2021
Annual Report
2021 FINANCIAL HIGHLIGHTS
(dollars in thousands)
NET SALES
GROSS PROFIT
2021
2020
2019
2018
2017
$3,250,792
$2,513,257
$2,959,446
$2,722,931
$2,335,542
$1,194,860
$882,048
$1,103,497
$1,004,140
$912,741
INCOME FROM OPERATIONS
$629,992
$324,431
$514,043
$445,966
$378,613
NET EARNINGS
$488,492
$207,294
$352,240
$317,152
$298,128
EPS ON NET EARNINGS
$8.62
$3.76
$6.33
$5.70
$5.26
WEIGHTED AVERAGE SHARES
56,665,000
55,136,000
55,656,000
55,604,000
56,719,000
CASHFLOW FROM OPERATIONS
$423,399
$524,785
$377,425
$368,914
$304,455
TOTAL ASSETS
TOTAL DEBT
$6,383,598
$5,202,474
$5,002,143
$4,549,781
$3,339,713
$2,414,294
$1,729,596
$1,873,140
$1,892,105
$1,028,881
STOCK PRICE PERFORMANCE
350
300
250
200
150
100
50
2016
2017
2018
9
1
0
82
1
0
2
0
2
0
2
7
1
0
2
1
2
0
2
$3,400
3,200
3,000
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
$500
450
400
350
300
250
200
150
100
50
0
Middleby
NASDAQ Composite Index
NASDAQ 100 index
9
1
0
2
8
1
0
2
7
1
0
2
0
2
0
2
2019
1
2
0
2
2020
2021
1
2
0
2
$9
9
1
0
82
1
0
2
7
1
0
2
0
2
0
2
8
7
6
5
4
3
2
1
0
NET SALES
(dollars in millions)
NET EARNINGS
(dollars in millions)
EPS ON NET EARNINGS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended January 1, 2022
or
Commission File No. 1-9973
THE MIDDLEBY CORPORATION
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)
Delaware
36-3352497
1400 Toastmaster Drive, Elgin,
Illinois
(Address of principal executive offices)
60120
(Zip Code)
Registrant's telephone number, including area code:
(847)
741-3300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $0.01 per share
Trading symbol(s)
MIDD
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definition of “accelerated filer," "large accelerated filer," "smaller reporting company," and
"emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth
company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ý
The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of July 3, 2021 was approximately $9,526,285,074.
The number of shares outstanding of the Registrant’s class of common stock, as of February 28, 2022, was 54,661,085 shares.
Part III of Form 10-K incorporates by reference the Registrant’s definitive proxy statement to be filed pursuant to Regulation 14A in
connection with the 2022 annual meeting of stockholders.
Documents Incorporated by Reference
THE MIDDLEBY CORPORATION
JANUARY 1, 2022
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Issues
PART I
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosure about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedule
Item 16.
Form 10-K Summary
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Item 1. Business
General
PART I
The Middleby Corporation, a Delaware corporation (“Middleby” or the “company”), through its operating subsidiary Middleby
Marshall Inc., a Delaware corporation (“Middleby Marshall”) and its subsidiaries, is a leader in the design, manufacture,
marketing, distribution, and service of a broad line of (i) foodservice equipment used in all types of commercial restaurants and
institutional kitchens, (ii) food preparation, cooking, baking, chilling and packaging equipment for food processing operations,
and (iii) premium kitchen equipment including ranges, ovens, refrigerators, ventilation, dishwashers and outdoor cooking
equipment primarily used in the residential market.
Founded in 1888 as a manufacturer of baking ovens, Middleby Marshall Oven Company was acquired in 1983 by TMC
Industries Ltd., a publicly traded company that changed its name in 1985 to The Middleby Corporation. The company has
established itself as a leading provider of (i) commercial restaurant equipment, (ii) food processing equipment and (iii)
residential kitchen equipment as a result of its acquisition of industry leading brands and through the introduction of innovative
products within each of these segments.
The company's annual reports on Form 10-K, including this Form 10-K, as well as the company's quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to such reports are available, free of charge, on the company's internet
website, www.middleby.com. These reports are available as soon as reasonably practicable after they are electronically filed
with or furnished to the Securities and Exchange Commission (“SEC”).
Business Segments and Products
The company conducts its business through three principal business segments: the Commercial Foodservice Equipment Group,
the Food Processing Equipment Group and the Residential Kitchen Equipment Group. See Note 10 to the Consolidated
Financial Statements for further information on the company's business segments.
Commercial Foodservice Equipment Group
The Commercial Foodservice Equipment Group has a broad portfolio of foodservice equipment, which enable it to serve
virtually any cooking, warming, holding, refrigeration, freezing and beverage application within a commercial kitchen or
foodservice operation. This equipment is used across all types of foodservice operations, including quick-service restaurants,
full-service restaurants, ghost kitchens, convenience stores, supermarkets, retail outlets, hotels and other institutions.
This commercial foodservice equipment is marketed under a portfolio of sixty-eight brands, including Anets, APW Wyott,
Bakers Pride, Beech, BKI, Blodgett, Blodgett Combi, Bloomfield, Britannia, Carter-Hoffmann, Celfrost, Concordia, CookTek,
Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Follett, Frifri, Globe, Goldstein, Holman, Houno,
IMC, Imperial, Induc, Ink Kegs, Inline Filling Systems, Jade, JoeTap, Josper, L2F, Lang, Lincat, MagiKitch’n, Market Forge,
Marsal, Meheen, Middleby Marshall, MPC, Newton CFV, Nieco, Nu-Vu, PerfectFry, Pitco, QualServ, RAM, Southbend, Ss
Brewtech, Star, Starline, Sveba Dahlen, Synesso, Tank, Taylor, Thor, Toastmaster, TurboChef, Ultrafryer, Varimixer, Wells,
Wild Goose and Wunder-Bar.
The products offered by this group include conveyor ovens, combi-ovens, convection ovens, baking ovens, proofing ovens,
deck ovens, speed cooking ovens, hydrovection ovens, ranges, fryers, rethermalizers, steam cooking equipment, food warming
equipment, catering equipment, heated cabinets, charbroilers, ventless cooking systems, kitchen ventilation, induction cooking
equipment, countertop cooking equipment, toasters, griddles, charcoal grills, professional mixers, stainless steel fabrication,
custom millwork, professional refrigerators, blast chillers, coldrooms, ice machines, freezers, soft serve ice cream equipment,
coffee and beverage dispensing equipment, home and professional craft brewing equipment, fry dispensers, bottle filling and
canning equipment, and IoT solutions.
1
Food Processing Equipment Group
The Food Processing Equipment Group offers a broad portfolio of processing solutions for customers producing protein
products, such as bacon, salami, hot dogs, dinner sausages, poultry and lunchmeats and bakery products, such as muffins,
cookies, crackers, pies, bread and buns. Through its broad line of products, the company is able to deliver a wide array of food
preparation, thermal processing and slicing/packaging solutions to service a variety of food processing requirements demanded
by its customers. The company can offer highly integrated full processing line solutions that provide a food processing
operation a uniquely integrated solution providing for the highest level of food quality, product consistency, and reduced
operating costs resulting from increased product yields, increased capacity, greater throughput and reduced labor costs through
automation.
This food processing equipment is marketed under a portfolio of twenty-one brands, including Alkar, Armor Inox, Auto-Bake,
Baker Thermal Solutions, Burford, Cozzini, CV-Tek, Danfotech, Drake, Glimek, Hinds-Bock, Maurer-Atmos, MP Equipment,
Pacproinc, RapidPak, Scanico, Spooner Vicars, Stewart Systems, Sveba Dahlen, Thurne and Ve.Ma.C.
The products offered by this group include a wide array of cooking and baking solutions, including batch ovens, baking ovens,
proofing ovens, conveyor belt ovens, continuous processing ovens, frying systems and automated thermal processing systems.
The company also provides a comprehensive portfolio of complementary food preparation equipment such as tumblers,
massagers, grinders, slicers, reduction and emulsion systems, mixers, blenders, formers, battering equipment, breading
equipment, seeding equipment, water cutting systems, food presses, food suspension equipment, filling and depositing solutions
and forming equipment, as well as a variety of automated loading and unloading systems, food safety, food handling, freezing,
defrosting and packaging equipment. This portfolio of equipment can be integrated to provide customers a highly efficient and
customized solution.
Residential Kitchen Equipment Group
The Residential Kitchen Equipment Group manufactures, sells and distributes kitchen equipment for the residential market.
Principal product lines of this group are ranges, cookers, stoves, cooktops, microwaves, ovens, refrigerators, dishwashers,
undercounter refrigeration, wine cellars, ice machines, beer dispensers, ventilation equipment, mixers, rotisseries and outdoor
cooking equipment. These products are sold and marketed under a portfolio of twenty-two brands, including AGA, AGA
Cookshop, Brava, Char-Griller, EVO, Kamado Joe, La Cornue, Leisure Sinks, Lynx, Marvel, Masterbuilt, Mercury, Novy,
Rangemaster, Rayburn, Redfyre, Sedona, Stanley, TurboChef, U-Line, Varimixer and Viking.
Acquisition Strategy
The company has pursued a strategy to acquire and assemble a leading portfolio of brands and technologies for each of its three
business segments. Over the past two years, the company has completed nine acquisitions to add to its portfolio of brands and
technologies of the Commercial Foodservice Equipment Group and the Residential Kitchen Equipment Group. These
acquisitions have added twelve brands to the Middleby portfolio and positioned the company as a leading provider of
equipment in each respective industry. Significant acquisitions included Novy and Kamado Joe and Masterbuilt, acquired for a
purchase price of $250.9 million and $400.7 million, net of cash acquired, respectively. All other acquisitions were acquired for
an aggregate purchase price totaling $430.5 million, net of cash acquired.
Commercial Foodservice Equipment Group
•
•
•
•
January 2020: The company completed its acquisition of the RAM fry dispenser product line ("RAM"), a leader
in automated fry dispensers, located in Red Wing, Minnesota.
February 2020: The company completed its acquisition of all of the capital stock of DBT Holdings, LLC
("Deutsche"), a leader in beverage brewing and processing systems located in Charlotte, North Carolina.
December 2020: The company completed its acquisition of all of the capital stock of MEP FMS Holdings, LLC
("Wild Goose"), a leader in the craft beer industry focused on providing the best canning and bottling integrity
in the industry, located in Louisville, Colorado and Venice, Florida.
December 2020: The company completed its acquisition of the properties and assets used to conduct the
business of United Foodservice Equipment Limited, a business that purchases and sells foodservice equipment
located in Hong Kong, and its affiliate, Zhuhai United Foodservice Equipment Limited (collectively, "United
Foodservice Equipment Zhuhai"), a business that manufactures and sells foodservice equipment located in
China.
2
•
•
September 2021: The company completed its acquisition of all of the capital stock of Imperial Commercial
Cooking Equipment ("Imperial"), a manufacturer of ranges, fryers, ovens, countertop equipment, and other
specialty cooking products for the commercial kitchen, located in Corona, California.
November 2021: The company completed its acquisition of all of the assets of Gate CFV Solutions, Inc. and
Newton CFV, LLC ("Newton CFV"), a business that manufactures and sells valves for beverage dispensing and
other applications utilizing patented CFV technology that provides constant pressure, flow and ratio control,
located in Sebastian, Florida.
Residential Kitchen Equipment Group
•
•
•
July 2021: The company completed its acquisition of all of the capital stock of Novy Invest NV ("Novy"), a
leader in cooker hoods and hobs, located in Belgium.
December 2021: The company completed its acquisition of all of the capital stock of A&J Structure Services,
LLC ("Char-Griller"), a leader in residential outdoor charcoal and gas cooking products, located in Atlanta,
Georgia.
December 2021: The company completed its acquisition of all of the member interests of Masterbuilt Holdings,
LLC ("Kamado Joe and Masterbuilt") and their residential outdoor brands Kamado Joe and Masterbuilt, a leader
in outdoor residential cooking equipment, located in the Atlanta, Georgia area.
The Customers and Market
Commercial Foodservice Equipment Industry
The company's end-user customers include: (i) fast food, fast casual and quick-service restaurants, including ghost kitchens, (ii)
full-service restaurants, including casual-theme restaurants, (iii) retail outlets, such as convenience stores, supermarkets and
department stores and (iv) public and private institutions, such as hotels, resorts, schools, hospitals, long-term care facilities,
correctional facilities, stadiums, airports, corporate cafeterias, college and universities, military facilities and government
agencies. The company's domestic sales are primarily through independent dealers and distributors and are marketed by the
company's sales personnel and network of independent manufacturers' representatives. Many of the dealers in the U.S. belong
to buying groups that negotiate sales terms with the company. Certain large multi-national restaurant and hotel chain customers
have purchasing organizations that manage product procurement for their systems. Included in these customers are several large
multi-national restaurant chains, which account for a meaningful portion of the company's business, although no single
customer accounts for more than 10% of net sales.
Over the past several decades, the commercial foodservice equipment industry has enjoyed steady growth in the United States
due to the development of new quick-service and casual-theme restaurant chain concepts, the expansion of foodservice into
nontraditional locations such as convenience stores and retail outlets, as well as store equipment modernization driven by
efforts to improve efficiencies within foodservice operations. In the international markets, foodservice equipment manufacturers
have been experiencing growth due to expanding international economies and increased opportunity for expansion by U.S.
chains into developing regions.
The company believes that the worldwide commercial foodservice equipment market has sales in excess of $35.0 billion. The
company believes that continuing growth in demand for foodservice equipment will result from the development of new
restaurant concepts in the U.S. and the expansion of U.S. and foreign chains into international markets, the replacement and
upgrade of existing equipment and new equipment requirements resulting from menu changes, menu diversity and consumer
food trends.
3
Food Processing Equipment Industry
The company's customers include a diversified base of leading food processors. Customers include several large international
food processing companies, which account for a significant portion of the revenues of this business segment, although none of
which is greater than 10% of net sales. A large portion of the company's revenues have been generated from producers of
protein products such as bacon, salami, hot dogs, dinner sausages, poultry, lunchmeats and plant based/alternative protein and
producers of bakery products, such as muffins, cookies, crackers, pies, bread and buns; however, the company believes that it
can leverage its expertise and product development capabilities in thermal processing to organically grow into new end markets
and offers unique full processing line solutions.
Food processing has quickly become a highly competitive landscape dominated by a few large conglomerates that possess a
variety of food brands. The consolidation of food processing plants associated with industry consolidation drives a need for
more flexible and efficient equipment that is capable of processing large volumes in quicker cycle times. In recent years, food
processors have had to conform to the demands of “big-box” retailers and the restaurant industry, including, most importantly,
greater product consistency and exact package weights. Food processors are beginning to realize that their old equipment is no
longer capable of efficiently producing adequate uniformity in the large product volumes required, and they are turning to
equipment manufacturers that offer better process control for proven product consistency, innovative packaging designs and
other solutions. To protect their own brands and reputations, retailers and large restaurant chains are also dictating food safety
standards that are often stricter than government regulations.
A number of factors, including raw material prices, cost of ownership of their equipment, labor and health care costs, are
driving food processors to focus on ways to improve their generally thin profitability margins. In order to increase the
profitability and efficiency in processing plants, food processors pay increasingly more attention to the performance of their
machinery and the flexibility in the functionality of the equipment. Food processors are continuously looking for ways to make
their plants safer and reduce labor-intensive activities. Food processors have begun to recognize the value of new technology as
an important vehicle to drive productivity and profitability in their plants. Due to customer requirements, food processors are
expected to continue to demand new and innovative equipment that addresses food safety, food quality, automation, flexibility
and sustainability.
Improving living standards in developing countries is spurring increased worldwide demand for pre-cooked and convenience
food products. As industrializing countries create more jobs, consumers in these countries will have the means to buy pre-
cooked food products. In industrialized regions, such as Western Europe and the U.S., consumers are demanding more pre-
cooked and convenience food products, such as deli tray variety packs, frozen food products and ready-to-eat varieties of ethnic
foods.
The global food processing equipment industry is highly fragmented, large and growing. The company estimates demand for
food processing equipment is in excess of $55.0 billion worldwide.
Residential Kitchen Equipment Industry
The company’s end-users include customers with high-end residential kitchens as well as retail dealers of residential cooking
equipment. The market potential for such equipment has continued to broaden due to an increase in interest from the consumer
to have professionally styled appliances with commercial inspired, higher performing features in their home. The kitchen has
been the main area in which consumers have invested the most money over the past several decades to increase the personal
satisfaction and the value of their home. Other important factors which affect the market size and growth include the level of
new home starts, increase in home renovations and general macro-economic factors. Macro-economic factors such as GDP
growth, employment rates, inflation and consumer confidence, which impact the overall economy, impact the residential
kitchen equipment industry and cause variability in the revenues at this segment. The residential kitchen appliance industry is
estimated to be in excess of $260 billion worldwide.
Backlog
Commercial Foodservice Equipment Group
The backlog of orders for the Commercial Foodservice Equipment Group was $881.9 million at January 1, 2022, most all of
which is expected to be filled during 2022. The Commercial Foodservice Equipment Group's backlog was $238.2 million at
January 2, 2021. The acquired Imperial and Newton CFV businesses accounted for $16.3 million of the backlog. The backlog is
not necessarily indicative of the level of business expected for the year and the growth in our backlog represents impacts from
COVID-19 pandemic related market conditions and supply chain challenges.
4
Food Processing Equipment Group
The backlog of orders for the Food Processing Equipment Group was $187.5 million at January 1, 2022, which is expected to
be filled by the end of fiscal 2023. The Food Processing Equipment Group's backlog was $131.2 million at January 2, 2021.
Residential Kitchen Equipment Group
The backlog of orders for the Residential Kitchen Equipment Group was $443.4 million at January 1, 2022, all of which is
expected to be filled during 2022. The acquired Novy, Char-Griller, and Kamado Joe and Masterbuilt businesses accounted for
$152.4 million of the backlog. The Residential Kitchen Equipment Group's backlog was $153.3 million at January 2, 2021.
Marketing and Distribution
Commercial Foodservice Equipment Group
Middleby's products and services are marketed in the U.S. and in over 100 countries through a combination of the company's
sales and marketing personnel, together with an extensive network of independent dealers, distributors, consultants, sales
representatives and agents.
In the United States, the company distributes its products to independent end-users primarily through a network of non-
exclusive dealers nationwide, who are supported by manufacturers' marketing representatives. Sales are made direct to certain
large restaurant chains that have established their own procurement and distribution organization for their franchise system. The
company's relationships with major restaurant chains are primarily handled through an integrated effort of top-level executive
and sales management at the corporate and business division levels to best serve each customer's needs. International sales are
primarily made through a network of company owned and local independent distributors and dealers.
Food Processing Equipment Group
The company maintains a direct sales force to market the brands and maintain direct relationships with each of its customers. In
North America, the company employs regional sales managers, each with responsibility for a group of customers and a
particular region. This sales force is complimented with involvement of executive management to maintain relationships with
customer executives and facilitate coordination amongst the brands for the key global accounts. Internationally, the company
maintains sales and distribution offices along with global sales managers supported by a network of independent sales
representatives.
The company’s sale process is highly consultative due to the highly technical nature of the equipment, especially in the case of
the full processing line solutions. During a typical sales process, sales people make several visits to the customer’s facility to
conceptually discuss the production requirements, footprint and configuration of the proposed equipment. The company
employs a technically proficient sales force, many of whom have previous technical experience with the company as well as
education backgrounds in food science. The sales strategy of the company is fostered with Protein and Bakery Innovation
Centers in Chicago, Dallas and India, that are available for development with technical performance and product testing for
customers.
Residential Kitchen Equipment Group
The company’s products are marketed through a network of distributors, dealers, designers, select online retailers and home
builders to the residential customers. The company markets and sells its products to these channels through a company-
employed sales force. The company’s products are distributed through a combination of an independent network of distributors
and its wholly owned distribution operations. The company's wholly owned distribution operations include two primary
customer support centers and regional logistic warehouse operations, which stock products and service parts for the respective
region. To supplement the sales and distribution network, the company has invested in Middleby branded residential
showrooms in Chicago, New York City, Orange County, California and Dallas.
Marketing support is provided to and coordinated with its network of dealers, designers, and home builders sales partners to
allow for coordinated efforts to market jointly to the end-user customers. The company in certain cases offers incentive based
financial programs to invest in local marketing activities with these sales partners.
5
Services and Product Warranty
The company is an industry leader in equipment installation programs and after-sales support and service. The company
provides a warranty on its products typically for a one-year period and in certain instances greater periods. The emphasis on
global service increases the likelihood of repeat business and enhances Middleby's image as a partner and provider of quality
products and services.
Commercial Foodservice Equipment Group
The company's domestic service network consists of over 100 authorized service parts distributors and 3,000 independent
certified technicians who have been formally trained and certified by the company through its factory training school and on-
site installation training programs. Technicians work through service parts distributors, which are required to provide around-
the-clock service. The company provides real-time technical support to the technicians in the field through factory-based
technical service engineers. The company maintains sufficient service parts inventory to ensure short lead times for service
calls.
Food Processing Equipment Group
The company maintains a technical service group of employees that oversees and performs installation and startup of equipment
and completes warranty and repair work. This technical service group provides services for customers both domestically and
internationally. Service technicians are trained regularly on new equipment to ensure the customer receives a high level of
customer service. From time to time the company utilizes trained third-party technicians supervised by company employees to
supplement company employees on large projects.
Residential Kitchen Equipment Group
The company maintains a network of independent authorized service agents throughout North America. Authorized service
agents are supported and trained by regional factory-support centers of the company. Trained technical support personnel are
available to support independent service agents with technical information and assist in repair issues. The factory-support
centers also dispatch service technicians to the customer and provide follow-up and monitoring to ensure field issues are
resolved. The company's independent service agents maintain a stock of factory-supplied parts to allow for a high first-call
completion rate for service and warranty repairs. The company maintains a substantial amount of service parts at each of its
manufacturing operations and distribution operations to provide for quick ship of parts to service agents and end-user customers
when necessary.
Internationally, the company has a network of company owned and independent distributors that provide sales and technical
service support in their respective markets. These distributors are required to have a team of factory-trained service technicians
and maintain a required stock of service parts to support the equipment in the market. The factory supports the international
distributors with technical trainers which travel to the various markets to provide on-hands training and monitoring of the
distributor service operations.
Competition
The commercial foodservice, food processing and residential kitchen equipment industries are highly competitive and
fragmented. Within a given product line the company may compete with a variety of companies, including companies that
manufacture a broad line of products and those that specialize in a particular product category. Competition is based upon many
factors, including brand recognition, product features, reliability, quality, price, delivery lead times, serviceability and after-sale
service. The company believes that its ability to compete depends on strong brand equity, exceptional product performance,
short lead-times and timely delivery, competitive pricing and superior customer service support. In the international markets,
the company competes with U.S. manufacturers and numerous global and local competitors.
6
The company believes that it is one of the largest multiple-line manufacturers of commercial kitchen, food processing and
residential kitchen equipment in the U.S. and worldwide although some of its competitors are units of operations that are larger
than the company and possess greater financial and personnel resources. Among the company's major competitors to the
Commercial Foodservice Equipment Group are the Ali Group S.r.l.; Duke Manufacturing; AB Electrolux; Haier Group;
Hoshizaki America, Inc.; Hobart Corporation and Vulcan-Hart, subsidiaries of Illinois Tool Works Inc.; Marmon Foodservice
Technologies, a Bershire Hathaway Company; Midea Group; Panasonic Corporation; Rational AG; SMEG S.p.A.; and Welbilt,
Inc. Major competitors to the Food Processing Equipment Group include AMF Bakery Systems, The GEA Group, JBT
Technologies, Marel, and Provisur. The residential kitchen appliance sector is highly competitive and includes a number of
large global competitors including, AB Electrolux, GE Appliances, LG Corporation, Panasonic Corporation, Samsung Group,
Weber Inc., and Whirlpool Corporation. However, within the premium segment of this kitchen equipment market, there are
fewer full line competitors and the company’s competition includes Bertazzoni; Bosch, Gaggenau, and Thermador, subsidiaries
of Bosch Siemens; Dacor, subsidiary of Samsung Electronics America; Haier Group; Midea Group; Miele; SMEG S.p.A.; and
Sub-Zero and Wolf, subsidiaries of Sub-Zero Group, Inc.
Manufacturing and Quality Control
The company’s manufacturing operations provide for an expertise in the design and production of specific products for each of
the three business segments. The company has from time to time either consolidated manufacturing facilities producing similar
product or transferred production of certain products to another existing operation with a higher level of expertise or efficiency.
The Commercial Foodservice Equipment Group manufactures its products in twenty-two domestic and seventeen international
production facilities. The Food Processing Equipment Group manufactures its products in eleven domestic and six international
production facilities. The Residential Kitchen Equipment Group manufactures its products in six domestic and five international
production facilities. See Item 2. Properties for a list of the principal domestic and international manufacturing facilities by
segment.
Metal fabrication, finishing, sub-assembly and assembly operations are typically conducted at each manufacturing facility.
Equipment installed at individual manufacturing facilities includes numerically controlled turret presses and machine centers,
shears, press brakes, welding equipment, polishing equipment, CAD/CAM systems and product testing and quality assurance
measurement devices. The company's CAD/CAM systems enable virtual electronic prototypes to be created, reviewed and
refined before the first physical prototype is built.
Detailed manufacturing drawings are quickly and accurately derived from the model and passed electronically to manufacturing
for programming and optimal parts nesting on various numerically controlled punching cells. The company believes that this
integrated product development and manufacturing process is critical to assuring product performance, customer service and
competitive pricing.
The company has established comprehensive programs to ensure the quality of products, to analyze potential product failures
and to certify vendors for continuous improvement. Products manufactured by the company are tested prior to shipment to
ensure compliance with company standards.
Sources of Supply
The company purchases its raw materials and component parts from a number of suppliers. The majority of the company’s
material purchases are standard commodity-type materials, such as stainless steel, electrical components and hardware. These
materials and parts generally are available in adequate quantities from numerous suppliers. Some component parts are obtained
from sole sources of supply. In such instances, management believes it can substitute other suppliers as required. The majority
of fabrication is done internally through the use of automated equipment. Certain equipment and accessories are manufactured
by other suppliers for sale by the company. The company believes it enjoys good relationships with its suppliers. The present
sources of supply have been impacted by COVID-19 pandemic market conditions, however are adequate for the company's
present and anticipated future requirements.
7
Research and Development
The company believes its future success will depend in part on its ability to develop new products and to improve existing
products. Much of the company's research and development efforts at the Commercial Foodservice Equipment Group, the Food
Processing Equipment Group and the Residential Kitchen Equipment Group are directed to the development and improvement
of products designed to reduce cooking and processing time, increase capacity or throughput, reduce energy consumption,
minimize labor costs, improve product yield and improve customer, employee and environmental safety, while maintaining
consistency and quality of cooking production and food preparation. The company's efforts have also been focused on IoT
solutions which allow customers to connect, analyze and control equipment, while delivering operational efficiencies. The
company has identified these issues as key concerns for most of its customers. The company often identifies product
improvement opportunities by working closely with customers on specific applications. Most research and development
activities are performed by the company's technical service and engineering staff located at each manufacturing location. On
occasion, the company will contract outside engineering firms to assist with the development of certain technical concepts and
applications. See Note 3(n) to the Consolidated Financial Statements for further information on the company's research and
development activities.
Seasonality
The company’s revenues at the Commercial Foodservice Equipment Group historically have been slightly stronger in the
second and third quarters due to increased purchases from customers involved with the catering business and institutional
customers, particularly schools, during the summer months. Revenues at the Residential Kitchen Equipment Group are
historically stronger in the second and third quarters, due to increased purchases of outdoor cooking equipment and greater new
home construction and remodels during the summer months, and the fourth quarter, due to increased holiday purchases in the
European markets. As a result of the COVID-19 pandemic, typical patterns of seasonality as previously mentioned were
disrupted.
Trademarks, Patents and Licenses
The company has developed, acquired and assembled a leading portfolio of trademarks and trade names. The company believes
that these trademarks and trade names help the company compete in the marketplace due to their recognition with customers,
restaurant operators, distribution partners, sales and service agents, and foodservice consultants that specify foodservice
equipment.
The company's leading portfolio of trade names of its Commercial Foodservice Equipment Group include Anets, APW Wyott,
Bakers Pride, Beech, BKI, Blodgett, Blodgett Combi, Bloomfield, Britannia, Carter-Hoffmann, Celfrost, Concordia, CookTek,
Crown, CTX, Desmon, Deutsche Beverage, Doyon, Eswood, EVO, Firex, Follett, Frifri, Globe, Goldstein, Holman, Houno,
IMC, Imperial, Induc, Ink Kegs, Inline Filling Systems, Jade, JoeTap, Josper, L2F, Lang, Lincat, MagiKitch’n, Market Forge,
Marsal, Meheen, Middleby Marshall, MPC, Newton CFV, Nieco, Nu-Vu, PerfectFry, Pitco, QualServ, RAM, Southbend, Ss
Brewtech, Star, Starline, Sveba Dahlen, Synesso, Tank, Taylor, Thor, Toastmaster, TurboChef, Ultrafryer, Varimixer, Wells,
Wild Goose and Wunder-Bar.
The company’s leading portfolio of trade names of its Food Processing Equipment Group include Alkar, Armor Inox, Auto-
Bake, Baker Thermal Solutions, Burford, Cozzini, CV-Tek, Danfotech, Drake, Glimek, Hinds-Bock, Maurer-Atmos, MP
Equipment, Pacproinc, RapidPak, Scanico, Spooner Vicars, Stewart Systems, Sveba Dahlen, Thurne and Ve.Ma.C.
