you could open up the call now to questions, that would be great.

[Operator Instructions] Our first question comes from Schon Williams of BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: It's Schon Williams. I wanted to dive in first here on the gross margins in the quarter. I wonder if you could just talk a little bit about maybe some of the sequential improvement Q3 versus Q4, I mean, quite a bit of 60 basis points of improvement on some modest volume expansion. I'm just wondering how much of that was Viking, how much of that was, I don't know, other pieces of the mix. And do you think a 40% gross margin is sustainable going forward?

Yes. Schon, this is Tim. So the improvement that we saw -- well, actually, most of the improvement sequentially from Q3 to Q4 took place in the Commercial Foodservice and Food Processing segments. The Viking gross margin was pretty strong around 38%, but that was fairly consistent with the third quarter as we had significant step-up in the gross margin in the entire back half of the year with Viking. So that's where we saw the sequential improvement. On Commercial Foodservice, some of that had to do with mix. And then I think our -- we're operating at pretty strong margins in that portfolio. So a lot of the change in that segment that we see from quarter-to-quarter really is more of a mix impact and where the sales are coming from within each of the brands of that portfolio. So that can kind of move up or down. And I would say, the fourth quarter was a stronger quarter from that standpoint because it was well in excess of 40%. On the Food Processing, that stepped up in the third quarter. I mean, there, we continue to focus on efficiency improvements with the new companies that we've bought over the last 2 years. So I think that's a continued, longer-term trend. I would say we had a good result on gross margins in that segment in the fourth quarter. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. So as we move into next year, I mean, should we -- we should see further improvement in the gross margins but possibly not at that 40% rate, depending on where the mix falls out?

Yes, I think that's exactly right. I mean, I think longer term, we'll see continued expansion in Food Processing and as well as Viking. In the nearer term, I think mix will have a bigger impact on the margin rate than anything. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And then as a follow-up, could I -- could we talk a little bit more about Viking and possibly what your plans are with both restructuring the workforce there and then possibly some planned expansion on the refrigeration side there? I just want to make sure I understand. I mean, where are we in terms of the endgame here with the restructuring activities? Are we still in the kind of third or fourth inning, or we're getting close to the end there? And then just talk maybe a little bit about some of the -- some of your plans around the planned expansion.

Schon, I can address that [indiscernible] definitely. We are working on introducing a new line of refrigeration, which we showed at the kitchen and bath show, and that was highly well received, totally innovative, highly patented refrigeration platform, which extend the shelf life of food significantly compared to our competitors. So -- however, this will require some complete investment in our refrigeration plan as we have to meet the energy -- the new energy requirement both in Europe and the U.S. So we will be making significant investments in this year in our refrigeration plants at Viking to be able to bring the equipment needed to create new forming, new installation and new testing and new hot tooling for those new models coming up in the fourth quarter of this year. Christopher Schon Williams - BB&T Capital Markets, Research Division: And any commentary about just in terms of restructuring? I mean, you went through another round of layoffs back in November there. I mean, anything -- should we continue to see additional gains there on profitability within Viking?

I think that as we continue looking at -- it's still a work in progress, I would say. I would hate to say today that we know exactly what's going to happen because we have moving parts. One, the first moving part, we've introduced 50 new products. Those 50 new products, we're going to require some investments in launching those products. So the first products are being launched right now as we speak. They're being launched March 1, so we'll have a slew of new products coming off March 1. The next wave is coming up in July and then the last wave comes in, in the fourth quarter, around November, December. So as we look at this, there's some impact, unfortunately, because we had to go to kitchen and bath show and show the products. So we're going to have some cannibalization where people are saying, "Why would I have -- why would I buy an old series refrigerator when I can get a new refrigerator, which looks totally fashionable and new?" So we're have to -- most probably have to work slow. How do you balance moving -- still having people buy what you have currently and manage when people have already looked at the peak and we got -- received awards on new products, saying, "Why would I buy a old wall oven, when I can buy the new French door oven, a new TurboChef oven?" So we're going to have somewhat of a -- the next few months of what I call a change of production and sales. Changes are going to be affected by the new introduction of products. So this year, in 2014, it will be -- it continues to be -- I think this'll be the last year of what I call restructuring in terms of not only people. I'm not talking destruction of people, but I'm talking about sales force, training, managing, switching from old ranges to the new ranges, old cooktop to new cooktop, the old refrigeration, the new refrigeration. So to answer your question briefly, we're going to continue having, most probably, a very volatile year at Viking this year as we continue moving through this transition.