The company’s leading portfolio of trade names of its Residential Kitchen Equipment Group include AGA, AGA Cookshop,
Brava, Char-Griller, EVO, Kamado Joe, La Cornue, Leisure Sinks, Lynx, Marvel, Masterbuilt, Mercury, Novy, Rangemaster,
Rayburn, Redfyre, Sedona, Stanley, TurboChef, U-Line, Varimixer and Viking.
The company holds a broad portfolio of patents and licenses covering technology and applications related to various products,
equipment and systems. Management believes the expiration of any one of these patents would not have a material adverse
effect on the overall operations or profitability of the company.
8
Human Capital
As of January 1, 2022, 10,624 persons were employed by the company and its subsidiaries among the various groups as
described below. 6,104 employees are located in the United States and the remaining employees are located outside of the
United States. Unionized employees accounted for approximately 5% of the company’s workforce as of January 1, 2022.
Management believes that the relationships between employees and management are good.
The company believes its success is a direct result of the people employed around the world. The company strives to create a
culture that encourages and celebrates collaboration, creativity and confidence while maintaining an environment based on
ethical values. The goal is to create a workplace that enables employees to develop their individual paths toward their career
goals and encourages a long-term working relationship with the company.
Commercial Foodservice Equipment Group
As of January 1, 2022, 6,078 persons were employed within the Commercial Foodservice Equipment Group. Of this
amount, 2,430 were management, administrative, sales, engineering and supervisory personnel; 3,213 were hourly
production non-union workers; and 435 were hourly production union members. Included in these totals were 2,465
individuals employed outside of the United States, of which 1,156 were management, sales, administrative and
engineering personnel, 1,163 were hourly production non-union workers and 146 were hourly production union
workers, who participate in an employee cooperative. At its Windsor, California facility, the company has a union
contract with the Sheet Metal Workers International Association that expires on December 31, 2023. At its Elgin,
Illinois facility, the company has a union contract with the International Brotherhood of Teamsters that expires on July
31, 2022. At its Easton, Pennsylvania facility, the company has a union contract with the United Steel, Paper and
Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union that expires on
May 4, 2023. The company also has a union workforce at its manufacturing facility in the Philippines, under a contract
that expires on June 30, 2026. Management believes that the relationships between employees, unions and
management are good.
Food Processing Equipment Group
As of January 1, 2022, 1,593 persons were employed within the Food Processing Equipment Group. Of this amount,
831 were management, administrative, sales, engineering and supervisory personnel; 633 were hourly production non-
union workers; and 129 were hourly production union members. Included in these totals were 703 individuals
employed outside of the United States, of which 411 were management, sales, administrative and engineering
personnel and 292 were hourly production non-union workers. At its Lodi, Wisconsin facility, the company has a
contract with the International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers that expires
on December 31, 2024. At its Algona, Iowa facility, the company has a union contract with the United Food and
Commercial Workers that expires on December 31, 2022. Management believes that the relationships between
employees, unions and management are good.
Residential Kitchen Equipment Group
As of January 1, 2022, 2,902 persons were employed within the Residential Kitchen Equipment Group. Of this
amount, 1,153 were management, administrative, sales, engineering and supervisory personnel and 1,749 were hourly
production workers. Included in these totals were 1,352 individuals employed outside of the United States, of which
542 were management, sales, administrative and engineering personnel and 810 were hourly non-union production
workers. Management believes that the relationships between employees and management are good.
Corporate
As of January 1, 2022, 51 persons were employed at the corporate office.
Employee Advancement
The company believes offering opportunities for career development within the company is integral to building and retaining an
outstanding workforce. The company is dedicated to the professional development of all employees. Through a commitment to
a diverse and engaging culture, the company is able to build a platform that promotes equal opportunities for advancement for
everyone.
9
Employee Safety
The company is dedicated to providing a safe and healthy workplace by operating in accordance with established health and
safety protocols. In response to the COVID-19 pandemic, the company implemented procedures at its manufacturing locations
and offices, including enhanced workplace sanitation, travel minimization, social distancing, staggered shifts and established
work-at-home protocols for non-production employees.
Diversity
Fostering a culture that supports diversity among employees as well as professional growth and advancement is an integral part
of the company’s identity. The company has a commitment to build its workforce from diverse backgrounds, experiences and
talents among race, religion, language, nationality, disability, age and gender. Through our diverse workforce the company is
able to attract the best talent, which allows better alignment with customers and creative and efficient development of new
products for the marketplace. As a global corporation, the company embraces and celebrates differences and endeavors to
cultivate an environment where diversity and inclusion are core values of the organization.
A Focus on Ethics
The company is dedicated to promoting integrity, honesty, and professionalism in all of the business activities within the
company. The company strongly believes that business success is a direct correlation of its reputation for fairness and integrity.
Accordingly, it is essential that the company’s board members and employees practice the highest standards of conduct and
professionalism in any interactions with stakeholders including customers, creditors, stockholders, suppliers and other
employees.
10
Item 1A. Risk Factors
The company’s business, results of operations, cash flows and financial condition are subject to various risks including, but not
limited to, those set forth below. Any of these risks, as well as risks not currently known to the company or that are currently
deemed to be immaterial, may adversely affect the company’s business, results of operations, cash flows and financial
condition. These risk factors should be carefully considered together with the other information in this Annual Report on Form
10-K, including the risks and uncertainties described under the heading Special Note Regarding Forward-Looking Statements.
Economic Risks
Current and future economic conditions could adversely affect the company’s business and financial performance.
The company’s operating results are impacted by the health of the North American, European, Asian and Latin American
economies. The company’s business and financial performance, including collection of its accounts receivable, may be
adversely affected by current and future economic conditions that may cause a decline in business and consumer spending, a
reduction in the availability of credit and decreased growth of its existing customers, resulting in customers electing to delay the
replacement of aging equipment. Higher energy costs, rising interest rates, weakness in the residential construction, housing and
home improvement markets, financial market volatility, inflation, recession and acts of terrorism may also adversely affect the
company’s business and financial performance. Additionally, the company may experience difficulties in scaling its operations
due to economic pressures in the U.S. and international markets.
Uncertainty surrounding the terms of the United Kingdom’s withdrawal from the European Union may have a negative
effect on global economic conditions, financial markets or the Company’s business.
In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national
referendum. On January 31, 2020, the U.K. officially exited the European Union and entered into a transition period to
negotiate the final terms of Brexit. The transition period ended on December 31, 2020. Although the U.K. and the European
Union have entered into a trade and cooperation agreement (the “TCA”), which came into full force on May 1, 2021, significant
parts of the U.K. economy are not addressed in detail by the TCA and a number of issues have been the subject of further
bilateral negotiations since the beginning of 2021. The potential future impact of Brexit remains unclear and could adversely
impact certain areas of labor and trade in addition to creating further short-term uncertainty and currency volatility. Changes to
the trading relationship between the U.K. and the European Union could result in increased cost of goods imported into and
exported from the U.K. and may decrease the profitability of the company's U.K. and other operations. Additional currency
volatility could drive a weaker British pound, which increases the cost of goods imported into the U.K. and may decrease the
profitability of the company's U.K. operations. Currency exchange rates for the British pound and the euro with respect to each
other and to the U.S. dollar may be negatively affected by Brexit, which could cause volatility in our financial results. With a
range of outcomes still possible, the impact from Brexit remains uncertain and will depend, in part, on the final outcome of
tariff, trade, regulatory and other negotiations.
The company is subject to currency fluctuations and other risks from its operations outside the United States.
The company has manufacturing and distribution operations located in Asia, Europe and Latin America. The company’s
operations are subject to the impact of economic downturns, political instability and foreign trade restrictions, which may
adversely affect the company’s business, financial condition and operating results. The company anticipates that international
sales will continue to account for a significant portion of consolidated net sales in the foreseeable future. Some sales and
operating costs of the company’s foreign operations are realized in local currencies, and an increase in the relative value of the
U.S. dollar against such currencies would lead to a reduction in consolidated sales and earnings. Additionally, foreign currency
exposures are not fully hedged, and there can be no assurance that the company’s future results of operations will not be
adversely affected by currency fluctuations. Furthermore, currency fluctuations may affect the prices paid to the company’s
suppliers for materials the company uses in production. As a result, operating margins may also be negatively impacted by
worldwide currency fluctuations that result in higher costs for certain cross-border transactions.
11
Business and Operational Risks
The COVID-19 pandemic has adversely impacted, and likely will continue to, adversely impact and pose risks to the
company, the nature and extent of which are highly uncertain and unpredictable.
The company is monitoring the global outbreak of the COVID-19 pandemic and taking steps to mitigate the risks posed by its
spread, including working with its customers, employees, suppliers and other stakeholders. The pandemic has adversely
affected, and is expected to continue to adversely affect, the company's financial results, condition and outlook. Certain
elements of the company's business (including its supply chain, distribution systems, production levels and research and
development activities) and operations have been negatively impacted due to significant portions of the company's workforce
being unable to work effectively due to quarantines, government orders and guidance, facility closures, illness, travel
restrictions, implementation of precautionary measures and other restrictions. The company also has experienced, and expects
to continue to experience, volatility in demand given disruptions in global health, economic and market conditions, consumer
behavior and global restaurant operations. If the pandemic continues and conditions worsen, the company expects to experience
additional adverse impacts on operational and commercial activities, costs, customer orders and purchases and collections of
accounts receivable, which may be material, and the extent of these exposures remains uncertain even if conditions begin to
improve. The pandemic has also increased the risk related to the company's ability to ensure business continuity during a
potential disruption, including increased cybersecurity attacks related to the work-from-home environment. Furthermore, the
pandemic has impacted and may further impact the broader economies of affected countries, including adversely impacting
economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, inflation and interest
rates, all of which could continue to negatively impact the company. Due to the global breadth of the pandemic's spread and the
range of governmental and community reactions, there is uncertainty around the pandemic's ultimate impact and the timing of
recovery, including as a result of the emergence of new COVID-19 variants, uncertainty regarding vaccine effectiveness on
certain variants and vaccine availability. Therefore, the pandemic could lead to an extended disruption of economic activity and
the impact on the company's consolidated results of operations, financial position and cash flows could be material. In addition,
the continuation or a resurgence of the pandemic could exacerbate the other risk factors.
The company’s level of indebtedness could adversely affect its business, results of operations and growth strategy.
The company now has and may continue to have a significant amount of indebtedness. At January 1, 2022, the company had
$2.4 billion of borrowings and $2.7 million in letters of credit outstanding. In August 2020, the company issued $747.5 million
aggregate principal amount of 1.00% Convertible Senior Notes due 2025 (the "Convertible Notes"), which bear interest semi-
annually in arrears and mature on September 1, 2025 unless they are redeemed, repurchased or converted prior to such date in
accordance with their terms. Upon conversion, the company can elect to pay or deliver, cash, shares of common stock or a
combination of cash and shares of common stock, in respect of the remainder, if any, of the company's conversion obligation in
excess of the aggregate principal amount of the Convertible Notes being converted. Under certain circumstances, the holders of
the Convertible Notes may require the company to repay all or a portion of the principal and interest outstanding under the
Convertible Notes in cash prior to the maturity date, which could have an adverse effect on the company's financial results.
To the extent the company requires additional capital resources, there can be no assurance that such funds will be available on
favorable terms, or at all. The unavailability of funds could have a material adverse effect on the company’s financial condition,
results of operations and ability to expand the company’s operations.
The company’s level of indebtedness could have adverse consequences to its business and operations, including the following:
•
•
•
•
•
the company may be unable to obtain additional financing for working capital, capital expenditures, product
development, acquisitions and other general corporate purposes;
a significant portion of the company’s cash flow from operations must be dedicated to debt service, which reduces
the amount of cash the company has available for other purposes;
the company may be more vulnerable in the event of a downturn in the company’s business or general economic
and industry conditions and have limited flexibility in planning for, or reacting to, changes in its business and/or
industry;
the company may be disadvantaged compared to its competitors that are less leveraged and thereby have greater
financial flexibility; and
the company may be restricted in its ability to make strategic acquisitions and to pursue new business
opportunities.
12
The company’s current credit agreement limits its ability to conduct business, which could negatively affect the
company’s ability to finance future capital needs and engage in other business activities.
The covenants in the company’s existing credit agreement contain a number of significant limitations on its ability to, among
other things:
•
•
•
•
pay dividends;
incur additional indebtedness;
create liens on the company’s assets;
engage in new lines of business;
• make investments;
• merge or consolidate; and
•
acquire, dispose of, or lease assets.
These restrictive covenants, among others, could negatively affect the company’s ability to finance its future capital needs,
engage in other business activities or withstand a future downturn in the company’s business or the economy.
Under the company’s current credit agreement, the company is required to maintain certain specified financial ratios and meet
financial tests, including certain ratios of secured leverage and interest coverage. The company’s ability to comply with these
requirements may be affected by matters beyond its control, and, as a result, there can be no assurance that the company will be
able to meet these ratios and tests. A breach of any of these covenants would prevent the company from being able to draw
under the company's revolver and would result in a default under the company’s current credit agreement. In the event of a
default under the company’s current credit agreement, the lenders could terminate their commitments and declare all amounts
borrowed, together with accrued interest and other fees, to be immediately due and payable. Borrowings under other debt
instruments that contain cross-acceleration or cross-default provisions may also be accelerated and become due and payable at
such time. The company may be unable to pay these debts in these circumstances.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect the company's financial
condition and operating results.
In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will be
entitled to convert their Convertible Notes at any time during specified periods at their option. If one or more holders elect to
convert their Convertible Notes, unless the company elects to satisfy the conversion obligation by delivering solely shares of its
common stock (other than paying cash in lieu of delivering any fractional share), the company would be required to settle any
converted principal through the payment of cash, which could adversely affect the company's liquidity. To the extent the
company satisfies the conversion obligation by delivering shares of common stock, the company would be required to deliver a
significant number of shares, which would cause dilution to its existing stockholders. In addition, even if holders do not elect to
convert their Convertible Notes in such circumstances, the company could be required under applicable accounting rules to
reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which
would result in a material reduction in net working capital.
The capped call transactions expose the company to counterparty risk and may affect the value of the company's
common stock.
In connection with the Convertible Notes, the company has entered into and may in the future enter into, capped call
transactions with certain financial institutions, referred to as the capped call counterparties. The capped call transactions are
expected generally to reduce or offset the potential dilution upon conversion of the Convertible Notes and/or offset any cash
payments the company is required to make in excess of the principal amount of the Convertible Notes, as the case may be, with
such reduction and/or offset subject to a cap. From time to time, the capped call counterparties or their respective affiliates may
modify their hedge positions by entering into or unwinding various derivative transactions with respect to the company's
common stock and/or purchasing or selling the company's common stock in secondary market transactions prior to the maturity
of the Convertible Notes. Any such activity could cause a decrease in the market price of the company's common stock.
13
In addition, the capped call counterparties are financial institutions, and the company is subject to the risk that one or more of
the capped call counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their
obligations under the capped call transactions. The company's exposure to the credit risk of the capped call counterparties is not
secured by any collateral. If a capped call counterparty becomes subject to insolvency proceedings, the company will become
an unsecured creditor in those proceedings with a claim equal to the exposure at the time under such transaction. The company's
exposure will depend on many factors but, generally, the exposure will increase if the market price or the volatility of the
company's common stock increases. In addition, upon a default or other failure to perform, or a termination of obligations, by a
capped call counterparty, the company may suffer more dilution than currently anticipated with respect to the company's
common stock. The company can provide no assurances as to the financial stability or viability of the capped call
counterparties.
Fluctuations in interest rates could adversely affect the company's results of operations and financial position.
The company's profitability may be adversely affected during any periods of unexpected or rapid increases in interest rates. The
company maintains a revolving credit facility, which, at January 1, 2022, bore interest at 1.375% above LIBOR per annum. A
significant increase in any of the forgoing rates would significantly increase the company's cost of borrowings, reduce the
availability and increase the cost of obtaining new debt and refinancing existing indebtedness and/or negatively impact the
market price of the company's common stock. For additional detail related to this risk, see Part II, Item 7A, "Quantitative and
Qualitative Disclosure About Market Risk."
The company has a significant amount of goodwill and indefinite life intangibles could suffer losses due to asset
impairment charges.
The company’s balance sheet includes a significant amount of goodwill and indefinite life intangible assets, which represent
approximately 35% and 21%, respectively, of its total assets as of January 1, 2022. The excess of the purchase price over the
fair value of assets acquired, including identifiable intangible assets, and liabilities assumed in conjunction with acquisitions is
recorded as goodwill. In accordance with Accounting Standards Codification (“ASC”) 350 Intangibles-Goodwill and Other, the
company’s long-lived assets (including goodwill and other intangibles) are reviewed for impairment annually and whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In assessing the
recoverability of long-lived assets, the company considers changes in economic conditions and makes assumptions regarding
estimated future cash flows and other factors. Various uncertainties, including continued adverse conditions in the capital
markets or changes in general economic conditions, could impact the future operating performance at one or more of the
company’s businesses, which could significantly affect the company’s valuations and could result in additional future
impairments. Also, estimates of future cash flows are judgments based on the company’s experience and knowledge of
operations. These estimates could be significantly impacted by many factors, including changes in global and local business and
economic conditions, operating costs, inflation, competition, and consumer and demographic trends. If the company’s estimates
or the underlying assumptions change in the future, the company may be required to record impairment charges that, if
incurred, could have a material adverse effect on the company’s reported net earnings.
The company's defined benefit pension plans are subject to financial market risks that could adversely affect the
company's results of operations and cash flows.
The performance of the financial markets and interest rates impact our defined benefit pension plan expenses and funding
obligations. Significant changes in market interest rates, decreases in fair value of plan assets, investment losses on plan assets,
relevant legislative and regulatory changes relating to defined benefit plan funding and changes in interest rates may increase
the company's funding obligations and adversely impact its results of operations and cash flows. In addition, upward pressure
on the cost of providing healthcare coverage to current employees and retirees may increase the company's future funding
obligations and adversely affect its results of operations and cash flows.
14
The company faces intense competition in the commercial foodservice, food processing, and residential kitchen
equipment industries and failure to successfully compete could impact the company’s results of operations and cash
flows.
The company operates in highly competitive industries. In each of the company’s three business segments, competition is based
on a variety of factors including product features and design, brand recognition, reliability, durability, technology, energy
efficiency, breadth of product offerings, price, customer relationships, delivery lead-times, serviceability and after-sale service.
The company has numerous competitors in each business segment. Many of the company’s competitors are substantially larger
and enjoy substantially greater financial, marketing, technological and personnel resources. These factors may enable them to
develop similar or superior products, to provide lower cost products and to carry out their business strategies more quickly and
efficiently than the company can. In addition, some competitors focus on particular product lines or geographic regions or
emphasize their local manufacturing presence or local market knowledge. Some competitors have different pricing structures
and may be able to deliver their products at lower prices. Although the company believes that the performance and price
characteristics of its products will provide competitive solutions for its customers’ needs, there can be no assurance that the
company’s customers will continue to choose the company’s products over products offered by its competitors.
Further, the markets for the company’s products are characterized by changing technology and evolving industry standards.
The company’s ability to compete successfully will depend, in large part, on its ability to enhance and improve its existing
products, to continue to bring innovative products to market in a timely fashion, to adapt the company’s products to the needs
and standards of its current and potential customers and to continue to improve operating efficiencies and lower manufacturing
costs. Moreover, competitors may develop technologies or products that render the company’s products obsolete or less
marketable. If the company is unable to successfully compete in this highly competitive environment, the company’s business,
financial condition and operating results will be materially harmed.
The company is subject to risks associated with developing products and technologies, which could delay product
introductions and result in significant expenditures.
The product, program and service needs of the company’s customers change and evolve regularly, and the company invests
substantial amounts in research and development efforts to pursue advancements in a wide range of technologies, products and
services. Also, the company continually seeks to refine and improve upon the performance, utility and physical attributes of its
existing products and to develop new products. As a result, the company’s business is subject to risks associated with new
product and technological development, including unanticipated technical or other problems, meeting development, production,
certification and regulatory approval schedules, execution of internal and external performance plans, availability of supplier-
and internally-produced parts and materials, performance of suppliers and subcontractors, hiring and training of qualified
personnel, achieving cost and production efficiencies, identification of emerging technological trends in the company’s target
end-markets, validation of innovative technologies, the level of customer interest in new technologies and products, and
customer acceptance of the company’s products and products that incorporate technologies that the company develops. These
factors involve significant risks and uncertainties. Also, any development efforts divert resources from other potential
investments in the company’s businesses, and these efforts may not lead to the development of new technologies or products on
a timely basis or meet the needs of the company’s customers as fully as competitive offerings. In addition, the markets for the
company’s products or products that incorporate the company’s technologies may not develop or grow as the company
anticipates. The company or its suppliers and subcontractors may encounter difficulties in developing and producing these new
products and services, and may not realize the degree or timing of benefits initially anticipated. Due to the design complexity of
the company's products, the company may in the future experience delays in completing the development and introduction of
new products. Any delays could result in increased development costs or deflect resources from other projects. The occurrence
of any of these risks could cause a substantial change in the design, delay in the development, or abandonment of new
technologies and products. Consequently, there can be no assurance that the company will develop new technologies superior to
the company’s current technologies or successfully bring new products to market.
Additionally, there can be no assurance that new technologies or products, if developed, will meet the company’s current price
or performance objectives, be developed on a timely basis, or prove to be as effective as products based on other technologies.
The inability to successfully complete the development of a product, or a determination by the company, for financial, technical
or other reasons, not to complete development of a product, particularly in instances in which the company has made significant
expenditures, could have a material adverse effect on the company’s financial condition and operating results.
15
The company depends on key customers for a material portion of its revenues. As a result, changes in the purchasing
patterns or loss of one or more key customers could adversely impact the company’s operating results.
Many of the company’s key customers are large restaurant chains and major food processing companies. The demand for the
company’s equipment can vary from period to period depending on the company’s customers’ internal growth plans,
construction, seasonality and other factors. In addition, an adverse change to the financial condition of key customers could
cause such key customers to open fewer facilities and defer purchases of new equipment for existing operations or otherwise
change the purchasing patterns of such key customers. Any of these conditions or the loss of key customers could have a
material adverse effect on the company’s financial condition and results of operations.
Price increases in some materials and disruptions in supply could affect the company’s profitability.
The company uses large amounts of stainless steel, aluminized steel and other commodities in the manufacture of its products.
A significant increase in the price of steel or any other commodity, due to tariffs or otherwise, would adversely affect the
company’s operating results. In addition, we have experienced disruptions to parts of our supply chain as a result of COVID-19.
Unanticipated delays in delivery of raw materials and component inventories by suppliers—including delays due to capacity
constraints, labor disputes, impaired financial condition of suppliers, natural disasters, extreme weather patterns and climate
change, pandemics or other events outside our control— may increase the company's production costs, cause delays in the
shipment of products or impair the ability of the company to satisfy customer demand. An interruption in or the cessation of an
important supply by any third party and the company’s inability to make alternative arrangements in a timely manner, or at all,
could have a material adverse effect on the company’s business, financial condition and operating results.
The company faces risks related to health epidemics and other widespread outbreaks of contagious disease, which
could significantly disrupt its operations and impact its operating results.
The spread of COVID-19 and other contagious diseases, or other adverse public health developments, has had, and will likely
continue to have, a material and adverse effect on our business operations. These effects have included and could continue to
include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities or the facilities of our
suppliers or customers. Any disruption of our suppliers or customers would likely impact our sales and operating results.
The company may be the subject of product liability claims or product recalls, and it may be unable to obtain or
maintain insurance adequate to cover potential liabilities.
Product liability is a significant commercial risk to the company. The company’s business exposes it to potential liability risks
that arise from the manufacturing, marketing and selling of the company’s products. In addition to direct expenditures for
damages, settlement and defense costs, there is a possibility of adverse publicity as a result of product liability claims. Plaintiffs
in some jurisdictions have received substantial damage awards against companies based upon claims for injuries allegedly
caused by the use of their products. In addition, it may be necessary for the company to recall products that do not meet
approved specifications, which could result in adverse publicity as well as costs connected to the recall and loss of revenue.
The company cannot be certain that a product liability claim or series of claims brought against it would not have an adverse
effect on the company’s business, financial condition or results of operations. If any claim is brought against the company,
regardless of the success or failure of the claim, there can be no assurance that the company will be able to obtain or maintain
product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities or the cost of
a recall. The company currently maintains insurance programs consisting of self-insurance up to certain limits and excess
insurance coverage for claims over established limits. There can be no assurance that the company's insurance programs will
provide adequate protection against actual losses. In addition, the company is subject to the risk that one or more of its insurers
may become insolvent or become unable to pay claims that may be made in the future.
An increase in warranty expenses could adversely affect the company’s financial performance.
The company offers purchasers of its products warranties covering workmanship and materials typically for one year and, in
certain circumstances, for periods of up to ten years, during which periods the company or an authorized service representative
will make repairs and replace parts that have become defective in the course of normal use. The company estimates and records
its future warranty costs based upon past experience. These warranty expenses may increase in the future and may exceed the
company’s warranty reserves, which, in turn, could adversely affect the company’s financial performance.
16
The company’s financial performance is subject to significant fluctuations.
The company’s financial performance is subject to quarterly and annual fluctuations due to a number of factors, including:
• general economic conditions;
•
the lengthy, unpredictable sales cycle for the commercial foodservice equipment, food processing equipment and
residential kitchen equipment groups;
• the gain or loss of significant customers;
• unexpected delays in new product introductions;
•
the level of market acceptance of new or enhanced versions of the company’s products;
• unexpected changes in the levels of the company’s operating expenses; and
• competitive product offerings and pricing actions.
Each of these factors could result in a material and adverse change in the company’s business, financial condition and results of
operations.
The company may be unable to manage its growth.
The company has recently experienced rapid growth in its business. Continued growth could place a strain on the company’s
management, operations and financial resources. There also will be additional demands on the company’s sales, marketing and
information systems and on the company’s administrative infrastructure as it develops and offers additional products and enters
new markets. The company cannot be certain that the company’s operating and financial control systems, administrative
infrastructure, outsourced and internal production capacity, facilities and personnel will be adequate to support the company’s
future operations or to effectively adapt to future growth. If the company cannot manage the company’s growth effectively, the
company’s business may be harmed.
Strategic and Organizational Risks
The company’s acquisition, investment and alliance strategy involves risks. If the company is unable to effectively
manage these risks, its business will be materially harmed.
To achieve the company’s strategic objectives, the company has pursued and may continue to pursue strategic acquisitions of
and investments in other companies, businesses or technologies. Acquisitions and investments entail numerous risks, including,
among others:
• difficulties in the assimilation of acquired businesses or technologies and the inability to fully realize some of the
expected synergies or otherwise achieve anticipated revenues and profits;
•
•
•
•
inability to operate acquired businesses or utilize acquired technologies profitably;
the significant amount of management time and attention needed to identify, execute and integrate any acquired
businesses;
potential assumption of unknown material liabilities;
failure to achieve financial or operating objectives;
• unanticipated costs relating to acquisitions or to the integration of acquired businesses;
•
•
loss of customers, suppliers, or key employees; and
the impact on the company's internal controls and compliance with the regulatory requirements under the
Sarbanes-Oxley Act of 2002.
17
The company may not be able to successfully integrate any operations, personnel, services or products that it has acquired or
may acquire in the future.
The company may seek to expand or enhance some of its operations by forming joint ventures or alliances with various
strategic partners throughout the world. Entering into joint ventures and alliances also entails risks, including difficulties in
developing and expanding the businesses of newly formed joint ventures, exercising influence over the activities of joint
ventures in which the company does not have a controlling interest and potential conflicts with the company’s joint venture or
alliance partners. The company cannot assure that any joint venture or alliance entered into or that may be entered into in the
future will be successful.
An inability to identify or complete future acquisitions could adversely affect future growth.
The company intends to continue its growth strategy of identifying and acquiring businesses with complementary products and
services by pursuing acquisitions that provide opportunities for profitable growth. While the company continues to evaluate
potential acquisitions, it may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future
acquisitions on satisfactory terms, obtain regulatory approval for certain acquisitions, or otherwise complete acquisitions in the
future. An inability to identify or complete future acquisitions could limit the company’s growth.
Expansion of the company’s international operations involves special challenges that it may not be able to meet. The
company’s failure to meet these challenges could adversely affect its business, financial condition and operating results.
The company plans to continue to expand its international operations. The company faces certain risks inherent in doing
business in international markets. These risks include:
•
extensive regulations and oversight, tariffs, including with respect to certain products imported from China or
exported to China, retaliatory tariffs by China and certain other countries in response to tariffs implemented by the
United States, and other trade barriers;
• withdrawal from or renegotiation of international trade agreements and other restrictions on trade between the
United States and China, the European Union, Canada, Mexico and other countries;
•
•
•
•
•
•
•
•
•
•
•
effects of the United Kingdom's decision to exit the European Union and related potential disruption to trade;
uncertain impact on operations, suppliers and customers related to business disruptions and restrictions due to the
COVID-19 pandemic;
reduced protection for intellectual property rights;
difficulties in staffing and managing foreign operations;
potentially adverse tax consequences;
limitations on ownership and on repatriation of earnings;
transportation delays and interruptions;
political, social, and economic instability and disruptions;
labor unrests or shortages;
potential for nationalization of enterprises; and
limitations on the company’s ability to enforce legal rights and remedies.
In addition, the company is and will be required to comply with the laws and regulations of foreign governmental and
regulatory authorities of each country in which the company conducts business.
18
There can be no assurance that the company will be able to succeed in marketing its products and services in international
markets. The company may also experience difficulty in managing its international operations because of, among other things,
competitive conditions overseas, management of foreign exchange risk, established domestic markets, and language and
cultural differences. Any of these factors could have a material adverse effect on the success of the company’s international
operations and, consequently, on the company’s business, financial condition and operating results.
The impact of future transactions on the company’s common stock is uncertain.
The company periodically reviews potential transactions related to products or product rights and businesses complementary to
the company’s business. Such transactions could include mergers, acquisitions, joint ventures, alliances or licensing
agreements. In the future, the company may choose to enter into such transactions at any time. The impact of transactions on
the market price of a company’s stock is often uncertain and may include substantial fluctuations. Consequently, any
announcement of any such transaction could have a material adverse effect upon the market price of the company’s common
stock. Moreover, depending upon the nature of any transaction, the company may experience a charge to earnings, which could
be material and have an adverse impact upon the market price of the company’s common stock.
The company’s business could suffer in the event of a work stoppage by its unionized labor force.
Because the company has a significant number of workers whose employment is subject to collective bargaining agreements
and labor union representation, the company is vulnerable to possible organized work stoppages and similar actions. Unionized
employees accounted for approximately 5% of the company’s workforce as of January 1, 2022. The company has union
contracts with employees at its facilities in Windsor, California; Algona, Iowa; Elgin, Illinois; Easton, Pennsylvania and Lodi,
Wisconsin that extend through December 2023, December 2022, July 2022, May 2023 and December 2024, respectively. The
company also has a union workforce at its manufacturing facility in the Philippines under a contract that extends through June
2026. Approximately 1% of the company's workforce is covered by collective bargaining agreements that expire within one
year. Any future strikes, employee slowdowns or similar actions by one or more unions, in connection with labor contract
negotiations or otherwise, could have a material adverse effect on the company’s ability to operate the company’s business.
The company depends significantly on its key personnel.
The company depends significantly on the company’s executive officers and certain other key personnel, whom could be
difficult to replace. While the company has employment agreements with certain key executives, the company cannot be certain
that it will succeed in retaining this personnel or their services under existing agreements. The incapacity, inability or
unwillingness of certain of these people to perform their services may have a material adverse effect on the company. There is
intense competition for qualified personnel within the company’s industry, and there can be no assurance that the company will
be able to continue to attract, motivate and retain personnel with the skills and experience needed to successfully manage the
company's business and operations.
Technology and Cybersecurity Risks
The company may not be able to adequately protect its intellectual property rights, which may materially harm its
business.
The company relies primarily on trade secret, copyright, service mark, trademark and patent law and contractual protections to
protect the company’s proprietary technology and other proprietary rights. The company has filed numerous patent applications
covering the company’s proprietary technology. Notwithstanding the precautions the company takes to protect its intellectual
property rights, it is possible that third parties may copy or otherwise obtain and use the company’s proprietary technology
without authorization or may otherwise infringe on the company’s rights. In some cases, including with respect to a number of
the company’s most important products, there may be no effective legal recourse against duplication by competitors as the legal
systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other
intellectual property protection. This could make it difficult for us to stop the infringement of our patents and future patents we
may own, or, generally, prevent the marketing of competing products in violation of our proprietary rights. Further, the laws of
some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United
States. In the future, the company may have to rely on litigation to enforce its intellectual property rights, protect its trade
secrets, determine the validity and scope of the proprietary rights of others or defend against claims of infringement or
invalidity. Any such litigation, whether successful or unsuccessful, could result in substantial costs to the company and
diversions of the company’s resources, either of which could adversely affect the company’s business.
19
Any infringement by the company of a third party's patent rights could result in litigation and adversely affect its ability
to provide, or could increase the cost of providing, the company’s products and services.
Patents of third parties may have an important bearing on the company’s ability to offer some of its products and services. The
company’s competitors, as well as other companies and individuals, may obtain patents related to the types of products and
services the company offers or plans to offer. There can be no assurance that the company is or will be aware of all patents
containing claims that may pose a risk of infringement by its products and services. In addition, some patent applications in the
United States are confidential until a patent is issued and, therefore, the company cannot evaluate the extent to which its
products and services may be covered or asserted to be covered by claims contained in pending patent applications. In general,
if one or more of the company’s products or services were to infringe patents held by others, the company may be required to
stop developing or marketing the products or services, to obtain licenses from the holders of the patents to develop and market
the services, or to redesign the products or services in such a way as to avoid infringing on the patent claims. The company
cannot assess the extent to which it may be required in the future to obtain licenses with respect to patents held by others,
whether such licenses would be available or, if available, whether it would be able to obtain such licenses on commercially
reasonable terms. If the company is unable to obtain such licenses, it also may not be able to redesign the company’s products
or services to avoid infringement, which could materially adversely affect the company’s business, financial condition and
operating results.
The company may be subject to information technology system failures, network disruptions, cybersecurity attacks and
breaches in data security, which may materially adversely affect the company’s operations, financial condition and
operating results.
The company depends on information technology as an enabler to improve the effectiveness of its operations and to interface
with its customers, as well as to maintain financial accuracy and efficiency. Information technology system failures,
including suppliers’ or vendors’ system failures, could disrupt the company’s operations by causing transaction errors,
processing inefficiencies, delays or cancellation of customer orders, the loss of customers, impediments to the manufacture or
shipment of products, other business disruptions, or the loss of or damage to intellectual property through a security breach.
The company’s information systems, or those of its third-party service providers, could also be penetrated by outside parties
intent on extracting information, corrupting information or disrupting business processes. Such unauthorized access could
disrupt the company’s business, increase costs and/or result in the loss of assets. Cybersecurity attacks are becoming more
sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other
electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or
otherwise protected information, corruption or destruction of data and other manipulation or improper use of systems or
networks. These events could negatively impact the company’s customers and/or reputation and lead to financial losses from
remediation actions, loss of business, production downtimes, operational delays or potential liability, penalties, fines or other
increases in expense, all of which may have a material adverse effect on the company’s business. In addition, as security
threats and cybersecurity and data privacy and protection laws and regulations, including those related to the collection,
storage, handling, use, disclosure, transfer, and security of personally identifiable information, continue to evolve and become
more sophisticated, we may invest additional resources in the security of our systems. Any such increased level of investment
could adversely affect our financial condition or results of operations. Further, as governmental authorities around the world
continue to consider legislative and regulatory proposals concerning data protection, we may face substantial penalties if we
fail to comply with regulations and laws regarding data protection.
Tax, Legal and Regulatory Risks
The company may be subject to litigation, tax, and other legal compliance risks.
In addition to product liability claims, the company is subject to a variety of litigation, tax, and other legal compliance risks.
These risks include, among other things, possible liability relating to personal injuries, intellectual property rights, contract-
related claims, taxes and compliance with U.S. and foreign export laws, competition laws, and laws governing improper
business practices. The company or one of its business units could be charged with wrongdoing as a result of such matters. If
convicted or found liable, the company could be subject to significant fines, penalties, repayments or other damages.
20
The company’s reputation, ability to do business, and results of operations may be impaired by the improper conduct of
any of its employees, agents, or business partners.
While the company strives to maintain high standards, the company cannot provide assurance that its internal controls and
compliance systems will always protect the company from acts committed by its employees, agents, or business partners that
violate U.S. and/or foreign laws or fail to protect the company’s confidential information, including the laws governing
payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, export and import
compliance, money laundering, and data privacy laws, as well as the improper use of proprietary information or social media.
Any such violations of law or improper actions could subject the company to civil or criminal investigations in the United
States and in other jurisdictions, lead to substantial civil or criminal, monetary and non-monetary penalties, and related
shareholder lawsuits, lead to increased costs of compliance and damage the company’s reputation.
The company is subject to potential liability under environmental laws.
The company’s operations are regulated by a number of federal, state and local environmental laws and regulations that govern,
among other things, the discharge of hazardous materials into the air and water as well as the handling, storage and disposal of
these materials. Compliance with these environmental laws and regulations is a significant consideration for the company
because it uses hazardous materials in its manufacturing processes. In addition, because the company is a generator of
hazardous wastes, even if it fully complies with applicable environmental laws, it may be subject to financial exposure for costs
associated with an investigation and remediation of sites at which it has arranged for the disposal of hazardous wastes if these
sites become contaminated. In the event of a violation of environmental laws, the company could be held liable for damages
and for the costs of remedial actions. Environmental laws could also become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with any violation, which could negatively affect the company’s
operating results. There can be no assurance that identification of presently unidentified environmental conditions, more
vigorous enforcement by regulatory authorities or other unanticipated events will not arise in the future resulting in additional
environmental liabilities, compliance costs and penalties that could be material. Environmental laws and regulations are
constantly evolving, and it is impossible to accurately predict the effect they may have upon the financial condition, results of
operations, or cash flows of the company.
We are subject to risks associated with possible climate change legislation, regulation and international accords.
Government mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climate change
impacts have resulted in, and are likely to continue resulting in, increased energy, manufacturing, transportation and raw
material costs. Governmental requirements directed at regulating greenhouse gas emissions could cause us to incur expenses
that we cannot recover or that will require us to increase the price of products we sell, which could impact the demand for those
products.
Unfavorable tax law changes and tax authority rulings may adversely affect financial results.
The company is subject to income taxes in the United States and in various foreign jurisdictions. Domestic and international tax
liabilities are based on the income and expenses in various tax jurisdictions. The amount of the company’s income and other tax
liability is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. authorities. If these audits
result in assessments different from amounts recorded, future financial results may include unfavorable tax adjustments.
21
The trading price of the company's common stock has been volatile, and investors in the company's common stock may
experience substantial losses.
The trading price of the company's common stock has been volatile and may become volatile again in the future. The trading
price of the company's common stock could decline or fluctuate in response to a variety of factors, including:
•
•
•
•
•
•
the company's failure to meet the performance estimates of securities analysts;
changes in buy/sell recommendations by securities analysts;
fluctuations in the company's operating results;
substantial sales of the company's common stock;
general stock market conditions; or
other economic or external factors.
Item 1B. Unresolved Staff Comments
Not applicable.
22
Item 2. Properties
The company's principal executive offices are located in Elgin, Illinois. The company operates thirty-nine manufacturing
facilities in the U.S. and twenty-eight manufacturing facilities internationally.
The principal properties of the company used to conduct business operations are listed below:
Location
Principal Function
Square
Footage
Owned/
Leased
Lease
Expiration
Commercial Foodservice:
Fort Smith, AR
Brea, CA
Vacaville, CA
Windsor, CA
Corona, CA
Louisville, CO
Venice, FL
Elgin, IL
Mundelein, IL
Rockton, IL
South Beloit, IL
Menominee, MI
Charlotte, NC
Fuquay-Varina, NC
Bow, NH
Pembroke, NH
Dayton, OH
Moraine, OH
Tualatin, OR
Easton, PA
Smithville, TN
Allen, TX
Carrollton, TX
Essex Junction, VT
Renton, WA
New South Wales, Australia
Toronto, Canada
Humen, China
Qingdao City, China
Zhuhai City, China
Brøndby, Denmark
Randers, Denmark
Viljandi, Estonia
Nusco, Italy
Sedico, Italy
Nogales, Mexico
Wiślina, Poland
Pineda de Mar, Spain
Fristad, Sweden
Laguna, the Philippines
Lincoln, the United Kingdom
712,600
86,600
81,200
75,000
86,000
37,700
38,600
207,000
70,000
339,400
171,700
60,000
44,000
183,900
100,000
136,200
37,700
38,300
29,500
246,700
268,000
21,000
132,400
282,500
61,700
204,900
87,700
6,600
113,500
104,500
50,900
50,100
47,000
260,600
52,500
129,000
77,500
57,100
173,800
115,200
100,000
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Owned
Owned
Owned
Leased
Owned
Leased
Owned
Owned
Leased
Owned
Leased
Leased
Owned
Owned
Leased
Leased
Owned
Leased
Owned
Owned
Leased
Leased
Leased
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Jan-26
Sep-26
May-27
Apr-32
N/A
Jul-28
Jun-24
N/A
N/A
N/A
Mar-24
N/A
Feb-24
N/A
N/A
Jul-24
N/A
Jun-27
May-28
N/A
N/A
Jun-23
Aug-22
N/A
Sep-28
N/A
N/A
Mar-22
Jul-29
May-22
N/A
N/A
N/A
N/A
Feb-24
N/A
N/A
N/A
N/A
N/A
N/A
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Warehousing
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Warehousing
Manufacturing, Warehousing and Offices
Warehousing
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Warehousing
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices*
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices*
Manufacturing, Warehousing
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
23
Principal Function
Square
Footage
Owned/
Leased
Lease
Expiration
Location
Food Processing:
Gainesville, GA
Algona, IA
Elgin, IL
Elk Grove, IL
Clayton, NC
Maysville, OK
Souderton, PA
Plano, TX
Waynesboro, VA
Bothell, WA
Lodi, WI
Aalborg, Denmark
Mauron, France
Reichenau, Germany
Bangalore, India
Castelnuovo Rangone, Italy
Norwich, the United Kingdom
Residential Kitchen:
Chino, CA
Redwood City, CA
Atlanta, GA
Buford, GA
Columbus, GA
Greenville, MI
Greenwood, MS
Brown Deer, WI
Kuurne, Belgium
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices
Warehousing and Offices
Warehousing and Offices
Warehousing and Offices
Warehousing and Offices
Warehousing and Offices
Manufacturing, Warehousing and Offices
Manufacturing, Warehousing and Offices**
Manufacturing, Warehousing and Offices
Manufacturing and Offices
Saint Ouen L'aumone , France
Manufacturing, Warehousing
Waterford, Ireland
Warehousing and Offices
Ketley, the United Kingdom
Manufacturing and Offices
Leamington Spa, the United Kingdom Manufacturing and Offices
Leamington Spa, the United Kingdom Manufacturing and Offices
Nottingham, the United Kingdom
Warehousing and Offices
* Contains two separate manufacturing facilities.
** Contains four separate manufacturing facilities.
107,400
70,100
25,000
101,500
65,000
36,700
35,000
339,100
26,400
23,600
114,600
68,300
107,200
57,900
75,000
26,800
30,000
100,000
20,600
169,200
178,100
133,800
225,000
740,600
161,900
289,700
30,400
73,000
217,300
270,200
100,300
153,100
Owned
Owned
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Leased
Owned
Leased
Leased
Owned
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
N/A
N/A
N/A
Nov-29
Oct-24
N/A
N/A
Apr-22
N/A
May-25
N/A
Dec-22
Dec-22
N/A
Mar-24
Dec-23
N/A
Feb-22
Jul-24
Dec-24
Feb-23
Feb-23
N/A
N/A
Nov-26
N/A
N/A
Jul-27
N/A
N/A
Aug-29
N/A
At various other locations the company leases small amounts of space for administrative, manufacturing, distribution and sales
functions, and in certain instances limited short-term inventory storage. These locations are in Australia, Brazil, Canada, China,
Czech Republic, Denmark, Dubai, France, Germany, India, Italy, Mexico, Netherlands, Philippines, Russia, Spain, the United
Kingdom and various locations in the United States.
Management believes that these facilities are adequate for the operation of the company's business as presently conducted.
24
Item 3. Legal Proceedings
The company is routinely involved in litigation incidental to its business, including product liability claims, which are partially
covered by insurance or in certain cases by indemnification provisions under purchase agreements for recently acquired
companies. Such routine claims are vigorously contested and management does not believe that the outcome of any such
pending litigation will have a material effect upon the financial condition, results of operations or cash flows of the company.
Item 4. Mine Safety Issues
Not applicable.
25
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
PART II
Principal Market
The company's Common Stock trades on the Nasdaq Global Select Market under the symbol "MIDD".
Stockholders
The company estimates there were approximately 69,204 record holders of the company's common stock as of February 28,
2022.
Dividends
The company does not currently pay cash dividends on its common stock. Any future payment of cash dividends on the
company’s common stock will be at the discretion of the company’s Board of Directors and will depend upon the company’s
results of operations, earnings, capital requirements, contractual restrictions and other factors deemed relevant by the Board of
Directors. The company’s Board of Directors currently intends to retain any future earnings to support its operations and to
finance the growth and development of the company’s business and does not intend to declare or pay cash dividends on its
common stock for the foreseeable future. In addition, the company’s revolving credit facility limits its ability to declare or pay
dividends on its common stock.
Securities Authorized for Issuance under Equity Compensation Plans
For information pertaining to securities authorized for issuance under equity compensation plans and the related weighted
average exercise price, see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.”
Unregistered Sales of Equity Securities in connection with Strategic Transactions
On June 29, 2020, in connection with the company’s minority investment in Bluezone Products, Inc. (“Bluezone”), the
company issued 46,365 unregistered shares of the company’s common stock to a certain stockholder of Bluezone (“Bluezone
Stockholder”) in exchange for 36,764 shares of series A preferred stock of Bluezone. The shares of company common stock
were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended
("Securities Act"). The company relied on such exemption based in part upon representations made by the Bluezone
Stockholder, including its status as an accredited investor, as such term is defined in Rule 501 of the Securities Act.
On December 23, 2020, in connection with the company’s purchase of assets from Appliance Innovation, Inc. ("Appliance"),
the company issued 93,392 unregistered shares of the company’s common stock to Appliance. The shares of company common
stock were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act. The company
relied on such exemption based in part upon representations made by Appliance, including its status as an accredited investor,
as such term is defined in Rule 501 of the Securities Act.
On December 27, 2021, in connection with the company’s purchase of all of the capital stock of Masterbuilt Holdings, LLC
("Kamado Joe and Masterbuilt"), the company issued 12,921 unregistered shares of the company’s common stock to Kamado
Joe and Masterbuilt. The shares of company common stock were issued in reliance on the exemption from registration under
Section 4(a)(2) of the Securities Act. The company relied on such exemption based in part upon representations made by
Kamado Joe and Masterbuilt, including its status as an accredited investor, as such term is defined in Rule 501 of the Securities
Act.
26
Issuer Purchases of Equity Securities
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
Total Number of Shares
Purchased as
Part of Publicly
Announced Plan or
Program
Maximum Number of
Shares that May Yet be
Purchased Under the
Plan or Program (1)
October 3, 2021 to October 30, 2021
October 31, 2021 to November 27, 2021
— $
—
November 28, 2021 to January 1, 2022
141,500
Quarter ended January 1, 2022
141,500 $
—
—
188.17
188.17
—
—
141,500
141,500
1,476,835
1,476,835
1,335,335
1,335,335
(1) In November 2017, the company's Board of Directors approved a stock repurchase program. This program authorizes the
company to repurchase in the aggregate up to 2,500,000 shares of its outstanding common stock in open market purchases or
negotiated transactions. As of January 1, 2022, 1,164,665 shares had been purchased under the 2017 stock repurchase program.
At January 1, 2022, the company had a total of 8,170,276 shares in treasury amounting to $566.4 million.
In the Consolidated Financial Statements, the company also treats shares withheld for tax purposes on behalf of employees in
connection with the vesting of restricted share grants as common stock repurchases because they reduce the number of shares
that would have been issued upon vesting. These withheld shares are not considered common stock repurchases under the
authorized common stock repurchase plan and accordingly are not included in the common stock repurchase totals in the
preceding table.
27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
This report contains "forward-looking statements" subject to the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve known and unknown risks, uncertainties and other factors, which could cause the
company's actual results, performance or outcomes to differ materially from those expressed or implied in the forward-looking
statements. The following are some of the important factors that could cause the company's actual results, performance or
outcomes to differ materially from those discussed in the forward-looking statements:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
changing market conditions;
volatility in earnings resulting from goodwill impairment losses, which may occur irregularly and in varying amounts;
variability in financing costs;
quarterly variations in operating results;
dependence on key customers;
risks associated with the company's foreign operations, including market acceptance and demand for the company's
products and the company's ability to manage the risk associated with the exposure to foreign currency exchange rate
fluctuations;
the company's ability to protect its trademarks, copyrights and other intellectual property;
the impact of competitive products and pricing;
the impact of announced management and organizational changes;
the state of the residential construction, housing and home improvement markets;
the state of the credit markets, including mortgages, home equity loans and consumer credit;
intense competition in the company's business segments including the impact of both new and established global
competitors;
unfavorable tax law changes and tax authority rulings;
cybersecurity attacks and other breaches in security;
the continued ability to realize profitable growth through the sourcing and completion of strategic acquisitions;
the timely development and market acceptance of the company's products; and
the availability and cost of raw materials.
The company cautions readers to carefully consider the statements set forth in the section entitled "Item 1A. Risk Factors" of
this filing and discussion of risks included in the company's SEC filings.
28
NET SALES SUMMARY
(dollars in thousands)
Fiscal Year Ended(1)
Business Segments:
2021
2020
2019
Sales
Percent
Sales
Percent
Sales
Percent
Commercial Foodservice
$ 2,032,761
62.5 % $ 1,510,279
60.1 % $ 1,984,345
67.1 %
Food Processing
480,746
14.8
437,272
17.4
400,951
13.5
Residential Kitchen
737,285
22.7
565,706
22.5
574,150
19.4
Total
$ 3,250,792
100.0 % $ 2,513,257
100.0 % $ 2,959,446
100.0 %
(1)
The company's fiscal year ends on the Saturday nearest to December 31.
29
Results of Operations
The following table sets forth certain items in the consolidated statements of earnings as a percentage of net sales for the
periods presented:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring
Merger termination fee
Gain on litigation settlement
Gain on sale of plant
Impairments
Income from operations
Interest expense and deferred financing amortization, net
Net periodic pension benefit (other than service cost & curtailment)
Curtailment loss
Other expense (income), net
Earnings before income taxes
Provision for income taxes
Net earnings
2021
Fiscal Year Ended(1)
2020
2019
100.0 %
63.2
36.8
20.5
0.3
(3.4)
—
—
—
19.4
1.8
(1.4)
—
—
19.0
4.0
15.0 %
100.0 %
64.9
35.1
21.2
0.5
—
—
(0.1)
0.6
12.9
3.1
(1.6)
0.6
0.1
10.7
2.4
8.3 %
100.0 %
62.7
37.3
20.1
0.3
—
(0.5)
—
—
17.4
2.9
(1.0)
—
(0.1)
15.6
3.7
11.9 %
(1)
The company's fiscal year ends on the Saturday nearest to December 31.
30
Fiscal Year Ended January 1, 2022 as Compared to January 2, 2021
NET SALES. Net sales in fiscal 2021 increased by $737.5 million, or 29.3%, to $3,250.8 million as compared to $2,513.3
million in fiscal 2020. Net sales increased by $124.8 million, or 5.0%, from the fiscal 2020 acquisitions of Deutsche, Wild
Goose, United Foodservice Equipment Zhuhai and the fiscal 2021 acquisitions of Novy, Newton CFV, Imperial, Char-Griller,
and Kamado Joe and Masterbuilt. Excluding acquisitions and a disposition, net sales increased $631.8 million, or 25.3%, from
the prior year. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for fiscal 2021 increased net
sales by approximately $39.5 million. Excluding the impact of foreign exchange, acquisitions and the disposition, sales
increased 23.7% for the year, including a net sales increase of 28.2% at the Commercial Foodservice Equipment Group, a net
sales increase of 9.1% at the Food Processing Equipment Group and a net sales increase of 23.2% at the Residential Kitchen
Equipment Group.
•
•
•
Net sales of the Commercial Foodservice Equipment Group increased by $522.5 million, or 34.6%, to $2,032.8
million in fiscal 2021 as compared to $1,510.3 million in fiscal 2020. Net sales from the acquisitions of Deutsche,
Wild Goose, United Foodservice Equipment Zhuhai, Newton CFV, and Imperial which were acquired on March
2, 2020, December 7, 2020, December 18, 2020, November 16, 2021 and September 24, 2021, respectively,
accounted for an increase of $77.4 million during fiscal 2021. Excluding the impact of acquisitions, net sales of
the Commercial Foodservice Equipment Group increased $445.1 million, or 29.5%, as compared to the prior year.
Excluding the impact of foreign exchange and acquisitions, net sales increased $426.1 million, or 28.2% at the
Commercial Foodservice Equipment Group. Domestically, the company realized a sales increase of $367.2
million, or 34.4%, to $1,435.1 million, as compared to $1,067.9 million in the prior year. This includes an increase
of $61.3 million from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was $305.9
million, or 28.6%. The increase in domestic sales is related to improvements in market conditions and consumer
demand. International sales increased $155.3 million, or 35.1%, to $597.7 million, as compared to $442.4 million
in the prior year. This includes the increase of $16.1 million from recent acquisitions and an increase of $19.0
million related to the favorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net
sales increase in international sales was $120.2 million, or 27.2%. The increase in international sales is related to
improvements in market conditions, primarily in the European and Asian markets.
Net sales of the Food Processing Equipment Group increased by $43.4 million, or 9.9%, to $480.7 million in
fiscal 2021, as compared to $437.3 million in fiscal 2020. Excluding the impact of foreign exchange, net sales
increased $39.6 million, or 9.1% at the Food Processing Equipment Group. Domestically, the company realized a
sales increase of $36.2 million, or 11.6%, to $347.3 million, as compared to $311.1 million in the prior year. The
increase in domestic sales reflects growth driven by both protein and bakery products. International sales
increased $7.2 million, or 5.7%, to $133.4 million, as compared to $126.2 million in the prior year. This includes
an increase of $3.8 million related to the favorable impact of exchange rates. Excluding foreign exchange, the net
sales increase in international sales was $3.4 million, or 2.7%. The increase in international revenues is primarily
driven by protein projects.
Net sales of the Residential Kitchen Equipment Group increased by $171.6 million, or 30.3%, to $737.3 million in
fiscal 2021, as compared to $565.7 million in fiscal 2020. Net sales from the acquisitions of Novy, Char-Griller,
and Kamado Joe and Masterbuilt, which were acquired on July 12, 2021, December 27, 2021, and December 27,
2021, respectively, accounted for an increase of $47.4 million during fiscal 2021. Excluding the impact of
acquisitions and the disposition, net sales of the Residential Kitchen Equipment Group increased $143.3 million,
or 26.2%, as compared to the prior year. Excluding the impact of foreign exchange, acquisitions, and the
disposition, net sales increased $126.6 million, or 23.2% at the Residential Kitchen Equipment Group.
Domestically, the company realized a sales increase of $80.5 million, or 21.5%, to $454.4 million, as compared to
$373.9 million in the prior year. This includes an increase of $3.5 million from recent acquisitions. Excluding
acquisitions, the net increase in domestic sales was $77.0 million, or 20.6%. International sales increased $91.1
million, or 47.5% to $282.9 million, as compared to $191.8 million in the prior year. This includes an increase of
$43.9 million from recent acquisitions and an increase of $16.7 million related to the favorable impact of
exchange rates. Excluding acquisitions, the disposition, and foreign exchange, the net sales increase in
international sales was $49.6 million, or 28.7%. The increase in domestic and international sales reflects the strong
demand for our premium appliance brands and strength in the European market.
31
GROSS PROFIT. Gross profit increased by $312.9 million to $1,194.9 million in fiscal 2021 from $882.0 million in fiscal
2020, primarily reflecting higher sales volumes related to improvements in market conditions and consumer demand and the
favorable impact of foreign exchange rates of $14.0 million. The gross margin rate increased to 36.8% in 2021 as compared to
35.1% in 2020. The gross margin rate in fiscal 2021 excluding acquisitions and impact of foreign exchange was 37.0%.
•
•
•
Gross profit at the Commercial Foodservice Equipment Group increased by $230.7 million, or 44.2%, to $752.9
million in fiscal 2021 as compared to $522.2 million in fiscal 2020. Gross profit from acquisitions increased gross
profit by $27.1 million. Excluding acquisitions, the gross profit increased by approximately $203.6 million related
to higher sales volumes. The impact of foreign exchange rates increased gross profit by approximately $6.7
million. The gross profit margin rate increased to 37.0% in fiscal 2021 as compared to 34.6% in the prior year.
The gross margin rate in fiscal 2021 excluding acquisitions and the impact of foreign exchange was 37.1%.
Gross profit at the Food Processing Equipment Group increased by $17.1 million, or 10.9%, to $174.2 million in
fiscal 2021 as compared to $157.1 million in fiscal 2020. The impact of foreign exchange rates increased gross
profit by approximately $2.0 million. The gross profit margin rate increased to 36.2% in fiscal 2021 as compared
to 35.9% in the prior year. The gross margin rate in fiscal 2021 excluding the impact of foreign exchange was
36.1%.
Gross profit at the Residential Kitchen Equipment Group increased by $64.3 million, or 31.5%, to $268.6 million
in fiscal 2021 as compared to $204.3 million in fiscal 2020. Gross profit from acquisitions increased gross profit
by $11.0 million. Excluding acquisitions, the gross profit increased by approximately $53.3 million related to
higher sales volumes. The impact of foreign exchange rates increased gross profit by approximately $5.3 million.
The gross margin rate increased to 36.4% in fiscal 2021 as compared to 36.1% in the prior year. The gross margin
rate in fiscal 2021 excluding acquisitions and the impact of foreign exchange was 37.5%.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Combined selling, general, and administrative expenses
increased by $136.1 million to $668.0 million in fiscal 2021 from $531.9 million in 2020. As a percentage of net sales, selling,
general and administrative expenses amounted to 20.5% in fiscal 2021 and 21.2% in fiscal 2020.