Yes. And, Schon, I'll just add, as we mentioned, we just completed the last few distributor acquisitions. Those were some of the larger pieces to complete the reorganization there. So we're in the midst of kind of reorganizing the whole sales and distribution function and integrating it with Viking. So that -- that's ongoing and will continue, really, through the first half of this year. But kind of the bigger picture, we had targeted getting to a 20% EBITDA run rate by the end of 2014. And we feel like we're pretty well on track with that with -- overall, our EBITDA margins were just north of 15% for the year, a little bit stronger in the back half of the year. So we think that will continue to pick up with -- particularly in the second half of the year as distribution is fully integrated and new products are further seated, and we'll pass some of the disruption in the first half.

Our next question comes from Peter Lisnic with Robert W. Baird. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Tim, I was wondering if you could talk just a little bit about Commercial Foodservice. You did 11% organic for the year. Obviously, as you look to 2014, that creates a tough comp. You've got a large customer order in there, I guess, 2 from '13. So give us a feel as to how '14 might play out, just given what you've got in terms of new products out there, customer inquiries. I'm just wondering, in terms of growth, what the '14 year might look like for Commercial Foodservice.

Peter, I'm going to answer that question. So first, yes, we're going to be overlapping a -- 2 major rollout that occurred in 2013. But I will tell you, specifically, that we have some exciting things coming up. So one of the things that we keep talking about, and we're going most probably start seeing the impact of the Kitchen of the Future coming in. So we've talked about what's happened after Chili's. So we're proud to announce that we have another chain, the size of Chili's, that we've now embarked on and we just finished shipping the first 50 units. So I believe that -- as we talked about this automation in the Kitchen of the Future, so we finally, basically now are working with the second chain that has the same potential as Chili's comes through with our Kitchen of the Future. So that's in the works. And that's going to start ramping up in the second half of the year, and that will offset some of the rollout of 2013. So how do I see -- so let's -- without getting into specific about new products, there's tons of new products every moment. Peter, you've been following -- and most of the analyst and most of the shareholders have been following the story of Middleby. We generate 10 to 12, 13 new products a year, and they are very, very disruptive. So let's talk about what's -- how the year is going to look in 2014 versus 2013. I think it's going to be very similar, and 2014 would be very similar to 2013. I see it to be same, and we're concerned about overlapping 2 major rollouts. We'll overlap them with some new customers coming in, including Kitchen of the Future. So if you have to think about 2014, yes, it's -- the last year 2013, we had a conference -- consumer conference issue with what happened in July with the sequester. This year, we're having it differently. We're having it to the weather. So we're always going to have the turbulence. We're not out of the gate. It's not clear, clear skies. But we seem to be managing those turbulences very well. Number two, I think last year, we had a huge disruption with Viking, with buying our distributor. It was very difficult. We end up changing business model in the industry. We went out and bought our -- basically, our sales force, and that was highly disruptive because a lot of those distributors, while we're negotiating, stopped placing orders. Some of the sales force was edgy, not knowing are they going to be kept, what is the compensation. So this will be behind us. We just finished, in February, the last 2 distributors. So we're done. That will pave the way for more stability on the Viking side. So I look at 2014 to be similar to 2013. It's not okay without its challenges, but we'll overcome that. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay, perfect. That's perfect color. And then I was just wondering if could ask a couple of strategic questions. The first one, I mean, you mentioned some new products at Viking on the refrigeration side and we also threw in Celfrost in there. So it seems like there's a little bit more of -- I don't know if focus is the right word, but there's more refrigeration in your language. Can you give us a feel for, as you look forward, what the opportunities on the refrigeration side might be for Middleby?