Selling, general and administrative expenses reflect increased costs of $33.0 million associated with acquisitions, including
$11.8 million of non-cash intangible amortization expense. Selling, general and administrative expenses increased
approximately $90.0 million related to compensation costs, professional fees, and commission expense. Increases in
professional fees were driven by the costs associated with our proposed and subsequently terminated acquisition of Welbilt, as
well as overall increased deal activity. Foreign exchange rates had a favorable impact of $6.7 million.
RESTRUCTURING EXPENSES. Restructuring expenses decreased $4.7 million to $7.7 million from $12.4 million in the
prior year period. In fiscal 2021, restructuring expenses related primarily to headcount reductions and facility consolidations
within the Commercial Foodservice Equipment Group. During fiscal 2020, restructuring charges related primarily to headcount
reductions and cost reduction initiatives related to facility consolidations at the Commercial Foodservice Equipment Group and
Residential Kitchen Equipment Group.
IMPAIRMENTS. In fiscal 2020, the company recognized impairment of $11.6 million associated with several trade names in
conjunction with the diminution of value as we assessed current market conditions and future business plans. See Note 3 (f) to
the Consolidated Financial Statements for further information on the annual impairment testing. In addition the company
recorded an impairment charge of approximately $2.9 million to reflect the fair market value of assets held for sale for a non-
core business within the Residential Kitchen Equipment Group. See Note 13, Restructuring and Acquisition Integration
Initiatives, in the Notes to the Consolidated Financial Statements for further information on restructuring initiatives. In fiscal
2021, there were no impairments recognized in the Consolidated Financial Statements.
32
INCOME FROM OPERATIONS. Income from operations increased $305.6 million to $630.0 million in fiscal 2021 from
$324.4 million in fiscal 2020. Operating income as a percentage of net sales amounted to 19.4% in 2021 as compared to 12.9%
in 2020. The increase in operating income resulted from improved market conditions and increased sales volumes. In addition,
during fiscal 2021, the company received approximately $67.7 million in a termination fee, net of deal costs and taxes.
Operating income in fiscal 2020 included impairment charges related to intangible assets, fixed assets, and assets held for sale.
Income from operations in 2021 included $160.8 million of non-cash expenses, including $42.7 million of depreciation
expense, $75.8 million of intangible amortization related to acquisitions and $42.3 million of stock based compensation. This
compares to $127.7 million of non-cash expenses in the prior year, including $39.1 million of depreciation expense, $69.0
million of intangible amortization related to acquisitions and $19.6 million of stock based compensation costs.
NON-OPERATING EXPENSES. Non-operating expenses decreased $45.9 million to $10.5 million of expense in fiscal 2021
from $56.4 million of expense in fiscal 2020. Net interest expense and deferred financing decreased $21.5 million to $57.2
million in fiscal 2021 from $78.6 million in fiscal 2020 reflecting a reduction in borrowing levels and lower borrowing costs on
our current debt structure. Net periodic pension benefit (other than service costs and curtailment) increased $5.1 million to
$45.1 million in fiscal 2021 from $40.0 million in fiscal 2020, related to the decrease in discount rate used to calculate the
interest cost. During fiscal 2020 a curtailment cost of approximately $14.7 million was recognized as a result of closing the
AGA Group Pension Scheme to future pension accruals.
INCOME TAXES. A tax provision of $131.0 million, at an effective rate of 21.1%, was recorded for fiscal 2021 as compared
to $60.8 million at an effective rate of 22.7%, in fiscal 2020. In comparison to the prior year, the tax provision reflects favorable
tax adjustments for deferred tax rate changes, tax refunds and adjustments for the finalization of 2020 tax returns. The effective
rates in 2021 and 2020 are higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials.
33
Fiscal Year Ended January 2, 2021 as Compared to December 28, 2019
NET SALES. Net sales in fiscal 2020 decreased by $446.1 million, or 15.1%, to $2,513.3 million as compared to $2,959.4
million in fiscal 2019. Net sales increased by $72.3 million, or 2.4%, from the fiscal 2019 acquisitions of Cooking Solutions
Group, Powerhouse, Ss Brewtech, Pacproinc, Brava, and Synesso and the fiscal 2020 acquisitions of RAM, Deutsche, Wild
Goose, and United Foodservice Equipment Zhuhai. Excluding acquisitions, net sales decreased $518.4 million, or 17.5%, from
the prior year. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for fiscal 2020 increased net
sales by approximately $0.2 million. Excluding the impact of foreign exchange and acquisitions, sales decreased 17.5% for the
year, including a net sales decrease of 26.5% at the Commercial Foodservice Equipment Group, a net sales increase of 5.9% at
the Food Processing Equipment Group and a net sales decrease of 2.9% at the Residential Kitchen Equipment Group.
•
•
•
Net sales of the Commercial Foodservice Equipment Group decreased by $474.0 million, or 23.9%, to $1,510.3
million in fiscal 2020 as compared to $1,984.3 million in fiscal 2019. Net sales from the acquisitions of Cooking
Solutions Group, Powerhouse, Ss Brewtech, Synesso, RAM, Deutsche, Wild Goose, and United Foodservice
Equipment Zhuhai, which were acquired on April 1, 2019, April 1, 2019, June 15, 2019, November 27, 2019,
January 13, 2020, March 2, 2020, December 7, 2020, and December 18, 2020, respectively, accounted for an
increase of $53.1 million during fiscal 2020. Excluding the impact of acquisitions, net sales of the Commercial
Foodservice Equipment Group decreased $527.1 million, or 26.6%, as compared to the prior year. Excluding the
impact of foreign exchange and acquisitions, net sales decreased $525.6 million, or 26.5% at the Commercial
Foodservice Equipment Group. Domestically, the company realized a sales decrease of $266.9 million, or 20.0%,
to $1,067.9 million, as compared to $1,334.8 million in the prior year. This includes an increase of $43.0 million
from recent acquisitions. Excluding acquisitions, the net decrease in domestic sales was $309.9 million, or 23.2%.
International sales decreased $207.1 million, or 31.9%, to $442.4 million, as compared to $649.5 million in the
prior year. This includes the increase of $10.1 million from recent acquisitions and a decrease of $1.5 million
related to the unfavorable impact of exchange rates. Excluding acquisitions and foreign exchange, the net sales
decrease in international sales was $215.7 million, or 33.2%. The decline in both domestic and international sales
reflects the impacts of COVID-19. This was most prevalent in the second quarter of 2020 and despite the decline
over the prior year, gradually recovered in the second half of the year.
Net sales of the Food Processing Equipment Group increased by $36.3 million, or 9.1%, to $437.3 million in
fiscal 2020, as compared to $401.0 million in fiscal 2019. Excluding the impact of foreign exchange and the
acquisition of Pacproinc, acquired July 16, 2019, net sales increased $23.8 million, or 5.9% at the Food Processing
Equipment Group. Domestically, the company realized a sales increase of $64.5 million, or 26.2%, to $311.1
million, as compared to $246.6 million in the prior year. Excluding the acquisition, net sales increased $51.8
million, or 21.0%. The increase in domestic sales reflects growth in protein equipment sales. International sales
decreased $28.2 million, or 18.3%, to $126.2 million, as compared to $154.4 million in the prior year. This
includes a decrease of $1.1 million related to the unfavorable impact of exchange rates. Excluding the acquisition
and foreign exchange, the net sales decrease in international sales was $28.0 million, or 18.1%. The decrease in
international revenues reflects declines in sales primarily due to the disruptive impact of COVID-19 on our
customers' operations.
Net sales of the Residential Kitchen Equipment Group decreased by $8.4 million, or 1.5%, to $565.7 million in
fiscal 2020, as compared to $574.1 million in fiscal 2019. Excluding the impact of foreign exchange, the
acquisition of Brava, acquired November, 19, 2019, net sales decreased $16.8 million, or 2.9% at the Residential
Kitchen Equipment Group. Domestically, the company realized a sales increase of $11.2 million, or 3.1%, to
$373.9 million, as compared to $362.7 million in the prior year. Excluding the acquisition, net sales increased
$5.6 million, or 1.5%. The increase in domestic sales is primarily related to strong consumer demand in the last
six months of the year, offset by the impacts of COVID-19 in the first half of the year. International sales
decreased $19.6 million, or 9.3% to $191.8 million, as compared to $211.4 million in the prior year. This includes
an increase of $2.8 million related to the favorable impact of exchange rates. Excluding foreign exchange, the net
sales decrease in international sales was $22.4 million, or 10.6%, primarily in the European market, reflecting the
impacts of Brexit and the outbreak of COVID-19 partially offset by strong consumer demand in the last six
months of the year.
34
GROSS PROFIT. Gross profit decreased by $221.5 million to $882.0 million in fiscal 2020 from $1,103.5 million in fiscal
2019, primarily reflecting the lower sales volumes related to COVID-19 and lower margins at recent acquisitions, offset by the
favorable impact of foreign exchange rates of $1.7 million. The gross margin rate decreased from 37.3% in 2019 to 35.1% in
2020. The gross margin rate in fiscal 2020 excluding acquisitions and impact of foreign exchange was 35.3%.
•
•
•
Gross profit at the Commercial Foodservice Equipment Group decreased by $224.4 million, or 30.1%, to $522.2
million in fiscal 2020 as compared to $746.6 million in fiscal 2019. Gross profit from the acquisitions of Cooking
Solutions Group, Powerhouse, Ss Brewtech, Synesso, RAM, Deutsche, Wild Goose, and United Foodservice
Equipment Zhuhai, accounted for an approximately $13.0 million increase in gross profit during fiscal 2020.
Excluding acquisitions, the gross profit decreased by approximately $237.4 million largely due to lower sales
volumes. The impact of foreign exchange rates increased gross profit by approximately $0.1 million. The gross
profit margin rate decreased to 34.6% as compared to 37.6% in the prior year, primarily due to lower margins at
recent acquisitions. The gross margin rate in fiscal 2020 excluding acquisitions and the impact of foreign
exchange was 34.9%.
Gross profit at the Food Processing Equipment Group increased by $14.9 million, or 10.5%, to $157.1 million in
fiscal 2020 as compared to $142.2 million in fiscal 2019. Excluding the acquisition, gross profit increased by
approximately $10.6 million. The impact of foreign exchange rates increased gross profit by approximately $0.4
million. The gross profit margin rate increased to 35.9% in fiscal 2020 as compared to 35.5% in the prior year.
The gross margin rate in fiscal 2020 excluding the acquisition and the impact of foreign exchange was 35.9%.
Gross profit at the Residential Kitchen Equipment Group decreased by $12.5 million, or 5.8%, to $204.3 million
in fiscal 2020 as compared to $216.8 million in fiscal 2019. The impact of foreign exchange rates increased gross
profit by approximately $1.2 million. The gross margin rate decreased to 36.1% in fiscal 2020 as compared to
37.8% in the prior year, primarily related to lower sales volumes and the impact of facility consolidations.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Combined selling, general, and administrative expenses
decreased by $61.9 million to $531.9 million in fiscal 2020 from $593.8 million in 2019. As a percentage of net sales, selling,
general and administrative expenses amounted to 21.2% in fiscal 2020 and 20.1% in fiscal 2019.
Selling, general and administrative expenses reflect increased costs of $30.2 million associated with acquisitions, including
$7.2 million of non-cash intangible amortization expense. Selling, general and administrative expenses decreased by $35.7
million related to compensation costs and commissions and $59.2 million due to controllable cost reductions primarily within
professional fees, travel and entertainment, convention costs, and advertising. Foreign exchange rates had a favorable impact of
$0.5 million. The decreases were partially offset by a $11.5 million increase related to higher non-cash share-based
compensation and $5.8 million related to increased allowances for doubtful accounts given the current market conditions. The
prior year expenses also included $10.1 million related to transition costs with the former Chairman and CEO upon his
retirement in February 2019.
RESTRUCTURING EXPENSES. Restructuring expenses increased $1.9 million to $12.4 million from $10.5 million in the
prior year period. In fiscal 2020, restructuring expenses related primarily to headcount reductions and facility consolidations
within the Commercial Foodservice Equipment Group. During fiscal 2019, restructuring charges related primarily to headcount
reductions and cost reduction initiatives related to facility consolidations at the Commercial Foodservice Equipment Group and
Residential Kitchen Equipment Group.
GAIN ON LITIGATION SETTLEMENT. In fiscal 2019, the company reached a settlement with respect to a lawsuit filed
by the company arising from a prior acquisition included in the Residential Kitchen Equipment Group. The gain associated with
this settlement, which is net of the release of funds in escrow, is reflected in the consolidated statement of earnings.
IMPAIRMENTS. In fiscal 2020, the company recognized impairment of $11.6 million associated with several trade names in
conjunction with the diminution of value as we assessed current market conditions and future business plans. See Note 3 (f) to
the Consolidated Financial Statements for further information on the annual impairment testing. In addition the company
recorded an impairment charge of approximately $2.9 million to reflect the fair market value of assets held for sale for a non-
core business within the Residential Kitchen Equipment Group. See Note 13, Restructuring and Acquisition Integration
Initiatives, in the Notes to the Consolidated Financial Statements for further information on restructuring initiatives.
35
INCOME FROM OPERATIONS. Income from operations decreased $189.6 million to $324.4 million in fiscal 2020 from
$514.0 million in fiscal 2019. Operating income as a percentage of net sales amounted to 12.9% in 2020 as compared to 17.4%
in 2019. The decrease in operating income resulted from the impacts of COVID-19. Operating income in fiscal 2019 included
the gain on litigation settlement, offset by the transition costs related to the former Chairman and CEO. Operating income in
fiscal 2020 included impairment charges related to intangible assets, fixed assets, and assets held for sale.
Income from operations in 2020 included $127.7 million of non-cash expenses, including $39.1 million of depreciation
expense, $69.0 million of intangible amortization related to acquisitions and $19.6 million of stock based compensation. This
compares to $110.0 million of non-cash expenses in the prior year, including $37.9 million of depreciation expense, $64.0
million of intangible amortization related to acquisitions and $8.1 million of stock based compensation costs.
NON-OPERATING EXPENSES. Non-operating expenses increased $5.0 million to $56.4 million of expense in fiscal 2020
from $51.4 million of income in fiscal 2019. Net interest expense and deferred financing decreased $4.0 million to $78.6
million in fiscal 2020 from $82.6 million in fiscal 2019 reflecting the reduction in the average interest rates under the Credit
Facility and benefit from the Convertible Notes, offset by higher non-cash interest from the lower interest rate on Convertible
Notes. Net periodic pension benefit (other than service costs and curtailment) increased $10.3 million to $40.0 million in fiscal
2020 from $29.7 million in fiscal 2019, related to the increase in discount rate used to calculate the interest cost and lower
expected returns on assets driven by lower asset values for fiscal 2019. During fiscal 2020, a curtailment cost of approximately
$14.7 million was recognized as a result of closing the AGA Group Pension Scheme to future pension accruals.
INCOME TAXES. A tax provision of $60.8 million, at an effective rate of 22.7%, was recorded for fiscal 2020 as compared to
$110.4 million at an effective rate of 23.9%, in fiscal 2019. In comparison to the prior year, the tax provision reflects favorable
tax adjustments for deferred tax rate changes and adjustments for the finalization of 2019 tax returns. The effective rates in
2020 and 2019 are higher than the federal tax rate of 21% primarily due to state taxes and foreign tax rate differentials.
36
Financial Condition and Liquidity
Total cash and cash equivalents decreased by $87.7 million to $180.4 million at January 1, 2022 from $268.1 million at
January 2, 2021. Total debt increased to $2.4 billion at January 1, 2022 from $1.7 billion at January 2, 2021 related to the
funding of acquisitions discussed below and the adoption of ASU 2020-06 as discussed in Note 3(r), Recently Issued
Accounting Standards, in the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form
10-K.
OPERATING ACTIVITIES. Net cash provided by operating activities after changes in assets and liabilities amounted to
$423.4 million as compared to $524.8 million in the prior year. During fiscal 2021, the company received approximately $67.7
million in a termination fee, net of deal costs and taxes.
During fiscal 2020, we realized significant benefits from improvements in working capital as a result of COVID-19 pandemic-
related market conditions on our business. During fiscal 2021, working capital changes meaningfully impacted operating cash
flows. This included an increase in accounts receivable of $99.9 million due to improved market conditions and increased sales
volumes. Also, inventory increased $204.2 million and accounts payable increased $61.3 million to support increased demand
and to manage challenges present in our supply chain.
In connection with the company’s acquisition activities, the company added assets and liabilities from the opening balance
sheets of the acquired businesses in its consolidated balance sheets and accordingly these amounts are not reflected in the net
changes in working capital.
INVESTING ACTIVITIES. During 2021, net cash used for investing activities amounted to $1.0 billion. Cash used to fund
acquisitions and investments amounted to $963.6 million primarily for the acquisitions of Novy, Imperial, Kamado Joe and
Masterbuilt and Char-Griller. Additionally, $46.6 million was expended, primarily for upgrades of production equipment,
manufacturing facilities and residential and commercial showrooms. We received $6.3 million in proceeds on the sale of
properties following facility consolidations actions.
FINANCING ACTIVITIES. Net cash flows used for financing activities amounted to $502.8 million in 2021. The company’s
borrowing activities during 2021 included $604.0 million of net proceeds under its Credit Facility. On October 21, 2021, the
company entered into an amended and restated five-year, $4.5 billion multi-currency senior secured credit agreement (the
"Credit Facility"). The company incurred approximately $9.2 million of debt issuance costs for the amendment to the Credit
Facility. In December 2021, the company then entered into privately negotiated capped call transactions (the "Capped Call
Transactions") in an aggregate amount of $54.6 million.
Additionally, the company repurchased $29.3 million of Middleby common shares during 2021. This was comprised of $2.7
million to repurchase 15,480 shares of Middleby common stock that were surrendered to the company for withholding taxes
related to restricted stock vestings and $26.6 million used to repurchase 141,500 shares of its common stock under a repurchase
program.
At January 1, 2022, the company was in compliance with all covenants pursuant to its borrowing agreements. 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.
Material Cash Requirements
The company's material cash requirements from contractual obligations primarily consist of long-term debt obligations,
operating lease obligations, tax obligations and continent contingent purchase price payments to the sellers that were deferred in
conjunction with various acquisitions. See Notes 3, 5 and 7 to the Consolidated Financial Statements for further information.
Related Party Transactions
From January 3, 2021 through the date hereof, there were no transactions between the company, its directors and executive
officers that are required to be disclosed pursuant to Item 404 of Regulation S-K, promulgated under the Securities and
Exchange Act of 1934, as amended.
37
Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of operations are based upon the company's
consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the company to make significant estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses as well as related disclosures. On an ongoing basis,
the company evaluates its estimates and judgments based on historical experience and various other factors that are believed to
be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions
and any such differences could be material to our consolidated financial statements.
Revenue Recognition
Revenue is recognized when the control of the promised goods or services are transferred to our customers, in an amount that
reflects the consideration that we expect to receive in exchange for those goods or services.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and represents the unit
of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when,
or as, the performance obligation is satisfied. The company’s contracts can have multiple performance obligations or just a
single performance obligation. For contracts with multiple performance obligations, the contract’s transaction price is allocated
to each performance obligation using the company’s best estimate of the standalone selling price of each distinct good or
service in the contract.
Within the Commercial Foodservice Equipment and Residential Foodservice Equipment Groups, the estimated standalone
selling price of equipment is based on observable prices. Within the Food Processing Equipment Group, the company estimates
the standalone selling price based on expected cost to manufacture the good or complete the service plus an appropriate profit
margin.
Control may pass to the customer over time or at a point in time. In general, the Commercial Foodservice Equipment and
Residential Foodservice Equipment Groups recognize revenue at the point in time control transfers to their customers based on
contractual shipping terms. Revenue from equipment sold under our long-term contracts within the Food Processing Equipment
group is recognized over time as the equipment is manufactured and assembled. Installation services provided in connection
with the delivery of the equipment are also generally recognized as those services are rendered. Over time transfer of control is
measured using an appropriate input measure (e.g., costs incurred or direct labor hours incurred in relation to total estimate).
These measures include forecasts based on the best information available and therefore reflect the company's judgment to
faithfully depict the transfer of the goods.
Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method for the majority of the
company’s inventories. The company evaluates the need to record valuation adjustments for inventory on a regular basis. The
company’s policy is to evaluate all inventories including raw material, work-in-process, finished goods, and spare
parts. Inventory in excess of estimated usage requirements is written down to its estimated net realizable value. Inherent in the
estimates of net realizable value are estimates related to our future manufacturing schedules, customer demand, possible
alternative uses, and ultimate realization of potentially excess inventory.
Goodwill and Indefinite-Life Intangibles
The company’s business acquisitions result in the recognition of goodwill and other intangible assets, which are a significant
portion of the company’s total assets. Goodwill represents the excess of acquisition costs over the fair value of the net tangible
assets and identifiable intangible assets acquired in a business combination. Identifiable intangible assets are recognized
separately from goodwill and include trademarks and trade names, technology, customer relationships and other specifically
identifiable assets. Trademarks and trade names are deemed to be indefinite-lived. Goodwill and indefinite-lived intangible
assets are not amortized, but are subject to impairment testing.
On an annual basis on the first day of the fourth quarter, or more frequently if triggering events occur, the company performs an
impairment assessment for goodwill and indefinite-lived intangible assets. The company considers qualitative factors to assess
if it is more likely than not that the fair value of goodwill and indefinite-lived intangible assets is below the carrying value.
38
In conducting a qualitative assessment, the company analyzes a variety of events or factors that may influence the fair value of
the reporting unit including, but not limited to: the results of prior quantitative assessments performed; changes in the carrying
amount of the reporting unit; actual and projected revenue and operating margin; relevant market data for both the company and
its peer companies; industry outlooks; macroeconomic conditions; liquidity; changes in key personnel; and the company's
competitive position. Significant judgment is used to evaluate the totality of these events and factors to make the determination
of whether it is more likely than not that the fair value of the reporting unit or indefinite-life intangible is less than its carrying
value.
Goodwill Valuations
The reporting units at which we test goodwill for impairment are our operating segments. These consist of the Commercial
Foodservice Equipment Group, the Food Processing Equipment Group and the Residential Kitchen Equipment Group. If the
fair value is less than its carrying value, an impairment loss, if any, is recorded for the difference between the implied fair value
and the carrying value of goodwill.
In performing a quantitative assessment, if required, the company estimates each reporting unit's fair value under an income
approach using a discounted cash flow model. The income approach uses each reporting unit's projection of estimated operating
results and cash flows that are discounted using a market participant discount rate based on a weighted-average cost of capital.
The financial projections reflect management's best estimate of economic and market conditions over the projected period
including forecasted revenue growth, operating margins, tax rate, capital expenditures, depreciation, amortization and changes
in working capital requirements. Other assumptions include discount rate and terminal growth rate. The estimated fair value of
each reporting unit is compared to their respective carrying values. Additionally, the company validates the estimates of fair
value under the income approach by comparing the fair value estimate using a market approach. A market approach estimates
fair value by applying cash flow multiples to the reporting unit's operating performance. The multiples are derived from
comparable publicly traded companies with similar operating and investment characteristics of the reporting units. The
company considers the implied control premium and conclude whether it is reasonable based on other recent market
transactions.
The company performed a qualitative assessment as of October 3, 2021 over all three reporting units and as a result of the
qualitative assessments, the company determined it is more likely than not that the fair value of our reporting units are greater
than the carrying amounts.
In estimating the fair value of its reporting units, management relies on a number of factors, including operating results,
business plans, economic projections, anticipated future cash flows, comparable transactions and other market data. There are
inherent uncertainties related to these factors and management’s judgment in applying them in the impairment tests of goodwill.
If actual results are not consistent with management's estimate and assumptions, a material impairment could have an adverse
effect on the company's financial condition and results of operations.
39
Indefinite-Life Intangible Valuations
In performing a quantitative assessment of indefinite-life intangible assets other than goodwill, primarily trademarks and trade
names, we analyze the variety of events or factors that may impact the fair value of the indefinite-life intangible, including, but
not limited to: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and
other relevant factors. We estimate the fair value of these intangible assets using the relief-from-royalty method which requires
assumptions related to projected revenues from our long-range plans; assumed royalty rates that could be payable if we did not
own the trademark; and a discount rate using a market based weighted-average cost of capital. If the estimated fair value of the
indefinite-life intangible asset is less than its carrying value, we would recognize an impairment loss.
In performing the quantitative analysis on these trademark assets, significant assumptions used in our relief-from-royalty model
included revenue growth rates, assumed royalty rates and the discount rate, which are discussed further below.
•
•
•
Revenue growth rates relate to projected revenues from our long-range plans and vary from brand to brand. Adverse
changes in the operating environment or our inability to grow revenues at the forecasted rates may result in a material
impairment charge.
In determining royalty rates for the valuation of our trademarks, we considered factors that affect the assumed royalty
rates that would hypothetically be paid for the use of the trademarks. The most significant factors in determining the
assumed royalty rates include the overall role and importance of the trademarks in the particular industry, the
profitability of the products utilizing the trademarks, and the position of the trademarked products in the given market
segment.
In developing discount rates for the valuation of our trademarks, we used the market based weighted average cost of
capital, adjusted for higher relative level of risks associated with doing business in other countries, as applicable, as
well as the higher relative levels of risks associated with intangible assets.
Based on the qualitative assessment as of October 3, 2021, the company determined it is more likely than not that the fair value
of its other indefinite-life intangible assets are greater than the carrying amounts and no quantitative analyses were required.
As of September 27, 2020, the company identified several trademarks and trade names with indicators of potential risk for
impairment and performed quantitative assessment. As a result of quantitative testing the company recognized $11.6 million of
impairment charges associated with several trademarks, none of which were individually material. There were no other
impairments in fiscal 2020 or 2021.
The company continues to monitor the global impacts of the COVID-19 pandemic to assess the outlook for demand of its
products and the impact on its business and financial performance. If actual results are not consistent with management's
estimate and assumptions, a material impairment charge of our trademarks and trade names could occur, which could have an
adverse effect on the company's financial condition and results of operations.
40
Convertible Debt
The company issued convertible debt with debt and equity components. The company evaluated the different components and
features of the hybrid instrument and determined whether certain elements were embedded derivative instruments which require
bifurcation. Components of convertible debt instruments that upon conversion may be settled fully in cash or partly in cash
based on a net-share settlement basis are accounted for separately as long-term debt and equity when the conversion feature of
the convertible bonds constitute an embedded equity instrument. When an equity instrument is identified, proceeds from
issuance are allocated between debt and equity by measuring first the liability component and then determining the equity
component as a residual amount. Prior to January 3, 2021, the liability component was measured as the fair value of a similar
nonconvertible debt, which results in the recognition of a debt discount. The debt discount amortizes to interest expense, net
within the Consolidated Statements of Earnings, using the effective interest method based on the expected maturity of the debt.
The equity component is reported in additional paid-in capital within the Consolidated Statement of Changes in Stockholders'
Equity and is not remeasured as long as it continues to meet the conditions for equity classification.
The company allocated transaction costs related to the issuance of convertible debt using the same proportions as the proceeds
from the convertible debt. Transaction costs attributable to the liability component are recorded as a direct deduction from the
related debt liability in the Consolidated Balance Sheets and are amortized to interest expense, net within the Consolidated
Statements of Earnings over the term of the convertible debt using the effective interest rate method. Transaction costs
attributable to the equity component are netted within additional paid-in capital within the Consolidated Statement of
Stockholders' Equity.
Effective January 3, 2021, the company early adopted ASU 2020-06 using the modified retrospective approach. The convertible
debt is now accounted for as a single liability and therefore the company no longer recognized any amortization of debt
discounts as non-cash interest expense.
For additional information regarding the company's convertible debt, see Note 5, Financing Arrangements, in the Notes to the
Consolidated Financial Statements.
Pension Benefits
The company sponsors pension benefits to certain employees. The accounting for these plans depends on assumptions made by
management, which are used by actuaries the company engages to calculate the projected and accumulated obligations and the
annual expense recognized for these plans. These assumptions include expected long-term rate of return on plan assets and
discount rates.
The amount of unrecognized actuarial gains and losses recognized in the current year’s operations is based on amortizing the
unrecognized gains or losses for each plan that exceed the larger of 10% of the projected benefit obligation or the fair value of
plan assets, also known as the corridor. The amount of unrecognized gain or loss that exceeds the corridor is amortized over the
average future service of the plan participants or the average life expectancy of inactive plan participants for plans where all or
almost all of the plan participants are inactive. While we believe that our assumptions are appropriate, significant differences in
our actual experience or significant changes in our assumptions may materially affect our pension obligations and our future
expense.
Income taxes
The company provides deferred income tax assets and liabilities based on the estimated future tax effects of differences
between the financial and tax bases of assets and liabilities based on currently enacted tax laws. The company’s deferred and
other tax balances are based on management’s interpretation of the tax regulations and rulings in numerous taxing jurisdictions.
Income tax expense and liabilities recognized by the company also reflect its best estimates and assumptions regarding, among
other things, the level of future taxable income, the effect of the company’s various tax planning strategies and uncertain tax
positions. Future tax authority rulings and changes in tax laws, changes in projected levels of taxable income and future tax
planning strategies could affect the actual effective tax rate and tax balances recorded by the company. The company follows
the provisions under ASC 740-10-25 that provides a recognition threshold and measurement criteria for the financial statement
recognition of a tax benefit taken or expected to be taken in a tax return. Tax benefits are recognized only when it is more likely
than not, based on the technical merits, that the benefits will be sustained on examination. Tax benefits that meet the more-
likely-than-not recognition threshold are measured using a probability weighting of the largest amount of tax benefit that has
greater than 50% likelihood of being realized upon settlement. Whether the more-likely-than-not recognition threshold is met
for a particular tax benefit is a matter of judgment based on the individual facts and circumstances evaluated in light of all
available evidence as of the balance sheet date.
41
New Accounting Pronouncements
See Note 3(r) to the Consolidated Financial Statements for further information on the new accounting pronouncements.
Certain Risk Factors That May Affect Future Results
An investment in shares of the company's common stock involves risks. The company believes the risks and uncertainties
described in "Item 1A. Risk Factors" and in "Special Note Regarding Forward-Looking Statements" are the material risks it
faces. Additional risks and uncertainties not currently known to the company or that it currently deems immaterial may impair
its business operations. If any of the risks identified in "Item 1A. Risk Factors" actually occurs, the company's business, results
of operations and financial condition could be materially adversely affected, and the trading price of the company's common
stock could decline.
42
Item 7A.
Quantitative and Qualitative Disclosure about Market Risk
The company is exposed to certain market risks that exist as part of its ongoing business operations, including fluctuations in
changes in interest rates, foreign currency exchange rates and price volatility for certain commodities. The company does not
hold or issue derivative financial instruments for trading or speculative purposes.
Interest Rate Risk
The company is exposed to market risk related to changes in interest rates. The following table summarizes the maturity of the
company's debt obligations:
2022
2023
2024
2025
2026 and thereafter
Variable Rate
Debt
$
27,293
23,621
23,634
757,945
1,581,801
$ 2,414,294
The company is exposed to interest rate risk on its floating-rate debt. 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 January 1, 2022, the fair value of these instruments was a liability of $18.0
million. The change in fair value of these swap agreements in the first twelve months of 2021 was a gain of $24.6 million, net
of taxes. The potential net loss on fair value for such instruments from a hypothetical 10% adverse change in quoted interest
rates would not have a material impact on the company's financial position, results of operations and cash flows.
In August 2020, the company issued $747.5 million aggregate principal amount of Convertible Notes in a private offering
pursuant to the Indenture. The company does not have economic interest rate exposure as the Convertible Notes have a fixed
annual rate of 1.00%. The fair value of the Convertible Notes is subject to interest rate risk, market risk and other factors due to
its conversion feature. The fair value of the Convertible Notes is also affected by the price and volatility of the company’s
common stock and will generally increase or decrease as the market price of our common stock changes. The interest and
market value changes affect the fair value of the Convertible Notes but do not impact the company’s financial position, cash
flows or results of operations due to the fixed nature of the debt obligation. Additionally, the company carries the Convertible
Notes at face value, less any unamortized discount on the balance sheet and presents the fair value for disclosure purposes only.
Foreign Exchange Derivative Financial Instruments
The company uses derivative financial instruments, principally foreign currency forward purchase and sale 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 potential loss on fair value for such instruments from a hypothetical 10% adverse change
in quoted foreign exchange rates would not have a material impact on the company's financial position, results of operations
and cash flows.
Derivative financial instruments are recognized on the balance sheet as either an asset or a liability measured at fair value.
Changes in the market value and the related foreign exchange gains and losses are recorded in the statement of earnings.
43
Item 8. Financial Statements and Supplementary Data
Reports of Independent Registered Public Accounting Firm (PCAOB ID:42)
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule is included in response to Item 15
Schedule II - Valuation and Qualifying Accounts and Reserves
Page
45
48
49
50
51
52
53
91
All other schedules for which provision is made to applicable regulation of the Securities and Exchange Commission are not
required under the related instruction or are inapplicable and, therefore, have been omitted.
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of The Middleby Corporation
Opinion on Internal Control over Financial Reporting
We have audited The Middleby Corporation’s internal control over financial reporting as of January 1, 2022, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework), (the COSO criteria). In our opinion, The Middleby Corporation (the Company) maintained, in
all material respects, effective internal control over financial reporting as of January 1, 2022, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of Novy, Imperial, Newton CFV, Kamado Joe and Masterbuilt and Char-Griller, which are included in the 2021
consolidated financial statements of the Company and constituted 17.6% and 1.0% of total and net assets, respectively, as of
January 1, 2022 and 1.9% and (0.4%) of net sales and net earnings, respectively, for the year then ended. Our audit of internal
control over financial reporting of the Company also did not include an evaluation of the internal control over financial
reporting of Novy, Imperial, Newton CFV, Kamado Joe and Masterbuilt and Char-Griller.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of January 1, 2022 and January 2, 2021, the related consolidated
statements of earnings, comprehensive income, changes in stockholders' equity and cash flows for each of the three years in the
period ended January 1, 2022, and the related notes and financial statement schedule listed in the Index at Item 8 and our report
dated March 2, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Chicago, Illinois
March 2, 2022
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of The Middleby Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Middleby Corporation (the Company) as of January 1,
2022 and January 2, 2021, the related consolidated statements of earnings, comprehensive income, changes in stockholders'
equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and financial
statement schedule listed in the Index at Item 8 (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the three years in the period
ended January 1, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of January 1, 2022, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated March 2, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosure to which it relates.
46
Description of the
Matter
How We Addressed
the Matter in Our
Audit
Business Combinations
As described in Note 2 to the consolidated financial statements, the Company completed the
acquisitions of Novy Invest NV and Kamado Joe and Masterbuilt for total net purchase
consideration of $651.6 million in the year ended January 1, 2022. The acquisitions were
accounted for under the acquisition method of accounting and the assets acquired and liabilities
assumed have been recorded based on preliminary estimates of fair value which are subject to
change based on the finalization of the fair values of the assets acquired and liabilities assumed.
Auditing the Company’s accounting for the preliminary allocation of the purchase price for these
acquisitions was complex due to the overall significance of the acquisitions and the estimation
uncertainty in determining the fair value of identifiable intangible assets, which principally
consisted of customer relationships and tradenames. The estimation uncertainty was primarily due
to the sensitivity of the respective fair values to underlying assumptions. A significant assumption
used by the Company to estimate the preliminary fair value of these assets was the determination
of which of the Company’s historical acquisitions were of a comparable nature to be utilized as a
basis for estimating the fair value of identified intangible assets. This determination was based
upon an analysis by the Company of each acquiree’s overall business and customer base as
compared to the Company’s historical acquisitions.
We obtained an understanding, evaluated the design, and tested the operating effectiveness of
controls that address the risks of material misstatement relating to the estimation of the
preliminary fair value of the identifiable intangible assets. For example, we tested controls over
management’s review of the significant assumptions, such as their evaluation of each acquired
business compared with historical acquisitions executed by the Company to determine similarities
and differences which provided the basis for determining which of the historical transactions to
use in estimating fair values of the identifiable intangible assets.
To test the estimate of the preliminary fair value of the acquired identifiable intangible assets, our
audit procedures included, among others, assessing the appropriateness of the historical
acquisitions utilized as a basis in estimating the preliminary fair values and testing the underlying
data used by the Company. For example, we obtained an understanding of the nature of each
acquired business through audit procedures such as review of publicly available information,
inquiries of management, and review of historical financial information. Based on this
understanding, we compared the nature of each acquired business and operations to the historical
acquisitions of the Company used in the preliminary fair value estimates. We also tested the
mathematical accuracy of historical acquisition averages for identifiable intangible assets.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2012.
Chicago, Illinois
March 2, 2022
47
THE MIDDLEBY CORPORATION
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 2022 AND JANUARY 2, 2021
(amounts in thousands, except share data)
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net of reserve for doubtful accounts of $18,770 and $19,225
Inventories, net
Prepaid expenses and other
Prepaid taxes
Total current assets
Property, plant and equipment, net of accumulated depreciation of $266,203 and $229,871
Goodwill
Other intangibles, net of amortization of $442,208 and $374,061
Long-term deferred tax assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
Accounts payable
Accrued expenses
Total current liabilities
Long-term debt
Long-term deferred tax liability
Accrued pension benefits
Other non-current liabilities
Stockholders' equity:
Preferred stock, $0.01 par value; nonvoting; 2,000,000 shares authorized; none issued
Common stock, $0.01 par value; 63,666,020 and 63,651,773 shares issued in 2021 and
2020, respectively
Paid-in capital
Treasury stock, at cost; 8,170,276 and 8,013,296 shares in 2021 and 2020
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
$
180,362 $
577,142
837,418
92,269
19,894
1,707,085
380,980
2,243,469
1,875,377
33,194
143,493
268,103
363,361
540,198
81,049
17,782
1,270,493
344,482
1,934,261
1,450,381
76,052
126,805
$ 6,383,598 $ 5,202,474
$
27,293 $
304,740
582,855
914,888
2,387,001
186,935
219,680
180,818
22,944
182,773
494,541
700,258
1,706,652
147,224
469,500
202,191
—
—
147
357,309
(566,399)
3,062,303
(359,084)
147
433,308
(537,134)
2,568,756
(488,428)
2,494,276
1,976,649
Total liabilities and stockholders' equity
$ 6,383,598 $ 5,202,474
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
48
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021
AND DECEMBER 28, 2019
(amounts in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Restructuring expenses
Merger termination fee
Gain on litigation settlement
Gain on sale of plant
Impairments
Income from operations
Interest expense and deferred financing amortization, net
Net periodic pension benefit (other than service cost & curtailment)
Curtailment loss
Other (income) expense, net
Earnings before income taxes
Provision for income taxes
Net earnings
Net earnings per share:
Basic
Diluted
Weighted average number of shares
Basic
Dilutive common stock equivalents
Diluted
2021
2020
$ 3,250,792 $ 2,513,257 $ 2,959,446
1,855,949
1,103,497
2,055,932
1,194,860
1,631,209
882,048
2019
667,976
7,655
(110,000)
—
(763)
—
629,992
57,157
(45,066)
—
(1,603)
619,504
131,012
488,492 $
531,897
12,375
—
—
(1,982)
15,327
324,431
78,617
(39,996)
14,682
3,071
268,057
60,763
207,294 $
593,813
10,480
—
(14,839)
—
—
514,043
82,609
(29,722)
865
(2,328)
462,619
110,379
352,240
8.85 $
8.62 $
3.76 $
3.76 $
6.33
6.33
55,216
1,449
56,665
55,093
43
55,136
55,647
9
55,656
$
$
$
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
49
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021
AND DECEMBER 28, 2019
(amounts in thousands)
2021
2020
2019
Net earnings
$
488,492
$
207,294
$
352,240
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension liability adjustment, net of tax
Unrealized gain (loss) on interest rate swaps, net of tax
Unrealized gain on certain investments, net of tax
Other comprehensive income (loss):
Comprehensive income
(47,693)
151,223
24,484
1,330
129,344
$
$
55,744
(172,583)
(20,656)
—
$
7,066
(57,398)
(24,125)
—
(137,495) $
(74,457)
617,836
$
69,799
$
277,783
$
$
$
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
50
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021
AND DECEMBER 28, 2019
(amounts in thousands)
Common
Stock
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(loss)
Total
Stockholders'
Equity
Balance, December 29, 2018
$
145 $ 377,419 $ (445,118) $ 2,009,233 $
(276,476) $
1,665,203
Net earnings
Adoption of ASU 2017-12 (1)
Currency translation adjustments
Change in unrecognized pension benefit costs, net of tax of
$(11,914)
Unrealized loss on interest rate swap, net of tax of $(8,516)
Stock compensation
Stock issuance
Purchase of treasury stock
Balance, December 28, 2019
Net earnings
Currency translation adjustments
Change in unrecognized pension benefit costs, net of tax of
$(40,426)
Unrealized loss on interest rate swap, net of tax of $(7,147)
Stock compensation
Stock issuance
Purchase of treasury stock
Equity component of issuance of convertible notes
Balance, January 2, 2021
Net earnings
Adoption of ASU 2020-06 (2)
Currency translation adjustments
Change in unrecognized pension benefit costs, net of tax of
$49,589
Unrealized gain on interest rate swap, net of tax of $8,619
Unrealized gain on certain investments, net of tax of $443
Stock compensation
Stock issuance
Purchase of treasury stock
Purchase of capped calls, net of tax of $(13,132)
—
—
—
—
—
—
—
—
—
—
—
—
—
8,133
1,850
—
—
—
—
—
—
—
—
(6,144)
352,240
(11)
—
—
—
—
—
—
—
11
7,066
(57,398)
(24,136)
—
—
—
352,240
—
7,066
(57,398)
(24,136)
8,133
1,850
(6,144)
$
145 $ 387,402 $ (451,262) $ 2,361,462 $
(350,933) $
1,946,814
—
—
—
—
—
2
—
—
—
—
—
—
19,613
25,985
—
308
—
—
—
—
—
—
(85,872)
—
207,294
—
—
—
—
—
—
—
—
55,744
207,294
55,744
(172,583)
(172,583)
(20,656)
(20,656)
—
—
—
—
19,613
25,987
(85,872)
308
$
147 $ 433,308 $ (537,134) $ 2,568,756 $
(488,428) $
1,976,649
—
—
—
—
—
—
—
—
—
—
—
(79,430)
—
—
—
—
42,330
2,522
—
—
—
—
—
—
—
—
—
(29,265)
(41,421)
—
488,492
5,055
—
—
—
—
—
—
—
—
—
—
(47,693)
151,223
24,484
1,330
—
—
—
—
488,492
(74,375)
(47,693)
151,223
24,484
1,330
42,330
2,522
(29,265)
(41,421)
Balance, January 1, 2022
$
147 $ 357,309 $ (566,399) $ 3,062,303 $
(359,084) $
2,494,276
(1) As of December 30, 2018, the company adopted ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities" using the modified retrospective method. The adoption of this guidance resulted in the
recognition of less than $(0.1) million as an adjustment to the opening balance of retained earnings.
(2) As of January 3, 2021 the company adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity using the modified retrospective method. The adoption of this guidance resulted in a $79.4 million reduction to paid-in
capital, net of tax of $25.5 million, and the recognition of $5.1 million as an adjustment to the opening balance of retained earnings, net of tax
of $1.6 million.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
51
THE MIDDLEBY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021
AND DECEMBER 28, 2019
(amounts in thousands)
Cash flows from operating activities—
Net earnings
2021
2020
2019
$
488,492 $
207,294 $
352,240
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization
125,243
110,532
103,428
Amortization of discount and issuance costs on convertible notes
Non-cash share-based compensation
Deferred income taxes
Net periodic pension benefit (other than service costs)
Gain on sale of plant
Impairments
Non-cash restructuring
Changes in assets and liabilities, net of acquisitions
Accounts receivable, net
Inventories, net
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities—
Net additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Acquisitions, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities—
Proceeds under Credit Facility
Repayments under Credit Facility
Proceeds from issuance of convertible notes, net of issuance costs
Premiums paid for capped call
Net repayments under foreign bank loan
Net repayments under other debt arrangement
Payments of deferred purchase price
Repurchase of treasury stock
Debt issuance costs
Net cash provided by (used in) financing activities
Effect of exchange rates on cash and cash equivalents
Changes in cash and cash equivalents—
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Non-cash investing and financing activities:
—
42,330
6,863
(45,066)
(763)
—
1,924
(99,890)
(204,167)
10,853
61,336
36,244
7,971
19,613
16,421
(25,314)
(1,982)
15,327
—
90,399
66,690
782
(3,015)
20,067
—
8,133
22,212
(28,857)
—
—
—
(27,748)
(28,288)
5,067
(29,396)
634
423,399
524,785
377,425
(46,551)
6,290
(5,000)
(963,600)
(34,849)
14,147
(7,052)
(79,003)
(1,008,861)
(106,757)
(46,609)
—
—
(281,058)
(327,667)
1,739,101
2,567,305
543,294
(1,135,058)
(3,345,770)
(560,363)
—
729,933
(54,553)
(104,650)
—
—
(405)
(179)
(1,648)
(6,144)
—
1,305
(45)
(3,700)
(85,872)
(10,974)
(252,468)
(25,445)
8,043
(1,514)
173,603
94,500
22,799
71,701
(2,030)
(303)
(5,861)
(29,265)
(9,242)
502,789
(5,068)
(87,741)
268,103
$
180,362 $
268,103 $
94,500
Stock issuance related to acquisition and purchase of intangible assets
2,522
15,869
—
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated financial statements.
52
THE MIDDLEBY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021
AND DECEMBER 28, 2019
(1)
NATURE OF OPERATIONS
The Middleby Corporation (the "company") is engaged in the design, manufacture and sale of commercial foodservice, food
processing equipment and residential kitchen equipment. The company manufactures and assembles this equipment at thirty-
nine U.S. and twenty-eight international manufacturing facilities. The company operates in three business segments: 1) the
Commercial Foodservice Equipment Group, 2) the Food Processing Equipment Group and 3) the Residential Kitchen
Equipment Group.
The Commercial Foodservice Equipment Group has a broad portfolio of foodservice equipment, which enable it to serve
virtually any cooking, warming, refrigeration, freezing and beverage application within a commercial kitchen or foodservice
operation. This equipment is used across all types of foodservice operations, including quick-service restaurants, full-service
restaurants, convenience stores, retail outlets, hotels and other institutions. The products offered by this group include conveyor
ovens, combi-ovens, convection ovens, baking ovens, proofing ovens, deck ovens, speed cooking ovens, hydrovection ovens,
ranges, fryers, rethermalizers, steam cooking equipment, food warming equipment, catering equipment, heated cabinets,
charbroilers, ventless cooking systems, kitchen ventilation, induction cooking equipment, countertop cooking equipment,
toasters, griddles, charcoal grills, professional mixers, stainless steel fabrication, custom millwork, professional refrigerators,
blast chillers, coldrooms, ice machines, freezers, soft serve ice cream equipment, coffee and beverage dispensing equipment,
home and professional craft brewing equipment, fry dispensers, bottle filling and canning equipment, and IoT solutions.
The Food Processing Equipment Group offers a broad portfolio of processing solutions for customers producing pre-cooked
meat products, such as hot dogs, dinner sausages, poultry and lunchmeats and baked goods such as muffins, cookies and bread.
Through its broad line of products, the company is able to deliver a wide array of cooking solutions to service a variety of food
processing requirements demanded by its customers. The company can offer highly integrated solutions that provide a food
processing operation a uniquely integrated solution providing for the highest level of food quality, product consistency, and
reduced operating costs resulting from increased product yields, increased capacity and greater throughput and reduced labor
costs through automation. The products offered by this group include a wide array of cooking and baking solutions, including
batch ovens, baking ovens, proofing ovens, conveyor belt ovens, continuous processing ovens, frying systems and automated
thermal processing systems. The company also provides a comprehensive portfolio of complementary food preparation
equipment such as tumblers, massagers, grinders, slicers, reduction and emulsion systems, mixers, blenders, formers, battering
equipment, breading equipment, seeding equipment, water cutting systems, food presses, food suspension equipment, filling
and depositing solutions, and forming equipment, as well as a variety of automated loading and unloading systems, food safety,
food handling, freezing, defrosting and packaging equipment. This portfolio of equipment can be integrated to provide
customers a highly efficient and customized solution.
The Residential Kitchen Equipment Group has a broad portfolio of innovative and professional-style residential kitchen
equipment. The products offered by this group include ranges, cookers, stoves, cooktops, microwaves, ovens, refrigerators,
dishwashers, undercounter refrigeration, wine cellars, ice machines, beer dispensers, ventilation equipment, mixers, rotisseries
and outdoor cooking equipment.
53
(2) ACQUISITIONS AND PURCHASE ACCOUNTING
The following represents the company's significant acquisitions in 2021 and 2020, the termination of a Merger Agreement, as
well as summarized information on various acquisitions that were not individually material.
Termination of Welbilt Merger
On April 20, 2021, Middleby entered into a Merger Agreement with Welbilt, Inc. Following Welbilt's receipt of an alternative
acquisition proposal, on July 13, 2021, Middleby announced that, under the terms of the Merger Agreement, it would not
exercise its right to propose any modifications to the terms of the Merger Agreement and would allow the match period to
expire. Accordingly, on July 14, 2021, Welbilt delivered to Middleby a written notice terminating the Merger Agreement and,
concurrently with Middleby’s receipt of the termination fee of $110.0 million in cash from Welbilt, the Merger Agreement was
terminated on July 14, 2021.
The termination fee received is reflected in the Consolidated Statements of Comprehensive Earnings as the "merger termination
fee" and $19.7 million of deal costs associated with the transaction are reflected in selling, general and administrative expenses
in the Consolidated Statements of Comprehensive Earnings.
2020 Acquisitions
During 2020, the company completed various acquisitions that were not individually material. The final allocation of
consideration paid for the other 2020 acquisitions is summarized as follows (in thousands):
Cash
Current assets
Property, plant and equipment
Goodwill
Other intangibles
Other assets
Current liabilities
Long-term deferred tax (liability) asset
Other non-current liabilities
Preliminary
Opening Balance
Sheet
Measurement
Period
Adjustments
Adjusted Opening
Balance Sheet
$
14,647 $
— $
43,670
3,014
55,335
63,201
6,121
(54,478)
(123)
(21,902)
(13,390)
(349)
3,847
625
52
13,037
387
791
14,647
30,280
2,665
59,182
63,826
6,173
(41,441)
264
(21,111)
Consideration paid at closing
$
109,485 $
5,000 $
114,485
Deferred payments
Contingent consideration
8,666
16,144
(468)
(836)
8,198
15,308
Net assets acquired and liabilities assumed
$
134,295 $
3,696 $
137,991
The long-term deferred tax asset amounted to $0.3 million and is related to the difference between the book and tax basis on
other assets and liability accounts.
The goodwill and $15.7 million of other intangibles associated with the trade names are subject to the non-amortization
provisions of ASC 350. Other intangibles also include $10.6 million allocated to customer relationships, $31.2 million allocated
to developed technology and $6.3 million allocated to backlog, which are being amortized over periods of 6 to 9 years, 6 to 12
years, and 3 to 9 months, respectively. Goodwill of $59.2 million and other intangibles of $63.8 million from these acquisitions
are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Of these assets, goodwill of
$24.4 million and intangibles of $63.5 million are expected to be deductible for tax purposes.
54
Several purchase agreements include deferred payment and earnout provisions providing for contingent payments due to the
sellers to the extent certain financial targets are exceeded. The deferred payments are payable between 2021 and 2022. The
contractual obligations associated with the deferred payments on the acquisition dates amount to $8.2 million. The earnouts are
payable between 2021 and 2023, if the company exceeds certain sales and earnings targets. The contractual obligations
associated with the contingent earnout provisions recognized on the acquisition dates amount to $15.3 million.
Novy Invest NV
On July 12, 2021, the company completed its acquisition of all of the capital stock of Novy Invest NV ("Novy"), a leading
manufacturer of premium residential ventilation hoods and cook tops located in Belgium, for a purchase price of approximately
$250.9 million, net of cash acquired.
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 values of assets acquired and liabilities assumed (in thousands):
Cash
Current assets
Property, plant and equipment
Goodwill
Other intangibles
Other assets
Current liabilities
Long-term deferred tax liability
Other non-current liabilities
Preliminary
Opening Balance
Sheet
Preliminary
Measurement
Period
Adjustments
Adjusted Opening
Balance Sheet
$
16,152 $
— $
23,762
17,058
142,741
126,557
26
(23,440)
(33,918)
(1,930)
—
(969)
(17,109)
22,966
173
569
(5,519)
(111)
16,152
23,762
16,089
125,632
149,523
199
(22,871)
(39,437)
(2,041)
Net assets acquired and liabilities assumed
$
267,008 $
— $
267,008
The long-term deferred tax liability amounted to $39.4 million. The deferred tax liability is comprised of $37.4 million related
to the difference between the book and tax basis of identifiable intangible assets and $2.0 million related to the difference
between the book and tax basis on identifiable tangible asset and liability accounts.
The goodwill and $105.7 million of other intangibles associated with the trade names are subject to the non-amortization
provisions of ASC 350. Other intangibles also include $40.0 million allocated to customer relationships, $2.7 million allocated
to developed technology and $1.1 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and
3 months, respectively. Goodwill of $125.6 million and other intangibles of $149.5 million from this acquisition are allocated to
the Residential Kitchen Equipment Group for segment reporting purposes. Goodwill and other intangibles are not 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
for all acquisitions completed during 2021. The intangible assets are pending external valuation and are preliminarily valued
using historical information from the Residential Kitchen Equipment Group and qualitative assessment of the business at
acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase
price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values 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.
55
Kamado Joe and Masterbuilt
On December 27, 2021, the company completed its acquisition of all of the member interests of Masterbuilt Holdings, LLC
("Kamado Joe and Masterbuilt") and their residential outdoor brands of Kamado Joe and Masterbuilt, a leader in outdoor
residential cooking located in the Atlanta, Georgia area, for a purchase price of approximately $400.7 million, net of cash
acquired. The purchase price included $403.6 million in cash and 12,921 shares of Middleby common stock valued at $2.5
million. The purchase price is subject to adjustment based upon a working capital provision provided by the purchase
agreement. The company expects to finalize this in the second quarter of 2022.
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 values of assets acquired and liabilities assumed (in thousands):
Cash
Current assets
Property, plant and equipment
Goodwill
Other intangibles
Other assets
Current liabilities
Long-term deferred tax liability
Other non-current liabilities
Preliminary
Opening Balance
Sheet
$
5,381
137,826
7,773
110,052
215,577
2,143
(54,865)
(15,907)
(1,914)
Net assets acquired and liabilities assumed
$
406,066
The long-term deferred tax liability amounted to $15.9 million. The net deferred tax liability is comprised of $2.3 million of
deferred tax asset related to tax loss carryforwards and $18.2 million of deferred tax liability related to the difference between
the book and tax basis on identifiable tangible asset and liability accounts.
The goodwill and $158.8 million of other intangibles associated with the trade names are subject to the non-amortization
provisions of ASC 350. Other intangibles also include $50.3 million allocated to customer relationships and $6.5 million
allocated to backlog, which are being amortized over periods of 7 years and 3 months, respectively. Goodwill of $110.1 million
and other intangibles of $215.6 million of the company are allocated to the Residential Kitchen Equipment Group for segment
reporting purposes. Of these assets, goodwill of $71.7 million and intangibles of $164.3 million 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
for all acquisitions completed during 2021. The intangible assets are pending external valuation and are preliminarily valued
using historical information from the Residential Kitchen Equipment Group and qualitative assessment of the business at
acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase
price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values 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.
56
Other 2021 Acquisitions
During the year ended January 1, 2022, the company completed various acquisitions that were not individually material. The
following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of
the acquisition dates for the other 2021 acquisitions and are summarized as follows (in thousands):
Cash
Current assets
Property, plant and equipment
Goodwill
Other intangibles
Other assets
Current liabilities
Long-term deferred tax liability
Other non-current liabilities
Preliminary
Opening Balance
Sheet
Preliminary
Measurement
Period
Adjustments
Adjusted Opening
Balance Sheet
$
6,414 $
— $
76,077
19,561
85,270
158,725
2,101
(33,910)
(3,010)
(7,092)
223
(72)
9,065
(9,193)
31
(38)
—
(16)
6,414
76,300
19,489
94,335
149,532
2,132
(33,948)
(3,010)
(7,108)
Consideration paid at closing
$
304,136 $
— $
304,136
Contingent consideration
9,404
—
9,404
Net assets acquired and liabilities assumed
$
313,540 $
— $
313,540
The long-term deferred tax liability amounted to $3.0 million. The net deferred tax liability is comprised of $0.6 million of
deferred tax asset related to tax loss carryforwards and $3.6 million of deferred tax liability related to the difference between the
book and tax basis on identifiable tangible asset and liability accounts.
The goodwill and $97.1 million of other intangibles associated with the trade names are subject to the non-amortization
provisions of ASC 350. Other intangibles also include $41.1 million allocated to customer relationships, $3.4 million allocated
to developed technology, and $7.9 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and
3 months, respectively. Goodwill of $30.5 million and other intangibles of $89.0 million are allocated to the Residential
Kitchen Equipment Group for segment reporting purposes. Goodwill of $63.8 million and other intangibles of $60.5 million are
allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Of these assets, goodwill of $92.3
million and intangibles of $148.4 million are expected to be deductible for tax purposes.
One purchase agreement includes earnout provisions providing for contingent payments due to the sellers to the extent certain
financial targets are exceeded and upon the achievement of product rollout targets. One earnout is payable upon the
achievement of product rollout targets. The second earnout is payable during 2026 if the company exceeds certain earnings
targets. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount
to $9.4 million.
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
for all acquisitions completed during 2021. Certain intangible assets are pending external valuation and are preliminarily valued
using historical information from the Residential Kitchen Equipment Group and Commercial Foodservice Equipment Group
and qualitative assessments of the individual businesses at acquisition date. Specifically, the company estimated the fair values
of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions.
Thus, the provisional measurements of fair values 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.