It's too early to tell. So far, they -- so far, our portfolio, both at Viking and both at Celfrost -- but let's talk about Viking most specifically, because I have a much better understanding of the Viking refrigeration than the Celfrost worldwide. So I will talk about Celfrost in just a minute, but let's talk of Viking refrigeration. Viking refrigeration in the high end is $1 billion market, a little bit over $1 billion. And the players are most probably 4 players, 4 to 5 players at most, and Viking is one of those 5 players with a very small market share. And I think that part of that position has been where Viking spent a lot of time focusing on ranges and cooking versus refrigeration. And we see Viking playing a major role at a high margin because that $1 billion market is a very high-margin residential refrigeration business. And we are interested in investing in it and growing it and growing our market share. So you look at our -- today, $1 billion most probably will have less than 3% of that market or around 3% -- let's say, around 5% at most, if you want to say that. There should be no reason for us not to be 10%, 20%, 25% of that market. And that's where we're going, and that's why we're making the investment. On the Celfrost side, we bought Celfrost because we believe that refrigeration in emerging market is very higher-margin proposition. Because as U.S. chains and local chains start growing their units in India, in the Middle East, in Sri Lanka, in China, refrigeration becomes an important part of it. And we want to be a player in those markets with technology as the value proposition that allows us to get the margins that we have and allow our customers to have a value proposition. And I think it's a win-win. And that's the reason we enjoyed going after Celfrost. It's a very market-opportunistic position. It's not to go and bring Celfrost to United States. It's not to come in and say, "I'm going to take Celfrost to Europe." The acquisition of Celfrost is specifically to become a leading refrigeration leader in emerging markets.

It's... go ahead. Adding that -- the -- Celfrost beyond refrigeration brought a lot of sales, service, infrastructure in India. So the leading brand with that infrastructure allows us to really service the whole market of India on the hot side, as well as it's really -- in an infrastructure investment, to grow our presence in India overall with kind of a leading cold-side brand.

[Operator Instructions] Our next question comes from Tony Brenner with Roth Capital Partners.

I have a question regarding Viking, couple of questions regarding Viking. First of all, with the acquisition of the distribution network, what kind of a markup does that imply for Viking sales? And then I presume that now that you'll be recording sales when the distributor sells rather than when Middleby ships to the distributor, there will be a delay of some sort in recognizing revenues. So between that markup as you recognize distributor revenues and the delay in recording those revenues, what does that imply for first quarter revenue comparisons for Viking?

Yes, that's a good question, and it's a hard question to answer. We've been going through that, really, in the second half of the year, Tony, because we've been acquiring distributors starting in the second quarter and, really, in each quarter we've either canceled or acquired distributors. So we've had kind of exactly what you're talking about, which is this lag of what was revenue now becoming an intercompany shipment. And because there are so many activities going on, it's been very hard for us to, on a net basis, understand what the impact of revenues is. In the first quarter, the ones that we completed were the largest of the distribution network. So it'll probably have the biggest impact in the first quarter. So we do expect that that'll probably flatten out or draw back what would've otherwise been some sales growth in the first quarter. But it's a little bit difficult right now because those are very recent acquisitions to understand the full implication of it.

Well, I could tell you one thing, Tony. It will definitely be easier for us at Viking having done -- finished acquiring the distribution than what happened last year. Last year, we started in April, I think March or April, and we were almost every quarter buying some. And it was not clear whether all of them would sell or who's going to buy and what is the structure. And I think that, from our perspective, while we might have challenge in the first quarter at Viking because of acquiring those last 2, it's definitely now, from a distribution standpoint, from a dealer standpoint, everybody knows we're going to call on them to have a unified program. We have unified pricing. We have a unified MSRP, unified GMRC. We put it all of the -- on Internet sales that now goes across the nation. I have to tell you I'm very excited. Finally, we got this done and it took a little bit longer than we expected, but it's now behind us. So from your question, how is it going to impact us? Yes, we might have an impact in the first quarter, but then it should be a lot smoother for the rest of the year compared to almost every quarter last year, we're facing that question.

Sure. Are the distributor margins much lower than Vikings own margins? It sounds like without those acquisitions, second half Vikings margins might've been a little greater than you're implying they were?

Well, distributors definitely that we bought have lower margins. Essentially, those were not very profitable operations from a bottom line standpoint. So as you initially indicated, we'll get an incremental market that they have, that they had cost to run those operations. And one of the things that we're in process of doing is streamlining that centralizing -- and realizing cost efficiencies, which will incrementally add to the EBITDA margin of Viking by the second half of 2014. We did get a little -- some of the benefit of that in the back half of this year with the ones that we have bought earlier in the year, but that's kind of the work in process, so.