57
Pro Forma Financial Information
In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the twelve
months ended January 1, 2022 and January 2, 2021, assumes the 2020 and 2021 acquisitions described above were completed
on December 29, 2019 (first day of fiscal year 2020). The following pro forma results include adjustments to reflect
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):
Net sales
Net earnings
Net earnings per share:
Basic
Diluted
Twelve Months Ended
January 1, 2022
January 2, 2021
3,732,010 $
519,879
2,980,164
177,923
9.42 $
9.17 $
3.23
3.23
$
$
$
The historical consolidated financial information of the Company and the acquisitions have been adjusted in the pro forma
information to give effect to pro forma events that are (1) directly attributable to the transactions, (2) factually supportable and
(3) expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that
would have been obtained had these acquisitions occurred at the beginning of the periods presented, nor is it intended to be a
projection of future results. Additionally, the pro forma financial information does not reflect the costs which the company has
incurred or may incur to integrate the acquired businesses.
(3)
(a)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation. The company's consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these financial statements requires the company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses as well as related disclosures. Significant items that are subject to such
estimates and judgments include 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. On an ongoing
basis, the company evaluates its estimates and assumptions based on historical experience and various other factors that are
believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions
or conditions.
The company's fiscal year ends on the Saturday nearest December 31. Fiscal years 2021, 2020, and 2019 ended on January 1,
2022, January 2, 2021 and December 28, 2019, respectively, and included 52, 53 and 52 weeks, respectively.
(b)
Cash and Cash Equivalents
The company considers all short-term investments with original maturities of three months or less when acquired to be cash
equivalents. The company’s policy is to invest its excess cash in interest-bearing deposits with major banks that are subject to
minimal credit and market risk.
(c)
Accounts Receivable
Accounts receivable, as shown in the consolidated balance sheets, are net of allowances for doubtful accounts of $18.8 million
and $19.2 million at January 1, 2022 and January 2, 2021, respectively. At January 1, 2022, all accounts receivable are expected
to be collected within one year.
58
(d)
Inventories
Inventories are composed of material, labor and overhead and are stated at the lower of cost or net realizable value. 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 January 1, 2022 and January 2, 2021 are
as follows (in thousands):
Raw materials and parts
Work in process
Finished goods
(e)
Property, Plant and Equipment
Property, plant and equipment are carried at cost as follows (in thousands):
Land
Building and improvements
Furniture and fixtures
Machinery and equipment
Less accumulated depreciation
2021
421,361 $
65,581
350,476
837,418 $
2020
263,200
55,104
221,894
540,198
2021
2020
54,477 $
270,812
56,706
265,188
647,183
(266,203)
380,980 $
40,707
245,435
68,063
220,148
574,353
(229,871)
344,482
$
$
$
$
Property, plant and equipment are depreciated or amortized on a straight-line basis over their useful lives based on
management's estimates of the period over which the assets will be utilized to benefit the operations of the company. The useful
lives are estimated based on historical experience with similar assets, taking into account anticipated technological or other
changes. The company periodically reviews these lives relative to physical factors, economic factors and industry trends. If
there are changes in the planned use of property and equipment or if technological changes were to occur more rapidly than
anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased
depreciation and amortization expense in future periods.
Following is a summary of the estimated useful lives:
Description
Building and improvements
Furniture and fixtures
Machinery and equipment
Life
20 to 40 years
3 to 7 years
3 to 10 years
Depreciation expense amounted to $42.7 million, $39.1 million and $37.9 million in fiscal 2021, 2020 and 2019, respectively.
Expenditures which significantly extend useful lives are capitalized. Maintenance and repairs are charged to expense as
incurred. Asset impairments are recorded whenever events or changes in circumstances indicate that the recorded value of an
asset is greater than the sum of its expected future undiscounted cash flows. Asset impairments are recorded at the amount by
which the recorded value of an asset exceeds its fair value.
59
(f)
Goodwill and Other Intangibles
The company’s business acquisitions result in the recognition of goodwill and other intangible assets, which are a significant
portion of the company’s total assets. Goodwill represents the excess of acquisition costs over the fair value of the net tangible
assets and identifiable intangible assets acquired in a business combination. Identifiable intangible assets are recognized
separately from goodwill and include trademarks and trade names, technology, customer relationships and other specifically
identifiable assets. Trademarks and trade names are deemed to be indefinite-lived. Goodwill and indefinite-lived intangible
assets are not amortized, but are subject to impairment testing.
The company performs the annual impairment assessment for goodwill and indefinite-lived intangible assets as of first day of
the fourth quarter of the fiscal year and more frequently if indicators of impairment exist. The goodwill impairment test is
performed at the reporting unit level. The company initially performs a qualitative analysis to determine if it is more likely than
not that the goodwill balance or indefinite-life intangible asset is impaired. In conducting a qualitative assessment, the company
analyzes a variety of events or factors that may influence the fair value of the reporting unit or indefinite-life intangible,
including, but not limited to: macroeconomic conditions, industry and market considerations, cost factors, overall financial
performance, share price and other relevant factors.
If an indicator of impairment is determined from the qualitative analysis, then the company will perform a quantitative analysis.
The fair value of each reporting unit is compared to its carrying value. If the fair value of the reporting unit is less than its
carrying value, the resulting difference will be a charge to impairment of goodwill in the Consolidated Statements of Earnings
in the period in which the determination is made. Fair value is determined using a combination of present value techniques and
market prices of comparable businesses.
The company performed a qualitative assessment as of October 3, 2021 over all three reporting units and determined it is not
more likely than not that the fair values of our reporting units are less than the carrying amounts and therefore quantitative
analysis is not required. No impairment was recognized and the company has not recognized any goodwill impairments and
therefore there are no accumulated impairment losses.
Goodwill is allocated to the business segments as follows (in thousands):
Balance as of December 28, 2019
$ 1,153,552 $ 257,679 $ 438,516 $ 1,849,747
Commercial
Foodservice
Food
Processing
Residential
Kitchen
Total
Goodwill acquired during the year
56,773
—
Measurement period adjustments to goodwill acquired in prior year
(56)
(8,732)
Exchange effect
18,167
6,851
—
1,770
9,741
56,773
(7,018)
34,759
Balance as of January 2, 2021
$ 1,228,436 $ 255,798 $ 450,027 $ 1,934,261
Goodwill acquired during the year
Measurement period adjustments to goodwill acquired in prior year
Exchange effect
63,849
2,411
—
—
266,170
330,019
—
2,411
(9,609)
(5,083)
(8,530)
(23,222)
Balance as of January 1, 2022
$ 1,285,087 $ 250,715 $ 707,667 $ 2,243,469
60
Intangible assets consist of the following (in thousands):
January 1, 2022
January 2, 2021
Estimated
Weighted
Avg
Remaining
Life
Gross
Carrying
Amount
Accumulated
Amortization
Estimated
Weighted
Avg
Remaining
Life
Gross
Carrying
Amount
Accumulated
Amortization
Amortized intangible assets:
Customer relationships
Backlog
Developed technology
Indefinite-lived intangible assets:
Trademarks and trade names
7.6
0.2
8.9
$ 863,339 $
13,684
73,461
$ 950,484 $
(411,327)
(929)
(29,952)
(442,208)
8.5
0.3
10.0
$ 735,264 $
5,443
56,931
$ 797,638 $
(347,029)
(2,638)
(24,394)
(374,061)
$ 1,367,101
$ 1,026,804
The company completed its annual impairment assessment for indefinite-lived intangible assets as of October 3, 2021. Based on
this qualitative assessment, the company determined it is not more likely than not that the fair values of our reporting units are
less than the carrying amounts and therefore a quantitative impairment analysis was not required.
The estimates of future cash flows used in determining the fair value of goodwill and indefinite-lived intangible assets involve
significant management judgment and are based upon assumptions about expected future operating performance, economic
conditions, market conditions and cost of capital. Inherent in estimating the future cash flows are uncertainties beyond our
control, such as changes in capital markets. The company continues to monitor the global impact of the COVID-19 pandemic to
assess the outlook for demand of its products and the impact on its business and financial performance. The actual cash flows
could differ materially from management's estimates due to changes in business conditions, operating performance and
economic conditions.
During 2020 testing, the company recorded impairment charges of $11.6 million associated with several trade names, none of
which were individually material. The company recorded charges of $5.3 million associated with trademarks within the
Commercial Foodservice Equipment Group, $5.4 million for the Food Processing Equipment Group and $0.9 million for the
Residential Kitchen Equipment Group.
Definite-lived intangible assets are amortized over their estimated useful lives and tested for impairment in accordance with the
methodology discussed above under "Property, Plant and Equipment."
The aggregate intangible amortization expense was $75.8 million, $69.0 million and $64.0 million in 2021, 2020 and 2019,
respectively. The estimated future amortization expense of intangible assets is as follows (in thousands):
2022
2023
2024
2025
2026
2027 and thereafter
$
$
95,132
76,386
64,914
58,553
55,277
158,014
508,276
61
(g)
Accrued Expenses
Accrued expenses consist of the following at January 1, 2022 and January 2, 2021, respectively (in thousands):
Contract liabilities
Accrued payroll and related expenses
Accrued warranty
Accrued customer rebates
Accrued short-term leases
Accrued sales and other tax
Accrued professional fees
Accrued agent commission
Accrued product liability and workers compensation
Accrued interest rate swaps
Accrued liabilities held for sale
Other accrued expenses
$
2021
133,315 $
115,762
80,215
72,451
22,753
22,684
19,292
13,670
10,952
1,171
—
90,590
2020
93,871
93,926
69,667
43,703
22,493
22,030
12,133
11,105
12,909
14,075
22,313
76,316
$
582,855 $
494,541
(h)
Litigation Matters
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 such matter will have a material adverse effect on its financial
condition, results of operations or cash flows of the company.
During 2019, we reached a settlement with respect to a lawsuit filed by the company arising from a prior acquisition included
our Residential Kitchen Equipment Segment. The gain associated with this settlement, which is net of the release of funds in
escrow, is reflected in the consolidated statement of earnings.
62
(i)
Accumulated Other Comprehensive Income (Loss)
The following table summarizes the components of accumulated other comprehensive income (loss) as reported in the
consolidated balance sheets (in thousands):
Unrecognized pension benefit costs, net of tax of $(39,470) and $(89,059)
Unrealized loss on interest rate swap, net of tax of $(4,501) and $(13,120)
Unrealized gain on certain investments, net of tax of $433 and $—
Currency translation adjustments
$
2021
(249,696) $
(13,064)
1,330
(97,654)
2020
(400,919)
(37,548)
—
(49,961)
$
(359,084) $
(488,428)
Changes in accumulated other comprehensive income (loss) (1) were as follows (in thousands):
Balance as of December 28, 2019
Other comprehensive income before
reclassification
Amounts reclassified from accumulated other
comprehensive income
Net current-period other comprehensive
income
Balance as of January 2, 2021
Other comprehensive income before
reclassification
Amounts reclassified from accumulated other
comprehensive income
Net current-period other comprehensive
income
Balance as of January 1, 2022
Currency
Translation
Adjustment
Pension
Benefit Costs
Unrealized
Gain/(Loss)
Interest
Rate Swap
Unrealized
Gain
Certain
Investments
Total
$
(105,705) $
(228,336) $
(16,892) $
— $
(350,933)
55,744
(174,826)
(36,170)
—
2,243
15,514
—
—
(155,252)
17,757
55,744 $
(172,583) $
(20,656)
— $
(137,495)
(49,961) $
(400,919) $
(37,548) $
— $
(488,428)
(47,693)
137,187
6,015
1,330
96,839
—
14,036
18,469
—
32,505
(47,693) $
151,223 $
24,484 $
1,330 $
129,344
(97,654) $
(249,696) $
(13,064) $
1,330 $
(359,084)
$
$
$
$
(1) As of January 1, 2022 pension, unrealized gain/(loss) interest rate swap and gain on certain investments amounts are net
of tax of $(39.5) million, $(4.5) million and $0.4 million, respectively. During the twelve months ended January 1, 2022, the
adjustments to pension benefit costs unrealized gain/(loss) interest rate swap and gain on certain investments were net of tax of $49.6
million, $8.6 million and $0.4 million, respectively.
63
(j)
Fair Value Measures
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 assets and liabilities that are measured at fair value are categorized using the fair value hierarchy at
January 1, 2022 and January 2, 2021 are as follows (in thousands):
As of January 1, 2022
Financial Assets:
Interest rate swaps
Foreign exchange derivative contracts
Financial Liabilities:
Interest rate swaps
Contingent consideration
As of January 2, 2021
Financial Liabilities:
Interest rate swaps
Contingent consideration
Foreign exchange derivative contracts
Fair Value
Level 1
Fair Value
Level 2
Fair Value
Level 3
Total
$
$
$
$
$
$
$
— $
— $
3,645 $
1,095 $
— $
— $
3,645
1,095
— $
— $
21,635 $
— $
— $
34,983 $
21,635
34,983
— $
— $
— $
51,093 $
— $
2,191 $
— $
25,558 $
— $
51,093
25,558
2,191
The contingent consideration, as of January 1, 2022 and January 2, 2021, relates to the earnout provisions recorded in
conjunction with various purchase agreements.
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 acquisitions in comparison to the earnout targets and adjusts the liability accordingly. During fiscal 2021 the
increase in contingent consideration was associated with 2021 acquisitions and there were no material performance assumption
adjustments.
(k)
Foreign Currency
The income statements of the company’s foreign operations are translated at the monthly average rates. Assets and liabilities of
the company’s foreign operations are translated at exchange rates at the balance sheet date. These translation adjustments are
not included in determining net income for the period but are disclosed and accumulated in a separate component of
stockholders’ equity. Exchange gains and losses on foreign currency transactions are included in determining net income for the
period in which they occur. These transactions amounted to a gain of $0.3 million, loss of $2.9 million and a loss of $0.9
million in 2021, 2020 and 2019, respectively, and are included in other expense on the statements of earnings.
(l)
Shipping and Handling Costs
Fees billed to the customer for shipping and handling are classified as a component of net revenues. Shipping and handling
costs are included in cost of products sold.
64
(m)
Warranty Costs
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, 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 for the fiscal years 2021 and 2020 are as follows (in thousands):
Beginning balance
Warranty reserve related to acquisitions
Warranty expense
Warranty claims paid
Ending balance
(n)
Research and Development Costs
2021
2020
$
$
69,667 $
5,046
68,199
(62,697)
80,215 $
66,374
1,485
58,047
(56,239)
69,667
Research and development costs, included in cost of sales in the consolidated statements of earnings, are charged to expense
when incurred. These costs were $41.8 million, $35.3 million and $41.2 million in fiscal 2021, 2020 and 2019, respectively.
(o)
Non-Cash Share-Based Compensation
The company's 2021 Stock Incentive Plan (the "2021 Plan"), allows for the granting of stock options, stock appreciation rights,
restricted stock and restricted stock units, performance stock, phantom units and other equity-based awards. The company
estimates the fair value of restricted stock grants, restricted stock units and performance stock at the time of grant and
recognizes compensation costs over the vesting period of the grants. The expense, net of forfeitures, is recognized using the
straight-line method. Non-cash share-based compensation expense is only recognized for those grants expected to vest. See
Note 6, "Common and Preferred Stock," for further information on the company's share-based incentive plans.
(p)
Earnings Per Share
“Basic earnings per share” is calculated based upon the weighted average number of common shares actually outstanding, and
“diluted earnings per share” is calculated based upon the weighted average number of common shares outstanding and other
dilutive securities.
The company’s potentially dilutive securities consist of shares issuable on exercise of outstanding options and vesting of
restricted stock grants computed using the treasury method and amounted to approximately 1,449,000, 43,000, and 9,000 for
fiscal 2021, 2020 and 2019, respectively. The company’s potentially dilutive securities consist of shares issuable on vesting of
restricted stock grants computed using the treasury method and amounted to approximately 56,000 for fiscal 2021. During
fiscal 2021, the average market price of the company's common stock exceeded the exercise price of the Convertible Notes
resulting in approximately 1,393,000 diluted stock equivalents to be included in the diluted net earnings per share. There have
been no conversions to date. See Note 5, Financing Arrangements, in these Notes to the Consolidated Financial Statements for
further details on the Convertible Notes. There were no anti-dilutive equity awards excluded from common stock equivalents
for 2021, 2020 or 2019.
(q)
Consolidated Statements of Cash Flows
Cash paid for interest was $50.6 million, $65.6 million and $80.9 million in fiscal 2021, 2020 and 2019, respectively. Cash
payments totaling $125.8 million, $41.2 million, and $91.5 million were made for income taxes during fiscal 2021, 2020 and
2019, respectively.
65
(r)
New Accounting Pronouncements
Accounting Pronouncements - Recently Adopted
In August 2020, the FASB issued ASU No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity," which simplifies the accounting for convertible instruments by eliminating the
requirement to separate embedded conversion features from the host contract when the conversion features are not required to
be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums
accounted for as paid-in capital. By removing the separation model, a convertible debt instrument is reported as a single liability
instrument with no separate accounting for embedded conversion features. This new standard also removes certain settlement
conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share
calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included
in diluted earnings per share calculations. Effective January 3, 2021, the company early adopted ASU 2020-06 using the
modified retrospective approach. Adoption of the new standard resulted in an increase to the opening balance of retained
earnings of $5.1 million, a decrease to additional paid-in capital of $79.4 million, and an increase to convertible senior notes of
$98.4 million. In addition, the company ceased recording non-cash interest expense associated with amortization of the debt
discount and calculates earnings per share using the if-converted method to the extent those shares are not anti-dilutive.
In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)", which
removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes
in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and
simplifies other areas of ASC 740. This guidance is effective for annual reporting periods, and interim periods within those
reporting periods, beginning after December 15, 2020 with early adoption permitted. The company adopted this guidance on
January 3, 2021, and it did not have a material impact on the company's Consolidated Financial Statements upon adoption.
In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)," which clarified that certain optional
expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected
by the discounting transition related to reference rate reform. The amendments in this update were effective immediately for all
entities. The adoption of this guidance did not materially impact the company's Consolidated Financial Statements.
Accounting Pronouncements - To be adopted
On May 3, 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments
(Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified
Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications
or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after
modification or exchange. This guidance is effective for fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The company is
currently evaluating the impacts the adoption of this guidance will have on its Consolidated Financial Statements and
disclosures.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities
About Government Assistance, which requires entities to provide disclosures on material government assistance transactions
for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting
policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and
any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is
effective for the company on January 2, 2022 and only impacts annual financial statement footnote disclosures. The company is
currently evaluating the impacts the adoption of this guidance will have on its Consolidated Financial Statements and
disclosures.
66
(4)
REVENUE RECOGNITION
Revenue is recognized when the control of the promised goods or services are transferred to our customers, in an amount that
reflects the consideration that we expect to receive in exchange for those goods or services.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and represents the unit
of account. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when,
or as, the performance obligation is satisfied. The company’s contracts can have multiple performance obligations or just a
single performance obligation.
For contracts with multiple performance obligations, the contracts transaction price is allocated to each performance obligation
using the company’s best estimate of the standalone selling price of each distinct good or service in the contract. As the
company’s standard payment terms are less than one year, the company does not assess whether a contract has a significant
financing component. The company treats shipping and handling activities performed after the customer obtains control of the
good as a contract fulfillment activity. Sales, use and value added taxes assessed by governmental authorities are excluded from
the measurement of the transaction price within the company’s contracts with its customers. The company generally expenses
sales commissions when incurred because the amortization period would have been less than one year. These costs are recorded
within selling, general and administrative expenses.
Within the Commercial Foodservice Equipment and Residential Foodservice Equipment Groups, the estimated standalone
selling price of equipment is based on observable prices. Within the Food Processing Equipment Group, the company estimates
the standalone selling price based on expected cost to manufacture the good or complete the service plus an appropriate profit
margin.
Control may pass to the customer over time or at a point in time. In general, the Commercial Foodservice Equipment and
Residential Foodservice Equipment Groups recognize revenue at the point in time control transfers to their customers based on
contractual shipping terms. Revenue from equipment sold under our long-term contracts within the Food Processing Equipment
group is recognized over time as the equipment is manufactured and assembled. Installation services provided in connection
with the delivery of the equipment are also generally recognized as those services are rendered. Over time transfer of control is
measured using an appropriate input measure (e.g., costs incurred or direct labor hours incurred in relation to total estimate).
These measures include forecasts based on the best information available and therefore reflect the company's judgment to
faithfully depict the transfer of the goods.
Contract Estimates
Accounting for long-term contracts within the Food Processing Equipment group involves the use of various techniques to
estimate total contract revenue and costs. For the company’s long-term contracts, estimated profit for the equipment
performance obligations is recognized as the equipment is manufactured and assembled. Profit on the equipment performance
obligations is estimated as the difference between the total estimated revenue and expected costs to complete a contract.
Contract cost estimates are based on labor productivity and availability, the complexity of the work to be performed; the cost
and availability of materials and labor, and the performance of subcontractors. The company does not disclose information
about remaining performance obligations that have original expected durations of one year or less.
Contracts within the Commercial Foodservice and Residential Foodservice Equipment groups may contain variable
consideration in the form of volume rebate programs. The company’s estimate of variable consideration is based on its
experience with similarly situated customers using the portfolio approach.
67
Disaggregation of Revenue
We disaggregate our net sales by reportable operating segment and geographical location as we believe it best depicts how the
nature, timing and uncertainty of our net sales and cash flows are affected by economic factors. In general, the Commercial
Foodservice Equipment and Residential Foodservice Equipment Groups recognize revenue at the point in time control transfers
to their customers based on contractual shipping terms. Revenue from equipment sold under our long-term contracts within the
Food Processing Equipment group is recognized over time as the equipment is manufactured and assembled. The following
table summarizes our net sales by reportable operating segment and geographical location (in thousands):
Twelve Months Ended January 1, 2022
United States and Canada
Asia
Europe and Middle East
Latin America
Total
Twelve Months Ended January 2, 2021
United States and Canada
Asia
Europe and Middle East
Latin America
Total
Twelve Months Ended December 28, 2019
United States and Canada
Asia
Europe and Middle East
Latin America
Total
Contract Balances
Commercial
Foodservice
Food
Processing
Residential
Kitchen
Total
$ 1,435,120 $
347,280 $
454,375 $ 2,236,775
204,432
344,273
48,936
17,641
77,671
38,154
11,154
265,508
6,248
233,227
687,452
93,338
$ 2,032,761 $
480,746 $
737,285 $ 3,250,792
$ 1,067,872 $
311,042 $
373,864 $ 1,752,778
155,742
246,845
39,820
26,778
78,690
20,762
6,711
182,919
2,212
189,231
508,454
62,794
$ 1,510,279 $
437,272 $
565,706 $ 2,513,257
$ 1,334,776 $
246,572 $
362,753 $ 1,944,101
221,422
349,613
78,534
31,250
98,814
24,315
5,760
198,672
6,965
258,432
647,099
109,814
$ 1,984,345 $
400,951 $
574,150 $ 2,959,446
Contract assets primarily relate to the company's right to consideration for work completed but not billed at the reporting date
and are recorded in prepaid expenses and other in the Consolidated Balance Sheet. Contract assets are transferred to receivables
when the right to consideration becomes unconditional.
Contract liabilities relate to advance consideration received from customers for which revenue has not been recognized. Current
contract liabilities are recorded in accrued expenses in the Consolidated Balance Sheet. Non-current contract liabilities are
recorded in other non-current liabilities in the Consolidated Balance Sheet. Contract liabilities are reduced when the associated
revenue from the contract is recognized.
The following table provides information about contract assets and contract liabilities from contracts with customers (in
thousands):
Contract assets
Contract liabilities
Non-current contract liabilities
January 1, 2022
January 2, 2021
$
$
$
21,592 $
133,315 $
11,602 $
20,328
93,871
13,523
68
During the twelve months period ended January 1, 2022, the company reclassified $16.3 million to accounts receivable which
was included in the contract asset balance at the beginning of the period. During the twelve months period ended January 1,
2022, the company recognized revenue of $77.3 million which was included in the contract liability balance at the beginning of
the period. Additions to contract liabilities representing amounts billed to clients in excess of revenue recognized to date were
$129.0 million during the twelve months period ended January 1, 2022. Substantially all of the company's outstanding
performance obligations will be satisfied within 12 to 36 months. There were no contract asset impairments during twelve
months period ended January 1, 2022.
(5)
FINANCING ARRANGEMENTS
2021
2020
(in thousands)
Senior secured revolving credit line
$
683,175 $
Term loan facility
Convertible senior notes
Foreign loans
Other debt arrangement
Total debt
Less: Current maturities of long-term debt
Long-term debt
993,340
734,417
2,224
1,138
2,414,294
27,293
755,000
335,938
632,847
4,421
1,390
1,729,596
22,944
$
2,387,001 $
1,706,652
On October 21, 2021, the company entered into an amended and restated five-year, $4.5 billion multi-currency senior secured
credit agreement (the "Credit Facility") that amends and restates the company's pre-existing $3.1 billion credit facility which
had an original maturity of January 31, 2025. The Credit Facility consists of (i) a $1 billion term loan facility, (ii) a $750
million delayed draw term loan facility, and (iii) a $2.75 billion multi-currency revolving credit facility, with the potential under
certain circumstances, to increase the amount of the credit facility by the greater of $625 million and 100% of consolidated
EBITDA for the most recently ended period of consecutive fiscal quarters (plus additional amounts, subject to compliance with
a senior secured net leverage ratio), either by increasing the revolving commitment or by adding one or more revolver or term
loan tranches. The Credit Facility matures on October 21, 2026, with the potential to extend the maturity date in one year
increments with the consent of the extending lenders. The term facility will amortize in equal quarterly installments due on the
last day of each fiscal quarter, commencing with the first full fiscal quarter after October 21, 2021, in an aggregate amount
equal to 2.50% of the original aggregate principal amount of the term loan facility, with the balance, plus any accrued interest,
due and payable on October 21, 2026. The delayed draw term loan facility is available for borrowing within one year and will
amortize in quarterly installments due on the last day of each fiscal quarter, commencing with the first full fiscal quarter after
each delayed draw term loan borrowing in an amount equal to 0.625% of the original aggregate principal amount of such
borrowing, with the balance, plus any accrued interest, due and payable on October 21, 2026. Fees associated with the
amendment of the term loan facilities are recorded as a direct deduction from the related debt liability in the Consolidated
Balance Sheets and amortized to interest expense over the term of the Credit Facility.
On August 21, 2020, the company issued $747.5 million aggregate principal amount of 1.00% Convertible Senior Notes due
2025 in a private offering pursuant to an indenture, dated August 21, 2020 (the "Indenture"), between the company and U.S.
Bank National Association, as trustee. The net proceeds from the sale of the Convertible Notes were approximately $729.9
million after deducting the initial purchasers' discounts and the offering expenses payable by the company. In connection with
the pricing of the Convertible Notes, the company entered into privately negotiated Capped Call Transactions (the "2020
Capped Call Transactions") and the company used the net proceeds of the offering of the Convertible Notes to pay the
aggregate amount of $104.7 million for them.
In December 2021, the company entered into two tranches of privately negotiated Capped Call Transactions (the "2021 Capped
Call Transactions") in the aggregate amount of $54.6 million. The 2020 and 2021 Capped Call Transactions initially cover,
subject to customary anti-dilution adjustments, the number of shares of the company's common stock that underlie the
Convertible Notes.
69
Credit Facility
As of January 1, 2022, the company had $1.7 billion of borrowings outstanding under the Credit Facility, including $1.0 billion
outstanding under the term loan ($993 million, net of unamortized issuance fees). The company also had $2.7 million in
outstanding letters of credit as of January 1, 2022, which reduces the borrowing availability under the Credit Facility.
Remaining borrowing capacity under this facility was $2.8 billion at January 1, 2022.
At January 1, 2022, borrowings under the Credit Facility accrued interest at a rate of 1.375% above LIBOR per annum or
0.375% above the highest of the prime rate, the federal funds rate plus 0.50% and one month LIBOR plus 1.00%. The interest
rates on borrowings under the Credit Facility may be adjusted quarterly based on the company’s Funded Debt less 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. Borrowings under the Credit
Facility will accrue interest at a minimum of 1.375% above LIBOR and the variable unused commitment fee will be at a
minimum of 0.20%. The average interest rate per annum, inclusive of hedging instruments, on the debt under the Credit Facility
was equal to 2.32% at the end of the period and the variable commitment fee was equal to 0.20% per annum as of January 1,
2022.
The term loan facility had an average interest rate per annum, inclusive of hedging instruments, of 2.93% as of January 1, 2022.
In addition, the company has international credit facilities to fund working capital needs outside the United States. At January 1,
2022, these foreign credit facilities amounted to $2.2 million in U.S. Dollars with a weighted average per annum interest rate of
approximately 10.18%.
The company’s debt is reflected on the balance sheet at cost. The fair values of the Credit Facility, term debt and foreign and
other debt is based on the amount of future cash flows associated with each instrument discounted using the company's
incremental borrowing rate. 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 carrying value and estimated aggregate fair value, a level 2 measurement, based primarily on
market prices, of debt excluding the Convertible Notes is as follows (in thousands):
Jan 1, 2022
Jan 2, 2021
Carrying Value
Fair Value
Carrying Value
Fair Value
Total debt excluding convertible senior notes
$
1,679,877 $
1,686,537 $
1,096,749 $
1,096,749
The company uses floating-to-fixed interest rate swap agreements to hedge variable interest rate risk associated with the Credit
Facility. At January 1, 2022, the company had outstanding floating-to-fixed interest rate swaps totaling $94.0 million notional
amount carrying an average interest rate of 1.45% maturing in less than 12 months and $708.0 million notional amount carrying
an average interest rate of 1.98% that mature in more than 12 months but less than 63 months. In February 2022, subsequent to
year end fiscal 2021, the company entered into an additional floating-to-fixed interest rate swap agreements totaling $375.0
million notional amount carrying an average interest rate of 1.50%.
The terms of the Credit Facility, as amended, 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, (ii) a maximum
Secured Leverage Ratio (as defined in the Credit Facility) of Funded Debt less Unrestricted Cash to Pro Forma EBITDA (each
as defined in the Credit Facility) of 3.75 to 1.00, which may be adjusted to 4.25 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 January 1, 2022,
the company was in compliance with all covenants pursuant to its borrowing agreements.
70
Convertible Notes
The following table summarizes the outstanding principal amount and carrying value of the Convertible Notes:
Principal amounts:
Principal
Unamortized debt discount
Unamortized issuance costs
Net carrying amount
Jan 1, 2022
Jan 2, 2021
(in thousands)
$
$
747,500 $
—
(13,083)
734,417 $
747,500
(98,358)
(16,295)
632,847
The following table summarizes total interest expense recognized related to the Convertible Notes:
Contractual interest expense
Interest cost related to amortization of the debt discount and issuance
costs
Total interest expense
Twelve Months Ended
Jan 1, 2022
Jan 2, 2021
$
$
7,454 $
3,484
10,938 $
2,720
7,971
10,691
The estimated fair value of the Convertible Notes was $1.2 billion as of January 1, 2022 and was determined through
consideration of quoted market prices. The fair value is classified as Level 2, as defined in Note 3 (j), Fair Value Measurements,
in these Notes to the Consolidated Financial Statements included in this Part II, Item 8 of this Annual Report on Form 10-K.
The if-converted value of the Convertible Notes exceeded their respective principal value by $396.0 million as of January 1,
2022.
The Convertible Notes are general unsecured obligations of the company. The Convertible Notes rank senior in right of
payment to any of the company’s future indebtedness that is expressly subordinated in right of payment to the Convertible
Notes; rank equal in right of payment to the company’s existing and future unsecured indebtedness that is not so subordinated;
are effectively subordinated in right of payment to any of the company’s secured indebtedness to the extent of the value of the
assets securing such indebtedness; and are structurally subordinated to all existing and future indebtedness and liabilities of the
company’s subsidiaries.
The company initially separated the Convertible Notes into liability and equity components. The equity component of the
Convertible Notes of approximately $105.0 million was included in the additional paid-in capital and the resulting debt discount
was being amortized to interest expense at an effective interest rate of 1.5%, which is no longer applicable upon adoption of
ASU 2020-06 as discussed in Note 3 to the Consolidated Financial Statement.
The Convertible Notes were issued pursuant to the Indenture and bear interest semi-annually in arrears at a rate of 1.00% per
annum on March 1 and September 1 of each year. The Convertible Notes are convertible based upon an initial conversion rate
of 7.7746 shares of the company's common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to
an initial conversion price of approximately $128.62 per share of the company's common stock. The conversion rate will be
subject to adjustment upon occurrence of certain specified events in accordance with the Indenture, but will not be adjusted for
accrued and unpaid interest. Additionally, in the event of a Fundamental Change (as defined in the Indenture), holders of the
Convertible Notes may require the company to repurchase all or a portion of their Convertible Notes at a price equal to 100.0%
of the principal amount of Convertible Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date. Upon
conversion, the company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay
or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the
company's election, in respect of the remainder, if any, of the company's conversion obligation in excess of the aggregate
principal amount of the notes being converted.
71
The Convertible Notes will mature on September 1, 2025 unless they are redeemed, repurchased or converted prior to such date
in accordance with their terms. Prior to the close of business on the business day immediately preceding June 1, 2025, the notes
will be convertible at the option of the holders only under the following circumstances: (1) during any fiscal quarter
commencing after the fiscal quarter ending on January 2, 2021 (and only during such fiscal quarter), if the last reported sale
price of the company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30
consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater
than or equal to 130.0% of the conversion price for the Convertible Notes on each applicable trading day; (2) during the five
business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the
Convertible Notes for each trading day of that ten consecutive trading day period was less than 98.0% of the product of the last
reported sale price of the company's common stock and the conversion rate of the Convertible Notes on each such trading day;
(3) if the company calls such Convertible Notes for redemption; or (4) upon the occurrence of specified corporate events. On or
after June 1, 2025, the notes will be convertible at the option of the holders at any time until the close of business on the second
scheduled trading day immediately preceding the maturity date. Holders of the Convertible Notes who convert in connection
with a Make-Whole Fundamental Change or during a Redemption Period (each as defined in the Indenture) will be, under
certain circumstances, entitled to an increase in the conversion rate.
The company may settle the conversions of the Convertible Notes in cash, shares of the company's common stock or any
combination thereof at its election. The number of shares of the company's common stock issuable at the conversion price of
$128.62 per share is expected to be 5.8 million shares. However, the Capped Call Transactions are expected generally to reduce
the potential dilution of the company's common stock upon any conversion of Convertible Notes and/or offset the cash
payments the company is required to make in excess of the principal amount of the Notes. Under the 2020 Capped Call
Transactions, the number of shares of common stock issuable at the conversion price of $207.93 is expected to be 3.6 million
shares. Under the 2021 Capped Call Transactions, the number of shares of common stock issuable at the conversion prices of
$216.50 and $225.00 is expected to be 3.5 million shares and 3.3 million shares, respectively. During the twelve months period
ended January 1, 2022, no Convertible Notes have been converted to date.
The company may redeem all or any portion of the Convertible Notes, at its option, on or after September 5, 2023 and prior to
the 41st scheduled trading day immediately preceding the maturity date, at a redemption price equal to 100.0% of the principal
amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest thereon, if the last reported sales price of the
company's common stock has been at least 130.0% of the conversion price then in effect for at least 20 trading days (whether or
not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and
including, the trading day immediately preceding the date on which the company provides written notice of redemption.
The Indenture includes customary terms and covenants, including certain events of default after which the Convertible Notes
may become due and payable immediately.
72
Capped Call Transactions
The 2020 Capped Call Transactions and 2021 Capped Call Transactions (collectively, the "Capped Call Transactions") are
expected generally to reduce the potential dilution and/or offset the cash payments the company is required to make in excess of
the principal amount of the Convertible Notes upon conversion of the Convertible Notes in the event that the market price per
share of the company's common stock is greater than the strike price of the Capped Call Transactions (which initially
corresponds to the initial conversion price of the Convertible Notes and is subject to certain adjustments under the terms of the
Capped Call Transactions), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call
Transactions. The 2020 Capped Call Transactions have an initial cap price of $207.93 per share of the company's common
stock. The 2021 Capped Call Transactions have initial cap prices of $216.50 and $225.00 per share of the company's common
stock. The Capped Call Transactions cover, initially, the number of shares of the company's common stock underlying the
Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes.
The Capped Call Transactions are separate transactions entered into by the company with the capped call counterparties, and
are not part of the terms of the Convertible Notes and will not affect any holder's right under the Convertible Notes. Holders of
the Convertible Notes will not have any rights with respect to the Capped Call Transactions. The Capped Call Transactions do
not meet the criteria for separate accounting as a derivative as they are indexed to the company's stock. The premiums paid of
the Capped Call Transactions have been included as a net reduction to additional paid-in capital with stockholders' equity.
The aggregate amount of debt payable during each of the next five years is as follows (in thousands):
2022
2023
2024
2025
2026 and thereafter
$
27,293
23,621
23,634
757,945
1,581,801
$
2,414,294
73
(6)
COMMON AND PREFERRED STOCK
(a)
Shares Authorized
At January 1, 2022 and January 2, 2021, the company had 95,000,000 authorized shares of common stock and 2,000,000
authorized shares of non-voting preferred stock.
(b)
Treasury Stock
In November 2017, the company's Board of Directors approved a stock repurchase program authorizing the company to
repurchase in the aggregate up to 2,500,000 shares of its outstanding common stock. During 2020, the company repurchased
896,965 shares of its common stock under the program for $69.7 million, including applicable commissions, which represented
an average price of $77.70. During 2021, the company repurchased 141,500 shares of its common stock under the program for
$26.6 million, including applicable commissions, which represented an average price of $188.17. As of January 1, 2022,
1,164,665 shares had been purchased under the 2017 stock repurchase program and 1,335,335 remain authorized for
repurchase.
The company also treats shares withheld for tax purposes on behalf of employees in connection with the vesting of restricted
share grants as common stock repurchases because they reduce the number of shares that would have been issued upon vesting.
During 2020, the company repurchased 176,242 shares of its common stock that were surrendered to the company for
withholding taxes related to restricted stock vestings for $16.2 million. During 2021, the company repurchased 15,480 shares of
its common stock that were surrendered to the company for withholding taxes related to restricted stock vestings for $2.7
million.
(c)
Share-Based Awards
The company maintains an incentive plan under which the company's Board of Directors grants share-based awards to key
employees. On May 10, 2021, the 2021 Stock Incentive Plan (the "2021 Plan") was approved, which included a maximum
amount of 1,350,000 shares allowed to be awarded plus the shares remaining for future grants under the 2011 Stock Incentive
Plan (the "2011 Plan") as of the approval date and any shares outstanding that are subsequently forfeited or expired. Thus, no
further shares are available to grant under the 2011 Plan and the maximum amount of shares available for future grants under
the 2021 Plan as of January 1, 2022 is 1,642,966.
Non-cash share-based compensation of $42.3 million, $19.6 million and $8.1 million was recognized for fiscal 2021, 2020 and
2019, respectively, associated with restricted share grants and restricted stock units. The company recorded a related tax benefit
of $0.4 million, $2.7 million and less than $0.5 million in fiscal 2021, 2020 and 2019, respectively.
Restricted share grants:
The company has issued restricted share grant awards, which are generally time and performance based and were not subject to
market conditions. The fair value of restricted share grants represents the closing share price of the company's stock as of the
date of the grant and is recognized over the vesting period of the awards. The weighted average grant date fair value was
$181.31, $57.74 and $113.26 per share for restricted share grants in fiscal 2021, 2020 and 2019 respectively, which represents
the closing share price of the company’s stock as of the date of grant. The approximate fair value of restricted shares vested
were $7.3 million, $44.8 million, $16.5 million for fiscal 2021, 2020 and 2019, respectively.
74
A summary of the company’s nonvested restricted share grant activity and their corresponding fair value on the date of grant for
fiscal year ended January 1, 2022 is as follows:
Nonvested shares at January 2, 2021
Granted
Vested
Forfeited
Nonvested shares at January 1, 2022
Weighted
Average
Grant-Date
Fair Value
112.54
Shares
433,065 $
4,399
(43,485)
(213,673)
181.31
115.77
112.49
180,306 $
113.31
As of January 1, 2022, there was $3.7 million of total unrecognized compensation cost related to nonvested restricted share
grant compensation arrangements, if all performance conditions are fully achieved. The remaining weighted average life is 0.34
years.
Restricted stock units:
During 2020, the company began granting restricted stock units, which entitle the holder to shares of common stock subject to
time vesting and the achievement of certain market and performance goals. The fair value for time based units are valued at the
closing share price of the company’s stock as of the date of the grant and the fair value for performance units are based upon
valuations using the Monte Carlo Methodology. Compensation expense is recognized over the performance measurement
period of the units in accordance with ASC 718 Stock Compensation for awards with market and performance vesting
conditions.
Time vesting units vest equally over two or three years and performance units vest based on achievement of certain company
performance criteria over the two or three year period, as set forth in the grant agreement ranging from 0 to 200% of the target
shares granted. The weighted average grant date fair value was $166.41 and $134.25 per share for restricted stock units in fiscal
2021 and 2020, respectively. No restricted stock units have vested.
A summary of the company’s nonvested restricted stock unit activity at target shares and their corresponding fair value on the
date of grant for fiscal year ended January 1, 2022 is as follows:
Nonvested shares at January 2, 2021
Granted
Nonvested shares at January 1, 2022
Weighted
Average
Grant-Date
Fair Value
134.25
Units
47,500 $
287,624
166.41
335,124 $
161.85
As of January 1, 2022, there was $66.2 million of total unrecognized compensation cost related to nonvested restricted stock
unit compensation arrangements, if all performance conditions are fully achieved. The remaining weighted average life is 1.74
years.
75
(7)
INCOME TAXES
Earnings before taxes is summarized as follows (in thousands):
Domestic
Foreign
Total
The provision for income taxes is summarized as follows (in thousands):
Federal
State and local
Foreign
Total
Current
Deferred
Total
2021
453,357 $
166,147
619,504 $
2020
178,813 $
89,244
268,057 $
2019
336,688
125,931
462,619
$
$
2021
2020
2019
$
$
$
$
84,689 $
24,363
21,960
131,012 $
124,149 $
6,863
131,012 $
36,908 $
8,815
15,040
60,763 $
44,342 $
16,421
60,763 $
69,074
16,203
25,102
110,379
88,167
22,212
110,379
Reconciliation of the differences between income taxes computed at the federal statutory rate to the effective rate are as
follows:
U.S. federal statutory tax rate
State taxes, net of federal benefit
Permanent differences
Foreign income tax rate at rates other than U.S. statutory
Deferred tax changes
Tax refunds
Change in valuation allowances (1)
Tax on unremitted earnings
Other
Consolidated effective tax
(1) Net of changes in related tax attributes.
2021
2020
2019
21.0 %
21.0 %
21.0 %
3.1
0.5
0.2
(2.2)
(0.7)
0.4
0.4
(1.6)
21.1 %
3.2
(0.4)
0.5
(0.7)
—
(0.1)
1.2
(2.0)
22.7 %
3.2
0.6
0.2
—
—
0.1
0.3
(1.5)
23.9 %
The company’s effective tax rate for 2021 was 21.1% as compared to 22.7% in 2020. The effective tax rate for 2021 reflects
favorable tax adjustments for deferred tax rate changes, tax refunds and adjustments for the finalization of 2020 tax returns. The
effective tax rate is higher than the federal tax rate of 21.0% primarily due to state taxes and foreign tax rate differentials.
76
At January 1, 2022 and January 2, 2021, the company had recorded the following deferred tax assets and liabilities (in
thousands):
Deferred tax assets:
Compensation related
Pension and post-retirement benefits
Inventory reserves
Accrued liabilities and reserves
Warranty reserves
Operating lease liability
Interest rate swaps
Convertible debt
Net operating loss carryforwards
Other
Gross deferred tax assets
Valuation allowance
Deferred tax assets
Deferred tax liabilities:
Intangible assets
Depreciable assets
Basis difference on affiliates
Operating lease right-of-use assets
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)
Long-term deferred asset
Long-term deferred liability
Net deferred tax assets (liabilities)
$
$
$
2021
2020
21,543 $
49,072
14,453
17,088
19,286
18,643
4,573
37,034
17,083
12,695
211,470
(10,222)
201,248 $
12,328
88,709
14,732
22,049
17,890
16,180
12,997
—
20,747
17,187
222,819
(11,731)
211,088
(273,974) $
(26,996)
(18,795)
(18,029)
(17,195)
(226,598)
(26,916)
—
(15,921)
(12,825)
$
(354,989) $
(282,260)
$
(153,741) $
(71,172)
33,194
(186,935)
(153,741) $
76,052
(147,224)
(71,172)
$
The company has recorded tax reserves on undistributed foreign earnings not permanently reinvested of $9.7 million and $7.5
million at January 1, 2022 and January 2, 2021, respectively. No further provisions were made for income taxes that may result
from future remittances of undistributed earnings of foreign subsidiaries that are determined to be permanently reinvested,
which were $538.0 million on January 1, 2022. Determination of the total amount of unrecognized deferred income taxes on
undistributed earnings net of foreign subsidiaries is not practicable.
The company has a deferred tax asset on net operating loss carryforwards totaling $17.1 million as of January 1, 2022. These
net operating losses are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States
federal loss carryforwards total $29.0 million of which $5.6 million will expire through 2036 and $23.4 million have no
expiration date. State loss carryforwards total $34.2 million and expire through 2040 and international loss carryforwards total
$44.7 million and expire through 2038; however, some have no expiration date. Of these carryforwards, $33.4 million are
subject to full valuation allowance.
77
As of January 1, 2022, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was
approximately $36.2 million (of which $36.2 million would impact the effective tax rate if recognized) plus approximately $7.1
million of accrued interest and $6.0 million of penalties. The company recognizes interest and penalties accrued related to
unrecognized tax benefits in income tax expense. Interest recognized in fiscal years 2021, 2020 and 2019 was $0.9 million, $0.8
million and $0.4 million, respectively. Penalties recognized in fiscal years 2021, 2020 and 2019 was $(1.0) million, $(0.2)
million and $(0.9) million, respectively.
Although the company believes its tax returns are correct, the final determination of tax examinations may be different than
what was reported on the tax returns. In the opinion of management, adequate tax provisions have been made for the years
subject to examination.
The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended December 28,
2019, January 2, 2021 and January 1, 2022 (in thousands):
Balance at December 28, 2019
Increases to current year tax positions
Increase to prior year tax positions
Decrease to prior year tax positions
Settlements
Lapse of statute of limitations
Balance at January 2, 2021
Increases to current year tax positions
Increase to prior year tax positions
Decrease to prior year tax positions
Settlements
Lapse of statute of limitations
Balance as of January 1, 2022
$
31,559
3,657
183
(53)
(533)
(4,484)
$
30,329
1,760
6,796
(576)
(1,180)
(920)
$
36,209
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 $3.8 million of its remaining unrecognized tax benefits may be recognized by the end of 2022 as a
result of settlements with taxing authorities or lapses of statutes of limitations.
In the normal course of business, income tax authorities in various income tax jurisdictions both in the United States and
internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to
determine if individual income tax authorities are in agreement with our interpretations of complex tax regulations regarding the
allocation of income to the various income tax jurisdictions. Income tax years are open from 2017 through the current year for
the United States federal jurisdiction. Income tax years open for our other major jurisdictions range from 2016 through the
current year.
78
(8)
FINANCIAL INSTRUMENTS
Derivatives are measured at fair value and recognized as either assets or liabilities. Derivatives that do not qualify as a hedge
must be adjusted to fair value in earnings. If a derivative does qualify, 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.
(a)
Foreign Exchange
The company periodically enters into derivative instruments, principally forward contracts to reduce exposures pertaining to
fluctuations in foreign exchange rates. The notional amount of foreign currency contracts outstanding was $350.5 million and
$155.6 million as of January 1, 2022 and January 2, 2021, respectively. The fair value of these forward contracts was an
unrealized gain of $1.1 million at the end of the year.
(b)
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. The fair value of these
instruments was a liability of $18.0 million and $51.1 million as of January 1, 2022 and January 2, 2021, respectively. The
change in fair value of these swap agreements in 2021 was a gain of $24.6 million, net of taxes.
A summary of the company’s interest rate swaps is as follows (in thousands):
Fair value
Fair value
Fair value
Amount of gain/(loss) recognized in other
comprehensive income
Gain/(loss) reclassified from accumulated other
comprehensive income (effective portion)
Location
Other assets
Accrued expenses
Other non-current
liabilities
Other comprehensive
income
Interest expense
$
$
$
$
$
Twelve Months Ended
Jan 1, 2022
Jan 2, 2021
3,645
1,171
$
$
—
14,075
20,464
$
37,018
14,634
$
(43,317)
(18,469) $
(15,514)
Interest rate swaps are subject to default risk to the extent the counterparty is unable to satisfy its 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 agreement.
79
(9)
LEASE COMMITMENTS
Accounting Policy
At the commencement date of a lease, the company recognizes a liability to make lease payments and an asset representing the
right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments
over the lease term, including variable fees that are known or subject to a minimum floor. The lease liability includes lease
component fees, while non-lease component fees are expensed as incurred for all asset classes. The company's lease terms
include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. When a contract
excludes an implicit rate, the company utilizes an incremental borrowing rate based on information available at the lease
commencement date including lease term and geographic region. The initial valuation of the right-of-use (“ROU”) asset
includes the initial measurement of the lease liability, lease payments made in advance of the lease commencement date and
initial direct costs incurred by the company and excludes lease incentives. Operating lease ROU assets are included in other
assets and operating lease liabilities are included accrued expenses and other non-current liabilities.
Leases with an initial term of 12 months or less are classified as short-term leases and are not recorded on the Consolidated
Balance Sheets. The lease expense for short-term leases is recognized on a straight-line basis over the lease term.
Leases
The company leases warehouse space, office facilities and equipment under operating leases. The company has operating lease
costs of $31.5 million, $30.1 million and $30.6 million in fiscal 2021, 2020 and 2019 respectively, including short-term lease
expense and variable lease costs, which were immaterial in the year.
Leases (in thousands)
Operating lease right-of-use assets:
Other assets
Operating lease liabilities:
Accrued expenses
Other non-current liabilities
Total Liability
January 1, 2022
January 2, 2021
93,388 $
97,193
22,753
74,202
96,955 $
22,493
76,529
99,022
$
$
Total Lease Commitments (in thousands)
Operating Leases
2022
2023
2024
2025
2026
2027 and thereafter
Total future lease commitments
Less imputed interest
Total
$
$
24,903
21,458
17,588
12,581
10,122
19,062
105,714
8,759
96,955
80
Other Lease Information (in thousands, except lease term and discount
rate)
Twelve Months Ended
January 1, 2022
Twelve Months Ended
January 2, 2021
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$
25,957
$
26,024
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
16,353
25,433
Weighted-average remaining lease terms - Operating
5.6 years
6.0 years
Weighted-average discount rate - Operating
2.8 %
3.0 %
January 1, 2022
January 2, 2021
81
(10)
SEGMENT INFORMATION
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 foodservice equipment for the
restaurant and institutional kitchen industry. The Food Processing Equipment Group manufactures preparation, cooking,
packaging food handling and food safety equipment for the food processing industry. The Residential Kitchen Equipment
Group manufactures, sells and distributes kitchen equipment for the residential market.
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. Management believes
that intersegment sales are made at established arm's length transfer prices.
The following table summarizes the results of operations for the company’s business segments(1) (dollars in thousands):
2021
Net sales
Income (loss) from operations(3,4,7)
Depreciation expense
Amortization expense (5)
Net capital expenditures
Total assets
Long-lived assets (6)
2020
Net sales
Income (loss) from operations (3,7)
Depreciation expense
Amortization expense (5)
Net capital expenditures
Total assets
Long-lived assets (6)
2019
Net sales
Income (loss) from operations (3,8)
Depreciation expense
Amortization expense (5)
Net capital expenditures
Total assets
Long-lived assets (6)
Commercial
Foodservice
Food
Processing
Residential
Kitchen
Corporate
and Other(2)
Total
$ 2,032,761 $
423,121
23,814
56,910
26,507
3,522,630
292,593
480,746 $
94,414
5,601
7,247
9,111
637,252
54,934
737,285 $
124,701
12,655
11,628
9,232
2,153,758
169,028
— $ 3,250,792
629,992
42,681
82,562
46,551
6,383,598
557,667
(12,244)
611
6,777
1,701
69,958
41,112
$ 1,510,279 $
239,625
21,768
51,985
25,463
3,249,441
279,481
437,272 $
78,008
5,507
7,319
3,427
617,171
55,069
565,706 $
67,046
11,691
9,657
4,801
1,221,229
192,940
— $ 2,513,257
324,431
39,086
71,446
34,849
5,202,474
547,339
(60,248)
120
2,485
1,158
114,633
19,849
$ 1,984,345 $
429,946
21,054
45,906
29,353
3,188,304
261,466
400,951 $
68,935
4,944
8,162
6,683
621,619
57,403
574,150 $
89,312
11,742
9,896
9,168
1,157,211
176,834
— $ 2,959,446
514,043
37,852
65,576
46,609
5,002,143
499,819
(74,150)
112
1,612
1,405
35,009
4,116
(1) Non-operating expenses are not allocated to the reportable 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.
(3) Restructuring expenses and impairments are included in operating income of the segment to which they pertain. See note 3(f)
and 12 for further details.
(4) Termination fee from Welbilt merger is included in Corporate and Other.
(5) Includes amortization of deferred financing costs and Convertible Notes issuance costs.
(6) Long-lived assets consist of property, plant and equipment, long-term deferred tax assets and other assets.
(7) Gain on sale of plant is included in Commercial Foodservice and Residential Kitchen for 2021 and Gain on sale of plant is
included in Commercial Foodservice for 2020.
(8) Gain on litigation settlement is included in Residential Kitchen.
82
Long-lived assets, not including goodwill and other intangibles (in thousands):
Geographic Information
United States and Canada
Asia
Europe and Middle East
Latin America
Total International
(11)
EMPLOYEE RETIREMENT PLANS
(a)
Pension Plans
U.S. Plans:
2021
359,215 $
2020
331,688 $
2019
305,207
$
32,986
157,432
8,034
198,452
28,018
181,242
6,391
215,651
22,312
165,781
6,519
194,612
$
557,667 $
547,339 $
499,819
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. 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 former Chairman ("Chairman Plan"). The retirement
benefits are based upon a percentage of the former 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. Benefits are
determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30,
2010 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, 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 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. In
December 2020, it was agreed that the Group Pension Scheme will be closed to future pension accruals effective April 5, 2021
and as a result, a curtailment loss was recognized in fiscal 2020.
The other, much smaller, defined benefit pension plans operating within the AGA Group cover employees in France 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.
83
A summary of the plans’ net periodic pension cost, benefit obligations, funded status, and net balance sheet position is as
follows (dollars in thousands)
Net Periodic Pension Cost (Benefit):
Service cost
Interest cost
Expected return on assets
Amortization of net loss
Amortization of prior service cost
Curtailment loss
Change in Benefit Obligation:
Fiscal 2021
Fiscal 2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
$
— $
773 $
— $
841
17,340
(1,029)
(78,956)
1,118
—
—
12,741
2,879
—
1,043
(999)
763
—
—
2,581
25,966
(72,795)
3,449
2,577
14,682
$
930 $
(45,223) $
807 $
(23,540)
Benefit obligation – beginning of year
$
38,897 $ 1,744,574 $
35,395 $ 1,501,616
Service cost
Prior service cost
Interest on benefit obligations
Member contributions
Actuarial (gain) loss
Net benefit payments
Curtailment loss
Exchange effect
—
—
841
—
773
—
17,340
81
(1,617)
(135,475)
(1,698)
(65,138)
—
—
—
(18,008)
—
—
1,043
—
4,146
(1,687)
—
—
2,581
2,309
25,966
312
186,945
(62,878)
14,682
73,041
Benefit obligation – end of year
$
36,423 $ 1,544,147 $
38,897 $ 1,744,574
Change in Plan Assets:
Plan assets at fair value – beginning of year
$
17,455 $ 1,296,516 $
16,744 $ 1,231,181
Company contributions
Investment gain
Member contributions
Benefit payments and plan expenses
Exchange effect
1,233
1,299
—
4,890
123,708
81
1,587
811
—
(1,698)
(65,138)
(1,687)
—
(17,456)
—
5,745
69,824
312
(62,878)
52,332
Plan assets at fair value – end of year
$
18,289 $ 1,342,601 $
17,455 $ 1,296,516
Funded Status:
Unfunded benefit obligation
$
(18,134) $
(201,546) $
(21,442) $
(448,058)
Amounts recognized in balance sheet at year end:
Accrued pension benefits
$
(18,134) $
(201,546) $
(21,442) $
(448,058)
84
Fiscal 2021
Fiscal 2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
Pre-tax components in accumulated other comprehensive
income at period end:
Net actuarial loss
$
7,419
$ 281,745
$ 10,424
$ 479,554
Pre-tax components recognized in other comprehensive
income for the period:
Current year actuarial (gain) loss
$
(1,887)
$ (181,518)
$
4,334
$ 211,494
Actuarial loss recognized
Prior service cost
Prior service cost recognized
Total amount recognized
(1,118)
(12,832)
(763)
—
—
—
(3,457)
—
—
(3,841)
3,335
(1,550)
$
(3,005)
$ (197,807)
$
3,571
$ 209,438
Accumulated Benefit Obligation
$ 36,423
$ 1,544,117
$ 38,897
$ 1,744,536
Salary growth rate
Assumed discount rate
Expected return on assets
n/a
2.6 %
6.0 %
0.8 %
1.9 %
6.2 %
n/a
2.2 %
6.0 %
0.8 %
1.2 %
6.2 %
The company has engaged non-affiliated third party professional investment advisors to assist the company in developing its
investment policy and establishing asset allocations. The company's overall investment objective is to provide a return, that
along with company contributions, is expected to meet future benefit payments. Investment policy is established in
consideration of anticipated future timing of benefit payments under the plans. The anticipated duration of the investment and
the potential for investment losses during that period are carefully weighed against the potential for appreciation when making
investment decisions. The company routinely monitors the performance of investments made under the plans and reviews
investment policy in consideration of changes made to the plans or expected changes in the timing of future benefit payments.