But that's -- those acquisitions don't change your projections for margin improvement at Viking overall, right?

No. They're kind of built in to our target to get to the 20% run rate for the second half of this year, but probably give us the opportunity to grow beyond that 20% as we move into 2015 and '16.

Okay. Will there be more than one new kitchen renovation customer in the first half of 2014, or is it only that one new customer that replaces Chili's?

Tony, this is not replacing that. I think we're just basically [indiscernible] of that customer. I think -- which is a -- will be our second large Kitchen of the Future customer. And that's -- I see this starting happening in the second half of the year. So it's -- so far, we've done 50. And I think we'll most probably see that starting accelerating in the second half of the year. So we're not going to see much until we'll find they are getting as -- happened with Chili's. It took some time to set this training, set the menus. So we'll see. Now it's up and going. We're done. Excuse is no longer accept. It's going to roll out, but it's going to -- you're going to start seeing acceleration of the rollout, I would say, in the second half of the year.

Selim, but I'm talking about other customers besides the one that you're referring to. Are there other chains that are going to come onstream?

Yes, yes. At this moment, as I've said, we have several chains testing the system, and we are still in test. So we only have now one that have gone from test to actual rollout. And it's the size of -- exactly the size of Chili's, in terms of Chili's.

My last question, Tim, you've implied that tax rate is going to go back to historical norms, 33% to 35%. You've got to go all the way back to the third quarter of 2011 before you had a tax rate as high as 34%. Over the last 3 years, you had a new normal, which is considering -- considerably below that. Why are you looking for an uptick in tax rate?

Well, I think -- really, the last couple of years, we've had some favorable reserve adjustments. We've done a lot to reduce exposures where we had tax reserves that were on the books. So those kind of came through the P&L and helped reduce the effective rate. They helped us reduce the go-forward exposures as we were able to do that. And then -- but then we were able to take some of the exposures off the books. And that was kind of benefited this year and last year as we kind of put those plans in place and also had some audits wrap up. So I think the rates have been running, I guess, lower than ordinary, really the last couple of years, because of that. But I think the big picture, Tony, is that our tax rate used to be 38%. I mean, it was much higher. And we've done a lot to bring that from the high-30s to the lower-30s, and a lot of that had to do with state tax planning, probably had to do with the international acquisitions and some structuring that we've done related to that. So I think, overall, the trend has been very positive over the last 5 years from the tax rate perspective.

Our next question from Greg Halter with Great Lakes Review.

I wonder if you could speak to how each of the geographic areas did, Europe, Asia and Latin America, in the quarter or the year or both.

I'm sorry, I missed that, Greg. What was the question again?

How the sales did in the geographic areas of Europe, Asia, Latin America.

Well, okay, as I mentioned, the -- overall, international growth was 15%. Our strongest performing market was Latin America, which was in excess of 20%. Europe performed very well also, which is -- we view as not necessarily an emerging market, and that was double-digit growth rates. So actually Asia was -- Asia grew in the high single digits, and that was probably a little bit slower than what we've seen historically. And that's, as I mentioned, because of -- in China, a large customer, which had some food safety issues during the year, they had slowed down store openings. So -- but we expect that to kind of come back online next year.

And that commentary you just provided, is that for the quarter or the year?

Yes, that is for the quarter.

Okay. And, Selim, I know you always talk about -- or sometimes talk about new products. Just wondered if there's anything of note that you may want to speak to.

I can talk a lot of new products coming up [indiscernible] And existed. As you well know, Greg, we have, basically, waterless steamer. That's being rolled out as we speak, very excited about that. We have a brand-new panini product that we're very excited about that. We have WOW! suite that going to be unveiled this year and to the revolutionary pizza oven, again, in the way it works and how it interacts with ventilation, highly patented, highly trusted. We have our waste management system, taking solid waste to biofuel. And that is out in place and is now getting out, picked up 6 orders so far. It was highly patented. We have our fire oven that's coming at NRA. We have significant amount of holding cabinets that's coming soon. And of course, at Viking, we have 50 new products being launched this year. I think as I look towards where -- I've always wanted to look at the picture at Middleby. If you are a shareholder or you're an analyst or you're a customer or you're an employee or supplier, you have to look at Middleby 3 years from where we launch the product. I always say we're continuing the softening the marketplace, and we've continued bringing value to our customers, whether on the residential or the food processing or the commercial side. And 2013 and 2014, we'll see that highest number of patented products being launched in the history of Middleby at all level, at the food processing, at the commercial and at the residential, in all 3 segments.