The assets of the plans were invested in the following classes of securities (none of which were securities of the company):
U.S. Plans:
Equity
Fixed income
Money market
Other (real estate investment trusts & commodities contracts)
Non-U.S. Plans:
Equity
Fixed income
Alternatives/Other
Real Estate
Cash and cash equivalents
Target Allocation
Percentage of Plan Assets
2021
2020
48 %
40
4
8
100 %
53 %
36
1
10
100 %
48 %
39
3
10
100 %
Target Allocation
Percentage of Plan Assets
2021
2020
17 %
38
32
13
—
100 %
11 %
56
15
15
3
100 %
12 %
57
15
13
3
100 %
85
In accordance with ASC 820 Fair Value Measurements and Disclosures, the company has measured its defined benefit pension
plans at fair value. In accordance with ASU 2015-04, "Practical Expedient for the Measurement Date of an Employer's Defined
Benefit Obligation and Plan Assets", the company has elected to measure the pension plan assets and obligations as of the
calendar month end closest to the fiscal year end. The following tables summarize the basis used to measure the pension plans’
assets at fair value as of January 1, 2022 and January 2, 2021 (in thousands):
U.S. Plans:
Asset Category
Total
Fiscal 2021
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Net Asset
Value
Total
Fiscal 2020
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Net Asset
Value
Short Term Investment Fund (a)
$
274 $
— $
274 $
533 $
— $
533
Equity Securities:
Large Cap
Mid Cap
Small Cap
International
Fixed Income:
Government/Corporate
High Yield
Alternative:
Global Real Estate Investment
Trust
Commodities Contracts
3,928
413
424
4,918
5,137
1,383
758
1,054
3,928
413
424
4,918
5,137
1,383
758
1,054
—
—
—
—
—
—
—
—
3,443
407
489
4,198
5,517
1,211
1,063
594
3,443
407
489
4,198
5,517
1,211
1,063
594
—
—
—
—
—
—
—
—
Total
$ 18,289 $
18,015 $
274 $ 17,455 $
16,922 $
533
(a) Represents collective short term investment fund, composed of high-grade money market instruments with short
maturities.
86
Non-U.S. Plans:
Asset Category
Total
Fiscal 2021
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Net Asset
Value
Cash and cash equivalents
$
51,780 $
6,566 $
5,092 $
— $
40,122
Equity Securities:
UK
International:
Developed
Emerging
Unquoted/Private Equity
Fixed Income:
Government/Corporate:
UK
International
Index Linked
Other
Convertible Bonds
Real Estate:
Direct
Indirect
Hedge Fund Strategy:
Equity Long/Short
Arbitrage & Event
Directional Trading & Fixed Income
Cash & Other
Direct Sourcing
Leveraged Loans
6,470
1,878
117,751
31,392
2,195
3,034
435
1
259,833
114,973
364,666
7,811
185
183,045
8,030
29,345
25,788
3,266
196,930
1,156
30,224
15,471
—
2,138
—
—
—
80
—
—
—
—
—
—
Alternative/Other
(92,239)
453
—
—
—
—
—
—
—
—
—
183,045
3,038
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,592
114,717
30,957
2,194
244,362
114,973
362,528
7,811
185
—
4,912
29,345
25,788
3,266
196,930
1,156
30,224
(92,692)
Total
$ 1,342,601 $
30,056 $
191,175 $
— $ 1,121,370
87
Asset Category
Total
Fiscal 2020
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Net Asset
Value
Cash and cash equivalents
$
36,537 $
9,653 $
832 $
— $
26,052
Equity Securities:
UK
International:
Developed
Emerging
Unquoted/Private Equity
Fixed Income:
Government/Corporate:
UK
International
Index Linked
Other
Convertible Bonds
Real Estate:
Direct
Indirect
Hedge Fund Strategy:
Equity Long/Short
Arbitrage & Event
Directional Trading & Fixed Income
Cash & Other
Direct Sourcing
Leveraged Loans
8,615
1,747
110,718
34,417
1,792
3,076
418
1
264,703
141,030
330,360
8,296
214
156,588
9,283
44,097
16,594
9,721
196,952
2,397
28,720
16,330
—
2,945
—
—
—
52
—
—
—
—
—
—
5
—
—
—
—
—
—
—
—
—
156,588
4,485
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,868
107,642
33,999
1,791
248,373
141,030
327,415
8,296
214
—
4,746
44,097
16,594
9,721
196,952
2,397
28,720
(104,523)
Alternative/Other
(104,518)
Total
$ 1,296,516 $
34,227 $
161,905 $
— $ 1,100,384
The fair value of the Level 1 assets is based on observable, quoted market prices of the identical underlying security in an active
market. The fair value of the Level 2 assets is primarily based on market observable inputs to quoted market prices, benchmark
yields and broker/dealer quotes. Level 3 inputs, as applicable, represent unobservable inputs that reflect assumptions developed
by management to measure assets at fair value.
The expected return on assets is developed in consideration of the anticipated duration of investment period for assets held by
the plan, the allocation of assets in the plan, and the historical returns for plan assets.
88
Estimated future benefit payments under the plans are as follows (dollars in thousands):
2022
2023
2024
2025
2026 through 2031
$
U.S.
Plans
Non-U.S.
Plans
1,798 $
1,802
1,810
1,831
11,597
62,209
63,462
63,739
64,817
388,203
Expected contributions to the U.S. Plans and Non-U.S. Plans to be made in 2022 are $0.4 million and $4.0 million, respectively.
(b)
Defined Contribution Plans
As of January 1, 2022, the company maintained two separate defined contribution 401(k) 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 maintained defined contribution plans for its UK based
employees.
89
(12)
RESTRUCTURING AND ACQUISITION INTEGRATION INITIATIVES
Commercial Foodservice Equipment Group:
During the fiscal years 2021, 2020 and 2019, the company undertook cost reduction initiatives related to the Commercial
Foodservice Equipment Group including headcount reductions and facility consolidations. These actions resulted in expenses of
$5.4 million, $10.1 million and $6.4 million in the twelve months ended January 1, 2022, January 2, 2021 and December 28,
2019 respectively, primarily for severance related to headcount reductions associated with COVID-19 pandemic and facility
consolidations. These expenses are reflected in restructuring expenses in the Consolidated Statements of Earnings. The primary
realization of cost savings from the restructuring initiatives began in 2020 with an expected annual savings of approximately
$20.0 million. At January 1, 2022, the restructuring obligations accrued for these initiatives are immaterial and will be
substantially complete by the end of fiscal year 2022.
The restructuring expenses for the other segments of the company were not material during fiscal years 2021, 2020 and 2019.
In December 2020, the company recorded an impairment of approximately $2.9 million associated to reflect the fair market
value of assets held for sale of a non-core business within the Residential Kitchen Equipment Group. This charge was reflected
in impairments in the Consolidated Statements of Earnings. As a result approximately $17.4 million of current assets have been
classified as held for sale, within prepaid expenses and other current assets and approximately $22.3 million of liabilities have
been classified as held for sale within accrued expenses on the Consolidated Balance Sheets. The sale was completed in January
2021.
90
THE MIDDLEBY CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED JANUARY 1, 2022, JANUARY 2, 2021
AND December 28, 2019
(amounts in thousands)
Balance
Beginning
Of Period
Additions/
(Recoveries)
Charged
to Expense
Other
Adjustments
(1)
Write-Offs
During
the Period
Balance
At End
Of Period
Allowance for doubtful accounts;
deducted from accounts receivable on the
balance sheets-
2021
2020
2019
$
$
$
19,225 $
809 $
554 $
(1,818) $
18,770
14,886 $
6,868 $
1,239 $
(3,768) $
19,225
13,608 $
1,941 $
2,009 $
(2,672) $
14,886
(1) Amounts consist primarily of valuation allowances assumed from acquired companies.
Valuation allowance - Deferred tax assets
2021
2020
2019
Balance
Beginning
Of Period
Additions/
(Recoveries)
Charged
to Expense
Write-Offs
During the
Period
Balance
At End
Of Period
11,731 $
1,138 $
(2,647) $
10,222
7,754 $
3,977 $
— $
11,731
26,023 $
129 $
(18,398) $
7,754
$
$
$
91
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report that are
designed to ensure that information required to be disclosed in the company's Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the company's management, including its Chief Executive Officer and Chief Financial
Officer as appropriate, to allow timely decisions regarding required disclosure.
The company carried out an evaluation, under the supervision and with the participation of the company's management,
including the company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation
of the company's disclosure controls and procedures as of January 1, 2022. Based on the foregoing, the company's Chief
Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective
as of the end of this period.
Changes in Internal Control Over Financial Reporting
During the quarter ended January 1, 2022, there have been no changes in the company's internal controls over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or
are reasonably likely to materially affect, the company's internal control over financial reporting.
92
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those policies and procedures that:
(i)
(ii)
pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of our management and directors; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (COSO). Our assessment of the internal control structure excluded Novy (acquired July 12,
2021), Imperial (acquired September 24, 2021), Newton CFV (acquired November 16, 2021), Kamado Joe and Masterbuilt
(acquired December 27, 2021) and Char-Griller (acquired December 27, 2021).
These acquisitions constitute 1.0% and 17.6% of net and total assets, respectively, 1.9% of net sales and (0.4)% of net income
of the consolidated financial statements of the Company as of and for the year ended January 1, 2022. These acquisitions are
included in the consolidated financial statements of the company as of and for the year ended January 1, 2022. Under guidelines
established by the Securities Exchange Commission, companies are allowed to exclude acquisitions from their assessment of
internal control over financial reporting during the first year of an acquisition while integrating the acquired companies.
Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our
internal control over financial reporting was effective as of January 1, 2022.
Ernst & Young LLP, independent registered public accounting firm, who audited and reported on the consolidated financial
statements of the company included in this report, has issued a report on the effectiveness of the company's internal control over
financial reporting as of January 1, 2022.
The Middleby Corporation
March 2, 2022
PART III
Pursuant to General Instruction G (3), of Form 10-K, the information called for by Part III Item 10 (Directors, Executive
Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and
Director Independence) and Item 14 (Principal Accountant Fees and Services), is incorporated herein by reference from the
registrant’s definitive proxy statement filed with the Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this Form 10-K.
93
Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)
1.
Financial Statements
The financial statements listed on Page 48 are filed as part of this Form 10-K.
3.
Exhibits
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
10.1
10.2
10.3*
10.4*
10.5*
10.6*
Restated Certificate of Incorporation of The Middleby Corporation (effective as of May 13,
2005), incorporated by reference to the company's Form 8-K, Exhibit 3.1, dated April 29,
2005, filed on May 17, 2005.
Fourth Amended and Restated Bylaws of The Middleby Corporation (effective as of
February 26, 2021), filed on March 3, 2021.
Certificate of Amendment to the Restated Certificate of Incorporation of The Middleby
Corporation (effective as of May 3, 2007), incorporated by reference to the company’s
Form 8-K, Exhibit 3.1, dated May 3, 2007, filed on May 3, 2007.
Certificate of Amendment to the Restated Certificate of Incorporation of The Middleby
Corporation (effective as of May 8, 2014), incorporated by reference to the company's Form
8-K, Exhibit 3.1, dated May 6, 2014, filed on May 8, 2014.
Certificate of Designations dated October 30, 1987, and specimen stock certificate relating
to the company Preferred Stock, incorporated by reference from the company’s Form 10-K,
Exhibit (4), for the fiscal year ended December 31, 1988, filed on March 15, 1989.
Indenture (including form of Global Note) with respect to The Middleby Corporation’s
1.00% Convertible Senior Notes due 2025, dated as of August 21, 2020, between The
Middleby Corporation and U.S. Bank National Association, as trustee, incorporated by
reference to the company's Form 8-K Exhibit 4.1 filed on August 21, 2020.
Form of Global Note for the 1.00% Convertible Senior Notes due 2025 incorporated by
reference to the company's Form 8-K Exhibit 4.1 filed on August 21, 2020.
Description of the Company's Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934, filed on March 3, 2021.
Voting and Support Agreement, dated as of April 20, 2021, by and among The Middleby
Corporation and the Welbilt Significant Stockholders named therein, incorporated by
reference to the company's Form 8-K Exhibit 10.1 filed on April 21, 2021.
Eighth Amended and Restated Credit Agreement, dated as of October 21, 2021, among
Middleby Marshall Inc., The Middleby Corporation, the Subsidiary Borrowers named
therein, the lenders named therein and Bank of America, N.A., as administrative agent for
the lenders, incorporated by reference to the company's Form 8-K Exhibit 10.1 filed on
October 21, 2021.
Amended 1998 Stock Incentive Plan, dated December 15, 2003, incorporated by reference
to the company’s Form 10-K, Exhibit 10.21, for the fiscal year ended January 3, 2004, filed
on April 2, 2004.
Employment Agreement by and between The Middleby Corporation and Timothy J.
FitzGerald, dated March 21, 2013, incorporated by reference to the company's Form 8-K
Exhibit 10.1, dated March 21, 2013, filed on March 25, 2013.
Form of The Middleby Corporation 1998 Stock Incentive Plan Restricted Stock Agreement,
incorporated by reference to the company's Form 8-K Exhibit 10.2, dated March 7, 2005,
filed on March 8, 2005.
Amendment to The Middleby Corporation 1998 Stock Incentive Plan, effective as of
January 1, 2005, incorporated by reference to the company's Form 8-K Exhibit 10.2, dated
April 29, 2005, filed on May 17, 2005.
94
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
21
23.1
31.1
31.2
32.1
32.2
101
104
Revised Form of Restricted Stock Agreement for The Middleby Corporation 1998 Stock
Incentive Plan, incorporated by reference to the company’s Form 8-K, Exhibit 10.1, dated
March 8, 2007, filed on March 14, 2007.
The Middleby Corporation 2011 Long-Term Incentive Plan, incorporated by reference to
Appendix A to the company’s definitive proxy statement filed with the Securities and
Exchange Commission on April 1, 2011.
The Middleby Corporation Value Creation Incentive Plan, incorporated by reference to
Appendix B to the company’s definitive proxy statement filed with the Securities and
Exchange Commission on April 1, 2011.
Form of Restricted Performance Stock Agreement for The Middleby Corporation 2011
Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 to the company's
Form 8-K, dated February 24, 2014, filed on March 3, 2014.
Amendment to Employment Agreement between The Middleby Corporation, Middleby
Marshall Inc. and Timothy J. FitzGerald, dated February 19, 2018, incorporated by
reference to the company's Form 8-K Exhibit 10.2, dated February 19, 2018, filed on
February 22, 2018.
Employment Agreement between The Middleby Corporation, Middleby Marshall Inc. and
David Brewer, dated February 19, 2018, incorporated by reference to the company's Form
8-K Exhibit 10.3, dated February 19, 2018, filed on February 22, 2018.
Form of Stock Award Agreement for The Middleby Corporation 2011 Long-Term
Incentive Plan, incorporated by reference to the company's Form 8-K, Exhibit 10.1, dated
April 11, 2019, filed on April 16, 2019.
Form of Restricted Stock Award Agreement for The Middleby Corporation 2011 Long-
Term Incentive Plan, incorporated by reference to the company's Form 8-K, Exhibit 10.2,
dated April 11, 2019, filed on April 16, 2019.
Form of Restricted Stock Unit Award Agreement for The Middleby Corporation 2011
Long-Term Incentive Plan, incorporated by reference to the company's Form 8-K Exhibit
10.1, dated December 31, 2020, filed on January 5, 2021.
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors for The
Middleby Corporation 2011 Long-Term Incentive Plan, incorporated by reference to the
company's Form 10-Q Exhibit 10.2 filed on May 13, 2021
List of subsidiaries.
Consent of Ernst & Young LLP.
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act, as amended.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act, as amended.
Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
Financial statements on Form 10-K for the year ended January 1, 2022, filed on March 2,
2022, formatted in Extensive Business Reporting Language (XBRL); (i) consolidated
balance sheets, (ii) consolidated statements of earnings, (iii) consolidated statements of cash
flows, (iv) notes to the consolidated financial statements.
Cover Page Interactive Data File (formatted as Inline Extensive Business Reporting
Language (iXBRL) and contained in Exhibit 101).
*
See the financial statement schedule included under Item 8.
Designates management contract or compensation plan.
(c)
95
Item 16. Form 10-K Summary
None
96
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 2nd day of March 2022.
SIGNATURES
THE MIDDLEBY CORPORATION
BY:
/s/ Bryan E. Mittelman
Bryan E. Mittelman
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities indicated on March 2, 2022.
Signatures
Title
PRINCIPAL EXECUTIVE OFFICER
/s/ Timothy J. FitzGerald
Timothy J. FitzGerald
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
/s/ Bryan E. Mittelman
Bryan E. Mittelman
DIRECTORS
/s/ Gordon O'Brien
Gordon O'Brien
/s/ Sarah Palisi Chapin
Sarah Palisi Chapin
/s/ Cathy L. McCarthy
Cathy L. McCarthy
/s/ John R. Miller, III
John R. Miller, III
/s/ Robert Nerbonne
Robert Nerbonne
/s/ Nassem Ziyad
Nassem Ziyad
Chief Executive Officer and Director
Chief Financial Officer,
Principal Financial Officer and
Principal Accounting Officer
Chairman of the Board, Director
Director
Director
Director
Director
Director
97
Subsidiaries of The Middleby Corporation(1)
EXHIBIT 21
Name of Subsidiary
State/Country of
Incorporation/Organization
A&J Manufacturing, LLC (Florida)
A&J Manufacturing, LLC (Georgia)
AGA Rangemaster Group Ltd
AGA Rangemaster Ltd
AGA Rangemaster Properties Ltd
AGA Rayburn Ltd
Alkar Holdings, Inc.
Alkar-RapidPak, Inc.
American Permanent Ware Company, LLC
Anetsberger, LLC
ARG Corporate Services Ltd
Armor Inox Holding France S.A.S.
Armor Inox Production S.a.r.l.
Armor Inox S.A.S.
Armor Inox Services S.A.S.
Armor Inox USA LLC
Associated American Industries, LLC
Auto-Bake Acquisition Pty. Ltd
Auto-Bake Pty Ltd
Automation Tech, LLC
Automatic Bar Controls, Inc.
Bakers Pride Oven Company, LLC
Baker Thermal Solutions LLC
Beech Ovens LLC
Beech Ovens Pty Ltd
Brava Home, Inc.
Britannia Kitchen Ventilation
Burford Bakery Solutions Limited
Burford Corp
Carter-Hoffmann LLC
Catering Equipment Industry srl
Cinoxplan, S.L.U.
Cloverleaf AM Essex, LLC
CM Brewing Technologies, LLC
Cooking Solutions Group, LLC
CookTek Induction Systems, LLC
Cozzini Middleby de Mexico, S. de R.L.de C.V.
Cozzini, LLC
Danfotech Holdings, LLC
Danfotech Inc.
Florida
Georgia
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Wisconsin
Wisconsin
Delaware
Delaware
United Kingdom
France
France
France
France
Delaware
Texas
Australia
Australia
Delaware
Delaware
Delaware
Delaware
Delaware
Australia
Delaware
United Kingdom
United Kingdom
Oklahoma
Delaware
Italy
Spain
Delaware
California
Delaware
Delaware
Mexico
Delaware
Delaware
Missouri
DBT Holdings LLC
Desmon S.p.A.
Evo America, LLC
F.R. Drake Company
Fab-Asia Inc.
Field Service Solutions
Filling Machines & Systems, Inc.
Firex S.r.l.
Follett Europe Polska sp. z.o.o.
Follett International sp. z.o.o.
Follett Products, LLC
GateNext, LLC
G.S. Blodgett, LLC
Giga Grandi Cucine S.r.l.
Globe Food Equipment Company
Globe Food Equipment Holding Company
Goldstein Eswood Commercial Cooking Pty Ltd
Goldstein Properties Pty Ltd
Grand Rise International Limited
Grange Furniture Inc.
Guangzhou Masterbuilt Co. Limited
Hinds-Bock Corporation
Holman Cooking Equipment Inc.
Houno A/S
Houno Holdings LLC
Imperial Machine Company Ltd
Inline Filling Systems, LLC
Jade Range LLC
Johs. Lassen Fjellebroen A/S
Josper, S.A.
Keylog S.r.l.
Kamado Joe Deutschland GmbH
Kamado Joe Europe BV
Kamado Joe UK Limited
KJ UK Holdings Limited
Lab2Fab, LLC
LA Cornue SAS
Levens Middleby Worldwide B.V.
Lincat Group Ltd.
Lincat Limited.
Masterbuilt I, Inc.
Masterbuilt II, Inc.
Masterbuilt Holdings, LLC
Masterbuilt Manufacturing, LLC
Maurer-Atmos Middleby GmbH
Meheen Manufacturing, Inc.
MEP FMS Holdings, LLC
Delaware
Italy
Delaware
Delaware
Philippines
Arkansas
Delaware
Italy
Poland
Poland
Delaware
Florida
Delaware
Italy
Ohio
Delaware
Australia
Australia
Hong Kong
Delaware
Peoples Republic of China
Washington
Delaware
Denmark
Delaware
United Kingdom
Florida
Delaware
Denmark
Spain
Italy
Germany
Netherlands
United Kingdom
United Kingdom
Delaware
France
Netherlands
United Kingdom
United Kingdom
Delaware
Delaware
Delaware
Delaware
Germany
Washington
Delaware
Middleby Advantage, LLC
Middleby Asia Ltd
Middleby Canada Company, Inc.
Middleby Celfrost Innovations Pvt Ltd
Middleby China Corporation
Middleby Coffee Solutions Group, LLC
Middleby Cozzini Brasil Equipamentos, Ltda
Middleby Denmark Holdings ApS
Middleby do Brasil Ltda
Middleby Espana SLU
Middleby Europe SL
Middleby Foodservice Equipment Corporation
Middleby Food Service Equipment Co., Ltd
Middleby Holding UK Ltd
Middleby India Engineering Pvt Ltd
Middleby Lux Holdings SCS
Middleby Luxembourg S.a.r.l.
Middleby Marshall Holding, LLC
Middleby Marshall, Inc.
Middleby Nationals Sales LLC
Middleby Packaging Solutions, LLC
Middleby Philippines Corporation
Middleby Sweden Holdings AB
Middleby UK Ltd
Middleby UK Residential Holdings
Middleby Worldwide Australia Pty Ltd
Middleby Worldwide Mexico SA de CV
Middleby Worldwide Philippines
Middleby Worldwide Services SA de CV
Middleby Worldwide, Inc.
Middleby XME S.L.U.
MP Equipment, LLC
New Star International Holdings, Inc.
Newton CFV, LLC
Newton CFV, Inc.
Nieco, LLC
Northland Corporation
Pacproinc, LLC
Novy GmbH
Novy Holding NV
Novy International
Novy Invest NV
Novy Ltd
Novy Nederland BV
Novy NV
Novy SAS
Pengyuan Technology (Shenzhen) Co, LTD.
Delaware
Hong Kong
Canada
India
Peoples Republic of China
Delaware
Brazil
Denmark
Brazil
Spain
Spain
Peoples Republic of China
Peoples Republic of China
United Kingdom
India
Luxembourg
Luxembourg
Delaware
Delaware
Delaware
Delaware
Philippines
Sweden
United Kingdom
United Kingdom
Australia
Mexico
Philippines
Mexico
Florida
Spain
Delaware
Delaware
Delaware
Delaware
Delaware
Michigan
Delaware
Germany
Belgium
Belgium
Belgium
United Kingdom
Netherlands
Belgium
Belgium
Peoples Republic of China
Pitco Frialator, LLC
Premier Specialty Brands, LLC
Powerhouse Dynamics, LLC
QualServ Solutions LLC
Scanico A/S
SD Group Intressenter (SDGI)
Spenuzza, Inc.
Standex de Mexico S.A. de C.V.
Star International Holdings, Inc.
Star Manufacturing International Inc.
Stewart Systems Baking, LLC
Sveba Dahlen Rus. Ltd.
Sveba-Dahlen Aktiebolag
Sveba Dahlen Baltic OÜ
Sveba-Dahlen España
Sveba-Dahlen Group AB
Taylor Company S.r.l.
Taylor Commercial Foodservice, LLC
Taylor Food Service Equipment Trading (Shanghai) Co. Ltd
The Alluvian Spa, LLC
The Alluvian, LLC
Thurne-Middleby Ltd
TMC Lux Holdings Sarl
TMC Lux Sarl
TMC Scots Holdings LP
TurboChef Technologies, LLC
ULC Holding Company
U-Line Corporation
Varimixer A/S
Ve.Ma.C. S.r.l.
Viking Cooking Schools, LLC
Viking Culinary Group, LLC
Viking Range Brasil Participacoes Ltda
Viking Range Corporation do Brasil Importacao e Comercio Ltda
Viking Range, LLC
Waterford Stanley Ltd
Wells Bloomfield LLC
Wild Goose Canning Technologies, LLC
Wunder-Bar Europe S.r.o.
Wunder-Bar Dispensing UK Ltd
Wunder-Bar Holdings, Inc.
Wunder-Bar International, Inc.
(1) Certain subsidiaries have been omitted as allowed.
Delaware
Delaware
Delaware
Delaware
Denmark
Sweden
California
Mexico
Delaware
Delaware
Delaware
Russia
Sweden
Estonia
Spain
Sweden
Italy
Delaware
China
Mississippi
Mississippi
United Kingdom
Luxembourg
Luxembourg
United Kingdom
Delaware
Delaware
Wisconsin
Denmark
Italy
Mississippi
Mississippi
Brazil
Brazil
Delaware
Ireland
Delaware
Colorado
Czech Republic
United Kingdom
Delaware
California
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-259055) pertaining
to The Middleby Corporation 2021 Long-Term Incentive Plan, of our reports dated March 2, 2022, with respect to
the consolidated financial statements and schedule of The Middleby Corporation and the effectiveness of internal
control over financial reporting of The Middleby Corporation, included in this Annual Report (Form 10-K) for the
year ended January 1, 2022.
/s/ Ernst & Young LLP
Chicago, Illinois
March 2, 2022
EXHIBIT 31.1
I, Timothy J. FitzGerald, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of The Middleby Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent function):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal controls over financial reporting.
Date: March 2, 2022
/s/ Timothy J. FitzGerald
Timothy J. FitzGerald
Chief Executive Officer of The Middleby Corporation
EXHIBIT 31.2
I, Bryan E. Mittelman, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of The Middleby Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent function):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal controls over financial reporting.
Date: March 2, 2022
/s/ Bryan E. Mittelman
Bryan E. Mittelman
Chief Financial Officer of The Middleby Corporation
CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER OF
THE MIDDLEBY CORPORATION
PURSUANT TO RULE 13A-14(b) UNDER THE EXCHANGE ACT AND
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
EXHIBIT 32.1
This certification is being furnished pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
I, Timothy J. FitzGerald, Chief Executive Officer (principal executive officer) of The Middleby Corporation (the “Registrant”),
certify, to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended January 1,
2022 of the Registrant (the “Report”), that:
(1)
(2)
Date: March 2, 2022
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
The information contained in the Report fairly presents, in all material aspects, the financial condition and
results of operations of the Registrant.
/s/ Timothy J. FitzGerald
Timothy J. FitzGerald
CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER OF
THE MIDDLEBY CORPORATION
PURSUANT TO RULE 13A-14(b) UNDER THE EXCHANGE ACT AND
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
EXHIBIT 32.2
This certification is being furnished pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
I, Bryan E. Mittelman, Chief Financial Officer (principal financial officer) of The Middleby Corporation (the “Registrant”),
certify, to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended January 1,
2022 of the Registrant (the “Report”), that:
(1)
(2)
Date: March 2, 2022
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
The information contained in the Report fairly presents, in all material aspects, the financial condition and
results of operations of the Registrant.
/s/ Bryan E. Mittelman
Bryan E. Mittelman
CORPORATE INFORMATION
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
CORPORATE HEADQUARTERS
Gordon O’Brien 2, 4
Chairman of the Board
Managing Partner
Cannon Capital
Sarah Palisi Chapin 4, 5, 6
Principal
Chapin Creative, LLC
Timothy J. FitzGerald
Chief Executive Officer
The Middleby Corporation
Cathy L. McCarthy 1, 2, 6
Chief Executive Officer
Cross Tack, Inc.
John R. Miller III 3, 4, 6
Retired, Chairman and
Chief Executive Officer
EOP, Inc.
Timothy J. FitzGerald
Chief Executive Officer
Bryan E. Mittelman
Chief Financial Officer
Martin Lindsay
Chief Risk and Administration Officer,
Treasurer and Secretary
James K. Pool III
Chief Technology and
Operations Officer
Steven P. Spittle
Chief Commercial Officer
TRANSFER AGENT AND REGISTRAR
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Robert Nerbonne 6
Retired, Executive Vice President
Cooper-Atkins, Corporation
Nassem Ziyad 2
Chief Operating Officer
Ziyad Brothers Importing
1 Chair of Audit Committee
2 Audit Committee Member
3 Chair of Compensation Committee
4 Compensation Committee Member
5 Chair of Nominating and Corporate Governance Committee
6 Nominating and Corporate Governance Committee Member
The Middleby Corporation
1400 Toastmaster Drive
Elgin, Illinois 60120
847 741 3300
FAX 847 741 0015
INDEPENDENT REGISTERED
PUBLIC ACCOUNTANTS
Ernst & Young LLP
Chicago, Illinois
STOCK MARKET INFORMATION
The Middleby Corporation is traded on
The NASDAQ Stock Market LLC under
the symbol “MIDD.”
INVESTOR RELATIONS
For additional information:
The Middleby Corporation
1400 Toastmaster Drive
Elgin, IL 60120
investors@middleby.com
847 741 3300
or visit www.middleby.com
COMMERCIAL FOODSERVICE EQUIPMENT
FOOD
BEVERAGE
TECHNOLOGY
FOOD PROCESSING EQUIPMENT
RESIDENTIAL KITCHEN EQUIPMENT
1400 Toastmaster Drive
Elgin, Illinois 60120
www.middleby.com
www.middlebyresidential.com
www.middprocessing.com