Okay. And Tim, relative to the -- some of the balance sheet categories, receivables, inventories and payables, what kind of impact have the acquisitions had on those? If you could break that down, that would be helpful.

Yes. It was significant, and I don't have exact numbers for you, unfortunately, but roughly 2/3 or more of the increases that you would see in the inventory and receivables would come from acquisitions that including not only the original acquisition, if I can go all the way back to distributors that we were acquiring during the year and then right at the calendar year, we've had Celfrost and Wunder-Bar, which was in December. So I think you're going to see most of the kind of growth in the inventory and receivables due to working capital. There would have been some incremental investment either due to sales growth or, more significantly, with investments we've made in international markets as we opened up our office in Brazil. We opened up an office in Australia, expanded some of the operations that we had in the Middle East, so we've invested in some working capital on those markets as we've been growing there as well. The overall DSO and inventory turns there were actually relatively consistent when you actually normalize these things. So we've seen a slight increase in those, but not substantial.

And I missed the number you provided on depreciation and amortization for the quarter.

Yes. So depreciation, I mentioned, was low in the quarter. It was about $0.5 million or was point -- it was $600,000, which was lower because we -- was the first year kind of valuation of all the Viking assets, which pulled up the fixed assets in the fourth quarter where we had a kind of a true-up adjustment. So we would normally see depreciation in the $2.5 million to $3 million range, and that came through at $600,000 in the fourth quarter. So that is one point that I mentioned, but I'll highlight again, and -- but for the entire quarter, we had $10.8 million of noncash expenses. So $6.9 million of it was intangible amortization. We have $3 million of noncash stock-based compensation and then the depreciation number I just mentioned.

Okay. And what did the company spend -- and you may not have the final numbers here, but on M&A, the cash flow number that will show up on the cash flow sheet spent on M&A in 2013?

I do not have the exact number, Greg. You asked specifically about new products. And I think that should be an interesting a question again because you're right, the DNA of the company has always been about innovation. So we're going to continue talking about, and I'll elaborate a little bit more of this. Actually, we should talk our new low volume fryer that has a payback of literally -- in less than a year, we continue working on our fryer system, and it's highly outside the division. Our fryer division has done extremely well. It continues to be well, both domestically and international. Our people oven business, especially with both our ventless conveyor oven and our WOW! oven, which is now we have introduced -- in 2006, we introduced WOW! 1. In 2010, we introduced WOW! 2. And now we're introducing WOW! 3, which is completely revolutionary in a way it will cook a pizza, the speed, the product and the service of that oven.

Is that the one I've seen that cooks a pizza in 90 seconds?

That one you see in 90 seconds is the fire. It's completely different. It's not a conveyor. But that's the brand new product being released in 2014. We just got a huge order for it. And yes, it's a 90-second pizza that has -- it's not a conveyor. It's a batch -- ventless batch oven, which is being launched by middle date this year, and very, very disruptive. After WOW! 3, it takes you back to the automated conveyor. So the fire is another product that's coming up this year in 2014 that will also change for a lot of people. It will allow us now to have people like who have bars, who have basically not a big kitchen operation, to be able to install that oven and serve toasted sandwiches, toasted appetizer or pizza right on the counter. The price point of that oven is phenomenal, and the way it bakes in 90 seconds is superb. And it's ventless fryer that's coming up. It's already introduced here in the U.S. by TurboChef, internationally by our division called Giga. So it's a really joint effort between TurboChef and Giga the Fast Oven that’s being developed, and we've very excited about that.

[indiscernible] answer your question. So our M&A spend for the year was just under $470 million, of which Viking is obviously the biggest piece of that. So Viking was about $360 million of that number, and the other roughly $100 million was the acquisition of Celfrost, Wunder-Bar and the Viking distributors that we bought throughout the year. And I'll just kind of repoint out again, with all these acquisitions we completed during year, we finished the year with a debt multiple or leverage multiple just under 2x, which is kind of the target that we started the year right after Viking at 3x. So we were able to have, I guess, significant delever regime from a multiple perspective, and that's even including all the acquisitions that we completed after Viking.

And what's your outlook for that? Do you see that 2x going down to 1x or...

Well, it's -- we're always in the continuous mode of acquiring in cash flow generation, so really it's just kind of a function where we're in the cycle with the acquisitions that we completed. So the pipeline continues to be strong in the acquisition and that's still one of the integral strategies of Middleby, which is continued to add winning brands and technologies to all three of the platforms that we have.

And one last one for you. What do you anticipate the capital spending for the company to be in 2014?

Well, we've historically targeted less than 2% of revenue. So I think we'll be in line with that this year. As well as many other years, we've been closer to the 1% range and the 2% range. It will probably step up in 2014 because of some of the initiatives we mentioned early on, which is the investments that we were making in the refrigeration at Viking.

Our next question comes from Peter Lisnic with Robert W. Baird. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Back again, just playing a longer-term question, adding another customer this year for Kitchen of the Future, can you give us a sense of just to how you think about the world evolving, and how big of an opportunity that Kitchen of the Future is for, a, the industry and, b, yourselves?

Okay. In fact, I can tell you, specifically, the Kitchen of the Future, today, we have around, I will say, 20 customers looking at it of the 20 customers that are impressed. They represent around, I would say, 25,000 units, so it's a lot of units. But if you look at it, in Chili's, it was around 1,200 to 1,500. So as you look at the world of the Kitchen of the Future, we haven't yet capped the potential. So that next customers is another -- it will have around 1,200 to 1,500 units. So we still have around 15,000 to 20,000 units, which is a good conversion to Kitchen of the Future. We expect the meaning of that is literally wonderful results, and you can see Chili's has started what it has done for them. It has made their kitchen more efficient, less terrible, faster and more consistent. And if you look back after now what you've done because you're almost complete with Chili's, but it's been a resounding success, and it's done a great job. I have to tell you, it's not only the corporate. I think Chili's implemented this with great training. They were able to reinvent menu items that they were stricter about quality, and they improved quality significantly. And most important, what Chili's has done allowing Kitchen of the Future to be successful is they have worked very closely between the back of the house and the front of the house. And I think that has been the success of the Kitchen of the future. I don't want -- Middleby should not be the only credit we take. I think Chili's has worked taking our hard work to where [ph] and working around their people in training with between many changes, and I think that has been a success. And that's what we've seen now as the second chain. They are doing the same thing with food menus but -- and this was the type of last year's impact. We're getting the same thing. They are buying the hardware and getting the kitchen in the front of the house just so you can talk and get more efficient. It might seem like cycle about the world for the Kitchen of the Future. It's just one of the starts of them, and I think it has become mainstream. And as we keep on getting both big brand name and gain the recognition that the $30,000 investment in the kitchen start for per store back to the store. The payback is there, the speed to table is there, the menu consistency, the quality gets better, no human error, and of course, you're taking labor out, which tends to become more and more expensive, so... Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: And is that -- to this point, I assume, that's more of a North American opportunity. Is there -- do you foresee that becoming more of an opportunity in the international part of your business as you look forward?

It does because it has the same implications and applications. And so far, it's been -- I shouldn't say that because it's been driven by U.S. chains. And Chili's has implemented that overseas. So it's done most of the international stores. But today, it's mostly -- I think a lot of it is U.S. chain, and the ones that I gave you, the numbers that I gave you of the units, which was 15,000 and 20,000 are all U.S. We haven't even talked about international chains, which could tap into it. And the other interesting part that we're starting to see that we just got the new interest. It's gone beyond just cash and earnings. Now those 15,000 to 20,000 have been all cash in value. And we're starting to see interest beyond casual buyers, fast casual, and we've had 1 fast-food chain very interested in looking at that concept, which are not in those numbers. So the Kitchen of the Future could be hundreds and hundreds of billions of dollars for us as we -- over the next few years.

Our next question comes from Schon Williams of BB&T Capital Markets. Christopher Schon Williams - BB&T Capital Markets, Research Division: Just a couple of quick follow-ups. Tim, you mentioned that you expected the Chinese customer to come back to the market. I just wanted to get maybe a little bit more clarity on the time frame, are we talking about first half of 2014 or second half of 2014? Do we need to wait until 2015? Just if you could help out a little bit there.

Yes. I mean, we're thinking 2014, not 2015. It will probably be more in the second half than the first half, so there's still maybe some disruption there obviously, in the first quarter. But then I think we think things will start to normalize as we move into the second quarter. Christopher Schon Williams - BB&T Capital Markets, Research Division: And have you -- I mean, it's -- probably, it was the least plausible that we may actually see some more sales coming out of that region just around food safety and sanitation. I mean, have you saw any interest there and then maybe coming out of some of the food safety concerns?

Well, I mean, that's so -- that's on the Food Processing side of the business, and I think the answer is there, yes, I mean, longer term, food safety and that whole area is something that's a big focus, or we're seeing more retention with our customers. You'd see, for example, Smithfield, which is the largest food processor in the U.S. or one of the large ones, was acquired by a Chinese company. A lot of that have to do with them trying to adapt U.S. food processes and safety standards in other markets. So with that, we think they're going to be adopting some of the standards that we see in the more established markets and the U.S. market and countries like that. So that kind of plays through that whole issue. So we do see opportunities on the Food Processing side as awareness around food safety increases. Christopher Schon Williams - BB&T Capital Markets, Research Division: Okay. And then -- and maybe on -- just you talked about a little bit of a disruption maybe around the weather in Q1 here. I want to say that your commentary focused primarily around Viking. I mean, any effect on the weather -- from weather on Food Processing or Commercial Foodservice?

I would have to say, yes, because we've had orders coming into the quarter. We haven't seen as much of it yet other than the structure Viking. I can tell you they talked to our customers, our restaurant customers being affected, of course. So I -- with deck and clients not coming in, if you've had the storm that you've had. And it happened -- unfortunately, a lot of the storms happened on weekends. They were mostly on weekends in the Northeast. They'd great parts of the Midwest, and you know what, a lot of people can't get out because they have very big snow. So I will tell you that the first quarter has been lumpy for our customers just in terms of -- would that have an impact in the second quarter? Now we can't tell you yet because it always happen literally in January and February. We came in the year so far with some good backlog. And however, as I talked to our chain restaurants, their same-sale store have been a little bit affected by the weather, specifically, if you have a lot of concentration in the Northeast and the Midwest. And I don't know what's going to be the impact in the second or third quarter with what does the latest CapEx, but I want to reemphasize that we really have faced a lot of challenges over the years. We're not in an economy that's moving, let me put it this way. With our performance, subjectly, the economy is booming and literally being able to help our customers redesign their kitchen to become more customer-centric, be able to make technology in our equipment, in our cooking platform so that they can reduce their fixed cost basic. But when you look at us and what we provide, it's not weather-related, it's not how well the chains are, it's literally how do I make somebody become more efficient with their operation, and that's what we do. And efficiency doesn’t come only in labor. Consistency speak, just you know. More menu items that you want to introduce breakfast, which will basically help you get without having to add holes because we're very big in ventless, which we haven't talked about. And so our ventless technology continues to grow double digit, and it's been fantastic for us. And so I look at what we bring is not determined by 1 quarter or by 1 weather or by our customers have -- if they want to be more efficient, have to use our technology. And it works. And it works at Starbucks. It works at SUBWAY. It works at Domino's. It works at Dunkin' Donuts. It works at Pizza Hut. It works at Chili's. And in terms of the WOW! payback, it will continue. It works. And that's why think of Middleby as more as we're not just -- we're not a sexy company. We're a company that delivers value. And whatever your issue is, we'll provide a solution in the kitchen to allow you to provide that customer experience that becomes growth. And when you look at SUBWAY and what we do with SUBWAY, not only baking the bread, toasting the bread, warming, holding the bread, it's been a great experience for them and for us.

And I'm not showing any further questions at this time. I'd like to turn the conference back over to our host for closing remarks.

I think, with what we've done, I want to thank everybody for the conference call. Thank you very much. Thank you.